M
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 13, 2004
FRANKLIN CREDIT MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-2243266
(I.R.S. employer identification no.)
0-17771
Commission file number)
Six Harrison Street
New York, New York
(Address of principal executive
offices)
10013
(Zip code)
Registrant's telephone number, including area code: (212) 925-8745
------------------------------------------------------------------------------
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01 Completion of Acquisition or Disposition of Assets
On September 24, 2004 and October 13, 2004, Franklin Credit Management
Corporation (the "Company"),through four wholly owned subsidiaries, consummated
the acquisition of a mixed pool of $99,361,251 in face amount of performing,
sub-performing and nonperforming mortgage loans secured by single family
residences, from Master Financial Corporation, N.A., a national mortgage banking
company, as seller (the "Seller"), pursuant to a Mortgage Loan Purchase and
Sale Agreement with Seller for a purchase price of $82,214,418 plus accrued
interest in the amount of $1,123,254. The purchase price was determined through
competitive bidding and arms'-length negotiations between the Company and the
Seller.
The purchase price was funded by the extentsion of the senior debt (the "Senior
Debt") by Sky Financial Bank, an Ohio corporation (the "Bank") pursuant to
Company's Master Credit and Security Agreement with the Bank. The new Senior
Debt bears interest at a rate initially equal to 5.5% adjusted monthly as
provided in the Master Credit Agreement.
The foregoing description is qualified in its entirety by reference to the full
text of the Mortgage Loan Purchase and Sale Agreement, dated as of September 24,
2004 between the Company and the Seller, which is filed herewith as
Exhibit 10.1.
Item 9.01. Financial Statements and Exhibits.
Pro forma financial statements required to be filed not later than 71 calender
days after the date of the original report will be filed by amendment.
(a) Financial Statements of Assets Acquired
See reference above.
(b) Pro Forma Financial Information
See reference above
(c) Exhibits.
The following exhibits are filed as part of this report:
2.2 Mortgage Loan Purchase and Sale Agreement, dated as of September 24, 2004
by and between Franklin Credit Management Corporation and Master Financial
Incorporated.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRANKLIN CREDIT MANAGEMENT CORPORATION
By: /s/ Thomas J. Axon
Thomas J. Axon
Chairman
October 19, 2004
Exhibits Index
10.1 Mortgage Loan Purchase and Sale Agreement, dated as of September 24, 2004
by and between Franklin Credit Management Corporation and Master
Financial Inc, Inc.
Exhibit 10.1
MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT
-----------------------------------------------------------------------
FRANKLIN CREDIT MANAGEMENT CORPORATION,
Purchaser
MASTER FINANCIAL, INC.,
Seller
-----------------------------------------------------------------------
Dated as of September ~ 24, 2004
Fixed Rate Residential Mortgage Loans
==============================================================================
TABLE OF CONTENTS
Page
SECTION 1. Definitions..................................................1
SECTION 2. Agreement to Purchase........................................8
SECTION 3. Mortgage Schedules...........................................8
SECTION 4. Purchase Price...............................................8
SECTION 5. Examination of Mortgage Files................................9
SECTION 6. Conveyance from Seller to Purchaser..........................9
SECTION 7. Servicing of the Mortgage Loans..............................11
SECTION 8. Transfer of Servicing........................................11
SECTION 9. Representations, Warranties and Covenants of the Seller;
Remedies for Breach..........................................13
SECTION 10. Closing......................................................20
SECTION 11. Closing Documents............................................21
SECTION 12. Costs........................................................22
SECTION 13. Cooperation of Seller with a Reconstitution..................22
SECTION 14. The Seller...................................................23
SECTION 15. Financial Statements.........................................24
SECTION 16. [Reserved]...................................................25
SECTION 17. Notices.....................................................25
SECTION 18. Severability Clause.........................................25
SECTION 19. Counterparts................................................26
SECTION 20. Governing Law...............................................26
SECTION 21. Intention of the Parties....................................26
SECTION 22. Successors and Assigns; Assignment of
Purchase Agreement..........................................26
SECTION 23. Waivers.....................................................27
SECTION 24. Exhibits....................................................27
SECTION 25. General Interpretive Principles.............................27
SECTION 26. Reproduction of Documents...................................27
SECTION 27. Further Agreements..........................................28
SECTION 28. [Reserved]..................................................28
SECTION 29. No Solicitation.............................................28
SECTION 30. Waiver of Trial by Jury.....................................28
SECTION 31. Governing Law Jurisdiction; Consent
to Service of Process.......................................29
EXHIBITS
EXHIBIT A CONTENTS OF EACH MORTGAGE FILE
EXHIBIT B FORM OF SELLER'S OFFICER'S CERTIFICATE
EXHIBIT C FORM OF OPINION OF COUNSEL TO THE SELLER
EXHIBIT D FORM OF ASSIGNMENT AND CONVEYANCE AGREEMENT
MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT
This MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT (the "Agreement"),
dated as of September~24, 2004, by and between Franklin Credit Management
Corporation, a Delaware corporation (the "Purchaser"), and Master Financial,
Inc., a California corporation (the "Seller").
W~I~T~N~E~S~S~E~T~H:
WHEREAS, the Seller desires to sell, from time to time, to the Purchaser,
and the Purchaser desires to purchase, from time to time, from the Seller,
certain first and second lien or unsecured, fixed-rate residential mortgage
loans, certain of which are insured by FHA (as defined below) (the "Mortgage
Loans") on a servicing released basis as described herein, and which shall be
delivered in pools of whole loans (each, a "Mortgage Loan Package") on various
dates as provided herein (each, a "Closing Date");
WHEREAS, each Mortgage Loan is either unsecured or secured by a mortgage,
deed of trust or other security instrument creating a first or second lien on a
residential dwelling located in the jurisdiction indicated on the Mortgage Loan
Schedule for the related Mortgage Loan Package;
WHEREAS, the Purchaser and the Seller wish to prescribe the manner of the
conveyance, servicing by the Interim Servicer and control of the Mortgage Loans;
and
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 Purchaser and the Seller agree
as follows:
SECTION 1. Definitions.
For purposes of this Agreement the following capitalized terms shall have
the respective meanings set forth below.
Accepted Servicing Practices: 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.
Act: The National Housing Act, as amended from time to time.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person 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" and
"controlled" have meanings correlative to the foregoing.
Agreement: This Mortgage Loan Purchase and Warranties Agreement and all
amendments hereof and supplements hereto.
Assignment and Conveyance Agreement: As defined in Subsection~6.01.
Assignment of Mortgage: 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 the Purchaser.
Balloon Mortgage Loan: Any Mortgage Loan which by its original terms or any
modifications thereof provides for amortization beyond its scheduled maturity
date.
Business Day: Any day other than (i)~a Saturday or Sunday, (ii)~a day on
which banking and savings and loan institutions, in the State of New York or the
State in which the Interim Servicer's servicing operations are located or
(iii)~the state in which the Custodian's operations are located, are authorized
or obligated by law or executive order to be closed.
Closing Date: The date or dates on which the Purchaser from time to time
shall purchase, and the Seller from time to time shall sell, the Mortgage Loans
listed on the related Mortgage Loan Schedule with respect to the related
Mortgage Loan Package.
Code: Internal Revenue Code of 1986, as amended.
Collection Account: The separate trust account created and maintained
pursuant to the Interim Servicing Agreement (with respect to each Mortgage Loan,
as specified therein).
Condemnation Proceeds: All awards or settlements in respect of a Mortgaged
Property, whether permanent or temporary, partial or entire, by exercise of the
power of eminent domain or condemnation, to the extent not required to be
released to a Mortgagor in accordance with the terms of the related Mortgage
Loan Documents.
Custodial Agreement: The agreement(s) governing the retention of the
originals of each Mortgage Note, Mortgage, Assignment of Mortgage and other
Mortgage Loan Documents. If more than one Custodial Agreement is in effect at
any given time, all of the individual Custodial Agreements shall collectively be
referred to as the "Custodial Agreement".
Custodian: U.S. Bank, National Association, and its successors in interest
or any successor to the Custodian under the Custodial Agreement as therein
provided.
Cut-off Date: The date or dates designated as such on the related Mortgage
Loan Schedule with respect to the related Mortgage Loan Package.
Deleted Mortgage Loan: A Mortgage Loan that is repurchased by the Seller in
accordance with the terms of this Agreement.
Determination Date: The date specified in the Interim Servicing Agreement
(with respect to each Mortgage Loan, for an interim period, as specified
therein).
Due Date: The day of the month on which the Monthly Payment is due on a
Mortgage Loan, exclusive of any days of grace.
Fannie Mae: The Federal National Mortgage Association, or any successor
thereto.
FHA: 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 Contract of Insurance: The contract of insurance under Title I covering
the related FHA Mortgage Loan.
FHA Insurance: The insurance proved by FHA pursuant to Title I of the
National Housing Act, as evidenced by the FHA Contract of Insurance.
FHA Mortgage Loan: Each Mortgage Loan eligible for FHA Insurance, as
indicated on the related Mortgage Loan Schedule.
First Lien Loan: A Mortgage Loan secured by a first lien Mortgage on the
related Mortgaged Property.
Freddie Mac: The Federal Home Loan Mortgage Corporation, or any successor
thereto.
HUD: The Department of Housing and Urban Development, or any federal agency
or official thereof which may from time to time succeed to the functions thereof
with regard to mortgage insurance issued by the FHA. The term "HUD", for
purposes of this Agreement, is also deemed to include subdivisions thereof such
as the FHA and Government National Mortgage Association. Insurance Proceeds:
With respect to each Mortgage Loan, proceeds of insurance policies insuring the
Mortgage Loan or the related Mortgaged Property, including any applicable FHA
insurance policies.
Interim Servicer: The servicer under the Interim Servicing Agreement, or
its successor in interest or assigns, or any successor to the Interim Servicer
under the Interim Servicing Agreement, as therein provided. Initially the
Interim Servicer shall be the Seller.
Interim Servicing Agreement: The agreement to be entered into by the
Purchaser and the Interim Servicer, providing for the Interim Servicer to
service the Mortgage Loans as specified by the
Interim Servicing Agreement.
Liquidated Mortgage Loan: Each Mortgage Loan identified as a Liquidated
Mortgage Loan on the related Mortgage Loan Schedule.
Liquidation Proceeds: Cash received in connection with the liquidation of a
defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage
Loan, trustee's sale, foreclosure sale or otherwise or the sale of the related
Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the
Mortgage Loan.
Manufactured Home: A single family residential unit that is constructed in
a factory in sections in accordance with the Federal Manufactured Home
Construction and Safety Standards adopted on July~15, 1976, by the Department of
Housing and Urban Development ("HUD Code"), as amended in 2000, which preempts
state and local building codes. Each unit is identified by the presence of a HUD
Plate/Compliance Certificate label. The sections are then transported to the
site and joined together and affixed to a pre-built permanent foundation (which
satisfies the manufacturer's requirements and all state, county, and local
building codes and regulations). The manufactured home is built on a
non-removable, permanent frame chassis that supports the complete unit of walls,
floors, and roof. The underneath part of the home may have running gear (wheels,
axles, and brakes) that enable it to be transported to the permanent site. The
wheels and hitch are removed prior to anchoring the unit to the permanent
foundation. The manufactured home must be classified as real estate and taxed
accordingly. The permanent foundation may be on land owned by the mortgager or
may be on leased land.
Monthly Payment: The scheduled monthly payment of principal and interest on
a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument securing a
Mortgage Note, which creates a first lien, in the case of a First Lien Loan, or
a second lien, in the case of a Second Lien Loan, on the Mortgaged Property.
Mortgage File: The items pertaining to a particular Mortgage Loan referred
to in Exhibit~A annexed hereto, and any additional documents required to be
added to the Mortgage File pursuant to this Agreement.
Mortgage Interest Rate: The annual rate of interest borne on a Mortgage
Note with respect to each Mortgage Loan.
Mortgage Loan: An individual Mortgage Loan which is the subject of this
Agreement, each Mortgage Loan originally sold and subject to this Agreement
being identified on the applicable Mortgage Loan Schedule, which Mortgage Loan
includes without limitation the Mortgage File, the Monthly Payments, Principal
Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds,
Servicing Rights and all other rights, benefits, proceeds and obligations
arising from or in connection with such Mortgage Loan, excluding replaced or
repurchased mortgage loans.
Mortgage Loan Documents: The documents required to be delivered to the
Custodian pursuant to Subsection~6.03 hereof with respect to any Mortgage Loan.
Mortgage Loan Package: Each pool of Mortgage Loans, which shall be
purchased by the Purchaser from the Seller from time to time on each Closing
Date.
Mortgage Loan Schedule: The schedule of Mortgage Loans setting forth the
following information with respect to each Mortgage Loan in the related Mortgage
Loan Package: (1)~the Seller's Mortgage Loan identifying number; (2)~the
Mortgagor's name; (3)~the street address of the Mortgaged Property including the
city, state and zip code; (4)~a code indicating whether the Mortgaged Property
is owner-occupied; (5)~the number and type of residential units constituting the
Mortgaged Property; (6)~the original months to maturity or the remaining months
to maturity from the related Cut-off Date, in any case based on the original
amortization schedule and, if different, the maturity expressed in the same
manner but based on the actual amortization schedule; (7)~the amount of monthly
principal and interest collected on such Mortgage Loan during each of the 3
months preceding the related Cut-off Date; (8)~the Mortgage Interest Rate as of
the related Cut-off Date; (9)~the date on which the Monthly Payment was due on
the Mortgage Loan and, if such date is not consistent with the Due Date
currently in effect, such Due Date; (10)~the stated maturity date; (11)~the
first payment date; (12)~the amount of the Monthly Payment as of the related
Cut-off Date; (13)~the last payment date on which a payment was actually applied
to the outstanding principal balance or interest; (14)~the original principal
amount of the Mortgage Loan; (15)~the principal balance of the Mortgage Loan as
of the close of business on the related Cut-off Date, after deduction of
payments of principal due and collected on or before the related Cut-off Date;
(16)~a code indicating whether the Mortgage Loan is an FHA Mortgage Loan (i.e.,
Title~I loan); (17)~whether such Mortgage Loan provides for a Prepayment Penalty
and, if applicable, the Prepayment Penalty period; (18)~the credit risk score
(FICO score); (19)~the date of origination; (20)~a code indicating whether the
Mortgage Loan is a Balloon Mortgage Loan; (21)~the Due Date for the first
Monthly Payment; (22)~the original Monthly Payment due; (23)~whether such
Mortgage Loan was modified; (24)~whether such Mortgage Loan is a liquidated
Mortgage Loan; (25)~the property type, if any, securing such Mortgage Loan
(i.e., single family, Manufactured Home, cooperative, condominium, etc.);
(26)~whether such Mortgage Loan is a First Lien Loan, Second Lien Loan or
unsecured; (27)~whether such Mortgage Loan is subject to bankruptcy and, if so,
the type (i.e., Chapter~7 or Chapter~13) and the pre-petition and post-petition
amounts outstanding under such Mortgage Loan; and (28)~whether the related
Mortgagor requested relief under the Servicemember's Relief Act. With respect to
the Mortgage Loans in the aggregate, the Mortgage Loan Schedule shall set forth
the following information, as of the related Cut-off Date: (1)~the number of
Mortgage Loans; (2)~the current aggregate outstanding principal balance of the
Mortgage Loans; (3)~the weighted average Mortgage Interest Rate of the Mortgage
Loans; (4)~the weighted average maturity of the Mortgage Loans; (5)~the
applicable Cut-off Date; and (6)~the applicable Closing Date.
Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
Mortgaged Property: With respect to each Mortgage Loan, the Mortgagor"s
real property securing repayment of a related Mortgage Note, consisting of an
unsubordinated estate in fee simple or, with respect to real property located in
jurisdictions in which the use of leasehold estates for residential properties
is a widely-accepted practice, a leasehold estate, in a single parcel or
multiple parcels of real property improved by a Residential Dwelling.
Mortgagor: The obligor on a Mortgage Note.
Officer's Certificate: A certificate signed by the Chairman of the Board or
the Vice Chairman of the Board or a President or a Vice President or the
Secretary or one of the Assistant Treasurers or Assistant Secretaries of the
Seller, and delivered to the Purchaser as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Seller, reasonably acceptable to the Purchaser.
Person: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof.
Preliminary Mortgage Schedule: As defined in Section~3.
Prepayment Penalty: With respect to each Mortgage Loan, the penalty if the
Mortgagor prepays such Mortgage Loan as provided in the related Mortgage Note or
Mortgage.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Loan which is received in advance of its scheduled Due Date, including
any prepayment penalty or premium thereon, and which is not accompanied by an
amount of interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepaymen
Purchase Price: The price paid on the related Closing Date by the
Purchaser to the Seller in exchange for the Mortgage Loans purchased on such
Closing Date as calculated in Section~4 of this Agreement.
Purchaser: Franklin Credit ManagementCorporation, a Delaware corporation,
and its successors in interest and assigns, or any successor to the Purchaser
under this Agreement as herein provided.
Reconstitution: A Whole Loan Transfer or a Securitization Transfer.
Reconstitution Date: As defined in Section~13.
Relief Act: The Servicemembers' Civil Relief Act.
Remittance Date: The date specified in the Interim Servicing Agreement
(with respect to each Mortgage Loan, as specified therein).
Repurchase Price: With respect to any Mortgage Loan, a price equal to
the Purchase Price with respect to such Mortgage Loan (reduced by all amounts
previously received by the Purchaser with respect to the Mortgage Loan
representing payments or recoveries of principal made by the Seller prior to the
Cut-off Date) plus accrued and unpaid interest at the Mortgage Note rate from
and after the related Closing Date through the re-purchase date, plus any
advances, costs, expenses, and out of pocket costs incurred by Purchaser in
connection with such Mortgage Loan.
Residential Dwelling: Any one of the following: (i)~a detached
one-family dwelling, (ii)~a detached two- to four-family dwelling, (iii)~a
one-family dwelling unit in a condominium project or (iv)~a one-family dwelling
in a planned unit development, none of which is a dwelling unit in a residential
cooperative housing corporation, mobile home or Manufactured Home.
RESPA: Real Estate Settlement Procedures Act, as amended from time to
time.
Second Lien Loan: A Mortgage Loan secured by a second lien
Mortgage on the related Mortgaged Property.
Securitization Transfer: The sale or transfer of some or all of the
Mortgage Loans to a trust or other entity as part of a publicly-issued or
privately-placed, rated or unrated mortgage pass-through or other
mortgage-backed securities transaction.
Seller: As defined in the initial paragraph of the Agreement,
together with its successors in interest.
Servicing Fee: With respect to each Mortgage Loan subject to the
Interim Servicing Agreement, a fee payable monthly equal to one-twelfth of
the product of (a)~the Servicing Fee Rate and (b)~the outstanding principal
balance of such Mortgage Loan. Such fee shall be payable monthly and shall
be pro-rated for any portion of a month during which the Mortgage Loan is
serviced by the Interim Servicer under the Interim Servicing Agreement. The
obligation of the Purchaser to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion (including recoveries
with respect to interest from Liquidation Proceeds, to the extent permitted by
this Agreement) of such Monthly Payment collected by the Interim Servicer,or as
otherwise provided under this Agreement.
Servicing Fee Rate: An amount per annum as set forth in the Interim
Servicing Agreement.
Servicing File: With respect to each Mortgage Loan, the file
retained by the Interim Servicer consisting of originals or copies of all
documents in the Mortgage File which are not delivered to the Purchaser or the
Custodian.
Servicing Rights: Any and all of the following: (a)~any and all
rights to service the Mortgage Loans; (b)~any payments to or monies
received by the Seller for servicing the Mortgage Loans; (c)~any late fees,
penalties or similar payments with respect to the Mortgage Loans; (d)~all
agreements or documents creating, defining or evidencing any such servicing
rights to the extent they relate to such servicing rights and all rights of the
Seller thereunder; (e)~all accounts and other rights to payment related to
any of the property described in this paragraph; and (f)~any and all
documents, files, records, servicing files, servicing documents, servicing
records, data tapes, computer records, or other information pertaining to the
Mortgage Loans or pertaining to the past, present or prospective servicing of
the Mortgage Loans.
Stated Principal Balance: As to each Mortgage Loan on any date
of determination,(i)~the principal balance of such Mortgage Loan at the
related Cut-off Date after giving effect to payments of principal due on or
before such date, to the extent actually received, minus (ii)~all
amounts previously distributed to the Purchaser with respect to the related
Mortgage Loan representing payments or recoveries of principal on such
Mortgage Loan.
Successor Servicer: Any servicer of one or more Mortgage Loans
designated by the Purchaser as being entitled to the benefits of the
indemnifications set forth in Subsections 9.03 and 14.01.
Whole Loan Transfer: The sale or transfer by Purchaser of some or all
of the Mortgage Loans in a whole loan or participation format pursuant to a
Reconstitution Agreement.
SECTION 2. Agreement to Purchase.
The Seller agrees to sell from time to time, and the Purchaser
agrees to purchase from time to time, Mortgage Loans having an
aggregate principal balance on the related Cut-off Date in an amount
agreed to by the Purchaser and the Seller as evidenced by the actual
aggregate principal balance of the Mortgage Loans accepted by the
Purchaser on each Closing Date. The price for each Mortgage Loan shall
be the related Purchase Price as set forth in Section~4.
SECTION 3. Mortgage Schedules.
The Seller from time to time shall provide the Purchaser with
certain information constituting a preliminary listing of the Mortgage
Loans to be purchased on each Closing Date in accordance with the
instructions of the Purchaser (each, a "Preliminary Mortgage
Schedule").
The Seller shall deliver the related Mortgage Loan Schedule for
the Mortgage Loans to be purchased on a particular Closing Date to the
Purchaser at least two (2) Business Days prior to the related Closing
Date.
SECTION 4. Purchase Price.
The "Purchase Price" for each Mortgage Loan shall be the
percentage of par as stated in the related Assignment and Conveyance
Agreement, multiplied by the aggregate principal balance, as of the
related Cut-off Date, of such Mortgage Loan listed on the related
Mortgage Loan Schedule. The initial principal amount of the related
Mortgage Loans shall be the aggregate principal balance of the
Mortgage Loans, so computed as of the related Cut-off Date.
In addition to the Purchase Price as described above, the
Purchaser shall pay to the Seller, at closing, up to 60 days of
accrued interest on the current principal amount of each related
Mortgage Loan (other than Liquidated Mortgage Loans) as of the related
Cut-off Date only if such Mortgage Loan is less than 60~days
delinquent as of the Cut-off Date. The Purchase Price plus accrued
interest as set forth in the preceding sentence shall be paid to the
Seller by wire transfer of immediately available funds to an account
designated by the Seller in writing.
The Purchaser shall be entitled to (1)~all principal collected on
or after the related Cut-off Date, and (2)~all payments of interest on
the Mortgage Loans net of applicable Servicing Fees (minus that
portion of any such payment which is allocable to the period prior to
the related Cut-off Date). If, after the related Closing Date, the
Seller receives any such amounts payable to the Purchaser, the Seller
shall, within 2 Business Days of receipt, forward such amounts to the
Purchaser.
SECTION 5. Examination of Mortgage Files.
At least ten (10) Business Days prior to the related Closing
Date, the Seller shall (a)~deliver to the Purchaser or its designee in
escrow, for examination with respect to each Mortgage Loan to be
purchased, the related Mortgage File, including a copy of the
Assignment of Mortgage, pertaining to each Mortgage Loan, or (b)~make
the related Mortgage File available to the Purchaser for examination
at such other location as shall otherwise be acceptable to the
Purchaser. Such examination may be made by the Purchaser or its
designee at any reasonable time before or after the related Closing
Date. If the Purchaser makes such examination prior to the related
Closing Date and determines, in its sole discretion, that any Mortgage
Loans are unacceptable to the Purchaser for any reason, such Mortgage
Loans shall be deleted from the related Mortgage Loan Schedule. The
Purchaser may, at its option and without notice to the Seller,
purchase some or all of the Mortgage Loans without conducting any
partial or complete examination. The fact that the Purchaser or its
designee has conducted or has failed to conduct any partial or
complete examination of the Mortgage Files shall not affect the
Purchaser's rights to demand repurchase or other relief as provided
herein.
SECTION 6. Conveyance from Seller to Purchaser.
Subsection 6.01 Conveyance of Mortgage Loans.
The Seller, simultaneously with the delivery of the Mortgage Loan
Schedule with respect to the related Mortgage Loan Package to be
purchased on each Closing Date, shall execute and deliver an
Assignment and Conveyance Agreement in the form attached hereto as
Exhibit~D (the "Assignment and Conveyance Agreement"). The Seller
shall cause the Servicing File retained by the Interim Servicer
pursuant to this Agreement to be appropriately identified in the
Seller's computer system and/or books and records, as appropriate, to
clearly reflect the sale of the related Mortgage Loan to the
Purchaser. The Seller shall cause the Interim Servicer to release from
its custody the contents of any Servicing File retained by it only in
accordance with this Agreement or the Interim Servicing Agreement,
except when such release is required in connection with a repurchase
of any such Mortgage Loan pursuant to Subsection~9.03.
Subsection 6.02 Books and Records.
Record title to each Mortgage as of the related Closing Date
shall be in the name of the Seller, an Affiliate of the Seller, the
Purchaser or one or more designees of the Purchaser, as the Purchaser
shall select. Notwithstanding the foregoing, each Mortgage and related
Mortgage Note shall be possessed solely by the Purchaser or the
appropriate designee of the Purchaser, as the case may be. All rights
arising out of the Mortgage Loans including, but not limited to, all
funds received by the Seller or the Interim Servicer after the related
Cut-off Date on or in connection with a Mortgage Loan shall be vested
in the Purchaser or one or more designees of the Purchaser; provided,
however, that all funds received on or in connection with a Mortgage
Loan shall be received and held by the Seller or the Interim Servicer
in trust for the benefit of the Purchaser or the appropriate designee
of the Purchaser, as the case may be, as the owner of the Mortgage
Loans pursuant to the terms of this Agreement.
The Seller shall be or shall cause the Interim Servicer to be
responsible for maintaining, and shall maintain, a complete set of
books and records for each Mortgage Loan which shall be marked clearly
to reflect the ownership of each Mortgage Loan by the Purchaser.
The sale of each Mortgage Loan shall be reflected on the Seller's
balance sheet and other financial statements as a sale of assets by
the Seller.
Subsection 6.03 Delivery of Mortgage Loan Documents.
The Seller shall deliver and release to the Custodian no later
than two (2) Business Days prior to the related Closing Date those
Mortgage Loan Documents set forth on Exhibit~A hereto as required by
the Custodial Agreement with respect to each Mortgage Loan set forth
on the related Mortgage Loan Schedule.
The Custodian shall certify its receipt of all such Mortgage Loan
Documents required to be delivered pursuant to the Custodial Agreement
for the related Closing Date, as evidenced by the Initial
Certification of the Custodian in the form annexed to the Custodial
Agreement. The Seller shall comply with the terms of the Custodial
Agreement and the Purchaser shall pay all fees and expenses of the
Custodian.
The Seller shall or shall cause the Interim Servicer to include
in the Servicing File original documents evidencing an assumption,
modification, consolidation or extension of any Mortgage Loan entered
into in accordance with this Agreement within two weeks of their
execution, provided, however, that the Seller shall provide the
Interim Servicer for inclusion in the Servicing File, with a certified
true copy of any such document submitted for recordation within two
weeks of its execution, and shall promptly provide the original of any
document submitted for recordation or a copy of such document
certified by the appropriate public recording office to be a true and
complete copy of the original within ninety days of its submission for
recordation.
In the event any document required to be delivered to the
Custodian in the Custodial Agreement, including an original or copy of
any document submitted for recordation to the appropriate public
recording office, is not so delivered to the Custodian, or to such
other Person as the Purchaser shall designate in writing, within 90
days following the related Closing Date (other than with respect to
the Assignments of Mortgage which shall be delivered to the Custodian
in blank and recorded subsequently by the Purchaser or its designee),
and in the event that the Seller does not cure such failure within 60
days of discovery or receipt of written notification of such failure
from the Purchaser, the related Mortgage Loan shall, upon the request
of the Purchaser, be repurchased by the Seller at the price and in the
manner specified in Subsection~9.03. The foregoing repurchase
obligation shall not apply in the event that the Seller cannot deliver
an original document submitted for recordation to the appropriate
public recording office within the specified period due to a delay
caused by the recording office in the applicable jurisdiction;
provided that the Seller shall instead deliver a recording receipt of
such recording office or, if such recording receipt is not available,
an officer"s certificate of a servicing officer of the Seller,
confirming that such documents have been accepted for recording;
provided that, upon request of the Purchaser and delivery by the
Purchaser to the Seller of a schedule of the related Mortgage Loans,
the Seller shall reissue and deliver to the Purchaser or its designee
said officer's certificate.
The Seller shall pay all fees or costs in transferring all
original documents to the Custodian or, upon written request of the
Purchaser, to the Purchaser or the Purchaser's designee. The Purchaser
or the Purchaser's designee shall be responsible for recording the
Assignments of Mortgage. Subsection 6.04 [Reserved].
SECTION 7. Servicing of the Mortgage Loans.
The Mortgage Loans have been sold by the Seller to the Purchaser
on a servicing released basis. Subject to, and upon the terms and
conditions of this Agreement and the Interim Servicing Agreement (with
respect to each Mortgage Loan, for an interim period, as specified
therein), the Seller hereby sells, transfers, assigns, conveys and
delivers to the Purchaser the Servicing Rights.
The Purchaser shall retain the Interim Servicer as contract
servicer of the Mortgage Loans for an interim period pursuant to and
in accordance with the terms and conditions contained in the Interim
Servicing Agreement (with respect to each Mortgage Loan, for an
interim period, as specified therein). The Seller shall cause the
Interim Servicer to execute the Interim Servicing Agreement on the
initial Closing Date.
Pursuant to the Interim Servicing Agreement (with respect to each
Mortgage Loan, for an interim period, as specified therein), the
Interim Servicer shall begin servicing the Mortgage Loans on behalf of
the Purchaser and shall be entitled to a Servicing Fee with respect to
such Mortgage Loans until the applicable Transfer Date. The Interim
Servicer shall conduct such servicing in accordance with the Interim
Servicing Agreement.
SECTION 8. Transfer of Servicing.
On the applicable Transfer Date, the Purchaser, or its designee,
shall assume all servicing responsibilities related to, and the Seller
shall cause the Interim Servicer to cease all servicing
responsibilities related to, the related Mortgage Loans subject to
such Transfer Date. The Transfer Date shall be the date determined in
accordance with Section!~6.02 of the Interim Servicing Agreement(with
respect to each Mortgage Loan, for an interim period, as specified
therein).
On or prior to the applicable Transfer Date, the Seller shall, at
its sole cost and expense, take such steps as may be necessary or
appropriate to effectuate and evidence the transfer of the servicing
of the related Mortgage Loans to the Purchaser, or its designee,
including but not limited to the following:
(a) Notice to Mortgagors. The Seller shall cause the Interim
Servicer to mail to the Mortgagor of each related Mortgage Loan a
letter advising such Mortgagor of the transfer of the servicing of the
related Mortgage Loan to the Purchaser, or its designee, in accordance
with the Cranston Gonzales National Affordable Housing Act of 1990;
provided, however, the content and format of the letter shall have the
prior approval of the Purchaser. The Seller shall cause the Interim
Servicer to provide the Purchaser with copies of all such related
notices no later than the Transfer Date.
(b) Notice to Taxing Authorities and Insurance Companies. The
Seller shall cause the Interim Servicer to transmit to the applicable
taxing authorities and insurance companies and/or agents, notification
of the transfer of the servicing to the Purchaser, or its designee,
and instructions to deliver all notices, tax bills and insurance
statements, as the case may be, to the Purchaser from and after the
Transfer Date. The Seller shall cause the Interim Servicer to provide
the Purchaser with copies of all such notices no later than the
Transfer Date.
(c) Delivery of Servicing Records. The Seller shall cause the
Interim Servicer to forward to the Purchaser, or its designee, all
servicing records and the Servicing File in the Interim Servicer's
possession relating to each related Mortgage Loan including the
information enumerated in the Interim Servicing Agreement (with
respect to each such Mortgage Loan, for an interim period, as
specified therein).
(d) [Reserved.]
(e) [Reserved.]
.
(f) Mortgage Payments Received Prior to Transfer Date. Prior to
the Transfer Date all payments received by the Interim Servicer or the
Seller on each related Mortgage Loan shall be properly applied by the
Seller to the account of the particular Mortgagor.
(g) Mortgage Payments Received after Transfer Date. The amount of
any related Monthly Payments received by the Seller after the Transfer
Date shall be properly endorsed and forwarded to the Purchaser by
overnight mail on the date of receipt at the expense of the Purchaser.
(h) Misapplied Payments. Misapplied payments shall be processed
as follows:
(i) All parties shall cooperate in correcting misapplication
errors;
(ii) The party receiving notice of a misapplied payment occurring
prior to the applicable Transfer Date and discovered after the
Transfer Date shall immediately notify the other party;
(iii) If a misapplied payment which occurred prior to the
Transfer Date cannot be identified and said misapplied payment has
resulted in a shortage in the Collection Account, the Seller shall be
liable for the amount of such shortage. The Seller shall reimburse the
Purchaser for the amount of such shortage within thirty (30)~days
after receipt of written demand therefor from the Purchaser;
(iv) If a misapplied payment which occurred prior to the Transfer
Date has created an improper Purchase Price as the result of an
inaccurate outstanding principal balance, a check shall be issued to
the party shorted by the improper payment application within five
(5)~Business Days after notice thereof by the other party; and
(v) Any check issued under the provisions of this Section~8(h)
shall be accompanied by a statement indicating the corresponding
Seller and/or the Purchaser Mortgage Loan identification number and an
explanation of the allocation of any such payments.
(i) Books and Records. On the Transfer Date, the books, records
and accounts of the Seller with respect to the related Mortgage Loans
shall be in accordance with all applicable Purchaser requirements.
(j) Reconciliation. The Seller shall, on or before the Transfer
Date, reconcile principal balances and make any necessary monetary
adjustments. Any such monetary adjustments will be transferred between
the Seller and the Purchaser as appropriate.
(k) IRS Forms. The Seller shall or shall cause the Interim
Servicer to file all IRS forms 1099, 1099A, 1098 or 1041 and K-1 which
are required to be filed on or before January 31, 2005 in relation to
the servicing and ownership of the related Mortgage Loans. The Seller
shall provide, in electronic format, the data used to prepare such
forms to the Purchaser upon request and shall reimburse the Purchaser
for any costs or penalties incurred by the Purchaser due to the
Seller's failure to comply with this paragraph.
SECTION 9. Representations, Warranties and Covenants of the Seller; Remedies for
Breach.
Subsection 9.01 Representations and Warranties Regarding the Seller.
The Seller represents, warrants and covenants to the Purchaser
that as of the date hereof and as of each Closing Date:
(a) Due Organization and Authority. The Seller is a corporation,
validly existing, and in good standing under the laws of its
jurisdiction of incorporation or formation and has all licenses
necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in the states where the
Mortgaged Property is located if the laws of such state require
licensing or qualification in order to conduct business of the type
conducted by the Seller. The Seller has corporate power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder; the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered pursuant to
this Agreement) by the Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this
Agreement has been duly executed and delivered and constitutes the
valid, legal, binding and enforceable obligation of the Seller, 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. All requisite corporate action has
been taken by the Seller to make this Agreement valid and binding upon
the Seller in accordance with its terms;
(b) No Consent Required. No consent, approval, authorization or
order is required for the transactions contemplated by this Agreement
from any court, governmental agency or body, or federal or state
regulatory authority having jurisdiction over the Seller is required
or, if required, such consent, approval, authorization or order has
been or will, prior to the related Closing Date, be obtained;
(c) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course
of business of the Seller, and the transfer, assignment and conveyance
of the Mortgage Notes and the Mortgages by the Seller pursuant to this
Agreement are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction;
(d) No Conflicts. Neither the execution and delivery of this
Agreement, the acquisition or origination of the Mortgage Loans by the
Seller, the sale of the Mortgage Loans to the Purchaser, the
consummation of the transactions contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of this
Agreement, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Seller's charter, by-laws or
other organizational documents or any legal restriction or any
agreement or instrument to which the Seller is now a party or by which
it is bound, or constitute a default or result in an acceleration
under any of the foregoing, or result in the violation of any law,
rule, regulation, order, judgment or decree to which the Seller or its
property is subject, or result in the creation or imposition of any
lien, charge or encumbrance that would have an adverse effect upon any
of its properties pursuant to the terms of any mortgage, contract,
deed of trust or other instrument, or impair the ability of the
Purchaser to realize on the Mortgage Loans, impair the value of the
Mortgage Loans, or impair the ability of the Purchaser to realize the
full amount of any insurance benefits accruing pursuant to this
Agreement;
(e) No Litigation Pending. There is no action, suit, proceeding
or investigation pending or threatened against the Seller, before any
court, administrative agency or other tribunal asserting the
invalidity of this Agreement, seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or which,
either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial
condition, properties or assets of the Seller, or in any material
impairment of the right or ability of the Seller to carry on its
business substantially as now conducted, or in any material liability
on the part of the Seller, or which would draw into question the
validity of this Agreement or the Mortgage Loans or of any action
taken or to be taken in connection with the obligations of the Seller
contemplated herein, or which would be likely to impair materially the
ability of the Seller to perform under the terms of this Agreement;
(f) Ability to Perform; Solvency. The Seller does not believe,
nor does it have any reason or cause to believe, that it cannot
perform each and every covenant contained in this Agreement. The
Seller is solvent and the sale of the Mortgage Loans will not cause
the Seller to become insolvent. The sale of the Mortgage Loans is not
undertaken with the intent to hinder, delay or defraud any of Seller's
creditors;
(g) Anti-Money Laundering Laws. The 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"); the 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;
(h) Delivery to the Custodian. The Mortgage Note, the Mortgage,
the Assignment of Mortgage and any other documents required to be
delivered with respect to each Mortgage Loan pursuant to the Custodial
Agreement, shall be delivered to the Custodian all in compliance with
the specific requirements of the Custodial Agreement. With respect to
each Mortgage Loan, the Seller will be in possession of a complete
Mortgage File in compliance with Exhibit~A hereto, except for such
documents as will be delivered to the Custodian;
(i) No Untrue Information. Neither this Agreement nor any
information, statement, tape, diskette, report, form, or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby (including any
Securitization Transfer or Whole Loan Transfer) contains or will
contain any untrue statement of fact or omits or will omit to state a
fact necessary to make the statements contained herein or therein not
misleading;
(j) No Brokers. The Seller has not dealt with any broker,
investment banker, agent or other person that may be entitled to any
commission or compensation in connection with the sale of the Mortgage
Loans;
(k) Sale Treatment. The Seller expects to be advised by its
independent certified public accountants that under generally accepted
accounting principles the transfer of the Mortgage Loans will be
treated as a sale on the books and records of the Seller and the
Seller has determined that the disposition of the Mortgage Loans
pursuant to this Agreement will be afforded sale treatment for tax and
accounting purposes;
(l) Owner of Record. The Seller is the owner of record of each
Mortgage and the indebtedness evidenced by each Mortgage Note, except
for the Assignments of Mortgage which have been sent for recording,
and upon recordation the Seller will be the owner of record of each
Mortgage and the indebtedness evidenced by each Mortgage Note, and
upon the sale of the Mortgage Loans to the Purchaser, the Seller will
retain the Mortgage Files with respect thereto in trust only for the
purpose of servicing and supervising the servicing of each Mortgage
Loan;
(m) Reasonable Purchase Price. The consideration received by the
Seller upon the sale of the Mortgage Loans under this Agreement
constitutes fair consideration and reasonably equivalent value for the
Mortgage Loans; and
(n) Credit Reporting. The Seller, as Interim Servicer, will fully
furnish, in accordance with the Fair Credit Reporting Act and its
implementing regulations, accurate and complete information (e.g.,
favorable and unfavorable) on its borrower credit files to Equifax,
Experian and Trans Union Credit Information Company (three of the
credit repositories), on a monthly basis. Additionally, the Seller, as
Interim Servicer, will transmit full-file credit reporting data for
each Mortgage Loan pursuant to Fannie Mae Guide Announcement 95-19 and
that for each Mortgage Loan, the Seller, as Interim Servicer, agrees
it shall report one of the following statuses each month as follows:
new origination, current, delinquent (30-, 60-, 90-days, etc.),
foreclosed, or charged-off.
Subsection 9.02 Representations and Warranties Regarding Individual Mortgage
Loans.
The Seller hereby represents and warrants to the Purchaser that,
as to each Mortgage Loan, as of the related Closing Date for such
Mortgage Loan:
(a) Mortgage Loans as Described. The information set forth in the
related Mortgage Loan Schedule is complete, true and correct;
(b) 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 delivered to the Custodian or to such other Person as
the Purchaser shall designate in writing, and the terms of which are
reflected in the related Mortgage Loan Schedule. The substance of any
such waiver is reflected on the related Mortgage Loan Schedule. No
Mortgagor has been released, in whole or in part, except in connection
with an assumption agreement, and which assumption agreement is part
of the Mortgage Loan File delivered to the Custodian or to such other
Person as the Purchaser shall designate in writing and the terms of
which are reflected in the related Mortgage Loan Schedule;
(c) Compliance with Applicable Laws. Any and all requirements of
any federal, state or local law or regulations including, without
limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity,
disclosure and all predatory and abusive lending laws applicable to
the Mortgage Loan, including, without limitation, any provisions
relating to prepayment penalties, have been complied with, the
consummation of the transactions contemplated hereby will not involve
the violation of any such laws or regulations, and the Seller shall
maintain in its possession, available for the Purchaser's inspection,
and shall deliver to the Purchaser upon demand, evidence of compliance
with all such requirements;
(d) Valid First or Second Lien. Each Mortgage with respect to a
Mortgage Loan identified as a First Lien Loan or Second Lien Loan on
the related Mortgage Loan Schedule, is a valid, subsisting,
enforceable and perfected, first lien (with respect to a First Lien
Loan) or second lien (with respect to a Second Lien Loan) on 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 with respect to the foregoing. 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 (with
respect to a First Lien Loan) or second lien (with respect to a Second
Lien Loan) and first priority (with respect to a First Lien Loan) or
second priority (with respect to a Second Lien Loan) security interest
on the property described therein and the Seller has full right to
sell and assign the same to the Purchaser;
(e) 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 (including, without limitation, any
provisions therein relating to prepayment penalties). 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 other 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 the Seller in connection with the origination of the Mortgage Loan
or in the application of any insurance in relation to such Mortgage
Loan. 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 or in the application for any
insurance in relation to such Mortgage Loan. The Seller has reviewed
all of the documents constituting the Servicing File and has made such
inquiries as it deems necessary to make and confirm the accuracy of
the representations set forth herein;
(f) 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;
(g) Ownership. The 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 the Purchaser, the
Seller will retain the Mortgage Files or any part thereof with respect
thereto not delivered to the Custodian, the Purchaser or the
Purchaser's 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 the Seller has good, indefeasible and
marketable title thereto, and has full right to transfer and sell the
Mortgage Loan to the Purchaser 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 Agreement and
following the sale of each Mortgage Loan, the Purchaser will own such
Mortgage Loan free and clear of any encumbrance, equity, participation
interest, lien, pledge, charge, claim or security interest. The Seller
intends to relinquish all rights to possess, control and monitor the
Mortgage Loan. After the related Closing Date, the Seller will have no
right to modify or alter the terms of the sale of the Mortgage Loan
and the Seller will have no obligation or right to repurchase the
Mortgage Loan or substitute another Mortgage Loan, except as provided
in this Agreement;
(h) Ability to Service. The Seller is an approved seller/servicer
of residential mortgage loans for FHA with the facilities, procedures,
and experienced personnel necessary for the sound servicing of
mortgage loans of the same type as the Mortgage Loans. The Seller is
in good standing to sell mortgage loans to and service mortgage loans
for FHA, and no event has occurred, including but not limited to a
change in insurance coverage, which would make the Seller unable to
comply with FHA eligibility requirements or which would require
notification to FHA;
(i) 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 paragraph (d)
above;
(j) 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. The Seller is in possession of a
complete, true and accurate Mortgage File in compliance with Exhibit~A
hereto, except for such documents the originals of which have been
delivered to the Custodian;
(k) Collection Practices. The origination, servicing and
collection practices used by the Seller and the Interim Servicer 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;
(l) FHA Mortgage Loans. Except for those Mortgage Loans
identified on the related Mortgage Loan Schedule as FHA Mortgage Loans
(i.e., Title~I loans), no Mortgage Loan is an FHA Mortgage Loan (i.e.,
Title~I loan);
(m) Recordation. Each original Mortgage was recorded and all
subsequent assignments of the original Mortgage (other than the
assignment to the Purchaser) have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the
lien thereof as against creditors of the Seller, or is in the process
of being recorded; and
(n) Except with respect to normal and customary bankruptcy and
foreclosure proceedings, there is no action, suit, proceeding or
investigation pending or threatened with respect to any Mortgage Loan,
before any court, administrative agency or other tribunal.
Subsection 9.03 Remedies for Breach of Representations and Warranties.
It is understood and agreed that the representations and
warranties set forth in Subsections 9.01 and 9.02 shall survive the
sale of the Mortgage Loans to the Purchaser and shall inure to the
benefit of the Purchaser, notwithstanding any restrictive or qualified
endorsement on any Mortgage Note or Assignment of Mortgage or the
examination or failure to examine any Mortgage File. Upon discovery by
either the Seller or the Purchaser of a breach of any of the foregoing
representations and warranties, the party discovering such breach
shall give prompt written notice to the other.
Within 60 days of the earlier of either discovery by or notice to
the Seller of any such breach of a representation or warranty, which
materially and adversely affects the value of the Mortgage Loans or
the interest of the Purchaser therein (or which materially and
adversely affects the value of the applicable Mortgage Loan or the
interest of the Purchaser therein in the case of a representation and
warranty relating to a particular Mortgage Loan), the Seller shall use
its best efforts promptly to cure such breach in all material respects
and, if such breach cannot be cured, the Seller shall, at the
Purchaser's option, repurchase such Mortgage Loan at the Repurchase
Price. In the event that a breach shall involve any representation or
warranty set forth in Subsection`9.01, and such breach cannot be cured
within 60 days of the earlier of either discovery by or notice to the
Seller of such breach, all of the Mortgage Loans affected by such
breach shall, at the Purchaser's option, be repurchased by the Seller
at the Repurchase Price. Any repurchase of a Mortgage Loan or Loans
pursuant to the foregoing provisions of this Subsection~9.03 shall be
accomplished by either (a)~if the Interim Servicing Agreement has been
entered into and is in effect, deposit in the Collection Account of
the amount of the Repurchase Price for distribution to the Purchaser
on the next scheduled Remittance Date, after deducting therefrom any
amount received in respect of such repurchased Mortgage Loan or Loans
and being held in the Collection Account for future distribution or
(b)~if the Interim Servicing Agreement has not been entered into or is
no longer in effect, by direct remittance of the Repurchase Price to
the Purchaser or its designee in accordance with the Purchaser's
instructions.
At the time of repurchase, the Purchaser and the Seller shall
arrange for the reassignment of the Deleted Mortgage Loan to the
Seller and the delivery to the Seller of any documents held by the
Custodian relating to the Deleted Mortgage Loan. In the event of a
repurchase or substitution, the Seller shall, simultaneously with such
reassignment, give written notice to the Purchaser that such
repurchase has taken place, amend the Mortgage Loan Schedule to
reflect the withdrawal of the Deleted Mortgage Loan from this
Agreement.
In addition to such repurchase obligation, the Seller shall
indemnify the Purchaser and its present and former directors,
officers, employees and agents and any successor Servicer and its
present and former directors, officers, employees and agents and hold
such parties harmless against any losses, damages, penalties, fines,
forfeitures, legal fees and expenses and related costs, judgments, and
other costs and expenses resulting from any claim, demand, defense or
assertion based on or grounded upon, or resulting from, a breach of
the Seller representations and warranties contained in this Agreement
or any Reconstitution Agreement. It is understood and agreed that the
obligations of the Seller set forth in this Subsection~9.03 to cure,
substitute for or repurchase a defective Mortgage Loan and to
indemnify the Purchaser and Successor Servicer as provided in this
Subsection~9.03 and in Subsection~14.01 constitute the sole remedies
of the Purchaser respecting a breach of the foregoing representations
and warranties. For purposes of this paragraph "Purchaser" shall mean
the Person then acting as the Purchaser under this Agreement and any
and all Persons who previously were "Purchasers" under this Agreement
and "Successor Servicer" shall mean any Person designated as the
Successor Servicer pursuant to this Agreement and any and all Persons
who previously were "Successor Servicers" pursuant to this Agreement.
Any cause of action against the Seller relating to or arising out
of the breach of any representations and warranties made in
Subsections~9.01 and 9.02 shall accrue as to any Mortgage Loan upon
(i)~discovery of such breach by the Purchaser or notice thereof by the
Seller to the Purchaser, (ii)~failure by the Seller to cure such
breach or repurchase such Mortgage Loan as specified above, and
(iii)~demand upon the Seller by the Purchaser for compliance with this
Agreement.
SECTION 10. Closing.
The closing for the purchase and sale of each Mortgage Loan
Package shall take place on the related Closing Date. At the
Purchaser's option, each Closing shall be either: by telephone,
confirmed by letter or wire as the parties shall agree, or conducted
in person, at such place as the parties shall agree.
The closing for the Mortgage Loans to be purchased on each
Closing Date shall be subject to each of the following conditions:
(i) at least two Business Days prior to the related Closing Date,
the Seller shall deliver to the Purchaser a magnetic diskette, or
transmit by modem, a listing on a loan-level basis of the necessary
information to compute the Purchase Price of the Mortgage Loans
delivered on such Closing Date (including accrued interest), and
prepare a Mortgage Loan Schedule;
(ii) all of the representations and warranties of the Seller
under this Agreement and of the Interim Servicer under the Interim
Servicing Agreement (with respect to each Mortgage Loan for an interim
period, as specified therein) shall be true and correct as of the
related Closing Date and no event shall have occurred which, with
notice or the passage of time, would constitute a default under this
Agreement or an Event of Default under the Interim Servicing
Agreement;
(iii) the Purchaser shall have received, or the Purchaser's
attorneys shall have received in escrow, all closing documents as
specified in Section~11 of this Agreement, in such forms as are agreed
upon and acceptable to the Purchaser, duly executed by all signatories
other than the Purchaser as required pursuant to the terms hereof;
(iv) the Seller shall have delivered and released to the
Custodian all documents required pursuant to the Custodial Agreement;
and
(v) all other terms and conditions of this Agreement shall have
been complied with.
Subject to the foregoing conditions, the Purchaser shall pay to
the Seller on the related Closing Date the Purchase Price, plus any
applicable accrued interest pursuant to Section~4 of this Agreement,
by wire transfer of immediately available funds to the account
designated by the Seller.
SECTION 11. Closing Documents.
The Closing Documents for the Mortgage Loans to be purchased on each Closing
Date shall consist of fully executed originals of the following documents:
(1) this Agreement (to be executed and delivered only for the initial
Closing Date);
(2) the Interim Servicing Agreement, dated as of the initial Cut-off Date
(to be executed and delivered only for the initial Closing Date);
(3) with respect to the initial Closing Date, the Custodial Agreement,
dated as of the initial Cut-off Date;
(4) the related Mortgage Loan Schedule to be attached to the related
Assignment and Conveyance as the Mortgage Loan Schedule thereto);
(5) with respect to the initial Closing Date, an Officer's Certificate, in
the form of Exhibit~C hereto with respect to each of the Seller,
including all attachments thereto; with respect to subsequent
Closing Dates, an Officer's Certificate upon request of the Purchaser;
(6) with respect to the initial Closing Date, an Opinion of Counsel of
the Seller (who may be an employee of the Seller), in the form of
Exhibit~D hereto ("Opinion of Counsel of the "Seller"); with
respect to subsequent Closing Dates, an Opinion of Counsel of the
Seller upon request of the Purchaser;
(7) a certificate or other evidence of merger or change of name, signed or
stamped by the applicable regulatory authority, if any of the Mortgage
Loans were acquired by the Seller by merger or acquired or originated
by the Seller while conducting business under a name other than its
present name, if applicable; and.
(8) Assignment and Conveyance Agreement in the form of Exhibit~D hereto,
and all exhibits thereto.
The Seller shall bear the risk of loss of the closing documents until such time
as they are received by the Purchaser or its attorneys.
SECTION 12. Costs.
The Purchaser shall pay any commissions due its salesmen and the legal fees and
expenses of its attorneys and custodial fees. All other costs and expenses
incurred in connection with the transfer and delivery of the Mortgage Loans and
the Servicing Rights and the Seller's attorney's fees, shall be paid by the
Seller.
SECTION 13. Cooperation of Seller with a Reconstitution.
The Seller and the Purchaser agree that with respect to some or
all of the Mortgage Loans, after the related Closing Date, on one or
more dates (each, a "Reconstitution Date") at the Purchaser's sole
option, the Purchaser may effect a sale (each, a "Reconstitution") of
some or all of the Mortgage Loans then subject to this Agreement,
without recourse, to:
(i) one or more third party purchasers in one or more Whole Loan Transfers;
or
(ii) one or more trusts or other entities to be formed as part of one or
more Securitization Transfers.
With respect to each Whole Loan Transfer and each Securitization
Transfer entered into by the Purchaser, the Seller agrees to cooperate
fully with the Purchaser and any prospective purchaser with respect to
all reasonable requests and due diligence procedures. The Seller shall
provide to such servicer or issuer, as the case may be, and any other
participants or purchasers in such Reconstitution: (i)~any and all
information and appropriate verification of information which may be
reasonably available to the Seller or its affiliates, whether through
letters of its auditors and counsel or otherwise, as the Purchaser or
any such other participant shall request; and (ii)~such additional
representations, warranties, covenants, opinions of counsel, letters
from auditors, and certificates of public officials or officers of the
Seller or the Interim Servicer as are reasonably believed necessary by
the Purchaser or any such other participant. For purposes of the
previous sentence, "Purchaser" shall mean the Person then acting as
the Purchaser under this Agreement and any and all Persons who
previously were "Purchasers" under this Agreement. Any costs incurred
by the Seller in connection with its cooperation pursuant to this
Section~13 shall be at the expense of the Purchaser.
In the event the Purchaser has elected to have the Seller or the
Interim Servicer hold record title to the Mortgages, prior to the
Reconstitution Date, the Seller shall prepare an assignment of
mortgage in blank or to the prospective purchaser or trustee, as
applicable, from the Seller or the Interim Servicer, as applicable,
acceptable to the prospective purchaser or trustee, as applicable, for
each Mortgage Loan that is part of the Reconstitution and shall pay
all preparation and recording costs associated therewith. In
connection with the Reconstitution, the Seller shall execute or shall
cause the Interim Servicer to execute each assignment of mortgage,
track such Assignments of Mortgage to ensure they have been recorded
and deliver them as required by the prospective purchaser or trustee,
as applicable, upon the Seller's receipt thereof. Additionally, the
Seller shall prepare and execute or shall cause the Interim Servicer
to execute, at the direction of the Purchaser, any note endorsement in
connection with any and all seller/servicer agreements.
All Mortgage Loans not sold or transferred pursuant to a
Reconstitution shall remain subject to this Agreement and, if the
Interim Servicing Agreement shall remain in effect with respect to the
related Mortgage Loan Package, shall continue to be serviced in
accordance with the terms of this Agreement and the Interim Servicing
Agreement and with respect thereto this Agreement shall remain in full
force and effect.
SECTION 14. The Seller.
Subsection 14.01 Additional Indemnification by the Seller; Third Party Claims.
(a) The Seller shall indemnify the Purchaser and its present and
former directors, officers, employees and agents and any Successor
Servicer and its present and former directors, officers, employees and
agents, and hold such parties harmless against any and all claims,
losses, damages, penalties, fines, forfeitures, legal fees and
expenses (including legal fees and expenses incurred in connection
with the enforcement of the Seller's indemnification obligation under
this Subsection~14.01) and related costs, judgments, and any other
costs, fees and expenses that such parties may sustain in any way
related to the failure of the Seller to perform its duties and the
Interim Servicer to service the Mortgage Loans in strict compliance
with the terms of this Agreement or any breach of any of Seller's
representations, warranties and covenants set forth in this Agreement
(provided that such costs shall not include any lost profits). For
purposes of this paragraph "Purchaser" shall mean the Person then
acting as the Purchaser under this Agreement and any and all Persons
who previously were "Purchasers" under this Agreement and "Successor
Servicer" shall mean any Person designated as the Successor Servicer
pursuant to this Agreement and any and all Persons who previously were
"Successor Servicers" pursuant to this Agreement.
(b) Promptly after receipt by an indemnified party under this
Subsection~14.01 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Subsection~14.01, notify the
indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any
indemnified party under this Subsection~14.01, except to the extent
that it has been prejudiced in any material respect, or from any
liability which it may have, otherwise than under this
Subsection~14.01. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party; provided that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified
party or parties shall have reasonably concluded that there may be
legal defenses available to it or them and/or other indemnified
parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and
to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such
indemnified party for expenses incurred by the indemnified party in
connection with the defense thereof unless (i)~the indemnified party
shall have employed separate counsel in connection with the assertion
of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel
(together with one local counsel, if applicable)), (ii)~the
indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the
action or (iii)~the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party; and except that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii).
Subsection 14.02 Merger or Consolidation of the Seller.
The Seller will keep in full effect its existence, rights and
franchises as a corporation under the laws of the state of its
incorporation except as permitted herein, and will obtain and preserve
its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of
the Mortgage Loans and to perform its duties under this Agreement.
Any Person into which the Seller may be merged or consolidated,
or any corporation resulting from any merger, conversion or
consolidation to which the Seller shall be a party, or any Person
succeeding to the business of the Seller, shall be the successor of
the Seller hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the
creditworthiness of the successor or surviving Person shall not be
materially and adversely different from the creditworthiness of the
Seller at such time.
SECTION 15. Financial Statements.
The Seller understands that in connection with the Purchaser's
marketing of the Mortgage Loans, the Purchaser shall make available to
prospective purchasers audited financial statements of the Seller for
the most recently completed three fiscal years respecting which such
statements are available. The Seller shall also make available any
comparable interim statements to the extent any such statements have
been prepared by the Seller (and are available upon request to members
or stockholders of the Seller or the public at large). The Seller, if
it has not already done so, agrees to furnish promptly to the
Purchaser copies of the statements specified above. The Seller shall
also make available information on its servicing performance with
respect to loans serviced for others, including delinquency ratios.
The Seller also agrees to allow reasonable access to a
knowledgeable financial or accounting officer for the purpose of
answering questions asked by any prospective purchaser regarding
recent developments affecting the Seller or the financial statements
of the Seller.
Notwithstanding anything to the contrary in this Section~15,
the Purchaser shall not disclose any financial statements
received under this Section~15 without the prior written consent
of the Seller, except to the extent that it is appropriate for
the Purchaser to do so in working with legal counsel, auditors,
taxing authorities or other governmental agencies.
SECTION 16. [Reserved].
SECTION 17. Notices.
All demands, notices and communications hereunder shall be in writing and shall
be deemed to have been duly given if mailed, by registered or certified mail,
return receipt requested, or, if by other means, when received by the other
party at the address as follows:
(i) if to the Seller:
Master Financial, Inc.
505 City Parkway West, Suite 800
Orange, California 92868
Attention: Michael J. Kim
(ii) if to the Purchaser:
Franklin Credit Management Corporation
6 Harrison Street, 6th Floor
New York, New York 10013
Attention: Alan Joseph
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
SECTION 18. Severability Clause.
Any part, provision representation or warranty of this Agreement which is
prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof. If the invalidity of any
part, provision, representation or warranty of this Agreement shall deprive any
party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good-faith, to develop a structure the economic
effect of which is nearly as possible the same as the economic effect of this
Agreement without regard to such invalidity.
SECTION 19. Counterparts.
This Agreement 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.
SECTION 20. Governing Law.
This Agreement shall be deemed in effect when a fully executed counterpart
thereof is received by the Purchaser in the State of New York and shall be
deemed to have been made in the State of New York. The Agreement shall be
construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with the substantive laws of the State of New York (without regard to
conflicts of laws principles), except to the extent preempted by Federal law.
SECTION 21. Intention of the Parties.
It is the intention of the parties that the Purchaser is purchasing, and the
Seller is selling the Mortgage Loans and not a debt instrument of the Seller or
another security. Accordingly, the parties hereto each intend to treat the
transaction for Federal income tax purposes as a sale by the Seller, and a
purchase by the Purchaser, of the Mortgage Loans. Moreover, the arrangement
under which the Mortgage Loans are held shall be consistent with classification
of such arrangement as a grantor trust in the event it is not found to represent
direct ownership of the Mortgage Loans. The Purchaser shall have the right to
review the Mortgage Loans and the related Mortgage Loan Files to determine the
characteristics of the Mortgage Loans which shall affect the Federal income tax
consequences of owning the Mortgage Loans and the Seller shall cooperate with
all reasonable requests made by the Purchaser in the course of such review.
SECTION 22. Successors and Assigns; Assignment of Purchase Agreement.
This Agreement shall bind and inure to the benefit of and be
enforceable by the Seller and the Purchaser and the respective
permitted successors and assigns of the Seller and the successors
and assigns of the Purchaser. This Agreement shall not be
assigned, pledged or hypothecated by the Seller to a third party
without the prior written consent of the Purchaser. This
Agreement may be assigned, pledged or hypothecated by the
Purchaser in whole or in part, and with respect to one or more of
the Mortgage Loans, without the consent of the Seller. In the
event the Purchaser assigns this Agreement, and the assignee
assumes any of the Purchaser's obligations hereunder, the Seller
acknowledges and agrees to look solely to such assignee, and not
to the Purchaser, for performance of the obligations so assumed
and the Purchaser shall be relieved from any liability to the
Seller with respect thereto.
SECTION 23. Waivers.
No term or provision of this Agreement may be waived or
modified unless such waiver or modification is in writing and
signed by the party against whom such waiver or modification is
sought to be enforced.
SECTION 24. Exhibits.
The exhibits to this Agreement are hereby incorporated and made a part hereof
and are an integral part of this Agreement.
SECTION 25. 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 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
Agreement;
(d) 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; and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
SECTION 26. Reproduction of Documents.
This Agreement and all documents relating thereto,
including, without limitation, (a)~consents, waivers and
modifications which may hereafter be executed, (b)~documents
received by any party at the closing, and (c)~financial
statements, certificates and other information previously or
hereafter furnished, may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or
not the original is in existence and whether or not such
reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 27. Further Agreements.
The Seller and the Purchaser each agree to execute and deliver to the other such
reasonable and appropriate additional documents, instruments or agreements as
may be necessary or appropriate to effectuate the purposes of this Agreement.
SECTION 28. [Reserved].
SECTION 29. No Solicitation.
From and after the related Closing Date, the Seller agrees that it will not take
any action or permit or cause any action to be taken by any of its agents or
affiliates, or by any independent contractors on the Seller's behalf, to
personally, by telephone or mail (via electronic means or otherwise), solicit a
Mortgagor under any Mortgage Loan for the purpose of refinancing a Mortgage
Loan, in whole or in part, without the prior written consent of the Purchaser.
Notwithstanding the foregoing, it is understood and agreed that the Seller, or
any of its respective affiliates:
(i) may advertise its availability for handling refinancings
of mortgages in its portfolio, including the promotion of terms
it has available for such refinancings, through the sending of
letters or promotional material, so long as it does not
specifically target Mortgagors and so long as such promotional
material either is sent to the mortgagors for all of the
mortgages in the servicing portfolio of the Seller and any of its
affiliates (those it owns as well as those serviced for others);
and
(ii) may provide pay-off information and otherwise cooperate
with individual mortgagors who contact it about prepaying their
mortgages by advising them of refinancing terms and streamlined
origination arrangements that are available.
Promotions undertaken by the Seller or by any affiliate of the Seller which are
directed to the general public at large (including, without limitation, mass
mailing based on commercially acquired mailing lists, newspaper, radio and
television advertisements), shall not constitute solicitation under this
Section~29.
SECTION 30. Waiver of Trial by Jury.
THE SELLER AND THE PURCHASER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 31. Governing Law Jurisdiction; Consent to Service of Process.
THIS AGREEMENT SHALL BE DEEMED IN EFFECT WHEN A FULLY EXECUTED COUNTERPART
THEREOF IS RECEIVED BY THE PURCHASER IN THE STATE OF NEW YORK AND SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK. THIS AGREEMENT SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
ITS CHOICE OF LAW RULES AND PRINCIPLES. EACH OF THE PURCHASER AND THE SELLER
IRREVOCABLY (I)~SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT; (II)~WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN INCONVENIENT FORUM IN ANY ACTION OR PROCEEDING IN ANY SUCH
COURT; (III)~AGREES THAT A FINAL JUDGMENT IN ANY ACTION OR PROCEEDING IN ANY
SUCH COURT SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW; AND (IV)~CONSENTS
TO SERVICE OF PROCESS UPON IT BY MAILING A COPY THEREOF BY CERTIFIED MAIL
ADDRESSED TO IT AS PROVIDED FOR NOTICES HEREUNDER.
[Signature Page Follows]
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
date first above written.
FRANKLIN CREDIT MANAGEMENT CORPORATION
(Purchaser)
By:______________________________________
Name:____________________________________
Title:___________________________________
MASTER FINANCIAL, INC.
(Seller)
By:_______________________________________
Name:_____________________________________
Title:____________________________________
EXHIBIT A
CONTENTS OF EACH MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include each of the
following items, which shall be available for inspection by the Purchaser and
any prospective Purchaser, and which shall be delivered to the Custodian, or to
such other Person as the Purchaser shall designate in writing, pursuant to
Section~6 of the Mortgage Loan Purchase and Warranties Agreement to which this
Exhibit is attached (the "Agreement"):
(a) the original Mortgage Note bearing all intervening endorsements,
endorsed "Pay to the order of _________, without recourse" and
signed in the name of the last endorsee (the "Last Endorsee") by an
authorized officer. To the extent that there is no room on the
face of the Mortgage Notes for endorsements, the endorsement
may be contained on an allonge, if state law so allows and the
Custodian is so advised by the Seller that state law so allows. If
the Mortgage Loan was acquired by the Seller in a merger, the
endorsement must be by "[Last Endorsee], successor by merger
to [name of predecessor]." If the Mortgage Loan was acquired or
originated by the Last Endorsee while doing business under another
name, the endorsement must be by "[Last Endorsee], formerly known as
[previous name]";
(b) [the original of any guarantee executed in connection with the
Mortgage Note;]
(c) the original Mortgage with evidence of recording thereon. If in
connection with any Mortgage Loan, the Seller cannot deliver or
cause to be delivered the original Mortgage with evidence of
recording thereon on or prior to the Closing Date because of a delay
caused by the public recording office where such Mortgage has been
delivered for recordation or because such Mortgage has been lost or
because such public recording office retains the original recorded
Mortgage, the Seller shall deliver or cause to be delivered to the
Custodian, a photocopy of such Mortgage, together with (i)~in the
case of a delay caused by the public recording office, an Officer's
Certificate of the Seller (or certified by the title company,
escrow agent, or closing attorney) stating that such Mortgage has been
dispatched to the appropriate public recording office for recordation
and that the original recorded Mortgage or a copy of such Mortgage
certified by such public recording office to be a true and complete
copy of the original recorded Mortgage will be promptly delivered
to the Custodian upon receipt thereof by the Seller; or (ii)~in the
case of a Mortgage where a public recording office retains the original
recorded Mortgage or in the case where a Mortgage is lost after
recordation in a public recording office, a copy of such Mortgage
certified by such public recording office to be a true and complete
copy of the original recorded Mortgage;
(d) the originals of all assumption, modification, consolidation or
extension agreements, if any, with evidence of recording thereon;
(e) the original Assignment of Mortgage for each Mortgage Loan, in form
and substance acceptable for recording. If the Mortgage Loan was
acquired by the Seller in a merger, the Assignment of Mortgage must
be made by "[Seller], successor by merger to [name of predecessor]."
If the Mortgage Loan was acquired or originated by the Seller while
doing business under another name, the Assignment of Mortgage must be
by "[Seller], formerly known as [previous name]";
(f) the originals of all intervening assignments of mortgage (if any)
evidencing a complete chain of assignment from the Seller to the
Last Endorsee with evidence of recording thereon, or if any such
intervening assignment has not been returned from the applicable
recording office or has been lost or if such public recording office
retains the original recorded assignments of mortgage, the Seller
shall deliver or cause to be delivered to the Custodian, a photocopy
of such intervening assignment, together with (i)~in the case of a
delay caused by the public recording office, an Officer's
Certificate of the Seller (or certified by the title company, escrow
agent, or closing attorney) stating that such intervening assignment
of mortgage has been dispatched to the appropriate public recording
office for recordation and that such original recorded intervening
assignment of mortgage or a copy of such intervening assignment of
mortgage certified by the appropriate public recording office to be a
true and complete copy of the original recorded intervening assignment
of mortgage will be promptly delivered to the Custodian upon receipt
thereof by the Seller; or (ii)~in the case of an intervening assignment
where a public recording office retains the original recorded
intervening assignment or in the case where an intervening assignment
is lost after recordation in a public recording office, a
copy of such intervening assignment certified by such public
recording office to be a true and complete copy of the original
recorded intervening assignment;
(g) the original FHA Contract of Insurance, with respect to each FHA
Mortgage Loan; and
(h) the original or, if unavailable, a copy of any security agreement,
chattel mortgage or equivalent document executed in connection with
the Mortgage.
In the event an Officer's Certificate of the Seller is delivered to the
Purchaser because of a delay caused by the public recording office in returning
any recorded document, the Seller shall deliver to the Purchaser, within 90 days
of the related Closing Date, an Officer's Certificate which shall (i)~identify
the recorded document, (ii)~state that the recorded document has not been
delivered to the Custodian due solely to a delay caused by the public recording
office, (iii)~state the amount of time generally required by the applicable
recording office to record and return a document submitted for recordation, and
(iv)~specify the date the applicable recorded document will be delivered to the
Custodian; provided, however, that any recorded document shall in no event be
delivered later than one year following the related Closing Date. An extension
of the date specified in clause (iv)~above may be requested from the Purchaser,
which consent shall not be unreasonably withheld.
EXHIBIT B
SELLER'S OFFICER'S CERTIFICATE
I, ____________________, hereby certify that I am the duly
elected [Vice]~President of Master Financial, Inc., a corporation
organized under the laws of the state of California (the
"Company") and further as follows:
(i) Attached hereto as Exhibit~1 is a true, correct and
complete copy of the Articles of Incorporation of the Company
dated September~8, 1981 along with an Amendment to Articles of
Incorporation dated December~11, 2002, which are both in full
force and effect on the date hereof.
(ii) Attached hereto as Exhibit~2 is a true, correct and
complete copy of the bylaws of the Company which are in effect on
the date hereof and which have been in effect without amendment,
waiver, rescission or modification since ___________.
(iii) Attached hereto as Exhibit`3 is an original
certificate of good standing of the Company issued within fifteen
days of the date hereof, and no event has occurred since the date
thereof which would impair such standing.
(iv) Attached hereto as Exhibit~4 is a true, correct and
complete copy of the corporate resolutions of the Board of
Directors of the Company authorizing the Company to execute and
deliver (a)the Mortgage Loan Purchase and Warranties Agreement,
dated as of September 24, 2004 (the "Purchase Agreement"), by and
between Franklin Credit Management Corporation (the "Purchaser")
and the Company and (b)~the Servicing Agreement, dated as of
September~24, 2004 (the "Servicing Agreement"), by and between
the Purchaser and the Company, and such resolutions are in effect
on the date hereof and have been in effect without amendment,
waiver, rescission or modification since ____________.
(v) Either (i)~no consent, approval, authorization or order
of any court or governmental agency or body is required for the
execution, delivery and performance by the Company of or
compliance by the Company with the Purchase Agreement, the sale
of the mortgage loans or the consummation of the transactions
contemplated by the agreements; or (ii)~any required consent,
approval, authorization or order has been obtained by the
Company.
(vi) Neither the consummation of the transactions
contemplated by, nor the fulfillment of the terms of the Purchase
Agreement conflicts or will conflict with or results or will
result in a breach of or constitutes or will constitute a default
under the charter or by-laws of the Company or, to the best of my
knowledge, the terms of any indenture or other agreement or
instrument to which the Company is a party or by which it is
bound or to which it is subject, or any statute or order, rule,
regulations, writ, injunction or decree of any court,
governmental authority or regulatory body to which the Company is
subject or by which it is bound.
(vii) To the best of my knowledge, there is no action, suit,
proceeding or investigation pending or threatened against the
Company which, in my judgment, either in any one instance or in
the aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets
of the Company or in any material impairment of the right or
ability of the Company to carry on its business substantially as
now conducted or in any material liability on the part of the
Company or which would draw into question the validity of the
Purchase Agreement, or the mortgage loans or of any action taken
or to be taken in connection with the transactions contemplated
hereby, or which would be likely to impair materially the ability
of the Company to perform under the terms of the Purchase
Agreement.
(viii) Each person listed on Exhibit~5 attached hereto who,
as an officer or representative of the Company, signed (a)~the
Purchase Agreement, and (b)~any other document delivered or on
the date hereof in connection with any purchase described in the
agreements set forth above was, at the respective times of such
signing and delivery, and is now, a duly elected or appointed,
qualified and acting officer or representative of the Company,
who holds the office set forth opposite his or her name on
Exhibit~5, and the signatures of such persons appearing on such
documents are their genuine signatures.
(ix) The Company is duly authorized to engage in the
transactions described and contemplated in the Purchase
Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the
Company.
Dated:____________________ By:___________________________
Name:_________________________
[Seal] Title: [Vice] President
I, ________________________, an [Assistant] Secretary of
______________[COMPANY], hereby certify that ____________ is the duly elected,
qualified and acting [Vice] President of the Company and that the signature
appearing above is [her] [his] genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:____________________ By:___________________________
Name:_________________________
Title: [Assistant] Secretary
EXHIBIT 5 to
Company's Officer's Certificate
NAME TITLE SIGNATURE
------------------------------------------------------------------------------
EXHIBIT C
FORM OF OPINION OF COUNSEL TO THE SELLER
(date)
Franklin Credit Management Corporation
6 Harrison Street, 6th Floor
New York, New York 10013
Dear Sirs:
You have requested our opinion, as counsel to Master Financial,
Inc. (the "Company"), with respect to certain matters in connection with
the sale by the Company of the Mortgage Loans pursuant to that certain
Mortgage Loan Purchase and Warranties Agreement by and between the Company and
Franklin Credit Management Corporation (the "Purchaser"), dated as of
September 24, 2004 (the "Purchase Agreement"), which Mortgage Loans will be
serviced on an interim basis by the Company pursuant to an Interim
Servicing Agreement dated as of September 24, 2004 between the Purchaser and
the Company (the "Servicing Agreement", and collectively with the
Purchase Agreement, the "Agreements"). Capitalized terms not otherwise
defined herein have the meanings set forth in the Purchase Agreement.
We have examined the following documents:
(i) the Purchase Agreement;
(ii) the Servicing Agreement;
(iii) the forms of Assignment of Mortgage and a corresponding form of
assignment of deed of trust ("Assignment of Deed of Trust");
(iv) the form of endorsement of the Mortgage Notes;
(v) a Certificate of certain officers of the Company which, among other
things, identifies contracts to which the Company is a party or by
which its assets are bound, and which are material to it (the
"Material Contracts") and
(vi) such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
To the extent we have deemed necessary and proper, we have relied upon the
representations and warranties of the Company contained in the Purchase
Agreement. We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the originals of all documents. We have also
assumed, with your consent, that for all relevant purposes the laws of the State
of New York are identical to the laws of the State of California. Each of the
statements set forth below that is made "to our knowledge" is subject to the
discussion set forth below concerning the basis of our knowledge.
Based upon the foregoing, it is our opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and is qualified to
transact business in, and is in good standing under, the laws of the State
of California.
2. The Company has the power to engage in the transactions contemplated by the
Agreements and all requisite power, authority and legal right to execute and
deliver the Agreements and to perform and observe the terms and conditions
of the Agreements.
3. The Agreements have been duly authorized, executed and delivered by
the Company, and are the legal, valid and binding agreement enforceable in
accordance with its terms against the Company, subject to the exceptions,
limitations and qualifications set forth below.
4. The officers of the Company have been duly authorized to execute any and all
documents by original signature in order to complete the transactions
contemplated by the Agreements.
5. The officers of the Company have been duly authorized to execute the
endorsements to the Mortgage Notes, the Assignments of Mortgages and the
Assignment of Deed of Trust.
6. Either (i)~no consent, approval, authorization or order of any California or
federal governmental agency or body or, to our knowledge, any court is
required for the execution, delivery and performance by the Company of or
compliance by the Company with the Agreements and the sale of the Mortgage
Loans by the Company or the consummation of the transactions contemplated
by the Agreements or (ii)~any such required consent, approval, authorization
or order has been obtained by the Company.
7. Neither the consummation of the transactions contemplated by, nor the
fulfillment of the terms of, the Agreements conflict or will conflict with
or results or will result in a breach of or constitute or will constitute a
default under the charter or by-laws of the Company or the material
terms of any Material Contract, or violates any California or federal
statute or rule, or regulation, or to our knowledge any order, writ,
injunction or decree of any court, governmental authority or regulatory body
to which the Company is subject or by which it is bound.
8. To our knowledge, except as set forth in Exhibit A hereto, there is no
action, suit, proceeding or investigation pending or threatened against the
Company which, in our judgment, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Company or in
any material impairment of the right or ability of the Company to carry on
its business substantially as now conducted or in any material liability
on the part of the Company or which would draw into question the validity of
the Agreements or the Mortgage Loans or of any action taken or to be taken
in connection with the transactions contemplated thereby, or which would be
likely to impair materially the ability of the Company to perform under the
terms of the Agreements.
9. The sale of each Mortgage Note and Mortgage as and in the manner contemplated
by the Agreements is sufficient to fully transfer to the Purchaser all right,
title and interest of the Company thereto as noteholder and mortgagee.
The opinions expressed in paragraph 3 above are subject to the following
exceptions, qualifications and limitations:
(i) The enforceability of the Agreements is subject to the effect of bankruptcy
, insolvency, reorganization, fraudulent conveyance, moratorium, or other
similar laws of general application, or legal or equitable principles relating
to, limiting, or affecting the enforceability of creditors' rights generally, or
limitations on the availability of equitable remedies, including, without
limitation, specific performance or injunctive relief, whether considered in a
proceeding at law or in equity;
(ii) The enforceability of the Agreements is subject to the effect of general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, and good faith and fair dealing;
(iii) The enforceability of the Agreements is subject to the effect of laws
and/or court decisions which may limit or prohibit the effectiveness, validity,
and/or enforceability of provisions waiving, releasing, or indemnifying a party
against liability for its own wrongful or negligent acts or where the
indemnification is contrary to public policy;
(iv) We express no opinion regarding the enforceability of contractual
provisions waiving broadly or vaguely stated rights, statutory or
constitutionally protected rights or unknown future rights where such waivers
are against public policy or prohibited by law or equity, or of provisions that
rights or remedies are not exclusive, that every right or remedy is cumulative
and may be exercised in addition to or together with any other right or remedy,
or that the election of some particular remedy or remedies does not preclude
resource to one or more others;
(v) We express no opinion concerning the enforceability of: (1) the provisions
of the Agreements which choose as the governing law of such documents the laws
of any particular state; (2) any waiver of the right to trial by jury; or (3)
forum selection clauses or consent to jurisdiction clauses.
With respect to our opinions in paragraphs 6 and 7 relating to the requirement
of obtaining the consent of a California or federal governmental body or agency,
and the absence of conflicts between the transactions contemplated by the
Agreements and California and federal statutes, rules and regulations, our
opinions are limited to those California and federal statutes, rules and
regulations that a lawyer practicing in the State of California exercising
customary professional diligence would reasonably recognize as being directly
applicable to the Borrowers the transactions contemplated by the Agreements, or
any or all of them.
With respect to the statements in paragraphs 6, 7 and 8 above which are stated
to be "to our knowledge," we have, with your consent, advised you only
concerning knowledge obtained by us as a result of the Officers' Certificate and
the actual present knowledge of those attorneys in our firm who have given
substantive attention to the representation described in the introductory
paragraph of this opinion and does not include any knowledge of any other
attorneys within our firm (regardless of whether they have represented or are
representing the Company in connection with any other matters) or any
constructive or imputed knowledge of any matters or items of information. Except
to that limited extent we have, with your consent, made no independent review of
litigation indices, public records or of any of the Company's operations,
transactions or contractual arrangements, except for those contracts identified
in the Officers' Certificate.
Except as otherwise set forth in the Agreements, we assume no obligation to
revise this opinion or alter its conclusions to update or support this letter to
reflect any facts or circumstances that may hereafter develop.
This opinion is given to you for your sole benefit, and no other person or
entity is entitled to rely hereon except that the purchaser or purchasers to
which you initially and directly resell the Mortgage Loans may rely on this
opinion as if it were addressed to them as of the date of this opinion.
Respectfully submitted,
EXHIBIT D
FORM OF ASSIGNMENT AND CONVEYANCE AGREEMENT
On this ___ day of ____________, ________, _______________ ("Seller"), as the
Seller under that certain Mortgage Loan Purchase and Warranties Agreement, dated
as of September [~~, 2004 (the "Purchase Agreement", acknowledges receipt of
the purchase price of $ [ ] together with accrued interest of $[ ] and does
hereby sell, transfer, assign, set over and convey to Franklin Credit Management
Corporation ("Purchaser") as the Purchaser under the Agreements (as defined
below) without recourse, but subject to the terms of the Agreements, all right,
title and interest of, in and to the Mortgage Loans listed on the Mortgage Loan
Schedule attached hereto as Exhibit~A (the "Mortgage Loans"), together with the
Mortgage Files and the related Servicing Rights and all rights and obligations
arising under the documents contained therein. Pursuant to Section~6 of the
Purchase Agreement, the Seller has delivered to the Custodian the documents for
each Mortgage Loan to be purchased as set forth in the Purchase Agreement. The
ownership of each Mortgage Note, Mortgage and the contents of the Mortgage File
and Servicing File is vested in the Purchaser and the ownership of all records
and documents with respect to the related Mortgage Loan prepared by or which
come into the possession of the Seller shall immediately vest in the Purchaser
and shall be retained and maintained, in trust, by the Seller at the will of the
Purchaser in a custodial capacity only.
In accordance with Section~6 of the Purchase Agreement, the Purchaser
accepts the Mortgage Loans listed on Exhibit~A attached hereto.
Notwithstanding the foregoing the Purchaser does not waive any rights or
remedies it may have under the Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]
MASTER FINANCIAL, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
Accepted and Agreed:
FRANKLIN CREDIT MANAGEMENT CORPORATION
By: _____________________________________________________
Name:
Title:
EXHIBIT A
TO ASSIGNMENT AND CONVEYANCE AGREEMENT
THE MORTGAGE LOANS