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SALE AND SERVICING AGREEMENT
Dated as of October 1, 1997
among
DITECH HOME LOAN OWNER TRUST 1997-1
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
DITECH FUNDING CORPORATION
(Transferor and Servicer)
and
THE BANK OF NEW YORK,
(Indenture Trustee)
DITECH HOME LOAN OWNER TRUST 1997-1
HOME LOAN ASSET BACKED NOTES
SERIES 1997-1
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.......................................................
Section 1.02 Other Definitional Provisions.....................................
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans......................................
Section 2.02 Ownership and Possession of Home Loan Files.......................
Section 2.03 Books and Records.................................................
Section 2.04 Delivery of Home Loan Documents...................................
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans; Certain
Substitutions; Certification by the Custodian
Section 2.06 Subsequent Transfers..............................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor...................
Section 3.02 Representations and Warranties of the Transferor..................
Section 3.03 Representations, Warranties and Covenants of the Servicer.........
Section 3.04 Representations and Warranties Regarding Individual Home Loans....
Section 3.05 Purchase and Substitution.........................................
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer............................................
Section 4.02 Payment of Taxes, Insurance and Other Charges.....................
Section 4.03 Fidelity Bond; Errors and Omissions Insurance.....................
Section 4.04 Filing of Continuation Statements.................................
Section 4.05 Superior Liens....................................................
Section 4.06 Subservicing......................................................
Section 4.07 Successor Servicers...............................................
Section 4.08 Maintenance of Insurance..........................................
Section 4.09 Reports to the Securities and Exchange Commission; 144A
Information.......................................................
Section 4.10 Foreclosure; Foreclosure Alternatives.............................
Section 4.11 Title, Management and Disposition of Foreclosure Property.........
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account..................
Section 5.02 Certificate Distribution Account and Note Distribution Account....
Section 5.03 Trust Accounts; Trust Account Property............................
Section 5.04 Allocation of Losses..............................................
Section 5.05 Pre-Funding Account...............................................
Section 5.06 Capitalized Interest Account......................................
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements........................................................
Section 6.02 Specification of Certain Tax Matters..............................
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance...................................
Section 7.02 Release of Home Loan Files........................................
Section 7.03 Servicing Compensation............................................
Section 7.04 Statement as to Compliance and Financial Statements...............
Section 7.05 Independent Public Accountants' Servicing Report..................
Section 7.06 Right to Examine Servicer Records.................................
Section 7.07 Reports to the Indenture Trustee; Collection Account Statements...
Section 7.08 Financial Statements..............................................
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims...............................
Section 9.02 Merger or Consolidation of the Servicer...........................
Section 9.03 Limitation on Liability of the Servicer and Others................
Section 9.04 Servicer Not to Resign; Assignment................................
Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee......
Section 9.06 Servicer May Own Securities.......................................
ARTICLE X
DEFAULT
Section 10.01 Events of Default................................................
Section 10.02 Indenture Trustee to Act; Appointment of Successor...............
Section 10.03 Waiver of Defaults...............................................
Section 10.04 Accounting Upon Termination of Servicer..........................
ARTICLE XI
TERMINATION
Section 11.01 Termination......................................................
Section 11.02 Optional Termination.............................................
Section 11.03 Notice of Termination............................................
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders..............................................
Section 12.02 Amendment........................................................
Section 12.03 Recordation of Agreement.........................................
Section 12.04 Duration of Agreement............................................
Section 12.05 Governing Law....................................................
Section 12.06 Notices..........................................................
Section 12.07 Severability of Provisions.......................................
Section 12.08 No Partnership...................................................
Section 12.09 Counterparts.....................................................
Section 12.10 Successors and Assigns...........................................
Section 12.11 Headings.........................................................
Section 12.12 Actions of Securityholders.......................................
Section 12.13 Reports to Rating Agencies.......................................
Section 12.14 Holders of the Residual Interest Certificates....................
Section 12.15 Limitation of Liability of Owner Trustee.........................
EXHIBIT A - Home Loan Schedule
EXHIBIT B - Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT C - Form of Subsequent Transfer Agreement
This Sale and Servicing Agreement is entered into effective as of October
1, 1997, among DITECH HOME LOAN OWNER TRUST 1997-1, a Delaware business trust
(the "Issuer" or the "Trust"), PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV, a
Delaware corporation, as Depositor (the "Depositor"), DITECH FUNDING
CORPORATION, a California corporation ("DiTech"), as Transferor (in such
capacity, the "Transferor") and Servicer (in such capacity, the "Servicer"), and
THE BANK OF NEW YORK, a New York banking corporation, as Indenture Trustee on
behalf of the Noteholders (in such capacity, the "Indenture Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the Issuer, the
Depositor, DiTech, the Indenture Trustee hereby agree as follows for the benefit
of each of them and for the benefit of the holders of the Notes and the Residual
Interest Certificates issued hereunder:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months, except that with respect to the Class A-1 Notes, calculations of accrued
interest shall be made on the basis of a 360-day year and the actual number of
days elapsed in each Accrual Period.
Accrual Period: With respect to the Class A-1 Notes, the period beginning
on the Distribution Date in the calendar month preceding the month in which the
related Distribution Date occurs (or, in the case of the first Distribution
Date, October 30, 1997) and ending on the day preceding the related Distribution
Date. With respect to the other Classes of Notes, the calendar month preceding
the month in which the related Distribution Date occurs.
Accepted Servicing Procedures: Servicing procedures that meet at least the
same standards the Servicer would follow in servicing mortgage loans such as the
Home Loans held for its own account, giving due consideration to standards of
practice of prudent mortgage lenders and loan servicers that originate and
service mortgage loans comparable to the Home Loans and the reliance placed by
the Securityholders on the Servicer for the servicing of the Home Loans but
without regard to:
(i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the
related Obligor;
(ii) the ownership of any Notes or the Residual Interest Certificates
by the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive compensation
for its services hereunder with respect to any particular
transaction.
Addition Notice: For any date during the Pre-Funding Period, a notice
(which may be verbal if promptly confirmed in writing) given to the Rating
Agencies, the Indenture Trustee and the Owner Trustee pursuant to Section 2.06
hereof.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, the term "control", when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have corresponding meanings.
Agreement: This Sale and Servicing Agreement and all amendments hereof and
supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the excess,
if any, of (a) the aggregate of the Class Principal Balances of all Classes of
Notes (after giving effect to all distributions on such Distribution Date) over
(b) the Pool Principal Balance as of the end of the preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
sequentially, to the Class B-2 Notes, the Class B-1 Notes, the Class M-2 Notes
and the Class M-1 Notes, in that order.
Assignment of Mortgage: With respect to each Home Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect or record the sale of the related Home Loan which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering Mortgages secured by Mortgaged Properties located
in the same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date, an
amount without duplication equal to the sum of: (i) all amounts received on the
Home Loans or required to be paid by the Servicer or the Transferor during the
related Due Period (exclusive of amounts not required to be deposited by the
Servicer in the Collection Account pursuant to Section 5.01(b)(1) hereof and
amounts permitted to be withdrawn by the Indenture Trustee from the Collection
Account pursuant to Section 5.01(b)(3) hereof) as reduced by any portion thereof
that may not be withdrawn therefrom pursuant to an order of a United States
bankruptcy court of competent jurisdiction imposing a stay pursuant to section
362 of the United States Bankruptcy Code; (ii) any and all income or gain from
investments in the Collection Account, Note Distribution Account and Certificate
Distribution Account; (iii) upon exercise of optional termination of the Notes
pursuant to Section 11.02 hereof, the Termination Price; (iv) the Purchase Price
paid for any Home Loans required to be purchased pursuant to Section 3.05 hereof
prior to the related Determination Date and the Substitution Adjustment to be
deposited in the Collection Account in connection with any substitution, in each
case prior to the related Determination Date; and (v) the Capitalized Interest
Requirement, if any, with respect to such Distribution Date.
Available Distribution Amount: With respect to any Distribution Date, the
Available Collection Amount minus the amount required to be paid from the Note
Distribution Account pursuant to Section 5.01(c)(i), plus on the Distribution
Date relating to the Due Period in which the termination of the Pre-Funding
Period shall have occurred, the amount on deposit in the Pre-Funding Account at
such time net of any Pre-Funded Earnings.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions in The City of New York or in the city in which the
corporate trust office of the Indenture Trustee is located or the city in which
the Servicer's servicing operations are located and are authorized or obligated
by law or executive order to be closed.
"Capitalized Interest Account": The account designated as such, established
and maintained pursuant to Section 5.06 hereof.
"Capitalized Interest Initial Deposit": $333,828.24.
"Capitalized Interest Requirement: With respect to the Distribution Date in
November 1997, (i) the product of (a) the Pre-Funding Amount on the Closing Date
and (b) one-twelfth and (c) the weighted average of the applicable Note Interest
Rates for the Notes (assuming that the Class A-1 Notes bear interest at 5.75625%
per annum) minus (ii) in the case of any Subsequent Loan transferred to the
Trust during the related Due Period, the amount of any interest collected after
the Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Distribution Date in December 1997, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 5.75625% per
annum) minus (iii) in the case of any Subsequent Loan transferred to the Trust
during the related Due Period, the amount of any interest collected after the
Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Distribution Date in January 1998, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear iinterest at 5.75625% per
annum) minus (ii) in the case of any Subsequent Loan transferred to the Trust
during the related Due Period, the amount of any interest collected after the
Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Distribution Date in February 1998, (i) the product of
(a) the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 5.75625% per
annum) minus (ii) any Pre-Funding Earnings for the related Due Period and minus
(iii) in the case of any Subsequent Loan transferred to the Trust during the
related Due Period, the amount of any interest collected after the Cut-Off Date
applicable to such Subsequent Loan and during such related Due Period.
Capitalized Interest Subsequent Deposit: As defined in Section
2.06(b)(viii)(B)(IV).
Certificate Distribution Account: The account designated as such,
established and maintained pursuant to Section 5.02 hereof.
Certificate Register: The register established pursuant to Section 3.4 of
the Trust Agreement.
Certificateholder: A holder of a Residual Interest Certificate.
Class: With respect to the Notes, all Notes bearing the same class
designation.
Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class M-1
Note, Class M-2 Note, Class B-1 Note and Class B-2 Note: The respective meanings
assigned thereto in the Indenture.
Class B-1 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; and with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus the
sum of (i) the aggregate Class Principal Balance of the Senior Notes and the
Mezzanine Notes (after taking into account any distributions made on such
Distribution Date in reduction of the Class Principal Balances of the Classes of
Senior Notes and Mezzanine Notes) and (ii) the greater of (x) the sum of (1)
4.50% of the Pool Principal Balance as of the related Determination Date and (2)
the Overcollateralization Target Amount for such Distribution Date (calculated
without giving effect to the proviso in the definition thereof) and (y) 0.50% of
the Maximum Collateral Amount; provided, however, that such amount shall never
be less than zero or greater than the Original Class Principal Balance of the
Class B-1 Notes.
Class B-2 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; and with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus the
sum of (i) the aggregate Class Principal Balance of the Senior Notes, the
Mezzanine Notes and the Class B-1 Notes (after taking into account any
distributions made on such Distribution Date in reduction of the Class Principal
Balances of the Classes of Senior Notes, Mezzanine Notes and Class B-1 Notes)
and (ii) the Overcollateralization Target Amount for such Distribution Date;
provided, however, that such amount shall never be less than zero or greater
than the Original Class Principal Balance of the Class B-2 Notes.
Class Factor: With respect to each Class and any date of determination, the
then applicable Class Principal Balance of such Class divided by the Original
Class Principal Balance thereof.
Class M-1 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; and with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus the
sum of (i) the aggregate Class Principal Balance of the Senior Notes (after
taking into account distributions made on such Distribution Date in reduction of
the Class Principal Balances of the Classes of Senior Notes) and (ii) the
greater of (x) the sum of (1) 27.00% of the Pool Principal Balance as of the
related Determination Date and (2) the Overcollateralization Target Amount for
such Distribution Date (calculated without giving effect to the proviso in the
definition thereof) and (y) 0.50% of the Maximum Collateral Amount; provided,
however, that such amount shall never be less than zero or greater than the
Original Class Principal Balance of the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
the Pool Principal Balance as of the related Determination Date minus the sum of
(i) the aggregate Class Principal Balance of the Senior Notes (after taking into
account any distributions made on such Distribution Date in reduction of the
Class Principal Balances of the Classes of Senior Notes) plus the Class
Principal Balance of the Class M-1 Notes (after taking into account any
distributions made on such Distribution Date in reduction of the Class Principal
Balance of the Class M-1 Notes) and (ii) the greater of (x) the sum of (1)
15.00% of the Pool Principal Balance as of the related Determination Date and
(2) the Overcollateralization Target Amount for such Distribution Date (without
giving effect to the proviso in the definition thereof) and (y) 0.50% of the
Maximum Collateral Amount; provided, however, that such amount shall never be
less than zero or greater than the Original Class Principal Balance of the Class
M-2 Notes.
Class Principal Balance: With respect to each Class and as of any date of
determination, the Original Class Principal Balance of such Class reduced by the
sum of (i) all amounts previously distributed in respect of principal of such
Class on all previous Distribution Dates and (ii) with respect to the Class M-1,
Class M-2, Class B-1 and Class B-2 Notes, all Allocable Loss Amounts applied in
reduction of principal of such Classes on all previous Distribution Dates.
Clean-up Call Date: The first Distribution Date on which the Pool Principal
Balance declines to 10% or less of the Maximum Collateral Amount.
Closing Date: October 30, 1997.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
Treasury Regulations promulgated thereunder.
Collection Account: The account designated as such, established and
maintained by the Servicer in accordance with Section 5.01 hereof.
Combination Loan: A loan, the proceeds of which were used by the Obligor in
combination to finance property improvements and for debt consolidation or other
purposes.
Combined Loan-to-Value Ratio: With respect to any Home Loan, the fraction,
expressed as a percentage, the numerator of which is the principal balance of
such Home Loan at origination plus, in the case of a junior lien Home Loan, the
aggregate outstanding principal balance of each related Superior Lien on the
date of origination of such Home Loan, and the denominator of which is the
stated value (as described in the underwriting criteria of the Transferor) of
the related Mortgaged Property at the time of origination of such Home Loan.
Credit Score: The credit evaluation scoring methodology developed by Fair,
▇▇▇▇▇ and Company.
Custodial Agreement: The custodial agreement dated as of October 1, 1997 by
and between the Issuer, the Depositor, DiTech, as the Transferor and the
Servicer, the Indenture Trustee and The Bank of New York, a New York banking
corporation, as the Custodian, providing for the retention of the Indenture
Trustee's Home Loan Files by the Custodian on behalf of the Indenture Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant to the
Custodial Agreement, which custodian shall not be affiliated with the Servicer,
the Transferor, any Subservicer or the Depositor. The Bank of New York, shall be
the initial Custodian pursuant to the terms of the Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to the Custodian,
calculated and payable monthly on each Distribution Date pursuant to Section
5.01(c)(i) hereof equal to the fee, if any, set forth in the Custodial
Agreement.
Custodian's Final Certification: As defined in Section 2.05(c).
Custodian's Initial Certification: As defined in Section 2.05(c).
Custodian's Updated Certification: As defined in Section 2.05(c).
Cut-Off Date: With respect to the Initial Loans, the close of business on
September 30, 1997, and, with respect to any Subsequent Loan, the date
designated as such in the related Subsequent Transfer Agreement.
DCR: Duff & ▇▇▇▇▇▇ Credit Rating Co.
Debt Consolidation Loan: A loan, the proceeds of which were primarily used
by the related Obligor for debt consolidation purposes or purposes other than to
finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any Home
Loan, including, without limitation, any Liquidated Home Loan with respect to
which any of the following has occurred as of the end of the preceding Due
Period: (a) foreclosure or similar proceedings have been commenced; (b) any
portion of a Monthly Payment becomes 180 days past due by the related Obligor;
or (c) the Servicer or any Subservicer has determined in good faith and in
accordance with customary servicing practices that such Home Loan is in default
or imminent default.
Defective Home Loan: As defined in Section 3.05 hereof.
Deleted Home Loan: A Home Loan replaced or to be replaced by one or more
than one Qualified Substitute Home Loan.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due thereon
is not made by the close of business on the day such Monthly Payment is
scheduled to be paid. A Home Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such Monthly Payment was
due or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was due on the 31st day of such
month), then on the last day of such immediately succeeding month. The
determination of whether a Home Loan is "60 days Delinquent," "90 days
Delinquent", etc. shall be done in like manner.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee or its nominee or custodian by physical delivery
to the Indenture Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC), transfer thereof
(i) by delivery of such certificated security endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined
in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such financial intermediary of
a confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of
the transferor and increasing the appropriate securities account of a
financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or
its nominee or custodian (all of the foregoing, "Physical Property")
and, in any event, any such Physical Property in registered form shall
be in the name of the Indenture Trustee or its nominee or custodian;
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Trust Account Property (as defined herein) to the Indenture Trustee or
its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
FNMA or FHLMC that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC: the
making by a Federal Reserve Bank of an appropriate entry crediting
such Trust Account property to an account of a financial intermediary
that is also a "participant" pursuant to applicable federal
regulations; the making by such financial intermediary of entries in
its books and records crediting such book-entry security held through
the Federal Reserve System pursuant to federal book-entry regulations
to the securities account of the Indenture Trustee or its nominee or
custodian and indicating that such custodian holds such Trust Account
Property solely as agent for the Indenture Trustee or its nominee or
custodian and the sending by such financial intermediary of
confirmation of the purchase by the Indenture Trustee or its nominee
or custodian of such book-entry security; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account Property to
the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof
including, without limitation, Article 8 of the UCC; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the
purchase by the Indenture Trustee or its nominee or custodian of such
uncertificated security, and the making by such financial intermediary
of entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or
custodian.
Denomination: With respect to a Note, the portion of the Original Class
Principal Balance represented by such Note as specified on the face thereof.
Depositor: PaineWebber Mortgage Acceptance Corporation IV, a Delaware
corporation, and any successor thereto.
Determination Date: With respect to any Distribution Date, the 8th calendar
day of the month in which such Distribution Date occurs or if such day is not a
Business Day, the immediately preceding Business Day.
Distribution Date: The 15th day of any month or if such 15th day is not a
Business Day, the first Business Day immediately following such day, commencing
in November 1997.
Distribution Statement: As defined in Section 6.01 hereof.
DiTech: DiTech Funding Corporation, a California corporation.
Due Date: The day of the month on which the Monthly Payment is due from the
Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Distribution Date,
the calendar month immediately preceding such Determination Date or Distribution
Date, as the case may be.
Eligible Account: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account the deposits in which are fully
insured by either the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC; (iii) a trust account (which shall be a "segregated trust
account") maintained with the corporate trust department of a federal or state
chartered depository institution or trust company with trust powers and acting
in its fiduciary capacity for the benefit of the Indenture Trustee and the
Issuer, which depository institution or trust company shall have capital and
surplus of not less than $50,000,000; or (iv) an account that will not cause any
Rating Agency to downgrade or withdraw its then-current rating(s) assigned to
the Notes, as evidenced in writing by such Rating Agency. (Each reference in
this definition of "Eligible Account" to the Rating Agency shall be construed as
a reference to Standard & Poor's, DCR and Fitch).
Eligible Servicer: A Person that (i) has demonstrated the ability
professionally and competently to service a portfolio of mortgage loans similar
to the Home Loans and (ii) has a net worth calculated in accordance with GAAP of
at least $500,000.
Event of Default: As described in Section 10.01 hereof.
Excess Spread: With respect to any Distribution Date, the excess of (a) the
Available Distribution Amount over (b) the Regular Distribution Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Fidelity Bond: As described in Section 4.03 hereof.
Fitch: Fitch Investors Service, L.P. or any successor thereto.
FNMA: The Federal National Mortgage Association and any successor thereto.
Foreclosed Loan: As of any date of determination, any Home Loan that has
been discharged as a result of (i) the completion of foreclosure or comparable
proceedings; (ii) the Owner Trustee's acceptance of the deed or other evidence
of title to the related Property in lieu of foreclosure or other comparable
proceeding; or (iii) the acquisition by the Owner Trustee of title to the
related Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that has
been acquired by the Servicer through foreclosure, deed in lieu of foreclosure
or similar proceedings in respect of the related Home Loan.
GAAP: Generally accepted accounting principles as in effect in the United
States.
Home Loan: Any Debt Consolidation Loan or Combination Loan that is included
in the Home Loan Pool. As applicable, a Home Loan shall be deemed to refer to
the related Debt Instrument, the Mortgage, if any, and any related Foreclosure
Property. The term "Home Loan" includes each Subsequent Loan.
Home Loan File: As to each Home Loan, the Indenture Trustee's Home Loan
File and the Servicer's Home Loan File.
Home Loan Interest Rate: The fixed annual rate of interest borne by a Debt
Instrument, as shown on the related Home Loan Schedule, as the same may be
modified by the Servicer in accordance with Section 4.01(c) or 4.10 hereof.
Home Loan Pool: The pool of Home Loans conveyed to the Issuer pursuant to
this Agreement on the Closing Date and Subsequent Transfer Dates, together with
the rights and obligations of a holder thereof, and the payments thereon and
proceeds therefrom received after the applicable Cut-Off Date, as identified on
the Home Loan Schedule annexed hereto as Exhibit A.
Home Loan Purchase Agreement: The home loan purchase agreement between the
Transferor and the Depositor, dated as of October 1, 1997.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit A
attached hereto, as amended or supplemented from time to time specifying, with
respect to each Home Loan, the following information: (i) the Transferor's Home
Loan number; (ii) the Obligor's name and the street address; (iii) the current
principal balance; (iv) the original principal amount with respect to any Home
Loan originated by the Transferor and the principal amount purchased by the
Transferor with respect to a Home Loan acquired by the Transferor subsequent to
its origination; (v) the combined loan-to-value ratio as of the date of the
origination of the related Home Loan; (vi) the paid through date; (vii) the Home
Loan Interest Rate; (viii) the final maturity date under the Debt Instrument;
(ix) the Monthly Payment; (x) the occupancy status of the Mortgaged Property, if
any; (xi) the lien priority of the Mortgage, if any; (xii) the original term of
the Debt Instrument; (xiii) the Credit Score, if applicable; and (xiv) the debt
to income ratio of the related Obligor.
Indenture: The Indenture, dated as of October 1, 1997, between the Issuer
and the Indenture Trustee.
Indenture Trustee: The Bank of New York, a New York banking corporation, as
Indenture Trustee under the Indenture and this Agreement acting on behalf of the
Noteholders, or any successor indenture trustee under the Indenture or this
Agreement.
Indenture Trustee Fee: As to any Distribution Date, the greater of (a)
one-twelfth of 0.0175% times the Pool Principal Balance as of the opening of
business on the first day of the calendar month preceding the calendar month of
such Distribution Date (or, with respect to the first Distribution Date, the
Original Pool Principal Balance) and (b) one-twelfth of $10,000.
Indenture Trustee's Home Loan File: As defined in Section 2.04(a) hereof.
Independent: When used with respect to any specified Person, such Person
(i) is in fact independent of DiTech, the Servicer, the Depositor or any of
their respective Affiliates, (ii) does not have any direct financial interest
in, or any material indirect financial interest in, any of DiTech, the Servicer,
the Depositor or any of their respective Affiliates and (iii) is not connected
with any of DiTech, the Servicer, the Depositor or any of their respective
Affiliates, as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions; provided, however, that a
Person shall not fail to be Independent of DiTech, the Servicer, the Depositor
or any of their respective Affiliates merely because such Person is the
beneficial owner of 1% or less of any class of securities issued by DiTech, the
Servicer, the Depositor or any of their respective Affiliates, as the case may
be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is Independent.
Initial Loan: Each Home Loan conveyed to the Issuer pursuant to this
Agreement on the Closing Date.
Insurance Policies: With respect to any Property, any related insurance
policy.
Insurance Proceeds: With respect to any Property, all amounts collected in
respect of Insurance Policies and not required to be applied to the restoration
of the related Property or paid to the related Obligor.
LIBOR: With respect to each Accrual Period (other than the initial Accrual
Period) and each Class of LIBOR Notes, the rate for United States dollar
deposits for one month that appears on the Telerate Screen Page 3750 as of 11:00
a.m., London time, on the related LIBOR Determination Date. If such rate does
not appear on such page (or such other page as may replace that page on that
service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Indenture Trustee), LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Indenture
Trustee and no Reference Bank Rate is available, LIBOR will be LIBOR applicable
to the preceding Accrual Period. LIBOR for the initial Accrual Period will be
5.65625%.
LIBOR Business Day: Any day on which banks are open for dealing in foreign
currency and exchange in London and New York City.
LIBOR Determination Date: With respect to each Accrual Period, the second
LIBOR Business Day before the first day of such Accrual Period, as determined by
the Indenture Trustee.
LIBOR Notes: The Class A-1 Notes.
Liquidated Home Loan: With respect to any date of determination, any
Foreclosure Property or any Home Loan in respect of which a Monthly Payment is
in excess of 30 days past due and as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to collect have been
recovered from or on account of such Home Loan or the related Foreclosure
Property; provided, however, that in any event such Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore be a Liquidated
Home Loan upon the earliest to occur of: (a) the liquidation of the related
Foreclosure Property, (b) the determination by the Servicer in accordance with
customary servicing practices that no further amounts are collectible from the
Home Loan and any related Mortgaged Property, or (c) the date on which any
portion of a Monthly Payment on any Home Loan is in excess of 180 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition, any
cash amounts received in connection with the management of the Mortgaged
Properties from Defaulted Home Loans and any other amounts required to be
deposited in the Collection Account pursuant to Section 5.01(b) hereof, in each
case other than Insurance Proceeds and Released Mortgaged Property Proceeds.
Loss Reimbursement Deficiency: With respect to any Distribution Date and
the Class M-1 Notes, Class M-2 Notes, Class B-1 Notes or the Class B-2 Notes,
the amount of Allocable Loss Amounts applied to the reduction of the Class
Principal Balance of such Class and not reimbursed pursuant to Section 5.01
hereof as of such Distribution Date plus interest accrued on the unreimbursed
portion thereof at the applicable Note Interest Rate through the end of the Due
Period immediately preceding such Distribution Date; provided, however, that no
interest shall accrue on any amount of such accrued and unpaid interest.
Majority Noteholders: Until such time as the sum of the Class Principal
Balances of all Classes of Notes has been reduced to zero, the holder or holders
of in excess of 50% of the Class Principal Balance of all Classes of Notes.
Majority Residual Interestholders: The holder or holders of in excess of
50% of the Residual Interest.
Mandatory Redemption Date: The Distribution Date immediately following the
end of the Pre-Funding Period.
Maturity Date means, with respect to each Class of Notes, Distribution Date
in the applicable month set forth below:
Class Maturity Date
----- -------------
A-1 April 2009
A-2 April 2013
A-3 August 2018
A-4 January 2024
M-1 January 2024
M-2 January 2024
B-1 January 2024
B-2 January 2024
Maximum Collateral Amount: The sum of the Original Pool Balance and the
Original Pre-Funded Amount.
Mezzanine Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess, if any, of (A) the Mezzanine Noteholders' Monthly
Interest Distribution Amount for the preceding Distribution Date plus any
outstanding Mezzanine Noteholders' Interest Carry-Forward Amount for preceding
Distribution Dates, over (B) the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution Date
net of the Senior Noteholders' Interest Distribution Amount for such preceding
Distribution Date; it being understood that the interest of the Class M-1
Noteholders in the Mezzanine Noteholders' Interest Carry-Forward Amount is
senior to that of the Class M-2 Noteholders.
Mezzanine Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Mezzanine Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Mezzanine Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Mezzanine Noteholders' Monthly Interest Distribution Amount: With respect
to each Distribution Date and the Classes of Mezzanine Notes, the interest
accrued at the respective Note Interest Rates on the respective Class Principal
Balances of such Classes immediately preceding such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date) after giving
effect to all payments of principal to the holders of such Classes of Notes on
or prior to such preceding Distribution Date.
Mezzanine Notes: The Class M-1 Notes and Class M-2 Notes.
Monthly Cut-Off Date: The last day of any calendar month and, with respect
to any Distribution Date, the last day of the calendar month immediately
preceding such Distribution Date.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by an Obligor on the related Home Loan, as set forth in the
related Debt Instrument.
Mortgage: The mortgage, deed of trust or other security instrument creating
a lien in accordance with applicable law on a Mortgaged Property to secure the
Debt Instrument which evidences a secured Home Loan.
Mortgaged Property: The real property encumbered by the Mortgage which
secures the Debt Instrument evidencing a secured Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
securing a Home Loan is located as set forth in the Home Loan Schedule.
Multiplier: The Multiplier will initially equal 1.50 and may from time to
time be permanently modified to a lesser amount (including zero), provided that
the Issuer shall have delivered to the Indenture Trustee written confirmation
from each Rating Agency that the rating assigned by it to each Class of Notes
which it originally rated will not be downgraded or withdrawal as a result of
such reduction.
Net Delinquency Calculation Amount: With respect to any Distribution Date,
the excess, if any, of (x) the product of the Multiplier and the Six-Month
Rolling Delinquency Average over (y) the aggregate of the amounts of Excess
Spread for the three preceding Distribution Dates.
Net Liquidation Proceeds: With respect to any Distribution Date,
Liquidation Proceeds received during the related Due Period, net of any
reimbursements to the Servicer made from such amounts for any unreimbursed
Servicing Compensation and Servicing Advances (including Nonrecoverable
Servicing Advances) made and any other fees and expenses paid in connection with
the foreclosure, conservation and liquidation of the related Liquidated Home
Loans or Foreclosure Properties pursuant to Section 4.11 hereof.
Net Loan Losses: With respect to any Defaulted Home Loan that is subject to
a modification pursuant to Section 4.01(c) hereof, an amount equal to the
portion of the Principal Balance, if any, released in connection with such
modification.
Net Loan Rate: With respect to each Home Loan, the related Home Loan
Interest Rate, less the rate at which the Servicing Fee is calculated.
Net Weighted Average Rate: With respect to any Accrual Period, a rate per
annum equal to the weighted average (by principal balance) of the Home Loan
Interest Rates as of the first day of the related Due Period less 0.7675%.
Nonrecoverable Servicing Advance: With respect to any Foreclosure Property,
(a) any Servicing Advance previously made and not reimbursed from late
collections, Liquidation Proceeds, Insurance Proceeds or the Released Mortgaged
Property Proceeds or (b) a Servicing Advance proposed to be made in respect of a
Home Loan or Foreclosure Property either of which, in the good faith business
judgment of the Servicer, as evidenced by an Officer's Certificate delivered to
the Indenture Trustee, would not be ultimately recoverable.
Note: Any of the Senior Notes, the Mezzanine Notes or the Subordinate
Notes.
Note Distribution Account: The account established and maintained pursuant
to Section 5.01(a)(2) hereof.
Noteholders' Interest Distribution Amount: The sum of the Senior
Noteholders' Interest Distribution Amount, the Mezzanine Noteholders' Interest
Distribution Amount and the Subordinate Noteholders' Interest Distribution
Amount.
Note Interest Rate: With respect to each Class of Notes, the annual rate of
interest payable to the holders of such Class of Notes, as specified below:
Class Note Interest Rate
----- ------------------
Class A-1 (1)
Class A-2 6.59%
Class A-3 6.71%
Class A-4 7.36% through the last day of
the month immediately
preceding the Clean-up Call
Date and 7.86% thereafter;
Class M-1 7.25%
Class M-2 7.35%
Class B-1 7.69%
Class B-2 8.85%
(1) Interest will accrue on the Class A-1 Notes during each Accrual
Period at a per annum interest rate equal to LIBOR for the
related LIBOR Determination Date plus 0.10%, subject to a maximum
rate equal to the Net Weighted Average Rate. The Note Interest
Rate applicable to the Class A-1 Notes for the initial Accrual
Period will be 5.75625% per annum.
Note Redemption Amount: As of any date of determination, an amount without
duplication equal to the sum of (i) the then outstanding Class Principal
Balances of the Classes of Notes plus all accrued and unpaid interest thereon,
(ii) any Trust Fees and Expenses due and unpaid on such date and (iii) any
Servicing Advance Reimbursement Amount.
Noteholder: A holder of a Note.
Obligor: Each obligor on a Debt Instrument.
Officer's Certificate: A certificate delivered to the Indenture Trustee or
the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Depositor, the Servicer or the Transferor, in each case, as
required by this Agreement.
Opinion of Counsel: A written opinion of counsel (who is acceptable to the
Rating Agencies), who may be employed by DiTech, the Servicer, the Depositor or
any of their respective Affiliates.
Original Class Principal Balance: With respect to the Classes of Notes, as
follows: Class A-1: $24,636,000; Class A-2: $22,945,000; Class A-3: $24,897,000;
Class A-4: $13,622,000; Class M-1: $17,700,000; Class M-2: $7,200,000; Class
B-1: $6,300,000; and Class B-2: $2,700,000.
Original Pool Principal Balance: $89,074,845, which is the Pool Principal
Balance as of the Cut-Off Date.
Original Pre-Funding Amount: $30,925,155.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Distribution Date, the
amount equal to the excess of (A) the sum of the Pool Principal Balance and the
Pre-Funded Amount, each as of the end of the preceding Due Period, over (B) the
aggregate of the Class Principal Balances of the Notes (after giving effect to
the distributions made on such date pursuant to Section 5.01(d)) hereof.
Overcollateralization Deficiency Amount: With respect to any Distribution
Date, the excess, if any, of the Overcollateralization Target Amount over the
Overcollateralization Amount (after giving effect to all prior distributions on
the Classes of Notes and to any prior distribution on the Residual Interest on
such Distribution Date pursuant to Section 5.01(d) hereof).
Overcollateralization Target Amount: (I) With respect to any Distribution
Date occurring prior to the Stepdown Date, an amount equal to the greater of (x)
4.00% of the Maximum Collateral Amount and (y) the Net Delinquency Calculation
Amount; and (II) with respect to any other Distribution Date, an amount equal to
the greater of (x) 8.00% of the Pool Principal Balance as of the end of the
related Due Period and (y) the Net Delinquency Calculation Amount; provided,
however, that the Overcollateralization Target Amount shall in no event be less
than 0.50% of the Maximum Collateral Amount or greater than the sum of the
aggregate Class Principal Balances of all Classes of Notes.
Owner Trustee: Bankers Trust (Delaware), as owner trustee under the Trust
Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $2,500 which shall be paid annually in
advance on the Closing Date and each anniversary thereof to the Owner Trustee in
October each year during the term of this Agreement commencing in October 1997.
Ownership Interest: As to any Note, any ownership or security interest in
such Note, including any interest in such Note as the holder thereof and any
other interest therein, whether direct or indirect, legal or beneficial, as
owner or as pledgee.
Percentage Interest: As defined in the Trust Agreement.
Permitted Investments: Each of the following:
(1) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(2) a repurchase agreement that satisfies the following criteria:
(A) it must be between the Indenture Trustee and either (x) primary
dealers on the Federal Reserve reporting dealer list which are rated
in one of the two highest categories for long-term unsecured debt
obligations by each Rating Agency or (y) banks rated in the highest
categories for long-term unsecured debt obligations by each Rating
Agency; and (B) it must be in writing and include the following terms:
(a) the securities acceptable for transfer are either (i) direct U.S.
government obligations or (ii) obligations of a federal agency that
are backed by the full faith and credit of the U.S. government or by
FNMA or FHLMC; (b) a term no greater than 60 days for any repurchase
transaction; (c) the collateral must be delivered to the Indenture
Trustee or a third party custodian acting as agent for the Indenture
Trustee by appropriate book entries and confirmation statements, and
must have been delivered before or simultaneously with payment (i.e.,
perfection by possession of certificated securities); and (d) the
securities sold thereunder must be valued weekly, marked-to-market at
current market price plus accrued interest and the value of the
collateral must be equal to at least 104% of the amount of cash
transferred by the Indenture Trustee under the repurchase agreement
and, if the value of the securities held as collateral declines to an
amount below 104% of the cash transferred by the Indenture Trustee
plus accrued interest (i.e., a margin call), then additional cash
and/or acceptable securities must be transferred to the Indenture
Trustee to satisfy such margin call; provided, however, that if the
securities used as collateral are obligations of FNMA or FHLMC, then
the value of the securities held as collateral must equal at least
105% of the cash transferred by the Indenture Trustee under such
repurchase agreement;
(3) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust
company incorporated under the laws of the United States or any state,
including the Indenture Trustee; provided, however, that the debt
obligations of such depository institution or trust company at the
date of the acquisition thereof have been rated by each Rating Agency
in the highest long-term rating categories;
(4) deposits, including deposits with the Indenture Trustee,
which are fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
Affiliates of the Indenture Trustee, which at the date of acquisition
is rated by each Rating Agency in its highest short-term rating
category and which has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category
(or those investments specified in (3) above with depository
institutions which have debt obligations rated by each Rating Agency
in the highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term
rating category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at
the time at which the investment is made;
provided, however, that no instrument described in the foregoing subparagraphs
shall evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to each of Standard & Poor's, DCR and Fitch.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period; provided, however, that the Pool Principal Balance on any
Distribution Date on which the Termination Price is to be paid to Noteholders
will be deemed to have been equal to zero as of such date.
Pre-Funded Percentage: With respect to any Class of Notes and a
Distribution Date, the percentage obtained from the fraction, the numerator of
which is the Class Principal Balance of such Class of Notes on the Closing Date
and the denominator of which is the Maximum Collateral Amount.
Pre-Funding Account: The account created and maintained by the Indenture
Trustee pursuant to Section 5.05 hereof.
Pre-Funding Amount: With respect to any date, the amount on deposit in the
Pre-Funding Account (net of any Pre-Funding Earnings).
Pre-Funding Earnings: With respect to the Distribution Date in December
1997, the actual investment earnings earned on amounts on deposit in the
Pre-Funding Account during the period from October 30, 1997 through and
including November 30, 1997. With respect to the Distribution Date in January
1998, the actual investment earnings earned on amounts on deposit in the
Pre-Funding Account from December 1, 1997 through and including December 31,
1997. With respect to the Distribution Date in February 1998, the actual
investment earnings earned on amounts on deposit in the Pre-Funding Account from
January 1, 1997 through and including January 31, 1997
Pre-Funding Period: The period commencing on the Closing Date and ending on
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any Pre-Funding Earnings) is less than
$50,000, (ii) the date on which any Event of Default relating to the Servicer
occurs and (iii) January 30, 1998.
Pre-Funding Distribution Trigger: With respect to the Distribution Date
following the Due Period in which the termination of the Pre-Funding Period
occurs, a Pre-Funding Distribution Trigger will be deemed to have occurred if,
at such time, the Pre-Funded Amount is greater than or equal to $50,000.
Principal Balance: With respect to any Home Loan or related Foreclosure
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance of
the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as of
the last day of the preceding Due Period (after giving effect to all payments
received thereon and the allocation of any Net Loan Losses with respect thereto
for a Defaulted Home Loan which relates to such Due Period), without giving
effect to amounts received in respect of such Home Loan or related Foreclosure
Property after such Due Period; provided, however, that any Liquidated Home Loan
shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due Period, any
principal amount received on a Home Loan in excess of the principal of the
Monthly Payment due in such Due Period.
Private Placement Memorandum: The Private Placement Memorandum to be
prepared by the Depositor in connection with the Class B-1 and Class B-2 Notes.
Property: The property (real, personal or mixed) encumbered by the Mortgage
which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus as supplemented by the
Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement to be prepared by the
Depositor in connection with the issuance and sale of the Class ▇-▇, ▇▇▇▇▇ ▇-▇,
Class A-3, Class A-4, Class M-1 and Class M-2 Notes.
Purchase Price: With respect to a Defective Home Loan, the Principal
Balance thereof as of the date of purchase, plus all accrued and unpaid interest
on such Defective Home Loan to and including the date of repurchase computed at
the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Defective Home Loan
(after deducting therefrom any amounts received in respect of such repurchased
Defective Home Loan and being held in the Collection Account for future
distribution to the extent such amounts represent recoveries of principal not
yet applied to reduce the related Principal Balance or interest (net of the
Servicing Fee) for the period from and after the date of repurchase).
Qualified Substitute Home Loan: A home loan or home loans substituted for a
Deleted Home Loan pursuant to Section 2.05 or Section 3.05 hereof, which (i) has
or have an interest rate or rates of not less than, and not more than two
percentage points greater than, the Home Loan Interest Rate for the Deleted Home
Loan, (ii) matures or mature not more than one year than, and not more than one
year earlier, than the maturity date of Deleted Home Loan, (iii) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance or Balances of the Deleted Home Loan or Loans as of such date,
(iv) has or have a lien priority equal or superior to that of the Deleted Home
Loan or Loans, (v) has or have a borrower or borrowers with a comparable credit
grade classification to the credit grade classification of the Obligor on the
Deleted Home Loan or Loans, including a Credit Score equal to or greater than
such Deleted Home Loan, (vi) has or have a borrower or borrowers with a
debt-to-income ratio no higher than the debt-to-income ratio of the Obligor with
respect to the Deleted Loan, and (vii) complies or comply as of the date of
substitution with each representation and warranty set forth in Section 3.04
hereof and is or are not more than 30 days delinquent as of the date of
substitution for such Deleted Home Loan or Loans. For purposes of determining
whether multiple mortgage loans proposed to be substituted for one or more
Deleted Home Loans pursuant to Section 2.05 or Section 3.05 hereof are in fact
"Qualified Substitute Home Loans" as provided above, the criteria specified in
clauses (i) and (iii) above may be considered on an aggregate or weighted
average basis, rather than on a loan-by-loan basis (i.e., so long as the
weighted average Home Loan Interest Rate of any loans proposed to be substituted
is not less than two percentage points less than and not more than two
percentage points greater than the Home Loan Interest Rate for the designated
Deleted Home Loan or Loans, the requirements of clause (i) above would be deemed
satisfied).
Rating Agencies: Standard & Poor's, DCR and Fitch. If no such organization
or successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable person designated
by the Servicer, notice of which designation shall have been given to the
Indenture Trustee and the Issuer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Distribution Date, the close of business
on the last Business Day of the month immediately preceding the month in which
such Distribution Date occurs.
Reference Bank Rate: With respect to any Accrual Period, the arithmetic
mean (rounded upwards, if necessary, to the nearest one sixteenth of a percent)
of the offered rates for United States dollar deposits for one month that are
offered by the Reference Banks as of 11:00 a.m., New York City time, on the
second LIBOR Business Day prior to the first day of such Accrual Period to prime
banks in the London interbank market for a period of one month in amounts
approximately equal to the outstanding Class Principal Balance of the Class A-1
Notes, provided that at least two such Reference Banks provide such rate. If
fewer than two offered rates appear, the Reference Bank Rate will be arithmetic
mean of the rates quoted by one or more major banks in New York City, selected
by the Indenture Trustee, as of 11:00 a.m., New York City time, on such date for
loans in U.S. Dollars to leading European Banks for a period of one month in
amounts approximately equal to the outstanding Class Principal Balance of the
Class A-1 Notes. If no such quotation can be obtained, the Reference Bank Rate
will be the Reference Bank Rate applicable to the preceding Accrual Period.
Reference Banks: Three money center banks selected by the Indenture
Trustee.
Regular Distribution Amount: With respect to any Distribution Date, the
lesser of (a) the Available Distribution Amount and (b) the sum of (i) the
Noteholders' Interest Distribution Amount, (ii) the Regular Principal
Distribution Amount and (iii) if such Distribution Date relates to the Due
Period in which the Pre-Funding Period shall have ended and at the termination
of such Pre-Funding Period a Pre-Funding Distribution Trigger shall have
occurred, the amount on deposit in the Pre-Funding Account on such date.
Regular Principal Distribution Amount: On each Distribution Date, an amount
equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes
of Notes immediately prior to such Distribution Date; and
(B) the sum of (i) each scheduled payment of principal collected
by the Servicer in the related Due Period, (ii) all full and partial
principal prepayments applied by the Servicer during such related Due
Period, (iii) the principal portion of all Net Liquidation Proceeds,
Insurance Proceeds and Released Mortgaged Property Proceeds received
during the related Due Period, (iv) that portion of the Purchase Price
of any repurchased Home Loan which represents principal received prior
to the related Determination Date, (v) the principal portion of any
Substitution Adjustments required to be deposited in the Collection
Account as of the related Determination Date, (vi) if such
Distribution Date relates to the Due Period in which the Pre-Funding
Period shall have ended and at the termination of such Pre-Funding
Period a Pre-Funding Distribution Trigger shall have occurred, the
amount on deposit in the Pre-Funding Account on such date, and (vii)
on the Distribution Date on which the Trust is to be terminated
pursuant to Section 11.02 hereof, the Termination Price (net of any
accrued and unpaid interest, Trust Fees and Expenses due and unpaid on
such date and Servicing Advance Reimbursement Amount).
Released Mortgaged Property Proceeds: With respect to any secured Home
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which proceeds in either case are not released to the Obligor in accordance with
applicable law, Accepted Servicing Procedures and this Agreement.
Residual Interest: The interest which represents the right to the amount
remaining, if any, after all prior distributions have been made under this
Agreement, the Indenture and the Trust Agreement on each Distribution Date and
certain other rights to receive amounts hereunder and under the Trust Agreement.
Residual Interest Certificate: The meaning assigned thereto in the Trust
Agreement.
Responsible Officer: When used with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary, Assistant Secretary or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer of the
Owner Trustee or any agent acting under a power of attorney with direct
responsibility for the administration of the Trust Agreement and this Agreement
on behalf of the Issuer. When used with respect to the Depositor, the
Transferor, the Servicer or the Custodian, the President or any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.
Securities: The Notes or Residual Interest Certificates.
Securityholder: Any Noteholder or Certificateholder.
Senior Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess, if any, of (A) the Senior Noteholders' Monthly
Interest Distribution Amount for the preceding Distribution Date plus any
outstanding Senior Noteholders' Interest Carry-Forward Amount for preceding
Distribution Dates, over (B) the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution Date.
Senior Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Senior Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Senior Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Senior Noteholders' Monthly Interest Distribution Amount: With respect to
each Distribution Date and the Classes of Senior Notes, the interest accrued at
the respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Distribution Date (or, in the case of
the first Distribution Date, on the Closing Date) after giving effect to all
payments of principal to the holders of such Classes of Notes on or prior to
such preceding Distribution Date.
Senior Notes: The Class A-1, Class A-2, Class A-3 and Class A-4 Notes.
Senior Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
an amount equal to the Pool Principal Balance as of the related Determination
Date minus the greater of (a) the sum of (1) 56.50% of the Pool Principal
Balance as of the related Determination Date and (2) the Overcollateralization
Target Amount for such Distribution Date (without giving effect to the proviso
in the definition thereof) and (b) 0.50% of the Maximum Collateral Amount,
provided; however, that such amount shall never be less than zero or greater
than the sum of the Original Class Principal Balances of the Notes.
Series or Series 1997-1: DiTech Home Loan Asset Backed Notes, Series
1997-1.
Servicer: DiTech, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.
Servicer Termination Event: The termination of the Servicer pursuant to
Section 10.01(b) hereof.
Servicer's Fiscal Year: January 1st through December 31st of each year.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
customarily included in the servicer's loan file for the related type of Home
Loan as specifically set forth in Section 2.04(b).
Servicer's Monthly Remittance Report: A report prepared and computed by the
Servicer in substantially the form of Exhibit B attached hereto.
Servicing Advance Reimbursement Amount: With respect to any date of
determination, the amount of any Servicing Advances that have not been
reimbursed as of such date, including Nonrecoverable Servicing Advances.
Servicing Advances: Subject to Section 4.01(b) hereof, all reasonable,
customary and necessary "out of pocket" costs and expenses advanced or paid by
the Servicer with respect to the Home Loans in accordance with the performance
by the Servicer of its servicing obligations hereunder, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of a Mortgaged Property, including without limitation advances in
respect of real estate taxes and assessments, (ii) any collection, enforcement
or judicial proceedings, including without limitation foreclosures, collections
and liquidations pursuant to Section 4.10 hereof, (iii) the conservation,
management and sale or other disposition of a Foreclosure Property pursuant to
Section 4.11 hereof, (iv) the preservation of the security for a Home Loan if
any lienholder under a Superior Lien has accelerated or intends to accelerate
the obligations secured by such Superior Lien pursuant to Section 4.05 hereof;
provided, however, that such Servicing Advances are reimbursable to the Servicer
out of Net Liquidation Proceeds.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 7.03 hereof.
Servicing Fee: As to each Home Loan (including any Home Loan that has been
foreclosed and has become a Foreclosure Property, but excluding any Liquidated
Home Loan), the fee payable monthly to the Servicer on each Distribution Date,
which shall be the product of 0.75% (75 basis points) and the Principal Balance
of such Home Loan as of the beginning of the immediately preceding Due Period,
divided by 12. The Servicing Fee includes any servicing fees owed or payable to
any Subservicer, which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved in,
or responsible for, the administration and servicing of the Home Loans whose
name and specimen signature appears on a list of servicing officers annexed to
an Officer's Certificate furnished by the Servicer or the Subservicer,
respectively, to the Issuer and the Indenture Trustee, on behalf of the
Noteholders, as such list may from time to time be amended.
Servicing Plan: The meaning assigned thereto in Section 10.01(c) herein.
Servicing Plan Trigger: The meaning assigned thereto in Section 10.01(c)
herein.
Six-Month Rolling Delinquency Average: With respect to any Distribution
Date, the average of the applicable 60-Day Delinquency Amounts for each of the
six immediately preceding Due Periods, where the 60-Day Delinquency Amount for
any Due Period is the aggregate of the Principal Balances of all Home Loans that
are 60 or more days delinquent, in foreclosure or Foreclosure Property as of the
end of such Due Period.
Standard & Poor's: Standard & Poor's, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, or any successor thereto.
Stepdown Date: The first Distribution Date occurring after October 2000,
upon which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.00% of
Maximum Collateral Amount;
(2) the Net Delinquency Calculation Amount is less than 4.00% of
the Maximum Collateral Amount; and
(3) the aggregate of the Class Principal Balances of the Senior
Notes will be able to be reduced on such Distribution Date (such
determination to be made by the Indenture Trustee prior to giving
effect to distribution of principal on such Distribution Date) to the
excess of:
(I) the Pool Principal Balance as of the related
Determination Date over
(II) the greater of
(a) the sum of
(1) 56.50% of the Pool Principal Balance as of the related
Determination Date and
(2) the Overcollateralization Target Amount for such
Distribution Date (such amount to be calculated (x) without
giving effect to the proviso in the definition thereof and
(y) pursuant only to clause (II) of the definition thereof);
and
(b) 0.50% of the Maximum Collateral Amount.
Subordinate Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess, if any, of (A) the Subordinate Noteholders'
Monthly Interest Distribution Amount for the preceding Distribution Date plus
any outstanding Subordinate Noteholders' Interest Carry-Forward Amount for
preceding Distribution Dates, over (B) the amount in respect of interest that is
actually deposited in the Note Distribution Account on such preceding
Distribution Date net of the Senior Noteholders' Interest Distribution Amount
and the Mezzanine Noteholders' Interest Distribution Amount for such preceding
Distribution Date; it being understood that the interest of the Class B-1
Noteholders in the Subordinate Noteholders' Interest Carry-Forward Amount is
senior to that of the Class B-2 Noteholders.
Subordinate Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Subordinate Noteholders' Monthly Interest
Distribution Amount for such Distribution Date and the Subordinate Noteholders'
Interest Carry-Forward Amount for such Distribution Date.
Subordinate Noteholders' Monthly Interest Distribution Amount: With respect
to each Distribution Date and the Classes of Subordinate Notes, the interest
accrued at the respective Note Interest Rates on the respective Class Principal
Balances of such Classes immediately preceding such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date) after giving
effect to all payments of principal to the holders of such Classes of Notes on
or prior to such preceding Distribution Date.
Subordinate Notes: The Class B-1 Notes and Class B-2 Notes.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent Transfer
Date and any Subsequent Loan transferred to the Trust during any month which
Subsequent Loan does not have a Monthly Payment due until the second Due Period
following such month, an amount equal to the product of (a) the Loan Balance of
such Subsequent Loan on the related Cut-Off Date and (b) one-twelfth of the Net
Loan Rate on such Subsequent Loan.
Subsequent Loan: Each Home Loan sold to the Trust for inclusion pursuant to
Section 2.06 hereof and the related Subsequent Transfer Agreement, which Home
Loan shall be listed on the related Subsequent Loan Schedule.
Subsequent Loan Schedule: The schedule of Subsequent Loans transferred to
the Trust pursuant to the related Subsequent Transfer Agreement and attached
thereto.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement executed
by the Owner Trustee, Indenture Trustee and the Transferor substantially in the
form of Exhibit C attached hereto by which Subsequent Loans are sold and
assigned to the Trust.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement; provided, however, that in no event shall there be more than three
(3) such Subsequent Transfer Agreements.
Subservicer: Any Person with which the Servicer has entered into a
Subservicing Agreement and which is an Eligible Servicer and satisfies any
requirements set forth in Section 4.06(a) hereof in respect of the
qualifications of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant to a
Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.06(a) hereof, copies of which shall be made
available, along with any modifications thereto, to the Issuer and the Indenture
Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Sections 2.05 or Section 3.05 hereof, the amount, if any determined
by the Servicer, by which (a) the sum of the aggregate principal balance (after
application of principal payments received on or before the date of
substitution) of any Qualified Substitute Home Loans as of the date of
substitution, plus any accrued and unpaid interest thereon to the date of
substitution, is less than (b) the sum of the aggregate of the Principal
Balances, together with accrued and unpaid interest thereon to the date of
substitution, of the related Deleted Home Loans.
Superior Lien: With respect to any Home Loan which is secured by a lien
other than a first priority lien, the mortgage loan(s) having a superior
priority lien on the related Mortgaged Property .
Termination Price: As of any date of determination, an amount without
duplication equal to the greater of (A) the Note Redemption Amount and (B) the
sum of (i) the Principal Balance of each Home Loan included in the Trust as of
the applicable Monthly Cut-Off Date; (ii) all unpaid interest accrued on the
Principal Balance of each such Home Loan at the related Net Loan Rate to such
Monthly Cut-Off Date; and (iii) the aggregate fair market value of each
Foreclosure Property included in the Trust on such Monthly Cut-Off Date, as
determined by an Independent appraiser acceptable to the Indenture Trustee as of
a date not more than 30 days prior to such Monthly Cut-Off Date.
Transferor: DiTech, in its capacity as the transferor hereunder.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in the Trust Accounts and all proceeds of the foregoing.
Trust Accounts: The Note Distribution Account, the Certificate Distribution
Account, the Collection Account, the Pre-Funding Account and the Capitalized
Interest Account.
Trust Agreement: The Trust Agreement dated as of October 1, 1997, among the
Depositor, the Company, the Paying Agent and the Owner Trustee.
Trust Estate: The assets subject to this Agreement, the Trust Agreement and
the Indenture and assigned to the Trust, which assets consist of: (i) such Home
Loans as from time to time are subject to this Agreement as listed in the Home
Loan Schedule, as the same may be amended or supplemented from time to time
including by the addition of Subsequent Loans, the removal of Deleted Home Loans
and the addition of Qualified Substitute Home Loans, together with the
Servicer's Home Loan Files and the Indenture Trustee's Home Loan Files relating
thereto and all proceeds thereof, (ii) the Mortgages and security interests in
Mortgaged Properties, (iii) all payments in respect of interest due with respect
to the Home Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date (iv) such assets as from time to time
are identified as Foreclosure Property, (v) such assets and funds as are from
time to time are deposited in the Collection Account, the Note Distribution
Account and the Certificate Distribution Account, including amounts on deposit
in such accounts which are invested in Permitted Investments, (vi) the Issuer's
rights under all insurance policies with respect to the Home Loans and any
Insurance Proceeds, (vii) Net Liquidation Proceeds and Released Mortgaged
Property Proceeds, and (viii) all right, title and interest of the Depositor in
and to the obligations of the Transferor under the Home Loan Purchase Agreement
pursuant to which the Depositor acquired the Home Loans from the Transferor, and
all proceeds of any of the foregoing.
Trust Fees and Expenses: As of each Distribution Date, an amount equal to
the Servicing Compensation, the Indenture Trustee Fee, the Owner Trustee Fee and
the Custodian Fee, if any.
UCC: The Uniform Commercial Code as in effect in the State of New York.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
GAAP. To the extent that the definitions of accounting terms in this Agreement
or in any such certificate or other document are inconsistent with the meanings
of such terms under GAAP, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans.
(a) As of the Closing Date, in consideration of the Issuer's delivery of
the Notes and the Residual Interest Certificates to the Depositor or its
designee, upon the order of the Depositor, the Depositor, as of the Closing Date
and concurrently with the execution and delivery hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
but subject to the other terms and provisions of this Agreement, all of the
right, title and interest of the Depositor in and to the Trust Estate. The
foregoing sale, transfer, assignment, set over and conveyance does not, and is
not intended to, result in a creation or an assumption by the Issuer of any
obligation of the Depositor, the Transferor or any other person in connection
with the Trust Estate or under any agreement or instrument relating thereto
except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to it of
the Trust Estate, including all right, title and interest of the Depositor in
and to the Trust Estate, receipt of which is hereby acknowledged by the Issuer.
Concurrently with such delivery and in exchange therefor, the Issuer has pledged
the Trust Estate to the Indenture Trustee, and the Indenture Trustee, pursuant
to the written instructions of the Issuer, has executed and caused the Notes to
be authenticated and delivered to the Depositor or its designee, upon the order
of the Issuer. In addition, concurrently with such delivery and in exchange
therefor, the Owner Trustee, pursuant to the instructions of the Depositor, has
executed (not in its individual capacity, but solely as Owner Trustee on behalf
of the Issuer) and caused the Residual Interest Certificates to be authenticated
and delivered to the Depositor or its designee, upon the order of the Depositor.
Section 2.02 Ownership and Possession of Home Loan Files.
Upon the issuance of the Notes, with respect to the Home Loans, the
ownership of each Debt Instrument, the related Mortgage and the contents of the
related Servicer's Home Loan File and the Indenture Trustee's Home Loan File
shall be vested in the Trust and pledged to the Indenture Trustee for the
benefit of the Securityholders, although possession of the Servicer's Home Loan
Files (other than items required to be maintained in the Indenture Trustee's
Home Loan Files) on behalf of and for the benefit of the Securityholders shall
remain with the Servicer, and the Custodian shall take possession of the
Indenture Trustee's Home Loan Files as contemplated in Section 2.05 hereof.
Section 2.03 Books and Records.
The sale of each Home Loan shall be reflected on the balance sheets and
other financial statements of the Depositor or the Transferor, as the case may
be, as a sale of assets by the Depositor or the Transferor, as the case may be,
under GAAP. Each of the Servicer and the Custodian shall be responsible for
maintaining, and shall maintain, a complete set of books and records for each
Home Loan which shall be clearly marked to reflect the ownership of each Home
Loan by the Owner Trustee and pledged to the Indenture Trustee for the benefit
of the Securityholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Home
Loans and the other property specified in Section 2.01(a) hereof from the
Depositor to the Trust and such property shall not be property of the Depositor.
If the assignment and transfer of the Home Loans and the other property
specified in Section 2.01(a) hereof to the Trust pursuant to this Agreement or
the conveyance of the Home Loans or any of such other property to the Trust is
held or deemed not to be a sale or is held or deemed to be a pledge of security
for a loan, the Depositor intends that the rights and obligations of the parties
shall be established pursuant to the terms of this Agreement and that, in such
event, (i) the Depositor shall be deemed to have granted and does hereby grant
to the Trust a first priority security interest in the entire right, title and
interest of the Depositor in and to the Home Loans and all other property
conveyed to the Trust pursuant to Section 2.01 hereof and all proceeds thereof
and (ii) this Agreement shall constitute a security agreement under applicable
law. Within ten (10) days of the Closing Date, the Depositor shall cause to be
filed UCC-1 financing statements naming the Trust as "secured parties" and
describing the Home Loans being sold by the Depositor to the Trust with the
office of the Secretary of State of the state in which the Depositor is located.
Section 2.04 Delivery of Home Loan Documents.
(a) With respect to each Home Loan, the Transferor and/or the Depositor, as
applicable, shall, on the Closing Date, deliver or caused to be delivered to the
Custodian, as the designated agent of the Indenture Trustee, each of the
following documents (collectively, the "Indenture Trustee's Home Loan Files"):
(i) The original Debt Instrument, endorsed by the Transferor in
blank or in the following form: "Pay to the order of The Bank of New
York, as Indenture Trustee under the Sale and Servicing Agreement,
dated as of October 1, 1997, DiTech Home Loan Owner Trust 1997-1,
without recourse", with all prior and intervening endorsements showing
a complete chain of endorsement from origination of the Home Loan to
the Transferor;
(ii) The original Mortgage with evidence of recording thereon
(or, if the original Mortgage has not been returned from the
applicable public recording office or is not otherwise available, a
copy of the Mortgage certified by a Responsible Officer of the
Transferor or by the closing attorney or by an officer of the title
insurer or agent of the title insurer which issued the related title
insurance policy, if any, or commitment therefor to be a true and
complete copy of the original Mortgage submitted for recording) and,
if the Mortgage was executed pursuant to a power of attorney, the
original power of attorney with evidence of recording thereon (or, if
the original power of attorney has not been returned from the
applicable public recording office or is not otherwise available, a
copy of the power of attorney certified by a Responsible Officer of
the Transferor or by the closing attorney or by an officer of the
title insurer or agent of the title insurer which issued the related
title insurance policy, if any, or commitment therefor, to be a true
and complete copy of the original power of attorney submitted for
recording);
(iii) The original executed Assignment of Mortgage, in recordable
form. The Assignment of Mortgage may be a blanket assignment, to the
extent such assignment is effective under applicable law, for
Mortgages covering Mortgaged Properties situated within the same
county. If the Assignment of Mortgage is in blanket form, an
Assignment of Mortgage need not be included in the individual
Indenture Trustee's Home Loan File;
(iv) All original intervening assignments of mortgage, with
evidence of recording thereon, showing a complete chain of assignment
from origination of the Home Loan to the Transferor (or, if any such
assignment of mortgage has not been returned from the applicable
public recording office or is not otherwise available, a copy of such
assignment of mortgage certified by a Responsible Officer of the
Transferor or by the closing attorney or by an officer of the title
insurer or agent of the title insurer which issued the related title
insurance policy, if any, or commitment therefor to be a true and
complete copy of the original assignment submitted for recording); and
(v) The original, or a copy certified by the Transferor to be a
true and correct copy of the original, of each assumption,
modification, written assurance or substitution agreement, if any.
(b) With respect to each Home Loan, the Transferor and the Depositor shall,
on the Closing Date, deliver or caused to be delivered to the Servicer, as the
designated agent of the Indenture Trustee, each of the following documents
(collectively, the "Servicer's Home Loan Files"): (i) an original or copy of
truth-in-lending disclosure, (ii) an original or copy of the credit application,
(iii) an original or copy of the consumer credit report, (iv) an original or
copy of verification of employment and income, or verification of
self-employment income, (v) if the Home Loan is a Combination Loan, an original
or copy of contract of work or written description with cost estimates, if any,
(vi) if the Home Loan is a Combination Loan for which the Transferor prepares an
inspection report, an original or copy of the report of inspection of
improvements to the Property, (vii) to the extent not included in (clause (ii)
of this Section 2.04(b), an original or copy of a written verification (or a
notice of telephonic verification, with written verification to follow) that the
Obligor at the time of origination was not more than 30 days delinquent on any
Superior Lien on the Mortgaged Property, (viii) if the Home Loan is secured by a
Mortgage, a copy of the HUD-1 or HUD 1-A Closing Statement indicating the sale
price, or an existing Uniform Residential Appraisal Report, or a Drive-by
Appraisal documented on FHLMC Form 704, or a tax assessment, or a full Uniform
Residential Appraisal Report prepared by a national appraisal firm in accordance
with the Transferor's guidelines, and (ix) an original or a copy of a title
search as of the time of origination with respect to the Property in accordance
with the Transferor's guidelines.
(c) The Indenture Trustee shall cause the Custodian to take and maintain
continuous physical possession of the Indenture Trustee's Home Loan Files in the
State of California and, in connection therewith, shall act solely as agent for
the Securityholders in accordance with the terms hereof and not as agent for the
Transferor or any other party.
(d) Within 60 days after the Closing Date in the case of Initial Loan or,
in the case of the subsequent Loans, within 60 days of the related Subsequent
Transfer Date, the Transferor, at its own expense, shall record each Assignment
of Mortgage (which may be a blanket assignment if permitted by applicable law)
in the appropriate real property or other records; provided, however, that the
Transferor need not record any such Assignment of Mortgage which relates to a
Home Loan in any jurisdiction under the laws of which, as evidenced by an
Opinion of Counsel delivered by the Transferor (at the Transferor's expense) to
the Indenture Trustee and the Rating Agencies, the recordation of such
Assignment of Mortgage is not necessary to protect the Indenture Trustee's and
the Certificateholder's interest in the related Home Loan. With respect to any
Assignment of Mortgage as to which the related recording information is
unavailable within 60 days following the Closing Date in the case of Initial
Loans or, in the case of Subsequent Loans, within 60 days of the related
Subsequent Transfer Date, such Assignment of Mortgage shall be submitted for
recording within 30 days after receipt of such information but in no event later
than one year after the Closing Date. The Indenture Trustee shall be required to
retain a copy of each Assignment of Mortgage submitted for recording. In the
event that any such Assignment of Mortgage is lost or returned unrecorded
because of a defect therein, the Transferor shall promptly prepare a substitute
Assignment of Mortgage or cure such defect, as the case may be, and thereafter
the Transferor shall be required to submit each such Assignment of Mortgage for
recording.
(e) All recordings required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Transferor.
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans; Certain
Substitutions; Certification by the Custodian.
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date an acknowledgment of receipt of the Indenture
Trustee's Home Loan File for each Home Loan. The Indenture Trustee declares that
it will cause the Custodian to hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included in the
Trust Estate and delivered to the Custodian, in trust, upon and subject to the
conditions set forth herein. The Indenture Trustee agrees to cause the Custodian
to review each Indenture Trustee's Home Loan File within 45 days after the
Closing Date (or, with respect to any Qualified Substitute Home Loan, within 45
days after the conveyance of the related Home Loan to the Trust) and to cause
the Custodian to deliver to the Transferor, the Depositor, the Indenture
Trustee, the Issuer and the Servicer a certification (the "Custodian's Initial
Certification") to the effect that, as to each Home Loan listed in the Home Loan
Schedule (other than any Home Loan paid in full or any Home Loan specifically
identified as an exception to such certification), (i) all documents required to
be delivered to the Indenture Trustee pursuant to this Agreement are in its
possession or in the possession of the Custodian on its behalf (other than as
expressly permitted by Section 2.04 hereof), (ii) all documents delivered by the
Depositor and the Transferor to the Custodian pursuant to Section 2.04 hereof
have been reviewed by the Custodian and have not been mutilated or damaged and
appear regular on their face (handwritten additions, changes or corrections
shall not constitute irregularities if initialed by the Obligor) and relate to
such Home Loan, (iii) based on the examination of the Custodian on behalf of the
Indenture Trustee, and only as to the foregoing documents, the information set
forth on the Home Loan Schedule accurately reflects the information set forth in
the Indenture Trustee's Home Loan File and (iv) each Debt Instrument has been
endorsed as provided in Section 2.04 hereof. Neither the Issuer nor the
Custodian shall be under any duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable or appropriate for the represented
purpose or that they are other than what they purport to be on their face or
(ii) to determine whether any Indenture Trustee's Home Loan File should include
any of the documents specified in Section 2.04(a)(v) hereof.
(b) The Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Noteholders and the Indenture
Trustee as the owner thereof for so long as the Indenture continues in full
force and effect; after the Indenture is terminated in accordance with the terms
thereof, the Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Certificateholders. It is
intended that, by the Servicer's agreement pursuant to this Section 2.05(b), the
Indenture Trustee shall be deemed to have possession of the Servicer's Home Loan
Files for purposes of Section 9-305 of the Uniform Commercial Code of the state
in which such documents or instruments are located. The Servicer shall promptly
report to the Indenture Trustee any failure by it to hold the Servicer's Home
Loan File as herein provided and shall promptly take appropriate action to
remedy any such failure. In acting as custodian of such documents and
instruments, the Servicer agrees not to assert any legal or beneficial ownership
interest in the Home Loans or such documents or instruments. The Servicer agrees
to indemnify the Securityholders and the Indenture Trustee for any and all
liabilities, obligations, losses, damages, payments, costs or expenses of any
kind whatsoever which may be imposed on, incurred by or asserted against the
Securityholders or the Indenture Trustee as the result of any act or omission by
the Servicer relating to the maintenance and custody of such documents or
instruments which have been delivered to the Servicer; provided, however, that
the Servicer will not be liable for any portion of any such amount resulting
from the negligence or misconduct of any Securityholders or the Indenture
Trustee; and provided, further, that the Servicer will not be liable for any
portion of any such amount resulting from the Servicer's compliance with any
instructions or directions consistent with this Agreement issued to the Servicer
by the Indenture Trustee. The Indenture Trustee shall have no duty to monitor or
otherwise oversee the Servicer's performance as custodian hereunder.
(c) The Custodian shall, for the benefit of the Securityholders, review
each Indenture Trustee's Home Loan File within 60 days after the date it
delivered a Custodian's Initial Certification and deliver to the Transferor, the
Depositor, the Indenture Trustee, the Issuer and the Servicer an updated
certification (a "Custodian's Updated Certification"), setting forth those
exceptions listed on the Custodian's Initial Certification which continue to
exist on the date of such Custodian's Updated Certification. With respect to any
Home Loans which are set forth as exceptions in the Custodian's Updated
Certification because recorded assignments or original or certified copies of
Mortgages have not yet been delivered to the Custodian, the Transferor shall
cure such exceptions by delivering such missing documents to the Custodian no
later than 360 days after the Closing Date.
The Custodian agrees, for the benefit of the Securityholders, to review
each Indenture Trustee's Home Loan File within 360 days after the Closing Date
and to deliver to the Transferor, the Depositor, the Indenture Trustee, the
Issuer and the Servicer a final certification (a "Custodian's Final
Certification"), setting forth those exceptions listed on the Custodian's
Updated Certification which continue to exist on the date of such Custodian's
Final Certification.
In performing any such review, the Custodian may conclusively rely on the
Transferor as to the purported genuineness of any such document and any
signature thereon. Neither the Issuer nor the Custodian shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction or whether a blanket assignment is permitted in
any applicable jurisdiction. If a material defect in a document constituting
part of a Indenture Trustee's Home Loan File is discovered, then the Depositor
and Transferor shall comply with the cure, substitution and repurchase
provisions of Section 3.05 hereof.
Section 2.06 Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in this Article
II and pursuant to the terms of the related Subsequent Transfer Agreement, in
consideration of the Issuer's delivery, on each Subsequent Transfer Date to or
upon the order of the Transferor, of all or a portion of the balance of funds in
the Pre-Funding Account, the Transferor shall on such Subsequent Transfer Date
sell, transfer, assign, set over and otherwise convey without recourse to the
Issuer, all of its right, title and interest in and to each Subsequent Loan
listed on the related Subsequent Loan Schedule. The transfer by the Transferor
to the Issuer of the Subsequent Loans set forth in the related Subsequent
Transfer Agreement shall be absolute and shall be intended by all parties hereto
to be treated as a sale by the Transferor to the Trust. If the assignment and
transfer of the Subsequent Loans and the other property specified in this
Section 2.06(a) from the Transferor to the Trust pursuant to this Agreement is
held or deemed not to be a sale or is held or deemed to be a pledge of security
for a loan, the Transferor intends that the rights and obligations of the
parties shall be established pursuant to the terms of this Agreement and that,
in such event, (i) the Transferor shall be deemed to have granted and does
hereby grant to the Issuer as of each Subsequent Transfer Date a perfected,
first priority security interest in the entire right, title and interest of the
Transferor in and to the related Subsequent Loans and all other property
conveyed to the Issuer pursuant to this Section 2.06(a) and all proceeds
thereof, and (ii) this Agreement shall constitute a security agreement under
applicable law. The amount released to the Transferor from the Pre-Funding
Account shall be one hundred percent (100%) of the aggregate Principal Balances
of the Subsequent Loans as of the related Cut-Off Date so transferred.
(b) The Indenture Trustee, at the direction of the Issuer, shall contribute
from the Pre-Funding Account funds in an amount equal to one hundred percent
(100%) of the aggregate Principal Balances of the Subsequent Loans as of the
related Cut-Off Date so transferred to the Trust and use such cash to purchase
the Subsequent Loans on behalf of the Trust, along with the other property and
rights related thereto described in paragraph (a) above only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(i) the Transferor shall have provided the Indenture Trustee,
Owner Trustee and the Rating Agencies with an Addition Notice, which
notice shall be given no fewer than two Business Days prior to the
related Subsequent Transfer Date and shall designate the Subsequent
Loans to be sold to the Trust and the aggregate Principal Balances of
such Subsequent Loans as of the related Cut-Off Date; and the Rating
Agencies shall have provided written confirmation to the Indenture
Trustee and the Owner Trustee that the purchase of such Subsequent
Loans will not result in a downgrade, withdrawal or qualification of
the ratings then in effect for the Outstanding Notes;
(ii) the Transferor shall have deposited in the Collection
Account all principal collected after the related Cut-Off Date and
interest payments collected after the related Cut-Off Date in respect
of each Subsequent Loan and the related Subsequent Cut-Off Date
Deposit;
(iii) the Transferor shall have delivered an Officer's
Certificate to the Indenture Trustee and the Owner Trustee confirming
that, as of each Subsequent Transfer Date, the Transferor was not
insolvent, would not be made insolvent by such transfer and was not
aware of any pending insolvency;
(iv) the Pre-Funding Period shall not have ended;
(v) the Transferor shall have delivered to the Indenture Trustee
and the Owner Trustee an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this paragraph
(b) and in the related Subsequent Transfer Agreement upon which the
Indenture Trustee and Owner Trustee may rely without independent
verification;
(vi) the Transferor shall have delivered an Officer's Certificate
to the Indenture Trustee and the Owner Trustee confirming that the
representations and warranties of the Transferor pursuant to Section
3.04 hereof (other than to the extent representations and warranties
relate to statistical information as to the characteristics of the
Initial Loans in the aggregate) and pursuant to Section 3.02 hereof
are true and correct with respect to the Subsequent Loans and the
Transferor, as applicable, as of the Subsequent Transfer Date;
(vii) the Trust shall not purchase a Subsequent Loan unless (A)
the Rating Agencies shall consent thereto (which consent shall not be
unreasonably withheld and shall be evidenced by a letter from the
Rating Agencies), (B) the following conditions shall have been
satisfied as to each Subsequent Loan: (I) no Subsequent Loans may be
30 or more days contractually delinquent as of the applicable Cut-Off
Date; (II) the lien securing any such Subsequent Loan must not be
lower than third priority; (III) such Subsequent Loan must have an
outstanding Principal Balance of at least $2,500 as of the applicable
Cut-Off Date; (IV) the first payment on such Subsequent Loan must be
due no later than the last day of the Due Period immediately
succeeding the Due Period in which it is transferred, unless the
Transferor deposits into the Collection Account 30 days' interest on
such Subsequent Loan at the Home Loan Interest Rate less the
applicable Servicing Fee rate (each such amount, a "Capitalized
Interest Subsequent Deposit"), in which event the first payment on
such Subsequent Loan must be due no later than the last day of the
second Due Period following the Due Period in which the transfer
occurs; (V) such Subsequent Loan is a fully amortizing loan with level
payments over the remaining term of no fewer than 10 years and no more
than 25 years and the scheduled maturity will be no later than January
2023; (VI) such Subsequent Loan must have a fixed Home Loan Interest
Rate of at least 9.50%; (VII) any such Subsequent Loan must have an
original Combined Loan-to-Value Ratio of no more than 125%, (VIII)
such Subsequent Loan must be underwritten, re-underwritten or
reviewed, as applicable, in accordance with the underwriting
guidelines of the Transferor in effect at such time or in a manner
similar to the Initial Loans, and (IX) following the purchase of such
Subsequent Loans by the Trust, the Loans included in the Pool must
have a weighted average interest rate and a weighted average remaining
term to maturity as of each respective Cut-Off Date comparable to
those of the Initial Loans included in the initial Pool and (C) the
following conditions shall have been satisfied with respect to the
Subsequent Loans conveyed on the Subsequent Transfer Date, (I) the
average weighted Home Loan Interest Rate must be greater than or equal
to 13.1%, (II) the average weighted Combined Loan-to-Value Ratio must
be less than or equal to 113%, (III) the average weighted FICO Score
must be greater than or equal to 680 and (IV) the average weighted
remaining term to maturity must be greater than or equal to 260
months.
(viii) in connection with the transfer and assignment of the
Subsequent Loans, the Transferor shall satisfy the document delivery
requirements set forth in Section 2.05 hereof; and
(ix) each proposed Subsequent Loan must be listed on Exhibit A
hereto as the same may be amended from time to time with the approval
of the Depositor.
(c) In connection with each Subsequent Transfer Date and on the related
Distribution Date, the Indenture Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirement and Pre-Funding
Account Earnings for such Distribution Date in accordance with the provisions of
this Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and the Capitalized Interest Account.
In the event that any amounts are released as a result of calculation error by
the Indenture Trustee from the Pre-Funding Account or from the Capitalized
Interest Account, the Indenture Trustee shall not be liable therefor and the
Transferor shall immediately repay such amounts to the Indenture Trustee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, the
Servicer, the Indenture Trustee, the Owner Trustee and the Noteholders that as
of the Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its
property, to carry on its business as currently conducted, to enter
into and perform its obligations under this Agreement and to create
the Trust pursuant to the Trust Agreement;
(b) The execution and delivery of this Agreement by the Depositor
and its performance of and compliance with the terms of this Agreement
will not violate the Depositor's certificate of incorporation or
by-laws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result
in the breach or acceleration of, any material contract, agreement or
other instrument to which the Depositor is a party or which may be
applicable to the Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter into
and consummate the transactions contemplated by this Agreement, has
duly authorized the execution, delivery and performance of this
Agreement and has duly executed and delivered this Agreement. This
Agreement, assuming due authorization, execution and delivery by the
Owner Trustee, the Indenture Trustee, the Transferor and the Servicer,
constitutes a valid, legal and binding obligation of the Depositor,
enforceable against it in accordance with the terms hereof, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution and
delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Depositor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Depositor currently pending with regard to
which the Depositor has received service of process and no action or
proceeding against, or investigation of, the Depositor is, to the
knowledge of the Depositor, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined
adversely, would prohibit its entering into this Agreement or render
the Notes invalid, (B) seek to prevent the issuance of the Notes or
the consummation of any of the transactions contemplated by this
Agreement or (C) if determined adversely, would prohibit or materially
and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this
Agreement or the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Depositor of, or compliance by the Depositor
with, this Agreement or the Notes, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or its obligations hereunder;
no petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Depositor prior to the date hereof;
(h) The Depositor did not sell the Home Loans to the Trust with
any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of
the Home Loans to the Trust;
(i) As of the Closing Date, the Depositor had good title to, and
was the sole owner of, each Home Loan free and clear of any lien other
than any such lien released simultaneously with the sale contemplated
herein, and, immediately upon each transfer and assignment herein
contemplated, the Depositor will have delivered to the Trust good
title to, and the Trust will be the sole owner of, each Home Loan free
and clear of any lien;
(j) The Depositor acquired title to each of the Home Loans in
good faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended; and
(m) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Depositor pursuant to this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
Section 3.02 Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Servicer, the
Indenture Trustee, the Owner Trustee, the Noteholders and the Depositor that as
of the Closing Date or the Subsequent Transfer Date, as the case may be (except
as otherwise specifically provided herein):
(a) The Transferor is a corporation licensed as a mortgage lender
duly organized, validly existing and in good standing under the laws
of the State of California and has, and had at all relevant times,
full corporate power to originate or purchase the Home Loans, to own
its property, to carry on its business as currently conducted and to
enter into and perform its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the
Transferor and its performance of and compliance with the terms of
this Agreement will not violate the Transferor's articles of
incorporation or by-laws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Transferor is a
party or which may be applicable to the Transferor or any of its
assets;
(c) The Transferor has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the Owner Trustee, the Indenture Trustee and the
Depositor, constitutes a valid, legal and binding obligation of the
Transferor, enforceable against it in accordance with the terms
hereof, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar
laws relating to or affecting the rights of creditors generally, and
by general equity principles (regardless of whether such enforcement
is considered in a proceeding in equity or at law);
(d) The Transferor is not in violation of, and the execution and
delivery of this Agreement by the Transferor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Transferor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Transferor currently pending with regard to
which the Transferor has received service of process and no action or
proceeding against, or investigation of, the Transferor is, to the
knowledge of the Transferor, threatened or otherwise pending before
any court, administrative agency or other tribunal that (A) if
determined adversely, would prohibit its entering into this Agreement
or render the Notes invalid, (B) seek to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by
this Agreement or (C) if determined adversely, would prohibit or
materially and adversely affect the sale of the Home Loans to the
Depositor, the performance by the Transferor of its obligations under,
or the validity or enforceability of, this Agreement or the Notes;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution,
delivery and performance by the Transferor of, or compliance by the
Transferor with, this Agreement, (2) the issuance of the Notes, (3)
the sale of the Home Loans under the Home Loan Purchase Agreement or
(4) the consummation of the transactions required of it by this
Agreement, except such as shall have been obtained before the Closing
Date;
(g) The Transferor acquired title to the Home Loans in good
faith, without notice of any adverse claim;
(h) The collection practices used by the Transferor with respect
to the Home Loans have been, in all material respects, legal, proper,
prudent and customary in the non-conforming mortgage servicing
business;
(i) No Officer's Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Transferor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or by the performance of its
obligations hereunder; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Transferor
prior to the date hereof;
(k) All information provided by or on behalf of the Transferor to
the Depositor or its Affiliates with respect to (i) summaries of the
individual Home Loans and any letters, certifications and other
materials furnished to the Depositor by the Transferor relating to the
Home Loans, (ii) report of environmental assessments of the related
Mortgaged Properties, (iii) reports of site inspections of the related
Mortgaged Properties, (iv) all information and documentation relating
to the Home Loans and included in the investor and Rating Agencies due
diligence and any documents or information relating to the Home Loans
and provided by the Transferor or any of its affiliates to potential
investors, including but not limited to Home Loan legal, underwriting
and servicing documents and information, (y) the information regarding
the Home Loans, underwriting, and the Transferor set forth in the
Prospectus and the Prospectus Supplement, and (vi) any computer
diskettes, computer tapes and/or other electronic media containing (A)
the information on the Home Loan Schedule, and (B) information
regarding the Home Loans provided to the Depositor or its Affiliates
and used in preparing Computational Materials (as such term is defined
in the no-action letter issued by the staff of the Securities and
Exchange Commission (the "SEC"), dated May 20, 1994 to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Acceptance Corporation I), Collateral Term Sheets, ABS Term Sheets,
and/or Structural Term Sheets (as such terms are defined in the
no-action letter issued by the SEC, dated February 17, 1995 to the
Public Securities Association does not contain an untrue statement of
a material fact and does not omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading; and
(l) The Transferor has transferred the Home Loans without any
intent to hinder, delay or defraud any of its creditors.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Indenture
Trustee's Home Loan Files to the Custodian (as the agent of the Indenture
Trustee) and shall inure to the benefit of the Securityholders, the Depositor,
the Servicer, the Indenture Trustee, the Owner Trustee and the Trust. Upon
discovery by any of the Transferor, the Depositor, the Servicer, the Indenture
Trustee or the Owner Trustee of a breach of any of the foregoing representations
and warranties that materially and adversely affects the value of any Home Loan
or the interests of the Securityholders therein, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the other parties. The obligations of the
Transferor set forth in Section 3.05 hereof to cure any breach or to substitute
for or repurchase an affected Home Loan shall constitute the sole remedies
available hereunder to the Securityholders, the Depositor, the Servicer, the
Indenture Trustee or the Owner Trustee respecting a breach of the
representations and warranties contained in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents and warrants to and covenants with the Owner
Trustee, the Indenture Trustee, the Noteholders, the Depositor and the
Transferor that as of the Closing Date or as of such date specifically provided
herein:
(a) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California and is or will be in compliance with the laws of each state
in which any Mortgaged Property is located to the extent necessary to
ensure the enforceability of each Home Loan in accordance with the
terms of this Agreement;
(b) The execution and delivery of this Agreement by the Servicer
and its performance of and compliance with the terms of this Agreement
will not violate the Servicer's articles of incorporation or by-laws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach or acceleration of, any material contract, agreement or other
instrument to which the Servicer is a party or which may be applicable
to the Servicer or any of its assets;
(c) The Servicer has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has
duly authorized the execution, delivery and performance of this
Agreement and has duly executed and delivered this Agreement. This
Agreement, assuming due authorization, execution and delivery by the
Indenture Trustee, the Owner Trustee and the Depositor, constitutes a
valid, legal and binding obligation of the Servicer, enforceable
against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Servicer or materially and adversely affect the performance of
its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Servicer currently pending with regard to which
the Servicer has received service of process and no action or
proceeding against, or investigation of, the Servicer is, to the
knowledge of the Servicer, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined
adversely, would prohibit its entering into this Agreement or render
the Notes invalid, (B) seek to prevent the issuance of the Notes or
the consummation of any of the transactions contemplated by this
Agreement or (C) if determined adversely, would prohibit or materially
and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this
Agreement or the Notes;
(f) 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 Notes, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Servicer is duly licensed where required as a "Licensee"
or is otherwise qualified in each state in which it transacts business
and is not in default of such state's applicable laws, rules and
regulations, except where the failure to so qualify or such default
would not have a material adverse effect on the ability of the
Servicer to conduct its business or perform its obligations hereunder;
(h) The Servicer is an Eligible Servicer and services mortgage
loans in accordance with Accepted Servicing Procedures;
(i) No Officer's Certificate, statement, report or other document
prepared by the Servicer and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Servicer is solvent and will not be rendered insolvent as
a result of the performance of its obligations pursuant to this
Agreement;
(k) The Servicer has not waived any default, breach, violation or
event of acceleration existing under any Debt Instrument or the
related Mortgage;
(l) The Servicer will cause to be performed any and all acts
required to be performed by the Servicer to preserve the rights and
remedies of the Trust and the Indenture Trustee in any Insurance
Policies applicable to the Home Loans including, without limitation,
in each case, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured, joint
loss payee and mortgagee rights in favor of the Trust and the
Indenture Trustee;
(m) The Servicer shall comply with, and shall service, or cause
to be serviced, each Home Loan, in accordance with all applicable
laws; and
(n) The Servicer agrees that, so long as it shall continue to
serve in the capacity contemplated under the terms of this Agreement,
it shall remain in good standing under the laws governing its creation
and existence and qualified under the laws of each state in which it
is necessary to perform its obligations under this Agreement or in
which the nature of its business requires such qualification; it shall
maintain all licenses, permits and other approvals required by any law
or regulations as may be necessary to perform its obligations under
this Agreement and to retain all rights to service the Loans; and it
shall not dissolve or otherwise dispose of all or substantially all of
its assets.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Indenture Trustee's Home Loan Files to the Indenture Trustee and
shall inure to the benefit of the Depositor, the Noteholders and the Indenture
Trustee. Upon discovery by any of the Transferor, the Depositor, the Servicer,
the Indenture Trustee or the Owner Trustee of a breach of any of the foregoing
representations, warranties and covenants that materially and adversely affects
the value of any Home Loan or the interests of the Noteholders therein, the
party discovering such breach shall give prompt written notice (but in no event
later than two Business Days following such discovery) to the other parties.
Section 3.04 Representations and Warranties Regarding Individual Home
Loans.
The Transferor hereby represents and warrants to the Depositor, the Issuer,
the Indenture Trustee and the Noteholders, with respect to each Loan as of the
Closing Date, and with respect to each Subsequent Loan, as of the related
Subsequent Transfer Date, except as otherwise expressly stated:
(a) The information pertaining to each Home Loan set forth in the
Home Loan Schedule was true and correct in all material respects as of
the Cut-Off Date;
(b) As of the applicable Cut-Off Date, none of the Loans was 30
or more days past due (without giving effect to any grace period); the
Transferor has not advanced funds, induced, solicited or knowingly
received any advance of funds from a party other than the Obligor,
directly or indirectly, for the payment of any amount required by any
Home Loan;
(c) The terms of the Debt Instrument and any related Mortgage
contain the entire agreement of the parties thereto and have not been
impaired, waived, altered or modified in any respect, except by
written instruments reflected in the related Indenture Trustee's Home
Loan File and recorded, if necessary, to maintain the lien priority of
the any related Mortgage; no instrument of waiver, alteration,
expansion or modification has been executed, and no Obligor has been
released, in whole or in part, except in connection with an assumption
agreement which assumption agreement is part of the related Indenture
Trustee's Home Loan File and the payment terms of which are reflected
in the related Home Loan Schedule;
(d) The Debt Instrument and any related Mortgage are not subject
to any set-off, claims, counterclaim or defense, including the defense
of usury or of fraud in the inducement, and will not be so subject in
the future with respect to the goods and services provided under the
Debt Instrument; and neither the operation of any of the terms of the
Debt Instrument and any related Mortgage, nor the exercise of any
right thereunder, will render such Debt Instrument or Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto;
(e) Any and all requirements of any federal, state or local law
applicable to the Home Loan (including any law applicable to the
origination, servicing and collection practices with respect thereto)
have been complied with;
(f) No Debt Instrument or Mortgage has been satisfied, canceled,
rescinded or subordinated, in whole or part; and the Transferor,
except as otherwise permitted by clause (c) of this Section 3.04, has
not waived the performance by the Obligor of any action, if the
Obligor's failure to perform such action would cause the Debt
Instrument or Home Loan to be in default; and with respect to a Home
Loan, the related Property has not been released from the lien of the
Mortgage, in whole or in part, nor has any instrument been executed
that would effect any such satisfaction, subordination, release,
cancellation or rescission;
(g) Each related Mortgage is a valid, subsisting and enforceable
lien on the related Property, including the land and all buildings on
the Property;
(h) The Debt Instrument and any related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights in general and by general principles
of equity;
(i) To the best of the Transferor's knowledge, all parties to the
Debt Instrument and any related Mortgage had legal capacity at the
time to enter into the Home Loan and to execute and deliver the Debt
Instrument and any related Mortgage, and the Debt Instrument and any
related Mortgage have been duly and properly executed by such parties;
(j) As of the applicable Cut-Off Date, the proceeds of the Home
Loan have been fully disbursed and there is no requirement for future
advances thereunder, and any and all applicable requirements set forth
in the Home Loan documents have been complied with; the Obligor is not
entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage;
(k) Immediately prior to the sale, transfer and assignment to the
Depositor, the Transferor will have good and indefeasible legal title
to the Home Loan, the related Debt Instrument and any related Mortgage
and the full right to transfer such Home Loan, the related Debt
Instrument and any related Mortgage, and the Transferor will have been
the sole owner thereof, subject to no liens, pledges, charges,
mortgages, encumbrances or rights of others, except for such liens as
will be released simultaneously with the transfer and assignment of
the Home Loans to the Depositor (and the Indenture Trustee's Home Loan
File will contain no evidence inconsistent with the foregoing); and
immediately upon the sale, transfer and assignment contemplated by the
Home Loan Purchase Agreement, the Depositor will hold good title to,
and be the sole owner of each Home Loan, the related Debt Instrument
and any related Mortgage, free of all liens (except any first liens
outstanding as of the Closing Date), pledges, charges, mortgages,
encumbrances or rights of others;
(l) Except for those Home Loans referred to in clause (b) of this
Section 3.04 that are delinquent as of the Cut-Off Date, there is no
default, breach, violation or event of acceleration known to the
Transferor under the Home Loan, the related Debt Instrument and any
related Mortgage and there is no event known to the Transferor which,
with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration thereunder and neither the Transferor nor its
predecessors have waived any such default, breach, violation or event
of acceleration;
(m) The Debt Instrument and any related Mortgage contain
customary and enforceable provisions so as to render the rights and
remedies of the holder thereof adequate for the realization against
the Property of the benefits of the security provided thereby,
including, (A) in the case of any Mortgage designated as a deed of
trust, by trustee's sale, and (B) otherwise by judicial foreclosure;
(n) Each Home Loan is a fixed rate loan; the Debt Instrument
shall mature within not more than 25 years from the date of
origination of the Home Loan; the Debt Instrument is payable in
substantially equal Monthly Payments, with interest payable in
arrears, and requires a Monthly Payment which is sufficient to fully
amortize the original principal balance over the original term and to
pay interest at the related Home Loan Interest Rate; interest on each
Home Loan is calculated on the basis of a 360-day year consisting of
twelve 30-day months, and the Debt Instrument does not provide for any
extension of the original term;
(o) The related Debt Instrument is not and has not been secured
by any collateral except, in the case of a Home Loan, the lien of the
corresponding Mortgage;
(p) With respect to any Home Loan, if the related Mortgage
constitutes a deed of trust, a trustee, duly qualified under
applicable law to serve as such, has been properly designated and
currently so serves and is named in the Mortgage, or a valid
substitution of trustee has been recorded, and no extraordinary fees
or expenses are or will become payable to the trustee under the deed
of trust, except in connection with default proceedings and a
trustee's sale after default by the Obligor;
(q) With respect to any Home Loan, the Transferor has no
knowledge of any circumstances or conditions not reflected in the
representations set forth herein, or in the Home Loan Schedule, or in
the related Indenture Trustee's Home Loan File with respect to the
related Mortgage, the related Property or the Obligor which could
reasonably be expected to materially and adversely affect the value of
the related Property or the marketability of the Home Loan or cause
the Home Loan to become delinquent or otherwise be in default;
(r) Assuming no material change to the applicable law or
regulations in effect as of the Closing Date, after the consummation
of the transactions contemplated by this Agreement, the Indenture
Trustee will have the ability to foreclose or otherwise realize upon a
Property or if otherwise permitted by applicable law, by pursuing
other remedies against an Obligor, if the Home Loan is a Home Loan, or
to enforce the provisions of the related Home Loan against the Obligor
thereunder, if the foreclosure upon any such Property or enforcement
of the provisions of the related Home Loan against the Obligor is
undertaken as set forth in Section 4.10 hereof;
(s) There exists a Home Loan File relating to each Home Loan and
such Home Loan File contains all of the original or certified
documentation listed in Section 2.04 hereof for such Home Loan. Each
Indenture Trustee's Home Loan File has been delivered to the Custodian
and each Servicer's Home Loan File is being held in trust by the
Servicer for the benefit of, and as agent for, the Securityholders and
the Indenture Trustee as their respective interest appear herein. Each
document included in the Home Loan File which is required to be
executed by the Obligor has been executed by the Obligor in the
appropriate places. With respect to each Home Loan, the related
Assignment of Mortgage to the Indenture Trustee is in recordable form
and is acceptable for recording under the laws of the jurisdiction in
which the Property is located. All blanks on any form required to be
completed have been so completed;
(t) Each Property is improved by a residential dwelling and is
not a Home Loan in respect of a manufactured home or mobile home or
the land on which a manufactured home or mobile home has been placed,
unless such manufactured home or mobile home is treated as real estate
under applicable law;
(u) Each Home Loan was underwritten by the Transferor in
accordance with the Transferor's underwriting guidelines;
(v) If the Property securing any Home Loan is in an area
identified by the Federal Emergency Management Agency ("FEMA") as
having special flood hazards, unless the community in which the area
is situated is not participating in the National Flood Insurance
Program and the regulations thereunder or less than a year has passed
since FEMA notification regarding such hazards, a flood insurance
policy is in effect with respect to such Property with a generally
acceptable carrier which complies with section 102(a) of the Flood
Disaster Protection Act of 1973; all improvements upon each Property
securing a Home Loan are insured by a generally acceptable insurer
against loss by fire, hazards of extended coverage and such other
hazards as are customary in the area where the Property is located,
pursuant to insurance policies conforming to the requirements of the
Agreement; all such policies contain a standard mortgagee clause
naming the Transferor or its predecessor in interest, its successors
and assigns, as loss payee;
(w) All costs, fees and expenses incurred in originating and
closing the Home Loan and in recording any related Mortgage were paid
and the Obligor is not entitled to any refund of any amounts paid or
due to the lender pursuant to the Debt Instrument or any related
Mortgage;
(x) There is no obligation on the part of the Transferor or any
other party other than the Obligor to make payments with respect to
the Home Loan;
(y) At the time of origination of the Home Loan, each related
Superior Lien, if any, was certified by the Obligor as not being 30 or
more days delinquent;
(z) To the best of the Transferor's knowledge, all parties which
have had any interest in the Home Loan, whether as mortgagee,
assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (i) in compliance with
any and all applicable licensing requirements of the laws of the state
wherein the Property is located, and (ii) (A) organized under the laws
of such state, or (B) qualified to do business in such state, or (C)
federal savings and loan associations or national banks having
principal offices in such state, or (D) not doing business in such
state;
(aa) With respect to each Home Loan, the related Mortgage
contains an enforceable provision requiring the consent of the
mortgagee to assumption of the related Home Loan upon sale of the
Property;
(ab) With respect to each Home Loan, there is no homestead or
other exemption available to the mortgagor which would materially
interfere with the right to sell the related Property at a trustee's
sale or the right to foreclose the Mortgage; no relief has been
requested or allowed to the mortgagor under the Soldiers' and Sailors'
Civil Relief Act of 1940;
(ac) The related Servicer's Home Loan File for each Home Loan
that is a Home Loan contains a title document with respect to such
Home Loan reflecting that title to the related Mortgaged Property is
vested at least 50% in the related Obligor;
(ad) To the best of the Transferor's knowledge, each Property
(including each residential dwelling improvement thereon) is free of
damage which materially and adversely affects the value thereof and
there is no proceeding pending for the total or partial condemnation
of any Property;
(ae) Each Home Loan was originated in compliance with all
applicable laws and, to the best of the Transferor's knowledge, no
fraud or misrepresentation was committed by any Person in connection
therewith;
(af) Each Home Loan has been serviced in accordance with all
applicable laws and, to the best of the Transferor's knowledge, no
fraud or misrepresentation was committed by any Person in connection
therewith;
(ag) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Transferor to the Depositor were
not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction;
(ah) Any Home Loan originated in the State of Texas, was
originated pursuant to either Chapter 3 or Chapter 6 of the Texas
Consumer Credit Code;
(ai) As of the applicable Cut-Off Date, no Obligor is a debtor
under proceedings under the United States Bankruptcy Code, and no
Obligor has defaulted in payments on a Home Loan after the filing of
such bankruptcy case, whether under a plan or reorganization or
otherwise;
(aj) To the best of the Transferor's knowledge, the Transferor
has not advanced funds, or induced, solicited or knowingly received
any advance of loan payments from a party other than, with respect to
a Home Loan, the owner of the Property subject to the Mortgage;
(ak) The Home Loans were originated by the Transferor or through
the Transferor's network of dealers and correspondents (including Home
Loans acquired by such correspondents);
(al) Each Home Loan either complies with the Home Ownership and
Equity Protection Act of 1994 or is not subject to such act;
(am) The Transferor has caused to be performed or shall cause to
be performed within one month of the Closing Date any and all acts
required to preserve the rights and remedies of the Trust and the
Indenture Trustee in any insurance policies applicable to each Home
Loan including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and
establishment of coinsured, joint loss payee and mortgagee rights in
favor of the Indenture Trustee;
(an) With respect to any Home Loan, to the best of the
Transferor's knowledge, the Property is free from any and all toxic
and hazardous substances and there exists no violation of any
environmental law, rule or regulation (whether local, state or
federal) in respect of the Property which violation has or could have
a material adverse effect on the market value of such Property. The
Transferor has no knowledge of any pending action or proceeding
directly involving the related Property in which compliance with any
environmental law, rule or regulation is in issue; and, to the
Transferor's best knowledge, nothing further remains to be done to
satisfy in full all requirements of each such law, rule or regulation
constituting a prerequisite to the use and enjoyment of such Property;
(ao) At the time of its origination no Home Loan was secured by a
Mortgage on a non-owner occupied Mortgaged Property;
(ap) With respect to the Initial Loans, on the Closing Date, and
with respect to the Subsequent Loans, on the Subsequent Transfer Date,
55% or more (by aggregate Principal Balance) of the Home Loans do not
constitute "real estate mortgages" for the purpose of Treasury
Regulations Section 301.7701(i) under the Code. For this purpose a
Home Loan does not constitute a "real estate mortgage" if:
(i) The Home Loan is not secured by an interest in real property,
or
(ii) The Home Loan is not an "obligation principally secured by
an interest in real property." For this purpose an "obligation is
principally secured by an interest in real property" if it satisfies
either test set out in paragraph (1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally secured by
an interest in real property if the fair market value of the
interest in real property securing the obligation (A) was at
least equal to 80 percent of the adjusted issue price of the
obligation at the time the obligation was originated (or, if
later, the time the obligation was significantly modified);
or (B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of
the real property interest must be first reduced by the
amount of any lien on the real property interest that is
senior to the obligation being tested, and must be further
reduced by a proportionate amount of any lien that is in
parity with the obligation being tested, in each case before
the percentages set forth in (1)(A) and (1)(B) are
determined. The adjusted issue price of an obligation is its
issue price plus the amount of accrued original issue
discount, if any, as of the date of determination.
(2) Alternative test. An obligation is principally secured by an
interest in real property if substantially all of the
proceeds of the obligation were used to acquire or to
improve or protect an interest in real property that, at the
origination date, is the only security for the obligation.
For purposes of this test, loan guarantees made by the
United States or any state (or any political subdivision,
agency, or instrumentality of the United States or of any
state), or other third party credit enhancement are not
viewed as additional security for a loan. An obligation is
not considered to be secured by property other than real
property solely because the obligor is personally liable on
the obligation. For this purpose only, substantially all of
the proceeds of the obligations means 66 2/3% or more of the
gross proceeds.
(aq) No Home Loan was adversely selected as to credit risk from
the pool of home loans owned by the Transferor;
(ar) With respect to each Home Loan that is not a first lien
mortgage loan, either (i) no consent for the Home Loan was required by
the holder of the related Superior Lien or (ii) such consent has been
obtained and has been delivered to the Indenture Trustee;
(as) Each Home Loan is a home improvement loan for goods or
services, a debt consolidation loan or a home equity loan;
(at) Each Debt Instrument is comprised of a single original
promissory note and each promissory note constitutes an "instrument"
or "chattel paper" for purposes of Article 9 of the UCC; each Debt
Instrument has been delivered to the Custodian and no copy of a Debt
Instrument contains an original authentication or signature of the
Trust;
(au) To the best of the Transferor's knowledge, all improvements
which were considered in determining the appraised value of the
Property lay wholly within the boundaries and building restriction
lines of the Property and no improvements on adjoining properties
encroach upon the Mortgaged Property. No improvement located on or
being part of the Mortgaged Property is in violation of any applicable
zoning law or regulation;
(av) To the best of the Transferor's knowledge, all inspections,
licenses and certificates required to be made, obtained and issued as
of the Closing Date with respect to the improvements and the use and
occupancy of all occupied portions of all Properties have been made,
obtained or issued as applicable;
(aw) The Home Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in
any separate account established by the Transferor, the Obligor or
anyone on behalf of the Obligor, or paid by any source other than the
Obligor nor does it contain any other similar provisions currently in
effect which may constitute a "buydown" provision. The Home Loan is
not a graduated payment Home Loan and the Home Loan does not have a
shared appreciation or other contingent interest feature; and
(ax) The Transferor has reviewed all of the documents
constituting the Mortgage File and has made such inquiries as it deems
necessary to make and confirm the accuracy of the representations set
forth herein.
Section 3.05 Purchase and Substitution.
(a) It is understood and agreed that the representations and warranties set
forth in Section 3.04 hereof shall survive the conveyance of the Home Loans to
the Issuer, the grant of the Home Loans to the Indenture Trustee and the
delivery of the Notes to the Noteholders. Upon discovery by the Depositor, the
Servicer, the Transferor, the Custodian, the Issuer, the Indenture Trustee or
any Securityholder of a breach of any of such representations and warranties or
the representations and warranties set forth in Section 3.02 which materially
and adversely affects the value of the Home Loans or the interests of the
Securityholders in the related Home Loan (notwithstanding that such
representation and warranty was made to the Transferor's best knowledge), the
party discovering such breach shall give prompt written notice to the others.
The Transferor shall within 60 days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, including any
breach of the representation set forth in Section 3.04(ap) hereof as a result of
an aggregate of Home Loans which would not otherwise cause a breach of any other
representation or warranty, promptly cure such breach in all material respects.
If within 60 days after the earlier of the Transferor's discovery of such breach
or the Transferor's receiving notice thereof such breach has not been remedied
by the Transferor and such breach materially and adversely affects the interests
of the Securityholders or in the related Home Loan (the "Defective Home Loan"),
the Transferor shall on or before the Determination Date next succeeding the end
of such 60-day period either (i) remove such Defective Home Loan from the Trust
(in which case it shall become a Deleted Home Loan) and substitute one or more
Qualified Substitute Home Loans in the manner and subject to the conditions set
forth in this Section 3.05 or (ii) purchase such Defective Home Loan at a
purchase price equal to the Purchase Price by depositing such Purchase Price in
the Collection Account. The Transferor shall provide the Servicer, the Indenture
Trustee and the Issuer with a certification of a Responsible Officer on the
Determination Date next succeeding the end of such 60-day period indicating
whether the Transferor is purchasing the Defective Home Loan or substituting in
lieu of such Defective Home Loan a Qualified Substitute Home Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall be
accompanied by payment by the Transferor of the Substitution Adjustment, if any,
to be deposited in the Collection Account. For purposes of calculating the
Available Collection Amount for any Distribution Date, amounts paid by the
Transferor pursuant to this Section 3.05 in connection with the repurchase or
substitution of any Defective Home Loan that are on deposit in the Collection
Account as of the Determination Date for such Distribution Date shall be deemed
to have been paid during the related Due Period and shall be transferred to the
Note Distribution Account as part of the Available Collection Amount to be
retained therein or transferred to the Certificate Distribution Account, if
applicable, pursuant to Section 5.01(c) hereof.
It is understood and agreed that the obligation of the Transferor to
repurchase or substitute any such Home Loan pursuant to this Section 3.05 shall
constitute the sole remedy against it with respect to such breach of the
foregoing representations or warranties or the existence of the foregoing
conditions. With respect to representations and warranties made by the
Transferor pursuant to Section 3.04 hereof that are made to the Transferor's
best knowledge, if it is discovered by any of the Depositor, the Transferor, the
Indenture Trustee or the Owner Trustee that the substance of such representation
and warranty is inaccurate and such inaccuracy materially and adversely affects
the value of the related Home Loan, notwithstanding the Transferor's lack of
knowledge, such inaccuracy shall be deemed a breach of the applicable
representation and warranty.
(b) As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Issuer (i) a certification executed by a
Responsible Officer of the Transferor to the effect that the Substitution
Adjustment has been credited to the Collection Account and (ii) the documents
constituting the Indenture Trustee's Home Loan File for such Qualified
Substitute Home Loan or Loans.
The Servicer shall deposit in the Collection Account all payments received
in connection with such Qualified Substitute Home Loan or Loans after the date
of such substitution. Monthly Payments received with respect to Qualified
Substitute Home Loans on or before the date of substitution will be retained by
the Transferor. The Issuer will be entitled to all payments received on the
Deleted Home Loan on or before the date of substitution and the Transferor shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Home Loan. The Transferor shall give written notice to the Issuer,
the Servicer (if the Transferor is not then acting as such), the Indenture
Trustee and Owner Trustee that such substitution has taken place and the
Servicer shall amend the Home Loan Schedule to reflect (i) the removal of such
Deleted Home Loan from the terms of this Agreement and (ii) the substitution of
the Qualified Substitute Home Loan. The Transferor shall promptly deliver to the
Issuer, the Servicer (if the Transferor is not then acting as such), the
Indenture Trustee and Owner Trustee, a copy of the amended Home Loan Schedule.
Upon such substitution, such Qualified Substitute Home Loan or Loans shall be
subject to the terms of this Agreement in all respects, and the Transferor shall
be deemed to have made with respect to such Qualified Substitute Home Loan or
Loans, as of the date of substitution, the covenants, representations and
warranties set forth in Section 3.04 hereof. On the date of such substitution,
the Transferor will deposit into the Collection Account an amount equal to the
related Substitution Adjustment, if any. In addition, on the date of such
substitution, the Servicer shall cause the Indenture Trustee to release the
Deleted Home Loan from the lien of the Indenture and the Servicer will cause
such Qualified Substitute Home Loan to be pledged to the Indenture Trustee under
the Indenture as part of the Trust Estate.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor pursuant to this Agreement, upon the deposit of
the Purchase Price therefor into the Collection Account, the Indenture Trustee
shall assign to the Transferor, without recourse, representation or warranty,
all the Indenture Trustee's right, title and interest in and to such Defective
Home Loans or Home Loans, which right, title and interest were conveyed to the
Indenture Trustee pursuant to Section 2.01 hereof. The Indenture Trustee shall
take any actions as shall be reasonably requested by the Transferor to effect
the repurchase of any such Home Loans.
(d) It is understood and agreed that the obligations of the Transferor set
forth in this Section 3.05 to cure, purchase or substitute for a Defective Home
Loan (and to indemnify the Trust for certain losses as described herein in
connection with a Defective Home Loan) constitute the sole remedies hereunder of
the Depositor, the Issuer, the Indenture Trustee, Owner Trustee and the
Securityholders respecting a breach of the representations and warranties
contained in Section 3.02 and Section 3.04 hereof. Any cause of action against
the Transferor relating to or arising out of a defect in a Indenture Trustee's
Home Loan File as contemplated by Section 2.05 hereof or against the Transferor
relating to or arising out of a breach of any representations and warranties
made in Section 3.04 hereof shall accrue as to any Home Loan upon (i) discovery
of such defect or breach by any party and notice thereof to the Transferor or
notice thereof by the Transferor to the Indenture Trustee, (ii) failure by the
Transferor to cure such defect or breach or purchase or substitute such Home
Loan as specified above, and (iii) demand upon the Transferor, as applicable, by
the Issuer or the Majority Noteholders for all amounts payable in respect of
such Home Loan.
(e) Neither the Issuer nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase or
substitution of any Home Loan pursuant to this Section or the eligibility of any
Home Loan for purposes of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent contractor, shall
service and administer the Home Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and the ordinary servicing practices of prudent
mortgage lending institutions. Notwithstanding anything to the contrary
contained herein, the Servicer, in servicing and administering the Home Loans,
shall employ or cause to be employed procedures (including collection,
foreclosure, liquidation and Foreclosure Property management and liquidation
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering loans of the same type as the Home Loans for its
own account, all in accordance with Accepted Servicing Procedures of prudent
lending institutions and servicers of loans of the same type as the Home Loans
and giving due consideration to the Securityholders' reliance on the Servicer.
The Servicer has and shall maintain the facilities, procedures and experienced
personnel necessary to comply with the servicing standard set forth in this
subsection (a) and the duties of the Servicer set forth in this Agreement
relating to the servicing and administration of the Home Loans. In performing
its obligations hereunder the Servicer shall at all times act in good faith in a
commercially reasonable manner in accordance with applicable law and the Debt
Instruments and Mortgages.
(b) Servicing Advances. In accordance with the preceding general servicing
standard, the Servicer, or any Subservicer on behalf of the Servicer, shall make
all Servicing Advances in connection with the servicing of each Home Loan
hereunder. Notwithstanding any provision to the contrary herein, neither the
Servicer nor any Subservicer on behalf of the Servicer shall have any obligation
to advance its own funds for any delinquent scheduled payments of principal and
interest on any Home Loan or to satisfy or keep current the indebtedness secured
by any Superior Liens on the related Mortgaged Property. No costs incurred by
the Servicer or any Subservicer in respect of Servicing Advances shall, for the
purposes of distributions to Securityholders, be added to the amount owing under
the related Home Loan. Notwithstanding any obligation by the Servicer to make a
Servicing Advance hereunder with respect to a Home Loan, before making any
Servicing Advance that is material in relation to the outstanding principal
balance of such Home Loan, the Servicer shall assess the reasonable likelihood
of (i) recovering such Servicing Advance and any prior Servicing Advances for
such Home Loan and (ii) recovering any amounts attributable to outstanding
interest and principal owing on such Home Loan for the benefit of the
Securityholders in excess of the costs, expenses and other deductions to obtain
such recovery, including without limitation any Servicing Advances therefor and,
if applicable, the outstanding indebtedness of all Superior Liens. The Servicer
shall only make a Servicing Advance with respect to a Home Loan to the extent
that the Servicer determines in its reasonable, good faith judgment that such
Servicing Advance would likely be recovered as aforesaid; provided, however,
that the Servicer will be entitled to be reimbursed for any Nonrecoverable
Servicing Advance pursuant to this Agreement.
(c) Waivers, Modifications and Extensions; Subordination. The Servicer
shall make reasonably diligent efforts to collect all payments called for under
the terms and provisions of the Home Loans and shall, to the extent such
procedures shall be consistent with this Agreement, follow Accepted Servicing
Procedures. The Servicer may in its discretion waive or permit to be waived any
penalty interest or any other fee or charge which the Servicer would be entitled
to retain hereunder as servicing compensation and extend the Due Date on a Debt
Instrument for a period (with respect to each payment as to which the Due Date
is extended) not greater than 90 days after the initially scheduled due date for
such payment. Notwithstanding anything in this Agreement to the contrary, the
Servicer shall not permit any additional extension or modification with respect
to any Home Loan other than that permitted by the immediately preceding sentence
unless the Home Loan is a Defaulted Home Loan. The Servicer may in its
discretion enter in subordination agreements with respect to any Home Loan,
provided that the Servicer determines, consistent with this Agreement and
Accepted Servicing Procedures that the entering into of such subordination
agreement is in the best interests of the Trust.
(d) Instruments of Satisfaction or Release. Without limiting the generality
of subsection (c) of this Section 4.01, the Servicer, in its own name or in the
name of a Subservicer, is hereby authorized and empowered, when the Servicer
believes it appropriate in its best judgment, to execute and deliver, on behalf
of the Securityholders and the Trust or any of them, and upon notice to the
Indenture Trustee, any and all instruments of satisfaction or cancellation or of
partial or full release or discharge, and all other comparable instruments with
respect to the Home Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trust and Securityholders. The Servicer shall
service and administer the Home Loans in accordance with applicable state and
federal law and shall provide to the Obligors any reports required to be
provided to them thereby. The Indenture Trustee shall execute, at the written
direction of the Servicer, any limited or special powers of attorney and other
documents reasonably acceptable to the Indenture Trustee to enable the Servicer
or any Subservicer to carry out their servicing and administrative duties
hereunder, including, without limitation, limited or special powers of attorney
with respect to any Foreclosure Property, and the Indenture Trustee shall not be
accountable for the actions of the Servicer or any Subservicers under such
powers of attorney and shall be indemnified by such parties with respect to such
actions.
Section 4.02 Payment of Taxes, Insurance and Other Charges.
The Servicer may and, if required by the Servicer, the Subservicers shall,
establish and maintain one or more accounts (each, a "Servicing Account") into
which any collections from the Obligors (or related advances from Subservicers)
for the payment of taxes, assessments, hazard insurance premiums and comparable
items for the account of the Obligors shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. Withdrawals of amounts so collected from a
Servicing Account may be made only to (i) effect timely payment of taxes,
assessments, hazard insurance premiums and comparable items; (ii) reimburse the
Servicer (or a Subservicer to the extent provided in the related Subservicing
Agreement) out of related collections for any advances with respect to taxes,
assessments, hazard insurance premiums and comparable items; (iii) refund to
Obligors any sums as may be determined to be overages; (iv) pay interest, if
required and as described below, to Obligors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
this Agreement in accordance with Section 11.01 hereof. As part of its servicing
duties, the Servicer or Subservicers shall pay to the Obligors interest on funds
in Servicing Accounts to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement from the Trust,
the Indenture Trustee, Owner Trustee, the Depositor, or any Securityholder
therefor. Upon request of the Indenture Trustee, the Transferor or the Servicer
shall cause the bank, savings association or other depository for each Servicing
Account to forward to the Indenture Trustee copies of such statements or reports
as the Indenture Trustee, the Depositor or any Securityholder shall reasonably
request.
Section 4.03 Fidelity Bond; Errors and Omissions Insurance.
The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy in
such amounts as required by, and satisfying any other requirements of, the
Federal Housing Administration and the FHLMC, with broad coverage on all
officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Home Loans
("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer against losses, including losses
resulting from forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts (including acts relating to the origination and servicing of
loans of the same type as the Home Loans) of such Servicer Employees. Such
fidelity bond shall also protect and insure the Servicer against losses in
connection with the release or satisfaction of a Home Loan without having
obtained payment in full of the indebtedness secured thereby. In the event of
any loss of principal or interest on a Home Loan for which reimbursement is
received from the Servicer's fidelity bond or errors and omissions insurance,
the process from any such insurance will be deposited in the Collection Account.
No provision of this Section 4.03 requiring such fidelity bond and errors and
omission insurance shall diminish or relieve the Servicer from its duties and
obligations as set forth in this Agreement. Upon the request of the Issuer or
the Indenture Trustee, the Servicer shall cause to be delivered to the
requesting party a certified true copy of such fidelity bond and insurance
policy.
Section 4.04 Filing of Continuation Statements.
On or before the fifth anniversary of the filing of any financing
statements by DiTech and the Depositor, respectively, with respect to the assets
conveyed to the Trust, DiTech and the Depositor shall prepare, have executed by
the necessary parties and file in the proper jurisdictions all financing and
continuation statements necessary to maintain the liens, security interests and
priorities of such liens and security interests that have been granted by DiTech
and the Depositor, respectively, and DiTech and the Depositor shall continue to
file on or before each fifth anniversary of the filing of any financing and
continuation statements such additional financing and continuation statements
until the Trust has terminated pursuant to Section 9.1 of the Trust Agreement.
The Indenture Trustee agrees to cooperate with DiTech and the Depositor in
preparing, executing and filing such statements. The Indenture Trustee agrees to
notify DiTech and the Depositor on the third Distribution Date prior to each
such fifth anniversary of the requirement that they file such financing and
continuation statements. The filing of any such statement with respect to DiTech
and the Depositor shall not be construed as any indication of an intent of any
party contrary to the expressed intent set forth in Section 2.03 hereof. If
DiTech or the Depositor has ceased to do business whenever any such financing
and continuation statements must be filed or DiTech or the Depositor fails to
file any such financing statements or continuation statements at least one month
prior to the expiration thereof, each of DiTech and the Depositor does hereby
make, constitute and appoint the Indenture Trustee its attorney-in-fact, with
full power and authority, to execute and file in its name and on its behalf any
such financing statements or continuation statements required under this Section
4.04. The granting of such power of attorney to the Indenture Trustee by the
Transferor and the Depositor does not create an obligation on the part of the
Indenture Trustee to execute or file any such financing or continuation
statements and the Indenture Trustee shall have no liability in connection
therewith.
Section 4.05 Superior Liens.
If the Servicer is notified that any lienholder under a Superior Lien has
accelerated or intends to accelerate the obligations secured by such Superior
Lien, or has declared or intends to declare a default under the related mortgage
or the promissory note secured thereby, or has filed or intends to file an
election to have any Mortgaged Property sold or foreclosed, the Servicer shall
take, on behalf of the Issuer and the Indenture Trustee, reasonable actions to
protect the interests of the Securityholders and/or to preserve the security of
the related Home Loan consistent with the requirements of this Agreement,
provided that the Servicer shall not be required to make any Servicing Advances
to cure the default or reinstate the Superior Lien. The Servicer shall promptly
notify the Issuer and the Indenture Trustee if it takes any such action.
Section 4.06 Subservicing.
(a) The Servicer may enter into Subservicing Agreements for any servicing
and administration of Home Loans with any institution that is an Eligible
Servicer and in compliance with the laws of each state necessary to enable it to
perform its obligations under such Subservicing Agreement. The Servicer shall
give prior written notice to the Issuer and the Indenture Trustee of the
appointment of any Subservicer. The Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement and to either service the related Home Loans directly or
enter into a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall service directly the related Home Loans.
Each Subservicing Agreement shall include the provision that such agreement
may be immediately terminated by the Indenture Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer. In no event shall any
Subservicing Agreement require the Indenture Trustee, as Successor Servicer, for
any reason whatsoever to pay compensation to a Subservicer in order to terminate
such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Issuer, the
Indenture Trustee and the Securityholders for the servicing and administration
of the Home Loans in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue of such Subservicing
Agreements or arrangements or by virtue of indemnification from the Subservicer
and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Home Loans. For purposes of
this Agreement, the Servicer shall be deemed to have received payments on Home
Loans when the Subservicer has actually received such payments and, unless the
context otherwise requires, references in this Agreement to actions taken or to
be taken by the Servicer in servicing the Home Loans include actions taken or to
be taken by a Subservicer on behalf of the Servicer. The Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification of
the Servicer by such Subservicer, and nothing contained in this Agreement shall
be deemed to limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor Servicer,
on behalf of the Issuer, the Indenture Trustee and the Securityholders pursuant
to Section 4.07 hereof, shall thereupon assume all of the rights and obligations
of the Servicer under each Subservicing Agreement that the Servicer may have
entered into, unless the successor Servicer elects to terminate any Subservicing
Agreement in accordance with its terms. The successor Servicer shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements which accrued prior to the transfer of servicing to the
successor Servicer. The Servicer, at its expense and without right of
reimbursement therefor, shall, upon request of the successor Servicer, deliver
to the assuming party all documents and records relating to each Subservicing
Agreement and the Home Loans then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Subservicing Agreements to the assuming
party.
(d) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Issuer, the Indenture Trustee and the Securityholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be in
such form and carried out to such an extent and at such time as the Servicer, in
its good faith business judgment, would require were it the owner of the related
Home Loans. The Servicer shall pay the costs of such enforcement at its own
expense and shall be reimbursed therefor only (i) from a general recovery
resulting from such enforcement to the extent, if any, that such recovery
exceeds all amounts due in respect of the related Home Loan or (ii) from a
specific recovery of costs, expenses or attorneys' fees against the party
against which such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none of
the Issuer, the Indenture Trustee or the Securityholders shall be deemed parties
thereto or shall have any claims, rights, obligations, duties or liabilities
with respect to the Subservicer in its capacity as such except as set forth in
subsection (c) of this Section 4.06.
(f) In those cases where a Subservicer is servicing a Home Loan pursuant to
a Subservicing Agreement, the Subservicer will be required to establish and
maintain one or more accounts (collectively, the "Subservicing Account"). The
Subservicing Account shall be an Eligible Account. The Subservicer will be
required to deposit into the Subservicing Account, no later than the first
Business Day after receipt, all proceeds of Home Loans received by the
Subservicer and remit such proceeds to the Servicer for deposit in the
Collection Account not later than the Business Day following receipt thereof by
the Subservicer. Notwithstanding anything in this subsection (f) to the
contrary, the Subservicer shall only be able to withdraw funds from the
Subservicing Account for the purpose of remitting such funds to the Servicer for
deposit into the Collection Account. The Servicer shall require the Subservicer
to cause any collection agent of the Subservicer to send a copy to the Servicer
of each statement of monthly payments collected by or on behalf of the
Subservicer within five Business Days after the end of every month, and the
Servicer shall compare the information provided in such reports with the
deposits made by the Subservicer into the Collection Account for the same
period. The Servicer shall be deemed to have received payments on the Home Loans
on the date on which the Subservicer has received such payments.
Section 4.07 Successor Servicers.
In the event that the Servicer is terminated pursuant to Section 10.01
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes unable
to perform its obligations under this Agreement, the Indenture Trustee will
become the successor servicer or will appoint a successor servicer in accordance
with the provisions of Section 10.02 hereof; provided, however, that any
successor servicer, excluding the Indenture Trustee, shall satisfy the
requirements of an Eligible Servicer and shall be approved by the Rating
Agencies.
Section 4.08 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained for each Foreclosure Property
acquired by the Trust such types and amounts of insurance coverage as the
Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance Policies
shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Home Loan:
(A) for the restoration or repair of the affected Property,
in which event such amounts shall be released to the
Obligor in accordance with the terms of the related
Debt Instrument or
(B) to the extent not so used, in reduction of the
Principal Balance of the related Home Loan, in which
event such amounts shall be deposited into the
Collection Account,
unless the related instruments require a different application, in which case
such amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.10 hereof, in the case of amounts
received in respect of any Foreclosure Property, for the restoration
or repair of such Foreclosure Property, unless the Servicer
determines, consistent with the servicing standard set forth in
Section 4.01 hereof, that such restoration or repair is not in the
best economic interest of the Trust, in which event such amounts shall
be deposited into the Collection Account as a payment received from
the operation of such Foreclosure Property.
Section 4.09 Reports to the Securities and Exchange Commission; 144A
Information.
(a) The Indenture Trustee shall, on behalf of the Trust, cause to be filed
with the Securities and Exchange Commission all monthly reports on Form 8-K and
annual reports on Form 10-K required to be filed under the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder. Upon the request of the
Indenture Trustee, each of the Servicer and the Transferor shall cooperate with
the Indenture Trustee in the preparation of any such report and shall provide to
the Indenture Trustee in a timely manner all such information or documentation
as the Indenture Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section 4.09. The Indenture
Trustee shall pay any fees, costs, expenses and liabilities (including legal
fees and expenses) incurred by each of the Issuer and the Depositor arising as a
result of the negligent failure of the Indenture Trustee to perform its duties
and obligations under this Section 4.09.
(b) The Servicer shall provide to the Indenture Trustee, if requested,
information regarding the Class B Notes and the Home Loans and such other
information as the Indenture Trustee shall be required to deliver to any holder
of a Class B Note and any prospective transferee designated by any such holder
to satisfy the condition of eligibility set forth in Rule 144A(d)(4) under the
Securities Act.
Section 4.10 Foreclosure; Foreclosure Alternatives.
(a) If any monthly payment due under any Home Loan is not paid when the
same is due and payable, or if the Obligor fails to perform any other covenant
or obligation under such Home Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as it shall deem to
be in the best interest of the Trust, including but not limited to proceeding
against the Property securing such Home Loan, accepting short pay-offs, short
sales, entering into assumptions and modifications, pursuing collection
litigation or alternative court proceedings to foreclosure actions. In the event
that the Servicer determines not to proceed against the Mortgaged Property or
Obligor, as applicable, on or before the Determination Date following such
determination, the Servicer shall determine in good faith in accordance with
customary servicing practices that all amounts which it expects to receive with
respect to such Home Loan have been received. If the Servicer makes such a
determination, it shall give notice to such effect to the Issuer and the
Indenture Trustee.
(b) In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, unless otherwise
prohibited by applicable law or court or administrative order, the Servicer, on
behalf of the Trust and the Indenture Trustee, may, at any time, institute
foreclosure proceedings to the extent permitted by law, exercise any power of
sale to the extent permitted by law, obtain a deed in lieu of foreclosure, or
otherwise acquire possession of or title to the related Mortgaged Property, by
operation of law or otherwise.
In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, the Servicer shall
institute foreclosure proceedings, repossess, exercise any power of sale to the
extent permitted by law, obtain a deed in lieu of foreclosure or otherwise
acquire possession of or title to any Property, by operation of law or
otherwise, only in the event that in the Servicer's reasonable judgment such
action is likely to result in a positive economic benefit to the Trust by
creating net liquidation proceeds (after reimbursement of all amounts owed with
respect to such Home Loan to the Servicer).
(c) The Indenture Trustee shall execute within 5 days after request of the
Servicer therefor, any powers of attorney and other documents necessary and
appropriate to carry out its duties hereunder, including any documents or powers
of attorney necessary to foreclose any Mortgage. The forms of any such powers or
documents shall be appended to such requests.
Section 4.11 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Indenture Trustee
for the benefit of the Securityholders. The Servicer shall manage, conserve,
protect and operate each Foreclosure Property for the Indenture Trustee and the
Securityholders solely for the purpose of the prudent and prompt disposition and
sale of such Foreclosure Property. The Servicer shall, either itself or through
an agent selected by the Servicer, manage, conserve, protect and operate the
Foreclosure Property in the same manner that it manages, conserves, protects and
operates other foreclosure property for its own account.
Subject to Section 4.10 hereof, the Servicer shall, consistent with the
servicing standards set forth herein, foreclose upon or otherwise comparably
convert the ownership of Properties securing such of the Home Loans as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. In connection with realization upon
defaulted Home Loans, the Servicer shall follow such practices and procedures as
it shall deem necessary or advisable, as shall be normal and usual in accordance
with Accepted Servicing Procedures and as shall meet the requirements of
insurers under any insurance policy required to be maintained hereunder with
respect to the related Home Loan. The Servicer shall be responsible for all
costs and expenses incurred by it in any such proceedings; provided, however,
that such costs and expenses will be recoverable as Servicing Advances by the
Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property that shall have suffered damage from
any cause of damage to a Mortgaged Property such that the complete restoration
of such property is not fully reimbursable by the hazard insurance policies
required to be maintained pursuant to this Agreement unless it shall determine
in its reasonable judgment, as evidenced by a certificate of a Servicing
Officer, that such foreclosure or restoration, as the case may be, will increase
the proceeds of liquidation of the related Home Loan after reimbursement to
itself of Servicing Advances. Any Servicing Advances made with respect to a Home
Loan shall be recoverable by the Servicer only from recoveries on such Home Loan
except to the extent such Servicing Advance is deemed a Nonrecoverable Servicing
Advance.
The Servicer may offer to sell to any Person any Foreclosure Property, if
and when the Servicer determines, in a manner consistent with Accepted Servicing
Procedures, that such a sale would be in the best interests of the Trust. The
Servicer shall give the Indenture Trustee not less than five days' prior notice
of its intention to sell any Foreclosure Property and shall accept the highest
bid received from any Person for any Foreclosure Property in an amount at least
equal to the sum of:
(1) the Principal Balance of the related foreclosed Home Loan
plus the outstanding amount of any Superior Liens; and
(2) all unpaid interest accrued thereon at the related Home Loan
Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosure Property by the Servicer, if the highest bidder is a Person other
than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of any
bid determined to be fair as aforesaid, the Servicer shall offer the affected
Foreclosure Property for sale to any Person, other than an Interested Person, in
a commercially reasonable manner for a period of not less than 10 or more than
30 days, and shall accept the highest cash bid received therefor in excess of
the highest bid previously submitted. If no such bid is received, any Interested
Person may resubmit its original bid and the Servicer shall accept the highest
outstanding cash bid, regardless of from whom received. No Interested Person
shall be obligated to submit a bid to purchase any Foreclosure Property and,
notwithstanding anything to the contrary herein, neither the Indenture Trustee,
in its individual capacity, nor any of its Affiliates may bid for or purchase
any Foreclosure Property pursuant hereto.
In determining whether any bid constitutes a fair price for any Foreclosure
Property, the Servicer shall take into account, and any appraiser or other
expert in real estate matters shall be instructed to take into account, as
applicable, among other factors, the financial standing of any tenant of the
Foreclosure Property, the physical condition of the Foreclosure Property and the
state of the local and national economies.
Subject to the provisions of Section 4.10 hereof, the Servicer shall act on
behalf of the Indenture Trustee in negotiating and taking any other action
necessary or appropriate in connection with the sale of any Foreclosure
Property, including the collection of all amounts payable in connection
therewith. Any sale of a Foreclosure Property shall be without recourse to the
Indenture Trustee, the Servicer or the Trust and, if consummated in accordance
with the terms of this Agreement, neither the Servicer nor the Indenture Trustee
shall have any liability to any Securityholder with respect to the purchase
price therefor accepted by the Servicer or the Indenture Trustee.
The Servicer may contract with any independent contractor for the operation
and management of any Foreclosure Property; provided, however, that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs
and expenses) to the Servicer as soon as practicable, but in no event
later than 30 days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this Section 4.11 relating to any
such contract or to actions taken through any such independent
contractor shall be deemed to relieve the Servicer of any of its
duties and obligations hereunder with respect to the operation and
management of any such Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations
in connection with the operation and management of such Foreclosure
Property.
The Servicer shall be entitled to enter into any agreement with any
independent contractor performing services for it related to its
duties and obligations hereunder for indemnification of the Servicer
by such independent contractor, and nothing in this Agreement shall be
deemed to limit or modify such indemnification. The Servicer shall not
be liable for any fees owed by it to any such independent contractor
and any amounts so expended shall be deemed Servicing Advances. Each
liquidation of a Foreclosure Property shall be carried by the Servicer
at such price and upon such terms and conditions as the Servicer shall
deem necessary or advisable and as shall be normal and usual in its
several servicing activities, and the resulting Liquidation Proceeds
shall be distributed in accordance with Section 5.01 hereof.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account.
(a) (1) Establishment of Collection Account. The Servicer, for the benefit
of the Securityholders, shall cause to be established and maintained one or
more Collection Accounts in the State of New York (collectively, the
"Collection Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Collection Account, The Bank of New York, as
Indenture Trustee, in trust for the DiTech Home Loan Asset Backed Notes,
Series 1997-1". The Collection Account may be maintained with the Indenture
Trustee or any other depository institution which satisfies the
requirements set forth in the definition of Eligible Account. The creation
of any Collection Account other than one maintained with the Indenture
Trustee shall be evidenced by a letter agreement between the Servicer and
the depository institution acceptable to the Indenture Trustee. A copy of
such letter agreement shall be furnished to the Indenture Trustee and, upon
request of any Securityholder, to such Securityholder. Funds in the
Collection Account shall be invested in accordance with Section 5.03
hereof.
The Collection Account shall be established, as of the Closing Date, with
the Indenture Trustee as an Eligible Account pursuant to the definition thereof.
The Collection Account may, upon written notice to the Issuer and the Indenture
Trustee, be transferred to a different depository institution so long as such
transfer is to an Eligible Account acceptable to the Indenture Trustee.
(2) Establishment of Note Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Noteholders, shall cause
to be established and maintained with the Indenture Trustee in the State of
New York one or more Note Distribution Accounts (collectively, the "Note
Distribution Account"), which shall be separate Eligible Accounts and may
be interest-bearing, entitled "Note Distribution Account, The Bank of New
York, as Indenture Trustee, in trust for the DiTech Home Loan Asset Backed
Notes, Series 1997-1". Funds in the Note Distribution Account shall be
invested in accordance with Section 5.03 hereof.
(b) (1) Deposits to Collection Account. The Servicer shall use its best
efforts to deposit or cause to be deposited (without duplication), within
two (2) Business Days after receipt thereof, into the Collection Account
and retain therein in trust for the benefit of the Securityholders:
(i) all payments in respect of interest due with respect to the
Home Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date, including any amounts
required to be deposited in the Collection Account pursuant to Section
2.06(b)(vii)(B)(IV) hereof;
(ii) all Net Liquidation Proceeds pursuant to Section 4.11
hereof, to the extent required under Section 4.08;
(iii) all Insurance Proceeds, to the extent required under
Section 4.08;
(iv) all Released Mortgaged Property Proceeds;
(v) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.05 and 3.05 hereof;
(vi) the deposit of the Termination Price under Section 11.01
hereof;
(vii) any amount to be deposited from the Pre-Funding Account or
the Capitalized Interest Account; and
(viii) interest and gains on funds held in the Collection
Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03 hereof,
and such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to the
Servicer from the Note Distribution Account on the next Distribution Date
following such Due Period.
(2) Deposits to Note Distribution Account. On the second Business Day
prior to each Distribution Date, the Indenture Trustee (based on
information provided by the Servicer for such Distribution Date) shall
withdraw from the Collection Account the Available Collection Amount and
deposit such into the Note Distribution Account for such Distribution Date.
(3) Withdrawals from Collection Account. The Indenture Trustee, at the
direction of the Servicer, shall also make the following withdrawals from
the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) to withdraw the Servicer Reimbursement Amount;
(iii) to clear and terminate the Collection Account in connection
with the termination of this Agreement; and
(iv) to make the payments set forth in Section 9.01(e) hereof.
(c) Withdrawals from Note Distribution Account. To the extent funds
are available in the Note Distribution Account, the Indenture Trustee
(based on the information provided by the Servicer contained in the
Servicer's Monthly Remittance Report for such Distribution Date) shall make
withdrawals therefrom by 9:00 a.m. (New York City time) on each
Distribution Date, for application in the following order of priority:
(i) to distribute on such Distribution Date the following amounts
pursuant to the Indenture in the following order: (a) to the Servicer,
an amount equal to (i) the Servicing Compensation (net of any amounts
retained prior to deposit into the Collection Account pursuant to
subsection (b)(1) above) and all unpaid Servicing Compensation from
prior Distribution Dates and (ii) all Nonrecoverable Servicing
Advances not previously reimbursed, (b) to the Indenture Trustee, an
amount equal to the Indenture Trustee Fee and all unpaid Indenture
Trustee Fees from prior Distribution Dates, (c) to the Owner Trustee,
an amount equal to the Owner Trustee Fee or any unpaid portion of the
Owner Trustee Fees, and (d) to the Custodian, an amount equal to the
Custodian Fee, if any, and all unpaid Custodian Fees from prior
Distribution Dates; and
(ii) to deposit into the Certificate Distribution Account the
applicable portions of the Available Distribution Amount distributable
in respect of the Residual Interest calculated pursuant to subsections
(d) and (e) of this Section 5.01 on such Distribution Date.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account and
the Note Distribution Account hereunder until the Class Principal Balance of
each Class of Notes has been reduced to zero.
(d) On each Distribution Date, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Distribution Date) shall distribute the Regular
Distribution Amount from the Note Distribution Account (in the case of all
amounts distributable to Noteholders) and from the Certificate Distribution
Account (in the case of all amounts distributable to Certificateholders),
in the following order of priority:
(i) to the holders of the Senior Notes pro rata, the Senior
Noteholders Interest Distribution Amount for such Distribution Date;
(ii) sequentially, to the holders of the Class M-1 and Class M-2
Notes, in that order, their respective portions of the Mezzanine
Noteholders' Interest Distribution Amount for such Distribution Date;
(iii) sequentially, to the holders of the Class B-1 and Class B-2
Notes, in that order, their respective portions of the Subordinate
Noteholders' Interest Distribution Amount for such Distribution Date;
(iv) if with respect to such Distribution Date the Pre-Funding
Distribution Trigger shall have occurred, the amount on deposit in the
Pre-Funding Account at the end of the Pre-Funding Period will be
distributed as principal to all Classes of Notes pro rata based on the
Original Class Principal Balances thereof;
(v) sequentially, to the holders of the Class A-1, Class A-2,
Class A-3 and Class A-4 Notes, in that order, until the respective
Class Principal Balances thereof are reduced to zero, the amount
necessary to reduce the aggregate Class Principal Balance of the
Senior Notes to the Senior Optimal Principal Balance for such
Distribution Date; provided, however, that on each Distribution Date
occurring on or after any reduction of the Class Principal Balances of
the Class M-1 Notes, Class M-2 Notes, Class B-1 Notes and the Class
B-2 Notes to zero through the application of Allocable Loss Amounts,
amounts shall be distributed among the remaining Senior Notes pro rata
in accordance with their outstanding Class Principal Balances and not
sequentially;
(vi) sequentially, to the holders of the Class M-1 Notes and
Class M-2 Notes in that order, the amount necessary to reduce the
Class Principal Balances thereof to the Class M-1 Optimal Principal
Balance and the Class M-2 Optimal Principal Balance, respectively, for
such Distribution Date;
(vii) sequentially, to the holders of the Class B-1 and Class B-2
Notes, in that order, the amount necessary to reduce the Class
Principal Balances thereof to the Class B-1 Optimal Principal Balance
and the Class B-2 Optimal Principal Balance, respectively, for such
Distribution Date;
(viii) sequentially, to the Class M-1 Notes, Class M-2 Notes,
Class B-1 and the Class B-2 Notes, in that order, until their
respective Loss Reimbursement Deficiencies have been paid in full
(first, to the reimbursement of Allocable Loss Amounts, until
completely reimbursed and then, to any accrued interest thereon); and
(ix) any remaining amount to the holders of the Residual Interest
Certificates.
(e) On each Distribution Date, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Distribution Date) shall distribute the Excess
Spread, if any, in the following order of priority:
(i) in an amount equal to the Overcollateralization Deficiency
Amount, if any, as follows:
(A) sequentially, to the holders of the Class A-1, Class
A-2, Class A-3 and Class A-4 Notes, in that order,
until the respective Class Principal Balances thereof
are reduced to zero and until the aggregate of their
Class Balances have been reduced to the Senior Optimal
Principal Balance for such Distribution Date;
(B) sequentially, to the holders of the Class M-1 Notes and
Class M-2 Notes, in that order, until the respective
Class Principal Balances thereof have been reduced to
the Class M-1 Optimal Principal Balance and Class M-2
Optimal Principal Balance, respectively, for such
Distribution Date; and
(C) (i) sequentially, to the holders of the Class B-1 Notes
and Class B-2 Notes, until the respective Class
Principal Balances thereof have been reduced to the
Class B-1 Optimal Principal Balance and the Class B-2
Optimal Principal Balance for such Distribution Date;
and
(ii) sequentially, to the Class M-1 Notes, the Class M-2 Notes,
Class B-1 Notes and the Class B-2 Notes, in that order, until their
respective Loss Reimbursement Deficiencies, if any, have been paid in
full (in the case of the Class M-1 Notes and Class M-2 Notes: first,
to the reimbursement of Allocable Loss Amounts until completely
reimbursed and, then, to any accrued interest thereon); and
(iii) any remaining amount to the holders of the Residual
Interest Certificates.
Section 5.02 Certificate Distribution Account and Note Distribution
Account.
(a) Establishment of Certificate Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Certificateholders, shall
cause to be established and maintained in the State of New York with the
Indenture Trustee for the benefit of the Trust one or more Certificate
Distribution Accounts (collectively, the "Certificate Distribution Account"),
each of which shall be an Eligible Account and may be interest-bearing, entitled
"Certificate Distribution Account for the DiTech Home Loan Owner Trust 1997-1".
Funds in the Certificate Distribution Account shall be invested in accordance
with Section 5.03 hereof.
(b) Distributions. On each Distribution Date the Indenture Trustee shall
withdraw from the Note Distribution Account all amounts required to be deposited
into the Certificate Distribution Account with respect to such Distribution Date
pursuant to Section 5.01(c)(ii) hereof and, on behalf of the Trust, shall
deposit such amounts into the Certificate Distribution Account. The Indenture
Trustee shall distribute all remaining amounts on deposit in the Note
Distribution Account to the holders of the Notes to the extent of amounts due
and unpaid on the Notes for principal thereof and interest thereon. The
Indenture Trustee, on behalf of the Trust shall distribute all amounts on
deposit in the Certificate Distribution Account first to the Indenture Trustee
to the extent of amounts due and not otherwise reimbursed pursuant to Section
6.07 of the Indenture and second, to the holders of the Residual Interest
Certificates.
(c) All distributions made on each Class of Notes on each Distribution Date
will be made on a pro rata basis among the Noteholders of record of such Class
of Notes on the next preceding Record Date based on the Percentage Interest
represented by their respective Notes, without preference or priority of any
kind, and, except as otherwise provided in the next succeeding sentence, shall
be made by wire transfer of immediately available funds to the account of such
Noteholder, if such Noteholder shall own of record Notes in original
Denominations aggregating at least $250,000 and shall have so notified the
Indenture Trustee, and otherwise by check mailed to the address of such
Noteholder appearing in the Notes Register. The final distribution on each Note
will be made in like manner, but only upon presentment and surrender of such
Note at the location specified in the notice to Noteholders of such final
distribution.
(d) All distributions made on the Residual Interest Certificates on each
Distribution Date will be made pro rata among the holders of the Residual
Interest Certificates of record on the next preceding Record Date based on their
percentage holdings in the Residual Interest, without preference or priority of
any kind, and, except as otherwise provided in the next succeeding sentence,
shall be made by wire transfer of immediately available funds to the account of
each such holder, if such holder shall own of record a Residual Interest
Certificate in an original denomination aggregating at least a 50% holding of
the Residual Interest and shall have so notified the Paying Agent, and otherwise
by check mailed to the address of such Residual Interest holder appearing in the
Certificate Register. The final distribution on each Residual Interest
Certificate will be made in like manner, but only upon presentment and surrender
of such Residual Interest Certificate at the location specified in the notice to
holders of the Residual Interest Certificates of such final distribution. Any
amount distributed to the holders of the Residual Interest Certificates on any
Distribution Date shall not be subject to any claim or interest of holders of
the other Classes of Notes.
Section 5.03 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to the
provisions hereunder, each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts distributed from each Trust
Account in accordance with the Indenture and this Agreement shall be released
from the lien of the Indenture upon such distribution thereunder or hereunder.
The Indenture Trustee shall possess all right, title and interest in and to all
funds on deposit from time to time in the Trust Accounts (other than the
Certificate Distribution Account) and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property and the Trust Estate. If, at any time, any
Trust Account ceases to be an Eligible Account, the Indenture Trustee (or the
Servicer on its behalf) shall, within ten Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency may consent) (i)
establish a new Trust Account as an Eligible Account, (ii) terminate the
ineligible Trust Account, and (iii) transfer any cash and investments from such
ineligible Trust Account to such new Trust Account.
With respect to the Trust Accounts (other than the Certificate Distribution
Account), the Indenture Trustee agrees, by its acceptance hereof, that each such
Trust Account shall be subject to the sole and exclusive custody and control of
the Indenture Trustee for the benefit of the Noteholders and the Issuer, as the
case may be, and the Indenture Trustee shall have sole signature and withdrawal
authority with respect thereto.
In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder shall also be subject to and
established and maintained in accordance with the Trust Agreement. Subject to
rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee or the Paying Agent shall possess for the benefit of the
Certificateholders all right, title and interest in all funds on deposit from
time to time in the Certificate Distribution Account and in all proceeds thereof
(including all income thereon) and all such funds, investments, proceeds and
income shall be part of the Trust Account Property and the Trust Estate.
Notwithstanding the preceding, the distribution of amounts from the Certificate
Distribution Account in accordance with Section 5.01(c)(ii) hereof shall also be
made for the benefit of the Indenture Trustee (including without limitation with
respect to its duties under the Indenture and this Agreement relating to the
Trust Estate), and the Indenture Trustee (in its capacity as Indenture Trustee)
shall have the right, but not the obligation, to take custody and control of the
Certificate Distribution Account and to cause the distribution of amounts
therefrom in the event that the Owner Trustee fails to distribute such amounts
in accordance with subsections (c) and (d) of Section 5.02.
The Servicer shall have the power, revocable by the Indenture Trustee or by
the Owner Trustee with the consent of the Indenture Trustee, to instruct the
Indenture Trustee or Owner Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer to carry out its
duties hereunder or permitting the Indenture Trustee or Owner Trustee to carry
out their respective duties herein or under the Indenture or the Trust
Agreement, as applicable.
(b) (1) Investment of Funds. So long as no Event of Default shall have
occurred and be continuing, the funds held in any Trust Account may be
invested (to the extent practicable and consistent with any requirements of
the Code) in Permitted Investments, as directed by the Transferor in
writing or by telephone or facsimile transmission confirmed in writing by
the Servicer. In any case, funds in any Trust Account must be available for
withdrawal without penalty, and any Permitted Investments must mature or
otherwise be available for withdrawal, not later than the Business Day
immediately preceding the Distribution Date next following the date of such
investment and shall not be sold or disposed of prior to its maturity
subject to subsection (b)(2) of this Section. All interest and any other
investment earnings on amounts or investments held in any Trust Account
shall be deposited into such Trust Account immediately upon receipt by the
Indenture Trustee. All Permitted Investments in which funds in any Trust
Account (other than the Certificate Distribution Account) are invested must
be held by or registered in the name of "The Bank of New York, as Indenture
Trustee, in trust for the DiTech Home Loan Asset Backed Notes, Series
1997-1". While the Indenture Trustee holds the Certificate Distribution
Account on behalf of the Trust, all Permitted Investments in which funds in
the Certificate Distribution Account are invested shall be held by or
registered in the name of "Certificate Distribution Account for DiTech Home
Loan Owner Trust 1997-1".
(2) Insufficiency and Losses in Trust Accounts. If any amounts are
needed for disbursement from any Trust Account held by or on behalf of the
Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Trust Account. The Indenture Trustee shall not be liable for any investment
loss or other charge resulting therefrom, unless such loss or charge is
caused by the failure of the Indenture Trustee to perform in accordance
with this Section 5.03.
If any losses are realized in connection with any investment in any Trust
Account pursuant to this Agreement and the Indenture, then the Transferor shall
deposit the amount of such losses (to the extent not offset by income from other
investments in such Trust Account) into such Trust Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in any Trust Account shall be taxed to the Issuer and for federal
and state income tax purposes the Issuer shall be deemed to be the owner of each
Trust Account.
(c) Subject to section 6.01 of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Account held
by the Indenture Trustee resulting from any investment loss on any Permitted
Investment included therein (except to the extent that the Indenture Trustee is
the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit accounts shall
be held solely in the Eligible Accounts, subject to the last sentence of
subsection (a) of this Section 5.03; and each such Eligible Account shall
be subject to the sole and exclusive dominion, custody and control of the
Indenture Trustee; and, without limitation on the foregoing, the Indenture
Trustee shall have sole signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with paragraph
(a) of the definition of "Delivery" in Section 1.1 hereof and shall be
held, pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in section 8-313(4) of the
UCC) acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" in Section 1.1 hereof and shall be maintained by
the Indenture Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in such
paragraph; and
(4) any Trust Account Property that is an "uncertificated security"
under Article VIII of the UCC and that is not governed by clause (3) above
shall be delivered to the Indenture Trustee in accordance with paragraph
(c) of the definition of "Delivery" in Section 1.1 hereof and shall be
maintained by the Indenture Trustee, pending maturity or disposition,
through continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Indenture Trustee
or by the Issuer with the consent of the Indenture Trustee, to instruct the
Indenture Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer or the Issuer to carry out their
respective duties hereunder or permitting the Indenture Trustee to carry out its
duties under the Indenture.
Section 5.04 Allocation of Losses.
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than the
related Principal Balance plus accrued interest thereon, or any Obligor makes a
partial payment of any Monthly Payment due on a Home Loan, such Net Liquidation
Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds or partial
payment shall be applied to payment of the related Debt Instrument, first, to
interest accrued at the Home Loan Interest Rate and, then, to principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be applied
to the reduction of the Class Principal Balances of the Class B-2, the Class B-1
Notes, the Class M-1 Notes and Class M-2 Notes in accordance with the Allocable
Loss Amount Priority.
Section 5.05 Pre-Funding Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained in the State of New York in the name of the Indenture
Trustee a Pre-Funding Account (the "Pre-Funding Account"), which shall be a
separate Eligible Account and may be interest-bearing, entitled "Pre-Funding
Account, The Bank of New York, as Indenture Trustee, in trust for the DiTech
Home Loan Asset Backed Securities, Series 1997-1." The Pre-Funding Account may
be maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of a Pre-Funding Account other than one maintained with
the Indenture Trustee shall be evidenced by a letter agreement between the
Servicer and the depository institution acceptable to the Indenture Trustee. A
copy of such letter agreement shall be furnished to the Indenture Trustee and,
upon request of any Securityholder, to such Securityholder. Funds in the
Pre-Funding Account shall be invested in accordance with Section 5.03 hereof.
On the Closing Date, the Trust will deposit in the Pre-Funding Account the
Pre-Funded Amount from the net proceeds of the sale of the Notes. On each
Subsequent Transfer Date, upon satisfaction of the conditions set forth in
Section 2.06 hereof with respect to such transfer, the Indenture Trustee shall
withdraw from the Pre-Funding Account an amount equal to the Principal Balances
of the Subsequent Loans transferred to the Issuer on such Subsequent Transfer
Date and distribute such amount to or upon the order of the Transferor.
(b) If the Pre-Funded Amount has not been reduced to zero on the last day
of the Pre-Funding Period after giving effect to any reductions in the
Pre-Funded Amount on such date pursuant to paragraph (a) above, the Indenture
Trustee in writing shall withdraw from the Pre-Funding Account on the Mandatory
Redemption Date (i) if the Pre-Funded Amount is equal to or less than $50,000,
and deposit such amount in the Note Distribution Account to be applied to reduce
the Outstanding Amount of the Class of Notes then entitled to distributions of
principal and (ii) if the Pre-Funded Amount is greater than $50,000, and deposit
such amounts to the Note Distribution Account to be applied in reduction of the
Class Principal Balance of each Class of Notes based on the related Pre-Funded
Percentage.
(c) On the Business Day preceding each of the second and third Distribution
Dates, if applicable, the Indenture Trustee shall withdraw the related
Pre-Funding Earnings for the related Due Period and remit such amounts to the
Transferor.
Section 5.06 Capitalized Interest Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained in the name of the Indenture Trustee a Capitalized
Interest Account (the "Capitalized Interest Account"), which shall be a separate
Eligible Account and may be interest-bearing, entitled "Capitalized Interest
Account, The Bank of New York, as Indenture Trustee, in trust for the DiTech
Home Loan Asset Backed Notes, Series 1997-1." The Capitalized Interest Account
may be maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of a Capitalized Interest Account other than one
maintained with the Indenture Trustee shall be evidenced by a letter agreement
between the Servicer and the depository institution acceptable to the Indenture
Trustee. A copy of such letter agreement shall be furnished to the Indenture
Trustee and, upon request of any Securityholder, to such Securityholder. Funds
in the Capitalized Interest Account shall be invested in accordance with Section
5.03 hereof.
On the Closing Date, the Trust will deposit in the Capitalized Interest
Account the Capitalized Interest Initial Deposit from the net proceeds of the
sale of the Notes and the Certificates and on each Subsequent Transfer Date the
Trust will deposit in the Capitalized Interest Account any applicable
Capitalized Interest Subsequent Deposit with respect to each Subsequent Loan.
(b) On each Determination Date during the Pre-Funding Period (including the
Determination Date in the month following the Due Period during which the
Pre-Funding Period ends), the Indenture Trustee will withdraw from the
Capitalized Interest Account an amount equal to the Capitalized Interest
Requirement and deposit such amount into the Collection Account.
(c) On the Mandatory Redemption Date, any amounts remaining in the
Capitalized Interest Account shall be paid to the Transferor.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall deliver to
the Indenture Trustee by facsimile, the receipt and legibility of which shall be
confirmed by telephone, and with hard copy thereof to be delivered no later than
one (1) Business Day after such Determination Date, the Servicer's Monthly
Remittance Report, setting forth the date of such Report (day, month and year),
the name of the Issuer (i.e. "DiTech Home Loan Owner Trust 1997-1"), the Series
designation of the Notes (i.e. "Series 1997-1") and the date of this Agreement,
all in substantially the form set out in Exhibit B hereto. Furthermore, no later
than each Determination Date, the Servicer shall deliver to the Indenture
Trustee a magnetic tape or computer disk providing such information regarding
the Servicer's activities in servicing the Home Loans during the related Due
Period as the Indenture Trustee may reasonably require.
(b) On each Distribution Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Distribution
Statement") to the Depositor, the Owner Trustee, the Securityholders and the
Rating Agencies, stating the date of original issuance of the Notes (day, month
and year), the name of the Issuer (i.e. "DiTech Home Loan Owner Trust 1997-1"),
the Series designation of the Notes (i.e., "Series 1997-1"), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Available Distribution Amount
for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Notes before and
after giving effect to distributions made to the holders of such Notes on
such Distribution Date, and the Pool Principal Balance as of the first and
last day of the related Due Period;
(iii) the Class Factor with respect to each Class of the Notes then
outstanding;
(iv) the amount of principal, if any, and interest to be distributed
to each Class of Notes on the related Distribution Date;
(v) with respect to each Class of Notes, the Optimal Principal Balance
thereof;
(vi) the Overcollateralization Deficiency Amount, and any amount to be
distributed to the Noteholders or the holders of the Residual Interest on
such Distribution Date;
(vii) the Servicing Compensation, the Indenture Trustee Fee, the Owner
Trustee Fee and, the Custodian Fee, if any, for such Distribution Date;
(viii) the Overcollateralization Amount on such Distribution Date, the
Overcollateralization Target Amount as of such Distribution Date, the Net
Loan Losses incurred during the related Due Period, the cumulative Net Loan
Losses as of such Distribution Date, the Allocable Loss Amount for such
Distribution Date and the application of the Allocable Loss Amount Priority
for such Distribution Date;
(ix) the weighted average maturity of the Home Loans and the weighted
average Home Loan Interest Rate of the Home Loans;
(x) certain performance information, including, without limitation,
delinquency and foreclosure information with respect to the Home Loans and
60-Day Delinquency Amounts (as defined in the definition of "Six-Month
Rolling Delinquency Average" in Section 1.01 hereof), as set forth in the
Servicer's Monthly Remittance Report;
(xi) the number of and aggregate Principal Balance of all Home Loans
in foreclosure proceedings and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all Home
Loans, all as of the close of business on the last day of the related Due
Period;
(xii) the number of and the aggregate Principal Balance of the Home
Loans in bankruptcy proceedings and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all Home
Loans, all as of the close of business on the last day of the related Due
Period;
(xiii) the number of Foreclosure Properties, the aggregate Principal
Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such Home
Loans to the aggregate Principal Balances of all Home Loans, all as of the
close of business on the last day of the related Due Period;
(xiv) during the related Due Period (and cumulatively, from the
Closing Date through the most current Due Period), the number and aggregate
Principal Balance of Home Loans for each of the following: (A) that became
Defaulted Home Loans, (B) that became Liquidated Home Loans, (C) that
became Deleted Home Loans pursuant to Section 3.05 hereof as a result of
such Deleted Home Loans being Defective Home Loans, and (D) that became
Deleted Home loans pursuant to Section 3.05 hereof as a result of such
Deleted Home Loans being Defaulted Home Loans or a Home Loan in default or
imminent default, including the foregoing amounts by loan type (i.e.,
Combination Loans, or Debt Consolidation Loans);
(xv) the scheduled principal payments and the principal prepayments
received with respect to the Home Loans during the Due Period and the
cumulative principal prepayment received since the Cut-off Date;
(xvi) the number and aggregate Principal Balance of Home Loans that
were 30, 60 or 90 days Delinquent as of the close of business on the last
day of the related Due Period; and
(xvii) the aggregate Principal Balance of each Loan which has become a
Liquidated Loan since the Cut-Off Date, also expressed as a percentage Pool
Principal Balance.
In the case of information furnished to Securityholders pursuant to
subclause (b)(iv) of this Section 6.01, the amounts shall be expressed as a
dollar amount per Note with a $1,000 Denomination.
All reports prepared by the Indenture Trustee of the withdrawals from and
deposits into the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the Indenture
Trustee may fully rely upon and shall have no liability with respect to such
information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a Securityholder such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b)(iv) of this Section 6.01, aggregated for
such calendar year or applicable portion thereof during which such Person was a
Securityholder.
(d) On each Distribution Date, the Indenture Trustee shall forward to the
holders of the Residual Interest Certificates a copy of the Distribution
Statement in respect of such Distribution Date and a statement setting forth the
amounts actually distributed to such holders of the Residual Interest
Certificates on such Distribution Date, together with such other information as
the Indenture Trustee deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a holder of Residual Interest Certificates, if
requested in writing by such Person, a statement containing the information
provided pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a holder of Residual
Interest Certificates.
(f) The Indenture Trustee shall forward to each Noteholder and each holder
of a Residual Interest Certificate, during the term of this Agreement, such
periodic, special or other reports, including information tax returns or reports
required with respect to the Notes and the Residual Interest Certificates, as
shall be necessary, reasonable, or appropriate with respect to the Noteholders
or the holders of Residual Interest Certificates, or otherwise with respect to
the purposes of this Agreement, all such reports or information in the case of
the Residual Interest Certificates to be provided by and in accordance with such
applicable instructions and directions as the Majority Residual Interestholders
may reasonably require.
(g) Reports and computer tapes furnished by the Servicer and the Indenture
Trustee pursuant to this Agreement shall be deemed confidential and of a
proprietary nature and shall not be copied or distributed except in connection
with the purposes and requirements of this Agreement. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Depositor or the Servicer or for
any other purpose except as set forth in this Agreement.
Section 6.02 Specification of Certain Tax Matters.
The Indenture Trustee shall comply with all requirements of the Code and
applicable state and local law with respect to the withholding from any
distributions made to any Noteholder or Certificateholder of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith, giving due effect to any applicable
exemptions from such withholding and effective certifications or forms provided
by the recipient. Any amounts withheld pursuant to this Section 6.02 shall be
deemed to have been distributed to the Noteholders or Certificateholders, as the
case may be, for all purposes of this Agreement or the Indenture.
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance.
(a) If any Home Loan contains a provision, in the nature of a "due-on-
sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the related lender's
option) become due and payable upon the sale or other transfer of an
interest in the related Property; or
(ii) provides that such Home Loan may not be assumed without the
consent of the related lender in connection with any such sale or other
transfer, then, for so long as such Home Loan is included in the Trust, the
Servicer, on behalf of the Indenture Trustee, shall exercise any right the
Trust or the Indenture Trustee may have as the lender of record with
respect to such Home Loan (x) to accelerate the payments thereon or (y) to
withhold its consent to any such sale or other transfer, in a manner
consistent with Accepted Servicing Procedures.
(b) If any Home Loan contains a provision in the nature of a "due-on-
encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the related lender's
option) become due and payable upon the creation of any lien or other
encumbrance on the related Property; or
(ii) requires the consent of the related lender to the creation of any
such lien or other encumbrance on the related Property, then, for so long
as such Home Loan is included in the Trust, the Servicer, on behalf of the
Trust, or the Indenture Trustee shall exercise any right the Indenture
Trustee may have as the lender of record with respect to such Home Loan (x)
to accelerate the payments thereon or (y) to withhold its consent to the
creation of any such lien or other encumbrance, in a manner consistent with
Accepted Servicing Standards.
(c) Nothing in this Section 7.01 shall constitute a waiver of the Indenture
Trustee's right to receive notice of any assumption of a Home Loan, any sale or
other transfer of the related Mortgaged Property or the creation of any lien or
other encumbrance with respect to such Mortgaged Property.
Section 7.02 Release of Home Loan Files.
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan plus all
interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment in full of
such Home Loan in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Home Loan has been conveyed to the
Trust pursuant to Section 3.05 hereof;
(iv) such Home Loan or the related Foreclosure Property has been sold
in connection with the termination of the Trust pursuant to Section 11.01
hereof; or
(v) the related Foreclosure Property has been sold pursuant to Section
4.11 hereof.
In each such case, the Servicer shall deliver a certificate to the effect
that the Servicer has complied with all of its obligations under this Agreement
with respect to such Home Loan and requesting that the Indenture Trustee release
to the Servicer the related Indenture Trustee's Home Loan File, and the
Indenture Trustee shall, within five Business Days or such shorter period as may
be required by applicable law, release, or cause the Custodian to release
(unless such Indenture Trustee's Home Loan File has previously been released),
the related Indenture Trustee's Home Loan File to the Servicer and execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest ownership of such Home Loan in the
Servicer or such other Person as may be specified in such certificate, the forms
of any such instrument to be appended to such certificate.
(b) From time to time and as appropriate for the servicing or foreclosure
of any Home Loan, the Indenture Trustee shall, upon request of the Servicer,
release the related Indenture Trustee's Home Loan File (or any requested portion
thereof) to the Servicer in accordance with Section 3(a) of the Custodial
Agreement.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be entitled
to receive from the Collection Account the Servicing Fee, out of which the
Servicer shall pay any servicing fees owed or payable to any Subservicer.
Additional servicing compensation in the form of prepayment penalties,
assumption fees, modification fees, and other administrative fees, insufficient
funds charges, amounts remitted pursuant to Section 7.01 hereof and late payment
charges shall be part of the Servicing Compensation payable to the Servicer
hereunder and shall be paid either by the Servicer's retaining such additional
servicing compensation prior to deposit into the Collection Account pursuant to
Section 5.01(b)(1) hereof or, if deposited into the Collection Account, as part
of the Servicing Compensation withdrawn from the Note Distribution Account
pursuant to Section 5.01(c)(1) hereof.
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 herein. The
Transferor also agrees to pay (i) all reasonable costs and expenses incurred by
any successor Servicer or the Indenture Trustee in replacing the Servicer in the
event of a default by the Servicer in the performance of its duties under the
terms and conditions of this Agreement and (ii) the annual monitoring fees of
the Rating Agencies.
Section 7.04 Statement as to Compliance and Financial Statements.
The Servicer will deliver to the Indenture Trustee, the Owner Trustee the
Depositor and the Rating Agencies not later than 90 days following the end of
each fiscal year of the Servicer (beginning in 1998), an Officer's Certificate
stating that (i) a review of the activities of the Servicer during the preceding
year and of performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all 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 officer and the
nature and status thereof and what action the Servicer proposes to take with
respect thereto.
Contemporaneously with the submission of the Officer's Certificate required
by the preceding paragraph, the Servicer shall deliver to the Indenture Trustee
and the Owner Trustee a copy of its annual audited financial statements prepared
in the ordinary course of business. The Servicer shall, upon the request of the
Depositor, deliver to such party any unaudited quarterly financial statements of
the Servicer.
The Servicer agrees to make available to the Depositor on a reasonable
basis a knowledgeable officer of the Servicer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor on
reasonable notice to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Depositor that the Servicer has
the ability to service the Home Loans in accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel relating
to the performance of the obligations of the Servicer hereunder, (ii) its
financial condition, (iii) the Home Loans and (iv) the performance of the
obligations of any Subservicer under the related Subservicing Agreement, in each
case as the Indenture Trustee or the Depositor may reasonably request from time
to time.
Section 7.05 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer (beginning with fiscal year 1998), the Servicer at its expense shall
cause any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., Coopers & ▇▇▇▇▇▇▇ LLP, Deloitte & Touche
LLP, Ernst & Young LLP, KPMG Peat Marwick LLP and Price Waterhouse & Co. or some
other nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Indenture Trustee, the Owner Trustee, the Rating Agencies and the Depositor
to the effect that such firm has examined certain documents and records relating
to the servicing of the Home Loans under this Agreement or of mortgage loans
under pooling and servicing agreements (including the Home Loans and this
Agreement) substantially similar to one another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby) and that, on the basis of such examination conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
the Audit Program for Mortgages serviced for FHLMC, such firm confirms that such
servicing has been conducted in compliance with such pooling and servicing
agreements except for such significant exceptions or errors in records that, in
the opinion of such firm, the Uniform Single Attestation Program for Mortgage
Bankers or the Attestation Program for Mortgages serviced for FHLMC requires it
to report, each of which errors and omissions shall be specified in such
statement. In rendering such statement, such firm may rely, as to matters
relating to direct servicing of mortgage loans by Subservicers, upon comparable
statements for examinations conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC (rendered within one year of such statement) of
independent public accountants with respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder individually or in the aggregate holding, in each case,
at least 20% of the Voting Interests, the Indenture Trustee, the Issuer and each
of their respective agents shall have the right upon 15 days prior notice,
during normal business hours and as often as reasonably required, to examine,
audit and copy, at the expense of the Person making such examination, any and
all of the books, records or other information of the Servicer (including
without limitation any Subservicer to the extent provided in the related
Subservicing Agreement), whether held by the Servicer or by another on behalf of
the Servicer, which is reasonable and which is relevant to the performance or
observance by the Servicer of the terms, covenants or conditions of this
Agreement. In the case of the supervisory agents and examiners of the Issuer,
Indenture Trustee and the Securityholders, access to the documentation regarding
the Home Loans required by applicable state and federal regulations shall be
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it. Each
Securityholder, the Indenture Trustee and the Issuer agree that any information
obtained pursuant to the terms of this Agreement shall be held confidential.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders or any prospective Securityholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and to permit the Securityholders and any prospective Securityholder to
inspect the Servicer's servicing facilities during normal business hours for the
purpose of satisfying the Securityholders and such prospective Securityholder
that the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
preceding Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of deposit
specified in Section 5.01(b)(1) hereof, the aggregate of withdrawals from the
Collection Account for each category of withdrawal specified in Section
5.01(b)(2) and (3) hereof, in each case, for the related Due Period.
Section 7.08 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Notes, Noteholders may request that the Servicer make available to the
Noteholders and to prospective Noteholders annual audited financial statements
of the Servicer for one or more of the most recently completed five fiscal years
for which such statements are available, which request shall not be unreasonably
denied.
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Transferor, the Owner Trustee, the
Trust, the Depositor and the Indenture Trustee (each an "Indemnified Party") and
hold harmless each of them against any and all claims, losses, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
any of the Servicer's representations and warranties and covenants contained in
this Agreement or in any way relating to the failure of the Servicer to perform
its duties and service the Home Loans in compliance with the terms of this
Agreement; provided, however, that if the Servicer is not liable pursuant to the
provisions of Section 9.01(d) hereof for its failure to perform its duties and
service the Home Loans in compliance with the terms of this Agreement, then the
provisions of this Section 9.01 shall have no force and effect with respect to
such failure.
(b) The Transferor, the Depositor, the Owner Trustee or the Indenture
Trustee, as the case may be, shall promptly notify the Servicer if a claim is
made by a third party with respect to a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Home Loans in compliance with the terms of this Agreement. The
Servicer shall promptly notify the Indenture Trustee, the Owner Trustee and the
Depositor of any claim of which it has been notified pursuant to this Section
9.01 by a Person other than the Depositor, and, in any event, shall promptly
notify the Depositor of its intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice to
the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party, unless (i) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (ii) the Servicer has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Servicer and one or more Indemnified
Parties, and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to them which are different
from or additional to those available to the Servicer. The Servicer shall not be
liable for any settlement of any such claim or action unless the Servicer shall
have consented thereto or be in default on its obligations hereunder. Any
failure by an Indemnified Party to comply with the provisions of this Section
9.01 shall relieve the Servicer of liability only if such failure is materially
prejudicial to the position of the Servicer and then only to the extent of such
prejudice.
(d) None of the Transferor, the Depositor, the Servicer or any of the
directors, officers, employees or agents of the Transferor, the Depositor or the
Servicer, or members or Affiliates of the Depositor shall be under any liability
to the Trust or the Securityholders 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; provided, however, that this provision shall not protect the
Transferor, the Depositor, the Servicer or any such person against the remedies
provided herein for the breach of any warranties, representations or covenants
made herein, or against any specific liability imposed on the Transferor, the
Depositor or the Servicer herein, or against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of the duties of the Servicer, the Depositor or the Transferor, as
the case may be, or by reason of reckless disregard of the obligations and
duties of the Servicer, the Depositor or the Transferor, as the case may be,
hereunder. The Transferor, the Depositor, the Servicer and any director,
officer, employee or agent of the Transferor, the Depositor or the Servicer, or
any member or Affiliate of the Depositor may rely in good faith on any document
of any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Trust and held harmless against any loss, liability
or expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Notes, other than any loss, liability or
expense related to any specific Home Loan or Home Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. Except as
otherwise provided herein, none of the Transferor, the Depositor or the Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not related to its respective duties under this Agreement; provided,
however, that, except as otherwise provided herein, any of the Transferor, the
Depositor or the Servicer may, with the prior consent of the Indenture Trustee,
in its discretion 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 and the interests of the Securityholders hereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust, and the
Transferor, the Depositor and the Servicer shall be entitled to be reimbursed
therefor out of the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and will obtain and preserve its qualification to do business
as a foreign corporation and maintain such other licenses and permits in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Home Loans and to perform its duties under this
Agreement; provided, however, that the Servicer may merge or consolidate with
any other corporation upon the satisfaction of the conditions set forth in the
following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee and the Issuer.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
hereof, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Home Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Indenture Trustee or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the preceding
sentence permitting the resignation of the Servicer shall be evidenced by an
independent opinion of counsel to such effect delivered (at the expense of the
Servicer) to the Indenture Trustee. No resignation of the Servicer shall become
effective until the Indenture Trustee or a successor servicer, appointed
pursuant to the provisions of Section 10.02 hereof and satisfying the
requirements of Section 4.07 hereof with respect to the qualifications of a
successor Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder and any agreement, instrument or act purporting to effect
any such assignment, transfer, delegation or appointment shall be void.
The Servicer agrees to cooperate with any successor Servicer in effecting
the transfer of the Servicer's servicing responsibilities and rights hereunder
pursuant to the first paragraph of this Section 9.04, including, without
limitation, the transfer to such successor of all relevant records and documents
(including any Home Loan Files in the possession of the Servicer) and all
amounts received with respect to the Home Loans and not otherwise permitted to
be retained by the Servicer pursuant to this Agreement. In addition, the
Servicer, at its sole cost and expense, shall prepare, execute and deliver any
and all documents and instruments to the successor Servicer including all Home
Loan Files in its possession and do or accomplish all other acts necessary or
appropriate to effect such termination and transfer of servicing
responsibilities.
Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Issuer and the Indenture Trustee under
this Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Issuer or the
Indenture Trustee.
Section 9.06 Servicer May Own Securities.
Each of the Servicer and any Affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Securities with
the same rights as it would have if it were not the Servicer or an Affiliate
thereof except as otherwise specifically provided herein. Securities so owned by
or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided,
however, that any Securities owned by the Servicer or any Affiliate thereof,
during the time such Securities are owned by them, shall be without voting
rights for any purpose set forth in this Agreement. The Servicer shall notify
the Indenture Trustee promptly after it or any of its Affiliates becomes the
owner or pledgee of a Security.
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) 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 deposit in the Collection Account
in accordance with Section 5.01(b) hereof any payments in respect of the
Home Loans received by the Servicer no later than the second Business Day
following the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues unremedied
for a period of 30 days after the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice is
a "Notice of Default" hereunder, shall have been given (a) to the Servicer
by the Indenture Trustee or the Issuer, or (b) to the Servicer, the
Indenture Trustee or the Issuer by the Majority Noteholders; 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, 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 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, 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 the Servicer's
property; or
(v) the Servicer shall admit in writing its inability to pay its debts
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) the Majority Noteholders (A) shall receive notice from the
Servicer that the Servicer is no longer able to discharge its duties under
this Agreement or (B) shall determine, in their reasonable judgment and
based upon published reports (including wire services), which they
reasonably believe in good faith to be reliable, that the Servicer:
a) has experienced a material adverse change in its business,
assets, liabilities, operations, condition (financial or otherwise) or
prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary course; or
(d) as of any Determination Date, the total Expected Loan Loss
Percentage (as defined below) exceeds (1) up to the fifth (5th)
anniversary of the September 30, 1997 Cut-Off Date, 31.5%, or (2)
thereafter 21% (where the "Expected Loan Loss Percentage" shall be the
sum of (A) the cumulative Net Loan Losses divided by the Initial Pool
Principal Balance, plus (B) 25% of the aggregate Principal Balance of
the Home Loans which are then more than 30 but less than 60 days
delinquent divided by the Initial Pool Principal Balance, plus (C) 50%
of the aggregate Principal Balance of the Home Loans which are then
more than 60 but less than 90 days delinquent divided by the Initial
Pool Principal Balance, plus (D) 100% of the aggregate Principal
Balance of the Home Loans which are then more than 90 days delinquent
divided by the Initial Pool Principal Balance).
(b) then, and in each and every such case, so long as an Event of Default
shall not have been remedied, the Indenture Trustee or the Majority Noteholders,
by notice in writing to the Servicer may, in addition to whatever rights such
Person may have at law or in equity to damages, including injunctive relief and
specific performance, may terminate all the rights and obligations of the
Servicer under this Agreement and in and to the Home Loans and the proceeds
thereof, as servicer under this Agreement. Upon receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Home Loans or otherwise, shall, subject to Section
10.02 hereof, pass to and be vested in a successor servicer, or the Indenture
Trustee if a successor servicer cannot be retained in a timely manner, and the
successor servicer, or Indenture Trustee, as applicable, is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
do or cause to be done all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, including, but not limited
to, the transfer and endorsement or assignment of the Home Loans and related
documents. The Servicer agrees to cooperate with the successor servicer in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the successor servicer
for administration by it of all amounts which shall at the time be credited by
the Servicer to each Collection Account or thereafter received with respect to
the Home Loans.
(c) If, as of any Determination Date, the total Expected Loan Loss
Percentage exceeds (1) up to the fifth (5th) anniversary of the September 30,
1997 Cut-Off Date, 15.75%, or (2) thereafter 26.625% (the "Servicing Plan
Trigger"), the Indenture Trustee shall prepare a plan (a "Servicing Plan") to
replace the Servicer pursuant to Section 10.02 herein and which shall set forth
the identity of any proposed successor servicer which shall be appointed
pursuant to Section 10.02 in the event of an Event of Default under paragraph
(a)(vi)(d) of this Section 10.01 and confirm the Indenture Trustee's obligations
under Section 10.02 herein to act as successor servicer if a successor servicer
cannot be retained in a timely manner.
Section 10.02 Indenture Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01 hereof, or the Indenture Trustee receives the
resignation of the Servicer evidenced by an Opinion of Counsel or accompanied by
the consents required by Section 9.04 hereof, or the Servicer is removed as
servicer pursuant to this Article X, then, subject to Section 4.07 hereof, the
Indenture Trustee shall appoint a successor servicer to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor servicer shall not be liable for any actions of any servicer prior to
it; and, provided further, that if a successor servicer cannot be retained in a
timely manner, the Indenture Trustee shall act as successor Servicer. In the
event the Indenture Trustee assumes the responsibilities of the Servicer
pursuant to this Section 10.02, the Indenture Trustee will make reasonable
efforts consistent with applicable law to become licensed, qualified and in good
standing in each Mortgaged Property State the laws of which require licensing or
qualification in order to perform its obligations as Servicer hereunder or,
alternatively, shall retain an agent that is so licensed, qualified and in good
standing in any such Mortgaged Property State.
In the case that the Indenture Trustee serves as successor servicer, the
Indenture Trustee in such capacity shall not be liable for any servicing of the
Home Loans prior to its date of appointment and shall not be subject to any
obligations to repurchase any Home Loans. The successor servicer shall be
obligated to make Servicing Advances hereunder. As compensation therefor, the
successor servicer appointed pursuant to the following paragraph, shall be
entitled to all funds relating to the Home Loans which the Servicer would have
been entitled to receive from the Note Distribution Account pursuant to Section
5.01(c) hereof as if the Servicer had continued to act as servicer hereunder,
together with other Servicing Compensation in the form of assumption fees, late
payment charges or otherwise as provided in Section 7.03 hereof. The Servicer
shall not be entitled to any termination fee if it is terminated pursuant to
Section 10.01 hereof but shall be entitled to any accrued and unpaid Servicing
Fee to the date of termination.
Any collections received by the Servicer after removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the Servicing
Fee, together with other Servicing Compensation provided for herein. In the
event the Indenture Trustee is required to solicit bids to appoint a successor
servicer, the Indenture Trustee shall solicit, by public announcement, bids from
Eligible Servicers. Such public announcement shall specify that the successor
servicer shall be entitled to the full amount of the Servicing Fee and Servicing
Compensation provided for herein. Within 30 days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the amount
of any unpaid Servicing Fees and unreimbursed Servicing Advances made by the
Indenture Trustee. After such deductions, the remainder of such sum shall be
paid by the Indenture Trustee to the Servicer at the time of such sale, transfer
and assignment to the Servicer's successor. The Indenture Trustee, the Issuer,
any Custodian, the Servicer and any such successor servicer shall take such
action, consistent with this Agreement, as shall be necessary to effect any such
succession. The Servicer agrees to cooperate with the Indenture Trustee and any
successor servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in any Trust Account maintained by the Servicer or which are
thereafter received with respect to the Home Loans. Neither the Indenture
Trustee nor any other successor servicer shall be held liable by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay in delivering, cash, documents or records to it or (ii) restrictions
imposed by any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Indenture Trustee to each Securityholder, the Issuer and the
Depositor and, except in the case of the appointment of the Indenture Trustee as
successor to the Servicer (when no consent shall be required), the Depositor,
the Majority Noteholders and the Issuer shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the Indenture
Trustee shall act as servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Indenture Trustee may make such
arrangements for the compensation of such successor servicer out of payments on
the Home Loans as it and such successor servicer shall agree; provided, however,
that no such compensation shall be in excess of that permitted the Servicer
pursuant to Section 7.03 hereof, together with other Servicing Compensation in
the form of assumption fees, late payment charges or otherwise as provided in
this Agreement.
Section 10.03 Waiver of Defaults.
The Majority Noteholders may waive any events permitting removal of the
Servicer as servicer pursuant to this Article X; provided, however, that the
Majority Noteholders may not waive a default in making a required distribution
on a Note or Residual Interest Certificate without the consent of the related
Noteholder or holder of the Residual Interest Certificate. Upon any 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 thereto except to the extent expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer shall,
at its own expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee the funds in any Trust Account
maintained by the Servicer;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee all Home Loan Files and related
documents and statements held by it hereunder and a Home Loan portfolio
computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee and to the Issuer and the
Securityholders a full accounting of all funds, including a statement
showing the Monthly Payments collected by it and a statement of monies held
in trust by it for payments or charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer
of servicing of the Home Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice by the Servicer to the Indenture
Trustee and the Owner Trustee of either: (a) the later of (i) the satisfaction
and discharge of the Indenture and the provisions thereof or (ii) the
disposition of all funds with respect to the last Home Loan and the remittance
of all funds due hereunder and the payment of all amounts due and payable to the
Indenture Trustee, the Owner Trustee, the Issuer and the Custodian; or (b) the
mutual consent of the Servicer, the Depositor, the Transferor and all
Securityholders in writing.
Section 11.02 Optional Termination.
The Majority Residual Interestholders may, at their option, effect an early
termination of the Trust on or after any Distribution Date on which the Pool
Principal Balance declines to 10% or less of the Maximum Collateral Amount. The
Majority Residual Interestholders shall effect such early termination by
providing notice thereof to the Indenture Trustee and Owner Trustee and by
purchasing all of the Home Loans at a purchase price, payable in cash, equal to
or greater than the Termination Price. The expense of any Independent appraiser
required under this Section 11.02 shall be a nonreimbursable expense of Majority
Residual Interestholders.
Any such early termination by the Majority Residual Interestholders shall
be accomplished by depositing into the Collection Account on the third Business
Day prior to the Distribution Date on which the purchase is to occur the amount
of the Termination Price to be paid. The Termination Price and any amounts then
on deposit in the Collection Account (other than any amounts not required to
have been deposited therein pursuant to Section 5.01(b)(1) hereof and any
amounts withdrawable therefrom by the Indenture Trustee pursuant to Section
5.01(b)(3) hereof) shall be transferred to the Note Distribution Account
pursuant to Section 5.01(b)(2) hereof for distribution to Noteholders on the
succeeding Distribution Date; and any amounts received with respect to the Home
Loans and Foreclosure Properties subsequent to the Due Period immediately
preceding such final Distribution Date shall belong to the purchaser thereof.
For purposes of calculating the Available Distribution Amount for such final
Distribution Date, amounts transferred to the Note Distribution Account
immediately preceding such final Distribution Date shall in all cases be deemed
to have been received during the related Due Period, and amounts so transferred
shall be applied pursuant to Section 5.01(d) and (e) hereof.
Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Trust shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with section 10.02 of the Indenture and (ii) by the
Owner Trustee to the Certificateholders in accordance with section 9.1(d) of the
Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders.
Except as otherwise specifically provided herein, whenever action, consent
or approval of the Securityholders is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Depositor, the
Servicer, the Transferor, the Indenture Trustee and the Issuer by written
agreement with notice thereof to the Securityholders, without the consent of any
of the Securityholders, to cure any error or ambiguity, to correct or supplement
any provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action will
not adversely affect in any material respect the interests of the
Securityholders. An amendment described above shall be deemed not to adversely
affect in any material respect the interests of the Securityholders if either
(i) an Opinion of Counsel is obtained to such effect and (ii) the party
requesting the amendment obtains a letter from each of the Rating Agencies
confirming that the amendment, if made, would not result in the downgrading or
withdrawal of the rating then assigned by the respective Rating Agency to any
Class of Notes then outstanding.
(b) This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Transferor, the Indenture Trustee and the Issuer by written
agreement, with the prior written consent of the Majority Noteholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Securityholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
Home Loans or distributions which are required to be made on any Security,
without the consent of the holders of 100% of each Class of Notes affected
thereby, (ii) adversely affect in any material respect the interests of the
holders of any Class of Notes in any manner other than as described in clause
(i), without the consent of the holders of 100% of such Class of Notes, or (iii)
reduce the percentage of any Class of Notes, the consent of which is required
for any such amendment, without the consent of the holders of 100% of such Class
of Notes.
(c) It shall not be necessary for the consent of Securityholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer and
the Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Issuer and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Issuer's own
rights, duties or immunities of the Issuer or the Indenture Trustee, as the case
may be, under this Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Noteholders' expense on
direction of the Majority Noteholders but only when accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Noteholders or is necessary for the administration or
servicing of the Home Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 12.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to: (i) in
the case of the Depositor, PaineWebber Mortgage Acceptance Corporation IV, ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.,
or such other addresses as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Depositor; (ii) in the case of the
Issuer, DiTech Home Loan Owner Trust 1997-1, c/o Bankers Trust (Delaware), ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: DiTech Home Loan
Owner Trust 1997-1, with a copy to Bankers Trust Company in ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ or such other
address as may hereafter be furnished to the Securityholders and the other
parties hereto; (iii) in the case of the Transferor and Servicer, DiTech Funding
Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
J. ▇▇▇▇ ▇▇▇▇▇▇, or such other address as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Servicer or the
Transferor; (iv) in the case of the Indenture Trustee, The Bank of New York, 101
▇▇▇▇▇▇▇ Street, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attention: Corporate
Trust-MBS Administration; and (v) in the case of the Securityholders, as set
forth in the applicable Note Register. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such notice by
such party, except that notices to the Securityholders shall be effective upon
mailing or personal delivery.
Section 12.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Indenture Trustee, the Issuer and
the Noteholders and their respective successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Servicer or the Issuer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this
Section 12.12.
(b) The fact and date of the execution by any Securityholder of any such
instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Securityholder shall bind every holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 12.12 as it shall deem necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
(iii) notice of any termination, replacement, succession, merger or
consolidation of the Servicer, any Custodian or the Issuer;
(iv) notice of final payment on the Notes;
(v) notice of any Event of Default;
(vi) copies of the annual independent accountants' report delivered
pursuant to Section 7.05 hereof, and copies of any compliance reports
delivered by the Servicer including under Section 7.04 hereof; and
(vii) copies of any Distribution Date Statement pursuant to Section
6.01(b) hereof.
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies, such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Standard & Poor's, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Asset-Backed Monitoring Department, (ii) if to
Fitch, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
[____________] and (iii) if to Duff & ▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: MBS Monitoring.
Section 12.14 Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Trust Agreement to the holders of the Residual Interest Certificates shall be
paid to such holders pro rata based on their percentage holdings in the Residual
Interest;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest Certificates, such
consent or approval shall be capable of being given by the holder or holders of
not less than 51% of the Residual Interest in aggregate.
Section 12.15 Limitation of Liability of Owner Trustee.
Notwithstanding anything contained herein to the contrary, this Agreement
has been signed by Bankers Trust (Delaware) not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
Bankers Trust (Delaware) in its individual capacity or any beneficial owner of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII AND VIII of the Trust Agreement.
IN WITNESS WHEREOF, the Issuer, the Depositor, the Servicer, the Transferor
and the Indenture Trustee have caused their names to be signed by their
respective officers thereunto duly authorized, as of the day and year first
above written, to this Sale and Servicing Agreement.
DITECH HOME LOAN OWNER TRUST 1997-1,
By: Bankers Trust (Delaware), not in its
individual capacity but solely as
Owner Trustee
By: ____________________________________
Name:
Title:
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor
By: ____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
DITECH FUNDING CORPORATION, as Transferor
and Servicer
By: ____________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Indenture Trustee
By: ____________________________________
Name:
Title:
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared _______________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said BANKERS TRUST (DELAWARE), not in its
individual capacity but in its capacity as Owner Trustee of DITECH HOME LOAN
OWNER TRUST 1997-1 as Issuer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF BANKERS TRUST (DELAWARE), this the ____ day
of October, 1997.
_________________________________
Notary Public, State of _________
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, as the Depositor, and that she executed the same as
the act of such corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES CORP., this the
____ day of October, 1997.
_________________________________
Notary Public, State of _________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared _______________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said DITECH FUNDING
CORPORATION, as the Transferor and Servicer, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF DITECH FUNDING CORPORATION, this the ____
day of October, 1997.
_________________________________
Notary Public, State of _________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
October 1997 personally appeared ____________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said THE BANK OF NEW YORK, a
New York banking corporation, as the Indenture Trustee, and that she executed
the same as the act of such entity for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF THE BANK OF NEW YORK, this the ____ day of
October, 1997.
_________________________________
Notary Public, State of _________
EXHIBIT A
---------
Availabe upon request from:
▇▇▇▇ ▇▇▇▇▇▇ Esq.
PaineWebber Mortgage Acceptance Corporatoin IV
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
EXHIBIT B
---------
Available upon request from the Indenture Trustee
EXHIBIT C
---------
SUBSEQUENT TRANSFER AGREEMENT (the "Subsequent Transfer Agreement"), dated
as of [________, 199_], between DITECH FUNDING CORPORATION ("DiTech" or the
"Transferor"), DITECH FUNDING HOME LOAN OWNER TRUST 1997-1 (the "Issuer"), and
THE BANK OF NEW YORK, as indenture trustee (the "Indenture Trustee").
W I T N E S S E T H
WHEREAS, pursuant to the terms of a Home Loan Purchase Agreement, dated as
of October 1, 1997 (the "Purchase Agreement"), between PaineWebber Mortgage
Acceptance Corporation IV, as Depositor (the "Depositor") and DiTech, as
Transferor, the Transferor has sold, transferred, assigned and otherwise
conveyed to the Depositor all its right, title and interest in and to certain
Home Loans
WHEREAS, pursuant to the terms of a Sale and Servicing Agreement, dated as
of [________, 199_] (the "Sale and Servicing Agreement"), among DiTech Funding
Home Loan Owner Trust 1997-1, as issuer (the "Owner Trust"), DiTech, as
Transferor and servicer, the Depositor and the Indenture Trustee, the Transferor
has the obligation to sell, transfer, assign and otherwise convey to the Issuer
all its right, title and interest in and to certain home loans as listed on
Schedule I attached hereto and the Related Documents thereto (as defined below)
(the "Subsequent Loans") pursuant to and in accordance with this Subsequent
Transfer Agreement;
WHEREAS, the parties hereto desire that the Transferor sell all its right,
title and interest in and to the Subsequent Loans and the Related Documents to
Issuer pursuant to the terms of this Subsequent Transfer Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined herein have the
meanings assigned thereto in the Sale and Servicing Agreement.
2. Sale of Subsequent Loans to Issuer; Grant of Security Interest to
Indenture Trustee. (a) The Transferor, concurrently with the execution and
delivery of this Subsequent Transfer Agreement, does hereby sell, transfer,
assign, set over, and otherwise convey to the Issuer, without recourse but
subject to the other terms and provisions of this Agreement and the Sale and
Servicing Agreement, all of its right, title and interest in and to the
following, whether now existing or hereafter acquired and wherever located: (i)
such Subsequent Loans as listed in the Subsequent Loan Schedule, as of the
[_________ 1, 199_] (the "Cut-Off Date"), together with the Servicer's Home Loan
Files and the Indenture Trustee's Home Loan Files relating thereto and all
proceeds thereof, (ii) the Mortgages and security interests in Mortgaged
Properties, (iii) all payments in respect of interest due with respect to such
Subsequent Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date, (iv) the Transferor's rights under
all insurance policies with respect to such Subsequent Loans and any Insurance
Proceeds, and (v) all proceeds of any of the foregoing.
(b) The Issuer hereby grants on the Subsequent Transfer Date, to the
Indenture Trustee, as Indenture Trustee for the benefit of the Holders of the
Notes, all of the Issuer's right, title and interest in and to: (i) Trust
Estate, inclusive of the Subsequent Loans conveyed hereby; (ii) all right, title
and interest of the Issuer in and to this Subsequent Transfer Agreement
(including the Issuer's right to cause the Transferor to repurchase Home Loans
from the Issuer under certain circumstances described therein); and (iii) all
present and future claims, demands, causes of action and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing.
3. Obligations of Transferor Upon Sale. In connection with any transfer
pursuant to Section 2.1 hereof, the Transferor further agrees, at its own
expense, on or prior to the Subsequent Transfer Date (a) to indicate in its
books and records that the Subsequent Loans have been sold to the Issuer
pursuant to this Subsequent Transfer Agreement and (b) to deliver to the Issuer
a computer file containing a true and complete list of all Subsequent Loans in
the format required by Section 2.2 of the Purchase Agreement.
In connection with any conveyance by the Transferor, the Transferor shall
on behalf of the Issuer deliver to, and deposit with the Custodian, on behalf of
the Indenture Trustee, as assignee of the Issuer, on or before the Subsequent
Transfer Date the Related Documents (as defined in the Purchase Agreement) with
respect to each Subsequent Loan.
In connection with any conveyance by the Transferor, the Transferor shall
on behalf of the Issuer deliver to, and deposit with the Servicer, as the
designated agent of the Indenture Trustee, as assignee of the Issuer, on or
before the Subsequent Transfer Date the Servicer's Home Loan File with respect
to each Subsequent Loan.
The Transferor further hereby confirms to the Issuer that, as of the
Subsequent Transfer Date it has caused the portions of the Transferor's
electronic ledger relating to the Subsequent Loans to be clearly and
unambiguously marked to indicate that the Subsequent Loans have been sold to the
Issuer.
The parties hereto intend that each of the transactions set forth herein be
a sale by the Transferor to the Issuer of all the Transferor's right, title and
interest in and to the Subsequent Loans and other property described above. In
the event the transactions set forth herein are deemed not to be a sale, the
Transferor hereby grants to the Issuer a security interest in all of the
Transferor's right, title and interest in, to and under the Subsequent Loans and
other property described above, whether now existing or hereafter created, to
secure all of the Transferor's obligations hereunder; and this Subsequent
Transfer Agreement shall constitute a security agreement under applicable law.
4. Payment of Purchase Price for the Subsequent Loans
(a) In consideration of the sale of the Subsequent Loans from the
Transferor to the Issuer on the Subsequent Transfer Date, the Issuer agrees to
pay to the Transferor on the Subsequent Transfer Date by transfer of immediately
available funds, an amount equal to 100% of the aggregate Principal Balances of
the Subsequent Loans as of the Cut-Off Date.
(b) Within 60 days of the Subsequent Transfer Date, the Transferor, at its
own expense, shall record each Assignment of Mortgage in favor of the Indenture
Trustee to the same extent required under Section 2.3 of the Purchase Agreement.
5. Transferor Representations and Warranties. (a) The Transferor hereby
makes the representations and warranties to the Issuer as of the Cut-Off Date
and the Subsequent Transfer Date specified in Section 3.1(a) of the Purchase
Agreement.
(b) The Transferor further represents and warrants to the Issuer that with
respect to the Subsequent Loans as of the Subsequent Transfer Date each of the
representations and warranties contained in Section 3.04 of the Sale and
Servicing Agreement are true and correct.
It is understood and agreed that the representations and warranties set
forth in this Section 3.1(b) shall survive delivery of the respective Subsequent
Loan Files to the Indenture Trustee on behalf of the Issuer. In the event that
(a) any of the representations and warranties of the Transferor in Section 3.04
of the Sale and Servicing Agreement are determined to be untrue in a manner that
materially and adversely affects the value of, or the interests of the
Securityholders in, any Subsequent Loan with respect to which such
representation or warranty is made and (b) the Transferor shall fail to cure
such breach within the time period specified in Section 3.05 of the Sale and
Servicing Agreement, the Transferor shall be obligated to repurchase or
substitute the affected Subsequent Loan(s) in accordance with the provisions of
Section 3.05 of the Sale and Servicing Agreement.
With respect to representations and warranties made by the Transferor
pursuant to this Section 3.1(b) that are made to the Transferor's best
knowledge, if it is discovered by any of the Issuer, the Transferor or the
Indenture Trustee that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related Subsequent Loan, notwithstanding the Transferor's lack of knowledge,
such inaccuracy shall be deemed a breach of the applicable representation and
warranty.
6. Covenants of the Transferor. The Transferor hereby covenants that except
for the transfer hereunder, the Transferor will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any lien on, any Subsequent Loan, or any interest therein; and the Transferor
will defend the right, title and interest of the Trust, as assignee of the
Issuer, in, to and under the Subsequent Loans, against all claims of third
parties claiming through or under the Transferor.
Whenever and so often as requested by the Issuer or the Transferor or the
Lender, the other party promptly will execute and deliver or cause to be
executed and delivered all such other and further instruments, documents, or
assurances, and promptly do or cause to be done all such other things, as may be
necessary and reasonably required to vest more fully in the requesting party all
rights, interests, powers, benefits, privileges and advantages conferred or
intended to be conferred upon it by this Agreement.
7. Termination. The respective obligations and responsibilities of the
Transferor and Issuer created hereby shall terminate, except for the
Transferor's and Issuer's indemnity obligations as provided herein, upon the
termination of the Trust as provided in Article XI of the Sale and Servicing
Agreement.
8. Governing Law. This Subsequent Transfer Agreement shall be governed by
and construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
9. Intention of the Parties. It is the intention of the parties that the
Issuer is purchasing, and the Transferor is selling, the Subsequent Loans rather
than pledging the Subsequent Loans to secure a loan by the Issuer to the
Transferor. The parties hereto each intend to treat the transaction for
accounting purposes as a sale by the Transferor, and a purchase by the Issuer,
of the Subsequent Loans. For federal income tax purposes, the parties hereto
each intend to treat the transaction as debt. The Issuer will have the right to
review the Subsequent Loans and the related Subsequent Loan Files to determine
the characteristics of the Subsequent Loans which will affect the federal income
tax consequences of owning the Subsequent Loans and the Transferor will
cooperate with all reasonable requests made by the Issuer in the course of such
review.
10. The representations and warranties set forth in Article III shall
survive the purchase of the Subsequent Loans hereunder.
11. This Subsequent Transfer Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Except as otherwise provided in this Section 11 no other Person shall
have the right or obligation hereunder.
IN WITNESS WHEREOF, the Transferor and the Issuer have caused this
Subsequent Transfer Agreement to be duly executed on their behalf by their
respective officers thereunto duly authorized as of the day and year first above
written.
DITECH FUNDING SUBSEQUENT LOAN OWNER
TRUST 1997-1, as Issuer
By: ________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
DITECH FUNDING CORPORATION,
as Transferor
By: ________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Indenture Trustee
By: ________________________________
SCHEDULE I
Subsequent Loan Schedule