ITEM 1. BUSINESS
GENERAL
Source One Mortgage Services Corporation, a Delaware corporation (together with its subsidiaries, the "Company" or "Source One"), is one of the largest mortgage banking companies in the United States that is not affiliated with a commercial bank. As of December 31, 1997, the Company had a mortgage loan servicing portfolio totaling $26.5 billion, including $14.9 billion of loans subserviced for others, which is serviced on behalf of approximately 234 institutional investors and numerous other security holders. As of December 31, 1997, the Company had 129 retail branch offices in 26 states and originated $4.4 billion in mortgage loans for the year then ended.
As a mortgage banker, the Company engages primarily in the business of producing and selling conforming and subprime residential mortgage loans, servicing conforming residential mortgage loans and subservicing residential mortgage loans for third parties. The Company's primary sources of revenue are net servicing revenue, net interest revenue, net gain on sale of mortgages, net gain on sale of servicing, earnings from unconsolidated affiliate and other revenue. The Company is also engaged, through certain of its subsidiaries, in the sale of credit-related insurance products (such as life, disability, health, accidental death and property and casualty insurance).
The Company was incorporated in 1972 and is the successor to Citizens Mortgage Corporation which was organized in 1946. The Company is a wholly-owned subsidiary of White Mountains Holdings, Inc. ("White Mountains") (formerly Fund American Enterprises, Inc.) and its parent Fund American Enterprises Holdings, Inc. ("Fund American"), a Delaware corporation organized in 1980, which was formerly known as The Fund American Companies, Inc. and Fireman's Fund Corporation.
The Company's principal executive offices are located at 27555 Farmington Road, Farmington Hills, Michigan 48334-3357; its telephone number is (248) 488-7000.
INDUSTRY OVERVIEW
Mortgage banking is the business of serving as a financial intermediary in (i) the origination and purchase of mortgage loans, (ii) the holding of such loans while aggregating sufficient loans to form appropriate mortgage-backed security pools, (iii) the subsequent sale of such loans through pools or directly to investors, and (iv) the ongoing management or servicing of such loans during the repayment period. Mortgage bankers generate revenue in each of the four stages of the mortgage banking process.
MORTGAGE LOAN PRODUCTION
The Company produces residential mortgage loans through a system of retail branch offices, a specialized marketing program, mortgage brokers and a correspondent network of banks, thrift institutions and other mortgage lenders. The existence of these mortgage production sources gives the Company the flexibility to shift its production between those sources as market conditions warrant and allows it to emphasize the production mode which is most economically advantageous. Loans produced, whether through origination or purchase, include conventional, conforming and subprime residential mortgage loans as well as conforming mortgage loans which are either insured by the Federal Housing Administration ("FHA") or partially guaranteed by the Veterans Administration ("VA") (government loans). In evaluating loans purchased through its correspondent network and loans originated through its broker network, the Company applies the same quality standards as required for loans originated by the Company itself. The Company's quality control department reviews a sample of the loans purchased to determine compliance with Company standards.
It is a policy of the Company to primarily produce fixed rate mortgage loans. Fixed rate mortgages tend to capture a larger share of the market in a declining interest rate environment and are less susceptible to prepayment risk than adjustable-rate mortgages. Accordingly, in a rising interest rate environment,
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
consumer preference for adjustable-rate mortgages tends to increase, which could have an adverse impact on the Company's mortgage production operations. However, the possible adverse impact on mortgage production may be mitigated by the positive impact on the Company's servicing portfolio. In 1997, fixed rate mortgage originations accounted for approximately 88% of the Company's total mortgage loan production as compared to 90% in 1996.
The following table sets forth selected information regarding the Company's mortgage loan production:
Mortgage loans originated by the Company are subject to a defined underwriting process in order to assess each prospective borrower's ability to repay the loan requested and the adequacy of each property as collateral. In addition, the Company is subject to the underwriting guidelines of FHA, VA, the Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") and the Federal National Mortgage Association ("FNMA" or "Fannie Mae"), as well as specific contractual requirements of institutional investors who have agreed to acquire mortgage loans originated by the Company.
In response to increased industry competition for producing and servicing conforming mortgage loans, the Company has decided to broaden its product line by offering higher margin products. The Company has recently begun to produce 203(k) (FHA home improvement) loans, manufactured housing loans, subprime loans and 125% loan-to-value ("125% LTV") second mortgage loans. The 203(k) loans and the manufactured housing loans are being sold into agency pools with servicing retained. The subprime and 125% LTV loans are being originated for a fee and sold to third parties on a servicing released basis. The Company is currently expanding its capability to service and subservice subprime loans and to subservice 125% LTV loans. Although these higher margin products are a new focus for the Company, they accounted for less than 2% of total production in 1997 and are currently expected to account for less than 10% of total production in 1998.
RETAIL BRANCH OFFICES. As of December 31, 1997, the Company had 129 retail branch offices in 26 states. Each office has sales representatives who originate mortgage loans through contacts with real estate brokers, builders, developers and others, as well as through direct contact with homebuyers.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
As of December 31, 1997, the Company's retail branch offices were located in the following states:
Most branch office originations are referred to regional operating centers for preparation of loan documentation, evaluation of compliance with the Company's underwriting conditions and closing of the loans.
CORRESPONDENT NETWORK. The Company conducts a program through which it agrees to purchase mortgage loans from a network of banks, thrift institutions and other mortgage lenders. The funding price for such loans is set by the Company on a daily basis. In addition, the Company pays a premium for the release of servicing rights, which is negotiated on a case-by-case basis. As of December 31, 1997 there were approximately 236 participants in the Company's correspondent network, with no single participant or group of affiliated participants accounting for more than 12% of the Company's total mortgage loan originations.
MORTGAGE BROKERS. The Company conducts a program through which it closes loans originated by a network of mortgage brokers. The funding price for such loans is set by the Company on a daily basis. The mortgage broker receives compensation equivalent to the difference between the Company's pricing schedule and the closing price. As of December 31, 1997 there were approximately 425 active participants in the Company's mortgage broker network, with no single broker or group of affiliated brokers accounting for more than 1% of the Company's total mortgage loan originations.
SPECIALIZED MARKETING PROGRAM. The Company also generates mortgage loan originations primarily by responding to refinancing requests from the population of loans currently serviced by the Company. The products currently offered by the Specialized Marketing Program consist of purchase money first mortgages, home equity lines of credit, closed-end second mortgages, refinancing and relocation assistance.
SALES OF LOANS
The Company sells loans either through mortgage-backed securities issued pursuant to programs of the Government National Mortgage Association ("GNMA" or "Ginnie Mae"), FNMA and FHLMC or to private investors. Most loans are aggregated in pools of $1.0 million or more, which are purchased by private investors after having been guaranteed by GNMA, FNMA or FHLMC. Substantially all GNMA securities are sold without recourse to the Company for loss of principal in the event of a subsequent default by the mortgage borrower due to the underlying FHA and VA insurance. Prior to December 1992, substantially all conventional securities were sold with recourse to the Company to the extent of insufficient proceeds from private mortgage insurance, foreclosure and other recoveries. Since December 1992, conventional loans have been sold without recourse to the Company.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
The following table summarizes the principal amount of the Company's loans sold:
Servicing agreements relating to mortgage-backed securities issued pursuant to the programs of GNMA, FNMA and FHLMC require the Company to advance funds to make the required payments to investors in the event of a delinquency by the borrower. The Company expects that it would recover most funds advanced upon cure of default by the borrower or at foreclosure. However, in connection with VA partially guaranteed loans and certain conventional loans (which may be, at most, partially insured by private mortgage insurers), funds advanced may not cover losses due to potential declines in collateral value. The Company is subject to limited amounts of principal risk with respect to these loans since the insurer has the option to reimburse the servicer for the lower of fair market value of the property or the mortgage loan outstanding, in addition to the VA guarantee on the loan. In addition, most of the Company's servicing agreements for mortgage-backed securities typically require the payment to investors of a full month's interest on each loan although the loan may be paid off (by optional prepayment or foreclosure) other than on a month-end basis. In this instance, the Company is obligated to pay the investor interest at the pass-through rate from the date of the loan payoff through the end of that calendar month without reimbursement.
The Company, through private placements and public offerings, has also sold mortgage loans through the issuance of mortgage pass-through certificates. The Company issued $521.7 million of real estate mortgage investment conduit ("REMIC") certificates through December 31, 1990. The Company is the primary servicer for these REMIC certificates, which were sold pursuant to five separate trusts that have no recourse provisions. The Company has not issued any mortgage pass-through certificates since 1990, however, the Company may offer additional mortgage pass-through certificates in the future if economic and market conditions warrant.
Historically, the Company's sales of loans have generated net gains. However, if secondary market interest rates decline after the Company obtains a mandatory forward commitment for a loan, the loan may not close and the Company may incur a loss from the cost of covering its obligations under such commitment. If secondary market interest rates increase after the Company commits to an interest rate for a loan, and the Company has not obtained a forward commitment, the Company may incur a loss when the loan is subsequently sold. To minimize this risk, the Company obtains mandatory and optional forward commitments of up to 120 days to sell mortgage-backed securities with respect to all loans which have been funded and a substantial portion of loans in process ("pipeline") which it believes will close.
The Company's risk management function closely monitors the mortgage loan pipeline to determine appropriate forward commitment coverage on a daily basis. In addition, the risk management area seeks to reduce counterparty risk by committing to sell mortgage loans only to approved dealers, with no dealer having in excess of 20% of current commitments. The Company currently transacts business with seventeen approved dealers.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
LOAN SERVICING
Mortgage loan servicing consists primarily of (i) collecting principal, interest and funds to be escrowed for tax and insurance payments from mortgage loan borrowers; (ii) remitting principal and interest to mortgage loan investors; (iii) paying property taxes and insurance premiums on mortgaged property; (iv) in some cases, advancing uncollected payments to mortgage loan investors; (v) administering delinquent loans; (vi) supervising foreclosures in the event of unremedied defaults; and (vii) performing all related accounting and reporting activities. Servicing generates cash income in the form of fees, which represent a percentage of the declining outstanding principal amount of the loans serviced and are collected from each mortgage loan payment received plus any late charges.
The Company currently retains the rights to service substantially all of the conforming mortgage loans it produces, while selling the rights to service its subprime and 125% LTV production. The Company is currently expanding its capability to service and subservice subprime loans and to subservice 125% LTV loans. In addition, the Company may acquire the rights to service or subservice a mortgage loan portfolio without originating or acquiring the underlying mortgage loans. The Company customarily makes such purchases of servicing rights from banks, thrift institutions and other mortgage lenders. The fees paid to acquire such servicing rights are negotiated on a case-by-case basis. The Company purchased the rights to service $.04 billion, $2.8 billion and $4.7 billion of mortgage loans from third parties during 1997, 1996 and 1995, respectively.
During 1996 and through 1997, the Company forged a new strategy with respect to its servicing operations. A major focus of this strategy is reducing exposure to interest rate risk, which increases with the size of an owned servicing portfolio. To reduce the exposure, the Company took steps to reduce its owned servicing portfolio and expand its subservicing business in the first quarter of 1997. In February 1997, the Company sold $17.0 billion of its nonrecourse mortgage servicing portfolio to a third party for adjusted proceeds of $266.9 million and recognized a pretax loss of $4.3 million on the sale and related assumption of subservicing. The Company recorded an additional loss of $3.7 million in the fourth quarter of 1997 in connection with the amendment of the subservicing arrangement which extended the Company's subservicing responsibilities for one additional year at less favorable terms than the original agreement provided. The Company will continue to service these loans pursuant to a subservicing agreement at least until March 1999, June 1999 and August 1999 for FHLMC loans, GNMA loans and FNMA loans, respectively. The subservicing period can be extended for a maximum of one year beyond these dates at the option of the purchaser. During 1996 and 1995, the Company sold the rights to service a total of $3.3 billion and $11.0 billion respectively, of mortgage loans to third parties resulting in a pretax gain of $10.1 million and $40.0 million, respectively.
In January 1998, the Company sold the rights to service approximately $1.1 billion of mortgage loans to third parties resulting in a pretax gain of approximately $2.0 million. The Company has entered into agreements to sell additional rights to service approximately $2.6 billion of mortgage loans to third parties. The Company expects to close the sale of rights to service approximately $2.1 billion of these mortgage loans by the end of March 1998 and the remainder during the second quarter of 1998 and expects to realize pretax gains on the sales.
In 1994, the Company sold the rights to service $3.9 billion of mortgage loans to a third party and continued to service these loans pursuant to a subservicing agreement. The gain of $19.9 million was deferred and was being recognized over the five-year life of the subservicing agreement. In the fourth quarter of 1996, the third party sold the rights to service approximately $1.0 billion of these mortgage loans, representing approximately 25% of the total loans subserviced by the Company for the third party. Accordingly, the Company recognized an additional $2.4 million of the deferred gain in 1996, representing approximately 25% of the deferred balance at the time of sale. In the fourth quarter of 1997, the third party sold the rights to service the remaining portfolio of loans. As a result, the Company recognized the $4.4 million remaining balance of the deferred gain . In 1997 and 1996, the Company recognized deferred gains totaling $6.9 million and $6.1 million, respectively, as part of mortgage servicing revenue.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
The following table summarizes the changes in the Company's mortgage loan servicing portfolio, excluding loans sold but not transferred:
The Company closely monitors the rate of delinquencies and foreclosures incident to its servicing portfolio. The following table summarizes the Company's delinquency and foreclosure experience with respect to residential mortgage loans serviced by the Company:
The increase in delinquencies in 1997, 1996 and 1995, is primarily the result of servicing portfolio acquisitions made by the Company during the fourth quarters of 1996 and 1995. The delinquency rates of these portfolios, which the Company acquired on favorable terms considered to be reflective of these higher delinquency rates, were higher than the Company's historical average delinquency rate. The Company has established an allowance for mortgage loan losses which totaled $12.8 million and $15.4 million as of December 31, 1997 and 1996, respectively. Excluding the allowance of $2.6 million included in the balance at December 31, 1996 relating to a commercial real estate owned property the Company sold during 1997, the allowance for losses on the Company's owned servicing portfolio remained unchanged. In addition, the Company's valuation allowance for its capitalized servicing asset which relates to its principal recourse portfolio includes an $8.2 million and $7.3 million reserve at December 31, 1997 and 1996, respectively, for estimated losses on the corresponding loans. Considering the significant decrease in the size of its owned servicing portfolio during 1997, the Company believes that the allowances are adequate to provide for estimated uninsured losses on its mortgage servicing portfolio.
The value of the Company's capitalized servicing asset is affected by changes in mortgage interest rates. Interest rates directly influence prepayment rates as well as other assumptions used in valuing the asset. In order to offset changes in the value of its capitalized servicing asset and to mitigate the effect on earnings of higher amortization and impairment which results from increased prepayment activity, the Company invests in various financial instruments. As interest rates decline, prepayment activity
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
generally increases, thereby reducing the value of the capitalized servicing asset, while the value of the financial instruments increases. Conversely, as interest rates increase, the value of the capitalized servicing asset increases while the value of such financial instruments decreases. The financial instruments utilized by the Company include interest rate floor contracts ("floors") and principal-only ("P/O") swaps. With respect to the floors, the Company is not exposed to losses in excess of its initial investment in the floors. The Company's exposure to loss in the P/O swaps is related to changes in the market value of the underlying P/O security over the life of the contract.
RELATED ACTIVITIES
In conjunction with its mortgage origination and servicing activities, the Company provides certain credit-related insurance products (such as life, disability, health, accidental death and property and casualty insurance) through subsidiaries. The insurance subsidiaries act as agents and receive fees based on premium value, but do not assume any insurance risk. Insurance products are sold through (i) solicitation at the time of mortgage application, (ii) direct mail solicitation shortly after mortgage loan closing, (iii) solicitation by a direct solicitor and (iv) resolicitation of the Company's servicing portfolio on an annual basis. At certain locations, personal solicitation by Company staff is permitted by state regulations which determine allowable insurance sales practices. The fees recognized under these programs were as follows:
CERTAIN BUSINESS CONDITIONS
Changes in the economy or prevailing interest rates can have significant effects, including material adverse effects, on the mortgage banking business and the Company.
Inflation and changes in interest rates can have differing effects on various aspects of the Company's business, particularly with respect to marketing gains and losses from the sale of mortgage loans, mortgage loan production, the value of the Company's servicing portfolio and net interest revenue. Historically, the Company's loan originations and loan production income have increased in response to falling interest rates and have decreased during periods of rising interest rates. Periods of low inflation and falling interest rates tend to reduce loan servicing income and the value of the Company's mortgage loan servicing portfolio because prepayments of mortgages increase and the average life of loan servicing rights is shortened. Conversely, periods of increasing inflation and rising interest rates tend to increase loan servicing income and the value of the Company's mortgage loan servicing portfolio because prepayments of mortgages decline and the average life of loan servicing rights is lengthened. To mitigate the Company's exposure to changes in market interest rates, the Company utilizes various derivative financial instruments. Refer to "Note 23 to the Consolidated Financial Statements" on pages 33-37 of the Company's 1997 Annual Report to Shareholders, herein incorporated by reference.
COMPETITION
The Company competes nationally and locally with other mortgage bankers, state and national banks, thrift institutions and insurance companies. National banks and thrift institutions have substantially more flexibility in their loan origination programs than the Company, which must originate loans meeting the standards of the secondary market. Mortgage lenders compete primarily with respect to price and service. Competition may also occur on mortgage terms and closing costs. The Company competes, in part, by using its commissioned sales force to maintain close relationships with real estate brokers, builders, developers and members of its correspondent and broker networks. In the opinion of management, no single mortgage lender dominates the industry.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
REGULATION
The Company is subject to the rules and regulations of, and examinations by, investors and insurers, including, FNMA, FHLMC, GNMA, FHA and VA with respect to originating, selling and servicing mortgage loans. Lenders are required to submit audited financial statements annually and to maintain specified net worth levels which vary depending on the amount of loans serviced and annual production. Mortgage loan origination activities are also subject to fair housing laws, the Equal Credit Opportunity Act, the Federal Truth-in-Lending Act, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, licensing laws, usury laws, the Home Mortgage Disclosure Act and the regulations promulgated thereunder which, among other things, prohibit discrimination in residential lending and require the disclosure of certain information to borrowers. There are various other state laws and regulations affecting the Company's mortgage banking and insurance operations. The Company's internal audit and quality control departments monitor compliance with these laws and regulations.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 1,572 persons (of whom approximately 370 were engaged in loan servicing activities and approximately 1,202 were engaged in residential loan production activities, administrative and managerial responsibilities).
None of the Company's employees are covered by a collective bargaining agreement. Management believes that the Company's employee relations are good.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, new products and similar matters. Such information is often subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause its actual results and experience to differ materially from the anticipated results or other expectations expressed in its forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include those discussed elsewhere herein (such as loan servicing, competition and regulation).
ITEM 2.
ITEM 2. PROPERTIES
The Company owns its principal executive offices in Farmington Hills, Michigan which house the majority of the Company's employees. The Company leases several other office facilities and operating equipment under cancelable and noncancelable agreements. Most leases contain renewal clauses.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Various claims have been made against the Company in the ordinary course of business. Management believes that any liabilities which could result from such claims would not materially affect the Company's financial position and results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Reported on page 4 of the Company's 1997 Annual Report to Shareholders, herein incorporated by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Reported on pages 3-4 of the Company's 1997 Annual Report to Shareholders, herein incorporated by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reported on pages 5-14 of the Company's 1997 Annual Report to Shareholders, herein incorporated by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements reported in the consolidated financial statements of the Company and the notes thereto and the report thereon of KPMG Peat Marwick LLP, independent auditors, appearing on pages 15-45 of the Company's Annual Report to Shareholders, herein incorporated by reference. Selected Quarterly Financial Data reported on page 46 of the Company's 1997 Annual Report to Shareholders, herein incorporated by reference. The report of Ernst & Young LLP, independent auditors, included as Exhibit 13(b) hereto.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On January 24, 1997, the Company, upon recommendation of the Audit Committee of the Board of Directors of its ultimate parent, Fund American Enterprises Holdings, Inc., appointed KPMG Peat Marwick LLP as its independent auditors for the fiscal year ending December 31, 1997, to replace Ernst & Young LLP ("Ernst & Young") effective upon the date of Ernst & Young's report on the consolidated financial statements of the Company for the year ended December 31, 1996.
In connection with the audits of the two years ended December 31, 1996, there were no disagreements with Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to their satisfaction, would have caused them to make reference in connection with their opinion to the subject matter of the disagreement.
The Company has requested Ernst & Young to furnish a letter addressed to the Commission stating whether it agrees with the above statements. A copy of that letter, dated March 27, 1997, is filed as Exhibit 16 (a) hereto.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Mr. Allemang has served as a director, Executive Vice President and Chief Financial Officer of the Company since November 1993. He was a director and Vice President of Fund American Enterprises, Inc. from August 1992 to December 1993. Mr. Allemang was formerly Senior Vice President of Fireman's Fund Insurance Company ("Fireman's Fund") from 1991 to 1992 and served as Vice President and Treasurer of Fund American from 1989 to 1991 and Vice President of Fireman's Fund from 1986 to 1991.
Mr. Barrette has served as a director of the Company since February 1998. He has served as Executive Vice President and Chief Financial Officer of Fund American Enterprises Holdings, Inc. since November 1997. He holds the same positions with, and is a director of White Mountains Holdings, Inc. He is also a director of White Mountains Insurance Company and Fund American Enterprises, Inc. From 1994 to 1996, he was an actuarial consultant with Tillinghast-Towers Perrin. He joined Fireman's Fund Insurance Company in 1973 and held various positions with that company, including Chief Actuary and Chief Financial Officer. Prior to his departure in 1993, he was a Director and Executive Vice President of Fireman's Fund Insurance Company and President of its Personal Insurance Division.
Mr. Baxter has served as a director of the Company since 1994. He served as Chairman of the Company from June 1996 to March 1997. He has served as President of White Mountains Holdings, Inc. since February 1997 and President of Fund American Enterprises, Inc. from January 1994 to February 1997. He was the Managing Director of the National Transportation Safety Board from 1990 to 1993, and prior to that was Senior Vice President of the National Bank of Washington. Mr. Baxter previously served as Assistant Director of The Office of Management and Budget under President Reagan and was a Vice President of GEICO Corporation. Mr. Baxter is also a director of Fund American Enterprises, Inc., Centricut, LLC., Main Street America Holdings, Inc., White Mountains Holdings, Inc. and White Mountains Insurance Company.
Mr. Densmore has served as a director of the Company since 1986. He has served as Executive Vice President of the Company's Servicing Division since 1987. He was the Chief Financial Officer from 1978 to 1987. Mr. Densmore joined the Company in 1976.
Mr. Janssen has served as a director of the Company since November 1997. He has served as Executive Vice President - Production and Capital Markets since 1997. He has also served as Executive Vice President of Capital Markets from 1996 to 1997, Senior Vice President of Finance from 1992 to 1996, Corporate Vice President and Controller from 1991 to 1992 and Vice President of the Financial Division from 1988 to 1992. Mr. Janssen joined the Company in 1981.
Mr. Mohan has served as a director of the Company since November 1997. He assumed the position of President and Chief Executive Officer of the Company in September of 1997. Mr. Mohan was with
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
Beneficial Corporation from 1963 to 1997. He held various positions which included District Manager, Operating Vice President, Senior Vice President and President of several Beneficial subsidiaries.
Mr. Ozanne has served as a director of the Company since August 1996. He has served as Chairman of the Company since March 1997 and as President of Fund American Enterprises, Inc. since February 1997. He is the founder and principal of Greenrange Partners. He was Chairman, President & Chief Executive Officer of Nations Financial Holdings Corporation (formerly U S WEST Capital Corporation) from 1989 to 1996. From 1983 to 1989 he was Executive Vice President, Asset Management and Consumer Groups, of General Electric Capital Corporation ("GECC"), Stamford, Connecticut and held other executive positions with GECC. He is currently a director of Financial Security Assurance Holdings Ltd.("FSA"), a publicly-held financial guaranty insurer with securities listed on the New York Stock Exchange.
Mr. Taylor has served as a director of the Company since August 1995. He has served as President of FSA since November 1997 and its Chief Operating Officer since May 1993. He is also a member of FSA's management review committee for structured transactions and its underwriting committee for municipal transactions. Prior to joining FSA in 1990 as an advisor for its new municipal bond insurance business, Mr. Taylor was an Executive Vice President, founder and executive committee member of Financial Guaranty Insurance Company. He is also a director of FSA.
COMMITTEES OF THE BOARD OF DIRECTORS
The major committees of the Board of Directors, committee membership and the functions of those committees are described below.
EXECUTIVE COMMITTEE. The members of the Executive Committee are: James H. Ozanne (Chairman), Terry L. Baxter and Francis X. Mohan.
The Executive Committee has been delegated all of the powers and authority of the Board on all but such matters which are reserved to the Board by the Delaware General Corporate Law.
AUDIT COMMITTEE. The members of the Audit Committee are: Roger K. Taylor (Chairman) and Raymond Barrette.
The Audit Committee exercises the powers of the Board in the management of the business and affairs of the Company regarding the accounting, reporting and financial control practices of the Company. It reviews the qualifications of the independent certified public accountants, makes recommendations to the Board as to their selection, reviews the plan, fees and results of their audit and reviews their non-audit services and related fees.
HUMAN RESOURCES COMMITTEE. The members of the Human Resources Committee are: Terry L. Baxter (Chairman), James H. Ozanne and Roger K. Taylor.
The Human Resources Committee establishes compensation for executive officers of the Company.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
Mr. Courson has served as a Senior Vice President of the Company and President and Chief Executive Officer of Central Pacific Mortgage Company ("Central Pacific"), a wholly-owned subsidiary of the Company, since July 1990. Prior to that he was President and Chief Operating Officer of Fundamental Mortgage Corporation of Dallas, Texas.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of the Company's equity securities. Officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with during the year ended December 31, 1997, except for Messrs. Mark A. Janssen, Francis X. Mohan and Roger K. Taylor, each of whom inadvertently failed to file on a timely basis a Form 3. Each of them subsequently filed a Form 3.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the salary, incentive compensation and benefits paid by the Company to its Chief Executive Officer, its four most highly compensated executive officers other than the Chief Executive Officer and its executive officer who retired during 1997 (collectively, the "Named Executive Officers") during each of the three most recent fiscal years.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
SUMMARY COMPENSATION TABLE
(a) Amounts shown for 1997 consist of the following: (i) Mr. Courson: reimbursement of automobile expenses. Amounts shown for 1996 consist of the following: (i) Mr. Densmore: reimbursement of automobile expenses; (ii) Mr. Allemang: reimbursement of automobile expenses; (iii) Mr. Janssen: reimbursement of automobile expenses; (iv) Mr. Courson: interest reimbursement of $570 on amounts paid to purchase investment contracts and reimbursement of automobile expenses; (v) Mr. Conrad: interest reimbursement of $2,309 on amounts paid to purchase investment contracts and reimbursement of automobile expenses. Amounts shown for 1995 consist of the following: (i) Mr. Densmore: reimbursement of automobile expenses; (ii) Mr. Allemang: reimbursement of automobile expenses; (iii) Mr. Janssen: reimbursement of automobile expenses; (iv) Mr. Courson: interest reimbursement of $2,945 on amounts paid to purchase investment contracts and reimbursement of automobile expenses; (v) Mr. Conrad: interest reimbursement of $32,578 on amounts paid to purchase investment contracts and reimbursement of automobile expenses.
(b) Represents amounts allocated pursuant to the Company's employee stock ownership plan ("ESOP"), except for (c) below.
(c) In addition to (b) above, amount includes: (i) payment of $305,565 pursuant to the Agreement between Mr. Conrad and the Company.
INVESTMENT CONTRACTS AND STOCK APPRECIATION RIGHTS
In 1993, certain directors and executive officers of the Company exchanged all their shares of the Company's Class B common stock for 1.558 units in an investment contract and 1.558 units of Stock Appreciation Rights ("SAR") for each Class B share held. The investment contract entitles the holder to receive the lesser of $86.625 or the closing price of Fund American's common stock on the day preceding exercise of the investment contract, multiplied by a factor of 1.223 in cash for each unit held. The units may be exercised at any time at the option of the holder.
The SARs may be exercised at any time simultaneously with each exercised investment contract unit at the option of the holders thereof. The value of each SAR is equal to the difference between $86.625 and the closing price of Fund American's common stock on the date preceding the exercise of the SAR multiplied by a factor of 1.223. The following table summarizes SAR values as of December 31, 1997.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
(a) Represents the number of investment contract units with respect to which the SARs were exercised. (b) The number and value of unexercised SARs are based on shares of Fund American common stock.
PENSION BENEFITS
The gross annual benefit paid is computed as a straight-life annuity reduced by .485% of average salary up to covered compensation; that is, the average of social security wage bases for the 35 years prior to retirement. The annual benefits shown in the above table are not reduced to reflect the limitations imposed by the Internal Revenue Code, which limit the annual benefits payable from qualified plans to any individual. The Company maintains a Supplemental Retirement Plan which is a non-qualified, unfunded deferred compensation plan. Under the plan, certain highly compensated employees affected by these limitations will receive additional retirement income payments from the Company so that their pension benefits will equal the amounts they would otherwise have been were it not for the limitations.
Messrs. Mohan, Densmore, Allemang, Janssen and Courson participate in retirement plans under which they are entitled to receive estimated annual retirement benefits in accordance with the table shown above.
Participants in the retirement plans are eligible to receive normal retirement benefits at age 65, reduced normal retirement benefits if qualified for early retirement or a deferred vested benefit if they terminate employment prior to retirement but after five years of service. In the fourth quarter of 1997, the Company's Board of Directors approved certain amendments to the Company's pension plan. The approved amendments included the expansion of eligibility requirements for early retirement from age 55 with ten years of service to the earlier of age 55 with ten years of service or age 50 with fifteen years of service for retirements beginning on or after January 1, 1997.
Eligible compensation for Messrs. Mohan, Densmore, Allemang, Janssen and Courson includes base salary plus bonus received, but is limited to not more than one and one-third of base salary in total. Benefits accrued under the retirement plans are limited to eligible compensation of $160,000 for 1997 for each of the Named Executive Officers.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
Benefits under the retirement plans for a single person are computed on a straight-life basis and benefits for a married person are generally computed on a joint and 50% survivor basis, subject to each participant's right to elect alternative survivor benefits. As of December 31, 1997, Messrs. Mohan, Densmore, Allemang, Janssen and Courson had 0, 21, 4, 16 and 7 whole years of credited service, respectively, for purposes of computing their benefits under the retirement plans.
COMPENSATION OF DIRECTORS
Directors who are neither employees of the Company nor employees or directors of Fund American (Mr. Taylor) receive an annual retainer of $10,000 (or in the case of Messrs. Keller and Macklin, a pro rata amount for less than a full year's service) and a fee of $1,500 for each board meeting attended. In addition, the following amounts were paid during 1997: $8,750 to Mr. Ozanne as a consultant to the Company prior to serving as Chairman of the Company, $1,500 to Mr. Macklin as former Chairman of the Executive Committee, and $25,000 to Mr. Baxter as a consultant to the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
In connection with the September 1997 retirement of James A. Conrad as President and Chief Executive Officer of the Company and pursuant to a certain agreement between him and the Company dated October 22, 1997, the Company agreed to pay Mr. Conrad (who is currently 56 years of age) the following: (i) the balance of his ESOP account and the portion of any contribution by the Company to the ESOP which would have been allocated to this account had he retired as of December 31, 1997; (ii) salary continuance of $20,371 per month through December 1998; (iii) his bonus under the Company's Executive Incentive Compensation Plan for 1997 in accordance with established performance objectives; (iv) medical and dental benefit coverage he would have received had he remained a full time employee of the Company through December 31, 1998 and (v) pension benefits, to commence on January 1, 1999, he would have received had he retired at age 62 (representing 19.9 years of credited service).
In connection with the employment of Mr. Mohan as President and Chief Executive Officer of the Company, the Company and Mr. Mohan entered into an employment agreement ("the Agreement"). The Agreement principally called for: (i) Mr. Mohan to receive an annual base salary of $250,000; (ii) Mr. Mohan to receive a bonus for 1997 equal to his base salary, provided he achieved specific performance objectives; (iii) Mr. Mohan to receive additional payments of $50,000 on November 1, 1997 and $200,000 on November 1, 1998 and 1999, provided that he is an employee of the Company on those dates; (iv) Mr. Mohan to participate in the Company's Long-Term Incentive Plan; (v) Mr. Mohan to participate in an investment and option program; and (vi) in the event Mr. Mohan is terminated without cause prior to December 31, 2000, Mr. Mohan to receive two years of base salary and vest immediately in any options. Amounts relating to 1997 are included in the "Summary Compensation Table" on page 13.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Human Resources Committee of the Board of Directors establishes compensation for executive officers of the Company. None of the members of the Human Resources Committee, namely Terry L. Baxter, James H. Ozanne and Roger K. Taylor, is, or was, an officer or employee of the Company or any of the Company's subsidiaries.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 27, 1998, there were two holders of the 3,211,881 shares of the Company's issued and outstanding common stock, with each share entitled to one vote, as follows:
The following table sets forth, as of March 27, 1998, beneficial ownership of Fund American common stock by each director of the Company and each of the current "Named Executive Officers" as defined herein.
* Represents less than 1% of the outstanding shares.
(a) Represents Fund American common stock pursuant to Item 403(b) of Regulation S-K of the Securities Act of 1933.
(b) Except for Messrs. Barrette, Ozanne and Taylor, includes shares beneficially owned by the Company's Employee Stock Ownership Plan and 401(k) Savings Plan (whereby voting rights are exercised by the Plan's trustee and attributable under the terms of the Plan to such person).
(c) Determined based on the beneficial ownership provisions specified in Rule 13d-3(d)(1) of the Exchange Act. Except to the extent indicated above, all executive officers and directors have (or share with their spouses) sole voting and investment power with respect to the shares for which they claim beneficial ownership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the terms of a tax allocation agreement between the Company and Fund American, Fund American has agreed to compensate the Company for the use of certain accumulated unrealized losses associated with the Company's common equity securities portfolio if such losses, when realized, can be utilized in Fund American's consolidated tax returns.
During 1996, the Company sold $1.4 million of common equity securities to White Mountains for cash proceeds of $.5 million. The Company recognized a $.9 million pretax loss from the sale.
In January 1997, the Company transferred $2.3 million of common equity securities to White Mountains in exchange for 21,239 shares of the Company's common stock held by White Mountains, which were retired by the Company. The Company recognized a $.3 million pretax gain from the transfer in the first quarter of 1997.
In March 1997, the Company issued 105,000 shares of its common stock to Fund American for cash proceeds of $12.7 million. In addition, the Company issued 230,293 shares of its common stock to White
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
Mountains in exchange for 1.0 million shares of the common stock of Financial Security Assurance Holdings Ltd. ("FSA") valued at $27.8 million. The Company issued an additional 650,827 shares of its common stock to White Mountains effective in the second quarter of 1997 in exchange for 2.5 million shares of FSA common stock, 2.0 million shares of FSA convertible redeemable preferred stock and options to acquire 2.6 million shares of FSA common stock valued at $78.5 million, net of associated tax liabilities and other adjustments.
In June 1997, the Company acquired an investment in U S WEST, Inc. ("U S West") redeemable preferred stock from Fund American for cash proceeds of $49.3 million. The investment, which is classified as available for sale, is a fixed maturity investment which is redeemable in September 2004 and may be redeemed at the option of U S West beginning in September 1999. The discount on this investment is being amortized over the anticipated life of the investment. The carrying value of this investment, which approximates fair value, totaled $49.4 million as of December 31, 1997. The Company recognized income from this investment of approximately $2.0 million in 1997.
During 1997, Mr. Conrad received $346,500 upon the exercise of 4,000 investment contract units, and Mr. Densmore received $1,039,500 upon the exercise of 12,000 investment contract units. See discussion of "Investment Contracts and Stock Appreciation Rights" on pages 13 and 14.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. (1) Financial Statements
The Financial Statements applicable to Source One Mortgage Services Corporation and consolidated subsidiaries have been incorporated by reference herein from Source One Mortgage Services Corporation's 1997 Annual Report to Shareholders as they appear in the Index to Financial Statements and Financial Statement Schedules appearing on page 20 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules
None.
(3) Exhibits
The exhibits required to be filed by Item 601 of Regulation S-K and by this form are listed on page 22 of this Annual Report on Form 10-K.
The management contracts and compensatory plans or arrangements required to be filed as exhibits and included in such list of exhibits are as follows:
Exhibit 10(a) Source One Mortgage Services Corporation Employee Stock Ownership and 401(k) Savings Plan and Trust Agreement, as amended and restated effective as of October 1, 1996
Exhibit 10(b) Form of Source One Mortgage Services Corporation Voluntary Deferred Compensation Plan
Exhibit 10(c) First Amendment to Source One Mortgage Services Corporation Voluntary Deferred Compensation Plan
Exhibit 10(d) Form of Source One Mortgage Services Corporation Retirement Plan, as amended and restated
Exhibit 10(e) First Amendment to Source One Mortgage Services Corporation Retirement Plan
Exhibit 10(f) Second Amendment to Source One Mortgage Services Corporation Retirement Plan
Exhibit 10(g) Third Amendment to Source One Mortgage Services Corporation Retirement Plan
Exhibit 10(h) Form of Source One Mortgage Services Corporation Retirement Plan Trust Agreement
Exhibit 10(i) Source One Mortgage Services Corporation Supplemental Retirement Plan
Exhibit 10(j) Source One Mortgage Services Corporation Stock Appreciation Rights Plan
Exhibit 10(w) Investment Contract by and between Source One Mortgage Services Corporation and James A. Conrad
Exhibit 10(x) Investment Contract by and between Source One Mortgage Services Corporation and John A. Courson
Exhibit 10(y) Investment Contract by and between Source One Mortgage Services Corporation and Robert R. Densmore
Exhibit 10(aa) Source One Mortgage Services Corporation Long Term Incentive Plan
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
Exhibit 10(ff) Incentive Agreement in the event of a sale of Source One Mortgage Services Corporation among certain Senior Officers of Source One Mortgage Services Corporation and Fund American Enterprises, Inc.
Exhibit 10 (gg) Retirement Agreement dated June 5, 1996 between Source One Mortgage Services Corporation and Robert W. Richards
Exhibit 10 (hh) Retirement Agreement dated October 22, 1997 between Source One Mortgage Services Corporation and James A. Conrad
Exhibit 10 (jj) Employment Agreement by and between Source One Mortgage Services Corporation and Francis X. Mohan
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
Source One Mortgage Services Corporation and Subsidiaries
Index to Financial Statements and Financial Statement Schedules
(Item 14(a))
Schedules for which provision is made in Regulation S-X are not required under the related instructions or are inapplicable and, therefore, have been omitted or the information required is included in the consolidated financial statements or notes thereto.
*Source One Mortgage Services Corporation's 1997 Annual Report to Shareholders.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
b. Reports on Form 8-K
The Company filed 7 reports on Form 8-K during the fourth quarter of 1997. The dates and contents are described below:
October 23, 1997 Reported Distribution Date Statements for October 25, November 1, November 1, and October 20, 1997 relating to the Source One Mortgage Services Corporation Agency MBS Multi-Class Pass-Through Certificates Series 1987-2, 1988-1, 1988-2 and 1990-1, respectively
October 27, 1997 Reported Report to the Trustee and Report to the Certificate Holders for the month of October 1997 relating to the Source One Mortgage Services Corporation 11 1/2% Mortgage Pass-Through Certificates, Series A
November 17, 1997 Third Amended and Restated Revolving Credit Agreement dated as of July 25, 1997 by and among Source One Mortgage Services Corporation, The Mortgage Authority, Inc. and Central Pacific Mortgage Company (subsidiaries of Source One Mortgage Services Corporation), and the First National Bank of Chicago, individually and as Administrative Agent and Certain Other Lenders
Third Amended and Restated Security and Collateral Agency Agreement dated as of July 25, 1997 by and among Source One Mortgage Services Corporation, The Mortgage Authority, Inc. and Central Pacific Mortgage Company (subsidiaries of Source One Mortgage Services Corporation), The First National Bank of Chicago (in its capacity as administrative agent for the lenders) and National City Bank, Kentucky, as collateral agent
November 25, 1997 Reported Distribution Date Statements for November 25, December 1, December 1, and November 20, 1997 relating to the Source One Mortgage Services Corporation Agency MBS Multi-Class Pass-Through Certificates Series 1987-2, 1988-1, 1988-2 and 1990-1, respectively
November 25, 1997 Reported Report to the Trustee and Report to the Certificate Holders for the month of November 1997 relating to the Source One Mortgage Services Corporation 11 1/2% Mortgage Pass-Through Certificates, Series A
December 29, 1997 Reported Distribution Date Statements for December 25, 1997, December 25, 1997, January 1, 1998, January 1, 1998 and December 20, 1997 relating to the Source One Mortgage Services Corporation Agency MBS Multi-Class Pass-Through Certificates Series 1987-1, 1987-2, 1988-1, 1988-2 and 1990-1, respectively
December 29, 1997 Reported Report to the Trustee and Report to the Certificate Holders for the month of December 1997 relating to the Source One Mortgage Services Corporation 11 1/2% Mortgage Pass-Through Certificates, Series A
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
c. Exhibits
Exhibit No.
3(a) Restated Certificate of Incorporation of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 4(a) of the February 28, 1994 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(b) Certificate of Designation for Series A Preferred Stock of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 3(b) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(c) Amended and Restated Bylaws of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 4(d) of Amendment No. 1 to the registration statement on Form S-3, Registration No. 33-71924)
4(a) Pooling and Servicing Agreement between Manufacturers Hanover Mortgage Corporation (now "Source One Mortgage Services Corporation") and National Bank of Detroit dated March 1, 1983 and relating to Mortgage Pass-Through Certificates, Series A, 11 1/2% Pass-Through Rate (incorporated by reference to Exhibit 4(a) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(b) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated September 25, 1987 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1987-1 (incorporated by reference to Exhibit 10(jj) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(c) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated January 28, 1988 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1987-2 (incorporated by reference to Exhibit 10(kk) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(d) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated March 30, 1988 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1988-1 (incorporated by reference to Exhibit 10(ll) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(e) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated June 28, 1988 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1988-2 (incorporated by reference to Exhibit 10(mm) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(f) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated July 30, 1990 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1990-1 (incorporated by reference to Exhibit 4(a) of the July 30, 1990 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(g) Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and National Bank of Detroit dated September 15, 1986 (incorporated by reference to Exhibit 4(a) of the registration statement on Form S-1, Registration No. 33-8562)
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
(h) First Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and National Bank of Detroit dated November 1, 1986 (incorporated by reference to Exhibit 4(b) of the registration statement on Form S-1, Registration No. 33-8562)
(i) Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated November 21, 1988 (incorporated by reference to Exhibit 4(h) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(j) First Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated November 21, 1988 (incorporated by reference to Exhibit 4(i) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(k) Second Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated October 10, 1991 (incorporated by reference to Exhibit 4(k) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(l) Third Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated October 10, 1991 (incorporated by reference to Exhibit 4(l) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(m) Indenture between Source One Mortgage Services Corporation and The First National Bank of Chicago dated May 7, 1992 (incorporated by reference to Exhibit 19(a) of the Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(n) Resolutions of the Chairman of the Board of Source One Mortgage Services Corporation regarding the issuance of medium-term indebtedness adopted pursuant to authority delegated by the Board of Directors of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 19(b) of the Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, File No. 1-12898, formerly File No. 33-8562). (Said resolutions establish the terms of the Medium-Term Notes, Series B, of Source One Mortgage Services Corporation issuable under the Indenture between Source One Mortgage Services Corporation and The First National Bank of Chicago dated May 7, 1992)
(o) Resolutions of the Chairman of the Board of Source One Mortgage Services Corporation regarding the issuance of a series of medium-term notes, Series B, entitled "9% Debentures due June 1, 2012" adopted pursuant to authority delegated by the Board of Directors of Source One Mortgage Services Corporation (incorporated by reference to Exhibit (i) of the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-12898, formerly File No. 33-8562). (Said resolutions establish the terms of the 9% Debentures due June 1, 2012 of Source One Mortgage Services Corporation issued under the Indenture between Source One Mortgage Services Corporation and The First National Bank of Chicago dated May 7, 1992)
(p) Indenture dated December 1, 1995 between Source One Mortgage Services Corporation and IBJ Schroeder Bank & Trust Company, as trustee (incorporated by reference to Exhibit (a)(1) of Amendment No. 4 to the Report on Schedule 13E-4 filed with the Securities and Exchange Commission on December 21, 1995)
(q) First Supplemental Indenture dated December 1, 1995 between Source One Mortgage Services Corporation and IBJ Schroeder Bank & Trust Company, as trustee (incorporated by reference to Exhibit (a)(2) of Amendment No. 4 to the Report on Schedule 13E-4 filed with the Securities and Exchange Commission on December 21, 1995)
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
(r) Form of 8.25% Debentures due 1996 (incorporated by reference to Exhibit 4(p) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(s) Form of Medium-Term Note, Series A (incorporated by reference to Exhibit 4(q) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(t) Form of 8.875% Notes due 2001 (incorporated by reference to Exhibit 4(r) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(u) Form of 9% Debentures due 2012 (incorporated by reference to Exhibit 4(s) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(v) Specimen Certificate for 8.42% Cumulative Preferred Stock, Series A, of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 4(a) of the Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, File No. 1-12898)
(w) Form of 9.375% Quarterly Income Capital Securities (Subordinated Interest Deferrable Debentures, Due 2025); included in the First Supplemental Indenture dated December 1, 1995 between Source One Mortgage Services Corporation and IBJ Schroeder Bank & Trust Company, as trustee (incorporated by reference to Exhibit (a)(2) of Amendment No. 4 to the Report on Schedule 13E-4 filed with the Securities and Exchange Commission on December 21, 1995)
10 Material Contracts
(a) Source One Mortgage Services Corporation Employee Stock Ownership and 401(k) Savings Plan and Trust Agreement (as amended and restated effective as of October 1, 1996) (incorporated by reference to Exhibit 10(a) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(b) Form of Source One Mortgage Services Corporation Voluntary Deferred Compensation Plan (incorporated by reference to Exhibit 10(e) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(c) First Amendment to Source One Mortgage Services Corporation Voluntary Deferred Compensation Plan (incorporated by reference to Exhibit 10(g) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(d) Form of Source One Mortgage Services Corporation Retirement Plan, as amended and restated (incorporated by reference to Exhibit 10(hh) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(e) First Amendment to Source One Mortgage Services Corporation Retirement Plan (incorporated by reference to Exhibit 10(j) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(f) Second Amendment to Source One Mortgage Services Corporation Retirement Plan (incorporated by reference to Exhibit 10(k) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(g) Third Amendment to Source One Mortgage Services Corporation Retirement Plan (incorporated by reference to Exhibit 10(l) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(h) Form of Source One Mortgage Services Corporation Retirement Plan Trust Agreement (incorporated by reference to Exhibit 10(d) of the registration statement on Form S-1, Registration No. 33-8562)
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
(i) Source One Mortgage Services Corporation Supplemental Retirement Plan (incorporated by reference to Exhibit 10(n) of the Annual Report on Form 10-K for the year ended December 31, 1989, File No. 1-12898, formerly File No. 33-8562)
(j) Source One Mortgage Services Corporation Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10(c) of the Current Report on Form 8-K dated November 11, 1993, File No. 1-12898, formerly File No. 33-8562)
(k) Third Amended and Restated Revolving Credit Agreement dated as of July 25, 1997 by and among Source One Mortgage Services Corporation, The Mortgage Authority, Inc. and Central Pacific Mortgage Company (subsidiaries of Source One Mortgage Services Corporation), and the First National Bank of Chicago, individually and as Administrative Agent and Certain Other Lenders (incorporated by reference to Exhibit 10(a) of the Current Report on Form 8-K dated November 17, 1997, File No. 1-12898)
(l) Third Amended and Restated Security and Collateral Agency Agreement dated as of July 25, 1997 by and among Source One Mortgage Services Corporation, The Mortgage Authority, Inc. and Central Pacific Mortgage Company (subsidiaries of Source One Mortgage Services Corporation), The First National Bank of Chicago (in its capacity as administrative agent for the lenders) and National City Bank, Kentucky, as collateral agent (incorporated by reference to Exhibit 10(b) of the Current Report on Form 8-K dated November 17, 1997, File No. 1-12898)
(m) Federal Tax Sharing Agreement dated as of January 1, 1991, and effective for taxable years beginning after December 31, 1990, by and among Fund American Enterprises Holdings, Inc. and Source One Mortgage Services Corporation (incorporated by reference to Exhibit 10(m) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(n) Eurocommercial Paper Program Agreement dated August 1, 1988 among Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the Dealers named therein (incorporated by reference to Exhibit 10(bb) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(o) Commercial Paper Dealer Agreement dated September 25, 1986 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Shearson Lehman Commercial Paper Inc. (incorporated by reference to Exhibit 10(cc) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(p) Commercial Paper Dealer Agreement dated September 23, 1986 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and First Boston Corporation (incorporated by reference to Exhibit 10(dd) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(q) Issuing and Paying Agency Agreement dated June 19, 1987 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Manufacturers Hanover Trust Company (incorporated by reference to Exhibit 10(s) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(r) Amendment dated June 20, 1992 to Issuing and Paying Agency Agreement dated June 19, 1987 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Manufacturers Hanover Trust Company (incorporated by reference to Exhibit 10(x) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
(s) Amendment dated August 1, 1988 to Issuing and Paying Agency Agreement dated June 19, 1987 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Manufacturers Hanover Trust Company (incorporated by reference to Exhibit 10(t) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(t) Letter of Representations dated November 23, 1990 relating to Issuing and Paying Agency Agreement dated September 18, 1986 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Morgan Guaranty Trust Company of New York (incorporated by reference to Exhibit 10(v) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(u) Depository Agreement dated June 16, 1993 between Source One Mortgage Services Corporation and The First National Bank of Chicago (incorporated by reference to Exhibit 10(a) of the Current Report on Form 8-K dated February 28, 1994, File No. 1-12898, formerly File No. 33-8562)
(v) Stock Purchase Agreement dated December 15, 1995, between Source One Mortgage Services Corporation and Fund American Enterprises, Inc. (incorporated by reference to Exhibit 10(bb) of the Annual Report on Form 10-K for the year ended December 31, 1995, File No. 1-12898)
(w) Investment Contract by and between Source One Mortgage Services Corporation and James A. Conrad (incorporated by reference to Exhibit 10(dd) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(x) Investment Contract by and between Source One Mortgage Services Corporation and John A. Courson (incorporated by reference to Exhibit 10(ee) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(y) Investment Contract by and between Source One Mortgage Services Corporation and Robert R. Densmore (incorporated by reference to Exhibit 10(ff) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(z) Investment Services Agreement dated November 13, 1991 between Source One Mortgage Services Corporation and Fund American Enterprises, Inc. (incorporated by reference to Exhibit 10(rr) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(aa) Source One Mortgage Services Corporation Long Term Incentive Plan (incorporated by reference to Exhibit 10(ii) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(bb) Loan Agreement dated August 10, 1995 by and between Source One Mortgage Services Corporation and Comerica Bank, as amended by an Amendment No. 1 to Loan Agreement dated 1995 and by an Amendment No. 2 to Loan Agreement dated July 10, 1996 (incorporated by reference to Exhibit 10(bb) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
(cc) FNMA/FHLMC/GNMA Mortgage Servicing Purchase and Sale Agreement dated February 28, 1997, by and between Source One Mortgage Services Corporation and Chemical Mortgage Company (incorporated by reference to Exhibit 10(dd) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(dd) Mortgage Loan Interim Subservicing Agreement made as of March 1, 1997, by and between Chemical Mortgage Company and Source One Mortgage Services Corporation (incorporated by reference to Exhibit 10(ee) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(ee) Mortgage Loan Subservicing Agreement, by and between Chemical Mortgage Company and Source One Mortgage Services Corporation (incorporated by reference to Exhibit 10(ff) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(ff) Incentive Agreement in the event of a sale of Source One Mortgage Services Corporation among certain Senior Officers of Source One Mortgage Services Corporation and Fund American Enterprises, Inc. (incorporated by reference to Exhibit 10(ll) of the Annual Report on Form 10-K for the year ended December 31, 1995, File No. 1-12898)
(gg) Retirement Agreement dated June 5, 1996 between Source One Mortgage Services Corporation and Robert W. Richards (incorporated by reference to Exhibit 10(hh) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(hh) Retirement Agreement dated October 22, 1997 between Source One Mortgage Services Corporation and James A. Conrad*
(ii) Mortgage Loan Subservicing Agreement Extension Amendment, by and between Chemical Mortgage Company and Source One Mortgage Services Corporation*
(jj) Employment Agreement by and between Source One Mortgage Services Corporation and Francis X. Mohan*
13 Annual Report to Security Holders
(a) Source One Mortgage Services Corporation 1997 Annual Report to Shareholders. Such report, except for those portions which are expressly incorporated by reference in this Annual Report on Form 10-K, is furnished only for the information of the Commission and is not deemed filed as part hereof*
(b) Audit opinion of Ernst & Young LLP*
16 (a) Letter of Ernst & Young LLP dated March 27, 1997 (incorporated by reference to Exhibit 16(a) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
21 Subsidiaries of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 21 of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
23 Consents of experts
(a) Consent of KPMG Peat Marwick LLP*
(b) Consent of Ernst & Young LLP*
(c) Consent of Coopers & Lybrand L.L.P. dated March 27, 1998 relating to Financial Security Assurance Holdings Ltd.*
24 Powers of Attorney*
27 Financial Data Schedule*
99 The Consolidated Financial Statements of Financial Security Assurance Holdings Ltd. and the related Report of Independent Accountants as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997*
* Filed herewith
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Source One Mortgage Services Corporation
Date: March 27, 1998 By: /s/ MICHAEL C. ALLEMANG ----------------------- Michael C. Allemang Executive Vice President, Chief Financial Officer and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.
The Company does not have any voting securities registered under Section 12 of the Act, and all of the Company's voting securities are held by two entities. Accordingly, no proxy statement, form of proxy or other proxy soliciting material has been, or will be, sent to more than 10 of the registrant's security holders with respect to any annual or other meeting of security holders.
Source One Mortgage Services Corporation and Subsidiaries Form 10-K
EXHIBIT INDEX
Exhibit No. Description
3(a) Restated Certificate of Incorporation of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 4(a) of the February 28, 1994 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(b) Certificate of Designation for Series A Preferred Stock of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 3(b) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(c) Amended and Restated Bylaws of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 4(d) of Amendment No. 1 to the registration statement on Form S-3, Registration No. 33-71924)
4(a) Pooling and Servicing Agreement between Manufacturers Hanover Mortgage Corporation (now "Source One Mortgage Services Corporation") and National Bank of Detroit dated March 1, 1983 and relating to Mortgage Pass-Through Certificates, Series A, 11 1/2% Pass-Through Rate (incorporated by reference to Exhibit 4(a) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(b) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated September 25, 1987 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1987-1 (incorporated by reference to Exhibit 10(jj) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(c) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated January 28, 1988 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1987-2 (incorporated by reference to Exhibit 10(kk) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(d) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated March 30, 1988 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1988-1 (incorporated by reference to Exhibit 10(ll) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(e) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated June 28, 1988 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1988-2 (incorporated by reference to Exhibit 10(mm) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(f) Deposit Trust Agreement between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the First National Bank of Chicago dated July 30, 1990 and relating to Agency MBS Multi-Class Pass-Through Certificates, Series 1990-1 (incorporated by reference to Exhibit 4(a) of the July 30, 1990 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(g) Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and National Bank of Detroit dated September 15, 1986 (incorporated by reference to Exhibit 4(a) of the registration statement on Form S-1, Registration No. 33-8562)
Exhibit No. Description
(h) First Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and National Bank of Detroit dated November 1, 1986 (incorporated by reference to Exhibit 4(b) of the registration statement on Form S-1, Registration No. 33-8562)
(i) Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated November 21, 1988 (incorporated by reference to Exhibit 4(h) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(j) First Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated November 21, 1988 (incorporated by reference to Exhibit 4(i) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(k) Second Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated October 10, 1991 (incorporated by reference to Exhibit 4(k) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(l) Third Supplemental Indenture between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and The First National Bank of Chicago dated October 10, 1991 (incorporated by reference to Exhibit 4(l) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(m) Indenture between Source One Mortgage Services Corporation and The First National Bank of Chicago dated May 7, 1992 (incorporated by reference to Exhibit 19(a) of the Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(n) Resolutions of the Chairman of the Board of Source One Mortgage Services Corporation regarding the issuance of medium-term indebtedness adopted pursuant to authority delegated by the Board of Directors of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 19(b) of the Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, File No. 1-12898, formerly File No. 33-8562). (Said resolutions establish the terms of the Medium-Term Notes, Series B, of Source One Mortgage Services Corporation issuable under the Indenture between Source One Mortgage Services Corporation and The First National Bank of Chicago dated May 7, 1992)
(o) Resolutions of the Chairman of the Board of Source One Mortgage Services Corporation regarding the issuance of a series of medium-term notes, Series B, entitled "9% Debentures due June 1, 2012" adopted pursuant to authority delegated by the Board of Directors of Source One Mortgage Services Corporation (incorporated by reference to Exhibit (i) of the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, File No. 1-12898, formerly File No. 33-8562). (Said resolutions establish the terms of the 9% Debentures due June 1, 2012 of Source One Mortgage Services Corporation issued under the Indenture between Source One Mortgage Services Corporation and The First National Bank of Chicago dated May 7, 1992)
(p) Indenture dated December 1, 1995 between Source One Mortgage Services Corporation and IBJ Schroeder Bank & Trust Company, as trustee (incorporated by reference to Exhibit (a)(1) of Amendment No. 4 to the Report on Schedule 13E-4 filed with the Securities and Exchange Commission on December 21, 1995)
(q) First Supplemental Indenture dated December 1, 1995 between Source One Mortgage Services Corporation and IBJ Schroeder Bank & Trust Company, as trustee (incorporated by reference to Exhibit (a)(2) of Amendment No. 4 to the Report on Schedule 13E-4 filed with the Securities and Exchange Commission on December 21, 1995)
Exhibit No. Description
(r) Form of 8.25% Debentures due 1996 (incorporated by reference to Exhibit 4(p) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(s) Form of Medium-Term Note, Series A (incorporated by reference to Exhibit 4(q) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(t) Form of 8.875% Notes due 2001 (incorporated by reference to Exhibit 4(r) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(u) Form of 9% Debentures due 2012 (incorporated by reference to Exhibit 4(s) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
(v) Specimen Certificate for 8.42% Cumulative Preferred Stock, Series A, of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 4(a) of the Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, File No. 1-12898)
(w) Form of 9.375% Quarterly Income Capital Securities (Subordinated Interest Deferrable Debentures, Due 2025); included in the First Supplemental Indenture dated December 1, 1995 between Source One Mortgage Services Corporation and IBJ Schroeder Bank & Trust Company, as trustee (incorporated by reference to Exhibit (a)(2) of Amendment No. 4 to the Report on Schedule 13E-4 filed with the Securities and Exchange Commission on December 21, 1995)
10 Material Contracts
(a) Source One Mortgage Services Corporation Employee Stock Ownership and 401(k) Savings Plan and Trust Agreement (as amended and restated effective as of October 1, 1996) (incorporated by reference to Exhibit 10(a) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(b) Form of Source One Mortgage Services Corporation Voluntary Deferred Compensation Plan (incorporated by reference to Exhibit 10(e) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(c) First Amendment to Source One Mortgage Services Corporation Voluntary Deferred Compensation Plan (incorporated by reference to Exhibit 10(g) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(d) Form of Source One Mortgage Services Corporation Retirement Plan, as amended and restated (incorporated by reference to Exhibit 10(hh) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(e) First Amendment to Source One Mortgage Services Corporation Retirement Plan (incorporated by reference to Exhibit 10(j) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(f) Second Amendment to Source One Mortgage Services Corporation Retirement Plan (incorporated by reference to Exhibit 10(k) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(g) Third Amendment to Source One Mortgage Services Corporation Retirement Plan (incorporated by reference to Exhibit 10(l) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(h) Form of Source One Mortgage Services Corporation Retirement Plan Trust Agreement (incorporated by reference to Exhibit 10(d) of the registration statement on Form S-1, Registration No. 33-8562)
Exhibit No. Description
(i) Source One Mortgage Services Corporation Supplemental Retirement Plan (incorporated by reference to Exhibit 10(n) of the Annual Report on Form 10-K for the year ended December 31, 1989, File No. 1-12898, formerly File No. 33-8562)
(j) Source One Mortgage Services Corporation Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10(c) of the Current Report on Form 8-K dated November 11, 1993, File No. 1-12898, formerly File No. 33-8562)
(k) Third Amended and Restated Revolving Credit Agreement dated as of July 25, 1997 by and among Source One Mortgage Services Corporation, The Mortgage Authority, Inc. and Central Pacific Mortgage Company (subsidiaries of Source One Mortgage Services Corporation), and the First National Bank of Chicago, individually and as Administrative Agent and Certain Other Lenders (incorporated by reference to Exhibit 10(a) of the Current Report on Form 8-K dated November 17, 1997, File No. 1-12898)
(l) Third Amended and Restated Security and Collateral Agency Agreement dated as of July 25, 1997 by and among Source One Mortgage Services Corporation, The Mortgage Authority, Inc. and Central Pacific Mortgage Company (subsidiaries of Source One Mortgage Services Corporation), The First National Bank of Chicago (in its capacity as administrative agent for the lenders) and National City Bank, Kentucky, as collateral agent (incorporated by reference to Exhibit 10(b) of the Current Report on Form 8-K dated November 17, 1997, File No. 1-12898)
(m) Federal Tax Sharing Agreement dated as of January 1, 1991, and effective for taxable years beginning after December 31, 1990, by and among Fund American Enterprises Holdings, Inc. and Source One Mortgage Services Corporation (incorporated by reference to Exhibit 10(m) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(n) Eurocommercial Paper Program Agreement dated August 1, 1988 among Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and the Dealers named therein (incorporated by reference to Exhibit 10(bb) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(o) Commercial Paper Dealer Agreement dated September 25, 1986 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Shearson Lehman Commercial Paper Inc. (incorporated by reference to Exhibit 10(cc) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(p) Commercial Paper Dealer Agreement dated September 23, 1986 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and First Boston Corporation (incorporated by reference to Exhibit 10(dd) of the September 22, 1988 Current Report on Form 8-K, File No. 1-12898, formerly File No. 33-8562)
(q) Issuing and Paying Agency Agreement dated June 19, 1987 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Manufacturers Hanover Trust Company (incorporated by reference to Exhibit 10(s) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(r) Amendment dated June 20, 1992 to Issuing and Paying Agency Agreement dated June 19, 1987 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Manufacturers Hanover Trust Company (incorporated by reference to Exhibit 10(x) of the Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-12898, formerly File No. 33-8562)
Exhibit No. Description
(s) Amendment dated August 1, 1988 to Issuing and Paying Agency Agreement dated June 19, 1987 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Manufacturers Hanover Trust Company (incorporated by reference to Exhibit 10(t) of the Annual Report on Form 10-K for the year ended December 31, 1990, File No. 1-12898, formerly File No. 33-8562)
(t) Letter of Representations dated November 23, 1990 relating to Issuing and Paying Agency Agreement dated September 18, 1986 between Fireman's Fund Mortgage Corporation (now "Source One Mortgage Services Corporation") and Morgan Guaranty Trust Company of New York (incorporated by reference to Exhibit 10(v) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(u) Depository Agreement dated June 16, 1993 between Source One Mortgage Services Corporation and The First National Bank of Chicago (incorporated by reference to Exhibit 10(a) of the Current Report on Form 8-K dated February 28, 1994, File No. 1-12898, formerly File No. 33-8562)
(v) Stock Purchase Agreement dated December 15, 1995, between Source One Mortgage Services Corporation and Fund American Enterprises, Inc. (incorporated by reference to Exhibit 10(bb) of the Annual Report on Form 10-K for the year ended December 31, 1995, File No. 1-12898)
(w) Investment Contract by and between Source One Mortgage Services Corporation and James A. Conrad (incorporated by reference to Exhibit 10(dd) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(x) Investment Contract by and between Source One Mortgage Services Corporation and John A. Courson (incorporated by reference to Exhibit 10(ee) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(y) Investment Contract by and between Source One Mortgage Services Corporation and Robert R. Densmore (incorporated by reference to Exhibit 10(ff) of the Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-12898)
(z) Investment Services Agreement dated November 13, 1991 between Source One Mortgage Services Corporation and Fund American Enterprises, Inc. (incorporated by reference to Exhibit 10(rr) of the Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-12898, formerly File No. 33-8562)
(aa) Source One Mortgage Services Corporation Long Term Incentive Plan (incorporated by reference to Exhibit 10(ii) of the Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-12898)
(bb) Loan Agreement dated August 10, 1995 by and between Source One Mortgage Services Corporation and Comerica Bank, as amended by an Amendment No. 1 to Loan Agreement dated 1995 and by an Amendment No. 2 to Loan Agreement dated July 10, 1996 (incorporated by reference to Exhibit 10(bb) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898) Exhibit No. Description
(cc) FNMA/FHLMC/GNMA Mortgage Servicing Purchase and Sale Agreement dated February 28, 1997, by and between Source One Mortgage Services Corporation and Chemical Mortgage Company (incorporated by reference to Exhibit 10(dd) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(dd) Mortgage Loan Interim Subservicing Agreement made as of March 1, 1997, by and between Chemical Mortgage Company and Source One Mortgage Services Corporation (incorporated by reference to Exhibit 10(ee) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(ee) Mortgage Loan Subservicing Agreement, by and between Chemical Mortgage Company and Source One Mortgage Services Corporation (incorporated by reference to Exhibit 10(ff) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(ff) Incentive Agreement in the event of a sale of Source One Mortgage Services Corporation among certain Senior Officers of Source One Mortgage Services Corporation and Fund American Enterprises, Inc. (incorporated by reference to Exhibit 10(ll) of the Annual Report on Form 10-K for the year ended December 31, 1995, File No. 1-12898)
(gg) Retirement Agreement dated June 5, 1996 between Source One Mortgage Services Corporation and Robert W. Richards (incorporated by reference to Exhibit 10(hh) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
(hh) Retirement Agreement dated October 22, 1997 between Source One Mortgage Services Corporation and James A. Conrad*
(ii) Mortgage Loan Subservicing Agreement Extension Amendment, by and between Chemical Mortgage Company and Source One Mortgage Services Corporation*
(jj) Employment Agreement by and between Source One Mortgage Services Corporation and Francis X. Mohan*
13 Annual Report to Security Holders
(a) Source One Mortgage Services Corporation 1997 Annual Report to Shareholders. Such report, except for those portions which are expressly incorporated by reference in this Annual Report on Form 10-K, is furnished only for the information of the Commission and is not deemed filed as part hereof*
(b) Audit opinion of Ernst & Young LLP*
16 (a) Letter of Ernst & Young LLP dated March 27, 1997 (incorporated by reference to Exhibit 16(a) of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
21 Subsidiaries of Source One Mortgage Services Corporation (incorporated by reference to Exhibit 21 of the Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-12898)
23 Consents of experts
(a) Consent of KPMG Peat Marwick LLP*
(b) Consent of Ernst & Young LLP*
(c) Consent of Coopers & Lybrand L.L.P. dated March 27, 1998 relating to Financial Security Assurance Holdings Ltd.*
24 Powers of Attorney*
27 Financial Data Schedule*
99 The Consolidated Financial Statements of Financial Security Assurance Holdings Ltd. and the related Report of Independent Accountants as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997*
* Filed herewith
Source One Mortgage Services Corporation and Subsidiaries Form 10-K