1
EXHIBIT 4
================================================================================
HFC REVOLVING CORPORATION,
as Seller,
and
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
_______________________
FORM OF POOLING AND SERVICING AGREEMENT
Dated as of _______________, 1996
_______________________
Revolving Home Equity Loan Asset Backed Certificates,
Series 1996-2
================================================================================
2
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Interest Calculations . . . . . . . . . . . . . . 18
Section 1.03. Usage of Terms . . . . . . . . . . . . . . . . . 18
ARTICLE II
Conveyance of Mortgage Loans; Original Issuance of Certificates; Tax Treatment
Section 2.01. Acknowledgment; Conveyance of Initial Mortgage
Loans; Retention of Obligation to Fund
Advances Under Loan Agreements; Custody of
Mortgage Files . . . . . . . . . . . . . . . . . 19
Section 2.02. Acceptance by Trustee; Retransfer of Mortgage
Loans; Conveyance of Eligible Substitute
Mortgage Loans . . . . . . . . . . . . . . . . . 23
Section 2.03. Representations and Warranties Regarding the
Master Servicer; Certain Covenants of the
Master Servicer . . . . . . . . . . . . . . . . . 26
Section 2.04. Representations and Warranties of the Seller
Regarding this Agreement and the Mortgage
Loans; Retransfer of Certain Mortgage Loans . . . 27
Section 2.05. Covenants of the Seller . . . . . . . . . . . . . 34
Section 2.06. Conveyance of the Subsequent Mortgage Loans . . . 35
Section 2.07. Retransfers of Mortgage Loans at Election of
Seller . . . . . . . . . . . . . . . . . . . . . 37
Section 2.08. Execution and Authentication of Certificates . . 39
Section 2.09. Tax Treatment . . . . . . . . . . . . . . . . . . 39
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The Master Servicer . . . . . . . . . . . . . . . 40
Section 3.02. Collection of Certain Mortgage Loan Payments;
Mortgage Loan Payment Record . . . . . . . . . . 42
Section 3.03. Withdrawals from the Collection Account;
Permitted Debits to the Mortgage Loan Payment
Record . . . . . . . . . . . . . . . . . . . . . 46
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses . . . . . . . . . . . . . . . 47
Section 3.05. Assumption and Modification Agreements . . . . . 48
Section 3.06. Realization Upon Defaulted Mortgage Loans . . . . 49
Section 3.07. Trustee to Cooperate . . . . . . . . . . . . . . 49
Section 3.08. Servicing Compensation; Payment of Certain
Expenses by Master Servicer . . . . . . . . . . . 50
Section 3.09. Annual Statement as to Compliance . . . . . . . . 50
i
3
Page
----
Section 3.10. Annual Servicing Report . . . . . . . . . . . . . 51
Section 3.11. Annual Opinion of Counsel . . . . . . . . . . . . 51
Section 3.12. Access to Certain Documentation and
Information Regarding the Mortgage Loans . . . . 51
Section 3.13. Maintenance of Certain Servicing Insurance
Policies . . . . . . . . . . . . . . . . . . . . 51
Section 3.14. Reports to the Securities and Exchange
Commission . . . . . . . . . . . . . . . . . . . 52
Section 3.15. Information Required by the Internal Revenue
Service Generally and Reports of Foreclosures
and Abandonments of Mortgaged Property . . . . . 52
Section 3.16. Additional Covenants of HFC . . . . . . . . . . . 52
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate . . . . . . . . . . . . . . 53
Section 4.02. Credit Enhancement Instrument; Spread Account . . 56
Section 4.03. Replacement Credit Enhancement Instruments . . . 57
ARTICLE V
Payments and Statements to Certificateholders; Rights of Certificateholders
Section 5.01. Distributions . . . . . . . . . . . . . . . . . . 58
Section 5.02. Calculation of the Class A Certificate Rate . . . 60
Section 5.03. Statements to Certificateholders . . . . . . . . 60
Section 5.04. Rights of Certificateholders . . . . . . . . . . 62
Section 5.05. Funding Account . . . . . . . . . . . . . . . . . 62
ARTICLE VI
The Certificates
Section 6.01. The Certificates . . . . . . . . . . . . . . . . 64
Section 6.02. Registration of Transfer and Exchange of Class
A Certificates . . . . . . . . . . . . . . . . . 64
Section 6.03. Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . . . 66
Section 6.04. Persons Deemed Owners . . . . . . . . . . . . . . 67
Section 6.05. Restrictions on Transfer of Seller
Certificates . . . . . . . . . . . . . . . . . . 67
Section 6.06. Appointment of Paying Agent . . . . . . . . . . . 68
Section 6.07. Actions of Certificateholders . . . . . . . . . . 68
ii
4
Page
----
ARTICLE VII
The Master Servicer and the Seller
Section 7.01. Liability of the Master Servicer and the
Seller . . . . . . . . . . . . . . . . . . . . . 69
Section 7.02. Merger or Consolidation of, or Assumption of
the Obligations of, the Master Servicer or the
Seller . . . . . . . . . . . . . . . . . . . . . 69
Section 7.03. Limitation on Liability of the Master Servicer
and Others . . . . . . . . . . . . . . . . . . . 69
Section 7.04. Master Servicer Not to Resign . . . . . . . . . . 70
Section 7.05. Delegation of Duties . . . . . . . . . . . . . . 71
ARTICLE VIII
Events of Servicing Termination
Section 8.01. Events of Servicing Termination . . . . . . . . . 71
Section 8.02. Trustee to Act; Appointment of Successor . . . . 73
Section 8.03. Notification to Certificateholders . . . . . . . 74
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee . . . . . . . . . . . . . . . . 74
Section 9.02. Certain Matters Affecting the Trustee . . . . . . 75
Section 9.03. Trustee Not Liable for Certificates or
Mortgage Loans . . . . . . . . . . . . . . . . . 76
Section 9.04. Trustee May Own Certificates . . . . . . . . . . 77
Section 9.05. Master Servicer to Pay Trustee's Fees and
Expenses . . . . . . . . . . . . . . . . . . . . 77
Section 9.06. Eligibility Requirements for Trustee . . . . . . 78
Section 9.07. Resignation or Removal of Trustee . . . . . . . . 78
Section 9.08. Successor Trustee . . . . . . . . . . . . . . . . 78
Section 9.09. Merger or Consolidation of Trustee . . . . . . . 79
Section 9.10. Appointment of Co-Trustee or Separate Trustee . . 79
Section 9.11. Trustee May Enforce Claims Without Possession
of Certificates . . . . . . . . . . . . . . . . . 80
Section 9.12. Inspection of Mortgage Files . . . . . . . . . . 81
ARTICLE X
Termination
Section 10.01. Termination . . . . . . . . . . . . . . . . . . . 81
iii
5
Page
----
ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events . . . . . . . . . . . . 83
Section 11.02. Additional Rights Upon the Occurrence of
Certain Events . . . . . . . . . . . . . . . . . 84
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment . . . . . . . . . . . . . . . . . . . . 86
Section 12.02. Recordation of Agreement . . . . . . . . . . . . 87
Section 12.03. Limitation on Rights of Certificateholders . . . 87
Section 12.04. Governing Law . . . . . . . . . . . . . . . . . . 88
Section 12.05. Notices . . . . . . . . . . . . . . . . . . . . . 88
Section 12.06. Severability of Provisions . . . . . . . . . . . 89
Section 12.07. Assignment . . . . . . . . . . . . . . . . . . . 89
Section 12.08. Certificates Nonassessable and Fully Paid . . . . 89
Section 12.09. Third-Party Beneficiaries . . . . . . . . . . . . 89
Section 12.10. Counterparts . . . . . . . . . . . . . . . . . . 89
Section 12.11. Effect of Headings and Table of Contents . . . . 89
Section 12.12. Limitation on Voting of Preferred Stock . . . . . 89
EXHIBIT A FORM OF CLASS A CERTIFICATE . . . . . . . . . . . . . . . A-1
EXHIBIT B FORM OF SELLER CERTIFICATE . . . . . . . . . . . . . . . . B-1
EXHIBIT C MORTGAGE LOAN SCHEDULE . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D FORM OF CONTENT OF ANNUAL OPINION OF COUNSEL . . . . . . . D-1
EXHIBIT E FORM OF INVESTMENT LETTER . . . . . . . . . . . . . . . . E-1
EXHIBIT F FORM OF TRUST RECEIPT . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G-1 FORM OF MASTER NOTE . . . . . . . . . . . . . . . . . . . G-1
EXHIBIT G-2 FORM OF FUNDING MASTER NOTE . . . . . . . . . . . . . . . G-2
iv
6
This Pooling and Servicing Agreement, dated as of ______________,
1996, among HFC Revolving Corporation, as Seller, Household Finance
Corporation, as Master Servicer, and The First National Bank of Chicago, a
national banking association, as Trustee,
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
Accelerated Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, required to reduce the Class A
Certificate Principal Balance (after giving effect to the distribution of all
other amounts actually distributed on the Class A Certificates on such
Distribution Date) so that the Invested Amount (after giving effect to other
distributions to be made on the Class A Certificates on such Distribution Date)
exceeds the Class A Certificate Principal Balance (as so reduced) by the
Required Overcollateralization Amount; provided, however, that the Accelerated
Principal Distribution Amount, if any, with respect to a Distribution Date
shall be limited to the amount by which Class A Interest Collections for such
date exceed the aggregate amount distributable therefrom on such date pursuant
to clauses (i) through (vi) of Section 5.01.
Additional Balance: As to any Mortgage Loan and day, the unpaid
balance of any principal advanced to the related Mortgagor after the date as of
which the related Cut-Off Date Trust Balance is calculated.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of
a Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise, and "controlling" and "controlled" shall
have meanings correlative to the foregoing.
Aggregate Class A Liquidation Loss Amount: With respect to any
Collection Period, the amount equal to the product of (i) the Class A
Certificateholders' Floating Allocation Percentage for such Collection Period
and (ii) the aggregate of the Liquidation Loss Amounts for such Collection
Period.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Alternative Principal Distribution Amount: As to any Distribution
Date, the amount (but not less than zero) equal to the Principal Collections
for the related Collection Period less the aggregate of principal amounts drawn
down under the Loan Agreements during the related Collection Period.
7
Authorized Newspaper: A newspaper of general circulation in the
Borough of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
BIF: The Bank Insurance Fund, as from time to time constituted,
created under the Financial Institutions Reform, Recovery and Enhancement Act
of 1989 or, if at any time after the execution of this instrument the Bank
Insurance Fund is not existing and performing duties now assigned to it, the
body performing such duties on such date.
Book-Entry Certificate: Any Class A Certificate registered in the
name of the Depository or its nominee, ownership of which is reflected on the
books of the Depository or on the books of a person maintaining an account with
such Depository (directly or as an indirect participant in accordance with the
rules of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the State of New York or Illinois are
required or authorized by law to be closed.
Certificate: A Class A Certificate or a Seller Certificate.
Certificate Owner: The Person who is the beneficial owner of a
Book-Entry Certificate.
Certificate Register and Certificate Registrar: The register
maintained and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate
is registered in the Certificate Register, except that, solely for the purpose
of giving any consent, direction, waiver or request pursuant to this Agreement,
(i) any Class A Certificate registered in the name of the Seller (unless to the
knowledge of a Responsible Officer of the Trustee the Seller is acting as
trustee or nominee for a Person who is not an Affiliate of the Seller and who
makes the voting decision with respect to such Class A Certificate) or the
Master Servicer or any Person known to a Responsible Officer of the Trustee to
be an Affiliate of either the Seller or the Master Servicer and (ii) any Class
A Certificate for which the Seller (unless to the knowledge of a Responsible
Officer of the Trustee (A) the Seller is acting as trustee or nominee for a
Person who is not an Affiliate of the Seller and who makes the voting decision
with respect to such Class A Certificate or (B) the Seller is the owner of all
the Class A Certificates) or the Master Servicer or any Person known to a
Responsible Officer of the Trustee to be an Affiliate (other than an Affiliate
that has purchased any Class A Certificate on the Closing Date) of either the
Seller or the Master Servicer is the Certificate Owner shall be deemed not to
be outstanding and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the requisite amount of Percentage
Interests necessary to effect any such consent, direction, waiver or request
has been obtained.
Charge Off Amount: As to any Charged Off Mortgage Loan and
Collection Period, an amount equal to the amount of the Trust Balance that the
Master Servicer has charged off on its servicing records during such Collection
Period.
2
8
Charged Off Mortgage Loan: A defaulted Mortgage Loan that is not a
Liquidated Mortgage Loan and as to which (i) collection procedures are ongoing
and (ii) the Master Servicer has charged off all or a portion of the related
Trust Balance.
Class A Carry Forward Interest: As to any Distribution Date, the
amount by which interest accrued on the Class A Certificates at the Class A
Certificate Rate for the related Interest Period exceeds the Class A Interest
Payment Cap for such Distribution Date.
Class A Certificate Distribution Amount: With respect to any
Distribution Date, the aggregate amount distributable in respect of principal
and interest on the Class A Certificates pursuant to this Agreement.
Class A Certificate Interest: With respect to any Distribution Date,
interest for the related Interest Period at the applicable Class A Certificate
Rate on the Class A Certificate Principal Balance on the first day of such
Interest Period (after giving effect to the distribution made on the first day
of such Interest Period); provided that Class A Certificate Interest shall not
exceed the Class A Interest Payment Cap for such Distribution Date.
Class A Certificate Principal Balance: With respect to any
Distribution Date, the Original Class A Certificate Principal Balance minus the
aggregate amount of distributions allocable to principal on the Class A
Certificates.
Class A Certificate Rate: With respect to the first Interest Period,
_____% and for any subsequent Interest Period, LIBOR plus _____%; provided,
however, that in no event shall the Class A Certificate Rate exceed the
Weighted Average Maximum Loan Rate for the related Collection Period minus
_____%.
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Certificateholders' Floating Allocation Percentage: With
respect to the initial Distribution Date and the initial Collection Period, the
percentage equivalent of a fraction, the numerator of which is the Invested
Amount as of the Closing Date and the denominator of which is the Pool Balance
as of the Closing Date. With respect to any Distribution Date and the related
Collection Period thereafter, the percentage equivalent of a fraction, the
numerator of which is the Invested Amount as of the end of the related
Collection Period and the denominator of which is (a) the Pool Balance as of
the end of the preceding Collection Period, plus (b) the aggregate of the Cut-
Off Date Trust Balances of any Subsequent Mortgage Loans and any Additional
Balances sold to the Trust in each case during the related Collection Period,
plus (c) the amount on deposit in the Funding Account at the end of the related
Collection Period, minus (d) the aggregate Trust Balances of any Mortgage Loans
that were retransferred pursuant to Section 2.07(a) during the related
Collection Period.
Class A Certificates: Any certificate executed on behalf of the
Trust by the Trustee and authenticated by the Trustee substantially in the form
set forth in Exhibit A hereto.
Class A Fixed Allocation Percentage: With respect to any
Distribution Date prior to the first Reset Date, _____%, and with respect to
any Distribution Date that is a Reset Date and for each Distribution Date
thereafter until the next Reset Date, the percentage equivalent of a fraction,
the numerator of which is the Invested Amount as of the end of the related
3
9
Collection Period, and the denominator of which is (a) the Pool Balance as of
the end of the preceding Collection Period, plus (b) the aggregate of the Cut-
Off Date Trust Balances of any Subsequent Mortgage Loans and any Additional
Balances sold to the Trust in each case during the related Collection Period,
plus (c) the amount on deposit in the Funding Account at the end of the related
Collection Period, minus (d) the aggregate Trust Balances of any Mortgage Loans
that were retransferred pursuant to Section 2.07(a) during the related
Collection Period. With respect to any Distribution Date to occur after a
Rapid Amortization Event, the Class A Fixed Allocation Percentage shall be the
Class A Fixed Allocation Percentage immediately prior to such Rapid
Amortization Event.
Class A Interest Collections: With respect to any day during a
Collection Period, the product of (i) the Interest Collections received on such
day and (ii) the Class A Certificateholders' Floating Allocation Percentage for
such Collection Period .
Class A Interest Payment Cap: With respect to any Distribution Date,
an amount equal to accrued interest on the Class A Certificate Principal
Balance for the related Interest Period at the Weighted Average Loan Rate for
the Collection Period preceding the month in which such Interest Period ends,
minus _____%.
Class A Loss Reduction Amount: With respect to any Distribution
Date, the portion, if any, of the Aggregate Class A Liquidation Loss Amount for
the related Collection Period that has not been distributed to Class A
Certificateholders on such Distribution Date.
Class A Servicing Fee: With respect to any Distribution Date, the
product of (i) the Servicing Fee Rate and (ii) the Invested Amount less the
amount on deposit in the Funding Account (net of reinvestment earnings thereon)
in each case on the first day succeeding the preceding Distribution Date.
Closing Date: ______________, 1996.
Code: The Internal Revenue Code of 1986, as the same may be amended
from time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Certificateholders pursuant to Section
3.02(b). The Collection Account shall be an Eligible Account.
Collection Period: With respect to any Distribution Date and
Mortgage Loan, the one-month period ending on the related Cycle Date in the
month immediately preceding the month in which such Distribution Date occurs.
When used with respect to all the Mortgage Loans and any Distribution Date, the
term "Collection Period" shall mean each of the respective Collection Periods
applicable to each of the Mortgage Loans that commenced in the second preceding
calendar month and ended in the calendar month immediately preceding the month
in which such Distribution Date occurs.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan as
of any date, the percentage equivalent of the fraction, the numerator of which
is the sum of (i) the applicable Credit Limit and (ii) the outstanding
principal balance of any senior mortgage loans
4
10
that are secured by the same Mortgaged Property, and the denominator of which
is the Valuation of the related Mortgaged Property as of such date.
Corporate Trust Office: The principal office of the Trustee at which
at any particular time its corporate trust business shall be administered,
which office on the Closing Date is located at the address set forth in Section
12.05.
Credit Enhancement Draw Amount: With respect to any Distribution
Date, the sum of (x) the amount, if any, by which (A) the aggregate amount
specified in clauses (i) and (ii) of Section 5.01(a) exceeds (B) the sum of the
Class A Interest Collections and any amount on deposit in the Spread Account
for such Distribution Date and (y) the Guaranteed Principal Distribution Amount
for such Distribution Date.
Credit Enhancement Instrument: The Surety ▇▇▇▇ ▇▇ _______ dated as
of the Closing Date, issued by the Credit Enhancer to the Trustee for the
benefit of the Class A Certificateholders.
Credit Enhancer: [Credit Enhancer], a ______________ insurance
corporation organized under the laws of the State of ______________.
Credit Enhancer Default: The occurrence and continuance of the
failure of the Credit Enhancer to make a payment required under the Credit
Enhancement Instrument.
Credit Limit: As to any Mortgage Loan, the maximum principal balance
permitted under the terms of the related Loan Agreement.
Cut-Off Date: With respect to each Initial Mortgage Loan, the close
of business on the related Cycle Date immediately prior to ______________, 1996
and, with respect to each Subsequent Mortgage Loan or Eligible Substitute
Mortgage Loan, the close of business on the related Cycle Date immediately
prior to the date on which such Subsequent Mortgage Loan or Eligible Substitute
Mortgage Loan, respectively, was transferred to the Trust.
Cut-Off Date Pool Balance: The aggregate of the Cut-Off Date Trust
Balances of the Initial Mortgage Loans.
Cut-Off Date Trust Balance: With respect to any Mortgage Loan, the
outstanding principal balance thereof reflected on the servicing records of the
related Subservicer at the close of business on the related Cut-Off Date after
deduction of all amounts of principal received with respect thereto on such
date.
Cycle Date: As to any Mortgage Loan, the day of the month on which
the related billing cycle for such Mortgage Loan ends, which day is, with
respect to the Initial Mortgage Loans, either the 4th, 5th, 6th, 8th, 10th,
11th, 12th, 16th, 17th, 18th, 19th, 20th, 25th or 26th day of each month.
Defective Mortgage Loan: A Mortgage Loan subject to retransfer
pursuant to Section 2.02 or 2.04.
Definitive Certificates: As defined in Section 6.02(c).
5
11
Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of Class
A Certificates evidencing $___________ in initial aggregate principal amount of
the Class A Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the UCC of the State of New
York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date, the fifth
Business Day prior to such Distribution Date.
Distribution Date: The 20th day of each month (or if such 20th day
is not a Business Day, then the next succeeding Business Day), beginning in
the month immediately following the month of the initial issuance of the
Certificates.
Electronic Ledger: The electronic master record of home equity
credit line mortgage loans maintained by the Master Servicer.
Eligible Account: An account that is either (i) maintained with a
depository institution whose short-term debt obligations at the time of any
deposit therein are rated in the highest short-term debt rating category by the
Rating Agencies, (ii) an account or accounts maintained with a depository
institution with a long-term unsecured debt rating by each Rating Agency that
is at least investment grade, provided that the deposits in such account or
accounts are fully insured by either the BIF or the SAIF, (iii) a segregated
trust account maintained on the corporate trust side with the Trustee in its
fiduciary capacity, or (iv) an account otherwise acceptable to the Credit
Enhancer and each Rating Agency, as evidenced by a letter to such effect from
the Credit Enhancer and each such Rating Agency to the Trustee, without
reduction or withdrawal of the then-current ratings of the Certificates.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by
the Seller for a Defective Mortgage Loan pursuant to Section 2.02 or 2.04,
which on the date of such substitution must (i) have a Trust Balance not
substantially greater or less than the Trust Balance of such Defective Mortgage
Loan; (ii) have a Loan Rate of not less than the Loan Rate of the Defective
Mortgage Loan and not more than 500 basis points in excess thereof; (iii) if
the Defective Mortgage Loan was an adjustable rate Mortgage Loan, (A) have a
Margin that is not less than the Margin for the Defective Mortgage Loan, or
more than 500 basis points higher than the Margin for the Defective Mortgage
Loan; and (B) have a Maximum Loan Rate and a minimum Loan Rate that are not
lower than the Maximum Loan Rate and minimum Loan Rate, respectively, of the
Defective Mortgage Loan; (iv) have a remaining term to maturity not more than
six months earlier or later than the remaining term to maturity of the
Defective Mortgage Loan; (v) comply with the representations and warranties set
forth in Section 2.04(b), except those representations and warranties set forth
in clauses (xi), (xvi), (xxvii), (xxix), (xxx), and (xxxi) in said Section
2.04; (vi) have a Combined Loan-to-Value Ratio that is not greater than the
Combined Loan-to-Value Ratio of the Defective Mortgage Loan as of the date of
origination of such Defective Mortgage Loan; (vii) have a lien position at
least equal to the lien position of the Mortgage relating to the Defective
Mortgage Loan; and (viii) be the obligation of a Mortgagor whose credit profile
is substantially similar to that of the Mortgagor
6
12
under the Defective Mortgage Loan, unless with respect to (i) through (viii)
above, each of the Rating Agencies and the Credit Enhancer consents to such
Eligible Substitute Mortgage Loan.
Event of Servicing Termination: As defined in Section 8.01.
Excess Funding Amount: With respect to any Distribution Date, the
excess of (i) the amount on deposit in the Funding Account in respect of
Principal Collections after making deposits therein on such Distribution Date
plus the aggregate of any amounts withdrawn from the Funding Account pursuant
to Section 5.05(c)(ii) on all prior Distribution Dates over (ii) _____% of the
Cut-Off Date Pool Balance.
Federal National Mortgage Association: FNMA.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Liquidation Proceeds less
Liquidation Expenses exceeds (ii) the sum of the related Trust Balance plus
accrued and unpaid interest thereon plus the related Charge-Off Amounts of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
Funding Account: The custodial account or accounts created and
maintained with the Trustee for the benefit of the Class A Certificateholders
pursuant to Section 5.05. The Funding Account shall be an Eligible Account.
Funding Master Note: A demand note executed by the Master Servicer
and payable to the Trustee, evidencing deposits to the Funding Account and owed
to the Trustee from time to time, substantially in the form of Exhibit G-2
hereto.
Funding Period: The period commencing on the Closing Date and ending
on the earlier of (i) the Distribution Date on which the Trustee has purchased
an aggregate of $___________ of Subsequent Mortgage Loans from amounts on
deposit in the Funding Account, but in no event later than the 15th
Distribution Date and (ii) the commencement of the Rapid Amortization Period.
Guaranteed Principal Distribution Amount: With respect to any
Distribution Date, the lesser of (i) the amount, if any, required to reduce the
Class A Certificate Principal Balance (after giving effect to the distributions
allocable to principal on the Class A Certificates out of Interest Collections,
Principal Collections, all distributions to the Class A Certificateholders
pursuant to Section 5.01(b) from amounts on deposit in the Funding Account, and
amounts withdrawn from the Spread Account on such Distribution Date) to the
Invested Amount immediately following such Distribution Date and (ii) the Net
Insured Principal Amount (as defined in the Credit Enhancement Instrument) for
such Distribution Date.
HFC: Household Finance Corporation, a Delaware corporation, and its
successors.
Initial Mortgage Loan: Each mortgage loan (including the rights to
receive payments thereunder) that is transferred and assigned to the Trustee on
the Closing Date pursuant to Section 2.01, together with the Related Documents
and the rights thereunder conveyed to the
7
13
Trustee pursuant to the Transfer Agreement (exclusive of such Mortgage Loans
that are retransferred to the Seller from time to time pursuant to Sections
2.02, 2.04 and 2.07), and held as a part of the Trust.
Insolvency Event: As defined in Section 11.02.
Insurance Agreement: The Insurance and Reimbursement Agreement dated
as of ______________, 1996 among HFC, as Master Servicer, the Seller, the
Credit Enhancer and the Trustee, including any amendments and supplements
thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the
Credit Enhancer) pursuant to any insurance policy covering a Mortgage Loan, or
by the Master Servicer pursuant to the last sentence of Section 3.04, net of
any component thereof covering any expenses incurred by or on behalf of the
Master Servicer in connection with obtaining such Insurance Proceeds and
exclusive of any portion thereof that is applied to the restoration or repair
of the related Mortgaged Property, released to the Mortgagor in accordance with
the Master Servicer's normal servicing procedures or required to be paid to any
holder of a mortgage senior to such Mortgage Loan.
Interest Collections: Any payments that constitute interest by or on
behalf of Mortgagors and any other amounts constituting interest (including
without limitation such portion of Insurance Proceeds, Net Liquidation Proceeds
and accrued interest paid by the Master Servicer in purchasing a Mortgage Loan
pursuant to Section 3.01) collected by the Master Servicer under the Mortgage
Loans (excluding any fees (including annual fees) or late charges or similar
administrative fees paid by Mortgagors), any investment earnings on amounts in
the Funding Account and, without duplication, all Recovered Charge Off Amounts,
whether or not any portions thereof may be considered principal pursuant to the
terms of the related Loan Agreement. Except as otherwise set forth herein, the
terms of the related Loan Agreement shall determine whether an amount
constitutes principal or interest.
Interest Period: With respect to any Distribution Date other than
the first Distribution Date, the period beginning on the preceding Distribution
Date and ending on the day preceding such Distribution Date, and in the case of
the first Distribution Date, the period beginning on the Closing Date and
ending on the day preceding the first Distribution Date.
Invested Amount: With respect to any date, an amount equal to (i)
the Original Invested Amount minus (ii) the sum of (a) all distributions to
Class A Certificateholders in respect of Scheduled Principal Distribution
Amounts, (b) (x) all payments pursuant to Section 5.01(a)(iii) from Class A
Interest Collections, and (y) all distributions to the Class A
Certificateholders pursuant to Section 5.01(b) from amounts on deposit in the
Funding Account, (c) all Class A Loss Reduction Amounts and (d) all principal
payments that would be made to Certificateholders but for the Master Servicer's
legal inability to deposit collections in the Collection Account due to a final
determination of a court of competent jurisdiction in any Master Servicer's,
Subservicer's or the Seller's insolvency.
LIBOR: With respect to each Distribution Date, the rate for deposits
in U.S. Dollars for a period of one month which appears on the Dow ▇▇▇▇▇
Telerate Service at Page 3750 as of 11:00 A.M., London time, on the day that is
two LIBOR Business Days prior to the preceding Distribution Date. If such rate
does not appear on such page (or such other page
8
14
as may replace that page on that service, or if such service is no longer
offered, such other service for displaying LIBOR or comparable rates as may be
selected by the Trustee after consultation with the Seller), the rate will be
the Reference Bank Rate. The "Reference Bank Rate" will be determined on the
basis of the rates at which deposits in U.S. Dollars are offered by the
reference banks (which shall be three major banks that are engaged in
transactions in the London interbank market, selected by the Trustee after
consultation with the Seller) as of 11:00 A.M., London time, on the day that is
two LIBOR Business Days prior to the immediately preceding Distribution Date to
prime banks in the London interbank market for a period of one month in amounts
approximately equal to the principal amount of the Certificates then
outstanding. The Trustee will request the principal London office of each of
the reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the
quotations. If on such date fewer than two quotations are provided as
requested, the rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Trustee after consultation
with the Seller, as of 11:00 A.M., New York City time, on such date for loans
in U.S. Dollars to leading European banks for a period of one month in amounts
approximately equal to the principal amount of the Certificates then
outstanding. If no such quotations can be obtained, the rate will be LIBOR for
the prior Distribution Date.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or
(ii) any other day on which banking institutions in the State of New York or
Illinois or in the City of London, England are required or authorized by law to
be closed.
Lien: Any mortgage, deed of trust, pledge, conveyance,
hypothecation, assignment, participation, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority right or interest or other
security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing or the filing of any financing statement under
the UCC (other than any such financing statement filed for informational
purposes only) or comparable law of any jurisdiction to evidence any of the
foregoing; provided, however, that any assignment pursuant to Section 6.05 or
7.02 hereof shall not be deemed to constitute a Lien.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage
Loan in respect of which the Master Servicer has determined, in accordance with
the servicing procedures specified herein, as of the end of the related
Collection Period that all Liquidation Proceeds which it expects to recover
with respect to the disposition of the related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
that are incurred by the Master Servicer in connection with the liquidation of
any Mortgage Loan and not recovered under any insurance policy, such expenses
including, without limitation, reasonable legal fees and expenses, any
unreimbursed amount expended pursuant to Section 3.06 (including, without
limitation, amounts advanced to correct defaults on any mortgage loan that is
senior to such Mortgage Loan and amounts advanced to keep current or pay off a
mortgage loan that is senior to such Mortgage Loan) with respect to the related
Mortgage Loan and any related and unreimbursed expenditures for real estate
property taxes or for property restoration, preservation or insurance against
casualty loss or damage.
9
15
Liquidation Loss Amount: With respect to any (i) Charged Off
Mortgage Loan and any Collection Period (other than the Collection Period in
which all or a portion of such Charged Off Mortgage Loan becomes a Liquidated
Mortgage Loan), the related Charge Off Amount and (ii) Liquidated Mortgage
Loan, the excess of the related Trust Balance at the end of the Collection
Period in which such Liquidated Mortgage Loan became a Liquidated Mortgage Loan
over the portion of related Net Liquidation Proceeds applied in reduction of
the related Trust Balance in accordance with the related Loan Agreement.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Credit Enhancement Instrument) received in
connection with the liquidation of any Mortgage Loan, whether through trustee's
sale, foreclosure sale or otherwise.
Loan Agreement: With respect to any Mortgage Loan, the related
credit line account agreement or promissory note, as applicable, executed by
the Mortgagor and any amendment or modifications thereof.
Loan Rate: With respect to any Mortgage Loan as of any day, the per
annum rate of interest applicable under the related Loan Agreement to the
calculation of interest for such day on the Trust Balance.
Margin: With respect to each Mortgage Loan with an adjustable Loan
Rate, the spread over the applicable index, as specified in the related Loan
Agreement.
Master Note: A demand note executed by the Master Servicer and
payable to the Trustee, evidencing receipts in respect of the Mortgage Loans
owed to the Trustee from time to time, substantially in the form of Exhibit G-1
hereto.
Master Servicer: Household Finance Corporation, a Delaware
corporation, or its successor in interest, or any successor master servicer
appointed as herein provided.
Master Servicer Credit Facility: Any surety bond, letter of credit
or similar agreement obtained by the Master Servicer pursuant to Section
3.02(c).
Master Servicer Credit Facility Amount: As of any Determination Date
upon which a Master Servicer Credit Facility is maintained pursuant to Section
3.02(c), the maximum amount of coverage thereunder in accordance with the terms
thereof.
Master Servicer Credit Facility Issuer: At any time with respect to
any Master Servicer Credit Facility, the institution that is then obligated
under such Master Servicer Credit Facility.
Maximum Loan Rate: As to any Mortgage Loan the lesser of the maximum
rate permitted by law and the highest rate at which interest can accrue
pursuant to the terms of the related Loan Agreement.
Maximum Principal Distribution Amount: With respect to any
Distribution Date, the applicable Class A Fixed Allocation Percentage of the
Principal Collections for the related Collection Period.
10
16
Minimum Monthly Payment: With respect to any Mortgage Loan and any
month, the minimum amount required to be paid by the related Mortgagor in that
month.
Minimum Seller Interest: With respect to any date, _____%.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc. or its successor in
interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first, second or third lien on an estate in fee simple interest in real
property securing a Mortgage Loan.
Mortgage File: The mortgage documents (including without limitation
the related Mortgage Note) listed in Section 2.01 pertaining to a particular
Mortgage Loan and any additional documents required to be added to the Mortgage
File pursuant to this Agreement, which documents may be physical documents or,
pursuant to the terms of Section 2.01, may be optical images or other
representations thereof.
Mortgage Loan: Each Initial Mortgage Loan, Subsequent Mortgage Loan
and Eligible Substitute Mortgage Loan.
Mortgage Loan Payment Record: With respect to the Trust, the record
maintained by the Master Servicer pursuant to Section 3.02(c).
Mortgage Loan Schedule: With respect to any date, the schedule of
Mortgage Loans included in the Trust on such date. The initial Mortgage Loan
Schedule is the schedule delivered by the Seller to the Trustee on the Closing
Date, which schedule sets forth as to each Initial Mortgage Loan as of the
related Cut-Off Date (i) the Cut-Off Date Trust Balance, (ii) the Credit Limit,
(iii) the Margin, if any, to be used to arrive at the Loan Rate, (iv) the
Maximum Loan Rate, and (v) the account number. The Mortgage Loan Schedule will
be amended from time to time to reflect the removal of Mortgage Loans and the
conveyance of Additional Balances, the Subsequent Mortgage Loans and any
Eligible Substitute Mortgage Loan to the Trust, and when so amended shall
include the information set forth above with respect to each Subsequent
Mortgage Loan and each Eligible Substitute Mortgage Loan as of their respective
Cut-Off Dates.
Mortgage Note: With respect to a Mortgage Loan, the revolving home
equity loan note or other evidence of indebtedness under which the related
Mortgagor agrees to pay the indebtedness evidenced thereby and secured by the
related Mortgage.
Mortgaged Property: The underlying property securing a Mortgage
Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
Net Insured Principal Amount: The meaning assigned to such term in
the Credit Enhancement Instrument.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage
Loan, Liquidation Proceeds, less the sum of (x) Liquidation Expenses and (y)
any Foreclosure Profit.
11
17
Officer's Certificate: A certificate signed by the President, a
Senior Vice President, a Vice President, the Treasurer, Assistant Treasurer,
Controller or Assistant Controller of the Seller or the Master Servicer, as the
case may be, and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee, who may be counsel for the Master Servicer or the Seller and who, in
the case of opinions delivered to the Credit Enhancer, is reasonably acceptable
to it.
Original Invested Amount: $___________.
Original Class A Certificate Principal Balance: $___________.
Overcollateralization Amount: As of any date of determination, the
amount, if any, by which the Invested Amount exceeds the Class A Certificate
Principal Balance.
Paying Agent: Any paying agent appointed pursuant to Section 6.06.
Percentage Interest: As to any Class A Certificate, the percentage
obtained by dividing the principal denomination of such Certificate by the
aggregate of the principal denominations of all Class A Certificates.
Permitted Investments: One or more of the following (excluding any
callable investments purchased at a premium):
(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 that
such obligations are backed by the full faith and credit of the United
States;
(ii) repurchase agreements on obligations specified in
clause (i) maturing not more than three months from the date of
acquisition thereof, provided that the short-term unsecured debt
obligations of the party agreeing to repurchase such obligations are
at the date of acquisition rated by each Rating Agency in its highest
short-term rating category (which is A-1+ for Standard & Poor's and
P-1 for Moody's);
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if ▇▇▇▇▇'▇ is a Rating Agency, 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) of any U.S. depository institution or trust
company incorporated under the laws of the United States or any state
thereof and subject to supervision and examination by federal and/or
state banking authorities, provided that the unsecured short-term debt
obligations of such depository institution or trust company at the
date of acquisition thereof have been rated by each of Moody's and
Standard & Poor's in its highest unsecured short-term debt rating
category;
(iv) commercial paper (having original maturities of not
more than 270 days) of any corporation incorporated under the laws of
the United States or any state thereof which on the date of
acquisition has been rated by Standard & Poor's and Moody's in their
highest short-term rating categories;
12
18
(v) short term investment funds sponsored by any trust
company or national banking association incorporated under the laws of
the United States or any state thereof which on the date of
acquisition has been rated by Standard & Poor's and Moody's in their
respective highest rating category for long-term unsecured debt, or
any other short-term investment fund the funds in which are invested
in securities rated in the highest rating category by Standard &
Poor's and Moody's and which mature on or prior to the next
Distribution Date;
(vi) interests in any money market fund which at the date
of acquisition has a rating of Aaa by Moody's and AAAm or AAAm-G by
Standard & Poor's or such lower rating as will not result in the
qualification, downgrading or withdrawal of the then-current rating
assigned to the Class A Certificates by each Rating Agency; and
(vii) other obligations or securities that are acceptable
to each Rating Agency and the Credit Enhancer as a Permitted
Investment hereunder and will not result in a reduction in the
then-current rating of the Class A Certificates, as evidenced by a
letter to such effect from such Rating Agency and the Credit Enhancer;
provided 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 principal and interest payments derived from obligations
underlying such instrument if such interest and principal payments provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may
be prepaid or called at a price less than its purchase price prior to its
stated maturity.
The Trustee is hereby authorized to execute purchases and sales
directed by the Master Servicer through the facilities of its own trading or
capital markets operations. The Trustee shall send to the Master Servicer
statements reflecting the monthly activity for each such purchase and sale made
hereunder for the preceding month. Although the Master Servicer recognizes
that it may obtain a broker confirmation or written monthly statement
containing comparable information at no additional cost, the Master Servicer
hereby agrees that confirmations of investments are not required to be issued
by the Trustee for each month in which a monthly statement is rendered. No
statement need be rendered pursuant to the provision hereof if no activity
occurred in the account for such month.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, or
government or any agency or political subdivision thereof.
Pool Balance: With respect to any date, the aggregate of the Trust
Balances of all Mortgage Loans as of such date.
Pool Factor: With respect to any Distribution Date, the percentage,
carried to seven places, obtained by dividing the Class A Certificate Principal
Balance for such Distribution Date by the Original Class A Certificate
Principal Balance.
Preferred Stock: As defined in Section 12.12.
13
19
Principal Collections: (a) Any payments that constitute principal by
or on behalf of Mortgagors and any other amounts constituting principal
(including but not limited to such portion of Insurance Proceeds, the principal
portion of any purchase price for a Mortgage Loan purchased by the Master
Servicer pursuant to Section 3.01 and such portion of Net Liquidation Proceeds,
but excluding Foreclosure Profits and Recovered Charge Off Amounts) collected
by the Master Servicer under the Mortgage Loans and (b) any Retransfer Deposit
Amounts deposited into the Collection Account by the Seller pursuant to Section
2.02. The terms of the related Loan Agreement shall determine whether an
amount is principal or interest.
Rapid Amortization Commencement Date: The earlier of the
Distribution Date in April 2005, and the Distribution Date relating to the
Collection Period in which a Rapid Amortization Event is deemed to occur
pursuant to Section 11.01.
Rapid Amortization Event: As defined in Section 11.01.
Rapid Amortization Period: The period commencing on the earlier of
(x) the Distribution Date in October 2004 and (y) the date as of which a Rapid
Amortization Event, if any, occurs.
Rating Agencies: Standard & Poor's and Moody's or their respective
successors. If such agency or a successor is no longer in existence, "Rating
Agency" shall be such statistical credit rating agency, or other comparable
Person, designated by the Seller, notice of which designation shall be given to
the Trustee. References herein to the highest short term unsecured rating
category of a Rating Agency shall mean A-1+ or better in the case of Standard &
Poor's and P-1 or better in the case of Moody's and in the case of any other
Rating Agency shall mean such equivalent ratings. References herein to the
highest long-term rating category of a Rating Agency shall mean "AAA" in the
case of Standard & Poor's and "Aaa" in the case of Moody's and in the case of
any other Rating Agency, such equivalent rating.
Receivables Purchase Agreement: The receivables purchase agreement
dated as of ______________, 1996, between the Seller and the Related Document
Sellers pursuant to which the Related Document Sellers convey to the Seller all
of their right, title and interest in and to the Cut-Off Date Trust Balances
and the Additional Balances, if any.
Record Date: The last day preceding the related Distribution Date;
provided, however, that following the date on which Definitive Certificates are
available pursuant to Section 6.02(c) the Record Date shall be the last day of
the month preceding the month in which the related Distribution Date occurs.
Recovered Charge Off Amount: With respect to any Mortgage Loan that
became a Liquidated Mortgage Loan in a Collection Period, the amount, if any,
by which (i) its Net Liquidation Proceeds that are allocable to principal in
accordance with the Loan Agreement exceeds (ii) its Trust Balance immediately
prior to foreclosure up to an amount of all related Charge Off Amounts, but in
no event less than zero.
REO: A Mortgaged Property that is acquired by the Trust in a
foreclosure or by grant of deed in lieu of foreclosure.
14
20
Related Documents: As such term is defined in the Receivables
Purchase Agreement.
Related Document Sellers: As defined in Section 2.01.
Replacement Event: As defined in Section 4.03.
Required Overcollateralization Amount: $___________.
Reset Date: Any Distribution Date immediately following either a
Distribution Date in which Subsequent Funding Mortgage Loans are acquired by
the Trust pursuant to Section 2.06 or a Collection Period in which Mortgage
Loans are retransferred from the Trust pursuant to Section 2.07(a).
Responsible Officer: When used with respect to the Trustee, any
officer in the Corporate Trustee Administration Department of the Trustee with
direct responsibility for the administration of this Agreement.
Retransfer Date: As defined in Section 2.07.
Retransfer Deposit Amount: As defined in Sections 2.02 and 2.04.
Retransfer Notice Date: As defined in Section 2.07.
Retransfer Price: An amount equal to the sum of (i) the outstanding
Class A Certificate Principal Balance, (ii) accrued and unpaid interest thereon
at the Class A Certificate Rate through the day preceding the final
Distribution Date pursuant to Section 10.01(a) and (iii) any unreimbursed draws
under the Credit Enhancement Instrument and other amounts due and unpaid under
the Insurance Agreement.
Revolving Credit Agreement: The revolving credit agreement dated as
of ______________, 1996, between the Master Servicer and the Seller, as amended
or supplemented from time to time.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and
performing duties now assigned to it, the body performing such duties on such
date.
Scheduled Principal Distribution Amount: With respect to any
Distribution Date prior to the Rapid Amortization Commencement Date, an amount
equal to the lesser of (i) the Maximum Principal Distribution Amount and (ii)
the Alternative Principal Distribution Amount. With respect to any
Distribution Date on or after the Rapid Amortization Commencement Date, an
amount equal to the Maximum Principal Distribution Amount.
Seller: HFC Revolving Corporation, a Delaware corporation, and its
successors in interest.
15
21
Seller Certificates: The certificates executed on behalf of the
Trust by the Trustee and authenticated by the Trustee substantially in the form
set forth in Exhibit B hereto.
Seller Certificateholders: The Holders of the Seller Certificates.
Seller Collections: The sum of Seller Interest Collections and
Seller Principal Collections.
Seller Interest: As to any Distribution Date, the percentage
interest in the Trust determined by dividing (a) the Pool Balance as of the
last day of the related Collection Period minus the Invested Amount immediately
following such Distribution Date reduced by the Principal Collections on
deposit in the Funding Account immediately following such Distribution Date by
(b) the Pool Balance as of the last day of the related Collection Period;
provided that any reduction in the Seller Interest as a result of Mortgage
Loans retransferred to the Seller pursuant to Section 2.02 or 2.04 shall be
limited to an amount that would not reduce the Seller Interest below the
Minimum Seller Interest on such Distribution Date after giving effect to such
retransfers.
Seller Interest Collections: Interest Collections that are not Class
A Interest Collections.
Seller Monthly Servicing Fee: With respect to any Distribution Date,
the product of (i) the Servicing Fee Rate and (ii) the Seller Principal Balance
on the first day succeeding the preceding Distribution Date.
Seller Principal Balance: As of the date of determination thereof,
the amount equal to (i) the Pool Balance minus (ii) the Invested Amount as of
the close of business on such day reduced by the Principal Collections on
deposit in the Funding Account.
Seller Principal Collections: On any Distribution Date, the
Principal Collections received during the related Collection Period minus the
amount of such Principal Collections required to be distributed to Class A
Certificateholders pursuant to Section 5.01(b) or deposited to the Funding
Account pursuant to Section 5.05(a) on such Distribution Date.
Servicing Certificate: A certificate completed by and executed on
behalf of the Master Servicer in accordance with Section 4.01.
Servicing Fee: The fee payable to the Master Servicer pursuant to
Section 3.08.
Servicing Fee Rate: A rate equal to [1.00]% per annum.
Servicing Officer: Any officer of the Master Servicer or other
individual designated by an officer of the Master 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 to
the Trustee on the Closing Date (with a copy to the Credit Enhancer) by the
Master Servicer, as such list may be amended from time to time.
Spread Account: The account created and maintained by the Trustee
pursuant to Section 4.02.
16
22
Spread Account Master Note: As defined in the Insurance Agreement.
Spread Account Maximum: As defined in the Insurance Agreement.
Standard & Poor's: Standard & Poor's Rating Services or its
successor in interest.
Subsequent Funding Mortgage Loan: Each mortgage loan acquired
pursuant to Section 2.06 with funds on deposit in the Funding Account during
the Funding Period (including the rights to receive payments thereunder) that
is transferred and assigned to the Trustee pursuant to Section 2.06 on the
related Subsequent Transfer Date, together with the Related Documents and the
rights thereunder conveyed to the Trustee pursuant to the Transfer Agreement
(exclusive of such Mortgage Loans that are retransferred to the Seller from
time to time pursuant to Sections 2.02, 2.04 and 2.07), and held as a part of
the Trust.
Subsequent Mortgage Loan: Each Subsequent Funding Mortgage Loan.
Subsequent Transfer Date: With respect to Subsequent Funding
Mortgage Loans, any Distribution Date during the Funding Period.
Subservicers: As defined in Section 2.01.
Transfer Agreement: The agreement dated as of ______________, 1996
between the Trustee and Related Document Sellers pursuant to which the Related
Document Sellers shall convey to the Trustee all of their right, title and
interest in and to the Transferred Assets (as defined in the Transfer
Agreement), including the Loan Agreements and the Mortgages related to the
Trust Balances being conveyed to the Trustee by the Seller pursuant to this
Agreement.
Transfer Date: With respect to the Cut-Off Date Trust Balances of
(i) the Initial Mortgage Loans, the Closing Date; (ii) the Subsequent Mortgage
Loans, the related Subsequent Transfer Date; and (iii) the Eligible Substitute
Mortgage Loans, the respective dates on which such Eligible Substitute Mortgage
Loans are conveyed to the Trust under the terms hereof.
Trust: The trust created by this Agreement, the corpus of which
consists of the Mortgage Loans, such assets as shall from time to time be
identified as deposited in the Collection Account (exclusive of net earnings
thereon), the Funding Account and the Spread Account in accordance with this
Agreement, property that secured a Mortgage Loan and that has become REO, the
interest of the Seller in certain hazard insurance policies maintained by the
Mortgagors or the Master Servicer in respect of the Mortgage Loans, the Credit
Enhancement Instrument, the Spread Account, the Collection Account, the Funding
Account, the Master Servicer Credit Facility, if any, the Master Note, if any,
the Funding Master Note, if any, the Spread Account Master Note, if any, and
all proceeds of each of the foregoing.
Trust Balance: As to any Mortgage Loan (other than a Liquidated
Mortgage Loan) and date, the related Cut-Off Date Trust Balance, plus (i) any
Additional Balance in respect of such Mortgage Loan, minus (ii) the sum of (x)
all Principal Collections credited against the Trust Balance and (y) any
related Charge-Off Amounts prior to such date. For purposes of this
definition, a Liquidated Mortgage Loan shall be deemed to have a Trust Balance
equal to the
17
23
Trust Balance of the related Mortgage Loan immediately prior to the final
recovery of related Liquidation Proceeds and a Trust Balance of zero
thereafter.
Trustee: The First National Bank of Chicago, a national banking
association, or any successor Trustee appointed in accordance with this
Agreement that has accepted such appointment in accordance with this Agreement.
UCC: The Uniform Commercial Code, as amended from time to time, as
in effect in any specified jurisdiction.
Unpaid Class A Carry Forward Interest: As to any Distribution Date,
the aggregate of Class A Carry Forward Interest from prior Distribution Dates
that has not previously been paid.
Unpaid Class A Certificate Interest Penalty Rate: A rate equal to
[2.00]% per annum.
Unpaid Class A Certificate Interest Shortfall: With respect to any
Distribution Date, the aggregate amount, if any, of Class A Certificate
Interest up to the Class A Interest Payment Cap that was accrued in respect of
a prior Distribution Date and has not been distributed to Class A
Certificateholders.
Valuation: With respect to any Mortgaged Property and time referred
to herein, the appraised value of the Mortgaged Property based upon the most
recent appraisal made by or on behalf of the Seller or the originator of the
related Mortgage Loan.
Weighted Average Loan Rate: As to any Collection Period, the average
of the daily Loan Rates for such Collection Period weighted on the basis of the
related Trust Balances outstanding at the end of such Collection Period for
each Mortgage Loan as determined by the Master Servicer in accordance with the
Master Servicer's normal servicing procedures.
Weighted Average Maximum Loan Rate: As to any Collection Period, the
average of the Maximum Loan Rates for such Collection Period weighted on the
basis of the related Trust Balances outstanding at the end of such Collection
Period for each Mortgage Loan as determined by the Master Servicer in
accordance with the Master Servicer's normal servicing procedures.
Section 1.02. Interest Calculations. All calculations of interest
hereunder that are made in respect of the Trust Balance of a Mortgage Loan
shall be made on a daily basis using a 360-day year. All calculations of
interest on the Class A Certificates shall be made on the basis of the actual
number of days in an Interest Period and a year assumed to consist of 360 days.
The calculation of the Servicing Fee shall be made on the basis of a 360-day
year consisting of twelve 30-day months.
Section 1.03. Usage of Terms. With respect to all terms in this
Agreement the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, optical imaging, and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein
entered into in accordance with their respective terms and not prohibited by
this Agreement; references to Persons include their permitted successors and
assigns; and the term "including"
18
24
means "including without limitation." The term "related Collection Period" as
used herein with respect to any Distribution Date shall mean the Collection
Period immediately preceding such Distribution Date and the term "preceding
Collection Period" as used herein with respect to any Distribution Date shall
mean the Collection Period preceding the related Collection Period for such
Distribution Date.
ARTICLE II
Conveyance of Mortgage Loans; Original Issuance of Certificates; Tax Treatment
Section 2.01. Acknowledgment; Conveyance of Initial Mortgage Loans;
Retention of Obligation to Fund Advances Under Loan Agreements; Custody of
Mortgage Files. (a) The Trustee acknowledges that Household Realty
Corporation, Household Finance Corporation of California, Household Finance
Corporation II, Household Finance Corporation III, Household Finance Industrial
Loan Company, Household Finance Realty Corporation of New York, Household
Financial Center Inc., Household Finance Realty Corporation of Nevada,
Household Industrial Loan Company of Kentucky, Household Finance Industrial
Loan Company of Iowa, Household Finance Consumer Discount Company, Household
Industrial Finance Company and Mortgage One Corporation (collectively, the
"Related Document Sellers" or the "Subservicers") have each conveyed or will
convey (i) to the Seller pursuant to the Receivables Purchase Agreement, their
right, title and interest in and to the Trust Balance of each Initial Mortgage
Loan, each Subsequent Mortgage Loan and each Eligible Substitute Mortgage Loan,
and all Interest Collections and Principal Collections in respect of any such
Mortgage Loan received after the applicable Cut-Off Date and (ii) to the
Trustee pursuant to the Transfer Agreement, their right, title and interest in
and to the corresponding Related Documents and certain other rights. The
Trustee will hold the Related Documents hereunder for the benefit of the
Certificateholders and the Credit Enhancer. The Seller, concurrently with the
execution and delivery of this Agreement, does hereby transfer, assign, set
over and otherwise convey to the Trust without recourse (subject to Sections
2.02 and 2.04) (i) all of its right, title and interest in and to the Trust
Balance of each Initial Mortgage Loan and all Interest Collections and
Principal Collections in respect thereof received on or after the Cut-Off Date
for the Initial Mortgage Loans or, with respect to any Additional Balance with
respect thereto, on and after the date of transfer to the Trust and (ii) to the
extent not otherwise conveyed pursuant to the Transfer Agreement, all other
assets, other than the Subsequent Mortgage Loans and Eligible Substitute
Mortgage Loans, included or to be included in the Trust (as specified in the
definition of "Trust") for the benefit of Certificateholders and the Credit
Enhancer, as their interests appear; provided, however, that the Related
Document Sellers, pursuant to the Receivables Purchase Agreement and the
Transfer Agreement, retain, and neither the Trustee nor the Trust assumes, the
obligation under any Loan Agreement with respect to an Initial Mortgage Loan
that provides for the funding of future advances to the Mortgagor thereunder,
which obligation shall not be affected by the resignation or termination of
Household Finance Corporation as Master Servicer pursuant to Section 7.04 or
8.01 or the termination of any Subservicer, and neither the Trust nor the
Trustee shall be obligated or permitted to fund any such future advances.
Future advances made to a Mortgagor under a Loan Agreement with respect to any
Initial Mortgage Loan shall be part of the related Trust Balance and
transferred to the Trust pursuant to this Section 2.01 and, therefore, will
constitute a part of the Trust property upon the sale thereof to the Seller
under the Receivables Purchase Agreement. In
19
25
addition, on or prior to the Closing Date, the Master Servicer shall cause the
Credit Enhancer to deliver the Credit Enhancement Instrument to the Trustee.
In the event a Master Servicer Credit Facility is obtained pursuant to Section
3.02(c), the Master Servicer promptly shall deliver to the Trustee such Master
Servicer Credit Facility in the Master Servicer Credit Facility Amount.
(b) The Seller agrees to take, or to cause to be taken, such
actions and to execute such documents (including without limitation the filing
of all necessary continuation statements for the UCC-1 financing statement
filed in the State of Illinois (which shall have been filed as promptly as
practicable but in no event later than 15 days following the Closing Date with
respect to the Initial Mortgage Loans or, to the extent not already included in
such filing made with respect to the Initial Mortgage Loans, the applicable
Transfer Date with respect to the Subsequent Mortgage Loans and any Eligible
Substitute Mortgage Loan) describing the applicable Cut-Off Date Trust Balances
and Additional Balances related to such Mortgage Loans and naming the Seller as
debtor and the Trustee as secured party, and any amendments to the UCC-1
financing statement required to reflect a change in the name or corporate
structure of the Seller, or the filing of any additional UCC-1 financing
statement due to any change in the principal office of the Seller) as are
necessary to perfect and protect the Certificateholders' and Credit Enhancer's
interests in each Cut-Off Date Trust Balance and the Additional Balances and
the proceeds thereof (other than delivering to the Trustee possession of the
Mortgage Files, which possession will, subject to the terms hereof, be
maintained by the Subservicers on behalf of the Master Servicer as custodian
and bailee for the Trustee). The Master Servicer shall cause each Subservicer
to file as promptly as practicable, but in no event later than 15 days
following the Closing Date with respect to the Initial Mortgage Loans or, to
the extent not already included in such filing made with respect to the Initial
Mortgage Loans, the applicable Transfer Date with respect to the Subsequent
Mortgage Loans and any Eligible Substitute Mortgage Loan, in the appropriate
public filing office or offices UCC-1 financing statements and continuation
statements naming such Subservicer as seller and the Seller as buyer, to file
appropriate continuation statements thereto, to file amendments thereto in the
case of a name change or change in corporate structure and to file appropriate
additional UCC-1 financing statements, if any, if such Subservicer changes its
principal office.
(c) In connection with such transfer and assignment by the Seller,
the Master Servicer, acting through the Subservicers, acknowledges hereby that
it is holding, with respect to the Initial Mortgage Loans, and will hold, with
respect to the Subsequent Mortgage Loans and any Eligible Substitute Mortgage
Loan, on and from the applicable Transfer Date, as custodian and bailee for the
Trustee the following documents or instruments with respect to each such
Mortgage Loan:
(i) the related Loan Agreement (or Loan Agreements if
more than one original has been executed) and any evidence of
indebtedness executed by the related Mortgagor in connection
therewith;
(ii) any related amendments to the Loan Agreement or
Mortgage, any related modification or assumption agreements and any
related previous assignments of the Mortgage Loan;
(iii) the related Mortgage with evidence of recording
indicated thereon; and
20
26
(iv) if the Mortgage Loan has a Credit Limit of $[50,000]
or more (excluding Mortgage Loans originated in New Jersey for the
period beginning [January 1, 1986 and ending April 30, 1987]),
evidence of title insurance;
provided, however, that as to any Mortgage Loan, if, as evidenced by an Opinion
of Counsel delivered to and in form and substance satisfactory to the Trustee
and the Credit Enhancer, (x) an optical image or other representation of the
related documents specified in clauses (i) through (iv) above are enforceable
in the relevant jurisdictions to the same extent as the original of such
document and (y) such optical image or other representation does not impair the
ability of an owner of such Mortgage Loan to transfer its interest in such
Mortgage Loan, such optical image or other representation may be held by the
Master Servicer, acting through the Subservicers, as custodian for the Trustee
in lieu of the physical documents specified above.
Except as hereinafter provided, the Master Servicer, acting through
the Subservicers, shall be entitled to maintain possession of all of the
foregoing documents and instruments and shall not be required to deliver any of
them to the Trustee. In the event, however, that possession of any of such
documents or instruments is required by any Person (including the Trustee)
acting as successor master servicer pursuant to Section 7.04 or 8.02 in order
to carry out the duties of Master Servicer hereunder, then such successor shall
be entitled to request delivery, at the expense of the Master Servicer, of such
documents or instruments by the Master Servicer and to retain such documents or
instruments for servicing purposes; provided that the Trustee or such servicers
shall maintain such documents at such offices as may be required by any
regulatory body having jurisdiction over such Mortgage Loans.
The Master Servicer's right to maintain possession, directly or
through the Subservicers, of the documents enumerated above shall continue so
long as (i) the long-term unsecured debt of HFC is assigned ratings of at least
A- by Standard and Poor's and A-3 by ▇▇▇▇▇'▇, or such lower ratings as shall be
acceptable to the Rating Agencies in order to maintain their then current
ratings of the Class A Certificates and acceptable to the Credit Enhancer, and
(ii) each of the Subservicers remains an affiliate of HFC. At such time as
either of the conditions specified in the preceding sentence is not satisfied,
as promptly as practicable, but in no event more than 90 days thereafter with
respect to the actions required under clause (i) below or more than 60 days
thereafter with respect to the actions required under clause (ii) below, the
Master Servicer shall cause each Subservicer, at such Subservicer's expense or,
at the Master Servicer's discretion, the Master Servicer's expense, to (i)
either (x) record an assignment of Mortgage in favor of the Trustee (which may
be a blanket assignment if permitted by applicable law) with respect to each of
the Mortgage Loans being subserviced by it in the appropriate real property or
other records or (y) deliver to the Trustee the assignment of such Mortgage in
favor of the Trustee in form for recordation, together with an Opinion of
Counsel addressed to the Trustee and the Credit Enhancer to the effect that
recording is not required to protect the Trustee's right, title and interest in
and to the related Mortgage Loan or, in case a court should recharacterize the
sale of the Mortgage Loans as a financing, to perfect a first priority security
interest in favor of the Trustee in the related Mortgage Loan, which Opinion of
Counsel also shall be reasonably acceptable to each of the Rating Agencies (as
evidenced in writing) and the Credit Enhancer, and (ii) unless an Opinion of
Counsel, reasonably acceptable to the Trustee, the Rating Agencies (as
evidenced in writing) and the Credit Enhancer, is delivered to the Trustee and
the Credit Enhancer to the effect that delivery of the Mortgage Files is not
necessary to protect the Trustee's right, title
21
27
and interest in and to the related Mortgage Loans, deliver the related Mortgage
Files to the Trustee to be held by the Trustee in trust, upon the terms herein
set forth, for the use and benefit of all present and future
Certificateholders, and the Trustee shall retain possession thereof except to
the extent the Master Servicer or Subservicers require any Mortgage Files for
normal servicing as contemplated by Section 3.07. Each of the Seller and each
Subservicer hereby appoints the Trustee its attorney-in-fact to prepare,
execute and record any assignments of Mortgages required under this Section
2.01 in the event that the Seller or any Subservicer should fail to do so on a
timely basis.
Within 60 days following delivery, if any, of the Mortgage Files to
the Trustee pursuant to the preceding paragraph, the Trustee shall review each
such Mortgage File to ascertain that all required documents set forth in this
Section 2.01 have been executed and received and that such documents relate to
the Mortgage Loans identified on the Mortgage Loan Schedule, and in so doing
the Trustee may rely on the purported due execution and genuineness of any
signature thereon. If within such 60-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Mortgage Loans identified in said Mortgage Loan Schedule
or, if in the course of its review, the Trustee determines that such Mortgage
File is otherwise defective in any material respect, the Trustee shall promptly
upon the conclusion of its review notify the Seller and the Credit Enhancer,
and the Seller shall have a period of 30 days after such notice within which to
correct or cure any such defect; provided, however, that if such defect shall
not have been corrected or cured within such 30-day period due to the failure
of the related office of real property or other records to return any document
constituting a part of a Mortgage File, the Seller shall so notify the Trustee
and the Credit Enhancer and the period during which such defect may be
corrected or cured shall be extended for one additional 30-day period.
The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in this Section 2.01. In reviewing any
Mortgage File pursuant to this Section, the Trustee shall have no
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form (except, if applicable, to determine if the Trustee is the assignee or
endorsee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, or whether a blanket assignment is
permitted in any applicable jurisdiction, whether any Person executing any
document is authorized to do so or whether any signature thereon is genuine,
but shall only be required to determine whether a document has been executed,
that it appears to be what it purports to be and, where applicable, that it
purports to be recorded.
(d) The Master Servicer hereby confirms to the Trustee that on or
prior to the Closing Date with respect to the Initial Mortgage Loans and on or
prior to the applicable Transfer Date with respect to the Subsequent Mortgage
Loans and any Eligible Substitute Mortgage Loan, the portions of the Electronic
Ledger relating to such Mortgage Loans have been or will have been clearly and
unambiguously marked, and the appropriate entries have been or will have been
made in its general accounting records, to indicate that such Mortgage Loans
have been sold and transferred to the Trustee and constitute part of the Trust
in accordance with the terms hereof.
22
28
Section 2.02. Acceptance by Trustee; Retransfer of Mortgage Loans;
Conveyance of Eligible Substitute Mortgage Loans. (a) The Trustee hereby
acknowledges its receipt of the Credit Enhancement Instrument, its acceptance
of the transfer and assignment of the Mortgage Notes and the Mortgages, and
declares that the Trustee holds and will hold such documents and interests and
all amounts received by it thereunder and hereunder in trust, upon the terms
herein set forth, for the use and benefit of all present and future
Certificateholders and the Credit Enhancer. If the Trustee has reviewed
Mortgage Files pursuant to Section 2.01, and has given notice to the Seller and
the Credit Enhancer of a defect in any Mortgage File pursuant to such Section
2.01 and the time to cure such defect has expired, or if at any time any loss
is suffered by the Trustee on behalf of the Certificateholders or the Credit
Enhancer, in respect of any Mortgage Loan as a result of (i) a defect in any
document constituting a part of its Mortgage File or (ii) an assignment of the
related Mortgage to the Trustee not having been recorded as required by Section
2.01, then on the Business Day next preceding the Distribution Date immediately
following the Collection Period in which the time to cure such default expired
or such loss occurred, all right, title and interest of the Trust in and to
such Mortgage Loan shall be deemed to be retransferred, reassigned and
otherwise reconveyed, without recourse, representation or warranty, to the
Seller on such Business Day and the Trust Balance of such Mortgage Loan shall
be deducted from the Pool Balance; provided, however, that interest accrued on
the Trust Balance of such Mortgage Loan to the date of such retransfer shall be
the property of the Trust and shall be deposited to the Collection Account as
Interest Collections pursuant to Section 3.02. Upon the occurrence of any such
event, or upon the retransfer of a Defective Mortgage Loan to the Seller for
any reason set forth in this Agreement, the Seller shall have the option of
conveying an Eligible Substitute Mortgage Loan in substitution for such
Defective Mortgage Loan pursuant to this Section 2.02. The Master Servicer
shall determine if, after giving effect to the addition to the Pool Balance of
the Trust Balance of any Eligible Substitute Mortgage Loan conveyed to the
Trustee pursuant to the previous sentence, the deduction from the Pool Balance
of the Trust Balance of such Defective Mortgage Loan would, but for the proviso
in the definition of Seller Interest, cause the Seller Interest to be less than
the Minimum Seller Interest, in which event the Master Servicer shall so inform
the Seller and the Seller shall deliver written notice of such potential
deficiency to the Trustee and the Master Servicer, and within two Business Days
after the Business Day of such retransfer the Seller shall deposit into the
Collection Account an amount in immediately available funds equal to the amount
necessary (the "Retransfer Deposit Amount"), to make the Seller Interest (but
for the proviso in the definition thereof) equal to the Minimum Seller
Interest. The Seller shall enforce its rights under the Receivables Purchase
Agreement to require the related Subservicer to effect such repurchase or
substitution of one or more Eligible Substitute Mortgage Loans, and the Seller
hereby appoints the Trustee its attorney-in-fact to enforce such rights against
the Subservicers to the extent that the Seller does not enforce its rights or
does not effect such repurchase or substitution, and the Trustee hereby accepts
such appointment. Such reduction of the Seller Interest (after giving effect
to the substitution of one or more Eligible Substitute Mortgage Loans) and the
actual payment of any Retransfer Deposit Amount shall be deemed to be payment
in full for such Defective Mortgage Loan. Upon receipt of an Officer's
Certificate from the Master Servicer to the effect that any Retransfer Deposit
Amount in respect of a Defective Mortgage Loan has been deposited into the
Collection Account or that the Seller Interest was not reduced below the
Minimum Seller Interest as a result of the deemed retransfer of a Defective
Mortgage Loan, then as promptly as practicable following such deemed
retransfer, the Trustee shall execute such documents and instruments of
transfer presented by the Seller and shall retransfer the Related Documents to
the appropriate Related Document Seller, without
23
29
recourse, representation or warranty, and take such other actions as shall
reasonably be requested by the Seller to effect the retransfer by the Trust of
such Defective Mortgage Loan pursuant to this Section.
In the event that on any day within 30 days of the date on which the
retransfer of a Defective Mortgage Loan from the Trust to the Seller is
effected pursuant to this Section, (A) the applicable representations and
warranties in Section 2.04 with respect to such Defective Mortgage Loan shall
be true and correct in all material respects on such date and (B) any defect in
the Mortgage File for such Mortgage Loan has been cured, the Seller and the
Related Document Seller may, but shall not be required to, retransfer in the
aggregate such Mortgage Loan to the Trust by delivering the Mortgage File for
such Mortgage Loan to the Master Servicer or the Trustee, as applicable
pursuant to Section 2.01, whereupon the Trust Balance of such Mortgage Loan
shall be included in the Pool Balance. Upon the retransfer to the Trust
pursuant to this Section 2.02 of a Mortgage Loan that was formerly a Defective
Mortgage Loan, the Seller shall be deemed to have made the applicable
representations and warranties in Section 2.04 as of the date of such
retransfer, and shall execute all such necessary documents and instruments of
transfer or assignment and shall cause the Related Document Seller to execute
such documents and instruments of transfer and take such other actions as shall
be necessary to effect the retransfer of such Mortgage Loan to the Trust. It
is understood and agreed that the obligation of the Seller to accept a
retransfer of a Defective Mortgage Loan and deposit any related Retransfer
Deposit Amount (after giving effect to any conveyance of Eligible Substitute
Mortgage Loans to the Trustee) into the Collection Account shall constitute the
sole remedy respecting such Defective Mortgage Loan available to
Certificateholders, the Trustee and the Credit Enhancer against the Seller, and
such obligation on the part of the Seller shall survive any resignation or
termination of Household Finance Corporation as Master Servicer pursuant to
Section 7.04 or 8.01.
(b) Subject to the satisfaction of the conditions set forth in
Section 2.01 and paragraph (c) below, in consideration of the Trustee's
agreement to deliver certain Defective Mortgage Loans to or upon the order of
the Master Servicer, upon (i) the delivery to the Trustee by the Master
Servicer, the Seller or any Subservicer, as applicable, of an Eligible
Substitute Mortgage Loan in substitution for such Defective Mortgage Loan and
(ii) compliance by the Master Servicer, the Seller or such Subservicer, as
applicable, with certain other conditions with respect to such substitution as
set forth in this Agreement, the Seller shall, on the applicable Transfer Dates
transfer, assign, set over and otherwise convey to the Trust without recourse
(subject to this Section 2.02 and Section 2.04) all of its right, title and
interest in and to the Trust Balances of such Eligible Substitute Mortgage
Loans and all Interest Collections and Principal Collections in respect thereof
received on or after the related Cut-Off Dates or, with respect to any
Additional Balances with respect thereto, on or after the dates of transfer to
the Trust; provided, however, that the Related Document Sellers, pursuant to
the Receivables Purchase Agreement and the Transfer Agreement, shall retain,
and neither the Trustee nor the Trust shall assume, the obligation under any
Loan Agreement with respect to an Eligible Substitute Mortgage Loan that
provides for the funding of future advances to the Mortgagor thereunder, which
obligation shall not be affected by the resignation or termination of HFC as
Master Servicer pursuant to Section 7.04 or 8.01 or the termination of any
Subservicer, and neither the Trust nor the Trustee shall be obligated or
permitted to fund any such future advances. Future advances made to a
Mortgagor under a Loan Agreement with respect to an Eligible Substitute
Mortgage Loan shall be part of the related Trust Balance and transferred to the
Trust pursuant to this Section 2.02, and, therefore, will constitute part of
24
30
the Trust property upon the sale thereof to the Seller under the Receivables
Purchase Agreement.
On each applicable Transfer Date, the Trustee shall acknowledge that
the Related Document Sellers have conveyed each of their right, title and
interest in and to each Eligible Substitute Mortgage Loan and the corresponding
Related Documents and certain other rights to the Trustee pursuant to the
Transfer Agreement, and the Trustee shall hold such documents hereunder for the
benefit of the Certificateholders.
(c) The obligation of the Trustee to accept the transfer of an
Eligible Substitute Mortgage Loan and the other property and rights related
thereto described in paragraph (b) above is subject to the satisfaction of each
of the following conditions on or prior to the related Transfer Date:
(i) the Seller shall have delivered to the Trustee a
revised Mortgage Loan Schedule indicating the conveyance of such
Eligible Substitute Mortgage Loan to the Trustee and the removal of
the Trust Balance of the related Defective Mortgage Loan from the
Trust;
(ii) the Seller shall have deposited in the Collection
Account all Principal Collections and Interest Collections in respect
of such Eligible Substitute Mortgage Loan received after the Cut-Off
Date for such Eligible Substitute Mortgage Loan;
(iii) the representations and warranties of the Seller in
Section 2.04(a) and in Section 2.04(b) to the extent such
representations and warranties in Section 2.04(b) do not pertain
exclusively to the Initial Mortgage Loans, are true and correct as of
the related Transfer Date;
(iv) the Master Servicer, acting through the Subservicers,
shall acknowledge in writing that it is holding as custodian and
bailee for the Trustee the documents or instruments with respect to
such Eligible Substitute Mortgage Loan specified in Section 2.01 or,
if so required by such Section, that it has delivered the related
Mortgage Files to the Trustee and complied with all other requirements
with respect to the assignment of the related Mortgages specified
therein;
(v) the Master Servicer shall represent and warrant that
no selection procedures reasonably believed by the Master Servicer to
be adverse to the interests of the Class A Certificateholders or the
Credit Enhancer were utilized in selecting such Eligible Substitute
Mortgage Loan;
(vi) no Eligible Substitute Mortgage Loan shall be more
than 89 days delinquent as of the applicable Transfer Date and
delinquent Eligible Substitute Mortgage Loans may be substituted only
for delinquent Defective Mortgage Loans; and
(vii) the Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (c).
Notwithstanding any other provision of this Section, a retransfer of a
Defective Mortgage Loan to the Seller pursuant to this Section that would cause
the Seller Interest (but
25
31
for the proviso in the definition thereof) to be less than the Minimum Seller
Interest (after giving effect to the conveyance, if any, of an Eligible
Substitute Mortgage Loan in substitution for such Defective Mortgage Loan)
shall not occur if the Seller fails to deposit in the Collection Account the
related Retransfer Deposit Amount, if any, as required by this Section with
respect to the retransfer of such Defective Mortgage Loan.
Section 2.03. Representations and Warranties Regarding the Master
Servicer; Certain Covenants of the Master Servicer. The Master Servicer
represents and warrants that as of the Closing Date and the Subsequent Transfer
Date:
(i) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to own its assets and to transact
the business in which it is currently engaged. The Master Servicer is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it require such
qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to
make, execute, deliver and perform its obligations under this
Agreement and to perform its obligations with respect to all of the
transactions contemplated under this Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of its obligations under this Agreement. When executed
and delivered, this Agreement will constitute the legal, valid and
binding obligation of the Master Servicer enforceable in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable
remedies (whether in a proceeding at law or in equity);
(iii) The Master Servicer is not required to obtain the
consent of any other Person or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or
authorizations, or registrations or declarations, as shall have been
obtained or filed, as the case may be;
(iv) The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby by the Master
Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the
Master Servicer or any provision of the Certificate of Incorporation
or Bylaws of the Master Servicer, or constitute a material breach of
any mortgage, indenture, contract or other agreement to which the
Master Servicer is a party or by which the Master Servicer may be
bound; and
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Master Servicer threatened, against the
Master Servicer or any of its properties or with respect to this
Agreement or the Certificates which in the opinion of the Master
Servicer has a
26
32
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
The representations and warranties set forth in this Section shall survive the
sale and assignment of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representations and warranties which materially and adversely
affects the interests of the Certificateholders or the Credit Enhancer, the
Person discovering such breach shall give prompt written notice to the other
parties and to the Credit Enhancer. Within 60 days (or such longer period as
permitted by prior written consent of a Responsible Officer of the Trustee and
the Credit Enhancer) of its discovery or its receipt of notice of such breach,
the Master Servicer shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Seller Regarding
this Agreement and the Mortgage Loans; Retransfer of Certain Mortgage Loans.
(a) The Seller represents and warrants that as of the applicable Transfer
Date:
(i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Seller is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it require such
qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets or
condition (financial or other) of the Seller;
(ii) The Seller has the power and authority to make,
execute, deliver and perform its obligations under this Agreement and
to perform its obligations with respect to all of the transactions
contemplated under this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance
of its obligations under this Agreement. When executed and delivered,
this Agreement will constitute the legal, valid and binding obligation
of the Seller enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and by the availability of equitable remedies (whether in a proceeding
at law or in equity);
(iii) The Seller is not required to obtain the consent of
any other Person or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except for
such consents, licenses, approvals or authorizations, or registrations
or declarations, as shall have been obtained or filed, as the case may
be;
(iv) The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby by the Seller will
not violate any provision of any existing law or regulation or any
order or decree of any court applicable to the Seller or any provision
of the Certificate of Incorporation or Bylaws of the Seller, or
constitute a material breach of any mortgage, indenture, contract or
other agreement to which the Seller is a party or by which the Seller
may be bound; and
27
33
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Seller threatened, against the Seller or
any of its properties or with respect to this Agreement or the
Certificates which in the opinion of the Seller has a reasonable
likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
(b) The Seller represents and warrants to the Trustee for the
benefit of the Certificateholders as of the respective Cut-Off Date for each
applicable Mortgage Loan transferred to the Trust (and to the extent expressly
stated therein as of such other time) that, as to such Mortgage Loan:
(i) This Agreement constitutes a legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a
proceeding at law or in equity);
(ii) This Agreement constitutes either (A) a valid
transfer and assignment to the Trustee of all right, title and
interest of the Seller in and to the Cut-Off Date Trust Balances with
respect to the applicable Mortgage Loans, all monies due or to become
due with respect thereto, and all proceeds of such Cut-Off Date Trust
Balances with respect to the Mortgage Loans and such funds as are from
time to time deposited in the Collection Account (excluding any
investment earnings thereon) and all other property specified in the
definition of "Trust" as being part of the corpus of the Trust
conveyed to the Trust by the Seller, and upon payment for the
Additional Balances, will constitute a valid transfer and assignment
to the Trustee of all right, title and interest of the Seller in and
to the Additional Balances, all monies due or to become due with
respect thereto, and all proceeds of such Additional Balances and all
other property specified in the definition of "Trust" relating to the
Additional Balances or (B) a grant of a security interest (as defined
in the UCC as in effect in Illinois) in such property to the Trustee
on behalf of the Trust, which is enforceable with respect to the
Cut-Off Date Trust Balances and Additional Balances, and the proceeds
thereof and such funds as are from time to time deposited in the
Collection Account (excluding any investment earnings thereon). If
this Agreement constitutes the grant of a security interest to the
Trust in such property, and if the Trustee obtains and maintains
possession of the Mortgage File for each Mortgage Loan, the Trust
shall have a first priority perfected security interest in such
property, subject to the effect of Section 9-306 of the UCC with
respect to collections on the Mortgage Loans that are deposited in the
Collection Account in accordance with the next to last paragraph of
Section 3.02(b);
(iii) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans and any Eligible Substitute Mortgage Loan
and as of the date any Additional Balance is created, the information
set forth in the Mortgage Loan Schedule for such Mortgage Loans is
true and correct in all material respects;
28
34
(iv) The applicable Cut-Off Date Trust Balance has not
been assigned or pledged, and the Seller has good and marketable title
thereto, and the Seller is the sole owner and holder of such Cut-Off
Date Trust Balance free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loan, to sell, assign or
transfer the same pursuant to this Agreement;
(v) The related Mortgage Note and the Mortgage with
respect to each Mortgage Loan have not been assigned or pledged, and
the Related Document Seller has good and marketable title thereto, and
the Related Document Seller is the sole owner and holder of the
Mortgage Loan free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loans, to sell and assign the
same pursuant to the Transfer Agreement;
(vi) The related Mortgage is a valid and subsisting first,
second or third lien, as set forth on the Mortgage Loan Schedule with
respect to each related Mortgage Loan, on the property therein
described, and as of the applicable Cut-Off Date the related Mortgaged
Property is free and clear of all encumbrances and liens having
priority over the first, second or third lien, as applicable, of such
Mortgage except for liens for (i) real estate taxes and special
assessments not yet delinquent; (ii) any first and if applicable,
second mortgage loan secured by such Mortgaged Property and specified
on the Mortgage Loan Schedule; (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording that are acceptable to mortgage
lending institutions generally; and (iv) other matters to which like
properties are commonly subject which do not materially interfere with
the benefits of the security intended to be provided by such Mortgage;
(vii) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans and any Eligible Substitute Mortgage Loan,
to the best knowledge of the Seller, there is no valid offset, defense
or counterclaim of any obligor under any Loan Agreement or Mortgage;
(viii) To the best knowledge of the Seller, as of the
Closing Date with respect to the Initial Mortgage Loans and the
applicable Transfer Date with respect to the Subsequent Mortgage Loans
and any Eligible Substitute Mortgage Loan, there is no delinquent
recording or other tax or fee or assessment lien against any related
Mortgage Property;
(ix) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans and any Eligible Substitute Mortgage Loan,
to the Seller's knowledge, there is no proceeding pending or
threatened for the total or partial condemnation of the related
Mortgaged Property, and such property is free of material damage and
is in good repair;
(x) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans and any
29
35
Eligible Substitute Mortgage Loan, there are no mechanics' or similar
liens or claims which have been filed for work, labor or material
affecting the related Mortgaged Property which are, or may be, liens
prior or equal to the lien of the related Mortgage, except liens which
are fully insured against by the title insurance policy referred to in
clause (xiv);
(xi) As of the applicable Cut-Off Date for the Mortgage
Loans, no Minimum Monthly Payment is more than 89 days delinquent
(measured on a contractual basis); and with respect to the Initial
Mortgage Loans no more than _____% (by Cut-Off Date Pool Balance) were
30-59 days delinquent (measured on a contractual basis) and no more
than _____% (by Cut-Off Date Pool Balance) were 60-89 days delinquent
(measured on a contractual basis);
(xii) For each Mortgage Loan, the related Mortgage File
contains each of the documents and instruments specified to be
included therein (including, with respect to the Initial Mortgage
Loans, an appraisal (which may be an appraisal prepared using a
statistical data base));
(xiii) The related Mortgage Note and the related Mortgage at
the time they were made complied in all material respects with
applicable state and federal laws, including, without limitation,
usury, truth-in-lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan;
(xiv) A lender's title insurance policy or binder was
issued on the date of origination of each Mortgage Loan with a Credit
Limit of $[50,000] or more (excluding Mortgage Loans originated in New
Jersey for the period beginning [January 1, 1986 and ending April 30,
1987]), and each such policy is valid and remains in full force and
effect, and a title search or other assurance of title customary in
the relevant jurisdiction was obtained with respect to each Mortgage
Loan as to which no title insurance policy or binder was issued;
(xv) None of the Mortgaged Properties is a mobile home or
a manufactured housing unit that is not permanently attached to its
foundation;
(xvi) As of the Cut-Off Date for the Initial Mortgage Loans
no more than _____% of such Mortgage Loans, by aggregate principal
balance, are secured by Mortgaged Properties located in one United
States postal zip code and no more than _____% of such Mortgage Loans,
by aggregate principal balance, are secured by Mortgaged Properties
located in planned unit developments;
(xvii) As of the applicable Cut-Off Date, (i) the Combined
Loan-to-Value Ratio for each Mortgage Loan was not in excess of _____%
and (ii) not more than _____% of the Initial Mortgage Loans, by
aggregate principal balance as of the related Cut-Off Date, exceeds
the applicable Credit Limit by up to _____%;
(xviii) No selection procedure reasonably believed by the
Seller to be adverse to the interests of the Certificateholders or the
Credit Enhancer was utilized in selecting the Mortgage Loans;
30
36
(xix) The Seller has not transferred the Mortgage Loans to
the Trust with any intent to hinder, delay or defraud any of its
creditors;
(xx) The Minimum Monthly Payment with respect to any
Mortgage Loan is not less than the interest accrued at the applicable
Loan Rate on the average daily Trust Balance during the interest
period relating to the date on which such Minimum Monthly Payment is
due;
(xxi) Within 15 days of the Closing Date with respect to
the Initial Mortgage Loans and, to the extent not already included in
such filing with respect to the Initial Mortgage Loans, the applicable
Transfer Date with respect to the Subsequent Mortgage Loans and any
Eligible Substitute Mortgage Loan, the Seller and each Subservicer
will file UCC-1 financing statements with respect to the Mortgage
Loans in accordance with Section 2.01 hereof;
(xxii) Each Loan Agreement and each Mortgage is in
substantially the form previously provided to the Trustee by the
Seller and each Mortgage Loan is an enforceable obligation of the
related Mortgagor;
(xxiii) To the best knowledge of the Seller, as of the
Closing Date with respect to the Initial Mortgage Loans and the
applicable Transfer Date with respect to the Subsequent Mortgage Loans
and any Eligible Substitute Mortgage Loan, the physical property
subject to each Mortgage is free of material damage and is in good
repair;
(xxiv) As of the Closing Date with respect to the Initial
Mortgage Loans and the applicable Transfer Date with respect to the
Subsequent Mortgage Loans and any Eligible Substitute Mortgage Loan,
the Seller has not received a notice of default of any senior mortgage
loan related to a Mortgaged Property that has not been cured by a
party other than the related Subservicer;
(xxv) The definition of Prime Rate or auction average 6
month U.S. Treasury Bills rate, as the case may be, in each Loan
Agreement relating to a Mortgage Loan that has an adjustable Loan Rate
does not differ materially from the definition in the form of loan
agreement previously provided to the Trustee and referred to in clause
(xxii) above;
(xxvi) None of the Mortgage Loans is a reverse mortgage loan
or included in the "Ever Yours Program";
(xxvii) No Initial Mortgage Loan had an original term to
maturity in excess of 180 months. The weighted average remaining term
to maturity of the Initial Mortgage Loans on a contractual basis as of
the Cut-Off Date for the Initial Mortgage Loans is approximately 145
months. For the Mortgage Loans having adjustable Loan Rates, which,
in the case of the Initial Mortgage Loans, comprise approximately
_____% of the Initial Mortgage Loans (by Cut-Off Date Pool Balance),
on each date that the Loan Rates have been adjusted, such adjustments
were made in compliance with the related Mortgage and Mortgage Note
and applicable law. Over the term of any such Mortgage Loan, the Loan
Rate may not exceed the related Maximum Loan Rate, if any. The
Initial Mortgage Loans have minimum Loan Rates which range between
_____% and
31
37
_____%. The Margins for the Initial Mortgage Loans having adjustable
Loan Rates range between _____% and _____% and the weighted average
Margin for such Mortgage Loans is approximately _____% as of the Cut-
Off Date for the Initial Mortgage Loans. As of the Cut-Off Date for
the Initial Mortgage Loans, the Loan Rates on such Initial Mortgage
Loans range between _____% and _____% and the weighted average Loan
Rate is approximately _____%.
(xxviii) Each Mortgaged Property consists of a single parcel
of real property with a one-to-four unit single family residence
erected thereon, or an individual condominium unit, planned unit
development unit or townhouse, generally approvable by FNMA;
(xxix) With respect to the Initial Mortgage Loans as of the
applicable Cut-Off Date, (a) no more than _____% (by Cut-Off Date Pool
Balance) of the Initial Mortgage Loans are secured by real property
improved by individual condominium units, planned development units,
townhouses or two-to-four family residences erected thereon, and (b)
at least _____% (by Cut-Off Date Pool Balance) of the Initial Mortgage
Loans are secured by real property with a detached one-family
residence erected thereon;
(xxx) As of the Cut-Off Date for the Initial Mortgage
Loans, the Credit Limits on the Initial Mortgage Loans range between
approximately $___________ and $___________ with an average of
approximately $__________. As of the Cut-Off Date for the Initial
Mortgage Loans, no Initial Mortgage Loan had a principal balance in
excess of approximately $___________ and the average principal
balance of the Initial Mortgage Loans is equal to approximately _____%
of their average Credit Limit; and
(xxxi) Approximately _____% and _____% of the Initial
Mortgage Loans, by aggregate principal balance as of the Cut-Off Date
for the Initial Mortgage Loans, are first and second liens,
respectively and the remainder are third liens.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive the transfer of the
Mortgage Loans to the Trust and the delivery, if any, of the respective
Mortgage Files to the Trustee and the termination of the rights and obligations
of the Master Servicer pursuant to Section 7.04 or 8.01. Upon discovery by the
Seller, the Master Servicer, the Credit Enhancer or a Responsible Officer of
the Trustee of a breach of any of the foregoing representations and warranties
(other than the representations and warranties set forth in Sections 204(b)(i),
(ii) and (iv) without regard to any limitation set forth therein concerning the
knowledge of the Seller as to the facts stated therein which breach materially
and adversely affects the interests of the Trust or the Class A
Certificateholders or the Credit Enhancer in the related Mortgage Loan, the
party discovering such breach shall give prompt written notice to the other
parties and the Credit Enhancer. The Seller shall, within 60 days of discovery
or receipt of notice of a breach of any such representation or warranty, or,
with the prior written consent of a Responsible Officer of the Trustee and the
Credit Enhancer, such longer period not to exceed 90 days specified in such
consent, cure such breach in all material respects or shall, not later than the
Business Day next preceding the Distribution Date in the month following the
end of the Collection Period in which any such cure period expired (or such
later date as permitted by written consent of the Credit Enhancer), accept a
retransfer of any such Defective Mortgage Loan from the Trust and may, at its
option, substitute an Eligible Substitute Mortgage Loan for such Defective
Mortgage Loan in the same manner and subject to the same conditions as set
forth in Section
32
38
2.02. The Seller shall enforce its rights against the related Subservicer
under the Receivables Purchase Agreement in respect of such breach and has
appointed the Trustee its attorney-in-fact to do so to the extent that the
Seller does not enforce such right, and the Trustee hereby accepts such
appointment. Upon accepting such retransfer and depositing the Retransfer
Deposit Amount, if any, to the Collection Account, the Seller shall be entitled
to receive an instrument of assignment or transfer from the Trustee to the same
extent as set forth in Section 2.02 with respect to the retransfer of Mortgage
Loans under that Section. In the event the Seller fails to accept any such
retransfer in the manner and at the time required, the Master Servicer shall be
obligated to deposit the applicable Retransfer Deposit Amount into the
Collection Account in the same manner and subject to the same conditions as set
forth in Section 2.02. It is understood and agreed that the obligation of the
Seller or the Master Servicer to accept a retransfer of a Mortgage Loan as to
which a breach has occurred and is continuing and to make any required deposit
in the Collection Account (after giving effect to the transfer of an Eligible
Substitute Mortgage Loan, if any, in substitution for such retransferred
Defective Mortgage Loan) shall constitute the sole remedy respecting such
breach available to Class A Certificateholders, the Trustee on behalf of Class
A Certificateholders and the Credit Enhancer, and such obligation of the Seller
shall survive any resignation or termination of HFC as the Master Servicer
hereunder.
In the event of a breach of any of the representations and warranties
set forth in Sections 204(b)(i), (ii) or (iv) hereof, the party discovering
such breach shall give prompt written notice to the Seller, the Master
Servicer, the Credit Enhancer and a Responsible Officer of the Trustee. Within
two Business Days after the Trustee receives notice of any such breach, the
Trustee shall send written notice thereof to the Credit Enhancer. Within 10
days of the delivery of such notice of breach to the Credit Enhancer, the
Credit Enhancer shall give written notice to the Seller directing the Seller to
accept retransfer of all of the Mortgage Loans (with the appropriate Related
Document Sellers accepting retransfer of all appropriate Related Documents)
within 60 days of such notice, or such longer period (not to exceed an
additional 30 days) as may be agreed by the Trustee and by the Credit Enhancer,
which agreement shall not be unreasonably withheld. In the event that at the
time of such breach a Credit Enhancer Default shall have occurred and be
continuing the Trustee shall, instead of the notice to the Credit Enhancer
provided above, within the same time period provided in the preceding sentence,
send written notice to the Class A Certificateholders describing such breach
and requesting that such Holders, within 60 days of their receipt of such
notice, instruct the Trustee in writing whether or not to direct the Seller to
accept assignment of all of the Mortgage Loans as provided below or to refrain
from so doing. Promptly following such 60 day period, the Trustee, unless it
shall have received written instructions to the contrary from Holders of Class
A Certificates evidencing not less than 51% of the aggregate Percentage
Interests of the Class A Certificates and the Credit Enhancer (provided no
Credit Enhancer Default shall have occurred and be continuing), shall direct
the Seller to accept reassignment of all the Mortgage Loans. The Seller shall
accept reassignment of such Mortgage Loans on the Distribution Date immediately
succeeding the expiration of such applicable period and shall deposit in the
Collection Account an amount (which, for purposes of this paragraph shall be
deemed the "Retransfer Deposit Amount") equal to the Class A Certificate
Principal Balance on the Distribution Date on which the retransfer is scheduled
to occur plus, in all cases, an amount equal to all interest accrued but unpaid
on the Class A Certificate Principal Balance through the day preceding such
Distribution Date, and shall pay to the Credit Enhancer any unreimbursed
payments under the Credit Enhancement Instrument and other amounts due and
unpaid under the Insurance Agreement. The payment of such
33
39
Retransfer Deposit Amount and the transfer of all other amounts deposited for
the preceding month in the Collection Account will be considered a prepayment
in full of the Class A Certificates and will be distributed upon presentation
and surrender of the Class A Certificates in lieu of the amount that would
otherwise be distributed on such Distribution Date if such retransfer had not
occurred. The obligation of the Seller to accept a retransfer of the Mortgage
Loans and to deposit to the Collection Account the applicable Retransfer
Deposit Amount shall constitute the sole remedy available to the Trustee or the
Class A Certificateholders respecting any such breach of the representations
and warranties set forth in Sections 204(b)(i), (ii) and (iv).
Section 2.05. Covenants of the Seller. The Seller hereby covenants
that:
(a) Security Interests. Except for the transfers contemplated
hereunder, the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur or assume any Lien on, any Mortgage Loan,
whether now existing or hereafter created, or any interest therein or in any
other property specified in the definition "Trust" (other than REOs) as being
part of the corpus of the Trust; the Seller will give notice to the Trustee of
the existence of any Lien on any Mortgage Loan immediately upon discovery
thereof; and the Seller, at its expense, will defend the right, title and
interest of the Trust in, to and under the Mortgage Loans, whether now existing
or hereafter created, against all claims of third parties claiming through or
under the Seller; provided, however, that nothing in this Section 2.05(a) shall
prevent or be deemed to prohibit the Seller from suffering to exist upon any of
the Mortgage Loans any Liens for municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at the
time be due and payable or if the Seller shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
(b) Negative Pledge. The Seller hereby agrees not to transfer,
assign, exchange, pledge, hypothecate, grant a security interest in, or
otherwise convey the Seller Certificates except in accordance with Sections
6.05 and 7.02.
(c) The Seller hereby agrees that:
(i) the Seller will compensate all of its directors,
officers, consultants and agents directly, from the Seller's own bank
accounts, for services provided to the Seller by such directors,
officers, consultants and agents and, to the extent any director,
consultant or agent of the Seller is also a director, officer,
employee, consultant or agent of the Master Servicer or any other
Person (including any Subservicer), the Seller and the Master Servicer
and such other Person will allocate among themselves the services and
attendant salaries of shared directors, officers, consultants, and
agents on a basis that reflects the actual services rendered;
(ii) the Seller will obtain services such as accounting,
receivables collection, payroll, employee benefits, and computer
services and services relating to the administering, servicing and
collection of receivables from the Master Servicer in accordance with
this Agreement;
(iii) the Seller, the Subservicers and the Master Servicer
will share certain overhead expenses, although the amount the Seller
will be charged for such use will
34
40
be based on actual use to the extent practicable and, to the extent
such allocation is not practicable, on a basis reasonably related to
use;
(iv) the Seller will use its own letterhead and will hold
itself out as a separate entity (and will require all directors and
officers of the Seller in conducting business on behalf of the Seller
to identify themselves as such and not as employees, directors or
officers of the Master Servicer or any other Person);
(v) the Seller will observe all corporate and other legal
formalities of the Seller;
(vi) separate financial records are and will continue to
be maintained to reflect the assets and liabilities of the Seller,
which financial records are and will be subject to audit by
independent public accountants at the reasonable request of the Board
of Directors of the Seller;
(vii) the Seller will not commingle its assets with the
assets of the Master Servicer or any Subservicer. All demand deposit
accounts and other bank accounts of the Seller will be maintained
separately from those of the Master Servicer and the Subservicers.
Monetary transactions between the Seller and the Master Servicer or
any Subservicer are and will continue to be properly reflected in the
Seller's financial records;
(viii) the Seller will not guaranty obligations of the
Master Servicer or any Subservicer;
(ix) except for issuances of the Seller's special voting
preferred stock, the Seller will not take any action, including,
without limitation, the issuance of additional Certificates or stock
of the Seller or the incurrence of additional debt (other than as
permitted or contemplated by this Agreement, the Receivables Purchase
Agreement, the Transfer Agreement, the Credit Enhancement Instrument
and the Revolving Credit Agreement between HFC and the Seller and any
similar revolving credit agreements between HFC (or any affiliate) and
the Seller in connection with trusts similar to the Trust) unless the
Rating Agencies have advised in writing that such action will not
reduce the current rating of the Class A Certificates, and the Seller
will give advance written notice of any proposed amendment to such
Revolving Credit Agreement to the Rating Agencies; and
(x) the Seller covenants and agrees that it shall not pay
cash dividends to HFC (a) unless the Seller's Board of Directors shall
have determined that the amount of such cash dividend is not expected
to be required by the Seller to fulfill its obligations to purchase
Additional Balances to be sold to the Trust hereunder or (b) if the
payment of such dividend would cause the debt-to-equity ratio of the
Seller to exceed the then-current debt-to-equity ratio of the Master
Servicer.
Section 2.06. Conveyance of the Subsequent Mortgage Loans. (a)
Subject to the satisfaction of the conditions set forth in Section 2.01 and
paragraph (b) below, in consideration of the Trustee's delivery on a Subsequent
Transfer Date to or upon the order of the Seller of all or a portion of the
amount in respect of Principal Collections in the Funding
35
41
Account the Seller shall, to the extent of the availability thereof, on the
related Subsequent Transfer Date transfer, assign, set over and otherwise
convey to the Trust without recourse (subject to Sections 2.02 and 2.04) all of
its right, title and interest in and to the Trust Balances of the Subsequent
Mortgage Loans and all Interest Collections and Principal Collections in
respect thereof received after the Cut-Off Date for the Subsequent Mortgage
Loans or, with respect to any Additional Balances with respect thereto, on or
after the date of transfer to the Trust; provided, however, that the Related
Document Sellers, pursuant to the Receivables Purchase Agreement and the
Transfer Agreement, shall retain, and neither the Trustee nor the Trust shall
assume, the obligation under any Loan Agreement for a Subsequent Mortgage Loan
that provides for the funding of future advances to the Mortgagor thereunder,
which obligation shall not be affected by the resignation or termination of HFC
as Master Servicer pursuant to Section 7.04 or 8.01 or the termination of any
Subservicer, and neither the Trust nor the Trustee shall be obligated or
permitted to fund any such future advances. Future advances made to a
Mortgagor under a Loan Agreement relating to a Subsequent Mortgage Loan shall
be part of the related Trust Balance and transferred to the Trust pursuant to
this Section 2.06, and, therefore, part of the Trust property upon the sale
thereof to the Seller under the Receivables Purchase Agreement.
On each Subsequent Transfer Date, the Trustee shall acknowledge that
the Related Document Sellers have conveyed each of their right, title and
interest in and to each Subsequent Mortgage Loan and to the corresponding
Related Documents and certain other rights to the Trustee pursuant to the
Transfer Agreement, and the Trustee shall hold such documents hereunder for the
benefit of the Certificateholders.
(b) The obligation of the Trustee to accept the transfer of the
Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to the Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee with a
letter from the Credit Enhancer consenting to such transfer of the
Subsequent Mortgage Loans (which consent shall not be unreasonably
withheld or delayed);
(ii) the Seller shall have delivered to the Trustee a
revised Mortgage Loan Schedule, listing the Subsequent Mortgage Loans;
(iii) the Seller shall have deposited in the Collection
Account all Principal Collections and Interest Collections in respect
of such Subsequent Mortgage Loans received after the Cut-Off Date for
the Subsequent Mortgage Loans;
(iv) the representations and warranties of the Seller in
Section 2.04(a) and in Section 2.04(b), to the extent such
representations and warranties do not pertain exclusively to the
Initial Mortgage Loans, are true and correct with respect to the
Subsequent Mortgage Loans as of the related Subsequent Transfer Date;
(v) the Seller shall have provided the Trustee with a
letter from each Rating Agency confirming that the transfer of the
Subsequent Mortgage Loans shall not result in a reduction or
withdrawal of its then-current rating of the Class A Certificates;
36
42
(vi) the Master Servicer, acting through the Subservicers,
shall acknowledge in writing that it is holding as custodian and
bailee for the Trustee the documents or instruments with respect to
the Subsequent Mortgage Loans specified in Section 2.01 or, if so
required by such Section, that it has delivered the related Mortgage
Files to the Trustee and complied with all other requirements with
respect to the assignment of the related Mortgages specified therein;
(vii) the Master Servicer shall represent and warrant that
no selection procedures reasonably believed by the Master Servicer to
be adverse to the interests of the Class A Certificateholders or the
Credit Enhancer were utilized in selecting the Subsequent Mortgage
Loans; and
(viii) the Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b).
(c) The obligation of the Trust to purchase any Subsequent
Mortgage Loans on a Subsequent Transfer Date is subject to the following
requirements: (i) the remaining term to maturity of each such Subsequent
Mortgage Loan may not exceed 180 months; (ii) the weighted average Margin of
the Subsequent Mortgage Loans (by aggregate Cut-Off Date Trust Balance with
respect to such Subsequent Mortgage Loans) plus any Subsequent Mortgage Loans
previously transferred to the Trust is at least _____%; (iii) the weighted
average Combined Loan-to-Value Ratio of the Subsequent Mortgage Loans (by
aggregate Cut-Off Date Trust Balance with respect to such Subsequent Mortgage
Loans) plus any Subsequent Mortgage Loans previously transferred to the Trust
is not more than _____%; (iv) no such Subsequent Mortgage Loan will have a Loan
Balance in excess of $[500,000]; (v) no less than _____% of the Subsequent
Mortgage Loans plus any Subsequent Mortgage Loans previously transferred to the
Trust (by aggregate Cut-Off Date Trust Balance with respect to such Subsequent
Mortgage Loans) are first liens; and (vi) at least _____% of such Subsequent
Mortgage Loans plus any Subsequent Mortgage Loans previously transferred to the
Trust (by aggregate Cut-Off Date Trust Balance with respect to such Subsequent
Mortgage Loans) are not more than 30 days delinquent (on a contractual basis)
in the payment of a Minimum Monthly Payment as of the Cut-Off Date for such
Subsequent Mortgage Loans. On the last Distribution Date of the Funding
Period, the Seller shall have provided the Trustee, the Rating Agencies and the
Credit Enhancer with an opinion of counsel to the effect that such transfer
constitutes a sale of the Trust Balances of the Subsequent Mortgage Loans to
the Seller and a sale of or grant of a security interest in the Subsequent
Mortgage Loans to the Trustee; provided, however, in the event of a change of
law during the Funding Period that materially affects the method of perfecting
the security interest in the Subsequent Mortgage Loans, the Seller shall either
(i) provide the Trustee, the Rating Agencies and the Credit Enhancer with an
opinion of counsel to the effect that such transfer constitutes a sale of the
Trust Balances of the Subsequent Mortgage Loans to the Seller and a sale of or
grant of a security interest in the Subsequent Mortgage Loans to the Trustee,
or (ii) take such action as is necessary to perfect the interests of the Trust
in the Subsequent Mortgage Loans, other than perfection by delivery of the
Subsequent Mortgage Loans, unless all Mortgage Loans are required to be
delivered to the Trustee pursuant to Section 2.01(c).
Section 2.07. Retransfers of Mortgage Loans at Election of Seller.
(a) Subject to the conditions set forth below, the Seller may, but shall not
be obligated to, require the retransfer of Mortgage Loans from the Trust to the
Seller as of the close of business on the last Business
37
43
Day of any calendar month (the "Retransfer Date"), provided that (x) on the
27th day of such calendar month (or on the following Business Day if such day
is not a Business Day) (the "Retransfer Notice Date"), the Seller shall give
the Trustee a notice of the proposed retransfer that contains a list of the
Mortgage Loans to be retransferred and (y) the following conditions shall be
satisfied:
(i) The Rapid Amortization Period shall not have
commenced;
(ii) On the Retransfer Notice Date, the Seller Interest
(after giving effect to the removal from the Trust of the Mortgage
Loans proposed to be retransferred) is at least equal to the Minimum
Seller Interest;
(iii) The retransfer of any Mortgage Loans on any
Retransfer Date prior to the commencement of the Rapid Amortization
Period shall not, in the reasonable belief of the Seller, cause a
Rapid Amortization Event to occur or an event which with notice or
lapse of time or both would constitute a Rapid Amortization Event;
(iv) On or before the Retransfer Date, the Master Servicer
shall have delivered to the Trustee a revised Mortgage Loan Schedule,
or if the aggregate amount of the Cut-Off Date Trust Balances of the
Mortgage Loans retransferred pursuant to this Section 2.07 is less
than _____% of the Cut-Off Date Pool Balance and the retransfer of the
Mortgage Loans is to facilitate the servicing of the Mortgage Loans
pursuant to Section 3.01, a list of Mortgage Loans to be removed from
the Trust, (in each case, with a copy to the Credit Enhancer)
reflecting the proposed retransfer and on the Retransfer Date shall
have marked the Electronic Ledger to show that the Mortgage Loans
retransferred to the Seller are no longer owned by the Trust;
(v) If the aggregate amount of the Cut-Off Date Trust
Balances of the Mortgage Loans retransferred pursuant to this Section
2.07 is less than _____% of the Cut-Off Date Pool Balance, as of the
Retransfer Notice Date, not more than _____% of the Trust Balances of
the Mortgage Loans remaining in the Trust (after giving effect to the
proposed retransfer) are delinquent more than 60 days; if the
aggregate amount of the Cut-Off Date Trust Balances of the Mortgage
Loans retransferred pursuant to this Section 2.07 is equal to or
greater than _____% and less than _____% of the Cut-Off Date Pool
Balance, as of the Retransfer Notice Date, not more than _____% of the
Trust Balances of the Mortgage Loans remaining in the Trust (after
giving effect to the proposed retransfer) are delinquent more than 60
days; if the aggregate amount of the Cut-Off Date Trust Balances of
the Mortgage Loans retransferred pursuant to this Section 2.07 is
equal to or greater than _____% of the Cut-Off Date Pool Balance, as
of the Retransfer Notice Date, not more than _____% of the Trust
Balances of the Mortgage Loans remaining in the Trust (after giving
effect to the proposed retransfer) are delinquent more than 60 days;
(vi) The Seller shall represent and warrant that no
selection procedures reasonably believed by the Seller to be
materially adverse to the interests of the Class A Certificateholders
or the Credit Enhancer were utilized in selecting the Mortgage Loans
to be removed from the Trust;
38
44
(vii) If either (a) the aggregate amount of the Cut-Off
Date Trust Balances of the Mortgage Loans retransferred pursuant to
this Section 2.07 is equal to or greater than _____% of the Cut-Off
Date Pool Balance and the retransfer of the Mortgage Loans is to
facilitate the servicing of the Mortgage Loan pursuant to Section
3.01, or (b) the Mortgage Loan is being removed for any reason other
than to facilitate the servicing of the Mortgage Loan, each Rating
Agency shall have received on or prior to the Retransfer Notice Date
notice in a form acceptable to the Rating Agencies of such proposed
retransfer of Mortgage Loans and, prior to the Retransfer Date, shall
not have notified the Seller in writing that such retransfer of
Mortgage Loans would result in a reduction or withdrawal of its then
current rating of the Class A Certificates; and
(viii) The Seller shall have delivered to the Trustee and
the Credit Enhancer an Officer's Certificate certifying that the items
set forth in subparagraphs (i) through (vii), inclusive, have been
performed or are true and correct, as the case may be. The Trustee
may conclusively rely on such Officer's Certificate, shall have no
duty to make inquiries with regard to the matters set forth therein
and shall incur no liability in so relying.
(b) Upon receiving the information required by Section 2.07(a)
from the Seller, the Master Servicer shall perform in a timely manner those
acts required of it in Section 2.07(a)(iv). Upon satisfaction of the above
conditions, on the Retransfer Date the Trustee (or the Master Servicer on its
behalf), subject to the last paragraph in Section 2.01, shall deliver to the
Seller the Mortgage File for each Mortgage Loan being retransferred, and the
Trustee shall execute and deliver to the Seller such other documents prepared
by the Seller as shall be reasonably necessary to retransfer such Mortgage
Loans to the Seller. Any such retransfer of the Trust's right, title and
interest in and to Mortgage Loans shall be without recourse, representation or
warranty by or of the Trust or the Trustee to the Seller. Upon reasonable
request from the Rating Agencies, the Master Servicer shall deliver, with
fifteen Business Days of such request, to the Rating Agencies, a list of all
Mortgage Loans removed from the Trust pursuant to this Section 2.07.
Section 2.08. Execution and Authentication of Certificates. The
Trustee shall execute on behalf of the Trust and shall authenticate and deliver
to or upon the order of the Seller (except that the Seller Certificates shall
be in the name of the Seller), in exchange for the Initial Mortgage Loans,
concurrently with the sale, assignment and conveyance to the Trust of the
Initial Mortgage Loans, Class A Certificates in authorized denominations and
the Seller Certificates, together evidencing the ownership of the entire Trust.
Section 2.09. Tax Treatment. It is the intention of the Seller and
the Class A Certificateholders that the Class A Certificates will be
indebtedness of the Seller for federal, state and local income and franchise
tax purposes and for purposes of any other tax imposed on or measured by
income. The Seller, the Trustee and each Class A Certificateholder (or
Certificate Owner) by acceptance of its Class A Certificate (or, in the case of
a Certificate Owner, by virtue of such Certificate Owner's acquisition of a
beneficial interest therein) agrees to treat the Class A Certificates (or
beneficial interest therein), for purposes of federal, state and local income
or franchise taxes and any other tax imposed on or measured by income, as
indebtedness of the Seller secured by the Mortgage Loans and to report the
transactions contemplated by this Agreement on all applicable tax returns in a
manner consistent with such treatment. Each Certificateholder agrees that it
will cause any Certificate Owner acquiring an
39
45
interest in a Certificate through it to comply with this Agreement as to
treatment as indebtedness for federal, state and local income and franchise tax
purposes and for purposes of any other tax imposed on or measured by income.
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The Master Servicer. The Master Servicer shall, or
shall cause the related Subservicer to, service and administer the Mortgage
Loans in a manner consistent with the terms of this Agreement and with general
industry practice and shall have full power and authority, acting alone or
through such Subservicer, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable, it being
understood, however, that the Master Servicer shall at all times remain
responsible to the Trustee and the Credit Enhancer and the Certificateholders
for the performance of its duties and obligations hereunder in accordance with
the terms hereof. Any amounts received by the related Subservicer in respect
of a Mortgage Loan shall be deemed to have been received by the Master Servicer
whether or not actually received by it. Without limiting the generality of the
foregoing, the Master Servicer shall, and is hereby authorized and empowered by
the Trustee to, execute and deliver, on behalf of itself, the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and
all other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. Upon the written request of the Master
Servicer, the Seller and the Trustee shall furnish the Master Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative duties hereunder.
The Master Servicer in such capacity may also consent to the placing of a lien
senior to that of the Mortgage on the related Mortgaged Property, provided that
(a) the Mortgage relating to the Mortgage Loan (i) was in
a first lien position as of the applicable Cut-Off Date and (ii) was
in a first lien position immediately prior to the placement of such
senior lien and (iii) the ratio of (A) the sum of the Credit Limit of
such Mortgage Loan and the unpaid principal balance of the lien senior
to that of the Mortgage on the related Mortgaged Property immediately
following such placement to (B) the Valuation of the Mortgaged
Property at the time the Mortgage Loan was originated is not greater
than (1) with respect to Mortgage Loans with a Combined Loan-to-Value
Ratio of _____% or less, _____%, (2) with respect to Mortgage Loans
with a Combined Loan-to-Value Ratio in excess of _____% and not
greater than _____%, _____% and (3) with respect to Mortgage Loans
with a Combined Loan-to-Value Ratio greater than _____%, _____%;
(b) such Mortgage succeeded to a first or second lien
position after the related Mortgage Loan was conveyed to the Trust
and, immediately following the placement of such senior lien, such
Mortgage is in a second or, if at the time the Mortgage Loan was in a
third lien position, a third lien position, and the outstanding
principal amount of the mortgage loan secured by such subsequent
senior lien and the rate at which interest accrues thereon are
40
46
no greater than those of the senior mortgage loan secured by the
Mortgaged Property as of the date the related Mortgage Loan was
conveyed to the Trust;
(c) the Mortgage relating to such Mortgage Loan was in a
second or third lien position as of the applicable Cut-Off Date, the
new senior lien secures a mortgage loan that refinances an existing
first or second mortgage loan and the outstanding principal amount of
the replacement first or second mortgage loan immediately following
such refinancing and the rate at which interest accrues thereon are
not greater than that of such existing first or second mortgage loan
at the date of such refinancing; or
(d) the Mortgage relating to such Mortgage Loan was in a
second or third lien position as of the applicable Cut-Off Date, the
new senior lien secures a mortgage loan that refinances an existing
first or second mortgage loan and (1) the then-current Combined Loan-
to-Value Ratio of the senior liens and the Mortgage does not exceed
such ratio as of the applicable Cut-Off Date and (2) the ratio of the
Mortgage to the Mortgage plus all senior liens immediately following
such refinancing is at least equal to such ratio as of the applicable
Cut-Off Date;
and provided, further, in the case of (a), (b) and (c) above, such
senior lien does not secure a note that provides for negative
amortization.
The Master Servicer shall purchase any Mortgage Loan with respect to
which (a) any loss is suffered by the Credit Enhancer or the Trustee, on behalf
of the Certificateholders, as a result of (i) a failure to file any UCC-1
financing statements required by either Section 2.01 or Section 2.06 or (ii) a
failure to publish, on or prior to the Closing Date with respect to any Initial
Mortgage Loan or on or prior to the applicable Transfer Date with respect to
any Subsequent Mortgage Loan or Eligible Substitute Mortgage Loan, such notices
reflecting the sale of such Mortgage Loan as are described in Section 3440.1(h)
of the California Civil Code or (iii) if such Mortgage Loan has a Credit Limit
of $[50,000] or more and was not originated in the State of New Jersey during
the period beginning [January 1, 1986 and ending April 30, 1987], title to the
related Mortgaged Property not being covered under a customary lender's title
insurance policy or (b) the Master Servicer has consented to the placing of a
subsequent senior lien pursuant to clause (a) above and foreclosure proceedings
are commenced with respect to such Mortgaged Property. Any such purchase by
the Master Servicer shall occur on the Business Day immediately preceding the
Distribution Date following the Collection Period during which such loss occurs
and shall be accomplished by the deposit by the Master Servicer into the
Collection Account of an amount equal to the Trust Balance of the applicable
Mortgage Loan plus accrued and unpaid interest thereon at the Loan Rate to the
end of the Collection Period in which such purchase occurs. Upon making any
such purchase the Master Servicer shall be entitled to receive an instrument of
assignment or transfer from the Trustee to the same extent as set forth in
Section 2.02.
The Master Servicer (or any Subservicer on behalf of the Master
Servicer) may enter into a modification with the related Mortgagor of any Loan
Agreement that is not otherwise purchased by the Master Servicer or
retransferred to the Seller pursuant to Section 2.07, so long as (i) such
modification is permitted by the Credit Enhancer (unless a Credit Enhancer
Default has occurred and is continuing, in which case no such permission shall
be required),
41
47
(ii) the Master Servicer (or such Subservicer on behalf of the Master Servicer)
determines that such modification is necessary and (iii) such modification
shall not have a material adverse effect on the interests of the
Certificateholders, the Credit Enhancer or the Trust; provided, however, the
Master Servicer (or any Subservicer acting on behalf of the Master Servicer)
shall not, prior to the removal from the Trust, modify a Loan Agreement to
change the Loan Rate from a floating rate to a fixed rate of interest per annum
or from a fixed rate to a floating rate of interest per annum. In addition,
the Master Servicer may agree to changes in the terms of a Mortgage Loan
requested by a Mortgagor which may have a material adverse effect on the
interests of Certificateholders or the Credit Enhancer, provided that the
Master Servicer (i) has determined that such changes are necessary to avoid
prepayment of the Mortgage Loan and that such changes are consistent with
prudent business practice as evidenced by an Officer's Certificate signed by a
Servicing Officer to such effect delivered to the Trustee and the Credit
Enhancer and (ii) purchases such Mortgage Loan on the Business Day immediately
preceding the Distribution Date following the Collection Period during which
such determination is made and prior to the effectiveness of such change, if
such Mortgage Loan has not been removed from the Trust by the Seller pursuant
to Section 2.07(a). In the event that such purchase does not occur, no change
will be made to the terms of the related Mortgage Loan. Such purchase shall be
accomplished in the same manner and subject to the same conditions set forth in
Section 2.02. Upon making any such purchase, the Master Servicer shall be
entitled to receive an instrument of assignment or transfer from the Trustee to
the same extent as set forth in Section 2.02. Notwithstanding the foregoing
however, the Master Servicer may make any changes to any of the Loan Agreements
with any Mortgagor or modify its collection or servicing policies as to a
particular Mortgagor if requested by the Seller. In such an event, the Seller
agrees to cause the Trust to retransfer the affected Mortgage Loan to the
Seller in accordance with Section 2.07(a).
The relationship of the Master Servicer (and of any successor to the
Master Servicer as master servicer under this Agreement) to the Trustee under
this Agreement is intended by the parties to be that of an independent
contractor and not that of a joint venturer, partner or agent.
In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer may, in
its sole discretion and to the extent permitted by applicable law, terminate
the existing subservicer arrangements with any subservicer or assume the
terminated Master Servicer's rights under such subservicing arrangements, which
termination or assumption will not violate the terms of such arrangements.
Section 3.02. Collection of Certain Mortgage Loan Payments; Mortgage
Loan Payment Record. (a) The Master 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, follow such collection procedures as it follows with respect to
mortgage loans in its servicing portfolio comparable to the Mortgage Loans.
Consistent with, and without limiting the generality of, the foregoing, the
Master Servicer may in its discretion (i) waive any late payment charge or any
assumption fees or other fees that may be collected in the ordinary course of
servicing the Mortgage Loans, (ii) arrange with a Mortgagor a schedule for the
payment of delinquent amounts, provided such arrangement is consistent with the
Master Servicer's policies with respect to the mortgage
42
48
loans it owns or services and (iii) and treat a Loan Agreement as current if
the Mortgagor has made one scheduled payment to cure the delinquency status of
such Mortgage Loan.
(b) The Master Servicer shall establish and maintain with the
Trustee a separate trust account (the "Collection Account") titled "The First
National Bank of Chicago, as Trustee, in trust for the registered holders of
Revolving Home Equity Loan Asset Backed Certificates, Series 1996-2." In the
event that a successor Trustee is appointed as provided in Section 9.07, a new
Collection Account shall be promptly established at and maintained by such
successor Trustee, and the title of the new Collection Account shall be
"[Successor Trustee], as Trustee, in trust for the registered holders of
Revolving Home Equity Loan Asset Backed Certificates, Series 1996-2", and any
amounts in the old Collection Account shall be transferred to the new
Collection Account. The Collection Account shall be an Eligible Account.
Except as provided below, the Master Servicer shall on the Closing Date, with
respect to the Initial Mortgage Loans, and on the applicable Transfer Date,
with respect to the Subsequent Mortgage Loans and any Eligible Substitute
Mortgage Loan, deposit to the Collection Account any amounts representing
payments on and any collections in respect of such Mortgage Loans received
after the applicable Cut-Off Date and prior to the Closing Date or applicable
Transfer Date, as the case may be, and thereafter deposit to the Collection
Account on a daily basis within two Business Days following receipt thereof the
following payments and collections received or made by it (without
duplication):
(i) Interest Collections on the Mortgage Loans;
(ii) Principal Collections on the Mortgage Loans;
(iii) any Retransfer Deposit Amount in respect of Mortgage
Loans that are repurchased or replaced by an Eligible Substitute
Mortgage Loan by the Seller pursuant to Section 2.02 or 2.04;
(iv) the aggregate purchase price of the Mortgage Loans
purchased by the Master Servicer pursuant to Section 3.01;
(v) Net Liquidation Proceeds;
(vi) Insurance Proceeds (including, for this purpose, any
amount required to be paid by the Master Servicer pursuant to Section
3.04 and excluding the portion of Insurance Proceeds, if any, that has
been applied to the restoration or repair of the related Mortgaged
Property or to the payment of any senior mortgage loan or that has
been released to the related Mortgagor in accordance with the normal
servicing procedures of the Master Servicer); and
(vii) amounts required to be paid by the Seller in
connection with the termination of the Trust pursuant to Section
10.01.
The foregoing requirements respecting deposits to the Collection Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, fees (including annual fees) or late charge penalties payable by
Mortgagors, or amounts received by the Master Servicer or a Subservicer for the
accounts of Mortgagors for application towards the payment
43
49
of taxes, insurance premiums, assessments and similar items for the account of
the related Subservicer, if any, need not be deposited to the Collection
Account.
The Trustee shall hold amounts deposited in the Collection Account as
trustee for the Certificateholders and for the Credit Enhancer. In addition,
the Master Servicer shall notify the Trustee and the Credit Enhancer in writing
on each Determination Date of the amount of payments and collections in the
Collection Account allocable to Interest Collections and Principal Collections
for the following Distribution Date and the amount allocable to Interest
Collections and Principal Collections for the second following Distribution
Date. Following such notification, the Master Servicer, in its capacity as
custodian for the Seller, shall be entitled to withdraw from the Collection
Account and retain any amounts that constitute income and gain realized from
the investment of such payments and collections.
The Master Servicer may cause the institution maintaining the
Collection Account to invest any funds in the Collection Account in Permitted
Investments (including obligations of the Master Servicer or of any of its
affiliates, if such obligations otherwise qualify as Permitted Investments),
which shall mature or otherwise be available not later than the Business Day
next preceding the Distribution Date or, with the approval of the Credit
Enhancer and the Rating Agencies, on the Distribution Date next following the
date of such investment (except that any investment in an obligation of the
institution with which the Collection Account is maintained may mature on or
before 12:00 noon, Chicago time, on such Distribution Date) and shall not be
sold or disposed of prior to its maturity. In the event the Trustee is at any
time maintaining the Collection Account, any request by the Master Servicer to
invest funds on deposit in the Collection Account shall be in writing, shall be
delivered to the Trustee at or before 10:30 A.M., Chicago time, if such
investment is to be made on such day, and shall certify that the requested
investment is a Permitted Investment that matures at or prior to the time
required hereby. Any such investment shall be registered in the name of the
Trustee as trustee hereunder or in the name of its nominee and to the extent
such investments are certificated they shall be maintained in the possession of
the Trustee in the state of its Corporate Trust Office. Except as provided
above, all income and gain realized from any such investment shall be for the
benefit of the Master Servicer and shall be subject to its withdrawal or order
from time to time. The amount of any losses incurred in respect of the
principal amount of any such investments shall be deposited in the Collection
Account by the Master Servicer out of its own funds immediately as realized.
(c) The deposit to the Collection Account referred to in Section
3.02(b) and the deposit to the Funding Account pursuant to Section 5.05(a) may
be effected by the recordation of payments and collections in the case of the
Collection Account on the Master Note and in the case of the Funding Account on
the Funding Master Note (which notes shall have been executed and delivered to
the Trustee at least five (5) Business Days prior to the first such recordation
or, in the case of the first Collection Period, on the Closing Date) so long as
either of the following conditions is satisfied: (x) commercial paper issued
by the Master Servicer is rated at least A-1 by Standard & Poor's and P-1 by
▇▇▇▇▇'▇; or (y) a Master Servicer Credit Facility is maintained in effect by
the Master Servicer acceptable in form and substance to each Rating Agency and
the Credit Enhancer (such acceptability to be evidenced by a written
confirmation of the Credit Enhancer and each Rating Agency to the effect, in
the case of the Rating Agencies, that, so long as the Master Servicer Credit
Facility is maintained, the then-current rating of the Class A Certificates
will not be adversely affected if, instead of making the deposits referred to
in Section 3.02(b) and Section 5.05(a) within the periods
44
50
specified therein, receipt by the Master Servicer of such amounts is recorded
on the Master Note and the Funding Master Note respectively), issued by a
depository institution or insurance company acceptable to the Credit Enhancer
and having a rating on its (A) short-term obligations of at least P-1 by
▇▇▇▇▇'▇ and A-1 by Standard & Poor's and (B) long-term obligations of at least
A-2 by ▇▇▇▇▇'▇ and A by Standard & Poor's, or other ratings approved by the
Rating Agencies and the Credit Enhancer; provided, however, that the amount of
payments and collections recorded and outstanding on the Master Note pursuant
to this subclause (y) shall not exceed _____% of the Master Servicer Credit
Facility Amount. To the extent and for so long as such conditions are met, the
Master Servicer shall, within two Business Days of receipt of any payments and
collections allocable to Principal Collections and Interest Collections, notify
the Trustee, the Credit Enhancer and the Master Servicer Credit Facility Issuer
in writing of the amounts that would otherwise be deposited in the Collection
Account pursuant to Section 3.02(b) and Section 5.05(a), and the Master
Servicer shall establish and maintain for the Trust a Mortgage Loan Payment
Record on which the payments on and collections in respect of the Mortgage
Loans for each of the categories specified in Section 3.02(b) and Section
5.05(a) shall be credited, and the Master Servicer shall notify the Trustee,
the Credit Enhancer and the Master Servicer Credit Facility Issuer in writing
as promptly as practicable (but in any event prior to the related Determination
Date with respect to each Distribution Date) of the amounts so credited for
each of the categories specified in such Sections that are to be included in
Interest Collections and Principal Collections for the related Distribution
Date and of the amounts so credited that will constitute a part of Interest
Collections and Principal Collections for the second following Distribution
Date.
If for any period during which the Master Servicer is recording
payments and collections in respect of the Mortgage Loans or deposits as the
case may be on the Master Note or the Funding Master Note as applicable (1)
pursuant to subclause (x) of the preceding paragraph and the ratings of the
Master Servicer's commercial paper are downgraded, suspended or withdrawn so
that the rating requirements specified in such subclause are no longer
satisfied, or (2) pursuant to subclause (y) of the preceding paragraph and
either (a) the Rating Agencies or the Credit Enhancer advise the Master
Servicer that the Master Servicer Credit Facility is no longer sufficient and,
in the case of the Rating Agencies, that continuing to record payments and
collections on the Master Note or the Funding Master Note instead of depositing
such amounts to the Collection Account or Funding Account, as applicable,
pursuant to Sections 3.02(b) and 5.05(a) will adversely affect the then-current
rating of the Class A Certificates or (b) the amount recorded and outstanding
on the Master Note exceeds _____% of the Master Servicer Credit Facility
Amount, then, the Master Servicer shall, within two (2) Business Days following
the date of such event, deposit such payments and collections (or in the case
of clause (2)(b) above, only the portion of such payments and collections in
excess of _____% of the Master Servicer Credit Facility Amount), in next day
funds in the Collection Account and the Funding Account, as applicable, as
determined by the Master Servicer; provided, however, that such deposits shall
in no event be made later than 11:00 A.M. on the Business Day preceding the
related Distribution Date.
The foregoing requirements respecting credits to the Mortgage Loan
Payment Record are exclusive, it being understood that, without limiting the
generality of the foregoing, the Master Servicer need not enter in the Mortgage
Loan Payment Record amounts representing fees (including annual fees) or late
charge penalties payable by Mortgagors, or amounts received by the Master
Servicer for the accounts of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
45
51
The Mortgage Loan Payment Record shall be made available for
inspection during normal business hours of the Master Servicer upon request of
the Trustee, the Credit Enhancer, any Master Servicer Credit Facility Issuer or
the firm of independent accountants acting pursuant to Section 3.10.
In the event a Master Note shall have been delivered to the Trustee
pursuant to the first paragraph of this Section 3.02(c), the Trustee shall
record on the back thereof an increase in the amount owed to the Trust equal to
the amount of payments and collections received in respect of the Mortgage
Loans and Additional Balances reflected in each notification received by the
Trustee pursuant to the first paragraph of this Section 3.02(c), within two
Business Days of receipt of such notification. Amounts owing under the Master
Note shall be reduced by the amount of Interest Collections and Principal
Collections deposited to the Collection Account in next day funds prior to
11:00 A.M. on the Business Day preceding the related Distribution Date (for
purposes of this subclause, the portion of such Principal Collections to be
transferred to the Funding Account, up to an aggregate amount equal to _____%
of the Cut-Off Date Pool Balance on any Distribution Date prior to the last
Distribution Date in the Funding Period shall not be required to be included in
Principal Collections and such amount shall not reduce amounts owing under the
Master Note).
In the event a Funding Master Note shall have been delivered to the
Trustee pursuant to the first paragraph of this Section 3.02(c), the Trustee
shall record on the back thereof an increase in the amount owed to the Trust
equal to the amount of payments in respect of Principal Collections to be
deposited to the Funding Account on each Distribution Date during the Funding
Period. Amounts owing under the Funding Master Note shall be reduced by the
amount of Principal Collections deposited to the Funding Account in next day
funds prior to 11:00 A.M. on the related Subsequent Transfer Date to pay any
Excess Funding Amount pursuant to Section 5.05(c)(i)(B), to acquire Subsequent
Mortgage Loans pursuant to Section 5.05(c)(ii) or on the last Distribution Date
of the Funding Period, to acquire Subsequent Mortgage Loans or Additional
Balances, or for deposit to the Collection Account for distribution as
Principal Collections, in each case pursuant to Section 5.05(c)(iii).
(d) So long as the conditions of Section 3.02(c) above are
satisfied, the Master Servicer shall deposit in the Collection Account all
amounts received with respect to the Mortgage Loans (whether or not allocable
to principal of or interest on the Trust Balance) which are reflected on the
Mortgage Loan Payment Record and which will constitute Interest Collections or
Principal Collections for the next Distribution Date, not later than the
Business Day preceding such Distribution Date, subject to withdrawal to the
same extent as debits to the Mortgage Loan Payment Record are permitted
pursuant to clauses (i) - (v), inclusive, of Section 3.03. Amounts deposited
in the Collection Account from payments on the Funding Master Note pursuant to
Section 3.02 shall be deemed to be made from the Funding Account.
Section 3.03. Withdrawals from the Collection Account; Permitted
Debits to the Mortgage Loan Payment Record. From time to time, withdrawals may
be made from the Collection Account or debits may be made to the Mortgage Loan
Payment Record, as the case may be, by the Master Servicer for the following
purposes:
(i) To reimburse the Master Servicer to the extent
permitted by Section 7.03;
46
52
(ii) To make deposits into the Collection Account and
Funding Account pursuant to Section 3.02;
(iii) To pay to the Seller amounts on deposit in the
Collection Account or credited to the Mortgage Loan Payment Record
that are not to be included in the distributions and payments pursuant
to Section 5.01 to the extent provided by Section 3.02(b);
(iv) To make distributions and payments pursuant to
Sections 5.01 and 5.05; and
(v) To pay to the party legally entitled by a final order
of a court of competent jurisdiction in an insolvency proceeding an
amount equal to any preference claim made with respect to amounts paid
with respect to the Mortgage Loans; provided that, if any such amount
is later determined not to be a preference by such court of competent
jurisdiction and is returned to the Master Servicer or any
Subservicer, such amount shall be redeposited into the Collection
Account by the Master Servicer.
In addition, if the Master Servicer deposits in the Collection Account
or credits to the Mortgage Loan Payment Record any amount not required to be
deposited therein or credited thereto or any amount in respect of payments by
Mortgagors made by checks subsequently returned for insufficient funds or other
reason for non-payment, it may at any time withdraw such amount from the
Collection Account or debit such amount on the Mortgage Loan Payment Record,
and any such amounts shall not be included in Interest Collections and
Principal Collections, any provision herein to the contrary notwithstanding.
Any withdrawal or debit permitted by this Section 3.03 may be accomplished by
delivering an Officer's Certificate to the Trustee which describes the purpose
of such withdrawal or debit (including, without limitation, that any such
amount was deposited in the Collection Account or credited to the Mortgage Loan
Payment Record in error or, in the case of returned checks, that such amounts
were properly debited, respectively). Upon receipt of any such Officer's
Certificate, the Trustee shall withdraw or debit such amount for the account of
the Master Servicer. All funds deposited or credited by the Master Servicer in
the Collection Account or to the Mortgage Loan Payment Record, respectively,
shall be held by the Trustee in trust for the Certificateholders and the Credit
Enhancer, until disbursed in accordance with Section 5.01 or withdrawn or
debited in accordance with this Section.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. The Master Servicer shall cause to be maintained for each Mortgage
Loan hazard insurance naming the Master Servicer or the related Subservicer as
loss payee thereunder providing extended coverage in an amount which is at
least equal to the lesser of (i) the maximum insurable value of the Mortgaged
Property or (ii) the combined principal balance owing on such Mortgage Loan and
any mortgage loan senior to such Mortgage Loan from time to time. The Master
Servicer shall also maintain on property acquired upon foreclosure, or by grant
of deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the maximum insurable value
of the Mortgaged Property or (ii) the combined unpaid principal balance owing
on such Mortgage Loan and any mortgage loans senior to such Mortgage Loans at
the time of such foreclosure or grant of deed in lieu of foreclosure plus
accrued interest thereon. Amounts collected by the Master Servicer under any
such policies shall be either deposited in the Collection Account or credited
to the Mortgage Loan Payment
47
53
Record to the extent called for by Section 3.02. In cases in which any
Mortgaged Property is located in a federally designated flood area, the hazard
insurance to be maintained for the related Mortgage Loan shall include flood
insurance. All such flood insurance shall be in such amounts as are required
under applicable guidelines of FNMA. The Master Servicer shall be under no
obligation to require that any Mortgagor maintain earthquake or other
additional insurance and shall be under no obligation itself to maintain any
such additional insurance on property acquired in respect of a Mortgage Loan,
other than pursuant to such applicable laws and regulations as shall at any
time be in force and as shall require such additional insurance. With respect
to Mortgaged Properties acquired by the Master Servicer as provided herein, the
Master Servicer may satisfy its obligation set forth in the first sentence of
this Section 3.04 by self insuring Mortgaged Properties for which the aggregate
unpaid principal balance of the related Mortgage Loans plus the outstanding
balance of any mortgage loans senior to such Mortgage Loans at the time title
was acquired, plus accrued interest (the "Combined Exposure"), was less than
$[500,000] (or such other amount as the Master Servicer may in good faith
determine from time to time) and by causing hazard policies to be maintained
with respect to Mortgaged Properties for which the Combined Exposure equals or
exceeds the self insurance threshold established from time to time by the
Master Servicer by maintaining a blanket policy consistent with prudent
industry standards insuring against hazard losses on the Mortgaged Properties.
Such policy may contain a deductible clause, in which case the Master Servicer
shall, in the event that there shall not have been maintained on the related
Mortgaged Property a policy complying with the first sentence of this Section
3.04, and there shall have been a loss which would have been covered by such
policy, credit to the Mortgage Loan Payment Record or deposit in the Collection
Account, as the case may be, the amount not otherwise payable under the blanket
policy because of such deductible clause.
Section 3.05. Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall exercise or refrain from exercising its
right to accelerate the maturity of such Mortgage Loan consistent with the
then-current practice of the Master Servicer and without regard to the
inclusion of such Mortgage Loan in the Trust and not in the Master Servicer's
portfolio. If it elects not to enforce its right to accelerate or if it is
prevented from doing so by applicable law, the Master Servicer (so long as such
action conforms with the Master Servicer's underwriting standards at the time
for new originations) is authorized to take or enter into an assumption and
modification agreement from or with the Person to whom such Mortgaged Property
has been or is about to be conveyed, pursuant to which such Person becomes
liable under the Loan Agreement and, to the extent permitted by applicable law,
the Mortgagor remains liable thereon. The Master Servicer shall notify the
Trustee that any assumption and modification agreement has been completed by
delivering to the Trustee an Officer's Certificate certifying that such
agreement is in compliance with this Section 3.05 and by forwarding to the
applicable Subservicer on behalf of the Seller or the Trustee, as applicable,
the original copy of such assumption and modification agreement. Any such
assumption and modification agreement shall, for all purposes, be considered a
part of the related Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. No change in the terms of the related
Loan Agreement may be made by the Master Servicer in connection with any such
assumption to the extent that such change would not be permitted to be made in
respect of the original Loan Agreement pursuant to the third paragraph of
Section 3.01 and unless the conditions specified in the third paragraph of
Section 3.01 are satisfied. Any fee collected by the Master Servicer for
entering into any such agreement will be retained by the Master Servicer as
additional servicing compensation.
48
54
Section 3.06. Realization Upon Defaulted Mortgage Loans. The Master
Servicer shall join the Related Document Seller as called for by the Transfer
Agreement and foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default when, in the opinion of the Master Servicer based upon the
practices and procedures referred to in the following sentence, no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.02; provided that if the Master Servicer has actual knowledge or
reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances and that the acquisition of such Mortgaged Property
would not be commercially reasonable, then the Master Servicer will not cause
the Trust to acquire title to such Mortgaged Property in a foreclosure or
similar proceeding. In connection with such foreclosure or other conversion,
the Master Servicer shall follow such practices (including, in the case of any
default on a related senior mortgage loan, the advancing of funds to correct
such default) and procedures as it shall deem necessary or advisable and as
shall be normal and usual in its general mortgage servicing activities. The
foregoing is subject to the proviso that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or towards
the correction of any default on a related senior mortgage loan or restoration
of any property unless it shall determine that such expenditure will increase
Net Liquidation Proceeds. The Master Servicer will be reimbursed out of
Liquidation Proceeds for advances of its own funds to pay Liquidation Expenses
before any Net Liquidation Proceeds are contributed to Certificateholders or
the Seller.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by grant of deed in lieu of foreclosure, the deed or certificate
of sale shall (i) so long as the long-term unsecured debt of HFC is assigned
ratings of at least A- by Standard & Poor's and A-3 by ▇▇▇▇▇'▇, be issued in
the name of the related Subservicer and (ii) if the conditions in clause (i)
above are not met, be issued to the Trustee, or to its nominee on behalf of the
Certificateholders.
Section 3.07. Trustee to Cooperate. On or before each Distribution
Date, the Master Servicer will notify the Trustee of the payment in full during
the related Collection Period of the Trust Balance of any Mortgage Loan with
respect to which the Credit Limit has been reduced to zero which notification
shall be by a certification (which certification shall include a statement to
the effect that all amounts received in connection with such payment which are
required to be deposited in the Collection Account or credited to the Mortgage
Loan Payment Record pursuant to Section 3.02 have been so deposited or
credited) of a Servicing Officer. Upon any such payment in full, the Master
Servicer is authorized to execute, pursuant to the authorization contained in
Section 3.01, if the assignments of Mortgage have been recorded as required
hereunder, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Master Servicer if required
by applicable law and be delivered to the Person entitled thereto. It is
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or transfer shall be reimbursed from amounts
deposited in the Collection Account or Funding Account or credited to the
Mortgage Loan Payment Record. If the Trustee is holding the Mortgage Files,
from time to time and as appropriate for the servicing or foreclosure of any
Mortgage Loan, the Trustee shall, upon request of the Master Servicer and
delivery to the Trustee of a trust receipt substantially in the form of Exhibit
F hereto signed by a Servicing Officer, release the related Mortgage File to
the Master Servicer, and the Trustee shall execute such documents as shall be
necessary to the prosecution of any such proceedings or the taking of other
servicing
49
55
actions. Such trust receipt shall obligate the Master Servicer to return the
Mortgage File to the Trustee when the need therefor by the Master Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the trust receipt shall be released by the Trustee to the Master
Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if the
Master Servicer so requests in writing and supplies the Trustee with
appropriate forms therefor, assign such Mortgage Loan for the purpose of
collection to the Master Servicer or to the related Subservicer (any such
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only), and, upon such assignment, such assignee for collection
will thereupon bring all required actions in its own name and otherwise enforce
the terms of the Mortgage Loan and deposit or credit the Net Liquidation
Proceeds received with respect thereto in the Collection Account or the
Mortgage Loan Payment Record, as the case may be. In the event that all
delinquent payments due under any such Mortgage Loan are paid by the Mortgagor
and any other defaults are cured then the assignee for collection shall
promptly reassign such Mortgage Loan to the Trustee and return it to the place
where the related Mortgage File was being maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer. The Master Servicer shall be entitled to receive the Class A
Servicing Fee pursuant to Section 5.01(a)(i) as compensation for its services
in connection with servicing the Mortgage Loans. The Seller Monthly Servicing
Fee shall be paid to the Master Servicer by the Seller and shall not be the
responsibility or liability of the Trust, the Trustee or the Class A
Certificateholders. Additional servicing compensation in the form of late
payment charges or other receipts not required to be deposited in the
Collection Account shall be retained by the Master Servicer. The Master
Servicer shall be required to pay all expenses incurred by it in connection
with its activities hereunder (including payment of Trustee fees and all other
fees and expenses not expressly stated hereunder to be for the account of the
Certificateholders) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
Section 3.09. Annual Statement as to Compliance. (a) The Master
Servicer will deliver to the Trustee, the Credit Enhancer and the Rating
Agencies, on or before [April 30 of each year, beginning April 30, 1998], an
Officer's Certificate stating that (i) a review of the activities of the Master
Servicer during the preceding calendar year and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best
of such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its material 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.
(b) The Master Servicer shall deliver to the Trustee, the Credit
Enhancer and each of the Rating Agencies, promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice by means of an Officer's Certificate of any event which with the
giving of notice or the lapse of time or both, would become an Event of
Servicing Termination.
50
56
Section 3.10. Annual Servicing Report. On or before [April 30 of
each year, beginning April 30, 1998], the Master Servicer at its expense shall
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Master Servicer) to furnish a report to the
Trustee, the Credit Enhancer and each Rating Agency to the effect that such
firm has examined certain documents and records relating to the servicing of
mortgage loans by the Master Servicer during the most recent calendar year then
ended under pooling and servicing agreements (including this Agreement)
substantially similar to this Agreement and that such examination, which has
been conducted substantially in compliance with the audit guide for audits of
non-supervised mortgagees approved by the Department of Housing and Urban
Development for use by independent public accountants (to the extent that the
procedures in such audit guide are applicable to the servicing obligations set
forth in such agreements), has disclosed no items of noncompliance with the
provisions of this Agreement which, in the opinion of such firm, are material,
except for such items of noncompliance as shall be set forth in such report.
Section 3.11. Annual Opinion of Counsel. On or before [April 30 of
each year, beginning April 30, 1998], the Master Servicer at its expense shall
deliver to the Trustee and the Credit Enhancer an Opinion of Counsel
substantially in the form set forth in Exhibit D hereto.
Section 3.12. Access to Certain Documentation and Information
Regarding the Mortgage Loans. (a) The Master Servicer and the Seller shall
provide to the Trustee, the Credit Enhancer, Class A Certificateholders that
are federally insured savings and loan associations, the Office of Thrift
Supervision, the successor to the Federal Home Loan Bank Board, the FDIC and
the supervisory agents and examiners of the Office of Thrift Supervision access
to the documentation regarding the Mortgage Loans required by applicable
regulations of the Office of Thrift Supervision and the FDIC (acting as
operator of the SAIF or the BIF), such access being afforded without charge but
only upon reasonable request and during normal business hours at the offices of
the Master Servicer, the related Subservicer or the Seller as determined by the
Master Servicer. Nothing in this Section 3.12 shall derogate from the
obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors, and the failure of the
Master Servicer to provide access as provided in this Section 3.12 as a result
of such obligation shall not constitute a breach of this Section 3.12.
(b) The Master Servicer shall supply information in such form as
the Trustee shall reasonably request to the Trustee and the Paying Agent, on or
before the start of the third Business Day preceding the related Distribution
Date, as is required in the Trustee's reasonable judgment to enable the Paying
Agent or the Trustee, as the case may be, to make the required distributions
and to furnish the required reports to Certificateholders and to make any claim
under the Credit Enhancement Instrument.
Section 3.13. Maintenance of Certain Servicing Insurance Policies.
The Master Servicer shall during the term of its service as master servicer
maintain in force (i) a policy or policies of insurance covering errors and
omissions in the performance of its obligations as master servicer hereunder
and (ii) a fidelity bond in respect of its officers, employees or agents. Each
such policy or policies and bond shall, together, comply with the requirements
from time to time of FNMA for persons performing servicing for mortgage loans
purchased by such Association.
51
57
Section 3.14. Reports to the Securities and Exchange Commission. The
Master Servicer shall, on behalf of the Trust, cause to be filed with the
Securities and Exchange Commission any periodic reports required to be filed
under the provisions of the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Securities and Exchange Commission thereunder.
Section 3.15. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Master Servicer shall prepare and deliver, or cause to be prepared and
delivered, to the Trustee all federal and state information reports when and as
required by all applicable state and federal income tax laws including, to the
extent applicable, returns reporting a cancellation of indebtedness as
prescribed by Section 6050P of the Code. In particular, with respect to the
requirement under Section 6050J of the Code to the effect that the Trustee
shall make reports of foreclosures and abandonments of any mortgaged property
for each year beginning in 1996, the Master Servicer, in order to facilitate
this reporting process, shall provide to the Trustee in a timely fashion each
year as required by law reports relating to each instance occurring during the
previous calendar year in which the Master Servicer or any Subservicer (i) on
behalf of the Trustee acquired an interest in any Mortgaged Property through
foreclosure or other comparable conversion in full or partial satisfaction of a
Mortgage Loan or (ii) knew or had reason to know that any Mortgaged Property
has been abandoned. The reports from the Master Servicer shall be in form and
substance sufficient to enable the Trustee to meet the reporting requirements
imposed by Section 6050J of the Code.
Section 3.16. Additional Covenants of HFC. HFC hereby agrees that:
(i) it will maintain its books and records to clearly
note the separate corporate existence of the Seller, each Subservicer
and the Master Servicer;
(ii) the Seller, the Subservicers and HFC will share
certain overhead expenses, although the amount the Seller will be
charged for such use will be based on actual use to the extent
practicable and, to the extent such allocation is not practicable, on
a basis reasonably related to use;
(iii) separate financial records will be maintained to
reflect the assets and liabilities of the Seller, HFC and each
Subservicer, which financial records are and will be subject to audit
by independent public accountants at the reasonable request of the
Board of Directors of the Seller, HFC or such Subservicer, as the case
may be;
(iv) except as permitted hereunder, there will be no
commingling of the assets of the Seller with the assets of HFC or any
Subservicer. All demand deposit accounts and other bank accounts of
the Seller will be maintained separately from those of HFC and the
Subservicers. Monetary transactions between the Seller and HFC or any
Subservicer are and will continue to be properly reflected in their
respective financial records;
(v) HFC at all times will recognize, and will take all
steps within its power to maintain, the corporate existence of the
Seller and Subservicers as being separate and apart from its own
corporate existence and will not refer to the Seller or any
Subservicer as a department or division of HFC; and
52
58
(vi) Except as otherwise expressly provided herein, HFC
will not guaranty any obligations of the Seller.
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate. Not later than each
Determination Date, the Master Servicer shall deliver to the Trustee, the
Paying Agent, the Credit Enhancer and each Rating Agency a Servicing
Certificate (in written form or the form of computer readable media or such
other form as may be agreed to by the Trustee and the Master Servicer),
together with an Officer's Certificate to the effect that such Servicing
Certificate is true and correct in all material respects, stating the related
Collection Period, Distribution Date, the series number of the Certificates,
the date of this Agreement, and:
(i) the aggregate amount of collections on the Mortgage
Loans received in such Collection Period;
(ii) the aggregate amount of Interest Collections for such
Collection Period;
(iii) the aggregate amount of Principal Collections for
such Collection Period;
(iv) the Class A Certificateholder Floating Allocation
Percentage and the Class A Fixed Allocation Percentage for such
Collection Period;
(v) the Class A Interest Collections for such Collection
Period;
(vi) the amount of Principal Collections to be deposited
to the Funding Account pursuant to Section 5.05(a);
(vii) the Seller Interest Collections for such Collection
Period;
(viii) the Seller Principal Collections for such Collection
Period;
(ix) Class A Certificate Interest and the Class A
Certificate Rate for the related Interest Period;
(x) the amount, if any, of such Class A Certificate
Interest that is not payable on account of insufficient Class A
Interest Collections;
(xi) the portion of (a) the Unpaid Class A Certificate
Interest Shortfall, if any, plus (b) interest thereon at a rate equal
to the sum of the Class A Certificate Rate applicable from time to
time and, to the extent permitted by law, the Unpaid Class A
Certificate Interest Penalty Rate to be distributed on such
Distribution Date;
(xii) the Unpaid Class A Certificate Interest Shortfall, if
any, remaining after the distribution on such Distribution Date;
53
59
(xiii) the Accelerated Principal Distribution Amount and the
portion thereof that will be distributed in respect of the Class A
Certificates pursuant to Section 5.01(a)(vii);
(xiv) the Scheduled Principal Distribution Amount,
separately stating the components thereof;
(xv) the amount of any Retransfer Deposit Amount deposited
to the Collection Account by the Seller pursuant to Section 2.02 or
2.04, separately stating the portion of each such amount that is to be
distributed in respect of the Class A Certificates on such
Distribution Date pursuant to Section 5.01(b);
(xvi) the Class A Servicing Fee for such Collection Period
and any accrued and unpaid Class A Servicing Fees for previous
Collection Periods;
(xvii) the Aggregate Class A Liquidation Loss Amount for
such Collection Period;
(xviii) the aggregate amount, if any, of Class A Loss
Reduction Amounts for previous Distribution Dates that have not been
previously reimbursed to Class A Certificateholders pursuant to
5.01(a)(iv);
(xix) the Pool Balance as of the end of such Collection
Period and the Pool Balance as of the end of the preceding Collection
Period;
(xx) the Invested Amount as of the end of such Collection
Period;
(xxi) the Class A Certificate Principal Balance and the
Pool Factor after giving effect to the distribution on such
Distribution Date and to any reduction on account of the Aggregate
Class A Liquidation Loss Amount;
(xxii) the Seller Principal Balance and Seller Interest
after giving effect to the distribution on such Distribution Date;
(xxiii) the aggregate amount of Additional Balances created
during such Collection Period;
(xxiv) the number and aggregate Trust Balances of Mortgage
Loans (x) as to which the Minimum Monthly Payment is delinquent for
30- 59 days, 60-89 days and 90 or more days, respectively, and (y)
that have become REO, in each case as of the end of such Collection
Period;
(xxv) whether a Rapid Amortization Event has occurred since
the prior Determination Date, specifying each such Rapid Amortization
Event if one has occurred;
(xxvi) whether an Event of Servicing Termination has
occurred since the prior Determination Date, specifying each such
Event of Servicing Termination if one has occurred;
54
60
(xxvii) the amount to be distributed to the Credit Enhancer
pursuant to Section 5.01(a)(v);
(xxviii) the amount to be distributed to the Spread Account
pursuant to Section 5.01(a)(viii);
(xxix) in the event the Master Servicer Credit Facility is
then in effect, the Master Servicer Credit Facility Amount after
giving effect to all drawings made under the Master Servicer Credit
Facility to and including the date of such statement;
(xxx) the amount referred to in clause (iii) of Section
5.01(a) and the Guaranteed Principal Distribution Amount distributable
in respect of the Class A Certificates for such Distribution Date;
(xxxi) the Credit Enhancement Draw Amount, if any, for such
Distribution Date;
(xxxii) the amount of Unpaid Class A Carry Forward Interest
to be included in such distribution and the amount of Unpaid Class A
Carry Forward Interest remaining after giving effect to the
distribution on such Distribution Date;
(xxxiii) the amount to be reimbursed to the Credit Enhancer
pursuant to Section 5.01(a)(vi);
(xxxiv) the amount to be paid to the Trustee pursuant to
Section 5.01(a)(x);
(xxxv) the amount to be distributed to the Seller pursuant
to Section 5.01(a)(xi);
(xxxvi) Weighted Average Loan Rate and Weighted Average
Maximum Loan Rate for such Collection Period;
(xxxvii) the amount on deposit in the Funding Account as of
such Distribution Date;
(xxxviii) the amount of investment earnings, if any, on
amounts in the Funding Account to be deposited in the Collection
Account for such Distribution Date;
(xxxix) with respect to each Distribution Date during the
Funding Period, the Excess Funding Amount, the amounts used to acquire
Subsequent Mortgage Loans pursuant to Section 5.05(c)(ii) (or
5.05(c)(iii)(A) as applicable), the amounts used to acquire Additional
Balances pursuant to Section 5.05(c)(iii)(B) and the amounts deposited
into the Collection Account pursuant to Section 5.05(c)(iii)(C) for
distribution to Class A Certificateholders on such Distribution Date;
(xl) the aggregate of the Trust Balances of the Subsequent
Funding Mortgage Loans purchased on the related Subsequent Transfer
Date and the aggregate of the Trust Balances of the Subsequent Funding
Mortgage Loans purchased on all prior Subsequent Transfer Dates;
55
61
(xli) the number of the Mortgage Loans and aggregate of the
Trust Balances of the Mortgage Loans retransferred on the related
Retransfer Date and the number of the Mortgage Loans and aggregate of
the Trust Balances of the Mortgage Loans retransferred on all prior
Retransfer Dates;
(xlii) [RESERVED];
(xliii) Class A Interest Payment Cap;
(xliv) Amounts deposited in the Collection Account pursuant
to Sections 3.02(d) and 5.06(e);
(xlv) Cumulative draws under the Policy; and
(xlvi) Net Yield (as defined in the Insurance Agreement).
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate
may be modified by the mutual agreement of the Master Servicer, the Trustee and
the Credit Enhancer. The Master Servicer shall give notice of any such change
to the Rating Agencies.
Section 4.02. Credit Enhancement Instrument; Spread Account. (a)
The Trustee shall establish and maintain with itself a separate trust account
(the "Spread Account") entitled "The First National Bank of Chicago, as
Trustee, in trust for the registered holders of Revolving Home Equity Loan
Asset Backed Certificates, Series 1996-2 and the Credit Enhancer". The Spread
Account shall be an Eligible Account. The Spread Account shall be maintained
by the Trustee for the benefit of the Class A Certificateholders and the Credit
Enhancer and withdrawals therefrom shall be made by the Trustee to be deposited
to the Collection Account to pay amounts referred to in clauses (i) and (ii) of
Section 5.01(a) for any Distribution Date and to pay the amount, if any, by
which the Class A Certificate Principal Balance for any Distribution Date
exceeds the Invested Amount for such date in each case after all distributions
of amounts available for distribution from the Collection Account on such
Distribution Date pursuant to Sections 3.02(d), 5.01 and 5.05 (in accordance
with the payment priority set forth in the Insurance Agreement) prior to any
draw under the Credit Enhancement Instrument, and thereafter to pay such other
amounts as are specified in the Insurance Agreement (in accordance with the
conditions and priorities set forth therein). Deposits into the Spread Account
shall be made pursuant to Section 5.01(a)(viii). Funds in the Spread Account
shall be property of the Trust. In the event that a successor Trustee is
appointed as provided in Section 9.07, a new Spread Account shall be promptly
established at and maintained by such successor Trustee, and the title of the
new Spread Account shall be "[Successor Trustee], as Trustee, in trust for the
registered holders of Revolving Home Equity Loan Asset Backed Certificates,
Series 1996-2 and the Credit Enhancer," and any amounts in the former Spread
Account shall be transferred to the new Spread Account. Any amounts remaining
on deposit in the Spread Account upon termination of the Trust shall be
released in accordance with the terms set forth in the Insurance Agreement.
56
62
Amounts deposited in the Spread Account shall be invested in Permitted
Investments (unless otherwise permitted under the Insurance Agreement) that
mature no later than the Business Day preceding the following Distribution
Date.
(b) The Trustee shall submit, if a Credit Enhancement Draw Amount
is specified in any Servicing Certificate, the Notice for Payment (as defined
in the Credit Enhancement Instrument) in the amount of the Credit Enhancement
Draw Amount to the Credit Enhancer no later than 12:00 noon, New York City
time, on the second Business Day prior to the applicable Distribution Date.
Upon receipt of such Credit Enhancement Draw Amount in accordance with the
terms of the Credit Enhancement Instrument, the Trustee shall deposit such
Credit Enhancement Draw Amount in the Collection Account for distribution to
Certificateholders pursuant to Section 5.01(d).
(c) In the event that the Master Servicer is at the time recording
collections in respect of the Mortgage Loans on the Master Note pursuant to
subclause (y) of the first paragraph of Section 3.02(c) and fails to deposit on
or before 11:00 A.M. New York time on the Business Day prior to a Distribution
Date funds in the amount specified by it in clauses (ii), (iii) and (xv) of the
related Servicing Certificate, the Trustee shall, to the extent it shall be a
beneficiary under any Master Servicer Credit Facility, make a proper demand
under such Master Servicer Credit Facility that the Master Servicer Credit
Facility Issuer pay as promptly as practicable to the Trustee (but in no event
later than the time specified in the Master Servicer Credit Facility on the
Business Day immediately preceding the related Distribution Date) for deposit
in the Collection Account the lesser of (i) the aggregate of the amounts
specified in clauses (ii), (iii) and (xv) of such Servicing Certificate for
such Distribution Date, and (ii) the amount by which the total amount deposited
by the Master Servicer in the Collection Account is less than the aggregate of
the amounts specified in clauses (ii), (iii) and (xv) of such Servicing
Certificate for such Distribution Date, but in no event shall the amount of
such demand exceed the Master Servicer Credit Facility Amount.
Section 4.03. Replacement Credit Enhancement Instruments. In the
event of a Credit Enhancer Default or if the claims paying ability rating of
the Credit Enhancer is downgraded (in each case a "Replacement Event"), the
Master Servicer may, in accordance with and upon satisfaction of the conditions
set forth in the Credit Enhancement Instrument, (x) substitute a new surety
bond or surety bonds for the existing Credit Enhancement Instrument or may
arrange for any other form of credit enhancement, provided that, in such event,
the claims paying ability ratings of the entity providing the substitute Credit
Enhancement Instrument are higher than those of the Credit Enhancer sought to
be replaced (after giving effect to such downgrade) and (y) restructure the
form of credit enhancement, including by eliminating the Credit Enhancement
Instrument without replacement, provided that the Rating Agencies shall have
consented to such restructuring and shall have confirmed that the ratings of
the Certificates shall be increased from their current levels (after giving
effect to such downgrade) as a result of such restructuring. It shall be a
condition to substitution of any new credit enhancement that there be delivered
to the Trustee (i) an Officer's Certificate by the Master Servicer stating that
the conditions to such substitution set forth in clauses (x) and (y) of this
Section 4.03 (to the extent applicable) have been satisfied, (ii) an Opinion of
Counsel, acceptable in form to the Trustee, from counsel to the provider of
such new credit enhancement with respect to the enforceability thereof and such
other matters as the Trustee may require and (iii) an Opinion of Counsel to the
effect that such substitution would not adversely affect in any material
respect the tax status of the Class A Certificates or result in
57
63
a material modification to this Agreement or of the Class A Certificates as
described in Section 1001 of the Code and the regulations thereunder. Upon
receipt of written notice of any such substitution from the Master Servicer and
the taking of physical possession of the new credit enhancement, the Trustee
shall, within five Business Days following receipt of such notice and such
taking of physical possession, deliver the replaced Credit Enhancement
Instrument to the Credit Enhancer.
ARTICLE V
Payments and Statements to Certificateholders; Rights of Certificateholders
Section 5.01. Distributions. (a) Distributions of Class A Interest
Collections. On each Distribution Date, the Trustee or the Paying Agent shall
distribute the Class A Interest Collections collected during the related
Collection Period, in the following amounts and order of priority to the
following Persons (based on the information set forth in the Servicing
Certificate for such Distribution Date):
(i) the Class A Servicing Fee for the related Collection
Period and any previously accrued and unpaid Class A Servicing Fee, to
the Master Servicer;
(ii) the remaining amount, if any, after giving effect to
clause (i) above, to the Class A Certificateholders in payment of the
following:
(x) the Class A Certificate Interest for
such Distribution Date; and
(y) the Unpaid Class A Certificate
Interest Shortfall, if any, for such Distribution
Date plus, to the extent legally permissible,
interest thereon at a per annum rate equal to the sum
of the Class A Certificate Rate applicable from time
to time plus, to the extent permitted by law, the
Unpaid Class A Certificate Interest Penalty Rate;
(iii) the Aggregate Class A Liquidation Loss Amount for
such Collection Period to the Class A Certificateholders as principal
in reduction of the Class A Certificate Principal Balance;
(iv) to the Class A Certificateholders as principal in
reduction of the Class A Certificate Principal Balance, the aggregate
amount of the Class A Loss Reduction Amounts, if any, for previous
Distribution Dates that have not been (A) previously reimbursed to
Class A Certificateholders pursuant to this clause (iv) or (B)
previously absorbed by the Overcollateralization Amount;
(v) the premium due under the Credit Enhancement
Instrument to the Credit Enhancer to the extent not paid by the Master
Servicer;
(vi) to reimburse the Credit Enhancer for previously
unreimbursed Credit Enhancement Draw Amounts and other amounts due
under the Insurance Agreement;
58
64
(vii) the Accelerated Principal Distribution Amount, if
any, to the Class A Certificateholders;
(viii) the remaining amount, if any, after giving effect to
clauses (i) through (vii) above, to the Spread Account up to the
Spread Account Maximum;
(ix) the amount, if any, of any Unpaid Class A Carry
Forward Interest to the Class A Certificateholders;
(x) fees due to the Trustee to the extent not paid by the
Master Servicer; and
(xi) any remaining amount to the Seller.
(b) Distribution of Principal Collections to Class A
Certificateholders. On each Distribution Date during the Funding Period, the
Scheduled Principal Distribution Amount shall be deposited to the Funding
Account and shall not be distributed to Class A Certificateholders; provided,
however, that on each Distribution Date during the Funding Period, the Trustee
shall distribute as principal to the Class A Certificateholders on such
Distribution Date amounts deposited in the Collection Account pursuant to
Sections 5.05(c)(i)(B) and 5.05(c)(iii)(C). On each Distribution Date
commencing with the first Distribution Date after the Funding Period and until
the Class A Certificate Principal Balance is reduced to zero, the Trustee shall
distribute the Principal Collections to Class A Certificateholders in an amount
equal to the lesser of (i) the Scheduled Principal Distribution Amount for such
date and (ii) the Class A Certificate Principal Balance after giving effect to
the distributions made pursuant to Section 5.01(a) on such Distribution Date.
(c) Distribution of the Credit Enhancement Draw Amount. With
respect to any Distribution Date, to the extent that Class A Interest
Collections and amounts withdrawn from the Spread Account and deposited to the
Collection Account on such Distribution Date applied in the order specified in
Section 5.01(a) are insufficient to make distributions as provided in clauses
(i) and (ii) thereof, the Trustee will make such payments from the amount drawn
under the Credit Enhancement Instrument for such Distribution Date pursuant to
Section 4.02(b). For any Distribution Date as to which there is a Guaranteed
Principal Distribution Amount, the Trustee shall distribute the Guaranteed
Principal Distribution Amount to Class A Certificateholders from the amount
drawn under the Credit Enhancement Instrument for such Distribution Date
pursuant to Section 4.02(b).
The aggregate amount of principal distributed to the Class A
Certificateholders under this Agreement shall not exceed the Original Class A
Certificate Principal Balance.
(d) Method of Distribution. The Trustee shall make distributions
in respect of a Distribution Date to each Class A Certificateholder of record
on the related Record Date (other than as provided in Section 10.01 respecting
the final distribution) by check or money order mailed to such Class A
Certificateholder at the address appearing in the Certificate Register, or upon
written request by a Class A Certificateholder delivered to the Trustee at
least five Business Days prior to such Record Date, by wire transfer (but only
if such Certificateholder is the Depository or such Certificateholder owns of
record one or more Class A Certificates having principal denominations
aggregating at least $5,000,000), or by such other means of
59
65
payment as such Class A Certificateholder and the Trustee shall agree. The
Master Servicer, as agent for the Trustee, shall make distributions to the
Holders of Seller Certificates of record in accordance with Section 5.01(f).
Distributions among Class A Certificateholders shall be made in proportion to
the Percentage Interests evidenced by the Class A Certificates held by such
Certificateholders.
(e) Distributions on Book-Entry Certificates. Each distribution
with respect to a Book-Entry Certificate shall be paid to the Depository, which
shall credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing
funds to the Certificate Owners that it represents. All such credits and
disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the Class A Certificates. None of the Trustee, the Paying Agent, the
Certificate Registrar, the Seller or the Master Servicer shall have any
responsibility therefor except as otherwise provided by applicable law.
(f) Distributions to Holders of Seller Certificates. On the
Business Day immediately following each Determination Date the Trustee shall,
based upon the information set forth in the Servicing Certificate for the
related Distribution Date, distribute to the Seller the Seller Collections for
the related Collection Period.
Section 5.02. Calculation of the Class A Certificate Rate. (a) On
the second LIBOR Business Day immediately preceding each Distribution Date
(referred to in this sentence as the "current Distribution Date"), the Trustee
shall determine LIBOR and the Class A Certificate Rate for the Distribution
Date next succeeding such current Distribution Date and inform the Master
Servicer (at the facsimile number given to the Trustee in writing) of such
rate.
Section 5.03. Statements to Certificateholders. On each
Determination Date, the Master Servicer shall forward to the Trustee and the
Paying Agent for mailing to each Class A Certificateholder, and concurrently
with each distribution to Class A Certificateholders, the Trustee shall mail to
each Class A Certificateholder, a statement with respect to such distribution
setting forth:
(i) the Class A Certificateholder Floating Allocation
Percentage and the Class A Fixed Allocation Percentage applicable to
such Distribution Date;
(ii) the Class A Certificate Distribution Amount;
(iii) the amount of such distributions allocable to Class A
Certificate Interest and the related Class A Certificate Rate;
(iv) the amount, if any, of Unpaid Class A Certificate
Interest Shortfall (and any interest accrued thereon at a per annum
rate equal to the sum of the Class A Certificate Rate and, to the
extent permitted by law, the Unpaid Class A Certificate Interest
Penalty Rate) and the amounts, if any, representing Unpaid Class A
Carry Forward Interest included in such distribution;
60
66
(v) the amount, if any, of the remaining Unpaid Class A
Certificate Interest Shortfall and remaining Unpaid Class A Carry
Forward Interest after giving effect to such distributions;
(vi) the amount, if any, of such distributions allocable
to principal, separately stating the components thereof;
(vii) the amount, if any, of the reimbursement of previous
Class A Loss Reduction Amounts in such distributions;
(viii) the amount, if any, of the aggregate of unreimbursed
Class A Loss Reduction Amounts remaining after giving effect to such
distributions;
(ix) the Class A Servicing Fee for such Distribution Date;
(x) the Invested Amount, the Class A Certificate
Principal Balance and the Pool Factor, each after giving effect to
such distribution;
(xi) the amount of Principal Collections on deposit in the
Funding Account as of such Distribution Date;
(xii) the Pool Balance as of the end of the related
Collection Period;
(xiii) the Credit Enhancement Draw Amount, if any, and the
Net Insured Principal Amount on the following Distribution Date;
(xiv) the number and aggregate Trust Balances of Mortgage
Loans as to which the Minimum Monthly Payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively, as of the end of
the related Collection Period;
(xv) the aggregate Liquidation Loss Amount for all
Mortgage Loans that became Liquidated Mortgage Loans during the
related Collection Period;
(xvi) the book value (within the meaning of 12 C.F.R.
Section 571.13 or comparable provision) of any real estate acquired
through foreclosure or grant of a deed in lieu of foreclosure;
(xvii) the Class A Certificate Rate applicable to the
distributions on the following Distribution Date;
(xviii) the number and aggregate Trust Balances of Subsequent
Funding Mortgage Loans on the Subsequent Transfer Date and the
aggregate of the Trust Balances of the Subsequent Funding Mortgage
Loans purchased on all prior Subsequent Transfer Dates;
(xix) the number of the Mortgage Loans and aggregate of the
Trust Balances of the Mortgage Loans retransferred on the related
Retransfer Date and the number of the Mortgage Loans and aggregate of
the Trust Balances of the Mortgage Loans retransferred on all prior
Retransfer Dates;
61
67
(xx) [RESERVED];
(xxi) [RESERVED]; and
(xxii) earnings on all accounts.
In the case of information furnished pursuant to clauses (ii), (iii)
(in respect of Class A Certificate Interest), (iv) and (vi) above, the amounts
shall be expressed as a dollar amount per Class A Certificate with a $1,000
denomination.
The Master Servicer shall also give such statement to each Rating
Agency at the time it gives such statement to the Trustee and the Paying Agent.
Within 60 days after the end of each calendar year, the Master
Servicer shall prepare or cause to be prepared and shall forward to the Trustee
the information set forth in clauses (iii) and (vi) above aggregated for such
calendar year. Such obligation of the Master Servicer shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer pursuant to any requirements of the Code.
Except as provided in the next sentence, the Master Servicer shall
prepare or cause to be prepared tax information returns (in a manner consistent
with the treatment of the Class A Certificates as indebtedness of the Seller)
and any other tax forms required to be distributed or filed by the Seller (with
a copy to the Trustee) or the Trustee in respect of the Class A Certificates
and shall deliver such information or forms for filing by the Seller or the
Trustee as required at least ten days prior to the date such information
returns or forms are required by law to be distributed or filed. The Master
Servicer shall prepare or cause to be prepared (in a manner consistent with the
treatment of the Class A Certificates as indebtedness of the Seller) Internal
Revenue Service Form 1099 (or any successor form) in respect of distributions
by the Trustee (or the Paying Agent) on the Class A Certificates and shall file
and distribute such forms as required by law.
Section 5.04. Rights of Certificateholders. The Class A Certificates
shall represent fractional undivided interests in the Trust, including the
right to receive the distributions at the times and in the amounts specified in
this Agreement; the Seller Certificates shall represent the remaining interest
in the Trust (other than the Spread Account, Funding Account and the Spread
Account Master Note and the Credit Enhancement Instrument).
Section 5.05. Funding Account. (a) The Trustee shall establish and
maintain with itself a separate trust account (the "Funding Account") entitled
"The First National Bank of Chicago, as Trustee, in trust for the registered
holders of Revolving Home Equity Loan Asset Backed Certificates, Series 1996-2,
Funding Account." The Funding Account shall be an Eligible Account. On each
Distribution Date during the Funding Period, the Trustee shall withdraw from
the Collection Account and deposit to the Funding Account the Scheduled
Principal Distribution Amount for such Distribution Date; provided, however, if
permitted by Section 3.02(c) hereof, such deposit may be effected by the
recordation of such amount in the Funding Master Note pursuant to such Section
3.02(c).
(b) The Master Servicer may cause the institution maintaining the
Funding Account to invest any funds in the Funding Account in Permitted
Investments (including obligations of
62
68
the Master Servicer or of any of its affiliates, if such obligations otherwise
qualify as Permitted Investments or the Funding Master Note), which shall
mature or otherwise be available not later than the Business Day next preceding
the Distribution Date or, with the approval of the Credit Enhancer and the
Rating Agencies, on the Distribution Date next following the date of such
investment (except that any investment in an obligation of the institution with
which the Funding Account and Collection Account is maintained may mature on or
before 12:00 noon, Chicago time, on such Distribution Date) and shall not be
sold or disposed of prior to its maturity. At any time when the Trustee is
maintaining the Funding Account, any request by the Master Servicer to invest
funds on deposit in the Funding Account shall be in writing, shall be delivered
to the Trustee at or before 10:30 A.M., Chicago time, if such investment is to
be made on such day, and shall certify that the requested investment is a
Permitted Investment which matures at or prior to the time required hereby.
Any such investment shall be registered in the name of the Trustee as trustee
hereunder or in the name of its nominee, and to the extent such investments are
certificated they shall be maintained in the possession of the Trustee in the
state of its Corporate Trust Office. All income and gain realized from any
such investment shall be for the benefit of the Class A Certificateholders and
shall be subject to withdrawal by the Trustee for distribution to the
Certificateholders as provided in subsection (c)(i) below. The amount of any
losses incurred in respect of the principal amount of any such investment shall
be deposited in the Funding Account by the Master Servicer out of its own funds
immediately as realized.
(c) From time to time withdrawals shall be made from the Funding
Account or debits shall be made to the Mortgage Loan Payment Record, as the
case may be, by the Trustee as follows:
(i) on each Distribution Date during the Funding Period,
to deposit to the Collection Account (A) all income realized from
Permitted Investments during the related Interest Period on Principal
Collections on deposit in the Funding Account for distribution as
Class A Interest Collections in accordance with Section 5.01(a); and
(B) the Excess Funding Amount for distribution as Principal
Collections in accordance with Section 5.01(b);
(ii) on each Distribution Date during the Funding Period
other than the last Distribution Date during the Funding Period, any
amounts in respect of Principal Collections on deposit in the Funding
Account shall be withdrawn and applied to purchase the Subsequent
Funding Mortgage Loans, if any, transferred to the Trust pursuant to
Section 2.06, provided, however, that the aggregate amount withdrawn
from the Funding Account pursuant to this Section 5.05(c)(ii) shall
not exceed _____% of the Cut-Off Date Pool Balance;
(iii) on the last Distribution Date of the Funding Period,
any amounts in respect of Principal Collections on deposit in the
Funding Account shall be withdrawn and applied in the following order:
(A) to purchase the Subsequent Funding Mortgage
Loans, if any, transferred to the Trust pursuant to Section
2.06; provided, however, that the aggregate amount withdrawn
from the Funding Account to acquire Subsequent Funding
Mortgage Loans shall not exceed _____% of the Cut-Off Date
Pool Balance;
63
69
(B) to the Seller, in payment for Additional
Balances, in a maximum amount equal to the excess, if any, of
the aggregate of principal amounts drawn down under the Loan
Agreements during the related Collection Period over Principal
Collections received during such Collection Period; and
(C) to the Collection Account, any remaining
amounts on deposit in the Funding Account in respect of
Principal Collections, for distribution to the Class A
Certificateholders pursuant to Section 5.01(b).
ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Class A Certificates and Seller
Certificates shall be substantially in the forms set forth in Exhibits A and B,
respectively, and shall, on original issue, be executed by the Trustee on
behalf of the Trust and authenticated and delivered by the Trustee to or upon
the order of the Seller concurrently with the sale and assignment to the
Trustee of the Trust. The Class A Certificates shall be initially evidenced by
one or more certificates representing the entire Original Class A Certificate
Principal Balance, and shall be held in minimum dollar denominations of
$100,000 and integral multiples of $1,000 in excess thereof. The sum of the
denominations of all outstanding Class A Certificates shall equal the Original
Class A Certificate Principal Balance. The Seller Certificates shall be
issuable as one or more certificates representing the entire interest in the
assets of the Trust other than that represented by the Class A Certificates and
shall initially be issued to the Seller.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of any officer of the Trustee duly authorized to execute
such Certificates on behalf of the Trust. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
were affixed, authorized to sign on behalf of the Trustee shall bind the
Trustee, notwithstanding that such individuals or any of them have ceased to be
so authorized prior to the authentication and delivery of such Certificates or
did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless such Certificate shall have been manually authenticated by the
Trustee substantially in the form provided for herein, and such authentication
upon any Certificate shall be conclusive evidence, and the only evidence, that
such Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication. Subject to
Section 6.02(c), the Class A Certificates shall be Book-Entry Certificates.
The Seller Certificates shall not be Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Class A
Certificates. (a) The Certificate Registrar shall cause to be kept at its
corporate trust office (which shall be the Corporate Trust Office if the
Trustee is the Certificate Registrar) a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Certificate Registrar
shall provide for the registration of Class A Certificates and of transfers and
exchanges of Class A Certificates as herein provided. The Trustee shall
initially serve as Certificate Registrar for the purpose of registering Class A
Certificates and transfers and exchanges of Class A Certificates as herein
provided.
64
70
Upon surrender for registration of transfer of any Class A Certificate
at any office or agency of the Certificate Registrar maintained for such
purpose pursuant to the foregoing paragraph, the Trustee shall execute on
behalf of the Trust and shall authenticate and deliver in the name of the
designated transferee or transferees, one or more new Class A Certificates of
the same aggregate Percentage Interest.
At the option of the Class A Certificateholders, Class A Certificates
may be exchanged for other Certificates of like Class in authorized
denominations and the same aggregate Percentage Interests, upon surrender of
the Certificates to be exchanged at any such office or agency. Whenever any
Class A Certificates are so surrendered for exchange, the Trustee shall execute
on behalf of the Trust and shall authenticate and deliver the Class A
Certificates which the Class A Certificateholder making the exchange is
entitled to receive. Every Class A Certificate presented or surrendered for
registration of transfer or exchange shall (if so required by the Trustee or
the Certificate Registrar) be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) transfers of the Class A Certificates may
not be registered by the Trustee except to another Depository; (ii) the
Depository shall maintain book-entry records with respect to the Certificate
Owners and with respect to ownership and registration of transfers of such
Class A Certificates; (iii) ownership and registration of transfers of the
Class A Certificates on the books of the Depository shall be governed by
applicable rules established by the Depository; (iv) the Depository may collect
its usual and customary fees, charges and expenses from its Depository
Participants; (v) the Trustee shall deal with the Depository as representative
of the Certificate Owners of the Class A Certificates for purposes of
exercising the rights of Holders under this Agreement, and requests and
directions for and votes of such representative shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and Persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall
be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owners. Each
Depository Participant shall only transfer ownership interests represented by
Book-Entry Certificates of Certificate Owners that it represents or of
brokerage firms for which it acts as agent in accordance with the Depository's
normal procedures.
(c) If (i) (x) the Depository or the Master Servicer advises the
Trustee in writing that the Depository is no longer willing or able to
discharge properly its responsibilities as Depository, and (y) the Trustee or
the Master Servicer is unable to locate a qualified successor, (ii) the Master
Servicer, at its sole option, elects to terminate the book-entry system through
the Depository or (iii) after the occurrence of an Event of Servicing
Termination, the Depository, at the direction of Class A Certificate Owners
representing Percentage Interests aggregating not less than 51%, advises the
Trustee in writing that the
65
71
continuation of a book-entry system through the Depository to the exclusion of
definitive, fully registered Class A Certificates (the "Definitive
Certificates") to Certificate Owners is no longer in the best interests of the
Certificate Owners, then upon surrender to the Certificate Registrar of the
Class A Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall execute on
behalf of the Trust and shall authenticate the Definitive Certificates. None
of the Seller, the Master Servicer, the Credit Enhancer or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Certificates, all references herein to obligations imposed upon
or to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates, and the Trustee, the Certificate Registrar, the Master
Servicer and the Seller shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
No service charge shall be made for any registration of transfer or
exchange of Class A Certificates, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
All Class A Certificates surrendered for registration of transfer or
exchange shall be cancelled by the Certificate Registrar.
(d) The Credit Enhancer shall be entitled to request in writing
and obtain from the Trustee a list of the names and addresses of the
Certificateholders. Unless Definitive Certificates have been issued to
Certificateholders, the Master Servicer shall furnish or cause to be furnished
to the Credit Enhancer, as promptly as is reasonably practicable, following a
request therefor from the Credit Enhancer in writing, a list, in such form as
the Credit Enhancer may reasonably require, of the names and addresses of the
Depository Participants having an interest in the Certificates through the
Depository as of the most recent Record Date and shall cause the Depository to
forward materials to Depository Participants on behalf of the Credit Enhancer,
and otherwise shall facilitate communications between the Credit Enhancer and
the Certificateholders as the Credit Enhancer may request. In the event that
Definitive Certificates shall have been issued, the Trustee and the Seller
shall provide the names and addresses of the Certificateholders as of the most
recent Record Date.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) any mutilated Certificate is surrendered to the Certificate Registrar or
the Certificate Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (ii) there is delivered to
the Trustee, the Master Servicer and the Certificate Registrar such security or
indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Trustee or the Certificate Registrar that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute on behalf of the Trust and shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like Class, tenor and Percentage Interest. Upon the
issuance of any new Certificate under this Section 6.03, the Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 6.03 shall constitute complete and indefeasible
evidence of ownership
66
72
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Master Servicer, the Seller, the
Trustee, the Certificate Registrar and any agent of the Master Servicer, the
Seller, the Trustee or the Certificate Registrar may treat the Person in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving distributions pursuant to Section 5.01 and for all other
purposes whatsoever, and none of the Master Servicer, the Seller, the Trustee,
the Certificate Registrar or any agent of any of them shall be affected by
notice to the contrary.
Section 6.05. Restrictions on Transfer of Seller Certificates. (a)
The Seller Certificates shall be assigned, transferred, exchanged, pledged,
hypothecated or otherwise conveyed (collectively, for purposes of this Section
6.05, "transferred" or a "transfer") only in accordance with this Section 6.05.
(b) No transfer of a Seller Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. The Trustee shall, and the Master Servicer
and the Credit Enhancer may, require a written Opinion of Counsel acceptable to
and in form and substance satisfactory to the Trustee and the Master Servicer
and the Credit Enhancer that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from
said Act and laws or is being made pursuant to said Act and laws, which Opinion
of Counsel shall not be an expense of the Trustee or the Master Servicer, and
the Trustee shall require the transferee to execute an investment letter
substantially in the form of Exhibit E hereto acceptable to and in form and
substance satisfactory to the Trustee and the Master Servicer certifying to the
Trustee and the Master Servicer the facts surrounding such transfer, which
investment letter shall not be an expense of the Trustee, the Seller or the
Master Servicer. The Holder of a Seller Certificate desiring to effect such
transfer shall, and does hereby agree to, indemnify the Seller, the Master
Servicer and the Trustee against any liability that may result if the transfer
is not so exempt or is not made in accordance with such federal and state laws.
(c) The Seller Certificates shall not be transferred except upon
satisfaction of the following conditions precedent: (i) the Person that
acquires a Seller Certificate shall (A) be organized and existing under the
laws of the United States of America or any state thereof or the District of
Columbia, (B) expressly assume, by an agreement supplemental hereto, executed
and delivered to the Trustee and the Credit Enhancer, the performance of every
covenant and obligation of the Seller hereunder with respect to the Mortgage
Loans evidenced by the Seller Certificates, and (C) as part of its acquisition
of a Seller Certificate, acquire all rights of the Seller or any transferee
under this Section 6.05(c) to amounts payable to the Seller or such transferee
hereunder; (ii) the Seller shall deliver to the Trustee and the Credit Enhancer
an Officer's Certificate stating that such transfer and such supplemental
agreement comply with this Section 6.05(c) and that all conditions precedent
provided by this subsection 6.05(c) have been complied with and an Opinion of
Counsel stating that all conditions precedent provided by this subsection
6.05(c) have been complied with, and the Trustee may conclusively rely on such
Officer's Certificate, shall have no duty to make inquiries with regard to the
matters set forth therein and shall incur no liability in so relying; (iii) the
Seller shall deliver to the Trustee a letter from each Rating Agency confirming
that its rating (with or
67
73
without giving effect to the Credit Enhancement Instrument) of the Class A
Certificates, after giving effect to such transfer, will not be reduced or
withdrawn; (iv) the Seller shall deliver to the Trustee and the Credit Enhancer
an Opinion of Counsel to the effect that (a) such transfer will not adversely
affect the treatment of the Class A Certificates after such transfer as debt
for federal and applicable state income tax purposes, (b) such transfer will
not have any material adverse impact on the federal income taxation of a Class
A Certificateholder or any Certificate Owner and (c) such transfer will not
cause the arrangement created by this Agreement to be treated as a taxable
mortgage pool as defined in Section 7701(i) of the Code; and (v) all filings
and other actions necessary to continue the perfection of the interest of the
Trust in the Mortgage Loans and the other property conveyed hereunder shall
have been taken or made. Notwithstanding the foregoing, the requirement set
forth in subclause (i)(A) of this Section 6.05(c) shall not apply in the event
the Trustee and the Credit Enhancer shall have received a letter from each
Rating Agency confirming that its rating of the Class A Certificates, after
giving effect to a proposed transfer to a Person that does not meet the
requirement set forth in subclause (i)(A), shall not be reduced or withdrawn.
Section 6.06. Appointment of Paying Agent. (a) The Paying Agent
shall make distributions to Class A Certificateholders from the Collection
Account pursuant to Section 5.01 and shall report the amounts of such
distributions to the Trustee. The duties of the Paying Agent may include the
obligation (i) to withdraw funds from the Collection Account pursuant to
Section 3.03 for the purpose of making the distributions referred to above and
(ii) to distribute statements and provide information to Certificateholders as
required hereunder. The Paying Agent hereunder shall at all times be a
corporation duly incorporated and validly existing under the laws of the United
States of America or any state thereof, authorized under such laws to exercise
corporate trust powers and subject to supervision or examination by federal or
state authorities. The Paying Agent shall initially be the Trustee. The
Trustee may appoint a successor to act as Paying Agent, which appointment shall
be reasonably satisfactory to the Seller and the Credit Enhancer.
(b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Class A Certificateholders in trust
for the benefit of the Class A Certificateholders entitled thereto until such
sums shall be paid to such Certificateholders and shall agree that it shall
comply with all requirements of the Code regarding the withholding of payments
in respect of federal income taxes due from Certificate Owners and otherwise
comply with the provisions of this Agreement applicable to it.
Section 6.07. Actions of Certificateholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by Certificateholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by their agents duly
appointed in writing; and except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, when required, to the Seller or the Master Servicer. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Agreement and conclusive in favor
of the Trustee, the Seller and the Master Servicer, if made in the manner
provided in this Section.
68
74
(b) The fact and date of the execution by any Certificateholder of
any such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind every Holder of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, or omitted
to be done, by the Trustee, the Seller or the Master Servicer in reliance
therein, whether or not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter
referred to in this Section 6.07 as it shall deem necessary.
ARTICLE VII
The Master Servicer and the Seller
Section 7.01. Liability of the Master Servicer and the Seller. The
Master Servicer shall be liable in accordance herewith only to the extent of
the obligations specifically imposed upon and undertaken by the Master Servicer
herein. The Seller shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Seller.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer or the Seller. Any corporation into which
the Master Servicer or Seller may be merged or consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer or the Seller shall be a party, or any corporation succeeding to the
business of the Master Servicer or the Seller, shall be the successor of the
Master Servicer or the Seller, as the case may be, hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 7.03. Limitation on Liability of the Master Servicer and
Others. None of the Master Servicer, the Seller, or any director, officer,
employee or agent of the Master Servicer or the Seller shall be under any
liability to the Trust or the Certificateholders for any action taken or for
refraining from the taking of any action by the Master Servicer or the Seller,
as applicable, in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Master
Servicer, the Seller or any such person against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder, and that this provision shall not be
construed to entitle the Master Servicer to indemnity in the event that amounts
advanced by the Master Servicer to retire any senior Lien exceed Net
Liquidation Proceeds realized with respect to the related Mortgage Loan. The
Master Servicer, the Seller and any director, officer, employee or agent of the
Master Servicer or the Seller may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Master Servicer, the Seller and any director,
officer, employee or agent of the Master Servicer or the Seller shall be
indemnified by the Trust and
69
75
held harmless against any loss, liability or expense incurred in connection
with any legal action relating to this Agreement or the Certificates, other
than any loss, liability or expense related to any specific Mortgage Loan or
Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Neither the Master Servicer nor
the Seller shall be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective duties under this
Agreement, and which in its opinion may involve it in any expense or liability;
provided, however, that the Master Servicer or the Seller may, in its sole
discretion, undertake any such action which it may deem necessary or desirable
in respect of this Agreement and the rights and duties of the parties hereto
and the interests of the Certificateholders hereunder. In such event, the
reasonable legal expenses and costs of such action and any liability resulting
therefrom and any claims by the Master Servicer or the Seller hereunder for
indemnification shall be expenses, costs and liabilities of the Trust, and the
Master Servicer or the Seller, as the case may be, shall be entitled to be
reimbursed therefor and indemnified pursuant to the terms hereof from amounts
deposited in the Collection Account as provided by Section 3.03; provided that
any indemnification pursuant to this Section 7.03 shall be payable only out of
Class A Interest Collections available after the application thereof pursuant
to all clauses of Section 5.01(a) other than clause (x) thereof and shall not
otherwise constitute a claim against the Trust. The Master Servicer's right to
indemnity or reimbursement pursuant to this Section 7.03 shall survive any
resignation or termination of the Master Servicer pursuant to Section 7.04 or
8.01 with respect to any losses, expenses, costs or liabilities arising prior
to such resignation or termination (or arising from events that occurred prior
to such resignation or termination). The Master Servicer shall have no claim
(whether by subrogation or otherwise) or other action against any
Certificateholder or the Credit Enhancer for any amounts paid by the Master
Servicer pursuant to any provision of this Agreement.
Section 7.04. Master Servicer Not to Resign. Subject to the
provisions of Section 7.02, the Master Servicer shall not resign from the
obligations and duties hereby imposed on it except (i) upon determination that
the performance of its obligations or duties hereunder are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it or its subsidiaries
or Affiliates, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer or its
subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Master Servicer has proposed
a successor servicer to the Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Trustee; (b) each Rating Agency shall
have delivered a letter to the Trustee stating that the appointment of such
proposed successor servicer as Master Servicer hereunder will not result in the
reduction or withdrawal of the then-current rating of the Class A Certificates;
(c) such proposed successor servicer is reasonably acceptable to the Credit
Enhancer, as evidenced by a letter to the Trustee; and (d) such proposed
successor servicer has agreed in writing to assume the obligations of Master
Servicer hereunder and under the Insurance Agreement and the Master Servicer
has delivered to the Trustee and the Credit Enhancer an Opinion of Counsel to
the effect that all conditions precedent to the resignation of the Master
Servicer and the appointment of and acceptance by the proposed successor
servicer have been satisfied; provided, however, that in the case of clause (i)
above no such resignation by the Master Servicer shall become effective until
the Trustee shall have assumed the Master Servicer's responsibilities and
obligations hereunder or the Trustee shall have
70
76
designated a successor servicer in accordance with Section 8.02. Any such
resignation shall not relieve the Master Servicer of responsibility for any of
the obligations specified in Sections 8.01 and 8.02 as obligations that survive
the resignation or termination of the Master Servicer. Any such determination
permitting the resignation of the Master Servicer pursuant to clause (i) above
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Trustee and the Credit Enhancer.
Section 7.05. Delegation of Duties. In the ordinary course of
business, the Master Servicer at any time may delegate any of its duties
hereunder to any Person, including any of its Affiliates, who agrees to conduct
such duties in accordance with standards comparable to those with which the
Master Servicer complies pursuant to Section 3.01. Such delegation shall not
relieve the Master Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the
meaning of Section 7.04. The Master Servicer shall provide each Rating Agency,
the Credit Enhancer and the Trustee with written notice prior to the delegation
of any of its duties to any Person other than any of the Master Servicer's
Affiliates or their respective successors and assigns.
ARTICLE VIII
Events of Servicing Termination
Section 8.01. Events of Servicing Termination. If any one of the
following events ("Events of Servicing Termination") shall occur and be
continuing:
(i) Any failure by the Master Servicer to deposit in the
Collection Account or Funding Account, as applicable, any deposit
required to be made under the terms of this Agreement which continues
unremedied for a period of five Business Days after the date upon
which written notice of such failure shall have been given to the
Master Servicer by the Trustee or the Credit Enhancer or to the Master
Servicer and the Trustee by Holders of Class A Certificates evidencing
not less than 51% of the aggregate Percentage Interests of the Class A
Certificates; or
(ii) Any failure on the part of the Master Servicer duly
to observe or perform in any material respect any other covenants or
agreements of the Master Servicer set forth in the Certificates or in
this Agreement, which failure (A) materially and adversely affects the
interests of Certificateholders or the Credit Enhancer and (B)
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Trustee or the
Credit Enhancer or to the Master Servicer and the Trustee by the
Holders of Class A Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Class A Certificates; or
(iii) The entry against the Master Servicer of a decree or
order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding up
or liquidation of its affairs, and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days;
or
71
77
(iv) The consent by the Master Servicer to the appointment
of a trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Master Servicer or of or relating to substantially all of its
property; or the Master 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;
then, (a) in the case of a Trigger Event under Section 6.01(a)(iv) of the
Insurance Agreement, the Credit Enhancer (so long as no Credit Enhancer Default
shall have occurred) or (b) in the case of the events described in clauses (i),
(ii), (iii) or (iv) so long as an Event of Servicing Termination shall not have
been remedied by the Master Servicer, either the Trustee, the Credit Enhancer
so long as no Credit Enhancer Default shall have occurred and be continuing or,
with the consent of the Credit Enhancer so long as no Credit Enhancer Default
shall have occurred and be continuing, the Holders of Class A Certificates
evidencing not less than 51% of the aggregate Percentage Interests of the Class
A Certificates, by notice then given in writing to the Master Servicer (and to
the Trustee if given by the Credit Enhancer or Class A Certificateholders) may
terminate all of the rights and obligations of the Master Servicer as servicer
under this Agreement; provided, however, that the responsibilities and duties
of the initial Master Servicer with respect to the purchase of Mortgage Loans
pursuant to Section 3.01 shall not terminate. Any such notice to the Master
Servicer shall also be given to each Rating Agency and the Credit Enhancer. On
or after the receipt by the Master Servicer of such written notice, all
authority and power of, and all benefits accruing to, the Master Servicer under
this Agreement, whether with respect to the Certificates or the Mortgage Loans
or otherwise, shall pass to and be vested in the Trustee or, if a successor
Master Servicer has been appointed under Section 8.02, such successor Master
Servicer pursuant to and under this Section 8.01; and, without limitation, the
Trustee is hereby authorized and empowered to execute and deliver, on behalf of
the Master Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of each Mortgage Loan and
related documents, or otherwise. The Master Servicer agrees to cooperate with
the Trustee in effecting the termination of the responsibilities and rights of
the Master Servicer hereunder, including, without limitation, the transfer to
the Trustee for the administration by it of all cash amounts that shall at the
time be held by the terminated Master Servicer and to be deposited by it in the
Collection Account, or that have been deposited by the terminated Master
Servicer in the Collection Account or thereafter received by the terminated
Master Servicer with respect to the Mortgage Loans.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.01(i) for a period of five Business Days or under Section
8.01(ii) for a period of 60 days, shall not constitute an Event of
Servicing Termination if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Master Servicer and such delay or
failure was caused by an act of God, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence
shall not relieve the Master Servicer from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of this
Agreement, and the Master Servicer shall provide the Trustee, the Seller, the
72
78
Credit Enhancer and the Class A Certificateholders with an Officers'
Certificate giving prompt notice of such failure or delay by it, together with
a description of its efforts to so perform its obligations. The Master
Servicer shall immediately notify the Trustee and the Credit Enhancer in
writing of any Events of Servicing Termination.
Section 8.02. Trustee to Act; Appointment of Successor. (a) On and
after the time the Master Servicer receives a notice of termination pursuant to
Section 8.01 or 7.04, the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer by the terms and provisions hereof; provided, however, that the
responsibilities and duties of HFC as Master Servicer with respect to the
purchase of the Mortgage Loans pursuant to Section 3.01 shall not terminate.
As compensation therefor, the Trustee shall be entitled to such compensation as
the Master Servicer would have been entitled to hereunder if no such notice of
termination had been given. Notwithstanding the above, (i) if the Trustee is
unwilling to act as successor Master Servicer, or (ii) if the Trustee is
legally unable so to act, the Trustee may (in the situation described in clause
(i)) or shall (in the situation described in clause (ii)) appoint, or petition
a court of competent jurisdiction to appoint, any housing and home finance
institution or other mortgage loan or home equity loan servicer having all
licenses and permits required in order to perform its obligations hereunder and
a net worth of not less than $50,000,000 as the successor to the Master
Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder;
provided that any such successor Master Servicer shall be acceptable to the
Credit Enhancer, as evidenced by the Credit Enhancer's prior written consent,
which consent shall not be unreasonably withheld; and provided, further, that
the appointment of any such successor Master Servicer will not result in the
qualification, reduction or withdrawal of the then-current ratings assigned to
the Class A Certificates by the Rating Agencies, as evidenced by a writing to
such effect delivered to the Trustee. Pending appointment of a successor to
the Master Servicer hereunder, unless the Trustee is prohibited by law from so
acting, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the successor shall be
entitled to receive compensation out of payments on Mortgage Loans in an amount
equal to the compensation which the Master Servicer would otherwise have
received pursuant to Section 3.08 (or such lesser compensation as the Trustee
and such successor shall agree). The Trustee and such successor shall take
such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
(b) Any successor, including the Trustee, to the Master Servicer
as master servicer shall during the term of its service as master servicer (i)
continue to service and administer the Mortgage Loans for the benefit of
Certificateholders and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees
and agents to the same extent as the Master Servicer is so required pursuant to
Section 3.13. The appointment of a successor Master Servicer shall not affect
any liability of the predecessor Master Servicer which may have arisen under
this Agreement prior to its termination as Master Servicer (including, without
limitation, any deductible under an insurance policy pursuant to Section 3.04),
nor shall any successor Master Servicer be liable for any acts or omissions of
the predecessor Master Servicer or for any breach by such Master Servicer or
the Seller of any
73
79
of their representations or warranties contained herein or in any related
document or agreement.
Section 8.03. Notification to Certificateholders. Upon any
termination or appointment of a successor to the Master Servicer pursuant to
this Article VIII, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate
Register, the Credit Enhancer and each Rating Agency.
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the
occurrence of an Event of Servicing Termination and after the curing of all
Events of Servicing Termination which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Servicing Termination of which a Responsible Officer
of the Trustee shall have actual knowledge has occurred (which has not been
cured), the Trustee shall exercise such rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Servicing
Termination of which a Responsible Officer of the Trustee shall have
actual knowledge, and after the curing of all such Events of Servicing
Termination which may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions of this
Agreement, the Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of bad faith on the
part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee
and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer of the
Trustee, unless it shall be proved that the Trustee was negligent in
performing its duties in accordance with the terms of this Agreement;
74
80
(iii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the consent or direction of the Credit
Enhancer or in accordance with the direction of the Holders of Class A
Certificates evidencing not less than 51% of the aggregate Percentage
Interests of the Class A Certificates relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of
any failure by the Master Servicer to comply with the obligations of
the Master Servicer referred to in clauses (i) and (ii) of Section
8.01 unless a Responsible Officer of the Trustee obtains actual
knowledge of such failure or the Trustee receives written notice of
such failure from the Master Servicer, the Credit Enhancer or the
Holders of Class A Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Class A Certificates.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Master Servicer under this Agreement, except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Master Servicer in accordance
with the terms of this Agreement. The Trustee shall provide prior written
notice to the Credit Enhancer of any decision it proposes to make pursuant to
this paragraph.
Section 9.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be
protected in acting or refraining from acting upon, any resolution,
Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) the Trustee may consult with counsel and any written
advice or opinion of counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted
by it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligations, upon
75
81
the occurrence of an Event of Servicing Termination of which a
Responsible Officer of the Trustee has actual knowledge (which has not
been cured), to exercise such of the rights and powers vested in it by
this Agreement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs;
(iv) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(v) prior to the occurrence of an Event of Servicing
Termination of which a Responsible Officer of the Trustee has actual
knowledge and after the curing of all Events of Servicing Termination
which may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or documents, unless
requested in writing to do so by Holders of Class A Certificates
evidencing not less than 51% of the aggregate Percentage Interests of
the Class A Certificates; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against
such cost, expense or liability as a condition to such proceeding.
The reasonable expense of every such examination shall be paid by the
Master Servicer or, if paid by the Trustee, shall be reimbursed by the
Master Servicer upon demand. Nothing in this clause (v) shall
derogate from the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the
Mortgagors; and
(vi) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian (except that the Trustee
shall not be responsible for selecting the Master Servicer as
custodian and bailee).
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Master Servicer, and the Trustee assumes no responsibility
for the correctness of the same. The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of the Certificates (other
than the signature and authentication of the Trustee on the Certificates) or of
any Mortgage Loan or related document. The Trustee shall not be accountable
for the use or application by the Master Servicer of any of the Certificates or
of the proceeds of such Certificates, or for the use or application of any
funds paid to the Seller or the Master Servicer in respect of the Mortgage
Loans or deposited in or withdrawn from the Collection Account by the Master
Servicer. The Trustee shall at no time have any responsibility or liability
for or with respect to the legality, validity and enforceability of any
Mortgage or any Mortgage Loan, or the perfection and priority of any Mortgage
or the maintenance of any such perfection and priority, or for or with respect
to the sufficiency of the Trust or its ability to generate the payments to be
distributed to Certificateholders under this Agreement, including, without
limitation: the existence, condition and ownership of any Mortgaged Property;
the existence and enforceability of any
76
82
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Master Servicer pursuant to Section 8.02); the existence and contents of
any Mortgage Loan on any computer or other record thereof (other than if the
Trustee shall assume the duties of the Master Servicer pursuant to Section
8.02); the validity of the assignment of any Mortgage Loan to the Trust or of
any intervening assignment; the completeness of any Mortgage Loan; the
performance or enforcement of any Mortgage Loan (other than if the Trustee
shall assume the duties of the Master Servicer pursuant to Section 8.02); the
compliance by the Seller or the Master Servicer with any warranty or
representation made under this Agreement or in any related document or the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any non-compliance therewith or any breach
thereof; any investment of monies by or at the direction of the Master Servicer
or the Credit Enhancer or any loss resulting therefrom, it being understood
that the Trustee shall remain responsible for any Trust property that it may
hold in its individual capacity; the acts or omissions of the Seller, the
Master Servicer (other than if the Trustee shall assume the duties of the
Master Servicer pursuant to Section 8.02), any Subservicer (other than if the
Trustee shall assume the duties of the Master Servicer pursuant to Section 8.02
and shall engage such Subservicer as its subservicer) or any Mortgagor; any
action of the Master Servicer (other than if the Trustee shall assume the
duties of the Master Servicer pursuant to Section 8.02), or any Subservicer
(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02 and shall engage such Subservicer as its subservicer)
taken in the name of the Trustee; or any action by the Trustee taken at the
instruction of the Master Servicer in accordance with the terms of this
Agreement (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02) or the Credit Enhancer; provided, however,
that the foregoing shall not relieve the Trustee of its obligation to perform
its duties under this Agreement. The Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or to otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder (unless the Trustee shall have become the
successor Master Servicer) or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of
Certificates with the same rights as it would have if it were not Trustee.
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses.
The Master Servicer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution
of the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and the Master Servicer will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as
may arise from its negligence or bad faith. In addition, the Master Servicer
and the Seller, jointly and severally, covenant and agree to indemnify the
Trustee from, and hold it harmless against, any and all losses, liabilities,
damages, claims or expenses other than those resulting from the Trustee's
willful malfeasance, bad faith or gross negligence or by reason of the
Trustee's reckless disregard of its obligations and duties hereunder.
77
83
Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 9.06, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. The principal office of the Trustee
(other than the initial Trustee) shall be in a state with respect to which an
Opinion of Counsel has been delivered to such Trustee at the time such Trustee
is appointed Trustee to the effect that the Trust will not be a taxable entity
under the laws of such state. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 9.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Seller, the Master Servicer, the Credit Enhancer
and each Rating Agency. Upon receiving such notice of resignation, the Seller
shall promptly appoint a successor Trustee (approved in writing by the Credit
Enhancer, so long as such approval is not unreasonably withheld) by written
instrument, in duplicate, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor Trustee; provided, however,
that any such successor Trustee shall be subject to the prior written approval
of the Master Servicer. If no successor Trustee shall have been so appointed
and have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Seller or the Credit Enhancer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Seller or the Credit Enhancer may remove the Trustee. If
the Seller or the Credit Enhancer removes the Trustee under the authority of
the immediately preceding sentence, the Seller shall promptly appoint a
successor Trustee (approved in writing by the Credit Enhancer and the Master
Servicer Credit Facility Issuer, if any, so long as such approval is not
unreasonably withheld) by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.07 shall
not become effective until acceptance of appointment by the successor Trustee
as provided in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Seller
and to its predecessor Trustee and the Credit Enhancer an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and
78
84
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Trustee. The
Seller, the Master Servicer and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Trustee all
such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.06 and shall have a credit rating
of A-3 by ▇▇▇▇▇'▇ or be otherwise acceptable to ▇▇▇▇▇'▇.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.08, the Master Servicer shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
Section 9.09. Merger or Consolidation of Trustee. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
eligible under the provisions of Section 9.06, 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.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the Seller
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
and the Credit Enhancer to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust, or any part
thereof, and, subject to the other provisions of this Section 9.10, such
powers, duties, obligations, rights and trusts as the Master Servicer and the
Trustee may consider necessary or desirable. Any such co-trustee or separate
trustee shall be subject to the written approval of the Master Servicer. If
the Master Servicer shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, or in the case an Event of
Servicing Termination shall have occurred and be continuing, the Trustee alone
shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor Trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.08.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
79
85
(i) all rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable
by reason of any act or omission of any other trustee hereunder; and
(iii) the Master Servicer and the Trustee acting jointly
may at any time accept the resignation of or remove any separate
trustee or co-trustee, except that following the occurrence of an
Event of Servicing Termination which has not been cured, the Trustee
acting alone may accept the resignation of or remove any separate
trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then-separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Seller and the Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the appointment of a
new or successor Trustee.
Section 9.11. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto. Any such proceeding instituted by the Trustee
shall be brought in its own name or in its capacity as Trustee. Any recovery
of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the benefit of the Certificateholders.
80
86
Section 9.12. Inspection of Mortgage Files. Following the time that
the Mortgage Files have been delivered to the Trustee upon reasonable prior
notice and during regular business hours, the Trustee shall permit
representatives of applicable state regulatory bodies or the Credit Enhancer to
inspect the Mortgage Files on the Trustee's premises or shall provide such
documents at such places required by State regulations, including the offices
of the Subservicers. Any loss incurred by the Trustee in fulfilling such
obligations shall be paid by the Master Servicer.
ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
responsibilities of the Master Servicer, the Seller and the Trustee created
hereby (other than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date, the obligations of the
Seller and the Master Servicer under Section 9.05 and the obligation of the
Master Servicer to send certain notices as hereinafter set forth) shall
terminate upon the last action required to be taken by the Trustee on the final
Distribution Date pursuant to this Article X following the earlier of (i) the
retransfer, under the conditions specified in Section 10.01(b), to the Seller of
the Class A Certificateholders' interest in each Mortgage Loan and all property
acquired in respect of any Mortgage Loan remaining in the Trust for an amount
equal to the Retransfer Price, (ii) the day following the Distribution Date on
which the distribution made to Class A Certificateholders has reduced the Class
A Certificate Principal Balance to zero and after which there is no unreimbursed
Class A Loss Reduction Amount, or any amount owing to the Credit Enhancer under
the Insurance Agreement, (iii) the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust (including without limitation the
disposition of the Mortgage Loans pursuant to Section 11.02) or the disposition
of all property acquired upon foreclosure or grant of deed in lieu of
foreclosure of any Mortgage Loan or (iv) the Distribution Date in February 2018;
provided that in no event shall the Trust created hereby continue beyond the
expiration of 21 years from the death of the last survivor of the descendants of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late Ambassador of the United States to the Court of St.
▇▇▇▇▇, living on the date hereof. Upon termination in accordance with clause
(i), (ii) or (iv) of this Section 10.01, the Trustee shall execute such
documents and instruments of transfer, in each case without recourse,
representation or warranty, presented by the Seller and take such other actions
as the Seller may reasonably request to effect the retransfer of the Mortgage
Loans to the Seller.
(b) The Seller shall have the right to exercise the option to
effect the retransfer to the Seller of each Mortgage Loan pursuant to Section
10.01(a) above on any Distribution Date on or after the Distribution Date
immediately prior to which the Class A Certificate Principal Balance is less
than or equal to ten percent (10%) of the Original Class A Certificate
Principal Balance and all amounts due and owing to the Credit Enhancer for
unpaid premiums and unreimbursed draws on the Credit Enhancement Instrument,
together with interest thereon as provided under the Insurance Agreement, have
been paid. The Seller shall give the Master Servicer written notification of
its election to exercise such option no later than five Business Days prior to
the first date on which the Trustee is required to notify the Class A
Certificateholders pursuant to paragraph (c) below.
81
87
(c) Notice of any termination, specifying the Distribution Date
(which shall be a date that would otherwise be a Distribution Date) upon which
the Class A Certificateholders may surrender their Class A Certificates to the
Trustee for payment of the final distribution and cancellation, shall be given
promptly by the Trustee (upon receipt of written directions from the Master
Servicer, if the Seller is exercising its right to retransfer the Mortgage
Loans) by letter to Class A Certificateholders and the Credit Enhancer mailed
not earlier than the 15th day and not later than the 25th day of the month next
preceding the month of such final distribution specifying (i) the Distribution
Date upon which final distribution of the Class A Certificates will be made
upon presentation and surrender of Class A Certificates at the office or agency
of the Trustee therein designated, (ii) the amount of any such final
distribution and (iii) that the Record Date otherwise applicable to such
Distribution Date is not applicable, distributions being made only upon
presentation and surrender of the Class A Certificates at the office or agency
of the Trustee therein specified. In the event written directions are
delivered by the Master Servicer to the Trustee as described in the preceding
sentence, the Seller shall deposit in the Collection Account on or before the
Distribution Date for such final distribution in immediately available funds an
amount which, when added to the funds on deposit in the Collection Account that
are payable to the Class A Certificateholders, will be equal to the Retransfer
Price.
(d) Upon presentation and surrender of the Class A Certificates,
the Trustee shall cause to be distributed to the holders of Class A
Certificates on the Distribution Date for such final distribution, in
proportion to the Percentage Interests of their respective Class A
Certificates, an amount equal to (i) if such final distribution is not being
made pursuant to a retransfer to the Seller pursuant to Section 10.01(a)(i),
the amounts referred to in Sections 5.01(a)(iii), (iv), (v) and 5.01(b) for
such Distribution Date and (ii) if such final distribution is being made
pursuant to such retransfer, the amount specified in Section 10.01(a)(i). The
distribution on such final Distribution Date pursuant to a retransfer pursuant
to Section 10.01(a)(i) shall be in lieu of the distribution otherwise required
to be made on such Distribution Date in respect of the Certificates. On the
final Distribution Date, prior to making the distributions called for above,
the Trustee will, pursuant to written instructions from the Master Servicer,
withdraw from the Collection Account and remit to the Credit Enhancer the
lesser of (x) the amount available for distribution on such final Distribution
Date, net of any portion thereof necessary to pay the amounts described in
clauses (d)(i) and (ii) above and (y) the unpaid amounts due and owing to the
Credit Enhancer for unpaid premiums and unreimbursed draws on the Credit
Enhancement Instrument, together with interest thereon as provided under the
Insurance Agreement.
(e) In the event that all of the Class A Certificateholders shall
not surrender their Class A Certificates for final payment and cancellation on
or before such final Distribution Date, the Trustee shall on such date cause
all funds in the Collection Account not distributed in final distribution to
Class A Certificateholders to be withdrawn therefrom and credited to the
remaining Class A Certificateholders by depositing such funds in a separate
escrow account for the benefit of such Class A Certificateholders and the
Seller (if the Seller has exercised its right to retransfer the Mortgage Loans)
or the Trustee (in any other case) and the Trustee shall give a second written
notice to the remaining Class A Certificateholders to surrender their Class A
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Class A
Certificates shall not have been surrendered for cancellation, any funds
deposited in such escrow account and remaining unclaimed shall be paid by the
Trustee to the Master Servicer and thereafter Class
82
88
A Certificateholders shall look only to the Master Servicer with respect to any
claims in respect of such funds.
ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events. If any one of the
following events shall occur:
(a) failure on the part of the Seller (i) to make any payment or
deposit required by the terms of this Agreement, on or before the date
occurring five Business Days after the date such payment or deposit is required
to be made hereunder, or (ii) to deliver possession of files and record
assignments when required or (iii) duly to observe or perform in any material
respect any other covenants or agreements of the Seller set forth in this
Agreement, which failure, in each case, materially and adversely affects the
interests of the Certificateholders and which, in the case of clause (iii),
continues unremedied and continues to affect materially and adversely the
interests of the Certificateholders or the Credit Enhancer for a period of 60
days after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Credit Enhancer or the Seller by
the Trustee or the Credit Enhancer, or to the Seller and the Trustee by the
Holders of Class A Certificates evidencing not less than 51% of the aggregate
Percentage Interests of the Class A Certificates;
(b) any representation or warranty made by the Seller in this
Agreement shall prove to have been incorrect in any material respect when made,
as a result of which the interests of the Class A Certificateholders or the
Credit Enhancer are materially and adversely affected, and which continues to
be incorrect in any material respect and continues to affect materially and
adversely the interests of the Certificateholders or the Credit Enhancer for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Seller by the
Trustee or the Credit Enhancer, or to the Seller and the Trustee and the Credit
Enhancer by the Holders of Class A Certificates evidencing not less than 51% of
the aggregate Percentage Interests of the Class A Certificates; provided,
however, that a Rapid Amortization Event pursuant to this subparagraph (b)
shall not be deemed to have occurred hereunder if the Seller has accepted
retransfer of the related Mortgage Loan or Mortgage Loans during such period
(or such longer period (not to exceed an additional 60 days) as the Trustee and
the Credit Enhancer may specify) in accordance with the provisions hereof;
(c) the Seller shall voluntarily or inadvertently go into
liquidation, consent to the appointment of a conservator or receiver or
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Seller or of or relating to all or substantially all of its property, or a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver,
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Seller and such decree or order shall have remained in force undischarged or
unstayed for a period of 30 days; or the Seller shall admit in writing its
inability to pay its debts generally as they become due,
83
89
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;
(d) the Trust shall become subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended;
(e) any Event of Servicing Termination shall occur;
(f) the aggregate of Credit Enhancement Draw Amounts exceeds
_____% of the sum of (i) the Cut-Off Date Pool Balance; and (ii) the amount by
which the Pool Balance as of any date that Subsequent Funding Mortgage Loans
are transferred to the Trust exceeds the Cut-Off Date Pool Balance;
(g) the occurrence of an Insolvency Event (as defined in Section
11.02 hereof) with respect to any Subservicer;
then, in the case of any event described in subparagraph (a), (b) or (e) after
the applicable grace period, if any, set forth in such subparagraphs, either the
Trustee, the Credit Enhancer so long as no Credit Enhancer Default has occurred
and is continuing or, with the consent of the Credit Enhancer so long as no
Credit Enhancer Default has occurred and is continuing, the Holders of Class A
Certificates evidencing not less than 51% of the aggregate Percentage Interests
of the Class A Certificates, by notice given in writing to the Seller and the
Master Servicer (and to the Trustee if given by the Credit Enhancer or the Class
A Certificateholders) may declare that a rapid amortization event (a "Rapid
Amortization Event") has occurred as of the date of such notice, and in the case
of any event described in subparagraphs (c), (d), (f) or (g), a Rapid
Amortization Event shall occur without any notice or other action on the part of
the Trustee, the Class A Certificateholders or the Credit Enhancer immediately
upon the occurrence of such event. The Seller and the Master Servicer shall
give prompt notice of the occurrence of a Rapid Amortization Event to the
Trustee and the Credit Enhancer.
Section 11.02. Additional Rights Upon the Occurrence of Certain
Events. (a) If the Seller voluntarily goes into liquidation or consents to
the appointment of a conservator or receiver or liquidator or similar person in
any insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Seller or of or relating to all or
substantially all its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment
of a conservator or receiver or liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Seller and such decree shall have remained in force
undischarged or unstayed for a period of 30 days; or the Seller 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 (such voluntary liquidation, appointment,
entering of such decree, admission, filing, making, suspension or violation, an
"Insolvency Event" and as used in Section 11.01(g) above such Events shall
relate to any Subservicer and not to the Seller), the Seller shall, on the day
of such appointment, voluntary liquidation, entering of such decree, admission,
filing, making, suspension or inability, as the case may be (the "Appointment
Day"), promptly give notice to the Trustee and the Credit Enhancer of such
Insolvency Event. Within 15 days of the receipt by the Trustee and the Credit
Enhancer
84
90
of the Seller's notice of an Insolvency Event, the Trustee shall (i) publish a
notice in Authorized Newspapers that an Insolvency Event has occurred and that
the Trustee intends to direct the Master Servicer to sell, dispose of or
otherwise liquidate the Mortgage Loans in a commercially reasonable manner and
(ii) send written notice to the Class A Certificateholders describing the
provisions of this Section 11.02 and requesting instructions from such Holders,
which notice shall request each Class A Certificateholder to advise the Trustee
in writing that it elects one of the following options: (A) the Class A
Certificateholder wishes the Trustee to instruct the Master Servicer not to
sell, dispose of or otherwise liquidate the Mortgage Loans, or (B) the Class A
Certificateholder wishes the Trustee to instruct the Master Servicer to sell,
dispose of or otherwise liquidate the Mortgage Loans, or (C) the Class A
Certificateholder refuses to advise the Trustee as to whether or not the
Trustee shall instruct the Master Servicer to sell, dispose of or otherwise
liquidate the Mortgage Loans. If after 90 days from the day notice pursuant to
clause (i) above is first published (the "Publication Date"), the Trustee shall
not have received written instructions of the Credit Enhancer or of Holders of
Class A Certificates evidencing not less than 51% of the aggregate Percentage
Interests of the Class A Certificates to the effect that the Trustee shall not
instruct the Master Servicer to sell, dispose of, or otherwise liquidate the
Mortgage Loans, or otherwise be prohibited by applicable law from any such
action, the Trustee shall instruct the Master Servicer to proceed to sell,
dispose of, or otherwise liquidate the Mortgage Loans in a commercially
reasonable manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids, and shall proceed to consummate the sale,
liquidation or disposition of the Mortgage Loans as provided above with the
highest bidder for the Mortgage Loans; provided, however, that (i) such sale,
disposition or other liquidation shall not be made without the prior written
consent of the Credit Enhancer so long as no Credit Enhancer Default shall have
occurred and be continuing, and (ii) if a net loss would be realized as a
result of the sale, liquidation or disposition of the Mortgage Loans, the
consent of all Class A Certificateholders must be obtained prior to any such
sale, liquidation or disposition. The Seller shall be permitted to bid for the
Mortgage Loans. The Trustee may obtain a prior determination from such
conservator or receiver that the terms and manner of any proposed sale,
disposition or liquidation are commercially reasonable. The provisions of
Sections 11.01 and 11.02 shall not be deemed to be mutually exclusive.
Notwithstanding the foregoing, neither the Master Servicer nor the Trustee
shall be required to proceed with such sale if any such action would violate
any stay or injunction imposed by any bankruptcy law or bankruptcy court.
(b) The proceeds from the sale, disposition or liquidation of the
Mortgage Loans pursuant to Section 11.02(a) above shall be treated as
collections on the Mortgage Loans received during the Rapid Amortization
Period; provided that the amount of such proceeds which are allocable to Class
A Interest Collections shall be deemed to be the sum of (x) all accrued and
unpaid interest on the Class A Certificates through the Interest Period
immediately preceding the Distribution Date on which such proceeds are
distributed to the Class A Certificateholders and (y) any unreimbursed Class A
Loss Reduction Amounts, and that the remaining amount of such proceeds which
are allocable to the Class A Certificateholders shall be deemed to be a
distribution in respect of principal on the Class A Certificates. On the day
following the Distribution Date on which such proceeds are distributed to the
Class A Certificateholders, the Trust shall terminate.
85
91
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment. This Agreement may be amended from time to
time by the Master Servicer, the Seller and the Trustee, in each case without
the consent of any of the Certificateholders, but only with the consent of the
Credit Enhancer and any Master Servicer Credit Facility Issuer, if any (which
consent shall not be unreasonably withheld), (i) to cure any ambiguity, (ii) to
correct any defective provisions or to correct or supplement any provisions
herein that may be inconsistent with any other provisions herein, (iii) to add
to the duties of the Seller or the Master Servicer, (iv) to add any other
provisions with respect to matters or questions arising under this Agreement or
the Credit Enhancement Instrument, as the case may be, which shall not be
inconsistent with this Agreement, (v) to add or amend any provisions of this
Agreement as required by any Rating Agency or any other nationally recognized
statistical rating agency in order to maintain or improve any rating of the
Class A Certificates (it being understood that, after obtaining the ratings in
effect on the Closing Date, neither the Trustee, the Seller nor the Master
Servicer is obligated to obtain, maintain or improve any such rating); (vi)
modify or eliminate provisions of this Agreement relating to the Credit
Enhancement Instrument or the Spread Account provided, however, that the
amendment shall not materially and adversely affect the interests of any Class A
Certificateholder, the Credit Enhancer or any Master Servicer Credit Facility
Issuer; provided, further, that any amendment shall not be deemed to adversely
affect in any material respect the interests of the Certificateholders if the
person requesting such amendment obtains a letter from each Rating Agency
stating that the amendment would not result in the downgrading or withdrawal of
the respective ratings then assigned to the Class A Certificates.
This Agreement also may be amended from time to time by the Master
Servicer, the Seller and the Trustee, and the Master Servicer, the Credit
Enhancer and any Master Servicer Credit Facility Issuer, may from time to time
consent to the amendment of the Credit Enhancement Instrument or the Master
Servicer Credit Facility, as the case may be, with the consent of the Holders
of the Class A Certificates evidencing not less than 51% of the aggregate
Percentage Interests of the Class A Certificates, and in the case of an
amendment to this Agreement, with the consent of the Credit Enhancer and the
Master Servicer Credit Facility Issuer, if any, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
Mortgage Loans or distributions or payments under the Credit Enhancement
Instrument which are required to be made on any Certificate without the consent
of the Holder of such Certificate or (ii) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the Holders
of all Class A Certificates then outstanding or (iii) adversely affect in any
material respect the interests of the Credit Enhancer or any Master Servicer
Credit Facility Issuer without the consent of such Credit Enhancer or Master
Servicer Credit Facility Issuer, as applicable, or (iv) result in a downgrading
of the ratings of the Class A Certificates without the consent of the Holders
of all Class A Certificates then outstanding and the Credit Enhancer.
Following the execution and delivery of any such amendment hereto or
to the Credit Enhancement Instrument or the Master Servicer Credit Facility, if
any, to which the Credit Enhancer or the Master Servicer Credit Facility Issuer
was required to consent, the Master Servicer shall reimburse the Credit
Enhancer and any Master Servicer Credit Facility Issuer for
86
92
the reasonable out-of-pocket costs and expenses incurred by each of them in
connection with such amendment.
Prior to the execution of any such amendment, the Master Servicer
shall furnish written notification of the substance of such amendment to each
Rating Agency. In addition, promptly after the execution of any such amendment
made with the consent of the Class A Certificateholders, the Trustee shall
furnish written notification of the substance of such amendment to each Class A
Certificateholder and fully executed original counterparts of the instruments
effecting such amendment to the Credit Enhancer and any Master Servicer Credit
Facility Issuer.
It shall not be necessary for the consent of Class A
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement.
Section 12.02. Recordation of Agreement. This Agreement is subject
to recordation in all appropriate public offices for real property records in
all the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Master
Servicer and at its expense on direction by the Trustee (which shall not have
any duty to determine whether such recordation should be made), but only upon
direction of the Trustee or the Master Servicer accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
in Sections 8.01, 9.01, 9.02, 11.01 and 12.01) or in any manner otherwise
control the operation and management of the Trust, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Certificateholders
from time to time as partners or members of an association; nor shall any
87
93
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Class A Certificates evidencing not less than 51% of the
aggregate Percentage Interests of the Class A Certificates shall have made
written request upon the Trustee to institute such action, suit or proceeding
in its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner herein provided and for the equal, ratable and
common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 12.03, each and every Certificateholder and
the Trustee shall be entitled to such relief as can be given either at law or
in equity.
Section 12.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 12.05. Notices. All demands, notices (whether or not any
notice is referred to herein as a notice, a written notice or a notice in
writing) and communications hereunder shall be in writing and shall be deemed
to have been duly given if personally delivered at or mailed by certified mail,
return receipt requested, or telecopied to (a) in the case of the Seller or the
Master Servicer, c/o Household Finance Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Treasurer, (b) in the case of the Trustee,
at the Corporate Trust Office, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: Corporate Trust Administration, (c) in the case of the
Credit Enhancer, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
Managing Director, Consumer Structured Finance, (d) in the case of any Master
Servicer Credit Facility Issuer, to such address as shall be designated by such
party in a written notice to each other party, (e) in the case of ▇▇▇▇▇'▇, Home
Equity Loan Monitoring Group, 4th Floor, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, and (f) in the case of Standard & Poor's, ▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇▇▇), ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Residential Mortgage Surveillance Department,
or, as to each party, at such other address as shall be designated by such
party in a written notice to each other party. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or
not the Certificateholder receives such notice.
88
94
Section 12.06. 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
Certificates or the rights of the Holders thereof.
Section 12.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05, 7.02 and 7.04, this
Agreement may not be assigned by the Seller or the Master Servicer without the
prior written consent of the Credit Enhancer and Holders of the Class A
Certificates evidencing Percentage Interests aggregating not less than 66-2/3%.
Section 12.08. Certificates Nonassessable and Fully Paid. The
parties agree that the Certificateholders shall not be personally liable for
obligations of the Trust, that the beneficial ownership interests represented
by the Certificates shall be nonassessable for any losses or expenses of the
Trust or for any reason whatsoever, and that the Certificates upon execution by
the Trustee on behalf of the Trust and the authentication and delivery thereof
by the Trustee pursuant to Section 2.08 or 6.01 are and shall be deemed fully
paid.
Section 12.09. Third-Party Beneficiaries. The Credit Enhancer shall
be an express third party beneficiary of the Agreement. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Certificateholders, the Certificate Owners, the Credit Enhancer, the Master
Servicer Credit Facility Issuer 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 12.10. 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 12.11. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 12.12. Limitation on Voting of Preferred Stock. The Trustee
shall hold all of the Class SV-E preferred stock ("Preferred Stock") of the
Seller in trust, for the benefit of the Certificateholders, and shall vote such
stock only pursuant to the written instructions of Holders of Class A
Certificates evidencing not less than 51% of the Percentage Interests of the
Class A Certificates. Concurrently with the retransfer of the Mortgage Loans
to the Seller pursuant to Section 10.01, the Trustee shall transfer to the
Seller for cancellation all shares of Preferred Stock held by the Trustee.
89
95
IN WITNESS WHEREOF, the Seller, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers all
as of the day and year first above written.
HFC REVOLVING CORPORATION,
as Seller
By:
--------------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer
By:
--------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:
--------------------------------------
Name:
Title:
96
State of Illinois }
} ss.:
County of ▇▇▇▇ }
On this _____ day of _____________, 1996 before me, a notary
public in and for the State of Illinois, personally appeared
________________________________, known to me who, being by me duly sworn,
did depose and say that he resides at ________________________________________
_________________; that he is the ____________________________________________
of HFC Revolving Corporation, a Delaware corporation, one of the parties
that executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
-----------------------------------------
Notary Public
[Seal]
State of Illinois }
} ss.:
County of ▇▇▇▇ }
On this _____ day of _____________, 1996 before me, a notary
public in and for the State of Illinois, personally appeared
________________________________, known to me who, being by me duly sworn,
did depose and say that he resides at ________________________________________
_________________; that he is the ____________________________________________
of Household Finance Corporation, a Delaware corporation, one of the parties
that executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
-----------------------------------------
Notary Public
[Seal]
97
State of Illinois }
} ss.:
County of ▇▇▇▇ }
On this _____ day of _____________, 1996 before me, a notary
public in and for the State of Illinois, personally appeared
________________________________, known to me who, being by me duly sworn,
did depose and say that he resides at ________________________________________
_________________; that he is the ____________________________________________
of The First National Bank of Chicago, a national banking association, one
of the parties that executed the foregoing instrument; and that he signed his
name thereto by order of the Board of Directors of said association.
-----------------------------------------
Notary Public
[Seal]
98
EXHIBIT A
[FORM OF CLASS A CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Date of Pooling and Servicing Agreement: Variable Certificate Rate
As of _________________, 1996
Cut-Off Date: Denomination:
________________, 1996 $__________________
First Distribution Date: Aggregate Principal Amount of all
________________, 1996 Class A Certificates: $___________
CUSIP No. 441919 ___ __ Certificate No. 00
--
REVOLVING HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
SERIES 1996-2
CLASS A CERTIFICATE
evidencing a percentage interest in the distributions allocable
to the Class A Certificates evidencing an undivided interest in a
Trust consisting of a pool of home equity revolving credit line
mortgage loans acquired by the Seller and serviced by
HOUSEHOLD FINANCE CORPORATION
This Certificate does not represent an obligation of or interest in HFC
Revolving Corporation (the "Seller") or the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying Mortgage Loans
are guaranteed or insured by any governmental agency or instrumentality.
This certifies that Cede & Co. is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination
of this Certificate by the aggregate of the denominations of all Class A
Certificates) in certain monthly distributions with respect to a Trust
consisting primarily of a pool of mortgage loans (the "Mortgage Loans"),
A-1
99
transferred by the Seller and serviced by Household Finance Corporation (in
such capacity, the "Master Servicer", including any successor Master Servicer
under the Agreement referred to below). The Trust was created pursuant to a
Pooling and Servicing Agreement dated as specified above (the "Agreement")
among the Seller, the Master Servicer and The First National Bank of Chicago,
as trustee (including any Successor Trustee under the Agreement, the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 20th day of each month or if such day is not a Business Day, then the next
succeeding Business Day (the "Distribution Date"), commencing on the first
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last day preceding such
Distribution Date, or, if Definitive Certificates are available pursuant to the
Agreement, on the last day of the month preceding the month in which the
related Distribution Date occurs (in each case, the "Record Date"), in an
amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amounts required to be distributed to Holders of Class A
Certificates on such Distribution Date under the terms of the Agreement.
This Certificate is entitled to the benefits of a financial guarantee
insurance policy issued by the Credit Enhancer. With respect to each
Distribution Date, an amount equal to the Credit Enhancement Draw Amount (as
defined in the Agreement), if any, will be drawn under the policy and, to the
extent provided in the Agreement, included in the distribution to
Certificateholders on such Distribution Date. The obligation of the Credit
Enhancer under the Credit Enhancement Instrument is unconditional and
irrevocable.
Distributions on this Certificate will be made by the Paying Agent by
check mailed to the Person entitled thereto as the name and address of such
Person shall appear on the Certificate Register or, upon written request by
such Person delivered to the Paying Agent at least five Business Days prior to
the related Record Date, by wire transfer (but only if such Person owns of
record one or more Class A Certificates having principal denominations
aggregating at least $5,000,000), or by such other means of payment as such
Person and the Paying Agent shall agree. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Paying
Agent of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose.
It is the intention of the Seller and the Class A Certificateholders
that the Class A Certificates will be indebtedness of the Seller for federal,
state and local income and franchise tax purposes and for purposes of any other
tax imposed on or measured by income. The Seller, the Trustee and the Holder
of this Certificate (or Certificate Owner) by acceptance of this Certificate
(or, in the case of a Certificate Owner, by virtue of such Certificate Owner's
acquisition of a beneficial interest herein) agree to treat the Class A
Certificates (or beneficial interest therein), for purposes of federal, state
and local income or franchise taxes and any other tax imposed on or measured by
income, as indebtedness of the Seller secured by the Mortgage Loans and to
report the transactions contemplated by the Agreement on all applicable tax
returns in a manner consistent with such treatment. Each Holder of this
A-2
100
Certificate agrees that it will cause any Certificate Owner acquiring an
interest in this Certificate through it to comply with the Agreement as to
treatment as indebtedness for federal, state and local income and franchise tax
purposes and for purposes of any other tax imposed on or measured by income.
This Certificate is one of the Class A Certificates from a duly
authorized issue of Certificates designated as Revolving Home Equity Loan Asset
Backed Certificates, Series 1996-2 (herein called the "Certificates"), and
representing, to the extent specified in the Agreement, an undivided ownership
interest in (i) each Mortgage Loan, (ii) such assets as shall from time to time
be deposited in the Collection Account (exclusive of net earnings thereon), the
Funding Account and the Spread Account in accordance with the Agreement, (iii)
property acquired by the Trust by foreclosure or grant of deed in lieu of
foreclosure or otherwise, (iv) the interest of the Seller in certain hazard
insurance policies in respect of the Mortgage Loans, (v) the Credit Enhancement
Instrument, (vi) the Spread Account, (vii) the Collection Account, (viii) the
Funding Account, (ix) the Master Servicer Credit Facility, if any, (x) the
Master Note, if any, (xi) the Funding Master Note, if any, (xii) the Spread
Account Master Note, if any, and (xiii) the proceeds of all of the foregoing.
The Certificates are limited in right of payment to certain payments on
and collections in respect of the Mortgage Loans, all as more specifically set
forth in the Agreement. The Certificateholder, by its acceptance of this
Certificate, agrees that it will look solely to the funds on deposit in the
Collection Account for payment hereunder and that the Trustee in its individual
capacity is not personally liable to the Certificateholders for any amount
payable under this Certificate or the Agreement or, except as expressly
provided in the Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
As provided in the Agreement, withdrawals from the Collection Account
may be made from time to time for purposes other than distributions to the
Class A Certificateholders and, subject to certain conditions in the Agreement,
Mortgage Loans may, at the election of the Seller, be removed from the Trust
and retransferred to the Seller.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the Master Servicer, and the rights of the Certificateholders under
the Agreement, at any time by the Master Servicer, the Seller and the Trustee
with the consent of (i) the Holders of Class A Certificates evidencing not less
than 51% of the aggregate Percentage Interests of the Class A Certificates and
(ii) the Credit Enhancer and any Master Servicer Credit Facility Issuer. Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon registration of the transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent is made upon
this Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holders of any of the Class A
Certificates.
As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register of the Certificate Registrar
A-3
101
upon surrender of this Certificate for registration of transfer at the office
or agency maintained by the Certificate Registrar for such purpose, accompanied
by a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Class A
Certificates of authorized denominations, if applicable, and evidencing the
same aggregate Percentage Interest will be issued to the designated transferee
or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of a like Class and tenor in authorized
denominations and evidencing the same aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee or the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Trustee, the Master Servicer, the Seller, and the Certificate
Registrar and any agent of the foregoing may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none
of the Trustee, the Master Servicer, the Seller, the Certificate Registrar or
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the last action required to be taken
by the Trustee on the final Distribution Date following the earlier of (i) the
day following the Distribution Date on which the Class A Certificate Principal
Balance has been reduced to zero and after which there is no unreimbursed Class
A Loss Reduction Amount or any amount owing to the Credit Enhancer under the
Insurance Agreement, (ii) the retransfer to the Seller of each Mortgage Loan
and all property acquired in respect of any Mortgage Loan remaining in the
Trust for an amount determined as provided in the Agreement, (iii) the final
payment or other liquidation of the last Mortgage Loan remaining in the Trust
(including, without limitation, the disposition of any Mortgage Loans pursuant
to Section 11.02 of the Agreement) or the disposition of all property acquired
upon foreclosure or by grant of deed in lieu of foreclosure of any Mortgage
Loan or (iv) the Distribution Date in February 2018; provided that in no event
shall the Trust continue beyond the expiration of 21 years from the death of
the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late Ambassador
of the United States to the Court of St. ▇▇▇▇▇, living on the date hereof. The
retransfer to the Seller of each Mortgage Loan and of property acquired in
respect of any Mortgage Loan will result in early retirement of the
Certificates. Such right of retransfer to the Seller may be exercised on any
Distribution Date on or after the Distribution Date immediately prior to which
the Class A Certificate Principal Balance is less than ten percent (10%) of the
Original Class A Certificate Principal Balance and all amounts due and owing to
the Credit Enhancer for unpaid premiums and unreimbursed draws on the Credit
Enhancement Instrument, together with interest thereon, have been paid in full.
Upon termination in accordance with clause (i), (ii) or (iv) of Section
10.01(a) of the Agreement, the Trustee shall execute such documents and
instruments of transfer presented by the Seller and take such other actions as
the Seller may reasonably request to effect the retransfer of the Mortgage
Loans to the Seller.
A-4
102
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual or facsimile signature, this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed under its official seal.
Dated:
HOUSEHOLD REVOLVING HOME EQUITY LOAN
TRUST 1996-2
By: The First National Bank of Chicago,
as Trustee
[SEAL] By:
-------------------------------------
Authorized Officer
Certificate of Authentication:
This is one of the Class A
Certificates referenced in the
within-mentioned Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:
------------------------------
Authorized Officer
A-5
103
EXHIBIT B
[FORM OF SELLER CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 6.05 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
REVOLVING HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
SERIES 1996-2
SELLER CERTIFICATE
evidencing a percentage interest in the distributions allocable
to the Seller Certificates evidencing an interest in a Trust
consisting of a pool of home equity revolving credit line
mortgage loans acquired by the Seller and serviced by
HOUSEHOLD FINANCE CORPORATION
Date of Pooling and Servicing Agreement: ___% Percentage Interest
As of _______________, 1996
Cut-off Date: Certificate No. ___
________________, 1996
First Distribution Date:
________________, 1996
This Seller Certificate does not represent an obligation of or interest
in HFC Revolving Corporation (the "Seller") or the Trustee referred to below or
any of their affiliates. Neither this Seller Certificate nor the underlying
Mortgage Loans are guaranteed or insured by any governmental agency or
instrumentality.
This certifies that _______________________ is the registered owner of
the Percentage Interest evidenced by this Seller Certificate in the entire
interest not allocated to the Class A Certificates in certain distributions
with respect to a Trust consisting primarily of a pool of mortgage loans (the
"Mortgage Loans"), transferred by the Seller and serviced by Household Finance
Corporation (in such capacity, the "Master Servicer", including any successor
Master Servicer under the Agreement referred to below). The Trust was created
pursuant to a Pooling and Servicing Agreement dated as specified above (the
"Agreement") among the Seller, the Master Servicer and The First National Bank
of Chicago, as trustee (including any Successor
B-1
104
Trustee under the Agreement, the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not
defined herein, the capitalized terms used herein have the meanings assigned in
the Agreement. This Seller Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Seller Certificate by virtue of the acceptance hereof assents
and by which such Holder is bound.
This certificate is one of the Seller Certificates from a duly
authorized issue of Certificates designated as Revolving Home Equity Loan Asset
Backed Certificates, Series 1996-2 (herein called the "Certificates"), and
representing, to the extent specified in the Agreement, an undivided ownership
interest in (i) each Mortgage Loan, (ii) such assets as shall from time to time
be deposited in the Collection Account (exclusive of any net earnings thereon)
in accordance with the Agreement, (iii) property acquired by the Trust by
foreclosure or grant of deed in lieu of foreclosure or otherwise, (iv) the
interest of the Seller in certain hazard insurance policies in respect of the
Mortgage Loans, (v) the Collection Account, (vi) the Master Servicer Credit
Facility, if any, (vii) the Master Note, if any, (viii) the Funding Master
Note, if any, and (ix) the proceeds of all of the foregoing.
Payments in respect of the Mortgage Loans will be allocated between the
Class A Certificates and the Seller Certificates and paid to the registered
Holder of the Seller Certificates as provided in the Agreement.
The Certificates are limited in right of payment to certain payments on
and collections in respect of the Mortgage Loans, all as more specifically set
forth in the Agreement. The Certificateholder, by its acceptance of this
Seller Certificate, agrees that it will look solely to the funds available in
accordance with the terms of the Agreement for payment hereunder and that the
Trustee in its individual capacity is not personally liable to the
Certificateholders for any amount payable under this Seller Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement.
This Seller Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the Master Servicer, and the rights of the Certificateholders under
the Agreement, at any time by the Master Servicer, the Seller and the Trustee,
with the consent of (i) the Holders of Class A Certificates evidencing not less
than 51% of the aggregate Percentage Interests of the Class A Certificates and
(ii) the Credit Enhancer and any Master Servicer Credit Facility Issuer. Any
such consent shall be conclusive and binding on the Holder of this Seller
Certificate and upon all future Holders of this Seller Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof. The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.
No transfer of this Seller Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. There shall be delivered to the Trustee,
and to the Master Servicer and Credit Enhancer (at the request of
B-2
105
either or both of them), an Opinion of Counsel acceptable to and in form and
substance satisfactory to the Trustee, the Master Servicer and the Credit
Enhancer that such transfer is exempt (describing the applicable exemption and
the basis therefor) from or is being made pursuant to the registration
requirements of the Securities Act of 1933, as amended, and of any applicable
state statute, which Opinion of Counsel shall not be an expense of the Trustee
or the Master Servicer, and there shall be delivered to the Trustee an
investment letter executed by the proposed transferee in form and substance
satisfactory to the Trustee and the Master Servicer certifying the facts
surrounding such Transfer, which investment letter shall not be an expense of
the Trustee, the Seller or the Master Servicer. The Holder hereof desiring to
effect such Transfer shall, and does hereby agree to, indemnify the Trustee,
the Seller and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
As provided in the Agreement and subject to certain limitations set
forth therein, and subject to the restrictions set forth on the first page
hereof, neither this Seller Certificate nor any legal or beneficial interest
herein may be, directly or indirectly, purchased, transferred, sold, pledged,
assigned or otherwise disposed of, and any proposed transferee hereof shall not
become the registered Holder hereof, without the satisfaction of the conditions
set forth in Section 6.05 of the Agreement.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee or the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Trustee, the Master Servicer, the Seller, the Credit Enhancer and
the Certificate Registrar and any agent of the foregoing may treat the Person
in whose name this Seller Certificate is registered as the owner hereof for all
purposes, and none of the Trustee, the Master Servicer, the Seller, the Credit
Enhancer, the Certificate Registrar or any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the last action required to be taken
by the Trustee on the final Distribution Date following the earlier of (i) the
day following the Distribution Date on which the Class A Certificate Principal
Balance has been reduced to zero and after which there is no unreimbursed Class
A Loss Reduction Amount or any amount owing to the Credit Enhancer under the
Insurance Agreement, (ii) the retransfer to the Seller of all Mortgage Loans
and all property acquired in respect of any Mortgage Loan remaining in the
Trust for an amount determined as provided in the Agreement, (iii) the final
payment or other liquidation of the last Mortgage Loan remaining in the Trust
(including, without limitation, the disposition of any Mortgage Loans pursuant
to Section 11.02 of the Agreement) or the disposition of all property acquired
upon foreclosure or by grant of deed in lieu of foreclosure of any Mortgage
Loan or (iv) the Distribution Date in February 2018; provided that in no event
shall the Trust continue beyond the expiration of 21 years from the death of
the last survivor of the descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the late Ambassador
of the United States to the Court of St. ▇▇▇▇▇, living on the date hereof. The
retransfer to the Seller of each Mortgage Loan and of property acquired in
respect of any Mortgage Loan will result in early retirement of the
Certificates. Such right of retransfer to the Seller may be exercised on any
Distribution Date on or after the Distribution Date immediately prior to which
the Class A Certificate Principal Balance is less than ten percent (10%) of the
Original Class A Certificate Principal Balance and all amounts
B-3
106
owing to the Credit Enhancer for unpaid premiums and unreimbursed draws on the
Credit Enhancement Instrument together with interest thereon, have been paid in
full. Upon termination in accordance with clause (i), (ii) or (iv) of Section
10.01(a) of the Agreement, the Trustee shall execute such documents and
instruments of transfer presented by the Seller and take such other actions as
the Seller may reasonably request to effect the retransfer of the Mortgage
Loans to the Seller.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual or facsimile signature, this Seller
Certificate shall not be entitled to any benefit under the Agreement, or be
valid for any purpose.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Seller Certificate to be duly executed.
Dated:
HOUSEHOLD REVOLVING HOME EQUITY LOAN
TRUST 1996-2
By: The First National Bank of Chicago,
as Trustee
By:
-------------------------------------
Authorized Officer
Certificate of Authentication:
This is one of the Seller
Certificates referenced in the
within-mentioned Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:
------------------------------
Authorized Officer
B-4
107
EXHIBIT C
MORTGAGE LOAN SCHEDULE
[Intentionally Omitted]
C-1
108
EXHIBIT D
[FORM OF CONTENT OF ANNUAL OPINION OF COUNSEL]
1. The Cut-Off Date Trust Balances and the Additional Balances will
constitute either "instruments," "chattel paper" or "general intangibles," in
each case as defined under Section 9-105 or 9-106 of the Uniform Commercial
Code (the "UCC"). It is noted that Seller has provided a certificate on which
we have relied for purposes of rendering the foregoing opinion to the effect
that the Cut-Off Date Trust Balances and the Additional Balances are evidenced
by Documentation in substantially the form attached to the Certificate. We
have not reviewed any Documentation pursuant to which the Cut-Off Date Trust
Balances and the Additional Balances have been evidenced. We call your
attention to the fact that the Cut-Off Date Trust Balances and the Additional
Balances arose under differing documentation and it is likely that some of said
documentation shall not conform to the Documentation in the form attached to
the Officer's Certificates.
2. If the transfer of the Cut-Off Date Trust Balances and the
Additional Balances by the Seller to the Trustee pursuant to the Pooling and
Servicing Agreement, constitutes a sale of the Cut-Off Date Trust Balances to
the Trust:
(i) with respect to Cut-Off Date Trust Balances, such sale
transfers all the right, title and interest of the Seller in and to such
Cut-Off Date Trust Balances and proceeds thereof to the Trust; and
(ii) with respect to Additional Balances which come into
existence after the Cut-Off Date, upon the creation of such Additional
Balances and the subsequent transfer of such Additional Balances to the
Trustee and receipt by the Seller of the consideration therefor, such
sale will transfer all the right, title and interest of the Seller in
and to such Additional Balances and proceeds thereof to the Trust;
and, in either case, no further action (other than the filing of continuation
statements or other appropriate financing statements as discussed below) will
thereafter be required to transfer to the Trustee an ownership interest in the
Cut-Off Date Trust Balances and the Additional Balances. We note that, unless
the obligor in respect of Cut-Off Date Trust Balances and the Additional
Balances has received notice of the assignment thereof, bona fide payments made
by such obligor to the assignor (or, in certain circumstances, a second
assignee) of such Cut-Off Date Trust Balances and the Additional Balances will
discharge such obligor's obligations to the extent of such payment. The Seller
has given us a certificate to the effect that it has good and marketable title
to the Cut-Off Date Trust Balances and the Additional Balances (and we have
relied thereon without independent investigation) free and clear of all Liens.
3. If the transfer of the Cut-Off Date Trust Balances and the
Additional Balances from the Seller to the Trustee, pursuant to the Pooling and
Servicing Agreement, does not constitute a sale of the Cut-Off Date Trust
Balances and the Additional Balances to the Trustee, then the Pooling and
Servicing Agreement creates a valid security interest in favor of the Trustee,
for the benefit of the Certificateholders, in the Seller's right, title and
interest in and to the Cut-Off Date Trust Balances and the Additional Balances
and in proceeds thereof securing the obligations of the Seller thereunder.
Such security interest would be perfected
D-1
109
as to "instruments," as defined under Section 9-105 of the UCC, by possession
and as to "general intangibles" or "chattel paper" as defined in Sections 9-105
and 9-106 of the UCC by filing under the UCC. If the Trustee were in
possession of such "instruments" on the date hereof, which as noted above it is
not and based solely upon the UCC Search, it would have a first priority
security interest in the Cut-Off Date Trust Balances and Additional Balances.
Except as stated in the prior sentence, we express no opinion with
respect to the perfection of a security interest in such Cut-Off Date Trust
Balances and the Additional Balances which are evidenced by instruments (as
defined in Section 9-105(1)(i) of the UCC) which are not in the possession of
the Trustee.
D-2
110
EXHIBIT E
FORM OF INVESTMENT LETTER FOR HOLDER OF SELLER CERTIFICATES
1. The Purchaser is acquiring the Seller Certificate (the
"Certificate") as principal for its own account for the purpose of investment
and not with a view to or for the sale in connection with any distribution
thereof, subject nevertheless to any requirement of law that the disposition of
the Purchaser's property shall at all times be and remain within its control.
2. The Purchaser has knowledge and experience in financial and
business matters and is capable of evaluating the merits and risks of its
investment in the Certificate and is able to bear the economic risk of such
investment. The Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the rules and regulations of the Securities and Exchange
Commission under the Securities Act of 1933, as amended. The Purchaser has
been given such information concerning the Certificate, the underlying Mortgage
Loans and the Master Servicer as it has requested.
3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale by the Purchaser of
the Certificate.
4. The Purchaser understands that the Certificate has not been and
will not be registered under the Securities Act of 1933, as amended, or any
state securities laws and may be resold (which resale is not currently
contemplated) only if an exemption from registration is available, that none of
the Seller, the Master Servicer or the Trustee is required to register the
Certificate and that any transfer must comply with Section 6.05 of the Pooling
and Servicing Agreement. In connection with any resale of the Certificate, the
Purchaser shall not make any general solicitation or advertisement.
5. The Purchaser agrees that it will obtain from any purchaser of
the Certificate from it the same representations, warranties and agreements
contained in the foregoing paragraphs 1 through 4 and in this paragraph 5.
6. The Purchaser hereby directs the Trustee to register the
Certificate acquired by the Purchaser in the name of its nominee as follows:
______________________________________.
Very truly yours,
-----------------------------------------
NAME OF PURCHASER
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
E-1
111
EXHIBIT F
TRUST RECEIPT
Loan Information
Name of Mortgagor:
-----------------------------------------
Servicer Loan No.:
-----------------------------------------
The undersigned Master Servicer hereby acknowledges that it has received
from The First National Bank of Chicago, as Trustee under the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") dated as of
________________, 1996 among the Trustee, HFC Revolving Corporation, as Seller,
and Household Finance Corporation, as Master Servicer, the documents referred
to below (the "Documents"). All capitalized terms not otherwise defined in
this Trust Receipt shall have the meanings given them in the Pooling and
Servicing Agreement.
( ) Promissory Note
( ) Mortgage
( ) Deed of Trust
( ) Assignment of Mortgage or Deed of Trust to .
---------------------------
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( )
-------------------------------------------------------
( )
-------------------------------------------------------
( )
-------------------------------------------------------
( )
-------------------------------------------------------
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee solely for the
purposes provided in the Pooling and Servicing Agreement.
(2) The Master Servicer shall not cause or knowingly permit the
Documents to become subject to, or encumbered by, any claim,
liens, security interest, charges, writs of attachment or other
impositions nor shall the Master Servicer assert or seek to
assert any claims or rights of setoff to or against the Documents
or any proceeds thereof.
F-1
112
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee 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 Pooling and Servicing Agreement.
HOUSEHOLD FINANCE CORPORATION
By:
-------------------------------------
Name:
Title:
F-2
113
EXHIBIT G-1
FORM OF MASTER NOTE
Chicago, Illinois
_____________________, 1996
For value received, HOUSEHOLD FINANCE CORPORATION, a Delaware
corporation (the "Borrower"), promises, subject to the provisions of Section
3.02 of the Pooling and Servicing Agreement referred to below, to pay to the
order of The First National Bank of Chicago and its successors as trustee (the
"Trustee") under the Pooling and Servicing Agreement dated as of
__________________, 1996 (the "Pooling and Servicing Agreement") among the
Borrower, as Master Servicer, Household Revolving Corporation, as Seller, and
the Trustee on the earlier of (i) the Business Day next preceding each related
Distribution Date and (ii) the date on which demand therefor is made by the
Trustee, the aggregate amount of all payments on and collections in respect of
the Mortgage Loans received by the Master Servicer during any Collection Period
that constitute Interest Collections or Principal Collections to be distributed
under Section 5.01 of the Pooling and Servicing Agreement on the related
Distribution Date in accordance with the requirements of Section 3.02 of the
Pooling and Servicing Agreement and are to be included in available funds for
the related Distribution Date (the "Master Loans"). All such payments shall be
made in lawful money of the United States in immediately available funds by
deposit to the Collection Account maintained pursuant to the Pooling and
Servicing Agreement. The holder of this Note is hereby authorized by the
Borrower to endorse on the schedule forming a part hereof appropriate notations
evidencing the date and amount of each Master Loan made by the Trustee to the
Borrower with respect thereto. The amount owing under this Master Note in
respect of the Master Loans shall be reduced by all payments of the amounts
referred to above.
The Borrower, for itself and its successors and assigns, waives with
respect to this Note, presentment for payment, demand, protest and notice of
dishonor, to the extent permitted by law. Capitalized terms defined in said
Pooling and Servicing Agreement and not otherwise defined herein are used
herein as therein defined.
HOUSEHOLD FINANCE CORPORATION
By:
--------------------------------------
Name:
Title:
G-1
114
EXHIBIT G-2
FORM OF FUNDING MASTER NOTE
Chicago, Illinois
_____________________, 1996
For value received, HOUSEHOLD FINANCE CORPORATION, a Delaware
corporation (the "Borrower"), promises, subject to the provisions of Section
3.02 of the Pooling and Servicing Agreement referred to below, to pay to the
order of The First National Bank of Chicago and its successors as trustee (the
"Trustee") under the Pooling and Servicing Agreement dated as of
________________, 1996 (the "Pooling and Servicing Agreement") among the
Borrower, as Master Servicer, Household Revolving Corporation, a Seller, and
the Trustee on the earlier of (i) the Business Day next preceding each related
Distribution Date, and (ii) the date on which demand therefor is made by the
Trustee, the aggregate amount of all deposits to be made into the Funding
Account pursuant to the Pooling and Servicing Agreement, together with interest
thereon at the Borrower's 30-day commercial paper rate in effect at the time
interest accrues on this Note from and including the last date to which
interest has been paid to but not including the date of such payment (the
"Master Loans"). Interest shall be due and payable on each Distribution Date
during the Funding Period in an amount equal to interest accrued during the
related Interest Period at the Borrower's 30-day commercial paper rate in
effect at the beginning of such Interest Period on the amount to be on deposit
in the Funding Account at the beginning of such Interest Period. All such
payments shall be made in lawful money of the United States in immediately
available funds by deposit to the Collection Account maintained pursuant to the
Pooling and Servicing Agreement. The holder of this Note is hereby authorized
by the Borrower to endorse on the schedule forming a part hereof appropriate
notations evidencing the date and amount of each Master Loan made by the
Trustee to the Borrower with respect thereto. The amount owing under this
Master Note in respect to the Master Loans shall be reduced by payment by the
Borrower of the amounts referred to above.
The Borrower, for itself and its successors and assigns, waives with
respect to this Note, presentment for payment, demand, protest and notice of
dishonor, to the extent permitted by law. Capitalized terms defined in said
Pooling and Servicing Agreement and not otherwise defined herein are used
herein as therein defined.
HOUSEHOLD FINANCE CORPORATION
By:
--------------------------------------
Name:
Title:
G-2