Outline
1. Loan Sale Agreement
2. Procedures for Loan Sale Closings
  • Notice to Successful Bidder
  • Closing Events
3. Post-Closing Events
4. Exhibits
    8-A. Defined Terms Section of Loan Sale Agreement
    8-B. Limited Power of Attorney Form
    8-C. Mortgage Note Endorsement Form
    8-D. Assignment and Lost Note Affidavit Form
    8-E. Assignment of Mortgage and Other Collateral Documents Form
    8-F. A Taxing Authority Notification Form


PROJECT TIMELINE 

1995            1996
Oct.  Nov. Dec. Jan. Feb. Mar. April.  May        June July Aug.
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                               |   Closing & Post Closing   |
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                                          (4/1-10/29)

The following description of the FHA Single Family Mortgage Loan Sale #2 closing process discusses the task responsibilities associated with closing, closing documentation, and procedures for closing loan sales. All capitalized terms in this section have the same meanings as set forth in the defined terms section of the loan sale agreement (LSA) (Exhibit 8-A).

1. LOAN SALE AGREEMENT

All closing procedures and requirements for the loan sale closings are described in and controlled by the LSA. Listed below are all items pertinent to closing which are contained within this document.

2. PROCEDURES FOR LOAN SALE CLOSINGS

All successful bidders must close approximately two weeks following the award date. For FHA Single Family Mortgage Loan Sale #2, the closings occurred between April 1 and April 12, 1996.

Notice to Successful Bidder

Once FHA accepts the successful bidder's bid, FHA retains the successful bidder's deposit. On the award date, FHA sends the successful bidder a bid confirmation letter and one duplicate original loan sale agreement executed by FHA with a copy of the bid confirmation letter attached. At least three business days prior to the closing date, FHA sends the closing date payment notice to the successful bidder.

Notice to Unsuccessful Bidders

If the bidder's bid is not accepted by FHA, the bidder's deposit must be returned (without interest) to the bidder within six business days following the award date.

Closing Events

Between 9:00 a.m. and 1:00 p.m. on the closing date, the successful bidder delivers to FHA:

(a) in accordance with the wire transfer instructions, the closing date payment which equals:

(i) the sum of:

A) the aggregate of the Bid Prices for the Mortgage Loan Pools;

B) the aggregate amount of accrued and unpaid interest on all Performing Mortgage Loans, calculated at the rate payable on each such Performing Mortgage Loan, pursuant to the terms of the Mortgage Loan Documents, for the period beginning on the last day through which interest was paid to Seller, through and including the day immediately preceding the Closing Date;

C) the aggregate amount of accrued and unpaid HUD Service Charge on all Performing Mortgage Loans, for the period beginning on the last day through which the HUD Service Charge was paid to Seller through, and including the day immediately preceding the Closing Date;

D) the Advances; and

E) the Closing Fee;

(ii) minus the sum of:

A) the Deposit; and

B) the aggregate amount of the Closing Escrow Account Balances with respect to the Mortgage Loans.

(b) copies of the Limited Powers of Attorney in the form attached as Exhibit 8-B, with no modifications to the form thereof, in such quantity as the Successful Bidder reasonably deems necessary, but not in excess of 50 copies;

(c) three prepaid, overnight courier packages, addressed to Successful Bidder, to be used by FHA for the purposes hereinafter set forth;

(d) a fully completed and executed Internal Revenue Service Form W-9 (taxpayer ID); and

(e) the notice providing the information required pursuant to the last paragraph of Section 5.3(d) of the Loan Sale Agreement, and pursuant to Sections 6.2(a) and 6.2(b) of the Loan Sale Agreement.

3. POST CLOSING EVENTS

Mortgage Loan Documents Availability Date

Successful bidders will be responsible for taking delivery of the mortgage loan documents. All costs associated with retrieving the legal files will be the responsibility of the successful bidders. On the mortgage loan documents availability date, the mortgage loan documents shall be picked up by successful bidders. Successful bidders must execute and return to HUD five (5) days prior to the mortgage loan documents availability date (April 29, 1996) a notice that identifies: (i) the person designated by successful bidders to pick up the mortgage loan documents; and (ii) the time that the Successful Bidders intend to retrieve the Mortgage Loan Documents. The Mortgage Loan Documents consist of:

(a) the original Mortgage Note or Lost Note Affidavit and Assignment;
(b) the Mortgage (including any assignments thereof); and
(c) the mortgagee title insurance policy issued in connection with the origination of the Mortgage.

Servicing Files Availability Date

Successful Bidders will be responsible for taking delivery of the Servicing Files. All costs associated with retrieving the Servicing Files will be the responsibility of the Successful Bidders. On the Servicing Files Availability Date, the Servicing Files shall be picked up by Successful Bidders. The servicing files will be available for pick up at the Due Diligence Facility no later than May 28, 1996. Successful Bidders must execute and return to HUD five (5) days prior to the Servicing Files Availability Date a notice that identifies: (i) the person designated by Successful Bidders to pick up the Servicing Files; and (ii) the time that the Successful Bidders intend to retrieve the Servicing Files. The Servicing Files consist of:

(a) correspondence;
(b) memoranda;
(c) forbearance agreements;
(d) litigation documents; and
(e) any written Payment Plan Agreements

Mortgagor Notification

At HUD's election, a notification shall be given either by the Successful Bidder alone or by HUD and the Successful Bidder jointly to all mortgagors. If HUD elects to have Successful Bidder give the notification alone, Successful Bidder shall, at Successful Bidder's cost and expense and in accordance with 24 Code of Federal Regulations Section 3500.21 (d)(2)(B), send the notification to all Mortgagors by first class mail at the last known mailing address of such Mortgagors . If HUD elects to have the notification given jointly, then: not less than 15 days prior to the Servicing Files Availability Date, HUD shall, at HUD's cost and expense, send the notification to all Mortgagors by first class mail at the last known mailing address of such Mortgagors.

Delivery of Servicing Tape Files

During the period between April 17, 1996 and May 1, 1996, FHA will deliver to Successful Bidder(s): (i) the Servicing Tape, and (ii) Standard Conversion Reports. The Servicing Tape shall be in the form of a magnetic tape or CD-ROM, and shall be an ASCII flat file with carriage return line feed delimited records. The Standard Conversion Reports shall be in the form of either paper or microfiche and shall contain a two-year loan transaction history report and a summary trial balance report. FHA makes no representation or warranty as to the accuracy or completeness of the information contained in the Servicing Tape or Standard Conversion Reports, and FHA shall have no liability by reason of the inaccuracy or incompleteness of the information contained in the Servicing Tape or Standard Conversion Reports, or by reason of any discrepancy between the foregoing and the information contained in the Mortgage Loan Schedule Diskette.

The Limited Seller Servicing Period

During the Closing Date and the Servicing Transfer Date (the "Limited Seller Servicing Period"), FHA and the Successful Bidder agree that FHA shall perform certain limited services on behalf of the Successful Bidder.

(a) During the Limited Seller Servicing Period, Seller shall:
(i) submit invoices to Mortgagors for the Monthly Payments (and any other amounts) which are due with respect to the Mortgage Loans in April and May, 1996.
(ii) deposit amounts received in a holding account and remit to Purchaser from such account all amounts received, without interest thereon, on a regular basis, promptly after receipt thereof by FHA. Payment shall be made by check, wire transfer or such other reasonable means selected by FHA. At FHA's election, such payments may be made by endorsement or payments tendered to FHA in the form as follows: "Pay to the order of [name of Successful Bidder] without recourse and without representations or warranties or any type, kind, character or nature, express or implied."If FHA has deposited payments received from any Mortgagor during the Limited Seller Servicing Period and issues a check or payment therefor to the Successful Bidder, the Successful Bidder shall bear the risk that any such payment so deposited by FHA may be returned due to insufficient funds or any other failure of collection. FHA shall have a period of ninety days after the date FHA delivers to the Successful Bidder payments made by or on behalf of any Mortgagor to notify the Successful Bidder in writing that any such payments were returned due to insufficient funds or any other failure of collection and specifying the amount thereof, whereupon the Successful Bidder shall pay promptly, but not later than ten Business Days following receipt of such notice, to FHA the amount of such payment by certified check, or by wire transfer if so directed by FHA and identify the Mortgage Loan and "Single Family Mortgage Loan Sale #2".
(iii) have the right, at its election, to pay any Real Estate Tax Bills which it receives during the Limited Seller Servicing Period. If FHA elects to pay any Real Estate Tax Bill, the Successful Bidder shall reimburse FHA for the amount thereof within ten Business Days after the Successful Bidder is billed therefor. If FHA elects not to pay any Real Estate Tax Bill, FHA shall use reasonable efforts to forward to the Successful Bidder in a timely manner any Real Estate Tax Bills which it may receive during the Limited Seller Servicing Period; and
(iv) have the right, at its election, to enter into renewals of existing Payment Plan Agreements on behalf of Purchaser, in the event that any Mortgagor is eligible for renewal pursuant to the servicing requirements.
(b) Except as expressed set forth above, the Successful Bidder shall have no obligations or responsibilities with respect to the Mortgage Loans during the Limited Seller Servicing Period. Without limiting the generality of the foregoing, FHA shall have neither the right nor the responsibility during the Limited Seller Servicing Period to modify the Mortgage Loan Documents or negotiate forbearance agreements or compromises.

Servicing Transfer - Servicing by Purchaser

(a) In general, after the Closing Date, Purchaser will assume all responsibilities and obligations of Seller as holder and/or servicer of the Mortgage Loans arising on or after the Closing Date, and Seller shall have no further responsibilities or obligations with respect to any of the Mortgage Loans.
(b) The Purchaser shall service the Mortgage Loans (or cause them to be serviced) in accordance with (i) applicable federal, state and local laws and regulations, (ii) prudent servicing practices such as the FNMA Servicing Guide for Single Family Mortgage Loans, and (iii) the requirements set forth in Section (c) below).
(c) In addition to the foregoing, the Purchaser shall service the mortgage Loans in accordance with the following requirements:

(i) Purchaser acknowledges that in certain cases, Payment Plan Agreements or extensions thereof, may have been made pursuant to an oral agreement between Seller and the Mortgagor. In such cases, the payment history and possibly other information in the Servicing File would evidence the existence of the Payment Plan Agreement. Purchaser shall comply with each Payment Plan Agreement, oral or written, until the term thereof expires or until there is a default under the Payment Plan Agreement.
(ii) As long as the Mortgagor under a Payment Plan Agreement makes the payments due under the Payment Plan Agreement, Purchaser shall be obligated to accept and apply such payments and to renegotiate and renew the Payment Plan Agreement for an additional period of time, except as hereinafter set forth. The renewed Payment Plan Agreement may require the payment of the Monthly Payment due under the Mortgage Note or the Monthly Payment due under the Mortgage Note plus an additional amount which is within the Mortgagor's reasonable ability to pay. A payment is within the Mortgagor's reasonable ability to pay if the Mortgagor is receiving sufficient income to support the amount due under the renewed Payment Plan Agreement and still pay basic living expenses, including but not limited to expenses for food, utilities, medical care, work-related transportation and emergencies. If it would not reasonably be within the Mortgagor's ability to pay at least the Monthly Payment due under the Mortgage Note, Purchaser shall not be obligated to renew the Payment Plan Agreement and shall have the right to take such action as may be permitted pursuant to the terms of the Mortgage and Mortgage Note by reason of the occurrence of a default thereunder.
(iii) In general, the Purchaser shall be obligated to continue to renew Payment Plan Agreements upon expiration at least through and including the expiration of the original term of the Mortgage.
(iv) If there is a default under a Payment Plan Agreement, the Mortgagor thereunder shall have the right to reinstate the Payment Plan Agreement if the Mortgagor makes a lump sum payment in an amount necessary to cure the default.
(v) If there is a default under a Payment Plan Agreement which requires the Mortgagor to pay the Monthly Payment due under the Mortgage Note plus an additional amount, Purchaser agrees to renegotiate the Payment Plan Agreement if the following requirements are satisfied:

    (A) the Mortgagor demonstrates a loss of income or other reasonable justification for the default;

    (B) the Mortgagor demonstrates that it would be within the Mortgagor's reasonable ability to pay at least the Monthly Payment due under the Mortgage Note; and

    (C) the Mortgagor makes a lump sum payment equal to the product of (1) the number of months that the Mortgagor is delinquent under the existing Payment Plan Agreement and (2) the new payment required to be made each month under the renegotiated Payment Plan Agreement.

(vi) If there is a default under a Payment Plan Agreement and the Mortgagor does not comply with the requirements of either Section 6.4(c)(iv) or (v) above, Purchaser shall have the right to terminate the Payment Plan Agreement by reason of the occurrence of the default, and to take such action as may be permitted pursuant to the terms of the Mortgage and Mortgage Note by reason of the occurrence of a default thereunder.
(vii) If a delinquency still exists at the expiration of the original terms of the Mortgage, Purchaser shall be obligated to extend the term of the Mortgage up to ten years if it would be within the Mortgagor's reasonable ability to pay a monthly payment which would pay the Mortgage loan in full in a period of ten years or less.

(d) Any Servicer of any of the Mortgage Loans must be an FHA Approved Mortgagee at all times.
(e) After a Mortgage Loan is modified, for consideration, with the consent of the Mortgagor, or the Mortgage Loan is refinanced, Purchaser shall not be required to service that particular Mortgage Loan in accordance with the requirements of Sections 6.4 (b), (c), and (d). Mortgage Loans that are so modified or refinanced may subsequently be transferred to any Person without regard to whether such Person is a Permitted Transferee.
(f) If Purchaser or any Servicer does not comply with the servicing requirements set forth in this Section 6.4, Seller may exclude Purchaser or Servicer from any future asset sales or may impose administrative sanctions on the Purchaser or Servicer, as applicable.

The Transfer Documents

Within one hundred eighty (180) calendar days following the Mortgage Loan Documents Availability Date, Successful Bidders shall, at their sole cost and expense, prepare and execute the Transfer Documents and Other Transfer Documents identified in the Loan Sale Agreement for each Mortgage Loan on behalf of HUD pursuant to the Limited Power of Attorney. The Transfer Documents consist of:

(a) An original Mortgage Note Endorsement in the form of Exhibit 8-C. Pursuant to the Mortgage Note Endorsement, any reference in the Mortgage Note to FHA Mortgage Insurance shall be deemed to have been stricken and the Mortgage Note shall be deemed to have been marked with he words "FHA Insurance Terminated. Mortgage Note Endorsement From HUD Hereby Made A Part Hereof." Promptly following the Mortgage Loan Documents Availability Date, Successful Bidder shall strike any reference in the Mortgage Note to FHA Mortgage Insurance and mark the Mortgage Note with the words, "FHA Insurance Terminated. Mortgage Note Endorsement From HUD Hereby Made A Part Hereof."
(b) If Seller does not have in its possession the original Mortgage Note and has not delivered an Assignment and Lost Note Affidavit, Successful Bidder shall prepare and execute an original Assignment and Lost Note Affidavit in the form of Exhibit 8-D, in place of the Mortgage Note Endorsement.
(c) An original Assignment of Mortgage and Other Collateral Loan Documents in the form of Exhibit 8-E.Except as set forth in the Loan Sale Agreement, Successful Bidders shall make no modifications to the forms of the Transfer Documents.

Taxing Authority Notification

On or before the date which is sixty days after the Servicing Files Availability Date, Successful Bidder shall complete and send a Taxing Authority Notification, in the form attached as Exhibit 8-F, to every taxing authority having jurisdiction over the Mortgaged Property covered by each Mortgage.

Recordation of Transfer Documents

Successful Bidders shall, at their own cost and expense, use their best efforts to cause all applicable Transfer Documents with respect to each Mortgage Loan to be recorded or filed in the appropriate land or other records of the appropriate county or other jurisdiction within one hundred and eighty (180) calendar days following the Mortgage Loan Documents Availability Date.

8-A. Defined Terms Section of Loan Sale Agreement
8-B. Limited Power of Attorney Form
8-C. Mortgage Note Endorsement Form
8-D. Assignment and Lost Note Affidavit Form
8-E. Assignment of Mortgage and Other Collateral Documents Form
8-F. A Taxing Authority Notification Form