EXHIBIT 10.2
EXECUTION
SALE AND SERVICING AGREEMENT
among
FIRSTPLUS HOME LOAN OWNER TRUST 1998-1,
as Issuer
FIRSTPLUS INVESTMENT CORPORATION,
as Seller
FIRSTPLUS FINANCIAL, INC.,
as Transferor and Servicer
and
U.S. BANK NATIONAL ASSOCIATION,
as Indenture Trustee and Co-Owner Trustee
Dated as of February 1, 1998
FIRSTPLUS HOME LOAN OWNER TRUST 1998-1
Asset Backed Securities, Series 1998-1
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Other Definitional Provisions . . . . . . . . . . . . . . . . . 26
1.03. Interest Calculation . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE II
CONVEYANCE OF THE HOME LOANS
2.01. Conveyance of the Initial Home Loans. . . . . . . . . . . . . . 26
2.02. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.03. Ownership and Possession of Home Loan Files . . . . . . . . . . 27
2.04. Books and Records . . . . . . . . . . . . . . . . . . . . . . . 27
2.05. Delivery of Home Loan Documents . . . . . . . . . . . . . . . . 28
2.06. Acceptance by Indenture Trustee of the Home Loans;
Certain Substitutions; Initial Certification by Custodian . . . 30
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. Representations and Warranties of the Seller . . . . . . . . . 32
3.02. Representations, Warranties and Covenants of the Servicer
and Transferor . . . . . . . . . . . . . . . . . . . . . . . . 33
3.03. Individual Home Loans . . . . . . . . . . . . . . . . . . . . . 35
3.04. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.05. Purchase and Substitution . . . . . . . . . . . . . . . . . . . 41
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
4.01. Duties of the Servicer . . . . . . . . . . . . . . . . . . . . 44
4.02. Liquidation of Home Loans . . . . . . . . . . . . . . . . . . . 46
4.03. Fidelity Bond; Errors and Omission Insurance . . . . . . . . . 47
4.04. Title, Management and Disposition of Foreclosure Property . . . 47
4.05. Access to Certain Documentation and Information Regarding
the Home Loans. . . . . . . . . . . . . . . . . . . . . . . . . 48
4.06. Superior Liens . . . . . . . . . . . . . . . . . . . . . . . . 48
4.07. Subservicing . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.08. Successor Servicers. . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
5.01. Collection Account and Note Payment Account . . . . . . . . . . 50
5.02. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.03. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.04. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.05. Certificate Distribution Account . . . . . . . . . . . . . . . 57
5.06. Trust Accounts; Trust Account Property . . . . . . . . . . . . 58
5.07. Allocation of Losses . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
6.01. Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.02. Reports of Foreclosure and Abandonment of Mortgaged
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.03. Specification of Certain Tax Matters . . . . . . . . . . . . . 68
ARTICLE VII
GENERAL SERVICING PROCEDURES
7.01. Assumption Agreements . . . . . . . . . . . . . . . . . . . . . 68
7.02. Satisfaction of Mortgages and Release of Home Loan Files . . . 69
7.03. Servicing Compensation . . . . . . . . . . . . . . . . . . . . 71
7.04. Quarterly Statements as to Compliance . . . . . . . . . . . . . 71
7.05. Annual Independent Public Accountants' Servicing Report . . . . 72
7.06. Right to Examine Servicer Records . . . . . . . . . . . . . . . 72
7.07. Reports to the Indenture Trustee; Collection Account Statements 72
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
8.01. Financial Statements . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE IX
THE SERVICER
9.01. Indemnification; Third Party Claims . . . . . . . . . . . . . . 73
9.02. Merger or Consolidation of the Servicer . . . . . . . . . . . . 74
9.03. Limitation on Liability of the Servicer and Others . . . . . . 75
9.04. Servicer Not to Resign; Assignment . . . . . . . . . . . . . . 75
9.05. Relationship of Servicer to the Issuer and the Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE X
DEFAULT
10.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 76
10.02. Indenture Trustee to Act; Appointment of Successor . . . . . . 78
10.03. Waiver of Defaults . . . . . . . . . . . . . . . . . . . . . . 79
10.04. Accounting Upon Termination of Servicer . . . . . . . . . . . . 80
ARTICLE XI
TERMINATION
11.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.02. Optional Termination by Seller. (Reserved) . . . . . . . . . 80
11.03. Notice of Termination . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Acts of Securityholders . . . . . . . . . . . . . . . . . . . . 81
12.02. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.03. Recordation of Agreement . . . . . . . . . . . . . . . . . . . 82
12.04. Duration of Agreement . . . . . . . . . . . . . . . . . . . . . 82
12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.07. Severability of Provisions . . . . . . . . . . . . . . . . . . 83
12.08. No Partnership . . . . . . . . . . . . . . . . . . . . . . . . 83
12.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . 84
12.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.12. Actions of Securityholders . . . . . . . . . . . . . . . . . . 84
12.13. Reports to Rating Agencies. . . . . . . . . . . . . . . . . . . 84
12.14. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . 85
12.15. No Petition . . . . . . . . . . . . . . . . . . . . . . . . . . 85
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B (Reserved)
EXHIBIT C (Reserved)
EXHIBIT D Schedule of Specified Home Loans
This Sale and Servicing Agreement is entered into effective as of
February 1, 1998, among FIRSTPLUS Home Loan Owner Trust 1998-1, a Delaware
business trust (the "Issuer" or the "Trust"), FIRSTPLUS Investment
Corporation, a Nevada corporation, as Seller (the "Seller"), FIRSTPLUS
Financial, Inc., a Texas corporation ("FFI"), as Transferor (in such
capacity, the "Transferor") and Servicer (in such capacity, the "Servicer")
and U.S. Bank National Association, a national banking association, as
Indenture Trustee on behalf of the Noteholders (in such capacity, the
"Indenture Trustee") and as Co-Owner Trustee on behalf of the
Certificateholders (in such capacity, the "Co-Owner Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase a pool of Home Loans which were
originated or purchased by the Transferor and sold to the Seller in the
ordinary course of business of the Transferor;
WHEREAS, the Seller is willing to sell such Home Loans to the Issuer;
and
WHEREAS, the Servicer is willing to service such Home Loans in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
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following words and phrases, unless the context otherwise requires, shall
have the meanings specified in this Article.
A IO Component's Interest Carry-Forward Amount: With respect to the
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initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the A IO Component's Monthly Interest Distributable
Amount for the immediately preceding Payment Date and any A IO Component's
Interest Carry-Forward Amount remaining outstanding with respect to prior
Payment Dates, over (b) the amount in respect of interest that was paid on
such Component on such immediately preceding Payment Date.
A IO Component's Interest Distributable Amount: With respect to any
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Payment Date, the sum of the A IO Component's Monthly Interest Distributable
Amount for such date and the A IO Component's Interest Carry-Forward Amount
for such date; provided, however, that on the Payment Date, if any, on which
the Component Principal Balance of the B-1 Component is reduced to zero
through application of the Allocable Loss Amount with respect to such Payment
Date, and on each succeeding Payment Date, the amount of the A IO Component's
Interest Distributable Amount will be equal to the A IO Component's Interest
Distributable Amount calculated without giving effect to this proviso, minus
the portion of any Allocable Loss Amount that otherwise would be applied to
any Class of Notes on such Payment Date in the absence of this proviso.
A IO Component's Monthly Interest Distributable Amount: With respect
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to any Payment Date, interest accrued for the related Due Period at the
applicable Interest Rate on the Component Notional Balance of the A IO
Component immediately preceding such Payment Date.
Accrual Period: With respect to the Class A-1 Notes, the period
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beginning on the Payment Date in the calendar month preceding the month in
which the related Payment Date occurs (or, in the case of the first Payment
Date, beginning on the Closing Date) and ending on the day preceding the
related Payment Date. With respect to the other Classes of Securities, the
calendar month preceding the month in which the related Payment Date occurs
(or, in the case of the first Payment Date, the period from the Closing Date
through the end of February).
Addition Notice: Not applicable.
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Administration Agreement: The Administration Agreement dated as of
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February 1, 1998 among the Issuer, FFI, and U.S. Bank National Association,
as Administrator, as such may be amended or supplemented from time to time.
Administrator: U.S. Bank National Association, or any successor in
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interest thereto, in its capacity as Administrator under the Administration
Agreement.
Agreement: This Sale and Servicing Agreement and all amendments hereof
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and supplements hereto.
Allocable Loss Amount: With respect to each Payment Date after the
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Initial Undercollateralization Amount has been reduced to zero, the excess,
if any, of (a) the aggregate of the Class Principal Balances of the
Securities (after giving effect to all payments and distributions on such
Payment Date) over (b) the sum of (i) the Pool Principal Balance as of the
immediately preceding Determination Date and (ii) the amount, if any, on
deposit in the Pre-Funding Account as of the end of the immediately preceding
Due Period (net of investment earnings thereon). With resect to each Payment
Date prior to the Payment Date on which the Initial Undercollateralization
Amount is reduced to zero, zero.
Allocable Loss Amount Priority: With respect to any Payment Date,
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sequentially, to the B-2 Component, the B-1 Component, the Class M-2 Notes
and the Class M-1 Notes, in that order, until the respective Class Principal
Balances (or Component Principal Balances) thereof are reduced to zero.
Assignment of Mortgage: With respect to each Home Loan, an assignment,
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notice of transfer or equivalent instrument sufficient under the laws of the
jurisdiction where the related Mortgaged Property is located to reflect of
record the assignment of the Mortgage with respect to such Home Loan to the
Indenture Trustee for the benefit of the Securityholders.
Assumed Pool Principal Balance: As of any date of determination, the
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sum of (a) the Initial Pool Principal Balance, (b) the Cut-Off Date Principal
Balance of each Subsequent Home Loan and (c) the amount, if any, on deposit
in the Pre-Funding Account as of such date (other than investment earnings).
Available Collection Amount: With respect to each Payment Date, an
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amount equal to the sum of (a) all amounts received in respect of the Home
Loans or paid by the Servicer, the Transferor or the Seller (exclusive of
amounts not required to be deposited in the Collection Account) during the
related Due Period (and, in the case of amounts required to be paid by the
Transferor in connection with the purchase or substitution of a Defective
Home Loan, deposited in the Collection Account on or before the related
Determination Date), as reduced by any portion thereof that may not be
withdrawn therefrom pursuant to an order of a United States bankruptcy court
of competent jurisdiction imposing a stay pursuant to Section 362 of the
United States Bankruptcy Code, (b) in the case of the Payment Date following
the Due Period in which the Funding Period ends, amounts, if any, remaining
in the Pre-Funding Account at the end of the Funding Period, (c) with respect
to the final Payment Date, or an early redemption or termination of the
Securities pursuant to Section 11.02(b), the Termination Price, or in the
case of an early redemption or termination of the Securities pursuant to
Section 11.02(a), the proceeds from the sale of the Home Loans; and (d) any
income or gain from investment of funds on deposit in the Collection Account.
Available Funds: With respect to any Payment Date, the amount deposited
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in the Note Payment Account with respect to such Payment Date less the
Servicing Compensation (net of the Servicing Fees, to the extent previously
paid or withheld) for such Payment Date.
Basic Documents: This Agreement, the Indenture, the Loan Sale
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Agreement, the Certificate of Trust, the Trust Agreement, the Administration
Agreement, the Custodial Agreement, the Note Depository Agreement and the
documents and certificates delivered in connection therewith.
B-1 Component Optimal Principal Balance: With respect to any Payment
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Date prior to the Overcollateralization Stepdown Date, zero; and with respect
to any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Notes (after taking into account payments made on
such Payment Date) and (b) the greater of (i) 5.05% of the Pool Principal
Balance as of the immediately preceding Determination Date plus the Required
Overcollateralization Amount for such Payment Date (calculated without giving
effect to the proviso in the definition thereof) and (ii) 0.50% of the
Assumed Pool Principal Balance.
B-1 Component's Interest Carry-Forward Amount: With respect to the
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initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the B-1 Component's Monthly Interest Distributable
Amount for the immediately preceding Payment Date and any B-1 Component's
Interest Carry-Forward Amount remaining outstanding with respect to prior
Payment Dates, over (b) the amount in respect of interest that was paid on
such Component on such immediately preceding Payment Date.
B-1 Component's Interest Distributable Amount: With respect to any
---------------------------------------------
Payment Date, the sum of the B-1 Component's Monthly Interest Distributable
Amount for such date and the B-1 Component's Interest Carry-Forward Amount
for such date; provided, however, that on the Payment Date, if any, on which
the Component Principal Balance of the B-1 Component is reduced to zero
through application of the Allocable Loss Amount with respect to such Payment
Date, the amount of the B-1 Component's Interest Distributable Amount will be
equal to the B-1 Component's Interest Distributable Amount calculated without
giving effect to this proviso, minus the portion, if any, of such Allocable
Loss Amount that otherwise would be applied to any Class of Notes on such
Payment Date in the absence of this proviso.
B-1 Component's Monthly Interest Distributable Amount: With respect to
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any Payment Date, interest accrued for the related Due Period at the
applicable Interest Rate on the Component Principal Balance of the B-1
Component immediately preceding such Payment Date.
B-2 Component Optimal Principal Balance: With respect to any Payment
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Date prior to the Overcollateralization Stepdown Date, zero; and with respect
to any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Notes and the Component Principal Balance of the B-
1 Component (after taking into account any payments made on such Payment
Date) and (b) the Required Overcollateralization Amount for such Payment
Date.
B-2 Component's Interest Carry-Forward Amount: With respect to the
---------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the B-2 Component's Monthly Interest Distributable
Amount for the immediately preceding Payment Date and any B-2 Component's
Interest Carry-Forward Amount remaining outstanding with respect to prior
Payment Dates, over (b) the amount in respect of interest that was paid on
such Component on such immediately preceding Payment Date.
B-2 Component's Interest Distributable Amount: With respect to any
---------------------------------------------
Payment Date, the sum of the B-2 Component's Monthly Interest Distributable
Amount for such date and the B-2 Component's Interest Carry-Forward Amount
for such date.
B-2 Component's Monthly Interest Distributable Amount: With respect to
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any Payment Date, interest accrued for the related Due Period at the
applicable Interest Rate on the Component Principal Balance of the B-2
Component immediately preceding such Payment Date.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
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day on which banking institutions in New York City or in the city in which
the corporate trust office of the Indenture Trustee is located are authorized
or obligated by law or executive order to be closed.
Certificate: The Residual Interest Certificate issued pursuant to the
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Trust Agreement.
Certificate Distribution Account: The Account established and
--------------------------------
maintained pursuant to Section 5.05.
Certificateholder: The holder of the Residual Interest Certificate.
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Class: With respect to the Notes, all Notes bearing the same class
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designation.
Class M-1 Noteholders' Interest Carry-Forward Amount: With respect to
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the initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the Class M-1 Noteholders' Monthly Interest Payment
Amount for the immediately preceding Payment Date and any Class M-1
Noteholders' Interest Carry-Forward Amount remaining outstanding with respect
to prior Payment Dates, over (b) the amount in respect of interest that was
paid on such Notes on such immediately preceding Payment Date.
Class M-1 Noteholders' Interest Payment Amount: With respect to any
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Payment Date, the sum of the Class M-1 Noteholders' Monthly Interest Payment
Amount for such date and the Class M-1 Noteholders' Interest Carry-Forward
Amount for such date.
Class M-1 Noteholders' Monthly Interest Payment Amount: With respect to
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any Payment Date, interest accrued for the related Due Period at the
applicable Interest Rate on the Class Principal Balance of the Class M-1
Notes immediately preceding such Payment Date.
Class M-1 Optimal Principal Balance: With respect to any Payment Date
-----------------------------------
prior to the Overcollateralization Stepdown Date, zero; and with respect to
any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Senior Notes (after taking into account payments
made on such Payment Date and (b) the greater of (i) 26.26% of the Pool
Principal Balance as of the immediately preceding Determination Date plus the
Required Overcollateralization Amount for such Payment Date (calculated
without giving effect to the proviso in the definition thereof) and (ii)
0.50% of the Assumed Pool Principal Balance.
Class M-2 Noteholders' Interest Carry-Forward Amount: With respect to
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the initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (a) the
Class M-2 Noteholders' Monthly Interest Payment Amount for the immediately
preceding Payment Date and any Class M-2 Noteholders' Interest Carry-Forward
Amount remaining outstanding with respect to prior Payment Dates, over (b)
the amount in respect of interest that was paid on such Notes on such
immediately preceding Payment Date.
Class M-2 Noteholders' Interest Payment Amount: With respect to any
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Payment Date, the sum of the Class M-2 Noteholders' Monthly Interest Payment
Amount for such date and the Class M-2 Noteholders' Interest Carry-Forward
Amount for such date.
Class M-2 Noteholders' Monthly Interest Payment Amount: With respect to
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any Payment Date, interest accrued for the related Due Period at the
applicable Interest Rate on the Class Principal Balance of the Class M-2
Notes immediately preceding such Payment Date.
Class M-2 Optimal Principal Balance: With respect to any Payment Date
-----------------------------------
prior to the Overcollateralization Stepdown Date, zero; and with respect to
any other Payment Date, the Pool Principal Balance as of the immediately
preceding Determination Date minus the sum of (a) the aggregate of the Class
Principal Balances of the Senior Notes and the Class M-1 Notes (after taking
into account any payments made on such Payment Date) and (b) the greater of
(i) 14.645% of the Pool Principal Balance as of the immediately preceding
Determination Date plus the Required Overcollateralization Amount for such
Payment Date (calculated without giving effect to the proviso in the
definition thereof) and (ii) 0.50% of the Assumed Pool Principal Balance.
Class Pool Factor: With respect to each Class of Securities and any
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Payment Date, the Class Principal Balance thereof (giving effect to payments
thereon on such Payment Date) divided by the Original Class Principal Balance
of such Class.
Class Principal Balance: With respect to each Class of Securities and
-----------------------
any date of determination, the Original Class Principal Balance thereof as
reduced by (a) all amounts previously paid in respect of such Class in
reduction of the Class Principal Balance thereof and (b) in the case of the
Subordinate Securities, any Allocable Loss Amounts previously applied
thereto.
Clearing Agency: An organization registered as a "clearing agency"
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pursuant to Section 17A of the Exchange Act.
Clearing Agency Participant: A broker, dealer, bank, other financial
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institution or other Person for whom from time to time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
Closing Date: February 11, 1998.
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Code: The Internal Revenue Code of 1986, as amended from time to time,
----
and Treasury Regulations promulgated thereunder.
Collection Account: An account established and maintained by the
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Servicer in accordance with Section 5.01(a)(1).
Combination Loan: A loan, the proceeds of which were used by the
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related Obligor in combination to finance property improvements, debt
consolidation, cash-out, or other consumer purposes.
Component: Any of the components of the Residual Interest Certificate
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having the designations, initial Component Principal Balances and Component
Interest Rates as follows:
Original Component
Designation Interest Rate Principal Balance
----------- ------------- -----------------
A IO Component 6.15%(1) (2)
B-1 Component 7.63%(3) $23,987,500.00
B-2 Component 8.02%(3) $12,625,000.00
Excess Component (4) (5)
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(1) After the Payment Date in April 2000, the Interest Rate applicable to
the Class A IO Component will be 0.00%
(2) The A IO Component will have an initial Component Notional Balance of
$41,619,500.00.
(3) The Interest Rate applicable to each of the B-1 and B-2 Components, if
the Residual Certificate remains outstanding, will be increased by 0.50% with
respect to each Payment Date occurring after the date on which the Seller is
first permitted to exercise its option to redeem or terminate the Securities
pursuant to Section 11.02(b).
(4) The Excess Component will not have an interest rate.
(5) The Excess Component will not have a principal balance.
Component Notional Balance: With respect to any Payment Date and the
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A IO Component, the sum of the Class Principal Balances of the Class A-7 and
Class A-8 Notes immediately prior to such date.
Component Principal Balance: With respect to each Component, other than
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a Notional Component, and any date of determination, the Original Component
Principal Balance thereof as reduced by (a) all amounts previously paid in
respect of such Component in reduction of the Component Principal Balance
thereof and (b) any Allocable Loss Amounts previously applied thereto.
Control: The meaning specified in Section 8-106 of the New York UCC.
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Co-Owner Trustee: U.S. Bank National Association, a national banking
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association, in its capacity as the Co-Owner Trustee under the Trust
Agreement acting on behalf of the Certificateholders, or any successor co-
owner trustee under the Trust Agreement.
Credit Score: With respect to the obligor on a home loan (including the
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Obligor on a Home Loan), a numerical assessment of default risk with respect
to such obligor, determined based on a methodology developed by Fair, ▇▇▇▇▇
and Company.
Custodial Agreement: The custodial agreement dated as of February 1,
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1998 by and among the Seller, FFI, as the Transferor and the Servicer, the
Indenture Trustee, and Bank One, Texas, National Association, as the
Custodian, and any subsequent custodial agreement, in similar form and
substance, providing for the retention of the Home Loan Files by the
Custodian on behalf of the Indenture Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant
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to the Custodial Agreement, which shall not be affiliated with the Servicer,
the Transferor, any Subservicer, or the Seller. Bank One, Texas, National
Association, shall be the initial Custodian pursuant to the terms of the
Custodial Agreement.
Cut-Off Date: The close of business on January 31, 1998.
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DCR: Duff & ▇▇▇▇▇▇ Credit Rating Co., or any successor thereto.
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Debt Consolidation Loan: A loan, the proceeds of which were primarily
-----------------------
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements.
Debt Instrument: With respect to any Home Loan, the note or other
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evidence of indebtedness evidencing the indebtedness of an Obligor under such
Home Loan.
Defective Home Loan: As defined in Section 3.05 hereof.
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Deferred Amount: As of any Payment Date and as to each Class of
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Subordinate Securities (or the B-1 or B-2 Component), the amount of Allocable
Loss Amounts previously applied in reduction of the Class Principal Balance
(or Component Principal Balance) thereof, to the extent not previously
reimbursed, plus interest accrued thereon at the applicable Interest Rate
from the date when so applied through the end of the Due Period immediately
preceding such Payment Date.
Delinquency Event: With respect to any Payment Date, a Delinquency
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Event will have occurred and be continuing if the Net Delinquency Calculation
Amount for such date exceeds the Required Overcollateralization Amount for
such date.
Deleted Home Loan: A Home Loan replaced by or to be replaced by a
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Qualified Substitute Home Loan pursuant to Section 3.05 or 2.06(c) hereof.
Determination Date: With respect to a Payment Date in a given month,
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the day of such month that is three (3) Business Days prior to such Payment
Date.
DTC: The Depository Trust Company.
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Due Date: With respect to any Home Loan, the day of the month on which
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the related Monthly Payment is due.
Due Period: With respect to each Payment Date, the calendar month
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immediately preceding the month in which such Payment Date occurs, with the
first Due Period commencing on February 1, 1998.
Eligible Account: At any time, an account which is any of the
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following: (i) an account maintained with a depository institution (A) the
long-term debt obligations of which are at such time rated by each Rating
Agency in one of their two highest long-term rating categories, or (B) the
short-term debt obligations of which are then rated by each Rating Agency in
their highest short-term rating category; (ii) an account or accounts the
deposits in which are fully insured by either the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC; (iii) a trust account (which
shall be a "segregated trust account") maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the Indenture Trustee and the Issuer, which depository institution
or trust company shall have capital and surplus of not less than $50,000,000;
or (iv) an account that will not cause any Rating Agency to downgrade or
withdraw its then-current rating(s) assigned to the Securities, as evidenced
in writing by such Rating Agency.
Eligible Servicer: A Person that is qualified to act as Servicer of the
-----------------
Home Loans under applicable federal and state laws and regulations and who
satisfies the criteria of Section 9.04(b) hereof.
Entitlement Holder: The meaning specified in Section 8-102(a)(7) of the
------------------
New York UCC.
Entitlement Order: The meaning specified in Section 8-102(a)(8) of the
-----------------
New York UCC (i.e., generally, orders directing the transfer or redemption of
any Financial Asset).
Event of Default: As specified in Section 10.01 hereof.
----------------
Excess Spread: With respect to any Payment Date, the excess of (a) the
-------------
Available Funds with respect to such Payment Date over (b) the Regular
Payment Amount with respect to such Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
FDIC: The Federal Deposit Insurance Corporation and any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
Fidelity Bond: As described in Section 4.03 hereof.
-------------
Financial Asset: The meaning specified in Section 8-102(a)(9) of the
---------------
New York UCC.
Fitch: Fitch IBCA, Inc., or any successor thereto.
-----
FNMA: The Federal National Mortgage Association and any successor
----
thereto.
Foreclosure Property: Any real or personal property securing a Home
--------------------
Loan that has been acquired by the Servicer through foreclosure, deed in lieu
of foreclosure or similar proceedings in respect of such Home Loan.
Funding Period: Not applicable.
--------------
HUD: The United States Department of Housing and Urban Development and
---
any successor thereto.
Home Improvement Loan: A loan, the net proceeds of which were or will
---------------------
be used by the Obligor to finance property improvements.
Home Loan: A Home Improvement Loan, Debt Consolidation Loan, or
---------
Combination Loan that is included in the Home Loan Pool. As applicable,
"Home Loan" shall be deemed to refer to the related Debt Instrument,
Mortgage, and any related Foreclosure Property.
Home Loan File: As defined in Section 2.05.
--------------
Home Loan Interest Rate: With respect to any Home Loan, the fixed
-----------------------
annual rate of interest borne by the related Debt Instrument, as shown on the
Home Loan Schedule, as such rate of interest may be modified from time to
time by the Servicer in accordance with Section 4.01(c) hereof.
Home Loan Pool: All of the Home Loans that are subject to the lien of
--------------
the Indenture as identified in the Home Loan Schedule.
Home Loan Schedule: The schedule of Initial Home Loans attached hereto
------------------
as Exhibit A, as amended from time to time pursuant to the terms of this
Agreement, such schedule identifying each Home Loan by address of the related
Mortgaged Property, if any, and the name(s) of each Obligor and setting forth
as to each Home Loan the following information: (i) the Principal Balance as
of the applicable Cut-Off Date, (ii) the account number, (iii) the original
principal amount, (iv) the Due Date, (v) the Home Loan Interest Rate, (vi)
the first date on which a Monthly Payment is due under the related Debt
Instrument, (vii) the Monthly Payment, (viii) the maturity date of the
related Debt Instrument, and (ix) the remaining number of months to maturity
as of the applicable Cut-Off Date.
Indenture: The Indenture dated as of February 1, 1998 between the
---------
Issuer and the Indenture Trustee, as such may be amended or supplemented from
time to time.
Indenture Event of Default: Any event of default specified in
--------------------------
Section 5.1 of the Indenture.
Indenture Trustee: U.S. Bank National Association, a national banking
-----------------
association, as Indenture Trustee under the Indenture, or any successor
indenture trustee under the Indenture.
Indenture Trustee Fee: The annual fee payable to the Indenture Trustee,
---------------------
calculated and payable monthly on each Payment Date, equal to $416.67, except
that with respect to the first Payment Date such monthly amount shall be pro
rated for the first Due Period.
Indenture Trustee's Home Loan File: As defined in Section 2.05(d).
----------------------------------
Initial Home Loan: An individual Home Loan that is conveyed to the
-----------------
Issuer pursuant to this Agreement on the Closing Date, together with the
rights and obligations of a holder thereof and payments thereon and proceeds
therefrom received after the Cut-Off Date. The Initial Home Loans subject to
this Agreement are identified on the Home Loan Schedule annexed hereto as
Exhibit A.
Initial Overcollateralization Amount: Zero.
------------------------------------
Initial Pool Principal Balance: $499,999,998.50, which is the Pool
------------------------------
Principal Balance as of the Cut-Off Date.
Initial Undercollateralization Amount: With respect to any Payment
-------------------------------------
Date, an amount (not less than zero) equal to the excess, if any, of (a) the
aggregate of the Class Principal Balances of all Classes of Securities, after
giving effect to payments and distributions in respect of the Securities on
such Payment Date, over (b) the sum of (i) the Pool Principal Balance as of
the end of the preceding Due Period and (ii) the amount, if any, on deposit
in the Pre-Funding Account as of the end of such Due Period (net of
investment earnings thereon). Notwithstanding the foregoing, on any date
after the Payment Date on which the Initial Undercollateralization Amount is
first reduced to zero, such amount shall be deemed to be zero.
Insurance Proceeds: With respect to each Payment Date, an amount equal
------------------
to, with respect to any Home Loan, the proceeds paid during the immediately
preceding Due Period to the Indenture Trustee or the Servicer by any insurer
pursuant to any insurance policy covering a Home Loan, Mortgaged Property or
REO Property or any other insurance policy that relates to a Home Loan, net
of any expenses incurred by the Indenture Trustee or the Servicer in
connection with the collection of such proceeds and not otherwise reimbursed,
but excluding the proceeds of any insurance policy that are to be applied to
the restoration or repair of the Mortgaged Property or released to the
borrower in accordance with customary loan servicing procedures.
Interest Rate: With respect to each Class of Securities, the per annum
-------------
rate of interest applicable to Securities of such Class, as specified below:
Class Interest Rate(1)
----- -------------
A-1 (2)
A-2 5.97%
A-3 6.04%
A-4 6.20%
A-5 6.25%
A-6 6.61%
A-7 6.88%
▇-▇
▇-▇ 7.09%
M-1 6.95%
M-2 7.15%
Residual Interest Certificate (3)
(1) The Interest Rate applicable to each Class of Notes remaining
outstanding will be increased by 0.50% with respect to each Payment Date
occurring after the date on which the Seller is first permitted to
exercise its option to redeem or terminate the Securities pursuant to
Section 11.02(b).
(2) Interest will accrue on the Class A-1 Notes during each Accrual Period
at a per annum rate equal to LIBOR for the related LIBOR Determination
Date plus 0.14%, subject to a maximum rate equal to the Net Weighted
Average Rate. The Interest Rate applicable to the Class A-1 Notes for
the initial Accrual Period will be 5.738% per annum.
(3) Interest will accrue on the Residual Interest Certificate during each
Accrual Period at a per annum rate calculated on the basis of the Class
Principal Balance thereof and the aggregate amount of interest accrued
on the A IO, B1 and B-2 Components during such Accrual Period.
With respect to each Component other than the Excess Component, the per annum
rate of interest applicable thereto is as specified in the definition of
Components.
LIBOR: With respect to each Accrual Period (other than the initial
-----
Accrual Period) and each Class of LIBOR Securities, the rate for United
States dollar deposits for one month that appears on Telerate Screen Page
3750 as of 11:00 a.m., London time, on the second LIBOR Business Day before
the first day of such Accrual Period, as determined by the Indenture Trustee.
If such rate does not appear on such page (or such other page as may replace
that page on that service, or if such service is no longer offered, such
other service for displaying LIBOR or comparable rates as may be reasonably
selected by the Indenture Trustee), LIBOR for the applicable Accrual Period
will be the Reference Bank Rate. If no such quotations can be obtained by
the Indenture Trustee and no Reference Bank Rate is available, LIBOR will be
LIBOR applicable to the preceding Accrual Period. LIBOR for the initial
Accrual Period will be 5.598%.
LIBOR Business Day: Any day on which banks are open for dealing in
------------------
foreign currency and exchange in London and New York City.
LIBOR Securities: The Class A-1 Notes.
----------------
Liquidated Home Loan: A defaulted Home Loan as to which the Servicer
--------------------
has determined that all recoverable liquidation and insurance proceeds have
been received, which will be deemed to occur upon the earlier of: (a) the
liquidation of the related Mortgaged Property acquired through foreclosure or
similar proceedings, (b) the Servicer's determination in accordance with
customary servicing practices that no further amounts are collectible from
the Home Loan and any related security, or (c) the 180th day that any portion
of a scheduled monthly payment of principal and interest is past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
--------------------
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition,
and any other amounts required to be deposited in the Collection Account
pursuant to Sections 4.02 or 4.04, in each case other than Post-Liquidation
Proceeds, Insurance Proceeds and Released Mortgaged Property Proceeds.
Loan Sale Agreement: Individually or collectively, as the context in
-------------------
which this term is used may require, any or all of the following: (i) the
loan sale agreement between the Transferor, as seller, and the Seller, as
purchaser, pursuant to which the Seller has acquired any of the Home Loans;
and (ii) each loan sale agreement entered into by the Transferor, as
purchaser, pursuant to which the Transferor has acquired any of the Home
Loans and which shall include all of the rights and benefits of the
Transferor thereunder with respect to such Home Loans, subject to any
limitations thereunder regarding assignment by the Transferor.
Majority Securityholders: (i) Until such time as the sum of the Class
------------------------
Principal Balances of all Classes of Notes has been reduced to zero, the
holder or holders of in excess of 50% of the aggregate Class Principal
Balance of all Classes of Notes (accordingly, the holder of the Residual
Interest Certificate shall be excluded from any rights or actions of the
Majority Securityholders during such period); and (ii) thereafter, the holder
of the Residual Interest Certificate.
Monthly Payment: With respect to a Home Loan, the scheduled monthly
---------------
payment of principal and/or interest required to be made by the related
Obligor on the related Home Loan, as set forth in the related Debt
Instrument.
Mortgage: The mortgage, deed of trust or other security instrument
--------
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a Home Loan.
Mortgaged Property: The property (real, personal or mixed) encumbered
------------------
by the Mortgage which secures the Debt Instrument evidencing a Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
-------------------------
securing an Initial Home Loan is located as set forth in the Home Loan
Schedule, and any other state wherein a Mortgaged Property securing any
Subsequent Home Loan may be located as set forth in the applicable Home Loan
Schedule.
Net Delinquency Calculation Amount: With respect to any Payment Date,
----------------------------------
the excess, if any, of (x) the product of 1.4 and the Rolling Six-Month
Delinquency Average over (y) the aggregate of the amounts of Excess Spread
for the three preceding Payments Dates.
Net Liquidation Proceeds: With respect to each Payment Date, an amount
------------------------
equal to any cash amounts received during the related Due Period from
Liquidated Home Loans, whether through trustee's sale, foreclosure sale,
disposition of REO Property, whole loan sales or otherwise (other than
Insurance Proceeds and Released Mortgaged Property Proceeds), and any other
cash amounts received during the related Due Period in connection with the
management of the Mortgaged Properties from defaulted Home Loans, in each
case, net of any reimbursements to the Servicer made from such amounts for
any unreimbursed Servicing Advances made and any other fees and expenses paid
in connection with the foreclosure, conservation and liquidation of the
related Liquidated Home Loans or Mortgaged Properties pursuant to Sections
4.02 and 4.04 hereof.
Net Loan Losses: With respect to a Payment Date, the sum of (A) with
---------------
respect to the Home Loans that became Liquidated Home Loans during the
immediately preceding Due Period, an amount (but not less than zero)
determined as of the related Determination Date equal to:
(i) the aggregate uncollected Principal Balances of such Liquidated
Home Loans as of the related Determination Date and without the
application of any amounts included in clause (ii) below, minus
(ii) the aggregate amount of any recoveries attributable to principal
from whatever source received during any Due Period, with respect
to such Liquidated Home Loans, including any subsequent Due Period,
and including without limitation any Net Liquidation Proceeds, any
Insurance Proceeds, any Released Mortgaged Property Proceeds, any
payments from the related Obligor and any payments made pursuant to
Section 3.05, less the amount of any expenses incurred in
connection with such recoveries; and
(B) with respect to any defaulted Home Loan that is subject to a
modification by the Servicer, an amount equal to the portion of the Principal
Balance, if any, released in connection with such modification.
Net Weighted Average Rate: With respect to any Accrual Period, the per
-------------------------
annum rate equal to the weighted average (by Principal Balance) of the
interest rates of the Home Loans as of the first day of the related Due
Period, as reduced by the Servicing Fee Rate.
New York UCC: The Uniform Commercial Code as in effect in the State of
------------
New York.
Non-Recordation State: Any state with respect to which the Transferor
---------------------
and the Seller shall have delivered to the Indenture Trustee (and to each
Rating Agency, in the case of any state in which 10% or more by Principal
Balance as of the Cut-Off Date of the Mortgaged Properties are located) on or
prior to March 31, 1998 an opinion, memorandum or other written assurance of
counsel in a form reasonably acceptable to the Indenture Trustee (and, where
applicable, to each Rating Agency), to the effect that, as to any Home Loan
with respect to which the related Mortgaged Property is located in such
state, recordation of an Assignment of Mortgage in such state is not
necessary to transfer title to the related Mortgage Note to the Issuer or to
pledge to the Indenture Trustee the issuer's rights under such Mortgage Note
in respect of which the Mortgaged Property is located in such state.
Note(s): One or more of the Class A-1 Notes, the Class A-2 Notes, the
-------
Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class A-6
Notes, the Class A-7 Notes, the Class A-8 Notes, the Class M-1 Notes or the
Class M-2 Notes.
Note Payment Account: The account established and maintained pursuant
--------------------
to Section 5.01(a)(2).
Noteholder: A holder of a Note.
----------
Noteholders' Interest Carry-Forward Amount: With respect to the initial
------------------------------------------
Payment Date, zero; with respect to each other Payment Date, the excess (if
any) of (A) the Noteholders' Monthly Interest Payment Amount for the
immediately preceding Payment Date and any Noteholders' Interest Carry-
Forward Amount remaining outstanding with respect to prior Payment Dates,
over (B) the amount in respect of interest on the Notes that was paid on the
Notes on such immediately preceding Payment Date.
Noteholders' Interest Payment Amount: With respect to any Payment Date,
------------------------------------
the sum of the Noteholders' Monthly Interest Payment Amount for such Payment
Date and the Noteholders' Interest Carry-Forward Amount for such Payment
Date.
Noteholders' Monthly Interest Payment Amount: With respect to any
--------------------------------------------
Payment Date, the aggregate of interest accrued for the related Due Period on
each Class of Notes at the applicable Interest Rate on the Class Principal
Balance thereof immediately preceding such Payment Date.
Notional Component: The A IO Component.
------------------
Obligor: Each obligor on a Debt Instrument.
-------
Officer's Certificate: A certificate delivered to the Indenture Trustee
---------------------
or the Issuer signed by the President or a Vice President of the Seller, the
Servicer, the Transferor or the Issuer, in each case, as required by this
Agreement.
Original Class Principal Balance: With respect to each Class of
--------------------------------
Securities, the original principal balance of such Class, as set forth below:
Original
Class Principal Balance
----- -----------------
A-1 $126,758,000.00
A-2 $43,036,000.00
A-3 $80,263,000.00
A-4 $25,881,000.00
A-5 $21,180,000.00
A-6 $33,700,000.00
A-7 $20,746,000.00
▇-▇
▇-▇ $20,873,500.00
M-1 $66,912,500.00
M-2 $29,037,500.00
Residual Interest Certificate (1)
(1) The Original Class Principal Balance of the Residual Interest
Certificate is equal to the sum of the Original Component Principal
Balances of the B-1 and B-2 Components, as set forth under the
definition of "Component" herein. The Original Class Principal Balance
of the Residual Interest Certificate is $36,612,500.00.
Overcollateralization Amount: With respect to any Payment Date, an
----------------------------
amount (not less than zero) equal to the excess of (a) the sum of (i) the
Pool Principal Balance as of the immediately preceding Determination Date and
(ii) the amount, if any, on deposit in the Pre-Funding Account (other than
investment earnings) as of the end of such immediately preceding Due Period
over (b) the aggregate of the Class Principal Balances of all Classes of
Securities, after giving effect, unless otherwise specified, to all payments
on the Notes and distributions in respect of the Residual Interest
Certificate on such Payment Date.
Overcollateralization Shortfall: With respect to any Payment Date, the
-------------------------------
excess, if any, of the Required Overcollateralization Amount for such Payment
Date over the Overcollateralization Amount before giving effect to payments
on the Notes and distributions in respect of the Residual Interest
Certificate to be made on such Payment Date pursuant to Section 5.01(c)(4).
Overcollateralization Stepdown Date: The first Payment Date occurring
-----------------------------------
after February 2001 as to which the aggregate of the Class Principal Balances
of the Senior Notes has been reduced to an amount equal to or less than the
amount, if any, by which (a) the Pool Principal Balance as of the immediately
preceding Determination Date exceeds (b) the greater of (i) 53.025% of the
Pool Principal Balance as of such immediately preceding Determination Date
plus the greater of (x) 7.0% of the Pool Principal Balance as of the
immediately preceding Determination Date and (y) the Net Delinquency
Calculation Amount for such Payment Date, and (ii) 0.50% of the Assumed Pool
Principal Balance as of such Payment Date.
Overcollateralization Surplus: With respect to any Payment Date, the
-----------------------------
excess, if any, of the Overcollateralization Amount for such Payment Date
over the Required Overcollateralization Amount for such date.
Ownership Interest: As to any Security, any ownership or security
------------------
interest in such Security, including any interest in such Security as the
holder thereof and any other interest therein, whether direct or indirect,
legal or beneficial, as owner or as pledgee.
Owner Trustee: Wilmington Trust Company, as owner trustee under the
-------------
Trust Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: The annual fee of $2,500 payable to the Owner
-----------------
Trustee on the Payment Date occurring in March each year during the term of
this Agreement commencing in March 1998; provided that the initial Owner
Trustee fee shall be paid on the Closing Date.
Payment Date: The 10th day of any month or if such 10th day is not a
------------
Business Day, the first Business Day immediately following such day,
commencing in March 1998 and ending upon termination of this Agreement.
Permitted Investments: Each of the following:
---------------------
(1) obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United
States;
(2) a repurchase agreement that satisfies the following criteria:
(1) must be between the Indenture Trustee and either (a) primary
dealers on the Federal Reserve reporting dealer list which are rated in
one of the two highest ratings for short-term unsecured debt obligations
by each Rating Agency, or (b) banks rated in one of the two highest
categories for short-term unsecured debt obligations by each Rating
Agency; and (2) the written repurchase agreement must include the
following: (a) securities which are acceptable for the transfer and
are either (I) direct U.S. governments obligations, or (II) obligations
of a Federal agency that are backed by the full faith and credit of the
U.S. government, or FNMA or FHLMC; (b) a term no greater than 60 days
for any repurchase transaction; (c) the collateral must be delivered to
the Indenture Trustee or a third party custodian acting as agent for the
Indenture Trustee by appropriate book entries and confirmation
statements and must have been delivered before or simultaneous with
payment (i.e., perfection by possession of certificated securities); and
(d) the securities sold thereunder must be valued weekly,
marked-to-market at current market price plus accrued interest and the
value of the collateral must be equal to at least 104% of the amount of
cash transferred by the Indenture Trustee under the repurchase agreement
and if the value of the securities held as collateral declines to an
amount below 104% of the cash transferred by the Indenture Trustee plus
accrued interest (i.e., a margin call), then additional cash and/or
acceptable securities must be transferred to the Indenture Trustee to
satisfy such margin call; provided, however, that if the securities used
as collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Indenture Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company
incorporated under the laws of the United States or any state, including
the Indenture Trustee; provided that the debt obligations of such
depository institution or trust company at the date of the acquisition
thereof have been rated by each Rating Agency in one of its two highest
short-term ratings;
(4) deposits, including deposits with the Indenture Trustee, which
are fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
affiliates of the Indenture Trustee, which at the date of acquisition is
rated by each Rating Agency in its highest short-term rating category
and which has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest short-term rating category
(or those investments specified in (iii) above with depository
institutions which have debt obligations rated by each Rating Agency in
one of its two highest short-term ratings);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest short-term
rating category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at the
time at which the investment is made;
provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument
described in the foregoing subparagraphs may be purchased at a price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
Person: Any individual, corporation, partnership, joint venture,
------
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency
or political subdivision thereof.
Pool Principal Balance: As of any Determination Date, the aggregate of
----------------------
the Principal Balances as of the close of business on the last day of the
immediately preceding Due Period of all Home Loans in the Home Loan Pool as
of the close of such Due Period.
Post-Liquidation Proceeds: As defined in Section 4.02(b).
-------------------------
Pre-Funded Amount: Not applicable.
-----------------
Pre-Funding Account: None.
-------------------
Pre-Funding Account Deposit: Not applicable.
---------------------------
Pre-Funding Account Weighted Average Balance: Not applicable.
--------------------------------------------
Pre-Funding Termination Payment Date: Not applicable.
------------------------------------
Principal Balance: With respect to any date of determination and with
-----------------
respect to any Home Loan or related Foreclosure Property, an amount equal to
the Cut-Off Date principal balance of such Home Loan minus all principal
reductions credited against the Principal Balance of such Home Loan since
such Cut-Off Date through the end of the immediately preceding Due Period;
provided, however, that the Principal Balance of a Liquidated Home Loan shall
be zero.
Principal Prepayment: With respect to any Home Loan and with respect
--------------------
to any Due Period, any principal amount received on a Home Loan in excess of
the scheduled principal amount included in the Monthly Payment due on the Due
Date in such Due Period.
Prospectus: The final Prospectus, dated September 10, 1997, as
----------
supplemented by the Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated January 30,
---------------------
1998, prepared by the Transferor and the Seller in connection with the
issuance and sale of the Securities.
Purchase Price: As defined in Section 3.05 herein.
--------------
Qualified Substitute Home Loan: A home loan or home loans substituted
------------------------------
for a Deleted Home Loan pursuant to Section 3.05, which (i) has or have an
interest rate or rates not more than 0.50% lower than the Home Loan Interest
Rate for the Deleted Home Loan, (ii) matures or mature not more than one year
later than and not more than one year earlier than the Deleted Home Loan,
(iii) has or have a principal balance or principal balances (after
application of all payments received on or prior to the date of substitution)
equal to or less than the Principal Balance of the Deleted Home Loan as of
such date, (iv) has or have a lien priority no lower than the Deleted Home
Loan, (v) has a related obligor with a Credit Score equal to or greater than
the Credit Score of the Obligor with respect to the Deleted Mortgage Loan,
and (vi) complies or comply as of the date of substitution with each
representation and warranty set forth in Section 3.03 and is not more than 29
days delinquent as of the date of substitution for such loan; and (vii) has a
related obligor with a Credit Score at origination of not less than 600. For
purposes of determining whether multiple home loans proposed to be
substituted for one or more Deleted Home Loans pursuant to Section 3.05 are
in fact "Qualified Substitute Home Loans" as provided above, the criteria
specified in clauses (i), (ii), (iii), (v) and (vii) above may be considered
on an aggregate or weighted average basis, rather than on a loan-by-loan
basis (e.g., so long as the weighted average Home Loan Interest Rate of any
loans proposed to be substituted is not less than nor more than one
percentage point different from the Home Loan Interest Rate for the
designated Deleted Home Loan or Home Loans and the weighted average Credit
Score of any Qualified Substitute Home Loans cumulatively substituted is
equal to the weighted average Credit Score of the Deleted Home Loans, the
requirements of clauses (i) and (v) above would be deemed satisfied), except
that, with respect to any such substitution, the lowest Credit Score of any
home loan substituted shall not be lower than the lowest Credit Score of the
related Deleted Home Loans.
Rating Agency: Each of DCR, S&P and Fitch and their respective
-------------
successors; provided, however, that if no such organization or successor is
any longer in existence, "Rating Agency" shall be a nationally recognized
statistical rating organization or other comparable person designated by the
Issuer, notice of which designation shall have been given to the Indenture
Trustee, the Issuer and the Servicer.
Ratings: The ratings initially assigned to the rated Securities by the
-------
Rating Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Payment Date, the close of business
-----------
on the last Business Day of the calendar month immediately preceding the
month in which such Payment Date occurs.
Reference Bank Rate: With respect to any Accrual Period, the arithmetic
-------------------
mean (rounded upwards, if necessary, to the nearest one sixteenth of a
percent) of the offered rates for United States dollar deposits for one month
that are offered by the Reference Banks as of 11:00 a.m., New York City time,
on the second LIBOR Business Day prior to the first day of such Accrual
Period to prime banks in the London interbank market for a period of one
month in amounts approximately equal to the outstanding Class Principal
Balance of the Class A-1 Notes, provided that at least two such Reference
Banks provide such rate. If fewer than two offered rates appear, the
Reference Bank Rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Indenture Trustee, as of
11:00 a.m., New York City time, on such date for loans in U.S. Dollars to
leading European Banks for a period of one month in amounts approximately
equal to the outstanding Class Principal Balance of the Class A-1 Notes. If
no such quotations can be obtained, the Reference Bank Rate will be the
Reference Bank Rate applicable to the preceding Accrual Period.
Reference Banks: Three money center banks selected by the Indenture
---------------
Trustee.
Regular Payment Amount: With respect to any Payment Date, the lesser
----------------------
of (a) the Available Funds and (b) the sum of (i) the Noteholders' Interest
Payment Amount, (ii) the aggregate of the A IO Component's Interest
Distributable Amount, the B-1 Component's Interest Distributable Amount and
the B-2 Component's Interest Distributable Amount and (iii) the Regular
Principal Payment Amount.
Regular Principal Payment Amount: With respect to each Payment Date,
--------------------------------
an amount equal to the lesser of:
(a) the sum of (i) each scheduled payment of principal collected by the
Servicer in the related Due Period, (ii) all partial and full principal
prepayments applied by the Servicer during such Due Period, (iii) the
principal portion of all Net Liquidation Proceeds, Insurance Proceeds and
Released Mortgaged Property Proceeds received by the Servicer during the
related Due Period in respect of any Home Loan, to the extent received on or
prior to the date on which such Home Loan became a Liquidated Home Loan, (iv)
that portion of the Purchase Price of any repurchased Home Loan which
represents principal and (v) the principal portion of any Substitution
Adjustments required to be deposited in the Collection Account as of the
related Determination Date; and
(b) the aggregate of the outstanding principal balances of the
Securities immediately prior to such Payment Date.
Released Mortgaged Property Proceeds: With respect to each Payment
------------------------------------
Date, an amount equal to, with respect to any Home Loan, the proceeds
received by the Servicer in connection with (i) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation
or (ii) any release of part of the Mortgaged Property from the lien of the
related Mortgage, whether by partial condemnation, sale or otherwise, which
in either case are not released to the borrower in accordance with applicable
law, customary mortgage servicing procedures and this Agreement.
Required Overcollateralization Amount: With respect to any Payment Date
-------------------------------------
occurring prior to the Overcollateralization Stepdown Date, an amount equal
to the greater of (x) 3.5% of the Assumed Pool Principal Balance as of the
end of the related Due Period and (y) the Net Delinquency Calculation Amount
for such Payment Date; with respect to any other Payment Date, an amount
equal to the greater of (x) 7.0% of the Pool Principal Balance as of the
immediately preceding Determination Date and (y) the Net Delinquency
Calculation Amount for such Payment Date; provided, however, that the
Required Overcollateralization Amount with respect to a Payment Date will in
no event be less than 0.5% of the Assumed Pool Principal Balance as of the
end of the related Due Period.
Residual Interest Certificate: The residual interest certificate issued
-----------------------------
pursuant to the Trust Agreement which, for purposes of calculating
distributions of interest and principal and of allocating Allocable Loss
Amounts, will be composed of the four payment Components having the
designations and, with respect to each of the A IO Component, the B-1
Component and the B-2 Component, the Interest Rates and Original Component
Notional Balance or Original Component Principal Balance as set forth under
"Component" herein.
Responsible Officer: When used with respect to the Indenture Trustee,
-------------------
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge
of and familiarity with the particular subject. When used with respect to
the Issuer, the Transferor, the Seller, or the Servicer, the President or any
Vice President, Assistant Vice President, or any Secretary or Assistant
Secretary thereof.
Rolling Six-Month Delinquency Average: With respect to any Payment
-------------------------------------
Date, the average of the applicable 60-Day Delinquency Amounts for each of
the six immediately preceding Due Periods.
S&P: Standard & Poor's Rating Services, a division of The ▇▇▇▇▇▇-▇▇▇▇
---
Companies, Inc., or any successor thereto.
Securities Act: The Securities Act of 1933, as amended.
--------------
Securities Intermediary: The Person acting as Securities Intermediary
-----------------------
under this Agreement (which is U.S. Bank National Association), its successor
in interest, and any successor Securities Intermediary appointed pursuant to
Section 5.06(d).
Security or Securities: Any Notes or the Residual Interest Certificate,
----------------------
as applicable.
Security Entitlement: The meaning specified in Section 8-102(a)(17) of
--------------------
the New York UCC.
Securityholder: A holder of a Note or the Residual Interest
--------------
Certificate, as applicable.
Seller: FIRSTPLUS Investment Corporation, a Nevada corporation, and any
------
successor thereto.
Senior Noteholders' Interest Carry-Forward Amount: With respect to the
--------------------------------------------------
initial Payment Date, zero; with respect to each other Payment Date, the
excess (if any) of (A) the Senior Noteholders' Monthly Interest Payment
Amount for the immediately preceding Payment Date and any Senior Noteholders'
Interest Carry-Forward Amount remaining outstanding with respect to prior
Payment Dates, over (B) the amount in respect of interest that was paid on
such Notes on such immediately preceding Payment Date.
Senior Noteholders' Interest Payment Amount: With respect to any
--------------------------------------------
Payment Date, the sum of the Senior Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Senior Noteholders' Interest Carry-
Forward Amount for such Payment Date.
Senior Noteholders' Monthly Interest Payment Amount: With respect to
----------------------------------------------------
each Payment Date, the aggregate of interest accrued for the related Accrual
Period on each Class of Senior Notes at the applicable Interest Rates on the
respective Class Principal Balances of such Classes immediately preceding
such Payment Date.
Senior Notes: The Class A-1, the Class A-2, the Class A-3, the Class
------------
A-4, the Class A-5, the Class A-6, the Class A-7 and the Class A-8 Notes.
Senior Optimal Principal Balance: With respect to any Payment Date
--------------------------------
prior to the Overcollateralization Stepdown Date, zero; with respect to any
other Payment Date, an amount equal to the Pool Principal Balance as of the
immediately preceding Determination Date minus the greater of (a) 53.025% of
the Pool Principal Balance as of such immediately preceding Determination
Date plus the Required Overcollateralization Amount for such Payment Date
(calculated without giving effect to the proviso in the definition thereof)
and (b) 0.50% of the Assumed Pool Principal Balance.
Series or Series 1998-1: FIRSTPLUS Asset Backed Securities, Series
------ -------------
1998-1.
Servicer: FFI, in its capacity as the servicer hereunder, or any
--------
successor appointed as herein provided.
Servicer's Fiscal Year: October 1st of each year through September 30th
----------------------
of the following year.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
--------------------------
customarily included in the servicer's loan file for the related type of Home
Loan in accordance with the servicing standard set forth in Section 4.01.
Servicer's Monthly Statement: As defined in Section 6.01(b).
----------------------------
Servicing Advances: Subject to Section 4.01(b), all reasonable,
------------------
customary and necessary "out of pocket" costs and expenses advanced or paid
by the Servicer with respect to the Home Loans in accordance with the
performance by the Servicer of its servicing obligations hereunder,
including, but not limited to, the costs and expenses for (i) the
preservation, restoration and protection of the Mortgaged Property, including
without limitation advances in respect of real estate taxes and assessments,
(ii) any collection, enforcement or judicial proceedings, including without
limitation foreclosures, collections and liquidations pursuant to Section
4.02, (iii) the conservation, management and sale or other disposition of any
Foreclosure Property pursuant to Section 4.04, (iv) the preservation of the
security for a Home Loan if any lienholder under a Superior Lien has
accelerated or intends to accelerate the obligations secured by such Superior
Lien pursuant to Section 4.06; provided that such Servicing Advances are
reimbursable to the Servicer as provided in Section 5.01(c)(3)(xv) to the
extent not previously deducted or retained by the Servicer in calculating Net
Liquidation Proceeds hereunder.
Servicing Advance Reimbursement Amount: As defined in
--------------------------------------
Section 5.01(c)(3)(xv).
Servicing Compensation: With respect to a Payment Date, the Servicing
----------------------
Fee and other amounts to which the Servicer is entitled pursuant to Sections
5.01(b)(1), 5.01(b)(2), 5.01(c)(1), 7.01 and 7.03.
Servicing Fee: As to each Home Loan (including any Home Loan that has
-------------
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each
Payment Date, which shall be (a) the product of the Servicing Fee Rate and
the Principal Balance of such Home Loan as of the second preceding
Determination Date divided by (b) 12. The Servicing Fee includes any
servicing fees owed or payable to any Subservicer and any custodial fees owed
or payable to the Custodian which fees shall be paid from the Servicing Fee.
Servicing Fee Rate: 0.75% per annum.
------------------
Servicing Officer: Any officer of the Servicer or Subservicer involved
-----------------
in, or responsible for, the administration and servicing of the Home Loans
whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Issuer and the Indenture Trustee, on behalf
of the Securityholders, as such list may from time to time be amended.
60-Day Delinquency Amount: With respect to any Due Period, the
-------------------------
aggregate of the Principal Balances of all Home Loans that are 60 or more
days delinquent, in foreclosure or REO Property as of the end of such Due
Period, excluding any Liquidated Home Loan.
Subordinate Security: Any Class M-1 Note, Class M-2 Note or Residual
--------------------
Interest Certificate.
Subsequent Home Loan: None.
--------------------
Subsequent Purchase Price: Not applicable.
-------------------------
Subsequent Transfer Agreement: Not applicable.
-----------------------------
Subsequent Transfer Date: Not applicable.
------------------------
Subservicer: Any Person with whom the Servicer has entered into a
-----------
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications of
a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant
--------------------
to a Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
----------------------
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), copies of which shall be made
available, along with any modifications thereto, to the Issuer and the
Indenture Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
-----------------------
pursuant to Section 3.05, the amount, if any, by which (a) the sum of the
aggregate Principal Balance after application of principal payments received
through the close of the preceding Due Period of any Qualified Substitute
Home Loans plus any accrued and unpaid interest thereon that is scheduled to
be paid during the Due Period in which such substitution occurs, is less than
(b) the sum of the aggregate of the Principal Balances, together with accrued
and unpaid interest scheduled to be paid during the Due Period in which such
substitution occurs, of the related Deleted Home Loans.
Superior Lien: With respect to any Home Loan which is secured by other
-------------
than a first priority lien, the mortgage(s) relating to the corresponding
Mortgaged Property having a superior priority lien.
Termination Price: An amount equal to the sum of (i) the then
-----------------
outstanding aggregate Class Principal Balances of the Securities plus all
accrued and unpaid interest thereon at the applicable Interest Rates, (ii)
any Servicing Compensation due and unpaid, and (iii) any unreimbursed
Servicing Advances including such Servicing Advances deemed to be
nonrecoverable.
Third-Party Purchaser: As defined in Section 11.02(a).
---------------------
Total Collection Amount: With respect to each Payment Date, an amount
-----------------------
equal to the sum of the Available Collection Amount and any investment
earnings on amounts in the Note Payment Account and the Certificate
Distribution Account during the related Due Period.
Transferor: FFI, in its capacity as the transferor hereunder.
----------
Trust: The Issuer.
-----
Trust Account Property: The Trust Accounts, the Certificate
----------------------
Distribution Account, all amounts and investments held from time to time in
any Trust Account or in the Certificate Distribution Account and all proceeds
of the foregoing.
Trust Accounts: The Note Payment Account, the Collection Account and
--------------
the Pre-Funding Account.
Trust Agreement: The Trust Agreement dated as of February 1, 1998 among
---------------
the Seller as Depositor, the Co-Owner Trustee and the Owner Trustee, as such
may be amended or supplemented from time to time.
Trust Estate: The assets subject to this Agreement and the Indenture
------------
pledged by the Issuer to the Indenture Trustee, which assets consist of
(a) all of the Seller's right, title and interest in and to: (i) such Home
Loans as from time to time are subject to this Agreement, including both the
Initial Home Loans and any Subsequent Home Loans conveyed to the Issuer as
provided in this Agreement and as listed in the Home Loan Schedule, as the
same may be amended or supplemented from time to time (including to reflect
the removal of Deleted Home Loans and the addition of Qualified Substitute
Home Loans), together with the Servicer's Home Loan Files and the Indenture
Trustee's Home Loan Files relating thereto and all proceeds thereof, (ii) all
payments and proceeds received on or with respect to the Home Loans after the
applicable Cut-Off Dates, less one third of amounts attributable to interest
collected during the initial Due Period, (iii) such assets as from time to
time are identified as Foreclosure Property, (iv) all assets and funds as are
from time to time deposited in any Trust Account, including amounts on
deposit in such accounts which are invested in Permitted Investments, (v) all
insurance policies with respect to the Home Loans and any Insurance Proceeds,
(vi) Net Liquidation Proceeds, Post-Liquidation Proceeds and Released
Mortgaged Property Proceeds, (vii) that certain Loan Sale Agreement under
which the Seller acquired the Initial Home Loans from the Transferor, and
(b) all right, title and interest of the Issuer, as purchaser, under each
Subsequent Transfer Agreement.
Weighted Average Interest Rate: As of any date of determination, the
------------------------------
per annum rate equal to the weighted average (by Class Principal Balance) of
the Interest Rates applicable to the Classes of Securities.
Withdrawal Date: With respect to a Payment Date, the second Business Day
---------------
prior to such Payment Date.
Section 1.02. Other Definitional Provisions. (a) Capitalized terms
-----------------------------
used herein and not otherwise defined herein have the meanings assigned to
them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
Section 1.03. Interest Calculation. Unless otherwise specified, all
--------------------
calculations of accrued interest and accrued fees shall be made on the basis
of a 360-day year consisting of twelve 30-day months, except that with
respect to the Class A-1 Notes, calculations of accrued interest shall be
made on the basis of a 360-day year and the actual number of days elapsed in
each Accrual Period.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01. Conveyance of the Initial Home Loans. (a) As of the
------------------------------------
Closing Date, in consideration of the Issuer's delivery of the Notes and the
Residual Interest Certificate to the Seller or its designee, upon the order
of the Seller, the Seller, as of the Closing Date and concurrently with the
execution and delivery hereof, does hereby sell, transfer, assign, set over
and otherwise convey to the Issuer, without recourse, but subject to the
other terms and provisions of this Agreement, all of the right, title and
interest of the Seller in and to the Trust Estate and the Certificate
Distribution Account. The foregoing sale, transfer, assignment, set over and
conveyance does not and is not intended to result in a creation or an
assumption by the Issuer of any obligation of the Seller, the Transferor or
any other Person in connection with the Trust Estate or under any agreement
or instrument relating thereto except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to
it by the Seller of all of the Seller's right, title and interest in and to
the Trust Estate, receipt of which is hereby acknowledged by the Issuer.
Concurrently with such delivery, the Issuer has pledged to the Indenture
Trustee the Trust Estate, and in exchange for the conveyance to it by the
Seller of all of the Seller's right, title and interest in and to the Trust
Estate (i) the Owner Trustee (not in its individual capacity, but solely as
Owner Trustee on behalf of the Issuer) has executed the Notes and (ii) the
Issuer has caused the Indenture Trustee to authenticate and deliver the Notes
to the Seller or its designee, upon the order of the Issuer. In addition,
concurrently with the delivery to the Issuer of all of the Seller's right,
title and interest in and to the Trust Estate and in exchange therefor, the
Owner Trustee, pursuant to the instructions of the Seller, has executed (not
in its individual capacity, but solely as Owner Trustee on behalf of the
Issuer) and caused to be authenticated and delivered the Residual Interest
Certificate to the Seller or its designee, upon the order of the Seller.
Section 2.02. (Reserved)
Section 2.03. Ownership and Possession of Home Loan Files. Upon the
-------------------------------------------
issuance of the Securities, with respect to the Initial Home Loans, and upon
payment of the related Subsequent Purchase Price, with respect to the
Subsequent Home Loans, the ownership of each Debt Instrument, the related
Mortgage and the contents of the related Servicer's Home Loan File and the
Indenture Trustee's Home Loan File shall be vested in the Issuer, subject to
the lien created by the Indenture in favor of the Indenture Trustee for the
benefit of the Securityholders, although possession of the Servicer's Home
Loan Files (other than items required to be maintained in the Indenture
Trustee's Home Loan Files) on behalf of the Indenture Trustee and for the
benefit of the Securityholders shall remain with the Servicer, and the
Custodian shall take possession of the Indenture Trustee's Home Loan Files as
contemplated in Section 2.06.
Section 2.04. Books and Records. The sale of each Home Loan shall be
-----------------
reflected on the Seller's balance sheets and other financial statements as a
sale of assets by the Seller to the Issuer under generally accepted
accounting principles ("GAAP"). The Servicer shall be responsible for
maintaining, and shall maintain, a complete set of books and records for each
Home Loan which shall be clearly marked to reflect the record ownership of
each Home Loan by the Issuer, subject to the lien created by the Indenture in
favor of the Indenture Trustee for the benefit of the Securityholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the
Trust Estate from the Seller to the Issuer and upon the execution of this
Agreement by the parties hereto, the Trust Estate shall no longer be owned by
the Seller. If the assignment, transfer and conveyance of the Trust Estate
to the Issuer pursuant to this Agreement is held or deemed not to be a sale
or is held or deemed to be a pledge of security for a loan, the Seller
intends that the rights and obligations of the parties to this Agreement
shall be established by the terms of this Agreement and that, in such event,
(i) the Seller shall be deemed to have granted to the Issuer a first priority
security interest in the entire right, title and interest of the Seller in
and to the Trust Estate and all proceeds thereof, and (ii) this Agreement
shall constitute a security agreement under applicable law. Prior to or
promptly after the Closing Date, the Seller shall cause to be filed a UCC-1
financing statement with the Secretary of State of Delaware naming the Seller
as "debtor" and the Issuer as "secured party" and describing the Trust
Estate.
Section 2.05. Delivery of Home Loan Documents.
-------------------------------
(a) With respect to each Initial Home Loan, on the Closing Date the
Transferor and the Seller have delivered or caused to be delivered, and with
respect to each Subsequent Home Loan, on the related Subsequent Transfer
Dates, the Transferor and the Seller will deliver or will cause to be
delivered, to the Custodian as the designated agent of the Indenture Trustee
each of the following documents (collectively, the "Home Loan Files"):
(i) The original Debt Instrument, endorsed "Pay to the order
of U.S. Bank National Association, as Indenture Trustee for the
FIRSTPLUS Asset Backed Securities, Series 1998-1, without recourse" and
signed, by facsimile or manual signature, in the name of the Seller by a
Responsible Officer thereof, together with all intervening endorsements
that evidence a complete chain of title from the originator thereof to
the Transferor; provided that any of the foregoing endorsements may be
contained on an allonge which shall be firmly affixed to such Debt
Instrument;
(ii) With respect to each Debt Instrument, either: (A) the
original Mortgage, with evidence of recording thereon, (B) a copy of the
Mortgage certified as a true copy by a Responsible Officer of the
Transferor or by the closing attorney, if the original has been
transmitted for recording but has not, at the time of delivery of this
Agreement, been returned or (C) a copy of the Mortgage certified by the
public recording office in those instances where the original recorded
Mortgage has been lost or has been retained by the public recording
office;
(iii) With respect to each Debt Instrument, either (A) the
original Assignment of Mortgage assigned to "U.S. Bank National
Association, as Indenture Trustee for the FIRSTPLUS Asset Backed
Securities, Series 1998-1" and signed in the name of the Transferor by a
Responsible Officer with evidence of recording thereon, (B) a copy of
the Assignment of Mortgage, certified as a true copy by a Responsible
Officer of the Transferor where the original has been transmitted for
recording but has not, at the time of delivery of this Agreement, been
returned or (C) a copy of the Assignment of Mortgage certified by the
public recording office in those instances where the original recorded
Assignment of Mortgage has been lost or has been retained by the public
recording office (provided, however, that where the original Assignment
of Mortgage is not being delivered to the Custodian, such Responsible
Officer may complete one or more blanket certificates attaching copies
of one or more Assignments of Mortgage relating thereto); provided that
any such Assignments of Mortgage may
--------
be made by blanket assignments for Home Loans secured by Mortgaged Properties
located in the same county, if permitted by applicable law; provided,
--------
however, that the recordation of such Assignment of Mortgage shall not be
required in Non-Recordation States;
(iv) With respect to each Debt Instrument, either: (A)
originals of all intervening assignments of the Mortgage, with evidence
of recording thereon, (B) if the original intervening assignments have
not yet been returned from the recording office, a copy of the originals
of such intervening assignments together with a certificate of a
Responsible Officer of the Transferor or the closing attorney certifying
that the copy is a true copy of the original of such intervening
assignments or (C) a copy of the intervening assignment certified by the
public recording office in those instances where the original recorded
intervening assignment has been lost or has been retained by the public
recording office; provided that the chain of intervening recorded
assignments shall not be required to match the chain of intervening
endorsements of the Debt Instrument, so long as the chain of intervening
recorded assignments, if applicable, evidences one or more assignments
of the Mortgage from the original mortgagee ultimately to the person who
has executed the Assignment of Mortgage referred to in clause (iii)
above; and
(v) Originals of all assumption and modification agreements,
if any, or a copy certified as a true copy by a Responsible Officer of
the Transferor if the original has been transmitted for recording until
such time as the original is returned by the public recording office.
(b) The Seller agrees to deliver or cause to be delivered on or before
the applicable Subsequent Transfer Date to the Custodian each of the
documents identified in paragraphs (i) through (v) of subsection (a) above
with respect to any Subsequent Home Loans.
(c) With respect to each Home Loan, the Transferor shall, within five
Business Days after the receipt thereof, and in any event, within nine (9)
months of the Closing Date (in the case of the Initial Home Loans) or the
related Subsequent Transfer Date (in the case of the Subsequent Home Loans),
deliver or cause to be delivered to the Custodian: (i) the original recorded
Mortgage in those instances where a copy thereof certified by the Transferor
was delivered to the Custodian; (ii) the original recorded Assignment of
Mortgage, except with respect to Non-Recordation States; (iii) any original
recorded intervening assignments of Mortgage in those instances where copies
thereof certified by the Transferor were delivered to the Custodian; and (iv)
the original recorded assumption and modification agreement in those
instances in which a copy was delivered. Notwithstanding anything to the
contrary contained in this Section 2.05, in those instances where the public
recording office retains the original Mortgage or, if applicable, the
Assignment of Mortgage, the intervening assignments of the Mortgage or the
original recorded assumption and modification agreement after it has been
recorded, or where any such original has been lost or destroyed, the Seller
and Transferor shall be deemed to have satisfied their respective obligations
hereunder with respect to the delivery of any such document upon delivery to
the Custodian of a copy, as certified by the public recording office to be a
true copy of the recorded original of such Mortgage or, if applicable, the
Assignment of Mortgage, intervening assignments of Mortgage or assumption and
modification agreement, respectively.
The Transferor and the Seller shall not be required to record
Assignments of Mortgages for any Home Loan with respect to which the related
Mortgaged Property is located in a Non-Recordation State, and the delivery of
the Assignments of Mortgages for such Home Loans to the Custodian in
recordable form on the Closing Date or Subsequent Transfer Date, as
applicable, shall constitute full compliance with subsection (a)(iii) above
and the Transferor, in its capacity as Servicer, shall retain record title to
such Mortgages on behalf of the Indenture Trustee and the holders of the
Securities. Notwithstanding the preceding provisions allowing for the non-
recordation of Assignments of Mortgage in the Non-Recordation States, if an
Event of Default occurs pursuant to clause (a)(vii) of Section 10.01 or the
Transferor, as the Servicer, is terminated hereunder, then the Transferor, in
its capacity as the Servicer or predecessor Servicer, shall be required to
record all Assignments of Mortgage in Non-Recordation States.
(d) All Home Loan documents held by the Custodian on behalf of the
Indenture Trustee are referred to herein as the "Indenture Trustee's Home
Loan File." All recordings required pursuant to this Section 2.05 shall be
accomplished by and at the expense of the Transferor.
Section 2.06. Acceptance by Indenture Trustee of the Home Loans;
--------------------------------------------------
Certain Substitutions; Initial Certification by Custodian. (a) The
---------------------------------------------------------
Indenture Trustee agrees to cause the Custodian to execute and deliver on the
Closing Date an acknowledgment of receipt of the Indenture Trustee's Home
Loan File for each Initial Home Loan, and the Indenture Trustee agrees to
cause the Custodian to execute and deliver on any Subsequent Transfer Date an
acknowledgment of receipt of the Indenture Trustee's Home Loan File for each
Subsequent Home Loan. The Indenture Trustee declares that it will cause the
Custodian to hold such documents and any amendments, replacements or
supplements thereto, as well as any other assets included in the Trust Estate
and delivered to the Custodian in trust, upon and subject to the conditions
set forth herein for the benefit of the Securityholders. The Indenture
Trustee agrees, for the benefit of the Securityholders, to cause the
Custodian to review each Indenture Trustee's Home Loan File within 45 days
after the Closing Date (or, with respect to any Qualified Substitute Home
Loan or Subsequent Home Loan, within 45 days after the conveyance of the
related Home Loan to the Issuer) and to cause the Custodian to deliver to the
Transferor, the Seller, the Indenture Trustee, the Issuer and the Servicer an
interim certification to the effect that, as to each Home Loan listed in the
Home Loan Schedule and as to each Subsequent Home Loan Listed in a Subsequent
Home Loan Schedule (other than any Home Loan paid in full or any Home Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to the Indenture
Trustee pursuant to this Agreement are in its possession or in the possession
of the Custodian on its behalf (other than as expressly permitted by
Section 2.05(c)) (ii) all documents delivered by the Seller and the
Transferor to the Custodian pursuant to Section 2.05 have been reviewed by
the Custodian and have not been mutilated or damaged and appear regular on
their face (handwritten additions, changes or corrections shall not
constitute irregularities if initialed by the Obligor) and relate to such
Home Loan, (iii) based on the examination of the Custodian on behalf of the
Indenture Trustee, and only as to the foregoing documents, the information
set forth on the Home Loan Schedule accurately reflects the information set
forth in the Indenture Trustee's Home Loan File and (iv) each Debt Instrument
has been endorsed as provided in Section 2.05. Neither the Issuer nor the
Custodian shall be under any duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the
represented purpose or that they are other than what they purport to be on
their face or (ii) to determine whether any Indenture Trustee's Home Loan
File should include any of the documents specified in Section 2.05(a)(v).
Prior to the first anniversary of the Closing Date, the Indenture Trustee
shall cause the Custodian to deliver to the Transferor, the Seller, the
Indenture Trustee, the Issuer and the Servicer a final certification
evidencing the completeness of the Home Loans in its possession or control.
(b) If the Custodian, during the process of reviewing the Indenture
Trustee's Home Loan Files, finds any document constituting a part of a
Indenture Trustee's Home Loan File which is not executed, has not been
received, is unrelated to any Home Loan identified in the Home Loan Schedule,
does not conform to the requirements of Section 2.05 or does not conform, in
all material respects, to the description thereof as set forth in the Home
Loan Schedule, then the Custodian shall promptly so notify the Transferor,
the Servicer, the Indenture Trustee, the Issuer and the Seller. In
performing any such review, the Custodian may conclusively rely on the Seller
and the Transferor as to the purported genuineness of any such document and
any signature thereon. It is understood that the scope of the Custodian's
review of the Indenture Trustee's Home Loan Files is limited solely to
confirming that the documents listed in Section 2.05 have been received and
further confirming that any and all documents delivered pursuant to Section
2.05 have been executed and relate to the Home Loans identified in the Home
Loan Schedule and to the Subsequent Home Loans listed in the Subsequent Home
Loan Schedule. Neither the Issuer nor the Custodian shall have any
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment
is permitted in any applicable jurisdiction. If a material defect in a
document constituting part of a Indenture Trustee's Home Loan File is
discovered, then the Seller and Transferor shall comply with the cure,
substitution and repurchase provisions of Section 3.05 hereof.
(c) On the Payment Date in March of each year commencing in 1998, the
Issuer shall deliver (or cause the Custodian to deliver) to the Seller, the
Indenture Trustee and the Servicer a certification listing all Indenture
Trustee's Home Loan Files held by the Custodian on behalf of the Indenture
Trustee on such Payment Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Seller. The Seller
--------------------------------------------
hereby represents, warrants and covenants with and to the Issuer, the
Indenture Trustee, the Servicer and the Securityholders as of the Closing
Date:
(a) The Seller is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws
of such state require licensing or qualification in order to conduct business
of the type conducted by the Seller and perform its obligations as Seller
hereunder except where the failure to be so licensed, qualified or in good
standing, either singularly or in the aggregate, would not have a material
adverse effect on its business or its ability to perform its obligations
hereunder; the Seller has the power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Seller and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action of the Seller; this Agreement evidences the valid,
binding and enforceable obligation of the Seller; and all requisite action
has been taken by the Seller to make this Agreement valid, binding and
enforceable upon the Seller in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium and other,
similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity.
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to
be taken, given or obtained, as the case may be, by or from any federal,
state or other governmental authority or agency (other than any such actions,
approvals, etc. under any state securities laws, real estate syndication or
"Blue Sky" statutes, as to which the Seller makes no such representation or
warranty) that are necessary in connection with the purchase and sale of the
Securities and the execution and delivery by the Seller of this Agreement and
the other related documents to which it is a party, have been duly taken,
given or obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and such
other documents on the part of the Seller and the performance by the Seller
of its obligations as Seller under this Agreement and such other documents to
which it is a party.
(c) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the Articles
of Incorporation or Bylaws of the Seller, (ii) the breach of any term or
provision of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or
loan or credit agreement or other material instrument to which the Seller, or
its property is subject, or (iii) the violation of any law, rule,
regulation, order, judgment or decree to which the Seller or its respective
property is subject.
(d) Neither this Agreement nor the Prospectus nor any statement, report
or other document prepared by the Seller and furnished or to be furnished
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading.
(e) There is no action, suit, proceeding or investigation pending or,
to the best of the Seller's knowledge, threatened against the Seller which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties
or assets of the Seller or in any material impairment of the right or ability
of the Seller to carry on its business substantially as now conducted, or in
any material liability on the part of the Seller or which would draw into
question the validity of this Agreement or the Home Loans or of any action
taken or to be taken in connection with the obligations of the Seller
contemplated herein, or which would be likely to impair materially the
ability of the Seller to perform under the terms of this Agreement.
(f) The Seller is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal
or other governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or otherwise)
or operations of the Seller or its properties or might have consequences that
would materially and adversely affect its performance hereunder.
(g) As of the Closing Date, the Issuer will have good and marketable
title to each Initial Home Loan and such other assets included in the Trust
Estate as of such date free and clear of any lien, mortgage, pledge, charge,
security interest or other encumbrance other than the lien of the Indenture.
(h) As of each Subsequent Transfer Date, the Issuer will have good and
marketable title to each Subsequent Home Loan transferred on such date and
such other items comprising the corpus of the Trust free and clear of any
lien, mortgage, pledge, charge, security interest or other encumbrance.
(i) The transfer, assignment and conveyance of the Home Loans, the Debt
Instruments and the Mortgages by the Seller pursuant to this Agreement or any
Subsequent Transfer Agreement are not subject to the bulk transfer laws or
any similar statutory provisions in effect in any applicable jurisdiction.
(j) The Seller shall provide each Rating Agency with notice and a copy
of any amendment to the Articles of Incorporation of the Seller promptly
after the filing thereof.
Section 3.02. Representations, Warranties and Covenants of the Servicer
---------------------------------------------------------
and Transferor. The Servicer as such and in its capacity as the Transferor
--------------
hereby represents, warrants and covenants with and to the Seller, the Issuer,
the Indenture Trustee and the Securityholders as of the Closing Date:
(a) The Servicer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Texas and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws
of such state require licensing or qualification in order to conduct business
of the type conducted by the Servicer and perform its obligations as Servicer
hereunder except where the failure to be so licensed, qualified or in good
standing, either singularly or in the aggregate, would not have a material
adverse effect on its business or its ability to perform its obligations
hereunder; the Servicer has the power and authority to execute and deliver
this Agreement and to perform in accordance herewith; the execution, delivery
and performance of this Agreement (including all instruments of transfer to
be delivered pursuant to this Agreement) by the Servicer and the consummation
of the transactions contemplated hereby have been duly and validly authorized
by all necessary action of the Servicer; this Agreement evidences the valid,
binding and enforceable obligation of the Servicer; and all requisite action
has been taken by the Servicer to make this Agreement valid, binding and
enforceable upon the Servicer in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium and other,
similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity;
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to
be taken, given or obtained, as the case may be, by or from any federal,
state or other governmental authority or agency (other than any such actions,
approvals, etc. under any state securities laws, real estate syndication or
"Blue Sky" statutes, as to which the Servicer makes no such representation or
warranty) that are necessary in connection with the execution and delivery by
the Servicer of this Agreement and the other related documents to which it is
a party, have been duly taken, given or obtained, as the case may be, are in
full force and effect, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired
or no review thereof may be obtained or appeal therefrom taken, and are
adequate to authorize the consummation of the transactions contemplated by
this Agreement and such other documents on the part of the Servicer and the
performance by the Servicer of its obligations as Servicer under this
Agreement and such other documents to which it is a party;
(c) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the charter
or by-laws of the Servicer, (ii) the breach of any term or provision of, or
conflict with or constitute a default under or result in the acceleration of
any obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Servicer or its property
is subject, or (iii) the violation of any law, rule, regulation, order,
judgment or decree to which the Servicer or its property is subject;
(d) Neither this Agreement nor the Prospectus nor any statement, report
or other document prepared by the Servicer and furnished or to be furnished
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading;
(e) There is no action, suit, proceeding or investigation pending or,
to the best of the Servicer's knowledge, threatened against the Servicer
which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Servicer or in any material impairment of the
right or ability of the Servicer to carry on its business substantially as
now conducted, or in any material liability on the part of the Servicer or
which would draw into question the validity of this Agreement or the Home
Loans or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or which would be likely to
impair materially the ability of the Servicer to perform under the terms of
this Agreement;
(f) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state,
municipal or other governmental agency, which default might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect its performance
hereunder;
(g) So long as FFI is the Servicer of the Home Loans hereunder, the
Servicer's Home Loan Files will be maintained at 1600 Viceroy, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, or, if FFI is no longer the Servicer hereunder or if FFI changes the
location of the Servicer's Home Loan Files, the Servicer's Home Loan Files
shall be maintained at such address as may be indicated on an Officer's
Certificate executed by a Servicing Officer and delivered to the Issuer, the
Indenture Trustee and the Seller;
(h) The Servicer shall not solicit any refinancing of any of the Home
Loans; provided, that this covenant shall not prevent or restrict either (1)
the Servicer from making general solicitations, by mail, advertisement or
otherwise of the general public or persons on a targeted list, so long as the
list was not generated from the Home Loan Schedule or (2) any refinancing in
connection with an Obligor's unsolicited request for refinancing; and
(i) The Servicer shall not sell, transfer, assign or otherwise dispose
of a customer or similar list comprised of the names of the Obligors under
the Home Loans to any third party.
Section 3.03. Individual Home Loans. The Transferor hereby represents
---------------------
and warrants to the Seller, the Issuer, the Indenture Trustee and the
Securityholders, with respect to the Initial Home Loans, as of the Closing
Date:
(a) Home Loan Information. The information with respect to each Home
---------------------
Loan set forth in the Home Loan Schedule is true and correct in all material
respects as of the applicable Cut-Off Date.
(b) Delivery of Home Loan Documents. All of the original or certified
-------------------------------
documentation required to be delivered to the Indenture Trustee or to the
Custodian on or prior to the Closing Date or the Subsequent Transfer Date, as
applicable, or as otherwise provided in this Agreement has or will be so
delivered.
(c) Payments Current. As of the applicable Cut-Off Date, none of the
----------------
Initial Home Loans are more than 30 days contractually delinquent, based on
the terms under which the related Mortgages and Debt Instruments have been
made. The Transferor has not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the related
Obligor, directly or indirectly, for the payment of any amount required by
any Home Loan.
(d) No Waiver or Modification. The terms of each Debt Instrument and
-------------------------
Mortgage, have not been impaired, waived, altered or modified in any respect,
except by written instruments reflected in the Indenture Trustee's Home Loan
File and no provision of any Mortgage or Debt Instrument has been "▇▇▇▇▇▇
out" or erased unless such modification has been initialed by each of the
parties to the related Home Loan. No instrument of waiver, alteration,
modification or assumption has been executed except for the instruments that
are part of the Indenture Trustee's Home Loan File and the terms of which are
reflected in the Indenture Trustee's Home Loan File.
(e) No Defenses. No Debt Instrument or Mortgage is subject to any
-----------
claim, set-off, counterclaim or defense, including the defense of usury, nor
will the operation of any of the terms of any Debt Instrument or Mortgage or
the exercise of any right thereunder, render such Debt Instrument or Mortgage
unenforceable, in whole or in part, or subject to any claim, right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such claim, right of rescission, set-off, counterclaim or defense has
been asserted in any proceeding or was asserted in any state or federal
bankruptcy or insolvency proceeding at the time the related Home Loan was
originated.
(f) Compliance with Laws; Relief Act Matters. Any and all requirements
----------------------------------------
of any federal, state or local law applicable to each Home Loan have been
complied with including, without limitation, all licensing, real estate
settlement procedures act, consumer, usury, truth-in-lending, consumer credit
protection, equal credit opportunity or disclosure laws applicable to each
Home Loan. Each Home Loan was originated in compliance with all applicable
laws and no fraud or misrepresentation was committed by any Person in
connection therewith. No relief has been requested by or allowed to an
Obligor under the Soldiers' and Sailors' Civil Relief Act of 1940.
(g) No Satisfaction or Release of Lien. No Mortgage has been
----------------------------------
satisfied, canceled, subordinated or rescinded, in whole or in part. No
Mortgaged Property has been released from the lien of the related Mortgage in
whole or in part, nor has any instrument been executed that would effect any
such release, cancellation, subordination or rescission, other than the
subordination of the lien of such Mortgage securing a Home Loan with respect
to a Superior Lien on such Mortgaged Property in connection with the
refinancing of the mortgage loan relating to such Superior Lien.
(h) Valid Lien. With respect to each Debt Instrument, the related
----------
Mortgage is or creates a valid, subsisting and enforceable lien on the
related Mortgaged Property.
(i) Validity of Home Loan Documents; Entire Agreement. Each Debt
-------------------------------------------------
Instrument and each Mortgage is genuine and each is the legal, valid and
binding obligation of the Obligor thereof, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
in general and by general principles of equity. All parties to each Debt
Instrument and each Mortgage had legal capacity at the time to enter into the
related Home Loan and to execute and deliver such Debt Instrument and
Mortgage, and such Debt Instrument and Mortgage have been duly and properly
executed by such parties. The Debt Instrument and the Mortgage contain the
entire agreement between the related Obligor and the lender and all
obligations of the lender under the related Home Loan, and no other agreement
defines, modifies, or expands the obligations of the lender under the Home
Loan, except for any assumptions or modifications included in the Indenture
Trustee's Home Loan File pursuant to Section 2.05(a)(v) or referred to in
Section 3.03(m).
(j) Full Disbursement of Proceeds. The proceeds of each Home Loan have
-----------------------------
been fully disbursed and there is no requirement for future advances
thereunder. All costs, fees and expenses incurred in making or closing each
Home Loan and the recording of the Mortgage have been disbursed. The Obligor
is not entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage and any and all requirements set forth in
the related Home Loan documents have been complied with.
(k) Ownership. Immediately prior to the conveyance thereof to the
---------
Seller, the Transferor had good and marketable title to each Home Loan, Debt
Instrument and Mortgage, the Transferor was the sole owner thereof and had
full right to sell each Home Loan, Debt Instrument and Mortgage to the
Seller; and upon the conveyance thereof by the Transferor to the Seller, the
Seller became the sole owner of each Home Loan, Debt Instrument and Mortgage
free and clear of any encumbrance, equity, lien, pledge, charge, claim or
security interest.
(l) Ownership of Mortgaged Property. With respect to each Home Loan,
-------------------------------
the related Servicer's Home Loan File contains a title document reflecting
that title to the related Mortgaged Property is held at least 50% by the
Obligor under such Home Loan.
(m) No Defaults. There is no default, breach, violation or event of
-----------
acceleration existing under any Mortgage or any Debt Instrument and, to the
best of the Transferor's knowledge, there is no event which, with the passage
of time or with notice and/or the expiration of any grace or cure period,
would constitute such a default, breach, violation or event of acceleration
and neither the Transferor nor its predecessors have waived any such default,
breach, violation or event of acceleration, except as set forth in an
instrument of waiver, alteration, modification or assumption that is included
in the Indenture Trustee's Home Loan File.
(n) Consent and Delinquency of Superior Lien. No obligation secured
----------------------------------------
by a Superior Lien was more than 30 days past due at the time of origination
of the related Home Loan. With respect to each Home Loan that is not a first
mortgage loan, either (i) no consent for the Home Loan is required by the
holder of the related prior lien or (ii) such consent has been obtained and
has been delivered to the Indenture Trustee.
(o) No Condemnation or Damage; Good Repair. To the best of the
--------------------------------------
Transferor's knowledge, the physical condition of each Mortgaged Property has
not deteriorated since the date of origination of the related Home Loan
(normal wear and tear excepted) and there is no proceeding pending for the
total or partial condemnation of any Mortgaged Property. To the best of the
Transferor's knowledge, the related Mortgaged Property described in each
Mortgage is free of damage and in good repair or will be free of damage and
in good repair following the completion of any improvements or repairs to be
financed by the related Home Loan.
(p) Environmental Compliance. To the best of the Transferor's
------------------------
knowledge, the Mortgaged Property is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or federal
environmental law, rule or regulation.
(q) Mortgage Remedies Adequate. Each Mortgage contains customary and
--------------------------
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including, (i) in
the case of a Mortgage designated as a deed of trust, by trustee's sale, and
(ii) otherwise, by judicial foreclosure.
(r) Remedies Against Originators. In the event that any Home Loan was
----------------------------
originated by an entity (such entity, the "Originator") other than the
Transferor and to the extent that the Transferor has failed to fulfill or is
not capable of fulfilling its obligations to cure, substitute or repurchase
such Home Loan as required hereunder, then the Indenture Trustee on behalf of
the Securityholders may enforce any remedies for breach of representations
and warranties made by the Originator with respect to such Home Loan.
(s) Security. No Debt Instrument is, or has been, secured by any
--------
collateral except the lien of the related Mortgage.
(t) Deed of Trust. If a Mortgage for a Home Loan constitutes a deed
-------------
of trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves as such and is named in
such Mortgage, or a valid substitution of trustee has been recorded or may be
recorded and no extraordinary fees or expenses are, or will become, payable
by the Transferor to the trustee under the deed of trust, except in
connection with default proceedings and a trustee's sale after default by the
related Obligor.
(u) Use of Proceeds of Combination Loan. With respect to each
-----------------------------------
Combination Loan the related Obligor has represented to Seller that a portion
of the proceeds of such Combination Loan will be used to finance property
improvements.
(v) Inspections of Improvements; and No Encroachment. To the best of
------------------------------------------------
the Transferor's knowledge, all inspections, licenses and certificates
required to be made, obtained and issued as of the Closing Date with respect
to the improvements and the use and occupancy of all occupied portions of all
Mortgaged Property have been made, obtained or issued as applicable. To the
best of the Transferor's knowledge, all improvements which were considered in
determining the appraised value of the Mortgaged Property lay wholly within
the boundaries and building restrictions lines of the related property and no
improvements on adjoining properties encroach upon such property and no
improvement located on or being a part of such property is in violation of
any applicable zoning laws or regulation.
(w) Flood Insurance. If required by federal or state law, each
---------------
Mortgaged Property is covered by flood insurance with a standard mortgagee
clause and extended coverage in an amount which is not less than the value of
such Mortgaged Property. All such insurance policies meet the requirements
of the current guidelines of the Federal Insurance Administration, conform to
the requirements of the FNMA Sellers' Guide and the FNMA Servicers' Guide,
and are of standard type and quality for the locale where the related
Mortgaged Property is located. All acts required to be performed to
preserve the rights and remedies of the Indenture Trustee in any such
insurance policies have been performed including, without limitation, any
necessary notifications of insurers and assignments of policies or interests
therein.
(x) Underwriting Origination and Servicing Practices. Each Home Loan,
------------------------------------------------
other than the Home Loans identified on Exhibit D hereto, has been
underwritten or re-underwritten in accordance with the Transferor's then-
current underwriting guidelines. The origination practices used by each
originator of the Home Loans and the servicing and collection practices used
by the Transferor with respect to each Home Loan have been in all material
respects legal, proper, prudent and customary with respect to the loan
origination and servicing business as applicable to the respective loan type.
To the best of the Transferor's knowledge, no fraud or misrepresentation was
committed by any Person in connection with the origination or servicing of
each Home Loan.
(y) Selection Criteria; No Bulk Transfer. The Home Loans were not
------------------------------------
selected by the Transferor for sale to the Seller or the Issuer on any basis
intended to adversely affect the Seller or the Issuer. The sale, transfer,
assignment, conveyance and grant of the Debt Instruments and the Mortgages by
the Transferor to the Seller were not subject to the bulk transfer laws or
any similar statutory provisions in effect in any applicable jurisdiction.
(z) Treasury Regulation Section301.7701. On the Closing Date, each
-----------------------------------
Subsequent Transfer Date and each date of substitution of a Qualified
Substitute Home Loan, 55% or more (by aggregate principal balance) of the
Home Loans do not constitute "real estate mortgages" for the purpose of
---
Treasury Regulation Section301.7701 under the Code. For this purpose a Home
Loan does not constitute a "real estate mortgage" if:
---
(i) The Home Loan is not secured by an interest in real property,
---
or
(ii) The Home Loan is not an "obligation principally secured by an
---
interest in real property." For this purpose an obligation is "principally
secured by an interest in real property" if it satisfies either the test set
------
out in paragraph (1) or the test set out in paragraph (2) below.
(1) The 80-percent test. An obligation is principally secured by
an interest in real property if the fair market value of the
interest in real property securing the obligation
(A) was at least equal to 80 percent of the adjusted issue
price of the obligation at the time the obligation was
originated (or, if later, the time the obligation was
significantly modified); or
(B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date or Subsequent
Transfer Date, as applicable.
For purposes of this paragraph (1), the fair market value of
the real property interest must be first reduced by the amount
of any lien on the real property interest that is senior to
the obligation being tested, and must be further reduced by a
proportionate amount of any lien that is in parity with the
obligation being tested, in each case before the percentages
set forth in (1)(A) and (1)(B) are determined. The adjusted
issue price of an obligation is its issue price plus the
amount of accrued original issue discount, if any, as of the
date of determination.
(2) Alternative test. An obligation is principally secured by an
interest in real property if substantially all of the proceeds
of the obligation were used to acquire or to improve or
protect an interest in real property that, at the origination
date, is the only security for the obligation. For purposes
of this test, loan guarantees made by the United States or any
state (or any political subdivision, agency, or
instrumentality of the United States or of any state), or
other third party credit enhancement are not viewed as
additional security for a loan. An obligation is not
considered to be secured by property other than real property
solely because the obligor is personally liable on the
obligation. For this purpose only substantially all of the
proceeds of the obligation means more than 66-2/3% of the
gross proceeds.
(aa) No Fraudulent Conveyance. The Home Loans are not being transferred
------------------------
with any intent to hinder, delay or defraud any creditors.
(ab) Value and Marketability. To the best of the Transferor's
-----------------------
knowledge, there do not exist any circumstances, conditions or information
with respect to the Home Loan, the related Mortgaged Property, the Obligor or
the Obligor's credit standing that reasonably can be expected to cause
private institutional investors investing in same type of home loan to regard
such Home Loan as an unacceptable investment, to increase the likelihood that
such Home Loan will become delinquent, or adversely affect the value or
marketability of such Home Loan.
(ac) Terms of Home Loans and Interest Method. Each Home Loan is a fixed
---------------------------------------
rate loan. Each Debt Instrument has an original term to maturity of not less
than 24 months nor more than 25 years and three months from the date of
origination. Each Debt Instrument is payable in monthly installments of
principal and interest, with interest payable in arrears, and requires a
monthly payment which is sufficient to amortize the original principal
balance over the original term and to pay interest at the related Home Loan
Interest Rate. No Debt Instrument provides for any extension of the original
term. Interest for each Home Loan is calculated at a rate of interest
computed by the simple interest method or the actuarial method.
(ad) Types of Home Loans; Retail Installment Contracts. Each Home Loan
-------------------------------------------------
is either (i) a Home Improvement Loan, (ii) a Debt Consolidation Loan, or
(iii) a Combination Loan. No Home Loan was originated for the express
purpose of purchasing a manufactured home. Some of the Home Loans are retail
installment contracts for goods or services, and some of the Home Loans are
home improvement loans for goods or services, which are either "consumer
credit contracts" or "purchase money loans" as such terms are defined in
16 C.F.R. Part 433.1.
(ae) No Buydown, GPM or Shared Appreciation Loans. No Home Loan
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contains any provisions pursuant to which principal and interest payments are
paid or partially paid with funds deposited in any separate account
established by the Transferor, the Obligor or anyone else on behalf of the
Obligor, or paid by any source other than the Obligor. No Home Loan contains
any other similar provision which may constitute a "buydown" provision. No
Home Loan is a graduated payment mortgage loan. No Home Loan has a shared
appreciation or other contingent interest feature.
(af) No Chattel Paper. Each Debt Instrument is comprised of one
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original promissory note and each such promissory note constitutes an
"instrument" for purposes of Section 9-105(1)(i) of the Relevant UCC. No
Debt Instrument constitutes or is comprised of "chattel paper" as such term
is defined in Section 9-105(1)(b) of the Relevant UCC. Each Debt Instrument
has been delivered to the Indenture Trustee.
(ag) Description Conforms to Prospectus Supplement. Each Initial Home
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Loan conforms, and all Initial Home Loans in the aggregate conform, in all
material respects to the description thereof set forth in the Prospectus
Supplement.
(ah) Review by Transferor. In light of the Transferor's underwriting
--------------------
guidelines, the Transferor has reviewed all of the documents constituting
each Servicer's Home Loan File and each Indenture Trustee's Home Loan File
and has made such inquiries as it deems reasonable under the circumstances to
make and confirm the accuracy of the representations set forth herein.
(ai) Fraud in Origination. Each Obligor has not commenced, and will not
--------------------
commence within six months following origination of the related Home Loan,
any bankruptcy or similar insolvency proceeding.
Section 3.04. (Reserved)
Section 3.05. Purchase and Substitution. (a) It is understood and
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agreed that the representations and warranties set forth in Sections 3.03 and
3.04 shall survive the conveyance of the Home Loans to the Issuer, the Grant
of the Home Loans to the Indenture Trustee and the delivery of the Securities
to the Securityholders. Upon discovery by the Seller, the Servicer, the
Transferor, the Custodian, the Issuer, the Indenture Trustee or any
Securityholder of a breach of any of such representations and warranties
which materially and adversely affects the value of the Home Loans or the
interest of the Securityholders, or which materially and adversely affects
the interests of the Securityholders in the related Home Loan in the case of
a representation and warranty relating to a particular Home Loan
(notwithstanding that such representation and warranty may have been made to
the Transferor's best knowledge), the party discovering such breach shall
give prompt written notice to the others. The Transferor shall within 60
days of the earlier of its discovery or its receipt of notice of any breach
of a representation or warranty, or of its discovery or its receipt of notice
of a material defect in a document contained in an Indenture Trustee's Home
Loan File as referred to in the last sentence of Section 2.06(b), promptly
cure such breach in all material respects. If, however, within 60 days after
the Seller's discovery of or receipt of notice of such a breach or defective
document, as applicable, such breach or defective document, as applicable,
has not been remedied by the Transferor and such breach or defective
document, as applicable, materially and adversely affects the interests of
the Securityholders generally or in the related Home Loan (the "Defective
Home Loan"), the Seller shall cause the Transferor on or before the
Determination Date next succeeding the end of such 60 day period either
(i) to remove such Defective Home Loan from the Trust Estate (in which case
it shall become a Deleted Home Loan) and substitute one or more Qualified
Substitute Home Loans in the manner and subject to the conditions set forth
in this Section 3.05 or (ii) to purchase such Defective Home Loan at a
purchase price equal to the Purchase Price (as defined below) by depositing
such Purchase Price in the Collection Account. In the event the Seller or
the Transferor is notified that any Mortgaged Property was, as of the Closing
Date, not free of damage or not in good repair, regardless of the
Transferor's knowledge, the Seller shall cause the Transferor to (x)
substitute or purchase the related Home Loan in accordance with clauses (i)
and (ii), respectively, above or (y) repair any such Mortgaged Property such
that such Mortgaged Property is free of damage and in good repair. The
Transferor shall provide the Servicer, the Indenture Trustee and the Issuer
with a certification of a Responsible Officer on the Determination Date next
succeeding the end of such 60 day period indicating whether the Transferor is
purchasing the Defective Home Loan or substituting in lieu of such Defective
Home Loan a Qualified Substitute Home Loan. With respect to the purchase of
a Defective Home Loan pursuant to this Section, the "Purchase Price" shall be
equal to the Principal Balance of such Defective Home Loan as of the date of
purchase, plus all accrued and unpaid interest on such Defective Home Loan to
but not including the Due Date in the Due Period in which such repurchase
occurs computed at the applicable Home Loan Interest Rate, plus the amount of
any unreimbursed Servicing Advances made by the Servicer with respect to such
Defective Home Loan, which Purchase Price shall be deposited in the
Collection Account (after deducting therefrom any amounts received in respect
of such repurchased Defective Home Loan and being held in the Collection
Account for future payment to the extent such amounts represent recoveries of
principal not yet applied to reduce the related Principal Balance or interest
(net of the Servicing Fee) for the period from and after the Due Date in the
Due Period most recently ended prior to such Determination Date).
Any substitution of Home Loans pursuant to this Section 3.05(a) shall be
accompanied by payment by the Transferor of the Substitution Adjustment, if
any, to be deposited in the Collection Account. For purposes of calculating
the Available Collection Amount for any Payment Date, amounts paid by the
Transferor pursuant to this Section 3.05 in connection with the repurchase or
substitution of any Defective Home Loan that are on deposit in the Collection
Account as of the Determination Date for such Payment Date shall be deemed to
have been paid during the related Due Period and shall be transferred to the
Note Payment Account to be retained therein or transferred to the Certificate
Distribution Account pursuant to Section 5.01(c).
As to any Home Loan for which the Transferor substitutes a Qualified
Substitute Home Loan or Loans, the Transferor shall effect such substitution
by delivering (i) to the Issuer a certification executed by a Responsible
Officer of the Transferor to the effect that the Substitution Adjustment has
been credited to the Collection Account, and (ii) to the Custodian on behalf
of the Indenture Trustee, the documents constituting the Indenture Trustee's
Loan File for such Qualified Substitute Home Loan or Loans.
(b) In addition to the preceding repurchase obligations, each of the
Transferor and Servicer shall have the option, exercisable in its sole
discretion at any time, to repurchase from the Issuer any Home Loan that is
delinquent or is in foreclosure or default or as to which default is
imminent; provided that any repurchase pursuant to this paragraph is
conducted in the same manner as the repurchase of a Defective Home Loan
pursuant to this Section 3.05.
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Home Loan or Loans on
or after the beginning of the Due Period in which such substitution occurs.
All payments received with respect to Qualified Substitute Home Loans on or
before the beginning of the Due Period in which such substitution occurs will
be retained by the Transferor. The Issuer will be entitled to all payments
received on the Deleted Home Loan on or before the beginning of the Due
Period in which such substitution occurs, and the Transferor shall thereafter
be entitled to retain all amounts subsequently received in respect of such
Deleted Home Loan. The Transferor shall give written notice to the Issuer,
the Servicer (if the Transferor is not then acting as such) and the Indenture
Trustee that such substitution has taken place. Upon such substitution,
such Qualified Substitute Home Loan or Loans shall be subject to the terms of
this Agreement in all respects, and the Transferor shall be deemed to have
made with respect to such Qualified Substitute Home Loan or Loans, as of the
date of substitution, the covenants, representations and warranties set forth
in Section 3.03. On the date of such substitution, the Transferor will
deposit into the Collection Account an amount equal to the related
Substitution Adjustment, if any. In addition, on the date of such
substitution, (i) the Issuer shall cause such Qualified Substitute Home Loan
to be pledged to the Indenture Trustee under the Indenture as part of the
Trust Estate and (ii) the Indenture Trustee shall (A) release the applicable
Deleted Home Loan from the lien of the Indenture, (B) release (or cause the
Custodian to release) to the Servicer for release to the Seller the Indenture
Trustee's Home Loan File for such Deleted Home Loan and (C) execute, without
recourse, representation or warranty, and deliver such instruments of
transfer and release presented to it by the Servicer as shall be necessary to
transfer such Deleted Home Loan to the Seller and to evidence such release.
(d) It is understood and agreed that the obligations of the Transferor
set forth in this Section 3.05 to cure, purchase or substitute for a
Defective Home Loan constitute the sole remedies of the Issuer, the Indenture
Trustee and the Securityholders hereunder respecting a breach of the
representations and warranties contained in Sections 3.03 and 3.04. Any
cause of action against the Seller relating to or arising out of a material
defect in a document contained in an Indenture Trustee's Home Loan File as
contemplated by Section 2.06(b) or against the Transferor relating to or
arising out of a breach of any representations and warranties made in
Sections 3.03 or 3.04 shall accrue as to any Home Loan upon (i) discovery of
such defect or breach by any party and notice thereof to the Seller or the
Transferor, as applicable, or notice thereof by the Transferor or the Seller,
as applicable, to the Issuer, (ii) failure by the Transferor or the Seller,
as applicable, to cure such defect or breach or purchase or substitute such
Home Loan as specified above, and (iii) demand upon the Transferor or the
Seller, as applicable, by the Issuer or the Majority Securityholders for all
amounts payable in respect of such Home Loan.
(e) Neither the Issuer nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase
or substitution of any Home Loan pursuant to this Section or the eligibility
of any Home Loan for purposes of this Agreement.
(f) In connection with a repurchase of or substitution for a Home Loan
pursuant to this Section 3.05, the Transferor shall amend the Home Loan
Schedule to reflect (i) the removal of the applicable Deleted Home Loan from
the terms of this Agreement and (ii) if applicable, the substitution of the
applicable Qualified Substitute Home Loan. The Transferor shall promptly
deliver to the Issuer, the Servicer (if the Transferor is not then acting as
such) and the Indenture Trustee a copy of the Home Loan Schedule as so
amended.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 4.01. Duties of the Servicer. (a) Servicing Standard. The
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Servicer, as an independent contractor, shall service and administer the Home
Loans and shall have full power and authority, acting alone, to do any and
all things in connection with such servicing and administration which the
Servicer may deem necessary or desirable and consistent with the terms of
this Agreement. Notwithstanding anything to the contrary contained herein,
the Servicer, in servicing and administering the Home Loans, shall employ or
cause to be employed procedures (including collection, foreclosure,
liquidation and Foreclosure Property management and liquidation procedures)
and exercise the same care that it customarily employs and exercises in
servicing and administering loans of the same type as the Home Loans for its
own account, all in accordance with accepted servicing practices of prudent
lending institutions and servicers of loans of the same type as the Home
Loans and giving due consideration to the Securityholders' reliance on the
Servicer. The Servicer has and shall maintain the facilities, procedures and
experienced personnel necessary to comply with the servicing standard set
forth in this subsection (a) and the duties of the Servicer set forth in this
Agreement relating to the servicing and administration of the Home Loans.
(b) Servicing Advances. In accordance with the preceding general
------------------
servicing standard, the Servicer, or any Subservicer on behalf of the
Servicer, shall make all Servicing Advances in connection with the servicing
of each Home Loan hereunder. Notwithstanding any provision to the contrary
herein, neither the Servicer, nor any Subservicer on behalf of the Servicer,
shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Home Loan or to satisfy
or keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of payments or
distributions to Securityholders, be added to the amount owing under the
related Home Loan. Notwithstanding any obligation by the Servicer to make a
Servicing Advance hereunder with respect to a Home Loan, before making any
Servicing Advance that is material in relation to the outstanding principal
balance thereof, the Servicer shall assess the reasonable likelihood of (i)
recovering such Servicing Advance and any prior Servicing Advances for such
Home Loan, and (ii) recovering any amounts attributable to outstanding
interest and principal owing on such Home Loan for the benefit of the
Securityholders in excess of the costs, expenses and other deductions to
obtain such recovery, including without limitation any Servicing Advances
therefor and, if applicable, the outstanding indebtedness secured by all
Superior Liens. The Servicer shall only make a Servicing Advance with
respect to a Home Loan to the extent that the Servicer determines in its
reasonable, good faith judgment that such Servicing Advance would likely be
recovered as aforesaid.
(c) Waivers, Modifications and Extensions. Consistent with the terms
-------------------------------------
of this Agreement, the Servicer may waive, modify or vary any provision of
any Home Loan or consent to the postponement of strict compliance with any
such provision or in any manner grant indulgence to any Obligor if in the
Servicer's reasonable determination such waiver, modification, postponement
or indulgence is not materially adverse to the interests of the
Securityholders; provided, however, unless the Obligor is in default with
respect to the Home Loan, or such default is, in the judgment of the
Servicer, reasonably foreseeable, the Servicer may not permit any
modification with respect to any Home Loan that would change the Home Loan
Interest Rate, defer (subject to the following paragraph) or forgive the
payment of any principal or interest (unless in connection with the
liquidation of the related Home Loan) or extend the final maturity date on
the Home Loan. The Servicer may grant a waiver or enter into a subordination
agreement with respect to the refinancing of the indebtedness secured by a
Superior Lien on the related Mortgaged Property, provided that the Obligor is
in a better financial or cash flow position as a result of such refinancing,
which may include a reduction in the Obligor's scheduled monthly payment on
the indebtedness secured by such Superior Lien. The Servicer shall notify
the Issuer and the Indenture Trustee of any modification, waiver or amendment
of any provision of any Home Loan and the date thereof, and shall deliver to
the Custodian for deposit in the related Indenture Trustee's Home Loan File,
an original counterpart of the agreement relating to such modification,
waiver or amendment promptly following the execution thereof.
Notwithstanding the preceding provisions of this subsection (c), the
Servicer may modify, vary or waive any defaulted Home Loan in a manner that
in the reasonable judgment of the Servicer will be likely to maximize the net
proceeds realizable from such defaulted Home Loan under the circumstances,
including, without limitation, the deferment or forgiveness of any principal
or interest payments due or to become due thereon; provided, however, that no
such modification, waiver or variation of a Home Loan pursuant to this
subsection (c) shall involve the execution by the related Obligor of a new
Debt Instrument.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of each Home Loan and the related
Debt Instrument and Mortgage. Consistent with the foregoing, the Servicer
may in its discretion waive or permit to be waived any late payment charge,
prepayment charge or assumption fee or any other fee or charge which the
Servicer would be entitled to retain hereunder as Servicing Compensation and
extend the due date for payments due on a Debt Instrument for a period.
The Servicer may, in a manner consistent with its servicing practices,
permit an Obligor who is selling his principal residence and purchasing a new
residence to substitute the new Mortgaged Property as collateral for the
related Home Loan. In such circumstances, the Servicer acknowledges that it
intends to, consistent with its servicing practices, generally require such
Obligor to make a partial prepayment in reduction of the principal balance of
the Home Loan to the extent that such Obligor has received proceeds from the
sale of the prior residence that will not be applied to the purchase of the
new residence.
(d) Instruments of Satisfaction or Release. Without limiting the
--------------------------------------
generality of the foregoing, the Servicer is hereby authorized and empowered
to execute and deliver on behalf of the Issuer, the Indenture Trustee, each
Securityholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Home Loans and with respect to the related Mortgaged
Properties. If reasonably required by the Servicer, the Issuer and the
Indenture Trustee 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 under this Agreement.
Section 4.02. Liquidation of Home Loans. (a) In the event that any
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payment due under any Home Loan and not postponed pursuant to Section 4.01(c)
is not paid when the same becomes due and payable, or in the event the
Obligor fails to perform any other covenant or obligation under the Home Loan
and such failure continues beyond any applicable grace period, the Servicer
shall, in accordance with the standard of care specified in Section 4.01(a),
take such action as it shall deem to be in the best interest of the
Securityholders to collect or liquidate such Home Loan in default in a manner
that in the reasonable judgment of the Servicer will be likely to maximize
the net proceeds realizable therefrom under the circumstances (including, but
without limitation, the purchase or substitution of such Home Loan pursuant
to Section 3.05, or, if no Superior Liens exist on the related Mortgaged
Property, foreclose or otherwise comparably effect ownership in such
Mortgaged Property in the name of the Indenture Trustee for the benefit of
Securityholders). In addition, the Servicer shall have the power and
authority, exercisable in its sole discretion at any time, to sell any
Liquidated Home Loan on behalf of the Indenture Trustee for the benefit of
the Securityholders to one or more third party purchasers in a manner that,
in the reasonable judgment of the Servicer, will be likely to maximize the
net proceeds realizable therefrom. The purchase price paid for any
Liquidated Loan sold to an affiliate of the Servicer shall not be less than
the price that would have been paid for such Liquidated Loan by an
unaffiliated third party. The Servicer shall promptly deposit the Net
Liquidation Proceeds or Post-Liquidation Proceeds, as applicable, from the
sale of such Liquidated Home Loans into the Collection Account in accordance
with Section 5.01 of this Agreement. The Servicer shall give the Indenture
Trustee notice of the election of remedies made pursuant to this Section
4.02. The Servicer shall not be required to satisfy the indebtedness secured
by any Superior Liens on the related Mortgaged Property or to advance funds
to keep the indebtedness secured by such Superior Liens current. In
connection with any collection or liquidation activities, the Servicer shall
exercise collection or liquidation procedures with the same degree of care
and skill as it would exercise or use under the circumstances in the conduct
of its own affairs.
(b) During any Due Period occurring after a Home Loan becomes a
Liquidated Home Loan, the Servicer shall deposit into the Collection Account
any proceeds received by it with respect to such Liquidated Home Loan or the
related Foreclosure Property ("Post-Liquidation Proceeds").
(c) After a Home Loan has become a Liquidated Home Loan, the Servicer
shall promptly prepare and forward to the Issuer, the Indenture Trustee and,
upon request of any Securityholder, to such Securityholder a liquidation
report detailing the following: (i) the Net Liquidation Proceeds, Insurance
Proceeds or Released Mortgaged Property Proceeds received in respect of such
Liquidated Home Loan; (ii) expenses incurred with respect thereto; (iii) any
Net Loan Losses incurred in connection therewith; and (iv) any Post-
Liquidation Proceeds.
Section 4.03. Fidelity Bond; Errors and Omission Insurance. The
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Servicer shall maintain with a responsible company, and at its own expense, a
blanket fidelity bond and an errors and omissions insurance policy in such
amounts as required by, and satisfying any other requirements of, the FHA and
the FHLMC, with broad coverage on all officers, employees or other persons
acting in any capacity requiring such persons to handle funds, money,
documents or papers relating to the Home Loans ("Servicer Employees"). Any
such fidelity bond and errors and omissions insurance shall protect and
insure the Servicer against losses, including losses resulting from forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts
(including acts relating to the origination and servicing of loans of the
same type as the Home Loans) of such Servicer Employees. Such fidelity bond
shall also protect and insure the Servicer against losses in connection with
the release or satisfaction of a Home Loan without having obtained payment in
full of the indebtedness secured thereby. In the event of any loss of
principal or interest on a Home Loan for which reimbursement is received from
the Servicer's fidelity bond or errors and omissions insurance, the proceeds
from any such insurance will be deposited in the Collection Account. No
provision of this Section 4.03 requiring such fidelity bond and errors and
omissions insurance shall diminish or relieve the Servicer from its duties
and obligations as set forth in this Agreement. Upon the request of the
Issuer, the Indenture Trustee, the Servicer shall cause to be delivered to
requesting party a certified true copy of such fidelity bond and insurance
policy. On the Closing Date, such fidelity bond and insurance is maintained
by the Servicer with Reliance Insurance Company of Illinois.
Section 4.04. Title, Management and Disposition of Foreclosure
------------------------------------------------
Property. The deed or certificate of sale in respect of each Foreclosure
--------
Property shall be taken in the name of the Indenture Trustee for the benefit
of the Securityholders.
The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Indenture Trustee and the Securityholders solely
for the purpose of its prudent and prompt disposition and sale. The Servicer
shall, either itself or through an agent selected by the Servicer, manage,
conserve, protect and operate the Foreclosure Property in the same manner
that it manages, conserves, protects and operates other foreclosure property
for its own account, and in the same manner that similar property in the same
locality as the Foreclosure Property is managed. The Servicer shall attempt
to sell the same (and may temporarily lease the same) on such terms and
conditions as the Servicer deems to be in the best interest of the
Securityholders. The disposition of Foreclosure Property shall be carried
out by the Servicer at such price, and upon such terms and conditions, as the
Servicer deems to be in the best interest of the Indenture Trustee and the
Securityholders and, as soon as practicable thereafter, the expenses of such
sale shall be paid. The Net Liquidation Proceeds or Post-Liquidation
Proceeds, as applicable, from the conservation, disposition and sale of the
Foreclosure Property shall be promptly deposited by the Servicer in the
Collection Account in accordance with Section 5.01 of this Agreement and the
Indenture, which Net Liquidation Proceeds or Post-Liquidation Proceeds, as
applicable, shall equal all cash amounts received with respect thereto less
the amounts retained and withdrawn by the Servicer for any related
unreimbursed Servicing Advances and any other fees and expenses incurred in
connection with such Foreclosure Property.
Section 4.05. Access to Certain Documentation and Information Regarding
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the Home Loans. The Servicer shall provide to the Issuer, the Indenture
--------------
Trustee, the Securityholders and the supervisory agents and examiners of each
of the foregoing access to the documentation regarding the Home Loans
required by applicable state and federal regulations, such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it.
Section 4.06. Superior Liens. (a) The Servicer shall file (or cause
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to be filed) of record a request for notice of any action by a lienholder
under a Superior Lien for the protection of the Indenture Trustee's interest,
where permitted by local law and whenever applicable state law does not
require that a junior lienholder be named as a party defendant in foreclosure
proceedings in order to foreclose such junior lienholder's equity of
redemption.
(b) If the Servicer is notified that any lienholder under a Superior
Lien has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to declare a default under the
related mortgage or promissory note secured thereby, or has filed or intends
to file an election to have any Mortgaged Property sold or foreclosed, the
Servicer shall take, on behalf of the Issuer and the Indenture Trustee, all
reasonable actions that are necessary to protect the interests of the
Securityholders, and/or to preserve the security of the related Home Loan,
including making any Servicing Advances that are necessary to cure the
default or reinstate the Superior Lien. The Servicer shall immediately
notify the Issuer and the Indenture Trustee of any such action or
circumstances. Any Servicing Advances by the Servicer pursuant to its
obligations in this Section 4.06 shall comply with requirements set forth in
Section 4.01(b) hereof.
Section 4.07. Subservicing. (a) The Servicer may, with the prior
------------
written consent of the Indenture Trustee and each Rating Agency, enter into
Subservicing Agreements for any servicing and administration of Home Loans
with any institution which is in compliance with the laws of each state
necessary to enable it to perform its obligations under such Subservicing
Agreement and is an Eligible Servicer. The Servicer shall give prior written
notice to the Issuer, the Indenture Trustee of the appointment of any
Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either directly service the related Home Loans or enter into
a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Issuer, the Indenture Trustee and Securityholders for the servicing and
administering of the Home Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of
such Subservicing Agreements or arrangements or by virtue of indemnification
from the Subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the Home
Loans. For purposes of this Agreement, the Servicer shall be deemed to have
received payments on Home Loans when the Subservicer has actually received
such payments and, unless the context otherwise requires, references in this
Agreement to actions taken or to be taken by the Servicer in servicing the
Home Loans include actions taken or to be taken by a Subservicer on behalf of
the Servicer. The Servicer shall be entitled to enter into any agreement
with a Subservicer for indemnification of the Servicer by such Subservicer,
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Issuer, the Indenture Trustee, and the
Securityholders pursuant to Section 4.08, shall thereupon assume all of the
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into, unless the successor Servicer elects to
terminate any Subservicing Agreement in accordance with its terms. The
successor Servicer shall be deemed to have assumed all of the Servicer's
interest therein and to have replaced the Servicer as a party to each
Subservicing Agreement to the same extent as if the Subservicing Agreements
had been assigned to the assuming party, except that the Servicer shall not
thereby be relieved of any liability or obligations under the Subservicing
Agreements. The Servicer at its expense and without right of reimbursement
therefor, shall, upon request of the successor Servicer, deliver to the
assuming party all documents and records relating to each Subservicing
Agreement and the Home Loans then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Subservicing Agreements to the assuming
party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Issuer, the Indenture Trustee and the Securityholders,
shall enforce the obligations of each Subservicer under the related
Subservicing Agreement. Such enforcement, including, without limitation, the
legal prosecution of claims and the pursuit of other appropriate remedies,
shall be in such form and carried out to such an extent and at such time as
the Servicer, in its good faith business judgment, would require were it the
owner of the related Home Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement to the extent, if
any, that such recovery exceeds all amounts due in respect of the related
Home Loan or (ii) from a specific recovery of costs, expenses or attorneys
fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be
between the Subservicer and the Servicer alone and none of the Issuer, the
Indenture Trustee or the Securityholders shall be deemed parties thereto or
shall have any claims, rights, obligations, duties or liabilities with
respect to the Subservicer in its capacity as such except as set forth in
Section 4.07(c) above.
Section 4.08. Successor Servicers. In the event that the Servicer is
-------------------
terminated pursuant to Section 10.01 hereof, or resigns pursuant to Section
9.04 hereof or otherwise becomes unable to perform its obligations under this
Agreement, the Indenture Trustee will become the successor Servicer or will
appoint a successor Servicer in accordance with the provisions of Section
10.02 hereof; provided that any successor Servicer, including the Indenture
Trustee, shall satisfy the requirements of an Eligible Servicer and shall be
approved by each Rating Agency.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account and Note Payment Account.
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(a)(1) Establishment of Collection Account. The Servicer shall cause
-----------------------------------
to be established and maintained in the name of the Securities Intermediary
one or more Collection Accounts which shall be pledged to the Indenture
Trustee for the benefit of Securityholders, which shall be separate Eligible
Accounts, which may be interest-bearing, entitled "Collection Account, U.S.
Bank National Association, as Indenture Trustee, in trust for the FIRSTPLUS
Asset Backed Securities, Series 1998-1". The Collection Account may be
maintained with the Indenture Trustee or, subject to the following paragraph,
any other depository institution which satisfies the requirements set forth
in the definition of Eligible Account. The creation of any Collection
Account other than one maintained with the Indenture Trustee shall be
evidenced by a letter agreement between the Servicer and the depository
institution. A copy of such letter agreement shall be furnished to the
Indenture Trustee and, upon request of any Securityholder, to such
Securityholder. Funds in the Collection Account shall be invested in
accordance with Section 5.06.
As of the Closing Date, the Collection Account shall be established with
the Indenture Trustee, and thereafter upon written notice to the Issuer and
the Indenture Trustee, and the Collection Account may be transferred by the
Servicer to a different depository institution so long as such transfer is to
an Eligible Account.
(a)(2) Establishment of Note Payment Account. No later than the
-------------------------------------
Closing Date, the Servicer shall cause to be established and maintained in
the name of the Securities Intermediary one or more Note Payment Accounts
which shall be pledged to the Indenture Trustee for the benefit of
Securityholders, which shall be separate Eligible Accounts, which may be
interest-bearing and which shall be entitled "Note Payment Account, U.S. Bank
National Association, as Indenture Trustee, in trust for the "FIRSTPLUS Asset
Backed Securities, Series 1998-1." Funds in the Note Payment Account shall
be invested in accordance with Section 5.06.
(b)(1) Deposits to Collection Account. The Servicer shall use its
------------------------------
best efforts to deposit or cause to be deposited (without duplication) within
one (1) Business Day, and shall in any event deposit within two (2) Business
Days, of receipt thereof in the Collection Account and retain therein in
trust for the benefit of the Securityholders:
(i) all payments on account of principal on each Home Loan
received after its related Cut-Off Date;
(ii) all payments on account of interest on each Home Loan received
after its related Cut-Off Date;
(iii) all Net Liquidation Proceeds and Post-Liquidation Proceeds
pursuant to Sections 4.02 or 4.04;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Section 3.05;
(vii) any amount required to be deposited in the Collection Account
pursuant to the receipt of proceeds from any fidelity bond or errors and
omission insurance under Section 4.03 or the deposit of the Termination
Price and any other proceeds of the sale of the Home Loans under Section
11.02; and
(viii) interest and gains on funds held in the Collection Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03, and
such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to
the Servicer from the Note Payment Account on the next Payment Date following
such Due Period.
(b)(2) Deposits to Note Payment Account. On the Withdrawal Date with
--------------------------------
respect to each Payment Date, the Indenture Trustee (based on information
contained in the Servicer's Monthly Remittance Report for such Payment Date)
shall (i) withdraw the Available Collection Amount with respect to such
Payment Date from the Collection Account, (x) pay the portion thereof
representing one-third of amounts attributable to interest collected during
the initial Due Period to the Transferor, (y) pay the portion thereof
representing income or gain from investments credited to the Collection
Account during the preceding Due Period to the Servicer as Servicing
Compensation with respect to such Payment Date, and (z) deposit the remainder
in the Note Payment Account and (ii) make withdrawals from the Pre-Funding
Account of amounts required to be deposited in the Note Payment Account from
such accounts on such Withdrawal Date and deposit into the Note Payment
Account the amounts so withdrawn.
(c) Withdrawals from Note Payment Account. Subject to Section 5.01(e),
-------------------------------------
no later than 11:00 a.m. (New York City time) on the second Business Day
prior to each Payment Date, to the extent funds are available in the Note
Payment Account, the Indenture Trustee (based on the information contained in
the Servicer's Monthly Remittance Report for such Payment Date) shall either
(1) retain funds in the Note Payment Account for payment or distribution on
such Payment Date or (2) make withdrawals from the Note Payment Account and
deposits into the other Trust Accounts as indicated, in each case as
specified below and in the following order of priority:
(1) to retain in the Note Payment Account for payment on such
Payment Date pursuant to the Indenture, to the Servicer, an amount equal
to the Servicing Compensation (net of (i) any amounts retained prior to
deposit into the Collection Account pursuant to subsection (b)(1) above,
(ii) any amounts representing income or gain from investments credited
to the Collection Account and paid to the Servicer pursuant to
subsection (b)(2) above and (iii) the Indenture Trustee Fee, which shall
be paid to the Indenture Trustee) and all unpaid Servicing Compensation
from prior Due Periods;
(2) to retain in the Note Payment Account for payment pursuant to
the Indenture on such Payment Date and to deposit in the Certificate
Distribution Account for distribution pursuant to Section 5.02, any
amount remaining from the Pre-Funding Account Deposit at the end of the
Funding Period, which will be paid (x) if no Indenture Event of Default
has occurred and such amount remaining is greater than $50,000, in
reduction, on a pro rata basis, of the Class Principal Balances (and
Component Principal Balances) of each Class of Securities (and the B-1
and B-2 Components) as provided in Section 8.2(a)(ii) of the Indenture
and Section 5.05(c)(i) hereof, (y) if no Indenture Event of Default has
occurred and such amount remaining is less than or equal to $50,000,
such remaining amount will be retained in the Note Payment Account and
be paid on the Pre-Funding Termination Payment Date sequentially to the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7 and Class A-8 Notes, in that order, in reduction of the Class
Principal Balances thereof, or (z) if an Indenture Event of Default has
occurred, such remaining amount will be retained in the Note Payment
Account and be paid in reduction of the Class Principal Balances of each
Class of Notes, pro rata based on the Class Principal Balances thereof;
(3) to retain in the Note Payment Account with respect to the
Notes, or to deposit in the Certificate Distribution Account with
respect to the Residual Interest Certificate, as applicable, to the
extent of the Regular Payment Amount for such Payment Date, in the
following order of priority:
(i) for payment pursuant to the Indenture to the holders
of the Senior Notes, the Senior Noteholders' Interest Payment
Amount for such Payment Date, allocated to each Class of Senior
Notes, pro rata, based on the amount of interest payable in respect
of each such Class based on the applicable Interest Rate;
(ii) for payment pursuant to the Indenture to the holders
of the Class M-1 Notes, the Class M-1 Noteholders' Interest Payment
Amount for such Payment Date;
(iii) for payment pursuant to the Indenture to the holders
of the Class M-2 Notes, the Class M-2 Noteholders' Interest Payment
for such Payment Date;
(iv) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the A IO
Component, the A IO Component's Interest Distributable Amount for
such Payment Date;
(v) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-1
Component, the B-1 Component's Interest Distributable Amount for
such Payment Date;
(vi) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-2
Component, the B-2 Component's Interest Distributable Amount for
such Payment Date;
(vii) for payment pursuant to the Indenture to the holders
of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6, Class A-7 and Class A-8 Notes, in that order, until the
respective Class Principal Balances thereof are reduced to zero,
the amount necessary to reduce the aggregate of the Class Principal
Balances of the Senior Notes to the Senior Optimal Principal
Balance for such Payment Date;
(viii) for payment pursuant to the Indenture to the holders
of the Class M-1 Notes, the amount necessary to reduce the Class
Principal Balance thereof to the Class M-1 Optimal Principal
Balance for such Payment Date;
(ix) for payment pursuant to the Indenture to the holders
of the Class M-2 Notes, the amount necessary to reduce the Class
Principal Balance thereof to the Class M-2 Optimal Principal
Balance for such Payment Date;
(x) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-1
Component, the amount necessary to reduce the Component Principal
Balance thereof to the B-1 Component Optimal Principal Balance for
such Payment Date;
(xi) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-2
Component, the amount necessary to reduce the Component Principal
Balance thereof to the B-2 Component Optimal Principal Balance for
such Payment Date;
(xii) for payment pursuant to the Indenture to the holders
of the Class M-1 Notes, the applicable Deferred Amount, if any,
until such Deferred Amount has been paid in full;
(xiii) for payment pursuant to the Indenture to the holders
of the Class M-2 Notes, the applicable Deferred Amount, if any,
until such Deferred Amount has been paid in full;
(xiv) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-1
Component, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(xv) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-2
Component, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(xvi) for distribution pursuant to Section 5.05 to the
Servicer, an amount equal to any Servicing Advances previously made
by the Servicer and not previously reimbursed (the "Servicing
Advance Reimbursement Amount"); and
(xvii) to deposit any remaining amount in the Certificate
Distribution Account for distribution pursuant to Section 5.05 to
the holder of the Residual Interest Certificate, in respect of the
Excess Component.
(4) to retain in the Note Payment Account with respect to the
Notes, or to deposit in the Certificate Distribution Account with
respect to the Residual Interest Certificate, as applicable, to the
extent of the Excess Spread, if any, in the following order of priority:
(i) in an amount equal to the Overcollateralization
Shortfall, if any, as follows:
(A) for payment pursuant to the Indenture to the holders
of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6, Class A-7 and Class A-8 Notes, in that order, until
the respective Class Principal Balances thereof are reduced to
zero, the amount necessary to reduce the aggregate of the
Class Principal Balances of the Senior Notes to the Senior
Optimal Principal Balance for such Payment Date;
(B) for payment pursuant to the Indenture to the holders
of the Class M-1 Notes, the amount necessary to reduce the
Class Principal Balance thereof to the Class M-1 Optimal
Principal Balance for such Payment Date;
(C) for payment pursuant to the Indenture to the holders
of the Class M-2 Notes, the amount necessary to reduce the
Class Principal Balance thereof to the Class M-2 Optimal
Principal Balance for such Payment Date;
(D) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the
B-1 Component, the amount necessary to reduce the Component
Principal Balance thereof to the B-1 Component Optimal
Principal Balance for such Payment Date, and
(E) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the
B-2 Component, the amount necessary to reduce the Component
Principal Balance thereof to the B-2 Component Optimal
Principal Balance for such Payment Date;
(ii) for payment pursuant to the Indenture to the holders
of the Class M-1 Notes, the applicable Deferred Amount, if any,
until such Deferred Amount has been paid in full;
(iii) for payment pursuant to the Indenture to the holders
of the Class M-2 Notes, the applicable Deferred Amount, if any,
until such Deferred Amount has been paid in full;
(iv) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-1
Component, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full;
(v) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the B-2
Component, the applicable Deferred Amount, if any, until such
Deferred Amount has been paid in full; and
(vi) for distribution pursuant to Section 5.05 to the
holder of the Residual Interest Certificate, in respect of the
Excess Component, any amount remaining in the Certificate
Distribution Account.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account
and the Note Payment Account hereunder until the Class Principal Balance of
each Class of Securities has been reduced to zero.
(d) Additional Withdrawals from Collection Account. The Indenture
----------------------------------------------
Trustee, at the direction of the Servicer, shall also make the following
withdrawals from the Collection Account, in no particular order of priority:
(i) to withdraw and pay as directed by the Servicer any amount not
required to be deposited in the Collection Account, including, without
limitation, any payments on or proceeds from a Home Loan received on or
prior to its related Cut-Off Date, or deposited therein in error; and
(ii) to clear and terminate the Collection Account in connection
with the termination of this Agreement.
The Servicer shall not retain any cash or investment in the Collection
Account for a period in excess of 12 months and cash therein shall be
considered transferred to the Note Payment Account on a first-in, first-out
basis.
(e) Additional Withdrawals from Note Payment Account Following Early
----------------------------------------------------------------
Redemption or Termination. No later than 11:00 a.m. (New York City time) on
-------------------------
the second Business Day prior to the Payment Date on which an early
redemption or termination pursuant to Section 11.02(a) or Section 11.02(b) is
to occur, to the extent funds are available in the Note Payment Account, the
Indenture Trustee (based on the information contained in the Servicer's
Monthly Remittance Report for such Payment Date) shall either (x) retain
funds in the Note Payment Account for payment on such Payment Date or (y)
make withdrawals from the Note Payment Account and deposits into the other
Trust Accounts as indicated, in each case as specified below and in the
following order of priority: (1) to deposit in the Certificate Distribution
Account for distribution pursuant to Section 5.05 to the Servicer, the
Servicing Advance Reimbursement Amount, and (2) to retain in the Note Payment
Account or to deposit in the Certificate Distribution Account, as specified
in each succeeding clause: (i) to retain in the Note Payment Account for
payment pursuant to the Indenture to the holders of the Notes, all accrued
and unpaid interest on each Class of Notes and an amount equal to the
aggregate of the then outstanding Class Principal Balances of each Class of
Notes; (ii) to deposit in the Certificate Distribution Account for
distribution pursuant to Section 5.05 to the Certificateholder, all accrued
and unpaid interest on the Residual Interest Certificate and an amount equal
to the aggregate of the then outstanding Class Principal Balance of the
Residual Interest Certificate; (iii) to retain in the Note Payment Account
for payment pursuant to the Indenture to the holders of the Class M-1 and
Class M-2 Notes, in that order, the applicable Deferred Amounts, if any,
until each such Deferred Amount has been paid in full; (iv) to deposit in the
Certificate Distribution Account for distribution pursuant to Section 5.05 to
the Residual Interest Certificate, in respect of the B-1 and B-2 Components,,
in that order, the applicable Deferred Amounts, if any, until each such
Deferred Amount has been paid in full; and (v) to deposit any remaining
amount in the Certificate Distribution Account for distribution pursuant to
Section 5.05 to the Residual Interest Certificate, in respect of the Excess
Component.
Section 5.02. (Reserved)
Section 5.03. (Reserved)
Section 5.04. (Reserved)
Section 5.05. Certificate Distribution Account. (a) Establishment.
-------------------------------- -------------
No later than the Closing Date, the Servicer, for the benefit of the
Certificateholder, will establish and maintain in the name of the Securities
Intermediary with U.S. Bank National Association for the benefit of the Owner
Trustee or Co-Owner Trustee on behalf of the Certificateholder one or more
separate Eligible Accounts, which while the Co-Owner Trustee holds such Trust
Account shall be entitled "Certificate Distribution Account, U.S. Bank
National Association, as Co-Owner Trustee, in trust for the FIRSTPLUS Asset
Backed Securities, Series 1998-1." Funds in the Certificate Distribution
Account shall be invested in accordance with Section 5.06.
(b) (Reserved)
(c) Distributions. Subject to Section 5.05(f), no later than the
-------------
second Business Day before each Payment Date, the Indenture Trustee shall
withdraw from the Note Payment Account all amounts required to be deposited
in the Certificate Distribution Account with respect to the preceding Due
Period pursuant to Section 5.01(c) and remit such amount to the Owner Trustee
or the Co-Owner Trustee for deposit into the Certificate Distribution
Account. On each Payment Date, the Owner Trustee or the Co-Owner Trustee
shall distribute all amounts on deposit in the Certificate Distribution
Account to the Certificateholder in respect of the Residual Interest
Certificate to the extent of amounts due and unpaid on the Residual Interest
Certificate for principal and interest and to the other parties specified
below the following amounts:
(i) only to the extent of funds withdrawn from the
Pre-Funding Account attributable to the remaining amount therein and
deposited in the Certificate Distribution Account by the Indenture
Trustee pursuant to Section 5.01(c)(2) to the Residual Interest
Certificate, pro rata in respect of the B-1 and B-2 Components;
(ii) to the Residual Interest Certificate, in respect of the A
IO, B-1 and B-2 Components, the amounts, if any, deposited in the
Certificate Distribution Account pursuant to Sections 5.01(c)(3) and
5.01(c)(4), in the order of priority provided therein;
(iii) to the Servicer, the amount, if any, in respect of the
Servicing Advance Reimbursement Amount deposited in the Certificate
Distribution Account pursuant to Section 5.01(c)(3)(xvi); and
(iv) to the Residual Interest Certificate, in respect of the
Excess Component, the amounts deposited in the Certificate Distribution
Account pursuant to Sections 5.01(c)(3)(xvii) and 5.01(c)(4)(vi).
(d) All distributions made on the Residual Interest Certificate shall
be made by wire transfer of immediately available funds to the account of
such Certificateholder. The final distribution on each Certificate will be
made in like manner, but only upon presentment and surrender of such
Certificate at the location specified in the notice to the Certificateholder
of such final distribution.
(e) Distributions Following Early Redemption or Termination. No later
-------------------------------------------------------
than the second Business Day before the Payment Date on which an early
redemption or termination pursuant to Section 11.02(a) or 11.02(b) is to
occur, the Indenture Trustee shall withdraw from the Note Payment Account all
amounts required to be deposited in the Certificate Distribution Account with
respect to the preceding Due Period pursuant to Section 5.01(e) and remit
such amount to the Owner Trustee or the Co-Owner Trustee for deposit into the
Certificate Distribution Account. On such Payment Date, the Owner Trustee or
the Co-Owner Trustee shall distribute all amounts on deposit in the
Certificate Distribution Account to the Certificateholder in respect of the
Residual Interest Certificate to the extent of amounts due and unpaid on the
Residual Interest Certificate for principal and interest and to the other
parties specified below the following amounts:
(i) to the Residual Interest Certificate, in respect of the A
IO Component, all accrued and unpaid interest thereon;
(ii) to the Residual Interest Certificate, in respect of the
B-1 Component, an amount equal to the Component Principal Balance of the
B-1 Component and all accrued and unpaid interest thereon;
(iii) to the Residual Interest Certificate, in respect of the
B-2 Component, an amount equal to the Component Principal Balance of the
B-2 Component and all accrued and unpaid interest thereon;
(iv) to the Residual Interest Certificate, in respect of the
B-1 and B-2 Components, the amounts, if any, deposited in the
Certificate Distribution Account pursuant to Section 5.01(e)(2)(iv); and
(v) to the Residual Interest Certificate, in respect of the
Excess Component, the amounts deposited in the Certificate Distribution
Account pursuant to Section 5.01(e)(2)(v).
Section 5.06. Trust Accounts; Trust Account Property. (a) Control of
--------------------------------------
Trust Accounts. Each of the Trust Accounts established hereunder has been
pledged by the Issuer to the Indenture Trustee under the Indenture and shall
be subject to the lien of the Indenture. In addition to the provisions
hereunder, each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts paid or distributed from each
Trust Account in accordance with the Indenture and this Agreement shall be
released from the lien of the Indenture upon such payment or distribution
thereunder or hereunder. The Indenture Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (including all income thereon) and all
such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Trust Estate. If, at any time, any Trust Account
ceases to be an Eligible Account, the Indenture Trustee (or the Servicer on
its behalf) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent)
(i) establish a new Trust Account as an Eligible Account, (ii) terminate the
ineligible Trust Account, and (iii) transfer any cash and investments from
such ineligible Trust Account to such new Trust Account. With respect to the
Trust Accounts, the Indenture Trustee agrees, by its acceptance hereof, that
each such Trust Account shall be subject to the sole and exclusive custody
and control of the Indenture Trustee for the benefit of the Securityholders
and the Issuer, as the case may be, and the Indenture Trustee shall have sole
signature and withdrawal authority with respect thereto.
In addition to this Agreement, the Certificate Distribution Account
established hereunder also shall be subject to and established and maintained
in accordance with the Trust Agreement. The Owner Trustee or Co-Owner
Trustee shall possess all right, title and interest for the benefit of the
Certificateholders in all funds on deposit from time to time in the
Certificate Distribution Account and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property. If, at any time, the Certificate
Distribution Account ceases to be an Eligible Account, the Issuer (or the
Servicer on its behalf) shall within 10 Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency may consent)
(i) establish a new Certificate Distribution Account as an Eligible Account,
(ii) terminate the ineligible Certificate Distribution Account, and
(iii) transfer any cash and investments from such ineligible Certificate
Distribution Account to such new Certificate Distribution Account. The Owner
Trustee and Co-Owner Trustee agree, by their acceptance hereof, that such
Certificate Distribution Account shall be subject to the sole and exclusive
custody and control of the Owner Trustee and Co-Owner Trustee for the benefit
of the Issuer and the parties entitled to distributions therefrom, including
without limitation, the Certificateholders, and the Owner Trustee and the Co-
Owner Trustee shall have sole signature and withdrawal authority with respect
to the Certificate Distribution Account.
The Servicer shall have the power, revocable by the Indenture Trustee or
by the Owner Trustee or Co-Owner Trustee with the consent of the Indenture
Trustee, to instruct the Indenture Trustee or Owner Trustee or Co-Owner
Trustee to make withdrawals and payments from the Trust Accounts and the
Certificate Distribution Account for the purpose of permitting the Servicer
to carry out its duties hereunder or permitting the Indenture Trustee or
Owner Trustee or Co-Owner Trustee to carry out its duties herein or under the
Indenture or the Trust Agreement, as applicable.
(b)(1) Investment of Funds. So long as no Event of Default shall
-------------------
have occurred and be continuing, the funds held in any Trust Account or in
the Certificate Distribution Account may be invested (to the extent
practicable and consistent with any requirements of the Code) in Permitted
Investments, as directed by the Servicer, in the case of the Collection
Account, or by the Transferor, in the case of each other Trust Account and
the Certificate Distribution Account, in each case in writing or by telephone
or facsimile transmission confirmed in writing by the Servicer or the
Transferor, as applicable. In any case, funds in any Trust Account or in the
Certificate Distribution Account must be available for withdrawal without
penalty, and any Permitted Investments must mature or otherwise be available
for withdrawal, not later than three (3) Business Days (except with respect
to the Note Payment Account, Pre-Funding Account and Certificate Distribution
Account, which shall be invested on a one (1) Business Day basis) immediately
preceding the Payment Date next following the date of such investment and
shall not be sold or disposed of prior to its maturity subject to
Section 5.06(b)(2) below. All interest and any other investment earnings on
amounts or investments held in any Trust Account or in the Certificate
Distribution Account shall be deposited into such account immediately upon
receipt by the Indenture Trustee, or in the case of the Certificate
Distribution Account, the Owner Trustee or Co-Owner Trustee, as applicable.
All Permitted Investments in which funds in any Trust Account are invested
must be held by or registered in the name of "U.S. Bank National Association,
as Indenture Trustee, in trust for the FIRSTPLUS Asset Backed Securities,
Series 1998-1". While the Co-Owner Trustee holds the Certificate
Distribution Account, all Permitted Investments in which funds in the
Certificate Distribution Account are invested shall be held by or registered
in the name of "U.S. Bank National Association, as Co-Owner Trustee, in trust
for the FIRSTPLUS Asset Backed Securities, Series 1998-1".
(b)(2) Insufficiency and Losses in Trust Accounts. If any amounts
------------------------------------------
are needed for disbursement from any Trust Account or the Certificate
Distribution Account and sufficient uninvested funds are not available to
make such disbursement, the Indenture Trustee, or Owner Trustee or Co-Owner
Trustee in the case of the Certificate Distribution Account, shall cause to
be sold or otherwise converted to cash a sufficient amount of the investments
in such account. The Indenture Trustee, or Owner Trustee or Co-Owner Trustee
in the case of the Certificate Distribution Account, shall not be liable for
any investment loss or other charge resulting therefrom, unless such loss or
charge is caused by the failure of the Indenture Trustee or Owner Trustee or
Co-Owner Trustee, respectively, to perform in accordance with this Section
5.06.
If any losses are realized in connection with any investment in any
Trust Account or in the Certificate Distribution Account pursuant to this
Agreement and the Indenture, then the Servicer, with respect to the
Collection Account, and the Transferor, with respect to each other such
account, shall deposit the amount of such losses (to the extent not offset by
income from other investments in such account) in such account immediately
upon the realization of such loss or, to the extent that the Servicer or the
Transferor, as applicable, fails to deposit any portion of such amount, the
Transferor or the Servicer, as applicable, shall deposit any insufficiency
from such failure in such account. All interest and any other investment
earnings on amounts held in any Trust Account or in the Certificate
Distribution Account shall be taxed to the Issuer and for federal and state
income tax purposes the Issuer shall be deemed to be the owner of each Trust
Account and of the Certificate Distribution Account.
(c) Subject to Section 6.1 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any
Trust Account held by the Indenture Trustee resulting from any investment
loss on any Permitted Investment included therein (except to the extent that
the Indenture Trustee, with respect to such Permitted Investment, is the
obligor and has defaulted thereon).
(d) The Issuer and the Indenture Trustee hereby appoint U.S. Bank
National Association as Securities Intermediary with respect to the Trust
Accounts and the Certificate Distribution Account. The Issuer has, pursuant
to the Indenture, granted to the Indenture Trustee, as collateral agent for
the benefit of the Securityholders, a security interest to secure all amounts
due Noteholders hereunder in and to the Trust Accounts and the Security
Entitlements to all Financial Assets credited to the Trust Accounts, and the
Seller hereby grants to the Issuer, as collateral agent for the benefit of
Certificateholders, a security interest to secure all mounts due
Certificateholders hereunder in and to the Certificate Distribution Account
and the Security Entitlements and all Financial Assets credited to the
Certificate Distribution Account, including in each case without limitation
all amounts, securities, investments, Financial Assets, investment property
and other property from time to time deposited in or credited to such
accounts and all proceeds thereof. Amounts held from time to time in the
Trust Accounts will continue to be held by the Securities Intermediary for
the benefit of the Indenture Trustee, as collateral agent, for the benefit of
the Securityholders, and amounts held from time to time in the Certificate
Distribution Account will continue to be held by the Securities Intermediary
for the benefit of the Issuer, as collateral agent, for the benefit of the
Certificateholders. Upon the termination of the Trust or the discharge of
the Indenture, the Indenture Trustee shall inform the Securities Intermediary
of such termination. By acceptance of their Securities or interests therein,
the Securityholders shall be deemed to have appointed U.S. Bank National
Association as Securities Intermediary. U.S. Bank National Association
hereby accepts such appointment as Securities Intermediary.
(1) With respect to the Trust Account Property credited to the
Trust Accounts and the Certificate Distribution Account, the Securities
Intermediary agrees that:
(i) with respect to any Trust Account Property that is held
in deposit accounts, each such deposit account shall be subject to the
exclusive custody and control of the Securities Intermediary, and the
Securities Intermediary shall have sole signature authority with respect
thereto;
(ii) the sole assets permitted in the Trust Accounts and the
Certificate Distribution Account shall be those as the Securities
Intermediary agrees to treat as Financial Assets; and
(iii) any such Trust Account Property that is, or is
treated as, a Financial Asset shall be physically delivered (accompanied
by any required endorsements) to, or credited to an account in the name
of, the Securities Intermediary or other eligible institution
maintaining any Trust Account or the Certificate Distribution Account in
accordance with the Securities Intermediary's customary procedures such
that the Securities Intermediary or such other institution establishes a
Security Entitlement in favor of the Indenture Trustee with respect
thereto over which the Securities Intermediary or such other institution
has Control;
(2) The Securities Intermediary hereby confirms that (A) each
Trust Account and the Certificate Distribution Account is an account to
which Financial Assets are or may be credited, and the Securities
Intermediary shall, subject to the terms of this Agreement, treat the
Indenture Trustee, as collateral agent, as entitled to exercise the
rights that comprise any Financial Asset credited to any Trust Account,
and the Issuer, as collateral agent, as entitled to exercise the rights
that comprise any Financial Asset credited to the Certificate
Distribution Account, (B) all Trust Account Property in respect of any
Trust Account or the Certificate Distribution Account will be promptly
credited by the Securities Intermediary to such account, and (C) all
securities or other property underlying any Financial Assets credited to
any Trust Account or the Certificate Distribution Account shall be
registered in the name of the Securities Intermediary, endorsed to the
Securities Intermediary or in blank or credited to another securities
account maintained in the name of the Securities Intermediary and in no
case (x) will any Financial Asset credited to any Trust Account be
registered in the name of the Seller or the Issuer, payable to the order
of the Seller or the Issuer or specially endorsed to the Seller or the
Issuer, or (y) will any Financial Asset credited to the Certificate
Distribution Account be registered in the name of the Seller, payable to
the order of the Seller or specially endorsed to the Seller, except to
the extent the foregoing have been specially endorsed to the Securities
Intermediary or in blank;
(3) The Securities Intermediary hereby agrees that each item of
property (whether investment property, Financial Asset, security,
instrument or cash) credited to any Trust Account or the Certificate
Distribution Account shall be treated as a Financial Asset;
(4) If at any time the Securities Intermediary shall receive any
order from the Indenture Trustee directing transfer or redemption of any
Financial Asset relating to any Trust Account, the Securities
Intermediary shall comply with such entitlement order without further
consent by the Seller, the Issuer or any other Person. If at any time
the Indenture Trustee notifies the Securities Intermediary in writing
that the Trust has been terminated or the Indenture discharged in
accordance herewith and with the Trust Agreement or the Indenture, as
applicable, and the security interest granted pursuant to the Indenture
has been released, then thereafter if the Securities Intermediary shall
receive any order from the Seller or the Issuer directing transfer or
redemption of any Financial Asset relating to any Trust Account, the
Securities Intermediary shall comply with such entitlement order without
further consent by the Indenture Trustee or any other Person;
If at any time the Securities Intermediary shall receive any order
from the Issuer directing transfer or redemption of any Financial Asset
relating to the Certificate Distribution Account, the Securities
Intermediary shall comply with such entitlement order without further
consent by the Seller or any other Person. If at any time the Issuer
notifies the Securities Intermediary in writing that the Trust has been
terminated in accordance herewith and with the Trust Agreement and the
security interest granted above has been released, then thereafter if
the Securities Intermediary shall receive any order from the Seller
directing transfer or redemption of any Financial Asset relating to the
Certificate Distribution Account, the Securities Intermediary shall
comply with such entitlement order without further consent by the Issuer
or any other Person;
(5) In the event that the Securities Intermediary has or
subsequently obtains by agreement, operation of law or otherwise a
security interest in any Trust Account or the Certificate Distribution
Account or any Financial Asset credited thereto, the Securities
Intermediary hereby agrees that such security interest shall be
subordinate to the security interest of the Indenture Trustee, in the
case of the Trust Accounts, or of the Issuer, in the case of the
Certificate Distribution Account. The Financial Assets credited to the
Trust Accounts or the Certificate Distribution Account will not be
subject to deduction, set-off, banker's lien, or any other right in
favor of any Person other than the Indenture Trustee, in the case of the
Trust Accounts, or the Issuer, in the case of the Certificate
Distribution Account (except that the Securities Intermediary may set
off (i) all amounts due to it in respect of its customary fees and
expenses for the routine maintenance and operation of the Trust Accounts
and the Certificate Distribution Account, and (ii) the face amount of
any checks which have been credited to any Trust Account or the
Certificate Distribution Account but are subsequently returned unpaid
because of uncollected or insufficient funds);
(6) There are no other agreements entered into between the
Securities Intermediary in such capacity and the Seller or the Issuer
with respect to any Trust Account, or the Seller with respect to the
Certificate Distribution Account. In the event of any conflict between
this Agreement (or any provision of this Agreement) and any other
agreement now existing or hereafter entered into, the terms of this
Agreement shall prevail;
(7) The rights and powers granted under the Indenture and herein
to (x) the Indenture Trustee have been granted in order to perfect its
security interest in the Trust Accounts and the Security Entitlements to
the Financial Assets credited thereto, and (y) the Issuer have been
granted in order to perfect its security interest in the Certificate
Distribution Account and the Security Entitlements to the Financial
Assets credited thereto, and are powers coupled with an interest and
will neither be affected by the bankruptcy of the Seller (or the Issuer,
in the case of the Trust Accounts) nor by the lapse of time. The
obligations of the Securities Intermediary hereunder shall continue in
effect until the security interest of the Indenture Trustee in the Trust
Accounts or the Issuer in the Certificate Distribution Account, and in
such Security Entitlements, has been terminated pursuant to the terms of
this Agreement and the Indenture Trustee or the Issuer, as applicable,
has notified the Securities Intermediary of such termination in writing;
and
(8) Notwithstanding anything else contained herein, the Seller and
the Issuer agree that the Trust Accounts and the Certificate
Distribution Account will be established only with the Securities
Intermediary or another institution meeting the requirements of this
Section, which by acceptance of its appointment as Securities
Intermediary agrees substantially as follows: (1) it will comply with
Entitlement Orders related to the Trust Accounts issued by the Indenture
Trustee, as collateral agent, without further consent by the Seller or
the Issuer, and with Entitlement Orders related to the Certificate
Distribution Account issued by the Issuer, as collateral agent, without
further consent by the Seller; (2) until termination of the Trust or
discharge of the Indenture, it will not enter into any other agreement
related to such accounts pursuant to which it agrees to comply with
Entitlement Orders of any Person other than the Indenture Trustee, as
collateral agent with respect to the Trust Accounts, or the Issuer, as
collateral agent with respect to the Certificate Distribution Account;
and (3) all assets delivered or credited to it in connection with such
accounts and all investments thereof will be promptly credited to the
applicable account.
(e) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Issuer with the consent of the Indenture Trustee, to
instruct the Indenture Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer or the Issuer to
carry out its respective duties hereunder or permitting the Indenture Trustee
to carry out its duties under the Indenture.
Section 5.07. Allocation of Losses. (a) In the event that Net
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Liquidation Proceeds, Insurance Proceeds or Released Mortgaged Property
Proceeds on a Liquidated Home Loan are less than the related Principal
Balance plus accrued interest thereon, or any Obligor makes a partial payment
of any Monthly Payment due on a Home Loan, such Net Liquidation Proceeds,
Insurance Proceeds, Released Mortgaged Property Proceeds or partial payment
shall be applied to payment of the related Debt Instrument, first to interest
accrued at the Home Loan Interest Rate and then to principal.
(b) On any Payment Date, any Allocable Loss Amount shall be applied,
after giving effect to all payments and distributions made on such Payment
Date, to the reduction of the Class Principal Balances of the Subordinate
Securities in accordance with the Allocable Loss Amount Priority. Any
Allocable Loss Amount allocated to a Class of Securities pursuant to this
Section 5.07(b) shall be allocated among the Securities of such Class in
proportion to their respective outstanding principal balances.
ARTICLE VI
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01. Statements. (a) No later than each Determination Date,
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the Servicer shall deliver to the Indenture Trustee a magnetic tape or
computer disk providing such information regarding the Servicer's activities
in servicing the Home Loans during the related Due Period as the Indenture
Trustee may reasonably require.
(b)(1) Subject to the modification of the Servicer's Monthly
Statement by the Servicer with the prior written consent of the Majority
Securityholders and the Indenture Trustee, no later than three (3) Business
Days before each Payment Date, the Servicer shall prepare and the Indenture
Trustee shall distribute a monthly statement (the "Servicer's Monthly
Statement", with respect to such Payment Date) to the Seller, the
Securityholders and each Rating Agency, stating the date of original issuance
of the Securities (day, month and year), the name of the Issuer (i.e.,
"FIRSTPLUS Home Loan Owner Trust 1998-1"), the series designation of the
Securities (i.e., "Series 1998-1"), the date of this Agreement and the
following information:
(i) the Available Collection Amount, the Regular Payment
Amount and the Excess Spread for the related Payment Date;
(ii) the amount, if any, on deposit in the Pre-Funding Account
on such Payment Date;
(iii) the Class Principal Balance of each Class of Securities
(and the Component Principal Balance or Component Notional Balance, as
applicable, of the Components of the Residual Interest Certificate), and
the Pool Principal Balance as of the first day of the related Due Period
and after giving effect to payments and distributions made to the
holders of such Securities on such Payment Date;
(iv) the Class Pool Factor with respect to each Class of
Securities then outstanding;
(v) the amount of principal and interest received on the Home
Loans during the related Due Period;
(vi) the amount, if any, of the Overcollateralization Surplus;
(vii) the Servicing Compensation for such Payment Date;
(viii) the Overcollateralization Amount with respect to such
Payment Date, the Required Overcollateralization Amount as of such
Payment Date, the Net Loan Losses incurred during the related Due Period
and the cumulative Net Loan Losses with respect to such Payment Date;
(ix) the amount, if any, paid on such Payment Date to each
Class of Subordinate Securities in respect of Deferred Amounts;
(x) with respect to each Class of Subordinate Securities and
the B-1 and B-2 Components of the Residual Interest Certificate, the
amount of any applicable Deferred Amounts remaining unreimbursed after
giving effect to payments made on such Payment Date;
(xi) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans each as of
such Payment Date;
(xii) certain performance information, including delinquency
and foreclosure information with respect to the Home Loans, as set forth
in the Servicer's Monthly Remittance Report;
(xiii) the amount of any Servicing Advance Reimbursement Amount
to be paid to the Servicer on such Payment Date, and the amount of any
Servicing Advance Reimbursement Amount remaining unpaid following such
payment;
(xiv) the number of and aggregate Principal Balance of all Home
Loans in foreclosure proceedings (other than any Home Loans described in
clause (xvi)) and the percent of the aggregate Principal Balances of
such Home Loans to the aggregate Principal Balances of all Home Loans,
all as of the close of business on the first day of the related Due
Period;
(xv) the number of and the aggregate Principal Balance of the
Home Loans in bankruptcy proceedings (other than any Home Loans
described in clause (xvii)) and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the first day of the
related Due Period;
(xvi) the number of Foreclosure Properties, the aggregate
Principal Balance of the related Home Loans, the book value of such
Foreclosure Properties and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the first day of the
related Due Period;
(xvii) during the related Due Period, the aggregate Principal
Balance of Home Loans for each of the following: (A) that became
Liquidated Home Loans, (B) that became Deleted Home Loans pursuant to
Section 3.05 as a result of such Deleted Home Loans being Defective Home
Loans, and (C) that became Deleted Home Loans pursuant to Section 3.05
as a result of such Deleted Home Loans being Liquidated Home Loans or a
Home Loan in foreclosure, default or imminent default, including the
foregoing amounts by loan type;
(xviii) from the Closing Date through the most current Due
Period, the cumulative aggregate Principal Balance of Home Loans for
each of the following: (A) that became Liquidated Home Loans, and (B)
that became Deleted Home Loans pursuant to Section 3.05 as a result of
such Deleted Home Loans being in foreclosure, default or imminent
default;
(xix) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the related
Due Period;
(xx) the number of and aggregate principal balance of all Home
Loans (both during the related Due Period and in aggregate since the
Closing Date) repurchased or substituted pursuant to Sections 2.06, 3.05
or 4.02;
(xxi) the number of Home Loans remaining in the Home Loan Pool;
and
(xxii) such other information as may be reasonably requested by
the Indenture Trustee.
(2) No later than three (3) Business Days before each Payment
Date, the Servicer shall prepare and distribute to the Seller and each Rating
Agency a monthly statement that includes the cumulative aggregate Principal
Balance of Home Loans that became Deleted Home Loans pursuant to Section
3.05(c) as a result of such Deleted Home Loans being Defective Home Loans,
from the Closing Date through the most current Due Period.
(3) No later than seven days following a repurchase or
substitution pursuant to Sections 2.06, 3.05 or 4.02, the Servicer shall
notify each Rating Agency of the aggregate principal balances of the Home
Loans repurchased or substituted and (if applicable) the relevant
Substitution Adjustment.
All reports prepared by the Servicer of the withdrawals from and
deposits in the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with
respect to such information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar
year, the Servicer shall prepare and direct the Indenture Trustee to
distribute to each Person who at any time during the calendar year was a
Securityholder, such information as is reasonably necessary to provide to
such Person a statement containing the information set forth in subclauses
(b)(iv) and (v) above, aggregated for such calendar year or applicable
portion thereof during which such Person was a Securityholder. Such
obligation of the Indenture Trustee shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Servicer to the Securityholders pursuant to any requirements of the Code as
are in force from time to time.
(d) On each Payment Date, the Indenture Trustee shall forward to DTC
and to the holder of the Residual Interest Certificate a copy of the
Servicer's Monthly Statement in respect of such Payment Date and a statement
setting forth the amounts actually distributed to the holder of the Residual
Interest Certificate on such Payment Date, together with such other
information as the Indenture Trustee deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar
year, the Servicer shall prepare and direct the Indenture Trustee to
distribute to each Person who at any time during the calendar year was the
holder of the Residual Interest Certificate, if requested in writing by such
Person, such information as is reasonably necessary to provide to such Person
a statement containing the information provided pursuant to the previous
paragraph aggregated for such calendar year or applicable portion thereof
during which such Person was the holder of the Residual Interest Certificate.
Such obligation of the Indenture Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Servicer to the holder of the Residual Interest Certificate
pursuant to any requirements of the Code as are in force from time to time.
(f) Upon reasonable advance notice in writing, the Servicer will
provide to each Securityholder which is a savings and loan association, bank
or insurance company access to information and documentation regarding the
Home Loans sufficient to permit such Securityholder to comply with applicable
regulations of the FDIC or other regulatory authorities with respect to
investment in such Securities.
(g) The Servicer or its agent shall furnish to the Indenture Trustee,
who in turn shall forward to each Securityholder, during the term of this
Agreement, such periodic, special, or other reports, including information
tax returns or reports required with respect to the Securities, including
Internal Revenue Service Forms 1099 and (if instructed in writing by the
Seller on the basis of the advice of legal counsel) and other similar reports
that are required to be filed by the Servicer or its agent and the holder of
Residual Interest Certificate, whether or not provided for herein, as shall
be necessary, reasonable, or appropriate with respect to the Securityholders
or the holders of the Residual Interest Certificate, or otherwise with
respect to the purposes of this Agreement, all such reports or information to
be provided by and in accordance with such applicable instructions and
directions as the Securityholders may reasonably require.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee pursuant to this Agreement shall be deemed confidential and
of proprietary nature, and shall not be copied or distributed except in
connection with the purposes and requirements of this Agreement. No Person
entitled to receive copies of such reports or tapes shall use the information
therein for the purpose of soliciting the customers of the Seller or the
Servicer or for any other purpose except as set forth in this Agreement.
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged
---------------------------------------------------
Property. Each year beginning in 1998 the Servicer, at its expense, shall
--------
make the reports of foreclosures and abandonments of any Mortgaged Property
required by Section 6050J of the Code. The reports from the Servicer shall
be in form and substance sufficient to meet the reporting requirements
imposed by such Section 6050J of the Code.
Section 6.03. Specification of Certain Tax Matters. Each
------------------------------------
Securityholder shall provide the Indenture Trustee with a completed and
executed Form W-9 prior to purchasing a Security. The Indenture Trustee
shall comply with all requirements of the Code, and applicable state and
local law, with respect to the withholding from any payments or distributions
made to any Securityholder of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in
connection therewith.
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01. Assumption Agreements. When a Mortgaged Property has
---------------------
been or is about to be conveyed by the Obligor, the Servicer shall, to the
extent it has knowledge of such conveyance or prospective conveyance,
exercise its rights to accelerate the maturity of the related Home Loan under
any "due-on-sale" clause contained in the related Mortgage or Debt
Instrument; provided, however, that the Servicer shall not exercise any such
right if the "due-on-sale" clause, in the reasonable belief of the Servicer,
is not enforceable under applicable law. In such event or in the event the
related Mortgage and Debt Instrument do not contain a "due-on-sale" clause,
the Servicer shall enter into an assumption and modification agreement with
the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Debt Instrument and,
unless prohibited by applicable law or the Home Loan documents, the Obligor
remains liable thereon. The Servicer is also authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Obligor is released from liability and such person is substituted as
Obligor and becomes liable under the Debt Instrument. The Servicer shall
notify the Custodian that any such substitution or assumption agreement has
been completed by forwarding to the Custodian the original of such
substitution or assumption agreement, which original shall be added by the
Custodian to the related Indenture Trustee's Home Loan File and shall, for
all purposes, be considered a part of such Indenture Trustee's Home Loan File
to the same extent as all other documents and instruments constituting a part
thereof. In connection with any assumption or substitution agreement entered
into pursuant to this Section 7.01, the Servicer shall not change the Home
Loan Interest Rate or the Monthly Payment, defer or forgive the payment of
principal or interest, reduce the outstanding principal amount or extend the
final maturity date on such Home Loan. Any fee collected by the Servicer for
consenting to any such conveyance or entering into an assumption or
substitution agreement shall be retained by or paid to the Servicer as
additional Servicing Compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 7.02. Satisfaction of Mortgages and Release of Home Loan Files.
--------------------------------------------------------
Subject to the provisions of Sections 4.01 and 4.02, the Servicer shall not
grant a satisfaction or release of a Mortgage without having obtained payment
in full of the indebtedness secured by the Mortgage or otherwise prejudice
any right the Securityholders may have under the mortgage instruments. The
Servicer shall maintain the fidelity bond and errors and omissions insurance
as provided for in Section 4.03 insuring the Servicer against any loss it may
sustain with respect to any Home Loan not satisfied in accordance with the
procedures set forth herein.
Upon the payment in full of any Home Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the
Custodian by an Officers' Certificate (which certificate shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 5.01(b) have been or will be so
deposited) of a Servicing Officer and shall request delivery to it of the
Indenture Trustee's Home Loan File. Upon receipt of such certification and
request and in accordance with Section 2.9 of the Indenture, the Custodian
shall promptly release the related Indenture Trustee's Home Loan File to the
Servicer. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be payable only from and to the
extent of Servicing Compensation and shall not be chargeable to the
Collection Account, the Note Payment Account, or the Certificate Distribution
Account. Upon receipt by the Custodian of the certification of a Servicing
Officer with respect to the release of the Indenture Trustee's Home Loan File
for any Home Loan or any documents included therein, the Custodian shall
release to the Servicer such Indenture Trustee's Home Loan File and shall
deliver such instruments of transfer presented to it by the Servicer as shall
be necessary or appropriate for the release of such Indenture Trustee's Home
Loan File in accordance with such certification of the Servicing Officer.
The release to the Servicer of an Indenture Trustee's Home Loan File pursuant
to such certification shall not require or be subject to the prior approval
of the Indenture Trustee in the case of a release in connection with the
following: (1) the satisfaction or release of a Mortgage upon the payment in
full of the Home Loan or upon such Home Loan becoming a Liquidated Home Loan;
(2) a Home Loan in default for which the Servicer is or will be pursuing
foreclosure or another method of liquidation pursuant to Section 4.02; or
(3) the correction of documentation in the Indenture Trustee's Home Loan File
for errors and ambiguities, provided that such corrections shall be performed
and returned to the Custodian in a prompt manner, and provided further that
no more than 100 Indenture Trustee's Home Loan Files shall be released and
held by the Servicer at any one time. In the case of a release of the
related Indenture Trustee's Home Loan File to the Servicer in connection with
a substitution or repurchase of any Home Loan pursuant to Section 3.05 or
Section 11.02 or a release for other servicing reasons, such release of the
Indenture Trustee's Home Loan File by the Custodian shall be subject to the
prior approval of the Indenture Trustee.
The Indenture Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee's sale or other documents necessary to
the foreclosure or trustee's sale in respect of a Mortgaged Property or to
any legal action brought to obtain judgment against any Obligor on the Debt
Instrument or Mortgage or to obtain a deficiency judgment, or to enforce any
other remedies or rights provided by the Debt Instrument or Mortgage or
otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Indenture Trustee a certificate
of a Servicing Officer requesting that such pleadings or documents be
executed by the Indenture Trustee and certifying as to the reason such
documents or pleadings are required and that the execution and delivery
thereof by the Indenture Trustee will not invalidate or otherwise affect the
lien of the Mortgage, except for the termination of such a lien upon
completion of the foreclosure or trustee's sale. The Indenture Trustee
shall, upon receipt of a written request from a Servicing Officer, execute
any document provided to the Indenture Trustee by the Servicer or take any
other action requested in such request that is, in the opinion of the
Servicer as evidenced by such request, required by any state or other
jurisdiction to discharge the lien of a Mortgage upon the satisfaction
thereof and the Indenture Trustee will sign and post, but will not guarantee
receipt of, any such documents to the Servicer, or such other party as the
Servicer may direct, within five Business Days, or more promptly if needed,
of the Indenture Trustee's receipt of such certificate or documents. Such
certificate or documents shall establish to the Indenture Trustee's
satisfaction that the related Home Loan has been paid in full by or on behalf
of the Obligor and that such payment has been deposited in the Collection
Account.
Subject to any other applicable terms and conditions of this Agreement,
the Indenture Trustee and Servicer shall be entitled to approve an assignment
in lieu of satisfaction with respect to any Home Loan, provided the obligee
with respect to such Home Loan following such proposed assignment provides
the Indenture Trustee and Servicer with a "Certification for Assignment of
Home Loan" in form and substance satisfactory to the Indenture Trustee and
Servicer, providing the following: (i) that the Home Loan is secured by
Mortgaged Property located in a jurisdiction in which an assignment in lieu
of satisfaction is required to preserve lien priority, minimize or avoid
mortgage recording taxes or otherwise comply with or facilitate a refinancing
under the laws of such jurisdiction; (ii) that the substance of the
assignment is, and is intended to be, a refinancing of such Home Loan and
that the form of the transaction is solely to comply with or facilitate the
transaction under such local laws; (iii) that the Home Loan following the
proposed assignment will have a rate of interest not more than 0.25 percent
below or above the rate of interest on such Home Loan prior to such proposed
assignment; and (iv) that such assignment is at the request of the related
Obligor. Upon approval of an assignment in lieu of satisfaction with respect
to any Home Loan, the Servicer shall receive cash in an amount equal to the
unpaid principal balance of and accrued interest on such Home Loan and the
Servicer shall treat such amount as a Principal Prepayment with respect to
such Home Loan for all purposes hereof.
Section 7.03. Servicing Compensation. As compensation for its services
----------------------
hereunder, the Servicer shall be entitled to receive from the Collection
Account, the Servicing Fee out of which the Servicer shall pay any servicing
fees owed or payable to any Subservicer and any custodial fees owed or
payable to the Custodian. Additional servicing compensation in the form of
assumption and other administrative fees, amounts remitted pursuant to
Section 7.01, prepayment penalties and late payment charges shall be part of
the Servicing Compensation payable to the Servicer hereunder and shall be
paid either by the Servicer retaining such additional servicing compensation
prior to deposit in the Collection Account pursuant to Section 5.01(b)(1) or
if deposited into the Collection Account as part of the Servicing
Compensation withdrawn from the Note Payment Account pursuant to
Section 8.2(a) of the Indenture.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled
to reimbursement therefor except as specifically provided for herein. The
Servicer also agrees to pay (i) the Owner Trustee Fee and the Indenture
Trustee Fee, and the fees of the Co-Owner Trustee and the Custodian, (ii) all
reasonable costs and expenses incurred by the Indenture Trustee, the Owner
Trustee or the Seller in investigating the Servicer's activities hereunder
when, in the reasonable opinion of the Indenture Trustee, the Owner Trustee
or the Seller, such investigation is warranted on the basis of adverse
information about the Servicer obtained from a reasonably reliable source,
(iii) all reasonable costs and expenses incurred by any successor servicer or
the Indenture Trustee in replacing the Servicer in the event of a default by
the Servicer in the performance of its duties under the terms and conditions
of this Agreement, and (iv) the annual Rating Agency monitoring fees.
Section 7.04. Quarterly Statements as to Compliance. Not later than
-------------------------------------
the last day of the second month following the end of each quarter of the
Servicer's Fiscal Year, beginning in February, 1998, the Servicer will
deliver to the Indenture Trustee, the Issuer and to each Securityholder, an
Officer's Certificate stating that (i) the Servicer has fully complied with
the provisions of Articles V and VII, (ii) a review of the activities of the
Servicer during the preceding quarter and of performance under this Agreement
has been made under such officer's supervision, and (iii) to the best of such
officers' knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such quarter, or, if there has
been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof and the
action being taken by the Servicer to cure such default.
Section 7.05. Annual Independent Public Accountants' Servicing Report.
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On or before 120 days after the end of each of the Servicer's fiscal years
elapsing during the term of its appointment under this Agreement, beginning
with the first fiscal year ending after the Closing Date, the Servicer, at
its expense, shall furnish to the Seller, the Indenture Trustee, the Issuer,
the Securityholders and the Rating Agencies (i) an opinion by a firm of
independent certified public accountants on the financial position of the
Servicer at the end of the relevant fiscal year and the results of operations
and changes in financial position of the Servicer for such year then ended on
the basis of an examination conducted in accordance with generally accepted
auditing standards, and (ii) if the Servicer is then servicing any Home
Loans, a statement from such independent certified public accountants to the
effect that based on an examination of certain specified documents and
records relating to the servicing of the Servicer's loan portfolio conducted
substantially in compliance with the audit program for mortgages serviced for
the United States Department of Housing and Urban Development Mortgage Audit
Standards, or the Uniform Single Attestation Program for Mortgage Bankers
(the "Applicable Accounting Standards"), such firm is of the opinion that
such servicing has been conducted in compliance with the Applicable
Accounting Standards except for (a) such exceptions as such firm shall
believe to be immaterial and (b) such other exceptions as shall be set forth
in such statement.
Section 7.06. Right to Examine Servicer Records. Each Securityholder,
---------------------------------
the Indenture Trustee, the Issuer and each of their respective agents shall
have the right upon reasonable prior notice, during normal business hours and
as often as reasonably required, to examine, audit and copy, at the expense
of the Person making such examination, any and all of the books, records or
other information of the Servicer (including without limitation any
Subservicer to the extent provided in the related Subservicing Agreement)
whether held by the Servicer or by another on behalf of the Servicer, which
may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. Each Securityholder, the
Indenture Trustee and the Issuer agree that any information obtained pursuant
to the terms of this Agreement shall be held confidential.
Section 7.07. Reports to the Indenture Trustee; Collection Account
----------------------------------------------------
Statements. If the Collection Account is not maintained with the Indenture
----------
Trustee, then not later than 25 days after each Record Date, the Servicer
shall forward to the Indenture Trustee a statement, certified by a Servicing
Officer, setting forth the status of the Collection Account as of the close
of business on the preceding Record Date and showing, for the period covered
by such statement, the aggregate of deposits into the Collection Account for
each category of deposit specified in Section 5.01(b), the aggregate of
withdrawals from the Collection Account for each category of withdrawal
specified in Section 5.01(b)(2) and (d) and the aggregate amount of permitted
withdrawals not made in the related Due Period in each case, for the related
Due Period.
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01. Financial Statements. The Servicer understands that, in
--------------------
connection with the transfer of the Securities, Securityholders may request
that the Servicer make available to the Securityholders, to prospective
Securityholders annual audited financial statements of the Servicer for one
or more of the most recently completed five fiscal years for which such
statements are available, which request shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders, any prospective Securityholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions
respecting recent developments affecting the Servicer or the financial
statements of the Servicer and to permit the Securityholders, any prospective
Securityholder to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Securityholders and such
prospective Securityholder that the Servicer has the ability to service the
Home Loans in accordance with this Agreement.
ARTICLE IX
THE SERVICER
Section 9.01. Indemnification; Third Party Claims. (a) The Servicer
-----------------------------------
agrees to indemnify and hold the Indenture Trustee, the Co-Owner Trustee, the
Issuer, the Seller and each Securityholder harmless from and against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Indenture
Trustee, the Issuer, the Seller or any Securityholder may sustain directly
resulting from the negligence or willful misconduct of the Servicer in the
performance of its duties hereunder or in the servicing of the Home Loans in
compliance with the terms of this Agreement. It is the express intention of
the parties to this Agreement that the indemnification and hold harmless
obligations of the Servicer set forth in the preceding sentence shall apply
fully to claims, losses, etc. resulting from acts or ▇▇▇▇▇▇ ons that may
constitute ordinary negligence on the part of the Servicer. The Servicer
shall not be liable or responsible for any of the representations, covenants,
warranties, responsibilities, duties or liabilities of any prior Servicer.
The Servicer shall immediately notify the Indenture Trustee, the Issuer, the
Seller and each Securityholder if a claim is made by a third party with
respect to this Agreement, and the Servicer shall assume (with the consent of
the Indenture Trustee and the Issuer) the defense of any such claim and
advance all expenses in connection therewith, including reasonable counsel
fees, and promptly advance funds to pay, discharge and satisfy any judgment
or decree which may be entered against the Servicer, the Indenture Trustee,
the Issuer, the Seller and/or any Securityholder in respect of such claim.
(b) The Seller agrees to indemnify and hold the Indenture Trustee, the
Issuer, the Servicer and each Securityholder harmless from and against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Indenture
Trustee, the Issuer, the Servicer or any Securityholder may sustain directly
resulting from the negligence or willful misconduct of the Seller in the
performance of its duties hereunder or in compliance with the terms of this
Agreement. It is the express intention of the parties to this Agreement that
the indemnification and hold harmless obligations of the Seller set forth in
the preceding sentence shall apply fully to claims, losses, etc. resulting
from acts or omissions that may constitute ordinary negligence on the part
of the Seller. The Seller shall immediately notify the Indenture Trustee,
the Issuer, the Servicer and each Securityholder if a claim is made by a
third party with respect to this Agreement, and the Seller shall assume (with
the consent of the Indenture Trustee and the Issuer) the defense of any such
claim and advance all expenses in connection therewith, including reasonable
counsel fees, and promptly advance funds to pay, discharge and satisfy any
judgment or decree which may be entered against the Seller, the Servicer, the
Indenture Trustee, the Issuer and/or any Securityholder in respect of such
claim.
(c) The Transferor agrees to indemnify and hold the Indenture Trustee,
the Issuer, the Servicer and each Securityholder harmless from and against
any and all claims, losses, penalties, fines, forfeitures, legal fees and
related costs, judgments, and any other costs, fees and expenses that the
Indenture Trustee, the Issuer, the Servicer or any Securityholder may sustain
directly resulting from the negligence or willful misconduct of the
Transferor in the performance of its duties hereunder or in compliance with
the terms of this Agreement. It is the express intention of the parties to
this Agreement that the indemnification and hold harmless obligations of the
Transferor set forth in the preceding sentence shall apply fully to claims,
losses, etc. resulting from acts or omissions that may constitute ordinary
negligence on the part of the Transferor. The Transferor shall immediately
notify the Indenture Trustee, the Issuer, the Servicer and each
Securityholder if a claim is made by a third party with respect to this
Agreement, and the Transferor shall assume (with the consent of the Indenture
Trustee and the Issuer) the defense of any such claim and advance all
expenses in connection therewith, including reasonable counsel fees, and
promptly advance funds to pay, discharge and satisfy any judgment or decree
which may be entered against the Transferor, the Servicer, the Indenture
Trustee, the Issuer and/or any Securityholder in respect of such claim.
(d) The obligations of the Servicer, the Seller and the Transferor
under this Section 9.01 shall survive the termination of this Agreement.
Section 9.02. Merger or Consolidation of the Servicer. The Servicer
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shall keep in full effect its existence, rights and franchises as a
corporation, and will obtain and preserve its qualification to do business as
a foreign corporation and maintain such other licenses and permits, in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Home Loans and to perform its duties under this
Agreement.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Servicer shall send notice of
any such merger, conversion, consolidation or succession to the Indenture
Trustee and the Issuer.
Section 9.03. Limitation on Liability of the Servicer and Others. The
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Servicer and any director, officer, employee or agent of the Servicer may
rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section
9.01 herein, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the
Servicer's duty to service the Home Loans in accordance with this Agreement.
Section 9.04. Servicer Not to Resign; Assignment. (a) The Servicer
----------------------------------
shall not resign from the obligations and duties hereby imposed on it except
by mutual consent of the Servicer, the Seller, the Indenture Trustee, the
Issuer and the Majority Securityholders, or upon the determination that the
Servicer's duties hereunder are no longer permissible under applicable law
and such incapacity cannot be cured by the Servicer. Any such determination
permitting the resignation of the Servicer shall be evidenced by a written
opinion of counsel (who may be an employee of the Servicer) to such effect
delivered to the Indenture Trustee, the Issuer and the Seller, which opinion
of counsel shall be in form and substance acceptable to the Indenture Trustee
and the Issuer. No such resignation shall become effective until the
Indenture Trustee or a successor servicer has assumed the Servicer's
responsibilities and obligations hereunder in accordance with Section 10.02.
(b) The Servicer shall not assign this Agreement or any of its
obligations, rights and duties hereunder without the prior written consent of
the Seller, the Indenture Trustee, the Issuer and the Majority
Securityholders; provided, however, the Servicer may assign this Agreement
(i) without the prior written consent of the Seller, the Indenture Trustee
and the Issuer, but with the prior written consent of the Majority
Securityholders to the Indenture Trustee or (ii) without the prior written
consent of the Seller, but with the prior written consent of the Indenture
Trustee, the Issuer and the Majority Securityholders, to any Person that (A)
services not less than $25,000,000 in aggregate outstanding principal amount
of loans similar in type to the Home Loans, (B) has a net worth of not less
than $2,500,000, (C) has a blanket fidelity bond and errors and omissions
insurance coverage satisfying the requirements set forth in Section 4.03 and
(D) will not cause any rating of any Class of the Securities in effect
immediately prior to such assignment to be qualified, downgraded or
withdrawn, as evidenced by a letter from each Rating Agency to such effect.
Any such assignment to a successor servicer (other than the Indenture
Trustee) shall be effective only upon delivery to the Indenture Trustee and
the Issuer of an agreement, duly executed by the Servicer and such successor
servicer in a form reasonably satisfactory to the Indenture Trustee and the
Issuer, in which such successor servicer shall assume the due and punctual
performance of each covenant and condition to be performed or observed by the
Servicer hereunder.
Section 9.05. Relationship of Servicer to the Issuer and the Indenture
--------------------------------------------------------
Trustee. The relationship of the Servicer (and of any successor to the
-------
Servicer as servicer under this Agreement) to the Issuer and the Indenture
Trustee under this Agreement is intended by the parties hereto to be that of
an independent contractor and not of a joint venturer, agent or partner of
the Issuer or the Indenture Trustee.
ARTICLE X
DEFAULT
Section 10.01. Events of Default. (a) In case one or more of the
-----------------
following Events of Default by the Servicer shall occur and be continuing,
that is to say:
(i) any failure by the Servicer to deposit in the Collection
Account in accordance with Section 5.01(b) any payments in respect of
the Home Loans received by the Servicer no later than the second
Business Day following the day on which such payments were received; or
(ii) any failure by the Servicer duly to observe or perform,
in any material respect, any other covenants, obligations or agreements
of the Servicer as set forth in this Agreement (other than a covenant,
obligation or agreement, or default in the observance of which, that is
elsewhere in this Section 10.01 specifically dealt with), which failure
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied and
stating that such notice is a "Notice of Default" hereunder, shall have
been given (a) to the Servicer by the Indenture Trustee or the Issuer,
or (b) to the Servicer, the Indenture Trustee or the Issuer by any
Securityholder; or
(iii) (A) the entry by a court or supervisory authority having
jurisdiction of a decree or order for relief in respect of the Servicer
in an involuntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization, or other similar law or
(B) the appointment a custodian, receiver, liquidator, assignee,
trustee, sequestrator, or other similar official of such member or of
any substantial part of its property, or ordering the winding up or
liquidation of the Servicer's affairs, and the continuance of any such
decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(iv) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding
to be adjudicated bankrupt or insolvent or the consent by the Servicer
to the entry of a decree or order for relief in respect of itself in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
the Servicer, or the filing by the Servicer of a petition or answer or
consent seeking reorganization or relief under any applicable federal or
state law, or the consent by the Servicer to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator, or similar official of the
Servicer or of any substantial part of its property, or the making by
the Servicer of an assignment for the benefit of creditors, or the
Servicer's failure to pay its debts generally as they become due, or the
taking of corporate action by the Servicer in furtherance of any such
action; or
(v) the Servicer shall admit in writing its inability to pay
its debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) the Majority Securityholders (A) shall receive notice
from the Servicer that the Servicer is no longer able to discharge its
duties under this Agreement or (B) shall determine, in their reasonable
judgment and based upon published reports (including wire services),
which they reasonably believe in good faith to be reliable, that the
Servicer
a) has experienced a material adverse change in its
business, assets, liabilities, operations, condition
(financial or otherwise) or prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary
course; or
(vii) as of any Determination Date, the total Expected Loan
Loss Percentage (as defined below) exceeds (1) up to the fifth (5th)
anniversary of the Cut-Off Date, 20.5%, or (2) thereafter, 30.75% (where
the "Expected Loan Loss Percentage" shall be the sum of (A) the
cumulative Net Loan Losses divided by the Assumed Pool Principal
Balance, plus (B) 25% of the aggregate Principal Balance of the Home
Loans which are then more than 30 but less than 60 days delinquent
divided by the Assumed Pool Principal Balance, plus (C) 50% of the
aggregate Principal Balance of the Home Loans which are then more than
60 but less than 90 days delinquent divided by the Assumed Pool
Principal Balance, plus (D) 100% of the aggregate Principal Balance of
the Home Loans which are then more than 90 days delinquent divided by
the Assumed Pool Principal Balance).
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Majority Securityholders, the
Indenture Trustee or the Issuer by notice in writing to the Servicer and each
Rating Agency may, in addition to whatever rights such Person may have at law
or equity to damages, including injunctive relief and specific performance
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Home Loans and the proceeds thereof, as servicer under this
Agreement. Upon receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with
respect to the Home Loans or otherwise, shall, subject to Section 10.02, pass
to and be vested in a successor servicer acceptable to the Rating Agencies,
or the Indenture Trustee if a successor servicer cannot be retained in a
timely manner, and the successor servicer, or Indenture Trustee, as
applicable, is hereby authorized and empowered to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and do or cause to be done all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Home Loans and related documents. The Servicer agrees to
cooperate with the successor servicer in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the successor servicer for administration by it
of all amounts which shall at the time be credited by the Servicer to each
Collection Account or thereafter received with respect to the Home Loans.
Section 10.02. Indenture Trustee to Act; Appointment of Successor. On
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and after the date the Servicer receives a notice of termination pursuant to
Section 10.01, or the Indenture Trustee receives the resignation of the
Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04, or the Servicer is removed as Servicer pursuant to
this Article X, then, subject to Section 4.08, the Indenture Trustee, with
the consent of the Majority Securityholders, shall appoint a successor
Servicer acceptable to the Rating Agencies to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor Servicer shall not be liable for any actions of any Servicer prior
to it; provided further, however, that if a successor Servicer cannot be
retained in a timely manner, the Indenture Trustee shall act as successor
Servicer and shall assume the responsibilities of the Servicer hereunder. In
the event that the Indenture Trustee assumed the responsibilities of Servicer
pursuant to this Section 10.02, the Indenture Trustee will become licensed,
qualified and in good standing in each Mortgaged Property State the laws of
which require licensing or qualification, in order to perform its obligations
as Servicer hereunder or, alternatively, shall retain an agent who is so
licensed, qualified and in good standing in any such Mortgaged Property
State. The successor Servicer shall be obligated to make Servicing Advances
hereunder. As compensation therefor, the successor Servicer appointed
pursuant to this Section 10.02, shall be entitled to all Servicing
Compensation as provided in this Agreement. The Servicer shall not be
entitled to any termination fee if it is terminated pursuant to Section
10.01, but shall be entitled to any accrued and unpaid Servicing Fee to the
date of termination. Any collections received by the prior Servicer after
its removal or resignation shall be endorsed by it to the Indenture Trustee
and remitted directly to the Indenture Trustee or, at the direction of the
Indenture Trustee, to the successor Servicer.
The compensation of any successor Servicer (including, without
limitation, the Indenture Trustee) so appointed shall be the Servicing Fee,
together with other Servicing Compensation provided for herein. In the event
the Indenture Trustee is required to solicit bids to appoint a successor
Servicer, the Indenture Trustee shall solicit, by public announcement, bids
from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth in Section 9.04(b)(ii)
above. Such public announcement shall specify that the successor Servicer
shall be entitled to the full amount of the Servicing Fee and Servicing
Compensation provided for herein. Within thirty days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest qualifying bid. The
Indenture Trustee shall deduct from any sum received by the Indenture Trustee
from the successor Servicer in respect of such sale, transfer and assignment
all costs and expenses of any public announcement and of any sale, transfer
and assignment of the servicing rights and responsibilities hereunder and the
amount of any unreimbursed Servicing Advances made by the Indenture Trustee.
After such deductions, the remainder of such sum shall be paid by the
Indenture Trustee to the Servicer at the time of such sale, transfer and
assignment to the successor Servicer.
The Indenture Trustee, the Issuer, any Custodian, the Servicer and any
such successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession of a
successor Servicer. The Servicer agrees to cooperate with the Indenture
Trustee and any successor Servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Indenture Trustee or such successor Servicer, as applicable, all
documents and records reasonably requested by the applicable party to enable
it to assume the Servicer's functions hereunder and shall promptly also
transfer to the Indenture Trustee or such successor Servicer, as applicable,
all amounts which then have been or should have been deposited in the
Collection Account by the Servicer or which are thereafter received with
respect to the Home Loans. Neither the Indenture Trustee nor any other
successor Servicer shall be held liable by reason of any failure to make, or
any delay in making, any payment hereunder or any portion thereof caused by
(i) the failure of the prior Servicer to deliver, or any delay in delivering,
cash, documents or records to it, or (ii) restrictions relating to the prior
Servicer imposed by any regulatory authority having jurisdiction over the
prior Servicer. No appointment of a successor Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Indenture Trustee to each Securityholder, the Issuer and the
Seller and, except in the case of the appointment of the Indenture Trustee as
successor Servicer (when no consent shall be required), the Seller, the
Majority Securityholders and the Issuer shall have consented thereto.
Pending appointment of a successor Servicer hereunder, the Indenture
Trustee shall act as Servicer hereunder as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may
make such arrangements for the compensation of such successor Servicer as it
and such successor Servicer shall agree; provided, however, that no such
compensation shall be in excess of the Servicing Compensation in the form of
assumption fees, late payment charges or otherwise as provided in this
Agreement.
Section 10.03. Waiver of Defaults. The Majority Securityholders may,
------------------
on behalf of all Securityholders, waive any events permitting removal of the
Servicer as servicer pursuant to this Article X, provided, however, that the
Majority Securityholders may not waive a default in making a required payment
or distribution on a Security or Residual Interest without the consent of the
related Securityholder or holders of the Residual Interest. Upon any waiver
of a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived.
Section 10.04. Accounting Upon Termination of Servicer. Upon
---------------------------------------
termination of the Servicer under this Article X, the Servicer shall, at its
own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the funds in any Collection Account;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, all of the Servicer's files, documents and
statements relating to the Home Loans held by it hereunder and a Home Loan
portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Indenture Trustee, the Issuer and the Securityholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for payments or
charges with respect to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Home Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
ARTICLE XI
TERMINATION
Section 11.01. Termination. (a) This Agreement shall terminate upon
-----------
any of the following events: (i) the later of (a) the satisfaction and
discharge of the Indenture pursuant to Section 4.1 of the Indenture and
Notice to the Indenture Trustee of such discharge and (b) the disposition of
all funds with respect to the last Home Loan and the remittance of all funds
due hereunder; (ii) payment of all amounts due and payable to the
Securityholders, the Servicer, the Indenture Trustee, the Owner Trustee, the
Co-Owner Trustee and the Issuer pursuant to this Agreement and the Indenture
and written notice to the Indenture Trustee from the Issuer of the Issuer's
intent to terminate this Agreement; or (iii) mutual written consent of the
Servicer, the Seller, the Transferor and all Securityholders in writing.
(b) Notice of termination of this Agreement pursuant to Section
11.01(a)(i) shall be sent by the Indenture Trustee to the Securityholders in
accordance with Section 2.6(b) of the Indenture. Notice of termination of
this Agreement pursuant to Section 11.01(a)(ii) or (iii) shall be mailed or
transmitted by facsimile by the Indenture Trustee to the Securityholders on
the Business Day immediately following the day on which the Indenture Trustee
receives notice of such termination, and such notice to the Securityholders
shall state that the Securityholders are to surrender their respective
Securities for cancellation and shall specify the place where such Securities
are to be surrendered.
Section 11.02. Optional Termination by Seller.
------------------------------
(a) (Reserved)
(b) The Seller may, at its option, effect an early redemption or
termination of the Securities on or after any Payment Date on which the Pool
Principal Balance declines to 10% or less of the Assumed Pool Principal
Balance as of the Closing Date. The Seller shall effect such early
redemption or termination by providing notice thereof to the Indenture
Trustee and Owner Trustee and by paying into the Collection Account in the
manner described below an amount equal to the Termination Price.
(c) Any early redemption and termination by the Seller pursuant to
Sections 11.01(b) shall be accomplished by depositing the Termination Price
into the Collection Account on the Determination Date immediately preceding
the Payment Date on which the early redemption or termination is to occur.
The amount so deposited and any other amounts then on deposit in the
Collection Account (other than any amounts not required to have been
deposited therein pursuant to Section 5.01(b)(1) and any amounts withdrawable
therefrom by the Indenture Trustee pursuant to Section 5.01(d)) shall be
transferred to the Note Payment Account pursuant to Section 5.01(b)(2) for
payment or distribution to Securityholders on the final Payment Date; and any
amounts received with respect to the Home Loans and Foreclosure Properties
subsequent to the Due Period immediately preceding such final Payment Date
shall belong to the Seller. For purposes of calculating the payments and
distributions to be made on the final Payment Date, amounts transferred to
the Note Payment Account immediately preceding such final Payment Date shall
in all cases be deemed to have been received during the related Due Period,
and amounts so transferred shall be applied pursuant to Section 5.01(d).
Section 11.03. Notice of Termination. Notice of termination of this
---------------------
Agreement or of early redemption and termination of the Securities shall be
sent (i) by the Indenture Trustee to the Noteholders in accordance with
Section 10.2 of the Indenture and (ii) by the Owner Trustee to the
Certificateholder in accordance with Section 9.1(d) of the Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Acts of Securityholders. Except as otherwise
-----------------------
specifically provided herein, whenever Securityholder action, consent or
approval is required under this Agreement, such action, consent or approval
shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all Securityholders if the Majority Securityholders agree to
take such action or give such consent or approval.
Section 12.02. Amendment. (a) This Agreement may be amended from time
---------
to time by the Issuer, the Seller, the Servicer, the Transferor and the
Indenture Trustee by written agreement with notice thereof to the
Securityholders, without the consent of any of the Securityholders, to cure
any error or ambiguity, to correct or supplement any provisions hereof which
may be defective or inconsistent with any other provisions hereof, to add any
other provisions with respect to matters or questions arising under this
Agreement; provided, however, that such action will not adversely affect in
any material respect the interests of the Securityholders. An amendment
described above shall be deemed not to adversely affect in any material
respect the interests of the Securityholders if either (i) an opinion of
counsel is obtained to such effect, or (ii) the party requesting the
amendment obtains a letter from each of the Rating Agencies confirming that
the amendment, if made, would not result in the downgrading or withdrawal of
the rating then assigned by the respective Rating Agency to any Class of
Securities then outstanding.
(b) This Agreement may also be amended from time to time by the Issuer,
the Seller, the Servicer, the Transferor and the Indenture Trustee by written
agreement, with the prior written consent of the Majority Securityholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Securityholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing
of, collections of payments on Home Loans or payments or distributions which
are required to be made on any Security, without the consent of the holders
of 100% of each Class of Securities affected thereby, (ii) adversely affect
in any material respect the interests of the holders of any Class of
Securities in any manner other than as described in (i), without the consent
of the holders of 100% of such Class of Securities, or (iii) reduce the
percentage of any Class of Securities, the holders of which are required to
consent to any such amendment, without the consent of the holders of 100% of
such Class of Securities.
(c) It shall not be necessary for the consent of Securityholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
(d) Prior to the execution of any amendment to this Agreement, the
Issuer shall be entitled to receive and rely upon an opinion of counsel
stating that the execution of such amendment is authorized or permitted by
this Agreement. The Issuer and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects such Person's own
rights, duties or immunities under this Agreement.
Section 12.03. Recordation of Agreement. To the extent permitted by
------------------------
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices
for real property records in all of the counties or other comparable
jurisdictions in which any or all of the Mortgaged Properties are situated,
and in any other appropriate public recording office or elsewhere, such
recordation to be effected by the Servicer at the Securityholders' expense on
direction of the Majority Securityholders, but only when accompanied by an
opinion of counsel to the effect that such recordation materially and
beneficially affects the interests of the Securityholders or is necessary for
the administration or servicing of the Home Loans.
Section 12.04. Duration of Agreement. This Agreement shall continue
---------------------
in existence and effect until terminated as herein provided.
Section 12.05. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS, AND, TO THE EXTENT PERMITTED BY LAW, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by overnight mail, certified mail or
registered mail, postage prepaid, to: (i) in the case of the Seller,
FIRSTPLUS Investment Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, or such other addresses as
may hereafter be furnished to the Securityholders and the other parties
hereto in writing by the Seller, (ii) in the case of the Issuer, FIRSTPLUS
Home Loan Owner Trust 1998-1, c/o Wilmington Trust Company, ▇▇▇▇▇▇ Square
North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such other address as may hereafter be furnished to the
Securityholders and the other parties hereto, (iii) in the case of the
Transferor and the Servicer, FIRSTPLUS Financial, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇ ▇▇▇▇▇▇, or such other address as
may hereafter be furnished to the Securityholders and the other parties
hereto in writing by the Servicer or the Transferor, (iv) in the case of the
Indenture Trustee or Co-Owner Trustee, U.S. Bank National Association,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Structured
Finance, FIRSTPLUS 1998-1, and (v) in the case of the Securityholders, as set
forth in the applicable Note Register and Certificate Register. Any such
notices shall be deemed to be effective with respect to any party hereto upon
the receipt of such notice by such party, provided, however, that a facsimile
-------- -------
or other form of electronic transmission shall be deemed to be received by
the parties referred to in (i) to (v) above when transmitted so long as the
transmitting machine has provided an electronic confirmation of such
transmission and such facsimile or other form of electronic transmission is
confirmed with a printed paper copy thereof by mail or overnight courier
service; and provided, further, that any delivery of computer readable format
hereunder shall be accompanied or confirmed by the delivery of a printed
paper copy thereof. Notices to the Securityholders shall be effective upon
mailing or personal delivery. Each party may, by notice, designate any
further or different address to which subsequent notices, certificates or
other communications to such party shall be sent.
Section 12.07. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other covenants, agreements, provisions
or terms of this Agreement.
Section 12.08. No Partnership. Nothing herein contained shall be
--------------
deemed or construed to create any partnership or joint venture between the
parties hereto and the services of the Servicer shall be rendered as an
independent contractor.
Section 12.09. Counterparts. This Agreement may be executed in one or
------------
more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
Agreement.
Section 12.10. Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the Servicer, the Transferor, the Seller,
the Issuer and the Securityholders and their respective successors and
permitted assigns.
Section 12.11. Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not
be deemed to be part of this Agreement.
Section 12.12. Actions of Securityholders. (a) Any request, demand,
--------------------------
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Securityholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Securityholders in person or by agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Indenture
Trustee, the Seller, the Servicer or the Issuer. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement and conclusive in favor of the Seller, the
Servicer and the Issuer if made in the manner provided in this Section.
(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner which the
Seller, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Securityholder shall bind every holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done, by the Indenture Trustee, the Seller, the Servicer or the Issuer in
reliance thereon, whether or not notation of such action is made upon such
Security.
(d) The Seller, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 12.12 as it shall deem necessary.
Section 12.13. Reports to Rating Agencies. (a) The Indenture Trustee
--------------------------
shall provide to each Rating Agency copies of statements, reports and
notices, to the extent received by it from the Servicer, the Transferor or
the Issuer hereunder, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home
Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of either the Servicer, any Custodian or the
Issuer;
(iv) notice of final payment on the Notes and the final
distribution with respect to the Residual Interest Certificate;
(v) notice of the occurrence of any Event of Default;
(vi) copies of the annual independent auditor's report
delivered pursuant to Section 7.05, and copies of any compliance reports
delivered by the Servicer hereunder including Section 7.04; and
(vii) copies of any Servicer's Monthly Statement pursuant to
Section 6.02(b); and
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies such statements,
reports and notices shall be delivered to the Rating Agencies at the
following addresses: (i) if to S&P, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Asset-Backed Monitoring Department, (ii) if to
Fitch, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and (iii) if to DCR,
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: RMBS
Monitoring.
Section 12.14. (Reserved).
Section 12.15. No Petition. Each of the Indenture Trustee, the Seller
-----------
and the Servicer by entering into this Agreement, hereby covenants and agrees
that it will not at any time institute against the Issuer, or join in any
institution against the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings
under any United States federal or state bankruptcy or similar law in
connection with any obligations relating to the Securities or any of the
Basic Documents.
IN WITNESS WHEREOF, the Servicer, the Transferor, the Issuer and the
Seller have caused their names to be signed by their respective officers
thereunto duly authorized, as of the day and year first above written, to
this Sale and Servicing Agreement.
FIRSTPLUS HOME LOAN OWNER TRUST 1998-1,
By: Wilmington Trust Company, as Owner Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
FIRSTPLUS INVESTMENT CORPORATION, as Seller
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
FIRSTPLUS FINANCIAL, INC., as Transferor and Servicer
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee and Co-Owner Trustee
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇ ▇▇▇▇▇▇, known to me to be the person and officer
whose name subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said FIRSTPLUS FINANCIAL, INC., a Texas
corporation, and that he executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 24th day of February,
1998.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------------------
Notary Public, State of Texas
▇-▇▇-▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇ ▇▇▇▇▇▇, known to me to be the person and officer
whose name subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said FIRSTPLUS INVESTMENT CORPORATION, a Nevada
corporation, and that he executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 24th day of February,
1998.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------------
Notary Public, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇-▇▇-▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ )
)
COUNTY OF NEWCASTLE )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, known to me to be the person and officer
whose name subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said FIRSTPLUS HOME LOAN OWNER TRUST 1998-1, as
Issuer, and that he executed the same as the act of such association for the
purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 24th day of February,
1998.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
Notary Public, State of Delaware
My commission expires:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
October 31, 1998. (printed name)
THE STATE OF MINNESOTA )
)
COUNTY OF ▇▇▇▇▇▇ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇.▇. ▇▇▇▇▇▇▇, known to me to be the person and officer
whose name subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said U.S. BANK NATIONAL ASSOCIATION, as Indenture
Trustee, and that she executed the same as the act of such association for
the purposes and consideration therein expressed, and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 24th day of February,
1998.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Notary Public, State of Minnesota
My commission expires:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
1/31/00. (printed name)
EXHIBIT A
Home Loan Schedule
(Delivered under Separate Cover)
EXHIBIT B
(Reserved)
EXHIBIT C
(Reserved)
EXHIBIT D
Schedule of Specified Home Loans