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Loan Participation Sale Agreement

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Sectors: Banking
Governing Law: Florida, View Florida State Laws
Effective Date: April 16, 2003
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EXHIBIT 10.1

LOAN PARTICIPATION

SALE AGREEMENT


THIS LOAN PARTICIPATION SALE AGREEMENT (the " Agreement" ) is made and entered into as of the 16 th day of April, 2003, by and between CRESCENT MORTGAGE SERVICES, INC., a Georgia corporation, whose address is 115 Perimeter Center Place, Suite 285, Atlanta, Georgia 30346 (the " Seller" ) and COLONIAL BANK , an Alabama banking corporation, whose address is 201 East Pine Street, Suite 730, Orlando, Florida 32801 (the " Buyer" ).

BACKGROUND

The Seller originates, acquires, markets, sells and services one-to-four family, residential real estate loans secured by a lien on the real property (and improvements) encumbered pursuant to such loans (collectively, the " Mortgage Loans" ). The Seller wishes to sell, and the Buyer wishes to purchase, undivided participation ownership interests (each, a " Participation Interest ," and collectively, the " Participation Interests" in the Mortgage Loans identified in the Participation Certificates(s) (as hereinafter defined) issued pursuant to this Agreement. This Agreement is intended by the parties to govern the sale, assignment and transfer by the Seller to the Buyer of such Participation Interest(s) in the Mortgage Loans identified in such Participation Certificate(s), including the percentage of the principal amount of such Mortgage Loans representing the undivided interest sold, the purchase price, the yield to be paid to the Buyer, and the Seller' s responsibilities for servicing and other incidents, including those of agency, with respect to the resulting Participation Interests. The purchase price to be paid by the Buyer for the Participation Interest(s) sold under this Agreement will be set forth in the Participation Certificate(s) issued by the Seller to the Buyer from time to time pursuant to this Agreement.


AGREEMENT


1. Sale and Identification of Loan Participation Interest . The Seller hereby agrees to sell to Buyer and the Buyer hereby agrees to purchase from the Seller the Participation Interest(s) in the Mortgage Loans identified in the Participation Certificate(s), in the form attached hereto as an Exhibit A , issued by the Seller to the Buyer from time to time pursuant to this Agreement (each, a " Participated Mortgage Loan ," and collectively, the " Participated Mortgage Loans" ). Each Participation Certificate shall specify, among other things, the percentage of the principal amount of the Mortgage Loans representing the undivided interest sold, the identification of the Mortgage Loans in which the Buyer has purchased the Participation Interest, the purchase price paid by the Buyer, and the yield to be paid to the Buyer. The Seller hereby sells, assigns, transfers and delivers to the Buyer, the percentage Participation Interest indicated in each Participation Certificate (as applicable, the " Buyer' s Percentage" or " Percentage" ) of the Seller' s ownership rights in and to the Participated Mortgage Loans and the indebtedness, promissory note or notes, collateral security (including, without limitation, where such term is used herein, the mortgage, deed of trust, deed to secure debt and any other form of security instrument used to create a lien or other encumbrance upon real property as security for such promissory note or notes) and all other documents and instruments evidencing, securing or otherwise relating to such Participated Mortgage Loans.


2. Ownership Interest . The parties hereto agree that, upon payment of the purchase price for the Buyer' s Percentage of the Participated Mortgage Loans, the Buyer immediately shall become vested, to the extent of such Percentage, with beneficial ownership of the Participated Mortgage Loans including, without limitation, the indebtedness, promissory note or notes, collateral security and all other documents and instruments evidencing, securing or otherwise relating to said Participated Mortgage Loans, together with all of the rights, privileges and remedies applicable thereto. Except as otherwise provided in this Agreement, the Seller shall continue to hold legal title to the Participated Mortgage Loans (in trust and as nominee for the benefit of the Buyer to the extent of the Buyer' s Percentage therein), and the Buyer shall be the holder, subject to the terms of this Agreement, of equitable title to the Buyer' s Percentage of such Participated Mortgage Loans. The Seller shall not represent to any person that the Seller owns any portion of the Participation Interest(s) sold to the Buyer under this Agreement, and the Seller shall reflect the transaction(s) hereunder on its balance sheet and other financial statements as a sale of assets by the Seller and the purchase of assets by the Buyer.


THIS LOAN PARTICIPATION IS INTENDED BY THE PARTIES TO BE AND CONSTITUTE A SALE BY THE SELLER TO THE BUYER, AND A PURCHASE BY THE BUYER FROM THE SELLER. OF PARTICIPATION INTERESTS IN THE ABOVE REFERENCED MORTGAGE LOANS INCLUDING, WITHOUT LIMITATION. THE INDEBTEDNESS, PROMISSORY NOTE OR NOTES, COLLATERAL SECURITY AND ALL OTHER DOCUMENTS AND INSTRUMENTS EVIDENCING, SECURING OR OTHERWISE RELATING TO SAID MORTGAGE LOANS, AND NO AMOUNT PAID BY THE BUYER HEREUNDER TO PURCHASE SUCH PARTICIPATION INTERESTS SHALL IN ANY WAY BE CONSTRUED AS A LOAN OR AN EXTENSION OF CREDIT BY THE BUYER TO THE SELLER.


3. Participation in Collateral . The Participation Interest purchased by the Buyer from the Seller in each Participated Mortgage Loan hereunder shall be proportionately secured (in an amount equal to the Buyer' s Percentage) by any collateral securing such Mortgage Loan in accordance with the provisions of the applicable collateral security documents and, notwithstanding designation of the Seller as the mortgagee or secured party thereunder, the Buyer shall have all rights, privileges and benefits of the mortgagee or secured party, to the extent of its Participation Interest, with respect to such Participated Mortgage Loans. For purposes of the foregoing, the Seller, in its capacity as the mortgagee or secured party, shall act as the representative and collateral agent for the Buyer with respect to obtaining, perfecting, protecting and maintaining the collateral security for the Participated Mortgage Loans.


4. Requirements for Participated Mortgage Loans . Each Mortgage Loan in which the Buyer purchases a Participation Interest hereunder shall be fully underwritten (using an automated underwriting system such as LP or DU) in conformity with the underwriting standards of Fannie Mae or Freddie Mac in effect at the time of such underwriting (i.e., a " conforming" Mortgage Loan" ) and shall meet each of the other requirements as set forth in Exhibit B attached hereto. The Seller shall not sell, or offer to sell, a Participation Interest in any Mortgage Loan to the Buyer hereunder unless such Mortgage Loan meets the requirements set forth in this Section 4.


5. Delivery of Loan Documentation . Upon purchase by the Buyer of a Participation Interest in any Mortgage Loans, the Seller concurrently therewith shall deliver a Participation Certificate to the Buyer identifying the particular Mortgage Loans in which the Buyer is purchasing a Participation Interest and specifying the Buyer' s Percentage of such Mortgage Loans and the other matters set forth in Section 1. Thereafter, the Seller shall deliver to the Buyer the following documents and instruments pertaining to each such Participated Mortgage Loan, (x) in the case of the documents and instruments referenced in subsection A below (the " Required Documents" ), as soon as said documents and instruments are available, and (y) in the case of the documents and instruments referenced in subsection B below (the " Additional Required Documents" ), upon request by the Buyer from time to time (provided, however, within ten (10) business days following the date of purchase by the Buyer of its Participation Interest in a Mortgage Loan, the Seller shall deliver to the Buyer the documents and instruments referenced in paragraphs (ix) and (x) of subsection B below):


A. Required Documents .


(i) Investor Commitment Certification (whole loan investor commitment information or weekly secondary market report, if Mortgage Loan is sold in a pool);

(ii) Original promissory note or other evidence of debt signed by loan debtor(s) (the " Obligor(s)" ). endorsed in blank by the Seller, and, if applicable, with an interim endorsement from originating mortgage company to the Seller;

(iii) Certified copies of the collateral security documents (including, without limitation, the mortgage, deed of trust, deed to secure debt and any other form of security instrument used to create a lien or other encumbrance upon real property as security for such promissory note) including, with respect thereto, any modification agreements;


(iv) Certified copy of any interim assignments, if applicable;


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(v) Original unrecorded assignment in blank of the collateral security documents or, if applicable, MERS designation;

(vi) Closing Agent certification (if required by the Buyer at any time); and

(vii) Copies of other supporting documentation, if applicable (such as Power of Attorney, Guardianship, Trust Agreement, etc. ).

B. Additional Required Documents .

(i) Original or certified copy of HUD-1 Settlement Statement;


(ii) Copy of the title insurance binder or certificate (including an attorney approval letter) covering at least the face amount of the promissory note, with the original policy of title insurance insuring the mortgage (or deed of trust, deed to secure debt, etc.) as a first lien on the real property and improvements encumbered thereby (the " Property" ) written by a title company and containing exceptions satisfactory to the Buyer;

(iii) Evidence of the applicable FHA commitment for insurance with respect to each FHA-insured promissory note, or VA commitment for guaranty with respect to each VA-guaranteed promissory note, and of the applicable commitment for private mortgage insurance with respect to each conventional promissory note having a loan-to-value ratio in excess of 80%;

(iv) Evidence of fire and extended coverage insurance in an amount not less than the lower of the following: (a) the amount of the Mortgage Loan, and (b) 100% of the insurable value of the Property. Such insurance shall be written by a company satisfactory to the Buyer with form and content subject to the Buyer' s approval. The Buyer reserves the right to obtain a loss payable endorsement in favor of the Buyer if the Buyer so desires;

(v) Evidence of Notice to Customer and Rescission required by the federal Truth-in-Lending Law and Federal Reserve Regulation Z;


(vi) Copy of the appraisal of the Property;

(vii) Survey(s) of the Property;


(viii) Termite treatment report of the Property;

(ix) Copies of the Obligor(s) financial statement(s) and written credit report(s);


(x) Copy of underwriting summary (LP or DU approval, etc.); and

(xi) Any other documentation as the Buyer reasonably may deem appropriate including, without limitation, documentation necessary to fulfill the requirements of investor commitments.


It is the understanding of the parties that the Seller shall retain possession of all Additional Required Documents as collateral agent for the benefit of the Buyer unless the Buyer requests, as aforesaid, that such Additional Required Documents be delivered to and held by the Buyer, in which case, the Seller shall promptly deliver same to the Buyer. To the extent that the Seller retains possession of any documents hereunder relating to the Participated Mortgage Loans, the Seller shall keep all such documents in segregated files appropriately marked to show that a Participation Interest therein has been sold to the Buyer. In addition, if required by the Buyer at any time in order to maintain, preserve and protect its Participation Interest(s) in the Participated Mortgage Loans, the Seller immediately shall record the assignment referenced in subsection A(v) above of this Section 5 in favor of the Buyer in the applicable recording office and pay all recording fees, charges and taxes in connection therewith.


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6. Expenses, Etc . All out-of-pocket expenses for preparation and recording of any documents including, without limitation, any assignments necessary to reflect ownership by the Buyer of its Participation Interest(s) to the Participated Mortgage Loans or any precautionary UCC-1 filings contemplated by Section 22E hereof to reflect the transaction(s) hereunder, shall be borne by Seller. The Seller shall prepare all documents including, without limitation, the Participation Certificates, necessary to reflect the Buyer' s Participation Interest(s) in the Participated Mortgage Loans.


7. Record Inspection Rights . The Buyer, or its agents or representatives or, if applicable, the Buyer' s successors or assigns, and its examiners or supervisory agents, shall have the right at any reasonable the during normal business hours to request, have access to and examine, any and all books, records and documents relating to any Participated Mortgage Loan or to any matters covered by this Agreement.

8. Servicing or Participated Mortgage Loans .

A. Unless the Buyer has notified the Seller of the Buyer' s election to take over servicing of the Participated Mortgage Loans as set forth in Section 9 hereof, the Seller shall be solely responsible for the servicing of the Participated Mortgage Loans. All payments of principal and interest and all fees and other income at any time received by the Seller with respect to a Participated Mortgage Loan shall be held by the Seller in trust for the Buyer and applied by the Seller in the manner set forth in Section 15. Upon request of the Buyer from time to time with respect to any Participated Mortgage Loan, the Seller shall promptly deliver to the Buyer a statement of such Mortgage Loans current status as to scheduled periodic debt service payments.


B. The Seller shall exercise due care and discretion in servicing the Participated Mortgage Loans and in collecting the payments thereunder and shall indemnify and hold the Buyer harmless from and against any loss or damage caused by the Seller' s failure to properly service such Mortgage Loans.


C. Except as otherwise set forth in Section 9, the Seller shall retain full power and authority and the reasonable discretion to administer the Participated Mortgage Loans and to take or omit to take any action whatsoever in respect thereof as the Seller deems reasonably necessary or desirable to preserve the value thereof and to maximize the proceeds to be realized therefrom; provided , however , the Seller, in all cases. shall act in good faith and in accordance with the usual practices employed by the Seller in the servicing of Mortgage Loans for its own account; and further provided , however , the Seller shall not without the prior consent of the Buyer:


(i) make or consent to any amendments in the terms and conditions of any Participated Mortgage Loan, or in the terms of the promissory note or notes evidencing such Mortgage Loan, or in any collateral security documents securing such Mortgage Loan;


(ii) waive or release any claim against any Obligor and/or against any co-maker, guarantor or endorser under any Participated Mortgage Loan;


(iii) make or consent to any release, substitution, exchange or subordination of any collateral for any Participated Mortgage Loan;


(iv) accelerate payment under any Participated Mortgage Loan and/or under any promissory note or notes evidencing such Mortgage Loan;

(v) commence any type of collection proceeding against any Obligor and/or against any co-maker, guarantor or endorser under any Participated Mortgage Loan; and/or

(vi) seize, sell. transfer, assign, foreclose or attempt to exercise any other remedy against any collateral securing any Participated Mortgage Loan.


D. Notwithstanding subsection C above of this Section S. if the Seller, in its reasonable judgment, determines that it is necessary to take on an emergency basis, any of the actions described is subsection (C)(iv) through (C)(vi) above and is unable to obtain the Buyer' s prior consent in a timely manner, then the Seller


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may take such action but shall simultaneously notify the Buyer of the action taken and the reason(s) therefor, together with evidence of the Seller' s attempt(s) to first obtain the Buyer' s prior consent to such action.

E. If the Seller requests the consent of the Buyer to any action in respect of a Participated Mortgage Loan, the Buyer shall respond within ten (10) business days after the Seller' s request. If the Buyer fails to respond within such time period, the Buyer shall be deemed to have agreed to the action referenced in the Seller' s request. If the Buyer responds after the expiration of such time period but prior to any action taken by the Seller, then the Seller shall honor the Buyer' s response.


9. Buyer' s Right to Service Participated Mortgage Loans . At the election of the Buyer exercised by the Buyer' s delivery of notice to the Seller, which notice may be given by the Buyer at any time and for any reason whatsoever, the Buyer may take over the servicing of the Participated Mortgage Loans and the collection of all payments thereunder. Upon the exercise of such election by the Buyer, the Seller shall immediately notify the Obligor(s), directing the Obligor(s) to forward principal and interest payments under the Participated Mortgage Loans directly to the Buyer, in sufficient amounts to satisfy the Buyer' s then Percentage ownership interest in such Mortgage Loans. In addition, the Seller shall deliver to the Buyer all mortgage files, computer programs, tapes, discs, cards, accounting records and other books, records, information and data of the Seller which are necessary or helpful to the Buyer in the administration and servicing of such Participated Mortgage Loans. Unless otherwise provided herein, the remaining terms and conditions of this Agreement shall survive the election by the Buyer to take over the servicing of the Participated Mortgage Loans. Such remaining terms and conditions of this Agreement shall continue to apply until such time as each Participated Mortgage Loan either is paid in full or the Buyer' s Participation Interest in such Mortgage Loans is repurchased by the Seller as provided in Section 17 below.


10. Representation and Warranties by the Seller . The Seller represents and warrants to the Buyer:


A. The Seller is a corporation, duly organized and validly existing in good standing under the laws governing its organization and has all licenses necessary to carry on its business as now being conducted and, if required by applicable law, is licensed, qualified and in good standing in each state where it conducts business.


B. The Seller has full power and authority to execute, deliver and perform this Agreement, including authority to sell, assign and transfer and, if applicable, to repurchase the Participation Interest(s) in the Mortgage Loans hereunder.


C. All necessary corporate, regulatory or other similar action has been taken to authorize and empower the Seller, and the officers or representatives acting on its behalf, to execute, deliver and perform this Agreement.


D. The execution and delivery of this Agreement by the Seller and the performance of or compliance with the terms and conditions hereof by the Seller do not of will not conflict with or result in, as the case may be, a material breach of any of the terms and conditions or provisions of the articles of incorporation or organization, as applicable, or bylaws or operating agreement (or regulations), as applicable, of the Seller or any provisions of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect to which the Seller or its properties or assets are subject.


E. The execution and delivery of this Agreement by the Seller and the performance of or compliance with the terms and conditions hereof by the Seller do not or will not conflict with or result in, as the case may be, at material breach of any of the terms, conditions or provisions of or constitute a material default under any indenture, loan or credit agreement or any other agreement, or instrument to which the Seller is a party or by which it or its properties or assets may be materially affected.


F. Assuming due authorization, execution and delivery by the Buyer, this Agreement constitutes a legal, valid and binding obligation of the Seller enforceable against the Seller according to its terms and conditions set forth herein.


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G. No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Seller of or compliance by the Seller with this Agreement, the sale of the Participation Interest(s) in the Participated Mortgage Loans to the Buyer or the consummation of the transactions contemplated by this Agreement or, if required, such approval has been obtained prior to the closing date.


H. There is no action, suit, regulatory or other proceeding of any kind pending or threatened against or materially affecting the Seller or the properties or assets of the Seller before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which, if determined adversely to the Seller, would prohibit the Seller from executing and delivering this Agreement and performing its obligations hereunder.

I. That as of the date the Buyer purchases a
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