EXHIBIT 4.3
-----------
================================================================================
[NAME OF SERVICER],
as Servicer,
and
SOUTHERN PACIFIC SECURED ASSETS CORP.
as Company
----------------------
SERVICING AGREEMENT
Dated as of _______________
----------------------
Adjustable-Rate Mortgage Loans
Southern Pacific MBN Trust Series 19__-__
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. DEFINITIONS............................................... 1
Section 1.02. OTHER DEFINITIONAL PROVISIONS............................. 2
Section 1.03. INTEREST CALCULATIONS..................................... 2
ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER..... 3
Representations and Warranties of the Company.............................. 4
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES............. 4
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. THE SERVICER............................................... 6
Section 3.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS............... 7
Section 3.03. WITHDRAWALS FROM THE COLLECTION ACCOUNT.................... 9
Section 3.04. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES........................................................... 11
Section 3.05. MODIFICATION AGREEMENTS.................................... 11
Section 3.06. ........................................................... 12
Section 3.07. REALIZATION UPON DEFAULTED MORTGAGE LOANS.................. 13
Section 3.08. COMPANY AND INDENTURE TRUSTEE TO COOPERATE................. 14
Section 3.09. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER........................................................... 15
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.......................... 15
Section 3.11. ANNUAL SERVICING REPORT.................................... 16
Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE MORTGAGE LOANS....................................... 16
Section 3.13. MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES........ 16
Section 3.14. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED
PROPERTY........................................................... 17
Section 3.15. OPTIONAL REPURCHASE OF DEFAULTED MORTGAGE LOANS............ 17
ARTICLE IV
i
Page
----
Servicing Certificate
Section 4.01. STATEMENTS TO SECURITYHOLDERS............................... 18
ARTICLE V
Distribution and Payment Accounts
Section 5.01. DISTRIBUTION ACCOUNT........................................ 20
Section 5.02. PAYMENT ACCOUNT............................................. 20
ARTICLE VI
The Servicer
Section 6.01. LIABILITY OF THE SERVICER................................... 22
Section 6.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER....................................... 22
Section 6.03. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.......... 22
Section 6.04. SERVICER NOT TO RESIGN...................................... 23
Section 6.05. DELEGATION OF DUTIES........................................ 23
Section 6.06. SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER TRUSTEE'S
FEES AND EXPENSES; INDEMNIFICATION................................. 24
ARTICLE VII
Default
Section 7.01. SERVICING DEFAULT........................................... 26
Section 7.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.......... 28
Section 7.03. NOTIFICATION TO SECURITYHOLDERS............................. 29
ARTICLE VIII
Miscellaneous Provisions
Section 8.01. AMENDMENT................................................... 30
Section 8.02. GOVERNING LAW............................................... 30
Section 8.03. NOTICES..................................................... 30
Section 8.04. SEVERABILITY OF PROVISIONS.................................. 30
Section 8.05. THIRD-PARTY BENEFICIARIES................................... 30
ii
Page
----
Section 8.06. COUNTERPARTS................................................ 31
Section 8.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS.................... 31
Section 8.08. TERMINATION UPON PURCHASE BY THE SERVICER OR LIQUIDATION
OF ALL MORTGAGE LOANS............................................... 31
Section 8.09. CERTAIN MATTERS AFFECTING THE INDENTURE TRUSTEE............. 31
[Section 8.10. AUTHORITY OF THE ADMINISTRATOR.............................. 32
EXHIBIT A - MORTGAGE LOAN SCHEDULE...........................................A-1
EXHIBIT B - POWER OF ATTORNEY................................................B-1
EXHIBIT C - CERTIFICATE PURSUANT TO SECTION 3.08.............................C-1
EXHIBIT D - FORM OF REQUEST FOR RELEASE......................................D-1
Schedule 1 - Mortgage Insurance Component Schedule...........................S-1
iii
This Servicing Agreement, dated as of _______________, between
[Name of Servicer], as Servicer (the "Servicer") and Southern Pacific Secured
Assets Corp., as Company (the "Company"),
W I T N E S S E T H T H A T:
----------------------------
WHEREAS, Southern Pacific Secured Assets Corp., will create
Southern Pacific MBN Trust Series 19__-__, an owner trust (the "Issuer") under
Delaware law, and will transfer the Mortgage Loans and all of its rights under
the Mortgage Loan Purchase Agreement to the Issuer,;
WHEREAS, pursuant to the terms of a Trust Agreement dated as
of _______________ (the "Owner Trust Agreement") between the Company, as
depositor, and ______________________, as owner trustee (the "Owner Trustee"),
the Company will sell the Mortgage Collateral to Issuer in exchange for the cash
proceeds of the Securities;
WHEREAS, pursuant to the terms of the Trust Agreement between
the Depositor and the Owner Trustee, the Issuer will issue and transfer to or at
the direction of the Depositor, the Mortgage-Backed Certificates, Series 199_-__
(the "Certificates");
WHEREAS, pursuant to the terms of an Indenture dated as of
_______________ (the "Indenture") between the Issuer and the Indenture Trustee,
the Issuer will issue and transfer to or at the direction of the Purchaser the
Mortgage-Backed Notes, Series 199_-__ (the "Notes"), consisting of the Notes and
secured by the Mortgage Collateral;
WHEREAS, pursuant to the terms of the Mortgage Loan Purchase
Agreement, the Company will acquire the Initial Loans; and
WHEREAS, pursuant to the terms of this Servicing Agreement,
the Servicer will service the Mortgage Loans directly or through one or more
Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. DEFINITIONS. For all purposes of this Servicing
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires, capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Definitions contained in Appendix A
to the Indenture which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) All terms
defined in this Servicing Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Section and Exhibit references contained in this Servicing Agreement
are references to Sections and Exhibits in or to this Servicing Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
Section 1.03. INTEREST CALCULATIONS. All calculations of interest
hereunder that are made in respect of the Principal Balance of a Mortgage Loan
shall be made on a daily basis using a 365-day year. All calculations of
interest on the Securities shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest ▇▇▇▇▇ with one-half of one ▇▇▇▇▇ being rounded
down.
2
ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER.
The Servicer represents and warrants to Company, the Issuer and for the benefit
of the Indenture Trustee, as pledgee of the Mortgage Collateral, and the
Securityholders, as of the Cut-Off Date, [the date of the Servicing Agreement],
the Closing Date [and any Deposit Date], that:
(i) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
[_______] and has the corporate power to own its assets and to transact
the business in which it is currently engaged. The Servicer is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such
qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Servicer;
(ii) The Servicer has the power and authority to make,
execute, deliver and perform this Servicing Agreement and all of the
transactions contemplated under this Servicing Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Servicing Agreement. When executed and delivered,
this Servicing Agreement will constitute the legal, valid and binding
obligation of the Servicer enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) The Servicer is not required to obtain the consent
of any other Person or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Servicing Agreement,
except for such consent, license, approval or authorization, or
registration or declaration, as shall have been obtained or filed, as
the case may be;
(iv) The execution and delivery of this Servicing
Agreement and the performance of the transactions contemplated hereby
by the Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the
Servicer or any provision of the Certificate of Incorporation or Bylaws
of the Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is a party
or by which the Servicer may be bound; and
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Servicer threatened, against the Servicer or
any of its properties or with respect to this Servicing Agreement or
the Notes or the Certificates which in the opinion of the Servicer has
a reasonable likelihood of resulting in a material adverse effect on
the transactions contemplated by this Servicing Agreement.
3
The foregoing representations and warranties shall survive any
termination of the Servicer hereunder.
Section 2.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to the Servicer for the benefit of the
Indenture Trustee, as pledgee of the Mortgage Collateral, and the
Securityholders, as of the Cut-Off Date, the Closing Date and any Deposit Date,
that:
(i) The Company is a corporation in good standing under
the laws of the State of California;
(ii) The Company has full power, authority and legal
right to execute and deliver this Servicing Agreement and to perform
its obligations under this Servicing Agreement, and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Servicing Agreement; and
(iii) The execution and delivery by the Company of this
Servicing Agreement and the performance by the Company of its
obligations under this Servicing Agreement will not violate any
provision of any law or regulation governing the Company or any order,
writ, judgment or decree of any court, arbitrator or governmental
authority or agency applicable to the Company or any of its assets.
Such execution, delivery, authentication and performance will not
require the authorization, consent or approval of, the giving of notice
to, the filing or registration with, or the taking of any other action
with respect to, any governmental authority or agency regulating the
activities of limited liability companies. Such execution, delivery,
authentication and performance will not conflict with, or result in a
breach or violation of, any mortgage, deed of trust, lease or other
agreement or instrument to which the Company is bound.
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES. The
Servicer, on behalf of and subject to the direction of the Indenture Trustee, as
pledgee of the Mortgage Collateral, or the Credit Enhancer, shall enforce the
representations and warranties of the Seller pursuant to the Mortgage Loan
Purchase Agreement. Upon the discovery by the Seller, the Servicer, the
Indenture Trustee, the Credit Enhancer, the Company or any Custodian of a breach
of any of the representations and warranties made in the Mortgage Loan Purchase
Agreement, in respect of any Mortgage Loan which materially and adversely
affects the interests of the Securityholders or the Credit Enhancer, the party
discovering such breach shall give prompt written notice to the other parties
(any Custodian being so obligated under a Custodial Agreement). The Servicer
shall promptly notify the Seller of such breach and request that, pursuant to
the terms of the Mortgage Loan Purchase Agreement, the Seller either (i) cure
such breach in all material respects within 45 days (with respect to a breach of
the representations and warranties contained in Section 3.1(a) of the Mortgage
Loan Purchase Agreement) or 90 days (with respect to a breach of the
representations and warranties contained in Section 3.1(b) of the Mortgage Loan
Purchase Agreement) from the date the Seller was notified of such breach or (ii)
purchase such Mortgage Loan from the Company at the price and in the manner set
forth in Section 3.1(b) of the Mortgage Loan Purchase Agreement; PROVIDED that
the Seller shall, subject to the conditions set forth in the Mortgage Loan
Purchase Agreement, have the option to substitute an Eligible Substitute
Mortgage Loan or Loans for such Mortgage Loan. In the event that the Seller
elects
4
to substitute one or more Eligible Substitute Mortgage Loans pursuant to Section
3.1(b) of the Mortgage Loan Purchase Agreement, the Seller shall deliver to the
Company with respect to such Eligible Substitute Mortgage Loans, the original
Mortgage Note, the Mortgage, and such other documents and agreements as are
required by the Mortgage Loan Purchase Agreement. No substitution will be made
in any calendar month after the Determination Date for such month. Payments due
with respect to Eligible Substitute Mortgage Loans in the month of substitution
shall not be transferred to the Company and will be retained by the Servicer and
remitted by the Servicer to the Seller on the next succeeding Payment Date
provided a payment has been received by the Company for such month in respect of
the Mortgage Loan to be removed. The Servicer shall amend or cause to be amended
the Mortgage Loan Schedule to reflect the removal of such Mortgage Loan and the
substitution of the Eligible Substitute Mortgage Loans and the Servicer shall
promptly deliver the amended Mortgage Loan Schedule to the Owner Trustee and
Indenture Trustee.
It is understood and agreed that the obligation of the Seller to cure
such breach or purchase or substitute for such Mortgage Loan as to which such a
breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Company and the Indenture Trustee, as
pledgee of the Mortgage Collateral, against the Seller. In connection with the
purchase of or substitution for any such Mortgage Loan by the Seller, the
Company shall assign to the Seller all of the right, title and interest in
respect of the Mortgage Loan Purchase Agreement applicable to such Mortgage
Loan. Upon receipt of the Repurchase Price, or upon completion of such
substitution, the applicable Custodian shall deliver the Mortgage Files to the
Servicer, together with all relevant endorsements and assignments.
5
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. THE SERVICER. (a) The Servicer shall service and
administer the Mortgage Loans in the same manner as would prudent institutional
mortgage lenders servicing comparable mortgage loans for their own account in
the jurisdictions where the related MOrtgaged Properties are located and in a
manner consistent with the terms of this Servicing Agreement and which shall be
normal and usual in its general mortgage servicing activities and shall have
full power and authority, acting alone or through a subservicer, to do any and
all things in connection with such servicing and administration which it may
deem necessary or desirable, it being understood, however, that the Servicer
shall at all times remain responsible to the Company, the Indenture Trustee, as
pledgee of the Mortgage Collateral, and the Securityholders for the performance
of its duties and obligations hereunder in accordance with the terms hereof and
the servicing standard set forth above. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
by the Company and the Indenture Trustee, as pledgee of the Mortgage Collateral,
to execute and deliver, on behalf of itself, the Company, the Securityholders
and the Indenture Trustee or any of them, 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 Mortgage Loans and with respect
to the Mortgaged Properties. The Company, the Indenture Trustee and the
Custodian, as applicable, shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder. On the Closing Date, the
Company shall deliver to the Servicer a power of attorney substantially in the
form of Exhibit B hereto.
If the Mortgage relating to a Mortgage Loan did not have a lien senior
on the related Mortgaged Property as of the Cut-Off Date, then the Servicer, in
such capacity, may not consent to the placing of a lien senior to that of the
Mortgage on the related Mortgaged Property. If the Mortgage relating to a
Mortgage Loan had a lien senior to the Mortgage Loan on the related Mortgaged
Property as of the Cut-Off Date, then the Servicer, in such capacity, may
consent to the refinancing of such senior lien; PROVIDED that (i) the resulting
Combined Loan-to-Value Ratio of such Mortgage Loan is no higher than the
Combined Loan-to-Value Ratio prior to such refinancing and (ii) the interest
rate for the loan evidencing the refinanced senior lien on the date of such
refinancing is no higher than the interest rate on the loan evidencing the
existing senior lien immediately prior to the date of such refinancing.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Servicing Agreement) to the Company under this Servicing
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(b) The Servicer has entered into Initial Subservicing Agreements with
the Initial Subservicers for the servicing and administration of the Mortgage
Loans and may enter into additional Subservicing Agreements with Subservicers
for the servicing and administration of certain of the Mortgage Loans.
References in this Servicing Agreement to actions taken or to be taken by the
Servicer in servicing the Mortgage Loans include actions taken or to be taken
6
by a Subservicer on behalf of the Servicer and any amount received by such
Subservicer in respect of a Mortgage Loan shall be deemed to have been received
by the Servicer whether or not actually received by the Servicer. Each
Subservicing Agreement will be upon such terms and conditions as are not
inconsistent with this Servicing Agreement and as the Servicer and the
Subservicer have agreed. With the approval of the Servicer, a Subservicer may
delegate its servicing obligations to third-party servicers, but such
Subservicers will remain obligated under the related Subservicing Agreements.
The Servicer and the Subservicer may enter into amendments to the related
Subservicing Agreements; PROVIDED, HOWEVER, that any such amendments shall be
consistent with and not violate the provisions of this Servicing Agreement. The
Servicer shall be entitled to terminate any Subservicing Agreement in accordance
with the terms and conditions thereof and without any limitation by virtue of
this Servicing Agreement; PROVIDED, HOWEVER, that in the event of termination of
any Subservicing Agreement by the Servicer or the Subservicer, the Servicer
shall either act as servicer of the related Mortgage Loan or enter into a
Subservicing Agreement with a successor Subservicer which will be bound by the
terms of the related Subservicing Agreement. The Servicer shall be entitled to
enter into any agreement with a Subservicer for indemnification of the Servicer
and nothing contained in this Servicing Agreement shall be deemed to limit or
modify such indemnification.
In the event that the rights, duties and obligations of the Servicer
are terminated hereunder, any successor to the Servicer in its sole discretion
may, to the extent permitted by applicable law, terminate the existing
Subservicing Agreement with any Subservicer in accordance with the terms of the
applicable Subservicing Agreement or assume the terminated Servicer's rights and
obligations under such subservicing arrangements which termination or assumption
will not violate the terms of such arrangements.
As part of its servicing activities hereunder, the Servicer, for the
benefit of the Company, shall use reasonable efforts to enforce the obligations
of each Subservicer under the related Subservicing Agreement, to the extent that
the non-performance of any such obligation would have material and adverse
effect on a Mortgage Loan. Such enforcement, including, without limitation, the
legal prosecution of claims, termination of Subservicing Agreements 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 Mortgage 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 Mortgage Loan or (ii) from a specific recovery of costs,
expenses or attorneys fees against the party against whom such enforcement is
directed.
Section 3.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS. (a) The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Mortgage Loans, and shall, to the extent such
procedures shall be consistent with this Servicing Agreement, follow such
collection procedures as shall be normal and usual in its general mortgage
servicing activities. Consistent with the foregoing, and without limiting the
generality of the foregoing, the Servicer may in its discretion (i) waive any
late payment charge, penalty interest or other fees which may be collected in
the ordinary course of servicing such Mortgage Loan and (ii) arrange with a
Mortgagor a schedule for the payment of principal and interest due and unpaid;
PROVIDED such arrangement is consistent with the Servicer's policies with
respect to
7
home equity mortgage loans; PROVIDED, FURTHER, that notwithstanding such
arrangement such Mortgage Loans will be included in the information regarding
delinquent Mortgage Loans set forth in the Servicing Certificate. The Servicer
may also extend the Due Date for payment due on a Mortgage Loan, PROVIDED,
HOWEVER, that the Servicer shall first determine that any such waiver or
extension will not adversely affect the lien of the related Mortgage. Consistent
with the terms of this Servicing Agreement, the Servicer may also waive, modify
or vary any term of any Mortgage Loan or consent to the postponement of strict
compliance with any such term or in any manner grant indulgence to any Mortgagor
if in the Servicer's determination such waiver, modification, postponement or
indulgence is not materially adverse to the interests of the Securityholders or
the Credit Enhancer, PROVIDED, HOWEVER, that the Servicer may not modify or
permit any Subservicer to modify any Mortgage Loan (including without limitation
any modification that would change the Mortgage Rate, forgive the payment of any
principal or interest (unless in connection with the liquidation of the related
Mortgage Loan) or extend the final maturity date of such Mortgage Loan) unless
such Mortgage Loan is in default or, in the judgment of the Servicer, such
default is reasonably foreseeable.
(b) The Servicer shall establish an account (the "Collection Account")
in which the Servicer shall deposit or cause to be deposited any amounts
representing payments on and any collections in respect of the Mortgage Loans
received by it subsequent to the Cut-Off Date as to any Initial Loan or the
related Deposit Date as to any Additional Loan (other than in respect of the
payments referred to in the following paragraph) within __ Business Day[s]
following receipt thereof (or otherwise on or prior to the Closing Date),
including the following payments and collections received or made by it (without
duplication):
(i) all payments of principal of or interest on the
Mortgage Loans received by the Servicer from the respective
Subservicer, net of any portion of the interest thereof retained by the
Subservicer as Subservicing Fees;
(ii) the aggregate Repurchase Price of the Mortgage
Loans purchased by the Servicer pursuant to Section 3.15;
(iii) Net Liquidation Proceeds net of any related
Foreclosure Profit;
(iv) all proceeds of any Mortgage Loans repurchased by
the Seller pursuant to the Mortgage Loan Purchase Agreement, and all
Substitution Adjustment Amounts required to be deposited in connection
with the substitution of an Eligible Substitute Mortgage Loan pursuant
to the Mortgage Loan Purchase Agreement;
(v) insurance proceeds, other than Net Liquidation
Proceeds, resulting from any insurance policy maintained on a
Mortgaged Property; and
(vi) amounts required to be paid by the Servicer
pursuant to Section 8.08.
PROVIDED, HOWEVER, that with respect to each Collection Period, the Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Collection Period. The foregoing
requirements respecting deposits to the Collection Account
8
are exclusive, it being understood that, without limiting the generality of the
foregoing, the Servicer need not deposit in the Collection Account amounts
representing Foreclosure Profits, fees (including annual fees) or late charge
penalties, payable by Mortgagors, or amounts received by the Servicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items. In the event any amount not required to
be deposited in the Collection Account is so deposited, the Servicer may at any
time withdraw such amount from the Collection Account, any provision herein to
the contrary notwithstanding. The Collection Account may contain funds that
belong to one or more trust funds created for the notes or certificates of other
series and may contain other funds respecting payments on mortgage loans
belonging to the Servicer or serviced or serviced by it on behalf of others.
Notwithstanding such commingling of funds, the Servicer shall keep records that
accurately reflect the funds on deposit in the Collection Account that have been
identified by it as being attributable to the Mortgage Loans and shall hold all
collections in the Collection Account to the extent they represent collections
on the Mortgage Loans for the benefit of the Company, the Indenture Trustee, the
Securityholders and the Credit Enhancer, as their interests may appear. The
Servicer shall remit all Foreclosure Profits to itself as additional servicing
compensation.
The Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Eligible Investments
(including obligations of the Servicer or any of its Affiliates, if such
obligations otherwise qualify as Eligible Investments), which shall mature not
later than the Business Day next preceding the Payment Date and shall not be
sold or disposed of prior to its maturity. Except as provided above, all income
and gain realized from any such investment shall be for the benefit of the
Servicer and shall be subject to its withdrawal or order from time to time. The
amount of any losses incurred in respect of the principal amount of any such
investments shall be deposited in the Collection Account by the Servicer out of
its own funds immediately as realized.
(c) The Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Servicer, in one or more accounts meeting the requirements of an Eligible
Account, and invested in Eligible Investments, unless, all such collections are
remitted on a daily basis to the Servicer for deposit into the Collection
Account.
Section 3.03. WITHDRAWALS FROM THE COLLECTION ACCOUNT. The Servicer
shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on deposit therein pursuant to Section 3.02 that
are attributable to the Mortgage Loans for the following purposes:
(i) to deposit in the Distribution Account, on the
Business Day prior to each Payment Date, an amount equal to the
Security Collections required to be distributed on such Payment Date;
(ii) to the extent deposited to the Collection Account,
to reimburse itself or the related Subservicer for previously
unreimbursed expenses incurred in maintaining individual insurance
policies pursuant to Section 3.04, or Liquidation Expenses, paid
pursuant to Section 3.07 or otherwise reimbursable pursuant to the
terms of this Servicing Agreement (to the extent not payable pursuant
to Section 3.09), such
9
withdrawal right being limited to amounts received on particular
Mortgage Loans (other than any Repurchase Price in respect thereof)
which represent late recoveries of the payments for which such advances
were made, or from related Liquidation Proceeds or the proceeds of the
purchase of such Mortgage Loan;
(iii) to pay to itself out of each payment received on
account of interest on a Mortgage Loan as contemplated by Section 3.09,
an amount equal to the related Servicing Fee (to the extent not
retained pursuant to Section 3.02), and to pay to any Subservicer any
Subservicing Fees not previously withheld by the Subservicer;
(iv) to the extent deposited in the Collection Account
to pay to itself as additional servicing compensation any interest or
investment income earned on funds deposited in the Collection Account
and Payment Account that it is entitled to withdraw pursuant to
Sections 3.02(b) and 5.01;
(v) to the extent deposited in the Collection Account,
to pay to itself as additional servicing compensation any Foreclosure
Profits;
(vi) to pay to itself or the Seller, with respect to any
Mortgage Loan or property acquired in respect thereof that has been
purchased or otherwise transferred to the Seller, the Servicer or other
entity, all amounts received thereon and not required to be distributed
to Securityholders as of the date on which the related Purchase Price
or Repurchase Price is determined;
(vii) to withdraw any other amount deposited in the
Collection Account that was not required to be deposited therein
pursuant to Section 3.02;
(viii) to pay to the Seller the amount, if any, deposited
in the Collection Account by the Indenture Trustee upon release thereof
from the Funding Account representing payments for Additional Loans;
and
(ix) after the occurrence of an Amortization Event, to
pay to the Seller, the Excluded Amount.
Since, in connection with withdrawals pursuant to clauses (iii), (iv), (vi) and
(vii), the Servicer's entitlement thereto is limited to collections or other
recoveries on the related Mortgage Loan, the Servicer shall keep and maintain
separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose
of justifying any withdrawal from the Collection Account pursuant to such
clauses. Notwithstanding any other provision of this Servicing Agreement, the
Servicer shall be entitled to reimburse itself for any previously unreimbursed
expenses incurred pursuant to Section 3.07 or otherwise reimbursable pursuant to
the terms of this Servicing Agreement that the Servicer determines to be
otherwise nonrecoverable (except with respect to any Mortgage Loan as to which
the Repurchase Price has been paid), by withdrawal from the Collection Account
of amounts on deposit therein attributable to the Mortgage Loans on any Business
Day prior to the Payment Date succeeding the date of such determination.
10
Section 3.04. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES. The Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Servicer or related Subservicer as loss payee
thereunder providing extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan from time to time or (ii) the combined principal balance owing on
such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Servicer shall also cause to be maintained on property acquired
upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, fire
insurance with extended coverage in an amount which is at least equal to the
amount necessary to avoid the application of any co-insurance clause contained
in the related hazard insurance policy. Amounts collected by the Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the related Mortgaged Property or property thus acquired or amounts released
to the Mortgagor in accordance with the Servicer's normal servicing procedures)
shall be deposited in the Collection Account to the extent called for by Section
3.02. In cases in which any Mortgaged Property is located at any time during the
life of a Mortgage Loan in a federally designated flood area, the hazard
insurance to be maintained for the related Mortgage Loan shall include flood
insurance (to the extent available). All such flood insurance shall be in
amounts equal to the lesser of (i) the amount required to compensate for any
loss or damage to the Mortgaged Property on a replacement cost basis and (ii)
the maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program (assuming that the area in
which such Mortgaged Property is located is participating in such program). The
Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Servicer shall obtain and maintain a blanket policy consistent with its
general mortgage servicing activities insuring against hazard losses on all of
the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section 3.04, it being
understood and agreed that such policy may contain a deductible clause, in which
case the Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property a policy complying with the first sentence of
this Section 3.04 and there shall have been a loss which would have been covered
by such policy, deposit in the Collection Account the amount not otherwise
payable under the blanket policy because of such deductible clause. Any such
deposit by the Servicer shall be made on the last Business Day of the Collection
Period in the month in which payments under any such policy would have been
deposited in the Collection Account. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to
present, on behalf of itself, the Company, the Issuer, the Indenture Trustee and
the Securityholders, claims under any such blanket policy.
Section 3.05. MODIFICATION AGREEMENTS. The Servicer or the related
Subservicer, as the case may be, shall be entitled to (A) execute assumption
agreements, substitution agreements, and instruments of satisfaction or
cancellation or of partial or full release or discharge, or any other document
contemplated by this Servicing Agreement and other comparable instruments with
respect to the Mortgage Loans and with respect to the Mortgaged Properties
subject to the Mortgages (and the Company shall promptly execute any such
documents on request of the Servicer) and (B) approve the granting of an
easement thereon in favor of another Person, any
11
alteration or demolition of the related Mortgaged Property or other similar
matters, if it has determined, exercising its good faith business judgment in
the same manner as it would if it were the owner of the related Mortgage Loan,
that the security for, and the timely and full collectability of, such Mortgage
Loan would not be adversely affected thereby. A partial release pursuant to this
Section 3.05 shall be permitted only if the Combined Loan-to-Value Ratio for
such Mortgage Loan after such partial release does not exceed the Combined
Loan-to-Value Ratio for such Mortgage Loan as of the Cut-Off Date. Any fee
collected by the Servicer or the related Subservicer for processing such request
will be retained by the Servicer or such Subservicer as additional servicing
compensation.
Section 3.06. TRUST ESTATE; RELATED DOCUMENTS. (a) When required by the
provisions of this Servicing Agreement, the Company shall execute instruments to
release property from the terms of this Servicing Agreement, or convey the
Company's interest in the same, in a manner and under circumstances which are
not inconsistent with the provisions of this Servicing Agreement. No party
relying upon an instrument executed by the Company as provided in this Article
III shall be bound to ascertain the Company's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) If from time to time the Servicer shall deliver to the Company or
the related Custodian copies of any written assurance, assumption agreement or
substitution agreement or other similar agreement pursuant to Section 3.05, the
Company or the related Custodian shall check that each of such documents
purports to be an original executed copy (or a copy of the original executed
document if the original executed copy has been submitted for recording and has
not yet been returned) and, if so, shall file such documents, and upon receipt
of the original executed copy from the applicable recording office or receipt of
a copy thereof certified by the applicable recording office shall file such
originals or certified copies with the Related Documents. If any such documents
submitted by the Servicer do not meet the above qualifications, such documents
shall promptly be returned by the Company or the related Custodian to the
Servicer, with a direction to the Servicer to forward the correct documentation.
(c) Upon Company Request accompanied by an Officers' Certificate of the
Servicer pursuant to Section 3.09 of this Servicing Agreement to the effect that
a Mortgage Loan has been the subject of a final payment or a prepayment in full
and the related Mortgage Loan has been terminated or that substantially all
Liquidation Proceeds which have been determined by the Servicer in its
reasonable judgment to be finally recoverable have been recovered, and upon
deposit to the Collection Account of such final monthly payment, prepayment in
full together with accrued and unpaid interest to the date of such payment with
respect to such Mortgage Loan or, if applicable, Liquidation Proceeds, the
Company shall promptly release the Related Documents to the Servicer, along with
such documents as the Servicer or the Mortgagor may request as contemplated by
the Servicing Agreement to evidence satisfaction and discharge of such Mortgage
Loan. If from time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Servicer requests the Company or the related Custodian
to release the Related Documents and delivers to the Company or the related
Custodian a trust receipt reasonably satisfactory to the Company or the related
Custodian and signed by a Responsible Officer of the Servicer, the Company or
the related Custodian shall release the Related Documents to the Servicer. If
such Mortgage Loans shall be liquidated and the Company or the
12
related Custodian receives a certificate from the Servicer as provided above,
then, upon request of the Company or the related Custodian shall release the
trust receipt to the Servicer.
Section 3.07. REALIZATION UPON DEFAULTED MORTGAGE LOANS. With respect
to such of the Mortgage Loans as come into and continue in default, the Servicer
will decide whether to foreclose upon the Mortgaged Properties securing such
Mortgage Loans or write off the unpaid principal balance of the Mortgage Loans
as bad debt; PROVIDED that if the Servicer has actual knowledge that any
Mortgaged Property is affected by hazardous or toxic wastes or substances and
that the acquisition of such Mortgaged Property would not be commercially
reasonable, then the Servicer will not cause the Company to acquire title to
such Mortgaged Property in a foreclosure or similar proceeding. In connection
with such foreclosure or other conversion, the Servicer shall follow such
practices (including, in the case of any default on a related senior mortgage
loan, the advancing of funds to correct such default) and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
mortgage servicing activities; PROVIDED that the Servicer shall not be liable in
any respect hereunder if the Servicer is acting in connection with any such
foreclosure or attempted foreclosure which is not completed or other conversion
in a manner that is consistent with the provisions of this Servicing Agreement.
The foregoing is subject to the proviso that the Servicer shall not be required
to expend its own funds in connection with any foreclosure or attempted
foreclosure which is not completed or towards the correction of any default on a
related senior mortgage loan or restoration of any property unless it shall
determine that such expenditure will increase Net Liquidation Proceeds. In the
event of a determination by the Servicer that any such expenditure previously
made pursuant to this Section 3.07 will not be reimbursable from Net Liquidation
Proceeds, the Servicer shall be entitled to reimbursement of its funds so
expended pursuant to Section 3.03.
Notwithstanding any provision of this Servicing Agreement, a Mortgage
Loan may be deemed to be finally liquidated if substantially all amounts
expected by the Servicer to be received in connection with the related defaulted
Mortgage Loan have been received; PROVIDED, HOWEVER, any subsequent collections
with respect to any such Mortgage Loan shall be deposited to the Collection
Account. For purposes of determining the amount of any Liquidation Proceeds or
Insurance Proceeds, or other unscheduled collections, the Servicer may take into
account minimal amounts of additional receipts expected to be received or any
estimated additional liquidation expenses expected to be incurred in connection
with the related defaulted Mortgage Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Company and the Indenture Trustee as their interests may
appear, or to their respective nominee on behalf of Securityholders.
Notwithstanding any such acquisition of title and cancellation of the related
Mortgage Loan, such Mortgaged Property shall (except as otherwise expressly
provided herein) be considered to be an outstanding Mortgage Loan held as an
asset of the Company until such time as such property shall be sold. Consistent
with the foregoing for purposes of all calculations hereunder, so long as such
Mortgaged Property shall be considered to be an outstanding Mortgage Loan it
shall be assumed that, notwithstanding that the indebtedness evidenced by the
related Mortgage Note shall have been discharged, such Mortgage Note in effect
at the time of any such acquisition of title before any adjustment thereto by
reason of any
13
bankruptcy or similar proceeding or any moratorium or similar waiver or grace
period will remain in effect.
Any proceeds from foreclosure proceedings or the purchase or repurchase
of any Mortgage Loan pursuant to the terms of this Servicing Agreement, as well
as any recovery resulting from a collection of Liquidation Proceeds or Insurance
Proceeds, will be applied in the following order of priority: first, to
reimburse the Servicer or the related Subservicer in accordance with Section
3.07; second, to all Servicing Fees payable therefrom; third, to the extent of
accrued and unpaid interest on the related Mortgage Loan, at the Net Mortgage
Rate to the Due Date prior to the Payment Date on which such amounts are to be
deposited in the Payment Account; fourth, as a recovery of principal on the
Mortgage Loan; and fifth, to Foreclosure Profits.
Section 3.08. COMPANY AND INDENTURE TRUSTEE TO COOPERATE. On or before
each Payment Date, the Servicer will notify the Indenture Trustee or the
relevant Custodian, with a copy to the Company, of the termination of or the
payment in full and the termination of any Mortgage Loan during the preceding
Collection Period, which notification shall be by a certification in
substantially the form attached hereto as Exhibit C (which certification shall
include a statement to the effect that all amounts received in connection with
such payment which are required to be deposited in the Collection Account
pursuant to Section 3.02 have been so deposited or credited) of a Servicing
Officer. Upon receipt of payment in full, the Servicer is authorized to execute,
pursuant to the authorization contained in Section 3.01, if the assignments of
Mortgage have been recorded as required under the Mortgage Loan Purchase
Agreement, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Servicer if required by
applicable law and be delivered to the Person entitled thereto. It is understood
and agreed that any expenses incurred in connection with such instrument of
satisfaction or transfer shall be reimbursed from amounts deposited in the
Collection Account. From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Indenture Trustee or the relevant
Custodian shall, upon request of the Servicer and delivery to the Indenture
Trustee or relevant Custodian, with a copy to the Company, of a Request for
Release, in the form annexed hereto as Exhibit D, signed by a Servicing Officer,
release or cause to be released the related Mortgage File to the Servicer and
the Company and Indenture Trustee shall promptly execute such documents, in the
forms provided by the Servicer, as shall be necessary for the prosecution of any
such proceedings or the taking of other servicing actions. Such trust receipt
shall obligate the Servicer to return the Mortgage File to the Indenture Trustee
or the related Custodian (as specified in such receipt) when the need therefor
by the Servicer no longer exists unless the Mortgage Loan shall be liquidated,
in which case, upon receipt of a certificate of a Servicing Officer similar to
that hereinabove specified, the trust receipt shall be released to the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions of the Mortgage Loan Purchase
Agreement, the Company shall, if so requested in writing by the Servicer,
promptly execute an appropriate assignment in the form provided by the Servicer
to assign such Mortgage Loan for the purpose of collection to the Servicer (any
such assignment shall unambiguously indicate that the assignment is for the
purpose of collection only), and, upon such assignment, such assignee for
collection will thereupon bring all required
14
actions in its own name and otherwise enforce the terms of the Mortgage Loan and
deposit or credit the Net Liquidation Proceeds, exclusive of Foreclosure
Profits, received with respect thereto in the Collection Account. In the event
that all delinquent payments due under any such Mortgage Loan are paid by the
Mortgagor and any other defaults are cured then the assignee for collection
shall promptly reassign such Mortgage Loan to the Company and return all Related
Documents to the place where the related Mortgage File was being maintained.
In connection with the Company's obligation to cooperate as provided in
this Section 3.08 and all other provisions of this Servicing Agreement requiring
the Company to authorize or permit any actions to be taken with respect to the
Mortgage Loans, the Indenture Trustee, as pledgee of the Mortgage Collateral in
the Company, expressly agrees, on behalf of the Company, to take all such
actions on behalf of the Company and to promptly execute and return all
instruments reasonably required by the Servicer in connection therewith;
PROVIDED that if the Servicer shall request a signature of the Indenture
Trustee, on behalf of the Company, the Servicer will deliver to the Indenture
Trustee an Officer's Certificate stating that such signature is necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Servicing Agreement.
Section 3.09. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. The Servicer shall be entitled to receive the Servicing Fee in
accordance with Section 3.03 as compensation for its services in connection with
servicing the Mortgage Loans. Moreover, additional servicing compensation in the
form of late payment charges and certain other receipts not required to be
deposited in the Collection Account as specified in Section 3.02 shall be
retained by the Servicer. The Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder (including payment of
all other fees and expenses not expressly stated hereunder to be for the account
of the Securityholders, including, without limitation, the fees and expenses of
the Administrator, Owner Trustee, Indenture Trustee and any Custodian) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE. (a) The Servicer will
deliver to the Company, the Issuer and the Indenture Trustee, with a copy to the
Credit Enhancer, on or before ________ of each year, beginning ________, ____,
an Officer's Certificate stating that (i) a review of the activities of the
Servicer during the preceding fiscal year and of its performance under this
Servicing Agreement has been made under such officer's supervision, (ii) to the
best of such officer's knowledge, based on such review, the Servicer has
fulfilled all its material obligations under this Servicing Agreement in all
material respects throughout such fiscal year, or, if there has been a material
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof and (iii) to the best of
such officer's knowledge, based on consultation with counsel, any continuation
Uniform Commercial Code financing statement or other Uniform Commercial Code
financing statement during the preceding fiscal year which the Servicer
determined was necessary to be filed was filed in order to continue protection
of the interest of the Company in the Mortgage Loans. In addition, the Servicer
shall deliver or cause each Subservicer to deliver to the Indenture Trustee, the
Company, the Issuer, the Depositor and the Credit Enhancer a copy of each
certification, accountant's report or other document upon which the foregoing
Officer's Certificate is based with respect to such Subservicer's performance.
15
(b) The Servicer shall deliver to the Company, the Issuer and the
Indenture Trustee, with a copy to the Credit Enhancer, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice by means of an Officer's Certificate of any event
which with the giving of notice or the lapse of time or both, would become a
Servicer of Default.
Section 3.11. ANNUAL SERVICING REPORT. On or before ________ of each
year, beginning ________, ____, the Servicer at its expense shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Servicer) to furnish a report to the Company, the Issuer,
the Indenture Trustee, the Depositor, the Credit Enhancer and each Rating Agency
to the effect that such firm has examined certain documents and records relating
to the servicing of mortgage loans by the Servicer during the most recent
calendar year then ended under servicing agreements (including this Servicing
Agreement) substantially similar to this Servicing Agreement and that such
examination, which has been conducted substantially in compliance with the audit
guide for audits of non-supervised mortgagees approved by the Department of
Housing and Urban Development for use by independent public accountants (to the
extent that the procedures in such audit guide are applicable to the servicing
obligations set forth in such agreements), has disclosed no items of
noncompliance with the provisions of this Servicing Agreement which, in the
opinion of such firm, are material, except for such items of noncompliance as
shall be set forth in such report. 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 the manner described above (rendered within one year of such
statement) of independent public accountants with respect to the related
Subservicer. For purposes of such statement, such firm may conclusively assume
that all servicing agreements among the Company and the Servicer relating to
home equity mortgage loans are substantially similar one to another except for
any such servicing agreement which, by its terms, specifically states otherwise.
Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS. Whenever required by statute or regulation, the Servicer
shall provide to the Credit Enhancer, any Securityholder upon reasonable request
(or a regulator for a Securityholder) or the Indenture Trustee, reasonable
access to the documentation regarding the Mortgage Loans such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer. Nothing in this Section 3.12
shall derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Servicer to provide access as provided in this Section 3.12 as a result
of such obligation shall not constitute a breach of this Section 3.12.
Section 3.13. MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES. The
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or policies and
bond shall be at least equal to the coverage that would be required by FNMA or
FHLMC, whichever is greater, for Persons performing servicing for mortgage loans
purchased by such entity.
16
Section 3.14. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY.
The Servicer shall prepare and deliver all federal and state information reports
when and as required by all applicable state and federal income tax laws. In
particular, with respect to the requirement under Section 6050J of the Code to
the effect that the Servicer or Subservicer shall make reports of foreclosures
and abandonments of any mortgaged property for each year beginning in ____, the
Servicer or Subservicer shall file reports relating to each instance occurring
during the previous calendar year in which the Servicer (i) on behalf of the
Company, acquires an interest in any Mortgaged Property through foreclosure or
other comparable conversion in full or partial satisfaction of a Mortgage Loan,
or (ii) knows or has reason to know that any Mortgaged Property has been
abandoned. The reports from the Servicer or Subservicer shall be in form and
substance sufficient to meet the reporting requirements imposed by Section 6050J
and Section 6050H (reports relating to mortgage interest received) of the Code.
Section 3.15. OPTIONAL REPURCHASE OF DEFAULTED MORTGAGE LOANS.
Notwithstanding any provision in Section 3.07 to the contrary, the Servicer may
repurchase any Mortgage Loan delinquent in payment for a period of 60 days or
longer for a price equal to the Repurchase Price.
17
ARTICLE IV
Servicing Certificate
Section 4.01. STATEMENTS TO SECURITYHOLDERS. (a) With respect to each
Payment Date, the Servicer shall forward to the Indenture Trustee and the
Indenture Trustee pursuant to Section 3.26 of the Indenture shall forward or
cause to be forwarded by mail to each Certificateholder, Noteholder, the Credit
Enhancer, the Depositor, the Owner Trustee, the Certificate Paying Agent and
each Rating Agency, a statement setting forth the following information as to
the Notes and Certificates, to the extent applicable:
(i) the aggregate amount of (a) Security Interest
Collections with respect to the Notes and the Certificates, (b)
aggregate Security Principal Collections with respect to the Notes and
the Certificates and (c) Security Collections for the related
Collection Period with respect to the Notes and the Certificates;
(ii) the amount of such distribution to the
Securityholders of the Notes and the Certificates applied to reduce the
principal balance thereof and separately stating the portion thereof in
respect of the Accelerated Principal Distribution Amount and the amount
to be deposited in the Funding Account on such Payment Date;
(iii) the amount of such distribution to the
Securityholders of the Notes and the Certificates allocable to interest
and separately stating the portion thereof in respect of overdue
accrued interest;
(iv) the Credit Enhancement Draw Amount, if any, for such
Payment Date and the aggregate amount of prior draws thereunder not yet
reimbursed;
(v) the aggregate Principal Balance of (a) the ________
Loans, (b) the ______ Loans, (c) the _________ Loans, as of the end of
the preceding Collection Period and (d) all of the Mortgage Loans;
(vi) the number and aggregate Principal Balances of
Mortgage Loans (a) as to which the Minimum Monthly Payment is
delinquent for 30-59 days, 60-89 days, 90- 179 days and 180 or more
days, respectively and (b) that have become REO, in each case as of the
end of the preceding Collection Period; PROVIDED, HOWEVER, that such
information will not be provided on the statements relating to the
first Payment Date;
(vii) the Weighted Average Net Mortgage Rate for the
related Collection Period and the Weighted Average Net Mortgage Rate
for (a) the ________ Loans, (b) the _______Loans and (c) the _________
Loans for the related Collection Period;
(viii) the Special Capital Distribution Amount and the
Required Special Capital Distribution Amount, in each case as the end
of the related Collection Period; and
18
(ix) the aggregate amount of Additional Loans acquired
during the previous Collection Period with amounts in respect of Net
Principal Collections from the Funding Account;
(x) the aggregate Liquidation Loss Amounts with respect
to the related Collection Period, the amount of any remaining Carryover
Loss Amount with respect to the Notes and Certificates, respectively,
and the aggregate of the Liquidation Loss Amounts from all Collection
Periods to date expressed as a percentage of the sum of (a) the Cut-Off
Date Pool Balance and (b) the amount by which the Pool Balance as of
the latest date that the Additional Loans have been transferred to the
Company exceeds the Cut-Off Date Pool Balance;
(xi) any unpaid interest on the Notes and Certificates,
respectively, after such Distribution Date;
(xii) the aggregate Principal Balance of each Class of
Notes and of the Certificates after giving effect to the distribution
of principal on such Payment Date;
(xiii) the respective Security Percentage applicable to the
Notes and Certificates, after application of payments made on such
Payment Date; and
(xiv) the amount distributed pursuant to Section
3.05(a)(xi) of the Indenture on such Payment Date.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed as an aggregate dollar amount per Note or
Certificate with a $1,000 denomination.
Prior to the close of business on the Business Day next succeeding each
Determination Date, the Servicer shall furnish a written statement to the
Company, the Owner Trustee, the Depositor, the Certificate Paying Agent and the
Indenture Trustee setting forth (i) all the foregoing information, (ii) the
aggregate amounts required to be withdrawn from the Collection Account and
deposited into the Payment Account on the Business Day preceding the Payment
Date pursuant to Section 3.03 and (iii) the amounts (A) withdrawn from the
Payment Account and deposited to the Funding Account pursuant to Section 8.02(b)
of the Indenture and (B) withdrawn from the Funding Account and deposited to the
Collection Account pursuant to Section 8.02(c)(i) of the Indenture. The
determination by the Servicer of such amounts shall, in the absence of obvious
error, be presumptively deemed to be correct for all purposes hereunder and the
Owner Trustee and Indenture Trustee shall be protected in relying upon the same
without any independent check or verification. In addition, upon the Company's
written request, the Servicer shall promptly furnish information reasonably
requested by the Company that is reasonably available to the Servicer to enable
the Company to perform its federal and state income tax reporting obligations.
19
ARTICLE V
Distribution and Payment Accounts
Section 5.01. DISTRIBUTION ACCOUNT. The Servicer shall establish and
maintain a separate trust account (the "Distribution Account") titled "Southern
Pacific MBN Trust Series 199_-_, [for the benefit of the Noteholders, the
Certificateholders and the Credit Enhancer pursuant to the Indenture, dated as
of _______________, between Southern Pacific MBN Trust Series 199_- _ and [Name
of Indenture Trustee]. The Distribution Account shall be an Eligible Account. On
the Business Day prior to each Payment Date, (i) amounts deposited into the
Distribution Account pursuant to Section 3.03(i) hereof will be distributed by
the Servicer in accordance with Section ____ of the [Trust] Agreement, and (ii)
the portion of such amounts then distributable with respect to the Mortgage
Collateral shall be deposited into the Payment Account. [The Servicer shall
invest or cause the institution maintaining the Distribution Account to invest
the funds in the Distribution Account in Eligible Investments designated in the
name of the [Servicer], which shall mature not later than the Business Day next
preceding the Payment Date next following the date of such investment (except
that (i) any investment in the institution with which the Distribution Account
is maintained may mature on such Payment Date and (ii) any other investment may
mature on such Payment Date if the Servicer shall advance funds on such Payment
Date to the Payment Account in the amount payable on such investment on such
Payment Date, pending receipt thereof to the extent necessary to make
distributions on the Securities) and shall not be sold or disposed of prior to
maturity. All income and gain realized from any such investment shall be for the
benefit of the Servicer and shall be subject to its withdrawal or order from
time to time. The amount of any losses incurred in respect of any such
investments shall be deposited in the Distribution Account by the Servicer out
of its own funds immediately as realized.]
Section 5.02. PAYMENT ACCOUNT. The Indenture Trustee shall establish
and maintain a separate trust account (the "Payment Account") titled
"__________________________________, as Indenture Trustee, for the benefit of
the Noteholders, the Certificate Paying Agent and the Credit Enhancer pursuant
to the Indenture, dated as of _______________, between Southern Pacific MBN
Trust Series 199_-__ and __________________________________". The Payment
Account shall be an Eligible Account. On each Payment Date, amounts on deposit
in the Payment Account will be distributed by the Indenture Trustee in
accordance with Section 3.05 of the Indenture. The Indenture Trustee shall, upon
written request from the Servicer, invest or cause the institution maintaining
the Payment Account to invest the funds in the Payment Account in Eligible
Investments designated in the name of the Indenture Trustee, which shall mature
not later than the Business Day next preceding the Payment Date next following
the date of such investment (except that (i) any investment in the institution
with which the Payment Account is maintained may mature on such Payment Date and
(ii) any other investment may mature on such Payment Date if the Indenture
Trustee shall advance funds on such Payment Date to the Payment Account in the
amount payable on such investment on such Payment Date, pending receipt thereof
to the extent necessary to make distributions on the Securities) and shall not
be sold or disposed of prior to maturity. All income and gain realized from any
such investment shall be for the benefit of the Servicer and shall be subject to
its withdrawal or order from time to time. The amount of any losses incurred in
respect of any such investments shall
20
be deposited in the Payment Account by the Servicer out of its own funds
immediately as realized.
21
ARTICLE VI
The Servicer
Section 6.01. LIABILITY OF THE SERVICER. The Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Servicer herein.
Section 6.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER. Any corporation into which the Servicer may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Servicer
shall be a party, or any corporation succeeding to the business of the Servicer,
shall be the successor of the Servicer, 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 may assign its rights and delegate its duties and
obligations under this Servicing Agreement; PROVIDED that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of FNMA or FHLMC, is reasonably satisfactory to the
Indenture Trustee (as pledgee of the Mortgage Collateral), the Company and the
Credit Enhancer, is willing to service the Mortgage Loans and executes and
delivers to the Indenture Trustee and the Company an agreement, in form and
substance reasonably satisfactory to the Credit Enhancer, the Indenture Trustee
and the Company, which contains an assumption by such Person of the due and
punctual performance and observance of each covenant and condition to be
performed or observed by the Servicer under this Servicing Agreement; PROVIDED
further that each Rating Agency's rating of the Securities in effect immediately
prior to such assignment and delegation will not be qualified, reduced, or
withdrawn as a result of such assignment and delegation (as evidenced by a
letter to such effect from each Rating Agency) or considered to be below
investment grade without taking into account the Credit Enhancement Instrument.
Section 6.03. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Company, the Issuer, the
Owner Trustee, the Indenture Trustee or the Securityholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Servicing Agreement, PROVIDED, HOWEVER, that this provision shall not protect
the Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder or by reason of its reckless disregard
of its obligations and duties hereunder. The Servicer and any director or
officer or employee or agent of the Servicer may rely in good faith on any
document of any kind PRIMA FACIE properly executed and submitted by any Person
respecting any matters arising hereunder. The Servicer and any director or
officer or employee or agent of the Servicer shall be indemnified by the Company
and held harmless against any loss, liability or expense incurred in connection
with any legal action relating to this Servicing Agreement or the Securities,
including any amount paid to the Owner Trustee or the Indenture Trustee pursuant
to Section 6.06(b), other than any loss, liability or expense related to any
specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall
22
be otherwise reimbursable pursuant to this Servicing Agreement) and any loss,
liability or expense incurred by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. The Servicer shall
not be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties to service the Mortgage Loans in
accordance with this Servicing Agreement, and which in its opinion may involve
it in any expense or liability; PROVIDED, HOWEVER, that the Servicer may in its
sole discretion undertake any such action which it may deem necessary or
desirable in respect of this Servicing Agreement, and the rights and duties of
the parties hereto and the interests of the Securityholders hereunder. In such
event, the reasonable legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Company, and
the Servicer shall be entitled to be reimbursed therefor. The Servicer's right
to indemnity or reimbursement pursuant to this Section 6.03 shall survive any
resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination).
Section 6.04. SERVICER NOT TO RESIGN. Subject to the provisions of
Section 6.02, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Servicing Agreement or (ii) upon satisfaction of the following conditions: (a)
the Servicer has proposed a successor servicer to the Company, the Administrator
and the Indenture Trustee in writing and such proposed successor servicer is
reasonably acceptable to the Company, the Administrator, the Indenture Trustee
and the Credit Enhancer; (b) each Rating Agency shall have delivered a letter to
the Company, the Credit Enhancer and the Indenture Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Securities; and (c) such
proposed successor servicer is reasonably acceptable to the Credit Enhancer, as
evidenced by a letter to the Company and the Indenture Trustee; PROVIDED,
HOWEVER, that no such resignation by the Servicer shall become effective until
such successor servicer or, in the case of (i) above, the Indenture Trustee, as
pledgee of the Mortgage Collateral, shall have assumed the Servicer's
responsibilities and obligations hereunder or the Indenture Trustee, as pledgee
of the Mortgage Collateral, shall have designated a successor servicer in
accordance with Section 7.02. Any such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 7.01
and 7.02 as obligations that survive the resignation or termination of the
Servicer. The Servicer shall have no claim (whether by subrogation or otherwise)
or other action against any Securityholder or the Credit Enhancer for any
amounts paid by the Servicer pursuant to any provision of this Servicing
Agreement. Any such determination permitting the resignation of the Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Indenture Trustee and the Credit Enhancer.
Section 6.05. DELEGATION OF DUTIES. In the ordinary course of
business, the Servicer at any time may delegate any of its duties hereunder to
any Person, including any of its Affiliates,
23
who agrees to conduct such duties in accordance with standards comparable to
those with which the Servicer complies pursuant to Section 3.01. Such delegation
shall not relieve the Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the meaning
of Section 6.04.
Section 6.06. SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER TRUSTEE'S
FEES AND EXPENSES; INDEMNIFICATION. (a) The Servicer covenants and agrees to pay
to the Owner Trustee, the Indenture Trustee and any co-trustee of the Indenture
Trustee from time to time, and the Owner Trustee, the Indenture Trustee and any
such co-trustee shall be entitled to, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by each of them in the execution of
the trusts created under the Trust Agreement and the Indenture and in the
exercise and performance of any of the powers and duties under the Trust
Agreement or the Indenture, as the case may be, of the Owner Trustee, the
Indenture Trustee and any co-trustee, and the Servicer will pay or reimburse the
Indenture Trustee and any co-trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by the Indenture Trustee or any
co-trustee in accordance with any of the provisions of this Servicing Agreement
except any such expense, disbursement or advance as may arise from its
negligence or bad faith.
(b) The Servicer agrees to indemnify the Indenture Trustee and the
Owner Trustee for, and to hold the Indenture Trustee and the Owner Trustee, as
the case may be, harmless against, any loss, liability or expense incurred
without negligence or willful misconduct on its part, arising out of, or in
connection with, the acceptance and administration of the Company and the assets
thereof, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against any claim in connection with the exercise
or performance of any of its powers or duties under any Basic Document, provided
that:
(i) with respect to any such claim, the Indenture
Trustee or Owner Trustee, as the case may be, shall have given the
Servicer written notice thereof promptly after the Indenture Trustee or
Owner Trustee, as the case may be, shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the
Company, the Indenture Trustee or Owner Trustee, as the case may be,
shall cooperate and consult fully with the Servicer in preparing such
defense; and
(iii) notwithstanding anything in this Servicing
Agreement to the contrary, the Servicer shall not be liable for
settlement of any claim by the Indenture Trustee or the Owner Trustee,
as the case may be, entered into without the prior consent of the
Servicer, which consent shall not be unreasonably withheld.
No termination of this Servicing Agreement shall affect the obligations created
by this Section 6.06 of the Servicer to indemnify the Indenture Trustee and the
Owner Trustee under the conditions and to the extent set forth herein.
Notwithstanding the foregoing, the indemnification provided by the
Servicer in this Section 6.06(b) shall not pertain to any loss, liability or
expense of the Indenture Trustee or the
24
Owner Trustee, including the costs and expenses of defending itself against any
claim, incurred in connection with any actions taken by the Indenture Trustee or
the Owner Trustee at the direction of the Noteholders or Certificateholders, as
the case may be, pursuant to the terms of this Servicing Agreement.
25
ARTICLE VII
Default
Section 7.01. SERVICING DEFAULT. If any one of the following events
("Servicing Default")shall occur and be continuing:
(i) Any failure by the Servicer to deposit in the
Collection Account, the Funding Account or Payment Account any deposit
required to be made under the terms of this Servicing Agreement which
continues unremedied for a period of five Business Days after the date
upon which written notice of such failure shall have been given to the
Servicer by the Company, the Issuer or the Indenture Trustee or to the
Servicer, the Company, the Issuer and the Indenture Trustee by the
Credit Enhancer; or
(ii) Failure on the part of the Servicer duly to observe
or perform in any material respect any other covenants or agreements of
the Servicer set forth in the Securities or in this Servicing
Agreement, which failure, in each case, materially and adversely
affects the interests of Securityholders or the Credit Enhancer and
which continues unremedied for a period of 45 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 to the Servicer by the Company, the
Issuer or the Indenture Trustee or to the Servicer, the Company, the
Issuer and the Indenture Trustee by the Credit Enhancer; or
(iii) The entry against the Servicer of a decree or order
by a court or agency or supervisory authority having jurisdiction in
the premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days; or
(iv) The Servicer shall voluntarily go into liquidation,
consent to the appointment of a conservator, receiver, liquidator or
similar person in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property,
or a decree or order of a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator,
receiver, liquidator or similar person in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, shall have been
entered against the Servicer and such decree or order shall have
remained in force undischarged, unbonded or unstayed for a period of 60
days; or the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; or
(v) Any failure by the Seller (so long as the Seller is
the Servicer) or the Servicer, as the case may be, to pay when due any
amount payable by it under the
26
terms of the Insurance Agreement which continues unremedied for a
period of three (3) Business Days after the date upon which written
notice of such failure shall have been given to the Seller (so long as
the Seller is the Servicer) or the Servicer, as the case may be; or
(vi) Failure on the part of the Seller or the Servicer
to duly perform in any material respect any covenant or agreement set
forth in the Insurance Agreement, which failure in each case materially
and adversely affects the interests of the Credit Enhancer and
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Depositor, the Indenture Trustee, the
Seller or the Servicer, as the case may be, by the Credit Enhancer.
then, and in every such case, other than that set forth in (vi) hereof, so long
as a Servicing Default shall not have been remedied by the Servicer, either the
Company, subject to the direction of the Indenture Trustee as pledgee of the
Mortgage Collateral, with the consent of the Credit Enhancer, or the Credit
Enhancer, by notice then given in writing to the Servicer (and to the Company
and the Issuer if given by the Credit Enhancer) and in the case of the event set
forth in (vi) hereof, the Credit Enhancer with the consent of Securityholders at
least 51% of the aggregate Principal Balance of the Notes and the Certificates
may terminate all of the rights and obligations of the Servicer as servicer
under this Servicing Agreement other than its right to receive servicing
compensation and expenses for servicing the Mortgage Loans hereunder during any
period prior to the date of such termination and the Company, subject to the
direction of the Indenture Trustee as pledgee of the Mortgage Collateral, with
the consent of the Credit Enhancer, or the Credit Enhancer may exercise any and
all other remedies available at law or equity. Any such notice to the Servicer
shall also be given to each Rating Agency, the Credit Enhancer, the Company and
the Issuer. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Servicing Agreement, whether with
respect to the Securities or the Mortgage Loans or otherwise, shall pass to and
be vested in the Company, subject to the direction of the Indenture Trustee as
pledgee of the Mortgage Collateral, pursuant to and under this Section 7.01;
and, without limitation, the Company is hereby authorized and empowered to
execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of each
Mortgage Loan and related documents, or otherwise. The Servicer agrees to
cooperate with the Company in effecting the termination of the responsibilities
and rights of the Servicer hereunder, including, without limitation, the
transfer to the Indenture Trustee for the administration by it of all cash
amounts relating to the Mortgage Loans that shall at the time be held by the
Servicer and to be deposited by it in the Collection Account, or that have been
deposited by the Servicer in the Collection Account or thereafter received by
the Servicer with respect to the Mortgage Loans. All reasonable costs and
expenses (including, but not limited to, attorneys' fees) incurred in connection
with amending this Servicing Agreement to reflect such succession as Servicer
pursuant to this Section 7.01 shall be paid by the predecessor Servicer (or if
the predecessor Servicer is the Indenture Trustee, the initial Servicer) upon
presentation of reasonable documentation of such costs and expenses.
27
Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a payment on a Mortgage Loan which was due prior to the notice terminating
the Servicer's rights and obligations hereunder and received after such notice,
that portion to which the Servicer would have been entitled pursuant to Sections
3.03 and 3.09 as well as its Servicing Fee in respect thereof, and any other
amounts payable to the Servicer hereunder the entitlement to which arose prior
to the termination of its activities hereunder.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 7.01(i) or under Section 7.01(ii) after the applicable grace
periods specified in such Sections, shall not constitute a Servicer Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an act of God
or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Servicer from using reasonable efforts to perform its respective obligations
in a timely manner in accordance with the terms of this Servicing Agreement and
the Servicer shall provide the Indenture Trustee, the Credit Enhancer and the
Securityholders with notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations. The Servicer shall
immediately notify the Indenture Trustee, the Credit Enhancer and the Owner
Trustee in writing of any Servicer Default.
Section 7.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a)
On and after the time the Servicer receives a notice of termination pursuant to
Section 7.01 or sends a notice pursuant to Section 6.04, the Indenture Trustee
on behalf of the Noteholders shall be the successor in all respects to the
Servicer in its capacity as servicer under this Servicing 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. Nothing in this Servicing Agreement or in
the Trust Agreement shall be construed to permit or require the Indenture
Trustee to (i) succeed to the responsibilities, duties and liabilities of the
initial Servicer in its capacity as Seller under the Mortgage Loan Purchase
Agreement, (ii) be responsible or accountable for any act or omission of the
Servicer prior to the issuance of a notice of termination hereunder, (iii)
require or obligate the Indenture Trustee, in its capacity as successor
Servicer, to purchase, repurchase or substitute any Mortgage Loan, (iv) fund any
losses on any Eligible Investment directed by any other Servicer, or (v) be
responsible for the representations and warranties of the Servicer. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation as the Servicer would have been entitled to hereunder if no such
notice of termination had been given. Notwithstanding the above, (i) if the
Indenture Trustee is unwilling to act as successor Servicer, or (ii) if the
Indenture Trustee is legally unable so to act, the Indenture Trustee on behalf
of the Mortgage Collateral holders may (in the situation described in clause
(i)) or shall (in the situation described in clause (ii)) appoint or petition a
court of competent jurisdiction to appoint any established housing and home
finance institution, bank or other mortgage loan or home equity loan servicer
having a net worth of not less than $10,000,000 as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder; PROVIDED that any such successor
Servicer shall be acceptable to the Credit Enhancer, as evidenced by the Credit
Enhancer's prior written consent which consent shall not be unreasonably
withheld and provided further that the appointment of any such successor
Servicer will not result in the qualification,
28
reduction or withdrawal of the ratings assigned to the Securities by the Rating
Agencies. Pending appointment of a successor to the Servicer hereunder, unless
the Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.09 (or such lesser compensation as the Indenture Trustee and such
successor shall agree). The appointment of a successor Servicer shall not affect
any liability of the predecessor Servicer which may have arisen under this
Servicing Agreement prior to its termination as Servicer (including, without
limitation, the obligation to purchase Mortgage Loans pursuant to Section 3.01,
to pay any deductible under an insurance policy pursuant to Section 3.04 or to
indemnify the Indenture Trustee pursuant to Section 6.06), nor shall any
successor Servicer be liable for any acts or omissions of the predecessor
Servicer or for any breach by such Servicer of any of its representations or
warranties contained herein or in any related document or agreement. The
Indenture Trustee and such successor shall take such action, consistent with
this Servicing Agreement, as shall be necessary to effectuate any such
succession.
(b) Any successor, including the Indenture Trustee on behalf of the
Noteholders, to the Servicer as servicer shall during the term of its service as
servicer (i) continue to service and administer the Mortgage Loans for the
benefit of the Securityholders, (ii) maintain in force a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Servicer is so required pursuant to Section
3.13.
(c) Any successor Servicer, including the Indenture Trustee on behalf
of the Mortgage Collateral holders, shall not be deemed in default or to have
breached its duties hereunder if the predecessor Servicer shall fail to deliver
any required deposit to the Collection Account or otherwise cooperate with any
required servicing transfer or succession hereunder.
Section 7.03. NOTIFICATION TO SECURITYHOLDERS. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VII or
Section 6.04, the Indenture Trustee shall give prompt written notice thereof to
the Securityholders, the Credit Enhancer, the Company, the Issuer and each
Rating Agency.
29
ARTICLE VIII
Miscellaneous Provisions
Section 8.01. AMENDMENT. This Servicing Agreement may be amended from
time to time by the parties hereto, provided that any amendment be accompanied
by a letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Securities and the
consent of the Credit Enhancer and the Indenture Trustee.
Section 8.02. GOVERNING LAW. THIS SERVICING 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.
Section 8.03. 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 certified mail, return receipt requested,
to (a) in the case of the Servicer, [Name and Address of Servicer], (b) in the
case of the Credit Enhancer, ________________, ________, ______________,
Attention: _________________, ___________________________, (c) in the case of
[Moody's, ___________, 4th Floor, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇],
(d) in the case of [Standard & Poor's, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: Residential Mortgage Surveillance Group], (e) in the case
of the Owner Trustee, the Corporate Trust Office, and (f) in the case of the
Issuer, to Southern Pacific MBN Trust Series 199_-__, c/o
______________________, __________________, __________, ______________,
Attention: __________________________, with a copy to the Administrator at
______________ or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party. [Any notice
required or permitted to be mailed to a Securityholder shall be given by first
class mail, postage prepaid, at the address of such Securityholder as shown in
the Register. Any notice so mailed within the time prescribed in this Servicing
Agreement shall be conclusively presumed to have been duly given, whether or not
the Securityholder receives such notice. Any notice or other document required
to be delivered or mailed by the Indenture Trustee to any Rating Agency shall be
given on a reasonable efforts basis and only as a matter of courtesy and
accommodation and the Indenture Trustee shall have no liability for failure to
delivery such notice or document to any Rating Agency.]
Section 8.04. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Servicing Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Securities or the rights of the Securityholders thereof.
Section 8.05. THIRD-PARTY BENEFICIARIES. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Securityholders, the Credit Enhancer, the Owner Trustee, the Indenture Trustee
and their respective successors and permitted assigns.
30
Except as otherwise provided in this Servicing Agreement, no other Person will
have any right or obligation hereunder.
Section 8.06. COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 8.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 8.08. TERMINATION UPON PURCHASE BY THE SERVICER OR LIQUIDATION
OF ALL MORTGAGE LOANS. The respective obligations and responsibilities of the
Servicer and the Company created hereby shall terminate upon the last action
required to be taken by the Issuer pursuant to the Trust Agreement and by the
Indenture Trustee pursuant to the Indenture following the earlier of:
(i) the date on or before which the Indenture or Trust
Agreement is terminated, or
(ii) the purchase by the Servicer from the Company of all Mortgage
Loans and all property acquired in respect of any Mortgage Loan at a
price equal to the greater of (a) 100% of the unpaid Principal Balance
of each Mortgage Loan, plus accrued and unpaid interest thereon at the
Weighted Average Net Mortgage Rate up to the day preceding the Payment
Date on which such amounts are to be distributed to Securityholders,
plus any amounts due and owing to the Credit Enhancer under the
Insurance Agreement and (b) the fair market value of the Mortgage Loans
as determined by two bids from competitive participants in the
adjustable home equity loan market.
The right of the Servicer to purchase the assets of the Company pursuant to
clause (ii) above is conditioned upon the Pool Balance as of the Final Scheduled
Payment Date being less than ten percent of the aggregate of the Cut-Off Date
Principal Balances of the Mortgage Loans. If such right is exercised by the
Servicer, the Servicer shall deposit the amount calculated pursuant to clause
(ii) above with the Indenture Trustee pursuant to Section 4.10 of the Indenture
and, upon the receipt of such deposit, the Indenture Trustee or relevant
Custodian shall release to the Servicer, the files pertaining to the Mortgage
Loans being purchased.
The Servicer, at its expense, shall prepare and deliver to the
Indenture Trustee and the Owner Trustee for execution, at the time the Mortgage
Loans are to be released to the Servicer, appropriate documents assigning each
such Mortgage Loan from the Company to the Servicer or the appropriate party.
Section 8.09. CERTAIN MATTERS AFFECTING THE INDENTURE TRUSTEE. For all
purposes of this Servicing Agreement, in the performance of any of its duties or
in the exercise of any of its powers hereunder, the Indenture Trustee shall be
subject to and entitled to the benefits of Article VI of the Indenture.
31
[Section 8.10. AUTHORITY OF THE ADMINISTRATOR. Each of the parties to
this Agreement acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the Issuer
or the Owner Trustee, copies of all notices, requests, demands and other
documents to be delivered to the Issuer or the Owner Trustee pursuant to the
terms hereof shall be delivered to the Administrator. Unless otherwise
instructed by the Issuer or the Owner Trustee, all notices, requests, demands
and other documents to be executed or delivered, and any action to be taken, by
the Issuer or the Owner Trustee pursuant to the terms hereof may be executed,
delivered and/or taken by the Administrator pursuant to the Administration
Agreement.]
32
IN WITNESS WHEREOF, the Servicer and the Company have caused this
Servicing Agreement to be duly executed by their respective officers or
representatives all as of the day and year first above written.
[NAME OF SERVICER],
as Servicer
----------------------------------
By
Title:
SOUTHERN PACIFIC SECURED ASSETS CORP.
as Company
By_________________________________
Title:
EXHIBIT D
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Collateral, we request
the release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan
Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
-------------------------------------
[Name of Servicer]
Authorized Signature
******************************************************************
TO CUSTODIAN/INDENTURE TRUSTEE: Please acknowledge this request, and check off
documents being enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: / / Promissory Note
/ / Primary Insurance Policy
/ / Mortgage or Deed of Trust
/ / Assignment(s) of Mortgage or
Deed of Trust
/ / Title Insurance Policy
/ / Other: ___________________________
___________________________
Name
___________________________
Title
___________________________
Date