EXHIBIT 99.1
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IMPAC FUNDING CORPORATION,
as Master Servicer,
IMPAC CMB TRUST SERIES 2003-12,
as Issuer
and
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee,
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SERVICING AGREEMENT
Dated as of December 18, 2003
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Mortgage Loans
Impac CMB Trust Series 2003-12
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions ..................................................................................................... 2
Section 1.01 Definitions .................................................................................. 2
Section 1.02 Other Definitional Provisions ................................................................ 2
Section 1.03 Interest Calculations ........................................................................ 3
ARTICLE II
Representations and Warranties .................................................................................. 4
Section 2.01 Representations and Warranties Regarding the Master Servicer ................................. 4
Section 2.02 Existence .................................................................................... 5
Section 2.03 Enforcement of Representations and Warranties ................................................ 5
ARTICLE III
Administration and Servicing of Mortgage Loans .................................................................. 7
Section 3.01 Master Servicer to Assure Servicing .......................................................... 7
Section 3.02 Subservicing Agreements Between Master Servicer and Subservicers ............................. 9
Section 3.03 Successor Subservicers ....................................................................... 10
Section 3.04 Liability of the Master Servicer ............................................................. 10
Section 3.05 Assumption or Termination of Subservicing Agreements by Indenture Trustee .................... 10
Section 3.06 Collection of Mortgage Loan Payments ......................................................... 11
Section 3.07 Withdrawals from the Collection Account ...................................................... 13
Section 3.08 Collection of Taxes Assessments and Similar Items; Servicing Accounts ........................ 16
Section 3.09 Access to Certain Documentation and Information Regarding the Mortgage Loans ................. 16
Section 3.10 Maintenance of Primary Insurance Policies and the Radian Policy; Collection Thereunder ....... 16
Section 3.11 Maintenance of Hazard Insurance and Fidelity Coverage ........................................ 17
Section 3.12 Due-on-Sale Clauses; Assumption Agreements ................................................... 19
Section 3.13 Realization Upon Defaulted Mortgage Loans .................................................... 20
Section 3.14 Indenture Trustee to Cooperate; Release of Mortgage Files .................................... 21
Section 3.15 Master Servicing Compensation ................................................................ 22
Section 3.16 Annual Statements of Compliance .............................................................. 23
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Section 3.17 Annual Independent Public Accountants' Servicing Report ...................................... 23
Section 3.18 Optional Purchase of Defaulted Mortgage Loans ................................................ 24
Section 3.19 Information Required by the Internal Revenue Service Generally and Reports of Foreclosures
and Abandonments of Mortgaged Property .................................................................... 24
ARTICLE IV
Servicing Certificate ........................................................................................... 25
Section 4.01 Remittance Reports ........................................................................... 25
Section 4.02 Reserved ..................................................................................... 25
Section 4.03 Reserved ..................................................................................... 25
Section 4.04 Advances ..................................................................................... 25
Section 4.05 Compensating Interest Payments ............................................................... 26
Section 4.06 Exchange Act Reporting ....................................................................... 26
ARTICLE V
The Master Servicer ............................................................................................. 29
Section 5.01 Liability of the Master Servicer ............................................................. 29
Section 5.02 Merger or Consolidation of or Assumption of the Obligations of the Master Servicer ........... 29
Section 5.03 Limitation on Liability of the Master Servicer and Others .................................... 29
Section 5.04 Master Servicer Not to Resign ................................................................ 30
Section 5.05 Delegation of Duties ......................................................................... 30
Section 5.06 Master Servicer to Pay Indenture Trustee's and Owner Trustee's Fees and Expenses;
Indemnification ........................................................................................... 31
ARTICLE VI
Default ......................................................................................................... 33
Section 6.01 Servicing Default ............................................................................ 33
Section 6.02 Indenture Trustee to Act; Appointment of Successor ........................................... 35
Section 6.03 Notification to Bondholders .................................................................. 37
Section 6.04 Waiver of Defaults ........................................................................... 37
ARTICLE VII
Miscellaneous Provisions ........................................................................................ 38
Section 7.01 Amendment .................................................................................... 38
Section 7.02 GOVERNING LAW ................................................................................ 38
Section 7.03 Notices ...................................................................................... 38
Section 7.04 Severability of Provisions ................................................................... 39
Section 7.05 Third-Party Beneficiaries .................................................................... 39
Section 7.06 Counterparts ................................................................................. 39
Section 7.07 Effect of Headings and Table of Contents ..................................................... 39
Section 7.08 Termination .................................................................................. 39
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Section 7.09 No Petition .................................................................................. 40
Section 7.10 No Recourse .................................................................................. 40
ARTICLE VIII
Duties of the Master Servicer ................................................................................... 40
Section 8.01 Administrative Duties ........................................................................ 40
Section 8.02 Records ...................................................................................... 41
Section 8.03 Additional Information to be Furnished ....................................................... 42
EXHIBIT A - MORTGAGE LOAN SCHEDULE ..............................................................................A-1
EXHIBIT B - FORM OF REQUEST FOR RELEASE .........................................................................B-1
EXHIBIT C-1 - FORM OF CERTIFICATION TO BE PROVIDED BY
THE MASTER SERVICER WITH FORM 10-K ................................................................C-1
EXHIBIT C-2 - FORM OF FORM CERTIFICATION TO BE PROVIDED BY
THE INDENTURE TRUSTEE WITH FORM 10-K ..............................................................C-2
EXHIBIT C-3 - FORM OF CERTIFICATION TO BE PROVIDED TO
MASTER SERVICER BY THE INDENTURE TRUSTEE ..........................................................C-3
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This Servicing Agreement, dated as of December 18, 2003, among Impac
Funding Corporation, as Master Servicer (the "Master Servicer" ), Impac CMB
Trust Series 2003-12, as Issuer (the "Issuer") and Deutsche Bank National Trust
Company, as Indentur e Trustee (the "Indenture Trustee").
W I T N E S S E T H T H A T :
WHEREAS, pursuant to the terms of the Mortgage Loan Sale and
Contribution Agreement, IMH Assets Corp. (the "Company" or the "Depositor") will
acquire the Mortgage Loans;
WHEREAS, the Company will create Impac CMB Trust Series 2003-12, a
Delaware statutory trust, and will transfer the Mortgage Loans and all of its
rights under the Mortgage Loan Sale and Contribution Agreement to the Issuer;
WHEREAS, pursuant to the terms of an Amended and Restated Trust
Agreement dated as of December 18, 2003 (the "Trust Agreement") among the
Company, as depositor, Wilmington Trust Company, as owner trustee (the "Owner
Trustee") and Deutsche Bank National Trust Company, as certificate registrar and
certificate paying agent, the Company will convey the Mortgage Loans to the
Issuer in exchange for the Certificates (as defined below);
WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer
will issue and transfer to or at the direction of the Depositor, the Trust
Certificates, Series 2003-12 (the "Certificates");
WHEREAS, pursuant to the terms of an Indenture dated as of December
18, 2003 (the "Indenture") between the Issuer and Deutsche Bank National Trust
Company (the "Indenture Trustee"), the Issuer will pledge the Mortgage Loans and
issue and transfer to or at the direction of the Purchaser the Collateralized
Asset-Backed Bonds, Series 2003-12, Class ▇-▇, ▇▇▇▇▇ ▇-▇, Class M-1, Class M-2,
Class M-3 and Class M-4 Bonds (collectively, the "Bonds"); and
WHEREAS, pursuant to the terms of this Servicing Agreement, the
Master Servicer will service the Mortgage Loans set forth on the Mortgage Loan
Schedule attached hereto as Exhibit A directly or through one or more
Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01 Definitions. For all purposes of this Servicing Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Definitions contained in Appendix A to the
Indenture which is incorporated by reference herein. All other capitalized terms
used herein shall have the meanings specified herein.
Section 1.02 Other Definitional Provisions.
(a) All terms defined in this Servicing Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Servicing Agreement shall refer to this Servicing Agreement as
a whole and not to any particular provision of this Servicing Agreement; Section
and Exhibit references contained in this Servicing Agreement are references to
Sections and Exhibits in or to this Servicing Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(d) The definitions contained in this Servicing Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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Section 1.03 Interest Calculations. All calculations of interest hereunder
that are made in respect of the Stated Principal Balance of a Mortgage Loan
shall be made on the basis of a 360-day year consisting of twelve 30-day months,
notwithstanding the terms of the related Mortgage Note and Mortgage.
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ARTICLE II
Representations and Warranties
Section 2.01 Representations and Warranties Regarding the Master Servicer.
The Master Servicer represents and warrants to the Issuer and for the benefit of
the Indenture Trustee, as pledgee of the Mortgage Loans and the Bondholders, as
of the Cut-off Date and the Closing Date, that:
(i) The Master Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California
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 requires such qualification and in which
the failure to so qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of the
Master Servicer or the validity or enforceability of the Mortgage Loans;
(ii) The Master Servicer has the power and authority to make,
execute, deliver and perform this Servicing Agreement and all of the
transactions contemplated under this Servicing Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Servicing Agreement. When executed and delivered, this
Servicing Agreement will constitute the legal, valid and binding
obligation of the 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;
(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 Servicing Agreement, except for such consent,
license, approval or authorization, or registration or declaration, as
shall have been obtained or filed, as the case may be;
(iv) The execution and delivery of this Servicing Agreement and the
performance of the transactions contemplated hereby by the 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;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending (other than
litigation with respect to which pleadings or documents have been filed
with a court, but not served on the Master Servicer), or to the knowledge
of the Master Servicer threatened, against the Master Servicer or any of
its properties or with respect to this Servicing Agreement or the Bonds or
the Certificates which,
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to the knowledge of the Master Servicer, has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated by
this Servicing Agreement; and
(vi) The Master Servicer is a member of MERS in good standing, and
will comply in all material respects with the rules and procedures of MERS
in connection with the servicing of the Mortgage Loans that are registered
with MERS.
The foregoing representations and warranties shall survive any termination
of the Master Servicer hereunder.
Section 2.02 Existence. The Issuer will keep in full effect its existence,
rights and franchises as a statutory trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Servicing Agreement.
Section 2.03 Enforcement of Representations and Warranties. The Master
Servicer, on behalf of and subject to the direction of the Indenture Trustee, as
pledgee of the Mortgage Loans, shall enforce the representations and warranties
and related obligations for breaches thereof of the Seller pursuant to the
Mortgage Loan Sale and Contribution Agreement. Upon the discovery by the Seller,
the Master Servicer, the Indenture Trustee or the Company of a breach of any of
the representations and warranties made in the Mortgage Loan Sale and
Contribution Agreement in respect of any Mortgage Loan, or upon the occurrence
of a Repurchase Event, which materially and adversely affects the interests of
the Bondholders or the Certificateholders, the party discovering the same shall
give prompt written notice to the other parties. The Master Servicer shall
promptly notify the Seller and request that, pursuant to the terms of the
Mortgage Loan Sale and Contribution Agreement, the Seller either (i) cure such
breach or Repurchase Event in all material respects or (ii) purchase such
Mortgage Loan, in each instance in accordance with the Mortgage Loan Sale and
Contribution Agreement; provided that the Seller shall, subject to the
conditions set forth in the Mortgage Loan Sale and Contribution Agreement, have
the option to substitute an Eligible Substitute Mortgage Loan or Eligible
Substitute Mortgage Loans for such Mortgage Loan. Monthly Payments due with
respect to Eligible Substitute Mortgage Loans in the month of substitution shall
not be part of the Trust Estate and will be retained by the Master Servicer and
remitted by the Master Servicer to the Seller on the next succeeding Payment
Date. For the month of substitution, distributions to the Payment Account
pursuant to this Servicing Agreement will include the Monthly Payment due on a
Deleted Mortgage Loan for such month and thereafter the Seller shall be entitled
to retain all amounts received in respect of such Deleted Mortgage Loan. The
Master Servicer shall amend or cause to be amended the Mortgage Loan Schedule to
reflect the removal of such Mortgage Loan and the substitution of the Eligible
Substitute Mortgage Loans and the Master Servicer shall promptly deliver the
amended Mortgage Loan Schedule to the related Subservicer, Owner Trustee and
Indenture Trustee.
In connection with the substitution of one or more Eligible Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (such amount,
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a "Substitution Adjustment Amount"), if any, by which the aggregate principal
balance of all such Eligible Substitute Mortgage Loans as of the date of
substitution is less than the aggregate principal balance of all such Deleted
Mortgage Loans (after application of the principal portion of the Monthly
Payments due in the month of substitution that are to be distributed to the
Payment Account in the month of substitution). The Seller shall pay the
Substitution Adjustment Amount to the Master Servicer and the Master Servicer
shall deposit such Substitution Adjustment Amount into the Collection Account
upon receipt.
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ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01 Master Servicer to Assure Servicing. (a) The Master Servicer
shall supervise, or take such actions as are necessary to ensure, the servicing
and administration of the Mortgage Loans and any REO Property in accordance with
this Servicing Agreement and its normal servicing practices, which generally
shall conform to the standards of an institution prudently servicing mortgage
loans for its own account and shall have full authority to do anything it
reasonably deems appropriate or desirable in connection with such servicing and
administration. The Master Servicer may perform its responsibilities relating to
servicing through other agents or independent contractors, but shall not thereby
be released from any of its responsibilities as hereinafter set forth. The
authority of the Master Servicer, in its capacity as master servicer, and any
Subservicer acting on its behalf, shall include, without limitation, the power
to (i) consult with and advise any Subservicer regarding administration of a
related Mortgage Loan, (ii) approve any recommendation by a Subservicer to
foreclose on a related Mortgage Loan, (iii) supervise the filing and collection
of insurance claims and take or cause to be taken such actions on behalf of the
insured Person thereunder as shall be reasonably necessary to prevent the denial
of coverage thereunder, and (iv) effectuate foreclosure or other conversion of
the ownership of the Mortgaged Property securing a related Mortgage Loan,
including the employment of attorneys, the institution of legal proceedings, the
collection of deficiency judgments, the acceptance of compromise proposals, the
filing of claims under any Primary Insurance Policy and the Radian Lender-Paid
PMI Policy, and any other matter pertaining to a delinquent Mortgage Loan. The
authority of the Master Servicer shall include, in addition, the power on behalf
of the Bondholders, the Indenture Trustee or any of them to (i) execute and
deliver customary consents or waivers and other instruments and documents, (ii)
consent to transfer of any related Mortgaged Property and assumptions of the
related Mortgage Notes and Security Instruments (in the manner provided in this
Servicing Agreement) and (iii) collect any Insurance Proceeds and Liquidation
Proceeds. Without limiting the generality of the foregoing, the Master Servicer
and any Subservicer acting on its behalf may, and is hereby authorized, and
empowered by the Indenture Trustee to, execute and deliver, on behalf of itself,
the Bondholders, the Indenture Trustee or any of them, any instruments of
satisfaction, cancellation, partial or full release, discharge and all other
comparable instruments, with respect to the related Mortgage Loans, the
Insurance Policies and the accounts related thereto, and the Mortgaged
Properties. The Master Servicer may exercise this power in its own name or in
the name of a Subservicer.
In accordance with the standards of the preceding paragraph, the Master
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.08, and further as
provided in Section 3.07; provided that the Master Servicer shall not be
obligated to make such advance if, in its good faith judgment, the Master
Servicer determines that such advance to be a Nonrecoverable Advance.
The relationship of the Master Servicer (and of any successor to the
Master Servicer under this Servicing Agreement) to the Indenture Trustee under
this Servicing Agreement is intended by
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the parties to be that of an independent contractor and not that of a joint
venturer, partner or agent; provided, however, that the Master Servicer is
authorized and empowered by the Indenture Trustee, on behalf of the Bondholders
and the Indenture Trustee, in its own name or in the name of any Subservicer,
when the Master Servicer or such Subservicer, as the case may be, believes it is
appropriate in its best judgment to register any Mortgage Loan on the MERS(R)
System, or cause the removal from the registration of any Mortgage Loan on the
MERS(R) System, to execute and deliver, on behalf of the Indenture Trustee and
the Bondholders or any of them, any and all instruments of assignment and other
comparable instruments with respect to such assignment or re-recording of a
Mortgage in the name of MERS, solely as nominee for the Indenture Trustee and
its successors and assigns. Any expenses incurred in connection with the actions
described in the preceding sentence shall be borne by the Master Servicer in
accordance with Section 3.15, with no right of reimbursement; provided, that if,
as a result of MERS discontinuing or becoming unable to continue operations in
connection with the MERS System, it becomes necessary to remove any Mortgage
Loan from registration on the MERS System and to arrange for the assignment of
the related Mortgages to the Indenture Trustee, then any related expenses shall
be reimbursable to the Master Servicer from the Trust.
(b) If the Mortgage relating to a Mortgage Loan did not have a lien senior
to the Mortgage Loan on the related Mortgaged Property as of the related Cut-off
Date, then the Master Servicer, in such capacity, may not consent to the placing
of a lien senior to that of the Mortgage on the related Mortgaged Property.
(c) The Master Servicer or the related Subservicer, as the case may be,
shall be entitled to (A) execute assumption agreements, substitution agreements,
and instruments of satisfaction or cancellation or of full release or discharge,
or any other document contemplated by this Servicing Agreement and other
comparable instruments with respect to the Mortgage Loans and with respect to
the Mortgaged Properties subject to the Mortgages (and the Issuer and the
Indenture Trustee each shall promptly execute any such documents on request of
the Master Servicer and prepared by it) and (B) approve the granting of an
easement thereon in favor of another Person, any alteration or demolition of the
related Mortgaged Property or other similar matters, if it has determined,
exercising its good faith business judgment in the same manner as it would if it
were the owner of the related Mortgage Loan, that the security for, and the
timely and full collectability of, such Mortgage Loan would not be adversely
affected thereby. An assumption pursuant to this Section 3.01 is permitted
solely if the creditworthiness of the prospective purchaser of a Mortgaged
Property meets the same or better underwriting guidelines as those which were
applied to the original borrower and the security for such Mortgage Loan is not
impaired by the assumption. Any fee collected by the Master Servicer or the
related Subservicer for processing such request will be retained by the Master
Servicer or such Subservicer as additional servicing compensation.
(d) Notwithstanding the provisions of Subsection 3.01(a), the Master
Servicer shall not take any action inconsistent with the interests of the
Indenture Trustee or the Bondholders or with the rights and interests of the
Indenture Trustee or the Bondholders under this Servicing Agreement.
(e) The Indenture Trustee shall execute and return to the Master Servicer
any limited powers of attorney and other documents in form as provided to it
necessary or appropriate to enable the Master Servicer to service and administer
the related Mortgage Loans and REO Property.
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Section 3.02 Subservicing Agreements Between Master Servicer and
Subservicers. (a) The Master Servicer may enter into Subservicing Agreements
with Subservicers for the servicing and administration of the Mortgage Loans and
for the performance of any and all other activities of the Master Servicer
hereunder. Each Subservicer shall be either (i) an institution the accounts of
which are insured by the FDIC or (ii) another entity that engages in the
business of originating or servicing mortgage loans comparable to the Mortgage
Loans, and in either case shall be authorized to transact business in the state
or states in which the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Subservicer to perform its obligations hereunder and under the Subservicing
Agreement, and in either case shall be a ▇▇▇▇▇▇▇ Mac or ▇▇▇▇▇▇ Mae approved
mortgage servicer. Any Subservicing Agreement entered into by the Master
Servicer shall include the provision that such Agreement may be immediately
terminated (x) with cause and without any termination fee by any Master Servicer
hereunder or (y) without cause in which case the Master Servicer shall be
responsible for any termination fee or penalty resulting therefrom. In addition,
each Subservicing Agreement shall provide for servicing of the Mortgage Loans
consistent with the terms of this Servicing Agreement. With the consent of the
Indenture Trustee, the Master Servicer and the Subservicers may enter into
Subservicing Agreements and make amendments to the Subservicing Agreements or
enter into different forms of Subservicing Agreements providing for, among other
things, the delegation by the Master Servicer to a Subservicer of additional
duties regarding the administration of the Mortgage Loans; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Servicing Agreement, and that no such amendment
or different form shall be made or entered into which could be reasonably
expected to be materially adverse to the interests of the Bondholders, without
the consent of the Holders of Bonds representing not less than a majority of the
aggregate Bond Principal Balance of the Bonds.
The Master Servicer has entered into Subservicing Agreements with the
Initial Subservicers for the servicing and administration of the Mortgage Loans
and may enter into additional Subservicing Agreements with Subservicers
acceptable to the Indenture Trustee for the servicing and administration of
certain of the Mortgage Loans.
(b) As part of its servicing activities hereunder, the Master Servicer,
for the benefit of the Indenture Trustee and the Bondholders, shall enforce the
obligations of each Subservicer under the related Subservicing Agreement. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Subservicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. The Master Servicer shall pay
the costs of such enforcement at its own expense, but shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement only
to the extent, if any, that such recovery exceeds all amounts due in respect of
the related Mortgage Loan or (ii) from a specific recovery of costs, expenses or
attorneys' fees against the party against whom such enforcement is directed.
(c) The Master Servicer represents that it has entered into a contract
regarding the sale of sub-servicing rights with respect to the Mortgage Loans
with GMAC Mortgage Corporation ("GMAC") and shall transfer the subservicing of
the Mortgage Loans from Countrywide to GMAC
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on or about March 1, 2004. The Indenture Trustee hereby consents to such
transfer with respect to the Mortgage Loans.
Section 3.03 Successor Subservicers. The Master Servicer shall be entitled
to terminate any Subservicing Agreement that may exist in accordance with the
terms and conditions of such Subservicing Agreement and without any limitation
by virtue of this Servicing Agreement; provided, however, that upon termination,
the Master Servicer shall either act as servicer of the related Mortgage Loan or
enter into an appropriate contract with a successor Subservicer acceptable to
the Indenture Trustee pursuant to which such successor Subservicer will be bound
by all relevant terms of the related Subservicing Agreement pertaining to the
servicing of such Mortgage Loan.
Section 3.04 Liability of the Master Servicer. (a) Notwithstanding any
Subservicing Agreement, any of the provisions of this Servicing Agreement
relating to agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Master Servicer shall under all circumstances remain obligated and primarily
liable to the Indenture Trustee and the Bondholders for the servicing and
administering of the Mortgage Loans and any REO Property in accordance with this
Servicing Agreement. The obligations and liability of the Master Servicer shall
not be diminished by virtue of Subservicing Agreements or by virtue of
indemnification of the Master Servicer by any Subservicer, or any other Person.
The obligations and liability of the Master Servicer shall remain of the same
nature and under the same terms and conditions as if the Master Servicer alone
were servicing and administering the related Mortgage Loans. The Master Servicer
shall, however, be entitled to enter into indemnification agreements with any
Subservicer or other Person and nothing in this Servicing Agreement shall be
deemed to limit or modify such indemnification. For the purposes of this
Servicing Agreement, the Master Servicer shall be deemed to have received any
payment on a Mortgage Loan on the date the Subservicer received such payment;
provided, however, that this sentence shall not apply to the Indenture Trustee
as the successor Master Servicer; provided, further, however, that the foregoing
provision shall not affect the obligation of the Master Servicer if it is also
the Indenture Trustee to advance amounts which are not Nonrecoverable Advances.
Any Subservicing Agreement that may be entered into and any transactions
or services relating to the Mortgage Loans involving a Subservicer in its
capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Master Servicer alone, and the Indenture Trustee and the
Bondholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 3.05.
Section 3.05 Assumption or Termination of Subservicing Agreements by
Indenture Trustee. (a) If the Indenture Trustee or a successor Master Servicer
shall assume the servicing obligations of the Master Servicer in accordance with
Section 6.02 below, the Indenture Trustee, to the extent necessary to permit the
Indenture Trustee to carry out the provisions of Section 6.02 with respect to
the Mortgage Loans, shall succeed to all of the rights and obligations of the
Master Servicer under each of the Subservicing Agreements. In such event, the
Indenture Trustee or its designee as the successor master servicer shall be
deemed to have assumed all of the Master Servicer's rights and obligations
therein and to have replaced the Master Servicer as a party to such Subservicing
Agreements to the same extent as if such Subservicing Agreements had been
assigned to the
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Indenture Trustee or its designee as a successor master servicer, except that
the Indenture Trustee or its designee as a successor master servicer shall not
be deemed to have assumed any obligations or liabilities of the Master Servicer
arising prior to such assumption (other than the obligation to make any
Advances) and the Master Servicer shall not thereby be relieved of any liability
or obligations under such Subservicing Agreements arising prior to such
assumption. Nothing in the foregoing shall be deemed to entitle the Indenture
Trustee or its designee as a successor master servicer at any time to receive
any portion of the servicing compensation provided under Section 3.15 except for
such portion as the Master Servicer would be entitled to receive.
(b) In the event that the Indenture Trustee or a successor Master Servicer
assumes the servicing obligations of the Master Servicer under Section 6.02,
upon the reasonable request of the Indenture Trustee or such successor Master
Servicer, the Master Servicer shall at its own expense deliver to the Indenture
Trustee, or to such successor Master Servicer, photocopies of all documents,
files and records, electronic or otherwise, relating to the Subservicing
Agreements and the related Mortgage Loans or REO Property then being serviced
and an accounting of amounts collected and held by it, if any, and will
otherwise cooperate and use its reasonable efforts to effect the orderly and
efficient transfer of the Subservicing Agreements, or responsibilities hereunder
to the Indenture Trustee, or to such successor Master Servicer.
Section 3.06 Collection of Mortgage Loan Payments. (a) The Master Servicer
will coordinate and monitor remittances by Subservicers to it with respect to
the Mortgage Loans in accordance with this Servicing Agreement.
(b) The Master Servicer shall make its best reasonable efforts to collect
or cause to be collected all payments required under the terms and provisions of
the Mortgage Loans and shall follow, and use its best reasonable efforts to
cause Subservicers to follow, collection procedures comparable to the collection
procedures of prudent mortgage lenders servicing mortgage loans for their own
account to the extent such procedures shall be consistent with this Servicing
Agreement. Consistent with the foregoing, the Master Servicer or the related
Subservicer may in its discretion (i) waive or permit to be waived any late
payment charge, prepayment charge, assumption fee, or any penalty interest in
connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or
permit to be suspended or reduced regular monthly payments for a period of up to
six months, or arrange or permit an arrangement with a Mortgagor for a scheduled
liquidation of delinquencies; provided, however, that the Master Servicer or the
related Subservicer may permit the foregoing only if it believes, in good faith,
that recoveries of Monthly Payments will be maximized; provided further,
however, that Monthly Payments may not be suspended during the twelve months
prior to the final maturity of the Bonds. In the event the Master Servicer or
related Subservicer shall consent to the deferment of the due dates for payments
due on a Mortgage Note, the Master Servicer shall nonetheless make an Advance or
shall cause the related Subservicer to make an advance to the same extent as if
such installment were due, owing and delinquent and had not been deferred
through liquidation of the Mortgaged Property; provided, however, that the
obligation of the Master Servicer or the related Subservicer to make an Advance
shall apply only to the extent that the Master Servicer believes, in good faith,
that such advances are not Nonrecoverable Advances.
(c) Within five Business Days after the Master Servicer has determined
that all amounts which it expects to recover from or on account of a Mortgage
Loan have been recovered and that no
11
further Liquidation Proceeds will be received in connection therewith, the
Master Servicer shall cause the related Subservicer to provide to the Master
Servicer a certificate of a Servicing Officer that such Mortgage Loan became a
Liquidated Mortgage Loan as of the date of such determination. The Master
Servicer shall provide to the Indenture Trustee a monthly summary of each
Mortgage Loan that became a Liquidated Mortgage Loan.
(d) The Master Servicer shall establish a segregated account in the name
of the Indenture Trustee (the "Collection Account"), which shall be an Eligible
Account, in which the Master Servicer shall deposit or cause to be deposited any
amounts representing payments on and any collections in respect of the Mortgage
Loans due subsequent to the Cut-off Date (other than in respect of the payments
referred to in the following paragraph) within two Business Days following
receipt thereof (or otherwise on or prior to the Closing Date), including the
following payments and collections received or made by it (without duplication):
(i) all payments of principal, including Principal Prepayments, of
or interest on the Mortgage Loans (including advances by a Subservicer)
received by the Master Servicer directly from Mortgagors or from the
respective Subservicer, net of any portion of the interest thereof
retained by the Subservicer as subservicing fees;
(ii) the aggregate Repurchase Price of the Mortgage Loans purchased
by the Master Servicer pursuant to Section 3.18;
(iii) Net Liquidation Proceeds;
(iv) all proceeds of any Mortgage Loans repurchased by the Seller
pursuant to the Mortgage Loan Sale and Contribution Agreement, and all
Substitution Adjustment Amounts required to be deposited in connection
with the substitution of an Eligible Substitute Mortgage Loan pursuant to
the Mortgage Loan Sale and Contribution Agreement;
(v) Insurance Proceeds, other than Net Liquidation Proceeds,
resulting from any insurance policy maintained on a Mortgaged Property;
(vi) any Advance and any Compensating Interest payments; and
(vii) any other amounts received by the Master Servicer, including
any fees or penalties not retained by a Subservicer, required to be
deposited in the Collection Account pursuant to this Servicing Agreement.
provided, however, that with respect to each Due Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Due Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Master Servicer need not deposit in the Collection Account fees (including
annual fees or assumption fees) or late charge and prepayment penalties, payable
by Mortgagors, each as further described in Section 3.15, or amounts received by
the Subservicer for the accounts of Mortgagors for application towards the
payment of taxes, insurance premiums, assessments and similar items. In the
event any amount not required to
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be deposited in the Collection Account is so deposited, the Master Servicer may
at any time (prior to being terminated under this Servicing Agreement) withdraw
such amount from the Collection Account, any provision herein to the contrary
notwithstanding. The Master Servicer shall keep records that accurately reflect
the funds on deposit in the Collection Account that have been identified by it
as being attributable to the Mortgage Loans and shall hold all collections in
the Collection Account for the benefit of the Owner Trustee, the Indenture
Trustee and the Bondholders, as their interests may appear. The Master Servicer
shall remit all Foreclosure Profits to the Collection Account, to the extent not
payable to the related Subservicer.
Funds in the Collection Account may not be invested with, and shall not be
commingled with, the Master Servicer's own funds or general assets or with funds
respecting payments on mortgage loans or with any other funds not related to the
Bonds. Funds in the Collection Account shall be invested solely in Eligible
Investments, designated in the name of the Indenture Trustee, which shall mature
not later than the Business Day next preceding the third Business Day prior to
each Payment Date next following the date of such investment and shall not be
sold or disposed of prior to maturity. All income and gain realized from any
such investment shall be for the benefit of the Master Servicer or the related
Subservicer. The amount of any losses incurred with respect to any such
investments shall be deposited in the Collection Account by the Master Servicer.
In the event the Indenture Trustee assumes the responsibilities of the
Master Servicer under this Servicing Agreement upon a Servicing Default under
Section 6.01, the Indenture Trustee shall be entitled to reimburse itself for
Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement
of the terminated Master Servicer or any successor Master Servicer.
(e) The Master Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Master Servicer, in one or more accounts meeting the requirements of an
Eligible Account, and invested in Eligible Investments, and in the name of the
Indenture Trustee. The Subservicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan separate and apart from any of its
own funds and general assets and any other funds. Each Subservicer shall make
remittances to the Master Servicer no later than the eighteenth (18th) day of
each month, commencing on the eighteenth (18th) day of the month next following
the Closing Date, or if such eighteenth (18th) day is not a Business Day, the
first Business Day immediately preceding such eighteenth (18th) day.
Section 3.07 Withdrawals from the Collection Account. (a) The Master
Servicer shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on deposit therein pursuant to Section 3.06 that
are attributable to the Mortgage Loans for the following purposes (without
duplication):
(i) to deposit in the Payment Account, by the third Business Day
prior to each Payment Date, the Available Funds required to be distributed
as provided in the Indenture on a Payment Date;
(ii) to the extent deposited to the Collection Account, to reimburse
itself or the related Subservicer for previously unreimbursed expenses
incurred in maintaining individual insurance policies pursuant to Sections
3.10 or 3.11, or Liquidation Expenses, paid pursuant
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to Section 3.13 or otherwise reimbursable pursuant to the terms of this
Servicing Agreement, such withdrawal right being limited to amounts
received on the related Mortgage Loans (other than any Repurchase Price in
respect thereto) which represent late recoveries of the payments for which
such advances were made, or from related Liquidation Proceeds;
(iii) to pay to itself out of each payment received on account of
interest on a Mortgage Loan as contemplated by Section 3.15, an amount
equal to the related Master Servicing Fee (to the extent not retained
pursuant to Section 3.06);
(iv) to pay to itself or the Seller, with respect to any Mortgage
Loan or property acquired in respect thereof that has been purchased or
otherwise transferred to the Seller, the Master Servicer or other entity,
all amounts received thereon and not required to be distributed to
Bondholders as of the date on which the related Purchase Price or
Repurchase Price is determined;
(v) to reimburse the Master Servicer or any Subservicer for any
Advance of its own funds or any advance of such Subservicer's own funds,
the right of the Master Servicer or a Subservicer to reimbursement
pursuant to this subclause (v) being limited to amounts received
(including, for this purpose, the Repurchase Price therefor, Insurance
Proceeds and Liquidation Proceeds) which represent late payments or
recoveries of the principal of or interest on such Mortgage Loan
respecting which such Advance or advance was made;
(vi) to reimburse the Master Servicer or any Subservicer from
Insurance Proceeds or Liquidation Proceeds relating to a particular
Mortgage Loan for amounts expended by the Master Servicer or such
Subservicer pursuant to Section 3.13 in good faith in connection with the
restoration of the related Mortgaged Property which was damaged by the
Uninsured Cause or in connection with the liquidation of such Mortgage
Loan;
(vii) to pay the Master Servicer or any Subservicer (payment to any
Subservicer to be subject to prior payment to the Master Servicer of an
amount equal to the Subservicing Fee), as appropriate, from Liquidation
Proceeds or Insurance Proceeds received in connection with the liquidation
of any Mortgage Loan, the amount which it or such Subservicer would have
been entitled to receive under subclause (iii) of this Subsection 3.07(a)
as servicing compensation on account of each defaulted Monthly Payment on
such Mortgage Loan if paid in a timely manner by the related Mortgagor,
but only to the extent that the aggregate of Liquidation Proceeds and
Insurance Proceeds with respect to such Mortgage Loan, after any
reimbursement to the Master Servicer or any Subservicer, pursuant to other
subclauses of this Subsection 3.07(a), exceeds the outstanding Stated
Principal Balance of such Mortgage Loan plus accrued and unpaid interest
thereon at the related Mortgage Rate less the Servicing Fee Rate to but
not including the date of payment (in any event, the amount of servicing
compensation received by a Subservicer and the Master Servicer with
respect to any defaulted Monthly Payment shall not exceed the applicable
Servicing Fee);
(viii) to reimburse the Master Servicer or any Subservicer for
advances of funds pursuant to Article III, the right to reimbursement
pursuant to this subclause being limited to amounts received on the
related Mortgage Loan (including, for this purpose, the
14
Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds)
which represent late recoveries of the payments for which such advances
were made;
(ix) to reimburse the Master Servicer or any Subservicer for any
Nonrecoverable Advance previously made, and not reimbursed pursuant to
this Subsection 3.07(a);
(x) to deposit in the Payment Account, by the third Business Day
prior to each Payment Date, the Indenture Trustee Fee and the Derivative
Contract Payment Amount;
(xi) to withdraw any other amount deposited in the Collection
Account that was not required to be deposited therein pursuant to Section
3.06;
(xii) to pay Radian the premium with respect to the Radian
Lender-Paid PMI Policy;
(xiii) to pay the Owner Trustee the Owner Trustee Fee;
(xiv) to reimburse the Master Servicer for costs associated with the
environmental report specified in Section 3.13(e); and
(xv) clear and terminate the Collection Account following a
termination of the Trust pursuant to Section 8.01 of the Trust Agreement.
In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v), (vi),
(vii) and (viii), the Master Servicer's entitlement thereto is limited to
collections or other recoveries on the related Mortgage Loan, and the Master
Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, for the purpose of justifying any withdrawal from the
Collection Account pursuant to such clauses. Notwithstanding any other provision
of this Servicing Agreement, the Master Servicer shall be entitled to reimburse
itself for any previously unreimbursed expenses incurred pursuant to Section
3.13 or otherwise reimbursable expenses incurred pursuant to the terms of this
Servicing Agreement, but only to the extent of collections or other recoveries
on the related Mortgage Loan.
(b) Notwithstanding the provisions of this Section 3.07, the Master
Servicer may, but is not required to, allow the Subservicers to deduct from
amounts received by them or from the related account maintained by a
Subservicer, prior to deposit in the Collection Account, any portion to which
such Subservicers are entitled as servicing compensation (including income on
Eligible Investments) or reimbursement of any reimbursable Advances or Servicing
Advances made by such Subservicers.
15
Section 3.08 Collection of Taxes Assessments and Similar Items; Servicing
Accounts.
(a) The Master Servicer shall establish and maintain or cause the related
Subservicer to establish and maintain, one or more Servicing Accounts. The
Master Servicer or a Subservicer will deposit and retain therein all collections
from the Mortgagors for the payment of taxes, assessments, insurance premiums,
or comparable items as agent of the Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in trust by the
Master Servicer or a Subservicer (and its successors and assigns) in the name of
the Indenture Trustee. Such Servicing Accounts shall be Eligible Accounts and if
permitted by applicable law, invested in Eligible Investments held in trust by
the Master Servicer or a Subservicer as described above and maturing, or be
subject to redemption or withdrawal, no later than the date on which such funds
are required to be withdrawn, and in no event later than 45 days after the date
of investment; withdrawals of amounts from the Servicing Accounts may be made
only to effect timely payment of taxes, assessments, insurance premiums, or
comparable items, to reimburse the Master Servicer or a Subservicer for any
advances made with respect to such items, to refund to any Mortgagors any sums
as may be determined to be overages, to pay interest, if required, to Mortgagors
on balances in the Servicing Accounts or to clear and terminate the Servicing
Accounts at or any time after the termination of this Servicing Agreement.
Section 3.09 Access to Certain Documentation and Information Regarding the
Mortgage Loans. The Master Servicer shall provide, and shall cause any
Subservicer to provide, to the Indenture Trustee and the Owner Trustee access to
the documentation regarding the related Mortgage Loans and REO Property and to
the Bondholders, the FDIC, and the supervisory agents and examiners of the FDIC
access to the documentation regarding the related Mortgage Loans required by
applicable regulations, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the Master
Servicer or the Subservicers that are designated by these entities; provided,
however, that, unless otherwise required by law, the Master Servicer or the
Subservicer shall not be required to provide access to such documentation if the
provision thereof would violate the legal right to privacy of any Mortgagor;
provided, further, however, that the Indenture Trustee and the Owner Trustee
shall coordinate their requests for such access so as not to impose an
unreasonable burden on, or cause an unreasonable interruption of, the business
of the Master Servicer or any Subservicer. The Master Servicer and the
Subservicers shall allow representatives of the above entities to photocopy any
of the documentation and shall provide equipment for that purpose at a charge
that covers their own actual out-of-pocket costs.
Section 3.10 Maintenance of Primary Insurance Policies and the Radian
Policy; Collection Thereunder.
(a) The Master Servicer shall, or shall cause the related Subservicer to,
exercise its best reasonable efforts to maintain and keep in full force and
effect each Primary Insurance Policy by a Qualified Insurer, or other insurer
satisfactory to the Rating Agencies, with respect to each Mortgage Loan as to
which as of the Cut-off Date a Primary Insurance Policy was in effect and the
original principal amount of the related Mortgage Note exceeded 80% of the
Original Value in an amount at least equal to the excess of such original
principal amount over 75% of such Original Value until the principal amount of
any such first lien Mortgage Loan is reduced below 80% of the Original
16
Value or, based upon a new appraisal, the principal amount of such first lien
Mortgage Loan represents less than 80% of the new appraised value. The Master
Servicer shall, or shall cause the related Subservicer to, effect the timely
payment of the premium on each Primary Insurance Policy. The Master Servicer and
the related Subservicer shall have the power to substitute for any Primary
Insurance Policy another substantially equivalent policy issued by another
Qualified Insurer, provided, that, such substitution shall be subject to the
condition that it will not cause the ratings on the Bonds to be downgraded or
withdrawn as evidenced by a writing from each Rating Agency.
(b) The Master Servicer shall take all such actions on behalf of the Trust
as are necessary to service, maintain and administer the Radian Lender-Paid PMI
Policy and to enforce the Trust's rights under the Radian Lender-Paid PMI
Policy. The Master Servicer shall effect the timely payment of the Radian PMI
Policy Fee. To the extent the Mortgagor with respect to a Radian PMI Insured
Loan is delinquent, the Master Servicer shall advance the related Radian PMI
Policy Fee as a Servicing Advance. Except as expressly set forth herein, the
Master Servicer shall have full authority on behalf of the Trust to do anything
it reasonably deems appropriate or desirable in connection with the servicing,
maintenance and administration of the Radian Lender-Paid PMI Policy. The Master
Servicer shall make its best reasonable efforts to file all insured claims under
the Radian Lender-Paid PMI Policy and collect from Radian all Insurance Proceeds
due to the Trust under the Radian Lender-Paid PMI Policy. The Master Servicer
shall not take, or permit any Subservicer to take, any action which would result
in non-coverage under the Radian Lender-Paid PMI Policy of any loss which, but
for the actions of the Master Servicer or any Subservicer, would have been
covered thereunder. To the extent coverage is available, the Master Servicer
shall keep or cause to be kept in full force and effect the Radian Lender-Paid
PMI Policy for the life of the Mortgage Loan. Neither the Master Servicer nor
the Indenture Trustee shall terminate the Radian Lender- Paid PMI Policy with
respect to any Mortgage Loan, except in accordance with the terms thereof. The
Master Servicer shall cooperate with Radian and shall use its best efforts to
furnish all reasonable aid, evidence and information in the possession of the
Master Servicer or to which the Master Servicer has access with respect to any
Radian PMI Insured Loan.
(c) If Radian remains in default pursuant to the Radian Lender-Paid PMI
Policy and may be terminated thereunder without payment of any further premium
for such policy, the Master Servicer shall use its best efforts to replace such
policy with a substitute policy at the same premium rate that is charged under
the Radian Lender-Paid PMI Policy and with coverage for losses in amounts
substantially similar to those under the Radian Lender-Paid PMI Policy.
(d) With respect to the Radian PMI Insured Loans covered by a Radian
Lender-Paid PMI Policy, the Master Servicer will confirm with Radian, and Radian
will certify to the Indenture Trustee, on or before January 31, 2004, that the
Mortgage Loans indicated on the Mortgage Loan Schedule as being covered by
Radian Lender-Paid PMI Policy are so covered.
Section 3.11 Maintenance of Hazard Insurance and Fidelity Coverage. (a)
The Master Servicer shall maintain and keep, or cause each Subservicer to
maintain and keep, with respect to each Mortgage Loan and REO Property, in full
force and effect hazard insurance (fire insurance with extended coverage) equal
to at least the lesser of the Stated Principal Balance of the Mortgage Loan or
the current replacement cost of the Mortgaged Property, and containing a
standard mortgagee clause, provided, however, that the amount of hazard
insurance may not be less than the amount
17
necessary to prevent loss due to the application of any co-insurance provision
of the related policy. Unless applicable state law requires a higher deductible,
the deductible on such hazard insurance policy may be no more than $1,000 or 1%
of the applicable amount of coverage, whichever is less. In the case of a
condominium unit or a unit in a planned unit development, the required hazard
insurance shall take the form of a multi-peril policy covering the entire
condominium project or planned unit development, in an amount equal to at least
100% of the insurable value based on replacement cost.
(b) Any amounts collected by the Master Servicer or a Subservicer under
any such hazard insurance policy (other than amounts to be applied to the
restoration or repair of the Mortgaged Property or amounts released to the
Mortgagor in accordance with the Master Servicer's or a Subservicer's normal
servicing procedures, the Mortgage Note, the Security Instrument or applicable
law) shall be deposited initially in a Collection Account, for transmittal to
the Payment Account, subject to withdrawal pursuant to Section 3.07.
(c) Any cost incurred by a Master Servicer or a Subservicer in maintaining
any such hazard insurance policy shall not be added to the amount owing under
the Mortgage Loan for the purpose of calculating monthly distributions to
Bondholders, notwithstanding that the terms of the Mortgage Loan so permit. Such
costs shall be recoverable by the Master Servicer or a Subservicer out of
related late payments by the Mortgagor or out of Insurance Proceeds or
Liquidation Proceeds or by the Master Servicer from the Repurchase Price, to the
extent permitted by Section 3.07.
(d) No earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired with respect to a Security
Instrument other than pursuant to such applicable laws and regulations as shall
at any time be in force and shall require such additional insurance. When, at
the time of origination of the Mortgage Loan or at any subsequent time, the
Mortgaged Property is located in a federally designated special flood hazard
area, the Master Servicer shall use its best reasonable efforts to cause with
respect to the Mortgage Loans and each REO Property flood insurance (to the
extent available and in accordance with mortgage servicing industry practice) to
be maintained. Such flood insurance shall cover the Mortgaged Property,
including all items taken into account in arriving at the Appraised Value on
which the Mortgage Loan was based, and shall be in an amount equal to the lesser
of (i) the Stated Principal Balance of the related Mortgage Loan and (ii) the
minimum amount required under the terms of coverage to compensate for any damage
or loss on a replacement cost basis, but not more than the maximum amount of
such insurance available for the related Mortgaged Property under either the
regular or emergency programs of the National Flood Insurance Program (assuming
that the area in which such Mortgaged Property is located is participating in
such program). Unless applicable state law requires a higher deductible, the
deductible on such flood insurance may not exceed $1,000 or 1% of the applicable
amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections 3.11
(a) and (d) and there shall have been a loss which would have been covered by
such insurance had it been maintained, the Master Servicer shall pay, or cause
the related Subservicer to pay, for any necessary repairs.
18
(f) The Master Servicer shall present, or cause the related Subservicer to
present, claims under any applicable Primary Insurance Policy or the related
hazard insurance or flood insurance policy.
(g) The Master Servicer shall obtain and maintain at its own expense and
for the duration of this Servicing Agreement and shall cause each Subservicer to
obtain and maintain a blanket fidelity bond and an errors and omissions
insurance policy covering such Person's officers, employees and other persons
acting on its behalf in connection with its activities under this Servicing
Agreement or the related Subservicing Agreement. The amount of coverage shall be
at least equal to the coverage maintained by the Master Servicer acceptable to
▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac to service loans for it or otherwise in an amount as
is commercially available at a cost that is generally not regarded as excessive
by industry standards. The Master Servicer shall promptly notify the Indenture
Trustee of any material change in the terms of such bond or policy. The Master
Servicer shall provide annually to the Indenture Trustee a certificate of
insurance that each such bond and policy are in effect. If any such bond or
policy ceases to be in effect, the Master Servicer shall, to the extent
possible, give the Indenture Trustee ten days' notice prior to any such
cessation and shall use its reasonable best efforts to obtain a comparable
replacement bond or policy, as the case may be. Any amounts relating to the
Mortgage Loans collected under each such bond or policy shall be deposited
initially in a Collection Account for transmittal to the Payment Account,
subject to withdrawal pursuant to Section 3.07.
Section 3.12 Due-on-Sale Clauses; Assumption Agreements. (a) In any case
in which the Master Servicer is notified by any Mortgagor or Subservicer that a
Mortgaged Property relating to a Mortgage Loan has been or is about to be
conveyed by the Mortgagor, the Master Servicer shall enforce, or shall instruct
such Subservicer to enforce, any due-on-sale clause contained in the related
Security Instrument to the extent permitted under the terms of the related
Mortgage Note and by applicable law. The Master Servicer or the related
Subservicer may repurchase a Mortgage Loan at the Repurchase Price when the
Master Servicer requires acceleration of the Mortgage Loan, but only if the
Master Servicer is satisfied, as evidenced by an Officer's Certificate delivered
to the Indenture Trustee, that either (i) such Mortgage Loan is in default or
default is reasonably foreseeable or (ii) if such Mortgage Loan is not in
default or default is not reasonably foreseeable, such repurchase will have no
adverse tax consequences for the Trust Estate or any Securityholder. If the
Master Servicer reasonably believes that such due-on-sale clause cannot be
enforced under applicable law or if the Mortgage Loan does not contain a
due-on-sale clause, the Master Servicer is authorized, and may authorize any
Subservicer, to consent to a conveyance subject to the lien of the Mortgage, and
to take or enter into an assumption agreement from or with the Person to whom
such property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the related Mortgage Note and unless prohibited by
applicable state law, such Mortgagor remains liable thereon, on condition,
however, that the related Mortgage Loan shall continue to be covered by a hazard
policy and (if so covered before the Master Servicer or the related Subservicer
enters into such agreement) by any Primary Insurance Policy. In connection with
any such assumption, no material term of the related Mortgage Note may be
changed. The Master Servicer shall forward to the Indenture Trustee the original
copy of such assumption agreement, which copy shall be added by the Indenture
Trustee to the related Mortgage File and which shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. A portion, equal to up to
2% of the Stated Principal Balance of the related Mortgage Loan, of any fee or
19
additional interest collected by the Master Servicer or the related Subservicer
for consenting in any such conveyance or entering into any such assumption
agreement may be retained by the related Subservicer as additional servicing
compensation.
(b) Notwithstanding the foregoing paragraph or any other provision of this
Servicing Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or any conveyance by the
Mortgagor of the related Mortgaged Property or assumption of a Mortgage Loan
which the Master Servicer reasonably believes it may be restricted by law from
preventing, for any reason whatsoever or if the exercise of such right would
impair or threaten to impair any recovery under any applicable insurance policy.
Section 3.13 Realization Upon Defaulted Mortgage Loans. (a) The Master
Servicer shall, or shall direct the related Subservicer to, foreclose upon or
otherwise comparably convert the ownership of properties securing any Mortgage
Loans that come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.06, except that the Master Servicer shall not, and shall not direct
the related Subservicer to, foreclose upon or otherwise comparably convert a
Mortgaged Property if there is evidence of toxic waste or other environmental
hazards thereon unless the Master Servicer follows the procedures in Subsection
(e) below.
(b) [Reserved]
(c) In connection with such foreclosure or other conversion, the Master
Servicer in conjunction with the related Subservicer, if any, shall use its best
reasonable efforts to preserve REO Property and to realize upon defaulted
Mortgage Loans in such manner (including short sales) as to maximize the receipt
of principal and interest by the Bondholders, taking into account, among other
things, the timing of foreclosure and the considerations set forth in Subsection
3.13(d). 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 restoration of any property unless it determines in good faith (i)
that such restoration or foreclosure will increase the proceeds of liquidation
of the Mortgage Loan to Bondholders after reimbursement to itself for such
expenses and (ii) that such expenses will be recoverable to it either through
Liquidation Proceeds (respecting which it shall have priority for purposes of
reimbursements from the Collection Account pursuant to Section 3.07) or through
Insurance Proceeds (respecting which it shall have similar priority). The Master
Servicer shall be responsible for all other costs and expenses incurred by it in
any such proceedings; provided, however, that it shall be entitled to
reimbursement thereof (as well as its normal servicing compensation), and in
respect of any Subservicer only, to receive Foreclosure Profits as additional
servicing compensation to the extent that transfers or withdrawals from the
Collection Account with respect thereto are permitted under Section 3.07. Any
income from or other funds (net of any income taxes) generated by REO Property
shall be deemed for purposes of this Servicing Agreement to be Insurance
Proceeds.
(d) The Trust Estate shall not acquire any real property (or any personal
property incident to such real property) except in connection with a default or
reasonably foreseeable default of a Mortgage Loan. In the event that the Trust
Estate acquires any real property (or personal property
20
incident to such real property) in connection with a default or imminent default
of a Mortgage Loan, such property shall be disposed of by the Master Servicer
(or its agent) on behalf of the Trust Estate within two years after its
acquisition by the Trust Estate.
(e) With respect to any Mortgage Loan as to which the Master Servicer or a
Subservicer has received notice of, or has actual knowledge of, the presence of
any toxic or hazardous substance on the Mortgaged Property, the Master Servicer
shall promptly notify the Indenture Trustee and the Owner Trustee and shall act
in accordance with any such directions and instructions provided by the
Indenture Trustee, as pledgee of the Issuer. If the Indenture Trustee has not
provided directions and instructions to the Master Servicer in connection with
any such Mortgage Loan within 30 days of a request by the Master Servicer for
such directions and instructions, then the Master Servicer shall take such
action as it deems to be in the best economic interest of the Trust Estate
(other than proceeding against the Mortgaged Property) and is hereby authorized
at such time as it deems appropriate to release such Mortgaged Property from the
lien of the related Mortgage. The parties hereto acknowledge that the Master
Servicer shall not obtain on behalf of the Issuer a deed as a result or in lieu
of foreclosure, and shall not otherwise acquire possession of or title to, or
commence any proceedings to acquire possession of or title to, or take any other
action with respect to, any Mortgaged Property, if the Owner Trustee or the
Indenture Trustee could reasonably be considered to be a responsible party for
any liability arising from the presence of any toxic or hazardous substance on
the Mortgaged Property, unless the Owner Trustee or the Indenture Trustee has
been indemnified to its reasonable satisfaction against such liability.
Section 3.14 Indenture Trustee to Cooperate; Release of Mortgage Files.
(a) Upon payment in full of any Mortgage Loan or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer will immediately notify the
Indenture Trustee by a certification signed by a Servicing Officer in the form
of the request for release (the "Request for Release") attached hereto as
Exhibit B (which certification shall include a statement to the effect that all
amounts received or to be received in connection with such payment which are
required to be deposited in the Payment Account have been or will be so
deposited) and shall request delivery to the Master Servicer or Subservicer, as
the case may be, of the Mortgage File. Upon receipt of such certification and
request, the Custodian shall release the related Mortgage File to the Master
Servicer or Subservicer and execute and deliver to the Master Servicer, without
recourse, the request for reconveyance, deed of reconveyance or release or
satisfaction of mortgage or such instrument releasing the lien of the Security
Instrument (furnished by the Master Servicer), together with the Mortgage Note
with written evidence of cancellation thereon. In connection with the
satisfaction of any MOM Loan, the Master Servicer is authorized to cause the
removal from the registration on the MERS(R) System of such Mortgage.
(b) From time to time as is appropriate, for the servicing or foreclosure
of any Mortgage Loan or collection under an insurance policy, the Master
Servicer may deliver to the Custodian a Request for Release signed by a
Servicing Officer on behalf of the Master Servicer in substantially
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the form attached as Exhibit B hereto. Upon receipt of the Request for Release,
the Indenture Trustee shall deliver the Mortgage File or any document therein to
the Master Servicer or Subservicer, as the case may be, as bailee for the
Indenture Trustee.
(c) The Master Servicer shall cause each Mortgage File or any document
therein released pursuant to Subsection 3.14(b) to be returned to the Indenture
Trustee, when the need therefor no longer exists, and in any event within 21
days of the Master Servicer's receipt thereof, unless the Mortgage Loan has
become a Liquidated Mortgage Loan and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Collection Account or such Mortgage
File is being used to pursue foreclosure or other legal proceedings. Prior to
return of a Mortgage File or any document to the Indenture Trustee, the Master
Servicer, the related insurer or Subservicer to whom such file or document was
delivered shall retain such file or document in its respective control as bailee
for the Indenture Trustee unless the Mortgage File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, to initiate or pursue legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non- judicially, and
the Master Servicer has delivered to the Indenture Trustee a certificate of a
Servicing Officer certifying as to the name and address of the Person to which
such Mortgage File or such document was delivered and the purpose or purposes of
such delivery. If a Mortgage Loan becomes a Liquidated Mortgage Loan, the
Indenture Trustee shall deliver the Request for Release with respect thereto to
the Master Servicer and upon deposit of the related Liquidation Proceeds in the
Collection Account.
(d) The Indenture Trustee shall execute and deliver to the Master Servicer
any court pleadings, requests for trustee's sale or other documents necessary to
(i) the foreclosure or trustee's sale with respect to a Mortgaged Property; (ii)
any legal action brought to obtain judgment against any Mortgagor on the
Mortgage Note or Security Instrument; (iii) obtain a deficiency judgment against
the Mortgagor; or (iv) enforce any other rights or remedies provided by the
Mortgage Note or Security Instrument or otherwise available at law or equity.
Together with such documents or pleadings the Master Servicer shall deliver to
the Indenture Trustee a certificate of a Servicing Officer in which it requests
the Indenture Trustee to execute the pleadings or documents. The certificate
shall certify and explain the reasons for which the pleadings or documents are
required. It shall further certify that the Indenture Trustee's execution and
delivery of the pleadings or documents will not invalidate any insurance
coverage under the insurance policies or invalidate or otherwise affect the lien
of the Security Instrument, except for the termination of such a lien upon
completion of the foreclosure or trustee's sale.
Section 3.15 Master Servicing Compensation. (a) As compensation for its
activities hereunder, the Master Servicer shall be entitled to receive the
Servicing Fee from full payments of accrued interest on each Mortgage Loan. The
Master Servicer shall be solely responsible for paying any and all fees with
respect to a Subservicer and the Trust Estate shall not bear any fees, expenses
or other costs directly associated with any Subservicer.
(b) The Master Servicer or the related Subservicer may retain additional
servicing compensation in the form of prepayment charges, if any, a portion of
the assumption fees up to 2% of the Stated Principal Balance of the related
Mortgage Loan, tax service fees, fees for statement of account or payoff, late
payment charges, or otherwise, to the extent such fees are collected from the
22
related Mortgagors or, with respect to a Liquidated Mortgage Loan, to the extent
such fees have accrued. The Master Servicer shall be required to pay all
expenses it incurs in connection with servicing activities under this Servicing
Agreement and shall not be entitled in connection with servicing activities
under this Servicing Agreement to reimbursement except as provided in this
Servicing Agreement. Expenses to be paid by the Master Servicer under this
Subsection 3.15(b) shall include payment of the expenses of the accountants
retained pursuant to Section 3.17.
Section 3.16 Annual Statements of Compliance. No later than March 1 of
each year, commencing in March 2004, the Master Servicer at its own expense
shall deliver to the Indenture Trustee, with a copy to the Rating Agencies, an
Officer's Certificate stating, as to the signer thereof, that (i) a review of
the activities of the Master Servicer during the preceding calendar year and of
performance under this Servicing Agreement has been made under such officer's
supervision, (ii) to the best of such officer's knowledge, based on such review,
the Master Servicer has fulfilled all its obligations under this Servicing
Agreement for 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 including the steps being taken by the Master Servicer
to remedy such default; (iii) a review of the activities of each Subservicer
during the Subservicer's most recently ended calendar year on or prior to
December 31 of the preceding year and its performance under its Subservicing
Agreement has been made under such officer's supervision; and (iv) to the best
of the Servicing Officer's knowledge, based on his review and the certification
of an officer of the Subservicer (unless the Servicing Officer has reason to
believe that reliance on such certification is not justified), either each
Subservicer has performed and fulfilled its duties, responsibilities and
obligations under this Servicing Agreement and its Subservicing Agreement in all
material respects throughout the year, or, if there has been a default in
performance or fulfillment of any such duties, responsibilities or obligations,
specifying the nature and status of each such default known to the Servicing
Officer. Copies of such statements shall be provided by the Master Servicer to
the Bondholders upon request or by the Indenture Trustee at the expense of the
Master Servicer should the Master Servicer fail to provide such copies.
Section 3.17 Annual Independent Public Accountants' Servicing Report. (a)
No later than March 1 of each year, commencing in March 2004, the Master
Servicer, at its expense, shall cause a firm of independent public accountants
who are members of the American Institute of Certified Public Accountants and
who are KPMG LLP (or a successor thereof) to furnish a statement to the Master
Servicer, which will be provided to the Indenture Trustee and the Rating
Agencies, to the effect that, in connection with the firm's examination of the
Master Servicer's financial statements as of the end of the preceding calendar
year, nothing came to their attention that indicated that the Master Servicer
was not in compliance with Sections 3.06, 3.07 and 3.08 except for (i) such
exceptions as such firm believes to be immaterial and (ii) such other exceptions
as are set forth in such statement.
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(b) No later than March 1 of each year, commencing in March 2004, the
Master Servicer, at its expense, shall or shall cause each Subservicer to cause
a nationally recognized firm of independent certified public accountants to
furnish to the Master Servicer or such Subservicer a report stating that (i) it
has obtained a letter of representation regarding certain matters from the
management of the Master Servicer or such Subservicer which includes an
assertion that the Master Servicer or such Subservicer has complied with certain
minimum mortgage loan servicing standards (to the extent applicable to
residential mortgage loans) identified in the Uniform Single Attestation Program
for Mortgage Bankers established by the Mortgage Bankers Association of America
with respect to the servicing of first and second lien conventional single
family mortgage loans during the most recently completed calendar year and (ii)
on the basis of an examination conducted by such firm in accordance with
standards established by the American Institute of Certified Public Accountants,
such representation is fairly stated in all material respects, subject to such
exceptions and other qualifications that may be appropriate. Immediately upon
receipt of such report, the Master Servicer shall or shall cause each
Subservicer to furnish a copy of such report to the Indenture Trustee and the
Rating Agencies.
Section 3.18 Optional Purchase of Defaulted Mortgage Loans. The Master
Servicer may, on behalf of the Issuer, but is not obligated to, repurchase from
the Issuer any Mortgage Loan delinquent in payment for a period of 90 days or
longer for a price equal to the Repurchase Price therefor. In addition, the
Master Servicer must repurchase any Mortgage Loan which does not satisfy the
requirements of 3.01(d) at a price equal to the Repurchase Price. Any such
purchase shall be accomplished as provided in Subsection 2.03 hereof.
Notwithstanding the foregoing, the Indenture Trustee, whether acting as
Indenture Trustee or in the capacity of successor Master Servicer, shall have no
obligation hereunder or under any other Basic Document to repurchase any
Mortgage Loan.
Section 3.19 Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Master Servicer shall prepare and deliver all federal and state information
reports when and as required by all applicable state and federal income tax
laws. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Master Servicer or Subservicer shall make reports of
foreclosures and abandonments of any mortgaged property for each year beginning
in 2003, the Master Servicer or Subservicer shall file reports relating to each
instance occurring during the previous calendar year in which the Master
Servicer (i) acquires an interest in any Mortgaged Property through foreclosure
or other comparable conversion in full or partial satisfaction of a Mortgage
Loan, or (ii) knows or has reason to know that any Mortgaged Property has been
abandoned. The reports from the Master Servicer or Subservicer shall be in form
and substance sufficient to meet the reporting requirements imposed by Section
6050J, Section 6050H (reports relating to mortgage interest received) and
Section 6050P of the Code (reports relating to cancellation of indebtedness).
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ARTICLE IV
Servicing Certificate
Section 4.01 Remittance Reports. On the Business Day following each
Determination Date, the Master Servicer shall deliver to the Indenture Trustee a
report, prepared as of the close of business on the Determination Date (the
"Remittance Report"), in the form of a magnetic tape or disk or such other
method as to which the Master Servicer and Indenture Trustee shall agree. The
Remittance Report and any written information supplemental thereto shall include
such information with respect to the Mortgage Loans that is reasonably available
to the Master Servicer and that is required by the Indenture Trustee for
purposes of making the calculations and providing the reports referred to in the
Indenture, as set forth in written specifications or guidelines issued by the
Indenture Trustee from time to time.
In addition, prior to each Payment Date, the Master Servicer shall
determine the total amount of Realized Losses, if any, that resulted from any
Cash Liquidation, Debt Service Reduction, Deficient Valuation or REO Disposition
that occurred during the related Collection Period. The amount of each Realized
Loss shall be evidenced by an Officer's Certificate delivered to the Indenture
Trustee with the related Remittance Report.
The determination by the Master Servicer of such amounts shall, in the
absence of obvious error, be presumptively deemed to be correct for all purposes
hereunder and the Owner Trustee and Indenture Trustee shall be protected in
relying upon the same without any independent check or verification. The
Indenture Trustee shall have no obligation to recompute, recalculate or verify
any information provided to it by the Master Servicer.
Section 4.02 Reserved.
Section 4.03 Reserved.
Section 4.04 Advances. If any Monthly Payment on a Mortgage Loan that was
due on the immediately preceding Due Date or due during the related Collection
Period and delinquent on the Determination Date is delinquent other than as a
result of application of the Relief Act, the Master Servicer will deposit in the
Collection Account not later than the third Business Day immediately preceding
the related Payment Date an amount equal to such Monthly Payment net of the
related Servicing Fee for such Mortgage Loan, except to the extent the Master
Servicer or the related Subservicer determines any such advance to be
nonrecoverable from Liquidation Proceeds, Insurance Proceeds or future payments
on any Mortgage Loan. Subject to the foregoing and in the absence of such a
determination, the Master Servicer shall continue to make such advances through
the date that the related Mortgaged Property has, in the judgment of the Master
Servicer, been completely liquidated. No later than the fourth Business Day
preceding each Payment Date, the Master Servicer shall present an Officer's
Certificate to the Indenture Trustee with respect to the Mortgage Loans, (i)
stating that the Master Servicer elects not to make an Advance in a stated
amount and (ii) detailing the reason it deems the advance to be a Nonrecoverable
Advance. The Master Servicer will
25
include in the Remittance Report a list of each Mortgage Loan for which it does
not make an Advance in accordance with this Section.
Such Advances may be made in whole or in part from funds in the Collection
Account being held for future distribution or withdrawal on or in connection
with Payment Dates in subsequent months. Any funds being held for future
distribution to Securityholders and so used shall be replaced by the Master
Servicer from its own funds by deposit in the Collection Account on or before
the fourth Business Day preceding any Payment Date to the extent that funds in
the Collection Account with respect to such Payment Date shall be less than
payments to Securityholders required to be made on such date.
In the event that the Master Servicer determines that, with respect to any
Payment Date, it will be unable to deposit in the Collection Account an amount
equal to the Advance required to be made not later than the third Business Day
immediately preceding the related Payment Date in the amount determined by the
Master Servicer pursuant to this Section 4.04, it shall give notice to the
Indenture Trustee of its inability to Advance (such notice may be given by
telecopy), not later than 4:00 PM, New York time, on the third Business Day
immediately preceding the related Payment Date, specifying the portion of such
amount that it will be unable to deposit. Not later than 12:00 PM, New York
time, on the related Payment Date, unless by such time the Master Servicer shall
have directly or indirectly deposited in the Payment Account the entire amount
of the Advances required to be made for the related Payment Date, pursuant to
this Section 4.04, the Indenture Trustee shall (a) terminate all of the rights
and obligations of the Master Servicer under this Servicing Agreement in
accordance with Section 6.01 and (b) assume the rights and obligations of the
Master Servicer hereunder, including the obligation to deposit in the Payment
Account an amount equal to the Advance for the Payment Date.
Section 4.05 Compensating Interest Payments. The Master Servicer shall
deposit in the Collection Account not later than the third Business Day
preceding the Payment Date an amount equal to the Compensating Interest for the
related Determination Date. The Master Servicer shall not be entitled to any
reimbursement of any Compensating Interest payment.
Section 4.06 Exchange Act Reporting. (a) The Indenture Trustee and the
Master Servicer shall reasonably cooperate with the Issuer and the Depositor in
connection with the Trust's satisfying the reporting requirements under the
Exchange Act. The Indenture Trustee shall prepare on behalf of the Trust any
Forms 8-K and 10-K customary for similar securities as required by the Exchange
Act and the Rules and Regulations of the Commission thereunder, and the Master
Servicer shall sign (or shall cause another entity acceptable to the Commission
to sign) and the Indenture Trustee shall file (via the Commission's Electronic
Data Gathering and Retrieval System) such forms on behalf of the Depositor or
Issuer (or such other entity). The Depositor and the Issuer hereby grant to the
Indenture Trustee a limited power of attorney to execute any Form 8-K and file
each such document on behalf of the Depositor and the Issuer. Such power of
attorney shall continue until the earlier of (i) receipt by the Indenture
Trustee from the Depositor and the Issuer of written termination of such power
of attorney and (ii) the termination of the Trust. Notwithstanding anything
herein or in the Indenture to the contrary, the Master Servicer, and not the
Indenture Trustee, shall be responsible for executing each Form 10-K filed on
behalf of the Trust.
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(b) Each Form 8-K shall be filed by the Indenture Trustee within 15 days
after each Payment Date, with a copy of the statement to the Bondholders for
such Payment Date as an exhibit thereto. Prior to March 30th of each year (or
such earlier date as may be required or permitted by the Exchange Act and the
Rules and Regulations of the Commission), the Indenture Trustee shall file a
Form 10-K, in substance as required by applicable law or applicable Commission
staff's interpretations. The Indenture Trustee shall prepare the Form 10-K and
provide the Master Servicer with the Form 10-K no later than March 20th of each
year. The Master Servicer shall execute such Form 10-K upon its receipt and
shall provide the original of such executed Form 10-K to the Indenture Trustee
no later than March 25th of each year. Such Form 10-K shall include as exhibits
the Master Servicer's annual statement of compliance described under Section
3.16 and the accountant's report described under Section 3.17, in each case to
the extent they have been timely delivered to the Indenture Trustee. If they are
not so timely delivered, the Indenture Trustee shall file an amended Form 10-K
including such documents as exhibits reasonably promptly after they are
delivered to the Indenture Trustee. The Indenture Trustee shall have no
liability with respect to any failure to properly prepare or file such periodic
reports resulting from or relating to the Indenture Trustee's inability or
failure to obtain any information not resulting from its own negligence or
willful misconduct. The Form 10-K shall also include a certification in the form
attached hereto as Exhibit C-1 (the "Certification"), in compliance with Rules
13a-14 and 15d-14 under the Exchange Act and any additional directives of the
Commission, which shall be signed by the senior officer of the Master Servicer
in charge of securitization.
(c) In addition, the Indenture Trustee shall sign a certification (in the
form attached hereto as Exhibit C-2) for the benefit of the Master Servicer and
its officers, directors and Affiliates regarding certain aspects of items 1
through 3 of the Certification (provided, however, that the Indenture Trustee
shall not undertake an analysis of any accountant's report attached as an
exhibit to the Form 10-K).
(d) In addition, (i) the Indenture Trustee shall indemnify and hold
harmless the Master Servicer and the Depositor and their officers, directors and
Affiliates from and against any losses, damages, penalties, fines, forfeitures,
reasonable and necessary legal fees and related costs, judgments and other costs
and expenses arising out of or based upon a breach of the Indenture Trustee's
obligations under this Section 4.06 caused by the Indenture Trustee's
negligence, bad faith or willful misconduct in connection therewith, and (ii)
the Master Servicer shall indemnify and hold harmless the Indenture Trustee, the
Master Servicer, the Issuer and their respective officers, directors and
Affiliates from and against any losses, damages, penalties, fines, forfeitures,
reasonable and necessary legal fees and related costs, judgments and other costs
and expenses arising out of or based upon a breach of the Master Servicer's
obligations under this Section 4.06 or the Master Servicer's negligence, bad
faith or willful misconduct in connection therewith. If (i) the indemnification
provided for herein is unavailable or insufficient to hold harmless the Master
Servicer, then the Indenture Trustee agrees that it shall contribute to the
amount paid or payable by the Master Servicer as a result of the losses, claims,
damages or liabilities of the Master Servicer in such proportion as is
appropriate to reflect the relative fault of the Master Servicer on the one hand
and the Indenture Trustee on the other in connection with a breach of the
Indenture Trustee's obligations under this Section 4.06 caused by the Indenture
Trustee's negligence, bad faith or willful misconduct in connection therewith
and (ii) the indemnification provided for herein is unavailable or insufficient
to hold harmless the Indenture Trustee, then the Master Servicer agrees that it
shall contribute to the
27
amount paid or payable by the Indenture Trustee as a result of the losses,
claims, damages or liabilities of the Indenture Trustee in such proportion as is
appropriate to reflect the relative fault of the Indenture Trustee on the one
hand and the Master Servicer on the other in connection with a breach of the
Master Servicer's obligations under this Section 4.06 or the Master Servicer's
negligence, bad faith or willful misconduct in connection therewith.
(e) In the event the Commission permits separate or split certifications
to be made with respect to the items currently contained in the Certification,
the Indenture Trustee shall provide a certification with respect to items 1 and
2 and the Master Servicer shall provide a certification with respect to items 3,
4 and 5 contained within the Certification, in each case substantially in the
form of the Certification attached as Exhibit C-1, or other form as indicated by
the Commission for this purpose. In addition, the Indenture Trustee shall sign a
certification (in the form attached hereto as Exhibit C-3) for the benefit of
the Master Servicer and its officers, directors and Affiliates regarding certain
aspects of item 3 of the Certification (provided, however, that the Indenture
Trustee shall not undertake an analysis of any accountant's report attached as
an exhibit to the Form 10-K).
(f) Notwithstanding any other provision of the Basic Documents, the
provisions of this Section 4.06 may be amended by the Master Servicer, the
Issuer and the Indenture Trustee without the consent of the Securityholders.
(g) Prior to January 30th of the first year in which the Indenture Trustee
is able to do so under applicable law, the Indenture Trustee shall file with the
Commission a Form 15D Suspension Notification with respect to the Trust.
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ARTICLE V
The Master Servicer
Section 5.01 Liability of the Master Servicer. 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.
Section 5.02 Merger or Consolidation of or Assumption of the Obligations
of the Master Servicer. Any corporation into which the Master Servicer may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Master
Servicer shall be a party, or any corporation succeeding to the business of the
Master Servicer, shall be the successor of the Master Servicer, hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that the successor or surviving Person to the Master Servicer
shall be qualified to sell mortgage loans to and service mortgage loans for
▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac.
The Master Servicer may assign its rights and delegate its duties and
obligations under this Servicing Agreement; provided, that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of ▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇ Mac, is reasonably
satisfactory to the Indenture Trustee (as pledgee of the Mortgage Loans) and the
Company (in its sole discretion), is willing to service the Mortgage Loans and
executes and delivers to the Indenture Trustee and the Company an agreement, in
form and substance reasonably satisfactory to the Indenture Trustee and the
Company, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Master Servicer under this Servicing Agreement; provided,
further, that each Rating Agency's rating of the Class ▇-▇, ▇▇▇▇▇ ▇-▇, Class
M-1, Class M-2, Class M-3 and Class M-4 Bonds in effect immediately prior to
such assignment and delegation will not be qualified, reduced, or withdrawn as a
result of such assignment and delegation (as evidenced by a letter to such
effect from each Rating Agency) or considered to be below investment grade.
Section 5.03 Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of the directors or officers or employees or
agents of the Master Servicer shall be under any liability to the Company, the
Issuer, the Owner Trustee, the Indenture Trustee or the Bondholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Servicing Agreement, provided, however, that this provision
shall not protect the Master Servicer or any such Person against any liability
which would otherwise be imposed by reason of its willful misfeasance, bad faith
or gross negligence in the performance of its duties hereunder or by reason of
its reckless disregard of its obligations and duties hereunder. The Master
Servicer and any director or officer or employee or agent of the Master Servicer
may rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising hereunder. The Master
Servicer and any director or officer or employee or agent of the Master Servicer
shall be indemnified by the Company and held harmless against any loss,
liability or expense incurred in connection with any legal action relating to
this
29
Servicing Agreement or the Bonds, including any amount paid to the Owner Trustee
or the Indenture Trustee pursuant to Section 5.06(b), other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Servicing Agreement) and any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder or by reason of its reckless disregard
of its obligations and duties hereunder. The Master Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to its duties to service the Mortgage Loans in accordance with this
Servicing Agreement, and which in its opinion may involve it in any expense or
liability; provided, however, that the Master Servicer may in its sole
discretion undertake any such action which it may deem necessary or desirable in
respect of this Servicing Agreement, and the rights and duties of the parties
hereto and the interests of the Securityholders hereunder. In such event, the
reasonable legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Company, and the
Master Servicer shall be entitled to be reimbursed therefor. The Master
Servicer's right to indemnity or reimbursement pursuant to this Section 5.03
shall survive any resignation or termination of the Master Servicer pursuant to
Section 5.04 or 6.01 with respect to any losses, expenses, costs or liabilities
arising prior to such resignation or termination (or arising from events that
occurred prior to such resignation or termination).
Section 5.04 Master Servicer Not to Resign. Subject to the provisions of
Section 5.02, 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 (ii) upon satisfaction of the following conditions: (a) the
Master Servicer has proposed a successor servicer to the Company and the
Indenture Trustee in writing and such proposed successor servicer is reasonably
acceptable to the Company and the Indenture Trustee; and (b) each Rating Agency
shall have delivered a letter (obtained by and at the expense of the Master
Servicer) to the Company and the Indenture Trustee prior to the appointment of
the successor servicer stating that the proposed appointment of such successor
servicer as Master Servicer hereunder will not result in the reduction or
withdrawal of the then current rating of the Bonds or the then current rating of
the Bonds; provided, however, that no such resignation by the Master Servicer
shall become effective until such successor servicer or, in the case of (i)
above, the Indenture Trustee, as pledgee of the Mortgage Loans, shall have
assumed the Master Servicer's responsibilities and obligations hereunder or
another successor Master Servicer has been appointed in accordance with Section
6.02. Any such resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 6.01 and 6.02 as
obligations that survive the resignation or termination of the Master Servicer.
The Master Servicer shall have no claim (whether by subrogation or otherwise) or
other action against any Bondholder for any amounts paid by the Master Servicer
pursuant to any provision of this Servicing Agreement. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Indenture Trustee.
Section 5.05 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
30
Servicer of its liabilities and responsibilities with respect to such duties and
shall not constitute a resignation within the meaning of Section 5.04.
Section 5.06 Master Servicer to Pay Indenture Trustee's and Owner
Trustee's Fees and Expenses; Indemnification. (a) The Master Servicer covenants
and agrees to pay to the Owner Trustee, the Indenture Trustee and any co-trustee
of the Indenture Trustee from time to time, and the Owner Trustee, the Indenture
Trustee and any such co-trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by each
of them in the execution of the trusts created under the Trust Agreement, the
Indenture or any other Basic Document and in the exercise and performance of any
of the powers and duties under the Trust Agreement or the Indenture, as the case
may be, of the Owner Trustee, the Indenture Trustee and any co-trustee of the
Indenture Trustee, and the Master Servicer will pay or reimburse (i) the
Indenture Trustee and any co-trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by the Indenture Trustee or any
co-trustee of the Indenture Trustee in accordance with any of the provisions of
this Servicing Agreement or any other Basic Document except any such expense,
disbursement or advance as may arise from its negligence or bad faith and (ii)
the Owner Trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by the Owner Trustee in accordance with any of the
provisions of this Servicing Agreement except any such expense, disbursement or
advance as may arise from its willful misconduct, gross negligence or bad faith
or grossly negligent failure to act.
(b) The Master Servicer agrees to indemnify the Indenture Trustee and the
Owner Trustee for, and to hold the Indenture Trustee and the Owner Trustee, as
the case may be, harmless against, any claim, tax, penalty, loss, liability or
expense of any kind whatsoever, incurred without negligence (gross negligence in
the case of the Owner Trustee) or willful misconduct on its part, arising out
of, or in connection with, the failure by the Master Servicer to perform its
duties in compliance with this Servicing Agreement, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against any claim in connection with the exercise or performance of any of its
powers or duties under any Basic Document, provided that:
(i) with respect to any such claim, the Indenture Trustee or Owner
Trustee, as the case may be, shall have given the Master Servicer written
notice thereof promptly after the Indenture Trustee or Owner Trustee, as
the case may be, shall have actual knowledge thereof, it being understood
that failure to give such notice shall not relieve the Master Servicer of
its indemnification obligations hereunder;
(ii) while maintaining control over its own defense, the Company,
the Indenture Trustee or Owner Trustee, as the case may be, shall
cooperate and consult fully with the Master Servicer in preparing such
defense; and
(iii) notwithstanding anything in this Servicing Agreement to the
contrary, the Master Servicer shall not be liable for settlement of any
claim by the Indenture Trustee or the Owner Trustee, as the case may be,
entered into without the prior consent of the Master Servicer, which
consent shall not be unreasonably withheld.
31
(c) The Master Servicer agrees to indemnify the Owner Trustee for, and to
hold the Owner Trustee, harmless against, any claim, tax, penalty, loss,
liability or expense of any kind whatsoever, in connection with the Owner
Trustee's duties under any of the Basic Documents, except to the extent that
such claim, tax, penalty, loss liability or expense is (i) caused by the Owner
Trustee's own willful misconduct, gross negligence or bad faith or grossly
negligent failure to act or (ii) incurred as a result of the inaccuracy of any
representation or warranty contained in Section 6.03 of the Trust Agreement
expressly made by the Owner Trustee.
(d) No termination of this Servicing Agreement or the resignation or
removal of the Owner Trustee or the Indenture Trustee shall affect the
obligations created by this Section 5.06 of the Master Servicer to indemnify the
Indenture Trustee and the Owner Trustee under the conditions and to the extent
set forth herein. This section shall survive the termination of this Servicing
Agreement and the resignation or removal of the Master Servicer. Any amounts to
be paid by the Master Servicer pursuant to this Subsection may not be paid from
the Trust Estate.
32
ARTICLE VI
Default
Section 6.01 Servicing Default. If any one of the following events (each,
a "Servicing Default") shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in the Collection
Account or Payment Account any deposit required to be made under the terms
of this Servicing Agreement, including any Advances and Compensating
Interest (other than Servicing Advances), which continues unremedied for a
period of one (1) Business Day after the date upon which written notice of
such failure shall have been given to the Master Servicer by the Company,
the Issuer or the Indenture Trustee; or
(ii) 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 (including Servicing Advances) set forth in the Bonds or
in this Servicing Agreement, which failure, in each case, materially and
adversely affects the interests of Bondholders and which continues
unremedied for a period of 30 days after the date on which written notice
of such failure, requiring the same to be remedied, and stating that such
notice is a "Notice of Default" hereunder, shall have been given to the
Master Servicer by the Company, the Issuer or the Indenture Trustee; 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, marshaling of assets and liabilities or similar proceedings, or
for the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(iv) The Master Servicer shall voluntarily go into liquidation,
consent to the appointment of a conservator, receiver, liquidator or
similar person in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Master
Servicer or of or relating to all or substantially all of its property, or
a decree or order of a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator,
receiver, liquidator or similar person in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been entered
against the Master Servicer and such decree or order shall have remained
in force undischarged, unbonded or unstayed for a period of 60 days; 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;
33
then, and in every such case, so long as a Servicing Default shall not have been
remedied by the Master Servicer, either the Issuer, subject to the direction of
the Indenture Trustee as pledgee of the Mortgage Loans, or the holders of at
least 51% of the aggregate Bond Principal Balance of each Class of Bonds may, by
notice then given in writing to the Master Servicer, terminate all of the rights
and obligations of the Master Servicer as servicer under this Servicing
Agreement other than its right to receive servicing compensation and expenses
for servicing the Mortgage Loans hereunder during any period prior to the date
of such termination and the Issuer, subject to the direction of the Indenture
Trustee as pledgee of the Mortgage Loans may exercise any and all other remedies
available at law or equity; provided, however, that the successor to the Master
Servicer appointed pursuant to Section 6.02 shall have accepted the duties of
Master Servicer effective upon the resignation or termination of the Master
Servicer. Any such notice to the Master Servicer shall also be given to each
Rating Agency, the Company and the Issuer. On or after the receipt by the Master
Servicer of such written notice, all authority and power of the Master Servicer
under this Servicing Agreement, whether with respect to the Bonds or the
Mortgage Loans or otherwise, shall pass to and be vested in the Indenture
Trustee, pursuant to and under this Section 6.01; and, without limitation, the
Indenture 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. Notwithstanding the foregoing, the
parties hereto and the Securityholders by their acceptance of any Security,
acknowledge and agree that there will be a period of transition before the
actual servicing functions can be fully transferred to the Indenture Trustee, as
successor Master Servicer, or to a successor Master Servicer appointed by the
Indenture Trustee pursuant to the provisions hereof, provided, that the
Indenture Trustee shall use its reasonable best efforts to succeed to the actual
servicing functions or find a successor Master Servicer as soon as possible but
no later than 90 days after such termination. The Master Servicer agrees to
cooperate with the Indenture Trustee in effecting the termination of the
responsibilities and rights of the Master Servicer hereunder, including, without
limitation, the transfer to the Indenture Trustee or the successor Master
Servicer for administration by it of (i) the property and amounts which are then
or should be part of the Trust Estate or which thereafter become part of the
Trust Estate; (ii) originals or copies of all documents of the Master Servicer
reasonably requested by the Indenture Trustee to enable it to assume the Master
Servicer's duties thereunder; (iii) the rights and obligations of the Master
Servicer under the Subservicing Agreements with respect to the Mortgage Loans;
(iv) all cash amounts which shall at the time be deposited by the Master
Servicer or should have been deposited to the Collection or the Payment Account
or thereafter be received with respect to the Mortgage Loans; and (v) all costs
or expenses associated with the complete transfer of all servicing data and the
completion, correction or manipulation of such servicing data as may be required
by the Indenture Trustee or any successor Master Servicer to correct any errors
or insufficiencies in the servicing data or otherwise to enable the Indenture
Trustee or successor Master Servicer to service the Mortgage Loans properly and
effectively. All reasonable costs and expenses (including, but not limited to,
attorneys' fees) incurred in connection with the succession as Master Servicer,
including amending this Servicing Agreement to reflect such succession as Master
Servicer pursuant to this Section 6.01 shall be paid by the predecessor Master
Servicer (or if the predecessor Master Servicer is the Indenture Trustee, the
initial Master Servicer) upon presentation of reasonable documentation of such
costs and expenses, and if not so paid by the predecessor Master Servicer, shall
be reimbursed by the Trust pursuant to Section 6.07 of the Indenture.
34
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a payment on a Mortgage Loan which was due prior to the notice
terminating the Master Servicer's rights and obligations hereunder and received
after such notice, that portion to which the Master Servicer would have been
entitled pursuant to Sections 3.07 and 3.15 as well as its Master Servicing Fee
in respect thereof, and any other amounts payable to the Master Servicer
hereunder the entitlement to which arose prior to the termination of its
activities hereunder.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 6.01(i) after the applicable grace periods specified in such Section,
shall not constitute a Servicing Default 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 or the public enemy, acts of
declared or undeclared war, public disorder, rebellion or sabotage, epidemics,
landslides, lightning, fire, hurricanes, earthquakes, floods or similar causes.
The preceding sentence shall not relieve the Master Servicer from using
reasonable efforts to perform its respective obligations in a timely manner in
accordance with the terms of this Servicing Agreement and the Master Servicer
shall provide the Indenture Trustee and the Bondholders with 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 Indenture
Trustee and the Owner Trustee in writing of any Servicing Default.
Section 6.02 Indenture Trustee to Act; Appointment of Successor. Within 90
days of the time the Master Servicer receives a notice of termination pursuant
to Section 6.01 or sends a notice pursuant to clause (i) of Section 5.04, the
Indenture Trustee on behalf of the Bondholders, or other successor appointed in
accordance with this Section 6.02, shall be the successor in all respects to the
Master Servicer in its capacity as servicer under this Servicing Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Master Servicer by the terms and provisions hereof, including but not limited to
the provisions of Article VIII. Nothing in this Servicing Agreement shall be
construed to permit or require the Indenture Trustee or any other successor
Master Servicer to (i) succeed to the responsibilities, duties and liabilities
of the initial Master Servicer in its capacity as the Seller under the Mortgage
Loan Sale and Contribution Agreement, (ii) be responsible or accountable for any
act or omission of the Master Servicer prior to the effectiveness of the Master
Servicer's termination hereunder, (iii) require or obligate the Indenture
Trustee, in its capacity as successor Master Servicer, to purchase, repurchase
or substitute any Mortgage Loan, (iv) fund any losses on any Eligible Investment
directed by any other Master Servicer, or (v) be responsible for the
representations and warranties of the Master Servicer, except as provided
herein; provided, however, that the Indenture Trustee, as successor Master
Servicer, shall be required to make any Advances to the extent that the Master
Servicer failed to make such Advances, to the extent such Advance is not
determined by the Indenture Trustee to be nonrecoverable. As compensation
therefor, the Indenture 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 Indenture
Trustee is unwilling to act as successor Master Servicer, or (ii) if the
Indenture Trustee is legally unable so to act, the Indenture Trustee on behalf
of the Bondholders may (in the situation described in clause (i)) or shall (in
the situation described in clause (ii)) appoint or petition a court of competent
jurisdiction to appoint any established housing and home finance institution,
bank or other mortgage loan servicer having a net worth of not less than
$10,000,000 as the successor to the Master Servicer
35
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder; provided that the appointment
of any such successor Master Servicer will not result in the qualification,
reduction or withdrawal of the ratings assigned to the Class ▇-▇, ▇▇▇▇▇ ▇-▇,
Class M-1, Class M-2, Class M-3 and Class M-4 Bonds by the Rating Agencies.
Pending appointment of a successor to the Master Servicer hereunder, unless the
Indenture Trustee is prohibited by law from so acting or is unwilling to act as
such, the Indenture Trustee shall act in such capacity as hereinabove provided.
In connection with such appointment and assumption, the successor shall be
entitled to receive compensation out of payments on Mortgage Loans in an amount
equal to the compensation which the Master Servicer would otherwise have
received pursuant to Section 3.15 (or such lesser compensation as the Indenture
Trustee and such successor shall agree). The appointment of a successor Master
Servicer shall not affect any liability of the predecessor Master Servicer which
may have arisen under this Servicing Agreement prior to its termination as
Master Servicer (including, without limitation, the obligation to purchase
Mortgage Loans pursuant to Section 3.01, to pay any deductible under an
insurance policy pursuant to Section 3.11 or to indemnify the Indenture Trustee
pursuant to Section 5.06), 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 of any of its representations or warranties contained
herein or in any related document or agreement. The Indenture Trustee, the
Custodian and such successor shall take such action, consistent with this
Servicing Agreement, as shall be necessary to effectuate any such succession.
In connection with the termination or resignation of the Master Servicer
hereunder, either (i) the successor Master Servicer, including the Indenture
Trustee if the Indenture Trustee is acting as successor Master Servicer, shall
represent and warrant that it is a member of MERS in good standing and shall
agree to comply in all material respects with the rules and procedures of MERS
in connection with the servicing of the Mortgage Loans that are registered with
MERS, in which case the predecessor Master Servicer shall cooperate with the
successor Master Servicer in causing MERS to revise its records to reflect the
transfer of servicing to the successor Master Servicer as necessary under MERS'
rules and regulations, or (ii) the predecessor Master Servicer shall cooperate
with the successor Master Servicer in causing MERS to execute and deliver an
assignment of Mortgage in recordable form to transfer the Mortgage from MERS to
the Indenture Trustee and to execute and deliver such other notices, documents
and other instruments as may be necessary or desirable to effect a transfer of
such Mortgage Loan or servicing of such Mortgage Loan on the MERS(R) System to
the successor Master Servicer. The predecessor Master Servicer shall file or
cause to be filed any such assignment in the appropriate recording office. The
predecessor Master Servicer shall bear any and all fees of MERS, costs of
preparing any assignments of Mortgage, and fees and costs of filing any
assignments of Mortgage that may be required under this Section 6.02. The
successor Master Servicer shall cause such assignment to be delivered to the
Indenture Trustee promptly upon receipt of the original with evidence of
recording thereon or a copy certified by the public recording office in which
such assignment was recorded.
(b) Any successor, including the Indenture Trustee on behalf of the
Bondholders, to the Master Servicer as servicer shall during the term of its
service as servicer (i) continue to service and administer the Mortgage Loans
for the benefit of the Securityholders, (ii) maintain in force a policy or
policies of insurance covering errors and omissions in the performance of its
obligations as Master
36
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 3.11(g).
(c) Any successor Master Servicer, including the Indenture Trustee on
behalf of the Bondholders, shall not be deemed to be in default or to have
breached its duties hereunder if the predecessor Master Servicer shall fail to
deliver any required deposit to the Collection Account or otherwise cooperate
with any required servicing transfer or succession hereunder.
(d) Notwithstanding anything else herein to the contrary, in no event
shall the Indenture Trustee be liable for any servicing fee or any differential
in the amount of the servicing fee paid hereunder and the amount necessary to
induce any successor Servicer to act as a successor Servicer under this
Servicing Agreement and the transactions set forth or provided for herein.
Section 6.03 Notification to Bondholders. Upon any termination or
appointment of a successor to the Master Servicer pursuant to this Article VI or
Section 5.04, the Indenture Trustee shall give prompt written notice thereof to
the Bondholders, the Owner Trustee, the Company, the Issuer and each Rating
Agency.
Section 6.04 Waiver of Defaults. The Indenture Trustee shall transmit by
mail to all Bondholders, within 10 days after the occurrence of any Servicing
Default known to the Indenture Trustee, unless such Servicing Default shall have
been cured, notice of each such Servicing Default hereunder known to a
Responsible Officer of the Indenture Trustee. The holders of at least 51% of the
aggregate Bond Principal Balance of the Bonds may waive any default by the
Master Servicer in the performance of its obligations hereunder and the
consequences thereof, except a default in the making of or the causing to be
made any required distribution on the Bonds. Upon any such waiver of a past
default, such default shall be deemed to cease to exist, and any Servicing
Default arising therefrom shall be deemed to have been timely remedied for every
purpose of this Servicing Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived. The Master Servicer shall give notice of any such
waiver to the Rating Agencies.
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ARTICLE VII
Miscellaneous Provisions
Section 7.01 Amendment. This Servicing Agreement may be amended from time
to time by the parties hereto, provided that any amendment be accompanied by a
letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Bonds or the rating
then assigned to the Bonds, and the consent of the Indenture Trustee.
Section 7.02 GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.03 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if when
delivered to:
(a) in the case of the
Master Servicer: Impac Funding Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
(b) in the case of
Rating Agencies: ▇▇▇▇▇'▇ Investors Service, Inc.
4th Floor
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Residential Mortgage
Monitoring Unit
Standard & Poor's, a division
of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ - 41st Floor
New York, New York 10041
Attention: Asset Backed Surveillance Group
(c) in the case of the
Owner Trustee, the
Corporate Trust Office: Wilmington Trust Company
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
38
(d) in the case of the
Issuer, to Impac CMB
Trust Series 2003-12: c/o IMH Assets Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
(e) in the case of the
Indenture Trustee: Deutsche Bank National Trust Company
▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Impac CMB Trust Series
2003-12 (IM0312)
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 Bondholder shall be given by first class mail, postage prepaid, at
the address of such Bondholder as shown in the Bond Register. Any notice so
mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Bondholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee to any Rating Agency shall be given on a
reasonable efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to deliver such notice
or document to any Rating Agency.
Section 7.04 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Servicing Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Bonds or the rights of the Bondholders thereof.
Section 7.05 Third-Party Beneficiaries. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the Bondholders,
the Owner Trustee, the Indenture Trustee and their respective successors and
permitted assigns. Except as otherwise provided in this Servicing Agreement, no
other Person will have any right or obligation hereunder. The Indenture Trustee
shall have the right to exercise all rights of the Issuer under this Servicing
Agreement.
Section 7.06 Counterparts. This instrument may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 7.07 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 7.08 Termination. The respective obligations and responsibilities
of the Master Servicer and the Issuer created hereby shall terminate upon the
satisfaction and discharge of the Indenture pursuant to Section 4.10 thereof.
39
Section 7.09 No Petition. The Master Servicer, by entering into this
Servicing Agreement, hereby covenants and agrees that it will not at any time
institute against the Issuer, or join in any institution against the Issuer, any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations of the Issuer. This section shall
survive the termination of this Servicing Agreement by one year.
Section 7.10 No Recourse. The Master Servicer acknowledges that no
recourse may be had against the Issuer, except as may be expressly set forth in
this Servicing Agreement.
ARTICLE VIII
Duties of the Master Servicer
Section 8.01 Administrative Duties. (a) Duties with Respect to the
Indenture. The Master Servicer shall perform all its duties and the duties of
the Issuer under the Indenture. In addition, the Master Servicer shall consult
with the Owner Trustee as the Master Servicer deems appropriate regarding the
duties of the Issuer under the Indenture. The Master Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture. The Master
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Master Servicer shall take all necessary action that is the
duty of the Issuer to take pursuant to the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Master Servicer set forth in
this Servicing Agreement or any of the Basic Documents, the Master
Servicer shall perform such calculations and shall prepare for execution
by the Issuer or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer or the
Owner Trustee to prepare, file or deliver pursuant to this Servicing
Agreement or any of the Basic Documents or under state and federal tax and
securities laws, and at the request of the Owner Trustee or the Indenture
Trustee shall take all appropriate action that it is the duty of the
Issuer to take pursuant to this Servicing Agreement or any of the Basic
Documents. In accordance with the directions of the Issuer or the Owner
Trustee, the Master Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Bonds
(including the Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Issuer, the Indenture
Trustee or the Owner Trustee.
(ii) Notwithstanding anything in this Servicing Agreement or any of
the Basic Documents to the contrary, the Master Servicer shall be
responsible for promptly notifying the Owner Trustee in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of
income) to an Owner (as defined in the Trust Agreement) as contemplated
40
in Section 5.03 of the Trust Agreement. Any such notice shall be in
writing and specify the amount of any withholding tax required to be
withheld by the Owner Trustee pursuant to such provision.
(iii) In carrying out the foregoing duties or any of its other
obligations under this Servicing Agreement, the Master Servicer may enter
into transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Master Servicer's opinion, no less favorable to the
Issuer in any material respect than with terms made available to unrelated
third parties.
(c) Tax Matters. The Master Servicer shall prepare, on behalf of the Owner
Trustee, financial statements and such annual or other reports of the Issuer as
are necessary for the preparation by the Indenture Trustee of tax returns and
information reports as provided in Section 5.03 of the Trust Agreement,
including, without limitation, Form 1099.
(d) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Master Servicer are non-ministerial, the Master
Servicer shall not take any action pursuant to this Article VIII unless within a
reasonable time before the taking of such action, the Master Servicer shall have
notified the Owner Trustee and the Indenture Trustee of the proposed action and
the Owner Trustee and, with respect to items (A), (B), (C) and (D) below, the
Indenture Trustee shall not have withheld consent or provided an alternative
direction. For the purpose of the preceding sentence, "non-ministerial matters"
shall include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Mortgage Loans);
(C) the amendment, change or modification of this Servicing
Agreement or any of the Basic Documents;
(D) the appointment of successor Certificate Paying Agents and
successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Servicers or the consent to the assignment
by the Certificate Registrar, Paying Agent or Indenture Trustee of
its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
Section 8.02 Records. The Master Servicer shall maintain appropriate books
of account and records relating to services performed under this Servicing
Agreement, which books of account and records shall be accessible for inspection
by the Issuer, the Indenture Trustee at any time during normal business hours.
41
Section 8.03 Additional Information to be Furnished. The Master Servicer
shall furnish to the Issuer and the Indenture Trustee from time to time such
additional information regarding the Mortgage Loans and the Bonds as the Issuer
and the Indenture Trustee shall reasonably request.
42
IN WITNESS WHEREOF, the Master Servicer, the Issuer and the Indenture
Trustee have caused this Servicing Agreement to be duly executed by their
respective officers or representatives all as of the day and year first above
written.
IMPAC FUNDING CORPORATION,
as Master Servicer
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President
IMPAC CMB TRUST SERIES 2003-12,
as Issuer
Wilmington Trust Company, not in its
individual capacity, but solely as Owner
Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Financial Services Officer
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Assistant Vice President
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President
Acknowledged and agreed with respect to
Section 5.03 hereof:
IMH ASSETS CORP.,
as Depositor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
EXHIBIT A
MORTGAGE LOAN SCHEDULE
(Filed Manually)
(In accordance with Rule 202 of Regulation S-T, this Mortgage Loan Schedule is
being filed in paper pursuant to a continuing hardship exemption.)
A-1
EXHIBIT B
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Loans, we request the
release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan Prepaid in Full
Other
Mortgage Loan Repurchased
Please deliver the Mortgage File to ____________________________________________
________________________________________________________________________________
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
__________________________
[Name of Master Servicer]
Authorized Signature
******************************************************************************
TO CUSTODIAN: Please acknowledge this request, and check off documents being
enclosed with a copy of this form. You should retain this form for your files in
accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Primary Insurance Policy
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or Deed
of Trust
[ ] Title Insurance Policy
__________________________ [ ] Other:
Name
__________________________
Title
__________________________
Date
B-1
EXHIBIT C-1
FORM OF CERTIFICATION TO BE PROVIDED BY THE MASTER SERVICER
WITH FORM 10-K
Re: Impac CMB Trust Series 2003-12
Collateralized Asset-Backed Bonds, Series 2003-12
I, [identify the certifying individual], certify that:
l. I have reviewed this annual report on Form 10-K, and all reports
on Form 8-K containing distribution or servicing reports filed in respect of
periods included in the year covered by this annual report, of IMH Assets Corp.
(the "Registrant");
2. Based on my knowledge, the information in these reports, taken as
a whole, does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of the
last day of the period covered by this annual report;
3. Based on my knowledge, the distribution or servicing information
required to be provided to the indenture trustee by the servicer under the
servicing, or similar, agreement for inclusion in these reports is included in
these reports;
4. I am responsible for reviewing the activities performed by the
servicer under the servicing, or similar, agreement and based upon my knowledge
and the annual compliance review required under that agreement, and except as
disclosed in the reports, the servicer has fulfilled its obligations under that
agreement; and
5. The reports disclose all significant deficiencies relating to the
servicer's compliance with the minimum servicing standards based upon the report
provided by an independent public accountant, after conducting a review in
compliance with the Uniform Single Attestation Program for Mortgage Bankers as
set forth in the servicing, or similar, agreement, that is included in these
reports.
In giving the certifications above, I have reasonably relied on
information provided to me by the following unaffiliated parties: [the Indenture
Trustee and Sub-Servicers]
Date:
__________________________________
[Signature]
[Title]
[Company]
C-1-1
EXHIBIT C-2
FORM OF CERTIFICATION TO BE
PROVIDED TO MASTER SERVICER BY THE INDENTURE TRUSTEE
Re: Impac CMB Trust Series 2003-12 (the "Trust" or the "Issuer")
Collateralized Asset-Backed Bonds, Series 2003-12
I, [identify the certifying individual], a [title] of Deutsche Bank
National Trust Company, as Indenture Trustee of the Trust, hereby certify to
Impac Funding Corporation and its officers, directors and affiliates, and with
the knowledge and intent that they will rely upon this certification, that:
1. I have reviewed the annual report on Form 10-K for the fiscal
year [___], and all reports on Form 8-K containing distribution reports filed in
respect of periods included in the year covered by that annual report, of the
Issuer relating to the above-referenced trust;
2. Based on my knowledge, the information in these distribution
reports prepared by the Indenture Trustee, taken as a whole, does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading as of the last day of the period
covered by that annual report; and
3. Based on my knowledge, the distribution information required to
be provided by the Indenture Trustee under the Indenture is included in these
distribution reports.
Capitalized terms used but not defined herein have the meanings
ascribed to them in Appendix A to the Indenture, dated December 18, 2003 (the
"Indenture"), between Impac CMB Trust Series 2003-12, as issuer, and Deutsche
Bank National Trust Company, as indenture trustee.
DEUTSCHE BANK NATIONAL TRUST
COMPANY, as Indenture Trustee
By:__________________________________
Name:
Title:
Date:
C-2-1
EXHIBIT C-3
FORM OF CERTIFICATION TO BE
PROVIDED TO MASTER SERVICER BY THE INDENTURE TRUSTEE
Re: Impac CMB Trust Series 2003-12 (the "Trust" or the "Issuer")
Collateralized Asset-Backed Bonds, Series 2003-12
I, [identify the certifying individual], a [title] of Deutsche Bank
National Trust Company, as Indenture Trustee of the Trust, hereby certify to
Impac Funding Corporation and its officers, directors and affiliates, and with
the knowledge and intent that they will rely upon this certification, that:
1. Based on my knowledge, the distribution information required to
be provided by the Indenture Trustee under the Indenture is included in these
distribution reports.
Capitalized terms used but not defined herein have the meanings
ascribed to them in Appendix A to the Indenture, dated December 18, 2003 (the
"Indenture"), between Impac CMB Trust Series 2003-12, as issuer, and Deutsche
Bank National Trust Company, as indenture trustee.
DEUTSCHE BANK NATIONAL TRUST
COMPANY, as Indenture Trustee
By:__________________________________
Name:
Title:
Date:
C-3-1