HomeMy WebLinkAbout1984-07-17; City Council; 7820 Exhibit 07; OFFICIAL REQUEST TO STATE OF CALIFORNIA FOR MORTGAGE REVENUE BOND ALLOCATION Exhibit 07kh 8 78D
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[NAME OF LENDING INSTITUTION]
as Lending Institution
and
UNITED GUARANTY RESIDENTIAL INSURANCE COMPANY OF IOWA
as Compliance Agent
and
FIRST INTERSTATE BANK OF CALIFORNIA
as Trustee
and
CITY OF CARLSBAD, CALIFORNIA
as Issuer
----________________---_---------------------------------------- -----___-___________---_----------------------------_-----------
MORTGAGE SALE AND SERVICE AGREEMENT
Dated as of June 1, 1985
CITY OF CARLSBAD, CALIFORNIA
SINGLE RESIDENTIAL MORTGAGE REVENUE BONDS BONDS
ISSUE OF 1985
___--_______________--------_----_------------------------------ ____________________--_-----------------------------------------
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference
only and is not a part of this Agreement).
ARTICLE I Page
Definitions ............................................. 2
ARTICLE I1
REPRESENTATIONS
Section 2.01. Representations, Warranties and Covenants
Section 2.02. Representations, Warranties and Covenants
Section 2.03 Representations, Warranties and Covenants
Section 2.04 Representations, Warranties and Covenants
of the Issuer ......................... 9
of the Lending Institution ............ 10
of the Trustee ........................ 12
of the Compliance Agent ............... 13
ARTICLE I11
ISSUANCE OF BONDS, APPLICATION OF BOND PROCEEDS
Section 3.01. Agreement to Issue Bonds; Application of
Bond Proceeds .......................... 15
Section 3.02. Payment of Cost of Issuance of Bonds ..... 15
Section 3.03. Special Arbitrage Certifications ........ 15
Section 3.04. Limited Liability ....................... 16
ARTICLE IV
COMMITMENTS TO PURCHASE LOANS
Section 4.01. Commitment to Buy and Sell ............... 16
Section 4.02. Loan Amount ............................. 18
Section 4.03. Loan Submission ......................... 18
Section 4.04. Closings ................................ 19
Section 4.05. Closing Documents ....................... 19
(i)
Section 4.06. Loan File ............................... 20
Section 4.07. Defective Documents ..................... 20
Section 4.08. Representations, Warranties and
Covenants of Lending Institution
Concerning Loans ...................... 21
Section 4.10. Report Re Loans ......................... 27
Section 4.09. Permitted Buydowns of Interest Rate ..... 26
ARTICLE V
ADMINISTRATION AND SERVICING OF LOANS
Section 5.01. Lending Institution to Act as Servicer ... 28
Section 5.02. Collection of Certain Loan Payments;
Section 5.03. Collection of Taxes, Assessments and
Section 5.04. Transfers and Permitted Withdrawals
Receipts Account ...................... 29
Similar Items; Loan Service Account .... 30
from Issuer's Receipts Account;
Requisitions for Reimbursements ....... 30
Section 5.05. Claims Against Insurer of Loans ......... 32
Section 5.06. Maintenance of Standard Hazard
Insurance and Flood Insurance ......... 33
Section 5.07. Maintenance of Earthquake Damage
Insurance ............................. 34
Section 5.08. Maintenance of Special Hazard Insurance
Section 5.09. Maintenance of Errors and Omissions
Section 5.10. Maintenance of Private Mortgage Insurance
Section 5.11. Transfers and Assumptions ............... 36
Section 5.12. Realization Upon Defaulted Loans ........ 38
Section 5.13. Issuer to Cooperate; Release of Loan Files ................................. 38
Section 5.14. Reports to Trustee and Issuer and Receipts Account Statements ....... 38
Section 5.15. Prohibition of Discrimination; Report
to Issuer ............................. 39 Section 5-16. Certain Verifications ................... 40
Policy ................................ 34
Insurance Policy and Fidelity Bond .... 35
Policy ................................ 35
(ii)
ARTICLE VI
LENDING INSTITUTION
Section 6.01. Merger or Consolidation of the Lending
Institution ........................... 40
Section 6.02. Lending Institution Not to Resign ....... 40
ARTICLE VI1
CAUSES PERMITTING TERMINATION OF
LENDING INSTITUTION
Section 7.01. Causes of Termination Defined ........... 41
Section 7.02. Remedies ................................ 43
Section 7.03. Trustee to Act; Appointment
of Successors ......................... 44
Section 7.04. Notification of Bondholders ............. 44
Section 7.05. No Remedy Exclusive ..................... 44
Section 7.06. Agreement to Pay Attorneys' Fees,
Costs and Other Expenses .............. 45
ARTICLE VI11
COMPLIANCE AGENT
Section 8.01. Compensation, Obligations, Duties and
Responsibilities of Compliance Agent .. 45
Section 8.02. Liability of Compliance Agent ........... 48
Section 8.03. Compliance Agent Not to Resign .......... 48
Section 8.04. Termination by Issuer ................... 49
(iii)
6ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9-01. Amendments, Changes and Modifications .... 49
Section 9-02. Changes in Applicable Laws ............... 49
Section 9.03. Recordation of Agreement ................. 49
Section 9.04. Limitation on Rights of Bondholders ...... 50
Section 9.05. Litigation Regarding Acceleration Clauses. 50
Section 9-06. Purchase of Bonds ........................ 50
Section 9.07. Governing Law 50
Section 9-08. Counterparts ............................. 50
Section 9.09. Notices 50
Section 9.10. Severability ............................. 51
Section 9.11. Further Assurances and Corporate Instruments 51
Section 9.12. Term of Agreement ........................ 51
............................
..................................
...........................
Testimonium
Signatures and Seals
EXHIBIT "A" Mortgage File
EXHIBIT "Brr Loan Submission Voucher
EXHIBIT "C" Lender's Certificate
EXHIBIT ''D" Opinion of Lender's Counsel
EXHIBIT "E" Riders to Note
EXHIBIT 'IF" Riders to Deed of Trust
EXHIBIT "G" Buyer's Affidavit
EXHIBIT "H" Seller's Affidavit
(iv)
MORTGAGE SALE AND SERVICE AGREEMENT
THIS MORTGAGE SALE AND SERVICE AGREEMENT (the "Agreement") ,
dated as of June 1, 1985, is among
California (the "Trustee") , United Guaranty Residential
Insurance Company of Iowa (the "Compliance Agent") , and the
City of Carlsbad, California (the "Issuer").
(the "Lending Institution"), First Interstate Bank of
WITNESSETH
WHEREAS, the Issuer has adopted a home mortgage finance
program (the "Program") pursuant to Part 5 of Division 31 of
the Health and Safety Code of the State of California (the
"Act" ) ;
WHEREAS, the Issuer has promulgated rules and regulations
with respect to purchasing mortgage loans originated and made
by qualified mortgage lenders to mortgagors to purchase
residences within its boundaries;
WHEREAS, the Issuer proposes to issue, sell and deliver its
Single Family Residential Mortgage Revenue Bonds, Issue of 1985
(the "Bonds") , pursuant to a purchase contract (the "Purchase
Contract") between the Issuer and PaineWebber Incorporated (the
"Underwriters"), for the purpose of providing funds to purchase
mortgage loans pursuant to the Program;
WHEREAS, the Issuer intends to enter into an indenture
between itself and the Trustee for the issuance of the Bonds
(the "Indenture"), pursuant to which the Trustee will be
empowered to purchase on behalf of the Issuer mortgage loans
which have been originated by the Lending Institution and
reviewed by the Compliance Agent, subject, among other things,
to certain of the terms and conditions hereinafter set forth;
WHEREAS, the Issuer, the Trustee, the Compliance Agent, and the Lending Institution are desirous of setting forth the terms
and conditions upon which the Lending Institution will
originate and service mortgage loans under the Program; and
WHEREAS, the Issuer has found and declared that the
purchase of Loans under the terms of this Agreement and the
Program will both further the purposes of the Act and serve the
public purpose of providing financing for decent, safe and
sanitary housing affordable to persons and families in the
lower end of the purchasing spectrum;
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, and for and in consideration of the mutual
promises, representations and agreements herein contained,
hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless the context clearly otherwise requires, each
capitalized word or phrase appearing herein which is defined in
the Indenture shall have the same meaning in this Agreement as
is given it in the Indenture. In addition thereto, unless the
context clearly requires otherwise, the following terms shall
have the following respective meanings:
"Acquisition Cost" means the cost of acquiring a Residence
from the seller as a completed residential unit, including: (i)
all amounts paid, either in cash or in kind, by the purchaser
(or a related party or for the benefit of the purchaser) to the
seller (or a related person or for the benefit of the seller)
as consideration for the Residence; (ii) if the Residence is
incomplete, the reasonable cost of completing it (so that
occupancy thereof is legally permitted); and, (iii) if the
Residence is purchased subject to a ground rent, the
capitalized value of the ground rent calculated using a
discount rate equal to the Yield on the Bonds; but exclusive
of: (i) usual and reasonable settlement or financing costs,
(but only to the extent that such amounts do not exceed the
usual and reasonable costs which would be paid by the purchaser
where financing is not provided through bonds the interest on
which is excludable from the gross income of the recipient for
federal income tax purposes), (ii) the value of services
performed by the mortgagor or members of his or her family in completing the Residence, and (iii) the cost of land which has
been owned by the mortgagor for at least two years before the
date on which construction of the Residence begins.
"Average Area Purchase Price" means the most current
average purchase price safe harbor limitations from time to
time published by the Department of the Treasury for the San
Diego Primary Metropolitan Statistical Area, stated separately
with respect to residences which have not been previously
occupied ("Average Area Purchase Price - New") and residences
which have been previously occupied ("Average Area Purchase
Price - Existing"); provided, however, that at its option or in
the absence of such safe harbor limitations, the average area
purchase price shall be determined by the Issuer in accordance
with the Code.
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"Bond Reserve Fund" means the fund by that name created
pursuant to the Indenture.
"Closing" means a closing held pursuant to Section 4.04 of
this Agreement at which a Loan is sold, without recourse, by
the Lending Institution to the Trustee on behalf of the Issuer.
"Closing Date" means the date on which a Closing is held
pursuant to this Agreement.
"Code" means the Internal Revenue Code of 1954, as amended,
and all regulations and rulings promulgated thereunder.
"Deed of Trust" means the instrument securing a Loan.
Developer" means any one of the persons signing a If
Developer Agreement who has designated the Lending Institution as the financial institution to originate and service Loans for
its Developer Reserved Single Family Residences and who has not
replaced the Lending Institution as such financial institution.
"Developer Agreement" means any of the agreements between a
Developer and the Issuer under which the Developer agrees to
provide Developer Reserved Single Family Residences, and all
amendments or supplements thereto.
"Developer Fees" means the fees paid to the Issuer by the
Developers pursuant to the Developer Agreements.
"Developer Reserved Single Family Residences" means
Residences which are anticipated to be sold by a Developer
pursuant to a Developer Agreement.
"Earthquake Damage Insurance" means an insurance policy, or
endorsement thereto, issued by a Qualified Insurer, which
provides extended coverage against earthquake loss in an amount at least equal to the principal balance owing on such Loan, but
not less than 90 percent of the insurable value of the
applicable Residence based upon the replacement cost thereof.
Such insurance may provide a deductible not to exceed 5 percent
per occurrence.
"Errors and Omissions Insurance Policy" means a standard
form insurance policy, in form and substance required of
mortgage sellers/servicers by the FHLMC or the FNMA insuring
against losses from errors or omissions in the conduct of a
business.
Existing Residence" means a Residence which has been ll
previously occupied.
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"FHLMC" means the Federal Home Loan Mortgage Corporation.
"Fidelity Bond" means a standard form fidelity bond, in
form and substance required of mortgage sellers/servicers by
the FNMA or the FHLMC.
"First Time Homebuyer" means an individual who has not had
a present ownership interest (within the meaning of the Code)
in his or her principal residence at any time during the three
year period ending on the date he or she executes a Note.
"Flood Insurance Policy" means insurance in the form of a
standard federal homeowner's flood insurance policy or in the
form of a conventional flood insurance policy in an amount at
least equal to the principal balance of the Loan secured by the
insured Residence, but not less than 90 percent of the
insurable value of such Residence based upon the replacement
cost thereof.
"FNMA" means the Federal National Mortgage Association.
Force Majeure'' means any cause or event not within the
control of a party hereto which prevents that party from
performing any of its obligations hereunder, including, without
limitation, the following: acts of God; strikes, lockouts or
other industrial disturbances; acts of public enemies; orders
or restraints of any kind of the government of the United
States of America or of the State or any of their departments,
agencies or officials, or any civil or military authority;
insurrections; riots; landslides; adverse weather conditions;
earthquakes; fires; storms; droughts; floods; explosions; and
breakage or accident to transmission wires, machinery,
transmission pipes or canals.
11
"Household Income" means the current adjusted gross income,
for purposes of federal income taxation, of a potential
mortgagor, together with the current adjusted gross income of
all persons over the age of 18 who reside or intend to reside with such mortgagor in the same dwelling unit, but exclusive of
the income of any co-signer of a Note who does not reside or
intend to reside therein, as evidenced by documentation
satisfactory to the Lending Institution.
Insurance Expenses" means expenses incurred by the Lending I1
Institution which are recoverable under any of the insurance
policies required to be maintained hereunder, exclusive of
amounts representing recoveries of principal of and interest on
any Loan.
"Insurance Proceeds" means payments received by the Lending
Institution under any insurance policy with respect to a Loan.
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Liquidation Expenses" means expenses incurred by the
Lending Institution in connection with the liquidation of any
defaulted Loan and not recovered under the applicable Private
Mortgage Insurance Policy, exclusive of amounts representing
recoveries of principal of and interest on any Loan.
!I
"Liquidation Proceeds'' means amounts (other than Insurance
Proceeds) received by the Lending Institution in connection
with the liquidation of any defaulted Loan, whether through
trustee's sale, foreclosure sale or otherwise.
Loan" means a loan evidenced by a Note secured by a first I1
lien Deed of Trust which meets the requirements of Section 4.08
hereof and which the Trustee, on behalf of the Issuer, has
purchased or intends to purchase from the Lending Institution
pursuant to this Agreement.
"Loan File" means the documents listed in Exhibit A to this
Agreement as required to be delivered by the Lending
Institution for each Closing pertaining to each Loan it
originates.
"Loan Principal Prepayments" means all amounts representing
recovery of the principal amount of any Loan (exclusive of
regularly scheduled principal payments) as a result of (1) any
prepayment of all of the principal amount of any Loan, including any prepayment fee, premium or other such additional
charge, less the amount retained by the Lending Institution as
servicer of such Loan as additional compensation on account of
such prepayment; (2) the sale, assignment or other disposition
of any Loan; (3) the acceleration of any Loan (on account of
default or any other cause) or the foreclosure or sale under
deed of trust or other proceedings taken in the event of
default of any Loan; and (4) compensation for losses incurred
with respect to any Loan from the proceeds of condemnation,
title insurance, hazard insurance, mortgage insurance or
guarantees (whether received in the form of moneys or as
debentures or certificates issued pursuant to a contract of insurance), exclusive of amounts recovered in respect of such
losses to the extent required to be otherwise applied pursuant
to the applicable contract of insurance.
"Loan Submission Voucher" means the voucher in the form of
Exhibit B to this Agreement which is submitted to the
Compliance Agent pursuant to Section 4.03 of this Agreement.
"Loan-to-Value Ratio" means the ratio of the original
principal amount of a Loan to the lesser of the initial
appraised value or the purchase price of a Residence.
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Maximum Acquisition Cost" means an amount which does not tt
exceed 110 percent of the Average Area Purchase Price - New in
the case of New Residence or of the Average Area Purchase Price - Existing in the case of an Existing Residence. The Maximum
Acquisition Cost shall be determined as of the earlier of the
date the Lending Institution makes a commitment to provide
financing (or, in the case of an assumption of an existing
Loan, the date the Lending Institution approves the assumption)
or the date the Residence is purchased.
"Median Household Income" means the highest of (i)
statewide median household income for the State as determined
by the Issuer, (ii) countywide median household income for the
County of San Diego as determined by the Issuer, or (iii)
median family income for the San Diego Primary Metropolitan
Statistical Area for a family of four, as published by the
United States Department of Housing and Urban Development, as
may be adjusted from time to time by the Issuer, or as may be
otherwise reasonably determined by the Issuer in accordance
with the Act.
"Mortgage Loan Interest Rate" means the annual rate of
interest, as specified in the Note (exclusive of any fee or
charge for mortgage insurance), of a Loan when held by the
Trustee on behalf of the Issuer, which rate shall be specified
by the Issuer in a Notice of Fee, Rate and Allocation.
"New Residence" means a Residence which has not been
previously occupied.
Note" means the promissory note executed by a mortgagor to 1"
evidence such mortgagor's obligation to repay a Loan.
"Notice Address" means:
(a) As to the Issuer:
City of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Attention: City Clerk
With a copy to:
City of Carlsbad
1200 Elm Avenue
Carlsbad, California 92008
Attention: City Attorney
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(b) As to the Trustee:
I First Interstate Bank of California
Trust Division
707 Wilshire Boulevard, 10th Floor
Los Angeles, California 90017
(c) As to the Compliance Agent:
United Guaranty Residential Insurance Company
of Iowa
201 North Elm Street
Greensboro, North Carolina 27401
Greensboro, North Carolina 27420
Attention: Mortgage Related Securities Department
or P.O. Box 21367
(d) As to the Lending Institution:
Attention:
"Notice of Fee, Rate and Allocation'' means a notice from
the Issuer to the Trustee, the Compliance Agent, the Lending
Institution, and the Developers specifying the Final Developer
Fee, the Mortgage Loan Interest Rate, any reduction in the
Developers' Reservation, and the Yield on the Bonds, which
notice shall be provided within thirty days after the issuance
of the Bonds.
"Private Mortgage Insurance Policy" means an insurance
policy or policies issued by a Private Mortgage Insurer under which the coverage is substantially the same as the coverage
provided by the United Guaranty Residential Insurance Company
of Iowa's Full Coverage Master Policy (100% Private Mortgage
Insurance) with Non-Monetary Default, Advances and Advance
Payments Endorsements, all in the form submitted to the Trustee
by United Guaranty Residential Insurance Company of Iowa as of
the date of issuance of the Bonds.
"Private Mortgage Insurer" means United Guaranty
Residential Insurance Company of Iowa, for so long as United
Guaranty Residential Insurance Company of Iowa (i) is legally
qualified to write Private Mortgage Insurance Policies in the
State, (ii) underwrites Private Mortgage Insurance Policies for
the Program in a manner consistent with its representations to
the Issuer, and (iii) maintains a credit rating which does not
cause a reduction in the rating of the Bonds assigned by
Standard and Poor's Corporation as of the issuance of the
Bonds; and thereafter, at the option of the Issuer, "Private
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Mortgage Insurer" shall mean any other insurer which meets the
criteria set forth in clauses (i) and (ii) hereof and which
maintains a credit rating which does not cause a reduction in
the rating of the Bonds assigned by Standard & Poor's
Corporation immediately prior to such insurer's participation in the Program as a private mortgage insurer, and which has
been approved by the Issuer to issue mortgage insurance under
the Program, other than the Federal Housing Administration, the
Veterans Administration or an instrumentality of the State.
"Program Fund" means the fund by that name created pursuant
to the Indenture and into which certain Bond proceeds and
Developer Fees will be deposited and used to purchase Loans.
"Qualified Insurer" means any properly licensed insurance company qualified to do business in and write the applicable
form of insurance in the State and which is rated B-6 or better
by Best's Insurance Reports (Property-Casualty).
Receipts Account" means the account by that name created 11
and maintained for the Issuer by the Lending Institution
pursuant to Section 5.02 of this Agreement and into which shall
be deposited all payments and collections received with respect
to Loans serviced by the Lending Institution, except the
Service Fee, unless it is the Lending Institution's practice to
calculate its Service Fee at the time it remits the balance of
the Receipts Account to the Trustee.
"Residence" means real property and improvements thereon
consisting of a single family detached or attached
(condominium, rowhouse, townhouse) residential unit (but not
including a mobile home, that is, a residence transportable in
one or more sections built on a permanent chassis) which can
reasonably be expected to become the principal residence of the
mortgagor within a reasonable period of time (which shall not
exceed 60 days) after the Loan is made to the mortgagor and
which is located within the corporate limits of the Issuer;
provided, however, that no condominium unit in a structure more than four stories in height shall be considered to be a
Residence.
"Revenue Fund" means the account by that name created
pursuant to the Indenture.
"Service Fee" means a fee payable to the Lending
Institution for servicing of Loans in an amount equal to a
monthly fee of 1/12 of 0. percent of the unpaid balance of
each Loan as of the day preceding the last day on which a
scheduled payment on the Loan was due.
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"Servicing Officer" means any officer of the Lending
Institution involved in, or responsible for, the administration
and servicing of the Loans, whose name appears on a list of
servicing officers furnished to the Issuer, the Trustee and the
Compliance Agent by the Lending Institution, as such list may
from time to time be amended.
"Special Hazard Insurance Policy" means a special hazard insurance policy or any replacement policy obtained by the
Trustee pursuant to Section 5.08 of this Agreement.
"Standard Hazard Insurance" means insurance, issued by a
Qualified Insurer, as described in Section 5.06 herein.
"State" means the State of California.
"Uninsured Cause" means any cause of damage to property subject to a Loan, the complete restoration of which is not
fully reimbursable by the insurance policies required to be
maintained pursuant to Section 5.06 or 5.07 of this Agreement.
"Yield on the Bonds" means the yield on the Bonds as determined by the Issuer in accordance with the Code and as
specified by the Issuer in a Notice of Fee, Rate, and
Allocation.
ARTICLE I1
REPRESENTATIONS
Section 2.01. Representations, Warranties and Covenants of
the Issuer. The Issuer represents and warrants to, and
covenants with, the Lending Institution, the Compliance Agent
and the Trustee that:
(a) The Issuer is a municipal corporation of the
State, duly organized and existing under the Constitution and laws of the State. Pursuant to the Act, the Issuer has
authorized the execution and delivery of this Agreement,
the Indenture, and the Developer Agreements.
(b) The Issuer has complied or intends to comply with
all of the provisions of the Constitution and laws of the
State including the Act, and has or will have full power
and authority to consummate all transactions contemplated
by this Agreement, the Developer Agreements, the Indenture,
and any and all other agreements relating thereto.
(c) To accomplish the foregoing, the Issuer proposes
to issue the Bonds following the execution of this
Agreement on the terms and bases set forth in the Indenture
and to use the proceeds thereof as specified in this
Agreement, the Developer Agreements and the Indenture.
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(d) No officer or official of the Issuer has any
prohibited interest, as defined by the applicable laws of
the State, in the Lending Institution or in the
transactions contemplated by this Agreement.
(e) The Issuer will make any and all findings and
determinations required or permitted to be made by it
pursuant to this Agreement in good faith and with due
diligence.
Section 2.02. Representations, Warranties and Covenants
of Lending Institution. The Lending Institution represents and
warrants to, and covenants with, the Issuer, the Trustee, the
Compliance Agent and, in order to induce the Underwriters to
enter into the Purchase Contract, the Underwriters that:
(a) It is (i) a duly organized and existing mortgage
banking corporation or other financial institution which
customarily provides servicing and origination of home
mortgages, and is authorized to do business in the State,
or (ii) a duly organized and existing federal or state
savings and loan association authorized to do business in
the State, or (iii) a duly organized and existing federal
or state bank authorized to do business in the State; and
it is either a FNMA or FHLMC approved seller/servicer.
(b) It will, during the term of this Agreement,
remain a financial institution subject to supervision and
examination by state or federal authorities (if currently
subject to such supervision and examination) as applicable, will not make a change in the character of its business
which would materially adversely affect its performance
hereunder, will remain in good standing and qualified to do
business under the laws of the United States of America or
the state of its then state of organization and of the
State, will not dissolve or otherwise dispose of all or
substantially all of its assets and will not voluntarily
consolidate with or merge into any other entity or permit
one or more other entities to consolidate with or merge
into it; provided, that it may, without violating the
agreement contained in this subsection, consolidate with or
merge into another financial institution, or permit one or
more financial institutions to consolidate with or merge
into it, or sell or otherwise transfer to another such financial institution all or substantially all of its
assets as an entirety and thereafter dissolve, provided
that the surviving, resulting, or transferee financial
institution, as the case may be, (i) shall be subject to
the supervision and examination of state or federal
authorities, to the extent applicable, (ii) shall be a FNMA
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or FHLMC approved seller/servicer, (iii) after giving
effect to such transaction, shall have a net worth
substantially equal to or greater than that of such
Lending Institution immediately prior to such
transaction, and (iv) shall assume in writing all of
the obligations of such Lending Institution under this
Agreement (in the case of a sale of all or
substantially all of such Lending Institution's
assets, the Trustee, on behalf of the Issuer, shall
release such Lending Institution in writing from all
liability hereunder, concurrently with and contingent
upon such assumption).
(c) It has the power to execute, deliver and perform,
and to enter into the transactions contemplated by, this
Agreement, and has duly authorized the execution, delivery
and performance of this Agreement.
(d) The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and
the fulfillment of or compliance with the terms and
conditions of this Agreement, do not and will not conflict
with or result in a breach of its charter or bylaws or any
of the terms, conditions or provisions of any legal
restriction or any agreement or instrument to which it is
now a party or by which it is bound, or constitute a
default (or constitute, with notice or lapse of time, or
both, a default) under any of the foregoing.
(e) It will not knowingly take any action or permit
any action which is within its control to be taken which
would to its knowledge impair the exemption from federal
income taxation of interest on the Bonds.
(f) The information, if any, concerning the Lending
Institution under the caption "Lending Institution" in the
preliminary Official Statement of the Issuer relating to
the Bonds does not contain any untrue statement of a
material fact or omit to state any material fact necessary
to make the statements therein not misleading.
(9) It will furnish to the Issuer and the Under- writers a letter and an opinion of counsel respectively,
dated the date of the issuance of the Bonds, in sub-
stantially the forms of Exhibits C and D hereto.
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Section 2.03. Representations, Warranties and Covenants of
Trustee. The Trustee represents and warrants to, and covenants
with, the Lending Institution, the Compliance Agent, the Issuer
and, in order to induce the Underwriters to enter into the
Purchase Contract, the Underwriters that:
(a) The Trustee has been duly organized under the laws of the State of California and is validly existing as
a banking association, with full corporate power to own its
properties and conduct its business;
(b) This Agreement has been duly authorized, executed
and delivered by the Trustee, and, when executed and
delivered by the Issuer, the Compliance Agent and the
Lending Institution, will constitute a legal, valid and
binding obligation of the Trustee enforceable in accordance
with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, or other laws
affecting creditors' rights generally or by equitable
principles if equitable remedies are sought;
(c) All corporate proceedings legally required to be
taken by the Trustee in connection with the authorization
and execution of this Agreement and the consummation of the
transactions contemplated hereby and related hereto, and to
the best of its knowledge, all approvals, authorizations, consents or other orders of state or federal regulatory
agencies, public boards or bodies, if any, as may be
legally required to be obtained by the Trustee prior to the
date of this Agreement with respect to any or all of such
matters, have been taken or obtained;
(d) The Trustee has full legal authority to engage in
the activities covered by this Agreement; and, furthermore,
the execution and delivery of this Agreement and compliance
with the terms, conditions and provisions hereof will not
conflict with or result in a breach of any of the terms,
conditions or provisions of the charter or bylaws of the
Trustee or any agreement or instrument to which it is a
party or by which it is bound, or to the best of its knowledge, any law or regulation or administrative decree
or order to which it is subject, or constitute a default
(or constitute, with notice or lapse of time, or both, a
default) thereunder;
(e) The Trustee is not in default with respect to any
order or decree of any court, or any order, regulation or
demand of any federal, state, municipal or governmental
agency, which default might have consequences that would
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materially and adversely affect the operation of the
Trustee or its properties with respect to its duties
and obligations contemplated by this Agreement;
(f) The Trustee is not a party to or bound by any
agreement or instrument or subject to any charter or any
other corporate restriction or any judgment, order, writ,
injunction, or decree which now or in the future may
materially and adversely affect -the ability of the Trustee
to perform its obligations under this Agreement or which
require the consent of any third person to the execution of
this Agreement or the consummation of the transactions
contemplated hereby;
(9) The Trustee is, or has a wholly-owned mortgage
banking subsidiary which is, a seller/servicer approved by
the FNMA or the FHLMC for conventional loans, and it shall
maintain its standing as such;
(h) The Trustee will report, as more fully set forth
in this Agreement, information relating to the Loans to the
Issuer and the Lending Institution and will do and perform
every act and thing which may be necessary or required to
perform its duties under this Agreement;
(i) No litigation is pending or, to the best of the
Trustee's knowledge, threatened against the Trustee which
would prohibit its entering into this Agreement or
consummating the transactions Contemplated hereby.
Section 2.04. Representations, Warranties and Covenants of
the Compliance Agent. The Compliance Agent represents and
warrants to, and covenants with, the Lending Iqstitution, the
Trustee, the Issuer and, in order to induce the Underwriters to
enter into the Purchase Contract, the Underwriters that:
(a) The Compliance Agent is a corporation duly
organized, validly existing and in good standing under the
laws of the state of its incorporation, is duly qualified
and in good standing to transact insurance business in the
State, and possesses all requisite authority, power,
licenses, permits and franchises to conduct any and all
such business contemplated by, and to execute, deliver, and
comply with its obligations under the terms of, this Agreement, the execution, delivery and performance of which
have been duly authorized by all necessary corporate action.
(b) The execution and delivery of this Agreement by
the Compliance Agent in the manner contemplated herein and
the performance and compliance with the terms hereof by it
will not violate its certificate or articles of
incorporation or bylaws, or any laws which could have any
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material adverse effect whatsoever upon the validity,
performance or enforceability of any of the terms of this
Agreement applicable to the Compliance Agent and will not
constitute a material default (or constitute, with notice
or lapse of time, or both, a default) under, or result in
the breach of, any material contract, agreement or other
instrument to which the Compliance Agent is a party or
which may be applicable to it or any of its assets.
(c) The execution and delivery of this Agreement by
the Compliance Agent in the manner contemplated herein and
the performance and compliance with the terms hereof by it
do not require the consent or approval of any governmental
authority, or if such consent or approval is required, it
has been obtained.
(d) This Agreement, and all documents and instruments
contemplated hereby, which are or pursuant hereto will be
executed and delivered by the Compliance Agent, will
constitute valid, legal and binding obligations of the
Compliance Agent (assuming execution and delivery thereof
by the other party or parties thereto), enforceable in
accordance with their respective terms, except as the
enforcement thereof may be limited by applicable laws
affecting creditors' rights generally and/or insurance
claimants' rights generally or by equitable principles if
equitable remedies are sought.
(e) From time to time the Compliance Agent will
report, as more fully set forth in this Agreement,
information relating to the Loans to the Lending
Institution, the Issuer, and the Trustee, and will do every
act and thing which may be necessary or required to perform
its duties under this Agreement.
(f) The Compliance Agent agrees that so long as it
shall continue to serve in the capacity contemplated under
the terms of this Agreement it will remain in good standing
under the laws of the State and qualified under the laws of
the State to do insurance business in the State, will not
dissolve or otherwise dispose of all or substantially all of its assets and will not voluntarily consolidate with or
merge into any other entity or permit one or more other
entities to consolidate with or merge into it; except that
the Compliance Agent may, without violating the covenant
contained in this subsection, consolidate with or merge
into another entity, or permit one or more entities to
consolidate or merge into it, or sell or otherwise transfer
to another such entity all or substantially all of its
assets as an entirety and thereafter dissolve, if the
surviving, resulting or transferee entity, as the case may
be, (i) shall have a net worth equal to or greater than the
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net worth of the Compliance Agent immediately preceding any
such transaction, (ii) shall be qualified under the laws of
the State to do insurance business in the State, shall be
qualified under the laws and have all necessary approvals
required of the Compliance Agent under this Section to
perform the Compliance Agent's duties under this Agreement,
and (iii) shall assume in writing all of the obligations of
the Compliance Agent under this Agreement (in the case of a
sale of all or substantially all of the Compliance Agent's
assets, the Trustee, on behalf of the Lending Institution
and the Issuer, shall release the Compliance Agent in
writing from all obligations so assumed, concurrently with
and contingent upon such assumption).
ARTICLE I11
ISSUANCE OF BONDS; APPLICATION OF BOND PROCEEDS
Section 3.01. Agreement to Issue Bonds; Application of Bond Proceeds. The Issuer agrees to use its best efforts to
issue, sell and deliver the Bonds to the initial purchaser or
purchasers thereof pursuant to the Purchase Contract on the
terms and bases set forth in the Indenture, provided the terms and conditions of such sale are acceptable to the Issuer. The
proceeds of the Bonds will be deposited with the Trustee as provided in the Indenture, and will be disbursed as provided in
the Indenture, the Developer Agreements and this Agreement.
Section 3.02. Payment of Cost of Issuance of Bonds. The
Lending Institution acknowledges that the Issuer shall direct
the payment of all costs not otherwise paid in connection with
the issuance of the Bonds, including, without limitation, costs
of printing, legal and accounting fees and all other costs as
specified in the Indenture, solely from moneys in the Program
Fund and that the Issuer shall have no obligation of any kind
to pay, or to reimburse the Lending Institution for, any costs
incurred by the Lending Institution in connection with the
issuance of the Bonds.
Section 3.03. Special Arbitrage Certifications. The
Issuer, the Trustee, the Compliance Agent and the Lending
Institution severally, and not jointly, certify to the
purchasers and holders of the Bonds from time to time
outstanding that, based solely on present expectations as set
forth in an arbitrage certificate delivered at the closing for
the sale of the Bonds, moneys on deposit in any fund or account
in connection with the Bonds, whether or not such moneys were
derived from the proceeds of the sale of the Bonds or from any
other sources, are not intended to be used in a manner which
will cause the interest on the Bonds to become subject to
federal income taxation. The Issuer, the Trustee, the
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Compliance Agent and the Lending Institution reserve the right,
however, to make any investment of such moneys permitted by the
laws of the State if, when and to the extent that the Code
shall be repealed or interpreted to permit such investment or
shall be held void by final judgment of a court of competent
jurisdiction so as to permit such investment, but only if such
investment made by virtue of such repeal, interpretation or
decision would not, in the opinion of counsel of recognized
competence in such matters, result in making the interest on
the Bonds subject to federal income taxation.
Section 3.04. Limited Liability. All obligations of the
Issuer incurred hereunder shall be limited obligations of the
Issuer, payable solely out of Bond proceeds, Developer Fees,
revenues, and other amounts derived by the Issuer from the
Loans (including earnings thereon and certain insurance
proceeds with respect thereto), and certain reserve funds
established in connection therewith and nothing contained
hereunder shall create any indebtedness or be construed to create any moral obligation on the part of the Issuer, or
permit any person to compel the exercise of the taxing power of
the Issuer. All obligations of the Issuer incurred hereunder
shall be subordinated to the obligations of the Issuer to the
holders of the Bonds, and shall be payable only after all
obligations of the Issuer to the holders of the Bonds shall
have been satisfied.
ARTICLE IV
COMMITMENTS TO PURCHASE LOANS
Section 4.01. Commitment to Buy and Sell. At or after the
times (but in no event later than the date set forth in Section
10 of Exhibit B of the applicable Developer Agreements unless
otherwise specified by the Issuer in a written notice to the other parties hereto) and in the amounts set forth in the
draw-down schedule included in Section 5 of said Exhibit B of
the Developer Agreements, the Trustee acting on behalf of the
Issuer and using moneys in the Program Fund, will purchase from
the Lending Institution Loans secured by the Residences
referred to in said Developer Agreements; provided, however,
that the Issuer may transfer the right to originate and service
Loans to another Lending Institution in connection with the
transfer of a reservation from one developer to another.
The Lending Institution will use its best efforts to
originate and sell such Loans to the Trustee, without recourse,
at or after such times and in said amounts, provided that, if
prior to the issuance of the Bonds the Issuer has entered into
a mortgage sale and service agreement substantially similar to
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this Agreement with another lending institution, the Issuer
shall determine the Developer Reserved Single Family Residences
with respect to which the Lending Institution shall originate
and sell loans to the Trustee.
Each Loan shall: (i) be secured by a first lien Deed of
Trust (subject to certain permitted encumbrances) on a
Residence, the Acquisition Cost of which does not exceed the
Maximum Acquisition Cost; (ii) be made to a person or persons
each of whom is a First Time Homebuyer (except that Loans in an aggregate principal amount not exceeding at any time 10 percent
of the total principal amount of all Loans may be made to
persons who are not First Time Homebuyers) whose Household
Income does not exceed: (a) 150 percent of the Median Household
Income in the case of a purchase of a New Residence, or (b) 120
percent of the Median Household Income in the case of an
Existing Residence (provided, however, that Loans representing
at least one-fifth of the principal amount of all Loans for
Existing Residences shall be made to persons whose Household
Income does not exceed 110 percent of the Median Household
Income); (iii) bear interest at the Mortgage Loan Interest
Rate; (iv) not be used to acquire or replace an existing
mortgage (other than a construction loan or similar temporary
financing); (v) comply with the requirements of Section 4.08
hereof; and (vi) be insured by a Private Mortgage Insurance
Policy. No Loan shall have a Loan-to-Value Ratio in excess of
95 percent and not more than 20 percent of the Loans shall be
made with respect to Residences which are condominiums.
Not more than 40 percent of the aggregate principal amount of the Loans in the first paragraph of this Section 4.01 may be
made for the purchase of Existing Residences.
Section 4.02. Loan Amount. The purchase price of each
Loan purchased hereunder by the Trustee on behalf of the Issuer
shall be equal to % of the principal amount thereof plus accrued interest thereon. The Trustee shall pay to the Lending
Institution from the Program Fund on each Closing Date a sum
equal to the aggregate applicable purchase price of Loans it
originated which are purchased on such Closing Date. The
Lending Institution shall fund each such Loan in the sum
of % of the aggregate principal amount of such Loan.
The Lending Institution may charge a non-refundable
application fee of not more than one hundred dollars ($100) in connection with each loan application it processes. Such fee
shall be credited against the fees and charges hereinafter
described.
At the closing for any Loan, the Lending Institution may charge the mortgagor a fee equal to 0.- percent of the original
principal amount of the Loan and may charge either the
mortgagor or the seller, as directed by the seller, an
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additional fee equal to 0. of one percent of the principal
amount of the Loan to be originated, which amounts may be
retained by the Lending Institution for its sole account. The
Lending Institution may also collect from the mortgagor charges
for any costs of the following items paid or incurred by the
Lending Institution in connection with the making of a Loan,
but only to the extent that such charges do not exceed either
those charged in the area in connection with the origination of
loans not financed through qualified mortgage bonds within the
meaning of the Code or the actual costs of the Lending
Institution: (i) at the closing for a Loan, title insurance,
recording charges, escrow and tax contract fees, standard
hazard, earthquake, flood, mortgage or life insurance premiums
in such amounts as may be actually incurred; and (ii) prior to
the closing for a Loan, credit report, survey, appraisal,
abstract and attorneys' fees, and similar charges for loan
processing fees, in an amount not to exceed $300 in total, plus
an additional $100 in the case of a Loan for which there is to
be a cosigner. In addition, the Lending Institution, at the
direction of the seller shall charge the buyer an origination
fee equal to one-quarter of one percent of the principal amount
of the Loan to be originated which fee shall be remitted to the
seller upon the closing of the Loan.
No other fees, charges or remuneration may be received by
the Lending Institution, directly or indirectly, in connection
with the origination or closing of a Loan for the Program.
Section 4.03. Loan Submission. A Loan Submission Voucher
accompanied by copies of supporting documents contained in Part
I1 of the Loan File for each Loan sold by the Lending Institution to the Trustee shall be delivered to the Compliance
Agent at a reasonable time, but not less than ten business
days, prior to the proposed date on which Trustee will make a
disbursement from the Program Fund for the purchase of such
Loan. In addition, the Lending Institution shall provide the
Trustee with telephonic notice of the aggregate principal
amount of the Loans to be purchased at least ten calendar days
before the Closing Date. The Compliance Agent shall review the
Loan Submission Voucher and accompanying documents for each
such Loan to determine whether it meets the criteria set forth in Section 8.01 hereof. Upon a determination that such
evidence exists, the Compliance Agent shall deliver a Loan
Submission Voucher to the Lending Institution and the Lending
Institution shall deliver the Loan Submission Voucher to the
Trustee.
Each Loan to be purchased shall be submitted on standard
conventional FHLMC loan documents with the riders set forth in
Exhibits E and F, and shall provide for payments of principal
and interest on the first day of each month, all such payments
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to be substantially equal, except that, with the approval of
the Private Mortgage Insurer, payments with respect to a Loan
may be increased in the second and following years (but in no
event after the sixth year), provided that: (a) the initial
payment with respect thereto is based upon an interest rate
which is not more than 303 basis points less than the fully
indexed accrual rate (unless the Private Mortgager Insurer
shall provide otherwise), (b) scheduled negative amortization
does not exceed 5 percent of the original principal amount of
the Loan if the Loan-to-Value Ratio exceeds 90 percent or 10
percent of the original principal amount of the Loan if the
Loan-to-Value Ratio does not exceed 90 percent and (c) annual
increases in payments shall be limited to 7.5 percent. Such
payments shall commence not later than the first day of the
second month following the Closing Date and in all cases not
later than 62 days from the date of settlement with mortgagor.
No Loan shall be purchased unless, on the submission date, all
matured payments due on the Note have been paid. The sale of
each Note and related Deed of Trust shall be evidenced by the
originating Lending Institution's (i) placing the following
endorsement on the back of such Note: "Pay to the Order of
First Interstate Bank of California, as Trustee for City of
Carlsbad, 1985 without recourse" and (ii) as soon as
practicable thereafter, executing and delivering to Trustee, on
behalf of Issuer, and recording or filing in the offices
necessary to evidence Issuer's ownership thereof, an assignment
to Issuer of the Deed of Trust securing such Note.
Section 4.04. Closings. The Closing for the purchase of
each Loan shall take place at the office of the Trustee or at
such other place as may be mutually agreeable to the Trustee and the Lending Institution. Closings for the Lending
Institution shall be in such numbers or for such principal
amounts of Loans as shall be agreeable to the Lending
Institution and the Trustee. Unless otherwise agreed among the
Lending Institution and the Trustee, Closings shall be at least
twice a month. No closing, however, shall be held on any of
the seven business days before each June 1 and December 1 of
each bond year.
All mortgagor payments on account of principal (except for
prepayments), interest, taxes or insurance collected by the
Lending Institution with respect to a Loan prior to the Closing Date, but not due until after the Closing Date for such Loan
("prepaid installments") shall be held by the Lending
Institution until the Closing. On such Closing, such amounts
shall be immediately deposited by the Lending Institution in
the appropriate fund or account, created hereunder or under the
Indenture, as if such amount had been received subsequent to
the Closing.
Section 4.05. Closing Documents. The Lending Institution
shall deliver to the Trustee in connection with the Closing for
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each Loan the documents comprising Part I of the Loan File,
including, without limitation, the Note, related Deed of Trust
and assignment required by Section 4.03 hereof, all of which
shall be held in the possession of the Trustee in accordance
with the Indenture.
Section 4.06. Loan File. The Lending Institution shall,
at its own expense, maintain, with respect to each Loan it
originates, any original documents not previously submitted to
the Trustee and all other documents commonly maintained, or
required to be retained by law or regulation, in its loan
files. Such documents may be stored on microfilm.
Section 4.07. Defective Documents. Notwithstanding the
Compliance Agent's review of the Loan Submission Voucher and
accompanying documents pursuant to Section 4.03 hereof, if at
any time any document or documents constituting a part of a
Loan File are in the opinion of the Trustee (which opinion shall be binding upon the Lending Institution) defective or
inaccurate in any material respect, the Lending Institution
shall cure the defect or inaccuracy within 60 days (or such shorter period of time as may be required by law) from the time the Trustee notifies it of the existence of the defect. The
Lending Institution hereby covenants and agrees that, if any
such material defect cannot be cured within such 60-day period
(or such shorter period of time as may be required by law), it will, not later than 90 days after the Trustee's notice to it
respecting such defect or inaccuracy, repurchase the related
Loan from the Issuer at a price equal to (i) percent of the principal remaining unpaid on such Loan plus (ii) unpaid
accrued interest thereon to the date of the repurchase. The
Trustee shall then assign and deliver such Note and Deed of
Trust to the Lending Institution. The Trustee, as agent for
the Issuer (and the Trustee is hereby irrevocably appointed as
the Issuer's agent and attorney-in-fact for such purpose) shall execute and deliver such instruments of transfer or assignment,
in each case without recourse, as shall be necessary to vest in the Lending Institution the Note and Deed of Trust released
pursuant thereto. The Lending Institution hereby waives any
statute of limitation or other law which might otherwise be
raised in defense to any obligation to repurchase any Loan
hereunder.
Notwithstanding the foregoing, in any case in which the
Lending Institution is required to repurchase a Loan by reason
of a defect, inaccuracy or misrepresentation in a Buyer's
Affidavit (Exhibit G) pertaining to a requirement of the Code
or the Act, the Lending Institution need not repurchase the
Loan so long as (i) such defect, inaccuracy or
misrepresentation constitutes a default under the Loan with
respect to which the Private Mortgage Insurance Policy provides coverage, and (ii) the Lending Institution shall diligently
proceed, on behalf of the Issuer, to declare all sums the
payment of which is secured thereby to be immediately due and
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payable and to take all steps necessary to collect all benefits
pursuant to the applicable Private Mortgage Insurance Policy.
Moreover, in any case in which the Lending Institution is
required to repurchase a Loan because a Developer incorrectly
indicated in an affidavit submitted to the Lending Institution
that the Acquisition Cost of a Residence did not exceed the
Maximum Acquisition Cost, the Lending Institution may exercise
the right of the Issuer, pursuant to Section 5.01 of the
Developer Agreement, to reqire the Developer to purchase such
Loan from the Issuer.
Section 4.08. Representations, Warranties and Covenants of
Lending Institution Concerning Loans. The Lending Institution
hereby represents and warrants to, and covenants with, the
Issuer, the Trustee, the Private Mortgage Insurer and the
Compliance Agent that with respect to the Loans it shall
originate for sale to the Trustee on behalf of the Issuer:
(i) The Information set forth in each Loan Submission
Voucher will be true and correct at the Closing Date
thereof to the best knowledge of the Lending Institution,
and each Loan shall have been closed after the delivery of
this Agreement;
(ii) Based upon representations made by the mortgagor
by an affidavit or declaration under penalty of perjury and
to the best knowledge of the Lending Institution (using the
underwriting procedures and criteria which it applies in
the case of loans being originated for its own portfolio),
each Loan will be secured by a Residence to be occupied by
the mortgagor as such mortgagor's principal place of
residence (and not as an investment or recreational home)
within 60 days and for a minimum of two years after
receiving the Loan; will be made substantially in
accordance with the Lending Institution's then current
standard underwriting policies, which shall generally
conform to FHLMC guidelines except as otherwise herein
prescribed and except that credit underwriting criteria may
be more liberal than provided for in said guidelines to the
extent approved by the Private Mortgage Insurer; will be
made for the purpose of purchasing the property subject to
the related Loan and not for the purpose of refinancing or replacing any existing loan on any such property (other
than a construction loan or similar temporary financing); will be a permanent mortgage and not a construction loan;
will have a term of not more than 360 and not less than 348
consecutive monthly installments; and complies with all of
the requirements of Section 4.01;
(iii) As of the Closing Date, the Loan will have been
finally endorsed for insurance under a Private Mortgage
Insurance Policy (or a firm commitment therefor received);
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and the Lending Institution agrees, until such time as no
Bonds are outstanding or as otherwise directed by the
Trustee, to cause such insurance to be maintained in force
and effect during all times that the Issuer owns an
interest in the Loan;
(iv) As of the Closing Date, the Loan will be secured
by a valid first lien Deed of Trust on the property
financed by the Loan, subject only to (a) the lien of current real property taxes and assessments, and covenants
conditions and restrictions, rights of way, easements, and other matters of public record as of the date of recording
of the related Deed of Trust, such exceptions appearing of
record being either acceptable to lending institutions
generally or taken into account and reflected in the
appraisal made in connection with the origination of the
Loan or (b) any lien the full payment for the release of
which provision has been made from the proceeds of such
Loan, provided each payment will be made as soon as
practicable ;
(v) As of the Closing Date, the Lending Institution
shall have in its possession with respect to the property
financed by the Loan and secured thereby an ALTA approved
or an equivalent mortgage title insurance policy (or a
commitment therefor) in an amount equal to the original principal amount of the Loan, naming the Lending
Institution and its successors and assigns, if any, as an
insured, and insuring that the Deed of Trust securing the
Loan constitutes a first lien on such property, subject to
the exceptions of the preceding subsection;
(vi) As of the Closing Date, the improvements upon
the real property subject to such Loan will be covered by a
valid and subsisting Standard Hazard Insurance Policy,
Flood Insurance Policy (if required) and Earthquake Damage
Insurance Policy with an endorsement in favor of the
Lending Institution, the Issuer and the Trustee as their
interests may appear, issued by a Qualifed Insurer;
(vii) The terms, covenants and conditions of the Loan
shall not have been and shall not prior to the Closing be
waived, altered, impaired or modified in any respect which
would materially affect the value, validity, enforceablity,
or prompt payment of the Loan, or the security of the lien
securing the Loan, except for such waivers, alterations and
the like accomplished by the Lending Institution prior to
the Closing Date and disclosed in writing to the Compliance
Agent;
(viii) As of the submission date, all matured payments
due on the Note will have been current;
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(ix) As of the Closing Date, there shall be no
delinquent tax or delinquent lien against the property
financed by the Loan, except as specified in paragraph (iv)
hereof or unless the title insurance specified in paragraph (v) hereof insures against such risks;
(x) As of the Closing Date, the Lending Institution shall not have done any act to create an offset, defense or
counterclaim to the Loan, including the obligation of the
mortgagor to pay the unpaid principal of and interest on
the Loan;
(xi) As of the Closing Date, there shall be no
mechanics' liens or claims for work, labor or material
affecting the premises financed by the Loan which are or
may be a lien prior to, or equal with, the lien of the Deed
of Trust securing the Loan, subject to the exceptions
specified in paragraph (iv) hereof, or unless the title
insurance specified in paragraph (v) hereof insures against
such risks;
(xii) The Lending Institution will cause an
inspection to be performed in connection with making the
Loan and, based upon the inspection and to the best
knowledge of the Lending Institution, the physical property
financed by the Loan will be complete, free of apparent
material damage, and in general good repair on the Closing Date of such Loan;
(xiii) In making such Loan, the Lending Institution
has complied with the Truth-in-Lending Act, the Real Estate
Settlement Procedures Act of 1974, the Equal Credit
Opportunity Act and any other applicable federal or state
statutes or regulations;
(xiv) Each Deed of Trust required to be filed in a
public office to perfect the lien of the Deed of Trust
securing each Loan against third parties will have been
duly recorded at the instructions of the Lending
Institution in the proper public office in order to give constructive notice thereof to all subsequent purchasers or
encumbrancers of the property financed by such Loan;
(xv) Each Loan at the time it shall have been made
shall have complied with the state and federal usury laws
applicable to the Lending Institution;
(xvi) To the best knowledge of the Lending
Institution, the mortgagor of a Loan shall not have
conveyed such mortgagor's right, title or interest to or in
the property to any party other than a trustee for the
benefit of such mortgagor;
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(xvii) The fees to be charged and retained by the
Lending Institution and the stated interest rate for each
Loan shall be in compliance with this Agreement;
delivered a Buyer's Affidavit in substantially the form
attached hereto as Exhibit G;
(xviii) Each mortgagor shall have executed and
(xix) Except in the case of Loans in an aggregate
principal amount not exceeding 10 percent of the total
amount of all Loans, to the best knowledge of the Lending
Institution, based upon its review of signed copies
(certified by the mortgagor to be true and accurate) of the
mortgagor's federal income tax returns for the three years
preceding the date of application for the Loan (from which
it has determined that the mortgagor has not claimed a
deduction pursuant to section 164(a)(l) of the Code for
taxes on real property which was the mortgagor's principal
residence or a deduction pursuant to section 163 of the
Code for interest paid on a mortgage secured by real property which was the mortgagor's principal residence) and
such other information as may have been furnished to the
Lending Institution in connection with the Loan
application, the affidavit furnished by the mortgagor under
the preceding paragraph will have been accurate as it
relates to the mortgagor's status as a First Time Homebuyer
(if all such tax returns are not submitted by the mortgagor, the Lending Institution shall obtain an affidavit to the effect that the mortgagor was not required
to file the same);
(xx) If the mortgagor is an employee of the Issuer,
the Lending Institution will have determined, or received a
written declaration from the Issuer to the effect, that the
mortgagor does not have decision-making authority for the
Issuer;
(xxi) The Note and Deed of Trust shall have attached
thereto the riders provided for in Exhibits E and F or such
other riders as the Issuer may from time to time require by
no tic e ;
(xxii) The Developer or seller, as the case may be,
shall have executed and delivered a Seller's Affidavit in
substantially the form attached hereto as Exhibit H;
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(xxiii) To the best knowledge of the Lending
, Institution, based upon its examination of the closing
statement pertaining to the sale of the Residence and such
other information as the Lending Institution deems
relevant, the Acquisition Cost of the Residence does not
exceed the Maximum Acquisition Cost;
(xxiv) To the Lending Institution's best knowledge
there is no circumstance or condition with respect to the
Loan or the mortgagor which (a) could reasonably be
expected to cause the Lending Institution to regard the
Loan as an unacceptable investment for its own portfolio,
cause the Loan to become delinquent, or adversely affect
the value or marketability of the Loan, except that the
interest rate on the Loan may be below the market interest
rate and the Loan-to-Value Ratio may be greater than that
which is otherwise acceptable to private lenders; or (b)
would lead it to believe that the affidavits required to be
made by the mortgagor and the Developer or seller are not
true and correct; and
(xxv) Neither the Lending Institution nor any other
person (insofar as the Lending Institution is aware) has
charged the seller of the Residence or any other person any
fee, charge or remuneration for the services to be provided by the Lending Institution pursuant to this Agreement
except those fees, charges and remunerations specifically
provided for herein.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section shall
survive the sale of the Loans by the Lending Institution to the
Trustee and that the representations, warranties and covenants
shall inure to the benefit of the transferees and the assigns
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of the Issuer, the Trustee, the Private Mortgage Insurer and
the Compliance Agent which, under the Indenture, include the
Bondholders. Upon discovery at any time by the Issuer, the
Private Mortgage Insurer, the Lending Institution, the
Compliance Agent or the Trustee of a breach of any of the
foregoing representations, warranties and covenants which may
materially and adversely affect the value of any Loan or the
interest of the Issuer in any Loan or the tax exemption for
interest on the Bonds, the party discovering such breach shall
give prompt written notice to the others. Within 60 days (or
such shorter period as may be required by law) of its discovery
or its receipt of notice of breach, the Lending Institution
shall cure such breach in all material respects or shall
purchase the Loan from Issuer in the manner and at the purchase
price set forth in Section 4.07 hereof.
Section 4.09. Permitted Buydowns of Interest Rate. The
interest rate on any Loan which provides for scheduled negative
amortization may not be bought down. The interest rate on any
Loan the scheduled amortization of which provides for
substantially equal monthly payments may be bought down, but
only under the following conditions:
(i) the money used to effect the buydown must be
deposited in an escrow account with scheduled monthly
releases which serve to reduce the mortgagor's payments;
(ii) the term of the buydown period may not be less than one year nor more than three years;
(iii) the initial interest rate buydown must be effective for one year and may not be greater than three
percentage points and the total amount of the buydown may
not exceed six percentage points in the case of Loans with
Loan-to-Value Ratios higher than 90 percent or 10
percentage points in the case of Loans with Loan-to-Value
Ratios of 90 percent or less;
(iv) reductions in the buydown must occur not more
frequently than annually, no such reduction may exceed one percentage point, and no resulting increase in the
scheduled monthly payment may exceed 7.5 percent per year;
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(VI or FSLIC;
the escrow account must be fully insured by FDIC
(vi) the Note and Deed of Trust may make no reference to the buydown and the interest rate and monthly payments
provided in the Note may not take into account the buydown;
agent to make monthly payments to the Lending Institution
for the account of the mortgagor;
(vii) the escrow agreement must require the escrow
(viii) the escrow agreement must provide for reversion
of escrowed moneys to the person who made the original deposit thereof if the Residence is sold by the mortgagor
or the Loan is prepaid in full, whether voluntarily or involuntarily;
(ix) if the Loan is to be underwritten on the basis of
the reduced mortgagor payment for the first year, the moneys for the buydown must be placed in the escrow account
prior to purchase of the Loan by the Trustee and must be
sufficient (with interest earnings thereon, but without
regard to the income of any co-signer) to make all monthly
payments provided under the buydown; and
(x) the mortgagor's only interest in the escrowed
moneys is to have them applied to payments due under the
Note as provided in this Section and such moneys may not be used to pay past due payments of the mortgagor.
Section 4.10. Report Re Loans. Prior to the purchase of
each Loan by the Trustee, the Lending Institution shall submit
to the Trustee, the Issuer and the Compliance Agent a report (in a form satisfactory to the Trustee) with respect to such Loan setting forth:
(1) The name and taxpayer indentification number of
the mortgagor;
(2) The date, amount and term of the Loan;
(3) The interest rate of the Loan;
(4) That the Loan is not a qualified home improvement
loan or a qualified rehabilitation loan (as defined in §103A-2(i)(ii) of the Income Tax Regulations);
(5) Whether the Residence is a previously occupied
Residence;
(6) Whether the Residence is a targeted area
residence (as defined in §103A-2(b)(3) of the Income Tax
Regulations;
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(7) That the Residence is a one-family residence;
(8) The Acquisition Cost of the Residence;
(9) The Average Area Purchase Price applicable to the
Residence ;
(10) Whether the mortgagor is a First Time Homebuyer;
(11) The number of the mortgagor's family members that
occupy the Residence;
(12) The adjusted income (as defined in
§1.167(k)-3(b)(3)of the Income Tax Regulations) of the
mortgagor's family for the previous calendar year; and
(13) Said adjusted income as a percentage of the
median income for the San Diego Primary Metropolitan
Statistical Area, as determined under Sectioq 8 of the
United States Housing Act of 1937, as amended, with
adjustments for smaller or larger families (or, in the
event programs under Section 8(f) of the Housing Act of 1937, as amended, are terminated, the applicable method of
determining adjusted income and median income in effect
immediately prior to the date of such termination).
ARTICLE V
ADMINISTRATION AND SERVICING OF LOANS
Section 5.01. Lending Institution to Act as Servicer. The
Lending Institution shall service and administer the Loans it
originated and shall have full power and authority, acting alone, to do any and all things in connection with such
servicing and administration which it may deem necessary or
desirable, subject to the provision of this Agreement. Without
limiting the generality of the foregoing, the Lending
Institution shall, and is hereby irrevocably authorized and
empowered by the Issuer to, execute and deliver, in its own
name, on behalf of itself and the Issuer, any and all
instruments of satisfaction or cancellation or of partial or
full release or discharge and all other comparable instruments,
with respect to the Loans and with respect to the Residences
subject to the Deeds of Trust securing such Loans.
Without limiting the generality of the foregoing paragraph,
the Lending Institution shall service the Loans in accordance
with the servicing standards as set forth in the FHLMC
Servicers' Guide, as they may be in effect during the term of
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the Program, and except as such standards may be specifically
modifed herein or as may reasonably be requested from time to
time by the Issuer or the Trustee. The Lending Institution
shall perform all of its duties in servicing Loans for the
Issuer with due care, diligence, and reasonable promptness and
shall use the same degree of care in servicing Loans under the
Program as it would employ in servicing mortgage loans on
behalf of FHLMC. In addition, the Lending Institution shall
provide to the Private Mortgage Insurer any and all notices and
follow all procedures required as a condition to the payment of
all benefits pursuant to the Private Mortgage Insurance Policy.
As compensation for its activities hereunder, and in
consideration for servicing the Loans it originated, the
Lending Institution shall retain from each mortgagor's monthly
payment allocable to interest in an amount equal to the Service Fee. In addition, the Lending Institution shall be entitled to
servicing compensation out of Insurance Proceeds or Liquidation
Proceeds to the extent permitted by Section 5.04 hereof.
Additional servicing compensation in the form of assumption
fees, reconveyance fees, late payment charges or otherwise, if any, may be retained by the Lending Institution to the extent
not required to be deposited in the Receipts Account it
maintains pursuant to Section 5.02 hereof. The Lending
Institution shall be required to pay all expenses incurred by
it in connection with its servicing activities hereunder
(including maintenance of the insurance required by Section
5.09 hereof) and shall not be entitled to reimbursement
therefor, except as specifically provided in Sections 5.03,
5.04 and 5.12 hereof and the Indenture.
Section 5.02. Collection of Certain Loan Payments;
Receipts Account. The Lending Institution shall collect and deposit, less the Service Fee (if it is the Lending
Institution's general practice to collect such fees upon the
receipt of a mortgagor's payment), in the Receipts Account all
payments called for under the terms and provisions of the
Loans, and shall follow such collection procedures as it
follows at the time of the execution of this Agreement with
respect to mortgage loans comparable to the Loans owned and
held in its own portfolio. If it is the Lending Institution's
accounting practice to determine the Service Fee at the end of
each month, and if the amounts deposited into the Receipts
Account include the Service Fee, then the Lending Institution
may withhold its Service Fee at the time it transfers the
balance of the Receipts Account pursuant to Section 5.04
hereof. Consistent with the foregoing, and subject to any
requirements imposed by the Private Mortgage Insurer of such
Loans, the Lending Institution may in its discretion arrange a
schedule for the liquidation of delinquent items, which schedule shall not be any more favorable to the mortgagor than
customarily obtained by the Lending Institution in the
administration of its own portfolio.
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The Lending Institution shall establish and maintain for
the Issuer as a separate account a Receipts Account. All funds
held in the Receipts Account shall constitute funds of the Issuer from the time of the deposit therein and the title of
the account shall be in the name of the Issuer. Each Lending
Institution shall hold moneys in its Receipts Account in an
account which shall be fully insured with the FDIC or the
FSLIC. In no event shall the amount in the Lending
Institution's Receipts Account exceed the maximum insurance on
such fund, and the Lending Institution shall immediately
transfer to the Trustee any amount which is in excess thereof.
Except as provided in Section 5.01 hereof, the Lending
Institution shall deposit in the Receipts Account it maintains
for the Issuer on a daily basis all payments and collections
received by it with respect to Loans, including Insurance
Proceeds and Liquidation Proceeds. All funds deposited in the Receipts Account shall be held by the Lending Institution
until disbursed in accordance with Section 5.04 hereof.
Section 5.03. Collection of Taxes, Assessments and
Similar Items; Loan Service Account. The Lending Institution
shall establish and maintain a loan service account and shall
deposit therein all collections of real estate taxes,
assessments, premiums on insurance required by Sections 5.06, 5.07 and 5.10 hereof or comparable items for the account of the
mortgagors of the Loans to the extent it deems the same
reasonably necessary. Withdrawals from the loan service
account may be made only to effect timely payments of taxes,
assessments, insurance premiums or comparable items with respect to such Loans, or to reimburse the Lending Institution
out of related collections for any payments made pursuant to Sections 5.06, 5.07 and 5.10 hereof and any real estate taxes,
assessments or premiums on insurance required by Sections 5.06,
5.07 and 5.10 or comparable items, advanced by it. Unless the
Lending Institution shall be required by law to pay interest to the respective mortgagors of Loans on funds in its loan service
account, the Lending Institution shall retain such interest to
defray its expenses in servicing its loan service account, or
to refund to each mortgagor the unused portion of the moneys
attributable to such mortgagor's Loan, when such Loan is repaid
in its entirety. The loan service account shall be fully
insured by FDIC or FSLIC.
Section 5.04. Transfers and Permitted Withdrawals from
Issuer's Receipts Account; Requisitions for Reimbursements. On
the close of business on the fifth and twentieth days of each
month, on the day preceding each Bond interest payment or redemption date, and whenever else the Lending Institution has
accumulated in any account hereunder an amount in excess of the
amounts which are insured by the FDIC or FSLIC, the Lending
Institution shall remit to the Trustee for deposit payments of
principal and interest on the Loans and all other payments paid
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by the mortgagor relating thereto, including Insurance Proceeds
and Liquidation Proceeds (except the Service Fees, escrow
payments and any other amounts permitted to be retained by the
Lending Institution pursuant to this Agreement).
If any such date of transfer is a Saturday, Sunday or legal
holiday, or is not a business day for the Lending Institution,
such transfer may be made at the opening of business on the
next succeeding business day.
The Issuer hereby authorizes the Lending Institution on any
date prior to the transfer to the Trustee of moneys in the
Receipts Account to withdraw moneys from such Receipts Account
to:
(a) Reimburse itself from Insurance Proceeds and
Liquidation Proceeds for amounts expended in good faith by
it with respect to the related Loan pursuant to Section
5.11 hereof in connection with the restoration of property
damaged by an Uninsured Cause;
(b) Reimburse itself from Insurance Proceeds for
Insurance Expenses and pay itself from Insurance Proceeds
any unpaid Service Fee on the related Loan, the latter
payment being limited to the amount, if any, by which the
sum of the aggregate of the Liquidation Proceeds, if any,
plus the aggregate Insurance Proceeds received in
connection with the liquidation of the defaulted Loan is,
after the deduction of Insurance Expenses and any amounts
deducted pursuant to subsection (a) above, in excess of the
principal balance of such Loan together with accrued and
unpaid interest thereon;
(c) Reimburse itself from Liquidation Proceeds for
Liquidation Expenses;
(d) Reimburse itself for all real estate taxes,
special assessments, utitility liens, premiums for Private
Mortgage Insurance, Standard Hazard Insurance, Flood
Insurance or Earthquake Damage Insurance advanced by it;
(e) Reimburse itself for any unpaid accrued interest
on a Closing Date for the related Loans; and
(f) Reimburse itself for any Service Fee to which it
is entitled and not theretofore retained before deposits
into the Receipts Account.
The Issuer agrees that it will execute and deliver, or
cause to be executed and delivered, such further instruments
and documents as may be required for permitting the above
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stated withdrawals from the Receipts Account. In connection
with withdrawals pursuant to subsections (a) through (f) above,
inclusive, the Lending Institution's entitlement thereto is
limited to collections or other recoveries on the related Loan,
and for this reason the Lending Institution shall keep and
maintain separate accounting, on a Loan-by-Loan basis, for the
purpose of justifying any such reimbursement.
Section 5.05. Claims Against Insurer of Loans. In
connection with its activities as administrator and servicer of
the Loans, the Lending Institution agrees to comply with any
requirements imposed by the Private Mortgage Insurer with
respect to the Loans it services, and with all applicable laws
and to present, on behalf of the parties in interest, claims
against all insurers of such Loans or mortgaged premises, and,
in this regard, to take all reasonable actions as shall be
necessary to permit recovery under all insurance policies
respecting such Loans or mortgaged premises.
of the Lending Institution under this Section specifically
include, but are not limited to, providing, within the time
limits applicable thereto, the Private Mortgage Insurer with
any and all notices and claims for payment which are required in order to collect payments under the Advance Payments
Endorsement to the Private Mortgage Insurance Policy. In
connection therewith, on the 16th day of each month the Lending Institution shall notify the Trustee and the Private Mortgage
Insurer by telephone, telex or other same day means of
communication of the aggregate amount of monthly installment payments on Loans which were first due on the preceding first day of such month and payable by the 15th day of such month but which were not received by the Lending Institution. The
Lending Institution shall immediately follow such notification
with written confirmation thereof, with a copy thereof to the Trustee, so that said written confirmation is received by the Private Mortgage Insurer and the Trustee not later than the
19th day of such month. (If the Trustee has not received such
notice by the 19th day of such month, the Trustee shall
immediately file or cause to be filed such notices and claims
for payment which are required to collect payments under said Advance Payments Endorsement.) The Lending Institution shall
also provide the Trustee and the Private Mortgage Insurer with
verbal notification on the 26th date of such month, to be
followed immediately by written confirmation, of all Loans
remaining delinquent as of the 25th day thereof.
The obligations
Pursuant to Section 5.02 hereof, any amounts collected by the Lending Institution from the Qualified Insurers with
respect to the Loans shall be deposited in its Receipts Account, subject to withdrawal for reimbursement pursuant to
Section 5.04 hereof. The Issuer, the Trustee and the Lending
Institution shall be named as insureds as their interests may
appear, where appropriate, under all insurance policies to be
obtained with respect to the Loans.
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Section 5.06. Maintenance of Standard Hazard Insurance and
Flood Insurance. The Lending Institution shall cause to be
maintained for each Loan it services fire insurance with
extended coverage on the mortgaged property in an amount which
is at least equal to the principal balance owing on the Loan,
but not less than 90% percent of the insurable value of the
Residence securing the Loan based upon the replacement cost thereof. Subject to all applicable laws, pursuant to Section
5.02 hereof, any amounts collected by the Lending Institution
under any such policies (other than amounts to be applied to
the restoration or repair of the property subject to the
related Loan) shall be deposited into its Receipts Account,
subject to withdrawal for reimbursement pursuant to Section
5.04 hereof. It is understood and agreed that such insurance
shall be with Qualified Insurers approved by the Lending Institution and that no other additional hazard insurance is to
be required of any mortgagor, except Flood Insurance where
required hereby and Earthquake Damage Insurance (if
commercially available), other than pursuant to such applicable
laws and regulations as shall at any time be in force and as
shall require such additional insurance.
In the case of condominium units, the applicable
declaration of covenants, conditions and restrictions must
require the homeowners' association established for each
project to maintain a Standard Hazard Insurance Policy and an Earthquake Damage Insurance Policy (if commercially available)
to cover the entire project. Such premiums are to be paid by the homeowner's association. In the absence of such a
requirement in the declaration of covenants, conditions and restrictions, the insurance requirements described in the first
paragraph of this Section shall be applicable to each unit
which secures a Loan. The association must have fidelity bond
coverage, in an amount not less than 1.5 times the
association's annual operating expenses and reserves, covering the negligent and willful acts and omissions of its officers,
agents, employees and volunteers, as well as comprehensive
public liability insurance covering common areas with a minimum
policy limit of $1,000,000 per occurrence and with a
severability of interest endorsement which precludes the
insurer from denying the claim of a condominium unit owner
because of the negligent acts of the association or of others
and such other coverages as are commonly required by lenders
making mortgage loans with respect to the units therein
(including, but not limited to, flood, boiler explosion or other machinery accidents with a minimum policy limit of $100,000 per occurrence).
In lieu of retaining in its possession the Standard Hazard
Insurance Policy, the Lending Institution may maintain at its
expense and keep a mortgagee single interest hazard insurance
policy, for the benefit of the Issuer and the Trustee, in such
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amount as may be acceptable to the Compliance Agent, throughout
the term of this Agreement.
In addition, the Lending Institution covenants and agrees
that if a mortgaged property is located in an area designated
as a flood area by federal or state authorities, it shall cause
to be maintained for such Loan secured by such mortgaged
property a Flood Insurance Policy.
Pursuant to Section 5.02 hereof, any amounts collected by the Lending Institution under any such policy relating to the
Loans shall be deposited in its Receipts Account, subject to
withdrawal for reimbursement pursuant to Section 5.04 hereof.
Section 5.07. Maintenance of Earthquake Damage Insurance. The Lending Institution shall cause to be maintained for each
Loan it services Earthquake Damage Insurance (if commercially
available) with extended coverage on the mortgaged Residence.
Subject to the laws of the State, pursuant to Section 5.02 hereof, any amounts collected by the Lending Institution under
any such policies (other than amounts to be applied to the restoration or repair of the property subject to the related
Loan) shall be deposited into its Receipts Account, subject to
withdrawal for reimbursement pursuant to Section 5.04 hereof.
It is understood and agreed that such insurance shall be with
Qualified Insurers approved by the Lending Institution.
Section 5.08. Maintenance of Special Hazard Insurance
Policy. The Issuer shall exercise its best reasonable efforts
to maintain and keep with a Qualified Insurer, a Special Hazard Insurance Policy to provide protection with respect to
mudslide, building collapse and losses resulting from the
application of a coinsurance clause, in an amount equal to the
greater of (i) 1 percent of the aggregate amount initially
available for the purchase of Loans which are purchased
hereunder (less any claims made and paid) or (ii) twice the original principal amount of the largest Loan so purchased
(less any claims made and paid), in full force and effect until
(i) each Loan has been paid in full or is no longer security for the Bonds or (ii) the principal of and interest on all
Bonds has been fully paid or provision for such payment has been provided for pursuant to the Indenture. The premium for
the Special Hazard Insurance Policy shall be paid from the
Program Expense Fund pursuant to the Indenture. In the event
that such insurance becomes unavailable from the original
Qualified Insurer, whose credit rating will not adversely
affect the rating assigned to the Bonds, the Issuer shall
exercise its best efforts to obtain a comparable replacement
policy from another Qualified Insurer with a total coverage equal to the then existing coverage of the Special Hazard
Insurance Policy. Pursuant to Section 5.02 hereof, any amount
collected under any such policy shall be paid to the Lending
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Institution which serviced the Loan with respect to which the
amount was collected and the Lending Institution shall deposit
such amount in its Receipts Account, subject to withdrawal for
reimbursement pursuant to Section 5.04 hereof.
Section 5.09. Maintenance of Errors and Omissions
Insurance Policy and Fidelity Bond. The Lending Institution
will use its best efforts to maintain, or require the mortgagor
to maintain, the Standard Hazard Insurance Policy (or mortgagee
single interest hazard insurance policy), the Private Mortgage
Insurance Policy, Earthquake Damage Insurance (if commercially
available) and, if required, Flood Insurance in effect at all
times throughout the terms of this Agreement. Additionally,
the Lending Institution will be obligated to perform its
servicing duties in a manner which will preserve all claims
against insurers. If the Lending Institution fails to perform
these obligations due to an error or omission of any of its
officers or employees, coverage will be provided by the Errors
and Omissions Insurance Policy required to be maintained by the
Lending Institution. If any officer or employee of the Lending
Institution misappropriates funds from the Lending Institution,
coverage therefor will be provided by the Fidelity Bond
maintained by the Lending Institution. The Lending Institution
must obtain and maintain in effect at all times throughout the
term of this Agreement an Errors and Omissions Insurance Policy
and a Fidelity Bond, both of which must be in amounts, and be
obtained from an insurance company, acceptable to the Trustee.
The Lending Institution, as servicer, will pay the premiums for
its Errors and Omissions Insurance Policy and Fidelity Bond.
Any amounts collected under the errors and omissions insurance
policy or fidelity bonds shall be deposited in the Receipts
Account established pursuant to Section 5.02 hereof.
Section 5.10. Maintenance of Private Mortgage Insurance
Policy. The Lending Institution covenants and agrees that it
shall cause to be maintained for all Loans, throughout the term
of this Agreement, a Private Mortgage Insurance Policy, but
only until no Bonds are outstanding or as otherwise determined
by the Trustee; provided, however, that as long as any Bond is
outstanding, the Trustee shall not waive this requirement
unless it shall have first received the consent of the Issuer
and written confirmation from Standard & Poor's Corporation
that such waiver will not adversely affect the rating assigned
to the Bonds. All premiums advanced by the Lending Institution
in maintaining any such insurance shall be added to the amount
owing under the Loan where the terms of the Loan so permit.
Such premiums shall be recoverable by the Lending Institution
pursuant to Section 5.03 or 5.04 hereof. Pursuant to Section
5.02 hereof, any amounts collected by the Lending Institution
under any such policy shall be deposited into the Receipts
Account.
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Section 5.11. Transfers and Assumptions. In any case in
which property subject to a Loan has been or is about to be
conveyed by the mortgagor or by his successor in interest, the
Lending Institution is authorized to consent to the conveyance
and to release the transferor and to take or enter into an
assumption agreement from or with the person to whom such
property has been or is about to be conveyed, but only if the
following conditions are met: (1) the Lending Institution has
determined that.al1 of the requirements of Article IV and
Article V hereof are met with respect to such assumption, based
upon the facts as they exist at the time of the assumption as
if the Loan were being made for the first time; (2) the Lending
Institution has determined that mortgagor or his successor in
interest, as the case may be, has satisfied the requirements of
any resale controls applicable to the Residence; (3) the
Lending Institution has received from the transferor an
executed Seller's Affidavit in the form attached hereto as
Exhibit H and from the person to whom such property has been or
is about to be conveyed an executed Buyer's Affidavit in the
form attached hereto as Exhibit G; (4) the Compliance Agent has
determined, on behalf of the Issuer, that the transferee is a
First Time Homebuyer who intends to occupy the Residence as his
or her principal place of residence within 60 days after the
assumption and that the Acquisition Cost of the Residence does
not exceed the Maximum Acquisition Cost; (5) the Private
Mortgage Insurer has approved such release and/or assumption
agreement; and (6) the Lending Institution has received payment
of its then customary assumption charge plus the charges
specified in clauses (i) and (ii) of Section 4.02 hereof. The
assumption agreement shall be inserted in the related Loan File
whereupon it shall be deemed a part of such Loan File for all
purposes hereof. agreement, the interest rate of the related Note shall not be
changed.
In connection with any such assumption
Under no circumstances shall the Lending Institution
consent to any conveyance of the Residence unless the above
conditions (1) through (5) have been met or unless the Issuer
shall have received an opinion of counsel of its choice,
recognized to be expert in such matters, that permitting a
conveyance without having met conditions (1) through (4)
thereof would not affect the validity of the Bonds nor the
tax-exemption for the interest thereon and the Issuer shall have so notified the Lending Institution. If the Lending
Institution determines that a Residence has been conveyed by
the mortgagor or his successor in interest and that the above conditions (1) through (5) have not been met, the Lending
Institution shall give notice thereof to the Issuer and the
Trustee. If the Lending Institution believes that some action
other than foreclosure (such as reconveyance under
circumstances meeting the above conditions) can be taken so as
to enable it to consent to the transfer of the Residence, it
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shall so advise the Issuer and the Trustee and cause such
action to be taken. If no such action can be taken, or if the
Lending Institution fails to cause such action to be taken, the
Lending Institution shall so advise the Issuer and the Trustee
shall take any and all steps necessary to secure all benefits
payable under the applicable Private Mortgage Insurance Policy
and shall commence foreclosure proceedings unless otherwise
directed by the Issuer within fifteen days after such notice.
Section 5.12. Realization Upon Defaulted Loans. The
Lending Institution shall foreclose upon or otherwise
comparably convert the ownership of properties securing such of
the Loans it services as come into and continue in default and
as to which no satisfactory arrangements can be made for the
curing of such default. In connection with such foreclosures
or other conversion, the Lending Institution shall follow such
practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing activities, provided that such practices and
procedures shall conform in every respect with the requirements
of the applicable Private Mortgage Insurance Policy to obtain
payments pursuant thereto. The Lending Institution shall give notice to the Trustee of the commencement of foreclosure
proceedings within three business days after the filing
thereof. Following such foreclosure or other conversion of ownership and upon deposit of such amounts as are realized as a
result of such foreclosure (Liquidation Proceeds, Insurance
Proceeds, and any other related procees or funds) in the
Receipts Account of the Lending Institution pursuant to the
Agreement, the Lending Institution shall notify the Trustee in
writing within five (5) business days of such deposit of (i)
the amount of unpaid principal of and unpaid accrued interest
on such defaulted Loan, and (ii) the sum realized from such Loan and deposited in the Receipts Account. The foregoing is
subject to the provision that, in the case of damage to
mortgaged property from an Uninsured Cause, the Lending
Institution may expend its own funds toward the restoration of the property if it reasonably believes (i) that after reimbursement to itself for such expenses such restoration will increase the proceeds of liquidation of the Loan to the Issuer,
after reimbursement to itself for such expenses, and (ii) that
such expenses will be recoverable to it either through
Liquidation Proceeds (respecting which it shall have priority
for purposes of withdrawal from the Receipts Account pursuant
to Section 5.04 hereof) or through Insurance Proceeds
(respecting which it shall have similar priority).
Institution shall be responsible for all other costs and
expenses incurred by it in any such proceedings or in
connection with preservation of all insurance policies
respecting the Loans it services; provided, however, that it
shall be entitled to withdrawal thereof (as well as its normal
Service Fee) to the extent, but only to the extent, that
The Lending
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withdrawals from its Receipts Account with respect thereto are
permitted under Section 5.04 hereof.
Section 5.13. Issuer to Cooperate; Release of Loan Files.
Upon the payment in full of any Loan it services, the Lending Institution will notify the Issuer within five business days by delivering to the Issuer, and a copy to the Trustee, a
certification (which certification shall include a statement to
the effect that all amounts received in connection with such
payment which are required to be deposited in its Receipts
Account pursuant to Section 5.02 hereof have been so deposited)
of a Servicing Officer of the Lending Institution along with the amount collected upon liquidation and, in the case of a
defaulted loan, data sufficient to account for the liquidation
and shall request delivery to it of the Note and related Deed
of Trust. Upon receipt of such certification and request, the
Trustee, pursuant to the Indenture, shall deliver the Note and
related Deed of Trust to the Lending Institution.
From time to time and as appropriate for the servicing or
foreclosure of any Loan, including for this purpose collection of Insurance Proceeds, the Issuer hereby appoints the Lending
Institution as its agent and attorney-in-fact to execute such
documents as shall be necessary to the prosecution of any such proceeding relating to a Loan it services. The Trustee shall,
on behalf of the Issuer, execute such documents as shall be
necessary to the prosecution of any such proceedings.
Section 5.14. Reports to Trustee and Issuer and Receipts
Account Statements. No later than the twenty-fifth day of each
month, the Lending Institution shall forward to the Trustee a
statement substantially similar to FHLMC'S single-debit
accounting for conventional loans, certified by a Servicing Officer, setting forth the status of the Receipts Account of
the Issuer it maintains, as of the close of business on the twentieth day of such month and showing, for the period covered
by such statement, the aggregate of deposits into and
withdrawals from its Receipts Account. Such statement shall be
in such form as the Trustee prescribes and shall also include
(i) information as to the principal balances of Loans
outstanding at the close of business on the twentieth day of
such month, (ii) information as to the number of, principal
balances of, and percentages of aggregate dollar amount of all
Loans it services, of Loans upon which one required monthly
payment of principal and interest shall be delinquent, as of
the close of business on the last day of the preceding calendar month (together with evidence satisfactory to the Trustee that
the Lending Institution has filed with the Private Mortgage
Insurer any and all notices and demands for payment required to
obtain payment with respect to such Loans under the Advance Payment Endorsement to the Private Mortgage Insurance Policy, in the absence of which evidence the Trustee shall direct the
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Lending Institution to immediately file the same with the
Private Mortgage Insurer), and (iii) the unpaid outstanding
principal amount of Loans with respect to and the estimated
fair market value of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure.
In addition, no later than the twenty-fifth day of each
month, the Lending Institution shall forward to the Trustee a statement setting forth the status of the Loan Service Account of the borrowers it maintains, as of the close of business on
the twentieth day of such month. Such statement shall be in
such form as the Trustee prescribes.
If such twenty-fifth day of the month is a Saturday, Sunday
or legal holiday or is not a business day for the Lending
Institution such report may be forwarded at the opening of
business on the next succeeding business day.
Institution's fiscal year, the Lending Institution shall
furnish to the Issuer and the Trustee an auditor's report
relating to the Lending Institution's financial statement and
mortgage loan operations. The Lending Institution shall also
deliver to the Issuer and the Trustee a Servicing Officer's
certificate stating that (i) a review of the activities under
this Agreement of the Lending Institution during the preceding
year and of its performance under this Agreement has been made
under such Servicing Officer's supervision, and (ii) to the
best of such Servicing Officer's knowledge, based upon such
review, there is, as of such date, no default by the Lending
Institution in the fulfillment of any of its obligations under
this Agreement, or if there is any such default known to such
Servicing Officer, specifying each such default and the nature
and status thereof.
Within 120 days after the close of the Lending
In addition to the foregoing, the Lending Institution will
provide to the Trustee or, at the direction of the Trustee, to
Standard & Poor's Corporation, on an annual basis, or as
reasonably requested by the Trustee or Standard & Poor's
Corporation, information concerning the periodic delinquency,
foreclosure and prepayment experience with respect to the Loans.
Section 5.15. Prohibition of Discrimination; Report to
Issuer. Except as specifically provided in this Agreement, the
Lending Institution will not arbitrarily reject an application
for a Loan or vary the terms of a Loan for residential
properties within a specified geographic area of the Issuer
because of the location and/or age of the property,
case of a proposed mortgagor, arbitrarily reject an application
or vary the terms of such Loans or the application procedures
therefor because of race, color, religion, national origin,
age, sex or marital status.
or, in the
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Any other information desired by the Issuer shall be
compiled by the Issuer from information contained in the Loan
Files which will be available for inspection upon reasonable
notice and at reasonable times.
Section 5.16. Certain Verifications. The Issuer or
Lending Institution from time to time may cause a firm of
independent public accountants to supply the Issuer, the
Trustee and the Lending Institution with such information as the Issuer or the Lending Institution may request in order to
determine in a manner reasonably satisfactory to the Issuer,
the Trustee and the Lending Institution all matters relating to
the sufficiency of projected cash flow receipts and
disbursements on the Loans and reserve funds to pay the
principal of and interest on the Bonds. Payment for costs and
expenses incurred in connection with supplying the foregoing
information shall be paid from moneys in the Revenue Fund
pursuant to the Indenture.
ARTICLE VI
LENDING INSTITUTION
Section 6.01. Merger or Consolidation of the Lending Institution. Any entity into which the Lending Institution may
be merged or consolidated, or any entity resulting from any merger, conversion or consolidation to which the Lending
Institution shall be a party, or any entity succeeding to the
business of the Lending Institution, shall be the successor of
the Lending Institution hereunder without the execution or
filing of any document or instrument, except as provided in
Section 2.02(b) of this Agreement, or any further act on the
part of any of the parties hereto.
Section 6.02. Lending Institution Not to Resign. The
Lending Institution shall not resign from its obligations and
duties hereby imposed on it except upon determination that its
duties hereunder are no longer permissible under applicable law. Any such determination permitting the resignation of the
Lending Institution shall be evidenced by an opinion of counsel
to such effect delivered to the Issuer and the Trustee. No
such resignation shall become effective until the Trustee or a
successor servicer shall have assumed the Lending Institution's
responsibilities and obligations in accordance with Section
7.03 hereof.
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ARTICLE VI1
CAUSES PERMITTING TERMINATION OF
LENDING INSTITUTION
Section 7.01. Causes of Termination Defined. Upon the happening of any one or more of the following events, the
Trustee, for and on behalf of the Issuer, may terminate this
Agreement with respect to the Lending Institution as provided
in Section 7.02 hereof and shall have the other remedies
specified therein:
(a) Failure by the Lending Institution to (i) deposit
funds in the Receipts Account as required by Section 5.02
hereof or (ii) to make the payments required under Section
5.04 hereof at the time specified therein; provided,
however, that the failure of the Trustee to receive such
funds will not constitute a cause for termination if such
payments have been forwarded by the Lending Institution at
the time specified, in which event the Lending Institution will have three business days after the receipt of notice
by the Trustee specifying such failure of receipt and
requesting that it be remedied to provide such payment and
provided further that a single failure of the Trustee to
receive such funds will not constitute a cause for
termination if the Lending Institution makes such payment within three business days after receipt of such notice
from the Trustee.
(b) Failure by the Lending Institution duly to
observe or perform in any material respect any other
covenant, condition or agreement in this Agreement to be
observed or performed by it, other than as referred to in
Section 7.01(a) hereof, for a period of thirty days after
written notice, specifying such failure and requesting that
it be remedied, given to the Lending Institution by the
Issuer, the Trustee or the Compliance Agent, unless the
Issuer, the Trustee or the Compliance Agent, (whichever has
given notice) shall agree in writing to an extension of such time prior to its expiration; provided, however, if
the failure stated in the notice cannot be corrected within
the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such
time if corrective action is instituted by the Lending
Institution within the applicable period and diligently
pursued until the default is corrected; and provided
further, that no cause, reason, or event shall require the
Trustee to purchase Loans on behalf of the Issuer after the
date specified in Section 4.01.
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(c) A decree or order of a court or agency or
supervisory authority having jurisdiction in the premises
for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its
affairs, shall have been entered against the Lending
Institution and such decree or order shall have remained in
force undischarged or unstayed for a period of sixty days.
(d) The Lending Institution shall have consented to
the appointment of a conservator or receiver or liquidator
in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or
relating to it or of or relating to all or substantially
all of its property.
(e) The Lending Institution shall admit in writing
its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable
insolvency or reorganizaiton statute, make an assignment
for the benefit of its creditors, or voluntarily suspend
payments of its obligations.
(f) The Lending Institution shall experience a
delinquency ratio for Loans sixty (60) days or more
delinquent which is two (2) times greater than the
delinquency ratio for conventional mortgage loan sixty (60)
days delinquent in the State of California as published by
the Federal Home Loan Bank Board of San Francisco. The
Lending Institution will have a thirty day cure period, as provided in (b) above, to rectify such delinquent ratio.
The foregoing provisions of subsection (b) of this Section are subject to the following limitation: if by reason of Force
Majeure, the Lending Institution is unable in whole or in part to carry out any agreement on its part herein contained, no
such event shall be deemed a cause for termination during the
continuance of such inability. The Lending Institution agrees,
however, to remedy with all reasonable dispatch the cause or
causes preventing it from carrying out its agreement; provided
that the settlement of strikes, lockouts, and other
disturbances shall be entirely within the discretion of the
Lending Institution, as the case may be, and it shall not be
required to make settlement of strikes, lockouts and other
disturbances by acceding to the demands of the opposing party
or parties when such course is in the judgment of the Lending
Institution unfavorable to it. In addition, if the delinquency
ratio of the Lending Institution described in subsection (f) of
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this Section results by reason of Force Majeure, the Compliance
Agent will not terminate the Agreement; provided, however, that
neither Force Majeure nor any other cause, reason, or event
shall require the Trustee to purchase Loans on behalf of the
Issuer after the date specified in subparagraph (b) hereof.
Section 7.02. Remedies. Whenever any event referred to in
Section 7.01 hereof shall have happened and be continuing, the
Trustee, for and on behalf of the Issuer, may take any one or
more of the following remedial steps:
(a) By notice in writing to the Lending Institution
with respect to which such an event has occurred, the
Trustee may, subject to applicable state and federal law,
terminate all of the Lending Institution's rights and
obligations concerning the servicing of Loans. On or after
the receipt by the Lending Institution of such written
notice, all authority and power of the Lending Institution
under this Agreement with respect to servicing Loans shall
pass to and be vested in the Trustee pursuant to and under
this Section; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on
behalf of the Lending Institution, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such termination.
The Lending Institution agrees to cooperate with the Trustee in effecting the termination of its servicing
responsibilities hereunder, including, without limitation,
the transfer to the Trustee for administration by it of
Loan Files, and to a FDIC or FSLIC fully insured account
designated by the Trustee all cash amounts which it shall
at the time hold in its Receipts Account and loan service
account or thereafter receive with respect to Loans.
(b) The Trustee may take whatever other action at law
or in equity may appear necessary or desirable to collect
the amounts then due and thereafter to become due under
this Agreement or enforce performance and observance of any
obligation, agreement or covenant under this Agreement, of the Lending Institution with respect to which such an event
has occurred.
Any amounts collected pursuant to action taken under this
Section shall be applied in accordance with the provisions of
the Indenture.
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Section 7.03. Trustee to Act; Appointment of Successors.
At the time the Lending Institution receives a notice of
termination pursuant to Section 7.02(a), the Trustee, on behalf
of the Issuer, shall succeed to all rights and obligations of
such terminated Lending Institution concerning servicing of the
Loans and shall be entitled to receive compensation therefor as
specified herein. As soon as practicable thereafter, the
Trustee shall enter a servicing agreement with another
qualified servicing institution approved by the Private
Mortgage Insurer, or shall itself assume such servicing for
such compensation. The Trustee may, if it shall be unable to
so act, appoint or petition a court of competent jurisdiction
to appoint any established bank or savings and loan association
having a net worth of not less than $500,000, or another
lending institution, as the successor to such terminated
Lending Institution, in the assumption of all or any part of
the responsibilities, duties or liabilities of the Lending
Institution under this Agreement. In connection with such
appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of
payments on Loans as it and such successor shall agree;
provided, however, that no such compensation shall be in excess
of the funds to which the Lending Institution would have been
entitled to retain or withdraw from the Receipts Account if it
had continued to act hereunder. After the Lending Institution
receives notice of termination under this Section 7.03, it
shall be entitled to no payments or compensation of any kind
(including the Service Fee for any period of time after such
notice of termination) other than the payments which are
provided for herein. The Trustee and such successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
Section 7.04. Notification of Bondholders. The Trustee
shall give published notice to the Bondholders of any termination or appointment of a successor to the Lending
Ins ti tuti on.
Section 7.05. No Remedy Exclusive. Unless otherwise
expressly provided, no remedy herein conferred upon the Issuer
or the Trustee or reserved to any of them is intended to be
exclusive of any other available remedy, but each remedy shall
be cumulative and shall be in addition to other remedies given under this Agreement, the Indenture, or existing at law or in
equity. No delay or omission to exercise any right or power
accruing upon the happening of any event set forth in Section
7.01 hereof shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the
Trustee to exercise any remedy reserved to it in this Article,
it shall not be necessary to give any notice, other than such
notice as may be required in this Article.
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Section 7.06. Agreement to Pay Attorneys' Fees, Costs and
Other Expenses. In the event the Lending Institution should
fail to perform its obligations under any of the provisions of
this Agreement and the Issuer or the Trustee should employ
attorneys or incur other expenses for the enforcement of
performance or observance of any obligation or agreement on the
part of the Lending Institution herein contained, the Lending
Institution agrees that it will pay or reimburse the Issuer or
the Trustee on demand the reasonable fee of such attorneys and
such other expenses and costs incurred in connection
therewith. In addition, the Lending Institution agrees to pay
or reimburse the Trustee on demand all expenses reasonably
incurred in locating and engaging a successor Lending
Institution pursuant to Section 7.03 hereof.
ARTICLE VI11
COMPLIANCE AGENT
Section 8.01. Compensation, Obligations, Duties, and
Responsibilities of Compliance Agent.
The Issuer will pay to the Compliance Agent from the
Program Fund a fee of one thousand dollars ($1,000); and during
the term of this Agreement, the Compliance Agent will perform
all of the following obligations, duties, and responsibilities
in connection with the origination and assumption of each Loan
to be acquired by the Trustee on behalf of the County under the
Program and pursuant to the Agreement and the Indenture:
(a) To review the Loan Submission Voucher, the,
documents referred to therein and such other documents
relating to such Loan as it deems appropriate, to determine:
(A) That the Residence
(i) Is a single family, attached or detached
structure, a single family condominium unit, or a
single family unit in a planned unit development
(but not including a mobilehome or a duplex,
triplex, fourplex, or any personal property);
(ii) Is located within the incorporated area
of the City of Carlsbad; and
(iii) Has an Acquisition Cost not exceeding the
Maximum Acquisition Cost.
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(B) That the land on which the Residence is
situated is, in the opinion of the Compliance Agent,
reasonably necessary to the basic livability of the
Residence and does not provide, other than incidentally, a source of income to the mortgagor.
(C) That the types and amounts of the actual or
estimated settlement and financing costs, fees and
other similar charges collected or to be collected by
the Lending Institution do not exceed the usual and
reasonable costs which would be paid by a mortgagor
where financing is not provided through a qualified
mortgage revenue bond issue. If such settlement and
financing costs, fees or similar charges are not usual
and reasonable, the Loan application shall be deemed
deficient and the Lending Institution notified of such
deficiency.
(D) That the Mortgagor:
(i) Has not had an existing mortgage, whether
paid off or not, on the Residence at any time
prior to the execution of the Loan, other than an
existing mortgage securing a construction period
loan, or similar temporary financing having a
term not exceeding twenty-four (24) months; and
(ii) Intends to occupy the Residence as the
principal residence of the Mortgagor within a
reasonable period (not to exceed sixty (60) days)
following the execution of or the assumption of
the Loan.
(E) That except in the case of Loans in an aggregate principal amount not exceeding at any time
10 percent of the total principal amount of all Loans
the individual(s) making application for a Loan, have
had no present ownership interest in a principal
residence at any time during the three (3) year period
prior to the date on which the Loan is executed or
assumed (and, in connection with the latter exception,
the Compliance Agent shall continually monitor the
Loans made pursuant thereto to persons who are not
First Home Buyers so that said amount is never
exceeded).
meet these requirements, the Compliance Agent shall:
In determining whether such individual(s)
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(i) Review copies of the signed or certified
federal income tax returns of each individual
intending to occupy the Residence for the three
(3) year period immediately preceding the date of such application to confirm that the
individual(s) did not claim deductions for taxes
or interest on indebtedness with respect to real property constituting a principal residence of
any such individual(s), whether one or more;
provided that:
(1) For purposes of the foregoing, the
Compliance Agent's investigation with
respect to such tax returns shall be deemed
to be sufficient if the Compliance Agent
complies fully with the requirements of
Revenue Procedure 82-16 as published in
Internal Revenue Bulletin No. 1982-9.
(2) In lieu of such tax return, the
Compliance Agent may accept the affidavit of
the individual(s) stating that a tax return
for one or more of the three (3) years was
not required to be filed pursuant to Section
6012 of the Internal Revenue Code of 1954,
as amended.
(F) That there are no persons who have or who
are expected to have a present ownership interest in
the Residence following the execution or assumption of
the Loan who have not executed a Buyer's Affidavit; and
(b) To review any other documentary evidence obtained by a Lending Institution to ascertain the accuracy and
completeness of information contained in the above and
foregoing, affidavits, certificates, and/or federal income
tax returns.
The Compliance Agent shall review all documents delivered
to it by a Lending Institution within five (5) business days of
receipt and shall promptly notify the Lending Institution of
any deficiency which the Compliance Agent determined to exist in any such materials. If a Lending Institution has not
satisfactorily cured any deficiency within twenty (20) days
from the date a notice specifying the deficiency is mailed to
such Lending Institution, the Compliance Agent shall disapprove the Loan. Upon determining to the Compliance Agent's
satisfaction that a Loan meets the requirements required to be verified by the Compliance Agent, the Compliance Agent shall
deliver the Loan Submission Voucher to the Trustee and notify
the Lending Institution accordingly.
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If, following its approval of a Loan, the Compliance Agent
subsequently discovers that any document submitted by a Lending
Institution for review hereunder is inaccurate or defective or
contains a representation or warranty of the Lending
Institution which is untrue, and which inaccuracy, defect, or
untrue representation or warranty, in the opinion of the
Compliance Agent, may materially or adversely affect the tax
exempt status of interest on the Bonds, the Compliance Agent
shall give prompt written notice thereof to the Lending
Institution, the County and the Trustee.
Section 8.02. Liability of Compliance Agent.
(a) The Compliance Agent assumes liability hereunder only
to the extent that obligations, duties or responsibilities are
specifically imposed upon it, and no implied covenants,
warranties, or obligations shall be read into this Agreement
against the Compliance Agent.
(b) The Compliance Agent shall utilize reasonable efforts
and due diligence in carrying out its duties hereunder and
shall not be liable to the Issuer, the Trustee, or the
Bondholders for any act, failure to act, error, mistake, or
omission unless such act, failure to act, error, mistake or
omission was willful. In no event shall the Compliance Agent
have any responsibility whatsoever for the loss of the tax
exempt status of the Bonds or for the curing or repurchase of
any defective Home Mortgage except in its capacity as Private
Mortgage Insurer.
(c) No director, officer, employee, or agent of the Compliance Agent shall be liable to any other party or the
Bondholders for the taking of any action or for refraining to
take action in good faith pursuant to this Agreement.
Section 8.03. Compliance Agent Not to Resign. The
Compliance Agent shall have no right to resign from its duties
and obligations hereunder; provided, however, that the
Compliance Agent shall have the right from time to time,
without the consent or approval of the Issuer and the Trustee,
to delegate to any entity which is affiliated with the
Compliance Agent some or all of the duties of the Compliance
Agent hereunder, and following any such delegation, such
delegee shall have sole and exclusive responsibility for
performing such duties. The Compliance Agent shall also have
the right from time to time, with the prior written consent of
the Issuer and the Trustee (which consents shall not be unreasonably withheld), to delegate any of the above-mentioned
duties of the Compliance Agent to any entity which is not
affiliated with the Compliance Agent and, following such delegation, such delegee shall have sole and exclusive responsibility for performing such duties.
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Section 8.04. Termination by Issuer. The Issuer may
terminate this Agreement with respect to the Compliance Agent
upon the happening of one or more of the following events:
(a) Failure of the Compliance Agent to duly observe
or perform in any material respect any covenant, condition,
or agreement in this Agreement for a period of thirty (30)
days or such longer period specified in a written notice to
the Compliance Agent specifying such failure and requesting
that it be remedied;
(b) The Compliance Agent consents to the appointment
of a conservator, receiver or liquidator to take possession
of all or substantially all of the assets of the Compliance
Agent; or
(c) The Compliance Agent makes a general assignment
for the benefit of its creditors, shall become insolvent,
shall file a petition for reorganization, rearrangement or
other such relief under any federal or state bankruptcy law
or laws, or shall be adjudged bankrupt or insolvent in
proceedings filed against the Compliance Agent.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Amendments, Changes and Modifications.
Subsequent to the issuance of the Bonds and prior to their payment in full (or provision for the payment thereof having
been made in accordance with the provisions of the Indenture),
this Agreement may not be effectively amended, changed,
modified, altered or terminated without the written approval of
the parties.
Section 9-02. Changes in Applicable Laws. In the event
the Act or the Code is amended so as, in the opinion of counsel
recognized to be expert in such matters, to reduce or eliminate
any restriction therein applicable to the use of the proceeds
of the Bonds, the Issuer may, at its option, similarly reduce
or eliminate the comparable restriction contained herein so as
to conform to such amendment by giving notice thereof to the
Developers and to the other parties hereto.
Section 9.03. Recordation of Agreement. This Agreement,
or a memorandum of any portion or portions hereof executed by
the Issuer and the Lending Institution, is subject to
recordation in all appropriate public offices for real property records, such recordation to be effected by the Lending
Institution at its expense, on direction by the Trustee.
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Section 9.04. Limitation on Rights of Bondholders. No
Bondholder shall give any right to institute a suit with
respect to this Agreement except as provided in Article VI11 of
the Indenture and only if for the equal benefit of all
Bondholders. This Section may be enforced by the Trustee or
any Bondholder.
Section 9.05. Litigation Regarding Acceleration Clauses.
In the event that the exercise of any acceleration clause
contained in any rider included in Exhibit E or Exhibit F
hereto gives rise to litigation challenging the
constitutionality or legality of such clause generally (as
opposed, for example, to the manner in which it was exercised
or the application thereof to a particular set of
circumstances) the Lending Institution need not be responsible
for pursuing or defending such litigation unless the Issuer
agrees to pay such reasonable costs and attorneys' fees as may
be incurred by the Lending Institution in pursuing or defending
such acceleration clause.
Section 9.06. Purchase of Bonds. The Lending Institution
(including a "related person'' thereof, within the meaning of
Section 103(b)(6)(c) of the Code) shall not purchase Bonds for
its or their own account.
Section 9.07. Governing Law. This Agreement shall be
construed in accordance with the laws of the State and the
obligations, rights and remedies of the parties hereunder shall
be determined in accordance with their own account.
Section 9.08. Counterparts. This Agreement may be
simultaneously executed in serveral counterparts, each of which
shall be an original and all of which shall constitute but one
and the same instrument.
Section 9.09. Notices. All notices, certificates, or
other communications hereunder shall be sufficiently given and
shall be deemed given when delivered or mailed by registered
mail, postage prepaid, addressed to the appropriate Notice
Address. A duplicate copy of each notice, certificate or other
communication given hereunder to the Issuer, the Lending
Institution, the Compliance Agent or the Trustee shall also be
given to the others. The Issuer, the Lending Institution, the
Compliance Agent and the Trustee may, by notice given
hereunder, designate any further or different addresses to
which subsequent notices, certificates or other. communications
shall be sent.
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Section 9.10. Severability. In the event any provision of
this Agreement shall be held liable or unenforceable by any
court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.
Section 9.11. Further Assurances and Corporate Instru-
ments. To the extent permitted by law, the Issuer and the
Lending Institution, severally and not jointly, agree that they
will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such
supplements hereto and such further instruments as may be
reasonably required for carrying out the intention of or
facilitating the performance of this Agreement.
Section 9.12. Term of Agreement. This Agreement shall be
in full force and effect from the date of the execution hereof
and shall continue in effect so long as any Bonds are
outstanding or the Issuer shall own any Loans purchased
hereunder whichever is later.
(The remainder of this page is intentionally left blank.)
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IN WITNESS WHEREOF, the Lending Institution, the Issuer,
the Trustee and the Compliance Agent have caused their names to
be signed hereto by their respective duly authorized officers
and their respective seals, duly attested, to be hereunto
fixed, all as of the day and year first above written.
Name of Lending Institution
BY
Its
FIRST INTERSTATE BANK OF CALIFORNIA
.
BY
Its
UNITED GUARANTY RESIDENTIAL
INSURANCE COMPANY OF IOWA
BY
Its
CITY OF CARLSBAD, CALIFORNIA
BY Mayor
ATTEST :
City Clerk
MV
[MSSA]
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EXHIBIT A
LOAN FILE
PART I. Documents to be Delivered to the Trustee
The following documents, for each Loan, must be for-
warded to the trustee at least five days before the proposed
purchase date :
1. Original and one copy of the executed Mortgage Sub-
mission Voucher
2. Original executed Note with endorsement and any
attendant riders
3. Original Deed of Trust or copy which has been noted:
"Certified true and correct copy of original which has
been transmitted for recordation." When a copy is
furnished, the original must be delivered to the
Trustee within sixty (60) days of the Purchase Date.
4. Original Assignment or copy meeting the same condi-
tions as the Deed of Trust
5. Original title insurance policy or copy of initial
binder with original policy to be delivered within
sixty (60) days
6. Private Mortgage Insurance Policy or firm commitment
therefor
7. Original Seller's Affidavit
8. Original Buyer's Affidavit
9. Information required by Section 4.10 of the Indenture
( "Report Re : Loans" )
PART 11. Documents to be Delivered to the Compliance Agent
and the Private Mortgage Insurer
Legible copies of the following for each Loan must be
delivered to the Compliance Agent and the Private Mortgage
Insurer concurrently with the delivery of the Loan Application
to the Private Mortgage Insurer, but in no event later than at
least ten days before the proposed purchase date.
Compliance Agent will only be returning the original of the
Mortgage Submission Voucher.
The
1. Original and one copy of Mortgage Submission Voucher
2. Copy of the Seller's Affidavit
3.
4. A statement reaffirming the representations and war-
Copy of the Buyer's Affidavit
ranties made with respect to the Loan in the Mortgage
Sale and Service Agreement
Such other information as the Compliance Agent may
reasonably request, including but not limited to federal income tax returns
5.
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EXHIBIT B
LOAN SUBMISSION VOUCHER
(Name of Lending Institution)
A. LOAN INFORMATION
Property Street Mtg. Int.
Lender's Loan ID Borrower's Last Name Inits. Addresss and Number Rate
/ /I / /- // // / / // // // // /
LTV Mtg.Ins. 0rig.Term
City, State, Zip Code County Code 0rig.LoanAmt. Ratio Code (Months)
/ // // / /7 / // / / // // /L // // /
Borrower's No.Instal1- Date of 1st # of Date of Purchase Date of
Income ment (PGtI) Installment Units Origination Price Maturity
/ // // / /7 / // // / / // // // // // // /
B. PURCHASE DATA
Principal Interest Scheduled Accrued/Prepaid
Bal. Offered Paid to Date Purchase Date Interest
/ / I / / / I / / / / / / / / /
I hereby represent and warrant to, and covenant with, the City of Carlsbad and
the Trustee that the information set forth herein (A and B) is true and correct
to my best knowledge and is consistent with the terms of the Agreement. Such
warranty constitutes recommendation that said Loan shall be made to Borrower.
Authorized Signature Date
........................................
C. APPROVAL/REJECTION - COMPLIANCE AGENT
Based on the information set forth above and the documents itemized in Part I
of the Mortgage File(s) which are a part of the submission, it is hereby
determined that the criteria set forth in Section 8.01 of the Mortgage Sale and
Service Agreement have/have not been met, and the referenced Loan is
/T APPROVED for purposes of commit- 17 REJECTED due to / / ment to borrower to make a Loan. / /
UNITED GUARANTY RESIDENTIAL
INSURANCE COMPANY OF IOWA
By :
Authorized Signature Date
........................................
D. TRUSTEE - FIRST INTERSTATE BANK OF CALIFORNIA
Principal Accrued/Prepaid
Bal. Purchased Interest Paid P & I Constant Date Purchased
/ // // // / I // // // I
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EXHIBIT C
Letterhead of
LENDING INSTITUTION
June - , 1985
The City of Carlsbad,
California
PaineWebber Incorporated
and the other Purchasers named in
the Purchase Contract dated June - , 1985
PaineWebber Incorporated
100 California Street, 12th Floor San Francisco, California 94111
City of Carlsbad, California
Single Family Residential Mortgage Revenue Bonds,
Issue of 1985
Dear Sirs:
We refer to the representations and warranties heretofore
made by us in the Mortgage Sale and Service Agreement dated
June 1, 1985 to induce you to execute and deliver the Purchase
Contract relating to the above mentioned Bonds. Moreover, we
hereby certify that the information concerning us which is set
forth in the City's Official Statement with respect to the
Bonds did not, as of the date of the Official Statement, and
does not, as of the date hereof: (i) contain any untrue statement of a material fact, or (ii) omit to state any
material fact which should be included therein for the purpose
for which the Official Statement is to be used or which is
necessary in order to make the statements contained therein, in
light of the circumstances in which they were made, not
misleading.
Very truly yours,
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EXHIBIT D
(Letterhead of Counsel to Lending Institution)
June , 1985
The City of Carlsbad, California
PaineWebber Incorporated
and the other Purchasers named in
the Purchase Contract dated June - , 1985
PaineWebber Incorporated
100 California Street, 12th Floor
San Francisco, California 94111
City of Carlsbad, California
Single Family Residential Mortgage Revenue Bonds,
Issue of 1985
Dear Sirs:
We have acted as counsel for [NAME OF LENDING INSTITUTION]
(the "Lending Institution") in connection with the Lending
Institution's entering into a Mortgage Sale and Service Agree-
ment (the "Agreement") among the Lending Institution, the City
of Carlsbad, California, First Interstate Bank of California,
as Trustee, and United Guaranty Residential Insurance Company
of Iowa, as Compliance Agent.
In that connection we have examined originals or copies
certified or otherwise identified to our satisfaction of (i)
the Agreement (ii) the Charter and Bylaws of the Lending Insti-
tution, and (iii) such other documents as we deem relevant to
the rendering of this opinion.
Based on the foregoing, and on diligent inquiry of the
Lending Institution, we are of the opinion that:
(i> the Lending Institution is a [INSERT TYPE OF ENTITY], duly created and lawfully existing under the laws
of the State of and licensed to do busi- ness in the State of California.
(ii) the Agreement has been duly authorized, executed
and delivered by the Lending Institution and constitutes a
valid, legal and binding obligation of the Lending Institu-
tion enforceable in accordance with its terms;
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(iii) the execution and delivery of the Agreement and
the performance by the Lending Institution of its obliga-
tions thereunder, do not violate the Charter or Bylaws of the Lending Institution or any court order by which the
Lending Institution is bound, and such actions do not con-
stitute a default under any agreement, indenture, mortgage,
lease, note or other obligation or instrument to which the
Lending Institution is a party or by which it is bound and
no approval or other action by any governmental authority
or agency is required in connection therewith; and
(iv) to the best of our knowledge, there is no action,
suit, proceeding, inquiry or investigation at law or in
equity or before or by any public board or body pending or,
to our knowledge, threatened against or affecting the Lend-
ing Institution or, to the best of our knowledge, any basis
therefor, wherein an unfavorable decision, ruling or find-
ing would adversely affect the transactions contemplated by
the Agreement.
Very truly yours,
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EXHIBIT E RIDERS TO NOTE
1) - LOAN ASSUMABILITY RIDER
This Loan Assumability Rider is made this day of , 19 I and is incorporated into and shall be
deemed to amend and supplement the Note, dated of even date
herewith, given by the undersigned (herein the "Mortgagor").
upon the Mortgagor's sale, transfer or other disposition of the
Property securing this Note only if the City of Carlsbad approves in writing such assumption and the new obligor or
obligors on the Note and any other new holders of an interest
in such Property meet the eligibility requirements of the City
of Carlsbad Home Finance Program.
The obligation evidenced by this Note may be assumed
2)- LOAN INTEREST RATE INCREASE RIDER
This Loan Interest Rate Increase Rider is made
this day of I 19 , and is incorporated into and shall be deemed to amend and supplement the Note, dated of
even date herewith, given by the undersigned (herein the
"Mortgagor" ) .
Upon the discovery of fraud or misrepresentation by
the Mortgagor with respect to any information provided by the
Mortgagor in the Buyer's Affidavit executed by the Mortgagor in
connection with the Note, at the sole discretion of the holder
of the Note, the rate of interest on the unpaid principal
balance of the Note shall be increased to eighteen percent
(18%) per annum and the monthly payments shall be increased to
provide for amortization of such balance over the remaining
portion of the original term of the Note with level payments of
principal and interest together.
3)- FORGIVENESS RIDER
This Forgiveness Rider is made this day of , 19-, and is incorporated into and shall be
deemed to amend and supplement the Note, dated of even date
herewith, given by the undersigned (herein the "Mortgagor").
Upon the redemption of the last outstanding bond of
the issue of bonds designated as the City of Carlsbad Single
Family Residential Mortgage Revenue Bonds, Issue of 1985, (the
"Bonds") pursuant to the Indenture relating to the Bonds, dated
as of June 1, 1985, by and between the City of Carlsbad and
First Interstate Bank of California, and upon payment to the
City of Carlsbad of any amount to be paid to it pursuant to
said Indenture, the Mortgagor's obligation to make payments
under this Note shall cease and shall be forgiven by the County
and the Trustee.
Mortgagor
Mortgagor
EXHIBIT F
RIDERS TO DEED OF TRUST
1) - LOAN ASSUMABILITY RIDER
This Loan Assumability Rider is made this day of , 19 , and is incorporated into and shall
be deemed to amend and supplement a Deed of Trust, dated of
even date herewith, given by the undersigned (herein the
"Mortgagor") to secure the Mortgagor's Note to
(herein "Beneficiary") and
covering the property described in the Deed of Trust and
located at
(the "Residence").
(property address)
Upon sale or other transfer, whether voluntary,
involuntary or by operation of law, of all or any part of the
Residence, not approved by the City of Carlsbad or to a person
ineligible to receive a Loan under the City of Carlsbad Home
Finance Program, Beneficiary may, by written notice to
(Trustor), declare all obligations secured hereby immediately
due and payable, except to the extent that such acceleration
and in such particular circumstances as exercise of such a
right by Beneficiary is prohibited by law. The provisions
hereof shall prevail notwithstanding any contrary provisions in
any note or other instrument which evidences the obligations hereby secured. (Trustor) shall notify Beneficiary promptly in
writing of any transaction or event which may give rise to a
right of acceleration hereunder. (Trustor) shall pay to
Beneficiary all damages Beneficiary sustains by reason of the
breach of the covenant of notice set forth herein.
2) - LOAN FRAUD RIDER
This Loan Fraud Rider is made this day of , 19-, and is incorporated into and shall be
deemed to amend and supplement a Deed of Trust, dated of even
date herewith, given by the undersigned (herein the
"Mortgagor") to secure the Mortgagor's Note to
(herein "Beneficiary") and
covering the property described in the Deed of Trust and
located at
(the "Residence" ) .
(property address)
Upon discovery of fraud or misrepresentation by the
Mortgagor with respect to any information provided by the
Mortgagor in the Buyer's Affidavit executed by the Mortgagor in
connection with the Mortgagor's Note, Beneficiary may, at
Beneficiary's sole discretion, by written notice to (Trustor),
declare all obligations secured hereby immediately due and
payable. The provisions hereof shall prevail notwithstanding
any contrary provisions in any note or other instrument which
evidences the obligations hereby secured. (Trustor) shall
notify Beneficiary promptly in writing of any transaction or event which may give rise to a right of acceleration
hereunder. (Trustor) shall pay to Beneficiary all damages
Beneficiary sustains by reason of the breach of the covenant of
notice set forth herein.
Mortgagor
Mortgagor
EXHIBIT G
BUYER'S AFFIDAVIT
STATE OF CALIFORNIA )
COUNTY OF SAN DIEGO ) ) ss.
as applicant for a loan to be originated by
to the City of Carlsbad's Home Mortgage Financing Program, or as applicant to assume a loan purchased for said Program, and
as purchaser of a residence which is the subject of such loan,
being first duly sworn, in order to obtain approval therefor and to induce United Guaranty Residential Insurance Company of Iowa to issue or to continue a mortgage guaranty insurance
policy with respect thereto, deposes and says:
pursuant
1. The residence to be financed with the proceeds of
the loan is located within the unincorporated portion of
the City of Carlsbad
at
[address]
2. The residence is reasonably suitable for
occupancy by not more than one family.
3. I intend to occupy the home as my principal place of residence within 60 days or less after the closing of
the loan, and thereafter to maintain the property as my principal residence for a period of at least two years. I
do not intend to, and have not entered into an arrangement
to, rent, sell, assign or transfer the residence.
4. I will not use the residence in a trade or
business which qualifies me to deduct any portion of the
cost of the home as a home business expense on my federal
or California income tax return(s), and in any event will
not use more than 15% of the total area of the residence
primarily in a trade or business.
5. I will not use the residence as an investment property and will not receive any income from the residence
or the land being purchased with the residence except
incidentally as follows:
6. I will not use the residence as a recreational
home.
7. All of the land being purchased with the
residence reasonably maintains the basic livability of the
residence, and I have no intention of subdividing such land
or otherwise selling it apart from the residence.
8. I have not had a present ownership interest* in a
principal residence, including factory-made housing
permanently fixed to real property, at any time during the
three-year period immediately prior to the closing of the
loan.
9. a. I have attached a copy of the purchase
contract, together with all other agreements which I have entered into with the seller of the residence, to
this Affidavit.
b. The acquisition cost** of the residence as
shown in the purchase contract is $
c. Neither I nor anyone on my behalf has made
any payment other than the amount shown in (a) to the
seller of the residence or to any other person on behalf of the seller, nor have I cancelled any debt of
the seller or any related person to the seller.
d. The residence (is/is not) located on leased
land. If the residence is located on leased land, the
terms of the lease, including the payments required to
be made thereunder, are set forth below:
*The term "present ownership interest" includes not
only outright ownership but also any of the following interests if held either directly by you or in trust for you: a joint
tenancy, a tenancy in common, a tenancy by the entirety, a
community property interest, the interest of a tenant-
shareholder in a cooperative, a life estate, or a contract
pursuant to which you have possession and the benefits and
burdens of ownership although legal title is not transferred
until some time later. This provision does not apply to
certain Residences as provided for in the City of Carlsbad's
Mortgage Sale and Service Agreement dated June 1, 1985.
**The term "acquisition cost" means the cost of
acquiring the residence from the seller as a completed unit.
The term does not include usual and reasonable settlement or
financing costs. It does include the amount of any lien or
assessment to which the residence is subject.
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10. I will not use any part of the loan proceeds to
acquire or replace an existing mortgage except for the
construction period financing or other temporary initial
financing set forth below:
Amount of Type, Purpose, and Term of
Loan Proceeds Existing Mortgage Being
Acquired or Replaced
11. I will not lease the residence, nor allow the
mortgage on the residence to be assumed, nor sell the
residence subject to the mortgage, without the approval of
the City of Carlsbad.
12. My adjusted gross income as calculated for
federal income tax purposes is $ , and, for all other persons who intend to reside permanently with me
in the residence, is $
I have read the Note and the Deed of Trust, and I
understand that the loan may be accelerated and the interest
rate increased upon the occurrence of certain events specified
therein.
I understand that, if I have made any material
misstatements in the foregoing representations or omitted to state any of the information requested, the following may occur:
1. I may be fined not more than $ or imprisoned not more than two years, or both, pursuant to
Section 1014 of Title 18 of the United States Code.
2. The office of the district attorney may be
contacted for investigation regarding misrepresentation and
fraud.
3. The outstanding principal balance of the loan may
be declared immediately due and payable together with
accrued interest and foreclosure costs (if foreclosure is
necessary because payment in full is not made immediately).
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4. The rate of interest on the loan may be increased
to percent (-x), and the monthly payment amount will be increased to amortize the
loan over the same term.
Signature
Subscribed and sworn to before me
thi s day of , 19 .
Notary Public in and for said
County and State
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EXHIBIT H
SELLER'S AFFIDAVIT
STATE OF CALIFORNIA )
COUNTY OF SAN DIEGO )
) ss.
, as the authorized representa-
tive of the seller of a residence to
and , as purchaser(s), being first duly sworn, in order to induce United Guaranty Residential
Insurance Company of Iowa to issue or to continue a mortgage guaranty insurance policy with respect thereto, deposes and
says :
1. The residence is located at
[address]
2. The residence is reasonably suitable for
occupancy by not more than one family.
3. All of the land being sold with the residence
reasonably maintains the basic livability of the residence,
and to the best of (my/our) knowledge the purchasers do not
intend to subdivide such land.
4. a. The acquisition cost* of the residence as
shown in the purchase contract is $
b. Neither the purchasers nor anyone on their
behalf has made any payment other than the amount
shown in (a) to me or to any other person on my
behalf, nor have they cancelled any debt owned by me
or by any person related to me.
*The term "acquisition cost" means the cost of acquiring a
residence from the seller as a completed unit. The term does
not include usual and reasonable settlement or financing
costs. It does include the amount of any lien or assessment to
which the residence is subject.
c. The residence (is/is not) located on leased
land. If the residence is located on leased land, the
terms of the lease, including the payments required to
be made thereunder, are set forth below:
d. The residence has/has not been previously
occupied.
5. The proceeds of the loan being obtained by the
purchasers from the City of Carlsbad's Home Mortgage
Finance Program will not be used to acquire or replace an
existing mortgage on the property (except for construction
period financing or other temporary initial financing).
6. If the undersigned is a developer who has
executed a Developer Agreement with the City of Carlsbad,
the undersigned hereby reaffirms the representations and
warranties with respect to the Residence which are
contained in Section 4.5 of said Developer Agreement.
Signature
Subscribed and sworn to before me
this day of , 19 . -
Notary Public in and for said
County and State
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