Exhibit 4.2
SALE AND SERVICING AGREEMENT
Dated as of [ ]
among
[ ]
(Seller)
BOND SECURITIZATION, L.L.C.
(Depositor)
[ ] HOME EQUITY LOAN TRUST 200_-_
(Trust)
[ ]
(Servicer)
and
[ ]
(Indenture Trustee)
[ ] Home Equity Loan Trust 200_-_
Table of Contents
Page
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EXHIBITS
EXHIBIT A Mortgage Loan Schedule
EXHIBIT B List of Servicing Officers
EXHIBIT C Form of Monthly Statement to Noteholders
EXHIBIT D Form of Servicing Certificate
EXHIBIT E Letter of Depositor to Indenture Trustee Re: Exchange Act Reports
EXHIBIT F Form of Liquidation Report
EXHIBIT G Form of Class A Notes
EXHIBIT H Form of Mortgage Note
EXHIBIT I Form of Mortgage
EXHIBIT J Form of Request for Release
EXHIBIT K Specimen of the Insurance Policy
EXHIBIT L Custodial Fee Letter
i
This Sale and Servicing Agreement (the "Agreement") is entered into
effective as of [ ], among [ ] HOME EQUITY LOAN TRUST 200_-_, a Delaware
business trust (the "Trust"), [ ], a [ ], as seller (the "Seller"), Bond
Securitization, L.L.C., a Delaware limited liability company, as depositor
(the "Depositor"), [ ], a [ ] corporation, as servicer (the "Servicer"), and
[Indenture Trustee], a [ ] banking corporation, as Indenture Trustee on behalf
of the Class A Noteholders (in such capacity, the "Indenture Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Trust desires to purchase from the Depositor a pool of
Mortgage Loans which were originated by the Seller in the ordinary course of
business of the Seller;
WHEREAS, the Depositor, concurrently with the execution of this
Agreement, purchased the Mortgage Loans from the Seller pursuant to the
Mortgage Loan Purchase Agreement (the "Mortgage Loan Purchase Agreement");
WHEREAS, the Servicer is willing to service such Mortgage Loans in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
Account: Any of the Distribution Account or the Collection Account.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of
a Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise and "controlling" and "controlled" shall
have meanings correlative to the foregoing.
Agreement: This Sale and Servicing Agreement and all amendments hereof
and supplements hereto.
Appraised Value: The appraised value of the Mortgaged Property based upon
the appraisal made by or for the originator at the time of the origination of
the related Mortgage Loan.
Assignment Event: [ ].
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Indenture Trustee, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering the Mortgage Loans secured by
Mortgaged Properties located in the same jurisdiction.
Available Funds: As to any Payment Date, the sum of (A) the sum of all
amounts described in clauses (i) through (vii) inclusive, of Section 3.02(b)
received by the Servicer (including any amounts paid by the Servicer and the
Seller, and excluding (a) any amounts not required to be deposited in the
Collection Account pursuant to Section 3.02(b), and (b) any amounts paid to
the Servicer or withdrawn by the Servicer pursuant to Sections 3.03(ii),
(iii), (iv), (v), (vi) and (vii) in respect of the Mortgage Loans) during the
related Due Period and deposited into the Collection Account as of the
Determination Date, (B) Insured Payments, if any, and (C) any Termination
Price with respect to the Mortgage Loans deposited to the Distribution Account
pursuant to Section 8.01(b). No amount included in this definition by virtue
of being described by any component of the definition thereof shall be
included twice by virtue of also being described by any other component or
otherwise.
Base O/C Amount: With respect to any Payment Date, an amount equal to the
product of (x) the Base O/C Percentage and (y) the Cut-Off Date Pool Principal
Balance.
Base O/C Percentage: [ ]%.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance
Fund is not existing and performing duties now assigned to it, the body
performing such duties on such date.
Book-Entry Note: Any Class A Note registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the
rules of such Depository).
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day
on which the Insurer or banking institutions in the States of New York, New
Jersey or the state in which the corporate trust office of the Indenture
Trustee is located are required or authorized by law to be closed.
Civil Relief Act Interest Shortfalls: As to any Payment Date, any
shortfalls in Interest Collections on the Mortgage Loans during the prior Due
Period that are attributable to the application of the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended.
Class A Monthly Principal Distributable Amount: [ ].
Class A Note: Any Class A Note executed by the Trust and authenticated by
the Indenture Trustee substantially in the form set forth in Exhibit G hereto.
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Class A Note Owner: The Person who is the beneficial owner of a
Book-Entry Note.
Class A Note Principal Balance: With respect to any date of
determination, (a) the Original Class A Note Principal Balance less (b) the
aggregate of amounts distributed as principal to the Class A Noteholders on
previous Payment Dates.
Class A Note Rate: [ ].
Class A Noteholder or Holder: The Person in whose name a Class A Note is
registered in the Note Register, except that, solely for the purpose of giving
any consent, direction, waiver or request pursuant to this Agreement, (x) any
Class A Note registered in the name of the Seller or the Depositor, or any
Person actually known to a Responsible Officer to be an Affiliate of the
Seller or the Depositor (y) any Class A Note for which the Seller or the
Depositor, or any Person actually known to a Responsible Officer to be an
Affiliate of the Seller or the Depositor is the Class A Note Owner shall be
deemed not to be outstanding (unless to the actual knowledge of a Responsible
Officer (i) the Seller or the Depositor, or such Affiliate, is acting as
trustee or nominee for a Person who is not an Affiliate of the Seller or the
Depositor and who makes the voting decision with respect to such Class A Note
or (ii) the Seller or the Depositor, or such Affiliate, is the Class A Note
Owner of all the Class A Notes) and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect any such consent, direction, waiver
or request has been obtained and (z) the Insurer shall be deemed to be the
owner of 100% of the Class A Notes so long as no Insurer Default is then
continuing.
Class A Principal Distribution: [ ]
Closing Date: [ ].
Code: The Internal Revenue Code of 1986, as amended from time to time,
and Treasury Regulations promulgated thereunder.
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Class A Noteholders, the Ownership Interest
and the Insurer pursuant to Section 3.02(b). The Collection Account shall be
an Eligible Account.
Combined Loan-to-Value Ratio or CLTV: With respect to any Mortgage Loan,
the sum of the original principal balance of such Mortgage Loan and the
outstanding principal balance of the First Lien, if any, as of the date of
origination of the Mortgage Loan, divided by the Appraised Value.
Compensating Interest: As to any Payment Date, the amount calculated
pursuant to Section 5.07.
Corporate Trust Office: The principal office of the Indenture Trustee at
which at any particular time its corporate business shall be administered,
which office on the Closing Date is located at [ ], Attention: Indenture Trust
Administration.
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Curtailment: With respect to a Mortgage Loan, any payment of principal
received during a Due Period as part of a payment that is in excess of the
amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency or to be applied for subsequent Monthly Payments as and when the
same come due pursuant to directions from the Mortgagor to such effect.
Custodial Fee: The fees and expenses as set forth in the fee letter
between [ ] and [ ], as of [ ], attached as Exhibit L hereto.
Cut-Off Date: As to a Mortgage Loan, the close of business on [ ].
Cut-Off Date Principal Balance: With respect to any Mortgage Loan, the
unpaid principal balance thereof as of the Cut-Off Date (or as of the
applicable date of substitution with respect to an Eligible Substitute
Mortgage Loan pursuant to Section 2.02 or 2.06).
Cut-Off Date Pool Principal Balance: $[ ].
Defective Mortgage Loan: Any Mortgage Loan subject to repurchase or
substitution by the Seller pursuant to Section 2.02 or 2.04 or purchase by the
Servicer pursuant to Section 3.20.
Definitive Notes: As defined in the Indenture.
Delinquency Amount: The product of the Delinquency Percentage and the
Pool Principal Balance as of the end of the related Due Period.
Delinquency Percentage: [ ].
Deposit Event: [ ].
Depositor: Bond Securitization, L.L.C., a Delaware limited liability
company.
Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of Class A Notes
evidencing $[ ] in initial aggregate principal amount of the Class A Notes.
The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(a)(5) of the UCC of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Payment Date, the eighteenth day
of the month in which such Payment Date occurs (or if such day is not a
Business Day, the Business Day immediately succeeding such eighteenth day).
Distributable Excess Spread: As to any Payment Date, the lesser of (i)
the Excess Spread for such Payment Date and (ii) the excess, if any, of the
Specified O/C Amount for such Payment Date over the O/C Amount on such date
before giving effect to the application of Distributable Excess Spread on such
Payment Date.
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Distribution Account: The account established by the Indenture Trustee
pursuant to Section 5.05. The Distribution Account shall be an Eligible
Account.
Due Date: With respect to any Mortgage Loan and any Monthly Payment, the
date on which such Monthly Payment is due from the related Mortgagor.
Due Period: As to any Determination Date or Payment Date, the calendar
month immediately preceding such Determination Date or Payment Date.
Eligible Account: [ ].
Eligible Investments: One or more of the following (excluding any
callable investments purchased at a premium):
[(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided that such obligations are
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition thereof,
provided that the short-term unsecured debt obligations of the party
agreeing to repurchase such obligations are at the time rated by a Rating
Agency in its highest short-term rating category (which is "A-1+" for
Standard & Poor's and "P-1" for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if ▇▇▇▇▇'▇ is a Rating Agency, shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than 365
days) of any U.S. depository institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal and/or state banking authorities,
provided that the unsecured short-term debt obligations of such
depository institution or trust company at the date of acquisition
thereof have been rated by either Moody's or Standard & Poor's in its
highest unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of not more than
90 days) of any corporation incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been
rated by Standard & Poor's or Moody's in their highest short-term rating
categories;
(v) short term investment funds ("STIFS") sponsored by any trust
company or national banking association incorporated under the laws of
the United States or any state thereof which on the date of acquisition
has been rated by Standard & Poor's or Moody's in their respective
highest rating category of long term unsecured debt;
(vi) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time as the
interest is held in such fund has a rating of "Aaa" by Moody's or either
"AAAm" or "AAAm-G" by Standard & Poor's; and
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(vii) other obligations or securities that are acceptable to each
Rating Agency and the Insurer as an Eligible Investment hereunder and
will not result in a reduction in the then current rating of the Class A
Notes, as evidenced by a letter to such effect from such Rating Agency
and the Insurer and with respect to which the Servicer has received
confirmation that, for tax purposes, the investment complies with each
proviso set forth below in the last clause of this definition;
provided that no instrument described hereunder shall evidence either the
right to receive (a) only interest with respect to the obligations underlying
such instrument or (b) both principal and interest payments derived from
obligations underlying such instrument and the interest and principal payments
with respect to such instrument provided a yield to maturity at par greater
than 120% of the yield to maturity at par of the underlying obligations; and
provided, further, that no instrument described hereunder may be purchased at
a price greater than par if such instrument may be prepaid or called at a
price less than its purchase price prior to its stated maturity.]
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
Seller for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance) that is no greater than the Principal Balance of
the Defective Mortgage Loan and no more than % less than the Principal Balance
of the Defective Mortgage Loan; (ii) have an original principal balance that
is a Conforming Original Principal Balance; (iii) have a Loan Rate not less
than the Loan Rate of the Defective Mortgage Loan and not more than % in
excess of the Loan Rate of such Defective Mortgage Loan; (iv) have a remaining
term to maturity not more than months earlier and not later than the remaining
term to maturity of the Defective Mortgage Loan; (v) be of the same type of
Mortgaged Property as the Defective Mortgage Loan or a detached single family
residence; (vi) have a Mortgage of the same or higher level of priority as the
Mortgage relating to the Defective Mortgage Loan at the time such Mortgage was
transferred to the Trust; (vii) comply with each representation and warranty
set forth in Section 2.04 (deemed to be made as of the date of substitution);
and (viii) have an original Combined Loan-to-Value Ratio [not greater] than
that of the Defective Mortgage Loan. More than one Eligible Substitute
Mortgage Loan may be substituted for a Defective Mortgage Loan if such
Eligible Substitute Mortgage Loans meet the foregoing attributes in the
aggregate and such substitution is approved in writing in advance by the
Insurer.
ERISA: Employee Retirement Income Security Act of 1974, as amended.
Event of Servicing Termination: As defined in Section 7.01.
Excess O/C Amount: As to any Payment Date, the amount by which (i) the
O/C Amount for such Payment Date exceeds (ii) the Specified O/C Amount for
such Payment Date.
Excess Spread: With respect to any Payment Date, the positive excess, if
any, of (a) Available Funds for such Payment Date over (b) the aggregate of
amounts required to be distributed pursuant to subclauses (i) through (iv) of
Section 5.01(a) herein on such Payment Date.
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FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
Fidelity Bond: As defined in Section 3.06.
Final Payment Date: The Payment Date in [ ].
First Lien: With respect to any Mortgage Loan that is a second priority
lien, the mortgage loan or mortgage loans relating to the corresponding
Mortgaged Property having a first priority lien to such Mortgage Loan.
Fiscal Agent: As defined in the Insurance Policy.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
Grant: As defined in the Indenture.
Guaranteed Principal Distribution Amount: (i) With respect to any Payment
Date other than the Final Payment Date, the amount, if any, by which the Class
A Note Principal Balance exceeds the [Pool Principal Balance] as of the end of
the related Due Period (after giving effect to all payments of principal on
the Class A Notes on such Payment Date pursuant to Section 5.01 hereof). With
respect to the Final Payment Date, the outstanding Class A Note Principal
Balance (after giving effect to all payments of principal on the Class A Notes
on such Final Payment Date pursuant to Section 5.01(a) hereof).
Indenture: The Indenture, dated as of [ ], between the Issuer and the
Indenture Trustee.
Indenture Trustee: [ ], a [ ] banking corporation, as Indenture Trustee
under the Indenture or any successor indenture trustee under the Indenture
appointed in accordance with such agreement.
Indenture Trustee Fee: With respect to any Payment Date, the greater of
(i) 1/12 of the sum of (a) the product of (1) the Indenture Trustee Fee Rate
and (2) the Pool Principal Balance of the Mortgage Loans as of the end of the
second preceding Due Period (or in the case of the first Payment Date, as of
the Cut Off Date) and (b) any Custodial Fees to the extent not paid by the
Servicer, or (ii) $[ ].
Indenture Trustee Fee Rate: The per annum rate at which the Indenture
Trustee Fee is calculated, which is an amount equal to [ ]% per annum.
Indenture Trustee's Statement to Noteholders: As defined in Section 5.03.
Insurance and Reimbursement Agreement: The Insurance and Reimbursement
Agreement dated as of [ ] among the Indenture Trustee, the Seller, the
Servicer, [ ] and the
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Insurer, including any amendments and supplements thereto in accordance with
the terms thereof.
Insurance Policy: The Financial Guaranty Insurance Policy (No. [ ]) with
respect to the Class A Notes and the Senior Interest Participation and all
endorsements thereto, if any, dated the Closing Date, issued by the Insurer
for the benefit of the Holders of the Class A Notes and the Senior Interest
Participation, a copy of which is attached hereto as Exhibit K.
Insurance Proceeds: Proceeds paid by any insurer (other than the Insurer)
pursuant to any insurance policy covering a Mortgage Loan or Mortgaged
Property, or amounts required to be paid by the Servicer pursuant to Section
3.05, net of any component thereof (i) covering any expenses incurred by or on
behalf of the Servicer in connection with obtaining such proceeds, (ii)
applied to the restoration or repair of the related Mortgaged Property, (iii)
released to the Mortgagor in accordance with the Servicer's normal servicing
procedures, or (iv) required to be paid to any holder of a mortgage senior to
such Mortgage Loan.
Insured Payment: With respect to any Payment Date, an amount equal to the
sum of the (i) the Guaranteed Principal Distribution Amount and (ii) the
amount, if any, by which the aggregate of the Interest Distributions with
respect to the Class A Notes for such Payment Date exceeds the amount on
deposit in the Distribution Account available to be distributed therefor on
such Payment Date.
Insurer: [ ], a stock insurance company organized and created under the
laws of the State of [ ], or any successor thereto.
Insurer Default: [ ].
Interest Carryover Shortfall: With respect to any Payment Date, the Class
A Notes, the amount by which the related Interest Distribution for such Class
A Notes for the preceding Payment Date exceeded the amount of interest that
was actually distributed to such Class A Notes on such preceding Payment Date.
Interest Distribution: With respect to any Payment Date, the Class A
Notes, the sum of (a) the related Monthly Interest Distributable Amount for
such Class A Notes for such Payment Date, and (b) any related Outstanding
Interest Carryover Shortfall for such Class A Notes for such Payment Date.
Interest Period: [ ].
Issuer: [ ]Home Equity Loan Trust 200_-_.
LIBOR: [ ].
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the State of New York or in the city of
London, England are required or authorized by law to be closed.
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Liquidated Mortgage Loan: As to any Payment Date, any Mortgage Loan in
respect of which the Servicer has determined, in accordance with the servicing
procedures specified herein, as of the end of the preceding Due Period, that
all Liquidation Proceeds which it expects to recover with respect to the
disposition of such Mortgage Loan or the related REO Property have been
recovered.
Liquidation Proceeds: With respect to a Mortgage Loan, the proceeds
(including Insurance Proceeds but not including amounts drawn under the
Insurance Policy) received in connection with the liquidation of any Mortgage
Loan or related REO Property, whether through trustee's sale, foreclosure sale
or otherwise (including rental income).
Liquidation Report: With respect to each Liquidated Mortgage Loan, the
report prepared by the Servicer in the form attached hereto as Exhibit F.
Loan Rate: With respect to any Mortgage Loan as of any day, the interest
rate applicable under the related Mortgage Note.
Majority Class A Noteholder: The Holder or Holders of Class A Notes
representing at least 51% of the aggregate Class A Note Principal Balance.
Monthly Advance: An advance made by the Servicer pursuant to Section
3.16.
Monthly Interest Distributable Amount: [ ].
Monthly Payment: With respect to a Mortgage Loan, the scheduled monthly
payment of principal and/or interest required to be made by a Mortgagor on
such Mortgage Loan.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor thereto.
Mortgage: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining
to a particular Mortgage Loan and any additional documents required to be
added to the Mortgage File pursuant to this Agreement.
Mortgage Loans: The mortgage loans that are transferred and assigned to
the Trust pursuant to Sections 2.01 and 2.06, together with the Related
Documents, exclusive of Mortgage Loans that are transferred to the Seller,
from time to time pursuant to Sections 2.02 and 2.06, or to the Servicer
pursuant to Section 3.20, as from time to time are held as a part of the
Trust, such mortgage loans originally so held being identified in the Mortgage
Loan Schedule delivered on the Closing Date.
Mortgage Loan Purchase Agreement: The mortgage loan purchase agreement,
dated as of [ ], between the Depositor, as purchaser, and [ ], as seller,
relating to the sale of the Mortgage Loans from [ ] to the Depositor.
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Mortgage Loan Schedule: With respect to any date, the schedule of
Mortgage Loans constituting assets of the Trust. The Mortgage Loan Schedule is
the schedule set forth herein as Exhibit A, which schedule sets forth as to
each Mortgage Loan: (i) the Cut-Off Date Principal Balance, (ii) the account
number, (iii) the original principal amount, (iv) the CLTV as of the date of
the origination of the related Mortgage Loan, (v) the Due Date, (vi) the Loan
Rate as of the Cut-Off Date, (vii) the first date on which a Monthly Payment
is or was due under the Mortgage Note, (viii) the original stated maturity
date of the Mortgage Note and if the Mortgage Loan is a Balloon Loan, the
amortization terms, (ix) the remaining number of months to maturity as of the
Cut-Off Date, (x) the state in which the related Mortgaged Property is
situated, (xi) the type of property and (xii) the lien status. The Mortgage
Loan Schedule will be amended from time to time to reflect the substitution of
an Eligible Substitute Mortgage Loan for a Defective Mortgage Loan from time
to time hereunder.
Mortgage Note: With respect to a Mortgage Loan, the promissory note
pursuant to which the related Mortgagor agrees to pay the indebtedness
evidenced thereby which is secured by the related Mortgage.
Mortgaged Property: The underlying property, including any real property
and improvements thereon, securing a Mortgage Loan.
Mortgagee: With respect to any Mortgage Loan as of any date of
determination, the holder of the related Mortgage Note and any related
Mortgage as of such date.
Mortgagor: With respect to any Mortgage Loan, the obligor or obligors
under the related Mortgage Note.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of unreimbursed Servicing Fees, Servicing Advances
and Monthly Advances with respect thereto.
Net Loan Rate: With respect to any Mortgage Loan, the Loan Rate less the
Servicing Fee Rate.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any
Servicing Advance or Monthly Advance previously made and not reimbursed
pursuant to Section 3.03(ii) or (ii) a Servicing Advance or Monthly Advance
proposed to be made in respect of a Mortgage Loan or REO Property which, in
the good faith business judgment of the Servicer, as evidenced by an Officer's
Certificate delivered to the Insurer, the Seller and the Indenture Trustee
promptly following such determination, would not be ultimately recoverable
pursuant to Sections 3.03(ii) or 3.03(vii).
Note Register and Note Registrar: As defined in the Indenture.
O/C Amount: As to any Payment Date, the excess, if any, of (a) the [Pool
Principal Balance] as of the close of business on the last day of the related
Due Period over (b) the Class A Note Principal Balance (after giving effect to
amounts available in respect of the Class A Monthly Principal Distributable
Amount for such Payment Date).
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O/C Reduction Amount: As to any Payment Date, an amount equal to the
lesser of (i) the Excess O/C Amount for such Payment Date and (ii) the
Principal Remittance Amount for such Payment Date.
Officer's Certificate: A certificate signed by the President, an
Executive Vice President, a Senior Vice President, a Vice President, an
Assistant Vice President, the Treasurer, Assistant Treasurer, Controller or
Assistant Controller of the Servicer, the Seller or the Depositor, as the case
may be, and delivered to the Indenture Trustee and the Insurer.
Opinion of Counsel: A written opinion of counsel reasonably acceptable to
the Indenture Trustee, who may be in-house counsel for the Servicer (or its
affiliate) or the Seller (or its affiliate)(except that any opinion pursuant
to Section 2.01 or 6.04 or relating to taxation or otherwise as required by
the Insurer must be an opinion of independent outside counsel) and who, in the
case of opinions delivered to the Insurer and the Rating Agency, is reasonably
acceptable to each of them.
Original Class A Note Principal Balance: $[ ].
Optional Termination Date: Any Payment Date on or after the Pool
Principal Balance has been reduced to an amount less than or equal to [ ]% of
the Cut-Off Date Pool Principal Balance.
Outstanding Interest Carryover Shortfall: With respect to any Payment
Date, the Class A Notes and the Senior Interest Participation, the amount of
related Interest Carryover Shortfall for such Payment Date and Class A Notes
or Senior Interest Participation, as applicable, plus one month's interest
thereon, at the Class A Note Rate or Senior Interest Participation Rate, as
applicable, to the extent permitted by law.
Owner Trustee: [ ], as owner trustee under the Trust Agreement, and any
successor owner trustee under the Trust Agreement appointed in accordance with
the terms thereof.
Owner Trustee Fee: A monthly fee equal to 1/12 of $[ ].
Ownership Interest: The Transferor Interest.
Paying Agent: Any paying agent appointed pursuant to the Indenture.
Payment Date: The [ ] day of each month or, if such day is not a Business
Day, then the next Business Day, beginning in [ ].
Percentage Interest: As to the Class A Notes and any date of
determination, the percentage obtained by dividing the principal denomination
of such Class A Note by the aggregate of the principal denominations of all
Class A Notes.
Person: Any individual, corporation, partnership, joint venture, limited
partnership, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
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Pool Factor: With respect to the Class A Notes and to any Payment Date,
the percentage, carried to seven places, obtained by dividing the Class A Note
Principal Balance for such Payment Date by the Original Class A Note Principal
Balance.
Pool Principal Balance: With respect to any date of determination, the
aggregate of the Principal Balance of all Mortgage Loans as of such date.
Preference Event: As defined in Section 4.01(c).
Premium Amount: The premium payable to the Insurer pursuant to the
Insurance Agreement.
Prepayment Interest Shortfall: With respect to any Payment Date, for each
Mortgage Loan that was the subject during the related Due Period of a
Principal Prepayment in full an amount equal to the excess, if any, of (i) 30
days' interest on the Principal Balance of such Mortgage Loan at the Net Loan
Rate (or at such lower rate as may be in effect for such Mortgage Loan
pursuant to application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended) over (ii) the amount of interest actually remitted by the
Mortgagor in connection with such Principal Prepayment less the Servicing Fee
for such Mortgage Loan in such month.
Principal Balance: As to any Mortgage Loan and any day, other than a
Liquidated Mortgage Loan, the Cut-Off Date Principal Balance, minus all
collections credited against the Principal Balance of any such Mortgage Loan
in accordance with the related Mortgage Note. For purposes of this definition,
a Liquidated Mortgage Loan shall be deemed to have a Principal Balance equal
to the Principal Balance of the related Mortgage Loan immediately prior to the
final recovery of related Liquidation Proceeds and a Principal Balance of zero
as of the end of the Due Period in which such Mortgage Loan becomes a
Liquidated Mortgage Loan.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy a
Mortgage Loan in full.
Principal Remittance Amount: With respect to any Payment Date, the amount
equal to the sum of the following amounts (without duplication) with respect
to the immediately preceding Due Period: (i) that portion of all Monthly
Payments allocable to principal on Mortgage Loans, including all full and
partial principal prepayments received during the related Due Period, (ii) the
Net Liquidation Proceeds allocable to principal actually collected by the
Servicer during the related Due Period, (iii) the portion of the Purchase
Price allocable to principal of all Defective Mortgage Loans that were
repurchased during the related Due Period and (iv) any Substitution
Adjustments for Mortgage Loans, deposited to the Distribution Account pursuant
to Section 2.06 on or prior to the related Determination Date and not
previously distributed.
Prospectus: The base prospectus of the Depositor dated [ ].
Prospectus Supplement: The prospectus supplement dated [ ], relating to
the offering of the Class A Notes.
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Purchase Price: As to any Mortgage Loan repurchased on any date pursuant
to Section 2.02, 2.04 or 3.20 an amount equal to the sum of (i) the unpaid
Principal Balance thereof, (ii) the greater of (a) all unpaid accrued interest
thereon to the end of the Due Period preceding the Payment Date on which such
Purchase Price is included in Available Funds and (b) 30 days' interest
thereon, computed at the applicable Loan Rate; provided, however, that if at
the time of repurchase the Seller is the Servicer, the amount described in
clause (ii) shall be computed at the Net Loan Rate, (iii) (x) if the Servicer
is not the Seller, any unreimbursed Servicing Advances with respect to such
Mortgage Loan and (y) expenses reasonably incurred or to be incurred by the
Servicer or the Indenture Trustee in respect of the breach or defect giving
rise to the purchase obligation and (iv) the amount of any penalties, fines,
forfeitures, legal fees and related costs, judgments and any other costs, fees
and expenses incurred by or imposed on the Depositor, the Indenture Trustee,
the Insurer or the Trust or with respect to which any of them are liable
arising from a breach by the Seller of its representations and warranties in
Section 2.04.
Purchaser: The Depositor in its capacity as purchaser under the Mortgage
Loan Purchase Agreement.
Rating Agency: Any statistical credit rating agency, or its successor,
that rated the Class A Notes and the Senior Interest Participation at the
request of the Seller at the time of the initial issuance of the Class A
Notes. If such agency or a successor is no longer in existence, "Rating
Agency" shall be such statistical credit rating agency, or other comparable
Person, designated by the Seller and the Insurer, notice of which designation
shall be given to the Indenture Trustee. References herein to the highest
short term unsecured rating category of a Rating Agency shall mean A-1+ or
better in the case of Standard & Poor's and P-1 or better in the case of
Moody's and in the case of any other Rating Agency shall mean the ratings such
other Rating Agency deems equivalent to the foregoing ratings. References
herein to the highest long-term rating category of a Rating Agency shall mean
"AAA" in the case of Standard & Poor's and "Aaa" in the case of Moody's and in
the case of any other Rating Agency, the rating such other Rating Agency deems
equivalent to the foregoing ratings.
Ratings: The ratings initially assigned to the Class A Notes and the
Senior Interest Participation by the Rating Agencies, as evidenced by letters
from the Rating Agencies.
Record Date: The Business Day immediately preceding such Payment Date;
provided, however, that if any Class A Notes becomes a Definitive Note, the
record date for such Class A Notes will be the last Business Day of the month
immediately preceding the month in which the related Payment Date occurs.
Reference Bank Rate: [ ].
Reference Banks: Three major banks that are engaged in the London
interbank market, selected by the Seller after consultation with the Indenture
Trustee.
Related Documents: As defined in Section 2.01.
Released Mortgaged Property Proceeds: As to any Mortgage Loan, proceeds
received by the Servicer in connection with (a) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation
or (b) any release of part of the Mortgaged Property
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from the lien of the related Mortgage, whether by partial condemnation, sale
or otherwise, which are not released to the Mortgagor in accordance with (i)
applicable law, (ii) mortgage servicing standards employed by the Servicer in
servicing mortgage loans for its own account and (iii) the Sale and Servicing
Agreement.
REO Property: A Mortgaged Property that is acquired by the Trust in
foreclosure or by deed in lieu of foreclosure.
Responsible Officer: With respect to the Indenture Trustee, any officer
assigned to the corporate trust group (or any successor thereto), including
any vice president, assistant vice president, trust officer, assistant
secretary or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers
and having direct responsibility for the administration of this Agreement.
When used with respect to the Seller or Servicer, the President or any Vice
President, Assistant Vice President, Treasurer, Assistant Treasurer or any
Secretary or Assistant Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and
performing duties now assigned to it, the body performing such duties on such
date.
Securities Act: The Securities Act of 1933, as amended.
Second Lien: With respect to any Mortgage Loan that is a third priority
lien the mortgage loan or loans relating to the corresponding Mortgage
Property having a second lien priority to such Mortgage Loan.
Seller: [ ], as Seller under the Mortgage Loan Purchase Agreement.
Servicer: [ ], as Servicer, or any successor hereunder appointed in
accordance with the terms hereof.
Servicing Advances: All reasonable and customary unanticipated "out of
pocket" costs and expenses incurred in the performance by the Servicer of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the REO Property, including reasonable fees paid
to any independent contractor in connection therewith, (iv) compliance with
the obligations under Sections 3.04, 3.07 or 3.19 hereunder, and (v) in
connection with the liquidation of a Mortgage Loan, expenditures relating to
the purchase or maintenance of the First Lien pursuant to Section 3.17, all of
which reasonable and customary unanticipated out-of-pocket costs and expenses
are reimbursable to the Servicer to the extent provided in Sections 3.03(ii),
3.03(vii) and 3.07.
Servicing Certificate: A certificate completed and executed by a
Servicing Officer on behalf of the Servicer.
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Servicing Fee: With respect to any Payment Date, the product of (i) the
Servicing Fee Rate and (ii) the aggregate Principal Balance of the Mortgage
Loans as of the end of the second preceding Due Period (or at the Cut-Off Date
with respect to the first Payment Date).
Servicing Fee Rate: [ ]% per annum (or if [ ]is no longer the Servicer, [
]% per annum).
Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished
to the Indenture Trustee (with a copy to the Insurer) by the Servicer on the
Closing Date, as such list may be amended from time to time, initially set
forth in Exhibit B hereto.
Specified O/C Amount: With respect to any Payment Date prior to the Step
Down Date the greater of (i) the Base O/C Amount and (ii) [ ]% of the
Delinquency Amount and, with respect to any Payment Date occurring on or after
the Step Down Date, the greatest of:
(i) two times the product of the Base O/C Percentage and the [Pool
Principal Balance] as of the close of business on the last day of the
related Due Period;
(ii) [ ]% of the Delinquency Amount; and
the sum of (a) the product of (x) [ ]% and (y) the Cut-Off Date Pool
Principal Balance and (b) the aggregate Principal Balance of the three
largest Mortgage Loans as of the end of the related Due Period;
provided, however, that with respect to any Payment Date occurring on or after
the Step Down Date, if the Delinquency Percentage exceeds [ ]%, the Specified
O/C Amount shall not be less than the Specified O/C Amount as of the
immediately preceding Payment Date; and provided, further, that the Insurer
may reduce the Specified O/C Amount so long as such reduction will not result
in a downgrade, qualification or withdrawal of the then current ratings of the
Class A Notes, without regard to the Insurance Policy, as evidenced in writing
by each Rating Agency.
Standard & Poor's: Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
Step Down Date: The later to occur of (A) the first Payment Date on which
the Pool Principal Balance is less than the product of [ ]% and the Cut-Off
Date Pool Principal Balance and (B) the [ ] Payment Date.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies the requirements set forth in Section
3.01(a) in respect of the qualification of a Subservicer.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Mortgage
Loans as provided in Section 3.01, a copy of which shall be delivered, along
with any modifications thereto, to the Indenture Trustee and the Insurer.
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Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 2.06, the sum of (a) the excess of (i) the aggregate
Principal Balances of all Defective Mortgage Loans to be replaced by Eligible
Substitute Mortgage Loans (after application of principal payments received on
or before the date of substitution of any Eligible Substitute Mortgage Loans
as of the date of substitution) over (ii) the Principal Balance of such
Eligible Substitute Mortgage Loans and (b) the greater of (x) accrued and
unpaid interest (accruing at the Loan Rate for such Defective Mortgage Loan)
on such excess through the Due Period relating to the Payment Date for which
such Substitution Adjustment will be included as part of Available Funds and
(y) 30 days' interest on such excess calculated on a 360-day year in each case
at the Loan Rate (or Net Loan Rate if the Seller is the Servicer) and (c) if
the Servicer is not the Seller, the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to such Defective Mortgage Loan and
(d) the amounts referred to in clauses (iii)(y) and (iv) of the definition of
Purchase Price in respect of such Defective Mortgage Loan.
Supplemental Mortgage Loan Schedule: As defined in Section 2.06(b).
Telerate Screen Page 3750: The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks).
Termination Price: As defined in Section 8.01(b).
Transaction Documents: This Agreement, the Mortgage Loan Purchase
Agreement, the Insurance Agreement, the Administration Agreement, the Trust
Agreement and the Indenture.
Transferor: [ ], or any such permitted holder of the Ownership Interest.
Transferor Interest: As defined in the Trust Agreement.
Trigger Event: As defined in Section 6.01 of the Insurance and
Reimbursement Agreement.
Trust: The trust created by the Trust Agreement, the corpus of which
consists of the Mortgage Loans and Mortgage Files, such other assets as shall
from time to time be identified as deposited in the Collection Account and the
Distribution Account in accordance with this Agreement, property that secured
a Mortgage Loan and that has become REO Property, the interest of the Seller
in certain hazard insurance policies (including any Insurance Proceeds)
maintained by the Mortgagors or the Servicer in respect of the Mortgage Loans,
the Insurance Policy, and Depositor's rights under the Mortgage Loan Purchase
Agreement and all proceeds of each of the foregoing.
Trust Agreement: The Trust Agreement dated as of [ ], among [ ], as
Seller, the Depositor and the Owner Trustee.
UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
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Underwriters: [ ], [ ], and [ ], as underwriters of the
[ ]Home Equity Loan Asset-Backed Notes, Series 200_-_.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture and the Trust Agreement, as
applicable.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
Section 1.03 Interest Calculations.
All calculations of interest that are made in respect of the Principal
Balance of a simple interest Mortgage Loan shall be made on the basis of a
365-day year and the actual number of days elapsed. The Monthly Interest
Distributable Amount in respect of the Class A Notes, and the Premium Amount
shall be calculated on the basis of a 360-day year and the actual number of
days elapsed. The Senior Interest Participation Rate shall be calculated on
the basis of a 360-day year consisting of twelve 30-day months. The
calculation of the Servicing Fee, the Indenture Trustee Fee and the Owner
Trustee Fee shall be made on the basis of a 360-day year consisting
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of twelve 30-day months. All dollar amounts calculated hereunder shall be
rounded to the nearest ▇▇▇▇▇ with one-half of one ▇▇▇▇▇ being rounded down.
ARTICLE II.
CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01 Conveyance of the Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby transfer, assign, set over and otherwise convey to the
Trust without recourse (subject to Sections 2.02 and 2.04) all of its right,
title and interest in and to (i) each Mortgage Loan and the related Mortgage
File, including its Cut-Off Date Principal Balance and all collections in
respect of interest and principal received after the Cut-Off Date; (ii)
property that secured a Mortgage Loan that is acquired by foreclosure or deed
in lieu of foreclosure; (iii) its rights under the insurance policies in
respect of the Mortgage Loans (including any Insurance Proceeds); (iv) amounts
on deposit in the Collection Account and the Distribution Account; (v) its
rights under the Mortgage Loan Purchase Agreement (excluding its rights to
indemnification under the indemnification provisions thereof); (vi) all other
assets included or to be included in the Trust for the benefit of the Class A
Noteholders, the Transferor and the Insurer and (vii) any and all proceeds of
the foregoing. In addition, on or prior to the Closing Date, the Seller shall
cause the Insurer to deliver the Insurance Policy to the Indenture Trustee for
the benefit of the Class A Noteholders.
In connection with such transfer, assignment, sale and conveyance by the
Depositor, the Depositor shall, within ___ days of an Assignment Event, cause
the Seller to deliver to, and deposit with, the Indenture Trustee (or its
designee), on or before the Closing Date, the following documents or
instruments with respect to each Mortgage Loan (the "Related Documents") and
the Mortgage Loan Schedule in computer readable format:
(i) the original Mortgage Note, endorsed in blank, with all
intervening endorsements showing a complete chain of title from the
originator of such Mortgage Loan to the Seller;
(ii) the original Mortgage, with evidence of recording thereon,
provided that if the original Mortgage has been delivered for recording
to the appropriate public recording office of the jurisdiction in which
the Mortgaged Property is located but has not yet been returned to the
Seller by such recording office, the Seller shall deliver to the
Indenture Trustee a certified true copy of such original Mortgage so
certified by the Seller, together with a certificate of the Seller
certifying that such original Mortgage has been so delivered to such
recording office; in all such instances, the Seller shall deliver or
cause to be delivered the original recorded Mortgage to the Indenture
Trustee promptly upon receipt of the original recorded Mortgage;
(iii) the original Assignment of Mortgage, from the Seller to "[ ],
as Indenture Trustee for [ ]Home Equity Loan Trust 200_-_", which
assignment shall be in form and substance acceptable for recording;
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(iv) the original attorney's opinion of title or the original policy
of title insurance, provided that if any such original policy of title
insurance has not yet been received by the Seller, the Seller may have
delivered to the Indenture Trustee a copy of such policy or a title
insurance binder or commitment for the issuance of such policy;
(v) originals of all intervening assignments of Mortgage, with
evidence of recording thereon, showing a complete chain of title from the
originator to the Seller, provided that if any such original intervening
assignment of Mortgage has been delivered for recording to the
appropriate public recording office of the jurisdiction in which the
Mortgaged Property is located but has not yet been returned to the Seller
by such recording office, the Seller shall have delivered to the
Indenture Trustee a certified true copy of such original assignment of
Mortgage so certified by the Seller, together with a certificate of the
Seller certifying that such original assignment of Mortgage has been so
delivered to such recording office; in all such instances, the Seller
shall deliver or cause to be delivered any such original assignments to
the Indenture Trustee promptly upon receipt thereof; and
(vi) originals of all assumption and modification agreements, if
any.
The Seller hereby confirms to the Owner Trustee, the Indenture Trustee
and the Insurer that it has made the appropriate entries in its general
accounting records, to indicate that such Mortgage Loans have been transferred
to the Trust and constitute part of the Trust in accordance with the terms of
the Trust. The Servicer hereby confirms to the Owner Trustee, the Indenture
Trustee and the Insurer that it has clearly and unambiguously made appropriate
entries in its general accounting records indicating that such Mortgage Loans
constitute part of the Trust and are serviced by it on behalf of the Trust in
accordance with the terms hereof.
Except as herein provided the Seller shall, as custodian for the benefit
of the Owner Trustee, Indenture Trustee and the Issuer be entitled to maintain
possession of the foregoing documents and instruments discussed above and
shall not be required to deliver any of them to the Indenture Trustee. In the
event, however, that possession of any such documents or instruments is
required by any Person (including the Indenture Trustee) acting as successor
Servicer pursuant to Section 7.02 in order to carry out the duties of the
Servicer hereunder, then such successor Servicer shall be entitled to request
delivery at the expense of the Servicer of such documents or instruments by
the Servicer and to retain such documents or instruments for servicing
purposes; provided that the Indenture Trustee or such successor Servicer shall
maintain such documents at such offices as may be required by any regulatory
body having jurisdiction over such Mortgage Loan.
Within __ days of an Assignment Event, the Seller, at its expense, shall
with respect to each Mortgage Loan with respect to which the related Mortgaged
Property is located in ______, either (a) send or cause to be sent for
recording the Assignments of Mortgage in favor of the Indenture Trustee in the
appropriate real property or other records (which may be a blanket assignment
if permitted by applicable law), or (b) provide to the Indenture Trustee and
the Insurer, an Opinion of Counsel in a form reasonably acceptable to the
Indenture Trustee and the Insurer, to the effect that, as to any Mortgage Loan
with respect to which the related Mortgaged Property is located in such state,
recordation of an Assignment of Mortgage in such state is not
19
necessary to transfer title to the related Mortgage Note to the Trust or to
pledge to the Indenture Trustee the Trust's rights under such Mortgage Note in
respect of which the Mortgaged Property is located in such state. In the event
that any such Assignment of Mortgage is lost or returned unrecorded because of
a defect therein, the Seller, at its own expense, shall promptly prepare a
substitute Assignment of Mortgage or cure such defect, as the case may be, and
thereafter the Seller shall be required to submit each such Assignment of
Mortgage for recording. With respect to any non-recordation state, the Seller
may. Any failure of the Seller to comply with this Section shall result in the
obligation of the Seller to purchase such Mortgage Loans pursuant to the
provisions of Section 2.02 or substitute for the related Mortgage Loans
pursuant to the provisions of Section 2.06.
It is the express intent of the parties hereto that the conveyance of the
Mortgage Loans and the other property described above by the Depositor to the
Trust, as provided in this Agreement, be, and be construed as, a sale of all
of the Depositor's right, title and interest in the Mortgage Loans and the
other property described above by the Depositor to the Trust. It is, further,
not the intention of the parties that such conveyance be deemed a pledge of
the Mortgage Loans and the other property described above by the Depositor to
the Trust to secure a debt or other obligation of the Depositor. However, in
the event, that notwithstanding the intent of the parties, the Mortgage Loans
and the other property described above are held to be property of the
Depositor, or if for any reason this Agreement is held or deemed to create a
security interest in the Mortgage Loans and the other property described
above, then, (a) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial
Code in effect in the applicable state; and (b) the Depositor hereby grants to
the Trust a security interest in and to all of the Depositor's right, title,
and interest, whether now owned or hereafter acquired, in and to:
(I) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of
credit, certificated securities and uncertificated securities
consisting of, arising from or relating to any of the property
described in (A) through (F) below: (A) each Mortgage Loan,
including (a) the Mortgage File, including the Mortgage Note
and the related Mortgage and (b) its Principal Balance and all
collections in respect thereof received after the Cut-Off Date,
identified on the Mortgage Loan Schedule, including all
Eligible Substitute Mortgage Loans; (B) its rights under the
Mortgage Loan Purchase Agreement and the Support Agreement; (C)
property that secured a Mortgage Loan that is acquired by
foreclosure or deed in lieu of foreclosure; (D) its rights
under the insurance policies in respect of the Mortgage Loans
(including any Insurance Proceeds); (E) amounts on deposit in
the Collection Account and the Distribution Account; and (F)
all other assets included or to be included in the Trust for
the benefit of the Class A Noteholders, the Transferor in
respect of the Senior Interest Participation and the Insurer;
and
(II) All proceeds of the collateral described in (I);
20
(b) The possession by the Indenture Trustee or its designee, of Mortgage
Files, including the Mortgage Notes and the Mortgages and such other goods,
letters of credit, advices of credit, instruments, money, documents, chattel
paper or certificated securities shall be deemed to be "possession by the
secured party," or possession by a purchaser or a person designated by him or
her, for purposes of perfecting the security interest pursuant to the UCC
(including, without limitation, Sections 9-305, 8-313 or 8-321 thereof) as in
force in the relevant jurisdiction; and notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed to be notifications to, or acknowledgments,
receipts or confirmations from, financial intermediaries, bailees or agents
(as applicable) of the Indenture Trustee or its designee for the purpose of
perfecting such security interest under applicable law. The Seller, the
Servicer, the Depositor and the Indenture Trustee, shall, to the extent
consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in
the Mortgage Loans and the proceeds thereof, such security interest would be
deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of the Agreement. In
connection herewith, the Trust shall have all of the rights and remedies of a
secured party and creditor under the Uniform Commercial Code as in force in
the relevant jurisdiction.
(c) The Indenture Trustee agrees to execute and deliver upon delivery to
it of the Mortgage Files following an Assignment Event an acknowledgment of
receipt of, for each Mortgage Loan, the items required to be delivered by the
Seller pursuant to Section 2.01(a) (i) through (vi). The Indenture Trustee
agrees, for the benefit of Class A Noteholders, and the Insurer, within days
after such delivery, to review the Mortgage Files to ascertain that all
required documents set forth in paragraphs (i) through (vi) of Section 2.01(a)
have been executed and received, and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule and that the Mortgage
Notes have been endorsed as set forth in Section 2.01(a), and in so doing the
Indenture Trustee may rely on the purported due execution and genuineness of
any signature thereon. If within such -day period the Indenture Trustee finds
any document constituting a part of a Mortgage File not to have been executed
or received or to be unrelated to the Mortgage Loans identified in said
Mortgage Loan Schedule or, if in the course of its review, the Indenture
Trustee determines that such Mortgage File is otherwise defective in any
material respect, the Indenture Trustee shall promptly upon the conclusion of
such review notify the Seller, the Depositor and the Insurer, and the Seller
shall have a period of days after such notice within which to correct or cure
any such defect; provided, however, that if such defect shall not have been
corrected or cured within such -day period due primarily to the failure of the
related office of real property or other records to return any document
constituting a part of a Mortgage File, the Seller shall so notify the
Indenture Trustee and the Insurer in writing and the period during which such
defect may be corrected or cured shall be extended until such time as any such
documents are returned from such related office (in no event, however, will
such period extend beyond one (1) year from the date of discovery of such
defect); provided that prior to any such extension the Seller shall deliver to
the Indenture Trustee a true copy of such document certified by the Seller to
be a true and correct copy, the original of which has been transmitted for
recordation.
The Indenture Trustee shall have no responsibility for reviewing any
Mortgage File except as expressly provided in this Section 2.01. In reviewing
any Mortgage File pursuant to
21
this Section, the Indenture Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of any
assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Indenture Trustee is the assignee or
endorsee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment
is permitted in any applicable jurisdiction, whether any Person executing any
document is authorized to do so or whether any signature thereon is genuine,
but shall only be required to determine whether a document has been executed,
that it appears to be what it purports to be, and, where applicable, that it
purports to be recorded.
Section 2.02 Acceptance by Indenture Trustee.
(a) The Indenture Trustee hereby acknowledges its receipt of the
Insurance Policy and the sale and assignment of the Mortgage Loans, and,
subject to the review and period for delivery provided for in Section 2.01,
the Mortgage Files, and declares that the Indenture Trustee will hold such
documents and all amounts received by it under the Indenture in trust, upon
the terms herein set forth, for the use and benefit of all present and future
Class A Noteholders and the Insurer.
(b) If the Seller is given notice under Section 2.01(c) and if the Seller
does not correct or cure such omission or defect within the -day period
specified in Section 2.01(c), the Seller shall purchase such Mortgage Loan
from the Trust or substitute an Eligible Substitute Mortgage Loan for such
Mortgage Loan on the Determination Date in the month following the month in
which such -day period expired at the Purchase Price of such Mortgage Loan or,
in the case of a substitution, in accordance with Section 2.06. The Purchase
Price and any Substitution Adjustments for the purchased Mortgage Loan shall
be deposited in the Collection Account on the Determination Date immediately
following such -day period; provided that the Indenture Trustee shall remit to
the Depositor or the Insurer, as applicable, the portion of the amount, if
any, of the Purchase Price referred to in clause (iv) of the definition
thereof to the extent such amount is incurred by or imposed on the Depositor
or the Insurer and, upon receipt by the Indenture Trustee of written
notification of such deposit signed by an officer of the Seller, the Indenture
Trustee shall release to the Seller the related Mortgage File and the
Indenture Trustee shall execute and deliver such instruments of transfer or
assignment, prepared by and at the expense of the Seller, in each case without
recourse, representation or warranty as shall be necessary to vest in the
Seller or its designee any Mortgage Loan released pursuant hereto. It is
understood and agreed that the obligation of the Seller to purchase any
Mortgage Loan or substitute an Eligible Substitute Mortgage Loan for such
Mortgage Loan as to which a material defect in or omission of a constituent
document exists shall constitute the sole remedy against the Seller respecting
such defect or omission available to the Insurer, the Noteholders, the
Indenture Trustee, the Owner Trustee or the Transferor.
The Servicer, promptly following the transfer of (i) a Defective Mortgage
Loan from or (ii) an Eligible Substitute Mortgage Loan to the Trust pursuant
to this Section and Section 2.06, as the case may be, shall amend the Mortgage
Loan Schedule and make appropriate entries in its general account records to
reflect such transfer and the addition of any Eligible Substitute Mortgage
Loan, if applicable.
22
Section 2.03 Representations and Warranties Regarding the Seller and the
Servicer. The Seller and Servicer each represent and warrant each as to itself
that, as of the Closing Date:
(i) Each of the Seller and the Servicer is a [ ], validly
existing and in good standing under the laws of [ ] and has the
power and authority to own its assets and to transact the business in
which it is currently engaged. Each of the Seller and the Servicer is
duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which
the failure so to qualify would have a material adverse effect on (a) its
business, properties, assets or condition (financial or other), (b) its
performance of its obligations under this Agreement, (c) the value or
marketability of the Mortgage Loans or (d) the ability to foreclose on
the related Mortgaged Properties;
(ii) Each of the Seller and the Servicer has the power and authority
to make, execute, deliver and perform this Agreement and to consummate
all of the transactions contemplated under this Agreement, and has taken
all necessary action to authorize the execution, delivery and performance
of this Agreement. When executed and delivered, this Agreement will
constitute its legal, valid and binding obligation enforceable in
accordance with its terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(iii) Each of the Seller and the Servicer holds all necessary
licenses, certificates and permits from all government authorities
necessary for conducting its business as it is presently conducted. It is
not required to obtain the consent of any other party or any consent,
license, approval or authorization from, or registration or declaration
with, any governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or
authorizations, or registrations or declarations, as shall have been
obtained or filed, as the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this Agreement by it
will not conflict with or result in a breach of, or constitute a default
under, any provision of any existing law or regulation or any order or
decree of any court applicable to the Seller or the Servicer or any of
its properties or any provision of its Articles of Incorporation or
Bylaws, or constitute a material breach of, or result in the creation or
imposition of any lien, charge or encumbrance upon any of its properties
pursuant to, any mortgage, indenture, contract or other agreement to
which it is a party or by which it may be bound;
(v) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Seller or the
Servicer contains any untrue statement of a material fact or omits to
state any material fact necessary to make the certificate, statement or
report not misleading;
23
(vi) The transactions contemplated by this Agreement are in the
ordinary course of the Seller's and the Servicer's business;
(vii) Neither the Seller nor the Servicer is insolvent, nor will the
Seller or the Servicer be made insolvent by the transfer of the Mortgage
Loans, nor is the Seller or the Servicer aware of any pending insolvency;
(viii) [Reserved]
(ix) There are no actions or proceedings against, or investigations
of it, pending or, to its knowledge, threatened, before any court,
administrative agency or other tribunal (A) that, if determined
adversely, would prohibit the Seller or the Servicer from entering into
this Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the Seller's
and the Servicer's performance of any of their respective obligations
under, or the validity or enforceability of, this Agreement;
(x) The Servicer represents and warrants that the collection
practices used by the Servicer with respect to the Mortgage Loans have
been, in all material respects, legal, proper, prudent and customary in
the home equity mortgage servicing business;
(xi) The Servicer represents and warrants that it believes that the
Servicing Fee Rate provides a reasonable level of base compensation to
the Servicer for servicing the Mortgage Loans on the terms set forth
herein;
(xii) The Seller represents and warrants that it did not sell the
Mortgage Loans to the Depositor as Purchaser under the Mortgage Loan
Purchase Agreement with any intent to hinder, delay or defraud any of its
creditors; and the Seller will not be rendered insolvent as a result of
the sale of the Mortgage Loans to the Depositor as Purchaser under the
Mortgage Loan Purchase Agreement;
(xiii) The Seller represents and warrants that it acquired title to
the Mortgage Loans in good faith, without notice of any adverse claim;
and
(xiv) The Seller represents and warrants that the transfer,
assignment and conveyance of the Mortgage Notes and the Mortgages by the
Seller pursuant to the Mortgage Loan Purchase Agreement and this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
(b) The representations and warranties set forth in this Section 2.03
shall survive the sale and assignment of the Mortgage Loans to the Trust. Upon
discovery of a breach of any representations and warranties which materially
and adversely affects the interests of the Indenture Trustee, the Class A
Noteholders or the Insurer, the Person discovering such breach shall give
prompt written notice to the other parties and to the Insurer. Within 60 days
of its discovery or its receipt of notice of breach, or, with the prior
written consent of a Responsible Officer of the Indenture Trustee and the
Insurer, such longer period specified in such consent, the Seller or the
Servicer, as appropriate, shall cure such breach in all material respects.
24
Section 2.04 Representations and Warranties of the Seller Regarding the
Mortgage Loans. (a) The Seller hereby represents and warrants to the Trust,
Indenture Trustee, on behalf of the Class A Noteholders and the Insurer as
follows as of the Closing Date, unless otherwise specifically set forth
herein:
(i) The information with respect to each Mortgage Loan set forth in
the Mortgage Loan Schedule is complete, true and correct in all material
respects as of the Cut-Off Date;
(ii) As of the Closing Date, for each Mortgage Loan, the related
Mortgage File contains each of the documents and instruments specified to
be included therein;
(iii) Each Mortgaged Property is improved by a residential dwelling,
which does not include cooperatives or mobile homes and does not
constitute other than real property under state law;
(iv) Each Mortgage Loan is being serviced by the Servicer or one or
more Subservicers;
(v) Each Mortgage Loan is a [closed-end] [revolving] home equity
loan and all amounts due under the related Mortgage Note have been
advanced. Each Mortgage Note provides for Monthly Payments which, if
timely paid on the Due Date therefor, are sufficient to fully amortize
the principal balance of such Mortgage Note on or before its maturity
date;
(vi) The Mortgage Note related to each Mortgage Loan bears a [fixed]
[variable] Loan Rate and there is only one original of each Mortgage
Note;
(vii) [Reserved]
(viii) Each Mortgage is a valid and subsisting first, second or
third lien of record on the Mortgaged Property subject, in the case of
any second or third Mortgage Loan, only to a First Lien or to a First
Lien and a Second Lien respectively on such Mortgaged Property and
subject in all cases to the exceptions to title set forth in the title
insurance policy with respect to the related Mortgage Loan, which
exceptions are generally acceptable to second mortgage lending companies,
and such other exceptions to which similar properties are commonly
subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided
by such Mortgage;
(ix) Except with respect to liens released immediately prior to the
transfer herein contemplated, each Mortgage Note and related Mortgage
have not been assigned or pledged and immediately prior to the transfer
and assignment herein contemplated, the Seller held good, marketable and
indefeasible title to, and was the sole owner and holder of, each
Mortgage Loan subject to no liens, charges, mortgages, claims,
participation interests, equities, pledges or security interests of any
nature, encumbrances or rights of others (collectively, a "Lien"); the
Seller has full right and authority under all governmental and regulatory
bodies having jurisdiction over the Seller, subject to no
25
interest or participation of, or agreement with, any party, to sell and
assign the same pursuant to this Agreement; and immediately upon the
transfer and assignment herein contemplated, the Seller shall have
transferred all of its right, title and interest in and to each Mortgage
Loan to the Purchaser (or its assignee) and the Purchaser (or its
assignee) will hold good, and equitable title, to, and be the sole owner
of, each Mortgage Loan subject to no Liens;
(x) None of the Mortgage Loans was or more days delinquent as of the
Cut-Off Date;
(xi) [Reserved]
(xii) No Mortgage Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Mortgage Note or Mortgage,
or the exercise of any right thereunder, render either the Mortgage Note
or the Mortgage unenforceable in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, and no such right of rescission, set-off, counterclaim
or defense has been asserted with respect thereto;
(xiii) There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior
to, or equal or coordinate with, the lien of the related Mortgage, and no
rights are outstanding that under law could give rise to such a lien
except those which are insured against by the title insurance policy
referred to in paragraph (xv) below;
(xiv) Each Mortgage Loan at the time it was made complied with, and
each Mortgage Loan at all times was serviced in compliance with, in each
case, in all material respects, applicable state and federal laws and
regulations, including, without limitation, usury, equal credit
opportunity, consumer credit, truth-in-lending and disclosure laws;
(xv) With respect to each Mortgage Loan, either (a) a lender's title
insurance policy, issued in standard American Land Title Association or
California Land Title Association form, or other form acceptable in a
particular jurisdiction, by a title insurance company authorized to
transact business in the state in which the related Mortgaged Property is
situated, together with a condominium endorsement, if applicable, in an
amount at least equal to the original principal balance of such Mortgage
Loan insuring the Seller and its successor's and assignees' interest
under the related Mortgage Loan as the holder of a valid first or second
mortgage lien of record on the real property described in the Mortgage,
subject only to the exceptions of the character referred to in paragraph
(viii) above, was valid and in full force and effect on the date of the
origination of such Mortgage Loan or (b) an attorney's opinion of title
was prepared in connection with the origination of such Mortgage Loan;
(xvi) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy with a generally acceptable
carrier that provides for fire and extended coverage representing
coverage described in Sections 3.04 and 3.05;
26
(xvii) A flood insurance policy is in effect with respect to each
Mortgaged Property with a generally acceptable carrier in an amount
representing coverage described in Sections 3.04 or 3.05, if and to the
extent required by Sections 3.04 or 3.05; (xviii) Each Mortgage and
Mortgage Note is the legal, valid and binding obligation of the related
Mortgagor and is enforceable in accordance with its terms, except only as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at
law), and all parties to each Mortgage Loan and the Mortgagee had full
legal capacity to execute all Mortgage Loan documents and to convey the
estate therein purported to be conveyed. The Mortgagor is a natural
person who is a party to the Mortgage Note and the Mortgage in an
individual capacity, and not in the capacity of a trustee or otherwise;
(xix) The Seller has directed the Servicer to perform any and all
acts required to be performed to preserve the rights and remedies of the
Indenture Trustee in any insurance policies applicable to the Mortgage
Loans including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Indenture Trustee;
(xx) As of the Cut-Off Date, no more than [ ]% of the Mortgage Loans
(by the Cut-Off Date Pool Principal Balance) are secured by Mortgaged
Properties located within any single zip code area. As of the Cut-Off
Date, at least [ ]% of the Cut-Off Date Pool Principal Balance is secured
by Mortgaged Properties that are owner-occupied residences, based on
representations by the related Mortgagors;
(xxi) The terms of the Mortgage Note and the Mortgage have not been
impaired, altered or modified in any material respect, except by a
written instrument which has been recorded or is in the process of being
recorded, if necessary, to protect the interests of the Trust, the
Indenture Trustee on behalf of the Class A Noteholders, and the Insurer
and which has been or will be delivered to the Indenture Trustee. The
substance of any such alteration or modification is reflected on the
related Mortgage Loan Schedule and was approved, if required, by the
related primary mortgage guaranty insurer, if any. Each original Mortgage
was recorded, and all subsequent assignments of the original Mortgage
have been recorded in the appropriate jurisdictions wherein such
recordation is necessary to perfect the lien thereof as against creditors
of the Seller, or are in the process of being recorded;
(xxii) No instrument of release or waiver has been executed in
connection with the Mortgage Loan, and no Mortgagor has been released, in
whole or in part;
(xxiii) Other than delinquencies as described in paragraph (x)
above, there are no defaults in complying with the terms of the Mortgage.
27
(xxiv) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring;
(xxv) To the best of the Seller's knowledge, all of the improvements
which were included for the purpose of determining the appraised value of
the Mortgaged Property lie wholly within the boundaries and building
restriction lines of such property, and no improvements on adjoining
properties encroach upon the Mortgaged Property;
(xxvi) To the best of the Seller's knowledge, no improvement located
on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation. All inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of the Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained
from the appropriate authorities and the Mortgaged Property is lawfully
occupied under applicable law;
(xxvii) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording the
Mortgage Loans were paid;
(xxviii) Each Mortgage Note is not and has not been secured by any
collateral, pledged account or other security except the lien of the
corresponding Mortgage;
(xxix) No Mortgage Loan is subject to the Home Ownership and Equity
Protection Act of 1994;
(xxx) There is no obligation on the part of the Seller or any other
party to make payments in addition to those made by the Mortgagor;
(xxxi) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such
Mortgage, and no fees or expenses are or will become payable by the
Trust, the Indenture Trustee or the Class A Noteholders to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;
(xxxii) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(xxxiii) The related First Lien, if any, requires equal monthly
payments, unless such First Lien bears an adjustable interest rate, the
monthly payments for the related First Lien may be adjusted no more
frequently than monthly;
(xxxiv) Either (i) no consent for the Mortgage Loan is required by
the holder of the related First Lien or (ii) such consent has been
obtained and is contained in the Mortgage File;
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(xxxv) To the best of the Seller's knowledge, no Mortgaged Property
was, as of the Cut-Off Date, located within a one-mile radius of any site
listed in the National Priorities List as defined under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, or on any similar state list of hazardous waste sites which are
known to contain any hazardous substance or hazardous waste;
(xxxvi) No Mortgage Loan provides for negative amortization;
(xxxvii) All parties which have had any interest in the Mortgage
Loan, whether as originator, mortgagee, assignee, pledgee, servicer or
otherwise, are (or, during the period in which they held and disposed of
such interest, were) (1) in compliance with any and all applicable
licensing requirements of the laws of the state wherein the Mortgaged
Property is located, and (2)(A) organized under the laws of such state,
or (B) qualified to do business in such state, or (C) federal savings and
loan associations or national banks having principal offices in such
state, or (D) not doing business in such state so as to require
qualification or licensing;
(xxxviii)The Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event the related security for the Mortgage Loan is
sold without the prior consent of the mortgagee thereunder;
(xxxix) Except as set forth in clause (x) above, there is no
default, breach, violation or event of acceleration existing under any
Mortgage or the related Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration; and the Seller has not waived any default, breach,
violation or event of acceleration;
(xl) All parties to the Mortgage Note and the Mortgage had legal
capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
(xli) All of the Mortgage Loans were originated in accordance with
the underwriting criteria set forth in the Prospectus Supplement;
(xlii) Each Mortgage Loan conforms, and all such Mortgage Loans in
the aggregate conform in all material respects to the description thereof
set forth in the Prospectus Supplement; each Mortgage Note and Mortgage
is in substantially one of the forms attached as Exhibit H and Exhibit I
hereto;
(xliii) The Mortgage Loans were not selected by the Seller for
inclusion in the Trust on any basis intended to adversely affect the
Trust or the Insurer;
(xliv) Each hazard insurance policy required to be maintained under
Section 3.04 with respect to the Mortgage Loan is a valid, binding,
enforceable and subsisting insurance policy of its respective kind and is
in full force and effect;
29
(xlv) As of the Cut-Off Date, no Mortgage Loan had a Combined
Loan-to-Value Ratio at the time of origination of more than [ ]%;
(xlvi) As of the Cut-Off Date, no more than [ ]% of the Mortgage
Loans (by Cut-Off Date Pool Principal Balance), are secured by Mortgaged
Properties that are non-owner occupied properties. The Mortgaged Property
is lawfully occupied under applicable law;
(xlvii) [Reserved]
(xlviii) As of the Closing Date, the Seller has not received a
notice of default of a First Lien which has not been cured;
(xlix) None of the Mortgage Loans are subject to a bankruptcy
proceeding; and
(l) Each of the documents and instruments included in a Mortgage
File is duly executed and in due and proper form and each such document
or instrument is in a form generally acceptable to prudent institutional
mortgage lenders that regularly originate or purchase mortgage loans
similar to the Mortgage Loans.
With respect to the representations and warranties set forth in this
Section that are made to the best of the Seller's knowledge or as to which the
Seller has no knowledge, if it is discovered by the Depositor, the Seller, the
Owner Trustee, the Servicer, the Insurer or the Indenture Trustee that the
substance of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan then, notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation and warranty being inaccurate at the time the
representation or warranty was made, such inaccuracy shall be deemed a breach
of the applicable representation or warranty and with respect to any breach of
such representation or warranty or of any other representation or warranty,
the Seller shall cure, repurchase or substitute in accordance with this
Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section shall survive delivery of the respective Mortgage Files
to the Indenture Trustee and the termination of the rights and obligations of
the Servicer pursuant to Section 6.04 or 7.01 herein. Upon discovery by the
Depositor, the Seller, the Servicer, the Insurer, the Indenture Trustee or the
Owner Trustee of a breach of any of the foregoing representations and
warranties, without regard to any limitation set forth therein concerning the
knowledge of the Seller as to the facts stated therein, which materially and
adversely affects the value of the related Mortgage Loan or the interests of
the Trust, the Class A Noteholders, the Transferor or the Insurer in the
related Mortgage Loan, the party discovering such breach shall give prompt
written notice to the other parties and the Insurer. Within days of its
discovery or its receipt of notice of breach, the Seller shall use all
reasonable efforts to cure such breach in all material respects and if such
breach is not cured by the end of such -day period, the Seller shall purchase
such Mortgage Loan from the Trust or substitute an Eligible Substitute
Mortgage Loan, as provided in Section 2.06 below, for such Mortgage Loan. Any
such purchase by the Seller shall be at the Purchase Price and in each case
shall be accomplished in the manner set forth in Section 2.02 herein. It is
understood and agreed that the obligation of the Seller to cure, substitute or
purchase any
30
Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy against the Seller respecting such breach available
to Class A Noteholders, the Senior Interest Participation, the Owner Trustee,
the Insurer and the Indenture Trustee on behalf of Class A Noteholders and the
Transferor in respect of the Ownership Interest.
Section 2.05 Representations and Warranties of the Depositor. The
Depositor represents and warrants to the Trust and the Indenture Trustee on
behalf of the Class A Noteholders and the Insurer as follows:
(i) This Agreement constitutes a legal, valid and binding obligation
of the Depositor, enforceable against the Depositor in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights
in general and except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in
equity);
(ii) Immediately prior to the transfer by the Depositor to the Trust
of each Mortgage Loan, the Depositor had good and equitable title to each
Mortgage Loan (insofar as such title was conveyed to it by the Seller)
subject to no prior lien, claim, participation interest, mortgage,
security interest, pledge, charge or other encumbrance or other interest
of any nature;
(iii) As of the Closing Date, the Depositor has transferred all
right, title and interest in the Mortgage Loans to the Trust;
(iv) The Depositor has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay or defraud any of its creditors;
and
(v) The Depositor has been duly organized and is validly existing as
a limited liability company in good standing under the laws of Delaware,
with full power and authority to own its assets and conduct its business
as presently being conducted.
Section 2.06 Substitution of Mortgage Loans. (a) On a Determination Date
which is on or before the date on which the Seller would otherwise be required
to repurchase a Mortgage Loan under Section 2.02 or 2.04, the Seller may
deliver to the Indenture Trustee one or more Eligible Substitute Mortgage
Loans in substitution for any one or more of the Defective Mortgage Loans
which the Seller would otherwise be required to repurchase pursuant to
Sections 2.02 or 2.04. In connection with any such substitution, the Seller
shall calculate the Substitution Adjustment, if any, and shall deposit such
amount to the Collection Account by 12:00 p.m. New York City time on the third
Business Day prior to the Payment Date in the month succeeding the calendar
month in which the related cure period expired.
(b) The Seller shall notify the Servicer, the Insurer and the Indenture
Trustee in writing not less than five Business Days before the related
Determination Date which is on or before the date on which the Seller would
otherwise be required to repurchase such Mortgage Loan pursuant to Section
2.02 or 2.04 of its intention to effect a substitution under this Section
2.06. On such Determination Date (the "Substitution Date"), the Seller shall
deliver to the Insurer and the Indenture Trustee (1) the Eligible Substitute
Mortgage Loans to be substituted for
31
the Defective Mortgage Loans, (2) a list of the Defective Mortgage Loans to be
substituted for by such Eligible Substitute Mortgage Loans, (3) an Officer's
Certificate (A) stating that no Event of Servicing Termination shall have
occurred and be continuing, (B) stating that the aggregate Principal Balance
of all Eligible Substitute Mortgage Loans (determined with respect to each
Eligible Substitute Mortgage Loan as of the Determination Date on which it was
substituted) including the principal balance of Eligible Substitute Mortgage
Loans being substituted on such Determination Date does not exceed an amount
equal to % of the Cut-Off Date Pool Principal Balance, (C) stating that all
conditions precedent to such substitution specified in subsection (a) have
been satisfied and attaching as an exhibit a supplemental Mortgage Loan
schedule (the "Supplemental Mortgage Loan Schedule") setting forth the same
type of information as appears on the Mortgage Loan Schedule and representing
as to the accuracy thereof and (D) confirming that the representations and
warranties contained in Section 2.04 are true and correct in all material
respects with respect to the Eligible Substitute Mortgage Loans on and as of
such Determination Date, provided that remedies for the inaccuracy of such
representations are limited as set forth in Sections 2.02, 2.04 and this
Section 2.06 and (4) a certificate stating that cash in the amount of the
related Substitution Adjustment, if any, has been deposited to the Collection
Account; provided that the Indenture Trustee shall remit to the Depositor or
the Insurer, as applicable, the portion of the amount, if any, of the
Substitution Adjustment referred to in clause (d) of the definition thereof to
the extent such amount is incurred by or imposed on the Depositor or the
Insurer. Upon receipt of the foregoing, the Indenture Trustee shall release
such Defective Mortgage Loans to the Seller without recourse, representation
or warranty.
(c) Concurrently with the satisfaction of the conditions set forth in
Sections 2.06(a) and (b) above and the transfer of such Eligible Substitute
Mortgage Loans to the Indenture Trustee on behalf of the Trust pursuant to
Section 2.06(a), Exhibit A to this Agreement shall be deemed to be amended to
exclude all Mortgage Loans being replaced by such Eligible Substitute Mortgage
Loans and to include the information set forth on the Supplemental Mortgage
Loan Schedule with respect to such Eligible Substitute Mortgage Loans, and all
references in this Agreement to Mortgage Loans shall include such Eligible
Substitute Mortgage Loans and be deemed to be made on or after the related
substitution date, as the case may be, as to such Eligible Substitute Mortgage
Loans.
(d) As to any Eligible Substitute Mortgage Loan or Loans, the Seller
shall cause to be delivered to the Indenture Trustee with respect to such
Eligible Substitute Mortgage Loan or Loans such documents and agreements as
are required to be held by the Indenture Trustee in accordance with Section
2.01. For any Due Period during which the Seller purchases one or more
Defective Mortgage Loans, the Servicer shall determine the amount that shall
be deposited by the Seller in the Collection Account at the time of
substitution. Any amounts received in respect of the Eligible Substitute
Mortgage Loan or Loans during the Due Period in which the circumstances giving
rise to such substitution occur shall not be a part of the Trust and shall not
be deposited by the Servicer in the Collection Account. All amounts received
by the Servicer during the Due Period in which the circumstances giving rise
to such substitution occur in respect of any Defective Mortgage Loan so
removed by the Indenture Trustee shall be deposited by the Servicer in the
Collection Account. Upon such substitution, the Eligible Substitute Mortgage
Loan or Loans shall be subject to the terms of this Agreement in all respects,
and the Seller shall be deemed to have made with respect to such Eligible
Substitute Mortgage Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in
32
Section 2.04. The procedures applied by the Seller in selecting each Eligible
Substitute Mortgage Loan shall not be materially adverse to the interests of
the Indenture Trustee, the Class A Noteholders, the Transferor in respect of
the Senior Interest Participation or the Insurer.
Section 2.07 Tax Treatment. It is the intention of the Seller and the
Class A Noteholders that the Class A Notes will be indebtedness for federal,
state and local income and franchise tax purposes and for purposes of any
other tax imposed on or measured by income. The terms of this Agreement shall
be interpreted to further the intent of the parties hereto. The Seller, the
Indenture Trustee and each Class A Noteholder (or Class A Note Owner) by
acceptance of its Class A Note (or, in the case of a Class A Note Owner, by
virtue of such Class A Note Owner's acquisition of a beneficial interest
therein) agrees to treat the Class A Note (or beneficial interest therein),
for purposes of federal, state and local income or franchise taxes and any
other tax imposed on or measured by income, as indebtedness secured by the
Trust Estate and to report the transactions contemplated by this Agreement on
all applicable tax returns in a manner consistent with such treatment. Each
Class A Noteholder agrees that it will cause any Class A Note Owner acquiring
an interest in a Class A Note through it to comply with this Agreement as to
treatment of the Class A Notes as indebtedness for federal, state and local
income and franchise tax purposes and for purposes of any other tax imposed on
or measured by income. The Indenture Trustee will prepare and file all tax
reports required hereunder on behalf of the Trust.
ARTICLE III.
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01 The Servicer.
(a) The Servicer, as independent contract servicer, shall service and
administer the Mortgage Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and
consistent with the terms of this Agreement. The Servicer may enter into
Subservicing Agreements for any servicing and administration of Mortgage Loans
with any institution which (i) is in compliance with the laws of each state
necessary to enable it to perform its obligations under such Subservicing
Agreement, (ii) (x) has been designated an approved Seller-Servicer by the
Federal Home Loan Mortgage Corporation ("FHLMC") or the Federal National
Mortgage Association ("FNMA") for first and second mortgage loans or (y) is an
affiliate of the Servicer or (z) is otherwise approved by the Insurer. The
Servicer shall give written notice to the Insurer, and the Indenture Trustee
prior to the appointment of any Subservicer. Any such Subservicing Agreement
shall be consistent with and not violate the provisions of this Agreement and
shall be in form and substance acceptable to the Insurer and the Indenture
Trustee. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and either itself directly service the related Mortgage Loans or
enter into a Subservicing Agreement with a successor subservicer which
qualifies hereunder.
(b) Notwithstanding any Subservicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated
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and primarily liable for the servicing and administering of the Mortgage Loans
in accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Mortgage Loans. For purposes of this
Agreement, the Servicer shall be deemed to have received payments on Mortgage
Loans when the Subservicer has received such payments. The Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification of
the Servicer by such Subservicer, and nothing contained in this Agreement
shall be deemed to limit or modify such indemnification.
(c) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a
Subservicer in its capacity as such and not as an originator shall be deemed
to be between the Subservicer and the Servicer alone, and the Indenture
Trustee, the Owner Trustee and Class A Noteholders and the Transferor in
respect of the Ownership Interest shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect
to the Subservicer except as set forth in Section 3.01(d) herein. The Servicer
shall be solely liable for all fees owed by it to any Subservicer irrespective
of whether the Servicer's compensation pursuant to this Agreement is
sufficient to pay such fees.
(d) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Servicing Termination), the
Indenture Trustee or its designee approved by the Insurer shall thereupon
assume all of the rights and obligations of the Servicer under each
Subservicing Agreement that the Servicer may have entered into, unless the
Indenture Trustee or designee approved by the Insurer elects to terminate any
Subservicing Agreement in accordance with the terms of such Subservicing
Agreement. Each Subservicing Agreement shall include the provision that such
agreement may be immediately terminated by the Insurer or the Indenture
Trustee in the event that the Servicer shall, for any reason, no longer be the
Servicer (including termination due to an Event of Servicing Termination). In
no event shall any Subservicing Agreement require the Insurer or the Indenture
Trustee as Successor Servicer to pay compensation to a Subservicer or order
the termination of such Subservicer. Any fee payable or expense incurred in
connection with such a termination will be payable by the outgoing Servicer.
If the Indenture Trustee does not terminate a Subservicing Agreement, the
Indenture Trustee, its designee or the successor servicer for the Indenture
Trustee shall be deemed to have assumed all of the Servicer's interest therein
and to have replaced the Servicer as a party to each Subservicing Agreement to
the same extent as if the Subservicing Agreements had been assigned to the
assuming party, except that the Servicer shall not thereby be relieved of any
liability or obligations under the Subservicing Agreements with regard to
events that occurred prior to the date the Servicer ceased to be the Servicer
hereunder. The Servicer, at its expense and without right of reimbursement
therefor, shall, upon the request of the Indenture Trustee, deliver to the
assuming party all documents and records relating to each Subservicing
Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of the Subservicing Agreements to the
assuming party.
(e) Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with
34
any such term or in any manner grant indulgence to any Mortgagor if in the
Servicer's determination such waiver, modification, postponement or indulgence
is not materially adverse to the interests of the Class A Noteholders, the
Transferor in respect of the Ownership Interest and the Insurer. No costs
incurred by the Servicer or any Subservicer in respect of Servicing Advances
shall, for the purposes of distributions to Class A Noteholders, be added to
the amount owing under the related Mortgage Loan. Without limiting the
generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered to execute and deliver on behalf of the Indenture
Trustee and each Class A Noteholder, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other
comparable instruments with respect to the Mortgage Loans and with respect to
the Mortgaged Properties. If reasonably required by the Servicer and requested
in writing, the Indenture Trustee shall furnish the Servicer and, if directed
by the Servicer, any Subservicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer and any such
Subservicer to carry out its servicing and administrative duties under this
Agreement.
Notwithstanding anything to the contrary contained herein, the Servicer,
in servicing and administering the Mortgage Loans, shall employ or cause to be
employed procedures (including collection, foreclosure and REO management
procedures) and exercise the same care that it customarily employs and
exercises in servicing and administering mortgage loans for its own account,
in accordance with accepted mortgage servicing practices of prudent lending
institutions servicing mortgage loans similar to the Mortgage Loans and giving
due consideration to the Insurer's and the Trust's reliance on the Servicer.
(f) On and after such time as the Indenture Trustee receives the
resignation of, or notice of the removal of, the Servicer from its rights and
obligations under this Agreement, and with respect to resignation pursuant to
Section 6.04 herein, after receipt by the Indenture Trustee and the Insurer of
the Opinion of Counsel required pursuant to Section 6.04, the Indenture
Trustee, if it so elects, and with the consent of the Insurer, shall assume
all of the rights and obligations of the Servicer, subject to Section 7.02
herein. The Servicer shall, upon request of the Indenture Trustee, but at the
expense of the Servicer, deliver to the Indenture Trustee, all documents and
records relating to the Mortgage Loans and an accounting of amounts collected
and held by the Servicer and otherwise use its best efforts to effect the
orderly and efficient transfer of servicing rights and obligations to the
assuming party.
(g) The Servicer shall deliver a list of Servicing Officers to the
Indenture Trustee and the Insurer on or before the Closing Date and shall
revise such list from time to time, as appropriate, and shall deliver all
revisions promptly to the Indenture Trustee and the Insurer.
(h) Consistent with the terms of this Agreement, the Servicer may consent
to the placing of a lien senior to that of the Mortgage on the related
Mortgaged Property; provided that such senior lien secures a mortgage loan
that refinances a First Lien and the combined loan-to-value ratio of the
related Mortgage Loan immediately following the refinancing (based on the
outstanding principal balance of the Mortgage Loan and the original principal
balance of such refinanced mortgage loan) is not greater than the Combined
Loan-to-Value Ratio of such Mortgage Loan as of date such Mortgage Loan was
originated.
35
Section 3.02 Collection of Certain Mortgage Loan Payments.
(a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans and shall, to
the extent such procedures shall be consistent with this Agreement, follow
such collection procedures as it follows with respect to mortgage loans in its
servicing portfolio comparable to the Mortgage Loans. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Servicer
may in its discretion (i) waive any prepayment penalty or late payment charge
or any assumption fees or other fees which may be collected in the ordinary
course of servicing such Mortgage Loan and (ii) arrange with a Mortgagor a
schedule for the payment of interest due and unpaid; provided that such
arrangement is consistent with the Servicer's policies with respect to the
mortgage loans it owns or services; provided, further, that notwithstanding
such arrangement such Mortgage Loans will be included in the monthly
information delivered by the Servicer to the Indenture Trustee pursuant to
Section 5.03 herein.
(b) The Servicer shall establish and maintain with [indenture trustee], a
separate trust account (the "Collection Account") entitled "[ ], as Indenture
Trustee, in trust for the registered holders of [ ] Home Equity Loan Asset-
Backed Notes and as Paying Agent for the Transferor in respect of the
Ownership Interest, as their interests may appear, Series 200_-_ Collection
Account." The Collection Account shall be an Eligible Account. The Servicer
shall on the Closing Date deposit any amounts representing payments on and any
collections in respect of the Mortgage Loans received after the Cut-Off Date
and prior to the Closing Date, and thereafter, subject to Section 3.02(d),
deposit within two Business Days following receipt thereof, the following
payments and collections received or made by it (without duplication) to the
Collection Account:
(i) all payments received after the Cut-Off Date on account of
principal on the Mortgage Loans and all Principal Prepayments and
Curtailments collected after the Cut-Off Date;
(ii) all payments received after the Cut-Off Date on account of
interest on the Mortgage Loans;
(iii) all Net Liquidation Proceeds net of related Foreclosure
Profits;
(iv) all Insurance Proceeds;
(v) any amounts payable in connection with the repurchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.02, 2.04 and 2.06;
(vi) all Released Mortgaged Property Proceeds; and
(vii) any amount required to be deposited therein pursuant to
Sections 3.02(c), 3.05, 3.07, 3.16, 3.20, 5.06(e) and 5.07 herein;
provided, however, that with respect to each Due Period, the Servicer shall be
permitted to retain (x) from payments in respect of interest on the Mortgage
Loans, the Servicing Fee for such Due
36
Period and (y) from payments from Mortgagors, Liquidation Proceeds, Insurance
Proceeds and Released Mortgaged Property Proceeds, any unreimbursed Servicing
Advances and Monthly Advances related thereto. The foregoing requirements
respecting deposits to the Collection Account are exclusive, it being
understood that, without limiting the generality of the foregoing, the
Servicer need not deposit in the Collection Account amounts representing
Foreclosure Profits, fees (including annual fees) or late charge penalties
payable by Mortgagors or amounts received by the Servicer for the accounts of
Mortgagors for application toward the payment of taxes, insurance premiums,
assessments and similar items.
(c) All funds in the Collection Account shall be held (i) uninvested or
(ii) invested at the direction of the Servicer in Eligible Investments. Any
investments of funds in the Collection Account shall mature or be withdrawable
at par on or prior to three Business Days preceding the immediately succeeding
Payment Date. Any investment earnings on funds held in the Collection Account
shall be for the account of the Servicer and may be withdrawn from the
Collection Account by the Servicer at any time. Any investment losses on funds
held in the Collection Account shall be for such account of the Servicer and
promptly upon the realization of such loss shall be contributed by the
Servicer to the Collection Account. Any references herein to amounts on
deposit in the Collection Account shall refer to amounts net of such
investment earnings.
(d) Notwithstanding anything contained in Section 3.02(b) to the
contrary, the Servicer shall be permitted to remit the collections specified
in Section 3.02(b), net of any amount permitted to be retained by the Servicer
as set forth in the proviso to such Section, to the Collection Account in
immediately available funds no later than 12:00 p.m. New York City time on the
second Business Day prior to each Payment Date but only for so long as (a) (i)
the Servicer shall be[ ], (ii) [ ]has a rating with respect to short-term
deposit obligations of at least "A-1" by S&P and "P-1" by ▇▇▇▇▇'▇, and (iii)
no Event of Servicing Termination shall have occurred and be continuing.
If the Servicer shall fail to make the deposit pursuant to this Section
3.02(d), the Indenture Trustee shall immediately notify, but in any event no
later than 12:00 p.m. New York City time on the third Business Day prior to
the Payment Date, by facsimile or telephone, [ ] and the Insurer of such
failure by the Servicer.
Section 3.03 Withdrawals from the Collection Account. The Indenture
Trustee shall withdraw or cause to be withdrawn funds from the Collection
Account for the following purposes:
(i) on each Payment Date, to deposit the portion of the Available
Funds then in the Collection Account to the Distribution Account;
(ii) to reimburse the Servicer for any accrued and unpaid Servicing
Fees and for unreimbursed Monthly Advances and Servicing Advances. The
Servicer's right to reimbursement for such unpaid Servicing Fees and
unreimbursed Servicing Advances shall be limited to late collections on
the related Mortgage Loan, including Liquidation Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Servicer from
the related Mortgagor or otherwise relating to the Mortgage Loan in
respect of which such reimbursed amounts are owed. The Servicer's right
to reimbursement for
37
unreimbursed Monthly Advances shall be limited to late collections of
interest on the related Mortgage Loan and to Liquidation Proceeds and
Insurance Proceeds on related Mortgage Loans;
(iii) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;
(iv) subject to Section 5.06 hereof, to make investments in Eligible
Investments and to pay to the Servicer interest earned in respect of
Eligible Investments or on funds deposited in the Collection Account;
(v) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein or were deposited therein in
error and to pay such funds to the appropriate Person;
(vi) to pay the Servicer the servicing compensation for the related
Due Period that it is entitled to receive pursuant to Section 3.09 herein
to the extent not retained or paid pursuant to Section 3.02(b) or Section
3.02(d) hereof;
(vii) to reimburse the Servicer for Nonrecoverable Advances that are
not, with respect to the aggregate Servicing Advances on any single
Mortgage Loan or REO Property, in excess of the Principal Balance
thereof;
(viii) to withdraw funds necessary for the conservation and
disposition of REO Property pursuant to Section 3.07 to the extent not
advanced by the Servicer; and
(ix) to clear and terminate the Collection Account upon the
termination of this Agreement and to pay any amounts remaining therein to
the Transferor.
Section 3.04 Maintenance of Hazard Insurance; Property Protection
Expenses. The Servicer shall cause to be maintained for each Mortgage Loan
fire and hazard insurance naming the Servicer or its designee as loss payee
thereunder providing extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing
such Mortgage Loan from time to time, (ii) the combined principal balance
owing on such Mortgage Loan and any mortgage loan senior to such Mortgage Loan
and (iii) the minimum amount required to compensate for damage or loss on a
replacement lost basis. The Servicer shall also maintain on property acquired
upon foreclosure, or by deed in lieu of foreclosure, fire and hazard insurance
with extended coverage in an amount which is at least equal to the lesser of
(i) the maximum insurable value from time to time of the improvements which
are a part of such property, (ii) the combined principal balance owing on such
Mortgage Loan and any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure, or deed in lieu of foreclosure plus accrued interest and
the good-faith estimate of the Servicer of related Servicing Advances to be
incurred in connection therewith. Amounts collected by the Servicer under any
such policies shall be deposited in the Collection Account to the extent
called for by Section 3.02. In cases in which any Mortgaged Property is
located in an area identified in a federally designated flood area, the hazard
insurance to be maintained for the related Mortgage Loan shall include flood
38
insurance to the extent such flood insurance is available and the Servicer has
determined such insurance to be necessary in accordance with accepted mortgage
servicing practices of prudent lending institutions. All such flood insurance
shall be in amounts not less than the lesser of (A) the amount in clause (i)
above, (B) the amount in clause (ii) above and (C) the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as
amended. The Servicer shall be under no obligation to require that any
Mortgagor maintain earthquake or other additional insurance and shall be under
no obligation itself to maintain any such additional insurance on property
acquired in respect of a Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require
such additional insurance.
Section 3.05 Maintenance of Mortgage Impairment Insurance Policy. In the
event that the Servicer shall obtain and maintain a blanket insurance policy
consistent with prudent industry standards, insuring against fire and hazards
of extended coverage on all of the Mortgage Loans, then, to the extent such
insurance policy names the Servicer or its designee as loss payee and provides
coverage in an amount equal to the aggregate unpaid principal balance on the
Mortgage Loans without coinsurance, and otherwise complies with the
requirements of Section 3.04, the Servicer shall be deemed conclusively to
have satisfied its obligations with respect to fire and hazard insurance
coverage under Section 3.04, it being understood and agreed that such blanket
insurance policy may contain a deductible clause, in which case the Servicer
shall, in the event that there shall not have been maintained on the related
Mortgaged Property an insurance policy complying with Section 3.04, and there
shall have been a loss which would have been covered by such insurance policy,
deposit in the Collection Account the difference, if any, between the amount
that would have been payable under an insurance policy complying with Section
3.04 and the amount paid under such blanket insurance policy. Upon the request
of the Insurer or the Indenture Trustee, the Servicer shall cause to be
delivered to the Insurer or the Indenture Trustee, as the case may be, a
certified true copy of such insurance policy. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Servicer
agrees to prepare and present, on behalf of itself, the Indenture Trustee, the
Insurer and the Trust, claims under any such insurance policy in a timely
fashion in accordance with the terms of such insurance policy.
Section 3.06 [Reserved]
Section 3.07 Management and Realization Upon Defaulted Mortgage Loans.
The Servicer shall manage, conserve, protect and operate each REO Property for
the Trust solely for the purpose of its prudent and prompt disposition and
sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the REO Property in the same
manner that it manages, conserves, protects and operates other foreclosed
property for its own account, and in the same manner that similar property in
the same locality as the REO Property is managed. The Servicer shall attempt
to sell the same (and may temporarily rent the same) on such terms and
conditions as the Servicer deems to be in the best interest of the Insurer and
the Trust.
The Servicer shall cause to be deposited, within the time period
specified in Section 3.02(b) or 3.02(d), as applicable, in the Collection
Account, all revenues received with respect to the related REO Property and
shall retain, or cause the Indenture Trustee to withdraw therefrom,
39
funds necessary for the proper operation, management and maintenance of the
REO Property and the fees of any managing agent acting on behalf of the
Servicer.
The disposition of REO Property shall be carried out by the Servicer for
cash at such price, and upon such terms and conditions, as the Servicer deems
to be in the best interest of the Trust and, as soon as practicable
thereafter, the expenses of such sale shall be paid. The cash proceeds of sale
of the REO Property shall be promptly deposited in the Collection Account,
pursuant to Section 3.02(b) or 3.02(d), as applicable, net of Foreclosure
Profits and of any related unreimbursed Servicing Advances, accrued and unpaid
Servicing Fees and unreimbursed Monthly Advances payable to the Servicer in
accordance with Section 3.03, for distribution to the Class A Noteholders and
the Transferor in respect of the Senior Interest Participation in accordance
with Section 5.01 herein.
The Servicer shall foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Mortgage Loans as come
into and continue in default either when no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.01, subject
to the provisions contained in the second succeeding paragraph of this Section
3.07.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee or its nominee on behalf of the Trust
and the Insurer.
If the Servicer has actual knowledge that a Mortgaged Property which the
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a 1 mile radius of any site with environmental
or hazardous waste risks, the Servicer will notify the Insurer prior to
acquiring the Mortgaged Property and shall not take any action without prior
written approval of the Insurer.
On each Payment Date, the Servicer shall provide to the Insurer the
Liquidation Report with respect to each Mortgage Loan that became a Liquidated
Mortgage Loan during the preceding Due Period.
Section 3.08 Indenture Trustee to Cooperate. Upon any principal
prepayment in full, the Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.01(e), if the related Assignment of
Mortgage has been recorded as required hereunder, an instrument of
satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Servicer if required by applicable law and be
delivered to the Person entitled thereto. It is understood and agreed that no
expenses incurred in connection with such instrument of satisfaction or
transfer shall be reimbursed from amounts deposited in the Collection Account.
If the Indenture Trustee is holding the Mortgage Files, from time to time and
as appropriate for the servicing or foreclosure of any Mortgage Loan, the
Indenture Trustee shall, upon request of the Servicer and delivery to the
Indenture Trustee of a Request for Release, in the form attached hereto as
Exhibit J, signed by a Servicing Officer, release the related Mortgage File to
the Servicer, and the Indenture Trustee shall execute such documents, at the
expense of and in the forms provided by the Servicer, as shall be necessary
for the prosecution of any such proceedings or the taking of other servicing
actions. Such Request for Release shall obligate the Servicer to
40
return the Mortgage File to the Indenture Trustee when the need therefor by
the Servicer no longer exists unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of a certificate of a Servicing Officer similar to
that hereinabove specified, a copy of the Request for Release shall be
released by the Indenture Trustee to the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the related
Assignment of Mortgage in accordance with the provisions hereof, the Indenture
Trustee shall, if so requested in writing by the Servicer execute an
appropriate assignment in the form provided to the Indenture Trustee by the
Servicer to assign such Mortgage Loan for the purpose of collection to the
Servicer (any such assignment shall unambiguously indicate that the assignment
is for the purpose of collection only) and, upon such assignment, such
assignee for collection will thereupon bring all required actions in its own
name and otherwise enforce the terms of the Mortgage Loan and deposit or
credit the Net Liquidation Proceeds, exclusive of Foreclosure Profits,
received with respect thereto in the Collection Account. In the event that all
delinquent payments due under any such Mortgage Loan are paid by the Mortgagor
and any other defaults are cured then the assignee for collection shall
promptly reassign such Mortgage Loan to the Indenture Trustee and return it to
the place where the related Mortgage File was being maintained.
Section 3.09 Servicing Compensation; Payment of Certain Expenses by
Servicer. Subject to Section 5.07 herein the Servicer shall be entitled to
retain the Servicing Fee in accordance with Section 3.02 as compensation for
its services in connection with servicing the Mortgage Loans. Moreover,
additional servicing compensation in the form of prepayment penalties or late
payment charges or other receipts not required to be deposited in the
Collection Account, including, without limitation, Foreclosure Profits and,
subject to Section 3.02(b) above, investment income on the Collection Account
or the Distribution Account shall be retained by the Servicer. The Servicer
shall be required to pay all expenses incurred by it in connection with its
activities hereunder (including payment of all other fees and expenses not
expressly stated hereunder to be for the account of the Trust) and shall not
be entitled to reimbursement therefor except as specifically provided herein.
Section 3.10 Annual Statement as to Compliance.
(a) The Servicer will deliver to the Indenture Trustee, the Insurer, the
Depositor and the Rating Agencies, on or before the last day of the fifth
month following the end of the Servicer's fiscal year, beginning in 200_, an
Officer's Certificate stating that (i) a review of the activities of the
Servicer during the preceding fiscal year (or such shorter period as is
applicable in the case of the first report) and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best
of such officer's knowledge, based on such review, the Servicer has fulfilled
all its material obligations under this Agreement throughout such fiscal year
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. The Servicer shall promptly notify the Insurer, the Seller, the
Indenture Trustee and the Rating Agencies in writing upon any change in the
basis on which its fiscal year is determined.
(b) The Servicer shall deliver to the Indenture Trustee, the Insurer, the
Depositor, the Seller and each of the Rating Agencies, promptly after having
obtained knowledge thereof, but in
41
no event later than five Business Days thereafter, written notice by means of
an Officer's Certificate of any event which, with the giving of notice or the
lapse of time or both, would become an Event of Servicing Termination.
Section 3.11 Annual Servicing Report. On or before the last day of the
fifth month following the end of the Servicer's fiscal year, beginning in [ ],
the Servicer, at its expense, shall cause a firm of independent public
accountants reasonably acceptable to the Depositor, the Trust and the Insurer
to furnish a letter or letters to the Insurer, the Seller, the Indenture
Trustee, the Depositor, the Trust and the Rating Agencies to the effect that
such firm has, with respect to the Servicer's overall servicing operations,
examined such operations in accordance with the requirements of the Uniform
Single Attestation Program for Mortgage Bankers, and stating such firm's
conclusions relating thereto. In the event such firm requires the Indenture
Trustee or the Trust to agree to the procedures performed by such firm, the
Servicer shall direct the Indenture Trustee or the Trust in writing to so
agree; it being understood and agreed that the Indenture Trustee or the Trust
will deliver such letter of agreement in conclusive reliance upon the
direction of the Servicer, and the Indenture Trustee or the Trust will make no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
Section 3.12 Access to Certain Documentation and Information Regarding
the Mortgage Loans. The Servicer shall provide to the Indenture Trustee, the
Insurer, Class A Noteholders which are federally insured savings and loan
associations, the Office of Thrift Supervision, the FDIC and the supervisory
agents and examiners of the Office of Thrift Supervision access to the
documentation regarding the Mortgage Loans required by applicable regulations
of the Office of Thrift Supervision and the FDIC (acting as operator of the
SAIF or the BIF), such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer. Nothing in this Section 3.12 shall derogate from the obligation of
the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of the Servicer to
provide access as provided in this Section 3.12 as a result of such obligation
shall not constitute a breach of this Section 3.12.
Section 3.13 [Reserved]
Section 3.14 Reports to the Securities and Exchange Commission. The
Indenture Trustee shall, on behalf of the Trust, cause to be filed with the
Securities and Exchange Commission any periodic reports required to be filed
under the provisions of the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Securities and Exchange Commission
thereunder. Upon the request of the Indenture Trustee, each of the Depositor,
the Seller and the Servicer shall cooperate with the Indenture Trustee in the
preparation of any such report and shall provide to the Indenture Trustee in a
timely manner all such information or documentation within their control as
the Indenture Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section 3.14.
Section 3.15 Reports of Foreclosures and Abandonments of Mortgaged
Properties, Returns Relating to Mortgage Interest Received from Individuals
and Returns Relating to Cancellation of Indebtedness. The Servicer shall make
reports of foreclosures and abandonments of any Mortgaged Property for each
year beginning in [ ]. The Servicer shall file
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reports relating to each instance occurring during the previous calendar year
in which the Servicer (i) on behalf of the Indenture Trustee acquires an
interest in any Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Mortgage Loan or (ii) knows or
has reason to know that any Mortgaged Property has been abandoned. The reports
from the Servicer shall be in form and substance sufficient to meet the
reporting requirements imposed by Sections 6050J, 6050H and 6050P of the Code.
Section 3.16 Advances by the Servicer. (a) Not later than 12:00 p.m. New
York City time on the second Business Day prior to each Payment Date, the
Servicer shall remit to the Indenture Trustee for deposit in the Distribution
Account an amount to be distributed on such Payment Date pursuant to Section
5.01 herein, equal to the interest due on each Mortgage Loan through the
related Due Date for such Mortgage Loan, but not received by the Servicer as
of the close of business on the last day of the related Due Period (net of the
Servicing Fee); such amount being defined herein as the "Monthly Advance." The
Servicer may fund all or a portion of the Monthly Advance with respect to the
Mortgage Loans by instructing the Indenture Trustee on such Determination Date
to use funds deposited in the Collection Account which are not part of
Available Funds for the related Payment Date; provided that if such funds are
so used the Servicer shall replace such funds on or before any subsequent
Determination Date on which such funds are required to be part of the
Available Funds.
(b) Notwithstanding anything herein to the contrary, no Servicing Advance
or Monthly Advance shall be required to be made hereunder if the Servicer
determines, and provides the Indenture Trustee with a Servicing Certificate to
the effect, that such Servicing Advance or Monthly Advance would, if made,
constitute a Nonrecoverable Advance.
Section 3.17 [Reserved]
Section 3.18 Assumption Agreements. When a Mortgaged Property has been or
is about to be conveyed by the Mortgagor, the Servicer shall, to the extent it
has knowledge of such conveyance or prospective conveyance, exercise its right
to accelerate the maturity of the related Mortgage Loan under any
"due-on-sale" clause contained in the related Mortgage or Mortgage Note;
provided, however, that the Servicer shall not exercise any such right if the
"due-on-sale" clause, in the reasonable belief of the Servicer, is not
enforceable under applicable law. In such event, the Servicer shall enter into
an assumption and modification agreement with the person to whom such property
has been or is about to be conveyed, pursuant to which such person shall
become liable under the Mortgage Note and, unless prohibited by applicable
law, the Mortgagor shall remain liable thereon. The Servicer, in accordance
with accepted mortgage loan servicing standards for mortgage loans similar to
the Mortgage Loans, is also authorized to enter into a substitution of
liability whereby such person is substituted as mortgagor and becomes liable
under the Mortgage Note. The Servicer shall notify the Indenture Trustee and
the Insurer in writing that any such substitution or assumption agreement has
been completed, and forward to the Indenture Trustee the original of such
substitution or assumption agreement, which original shall be added by the
Indenture Trustee to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. In connection with any
assumption or substitution agreement entered into pursuant to this Section
3.18, the Servicer shall not change the Loan Rate
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or the Monthly Payment, defer or forgive the payment of principal or interest,
reduce the outstanding principal amount or extend the final maturity date on
such Mortgage Loan.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 3.19 Payment of Taxes, Insurance and Other Charges. With respect
to each Mortgage Loan, the Servicer shall not be required to maintain records
relating to payment of taxes or insurance (including hazard insurance).
Section 3.20 Optional Purchase of Defaulted Mortgage Loans. The Servicer,
in its sole discretion, shall have the right to elect (by written notice sent
to the Indenture Trustee and the Insurer) to purchase for its own account from
the Trust any Mortgage Loan which is 90 days or more delinquent in the manner
and at the price specified in Section 2.02. The Purchase Price for any
Mortgage Loan purchased hereunder shall be deposited in the Collection Account
pursuant to Section 3.02(b) or 3.02(d), as applicable, provided that the
Indenture Trustee shall remit to the Depositor or the Insurer, as applicable,
the portion of the amount, if any, of the Purchase Price referred to in clause
(iv) of the definition thereof to the extent such amount is incurred by or
imposed on the Depositor or the Insurer. The Indenture Trustee, upon receipt
of such deposit, shall release or cause to be released to the purchaser of
such Mortgage Loan the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment prepared by the purchaser of such
Mortgage Loan, in each case without recourse, as shall be necessary to vest in
the purchaser of such Mortgage Loan any Mortgage Loan released pursuant hereto
and the purchaser of such Mortgage Loan shall succeed to all the Trust's
right, title and interest in and to such Mortgage Loan and all security and
documents related thereto. Such assignment shall be an assignment outright and
not for security. The purchaser of such Mortgage Loan shall thereupon own such
Mortgage Loan, and all security and documents, free of any further obligation
to the Indenture Trustee, the Insurer or the Noteholders or the holders of the
Senior Interest Participation with respect thereto.
Notwithstanding the foregoing, unless the Insurer consents, the Servicer
may only exercise its option pursuant to this Section 3.20 with respect to the
Mortgage Loan or Mortgage Loans that have been delinquent for the longest
period at the time of such repurchase. Any request by the Servicer to the
Insurer for consent to repurchase Mortgage Loans that are not the most
delinquent shall be accompanied by a description of the Mortgage Loans that
have been delinquent longer than the Mortgage Loan or Mortgage Loans which the
Servicer proposes to repurchase.
ARTICLE IV.
INSURER
Section 4.01 Claims upon the Insurance Policy. (a) As soon as possible,
and in no event later than 10:00 a.m. New York City time on the second
Business Day immediately preceding
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the Payment Date, the Indenture Trustee shall furnish the Insurer, the Fiscal
Agent and the Servicer with a completed notice in the form set forth as
Exhibit A to the Insurance Policy (the "Notice for Payment") in the event that
the Insured Payment for such Payment Date is equal to an amount greater than
zero. The Notice for Payment shall specify the amount of Insured Payment and
shall constitute a claim for an Insured Payment pursuant to the Insurance
Policy. Upon receipt of an Insured Payment on behalf of the Holders of the
Class A Notes under the Insurance Policy, the Indenture Trustee shall deposit
such Insured Payment in the Distribution Account and shall distribute such
Insured Payments pursuant to Section 5.01.
(b) The Indenture Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of the Class A Notes from
moneys received under the Insurance Policy. The Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
four Business Day's prior written notice to the Indenture Trustee.
(c) If a payment to the Class A Noteholders which is guaranteed pursuant
to the Insurance Policy is voided (a "Preference Event") under any applicable
bankruptcy, insolvency, receivership or similar law in an Insolvency
Proceeding (as defined in the Insurance Policy), and, as a result of such a
Preference Event, the Indenture Trustee is required to return such voided
payment, or any portion of such voided payment, made in respect of the Class A
Notes (an "Avoided Payment"), the Indenture Trustee shall furnish to the
Insurer (w) a certified copy of a final order of a court exercising
jurisdiction in such Insolvency Proceeding to the effect that the Indenture
Trustee is required to return any such payment or portion thereof during the
term of the Insurance Policy because such payment was voided under applicable
law, with respect to which order the appeal period has expired without an
appeal having been filed (the "Final Order"), (x) an Opinion of Counsel
satisfactory to the Insurer that such order is final and not subject to
appeal, (y) an assignment, in form reasonably satisfactory to the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Indenture
Trustee relating to or arising under such Avoided Payment and (z) a Notice for
Payment appropriately completed and executed by the Indenture Trustee. Such
payment shall be disbursed to the receiver, conservator, debtor-in-possession
or trustee in bankruptcy named in the Final Order and not to the Indenture
Trustee directly (unless a Class A Noteholder has previously paid such amount
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the Final Order in which case such payment shall be disbursed to the
Beneficiary for distribution to such Class A Noteholder upon proof of such
payment reasonably satisfactory to Insurer). The Indenture Trustee is not
permitted to make a claim on the Trust or on any Class A Noteholder for
payments made to any Class A Noteholder which are characterized as preference
payments by any bankruptcy court having jurisdiction over any bankrupt
Mortgagor unless ordered to do so by such bankruptcy court.
(d) Any amounts received by the Indenture Trustee pursuant to the
Insurance Policy in respect of the Class A Notes shall be deposited to the
Distribution Account.
Section 4.02 Effect of Payments by the Insurer; Subrogation. Anything
herein to the contrary notwithstanding, any payment with respect to principal
of or interest on any of the Class A Notes which are made with moneys received
pursuant to the terms of the Insurance Policy shall not be considered payment
of such Class A Notes, as applicable, from the Trust and
45
shall not result in the payment of or the provision for the payment of the
principal of or interest on such Class A Notes, as applicable, within the
meaning of Section 5.01 herein. The Seller, the Servicer and the Indenture
Trustee acknowledge, and each Holder by its acceptance of a Class A Note
agrees, that without the need for any further action on the part of the
Insurer, the Seller, the Servicer, the Indenture Trustee or the Note Registrar
(a) to the extent the Insurer makes payments, directly or indirectly, on
account of principal of or interest on any Class A Notes to the Holders of
such Class A Notes, the Insurer will be fully subrogated to the rights of such
Holders to receive such principal and interest, as applicable, from the Trust
and (b) the Insurer shall be paid such principal and interest but only from
the sources and in the manner provided herein and in the Insurance Agreement
for the payment of such principal and interest.
The Indenture Trustee and the Servicer shall cooperate in all respects
with any reasonable request by the Insurer for action to preserve or enforce
the Insurer's rights or interests under this Agreement without limiting the
rights or affecting the interests of the Holders of the Class A Notes as
otherwise set forth herein.
Section 4.03 [Reserved]
Section 4.04 [Reserved]
Section 4.05 Replacement Insurance Policy. In the event of a default by
the Insurer under the Insurance Policy or if the claims paying ability rating
of the Insurer is downgraded and such downgrade results in a downgrading of
the then current rating of the Class A Notes (in each case, a "Replacement
Event"), the Seller may, in accordance with and upon satisfaction of the
conditions set forth in the Insurance Policy and the Insurance and
Reimbursement Agreement and payment in full of all amounts owed to the
Insurer, but shall not be required to, substitute a new insurance policy or
insurance policies for the existing Insurance Policy, or may arrange for any
other form of credit enhancement; provided, however, that in each case the
Class A Notes shall be rated no lower than the rating assigned by each Rating
Agency to the Class A Notes immediately prior to such Replacement Event. It
shall be a condition to substitution of any new credit enhancement that there
be delivered to the Indenture Trustee (i) a legal opinion, acceptable in form
and substance to the Indenture Trustee, from counsel to the provider of such
new credit enhancement with respect to the enforceability thereof and such
other matters as the Indenture Trustee may require and (ii) an Opinion of
Counsel to the effect that such substitution would not have a materially
adverse tax effect on the Trust. Upon receipt of the items referred to above
and the taking of physical possession of the new credit enhancement, the
Indenture Trustee shall, within five Business Days following receipt of such
items and such taking of physical possession, deliver the replaced Insurance
Policy to the Insurer.
46
ARTICLE V.
PRIORITY OF DISTRIBUTIONS; STATEMENTS TO
NOTEHOLDERS; RIGHTS OF NOTEHOLDERS
Section 5.01 Distributions.
(a) Distributions of Interest and Principal Proceeds. Pursuant to Section
5.4(b) of the Indenture, on each Payment Date, the Indenture Trustee, with
respect to the Class A Notes, and the Paying Agent, with respect to the
Ownership Interest, shall distribute out of the Distribution Account, to the
extent of Available Funds (except that amounts paid under the Insurance Policy
shall only be available for distribution to Class A Noteholders), the
following amounts and in the following order of priority to the following
Persons (based on the information set forth in the Servicing Certificate):
(i) to the Indenture Trustee, the Indenture Trustee Fee for such
Payment Date, to the Owner Trustee, the Owner Trustee Fee for such
Payment Date, and to the Insurer, the Premium Amount;
(ii) to the holders of the Class A Notes, an amount equal to the
Interest Distribution for the Class A Notes for such Payment Date;
(iii) to the holders of the Class A Notes, the Class A Principal
Distribution for such Payment Date (other than the portion constituting
Distributable Excess Spread);
(iv) to the Insurer, the amount owing to the Insurer under the
Insurance Agreement for reimbursement for prior draws made on the
Insurance Policy;
(v) to the holders of the Class A Notes, to the extent of Available
Funds remaining, the Distributable Excess Spread for such Payment Date;
(vi) to the Servicer, the amount of any accrued and unpaid Servicing
Fee;
(vii) to the Servicer, the amount of Nonrecoverable Advances not
previously reimbursed and any amounts payable to the Servicer pursuant to
Section 7.03;
(viii) to the Insurer, any other amounts owing to the Insurer under
the Insurance Agreement; and
(ix) to the Transferor in respect of the Ownership Interest, the
balance.
(b) Method of Distribution. The Indenture Trustee shall make
distributions in respect of a Payment Date to each Class A Noteholder of
record on the related Record Date (other than as provided in Section 8.01
respecting the final distribution) by check or money order mailed to such
Class A Noteholder at the address appearing in the Note Register, or upon
written request by a Class A Noteholder delivered to the Indenture Trustee at
least five Business Days prior to such Record Date, by wire transfer (but only
if such Class A Noteholder is the Depository or such Class A Noteholder owns
of record one or more Class A Notes having principal
47
denominations aggregating at least $[1,000,000]), or by such other means of
payment as such Class A Noteholder and the Indenture Trustee shall agree.
Distributions among Class A Noteholders shall be made in proportion to the
Percentage Interests evidenced by the Class A Notes held by such Class A
Noteholders. The Indenture Trustee, acting in its capacity as Paying Agent,
shall make distributions in respect of a Payment Date to the Transferor of
record on the related Record Date, in respect of the Senior Interest
Participation by wire transfer or by such other means of payment as the
Transferor and the Paying Agent shall agree.
(c) Distributions on Book-Entry Notes. Each distribution with respect to
a Book-Entry Note shall be paid to the Depository, which shall credit the
amount of such distribution to the accounts of its Depository Participants in
accordance with its normal procedures. Each Depository Participant shall be
responsible for disbursing such distribution to the Class A Note Owners that
it represents and to each indirect participating brokerage firm (a "brokerage
firm" or "indirect participating firm") for which it acts as agent. Each
brokerage firm shall be responsible for disbursing funds to the Class A Note
Owners that it represents. All such credits and disbursements with respect to
a Book-Entry Note are to be made by the Depository and the Depository
Participants in accordance with the provisions of the Class A Notes. None of
the Indenture Trustee, the Paying Agent, the Note Registrar, the Seller, the
Insurer, the Trust or the Servicer shall have any responsibility therefor
except as otherwise provided by applicable law.
Section 5.02 Calculation of the Class A Note Rate. With respect to the
Class A Notes, on the second LIBOR Business Day immediately preceding each
Payment Date (or as of the fourth LIBOR Business Day prior to the Closing
Date, in the case of the first Payment Date), the Indenture Trustee shall
determine LIBOR for the Interest Period commencing on such Payment Date and
inform the Servicer (at the facsimile number given to the Indenture Trustee in
writing) of such rates. On or prior to each Determination Date, the Indenture
Trustee shall determine the applicable Class A Note Rate for the related
Payment Date.
Section 5.03 Statements to Noteholders. (a) Not later than 12:00 noon,
New York time, on each Determination Date, the Servicer shall deliver to the
Indenture Trustee, the Depositor and the Underwriters a computer tape (or such
other report in a form and format mutually agreeable to the Servicer and the
Indenture Trustee) (the "Servicing Certificate") containing the information
set forth in Exhibit D hereto with respect to the Mortgage Loans on an
aggregate basis as of the end of the preceding Due Period and such other
information as the Indenture Trustee shall reasonably require. Not later than
12:00 noon, New York time, on the Business Day preceding the Payment Date, the
Indenture Trustee shall deliver to the Depositor, the Servicer, the Transferor
and to the Insurer, by telecopy, with a hard copy thereof to be delivered on
such Payment Date, a statement (the "Indenture Trustee's Statement to
Noteholders") (based solely on the information contained on the computer tape
provided by the Servicer) containing the information set forth below with
respect to such Payment Date:
(i) The Available Funds and the Class A Note Rate for the related
Payment Date;
(ii) The Class A Note Principal Balance, the Pool Principal Balance
as reported in the prior Indenture Trustee's Statement to Noteholders or,
in the case of the
48
first Determination Date, the Original Class A Note Principal Balance and
the Cut-Off Date Pool Principal Balance;
(iii) The aggregate amount of collections received on the Mortgage
Loans on or prior to such Determination Date in respect of the preceding
Due Period, separately stating the amounts received in respect of
principal and interest;
(iv) The number and Principal Balances of all Mortgage Loans that
were the subject of Principal Prepayments during the related Due Period;
(v) The amount of all Curtailments that were received during the Due
Period;
(vi) The principal portion of all Monthly Payments received during
the Due Period;
(vii) The interest portion of all Monthly Payments received on the
Mortgage Loans during the Due Period;
(viii) The amount required to be paid by the Seller (reported
separately) pursuant to Sections 2.02, 2.04 or 2.06;
(ix) The amount of the Monthly Advances and the Compensating
Interest payment to be made with respect to such Payment Date;
(x) The Class A Principal Distribution to be distributed on the
Class A Notes, and the Interest Distribution for the related Payment Date
to be distributed on the Class A Notes and the Senior Interest
Participation;
(xi) The amount, if any, of the Outstanding Interest Carryover
Shortfall after giving effect to the distributions on the related Payment
Date;
(xii) The amount of the Insured Payments, if any, to be made on the
related Payment Date;
(xiii) The amount to be distributed to the Transferor in respect of
the Senior Interest Participation pursuant to 5.01(a)(ii) and the
Transferor Interest for the related Payment Date pursuant to Section
5.01(a)(ix);
(xiv) The Class A Note Principal Balance after giving effect to the
distribution to be made on the related Payment Date;
(xv) The weighted average remaining term to maturity of the Mortgage
Loans and the weighted average Loan Rate;
(xvi) The Servicing Fee to be paid to the Servicer pursuant to
Section 5.01(a)(vi) and the amounts to be paid to the Insurer, separately
stated, pursuant to Sections 5.01(a)(iv) and 5.01(a)(viii);
49
(xvii) The Premium Amount to be paid to the Insurer pursuant to
Section 5.01;
(xviii) The amount of all payments or reimbursements to the Servicer
pursuant to Section 3.03;
(xix) The O/C Amount, the O/C Reduction Amount, the Excess O/C
Amount and the Specified O/C Amount for the Payment Date and the Excess
Spread for such Payment Date;
(xx) The amount of Distributable Excess Spread to be distributed to
the Class A Noteholders on such Payment Date pursuant to Section
5.01(a)(v) on such Payment Date;
(xxi) The number of Mortgage Loans outstanding at the beginning and
at the end of the related Due Period;
(xxii) The Pool Principal Balance as of the end of the Due Period
related to such Payment Date;
(xxiii) The number and aggregate Principal Balances of Mortgage
Loans (w) as to which the Monthly Payment is delinquent for 30-59 days,
60-89 days and 90 or more days, respectively, (x) that have become REO
Properties, in each case as of the end of the preceding Due Period, (y)
that are in foreclosure and (z) the Mortgagor of which is the subject of
any bankruptcy or insolvency proceeding;
(xxiv) The unpaid principal amount of all Mortgage Loans that became
Liquidated Mortgage Loans during such Due Period;
(xxv) The Net Liquidation Proceeds received during such Due Period;
(xxvi) The cumulative losses on the Mortgage Loans;
(xxvii) The book value (within the meaning of 12 ▇.▇.▇.▇▇. 571.13 or
comparable provision) of any real estate acquired through foreclosure or
grant of a deed in lieu of foreclosure; and
(xxviii) The Delinquency Percentage in respect of such Payment Date.
In the case of information furnished pursuant to clauses (ii), (x) and
(xiv) above, the amounts shall be expressed, in a separate section of the
report, as a dollar amount for each Class A Note for each $1,000 original
dollar amount as of the Cut-Off Date.
In addition, the Indenture Trustee shall forward the Indenture Trustee's
Statement to Noteholders to each Class A Noteholder, the Rating Agencies,
Bloomberg (at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: [ ]) and
Intex Solutions (at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: [ ]) on the related Payment Date. The Indenture Trustee may fully
and conclusively rely upon and shall have no liability with respect to
information provided by the Servicer.
50
To the extent that there are inconsistencies between the telecopy of the
Indenture Trustee's Statement to Noteholders and the hard copy thereof, the
Servicer may rely upon the latter.
(b) The Indenture Trustee shall prepare or cause to be prepared (in a
manner consistent with the treatment of the Class A Notes as indebtedness of
the Trust, or as may be otherwise required by Section 3.15 herein) Internal
Revenue Service Form 1099 (or any successor form) and any other tax forms
required to be filed or furnished to Class A Noteholders in respect of
distributions by the Indenture Trustee (or the Paying Agent) on the Class A
Notes and shall file and distribute such forms as required by law.
(c) The Servicer and the Indenture Trustee shall furnish to each Class A
Noteholder and to the Insurer (if requested in writing), during the term of
this Agreement, such periodic, special or other reports or information,
whether or not provided for herein, as shall be necessary, reasonable or
appropriate with respect to the Class A Noteholder or the Insurer, as the case
may be, or otherwise with respect to the purposes of this Agreement, all such
reports or information to be provided by and in accordance with such
applicable instructions and directions (if requested in writing) as the Class
A Noteholder or the Insurer, as the case may be, may reasonably require;
provided that the Servicer and the Indenture Trustee shall be entitled to be
reimbursed by such Class A Noteholder or the Insurer, as the case may be, for
their respective fees and actual expenses associated with providing such
reports, if such reports are not generally produced in the ordinary course of
their respective businesses or readily obtainable.
(d) Reports and computer tapes furnished by the Servicer pursuant to this
Agreement shall be deemed confidential and of a proprietary nature, and shall
not be copied or distributed except to the extent provided in this Agreement
and to the extent required by law or to the Rating Agencies, the Depositor,
the Insurer's reinsurers, parent, regulators, liquidity providers and auditors
and to the extent the Seller instructs the Indenture Trustee in writing to
furnish information regarding the Trust or the Mortgage Loans to third-party
information providers. No Person entitled to receive copies of such reports or
tapes or lists of Class A Noteholders shall use the information therein for
the purpose of soliciting the customers of the Seller or for any other purpose
except as set forth in this Agreement.
Section 5.04 [Reserved]
Section 5.05 Distribution Account. The Indenture Trustee shall establish
an account (the "Distribution Account") titled "[ ], as Indenture Trustee, in
trust for the registered holders of [ ]Home Equity Loan Asset-Backed Notes and
the Insurer, and as Paying Agent for the Transferor in respect of the
Ownership Interest, as their interests may appear, Series 200_-_ Distribution
Account." The Distribution Account shall be an Eligible Account. The Indenture
Trustee shall deposit any amounts representing payments on and any collections
in respect of the Mortgage Loans received by it immediately following receipt
thereof to the Distribution Account including, without limitation, all amounts
(i) withdrawn by the Servicer from the Collection Account pursuant to Section
3.03 herein for deposit to the Distribution Account, and (ii) drawn under the
Insurance Policy in respect of an Insured Payment. Amounts on deposit in the
Distribution Account may be invested in Eligible Investments pursuant to
Section 5.06 below.
51
Section 5.06 Investment of Accounts.
(a) So long as no Event of Servicing Termination shall have occurred and
be continuing, and consistent with any requirements of the Code, all or a
portion of any Account held by the Indenture Trustee shall be invested and
reinvested by the Indenture Trustee, as directed in writing by the Servicer,
in one or more Eligible Investments bearing interest or sold at a discount. If
an Event of Servicing Termination shall have occurred and be continuing or if
the Servicer does not provide investment directions, the Indenture Trustee
shall invest all Accounts in Eligible Investments described in paragraph (vi)
of the definition of Eligible Investments. No such investment in any Account
shall mature later than the Business Day immediately preceding the next
Payment Date (except that (i) if such Eligible Investment is (a) an investment
described in item (vi) of Eligible Investments or (b) an obligation of the
Indenture Trustee, then such Eligible Investment shall mature not later than
such Payment Date and (ii) any other date as may be approved by the Rating
Agencies and the Insurer).
(b) If any amounts are needed for disbursement from any Account held by
the Indenture Trustee and sufficient uninvested funds are not available to
make such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Account.
(c) The Indenture Trustee shall not in any way be held liable for the
selection of Eligible Investments or by reason of any investment loss or
charge or any insufficiency in any Account held by the Indenture Trustee
resulting from any investment loss on any Eligible Investment included therein
unless the Indenture Trustee's failure to perform in accordance with this
Section is the cause of such loss or charge (except to the extent that the
Indenture Trustee is the obligor and has defaulted thereon or as provided in
subsection (b) of this Section). The Indenture Trustee shall have no liability
in respect of losses incurred as a result of the liquidation of any Eligible
Investment prior to its stated maturity or the failure of the Servicer to
provide timely written investment direction. In the absence of written
investment direction, the Indenture Trustee shall invest funds in the Accounts
in the Eligible Investment described in clause (vi) of the definition thereof.
(d) The Indenture Trustee shall invest and reinvest funds in the Accounts
held by the Indenture Trustee, to the fullest extent practicable, in such
manner as the Servicer shall from time to time direct as set forth in Section
5.06(a), but only in one or more Eligible Investments.
(e) So long as no Event of Servicing Termination shall have occurred and
be continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in the Collection Account and the Distribution
Account shall be for the benefit of the Servicer as servicing compensation (in
addition to the Servicing Fee), and shall be subject to withdrawal on or
before the first Business Day of the month following the month in which such
income or gain is received. The Servicer shall deposit in the Collection
Account or the Distribution Account, as the case may be, the amount of any
loss incurred in respect of any Eligible Investment held therein which is in
excess of the income and gain thereon immediately upon realization of such
loss from its own funds, without any right to reimbursement therefore.
52
Section 5.07 Compensating Interest. Not later than 12:00 p.m., New York
City time on the third Business Day prior to each Payment Date, the Servicer
shall remit to the Indenture Trustee for deposit to the Collection Account, an
amount equal to the lesser of (A) the aggregate of the Prepayment Interest
Shortfalls for the related Payment Date resulting from Principal Prepayments
during the related Due Period and (B) its aggregate Servicing Fees received in
the related Due Period. The Servicer shall not have the right to reimbursement
for any amount deposited to the Collection Account pursuant to this Section
5.07.
ARTICLE VI.
THE SELLER, THE SERVICER AND THE DEPOSITOR
Section 6.01 Liability of the Seller, the Servicer and the Depositor. The
Seller and the Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by the
Seller or Servicer, as the case may be, herein. The Depositor shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Depositor.
Section 6.02 Merger or Consolidation of, or Assumption of the Obligations
of, the Seller, the Servicer or the Depositor. Any corporation into which the
Seller, the Servicer or Depositor may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Seller, the Servicer or the Depositor shall be a party, or any corporation
succeeding to the business of the Seller, the Servicer or the Depositor shall
be the successor of the Seller, the Servicer or the Depositor, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor Servicer shall satisfy
all the requirements of Section 7.02 with respect to the qualifications of a
successor Servicer, and shall be approved by the Insurer [(which approval
shall not be unreasonably withheld)].
Section 6.03 Limitation on Liability of the Servicer and Others. Neither
the Servicer nor any of the directors or officers or employees or agents of
the Servicer shall be under any liability to the Trust or the Class A
Noteholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or gross negligence in
the performance of duties of the Servicer or by reason of its reckless
disregard of its obligations and duties of the Servicer hereunder; provided,
further, that this provision shall not be construed to entitle the Servicer to
indemnity in the event that amounts advanced by the Servicer to retire any
senior lien exceed Net Liquidation Proceeds realized with respect to the
related Mortgage Loan. The Servicer and any director or officer or employee or
agent of the Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Servicer and any director or officer or employee or
agent of the Servicer shall be indemnified by the Trust and held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to this Agreement or the Notes, other than any loss, liability
or expense related to any specific Mortgage Loan or Mortgage Loans (except as
any such loss, liability or expense
53
shall be otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of its willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of its
reckless disregard of obligations and duties hereunder; and such amounts shall
be payable only pursuant to Section 5.01(a)(vii). The Servicer may with the
consent of the Insurer (which consent shall not be unreasonably withheld)
undertake any such action which it may deem necessary or desirable in respect
of this Agreement, and the rights and duties of the parties hereto and the
interests of the Class A Noteholders hereunder. In such event, the reasonable
legal expenses and costs of such action and any liability resulting therefrom
shall be expenses, costs and liabilities of the Trust and the Servicer shall
be entitled to be reimbursed therefor only pursuant to Section 5.01(a)(vii).
The Servicer's right to indemnity or reimbursement pursuant to this Section
6.03 shall survive any resignation or termination of the Servicer pursuant to
Section 6.04 or 7.01 below with respect to any losses, expenses, costs or
liabilities arising prior to such resignation or termination (or arising from
events that occurred prior to such resignation or termination). This paragraph
shall apply to the Servicer solely in its capacity as Servicer hereunder and
in no other capacities.
Section 6.04 Servicer Not to Resign. Subject to the provisions of Section
6.02 above, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and
nature carried on by the Servicer or its subsidiaries or Affiliates at the
date of this Agreement or (ii) upon satisfaction of the following conditions:
(a) the Servicer has proposed a successor servicer to the Indenture Trustee in
writing and such proposed successor servicer is reasonably acceptable to the
Indenture Trustee; (b) each Rating Agency shall have delivered a letter to the
Indenture Trustee prior to the appointment of the successor servicer stating
that the proposed appointment of such successor servicer as Servicer hereunder
will not result in the reduction or withdrawal of the then current rating of
the Class A Notes; and (c) such proposed successor servicer is reasonably
acceptable to the Insurer, as evidenced by a letter to the Indenture Trustee;
provided, however, that no such resignation by the Servicer shall become
effective until such successor servicer or, in the case of (i) above, the
Indenture Trustee shall have assumed the Servicer's responsibilities and
obligations hereunder or the Indenture Trustee shall have designated a
successor servicer in accordance with Section 7.02 below. Any such resignation
shall not relieve the Servicer of responsibility for any of the obligations
specified in Sections 7.01 and 7.02 below as obligations that survive the
resignation or termination of the Servicer. Any such determination permitting
the resignation of the Servicer pursuant to clause (i) above shall be
evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee and the Insurer.
Section 6.05 Delegation of Duties. In the ordinary course of business,
the Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
accordance with standards comparable to those set forth in Section 3.01
herein. Such delegation shall not relieve the Servicer of its liabilities and
responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 6.04 above. The Servicer shall
provide the Insurer and the Indenture Trustee with written notice prior to the
delegation of any of its duties to any Person other than any of the Servicer's
Affiliates or their respective successors and assigns, and the Insurer shall
have
54
consented to the appointment of any Subservicer (which consent shall not have
been unreasonably withheld).
Section 6.06 Indemnification of the Trust by the Servicer. The Servicer
shall indemnify and hold harmless the Owner Trustee, the Trust and the
Indenture Trustee and its officers, directors, agents and employees from and
against any loss, liability, expense, damage or injury suffered or sustained
by reason of the Servicer's willful misfeasance, bad faith or gross negligence
in the performance of its activities in servicing or administering the
Mortgage Loans pursuant to this Agreement, including, but not limited to, any
judgment, award, settlement, reasonable fees of, counsel of its selection and
other costs or expenses incurred in connection with the defense of any actual
or threatened action, proceeding or claim related to the Servicer's
misfeasance, bad faith or gross negligence. Any such indemnification shall not
be payable from the assets of the Trust. The provisions of this indemnity
shall run directly to and be enforceable by an injured party subject to the
limitations hereof. The provisions of this Section 6.06 shall survive
termination of the Agreement or the earlier of the resignation or removal of
the Owner Trustee or the Indenture Trustee, as the case may be. In addition,
the Servicer agrees to indemnify the Indenture Trustee pursuant to Section 6.7
of the Indenture.
ARTICLE VII.
SERVICING TERMINATION
Section 7.01 Events of Servicing Termination.
If any one of the following events ("Events of Servicing Termination")
shall occur and be continuing:
(i) (A) the failure by the Servicer to make any required Monthly
Advance when due; or (B) any other failure by the Servicer to deposit in
the Collection Account or the Distribution Account any deposit required
to be made under the terms of this Agreement which continues unremedied
for a period of two Business Days after the date upon which written
notice of such failure shall have been given to the Servicer by the
Indenture Trustee or to the Servicer and the Indenture Trustee by the
Insurer or by the Holders of Class A Notes representing not less than 25%
of the aggregate Class A Note Principal Balance; or
(ii) the failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of 30 days, or,
except as otherwise described in subclause (vi) below, the failure by the
Servicer duly to observe or perform, in any material respect, any other
covenants, obligations or agreements of the Servicer as set forth in this
Agreement, which failure adversely affects the interests of the Class A
Noteholders or the Insurer and continues unremedied for a period of 30
days, after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by the
Indenture Trustee or to the Servicer and the Indenture Trustee by the
Insurer or by the Holders of Class A Notes representing not less than 25%
of the aggregate Class A Note Principal Balance; or
55
(iii) the entry against the Servicer of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises
for the appointment of a trustee, conservator, receiver or liquidator in
any insolvency, conservatorship, receivership, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(iv) the Servicer shall voluntarily go into liquidation, consent to
the appointment of a conservator or receiver or liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Servicer or of
or relating to all or substantially all of its property, or a decree or
order of a court or agency or supervisory authority having jurisdiction
in the premises for the appointment of a conservator, receiver,
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against
the Servicer and such decree or order shall have remained in force
undischarged, unbonded or unstayed for a period of 60 days; or the
Servicer shall admit in writing its inability to pay its debts generally
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors or voluntarily suspend payment of its obligations; or
(v) so long as the Seller is the Servicer, any failure of the Seller
to repurchase or substitute Eligible Substitute Mortgage Loans for
Defective Mortgage Loans as required pursuant to the Mortgage Loan
Purchase Agreement or this Agreement; or
(vi) Any breach by the Servicer of a representation or warranty made
in Section 2.03 herein, which breach materially and adversely affects the
interests of the Class A Noteholders or the Insurer and continues
unremedied for a period of 30 days after the giving of written notice of
such failure to the Servicer by the Indenture Trustee, or to the Servicer
and the Indenture Trustee by the Insurer or Holders of Class A Notes
evidencing Percentage Interests aggregating not less than 25% of the
aggregate Class A Note Principal Balance [(or such longer period[, with
the consent of the Insurer (which consent shall not be unreasonably
withheld),] as may be reasonably necessary to remedy such breach,
provided that the Servicer has commenced and diligently pursues such
remedy to completion)]; or
(vii) [Reserved];
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied within the applicable grace
period, (x) subject to the succeeding paragraph, with respect solely to
clause (i)(A) above, if such Monthly Advance is not made by 4:00 P.M.,
New York time, on the second Business Day following written notice to the
Servicer of such event the Indenture Trustee shall terminate all of the
rights and obligations of the Servicer under this Agreement and the
Indenture Trustee, or any other successor servicer appointed in
accordance with Section 7.02 below, shall immediately make such Monthly
Advance and assume, pursuant to Section 7.02, the duties of a
56
successor Servicer and (y) in the case of (i)(B), (ii), (iii), (iv), (v),
(vi) and (vii) above, the Indenture Trustee shall, at the direction of
the Insurer or the Holders of Class A Notes representing not less than
51% of the Class A Note Principal Balance (with the consent of the
Insurer, so long as no Insurer Default exists), by notice then given in
writing to the Servicer (and to the Indenture Trustee if given by Holders
of Class A Notes), terminate all of the rights and obligations of the
Servicer as servicer under this Agreement. Any such notice to the
Servicer shall also be given to each Rating Agency, [ ], the Depositor,
the Trust and the Insurer. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Class A Notes or the Mortgage
Loans or otherwise, shall pass to and be vested in the Indenture Trustee
pursuant to and under this Section 7.01; and, without limitation, the
Indenture Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any
and all documents and other instruments, and to do or accomplish all
other acts or things necessary or appropriate to effect the purposes of
such notice of termination, whether to complete the transfer and
endorsement of each Mortgage Loan and related documents or otherwise. The
Servicer agrees to cooperate with the Indenture Trustee in effecting the
termination of the responsibilities and rights of the Servicer hereunder,
including, without limitation, the transfer to the Indenture Trustee for
the administration by it of all cash amounts that shall at the time be
held by the Servicer and to be deposited by it in the Collection Account,
or that have been deposited by the Servicer in the Collection Account or
thereafter received by the Servicer with respect to the Mortgage Loans.
All reasonable costs and expenses (including attorneys' fees) incurred in
connection with transferring the Mortgage Files to the successor Servicer
and amending this Agreement to reflect such succession as Servicer
pursuant to this Section 7.01 shall be paid by the predecessor Servicer
(or if the predecessor Servicer is the Indenture Trustee, the initial
Servicer) upon presentation of reasonable documentation of such costs and
expenses.
In addition, upon the occurrence of any Trigger Event, as provided in the
Insurance and Reimbursement Agreement, and upon the direction of the
Insurer in connection therewith, the Indenture Trustee shall terminate
the rights and responsibilities of the Servicer hereunder and shall
appoint a successor Servicer in accordance with the provisions of Section
7.02.
Section 7.02 Indenture Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 7.01 or resigns pursuant to 6.04 herein, the Indenture
Trustee or a previously agreed upon successor Servicer shall be the successor
in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof. As compensation
therefor, the Indenture Trustee shall be entitled to such compensation as the
Servicer would have been entitled to hereunder if no such notice of
termination had been given. Notwithstanding the above, (i) if the Indenture
Trustee is unwilling to act as successor Servicer, or (ii) if the Indenture
Trustee is legally unable so to act, the Indenture Trustee shall appoint or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution, bank or other mortgage loan or home equity
57
loan servicer having a net worth of not less than $50,000,000 as the successor
to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided
that any such successor Servicer shall be acceptable to the Insurer, as
evidenced by the Insurer's prior written consent (which consent shall not be
unreasonably withheld); and provided, further, that the appointment of any
such successor Servicer will not result in the qualification, reduction or
withdrawal of the ratings assigned to the Class A Notes by the Rating
Agencies. Pending appointment of a successor to the Servicer hereunder, unless
the Indenture Trustee is prohibited by law from so acting, the Indenture
Trustee shall act in such capacity as hereinabove provided. Notwithstanding
anything herein or in the Indenture to the contrary, in no event shall the
Indenture Trustee be held liable for any Servicing Fee or for any differential
in the amount necessary to induce any successor servicer to act as successor
servicer under this Agreement and the transactions set forth or provided for
therein. In connection with such appointment and assumption, the successor
shall be entitled to receive compensation out of payments on Mortgage Loans in
an amount equal to the compensation which the Servicer would otherwise have
received pursuant to Section 3.09 herein (or such lesser compensation as the
Indenture Trustee and such successor shall agree). The appointment of a
successor Servicer shall not affect any liability of the predecessor Servicer
which may have arisen under this Agreement prior to its termination as
Servicer to pay any deductible under an insurance policy pursuant to Section
3.05 herein or to indemnify the Trust and the Indenture Trustee pursuant to
Section 6.06), nor shall any successor Servicer be liable for any acts or
omissions of the predecessor Servicer or for any breach by such Servicer of
any of its representations or warranties contained herein or in any related
document or agreement. The Indenture Trustee and such successor shall take
such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
(b) Any successor, including the Indenture Trustee, to the Servicer as
servicer shall during the term of its service as servicer (i) continue to
service and administer the Mortgage Loans for the benefit of the Trust, and
(ii) maintain in force an insurance policy or policies of insurance covering
errors and omissions in the performance of its obligations as Servicer
hereunder and a fidelity bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.06
herein. No successor servicer shall have the right to retain and commingle
payments on, and collections in respect of, the Mortgage Loans with its own
funds pursuant to Section 3.02(d) unless (i) consented to in writing by the
Insurer and (ii) such commingling will not result in a downgrade,
qualification or withdrawal of the then current ratings of the Class A Notes,
without regard to the Insurance Policy, as evidenced in writing by each Rating
Agency.
Section 7.03 Waiver of Defaults. The Insurer or the Majority Noteholders
with the consent of the Insurer (which consent shall not be unreasonably
withheld) may, on behalf of all Class A Noteholders, waive any events
permitting removal of the Servicer as servicer pursuant to this Article VIII,
provided, however, that the Insurer and the Majority Noteholders may not waive
a default in making a required distribution on a Class A Note without the
consent of the Holder of such Class A Note. Upon any waiver of a past default,
such default shall cease to exist and any Event of Servicing Termination
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto except to the extent expressly so
waived. Notice of any such waiver shall be given by the Indenture Trustee to
the Rating Agencies.
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Section 7.04 Notification to Class A Noteholders. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VII or
Section 6.04 above, the Indenture Trustee shall give prompt written notice
thereof to the Class A Noteholders at their respective addresses appearing in
the Class A Note Register, the Insurer and each Rating Agency.
ARTICLE VIII.
TERMINATION
Section 8.01 Termination.
(a) The respective obligations and responsibilities of the Depositor, the
Seller, the Servicer, the Trust and the Indenture Trustee created hereby
(other than the obligation of the Indenture Trustee to make certain payments
to Class A Noteholders after the Final Payment Date and the obligation of the
Servicer to send certain notices as hereinafter set forth) shall terminate
upon notice to the Indenture Trustee of the later of (A) payment in full of
all amounts owing to the Insurer unless the Insurer shall otherwise consent
and (B) the earliest of (i) the final payment or other liquidation of the last
Mortgage Loan remaining in the Trust; (ii) the optional purchase by the
Servicer of the Mortgage Loans as described below and (iii) the Payment Date
in [ ]. Notwithstanding the forgoing, in no event shall the trust created
hereby continue beyond the expiration of 21 years from the date of the last
survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late ambassador of the
United States to the Court of St. ▇▇▇▇▇, living on the date hereof.
(b) The Servicer may, at its option, terminate this Agreement on any
Payment Date on or after the Payment Date on which the aggregate Pool
Principal Balance is less than or equal to [ ] of the Cut-Off Date Pool
Principal Balance by purchasing, on the next succeeding Payment Date, all of
the outstanding Mortgage Loans and REO Properties at a price equal to the sum
of the outstanding Pool Principal Balance and accrued and unpaid interest
thereon at the weighted average of the Loan Rates through the end of the Due
Period preceding the final Payment Date together with all amounts due and
owing to the Insurer (the "Termination Price").
In connection with any such purchase pursuant to the preceding paragraph,
the Servicer shall deposit in the Distribution Account all amounts then on
deposit in the Collection Account (less amounts permitted to be withdrawn by
the Servicer pursuant to Section 3.03), which deposit shall be deemed to have
occurred immediately preceding such purchase.
Any such purchase shall be accomplished by deposit into the Distribution
Account on the Determination Date before such Payment Date of the Termination
Price.
(c) Notice of any termination, specifying the Payment Date (which shall
be a date that would otherwise be a Payment Date) upon which the Class A
Noteholders may surrender their Class A Notes to the Indenture Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Indenture Trustee (upon receipt of written directions from the Servicer,
if the Servicer is exercising its right to transfer of the Mortgage Loans,
given not later than the first day of the month preceding the month of such
final distribution) to the Insurer and to the Servicer by letter to the Class
A Noteholders mailed not earlier than the 15th
59
day and not later than the 25th day of the month next preceding the month of
such final distribution specifying (i) the Payment Date upon which final
distribution of the Class A Notes will be made upon presentation and surrender
of Class A Notes at the office or agency of the Indenture Trustee therein
designated, (ii) the amount of any such final distribution and (iii) that the
Record Date otherwise applicable to such Payment Date is not applicable,
distributions being made only upon presentation and surrender of the Class A
Notes at the office or agency of the Indenture Trustee therein specified.
(d) Upon presentation and surrender of the Class A Notes, the Indenture
Trustee shall cause to be distributed to the Holders of the Class A Notes on
the Payment Date for such final distribution, in proportion to the Percentage
Interests of their respective Class A Notes and to the extent that funds are
available for such purpose, an amount equal to the amount required to be
distributed to Class A Noteholders pursuant to Section 5.01 for such Payment
Date. On the final Payment Date prior to having made the distributions called
for above, the Indenture Trustee shall, based upon the information set forth
in the Servicing Certificate for such Payment Date, withdraw from the
Distribution Account and remit to the Insurer the lesser of (x) the amount
available for distribution on such final Payment Date, net of any portion
thereof necessary to pay the Class A Noteholders and the Transferor in respect
of the Senior Interest Participation pursuant to Section 5.01(a) and any
amounts owing to the Indenture Trustee in respect of the Indenture Trustee Fee
and (y) the unpaid amounts due and owing to the Insurer pursuant to the
Insurance Agreement.
(e) In the event that all of the Class A Noteholders shall not surrender
their Class A Notes for final payment and cancellation on or before such final
Payment Date, the Indenture Trustee shall promptly following such date cause
all funds in the Distribution Account not distributed in final distribution to
Class A Noteholders and the holder of the Transferor Interest in respect of
the Senior Interest Participation, to be withdrawn therefrom and credited to
the remaining Class A Noteholders and the holder of the Transferor Interest in
respect of the Senior Interest Participation, as applicable, by depositing
such funds in a separate escrow account for the benefit of such Class A
Noteholders and holder of the Transferor Interest in respect of the Senior
Interest Participation, and the Servicer (if the Servicer has exercised its
right to purchase the Mortgage Loans) or the Indenture Trustee (in any other
case) shall give a second written notice to the remaining Class A Noteholders
to surrender their Class A Notes for cancellation and receive the final
distribution with respect thereto. If within nine months after the second
notice all the Class A Notes shall not have been surrendered for cancellation,
the Transferor Interest will be entitled to all unclaimed funds and other
assets which remain subject hereto and the Indenture Trustee upon transfer of
such funds shall be discharged of any responsibility for such funds and the
Noteholders shall look to the holder of the Transferor Interest for payment.
(f) Upon payment of all amounts owed under the Insurance Policy and
cancellation of the Class A Notes, the Indenture Trustee shall provide the
Insurer notice of cancellation of the Class A Notes and surrender the
Insurance Policy to the Insurer.
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ARTICLE IX.
MISCELLANEOUS PROVISIONS
Section 9.01 Amendment.
(a) This Agreement may be amended from time to time by the Depositor, the
Seller, the Servicer, the Trust and the Indenture Trustee by written
agreement, without the consent of any of the Class A Noteholders, but only
with the consent of the Insurer (which consent shall not be unreasonably
withheld) (i) to cure any ambiguity, (ii) to correct any defective provisions
or to correct or supplement any provisions herein that may be inconsistent
with any other provisions herein, (iii) to add to the duties of the Servicer,
(iv) to add any other provisions with respect to matters or questions arising
under this Agreement or the Insurance Policy, as the case may be, which shall
not be inconsistent with the provisions of this Agreement, (v) to add or amend
any provisions of this Agreement as required by any Rating Agency or any other
nationally recognized statistical rating agency in order to maintain or
improve any rating of the Class A Notes (it being understood that, after
obtaining the ratings in effect on the Closing Date, neither the Indenture
Trustee, the Seller, the Depositor nor the Servicer is obligated to obtain,
maintain or improve any such rating), or (vi) to amend the definition of
Specified O/C Amount; provided, however, that as evidenced by an Opinion of
Counsel (at the expense of the party requesting such amendment) in each case
such action shall not, (1) have any material adverse tax consequence with
respect to such Class A Noteholder, the Insurer or the Trust or (2) adversely
affect in any material respect the interest of any Class A Noteholder or the
Insurer, provided, further, that the amendment shall not be deemed to
adversely affect in any material respect the interests of the Class A
Noteholder or the Insurer, and no Opinion of Counsel to that effect shall be
required by this clause (2) if the Person requesting the amendment obtains a
letter from the Rating Agency stating that the amendment would not result in
the downgrading or withdrawal of the respective ratings then assigned to the
Class A Notes without regard to the Insurance Policy.
(b) This Agreement also may be amended from time to time by the Seller,
the Servicer, the Depositor, the Trust and the Indenture Trustee, with the
consent of the Holders of Class A Notes representing not less than 51% of the
Class A Note Principal Balance, and with the consent of the Insurer (which
consent shall not be unreasonably withheld), for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Class A
Noteholders or the Transferor in respect of the Ownership Interest; provided,
however, that no such amendment shall (i) reduce in any manner the amount of,
or delay the timing of, payments on the Class A Notes or Senior Interest
Participation or distributions or payments under the Insurance Policy which
are required to be made on the Class A Notes or Senior Interest Participation
without the consent of the Holder of such Class A Notes or Senior Interest
Participation or (ii) reduce the aforesaid percentage required to consent to
any such amendment, without the consent of the Holders of all Class A Notes
then outstanding.
Prior to the execution of any such amendments, the Indenture Trustee
shall furnish written notification of the substance of such amendment to each
Rating Agency. In addition, promptly after the execution of any such amendment
made with the consent of the Class A Noteholders, the Indenture Trustee shall
furnish written notification of the substance of such
61
amendment to each Class A Noteholder and fully executed original counterparts
of the instruments effecting such amendment to the Insurer.
(c) It shall not be necessary for the consent of Class A Noteholders
under this Section 9.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Class A Noteholders shall be subject
to such reasonable requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, each of the
Indenture Trustee and the Owner Trustee shall be entitled to receive and
conclusively rely upon an Opinion of Counsel stating that the execution of
such amendment is authorized or permitted by this Agreement and all conditions
precedent to the execution of such amendment have been met. The Indenture
Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Indenture Trustee's own rights, duties, indemnities or
immunities under this Agreement.
Section 9.02 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in all
of the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Servicer
at the Class A Noteholders' expense on direction of the Indenture Trustee or
the Majority Class A Noteholders, but only when accompanied by an opinion of
counsel to the effect that such recordation materially and beneficially
affects the interests of the Class A Noteholders or is necessary for the
administration or servicing of the Mortgage Loans.
Section 9.03 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 9.04 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 9.05 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed
by overnight mail, certified mail or registered mail, postage prepaid, to: (i)
in the case of the Seller, the Trust or the Servicer, [ ], (ii) in the case of
the Indenture Trustee, at the Corporate Trust Office, (iii) in the case of the
62
Insurer, [ ], Attention: [ ], (iv) in the case of Moody's, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attention: Residential Mortgage
Monitoring, (v) in the case of Standard & Poor's, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, (vi) in the case of the Depositor, [ ], (vii) in the case of [ ]
and (viii) in the case of the Class A Noteholders, as set forth in the Note
Register. Any such notices shall be deemed to be effective with respect to any
party hereto upon the receipt of such notice by such party, except that
notices to the Class A Noteholders shall be effective upon mailing or personal
delivery.
Section 9.06 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 9.07 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor.
Section 9.08 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together,
shall constitute one and the same Agreement.
Section 9.09 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Seller, the Trust, the Indenture Trustee and the Class A
Noteholders and their respective successors and permitted assigns. The Insurer
is an express third party beneficiary of this Agreement.
Section 9.10 Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 9.11 Indenture Trustee.
All privileges, rights and immunities given to the Indenture Trustee in
the Indenture are hereby extended to and applicable to the Indenture Trustee's
obligations hereunder.
Section 9.12 Reports to Rating Agencies.
The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared by the
Servicer hereunder, as follows:
63
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Mortgage Loans;
(iii) notice of any termination, replacement, succession, merger or
consolidation of either the Servicer or the Trust;
(iv) notice of final payment on the Class A Notes;
(v) notice of any Event of Servicing Termination;
(vi) copies of the annual independent auditor's report delivered
pursuant to Section 3.11 herein, and copies of any compliance reports
delivered by the Servicer hereunder including Section 3.10 herein; and
(vii) copies of any Servicing Certificate pursuant to Section 5.03
herein.
Section 9.13 Inconsistencies Among Transaction Documents.
In the event certain provisions of a Transaction Document conflict with
the provisions of this Sale and Servicing Agreement, the parties hereto agree
that the provisions of this Sale and Servicing Agreement shall be controlling.
Section 9.14 Rights of the Insurer to Exercise Rights of Noteholders.
By accepting its Class A Note, each Class A Noteholder agrees that unless
an Insurer Default exists, the Insurer shall have the right to exercise all
rights of the Class A Noteholders as specified under this Agreement without
any further consent of the Class A Noteholders. Any right conferred to the
Insurer hereunder shall be suspended and shall run to the benefit of the Class
A Noteholders during any period in which there exists an Insurer Default.
64
IN WITNESS WHEREOF, the following have caused their names to be signed by
their respective officers thereunto duly authorized, as of the day and year
first above written, to this Sale and Servicing Agreement.
[ ] HOME EQUITY LOAN TRUST 200_-_,
By: [ ], not in its individual
capacity but solely as Owner Trustee
By:______________________________________
Name:
Title:
[ ],
as Seller and Servicer
By:______________________________________
Name:
Title:
BOND SECURITIZATION, L.L.C.,
as Depositor
By:______________________________________
Name:
Title:
[ ],
as Indenture Trustee
By:______________________________________
Name:
Title:
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on [ ], the undersigned authority, a Notary Public, on this
day personally appeared [__], known to me to be a person and officer whose name
is subscribed to the foregoing instrument and acknowledged to me that the same
was the act of the said [ ]not in its individual capacity but in its capacity
as Owner Trustee of [ ] HOME EQUITY LOAN TRUST 200_-_, as the Trust, and that
he executed the same as the act of such corporation for the purpose and
consideration therein expressed, and in the capacity therein stated.
_______________________________________
Notary Public, State of ________
2
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on [ ], the undersigned authority, a Notary Public, on this
day personally appeared __, known to me to be a person and officer whose name is
subscribed to the foregoing instrument and acknowledged to me that the same
was the act of the said [ ], as the Seller and the Servicer, and that he
executed the same as the act of such corporation for the purpose and
consideration therein expressed, and in the capacity therein stated.
_______________________________________
Notary Public, State of ________
3
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on [ ], the undersigned authority, a Notary Public, on this
day personally appeared __, known to me to be a person and officer whose name
is subscribed to the foregoing instrument and acknowledged to me that the same
was the act of the said [ ], as the Depositor, and that he executed the same
as the act of such corporation for the purpose and consideration therein
expressed, and in the capacity therein stated.
_______________________________________
Notary Public, State of ________
4
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on [ ], the undersigned authority, a Notary Public, on this
day personally appeared __, known to me to be the person and officer whose name
is subscribed to the foregoing instrument and acknowledged to me that the same
was the act of the said [ ], as Indenture Trustee, and that he executed the
same as the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
_______________________________________
Notary Public, State of ________
5
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, on [ ] the undersigned authority, a Notary Public, on this day
personally appeared [ ], known to me to be the person and officer whose name
is subscribed to the foregoing instrument and acknowledged to me that the same
was the act of the said [ ], and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
_______________________________________
Notary Public, State of ________
6
EXHIBIT A
---------
MORTGAGE LOAN SCHEDULE
A-1
EXHIBIT B
---------
LIST OF SERVICING OFFICERS
B-1
EXHIBIT C
---------
FORM OF MONTHLY STATEMENT TO NOTEHOLDERS
C-1
EXHIBIT D
---------
FORM OF SERVICING CERTIFICATE
D-1
EXHIBIT E
---------
LETTER OF DEPOSITOR TO INDENTURE TRUSTEE RE: EXCHANGE ACT REPORTS
[DATE]
[Address]
[Address]
[Address]
Re: [ ] Home Equity Loan Trust ____-_,
[ ] Home Equity Loan Asset-Backed Notes,
Series _____-_
-------------------------------------------
Ladies and Gentlemen:
Pursuant to and in reference to Section 3.14 of the Sale and Servicing
Agreement dated as of [ ] relating to the above referenced Notes, please note
the following:
(a) CIK Number for [ ] Home Equity Loan Trust ____-_ (the "Trust"):
____________.
(b) CCC for the Trust should be applied for at your earliest convenience
and reported to our attention.
In order to comply with the reporting obligations for the Trust under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), the
Indenture Trustee must file within 15 days following each Payment Date a copy
of the report distributed by the Indenture Trustee to the Noteholders in a
current report on Form 8-K. Such reports provide all current information
ordinarily of interest to the Noteholders. The Indenture Trustee must also
report on a current report on Form 8-K any significant occurrences during the
reporting period that would be reportable under Item 1, Item 2, Item 4 and
Item 5. In addition, the Indenture Trustee should cause the filing of an
annual report on Form 10-K within 90 days following the end of the Trust's
fiscal year containing the following information:
Part I, Item 3. A description of any material pending litigation;
Part I, Item 4. A description of any submission matters to vote of
Noteholders;
Part II, Item 5. A statement of the number of Noteholders and the
principal market, if any, in which the Notes trade;
Part II, Item 9. A statement as to any changes in or disagreements
with the independent public accounts for the Trust;
Part IV, Item 14. A copy of the annual certificate of compliance by an
officer of the Master Servicer, and any Subservicer
and the audit of the servicing by the independent
accounting firm.
Promptly after filing the Form 10-K, the Indenture Trustee should file a Form
15 in accordance with Section 3.14 of the Sale and Servicing Agreement,
deregistering the Trust and terminating
E-1
the reporting obligations under the Exchange Act. All filings must be made
through the ▇▇▇▇▇ System and all acceptance slips from the filings should be
saved as they will be needed for the annual certificate.
[ ]
By:______________________________________
Name:
Title:
E-2
EXHIBIT F
---------
FORM OF LIQUIDATION REPORT
F-1
EXHIBIT G
---------
FORM OF CLASS A NOTES
G-1
EXHIBIT H
---------
FORM OF MORTGAGE NOTE
H-1
EXHIBIT I
---------
FORM OF MORTGAGE
I-1
EXHIBIT J
---------
FORM OF REQUEST FOR RELEASE
[DATE]
[Address]
[Address]
[Address]
Attention:
Re: [ ] Home Equity Loan Asset-Backed Notes, Series ____-_
Gentlemen:
In connection with the administration of the Mortgage Loans held by you
as Indenture Trustee under the Sale and Servicing Agreement dated as of [ ],
among [ ], as Seller and Servicer, [ ] Home Equity Loan Trust ____-_, Bond
Securitization, L.L.C., as Depositor, and you, as Indenture Trustee (the "Sale
and Servicing Agreement"), we hereby request a release of the Mortgage File
held by you as Indenture Trustee with respect to the following described
Mortgage Loan for the reason indicated below.
Loan No.:
--------
Reason for requesting file:
--------------------------
__________ 1. Mortgage Loan paid in full. (The Servicer hereby
certifies that all amounts received in connection
with the payment in full of the Mortgage Loan which
are required to be deposited in the Collection
Account pursuant to Section 3.02 of the Sale and
Servicing Agreement have been so deposited).
__________ 2. The Mortgage Loan is being foreclosed.
__________ 3. The Mortgage Loan is being re-financed by another
depository institution. (The Servicer hereby
certifies that all amounts received in connection
with the payment in full of the Mortgage Loan which
are required to be deposited in the Collection
Account pursuant to Section 3.02 of the Sale and
Servicing Agreement have been so deposited).
__________ 4. Other (Describe).
The undersigned acknowledges that the above Mortgage File will be held by
the undersigned in accordance with the provisions of the Sale and Servicing
Agreement and will promptly be returned to the Indenture Trustee when the need
therefor by the Servicer no longer exists unless the Mortgage Loan has been
liquidated.
J-1
Capitalized terms used herein shall have the meanings ascribed to them in
the Sale and Servicing Agreement.
[ ]
By:______________________________________
Name:
Title:
J-2
EXHIBIT K
---------
SPECIMEN OF THE INSURANCE POLICY
K-1
EXHIBIT L
---------
CUSTODIAL FEE LETTER
L-1