Exhibit 10.38

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

CITIGROUP GLOBAL MARKETS REALTY CORP
 390 Greenwich Street 5th Floor
 New York, NY 10013

 

	
 
    	
As of   December 20, 2011
    


 

	
TO:
    	
 
    	
PennyMac   Corp. (“PMC” or “Purchaser”)
    
	
FROM:
    	
 
    	
Citigroup   Global Markets Realty Corp. (“Citigroup” or “Seller”)
    
	
RE:
    	
 
    	
Sale   of Assets to PMC
    


 

This letter agreement will serve as the commitment by Seller to sell and by Purchaser to purchase, on a mandatory delivery basis, without recourse, certain first lien, fixed-rate and adjustable-rate, conventional, residential mortgage loans (the “Mortgage Loans”) and certain residential real property including land and improvements, together with all buildings, fixtures and attachments thereto (the “REO Properties”, and together with the Mortgage Loans, the “Assets”) under the terms set forth below, which Assets will be purchased by the Seller pursuant to the Purchase Agreement(s) (as defined herein) and as set forth on Schedule 1-A and Schedule 1-B attached hereto (together, the “Schedules”).  The Schedules may be amended by mutual agreement of the parties to add or subtract Assets purchased pursuant to the Purchase Agreements.  Purchaser will purchase all of Seller’s right, title and interest in the Assets.  The terms and provisions of this transaction, including the purchase price for the Assets, are described below.

 

	
1.
    	
Closing   Date:
    	
 
    	
The   Purchaser may purchase any Asset on any date following the related Original   Closing Date, which date shall be deemed a “Closing Date.” Any such Assets   purchased on any Closing Date shall be mutually agreed upon in writing by the   parties hereto. Any such Closing Date shall be agreed upon between the   parties hereto in writing, but in no event shall any Closing Date be later   than June 11, 2012 (or such later date which is six (6) months following the   latest Original Closing Date) (the “End Date”); provided, however, that in   the event that the aggregate Original Purchase Price for all of the Assets   purchased by the Seller (the “Purchased Assets”) has decreased by twelve and   one-half percent (12.5%) or more due solely to the receipt of any principal   and interest collections on such Purchased Assets (collectively, “Proceeds”)   and/or liquidation proceeds by the Seller or sales to the Purchaser   hereunder, the “End Date” for purposes of this letter agreement shall be   December 10, 2012 (or such later date which is twelve (12) months following   the latest Original Closing Date).
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Transfer   Date:
    	
 
    	
December   28, 2011, or such other date as may be mutually agreed upon by Citigroup and   the Initial Seller under the mortgage loan purchase agreement(s) pursuant to   which Citigroup purchased the Mortgage Loans from the Initial Seller (the   “Purchase Agreements”). PMC shall be the successor servicer following such   date.
    


 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

	
 
    	
 
    	
 
    	
The   “Initial Seller” shall mean the large money center bank from which Citigroup   purchased the Assets.
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Aggregate   Delivery Balance:
    	
 
    	
$81,651,725.44,   or such other amount actually purchased from the Initial Seller on the   Original Closing Date(s) (less any amounts attributable to Mortgage Loans   that are repurchased by Initial Seller pursuant to the terms and provisions   of the Purchase Agreement). Such Aggregate Delivery Balance represents the   aggregate amount of Assets set forth on the Schedules, with Schedule 1-A   representing the Assets purchased by the Seller on December 9, 2011 in the   amount of $49,030,928.99 and Schedule 1-B representing Assets to be   purchased by the Seller from the Initial Seller in an amount equal to   $32,620,796.45.
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Purchase   Price Percentage:
    	
 
    	
For   each Asset, the Base Purchase Price Percentage plus a percentage equal   to (i) in the event the related Closing Date shall occur within *** (***)   days from the related Original Closing Date, ***%, (ii) in the event the related   Closing Date shall occur within a period of *** (***) to *** (***) days from   the related Original Closing Date, ***%, (iii) in the event the related   Closing Date shall occur within a period of *** (***) to *** (***) days from   the related Original Closing Date, ***%, or (iv) in the event the related   Closing Date shall occur within a period of *** (***) to *** (***) days from   the related Original Closing Date, ***%.

 

For   purposes of this letter agreement, the “Base Purchase Price Percentage” shall   mean, with respect to each Asset, the purchase price percentage set forth on Schedule   1-A and Schedule 1-B.
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Purchase   Price:
    	
 
    	
The   purchase price for each Asset purchased on any related Closing Date (the   “Purchase Price”) shall be equal to (a) (i) the unpaid principal balance of   such Asset as of the related Cut-off Date as defined in the related Purchase   Agreement (the “Original Cut-off Date”), multiplied by (ii) the related   Purchase Price Percentage less (b) any Proceeds received following the date   on which Citigroup purchased the related Asset (the “Original Closing Date”).   In connection with the payment of the Purchase Price, Purchaser shall pay any   and all Reimbursement Amounts to Seller. If the amount in clause (b) above   exceeds the amount in clause (a) above (net of any related Reimbursement   Amounts), Seller shall remit such excess amount to Purchaser. For the   avoidance of doubt, the latest Original Closing Date shall be no later   than***, 2012. 

 

The   Purchase Price for any Assets or the excess amount after 
    


 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

	
 
    	
 
    	
 
    	
application   of the Purchase Price shall be paid to Seller or Purchaser, as applicable, in   immediately available funds by wire transfer on the related Closing Date.
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Reimbursement   Amounts
    	
 
    	
With   respect to each Asset, the sum of (a) any and all out-of-pocket costs and   expenses incurred by Citigroup with respect to such Asset arising out of or   relating to this letter agreement, the Servicing Agreement, the Purchase   Agreement or the Interim Servicing Agreement, including, but not limited to,   servicing, corporate and escrow advances, servicing reimbursement made by   Citigroup, any servicing fees paid by Citigroup, any costs and expenses   incurred by Citigroup in connection with its due diligence review of the   Assets (allocated based upon the number of Assets) and any other amounts paid   to Initial Seller under the Purchase Agreement or the Interim Servicing   Agreement (other than the Original Purchase Price for the Assets) or to PMC   under the Servicing Agreement that did not arise from *** thereunder and (b) Citigroup’s   Cost of Carry for such Asset. 

 

For   purposes of this letter agreement, the “Original Purchase Price” shall have   the meaning ascribed to the term “Purchase Price” in the Purchase Agreement.
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
Cost   of Carry:
    	
 
    	
An   amount equal to the “cost of carry” imputed to Citigroup in connection with   any Asset purchased under the Purchase Agreement and held by Seller equal to   the product of (x) the sum of (a) the Original Purchase Price for such Asset   as reduced monthly by remittances of principal on the Asset received by   Citigroup and (b) any and all Reimbursement Amounts incurred by Citigroup   (other than the Cost of Carry) with respect to such Asset and (y) LIBOR plus   *** (***) basis points per annum. 

 

For   the purposes hereunder, “LIBOR” shall mean the rate determined daily by   Citigroup on the basis of the offered rate for one-month U.S. dollar   deposits, as such rate appears on Reuters Screen LIBOR01 Page as of 11:00 a.m.   (London time) on such date (rounded up to the nearest whole multiple of   1/16%); provided that if such rate does not appear on Reuters Screen LIBOR01   Page, the rate for such date will be the rate determined by reference to such   other comparable publicly available service publishing such rates as may be   selected by the Citigroup in its sole discretion and communicated to PMC.
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
Liquidated   Assets:
    	
 
    	
With   respect to any Liquidated Asset, in the month following the liquidation date   of such Asset, following any required reconciliation that shall be performed   on such Asset by the parties, the Purchaser shall remit to Citigroup an   amount equal
    


 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

	
 
    	
 
    	
 
    	
to   (a) the product of (i) the Liquidation Percentage and (ii) the unpaid   principal balance of such Asset as of the Original Cut-off Date, minus   (b) the difference between (i) the total amount of liquidation proceeds   received on such Asset and (ii) the sum of (1) the Original Purchase Price   for such Asset, plus (2) any and all Reimbursement Amounts for such Asset, minus   (3) any Proceeds on such Asset received following the Original Closing Date;   provided, however, if the amount in clause (b) above exceeds the amount in   clause (a) above, Citigroup shall remit such excess amount to Purchaser. 

 

For   the purposes of this letter agreement, “Liquidated Asset” shall mean an Asset   for which all amounts expected to be recovered (exclusive of the possibility   of recovery from deficiency judgments or default judgment) have been   recovered by the servicer, whether by way of disposition of an REO Property,   refinance, offer and compromise, charge-off or other means of liquidation.
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
Liquidation   Percentage:
    	
 
    	
The   positive difference between (i) the *** calculated as of the liquidation date   as if such Liquidated Asset was *** on such liquidation date and (ii) the ***   in respect of such Asset.
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
Assignment   Agreement:
    	
 
    	
The   Assets will be sold pursuant to a separate assignment, assumption and   recognition agreement to be entered into among Seller, Purchaser and Initial   Seller (the “Assignment Agreement”) pursuant to which Seller will assign its   rights and obligations with respect to the Assets under the related Purchase   Agreement.
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
Servicing   Agreement:
    	
 
    	
PMC   and Citigroup have entered into that certain Flow Servicing Agreement, dated as   of August 4, 2011 (the “Servicing Agreement”). PMC shall purchase the   Mortgage Servicing Rights (“MSRs”) relating to the Assets prior to the   Transfer Date. PennyMac Loan Services, LLC (“PLS”) shall sub-service the   Assets for PMC in accordance with standards set forth in the Servicing   Agreement.
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
Further   Assurances:
    	
 
    	
Purchaser   and Seller further agree that upon reasonable request they shall do such   other and further acts and deeds, and shall execute, acknowledge and deliver   and record such other documents and instruments as may be reasonably   necessary from time to time to evidence, confirm or carry out the intent and   purposes of this letter agreement.
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
Expenses:
    	
 
    	
Notwithstanding   anything to the contrary contained herein, each party will bear its own   costs, fees and expenses (including the costs, fees and expenses of its   attorneys). Purchaser will bear the cost of the delivery of the collateral   files to the 
    


 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

	
 
    	
 
    	
 
    	
custodian;   the costs of preparing and recording the assignments from Seller to Purchaser   (including intervening assignments necessary to perfect title to Purchaser)   and endorsing notes to Purchaser, as required; the costs of notifying the   mortgagors, hazard, flood and mortgage insurance companies, and others, as   necessary, and the costs of shipping all Asset records to Purchaser.
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
Entire   Agreement:
    	
 
    	
This   letter agreement sets forth the entire understanding of the parties relating   to the subject matter hereof to date and supersedes and cancels any prior   communications, understandings and agreements between the parties. This   letter agreement may not be amended or modified except by the parties in   writing. This letter agreement may be simultaneously executed in several   counterparts, each of which shall be deemed to be an original, and all such   counterparts shall together constitute but one and the same agreement.
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
Liquidated   Damages:
    	
 
    	
If   for any reason Purchaser fails to purchase any Asset by the End Date, in   addition to any other amounts owed under this letter agreement, Purchaser   shall, as liquidated damages for such failure, remit to Seller an amount   equal to (a) the product of (i) the Spread Percentage and (ii) the unpaid   principal balance of such Asset as of the Original Cut-off Date, minus   (b) the difference between (i) the fair market value of the Assets (as   determined pursuant to a third party indicative bid obtained by Citigroup   within a reasonable period of time following the related Break-up Date) or,   with respect to any Liquidated Asset, the total amount of liquidation   proceeds received on such Asset and (ii) the sum of (1) the Original Purchase   Price for such Asset, (2) any and all Reimbursement Amounts for such Asset, minus   (3) any Proceeds on such Asset received following the Original Closing Date;   provided, however, if the amount in clause (b) above exceeds the amount in   clause (a) above, Seller shall remit such excess amount to Purchaser. 

 

Purchaser   shall promptly provide Citigroup with any information on the Assets that it   requires in connection with Citigroup’s obtaining the related third party   indicative bid. 

 

For   purposes of this letter agreement, the “Break-up Date” shall mean the earlier   to occur of (i) the date on which *** in *** of its *** or *** to *** an ***   as *** under this letter agreement and (ii) the ***.
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
Spread   Percentage:
    	
 
    	
The   positive difference between (i) the *** calculated as of the Break-up Date as   if such Asset was *** on the Break-up Date and (ii) the *** in respect of   such Asset.
    


 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

	
17.
    	
Disposition   of Assets:
    	
 
    	
Purchaser   acknowledges and agrees that Seller shall, in its sole discretion, be   permitted to sell or dispose of any Asset (or otherwise obtain a third party   indicative bid for the Assets within a reasonable period of time following   any Break-up Date) at any price and at any time that it, in its sole   discretion, deems reasonable and Purchaser waives any right to object to or   contest the price obtained by Seller in the sale, disposition and/or third   party indicative bid of any Asset.
    
	
 
    	
 
    	
 
    	
 
    
	
18.
    	
Severability:
    	
 
    	
If   any provision hereof is found by a court of competent jurisdiction to be   prohibited or unenforceable, such provision shall be ineffective only to the   extent of such prohibition or unenforceability, and such prohibition or   enforceability shall not invalidate the balance of such provision to the   extent it is not prohibited or unenforceable, nor invalidate the other   provisions hereof.
    
	
 
    	
 
    	
 
    	
 
    
	
19.
    	
Governing   Law:
    	
 
    	
The   parties agree that this letter agreement shall be construed in accordance   with and governed by the laws of the State of New York, excluding its rules of   conflicts of laws but including the New York General Obligations Law Sections   5-1401 and 5-1402. The parties consent to the exclusive jurisdiction of the   following courts in connection with any dispute between the Parties arising   from or in connection with this letter agreement (i) United States District   Court for the Southern District of New York; and (ii) Supreme Court, New York   County, New York. Purchaser hereby irrevocably waives any objection to venue   of any action between the parties in the courts described herein, whether   pursuant to the doctrine of forum non conveniens or otherwise. In the event   Seller commences legal proceedings against Purchaser in any of the courts set   forth above, Purchaser waives any objection to the selection of that court   and shall not seek to change venue to any other court.
    
	
 
    	
 
    	
 
    	
 
    
	
20.
    	
Arm’s   Length Transaction:
    	
 
    	
Each   party acknowledges that it has participated in the negotiation of this letter   agreement, and agrees that no provision of this letter agreement shall be   construed against or interpreted to the disadvantage of any party by any   court or other governmental or judicial authority by reason of such party   having or being deemed to have structured, dictated or drafted such   provision. All of the terms of this letter agreement were negotiated at arm’s   length, and were prepared and executed without fraud, duress, undue influence   or coercion of any kind exerted by either party upon the other. The execution   and delivery of this letter agreement is the free and voluntary act of Seller   and Purchaser.
    


 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

	
21.
    	
Confidentiality:
    	
 
    	
Each   party agrees for itself and its respective directors, officers, employees,   agents, representatives, subsidiaries and affiliates, to keep the terms of   this letter agreement confidential and to not disclose any such terms to   anyone except: (a) in connection with the enforcement of this letter   agreement, (b) to the parties’ respective attorneys, accountants and/or   regulators who have specific need for the information; or (c) in response to   or to otherwise comply with appropriate legal process, law, regulation or   governmental agency request.
    
	
 
    	
 
    	
 
    	
 
    
	
22.
    	
Miscellaneous:
    	
 
    	
The   rights granted hereunder shall be cumulative with the rights provided under   the Assignment Agreement and shall inure to the benefit of Seller and its   successors and assigns. For the purpose of facilitating the execution of this   letter agreement, and for other purposes, this letter agreement may be   executed simultaneously in any number of counterparts. Each counterpart shall   be deemed to be an original, and all such counterparts shall constitute one   and the same instrument. The parties intend that faxed signatures and   electronically imaged signatures such as .pdf files shall constitute original   signatures and are binding on all parties. The original documents shall be   promptly delivered, if requested.
    


 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

Please acknowledge your acceptance and agreement to the foregoing by signing and returning this letter agreement via email and overnight courier to Peter Steinmetz (email: peter.steinmetz@citi.com) at Citigroup Global Markets Realty Corp., 390 Greenwich Street, 5th Floor, New York, NY 10013.  Thank-you.

 

	
 
    	
Very   Truly Yours,
    
	
 
    	
 
    
	
 
    	
CITIGROUP   GLOBAL MARKETS REALTY CORP.
    
	
 
    	
 
    
	
 
    	
BY:
    	
/s/   Shameer Hussein
    
	
 
    	
 
    	
 
    
	
 
    	
NAME:
    	
Shameer   Hussein
    
	
 
    	
 
    	
 
    
	
 
    	
TITLE:
    	
Authorized   Agent
    


 

 

	
CONFIRMED   AND AGREED TO:
    	
 
    
	
 
    	
 
    
	
PENNYMAC   CORP.
    	
 
    
	
 
    	
 
    
	
BY:
    	
/s/   Vandad Fartaj
    	
 
    
	
 
    	
 
    	
 
    
	
NAME:
    	
Vandad   Fartaj
    	
 
    
	
 
    	
 
    	
 
    
	
TITLE:
    	
Chief   Investment Officer
    	
 
    


 

Confirmation (December 2011)

 











 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND RULE 24B-2 PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS

 

Schedule 1-A

 

Assets

 

***