Loan Purchase and Sale Agreement (LPSA): A Clause-by-Clause Guide

A loan purchase agreement, usually called an LPSA (loan purchase and sale agreement) in the note business, is the binding contract in which a seller agrees to sell and a buyer agrees to buy specific mortgage loans. It sets the price, the cutoff date, what the seller promises about the loans and what happens if a promise turns out to be false. How much protection you get varies widely: in a master agreement Ocwen used to sell loans to Altisource Residential in 2013, the seller had 90 days to cure a breach before repurchasing the loan, while in a 2011 JPMorgan Chase sale of a single commercial loan, section 10.3 of the article headed "Indemnification; Repurchase; Discretionary Exclusion" reads "Intentionally Omitted."

This guide walks through an LPSA clause by clause: what each section does, what the publicly filed agreements above actually say, and where buyers usually push. It describes how these clauses typically work, not what your contract must say, so have an attorney review the agreement on your first purchases.

What Is a Loan Purchase Agreement, and What Else Is It Called?

The LPSA comes after the parts of the deal that aren't binding. You review the seller's loan tape, bid, sign a letter of intent and run due diligence; the LPSA is where both sides commit. Once it's signed, the buyer is obligated to fund and the seller to deliver the loans and their collateral files. The pre-closing phase of our mortgage due diligence checklist lists what to have verified before you sign.

The same contract goes by several names:

The labels differ, but the sections cover similar ground: parties and definitions, dates, price, transfer mechanics, representations from both sides, remedies and the exhibits.

Parties: Is the Seller the Last Holder in the Chain?

The opening section names the seller and buyer by legal entity and address. It looks like a formality, but it's your first ownership check. The seller on the LPSA should be the entity at the end of both chains in the file: the last assignment of the mortgage and the last allonge or endorsement on the promissory note. If a related company holds the last assignment but a different entity signs the contract, you may be buying from someone who doesn't own the loan.

Cross-check the seller's name against every link in the chain of title before you sign, not after you fund. Our guide to confirming note ownership before you buy covers where to look. The title representation can outlast the others: in the JPMorgan agreement, the seller represents that it "is the sole legal and beneficial owner of the Loans," and that representation is carved out of the 90-day survival limit that applies to the others.

Closing Date vs. Cutoff Date

Two dates decide when ownership, and everything that comes with it, moves from seller to buyer.

In the agreements I use, the cutoff date is generally the funding date. It doesn't have to be. In the JPMorgan sale, the "Cut-Off Date" was May 19, 2011, closing was due "not later than June 17, 2011," and "all Collections in respect of the Assets received on or after the Cut-Off Date shall be for the account of Buyer," with the buyer also reimbursing protective advances the seller made after the cutoff. In Ocwen's master agreement, the purchase price is each loan's balance as of the cutoff date multiplied by the agreed purchase price percentage, and the buyer "shall be entitled to all payments of principal and interest and other recoveries on the Mortgage Loans received on and after the related Cut-off Date."

The cutoff cuts both ways:

• A payoff. If the borrower pays off the day after the cutoff, the proceeds are yours. If they pay off the day before, the seller keeps them, and in the agreements I use that loan simply drops out of the sale.
• A senior foreclosure. If a senior lien forecloses the day after the cutoff and wipes out the junior lien you bought, the loss is yours. A day earlier, it was the seller's problem.

Read the definition rather than assuming, and track the date.

Purchase Price and the Loan Schedule (Exhibit A)

The purchase price appears in the body of the agreement and is itemized in the mortgage loan schedule: Exhibit A in the agreement I use, Schedule 1 in JPMorgan's. At minimum the schedule lists each loan's number, property address, unpaid principal balance and price.

Before you sign, check three things:

1. Each loan's price matches what you negotiated, including any repricing from due diligence.
2. The total price and total UPB at the bottom of the schedule match the figures in the contract body.
3. The balances haven't quietly changed since you priced the tape. A loan dropped from the pool or a corrected balance has to flow through to the totals.

Two smaller money terms are worth finding. A deposit: the JPMorgan agreement set it at "Zero Dollars ($0.00)," while in HUD's HVLS 2027-1 reverse-mortgage sale, a winning bidder posts a deposit that "will be applied to the sale price on the settlement date" (HUD, September 2026 notice). And payments that arrive after the cutoff but before servicing moves: they belong to the buyer and are forwarded on, not credited against a price you've already paid.

Transfer Date: Documents, Servicing and Borrower Notices

The transfer date is the seller's deadline for post-closing delivery, and it usually covers three things:

• New assignments and allonges transferring the loans to your entity
• The physical collateral files, originals plus images, shipped to you or your custodian
• The servicing transfer from the current servicer to yours, through the boarding process

In the agreement I use, the transfer date is 30 days after closing, a normal window, though some sellers expect longer, maybe 60 days. On the loans I sell, the real delay is the servicer scheduling the transfer on its end, not the paperwork. Large sellers set their own clocks: the JPMorgan agreement required the original note, endorsed to the buyer "without recourse, representation or warranty" (or a lost note affidavit), within three business days of closing, and HUD's September 2026 sale notice says deliveries "will occur in conjunction with settlement and servicing transfer no later than 60 days after the Award Date."

The paperwork maps onto the Uniform Commercial Code. A note is transferred "when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument" (UCC §3-203(a)), and an allonge counts because "a paper affixed to the instrument is a part of the instrument" (UCC §3-204(a)). Article 9 applies to "a sale of ... promissory notes" (UCC §9-109(a)(3)), and attaching an interest in a right to payment secured by a mortgage "is also attachment of a security interest in the ... mortgage" (UCC §9-203(g)). The county land records run on state recording law, though, so record the assignment promptly; our guide to recording the assignment of mortgage explains why.

Federal rules also set two borrower notices on consumer mortgage loans:

For 60 days after the transfer, a payment the borrower sends on time to the old servicer "may not be treated as late for any purpose" (12 CFR §1024.33(c)). Some LPSAs split the letters between the parties: in the JPMorgan agreement, the seller notifies each borrower and directs payments to the buyer, and the buyer "shall, at its own expense, send to each Borrower a notification of sale letter." Our post-funding closing checklist tracks each step.

Who Prepares the Assignments and Allonges?

Some agreements put this on the buyer, including the one I use. On the loans I sell, we prepare the assignments and allonges anyway as part of the collateral package, and I think that's standard for sellers, because the seller's entity is the one signing and notarizing them. Whoever drafts them, your job is the same: confirm every assignment and allonge names the right entities and loan, is signed and notarized where required, and arrives in the file.

Buyer Representations: What You Promise the Seller

The buyer's section is shorter, but you are still signing statements of fact. Typical ones:

• Your entity is duly organized, in good standing and authorized to sign.
• You aren't on the Treasury's sanctions list and aren't the borrower or the borrower's affiliate (both appear in the JPMorgan agreement).
• You carry a stated amount of insurance, if the seller's form asks for it. Check the number against your policy before you sign.
• You understand what you're buying. Ocwen's buyer acknowledged the loans "may have limited or no liquidity" and that it could bear "a total loss of the Purchase Price."

HUD goes further and makes bidders sign a qualification statement with "certain representations and warranties" before they can get the bid package and its due diligence files (HUD).

Seller Representations and Warranties: Your Main Protection

The seller's representations and warranties are statements about the loans that, if false, give you contractual recourse. They are the most important section of the agreement, and the most variable. These are the asset-level representations in the agreement I use when I sell loans, and the ones to ask for when a seller's form leaves them out:

The 1099-C representation matters because of what the form records. A lender files it after an "identifiable event," and the IRS list includes "a discharge of indebtedness because of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt" (IRS, Instructions for Forms 1099-A and 1099-C). If a prior holder filed one, the borrower holds a federal form saying the debt was canceled, and whether you can still collect becomes a question you've bought. A missing original note is a similar problem: under the UCC, a person enforcing a lost note "must prove the terms of the instrument and the person's right to enforce the instrument" (UCC §3-309(b)). Our guide to what happens if the promissory note is missing covers the lost note affidavit.

Watch for knowledge qualifiers. JPMorgan's modification representation applies only "to Seller's knowledge." Ocwen's loan-level representations are also made to the seller's knowledge, but for most of them the agreement adds that if the facts are wrong, there is a breach "notwithstanding that such representation and warranty is made 'to Seller's knowledge,'" which turns a weak promise into a usable one for repurchase.

As-Is Language, Excluded Information and Survival

Three clauses set the outer edges of your recourse, and they're easy to skim past:

• As-is. Both filed agreements apply "AS IS, WHERE IS" and "WITH ALL FAULTS" language to whatever they don't expressly represent. Anything not represented is your risk.
• Excluded information. In the JPMorgan agreement, the buyer acknowledges the seller may hold material information it hasn't shared, and "waives and releases any claims" over its nondisclosure. Your due diligence is the only check on what's missing.
• Survival. Representations expire. JPMorgan's survive "for a period of 90 days after the Closing Date," except title. Ocwen's survive six months. Your collateral file audit has to finish, and any claim has to be sent, inside that window.

Cure and Repurchase: What Happens After a Breach

The repurchase clause turns a false representation into a refund. The usual sequence:

1. You find the breach. Auditing the files after closing, you find a gap in the assignment chain, a missing note with no lost note affidavit, or an undisclosed modification.
2. You send a collateral exception report. Written notice listing each deficiency and the representation it breaks. Ocwen's agreement requires "prompt written notice" with "sufficient documentation to enable Seller to determine the validity" of the claim. A phone call carries no contractual weight.
3. The seller gets a cure period. Ocwen's seller had 90 days from receiving the notice to fix the problem: find the document, record a corrective assignment, supply an affidavit.
4. If it isn't cured, the seller buys the loan back. Read the price formula. Ocwen's repurchase price is the loan's unpaid balance on the repurchase date times the original purchase price percentage, never more than the price you paid, so principal you've collected shrinks the refund.

The fine print matters at every step. Ocwen's breach has to "materially and adversely" affect the loan's value, and the seller has no obligation to repurchase if notice doesn't arrive "within six (6) months following the related Closing Date." JPMorgan's agreement has no repurchase right at all; its buyer even takes any loan caught up in a proceeding, bankruptcy included, "without any reduction or adjustment to the Purchase Price or right to have Seller repurchase such Asset." Without a repurchase clause, your recourse is a claim for breach: JPMorgan's buyer has "no recourse to Seller except for Seller's breaches of its representations, warranties or covenants," and most of those representations expire 90 days after closing.

Use the clause with judgment. A bank that has to buy loans back may decide selling them isn't worth it, so I only ask for a repurchase when a breach breaks the economics of a loan.

Indemnification: Don't Assume It Runs Both Ways

Indemnification decides who pays when a third party sues over the loans: a borrower over pre-sale servicing, say, or a challenge to the lien. Buyers often expect the seller to cover what happened before closing and the buyer what happens after. Read whether yours does. In the JPMorgan agreement, the indemnity section is a "Buyer's Indemnity": the buyer covers the seller's losses from the buyer's breaches and the obligations it assumed, and it expressly "includes all environmental risks and liabilities associated with the Assets," with no matching seller indemnity. If you see carve-outs for regulatory claims or servicer conduct before the cutoff, ask why.

Exhibit B: The Bill of Sale

The agreement I use attaches a bill of sale as Exhibit B, which the seller signs once the funds arrive to acknowledge payment and the transfer of the loans. With a seller you trade with often, it can feel like a formality, and some buyers never ask for it. It earns its place in two situations: a first trade with a new seller, and a servicing transfer that stalls, when you may need to enforce the agreement's timing. Collect it on every first trade.

Can You Negotiate an LPSA?

It depends on who's selling. HUD's September 2026 notice for its HVLS 2027-1 sale is blunt: "To ensure a competitive bidding process, the terms of the bidding process and the CAA are not subject to negotiation." HUD also "reserves the right to remove mortgage loans from a sale at any time prior to the Award Date." On the other side of the table, when I sell loans we generally don't negotiate additional terms.

With a seller whose form leaves gaps, these are the requests worth making:

• Add missing representations, especially complete collateral files and no 1099-C filings. Neither costs a seller with clean loans anything.
• Define the cure period if the repurchase clause doesn't set one.
• Match the survival period to your audit. If files arrive 30 days after closing and representations die at 90, you have 60 days to audit and give notice.
• Pin down the cutoff date so payments in the gap between closing and the servicing transfer have an owner.
• Spell out document delivery: which documents, by when and in what form.
• Use a third-party escrow or bailee with a new seller, so funds and documents release only when both sides have delivered, and confirm wire instructions by phone using a number you already have.

A Pre-Signing Check

The rule I use: if a protection you'd need on a given loan isn't in the agreement, either negotiate it in or price the loan as if it will never be there. Once the wire goes out, the LPSA is the only recourse you have.