Section 260.403  Terms and Conditions of the Purchase of Mortgage Loans

a)         The Authority shall purchase Mortgage Loans on the terms and conditions and in the manner prescribed in the Mortgage Purchase Agreement.  The Mortgage Purchase Agreement shall contain such warranties of the Lender in connection with the Mortgage Loans to be sold thereunder as the Authority shall require, which shall include, among others, the following:

1)         The mortgagor is an Eligible Borrower;

2)         The purchase price of the Qualified Dwelling subject to the Mortgage Loan does not exceed any maximum purchase price limitations established by the Authority;

3)         The Mortgage Loan is evidenced by a properly executed promissory note made payable or assigned to the order of the Lender, endorsed by the Lender to the Authority and secured by a Mortgage on the Qualified  Dwelling; both the note and the Mortgage are the legal, valid, and binding obligations of the makers and mortgagors thereof and are enforceable in accordance with their terms, except only as such enforcement may be limited by laws affecting the enforcement of creditors' rights generally, and all parties to each Mortgage Loan had full legal  capacity to execute all Mortgage Loan documents at the time of execution;

4)         The Mortgage, the Uniform Commercial Code Form 1 and Form 2 financing statements, if any, and any other document required to be filed in a public office to perfect the mortgage lien against third parties have been duly and timely filed, registered, or recorded by the Lender in the proper public office in order to give constructive notice of them to all subsequent purchasers or encumbrancers;

5)         The Lender, being the sole owner and holder of the Mortgage Loan, has full right to sell and assign the Mortgage Loan to the Authority and such assignment conveys a good and marketable mortgagee's title to the Authority free and clear of all liens and encumbrances and subject only to real property taxes and assessments not yet due and encumbrances customarily accepted in accordance with applicable title standards and disclosed to the Authority prior to purchase of the Mortgage Loan;

6)         The Mortgage creates a valid and existing first mortgage lien on the Qualified Dwelling to secure the Mortgage Loan; the term "first mortgage lien" means such classes of first liens as are commonly given to secure loans on real estate under the laws of the State;

7)         The Lender has not modified in any respect, has not satisfied, canceled, subordinated, or compromised in whole or in part the Mortgage Loan indebtedness and has not released the mortgaged property in whole or in part from the lien of the indebtedness evidenced by the note and secured by the Mortgage; and the terms, covenants, and conditions of the note evidencing the Mortgage Loan and the Mortgage securing the Mortgage Loan have not been waived, altered, or modified in any respect that would materially affect the validity or enforceability of the Mortgage Loan or the security of the lien of the Mortgage;

8)         The real property securing the Mortgage Loan is a Qualified Dwelling;

9)         The Qualified Dwelling is covered by a valid and existing policy of hazard insurance meeting the requirements of the Authority;

10)       The Lender has complied as follows:

A)        as to each FHA-insured Mortgage Loan, with the National Housing Act (12 U.S.C. Section 1701 et seq.) as amended and supplemented, all rules and regulations issued thereunder and all administrative publications.  The FHA insurance shall be in full force and effect and, upon purchase by the Authority of the Mortgage Loan, shall inure to the benefit of the Authority;

B)        as to each Mortgage Loan guaranteed by the VA or FmHA, with the Servicemen's Readjustment Act (38 U.S.C.  Section 1803 et seq.), the Consolidated Farm and Rural Development Act (7 U.S.C.  Section 1921 et seq.), Title V of the Housing Act of 1949 (42 U.S.C.  Sections 1471-1482) or other applicable federal law, as amended and supplemented, all rules and regulations issued thereunder and all  administrative publications.  Any such guaranty shall be in full force and effect and, upon purchase by the Authority of the Mortgage Loan, shall inure to the benefit of the Authority; and

C)        as to each Mortgage Loan insured by a private mortgage insurance company, with all rules and  requirements of such company.  Any such insurance  shall be in full force and effect and, upon  purchase by the Authority of the  Mortgage Loan, shall inure to the benefit of the Authority;

11)       The Mortgage Loan is covered by a fully paid mortgagee's title insurance policy in such form as the Authority may require; and

12)       To the best of Lender's information, knowledge and  belief, no condition exists that would prohibit the purchase of the Mortgage Loan by the Authority  under all applicable rules, regulations and contractual provisions.

b)         If a Lender fails to deliver Mortgage Loans to the Authority in the amount, on the terms and conditions, and within the time period set forth in the Mortgage Purchase Agreement, the Authority may, if it so chooses and in its sole discretion, reallocate all or part of the unused portion of that Lender's Allocation to other Lenders; redeem all or part of the applicable Bonds  issued with respect to such unused portion of the commitment, but only if permitted by the Series Resolution of the Authority authorizing issuance of the Bonds; or undertake a combination of the above.  The Mortgage Purchase Agreement may provide for liquidated damages, extension fees, and forfeiture of all or a part of any letter of credit or cash deposit deposited with the Authority by the Lender if the Authority makes any reallocation pursuant to this subsection.

c)         The Mortgage Purchase Agreement shall provide that the  Authority shall have the right to require the Lender to repurchase Mortgage Loans sold to the Authority by the Lender if the Director, Deputy Director or Assistant Director determines that the Lender has failed to comply with the requirements of either this Part or its contracts and agreements with the Authority under the Program.