EXHIBIT 4.3
FORM OF SALE AND SERVICING AGREEMENT
SALE AND SERVICING AGREEMENT
Dated as of _____________________
Among
_______________ TRUST ___________
(Issuer)
______________________
(Servicer)
HOME EQUITY SECURITIZATION CORP.
(Depositor)
and
_______________________________________________
(Indenture Trustee and Co-Owner Trustee)
_______________ Trust ___________
This Sale and Servicing Agreement is entered into as of
____________________, among _________________ TRUST ____________, a Delaware
business trust (the "Issuer" or the "Trust"), [____________________________]),
as Servicer (the "Servicer"), HOME EQUITY SECURITIZATION CORP., a
_______________, corporation, as Depositor (the "Depositor"), and
____________________________________________, as Indenture Trustee on behalf of
the Noteholders (in such capacity, the "Indenture Trustee"), and as Co-Owner
Trustee on behalf of the Certificateholders (in such capacity, the "Co-Owner
Trustee")
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase a pool of Loans which were
originated or purchased by the Servicer in its ordinary course of business and
subsequently conveyed by the Servicer to the Depositor;
WHEREAS, the Depositor is willing to sell such Loans to the Issuer; and
WHEREAS, the Servicer is willing to service such Loans in accordance with
the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article I. Unless otherwise specified, all
calculations of interest described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months.
Accepted Servicing Procedures: Servicing procedures that meet at least the
same standards the Servicer would follow in servicing first, second and third
lien residential mortgage loans such as the Loans held for its own account,
giving due consideration to standards of practice of prudent mortgage lenders
and loan servicers that originate and service mortgage loans comparable to the
Loans and to the reliance placed by the Securityholders on the Servicer for the
servicing of the Loans but without regard to:
(i) any relationship that the Servicer, any Subservicer or any
affiliate of the Servicer or any Subservicer may have with the related
Mortgagor;
(ii) the ownership of any Securities by the Servicer or any affiliate
of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive compensation
for its services hereunder with respect to any particular transaction.
Accrual Period: With respect to each Class of Notes for a given
Distribution Date, the calendar month preceding the month of such Distribution
Date based on a 360-day year consisting of twelve 30-day months.
Addition Notice: For any date during the Pre-Funding Period, a notice
(which shall be in writing) given to the Rating Agencies, the Owner Trustee, the
Co-Owner Trustee and the Indenture Trustee pursuant to Section 2.7.
Adjustable Rate Loan: Each Loan identified on the Loan Schedule as having
an adjustable Loan Interest Rate.
Aggregate Note Principal Balance: With respect to any Distribution Date,
the aggregate of the Class Principal Balances of the Notes.
Agreement: This Sale and Servicing Agreement and all amendments hereof and
supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the excess,
if any, of (a) the aggregate of the Class Principal Balances of all Classes of
Notes (after giving effect to all distributions on such Distribution Date) over
(b) the sum of the Pool Principal Balance and the Pre-Funded Amount as of the
end of the immediately preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
sequentially, to the Class B Notes, the Class M-2 Notes and the Class M-1 Notes,
in that order, until the respective Class Principal Balances thereof are reduced
to zero.
Appraised Value: The appraised value of any Mortgaged Property, based upon
the appraisal made at the time the related Loan is originated.
Assignment of Mortgage: With respect to each Loan secured by a Mortgage, an
assignment, notice of transfer or equivalent instrument sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect or record the sale of the related Loan which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering Mortgages secured by Mortgaged Properties located in the
same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date, an
amount equal to the sum of: (i) all amounts received on the Loans or required to
be paid by the Servicer or the Depositor during the related Due Period
(exclusive of amounts not required to be deposited by the Servicer in the
Collection Account pursuant to Section 5.1(b)(1) and amounts permitted to be
withdrawn by the Indenture Trustee from the Collection Account pursuant to
Section 5.1(b)(3)) as reduced by any portion thereof that may not be withdrawn
therefrom pursuant to an order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Bankruptcy Code; (ii) with respect to the final Distribution Date or an early
redemption or termination of the Securities pursuant to Section 11.2, the
Termination Price; (iii) the Purchase Price paid for any Loans required to be
purchased and the Substitution Adjustment, if any, required to be deposited in
the Collection Account in connection with any substitution, in each case
pursuant to Section 3.5 and prior to the related Determination Date and (iv) the
Capitalized Interest Requirement, if any, with respect to such Distribution
Date.
Available Distribution Amount: With respect to any Distribution Date, the
Available Collection Amount, minus the amount required to be paid from the Note
Distribution Account pursuant to Section 5.1(c)(i), plus, if applicable, the
amount of any Pre-Funding Earnings for the related Due Period and, on the
Distribution Date relating to the Due Period in which the termination of the
Pre-Funding Period occurred, the amount on deposit in the Pre-Funding Account at
such time.
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Balloon Loan: A Loan with a final Monthly Payment that is greater than five
(5) times any other Monthly Payment.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions in New York City or in the city in which the
corporate trust office of the Indenture Trustee is located are authorized or
obligated by law or executive order to be closed.
Call Option Date: The first Distribution Date on which the Majority
Residual Interest Holders are able to cause an optional termination of the
Issuer pursuant to Section 11.2.
Capitalized Interest Account: The account designated as such, established
and maintained pursuant to Section 5.6.
Capitalized Interest Requirement: With respect to the Distribution Date in
___________, (A) the product of (a) a fraction, the numerator of which is the
Pre-Funding Amount on the Closing Date and the denominator of which is the sum
of the Pre-Funding Amount on the Closing Date and the Original Pool Principal
Balance and (b) the aggregate amount of interest accrued on each Class of Notes
for the related Accrual Periods minus (B) in the case of any Subsequent Loan
transferred to the Issuer during the related Due Period, the amount of any
interest collected after the Cut-Off Date applicable to such Subsequent Loan and
during such related Due Period and minus (C) any Pre-Funding Earnings for the
related Due Period.
With respect to the Distribution Date in _________________, (A) the product
of (a) a fraction, the numerator of which is the Pre-Funding Amount on the first
day of the related Due Period and the denominator of which is the sum of the
Pre-Funding Amount on the first day of the related Due Period and the Pool
Principal Balance on the first day of the related Due Period and (b) the
percentage equivalent of fraction the numerator of which is the aggregate amount
of interest accrued on each Class of Notes for the related Accrual Period minus
(B) any Pre-Funding Earnings for the related Due Period and minus (C) in the
case of any Subsequent Loan transferred to the Issuer during the related Due
Period, the amount of any interest collected after the Cut-Off Date applicable
to such Subsequent Loan and during such related Due Period.
With respect to the Distribution Date in _________________, (A) the product
of (a) the Pre-Funding Amount on the first day of the related Due Period the
denominator of which is the sum of the Pre-Funding Amount on the first day of
the related Due Period and the Pool Principal Balance on the first day of the
related Due Period and (b) the aggregate amount of interest accrued on each
Class of Notes for the related Accrual Period minus (B) any Pre-Funding Earnings
for the related Due Period and minus (C) in the case of any Subsequent Loan
transferred to the Issuer during the related Due Period, the amount of any
interest collected after the Cut-Off Date applicable to such Subsequent Loan and
during such related Due Period.
Certificate: Any Residual Interest Instrument issued pursuant to the Trust
Agreement.
Certificate Distribution Account: The Account established and maintained
pursuant to Section 5.2.
Certificateholder: A holder of any Certificate.
Class: With respect to the Notes, all Notes bearing the same Class
designation.
Class A Excess Spread Distribution Amount: With respect to any Distribution
Date, the least of (i) the excess of (x) the Class Principal Balance of all
Senior Notes (after giving effect to all distributions
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pursuant to Section 5.1(d)) over (y) the Senior Optimal Principal Balance for
such Distribution Date, (ii) the Overcollateralization Deficiency Amount for
such Distribution Date, and (iii) the Excess Spread for such Distribution Date.
Class A Principal Distribution Amount: With respect to any Distribution
Date, the lesser of (i) the Regular Principal Distribution Amount and (ii) the
excess of (x) the aggregate Class Principal Balance of all Senior Notes (prior
to giving effect to distributions on such Distribution Date, other than any
distributions in respect of the Pre-Funded Amount on the Distribution Date on
which a Pre-Funding Pro Rata Distribution Trigger has occurred) over (y) the
Senior Optimal Principal Balance for such Distribution Date.
Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class M-1
Note, Class M-2 Note and Class B Note: The respective meanings assigned thereto
in the Indenture.
Class B Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date, the excess of (A) the Class B Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Class B Noteholders' Interest Carry-Forward Amount for such preceding
Distribution Date, over (B) the amount in respect of interest that is actually
distributed to such Notes on such preceding Distribution Date.
Class B Noteholders' Interest Distributable Amount: With respect to any
Distribution Date and the Class B Notes, the sum of the Class B Noteholders'
Monthly Interest Distributable Amount for such Distribution Date and the Class B
Noteholders' Interest Carry-Forward Amount for such Distribution Date.
Class B Noteholders' Monthly Interest Distributable Amount: With respect to
any Distribution Date and the Class B Notes, the aggregate amount of thirty (30)
days' accrued interest at the Class B Note Interest Rate on the sum of the (i)
Class Principal Balance of the Class B Notes immediately preceding such
Distribution Date and (ii) any Class B Noteholders' Interest Carry-Forward
Amount remaining outstanding for such Distribution Date.
Class Factor: With respect to each Class and any date of determination, the
then applicable Class Principal Balance of such Class divided by the Original
Class Principal Balance thereof.
Class M-1 Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date and the Class M-1 Notes, the excess of (A) the Class M-1
Noteholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding Class M-1 Noteholders' Interest
Carry-Forward Amount for such preceding Distribution Date, over (B) the amount
in respect of interest that is actually distributed to such Notes on such
preceding Distribution Date.
Class M-1 Noteholders' Interest Distributable Amount: With respect to any
Distribution Date and the Class M-1 Notes, the sum of the Class M-1 Noteholders'
Monthly Interest Distributable Amount for such Distribution Date and the Class
M-1 Noteholders' Interest Carry-Forward Amount for such Distribution Date.
Class M-1 Noteholders' Monthly Interest Distributable Amount: With respect
to each Distribution Date and the Class M-1 Notes, the aggregate amount of
thirty (30) days' accrued interest at the Class M-1 Note Interest Rate on the
sum of (i) the Class Principal Balance of the Class M-1 Notes immediately
preceding such Distribution Date and (ii) any Class M-1 Noteholders' Interest
Carry-Forward Amount remaining outstanding for such Distribution Date.
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Class M-1 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; and with respect to any other Distribution
Date, the Pool Principal Balance as of the preceding Determination Date minus
the sum of (i) the aggregate Class Principal Balance of the Senior Notes (after
taking into account distributions made on such Distribution Date in reduction of
the Class Principal Balances of the Classes of Senior Notes prior to such
determination) and (ii) the greater of (x) the sum of (1) __% of the Pool
Principal Balance as of the preceding Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (calculated
without giving effect to the proviso in the definition thereof) and (y) ____% of
the Maximum Collateral Amount; provided however, that the Class M-1 Optimal
Principal Balance shall never be less than zero or greater than the Original
Class Principal Balance of the Class M-1 Notes.
Class M-2 Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date and the Class M-2 Notes, the excess of (A) the Class M-2
Noteholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding Class M-2 Noteholders' Interest
Carry-Forward Amount for such preceding Distribution Date, over (B) the amount
in respect of interest that is actually distributed to such Notes on such
preceding Distribution Date.
Class M-2 Noteholders' Interest Distributable Amount: With respect to any
Distribution Date and the Class M-2 Notes, the sum of the Class M-2 Noteholders'
Monthly Interest Distributable Amount for such Distribution Date and the Class
M-2 Noteholders' Interest Carry-Forward Amount for such Distribution Date.
Class M-2 Noteholders' Monthly Interest Distributable Amount: With respect
to each Distribution Date and the Class M-2 Notes, the aggregate amount of
thirty (30) days' accrued interest at the Class M-2 Note Interest Rate on the
sum of (i) the Class Principal Balance of the Class M-2 Notes immediately
preceding such Distribution Date and (ii) any Class M-2 Noteholders' Interest
Carry-Forward Amount remaining outstanding for such Distribution Date.
Class M-2 Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
the Pool Principal Balance as of the preceding Determination Date minus the sum
of (i) the aggregate Class Principal Balance of the Senior Notes (after taking
into account any distributions made on such Distribution Date in reduction of
the Class Principal Balances of the Classes of Senior Notes prior to such
determination) plus the Class Principal Balance of the Class M-1 Notes (after
taking into account any distributions made on such Distribution Date in
reduction of the Class Principal Balance of the Class M-1 Notes prior to such
determination) and (ii) the greater of (x) the sum of (1) ___% of the Pool
Principal Balance as of the preceding Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without giving
effect to the proviso in the definition thereof) and (y) ____% of the Maximum
Collateral Amount; provided, however, that such amount shall never be less than
zero or greater than the Original Class Principal Balance of the Class M-2
Notes.
Class Principal Balance: With respect to each Class and as of any date of
determination, the Original Class Principal Balance of such Class reduced by the
sum of (i) all amounts previously distributed in respect of principal of such
Class on all previous Distribution Dates and (ii) with respect to the Class M-1,
Class M-2 and the Class B Notes, all Allocable Loss Amounts applied in reduction
of principal of such Class on all previous Distribution Dates.
Closing Date: ___________________________.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
Treasury Regulations promulgated thereunder.
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Collection Account: The account established and maintained by the Servicer
in accordance with Section 5.1.
Combination Loan: A loan, the proceeds of which were used by the Mortgagor
in combination to finance property improvements and for debt consolidation or
other purposes.
Combined Loan-to-Value Ratio or CLTV: The sum of (x) any outstanding first
mortgage balance as of the date of origination of the related Mortgage plus (y)
Principal Balance as of the Cut-Off Date, divided by the Appraised Value of such
Mortgaged Property.
Commission: The Securities and Exchange Commission.
Co-Owner Trustee: _____________________________________, in its capacity as
the Co-Owner Trustee under the Trust Agreement acting on behalf of the
Certificateholders, or any successor co-owner trustee under the Trust Agreement.
Cram Down Losses: With respect to any Loan, the reduction to the related
Loan Balance and/or the amount by which the installment of interest due on the
related Due Date under the terms of such Loan has been reduced as a result of a
reduction in the related Loan Interest Rate, in each case resulting from an
order issued by a court of appropriate jurisdiction in an insolvency proceeding.
A Cram Down Loss shall be deemed to have occurred on the date of issuance of
such order.
Custodial Agreement: The custodial agreement dated as of
____________________by and among the Depositor, _________, as servicer, the
Indenture Trustee, and ________________________, as the Custodian providing for
the retention of the Indenture Trustee's Loan Files by the Custodian on behalf
of the Indenture Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant to the
Custodial Agreement, which shall not be affiliated with the Servicer, the
Depositor or any Subservicer. ____________________________________ shall be the
initial Custodian pursuant to the terms of the Custodial Agreement.
Cut-Off Date: With respect to the Initial Loans, the close of business on
________________________. With respect to any Subsequent Loan, the close of
business on the date designated as such in the related Subsequent Transfer
Agreement.
Debt Consolidation Loan: A loan, the proceeds of which were primarily used
by the related Mortgagor for debt consolidation purposes or purposes other than
to finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing the
indebtedness of an Mortgagor under a Loan.
Defaulted Loan: With respect to any date of determination, any Loan,
including without limitation any Liquidated Loan, incident to foreclosure,
default or imminent default.
Defective Loan: As defined in Section 3.5 hereof.
Delinquent: A Loan is "Delinquent" if any Monthly Payment due thereon is
not made by the close of business on the day such Monthly Payment is scheduled
to be paid. A Loan is "30 days Delinquent" if such Monthly Payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such Monthly Payment was due, or, if
there is no such corresponding day (e.g., as when a 30-day month follows a
31-day month in
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which a payment was due on the 31st day of such month) then on the last day of
such immediately succeeding month. The determination of whether a Loan is "60
days Delinquent," "90 days Delinquent", etc., shall be done in like manner.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee or its nominee or
custodian by physical delivery to the Indenture Trustee or its nominee or
custodian endorsed to, or registered in the name of, the Indenture Trustee or
its nominee or custodian or endorsed in blank, and, with respect to a
certificated security (as defined in Section 8-102 of the UCC) transfer thereof
(i) by delivery of such certificated security endorsed to, or registered in the
name of, the Indenture Trustee or its nominee or custodian or endorsed in blank
to a financial intermediary (as defined in Section 8-313 of the UCC) and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Indenture
Trustee or its nominee or custodian, or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102(3) of the UCC) and the making by such
clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the appropriate
securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such clearing
corporation or a "custodian bank" (as defined in Section 8-102(4) of the UCC) or
the nominee of either subject to the clearing corporation's exclusive control,
the sending of a confirmation by the financial intermediary of the purchase by
the Indenture Trustee or its nominee or custodian of such securities and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the name of
the Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property (as defined
herein) to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, FNMA or
FHLMC that is a book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations, the following procedures, all in
accordance with applicable law, including applicable federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a financial intermediary that is also a "depository" pursuant to
applicable federal regulations and issuance by such financial intermediary of a
deposit advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry securities; the
making by such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations as belonging to the Indenture Trustee
or its nominee or custodian and indicating that such custodian holds such Trust
Account Property solely as agent for the Indenture Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof; and
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(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such uncertificated security, the making by such financial
intermediary of entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or custodian.
Determination Date: With respect to any Distribution Date, the fourteenth
calendar day of the month in which such Distribution Date occurs or if such day
is not a Business Day, the immediately preceding Business Day.
Distribution Date: The 25th day of any month or if such 25th day is not a
Business Day, the first Business Day immediately following such day, commencing
in __________________.
Distribution Statement: As defined in Section 6.1.
DTC: The Depository Trust Company.
Due Date: The day of the month on which the Monthly Payment is due from the
Mortgagor on a Loan.
Due Period: With respect to any Determination Date or Distribution Date,
the calendar month immediately preceding the month in which such Determination
Date or Distribution Date occurs, as the case may be.
Eligible Account: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories, or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC; (iii) a trust account (which shall be a "segregated
trust account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Indenture Trustee and
the Issuer, which depository institution or trust company shall have capital and
surplus of not less than $____________________; or (iv) an account that will not
cause any Rating Agency to downgrade or withdraw its then-current rating(s)
assigned to the Notes, as evidenced in writing by such Rating Agency. (Each
reference in this definition of "Eligible Account" to the Rating Agency shall be
construed as a reference to ____________________ or ____________________.)
Eligible Servicer: A Person who is qualified to act as Servicer of the
Loans under applicable federal and state laws and regulations.
Event of Default: As described in Section 10.1.
Excess Spread: With respect to any Distribution Date, the excess of (a) the
Available Distribution Amount over (b) the Regular Distribution Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Loan Mortgage Corporation and any successor thereto.
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FICO Score: The credit evaluation scoring methodology developed by Fair,
▇▇▇▇▇ and Company.
Fidelity Bond: As described in Section 4.3.
[Fitch: Fitch Investors Service, L.P. or any successor thereto.]
Fixed Rate Loan: Each Loan identified on the Loan Schedule as bearing a
fixed Loan Interest Rate.
FNMA: The Federal National Mortgage Association and any successor thereto.
Foreclosure Property: Any real property securing a Loan that has been
acquired by the Servicer through foreclosure, deed in lieu of foreclosure or
similar proceedings in respect of the related Loan.
Gross Margin: As to each Adjustable Rate Loan, the fixed percentage set
forth in the related Debt Instrument and indicated in the Loan Schedule as the
"Gross Margin," which percentage is added to the Index on each Interest
Adjustment Date to determine (subject to rounding, any applicable statutory
maximum interest rate, the Periodic Rate Caps, the Lifetime Floor and the
Lifetime Cap) the Mortgage Interest Rate on such Loan until the next Interest
Adjustment Date.
HUD: The United States Department of Housing and Urban Development and any
successor thereto.
Indenture: The Indenture, dated as of _______________________, between the
Issuer and the Indenture Trustee.
Indenture Trustee: ____________________________________, as Indenture
Trustee under the Indenture and this Agreement acting on behalf of the
Noteholders, or any successor indenture trustee under the Indenture or this
Agreement.
Indenture Trustee Fee: The annual fee payable to the Indenture Trustee,
calculated and payable monthly on each Distribution Date pursuant to Section
5.1(c)(i), equal to the per annum percentage of _____ percent of the Pool
Principal Balance as of the first day of the immediately preceding Due Period.
Indenture Trustee's Loan File: As defined in Section 2.5(a).
Independent: When used with respect to any specified Person, such Person
that (i) is in fact independent of the Servicer, the Depositor or any of their
respective affiliates, (ii) does not have any direct financial interest in or
any material indirect financial interest in any of the Servicer, the Depositor
or any of their respective affiliates and (iii) is not connected with any of the
Servicer, the Depositor or any of their respective affiliates, as an officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, however, that a Person shall not fail to be
Independent of ______________, the Servicer, the Depositor or any of their
respective affiliates merely because such Person is the beneficial owner of
________% or less of any class of securities issued by ______________, the
Servicer, the Depositor or any of their respective affiliates, as the case may
be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is Independent.
Index: The LIBOR Index.
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Insurance Proceeds: With respect to any Loan, the proceeds paid to the
Servicer by any insurer pursuant to any insurance policy covering a Loan,
Mortgaged Property or Foreclosure Property or any other insurance policy that
relates to a Loan, net of any expenses that are incurred by the Servicer in
connection with the collection of such proceeds and not otherwise reimbursed to
the Servicer, other than proceeds of any insurance policy that are to be applied
to the restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with customary mortgage loan servicing procedures
applicable to the respective loan type, including Debt Consolidation Loans and
Combination Loans.
Interest Adjustment Date: With respect to any Adjustable Rate Loan, the
date on which the Loan Interest Rate is or may be adjusted with respect to such
Loan.
LIBOR Index: The London Interbank Offered Rate for six month U.S. dollar
deposits either as announced by the Federal National Mortgage Association and
available as of the date 45 days before each Interest Adjustment Date or as
published in The Wall Street Journal generally on a day of the month preceding
the month of the Interest Adjustment Date.
Lien: A security interest, lien, charge, pledge, equity, or encumbrance of
any kind, other than tax liens, mechanics' liens and any liens that attach to
the respective Mortgaged Property by operation of law as a result of any act or
omission by the related Mortgagor.
Lifetime Cap: As to any Adjustable Rate Loan, the maximum Loan Interest
Rate set forth in the related Debt Instrument and indicated in the Loan
Schedule.
Lifetime Floor: As to any Adjustable Rate Loan, the minimum Loan Interest
Rate set forth in the related Debt Instrument and indicated in the Loan
Schedule.
Liquidated Loan: With respect to any date of determination, any Loan or
Foreclosure Property in respect of a Loan as to which the Servicer has
determined that all amounts which it reasonably and in good faith expects to
collect have been recovered from or on account of such Loan or the related
Foreclosure Property; provided that, in any event, such Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore deemed a
Liquidated Loan upon the earliest of: (a) the liquidation of the related
Foreclosure Property, (b) the determination by the Servicer in accordance with
customary servicing practices that no further amounts are collectible from the
Loan and any related Mortgaged Property, or (c) the date on which any portion of
a Monthly Payment on any Loan is in excess of 180 consecutive days past due.
Liquidation Proceeds: With respect to a Liquidated Loan, any cash amounts
received in connection with the liquidation of such Liquidated Loan, whether
through trustee's sale, foreclosure sale or other disposition, and any other
amounts required to be deposited in the Collection Account pursuant to Section
4.2 or Section 4.4, in each case other than Insurance Proceeds and Released
Mortgaged Property Proceeds.
Loan: Any Debt Consolidation Loan or Combination Loan identified as sold to
the Issuer by virtue of its inclusion on the Loan Schedule. As applicable, a
Loan shall be deemed to refer to the related Debt Instrument, Mortgage and any
related Foreclosure Property. The term "Loan" includes any Subsequent Loan on
and after the date it becomes a Subsequent Loan.
Loan Interest Rate: With respect to each Fixed Rate Loan, the fixed annual
rate of interest borne by a Debt Instrument, as shown on the related Loan
Schedule as the same may be modified by the Servicer in accordance with Section
4.1(c). With respect to each Adjustable Rate Loan, subject to applicable
Periodic Rate Cap, the Lifetime Cap and the Lifetime Floor, the related Index
plus the
10
applicable Gross Margin, as shown by the related Loan Schedule as the same may
be modified by the Servicer in accordance with Section 4.1(c).
Loan Pool: The pool of Loans.
Loan Sale Agreement: The loan sale agreement between _________, as seller
and the Depositor, as purchaser, dated as of _______________________________.
Loan Schedule: The schedule of Loans attached hereto as Exhibit A and
provided to the Indenture Trustee in computer readable form in a format
acceptable to the Indenture Trustee, as amended or supplemented from time to
time, such schedule identifying each Loan by address (including the related
state and Zip code) of the related Mortgaged Property, if any, and the name(s)
of each Mortgagor and setting forth as to each Loan the following information:
(i) the Principal Balance as of the Cut-Off Date, (ii) the account number, (iii)
the original principal amount, (iv) the Due Date, (v) whether such Loan is a
Fixed Rate Loan or an Adjustable Rate Loan, (vi) for each Fixed Rate Loan, the
Loan Interest Rate and for each Adjustable Rate Loan, the Gross Margin, (vii)
the first date on which a Monthly Payment is due under the related Debt
Instrument, (viii) the Monthly Payment, (ix) the maturity date of the related
Debt Instrument, and (x) the remaining number of months to maturity as of the
Cut-Off Date.
Loss Reimbursement Deficiency: With respect to any Distribution Date and
the Class M-1 Notes, Class M-2 Notes or Class B Notes, the amount of Allocable
Loss Amounts applied to the reduction of the Class Principal Balance of such
Class and not reimbursed pursuant to Section 5.1(d)(viii) as of such
Distribution Date plus interest accrued thereon during the related Accrual
Period at the related Note Interest Rate.
Mandatory Redemption Date: The Distribution Date immediately following the
end of the Pre-Funding Period.
Majority Securityholders: The holder or holders of in excess of 50% of the
Class Principal Balance of all Classes of Notes.
Majority Residual Interest Holders: The holder or holders of in excess of
50% Percentage Interest of the Residual Interests.
Maximum Collateral Amount: The sum of the Original Pool Principal Balance
and the Principal Balances of all Subsequent Loans transferred to the Issuer on
or prior to the applicable Cut-Off Date.
Mezzanine Notes: The Class M-1 Notes and Class M-2 Notes.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by a Mortgagor on the related Loan, as set forth in the
related Debt Instrument.
[Moody's: ▇▇▇▇▇'▇ Investment Service, Inc. or any successor thereto.]
Mortgage: The mortgage, deed of trust or other security instrument creating
a lien in accordance with applicable law on a Mortgaged Property to secure the
Debt Instrument which evidences a secured Loan.
Mortgagor: The obligor on a Debt Instrument.
Mortgaged Property: The real property encumbered by the Mortgage which
secures the Debt Instrument evidencing a secured Loan.
11
Mortgaged Property States: Each state in which any Mortgaged Property
securing a Loan is located as set forth in the Loan Schedule.
Net Delinquency Calculation Amount: With respect to any Distribution Date,
beginning with the sixth Distribution Date, the excess, if any, of (x) the
product of 2.5 and the Six-Month Rolling Delinquency Average over (y) the
aggregate of the amounts of Excess Spread for the three preceding Distribution
Dates.
Net Liquidation Proceeds: With respect to any Distribution Date, any cash
amounts received from Liquidated Loans during the related Due Period, whether
through trustee's sale, foreclosure sale, disposition of Mortgaged Properties or
otherwise (other than Insurance Proceeds and Released Mortgaged Property
Proceeds), and any other cash amounts received in connection with the management
of the Mortgaged Properties relating to Defaulted Loans, in each case, net of
any reimbursements to the Servicer made from such amounts for any unreimbursed
Servicing Compensation and Servicing Advances (including Nonrecoverable
Servicing Advances) made and any other fees and expenses paid in connection with
the foreclosure, conservation and liquidation of the related Liquidated Loans or
Foreclosure Property pursuant to Sections 4.2 and Section 4.4.
Net Loan Losses: On each Distribution Date, the sum of
(a) with respect to the Loans that become Liquidated Loans during the
immediately preceding Due Period, an amount (but not less than zero) determined
as of the related Determination Date equal to:
(i) the aggregate uncollected Principal Balances of such Liquidated Loans
as of the last day of such Due Period and without the application of any amounts
included in clause (ii) below, minus
(ii) the aggregate amount of any recoveries attributable to principal from
whatever source received during any Due Period, with respect to such Liquidated
Loans, including any Due Period subsequent to the Due Period wherein such Loan
became a Liquidated Loan, and including without limitation any Net Liquidation
Proceeds, any Insurance Proceeds, any Released Mortgaged Property Proceeds, any
payments from the related Mortgagor and any payments made pursuant to Section
3.5, less the amount of any expenses incurred in connection with such
recoveries; and
(b) the aggregate Cram Down Losses during the related Due Period.
Net Loan Rate: With respect to each Loan, the related Loan Interest Rate,
less the rate at which the Servicing Fee is calculated.
Nonrecoverable Servicing Advance: (A) Any Servicing Advance previously made
and not reimbursed from late collections, Liquidation Proceeds, Insurance
Proceeds, Post Liquidation Proceeds or the Released Mortgaged Property Proceeds,
or (B) a Servicing Advance proposed to be made in respect of a Loan or
Foreclosure Property either of which, in the good faith business judgment of the
Servicer, as evidenced by an Officer's Certificate delivered to the Indenture
Trustee would not be ultimately recoverable.
Note: Any of the Senior Notes, the Class M-1 Notes, the Class M-2 Notes and
the Class B Notes.
Note Distribution Account: The account established and maintained pursuant
to Section 5.1(a)(2).
Noteholder: A holder of a Note.
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Noteholders' Interest Distributable Amount: With respect to any
Distribution Date, the sum of the Senior Noteholders' Interest Distributable
Amount, the Class M-1 Noteholders' Interest Distributable Amount, the Class M-2
Noteholders' Interest Distributable Amount and the Class B Noteholders' Interest
Distributable Amount for such Distribution Date.
Note Interest Rate: With respect to each Class of Notes and any
Distribution Date, the per annum rate of interest payable to the holders of such
Class of Notes. The Note Interest Rates with respect to the Classes of Notes are
as follows: Class A-1: ____%; Class A-2: ____%; Class A-3: ____%; Class A-4:
____%; Class M-1: ____%; Class M-2: ____%; and Class B: ____%.
Officer's Certificate: A certificate delivered to the Indenture Trustee or
the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Servicer or the Depositor, in each case, as required by this
Agreement.
Optional Principal Balance: With respect to the Senior Notes, the Senior
Optimal Principal Balance; with respect to the Class M-1 Notes, the Class M-2
Notes and the Class B Notes, the Class M-1 Optimal Principal Balance and the
Class B Optimal Principal Balance respectively.
Original Class Principal Balance: With respect to the Classes of Notes, as
follows: Class A-1: $__________; Class A-2: $__________; Class A-3: $__________;
Class A-4: $__________; Class M-1: $__________; Class M-2: $__________; and
Class B: $_________.
Original Pool Principal Balance: $_____________, which is the Pool
Principal Balance as of the initial Cut-Off Date.
Original Pre-Funded Amount: $_____________.
Overcollateralization Amount: With respect to any Distribution Date, the
amount equal to the excess of (A) the sum of the Pool Principal Balance and the
Pre-Funded Amount, each as of the end of the preceding Due Period, over (B) the
aggregate of the Class Principal Balances of the Notes (after giving effect to
all distributions to be made to the Noteholders and the holders of the Residual
Interest Instruments on such Distribution Date).
Overcollateralization Deficiency Amount: With respect to any date of
determination, the excess, if any, of the Overcollateralization Target Amount
over the Overcollateralization Amount (such Overcollateralization Amount to be
calculated after giving effect to all (distributions to be made to the
Noteholders and the holders of the Residual Interest Instruments on such
Distribution Date).
Overcollateralization Target Amount: (A) With respect to any Distribution
Date occurring prior to the Stepdown Date, an amount equal to the greater of (x)
7% of the Maximum Collateral Amount and (y) the Net Delinquency Calculation
Amount; (B) with respect to any other Distribution Date, an amount equal to the
greater of (x) 14% of the Pool Principal Balance as of the end of the related
Due Period and (y) the Net Delinquency Calculation Amount; provided, however,
that the Overcollateralization Target Amount shall in no event be less than
0.50% of the Maximum Collateral Amount.
Ownership Interest: As to any Security, any ownership or security interest
in such Security, including any interest in such Security as the holder thereof
and any other interest therein, whether direct or indirect, legal or beneficial,
as owner or as pledgee.
Owner Trustee: _______________________________, as owner trustee under the
Trust Agreement, and any successor owner trustee under the Trust Agreement.
13
Owner Trustee Fee: The annual fee of $_______________, payable in equal
monthly installments to the Servicer who shall in turn pay such $_______________
to the Owner Trustee on the Distribution Date occurring in September each year
during the term of this Agreement commencing in ________________________;
provided, however, that the initial Owner Trustee Fee shall be paid by the
Depositor on the Closing Date.
Percentage Interest: As defined in the Trust Agreement.
Periodic Rate Cap: With respect to any Adjustable Rate Loan the periodic
rate cap set forth in the Debt Instrument related thereto.
Permitted Investments: Each of the following:
(a) obligations of, or guaranteed as to principal and interest by, the
United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(b) a repurchase agreement that satisfies the following criteria: (1)
must be between the Indenture Trustee and either (a) primary dealers on the
Federal Reserve reporting dealer list which are rated in one of the two
highest categories for long-term unsecured debt obligations by at least one
Rating Agency, or (b) banks rated in one of the two highest categories for
long-term unsecured debt obligations by at least one Rating Agency; and (2)
the written repurchase agreement must include the following: (a) securities
that are acceptable for transfer and are either (I) direct U.S. government
obligations, or (II) obligations of a federal agency that are backed by the
full faith and credit of the U.S. government, or FNMA or FHLMC; (b) a term
no greater than 60 days for any repurchase transaction; (c) the collateral
must be delivered to the Indenture Trustee or a third party custodian
acting as agent for the Indenture Trustee by appropriate book entries and
confirmation statements, and must have been delivered before or
simultaneous with payment (i.e., perfection by possession of certificated
securities); and (d) the securities sold thereunder must be valued weekly,
marked-to-market at current market price plus accrued interest and the
value of the collateral must be equal to at least ______% of the amount of
cash transferred by the Indenture Trustee under the repurchase agreement
and if the value of the securities held as collateral declines to an amount
below _______% of the cash transferred by the Indenture Trustee plus
accrued interest (i.e., a margin call), then additional cash and/or
acceptable securities must be transferred to the Indenture Trustee to
satisfy such margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least _____% of the cash
transferred by the Indenture Trustee under such repurchase agreement;
(c) certificates of deposit, time deposits and bankers acceptances of
any United States depository institution or trust company incorporated
under the laws of the United States or any state, including the Indenture
Trustee; provided that the debt obligations of such depository institution
or trust company at the date of the acquisition thereof have been rated by
at least one Rating Agency in one of its two highest long-term rating
categories;
(d) deposits, including deposits with the Indenture Trustee, that are
fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC, as the case may be;
(e) commercial paper of any corporation incorporated under the laws of
the United States or any state thereof, including corporate affiliates of
the Indenture Trustee, which at the date of acquisition is rated by at
least one Rating Agency in its highest short-term rating category and which
has an original maturity of not more than 365 days;
14
(f) debt obligations rated by at least one Rating Agency at the time
at which the investment is made in its highest long-term rating category
(or those investments specified in (3) above with depository institutions
which have debt obligations rated by at least one Rating Agency in one of
its two highest long-term rating categories);
(g) money market funds which are rated by at least one Rating Agency
at the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand withdrawals
being conclusively deemed to satisfy any maturity requirements for
Permitted Investments set forth in this Agreement; or
(h) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at the
time at which the investment is made;
provided, however, that no instrument described in the foregoing subparagraphs
shall evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than _____% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity. Any loans repurchased after the end of a Due Period
and prior to the following Determination Date shall be deemed to have been
repurchased during such Due Period.
Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to each of ___________________ and
______________________.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Loans as of the end of the preceding Due
Period, provided, however, that the Pool Principal Balance as of the end of the
Due Period relating to the Distribution Date on which the Termination Price is
to be paid will be deemed to have been equal to zero as of such date.
Post Liquidation Proceeds: As defined in Section 4.2(b).
Pre-Funded Percentage: With respect to any Class of Notes and a
Distribution Date, the percentage obtained from the fraction, the numerator of
which is the Class Principal Balance of such Class of Notes on the Closing Date
and the denominator of which is the aggregate of the Class Principal Balances
for all Classes of Notes as of the Closing Date.
Pre-Funding Account: The account created and maintained by the Indenture
Trustee pursuant to Section 5.5.
Pre-Funding Amount: With respect to any date, the amount on deposit in the
Pre-Funding Account (net of any Pre-Funding Earnings).
15
Pre-Funding Earnings: With respect to the Distribution Date in
_______________, the actual investment earnings earned on amounts on deposit in
the Pre-Funding Account during the period from _______________________ through
and including ______________________. With respect to the Distribution Date in
_____________________, the actual investment earnings earned on amounts on
deposit in the Pre-Funding Account during the period from
___________________________ through and including _________________________
(which amount shall be available on __________________________). With respect to
the Distribution Date in _______________________________, the actual investment
earnings earned on amounts on deposit in the Pre-Funding Account during the
period from ______________________ through and including _____________________
(which amount shall be available on _______________________).
Pre-Funding Period: The period commencing on the Closing Date and ending on
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any Pre-Funding Earnings) is less than
$________________, (ii) the date on which any Event of Default relating to the
Servicer occurs and (iii) ________________________.
Pre-Funding Pro Rata Distribution Trigger: With respect to the Distribution
Date following the Due Period in which the termination of the Pre-Funding Period
occurs, a Pre-Funding Pro Rata Distribution Trigger will be deemed to have
occurred if, at such time, the Pre-Funded Amount was greater than or equal to
$__________________.
Principal Balance: With respect to any Loan or related Foreclosure
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance of
the Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Loan as of the
last day of the preceding Due Period (after giving effect to all payments
received thereon and the allocation of any Net Loan Losses pursuant to clause
(B) thereof with respect thereto for any Defaulted Loan which relates to such
Due Period), without giving effect to amounts received in respect of such Loan
or related Foreclosure Property after such Due Period; provided, however, that
any Loan that became a Liquidated Loan during the preceding Due Period shall
have a Principal Balance of zero. With respect to any Distribution Date, any
Loans repurchased in the month following the end of the related Due Period but
prior to the Determination Date in such month shall be deemed to have been
repurchased during such related Due Period.
Principal Prepayment: With respect to any Loan and any Due Period, any
principal amount received on a Loan in excess of the principal portion of the
Monthly Payment due in such Due Period.
Property: The property (real, personal or mixed) encumbered by the Mortgage
which secures the Debt Instrument evidencing a secured Loan.
Prospectus Supplement: The Prospectus Supplement dated ___________________
relating to the Securities and filed with the Commission in connection with the
Registration Statement heretofore filed or to be filed with the Commission
pursuant to Rule 424(b)2 or 424(b)5.
Purchase Price: As defined in Section 3.5.
Qualified Substitute Loan: A home loan or home loans substituted for a
Defective Loan pursuant to Section 2.6 or Section 3.5, which (i) is a Fixed Rate
Loan if the related Defective Loan is a Fixed Rate Loan, (ii) has or have an
interest rate or rates of not less than two percentage points fewer and not more
than two percentage points greater than the Loan Interest Rate for the Defective
Loan, (iii) matures or mature not more than two years later than and not more
than two years earlier than the Defective Loan (provided, however, that no such
Qualified Substitute Loan shall mature later than the latest maturing Loan held
by the Issuer as of the Closing Date), (iv) has or have a principal balance or
principal balances
16
(after application of all payments received on or prior to the date of
substitution) equal to or less than the Principal Balance of the Defective Loan
as of such date, (v) has or have a lien priority equal or superior to that of
the Defective Loan, (vi) has or have a borrower with a comparable credit grade
classification to the credit grade classification of the borrower with respect
to the Deleted Loans, including a FICO Score that is no more than 10 points
below that of such Deleted Loan; (vii) has a first payment date within 30 days
of its transfer to the Issuer; and (viii) complies or comply as of the date of
substitution with each representation and warranty set forth in Section 3.4 and
is or are not more than 29 days delinquent as of the date of substitution for
such Deleted Loan, including, without limitation, satisfaction of the conditions
set forth in Section 3.4(af) as not constituting a "real estate mortgage" if the
related Defective Loan did not constitute a "real estate mortgage". For purposes
of determining whether multiple mortgage loans proposed to be substituted for
one or more Deleted Loans pursuant to Section 2.6 or Section 3.5 are in fact
"Qualified Substitute Loans" as provided above, the criteria specified in
clauses (i) and (iii) above may be considered on an aggregate or weighted
average basis, rather than on a loan-by-loan basis (e.g. so long as the weighted
average Loan Interest Rate of any loans proposed to be substituted is not less
than two percentage points fewer than and not more than two percentage points
greater than the Loan Interest Rate for the designated Deleted Loan or Loans,
the requirements of clause (ii) above would be deemed satisfied).
Rating Agencies: Any and all of (i) [Fitch] or (ii) [Moody's.] If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Issuer, notice of which designation shall have been given to
the Indenture Trustee, the Issuer and the Servicer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Distribution Date (other than the first
Distribution Date), the close of business on the last Business Day of the month
immediately preceding the month in which such Distribution Date occurs and, with
respect to the first Distribution Date, the Closing Date.
Regular Distribution Amount: With respect to any Distribution Date, the
lesser of (a) the Available Distribution Amount and (b) the sum of (i) the
Noteholders' Interest Distribution Amount, (ii) the Regular Principal
Distribution Amount and (iii) if such Distribution Date relates to the Due
Period in which the Pre-Funding Period ended and at the termination of such
Pre-Funding Period a Pre-Funding Pro Rata Distribution Trigger had occurred, the
amount on deposit in the Pre-Funding Account on such date.
Regular Principal Distribution Amount: On each Distribution Date, an amount
equal to the lesser of:
(a) the aggregate of the Class Principal Balances of the Classes of Notes
immediately prior to such Distribution Date; and
(b) the sum of (i) each scheduled payment of principal actually collected
by the Servicer in the related Due Period, (ii) all partial and full principal
prepayments applied by the Servicer during such related Due Period, (iii) the
principal portion of all Net Liquidation Proceeds, Insurance Proceeds and
Released Mortgaged Property Proceeds received during the related Due Period,
(iv) that portion of the Purchase Price, received on or after the second
preceding Determination Date and prior to the immediately preceding
Determination Date, that represents principal of the related Repurchased Loan,
(v) the principal portion of any Substitution Adjustments required to be
deposited in the Collection Account as of the related Determination Date, (vi)
if such Distribution Date relates to the Due Period in which the Pre-Funding
Period ended and at the termination of such Pre-Funding Period a Pre-Funding Pro
Rata Distribution Trigger had not occurred, the amount on deposit in the
Pre-Funding Account on such
17
date and (vii) on the Distribution Date on which the Issuer is to be dissolved
pursuant to Section 11.2, that portion of the Termination Price to be applied to
the payment of principal of the Securities.
Released Mortgaged Property Proceeds: With respect to any secured Loan,
proceeds received by the Servicer in connection with (i) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise; which in either
case are not released to the Mortgagor in accordance with applicable law,
Accepted Servicing Procedures and this Agreement.
Remittance Date: The 20th day of each month, or if such 20th day is not a
Business Day, the first Business Day immediately following such day, commencing
in ____________.
Repurchased Loan: Any Loan that has been repurchased pursuant to clause
(ii) of the fourth sentence of Section 3.5(a).
Residual Interests: Each instrument that represents (i) the right to
receive distributions from the Certificate Distribution Account pursuant to this
Agreement, the Indenture and the Trust Agreement on each Distribution Date
together with (ii) certain other rights to receive amounts hereunder and under
the Trust Agreement.
Responsible Officer: When used with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary, Assistant Secretary or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and this Agreement
on behalf of the Issuer. When used with respect to the Depositor, the Servicer,
or the Custodian, the President or any Vice President, Assistant Vice President,
or any Secretary or Assistant Secretary.
Securities: Collectively, the Notes and the Certificates.
Securityholder: Collectively, any holder of a Note or a Certificate.
Senior Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date and the Classes of Senior Notes, the excess of (A) the Senior
Noteholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding Senior Noteholders' Interest Carry-Forward
Amount for such preceding Distribution Date, over (B) the amount in respect of
interest that is actually distributed to such Notes on such preceding
Distribution Date.
Senior Noteholders' Interest Distributable Amount: With respect to any
Distribution Date and the Classes of Senior Notes, the sum of the Senior
Noteholders' Monthly Interest Distributable Amount for such Distribution Date
and the Senior Noteholders' Interest Carry-Forward Amount for such Distribution
Date.
Senior Noteholders' Monthly Interest Distributable Amount: With respect to
each Distribution Date and the Classes of Senior Notes, the aggregate amount of
interest accrued during the related Accrual Period at the respective Note
Interest Rates on the sum of (i) the Class Principal Balance of such Class
immediately preceding such Distribution Date and (ii) any Senior Noteholders'
Interest Carry-Forward Amount with respect to such Class remaining outstanding
for such Distribution Date.
18
Senior Notes: The Class A-1, Class A-2, Class A-3 and Class A-4 Notes.
Senior Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
an amount equal to the Pool Principal Balance as of the preceding Determination
Date minus the greater of (a) the sum of (1) ________% of the Pool Principal
Balance as of the preceding Determination Date and (2) the Overcollateralization
Target Amount for such Distribution Date (without giving effect to the proviso
in the definition thereof) and (b) ________% of the Maximum Collateral Amount;
provided, however, that the Senior Optimal Principal Balance shall never be less
than zero or greater than the aggregate Note Principal Balance of the Senior
Notes as of the Closing Date.
Series or Series ______: First Union Home Loan Asset Backed Notes, Series
_______.
Servicer: ______________________, in its capacity as the servicer
hereunder, or any successor appointed as herein provided.
Servicer's Fiscal Year: January 1st through December 31st of each year.
Servicer's Loan Files: In respect of each Loan, all documents customarily
included in the servicer's loan file for the related type of Loan in accordance
with the servicing standard set forth in Section 4.1.
Servicer's Monthly Remittance Report: The monthly report described in
Section 6.1(a).
Servicing Advances: Subject to Section 4.1(b), all reasonable, customary
and necessary "out of pocket" costs and expenses advanced or paid by the
Servicer with respect to the Loans in accordance with the performance by the
Servicer of its servicing obligations hereunder, including, but not limited to,
the costs and expenses for (i) the preservation, restoration and protection of
the Mortgaged Property, including without limitation advances in respect of real
estate taxes and assessments, (ii) any collection, enforcement or judicial
proceedings, including without limitation foreclosures, collections and
liquidations pursuant to Section 4.2, (iii) the conservation, management and
sale or other disposition of a Foreclosure Property pursuant to Section 4.4,
(iv) the preservation of the security for a Loan if any lienholder under a
Superior Lien has accelerated or intends to accelerate the obligations secured
by such Superior Lien pursuant to Section 4.1(b); provided, however, that such
Servicing Advances are reimbursable to the Servicer on account of late
collections as set forth in Section 5.1(b)(3)(iii) or, to the extent that such
Servicing Advances constitute Nonrecoverable Servicing Advances, from any
amounts on deposit in the Collection Account.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 7.1 and Section 7.3.
Servicing Fee: As to each Loan (including any Loan that has been foreclosed
and has become a Foreclosure Property, but excluding any Liquidated Loan), the
fee payable monthly to the Servicer on each Distribution Date, which shall be
the product of 1.00% (100 basis points) and the Principal Balance of such Loan
as of the beginning of the immediately preceding Due Period, divided by 12. The
Servicing Fee includes any servicing fees owed or payable to any Subservicer
which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved in,
or responsible for, the administration and servicing of the Loans whose name and
specimen signature appears on a list of servicing officers annexed to an
Officer's Certificate furnished by the Servicer or the Subservicer,
19
respectively, to the Issuer and the Indenture Trustee, on behalf of the
Securityholders, as such list may from time to time be amended.
Six-Month Rolling Delinquency Average: With respect to any Distribution
Date, the average of the applicable 60-Day Delinquency Amounts for each of the
six immediately preceding Due Periods, where the 60-Day Delinquency Amount for
any Due Period is the aggregate of the Principal Balances of all Loans (without
duplication) that are 60 or more days Delinquent, in foreclosure or Foreclosure
Property as of the end of such Due Period.
Spread Deferral Period: The period beginning on the Closing Date and ending
as soon as Excess Spread in an amount equal to $____________________ Loan been
deposited in the Certificate Distribution Account for distribution to holders of
the Residual Interests..
Stepdown Date: The first Distribution Date occurring after September 2000
as to which all of the following conditions exist:
(a) the Pool Principal Balance has been reduced to an amount less than
or equal to 50% of the Maximum Collateral Amount;
(b) the Net Delinquency Calculation Amount is less than _____% of the
Maximum Collateral Amount; and
(c) the aggregate Class Principal Balance of the Senior Notes (after
giving effect to distributions of principal on such Distribution Date) will
be reduced on such Distribution Date (such determination to be made by the
Indenture Trustee prior to making actual distributions on such Distribution
Date) to the excess of (i) the Pool Principal Balance as of the preceding
Determination Date over (ii) the greater of (a) the sum of (1) _________%
of the Pool Principal Balance as of the preceding Determination Date and
(2) the Overcollateralization Target Amount for such Distribution Date
(such Overcollateralization Target Amount to be calculated for this purpose
without giving effect to the proviso in the definition thereof and rather
calculated pursuant only to clause (B) in the definition thereof) and (b)
___________% of the Maximum Collateral Amount.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent Transfer
Date and any Subsequent Loan transferred to the Issuer during any month which
does not have a Monthly Payment due until the second Due Period following such
month, an amount equal to the product of (a) the Loan Balance of such Subsequent
Loan on the related Cut-Off Date and (b) one-twelfth of the Net Loan Rate on
such Subsequent Loan.
Subsequent Loans: The Loans sold to the Issuer pursuant to Section 2.7 and
the related Subsequent Transfer Agreement, which shall be listed on the loan
schedule attached to such Subsequent Transfer Agreement.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement executed
by the Owner Trustee, Indenture Trustee and the Depositor substantially in the
form in Exhibit E hereto, by which Subsequent Loans are sold and assigned to the
Issuer; provided, however, that in no event shall there be more than three (3)
such Subsequent Transfer Agreements.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.6(a) in respect of the qualifications of a
Subservicer.
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Subservicing Account: An account established by a Subservicer pursuant to a
Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Loans
as provided in Section 4.6(a), copies of which shall be made available, along
with any modifications thereto, to the Issuer and the Indenture Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 2.6 or Section 3.5, the amount, if any, by which (a) the sum
of the aggregate Principal Balance (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Loans as of the date of substitution plus any accrued and unpaid interest
thereon to the date of substitution, is less than (b) the sum of the aggregate
of the Principal Balances, together with accrued and unpaid interest thereon to
the date of substitution, of the related Defective Loans.
Superior Lien: With respect to any Loan that is secured by a lien other
than a first priority lien, the mortgage loan(s) relating to the corresponding
Mortgaged Property having a superior priority lien.
Termination Price: As of any date of determination, an amount without
duplication equal to the sum of (i) the then outstanding Principal Balances of
the Loans plus all accrued and unpaid interest thereon, (ii) any Trust Fees and
Expenses due and unpaid on such date and (iii) any unreimbursed Servicing
Advances or any Nonrecoverable Servicing Advances.
Depositor: Home Equity Securitization Corp., in its capacity as the
Depositor hereunder.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in any Trust Account and all proceeds of the foregoing.
Trust Accounts: The Note Distribution Account, the Certificate Distribution
Account, the Collection Account, the Pre-Funding Account and the Capitalized
Interest Account.
Trust Agreement: The Trust Agreement dated as of ______________________,
among the Depositor, the Co-Owner Trustee and the Owner Trustee.
Trust Estate: The assets subject to this Agreement, the Trust Agreement and
the Indenture and assigned to the Trust, which assets consist of: (i) such Loans
as from time to time are subject to this Agreement as listed in the Loan
Schedule, as the same may be amended or supplemented from time to time including
the addition of Subsequent Loans, the removal of Deleted Loans and the addition
of Qualified Substitute Loans, together with the Servicer's Loan Files and the
Indenture Trustee's Loan Files relating thereto and all proceeds thereof, (ii)
all payments in respect of interest received with respect to the Loans on or
after the Cut-Off Date and all payments received with respect to principal, on
or after the Cut-Off Date, (iii) such assets as from time to time are identified
as Foreclosure Property, (iv) such assets and funds as are from time to time are
deposited in the Collection Account, the Note Distribution Account and the
Certificate Distribution Account, including amounts on deposit in such accounts
which are invested in Permitted Investments, (v) the Issuer's rights under all
insurance policies with respect to the Loans and any Insurance Proceeds, (vi)
Net Liquidation Proceeds, Post Liquidation Proceeds and Released Mortgaged
Property Proceeds, and (vii) all right, title and interest of the Servicer and
the Depositor in and to the rights and obligations of any Subservicer, pursuant
to any Subservicing Agreement.
Trust Fees and Expenses: As of each Distribution Date, an amount equal to
the Servicing Compensation, the Indenture Trustee Fee and the Owner Trustee Fee.
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Underwriter: _____________________________________________.
Underwriting Guidelines: The underwriting guidelines of the Servicer a copy
of which is attached as an exhibit to the Loan Purchase Agreement.
Uninsured Cause: Any cause of damage to a Mortgaged Property such that the
complete restoration of such property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to this Agreement.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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ARTICLE II
CONVEYANCE OF THE LOANS
Section 2.01 Conveyance of the Loans.
(a) As of the Closing Date, in consideration of the Issuer's delivery upon
the order of the Depositor, of the Notes and Residual Interest Instruments to
the Depositor or its designee, the Depositor, as of the Closing Date and
concurrently with the execution and delivery hereof, does hereby sell, transfer,
assign, set over and otherwise convey to the Issuer, without recourse, but
subject to the other terms and provisions of this Agreement, all of the right,
title and interest of the Depositor in and to the Trust Estate. The foregoing
sale, transfer, assignment, set over and conveyance does not and is not intended
to result in a creation or an assumption by the Issuer of any obligation of the
Depositor or any other Person in connection with the Trust Estate or under any
agreement or instrument relating thereto except as specifically set forth
herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to it of
the Trust Estate, receipt of which is hereby acknowledged by the Issuer.
Concurrently with such delivery and in exchange therefor, the Issuer has pledged
to the Indenture Trustee the Trust Estate and the Indenture Trustee, pursuant to
the written instructions of the Issuer, has executed and caused to be
authenticated and delivered the Notes to the Depositor or its designee, upon the
order of the Issuer. In addition, concurrently with such delivery and in
exchange therefor, the Owner Trustee, pursuant to the instructions of the
Depositor, has executed (not in its individual capacity, but solely as Owner
Trustee on behalf of the Issuer) and caused to be authenticated and delivered
upon the order of the Depositor the Residual Interests to the Depositor or its
designee.
Section 2.02 Intended Characterization; Grant of Security Interest.
(a) It is the intention of the parties hereto that the conveyance by the
Depositor of the Trust Estate to the Issuer shall constitute a purchase and sale
of such Trust Estate and not a loan. In the event, however, that a court of
competent jurisdiction were to hold that the transaction evidenced hereby
constitutes a loan and not a purchase and sale, it is the intention of the
parties hereto that this Agreement shall constitute a security agreement under
applicable law, and that the Depositor shall be deemed to have granted and
hereby, does grant to the Issuer, a first priority perfected security interest
in all of the Depositor's right, title and interest in, to and under the Trust
Estate to secure a loan in an amount equal to the purchase price of the Loans.
(b) The Depositor and the Servicer shall take no action inconsistent with
the Issuer's ownership of the Trust Estate and shall indicate or shall cause to
be indicated in its records and records held on its behalf that ownership of
each Loan and the assets in the Trust Estate are held by the Issuer. In
addition, the Depositor and the Servicer shall respond to any inquiries from
third parties with respect to ownership of a Loan or any other asset in the
Trust Estate by stating that it is not the owner of such asset and that
ownership of such Loan or other Trust Estate asset is held by the Issuer.
Section 2.02 Ownership and Possession of Indenture Trustee's Loan Files.
Upon the issuance of the Securities, with respect to the Loans, the
ownership of each Debt Instrument, the related Mortgage and the contents of the
related Servicer's Loan File and the Indenture Trustee's Loan File shall be
vested in the Owner Trustee and the Co-Owner Trustee and pledged to the
Indenture Trustee for the benefit of the Noteholders, although possession of the
Servicer's Loan Files (other than items required to be maintained in the
Indenture Trustee's Loan Files) on behalf of and for the
23
benefit of the Securityholders shall remain with the Servicer, and the Custodian
shall take possession of the Indenture Trustee's Loan Files as contemplated in
Section 2.6.
Section 2.04 Books and Records.
The sale of each Loan shall be reflected on the Depositor's balance sheets
and other financial statements as a sale of assets by the Depositor under
generally accepted accounting principles ("GAAP"). The Servicer shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Loan which shall be clearly marked to reflect the ownership of
each Loan by the Owner Trustee and the Co-Owner Trustee for the benefit of the
Securityholders and the pledge of each Loan to the Indenture Trustee for the
benefit of the Noteholders. The Custodian, pursuant to the terms of the
Custodial Agreement, shall hold the Indenture Trustee's Loan Files and maintain
books and records for the Loans which shall be clearly marked to reflect the
ownership of each Loan by the Issuer for the benefit of the Securityholders and
the pledge of each Loan to the Indenture Trustee for the benefit of the
Noteholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Loans
and the other property specified in Section 2.1(a) from the Depositor to the
Issuer and such property shall not be property of the Depositor. If the
assignment and transfer of the Loans and the other property specified in Section
2.1(a) to the Issuer pursuant to this Agreement or the conveyance of the Loans
or any of such other property to the Issuer is held or deemed not to be a sale
or is held or deemed to be a pledge of security for a loan, the Depositor
intends that the rights and obligations of the parties shall be established
pursuant to the terms of this Agreement and that, in such event, (i) the
Depositor shall be deemed to have granted and does hereby grant to the Issuer a
first priority security interest in the entire right, title and interest of the
Depositor in and to the Loans and all other property conveyed to the Issuer
pursuant to Section 2.1(a) and all proceeds thereof, and (ii) this Agreement
shall constitute a security agreement under applicable law. Within five days
after the Closing Date, the Depositor shall cause to be filed UCC-1 financing
statements naming the Issuer as "secured party" and describing the Loans and
such other assets being sold by the Depositor to the Issuer with the office of
the Secretary of State of the state in which the principal place of business of
the Depositor is located.
Section 2.05 Delivery of Loan Documents.
(a) With respect to each Loan, on the Closing Date the Depositor has
delivered or caused to be delivered to the Custodian as the designated agent of
the Indenture Trustee each of the following documents (collectively, the
"Indenture Trustee's Loan Files"):
(i) The original Debt Instrument, endorsed by _________ in blank with
all prior and intervening endorsements showing a complete chain of
endorsement from origination of the Loan to ______
(ii) The original Mortgage with evidence of recording thereon (or, if
the original Mortgage has not been returned from the applicable public
recording office or is not otherwise available, a copy of the Mortgage
certified by a Responsible Officer of the Depositor or by the closing
attorney or by an officer of the title insurer or agent of the title
insurer which issued the related title insurance policy or commitment
therefor to be a true and complete copy of the original Mortgage submitted
for recording) and, if the Mortgage was executed pursuant to a power of
attorney, the original power of attorney with evidence of recording thereon
(or, if the original power of attorney has not been returned from the
applicable public recording office or is not otherwise available, a copy of
the power of attorney certified by a Responsible Officer of the Depositor
or by the closing attorney or by an officer of the title insurer or agent
of the title insurer
24
which issued the related title insurance policy or commitment therefor, to
be a true and complete copy of the original power of attorney submitted for
recording);
(iii) The original executed Assignment of Mortgage, acceptable for
recording except with respect to any currently unavailable recording
information, from the Depositor to the Indenture Trustee in blank;
(iv) The original initial Assignment of Mortgage and any original
intervening Assignments of Mortgage, with evidence of recording thereon,
showing a complete chain of assignment from origination of the Loan to the
Depositor (or, if any such Assignment of Mortgage has not been returned
from the applicable public recording office or is not otherwise available,
a copy of such Assignment of Mortgage certified by a Responsible Officer of
the Depositor or by the closing attorney or by an officer of the title
insurer or agent of the title insurer which issued the related title
insurance policy or commitment therefor to be a true and complete copy of
the original Assignment of Mortgage submitted for recording); and
(v) the original, or a copy certified by the Depositor to be a true
and correct copy of the original, of each assumption, modification, written
assurance or substitution agreement, if any.
(b) With respect to any Mortgage referred to in Section 2.5(a)(ii) as to
which the original Mortgage is not available as of the Closing Date or the
Subsequent Transfer Date, as the case may be, and with respect to any Assignment
of Mortgage referred to in Section 2.5(a)(iii) or Section 2.5(a)(iv) as to which
the original Assignment of Mortgage is not available as of the Closing Date or
the Subsequent Transfer Date, as the case may be, the Depositor shall deliver,
prior to the Closing Date or the Subsequent Transfer Date, as the case may be, a
copy of such Mortgage or such Assignment of Mortgage, as the case may be,
certified by the Depositor to be a true and correct copy, to the Indenture
Trustee and shall also deliver the original Mortgage, or where the original
Mortgage is unavailable a copy thereof certified by the applicable public
recording office, and the original Assignment of Mortgage, or where the original
Assignment of Mortgage is unavailable a copy thereof certified by the applicable
public recording office, to the Indenture Trustee within five Business Days of
receipt thereof by the Depositor but in no event later than 360 days following
the date of origination of the related Loan or the date of such Assignment of
Mortgage to the Depositor. The failure of the Depositor to deliver to the
Indenture Trustee (x) any original Mortgage under Section 2.5(a)(ii) (or where
the original is unavailable a copy thereof certified by the applicable public
recording office), or (y) any original Assignment of Mortgage under Section
2.5(a)(iii) and (iv) (or where the original is unavailable a copy thereof
certified by the applicable public recording office), shall not be deemed a
breach of this Agreement for any purpose whatsoever until the expiration of such
360 day period.
The Depositor shall promptly (and in no event later than 35 Business Days
following the Closing Date and each Subsequent Transfer Date) submit for
recording, at the Depositor's expense, in the appropriate public office for real
property records, each original Assignment of Mortgage referred to in Section
2.5(a)(iii), as well as each original Assignment of Mortgage referred to in
Section 2.5(a)(iv) that was not previously submitted for recording; provided,
however, that Assignments of Mortgage shall not be required to be submitted for
recording with respect to any Loan if the Indenture Trustee and each of the
Rating Agencies shall have received an opinion of counsel satisfactory to the
Indenture Trustee and each of the Rating Agencies, stating that, in such
counsel's opinion, the failure to record such Assignment of Mortgage shall not
have a material adverse effect on the security interest of the Indenture Trustee
in the Mortgage. With respect to any original Assignment of Mortgage referred to
in Section 2.5(a)(iii) as to which the related recording information is
unavailable within five Business Days following the Closing Date or Subsequent
Transfer Date, as the case may be, such original Assignment of Mortgage shall be
submitted for recording within five Business Days after receipt of such
information (or any longer period as approved by the Indenture Trustee in
writing with respect to specific Loans upon the request of the
25
Depositor pursuant to an Officer's Certificate in accordance with Accepted
Servicing Procedures stating the amount of time generally required by the
applicable recording office to record and return such documents submitted for
recordation) after the Closing Date or Subsequent Transfer Date. The Depositor
shall deliver each recorded Assignment of Mortgage referred to in Section
2.5(a)(iii) or, where the original is unavailable, a copy thereof certified by
the applicable public recording office to be a true and correct copy of the
original, to the Indenture Trustee no later than the earlier of (i) five
Business Days after receipt thereof and (ii) within 360 days of the Closing Date
or Subsequent Transfer Date. Any failure of the Depositor to deliver to the
Indenture Trustee, prior to the expiration of such 360 day period, any such
recorded Assignment of Mortgage, or such certified copy if such recorded
Assignment of Mortgage has not been received by it, shall not be deemed a breach
of this Agreement for any purpose. In the event that any such Assignment of
Mortgage is lost or returned unrecorded because of a defect therein, the
Depositor shall promptly prepare a substitute Assignment of Mortgage or cure
such defect, as the case may be, and thereafter cause each such Assignment of
Mortgage to be duly recorded.
The Servicer shall promptly upon receipt thereof (and in no event later
than the earlier of (i) five Business Days following such receipt and (ii) 360
days after the Closing Date or Subsequent Transfer Date, as the case may be,
deliver to the Indenture Trustee (a) the original recorded Mortgage in those
instances where a certified copy thereof was delivered to the Indenture Trustee;
(b) the original recorded Assignment of Mortgage or Assignment of Mortgages
showing a complete chain of assignment from origination of a Loan to the
Depositor in those instances where certified copies thereof were delivered to
the Indenture Trustee; (c) the original policy of title insurance or title
report, as applicable, or a copy certified by the Depositor to be a true and
correct copy in those instances where a commitment (binder) (including any
marked additions thereto or deletions therefrom) to issue such policy was
delivered to the Indenture Trustee; and (d) any other original documents
constituting a part of an Indenture Trustee's Loan File received with respect to
any Home Loan, including, but not limited to, any original documents evidencing
an assumption or modification of any Loan.
All original documents relating to the Loans that are not delivered to the
Indenture Trustee are and shall be held by the Depositor or the Servicer, as the
case may be, in trust for the benefit of the Indenture Trustee on behalf of the
Securityholders. In the event that any such original document is required
pursuant to the terms of this Section 2.5 to be a part of an Indenture Trustee's
Loan File, such document shall be delivered promptly to the Indenture Trustee.
Any original document that is not required pursuant to the terms of this Section
2.5 to be a part of an Indenture Trustee's Loan File delivered to or held by the
Indenture Trustee shall be delivered promptly to the Servicer.
In connection with the delivery of documentation provided by this Section
2.5, the Depositor hereby appoints the Indenture Trustee its attorney with full
power and authority to act in its stead for the purpose of executing and
certifying assignments and endorsing and certifying promissory notes which form
a part of each Indenture Trustee's Loan File to cure any deficiencies in such
documentation; provided, however, that the Indenture Trustee has no obligation
to exercise any such power unless it has received from the Depositor (i) written
instructions to do so, (ii) reimbursement for any associated expenses, and (iii)
indemnification satisfactory to the Indenture Trustee in connection therewith.
If the Depositor has not delivered all required documentation with respect
to any Loan within the time periods, if any, specified in this Agreement, the
Depositor shall be required to take action with respect to such Loan as and to
the extent provided in Section 2.6.
(c) All recordings required pursuant to this Section 2.5 shall be
accomplished by and at the expense of the Depositor.
26
Section 2.06 Acceptance by Indenture Trustee of the Loans; Certain
Substitutions; Initial Certification by Indenture Trustee or Custodian.
(a) The Indenture Trustee agrees to execute and deliver on the Closing Date
an acknowledgment of receipt of the Indenture Trustee's Loan File for each Loan
received by the Indenture Trustee on the Closing Date, and the Indenture Trustee
agrees to execute and deliver on any Subsequent Transfer Date an acknowledgement
of receipt of the Indenture Trustee's Loan File for each Subsequent Loan
received by the Indenture Trustee on such Subsequent Transfer Date; such
acknowledgements of receipts shall be substantially in the form of Exhibit C. In
addition, the Indenture Trustee agrees to acknowledge the assignment to it of
all other assets included in clauses (i) through (v) of the definition of "Trust
Estate" and the Trust Accounts and declares that it holds and will hold such
documents and the other documents delivered to it constituting the Indenture
Trustee's Loan Files, and that it holds or will hold all such assets and such
other assets included in the definition of "Trust Estate" that are delivered to
it, in trust for the exclusive use and benefit of all present and future
Securityholders.
Within 30 Business Days of the Closing Date or Subsequent Transfer Date, as
applicable, the Indenture Trustee shall deliver to the Depositor and the
Servicer a certification in the form annexed hereto as Exhibit E, with any
applicable exceptions noted thereon. Neither the Indenture Trustee nor the
Issuer shall be under any duty or obligation (i) to inspect, review or examine
any such documents, instruments, certificates or other papers to determine that
they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face or (ii) to
determine if any Indenture Trustee's Loan File should include any document
specified in Section 2.5(a)(v).
After the delivery of the certification, the Indenture Trustee shall
provide to the Servicer and the Depositor, and the Depositor shall in turn
provide to the Indenture Trustee, no less frequently than quarterly, updated
certifications, a form of which is attached hereto as Exhibit F, indicating the
then current status of exceptions until all such exceptions have been
eliminated.
If in the process of reviewing the Indenture Trustee's Loan Files and
making or preparing the certifications referred to above the Indenture Trustee
finds any document or documents constituting a part of an Indenture Trustee's
Loan File to be missing or defective in any material respect, or at the end of
any 360-day period referenced above finds that all recorded Assignments of
Mortgage and all original Mortgages or certified copies thereof have not been
delivered to it, the Indenture Trustee shall promptly so notify the Depositor
and the Servicer. In performing any such review, the Indenture Trustee may
conclusively rely on the Depositor as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Indenture Trustee's review of the items delivered to the Indenture Trustee
pursuant to Section 2.5, unless otherwise expressly stated, shall be limited
solely to confirming that the documents listed in Section 2.5 have been executed
and received, relate to the Loans in the Loan Schedule and conform as to the
loan number and address and description thereof in the Loan Schedule. Neither
the Indenture Trustee nor the Issuer shall have any responsibility for
determining whether any document is valid and binding, whether the text of any
assignment or endorsement is in proper or recordable form or whether a blanket
assignment is permitted in any applicable jurisdiction. In addition, upon the
discovery by the Depositor, the Servicer or the Indenture Trustee of a breach of
any of the representations and warranties made by the Depositor herein in
respect of any Loan which materially and adversely affects the value of such
Loan or the interests of the Securityholders in such Loan, the Person
discovering such breach shall give prompt written notice to the other Persons
set forth in this sentence.
At such time as any Loan becomes 90 days Delinquent, the Servicer shall
make, or cause to be made, a reasonable investigation to determine whether such
Loan satisfied the representations and
27
warranties of the Depositor set forth in Section 3.4 as of the Closing Date;
provided, however, that only one such investigation shall be required for any
Loan.
If the Depositor has not delivered all required documentation with respect
to any Loan within the time periods specified in this Agreement (as such may
have been extended pursuant to Section 2.5(b)) or if a material defect exists
with respect to any documentation delivered by the Depositor, the Depositor
shall be required to take action with respect to such Loan as and to the extent
provided in Section 3.5.
(b) The Servicer's Loan File shall be held in the custody of the Servicer
for the benefit of, and as agent for, the Securityholders and the Indenture
Trustee as the owner thereof. It is intended that by the Servicer's agreement
pursuant to this Section 2.6(b) the Indenture Trustee shall be deemed to have
possession of the Servicer's Loan Files for purposes of Section 9-305 of the
Uniform Commercial Code of the state in which such documents or instruments are
located. The Servicer shall promptly report to the Indenture Trustee any failure
by it to hold the Servicer's Loan File as herein provided and shall promptly
take appropriate action to remedy any such failure. In acting as custodian of
such documents and instruments, the Servicer agrees not to assert any legal or
beneficial ownership interest in the Loans or such documents or instruments. The
Servicer agrees to indemnify the Securityholders and the Indenture Trustee for
any and all liabilities, obligations, losses, damages, payments, costs, or
expenses of any kind whatsoever which may be imposed on, incurred by or asserted
against the Securityholders or the Indenture Trustee as the result of any act or
omission by the Servicer relating to the maintenance and custody of such
documents or instruments which have been delivered to the Servicer; provided,
however, that the Servicer will not be liable for any portion of any such amount
resulting from the negligence or misconduct of any Securityholder or the
Indenture Trustee and provided, further, that the Servicer will not be liable
for any portion of any such amount resulting from the Servicer's compliance with
any instructions or directions consistent with this Agreement issued to the
Servicer by the Indenture Trustee. The Indenture Trustee shall have no duty to
monitor or otherwise oversee the Servicer's performance as custodian hereunder.
(c) If the Custodian, during the process of reviewing the Indenture
Trustee's Loan Files, finds any document constituting a part of an Indenture
Trustee's Loan File which is not executed, has not been received, is unrelated
to any Loan identified in the Loan Schedule, does not conform to the
requirements of Section 2.5 or does not conform, in all material respects, to
the description thereof as set forth in the Loan Schedule, then the Custodian
shall promptly so notify the Depositor, the Servicer, the Indenture Trustee and
the Issuer. In performing any such review, the Custodian may conclusively rely
on the Depositor as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Custodian's review of
the Indenture Trustee's Loan Files is limited solely to confirming that the
documents listed in Section 2.5 have been received and further confirming that
any and all documents delivered pursuant to Section 2.5 have been executed and
relate to the Loans identified in the Loan Schedule. Neither the Issuer nor the
Custodian shall have any responsibility for determining whether any document is
valid and binding, whether the text of any assignment or endorsement is in
proper or recordable form, whether any document has been recorded in accordance
with the requirements of any applicable jurisdiction, or whether a blanket
assignment is permitted in any applicable jurisdiction. If a material defect in
a document constituting part of an Indenture Trustee's Loan File is discovered,
then Depositor and _____ shall comply with the cure, substitution and repurchase
provisions of Section 3.5.
Section 2.07 Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in this Article
II and pursuant to the terms of the related Subsequent Transfer Agreement, in
consideration of the Indenture Trustee's delivery on each Subsequent Transfer
Date to or upon the order of the Depositor of all or a portion of the balance of
funds in the Pre-Funding Account, the Depositor shall on such Subsequent
Transfer Date sell, transfer,
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assign, set over and otherwise convey without recourse to the Issuer, all of its
right, title and interest in and to each Subsequent Loan listed on the related
Loan Schedule delivered by the Depositor on such Subsequent Transfer Date,
including (i) the related Principal Balance, all interest payments and all
collections in respect of principal received after the related Cut-Off Date;
(ii) any real property that secured such Subsequent Loan and that has been
acquired by foreclosure or deed in lieu of foreclosure; (iii) all of its
interest in any insurance policies in respect of such Subsequent Loan; and (iv)
all proceeds of the foregoing. The transfer by the Depositor to the Issuer of
the Subsequent Loans set forth in the related Subsequent Transfer Agreement
shall be absolute and shall be intended by all parties hereto to be treated as a
sale by the Depositor to the Issuer in consideration of the funds released from
the Pre-Funding Account. If the assignment and transfer of the Subsequent Loans
and the other property specified in this Section 2.7(a) from the Depositor to
the Issuer pursuant to this Agreement is held or deemed not to be a sale or is
held or deemed to be a pledge of security for a loan, the Depositor intends that
the rights and obligations of the parties shall be established pursuant to the
terms of this Agreement and that, in such event, (i) the Depositor shall be
deemed to have granted and does hereby grant to the Indenture Trustee and
Co-Owner Trustee as of each Subsequent Transfer Date a perfected, first priority
security interest in the entire right, title and interest of the Depositor in
and to the related Subsequent Loans and all other property conveyed to the Owner
Trustee and Co-Owner Trustee pursuant to this Section 2.7(a) and all proceeds
thereof, and (ii) this Agreement shall constitute a security agreement under
applicable law. The amount released to the Depositor from the Pre-Funding
Account shall be one hundred percent (100%) of the aggregate of the Principal
Balances of the Subsequent Loans so transferred.
(b) The Indenture Trustee shall contribute from the Pre-Funding Account
funds in an amount equal to one-hundred percent (100%) of the aggregate
Principal Balances as of the related Cut-Off Date or Dates of the Subsequent
Loans so transferred to the Issuer and use such cash to purchase the Subsequent
Loans on behalf of the Issuer, along with the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to the related Subsequent Transfer Dates:
(i) the Depositor shall have provided the Indenture Trustee, Owner
Trustee, the Co-Owner Trustee and the Rating Agencies with an Addition
Notice, which notice shall be given not less than four Business Days prior
to the related Subsequent Transfer Date and shall designate the Subsequent
Loans to be sold to the Issuer and the aggregate Principal Balances of such
Loans as of the related Cut-Off Date or Dates;
(ii) the Depositor shall have deposited in the Collection Account all
principal collected after the related Cut-Off Date and interest payments
collected after the related Cut-Off Date in respect of each Subsequent
Loan, and the related Subsequent Cut-Off Date Deposit;
(iii) the Depositor shall have delivered an Officer's Certificate to
the Indenture Trustee and the Co-Owner Trustee confirming that as of each
Subsequent Transfer Date, the Depositor was not insolvent, nor will it be
made insolvent by such transfer, nor is it aware of any pending insolvency;
(iv) the Pre-Funding Period shall not have ended;
(v) the Depositor shall have delivered to the Indenture Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and in the related Subsequent
Transfer Agreement;
(vi) the Depositor shall have delivered an Officer's Certificate to
the Indenture Trustee and the Co-Owner Trustee confirming that the
representations and warranties of the Depositor pursuant to Section 3.4
(other than to the extent representations and warranties relate to
statistical
29
information as to the characteristics of the initial Loans in the
aggregate) and pursuant to Section 3.2 are true and correct with respect to
the Depositor and the Subsequent Loans, as applicable, as of the Subsequent
Transfer Date;
(vii) the Issuer shall not purchase any group of Subsequent Loans
unless the Depositor shall have delivered to the Indenture Trustee an
Officer's Certificate confirming that, as a result of such purchase, the
percentage of the Pool Principal Balance comprised of Mortgage Loans that
do not constitute "real estate mortgages" (as set forth in Section 3.4(af))
remains the same or increases.
(viii) the Depositor shall have provided the Indenture Trustee and the
Co-Owner Trustee with an Opinion of Counsel relating to the sale of the
Subsequent Loans to the Indenture Trustee;
(ix) the Issuer shall not purchase a Subsequent Loan unless it and the
Indenture Trustee shall each have received a certificate of the Depositor
indicating (a) the Rating Agencies shall have consented to the purchase
thereof (which consent shall not be unreasonably withheld) and (b) such
subsequent loan shall mature no later than six-months after the latest
maturing initial Loan; and
(x) in connection with the transfer and assignment of the Subsequent
Loans, the Depositor shall satisfy the document delivery requirements set
forth in Section 2.5.
(c) In connection with each Subsequent Transfer Date and on the related
Distribution Date, the Indenture Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirement and Pre-Funding
Account Earnings for such Distribution Date in accordance with the provisions of
this Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and of the Capitalized Interest
Account. In the event that any amounts are released as a result of calculation
error by the Indenture Trustee from the Pre-Funding Account or from the
Capitalized Interest Account, the Indenture Trustee shall not be liable
therefor, and the Depositor shall immediately repay such amounts to the
Indenture Trustee.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Indenture Trustee, the
Owner Trustee and the Securityholders that as of the Closing Date or the
Subsequent Transfer Date, as the case may be (except as otherwise specifically
provided herein):
(a) The Depositor is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina. and has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each state where a Mortgaged
Property is located if the laws of such state require licensing or qualification
in order for the Depositor to conduct such business and to perform its
obligations as the Depositor hereunder, and in any event the Depositor is in
compliance with the laws of any such state to the extent necessary to ensure the
enforceability of the related Loans, and had at all relevant times, full
corporate power to originate or purchase the Loans, to own its property, to
carry on its business as presently conducted and to enter into and perform its
obligations under this Agreement;
(b) The execution and delivery of this Agreement by the Depositor and its
performance of and compliance with the terms of this Agreement will not violate
the Depositor's certificate of incorporation or by-laws or constitute a default
(or an event that, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Depositor is a party or
which may be applicable to the Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement to be consummated by
it, has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Issuer, the Servicer,
and the Indenture Trustee, constitutes a valid, legal and binding obligation of
the Depositor, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);
(d) The Depositor is not in violation of, and the execution and delivery of
this Agreement by the Depositor and its performance and compliance with the
terms of this Agreement will not constitute a violation with respect to, any
order or decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction, which violation would
materially and adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There is no action, suit, proceeding or investigation pending or, to
the knowledge of the Depositor, threatened, before any court, administrative
agency or governmental tribunal against the Depositor which, either in any one
instance or in the aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets of the
Depositor, or in any material impairment of the right or ability of the
Depositor to carry on its business substantially as now conducted, or in any
material liability on the part of the Depositor, or which would draw into
question the validity of this Agreement, the Loans, or of any action taken or to
be taken in connection with the obligations of the Depositor contemplated
herein, or which would impair materially the ability of the Depositor to perform
31
under the terms of this Agreement or that might prohibit its entering into this
Agreement or the consummation of any of the transactions contemplated hereby;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the Securities, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the Closing
Date;
(g) The Depositor has filed or will file the Prospectus and Prospectus
Supplement with the Commission in accordance with Rule 424(b) under the
Securities Act;
(h) The Depositor acquired title to the Loans in good faith, without notice
of any adverse claim;
(i) The collection practices, if any, used by the Depositor with respect to
the Loans have been, in all material respects, legal, proper, prudent and
customary in the non-conforming mortgage servicing business;
(j) No Officers' Certificate, statement, report or other document prepared
by the Depositor and furnished or to be furnished by it pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading;
(k) The Depositor is duly licensed where required as a "Licensee" or is
otherwise qualified in each state in which it transacts business and is not in
default of such state's applicable laws, rules and regulations, except where the
failure to so qualify or such default would not have a material adverse effect
on the ability of the Depositor to conduct its business or perform its
obligations hereunder;
(l) The Depositor does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in this
Agreement. The Depositor is solvent and the sale of the Loans by the Depositor
pursuant to the terms of this Agreement will not cause the Depositor to become
insolvent. The sale of the Loans by the Depositor pursuant to the terms of this
Agreement was not undertaken with the intent to hinder, delay or defraud any of
the Depositor's creditors;
(m) Neither this Agreement nor the information contained in the Prospectus
Supplement under the captions "Summary __ The Loans," "Risk Factors",
"Underwriting Guidelines" and "____________" contains no untrue statement or
alleged untrue statement of a material fact or omits to state any material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading;
(n) The Depositor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended;
(o) Upon the receipt of each Indenture Trustee's Loan File by the Issuer,
the Issuer will have good title to each related Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien created by
the Depositor (other than liens which will be simultaneously released);
(p) The consummation of the transactions contemplated by this Agreement are
in the ordinary course of business of the Depositor, and the transfer,
assignment and conveyance of the Debt Instruments and the Mortgages by the
Depositor pursuant to this Agreement are not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable jurisdiction;
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(q) The Loans are not intentionally selected in a manner so as to affect
adversely the interests of the Issuer;
(r) The Depositor has determined that it will treat the disposition of the
Loans pursuant to this Agreement as a sale for accounting and tax purposes;
(s) The Depositor has not dealt with any broker or agent or anyone else
that may be entitled to any commission or compensation in connection with the
sale of the Loans to the Issuer other than to the Issuer or an affiliate
thereof;
(t) The consideration received by the Depositor upon the sale of the Loans
under this Agreement constitutes fair consideration and reasonably equivalent
value for the Loans.
(u) The Depositor did not sell the Loans to the Issuer with any intent to
hinder, delay or defraud any of its creditors; the Depositor will not be
rendered insolvent as a result of the sale of the Loans to the Issuer;
(v) As of the Closing Date, the Depositor had good title to, and was the
sole owner of, each Loan free and clear of any Lien other than any such Lien
released simultaneously with the sale contemplated herein, and, immediately upon
each transfer and assignment herein contemplated, the Depositor will have taken
all steps necessary so that the Issuer will have good title to, and will be the
sole owner of, each Loan free and clear of any lien; and
(w) The transfer, assignment and conveyance of the Debt Instruments and the
Mortgages by the Depositor pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.
It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive delivery of the respective Indenture
Trustee's Loan Files to the Custodian (as the agent of the Indenture Trustee)
and shall inure to the benefit of the Securityholders, the Servicer, the
Indenture Trustee, the Owner Trustee and the Issuer. Upon discovery by any of
the Depositor, the Servicer or the Indenture Trustee of a breach of any of the
foregoing representations and warranties that materially and adversely affects
the value of any Loan or the interests of the Securityholders therein, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to the other parties. The
obligations of the Depositor and [ _____ ] set forth in Section 3.5 to cure any
breach or to substitute for or repurchase an affected Loan shall constitute the
sole remedies available to the Securityholders, the Servicer, the Indenture
Trustee and the Owner Trustee respecting a breach of the representations and
warranties contained in this Section 3.2.
Section 3.02 Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents and warrants to and covenants with the Owner
Trustee, the Securityholders, and the Depositor that as of the Closing Date or
as of such date specifically provided herein:
(a) The Servicer is a federal savings bank duly organized, validly existing
and in good standing under the laws of the United States of America and has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each state where a Mortgaged
Property is located if the laws of such state require licensing or qualification
in order for the Servicer to conduct such business and to perform its
obligations as the Servicer hereunder and is in any event in compliance with the
laws of each state in which any Mortgaged Property is located to the extent
necessary to ensure the enforceability of each Loan in accordance with the terms
of this Agreement;
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(b) The execution and delivery of this Agreement by the Servicer and its
performance of and compliance with the terms of this Agreement will not violate
the Servicer's charter or by-laws or constitute a default (or an event that,
with notice or lapse of time, or both, would constitute a default) under, or
result in the breach or acceleration of, any material contract, agreement or
other instrument to which the Servicer is a party or which may be applicable to
the Servicer or any of its assets;
(c) The Servicer has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement, has duly authorized
the execution, delivery and performance of this Agreement, and has duly executed
and delivered this Agreement. This Agreement, assuming due authorization,
execution and delivery by the Issuer, the Indenture Trustee and the Owner
Trustee, constitutes a valid, legal and binding obligation of the Servicer,
enforceable against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally and those of creditors of a federal savings bank,
and by general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and delivery of
this Agreement by the Servicer and its performance and compliance with the terms
of this Agreement will not constitute a violation with respect to, any order or
decree of any court or any order or regulation of any federal, state, municipal
or governmental agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations of the
Servicer, materially and adversely affect the performance of its duties
hereunder or impair the ability of the Indenture Trustee (or the Servicer as
agent of the Indenture Trustee) to realize on the Loans or impair the value of
the Loans;
(e) There is no action, suit, proceeding or investigation pending or, to
the knowledge of the Servicer, threatened, before any court, administrative
agency or government tribunal against the Servicer that, either in any one
instance or in the aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets of the Servicer,
or in any material impairment of the right or ability of the Servicer to carry
on its business substantially as now conducted, or in any material liability on
the part of the Servicer, or which would draw into question the validity of this
Agreement, the Loans, or of any action taken or to be taken in connection with
the obligations of the Servicer contemplated herein, or which would impair
materially the ability of the Servicer to perform under the terms of this
Agreement or that might prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
(f) The Servicer will examine each Subservicing Agreement and will be
familiar with the terms thereof. Each designated Subservicer and the terms of
each Subservicing Agreement will be required to comply with the provisions of
Section 4.7. The terms of any Subservicing Agreement will not be inconsistent
with any of the provisions of this Agreement;
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the Securities, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the Closing
Date;
(h) The collection practices used by the Servicer with respect to the Loans
have been, in all material respects, legal, proper, prudent and customary in the
nonconforming mortgage servicing business;
(i) The transactions contemplated by this Agreement are in the ordinary
course of business of the Servicer;
34
(j) The Servicer is duly licensed where required as a "licensee" or is
otherwise qualified in each state in which it transacts business and is not in
default of such state's applicable laws, rules and regulations, except where the
failure to so qualify or such default would not have a material adverse effect
on the ability of the Servicer to conduct its business or perform its
obligations hereunder;
(k) The Servicer is an Eligible Servicer and services mortgage loans in
accordance with Accepted Servicing Procedures;
(l) Neither this Agreement nor the information contained in the Prospectus
Supplement under the captions "Risk Factors Underwriting Guidelines" and
"_______________" contains any untrue statement or alleged untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which they will be made, not misleading;
(m) No Officers' Certificate, statement, report or other document prepared
by the Servicer and furnished or to be furnished by it pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading;
(n) The Servicer is solvent and will not be rendered insolvent as a result
of the performance of its obligations pursuant to this Agreement;
(o) The Servicer has not waived any default, breach, violation or event of
acceleration under any Debt Instrument or the related Mortgage;
(p) The Servicer is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.
(q) This Agreement, the Loan Purchase Agreement and the Custodial Agreement
were each approved by the board of directors or loan committee of _________,
which approval is reflected in the minutes of said board or committee, and will
be continuously maintained from the time of its execution as an official record
of _________.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.3 shall survive delivery of the respective
Indenture Trustee's Loan Files to the Indenture Trustee and shall inure to the
benefit of the Securityholders and the Indenture Trustee. Upon discovery by any
of the Depositor, the Servicer or the Indenture Trustee of a breach of any of
the foregoing representations, warranties and covenants that materially and
adversely affects the value of any Loan or the interests of the Securityholders
therein, the party discovering such breach shall give prompt written notice (but
in no event later than two Business Days following such discovery) to the other
parties. The obligations of the Servicer set forth in (x) Section 3.5 to cure
any breach or to purchase an affected Loan and (y) Section 9.1(a) to indemnify
and hold harmless the Issuer, the Depositor, the Indenture Trustee, and the
Securityholders shall constitute the sole remedies available to the Depositor,
the Securityholders, the Issuer, or the Indenture Trustee respecting a breach of
the representations, warranties and covenants contained in this Section 3.3.
Section 3.03 Representations and Warranties regarding Individual Loans.
Each of the [Servicer] and the Depositor hereby represents and warrants to
the Issuer, the Indenture Trustee and the Securityholders, with respect to each
Loan, as of the Closing Date and, with respect to each Subsequent Loan, as of
the related Subsequent Transfer Date (except as otherwise expressly stated):
35
(a) The information set forth in each Loan Schedule is complete, true and
correct;
(b) The information to be provided by the Depositor to the Indenture
Trustee in connection with a Subsequent Loan will be true and correct in all
material respects at the date or dates respecting which such information is
furnished;
(c) Each Mortgage is a valid first or second lien on a fee simple (or its
equivalent under applicable state law) estate in the real property securing the
amount owed by the Mortgagor under the Debt Instrument subject only to (i) the
lien of current real property taxes and assessments which are not delinquent,
(ii) any related first mortgage loan, (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally in the area wherein
the related Mortgaged Property is located and specifically referred to in the
title insurance policy delivered to the originator of the Loan and referred to
or otherwise considered in the appraisal obtained in connection with the
origination of the related Loan and (iv) other matters to which like properties
are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage or the use, enjoyment, value
or marketability of the related Mortgaged Property;
(d) Immediately prior to the sale of the Loan to the Issuer (i) the
Depositor was the sole owner and holder of each Loan, (ii) each Loan was not
otherwise assigned or pledged, (iii) the Depositor had good, indefeasible and
marketable title thereto, (iv) the Depositor had full right to transfer and sell
the Loan therein to the Issuer hereunder free and clear of any encumbrance,
equity interest, participation interest, lien, pledge, charge, claim or security
interest, and (v) the Depositor had full right and authority subject to no
interest or participation of, or agreement with, any other party, to sell and
assign each Loan to the Issuer hereunder and the Issuer will own such Loan free
and clear of any encumbrance, equity interest, participation interest, lien,
pledge, charge, claim or security interest (other than the lien created by this
Agreement);
(e) As of the Cut-Off Date, no payment of principal or interest on or in
respect of any Loan remains unpaid for 30 or more days past the date the same
was due in accordance with the related Debt Instrument without regard to
applicable grace periods;
(f) No Fixed Rate Loan has a Loan Interest Rate less than, ___________% per
annum and the weighted average interest rate of the Fixed Rate Loans as of the
Cut-Off Date was ___________% and no Adjustable Rate Loan has a Lifetime Floor
less than _________% per annum and the weighted average interest rate of the
Adjustable Rate Loans as of the Cut-Off Date was ______%;
(g) At origination, no Loan had an original term to maturity of greater
than 360 months;
(h) As of the Cut-Off Date, the weighted average remaining term to maturity
of the Loans was 226 months;
(i) There is no mechanics' or similar lien or claim for work, labor or
material (and no rights are outstanding that under law could give rise to such
lien) affecting the Mortgaged Property; the related Mortgaged Property is not
subject to any lien or claim which is or may be a lien prior to, or equal or
coordinate with, the lien of such Mortgage, except those which are insured
against by the title insurance policy referred to in (af) below;
(j) There is no delinquent tax or assessment lien against any Mortgaged
Property;
36
(k) Such Loan, the Mortgage, and the Debt Instrument, including, without
limitation, the obligation of the Mortgagor to pay the unpaid principal of and
interest on the Debt Instrument, are each not subject to any right of rescission
(or any such rescission right has expired in accordance with applicable law),
set-off, counterclaim, or defense, including the defense of usury, nor will the
operation of any of the terms of the Debt Instrument or the Mortgage, or the
exercise of any right thereunder, render either the Debt Instrument or the
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim, or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim, or defense has been
asserted with respect thereto;
(l) The Mortgaged Property is free of material damage and is in good
repair, and there is no pending or threatened proceeding for the total or
partial condemnation of the Mortgaged Property;
(m) The Depositor has not received a notice of default of any first
mortgage loan secured by the Mortgaged Property which has not been cured by a
party other than the Depositor;
(n) Each Debt Instrument and Mortgage are in substantially the forms
previously provided to the Indenture Trustee;
(o) No Loan had, at the date of origination, a Combined Loan-to-Value Ratio
in excess of 125%, and the weighted average Combined Loan-to-Value ratio of all
Loans as of the Cut-Off Date was _____________%;
(p) The Loan was not originated in a program in which the amount of
documentation in the underwriting process was limited in comparison to the
originator's normal documentation requirements for similar type loans;
(q) No more than the following percentages of the Loans by Principal
Balance as of the Cut-Off Date were secured by Mortgaged Properties located in
the following states
State Percent of
Principal Balance
[__________] [______]% [__________] [______]%
[__________] [______]% [__________] [______]%
[__________] [______]% [__________] [______]%
(r) The Loans were not selected by the Depositor for sale to the Issuer on
any basis adverse to the Issuer relative to the portfolio of similar mortgage
loans of the Depositor;
(s) None of the Loans constitutes a lien on leasehold interests;
37
(t) Each Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. To the best of the
Depositor's knowledge, there is no homestead or other exemption available to the
related Mortgagor which would materially interfere with the right to sell the
related Mortgaged Property at a trustee's sale or the right to foreclose the
related Mortgage. The Mortgage contains customary and enforceable provisions for
the acceleration of the payment of the Principal Balance of such Loan in the
event all or any part of the related Mortgaged Property is sold or otherwise
transferred without the prior written consent of the holder thereof;
(u) Each Loan has been closed and the proceeds of such Loan have been fully
disbursed, including reserves set aside by the Depositor, there is no
requirement for, and the Depositor shall not make any, future advances
thereunder. Any future advances made prior to the Cut-Off Date have been
consolidated with the principal balance secured by the Mortgage, and such
principal balance, as consolidated, bears a single interest rate and single
repayment term reflected on the applicable Loan Schedule. The Principal Balance
as of the Cut-Off Date does not exceed the original principal amount of such
Loan. Any and all requirements as to completion of any on-site or off site
improvements and as to disbursements of any escrow funds therefor have been
complied with. All costs, fees, and expenses incurred in making, or recording
such Loan have been paid and the related Mortgagor is not entitled to any refund
of any amounts paid or due under the related Debt Instrument or Mortgage;
(v) All Loans were originated in compliance with _________'s Underwriting
Guidelines and conform in all material respects to the description thereof set
forth in the Prospectus Supplement;
(w) The terms of the Mortgage and Debt Instrument have not been impaired,
waived, altered, or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the Indenture
Trustee and which has been delivered to the Indenture Trustee. The substance of
any such alteration or modification is or as to Subsequent Loans will be
reflected on the applicable Loan Schedule and, to the extent necessary, has been
or will be approved by (i) the insurer under the applicable mortgage title
insurance policy, and (ii) the insurer under any other insurance policy required
hereunder for such Loan where such insurance policy requires approval and the
failure to procure approval would impair coverage under such policy;
(x) No instrument of release, satisfaction, subordination, rescission,
waiver, alteration, or modification has been executed in connection with such
Loan, no Loan has been satisfied, canceled, subordinated or rescinded, in whole
or in part, and no Loan has been released, in whole or in part, except in
connection with an assumption agreement which has been approved by the insurer
under any insurance policy required hereunder for such Loan where such policy
requires approval and the failure to procure approval would impair coverage
under such policy, and which is part of the Mortgage File and has been delivered
to the Indenture Trustee, and the terms of which are reflected in the applicable
Loan Schedule;
(y) There is no default, breach, violation, or event of acceleration
existing under the Mortgage or the Debt Instrument and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event of acceleration, and
the Depositor has not waived any such default, breach, violation or event of
acceleration. All taxes, governmental assessments (including assessments payable
in future installments), insurance premiums, water, sewer, and municipal
charges, leaseholder payments, or ground rents which previously became due and
owing in respect of or affecting the related Mortgaged Property have been paid.
The Depositor has not advanced funds, or induced, solicited, or knowingly
received any advance of funds by a party other than the Mortgagor, directly or
indirectly, for the payment of any amount required by the Mortgage or the Debt
Instrument;
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(z) All of the improvements which were included for the purposes of
determining the Appraised Value of the Mortgaged Property were completed at the
time that such Loan was originated and lie wholly within the boundaries and
building restriction lines of such Mortgaged Property. No improvements on
adjoining properties encroach upon the Mortgaged Property. No improvement
located on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation. All inspections, licenses, and certificates
required to be made or issued with respect to all occupied portions of the
Mortgaged Property (including all such improvements which were included for the
purpose of determining such Appraised Value) and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriters certificates, have been made or obtained from the
appropriate authorities and the Mortgaged Property is lawfully occupied under
applicable law;
(aa) There do not exist any circumstances or conditions with respect to the
Mortgage, the Mortgaged Property, the Mortgagor, or the Mortgagor's credit
standing that can be reasonably expected to cause such Loan to become delinquent
or adversely affect the value or marketability of such Loan, other than any such
circumstances or conditions permitted under _________'s Underwriting Guidelines;
(bb) All parties which have had any interest in the Mortgage, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (i) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located and (ii) (A) organized under the laws of such
state, (B) qualified to do business in such state, (C) federal savings
associations or national banks, (D) not doing business in such state, or (E) not
required to qualify to do business in such state;
(cc) The Debt Instrument, the Mortgage and every other agreement, if any,
executed by the applicable Mortgagor in connection with such Loan, are genuine,
and each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally and except that
the equitable remedy of specific performance and other equitable remedies are
subject to the discretion of the courts. All parties to the Debt Instrument, the
Mortgage and every other such agreement had legal capacity to execute the Debt
Instrument, the Mortgage and every other such agreement and convey the estate
therein purported to be conveyed, and the Debt Instrument, the Mortgage and
every other such agreement have been duly and properly executed by such parties
or pursuant to a valid power-of-attorney that has been recorded with the
Mortgage;
(dd) The transfer of the Debt Instrument and the Mortgage as and in the
manner contemplated by this Agreement is sufficient either (i) fully to transfer
to the Issuer all right, title, and interest of the Depositor thereto as note
holder and mortgagee or (ii) to grant to the Issuer the security interest
referred to in Section 2.2. The Mortgage has been duly assigned and the Debt
Instrument has been duly endorsed. The assignment of Mortgage delivered to the
Indenture Trustee pursuant to Section 2.1(a) is in recordable form and is
acceptable for recording under the laws of the applicable jurisdiction. The
endorsement of the Debt Instrument, the delivery to the Indenture Trustee of the
endorsed Debt Instrument, and such assignment of Mortgage, and the delivery of
such assignment of Mortgage for recording to, and the due recording of such
assignment of Mortgage in, the appropriate public recording office in the
jurisdiction in which the Mortgaged Property is located are sufficient to permit
the Indenture Trustee to avail itself of all protection available under
applicable law against the claims of any present or future creditors of the
Depositor, and are sufficient to prevent any other sale, transfer, assignment,
pledge, or hypothecation of the Debt Instrument and Mortgage by the Depositor
from being enforceable;
(ee) Any and all requirements of any federal, state, or local law
including, without limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity, or disclosure
laws applicable to such Loan have been complied with, and the Servicer shall
maintain in its possession, available for the Indenture Trustee's inspection,
and shall deliver to the
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Indenture Trustee or its designee upon demand, evidence of compliance with all
such requirements. The consummation of the transactions contemplated by this
Agreement will not cause the violation of any such laws;
(ff) On the Closing Date, [55]% or more (by aggregate Principal Balance) of
the Loans do not constitute "real estate mortgages" for the purpose of Treasury
Regulation "301.7701 under the Code. For this purpose a Loan does not constitute
a "real estate mortgage" if:
(i) The Loan is not secured by an interest in real property, and
(ii) The Loan is not an "obligation principally secured by an interest
in real property."
For this purpose an "obligation is principally secured by an interest
in real property" if it satisfies either the test set out in paragraph (1)
or paragraph (2) below.
(1) The 80-percent test. An obligation is principally secured by
an interest in real property if the fair market value of the interest
in real property securing the obligation
(A) was at least equal to 80 percent of the adjusted issue
price of the obligation at the time the obligation was originated
(or, if later, the time the obligation was significantly
modified); or
(B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date.
For purposes of this paragraph (1), the fair market value of the real
property interest must be first reduced by the amount of any lien on the
real property interest that is senior to the obligation being tested, and
must be further reduced by a proportionate amount of any lien that is in
parity with the obligation being tested, in each case before the
percentages set forth in (1)(A) and (1)(B) are determined. The adjusted
issue price of an obligation is its issue price plus the amount of accrued
original issue discount, if any, as of the date of determination.
(2) Alternative test. An obligation is principally secured by an
interest in real property if substantially all of the proceeds of the
obligation were used to acquire or to improve or protect an interest
in real property that, at the origination date, is the only security
for the obligation. For purposes of this test, loan guarantees made by
the United States or any state (or any political subdivision, agency,
or instrumentality of the United States or of any state), or other
third party credit enhancement are not viewed as additional security
for a loan. An obligation is not considered to be secured by property
other than real property solely because the obligor is personally
liable on the obligation. For this purpose only, substantially all of
the proceeds of the obligations means 66% or more of the gross
proceeds.
(gg) Such Loan, if a first lien, is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of policy and
such Loan, if a second lien, is covered by a PERT policy, issued by and the
valid and binding obligation of a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring the Depositor,
and its successors and assigns, as to the first or second, as applicable,
priority lien, of the Mortgage in the original principal amount of such Loan.
The assignment to the Indenture Trustee of the Depositor's interest in such
mortgage title insurance policy does not require the consent of or notification
to the insurer. Such mortgage title insurance policy is in full force and effect
and will be in full force and effect and inure to
40
the benefit of the Indenture Trustee upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such mortgage
title insurance policy and neither the Depositor nor any prior holder of the
Mortgage has done, by act or omission, anything which would impair the coverage
of such mortgage title insurance policy;
(hh) All improvements upon the Mortgaged Property are insured against loss
by fire, hazards of extended coverage, and such other hazards as are customary
in the area where the Mortgaged Property is located pursuant to insurance
policies conforming to the requirements of Section 4.8. If the Mortgaged
Property at origination was located in an area identified on a flood hazard
boundary map or flood insurance rate map issued by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Indenture Trustee upon the
consummation of the transactions contemplated by this Agreement, and contain a
standard mortgagee clause naming the originator of such Loan, and its successors
and assigns, as mortgagee and loss payee. All premiums thereon have been paid.
The Mortgage obligates the Mortgagor to maintain all such insurance at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor, and neither the Depositor nor any prior holder of the Mortgage has
acted or failed to act so as to impair the coverage of any such insurance policy
or the validity, binding effect, and enforceability thereof;
(ii) If the Mortgage constitutes a deed of trust, a trustee, authorized and
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Indenture Trustee or the
Certificateholders to the trustee under the deed of trust, except in connection
with a trustee's sale after default by the Mortgagor;
(jj) The Mortgaged Property consists of one or more parcels of real
property separately assessed for tax purposes. Each Mortgaged Property is
improved by a one-to-four-family residential dwelling, which does not include
(i) a unit in a cooperative apartment, (ii) a property constituting part of a
syndication, (iii) a time share unit, (iv) a property held in trust, (v) a
mobile home, (vi) a manufactured dwelling, (vii) a log-constructed home, or
(viii) a recreational vehicle, and each such Mortgaged Property does not
constitute other than real property under applicable state law;
(kk) There exist no material deficiencies with respect to escrow deposits
and payments, if such are required, for which customary arrangements for
repayment thereof have not been made or which the Depositor expects not to be
cured, and no escrow deposits or payments of other charges or payments due the
Depositor have been capitalized under the Mortgage or the Debt Instrument;
(ll) Such Loan was not originated at a below market interest rate. Such
Loan does not have a shared appreciation feature, or other contingent interest
feature;
(mm) The origination and collection practices used by the Depositor with
respect to such Loan have been in all respects legal, proper, prudent, and
customary in the mortgage origination and servicing business;
(nn) The Mortgagor has, to the extent required by applicable law, executed
a statement to the effect that the Mortgagor has received all disclosure
materials, if any, required by applicable law with respect to the making of
fixed-rate mortgage loans. The Servicer shall maintain or cause to be maintained
such statement in the Mortgage File;
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(oo) All amounts received by the Depositor with respect to such Loan after
the Cut-Off Date and required to be deposited in the Certificate Distribution
Account or Collection Account have been so deposited in the Certificate
Distribution Account or Collection Account and are, as of the Closing Date, or
will be as of the Subsequent Transfer Date, as applicable, in the Certificate
Distribution Account or Collection Account;
(pp) Any appraisal report with respect to a Mortgaged Property contained in
the Mortgage File was signed prior to the approval of the application for such
Loan by a qualified appraiser, duly appointed by the originator of such Loan,
who had no interest, direct or indirect, in the Mortgaged Property or in any
loan made on the security thereof and whose compensation is not affected by the
approval or disapproval of such application;
(qq) When measured by the Cut-Off Date Principal Balances as of the Cut-Off
Date, the Mortgagors with respect to at least ____% of the Loans represented at
the time of origination that the Mortgagor would occupy the Mortgaged Property
as the Mortgagor's primary residence;
(rr) Each Debt Instrument is payable on the _____ day of each month. The
Loan Interest Rate and Monthly Payment with respect to the Adjustable Rate Loans
are adjusted in accordance with the terms of the related Debt Instrument. All
required notices of interest rate and payment amount adjustments have been sent
to the Mortgagor on a timely basis and the computations of such adjustments were
properly calculated. Installments of interest on the Adjustable Rate Loans are
subject to change due to the adjustments to the Loan Interest Rate on each
Interest Adjustment Date, with interest calculated and payable in arrears,
sufficient to amortize the Loan fully by the stated maturity date over the
original term of the Loan. All Loan Interest Rate adjustments have been made in
strict compliance with state and federal law and the terms of the related Debt
Instrument. Any interest required to be paid pursuant to state and local law has
been properly paid and credited. As of the Cut-Off Date, for each Adjustable
Rate Loan, the Lifetime Cap is not lower than approximately [________]% per
annum, the Lifetime Floor is not lower than approximately [________]% per annum,
the Gross Margin is not less than approximately [________]%, the related Debt
Instrument does not provide for negative amortization, limits in the amount of
monthly payments or a conversion feature, the Loan Interest Rate is subject to
adjustment on each Interest Adjustment Date to equal the sum of the LIBOR Index
plus the applicable Gross Margin, subject to rounding, the Periodic Rate Cap,
the applicable Lifetime Floor and the applicable Lifetime Cap on each Interest
Adjustment Date;
(ss) To the best of the Depositor's knowledge, there exists no violation of
any local, state, or federal environmental law, rule or regulation in respect of
the Mortgaged Property which violation has or could have a material adverse
effect on the market value of such Mortgaged Property. The Depositor has no
knowledge of any pending action or proceeding directly involving the related
Mortgaged Property in which compliance with any environmental law, rule or
regulation is in issue; and, to the best of the Depositor's knowledge, nothing
further remains to be done to satisfy in full all requirements of each such law,
rule or regulation constituting a prerequisite to the use and employment of such
Mortgaged Property;
(tt) With respect to second lien Loans:
(i) the Depositor has no knowledge that the Mortgagor has received
notice from the holder of the prior mortgage that such prior mortgage is in
default;
(ii) no consent from the holder of the prior mortgage is needed for
the creation of the second lien Mortgage or, if required, has been obtained
and is in the related Mortgage File;
(iii) if the prior mortgage has a negative amortization features, the
Combined Loan-to-Value Ratio was determined using the maximum loan amount
of such prior mortgage;
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(iv) the related first mortgage loan encumbering the related Mortgaged
Property does not have a mandatory future advance provision;
(v) except with respect to ____________% of the second Loans that are
Balloon Loans, the related prior loan requires equal monthly payments; and
(vi) the maturity date of the Loan is prior to the maturity date of
the related prior lien if such provides for a balloon payment;
(uu) Each Loan conforms, and all such Loans in the aggregate conform, to
the individual and aggregate descriptions thereof in the Prospectus Supplement;
(vv) The Depositor further represents and warrants to the Indenture Trustee
and the Noteholders that as of the Subsequent Cut-Off Date all representations
and warranties set forth in clauses (a) through (at) above and clause (av)
through (be) below are correct in all material respects as to each Subsequent
Loan, and (i) each Subsequent Loan is not 30 or more days contractually
delinquent as of the related Subsequent Cut-Off Date; (ii) the original term to
maturity of each Subsequent Loan does not exceed 360 months; (iii) each
Subsequent Loan that is a Fixed Rate Loan has a Loan Interest Rate of at least
____%; and each Subsequent Loan that is an Adjustable Rate Loan has a Loan
Interest Rate of at least ____%; (iv) the purchase of the Subsequent Loans will
not cause the Rating Agencies to lower the ratings assigned to the Senior Notes;
(v) the principal balance of any Subsequent Loan that is a first lien does not
exceed $_____, and the principal balance of any Subsequent Mortgage loan that is
a second lien does not exceed $_____; (vi) no more than ____% of the Subsequent
Loans are second liens; (vii) no Subsequent Loan has a CLTV of more than 125%;
(viii) no more than ____% of the Subsequent Loans which are first lien Loans and
no more than ____% of the Subsequent Loans which are second lien Loans are
Balloon Loans; (ix) the Subsequent Loans which are first lien Loans have a
weighted average Loan Interest Rate of at least ____%, the Subsequent Loans
which are second lien Loans have a weighted average Loan Interest Rate of at
least ____%; and (ix) following the purchase of the Subsequent Loans by the
Issuer, the Loans (including the Subsequent Loans) (A) will have a weighted
average Loan Interest Rate of at least ____%; and (B) will have a weighted
average CLTV of not more than ____%;
(ww) To the best of the Depositor's knowledge, no error, omission,
misrepresentation, negligence, fraud or similar occurrence with respect to a
Loan has taken place on the part of any person, including without limitation the
Mortgagor, any appraiser, a builder or developer, or any other party involved in
the origination of the Loan or in the application of any insurance in relation
to such Loan;
(xx) Each Debt Instrument held by the Indenture Trustee is the sole
original Debt Instrument and no copies exist which are not stamped duplicate;
(yy) Each Mortgage was recorded, and all subsequent assignments of the
original Mortgage have been recorded in the appropriate jurisdictions wherein
such recordation is necessary to perfect the lien thereof as against creditors
of the Depositor;
(zz) No more than ____% of the Fixed Rate Loans, and ____% of the
Adjustable Rate Loans are secured by properties sharing a single ZIP code;
(aaa) Except with respect to ______________% of the Loans which are Balloon
Loans, with respect to each Loan, the payments required of the related Mortgagor
are and will be such that the Loan will fully amortize over its term;
(bbb) No Loan contains any provisions pursuant to which payments are paid
or partially paid with funds deposited in any separate account established by
the Depositor, the Mortgagor or anyone else
43
on behalf of the Mortgagor, or paid by any source other than the Mortgagor. No
Loan contains any other similar provision which may constitute a "buydown"
provision. No Loan is a graduated payment mortgage loan. No Loan has a shared
appreciation or other contingent interest feature;
(ccc) The Loans are not being transferred with any intent to hinder, delay
or defraud any creditor;
(ddd) No Mortgagor has or will have a claim or defense under any express or
implied warranty or otherwise with respect to goods or services provided under
such Loan;
(eee) The Mortgage and the Debt Instrument contain the entire agreement of
the parties and all obligations of the seller or subcontractor under the related
Loan, and no other agreement defines, modifies, or expands the obligations of
the seller or subcontractor under the Loan.
Section 3.04 Purchase and Substitution.
(a) It is understood and agreed that the representations and warranties set
forth in Article III, shall survive the conveyance of the Loans to the Issuer,
the grant of the Loans to the Indenture Trustee and the delivery of the
Securities to the Securityholders. Upon discovery by the Servicer, the
Depositor, the Custodian, the Issuer, the Indenture Trustee or any
Securityholder of a breach of any of such representations and warranties which
materially and adversely affects the value of the Loans or the interest of the
Securityholders, or which materially and adversely affects the interests of the
Securityholders in the related Loan in the case of a representation and warranty
relating to a particular Loan (notwithstanding that such representation and
warranty was made to the Depositor's or the Servicer's best knowledge), the
party discovering such breach shall give prompt written notice to the others.
The Depositor or ________ shall within 60 days of the earlier of its discovery
or its receipt of notice of any breach of a representation or warranty, promptly
cure such breach in all material respects. If, however, within 60 days after the
earlier of the Depositor's or _________'s discovery of such breach or the
Depositor's or _________'s receiving notice thereof such breach has not been
remedied by either the Depositor or ______ and such breach materially and
adversely affects the interests of the Securityholders in, or the value of, the
related Loan (the "Defective Loan"), the Depositor or _______ shall on or before
the Determination Date next succeeding the end of such 60-day period either (i)
remove such Defective Loan from the Issuer (in which case it shall become a
"Deleted Loan") and substitute one or more Qualified Substitute Loans in the
manner and subject to the conditions set forth in this Section 3.5 or (ii)
purchase such Defective Loan at a purchase price equal to the Purchase Price (as
defined below) by depositing such Purchase Price in the Collection Account. The
Depositor or _____ shall provide the Servicer (if the certificate is to come
from the Depositor), the Indenture Trustee and the Issuer with a certification
of a Responsible Officer on the Determination Date next succeeding the end of
such 60-day period indicating whether the Depositor is purchasing the Defective
Loan or substituting in lieu of such Defective Loan a Qualified Substitute Loan.
With respect to the purchase of a Defective Loan pursuant to this Section 3.5,
the "Purchase Price" shall be equal to the Principal Balance of such Defective
Loan as of the date of purchase, plus all accrued and unpaid interest on such
Defective Loan to but not including the Due Date in the Due Period most recently
ended prior to such Determination Date computed at the applicable Loan Interest
Rate, plus the amount of any unreimbursed Servicing Advances and Nonrecoverable
Servicing Advances made by the Servicer with respect to such Defective Loan,
which Purchase Price shall be deposited in the Collection Account (after
deducting therefrom any amounts received in respect of such repurchased
Defective Loan and being held in the Collection Account for future distribution
to the extent such amounts represent recoveries of principal not yet applied to
reduce the related Principal Balance or interest (net of the Servicing Fee) for
the period from and after the Due Date in the Due Period most recently ended
prior to such Determination Date).
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Any substitution of Loans pursuant to this Section 3.5(a) and Section
2.6(a) shall be accompanied by payment by the Depositor or ______ of the
Substitution Adjustment, if any, to be deposited in the Collection Account. For
purposes of calculating the Available Collection Amount for any Distribution
Date, amounts paid by the Depositor or ______ pursuant to this Section 3.5 in
connection with the repurchase or substitution of any Defective Loan that are on
deposit in the Collection Account as of the Determination Date for such
Distribution Date shall be deemed to have been paid during the related Due
Period and shall be transferred to the Note Distribution Account as part of the
Available Collection Amount to be retained therein or transferred to the
Certificate Distribution Account, if applicable, pursuant to Section 5.1(c).
As to any Deleted Loan for which the Depositor or ______substitutes a
Qualified Substitute Loan or Loans, the Depositor or _____ shall effect such
substitution by delivering (i) to the Issuer a certification executed by a
Responsible Officer of the Depositor to the effect that the Substitution
Adjustment has been credited to the Collection Account and (ii) to the Indenture
Trustee (or the Custodian on behalf of the Indenture Trustee, as applicable) the
documents constituting the Indenture Trustee's Loan File for such Qualified
Substitute Loan or Loans.
(b) _____ shall deposit in the Collection Account all payments received in
connection with such Qualified Substitute Loan or Loans after the date of such
substitution. Monthly Payments received with respect to Qualified Substitute
Loans on or before the date of substitution will be retained by the Depositor
(or _________, if substituted by _________). The Issuer will be entitled to all
payments received on the Deleted Loan on or before the date of substitution, and
the Depositor or _________, as the case may be, shall thereafter be entitled to
retain all amounts subsequently received in respect of such Deleted Loan. The
Depositor or _____ shall give written notice to the Issuer, the Servicer, the
Indenture Trustee that such substitution has taken place and the Servicer shall
amend the Loan Schedule to reflect (i) the removal of such Defective Loan from
the terms of this Agreement and (ii) the substitution of the Qualified
Substitute Loan. The Depositor or _____ shall promptly deliver to the Issuer,
the Servicer and the Indenture Trustee, a copy of the amended Loan Schedule.
Upon such substitution, such Qualified Substitute Loan or Loans shall be subject
to the terms of this Agreement in all respects, and ____ and the Depositor shall
be deemed to have made with respect to such Qualified Substitute Loan or Loans,
as of the date of substitution, the covenants, representations and warranties
set forth in Section 3.4. On the date of such substitution, the Depositor or
_________, as the case may be, will deposit into the Collection Account an
amount equal to the related Substitution Adjustment, if any. In addition, on the
date of such substitution, the Issuer shall cause the Indenture Trustee to
release the Deleted Loan from the lien of the Indenture and the Issuer will
cause such Qualified Substitute Loan to be pledged to the Indenture Trustee
under the Indenture as part of the Trust Estate.
(c) It is understood and agreed that the obligations of the Depositor and
_____ set forth in this Section 3.5 to cure, purchase or substitute for a
Defective Loan constitute the sole remedies of the Issuer, the Indenture Trustee
and the Securityholders hereunder respecting a breach of the representations and
warranties contained in Section 3.4. Any cause of action against the Depositor
or _____ relating to or arising out of a defect in a Indenture Trustee's Loan
File as contemplated by Section 2.6 or against ____ or the Depositor relating to
or arising out of a breach of any representations and warranties made in Section
3.4 shall accrue as to any Loan upon (i) discovery of such defect or breach by
any party and notice thereof to the Depositor or ____ or notice thereof by the
Depositor or _____ to the Issuer, (ii) failure by the Depositor or ______ to
cure such defect or breach or to purchase or substitute such Loan as specified
above, and (iii) demand upon the Depositor by the Issuer or the Majority
Securityholders, as applicable, for all amounts payable in respect of such Loan.
(d) Neither the Issuer nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any
45
condition requiring the repurchase or substitution of any Loan pursuant to this
Section 3.5 or the eligibility of any Loan for purposes of this Agreement.
(e) With respect to all Defective Loans or other Loans repurchased by the
Depositor or ______ pursuant to this Agreement, upon the deposit of the Purchase
Price therefor in the Note Distribution Account, the Indenture Trustee shall
assign to the Depositor or _________, as the case may be, without recourse,
representation or warranty, all the Indenture Trustee's right, title and
interest in and to such Defective Loan or Loans, which right, title and interest
were conveyed to the Indenture Trustee pursuant to Section 2.1.
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ARTICLE IV.
ADMINISTRATION AND SERVICING OF THE LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent contractor, shall
service and administer the Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement. Notwithstanding anything to the contrary
contained herein, the Servicer, in servicing and administering the Loans, shall
employ or cause to be employed procedures (including collection, foreclosure,
liquidation and Foreclosure Property management and liquidation procedures) and
exercise the same care that it customarily employs and exercises in servicing
and administering loans of the same type as the Loans for its own account, all
in accordance with Accepted Servicing Procedures of prudent lending institutions
and servicers of loans of the same type as the Loans and giving due
consideration to the Securityholders' reliance on the Servicer. The Servicer has
and shall maintain the facilities, procedures and experienced personnel
necessary to comply with the servicing standard set forth in this subsection (a)
and the duties of the Servicer set forth in this Agreement relating to the
servicing and administration of the Loans.
(b) Servicing Advances. In accordance with the preceding general servicing
standard, the Servicer, or any Subservicer on behalf of the Servicer, shall make
all Servicing Advances in connection with the servicing of each Loan hereunder.
Notwithstanding any provision to the contrary herein, neither the Servicer, nor
any Subservicer on behalf of the Servicer, shall have any obligation to advance
its own funds for any delinquent scheduled payments of principal and interest on
any Loan or to satisfy or keep current the indebtedness secured by any Superior
Liens on the related Mortgaged Property. No costs incurred by the Servicer or
any Subservicer in respect of Servicing Advances shall, for the purposes of
distributions to Securityholders, be added to the amount owing under the related
Loan. Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Loan, before making any Servicing Advance that is
material in relation to the outstanding principal balance thereof, the Servicer
shall assess the reasonable likelihood of (i) recovering such Servicing Advance
and any prior Servicing Advances for such Loan, and (ii) recovering any amounts
attributable to outstanding interest and principal owing on such Loan for the
benefit of the Securityholders in excess of the costs, expenses and other
deductions to obtain such recovery, including without limitation any Servicing
Advances therefor and, if applicable, the outstanding indebtedness of all
Superior Liens. The Servicer shall only make a Servicing Advance with respect to
a Loan to the extent that the Servicer determines in its reasonable, good faith
judgment that such Servicing Advance would likely be recovered as aforesaid;
provided, however, that the Servicer will be entitled to be reimbursed for any
Nonrecoverable Servicing Advance pursuant to this Agreement.
(c) Waivers, Modifications and Extensions. The Servicer shall make
reasonably diligent efforts to collect all payments called for under the terms
and provisions of the Loans, and shall, to the extent such procedures shall be
consistent with this Agreement, follow Accepted Servicing Procedures. The
Servicer may in its discretion waive or permit to be waived any penalty interest
or any other fee or charge which the Servicer would be entitled to retain
hereunder as servicing compensation and extend the Due Date on a Debt Instrument
for a period (with respect to each payment as to which the Due Date is extended)
not greater than 90 days after the initially scheduled due date for such
payment. Notwithstanding anything in this Agreement to the contrary, the
Servicer shall not permit any additional extension or modification with respect
to any Loan other than that permitted by the immediately preceding sentence
unless the Loan is a Defaulted Loan.
47
(d) Instruments of Satisfaction or Release. Without limiting the generality
of Section 4.1(c), the Servicer, in its own name or in the name of a
Subservicer, is hereby authorized and empowered when the Servicer believes it
appropriate in its best judgment and subject to the requirements of this
Agreement or Acceptable Servicing Procedures to execute and deliver, on behalf
of the Securityholders and the Issuer or any of them, and upon notice to the
Indenture Trustee, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Issuer and Securityholders. The Servicer shall
service and administer the Loans in accordance with applicable state and federal
law and shall provide to the Mortgagors any reports required to be provided to
them thereby. The Indenture Trustee shall execute, at the written direction of
the Servicer, any limited or special powers of attorney and other documents
reasonably acceptable to the Indenture Trustee to enable the Servicer or any
Subservicer to carry out their servicing and administrative duties hereunder,
including, without limitation, limited or special powers of attorney with
respect to any Foreclosure Property, and the Indenture Trustee shall not be
accountable for the actions of the Servicer or any Subservicers under such
powers of attorney and shall be indemnified by such parties with respect to such
actions.
Section 4.02 Liquidation of Loans; Defaulted Loans.
(a) In the event that any payment due under any Loan and not postponed
pursuant to Section 4.1(c) is not paid when the same becomes due and payable, or
in the event the Mortgagor fails to perform any other covenant or obligation
under the Loan and such failure continues beyond any applicable grace period,
the Servicer shall, in accordance with the standard of care specified in Section
4.1(a), take such action as it shall deem to be in the best interest of the
Securityholders to collect or liquidate such Defaulted Loan in a manner that in
the reasonable judgment of the Servicer will be likely to maximize the net
proceeds realizable therefrom under the circumstances. The Servicer shall give
the Indenture Trustee notice of the election of remedies made pursuant to this
Section 4.2. The Servicer shall not be required to satisfy the indebtedness
secured by any Superior Liens on the related Mortgaged Property or to advance
funds to keep the indebtedness secured by such Superior Liens current. In
connection with any collection or liquidation activities, the Servicer shall
exercise collection or liquidation procedures with the same degree of care and
skill as it would exercise or use under the circumstances in the conduct of its
own affairs.
(b) During any Due Period occurring after a Loan becomes a Liquidated Loan,
the Servicer shall deposit into the Collection Account any proceeds received by
it with respect to such Liquidated Loan or the related Foreclosure Property
("Post Liquidation Proceeds").
(c) After a Loan has become a Liquidated Loan, the Servicer shall promptly
prepare and forward to the Issuer, the Indenture Trustee, and, upon request of
any Securityholder, to such Securityholder a Liquidation Report detailing the
following: (i) the Net Liquidation Proceeds, Insurance Proceeds or Released
Mortgaged Property Proceeds received in respect of such Liquidated Loan; (ii)
expenses incurred with respect thereto; (iii) any Net Loan Losses incurred in
connection therewith; and (iv) any Post Liquidation Proceeds.
(d) The Servicer may at its option purchase from the Issuer any Loan that
is 90 days or more Delinquent and which the Servicer determines in good faith
would otherwise become subject to foreclosure proceedings at a price equal to
the Purchase Price; provided, however, that the aggregate Principal Balance of
all Loans that may be so purchased by the Servicer shall not exceed an amount
equal to 10% of the Original Pool Principal Balance and provided, further, that,
as a result of such purchase the percentage of the Pool Principal Balance of
Loans that do not constitute real estate mortgages (as set forth in Section
3.4(af)) shall not be less than 55%. The Purchase Price for any Loan purchased
hereunder shall
48
be deposited into the Collection Account and the Indenture Trustee, upon (i)
receipt of an Officer's Certificate of the Servicer as to the making of such
deposit and (ii) confirmation that such deposit has been made, shall release or
cause to be released to the Servicer the related Indenture Trustee's Loan File
and shall execute and deliver such instruments of transfer or assignment as are
furnished by the Depositor or the Servicer, as the case may be, in each case
without recourse, as shall be necessary to vest in the Depositor or the
Servicer, as the case may be, title to any Loan released pursuant hereto, and
the Indenture Trustee shall have no further responsibility or liability (except
as to its own acts) with regard to such Loan.
Section 4.03 Fidelity Bond; Errors and Omission Insurance.
The Servicer shall keep in force during the term of this Agreement a policy
or policies of insurance covering errors and omissions for failure in the
performance of the Servicer's obligations under this Agreement, which policy or
policies shall be in such form and amount that would meet the requirements of
FNMA or FHLMC if it were the purchaser of the Loans. The Servicer shall also
maintain a fidelity bond (the "Fidelity Bond") in the form and amount that would
meet the requirements of FNMA or FHLMC if it were the purchaser of the Loans.
The Servicer shall be deemed to have complied with this provision if an
affiliate of the Servicer has such errors and omissions and fidelity bond
coverage and, by the terms of such insurance policy or fidelity bond, the
coverage afforded thereunder extends to the Servicer. Any such errors and
omissions policy and fidelity bond shall not be canceled without thirty days'
prior written notice to the Indenture Trustee. Upon the request of the Indenture
Trustee, or any Securityholder, the Servicer shall furnish to the requesting
party copies of all binders and policies or certificates evidencing that such
bonds and insurance policies are in full force and effect. The Servicer shall
also cause each Sub-Servicer to maintain a policy of insurance covering errors
and omissions and a fidelity bond which would meet the requirements set forth
above.
Section 4.04 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Indenture Trustee
for the benefit of the Securityholders.
The Servicer shall manage, conserve, protect and operate each Foreclosure
Property for the Indenture Trustee and the Securityholders solely for the
purpose of its prudent and prompt disposition and sale. The Servicer shall,
either itself or through an agent selected by the Servicer, manage, conserve,
protect and operate the Foreclosure Property in the same manner that it manages,
conserves, protects and operates other foreclosure property for its own account.
The Servicer shall attempt to sell the same (and may temporarily lease the same)
on such terms and conditions as the Servicer deems to be in the best interest of
the Securityholders.
(a) The Servicer shall, consistent with the servicing standards set forth
herein, foreclose upon or otherwise comparably convert the ownership of
properties securing such of the Loans as come into and continue in default and
as to which no satisfactory arrangements can be made for collection of
delinquent payments. In connection with realization upon defaulted Loans, the
Servicer shall follow such practices and procedures as it shall deem necessary
or advisable, as shall be normal and usual in accordance with Accepted Servicing
Procedures and the requirements of insurers under any insurance policy required
to be maintained hereunder with respect to the related Loan. The Servicer shall
be responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be recoverable
as Servicing Advances by the Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property
49
that shall have suffered damage from an Uninsured Cause, unless it shall
determine in its reasonable judgment, as evidenced by a certificate of a
Servicing Officer, that such foreclosure or restoration, as the case may be,
will increase the proceeds of liquidation of the related Loan after
reimbursement to itself for Servicing Advances. Any Servicing Advances made with
respect to a Loan shall be recoverable by the Servicer only from recoveries on
such Loan except to the extent such Servicing Advance is deemed a Nonrecoverable
Servicing Advance.
The disposition of Foreclosure Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Indenture Trustee and the
Securityholders and, as soon as practicable thereafter, the expenses of such
sale shall be paid. The Net Liquidation Proceeds or Post Liquidation Proceeds,
as applicable, from the conservation, disposition and sale of the Foreclosure
Property shall be promptly deposited by the Servicer in the Collection Account
in accordance with the Indenture and Section 5.1.
Prior to acquiring any Foreclosure Property, the Servicer shall cause a
review to be performed, in accordance with Accepted Servicing Procedures, on the
related Mortgaged Property by a company such as Equifax, Inc. or Toxicheck, and
the scope of such review shall be limited to the review of public records and
documents for indications that such Mortgaged Property has on it, under it or is
near, hazardous or toxic material or waste. If such review reveals that the
Mortgaged Property has on it, under it or is near hazardous or toxic material or
waste or reveals any other environmental problem, the Servicer shall provide a
copy to the Indenture Trustee of the related report with an attached
certification of a Responsible Officer that based on an analysis of all
available information (including potential clean up costs and liability claims)
at the time it is the best judgment of such Responsible Officer that such
foreclosure shall increase Net Liquidation Proceeds to the Indenture Trustee and
the Issuer shall take title to such Mortgaged Property. The Indenture Trustee
shall promptly forward such report and certification to the Securityholders.
The Servicer may contract with any independent contractor for the operation
and management of any Foreclosure Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later
than thirty days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this Section 4.4 relating to any such
contract or to actions taken through any such independent contractor shall
be deemed to relieve the Servicer of any of its duties and obligations
hereunder with respect to the operation and management of any such
Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to the same
extent as if it alone were performing all duties and obligations in
connection with the operation and management of such Foreclosure Property.
The Servicer shall be entitled to enter into any agreement with any independent
contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such independent contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall not be liable for all fees owed by it to any
such independent
50
contractor, and that any amounts so expended shall be deemed Servicing Advances.
Each liquidation of a Foreclosure Property shall be carried out by the Servicer
at such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in accordance with Accepted
Servicing Procedures, and the resulting Liquidation Proceeds shall be
distributed in accordance with the Section 5.1.
Section 4.05 Access to Certain Documentation and Information Regarding the
Loans.
The Servicer shall provide to the Issuer, the Indenture Trustee and the
Securityholders and the supervisory agents and examiners of each of the
foregoing access to the documentation regarding the Loans required by applicable
state and federal regulations, such access being afforded without charge but
only upon reasonable request and during normal business hours at the offices of
the Servicer designated by it.
Section 4.06 Subservicing.
(a) The Servicer may enter into Subservicing Agreements for any servicing
and administration of Loans with any institution which is in compliance with the
laws of each state necessary to enable it to perform its obligations under such
Subservicing Agreement and is an Eligible Servicer. The Servicer shall give
prior written notice to the Issuer and the Indenture Trustee of the appointment
of any Subservicer. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either directly service the related Loans or enter into a
Subservicing Agreement with a successor subservicer which qualifies hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall service directly the related Loans.
Each Subservicing Agreement shall include the provision that such agreement
may be immediately terminated by the Indenture Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer. In no event shall any
Subservicing Agreement require the Indenture Trustee, as Successor Servicer, for
any reason whatsoever to pay compensation to a Subservicer in order to terminate
such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Issuer, the
Indenture Trustee and Securityholders for the servicing and administering of the
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Loans. For purposes of this Agreement, the
Servicer shall be deemed to have received payments on Loans when the Subservicer
has actually received such payments and, unless the context otherwise requires,
references in this Agreement to actions taken or to be taken by the Servicer in
servicing the Loans include actions taken or to be taken by a Subservicer on
behalf of the Servicer. The Servicer shall be entitled to enter into any
agreement with a Subservicer for indemnification of the Servicer by such
Subservicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor Servicer,
on behalf of the Issuer, the Indenture Trustee and
51
the Securityholders pursuant to Section 4.7, shall thereupon assume all of the
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into, unless the successor Servicer elects to
terminate any Subservicing Agreement in accordance with its terms. The successor
Servicer shall be deemed to have assumed all of the servicer's interest therein
and to have replaced the Servicer as a party to each Subservicing Agreement to
the same extent as if the Subservicing Agreements had been assigned to the
assuming party, except that the Servicer shall not thereby be relieved of any
liability or obligations under the Subservicing Agreements which accrued prior
to the transfer of servicing to the successor Servicer. The Servicer at its
expense and without right of reimbursement therefor, shall, upon request of the
successor Servicer, deliver to the assuming party all documents and records
relating to each Subservicing Agreement and the Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Issuer, the Indenture Trustee and the Securityholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be in
such form and carried out to such an extent and at such time as the Servicer, in
its good faith business judgment, would require were it the owner of the related
Loans. The Servicer shall pay the costs of such enforcement at its own expense,
and shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Loan or (ii) from a specific recovery of costs,
expenses or attorneys fees against the party against whom such enforcement is
directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Loans involving a Subservicer in its
capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone and none of the Issuer, the Indenture Trustee
or the Securityholders shall be deemed parties thereto or shall have any claims,
rights, obligations, duties or liabilities with respect to the Subservicer in
its capacity as such except as set forth in Section 4.6(c).
(f) In those cases where a Subservicer is servicing a Loan pursuant to a
Subservicing Agreement, the Subservicer will be required to establish and
maintain one or more accounts (collectively, the "Subservicing Account"). The
Subservicing Account shall be an Eligible Account. The Subservicer will be
required to deposit into the Subservicing Account no later than the first
Business Day after receipt all proceeds of Loans received by the Subservicer and
remit such proceeds to the Servicer for deposit in the Collection Account not
later than the Business Day following receipt thereof by the Subservicer.
Notwithstanding anything in this clause (f) to the contrary, the Subservicer
shall only be able to withdraw funds from the Subservicing Account for the
purpose of remitting such funds to the Servicer for deposit into the Collection
Account. The Servicer shall require the Subservicer to cause any collection
agent of the Subservicer to send a copy to the Servicer of each statement of
monthly payments collected by or on behalf of the Subservicer within five
Business Days after the end of every month, and the Servicer shall compare the
information provided in such reports with the deposits made by the Subservicer
into the Collection Account for the same period. The Servicer shall be deemed to
have received payments on the Loans on the date on which the Subservicer has
received such payments.
Section 4.07 Successor Servicers.
In the event that the Servicer is terminated pursuant to Section 10.1, or
resigns pursuant to Section 9.4 or otherwise becomes unable to perform its
obligations under this Agreement, the Indenture Trustee will become the
successor servicer or will appoint a successor servicer in accordance with the
52
provisions of Section 10.2; provided that any successor servicer, including the
Indenture Trustee, shall satisfy the requirements of an Eligible Servicer and
shall be approved by the Rating Agencies.
Section 4.08 Maintenance of Hazard Insurance; Property Protection Expenses.
The Servicer shall cause to be maintained for each Loan fire and hazard
insurance naming the Servicer as loss payee thereunder providing extended
coverage in an amount which is at least equal to the least of (i) the maximum
insurable value of the improvements securing such Loan from time to time, (ii)
the combined principal balance owing on such Loan and any mortgage loan senior
to such Loan and (iii) the minimum amount required to compensate for damage or
loss on a replacement cost basis. The Servicer shall also maintain on property
acquired upon foreclosure, or by deed in lieu of foreclosure, hazard insurance
with extended coverage in an amount which is at least equal to the least of (i)
the maximum insurable value from time to time of the improvements which are a
part of such property, (ii) the combined principal balance owing on such Loan
and any mortgage loan senior to such Loan and (iii) the minimum amount required
to compensate for damage or loss on a replacement cost basis at the time of such
foreclosure, fire and or deed in lieu of foreclosure.
Any amounts to be collected by the Servicer under any such policies (other
than amounts to be applied to the restoration or repair of the property subject
to the related Mortgage or amounts to be released to the Mortgagor in accordance
with Accepted Servicing Procedures, subject to the terms and conditions of the
related Mortgage and Debt Instrument) shall be deposited in the Collection
Account, subject to withdrawal as set forth herein.
Any cost incurred by the Servicer in maintaining any such insurance shall
not, for the purpose of calculating distributions to Securityholders, be added
to the Principal Balance of the related Loan, notwithstanding that the terms of
such Loan so permit. It is understood and agreed that no earthquake or other
additional insurance is to be required of any Mortgagor other than pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance. If the Mortgaged Property or
Foreclosure Property is located at the time of origination of the Loan in a
federally designated special flood hazard area (and if the flood insurance
policy referenced herein has been made available), the Servicer will cause to be
maintained flood insurance in respect thereof. Such flood insurance shall be in
an amount equal to the least of (i) the sum of the Principal Balance of the
related Loan and any Senior Lien, (ii) the maximum insurable value of the
related Mortgaged Property, and (iii) the maximum amount of such insurance
available for the related Mortgaged Property under the national flood insurance
program (assuming that the area in which such Mortgaged Property is located is
participating in such program).
Section 4.09 Maintenance of Mortgage Impairment Insurance Policy.
In the event that the Servicer shall obtain and maintain a blanket policy
with an insurer having a general policy rating of A:VIII or better in Best's Key
Rating Guide, insuring against fire and hazards of extended coverage on all of
the Loans, then, to the extent such policy names the Servicer as loss payee and
provides coverage in an amount equal to the aggregate unpaid principal balance
on the Loans without co-insurance, and otherwise complies with the requirements
of Section 4.8, the Servicer shall be deemed conclusively to have satisfied its
obligations with respect to fire and hazard insurance coverage under Section
4.8, it being understood and agreed that such blanket policy may contain a
deductible clause that is in form and substance consistent with standard
industry practice for servicers of mortgage loans comparable to the Loans, in
which case the Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with Section
4.8, and there shall have been a loss which would have been covered by such
policy, deposit in the Collection Account the difference, if any, between the
amount that would have been payable under a policy complying with Section 4.8
and the amount paid under such blanket policy. Upon the request of the Indenture
Trustee or
53
any Securityholder, the Servicer shall cause to be delivered to the Indenture
Trustee or such Certificateholder, as the case may be, a certified true copy of
such policy. In connection with its activities as administrator and servicer of
the Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Indenture Trustee and Securityholders, claims under any such policy in a timely
fashion in accordance with the terms of such policy.
Section 4.10 Reports to the Securities and Exchange Commission.
The Indenture Trustee shall, on behalf of the Issuer, cause to be filed
with the Securities and Exchange Commission all reports on Forms 8-K and 10-K
required to be filed under the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder. Upon the request of the Indenture Trustee, each of the
Servicer and the Depositor shall cooperate with the Indenture Trustee in the
preparation of any such report and shall provide to the Indenture Trustee in a
timely manner all such information or documentation as the Indenture Trustee may
reasonably request in connection with the performance of its duties and
obligations under this Section 4.10.
Section 4.11 Payment of Taxes, Insurance and Other Charges.
The Servicer may and, if required by the Servicer, the Subservicers shall,
establish and maintain one or more accounts (the "Servicing Accounts"), into
which any collections from the Mortgagors (or related advances from
Subservicers) for the payment of taxes, assessments, hazard insurance premiums,
and comparable items for the account of the Mortgagors shall be deposited and
retained. Servicing Accounts shall be Eligible Accounts. Withdrawals of amounts
so collected from a Servicing Account may be made only to (i) effect timely
payment of taxes, assessments, hazard insurance premiums, and comparable items;
(ii) reimburse the Servicer (or a Subservicer to the extent provided in the
related Subservicing Agreement) out of related collections for any advances with
respect to taxes, assessments and insurance premiums and with respect to hazard
insurance; (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of this Agreement in accordance with Section 11.1. As
part of its servicing duties, the Servicer or Subservicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement from the Issuer, the Indenture Trustee, or any Securityholder
therefor. Upon request of the Indenture Trustee, the Depositor or the Servicer
shall cause the bank, savings association or other depository for each Servicing
Account to forward to the Indenture Trustee copies of such statements or reports
as the Indenture Trustee, the Depositor, or any Securityholder shall reasonably
request.
Section 4.12 Filing of Continuation Statements.
On or before the fifth anniversary of the filing of any financing
statements by ______ or the Depositor, respectively, with respect to the assets
conveyed to the Issuer or the Depositor, as the case may be, shall prepare, have
executed by the necessary parties and file in the proper jurisdictions all
financing and continuation statements necessary to maintain the liens, security
interests, and priorities of such liens and security interests that have been
granted by ______ or the Depositor, as the case may be, and ______ Savings Bank,
Federal Savings Bank or ______ Investments Holdings, Inc, as the case may be
shall continue to file on or before each fifth anniversary of the filing of any
financing and continuation statements such additional financing and continuation
statements until the Issuer has been dissolved pursuant to Section 9.1 of the
Trust Agreement. The Indenture Trustee agrees to cooperate with ______ and the
Depositor in preparing, executing and filing such statements. The Indenture
Trustee agrees to notify ______ and the Depositor on the third Distribution Date
prior to each such fifth anniversary of the
54
requirement to file such financing and continuation statements. The filing of
any such statement with respect to ______ and the Depositor shall not be
construed as any indication of an intent of any party contrary to the expressed
intent set forth in Section 2.2 or Section ____ of the Loan Purchase Agreement
or Section ____ of the Loan Sale Agreement. If ______ or the Depositor has
ceased to do business whenever any such financing and continuation statements
must be filed or ______ or the Depositor fails to file any such financing
statements or continuation statements at least one month prior to the expiration
thereof and the Indenture Trustee is notified of such failure or has actual
knowledge thereof, the Indenture Trustee shall perform the services required
under this Section 4.12.
55
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account.
(a) (1) Establishment of Collection Account. The Servicer, for the benefit
of the Securityholders, shall cause to be established and maintained one or more
Collection Accounts, which shall be separate Eligible Accounts, which may be
interest-bearing, entitled "Collection Account, _____________________________,
as Indenture Trustee, in trust for the First Union Home Loan Asset Backed
Securities, Series __________". The Collection Account may be maintained with
the Indenture Trustee or any other depository institution which satisfies the
requirements set forth in the definition of Eligible Account. The creation of
any Collection Account other than one maintained with the Indenture Trustee
shall be evidenced by a letter agreement in the form attached hereto as Exhibit
H between the Servicer and the depository institution. A copy of such letter
agreement shall be furnished to the Indenture Trustee and, upon request of any
Securityholder, to such Securityholder. Funds in the Collection Account shall be
invested in accordance with Section 5.3.
The Collection Account shall be established, as of the Closing Date, with
the Indenture Trustee as an Eligible Account pursuant to the definition thereof.
The Collection Account may, upon written notice to the Issuer and the Indenture
Trustee, be transferred to a different depository institution so long as such
transfer is to an Eligible Account reasonably acceptable to the Indenture
Trustee.
(2) Establishment of Note Distribution Account. No later than the Closing
Date, the Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained with the Indenture Trustee one or more Note
Distribution Accounts, which shall be separate Eligible Accounts, which may be
interest-bearing and which shall be entitled "Note Distribution Account,
_____________________________________, as Indenture Trustee, in trust for the
First Union Home Loan Asset Backed Securities, Series ______________". Funds in
the Note Distribution Account shall be invested in accordance with Section 5.3.
(b) (1) Deposits to Collection Account. The Servicer shall use its best
efforts to deposit or cause to be deposited (without duplication) within two (2)
Business Days, of receipt thereof in the Collection Account and retain therein
in trust for the benefit of the Securityholders:
(i) all payments on account of interest and principal on the Loans
collected after the Cut-Off Date;
(ii) all Net Liquidation Proceeds and Post Liquidation Proceeds
pursuant to Section 4.2 or Section 4.4;
(iii) all Insurance Proceeds;
(iv) all Released Mortgaged Property Proceeds;
(v) any amounts payable in connection with the repurchase of any Loan
and the amount of any Substitution Adjustment pursuant to Section 2.6 and
Section 3.5;
(vi) any amount required to be deposited in the Collection Account
pursuant to the receipt of proceeds from any insurance policies under
Section 4.3 or the deposit of the Termination Price under Section 11.2; and
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(vii) any amounts to be transferred from the Capitalized Interest
Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts (such as assumption fees, modification fees, and
other administrative fees, insufficient funds charges, prepayment penalties,
late payment charges and investment income on earnings on the Trust Accounts
(other than on the Note Distribution Account)) received with respect to a Loan
that constitute additional Servicing Compensation pursuant to Section 7.3, and
such amounts retained by the Servicer during a Due Period shall be excluded from
the calculation of the Servicing Compensation that is distributable to the
Servicer from the Note Distribution Account on the next Distribution Date
following such Due Period.
(2) Deposits to Note Distribution Account. On the Remittance Date of each
month the Servicer shall instruct the Indenture Trustee to withdraw from the
Collection Account the Available Collection Amount and deposit such Available
Collection Amount into the Note Distribution Account for such month's
Distribution Date. In addition, on each of the first three Distribution Dates,
the Indenture Trustee shall withdraw from the Prefunding Account the amounts of
any Pre-Funding Earnings for the related Due Period or any amounts referred to
in Section 5.5(b) or Section 5.5(c), and deposit such into the Note Distribution
Account.
(3) Withdrawals from Collection Account. The Indenture Trustee, at the
direction of the Servicer shall also make the following withdrawals from the
Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) on each Distribution Date, to pay to the Servicer any accrued and
unpaid Servicing Fees and any additional Servicing Compensation pursuant to
Section 7.3 not withheld pursuant to Section 5.1(b)(1);
(iii) on each Distribution Date, to pay to the Servicer any
unreimbursed Servicing Advances; provided, however, that the Servicer's
right to reimbursement for unreimbursed Servicing Advances shall be limited
to late collections (excluding the scheduled monthly payments) on the
related Loans, including, without limitation, late collections constituting
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance
Proceeds, Post Liquidation Proceeds and such other amounts as may be
collected by the Servicer from the related Mortgagor or otherwise relating
to the Loan in respect of which such unreimbursed amounts are owed;
(iv) on each Distribution Date, to reimburse the Servicer for any
Servicing Advances determined by the Servicer in good faith to have become
Nonrecoverable Servicing Advances.
(v) make payments set forth in Section 9.1(e).
(c) Withdrawals from Note Distribution Account. To the extent funds are
available in the Note Distribution Account, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Distribution Date) shall make withdrawals therefrom
by 11:00 a.m. (New York City time) on each Distribution Date, for application in
the following order of priority:
(i) to distribute on such Distribution Date the following amounts
pursuant to the Indenture in the following order: (a) to the Servicer, an
amount equal to the Servicing Compensation (net of any amounts retained
prior to deposit into the Collection Account pursuant to Section 5.1(b)(1))
and all unpaid Servicing Compensation from prior due periods, (b) to the
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Indenture Trustee, an amount equal to the Indenture Trustee Fee and all
unpaid Indenture Trustee Fees from prior Distribution Dates, (c) to the
Depositor, in trust for the Owner Trustee, an amount equal to the Owner
Trustee Fee and all unpaid Owner Trustee Fees from prior Distribution Dates
and (d) to the Custodian, an amount equal to the Custodian Fee and all
unpaid Custodian Fees from prior Distribution Dates; and
(ii) to deposit into the Certificate Distribution Account the
applicable portions of the Available Distribution Amount distributable in
respect of the Residual Interests calculated pursuant to Section 5.1(d) and
Section 5.1(e) below on such Distribution Date;
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account and
the Note Distribution Account hereunder until the Class Principal Balance of
each Class of Securities has been reduced to zero.
(d) On each Distribution Date the Indenture Trustee shall distribute the
Regular Distribution Amount from the Note Distribution Account (in the case of
all amounts distributable to Noteholders), in the following order of priority:
(i) to the holders of the Senior Notes, the Senior Noteholders'
Interest Distributable Amount for such Distribution Date allocated to each
Class of Senior Notes, pro rata, based on the amount of interest
distributable in respect of each such Class based on the related Note
Interest Rate;
(ii) sequentially, to the holders of the Class M-1 and Class M-2
Notes, in that order, their respective portions of the Class M-1
Noteholders' Interest Distributable Amount and the Class M-2 Noteholders'
Interest Distributable Amount, respectively, for such Distribution Date;
(iii) to the holders of the Class B Notes, the Class B Noteholders'
Interest Distributable Amount for such Distribution Date;
(iv) if with respect to such Distribution Date the Pre-Funding Pro
Rata Distribution Trigger has occurred, the amount on deposit in the
Pre-Funding Account at the end of the Pre-Funding Period will be
distributed as principal to all Classes of Notes and the Residual Interests
(which initially are represented by the Overcollateralization Amount on the
Closing Date), pro rata, based on the Original Class Principal Balances
thereof and the Residual Interests as so represented in relation to the sum
of the Original Pool Principal Balance and the Original Pre-Funded Amount;
(v) sequentially, to the holders of the Class ▇-▇, ▇▇▇▇▇ ▇-▇, Class
A-3, Class A-4 Notes, in that order, until the respective Class Principal
Balances thereof are reduced to zero, the amount necessary to reduce the
aggregate Class Principal Balance of the Senior Notes to the Senior Optimal
Principal Balance for such Distribution Date;
(vi) sequentially, to the holders of the Class M-1 and the Class M-2
Notes, in that order, the amount necessary to reduce the Class Principal
Balances thereof to the Class M-1 Optimal Principal Balance and the Class
M-2 Optimal Principal Balance, respectively, for such Distribution Date;
(vii) to the holders of the Class B Notes, the amount necessary to
reduce the Class Principal Balance thereof to zero;
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(viii) to the holders of the Class M-1 Notes, Class M-2 Notes and the
Class B Notes, in that order, until their respective Loss Reimbursement
Deficiencies have been paid in full first, as a payment of principal and
then as a payment of interest; and
(ix) any remaining amount to the holders of the Residual Interests.
(e) On each Distribution Date prior to the termination of the Spread
Deferral Period, the Indenture Trustee shall deposit the Excess Spread, if any,
to the Certificate Distribution Account for distribution to the holders of the
Residual Interests; on each Distribution Date following (and to the extent of)
the termination of the Spread Deferral Period, the Indenture Trustee shall
distribute the Excess Spread, if any, in the following order of priority (in
each case, after giving effect to the distributions in Section 5.1(d)):
(i) in an amount equal to the Overcollateralization Deficiency Amount,
if any, as follows:
(A) to the holders of the Class A-1, Class A-2, Class A-3 and
Class A-4 Notes, in that order, until each respective Class Principal
Balance thereof is reduced to zero, the amount necessary to reduce the
aggregate Class Principal Balance of the Senior Notes to the Senior
Optimal Principal Balance for such Distribution Date;
(B) sequentially, to the holders of the Class M-1 and Class M-2
Notes, in that order, the amount necessary to reduce the Class
Principal Balances thereof to the Class M-1 Optimal Principal Balance
and Class M-2 Optimal Principal Balance, respectively, for such
Distribution Date; and
(C) to the holders of the Class B Notes, until the Class
Principal Balance thereof has been reduced to zero; and
(ii) sequentially, to the Class M-1, the Class M-2 and the Class B
Notes, in that order, until their respective Loss Reimbursement
Deficiencies, if any, have been paid in full, first as a payment of
principal and then as a payment of interest; and
(iii) any remaining amount to the holders of the Residual Interests.
(f) Notwithstanding the priorities specified above, on any Distribution
Date as to which the Class Principal Balances of each of the Class M-1, Class
M-2 and Class B Notes and the Overcollateralization Amount have been reduced to
zero, distributions of principal on the Classes of Senior Notes will be applied
to such Classes pro rata based on their respective Class Principal Balances.
Section 5.02 Certificate Distribution Account and Distributions on the
Notes.
(a) Establishment. No later than the Closing Date, the Servicer, for the
benefit of the Securityholders, shall cause to be established and maintained
with the Indenture Trustee for the benefit of the Owner Trustee on behalf of the
Certificateholders one or more separate Eligible Accounts, which Trust
Account(s) shall be entitled "Certificate Distribution Account, ________
________________________________, as Indenture Trustee, in trust for the
_______________ Trust Series ______". Funds in the Certificate Distribution
Account shall be invested in accordance with Section 5.3.
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(b) Distributions. On each Distribution Date the Indenture Trustee shall
withdraw from the Note Distribution Account all amounts required to be deposited
in the Certificate Distribution Account with respect to such Distribution Date
pursuant to Section 5.1(c)(ii) and will remit such amount to the Owner Trustee
or the Co-Owner Trustee for deposit into the Certificate Distribution Account.
The Indenture Trustee shall distribute all remaining amounts on deposit in the
Note Distribution Account to the holders of the Notes to the extent of amounts
due and unpaid on the Notes for principal thereof and interest thereon. The
Owner Trustee or the Co-Owner Trustee shall distribute all amounts on deposit in
the Certificate Distribution Account to the holders of the Residual Interests.
(c) All distributions made on the Notes on each Distribution Date will be
made on a pro rata basis among the Noteholders of record of such Class on the
next preceding Record Date based on the Percentage Interest represented by their
respective Notes, and except as otherwise provided in the next succeeding
sentence, shall be made by wire transfer of immediately available funds to the
account of such Noteholder, if such Noteholder shall own of record Notes which
have original denominations aggregating at least $________________ and shall
have so notified the Indenture Trustee, and otherwise by check mailed to the
address of such Noteholder appearing in the Notes Register. The final
distribution on each Note will be made in like manner, but only upon presentment
and surrender of such Note at the location specified in the notice to
Noteholders of such final distribution.
(d) All distributions made on the Residual Interests on each Distribution
Date will be made on a pro rata basis among the holders of the Residual
Interests of record on the next preceding Record Date based on the Percentage
Interest represented by their respective Residual Interests, and except as
otherwise provided in the next succeeding sentence, shall be made by wire
transfer of immediately available funds to the account of each such holder, if
such holder shall own of record a Residual Interest having an original
denomination aggregating at least a _______% Percentage Interest thereof and
shall have so notified the Owner Trustee or Co-Owner Trustee. The final
distribution on each Residual Interest will be made in like manner, but only
upon presentment and surrender of such Residual Interest at the location
specified in the notice to holders of the Residual Interests of such final
distribution.
Section 5.03 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to the
provisions hereunder, each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts distributed from each Trust
Account in accordance with the Indenture and this Agreement shall be released
from the lien of the Indenture upon such distribution thereunder or hereunder.
The Indenture Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Trust Accounts (other than the Certificate
Distribution Account) and in all proceeds thereof (excluding all income thereon)
and all such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Trust Estate. If, at any time, any Trust Account ceases
to be an Eligible Account, the Indenture Trustee (or the Servicer on its behalf)
shall within 10 Business Days (or such longer period, not to exceed 30 calendar
days, as to which each Rating Agency may consent) (i) establish a new Trust
Account as an Eligible Account, (ii) terminate the ineligible Trust Account, and
(iii) transfer any cash and investments from such ineligible Trust Account to
such new Trust Account.
With respect to the Trust Accounts (other than the Certificate Distribution
Account), the Indenture Trustee agrees, by its acceptance hereof, that each such
Trust Account shall be subject to the sole and exclusive custody and control of
the Indenture Trustee for the benefit of the Securityholders and the Issuer, as
the case may be, and the Indenture Trustee shall have sole signature and
withdrawal authority with respect thereto.
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In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder also shall be subject to and
established and maintained in accordance with the Trust Agreement. Subject to
rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee or Co-Owner Trustee shall possess all right, title and interest for the
benefit of the Certificateholders in all funds on deposit from time to time in
the Certificate Distribution Account and in all proceeds thereof (excluding all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property and the Trust Estate. Subject to the rights
of the Indenture Trustee, the Owner Trustee and Co-Owner Trustee agree, by its
acceptance hereof, that such Certificate Distribution Account shall be subject
to the sole and exclusive custody and control of the Owner Trustee and Co-Owner
Trustee for the benefit of the Issuer and the parties entitled to distributions
therefrom, including without limitation, the Certificateholders, and the Owner
Trustee and the Co-Owner Trustee shall have sole signature and withdrawal
authority with respect to the Certificate Distribution Account. Notwithstanding
the preceding, the distribution of amounts from the Certificate Distribution
Account in accordance with Section 5.2(b) also shall be made for the benefit of
the Indenture Trustee (including without limitation with respect to its duties
under the Indenture and this Agreement relating to the Trust Estate), and the
Indenture Trustee (in its capacity as Indenture Trustee) shall have the right,
but not the obligation to take custody and control of the Certificate
Distribution Account and to cause the distribution of amounts therefrom in the
event that the Owner Trustee fails to distribute such amounts in accordance with
Section 5.2(d) and Section 5.2(e).
Servicer shall have the power, revocable by the Indenture Trustee or by the
Owner Trustee or Co-Owner Trustee with the consent of the Indenture Trustee, to
instruct the Indenture Trustee or Owner Trustee to make withdrawals and payments
from the Trust Accounts for the purpose of permitting the Servicer to carry out
its duties hereunder or permitting the Indenture Trustee or Owner Trustee to
carry out its respective duties herein or under the Indenture or the Trust
Agreement, as applicable.
(b) (1) Investment of Funds. So long as no Event of Default shall have
occurred and be continuing, the funds held in any Trust Account may be invested
(to the extent practicable and consistent with any requirements of the Code) in
Permitted Investments, as directed by the Servicer in writing or by telephone or
facsimile transmission confirmed in writing by the Servicer, except that funds
held in the Note Distribution Account shall be invested by the Indenture Trustee
in Permitted Investments selected by it. In any case, funds in any Trust Account
must be available for withdrawal without penalty, and any Permitted Investments
must mature or otherwise be available for withdrawal, not later than the
Business Day immediately preceding the Distribution Date next following the date
of such investment and shall not be sold or disposed of prior to its maturity
subject to Section 5.3(b)(2). All interest and any other investment earnings on
amounts or investments held in the Collection Account shall be deposited into
the Collection Account immediately upon receipt by the Indenture Trustee, or in
the case of the Certificate Distribution Account, the Owner Trustee or Co-Owner
Trustee, as applicable but shall be payable to the Servicer as additional
Servicing Compensation and may be withdrawn from the Collection Account pursuant
to Section 5.1(b)(3)(ii). All interest and any other investment earnings on
amounts or investments held in the Note Distribution Account shall be payable to
the Indenture Trustee. All Permitted Investments in which funds in any Trust
Account (other than the Certificate Distribution Account) are invested must be
held by or registered in the name of
"__________________________________________, as Indenture Trustee, in trust for
the First Union Home Loan Asset Backed Securities, Series ________". While the
Co-Owner Trustee holds the Certificate Distribution Account, all Permitted
Investments in which funds in the Certificate Distribution Account are invested
shall be held by or registered in the name of "_______________________________,
as Co-Owner Trustee, in trust for the First Union Home Loan Asset Backed
Securities, Series ________".
(2) Insufficiency and Losses in Trust Accounts. If any amounts are needed
for disbursement from any Trust Account held by or on behalf of the Indenture
Trustee and sufficient uninvested funds are
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not available to make such disbursement, the Indenture Trustee, or Owner Trustee
or Co-Owner Trustee in the case of the Certificate Distribution Account, shall
cause to be sold or otherwise converted to cash a sufficient amount of the
investments in such Trust Account. The Indenture Trustee, or Owner Trustee or
Co-Owner Trustee in the case of the Certificate Distribution Account, shall not
be liable for any investment loss or other charge resulting therefrom, unless
such loss or charge is caused by the failure of the Indenture Trustee or Owner
Trustee or Co-Owner Trustee, respectively, to perform in accordance with this
Section 5.3.
If any losses are realized in connection with any investment in any Trust
Account pursuant to this Agreement and the Indenture, then the Servicer shall
deposit the amount of such losses (to the extent not offset by income from other
investments in such Trust Account) in such Trust Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in any Trust Account shall be taxed to the Issuer and for federal
and state income tax purposes the Issuer shall be deemed to be the owner of each
Trust Account.
(c) Subject to Section 6.1 of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Account held
by the Indenture Trustee resulting from any investment loss on any Permitted
Investment included therein (except to the extent that the Indenture Trustee is
the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(A) any Trust Account Property that is held in deposit accounts shall
be held solely in Eligible Accounts, subject to the last sentence of the
first paragraph of Section 5.3(a); and each such Eligible Account shall be
subject to the exclusive custody and control of the Indenture Trustee, and
the Indenture Trustee shall have sole signature authority with respect
thereto;
(B) any Trust Account Property that constitutes Physical Property
shall be delivered to the Indenture Trustee in accordance with paragraph
(a) of the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee or a financial intermediary
(as such term is defined in Section 8-313(4) of the UCC) acting solely for
the Indenture Trustee;
(C) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued book-entry registration
of such Trust Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated security"
under Article 8 of the UCC and that is not governed by clause (C) above
shall be delivered to the Indenture Trustee in accordance with paragraph
(c) of the definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through continued
registration of the Indenture Trustee's (or its nominee's) ownership of
such security.
(e) The Servicer shall have the power, revocable by the Indenture Trustee
or by the Issuer with the consent of the Indenture Trustee, to instruct the
Indenture Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer or the Issuer to carry out
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their respective duties hereunder or permitting the Indenture Trustee to carry
out its duties under the Indenture.
Section 5.04 Allocation of Losses.
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Loan are less than the
related Principal Balance plus accrued interest thereon, or any Mortgagor makes
a partial payment of any Monthly Payment due on a Loan, such Net Liquidation
Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds or partial
payment shall be applied to payment of the related Debt Instrument, first to
interest accrued at the Loan Interest Rate and then to principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be applied
to the reduction of the Class Principal Balances of the Class B, the Class M-1
and Class M-2 Notes in accordance with the Allocable Loss Amount Priority.
Section 5.05 Pre-Funding Account.
(a) The Servicer, for the benefit of the Noteholders, shall establish and
maintain in the name of the Indenture Trustee an Eligible Deposit Account (the
"Pre-Funding Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Securityholders.
On the Closing Date, the Owner Trustee will deposit in the Pre-Funding
Account the Pre-Funded Amount from the net proceeds of the sale of the Notes. On
each Subsequent Transfer Date, upon satisfaction of the conditions set forth in
Section 2.7 with respect to such transfer, the Indenture Trustee shall withdraw
from the Pre-Funding Account an amount equal to 100% of the Principal Balances
of the Subsequent Loans transferred to the Issuer on such Subsequent Transfer
Date, and to distribute such amount to or upon the order of the Depositor.
(b) If the Pre-Funded Amount has not been reduced to zero on the last day
of the Pre-Funding Period after giving effect to any reductions in the
Pre-Funded Amount on such date pursuant to paragraph (a) above, the Indenture
Trustee in writing shall withdraw from the Pre-Funding Account on the Mandatory
Redemption Date and (i) if the Pre-Funded Amount is less than $50,000 deposit
such amount in the Note Distribution Account to be applied to reduce the
Outstanding Amount of the Class of Notes then entitled to distributions of
principal and (ii) if the Pre-Funded Amount is greater than or equal to $50,000,
deposit such amounts to the Note Distribution Account for distribution pursuant
to Section 5.1(d)(iv).
(c) On the Business Day preceding each of the second and third Distribution
Dates, if applicable, the Indenture Trustee shall withdraw the related
Pre-Funding Earnings for the related Due Period and deposit such amounts into
the Note Distribution Account.
Section 5.06 Capitalized Interest Account.
(a) The Servicer, for the benefit of the Noteholders, shall establish and
maintain in the name of the Indenture Trustee an Eligible Account (the
"Capitalized Interest Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Noteholders.
(b) On each Determination Date during the Pre-Funding Period (including the
Determination Date in the month following the Due Period during which the
Pre-Funding Period ends), the Indenture Trustee will withdraw from the
Capitalized Interest Account an amount equal to the Capitalized Interest
Requirement and deposit such amount into the Collection Account.
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(c) On the Mandatory Redemption Date, any amounts remaining in the
Capitalized Interest Account shall be paid to the Depositor.
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ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall deliver to
the Indenture Trustee (i) a printed report setting forth the payments and
collections received with respect to the Loans during the Due Period for the
month immediately preceding the month in which such Determination Date occurs
(each such tape, a "Servicer Remittance Report") and (ii),if not included in the
Servicer Remittance Report, a printed report and an electromagnetic tape in
computer readable format, setting forth the information described in clauses (A)
- (I) of Section 6.1(b) for the month immediately preceding the month in which
such Determination Date occurs (such report, a "Delinquency Report").
Furthermore, no later than each Determination Date, the Servicer shall deliver
to the Indenture Trustee a magnetic tape or computer disk providing such
information regarding the Servicer's activities in servicing the Loans during
the related Due Period as the Indenture Trustee may reasonably require.
(b) On each Distribution Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Distribution
Statement"), to the Depositor, the Securityholders and the Rating Agencies,
stating the date of original issuance of the Securities (day, month and year),
the name of the Issuer (i.e. "_______________ Trust ____________"), the series
designation of the Notes (i.e., "Series ___________"), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Available Distribution Amount
for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Notes before and
after giving effect to distributions made to the holders of such Securities
on such Distribution Date, and the Pool Principal Balance as of the first
and last day of the related Due Period;
(iii) the Class Factor with respect to each Class of the Securities
then outstanding;
(iv) the amount of principal and interest received on the Loans during
the related Due Period;
(v) with respect to each Class of Notes, the Optimal Principal Balance
thereof;
(vi) the Overcollateralization Deficiency Amount, and any amount to be
distributed to the Noteholders or the holders of the Residual Interests on
such Distribution Date;
(vii) the Servicing Compensation, the Indenture Trustee Fee, the Owner
Trustee Fee and the Custodial Fee for such Distribution Date;
(viii) the Overcollateralization Amount on such Distribution Date, the
Overcollateralization Target Amount as of such Distribution Date, the Net
Loan Losses incurred during the related Due Period, the cumulative Net Loan
Losses as of such Distribution Date and Allocable Loss Amount for such
Distribution Date;
(ix) the weighted average maturity of the Loans and the weighted
average Loan Interest Rate of the Loans;
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(x) certain performance information, including delinquency and
foreclosure information with respect to the Loans, as set forth in the
Servicer's Monthly Remittance Report; and
(xi) the Pre-Funding Amount at the end of the related Due Period.
In addition, on each Distribution Date the Indenture Trustee shall
distribute to each Securityholder, together with the information described
above, the following information based solely upon information provided to the
Indenture Trustee pursuant to Section 6.1(a) upon which the Indenture Trustee
may conclusively rely without independent verification:
(A) the number and aggregate Principal Balance (including the
percentage equivalent relative to the aggregate Principal Balance of
all Loans) of Loans (i) 30-59 days delinquent, (ii) 60-89 days
delinquent and (iii) 90 days or more delinquent (which statistics
shall include Loans in foreclosure and bankruptcy but which shall
exclude Foreclosure Properties), as of the close of business on the
last day of the calendar month next preceding such Distribution Date
and the aggregate Principal Balances of all Loans as of such date;
(B) the number of, and aggregate Principal Balance of, all Loans
in foreclosure proceedings (other than any Loans described in clause
(C)) and the percent of the aggregate Principal Balances of such Loans
to the aggregate Principal Balances of all Loans, all as of the close
of business on the last day of the calendar month next preceding such
Distribution Date;
(C) the number of, and the aggregate Principal Balance of, the
related Loans in bankruptcy proceedings (other than any Loans
described in clause (B)) and the percent of the aggregate Principal
Balances of such Loans to the aggregate Principal Balances of all
Loans, all as of the close of business on the last day of the calendar
month next preceding such Distribution Date;
(D) the number of Foreclosure Properties, the aggregate Principal
Balances of the related Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such
Loans to the aggregate Principal Balances of all Loans, all as of the
close of business on the last day of the calendar month next preceding
such Distribution Date;
(E) for each Foreclosure Property, the Principal Balance of the
related Loan, the loan number of such Loan, the value of the Mortgaged
Property, the value established by any new appraisal, the estimated
cost of disposing of the Loan and the amount of any unreimbursed
Servicing Advances;
(F) for each Loan which is in foreclosure, the Principal Balance
of such Loan, the book value of the Mortgaged Property, the combined
loan-to-value ratio as of the date of origination, the combined
loan-to-value ratio as of the close of business on the last day of the
calendar month next preceding such Distribution Date and the last
paid-to-date;
(G) the principal balance of each Loan that was modified or
extended pursuant to the terms hereof;
(H) during the related Due Period, the number of and aggregate
Principal Balance and the loan numbers of Loans for each of the
following: (A)
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that became Liquidated Loans, (B) that became Defective Loans pursuant
to Section 3.5 as a result of such Defective Loans being Defective
Loans, and (C) that became Defaulted Loans;
(I) from the Closing Date through the most current Due Period,
the number of and cumulative aggregate Principal Balance of Loans for
each of the following: (A) that became Liquidated Loans, (B) that
became Defective Loans pursuant to Section 3.5 as a result of such
Deleted Home loans being Defective Loans, and (C) that became
Defective Loans pursuant to Section 3.5 as a result of such Defective
Loans being Defaulted Loans or a Loan in default or imminent default,
including the foregoing amounts by loan type (i.e. Combination Loans
or Debt Consolidation Loans); and
(J) the Net Delinquency Calculation Amount for such Distribution
Date.
All reports prepared by the Indenture Trustee of the withdrawals from and
deposits in the Collection Account will be based in whole or in part upon the
information provided to the Indenture Trustee by the Servicer, and the Indenture
Trustee may fully rely upon and shall have no liability with respect to such
information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person who at any
time during the calendar year was a Securityholder, such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclauses (b)(iv) and (vii) above, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Securityholder. Such obligation of the Indenture Trustee shall be deemed to have
been satisfied to the extent that comparable information shall be prepared and
furnished by the Indenture Trustee to the Securityholders pursuant to any
requirements of the Code as are from time to time in effect.
(d) On each Distribution Date, the Indenture Trustee shall forward to the
holder of each Residual Interest a copy of the Distribution Statement in respect
of such Distribution Date and a statement setting forth the amounts actually
distributed to such holders of the Residual Interests on such Distribution Date,
together with such other information as the Indenture Trustee deems necessary or
appropriate.
(e) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person who at any
time during the calendar year was a holder of a Residual Interest, if requested
in writing by such Person, such information as is reasonably necessary to
provide to such Person a statement containing the information provided pursuant
to the previous paragraph aggregated for such calendar year or applicable
portion thereof during which such Person was a holder of a Residual Interest.
(f) Upon reasonable advance notice in writing, the Servicer will provide to
each Securityholder which is a savings and loan association, bank or insurance
company access to information and documentation regarding the Loans sufficient
to permit such Securityholder to comply with applicable regulations of the FDIC
or other regulatory authorities with respect to investment in such Securities.
(g) The Indenture Trustee shall forward to each Noteholder and the holder
of a Residual Interest, during the term of this Agreement, such periodic,
special, or other reports, including information tax returns or reports required
with respect to the Notes and the Residual Interests, including Internal
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Revenue Service Forms 1099 and (if instructed in writing by the Depositor on the
basis of the advice of legal counsel) Form 1066, Schedule Q and other similar
reports that are required to be filed by the Indenture Trustee or its agent and
the holder of a Residual Interest, whether or not provided for herein, as shall
be necessary, reasonable, or appropriate with respect to the Noteholders or the
holder of a Residual Interest, or otherwise with respect to the purposes of this
Agreement, all such reports or information to be provided by and in accordance
with such applicable instructions and directions as the Noteholders or the
holder of a Residual Interest may reasonably require.
(h) Reports and computer tapes furnished by the Servicer and the Indenture
Trustee pursuant to this Agreement shall be deemed confidential and of a
proprietary nature, and shall not be copied or distributed except in connection
with the purposes and requirements of this Agreement. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Depositor or the Servicer or for
any other purpose except as set forth in this Agreement.
Section 6.02 Reports of Foreclosure and Abandonment of Mortgaged Property.
Each year beginning in 1998 the Servicer, at its expense, shall make the
reports of foreclosures and abandonments of any Mortgaged Property required by
Section 6050J of the Code. The reports from the Servicer shall be in form and
substance sufficient to meet the reporting requirements imposed by such Section
6050J of the Code.
Section 6.03 Specification of Certain Tax Matters.
Each Securityholder in whose name a Security is registered shall provide
the Indenture Trustee with a completed and executed Form W-9 or Form W-8, as
applicable, prior to purchasing a Security. The Indenture Trustee shall comply
with all requirements of the Code, and applicable state and local law, with
respect to the withholding from any distributions made to any Securityholder of
any applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
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ARTICLE VII.
GENERAL SERVICING PROCEDURE
Section 7.01 Assumption Agreements.
Except as otherwise provided in the next sentence, the Servicer will, to
the extent it has knowledge of any conveyance or prospective conveyance of any
Mortgaged Property by any Mortgagor (whether by absolute conveyance or by
contract of sale, and whether or not the Mortgagor remains or is to remain
liable under the Debt Instrument and/or the Mortgage), exercise its rights to
accelerate the maturity of such Loan under the "due-on-sale" clause, if any,
applicable thereto. If the Servicer reasonably believes it is unable under
applicable law to enforce such "due-on-sale" clause or enforcement would
materially increase the risk of default or delinquency on, or impair the
security for, the Loan, the Servicer will enter into an assumption and
modification agreement from or with the person to whom such property has been
conveyed or is proposed to be conveyed, pursuant to which such person becomes
liable under the Debt Instrument and, to the extent permitted by applicable
state law, the Mortgagor remains liable thereon. The Servicer is also authorized
to enter into a substitution of liability agreement with such person, pursuant
to which the original Mortgagor is released from liability and such person is
substituted as the Mortgagor and becomes liable under the Debt Instrument. In
connection with any assumption or substitution, the Servicer shall apply
Accepted Servicing Procedures. Any fee collected by the Servicer in respect of
an assumption or substitution of liability agreement will be retained by the
Servicer as additional servicing compensation. In connection with any such
assumption, no material term of the Debt Instrument (including, but not limited
to, the related Loan Interest Rate and the amount of the Monthly Payment) may be
amended or modified, except as otherwise required pursuant to the terms thereof.
The Servicer shall notify the Indenture Trustee that any such substitution or
assumption agreement has been completed by forwarding to the Indenture Trustee
the original copy of such substitution or assumption agreement, which copy shall
be added to the related Indenture Trustee's Loan File and shall, for all
purposes, be considered a part of such Indenture Trustee's Loan File to the same
extent as all other documents and instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Loan by operation of law or by the terms of the Debt Instrument or any
assumption which the Servicer believes in good faith that it may be restricted
by law from preventing, for any reason whatever. For purposes of this Section
7.1, the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
Section 7.02 Satisfaction of Mortgages and Release of Indenture Trustee's
Loan Files.
Upon the payment in full of any Loan, or the receipt by the Servicer of a
notification that payment in full shall be escrowed in a manner customary for
such purposes, the Servicer will notify the Indenture Trustee by an appropriate
certification of a Servicing Officer in the form of Exhibit D and shall request
delivery to it of the Indenture Trustee's Loan File. Upon receipt of such
certification and request, the Indenture Trustee shall promptly release the
related Indenture Trustee's Loan File to the Servicer. The Servicer shall
provide for preparation of the appropriate instrument of satisfaction covering
any Loan that pays in full and, on behalf of the Indenture Trustee the Servicer
shall execute or, to the extent that the Servicer cannot so execute on behalf of
the Indenture Trustee, the Indenture Trustee shall cooperate in the execution
and return of such instrument to provide for its delivery or recording as may be
required. No expenses incurred in connection with any instrument of satisfaction
or deed of reconveyance shall be chargeable to any Trust Account or shall be
otherwise chargeable to the Issuer, the Indenture Trustee or the
Securityholders.
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From time to time and as appropriate for the servicing or foreclosure of
any Loan, the Indenture Trustee shall, upon request of the Servicer and delivery
to the Indenture Trustee of a Request for Release of Indenture Trustee's Loan
File in the form of Exhibit D, release the related Indenture Trustee's Loan File
to the Servicer, and the Indenture Trustee shall, at the direction of the
Servicer, execute such documents as shall be necessary to the prosecution of any
such proceedings. Such Request for Release shall obligate the Servicer to return
each and every Indenture Trustee's Loan File previously requested from the
Indenture Trustee's Loan File to the Indenture Trustee when the need therefor by
the Servicer no longer exists, unless the Loan has been liquidated and the Net
Liquidation Proceeds relating to the Indenture Trustee's Loan File have been
deposited in the Collection Account or the Indenture Trustee's Loan File or such
document has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Servicer has delivered to the Indenture
Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Indenture Trustee's Loan File was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Loan was liquidated and that all amounts
received or to be received in connection with such liquidation which are
required to be deposited into the Collection Account have been so deposited, a
copy of the Request for Release shall be released by the Indenture Trustee to
the Servicer.
On behalf of the Indenture Trustee, the Servicer shall execute or, to the
extent that the Servicer cannot so execute on behalf of the Indenture Trustee,
upon written certification of a Servicing Officer, the Indenture Trustee shall
execute and deliver to the Servicer, any court pleadings, requests for trustee's
sale or other documents necessary to the foreclosure or trustee's sale in
respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Mortgagor on the Debt Instrument or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Debt Instrument or Mortgage or otherwise available at law or in equity. Each
such certification shall include a request that such pleadings or documents be
executed by the Indenture Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Indenture Trustee will not invalidate or otherwise affect the lien of the
Mortgage, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale.
The Indenture Trustee shall execute and deliver to the Servicer any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Debt Instrument
or Mortgage or to obtain a deficiency judgment, or to enforce any other remedies
or rights provided by the Debt Instrument or Mortgage or otherwise available at
law or in equity. Together with such documents or pleadings, the Servicer shall
deliver to the Indenture Trustee a certificate of a Servicing Officer requesting
that such pleadings or documents be executed by the Indenture Trustee and
certifying as to the reason such documents or pleadings are required and that
the execution and delivery thereof by the Indenture Trustee will not invalidate
or otherwise affect the lien of the Mortgage, except for the termination of such
a lien upon completion of the foreclosure or trustee's sale. The Indenture
Trustee shall, upon receipt of a written request from a Servicing Officer,
execute any document provided to the Indenture Trustee by the Servicer or take
any other action requested in such request that is, in the opinion of the
Servicer as evidenced by such request, required by any state or other
jurisdiction to discharge the lien of a Mortgage upon the satisfaction thereof
and the Indenture Trustee will sign and post, but will not guarantee receipt of,
any such documents to the Servicer, or such other party as the Servicer may
direct, within five Business Days, or more promptly if needed, of the Indenture
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Indenture Trustee's satisfaction that the
related Loan has been paid in full by or on behalf of the Mortgagor and that
such payment has been deposited in the Collection Account.
Section 7.03 Servicing Compensation.
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As compensation for its services hereunder, the Servicer shall be entitled
to retain from amounts otherwise required to be deposited into the Collection
Account, the Servicing Fee out of which the Servicer shall pay any servicing
fees owed or payable to any Subservicer. Additional servicing compensation in
the form of assumption fees, modification fees, and other administrative fees,
insufficient funds charges, prepayment penalties, amounts remitted pursuant to
Section 7.1, late payment charges and investment income on earnings on the Trust
Accounts shall be part of the Servicing Compensation payable to the Servicer
hereunder and shall be paid either by the Servicer retaining such additional
servicing compensation prior to deposit in the Collection Account pursuant to
Section 5.1(b)(1) or if deposited into the Collection Account as part of the
Servicing Compensation withdrawn from the Note Distribution Account pursuant to
Section 5.1(b)(3).
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The Servicer
also agrees to pay all annual Rating Agency monitoring fees.
Section 7.04 Statement as to Compliance and Financial Statements.
The Servicer will deliver to the Indenture Trustee and the Depositor not
later than 90 days following the end of each Servicer's Fiscal Year (beginning
with ____________ which will cover activities during the fiscal year ________),
an Officers' Certificate stating, as to each signatory thereof, that (i) a
review of the activities of the Servicer during the preceding year and of
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all of its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status thereof.
Contemporaneously with the submission of the Officers' Certificate required
by the preceding paragraph, the Servicer shall deliver to the Trustee a copy of
its annual audited financial statements prepared in the ordinary course of
business. The Servicer shall, upon the request of the Depositor, deliver to such
party any unaudited quarterly financial statements of the Servicer.
The Servicer agrees to make available on a reasonable basis to the
Depositor a knowledgeable officer of the Servicer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor or the
Underwriters on reasonable notice to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Depositor or the
Underwriters that the Servicer has the ability to service the Loans in
accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel relating
to the performance of the obligations of the Servicer hereunder, (ii) its
financial condition, (iii) the Loans and (iv) the performance of the obligations
of any Subservicer under the related Subservicing Agreement, in each case as the
Indenture Trustee or the Depositor may reasonably request from time to time.
Section 7.05 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each Servicer's Fiscal Year
(beginning with __________ which will cover activities during the fiscal year
______), the Servicer at its expense shall cause any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co.,
Coopers & ▇▇▇▇▇▇▇, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick and Price
Waterhouse & Co. or such other nationally recognized firm of Independent
Certified Public Accountants (which may also render other services to the
Servicer) to furnish a statement to the Trustee and the Depositor to the effect
that such firm has examined certain documents and records
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relating to the servicing of the Loans under this Agreement or of mortgage loans
under pooling and servicing agreements (including the Loans and this Agreement)
substantially similar to one another (such statement to have attached thereto a
schedule setting forth the pooling and servicing agreements covered thereby) and
that, on the basis of such examination conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC, such firm confirms that such servicing
has been conducted in compliance with such pooling and servicing agreements
except for such significant exceptions or errors in records that, in the opinion
of such firm, the Uniform Single Attestation Program for Mortgage Bankers or the
Attestation Program for Mortgages serviced for FHLMC requires it to report, each
of which errors and omissions shall be specified in such statement. In rendering
such statement, such firm may rely, as to matters relating to direct servicing
of mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC (rendered within one year of such statement) of independent public
accountants with respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder, the Indenture Trustee, the Issuer and each of their
respective agents shall have the right upon reasonable prior notice, during
normal business hours and as often as reasonably required, to examine, audit and
copy, at the expense of the Person making such examination, any and all of the
books, records or other information of the Servicer (including without
limitation any Subservicer to the extent provided in the related Subservicing
Agreement) whether held by the Servicer or by another on behalf of the Servicer,
which may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. Each Securityholder, the
Indenture Trustee and the Issuer agree that any information obtained pursuant to
the terms of this Agreement shall be held confidential.
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
preceding Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of deposit
specified in Section 5.1(b)(1), the aggregate of withdrawals from the Collection
Account for each category of withdrawal specified in Section 5.1(b)(2) and
Section 5.1(b)(3) for the related Due Period.
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ARTICLE VIII.
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Securities, Securityholders may request that the Servicer make available to the
Securityholders and to prospective Securityholders annual audited financial
statements of the Servicer for one or more of the most recently completed five
fiscal years for which such statements are available, which request shall not be
unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders or any prospective Securityholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and to permit the Securityholders and any prospective Securityholder to
inspect the Servicer's servicing facilities during normal business hours for the
purpose of satisfying the Securityholders and such prospective Securityholder
that the Servicer has the ability to service the Loans in accordance with this
Agreement.
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ARTICLE IX.
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Depositor, the Issuer, the Owner
Trustee, the Co-Owner Trustee, and the Indenture Trustee (each an "Indemnified
Party") and hold harmless each of them against any and all claims, losses,
damages, penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
any of the Servicer's representations and warranties and covenants contained in
this Agreement or in any way relating to the failure of the Servicer to perform
its duties and service the Loans in compliance with the terms of this Agreement;
provided, however, that if the Servicer is not liable pursuant to the provisions
of Section 9.1(d) for its failure to perform its duties and service the Loans in
compliance with the terms of this Agreement, then the provisions of this Section
9.1 shall have no force and effect with respect to such failure.
(b) The Depositor, the Owner Trustee, the Co-Owner Trustee, or the
Indenture Trustee, as the case may be, shall promptly notify the Servicer if a
claim is made by a third party with respect to a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Loans in compliance with the terms of this Agreement. The Servicer
shall promptly notify the Indenture Trustee and the Depositor of any claim of
which it has been notified pursuant to this Section 9.1 by a Person other than
the Depositor, and, in any event, shall promptly notify the Depositor of its
intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice to
the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party, unless (a) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (b) the Servicer has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or (c)
the named parties to any such action or proceeding (including any impleaded
parties) include both the Servicer and one or more Indemnified Parties, and the
Indemnified Parties shall have been advised by counsel that there may be one or
more legal defenses available to them which are different from or additional to
those available to the Servicer. The Servicer shall not be liable for any
settlement of any such claim or action unless the Servicer shall have consented
thereto or be in default on its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section 9.1 shall
relieve the Servicer of liability only if such failure is materially prejudicial
to the position of the Servicer and then only to the extent of such prejudice.
(d) Neither the Depositor nor the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer, or members or
affiliates of the Depositor shall be under any liability to the Issuer or the
Securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Depositor, the
Servicer or any such person against the remedies provided herein for the breach
of any warranties, representations or covenants made herein, or against any
specific liability imposed on the Depositor or the Servicer herein, or against
any liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of the duties of the Servicer or the
Depositor, as the case may be, or by reason of reckless disregard of the
obligations and duties of the Servicer or the Depositor, as the case may be,
hereunder. The Depositor, the Servicer and
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any director, officer, employee or agent of the Depositor or the Servicer, or
any member or affiliate of the Depositor may rely in good faith on any document
of any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder.
(e) The Servicer and the Depositor and any director, officer, employee or
agent of the Servicer or the Depositor shall be indemnified by the Issuer and
held harmless against any loss, liability or expense incurred in connection with
any audit, controversy or judicial proceeding relating to a governmental taxing
authority or any legal action relating to this Agreement or the Securities,
other than any loss, liability or expense related to any specific Loan or Loans
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. Except as otherwise provided herein, neither the Depositor nor the
Servicer shall be under any obligation to appear in, prosecute or defend any
legal action that is not related to its respective duties under this Agreement;
provided, however, that, except as otherwise provided herein, either the
Depositor or the Servicer may, with the prior consent of the Indenture Trustee,
in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Securityholders hereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Issuer, and the
Depositor and the Servicer shall be entitled to be reimbursed therefor out of
the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and will obtain and preserve its qualification to do business
as a foreign corporation and maintain such other licenses and permits, in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Loans and to perform its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee and the Issuer.
Section 9.03 Limitation on Liability of the Servicer and Others.
(a) The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith reasonably
believes to be genuine and to have been adopted or signed by the proper
authorities respecting any matters arising hereunder. Subject to the terms of
Section 9.01, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Loans in accordance with this Agreement.
(b) It is expressly understood and agreed by the parties hereto that (i)
this Agreement is executed and delivered by _____________________, not
individually or personally but solely as trustee of the Issuer under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it, (ii) each of the representations, undertaking and agreements herein made on
the part of the Issuer is made and intended not as personal representations,
undertakings and agreements by _____________________________ but is made and
intended for the purpose for binding only the Issuer, (iii) nothing herein
contained shall be construed as creating any liability on
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________________________________, individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability, if
any, being expressly waived by the parties hereto and by any Person claiming by,
through or under the parties hereto and (iv) under no circumstances shall
___________________________ be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representations, warranty or covenant made or undertaken by the
Issuer under this Agreement or the other Basic Documents.
Section 9.04 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) by the consent of the Indenture Trustee or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the preceding
sentence permitting the resignation of the Servicer shall be evidenced by an
independent opinion of counsel to such effect delivered (at the expense of the
Servicer) to the Indenture Trustee. No resignation of the Servicer shall become
effective until the Indenture Trustee or a successor servicer, appointed
pursuant to the provisions of Section 10.2 and satisfying the requirements of
Section 4.7 with respect to the qualifications of a successor Servicer, shall
have assumed the Servicer's responsibilities, duties, liabilities (other than
those liabilities arising prior to the appointment of such successor) and
obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder, without the prior written consent of the Indenture
Trustee, and absent such written consent any agreement, instrument or act
purporting to effect any such assignment, transfer, delegation or appointment
shall be void.
Section 9.05 Relationship of Servicer to Issuer and the Indenture Trustee.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Issuer and the Indenture Trustee under
this Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Issuer or the
Indenture Trustee.
Section 9.06 Servicer May Own Notes.
Each of the Servicer and any affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Notes with the
same rights as it would have if it were not the Servicer or an affiliate thereof
except as otherwise specifically provided herein. Notes so owned by or pledged
to the Servicer or such affiliate shall have an equal and proportionate benefit
under the provisions of this Agreement, without preference, priority, or
distinction as among all of the Notes; provided, however, that any Notes owned
by the Servicer or any affiliate thereof, during the time such Notes are owned
by any of them, shall be without voting rights for any purpose set forth in this
Agreement. The Servicer shall notify the Indenture Trustee promptly after it or
any of its affiliates becomes the owner or pledgee of a Note.
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ARTICLE X.
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by the Servicer
shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection Account
in accordance with Section 5.1(b) any payments in respect of the Loans
received by the Servicer no later than the second Business Day following
the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues unremedied
for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice is
a "Notice of Default" hereunder, shall have been given (a) to the Servicer
by the Indenture Trustee or the Issuer, or (b) to the Servicer, the
Indenture Trustee or the Issuer by any Majority Securityholder; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator 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 Servicer
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer's
property; or
(v) the Servicer shall admit in writing its inability to pay its debts
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations;
(b) then, and in each and every such case, so long as an Event of Default
shall not have been remedied, the Majority Securityholders, the Indenture
Trustee or the Issuer by notice in writing to the Servicer may, in addition to
whatever rights such Person may have at law or in equity to damages, including
injunctive relief and specific performance, may terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Loans and the
proceeds thereof, as servicer under this Agreement. Upon receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Loans or otherwise, shall, subject to
Section 10.2, pass to and be vested in a successor servicer, or the Indenture
Trustee if a successor servicer cannot be retained in a timely manner, and the
successor servicer, or Indenture Trustee, as applicable, is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
do or cause to be done all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, including, but not limited
to, the transfer and endorsement or assignment of the Loans and related
documents. The Servicer agrees to cooperate with the successor servicer in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the successor servicer
for administration by it of all amounts which shall at the time be credited by
the Servicer to each Collection Account or thereafter received with respect to
the Loans.
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Section 10.02 Indenture Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.1, or the Indenture Trustee receives the resignation of
the Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.4, or the Servicer is removed as servicer pursuant to this
Article X, then, subject to Section 4.7, the Indenture Trustee shall appoint a
successor servicer to be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof; provided, however, that the successor servicer shall not be liable for
any actions of any servicer prior to it; provided further, however, that if a
successor servicer cannot be retained in a timely manner, the Indenture Trustee
shall act as successor Servicer. In the event the Indenture Trustee assumes the
responsibilities of the Servicer pursuant to this Section 10.2, the Indenture
Trustee will make reasonable efforts consistent with applicable law to become
licensed, qualified and in good standing in each Mortgaged Property State the
laws of which require licensing or qualification, in order to perform its
obligations as Servicer hereunder or, alternatively, shall retain an agent who
is so licensed, qualified and in good standing in any such Mortgaged Property
State.
In the case that the Indenture Trustee serves as successor servicer, the
Indenture Trustee in such capacity shall not be liable for any servicing of the
Loans prior to its date of appointment, and shall not be subject to any
obligations to repurchase any Loans. The successor servicer shall be obligated
to make Servicing Advances hereunder. As compensation therefor, the successor
servicer appointed pursuant to the following paragraph, shall be entitled to all
funds relating to the Loans which the Servicer would have been entitled to
receive from the Note Distribution Account pursuant to Section 5.1(c) as if the
Servicer had continued to act as servicer hereunder, together with other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in Section 7.1 and Section 7.3.
Any collections received by the Servicer after removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the Servicing
Fees, together with other Servicing Compensation provided for herein. In the
event the Indenture Trustee is required to solicit bids to appoint a successor
servicer, the Indenture Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
that: (i) have a net worth of not less than $25,000,000, (ii) have a blanket
fidelity bond and errors and omissions insurance coverage satisfying the
requirements set forth in Section 4.3 and (iii) would not cause any rating of
any Class of the Securities in effect immediately prior to such assignment to be
qualified, downgraded or withdrawn, as evidenced by a letter from each Rating
Agency to such effect. Such public announcement shall specify that the successor
servicer shall be entitled to the full amount of the Servicing Fee and Servicing
Compensation provided for herein. Within thirty days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the amount
of any unpaid Servicing Fees and unreimbursed Servicing Advances made by the
Indenture Trustee. After such deductions, the remainder of such sum shall be
paid by the Indenture Trustee to the Servicer at the time of such sale, transfer
and assignment to the Servicer's successor. The Indenture Trustee, the Issuer,
any Custodian, the Servicer and any such successor servicer shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The Servicer agrees to cooperate with the Indenture Trustee and
any successor servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as
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applicable, all amounts which then have been or should have been deposited in
any Trust Account maintained by the Servicer or which are thereafter received
with respect to the Loans. Neither the Indenture Trustee nor any other successor
servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer hereunder. No appointment of a successor
to the Servicer hereunder shall be effective until written notice of such
proposed appointment shall have been provided by the Indenture Trustee to each
Securityholder, the Issuer and the Depositor and, except in the case of the
appointment of the Indenture Trustee as successor to the Servicer (when no
consent shall be required).
Pending appointment of a successor to the Servicer hereunder, the Indenture
Trustee shall act as servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Indenture Trustee may make such
arrangements for the compensation of such successor servicer out of payments on
the Loans as it and such successor servicer shall agree; provided, however, that
no such compensation shall be in excess of that permitted the Servicer pursuant
to Section 7.3, together with other Servicing Compensation in the form of
assumption fees, late payment charges or otherwise as provided in this
Agreement.
In connection with any transfer of servicing responsibilities pursuant to
this Section 10.2, the successor Servicer shall be responsible for all costs and
expenses in connection with such transfer, other than the costs and expenses of
transferring the files and records relating to the Loans which shall be at the
expense of the Servicer being replaced.
Section 10.03 Waiver of Defaults.
The Majority Securityholders may waive any events permitting removal of the
Servicer as servicer pursuant to this Article X, provided, however, that the
Majority Securityholders may not waive a default in making a required
distribution on a Note or Residual Interest without the consent of the related
Noteholder or holders of the Residual Interests. Upon any waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer shall,
at its own expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee the funds in any Trust Account
maintained by the Servicer;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee all Loan Files and related documents
and statements held by it hereunder and a Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee, the Issuer and the Securityholders a
full accounting of all funds, including a statement showing the Monthly
Payments collected by it and a statement of monies held in trust by it for
payments or charges with respect to the Loans; and
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(d) execute and deliver such instruments and perform all acts reasonably
requested in order to effect the orderly and efficient transfer of servicing of
the Loans to its successor and to more fully and definitively vest in such
successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
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ARTICLE XI.
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either: (a) the later of (i) the satisfaction and discharge of the Indenture
pursuant to the provisions thereof or (ii) the disposition of all funds with
respect to the last Loan and the remittance of all funds due hereunder and the
payment of all amounts due and payable to the Indenture Trustee, the Owner
Trustee, the Co-Owner Trustee, the Issuer and the Custodian; or (b) the mutual
consent of the Servicer, the Depositor and all Securityholders in writing.
Section 11.02 Optional Termination.
The Majority Residual Interestholders may, at their option, effect an early
termination of the Issuer on or after any Distribution Date on which the Pool
Principal Balance declines to ___% or less of the Maximum Collateral Amount. The
Majority Residual Interestholders shall effect such early termination by
providing notice thereof to the Indenture Trustee and Owner Trustee and by
purchasing all of the Loans at a price not less than the Termination Price.
Any such early termination by the Majority Residual Interestholders shall
be accomplished by depositing into the Collection Account on the Determination
Date immediately preceding the Distribution Date on which the purchase is to
occur the amount of the Termination Price to be paid. The Termination Price and
any amounts then on deposit in the Collection Account (other than any amounts
not required to have been deposited therein pursuant to Section 5.1(b)(1) and
any amounts withdrawable therefrom by the Indenture Trustee pursuant to Section
5.1(b)(3)) shall be transferred to the Note Distribution Account pursuant to
Section 5.1(b)(2) for distribution to Securityholders on the succeeding
Distribution Date; and any amounts received with respect to the Loans and
Foreclosure Properties subsequent to the Due Period immediately preceding such
final Distribution Date shall belong to the purchaser thereof. For purposes of
calculating the Available Distribution Amount for such final Distribution Date,
amounts transferred to the Note Distribution Account immediately preceding such
final Distribution Date shall in all cases be deemed to have been received
during the related Due Period, and amounts so transferred shall be applied
pursuant to Section 5.1(c) and Section 5.1(d).
Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Issuer shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with Section 2.06(b) of the Indenture and (ii) by the
Owner Trustee to the Residual Interestholders in accordance with Section 9.1(d)
of the Trust Agreement.
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ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders.
Except as otherwise specifically provided herein, whenever Securityholder
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed to have been taken or given on behalf of,
and shall be binding upon, all Securityholders if the Majority Securityholders
agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Servicer, the
Depositor and the Issuer by written agreement with notice thereof to the
Securityholders, without the consent of any of the Securityholders, to cure any
error or ambiguity, to correct or supplement any provisions hereof which may be
defective or inconsistent with any other provisions hereof or to add any other
provisions with respect to matters or questions arising under this Agreement;
provided, however, that such action will not adversely affect in any material
respect the interests of the Securityholders. An amendment described above shall
be deemed not to adversely affect in any material respect the interests of the
Securityholders if either (i) an opinion of counsel is obtained to such effect,
and (ii) the party requesting the amendment obtains a letter from each of the
Rating Agencies confirming that the amendment, if made, would not result in the
downgrading or withdrawal of the rating then assigned by the respective Rating
Agency to any Class of Securities then outstanding.
(b) This Agreement may also be amended from time to time by the Servicer,
the Depositor and the Issuer by written agreement, with the prior written
consent of the Majority Securityholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Securityholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, collections of payments on Loans or
distributions which are required to be made on any Security, without the consent
of the holders of 100% of each Class of Notes affected thereby, (ii) adversely
affect in any material respect the interests of the holders of any Class of
Notes in any manner other than as described in (i), without the consent of the
holders of 100% of such Class of Notes, or (iii) reduce the percentage of any
Class of Notes, the holders of which are required to consent to any such
amendment, without the consent of the holders of 100% of such Class of Notes.
(c) It shall not be necessary for the consent of Securityholders under this
Section 12.2 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer shall
be entitled to receive and rely upon an opinion of counsel stating that the
execution of such amendment is authorized or permitted by this Agreement. The
Issuer may, but shall not be obligated to, enter into any such amendment which
affects the Issuer's own rights, duties or immunities under this Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected
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by the Servicer at the Securityholders' expense on direction of the Majority
Securityholders but only when accompanied by an opinion of counsel to the effect
that such recordation materially and beneficially affects the interests of the
Securityholders or is necessary for the administration or servicing of the
Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 12.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to: (i) in
the case of the Issuer, _______________ Trust _______,
____________________________________________
__________________________________________, Attention:______________, or such
other address as may hereafter be furnished to the Securityholders and the other
parties hereto, (ii) in the case of the Depositor and the Servicer, [ADDRESS],
Attention: _____________, or such other address as may hereafter be furnished to
the Securityholders and the other parties hereto in writing by the Servicer or
the Depositor, (iii) in the case of the Indenture Trustee or Co-Owner Trustee,
____________________________________, ___________________, _______________
_________________________, Attention: _______________________________, and (iv)
in the case of the Securityholders, as set forth in the applicable Note
Register. Any such notices shall be deemed to be effective with respect to any
party hereto upon the receipt of such notice by such party, except that notices
to the Securityholders shall be effective upon mailing or personal delivery.
Section 12.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
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This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Depositor, the Issuer and the Securityholders and their respective
successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Servicer or the Issuer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this
Section 12.12.
(b) The fact and date of the execution by any Securityholder of any such
instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Securityholder shall bind every holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 12.12 as it shall deem necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Servicer shall provide or cause the Indenture Trustee to provide or
cause to be provided to each Rating Agency copies of statements, reports and
notices, to the extent received or prepared in connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Loans;
(iii) notice of any termination, replacement, succession, merger or
consolidation of either the Servicer, any Custodian or the Issuer;
(iv) notice of final payment on the Notes;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor's report delivered
pursuant to Section 7.5, and copies of any compliance reports delivered by
the Servicer hereunder including Section 7.4; and
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(vii) copies of any Distribution Statement pursuant to Section 6.1(b).
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to [▇▇▇▇▇'▇, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: [___________],] (ii) and if to [Fitch, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: [__________________].]
Section 12.14 Holders of the Residual Interests.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Trust Agreement to the holders of the Residual Interests shall be paid to such
holders pro rata based on their percentage holdings in the Residual Interests;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interests, such consent or
approval shall be capable of being given by the Majority Residual
Interestholder.
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IN WITNESS WHEREOF, the Servicer, the Issuer, the Indenture Trustee, the
Co-Owner Trustee and the Depositor have caused their names to be signed by their
respective officers thereunto duly authorized, as of the day and year first
above written, to this SALE AND SERVICING AGREEMENT.
_______________ TRUST ____________,
BY: ______________________________, NOT IN
ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER
TRUSTEE
BY: ___________________________________
NAME:
TITLE:
_______________________, AS SERVICER
BY: ___________________________________
NAME:________________________________
TITLE: ________________________________
HOME EQUITY SECURITIZATION CORP.,
AS DEPOSITOR
BY: ___________________________________
NAME:________________________________
TITLE: ________________________________
______________________________________ , AS
INDENTURE TRUSTEE AND CO-OWNER TRUSTEE
BY: ___________________________________
NAME:________________________________
TITLE: ________________________________
86
THE STATE OF DELAWARE )
)
COUNTY OF NEW CASTLE )
BEFORE ME, the undersigned authority, a notary public, on this day
personally appeared __________________________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said ______________________________, not in
its individual capacity but in its capacity as owner trustee of _______________
TRUST __________as Issuer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___th day of _______,
________.
__________________________________________
Notary Public in the State of Delaware
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STATE OF _______________
COUNTY OF ______________
On _________________, _____, before me, _____________________ a Notary
Public in and for said County and State, personally appeared
____________________, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________________
Notary Public
88
STATE OF __________________
COUNTY OF ________________
On _________________, ______, before me ________________, a Notary Public
in and for said County and State, personally appeared ____________________.,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________________
Notary Public
89
STATE OF _________________
COUNTY OF _______________
On _________________, _______________, before me __________________, a
Notary Public in and for said County and State, personally appeared
_________________., personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________________
Notary Public
90
STATE OF _______________
COUNTY OF _____________
On _________________, ____________, before me _________________, a Notary
Public in and for said County and State, personally appeared __________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
__________________________________________
Notary Public
91
EXHIBIT A
SCHEDULE OF LOANS
92
EXHIBIT B
RESERVED
93
EXHIBIT C
INDENTURE TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
______________________________________, in its capacity as Indenture
Trustee under that certain Sale and Servicing Agreement, dated as of
_________________ among _______, the Depositor, the Indenture Trustee and the
Issuer (the "Sale and Servicing Agreement"), hereby acknowledges receipt by it
in good faith without notice of adverse claims, of the Debt Instruments and, in
accordance with Section 2.6 of the Sale and Servicing Agreement, acknowledges
receipt of the remaining contents of the Indenture Trustee's Loan Files, in each
case delivered to the Indenture Trustee on the Subsequent Transfer Date except,
in each case, with respect to the list of exceptions attached hereto and
declares that it holds and will hold such documents and the other documents
delivered to it constituting the Indenture Trustee's Loan Files, and that it
holds or will hold all such assets and such other assets included in the
definition of "Trust Estate" that are delivered to it, in trust for the
exclusive use and benefit of all present and future Securityholders. The
Indenture Trustee has made no independent examination of any such documents
beyond the review specifically required in the Sale and Servicing Agreement. The
Indenture Trustee makes no representation as to and shall not be responsible to
verify (i) the validity, legality, enforceability, sufficiency, recordability or
genuineness of any document in the Indenture Trustee's Loan Files or of any such
Loan or (ii) the collectability, insurability, effectiveness or suitability of
any Loan.
The Schedule of Loans is attached to this Acknowledgment of Receipt.
Capitalized terms used herein and not defined shall have the respective
meanings assigned to them in the Sale and Servicing Agreement.
______________________________, as
Indenture Trustee
By: ______________________________
Name:
Title:
Dated: __________________
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EXHIBIT D
REQUEST FOR RELEASE OF INDENTURE TRUSTEE'S LOAN FILE
[Date]
To: _________________________________________________, as Custodian
______________________________
______________________________
Attn: ________________________________
Re: Custodial Agreement dated as of ________________ (the "Custodial
Agreement"), among HOME EQUITY SECURITIZATION CORP., as Depositor and
Servicer, _______________________, as Custodian,
__________________________________, as Indenture Trustee and
_______________ TRUST ______, as Issuer
In connection with the Indenture Trustee's Loan Files held by
____________________ _________________________, as the Custodian, we request the
release, and acknowledge receipt, of the Indenture Trustee's Loan File for the
Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
Loan Number:
Reason for Requesting Documents (check one)
___ 1 Loan Paid in Full. Servicer hereby certifies that all amounts
received in connection therewith have been credited to the Collection Account.
___ 2. (a) Loan in foreclosure or another method of liquidation pursuant
to Section 4.2 of the Sale and Servicing Agreement.
(b) Loan subject to documentation corrections for errors and
ambiguities. Servicer hereby certifies that the Indenture Trustee's Loan File
released pursuant to this Request for Release of the Indenture Trustee's Loan
File has errors or ambiguities that require correction and that such
documentation shall be corrected in a prompt manner and returned to the
Custodian in accordance with the Sale and Servicing Agreement.
___ 3. Loan repurchased or substituted pursuant to Article II or III of
the Sale and Servicing Agreement. Servicer hereby certifies that the Purchase
Price or Substitution Adjustment has been credited to the Collection Account.
___ 4. Loan Liquidated. Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation have been finally received and
credited to the Collection Account.
___ 5. Loan repurchased pursuant to Section 11.2 of the Sale and
Servicing Agreement.
If box 1 or 4 above is checked, and if the Indenture Trustee's Loan File
was previously released to us, please release to us our previous receipt on file
with you relating to the above specified Loan.
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If box 2,3 or 5 above is checked, upon our return of all of the above
Indenture Trustee's Loan File to ________________, as Custodian, please
acknowledge your receipt by signing in the space indicated below, and returning
this form.
Capitalized words used and not otherwise defined herein have the meanings
assigned to them in the Custodial Agreement.
_____________________________,
as Servicer
By: ___________________________________
Name: _________________________________
Title: ________________________________
Date: _________________________________
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_____________________________________,
as Indenture Trustee
By: ___________________________________
Name: _________________________________
Title: ________________________________
Receipt of documents returned to Custodian:
_____________________________________,
as Custodian
By: ___________________________________
Name: _________________________________
Title: ________________________________
▇▇
▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ TRUSTEE'S CERTIFICATION
_________________________
ADDRESS
Attention: _____________
Re: Sale and Servicing Agreement, dated as of ___________________ among First
Union Asset Backed Securites, Inc., and _______________________________;
_______________ Trust, Series ______ Loan Asset-Backed Notes
Ladies and Gentlemen:
This certification is being delivered to you in accordance with Section 2.6
of the above-captioned Sale and Servicing Agreement.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-referenced Sale and Servicing Agreement.
The Indenture Trustee hereby certifies that it has reviewed the Indenture
Trustee's Loan Files with respect to the Loans listed in the related Loan
Schedule, and that except as noted on the list of exceptions attached hereto and
without making any determination as to whether any Indenture Trustee's Loan File
includes any of the documents specified in Section 2.5 of the Sale and Servicing
Agreement, as to each Loan listed in the Loan Schedule, (1) all documents
constituting part of each such Indenture Trustee's Loan File required to be
delivered to it pursuant to the Sale and Servicing Agreement are in its
possession, (2) such documents have been reviewed by it and appear to have been
properly executed and regular on their face and to relate to such Loan and (3)
based on its examination and only as to the foregoing documents, the information
set forth in the Loan Schedule relating to such Loans which corresponds to items
(i), (ii) and (iv)-(viii) of the definition of "Loan Schedule" accurately
reflects information set forth in the Indenture Trustee's Loan File.
The Indenture Trustee has made no independent examination of any documents
contained in each Indenture Trustee's Loan File beyond the review specifically
required in the above-referenced Sale and Servicing Agreement. The Indenture
Trustee makes no representations as to: (i) the validity, legality, sufficiency,
enforceability, execution by a Responsible Officer or genuineness of any of the
documents contained in any Indenture Trustee's Loan File of any of the Loans
identified on the Loan Schedule, or (ii) the collectability, insurability,
effectiveness or suitability of any such Loan or (iii) the existence of any
document specified in clause (v) of Section 2.5(a) of the Sale and Servicing
Agreement. Pursuant to the terms of the Sale and Servicing Agreement, the scope
of the Indenture Trustee's review of the items delivered to the Indenture
Trustee pursuant to Section 2.5 of the Sale and Servicing Agreement was limited
solely to confirming that the documents listed in such Section 2.5 have been
executed and received, relate to the Loan in the Loan Schedule and conform as to
borrower, loan number and address to the correlative information set forth in
the Loan Schedule.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.
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______________________________________
______________________, as Indenture Trustee
By: ___________________________________
Name: _________________________________
Title: ________________________________
99
EXHIBIT E
FORM OF SUBSEQUENT TRANSFER AGREEMENT
____________, ____
SUBSEQUENT TRANSFER AGREEMENT (the "Agreement") by and among
_____________________________, as owner trustee (the "Owner Trustee"),
__________________ ("____________"), Home Equity Securitization Corp., a North
Carolina. corporation (the "Depositor") and ___________________________________,
as indenture trustee and co-owner trustee under the Indenture (in such
capacities, the "Indenture Trustee" and the "Co-Owner Trustee," respectively).
Reference is hereby made to the Sale and Servicing Agreement (the "Sale and
Servicing Agreement") dated as of ___________________________, among
_______________ Trust ________________, _________, the Depositor, the Indenture
Trustee and the Co-Owner Trustee.
WHEREAS, the Depositor wishes to sell the Subsequent Loans set forth in
Schedule A hereto to the Issuer, and the Issuer wishes to purchase such
Subsequent Loans and to pledge such Subsequent Loans to the Indenture Trustee,
all in accordance with the provisions of the Sale and Servicing Agreement and
the Indenture;
NOW, THEREFORE, the Depositor, _________, the Owner Trustee, the Indenture
Trustee and the Co-Owner Trustee hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Sale and
Servicing Agreement.
Section 2. Subsequent Loans. Schedule A attached hereto sets forth the
Subsequent Loans being transferred hereby by the Depositor to the Issuer having
an aggregate principal balance of $_______________________ as of ______________,
_______ (the "Subsequent Cutoff Date").
Section 3. Transfer of Subsequent Loans to the Issuer. Pursuant to and upon
the representations, warranties and agreements on the part of the Depositor in
the Sale and Servicing Agreement and in consideration of the purchase price of
$_______________________, the Depositor does hereby sell, assign, transfer and
otherwise convey unto the Issuer, without recourse (except as expressly provided
in the Sale and Servicing Agreement), all right, title and interest of ______ in
and to the Subsequent Loans and all monies received thereon on or after the
Subsequent Cutoff Date, together with the related Subsequent Loans and the
interest in any property which secured a Subsequent Loan, and all payments
thereon and proceeds of the conversion, voluntary or involuntary, of the
foregoing; and proceeds of all the foregoing. The foregoing sale does not
constitute and is not intended to result in any assumption by the Issuer of any
obligation of ______ to the Mortgagors, insurers or any other person in
connection with the Subsequent Loans, the Indenture Trustee's Loan Files, any
insurance policies or any agreement or instrument relating to any of them.
Section 4. Withdrawal from the Pre-Funding Account. Pursuant to Section 5.5
of the Sale and Servicing Agreement, the Indenture Trustee shall withdraw
$_____________________ from the Pre-Funding Account to pay to the Depositor.
Section 5. Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
100
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 7. Headings. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
Section 8. Governing Law. This 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.
* * *
101
IN WITNESS WHEREOF, the parties hereto have caused this Subsequent Transfer
Agreement to be duly executed by their respective officers as of the day and
year first above written.
_______________ TRUST ____________,
BY: ______________________________, NOT IN
ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER
TRUSTEE
BY: ___________________________________
NAME:
TITLE:
_______________________, AS SERVICER
BY: ___________________________________
NAME:________________________________
TITLE: ________________________________
HOME EQUITY SECURITIZATION CORP.,
AS DEPOSITOR
BY: ___________________________________
NAME:________________________________
TITLE: ________________________________
______________________________________ , AS
INDENTURE TRUSTEE AND CO-OWNER TRUSTEE
BY: ___________________________________
NAME:________________________________
TITLE: ________________________________
102
SCHEDULE A TO
SUBSEQUENT TRANSFER AGREEMENT
SCHEDULE OF SUBSEQUENT LOANS
103
EXHIBIT F
FORM OF INDENTURE TRUSTEE'S EXCEPTION REPORT
, 199__
ADDRESS
Attention: __________
Re: Sale and Servicing Agreement, dated as of _______________, Home Equity
Securitization Corp., and _________________________; _______________ Trust,
Series ________ Loan Asset Backed Notes
Ladies and Gentlemen:
In accordance with Section 2.6 of the above-referenced Sale and Servicing
Agreement, the undersigned, as Indenture Trustee, hereby sets forth an updated
exception report from the previous Indenture Trustee's Certification issued
[INSERT DATE].
The Indenture Trustee has made no independent examination of any documents
contained in each Indenture Trustee's Loan File beyond the review specifically
required in the above-referenced Sale and Servicing Agreement. The Indenture
Trustee makes no representations as to: (i) the validity, legality, sufficiency,
enforceability, execution by a Responsible Officer, or genuineness of any of the
documents contained in each Indenture Trustee's Loan File of any of the Loans
identified on the Loan Schedule, or (ii) the collectability, insurability,
effectiveness or suitability of any such Loan or (iii) the existence of any
document specified in clause (v) of Section 2.5(a) of the Sale and Servicing
Agreement.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.
______________________________________
______________________, as Indenture Trustee
By: ___________________________________
Name: _________________________________
Title: ________________________________
104
EXHIBIT G
TRUST RECEIPT
105
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS .................................................... 1
Section 1.01 Definitions. ....................................... 1
Section 1.02 Other Definitional Provisions ...................... 22
ARTICLE II. CONVEYANCE OF THE LOANS ....................................... 23
Section 2.01 Conveyance of the Loans ............................ 23
Section 2.02 Intended Characterization; Grant of Security Interest 23
Section 2.03 Ownership and Possession of Indenture Trustee's Loan
Files ............................................. 23
Section 2.04 Books and Records ................................. 24
Section 2.05 Delivery of Loan Documents ......................... 24
Section 2.06 Acceptance by Indenture Trustee of the Loans;
Certain Substitutions; Initial Certification by
Indenture Trustee or Custodian ..................... 27
Section 2.07 Subsequent Transfers ............................... 28
ARTICLE III. REPRESENTATIONS AND WARRANTIES ............................... 31
Section 3.01 Representations and Warranties of the Depositor .... 31
Section 3.02 Representations, Warranties and Covenants of the
Servicer ........................................... 33
Section 3.03 Representations and Warranties regarding Individual
Loans .............................................. 35
Section 3.04 Purchase and Substitution .......................... 44
ARTICLE IV. ADMINISTRATION AND SERVICING OF THE LOANS ..................... 47
Section 4.01 Duties of the Servicer ............................. 47
Section 4.02 Liquidation of Loans; Defaulted Loans .............. 48
Section 4.03 Fidelity Bond; Errors and Omission Insurance ....... 49
Section 4.04 Title, Management and Disposition of Foreclosure
Property ........................................... 49
Section 4.05 Access to Certain Documentation and Information
Regarding the Loans ................................ 51
Section 4.06 Subservicing ....................................... 51
Section 4.07 Successor Servicers ................................ 52
Section 4.08 Maintenance of Hazard Insurance; Property Protection
Expenses ........................................... 53
Section 4.09 Maintenance of Mortgage Impairment Insurance Policy 53
Section 4.10 Reports to the Securities and Exchange Commission .. 54
Section 4.11 Payment of Taxes, Insurance and Other Charges ...... 54
Section 4.12 Filing of Continuation Statements .................. 54
ARTICLE V. ESTABLISHMENT OF TRUST ACCOUNTS ................................ 56
Section 5.01 Collection Acount and Note Distribution Account .... 56
Section 5.02 Certificate Distribution Account and Distributions
on the Notes ....................................... 59
Section 5.03 Trust Accounts; Trust Account Property ............. 60
Section 5.04 Allocation of Losses ............................... 63
Section 5.05 Pre-Funding Account ................................ 63
Section 5.06 Capitalized Interest Account ....................... 63
ARTICLE VI. STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS .......... 65
Section 6.01 Statements ......................................... 65
Section 6.02 Reports of Foreclosure and Abandonment of
Mortgaged Property ................................. 68
Section 6.03 Specification of Certain Tax Matters ............... 68
ARTICLE VII. GENERAL SERVICING PROCEDURE .................................. 69
Section 7.01 Assumption Agreements .............................. 69
Section 7.02 Satisfaction of Mortgages and Release of Indenture
Trustee's Loan Files ............................... 69
Section 7.03 Servicing Compensation ............................. 70
Section 7.04 Statement as to Compliance and Financial Statements. 71
106
Section 7.05 Independent Public Accountants' Servicing Report ... 71
Section 7.06 Right to Examine Servicer Records .................. 72
Section 7.07 Reports to the Indenture Trustee; Collection
Account Statements ................................. 72
ARTICLE VIII. REPORTS TO BE PROVIDED BY SERVICER .......................... 73
Section 8.01 Financial Statements ............................... 73
ARTICLE IX. THE SERVICER .................................................. 74
Section 9.01 Indemnification; Third Party Claims ................ 74
Section 9.02 Merger or Consolidation of the Servicer ............ 75
Section 9.03 Limitation on Liaiblity of the Servicer and Others . 75
Section 9.04 Servicer Not to Resign; Assignment ................. 76
Section 9.05 Relationship of Servicer to Issuer and the Indenture
Trustee ............................................ 76
Section 9.06 Servicer May Own Notes ............................. 76
ARTICLE X. DEFAULT ........................................................ 77
Section 10.01 Events of Default .................................. 77
Section 10.02 Indenture Trustee to Act; Appointment of Successor . 78
Section 10.03 Waiver of Defaults ................................. 79
Section 10.04 Accounting Upon Termination of Servicer ............ 79
ARTICLE XI. TERMINATION ................................................... 81
Section 11.01 Termination ........................................ 81
Section 11.02 Optional Termination ............................... 81
Section 11.03 Notice of Termination .............................. 81
ARTICLE XII. MISCELLANEOUS PROVISIONS ..................................... 82
Section 12.01 Acts of Securityholders ............................ 82
Section 12.02 Amendment .......................................... 82
Section 12.03 Recordation of Agreement ........................... 82
Section 12.04 Duration of Agreement .............................. 83
Section 12.05 Governing Law ...................................... 83
Section 12.06 Notices ............................................ 83
Section 12.07 Severability of Provisions ......................... 83
Section 12.08 No Partnership ..................................... 83
Section 12.09 Counterparts ....................................... 83
Section 12.10 Successors and Assigns ............................. 83
Section 12.11 Headings ........................................... 84
Section 12.12 Actions of Securityholders ......................... 84
Section 12.13 Reports to Rating Agencies ......................... 84
Section 12.14 Holders of the Residual Interests .................. 85
EXHIBIT A - SCHEDULE OF LOANS ............................................. 92
EXHIBIT B - RESERVED ...................................................... 93
EXHIBIT C - INDENTURE TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT ................. 94
EXHIBIT D - REQUEST FOR RELEASE OF INDENTURE TRUSTEE'S LOAN FILE .......... 95
EXHIBIT E - FORM OF INDENTURE TRUSTEE'S CERTIFICATION ..................... 98
EXHIBIT E - FORM OF SUBSEQUENT TRANSFER AGREEMENT ......................... 100
EXHIBIT F - FORM OF INDENTURE TRUSTEE'S EXCEPTION REPORT .................. 104
EXHIBIT G - TRUST RECEIPT ................................................. 105
107