Document Sample
The following outlines the key terms and conditions of the Arrangement. Any terms & conditions
or other matters not made clear in this Conditional Commitment Letter are subject to mutual
agreement among the parties but none of the terms set forth herein shall in any way be construed
as a commitment on the part of Warehouse Lender or any of its affiliates until such time as
Warehouse Lender completes its due diligence and enters into definitive documentation with the
Seller regarding the Arrangement. This Conditional Commitment Letter is intended for the sole
benefit of [TBD] (the “Seller”) and shall not be relied upon by any other person. This proposal
and its terms are submitted on a confidential basis and shall not be disclosed except as required
by law or on a need to know basis to officers and directors of the Seller.

Date: February [__], 2010

Arrangement: A full recourse reverse repurchase arrangement for the purpose of selling and
purchasing participation interests in Eligible Loans at the Purchase Price and compliance with the
other terms and conditions of the Arrangement.
Seller: [TBD]
Guarantor: The Purchaser shall have full recourse to [Company Rep], to the extent of any losses,
costs and expenses arising from the following actions by authorized officers of [TBD]: (i) willful
misconduct; (ii) acts of fraud; (iii) misappropriation of funds and theft; (iv) criminal acts; (v)
hindrance of the Purchaser’s security interest; or (vi) prohibited disposition of secured collateral.
Buyer: Warehouse Lender and/or, at the sole option of The Warehouse lender, an affiliate of The
Warehouse Lender, a special purpose corporation administered by The Warehouse Lender or any
affiliate of The Warehouse Lender (any of such entities which act as Buyer pursuant to the
arrangement are collectively referred to as the “Buyer”).

Custodian: Deutsche Bank National Trust Company or any other custodian acceptable to the
Term: Up to 364 days.
Maximum Aggregate
Purchase Price: Up to $10 million, subject to the limitations described below.
Roll Date The last Business Day of each calendar month.
Repurchase Date: The Seller will be required to repurchase all Purchased Participation Interests
in Eligible Loans held by Buyer on the earlier of (i) Pool settlement or (ii) the Termination Date.
Repurchase Price: On each Roll Date or any other date of determination, as specified in the
master repurchase agreement, the Repurchase Price shall be equal to the portion of the Purchase
Price not yet repaid, plus the
Price Differential, plus any accrued and unpaid fees and expenses and indemnity amounts.
Price Differential: Will be calculated by application of the Pricing Rate (or during the
continuation of an Event of Default, by daily application of the Default Rate) to the outstanding
Purchase Price on the basis of a 360-day year and the actual number of days elapsed between the
purchase date and the next Repurchase Date.
Pricing Rate: Equal to the sum of (i) one month LIBOR (reset daily) and (ii) 7.99%.
Default Rate: An additional 200 basis points per annum above the then applicable Pricing Rate or
any other applicable interest rate upon the occurrence and during the continuance of an Event of
Default under the Arrangement documents or with respect to any payment that is received after
its due date.
Structuring and Commitment Fee: A nonrefundable fee equal to $100,000 in addition to the
consulting fee of 35 basis points which shall be paid, and deemed fully earned as of the Closing
Non-Usage Fee: The Seller shall be required to pay a minimum Non-Usage Fee to the Buyer each
month in an amount equal to 75bps multiplied by the difference between $7.5 million and the
highest drawn amount during the month (if less then $7.5 million). If no Non-Usage Fee is due as
a result of this calculation, then no minimum Payment is required to be made by the Seller,
Otherwise all Price Differential payments (Loan interest payments) shall be made on the next
Repurchase Date. The Non-Usage Fee shall be waived for the first month of the Arrangement.
Closing Date: Upon the execution of definitive legal documentation and satisfaction or waiver of
all conditions precedent set forth therein, as determined by the Buyer in its sole discretion.
Termination Date: The Arrangement will terminate and the aggregate Repurchase Price for all
Purchased Participation Interests not yet repurchased will be fully payable on the earlier of a) 364
days from signing of the definitive documentation, b) at the option of the Buyer, the occurrence
of an Event of Default, or c) the occurrence of a Termination Event that has not been waived by
the Buyer.
Termination Event: Shall include, without limitation, any of the following: (i) the occurrence of
any outbreak or material escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis, the effect of which on the financial markets is such
as to make it, in the sole determination of Buyer, impracticable to continue the facility, (ii) if
Buyer determines that any change in law or accounting rules regarding capital requirements has
or would have the effect of reducing the rate of return on Buyer’s capital or on the capital of any
Affiliate of Buyer as a consequence of such change in law or accounting rules, and Seller
determines that it will not compensate Buyer or Buyer’s Affiliate, as applicable, for such reduced
rate of return, (iii) if there is an increase in the cost to Buyer in engaging in Transactions due to
the introduction of, any change in, or the compliance by Buyer with (x) any eurocurrency reserve
requirement, or (y) the interpretation of any law, regulation or any guideline or request from any
central bank or other governmental
authority (whether or not having the force of law), and Seller determines that it will not
compensate Buyer for such increased costs, (iv) changes to FHA or GNMA policies or
procedures such as to make it, in the sole determination of the Buyer, impracticable to continue
the Arrangement, or (v) any other event beyond the control of Buyer which Buyer reasonably
determines may result in Buyer’s inability to perform its obligations under the Arrangement
including, without limitation, acts of God, strikes, lockouts, riots, acts of war or terrorism,
epidemics, nationalization, expropriation, currency restrictions, fire, communication line failures,
computer viruses, power failures, earthquakes, or other disasters of a similar nature to the
Eligible Loans: The Arrangement will provide for the purchase of an undivided participation
interest in loans meeting the criteria stated herein. The participation percentage shall be as set
forth under “Advance Rate” below. The participation interest to be purchased is referred to herein
as a “Purchased Participation Interest" and a loan meeting the criteria stated herein and subject to
a Purchased Participation Interest is an “Eligible Loan”. Eligible Loans must be fixed rate fully
drawn home equity conversion loans (HECMs), eligible for FHA Insurance, eligible for inclusion
in Ginnie Mae Pools, and fully comply with all of the terms and conditions, including any
covenants, representations and warranties, in the GNMA Guides.
Eligible Loans shall mean fixed rate mortgage loans secured by first liens on real property and
which meet eligibility criteria satisfactory to Buyer including but not limited to:
The individual Eligible Loans were originated in accordance with underwriting guidelines
acceptable to GNMA and are eligible for insurance by FHA;
The individual Purchased Participation Interests in such Eligible Loans have remained subject to
the Arrangement for less than 30 days;
The individual Eligible Loans have been originated less than 15 days prior to the date of
The individual Eligible Loans shall not be subject to the provisions of the Homeownership and
Equity Protection Act of 1994, as amended, or subject to any comparable federal, state or local
statutes or regulations or any other statute or regulation providing assignee liability to holders of
such Mortgage Loans or subjecting the parties to heightened scrutiny;
The individual Eligible Loans meet representations and warranties customary for reverse
repurchase facilities or securitizations of similar assets, or as otherwise required by Buyer;
The underlying Mortgaged Properties are covered by hazard insurance polices. Insurance
coverage must be deemed adequate and customary for the underlying Mortgaged Property;
The underlying Mortgaged Property is not subject to an environmental hazard, zoning or building
code violation that would have to be eliminated under applicable law, would otherwise affect the
marketability of such Mortgaged Property or would subject the owner or operator of such
Mortgaged Property or Buyer to liability under applicable law;
The underlying Mortgaged Property shall not be subject to any liens related to the existence of
any clean-up of a hazardous substance;
All inspections, licenses and certificates required to be made or issued with respect to all
occupied portions of the mortgaged property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy, have been made or obtained from the
appropriate authorities;
The proceeds of the Mortgage Loan have been fully disbursed to the mortgagor and there is no
obligation for the mortgagee or its agent to advance additional funds thereunder unless required
per FHA or GNMA requirements for HECM loans and HMBS securitizations;
The individual Eligible Loans meet any other requirements agreed among the parties hereto;
The Servicing Rights appurtenant to the Eligible Loans are not pledged to or otherwise
encumbered by, any person other than Buyer (or as otherwise required by GNMA); and
The Eligible Loans shall be subject to any sublimits described in Purchase Price or the
Arrangement documents.
In the event that any loan is rejected for purchase by any investor, the Buyer may, in its sole
discretion, purchase such loan under the terms of the Arrangement as a “Recommitment Loan”
subject to the sub limits and terms specified below:
Buyer, with respect to the Arrangement, shall own (a) the Purchased Loans, (b) the take-out
commitments related thereto, (c) all proceeds relating to the sale, securitization, or other
disposition of the Purchased Loans, (d) the hedges related to the Purchased Loans pursuant to a
Netting Agreement, (e) the Servicing Rights and all servicing records appurtenant to the
Purchased Loans, and (f) all income with respect to such Purchased Loans.
Valuation: The value of the Eligible Loans will be provided by the Seller and must be marked to
market according to a commercially reasonable methodology. In addition, the following loans
will have a Market Value of zero:
any asset that is not eligible for FHA insurance and/or GNMA HMBS issuance;
any asset that has been subject to the Arrangement for more than 45 days;
any asset for which a breach of representation or warranty has occurred; and
any loan that is not an Eligible Loan.
Purchase Price: Up to $10,000,000, subject to the Advance Rate for each Purchased Participating
Advance Rate: 95% of the lower of (x) Market Value and (y) Par. Such percentage shall be
reduced to 85% (thus triggering a margin call) with respect to any such loan which is subject to
the Arrangement for more than 45 calendar days, and reduced to 85% for all loans as described
under "Hedging" below.
If Buyer has determined that there has been a material adverse change in market conditions or in
the Seller’s financial condition or business practices, the Advance Rate may be lowered to a
percentage as shall be satisfactory to Buyer in its sole discretion.
Holding Period: No Purchased Participation Interests can be held in the Facility for more than 30
calendar days. If Purchased Participation Interests are on the line for longer then 30 days there
will be a penalty of $200 per Purchased Participation Interest and an additional $200 for each 10
days the Purchased Participation Interest is still on the line. Any Purchased Participation Interest
on the Repo facility for 75 calendar days will be required to be repurchased within 1 business
Hedging: Seller must either (i) maintain forwards sales on all loans prior to purchase by the Buyer
or (ii) if the average sales price of the HMBS per the mark to market falls below 102 the advance
rate will retroactively drop to 85% and will invoke a margin call for the difference between the
original amount advanced and 85% times the lower of (x) Market Value and (y) Par at the time of
Pool Settlement: At settlement the Seller will instruct the purchaser of the securities to remit the
appropriate amount of proceeds (including interest and fees due on the facility) to the Buyer, with
any excess funds being distributed directly to the Seller. If the Buyer is the purchaser of the
securities then they can net fund the difference between the purchase amount and the related
amounts owed under this Repo Facility prior to remitting the excess funds to other secured
lenders and the Seller.
Administration Fee: The Seller shall pay the Buyer an Administration Fee equal to $195 for a
Purchased Participating Interest purchased by Buyer. Such fee shall be payable on a per loan
basis on the Roll Date following the initial Purchase Date for each Purchased Participating
Interest (or on the Termination Date if earlier).
Margin Call: If the Market Value of the pool of Eligible Loans shall fall below par after marking
the loans to market and adjusting for any applicable hedges, the aggregate dollar amount below
par that remains un-hedged shall be considered a “Margin Deficit.” The market value of any
hedged Eligible Loan shall be the take-out price. The Buyer reserves the right to make a margin
call (“Margin Call”) for the amount of the Margin Deficit, which shall also include the
circumstances described under "Advance Rate" and "Hedging" above. The Seller shall be
required to transfer cash or additional participation interests in Eligible Loans (at Buyer’s
discretion), in an amount to eliminate such Margin Deficit. Seller will be obligated to satisfy such
Margin Call within one (1) business day after receiving such notice.
When Purchased Participation Interests subject to a margin call are settled, to the extent the
margin call was honored with cash, such cash shall be applied to offset the Repurchase Price, and
to the extent the margin call was honored by the posting of participation interests in Eligible
Loans as additional collateral, such excess collateral shall be released to the Seller.
Wet Funding: At any time, no more than $2,000,000 of the Purchased Participation Interests in
the aggregate may be sold to the Buyer on a "wet-funding" basis, prior to the Seller's delivery to
the Custodian of all the documents set forth on Exhibit A hereto and the Custodian's delivery to
the Seller of a Trust Receipt; provided, however, that the Custodian must deliver a Trust Receipt
with respect to the Eligible Loans subject to such Purchased Participation Interests within 48
hours (2 Business Days) of the related Purchase Date. If a Trust Receipt with respect to any
Eligible Loan subject to a Purchased Participation Interest sold on a "wet-funding" basis has not
been delivered within 48 hours (2 Business Days) of the Purchase Date, the Buyer, at its option,
may demand that the Seller repurchase such Purchased Participation Interest from the Buyer for
the original Purchase Price. The Buyer, in its sole discretion, may purchase more than $2,000,000
of the Purchased Participation Interests on a "wet-funding" basis. The Seller shall pay the Buyer
an additional administrative fee of $200 for (i) each Purchased Participation Interest that remains
financed under the Arrangement on a wet basis for more than 48 hours (2 Business Days) and (ii)
any wet Purchased Participation Interest which the Buyer permits to be financed under the
Arrangement in excess of the $2,000,000 sub-limit.
Servicer: For so long as the Purchased Participating Interests are subject to the Arrangement, the
Seller (in such capacity, the “Servicer”) shall service the Eligible Loans The Servicer shall
service all Eligible Loans in accordance with accepted servicing practices of prudent mortgage
loan servicers and in accordance with FHA and GNMA requirements, and shall not resign or
transfer the servicing of any Eligible Loans without the prior written consent of Buyer. The Seller
shall designate a third party servicer to act as the “Back-up Servicer” and Buyer agrees that [----]
Corporation, doing business as “[----]”, is an acceptable Back-up Servicer. The Servicer shall pay
any fees and expenses of the Back-up Servicer and shall fully cooperate with all reasonable
requests of the Back-up Servicer. The Servicer shall provide Back-up Servicer with complete and
accurate information for the Back-up Servicer to board the Eligible Loans on its computer system
and shall provide computer records upon request but not less frequently than every month
reflecting the current status of the Eligible Loans.
Due Diligence: Prior to the establishment of the Arrangement, Buyer will conduct a
comprehensive due diligence of the business, operations, servicing and financial condition of the
Seller and will arrange for due diligence performed on a representative sample of Purchased Loan
files, results to be addressed to the Seller and Buyer. The consummation of the Arrangement shall
be conditioned on the results of such due diligence being satisfactory to Buyer in its sole
discretion. Seller shall be responsible for reimbursing any such due diligence fees and expenses
of Buyer and its affiliates and designees. The outstanding due diligence items are set forth on
Exhibit B attached hereto.
In addition, Buyer, at its option, will contract for on-going due diligence on Purchased Loan files
of monthly production, at the expense of the Seller. In addition, at Buyer’s sole discretion, Buyer
may undertake additional due diligence with the results thereof to be addressed to the Seller and
Buyer, at the expense of the Seller.
Delivery Notice: Not later than 3 p.m. eastern time on the business day prior to the proposed sale
of Purchased Participation Interests to Buyer, Seller shall deliver a notice of the amount of such
proposed sale to Buyer with a schedule and computer tape. Each schedule will contain certain
comprehensive information with respect to the Eligible Loans in a format acceptable to the
Buyer, including but not limited to:
the Mortgage Loan number;
Mortgagor’s name (including any co-mortgagors);
Borrower and or co-borrower’s date of birth
the full street address, city, state and zip code of the Mortgaged Property;
the principal balance of the mortgage;
Interest Rate change date
Index Type
Lifetime Interest Rate Cap
Maximum Rate
Principal Limit – Listed on Payment Plan
Maximum Claim Amount – Insured Amount
FHA # - If typed on collateral documents
MERS/Min Number – if applicable
Maximum Principal Balance – Mortgage amount
Product Type – HECM, HECY, HEC-Fixed, etc.
a code indicating whether the related mortgaged property is a single family residence, PUD,
condominium or townhouse;
the mortgage interest rate as of the cut-off date;
the mortgage interest rate as of the date of origination;
the origination date of the mortgage;
the principal balance of the mortgage as of the cut-off date;
the appraised value;
a code indicating whether the Mortgage Loan is a conventional Mortgage Loan, an FHA Loan or
a VA Loan;
the number of mortgages;
the current aggregate outstanding principal balance of the Mortgage Loans;
the weighted average mortgage interest rate of the Mortgage Loans; and
any other information required by the Buyer.
Reporting Requirements: Seller shall be subject to usual and customary reporting requirements
for a transaction of this nature and as otherwise deemed appropriate by Buyer. In addition, Seller
shall provide the following:
1. On the third Business Day of each month (or at any other time on two (2) Business Day’s
notice), a report to Buyers setting forth the amount of unrestricted cash maintained by Seller as of
the last Business Day of the prior week;
2. On the third Business Day of each month (or at any other time on two (2) Business Day’s
notice), a report to Buyers setting forth the aggregate unpaid principal balance of all Mortgage
Loans tendered to Seller by any warehouse lender, trust or whole loan purchaser (including FHA
and GNMA) for repurchase
due to defects or a breach of a representation of warranty or eligibility criteria;
3. On the first Business Day of each week, a report on the mark to market of all Mortgage Loans
owned by the Seller, including Purchased Loans and a report on all hedges outstanding with
respect to all loans including the Eligible Loans; The prices on the mark to market must be
computed with a commercially reasonable methodology. It is understood and agreed that pricing
loans including the value of servicing rights to what the loans would be worth in a GNMA HMBS
pool shall fully satisfy this commercially reasonable requirement;
4. On the third Business Day of each month, a report to the Buyer setting forth all current and
historic loan repurchase activity (i.e., repurchase requests, rescissions, repurchase disputes,
repurchases actually effected, etc.) by Seller during the previous months;
5. On the fifteenth Business Day of each month, Seller's complete balance sheet, income
statement and statement of cash flows; and
6. On the third Business Day of each month, a report on the Seller’s mortgage loan production
and a list of the uninsured status for all serviced loans.
Financial Covenants: At all times, Seller must meet certain financial tests including but not
limited to the following:
Minimum Adjusted Tangible Net Worth (consolidated net worth calculated in accordance with
GAAP, less goodwill, intangible assets and intercompany/interaffiliate receivables and other
items agreed to among the parties) is greater than or equal to the sum of (i) $7,500,000 or (ii) a
minimum net worth of no less than 80% of facility closing net worth.
The ratio of Total Indebtedness to Adjusted Tangible Net Worth is less than or equal to 4:1
Maintain unencumbered cash and cash equivalents of at least equal to the greater of (x) $1.5
million, or (y) 40% of the aggregate outstanding principal balance (as of any date of
determination) of Seller’s lines of credit and any other borrowings that may be subject to margin
The Seller shall not permit Net Income before taxes, for any period of two consecutive months
commencing with the period ending [Signing of commitment], to be less than $10,000. The Seller
currently follows the GAAP guidance of lower of cost or market for all loans. As such, it is fully
understood that an adjustment shall be made to the GAAP financials for the Seller by the Buyer
to adjust all loans held on balance sheet for a mark to market adjustment as if the loans had
already been included in a GNMA securitization.
To the extent that Seller or any of its Affiliates are obligated under any other lending
arrangement, to comply with financial covenants or fund margin accounts with terms that are
more favorable to the lender thereunder or otherwise more restrictive of the borrower thereunder
than the terms in the Arrangement, the more favorable covenants shall be automatically
incorporated into the master repurchase agreement as if fully set forth therein.
If a financial covenant is breached, an Event of Default shall be deemed to have occurred.
Events of Default: Will include, but not be limited to, the following relating to the Seller:
Breach of representations, warranties or other covenants or terms & conditions of the
Arrangement or any other contracts and agreements;
Default on any payment obligation or admission of its inability to pay its debts and obligations;
Bankruptcy/insolvency, liquidation, merger/consolidation, sale of substantially all its assets or
material adverse change in financial condition or operations;
Any material adverse change to the financial condition or business prospects of the Seller as
determined by the Buyer in its sole discretion;
Going concern reference in financial reporting;
Change in control of more than 51% of the stock of the Seller ;
Breach of Financial Covenants or failure to cure Margin Deficits;
Default under any other debt or repurchase obligations, including, without limitation, any
servicing term loan, or any change in the subordinated status of any sub-debt that would
adversely affect the Buyer;
Loss of FHA-approved mortgagee status or status as a Ginnie Mae or HUD-approved seller or
servicer or if such agency will not accept deliveries of loans from the Seller;
Failure to satisfy a Margin Call;
Cross default with respect to any other facility or arrangement between Seller and Buyer or any of
its affiliates;
If Servicing Agreement, Back Up Servicing Agreement, Custodial Agreement or any other
transaction document (including any hedge) is terminated;
If the FHA, VA, Ginnie Mae, Fannie Mae or Freddie Mac servicing portfolio is seized or
servicing of loans is transferred away from Seller;
If [ Company Rep] resigns or is removed from his current position at the Seller, or fails otherwise
to devote substantially all of his professional time to Seller, and is not replaced with an individual
acceptable to the Buyer in its sole discretion within [30] days of such resignation or removal;
A final, non-appealable judgment is rendered against the Seller in excess of $500,000,
individually or in the aggregate;
If Seller grants or suffers to exist any lien on any Eligible Loan or if the Buyer shall fail to have a
first priority lien on any Eligible Loan;
If Seller commits fraud or malfeasance in connection with the Arrangement;
Event of default under the Servicing Agreement; or
Event of default under any firm commitment by an investor in connection with the purchase of
Eligible Loans or the bankruptcy/ insolvency of any such investor.
Other than an Event of Default specified in item 3, which Event of Default shall be deemed
automatically declared, upon the occurrence of an Event of Default (other than item 3 which shall
be automatic), the Buyer shall give the Seller notice in writing of the
declaration of such Event of Default and upon receipt of notification, the Seller shall have a
minimum of five (5) Business Days to cure said Event of Default prior to the exercise of its
remedies. Upon the declaration of an Event of Default, the Seller shall be deemed to have
immediately transferred to the Buyer all participation interests retained by the Seller with respect
to the Eligible Loans subject to the Arrangement, the Arrangement will terminate and the
aggregate Repurchase Price and all other payment obligations will be immediately due and
payable. Buyer shall be entitled to any and all remedies pursuant to the Arrangement documents
and applicable law, including the right to sell all or portions of the Eligible Loans on a servicing
released basis. Recovery will be limited to amounts owed to the Buyer under the Arrangement.
Excess proceeds on the sale of the Eligible Loans will be remitted back to the Seller after all
obligations due under this Arrangement are paid.
Condition Precedent to
Initial Purchase: Prior to, or simultaneously with, the Buyer making the initial Purchase under the
Arrangement, customary conditions precedent shall have been satisfied, including, but not limited
Evidence of FHA-approved mortgagee status and of GNMA/HUD approved seller/servicer status;
The representations and warranties contained in the Arrangement documents shall be true and
correct in all material respects;
Buyer shall have received reps and warrants to cover compliance with laws/licenses/registrations
and that the agreement doesn’t conflict with our formation docs;
Results of operational, legal, corporate and background diligence performed on the Seller, its
principals, and related subsidiaries and affiliates and on the Eligible Loans shall be reasonably
All fees and expenses payable to Buyer on or prior to the making of the initial Purchase shall
have been paid;
No default nor potential default exists on any other debt facility of Seller or its affiliates:
The assets sold under the Arrangement shall be free of any liens.
Condition Precedent to
each Purchase: Prior to Buyer making each purchase under the Arrangement, customary
conditions precedent shall have been satisfied, including, but not limited to:
1. No event of default shall have occurred or be continuing; prior to making and after making
each purchase,
2. No Margin Deficit shall exist;
3. The aggregate of all Purchase Prices then outstanding shall not exceed the Maximum
Aggregate Purchase Price or the Sub-limits, if any, with respect to the Purchased Participation
4. All representations and warranties shall be true and correct;
5. With respect to each dry loan, the Seller shall have delivered to the Custodian, prior to the
Purchase Date, all documents required to be delivered prior to the Purchase Date (such
documents are
set forth on Exhibit A hereto) and the Custodian shall have delivered to Buyer a certification and
acknowledgment (a "Trust Receipt") that all such documents have been so received, are in proper
form, and that the Custodian is holding such documents on the sole behalf of Buyer. For wet
loans, such documents shall be delivered within 48 hour (2 Business Days) of the Purchase Date.
6. The Buyer shall have completed due diligence on the Eligible Loans underlying the
participation interests to be purchased(such documents are set forth on Exhibit A hereto as Prior
to funding documents sent to The Warehouse Lender) and the Seller, its principals, and related
subsidiaries and affiliates, the results of which shall be acceptable to the Buyer in its sole
7. No default nor potential default exists on any other debt facility of Seller or its affiliates;
8. The assets sold under the Arrangement including any Servicing Rights shall be free of any
9. The Buyer shall have received all information regarding any subordinated debt issued by the
Seller, including confirmation of the subordinated status of such debt, and such information shall
be acceptable to the Buyer in its sole discretion; and
10.Daily wires sent (x) directly from Purchaser to the Seller's account with the Custodian for
disbursement to settlement agents for funding HECMs and (y) to the Seller for term advances.
Covenants, Representations
And Warranties, Indemnities: Usual and customary for a transaction of this nature and as
otherwise deemed appropriate by Buyer, including, without limitation, representations and
warranties covering Seller's compliance with laws/licenses/registrations and that the agreements
do not conflict with the Seller's formation docs. All obligations of the Seller to Buyer or its
affiliates shall be cross-collateralized.
Opinions: Seller shall cause a legal opinion to be delivered to Buyer covering Seller's due
organization, valid existence and good standing, its compliance with laws/licenses/registrations,
that the Agreement has been duly authorized and validly executed and delivered, and that the
Agreement does not conflict with Seller's formation documents or with other material contracts of
Seller. A form of the required opinion is set forth in Exhibit C to the Agreement.
Fees and expenses: Seller shall be responsible for any and all legal fees, due diligence and other
out-of-pocket expenses incurred by Buyer and its affiliates in connection with the preparation,
negotiation and execution of the Arrangement and related documentation and any and all due
diligence performed on the Seller and the Mortgage Loans, whether or not the Arrangement
closes or funds. The Seller will pay to Purchaser the sum of $15,000 contemporaneously with its
execution of this document (the “Deposit”). The Deposit is to be held as a deposit against the
Expenses as and when they are incurred. Seller is not entitled to receive or be credited for any
interest that may be earned on the Deposit during the time the Deposit is held by Purchaser
pending application of it to the Expenses. Purchaser further shall not be obligated to segregate the
Deposit from its other funds, and Purchaser reserves the right to request additional deposits, if
12. In addition, the Seller shall be responsible for any and all legal fees, permitted ongoing due
diligence and other out-of-pocket expenses incurred by Buyer in connection with the
administration, amendment and enforcement of the Arrangement. The Buyer may net any
expense amounts or fees due to the Buyer or its affiliates against any of the proceeds of any
Purchase Price or other amount paid to any Seller.
Assignability: Buyer, in its sole and absolute discretion, may assign, pledge or otherwise
hypothecate all or a part of the Arrangement to one or more of its affiliates or to any third party
that the Buyer and Seller mutually consent and agree is financially able to perform the obligations
hereunder and such consent shall not be unreasonably withheld.
Right of First Refusal: As part of the consideration for the Arrangement and as part of the
documentation thereof, the Seller and the Buyer, or any affiliate of the Buyers choosing, shall
enter into a side letter whereby the Seller shall grant to the Buyer a right of first refusal to acquire
all or a portion of any Ginnie Mae Securities created by the Seller whether from Purchase Loans
hereunder or other loans that it or its affiliates originate from time to time during the term of the
Arrangement. The Buyer shall have the opportunity to match the highest bid received by the
Seller in connection with the sale of any such securities and if matched, the Seller shall be
obligated to sell such securities to the Buyer.
Governing Law: New York.
Confidentiality: This Conditional Commitment Letter and the definitive Arrangement
documentation are confidential and proprietary to Buyer.
The Warehouse Lender
Name: ______________________
Title: _______________________
Acknowledged and agreed:
Name: ______________________
Title: ______________________

13 Exhibit A
GNMA Initial Certification
1) Note – Original =LNA requires use of GNMA form (Appendix V-1), copy of Note and
obtaining a lost instrument bond with limited liability in the form prescribed by GNMA from an
insurance company or surety company. Endorsement chain needs to be complete from originating
company to Issuer. Final endorsement from issuer to blank needs to be endorsed by signer listed
on GNMA form 11702. All allonges need to be stapled to Note. Mortgages vested in name of
Trust need signatures from borrower(s) and trustee(s).
2) HECM Loan Agreement – Complete Certified Copy (Payment Plan, Repair Rider) needs to
signed by borrower and lender.
3) Mortgage – Certified Copy
4) Assignment – Original = needs to be from Issuer to blank.
5) Intermediate assignment(s) – Certified Copy
6) Power of Attorney – Certified Copy
7) Trust Agreements – Certified Copy
8) Title Policy – Prelim/Title Commitment

Prior to funding documents sent to The Warehouse Lender:
1) Final 1009 Loan application (unsigned is acceptable)
2) DE Underwriter Conditional Commitment
3) Appraisal
4) Title Commitment
5) Settlement Agent with Tax-ID
6) Wiring instructions
7) Preliminary HUD-1
8) Counseling Certificate
9) Home owners insurance
The Bank Reserves the Right to require copies of any of the foregoing for review prior to making
any advance relating to any purchase in any specific mortgage loan.
14 Exhibit B
Due Diligence Requests
(a) Financial Statements (2008, 2009, most recent monthly)
(b) Production Summary (2008 and 2009, by month) – product, channel, etc.
(c) Pro Forma Budget for 2010 – with explanation of how you expect to get to profitability
(d) Servicing Portfolio Reports
(e) Takeout Investors (2009 volume and product)
(f) Repurchase Demands (2008, 2009 - by Investor) – if any
(g) Repurchases (2008, 2009 – by Investor) – if any
(h) Most recent HUD and Agency audits
(i) Corporate infrastructure - Organizational chart
(j) Funding tapes for last 3 months
(k) Senior management biographies
(l) Articles of Incorporation
(m) Board Resolutions and By Laws
(n) A list of all licenses held
(o) Any documents relating to any governmental licenses, applications, notices or regulatory
correspondence with any state or federal agency, including but not limited to mortgage lending
(p) Complete set of underwriting guidelines and matrices
(q) Underwriting Policies and Procedures
(r) Processing, closing, funding and post closing policies and procedures
(s) Exception Policy and reports tracking exceptions for last 3 months
(t) Quality Control Policies and Procedures - Pre funding and post funding
(u) Quality Control Reports for last 3 months
(v) Most recent Quality Control Reports from Investors
(w) Signed GNMA Issuer approval and FNMA approval Letters
(x) Government Uninsured Report (monthly tracking of loans which are uninsured)
(y) All Indemnification letters sent by HUD
(z) Fraud policies and procedures including reports for last 3 months
(aa) Broker/Correspondent approval policies and procedures
(bb) Appraisal Review policies and procedures
(cc) Compliance policies and procedures
(dd) Origination system platform
(ee) Appropriate UCC, judgment and tax lien searches, credit checks and background checks with
respect to Seller and [Company Rep]
(ff) Current financial statements and such additional financial information with respect to
[Company Rep]

(gg) A copy of Seller’s insurance policies with all coverage’s required under the loan documents
(hh) Copies of all intercompany agreements, management agreements, documents relating to
borrowed money, capital leases, occupancy leases and other material contracts
(ii) Any other documents and materials as Purchaser shall deem necessary or appropriate
(jj) Sample funding reports
(kk) List of approved settlement agents – What is your approval process?
(ll) Servicing policy and procedures
(mm) Copy of any other loan agreements
(oo) Information/reports on the back-up servicer.

16 Exhibit C
Required Corporate Opinion for Repo Sellers
•Each [Seller] is duly organized, validly existing and in good standing under the laws of the
States of [____], respectively, and has all licenses and approvals necessary to conduct their
businesses, to own their properties and to perform their obligations under the Transaction
Documents in the States of [_____].
• Each [Seller] has the necessary [corporate] power and authority to perform its obligations under
the Transaction Documents and the execution, delivery and performance of the Transaction
Documents has been duly authorized by all necessary [corporate] action on the part of each of the
Originator, the Seller and the Issuer.
• Each of the Transaction Documents to which each [Seller], respectively is a party constitutes a
legal, valid and binding obligation of such person, enforceable against such person in accordance
with its terms.
• The execution and delivery of the Transaction Documents to which each [Seller], respectively,
is a party and the consummation of the transactions contemplated thereby do not and will not (i)
violate or conflict with the provisions of the [certificate of incorporation or by-laws] of such
person, (ii) result in the imposition of any lien under, cause the acceleration of any obligation
under or violate or conflict with the terms, conditions or provisions of any agreements to which it
is a party, (iii) result in a breach of any of the terms, conditions or provisions of any order, statute
or regulation applicable to such [Seller] of any court, regulatory body or governmental body
having jurisdiction over such [Seller] or any of their respective properties, (iv) violate any Federal
law of the United States of America or law of the State of [______] or (ii) require any consent or
approval of, or filing with or notice to, any governmental or regulatory body of the United States
of America or the State of [________].

• There is no action, suit or proceeding pending or threatened against any [Seller] before any
governmental agency, body or authority or any arbitrator (a) asserting the invalidity of the
Transaction Documents, or (b) that reasonably could be expected to have a material adverse
effect on such respective [Seller]'s ability to perform it obligations under the Transaction