Secured Borrowings

6 Months Ended

Jun. 30, 2012

Secured Borrowings

Secured Borrowings

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.

		June 30, 2012					December 31, 2011
(In thousands of dollars) Description	Current Year Expiration Date	Facility Limit			Outstanding Balance		Facility Limit			Outstanding Balance
Credit Facility No. 1	March 10, 2012	$	—		$	—	$	75,000		$	68,756
Credit Facility No. 2	September 11, 2012	75,000		(1)	21,854		75,000			49,704
Credit Facility No. 3	September 5, 2012	75,000		(1)	24,864		100,000			92,802
		$	150,000	(2)	$	46,718	$	250,000	(2)	$	211,262
Accelerated Purchase Facility	March 10, 2012	—			—		50,000			2,349
Total		$	150,000		$	46,718	$	300,000		$	213,611

(1)Effective July 31, 2012, the facility limit under each respective line was reduced to $45.0 million.

(2)Committed capacity under the facilities is $0 million and $100 million as of June 30, 2012 and December 31, 2011, respectively.  Effective July 31, 2012, the aggregate facility limit was $90.0 million.

The lender to Credit Facility No. 1 and the Accelerated Purchase Facility elected not to renew it and instead agreed to a 120-day extension.  The advances under these lines were paid in full as of April 24, 2012, and pursuant to an amendment to the master repurchase agreement, those warehouse covenants are no longer in force, and ClearPoint has no further continuing reporting or notice obligations to this lender.

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.

The Company previously disclosed within Note 15 within the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, notices of default (along with simultaneous waivers) 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.

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 plan to right size the business as further described in Note 21 herein.  If ClearPoint is not successful in that plan and therefore unable to achieve profitability or 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.