Exhibit 99.1
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▇▇▇▇▇▇ CAPITAL, A DIVISION OF ▇▇▇▇▇▇ BROTHERS HOLDINGS INC.,
Purchaser
and
FIRST NATIONWIDE MORTGAGE CORPORATION,
Company
_____________________________________________
SELLER'S WARRANTIES AND SERVICING AGREEMENT
Dated as of November 1, 1997
_____________________________________________
Conventional Residential Fixed Rate Mortgage Loans
Group No. 1997-FN-01
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; POSSESSION
OF MORTGAGE FILES; BOOKS AND RECORDS;
CUSTODIAL AGREEMENT; DELIVERY OF DOCUMENTS
Section Page
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2.01 Conveyance of Mortgage Loans; Possession
of Mortgage Files; Maintenance of
Servicing Files...................................
2.02 Books and Records; Transfers of Mortgage Loans.......
2.03 Custodial Agreement; Delivery of Documents ..........
ARTICLE III
REPRESENTATIONS AND WARRANTIES; REMEDIES AND BREACH
3.01 Company Representations and Warranties .............
3.02 Representations and Warranties Regarding
Individual Mortgage Loans ........................
3.03 Remedies for Breach of Representations
and Warranties ...................................
3.04 Restrictions and Requirements Applicable in the Event
that a Mortgage Loan is Acquired by
a REMIC...........................................
3.05 Repurchase of Delinquent Mortgage Loans.............
3.06 Repurchase of REO Properties........................
3.07 Purchaser Representations and Warranties............
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
4.01 Company to Act as Servicer .........................
4.02 Liquidation of Mortgage Loans
4.03 Collection of Mortgage Loan Payments................
4.04 Establishment of and Deposits to
Custodial Account ................................
4.05 Permitted Withdrawals From
Custodial Account ................................
4.06 Establishment of and Deposits to
Escrow Account ...................................
4.07 Permitted Withdrawals From Escrow Account ..........
4.08 Payment of Taxes, Insurance and
Other Charges ....................................
4.09 Protection of Accounts .............................
4.10 Maintenance of Hazard Insurance ....................
4.11 Maintenance of Mortgage Impairment..................
Insurance ........................................
4.12 Maintenance of Fidelity Bond and
Errors and Omissions Insurance ...................
4.13 Inspections ........................................
4.14 Restoration of Mortgaged Property ..................
4.15 Maintenance of PMI Policy; Claims
4.16 Title, Management and Disposition
of REO Property ..................................
4.17 Real Estate Owned Reports ..........................
4.18 Liquidation Reports ................................
4.19 Reports of Foreclosures and Abandonments of
Mortgaged Property................................
ARTICLE V
PAYMENTS TO PURCHASER
5.01 Remittances..........................................
5.02 Statements to Purchaser..............................
5.03 Monthly Advances by Company .........................
ARTICLE VI
GENERAL SERVICING PROCEDURES
6.01 Transfers of Mortgaged Property ....................
6.02 Satisfaction of Mortgages and
Release of Mortgage Files ........................
6.03 Penalties for Prepayment............................
6.04 Servicing Compensation .............................
6.05 Annual Statement as to Compliance ..................
6.06 Annual Independent Public Accountants'
Servicing Report .................................
6.07 Right to Examine Company Records ...................
ARTICLE VII
AGENCY TRANSFER; PASS-THROUGH TRANSFER
7.01. Removal of Mortgage Loans from Inclusion Under
this Agreement Upon an Agency Transfer, or a
Pass-Through Transfer on One or More
Reconstitution Dates.............................
7.02. Purchaser's Repurchase and
Indemnification Obligations......................
ARTICLE VIII
COMPANY TO COOPERATE
8.01 Provision of Information...........................
8.02 Financial Statements; Servicing Facilities ........
ARTICLE IX
THE COMPANY
9.01 Indemnification; Third Party Claims ...............
9.02 Merger or Consolidation of the Company ............
9.03 Limitation on Liability of Company
and Others ......................................
9.04 Limitation on Resignation and
Assignment by Company ..........................
ARTICLE X
DEFAULT
10.01 Events of Default .................................
10.02 Waiver of Defaults ................................
ARTICLE XI
TERMINATION
11.01 Termination ........................................
11.02 Termination Without Cause ..........................
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01 Successor to Company ...............................
12.02 Amendment ..........................................
12.03 Governing Law ......................................
12.04 Duration of Agreement ..............................
12.05 Notices ............................................
12.06 Severability of Provisions .........................
12.07 Relationship of Parties ............................
12.08 Execution; Successors and Assigns ..................
12.09 Recordation of Assignments of Mortgage .............
12.10 Assignment by Purchaser.............................
12.11 No Personal Solicitation............................
EXHIBITS
EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT B-1 CONTENTS OF EACH MORTGAGE FILE
EXHIBIT B-2 CONTENTS OF EACH SERVICING FILE
EXHIBIT C CUSTODIAL AGREEMENT
EXHIBIT D-1 FORM OF CUSTODIAL ACCOUNT
CERTIFICATION
EXHIBIT D-2 FORM OF CUSTODIAL ACCOUNT
LETTER AGREEMENT
EXHIBIT E-1 FORM OF ESCROW ACCOUNT CERTIFICATION
EXHIBIT E-2 FORM OF ESCROW ACCOUNT
LETTER AGREEMENT
EXHIBIT F FORM OF MONTHLY REMITTANCE ADVICE
This is a Seller's Warranties and Servicing Agreement for
conventional fixed rate residential first mortgage loans, dated and effective
as of November 1, 1997, and is executed between ▇▇▇▇▇▇ Capital, A Division of
▇▇▇▇▇▇ Brothers Holdings Inc., as purchaser (the "Purchaser"), and First
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Nationwide Mortgage Corporation, as seller and servicer (the "Company").
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W I T N E S S E T H
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WHEREAS, the Purchaser has agreed to purchase from the Company and
the Company has agreed to sell to the Purchaser certain Mortgage Loans which
have an aggregate outstanding principal balance as of the close of business
on the Cut-off Date, after deduction of principal payments due on or before
such date of $443,247,897;
WHEREAS, each of the Mortgage Loans is secured by a mortgage, deed
of trust or other security instrument creating a first lien on a residential
dwelling located in the jurisdiction indicated on the Mortgage Loan Schedule,
which is annexed hereto as Exhibit A; and
WHEREAS, the Purchaser and the Company wish to prescribe the manner
of delivery of the Mortgage Loans to Purchaser and the management, servicing
and control of the Mortgage Loans.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Purchaser and the
Company agree as follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
Accepted Servicing Practices: With respect to any Mortgage Loan,
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those mortgage servicing practices of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located.
Agreement: This Seller's Warranties and Servicing Agreement and
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all amendments hereof and supplements hereto.
ALTA: The American Land Title Association or any successor
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thereto.
Ancillary Income: All income derived from the Mortgage Loans,
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other than Servicing Fees, including but not limited to, late charges,
prepayment fees, fees received with respect to checks or bank drafts returned
by the related bank for non-sufficient funds, assumption fees, optional
insurance administrative fees and all other incidental fees and charges.
Appraised Value: The value set forth in an appraisal made in
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connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
Assignment of Mortgage: An assignment of the Mortgage, notice of
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transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Purchaser.
BIF: The Bank Insurance Fund, or any successor thereto.
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Breach: As defined in Section 3.03.
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Business Day: Any day other than (i) a Saturday or Sunday, or (ii)
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a day on which banking and savings and loan institutions in the States of New
York and Maryland are authorized or obligated by law or executive order to be
closed.
Certificates. Any and all of the Certificates issued pursuant to
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the Trust Agreement.
Closing Date: November 7, 1997.
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Code: The Internal Revenue Code of 1986, as it may be amended from
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time to time or any successor statute thereto, and applicable U.S. Department
of the Treasury regulations issued pursuant thereto.
Company: First Nationwide Mortgage Corporation, or its successor
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in interest or assigns, or any successor to the Company under this Agreement
appointed as herein provided.
Condemnation Proceeds: All awards or settlements in respect of a
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Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
Custodial Account: The separate account or accounts created and
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maintained pursuant to Section 4.04.
Custodial Agreement: The agreement governing the retention of the
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originals of each Mortgage Note, Mortgage, Assignment of Mortgage and other
Mortgage Loan Documents which is annexed hereto as exhibit C.
Custodian: The custodian under the Custodial Agreement, or its
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successor in interest or assigns, or any successor to the Custodian under the
Custodial Agreement as provided therein.
Cut-off Date: November 1, 1997.
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Deleted Mortgage Loan: A Mortgage Loan which is repurchased by the
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Company in accordance with the terms of this Agreement and which is, in the
case of a substitution pursuant to Section 3.03, replaced or to be replaced
with a Qualified Substitute Mortgage Loan.
Determination Date: The last day Business Day prior to the
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Remittance Date.
Disqualified Organization: An organization defined as such in
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Section 860E(e) of the Code.
Due Date: The day of the month on which the Monthly Payment is due
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on a Mortgage Loan, exclusive of any days of grace. With respect to the
Mortgage Loans for which payment from the Mortgagor is due on a day other
than the first day of the month, such Mortgage Loans will be treated as if
the Monthly Payment is due on the first day of the month following the actual
Due Date.
Due Period: With respect to each Remittance Date, the period
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commencing on the second day of the month preceding the month of the
Remittance Date and ending in the first day of the month of the Remittance
Date.
Eligible Investments: Any one or more of the obligations and
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securities listed below which investment provides for a date of maturity not
later than the Determination Date in each month:
(i) direct obligations of, and obligations fully guaranteed by,
the United States of America, or any agency or instrumentality
of the United States of America the obligations of which are
backed by the full faith and credit of the United States of
America; and
(ii) federal funds, demand and time deposits in, certificates of
deposits of, or bankers' acceptances issued by, any depository
institution or trust company incorporated or organized under
the laws of the United States of America or any state thereof
and subject to supervision and examination by federal and/or
state banking authorities, so long as at the time of such
investment or contractual commitment providing for such
investment the commercial paper or other short-term debt
obligations of such depository institution or trust company
(or, in the case of a depository institution or trust company
which is the principal subsidiary of a holding company, the
commercial paper or other short-term debt obligations of such
holding company) are rated in one of two of the highest
ratings by each of Standard & Poor's, Fitch and ▇▇▇▇▇'▇ and
the long-term debt obligations of such holding company)
are rated in one of two of the highest ratings, by each
of Standard & Poor's, Fitch and Moody's, and the long-term
debt obligations of such depository institution or trust
company (or, in the case of a depository institution or
trust company which is the principal subsidiary of a holding
company, the long-term debt obligations of such
holding company) are rated in one of two of the highest
ratings, by each of Standard & Poor's, Fitch and ▇▇▇▇▇'▇;
provided, however, that no such instrument shall be an Eligible
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Investment if such instrument evidences either (i) a right to receive only
interest payments with respect to the obligations underlying such instrument,
or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with
respect to such instrument provide a yield to maturity of greater than 120%
of the yield to maturity at par of such underlying obligations.
Errors and Omissions Insurance Policy: An errors and omissions
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insurance policy to be maintained by the Company pursuant to Section 4.12.
Escrow Account: The separate account or accounts created and
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maintained pursuant to Section 4.06.
Escrow Payments: With respect to any Mortgage Loan, the amounts
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constituting ground rents, taxes, mortgage insurance premiums, fire and
hazard insurance premiums, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage, applicable law or
any other related document.
Event of Default: Any one of the conditions or circumstances
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enumerated in Section 10.01.
FDIC: The Federal Deposit Insurance Corporation, or any successor
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thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, or any
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successor thereto.
Fidelity Bond: A fidelity bond to be maintained by the Company
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pursuant to Section 4.12.
First Remittance Date: December 18, 1997.
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Fitch: Fitch Investors Service, L.P., or its successor in
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interest.
FNMA: The Federal National Mortgage Association, or any successor
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thereto.
FNMA Guides: The FNMA Sellers' Guide and the FNMA Servicers' Guide
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and all amendments or additions thereto.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds
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of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.
Liquidation Proceeds: Cash received in connection with the
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liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan, trustee's sale, foreclosure sale or
otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage Loan.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the
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ratio of the Stated Principal Balance of the Mortgage Loan as of the date of
origination (unless otherwise indicated) to the lesser of (a) the Appraised
Value of the Mortgaged Property and (b) if the Mortgage Loan was made to
finance the acquisition of the related Mortgaged Property, the purchase price
of the Mortgaged Property, expressed as a percentage.
Master Servicer: The person, if any, designated as "Master
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Servicer" under a Reconstitution Agreement.
Monthly Advance: The portion of Monthly Payment delinquent with
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respect to each Mortgage Loan at the close of business on the Determination
Date required to be advanced by the Company pursuant to Section 5.03 on the
Business Day immediately preceding the Remittance Date of the related month.
Moody's: ▇▇▇▇▇'▇ Investors Services, Inc., or its successor in
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interest.
Monthly Payment: The scheduled monthly payment of principal and
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interest on a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument securing
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a Mortgage Note, which creates a first lien on an unsubordinated estate in
fee simple in real property securing the Mortgage Note.
Mortgage File: The items pertaining to a particular Mortgage Loan
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referred to in Exhibit B-1 annexed hereto, and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
Mortgage Impairment Insurance Policy: A mortgage impairment or
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blanket hazard insurance policy as described in Section 4.11.
Mortgage Interest Rate: The annual rate of interest borne on a
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Mortgage Note in accordance with the provisions of the Mortgage Note.
Mortgage Loan: An individual Mortgage Loan which is the subject
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of this Agreement, each Mortgage Loan originally sold and subject to this
Agreement being identified on the Mortgage Loan Schedule, which Mortgage
Loan includes without limitation the Mortgage File, and as they apply to
the period from and after the Cut-off Date, all the Monthly
Payments, Principal Prepayments, Liquidation Proceeds, Condemnation
Proceeds, Insurance Proceeds, REO Disposition Proceeds and all other
rights, benefits, proceeds and obligations arising from or in connection
with such Mortgage Loan.
Mortgage Loan Documents: The documents required to be delivered
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pursuant to this Agreement.
Mortgage Loan Remittance Rate: With respect to each Mortgage Loan,
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the annual rate of interest remitted to the Purchaser, which shall be equal
to the Mortgage Interest Rate minus the Servicing Fee Rate.
Mortgage Loan Schedule: A schedule of Mortgage Loans annexed
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hereto as Exhibit A, such schedule setting forth the following information
with respect to each Mortgage Loan: (1) the Company's Mortgage Loan
identifying number; (2) the Mortgagor's name; (3) the street address of the
Mortgaged Property including the state code; (4) a code indicating whether
the Mortgaged Property is a single family residence, a 2-4 family residence,
a condominium unit or a unit in a planned unit development; (5) the original
months to maturity or the remaining months to maturity from the Cut-off Date,
in any case based on the original amortization schedule, and if different,
the maturity expressed in the same manner but based on the actual
amortization schedule; (6) the Loan-to-Value Ratio at origination; (7) the
Mortgage Interest Rate as of the Cut-off Date; (8) the date on which the
Mortgage Loan was originated; (9) the stated maturity date; (10) the amount
of the Monthly Payment; (11) the last payment date on which a payment was
actually applied to the outstanding principal balance; (12) the original
principal amount of the Mortgage Loan; (13) the principal balance of the
Mortgage Loan as of the close of business on the Cut-off Date, after
deduction of payments of principal due on or before the Cut-off Date, whether
or not collected; (14) the Mortgage Loan Remittance Rate as of the Cut-off
Date; (15) the PMI Policy certificate number; (16) the PMI Policy coverage
percentage; (17) a code indicating the occupancy status; and (18) a code
indicating the loan purpose. With respect to the Mortgage Loans in the
aggregate, the Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date: (1) the number of Mortgage Loans; (2)
the current aggregate outstanding principal balance of the Mortgage Loans;
(3) the weighted average Mortgage Interest Rate of the Mortgage Loans; and
(4) the weighted average maturity of the Mortgage Loans.
Mortgage Note: The note or other evidence of the indebtedness of
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a Mortgagor secured by a Mortgage.
Mortgaged Property: The real property and all improvements thereon
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securing repayment of the debt evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
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Nonrecoverable Advance: With respect to any Mortgage Loan, any
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Monthly Advance or proposed Monthly Advance which, in the judgment of
Servicer, may not be ultimately recoverable by the Servicer from Liquidation
Proceeds, Insurance Proceeds, Condemnation Proceeds or otherwise.
Officer's Certificate: A certificate signed by the Chairman of the
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Board or the Vice Chairman of the Board or the President or a Vice President
or an Assistant Vice President and by the Treasurer or the Secretary or one
of the Assistant Treasurers or Assistant Secretaries of the Company, and
delivered to the Purchaser as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be an
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employee of the Company, reasonably acceptable to the Purchaser, provided
that any Opinion of Counsel relating to (a) qualification of the Mortgage
Loans in a REMIC or (b) compliance with the REMIC Provisions, must be an
opinion of counsel who (i) is in fact independent of the Company and any
master servicer of the Mortgage Loans, (ii) does not have any material direct
or indirect financial interest in the Company or any master servicer of the
Mortgage Loans or in an affiliate of either and (iii) is not connected with
the Company or any master servicer of the Mortgage Loans as an officer,
employee, director or person performing similar functions.
Pass-Through Transfer: The sale or transfer of some or all of the
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Mortgage Loans to a trust to be formed as part of a publicly-issued and/or
privately placed, rated or unrated, mortgage pass-through transaction,
retaining the Company as "servicer" (with or without a master servicer)
thereunder.
Person: Any individual, corporation, limited liability company,
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partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political
subdivision thereof.
PMI Policy: A policy of primary mortgage guaranty insurance issued
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by a Qualified Insurer, as required by this Agreement with respect to certain
Mortgage Loans.
Prepayment Interest Shortfall Amount: With respect to any Mortgage
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Loan that was subject to a Principal Prepayment in full or in part during any
Principal Prepayment Period, which Principal Prepayment was applied to such
Mortgage Loan prior to such Mortgage Loan's Due Date in such Due Period, the
amount of interest (net the related Servicing Fee) that would have accrued on
the amount of such Principal Prepayment during the period commencing on the
date as of which such Principal Prepayment was applied to such Mortgage Loan
and ending on the day immediately preceding such Due Date, inclusive.
Prepayment Penalty: With respect to each Mortgage Loan, the
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penalty if the mortgagor prepays such Mortgage Loan during the first three
(3) years after origination thereof as provided in the related Mortgage Note
or Mortgage.
Prime Rate: The prime rate announced to be in effect from time to
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time, as published as the average rate in The Wall Street Journal.
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Principal Prepayment: Any payment or other recovery of principal
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on a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing scheduled
interest due on any date or dates in any month or months subsequent to the
month of prepayment.
Principal Prepayment Period: The month preceding the month in
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which the related Remittance Date occurs.
Purchaser: Lehman Capital, A Division of ▇▇▇▇▇▇ Brothers Holdings
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Inc. or its successor in interest or any successor to the Purchaser under
this Agreement as herein provided.
Qualified Depository: A depository the accounts of which are
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insured by the FDIC through the BIF or the SAIF and the debt obligations of
which are rated AA or better by Standard & Poor's, provided, however, that
prior to a Pass-through Transfer, California Federal Bank, a Federal Savings
Bank shall be deemed a "Qualified Depository" and from and after a Pass-
through Transfer, California Federal Bank, a Federal Savings Bank shall be
deemed a "Qualified Depository." only if it is acceptable to the Rating
Agencies which are rating such Pass-through Transfer.
Qualified Insurer: A mortgage guaranty insurance company duly
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authorized and licensed where required by law to transact mortgage guaranty
insurance business and approved as an insurer by FNMA or FHLMC.
Qualified Substitute Mortgage Loan: A mortgage loan eligible to
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be substituted by the Company for a Deleted Mortgage Loan which must, on the
date of such substitution, (i) have an outstanding principal balance, after
deduction of all scheduled payments due in the month of substitution (or in
the case of a substitution of more than one mortgage loan for a Deleted
Mortgage Loan, an aggregate principal balance), not in excess of the Stated
Principal Balance of the Deleted Mortgage Loan; (ii) have a Mortgage Loan
Remittance Rate not less than and not more than 2% greater than the Mortgage
Loan Remittance Rate of the Deleted Mortgage Loan; (iii) have a remaining
term to maturity not greater than and not more than one year less than that
of the Deleted Mortgage Loan; (iv) comply with each representation and
warranty set forth in Sections 3.01 and 3.02; and (v) has a Loan-to-Value
Ratio as of the date of such substitution not greater than that of the
related Deleted Mortgage Loan.
Rating Agency: Any of Fitch, ▇▇▇▇▇'▇ or Standard & Poor's, Duff
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& ▇▇▇▇▇▇ or their respective successors designated by the Purchaser.
Reconstitution Agreements: The agreement or agreements entered
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into by the Purchaser, the Company (if applicable) and certain third parties
on the Reconstitution Date(s) with respect to any or all of the Mortgage
Loans serviced hereunder, in connection with a Pass-Through Transfer as set
forth in Section 7.01, including, but not limited to, a Pooling and Servicing
Agreement, a Trust Agreement, and/or a subservicing/master servicing
agreement and related custodial/trust agreement and related documents with
respect to a Pass-Through Transfer. The form of relevant Reconstitution
Agreement to be entered into by the Purchaser and/or master servicer or
trustee and the Company with respect to Pass-Through Transfers shall be
reasonably satisfactory in form and substance to the Purchaser and the
Company (giving due regard to any rating or master servicing requirements)
and the representations and warranties and servicing provisions contained
therein shall be substantially similar to those contained in this Agreement,
unless otherwise mutually agreed by the parties; provided, however, that the
Company shall not be required to make any additional representations or
warranties thereafter or to update or bring-down any representation and
warranties contained herein, except the representations and warranties set
forth in Section 3.01 herein, and the Company shall be entitled to receive
the same servicing compensation as is provided in Section 6.04 following the
related Reconstitution Date.
Reconstitution Date: The date or dates on which any or all of the
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Mortgage Loans serviced under this Agreement shall be subject to a
Pass-Through Transfer pursuant to Section 7.01 hereof.
Record Date: The close of business of the last Business Day of the
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month preceding the month of the related Remittance Date.
REMIC: A "real estate mortgage investment conduit" within the
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meaning of Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law
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relating to a REMIC, which appear at Section 860A through 86OG of Subchapter
M of Chapter 1, Subtitle A of the Code, and related provisions, and
regulations, rulings or pronouncements promulgated thereunder, as the
foregoing may be in effect from time to time.
Remittance Date: The 18th day (or if such 18th day is not a
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Business Day, the first Business Day immediately following) of any month,
beginning with the First Remittance Date.
REO Disposition: The final sale by the Company of any REO
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Property.
REO Disposition Proceeds: All amounts received with respect to an
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REO Disposition pursuant to Section 4.16.
REO Property: A Mortgaged Property acquired by the Company on
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behalf of the Purchasers through foreclosure or by deed in lieu of
foreclosure, as described in Section 4.16.
Repurchase Price: With respect to any Mortgage Loan, a price equal
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to (i) the Stated Principal Balance of the Mortgage Loan plus (ii) interest
on such Stated Principal Balance at the Mortgage Loan Remittance Rate from
the date on which interest has last been paid and distributed to the
Purchaser to the date of repurchase, less amounts received or advanced in
respect of such repurchased Mortgage Loan which are being held in the
Custodial Account for distribution in the month of repurchase.
Notwithstanding the foregoing, if the date of repurchase is on a date other
than the last day of a Prepayment Period, then the Company shall pay, in lieu
of the interest specified in clause (ii) above, interest at the Mortgage Loan
Remittance Rate from the date on which interest has last been paid and
distributed to the Purchaser through the last day of the Prepayment Period.
SAIF: The Savings Association Insurance Fund, or any successor
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thereto.
Securities Act of 1933 or the 1933 Act: The Securities Act of
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1933, as amended.
Servicing Advances: All customary, reasonable and necessary "out
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of pocket" costs and expenses other than Monthly Advances (including
reasonable attorneys' fees and disbursements) incurred in the performance by
the Company of its servicing obligations, including, but not limited to, the
cost of (a) the preservation, restoration and protection of the Mortgaged
Property, (b) any enforcement or judicial proceedings, including
foreclosures, (c) the management and liquidation of any REO Property and (d)
compliance with the obligations under Section 4.08.
Servicing Fee: With respect to each Mortgage Loan or REO Property,
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the amount of the monthly fee the Purchaser shall pay to the Company, which
shall, for a period of one full month, be equal to one-twelfth of the product
of (a) the Servicing Fee Rate and (b) the outstanding principal balance of
such Mortgage Loan or with respect to an REO Property, the outstanding
principal balance of the related Mortgage Loan immediately prior to its
conversion to REO Property, reduced by any amount applied as a reduction of
principal on the related Mortgage Loan in connection with such conversion.
Such fee shall be payable monthly, computed on the basis of the same
principal amount and period respecting which any related interest payment on
a Mortgage Loan is computed. The obligation of the Purchaser to pay the
Servicing Fee is limited to, and the Servicing Fee is payable solely from,
the interest portion (including recoveries with respect to interest from
Liquidation Proceeds, to the extent permitted by Section 4.05) of each
Monthly Payment collected by the Company, or as otherwise provided under
Section 4.05.
Servicing Fee Rate: With respect to each Mortgage Loan with an
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original term to maturity of 15 years, the Servicing Fee Rate shall equal a
rate per annum equal to the Mortgage Interest Rate minus 6.75%, provided
that, such rate shall not exceed 0.50% per annum or be less than 0.25% per
annum. With respect to each Mortgage Loan with an original term to maturity
of 30 years, the Servicing Fee Rate shall equal a rate per annum equal to the
Mortgage Interest Rate minus 7.00%, provided that, such rate shall not exceed
0.50% per annum or be less than 0.25% per annum.
Servicing File: With respect to each Mortgage Loan, the file
--------------
retained by the Company consisting of the items set forth on Exhibit B-2
attached hereto.
Servicing Officer: Any officer of the Company involved in or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished by the Company to the
Purchaser upon request, as such list may from time to time be amended.
Standard & Poor's: Standard & Poor's Ratings Services, or its
-----------------
successor in interest.
Stated Principal Balance: As to each Mortgage Loan, and
------------------------
Determination Date (i) the principal balance of the Mortgage Loan at the Cut-
off Date after giving effect to payments of principal due on or before such
date, whether or not received, minus (ii) all amounts previously distributed
to the Purchaser with respect to the related Mortgage Loan representing
payments or recoveries of principal and all Monthly Advances in lieu thereof.
Subservicer: Any Subservicer which is subservicing the Mortgage
-----------
Loans pursuant to a Subservicing Agreement. Any subservicer shall meet the
qualifications set forth in Section 4.01.
Subservicing Agreement: An agreement between the Company and a
----------------------
Subservicer for the servicing of the Mortgage Loans.
Trust Agreement: The Trust Agreement dated as of November 1, 1997
---------------
between the Depositor and the Trustee.
Trustee: The person designated as "Trustee" under the Trust
-------
Agreement, or its successor in interest or assigns.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES;
-----------------------------------------------------------
BOOKS AND RECORDS; CUSTODIAL AGREEMENT; DELIVERY OF DOCUMENTS
-------------------------------------------------------------
Section 2.01 Conveyance of Mortgage Loans; Possession of Mortgage
----------------------------------------------------
Files; Maintenance of Servicing Files.
----- -------------------------------
The Company, simultaneously with the execution and delivery of this
Agreement, does hereby sell, transfer, assign, set over and convey to the
Purchaser, without recourse, but subject to the terms of this Agreement, all
the right, title and interest of the Company in and to the Mortgage Loans,
including all interest and principal received on or with respect to the
Mortgage Loans (other than payments of principal and interest due on the
Mortgage Loans on or before the Cut-off Date). Pursuant to Section 2.03, the
Company has delivered the Mortgage Loan Documents to the Custodian.
The contents of each Servicing File are and shall be held in trust
by the Company for the benefit of the Purchaser as the owner thereof. The
possession of each Servicing File by the Company is at the will of the
Purchaser for the sole purpose of servicing the related Mortgage Loan, and
such retention and possession by the Company is in a custodial capacity only.
Upon the sale of the Mortgage Loans the ownership of each Mortgage Note, the
related Mortgage and the related Mortgage File and Servicing File shall vest
immediately in the Purchaser, and the ownership of all records and documents
with respect to the related Mortgage Loan prepared by or which come into the
possession of the Company shall vest immediately in the Purchaser and shall
be retained and maintained by the Company, in trust, at the will of the
Purchaser and only in such custodial capacity. Each Servicing File shall be
marked and identified as owned by the Purchaser and shall be easily retrieved
from other servicing files for mortgage loans which are not the Mortgage
Loans. The Company shall release its custody of the contents of any
Servicing File only in accordance with written instructions from the
Purchaser, unless such release is required as incidental to the Company's
servicing of the Mortgage Loans or is in connection with a repurchase of any
Mortgage Loan pursuant to Section 3.03 or 6.02.
Section 2.02 Books and Records; Transfers of Mortgage Loans.
----------------------------------------------
From and after the sale of the Mortgage Loans to the Purchaser all
rights arising out of the Mortgage Loans including but not limited to all
funds received by the Company on or in connection with the Mortgage Loans,
shall be received and held by the Company in trust for the benefit of the
Purchaser as owner of the Mortgage Loans, and the Company may, at the option
of the Purchaser retain record title to the related Mortgages for the sole
purpose of facilitating the servicing and the supervision of the servicing of
the Mortgage Loans.
The sale of each Mortgage Loan shall be reflected on the Company's
balance sheet and other financial statements as a sale of assets by the
Company. The Company shall be responsible for maintaining, and shall
maintain books and records for each Mortgage Loan, which may be in the form
of electronic media, and shall be marked clearly to reflect the ownership of
each Mortgage Loan by the Purchaser. To the extent that original documents
are not required for purposes of realization of Liquidation Proceeds or
Insurance Proceeds, documents maintained by the Company may be in the form of
microfilm or microfiche or such other reliable means of recreating
original documents, including but not limited to, optical imagery
techniques so long as the Company complies with the requirements of
the FNMA Selling and Servicing Guide, as amended from time to time.
The Company shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the
Company shall note on its books and records any transfers of Mortgage Loans.
No transfer of a Mortgage Loan may be made unless such transfer is in
compliance with the terms hereof. For the purposes of this Agreement, the
Company shall be under no obligation to deal with any person with respect to
this agreement or the Mortgage Loans unless the books and records show such
person as the owner of the Mortgage Loan. The Purchaser may, subject to the
terms of this Agreement, sell and transfer one or more of the Mortgage Loans,
provided, however, that (i) the transferee will not be deemed to be a
-------- -------
Purchaser hereunder binding upon the Company unless such transferee shall
agree in writing to be bound by the terms of this Agreement and a copy of the
instrument of transfer or assignment and assumption agreement executed by the
transferring Purchaser and by the transferee Purchaser shall have been
delivered to the Company; and (ii) no more than four (4) Persons at any given
time may have the status of "Purchaser" hereunder, unless otherwise consented
to by the Company, which consent shall not be unreasonably withheld. The
Purchaser also shall advise the Company of the transfer. Upon receipt of
notice of the transfer, the Company shall mark its books and records to
reflect the ownership of the Mortgage Loans of such assignee, and shall
release the previous Purchaser from its obligations hereunder with respect to
the Mortgage Loans sold or transferred.
Section 2.03 Custodial Agreement: Delivery of Documents.
-------------------------------------------
Pursuant to the Custodial Agreement delivered to the Purchaser
contemporaneously with the delivery of this Agreement, the Company shall
deliver and release to the Custodian, at least four (4) Business Days prior
to the Closing Date, those Mortgage Loan Documents as set forth on Exhibit B-
1.
The Custodian has certified its receipt of all such Mortgage Loan
Documents as evidenced by the Initial Certification of the Custodian in the
form annexed to the Custodial Agreement.
The Company shall forward to the Custodian original documents
evidencing an assumption, modification, consolidation or extension of any
Mortgage Loan entered into in accordance with Section 4.01 or 6.01 within 30
days of their execution, provided, however, that the Company shall provide to
the Custodian with a certified true copy certified by a servicing officer of
the Company of any such document submitted for recordation within 30 days of
its execution, and shall provide the original of any document submitted for
recordation within thirty days of receipt of such original recorded document
from the relevant public recording office.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
-------------------------------
REMEDIES AND BREACH
-------------------
Section 3.01 Company Representations and Warranties.
The Company represents and warrants to the Purchaser that as of the
Closing Date:
(a) Due Organization and Authority. The Company is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware 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 to conduct business of the type conducted
by the Company, and in any event the Company is in compliance with the laws
of any such state to the extent necessary to ensure the enforceability of the
related Mortgage Loan and the servicing of such Mortgage Loan in accordance
with the terms of this Agreement; the Company has the full corporate power
and authority to execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant to
this Agreement) by the Company and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this Agreement
evidences the valid, binding and enforceable obligation of the Company; and
all requisite corporate action has been taken by the Company to make this
Agreement valid and binding upon the Company in accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
---------------------------
transactions contemplated by this Agreement are in the ordinary course of
business of the Company, and the transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Company pursuant to this Agreement
are not subject to the bulk transfer or any similar statutory provisions in
effect in any applicable jurisdiction;
(c) No Conflicts. Neither the execution and delivery of this
------------
Agreement, the acquisition of the Mortgage Loans by the Company, the sale of
the Mortgage Loans to the Purchaser or the transactions contemplated hereby,
nor the fulfillment of or compliance with the terms and conditions of this
Agreement, will conflict with or result in a breach of any of the terms,
conditions or provisions of the Company's charter or by-laws or any legal
restriction or any agreement or instrument to which the Company is now a
party or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Company or its
property is subject, or impair the ability of the Purchaser to realize on the
Mortgage Loans, or impair the value of the Mortgage Loans;
(d) Ability to Service. The Company is an approved
------------------
seller/servicer of conventional residential mortgage loans for FNMA or FHLMC,
with the facilities, procedures, and experienced personnel necessary for the
sound servicing of mortgage loans of the same type as the Mortgage Loans.
The Company is in good standing to sell mortgage loans to and service
mortgage loans for FNMA or FHLMC, and no event has occurred, including but
not limited to a change in insurance coverage, which would make the Company
unable to comply with FNMA or FHLMC eligibility requirements or which
would require notification to either FNMA or FHLMC;
(e) Reasonable Servicing Fee. The Company acknowledges and agrees
------------------------
that the Servicing Fee, as calculated at the Servicing Fee Rate, represents
reasonable compensation for performing such services and that the entire
Servicing Fee shall be treated by the Company, for accounting and tax
purposes, as compensation for the servicing and administration of the
Mortgage Loans pursuant to this Agreement;
(f) Ability to Perform. The Company 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 Company is solvent and the sale of
the Mortgage Loans is not undertaken to hinder, delay or defraud any of the
Company's creditors;
(g) No Litigation Pending. There is no action, suit, proceeding
---------------------
or investigation pending or threatened against the Company 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 Company, or in any material impairment of the right or ability of the
Company to carry on its business substantially as now conducted, or in any
material liability on the part of the Company, or which would draw into
question the validity of this Agreement or the Mortgage Loans or of any
action taken or to be taken in connection with the obligations of the Company
contemplated herein, or which would be likely to impair materially the
ability of the Company to perform under the terms of this Agreement;
(h) No Consent Required. No consent, approval, authorization or
-------------------
order of any court or governmental agency or body is required for the
execution, delivery and performance by the Company of or compliance by the
Company with this Agreement or the sale of the Mortgage Loans as evidenced by
the consummation of the transactions contemplated by this Agreement, or if
required, such approval has been obtained prior to the Closing Date;
(i) Selection Process. The Mortgage Loans were selected from
-----------------
among the outstanding fixed rate one- to four- family mortgage loans in the
Company's portfolio at the Closing Date as to which the representations and
warranties set forth in Section 3.02 could be made and such selection was not
made in a manner so as to affect adversely the interests of the Purchaser;
(j) No Untrue Information. Neither this Agreement nor any
---------------------
statement, report or other document furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a fact
necessary to make the statements contained therein not misleading in any
material respect;
(k) Sale Treatment. The Company has determined that the
--------------
disposition of the Mortgage Loans pursuant to this Agreement will be afforded
sale treatment for accounting and tax purposes;
(l) Financial Statements. The Company has delivered to the
--------------------
Purchaser financial statements as to its last three complete fiscal years and
any later quarter ended more than 60 days prior to the execution of this
Agreement. All such financial statements fairly present the pertinent
results of operations and changes in financial position at the end of
each such period of the Company and its subsidiaries and have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set forth in
the notes thereto. There has been no change in the business, operations,
financial condition, properties or assets of the Company since the date of
the Company's financial statements that would have a material adverse effect
on its ability to perform its obligations under this Agreement;
(m) No Brokers' Fees. The Company has not dealt with any broker,
----------------
investment banker, agent or other person that may be entitled to any
commission or compensation in connection with the sale of the Mortgage Loans;
and
(n) Fair Consideration. The consideration received by the Company
------------------
upon the sale of the Mortgage Loans under this Agreement constitutes fair
consideration and reasonably equivalent value for the Mortgage Loans.
Section 3.02 Representations and Warranties Regarding Individual
---------------------------------------------------
Mortgage Loans.
--------------
As to each Mortgage Loan, the Company hereby represents and
warrants to the Purchaser that as of the Closing Date:
(a) Mortgage Loans as Described. The information set forth in the
---------------------------
Mortgage Loan Schedule is complete, true and correct in all material respects
as of the date specified in the Mortgage Loan Schedule.;
(b) Payments Current. All payments required to be made up to and
----------------
including October 1, 1997 for the Mortgage Loan under the terms of the
Mortgage Note have been made and credited. No payment required under the
Mortgage Loan has been delinquent at any time since the date the Mortgage
Loan was originated, with the exception of one delinquent Monthly Payment
with respect to the Mortgage Loans identified by numbers 8237984 and 8268955;
(c) No Outstanding Charges. There are no defaults in complying
----------------------
with the terms of the Mortgages, and all taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid prior to
any termination or penalty therefore, or an escrow of funds has been
established in an amount sufficient to pay for every such item which remains
unpaid and which has been assessed but is not yet due and payable. The
Company 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 under the Mortgage Loan,
except for interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage Loan proceeds, whichever is greater, to the day
which precedes by one month the Due Date of the first installment of
principal and interest;
(d) Original Terms Unmodified. The terms of the Mortgage Note and
-------------------------
Mortgage 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 interests of the holder of the Mortgage Loan, and which has been
delivered to the Custodian. The substance of any such waiver, alteration or
modification has been approved by the issuer of any related PMI Policy
and the title insurer, to the extent required by the policy, and its
terms are reflected on the Mortgage Loan Schedule. No Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement approved by the issuer of any related PMI Policy and the title
insurer, to the extent required by the policy, and which assumption agreement
is part of the Mortgage Loan File delivered to the Custodian and the terms of
which are reflected in the Mortgage Loan Schedule;
(e) No Defenses. The Mortgage Note and the Mortgage are not
-----------
subject to any right of rescission, set-off, counterclaim or defense,
including without limitation the defense of usury, nor will the operation of
any of the terms of the Mortgage Note or the Mortgage, or the exercise of any
right thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including without limitation the defense of
usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto, and no Mortgagor was a debtor in any
state or federal bankruptcy or insolvency proceeding at the time the Mortgage
Loan was originated;
(f) Hazard Insurance. Pursuant to the terms of the Mortgage, all
----------------
buildings or other improvements upon the Mortgaged Property are insured by a
generally acceptable insurer 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 4.10. If upon origination of the Mortgage Loan,
the Mortgaged Property was in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards (and
such flood insurance has been made available) a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration is in effect which policy conforms to the requirements of
Section 4.10. All individual insurance policies contain a standard mortgagee
clause naming the Company and its successors and assigns as mortgagee, and
all premiums thereon have been paid. The Mortgage obligates the Mortgagor
thereunder to maintain the hazard insurance policy at the Mortgagor's cost
and expense, and on the Mortgagor's failure to do so, authorizes the holder
of the Mortgage to obtain and maintain such insurance at such ▇▇▇▇▇▇▇▇▇'s
cost and expense, and to seek reimbursement therefor from the Mortgagor.
Where required by state law or regulation, the Mortgagor has been given an
opportunity to choose the carrier of the required hazard insurance, provided
the policy is not a "master" or "blanket" hazard insurance policy covering
the common facilities of a planned unit development. The hazard 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 Purchaser upon the consummation of the transactions contemplated by this
Agreement. The Company has not engaged in, and has no knowledge of the
Mortgagor's or any Subservicer's having engaged in, any act or omission which
would impair the coverage of any such policy, the benefits of the endorsement
provided for herein, or the validity and binding effect of either, including
without limitation, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or
realized by any attorney, firm or other person or entity, and no such
unlawful items have been received, retained or realized by the Company;
(g) Compliance with Applicable Laws. 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 the Mortgage
Loan have been complied with, and the Company shall maintain in its
possession, available for the Purchaser's inspection, and shall deliver
to the Purchaser upon demand, evidence of compliance with all such
requirements;
(h) No Satisfaction of Mortgage. The Mortgage has not been
---------------------------
satisfied, canceled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in
whole or in part, nor has any instrument been executed that would effect any
such release, cancellation, subordination or rescission. The Company has not
waived the performance by the Mortgagor of any action, if the Mortgagor's
failure to perform such action would cause the Mortgage Loan to be in
default, nor has the Company waived any default resulting from any action or
inaction by the Mortgagor;
(i) Location and Type of Mortgaged Property. The Mortgaged
---------------------------------------
Property is located in the state identified in the Mortgage Loan Schedule and
consists of a parcel of real property with a detached single family residence
erected thereon, or a two- to four-family dwelling, or an individual
condominium unit in a low-rise condominium project, or an individual unit in
a planned unit development, provided, however, that any condominium project
or planned unit development shall conform with the applicable underwriting
standards of the Seller which were in place at the time of the origination of
such Mortgage Loan, and no residence or dwelling is a mobile home or a
manufactured dwelling. As of origination, no portion of the Mortgaged
Property was used for commercial purposes;
(j) Valid First Lien. The Mortgage is a valid, subsisting and
----------------
enforceable and perfected first lien on the Mortgaged Property. The lien of
the Mortgage is subject only to:
(1) the lien of current real property taxes and assessments
not yet due and payable;
(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy
delivered to the originator of the Mortgage Loan and (i) referred to or
to otherwise considered in the appraisal made for the originator of the
Mortgage Loan or (ii) which do not adversely affect the Appraised Value
of the Mortgaged Property set forth in such appraisal; and
(3) 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 the mortgage or the use, enjoyment,
value or marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to
and delivered in connection with the Mortgage Loan establishes and creates a
valid, subsisting and enforceable first lien and first priority security
interest on the property described therein and the Company has full right to
sell and assign the same to the Purchaser. The Mortgaged Property was not,
as of the date of origination of the Mortgage Loan, subject to a mortgage,
deed of trust, deed to secured debt or other security instrument creating a
lien subordinate to the lien of the Mortgage;
(k) Pool Characteristics. As of the Cut-off Date, with respect to
--------------------
aggregate outstanding principal balance of all Mortgage Loans, (a) no more
than 0.9% are secured by real property improved by two- to four-family
dwellings, (b) no more than 4.6% are secured by real property improved by
individual condominium units, (c) no more than 18.1% are secured by real
property improved by an individual unit in a planned unit development, and
(d) at least 76.4% are secured by real property with a detached one-family
residence erected thereon. When measured by principal balance as of the Cut-
off Date, no more than 2.6% of the Mortgage Loans are secured by Mortgaged
Properties located in the same United States postal zip code; the Mortgage
Loans have a weighed average remaining term of 326 months. The average
principal balance of the Mortgage Loans on the Cut-off Date was $330,542. As
of the Cut-off Date, the Mortgage Loans have a weighted average FICO score of
735. As of the Cut-off Date, with respect to the aggregate unpaid principal
balance of the Mortgage Loans; (i) no more than 15.1% were originated
pursuant to the Seller's reduced documentation program; and (ii) at least
84.9% of the Mortgage Loans were originated under a full documentation
program. With respect to the aggregate unpaid balance of the Mortgage Loans
as of the Cut-off Date, and the occupancy status of the related Mortgaged
Properties at the time of origination, (i) not more than 0.7% of the
Mortgaged Properties were owner-occupied second homes; (ii) not more than
0.1% of the Mortgaged Properties were investor properties; and (iii) at
least 99.3% of the Mortgaged Properties were owner-occupied primary
residences. With respect to the aggregate unpaid principal balance of all the
Mortgage Loans as of the Cut-off Date, the Mortgaged Properties are located
as follows (i) 93.9% are located in California, with the remaining 6.1% being
geographically dispersed.
(l) Validity of Mortgage Documents. The Mortgage Note and the
------------------------------
Mortgage are genuine, and each is the legal, valid and binding obligation of
the maker thereof enforceable in accordance with its terms. All parties to
the Mortgage Note and the Mortgage and any other related agreement had legal
capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage and any other related agreement, and the
Mortgage Note and the Mortgage have been duly and properly executed by such
parties. The documents, instruments and agreements submitted for loan
underwriting were not falsified and contain no untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the information and statements therein not misleading. No
fraud was committed in connection with the origination of the Mortgage Loan;
(m) Full Disbursement of Proceeds. The proceeds of the Mortgage
-----------------------------
Loan have been fully disbursed and there is no requirement for future
advances thereunder, and any and all requirements as to completion of any on-
site or off-site improvement and as to disbursements of any escrow funds
therefor have been complied with, provided that, with respect to improvements
which can not be made as of the origination date because of weather related
reasons, an escrow fund sufficient to make such improvements is held by the
Company. All costs, fees and expenses incurred in making or closing the
Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor
is not entitled to any refund of any amounts paid or due under the Mortgage
Note or Mortgage;
(n) Ownership. The Company is the sole owner of record and holder
---------
of the Mortgage Loan. The Mortgage Loan is not assigned or pledged, and the
Company has good and marketable title thereto, and has full right to transfer
and sell the Mortgage Loan therein to the Purchaser free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest, and has full right and authority subject to no
interest or participation of, or agreement with, any other party, to sell and
assign each Mortgage Loan pursuant to this Agreement;
(o) Doing Business. All parties which have had any interest in
--------------
the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are
(or, during the period in which they held and disposed of such interest,
were) (1) in compliance with any and all applicable licensing requirements of
the laws of the state wherein the Mortgaged Property is located, and (2)
either (a) organized under the laws of such state, or (b) qualified to do
business in such state, or (c) federal savings and loan associations or
national banks having principal offices in such state, or (d) not doing
business in such state;
(p) LTV, PMI Policy. No Mortgage Loan has a LTV equal to or
---------------
greater than 95%. The original LTV of the Mortgage Loan either was not more
than 80% or there is a PMI Policy in effect which shall insure payment
defaults and which satisfies all of FNMA's requirements therefore and such
PMI Policy is issued by a primary mortgage insurer having a claims paying
ability rate acceptable to FNMA until the loan-to-value ratio of such
Mortgage Loan is reduced to 80%. All provisions of such PMI Policy have been
and are being complied with, such policy is in full force and effect, and all
premiums due thereunder have been paid. No action, inaction, or event has
occurred and no state of facts exists that has, or will result in the
exclusion from, denial of, or defense to coverage. Any Mortgage Loan subject
to a PMI Policy obligates the Mortgagor thereunder to maintain the PMI Policy
and to pay all premiums and charges in connection therewith. The Mortgage
Interest Rate for the Mortgage Loan as set forth on the Mortgage Loan
Schedule is net of any such insurance premium;
(q) Title Insurance. The Mortgage Loan is covered by either (i)
---------------
an attorney's opinion of title and abstract of title the form and substance
of which is acceptable to mortgage lending institutions making mortgage loans
in the area where the Mortgaged Property is located or (ii) an ALTA lender's
title insurance policy or other generally acceptable form of policy of
insurance acceptable to FNMA or FHLMC, issued by a title insurer acceptable
to FNMA or FHLMC and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the Company, its successors and
assigns, as to the first priority lien of the Mortgage in the original
principal amount of the Mortgage Loan, subject only to the exceptions
contained in clauses (1), (2) and (3) of paragraph (j) of this Section 3.02
and against any loss by reason of the invalidity or unenforceability of the
lien resulting from the provisions of the mortgage providing for adjustment
to the Mortgage Interest Rate and Monthly Payment. Where required by state
law or regulation, the Mortgagor has been given the opportunity to choose the
carrier of the required mortgage title insurance. Additionally, such
lender's title insurance policy affirmatively insures ingress and egress, and
against encroachments by or upon the Mortgaged Property or any interest
therein. The Company is the sole insured of such lender's title insurance
policy, and such lender's title insurance policy is in full force and effect
and will be in force and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such lender's
title insurance policy, and no prior holder of the Mortgage, including the
Company, has done, by act or omission, anything which would impair the
coverage of such lender's title insurance policy including without
limitation, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or
realized by any attorney, firm or other person or entity, and no such
unlawful items have been received, retained or realized by the Company;
(r) No Defaults. There is no default, breach, violation or event
-----------
of acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event
of acceleration, and neither the Company nor its predecessors have waived any
default, breach, violation or event of acceleration;
(s) No Mechanics' Liens. There are no mechanics' or similar liens
-------------------
or claims which have been filed for work, labor or material (and no rights
are outstanding that under the law could give rise to such liens) affecting
the related Mortgaged Property which are or may be liens prior to, or equal
or coordinate with, the lien of the related Mortgage;
(t) Location of Improvements; No Encroachments. All improvements
------------------------------------------
which were considered in determining the Appraised Value of the Mortgaged
Property lay wholly within the boundaries and building restriction lines of
the Mortgaged Property and 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;
(u) Origination: Payment Terms. At the time the Mortgage Loan
---------------------------
was originated, the originator was a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the
National Housing Act or a savings and loan association, a savings bank, a
commercial bank or similar banking institution which was supervised and
examined by a Federal or State authority or a mortgage banker or broker
licensed or authorized to do business in the jurisdiction in which the
related Mortgaged Property is located, applying the same standards and
procedures used by the Company in originating Mortgage Loans directly. The
Mortgage Interest Rate is fixed. The Mortgage Note is payable on the first
day of each month in equal monthly installments of principal and interest,
with interest calculated and payable in arrears, sufficient to amortize the
Mortgage Loan fully by the stated maturity date, over an original term of not
more than thirty years from commencement of amortization, with a principal
balance at origination of no more than $999,999 and no less than $31,500, and
a Stated Principal Balance of at least $31,114. Each Mortgage Loan has a
Mortgage Interest Rate of not less than 6.75% and not more than 8.75%. The
stated remaining term of the Mortgage Loan is between 172 and 360 months;
(v) Customary Provisions. The Mortgage contains customary and
--------------------
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged Property of
the benefits of the security provided thereby, including, (i) in the case of
a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. Upon default by a Mortgagor on a Mortgage
Loan and foreclosure on, or trustee's sale of, the Mortgaged Property
pursuant to the proper procedures, the holder of the Mortgage Loan will be
able to deliver good and merchantable title to the Mortgaged Property. There
is no homestead or other exemption available to a Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale
or the right to foreclose the Mortgage;
(w) Conformance with Underwriting Standards. The Mortgage Loans
---------------------------------------
were underwritten either in accordance with the Seller's underwriting
guidelines at the time that the Mortgage Loan was originated or in general
accordance with prudent secondary market standard underwriting guidelines.
(x) Occupancy of the Mortgaged Property. As of the origination
-----------------------------------
date the Mortgaged Property was lawfully occupied under applicable law. As
of the origination date, all inspections, licenses and certificates required
by applicable law to be made or issued with respect to all occupied portions
of the Mortgaged Property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities if required by such authorities for the use and occupancy of the
Mortgaged Property.
(y) No Additional Collateral. The Mortgage Note is not and has
------------------------
not been secured by any collateral except the lien of the corresponding
Mortgage and the security interest of any applicable security agreement or
chattel mortgage referred to in (j) above;
(z) Deeds of Trust. In the event the Mortgage constitutes a deed
--------------
of trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in the
Mortgage, and no fees or expenses are or will become payable by the
Purchasers to the trustee under the deed of trust, except in connection with
a trustee's sale after default by the Mortgagor;
(aa) Acceptable Investment. The Company has no knowledge of any
---------------------
circumstances or conditions with respect to the Mortgage, the Mortgaged
Property, the Mortgagor or the Mortgagor's credit standing that can
reasonably be expected to cause private institutional investors to regard the
Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to
become delinquent, or adversely affect the value or marketability of the
Mortgage Loan;
(bb) Delivery of Mortgage Documents. The Mortgage Note, the
------------------------------
Mortgage, the Assignment of Mortgage and any other documents set forth in
Exhibit B-1 have been delivered to the Custodian. The Company is in
possession of a complete, true and accurate Mortgage File in compliance with
Exhibit B-1, except for such documents the originals of which have been
delivered to the Custodian;
(cc) Condominiums/Planned Unit Developments. If the Mortgaged
--------------------------------------
Property is a condominium unit or a planned unit development (other than a de
minimus planned unit development) such condominium or planned unit
development project meets the Company's underwriting guidelines.
(dd) Transfer of Mortgage Loans. The Assignment of Mortgage is in
--------------------------
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located;
(ee) Due on Sale. The Mortgage contains an enforceable provision
-----------
for the acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event that the Mortgaged Property is sold or transferred
without the prior written consent of the mortgagee thereunder;
(ff) No Buydown Provisions; No Graduated Payments or Contingent
----------------------------------------------------------
Interests. The Mortgage Loan does not contain provisions pursuant to which
---------
Monthly Payments are paid or partially paid with funds deposited in any
separate account established by the Company, the Mortgagor or anyone on
behalf of the Mortgagor, or paid by any source other than the Mortgagor
nor does it contain any other similar provisions currently in effect
which may constitute a "buydown" provision. The Mortgage Loan is not a
graduated payment mortgage loan and the Mortgage Loan does not have a
shared appreciation or other contingent interest feature;
(gg) Consolidation of Future Advances. Any future advances made
--------------------------------
prior to the Cut-off Date have been consolidated with the outstanding
principal amount secured by the Mortgage, and the secured principal amount,
as consolidated, bears a single interest rate and single repayment term. The
lien of the Mortgage securing the consolidated principal amount is expressly
insured as having first lien priority by a title insurance policy, an
endorsement to the policy insuring the mortgagee's consolidated interest or
by other title evidence acceptable to FNMA and FHLMC. The consolidated
principal amount does not exceed the original principal amount of the
Mortgage Loan;
(hh) Mortgaged Property Undamaged. There is no proceeding, pending
----------------------------
or threatened, for the total or partial condemnation of the Mortgaged
Property. The Mortgaged Property is undamaged by waste, fire, earthquake or
earth movement, windstorm, flood, tornado or other casualty so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage
Loan or the use for which the premises were intended;
(ii) Collection Practices; Escrow Deposits. The origination and
-------------------------------------
collection practices used with respect to the Mortgage Loan have been in
accordance with Accepted Servicing Practices, and have been in all respects
in compliance with all applicable laws and regulations. With respect to
Mortgage Loans for which an Escrow Account is established, all escrow
deposits and Escrow Payments are in the possession of the Company and there
exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. With respect to
Mortgage Loans for which an Escrow Account is established, all Escrow
Payments have been collected in full compliance with state and federal law.
With respect to Mortgage Loans for which an Escrow Account is established, an
escrow of funds is not prohibited by applicable law and has been established
in an amount sufficient to pay for every item which remains unpaid and has
been assessed, but is not yet due and payable. No escrow deposits or Escrow
Payments or other charges or payments due the Company have been capitalized
under the Mortgage or the Mortgage Note;
(jj) Appraisal. The Mortgage File contains an appraisal of the
---------
related Mortgage Property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, duly appointed by the Company, 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 the Mortgage Loan, and the appraisal and appraiser
both satisfy the requirements of Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated;
(kk) Soldiers' and Sailors' Relief Act. The Mortgagor has not
---------------------------------
notified the Company, and the Company has no knowledge of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940;
(ll) Environmental Matters. To the Company's knowledge, the
---------------------
Mortgaged Property is free from any and all toxic or hazardous substances and
there exists no violation of any local, state or federal environmental law,
rule or regulation. To the Company's knowledge, there is no pending action or
proceeding directly involving any Mortgaged Property of which the Company is
aware in which compliance with any environmental law, rule or regulation is
an issue; and to the best of the Company's knowledge, nothing further remains
to be done to satisfy in full all requirements of each such law, rule or
regulation consisting a prerequisite to use and enjoyment of said property;
(mm) Prepayment Penalties. Each Mortgage Loan contains a
--------------------
Prepayment Penalty in an amount as specified in the related Mortgage Loan
Documents. The Prepayment Penalty shall be in effect for the first three
years after the origination date of each Mortgage Loan.
(nn) No Construction Loans. No Mortgage Loan was made in
---------------------
connection with (i) the construction or rehabilitation of a Mortgaged
Property or (ii) facilitating the trade-in or exchange of a Mortgaged
Property; (oo) No Denial of Insurance. No action, inaction, or event has
----------------------
occurred and no state of fact exists or has existed that has resulted or will
result in the exclusion from, denial of, or defense to coverage under any
applicable pool insurance policy, special hazard insurance policy, PMI Policy
or bankruptcy bond, irrespective of the cause of such failure of coverage.
In connection with the placement of any such insurance, no unlawful
commission, fee, or other compensation has been or will be received by the
Company or any designee of the Company or any corporation in which the
Company had a financial interest at the time of placement of such insurance;
and
(pp) Regarding the Mortgagor. The Mortgagor is one or more natural
-----------------------
persons and/or trustees for an Illinois land trust or a trustee under a
"living trust" and such "living trust" is in compliance with FNMA guidelines
for such trusts.
Section 3.03 Remedies for Breach of Representations and Warranties.
-----------------------------------------------------
It is understood and agreed that the representations and warranties
set forth in Sections 3.01 and 3.02 shall survive the sale of the Mortgage
Loans to the Purchaser and the delivery of the Mortgage Loan Documents to the
Custodian and shall inure to the benefit of the Purchaser, notwithstanding
any restrictive or qualified endorsement on any Mortgage Note or Assignment
of Mortgage or the examination or failure to examine any Mortgage File. Upon
discovery by either the Company or the Purchaser of a breach of any of the
foregoing representations and warranties which materially and adversely
affects the value of the Mortgage Loans or the interest of the Purchaser
therein, or which materially and adversely affects the interests of Purchaser
in the related Mortgage Loan in the case of a representation and warranty
relating to a particular Mortgage Loan (in the case of any of the foregoing,
a "Breach"), the party discovering such Breach shall give prompt written
------
notice to the other. In the event that the title policy insuring the lien of
any Mortgage does not run to the benefit of the Purchaser and its successors
and assigns; upon notice thereof, the Company shall pay for any necessary
title policy endorsement to provide that such title policy covers the
purchase and its successors and assigns.
Within 60 days of the earlier of either discovery by or notice to
the Company of any Breach of a representation or warranty, the Company
shall use its best efforts promptly to cure such Breach in all material
respects and, if such Breach cannot be cured, the Company shall,
at the Purchaser's option, repurchase such Mortgage Loan at the
Repurchase Price. In the event that a Breach shall involve any
representation or warranty set forth in Section 3.01, and such
Breach cannot be cured within 60 days of the earlier of either
discovery by or notice to the Company of such Breach, all of the affected
Mortgage Loans shall, at the Purchaser's option, be repurchased by the
Company at the Repurchase Price. However, if the Breach shall involve a
representation or warranty set forth in Section 3.02 and the Company
discovers or receives notice of any such Breach within two years of the
Closing Date, the Company shall, at the Company's option, rather than
repurchase the Mortgage Loan as provided above, remove such Mortgage Loan (a
"Deleted Mortgage Loan") and substitute in its place a Qualified Substitute
---------------------
Mortgage Loan or Loans, provided that any such substitution shall be effected
not later than two years after the Closing Date. Notwithstanding the
foregoing, no such substitution shall be made unless the Purchaser has
received an Opinion of Counsel (at the expense of the Company) that such
substitution will not adversely affect the status of any REMIC established in
connection with a Pass-Through Transfer as a REMIC or cause any such REMIC to
be deemed to have engaged in a "prohibited transaction" under the REMIC
provisions. Any repurchase of a Mortgage Loan or Loans pursuant to the
foregoing provisions of this Section 3.03 shall be accomplished by deposit in
the Custodial Account of the amount of the Repurchase Price for distribution
to Purchaser on the next scheduled Remittance Date, after deducting therefrom
any amount received in respect of such repurchased Mortgage Loan or Loans and
being held in the Custodial Account for future distribution.
At the time of repurchase or substitution, the Purchaser and the
Company shall arrange for the reassignment of the Deleted Mortgage Loan to
the Company and the delivery to the Company of any documents held by the
Custodian relating to the Deleted Mortgage Loan. In the event of a
repurchase or substitution, the Company shall, simultaneously with such
reassignment, give written notice to the Purchaser that such repurchase or
substitution has taken place, amend the Mortgage Loan Schedule to reflect the
withdrawal of the Deleted Mortgage Loan from this Agreement, and, in the case
of substitution, identify a Qualified Substitute Mortgage Loan and amend the
Mortgage Loan Schedule to reflect the addition of such Qualified Substitute
Mortgage Loan to this Agreement. In connection with any such substitution,
the Company shall be deemed to have made as to such Qualified Substitute
Mortgage Loan the representations and warranties set forth in this Agreement
except that all such representations and warranties set forth in this
Agreement shall be deemed made as of the date of such substitution. The
Company shall effect such substitution by delivering to the Custodian for
such Qualified Substitute Mortgage Loan the documents required by Section
2.03, with the Mortgage Note endorsed as required by Section 2.03. No
substitution will be made in any calendar month after the Determination Date
for such month. The Company shall deposit in the Custodial Account the
Monthly Payment less the Servicing Fee due on such Qualified Substitute
Mortgage Loan or Loans in the month following the date of such substitution.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in
the month of substitution shall be retained by the Company. For the month
of substitution, distributions to Purchaser shall include the Monthly Payment
due on any Deleted Mortgage Loan in the month of substitution, and the
Company shall thereafter be entitled to retain all amounts subsequently
received by the Company in respect of such Deleted Mortgage Loan.
For any month in which the Company substitutes a Qualified
Substitute Mortgage Loan for a Deleted Mortgage Loan, the Company shall
determine the amount (if any) by which the aggregate principal balance of
all Qualified Substitute Mortgage Loans as of the date of substitution
is less than the aggregate Stated Principal Balance of all Deleted
Mortgage Loans (after application of scheduled principal payments due in
the month of substitution). The amount of such shortfall shall be
distributed by the Company in the month of substitution pursuant to
Section 5.01. Accordingly, on the date of such substitution, the
Company shall deposit from its own funds into the Custodial
Account an amount equal to the amount of such shortfall.
It is understood and agreed that the obligations of the Company set
forth in this Section 3.03 to cure, substitute for or repurchase a defective
Mortgage Loan constitute the sole remedies of the Purchaser respecting a
Breach of the representations and warranties contained in Sections 3.01 and
3.02.
Any cause of action against the Company relating to or arising out
of the Breach of any representations and warranties made in Sections 3.01 and
3.02 shall accrue as to any Mortgage Loan upon (i) discovery of such Breach
by the Purchaser or notice thereof by the Company to the Purchaser, (ii)
failures by the Company to cure such Breach or repurchase such Mortgage Loan
as specified above, and (iii) demand upon the Company by the Purchaser for
compliance with this Agreement.
Section 3.04 Restrictions and Requirements Applicable in the
-----------------------------------------------
Event that a Mortgage Loan is Acquired by a REMIC.
--------------------------------------------------
In the event that any Mortgage Loan is held by a REMIC,
notwithstanding any contrary provision of this Agreement, the following
provisions shall apply:
The Company shall dispose of any REO Property as soon as possible
and shall sell such REO Property in any event within three years after title
has been taken to such REO Property, unless (i) the Master Servicer and the
Company shall have been supplied with an Opinion of Counsel to the effect
that the holding by the REMIC of such Mortgaged Property subsequent to such
three-year period (and specifying the period beyond such three-year period
for which the Mortgaged Property may be held) will not result in the
imposition of taxes on "prohibited transactions" of the REMIC as defined in
Section 860F of the Code, or cause the REMIC to fail to qualify as a REMIC,
in which case the REMIC may continue to hold such Mortgaged Property (subject
to any conditions contained in such Opinion of Counsel), or (ii) the Master
Servicer or the Company shall have applied for, prior to the expiration of
such three-year period, an extension of such three-year period in the manner
contemplated by Section 856(e)(3) of the Code, in which case the three-year
period shall be extended by the applicable period. If a period longer than
three years is permitted under the foregoing sentence and is necessary to
sell any REO Property, the Company shall report monthly to the Master
Servicer as to the progress being made in selling such REO Property.
Notwithstanding any other provision of this Agreement, no Mortgaged
Property held by a REMIC shall be rented (or allowed to continue to be
rented) or otherwise used for the production of income by or on behalf of the
REMIC or sold in such a manner or pursuant to any terms that would (i) cause
such Mortgaged Property to fail to qualify at any time as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code, (ii) subject
the REMIC to the imposition of any federal or state income taxes on "net
income from foreclosure property" with respect to such Mortgaged Property
within the meaning of 860G(c) of the Code, or (iii) cause the sale of such
Mortgaged Property to result in the receipt by the Trust of any income from
non-permitted assets as described in section 860F(a)(2)(B) of the Code,
unless the Company has agreed to indemnify and hold harmless the Trust with
respect to the imposition of any taxes.
Section 3.05 Repurchase of Delinquent Mortgage Loans
---------------------------------------
The Company, at its option, may (but is not obligated to)
repurchase from the Purchaser, on any date during a Prepayment Period, (a)
any Mortgage Loan that is delinquent in payment by three or more Monthly
Payments or (b) any Mortgage Loan with respect to which there has been
initiated legal action or other proceedings for the foreclosure of the
related Mortgaged Property either judicially or non-judicially. If it elects
to make any such repurchase, the Company shall repurchase such Mortgage Loan
with its own funds at a price equal to the Repurchase Price for such Mortgage
Loan.
Section 3.06 Repurchase of REO Properties
----------------------------
The Company, at its option, may (but is not obligated to)
repurchase from the Purchaser, on any date during a Prepayment Period any REO
Property. If it elects to make any such repurchase, the Company shall
purchase such REO Property with its own funds at a price equal to the
then fair market value for such REO Property, calculated on the basis of
the average of two independent appraisals (obtained at the expense of the
Company) of such REO Property.
Section 3.07 Purchaser Representations and Warranties.
----------------------------------------
The Purchaser represents and warrants to the Company that as of the
Closing Date:
(a) Due Organization and Authority. The Purchaser is a
------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all licenses necessary to carry on its
business as now being conducted; the Purchaser has the full corporate power
and authority to execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance of this
Agreement by the Purchaser and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this Agreement
evidences the valid, binding and enforceable obligation of the Purchaser; and
all requisite corporate action has been taken by the Purchaser to make this
Agreement valid and binding upon the Purchaser in accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
---------------------------
transactions contemplated by this Agreement are in the ordinary course of
business of the Purchaser, and the transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Purchaser pursuant to this Agreement
are not subject to the bulk transfer or any similar statutory provisions in
effect in any applicable jurisdiction;
(c) No Conflicts. Neither the execution and delivery of this
------------
Agreement, the acquisition of the Mortgage Loans by the Purchaser, or the
transactions contemplated hereby, nor the fulfillment of or compliance with
the terms and conditions of this Agreement, will conflict with or result in a
breach of any of the terms, conditions or provisions of the Purchaser's
charter or by-laws or any legal restriction or any agreement or instrument to
which the Purchaser is now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the foregoing, or result in
the violation of any law, rule, regulation, order, judgment or decree to
which the Purchaser or its property is subject;
(d) Ability to Perform. The Purchaser 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 Purchaser is solvent and the sale
of the Mortgage Loans is not undertaken to hinder, delay or defraud any of
the Purchaser's creditors;
(e) No Litigation Pending. There is no action, suit, proceeding
---------------------
or investigation pending or threatened against the Purchaser 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 Purchaser, or in any material impairment of the right or ability of
the Purchaser to carry on its business substantially as now conducted, or in
any material liability on the part of the Purchaser, or which would draw into
question the validity of this Agreement or of any action taken or to be taken
in connection with the obligations of the Purchaser contemplated herein, or
which would be likely to impair materially the ability of the Purchaser to
perform under the terms of this Agreement; and
(f) Sale Treatment. The Purchaser has determined that the
--------------
disposition of the Mortgage Loans pursuant to this Agreement will be afforded
sale treatment for accounting and tax purposes.
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
----------------------------------------------
Section 4.01 Company to Act as Servicer.
--------------------------
The Company, as an independent contractor, shall service and
administer the Mortgage 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 Company may deem necessary or desirable, consistent
with the terms of this Agreement and with Accepted Servicing Practices.
Consistent with the terms of this Agreement, the Company may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to
any Mortgagor if in the Company's reasonable and prudent determination such
waiver, modification, postponement or indulgence is not materially adverse to
the Purchasers, provided, however, that the Company shall not make any future
advances with respect to a Mortgage Loan and (unless the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment
of the Company, imminent and the Company has obtained the prior written
consent of the Purchaser) the Company shall not permit any modification with
respect to any Mortgage Loan that would change the Mortgage Interest Rate,
defer or forgive the payment of principal or interest, reduce or increase the
outstanding principal balance (except for actual payments of principal) or
change the final maturity date on such Mortgage Loan or would constitute an
alteration, substitution or release of any of the collateral securing a
Mortgage Loan other than in connection with a payment in full of the Mortgage
Loan. In the event of any such modification which permits the deferral of
interest or principal payments on any Mortgage Loan for which the Purchaser's
consent was not obtained, the Company shall, on the Business Day immediately
preceding the Remittance Date in any month in which any such principal or
interest payment has been deferred, deposit in the Custodial Account from its
own funds, in accordance with Section 5.03, the difference between (a) such
month's principal and one month's interest at the Mortgage Loan Remittance
Rate on the unpaid principal balance of such Mortgage Loan and (b) the amount
paid by the Mortgagor. The Company shall be entitled to reimbursement for
such advances to the same extent as for all other advances made pursuant to
Section 5.03. Without limiting the generality of the foregoing, the Company
shall continue, and is hereby authorized and empowered, to execute and
deliver on behalf of itself and the Purchasers, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and
all other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. If reasonably required by the Company,
the Purchaser shall furnish the Company with any powers of attorney and other
documents necessary or appropriate to enable the Company to carry out its
servicing and administrative duties under this Agreement.
In servicing and administering the Mortgage Loans, the Company
shall employ procedures (including collection procedures) and exercise the
same care that it customarily employs and exercises in servicing and
administering mortgage loans for its own account, giving due consideration to
Accepted Servicing Practices where such practices do not conflict with the
requirements of this Agreement.
The Mortgage Loans may be subserviced by the Subservicer on behalf
of the Company in accordance with the servicing provisions of this agreement,
provided that the Subservicer is a FNMA-approved lender or a FHLMC
seller/servicer in good standing, and no event has occurred, including but
not limited to a change in insurance coverage, which would make it unable to
comply with the eligibility requirements for lenders imposed by FNMA or for
seller/servicers imposed by FHLMC, or which would require notification to
FNMA or FHLMC. The Company may perform any of its servicing
responsibilities hereunder or may cause the Subservicer to perform
any such servicing responsibilities on its behalf, but the use
by the Company of the Subservicer shall not release the Company from
any of its obligations hereunder and the Company shall remain responsible
hereunder for all acts and omissions of the Subservicer as fully as if such
acts and omissions were those of the Company. The Company shall pay all fees
and expenses of the Subservicer from its own funds, and the Subservicer's fee
shall not exceed the Servicing Fee.
At the cost and expense of the Company, without any right of
reimbursement from the Custodial Account, the Company shall be entitled to
terminate the rights and responsibilities of the Subservicer and arrange for
any servicing responsibilities to be performed by a successor Subservicer
meeting the requirements in the preceding paragraph, provided, however, that
nothing contained herein shall be deemed to prevent or prohibit the Company,
at the Company's option, from electing to service the related Mortgage Loans
itself. In the event that the Company's responsibilities and duties under
this Agreement are terminated pursuant to Section 9.01 or 10.01, and if
requested to do so by the Purchaser, the Company shall at its own cost and
expense terminate the rights and responsibilities of the Subservicer as soon
as is reasonably possible. The Company shall pay all fees, expenses or
penalties necessary in order to terminate the rights and responsibilities of
the Subservicer from the Company's own funds without reimbursement from the
Purchaser.
Notwithstanding any of the provisions of this Agreement relating to
agreements or arrangements between the Company and the Subservicer or any
reference herein to actions taken through the Subservicer or otherwise, the
Company shall not be relieved of its obligations to the Purchaser and shall
be obligated to the same extent and under the same terms and conditions as if
it alone were servicing and administering the Mortgage Loans. The Company
shall be entitled to enter into an agreement with the Subservicer for
indemnification of the Company by the Subservicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
Any Subservicing Agreement and any other transactions or services
relating to the Mortgage Loans involving the Subservicer shall be deemed to
be between the Subservicer and Company alone, and the Purchaser shall have no
obligations, duties or liabilities with respect to the Subservicer including
no obligation, duty or liability of Purchaser to pay the Subservicer's fees
and expenses. For purposes of distributions and advances by the Company
pursuant to this Agreement, the Company shall be deemed to have received a
payment on a Mortgage Loan when the Subservicer has received such payment.
The Company shall maintain with respect to each Mortgage Loan and
shall make available for inspection during normal business hours upon
reasonable notice by the Purchaser or its designee the related Servicing File
during the time the Purchaser retains ownership of a Mortgage File and
thereafter in accordance with applicable laws and regulations.
Section 4.02 Liquidation of Mortgage Loans.
-----------------------------
In the event that any payment due under any Mortgage Loan and not
postponed pursuant to Section 4.01 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 Mortgage Loan and such failure continues beyond any
applicable grace period, the Company shall take such action as (1) the
Company would take under similar circumstances with respect to a similar
mortgage loan held for its own account for investment, (2) shall be
consistent with Accepted Servicing Practices, (3) the Company shall determine
prudently to be in the best interest of Purchaser, and (4) is consistent with
any related PMI Policy. In the event that any payment due under any Mortgage
Loan is not postponed pursuant to Section 4.01 and remains delinquent for a
period of 90 days or any other default continues for a period of 90 days
beyond the expiration of any grace or cure period, the Company shall commence
foreclosure proceedings. In such connection, the Company shall from its own
funds make all necessary and proper Servicing Advances, provided, however,
that the Company shall not be required to expend its own funds in connection
with any foreclosure or towards the restoration or preservation of any
Mortgaged Property, unless it shall determine (a) that such preservation,
restoration and/or foreclosure will increase the proceeds of liquidation of
the Mortgage Loan to Purchaser after reimbursement to itself for such
expenses and (b) that such expenses will be recoverable by it either through
Liquidation Proceeds (respecting which it shall have priority for purposes of
withdrawals from the Custodial Account pursuant to Section 4.05) or through
Insurance Proceeds (respecting which it shall have similar priority).
Notwithstanding anything to the contrary contained herein, in
connection with a foreclosure or acceptance of a deed in lieu of foreclosure,
in the event the Company has reasonable cause to believe that a Mortgaged
Property is contaminated by hazardous or toxic substances or wastes, or if
the Purchaser otherwise requests an environmental inspection or review of
such Mortgaged Property conducted by a qualified inspector shall be arranged
for by Company at Purchaser's expense. Upon completion of the inspection,
the Company shall promptly provide the Purchaser with a written report of the
environmental inspection.
After reviewing the environmental inspection report, the Purchaser
shall determine how the Company shall proceed with respect to the Mortgaged
Property. In the event (a) the environmental inspection report indicates
that the Mortgaged Property is contaminated by hazardous or toxic substances
or wastes and (b) the Purchaser directs the Company to proceed with
foreclosure or acceptance of a deed in lieu of foreclosure, the Company shall
be reimbursed for all reasonable costs associated with such foreclosure or
acceptance of a deed in lieu of foreclosure and any related environmental
clean up costs, as applicable, from the related Liquidation Proceeds, or if
the Liquidation Proceeds are insufficient to fully reimburse the Company, the
Company shall be entitled to be reimbursed from amounts in the Custodial
Account pursuant to Section 4.05 hereof. In the event the Purchaser directs
the Company not to proceed with foreclosure or acceptance of a deed in lieu
of foreclosure, the Company shall be reimbursed for all Servicing Advances
made with respect to the related Mortgaged Property from the Custodial
Account pursuant to Section 4.05 hereof.
Section 4.03 Collection of Mortgage Loan Payments.
------------------------------------
Continuously from the date hereof until the principal and interest
on all Mortgage Loans are paid in full, the Company shall proceed diligently
to collect all payments due under each of the Mortgage Loans when the same
shall become due and payable and shall take special care in ascertaining and
estimating Escrow Payments and all other charges that will become due and
payable with respect to the Mortgage Loan and the Mortgaged Property, to the
end that the installments payable by the Mortgagors will be sufficient to pay
such charges as and when they become due and payable.
Section 4.04 Establishment of and Deposits to Custodial Account.
--------------------------------------------------
The Company shall segregate and hold all funds collected and
received pursuant to a Mortgage Loan separate and apart from any of its own
funds and general assets and shall establish and maintain one or more
Custodial Accounts, in the form of time deposit or demand accounts, titled
"First Nationwide Mortgage Corporation in trust for the Purchaser of
Conventional Residential Fixed Rate Mortgage Loans, Group No. 1997-FN-01 and
various Mortgagors". The Custodial Account shall be established with a
Qualified Depository acceptable to the Purchaser. Any funds deposited in the
Custodial Account shall at all times be fully insured to the full extent
permitted under applicable law. Funds deposited in the Custodial Account may
be drawn on by the Company in accordance with Section 4.05. The creation of
any Custodial Account shall be evidenced by a certification in the form of
Exhibit D-1 hereto, in the case of an account established with the Company,
or by a letter agreement in the form of Exhibit D-2 hereto, in the case of an
account held by a depository other than the Company. A copy of such
certification or letter agreement shall be furnished to the Purchaser and,
upon request, to any subsequent Purchaser.
The Company shall deposit in the Custodial Account on a daily
basis, and retain therein, the following collections received by the Company
and payments made by the Company after the Cut-off Date, other than payments
of principal and interest due on or before the Cut-off Date:
(i) all payments on account of principal on the Mortgage Loans,
including all Principal Prepayments;
(ii) all payments on account of interest on the Mortgage Loans adjusted
to the Mortgage Loan Remittance Rate;
(iii) all Liquidation Proceeds;
(iv) all Insurance Proceeds including amounts required to be deposited
pursuant to Section 4.10 (other than proceeds to be held in the Escrow
Account and applied to the restoration or repair of the Mortgaged Property or
released to the Mortgagor in accordance with Section 4.14), Section 4.11 and
Section 4.15;
(v) all Condemnation Proceeds which are not applied to the restoration
or repair of the Mortgaged Property or released to the Mortgagor in
accordance with Section 4.14;
(vi) any amount required to be deposited in the Custodial Account
pursuant to Section 4.01, 4.09, 5.03, or 6.02;
(vii) any amounts payable in connection with the repurchase of any
Mortgage Loan pursuant to Section 3.03 and all amounts required to be
deposited by the Company in connection with a shortfall in principal amount
of any Qualified Substitute Mortgage Loan pursuant to Section 3.03;
(viii) with respect to each Principal Prepayment in full or in part,
the Prepayment Interest Shortfall Amount, if any, for the Principal
Prepayment Period. Such deposit shall be made from the Company's own funds,
without reimbursement therefor, up to a maximum amount per month of the
aggregate of the Servicing Fees (based, solely for purposes of this
calculation, on a Servicing Fee Rate equal to 0.25% per annum) actually
received for such month for the Mortgage Loans;
(ix) any amounts required to be deposited by the Company pursuant to
Section 4.11 in connection with the deductible clause in any blanket hazard
insurance policy; and
(x) any amounts received with respect to or related to any REO Property
and all REO Disposition Proceeds pursuant to Section 4.16.
The foregoing requirements for deposit into the Custodial Account
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, Ancillary Income need not be deposited by the
Company into the Custodial Account. Any interest paid on funds deposited in
the Custodial Account by the depository institution shall accrue to the
benefit of the Company and the Company shall be entitled to retain and
withdraw such interest from the Custodial Account pursuant to Section 4.05.
Section 4.05 Permitted Withdrawals From Custodial Account.
--------------------------------------------
The Company shall, from time to time, withdraw funds from the
Custodial Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the manner
provided for in Section 5.01;
(ii) to reimburse itself for Monthly Advances of the Company's funds
made pursuant to Section 5.03, the Company's right to reimburse itself
pursuant to this subclause (ii) being limited to amounts received on the
related Mortgage Loan which represent late payments of principal and/or
interest respecting which any such advance was made, it being understood
that, in the case of any such reimbursement, the Company's right thereto
shall be prior to the rights of Purchaser except where the Company is
required to repurchase a Mortgage Loan pursuant to Section 3.03 or 6.02, the
Company's right to such reimbursement shall be subsequent to the payment to
the Purchasers of the Repurchase Price pursuant to such sections and all
other amounts required to be paid to the Purchasers with respect to such
Mortgage Loan;
(iii) to reimburse itself for unreimbursed Servicing Advances, and
for any unpaid Servicing Fees, the Company's right to reimburse itself
pursuant to this subclause (iii) with respect to any Mortgage Loan being
limited to related Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Company from
the Mortgagor or otherwise relating to the Mortgage Loan, it being understood
that, in the case of any such reimbursement, the Company's right thereto
shall be prior to the rights of Purchaser, except that where the Company is
required to repurchase a Mortgage Loan pursuant to Section 3.03 or 6.02, in
which case the Company's right to such reimbursement shall be subsequent to
the payment to the Purchasers of the Repurchase Price pursuant to such
sections and all other amounts required to be paid to the Purchasers with
respect to such Mortgage Loan;
(iv) to reimburse itself, following a final liquidation of a Mortgage
Loan, for any outstanding Nonrecoverable Advances with respect to such
Mortgage Loan, not previously reimbursed pursuant to clause (ii) or clause
(iii) above, it being understood, in the case of any such reimbursement, that
such right thereto shall be prior to the rights of the Purchaser.
(v) to pay itself interest on funds deposited in the Custodial Account;
(vi) to reimburse itself for expenses incurred and reimbursable to it
pursuant to Section 8.01;
(vii) to pay any amount required to be paid pursuant to Section 4.16
related to any REO Property, it being understood that, in the case of any
such expenditure or withdrawal related to a particular REO Property, the
amount of such expenditure or withdrawal from the Custodial Account shall be
limited to amounts on deposit in the Custodial Account with respect to the
related REO Property;
(viii) to clear and terminate the Custodial Account upon the
termination of this Agreement.
In the event that the Custodial Account is interest bearing, on
each Remittance Date, the Company shall withdraw all funds from the Custodial
Account except for those amounts which, pursuant to Section 5.01, the Company
is not obligated to remit on such Remittance Date. The Company may use such
withdrawn funds only for the purposes described in this Section 4.05.
Section 4.06 Establishment of and Deposits to Escrow Account.
-----------------------------------------------
The Company shall segregate and hold all funds collected and
received pursuant to a Mortgage Loan constituting Escrow Payments separate
and apart from any of its own funds and general assets and shall establish
and maintain one or more Escrow Accounts, in the form of time deposit or
demand accounts, titled, "First Nationwide Mortgage Corporation, in trust for
the Purchaser of Conventional Residential Fixed Rate Mortgage Loans, Group
No. 1997-FN-01, and various Mortgagors". The Escrow Accounts shall be
established with a Qualified Depository, in a manner which shall provide
maximum available insurance thereunder. Funds deposited in the Escrow
Account may be drawn on by the Company in accordance with Section 4.07. The
creation of any Escrow Account shall be evidenced by a certification in the
form of Exhibit E-1 hereto, in the case of an account established with the
Company, or by a letter agreement in the form of Exhibit E-2 hereto, in the
case of an account held by a depository other than the Company. A copy of
such certification shall be furnished to the Purchaser and, upon request, to
any subsequent Purchaser.
The Company shall deposit in the Escrow Account or Accounts on a
daily basis, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage Loans, for
the purpose of effecting timely payment of any such items as required under
the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or Condemnation
Proceeds which are to be applied to the restoration or repair of any
Mortgaged Property.
The Company shall make withdrawals from the Escrow Account only to
effect such payments as are required under this Agreement, as set forth in
Section 4.07. The Company shall be entitled to retain any interest paid on
funds deposited in the Escrow Account by the depository institution, other
than interest on escrowed funds required by law to be paid to the Mortgagor.
To the extent required by law, the Company shall pay interest on escrowed
funds to the Mortgagor notwithstanding that the Escrow Account may be non-
interest bearing or that interest paid thereon is insufficient for such
purposes.
Section 4.07 Permitted Withdrawals From Escrow Account.
-----------------------------------------
Withdrawals from the Escrow Account or Accounts may be made by the
Company only:
(i) to effect timely payments of ground rents, taxes, assessments,
water rates, mortgage insurance premiums, condominium charges, fire and
hazard insurance premiums or other items constituting Escrow Payments for the
related Mortgage;
(ii) to reimburse the Company for any Servicing Advances made by the
Company pursuant to Section 4.08 with respect to a related Mortgage Loan, but
only from amounts received on the related Mortgage Loan which represent late
collections of Escrow Payments thereunder;
(iii) to refund to any Mortgagor any funds found to be in excess of
the amounts required under the terms of the related Mortgage Loan;
(iv) for transfer to the Custodial Account and application to reduce the
principal balance of the Mortgage Loan in accordance with the terms of the
related Mortgage and Mortgage Note;
(v) for application to restoration or repair of the Mortgaged Property
in accordance with the procedures outlined in Section 4.14;
(vi) to pay to the Company, or any Mortgagor to the extent required by
law, any interest paid on the funds deposited in the Escrow Account; and
(vii) to clear and terminate the Escrow Account on the termination
of this Agreement.
Section 4.08 Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
With respect to each Mortgage Loan, the Company shall maintain
accurate records reflecting the status of ground rents and taxes and any
other item which may become a lien senior to the lien of the related Mortgage
and the status of PMI Policy premiums and fire and hazard insurance coverage
and shall obtain, from time to time, all bills for the payment of such
charges (including renewal premiums) and shall effect or cause to be effected
payment thereof prior to the applicable penalty or termination date. To the
extent that a Mortgage does not provide for Escrow Payments, the Company
shall determine that any such payments are made by the Mortgagor prior to the
applicable penalty or termination date. The Company assumes full
responsibility for (a) the timely payment of all such bills and shall effect
timely payment of all such charges irrespective of each Mortgagor's faithful
performance in the payment of same or the making of the Escrow Payments, and
the Company shall make Servicing Advances from its own funds to effect such
payments and (b) any penalties or late charges incurred in connection with
such bills and any other charges (including, without limitation, assessments,
water rates or sewer rents) which may become a lien against the Mortgaged
Property without reimbursement therefore.
Section 4.09 Protection of Accounts.
----------------------
The Company may transfer the Custodial Account or the Escrow
Account to a different Qualified Depository from time to time. Such transfer
shall be made only upon obtaining the consent of the Purchaser, which consent
shall not be withheld unreasonably.
The Company shall bear any expenses, losses or damages sustained by
the Purchaser because the Custodial Account and/or the Escrow Account are not
demand deposit accounts.
Amounts on deposit in the Custodial Account and the Escrow Account
may at the option of the Company be invested in Eligible Investments;
provided that in the event that amounts on deposit in the Custodial Account
or the Escrow Account exceed the amount fully insured by the FDIC (the
"Insured Amount") the Company shall be obligated to invest the excess amount
--------------
over the Insured Amount in Eligible Investments on the same
Business Day as such excess amount becomes present in the Custodial Account
or the Escrow Account. Any such Eligible Investment shall mature no later
than the Determination Date next following the date of such Eligible
Investment, provided, however, that if such Eligible Investment is an
obligation of a Qualified Depository (other than the Company) that maintains
the Custodial Account or the Escrow Account, then such Eligible Investment
may mature on such Remittance Date. Any such Eligible Investment shall be
made in the name of the Company in trust for the benefit of the Purchaser.
All income on or gain realized from any such Eligible Investment shall be for
the benefit of the Company and may be withdrawn at any time by the Company.
Any losses incurred in respect of any such investment shall be deposited in
the Custodial Account or the Escrow Account, by the Company out of its own
funds immediately as realized.
Section 4.10. Maintenance of Hazard Insurance.
-------------------------------
The Company shall cause to be maintained for each Mortgage Loan
hazard insurance such that all buildings upon the Mortgaged Property are
insured by a generally acceptable insurer rated either A:VI or better in the
current Best's Key Rating Guide ("Best's") or acceptable to FNMA and/or FHLMC
------
against loss by fire, hazards of extended coverage and such other hazards as
are customary in the area where the Mortgaged Property is located, in an
amount which is at least equal to the lesser of (i) the maximum insurable
value of the improvements securing such Mortgage Loan and (ii) the greater of
(a) the outstanding principal balance of the Mortgage Loan and (b) an amount
such that the proceeds thereof shall be sufficient to prevent the Mortgagor
or the loss payee from becoming a co-insurer.
If upon origination of the Mortgage Loan, the related Mortgaged
Property was located in an area identified in the Federal Register by the
Flood Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available) a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance
Administration is in effect with a generally acceptable insurance carrier
rated A:VI in Best's or acceptable to FNMA and/or FHLMC in an amount
representing coverage equal to the lesser of (i) the minimum amount required,
under the terms of coverage, to compensate for any damage or loss on a
replacement cost basis (or the unpaid balance of the mortgage if replacement
cost coverage is not available for the type of building insured) and (ii) the
maximum amount of insurance which is available under the Flood Disaster
Protection Act of 1973, as amended. If at any time during the term of the
Mortgage Loan, the Company determines in accordance with applicable law and
pursuant to the FNMA Guides that a Mortgaged Property is located in a special
flood hazard area and is not covered by flood insurance or is covered in an
amount less than the amount required by the Flood Disaster Protection Act of
1973, as amended, the Company shall notify the related Mortgagor that the
Mortgagor must obtain such flood insurance coverage, and if said Mortgagor
fails to obtain the required flood insurance coverage within forty-five (45)
days after such notification, the Company shall immediately force place the
required flood insurance on the Mortgagor's behalf.
If a Mortgage is secured by a unit in a condominium project, the
Company shall verify that the coverage required of the owner's association,
including hazard, flood, liability, and fidelity coverage, is being
maintained in accordance with then current FNMA or FHLMC requirements, and
secure from the owner's association its agreement to notify the Company
promptly of any change in the insurance coverage or of any condemnation or
casualty loss that may have a material effect on the value of the Mortgaged
Property as security.
The Company shall cause to be maintained on each Mortgaged Property
such other additional special hazard insurance as may be required pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance, or pursuant to the requirements of
any PMI Policy insurer, or as may be required to conform with Accepted
Servicing Practices.
All policies required hereunder shall name the Company as loss
payee and shall be endorsed with standard or union mortgagee clauses, without
contribution, which shall provide for at least 30 days prior written notice
of any cancellation, reduction in amount or material change in coverage.
The Company shall not interfere with the Mortgagor's freedom of
choice in selecting either his insurance carrier or agent, provided, however,
that the Company shall not accept any such insurance policies from insurance
companies unless such companies are rated A:VI in Best's or acceptable FNMA
and/or FHLMC and are licensed to do business in the jurisdiction in which the
Mortgaged Property is located. The Company shall determine that such
policies provide sufficient risk coverage and amounts, that they insure the
property owner, and that they properly describe the property address.
Pursuant to Section 4.04, any amounts collected by the Company
under any such policies (other than amounts to be deposited in the Escrow
Account and applied to the restoration or repair of the related Mortgaged
Property, or property acquired in liquidation of the Mortgage Loan, or to be
released to the Mortgagor, in accordance with the Company's normal servicing
procedures as specified in Section 4.14) shall be deposited in the Custodial
Account subject to withdrawal pursuant to Section 4.05.
Section 4.11 Maintenance of Mortgage Impairment Insurance.
--------------------------------------------
In the event that the Company shall obtain and maintain a blanket
policy insuring against losses arising from fire and hazards covered under
extended coverage on all of the Mortgage Loans, then, to the extent such
policy provides coverage in an amount equal to the amount required pursuant
to Section 4.10 and otherwise complies with all other requirements of Section
4.10, it shall conclusively be deemed to have satisfied its obligations as
set forth in Section 4.10. Any amounts collected by the Company under any
such policy relating to a Mortgage Loan shall be deposited in the Custodial
Account subject to withdrawal pursuant to Section 4.05. Such policy may
contain a deductible clause, in which case, in the event that there shall not
have been maintained on the related Mortgaged Property a policy complying
with Section 4.10, and there shall have been a loss which would have been
covered by such policy, the Company shall deposit in the Custodial Account at
the time of such loss the amount not otherwise payable under the blanket
policy because of such deductible clause, such amount to deposited from the
Company's funds, without reimbursement therefor. Upon request of any
Purchaser, the Company shall cause to be delivered to such Purchaser a
certified true copy of such policy and a statement from the insurer
thereunder that such policy shall in no event be terminated or materially
modified without 30 days' prior written notice to such Purchaser.
Section 4.12 Maintenance of Fidelity Bond and
--------------------------------
Errors and Omissions Insurance.
------------------------------
The Company shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance
Policy, with broad coverage on all officers, employees or other persons
acting in any capacity requiring such persons to handle funds, money,
documents or papers relating to the Mortgage Loans ("Company Employees").
-----------------
Any such Fidelity Bond and Errors and Omissions Insurance Policy shall be in
the form of the Financial Institution Bond Form 22 - Fidelity Bond American
International Specialty Lines Insurance Policy Form ("5713) 5/93") Mortgage
Banker Broker E&O and shall protect and insure the Company against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Company Employees. Such Fidelity Bond and Errors and
Omissions Insurance Policy also shall protect and insure the Company against
losses in connection with the release or satisfaction of a Mortgage Loan
without having obtained payment in full of the indebtedness secured thereby.
No provision of this Section 4.12 requiring such Fidelity Bond and Errors and
Omissions Insurance Policy shall diminish or relieve the Company from its
duties and obligations as set forth in this Agreement. The minimum coverage
under any such bond and insurance policy shall be at least equal to the
corresponding amounts required by FNMA. Upon the request of any Purchaser,
the Company shall cause to be delivered to such Purchaser a certificate of
insurance of the insurer and the surety including a statement from the surety
and the insurer that such fidelity bond and insurance policy shall in no
event be terminated or materially modified without 30 days' prior written
notice to the Purchaser.
Section 4.13 Inspections.
-----------
The Company shall inspect the Mortgaged Property as often as deemed
necessary by the Company to assure itself that the value of the Mortgaged
Property is being preserved. In addition, if any Mortgage Loan is more than
60 days delinquent, the Company immediately shall inspect the Mortgaged
Property and shall conduct subsequent inspections in accordance with Accepted
Servicing Practices or as may be required by the primary mortgage guaranty
insurer. The Company shall keep a written or electronic report of each such
inspection.
Section 4.14 Restoration of Mortgaged Property.
---------------------------------
The Company need not obtain the approval of the Purchaser prior to
releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to
be applied to the restoration or repair of the Mortgaged Property if such
release is in accordance with Accepted Servicing Practices. At a minimum,
the Company shall comply with the following conditions in connection with any
such release of Insurance Proceeds or Condemnation Proceeds:
(i) the Company shall receive satisfactory independent verification of
completion of repairs and issuance of any required approvals with respect
thereto;
(ii) the Company shall take all steps necessary to preserve the priority
of the lien of the Mortgage, including, but not limited to requiring waivers
with respect to mechanics' and materialmen's liens;
(iii) if the Mortgage Loan is not included in a Pass-Through
Transfer, the Company shall verify that the Mortgage Loan is not in default;
and
(iv) pending repairs or restoration, the Company shall place the
Insurance Proceeds or Condemnation Proceeds in the Escrow Account.
If the Purchaser is named as an additional loss payee, the Company
is hereby empowered to endorse any loss draft issued in respect of such a
claim in the name of the Purchaser.
Section 4.15 Maintenance of PMI Policy; Claims.
---------------------------------
With respect to each Mortgage Loan with a LTV in excess of 80%, the
Company shall, without any cost to the Purchaser, maintain or cause the
Mortgagor to maintain in full force and effect a PMI Policy insuring that
portion of the Mortgage Loan in excess of 75% of value, and shall pay or
shall cause the Mortgagor to pay the premium thereon on a timely basis, until
the LTV of such Mortgage Loan is reduced to 80%. In the event that such PMI
Policy shall be terminated, the Company shall obtain from another Qualified
Insurer a comparable replacement policy, with a total coverage equal to the
remaining coverage of such terminated PMI Policy. If the insurer shall cease
to be a Qualified Insurer, the Company shall determine whether recoveries
under the PMI Policy are jeopardized for reasons related to the financial
condition of such insurer, it being understood that the Company shall in no
event have any responsibility or liability for any failure to recover under
the PMI Policy for such reason. If the Company determines that recoveries
are so jeopardized, it shall notify the Purchaser and the Mortgagor, if
required, and obtain from another Qualified Insurer a replacement insurance
policy. The Company shall not take any action which would result in
noncoverage under any applicable PMI Policy of any loss which, but for the
actions of the Company would have been covered thereunder. In connection
with any assumption or substitution agreement entered into or to be entered
into pursuant to Section 6.01, the Company shall promptly notify the insurer
under the related PMI Policy, if any, of such assumption or substitution of
liability in accordance with the terms of such PMI Policy and shall take all
actions which may be required by such insurer as a condition to the
continuation of coverage under such PMI Policy. If such PMI Policy is
terminated as a result of such assumption or substitution of liability, the
Company shall obtain a replacement PMI Policy as provided above.
In connection with its activities as servicer, the Company agrees
to prepare and present, on behalf of itself and the Purchaser, claims to the
insurer under any PMI Policy in a timely fashion in accordance with the terms
of such PMI Policy and, in this regard, to take such action as shall be
necessary to permit recovery under any PMI Policy respecting a defaulted
Mortgage Loan. Pursuant to Section 4.04, any amounts collected by the
Company under any PMI Policy shall be deposited in the Custodial Account,
subject to withdrawal pursuant to Section 4.05.
Section 4.16 Title, Management and Disposition of REO Property.
-------------------------------------------------
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be taken in the name of the Purchaser, or in the event the
Purchaser is not authorized or permitted to hold title to real property in
the state where the REO Property is located, or would be adversely affected
under the "doing business" or tax laws of such state by so holding title, the
deed or certificate of sale shall be taken in the name of such Person or
Persons as shall be consistent with an opinion of counsel obtained by the
Company from any attorney duly licensed to practice law in the state where
the REO Property is located. The Person or Persons holding such title other
than the Purchaser shall acknowledge in writing that such title is being held
as nominee for the Purchaser.
The Purchaser shall furnish the Servicer, upon written request,
with any powers of attorney empowering the Servicer or any Subservicer to
execute and deliver instruments of satisfaction or cancellation or of partial
or full release or discharge or to foreclose upon or otherwise liquidate
Mortgaged Property in accordance with the provision hereof, and shall execute
and deliver such other documents as the Servicer may reasonably request and
which are necessary or appropriate to enable the Servicer to service and
administer the Mortgage Loans and to carry out its duties hereunder.
The Company shall manage, conserve, protect and operate each REO
Property for the Purchaser solely for the purpose of its prompt disposition
and sale. The Company, either itself or through an agent selected by the
Company, shall manage, conserve, protect and operate the REO Property in the
same manner that it manages, conserves, protects and operates other
foreclosed property for its own account, and in the same manner that similar
property in the same locality as the REO Property is managed. The Company
shall attempt to sell the same (and may temporarily rent the same for a
period not greater than one year, except as otherwise provided below) on such
terms and conditions as the Company deems to be in the best interest of the
Purchaser.
The Company shall use its best efforts to dispose of the REO
Property as soon as possible and shall sell such REO Property in any event
within one year after title has been taken to such REO Property, unless (i)
(A) a REMIC election has not been made with respect to the arrangement under
which the Mortgage Loans and the REO Property are held, and (ii) the Company
determines, and gives an appropriate notice to the Purchaser to such effect,
that a longer period is necessary for the orderly liquidation of such REO
Property. If a period longer than one year is permitted under the foregoing
sentence and is necessary to sell any REO Property, (i) the Company shall
report monthly to the Purchaser as to the progress being made in selling such
REO Property and (ii) if, with the written consent of the Purchaser, a
purchase money mortgage is taken in connection with such sale, such purchase
money mortgage shall name the Company as mortgagee, and such purchase money
mortgage shall not be held pursuant to this Agreement, but instead a separate
participation agreement among the Company and Purchaser shall be entered into
with respect to such purchase money mortgage.
The Company shall also maintain on each REO Property fire and
hazard insurance with extended coverage in amount which is at least equal to
the maximum insurable value of the improvements which are a part of such
property, liability insurance and, to the extent required and available
under the Flood Disaster Protection Act of 1973, as amended, flood
insurance in the amount required above.
The disposition of REO Property shall be carried out by the Company
at such price, and upon such terms and conditions, as the Company deems to be
in the best interests of the Purchaser. The proceeds of sale of the REO
Property shall be promptly deposited in the Custodial Account. As soon as
practical thereafter the expenses of such sale shall be paid and the Company
shall reimburse itself for any related unreimbursed Servicing Advances,
unpaid Servicing Fees, unreimbursed Monthly Advances made pursuant to Section
5.03, and a one time REO Property disposition fee of $800 for each REO
Property sold hereunder. On the Remittance Date immediately following the
Principal Prepayment Period in which such sale proceeds are received the net
cash proceeds of such sale remaining in the Custodial Account shall be
distributed to the Purchaser.
The Company shall withdraw the Custodial Account funds necessary
for the proper operation, management and maintenance of the REO Property,
including the cost of maintaining any hazard insurance pursuant to Section
4.10 and the fees of any managing agent of the Company, a Subservicer, or the
Company itself. The REO management fee shall be an amount that is reasonable
and customary in the area where the Mortgaged Property is located. The
Company shall make monthly distributions on each Remittance Date to the
Purchasers of the net cash flow from the REO Property (which shall equal the
revenues from such REO Property net of the expenses described in this Section
4.16 and of any reserves reasonably required from time to time to be
maintained to satisfy anticipated liabilities for such expenses).
Section 4.17 Real Estate Owned Reports.
-------------------------
Together with the statement furnished pursuant to Section 5.02, the
Company shall furnish to the Purchaser on or before the Remittance Date each
month a statement with respect to any REO Property covering the operation of
such REO Property for the previous month and the Company's efforts in
connection with the sale of such REO Property and any rental of such REO
Property incidental to the sale thereof for the previous month. That
statement shall be accompanied by such other information as the Purchaser
shall reasonably request.
Section 4.18 Liquidation Reports.
-------------------
Upon the foreclosure sale of any Mortgaged Property or the
acquisition thereof by the Purchaser pursuant to a deed in lieu of
foreclosure, the Company shall submit to the Purchaser a liquidation report
with respect to such Mortgaged Property.
Section 4.19 Reports of Foreclosures and Abandonments
----------------------------------------
of Mortgaged Property.
---------------------
Following the foreclosure sale or abandonment of any Mortgaged
Property, the Company shall report such foreclosure or abandonment as
required pursuant to Section 6050J of the Code.
ARTICLE V
PAYMENTS TO PURCHASER
---------------------
Section 5.01 Remittances.
-----------
On each Remittance Date the Company shall remit by wire transfer of
immediately available funds to the Purchaser (a) all amounts deposited in the
Custodial Account as of the close of business on the Determination Date (net
of charges against or withdrawals from the Custodial Account pursuant to
Section 4.05), plus (b) all Monthly Advances, if any, which the Company is
obligated to distribute pursuant to Section 5.03, minus (c) any amounts
attributable to Principal Prepayments received after the applicable Principal
Prepayment Period which amounts shall be remitted on the following Remittance
Date, together with any additional interest required to be deposited in the
Custodial Account in connection with such Principal Prepayment in accordance
with Section 4.04(viii), and minus (d) any amounts attributable to Monthly
Payments collected but due on a Due Date or Dates subsequent to the first day
of the month of the Remittance Date, which amounts shall be remitted on the
Remittance Date next succeeding the Due Period for such amounts.
With respect to any remittance received by the Purchaser after the
second Business Day following the Business Day on which such payment was due,
the Company shall pay to the Purchaser interest on any such late payment at
an annual rate equal to the Prime Rate, adjusted as of the date of each
change, plus three percentage points, but in no event greater than the
maximum amount permitted by applicable law. Such interest shall be deposited
in the Custodial Account by the Company on the date such late payment is made
and shall cover the period commencing with the day following such second
Business Day and ending with the Business Day on which such payment is made,
both inclusive. Such interest shall be remitted along with the distribution
payable on the next succeeding Remittance Date. The payment by the Company
of any such interest shall not be deemed an extension of time for payment or
a waiver of any Event of Default by the Company.
Section 5.02 Statements to Purchaser.
-----------------------
Not later than the Remittance Date, the Company shall furnish to
the Purchaser a Monthly Remittance Advice, with a trial balance report
attached thereto, in the form of Exhibit F annexed hereto in hard copy and
electronic medium mutually acceptable to the parties as to the preceding
remittance and the period ending on the preceding Determination Date.
In addition, not more than 60 days after the end of each calendar
year, the Company shall furnish to each Person who was a Purchaser at any
time during such calendar year an annual statement in accordance with the
requirements of applicable federal income tax law as to the aggregate of
remittances for the applicable portion of such year.
Such obligation of the Company shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Company pursuant to any requirements of the Internal Revenue
Code as from time to time are in force.
The Company shall prepare any and all tax, information statements
or other filings required to be delivered to any governmental taxing
authority or to any Purchaser pursuant to any applicable law with respect
to the Mortgage Loans and the transactions contemplated hereby. In
addition, the Company shall provide each Purchaser with such information
concerning the Mortgage Loans as is necessary for such Purchaser to
prepare its federal income tax return as any Purchaser may reasonably
request from time to time.
Notwithstanding anything herein to the contrary, with respect to
any Mortgage Loan which is held by a REMIC, the Company shall not be required
to prepare or file any tax return for the REMIC.
Section 5.03 Monthly Advances by Company.
---------------------------
On the Business Day immediately preceding each Remittance Date, the
Company shall deposit in the Custodial Account from its own funds an amount
equal to all Monthly Payments (with interest adjusted to the Mortgage Loan
Remittance Rate) which were due on the Mortgage Loans during the applicable
Due Period and which were delinquent at the close of business on the
immediately preceding Determination Date or which were deferred pursuant to
Section 4.01. The Company's obligation to make such Monthly Advances as to
any Mortgage Loan will continue through the last Monthly Payment due prior to
the payment in full of the Mortgage Loan, or through the last Remittance Date
prior to the Remittance Date for the distribution of all Liquidation Proceeds
and other payments or recoveries (including Insurance Proceeds and
Condemnation Proceeds) with respect to the Mortgage Loan.
The Servicer shall be obligated to make Monthly Advances in
accordance with the provisions of this Agreement; provided however, that such
obligation with respect to any Mortgage Loan shall cease if the Servicer
determines, in its reasonable opinion, that Monthly Advances with respect to
such Mortgage Loan are Nonrecoverable Advances. In the event that the
Servicer determines that any such advances are Nonrecoverable Advances, the
Servicer shall provide the Purchaser with a certificate signed by two
Servicing Officers evidencing such determination.
If a Monthly Advance is required hereunder, the Company shall on
the Remittance Date immediately following the related Determination Date
either (i) deposit in the Custodial Account an amount equal to such Monthly
Advance, (ii) cause to be made an appropriate entry in the records of the
Custodial Account that funds in such account being held for future
distribution or withdrawal have been, as permitted by this Section 5.03, used
by the Company to make such Monthly Advance and remit such funds to the
Purchaser or (iii) make Monthly Advances in the form of any combination of
clauses (i) and (ii) aggregating the amount of such Monthly Advance. Any
funds being held in the Custodial Account for future distribution to
Purchaser and so used shall be replaced by the Company from its own funds by
deposit in the Custodial Account on or before any future Remittance Date in
which such funds would be due to the Purchaser.
ARTICLE VI
GENERAL SERVICING PROCEDURES
----------------------------
Section 6.0l Transfers of Mortgaged Property.
-------------------------------
The Company shall use its best efforts to enforce any "due-on-sale"
provision contained in any Mortgage or Mortgage Note and to deny assumption
by the person to whom the Mortgaged Property has been or is about to be sold
whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains liable on the Mortgage and the Mortgage Note. When the
Mortgaged Property has been conveyed by the Mortgagor, the Company shall, to
the extent it has knowledge of such conveyance, exercise its rights to
accelerate the maturity of such Mortgage Loan under the "due-on-sale" clause
applicable thereto, provided, however, that the Company shall not exercise
such rights if prohibited by law from doing so or if the exercise of such
rights would impair or threaten to impair any recovery under the related PMI
Policy, if any.
If the Company reasonably believes it is unable under applicable
law to enforce such "due-on-sale" clause, the Company shall enter into (i) an
assumption and modification agreement with the person to whom such property
has been conveyed, pursuant to which such person becomes liable under the
Mortgage Note and the original Mortgagor remains liable thereon or (ii) in
the event the Company is unable under applicable law to require that the
original Mortgagor remain liable under the Mortgage Note and the Company has
the prior consent of the primary mortgage guaranty insurer, a substitution of
liability agreement with the purchaser of the Mortgaged Property pursuant to
which the original Mortgagor is released from liability and the purchaser of
the Mortgaged Property is substituted as Mortgagor and becomes liable under
the Mortgage Note. In connection with any such assumption, neither the
Mortgage Interest Rate borne by the related Mortgage Note, the term of the
Mortgage Loan nor the outstanding principal amount of the Mortgage Loan shall
be changed.
To the extent that any Mortgage Loan is assumable, the Company
shall inquire diligently into the creditworthiness of the proposed
transferee, and shall use the underwriting criteria for approving the credit
of the proposed transferee which are used by FNMA with respect to
underwriting mortgage loans of the same type as the Mortgage Loans. If the
credit of the proposed transferee does not meet such underwriting criteria,
the Company diligently shall, to the extent permitted by the Mortgage or the
Mortgage Note and by applicable law, accelerate the maturity of the Mortgage
Loan.
Section 6.02 Satisfaction of Mortgages and Release of Mortgage Files.
-------------------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by
the Company of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Company shall notify the Purchaser in
the Monthly Remittance Advice as provided in Section 5.02, and upon deposit
of such payment in full in the Custodial Account may request the release of
any Mortgage Loan Documents.
If the Company satisfies or releases a Mortgage without first
having obtained payment in full of the indebtedness secured by the Mortgage
or should the Company otherwise prejudice any rights the Purchaser may
have under the mortgage instruments, upon written demand of the Purchaser,
the Company shall repurchase the related Mortgage Loan at the Repurchase
Price by deposit thereof in the Custodial Account within 2 Business Days
of receipt of such demand by the Purchaser. The Company shall maintain
the Fidelity Bond and Errors and Omissions Insurance Policy as
provided for in Section 4.12 insuring the Company against any loss it
may sustain with respect to any Mortgage Loan not satisfied in
accordance with the procedures set forth herein.
Section 6.03 Penalties for Prepayment
------------------------
Each Mortgage Loan contains a Prepayment Penalty in an amount as
specified in the related Mortgage Loan Documents. The Company shall, to the
extent permitted by applicable law, collect from each Mortgagor who prepays
principal in excess of 20% of the original principal balance of the related
Mortgage Loan in any one year, the amount of the Prepayment Penalty as
permitted in the related Mortgage Loan Documents. The Company shall retain,
as servicing compensation, all such Prepayment Penalties received in
connection with any Mortgage Loan.
Section 6.04 Servicing Compensation.
---------------------
As compensation for its services hereunder, the Company shall be
entitled to withdraw from the Custodial Account or to retain from interest
payments on the Mortgage Loans the amount of its Servicing Fee, less any
amounts payable by the Company pursuant to Section 4.04 (viii). The
Servicing Fee shall be payable monthly and shall be computed on the basis of
the same unpaid principal balance and for the period respecting which any
related interest payment on a Mortgage Loan is computed. The Servicing Fee
shall be payable only at the time of and with respect to those Mortgage Loans
for which payment is in fact made of the entire amount of the Monthly
Payment. The obligation of the Purchaser to pay the Servicing Fee is limited
to, and payable solely from, the interest portion of such Monthly Payments
collected by the Company or as otherwise provided in Section 4.05.
Additional servicing compensation in the form of Ancillary Income
shall be retained by the Company. The Company shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement thereof except as specifically
provided for herein.
Section 6.05 Annual Statement as to Compliance.
---------------------------------
The Company shall deliver to the Purchaser, on or before March 31
each year beginning March 31, 1998, an Officer's Certificate, stating that
(i) a review of the activities of the Company during the preceding calendar
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 Company has fulfilled all its obligations under
this Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof and the action being taken by
the Company to cure such default.
Section 6.06 Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
On or before March 31st of each year beginning March 31, 1998, the
Company, at its expense, shall cause a firm of independent public accountants
which is a member of the American Institute of Certified Public Accountants
to furnish a statement to each Purchaser to the effect that such firm has
examined certain documents and records relating to the servicing of mortgage
loans which the servicer is servicing, including the Mortgage Loans, and
that, on the basis of such examination conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers, nothing has
come to their attention which would indicate that such servicing has not been
conducted in compliance with Accepted Servicing Practices, except for (i)
such exceptions as such firm shall believe to be immaterial, and (ii) such
other exceptions as shall be set forth in such statement.
Section 6.07 Right to Examine Company Records.
--------------------------------
The Purchaser shall have the right to examine and audit any and all
of the books, records, or other information of the Company, whether held by
the Company or by another on its behalf, with respect to or concerning this
Agreement or the Mortgage Loans, during business hours or at such other times
as may be reasonable under applicable circumstances, upon reasonable advance
notice.
ARTICLE VII
AGENCY TRANSFER; PASS-THROUGH TRANSFER
Section 7.01. Removal of Mortgage Loans from Inclusion Under this
---------------------------------------------------
Agreement Upon an Agency Transfer, or a Pass-Through
----------------------------------------------------
Transfer on One or More Reconstitution Dates.
--------------------------------------------
The Purchaser and the Company agree that with respect to some or
all of the Mortgage Loans, from time to time the Purchaser shall, subject to
Section 2.02, effect a Pass-Through Transfer, in each case retaining the
Company as the servicer thereof, or as applicable the "seller/servicer". On
the related Reconstitution Date, the Mortgage Loans transferred shall cease
to be covered by this Agreement.
The Company shall cooperate with the Purchaser in connection with
any Agency Transfer or Pass-Through Transfer contemplated by the Purchaser
pursuant to this Section 7.01. In that connection, the Company shall (a)
execute any Reconstitution Agreement within a reasonable period of time after
receipt of any Reconstitution Agreement which time shall be sufficient for
the Company and Company's counsel to review such Reconstitution Agreement,
but such time shall not exceed ten (10) Business Days after such receipt, and
(b) provide to FNMA, FHLMC, the trustee or a third party purchaser, as the
case may be, subject to any Reconstitution Agreement: any and all information
and appropriate verification of information which may be reasonably available
to the Company, whether through letters of its auditors and counsel or
otherwise, as the Purchaser shall reasonably request or as are reasonably
believed necessary by FNMA, FHLMC, the trustee, such third party purchaser,
any master servicer, or any rating agency, as the case may be, in connection
with such transactions, at reasonable out-of-pocket expense of the Purchaser
(unless such information is otherwise required to be provided by the Company
hereunder); provided, however, that the Company shall only be required to
remake or update the representations and warranties contained in Section 3.01
of this Agreement as of the Reconstitution Date. In furtherance of the
foregoing, the Company shall deliver, to the extent available, information as
to its delinquency, foreclosure and loss experience for the immediately
preceding three year period in each case, with respect to mortgage loans
owned by it and such mortgage loans serviced for others during such period.
In connection with a Pass-Through Transfer, the Company shall indemnify the
Purchaser if any information furnished by the Company for use in any
prospectus delivered with respect to the Certificates issued in connection
therewith is untrue in any material respect or omits information necessary to
make the statements contained therein not misleading in any material respect
in light of the circumstances under which they were made.
In the event the Purchaser has elected to have the Company hold
record title to the Mortgages, prior to a Reconstitution Date the Company or
its designee shall prepare an Assignment of Mortgage in blank from the
Company, acceptable to FNMA, FHLMC, the trustee or such third party, as the
case may be, for each Mortgage Loan that is part of a Pass-Through Transfer
and shall pay all preparation and recording costs associated therewith so
long as such Assignment of Mortgage has not previously been recorded at the
expense of the Company. The Company shall execute each Assignment of
Mortgage, track such Assignments of Mortgage to ensure they have been
recorded and deliver them as required by FNMA, FHLMC, the trustee or such
third party, as the case may be, upon the Company's receipt thereof.
Additionally, the Company shall prepare and execute, at the direction of
the Purchaser, any note endorsements in connection with any and all
Reconstitution Agreements.
All Mortgage Loans not sold or transferred pursuant to an Agency
Transfer or Pass-Through Transfer and any Mortgage Loans repurchased by the
Purchaser pursuant to Section 7.02 hereof, shall be subject to this Agreement
and shall continue to be serviced in accordance with the terms of this
Agreement and with respect thereto this Agreement shall remain in full force
and effect.
Section 7.02. Purchaser's Repurchase and Indemnification
------------------------------------------
Obligations.
-----------
Upon receipt by the Company of notice from FNMA, FHLMC or the
trustee of a breach of any Purchaser representation or warranty contained in
any Reconstitution Agreement or a request by FNMA, FHLMC or the trustee, as
the case may be, for the repurchase of any Mortgage Loan transferred to FNMA
or FHLMC pursuant to an Agency Transfer or to a trustee pursuant to a Pass-
Through Transfer, the Company shall promptly notify the Purchaser of same and
shall, at the direction of the Purchaser, use its best efforts to cure and
correct any such breach and to satisfy the requests or concerns of FNMA,
FHLMC, or the trustee related to such deficiencies of the related Mortgage
Loans transferred to FNMA, FHLMC, or the trustee.
The Purchaser shall repurchase from the Company any Mortgage Loan
transferred to FNMA or FHLMC pursuant to an Agency Transfer or to a trustee
pursuant to a Pass-Through Transfer with respect to which the Company has
been required by FNMA, FHLMC, or the trustee to repurchase due to a breach of
a representation or warranty made by the Purchaser with respect to the
Mortgage Loans, or the servicing thereof prior to the transfer date to FNMA,
FHLMC, or the trustee in any Reconstitution Agreement and not due to a Breach
of the Company's representations or obligations thereunder . The repurchase
price to be paid by the Purchaser to the Company shall equal that repurchase
price paid by the Company to FNMA, FHLMC, or the third party purchaser plus
all reasonable costs and expenses borne by the Company in connection with the
cure of such breach of a representation or warranty made by the Purchaser and
in connection with the repurchase of such Mortgage Loan from FNMA, FHLMC, or
the trustee, including, but not limited to, reasonable and necessary
attorneys' fees.
At the time of repurchase, the Custodian and the Company shall
arrange for the reassignment of the repurchased Mortgage Loan to the
Purchaser according to the Purchaser's instructions and the delivery to the
Custodian of any documents held by FNMA, FHLMC, or the trustee with respect
to the repurchased Mortgage Loan pursuant to the related Reconstitution
Agreement. In the event of a repurchase, the Company shall, simultaneously
with such reassignment, give written notice to the Purchaser that such
repurchase has taken place, and amend the Mortgage Loan Schedule to reflect
the addition of the repurchased Mortgage Loan to this Agreement.
ARTICLE VIII
COMPANY TO COOPERATE
--------------------
Section 8.01 Provision of Information.
------------------------
During the term of this Agreement, the Company shall furnish to the
Purchaser such periodic, special, or other reports or information, and copies
or originals of any documents contained in the Servicing File for each
Mortgage Loan, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Purchaser, any regulatory
requirement pertaining to the Purchaser or the purposes of this Agreement.
All such reports, documents or information shall be provided by and in
accordance with all reasonable instructions and directions which the
Purchaser may give.
The Company shall execute and deliver all such instruments and take
all such action as the Purchaser may reasonably request from time to time, in
order to effectuate the purposes and to carry out the terms of this
Agreement.
Section 8.02 Financial Statements; Servicing Facility.
------------------------------- --------
In connection with marketing the Mortgage Loans, the Purchaser may
make available to a prospective Purchaser a Consolidated Statement of
Operations of the Company for the most recently completed five fiscal years
or such lesser period the Company has been in existence for which such a
statement is available, as well as a Consolidated Statement of Condition at
the end of the last two fiscal years covered by such Consolidated Statement
of Operations. The Company also shall make available the most recent
comparable interim statements to the extent any such statements have been
prepared by or on behalf of the Company (and are available upon request to
members or stockholders of the Company or to the public at large). If it has
not already done so, the Company shall furnish promptly to the Purchaser
copies of the statement specified above.
Upon reasonable notice during normal business hours, the Company
also shall make available to Purchaser or prospective Purchaser a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting recent developments affecting the Company or the
financial statements of the Company, and to permit any prospective Purchaser
to inspect the Company's servicing facilities or those of any Subservicer for
the purpose of satisfying such prospective Purchaser that the Company and any
Subservicer have the ability to service the Mortgage Loans as provided in
this Agreement.
ARTICLE IX
THE COMPANY
-----------
Section 9.01 Indemnification; Third Party Claims.
-----------------------------------
The Company shall indemnify the Purchaser and hold it harmless
against any and all claims, losses, damages, penalties, fines, forfeitures,
reasonable and necessary legal fees and related costs, judgments, and any
other costs, fees and expenses that the Purchaser may sustain in any way
related to the failure of the Company to perform its duties and service the
Mortgage Loans in material compliance with the terms of this Agreement or any
Reconstitution Agreement entered into pursuant to Section 7.01. The Company
immediately shall notify the Purchaser if a claim is made by a third party
with respect to this Agreement or any Reconstitution Agreement or the
Mortgage Loans, shall promptly notify FNMA, FHLMC, or the trustee with
respect to any claim made by a third party with respect to any Reconstitution
Agreement, the Mortgage Loans, assume (with the prior written consent of the
Purchaser) the defense of any such claim and pay all expenses in connection
therewith, including counsel fees, and promptly pay, discharge and satisfy
any judgment or decree which may be entered against it or the Purchaser in
respect of such claim. The Company shall follow any reasonable written
instructions received from the Purchaser in connection with such claim. The
Purchaser promptly shall reimburse the Company for all amounts advanced by it
pursuant to the preceding sentence except when the claim is in any way
related to the Company's indemnification pursuant to Section 3.03, or the
failure of the Company to service and administer the Mortgage Loans in
material compliance with the terms of this Agreement or any Reconstitution
Agreement.
Section 9.02 Merger or Consolidation of the Company.
----------------------------------------
The Company shall keep in full effect its existence, rights and
franchises as a corporation, and shall obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform
its duties under this Agreement.
Any person into which the Company may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to
which the Company shall be a party, or any Person succeeding to the business
of the Company, shall be the successor of the Company hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding, provided,
however, that the successor or surviving Person shall be an institution
either (i) having a net worth of not less than $25,000,000 or whose deposits
are insured by the FDIC through the BIF or the SAIF, and (ii) which is a
FNMA-approved company in good standing. If any such merger, conversion or
consolidation occurs after a Reconstitution Date, in addition to the
foregoing, there must be delivered to the Purchaser a letter from each of the
Rating Agencies to the effect that such merger, conversion or consolidation
will not result in a qualification, withdrawal or downgrade of the then-
current rating of any of the Certificates.
Section 9.03 Limitation on Liability of Company and Others.
---------------------------------------------
Neither the Company nor any of the directors, officers, employees
or agents of the Company shall be under any liability to the Purchaser 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 Company or any such person
against any Breach of warranties or representations made herein, or failure
to perform its obligations in strict compliance with any standard of care set
forth in this Agreement, or any liability which would otherwise be imposed by
reason of any breach of the terms and conditions of this Agreement. The
Company and any director, officer, employee or agent of the Company may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The
Company shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the
Mortgage Loans in accordance with this Agreement and which in its opinion may
involve it in any expense or liability, provided, however, that the Company
may, with the consent of the Purchaser, undertake any such action which it
may deem necessary or desirable in respect to this Agreement and the rights
and duties of the parties hereto. In such event, the Company shall be
entitled to reimbursement from the Purchaser of the reasonable legal expenses
and costs of such action unless such action results from the Company's
willful misconduct, bad faith or negligence in the performance of its duties
hereunder.
Section 9.04 Limitation on Resignation and Assignment by Company.
---------------------------------------------------
The Purchaser has entered into this Agreement with the Company and
subsequent Purchasers will purchase the Mortgage Loans in reliance upon the
independent status of the Company, and the representations as to the adequacy
of its servicing facilities, plant, personnel, records and procedures, its
integrity, reputation and financial standing, and the continuance thereof.
Therefore, the Company shall neither assign this Agreement or the servicing
hereunder or, except as provided in Section 9.02, delegate its rights or
duties hereunder or any portion hereof to other than a Subservicer or sell or
otherwise dispose of all or substantially all of its property or assets
without the prior written consent of the Purchaser, which consent shall not
be unreasonably withheld.
The Company shall not resign from the obligations and duties hereby
imposed on it except by mutual consent of the Company and the Purchaser (such
consent of Purchaser not to be unreasonably withheld) or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Company. Any such
determination permitting the resignation of the Company shall be evidenced by
an Opinion of Counsel to such effect delivered to the Purchaser which Opinion
of Counsel shall be in form and substance acceptable to the Purchaser. No
such resignation shall become effective until a successor shall have assumed
the Company's responsibilities and obligations hereunder in the manner
provided in Section 12.01.
Without in any way limiting the generality of this Section 9.04, in
the event that the Company either shall assign this Agreement or the
servicing responsibilities hereunder or delegate its duties hereunder or any
portion thereof (to other than a Subservicer) or, except as provided in
Section 9.02, sell or otherwise dispose of all or substantially all of its
property or assets without the prior written consent of the Purchaser as
provided herein, then the Purchaser shall have the right to terminate this
Agreement upon notice given as set forth in Section 10.01, without any
payment of any penalty or damages and without any liability whatsoever to
the Company or any third party.
Notwithstanding the foregoing provisions, the Company may resign or
assign its rights as servicer hereunder without Purchaser's consent if the
following conditions are met:
There must be delivered to the Purchaser a letter from each of the
Rating Agencies to the effect that such transfer of servicing or sale or
disposition of assets will not result in a qualification, withdrawal or
downgrade of the then-current rating of any of the Certificates (if such
resignation or assignment occurs following a Reconstitution Date). In
addition, the ability of the Company to assign its rights and delegate its
duties under this Agreement to a successor servicer shall be subject to the
following conditions:
(i) Such successor servicer must be qualified to service loans for
FNMA or FHLMC;
(ii) Such successor servicer must have a net worth of not less than
$15,000,000;
(iii) Such successor servicer must execute and deliver to the
Trustee an agreement, in form and substance reasonably satisfactory to
the Trustee, that contains an assumption by such successor servicer of
the due and punctual performance and observance of each servicing
covenant and condition to be performed and observed by the Company under
this Agreement;
(iv) The Company shall, at its cost and expense, take such steps
that may be necessary or appropriate to effectuate and evidence the
transfer of the servicing of the Mortgage Loans to such successor
servicer, including, but not limited to, the following: (a) to the
extent required by the terms of the Mortgage Loans and by applicable
federal and state laws and regulations, the Company shall timely mail to
each obligor under a Mortgage Loan any required notices or disclosures
describing the transfer of servicing of the Mortgage Loans to the
successor servicer; (b) prior to the effective date of such transfer of
servicing, the Company shall transmit to any related insurer
notification of such transfer of servicing, (c) on or prior to the
effective date of such transfer of servicing the Company shall deliver
to the successor servicer all Servicing Files and any related records or
materials; (d) on or prior to the effective date of such transfer of
servicing, the Company shall transfer to the successor servicer all
funds held by the Company in respect of the Mortgage Loans, other than
amounts payable to the Company pursuant to this Agreement; (e) on or
prior to the effective date of such transfer of servicing, the Company
shall remit to the Purchaser the amount of any Monthly Advance made by
the Company on any prior date out of amounts held in a Custodial Account
for future distribution and not yet paid into such Custodial Account by
the Company; (f) the Company shall, after the effective date of the
transfer of servicing to the successor servicer, continue to forward to
such successor servicer, within one Business Day of receipt, the amount
of any payments or other recoveries received by the Company in respect
of the Mortgage Loans, and the Company shall notify the successor
servicer of the source and proper application of each such payment or
recovery; (g) the Company shall, after the effective date of transfer of
servicing to the successor servicer, continue to cooperate with the
successor servicer to facilitate such transfer in such manner and to
such extent as the successor servicer may reasonably request.
ARTICLE X
DEFAULT
-------
Section 10.01 Events of Default.
-----------------
Each of the following shall constitute an Event of Default on the
part of the Company:
(i) any failure by the Company to remit to the Purchaser any
payment required to be made under the terms of this Agreement which continues
unremedied for a period of five days after the date upon which written notice
of such failure, requiring the same to be remedied, shall have been given to
the Company by the Purchaser; or
(ii) failure by the Company duly to observe or perform in any
material respect any other of the covenants or agreements on the part of the
Company set forth in this Agreement or in the Custodial Agreement which
continues unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Company by the Purchaser or by the Custodian; or
(iii) failure by the Company to maintain its license to do business
in any jurisdiction where the Mortgaged Property is located; or
(iv) 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, including
bankruptcy, marshaling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been entered
against the Company and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(v) the Company 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
Company or of or relating to all or substantially all of its property; or
(vi) the Company shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of any
applicable insolvency, bankruptcy or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily suspend payment of
its obligations or cease its normal business operations for three Business
Days; or
(vii) the Company ceases to meet the qualifications of a FNMA
lender; or
(viii) the Company fails to maintain a minimum net worth of
$25,000,000; or
(ix) the Company attempts to assign its right to servicing
compensation hereunder or the Company attempts, without the consent of the
Purchaser, to sell or otherwise dispose of all or substantially all of its
property or assets or to assign this Agreement or the servicing
responsibilities hereunder or to delegate its duties hereunder or any portion
thereof (to other than a Subservicer) in violation of Section 9.04.
In each and every such case, so long as an Event of Default shall
not have been remedied, in addition to whatsoever rights the Purchaser may
have at law or equity to damages, including injunctive relief and specific
performance, the Purchaser, by notice in writing to the Company, may
terminate all the rights and obligations of the Company under this Agreement
and in and to the Mortgage Loans and the proceeds thereof.
Upon receipt by the Company of such written notice, all authority
and power of the Company under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall pass to and be vested in the successor
appointed pursuant to Section 12.01. Upon written request from any
Purchaser, the Company shall prepare, execute and deliver to the successor
entity designated by the Purchaser any and all documents and other
instruments, place in such successor's possession all Mortgage Files, 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 Mortgage Loans and
related documents, at the Company's sole expense. The Company shall
cooperate with the Purchaser and such successor in effecting the termination
of the Company's responsibilities and rights hereunder, including without
limitation, the transfer to such successor for administration by it of all
cash amounts which shall at the time be credited by the Company to the
Custodial Account or Escrow Account or thereafter received with respect to
the Mortgage Loans.
Section 10.02 Waiver of Defaults.
------------------
By a written notice, the Purchaser may waive any default by the
Company in the performance of its obligations hereunder and its consequences.
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 thereon except to
the extent expressly so waived.
ARTICLE XI
TERMINATION
-----------
Section 11.01 Termination.
-----------
This Agreement shall terminate upon either: (i) the later of the
final payment or other liquidation (or any advance with respect thereto) of
the last Mortgage Loan or the disposition of any REO Property with respect to
the last Mortgage Loan and the remittance of all funds due hereunder; or (ii)
mutual consent of the Company and the Purchaser in writing.
Section 11.02 Termination Without Cause.
-------------------------
Beginning three years after the Closing Date, the Purchaser may
terminate, at its sole option, any rights the Company may have hereunder,
without cause as provided in this Section 11.02 upon thirty (30) days notice
to the Company. Any such notice of termination shall be in writing and
delivered to the Company by registered mail as provided in Section 12.05.
Upon the termination of servicing without cause hereunder, the
Purchaser shall pay to the Company a termination fee equal to: (i) with
respect to Mortgage Loans with a Servicing Rate equal to 25 basis points or
less, an amount equal to six (6) times the applicable Servicing Rate
multiplied by the outstanding principal balance of such Mortgage Loans in
which the servicing is being terminated, or (ii) with respect to Mortgage
Loans with a Servicing Rate greater than 25 basis points, 1.50% plus seven
(7) times the excess of the Servicing Rate over 25 basis points multiplied by
the outstanding principal balance of such Mortgage Loans in which the
servicing is being terminated.
ARTICLE XII
MISCELLANEOUS PROVISIONS
-------------------
Section 12.01 Successor to Company.
--------------------
Prior to termination of the Company's responsibilities and duties
under this Agreement pursuant to Sections 9.04, 10.01, 11.01 (ii) or pursuant
to Section 11.02 after the 90 day period has expired, the Purchaser shall,
(i) succeed to and assume all of the Company's responsibilities, rights,
duties and obligations under this Agreement, or (ii) appoint a successor
having the characteristics set forth in clauses (i) through (iii) of Section
9.02 and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Company under this Agreement
prior to the termination of Company's responsibilities, duties and
liabilities under this Agreement. In connection with such appointment and
assumption, the Purchaser may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor
shall agree (not to exceed the Servicing Fee). In the event that the
Company's duties, responsibilities and liabilities under this Agreement
should be terminated pursuant to the aforementioned sections, the Company
shall discharge such duties and responsibilities during the period from the
date it acquires knowledge of such termination until the effective date
thereof with the same degree of diligence and prudence which it is obligated
to exercise under this Agreement, and shall take no action whatsoever that
might impair or prejudice the rights or financial condition of its successor.
The resignation or removal of the Company pursuant to the aforementioned
sections shall not become effective until a successor shall be appointed
pursuant to this Section 12.01 and shall in no event relieve the Company of
the representations and warranties made pursuant to Sections 3.01 and 3.02
and the remedies available to the Purchaser under Section 3.03, it being
understood and agreed that the provisions of such Sections 3.01, 3.02, 3.03
and 9.01 shall be applicable to the Company notwithstanding any such sale,
assignment, resignation or termination of the Company, or the termination of
this Agreement.
Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Company and to the Purchaser an instrument
accepting such appointment, wherein the successor shall make the
representations and warranties set forth in Section 3.01, except for
subsections (f), (h), (i) and (k) thereof, whereupon such successor shall
become fully vested with all the rights, powers, duties, responsibilities,
obligations and liabilities of the Company, with like effect as if originally
named as a party to this Agreement. Any termination or resignation of the
Company or termination of this Agreement pursuant to Section 9.04, 10.01,
11.01 or 11.02 shall not affect any claims that any Purchaser may have
against the Company arising out of the Company's actions or failure to act
prior to any such termination or resignation.
The Company shall deliver promptly to the successor servicer the
Funds in the Custodial Account and Escrow Account and all Mortgage Files and
related documents and statements held by it hereunder and the Company shall
account for all funds and shall execute and deliver such instruments and do
such other things as may reasonably be required to more fully and
definitively vest in the successor all such rights, powers, duties,
responsibilities, obligations and liabilities of the Company.
Upon a successor's acceptance of appointment as such, the Company
shall notify by mail the Purchaser of such appointment in accordance with the
procedures set forth in Section 12.05.
Section 12.02 Amendment.
---------
This Agreement may be amended from time to time by the Company and
the Purchaser by written agreement signed by the Company and the Purchaser.
Section 12.03 Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.04 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until
terminated as herein provided. This Agreement shall continue notwithstanding
transfers of the Mortgage Loans by the Purchaser.
Section 12.05 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 registered mail, postage prepaid, addressed as follows:
(i) if to the Company:
First Nationwide Mortgage Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Vice President - Secondary Marketing
copies to:
First Nationwide Mortgage Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Chief Counsel
or such other address as may hereafter be furnished to the Purchaser in
writing by the Company;
(ii) if to Purchaser:
Lehman Capital, a Division of
▇▇▇▇▇▇ Brothers Holdings Inc.
3 World Financial Center
12th Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Contract Finance
Section 12.06 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 provisions of this Agreement.
Section 12.07 Relationship of Parties.
-----------------------
Nothing herein contained shall be deemed or construed to create a
partnership or joint venture between the parties hereto and the services of
the Company shall be rendered as an independent contractor and not as agent
for the Purchaser.
Section 12.08 Execution; Successors and Assigns.
---------------------------------
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. Subject to Section 8.04, this
Agreement shall inure to the benefit of and be binding upon the Company and
the Purchaser and their respective successors and assigns.
Section 12.09 Recordation of Assignments of Mortgage.
--------------------------------------
To the extent permitted by applicable law, each of the Assignments
of Mortgage is subject to recordation in all appropriate public offices for
real property records in all the counties or other comparable jurisdictions
in which any or all of the Mortgaged Properties are situated, and in any
other appropriate public recording office or elsewhere, such recordation to
be effected at the Company's expense in the event recordation is either
necessary under applicable law or requested by the Purchaser at its sole
option so long as such recordation is the initial recordation of an
assignment of the Mortgage Loan since the sale to the Purchaser of such
Mortgage Loan.
Section 12.10 Assignment by Purchaser.
-----------------------
The Purchaser shall have the right, without the consent of the
Company but subject to the limit set forth in Section 2.02 hereof, to assign,
in whole or in part, its interest under this Agreement with respect to some
or all of the Mortgage Loans, and designate any person to exercise any rights
and assume obligations of the Purchaser hereunder with respect to such
Mortgage Loans, by executing an assignment and assumption agreement or other
instrument of transfer to such effect. Upon such assignment of rights and
assumption of obligations, the assignee or designee shall accede to the
rights and obligations hereunder of the Purchaser with respect to such
Mortgage Loans and the Purchaser as assignor shall be released from all
obligations hereunder with respect to such Mortgage Loans from and after the
date of such assignment and assumption. All references to the Purchaser in
this Agreement shall be deemed to include its assignee or designee.
Section 12.11 No Personal Solicitation.
------------------------
The Company agrees that it shall not solicit any Mortgagors (in
writing or otherwise) to refinance any of the Mortgage Loans; provided that
mass advertising or mailing (such as placing advertisements on television, on
radio, in magazines or in newspapers) that is not exclusively directed
towards the Mortgagors shall not constitute "solicitation" and shall not
violate this covenant.
IN WITNESS WHEREOF, the Company and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
LEHMAN CAPITAL, A DIVISION OF
▇▇▇▇▇▇ BROTHERS HOLDINGS INC.
(Purchaser)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
FIRST NATIONWIDE MORTGAGE
CORPORATION
(Seller)
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
-------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
Title: President & CEO
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the __ day of ________, 1997 before me, a Notary Public in and
for said State, personally appeared ___________________________, known to me
to be Vice President of Lehman Capital, A Division of ▇▇▇▇▇▇ Brothers
Holdings Inc., the corporation that executed the within instrument and also
known to me to be the person who executed it on behalf of said corporation,
and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office
seal the day and year in this certificate first above written.
______________________________
Notary Public
My Commission expires ________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the __ day of _______, 1997 before me, a Notary Public in and
for said State, personally appeared ____________________________, known to me
to be __________________ of ____________________, the corporation that
executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office
seal the day and year in this certificate first above written.
-------------------------------
Notary Public
My Commission expires ________
EXHIBIT A
MORTGAGE LOAN SCHEDULE
EXHIBIT B-1
MORTGAGE FILE
(a) The original Mortgage Note bearing all intervening endorsements and
including any riders to the Mortgage Note, endorsed "Pay to the order of
___________________ without recourse and signed in the name of the previous
owner by an authorized officer;
(b) the original of any guarantee executed in connection with the
Mortgage Note (if any);
(c) the original Mortgage with evidence of recording thereon, or copies
certified by the related recording office or if the original Mortgage has not
yet been returned from the recording office, a copy certified by the Company
indicating that such Mortgage has been delivered for recording. The return
directions for the original Mortgage should indicate, when recorded, mail to
the Company;
(d) the originals of all assumption, modification, consolidation or
extension agreements, (or, if an original of any of these documents has not
been returned from the recording office, a certified copy thereof, the
original to be delivered to the Company forthwith after return from such
recording office) with evidence of recording thereon, if any;
(e) the original Assignment of Mortgage as appropriate, in recordable
form, for each Mortgage Loan to _____________________;
(f) the originals of any intervening recorded Assignments of Mortgage,
showing a complete chain of assignment from origination to the Company,
including warehousing assignments, with evidence of recording thereon (or, if
an original intervening Assignment of Mortgage has not been returned from the
recording office, a certified copy thereof, the original to be delivered to
the Custodian forthwith after return from such recording office);
(g) the original mortgage title insurance policy, or copy of title
commitment (or in appropriate jurisdictions, attorney's opinion of title and
abstract of title); and
(h) the original primary mortgage insurance certificate, if any or copy
of mortgage insurance certificate.
EXHIBIT B-2
CONTENTS OF EACH SERVICING FILE
With respect to each Mortgage Loan, the Servicing File shall
include each of the following items, which shall be available for inspection
by the Purchaser and any prospective Purchaser, and which shall be retained
by the Company in the Servicing File (or other file or electronic media)
pursuant to the Seller's Warranties and Servicing Agreement to which this
Exhibit is attached (the "Agreement"):
---------
1. A copy of each document contained in the Mortgage File.
2. Any security agreement, chattel mortgage or equivalent executed in
connection with the Mortgage.
3. Residential loan application.
4. Mortgage Loan closing statement.
5. Verification of employment and income.
6. Verification of acceptable evidence of source and amount of
downpayment.
7. If applicable, credit report on the Mortgagor.
8. Residential appraisal report.
9. Photograph of the Mortgaged Property.
10. If applicable, survey of the Mortgaged Property.
11. Copy of each instrument necessary to complete identification of any
exception set forth in the exception schedule in the title policy,
i.e., map or plat, restrictions, easements, sewer agreements, home
association declarations, etc.
12. All required disclosure statements required to be disclosed to
borrowers at the time of application or origination, as applicable
for the Mortgage Loan.
13. If available, termite report, structural engineer's report, water
potability and septic certification.
14. Sales contract.
15. In accordance with customary industry practice, tax receipts,
insurance premium receipts, ledger sheets, payment history from
date of origination, insurance claim files, correspondence, current
and historical computerized data files, and all other processing,
underwriting and closing papers and records which are customarily
contained in a mortgage loan file and which are required to
document the Mortgage Loan or to service the Mortgage Loan.
In the event an Officer's Certificate of the Company is delivered
to the Custodian because of a delay caused by the public recording office in
returning any recorded document, the Company shall deliver to the Custodian,
within 60 days of the Closing Date, an Officer's Certificate which shall (i)
identify the recorded document, (ii) state that the recorded document has not
been delivered to the Custodian due solely to a delay caused by the public
recording office, (iii) state the amount of time generally required by the
applicable recording office to record and return a document submitted for
recordation, and (iv) specify the date the applicable recorded document will
be delivered to the Custodian. The Company shall be required to deliver to
the Custodian the applicable recorded document by the date specified in (iv)
above. An extension of the date specified in (iv) above may be requested
from the Purchaser, which consent shall not be unreasonably withheld.
EXHIBIT D-1
CUSTODIAL ACCOUNT CERTIFICATION
_____________________, 199__
First Nationwide Mortgage Corporation hereby certifies that it has
established the account described below as a Custodial Account pursuant to
Section 4.04 of the Seller's Warranties and Servicing Agreement, dated as of
November 1, 1997, Conventional Residential Fixed Rate Mortgage Loans, Group
_________.
Title of Account: First Nationwide Mortgage Corporation in trust for the
Purchaser, Group 97-FN-01.
Account Number: ___________________
Address of office or branch
of the Company at
which Account is maintained:
-------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
FIRST NATIONWIDE MORTGAGE
CORPORATION
Company
By: __________________________________
Name: ________________________________
Title: _______________________________
EXHIBIT D-2
CUSTODIAL ACCOUNT LETTER AGREEMENT
___________, 1997
To: ------------------------
------------------------
------------------------
(the "Depository")
As Company under the Seller's Warranties and Servicing Agreement,
dated as of November 1, 1997, Conventional Residential Fixed Rate Mortgage
Loans, Group _________ (the "Agreement"), we hereby authorize and request you
---------
to establish an account, as a Custodial Account pursuant to Section 4.04 of
the Agreement, to be designated as "First Nationwide Mortgage Corporation, in
trust for the Purchaser - Conventional Residential Fixed Rate MortgageLoans -
Group 97-FN-01." All deposits in the account shall be subject to withdrawal
therefrom by order signed by the Company. You may refuse any deposit which
would result in violation of the requirement that the account be fully
insured as described below. This letter is submitted to you in duplicate.
Please execute and return one original to us.
FIRST NATIONWIDE MORTGAGE
CORPORATION
Company
By: ___________________________
Name: _________________________
Title: ________________________
Date: ________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number __________, at
the office of the Depository indicated above, and agrees to honor withdrawals
on such account as provided above. The full amount deposited at any time in
the account will be insured by the Federal Deposit Insurance Corporation
through the Bank Insurance Fund ("BIF") or the Savings Association Insurance
---
Fund ("SAIF").
----
_________________________
Depository
By: ______________________
Name:_____________________
Title:____________________
Date:_____________________
EXHIBIT E-1
ESCROW ACCOUNT CERTIFICATION
__________________, 1997
First Nationwide Mortgage Corporation hereby certifies that it has
established the account described below as an Escrow Account pursuant to
Section 4.06 of the Seller's Warranties and Servicing Agreement, dated as of
November1, 1997,Conventional ResidentialFixed RateMortgage Loans,Group 97-FN-
01.
Title of Account: "First Nationwide Mortgage Corporation, in trust for the
Purchaser, Group 97-FN-01, and various Mortgagors."
Account Number: _______________________
Address of office or branch
of the Company at
which Account is maintained:
______________________________
______________________________
_______________________________
_______________________________
November 1, 1997
FIRST NATIONWIDE MORTGAGE
CORPORATION
Company
By: __________________________
Name: ________________________
Title: _______________________
EXHIBIT E-2
ESCROW ACCOUNT LETTER AGREEMENT
___________________, 199__
To:____________________________
____________________________
____________________________
(the "Depository")
As Company under the Seller's Warranties and Servicing Agreement,
dated as of November 1, 1997, Conventional Residential Fixed Rate Mortgage
Loans, Group 97-FN-01 (the "Agreement"), we hereby authorize and request you
---------
to establish an account, as an Escrow Account pursuant to Section 4.07 of the
Agreement, to be designated as "First Nationwide Mortgage Corporation, in
trust for the Purchaser - Conventional Residential Fixed Rate Mortgage Loans
- Group 97-FN-01." All deposits in the account shall be subject to
withdrawal therefrom by order signed by the Company. You may refuse any
deposit which would result in violation of the requirement that the account
be fully insured as described below. This letter is submitted to you in
duplicate. Please execute and return one original to us.
FIRST NATIONWIDE MORTGAGE
CORPORATION
Company
By:____________________________
Name:__________________________
Title:_________________________
Date:__________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number ______, at the
office of the Depository indicated above, and agrees to honor withdrawals on
such account as provided above. The full amount deposited at any time in the
account will be insured by the Federal Deposit Insurance Corporation through
the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
---
("SAIF").
----
_______________________
Depository
By:_____________________
Name:___________________
Title:___________________
Date:____________________
EXHIBIT F
MONTHLY REMITTANCE ADVICE