EXHIBIT 4.3
WILSHIRE SERVICING CORPORATION
Master Servicer
NATIONAL MORTGAGE CORPORATION
Servicer
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Indenture Trustee
and
WILSHIRE REIT TRUST SERIES 1998-1
Issuer
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SERVICING AGREEMENT
Dated as of September 1, 1998
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Asset-Backed Floating Rate Notes
Series 1998-11
TABLE OF CONTENTS
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SECTION PAGE
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ARTICLE I
DEFINITIONS
1.01. Defined Terms..................................................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. Enforcement of Representations and Warranties.................................................23
2.02. Existence.....................................................................................25
2.03. Representations, Warranties and Covenants of the Servicer
and the Master Servicer.......................................................................25
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
3.01. Servicer to Act as Servicer...................................................................29
3.02. Sub-Servicing Agreements Between the Servicer and Sub-Servicers...............................30
3.03. Successor Sub-Servicers.......................................................................32
3.04. Liability of the Servicer.....................................................................32
3.05. No Contractual Relationship Between Sub-Servicers and Indenture Trustee,
Issuer or Noteholders.........................................................................32
3.06. Assumption or Termination of Sub-Servicing Agreements by
Indenture Trustee.............................................................................33
3.07. Collection of Certain Mortgage Loan Payments..................................................33
3.08. Sub-Servicing Accounts........................................................................34
3.09. Collection of Taxes, Assessments and Similar Items; Servicing Accounts........................34
3.10. Collection Account............................................................................35
3.11. Withdrawals from the Collection Account.......................................................37
3.12. Investment of Funds in the Collection Account.................................................39
3.13. [intentionally omitted].......................................................................39
3.14. Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.............................................................................39
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.....................................41
3.16. Realization Upon Defaulted Mortgage Loans.....................................................42
3.17. Indenture Trustee to Cooperate; Release of Mortgage Files.....................................44
3.18. Servicing Compensation........................................................................45
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SECTION PAGE
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3.19. Reports to the Indenture Trustee; Collection Account Statements...............................45
3.20. Statement as to Compliance....................................................................46
3.21. Independent Public Accountants' Servicing Report..............................................46
3.22. Access to Certain Documentation...............................................................47
3.23. Title, Management and Disposition of REO Property.............................................47
3.24. Obligations of the Servicer in Respect of Prepayment Interest Shortfalls......................48
3.25. Obligations of the Servicer in Respect of Mortgage Rates and
Monthly Payments..............................................................................49
3.26. Transfer of Servicing.........................................................................49
ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
4.01. Remittance Reports; P&I Advances..............................................................51
4.02. Determination of Realized Losses..............................................................52
ARTICLE V
THE SERVICER
5.01. Liability of the Servicer.....................................................................53
5.02. Merger or Consolidation of the Servicer.......................................................53
5.03. Limitation on Liability of the Master Servicer, Servicer and Others...........................53
5.04. Limitation on Resignation of the Servicer.....................................................54
5.05. Rights of the Indenture Trustee and the Issuer in Respect of the Servicer.....................55
5.06. Indemnification of the Master Servicer, the Indenture Trustee and the Owner
Trustee by the Servicer.......................................................................56
ARTICLE VI
DEFAULT
6.01. Servicer Events of Default....................................................................57
6.02. Master Servicer or Indenture Trustee to Act; Appointment of Successor.........................59
6.03. Notification to Noteholders...................................................................61
6.04. Waiver of Servicer Events of Default..........................................................61
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SECTION PAGE
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ARTICLE VII
SPECIAL FORECLOSURE PROCEDURES
AT OPTION OF THE CERTIFICATEHOLDER OF THE MAJORITY
IN PERCENTAGE INTEREST IN THE EQUITY CERTIFICATES
7.01. General.......................................................................................62
7.02. Reports and Notices...........................................................................63
7.03. Election to Delay Foreclosure Proceedings.....................................................64
7.04. Election to Commence Foreclosure Proceedings..................................................66
7.05. Termination...................................................................................68
7.06. Collateral Account............................................................................68
7.07. Collateral Account Permitted Investments......................................................68
7.08. Grant of Security Interest....................................................................69
7.09. Collateral Shortfalls.........................................................................69
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. Amendment.....................................................................................71
8.02. Governing Law.................................................................................71
8.03. Notices.......................................................................................71
8.04. Severability of Provisions....................................................................72
8.05. Article and Section References................................................................72
8.06. Third-Party Beneficiaries.....................................................................72
8.07. Counterparts..................................................................................72
8.08 Termination...................................................................................72
8.09. No Recourse...................................................................................72
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EXHIBITS
Exhibit A-1 Request for Release
Exhibit A-2 Request for Release Mortgage Loans paid in full
Schedule 1 Mortgage Loan Schedule
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This Servicing Agreement, is dated and effective as of
September 1, 1998, among WILSHIRE SERVICING CORPORATION as Master Servicer,
NATIONAL MORTGAGE CORPORATION as Servicer, NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION as Indenture Trustee and Wilshire REIT Trust Series 1998-1 as
Issuer.
PRELIMINARY STATEMENT:
WHEREAS, the Master Servicer and Servicer are engaged in the
business of servicing sub-prime mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture
Trustee certain mortgage loans, identified on Schedule 1 hereto (the "Mortgage
Loans") in connection with the issuance of the Asset-Backed Floating Rate Notes,
Series 1998-11 (the "Notes");
WHEREAS, the Issuer desires to contract with the Master
Servicer and the Servicer for the servicing responsibilities associated with
such Mortgage Loans; and
WHEREAS, the Issuer, the Master Servicer, the Servicer and
the Indenture Trustee desire to execute this Agreement to define each party's
rights, duties and obligations relating to the servicing of the Mortgage Loans;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
"Adjustable Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.
"Adjustment Date": With respect to each Adjustable Rate
Mortgage Loan, the day of the month on which the Mortgage Rate of a Mortgage
Loan changes pursuant to the related Mortgage Note. The first Adjustment Date
following the Cut-off Date as to each Mortgage Loan is set forth in the Mortgage
Loan Schedule.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Servicing Agreement and all amendments
hereof and supplements hereto.
"Available Payment Amount": With respect to any Payment Date,
an amount equal to (1) the sum of (a) the aggregate of the amounts on deposit in
the Collection Account and Payment Account as of the close of business on the
related Determination Date, (b) the aggregate of any amounts received in respect
of an REO Property withdrawn from any REO Account and deposited in the Payment
Account for such Payment Date pursuant to Section 3.23, (c) the aggregate of any
amounts deposited in the Payment Account by the Servicer in respect of
Prepayment Interest Shortfalls for such Payment Date pursuant to Section 3.24,
(d) the aggregate of any P&I Advances made by the Servicer for such Payment Date
pursuant to Section 4.01 and (e) the aggregate of any advances made by the
Master Servicer or the Indenture Trustee for such Payment Date pursuant to
Section 6.02, reduced (to not less than zero) by (2) the sum of (x) the portion
of the amount described in clause (1)(a) above that represents (i) Monthly
Payments on the Mortgage Loans received from a Mortgagor on or prior to the
Determination Date but due during any Due Period subsequent to the related Due
Period, (ii) Principal Prepayments on the Mortgage Loans received after the
related Prepayment Period (together with any interest payments received with
such Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds and Insurance Proceeds received
in respect of the Mortgage Loans after the related Prepayment Period, (iv)
amounts reimbursable or payable to the Master Servicer, the Servicer, the
Indenture Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11 or
Section 3.12 or amounts payable from the Payment Account pursuant to Section
6.07 of the Indenture, (v) Stayed Funds, (vi) the Indenture Trustee Fee and the
Master Servicing Fee payable from the Payment Account pursuant to the Indenture
in the amounts calculated as described herein, (vii) amounts deposited in the
Collection Account or the Payment Account in error and (viii) the amount of any
Prepayment Charges collected by the Servicer in connection with the voluntary
Principal Prepayment in full of any of the Mortgage Loans and (y) amounts
reimbursable to the Master Servicer or the Indenture Trustee for an advance made
pursuant to Section 6.02(b), which advance the Master Servicer or the Indenture
Trustee, as applicable, has determined to be nonrecoverable from the Stayed
Funds in respect of which it was made.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title
11 of the United States Code), as amended.
"Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation (i.e. "principal cramdown")
or Debt Service Reduction (i.e. "interest cramdown").
"Basic Document": The Owner Trust Agreement, the Certificate
of Trust, the Indenture, the Mortgage Loan Purchase Agreement, the Ownership
Transfer Agreement, the
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Servicing Agreement and the other documents and certificates delivered in
connection with any of the above.
"Book-Entry Notes": Any Note registered in the name of the
Depository or its nominee. Initially, the Book-Entry Notes will be the Class A
Notes and the Mezzanine Notes.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of
California, the State of Maryland or the State of New York, 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.
"Business Trust Statute": Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.ss.3801 ET SEQ., as the same may be amended from
time to time.
"Certificate of Trust": The Certificate of Trust filed for
the Issuer pursuant to Section 3810(a) of the Business Trust Statute.
"Certificateholder": The Person in whose name an Equity
Certificate is registered in the Certificate Register.
"Class": Collectively, all of the Notes bearing the same
class designation.
"Class A Note": Any one of the Class A Notes authorized by
the Indenture, substantially in the form annexed as Exhibit A-1 to the
Indenture.
"Class M-1 Note": Any one of the Class M-1 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-2 to the
Indenture.
"Class M-2 Note": Any one of the Class M-2 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-3 to the
Indenture.
"Class M-3 Note": Any one of the Class M-3 Notes authorized
by the Indenture, substantially in the form annexed as Exhibit A-4 to the
Indenture.
"Closing Date": September 30, 1998.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a), which shall be entitled,
"National Mortgage Corporation, as Servicer for Norwest Bank Minnesota, National
Association, as Indenture Trustee, in trust for the registered holders of ,
Salomon Brothers Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes,
Series 1998-11". The Collection Account must be an Eligible Account.
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"Corporate Trust Office": With respect to the Indenture
Trustee, the principal corporate trust office of the Indenture Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate
Trust Services, or at such other address as the Indenture Trustee may designate
from time to time by notice to the Noteholders, the Issuer, the Owner Trustee,
the Master Servicer and the Servicer. With respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee at, which at any
particular time its corporate trust business shall be administered, which office
at the date of the execution of this instrument is located at ▇▇▇▇▇▇ Square
North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Wilshire
REIT Trust Series 1998- 1, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the
Certificateholders, the Issuer, the Indenture Trustee, the Master Servicer and
the Servicer.
"Cumulative Loss Percentage": With respect to any Payment
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Realized Losses incurred from the Cut-off Date to the last
day of the preceding calendar month and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date.
"Custodial Agreement": An agreement that may be entered into
among the Issuer, the Master Servicer, the Servicers, the Indenture Trustee and
a Custodian in the form of Exhibit C annexed to the Indenture or a similar
agreement assigned to the Indenture Trustee with respect to the Mortgage Loans.
"Custodian": A Custodian, which shall not be the Issuer, the
Master Servicer, the Servicer, the Depositor, the Seller, the Transferor, the
Owner Trustee or any Affiliate of any of them, appointed pursuant to a Custodial
Agreement.
"Cut-off Date": With respect to each Original Mortgage Loan,
September 1, 1998. With respect to all Qualified Substitute Mortgage Loans,
their respective dates of substitution. References herein to the "Cut-off Date,"
when used with respect to more than one Mortgage Loan, shall be to the
respective Cut-off Dates for such Mortgage Loans.
"DCR": Duff & ▇▇▇▇▇▇ Credit Rating Co. or its successor in
interest.
"Debt Service Reduction": With respect to any Mortgage Loan,
a reduction in the scheduled Monthly Payment for such Mortgage Loan by a court
of competent jurisdiction in a proceeding under the Bankruptcy Code, except such
a reduction resulting from a Deficient Valuation.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then
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outstanding principal balance of the Mortgage Loan, which valuation results from
a proceeding initiated under the Bankruptcy Code.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Depositor": Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Notes that are to be Book-Entry Notes, is CEDE & Co. The
Depository shall at all times be a "clearing corporation" as defined in Section
8-102(3) of the Uniform Commercial Code of the State of New York and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and (c) has
outstanding unsecured commercial paper or other short-term unsecured debt
obligations that are rated D-1+ by DCR (if rated by DCR) and A-1 by S&P (or
comparable ratings if DCR and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Payment Date, the
15th day of the calendar month in which such Payment Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.
"Due Date": With respect to each Payment Date, the first day
of the calendar month in which such Payment Date occurs, which is the day of the
month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any
days of grace.
"Due Period": With respect to any Payment Date, the period
commencing on the second day of the calendar month preceding the calendar month
in which such Payment Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which are rated "AAA" or
"D-1+", as applicable, by DCR (if rated by DCR) and A-1 by S&P (or comparable
ratings if DCR and S&P are not the Rating Agencies) at the time any amounts are
held on deposit therein, (ii) an account or accounts the deposits in which are
fully insured by the
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FDIC or (iii) a trust account or accounts maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"Equity Certificates": The certificates evidencing the
beneficial ownership interest in the Issuer and executed by the Owner Trustee in
substantially the form set forth in Exhibit A to the Owner Trust Agreement.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"▇▇▇▇▇▇ ▇▇▇": ▇▇▇▇▇▇ ▇▇▇, formerly known as the Federal
National Mortgage Association ("FNMA") or any successor thereto.
"FDIC": Federal Deposit Insurance Corporation or any
successor thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller or the Servicer pursuant to or as contemplated by
Section 2.01 or Section 3.16(c)), a determination made by the Servicer that all
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.
"▇▇▇▇▇▇▇ Mac": ▇▇▇▇▇▇▇ Mac, formerly known as the Federal
Home Loan Mortgage Corporation ("FHLMC") or any successor thereto.
"Gross Margin": With respect to each Adjustable Rate Mortgage
Loan, the fixed percentage set forth in the related Mortgage Note that is added
to the Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Rate for such Mortgage Loan.
"Indenture Trustee": Norwest Bank Minnesota, National
Association, a national banking association, in its capacity as Indenture
Trustee, or its successor in interest, or any successor indenture trustee
appointed as provided in the Indenture.
"Indenture Trustee Fee": The amount payable to the Indenture
Trustee on each Payment Date pursuant to the Indenture as compensation for all
services rendered by it, which amount shall equal one twelfth of the product of
(i) the Indenture Trustee Fee Rate, multiplied by (ii) the aggregate Scheduled
Principal Balance of the Mortgage Loans and any REO Properties as of the second
preceding Due Date (or, in the case of the initial Payment Date, as of the
Cut-off Date).
"Indenture Trustee Fee Rate": 0.0035% per annum.
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"Index": With respect to each Adjustable Rate Mortgage Loan
and each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in THE
WALL STREET JOURNAL and as most recently available as of a date as specified in
the related Mortgage Note.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Issuer": Wilshire REIT Trust Series 1998-1, a Delaware
Business Trust, or its successor in interest.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Due Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any
of the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from the Trust Estate by reason of its being purchased, sold or
replaced pursuant to or as contemplated by Section 2.01 or Section 3.16(c). With
respect to any REO Property, a Final Recovery Determination is made as to such
REO Property.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan
through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.01, Section 3.16(c) or Section 3.23.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"Master Servicer": Wilshire Servicing Corporation or its
successor in interest, in its capacity as Master Servicer hereunder.
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"Master Servicing Fee": With respect to each Mortgage Loan
and for any calendar month, an amount equal to one month's interest (or in the
event of any payment of interest which accompanies a Principal Prepayment in
full made by the Mortgagor during such calendar month, interest for the number
of days covered by such payment of interest) at the applicable Master Servicing
Fee Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month.
"Master Servicing Fee Rate": 0.05% per annum.
"Maximum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
maximum Mortgage Rate thereunder.
"Minimum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
minimum Mortgage Rate thereunder.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
"Mortgage File": The file containing the Related Documents
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to the Mortgage Loan Purchase
Agreement or this Servicing Agreement.
"Mortgage Loan": Each mortgage loan identified in the
Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement, dated as
of September 1, 1998, among the Seller, the Transferor and the Issuer.
"Mortgage Loan Remittance Rate": With respect to any Mortgage
Loan or REO Property, as of any date of determination, the then applicable Net
Mortgage Rate in respect thereof plus the Indenture Trustee Fee Rate and the
Master Servicing Fee Rate.
"Mortgage Loan Schedule": As of any date, the list of
Mortgage Loans attached hereto as Schedule 1. The Mortgage Loan Schedule shall
set forth the following information with respect to each Mortgage Loan:
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(xxxiv) the Mortgage Loan identifying number;
(xxxv) the Mortgagor's name;
(xxxvi) the street address of the Mortgaged Property including the
state and zip code;
(xxxvii) a code indicating whether the Mortgaged Property is
owner-occupied;
(xxxviii) the type of Residential Dwelling constituting the Mortgaged
Property;
(xxxix) the original months to maturity;
(xl) the Loan-to-Value Ratio at origination;
(xli) the Mortgage Rate in effect immediately following the Cut-off
Date;
(xlii) the date on which the first Monthly Payment was due on the
Mortgage Loan;
(xliii) the stated maturity date;
(xliv) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
(xlv) the last Due Date on which a Monthly Payment was actually applied
to the unpaid Stated Principal Balance;
(xlvi) the original principal amount of the Mortgage Loan;
(xlvii) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xlviii) with respect to each Adjustable Rate Mortgage Loan, the Gross
Margin;
(xlix) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, rate/term refinancing, cash-out refinancing);
(l) with respect to each Adjustable Rate Mortgage Loan, the Maximum
Mortgage Rate;
(li) with respect to each Adjustable Rate Mortgage Loan, the Minimum
Mortgage Rate;
(lii) the Mortgage Rate at origination;
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(liii) with respect to each Adjustable Rate Mortgage Loan, the
Periodic Rate Cap and the maximum first Adjustment Date
Mortgage Rate adjustment;
(liv) a code indicating the documentation program;
(lv) with respect to each Adjustable Rate Mortgage Loan, the first
Adjustment Date immediately following the Cut-off Date;
(lvi) the risk grade;
(lvii) the Value of the Mortgaged Property;
(lviii) the sale price of the Mortgaged Property, if applicable; and
(lix) a code indicating whether there is a Prepayment Charge.
The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate as of the
Cut-off Date: (1) the number of Mortgage Loans; (2) the current principal
balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans. The
Mortgage Loan Schedule shall be amended from time to time by the Servicer in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date
for such Mortgage Loan, determined in accordance with the definition of Cut-off
Date herein.
"Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, without regard to
any reduction thereof as a result of a Debt Service
Reduction or operation of the Relief Act.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Most Senior Class": The Class A Notes, or after the Class A
Notes have been paid in full, the Class of Subordinate Notes then outstanding
with the lowest numerical designation.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable
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Mortgage Rate for such Mortgage Loan minus the sum of the Servicing Fee Rate,
the Indenture Trustee Fee Rate and the Master Servicing Fee Rate.
"Nonrecoverable P&I Advance": Any P&I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the good faith business judgment of the Servicer, will not or, in the case of a
proposed P&I Advance, would not be ultimately recoverable from related late
payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Note Balance": With respect to any Note, as of any date of
determination, the Note Balance of such Note on the Payment Date immediately
prior to such date of determination, minus all payments allocable to principal
made thereon and Realized Losses allocated thereto on such immediately prior
Payment Date (or, in the case of any date of determination up to and including
the initial Payment Date, the initial Note Balance of such Note, as stated on
the face thereof).
"Note Owner": With respect to a Book-Entry Note, the Person
who is the beneficial owner of such Note as reflected on the books of the
Depository or on the books of a Depository Participant or on the books of an
indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Note Register": The register maintained by the Note Registrar
in which the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.
"Note Registrar": The Indenture Trustee, in its capacity as
Note Registrar or its successor in interest, or any successor Note Registrar
appointed as provided in the Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is
registered in the Note Register, except that solely for the purposes of giving
any consent pursuant to the Indenture, the Owner Trust Agreement or the
Servicing Agreement, any Note registered in the name of the Seller, the
Depositor, the Issuer, the Master Servicer or the Servicer or any Affiliate
thereof shall be deemed not to be outstanding and the Voting Rights to which it
is entitled shall not be taken into account in determining whether the requisite
percentage of Voting Rights necessary to effect any such consent has been
obtained. The Indenture Trustee may conclusively rely upon a certificate of the
Seller, the Depositor, the Issuer, the Master Servicer or the Servicer in
determining whether a Note is held by an Affiliate thereof. All references
herein to "Holders" or "Noteholders" shall reflect the rights of Note Owners as
they may indirectly exercise such rights through the Depository and
participating members thereof, except as otherwise specified herein; provided,
however, that the Indenture Trustee shall be required to recognize as a "Holder"
or "Noteholder" only the Person in whose name a Note is registered in the Note
Register.
"Notes": Asset-Backed Floating Rate Notes, Series 1998-11,
designated as the "Notes" in the Indenture.
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"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Seller; with respect to the
Servicer or Master Servicer, any officer who is authorized to act for the
Servicer in matters relating to this Agreement, and whose action is binding upon
the Servicer or Master Servicer, as applicable, initially including those
individuals whose names appear on the list of authorized officers delivered at
the closing.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Issuer, the Master Servicer or
the Servicer acceptable to the Indenture Trustee, which acceptance shall not be
unreasonably withheld.
"Original Mortgage Loan": Any of the Mortgage Loans included
in the Trust Estate as of the Closing Date.
"Owner Trust Agreement": The Trust Agreement, dated as of
September 1, 1998, as amended and restated by the Amended and Restated Trust
Agreement, dated as of September 1, 1998, between the Owner Trustee and the
Depositor.
"Owner Trustee": Wilmington Trust Company and its successors
and assigns or any successor owner trustee appointed pursuant to the terms of
the Owner Trust Agreement.
"Payment Account": The trust account or accounts created and
maintained by the Indenture Trustee pursuant to Section 3.01 of the Indenture
which shall be entitled "Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
The Payment Account must be an Eligible Account.
"Payment Date": The 25th day of any month, or if such 25th day
is not a Business Day, the Business Day immediately following such 25th day,
commencing in October 1998.
"Percentage Interest": With respect to any Class of Notes, the
portion of the respective Class evidenced by such Note, expressed as a
percentage, the numerator of which is the initial Note Balance represented by
such Note, and the denominator of which is the initial aggregate Note Balance of
all of the Notes of such Class. The Notes are issuable only in Percentage
Interests corresponding to initial Note Balances of $10,000 and integral
multiples of $1.00 in excess thereof; provided, however that a single Note of
each Class may be issued having a Percentage Interest corresponding to the
remainder of the aggregate initial Note Balance of such Note or to an otherwise
authorized denomination for such Class plus such remainder.
"Periodic Rate Cap": With respect to each Adjustable Rate
Mortgage Loan and any Adjustment Date therefor, the fixed percentage set forth
in the related Mortgage Note, which is the maximum amount by which the Mortgage
Rate for such Mortgage Loan may increase or
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decrease (without regard to the Maximum Mortgage Rate or the Minimum Mortgage
Rate) on such Adjustment Date from the Mortgage Rate in effect immediately prior
to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Issuer, the Servicer, the Indenture Trustee
or any of their respective Affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United
States;
(ii) demand and time deposits in, certificates of
deposit of, or bankers' acceptances (which shall each have an original
maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days or a remaining maturity of more than 30 days) denominated in
United States dollars and issued by, any Depository Institution;
(iii) repurchase obligations with respect to any
security described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a
discount that are issued by any corporation incorporated under the laws
of the United States of America or any state thereof and that are rated
by each Rating Agency that rates such securities in its highest
long-term unsecured rating categories at the time of such investment or
contractual commitment providing for such investment;
(v) commercial paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than 30
days after the date of acquisition thereof) that is rated by each
Rating Agency that rates such securities in its highest short-term
unsecured debt rating available at the time of such investment;
(vi) units of money market funds, including money
market funds advised by the Indenture Trustee or an Affiliate thereof,
that have been rated "AAA" by DCR (if rated by DCR) and "AAA" by S&P;
and
(viii) if previously confirmed in writing to the
Indenture Trustee, any other demand, money market or time deposit, or
any other obligation, security or investment, as may be acceptable to
the Rating Agencies as a permitted investment of funds backing
securities having ratings equivalent to its highest initial rating of
the Class A Notes;
provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both
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principal and interest payments derived from obligations underlying such
instrument and 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.
"Person": Any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Servicer in respect of any Payment Date pursuant to Section
4.01.
"Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge collected by the Servicer from a
Mortgagor in connection with any Principal Prepayment pursuant to the terms of
the related Mortgage Note as from time to time held as a part of the Trust
Estate, the Prepayment Charges so held being identified in the Mortgage
Loan Schedule.
"Prepayment Interest Shortfall": With respect to any Payment
Date, for each Mortgage Loan that was during the related Prepayment Period the
subject of a Principal Prepayment in full or in part that was applied by the
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the Due Date in the succeeding Prepayment Period, an amount equal to
interest at the applicable Mortgage Loan Remittance Rate on the amount of such
Principal Prepayment for the number of days commencing on the date on which the
prepayment is applied and ending on the last day of the related Prepayment
Period. The obligations of the Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Payment Date, the
calendar month preceding the calendar month in which such Payment Date occurs.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest (without regard to
any prepayment charge that may have been collected by the Servicer in connection
with such payment of principal) representing the full amount of scheduled
interest due on any Due Date in any month or months subsequent to the month of
prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.01 or
Section 3.16(c), and as confirmed by an Officers' Certificate from the Master
Servicer to the Indenture Trustee, an amount equal to the sum of: (i) 100% of
the Stated Principal Balance thereof as of the date of purchase, (ii) in the
case of (x) a Mortgage Loan, accrued interest on such Stated Principal Balance
at the applicable Mortgage Loan Remittance Rate in effect from time to time from
the Due Date as to which interest was last covered by a payment by the Mortgagor
or an advance by the Servicer, which payment or advance had as of the date of
purchase been distributed pursuant to the Indenture, through the
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end of the calendar month in which the purchase is to be effected, and (y) an
REO Property, the sum of (1) accrued interest on such Stated Principal Balance
at the applicable Mortgage Loan Remittance Rate in effect from time to time from
the Due Date as to which interest was last covered by a payment by the Mortgagor
or an advance by the Servicer through the end of the calendar month immediately
preceding the calendar month in which such REO Property was acquired, plus (2)
REO Imputed Interest for such REO Property for each calendar month commencing
with the calendar month in which such REO Property was acquired and ending with
the calendar month in which such purchase is to be effected, minus the total of
all net rental income, Insurance Proceeds, Liquidation Proceeds and P&I Advances
that as of the date of purchase had been distributed as or to cover REO Imputed
Interest; (iii) any unreimbursed Servicing Advances and P&I Advances and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property; (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and Section 3.16(b);
and (v) in the case of a Mortgage Loan required to be purchased pursuant to
Section 2.01, expenses reasonably incurred or to be incurred by the Servicer or
the Indenture Trustee in respect of the breach or defect giving rise to the
purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Scheduled
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) with respect to each Adjustable Rate
Mortgage Loan, have a Maximum Mortgage Rate not less than the Maximum Mortgage
Rate on the Deleted Mortgage Loan, (iv) with respect to each Adjustable Rate
Mortgage Loan, have a Minimum Mortgage Rate not less than the Minimum Mortgage
Rate of the Deleted Mortgage Loan, (v) with respect to each Adjustable Rate
Mortgage Loan, have a Gross Margin equal to the Gross Margin of the Deleted
Mortgage Loan, (vi) with respect to each Adjustable Rate Mortgage Loan, have a
next Adjustment Date not more than two months later than the next Adjustment
Date on the Deleted Mortgage Loan, (vii) have a remaining term to maturity not
greater than (and not more than one year less than) that of the Deleted Mortgage
Loan, (viii) have the same Due Date as the Due Date on the Deleted Mortgage
Loan, (ix) have a Loan-to- Value Ratio as of the date of substitution equal to
or lower than the Loan-to-Value Ratio of the Deleted Mortgage Loan as of such
date, (x) have a risk grading determined by the Servicer at least equal to the
risk grading assigned on the Deleted Mortgage Loan and (xi) conform to each
representation and warranty set forth in Exhibit 2 to the Mortgage Loan Purchase
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Rates described in clause (ii) hereof
shall be determined on the basis of weighted average Mortgage Rates, the risk
gradings described in clause (x) hereof shall be satisfied as to each such
mortgage loan, the terms described in clause (vii) hereof shall be determined on
the basis of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (ix) hereof shall be satisfied as to
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each such mortgage loan and, except to the extent otherwise provided in this
sentence, the representations and warranties described in clause (xi) hereof
must be satisfied as to each Qualified Substitute Mortgage Loan or in the
aggregate, as the case may be.
"Rating Agency" or "Rating Agencies": DCR and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Issuer, notice of which
designation shall be given to the Indenture Trustee, the Master Servicer and the
Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made, an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Payment Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Section 3.11(ix) and Section 3.16(b), minus (iv) the proceeds,
if any, received in respect of such Mortgage Loan during the calendar month in
which such Final Recovery Determination was made, net of amounts that are
payable therefrom to the Servicer with respect to such Mortgage Loan pursuant to
Section 3.11(iii).
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Estate, plus (ii)
accrued interest from the Due Date as to which interest was last paid by the
Mortgagor in respect of the related Mortgage Loan through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, calculated in the case of each calendar month during such
period (A) at an annual rate equal to the annual rate at which interest was then
accruing on the related Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of the related Mortgage Loan as of the close of
business on the Payment Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Section 3.11(ix) and Section 3.16(b), minus
(v) the aggregate of all P&I Advances made by the Servicer in respect of such
REO Property or the related Mortgage Loan for which the Servicer has been or, in
connection with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.23 out of rental income, Insurance Proceeds and Liquidation
Proceeds received in respect of such REO Property, minus (vi) the total of all
net rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such
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REO Property that has been, or in connection with such Final Recovery
Determination, will be transferred to the Payment Account pursuant to Section
3.23.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as
reduced by the Deficient Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected
Monthly Payment.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Related Documents": With respect to each Mortgage Loan, the
documents specified in Section 2.4(b) of the Mortgage Loan Purchase Agreement
and Section 2.03 of the Indenture and any documents required to be added to such
documents pursuant to the Mortgage Loan Purchase Agreement, the Owner Trust
Agreement, the Indenture or the Servicing Agreement.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any Payment
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.
"Remittance Report": A report in form and substance that would
be acceptable to ▇▇▇▇▇▇ ▇▇▇ on a magnetic disk or tape prepared by the Servicer
pursuant to Section 4.01 with such additions, deletions and modifications as
agreed to by the Indenture Trustee and the
Servicer.
"REO Account": The account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Estate.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Estate, one month's interest at the applicable Mortgage Loan Remittance Rate on
the Stated Principal Balance of such REO Property (or, in the case of the first
such calendar month, of the related Mortgage Loan if appropriate) as of the
close of business on the Payment Date in such calendar month.
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"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds or otherwise, net of any
portion of such amounts (i) payable pursuant to Section 3.23(c) in respect of
the proper operation, management and maintenance of such REO Property or (ii)
payable or reimbursable to the Servicer pursuant to Section 3.23(d) for unpaid
Servicing Fees in respect of the related Mortgage Loan and unreimbursed
Servicing Advances and P&I Advances in respect of such REO Property or the
related Mortgage Loan, over (b) the REO Imputed Interest in respect of such REO
Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Servicer
on behalf of the Trust Estate through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit A-1 or Exhibit A-2 attached hereto.
"Residential Dwelling": Any one of the following: (i) an
attached or detached one-family dwelling, (ii) a detached two- to four-family
dwelling, (iii) a one-family dwelling unit in a ▇▇▇▇▇▇ Mae eligible condominium
project, or (iv) a detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, Section 5402(6)).
"Responsible Officer": When used with respect to the Indenture
Trustee, the Chairman or Vice Chairman of the Board of Directors or Trustees,
the Chairman or Vice Chairman of the Executive or Standing Committee of the
Board of Directors or Trustees, the President, the Chairman of the Committee on
Trust Matters, any vice president, any assistant vice president, the Secretary,
any assistant secretary, the Treasurer, any assistant treasurer, the Cashier,
any assistant cashier, any trust officer or assistant trust officer, the
Controller and any assistant controller or any other officer of the Indenture
Trustee customarily performing functions similar to those performed by any of
the above designated officers and, with respect to a particular matter, to whom
such matter is referred because of such officer's knowledge of and familiarity
with the particular subject.
"Scheduled Principal Balance": With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and
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Mortgage Note) on a Due Date occurring on or before the date on which such
proceeds were received and (iv) any Realized Loss incurred with respect thereto
as a result of a Deficient Valuation occurring before such Due Date, but only to
the extent such Realized Loss represents a reduction in the portion of principal
of such Mortgage Loan not yet due (without regard to any acceleration of
payments under the related Mortgage and Mortgage Note) as of the date of such
Deficient Valuation; and (c) as of any Due Date subsequent to the occurrence of
a Liquidation Event with respect to such Mortgage Loan, zero. With respect to
any REO Property: (a) as of any Due Date subsequent to the date of its
acquisition on behalf of the Trust Estate up to and including the Due Date in
the calendar month in which a Liquidation Event occurs with respect to such REO
Property, an amount (not less than zero) equal to the Scheduled Principal
Balance of the related Mortgage Loan as of the Due Date in the calendar month in
which such REO Property was acquired, minus the aggregate amount of REO
Principal Amortization, if any, in respect of such REO Property for all
previously ended calendar months; and (b) as of any Due Date subsequent to the
occurrence of a Liquidation Event with respect to such REO Property, zero.
"Seller": Wilshire Real Estate Investment Trust Inc. or its
successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Servicer": National Mortgage Corporation ("National") or any
successor servicer appointed as herein provided, in its capacity as Servicer
hereunder; provided, however, that with respect to the Mortgage Loans identified
on Part B of Schedule 1, the servicing will be transferred to the Master
Servicer on October 30, 1998.
"Servicer Event of Default": One or more of the events
described in Section 6.01.
"Servicer Remittance Date": With respect to any Payment Date,
3:00 p.m. New York time on the 18th day of the calendar month in which such
Payment Date occurs or, if such 18th day is not a Business Day, the Business Day
immediately preceding such 18th day; provided, however, that if such immediately
preceding Business Day is the Determination Date, the Servicer Remittance Date
shall be the next succeeding Business Day.
"Servicer Termination Test": With respect to any Payment Date,
the Servicer Termination Test will be failed if the Cumulative Loss Percentage
exceeds 5.75%; provided, however that such Servicer Termination Test shall not
apply if the Master Servicer becomes the Servicer in connection with the default
by National with regard to any Mortgage Loan listed on
Part A of Schedule 1 attached hereto.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of
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(i) the preservation, restoration and protection of a Mortgaged Property, (ii)
any enforcement or judicial proceedings, including foreclosures, in respect of a
particular Mortgage Loan, (iii) the management (including reasonable fees in
connection therewith) and liquidation of any REO Property, and (iv) the
performance of its obligations under Section 3.01, Section 3.09, Section 3.14,
Section 3.16 and Section 3.23. The Servicer shall not be required to make any
Servicing Advance in respect of a Mortgage Loan or REO Property that, in the
good faith business judgment of the Servicer, would not be ultimately
recoverable from related Insurance Proceeds or Liquidation Proceeds on such
Mortgage Loan or REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the applicable Servicing Fee Rate on the
same principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any employee of the Master Servicer or
Servicer involved in, or responsible for, the administration and servicing of
the Mortgage Loans, whose name and specimen signature appear on a list of
Servicing Officers furnished by the Master Servicer or Servicer, as applicable,
to the Indenture Trustee and the Issuer on the Closing Date, as such list may
from time to time be amended.
"S&P": Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or its successor in interest.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the Scheduled Principal Balance of such Mortgage Loan
as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the sum of
(i) the principal portion of each Monthly Payment due on a Due Date subsequent
to the Cut-off Date, to the extent received from the Mortgagor or advanced by
the Servicer and distributed pursuant to the Indenture on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent distributed pursuant to the Indenture on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Servicer as recoveries of principal in accordance with the provisions of
Section 3.16, to the extent distributed pursuant to the Indenture on or before
such date of determination, and (iv) any Realized Loss incurred with respect
thereto as a result of a Deficient Valuation made during or prior to the
Prepayment Period for the most recent Payment Date coinciding with or preceding
such date of determination; and (b) as of any date of determination coinciding
with or subsequent to the Payment Date on which the proceeds, if any, of a
Liquidation Event with respect to such Mortgage Loan would be distributed, zero.
With respect to any REO
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Property: (a) as of any date of determination up to but not including the
Payment Date on which the proceeds, if any, of a Liquidation Event with respect
to such REO Property would be distributed, an amount (not less than zero) equal
to the Stated Principal Balance of the related Mortgage Loan as of the date on
which such REO Property was acquired on behalf of the Trust Estate, minus the
sum of (i) if such REO Property was acquired before the Payment Date in any
calendar month, the principal portion of the Monthly Payment due on the Due Date
in the calendar month of acquisition, to the extent advanced by the Servicer and
distributed pursuant to the Indenture on or before such date of determination,
and (ii) the aggregate amount of REO Principal Amortization in respect of such
REO Property for all previously ended calendar months, to the extent distributed
pursuant to the Indenture on or before such date of determination; and (b) as of
any date of determination coinciding with or subsequent to the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such REO
Property would be distributed, zero.
"Stayed Funds": If the Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 6.02(b)) is prohibited by Section 362 of the federal Bankruptcy Code,
funds which are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such
Remittance absent such prohibition.
"Subordinate Note": Any Class M-1 Note, Class M-2 Note or
Class M-3 Note.
"Sub-Servicer": Any Person with which the Servicer has entered
into a Sub- Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub- Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.
"Transfer Date": October 30, 1998.
"Transferor": Wilshire REIT 1998-1, Inc.
"Trust Estate": The meaning specified in the Granting Clause
of the Indenture.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.
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"Value": With respect to any Mortgaged Property, the lesser of
(i) the value thereof as determined by an appraisal made for the originator of
the Mortgage Loan at the time of origination of the Mortgage Loan by an
appraiser who met the minimum requirements of ▇▇▇▇▇▇ Mae and ▇▇▇▇▇▇▇ Mac, and
(ii) the purchase price paid for the related Mortgaged Property by the Mortgagor
with the proceeds of the Mortgage Loan, provided, however, in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is based solely
upon the value determined by an appraisal made for the originator of such
Refinanced Mortgage Loan at the time of origination of such Refinanced Mortgage
Loan by an appraiser who met the minimum requirements of ▇▇▇▇▇▇ Mae and ▇▇▇▇▇▇▇
Mac.
"Voting Rights": The portion of the voting rights of all of
the Notes which is allocated to any Note. At all times during the term of this
Agreement, (i) 100% of all of the Voting Rights shall be allocated to the Most
Senior Class of Notes, in proportion to their then outstanding Note Balances.
All Voting Rights allocated to any Class of Notes shall be allocated among such
Notes PRO RATA in accordance with the respective Percentage Interests evidenced
thereby.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Enforcement of Representations and Warranties.
(a) Upon discovery by the Master Servicer, the Servicer, the
Indenture Trustee or the Issuer of any materially defective document in, or that
a document is missing from, a Mortgage File or of a breach of any of the
representations and warranties made by the Seller in the Mortgage Loan Purchase
Agreement in respect of any Mortgage Loan which materially adversely affects
such Mortgage Loan or the interests of the Noteholders in such Mortgage Loan (in
the case of any such representation or warranty made to the knowledge or the
best of knowledge of the Seller as to which the Seller has no knowledge, without
regard to the Seller's lack of knowledge with respect to the substance of such
representation or warranty being inaccurate at the time it was made), the party
discovering such breach shall give prompt written notice to the other parties.
The Indenture Trustee shall promptly notify the Seller of such defect, missing
document or breach and request that the Seller deliver such missing document or
cure such defect or breach within 90 days from the date the Seller was notified
of such missing document, defect or breach, and if the Seller does not deliver
such missing document or cure such defect or breach in all material respects
during such period, the Master Servicer shall enforce the obligations of the
Seller under the Mortgage Loan Purchase Agreement to repurchase such Mortgage
Loan from the Trust Estate at the Purchase Price within 90 days after the date
on which the Seller was notified of such missing document, defect or breach, if
and to the extent that the Seller is obligated to do so under the Mortgage Loan
Purchase Agreement. The Purchase Price for the repurchased Mortgage Loan shall
be deposited in the Collection Account. In lieu of repurchasing any such
Mortgage Loan as provided above, if so provided in the Mortgage Loan Purchase
Agreement, the Seller may cause such Mortgage Loan to be removed from the Trust
Estate (in which case it shall become a Deleted Mortgage Loan) and substitute
one or more Qualified Substitute Mortgage Loans.
Monthly Payments due with respect to Qualified Substitute
Mortgage Loans in the month of substitution are not part of the Trust Estate and
will be retained by the Seller. For the month of substitution, distributions to
Noteholders will reflect the Monthly Payment due on such Deleted Mortgage Loan
on or before the Due Date in the month of substitution, and the Seller shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Deleted Mortgage Loan. The Master Servicer shall give or cause to be given
written notice to the Noteholders that such substitution has taken place, shall
amend the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage
Loan from the terms of this Agreement and the substitution of the Qualified
Substitute Mortgage Loan or Loans and shall deliver a copy of such amended
Mortgage Loan Schedule to the Indenture Trustee and the Owner Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Trust Estate and shall be subject in all respects to the terms of
this Agreement and the Mortgage Loan
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Purchase Agreement, including all applicable representations and warranties
thereof included in the Mortgage Loan Purchase Agreement as of the date of
substitution.
For any month in which the Seller substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Master Servicer will determine the amount (with respect to each Qualified
Substitute Mortgage Loan, the "Substitution Shortfall Amount"), if any, by which
the Purchase Price of each such Deleted Mortgage Loan exceeds, as to each such
Qualified Substitute Mortgage Loan, the Scheduled Principal Balance thereof as
of the date of substitution, together with one month's interest on such
Scheduled Principal Balance at the applicable Mortgage Loan Remittance Rate. On
the date of such substitution the Seller will deliver or cause to be delivered
to the Master Servicer for deposit in the Collection Account an amount equal to
the applicable Substitution Shortfall Amounts, if any.
It is understood and agreed that the obligation of the Seller to cure
or to repurchase (or to substitute for) any Mortgage Loan as to which a document
is missing, a material defect in a constituent document exists or as to which
such a breach has occurred and is continuing shall constitute the sole remedy
respecting such omission, defect or breach available to the Issuer and the
Indenture Trustee, as pledgee of the Mortgage Loans, against the Seller. In
connection with the purchase of or substitution of any such Mortgage Loan by the
Seller, the Issuer shall assign to the Seller all of its right, title and
interest in respect of the Mortgage Loan Purchase Agreement applicable to such
Mortgage Loan. The Indenture Trustee or a Custodian on its behalf, upon receipt
of written certification from the Master Servicer of deposit of the Purchase
Price, in the case of a repurchased Mortgage Loan or upon receipt of the related
Qualified Substitute Mortgage Loan or Loans and certification from the Master
Servicer of deposit of the Substitution Shortfall Amount, shall release to the
Seller the related Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Seller shall furnish to it and as shall be necessary to vest in the Seller any
Mortgage Loan released pursuant hereto, and the Indenture Trustee shall have no
further responsibility with regard to such Mortgage File.
(b)(i) Within 90 days of the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in Section
2.03(a) which materially and adversely affects the interests of the Noteholders
in any Mortgage Loan, the Servicer shall cure such breach in all material
respects.
(ii) Within 90 days of the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in Section
2.03(a) which materially and adversely affects the interests of the
Certificateholders to any Prepayment Charge, the Servicer shall cure such breach
in all material respects. If the representation made by the Servicer in Section
2.03(a)(vii) is breached, the Servicer must pay into the Collection Account the
amount of the scheduled Prepayment Charge, less any amount collected and paid by
the Servicer into the Collection Account; and if the covenant made by the
Servicer in Section 2.03(a)(viii) is breached, the Servicer must pay into the
Collection Account the amount of the waived Prepayment Charge.
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(iii) Within 90 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.03(b) which materially and adversely affects the interests of the Noteholders
in any Mortgage Loan, the Master Servicer shall cure such breach in all material
respects.
SECTION 2.02. Existence.
The Issuer will keep in full force and effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware and will obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary
to protect the validity and enforceability of this Agreement.
SECTION 2.03. Representations, Warranties and Covenants of the
Servicer and the Master Servicer.
(a) The Servicer hereby represents, warrants and covenants to
the Issuer, the Seller, the Indenture Trustee and the Noteholders that as of the
Closing Date or as of such date specifically provided herein:
(i) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Colorado and is duly authorized and qualified to
transact any and all business contemplated by this Agreement
to be conducted by the Servicer in any state in which a
Mortgaged Property is located or is otherwise not required
under applicable law to effect such qualification and, in any
event, is in compliance with the doing business laws of any
such State, to the extent necessary to ensure its ability to
enforce each Mortgage Loan and to service the Mortgage Loans
in accordance with the terms of this Agreement;
(ii) The Servicer has the full corporate power and
authority to service each Mortgage Loan, and to execute,
deliver and perform, and to enter into and consummate the
transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of
the Servicer the execution, delivery and performance of this
Agreement; and this Agreement, assuming the due authorization,
execution and delivery thereof by the Issuer and the Indenture
Trustee, constitutes a legal, valid and binding obligation of
the Servicer, enforceable against the Servicer in accordance
with its terms, except to the extent that (a) the
enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws
relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and
to the discretion of the court before which any proceeding
therefor may be brought;
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(iii) The execution and delivery of this Agreement by the
Servicer, the servicing of the Mortgage Loans by the Servicer
hereunder, the consummation of any other of the transactions
herein contemplated, and the fulfillment of or compliance with
the terms hereof are in the ordinary course of business of the
Servicer and will not (A) result in a breach of any term or
provision of the charter or by-laws of the Servicer or (B)
conflict with, result in a breach, violation or acceleration
of, or result in a default under, the terms of any other
material agreement or instrument to which the Servicer is a
party or by which it may be bound, or any statute, order or
regulation applicable to the Servicer of any court, regulatory
body, administrative agency or governmental body having
jurisdiction over the Servicer; and the Servicer is not a
party to, bound by, or in breach or violation of any indenture
or other agreement or instrument, or subject to or in
violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body
having jurisdiction over it, which materially and adversely
affects or, to the Servicer's knowledge, would in the future
materially and adversely affect, (x) the ability of the
Servicer to perform its obligations under this Agreement or
(y) the business, operations, financial condition, properties
or assets of the Servicer taken as a whole;
(iv) The Servicer is an approved seller/servicer for
▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇ Mac in good standing and is a HUD
approved mortgagee pursuant to Section 203 of the National
Housing Act;
(v) No litigation is pending against the Servicer that
would materially and adversely affect the execution, delivery
or enforceability of this Agreement or the ability of the
Servicer to service the Mortgage Loans or to perform any of
its other obligations hereunder in accordance with the terms
hereof;
(vi) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Servicer of, or
compliance by the Servicer with, this Agreement or the
consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations
or orders, if any, that have been obtained prior to the
Closing Date;
(vii) The amount of each Prepayment Charge is as set
forth in the related Mortgage Note and each Prepayment Charge
is permissible and enforceable in accordance with its terms
(except to the extent that the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership
and other similar laws relating to creditors' rights
generally) under applicable state law; and
(viii) The Servicer will not waive any Prepayment Charge
or part of a Prepayment Charge unless such waiver would
maximize recovery of total proceeds taking into account the
value of such Prepayment Charge and related Mortgage
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Loan and doing so is standard and customary in servicing
similar Mortgage Loans (including any waiver of a Prepayment
Charge in connection with a refinancing of a Mortgage Loan
that is related to a default or a reasonably foreseeable
default) and in no event will it waive a Prepayment Charge in
connection with a refinancing of a Mortgage Loan that is not
related to a default or a reasonably foreseeable default.
(b) The Master Servicer hereby represents, warrants and
covenants to the Issuer, the Seller, the Indenture Trustee and the Noteholders
that as of the Closing Date or as of such date
specifically provided herein:
(i) The Master Servicer is duly organized, validly
existing and in good standing as a Delaware corporation under
the laws of the State of Delaware and is and will remain in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of the
Mortgage Loans in accordance with the terms of this Agreement.
(ii) The Master Servicer has the full power and
authority to conduct its business as presently conducted by it
and to execute, deliver and perform, and to enter into and
consummate, all transactions contemplated by this Agreement.
The Master Servicer has duly authorized the execution,
delivery and performance of this Agreement, has duly executed
and delivered this Agreement, and this Agreement, assuming due
authorization, execution and delivery by each of the other
parties hereto, constitutes a legal, valid and binding
obligation of the Master Servicer, enforceable against it in
accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar
laws affecting the enforcement of creditors' rights generally
and by general principles of equity.
(iii) The execution and delivery of this Agreement by the
Master Servicer and the performance of and compliance with the
terms of this Agreement will not (a) violate the Master
Servicer's charter or by-laws or any law, rule, regulation,
order, judgment, award, administrative interpretation,
injunction, writ, decree or the like affecting the Master
Servicer or by which the Master Servicer is bound or (b)
result in a breach of or constitute a default under any
indenture or other material agreement to which the Master
Servicer is a party or by which the Master Servicer is bound,
which in the case of either clause (a) or (b) will have a
material adverse effect on the Master Servicer's ability to
perform its obligations under this Agreement.
(iv) The Master Servicer or one of its Affiliates is an
approved servicer for ▇▇▇▇▇▇ Mae in good standing. No event
has occurred, including but not limited to a change in
insurance coverage, which would make such party unable to
comply with ▇▇▇▇▇▇▇ Mac or ▇▇▇▇▇▇ Mae (as applicable)
eligibility requirements or which would require notification
to ▇▇▇▇▇▇▇ Mac or ▇▇▇▇▇▇ Mae (as applicable).
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(v) The Master Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform
each and every covenant applicable to it contained in this
Agreement.
(vi) There are no actions or proceedings against or
investigations known to the Master Servicer before any court,
administrative or other tribunal that (A) might prohibit its
entering into this Agreement, (B) seek to prevent the
consummation of the transactions contemplated by this
Agreement or (C) might prohibit or materially and adversely
affect the performance by the Master Servicer of its
obligations under, or the validity or enforceability of, this
Agreement.
(vii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Master Servicer of,
or the compliance by the Master Servicer with, this Agreement,
except for such consents, approvals, authorizations or orders,
if any, that have been obtained prior to the Closing Date;
(viii) No litigation is pending or, to the best of the
Master Servicer's knowledge, threatened against the Master
Servicer which would prohibit the Master Servicer from
entering into this Agreement or, in the Master Servicer's good
faith reasonable judgment, is likely to materially and
adversely affect either the ability of the Master Servicer to
perform its obligations under this Agreement or the financial
condition of the Master Servicer.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.03 shall survive delivery
of the Mortgage Files to the Indenture Trustee or to a Custodian, as the case
may be, and shall inure to the benefit of the Indenture Trustee, the Seller, the
Issuer and the Noteholders. Upon discovery by any of the Issuer, the Master
Servicer, the Servicer or the Indenture Trustee of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan, Prepayment Charge or the
interests therein of the Noteholders or Certificateholders, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to the Indenture Trustee.
Subject to Section 6.01, the obligations of the Master Servicer and the Servicer
set forth in Section 2.01(b) to cure breaches shall constitute the sole remedies
against the Master Servicer or the Servicer, as applicable, available to the
Noteholders, the Certificateholders, the Issuer or the Indenture Trustee on
behalf of the Noteholders respecting a breach of the representations, warranties
and covenants contained in this Section 2.03.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on behalf
of the Indenture Trustee and in the best interests of and for the benefit of the
Noteholders (as determined by the Servicer in its reasonable judgment) in
accordance with the terms of this Agreement and the respective Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which it
services and administers similar mortgage loans for its own portfolio, giving
due consideration to customary and usual standards of practice of prudent
mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:
(i) any relationship that the Servicer, any
Sub-Servicer or any Affiliate of the Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Note by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make P&I Advances or
Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to
receive compensation for its services hereunder or with
respect to any particular transaction.
To the extent consistent with the foregoing, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Indenture Trustee when the Servicer believes it appropriate in its best judgment
in accordance with the servicing standards set forth above, to execute and
deliver, on behalf of the Noteholders and the Indenture Trustee, and upon notice
to the Indenture Trustee, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and the Mortgaged
Properties and to institute foreclosure proceedings or obtain a deed-in-lieu of
foreclosure so as to convert the ownership of such properties, and to hold or
cause to be held title to such properties, on behalf of the Indenture Trustee
and Noteholders. The Servicer shall service
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and administer the Mortgage Loans in accordance with applicable state and
federal law and shall provide to the Mortgagors any reports required to be
provided to them thereby. The Servicer shall also comply in the performance of
this Agreement with all reasonable rules and requirements of each insurer under
any standard hazard insurance policy. Subject to Section 3.17, the Indenture
Trustee shall execute, at the written request of the Servicer, and furnish to
the Servicer and any Sub-Servicer such documents as are necessary or appropriate
to enable the Servicer or any Sub- Servicer to carry out their servicing and
administrative duties hereunder, and the Indenture Trustee hereby grants to the
Servicer a power of attorney to carry out such duties including a power of
attorney to take title to Mortgaged Properties after foreclosure on behalf of
the Indenture Trustee and the Noteholders. The Indenture Trustee shall execute a
separate power of attorney in favor of the Servicer for the purposes described
herein to the extent necessary or desirable to enable the Servicer to perform
its duties hereunder. The Indenture Trustee shall not be liable for the actions
of the Servicer or any Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph,
the Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be Servicing Advances reimbursable in
the first instance from related collections from the Mortgagors pursuant to
Section 3.09, and further as provided in Section 3.11. Any cost incurred by the
Servicer or by Sub-Servicers in effecting the timely payment of taxes and
assessments on a Mortgaged Property shall not, for the purpose of calculating
distributions to Noteholders, be added to the unpaid principal balance of the
related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so
permit.
Notwithstanding anything in this Agreement to the contrary,
the Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.01) and the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in default
with respect to the Mortgage Loan or such default is, in the judgment of the
Servicer, reasonably foreseeable).
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities
arising under this Agreement.
SECTION 3.02. Sub-Servicing Agreements Between the Servicer
and Sub- Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements
(provided that such agreements would not result in a withdrawal or a downgrading
by any Rating Agency of the rating on any Class of Notes) with Sub-Servicers,
for the servicing and administration of the Mortgage Loans. Notwithstanding the
foregoing, in connection with the transfer of servicing to the Master
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Servicer on the Transfer Date, the Master Servicer as successor Servicer can
appoint Wilshire Credit Corporation ("WCC") as a Sub-Servicer without any
approval.
Each Sub-Servicer shall be (i) authorized to transact business
in the state or states in which the related Mortgaged Properties it is to
service are situated, if and to the extent required by applicable law to enable
the Sub-Servicer to perform its obligations hereunder and under the
Sub-Servicing Agreement, (ii) an institution approved as a mortgage loan
originator by the Federal Housing Administration or an institution the deposit
accounts of which are insured by the FDIC and (iii) a ▇▇▇▇▇▇▇ Mac or ▇▇▇▇▇▇ Mae
approved mortgage servicer. Each Sub-Servicing Agreement must impose on the
Sub-Servicer requirements conforming to the provisions set forth in Section 3.08
and provide for servicing of the Mortgage Loans consistent with the terms of
this Agreement. The Servicer will examine each Sub-Servicing Agreement and will
be familiar with the terms thereof. The terms of any Sub-Servicing Agreement
will not be inconsistent with any of the provisions of this Agreement. The
Servicer and the Sub-Servicers may enter into and make amendments to the
Sub-Servicing Agreements or enter into different forms of Sub-Servicing
Agreements; provided, however, that any such amendments or different forms shall
be consistent with and not violate the provisions of this Agreement, and that no
such amendment or different form shall be made or entered into which could be
reasonably expected to be materially adverse to the interests of the
Noteholders, without the consent of the Holders of Notes entitled to at least
66% of the Voting Rights. Any variation without the consent of the Holders of
Notes entitled to at least 66% of the Voting Rights from the provisions set
forth in Section 3.08 relating to insurance or priority requirements of
Sub-Servicing Accounts, or credits and charges to the Sub- Servicing Accounts or
the timing and amount of remittances by the Sub-Servicers to the Servicer, are
conclusively deemed to be inconsistent with this Agreement and therefore
prohibited. The Servicer shall deliver to the Master Servicer, the Indenture
Trustee and the Owner Trustee copies of all Sub-Servicing Agreements, and any
amendments or modifications thereof, promptly upon the Servicer's execution and
delivery of such instruments (other than any Sub-Servicing Agreement between the
Master Servicer and WCC).
(b) As part of its servicing activities hereunder, the
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Indenture Trustee and the Noteholders, shall enforce the
obligations of each Sub-Servicer under the related Sub- Servicing Agreement and
of the Seller under the Mortgage Loan Purchase Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase a Mortgage Loan on account
of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.01(a). Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements, and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The Servicer shall pay the costs of
such enforcement at its own expense, and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement, to the extent, if any,
that such recovery exceeds all amounts due in respect of the related Mortgage
Loans, or (ii) from
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a specific recovery of costs, expenses or attorneys' fees against the party
against whom such enforcement is directed.
SECTION 3.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement and the rights and obligations of any Sub-Servicer pursuant to any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement. In the event of termination of any Sub-Servicer, all
servicing obligations of such Sub-Servicer shall be assumed simultaneously by
the Servicer without any act or deed on the part of such Sub-Servicer or the
Servicer, and the Servicer either shall service directly the related Mortgage
Loans or shall enter into a Sub-Servicing Agreement with a successor
Sub-Servicer which qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that
such agreement may be immediately terminated by the Indenture Trustee without
fee, in accordance with the terms of this Agreement, in the event that the
Servicer shall, for any reason, no longer be the Servicer
(including termination due to a Servicer Event of Default).
SECTION 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee and the Noteholders for the servicing and administering of the
Mortgage Loans in accordance with the provisions of Section 3.01 without
diminution of such obligation or liability by virtue of such Sub-Servicing
Agreements or arrangements or by virtue of indemnification from the Sub-Servicer
and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Mortgage Loans. The Servicer
shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Servicer by such Sub-Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Indenture Trustee, Issuer or
Noteholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Indenture Trustee, Issuer and Noteholders shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Sub-Servicer except as set forth in Section
3.06. The Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Servicer's compensation pursuant to
this Agreement is sufficient to pay such fees.
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SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Indenture Trustee.
In the event the Servicer shall for any reason no longer be
the servicer (including by reason of the occurrence of a Servicer Event of
Default), the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee or its designee) shall thereupon assume all of the rights and
obligations of the Servicer under each Sub-Servicing Agreement that the Servicer
may have entered into, unless the Master Servicer (or if the Master Servicer is
the Servicer, the Indenture Trustee or its designee) elects to terminate any
Sub-Servicing Agreement in accordance with its terms as provided in Section
3.03. Upon such assumption, the Master Servicer (or the Indenture Trustee, its
designee or the successor servicer for the Indenture Trustee appointed pursuant
to Section 6.02) shall be deemed, subject to Section 3.03, to have assumed all
of the Servicer's interest therein and to have replaced the Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each Sub-Servicing
Agreement had been assigned to the assuming party, except that (i) the Servicer
shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement and (ii) none of the Master Servicer, the Indenture
Trustee, its designee or any successor Servicer, as applicable, shall be deemed
to have assumed any liability or obligation of the Servicer that arose before it
ceased to be the Servicer.
The Servicer at its expense shall, upon request of the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee),
deliver to the assuming party all documents and records relating to each
Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
SECTION 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any applicable insurance policies, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Servicer may in its discretion (i) waive any late payment
charge or, if applicable, penalty interest, or (ii) extend the due dates for
Monthly Payments due on a Mortgage Note for a period of not greater than 180
days; provided that any extension pursuant to clause (ii) above shall not affect
the amortization schedule of any Mortgage Loan for purposes of any computation
hereunder, except as provided below. In the event of any such arrangement
pursuant to clause (ii) above, the Servicer shall make timely advances on such
Mortgage Loan during such extension pursuant to Section 4.01 and in accordance
with the amortization schedule of such Mortgage Loan without modification
thereof by reason of such arrangements. Notwithstanding the foregoing, in the
event that any Mortgage Loan is in default or, in the judgment of the Servicer,
such default is reasonably foreseeable, the Servicer, consistent with the
standards set forth in Section 3.01, may also, waive, modify or vary any term of
such Mortgage Loan (including modifications that would change the
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Mortgage Rate, forgive the payment of principal or interest or extend the final
maturity date of such Mortgage Loan), accept payment from the related Mortgagor
of an amount less than the Stated Principal Balance in final satisfaction of
such Mortgage Loan (such payment, a "Short Payoff") or consent to the
postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor.
SECTION 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage
Loan pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer shall deposit in the clearing account (which account
must be an Eligible Account) in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Sub-Servicer's receipt thereof, all proceeds of Mortgage Loans received by
the Sub-Servicer less its servicing compensation to the extent permitted by the
Sub-Servicing Agreement, and shall thereafter deposit such amounts in the
Sub-Servicing Account, in no event more than two Business Days after the deposit
of such funds into the clearing account. The Sub-Servicer shall thereafter
deposit such proceeds in the Collection Account or remit such proceeds to the
Servicer for deposit in the Collection Account not later than two Business Days
after the deposit of such amounts in the Sub-Servicing Account. For purposes of
this Agreement, the Servicer shall be deemed to have received payments on the
Mortgage Loans when the Sub- Servicer receives such payments.
SECTION 3.09. Collection of Taxes, Assessments and Similar
Items; Servicing Accounts.
The Servicer shall establish and maintain one or more accounts
(the "Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub- Servicers) for the payment of taxes, assessments,
hazard insurance premiums and comparable items for the account of the Mortgagors
("Escrow Payments") shall be deposited and retained. Servicing Accounts shall be
Eligible Accounts. The Servicer shall deposit in the clearing account (which
account must be an Eligible Account) in which it customarily deposits payments
and collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Servicer's receipt thereof, all Escrow Payments collected on account of the
Mortgage Loans and shall thereafter deposit such Escrow Payments in the
Servicing Accounts, in no event more than two Business Days after the deposit of
such funds in the clearing account, for the purpose of effecting the payment of
any such items as required under the terms of this Agreement. Withdrawals of
amounts from a Servicing Account may be made only to (i) effect payment of
taxes, assessments, hazard insurance premiums, and comparable items; (ii)
reimburse the Servicer (or a Sub-Servicer to the extent provided in the related
Sub-Servicing Agreement) out of related collections for any advances made
pursuant to Section 3.01 (with respect to taxes and assessments) and Section
3.14 (with respect to hazard
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insurance); (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; (v) clear and terminate the Servicing
Account at the termination of the Servicer's obligations and responsibilities in
respect of the Mortgage Loans under this Agreement in accordance with Article
VII; or (vi) recover amounts deposited in error. As part of its servicing
duties, the Servicer or Sub-Servicers shall pay to the Mortgagors interest on
funds in Servicing Accounts, to the extent required by law and, to the extent
that interest earned on funds in the Servicing Accounts is insufficient, to pay
such interest from its or their own funds, without any reimbursement therefor.
To the extent that a Mortgage does not provide for Escrow Payments, the Servicer
shall determine whether any such payments are made by the Mortgagor in a manner
and at a time that avoids the loss of the Mortgaged Property due to a tax sale
or the foreclosure of a tax lien. The Servicer assumes full responsibility for
the payment of all such bills and shall effect payments of all such bills
irrespective of the Mortgagor's faithful performance in the payment of same or
the making of the Escrow Payments and shall make advances from its own funds to
effect such payments.
SECTION 3.10. Collection Account.
(a) On behalf of the Trust Estate, the Servicer shall
establish and maintain one or more accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Indenture Trustee
and the Noteholders. On behalf of the Trust Estate, the Servicer shall deposit
or cause to be deposited in the clearing account (which account must be an
Eligible Account) in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the deposit of such funds into the
clearing account, as and when received or as otherwise required hereunder, the
following payments and collections received or made by it subsequent to the
Cut-off Date (other than in respect of principal or interest on the related
Mortgage Loans due on or before the Cut-off Date), or payments (other than
Principal Prepayments) received by it on or prior to the Cut-off Date but
allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property);
(iv) any amounts required to be deposited pursuant to
Section 3.12 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account;
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(v) any amounts required to be deposited by the
Servicer pursuant to the second paragraph of Section 3.14(a)
in respect of any blanket policy deductibles;
(vi) all proceeds of any Mortgage Loan repurchased or
purchased in accordance with Section 2.01;
(vii) all amounts remitted by the Seller in connection
with shortfalls in principal amount of Qualified Substitute
Mortgage Loans pursuant to Section 2.01; and
(viii) all Prepayment Charges collected by the Servicer in
connection with the Principal Prepayments of any of the
Mortgage Loans.
The foregoing requirements for deposit in the Collection
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late payment
charges or assumption fees need not be deposited by the Servicer in the
Collection Account but may be retained by the Servicer as additional
compensation. In the event the Servicer shall deposit in the Collection Account
any amount not required to be deposited therein, it may at any time withdraw
such amount from the Collection Account, any provision herein to the contrary
notwithstanding.
(b) On behalf of the Trust Estate, the Servicer shall deliver
to the Indenture Trustee in immediately available funds for deposit in the
Payment Account on or before 3:00 p.m. New York time (i) on the Servicer
Remittance Date, that portion of the Available Payment Amount (calculated
without regard to the references in clause (2) of the definition thereof to
amounts that may be withdrawn from the Payment Account) for the related Payment
Date then on deposit in the Collection Account and the amount of all Prepayment
Charges collected by the Servicer in connection with Principal Prepayments of
any of the Mortgage Loans then on deposit in the Collection Account, and (ii) on
each Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Servicer shall, on or
before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Servicer,
the Indenture Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11
and shall pay such amounts to the Persons entitled thereto.
(c) Funds in the Collection Account may be invested in
Permitted Investments in accordance with the provisions set forth in Section
3.12. The Servicer shall give notice to the
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Master Servicer and the Indenture Trustee of the location of the Collection
Account maintained by it when established and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Indenture Trustee for deposit in an account
(which may be the Payment Account and must satisfy the standards for the Payment
Account as set forth in the definition thereof) and for all purposes of this
Agreement shall be deemed to be a part of the Collection Account; provided,
however, that the Indenture Trustee shall have the sole authority to withdraw
any funds held pursuant to this subsection (d). In the event the Servicer shall
deliver to the Indenture Trustee for deposit in the Payment Account any amount
not required to be deposited therein, it may at any time request that the
Indenture Trustee withdraw such amount from the Payment Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Servicer shall deliver to the Indenture Trustee from time to time
for deposit, and the Indenture Trustee shall so deposit, in the Payment Account:
(i) any P&I Advances, as required pursuant to Section
4.01;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
(iii) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfalls; and
(iv) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters.
(e) Promptly upon receipt of any Stayed Funds, whether from
the Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Indenture Trustee shall deposit such funds in the Payment Account,
subject to withdrawal thereof pursuant to Section
6.02(b) or as otherwise permitted hereunder.
SECTION 3.11. Withdrawals from the Collection Account.
(a) The Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.01:
(i) to remit to the Indenture Trustee for deposit in
the Payment Account the amounts required to be so remitted
pursuant to Section 3.10(b) or permitted to be so remitted
pursuant to the first sentence of Section 3.10(d);
(ii) subject to Section 3.16(d), to reimburse the
Servicer or Master Servicer, as the case may be, for P&I
Advances, but only to the extent of amounts received which
represent Late Collections (net of the related Servicing Fees)
of
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Monthly Payments on Mortgage Loans with respect to which such
P&I Advances were made in accordance with the provisions of
Section 4.01;
(iii) subject to Section 3.16(d), to pay the Master
Servicer, the Servicer or any Sub-Servicer any unpaid
Servicing Fees and reimburse any unreimbursed Servicing
Advances with respect to each Mortgage Loan, but only to the
extent of any Liquidation Proceeds, Insurance Proceeds or
other amounts as may be collected by the Servicer from a
Mortgagor, or otherwise received with respect to such Mortgage
Loan;
(iv) to pay to the Servicer as servicing compensation
(in addition to the Servicing Fee) on the Servicer Remittance
Date any interest or investment income earned on funds
deposited in the Collection Account;
(v) to pay to the Servicer or the Seller, as the case
may be, with respect to each Mortgage Loan that has previously
been purchased or replaced pursuant to Section 2.01 or Section
3.16(c) all amounts received thereon subsequent to the date of
purchase or substitution, as the case may be;
(vi) to reimburse the Servicer for any P&I Advance
previously made which the Servicer has determined to be a
Nonrecoverable P&I Advance in accordance with the provisions
of Section 4.01;
(vii) to reimburse the Servicer for expenses incurred
by or reimbursable to the Servicer pursuant to Section 5.03;
(viii) to reimburse the Servicer for expenses
reasonably incurred in respect of the breach or defect giving
rise to the purchase obligation under Section 2.01 of this
Agreement that were included in the Purchase Price of the
Mortgage Loan, including any expenses arising out of the
enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Servicer for advances
in respect of, expenses incurred in connection with any
Mortgage Loan pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account upon
a termination pursuant to Section 8.08.
The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (iv), (v), (vi), (viii) and (ix) above.
The Servicer shall provide written notification to the Indenture Trustee, on or
prior to the next succeeding Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclause (vii) above.
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SECTION 3.12. Investment of Funds in the Collection Account.
(a) The Servicer may direct any depository institution
maintaining the Collection Account (for purposes of this Section 3.12, an
"Investment Account") to invest the funds in such Investment Account in one or
more Permitted Investments bearing interest or sold at a discount, and maturing,
unless payable on demand, (i) no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Indenture Trustee
is the obligor thereon, and (ii) no later than the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if the
Indenture Trustee is the obligor thereon. All such Permitted Investments shall
be held to maturity, unless payable on demand.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account held by or on behalf of the Servicer, shall
be for the benefit of the Servicer and shall be subject to its withdrawal in
accordance with Section 3.11. The Servicer shall deposit in the Collection
Account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the least of (i) the current
principal balance of such Mortgage Loan, (ii) the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis and (iii) the maximum insurable value of
the improvements which are a part of such Mortgaged Property, in each case in an
amount not less than such amount as is necessary to avoid the application of any
coinsurance clause contained in the related hazard insurance policy. The
Servicer shall also cause to be maintained fire insurance with extended coverage
on each REO Property in an amount which is at least equal to the lesser of (i)
the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage Loan
at the time it became an REO Property, plus accrued interest at the Mortgage
Rate and related Servicing Advances. The Servicer will comply in the performance
of this Agreement with all reasonable rules and requirements of each insurer
under any such hazard policies. Any amounts to be collected by the Servicer
under any such policies (other than amounts to be applied to the restoration or
repair of the property subject to the related Mortgage or amounts to be released
to the Mortgagor in accordance with the procedures that the Servicer would
follow in servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if received
in respect of a Mortgage Loan, or in the REO Account, subject to withdrawal
pursuant to Section
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3.23, if received in respect of an REO Property. Any cost incurred by the
Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Noteholders, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit. It is understood and agreed that no earthquake or other
additional insurance is to be required of any Mortgagor other than pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance. If the Mortgaged Property or REO
Property is at any time in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, the
Servicer will cause to be maintained a flood insurance policy in respect
thereof. Such flood insurance shall be in an amount equal to the lesser of (i)
the unpaid principal balance of the related Mortgage Loan and (ii) the maximum
amount of such insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program).
In the event that the Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's Key Rating Guide (or such other rating that is comparable to such
rating) insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.14, it being understood and agreed that
such policy may contain a deductible clause, in which case the Servicer shall,
in the event that there shall not have been maintained on the related Mortgaged
Property or REO Property a policy complying with the first two sentences of this
Section 3.14, and there shall have been one or more losses which would have been
covered by such policy, deposit to the Collection Account from its own funds the
amount not otherwise payable under the blanket policy because of such deductible
clause. In connection with its activities as administrator and servicer of the
Mortgage Loans, the Servicer agrees to prepare and present, on behalf of itself,
the Indenture Trustee and Noteholders, claims under any such blanket policy in a
timely fashion in accordance with the terms of such policy.
(b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and omissions for
failure in the performance of the Servicer's obligations under this Agreement,
which policy or policies shall be in such form and amount that would meet the
requirements of ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac if it were the purchaser of the
Mortgage Loans, unless the Servicer has obtained a waiver of such requirements
from ▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇ Mac. The Servicer shall also maintain a fidelity bond
in the form and amount that would meet the requirements of ▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇
Mac, unless the Servicer has obtained a waiver of such requirements from ▇▇▇▇▇▇
Mae or ▇▇▇▇▇▇▇ Mac. The Servicer shall provide the Indenture Trustee (upon the
Indenture Trustee's reasonable request) with copies of any such insurance
policies and fidelity bond. The Servicer shall be deemed to have complied with
this provision if an Affiliate of the Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Servicer. Any such errors
and omissions policy and fidelity bond shall by its terms not be cancelable
without thirty days' prior written notice to the Indenture Trustee. The Servicer
shall also cause each Sub-Servicer to maintain a policy of insurance covering
errors and omissions and a fidelity bond which would meet such requirements.
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SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, or if any of the other conditions set
forth in the proviso to the preceding sentence apply, the Servicer will enter
into an assumption and modification agreement from or with the person to whom
such property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Servicer is
also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the underwriting criteria of the Servicer and has a credit risk
rating at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual in its
general mortgage servicing activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy, or a new policy meeting
the requirements of this Section is obtained. Any fee collected by the Servicer
in respect of an assumption or substitution of liability agreement will be
retained by the Servicer as additional servicing compensation. In connection
with any such assumption, no material term of the Mortgage Note (including but
not limited to the related Mortgage Rate and the amount of the Monthly Payment)
may be amended or modified, except as otherwise required pursuant to the terms
thereof. The Servicer shall notify the Indenture Trustee and any respective
Custodian that any such substitution or assumption agreement has been completed
by forwarding to the Indenture Trustee or to such Custodian, as the case may be,
the executed original of such substitution or assumption agreement, which
document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.15, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
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SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall, consistent with the servicing standard
set forth in Section 3.01, foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The Servicer shall
be responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be recoverable
as Servicing Advances by the Servicer as contemplated in Section 3.11 and
Section 3.23. The foregoing is subject to the provision that, in any case in
which Mortgaged Property shall have suffered damage from an Uninsured Cause, the
Servicer shall not be required to expend its own funds toward the restoration of
such property unless it shall determine in its sole and absolute discretion that
such restoration will increase the proceeds of liquidation of the related
Mortgage Loan after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Indenture Trustee, either (i)
obtain title to such Mortgaged Property as a result of or in lieu of foreclosure
or otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Indenture Trustee, the Trust Estate or the Noteholders would be considered
to hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended from
time to time, or any comparable law, unless the Servicer has also previously
determined, based on its reasonable judgment and a report prepared by a Person
who regularly conducts environmental audits using customary industry standards,
that:
(1) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it would be in
the best economic interest of the Trust Estate to take such
actions as are necessary to bring the Mortgaged Property into
compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Estate to take such
actions with respect to the affected Mortgaged Property.
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The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.11(ix), such right of reimbursement being prior to the rights of
Noteholders to receive any amount in the Collection Account received in respect
of the affected Mortgage Loan or other Mortgage Loans. It is understood by the
parties hereto that any such advance will be deemed a Servicing Advance.
If the Servicer determines, as described above, that it is in
the best economic interest of the Trust Estate to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Trust Estate. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Noteholders to receive any amount in the Collection Account received
in respect of the affected Mortgage Loan or other Mortgage Loans. It is
understood by the parties hereto that any such advance will be deemed to be a
Servicing Advance.
(c) The Master Servicer, at its option, may purchase from the
Trust Estate any Mortgage Loan that is 90 days or more delinquent, which the
Master Servicer determines in good faith will otherwise become subject to
foreclosure proceedings (evidence of such determination to be delivered in
writing to the Indenture Trustee prior to purchase), at a price equal to the
Purchase Price. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited in the Collection Account, and the Indenture Trustee or a
Custodian on its behalf, upon receipt of written certification from the Servicer
of such deposit, shall release or cause to be released to the Master Servicer
the related Mortgage File and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Master Servicer
shall furnish and as shall be necessary to vest in the Master Servicer title to
any Mortgage Loan released pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: FIRST, to reimburse the
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
P&I Advances, pursuant to Section 3.11(ii) or (iii); SECOND, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Payment Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and THIRD, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery so allocated to interest is less than the full amount
of accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the Servicer as follows: FIRST, to unpaid
Servicing Fees; and SECOND, to the balance of the interest then
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due and owing. The portion of the recovery so allocated to unpaid Servicing Fees
shall be reimbursed to the Servicer or any Sub-Servicer pursuant to Section
3.11(iii).
SECTION 3.17. Indenture Trustee to Cooperate; Release of
Mortgage Files.
(a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Servicer of a notification that payment in full shall be escrowed
in a manner customary for such purposes, the Servicer will immediately notify
the Indenture Trustee and any related Custodian by a certification in the form
of Exhibit A-2 (which certification 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 3.10 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Mortgage File. Upon receipt of such certification and request, the
Indenture Trustee or such Custodian, as the case may be, shall promptly release
the related Mortgage File to the Servicer. No expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be chargeable
to the Collection Account or the Payment Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Indenture Trustee and
any related Custodian shall, upon request of the Servicer and delivery to the
Indenture Trustee or such Custodian, as the case may be, of a Request for
Release in the form of Exhibit A-l, release the related Mortgage File to the
Servicer, and the Indenture Trustee shall, at the direction of the Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Indenture
Trustee or to such Custodian when the need therefor by the Servicer no longer
exists, unless the Mortgage Loan has been liquidated and the Liquidation
Proceeds relating to the Mortgage Loan have been deposited in the Collection
Account or the Mortgage File or such document has been delivered to an attorney,
or to a public trustee or other public official as required by law, for purposes
of initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property either judicially or non-judicially, and the Servicer
has delivered to the Indenture Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of a certificate of a Servicing Officer stating that such Mortgage
Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Indenture Trustee or such Custodian to the Servicer.
(c) Upon written certification of a Servicing Officer, the
Indenture Trustee shall execute and deliver to the Servicer any court pleadings,
requests for trustee's sale or other documents reasonably 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 Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights
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provided by the Mortgage Note or Mortgage or otherwise available at law or in
equity. Each such certification shall include a request that such pleadings or
documents be executed by the Indenture Trustee and a statement 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.
SECTION 3.18. Servicing Compensation.
As compensation for the activities of the Servicer hereunder,
the Servicer shall be entitled to the Servicing Fee with respect to each
Mortgage Loan payable solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.24. In addition, the Servicer shall be
entitled to recover unpaid Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.11(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.23. The right to receive the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Servicer's responsibilities and obligations under this Agreement.
Additional servicing compensation in the form of assumption
fees, late payment charges and other similar fees and charges (other than
Prepayment Charges) shall be retained by the Servicer (subject to Section 3.24)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw from
the Collection Account, and pursuant to Section 3.23(b) to withdraw from any REO
Account, as additional servicing compensation, interest or other income earned
on deposits therein, subject to Section 3.12 and Section 3.24. The Servicer
shall be required to pay all expenses incurred by it in connection with its
servicing activities hereunder (including premiums for the insurance required by
Section 3.14, to the extent such premiums are not paid by the related Mortgagors
or by a Sub-Servicer, it being understood however, that payment of such premiums
by the Servicer shall constitute Servicing Advances and servicing compensation
of each Sub-Servicer) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
SECTION 3.19. Reports to the Indenture Trustee; Collection
Account Statements.
Not later than fifteen days after each Payment Date, the
Servicer shall forward to the Indenture Trustee, the Master Servicer and the
Issuer a statement prepared by the Servicer setting forth the status of the
Collection Account as of the close of business on such Payment Date and showing,
for the period covered by such statement, the aggregate amount of deposits into
and withdrawals from the Collection Account of each category of deposit
specified in Section 3.10(a) and each category of withdrawal specified in
Section 3.11. Such statement shall include information as to the aggregate of
the outstanding principal balances of all of the Mortgage Loans as of the last
day of the calendar month immediately preceding such Payment Date. Copies of
such statement shall be provided by the Indenture Trustee to any Noteholder and
to any Person identified to the Indenture Trustee as a prospective transferee of
a Note, upon request at the
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expense of the requesting party, provided such statement is delivered by the
Servicer to the Indenture Trustee.
SECTION 3.20. Statement as to Compliance.
The Servicer will deliver to the Master Servicer, the
Indenture Trustee, the Issuer and each Rating Agency on or before April 15 of
each calendar year commencing in 1999, an Officers' Certificate stating, as to
each signatory thereof, that (i) a review of the activities of the Servicer
during the preceding year and of performance under this Agreement has been made
under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof. Copies of any such
statement shall be provided by the Indenture Trustee to any Noteholder and to
any Person identified to the Indenture Trustee as a prospective transferee of a
Note, upon the request and at the expense of the requesting party, provided that
such statement is delivered by the Servicer to the Indenture Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than April 15 of each calendar year commencing in
1999, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
Servicer has complied with certain minimum residential mortgage loan servicing
standards, identified in the Uniform Single Attestation Program for Mortgage
Bankers established by the Mortgage Bankers Association of America, with respect
to the servicing of residential mortgage loans during the most recently
completed fiscal year and (ii) on the basis of an examination conducted by such
firm in accordance with standards established by the American Institute of
Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. In rendering its report such firm may rely, as to matters
relating to the direct servicing of residential mortgage loans by Sub-Servicers,
upon comparable reports of firms of independent certified public accountants
rendered on the basis of examinations conducted in accordance with the same
standards (rendered within one year of such report) with respect to those
Sub-Servicers. Immediately upon receipt of such report, the Servicer shall
furnish a copy of such report to the Master Servicer, the Indenture Trustee, the
Issuer and each Rating Agency. Copies of such statement shall be provided by the
Indenture Trustee to any Noteholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Indenture
Trustee. In the event such firm of independent certified public accountants
requires the Indenture Trustee to agree to the procedures performed by such
firm, the Servicer shall direct the Indenture Trustee in writing to so agree; it
being understood and agreed that the Indenture Trustee will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and the
Indenture Trustee has not made any independent inquiry or investigation as to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
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SECTION 3.22. Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Noteholder, access to
the documentation regarding the Mortgage Loans required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Noteholder, the Indenture Trustee and
to any Person identified to the Servicer as a prospective transferee of a Note,
upon reasonable request during normal business hours at the offices of the
Servicer designated by it at the expense of the Person requesting such access.
SECTION 3.23. Title, Management and Disposition of REO
Property.
(a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Indenture Trustee, or its nominee, in trust for the
benefit of the Noteholders.
(b) The Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets and shall establish and maintain
with respect to REO Properties an account held in trust for the Indenture
Trustee for the benefit of the Noteholders (the "REO Account"), which shall be
an Eligible Account. The Servicer shall be permitted to allow the Collection
Account to serve as the REO Account, subject to separate ledgers for each REO
Property. The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, all on such terms and for such period as the
Servicer deems to be in the best interests of Noteholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited in the clearing
account (which account must be an Eligible Account) in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Servicer's receipt thereof, and shall thereafter
deposit in the REO Account, in no event more than two Business Days after the
deposit of such funds into the clearing account, all revenues received by it
with respect to an REO Property and shall withdraw therefrom funds necessary for
the proper operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect
of such REO Property that may result in the imposition of a
lien thereon; and
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(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds as Servicing Advances such amount as is necessary for such
purposes if, but only if, the Servicer would make such advances if the Servicer
owned the REO Property and if in the Servicer's judgment, the payment of such
amounts will be recoverable from the rental or sale of the REO Property.
(d) In addition to the withdrawals permitted under Section
3.23(c), the Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage Loan. On the
Servicer Remittance Date, the Servicer shall withdraw from each REO Account
maintained by it and deposit into the Payment Account in accordance with Section
3.10(d)(ii), for distribution on the related Payment Date in accordance with the
Indenture, the income from the related REO Property received during the prior
calendar month, net of any withdrawals made pursuant to Section 3.23(c) or this
Section 3.23(d).
(e) Each REO Disposition shall be carried out by the Servicer
at such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities for similar properties.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer or any Sub-Servicer as
provided above, shall be deposited in the Payment Account in accordance with
Section 3.10(d)(ii) on the Servicer Remittance Date in the month following the
receipt thereof for distribution on the related Payment Date in accordance with
the Indenture.
(g) The Servicer shall file information returns with respect
to the receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively. Such reports shall be
in form and substance sufficient to meet the reporting requirements imposed by
such Sections 6050H, 6050J and 6050P of the Code.
SECTION 3.24. Obligations of the Servicer in Respect of
Prepayment Interest Shortfalls.
The Servicer shall deliver to the Indenture Trustee for
deposit into the Payment Account on or before 3:00 p.m. New York time on the
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for
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the related Payment Date resulting solely from Principal Prepayments during the
related Prepayment Period and (ii) the amount of its aggregate Servicing Fee for
the most recently ended
calendar month.
SECTION 3.25. Obligations of the Servicer in Respect of
Mortgage Rates and Monthly Payments.
In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Indenture Trustee
for deposit in the Payment Account from its own funds the amount of any such
shortfall and shall indemnify and hold harmless the Trust Estate, the Indenture
Trustee, the Issuer, the Owner Trustee and any successor servicer in respect of
any such liability. Such indemnities shall survive the termination or discharge
of this Agreement.
SECTION 3.26. Transfer of Servicing.
(a) On the Transfer Date, National shall resign as Servicer
with respect to the Mortgage Loans listed on Part B of Schedule 1 attached
hereto (the "related Mortgage Loans") and such servicing rights and obligations
shall be transferred to the Master Servicer. In connection with such transfer,
the Master Servicer will set up any accounts necessary in order to comply with
the provisions hereof in its capacity as Servicer on or prior to the Transfer
Date. On and after the Transfer Date, the Master Servicer will be entitled to
the Servicing Fee with respect to the related Mortgage Loans and will have all
rights and be subject to all obligations of the predecessor Servicer. On and
after the Transfer Date, National will still be entitled to reimbursement for
any P&I Advances or Servicing Advances that it made while acting as Servicer
with respect to the related Mortgage Loans. National hereby agrees to fully
cooperate with the Master Servicer in the transfer of the servicing hereunder in
connection with the related Mortgage Loans. Upon the transfer of servicing to
the Master Servicer, National shall no longer be liable or responsible for any
liabilities or obligations with respect to or arising out of the servicing of
the related Mortgage Loans after such transfer of the servicing thereof to the
Master Servicer.
(b) On and after the Transfer Date, unless otherwise specified, all
references to actions to be taken or previously taken by "the Servicer" under
this Agreement with respect to a Mortgage Loan or Mortgage Loans or with respect
to an REO Property or REO Properties shall be to actions to be taken or
previously taken by each Servicer with respect to a Mortgage Loan or Mortgage
Loans serviced thereby or with respect to an REO Property or REO Properties
administered thereby. Furthermore, unless otherwise specified, all references to
actions to be taken or previously taken by "the Servicer" under this Agreement
with respect to "the Collection Account" or "the Servicing Account" shall be to
actions to be taken or previously taken by each Servicer with respect to the
Collection Account or the Servicing Account to be established and maintained
thereby. Consistent with the foregoing, but only insofar as the context so
permits, this Agreement
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is to be read with respect to each Servicer as if such Servicer alone was
servicing and administering its respective Mortgage Loans hereunder.
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ARTICLE IV
REMITTANCE REPORTS; P&I ADVANCES
SECTION 4.01. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Servicer shall deliver to the Master Servicer in electronic format and the
Indenture Trustee by telecopy (or by such other means as the Servicer, the
Indenture Trustee and the Master Servicer may agree from time to time) a
Remittance Report with respect to the related Payment Date. Such Remittance
Report will include (i) the amount of P&I Advances to be made by the Servicer in
respect of the related Payment Date, the aggregate amount of P&I Advances
outstanding after giving effect to such P&I Advances, and the aggregate amount
of Nonrecoverable P&I Advances in respect of such Payment Date and (ii) such
other information with respect to the Mortgage Loans as the Indenture Trustee
may reasonably require to perform the calculations necessary to make the
distributions contemplated by the Indenture and to prepare the statements to
Noteholders contemplated by the Indenture. Neither the Master Servicer nor the
Indenture Trustee shall not be responsible to recompute, recalculate or verify
any information provided to it by the Servicer.
(b) The amount of P&I Advances to be made by the Servicer for
any Payment Date shall equal, subject to Section 4.01(d), the sum of (i) the
aggregate amount of Monthly Payments (with each interest portion thereof net of
the related Servicing Fee), due on the related Due Date in respect of the
Mortgage Loans, which Monthly Payments were delinquent as of the close of
business on the related Determination Date and (ii) with respect to each REO
Property, which REO Property was acquired during or prior to the related
Prepayment Period and as to which such REO Property an REO Disposition did not
occur during the related Prepayment Period, an amount equal to the excess, if
any, of the Monthly Payments (with each interest portion thereof net of the
related Servicing Fee) that would have been due on the related Due Date in
respect of the related Mortgage Loans, over the net income from such REO
Property transferred to the Payment Account pursuant to Section 3.23 for
distribution on such Payment Date.
On or before 3:00 p.m. New York time on the Servicer
Remittance Date, the Servicer shall remit in immediately available funds to the
Indenture Trustee for deposit in the Payment Account an amount equal to the
aggregate amount of P&I Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Payment Date either (i) from its own
funds or (ii) from the Collection Account, to the extent of funds held therein
for future distribution (in which case, it will cause to be made an appropriate
entry in the records of Collection Account that amounts held for future
distribution have been, as permitted by this Section 4.01, used by the Servicer
in discharge of any such P&I Advance) or (iii) in the form of any combination of
(i) and (ii) aggregating the total amount of P&I Advances to be made by the
Servicer with respect to the Mortgage Loans and REO Properties. Any amounts held
for future distribution and so used shall be appropriately reflected in the
Servicer's records and replaced by the Servicer by deposit in the Collection
Account on or before any future Servicer Remittance Date to the extent that the
Available Payment Amount for the related Payment Date (determined without
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regard to P&I Advances to be made on the Servicer Remittance Date) shall be less
than the total amount that would be distributed to the Classes of Noteholders
pursuant to the Indenture on such Payment Date if such amounts held for future
distributions had not been so used to make P&I Advances. The Indenture Trustee
will provide notice to the Servicer by telecopy by the close of business on any
Servicer Remittance Date in the event that the amount remitted by the Servicer
to the Indenture Trustee on such date is less than the P&I Advances required to
be made by the Servicer for the related Payment Date.
(c) The obligation of the Servicer to make such P&I Advances
is mandatory, notwithstanding any other provision of this Agreement but subject
to (d) below, and, with respect to any Mortgage Loan or REO Property, shall
continue until a Final Recovery Determination in connection therewith or the
removal thereof from the Trust Estate pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Servicer if such P&I
Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Servicer that it has made a Nonrecoverable P&I Advance or
that any proposed P&I Advance, if made, would constitute a Nonrecoverable P&I
Advance, shall be evidenced by an Officers' Certificate of the Servicer
delivered to the Indenture Trustee.
SECTION 4.02. Determination of Realized Losses.
Prior to each Determination Date, the Servicer shall determine
as to each Mortgage Loan and REO Property: (i) the total amount of Realized
Losses, if any, incurred in connection with any Final Recovery Determinations
made during the related Prepayment Period and (ii) the respective portions of
such Realized Losses allocable to interest and allocable to principal. Prior to
each Determination Date, the Servicer shall also determine as to each Mortgage
Loan: (A) the total amount of Realized Losses, if any, incurred in connection
with any Deficient Valuations made during the related Prepayment Period; and (B)
the total amount of Realized Losses, if any, incurred in connection with Debt
Service Reductions in respect of Monthly Payments due during the related Due
Period. The information described in the two preceding sentences that is to be
supplied by the Servicer shall be evidenced by an Officers' Certificate
delivered to the Indenture Trustee by the Servicer prior to the Determination
Date immediately following the end of (x) in the case of Bankruptcy Losses
allocable to interest, the Due Period during which any such Realized Loss was
incurred, and (y) in the case of all other Realized Losses, the Prepayment
Period during which any such Realized Loss was incurred.
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ARTICLE V
THE SERVICER
SECTION 5.01. Liability of the Servicer.
The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically imposed by this Agreement and
undertaken hereunder by the Servicer herein.
SECTION 5.02. Merger or Consolidation of the Servicer.
Subject to the following paragraph, the Servicer will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation and its qualification as an approved
conventional seller/servicer for ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac in good standing. The
Servicer will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Notes or any of the Mortgage Loans and to perform its respective duties under
this Agreement.
The Servicer may be merged or consolidated with or into any
Person, or transfer all or substantially all of its assets to any Person, in
which case any Person resulting from any merger or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be the successor of the Servicer without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person to the Servicer shall be qualified to service
mortgage loans on behalf of ▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇ Mac; and provided further that
the Rating Agencies' ratings of the Notes in effect immediately prior to such
merger or consolidation will not be qualified, reduced or withdrawn as a result
thereof (as evidenced by a letter to such effect from the Rating Agencies).
SECTION 5.03. Limitation on Liability of the Master Servicer,
Servicer and Others.
None of the Master Servicer, the Servicer nor any of the
directors, officers, employees or agents of the Master Servicer or Servicer
shall be under any liability to the Trust Estate or the Noteholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Master Servicer, the Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer or
Servicer pursuant hereto, or against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Master Servicer,
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Servicer and any director, officer, employee or agent of the Master Servicer or
Servicer may rely in good faith on any document of any kind which, PRIMA FACIE,
is properly executed and submitted by any Person respecting any matters arising
hereunder. The Master Servicer, Servicer and any director, officer, employee or
agent of the Master Servicer or Servicer shall be indemnified and held harmless
by the Trust Estate against any loss, liability or expense incurred in
connection with any legal action relating to this Agreement or the Notes, other
than any loss, liability or expense to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) or any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Master Servicer or Servicer shall
be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under this Agreement and,
in its opinion, does not involve it in any expense or liability; provided,
however, that each of the Master Servicer and the Servicer may in its
discretion, but without any obligation to do so, undertake any such action which
it may deem necessary or desirable with respect to this Agreement and the rights
and duties of the parties hereto and the interests of the Noteholders hereunder.
In such event, unless the Master Servicer or the Servicer acts without the
consent of Holders of Notes entitled to at least 51% of the Voting Rights (which
consent shall not be necessary in the case of litigation or other legal action
by either to enforce their respective rights or defend themselves hereunder),
the legal expenses and costs of such action and any liability resulting
therefrom (except any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder) shall be
expenses, costs and liabilities of the Trust Estate, and the Master Servicer or
the Servicer, as the case may be, shall be entitled to be reimbursed therefor
from the Collection Account as and to the extent provided in Section 3.11, any
such right of reimbursement being prior to the rights of the Noteholders to
receive any amount in the Collection Account.
SECTION 5.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that its duties hereunder are
no longer permissible under applicable law or (ii) with the written consent of
the Master Servicer, the Indenture Trustee and the Issuer and written
confirmation from each Rating Agency (which confirmation shall be furnished to
the Indenture Trustee and the Issuer) that such resignation will not cause such
Rating Agency to reduce the then current rating of the Notes; provided, however
such written consent and written confirmation shall not be necessary in
connection with the transfer of servicing to the Master Servicer on the Transfer
Date. Any such determination pursuant to clause (i) of the preceding sentence
permitting the resignation of the Servicer (other than in connection with the
transfer of servicing to the Master Servicer on the Transfer Date) shall be
evidenced by an Opinion of Counsel to such effect obtained at the expense of the
Servicer and delivered to the Master Servicer, the Indenture Trustee and the
Issuer. No resignation of the Servicer shall become effective until the Master
Servicer (or if the Master Servicer is not the successor, the Indenture Trustee
or a successor servicer) shall have assumed the Servicer's responsibilities,
duties, liabilities (other than those liabilities arising prior to the
appointment of such successor) and obligations under this
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Agreement. The provisions of this paragraph shall not apply in connection with
the transfer of servicing with respect to the Mortgage Loans listed on Part B of
Schedule 1 attached hereto on the Transfer Date from National to the Master
Servicer.
Except as expressly provided herein, the Servicer shall not
assign nor transfer any of its rights, benefits or privileges hereunder to any
other Person, nor delegate to or subcontract with, nor authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. If, pursuant to any provision hereof, the
duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
SECTION 5.05. Rights of the Indenture Trustee and the Issuer
in Respect of the Servicer.
The Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Master Servicer, the
Issuer and the Indenture Trustee, upon reasonable notice, during normal business
hours, access to all records maintained by the Servicer (and any such
Sub-Servicer) in respect of the Servicer's rights and obligations hereunder and
access to officers of the Servicer (and those of any such Sub-Servicer)
responsible for such obligations. Upon request, the Servicer shall furnish to
the Master Servicer, the Issuer and the Indenture Trustee its (and any such
Sub-Servicer's) most recent financial statements and such other information
relating to the Servicer's capacity to perform its obligations under this
Agreement that it possesses. To the extent such information is not otherwise
available to the public, the Master Servicer, the Issuer and the Indenture
Trustee shall not disseminate any information obtained pursuant to the preceding
two sentences without the Servicer's written consent, except as required
pursuant to this Agreement or to the extent that it is appropriate to do so (i)
in working with legal counsel, auditors, taxing authorities or other
governmental agencies, rating agencies or reinsurers or (ii) pursuant to any
law, rule, regulation, order, judgment, writ, injunction or decree of any court
or governmental authority having jurisdiction over the Master Servicer, the
Issuer, the Indenture Trustee or the Trust Estate, and in each case, the Master
Servicer, the Issuer or the Indenture Trustee, as the case may be, shall use its
best efforts to assure the confidentiality of any such disseminated non-public
information. The Master Servicer, the Indenture Trustee or the Issuer may, but
is not obligated to, enforce the obligations of the Servicer under this
Agreement and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Servicer under this Agreement or
exercise the rights of the Servicer under this Agreement; provided that the
Servicer shall not be relieved of any of its obligations under this Agreement by
virtue of such performance by the Master Servicer, the Issuer, the Indenture
Trustee or any of their designees. The Master Servicer, the Issuer and the
Indenture Trustee shall not have any responsibility or liability for any action
or failure to act by the Servicer and is not obligated to supervise the
performance of the Servicer under this Agreement or otherwise.
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SECTION 5.06. Indemnification of the Master Servicer, the
Indenture Trustee and the Owner Trustee by the
Servicer.
The Servicer agrees to indemnify the Master Servicer, the
Indenture Trustee and the Owner Trustee for, and to hold the Master Servicer,
the Indenture Trustee and the Owner Trustee, as the case may be, harmless
against, any claim, tax, penalty, loss, liability or expense of any kind
whatsoever, incurred without negligence or willful misconduct on the part of the
Master Servicer, the Indenture Trustee or the Owner Trustee, arising out of, or
in connection with, the failure by the Servicer to perform its duties in
compliance with this Servicing Agreement, including the reasonable costs and
expenses (including reasonable legal fees and expenses) of defending itself
against any claim in connection with the exercise or performance of any of its
powers or duties under any Basic Document, provided that:
(i) with respect to any such claim, the Master
Servicer, the Indenture Trustee or the Owner Trustee, as the
case may be, shall have given the Servicer written notice
thereof promptly after the Master Servicer, the Indenture
Trustee or the Owner Trustee, as the case may be, shall have
actual knowledge thereof;
(ii) the Servicer shall have the right to assume
control of the defense of such claim, using counsel approved
by the Indenture Trustee and the Owner Trustee, which approval
shall not be unreasonably withheld, whereupon the Servicer
shall not be liable for any separate attorneys' fees or
disbursements or other costs incurred by the Indenture Trustee
or the Owner Trustee in connection with such claim; and
(iii) notwithstanding anything in this Servicing
Agreement to the contrary, the Servicer shall not be liable
for settlement of any claim by the Master Servicer, the
Indenture Trustee or the Owner Trustee, as the case may be,
entered into without the prior consent of the Servicer, which
consent shall not be unreasonably withheld.
Notwithstanding the foregoing, with respect to the Mortgage Loans on
Part B of Schedule 1 attached hereto, the indemnification provided for in this
Section 5.06 is provided by National only until the date on which servicing is
transferred with respect to such Mortgage Loans and such indemnification will be
provided by the Master Servicer thereafter. However, after the transfer of
servicing with respect to such Mortgage Loans, National will still be
responsible for any claim, tax, penalty, loss, liability or expense arising out
of, or in connection with, the failure by National to perform its duties during
the time it was acting as Servicer for such Mortgage Loans.
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ARTICLE VI
DEFAULT
SECTION 6.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any
one of the following events:
(i) any failure by the Servicer to remit to the
Indenture Trustee for distribution to the Noteholders any
payment (other than a P&I Advance required to be made from its
own funds on any Servicer Remittance Date pursuant to Section
4.01) required to be made under the terms of this Agreement
which continues unremedied for a period of one Business Day
after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Servicer by either the Master Servicer or the Indenture
Trustee (in which case notice shall be provided by telecopy),
or to the Servicer and the Indenture Trustee by the Holders of
Notes entitled to at least 25% of the Voting Rights; or
(ii) any failure on the part of the Servicer duly to
observe or perform in any material respect any of the
covenants or agreements on the part of the Servicer contained
in this Agreement which continues unremedied for a period of
45 days after the earlier of (i) the date on which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by either the Master
Servicer or the Indenture Trustee, or to the Servicer and the
Indenture Trustee by the Holders of Notes entitled to at least
25% of the Voting Rights and (ii) actual knowledge of such
failure by a Servicing Officer of the Servicer; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in
an involuntary case under any present or future federal or
state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against the Servicer and
if such proceeding is being contested by the Servicer in good
faith such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days or results in
the entry of an order for relief or any such adjudication or
appointment; or
(iv) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of its property; or
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(v) the Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition
to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure by the Servicer of the Servicer
Termination Test; provided, however that if the Master
Servicer becomes the Servicer in connection with the default
by National with regard to any Mortgage Loan listed on Part A
of Schedule 1 attached hereto such Servicer Termination Test
shall not apply; or
(vii) any failure of the Servicer to make any P&I Advance
on any Servicer Remittance Date required to be made from its
own funds pursuant to Section 4.01 which continues unremedied
until 3:00 p.m. New York time on the Business Day immediately
following the Servicer Remittance Date.
If a Servicer Event of Default described in clauses (i) through (vi) of this
Section shall occur, then, and in each and every such case, so long as such
Servicer Event of Default shall not have been remedied, the Master Servicer may,
but solely with the written consent of the Indenture Trustee (or if the Master
Servicer is the Servicer, the Indenture Trustee may), and at the written
direction of the Holders of Notes entitled to at least 51% of Voting Rights, the
Master Servicer (or if the Master Servicer is the Servicer, the Indenture
Trustee) shall, by notice in writing to the Servicer, terminate all of the
rights and obligations of the Servicer in its capacity as a Servicer under this
Agreement, to the extent permitted by law, and in and to the Mortgage Loans and
the proceeds thereof. If a Servicer Event of Default described in clause (vii)
hereof shall occur, the Master Servicer (or if the Master Servicer is the
Servicer, the Indenture Trustee) shall, by notice in writing to the Servicer,
terminate all of the rights and obligations of the Servicer in its capacity as a
Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Notes (other than as a Holder of any Note) or the Mortgage Loans or
otherwise, shall pass to and be vested in the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) pursuant to and under this
Section and, without limitation, the Master Servicer (or if the Master Servicer
is the Servicer, the Indenture Trustee) is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver on behalf of and at the
expense of the Servicer, any and all documents and other instruments and to do
or accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Servicer agrees, at its sole cost and expense, promptly (and in
any event no later than ten Business Days subsequent to such notice) to provide
the Master Servicer (or if the Master Servicer is the Servicer, the Indenture
Trustee) with all documents and records requested by it to enable it to assume
the Servicer's functions under this Agreement, and to cooperate with the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee) in
effecting the termination of the Servicer's responsibilities and rights under
this Agreement, including, without limitation, the transfer within one Business
Day to the Master Servicer (or if the Master Servicer is the Servicer,
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the Indenture Trustee) for administration by it of all cash amounts which at the
time shall be or should have been credited by the Servicer to the Collection
Account held by or on behalf of the Servicer, the Payment Account or any REO
Account or Servicing Account held by or on behalf of the Servicer or thereafter
be received with respect to the Mortgage Loans or any REO Property serviced by
the Servicer (provided, however, that the Servicer shall continue to be entitled
to receive all amounts accrued or owing to it under this Agreement on or prior
to the date of such termination, whether in respect of P&I Advances or
otherwise, and shall continue to be entitled to the benefits of Section 5.03,
notwithstanding any such termination, with respect to events occurring prior to
such termination). For purposes of this Section 6.01, the Indenture Trustee
shall not be deemed to have knowledge of a Servicer Event of Default unless a
Responsible Officer of the Indenture Trustee assigned to and working in the
Indenture Trustee's Corporate Trust Office has actual knowledge thereof or
unless written notice of any event which is in fact such a Servicer Event of
Default is received by the Indenture Trustee and such notice references the
Notes, the Trust Estate or this Agreement.
SECTION 6.02. Master Servicer or Indenture Trustee to Act;
Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination, the Master Servicer or if the Master Servicer is the Servicer, the
Indenture Trustee shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto and arising thereafter placed on the Servicer
(except if the Indenture Trustee is successor for any representations or
warranties of the Servicer under this Agreement, the responsibilities, duties
and liabilities contained in Section 2.01(b) and its obligation to deposit
amounts in respect of losses pursuant to Section 3.12) by the terms and
provisions hereof including, without limitation, the Servicer's obligations to
make P&I Advances pursuant to Section 4.01; provided, however, that if the
Indenture Trustee is prohibited by law or regulation from obligating itself to
make advances regarding delinquent mortgage loans, then the Indenture Trustee
shall not be obligated to make P&I Advances pursuant to Section 4.01; and
provided further, that any failure to perform such duties or responsibilities
caused by the Servicer's failure to provide information required by Section 6.01
shall not be considered a default by the Master Servicer or the Indenture
Trustee as successor to the Servicer hereunder. As compensation therefor, the
Master Servicer or the Indenture Trustee, as the case may be, shall be entitled
to the Servicing Fees and all funds relating to the Mortgage Loans to which the
Servicer would have been entitled if it had continued to act hereunder (other
than amounts which were due or would become due to the Servicer prior to its
termination or resignation). Notwithstanding the above and subject to the next
paragraph, the Master Servicer or the Indenture Trustee, as the case may be,
may, if it shall be unwilling to so act, or shall, if it is unable to so act or
if it is prohibited by law from making advances regarding delinquent mortgage
loans, or if the Holders of Notes entitled to at least 51% of the Voting Rights
so request in writing to the Master Servicer or the Indenture Trustee, as the
case may be, promptly appoint or petition a court of competent jurisdiction to
appoint, an established mortgage loan servicing institution acceptable to each
Rating Agency and having a net worth of not less than $15,000,000 as the
successor to the Servicer under this Agreement in the
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assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer under this Agreement. No appointment of a successor to the Servicer
under this Agreement shall be effective until the assumption by the successor of
all of the Servicer's responsibilities, duties and liabilities hereunder. In
connection with such appointment and assumption described herein, the Master
Servicer or the Indenture Trustee, as the case may be, may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Servicer as such
hereunder. The Master Servicer or the Indenture Trustee, as the case may be, and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. Pending appointment of a
successor to the Servicer under this Agreement, the Master Servicer or the
Indenture Trustee, as the case may be, shall act in such capacity as hereinabove
provided.
Upon removal or resignation of the Servicer, if the Master
Servicer (or if the Master Servicer is the Servicer, the Indenture Trustee) is
not going to serve as successor Servicer, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) with the cooperation of the
Issuer, (x) shall solicit bids for a successor Servicer as described below and
(y) pending the appointment of a successor Servicer as a result of soliciting
such bids, shall serve as Servicer of the Mortgage Loans serviced by such
predecessor Servicer. The Master Servicer (or if the Master Servicer is the
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 above (including the Indenture
Trustee or any affiliate thereof). Such public announcement shall specify that
the successor Servicer shall be entitled to the servicing compensation agreed
upon between the Master Servicer (or if the Master Servicer is the Servicer, the
Indenture Trustee), the successor Servicer and the Issuer; provided, however,
that no such fee shall exceed the related Servicing Fee. Within thirty days
after any such public announcement, the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee), with the cooperation of the
Issuer, shall negotiate in good faith and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) upon receipt of the purchase
price shall pay such purchase price to the Servicer being so removed, after
deducting from any sum received by the Master Servicer (or if the Master
Servicer is the Servicer, the Indenture Trustee) from the successor to the
Servicer in respect of such sale, transfer and assignment all costs and expenses
of any public announcement and of any sale, transfer and assignment of the
servicing rights and responsibilities reasonably incurred hereunder. After such
deductions, the remainder of such sum shall be paid by the Master Servicer (or
if the Master Servicer is the Servicer, the Indenture Trustee) to the Servicer
at the time of such sale.
(b) If the Servicer fails to remit to the Indenture Trustee
for distribution to the Noteholders any payment required to be made under the
terms of the Notes and the Indenture (for purposes of this Section 6.02(b), a
"Remittance") because the Servicer is the subject of a proceeding under the
federal Bankruptcy Code and the making of such Remittance is prohibited by
Section 362 of the federal Bankruptcy Code, the Indenture Trustee shall upon
notice of such
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prohibition, regardless of whether it has received a notice of termination under
Section 6.01, advance the amount of such Remittance by depositing such amount in
the Payment Account on the related Payment Date. The Indenture Trustee shall be
obligated to make such advance only if (i) such advance, in the good faith
judgment of the Indenture Trustee, can reasonably be expected to be ultimately
recoverable from Stayed Funds and (ii) the Indenture Trustee is not prohibited
by law from making such advance or obligating itself to do so. Upon remittance
of the Stayed Funds to the Indenture Trustee or the deposit thereof in the
Payment Account by the Servicer, a trustee in bankruptcy or a federal bankruptcy
court, the Indenture Trustee may recover the amount so advanced, without
interest, by withdrawing such amount from the Payment Account; however, nothing
in this Agreement shall be deemed to affect the Indenture Trustee's rights to
recover from the Servicer's own funds interest on the amount of any such
advance. If the Indenture Trustee at any time makes an advance under this
Subsection which it later determines in its good faith judgment will not be
ultimately recoverable from the Stayed Funds with respect to which such advance
was made, the Indenture Trustee shall be entitled to reimburse itself for such
advance, without interest, by withdrawing from the Payment Account, out of
amounts on deposit therein, an amount equal to the portion of such advance
attributable to the Stayed Funds.
SECTION 6.03. Notification to Noteholders.
(a) Upon any termination of the Servicer pursuant to Section
6.01 above or any appointment of a successor to the Servicer pursuant to Section
6.02 above, the Indenture Trustee shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note Register.
(b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Servicer Event of Default or five days after a Responsible
Officer of the Indenture Trustee becomes aware of the occurrence of such an
event, the Indenture Trustee shall transmit by mail to the Master Servicer and
to all Holders of Notes notice of each such occurrence, unless such default or
Servicer Event of Default shall have been cured or waived.
SECTION 6.04. Waiver of Servicer Events of Default.
The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Notes affected by any default or Servicer Event of
Default hereunder may waive such default or Servicer Event of Default; provided,
however, that a default or Servicer Event of Default under clause (i) or (vii)
of Section 6.01 may be waived only by all of the Holders of the Notes. Upon any
such waiver of a default or Servicer Event of Default, such default or Servicer
Event of Default shall cease to exist and shall be deemed to have been remedied
for every purpose hereunder. No such waiver shall extend to any subsequent or
other default or Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.
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ARTICLE VII
SPECIAL FORECLOSURE PROCEDURES
AT OPTION OF THE CERTIFICATEHOLDER OF THE MAJORITY
IN PERCENTAGE INTEREST IN THE EQUITY CERTIFICATES
SECTION 7.01. General.
(a) The Servicer hereby consents to the terms and provisions
of this Article VII so long as the Transferor is the Directing Holder. If at any
time any Person other than the Transferor is the Directing Holder, the terms and
provisions of this Article VII shall only become operative upon the express
written consent of the Servicer, with written notice of such consent delivered
to the Indenture Trustee, and then only for so long as the specific
Certificateholder to whom consent was granted remains the Certificateholder of a
majority in Percentage Interest in the Equity Certificates. In the event of any
conflict between the terms and conditions of this Article VII and the first
paragraph of Section 3.16(a), this Article VII shall control.
(b) Whenever used in this Article VII, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
AFFIRMATION: A written statement signed by the
Certificateholder of a majority in Percentage Interest in the Equity
Certificates and sent to the Servicer certifying such Certificateholder's
Percentage Interest in the Equity Certificates, and affirming the terms of
Section 7.08.
COLLATERAL ACCOUNT: The fund established and maintained
pursuant to Section 7.06 hereof.
COMMENCEMENT OF FORECLOSURE: The first official action
required under local law in order to commence foreclosure proceedings or to
schedule a trustee's sale under a deed of trust, including (i) in the case of a
mortgage or deed to secure debt, any filing or service of process necessary to
commence an action to foreclose or (ii) in the case of a deed of trust, the
posting, publishing, filing or delivery of a notice of sale, but not including
in either case any notice of default, notice of intent to foreclose or sell or
any other action prerequisite to the actions specified in (i) or (ii) above.
CURRENT APPRAISAL: With respect to any Subject Mortgage Loan
as to which the Directing Holder has made an Election to Delay Foreclosure or an
Election to Foreclose, an appraisal of such Mortgage Loan, based on an appraisal
of the related Mortgaged Property obtained by the Directing Holder at its
expense from an appraiser acceptable to the Servicer as nearly contemporaneously
as practicable to the time of the Directing Holder's election, prepared based on
customary requirements for such appraisals, and which appraisal shall take into
account estimated liquidation expenses and carrying costs.
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DIRECTING HOLDER: The Certificateholder of a majority in
Percentage Interest of the Equity Certificates from the time that such
Certificateholder provides the Affirmation to the Servicer and until such time
as such Certificateholder is no longer a Certificateholder of a majority in
Percentage Interest in the Equity Certificates.
ELECTION TO DELAY FORECLOSURE: Any election by the Directing
Holder to delay the Commencement of Foreclosure, made in accordance with Section
7.03(b).
ELECTION TO FORECLOSE: Any election by the Directing Holder to
proceed with the Commencement of Foreclosure, made in accordance with Section
7.04(a).
FAIR MARKET VALUE: With respect to a Subject Mortgage Loan,
the fair market value of the related Mortgaged Property as determined pursuant
to the Current Appraisal.
REQUIRED COLLATERAL ACCOUNT BALANCE: As of any date of
determination, an amount equal to the aggregate of all amounts previously
required to be deposited in the Collateral Account pursuant to Section 7.03(d)
(after adjustment for all withdrawals and deposits pursuant to Section 7.03(e))
and Section 7.04(b) (after adjustment for all withdrawals and deposits pursuant
to Section 7.04(c)), reduced by all withdrawals therefrom pursuant to Section
7.03(g) and Section 7.04(d).
SUBJECT MORTGAGE LOAN: Any Mortgage Loan that comes into and
continues in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 3.07.
UPDATED CURRENT APPRAISAL: With respect to any Subject
Mortgage Loan as to which the Directing Holder has made an Election to Delay
Foreclosure and as to which no amount has been realized on such Subject Mortgage
Loan within six months from the time the Subject Mortgage Loan becomes
delinquent, an appraisal of such Mortgage Loan, based on an appraisal of the
related Mortgaged Property obtained by the Directing Holder at its expense from
an appraiser acceptable to the Servicer as nearly contemporaneously as
practicable to the time which the Directing Holder is obligated to purchase such
Subject Mortgage Loan pursuant to Section 7.03(g), prepared based on customary
requirements for such appraisals, and which appraisal shall take into account
estimated liquidation expenses and carrying costs.
(c) All capitalized terms not otherwise defined in this
Article VII shall have the meanings assigned elsewhere in this Agreement.
SECTION 7.02. Reports and Notices.
(a) In connection with the performance of its duties under
this Agreement relating to the realization upon defaulted Mortgage Loans, the
Servicer shall provide to the Directing Holder the following notices and
reports:
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(i) Upon reasonable request of the Directing Holder, with
respect to any Mortgage Loan listed as at least 30 days delinquent in
the statement provided to Noteholders pursuant to Section 7.05 of the
Indenture, the Servicer shall provide such information as it may have
in its possession or may reasonably obtain, the reasonable out of
pocket expenses of the Servicer in providing such information to be
paid promptly by the Directing Holder, upon receipt of an invoice from
the Servicer.
(ii) Prior to the Commencement of Foreclosure in connection
with any Subject Mortgage Loan, the Servicer shall provide the
Directing Holder with a notice of such proposed and imminent
foreclosure, stating the loan number and the aggregate amount
owing under such Mortgage Loan.
(b) If requested by the Directing Holder, the Servicer shall
make its servicing personnel available (during its normal business hours) to
respond to reasonable inquiries by the Directing Holder in connection with any
Subject Mortgage Loan identified in a report or notice under subsection (a)(i)
or (a)(ii) above which has been given to the Directing Holder; provided, that
(1) the Servicer shall only be required to provide information that is readily
accessible to its servicing personnel and (2) the Servicer shall not be required
to provide any written information under this subsection.
(c) The Remittance Reports prepared by the Servicer pursuant
to Section 4.01, and the statements to Noteholders prepared by the Indenture
Trustee pursuant to Section 7.05 of the Indenture, shall each include the
following additional information: (i) the number and aggregate unpaid principal
balance of Mortgage Loans as to which an Election to Delay Foreclosure has been
made and (ii) the number and aggregate unpaid principal balance of Mortgage
Loans as to which an Election to Foreclose has been made.
SECTION 7.03. Election to Delay Foreclosure Proceedings.
(a) In the event that the Servicer does not receive written
notice of the Directing Holder's election pursuant to subsection (b) below
within 24 hours of transmission of the notice provided by the Servicer under
Section 7.02(a)(ii), the Servicer shall proceed with the Commencement of
Foreclosure in respect of such Subject Mortgage Loan in accordance with its
normal foreclosure policies without additional notice to the Directing Holder.
Any foreclosure that has been initiated may be discontinued if the Subject
Mortgage Loan has been brought current (including the payment to the Collateral
Account of all related P&I Advances and Servicing Advances) or if a refinancing
or prepayment occurs pursuant to which the Subject Mortgage Loan is brought
current (including the payment of all related P&I Advances and Servicing
Advances), without notice to the Directing Holder.
(b) In connection with any Subject Mortgage Loan with respect
to which a notice under Section 7.02(a)(ii) has been given to the Directing
Holder, the Directing Holder may elect, for reasonable cause as determined by
the Directing Holder, to instruct the Servicer to delay Commencement of
Foreclosure until such time as the Directing Holder determines that the
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Servicer may proceed with Commencement of Foreclosure. Such election must be
evidenced by written notice received by the Servicer within 24 hours of
transmission of the notice provided by the Servicer under Section 7.02(a)(ii),
except that such 24 hour period shall be extended for a reasonable period, not
to exceed four Business Days if the Directing Holder requests additional
information related to such foreclosure or such Subject Mortgage Loan, to permit
the review of such additional information.
(c) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Directing Holder
shall obtain a Current Appraisal as soon as practicable, and shall provide the
Servicer with a copy of such Current Appraisal. With respect to any Subject
Mortgage Loan as to which the Directing Holder has made an Election to Delay
Foreclosure and as to which no amount has been realized on such Subject Mortgage
Loan within six months from the time the Subject Mortgage Loan becomes
delinquent, the Directing Holder shall obtain an Updated Current Appraisal and
shall provide the Servicer with a copy of such Updated Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Directing Holder shall remit to the Servicer, for deposit in
the Collateral Account, an amount, as calculated by the Servicer, equal to the
sum of (1) 125% of the Fair Market Value determined pursuant to the Current
Appraisal referred to in subsection (c) above (or, if such Current Appraisal has
not yet been obtained, the Servicer's estimate thereof, in which case the
required deposit under this subsection shall be adjusted upon obtaining such
Current Appraisal) and (2) three months' interest on the Subject Mortgage Loan
at the applicable Mortgage Rate. If any Election to Delay Foreclosure extends
for a period in excess of three months (such excess period being referred to
herein as the "Excess Period"), the Directing Holder shall remit by wire
transfer in advance to the Servicer for deposit in the Collateral Account the
amount of each additional month's interest, as calculated by the Servicer, equal
to interest on the Mortgage Loan at the applicable Mortgage Rate for the Excess
Period. Nothing contained in this Article VII shall alter the Servicer's
obligation to make P&I Advances pursuant to Section 4.01.
(e) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Servicer may
withdraw from the Collateral Account from time to time amounts necessary to
reimburse the Servicer for all P&I Advances and Servicing Advances thereafter
made by the Servicer in accordance with this Agreement. To the extent that the
amount of any Servicing Advance is determined by the Servicer based on estimated
costs, and the actual costs are subsequently determined to be higher than the
estimate, the Servicer may withdraw the additional amount from the Collateral
Account and if the actual costs are determined to be lower than such estimate,
the Servicer shall deposit the amount of such difference into the Collateral
Account. In the event that the Subject Mortgage Loan is brought current by the
Mortgagor and the foreclosure action is discontinued, the amounts so withdrawn
from the Collateral Account by the Servicer as reimbursement for P&I Advances
and Servicing Advances shall be redeposited therein by the Servicer and the
Servicer shall be reimbursed as otherwise provided in this Agreement. Except as
provided in the two preceding sentences, amounts withdrawn from the Collateral
Account to cover P&I Advances and Servicing Advances shall not
-65-
be redeposited therein or otherwise reimbursed to the Directing Holder; however,
the Servicer waives any right to reimbursement for such amounts under any other
provision of this Agreement. If and when any such Subject Mortgage Loan is
brought current by the Mortgagor (including the payment to the Collateral
Account of all related P&I Advances and Servicing Advances), all amounts
remaining in the Collateral Account in respect of such Subject Mortgage Loan
(after adjustment for all withdrawals and deposits pursuant to this subsection)
shall be released to the Directing Holder.
(f) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Delay Foreclosure, the Servicer shall
continue to service the Subject Mortgage Loan in accordance with the terms of
this Agreement (other than the delay in Commencement of Foreclosure as provided
herein). If and when the Directing Holder shall notify the Servicer that it
believes that it is appropriate to do so, the Servicer shall proceed with the
Commencement of Foreclosure.
(g) Upon the occurrence of a liquidation of a defaulted
Mortgage Loan or the disposition of a REO Property with respect to any Subject
Mortgage Loan, in either case as to which the Directing Holder made an Election
to Delay Foreclosure, the Servicer shall calculate the amount, if any, by which
the Fair Market Value determined pursuant to the Current Appraisal obtained
under subsection (c) above exceeds the Liquidation Proceeds for the related
Mortgage Loan or REO Property, and the Servicer shall withdraw the amount of
such excess from the Collateral Account, shall remit the same to the Collection
Account and in its capacity as Servicer shall apply such amount as additional
Liquidation Proceeds pursuant to this Agreement. If the Liquidation Proceeds for
such Mortgage Loan or REO Property exceeds the Fair Market Value determined
pursuant to the Current Appraisal obtained under subsection (c) above, the
Servicer shall deposit immediately such excess into the Collection Account as
additional Liquidation Proceeds pursuant to this Agreement. After making any
such withdrawal as provided in this subsection (g), all amounts remaining in the
Collateral Account in respect of such Subject Mortgage Loan (after adjustment
for all withdrawals and deposits pursuant to subsection (e)) shall be released
to the Directing Holder. If within six months of the time the Subject Mortgage
Loan becomes delinquent, no amount has been realized on the Subject Mortgage
Loan, the Directing Holder shall purchase the Mortgage Loan from the Trust
Estate at a purchase price equal to the greater of (i) the Fair Market Value
shown on the Current Appraisal determined pursuant to subsection (c) above or
(ii) the Fair Market Value shown on the Updated Current Appraisal determined
pursuant to subsection (c) above. The Servicer shall first apply amounts on
deposit in the Collateral Account towards such purchase price. Any shortfall
shall be paid by the Directing Holder and any excess will be returned to it. The
Servicer shall remit the amount of such purchase price to the Collection
Account.
SECTION 7.04. Election to Commence Foreclosure Proceedings.
(a) In connection with any Subject Mortgage Loan identified
under Section 7.02(a)(i), the Directing Holder may elect, for reasonable cause
as determined by the Directing
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Holder, to instruct the Servicer to proceed with Commencement of Foreclosure as
soon as practicable.
(b) Within two Business Days of making any Election to
Foreclose, the Directing Holder shall remit to the Servicer, for deposit in the
Collateral Account, an amount, as calculated by the Servicer, equal to the sum
of (1) 125% of the Stated Principal Balance of the Subject Mortgage Loan and (2)
three months' interest on the Subject Mortgage Loan at the applicable Mortgage
Rate. If and when any such Subject Mortgage Loan is brought current (including
the payment to the Collateral Account of all related P&I Advances and Servicing
Advances) by the Mortgagor, all amounts in the Collateral Account in respect of
such Subject Mortgage Loan shall be released to the Directing Holder.
(c) With respect to any Subject Mortgage Loan as to which the
Directing Holder has made an Election to Foreclose, the Servicer shall continue
to service such Subject Mortgage Loan in accordance with the terms of this
Agreement (other than to proceed with the Commencement of Foreclosure as
provided herein). In connection therewith, the Servicer shall have the same
rights to make withdrawals for related P&I Advances and Servicing Advances from
the Collateral Account as are provided under Section 7.03(e), and the Servicer
shall make reimbursements thereto to the limited extent provided under such
subsection. The Servicer shall not be required to proceed with the Commencement
of Foreclosure if (i) the same is stayed as a result of the Mortgagor's
bankruptcy or is otherwise barred by applicable law, or to the extent that all
legal conditions precedent thereto have not yet been complied with or (ii) the
Servicer reasonably determines that such foreclosure might result in liability
to the Servicer, unless the Directing Holder provides, at such time, a general
indemnity to the Servicer with respect to any such liability or (iii) the
Servicer believes there is a breach of representations or warranties which may
result in a repurchase or substitution of such Mortgage Loan or (iv) the
Servicer reasonably believes the Mortgaged Property may be contaminated with or
affected by hazardous wastes or hazardous substances. Any foreclosure that has
been initiated may be discontinued if the Subject Mortgage Loan has been brought
current (including the payment to the Collateral Account of all related P&I
Advances and Servicing Advances) or if a refinancing or prepayment occurs
pursuant to which the Subject Mortgage Loan is brought current (including the
payment to the Collateral Account of all related P&I Advances and Servicing
Advances), without notice to the Directing Holder. If and when any such Subject
Mortgage Loan is brought current by the Mortgagor (including the payment to the
Collateral Account of all related P&I Advances and Servicing Advances), all
amounts remaining in the Collateral Account in respect of such Subject Mortgage
Loan (after adjustment for all withdrawals and deposits pursuant to this
subsection) shall be released to the Directing Holder.
(d) Upon the occurrence of a liquidation of a defaulted
Mortgage Loan or the disposition of a REO Property, in either case with respect
to any Subject Mortgage Loan as to which the Directing Holder made an Election
to Foreclose and as to which the Servicer proceeded with the Commencement of
Foreclosure in accordance with subsection (c) above, the Servicer shall
calculate the amount, if any, by which the Stated Principal Balance of such
Subject Mortgage Loan exceeds the Liquidation Proceeds for the related Mortgage
Loan or REO Property, and the
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Servicer shall withdraw the amount of such excess from the Collateral Account,
shall remit the same to the Collection Account and in its capacity as Servicer
shall apply such amount as additional Liquidation Proceeds pursuant to this
Agreement. After making any such withdrawal or deposit as provided in this
subsection (d), all amounts remaining in the Collateral Account in respect of
such Subject Mortgage Loan shall be released to the Directing Holder.
SECTION 7.05. Termination.
With respect to all Subject Mortgage Loans included in the
Trust Estate, the Directing Holder's rights to make any Election to Delay
Foreclosure or any Election to Foreclose and the Servicer's obligations under
Section 7.02 shall terminate upon the earlier of (i) the termination of this
Agreement or (ii) such time as the Directing Holder ceases to be a
Certificateholder of a majority in Percentage Interest of the Equity
Certificates. Except as set forth above, this Article VII of this Agreement and
the respective rights, obligations and responsibilities of the Directing Holder
and the Servicer hereunder shall terminate and be of no further force and effect
upon the final liquidation of the last Subject Mortgage Loan as to which the
Directing Holder made any Election to Delay Foreclosure or any Election to
Foreclose and the withdrawal of all remaining amounts in the Collateral Account
as provided herein.
SECTION 7.06. Collateral Account.
Upon receipt from the Directing Holder of the initial amount
required to be deposited in the Collateral Account pursuant to Section 7.03(d)
or Section 7.04(b), the Servicer shall establish and maintain as a separate
Eligible Account (the "Collateral Account"), entitled "National Mortgage
Corporation, as Servicer for Norwest Bank Minnesota, National Association, as
Indenture Trustee, in trust for the registered holders of , Salomon Brothers
Mortgage Securities VII, Inc. Asset-Backed Floating Rate Notes, Series 1998-11".
Amounts in the Collateral Account shall continue to be the property of the
Directing Holder, subject to the first priority security interest granted
hereunder for the benefit of the Noteholders and the Certificateholders, until
withdrawn from the Collateral Account pursuant to Section 7.03 or Section 7.04
hereof.
Upon the termination of this Article VII of this Agreement
pursuant to Section 7.05 hereof, the Servicer shall distribute to the Directing
Holder all amounts remaining in the Collateral
Account together with any investment earnings thereon.
The Collateral Account shall not be an asset of the Trust
Estate and, for federal income tax purposes, shall be owned by the Directing
Holder.
For purposes of determining whether a P&I Advance constitutes
a Nonrecoverable P&I Advance, Liquidation Proceeds shall be deemed to include
any amounts ultimately recoverable from the Collateral Account or, to the extent
of any shortfall described in Section
7.09, from the Directing Holder.
SECTION 7.07. Collateral Account Permitted Investments.
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The Servicer shall, at the written direction of the Directing
Holder, invest the funds in the Collateral Account in Permitted Investments.
Such direction shall not be changed more frequently than quarterly. In the
absence of any direction, the Servicer shall invest funds in the Collateral
Account in accordance with the definition of Permitted Investments herein in its
discretion.
All income and gain realized from any investment as well as
any interest earned on deposits in the Collateral Account (net of any losses on
such investments) and any payments of principal made in respect of any Permitted
Investment shall be deposited in the Collateral Account upon receipt. All costs
associated with the purchase and sale of Collateral Account Permitted
Investments shall be borne by the Directing Holder. The Directing Holder shall
deposit in the Collateral Account the amount of any loss incurred in respect of
any such Permitted Investments made with funds in such Collateral Account
immediately upon realization of such loss. The Servicer shall periodically (but
not more frequently than monthly) distribute to the Directing Holder upon
request an amount of cash, to the extent cash is available therefor in the
Collateral Account, equal to the amount by which the balance of the Collateral
Account, after giving effect to all other distributions to be made from the
Collateral Account on such date, exceeds the Required Collateral Account
Balance. Any amounts so distributed shall be released from the lien and security
interest created pursuant of Section 7.08 of this Agreement.
SECTION 7.08. Grant of Security Interest.
The Directing Holder hereby grants to the Servicer for the
benefit of the Noteholders and Certificateholders a security interest in and
lien on all of the Directing Holder's right, title and interest, whether now
owned or hereafter acquired, in and to: (1) the Collateral Account, (2) all
amounts deposited in the Collateral Account and Permitted Investments in which
such amounts are invested (and the distributions and proceeds of such
investments) and (3) all cash and non-cash proceeds of any of the foregoing,
including proceeds of the voluntary or involuntary conversion thereof (all of
the foregoing collectively, the "Collateral").
The Directing Holder hereby acknowledges the lien on and
security interest in the Collateral for the benefit of the Noteholders and
Certificateholders. The Directing Holder shall take all actions requested by the
Servicer as may be reasonably necessary to perfect the security interest created
under this Section 7.08 of this Agreement in the Collateral and cause it to be
prior to all other security interests and liens, including the execution and
delivery to the Servicer for filing of appropriate financing statements in
accordance with applicable law. Upon receipt of duly filed financing statements,
the Servicer shall file appropriate continuation statements, or appoint an agent
on its behalf to file such statements, in accordance with applicable law.
SECTION 7.09. Collateral Shortfalls.
In the event that amounts on deposit in the Collateral Account
at any time are insufficient to cover any withdrawals therefrom that the
Servicer is then entitled to make hereunder, the Directing Holder shall be
obligated to pay such amounts to the Servicer
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immediately upon demand. Such obligation shall constitute a general obligation
of the Directing Holder.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. Amendment.
This Agreement may be amended from time to time by the
parties hereto, provided that any amendment be accompanied by a letter from the
Rating Agencies to the effect that the amendment will not result in the
downgrading or withdrawal of the ratings then assigned to the
Notes.
SECTION 8.02. 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.
SECTION 8.03. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Master Servicer, Wilshire Servicing Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇ (facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇), (b) in the case of the Servicer, National Mortgage
Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: President (facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇), (c) in the case of DCR,
Duff & ▇▇▇▇▇▇ Credit Rating Co., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (d)
in the case of S&P, Standard & Poor's Ratings Services, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (e) in the case of the Issuer (or the Owner Trustee on behalf of
the Issuer), c/o Wilmington Trust Company, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust
Administration (telecopy number (▇▇▇) ▇▇▇-▇▇▇▇) (with copies to Wilshire Real
Estate Investment Trust Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (telecopy number (▇▇▇) ▇▇▇-▇▇▇▇), (f) in
the case of the Indenture Trustee, Norwest Bank Minnesota, National Association,
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention;
Corporate Trust Services/Asset-Backed Administration (telecopy number (612)
667-3539) (with a copy to Norwest Bank Minnesota, National Association, ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Securities
Administration (telecopy number (410) 884- 2360)), (g) in the case of the
Seller, Wilshire Real Estate Investment Trust Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
(telecopy number (▇▇▇) ▇▇▇-▇▇▇▇), or as to each party, at such other address as
shall be designated by such party in written notice to each other party. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Noteholder
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as shown in the Note Register. Any notice so mailed within the time prescribed
in the Agreement shall be conclusively presumed to have been duly given, whether
or not the Noteholder receives such notice.
SECTION 8.04. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Notes or the rights of the Holders thereof.
SECTION 8.05. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
SECTION 8.06. Third-Party Beneficiaries.
This Agreement will inure to the benefit of and be binding
upon the parties hereto, the Noteholders, the Owner Trustee, the Seller and
their respective successors and permitted assigns. Except as otherwise provided
in this Agreement, no other Person will have any right or
obligation hereunder.
SECTION 8.07. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but
one and the same instrument.
SECTION 8.08 Termination.
Except with respect to obligations of the Servicer relating to
any representations and warranties or indemnities made by it in this Agreement,
the respective obligations and responsibilities of the Servicer, the Indenture
Trustee and the Issuer created hereby shall terminate upon the satisfaction and
discharge of the Indenture pursuant to Section 4.10 thereof.
SECTION 8.09. No Recourse.
(a) The Master Servicer and the Servicer each acknowledge that
no recourse may be had against the Issuer, except as may be expressly set forth
in this Agreement.
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(b) It is expressly understood and agreed by and between the
parties hereto (i) that this Agreement is executed and delivered by the Owner
Trustee, not in its individual capacity but solely as Owner Trustee under the
Owner Trust Agreement in the exercise of the power and authority conferred and
vested in it as such Owner Trustee, (ii) each of the representations,
undertakings and agreements made herein by the Issuer are not personal
representations, undertakings and agreements of the Owner Trustee but are
binding only on the Issuer created pursuant to the Owner Trust Agreement, (iii)
nothing contained herein shall be construed as creating any liability on the
Owner Trustee, individually or personally, to perform any covenant of the Issuer
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any person claiming by, through or
under any such party and (iv) under no circumstances shall the Owner Trustee be
personally liable for the payment of any indebtedness or expense of the Issuer
or be liable for the breach or failure of any obligation, representation,
warranty or covenant make or undertaken by the Issuer under this Agreement.
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IN WITNESS WHEREOF, the Master Servicer, the Servicer, the
Issuer and the Indenture Trustee have caused their names to be signed hereto by
their respective officers thereunto duly authorized, in each case as of the day
and year first above written.
WILSHIRE SERVICING CORPORATION
as Master Servicer
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
NATIONAL MORTGAGE COMPANY
as Servicer
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
WILSHIRE REIT TRUST SERIES 1998-1,
as Issuer
By: Wilmington Trust
Company, not in
its individual capacity but
solely as Owner Trustee
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
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EXHIBIT A-1
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
Loan Information
----------------
Name of Mortgagor:
-------------------------------
Servicer
Loan No.:
-------------------------------
Indenture Trustee/Custodian
---------------------------
Name:
-------------------------------
Address:
-------------------------------
-------------------------------
Indenture Trustee/Custodian
Mortgage File No.:
-------------------------------
Depositor
---------
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address:
-------------------------------
-------------------------------
Notes: Asset-Backed Floating Rate Notes, Series 1998-11.
A-1-1
The undersigned Servicer hereby acknowledges that it has
received from _______________________, as Indenture Trustee (or a Custodian on
its behalf) for the Holders of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Notes, Series 1998-11, the documents referred to
below (the "Documents"). All capitalized terms not otherwise defined in this
Request for Release shall have the meanings given them in the Servicing
Agreement, dated as of September 1, 1998, among the Indenture Trustee, the
Issuer and the Servicer (the "Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal sum of
$__________, made by _____________________, payable to, or endorsed to the order
of, the Indenture Trustee.
( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.
( ) Deed of Trust recorded on ___________________ as instrument no. ________________
in the County Recorder's Office of the County of _________________, State of
____________________ in book/reel/docket _________________ of official records at
page/image ______________.
( ) Assignment of Mortgage or Deed of Trust to the Indenture Trustee, recorded on
___________________ as instrument no. _________ in the County Recorder's Office of
the County of _______________, State of _______________________ in
book/reel/docket ____________ of official records at page/image ____________.
( ) Other documents, including any amendments, assignments or other assumptions of the
Mortgage Note or Mortgage.
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
The undersigned Servicer hereby acknowledges and agrees as
follows:
(1) The Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Indenture Trustee, solely for
the purposes provided in the Agreement.
(2) The Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of attachment or other
A-1-2
impositions nor shall the Servicer assert or seek to assert any claims
or rights of setoff to or against the Documents or any proceeds
thereof.
(3) The Servicer shall return each and every Document
previously requested from the Mortgage File to the Indenture Trustee
(or a Custodian on its behalf) when the need therefor no longer exists,
unless the Mortgage Loan relating to the Documents has been liquidated
and the proceeds thereof have been remitted to the Collection Account
and except as expressly provided in the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Servicer shall at all times be ear marked for the account of the
Indenture Trustee, and the Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the
Servicer's possession, custody or control.
Dated:
[ Servicer]
By:
----------------------------
Name:
Title:
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
ASSET-BACKED FLOATING RATE NOTES, SERIES 1998-11
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH
HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE SERVICING
AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.
LOAN NUMBER: _____________________ BORROWER'S NAME: _________________
COUNTY:___________________________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
______________________________ DATED:__________________________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
A-2-1
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
[AVAILABLE UPON REQUEST]