Secured Borrowings

12 Months Ended

Dec. 31, 2011

Secured Borrowings

Secured Borrowings

NOTE 15. Secured Borrowings

        Pursuant to certain master repurchase agreements, ClearPoint was extended secured mortgage warehouse lines of credit in order to fund mortgage originations. These lines of credit carry floating rates of interest and are collateralized by ClearPoint's mortgage loans. Outstanding borrowings were approximately $213.6 million as of December 31, 2011.

(In thousands)	Expiration Date		Available Line of Credit
Warehouse line—#1		3/2012	$	75,000	(1)
Warehouse line—#2		9/2012		100,000	(2)
Warehouse line—#3		9/2012		75,000
Total			$	250,000	(3)

(1)

Excludes a $50.0 million line established for loan originations sold directly to this lender.

(2)

This line can be terminated at will by the lender on 90-days' notice.

(3)

Includes $150 million which was uncommitted at December 31, 2011.

        If ClearPoint does not sell loans it originates from funds advanced under ClearPoint's mortgage warehouse lines of credit within certain periods of time, the lenders can incrementally curtail, or reduce, such advances. Under these circumstances, ClearPoint would be required to repay the curtailed amounts to the lenders prior to receiving any proceeds from the sale of the loan.

        ClearPoint is required, among other things, to comply with certain financial covenants, including maintaining (i) a minimum tangible net worth ratio, (ii) a maximum leverage ratio, (iii) certain levels of profits/losses, and (iv) a minimum level of liquid assets.

        If ClearPoint fails to comply with these covenants, the lenders could declare the credit lines to be in default and require the payment of all amounts then outstanding under the lines. Also, the applicable agreements contain "cross default" provisions, so that a default under one agreement triggers a default under the others. In October 2011, ClearPoint had breached certain covenants for which its warehouse line lenders provided waivers.

        As further described in Note 29 "Subsequent Events," the lender to the warehouse line, scheduled to expire in March 2012, elected not to renew it. This lender instead agreed to a 120-day extension. ClearPoint may make requests for funding under this line for the first 60 days of the extension, with the amount which ClearPoint may request decreasing, ultimately to zero at the sixtieth day. However, the lender is not committed to agree to any particular funding request. Concurrent with the extension, this lender issued a notice of default of certain of ClearPoint's financial covenants relating to ClearPoint's liquidity from October 2011 to March 2012 and certain levels of profits/losses in February 2012, along with a simultaneous waiver, while requiring more restrictive curtailment provisions and financing terms. The default under this line of credit caused cross-defaults under ClearPoint's other two warehouse lines of credit. In February 2012, ClearPoint was also in default of covenants related to liquidity and profits/losses under these lines. These other two lenders agreed to waive these defaults, but required that the Parent's exposure under its curtailment guaranties as to loans funded on or after February 29, 2012 be increased to range from 5% to 100% , in generaly of the lesser of the market value or the principal amount of such loans, depending on the length of time such loans persist on the warehouse line.

        As noted above, ClearPoint is required to achieve certain profitability levels to remain in compliance under its warehouse lines. ClearPoint has incurred losses since its acquisition and is engaged in a remediation plan, as further described in Note 23 herein, that will, at least temporarily, make it probable that ClearPoint will not achieve profitability levels that satisfy its financial covenants. Assuming ClearPoint is unable to right size its business in a manner that achieves profitability, and if it is unable to amend the profitability covenants, it will breach these covenants in future periods. If ClearPoint is unable to comply with the terms of its warehouse credit lines, these lines could be terminated, potentially resulting in the acceleration of all amounts due under the lines.

        Refer to Note 29 herein for additional information regarding ClearPoint's secured mortgage warehouse lines of credit.