Exhibit 10.7
Execution Copy
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SERVICING AGREEMENT
_____________________________
Dated as of November 4, 2004
_____________________________
Penn Square East Funding, LLC,
as Owner,
FORTRESS CREDIT CORP.,
as Lender,
AMERICAN BUSINESS MORTGAGE SERVICES, INC.,
and
HOME AMERICAN CREDIT, INC.
jointly and severally, as Servicer
and
COUNTRYWIDE HOME LOANS SERVICING LP,
as Backup Servicer
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.............................................................................................1
Section 1.01 Defined Terms...................................................................................1
ARTICLE II SERVICING OF MORTGAGE LOANS; POSSESSION OF SERVICING FILES; BOOKS AND RECORDS; DELIVERY OF
MORTGAGE LOAN DOCUMENTS.........................................................................................8
Section 2.01 Servicing of Mortgage Loans.....................................................................8
Section 2.02 Maintenance of Servicing Files..................................................................8
Section 2.03 Books and Records...............................................................................8
Section 2.04 Delivery of Mortgage Loan Documents.............................................................9
Section 2.05 Quality Control Procedures......................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SERVICER.......................................................10
ARTICLE IV ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................................12
Section 4.01 Servicer to Act as Servicer....................................................................12
Section 4.02 Collection of Mortgage Loan Payments...........................................................13
Section 4.03 Realization Upon Defaulted Mortgage Loans......................................................14
Section 4.04 Establishment of Collection Accounts; Deposits in Collection Accounts; Lender's
Security Interest in the Collection Account....................................................14
Section 4.05 Permitted Withdrawals From the Collection Account..............................................16
Section 4.06 Establishment of Escrow Accounts; Deposits in Escrow Accounts; Lender's Security
Interest in the Escrow Account.................................................................17
Section 4.07 Permitted Withdrawals From Escrow Account......................................................18
Section 4.08 Payment of Taxes, Insurance and Other Charges; Collections Thereunder..........................19
Section 4.09 Maintenance of Hazard Insurance................................................................19
Section 4.10 [RESERVED].....................................................................................20
Section 4.11 Fidelity Bond, Errors and Omissions Insurance..................................................20
Section 4.12 Title, Management and Disposition of REO Property..............................................20
ARTICLE V PAYMENTS...............................................................................................22
Section 5.01 Remittances....................................................................................22
Section 5.02 Statements to the Owner and Lender.............................................................23
Section 5.03 [Reserved].....................................................................................24
Section 5.04 Liquidation Reports............................................................................24
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ARTICLE VI GENERAL SERVICING PROCEDURES..........................................................................24
Section 6.01 Assumption Agreements..........................................................................24
Section 6.02 Satisfaction of Mortgages and Release of Mortgage Loan Documents...............................25
Section 6.03 Servicing Compensation.........................................................................26
Section 6.04 Annual Statement as to Compliance..............................................................26
Section 6.05 Annual Independent Certified Public Accountants' Servicing Report..............................27
Section 6.06 Right to Examine Servicer Records..............................................................27
Section 6.07 Non-solicitation...............................................................................27
ARTICLE VII REPORTS TO BE PREPARED BY SERVICER...................................................................28
Section 7.01 Servicer Shall Provide Information as Reasonably Required......................................28
ARTICLE VIII THE SERVICER........................................................................................28
Section 8.01 Indemnification; Third Party Claims............................................................28
Section 8.02 Existence of the Servicer......................................................................29
Section 8.03 Limitation on Liability of the Servicer and Others.............................................29
Section 8.04 Servicer Not to Resign.........................................................................29
Section 8.05 No Transfer of Servicing.......................................................................29
Section 8.06 Separateness...................................................................................30
ARTICLE IX DEFAULT...............................................................................................30
Section 9.01 Events of Default..............................................................................30
Section 9.02 Waiver of Defaults.............................................................................32
Section 9.03 Backup Servicer................................................................................32
ARTICLE X TERMINATION............................................................................................36
Section 10.01 Servicing Term.................................................................................36
Section 10.02 Termination....................................................................................36
Section 10.03 Termination Without Cause......................................................................37
ARTICLE XI MISCELLANEOUS PROVISIONS..............................................................................37
Section 11.01 Amendment......................................................................................37
Section 11.02 Recordation of Agreement.......................................................................37
Section 11.03 Governing Law..................................................................................37
Section 11.04 Notices. 37
Section 11.05 Severability of Provisions.....................................................................39
Section 11.06 Exhibits.......................................................................................39
Section 11.07 General Interpretive Principles................................................................39
Section 11.08 Reproduction of Documents......................................................................40
Section 11.09 Confidentiality of Information.................................................................40
Section 11.10 Recordation of Assignments of Mortgage.........................................................40
Section 11.11 Assignment.....................................................................................41
Section 11.12 No Partnership.................................................................................41
Section 11.13 Execution; Successors and Assigns..............................................................41
Section 11.14 Entire Agreement...............................................................................41
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EXHIBITS
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Exhibit A Custodial Loan Transmission
Exhibit B Blocked Account Control Agreement
Exhibit C Escrow Account Letter Agreement
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THIS SERVICING AGREEMENT, dated as of November 4, 2004, is
executed among PENN SQUARE EAST FUNDING, LLC, a Delaware limited liability
company (the "Owner"), FORTRESS CREDIT CORP., a Delaware corporation (the
"Lender"), AMERICAN BUSINESS MORTGAGE SERVICES, INC., a New Jersey corporation,
and Home American Credit, Inc., a Pennsylvania corporation (jointly and
severally, the "Servicer"), and COUNTRYWIDE HOME LOANS SERVICING LP, a Texas
limited partnership (the "Backup Servicer").
W I T N E S S E T H :
WHEREAS, the Owner is the owner of the Mortgage Loans;
WHEREAS, the Owner has pledged the Mortgage Loans to the
Lender and the Lender has a perfected first priority security interest in the
Mortgage Loans;
WHEREAS, the Owner, the Lender, the Servicer and the Backup
Servicer wish to prescribe the permanent management, servicing and control of
the Mortgage Loans;
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Owner, the Lender,
the Servicer and the Backup Servicer agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.
Whenever used in this Agreement, capitalized terms shall have
the meaning as set forth below; provided, that capitalized terms not defined in
this Agreement shall have the meaning set forth in the Loan Agreement.
Agreement: This Servicing Agreement including all exhibits
hereto, amendments hereof and supplements hereto.
APA Assignment: As defined in the Loan Agreement.
Backup Servicer: Countrywide Home Loan Servicing LP, or any of
its successors in interest or any successor under this Agreement appointed as
herein provided.
Backup Servicing Fee: The fee payable to the Backup Servicer
on each Payment Date for its services as Backup Servicer hereunder, in an amount
equal to the greater of (1) the Minimum Backup Servicing Fee and (2) the Backup
Servicing Fee Rate accrued for one month (on the basis of a 360-day year and
twelve 30-day months) on the Principal Balance of the Mortgage Loans as of the
close of business on the Determination Date immediately preceding such Payment
Date; provided, however, if the Servicer has been removed (with or without
cause) as Servicer or has resigned as Servicer or if the Servicer's term as
servicer has expired, and in any such case if a Backup Servicer is no longer
required hereunder, then the Minimum Backup Servicing Fee shall be $0 and the
Backup Servicing Fee Rate shall be 0.00% per annum.
Backup Servicing Fee Rate: 0.04% per annum.
Business Day: Any day other than (i) a Saturday or Sunday,
(ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New
York, the Custodian or banking and savings and loan institutions in the State of
New York, or the City of New York or the city or state in which the Custodian's
offices are located are closed, or (iii) a day on which trading in securities on
the New York Stock Exchange or any other major securities exchange in the United
States is not conducted.
Code: The Internal Revenue Code of 1986, as amended from time
to time.
Collection Account: The separate demand account (or, if
necessary, accounts), created and maintained pursuant to Section 4.04 which
shall be (i) entitled "[servicer] Collection Account in trust for Penn Square
East Funding, LLC, Fortress Credit Corp. and various Mortgagors", (ii)
established at a Qualified Depository, each of which accounts shall in no event
contain funds in excess of the FDIC insurance limits and (iii) subject to the
Collection Account Control Agreement at the sole dominion and control of the
Lender.
Condemnation Proceeds: All awards or settlements in respect of
a Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
Countrywide: Countrywide Home Loan Servicing L.P.
Custodial Agreement: The Custodial Agreement, dated as of
November 4, 2004, among Owner, Custodian, Servicer, and Lender, as the same may
be amended, supplemented or otherwise modified from time to time.
Custodial Loan Transmission: As defined in the Custodial
Agreement.
Custodian: JPMorgan Chase Bank, its successors, participants
and assigns, or such other custodian as Owner shall designate with the prior
written approval of Lender.
Cut-off Date: With respect to each Mortgage Loan, the date
designated as such in the related APA Assignment.
Determination Date: The last Business Day of the month
immediately preceding the month of the Payment Date.
Due Date: The day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.
Effective Date: November 4, 2004.
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Escrow Account: The separate demand account (or, if necessary,
accounts), created and maintained pursuant to Section 4.06 which shall be (i)
entitled "[servicer] Escrow Account in trust for Penn Square East Funding, LLC,
Fortress Credit Corp. and various Mortgagors", (ii) established at a Qualified
Depository, each of which accounts shall in no event contain funds in excess of
the FDIC insurance limits and (iii) subject to the Collection Account Control
Agreement at the sole dominion and control of the Lender.
Escrow Payments: With respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
Event of Default: Any one of the conditions or circumstances
enumerated in Section 9.01.
FDIC: The Federal Deposit Insurance Corporation, or any
successor thereto.
Fidelity Bond: A fidelity bond to be maintained by the
Servicer pursuant to Section 4.12.
FIRREA: The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended from time to time.
GAAP: Generally accepted accounting principles as in effect
from time to time in the United States of America.
HUD: The United States Department of Housing and Urban
Development or any successor.
Initial Set-Up Fee: The fee payable to the Backup Servicer on
the Effective Date of this Agreement for the initial cracking of the information
provided by the Servicer pursuant to Section 9.03 hereof, in an amount equal to
$15,000.
Insurance Proceeds: With respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
Lender: Fortress Credit Corp., a Delaware corporation, and its
successors and assigns.
Liquidation Proceeds: Cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, other than
amounts received following the acquisition of an REO Property pursuant to
Section 4.13.
Loan Agreement: The Master Loan and Security Agreement dated
as of November 4, 2004, between the Owner and the Lender, as the same may be
amended, supplemented or otherwise modified from time to time.
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Minimum Backup Servicing Fee: $7,500.
Monthly Payment: The scheduled monthly payment of principal
and interest on a Mortgage Loan as adjusted in accordance with changes in the
Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an
adjustable rate Mortgage Loan.
Mortgage: With respect to a Mortgage Loan, the mortgage, deed
of trust or other instrument, which creates a first lien or second lien (as
indicated on the Mortgage Loan Data Transmission) on the fee simple or a
leasehold estate in the real property described therein.
Mortgage File: As defined in the Custodial Agreement.
Mortgage Interest Rate: The annual rate of interest borne on a
Mortgage Note, which shall be adjusted from time to time with respect to
adjustable rate Mortgage Loans.
Mortgage Loan: An individual Mortgage Loan described herein
and as further identified on the Custodial Loan Transmission, which Mortgage
Loan includes without limitation the Mortgage Loan Documents, the Monthly
Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds, REO Disposition Proceeds and all other rights, benefits,
proceeds and obligations arising from or in connection with such Mortgage Loan.
Mortgage Loan Documents: With respect to a Mortgage Loan, the
documents comprising the Mortgage File for such Mortgage Loan.
Mortgage Note: The original executed promissory note or other
evidence of the indebtedness of a Mortgagor with respect to a Mortgage Loan.
Mortgaged Property: The real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note. The Mortgagor is a
natural person who is a party to the Mortgage Note and Mortgage in an individual
capacity.
Nonrecoverable Advance: Any expenses incurred pursuant to
Section 4.08 which, in the good faith judgment of the Servicer, may not be
ultimately recoverable by the Servicer from Liquidation Proceeds. The
determination by the Servicer that it has made a Nonrecoverable Advance shall be
evidenced by an Officer's Certificate of the Servicer delivered to the Owner and
detailing the reasons for such determination.
OCC: Office of the Comptroller of the Currency, its successors
and assigns.
Officers' Certificate: A certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President, a Senior Vice
President or a Vice President or by the Treasurer or the Secretary or one of the
Assistant Treasurers or Assistant Secretaries of the Servicer, and delivered to
the Owner as required by this Agreement.
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Opinion of Counsel: A written opinion of counsel, who may be
an employee of the party on behalf of whom the opinion is being given,
reasonably acceptable to the Owner.
OTS: Office of Thrift Supervision, its successors and assigns.
Owner: Penn Square East Funding, LLC, its successors in
interest and assigns.
Pass-Through Transfer: The sale or transfer of some or all of
the Mortgage Loans to a trust as part of a publicly issued or privately placed,
rated or unrated Mortgage pass-through transaction.
Payment Date: The 15th day of any month, or if such 15th day
is not a Business Day, the first Business Day immediately preceding such 15th
day. The first Payment Date shall occur on November 15, 2004.
Person: Any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
Primary Mortgage Insurance Policy: Each primary policy of
mortgage insurance, or any replacement policy therefor obtained by the Servicer,
if any.
Prime Rate: The prime rate of U.S. money center banks as
published from time to time in The Wall Street Journal.
Principal Prepayment: Any payment or other recovery of
principal on a Mortgage Loan, full or partial, which is received in advance of
its scheduled Due Date, including any prepayment penalty or premium thereon and
which is not accompanied by an amount of interest representing scheduled
interest due on any date or dates in any month or months subsequent to the month
of prepayment.
Qualified Appraiser: With respect to any Mortgage Loan, an
appraiser, duly appointed by the Servicer, who had no interest, direct or
indirect in the related Mortgaged Property or in any loan made on the security
thereof, and whose compensation is not affected by the approval or disapproval
of such Mortgage Loan, which appraiser and the appraisal made by such appraiser
both satisfy the requirements of Title XI of FIRREA and the regulations
promulgated thereunder, all as in effect on the date such Mortgage Loan was
originated.
Qualified Depository: The Custodian or, with the written
consent of the Lender, not to be unreasonably withheld, a depository, the
accounts of which are insured by the FDIC and the short term debt ratings and
the long term deposit ratings of which are rated in one of the two highest
rating categories by Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies Inc., ▇▇▇▇▇'▇ Investors Service, Inc., and Fitch IBCA Inc.
Qualified Insurer: With respect to any Mortgage loan, an
insurance company duly qualified as such under the laws of the state in which
the related Mortgaged Property is located, duly authorized and licensed in such
state to transact the applicable insurance business and to write the insurance
provided in accordance with the Approved Underwriting Guidelines, and approved
as an insurer by ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇ Mac and whose claims paying ability is
rated in the two highest rating categories by any of the rating agencies with
respect to primary mortgage insurance and in the two highest rating categories
by Best's with respect to hazard and flood insurance.
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REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC Provisions: The provisions of the Federal income tax law
relating to a REMIC, which appear at Section 860A through 860G of Subchapter M
of Chapter 1, Subtitle A of the Code, and related provisions, and regulations,
rulings or pronouncements promulgated thereunder, as the foregoing may be in
effect from time to time.
REO Disposition: The final sale by the Servicer of any REO
Property.
REO Disposition Proceeds: Amounts received by the Servicer in
connection with a related REO Disposition.
REO Property: A Mortgaged Property acquired by the Servicer on
behalf of the Owner as described in Section 4.13.
Servicer: Jointly and severally, American Business Mortgage
Services, Inc., and/or Home American Credit, Inc. or any of their successors in
interest or any successor under this Agreement appointed as herein provided.
Servicing Advances: All customary, reasonable and necessary
"out of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred prior to, on and subsequent to the Effective Date in the
performance by the Servicer of its servicing obligations relating to each
Mortgage Loan, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement,
administrative or judicial proceedings, or any legal work or advice specifically
related to servicing the Mortgage Loans, including but not limited to,
foreclosures, bankruptcies, condemnations, drug seizures, elections,
foreclosures by subordinate or superior lienholders, and other legal actions
incidental to the servicing of the Mortgage Loans (provided that such expenses
are reasonable and that the Servicer specifies the Mortgage Loan(s) to which
such expenses relate), (c) the management and liquidation of the Mortgaged
Property if the Mortgaged Property is acquired in full or partial satisfaction
of the Mortgage, (d) taxes, assessments, water rates, sewer rates and other
charges which are or may become a lien upon the Mortgaged Property, and Primary
Mortgage Insurance Policy premiums and fire and hazard insurance coverage and
(e) compliance with the obligations under Section 4.08.
Servicing Fee: With respect to each Mortgage Loan, the amount
of the annual fee the Owner shall pay to the Servicer, which shall, for a period
of one full month, be equal to one-twelfth of the product of (a) the applicable
Servicing Fee Rate and (b) the outstanding principal balance of such Mortgage
Loan. Such fee shall be payable monthly, computed on the basis of the same
principal amount and period respecting which any related interest payment on a
Mortgage Loan is computed. The obligation of the Owner to pay the Servicing Fee
is limited to, and the Servicing Fee is payable solely from, the interest
portion (not including recoveries of interest from Liquidation Proceeds or
otherwise) of the Monthly Payment collected by the Servicer in respect of such
Mortgage Loan, or as otherwise provided under Section 4.05.
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Servicing Fee Rate: The Servicing Fee Rate shall be a rate per
annum equal to 0.35% with respect to any Mortgage Loan; provided, however, that
if the Backup Servicer has succeeded as the successor Servicer hereunder, the
Servicing Fee Rate shall be a rate per annum equal to 0.50% after the Servicing
Transfer Date; provided further, however, that in the event of an Event of
Default under the Loan Agreement, the Servicing Fee Rate shall be a commercially
reasonable rate or per loan fee (taking into consideration, among other factors,
the fact that the Loan Agreement is no longer a revolving facility) as agreed
upon by the Backup Servicer and the Lender, who agree to act in good faith based
upon the then Principal Balance of the Mortgage Loans outstanding at such time
and anticipated balances going forward, and the 0.50% rate shall be applicable
for a minimum of three (3) months following such a Servicing Transfer Date.
Servicing File: With respect to each Mortgage Loan, the file
retained by the Servicer consisting of originals of all material documents in
the Mortgage File which are not delivered to the Custodian and copies of the
Mortgage Loan Documents set forth in Section 2 of the Custodial Agreement.
Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished by the Servicer to the
Owner upon request, as such list may from time to time be amended.
Servicing Transfer Costs: All reasonable costs and expenses
incurred by the Backup Servicer in connection with the transfer of servicing
from a predecessor Servicer, including, without limitation, any reasonable costs
or expenses associated with the complete transfer of all servicing data and the
completion, correction or manipulation of such servicing data as may be required
by the Backup Servicer to correct any errors or insufficiencies in the servicing
data or otherwise to enable the Backup Servicer to service the Mortgage Loans
properly and effectively and any fees of MERS, costs of preparing any
assignments of Mortgage, or fees and costs of filing any assignments of Mortgage
that may be required as a result of the transfer of servicing; provided, that in
the event that less than one hundred (100) Mortgage Loans are transferred to the
Backup Servicer, the cost and expenses shall be deemed $100 (one hundred
dollars) per Mortgage Loan.
Servicing Transfer Date: The date on which the Backup Servicer
receives the written notice of the termination of Servicer pursuant to 9.01
hereof.
Whole Loan Transfer: The sale or transfer of some or all of
the ownership interest in the Mortgage Loans by the Owner to one or more third
parties in whole loan or participation format.
Capitalized terms which are not otherwise defined herein shall
have the meanings assigned to such terms in the Loan Agreement.
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ARTICLE II
SERVICING OF MORTGAGE LOANS; POSSESSION OF SERVICING FILES;
BOOKS AND RECORDS; DELIVERY OF MORTGAGE LOAN DOCUMENTS
Section 2.01 Servicing of Mortgage Loans.
From and after the Effective Date, the Servicer does hereby
agree to service the Mortgage Loans, but subject to the terms of this Agreement.
The rights of the Owner and Lender to receive payments with respect to the
Mortgage Loans shall be as set forth in this Agreement except where in conflict
with the Loan Agreement, in which case the terms of the Loan Agreement shall
control.
Section 2.02 Maintenance of Servicing Files.
The Servicer shall maintain a Servicing File consisting of all
documents necessary to service each Mortgage Loan. The possession of each
Servicing File by the Servicer is for the sole purpose of servicing the related
Mortgage Loan, and such retention and possession by the Servicer is in a
custodial capacity only. The Servicer acknowledges that the ownership of each
Mortgage Loan, including the Mortgage Note, the Mortgage, all other Mortgage
Loan Documents and all rights, benefits, proceeds and obligations arising
therefrom or in connection therewith, has been vested in the Owner and that the
Owner has pledged to the Lender each Mortgage Loan, including the Mortgage Note,
the Mortgage, all other Mortgage Loan Documents and all rights, benefits,
proceeds and obligations arising therefrom or in connection therewith. All
rights arising out of the Mortgage Loans including, but not limited to, all
funds received on or in connection with the Mortgage Loans and all records or
documents with respect to the Mortgage Loans prepared by or which come into the
possession of the Servicer shall be received and held by the Servicer in trust
for the benefit of the Lender as the pledgee of the related Mortgage Loans
pursuant to the Custodial Agreement. Any portion of the related Servicing Files
retained by the Servicer shall be appropriately identified in the Servicer's
computer system to clearly reflect the ownership of the related Mortgage Loans
by the Owner and the perfected first priority security interest therein of the
Lender. The Servicer shall release its custody of the contents of the related
Servicing Files only in accordance with written instructions of the Owner (with
the written consent of the Lender), except when such release is required as
incidental to the Servicer's servicing of the Mortgage Loans, such written
instructions shall not be required.
Section 2.03 Books and Records.
The Servicer shall be responsible for maintaining, and shall
maintain, a complete set of books and records for the Mortgage Loans which shall
be appropriately identified in the Servicer's computer system to clearly reflect
the ownership of the Mortgage Loans by the Owner and the perfected first
priority security interest therein of the Lender. In particular, the Servicer
shall maintain in its possession, available for inspection by the Owner, the
Lender or their designees, and shall deliver to the Owner or Lender upon demand,
evidence of compliance with all federal, state and local laws, rules and
regulations, as applicable, including but not limited to documentation as to the
method used in determining the applicability of the provisions of the Flood
Disaster Protection Act of 1973, as amended, to each Mortgaged Property,
documentation evidencing insurance coverage and eligibility of any condominium
project and periodic inspection reports as required by Section 4.13. To the
extent that original documents are not required for purposes of realization of
Liquidation Proceeds or Insurance Proceeds, documents maintained by the Servicer
may be in the form of microfilm or microfiche or such other reliable means of
recreating original documents, including but not limited to, optical imagery
techniques so long as the Servicer complies with Accepted Servicing Practices.
8
The Servicer shall maintain with respect to each Mortgage
Loan, and shall make available for inspection by the Owner, the Lender or their
designees, the related Servicing File (or copies thereof) during the time the
Owner retains ownership of such Mortgage Loan or the Lender retains its security
interest in such Mortgage Loan and thereafter in accordance with applicable laws
and regulations.
Section 2.04 Delivery of Mortgage Loan Documents.
The Servicer shall forward to the Custodian on behalf of the
Owner and for the benefit of Lender original documents evidencing an assumption,
modification, consolidation or extension of any Mortgage Loan entered into in
accordance with Section 4.01 or 6.01 promptly after their execution; provided,
however, that the Servicer shall provide the Custodian on behalf of the Owner
and for the benefit of Lender with a certified true copy of any such document
submitted for recordation promptly after its execution, and shall provide the
original of any document submitted for recordation or a copy of such document
certified by the appropriate public recording office to be a true and complete
copy of the original within 180 days of its execution. If delivery is not
completed within 180 days solely due to delays in making such delivery by reason
of the fact that such documents shall not have been returned by the appropriate
recording office, the Servicer shall continue to use its best efforts to effect
delivery as soon as possible thereafter.
From time to time the Servicer may have a need for Mortgage
Loan Documents to be released by the Custodian. If the Servicer shall require
any of the Mortgage Loan Documents, the Servicer shall notify the Custodian in
writing of such request in the form of the request for release provided for in
the Custodial Agreement. As set forth in Section 5 of the Custodial Agreement,
the Custodian (with the written consent of the Lender, as applicable) shall
deliver to the Servicer a copy of any requested Mortgage Loan Document
previously delivered to the Custodian; provided that such documentation is
promptly returned to the Custodian when the Servicer no longer requires
possession of the document, and provided that during the time that any such
documentation is held by the Servicer, such possession is in trust for the
benefit of the Lender.
Section 2.05 Quality Control Procedures.
The Servicer shall maintain at all times an internal quality
control program that verifies, on a regular basis, the existence and accuracy of
the legal documents, credit documents, property appraisals, and underwriting
decisions. The program must be capable of evaluating and monitoring the overall
quality of its servicing activities. The purpose of the program is to ensure
that the Mortgage Loans are serviced in accordance with prudent mortgage banking
practices and accounting principles; guard against dishonest, fraudulent, or
negligent acts; and guard against errors and omissions by officers, employees,
or other authorized persons.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SERVICER
The Servicer represents, warrants and covenants to the Owner
and the Lender that as of the Effective Date or as of such date specifically
provided herein:
(a) The Servicer is a validly existing corporation in good
standing under the laws of the State of its organization and is qualified to
transact business in, is in good standing under the laws of, and possesses all
licenses necessary for the conduct of its business in, each state in which any
Mortgaged Property is located or is otherwise exempt or not required under
applicable law to effect such qualification or license and no demand for such
qualification or license has been made upon the Servicer by any such state, and
in any event the Servicer is in compliance with the laws of each such State to
the extent necessary to ensure the enforceability of each Mortgage Loan and the
servicing of the Mortgage Loans in accordance with the terms of this Agreement;
(b) The Servicer has full power and authority to execute,
deliver and perform, and to enter into and consummate all transactions
contemplated by this Agreement and to conduct its business as presently
conducted, has duly authorized the execution, delivery and performance of this
Agreement, has duly executed and delivered this Agreement, and this Agreement
constitutes a legal, valid and binding obligation of the Servicer, enforceable
against it in accordance with its terms subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject to
the application of the rules of equity, including those respecting the
availability of specific performance;
(c) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated thereby and hereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement
will conflict with any of the terms, conditions or provisions of the Servicer's
articles of incorporation or by-laws or materially conflict with or result in a
material breach of any of the terms, conditions or provisions of any legal
restriction or any agreement or instrument to which the Servicer is now a party
or by which it is bound, or constitute a default or result in an acceleration
under any of the foregoing, or result in the material violation of any law,
rule, regulation, order, judgment or decree to which the Servicer or its
property is subject;
(d) Except as disclosed in the Annual Report on Form 10-K of
American Business Financial Services, Inc. for the year ended June 30, 2004,
there is no litigation pending or threatened with respect to the Servicer which
is reasonably likely to have a material adverse effect on the execution,
delivery or enforceability of this Agreement, or which is reasonably likely to
have a material adverse effect on the financial condition of the Servicer;
(e) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Servicer of or compliance by the Servicer with this Agreement
or the consummation of the transactions contemplated by this Agreement except
for consents, approvals, authorizations and orders which have been obtained;
10
(f) The consummation of the transactions contemplated by this
Agreement is in the ordinary course of business of the Servicer;
(g) The collection and servicing practices used by the
Servicer, with respect to each Mortgage Note and Mortgage have been in all
material respects legal, proper and prudent in the mortgage servicing business.
With respect to escrow deposits and payments that the Servicer collects, all
such payments are in the possession of, or under the control of, the Servicer,
and there exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. No escrow deposits or
other charges or payments due under the Mortgage Note have been capitalized
under any Mortgage or the related Mortgage Note;
(h) [RESERVED];
(i) The Servicer does not believe, nor does it have any cause
or reason to believe, that it cannot perform each and every covenant contained
in this Agreement;
(j) No statement, report or other document furnished or to be
furnished pursuant to this Agreement contains or will contain any statement that
is or will be inaccurate or misleading in any material respect or omits to state
a material fact required to be stated therein or necessary to make the
information and statements therein not misleading;
(k) No fraud or misrepresentation or omission of a material
fact with respect to the servicing of a Mortgage Loan has taken place on the
part of the Servicer;
(l) At the time Servicer commenced servicing the Mortgage
Loans, either (i) each Mortgagor was properly notified with respect to
Servicer's servicing of the related Mortgage Loan in accordance with the
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ National Affordable Housing Act of 1990, as the same may be
amended from time to time, and the regulations provided in accordance with the
Real Estate Settlement Procedures Act or (ii) such notification was not
required; and
(m) At the time Servicer commenced servicing the Mortgage
Loans, all applicable taxing authorities and insurance companies (including
primary mortgage insurance policy insurers, if applicable) and/or agents were
notified of the transfer of the servicing of the Mortgage Loans to Servicer, or
its designee, and Servicer currently receives all related notices, tax bills and
insurance statements (either directly or indirectly through third party tax
services). Additionally, any and all costs, fees and expenses associated with
the Servicer's commencement of the servicing of the Mortgage Loans, including
the costs of any insurer notifications, the transfer or implementation of tax
service contracts, flood certification contracts, and any and all other
servicing transfer-related costs and expenses have been paid for by the Servicer
and will, in no event, be the responsibility of the Owner or the Lender.
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ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 4.01 Servicer to Act as Servicer.
The Servicer, as independent contract servicer, shall service
and administer the Mortgage Loans in accordance with this Agreement and with
Accepted Servicing Practices, and shall have full power and authority, acting
alone, to do or cause to be done 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 and with Accepted Servicing
Practices and shall exercise the same care that it customarily employs for its
own account. Except as set forth in this Agreement, the Servicer shall service
the Mortgage Loans in accordance with Accepted Servicing Practices, which
include, but are not limited to, provisions regarding the liquidation of
Mortgage Loans, the collection of Mortgage Loan payments, the payment of taxes,
insurance and other charges, the maintenance of hazard insurance with a
Qualified Insurer, the maintenance of fidelity bond and errors and omissions
insurance, inspections, the restoration of Mortgaged Property, insurance claims,
and title insurance, management of REO Property, permitted withdrawals with
respect to REO Property, liquidation reports, and reports of foreclosures and
abandonments of Mortgaged Property, the transfer of Mortgaged Property, the
release of Mortgage Loan Documents, annual statements, and examination of
records and facilities. In the event of any conflict, inconsistency or
discrepancy between any of the servicing provisions of this Agreement and
Accepted Servicing Practices, the provisions of this Agreement shall control and
be binding upon the Owner and the Servicer. The Owner may, upon the written
consent of Lender, deliver powers-of-attorney to the Servicer sufficient to
allow the Servicer as servicer to execute all documentation requiring execution
on behalf of Owner with respect to the servicing of the Mortgage Loans,
including satisfactions, partial releases, modifications and foreclosure
documentation or, in the alternative, shall as promptly as reasonably possible,
execute and return such documentation to the Servicer.
Consistent with the terms of this Agreement and Accepted
Servicing Practices, the Servicer may waive, modify or vary any term of any
Mortgage Loan or consent to the postponement of any such term or in any manner
grant indulgence to any Mortgagor but only if (i) in the Servicer's reasonable
and prudent determination such waiver, modification, postponement or indulgence
is not materially adverse to the Owner or the Lender and (ii) the Servicer has
obtained the prior written consent of the Owner and Lender. Without limiting the
generality of the foregoing, upon receipt of a Principal Prepayment in full and
deposit of same in the Collection Account, the Servicer shall continue, and is
hereby authorized and empowered, to prepare, execute and deliver, 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 in accordance with the terms
of this Agreement and Accepted Servicing Practices.
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The Servicer shall perform all of its servicing
responsibilities hereunder or may, with the Owner's, the Backup Servicer's and
Lender's prior written approval, cause a subservicer to perform any such
servicing responsibilities on its behalf pursuant to a written subservicing
agreement approved in writing by, and assigned to, the Lender, but the use by
the Servicer of a subservicer shall not release the Servicer from any of its
obligations hereunder and the Servicer shall remain responsible hereunder for
all acts and omissions of each subservicer as fully as if such acts and
omissions were those of the Servicer. Any such subservicer that the Owner and
Lender shall approve shall agree in writing to conform to the Accepted Servicing
Practices. The Servicer shall pay all fees and expenses of each subservicer from
its own funds, and a subservicer's fee shall not exceed the Servicing Fee.
At the cost and expense of the Servicer, without any right of
reimbursement from the Collection Account, the Servicer shall be entitled to
terminate the rights and responsibilities of a subservicer and arrange, with the
Owner's, the Backup Servicer's and Lender's prior written approval, for any
servicing responsibilities to be performed by a successor subservicer meeting
the requirements in the preceding paragraph, provided, however, that nothing
contained herein shall be deemed to prevent or prohibit the Servicer, at the
Servicer's option, from electing to service the related Mortgage Loans itself.
In the event that the Servicer's responsibilities and duties under this
Agreement are terminated pursuant to Section 8.04, 9.01 or 10.02, and if
requested to do so in writing by the Owner, the Backup Servicer and the Lender,
the Servicer shall at its own cost and expense terminate the rights and
responsibilities of each subservicer effective as of the date of termination of
the Servicer. The Servicer shall pay all fees, expenses or penalties necessary
in order to terminate the rights and responsibilities of each subservicer from
the Servicer's own funds without reimbursement from the Owner or Lender.
Notwithstanding any of the provisions of this Agreement
relating to agreements or arrangements between the Servicer and a subservicer or
any reference herein to actions taken through a subservicer or otherwise, the
Servicer shall not be relieved of its obligations to the Owner and Lender, the
Backup Servicer's and shall be obligated to the same extent and under the same
terms and conditions as if it alone were servicing and administering the
Mortgage Loans. The Servicer shall be entitled to enter into an agreement with a
subservicer for indemnification of the Servicer by the subservicer and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification.
Any subservicing agreement and any other transactions or
services relating to the Mortgage Loans involving a subservicer shall be deemed
to be between such subservicer and Servicer alone, and the Owner (and the
Lender) shall have no obligations, duties or liabilities with respect to such
subservicer including no obligation, duty or liability of Owner (or the Lender)
to pay such subservicer's fees and expenses. For purposes of distributions by
the Servicer pursuant to this Agreement, the Servicer shall be deemed to have
received a payment on a Mortgage Loan when a subservicer has received such
payment.
Section 4.02 Collection of Mortgage Loan Payments.
Continuously from the Effective Date until the date each
Mortgage Loan ceases to be subject to this Agreement, the Servicer will proceed
with reasonable diligence to collect all payments due under each Mortgage Loan
when the same shall become due and payable and shall, to the extent such
procedures shall be consistent with this Agreement and the terms and provisions
of related Primary Mortgage Insurance Policy, if any, follow such collection
procedures as it follows with respect to mortgage loans comparable to the
Mortgage Loans and held for its own account and in accordance with Accepted
Servicing Practices. Further, the Servicer will take reasonable care in
ascertaining and estimating annual ground rents, taxes, assessments, water
rates, fire and hazard insurance premiums, mortgage insurance premiums, and all
other charges that, as provided in the Mortgage, will become due and payable to
the end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.
13
Section 4.03 Realization Upon Defaulted Mortgage Loans.
The Servicer shall use its reasonable efforts, consistent with
Accepted Servicing Practices, to foreclose upon or otherwise comparably convert
the ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 4.01. The Servicer shall
use its reasonable efforts to realize upon defaulted Mortgage Loans in such
manner as will maximize the receipt of principal and interest by the Owner and
Lender, taking into account, among other things, the timing of foreclosure
proceedings. The foregoing is subject to the provisions that, in any case in
which Mortgaged Property shall have suffered damage, the Servicer shall not be
required to expend its own funds toward the restoration of such property unless
it shall determine in its discretion (i) that such restoration will increase the
proceeds of liquidation of the related Mortgage Loan to the Owner and Lender
after reimbursement to itself for such expenses, and (ii) that such expenses
will be recoverable by the Servicer through Insurance Proceeds or Liquidation
Proceeds from the related Mortgaged Property, as contemplated in Section 4.05.
The Servicer shall notify the Owner and Lender in writing of the commencement of
foreclosure proceedings. The Servicer shall be responsible for all costs and
expenses incurred by it in any such proceedings or functions as Servicing
Advances; provided, however, that it shall be entitled to reimbursement therefor
from the related Mortgaged Property, as contemplated in Section 4.05.
Notwithstanding anything to the contrary contained herein, in connection with a
foreclosure or acceptance of a deed in lieu of foreclosure, in the event the
Servicer has reasonable cause to believe that a Mortgaged Property is
contaminated by hazardous or toxic substances or wastes, or if the Owner or
Lender otherwise requests an environmental inspection or review of such
Mortgaged Property, such an inspection or review is to be conducted by a
qualified inspector. Upon completion of the inspection, the Servicer shall
promptly provide the Owner and Lender with a written report of the environmental
inspection. After reviewing the environmental inspection report, the Owner,
after receipt of written consent of the Lender, and Lender shall determine how
the Servicer shall proceed with respect to the Mortgaged Property.
Section 4.04 Establishment of Collection Accounts; Deposits in
Collection Accounts; Lender's Security Interest in Collection Accounts.
With respect to each Mortgage Loan, the Servicer shall direct
the related Mortgagor to send all payments relating to such Mortgage Loan
directly to the Lockbox as set forth in the Loan Agreement; provided, that with
respect to each Mortgage Loan that has been transferred to the Backup Servicer
in its capacity as Servicer, the Backup Servicer, as Servicer of such Mortgage
Loan, shall not be required to direct payments to the Lockbox but may instead
use its internal lockbox. If any payments relating to any Mortgage Loan are
nevertheless received directly by the Servicer, the Servicer shall deposit such
payments directly into the Collection Account pursuant to this Section 4.04 or
into the Escrow Account (in the case of Escrow Payments) pursuant to Section
4.06 below.
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The Servicer shall not under any circumstances commingle any
payments relating to any Mortgage Loan with any of its or another Person's own
funds and general assets. The Servicer shall segregate and hold all funds
collected and received pursuant to each Mortgage Loan separate and apart from
any of its own funds and general assets and shall only deposit payments or
recoveries relating to the Mortgage Loans into the Collection Account. The
Collection Account shall be established with a Qualified Depository and as set
forth in the Loan Agreement. The Collection Account shall be under the sole
dominion and control of the Lender as set forth in the form of Blocked Account
Control Agreement attached hereto as Exhibit B-1; provided, that if servicing is
transferred to the Backup Servicer in its capacity as Servicer, then the Backup
Servicer in its capacity as Servicer shall have the authority to direct
withdrawals from the Collection Account at anytime before a notice of default is
sent from the Lender to the Depositary as set forth the form of Blocked Account
Control Agreement attached hereto as Exhibit B-2. An executed original of such
Collection Account - Blocked Account Control Agreement shall be delivered to the
Owner, Lender and Backup Servicer.
The Servicer shall deposit in the Collection Account or
Accounts no later than one (1) Business Day after receipt (or two (2) Business
Days after receipt, in the case of Backup Servicer acting as Servicer) and
retain therein the following payments and collections:
(i) all payments on account of principal and interest,
including Principal Prepayments, on the Mortgage Loans received after the
Cut-off Date;
(ii) all Liquidation Proceeds and REO Disposition Proceeds
received after the Cut-off Date;
(iii) any net amounts received by the Servicer after the
Cut-off Date in connection with any REO Property pursuant to Section 4.13;
(iv) all Insurance Proceeds received after the Cut-off Date
including amounts required to be deposited pursuant to Sections 4.08 and 4.10,
other than proceeds to be held in the Escrow Account and applied to the
restoration or repair of the Mortgaged Property or released to the Mortgagor in
accordance with the Servicer's normal servicing procedures, the loan documents
or applicable law;
(v) all Condemnation Proceeds affecting any Mortgaged Property
received after the Cut-off Date other than proceeds to be held in the Escrow
Account and applied to the restoration or repair of the Mortgaged Property or
released to the Mortgagor in accordance with the Servicer's normal servicing
procedures, the loan documents or applicable law;
(vi) any amounts received after the Cut-off Date and required
to be deposited in the Collection Account pursuant to 6.02; and
(vii) funds resulting from the liquidation of any Permitted
Investments together with an amount equal to any losses related thereto which
shall be deposited into the Collection Account no later than one (1) Business
Day (or two (2) Business Days, in the case of Backup Servicer acting as
Servicer) after receipt prior to the related Payment Date.
15
The foregoing requirements for deposit in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, ancillary fees including payments in
the nature of late payment charges and assumption fees, to the extent permitted
by Section 6.01, need not be deposited by the Servicer in the Collection
Account. Any interest paid on funds deposited in the Collection Account by the
Qualified Depository shall accrue to the benefit of the Servicer and the
Servicer shall be entitled to be paid the amount of such interest from the
Collection Account pursuant to Section 4.05(iv).
The Servicer hereby assigns, pledges and grants a first
priority security interest to the Lender in all of its right, title and interest
(if any) in, to and under the Collection Account, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, to secure the
payment of the Obligations. The Servicer agrees to ▇▇▇▇ its computer records and
tapes to evidence the security interests granted to the Lender hereunder.
Section 4.05 Permitted Withdrawals From the Collection
Account.
The Servicer shall make withdrawals from the Collection
Account only for the following purposes:
(i) to make payments in the amounts and in the manner provided
for in Section 5.01;
(ii) [Reserved;]
(iii) to reimburse Servicer for unreimbursed Servicing
Advances, the Servicer's right to reimburse itself pursuant to this subclause
(iii) with respect to any Mortgage Loan being limited to excess Liquidation
Proceeds, Condemnation Proceeds and Insurance Proceeds (after application of all
such amounts to principal, interest on late fees on the related Mortgage Loan)
received after the Cut-off Date related to such Mortgage Loan. Upon written
notice from the Owner or the Lender from time to time, the Servicer will provide
the Owner and Lender with copies of invoices, bills and other documentation
relating to Servicing Advances that are to be reimbursed from the Collection
Account, in a form that would permit the Owner or Lender to fully recover any
amounts due pursuant to any insurance policies. In no instance shall Servicing
Advances related to a Mortgage Loan be reimbursed from payments or proceeds of
any other Mortgage Loan;
(iv) to pay interest earned on the balance in the Collection
Account to the Servicer;
(v) to reimburse the Servicer for any Nonrecoverable Advances
made by it;
(vi) to transfer funds to another Qualified Depository in
accordance with Section 4.09 hereof;
16
(vii) to remove funds inadvertently placed in the Collection
Account in error by the Servicer; and
(viii) to clear and terminate the Collection Account upon the
termination of this Agreement.
Section 4.06 Establishment of Escrow Accounts; Deposits in
Escrow Accounts; Lender's Security Interest in the Escrow Account.
The Escrow Account shall be established with a Qualified
Depository and as set forth in the Loan Agreement. The Escrow Account shall be
under the sole dominion and control of the Lender. The Servicer shall deposit
Escrow Payments relating to the Mortgage Loans into the Escrow Account as set
forth in Section 4.04 above. The Servicer shall segregate and hold all funds
collected and received pursuant to each Mortgage Loan which constitute Escrow
Payments separate and apart from any of its own funds and general assets and
shall only deposit payments relating to a Mortgage Loan in the Escrow Account.
The Escrow Account shall be established with a Qualified Depository. Funds
deposited in the Escrow Account may be drawn on by the Servicer in accordance
with Section 4.07. The Escrow Account shall be under the sole dominion and
control of the Lender as set forth in the form of Blocked Account Control
Agreement attached hereto as Exhibit B-1; provided, that if servicing is
transferred to the Backup Servicer in its capacity as Servicer, then the Backup
Servicer in its capacity as Servicer shall have the authority to direct
withdrawals from the Escrow Account at anytime before a notice of default is
sent from the Lender to the Depositary as set forth the form of Blocked Account
Control Agreement attached hereto as Exhibit B-2. An original of such letter
agreement shall be furnished to the Owner, the Backup Servicer and Lender.
The Servicer shall deposit in the Escrow Account or Accounts
no later than one (1) Business Day after receipt (or, two (2) Business Days
after receipt, in the case of Countrywide as Servicer) on a daily basis and
retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any items as are required
under the terms of this Agreement;
(ii) all Insurance Proceeds which are to be applied to the
restoration or repair of any Mortgaged Property; and
(iii) all Servicing Advances for Mortgagors whose Escrow
Payments are insufficient to cover escrow disbursements.
The Servicer shall make withdrawals from an Escrow Account
only to effect such payments as are required under this Agreement, and for such
other purposes as shall be as set forth in and in accordance with Section 4.07.
The Servicer shall be entitled to retain or be paid any interest paid on funds
deposited in an Escrow Account by the Qualified Depository other than interest
on escrowed funds required by law to be paid to the Mortgagor and, to the extent
required by law, the Servicer shall pay interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account is non-interest bearing or
that interest paid thereon is insufficient for such purposes.
17
The Servicer hereby assigns, pledges and grants a first
priority security interest to the Lender in all of its right, title and interest
(if any) in, to and under the Escrow Account, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, to secure the
payment of the Obligations. The Servicer agrees to ▇▇▇▇ its computer records and
tapes to evidence the security interests granted to the Lender hereunder.
Section 4.07 Permitted Withdrawals From Escrow Account.
Withdrawals from the Escrow Account may be made by the
Servicer only:
(i) to effect timely payments of ground rents, taxes,
assessments, water rates, fire and hazard insurance premiums, Primary Mortgage
Insurance Policy premiums, if applicable, and comparable items;
(ii) to reimburse Servicer for any Servicing Advance made by
Servicer with respect to a related Mortgage Loan but only from amounts received
on the related Mortgage Loan which represent late payments or collections of
Escrow Payments thereunder;
(iii) to refund to the Mortgagor any funds as may be
determined to be overages;
(iv) for transfer to the Collection Account in connection with
an acquisition of REO Property;
(v) for application to restoration or repair of the Mortgaged
Property securing a Mortgage Loan to the extent that the applicable Escrow
Payments relate to such Mortgage Loan;
(vi) to pay to the Servicer, or to the Mortgagor to the extent
required by law, any interest paid on the funds deposited in the Escrow Account;
(vii) to pay to the Mortgagors or other parties Insurance
Proceeds deposited in accordance with Section 4.06;
(viii) to remove funds inadvertently placed in an Escrow
Account in error by the Servicer; and
(ix) to clear and terminate the Escrow Account on the
termination of this Agreement.
As part of its servicing duties, the Servicer shall pay to the
Mortgagors interest on funds in an Escrow Account, to the extent required by
law, and to the extent that interest earned on funds in the Escrow Account is
insufficient, shall pay such interest from its own funds, without any
reimbursement therefor.
18
Section 4.08 Payment of Taxes, Insurance and Other Charges;
Collections Thereunder.
With respect to each Mortgage Loan, the Servicer shall
maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property and the status of fire and hazard insurance coverage and
shall obtain, from time to time, all bills for the payment of such charges,
including renewal premiums and shall effect payment thereof prior to the
applicable penalty or termination date and at a time appropriate for securing
maximum discounts allowable, employing for such purpose deposits of the
Mortgagor in the Escrow Account which shall have been estimated and accumulated
by the Servicer in amounts sufficient for such purposes, as allowed under the
terms of the Mortgage or applicable law. To the extent that the Mortgage does
not provide for Escrow Payments, the Servicer shall determine that any such
payments are made by the Mortgagor at the time they first become due. The
Servicer assumes full responsibility for the timely payment of all such bills
and shall effect timely payments of all such bills irrespective of the
Mortgagor's faithful performance in the payment of same or the making of the
Escrow Payments and shall make advances from its own funds to effect such
payments.
Section 4.09 Maintenance of Hazard Insurance.
The Servicer shall cause to be maintained for each Mortgage
Loan fire and hazard insurance with extended coverage as is customary in the
area where the Mortgaged Property is located in an amount which is equal to the
lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan or (ii) the greater of (a) the outstanding principal balance of
such Mortgage Loan, and (b) the percentage such that the proceeds thereof shall
be sufficient to prevent the Mortgagor and/or the Mortgagee from becoming a
co-insurer. If the Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as being a special flood
hazard area that has federally-mandated flood insurance requirements, the
Servicer will cause to be maintained a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable insurance carrier, in an amount representing
coverage not less than the least of (i) the outstanding principal balance of
such Mortgage Loan, (ii) the maximum insurable value of the improvements
securing such Mortgage Loan or (iii) the maximum amount of insurance which is
available under the Flood Disaster Protection Act of 1973, as amended. The
Servicer shall also maintain on the REO Property, fire and hazard insurance with
extended coverage in an amount which is at least equal to the maximum insurable
value of the improvements which are a part of such property, liability insurance
and, to the extent required and available under the Flood Disaster Protection
Act of 1973, as amended, flood insurance in an amount as provided above. Any
amounts collected by the Servicer under any such policies other than amounts to
be deposited in the Escrow Account and applied to the restoration or repair of
the Mortgaged Property or REO Property, or released to the Mortgagor in
accordance with the Servicer's normal servicing procedures, shall be deposited
in the Collection Account, subject to withdrawal pursuant to Section 4.05. It is
understood and agreed that no other additional insurance need be required by the
Servicer or the Mortgagor or maintained on property acquired in respect of the
Mortgage Loans, other than pursuant to such applicable state or federal laws and
regulations as shall at any time be in force and as shall require such
additional insurance. All such policies shall be endorsed with standard
mortgagee clauses with loss payable to the Servicer and its successors and/or
assigns and shall provide for at least thirty days prior written notice of any
cancellation, reduction in the amount or material change in coverage to the
Servicer. The Servicer shall not interfere with the Mortgagor's freedom of
choice in selecting either his insurance carrier or agent, provided, however,
that the Servicer shall not accept any such insurance policies from insurance
companies unless such companies currently reflect a General Policy Rating in
Best's Key Rating Guide currently acceptable to ▇▇▇▇▇▇ Mae and are licensed to
do business in the state wherein the property subject to the policy is located.
19
Section 4.10 [RESERVED]
Section 4.11 Fidelity Bond, Errors and Omissions Insurance.
The Servicer shall maintain, at its own expense, a blanket
fidelity bond and an errors and omissions insurance policy, with broad coverage
with responsible companies on all officers, employees or other persons acting in
any capacity with regard to the Mortgage Loans and who handle funds, money,
documents and papers relating to the Mortgage Loans. The Fidelity Bond and
errors and omissions insurance shall be in the form of the Mortgage Banker's
Blanket Bond and shall protect and insure the Servicer against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
such persons. Such Fidelity Bond and errors and omissions insurance shall also
protect and insure the Servicer against losses in connection with the failure to
maintain any insurance policies required pursuant to this Agreement and the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. No provision of this Section 4.11
requiring the Fidelity Bond and errors and omissions insurance shall diminish or
relieve the Servicer from its duties and obligations as set forth in this
Agreement. The minimum coverage under any such Fidelity Bond and insurance
policy shall be at least equal to the corresponding amounts required under
Accepted Servicing Practices. The Servicer shall, upon request of Lender,
deliver to the Lender a certificate from the surety and the insurer as to the
existence of the Fidelity Bond and errors and omissions insurance policy and
shall obtain a statement from the surety and the insurer that such Fidelity Bond
or insurance policy shall in no event be terminated or materially modified
without thirty days prior written notice to the Owner and Lender. The Servicer
shall notify the Owner and Lender within five Business Days of receipt of notice
that such Fidelity Bond or insurance policy will be, or has been, materially
modified or terminated. The Owner, Lender and their respective successors or
assigns as their interests may appear must be named as loss payees on the
Fidelity Bond and as additional insured on the errors and omissions policy.
Section 4.12 Title, Management and Disposition of REO
Property.
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 taken in the name of the Owner or its designee as designated in
writing by Lender. Any such Person or Persons holding such title other than the
Owner shall acknowledge in writing that such title is being held as nominee for
the benefit of the Owner and Lender.
20
The Servicer shall notify the Owner and Lender in accordance
with Accepted Servicing Practices of each acquisition of REO Property upon such
acquisition, and thereafter assume the responsibility for marketing such REO
Property in accordance with Accepted Servicing Practices. Thereafter, the
Servicer shall continue to provide certain administrative services to the Owner
and Lender relating to such REO Property as set forth in this Section 4.12. The
REO Property must be sold within three years following the end of the calendar
year of the date of acquisition, unless a REMIC election has been made with
respect to the arrangement under which the Mortgage Loans and REO Property are
held and (i) the Owner and Lender shall have been supplied with an Opinion of
Counsel to the effect that the holding by the related trust of such Mortgaged
Property subsequent to such three-year period (and specifying the period beyond
such three-year period for which the Mortgaged Property may be held) will not
result in the imposition of taxes on "prohibited transactions" of the related
trust as defined in Section 860F of the Code, or cause the related REMIC to fail
to qualify as a REMIC, in which case the related trust may continue to hold such
Mortgaged Property (subject to any conditions contained in such Opinion of
Counsel), or (ii) the Owner (at the Servicer's expense) or the Servicer shall
have applied for, prior to the expiration of such three-year period, an
extension of such three-year period in the manner contemplated by Section
856(e)(3) of the Code, in which case the three-year period shall be extended by
the applicable period. If a period longer than three years is permitted under
the foregoing sentence and is necessary to sell any REO Property, (i) the
Servicer shall report monthly to the Owner and Lender as to progress being made
in selling such REO Property and (ii) if, with the written consent of the Owner
and Lender, a purchase money mortgage is taken in connection with such sale,
such purchase money mortgage shall name the Servicer as mortgagee, and such
purchase money mortgage shall not be held pursuant to this Agreement, but
instead a separate participation agreement between the Servicer and Owner shall
be entered into with respect to such purchase money mortgage.
Notwithstanding any other provision of this Agreement, if a
REMIC election has been made, no Mortgaged Property held by a REMIC shall be
rented (or allowed to continue to be rented) or otherwise used for the
production of income by or on behalf of the related trust or sold in such a
manner or pursuant to any terms that would (i) cause such Mortgaged Property to
fail to qualify at any time as "foreclosure property" within a meaning of
Section 860G(a)(8) of the Code, (ii) subject the related trust to the imposition
of any federal or state income taxes on "net income from foreclosure property"
with respect to such Mortgaged Property within the meaning of Section 860G(c) of
the Code, or (iii) cause the sale of such Mortgaged Property to result in the
receipt by the related trust or any income from non-permitted assets as
described in Section 860F(a) (2)(B) of the Code, unless the Servicer has agreed
to indemnify and hold harmless the related trust with respect to the imposition
of any such taxes.
The Servicer shall, either itself or through an agent selected
by the Servicer, and in accordance with the Accepted Servicing Practices,
manage, conserve, protect and operate each 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. Each REO Disposition shall be carried out by the
Servicer at such price and upon such terms and conditions as the Servicer deems
to be in the best interest of the Owner and Lender. The REO Disposition Proceeds
from the sale of the REO Property shall be promptly deposited in the Collection
Account. As soon as practical thereafter, the expenses of such sale shall be
paid and the Servicer shall be reimbursed for any related Servicing Advances.
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The Servicer shall cause each REO Property to be inspected
promptly upon the acquisition of title thereto and shall cause each REO Property
to be inspected at least monthly thereafter or more frequently as may be
required by the circumstances. The Servicer shall make or cause the inspector to
make a written report of each such inspection. Such reports shall be retained in
the Servicing File and copies thereof shall be forwarded by the Servicer to the
Owner.
Notwithstanding anything to the contrary set forth in this
Section 4.13, the parties hereto hereby agree that the Owner, upon the written
consent of Lender, shall be entitled to manage, conserve, protect and operate
each REO Property for its own benefit (such option, an "REO Option"). In
connection with the exercise of an REO Option, the prior two paragraphs and the
related provisions of Section 4.03 and Section 4.04(iii) (such provisions, the
"REO Marketing Provisions") shall be revised as follows. Following the
acquisition of any Mortgaged Property, the Servicer shall submit to the Owner
and Lender copies of invoices, bills and other documentation relating to
Servicing Advances in a form that would permit the Owner or Lender to fully
recover any amounts due pursuant to any insurance policies and, upon exercising
the REO Option, the Owner shall promptly reimburse the Servicer for such
amounts. In the event the REO Option is exercised with respect to an REO
Property, Section 4.04 (iii) shall not be applicable thereto. References made in
Section 4.03 with respect to the reimbursement of Servicing Advances shall, for
purposes of such REO Property, be deemed to be covered by this paragraph. The
Owner acknowledges that, in the event it exercises an REO Option, with respect
to the related REO Property, there shall be no breach by the Servicer based upon
or arising out of the Servicer's failure to comply with the REO Marketing
Provisions.
ARTICLE V
PAYMENTS
Section 5.01 Remittances.
On each Payment Date, the Servicer shall cause to be remitted
all amounts credited to the Collection Account as of the close of business on
the related preceding Determination Date, net of charges against or withdrawals
from the Collection Account pursuant to Section 4.05. One Business Day prior to
each Payment Date, the Servicer shall deliver to the Lender a remittance report.
The Lender shall confirm the amounts contained in the report and authorize the
remittance of such amounts in the following order of priority:
(a) to pay the fees and expenses of the independent director
of the Owner then due;
(b) to pay the fees and expenses of the Custodian then due;
(c) to pay any Servicing Fee then due;
(d) to pay the accrued Back-up Servicing Fee then due,
including any Servicing Transfer Costs payable pursuant to Section 9.03 hereof;
(e) to pay to the Lender the unreimbursed Lender Expenses and
Indemnified Liabilities of the Lender-Related Parties;
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(f) to pay the interest due to the Lender;
(g) to pay the principal due to the Lender to satisfy any
Borrowing Base Deficiency or otherwise;
(h) to pay the Servicer for any Nonrecoverable Advances made
by it;
(i) to pay into the Expense Reserve Account any amount then
required to be deposited therein pursuant to Section 2.08 of the Loan Agreement;
and
(j) to pay the balance to the Owner.
Section 5.02 Statements to the Owner and Lender.
The Servicer shall furnish to the Owner, the Backup Servicer
and Lender an individual Mortgage Loan accounting report (a "Report"), as of the
last Business Day of each month, in the Servicer's assigned loan number order to
document Mortgage Loan payment activity on an individual Mortgage Loan basis.
With respect to each month, such Report shall be received by the Owner, the
Backup Servicer and Lender (i) no later than the fifth Business Day of the
following month of the related Payment Date on a disk or tape or other
computer-readable format, in such format as may be mutually agreed upon by the
Owner, Lender and the Servicer, and (ii) no later than the tenth Business Day of
the following month of the related Payment Date in hard copy (provided, however,
that if the Backup Servicer has succeeded as the successor Servicer hereunder,
the duty to provide such Report in hard copy shall be at the option of the
successor Servicer), which Report shall contain the following:
(i) With respect to each Monthly Payment (on both an actual
and scheduled basis with respect to Mortgage Loan balances and on an actual
basis with respect to paid-through dates), the amount of such remittance
allocable to principal (including a separate breakdown of any Principal
Prepayment, including the date of such prepayment, and any prepayment penalties
or premiums, along with a detailed report of interest on Principal Prepayment
amounts remitted in accordance with Section 5.01);
(ii) with respect to each Monthly Payment, the amount of such
remittance allocable to interest;
(iii) the aggregate Stated Principal Balance of the Mortgage
Loans;
(iv) the aggregate of any Servicing Advances reimbursed to the
Servicer during the prior distribution period pursuant to Section 4.05;
(v) the number and aggregate outstanding principal balances of
Mortgage Loans (a) delinquent (1) 30 to 59 days, (2) 60 to 89 days, (3) 90 days
or more; (b) as to which foreclosure has commenced; and (c) as to which REO
Property has been acquired;
(vi) the identity of each Mortgage Loan which has been pledged
to the Lender for 120 days or more; and
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(vii) such other reports as may reasonably be required by the
Owner or Lender.
The Servicer shall also provide a trial balance, sorted in the
Owner's assigned loan number order, in such form as the Servicer, Lender and the
Owner shall agree, with each such Report.
The Servicer shall prepare and file any and all information
statements or other filings required to be delivered to any governmental taxing
authority or to Owner pursuant to any applicable law with respect to the
Mortgage Loans and the transactions contemplated hereby. In addition, the
Servicer shall provide the Owner with such information concerning the Mortgage
Loans as is necessary for the Owner to prepare its federal income tax return as
the Owner may reasonably request from time to time.
In addition, not more than 60 days after the end of each
calendar year, the Servicer shall furnish to each Person who was an Owner at any
time during such calendar year an annual statement in accordance with the
requirements of applicable federal income tax law together with a copy to Lender
as to the aggregate of remittances of principal and interest for the applicable
portion of such year.
Section 5.03 [Reserved].
Section 5.04 Liquidation Reports.
Upon the foreclosure sale of any Mortgaged Property or the
acquisition thereof by the Owner pursuant to a deed-in--lieu of foreclosure, the
Servicer shall submit to the Owner a liquidation report with respect to such
Mortgaged Property in such form as the Servicer and the Owner shall agree. The
Servicer shall also provide reports on the status of REO Property containing
such information as Owner may reasonably require.
ARTICLE VI
GENERAL SERVICING PROCEDURES
Section 6.01 Assumption Agreements.
The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance by any Mortgagor of a Mortgaged Property
(whether by absolute conveyance or by contract of, sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under any "due-on-sale" clause to the extent permitted by law; provided,
however, that the Servicer shall not exercise any such rights if prohibited by
law or the terms of the Mortgage Note from doing so or if the exercise of such
rights would impair or threaten to impair any recovery under the related Primary
Mortgage Insurance Policy, if any. If the Servicer reasonably believes it is
unable under applicable law to enforce such "due-on-sale" clause, the Servicer,
with the approval of the Owner and Lender (such approval not to be unreasonably
withheld), will enter into an assumption agreement with the person to whom the
Mortgaged Property has been conveyed or is proposed to be conveyed, pursuant to
which such person becomes liable under the Mortgage Note and, to the extent
permitted by applicable state law, the Mortgagor remains liable thereon. Where
an assumption is allowed pursuant to this Section 6.01, the Servicer, with the
prior consent of the primary mortgage insurer, if any, is authorized to enter
into a substitution of liability agreement with the person to whom the Mortgaged
Property has been conveyed or is proposed to be conveyed pursuant to which the
original mortgagor is released from liability and such Person is substituted as
mortgagor and becomes liable under the related Mortgage Note. Any such
substitution of liability agreement shall be in lieu of an assumption agreement.
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In connection with any such assumption or substitution of
liability, the Servicer shall follow the underwriting practices and procedures
of the Approved Underwriting Guidelines. With respect to an assumption or
substitution of liability, the Mortgage Interest Rate borne by the related
Mortgage Note and the amount of the Monthly Payment may not be changed. The
Servicer shall notify the Owner and Lender that any such substitution of
liability or assumption agreement has been completed by forwarding to the Owner
and Lender the original of any such substitution of liability or assumption
agreement, which document shall be added to the related Mortgage Loan Documents
and shall, for all purposes, be considered a part of such related mortgage file
to the same extent as all other documents and instruments constituting a part
thereof. All fees collected by the Servicer for entering into an assumption or
substitution of liability agreement shall belong to the Servicer.
Notwithstanding the foregoing paragraphs of this section 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. For purposes of this Section 6.01, the term "assumption" is deemed
to also include a sale of the Mortgaged Property subject to the Mortgage that is
not accompanied by an assumption or substitution of liability agreement.
Section 6.02 Satisfaction of Mortgages and Release of Mortgage
Loan Documents.
Upon the payment in full of any Mortgage Loan, the Servicer
will immediately notify the Custodian with a certification and request for
release by a Servicing Officer, which certification shall include a statement to
the effect that all amounts received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 4.04 have
been so deposited, and a request for delivery to the Servicer of the portion of
the Mortgage Loan Documents held by the Custodian, and unless the related
Mortgage Loans are the subject of a Pass-Through Transfer, such request is to be
acknowledged by the Owner and Lender. Upon receipt of such certification and
request, the Owner and Lender shall promptly release or cause the Custodian to
promptly release the related Mortgage Loan Documents to the Servicer and the
Servicer shall prepare and deliver for execution by the Owner or at the Owner's
option execute under the authority of a power of attorney delivered to the
Servicer by the Owner any satisfaction or release. No expense incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Collection Account.
In the event the Servicer satisfies or releases a Mortgage
without having obtained payment in full of the indebtedness secured by the
Mortgage or should it otherwise prejudice any right the Owner or Lender may have
under the mortgage instruments, the Servicer, upon written demand, shall remit
within two Business Days to the Lender the then outstanding principal balance of
the related Mortgage Loan by deposit thereof in the Collection Account. The
Servicer shall maintain the Fidelity Bond insuring the Servicer against any loss
it may sustain with respect to any Mortgage Loan not satisfied in accordance
with the procedures set forth herein and in accordance with Accepted Servicing
Practices.
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From time to time and as appropriate for the servicing or
foreclosure of the Mortgage Loans, including for the purpose of collection under
any Primary Mortgage Insurance Policy, upon request of the Servicer and delivery
to the Custodian of a servicing receipt signed by a Servicing Officer (and
unless the related Mortgage Loans are the subject of a Pass-Through Transfer,
acknowledged by the Owner and Lender), the Custodian shall release the portion
of the Mortgage Loan Documents held by the Custodian to the Servicer. Such
servicing receipt shall obligate the Servicer to promptly return the related
Mortgage Loan Documents to the Custodian, when the need therefor by the Servicer
no longer exists, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or such documents have been delivered to an attorney, or to a
public trustee or other public official as required by law, for purposes of
initiating or pursuing legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or non-judicially, and the Servicer has
promptly delivered to the Owner, Lender and the Custodian a certificate of a
Servicing Officer certifying as to the name and address of the Person to which
such documents were delivered and the purpose or purposes of such delivery. Upon
receipt of a certificate of a Servicing Officer stating that such Mortgage Loan
was liquidated, the servicing receipt shall be released by the Owner, Lender
and/or the Custodian, as applicable, to the Servicer.
Section 6.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall
be entitled to direct remittances from the Collection Account on the Mortgage
Loans in the amounts provided for as the Servicer's Servicing Fee under Section
5.01. Additional servicing compensation in the form of interest earned on the
Collection Account, assumption fees, as provided in Section 6.01, late payment
charges and other ancillary fees shall be retained by the Servicer to the extent
not required to be deposited in the Collection Account. The Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder and shall not be entitled to reimbursement therefor except
as specifically provided for.
Section 6.04 Annual Statement as to Compliance.
The Servicer will deliver to the Owner, the Backup Servicer
and Lender not later than 90 days following the end of each fiscal year of the
Servicer, an Officers' Certificate stating, as to each signatory thereof, that
(i) a review of the activities of the Servicer during the preceding calendar
year and of performance under this Agreement has been made under such officers'
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof except for such defaults as such Officers in their
good faith judgment believe to be immaterial.
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Section 6.05 Annual Independent Certified Public Accountants'
Servicing Report.
Not later than 90 days following the end of each fiscal year
of the Servicer, the Servicer at its expense shall cause a firm of independent
public accountants which is a member of the American Institute of Certified
Public Accountants to furnish a statement to the Owner and Lender to the effect
that such firm has examined certain documents and records relating to the
Servicer's servicing of mortgage loans of the same type as the Mortgage Loans
pursuant to servicing agreements substantially similar to this Agreement, which
agreements may include this Agreement, and that, on the basis of such an
examination, conducted substantially in accordance with the Uniform Single
Attestation Program for Mortgage Bankers, such firm is of the opinion that the
Servicer's servicing has been conducted in compliance with the agreements
examined pursuant to this Section 6.05, except for (i) such exceptions as such
firm shall believe to be immaterial, and (ii) such other exceptions as shall be
set forth in such statement.
Section 6.06 Right to Examine Servicer Records.
Each of the Owner, the Backup Servicer and Lender shall have
the right to examine and audit, at its respective expense, upon reasonable
notice to the Servicer, during business hours or at such other times as might be
reasonable under applicable circumstances, any and all of the books, records,
documentation or other information of the Servicer, or held by another for the
Servicer or on its behalf or otherwise, which relate to the performance or
observance by the Servicer of the terms, covenants or conditions of this
Agreement.
The Servicer shall provide to the Owner, the Lender and any
supervisory agents or examiners representing a state or federal governmental
agency having jurisdiction over the Owner or the Lender, including but not
limited to OTS, FDIC and other similar entities, access to any documentation
regarding the Mortgage Loans in the possession of the Servicer which may be
required by any applicable regulations. Such access shall be afforded without
charge, upon reasonable request, during normal business hours and at the offices
of the Servicer, and in accordance with the applicable federal government
agency, FDIC, OTS, or any other similar regulations.
Section 6.07 Non-solicitation.
The Servicer or any agent or affiliate shall not knowingly
conduct any solicitation exclusively targeted to the Mortgagors for the purpose
of inducing or encouraging the early prepayment or refinancing of the related
Mortgage Loans. It is understood and agreed that promotions undertaken by the
Servicer or any agent or affiliate of the Servicer which are directed to the
general public at large, including, without limitation, mass mailings based on
commercially acquired mailing lists, newspaper, radio and television
advertisements shall not constitute solicitation under this section. Nothing
contained herein shall prohibit the Servicer from (i) distributing any general
advertising including information brochures, coupon books, or other similar
documentation which indicates services the Seller offers, including refinances
to all Mortgagors in Servicer's servicing portfolio or (ii) providing financing
of home equity loans to Mortgagors at the Mortgagor's request.
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ARTICLE VII
REPORTS TO BE PREPARED BY SERVICER
Section 7.01 Servicer Shall Provide Information as Reasonably
Required.
The Servicer shall furnish to Lender and the Owner upon
request, 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 purposes of this
Agreement. The Servicer may negotiate with the Owner or Lender for a reasonable
fee for providing such report or information, unless (i) the Servicer is
required to supply such report or information pursuant to any other section of
this Agreement, or (ii) the report or information has been requested in
connection with Internal Revenue Service, OTS, FDIC or other regulatory agency
requirements. All such reports or information shall be provided by and in
accordance with all reasonable instructions and directions given by the Owner or
Lender. The Servicer agrees to execute and deliver all such instruments and take
all such action as the Owner or Lender, from time to time, may reasonably
request in order to effectuate the purpose and to carry out the terms of this
Agreement.
ARTICLE VIII
THE SERVICER
Section 8.01 Indemnification; Third Party Claims.
The Servicer agrees to indemnify the Owner, the Backup
Servicer and Lender and hold each harmless from and against any and all claims,
losses, damages, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Owner, the Backup
Servicer or Lender may sustain in any way related to the failure of the Servicer
to perform in any way its duties and service the Mortgage Loans in strict
compliance with the terms of this Agreement and for breach of any representation
or warranty of the Servicer contained herein. The Servicer shall immediately
notify the Owner, the Backup Servicer and Lender if a claim is made by a third
party with respect to this Agreement or the Mortgage Loans, assume (with the
consent of the Owner and with counsel reasonably satisfactory to the Owner) the
defense of any such claim and pay all expenses in connection therewith,
including counsel fees, and promptly pay, discharge and satisfy any judgment or
decree which may be entered against it, the Owner, the Backup Servicer or Lender
in respect of such claim but failure to so notify the Owner, the Backup Servicer
or Lender shall not limit its obligations hereunder. The Servicer agrees that it
will not enter into any settlement of any such claim without the consent of the
Owner, the Backup Servicer and Lender unless such settlement includes an
unconditional release of the Owner from all liability that is the subject matter
of such claim. The provisions of this Section 8.01 shall survive termination of
this Agreement.
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Section 8.02 Existence of the Servicer.
The Servicer will keep in full effect its existence, rights
and franchises as a corporation under the laws of the state of its incorporation
except as permitted herein, and will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement.
Section 8.03 Limitation on Liability of the Servicer and
Others.
Neither the Servicer nor any of the officers, employees or
agents of the Servicer shall be under any liability to the Owner for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Agreement, or for errors in judgment made in good faith; provided, however,
that this provision shall not protect the Servicer or any such person against
any breach of warranties or representations made herein, or failure to perform
in any way its obligations in compliance with any standard of care set forth in
this Agreement, or any liability which would otherwise be imposed by reason of
negligence or any breach of the terms and conditions of this Agreement. The
Servicer and any officer, employee or agent of the Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
the Owner respecting any matters arising hereunder. The Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to its duties to service the Mortgage Loans in accordance with
this Agreement and which in its opinion may involve it in any expenses or
liability; provided, however, that the Servicer may, with the consent of the
Owner and Lender, which consent shall not be unreasonably withheld, undertake
any such action which it may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto. In such event, the
reasonable legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities for which the Owner will be
liable, and the Servicer shall be entitled to be reimbursed therefor from the
Owner upon written demand.
Section 8.04 Servicer Not to Resign.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except by mutual consent of the Servicer, the Owner and
Lender or upon the determination that its duties hereunder are no longer
permissible under applicable law and such incapacity cannot be cured by the
Servicer. Any such determination permitting the resignation of the Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Owner and Lender which Opinion of Counsel shall be in form and substance
acceptable to the Owner and Lender. No such resignation shall become effective
until a successor shall have assumed the Servicer's responsibilities and
obligations hereunder in the manner provided in Sections 9.01 and 9.03.
Section 8.05 No Transfer of Servicing.
With respect to the retention of the Servicer to service the
Mortgage Loans hereunder, the Servicer acknowledges that the Owner and Lender
have acted in reliance upon the Servicer's independent status, the adequacy of
its servicing facilities, plan, personnel, records and procedures, its
integrity, reputation and financial standing and the continuance thereof.
Without in any way limiting the generality of this section, the Servicer shall
not either assign this Agreement or the servicing hereunder or delegate its
rights or duties hereunder or any portion thereof, or sell or otherwise dispose
of all or substantially all of its property or assets, without the prior written
approval of the Owner and Lender.
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Section 8.06 Separateness.
The Servicer agrees to conduct its Servicing activities under
this Agreement and its activities otherwise involving the Mortgage Loans in a
manner which is consistent with Borrower's compliance with the separateness
requirements in its LLC Agreement and Section 7.24 of the Loan Agreement.
ARTICLE IX
DEFAULT
Section 9.01 Events of Default.
In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer to remit any payment required
to be made under the terms of this Agreement which continues unremedied for
either one (1) Business Day, if the Servicer is ABMS and/or HAC (or two (2)
Business Days, in case the Backup Servicer is acting as Servicer) (it being
understood that this subparagraph shall not affect Servicer's obligation
pursuant to Section 5.01 to pay default interest on any remittance received
after the Business Day on which such payment was due); or
(ii) any failure on the part of the Servicer duly to observe
or perform in any material respect any other of the covenants or agreements on
the part of the Servicer set forth in this Agreement, the breach of which has a
material adverse effect and which continue unremedied for a period of thirty
days (except that such number of days shall be fifteen in the case of a failure
to pay any premium for any insurance policy required to be maintained under this
Agreement and such failure shall be deemed to have a material adverse effect)
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 Owner or Lender; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or receiver
or liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling 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 or unstayed for a
period of sixty days; or
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(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, bankruptcy,
readjustment of debt, marshaling 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
(v) 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
(vi) only if ABMS and/or HAC is the Servicer, there occurs an
"Event of Default" as defined in the Loan Agreement; or
(vii) only if ABMS and/or HAC is the Servicer, the Servicer
attempts to assign its right to servicing compensation hereunder or the Servicer
attempts, without the consent of the Owner, to sell or otherwise dispose of all
or substantially all of its property or assets or to assign this Agreement or
the servicing responsibilities hereunder or to delegate its duties hereunder or
any portion thereof except as otherwise permitted herein; or
(viii) the Servicer ceases (either directly or indirectly
through its subservicers) to be qualified to transact business in any
jurisdiction where it is currently so qualified, but only to the extent such
non-qualification materially and adversely affects the Servicer's ability to
perform its obligations hereunder; or
(ix) only if ABMS and/or HAC is the Servicer, the Servicer
shall cease to be a direct or indirect wholly-owned subsidiary of ABSFI; or
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Owner (with prior written consent of Lender) or Lender,
by notice in writing to the Servicer and a copy to Backup Servicer may, in
addition to whatever rights the Owner or Lender may have under Section 8.01 and
at law or equity to damages, including injunctive relief and specific
performance, terminate all the rights and obligations of the Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof without
compensating the Servicer for the same (or paying any other fees and expenses).
On or after the receipt by the Servicer and Backup Servicer of such written
notice of the termination of Servicer, all authority and power of the Servicer
under this Agreement, whether with respect to the Mortgage Loans or otherwise,
shall pass to and be vested in the Backup Servicer pursuant to and under this
Section, and, without limitation, the Backup Servicer, is hereby authorized and
empowered, as attorney-in-fact or otherwise, to execute and deliver, on behalf
of and at the expense of the Servicer, 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 or assignment of the Mortgage Loans and
related documents, or otherwise. Upon written request from the Owner and the
Lender, the Servicer shall prepare, execute and deliver, any and all documents
and other instruments, and place in the Backup Servicer's possession all
Servicing Files, and 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 or assignment of the Mortgage Loans and
related documents, or otherwise, at the Servicer's sole expense. The Servicer
agrees to cooperate with the Owner, the Lender and the Backup Servicer in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the Backup Servicer
for administration by it of all cash amounts which shall at the time be credited
by the Servicer to the Collection Account or Escrow Account or otherwise held by
the Servicer or thereafter received with respect to the Mortgage Loans or any
REO Property.
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In the event that the Backup Servicer becomes the successor
Servicer, the parties hereby agree that there shall no longer be the requirement
to have a Backup Servicer.
Section 9.02 Waiver of Defaults.
The Owner may waive only by written notice and only upon the
written consent of Lender any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Default 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 thereon except to the extent expressly so waived in
writing.
Section 9.03 Backup Servicer.
(a) From and after the Effective Date hereof until the
Servicing Transfer Date, the Backup Servicer shall act as back-up servicer with
respect to the Mortgage Loans, and shall perform such functions, duties,
obligations, undertakings and responsibilities as set forth in Section 9.03(b)
below subject to this Section 9.03(a). Prior to the Servicing Transfer Date, the
Backup Servicer shall have only those duties and obligations imposed by it
described in Section 9.03(b) below, and shall have no obligations or duties
under any agreement to which it is not a party, including but not limited to the
various agreements named herein; provided, that prior to the Servicing Transfer
Date, with respect to any Mortgage Loans which are pledged to the Lender for at
least 150 days, the Backup Servicer shall service all such Mortgage Loans as if
it were the Servicer and shall be compensated a fee of $20 per month per
Mortgage Loan with respect to each such Mortgage Loan in excess of the 50th
Mortgage Loan transferred to the Backup Servicer (it being understood that this
fee of $20 per month per Mortgage Loan is only applicable during the period
before the Servicing Transfer Date). In its capacity as Backup Servicer, it
shall in no event be liable for any obligations of the Owner or the Servicer to
any party, whether hereunder or under any other agreement, which are not related
to servicing functions, including, without limitation, any repurchase
obligations; provided, that the Backup Servicer shall have all of the rights,
duties and obligations of the Servicer with respect to each Mortgage Loans
transferred to it for servicing before the Servicing Transfer Date.
(b) No later than the fifth (5th) Business Day of each
calendar month, the Servicer shall deliver to the Backup Servicer a complete set
of servicing records in computer-readable form with respect to the payment,
collection and other servicing activity of the Mortgage Loans during the
preceding calendar month, which records shall contain sufficient data to permit
the Backup Servicer to assume the duties of the Servicer hereunder without delay
on account of the absence of relevant servicing information. The information
described in the foregoing sentence and all other information provided by the
Servicer to the Backup Servicer pursuant to the Agreement shall be in form and
substance satisfactory to the Backup Servicer. On at least a monthly basis, the
Backup Servicer shall convert and "map" the data contained in such servicing
records to its own servicing system, and shall provide the Lender not later than
the 15th day of each month commencing November 15, 2004, with a certification by
an appropriate officer of the Backup Servicer to the effect that it has received
from the Servicer each monthly submission of servicing data, has completed such
conversion and mapping of the data delivered with respect to the immediately
preceding month, and is capable of assuming the duties of the Servicer if
required to do so hereunder upon at least 15 days' prior to written notice from
the Lender.
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(c) The Backup Servicer, prior to assuming any of the
Servicer's duties hereunder may not resign hereunder unless it arranges for a
successor Backup Servicer reasonably acceptable to the Owner and the Lender with
not less than 90 days' notice delivered to the Owner, the Lender and the
Servicer.
(d) From and after the Servicing Transfer Date, the Backup
Servicer shall perform all of the functions, duties, obligations, undertakings
and responsibilities of the Servicer hereunder and shall be the successor to the
Servicer hereunder, but only in its capacity as Servicer under this Agreement.
In the event the Backup Servicer becomes the successor Servicer, it shall not be
liable for any acts or omissions of the Servicer under this Agreement or any
other agreement and shall not be deemed to have made any representations and
warranties of the Servicer or any predecessor Servicer under this Agreement or
any other agreement. In the event the Backup Servicer becomes the successor
Servicer, it shall be not deemed to be in default thereunder by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by (a) the failure of the Servicer or any predecessor
Servicer to (i) deliver, or any delay in delivering, cash, documents or records
to it, (ii) cooperate as required by this Agreement, or (iii) deliver the
Mortgage Loans to the Custodian as required by this Agreement, or (b)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer.
(e) Upon the transfer of the servicing of the Mortgage Loans,
prior to the first Payment Date after the Servicing Transfer Date, the Lender
shall cause the Custodian to provide the Backup Servicer with an officer's
certificate that contains (i) a complete description of all material breaches by
the Servicer which have not been fully cured and (ii) a confirmation that all
reports required to be filed by the Custodian have been timely filed.
(f) The Backup Servicer agrees to indemnify the Owner, the
Servicer and the Lender, and any of their respective directors, officers,
employees or agents from, and hold them harmless against, any and all costs,
expenses (including reasonable attorney fees and disbursements), losses, claims,
damages and liabilities to the extent that such cost, expense, loss, claim,
damage or liability arose out of, or was imposed upon the Owner, the Servicer or
the Lender and their respective directors, officers, employees and agents
through the Backup Servicer's intentional misconduct or gross negligence, except
to the extent such indemnified party's own bad faith, willful misconduct or
gross negligence contributes to the costs, loss, claim, damage or liability.
Each of the Owner, the Servicer and the Lender agrees, severally and not
jointly, to indemnify the Backup Servicer, and any of its respective directors,
officers, employees or agents from, and hold them harmless against, any and all
costs, expenses (including reasonable attorney fees and disbursements), losses,
claims, damages and liabilities to the extent that such cost, expense, loss,
claim, damage or liability arose out of, or was imposed upon the Backup Servicer
and its respective directors, officers, employees and agents through the
intentional misconduct or gross negligence of the Owner, the Servicer or the
Lender, except to the extent such indemnified party's own bad faith, willful
misconduct or gross negligence contributes to the costs, loss, claim, damage or
liability (for the avoidance of doubt, in no event shall Owner or Lender
indemnify the Backup Servicer for the intentional misconduct or gross negligence
of either (x) the other or (y) the Servicer).
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(g) The Backup Servicer will not be obligated to incur any
expenses or costs (including, without limitation, legal fees and the preparation
and recording of all intervening assignments of mortgage) in connection with the
transfer of servicing of the Mortgage Loans to the Backup Servicer, or to compel
the performance of any obligations by any party to the Agreement. Without
limiting any obligations of a terminated Servicer as provided above, if the
Servicer is no longer the Servicer hereunder for any reason, such predecessor
Servicer shall be responsible for paying any Servicing Transfer Costs incurred
by the Backup Servicer in connection with the transfer of servicing from the
predecessor Servicer; provided, that if the predecessor Servicer fails to pay
any such Servicing Transfer Costs, the Lender shall cause such Servicing
Transfer Costs to be paid out of the Collection Account. In addition, if the
Backup Servicer is the successor to the Servicer, and if the predecessor
Servicer fails to pay any Servicing Transfer Costs incurred by the Backup
Servicer, then the Backup Servicer may offset any such Servicing Transfer Costs
against amounts that are payable or reimbursable to the predecessor Servicer
with respect to unpaid Servicing Fees and unreimbursed Servicing Advances as set
forth below in the following paragraph below (and the Backup Servicer shall only
be paid such Servicing Transfer Costs from the Collection Account to the extent
it reasonably determines that such Servicing Transfer Costs will not be
recoverable pursuant to such offsets). To the extent such Servicing Transfer
Costs remain unpaid by the predecessor Servicer, from the Collection Account, or
from offset against amounts that are payable or reimbursable to the predecessor
Servicer with respect to unpaid Servicing Fees and unreimbursed Servicing
Advances, such unpaid Servicing Transfer Costs shall be paid by the Owner and
the predecessor Servicer, jointly and severally. The foregoing obligation of the
predecessor Servicer with respect to Servicing Transfer Costs shall not be
deemed to limit any other liability the predecessor Servicer may have to the
other parties hereto in respect of any breach of its obligations or duties
hereunder.
(h) If the Backup Servicer is the successor to the Servicer,
the Backup Servicer in such capacity shall remit all unpaid Servicing Fees
accrued during the period prior to the Servicing Transfer and unreimbursed
Servicing Advances outstanding on the Servicing Transfer Date to the predecessor
Servicer; provided, however, there shall be no duty to so remit if the Servicing
Transfer is the result of an Event of Default under this Agreement with respect
to the predecessor Servicer; and provided further, that such duty to reimburse
relates only to all such unpaid Servicing Fees accrued during the period prior
to the Servicing Transfer and unreimbursed Servicing Advances made by the
predecessor Servicer prior to Servicing Transfer Date; and, further, provided,
that the Backup Servicer in its capacity as successor Servicer shall be obliged
to make such reimbursement only out of collections on the related Mortgage Loan,
(including monthly collections, Liquidation Proceeds, Released Mortgaged
Property Proceeds, Insurance Proceeds, or their equivalent under the Basic
Document) and such other amounts that the Servicer is permitted to collect from
the related Mortgagor or otherwise relating to the related Mortgage Loan before
the Backup Servicer in its capacity as successor Servicer reimburses itself for
any unreimbursed Servicing Advances which it makes with respect to such Mortgage
Loan. The Backup Servicer in its capacity as successor Servicer shall remit any
funds due to the predecessor Servicer under this paragraph on the Payment Date.
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(i) The Backup Servicer, as compensation for its obligations
and duties as Backup Servicer hereunder, shall be paid the Backup Servicing Fee
on each Payment Date pursuant to Section 5.01. If the Backup Servicer shall
succeed as Servicer hereunder, the Backup Servicer shall no longer be entitled
to be paid the Backup Servicing Fee with respect to any period after the
Servicing Transfer Date.
(j) In addition, as compensation for its assumption of its
duties as Backup Servicer hereunder, the Lender shall deliver to the Backup
Servicer on the Effective Date hereof, from the Lender's own funds, the Initial
Setup Fee.
(k) As compensation for its assumption of its duties as
successor to the Servicer hereunder, on and after the Servicing Transfer Date,
the Backup Servicer in its capacity as successor to the Servicer hereunder shall
become entitled to receive the Servicing Fee for three (3) months (regardless of
the actual number of months that the Backup Servicer has acted as the successor
Servicer) on each Mortgage Loan and such other compensation to the Servicer as
is provided in this Agreement (other than any such compensation due to the
predecessor Servicer for any period prior to the Servicing Transfer Date);
provided, however that the predecessor Servicer shall nonetheless be entitled to
payment or reimbursement for unpaid Servicing Fees accrued during the period
prior to the Servicing Transfer Date or Servicing Advances made by such
predecessor Servicer during the period prior to the Servicing Transfer Date
pursuant to Section 9.03(h) hereof. The parties agree that if the Backup
Servicer has succeeded as the successor Servicer hereunder, the Servicing Fee
Rate shall be equal to 0.50% after the Servicing Transfer Date, provided,
however, in the event of an Event of Default under the Loan Agreement, the
Servicing Fee Rate shall be a commercially reasonable rate or per loan fee
(taking into consideration, among other factors, the fact that the Loan
Agreement is no longer a revolving facility) as agreed upon by the Backup
Servicer and the Lender, who agree to act in good faith based upon the then
Principal Balance of the Mortgage Loans outstanding at such time and anticipated
balances going forward; and provided further, that the 0.50% rate shall be
applicable for a minimum of three (3) months following such a Servicing Transfer
Date. If the Lender and the Backup Servicer fail to set a mutually agreeable
Servicing Fee Rate in good faith negotiations after the Servicing Transfer Date
and the subsequent Event of Default, the Backup Servicer may in its sole
discretion resign as successor Servicer hereunder at no cost to the Backup
Servicer and the Lender shall reimburse the Backup Servicer for any unreimbursed
Servicing Advances made by the Backup Servicer with respect to the Mortgage
Loans and any unreimbursed Servicing Transfer Costs incurred by the Backup
Servicer prior to the date of such resignation.
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(l) If the Backup Servicer is terminated as Backup Servicer
without cause or, is required by the Owner (with the prior written consent of
the Lender) or the Lender to resign as Backup Servicer, the Backup Servicer
shall be paid from the Collection Account (or from the Lender if there are
insufficient funds in the Collection Account) a termination fee equal to the
Backup Servicing Fee Rate accrued for nine (9) months (on the basis of a 360-day
year and twelve 30-day months) less the number of months that the Backup
Servicer has already received a payment as Backup Servicer on the aggregate
principal balance of the Mortgage Loans on the date of such termination, if such
termination or forced resignation occurs on or prior to the nine month
anniversary of the Effective Date. No termination fee shall be payable to the
Backup Servicer if the Backup Servicer is terminated as Backup Servicer without
cause or, is required to resign as Backup Servicer, after the 9-month
anniversary of the Effective Date or if the Backup Servicer resigns pursuant to
Section 9.03(k).
ARTICLE X
TERMINATION
Section 10.01 Servicing Term.
The Servicer hereby covenants and agrees to act as the
Servicer under this Agreement as of the Closing Date through the Termination
Date; provided, that the right of the Servicer to service any given Mortgage
Loan shall automatically expire on the 150th day after such Mortgage Loan is
pledged to the Lender pursuant to the Loan Agreement without any further notice
from or other action by the Lender or Owner. However, if the Backup Servicer
shall become the Servicer hereunder the term of the Backup Servicer as Servicer
shall not be subject to expiration pursuant to this Section 10.01.
With respect to each Mortgage Loan, upon the expiration of the
right of the Servicer to service such Mortgage Loan as set forth in this Section
10.01, the Backup 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 and arising thereafter
placed on the Servicer (except for any representations or warranties of the
Servicer under this Agreement by the terms and provisions hereof); provided,
that the Backup Servicer shall continue to be compensated in its capacity as the
Backup Servicer (and not in the capacity as Servicer) until the Servicing
Transfer Date occurs.
Section 10.02 Termination.
Notwithstanding the foregoing Section 10.01, the respective
obligations and responsibilities of the Servicer shall terminate upon the
earliest of (i) the later of the final payment of the last Mortgage Loan and the
remittance of all funds due hereunder; or (ii) mutual consent of the Servicer,
the Owner and the Lender in writing; or (iii) termination by the Lender pursuant
to Section 9.01; or (iv) the expiration of servicing pursuant to Section 10.01
above; provided, that with respect to Countrywide as Backup Servicer and
Servicer, if Countrywide's agreed-upon fees and expenses are not paid within 60
days of notice of default, Countrywide's obligations and responsibilities as
Backup Servicer and Servicer shall terminate and Countrywide shall return any
Mortgage Files in its possession as directed by the Lender.
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Section 10.03 Termination Without Cause.
The Lender may, at its sole option, terminate any rights the
Servicer may have hereunder, without cause, upon 20 days prior written notice.
Any such notice of termination shall be in writing and delivered to the Servicer
as provided in Section 11.05 of this Agreement.
Termination pursuant to this Section 10.03 shall be effective
on the date (the "Transfer Date") on which the Servicer transfers all
responsibilities, rights, duties and obligations under this Agreement to the
successor appointed pursuant to Sections 9.01 and 9.03. The Lender shall appoint
such successor and the Transfer Date shall be no more than 20 days following the
date on which the Servicer receives notice of termination.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Amendment.
This Agreement may be amended from time to time by the
Servicer, the Owner, the Lender and the Backup Servicer by written agreement
signed by the Servicer, the Owner, the Lender and the Backup Servicer.
Section 11.02 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any of
all the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Servicer's expense on direction of the Owner or
Lender accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interest of the Owner or Lender or is
necessary for the administration or servicing the Mortgage Loans.
Section 11.03 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO PRINCIPLES OF CONFLICTS OF LAWS. THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.04 Notices.
Any demands, notices or other communications permitted or
required hereunder shall be in writing and shall be deemed conclusively to have
been given if personally, delivered, sent by overnight courier with proof of
delivery, mailed by certified mail, postage prepaid, and return receipt
requested or transmitted by telecopier and confirmed by a similar writing
delivered by overnight courier, as follows:
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(i) if to the Servicer:
American Business Mortgage Services, Inc.
The ▇▇▇▇▇▇▇▇▇ Bldg.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
HomeAmerican Credit, Inc.
The ▇▇▇▇▇▇▇▇▇ Bldg.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Blank Rome LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Owner:
Penn Square East Funding, LLC
The ▇▇▇▇▇▇▇▇▇ Bldg.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Blank Rome LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) if to the Lender:
Fortress Credit Corp.
1251 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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(iv) if to the Backup Servicer:
Countrywide Home Loans Servicing LP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇▇-▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice, or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
address (as evidenced, in the case of registered or certified mail, by the date
noted on the return receipt).
Section 11.05 Severability of Provisions.
Any part, provision, representation or warranty of this
Agreement which is prohibited or which is held to be void or unenforceable shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part, provision,
representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall
be ineffective, as to such jurisdiction, to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part, provision, representation or
warranty of this Agreement shall deprive any party of the economic benefit
intended to be conferred by this Agreement, the parties shall negotiate, in good
faith, to develop a structure the economic effect of which is nearly as possible
the same as the economic effect of this Agreement without regard to such
invalidity.
Section 11.06 Exhibits.
The exhibits to this Agreement are hereby incorporated and
made a part hereof and are an integral part of this Agreement.
Section 11.07 General Interpretive Principles.
For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(i) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the other
gender;
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(ii) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(iii) references herein to "Articles," "Sections,"
"Subsections," "Paragraphs," and other subdivisions without reference to a
document are to designated Articles, Sections, Subsections, Paragraphs and other
subdivisions of this Agreement;
(iv) a reference to a Subsection without further reference to
a Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(v) the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
provision; and
(vi) the term "include" or "including" shall mean without
limitation by reason of enumeration.
Section 11.08 Reproduction of Documents.
This Agreement and all documents relating hereto, including,
without limitation, (i) consents, waivers and modifications which may hereafter
be executed, (ii) documents received by any party at the closing, and (iii)
financial statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 11.09 Confidentiality of Information.
Each party recognizes that, in connection with this Agreement,
it may become privy to non-public information regarding the financial condition,
operations and prospects of the other party. Except as required to be disclosed
by law, each party agrees to keep all non-public information regarding the other
party strictly confidential, and to use all such information solely in order to
effectuate the purpose of this Agreement.
Section 11.10 Recordation of Assignments of Mortgage.
To the extent permitted by applicable law, each of the
Assignments of Mortgage may be subject to recordation in all appropriate public
offices for real property records in all 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. The Servicer shall not be responsible for the
cost or preparation of such recordation.
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Section 11.11 Assignment.
This Agreement is assignable by the Lender upon notice to the
Owner, the Servicer and the Backup Servicer (the "Notice Date") in whole or in
part without the consent of the Owner, the Servicer or the Backup Servicer,
provided that the rights with respect to this Agreement shall not be assigned
without the associated liabilities with respect to events occurring after the
Notice Date (Lender shall remain liable with respect to events occurring up to
and including the Notice Date). The Owner shall have the right, only upon prior
written consent of the Lender, but without the consent of the Servicer and the
Backup Servicer, to assign, in whole or in part, its interest under this
Agreement with respect to some or all of the Mortgage Loans, and designate any
person to exercise any rights of the Owner hereunder. In no event shall Owner
sell a partial interest in any Mortgage Loan. The Backup Servicer shall not
assign this Agreement without the prior written consent of the Lender, which
consent shall not be unreasonably withheld, delayed or conditioned. All
references to the Owner in this Agreement shall be deemed to include its
assignees or designees.
Section 11.12 No Partnership.
Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor and not
as agent for Owner.
Section 11.13 Execution; Successors and Assigns.
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. Subject to Sections 8.04 and 9.03 and
11.11, this Agreement shall inure to the benefit of and be binding upon the
Servicer, the Backup Servicer and the Owner and their respective successors and
assigns.
Section 11.14 Entire Agreement.
Each of the Servicer, the Owner and the Backup Servicer
acknowledges that no representations, agreements or promises were made to it by
the other party or any of its employees other than those representations,
agreements or promises specifically contained herein. This Agreement sets forth
the entire understanding among the parties hereto and shall be binding upon all
successors of all of the parties.
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IN WITNESS WHEREOF, the Servicer, the Owner, the Lender and
the Backup Servicer have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the date and year first
above written.
SERVICER
--------
AMERICAN BUSINESS MORTGAGE SERVICES,
INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President, General Counsel
and Secretary
OWNER
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PENN SQUARE EAST FUNDING, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
LENDER
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FORTRESS CREDIT CORP.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Credit Officer
BACKUP SERVICER
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COUNTRYWIDE HOME LOANS SERVICING LP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇
Title: Senior Vice President
C-1