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EXHIBIT 10.43
EXECUTION COPY
SALE AND SERVICING AGREEMENT
Dated as of August 16, 1997
among
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
(Issuer)
FINANCIAL ASSET SECURITIES CORP.
(Depositor)
MEGO MORTGAGE CORPORATION
(Seller and Servicer)
NORWEST BANK MINNESOTA, N.A.
(Master Servicer)
and
U.S. BANK NATIONAL ASSOCIATION, D/B/A
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Co-Owner Trustee)
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
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TABLE OF CONTENTS
Page
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ARTICLE I.
DEFINITIONS
Section 1.01 Definitions .................................................................... 1
Section 1.02 Other Definitional Provisions .................................................. 26
Section 1.03 Interest Calculations .......................................................... 26
ARTICLE II.
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans ................................................... 28
Section 2.02 Reserved ....................................................................... 28
Section 2.03 Ownership and Possession of Home Loan Files .................................... 28
Section 2.04 Books and Records .............................................................. 29
Section 2.05 Delivery of Home Loan Documents ................................................ 29
Section 2.06 Acceptance by Indenture Trustee of the Home Loans; Certain
Substitutions; Initial Certification ........................................... 32
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor
Section 3.02 Representations, Warranties and Covenants of the Master
Servicer ....................................................................... 34
Section 3.03 Representations and Warranties of Mego ......................................... 37
Section 3.04 [Reserved] ..................................................................... 45
Section 3.05 Purchase and Substitution ...................................................... 45
ARTICLE IV.
ADMINISTRATION AND SERVICING OF HOME LOANS
Section 4.01 Servicing Standard ............................................................. 48
Section 4.02 Servicing Arrangements ......................................................... 49
Section 4.03 Servicing Record ............................................................... 50
Section 4.04 Annual Statement as to Compliance; Notice of Event of Default .................. 53
Section 4.05 Annual Independent Accountants' Report; Servicer Review
Report ......................................................................... 53
Section 4.06 Access to Certain Documentation and Information Regarding Home
Loans........................................................................... 54
Section 4.07 [Reserved] ..................................................................... 55
Section 4.08 Advances ....................................................................... 55
Section 4.09 Reimbursement of Interest Advances and Foreclosure Advances .................... 56
Section 4.10. Modifications, Waivers, Amendments and Consents ................................ 57
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Section 4.11. Due-On-Sale; Due-on-Encumbrance ................................................ 57
Section 4.12. Collection Procedures; Foreclosure Procedures .................................. 58
Section 4.13. Sale of Foreclosed Properties .................................................. 59
Section 4.14. Management of Real Estate Owned ................................................ 60
Section 4.15. Inspections .................................................................... 61
Section 4.16. Maintenance of Insurance ....................................................... 61
Section 4.17. Release of Files ............................................................... 62
Section 4.18. Filing of Continuation Statements .............................................. 63
Section 4.19. Fidelity Bond .................................................................. 64
Section 4.20. Errors and Omissions Insurance ................................................. 64
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account ............................... 65
Section 5.02 Allocation of Losses ........................................................... 69
Section 5.03 Certificate Distribution Account ............................................... 69
Section 5.04 Trust Accounts; Trust Account Property ......................................... 70
Section 5.05 Servicer to Pay Owner Trustee Fee .............................................. 73
ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Master Servicing Certificate ................................................... 74
Section 6.02 Statement to Securityholders ................................................... 74
ARTICLE VII.
THE MASTER SERVICER
Section 7.01 Indemnification; Third Party Claims ............................................ 75
Section 7.02 Merger or Consolidation of the Master Servicer ................................. 75
Section 7.03 Limitation on Liability of the Master Servicer and Others ...................... 76
Section 7.04 Master Servicer Not to Resign; Assignment ...................................... 76
Section 7.05 Relationship of Master Servicer to Issuer and the Indenture
Trustee ........................................................................ 77
Section 7.06 Master Servicer May Own Notes .................................................. 77
ARTICLE VIII.
DEFAULT
Section 8.01 Events of Default .............................................................. 78
Section 8.02 Consequences of an Event of Default ............................................ 79
Section 8.03 Appointment of Successor ....................................................... 80
Section 8.04 Notification to Certificateholders ............................................. 80
Section 8.05 Waiver of Past Defaults ........................................................ 81
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ARTICLE IX.
TERMINATION
Section 9.01 Termination .................................................................... 82
Section 9.02 Notice of Termination .......................................................... 82
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.01 Acts of Securityholders ........................................................ 83
Section 10.02 Amendment ...................................................................... 83
Section 10.03 Recordation of Agreement ....................................................... 84
Section 10.04 Duration of Agreement .......................................................... 84
Section 10.05 Governing Law .................................................................. 84
Section 10.06 Notices ........................................................................ 84
Section 10.07 Severability of Provisions ..................................................... 85
Section 10.08 No Partnership ................................................................. 85
Section 10.09 Counterparts ................................................................... 85
Section 10.10 Successors and Assigns ......................................................... 85
Section 10.11 Headings ....................................................................... 85
Section 10.12 Actions of Securityholders ..................................................... 86
Section 10.13 Reports to Rating Agencies ..................................................... 86
Section 10.14 Inconsistencies Among Transaction Documents .................................... 87
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Master Servicer Certificate
EXHIBIT C Form of Monthly Statement to Securityholders
EXHIBIT D Underwriting Guidelines
EXHIBIT E Form of Servicing Agreement
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This Sale and Servicing Agreement is entered into effective as of
August 16, 1997, among MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4, a Delaware
business trust (the "Issuer" or the "Trust"), FINANCIAL ASSET SECURITIES CORP.,
a Delaware corporation, as Depositor (the "Depositor"), MEGO MORTGAGE
CORPORATION, a Delaware corporation ("Mego"), as Seller (in such capacity, the
"Seller") and Servicer (in such capacity, the "Servicer"), NORWEST BANK
MINNESOTA, N.A., as Master Servicer (the "Master Servicer"), and U.S. BANK
NATIONAL ASSOCIATION, D/B/A FIRST BANK NATIONAL ASSOCIATION, a national banking
association, as Indenture Trustee on behalf of the Noteholders (in such
capacity, the "Indenture Trustee") and as Co-Owner Trustee on behalf of the
Securityholders and Residual Instrument holders (in such capacity, the "Co-Owner
Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase a pool of Home Loans which were
originated or purchased by the Seller and sold to the Depositor in the ordinary
course of business of the Seller;
WHEREAS, the Depositor is willing to purchase from the Seller and sell
such Home Loans to the Issuer; and
WHEREAS, the Master Servicer is willing to service such Home Loans in
accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
Accrual Period: With respect to the first Distribution Date and the
Class A-1 Notes, the period commencing on the Closing Date and ending on the day
immediately preceding such Distribution Date (27 days). With respect to any
subsequent Distribution Date and the Class A-1 Notes, the period commencing on
the immediately preceding Distribution Date and ending on the day immediately
preceding such subsequent Distribution Date. With respect to the first
Distribution Date and the Classes of Securities other than the Class A-1 Notes,
the period commencing on the Cut-Off Date and ending on the last day of the
month of the Cut-Off Date (15 days). With respect to any Classes of Securities
other than the Class A-1 Notes for any subsequent Distribution Date, the
calendar month preceding the month of such Distribution Date based on a 360-day
year consisting of twelve 30-day months.
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Aggregate Note Principal Balance: With respect to any Distribution
Date, the aggregate of the Class Principal Balances of the Notes.
Agreement: This Sale and Servicing Agreement and all amendments hereof
and supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the
excess, if any, of (a) the aggregate of the Class Principal Balances of all
Classes of Securities (after giving effect to all distributions on such
Distribution Date) over (b) the Pool Principal Balance as of the end of the
preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
sequentially, to the Certificates, the Class M-2 Notes and the Class M-1 Notes,
in that order, until the respective Class Principal Balances thereof are reduced
to zero.
Assignment of Mortgage: With respect to each Home Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Property is located to
reflect of record the sale of the related Home Loan to the Trust as follows:
"U.S. Bank National Association, d/b/a First Bank National Association, as
Indenture Trustee and Co-Owner Trustee for the Mego Mortgage Home Loan Owner
Trust 1997-4".
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in New York City or in the city in which the
Corporate Trust Office of the Indenture Trustee is located or the city in which
the Master Servicer's or Servicer's servicing operations are located and are
authorized or obligated by law or executive order to be closed.
Certificate Distribution Account: The account established and
maintained pursuant to Section 5.03.
Certificate: Any Certificate issued pursuant to the Trust Agreement.
Certificateholder: A holder of any Certificate.
Certificateholders' Interest Carry-Forward Amount: With respect to any
Distribution Date and the Certificates, the sum of (i) the excess of (A) the
Certificateholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding Certificateholders' Interest Carry-Forward
Amount on such preceding Distribution Date, over (B) the amount of interest that
is actually distributed to the Certificateholders on such preceding Distribution
Date plus (ii) interest on such excess, to the extent permitted by law, at the
applicable Certificate Pass-Through Rate from such proceeding Distribution Date
through the current Distribution Date.
Certificateholders' Interest Distributable Amount: With respect to any
Distribution Date and the Certificates, the sum of the Certificateholders'
Monthly Interest Distributable Amount and
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the Certificateholders' Interest Carry-Forward Amount for such Distribution
Date; provided however, that on the Distribution Date, if any, on which the
Class Principal Balance of the Certificates is reduced to zero through
application of an Allocable Loss Amount, the Certificateholders' Interest
Distributable Amount shall be reduced by an amount equal to the portion, if any,
of the Allocable Loss Amount that would be allocable to the Classes of Mezzanine
Notes without giving effect to this proviso.
Certificateholders' Monthly Interest Distributable Amount: With respect
to any Distribution Date and the Certificates, interest accrued during the
related Accrual Period at the Certificate Pass-Through Rate on the Class
Principal Balance of the Certificates immediately preceding such Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
Certificate Optimal Principal Balance: With respect to any Distribution
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the preceding Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Notes
(after taking into account any distributions made on such Distribution Date in
reduction of the Class Principal Balances of the Notes prior to such
determination) and (ii) the Overcollateralization Target Amount for such
Distribution Date; provided however, that the Certificate Optimal Principal
Balance amount shall never be less than zero or greater than the Original Class
Principal Balance of the Certificates.
Certificate Pass-Through Rate: The per annum rate of 7.95%; provided,
however, with respect to any Distribution Date after the first Distribution Date
on which either the Mego or the Master Servicer may exercise its option to
purchase the Home Loans pursuant to Section 9.01(b), the Certificate
Pass-Through Rate shall be 8.45%.
Certificate Register: The register established pursuant to Section 3.4
of the Trust Agreement.
Class: With respect to the Notes, all Notes bearing the same class
designation, and with respect to the Certificates, the Certificates shall be
deemed to be one class.
Class A-1 Note: Any Class A-1 Note in the form attached to the
Indenture as Exhibit A-1.
Class A-2 Note: Any Class A-2 Note in the form attached to the
Indenture as Exhibit A-2.
Class A-3 Note: Any Class A-3 Note in the form attached to the
Indenture as Exhibit A-3.
Class A-4 Note: Any Class A-4 Note in the form attached to the
Indenture as Exhibit A-4.
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Class M-1 Optimal Principal Balance: With respect to any Distribution
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the preceding Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Senior
Notes (after taking into account distributions made on such Distribution Date in
reduction of the Class Principal Balances of the Classes of Senior Notes prior
to such determination) and (ii) the greater of (x) the sum of (1) 27.00% of the
Pool Principal Balance as of the preceding Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (calculated
without giving effect to the proviso in the definition thereof) or (y) 0.50% of
the Original Pool Principal Balance; provided however, that the Class M-1
Optimal Principal Balance shall never be less than zero or greater than the
Original Class Principal Balance of the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any Distribution
Date prior to the Stepdown Date, zero; with respect to any other Distribution
Date, the Pool Principal Balance as of the preceding Determination Date minus
the sum of (i) the aggregate Class Principal Balance of the Senior Notes (after
taking into account any distributions made on such Distribution Date in
reduction of the Class Principal Balances of the Classes of Senior Notes prior
to such determination) plus the Class Principal Balance of the Class M-1 Notes
(after taking into account any distributions made on such Distribution Date in
reduction of the Class Principal Balance of the Class M-1 Notes prior to such
determination) and (ii) the greater of (x) the sum of (1) 12.50% of the Pool
Principal Balance as of the preceding Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without giving
effect to the proviso in the definition thereof) or (y) 0.50% of the Original
Pool Principal Balance; provided, however, that the Class M-2 Optimal Principal
Balance shall never be less than zero or greater than the Original Class
Principal Balance of the Class M-2 Notes.
Class M-1 Note: Any Class M-1 Note in the form attached to the
Indenture as Exhibit A.
Class M-2 Note: Any Class M-2 Note in the form attached to the
Indenture as Exhibit A.
Class Principal Balance: With respect to each Class and as of any date
of determination, the Original Class Principal Balance of such Class reduced by
the sum of (i) all amounts previously distributed in respect of principal of
such Class on all previous Distribution Dates and (ii) with respect to the Class
M-1, Class M-2 Notes and the Certificates, all Allocable Loss Amounts applied in
reduction of principal of such Class on all previous Distribution Dates.
Closing Date: August 29, 1997.
Code: The Internal Revenue Code of 1986, as amended from time to time,
and Treasury Regulations promulgated thereunder.
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Collected Amount: With respect to any Determination Date or related
Distribution Date, the sum of the amount on deposit in the Note Distribution
Account on such Determination Date plus the amounts required to be deposited
into the Note Distribution Account pursuant to Section 5.01(b).
Collection Account: The account denominated as a Collection Account and
maintained or caused to be maintained by the Indenture Trustee pursuant to
Section 5.01.
Corporate Trust Office: The office of the Indenture Trustee at which
any particular time its corporate business shall be principally administered,
located on the Closing Date at U.S. Bank National Association, d/b/a First Bank
National Association, ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Structured Finance.
Co-Owner Trustee: U.S. Bank National Association, d/b/a First Bank
National Association, a national banking association, in its capacity as the
Co-Owner Trustee under the Trust Agreement acting on behalf of the
Securityholders, or any successor co-owner trustee under the Trust Agreement.
Cumulative Net Losses: With respect to any Distribution Date, the
aggregate amount of Net Loan Losses calculated for such Distribution Date and
each prior Distribution Date, reduced by any recoveries in respect of principal
on a Defaulted Home Loan received after the Due Period in which such Home Loan
became a Defaulted Home Loan.
Cut-Off Date: With respect to any Home Loan, the opening of business on
August 16, 1997.
Debt Instrument: The note or other evidence of indebtedness evidencing
the indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: A Home Loan with respect to which: (i) the
Property has been acquired through foreclosure or similar proceedings and sold,
(ii) any portion of a Monthly Payment is more than 180 calendar days past due
(without giving effect to any grace period), or (iii) the Servicer has
determined in accordance with customary servicing practices, that the Home Loan
is uncollectible.
Defective Home Loan: A Home Loan required to be repurchased pursuant to
Section 3.05 hereof.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee or its nominee or custodian by physical delivery
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to the Indenture Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC) transfer thereof (i)
by delivery of such certificated security endorsed to, or registered in
the name of, the Indenture Trustee or its nominee or custodian or
endorsed in blank to a financial intermediary (as defined in Section
8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated
securities as belonging to the Indenture Trustee or its nominee or
custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of the
transferor and increasing the appropriate securities account of a
financial intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or
its nominee or custodian (all of the foregoing, "Physical Property"),
and, in any event, any such Physical Property in registered form shall
be in the name of the Indenture Trustee or its nominee or custodian;
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Trust Account Property (as defined herein) to the Indenture Trustee or
its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, FNMA or FHLMC that is a book-entry security held through the
Federal Reserve System pursuant to federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such Trust Account Property to an
appropriate book-entry account maintained with a Federal Reserve Bank
by a financial intermediary that is also a "depository" pursuant to
applicable federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Indenture Trustee or its nominee or
custodian of the purchase by the Indenture Trustee or its nominee or
custodian of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to
federal book-entry regulations as belonging to the Indenture Trustee or
its nominee or custodian and indicating that such custodian holds such
Trust Account Property solely as agent for the Indenture Trustee or its
nominee or custodian; and such additional or alternative
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procedures as may hereafter become appropriate to effect complete
transfer of ownership of any such Trust Account Property to the
Indenture Trustee or its nominee or custodian, consistent with changes
in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Indenture Trustee or its nominee or custodian of such
uncertificated security, the making by such financial intermediary of
entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or
custodian.
Depositor: Financial Asset Securities Corp., a Delaware corporation,
and any successor thereto.
Determination Date: With respect to any Distribution Date, the fifth
Business Day preceding such Distribution Date.
Distribution Date: The 25th day of any month or if such 25th day is not
a Business Day, the first Business Day immediately following such day,
commencing in September 1997.
DTC: The Depository Trust Company.
Due Date: With respect to any Monthly Payment, the date on which such
Monthly Payment is required to be paid pursuant to the related Debt Instrument.
Due Period: With respect to any Determination Date or Distribution
Date, the calendar month immediately preceding such Determination Date or
Distribution Date, as the case may be; provided, however, that with respect to
the September 1997 Distribution Date, Due Period shall mean the period from
August 16, 1997 to August 31, 1997.
DCR: Duff & ▇▇▇▇▇▇ Credit Rating Co.
Early Termination Notice Date: Any date on which the Pool Principal
Balance is less than 10% of the Initial Principal Balance.
Eligible Account: At any time, an account which is any of the
following: (i) A segregated trust account that is maintained with the corporate
trust department of a depository institution (A) the long-term debt obligations
of which are at such time rated by each Rating Agency in one of their two
highest long-term rating categories, or (B) short-term debt obligations of which
are then rated by each Rating Agency in their highest short-term rating category
or (C) a segregated trust account department of a federal or state chartered
depository institution or trust company having capital and surplus of not less
than $100,000,000 acting in its fiduciary capacity;
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(ii) a segregated direct deposit account maintained with a depository
institution or trust company organized under the laws of the United States of
America, or any of the States thereof, or the District of Columbia, having a
certificate of deposit, short term deposit or commercial paper rating of at
least A-1+ by Standard & Poor's and P-1 by Moody's or (iii) an account that will
not cause any Rating Agency to downgrade or withdraw its then current rating(s)
assigned to the Notes as evidenced in writing by such Rating Agency.
Eligible Servicer: (a) Either a Person that (i) is servicing a
portfolio of mortgage loans, (ii) is legally qualified to service, and is
capable of servicing, the Home Loans and has all licenses required to service
mortgage loans, (iii) has demonstrated the ability professionally and
competently to service a portfolio of mortgage loans similar to the Home Loans
with reasonable skill and care, (iv) has a net worth calculated in accordance
with generally accepted accounting principles of at least $500,000 and (v) has
been approved in writing by the Rating Agencies or (b) Mego Mortgage
Corporation, Preferred Equities Corporation or Norwest Bank Minnesota, N.A.
Event of Default: As described in Section 8.01 hereof.
Excess Spread. With respect to any Distribution Date, the positive
excess, if any, of (x) the Collected Amount with respect to such Distribution
Date over (y) the amount distributed pursuant to clauses (i) and (ii) of Section
5.01(c) on such Distribution Date.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FICO Score: The credit evaluation scoring methodology developed by
Fair, ▇▇▇▇▇ and Company.
Final Maturity Date: With respect to the following Classes of
Securities:
Class A-1 Notes: September 25, 2023
Class A-2 Notes: September 25, 2023
Class A-3 Notes: September 25, 2023
Class A-4 Notes: September 25, 2023
Class M-1 Notes: September 25, 2023
Class M-2 Notes: September 25, 2023
Certificates: September 25, 2023
Fitch: Fitch Investors Service, L.P.
FNMA: The Federal National Mortgage Association and any successor
thereto.
Foreclosure Advances: As defined in Section 4.08(b).
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Foreclosed Loan. As of any date of determination, any Mortgage Loan
that has been discharged as a result of (i) the completion of foreclosure or
comparable proceedings; (ii) the Owner Trustee's acceptance of the deed or other
evidence of title to the related Property in lieu of foreclosure or other
comparable proceeding; or (iii) the acquisition by the Owner Trustee of title to
the related Property by operation of law.
Foreclosed Property. With respect to any Mortgage Loan, any Property
acquired by the Trust as a result of:
(i) the completion of foreclosure or comparable proceedings
with respect to the related Mortgage Loan;
(ii) the Co-Owner Trustee's acceptance of the deed or other
evidence of title to the related Property in lieu of foreclosure or
other proceeding with respect to the related Loan; or
(iii) the acquisition by the Co-Owner Trustee of title thereto
by operation of law.
Grant: As defined in the Indenture.
HUD: The United States Department of Housing and Urban Development and
any successor thereto.
Home Loan: An individual home loan that is conveyed to the Issuer
pursuant to this Agreement on the Closing Date, together with the rights and
obligations of a holder thereof and payments of principal in respect of such
Home Loan received on or after the Cut-Off Date and payments of interest in
respect of such Home Loan due on or after the Cut-Off Date, the Home Loans
subject to this Agreement being identified on the Home Loan Schedule as amended
from time to time and annexed hereto as Exhibit A.
Home Loan File: The Indenture Trustee's Home Loan File and the
Servicer's Home Loan File.
Home Loan Interest Rate: The fixed annual rate of interest borne by a
Debt Instrument, as shown on the related Home Loan Schedule.
Home Loan Pool: The pool of Home Loans.
Home Loan Purchase Agreement: The home loan purchase agreement between
the Seller, as seller, and the Depositor, as purchaser, dated as of August 16,
1997.
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Home Loan Schedule: The schedule of Home Loans specifying with respect
to each Home Loan, the information set forth on Exhibit A attached hereto, as
amended or supplemented from time to time.
Indenture: The Indenture, dated as of August 16, 1997, between the
Issuer and the Indenture Trustee.
Indenture Trustee: U.S. Bank National Association, d/b/a First Bank
National Association, a national banking association, as Indenture Trustee under
the Indenture and this Agreement acting on behalf of the Noteholders, or any
successor indenture trustee under the Indenture and this Agreement.
Indenture Trustee Fee: With respect to any Distribution Date, the
greater of (A) one-twelfth of 0.0275% times the Pool Principal Balance of the
Home Loans as of the opening of business on the first day of the calendar month
preceding the calendar month of such Distribution Date (or, with respect to the
first Distribution Date, the Original Pool Principal Balance); and (B) $500.00.
Indenture Trustee's Home Loan File: As defined in Section 2.05.
Independent: When used with respect to any specified Person, such
Person (i) is in fact independent of Mego, the Master Servicer, the Depositor or
any of their respective affiliates, (ii) does not have any direct financial
interest in or any material indirect financial interest in any of Mego, the
Master Servicer, the Depositor or any of their respective affiliates and (iii)
is not connected with any of Mego, the Master Servicer, the Depositor or any of
their respective affiliates, as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions; provided,
however, that a Person shall not fail to be Independent of Mego, the Master
Servicer, the Depositor or any of their respective affiliates merely because
such Person is the beneficial owner of 1% or less of any class of securities
issued by Mego, the Master Servicer, the Depositor or any of their respective
affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified
public accountants which is Independent.
Independent Contractor: As defined in Section 4.14(b).
Insurance Policies: With respect to any Property, any related insurance
policy.
Insurance Proceeds: With respect to any Property, all amounts collected
in respect of Insurance Policies and not required to be applied to the
restoration of the related Property or paid to the related Obligor.
Interest Advance: As defined in Section 4.08(a).
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Interest Determination Date: With respect to any Accrual Period, the
second London Business Day preceding the commencement of such Accrual Period.
Issuer: Mego Mortgage Home Loan Owner Trust 1997-4.
London Business Day: Any day on which banks in the City of London or
New York City are open and conducting transactions in United States dollars.
Loss Reimbursement Entitlement: With respect to any Distribution Date
and the Class M-1 Notes, Class M-2 Notes or the Certificates, the amount of
Allocable Loss Amounts applied to the reduction of the Class Principal Balance
of such Class pursuant to Section 5.02 and not reimbursed pursuant to Section
5.01 or 5.03 hereof as of such Distribution Date, plus (in the case of the Class
M-1 Notes and Class M-2 Notes) interest accrued on the unreimbursed portion
thereof at the applicable Note Interest Rate through the end of the Due Period
immediately preceding such Distribution Date; however, no interest shall accrue
on any amount of any such accrued and unpaid interest.
Majority Securityholders: (i) Until such time as the sum of the
Aggregate Note Principal Balance has been reduced to zero, the holder or holders
of in excess of 50% of the Class Principal Balance of all Classes of Notes (as a
result of which the holders of the Certificates and the Residual Instruments
shall be excluded from any rights or actions of the Majority Securityholders
during such period); (ii) thereafter and until such time as the Class Principal
Balance of the Certificate has been reduced to zero, the holder or holders of in
excess of 50% of the Class Principal Balance of the Certificates (as a result of
which the holders of the Residual Instruments shall be excluded from any rights
or actions of the Majority Securityholders during such period); and (iii)
thereafter, the holder or holders of in excess of 50% of the Percentage Interest
of the Residual Instruments.
Master Servicer: Norwest Bank Minnesota, N.A., a national banking
association, its successors in interest or any successor master servicer
appointed as herein provided.
Master Servicer Certificate: As defined in Section 6.01.
Master Servicer Fee: With respect to any Distribution Date, 1/12 times
0.08% times the Pool Principal Balance as of the opening of business on the
first day of the month preceding the month of such Distribution Date (or, with
respect to the first Distribution Date, the Original Pool Principal Balance).
Master Servicing Officer: Any officer of the Master Servicer
responsible for the administration and servicing of the Home Loans whose name
and specimen signature appears on a list of servicing officers furnished to the
Indenture Trustee by the Master Servicer, as such list may from time to time be
amended.
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Maturity Date: With respect to any Home Loan and as of any date of
determination, the date on which the last payment of principal is due and
payable under the related Debt Instrument.
Mezzanine Notes: The Class M-1 Notes and the Class M-2 Notes.
Monthly Cut-Off Date: The last day of any calendar month, and with
respect to any Distribution Date or related Determination Date, the last day of
the calendar month immediately preceding such Distribution Date or related
Determination Date.
Monthly Payment: With respect to any Home Loan and any Due Period, the
payment of principal and interest due in such Due Period from the Obligor
pursuant to the related Debt Instrument (as amended or modified, if applicable,
pursuant to Section 4.10). The Monthly Payment related to a Determination Date
or a Distribution Date shall be the Monthly Payment due for the preceding Due
Period.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor thereto.
Mortgage: With respect to any Mortgage Loan, the mortgage, deed of
trust or other instrument creating a mortgage lien (and in a title theory state
the document conveying title to the Property as security for the related Loan)
or other security interest on the related Property.
Mortgage Loan: As of any date of determination, each of the Home Loans,
secured by an interest in a Property, transferred and assigned to the Indenture
Trustee pursuant to Section 2.01(a).
Mortgagee or Obligee: With respect to any Home Loan as of any date of
determination, the holder of the related Debt Instrument and any related
Mortgage as of such date.
Mortgagor or Obligor: With respect to any Home Loan, the obligor(s) on
the related Debt Instrument.
Net Delinquency Calculation Amount: With respect to any Distribution
Date, beginning with the sixth Distribution Date, the excess, if any, of (x) the
product of (a) the product of 2.5 times the 61+ Delinquency Percentage (Rolling
Six-Month) and (b) the Pool Principal Balance as of the preceding Due Period
over (y) the aggregate of the amounts of Excess Spread for the three preceding
Distribution Dates.
Net Loan Losses: With respect to any Distribution Date and the Home
Loans that become Defaulted Home Loans during the immediately preceding Due
Period, the aggregate Principal Balance of such Defaulted Home Loans as of the
last day of such Due Period, after giving effect to any recoveries attributable
to principal from whatever source received during such Due Period with respect
to such Defaulted Home Loans, including without limitation any Insurance
Proceeds.
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Net Loan Rate: With respect to each Home Loan, the related Home Loan
Interest Rate, less the rate at which the Servicer Fee is calculated.
Nonrecoverable Advances: With respect to any Home Loan, (i) any
Interest Advance previously made and not reimbursed pursuant to Section
5.01(c)(i)(b), or (ii) an Interest Advance proposed to be made in respect of a
Home Loan which, in either case, in the good faith business judgment of the
Master Servicer, as evidenced by an Officer's Certificate delivered to Mego and
the Indenture Trustee no later than the Business Day following such
determination, would not be recoverable ultimately from the Payments received in
subsequent Due Periods in respect of that Home Loan.
Note(s): One or more of the Senior Notes, the Class M-1 Notes and the
Class M-2 Notes.
Note Distribution Account: The account established and maintained
pursuant to Section 5.01(a)(2).
Noteholder: A holder of a Note.
Noteholders' Interest Carry-Forward Amount: With respect to any
Distribution Date and each Class of Notes, the sum of (i) the excess of (A) the
applicable Noteholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding Noteholders' Interest Carry-Forward Amount
for such Class on such preceding Distribution Date, over (B) the amount in
respect of interest that is actually paid on such Class of Notes on such
preceding Distribution Date plus (ii) interest on such excess, to the extent
permitted by law, at the applicable Note Interest Rate from such preceding
Distribution Date through the current Distribution Date.
Noteholders' Interest Distributable Amount: With respect to each
Distribution Date and each Class of Notes, the sum of the applicable
Noteholders' Monthly Interest Distributable Amount and the applicable
Noteholders' Interest Carry-Forward Amount for such Class of Notes, if any, for
such Distribution Date.
Noteholders' Monthly Interest Distributable Amount: With respect to
each Distribution Date and Class of Notes, interest accrued during the related
Accrual Period at the respective Note Interest Rate for such Class of Notes on
the Class Principal Balance of such Class immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, on the
Closing Date).
Note Interest Rate: With respect to each Class of Notes, the per annum
rate of interest payable to the holders of such Class of Notes. The Note
Interest Rate with respect to the Class A-1 Notes is the lesser of (a) the sum
of (i) One-Month LIBOR and (ii) 0.125% or (b) 11.00% (provided that, for the
initial Distribution Date, the Class A-1 Note Interest Rate will be 5.75%); the
Note Interest Rate with respect to the Class A-2 Notes is equal to 6.77% per
annum; the Note Interest Rate with respect to the Class A-3 Notes is equal to
7.03% per annum; the Note Interest
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Rate with respect to the Class A-4 Notes is equal to 7.39% per annum; the Note
Interest Rate with respect to the Class M-1 Notes is equal to 7.50% per annum;
and the Note Interest Rate with respect to the Class M-2 Notes is equal to 7.65%
per annum; provided, however, with respect to the Class A-4, Class M-1 and Class
M-2 Notes with respect to any Distribution Date after the first Distribution
Date on which either Mego or the Master Servicer may exercise its option to
purchase the Home Loans pursuant to Section 9.01(b), the Note Interest Rate
shall be 7.89%, 8.00% and 8.15% per annum, respectively.
Note Register: The register established pursuant to Section 2.3 of the
Indenture.
Obligee: See Mortgagee.
Obligor: See Mortgagor.
Officer's Certificate: A certificate signed by (i) any Master Servicing
Officer or (ii) the Chairman of the Board, the Vice Chairman of the Board, the
President, a Vice President, an Assistant Vice President, the Treasurer, the
Secretary or one of the Assistant Treasurers or Assistant Secretaries of the
Depositor or Mego, as the case may be, as required by this Agreement.
One-Month LIBOR: With respect to any Accrual Period and the Class A-1
Notes, the rate determined by the Indenture Trustee on the related Interest
Determination Date on the basis of the offered rates of the Reference Banks for
one-month United States dollar deposits, as such rates appear on the Telerate
Screen 3750, as of 11:00 a.m. (London time) on such Interest Determination Date.
On each Interest Determination Date, One-Month LIBOR for the related Accrual
Period will be established by the Indenture Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations,
One-Month LIBOR for the related Accrual Period shall
be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole
multiple of 0.0625%.
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations,
One-Month LIBOR for the related Accrual Period shall
be the higher of (i) One-Month LIBOR as determined on
the previous Interest Determination Date and (ii) the
Reserve Interest Rate.
Opinion of Counsel. A written opinion of counsel (who is acceptable to
the Rating Agencies), who may be employed by Mego, the Master Servicer, the
Depositor or any of their respective affiliates.
Original Class Principal Balance: In the case of the Class A-1 Notes,
$23,600,000; in the case of the Class A-2 Notes, $18,000,000; in the case of the
Class A-3 Notes, $4,150,000; in the
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case of the Class A-4 Notes, $7,957,000; in the case of the Class M-1 Notes,
$9,715,000; in the case of the Class M-2 Notes, $5,315,000 and in the case of
the Certificates, $4,583,262.
Original Pool Principal Balance: $73,320,262.07 which is the Pool
Principal Balance, as of the Cut-Off Date.
Other Fees: With respect to any Distribution Date, (i) amounts in
respect of fees and expenses due to any provider of services to the Trust,
except the Indenture Trustee, the Master Servicer, the Servicer and also except
any Person, the fees of which are required by this Agreement to be paid by the
Master Servicer, the Servicer, or the Indenture Trustee; (ii) any taxes assessed
against the Trust; and (iii) the reasonable transition expenses of a successor
Master Servicer incurred in acting as successor Master Servicer.
Overcollateralization Amount: With respect to any Distribution Date,
the amount equal to the excess of (A) the Pool Principal Balance as of the last
day of the related Due Period over (B) the aggregate of the Class Principal
Balances of the Securities (after giving effect to all distributions on the
Classes of Securities on such Distribution Date).
Overcollateralization Deficiency Amount: With respect to any
Distribution Date, the excess, if any, of the Overcollateralization Target
Amount over the Overcollateralization Amount (such Overcollateralization Amount
to be calculated after giving effect to all prior distributions on the Classes
of Securities on such Distribution Date pursuant to Section 5.01(c)(i) and (ii)
hereof).
Overcollateralization Target Amount: (A) With respect to any
Distribution Date occurring prior to the Stepdown Date, an amount equal to the
greater of (x) 7.50% of the Original Pool Principal Balance or (y) the Net
Delinquency Calculation Amount; (B) with respect to any other Distribution Date,
an amount equal to the greater of (x) 15% of the Pool Principal Balance as of
the end of the related Due Period or (y) the Net Delinquency Calculation Amount;
provided, however, that the Overcollateralization Target Amount shall in no
event be less than 0.50% of the Original Pool Principal Balance.
Ownership Interest: As to any Security, any ownership or security
interest in such Security, including any interest in such Security as the holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial, as owner or as pledgee.
Owner Trustee: Wilmington Trust Company, as owner trustee under the
Trust Agreement, and any successor owner trustee under the Trust Agreement.
Owner Trustee Fee: $4,000.
Owner Trustee Fee Reserve: With respect to any Distribution Date,
$333.33.
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Payment: With respect to any Home Loan or the related Foreclosed
Property and any Distribution Date or related Determination Date, all amounts
received or collected on account of principal and interest by or on behalf of
the Master Servicer during the preceding Due Period (or with respect to the
interest component of any Monthly Payment due during such Due Period, received
or collected by or on behalf of the Master Servicer during the period commencing
on the first day of the preceding Due Period and ending prior to such
Determination Date) in respect of such Home Loan or Foreclosed Property from
whatever source, including without limitation, amounts received or collected
from, or representing:
(i) the related Obligor;
(ii) the application to amounts due on such Home Loan (or, in
the case of any Foreclosed Property, to amounts previously due on the
related Foreclosed Loan) of any related Insurance Proceeds (to the
extent provided in Section 4.16(b)), any related condemnation awards or
settlements or any payments made by any related guarantor or
third-party credit-support provider;
(iii) the operation or sale of the related Foreclosed
Property;
(iv) the Purchase Price with respect to such Home Loan or
Substitution Adjustment Amounts with respect thereto; or
(v) the Termination Price pursuant to Section 9.01(b);
provided, however, that any amount the Servicer shall be entitled to retain as
additional servicer compensation pursuant to Section 6.05(a) of the Servicing
Agreement shall be excluded from the calculation of Payment.
Percentage Interest: As defined in the Trust Agreement.
Permitted Investments: Each of the following:
(a) Direct obligations of the United States of America
(including obligations issued or held in book-entry form on the books of the
Department of the Treasury, and CATS and TIGRS) or obligations the principal of
and interest on which are unconditionally guaranteed by the United States of
America.
(b) Bonds, debentures, notes or other evidence of indebtedness
issued or guaranteed by any of the following federal agencies and provided such
obligations are backed by the full faith and credit of the United States of
America (stripped securities are only permitted if they have been stripped by
the agency itself):
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1. U.S. Export-Import Bank (Eximbank)
A. Direct obligations or fully guaranteed
certificates of beneficial ownership
2. Farmers Home Administration (FmHA)
A. Certificates of beneficial ownership
3. Federal Financing Bank
4. Federal Housing Administration (FHA)
A. Debentures
5. General Services Administration
A. Participation certificates
6. U.S. Maritime Administration
A. Guaranteed Title XI financing
7. U.S. Department of Housing and Urban Development
(HUD)
A. Project Notes
B. Local Authority Bonds
C. New Communities Debentures - U.S. government
guaranteed debentures
D. U.S. Public Housing Notes and Bonds - U.S.
government guaranteed public housing notes
and bonds
(c) Bonds, debentures, notes or other evidence of indebtedness
issued or guaranteed by any of the following non-full faith and credit U.S.
government agencies that are rated by both Rating Agencies in either the highest
long-term rating categories or in one of the top two highest short-term rating
categories (stripped securities are only permitted if they have been stripped by
the agency itself):
1. Federal Home Loan Bank System
A. Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC)
A. Participation Certificates
B. Senior debt obligations
3. Federal National Mortgage Association (FNMA)
A. Mortgage-backed securities and senior debt
obligations
4. Student Loan Marketing Association
A. Senior debt obligations
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5. Resolution Funding Corp. obligations
6. Farm Credit System
A. Consolidated systemwide bonds and notes
(d) Money market funds registered under the Investment Company
Act of 1940, as amended, whose shares are registered under the Securities Act,
and having a rating by Standard & Poor's of AAAm-G; AAAm; or AAm and a rating by
Moody's of Aaa.
(e) Certificates of deposit secured at all times by collateral
described in (a) and/or (b) above. Such certificates must be issued by
commercial banks, savings and loan associations or mutual savings banks which
have a short term rating by Moody's of P-1 or higher and by Standard & Poor's of
A-1 or higher. The collateral must be held by a third party and the Indenture
Trustee must have a perfected first security interest in the collateral.
(f) Certificates of deposit, savings accounts, deposit
accounts or money market deposits which are fully insured by FDIC, including BIF
and SAIF.
(g) Investment agreements, including guaranteed investment
contracts, acceptable to each Rating Agency.
(h) Commercial paper rated "Prime - 1" by Moody's and "A-1" or
better by Standard & Poor's.
(i) Bonds or notes issued by any state or municipality which
are rated by Moody's and Standard & Poor's in the highest long term rating
categories or one of the two highest short-term rating categories assigned by
such agencies.
(j) Federal funds or bankers acceptances with a maximum term
of one year of any bank which has an unsecured, uninsured and unguaranteed
obligation rating of "Prime - 1" by Moody's and "A-1" or "A" or better by
Standard & Poor's.
(k) Repurchase agreements providing for the transfer of
securities from a dealer bank or securities firm (seller/borrower) to the Trust
(buyer/lender), and the transfer of cash from the Trust to the dealer bank or
securities firm with an agreement that the dealer bank or securities firm will
repay the cash plus a yield to the Trust in exchange for the securities at a
specified date.
Repurchase agreements ("repos") must satisfy the following
criteria.
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1. Repos must be between the Trust and a dealer bank or
securities firm which are:
A. Primary dealers on the Federal Reserve
reporting dealer list which are rated A or
better by Standard & Poor's and P-1 by
Moody's, or
▇. ▇▇▇▇▇ rated "A" or above by Standard &
Poor's and P-1 by Moody's.
2. The written repo contract trust must include the
following:
A. Securities which are acceptable for transfer
are:
(1) Direct U.S. governments, or
(2) Federal agencies backed by the full
faith and credit of the U.S.
government (or FNMA or FHLMC) other
than mortgage backed securities.
B. The term of the repo may be up to 30 days
C. The collateral must be delivered to the
Indenture Trustee (if the Indenture Trustee
is not supplying the collateral) or third
party acting as agent for the Indenture
Trustee (if the Indenture Trustee is
supplying the collateral)
before/simultaneous with payment (perfection
by possession of certificated securities).
D. Valuation of Collateral
(1) The securities must be valued
weekly, marked-to-market at current
market price plus accrued interest.
(a) The value of collateral must be
equal to 104% of the amount of cash
transferred by the Trust to the
dealer bank or security firm under
the repo plus accrued interest. If
the value of securities held as
collateral slips below 104% of the
value of the cash transferred by
the Trust, then additional cash
and/or acceptable securities must
be transferred. If, however, the
securities used as collateral are
FNMA or FHLMC, then the value of
collateral must equal 105%.
3. Legal opinion which must be delivered to the
Indenture Trustee:
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a. Repo meets guidelines under state law for
legal investment of public funds.
Each reference in this definition of "Permitted Investments" to the
Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to Standard & Poor's and
Moody's.
Person: Any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: With respect to any date of determination, the
sum of the Principal Balances for all Home Loans as of the end of the preceding
Due Period.
Principal Balance: With respect to any Home Loan, and for any date of
determination, the Principal Balance of such Home Loan as of the Cut-Off Date
minus all principal reductions credited against the Principal Balance of such
Home Loan on or subsequent to the Cut-Off Date for such Home Loan; provided,
that with respect to any Defaulted Home Loan, the Principal Balance shall be
zero as of the end of the Due Period in which such Home Loan becomes a Defaulted
Home Loan.
Property: The property (real, personal or mixed) encumbered by the
Mortgage which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus, dated June 20, 1997, as
supplemented by the Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated as of August 26,
1997, prepared by the Seller and the Depositor in connection with the issuance
and sale of the Securities.
Purchase Price: With respect to a Home Loan, means the Principal
Balance of such Home Loan as of the date of purchase, plus unpaid accrued
interest at the related Home Loan Interest Rate to the last day of the month in
which such purchase occurs (without regard to any Interest Advance that may have
been made with respect to such Home Loan).
Qualified Substitute Home Loan: A Home Loan: (i) having characteristics
such that the representations and warranties made pursuant to Section 3.03(b)
with respect to the Home Loans are true and correct as of the date of
substitution with respect to such Home Loan; (ii) each Monthly Payment with
respect to such Home Loan shall be greater than or equal to the Monthly Payments
due in the same Due Period on the Home Loan for which such Qualified Substitute
Home Loan is replacing; (iii) the Maturity Date with respect to such Home Loan
shall be no later
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than the Maturity Date of the Home Loan for which such Qualified Substitute Home
Loan is replacing; (iv) as of the date of substitution, the Principal Balance of
such Home Loan is less than or equal to (but not more than 1% less than) the
Principal Balance of the Home Loan for which such Qualified Substitute Home Loan
is replacing; (v) the Home Loan Interest Rate with respect to such Home Loan is
at least equal to the Home Loan Interest Rate of the Home Loan for which such
Qualified Substitute Home Loan is replacing; (vi) with respect to which the FICO
score is equal to or greater than the FICO score for such Home Loan for which
such Qualified Substitute Home Loan is replacing; and (vii) which is not a real
estate mortgage within the meaning of Treasury Regulation ss.301.7701(i) - 1(d);
provided however, in the event more than one Qualified Substitute Home Loan is
replacing one or more Defective Home Loans on any date, in which case (i) the
weighted average Home Loan Interest Rate for such Qualified Substitute Home
Loans must equal or exceed the weighted average Home Loan Interest Rate of the
Defective Home Loans immediately prior to giving effect to the substitution, in
each case weighted on the basis of the outstanding Principal Balance of such
loans as of such day, (ii) the sum of the Monthly Payments with respect to such
Qualified Substitute Home Loans shall be greater than or equal to the Monthly
Payments due in the same Due Period on the Defective Home Loans being replaced,
and (iii) as of the date of substitution, the aggregate Principal Balances of
such Qualified Substitute Home Loans are less than or equal to (but not more
than 1% less than) the aggregate Principal Balances of the Defective Home Loans
being replaced.
Rating Agency or Rating Agencies: Any of (i) Standard & Poor's, (ii)
Fitch, or (iii) DCR or, if no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable person designated by the Issuer, notice of
which designation shall have been given to the Indenture Trustee and the Master
Servicer.
Ratings: The ratings initially assigned to the Notes and the
Certificates by the Rating Agencies, as evidenced by letters from the Rating
Agencies.
Record Date: With respect to each Distribution Date, the close of
business on the last Business Day of the month immediately preceding the month
in which such Distribution Date occurs; provided that the first Record Date will
be September 5, 1997.
Reference Banks: Bankers Trust Company, ▇▇▇▇▇▇▇'▇ Bank Plc, The Bank of
Tokyo and National Westminster Bank Plc; provided that if any of the foregoing
banks are not suitable to serve as a Reference Bank, then any leading banks
selected by the Indenture Trustee which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London, England, (ii) not controlling, under
the control of or under common control with the Depositor or any affiliate
thereof, (iii) whose quotations appear on the Telerate Screen 3750 on the
relevant Interest Determination Date and (iv) which have been designated as such
by the Indenture Trustee.
Regular Distribution Amount: With respect to any Distribution Date, the
lesser of (a) the Collected Amount less the amounts required to be distributed
pursuant to Section 5.01(c)(i) on
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such Distribution Date or (b) the sum of (i) the Noteholders' Interest
Distributable Amount, (ii) the Certificateholders' Interest Distributable Amount
and (iii) the Regular Principal Distribution Amount, in each case for such
Distribution Date.
Regular Principal Distribution Amount: With respect to each
Distribution Date, an amount equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes of
Securities immediately prior to such Distribution Date; or
(B) The sum of the following amounts (without duplication) with respect
to the immediately preceding Due Period: that portion of all Payments received
on Home Loans allocable to principal for such Distribution Date, including all
full and partial principal prepayments (including (i) such payments in respect
of such Home Loans that became Defaulted Home Loans on or prior to the end of
the preceding Due Period, (ii) the portion of the Purchase Price allocable to
principal of all Defective Loans or Defaulted Loans and the portion of the
Termination Price, if any, set forth in Section 9.01(b) allocable to principal
with respect to the Home Loans, and (iii) any Substitution Adjustment Amounts
deposited to the Note Distribution Account pursuant to Section 3.05 on the
previous Determination Date).
Reserve Interest Rate: With respect to any Interest Determination Date,
the rate per annum that the Indenture Trustee determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
0.0625%) of the one-month United States dollar lending rates which New York City
banks selected by the Indenture Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest one-month United States dollar
lending rate which New York City banks selected by the Indenture Trustee are
quoting on such Interest Determination Date to leading European banks.
Residual Instruments: The instruments evidencing the right to the
amount remaining, if any, after all prior distributions have been made under
this Agreement, the Indenture and the Trust Agreement on each Distribution Date
and certain other rights to receive amounts hereunder and under the Trust
Agreement.
Responsible Officer: When used with respect to the Master Servicer or
the Indenture Trustee, any officer of the Master Servicer or any officer within
the Corporate Trust Office of the Indenture Trustee, respectively, including
with respect to each, any Vice President, Assistant Vice President, Secretary,
Assistant Secretary or any other officer of the Indenture Trustee or Master
Servicer customarily performing functions similar to those performed by any of
the above designated officers and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject. When used with respect
to the Issuer, any officer in the Corporate Trust Administration Department of
the Owner Trustee with direct responsibility for the administration of the Trust
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Agreement and this Agreement on behalf of the Issuer. When used with respect to
the Depositor or the Seller, the President or any Vice President, Assistant Vice
President, or any Secretary or Assistant Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Securities: The Notes and/or the Certificates, as applicable.
Securities Act: The Securities Act of 1933, as amended.
Securityholder: A holder of a Note or Certificate, as applicable.
Seller: Mego, in its capacity as the seller hereunder.
Senior Notes: The Class A-1, Class A-2, Class A-3 and Class A-4 Notes.
Senior Optimal Principal Balance: With respect to any Distribution Date
prior to the Stepdown Date, zero; with respect to any other Distribution Date,
an amount equal to the Pool Principal Balance as of the preceding Determination
Date minus the greater of (a) the sum of (1) 53.50% of the Pool Principal
Balance as of the preceding Determination Date and (2) the Overcollateralization
Target Amount for such Distribution Date (without giving effect to the proviso
in the definition thereof) or (b) 0.50% of the Original Pool Principal Balance;
provided however, that the Senior Optimal Principal Balance shall never be less
than zero or greater than the Aggregate Note Principal Balance as of the Closing
Date.
Series or Series 1997-4: Mego Mortgage Home Loan Asset Backed
Securities, Series 1997-4.
Servicer: Mego, in its capacity as the servicer hereunder, or any other
Eligible Servicer with whom the Master Servicer has entered into a Servicing
Agreement pursuant to Section 4.02.
Servicer Fee: With respect to any Distribution Date (other than the
first Distribution Date), 1/12 times 1.00% times the Pool Principal Balance, as
of the opening of business on the first day of the month preceding the month of
such Distribution Date. With respect to the first Distribution Date, 15/360
times 1.00% times the Original Pool Principal Balance.
Servicer Review Report: As defined in Section 4.05(d).
Servicer Termination Event: With respect to the Servicing Agreement,
the events specified in Section 7.02 therein.
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Servicer's Home Loan Files: As defined in Section 2.05(b).
Servicing Agreement: The servicing agreement dated as of August 16,
1997 between Mego, as Servicer, the Master Servicer, the Indenture Trustee and
the Trust and any other agreement entered into in accordance with Section 4.02.
Standard & Poor's: Standard & Poor's Ratings Services, a division of
The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
Stepdown Date: The first Distribution Date occurring after August 2000
as to which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to an amount less than
or equal to 50% of the Original Pool Principal Balance;
(2) the Net Delinquency Calculation Amount is less than 7.50% of the
Original Pool Principal Balance; and
(3) the aggregate Class Principal Balance of the Senior Notes (after
giving effect to distributions of principal on such Distribution Date) will be
able to be reduced on such Distribution Date (such determination to be made by
the Indenture Trustee prior to making actual distributions on such Distribution
Date) to an amount equal to or less than the excess of (i) the Pool Principal
Balance as of the preceding Determination Date over (ii) the greater of (1) the
sum of (x) 53.50% of the Pool Principal Balance as of the preceding
Determination Date and (y) the Overcollateralization Target Amount for such
Distribution Date (such Overcollateralization Target Amount calculated without
giving effect to the proviso in the definition thereof and calculated pursuant
only to clause (B) in the definition thereof) or (2) 0.50% of the Original Pool
Principal Balance.
Servicing Record. The records for each Home Loan maintained by the
Master Servicer pursuant to Section 4.03.
Servicing Standard. The standard set forth in Section 4.01(a).
61+ Day Delinquent Loan. With respect to any Determination Date or
related Distribution Date, a Home Loan, other than a Defaulted Home Loan, with
respect to which any portion of a Monthly Payment is, as of the related Monthly
Cut-Off Date, 61 days or more past due (without giving effect to any grace
period and including Home Loans in foreclosure and Foreclosed Property that are
not otherwise Defaulted Home Loans) and unpaid by the Obligor.
61+ Delinquency Percentage (Rolling Six Month). With respect to any
Determination Date or related Distribution Date, the average of the percentage
equivalents of the fractions determined for each of the six immediately
preceding Due Periods the numerator of each of which is equal to the aggregate
Principal Balance of Home Loans that are 61+ Day Delinquent
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Loans as of the end of such Due Period and the denominator of which is the Pool
Principal Balance as of the end of such Due Period.
Substitution Adjustment Amount: The meaning assigned to such term in
Section 3.05.
Substitution Date: As defined in Section 3.05.
Termination Date: The earlier of (a) the Distribution Date in September
2023 and (b) the Distribution Date next following the Monthly Cut-Off Date
coinciding with or next following the date of the liquidation or disposition of
the last asset held by the Trust pursuant to Sections 4.13 or 9.01.
Termination Price: As defined in Section 9.01(b).
Total Expected Loan Loss Percentage: With respect to any Distribution
Date, the percentage equivalent of the fraction, the numerator of which is equal
to the sum of (a) Cumulative Net Losses for such Distribution Date, (b) 25% of
the aggregate Principal Balance of Home Loans which are between 31 and 60 days
past due (without giving effect to any grace period) as of the last day of the
preceding Due Period, (c) 50% of the aggregate Principal Balance of Home Loans
which are between 61 and 90 days past due (without giving effect to any grace
period) as of the last day of the preceding Due Period, (d) the aggregate
Principal Balance of the Home Loans which are more than 90 days past due
(without giving effect to any grace period) as of the last day of the preceding
Due Period and the denominator of which is the Original Pool Principal Balance.
Transaction Documents. This Agreement, the Home Loan Purchase
Agreement, the Trust Agreement, the Servicing Agreement, the Indenture and the
Administration Agreement.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in any Trust Account and all proceeds of the foregoing.
Trust Accounts: The Note Distribution Account, the Certificate
Distribution Account and the Collection Account.
Trust Agreement: The Trust Agreement dated as of August 16, 1997, among
the Depositor, the Co-Owner Trustee, the Owner Trustee and Mego Mortgage
Corporation.
Trust Estate: The assets subject to this Agreement, the Trust Agreement
and the Indenture and assigned to the Indenture Trustee, which assets consist
of: (i) such Home Loans as from time to time are subject to this Agreement,
including Qualified Substitute Home Loans added to the Trust from time to time,
together with the Servicer's Home Loan Files and the Indenture Trustee's Home
Loan Files relating thereto and all proceeds thereof, (ii) the Mortgages and
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security interests in Properties, (iii) all payments of principal in respect of
Home Loans received on or after the Cut-Off Date and payments of interest in
respect of Home Loans due on or after the Cut-Off Date, (iv) such assets as from
time to time are identified as Foreclosed Property, (v) such assets and funds as
are from time to time deposited in the Collection Account, the Note Distribution
Account and the Certificate Distribution Account, including amounts on deposit
in such accounts which are invested in Permitted Investments, (vi) the Issuer's
rights under the Insurance Policies and any Insurance Proceeds, and (vii) all
right, title and interest of the Depositor in and to the obligations of the
Seller under the Home Loan Purchase Agreement in which the Depositor acquired
the Home Loans from the Seller.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture and the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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Section 1.03 Interest Calculations.
Except as otherwise set forth herein, all calculations of accrued
interest on the Home Loans, the Notes (except the Class A-1 Notes), the
Certificates and accrued fees shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All calculations on the Class A-1 Notes
shall be made on the basis of the actual number of days in the applicable
Accrual Period and a 360-day year.
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ARTICLE II.
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans.
(a) As of the Closing Date, in consideration of the Issuer's delivery
of the Notes, Certificates and Residual Instruments to the Depositor or its
designee, upon the order of the Depositor, the Depositor, as of the Closing Date
and concurrently with the execution and delivery hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
but subject to the other terms and provisions of this Agreement, all of the
right, title and interest of the Depositor in and to the Trust Estate. The
foregoing sale, transfer, assignment, set over and conveyance does not and is
not intended to result in a creation or an assumption by the Issuer of any
obligation of the Depositor, the Seller or any other person in connection with
the Trust Estate or under any agreement or instrument relating thereto except as
specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to
it of the Trust Estate, including from the Depositor all right, title and
interest of the Depositor in and to the Trust Estate, receipt of which is hereby
acknowledged by the Issuer, and the acceptance of which is made in good faith
and without notice or knowledge of any adverse claims or liens. Concurrently
with such delivery and in exchange therefor, the Issuer has pledged to the
Indenture Trustee the Trust Estate, and the Indenture Trustee, pursuant to the
written instructions of the Issuer, has executed and caused to be authenticated
and delivered the Notes to the Depositor or its designee, upon the order of the
Issuer. In addition, concurrently with such delivery and in exchange therefor,
the Owner Trustee, pursuant to the instructions of the Depositor, has executed
(not in its individual capacity, but solely as Owner Trustee on behalf of the
Issuer) and caused to be authenticated and delivered the Certificates and
Residual Instruments to the Depositor or its designee, upon the order of the
Depositor.
Section 2.02 Reserved.
Section 2.03 Ownership and Possession of Home Loan Files.
Upon the issuance of the Securities, with respect to the Home Loans,
the ownership of each Debt Instrument, the related Mortgage and the contents of
the related Servicer's Home Loan File and the Indenture Trustee's Home Loan File
shall be vested in the Owner Trustee and the Co-Owner Trustee and pledged to the
Indenture Trustee for the benefit of the Noteholders, although possession of the
Servicer's Home Loan Files (other than items required to be maintained in the
Indenture Trustee's Home Loan Files) on behalf of and for the benefit of the
Securityholders shall remain with Mego, and the Indenture Trustee shall take
possession of the Indenture Trustee's Home Loan Files as contemplated in Section
2.06.
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Section 2.04 Books and Records.
The sale of each Home Loan shall be reflected on the Depositor's or the
Seller's, as the case may be, balance sheets and other financial statements as a
sale of assets by the Depositor or the Seller, as the case may be, under
generally accepted accounting principles ("GAAP"). The Master Servicer shall
maintain, or cause to be maintained pursuant to Section 4.03, a complete set of
books and records for each Home Loan which shall be clearly marked to reflect
the ownership of each Home Loan by the Owner Trustee and the Co-Owner Trustee
and the pledge to the Indenture Trustee for the benefit of the Securityholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Home
Loans and the other property specified in Section 2.01(a) from the Depositor to
the Trust and such property shall not be property of the Depositor. If the
assignment and transfer of the Home Loans and the other property specified in
this Section 2.01(a) to the Owner Trustee and Co-Owner Trustee pursuant to this
Agreement or the conveyance of the Home Loans or any of such other property to
the Owner Trustee and Co-Owner Trustee is held or deemed not to be a sale or is
held or deemed to be a pledge of security for a loan, the Depositor intends that
the rights and obligations of the parties shall be established pursuant to the
terms of the Agreement and that, in such event, (i) the Depositor shall be
deemed to have granted and does hereby grant to the Owner Trustee and Co-Owner
Trustee a first priority security interest in the entire right, title and
interest of the Depositor in and to the Home Loans and all other property
conveyed to the Owner Trustee and Co-Owner Trustee pursuant to Section 2.01 and
all proceeds thereof, and (ii) this Agreement shall constitute a security
agreement under applicable law. Within five days of the Closing Date, the
Depositor shall cause to be filed UCC-1 financing statements naming the Owner
Trustee and Co-Owner Trustee as "secured parties" and describing the Home Loans
being sold by the Depositor to the Trust with the office of the Secretary of
State of the State in which the Depositor is located.
Section 2.05 Delivery of Home Loan Documents.
(a) With respect to each Home Loan, on the Closing Date the Seller, at
the direction of the Depositor, shall have delivered or caused to be delivered
to the Indenture Trustee each of the following documents (collectively, the
"Indenture Trustee's Home Loan Files"):
(i) The original Debt Instrument, showing a complete chain of
endorsements or assignments from the named payee to the Trust and
endorsed as follows: "Pay to the order of U.S. Bank National
Association, d/b/a First Bank National Association, as Indenture
Trustee and Co-Owner Trustee for Mego Mortgage Home Loan Owner Trust
1997-4, without recourse";
(ii) If such Home Loan is a Mortgage Loan, the original
Mortgage with evidence of recording indicated thereon (except that a
true copy thereof certified by an appropriate public official may be
substituted); provided, however, that if the Mortgage with evidence of
recording thereon cannot be delivered concurrently with the execution
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and delivery of this Agreement solely because of a delay caused by the
public recording office where such Mortgage has been delivered for
recordation, there shall be delivered to the Indenture Trustee a copy
of such Mortgage certified as a true copy in an Officer's Certificate
which shall certify that such Mortgage has been delivered to the
appropriate public recording office for recordation, and there shall be
promptly delivered to the Indenture Trustee such Mortgage with evidence
of recording indicated thereon upon receipt thereof from the public
recording official (or a true copy thereof certified by an appropriate
public official may be delivered to the Indenture Trustee);
(iii) If such Home Loan is a Mortgage Loan, the original
Assignment of Mortgage, in recordable form. Such assignments may be
blanket assignments, to the extent such assignments are effective under
applicable law, for Mortgages covering Mortgaged Properties situated
within the same county. If the Assignment of Mortgage is in blanket
form an assignment of Mortgage need not be included in the individual
Home Loan File;
(iv) If such Home Loan is a Mortgage Loan, all original
intervening assignments of the Mortgage, showing a complete chain of
assignments from the named mortgagee to the assignor to the Indenture
Trustee, with evidence of recording thereon (or true copies thereof
certified by appropriate public officials may be substituted);
provided, however, that if the intermediate assignments of mortgage
with evidence of recording thereon cannot be delivered concurrently
with the execution and delivery of this Agreement solely because of a
delay caused by the public recording office where such assignments of
Mortgage have been delivered for recordation, there shall be delivered
to the Indenture Trustee a copy of each such assignment of Mortgage
certified as a true copy in an Officer's Certificate of Mego, which
shall certify that each such assignment of Mortgage has been delivered
to the appropriate public recording office for recordation, and there
shall be promptly delivered to the Indenture Trustee such assignments
of Mortgage with evidence of recording indicated thereon upon its
receipt thereof from the public recording official (or true copies
thereof certified by an appropriate public official may be delivered to
the Indenture Trustee);
(v) An original of each assumption or modification agreement,
if any, relating to such Home Loan.
(b) With respect to each Home Loan, on the Closing Date, the Seller, at
the direction of the Depositor, shall have delivered or caused to be delivered
to Mego, as the designated agent of the Indenture Trustee each of the following
documents (collectively, the "Servicer's Home Loan Files"): (A) an original or
copy of truth-in-lending disclosure, (B) an original or copy of the credit
application, (C) an original or copy of the consumer credit report, (D) an
original or copy of verification of employment and income, or verification of
self-employment income, (E) an original or copy of contract of work or written
description with cost estimates, if applicable, (F) an original or copy of
report of inspection of improvements to the Property, if applicable, (G) to the
extent not included in (B), an original or a copy of a written verification,
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or an underwriter's notation of obtaining a verbal verification from the holder
of any senior mortgage or deed of trust that such Mortgagor at the time of
origination was not more than 30 days delinquent on any senior mortgage or deed
of trust on the Property, (H) (a) if the original principal balance is between
$35,001 and $40,000, (1) evidence that the borrower has a FICO Score of at least
640, a debt to income ratio no greater than 45%, and disposable income of at
least $1,500 per month, or (2) (I) a copy of the HUD-1 Closing Statement
indicating the sale price, or (II) an Uniform Residential Appraisal Report, or
(III) a Drive-By Appraisal documented on either FHLMC Form 704 or FNMA Form
2055, or (IV) a tax assessment, or (V) a broker's price opinion; (b) if the
original principal balance is between $40,001 and $50,000, (1) a copy of the
HUD-1 Closing Statement indicating the sale price, or (2) an Uniform Residential
Appraisal Report, or (3) a Drive-By Appraisal documented on either FHLMC Form
704 or FNMA Form 2055, or (4) a tax assessment, or (5) a broker's price opinion;
or (c) if the original principal balance exceeds $50,000, a full Uniform
Residential Appraisal Report prepared by a national appraisal firm, and (I) an
original or a copy of a title search as of the time of origination with respect
to the Property.
(c) [Reserved]
(d) The Indenture Trustee shall take and maintain continuous physical
possession of the Indenture Trustee's Home Loan Files in the State of Minnesota,
and in connection therewith, shall act solely as agent for the holders of the
Securities in accordance with the terms hereof and not as agent for Mego or any
other party.
(e) Within 60 days of the Closing Date, Mego, at its own expense, shall
cause the Indenture Trustee to record each Assignment of Mortgage (which may be
a blanket assignment if permitted by applicable law) in the appropriate real
property or other records; provided, however, the Indenture Trustee need not
cause to be recorded any such Assignment of Mortgage which relates to a Mortgage
Loan in any jurisdiction under the laws of which, as evidenced by an Opinion of
Counsel delivered by Mego (at Mego's expense) to the Indenture Trustee, and the
Rating Agencies, the recordation of such Assignment of Mortgage is not necessary
to protect the Indenture Trustee's interest in the related Mortgage Loan against
the claims of any subsequent transferee or any creditor of the Depositor or the
Seller. With respect to any Assignment of Mortgage as to which the related
recording information is unavailable within 60 days following the Closing Date,
such Assignment of Mortgage shall be submitted for recording within 30 days
after receipt of such information but in no event later than one year after the
Closing Date. The Indenture Trustee shall be required to retain a copy of each
Assignment of Mortgage submitted for recording. In the event that any such
Assignment of Mortgage is lost or returned unrecorded because of a defect
therein, Mego shall promptly prepare a substitute Assignment of Mortgage or cure
such defect, as the case may be, and thereafter the Indenture Trustee shall be
required to submit each such Assignment of Mortgage Loan for recording.
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Section 2.06 Acceptance by Indenture Trustee of the Home Loans;
Certain Substitutions; Initial Certification.
(a) The Indenture Trustee agrees to execute and deliver on the Closing
Date an acknowledgment of receipt of the Indenture Trustee's Home Loan File for
each Home Loan. The Indenture Trustee declares that it will hold such documents
and any amendments, replacements or supplements thereto, as well as any other
assets included in the Trust Estate, upon and subject to the conditions set
forth herein for the benefit of the Securityholders in good faith and without
notice of any adverse claims or liens. The Indenture Trustee agrees, for the
benefit of the Securityholders to review each Indenture Trustee's Home Loan File
within 45 days after the Closing Date (or, with respect to any Qualified
Substitute Home Loan, within 45 days after the conveyance of the related Home
Loan to the Trust) and to deliver to the Seller, the Depositor, the Indenture
Trustee, the Issuer and the Master Servicer a certification to the effect that,
as to each Home Loan listed in the Home Loan Schedule (other than any Home Loan
paid in full or any Home Loan specifically identified in such certification as
not covered by such certification), (i) all documents required to be delivered
to the Indenture Trustee pursuant to this Agreement are in its possession (other
than as expressly permitted in Section 2.05), (ii) all documents delivered by
the Depositor and the Seller to the Indenture Trustee pursuant to Section 2.05
have been reviewed by the Indenture Trustee and have not been mutilated or
damaged and appear regular on their face (handwritten additions, changes or
corrections shall not constitute irregularities if initialed by the Obligor) and
relate to such Home Loan, (iii) based on the examination of the Indenture
Trustee, and only as to the foregoing documents, the information set forth on
the Home Loan Schedule accurately reflects the information set forth in the
Indenture Trustee's Home Loan File and (iv) each Debt Instrument has been
endorsed as provided in Section 2.05. Neither the Issuer nor the Indenture
Trustee shall be under any duty or obligation (i) to inspect, review or examine
any such documents, instruments, certificates or other papers to determine that
they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face or (ii) to
determine whether any Indenture Trustee's Home Loan File should include any of
the documents specified in Section 2.05(a)(v).
(b) The Servicer's Home Loan File shall be held in the custody of Mego
for the benefit of, and as agent for, the Securityholders, the Indenture Trustee
and the Issuer, as the owner thereof. It is intended that by Mego's agreement
pursuant to this Section 2.06(b) the Indenture Trustee shall be deemed to have
possession of the Servicer's Home Loan Files for purposes of Section 9-305 of
the Uniform Commercial Code of the State in which such documents or instruments
are located. Mego shall promptly report to the Indenture Trustee any failure by
it to hold the Servicer's Home Loan File as herein provided and shall promptly
take appropriate action to remedy any such failure. In acting as custodian of
such documents and instruments, Mego agrees not to assert any legal or
beneficial ownership interest in the Home Loans or such documents or
instruments. Mego agrees to indemnify the Securityholders and the Indenture
Trustee for any and all liabilities, obligations, losses, damages, payments,
costs, or expenses of any kind whatsoever which may be imposed on, incurred by
or asserted against the Securityholders or the Indenture Trustee as the result
of any act or omission by Mego relating
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to the maintenance and custody of such documents or instruments which have been
delivered to Mego; provided, however, that Mego will not be liable for any
portion of any such amount resulting from the negligence or misconduct of any
Securityholder or the Indenture Trustee and provided, further, that Mego will
not be liable for any portion of any such amount resulting from Mego's
compliance with any instructions or directions consistent with this Agreement
issued to Mego by the Indenture Trustee. The Indenture Trustee shall have no
duty to monitor or otherwise oversee Mego's performance as custodian hereunder.
(c) Upon determination by the Master Servicer, the Depositor, Mego or
the Indenture Trustee that any document constituting a part of any Home Loan
File was not delivered to the Indenture Trustee or, with respect to any document
constituting the Servicer's Home Loan File, to Mego, as custodian for the
Indenture Trustee and the Issuer, by the time required hereby (which in the case
of (A) a failure to deliver a recorded mortgage or recorded assignment pursuant
to Section 2.05(a)(ii) or (a)(iv) (only under the circumstances in which a delay
is caused by the public recording office and an Officer's Certificate is
required to be provided thereunder) shall be the 20 month anniversary of the
Closing Date, (B) a failure to deliver an inspection report pursuant to Section
2.05(b)(F) shall be the 12 month anniversary of the Closing Date, (C) a failure
to deliver each other document constituting a part of any Indenture Trustee's
Home Loan File shall be the Closing Date and (D) a failure to deliver each
document (other than those described in clause (B) above) specified in Section
2.05(b) shall be 45 Business Days after the Closing Date) to be so delivered or
was defective in any material respect when delivered to the Indenture Trustee,
the party identifying any of the foregoing shall give prompt written notice to
the other parties. Nothing contained herein shall require the Indenture Trustee
to undertake any independent investigation or to make any review of any Home
Loan File other than as provided for in this Section 2.06. Mego, upon receipt of
such notice, shall comply with the cure, substitution and repurchase provisions
of Section 3.05 hereof.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants with and to the
Issuer, and the Indenture Trustee, on behalf of the Securityholders, and the
Master Servicer, as of the Closing Date:
(a) The Depositor 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
Depositor has the 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 Depositor and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action of the Depositor; this Agreement evidences the valid, binding and
enforceable obligation of the Depositor; and all requisite action has been taken
by the Depositor to make this Agreement valid, binding and enforceable upon the
Depositor in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other, similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity;
(b) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the Articles of
Incorporation or Bylaws of the Depositor, (ii) the breach of any term or
provision of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or loan
or credit agreement or other material instrument to which the Depositor, or its
property is subject, or (iii) the violation of any law, rule, regulation, order,
judgment or decree to which the Depositor or its respective property is subject;
(c) The Depositor is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or other governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or might have consequences that
would materially and adversely affect its performance hereunder.
Section 3.02 Representations, Warranties and Covenants of the Master
Servicer.
The Master Servicer hereby represents, warrants and covenants with and
to the Depositor, the Issuer, Mego, the Indenture Trustee and the
Securityholders as of the Closing Date:
(a) The Master Servicer is a national banking association duly
organized and validly existing under the laws of the United States of America,
with full power and authority to own
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its properties and conduct its business as such properties are presently owned
and such business is presently conducted;
(b) The Master Servicer has the full power and authority to execute,
deliver and perform, and to enter into and consummate all transactions
contemplated by this Agreement and each other Transaction Document to which it
is a party, has duly authorized the execution, delivery and performance of this
Agreement and each other Transaction Document to which it is a party, has duly
executed and delivered this Agreement and each other Transaction Document to
which it is a party, and this Agreement and each other Transaction Document to
which it is a party, when duly authorized, executed and delivered by the other
parties thereto, will constitute a legal, valid and binding obligation of the
Master Servicer, enforceable against it in accordance with its terms;
(c) Neither the execution and delivery of this Agreement or any other
Transaction Document to which the Master Servicer is a party, the consummation
of the transactions required of the Master Servicer herein or therein, nor the
fulfillment of or compliance with the terms and conditions of this Agreement or
any other Transaction Document to which the Master Servicer is a party will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Master Servicer's charter or bylaws or any legal restriction
or any material agreement or instrument to which the Master Servicer is now a
party or by which it is bound, or which would adversely affect the
administration of the Trust as contemplated hereby, or constitute a material
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 Master Servicer or its property is subject;
(d) The Master Servicer is not in default, and the execution and
delivery of this Agreement and each other Transaction Document to which it is a
party and its performance of and compliance with the terms hereof and thereof
will not constitute a violation of, any law, any order or decree of any court,
or any order, regulation or demand of any federal, state or local governmental
or regulatory authority;
(e) No action, suit or other proceeding or investigation is pending or,
to the Master Servicer's knowledge, threatened before any court or any federal,
state or local governmental or regulatory authority (A) asserting the invalidity
of this Agreement or any other Transaction Document to which the Master Servicer
is a party, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document to which the
Master Servicer is a party, or (C) seeking any determination or ruling that
would materially and adversely affect the ability of the Master Servicer to
perform its obligations under this Agreement or any other Transaction Document
to which the Master Servicer is a party;
(f) No consent, approval, authorization or order of, registration or
filing with or notice to, any court or any federal, state or local government or
regulatory authority is required for the execution, delivery and performance by
the Master Servicer of this Agreement or any other
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Transaction Document to which the Master Servicer is a party (other than those
that have been obtained or will be obtained prior to the Closing Date);
(g) Neither this Agreement nor any other Transaction Document to which
the Master Servicer is a party nor any statement, report or other document
furnished or to be furnished by the Master Servicer pursuant to this Agreement
or any other Transaction Document to which the Master Servicer is a party or in
connection with the transactions contemplated hereby and thereby contains any
untrue statement of material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading;
(h) The statements contained in the section of the Prospectus
Supplement entitled "The Master Servicer" which describe the Master Servicer are
true and correct in all material respects, and such section of the Prospectus
Supplement does not contain any untrue statement of a material fact with respect
to the Master Servicer and does not omit to state a material fact necessary to
make the statements contained therein with respect to the Master Servicer not
misleading;
(i) The Master Servicer is solvent, and the Master Servicer will not be
rendered insolvent as a result of the performance of its obligations pursuant to
this Agreement and any other Transaction Document to which the Master Servicer
is a party;
(j) The Servicing Agreement conforms to the requirements for a
Servicing Agreement contained in this Agreement;
(k) The Master Servicer, or an affiliate thereof, the primary business
of which is the servicing of home loans such as the Home Loans, is an Eligible
Servicer, and the Master Servicer or such affiliate possesses all state and
federal licenses necessary for servicing the Home Loans in accordance with this
Agreement;
(l) The Master Servicer has not waived any default, breach, violation
or event of acceleration existing under any Debt Instrument or the related
Mortgage;
(m) The Master Servicer will cause to be performed any and all acts
required to be performed by the Master Servicer or Servicer to preserve the
rights and remedies of the Trust and the Indenture Trustee in any Insurance
Policies applicable to the Home Loans, including, without limitation, any
necessary notifications of insurers, assignments of policies or interests
therein, and establishments of co-insured, joint loss payee and mortgagee rights
in favor of the Trust and the Indenture Trustee;
(n) The Master Servicer shall comply with, and shall service, or cause
to be serviced, each Home Loan, in accordance with all applicable laws, all
rules and regulations issued thereunder, and all administrative publications
published pursuant thereto; and
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(o) The Master Servicer agrees that, so long as it shall continue to
serve in the capacity contemplated under the terms of this Agreement, it shall
remain in good standing under the laws governing its creation and existence and
qualified under the laws of each state in which it is necessary to perform its
obligations under this Agreement or in which the nature of its business requires
such qualification, it shall maintain or cause an affiliate to maintain all
licenses, permits and other approvals required by any law or regulations, as may
be necessary to perform its obligations under this Agreement and to retain all
rights to service the Loans, and it shall not dissolve or otherwise dispose of
all or substantially all of its assets.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive the issuance and delivery of the
Securities and shall be continuing as long as any Security shall be outstanding
or this Agreement has not been terminated.
Section 3.03 Representations and Warranties of Mego.
(a) The Seller hereby represents and warrants to the Depositor, the
Issuer, the Indenture Trustee, the Master Servicer and the Securityholders, that
as of the Closing Date:
(i) Mego is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Mego is
duly qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
currently conducted and the performance of its obligations under the
Transaction Documents, in each jurisdiction in which the failure to be
so qualified or to obtain such approvals would render any Transaction
Document unenforceable in any respect or would have a material adverse
effect upon the Transaction;
(ii) Mego has full power and authority to execute, deliver
and perform, and to enter into and consummate all transactions required
of it by this Agreement and each other Transaction Document to which it
is a party; has duly authorized the execution, delivery and performance
of this Agreement and each other Transaction Document to which it is a
party; has duly executed and delivered this Agreement and each other
Transaction Document to which it is a party; when duly authorized,
executed and delivered by the other parties hereto, this Agreement and
each other Transaction Document to which it is a party will constitute
a legal, valid and binding obligation of Mego enforceable against it in
accordance with its terms, except as such enforceability may be limited
by general principles of equity (whether considered in a proceeding at
law or in equity);
(iii) Neither the execution and delivery of this Agreement or
any of the other Transaction Documents to which Mego is a party, the
consummation of the transactions required of it herein or under any
other Transaction Document, nor the fulfillment of or compliance with
the terms and conditions of this Agreement or any of the other
Transaction Documents will conflict with or result in a breach of any
of the
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terms, conditions or provisions of Mego's charter or by-laws or any
legal restriction or any material agreement or instrument to which Mego
is now a party or by which it is bound, or which would adversely affect
the creation and administration of the Trust as contemplated hereby, or
constitute a material 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 Mego or its respective property is
subject;
(iv) There is no action, suit, proceeding, investigation or
litigation pending against Mego or, to its knowledge, threatened,
which, if determined adversely to Mego, would materially adversely
affect the sale of the Loans, the issuance of the Securities and
Residual Instruments, the execution, delivery or enforceability of this
Agreement or any other Transaction Document, or which would have a
material adverse affect on the financial condition of Mego;
(v) No consent, approval, authorization or order of any
court or governmental agency or body is required for: (a) the
execution, delivery and performance by Mego of, or compliance by Mego
with, this Agreement, (b) the issuance of the Securities and Residual
Instruments, (c) the sale of the Home Loans under the Home Loan
Purchase Agreement or (d) the consummation of the transactions required
of it by this Agreement, except: (A) such as shall have been obtained
before the Closing Date, and (B) such as may be required under state
securities or "Blue Sky" laws in connection with the sale of the
Securities by the Underwriter;
(vi) Mego is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of Mego or its properties or might
have consequences that would materially and adversely affect its
performance hereunder;
(vii) Mego received fair consideration and reasonably
equivalent value in exchange for the sale of the Home Loans to the
Depositor;
(viii) Mego has transferred the Home Loans without any intent
to hinder, delay or defraud any of its creditors;
(b) Mego hereby agrees for the benefit of the Depositor, the Issuer,
the Indenture Trustee and the Securityholders that the failure of any of the
following representations and warranties to be true and correct as to any Home
Loan as of the Cut-Off Date for such Home Loan, or such later date if so
specified in such representation and warranty, gives rise to the remedy
specified in Section 3.05;
(i) The information pertaining to each Home Loan set
forth in the Home Loan Schedule was true and correct in all material
respects as of the applicable Cut-Off Date;
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(ii) As of the Cut-off Date, all the Home Loans are between 0
and 29 days past due; Mego has not advanced funds, induced, solicited
or knowingly received any advance of funds from a party other than the
Obligor, directly or indirectly, for the payment of any amount required
by the Home Loan;
(iii) The terms of the Debt Instrument and the related
Mortgage contain the entire agreement of the parties and have not been
impaired, waived, altered or modified in any respect, except by written
instruments reflected in the related Home Loan File and recorded, if
necessary, to maintain the lien priority of the related Mortgage; and
no other instrument of waiver, alteration, expansion or modification
has been executed, and no Obligor has been released, in whole or in
part, except in connection with an assumption agreement which
assumption agreement is part of the related Home Loan File and the
payment terms of which are reflected in the related Home Loan Schedule;
(iv) The Debt Instrument and the related Mortgage are not
subject to any set-off, claims, counterclaim or defense and will not
have such in the future with respect to the goods and services provided
under the Debt Instrument, including the defense of usury or of fraud
in the inducement, nor will the operation of any of the terms of the
Debt Instrument and the related Mortgage, or the exercise of any right
thereunder, render such Debt Instrument or Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto;
(v) Any and all requirements of any federal, state or local
law applicable to the Home Loan (including any law applicable to the
origination, servicing and collection practices with respect thereto)
have been complied with;
(vi) No Debt Instrument or Mortgage has been satisfied,
cancelled, rescinded or subordinated, in whole or part; and Mego has
not waived the performance by the Obligor of any action, if the
Obligor's failure to perform such action would cause the Debt
Instrument or Mortgage Loan to be in default, except as otherwise
permitted by clause (iii); and the related 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 satisfaction,
subordination, release, cancellation or rescission;
(vii) Each Mortgage is a valid, subsisting and enforceable
lien on the related Property, including the land and all buildings on
the Property;
(viii) The Debt Instrument and the related Mortgage are
genuine and each is the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting creditors' rights in general and by
general principles of equity;
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(ix) To Mego's best knowledge, all parties to the Debt
Instrument and the related Mortgage had legal capacity at the time to
enter into the Home Loan and to execute and deliver the Debt Instrument
and the related Mortgage, and the Debt Instrument and the related
Mortgage have been duly and properly executed by such parties;
(x) As of the applicable Cut-Off Date, the proceeds of the
Home Loan have been fully disbursed and there is no requirement for
future advances thereunder, and any and all applicable requirements set
forth in the Home Loan documents have been complied with; the Obligor
is not entitled to any refund of any amounts paid or due under the Debt
Instrument or the related Mortgage;
(xi) Immediately prior to the sale, transfer and assignment
to the Depositor, Mego will have good and indefeasible legal title to
the Home Loan, the related Debt Instrument and the related Mortgage and
the full right to transfer such Home Loan, the related Debt Instrument
and the related Mortgage, and Mego will have been the sole owner
thereof, subject to no liens, pledges, charges, mortgages, encumbrances
or rights of others, except for such liens as will be released
simultaneously with the transfer and assignment of the Home Loans to
the Depositor (and the Home Loan File will contain no evidence
inconsistent with the foregoing); and immediately upon the sale,
transfer and assignment contemplated by the Home Loan Purchase
Agreement, the Depositor will hold good title to, and be the sole owner
of each Home Loan, the related Debt Instrument and the related
Mortgage, free of all liens, pledges, charges, mortgages, encumbrances
or rights of others;
(xii) Except for those Home Loans referred to in Section
3.03(b)(ii) above that are delinquent as of the Closing Date, there is
no default, breach, violation or event of acceleration existing under
the Home Loan, the related Debt Instrument and the related Mortgage and
there is 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 Mego nor its
predecessors have waived any default, breach, violation or event of
acceleration;
(xiii) The Debt Instrument and the related Mortgage contain
customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization against the
Property of the benefits of the security provided thereby, including,
(A) in the case of any Mortgage designated as a deed of trust, by
trustee's sale, and (B) otherwise by judicial foreclosure;
(xiv) Each Home Loan is a fixed rate loan; the Debt
Instrument shall mature within not more than 25 years, from the date of
origination of the Home Loan; the Debt Instrument is payable in
substantially equal Monthly Payments, with interest payable in arrears,
and requires a Monthly Payment which is sufficient to fully amortize
the original principal balance over the original term and to pay
interest at the related
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Home Loan Interest Rate; interest on each Home Loan is calculated on
the basis of a 360 day year consisting of twelve 30-day months, and the
Debt Instrument does not provide for any extension of the original
term;
(xv) The related Debt Instrument is not and has not been
secured by any collateral except the lien of the corresponding
Mortgage;
(xvi) With respect to any Mortgage Loan, if the related
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, or a valid
substitution of trustee has been recorded, and no extraordinary fees or
expenses are or will become payable to the trustee under the deed of
trust, except in connection with default proceedings and a trustee's
sale after default by the Obligor;
(xvii) Mego has no knowledge of any circumstances or
conditions not reflected in the representations set forth herein, or in
the Home Loan Schedule, or in the related Home Loan File with respect
to the related Mortgage, the related Property or the Obligor which
could reasonably be expected to materially and adversely affect the
value of the related Property, or the marketability of the Mortgage
Loan or to cause the Mortgage Loan to become delinquent or otherwise in
default;
(xviii) Assuming no material change to the applicable law or
regulations in effect as of the Closing Date, after the consummation of
the transactions contemplated by this Agreement, the Master Servicer on
behalf of the Trust and the Indenture Trustee will have the ability to
foreclose or otherwise realize upon a Property, if the Home Loan is a
Mortgage Loan, or to enforce the provisions of the related Home Loan
against the Obligor thereunder, if the foreclosure upon any such
Property or enforcement of the provisions of the related Home Loan
against the Obligor are undertaken as set forth in Section 4.12;
(xix) There exists a Home Loan File relating to each Home
Loan and such Home Loan File contains all of the original or certified
documentation listed in Section 2.05 for such Home Loan, subject to
applicable grace periods set forth in Section 2.06(c). Each Indenture
Trustee's Home Loan File has been delivered to the Indenture Trustee
and each Servicer's Home Loan File is being held in trust by Mego for
the benefit of, and as agent for, the Indenture Trustee, the
Securityholders and the Owner Trustee as the owner thereof. Each
document included in the Home Loan File which is required to be
executed by the Obligor has been executed by the Obligor in the
appropriate places. With respect to each Mortgage Loan, the related
Assignment of Mortgage to the Indenture Trustee is in recordable form
and is acceptable for recording under the laws of the jurisdiction in
which the Property is located. All blanks on any form required to be
completed have been so completed;
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(xx) Each Property is improved by a residential dwelling
and is not a Home Loan in respect of a manufactured home or mobile home
or the land on which a manufactured home or mobile home has been
placed;
(xxi) Each Mortgage Loan was originated by Mego in
accordance with Mego's "Debt Consolidation Loan Program", "Combination
Debt Consolidation Home Improvement Loan Program", "Renovator 125 Loan
Program" and "Zero Equity Loan Program" underwriting guidelines, as
applicable, attached hereto as Exhibit D;
(xxii) If the Property securing any Mortgage Loan is in an
area identified by the Federal Emergency Management Agency ("FEMA") as
having special flood hazards, unless the community in which the area is
situated is participating in the National Flood Insurance Program and
the regulations thereunder or less than a year has passed since FEMA
notification regarding such hazards, a flood insurance policy is in
effect with respect to such Property with a generally acceptable
carrier which complies with Section 102(a) of the Flood Disaster
Protection Act of 1973; all improvements upon each 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 Property is located pursuant to insurance policies conforming
to the requirements of the Agreement; all such policies contain a
standard mortgage clause naming Mego, its successors and assigns, as
loss payee;
(xxiii) All costs, fees and expenses incurred in originating
and closing the Home Loan and in recording the related Mortgage were
paid and the Obligor is not entitled to any refund of any amounts, paid
or due to the Obligee pursuant to the Debt Instrument or any related
Mortgage;
(xxiv) There is no obligation on the part of Mego or any
other party other than the Obligor to make payments with respect to
the Home Loan;
(xxv) At the time of origination of the Home Loan, each
related prior lien, if any, was not 30 or more days delinquent;
(xxvi) With respect to each Mortgage Loan, the related
Mortgage contains an enforceable provision requiring the consent of the
Mortgagee to assumption of the related Mortgage Loan upon sale of the
Property;
(xxvii) With respect to any Mortgage Loan, there is no
homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the related Property at a
trustee's sale or the right to foreclose the Mortgage; no relief has
been requested or allowed to the Mortgagor under the Civil Relief Act;
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(xxviii) The related Home Loan File for each Home Loan
contains a title document with respect to such Home Loan reflecting
that title to the related Property is vested at least 50% in the
Obligor under such Home Loan;
(xxix) Each Property (including each residential dwelling
improvement thereon) is free of damage which materially and adversely
affects the value thereof;
(xxx) Each Home Loan was originated in compliance with all
applicable laws and, to the best of Mego's knowledge, no fraud or
misrepresentation was committed by any Person in connection therewith;
(xxxi) Each Home Loan has been serviced in accordance with
all applicable laws and, to the best of Mego's knowledge, no fraud or
misrepresentation was committed by any Person in connection therewith;
(xxxii) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by Mego to the Depositor were not subject
to the bulk transfer laws or any similar statutory provisions in effect
in any applicable jurisdiction;
(xxxiii) Any Home Loan originated in the State of Texas, was
originated pursuant to either Chapter 3 or Chapter 6 of the Texas
Consumer Credit Code;
(xxxiv) As of the applicable Cut-Off Date, no Obligor is a
debtor under proceedings under the Bankruptcy Code, and no such Obligor
has defaulted in payments on a Home Loan after the filing of such
bankruptcy case, whether under a plan or reorganization or otherwise;
(xxxv) Mego has not advanced funds, or induced, solicited
or knowingly received any advance of loan payments from a party other
than, with respect to a Mortgage Loan, the owner of the Property
subject to the Mortgage;
(xxxvi) Mego originated the Home Loans through its network
of dealers and correspondents;
(xxxvii) Each Home Loan conforms, and all such Home Loans in
the aggregate conform, to the description thereof set forth in the
Prospectus Supplement;
(xxxviii) Each Home Loan either complies with the Home
Ownership and Equity Protection Act of 1994 or is not subject to such
act;
(xxxix) Mego has caused to be performed or shall cause to be
performed within 15 Business Days of the Closing Date any and all acts
required to preserve the rights and remedies of the Trust and the
Indenture Trustee in any insurance policies applicable to each Home
Loan, including, without limitation, any necessary notifications
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of insurers, assignments of policies or interests therein, and
establishment of coinsured, joint loss payee and mortgagee rights in
favor of the Indenture Trustee;
(xl) To Mego's best knowledge, there exists no violation of
any environmental law (either local, state or federal), rule or
regulation in respect of the Property which violation has or could have
a material adverse effect on the market value of such Property. Mego
has no knowledge of any pending action or proceeding directly involving
the related Property in which compliance with any environmental law,
rule or regulation is in issue; and, to Mego's best knowledge, nothing
further remains to be done to satisfy in full all requirements of each
such law, rule or regulation constituting a prerequisite to the use and
enjoyment of such Property;
(xli) None of the Mortgage Loans is secured by Mortgages on
non- owner occupied Mortgaged Properties;
(xlii) On the Closing Date, 55% or more (by aggregate
Principal Balance) of the Home Loans do not constitute "real estate
mortgages" for the purpose of Treasury Regulation ss.301.7701(i) - 1(d)
under the Code. For this purpose a Home Loan constitutes a "real estate
mortgage" if the Home Loan is an "obligation principally secured by an
interest in real property." For this purpose an "obligation is
principally secured by an interest in real property" if it satisfies
either test set out in paragraph (1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally
secured by an interest in real property if the fair
market value of the interest in real property
securing the obligation was at least equal to 80
percent of the adjusted issue price of the obligation
at the time the obligation was originated (or, if
later, the time the obligation was significantly
modified).
For purposes of this paragraph (1), the fair market
value of the real property interest must be first
reduced by the amount of any lien on the real
property interest that is senior to the obligation
being tested, and must be further reduced by a
proportionate amount of any lien that is in parity
with the obligation being tested. The adjusted issue
price of an obligation is its issue price plus the
amount of accrued original issue discount, if any, as
of the date of determination.
(2) Alternative test. An obligation is principally
secured by an interest in real property if
substantially all of the proceeds of the obligation
were used to acquire or to improve or protect an
interest in real property that, at the
origination date, is the only security for the
obligation. For purposes of this test, loan
guarantees made by the United States or any state (or
any political subdivision, agency, or instrumentality
of the United States or of any state), or other third
party credit enhancement are not viewed as
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additional security for a loan. An obligation is not
considered to be secured by property other than real
property solely because the obligor is personally
liable on the obligation. For this purpose only,
substantially all of the proceeds of the obligations
means 66 2/3% or more of the gross proceeds.
(xliii) With respect to each Home Loan that is not a first
mortgage loan, either (i) no consent for the Home Loan is required by
the holder of the related prior lien or (ii) such consent has been
obtained and has been delivered to the Indenture Trustee;
(xliv) No Home Loan was selected from Mego's assets in a
manner which would cause it to be adversely selected as to credit risk
from the pool of home loans owned by Mego.
Section 3.04 [Reserved].
Section 3.05 Purchase and Substitution.
(a) It is understood and agreed that the representations and warranties
set forth in Sections 3.03 shall survive the conveyance of the Home Loans to the
Issuer, the Grant of the Home Loans to the Indenture Trustee and the delivery of
the Securities to the Securityholders and shall be continuing as long as any
Security is outstanding. Upon discovery by the Depositor, the Master Servicer,
the Seller, the Owner Trustee, the Indenture Trustee or any Securityholder of a
breach of any of such representations and warranties made pursuant to Section
3.03(b), the party discovering such breach shall give prompt written notice to
the others. In the event of a determination in Section 2.06(c) or a breach of a
representation and warranty made pursuant to Section 3.03(b) that materially and
adversely affects the value of the Home Loans or the interest of the
Securityholders, or which materially and adversely affects the interests of the
Securityholders in the related Home Loan in the case of a representation and
warranty relating to a particular Home Loan (notwithstanding that such
representation and warranty was made to the Seller's best knowledge), and a
failure within sixty Business Days of discovery or receipt of notice of such
failure to effect a cure of the circumstances giving rise to such defect, Mego
shall be obligated, on the Monthly Cut-Off Date next succeeding the expiration
of such sixty-day period, to repurchase (or substitute for, to the extent
permitted by subsection (b) below) the affected Home Loan. It is understood and
agreed that the obligation of Mego to repurchase or substitute any such Home
Loan pursuant to this Section shall constitute the sole remedy against it with
respect to such breach of the foregoing representations or warranties or the
existence of the foregoing conditions. With respect to representations and
warranties made by Mego pursuant to Section 3.03(b) that are made to Mego's best
knowledge, if it is discovered by any of the Depositor, the Master Servicer, the
Seller, Mego, the Indenture Trustee, the Owner Trustee, or any Securityholder
that the substance of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related Home Loan,
notwithstanding
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Mego's lack of knowledge, such inaccuracy shall be deemed a breach of the
applicable representation and warranty.
If Mego is required to repurchase any Home Loan on a Monthly Cut-Off
Date that is not a Business Day, such repurchase shall be made on the last
Business Day preceding such Monthly Cut-Off Date. Any Home Loan required to be
purchased or repurchased pursuant to this Section 3.05(a) is referred to as a
"Defective Home Loan".
(b) Mego shall be obligated to repurchase a Defective Home Loan for the
Purchase Price, payable to the Indenture Trustee in cash on the Monthly Cut-Off
Date specified in Section 3.05(a) above, for deposit in the Note Distribution
Account. Notwithstanding the foregoing, Mego may elect in lieu of the repurchase
of a Defective Home Loan as provided in this Section 3.05, to substitute, as of
the Monthly Cut-off Date specified in Section 3.05(a), a Qualified Substitute
Home Loan for the Defective Home Loan in accordance with the provisions of this
Section 3.05.
(c) Mego shall notify the Master Servicer, and the Indenture Trustee in
writing not less than five Business Days before the related Determination Date
which is on or before the date on which Mego would otherwise be required to
repurchase such Home Loan pursuant to Section 3.05(a) of its intention to effect
a substitution under this Section. On such Determination Date (the "Substitution
Date"), Mego shall deliver to the Indenture Trustee a list of the Home Loans to
be substituted for by such Qualified Substitute Home Loans, and attaching as an
exhibit a supplemental Home Loan Schedule (the "Supplemental Loan Schedule")
setting forth the same type of information appearing on the Home Loan Schedule
and representing as to the accuracy thereof. In connection with any substitution
pursuant to this Section 3.05, to the extent that the aggregate Principal
Balance of any Qualified Substitute Home Loan or Home Loans is less than the
aggregate Principal Balance of the corresponding Home Loan or Home Loans as of
the end of the Due Period prior to the Determination Date on which the
substitution is being made, Mego shall deposit such difference (a "Substitution
Adjustment Amount") to the Note Distribution Account on such date.
(d) Concurrently with the satisfaction of the conditions set forth in
this Section 3.05 and the Grant of such Qualified Substitute Home Loans to the
Indenture Trustee pursuant to the Indenture, Exhibit A to this Agreement shall
be deemed to be amended to exclude all Home Loans being replaced by such
Qualified Substitute Home Loans and to include the information set forth on the
Supplemental Loan Schedule with respect to such Qualified Substitute Home Loans,
and all references in this Agreement to Home Loans shall include such Qualified
Substitute Home Loans and be deemed to be made on or after the related
Substitution Date, as the case may be, as to such Qualified Substitute Home
Loans.
(e) With respect to all Defective Home Loans or other Home Loans
repurchased by Mego pursuant to this Agreement, upon the deposit of the Purchase
Price therefor to the Note Distribution Account, the Indenture Trustee shall
assign to Mego, without recourse, representation or warranty, all the Indenture
Trustee's right, title and interest in and to such Defective Home
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Loans or Home Loans, which right, title and interest were conveyed to the
Indenture Trustee pursuant to Section 2.01. The Indenture Trustee shall take any
actions as shall be reasonably requested by Mego to effect the repurchase of any
such Home Loans.
(f) The Servicer may, at its option, purchase from the Trust any
Defaulted Home Loan or substitute a Qualified Substitute Home Loan for any
Defaulted Home Loan, provided, however, that the aggregate of Principal Balances
of Defaulted Home Loans purchased or replaced pursuant to this Section 3.05(f)
shall not exceed 10% of the Original Pool Principal Balance. If the Servicer
elects to purchase a Defaulted Home Loan, the Servicer shall deposit the
Purchase Price in the Note Distribution Account on the Monthly Cut-Off Date
following the date on which such election is made. Any substitution of a
Defaulted Home Loan for a Qualified Substitute Home Loan by the Servicer shall
be performed in accordance with the substitution provisions set forth in Section
3.05(c) and Section 3.05(d).
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ARTICLE IV.
ADMINISTRATION AND SERVICING OF HOME LOANS
Section 4.01 Servicing Standard.
(a) The Master Servicer is hereby authorized to act as agent for the
Trust and in such capacity shall manage, service, administer and make
collections on the Home Loans, and perform the other actions required by the
Master Servicer under this Agreement. In performing its obligations hereunder
the Master Servicer shall at all times act in good faith in a commercially
reasonable manner and in accordance with applicable law and the Debt Instruments
and Mortgages. The Master Servicer shall have full power and authority, acting
alone and/or through the Servicer as provided in Section 4.02, subject only to
this Agreement and the respective Home Loans, to do any and all things in
connection with such servicing and administration which are consistent with the
ordinary practices of prudent mortgage lending institutions, but without regard
to:
(i) any relationship that the Master Servicer, the Servicer
or any affiliate of the Master Servicer or any Servicer may have with
the related Obligor:
(ii) Mego's obligations to repurchase or substitute for a
Defective Home Loan pursuant to Section 3.05;
(iii) the ownership of any Securities by the Master Servicer
or any affiliate of the Master Servicer;
(iv) the Master Servicer's obligation to make Interest
Advances pursuant to Section 4.08(a) or to make Foreclosure Advances
pursuant to Section 4.08(b); or
(v) the Master Servicer's right to receive compensation for
its services as provided in Section 5.01(c)(i)(a).
The Master Servicer may take any action hereunder, including exercising
any remedy under any Home Loan, retaining counsel in connection with the
performance of any of its obligations hereunder and instigating litigation to
enforce any obligation of any Obligor, without the consent or approval of the
Indenture Trustee, unless any such consent or approval is expressly required
hereunder or under applicable law.
(b) The Indenture Trustee shall execute and return to the Master
Servicer or the Servicer designated in a written instruction from the Master
Servicer to the Indenture Trustee, within 5 days of the Indenture Trustee's
receipt any and all documents or instruments necessary to maintain the lien
created by any Mortgage on the related Property or any portion thereof, and,
within 5 days of request by the Master Servicer or the Servicer therefor a power
of attorney in
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favor of the Master Servicer or Servicer with respect to any modification,
waiver, or amendment to any document contained in any Home Loan File and any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge, and all other comparable instruments, with respect to the Home
Loans and with respect to the related Mortgaged Properties prepared and
delivered to the Indenture Trustee by the Master Servicer or any Servicer, all
in accordance with the terms of this Agreement.
(c) The Indenture Trustee shall furnish the Master Servicer or Servicer
within 5 days of request of a Master Servicing Officer therefor any powers of
attorney and other documents necessary and appropriate to carry out its
servicing and administrative duties hereunder, including any documents or powers
of attorney necessary to foreclose any Home Loan. The forms of any such powers
or documents shall be appended to such requests.
Section 4.02 Servicing Arrangements.
(a) On or prior to the date hereof, the Master Servicer has entered
into a Servicing Agreement with respect to all of the Home Loans, in
substantially the form of the Form of the Servicing Agreement attached hereto as
Exhibit E with Mego, as Servicer. Upon the termination of the Servicing
Agreement, the Master Servicer may only appoint or consent to the appointment or
succession of a successor Servicer under the Servicing Agreement and may only
enter into a substitute servicing agreement which is in form and substance as
the Servicing Agreement attached hereto as Exhibit E and with a Person
acceptable to the Indenture Trustee. The Master Servicer shall not consent to
any material amendment, modification or waiver of the provisions of a Servicing
Agreement without the consent of the Indenture Trustee.
(b) No provision of this Agreement or the Servicing Agreement shall be
deemed to relieve the Master Servicer of any of its duties and obligations to
the Indenture Trustee on behalf of Securityholders with respect to the servicing
and administration of the Home Loans as provided hereunder; it being understood
that the Master Servicer shall be obligated with respect thereto to the same
extent and under the same terms and conditions as if it alone were performing
all duties and obligations set forth in this Agreement in connection with the
collection, servicing and administration of such Home Loans.
(c) Without limitation of the provisions of Section 4.02(b), the Master
Servicer shall (i) review the servicing reports prepared by the Servicer in
order to ensure the accuracy thereof, (ii) otherwise monitor the performance by
the Servicer under the Servicing Agreement and notify the Indenture Trustee of
any Servicer Termination Event, and (iii) be obligated to ensure that the
Servicer deposits Payments into the Collection Account. In the event the
Servicer fails to make such deposit, the Master Servicer will deposit such
amounts as set forth in Section 5.01(a)(1).
(d) The Master Servicer agrees that it shall at all times be prepared
to perform the obligations of the Servicer if the Servicer fails to perform its
duties and obligations under the Servicing Agreement.
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(e) The Servicing Agreement may provide that the Servicer may retain,
as additional compensation, prepayment penalties, assumption and processing fees
paid by any Obligor and all similar fees customarily associated with the
servicing of the Home Loans, including, but not limited to late charges, paid by
any Obligor.
(f) Mego, as Servicer, shall provide information to the Master Servicer
monthly in a mutually agreeable format in order to enable the Master Servicer to
independently reconfirm the loan-by-loan reconciliation of the outstanding
Principal Balance of each Home Loan included in such information. The Master
Servicer shall prepare exception reports, if necessary, showing all Principal
Balance differences between the information provided by the Servicer and the
confirmations prepared by the Master Servicer and shall furnish such reports to
the Indenture Trustee.
Section 4.03 Servicing Record.
(a) The Master Servicer shall establish and maintain books and records
for the Home Loans (the "Servicing Record"), in which the Master Servicer shall
record: (i) all Payments received or collected by or on behalf of the Master
Servicer (through the Servicer or otherwise) or received by the Indenture
Trustee in respect of each Home Loan and each Foreclosed Property and (ii) all
amounts owing to the Master Servicer in compensation for services rendered by
the Master Servicer hereunder or in reimbursement of costs and expenses incurred
by the Master Servicer hereunder.
(b) Except as otherwise provided herein, amounts received or collected
by or on behalf of the Master Servicer or the Indenture Trustee from or on
behalf of any Obligor or in respect of any Foreclosed Property shall be credited
to the Servicing Record:
(i) promptly following direct receipt or direct collection
by the Master Servicer;
(ii) in the case of a Home Loan directly serviced by a
Servicer, promptly following deposit of the receipt or collection in
the related Collection Account; or
(iii) in the case of any amount received directly by the
Indenture Trustee, promptly following the Master Servicer's actual
knowledge of receipt by the Indenture Trustee;
but in any event not later than the Determination Date next following the date
of receipt or collection by or on behalf of the Master Servicer (through the
Servicer or otherwise) or receipt by the Indenture Trustee. Amounts received or
collected by the Master Servicer in connection with the purchase or repurchase
of any Home Loan or any Foreclosed Property shall be so recorded on and as of
the date of receipt. The Servicing Record shall separately reflect amounts so
received or collected by the Master Servicer in each Due Period.
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(c) The Master Servicer shall credit to the Servicing Record relating
to each Determination Date, on a Home Loan-by-Home Loan basis, each of the
following Payments collected or received by or on behalf of the Master Servicer
(through the Servicer or otherwise) or received by the Indenture Trustee in
respect of each Home Loan and each Foreclosed Property:
(i) all payments on account of principal;
(ii) all payments on account of interest;
(iii) all proceeds of the purchase or repurchase of any Home
Loan pursuant to Section 3.05 and all Substitution Adjustment Amounts;
(iv) all amounts paid by or on behalf of the related Obligor
in respect of Foreclosure Advances previously advanced by the Master
Servicer or the Servicer;
(v) all revenues received or collected in respect of any
Foreclosed Property, including all proceeds of the sale of any
Foreclosed Property pursuant to Section 4.13;
(vi) all proceeds of the sale of the Home Loans and any
Foreclosed Properties pursuant to Section 9.01; and
(vii) all Insurance Proceeds, any condemnation awards or
settlements or any payments made by any related guarantor or
third-party credit-support provider and any and all other amounts
received in respect of Home Loans and not specified above.
(d) Notwithstanding anything to the contrary herein, the Master
Servicer shall not be required to credit to the Servicing Record, and neither
the Master Servicer nor any Securityholder shall have any right or interest in
any amount due or received with respect to any Home Loan or any related
Foreclosed Property subsequent to the date of purchase of such Home Loan or
Foreclosed Property from the Trust.
(e) The Master Servicer shall separately record in the Servicing Record
the items required to be included in the Master Servicer Certificate and
additionally the following items to the extent not included therein:
(i) on or before each Determination Date, the related unpaid
Master Servicer Fee due the Master Servicer on the next Distribution
Date;
(ii) on or before each Determination Date, all amounts
retained by the Servicer in respect of the preceding Due Period in
respect of amounts due Independent Contractors hired by the Master
Servicer to operate and manage a Foreclosed Property pursuant to
Section 4.14(b);
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(iii) on or before each Determination Date, the amount of
unreimbursed Interest Advances in respect of prior Distribution Dates
and the amount which the Master Servicer or the Servicer is entitled to
be reimbursed therefor in accordance with Section 4.09;
(iv) on or before each Determination Date, all amounts due
in accordance with Section 4.09 as of the preceding Monthly Cut-Off
Date in reimbursement of Foreclosure Advances previously advanced by
the Master Servicer or the Servicer (separately identifying the type
and amount of each then due);
(v) on or before each Determination Date and based on
information provided to the Master Servicer by the Indenture Trustee,
all Other Fees distributable pursuant to Section 5.01(c)(iii)(d) on the
next succeeding Distribution Date;
(vi) promptly following each Distribution Date, the
aggregate amount of the Master Servicer Fee, Servicer Fee and the
Indenture Trustee Fee paid to the Master Servicer, Servicer and
Indenture Trustee respectively, on such Distribution Date pursuant to
Section 5.01(c)(i)(a) and the aggregate amount of the Owner Trustee Fee
Reserve paid to the Servicer, on such Distribution Date pursuant to
Section 5.01(c)(i)(c);
(vii) promptly following each Distribution Date, the
aggregate amount of Interest Advances and Foreclosure Advances
reimbursed to the Master Servicer or the Servicer on such Distribution
Date;
(viii) on or before each Determination Date, the Principal
Balance of Home Loans that became Defaulted Home Loans during the prior
Due Period;
(ix) on or before each Determination Date, identification by
loan number, Obligor name, address of Property and Principal Balance of
such Home Loan with respect to which the Master Servicer has requested
that the Indenture Trustee obtain the environmental report required by
Section 4.12 in connection with deciding pursuant to Section 4.12 to
foreclose on or otherwise acquire title to the related Property;
(x) on or before each Determination Date, the Principal
Balance of each such Home Loan with respect to which the Master
Servicer has determined under the circumstances described in Section
4.12(a) in good faith in accordance with customary mortgage loan
servicing practices that all amounts which it expects to receive with
respect to such Home Loan have been received; and
(xi) on or before each Determination Date, any other
information with respect to the Home Loans reasonably required by the
Indenture Trustee to determine the amount required to be distributed
pursuant to Section 5.01(c) and determinable by the Master Servicer
without undue burden from the Servicer or the items otherwise required
to be maintained in each Servicing Record.
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Section 4.04 Annual Statement as to Compliance; Notice of Event of
Default.
(a) The Master Servicer will deliver to the Indenture Trustee and the
Depositor on or before May 31 of each year, beginning in 1998 an Officer's
Certificate signed by two Responsible Officers of the Master Servicer stating
with respect to the Trust, that:
(i) a review of the activities of the Master Servicer during
the preceding calendar year (or in connection with the first such
Officer's Certificate the period from the Closing Date through the end
of 1997) and of the Master Servicer's performance under this Agreement
with respect to such Trust has been made under the supervision of the
signer of such Officer's Certificate; and
(ii) to the best of such signer's knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under
this Agreement throughout such year (or such portion of such year), or
there has been a default in the fulfillment of any such obligation, in
which case such Officer's Certificate shall specify each such default
known to such signer and the nature and status thereof and what action
the Master Servicer proposes to take with respect thereto.
(b) The Master Servicer shall deliver to the Indenture Trustee and the
Depositor, promptly after having obtained knowledge thereof, but in no event
later than 2 Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become an Event of Default under Section 8.01. Each of Mego, the
Depositor, the Indenture Trustee, the Owner Trustee and the Master Servicer
shall deliver to the other of such Persons promptly after having obtained
knowledge thereof, but in no event later than 2 Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become an Event of Default under Section
8.01.
Section 4.05 Annual Independent Accountants' Report; Servicer Review
Report.
(a) The Master Servicer shall cause a firm of Independent Accountants,
who may also render other services to the Master Servicer, to deliver to the
Indenture Trustee, Owner Trustee and the Depositor on or before May 31 (or 150
days after the end of the Master Servicer's fiscal year) of each year, beginning
on the first May 31 (or other applicable date) after the date that is six months
after the Closing Date, with respect to the twelve months ended the immediately
preceding December 31 (or other applicable date) (or such other period as shall
have elapsed from the Closing Date to the date of such certificate) a report,
conducted in accordance with generally accepted accounting principles (the
"Accountant's Report") including: (i) an opinion on the financial position of
the Master Servicer at the end of its most recent fiscal year, and the results
of operations and changes in financial position of the Master Servicer for such
year then ended on the basis of an examination conducted in accordance with
generally accepted auditing standards, and (ii) a statement to the effect that,
based on an examination of certain specified documents and records relating to
the servicing of the Master Servicer's mortgage loan portfolio
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or the affiliate of the Master Servicer principally engaged in the servicing of
mortgage loans conducted in compliance with the audit program for mortgages
serviced for FNMA, the United States Department of Housing and Urban Development
Mortgagee Audit Standards or the Uniform Single Attestation Program for Mortgage
Bankers (the "Applicable Accounting Standards") such firm is of the opinion that
such servicing has been conducted in compliance with the Applicable Accounting
Standards except for such exceptions as such firm shall believe to be immaterial
and such other exceptions as shall be set forth in such statement.
(b) In addition, the Master Servicer will provide a report of a firm of
Independent Accountants which shall state that (1) a review in accordance with
agreed upon procedures was made of such number of Master Servicer Certificates
which the Independent Accountants deem necessary to carry out their review of
Master Servicer performance, but in no case less than two and (2) except as
disclosed in the Accountant's Report, no exceptions or errors in the Master
Servicer Certificates so examined were found. The Accountant's Report shall also
indicate that the firm is independent of the Master Servicer within the meaning
of the Code of Professional Ethics of the American Institute of Certified Public
Accountants.
(c) The Master Servicer shall mail a copy of the Servicer Review Report
and any report or statement of the Servicer prepared pursuant to Section 6.04 of
the Servicing Agreement to the Indenture Trustee.
(d) The Master Servicer, at the expense of the Servicer, shall cause a
firm of Independent Accountants to review, annually within 90 days after each
anniversary of the Closing Date, in accordance with agreed upon procedures the
performance of the Servicer under the Servicing Agreement in order to confirm
that the records of the Servicer accurately reflect collections, delinquencies
and other relevant data with respect to the Home Loans reported to the Master
Servicer for the purpose of preparation of the Servicing Record, and that such
data is accurately reported to the Master Servicer for reflection in the
Servicing Record. Any exceptions or errors disclosed by such procedures shall be
included in a report delivered to the Master Servicer, the Indenture Trustee,
Owner Trustee and the Depositor (the "Servicer Review Report").
Section 4.06 Access to Certain Documentation and Information Regarding
Home Loans.
The Master Servicer shall provide to representatives of the Indenture
Trustee reasonable access to (a) the documentation regarding the Home Loans and
to those employees of the Master Servicer who are responsible for the
performance of the Master Servicer's duties hereunder and (b) the books of
account, records, reports and other papers of the Master Servicer and to discuss
its affairs, finances and accounts with its employees and Independent
accountants for the purpose of reviewing or evaluating the financial condition
of the Master Servicer. The Master Servicer shall provide such access to any
Securityholder only in such cases where the Master Servicer is required by
applicable statutes or regulations (whether applicable to the Master Servicer or
to such Securityholder) to permit such Securityholder to review such
documentation. In each case, such access shall be afforded without charge but
only upon reasonable request and during Section shall derogate from the
obligation of the Master Servicer
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to observe any applicable law prohibiting disclosure of information regarding
the Obligors, and the failure of the Master Servicer to provide access as
provided in this Section as a result of such obligation shall not constitute a
breach of this Section. Any Securityholder, by its acceptance of a Security (or
by acquisition of its beneficial interest therein), shall be deemed to have
agreed to keep confidential and not to use for its own benefit any information
obtained by it pursuant to this Section, except as may be required by applicable
law or by any applicable regulatory authority.
Section 4.07 [Reserved]
Section 4.08 Advances.
(a) With respect to the Home Loans (other than Defaulted Home Loans)
and each Distribution Date, the Master Servicer shall advance from its own funds
and deposit into the Note Distribution Account or from funds on deposit in the
related Collection Account in respect of amounts available for distribution on
future Distribution Dates, no later than the related Determination Date, the
excess, if any, of (i) the aggregate of the portions of the Monthly Payments due
with respect to all Home Loans in the related Due Period allocable to interest
(calculated at a rate equal to the Net Loan Rate) over (ii) the aggregate amount
to be deposited into the Note Distribution Account with respect to all Home
Loans and such Distribution Date and allocated in accordance with Section
4.03(c) to interest (such amounts, "Interest Advances"). Any funds so applied
from funds on deposit in the Collection Account in respect of amounts available
for distribution on future Distribution Dates shall be reimbursed by the Master
Servicer on or before any future Distribution Date to the extent that funds on
deposit in the Note Distribution Account applied in the order of priority set
forth in such Section 5.01(c) would be less than the amount required to be
distributed pursuant to Section 5.01(c) on such dates as a result of such
Interest Advances.
Notwithstanding anything herein to the contrary, no Interest Advance
shall be required to be made hereunder (i) if the Master Servicer determines
that such Interest Advance would, if made, constitute a Nonrecoverable Advance
or (ii) with respect to shortfalls in interest resulting from application of the
Soldiers' and Sailors' Relief Act or from full or partial prepayments of any
Loan.
(b) The Master Servicer shall advance from its own funds the following
amounts in respect of any Mortgage Loan or Foreclosed Property, as applicable
(collectively, "Foreclosure Advances"):
(i) all third party costs and expenses (including legal fees
and costs and expenses relating to bankruptcy or insolvency proceedings
in respect of any Obligor) associated with the institution of
foreclosure or other similar proceedings in respect of any Home Loan
pursuant to Section 4.12;
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(ii) all insurance premiums due and payable in respect of
each Foreclosed Property, prior to the date on which the related
Insurance Policy would otherwise be terminated;
(iii) all real estate taxes and assessments in respect of each
Foreclosed Property that have resulted in the imposition of a lien
thereon, other than amounts that are due but not yet delinquent;
(iv) all costs and expenses necessary to maintain each
Foreclosed Property;
(v) all fees and expenses payable to any Independent
Contractor hired to operate and manage a Foreclosed Property pursuant
to Section 4.14(b); and
(vi) all fees and expenses of any Independent appraiser or
other real estate expert retained by the Indenture Trustee pursuant to
Section 4.13(a).
The Master Servicer shall advance the Foreclosure Advances described in clauses
(i) through (vi) above if, but only if, it has approved the foreclosure or other
similar proceeding in writing and the Master Servicer would make such an advance
if it or an affiliate held the affected Mortgage Loan or Foreclosed Property for
its own account and, in the Master Servicer's good faith judgment, such advance
would not constitute a nonrecoverable advance. In making such assessment with
respect to the institution of such proceedings, the Master Servicer shall not
advance funds with respect to a Mortgage Loan unless the appraised value of the
related Property exceeds the sum of (i) the amounts necessary to satisfy any
liens prior to the liens on Mortgages securing such Mortgage Loan and (ii) the
reasonably anticipated costs of foreclosure or similar proceedings.
Section 4.09 Reimbursement of Interest Advances and Foreclosure
Advances.
(a) The Master Servicer shall be entitled to be reimbursed pursuant to
Section 5.01(c) for previously unreimbursed Interest Advances made from its own
funds or any such previously unreimbursed Interest Advance by the Servicer with
respect to a Home Loan on Distribution Dates subsequent to the Distribution Date
in respect of which such Interest Advance was made from Payments with respect to
such Home Loan. If an Interest Advance shall become a Nonrecoverable Advance or
if a Home Loan shall become a Defaulted Home Loan and the Master Servicer or
Servicer shall not have been fully reimbursed for any such Interest Advances
with respect to such Home Loan, the Master Servicer or Servicer, as applicable,
shall be entitled to be reimbursed for the outstanding amount of such Interest
Advances from unrelated Home Loans pursuant to Section 5.01(c)(i)(b). No
interest shall be due to the Master Servicer in respect of any Interest Advance
for any period prior to the reimbursement thereof.
(b) The Master Servicer shall be entitled to be reimbursed pursuant to
Section 5.01(c)(i)(b) from related Payments for Foreclosure Advances advanced on
or prior to the related
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Monthly Cut-Off Date but only to the extent the Master Servicer has satisfied
the requirements of Section 4.08. No interest shall be due to the Master
Servicer in respect of any Foreclosure Advance for any period prior to the
reimbursement thereof.
(c) The Indenture Trustee shall offset against amounts otherwise
distributable to the Master Servicer pursuant to Section 5.01(c), amounts, if
any, which were required to be deposited in any Collection Account pursuant to
Section 5.01(c) with respect to the related Due Period but which were not so
deposited.
Section 4.10. Modifications, Waivers, Amendments and Consents.
(a) The Master Servicer shall not agree to any modification, waiver or
amendment of any provision of any Home Loan unless, in the Master Servicer's
good faith judgment, (i) such modification, waiver or amendment would minimize
the loss that might otherwise be experienced with respect to such Home Loan, and
(ii) such Home Loan has experienced a payment default or a payment default is
reasonably foreseeable by the Master Servicer. The Master Servicer may agree to
subordinate the position of the security interest in the Property which secures
any Mortgage Loan, provided such subordination (i) would permit the Obligor to
refinance a senior lien to take advantage of a lower interest rate or (ii) would
permit the Obligor to extend the term of the senior lien. Notwithstanding the
foregoing, no modification, waiver or amendment of a Home Loan shall involve the
execution by the Obligor of a new Debt Instrument or a new Mortgage.
(b) The Master Servicer shall notify the Indenture Trustee of any
modification, waiver or amendment of any provision of any Home Loan and the date
thereof, and shall deliver to the Indenture Trustee for deposit in the related
Home Loan File, an original counterpart of the agreement relating to such
modification, waiver or amendment, promptly following the execution thereof.
Such notice shall state that the conditions contained in this Section 4.10 have
been satisfied.
Section 4.11. Due-On-Sale; Due-on-Encumbrance.
(a) If any Home Loan contains a provision, in the nature of a
"due-on-sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the sale or other
transfer of an interest in the related Property; or
(ii) provides that such Home Loan may not be assumed without
the consent of the related Obligee in connection with any such sale or
other transfer,
then, for so long as such Home Loan is included in the Trust, the Master
Servicer, on behalf of the Indenture Trustee, shall exercise any right the Trust
or the Indenture Trustee may have as the
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Obligee of record with respect to such Home Loan (x) to accelerate the payments
thereon, or (y) to withhold its consent to any such sale or other transfer, in a
manner consistent with the servicing standard set forth in Section 4.01.
(b) If any Home Loan contains a provision, in the nature of a
"due-on-encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the creation of any lien
or other encumbrance on the related Property; or
(ii) requires the consent of the related Obligee to the
creation of any such lien or other encumbrance on the related Property,
then, for so long as such Home Loan is included in the Trust, the Master
Servicer, on behalf of the Trust or the Indenture Trustee, shall exercise any
right the Indenture Trustee may have as the Obligee of record with respect to
such Home Loan (x) to accelerate the payments thereon, or (y) to withhold its
consent to the creation of any such lien or other encumbrance, in a manner
consistent with the servicing standard set forth in Section 4.01.
(c) Nothing in this Section 4.11 shall constitute a waiver of the
Indenture Trustee's right to receive notice of any assumption of a Home Loan,
any sale or other transfer of the related Property or the creation of any lien
or other encumbrance with respect to such Property.
(d) Except as otherwise permitted by Section 4.10, the Master Servicer
shall not agree to modify, waive or amend any term of any Home Loan in
connection with the taking of, or the failure to take, any action pursuant to
this Section 4.11.
Section 4.12. Collection Procedures; Foreclosure Procedures.
(a) If any Monthly Payment due under any Home Loan is not paid when the
same is due and payable, or if the Obligor fails to perform any other covenant
or obligation under such Home Loan and such failure continues beyond any
applicable grace period, the Master Servicer shall take such action as it shall
deem to be in the best interest of the Trust; including but not limited to
proceeding against the Property securing such Home Loan. In the event that the
Master Servicer determines not to proceed against the Property, on or before the
Determination Date following such determination the Master Servicer shall
determine in good faith in accordance with customary servicing practices that
all amounts which it expects to receive with respect to such Home Loan have been
received. If the Master Servicer makes such a determination, it shall be
reflected in the Servicing Record pursuant to Section 4.03(e)(xi).
(b) In accordance with the criteria for proceeding against the Property
set forth in Section 4.12(a), unless otherwise prohibited by applicable law or
court or administrative order, the Master Servicer, on behalf of the Trust and
the Indenture Trustee, may, at any time, institute
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foreclosure proceedings, exercise any power of sale to the extent permitted by
law, obtain a deed in lieu of foreclosure, or otherwise acquire possession of or
title to the related Property, by operation of law or otherwise. The Master
Servicer shall be permitted to institute foreclosure proceedings, repossess,
exercise any power of sale to the extent permitted by law, obtain a deed in lieu
of foreclosure, or otherwise acquire possession of or title to any Property, by
operation of law or otherwise only in the event that in the Master Servicer's
reasonable judgement such action is likely to result in a positive economic
benefit to the Trust by creating net liquidation proceeds (after reimbursement
of all amounts owed with respect to such Home Loan to the Master Servicer or the
Servicer) and provided that, with respect to any Property, prior to taking title
thereto, the Master Servicer has requested that the Indenture Trustee obtain,
and the Indenture Trustee shall have obtained, an environmental review to be
performed on such Property by a company with recognized expertise, the scope of
which is limited to the review of public records and documents for information
regarding whether such Property has on it, under it or is near, hazardous or
toxic material or waste. If such review reveals that such Property has on it,
under it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Indenture Trustee shall provide a copy of the related
report to the Master Servicer and title shall be taken to such Property only
after obtaining the written consent of the Indenture Trustee.
In connection with any foreclosure proceeding on a Mortgage Loan, the
Master Servicer shall follow such practices and procedures in a manner which is
consistent with the Master Servicer's procedure for foreclosure with respect to
similar loans held in the Master Servicer's portfolio for its own account or, if
there are no such loans, such loans serviced by the Master Servicer for others,
giving due consideration to accepted servicing practices of prudent lending
institutions. To the extent required by Section 4.08, the Master Servicer shall
advance all necessary and proper Foreclosure Advances until final disposition of
the Foreclosed Property and shall manage such Foreclosed Property pursuant to
Section 4.14. If, in following such foreclosure procedures, title to the
Foreclosed Property is acquired, the deed or certificate of sale shall be issued
to the Co-Owner Trustee and the Indenture Trustee.
Section 4.13. Sale of Foreclosed Properties.
(a) The Master Servicer may offer to sell to any Person any Foreclosed
Property, if and when the Master Servicer determines consistent with the
Servicing Standard and that such a sale would be in the best interests of the
Trust. The Master Servicer shall give the Indenture Trustee not less than five
days' prior notice of its intention to sell any Foreclosed Property, and shall
accept the highest bid received from any Person for any Foreclosed Property in
an amount at least equal to the sum of:
(i) the Principal Balance of the related foreclosed Home Loan,
unreimbursed Foreclosure Advances plus the outstanding amount of any
liens superior in priority, if any, to the lien of the foreclosed Home
Loan; and
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(ii) all unpaid interest accrued thereon at the related Home
Loan Interest Rate through the date of sale.
In the absence of any such bid, the Master Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosed Property by the Master Servicer, if the highest bidder is a Person
that is Independent, or by an Independent appraiser retained by the Master
Servicer, if the highest bidder is a Person that is not Independent. In the
absence of any bid determined to be fair as aforesaid, the Master Servicer shall
offer the affected Foreclosed Property for sale to any Person, other than an
Interested Person, in a commercially reasonable manner for a period of not less
than 10 or more than 30 days, and shall accept the highest cash bid received
therefor in excess of the highest bid previously submitted. If no such bid is
received, any Person who is not Independent may resubmit its original bid, and
the Master Servicer shall accept the highest outstanding cash bid, regardless of
from whom received. No Interested Person shall be obligated to submit a bid to
purchase any Foreclosed Property, and notwithstanding anything to the contrary
herein, neither the Indenture Trustee, in its individual capacity, nor any of
its affiliates may bid for or purchase any Foreclosed Property pursuant hereto.
(b) In determining whether any bid constitutes a fair price for any
Foreclosed Property the Master Servicer shall take into account, and any
appraiser or other expert in real estate matters shall be instructed to take
into account, as applicable, among other factors, the financial standing of any
tenant of the Foreclosed Property, the physical condition of the Foreclosed
Property, and the state of the local and national economies.
(c) The Master Servicer shall act on behalf of the Indenture Trustee in
negotiating and taking any other action necessary or appropriate in connection
with the sale of any Foreclosed Property, including the collection of all
amounts payable in connection therewith. Any sale of a Foreclosed Property shall
be without recourse to the Indenture Trustee, the Master Servicer or the Trust,
and if consummated in accordance with the terms of this Agreement, neither the
Master Servicer nor the Indenture Trustee shall have any liability to any
Securityholder with respect to the purchase price therefor accepted by the
Master Servicer or the Indenture Trustee.
Section 4.14. Management of Real Estate Owned.
(a) If the Trust acquires any Foreclosed Property pursuant to Section
4.12, the Master Servicer shall have full power and authority, subject only to
the specific requirements and prohibitions of this Agreement, to do any and all
things in connection therewith as are consistent with the manner in which the
Master Servicer manages and operates similar property owned by the Master
Servicer or any of its affiliates, all on such terms and for such period as the
Master Servicer deems to be in the best interests of Securityholders.
(b) The Master Servicer may contract with any Person that is
Independent (an "Independent Contractor") for the operation and management of
any Foreclosed Property, provided that:
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(i) the terms and conditions of any such contract may not be
inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor remit all
related Payments to the Master Servicer as soon as practicable, but
in no event later than two Business Days following the receipt
thereof by such Independent Contractor;
(iii) none of the provisions of this Section 4.14(b) relating
to any such contract or to actions taken through any such Independent
Contractor shall be deemed to relieve the Master Servicer of any of its
duties and obligations to the Indenture Trustee for the benefit of
Securityholders with respect to the operation and management of any
such Foreclosed Property; and
(iv) the Master Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all duties
and obligations in connection with the operation and management of such
Foreclosed Property.
The Master Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, but shall be entitled to
be reimbursed for all such fees advanced by it pursuant to Section 4.08(b)(v) in
the manner provided in Section 4.09(b).
Section 4.15. Inspections.
The Master Servicer shall inspect or cause to be inspected each
Property that secures any Home Loan at such times and in such manner as are
consistent with the servicing standard set forth in Section 4.01.
Section 4.16. Maintenance of Insurance.
(a) The Master Servicer shall cause to be maintained for each
Foreclosed Property acquired by the Trust such types and amounts of insurance
coverage as the Master Servicer shall deem reasonable. The Master Servicer shall
cause to be maintained for each Home Loan, fire and hazard insurance naming Mego
as loss payee thereunder providing extended coverage in an amount which is at
least equal to the least of (i) the maximum insurable value of the improvements
securing such Home Loan from time to time, (ii) the combined principal balance
owing on such Home Loan and any mortgage loan senior to such Home Loan and (iii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis. In cases in which any Property securing a Home Loan is located in a
federally designated flood area, the hazard insurance to be maintained for the
related Home Loan shall include flood insurance
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to the extent such flood insurance is available and the Master Servicer has
determined such insurance to be necessary in accordance with accepted mortgage
loan servicing standards for mortgage loans similar to the Mortgage Loans. All
such flood insurance shall be in amounts equal to the least of (A) the maximum
insurable value of the improvement securing such Home Loan, (B) the combined
principal balance owing on such Home Loan and any mortgage loan senior to such
Home Loan and (c) the maximum amount of insurance available to the lender under
the National Flood Insurance Act of 1968, as amended.
(b) Any amounts collected by the Master Servicer under any Insurance
Policies, shall be paid over or applied by the Master Servicer as follows:
(i) In the case of amounts received in respect of any Home
Loan:
(A) for the restoration or repair of the affected
Property, in which event such amounts shall be released to the
Obligor in accordance with the terms of the related Debt
Instrument or to the extent not so used,
(B) in reduction of the Principal Balance of the related
Home Loan, in which event such amounts shall be credited to
the Servicing Record,
unless the related instruments require a different application, in which case
such amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.14, in the case of amounts received
in respect of any Foreclosed Property, for the restoration or repair of
such Foreclosed Property, unless the Master Servicer determines,
consistent with the servicing standard set forth in Section 4.01, that
such restoration or repair is not in the best economic interest of the
Trust, in which event such amounts shall be credited, as of the date of
receipt, to the applicable Servicing Record, as a Payment received from
the operation of such Foreclosed Property.
Section 4.17. Release of Files.
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan plus
all interest accrued thereon shall have been paid;
(ii) the Master Servicer, or the Servicer shall have
received, in escrow, payment in full of such Home Loan in a manner
customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Home Loan has been conveyed to
the Trust pursuant to Section 3.05;
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(iv) such Home Loan or the related Foreclosed Property has
been sold in connection with the termination of the Trust pursuant to
Section 9.01; or
(v) the related Foreclosed Property has been sold pursuant to
Section 4.13.
In each such case, the Servicer shall deliver a certificate to the effect that
the Servicer has complied with all of its obligations under the Servicing
Agreement with respect to such Home Loan and requesting that the Indenture
Trustee release to the Servicer the related Home Loan File, then the Indenture
Trustee shall, within three Business Days or such shorter period as may be
required by applicable law, release (unless such Home Loan File has previously
been released), the related Home Loan File to the Servicer and execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest ownership of such Home Loan in the
Servicer or such other Person as may be specified in such certificate, the forms
of any such instrument to be appended to such certificate.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Home Loan, the Indenture Trustee shall, upon request of the
Servicer, release the related Home Loan File (or any requested portion thereof)
to the Servicer. Such receipt shall obligate the Servicer, to return the Home
Loan File (or such portion thereof) to the Indenture Trustee when the need
therefor by the Servicer, no longer exists unless any of the conditions
specified in subsection (a) above, is satisfied prior thereto. The Indenture
Trustee shall release such receipt to the Servicer (i) upon the Servicer's
return of such Home Loan File (or such portion thereof) to the Indenture Trustee
or (ii) if any of the conditions specified in subsection (a) has been satisfied,
and the Servicer has not yet returned such Home Loan File (or such portion
thereof) to the Indenture Trustee, upon receipt of a certificate certifying that
any of such condition has been satisfied.
Section 4.18. Filing of Continuation Statements.
On or before the fifth anniversary of the filing of any financing
statements by Mego and the Depositor, respectively, with respect to the assets
conveyed to the Trust, Mego and the Depositor shall prepare, have executed by
the necessary parties and file in the proper jurisdictions all financing and
continuation statements necessary to maintain the liens, security interests, and
priorities of such liens and security interests that have been granted by Mego
and the Depositor, respectively, and Mego and the Depositor shall continue to
file on or before each fifth anniversary of the filing of any financing and
continuation statements such additional financing and continuation statements
until the Trust has terminated pursuant to Section 9.1 of the Trust Agreement.
The Indenture Trustee agrees to cooperate with Mego and the Depositor in
preparing, executing and filing such statements. The Indenture Trustee agrees to
notify Mego and the Depositor no later than the third Distribution Date prior to
each such fifth anniversary of the requirement to file such financing and
continuation statements. The filing of any such statement with respect to Mego
and the Depositor shall not be construed as any indication of an intent of any
party contrary to the expressed intent set forth in Section 2.04 hereof. If Mego
or the Depositor has ceased to do business whenever any such financing and
continuation statements
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must be filed or Mego or the Depositor fails to file any such financing
statements or continuation statements at least one month prior to the expiration
thereof, the Indenture Trustee shall perform the services required under this
Section 4.18.
Section 4.19. Fidelity Bond.
The Master Servicer shall maintain a fidelity bond in such form and
amount as is customary for entities acting as custodian of funds and documents
in respect of loans on behalf of institutional investors and shall cause each
Servicer to maintain such fidelity bond in an amount that conforms to FNMA
levels.
Section 4.20. Errors and Omissions Insurance.
The Master Servicer shall obtain and maintain at all times during the
term of this Agreement errors and omissions insurance coverage covering the
Master Servicer and its employees issued by a responsible insurance company. The
issuer, policy terms and forms and amounts of coverage, including applicable
deductibles shall be in such form and amount as is customary for entities acting
as master servicers. The Master Servicer agrees to notify the Indenture Trustee
in writing within five (5) days of the Master Servicer's receipt of notice of
the cancellation or termination of any such errors and omissions insurance
coverage. The Master Servicer shall cause the Servicer to maintain such errors
and omissions insurance coverage as provided herein and in an amount that
conforms to FNMA Levels.
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ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account.
(a) (1) Establishment of Collection Account. The Indenture Trustee has
heretofore established or caused to be established and shall hereafter maintain
or cause to be maintained a separate account denominated a Collection Account,
which in each case is and shall continue to be an Eligible Account in the name
of the Indenture Trustee and shall be designated "U.S. Bank National
Association, d/b/a First Bank National Association, as Indenture Trustee in
trust for Mego Mortgage Home Loan Asset Backed Securities, Series 1997-4,
Collection Account." The Master Servicer shall cause all applicable Payments
received by the Servicer to be deposited to the Collection Account no later than
the second Business Day following the date of receipt thereof by the Servicer.
The Indenture Trustee shall provide to the Master Servicer and the Servicer a
monthly statement of all activity in the Collection Account. Funds in the
Collection Account shall be invested in accordance with Section 5.04.
(2) Establishment of Note Distribution Account. The Indenture Trustee
has heretofore established with itself in its trust capacity at its corporate
trust department for the benefit of Securityholders an account referred to
herein as a Note Distribution Account. The Indenture Trustee shall at all times
maintain the Note Distribution Account as an Eligible Account and shall cause
such account to be designated "U.S. Bank National Association, d/b/a First Bank
National Association, as Indenture Trustee in trust for Mego Mortgage Home Loan
Asset Backed Securities, Series 1997-4 Note Distribution Account."
(b) Withdrawals from Collection Account. No later than the second
Business Day preceding each Distribution Date, the Indenture Trustee shall
withdraw amounts from the Collection Account representing the Payments with
respect to the related Determination Date on deposit therein and deposit such
amounts into the Note Distribution Account and liquidate the Permitted
Investments in which such amounts are invested and distribute all net investment
earnings to the Servicer.
(c) Withdrawals from Note Distribution Account. On each Distribution
Date, the Indenture Trustee shall liquidate the Permitted Investments in which
amounts on deposit in the Note Distribution Account are invested and distribute
all net investment earnings to the Servicer and, to the extent funds are
available in the Note Distribution Account, the Indenture Trustee (based on the
information contained in the Master Servicer Certificate for such Distribution
Date) shall make the following withdrawals from the Note Distribution Account by
10:00 a.m. (New York City time) on such Distribution Date, in the following
order of priority:
(i) to distribute on such Distribution Date the following
amounts pursuant to the Indenture, from the Collected Amount, in the
following order:
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(a) concurrently, to (x) the Master Servicer, the
Master Servicer Fee, (y) the Servicer, the Servicer Fee, and
(z) to the Indenture Trustee, the Indenture Trustee Fee, in
each case for such Distribution Date;
(b) to the Master Servicer or Servicer, any amount in
respect of reimbursement of Interest Advances or Foreclosure
Advances, to which the Master Servicer or any Servicer is
entitled pursuant to Section 4.09 with respect to such
Distribution Date;
(c) to the Servicer, the Owner Trustee Fee Reserve,
for such Distribution Date;
(ii) to distribute on such Distribution Date the Regular
Distribution Amount pursuant to the Indenture, from the Collected
Amount remaining after the application of clause (i), in the following
order:
(a) to the holders of each Class of Senior Notes, an
amount equal to the applicable Noteholders' Interest
Distributable Amount for such Distribution Date (any shortfall
to be allocated, pro rata, based on the amount each such Class
would be entitled to receive in the absence of any such
shortfall);
(b) first, to the holders of Class M-1 Notes and then
to the holders of the Class M-2 Notes, in that order, an
amount equal to the applicable Noteholders' Interest
Distributable Amount for such Distribution Date;
(c) to the Certificate Distribution Account for
distribution pursuant to Section 5.03(b) to holders of the
Certificates, an amount equal to the Certificateholders'
Interest Distributable Amount for such Distribution Date;
(d) sequentially, to the holders of the Class A-1,
Class A-2, Class A-3 and Class A-4 Notes, in that order, until
the respective Class Principal Balances thereof are reduced to
zero, the amount necessary to reduce the aggregate Class
Principal Balance of the Senior Notes to the Senior Optimal
Principal Balance for such Distribution Date;
(e) first, to the holders of the Class M-1 Notes and
then to the holders of the Class M-2 Notes, the amount
necessary to reduce the Class Principal Balances thereof to
the Class M-1 Optimal Principal Balance and the Class M-2
Optimal Principal Balance, respectively, for such Distribution
Date;
(f) to the Certificate Distribution Account for
distribution pursuant to Section 5.03(b) to holders of the
Certificates, the amount necessary to
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reduce the Class Principal Balance thereof to the Certificate
Optimal Principal Balance for such Distribution Date; and
(g) sequentially, to the Class M-1 Notes, Class M-2
Notes and the Certificates, in that order, until their
respective Loss Reimbursement Entitlements have been paid in
full (in the case of the Class M-1 and Class M-2 Notes, first
to the reimbursement of Allocable Loss Amounts, until
completely reimbursed, and then to any accrued interest
thereon) (such amounts to be distributed to the holders of the
Certificates pursuant to this clause (g) shall be deposited in
the Certificate Distribution Account).
(iii) On each Distribution Date, the Indenture Trustee
shall distribute the Excess Spread, if any, in the following order of
priority:
(a) in an amount equal to the Overcollateralization
Deficiency Amount, if any, as follows:
(i) sequentially, to the holders of the
Class A-1, Class A-2, Class A-3 and Class A-4 Notes,
in that order, until the respective Class Principal
Balances thereof are reduced to zero, the amount
necessary to reduce the aggregate of their Class
Principal Balances to the Senior Optimal Principal
Balance for such Distribution Date;
(ii) first, to the holders of the Class M-1
Notes and then to the holders of the Class M-2 Notes,
as principal, until the respective Class Principal
Balances thereof have been reduced to the Class M-1
Optimal Principal Balance and Class M-2 Optimal
Principal Balance, respectively, for such
Distribution Date; and
(iii) to the Certificate Distribution
Account for distribution pursuant to Section 5.03(b)
to the holders of the Certificates, until the Class
Principal Balance thereof has been reduced to the
Certificate Optimal Principal Balance for such
Distribution Date; and
(b) sequentially, to the Class M-1 Notes, the Class
M-2 Notes and the Certificates, in that order, until their
respective Loss Reimbursement Entitlements, if any, have been
paid in full (in the case of the Class M-1 and Class M-2
Notes, first to the reimbursement of Allocable Loss Amounts,
until completely reimbursed, and then to any accrued interest
thereon) (such amounts to be distributed to the holders of the
Certificates pursuant to this clause (b) shall be deposited in
the Certificate Distribution Account); and
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(c) to any successor Master Servicer, if any, for
such Distribution Date, amounts payable in accordance with
Section 8.03(c) in addition to the Master Servicer Fee;
(d) to the Person entitled thereof, payments in
respect of Other Fees; and
(e) for deposit into the Certificate Distribution
Account, for distribution pursuant to Section 5.03(b) on such
Distribution Date, to the holders of the Residual Instruments,
any remaining amount.
(d) Additional Withdrawals from Collection Account. On the third
Business Day prior to each Distribution Date, the Indenture Trustee, at the
direction of the Master Servicer shall also make the following withdrawals from
the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be
deposited in the Collection Account or deposited therein in
error; and
(ii) to clear and terminate the Collection Account in
connection with the termination of this Agreement.
(e) All distributions made on each Class of Notes on each Distribution
Date will be made on a pro rata basis among the Noteholders of such Class of
record on the preceding Record Date based on the Percentage Interest represented
by their respective Notes, and except as otherwise provided in the next
succeeding sentence, shall be made by wire transfer of immediately available
funds to the account of such Noteholder, if such Noteholder shall own of record
Notes representing at least a $1,000,000 Denomination and shall have so notified
the Indenture Trustee, and otherwise by check mailed, via first class mail,
postage prepaid, to the address of such Noteholder appearing in the Note
Register. The final distribution on each Note will be made in like manner, but
only upon presentment and surrender of such Note at the location specified in
the notice to Noteholders of such final distribution. Notwithstanding the
reduction of the Class Principal Balance of a Class to zero, the final
distribution with respect to each Class shall be made upon the earlier of (a)
the reduction of any Loss Reimbursement Entitlement with respect thereto to
zero, or (b) the Final Maturity Date for such Class.
Whenever the Indenture Trustee, based on a Master Servicer Certificate,
expects that the final distribution with respect to a Class of Securities will
be made on the next Distribution Date, the Indenture Trustee shall, as soon as
practicable, mail to each Holder of such Class of Securities as of the
applicable Record Date a notice to the effect that:
(i) the Indenture Trustee expects that the final distribution
with respect to such Class of Securities will be made on such
Distribution Date, and
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(ii) no interest shall accrue on such Class of Securities
after such Distribution Date provided that the final distribution
occurs on such Distribution Date.
Section 5.02 Allocation of Losses.
(a) In the event that the Payments received or collected in respect of
a Home Loan are less than the related Principal Balance plus accrued interest
thereon, or any Obligor makes a partial payment of any Monthly Payment due on a
Home Loan, such Payments or partial payment shall be applied to payment of the
related Debt Instrument, first to interest accrued at the Home Loan Interest
Rate and then to principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be
applied to the reduction of the Class Principal Balances of the Certificates,
the Class M-2 and Class M-1 Notes in accordance with the Allocable Loss Amount
Priority.
Section 5.03 Certificate Distribution Account.
(a) Establishment. No later than the Closing Date, the Indenture
Trustee, will establish and maintain with the Indenture Trustee for the benefit
of the Owner Trustee on behalf of the Certificateholders and holders of Residual
Instruments one or more separate Eligible Accounts, which while the Indenture
Trustee holds such Trust Account shall be entitled "Certificate Distribution
Account, U.S. Bank National Association, d/b/a First Bank National Association,
as Co-Owner Trustee, in trust for the Mego Mortgage Home Loan Asset Backed
Securities, Series 1997-4". Funds in the Certificate Distribution Account shall
be invested in accordance with Section 5.04.
(b) Distributions. On each Distribution Date, the Indenture Trustee
shall withdraw from the Note Distribution Account all amounts required to be
deposited in the Certificate Distribution Account with respect to the preceding
Due Period pursuant to Section 5.01(c)(ii)(c), (f) and (g) and
5.01(c)(iii)(a)(iii), (b) and (e) and will remit such amount to the Owner
Trustee or the Co-Owner Trustee for deposit into the Certificate Distribution
Account. On each Distribution Date, the Owner Trustee or the Co-Owner Trustee
shall distribute all amounts on deposit in the Certificate Distribution Account
to the Certificateholders and the holders of the Residual Instruments, as
specified and in accordance with the amounts calculated pursuant to the
foregoing sections of Section 5.01.
(c) All distributions made on the Certificates on each Distribution
Date will be made on a pro rata basis among the Certificateholders of record on
the immediately preceding Record Date based on the Percentage Interest
represented by their respective Certificates, and except as otherwise provided
in the next succeeding sentence, shall be made by wire transfer of immediately
available funds to the account of such Certificateholder, if such
Certificateholder shall own of record Certificates representing at least a 30%
Percentage Interest and shall have so notified the Owner Trustee or Co-Owner
Trustee, and otherwise by check mailed, via first class mail, postage prepaid,
to the address of such Certificateholder appearing in the Certificate
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Register. The final distribution on each Certificate will be made in like
manner, but only upon presentment and surrender of such Certificate at the
location specified in the notice to holders of the Certificates of such final
distribution. Notwithstanding the reduction of the Class Principal Balance of a
Class to zero, the final distribution with respect to each Class shall be made
upon the earlier of (a) the reduction of any Loss Reimbursement Entitlement with
respect thereto to zero, and (b) the Final Maturity Date for such Class.
(d) All distributions made on the Residual Instruments on each
Distribution Date will be made on a pro rata basis among the holders of Residual
Instruments of record on the immediately preceding Record Date based on the
Percentage Interest represented by such Residual Instruments, and except as
otherwise provided in the next succeeding sentence, shall be made by wire
transfer of immediately available funds to the account of such holders of
Residual Instruments, if such holders of Residual Instruments shall own of
record Residual Instruments representing at least a 30% Percentage Interest and
shall have so notified the Owner Trustee or Co-Owner Trustee, and otherwise by
check mailed, via first class mail, postage prepaid, to the address of such
holder of Residual Instruments appearing in the Certificate Register. The final
distribution on each Residual Instrument will be made in like manner, but only
upon presentment and surrender of such Residual Instrument at the location
specified in the notice to holders of the Residual Instruments of such final
distribution.
Section 5.04 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to the
provisions hereunder, each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts distributed from each Trust
Account in accordance with the Indenture and this Agreement shall be released
from the lien of the Indenture upon such distribution thereunder or hereunder.
The Indenture Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Trust Accounts (other than the Certificate
Distribution Account) and in all proceeds thereof and all such funds,
investments, proceeds shall be part of the Trust Account Property and the Trust
Estate. If, at any time, any Trust Account ceases to be an Eligible Account, the
Indenture Trustee (or the Master Servicer on its behalf) shall within 10
Business Days (or such longer period, not to exceed 30 calendar days, as to
which each Rating Agency may consent) (i) establish a new Trust Account as an
Eligible Account, (ii) terminate the ineligible Trust Account, and (iii)
transfer any cash and investments from such ineligible Trust Account to such new
Trust Account.
With respect to the Trust Accounts (other than the Certificate
Distribution Account), the Indenture Trustee agrees, by its acceptance hereof,
that each such Trust Account shall be subject to the sole and exclusive custody
and control of the Indenture Trustee for the benefit of the Securityholders and
the Issuer, as the case may be, and the Indenture Trustee shall have sole
signature and withdrawal authority with respect thereto.
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In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder also shall be subject to and
established and maintained in accordance with the Trust Agreement. Subject to
rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee and the Co-Owner Trustee shall possess all right, title and interest for
the benefit of the Securityholders in all funds on deposit from time to time in
the Certificate Distribution Account and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property and the Trust Estate. Subject to the rights
of the Indenture Trustee, the Owner Trustee and Co-Owner Trustee agree, by its
acceptance hereof, that such Certificate Distribution Account shall be subject
to the sole and exclusive custody and control of the Owner Trustee or Co-Owner
Trustee for the benefit of the Issuer and the parties entitled to distributions
therefrom, including without limitation, the Certificateholders, the holders of
Residual Instruments and the Owner Trustee and the Co-Owner Trustee shall have
sole signature and withdrawal authority with respect to the Certificate
Distribution Account. Notwithstanding the preceding, the distribution of amounts
from the Certificate Distribution Account in accordance with Section 5.03(b)
also shall be made for the benefit of the Indenture Trustee (with respect to its
duties under the Indenture and this Agreement relating to the Trust Estate), and
the Indenture Trustee (in its capacity as Indenture Trustee) shall have the
right, but not the obligation to take custody and control of the Certificate
Distribution Account and to cause the distribution of amounts therefrom in the
event that the Owner Trustee or Co-Owner Trustee fails to distribute such
amounts in accordance with Section 5.03(b).
The Master Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee or Co-Owner Trustee with the consent of the
Indenture Trustee, to instruct the Indenture Trustee, Co-Owner Trustee or Owner
Trustee to make withdrawals and payments from the Trust Accounts for the purpose
of permitting the Master Servicer to carry out its respective duties hereunder
or permitting the Indenture Trustee or Owner Trustee to carry out its duties
herein or under the Indenture or the Trust Agreement, as applicable.
(b) (1) Investment of Funds. The funds held in any Trust Account may
only be invested (to the extent practicable and consistent with any requirements
of the Code) in Permitted Investments, as directed by a Responsible Officer of
Mego in writing. In any case, funds in any Trust Account must be available for
withdrawal without penalty, and any Permitted Investments and the funds held in
any Trust Account, other than the Note Distribution Account, must mature or
otherwise be available for withdrawal, not later than three (3) Business Days
immediately preceding the Distribution Date next following the date of such
investment and shall not be sold or disposed of prior to its maturity subject to
Section 5.04(b)(2) below. Amounts deposited to the Note Distribution Account
pursuant to Section 5.01(b) prior to each Distribution Date shall be invested in
Permitted Investments which are overnight investments from the date of deposit
to the Business Day preceding each Distribution Date. All interest and any other
investment earnings on amounts or investments held in any Trust Account shall be
deposited into such Trust Account immediately upon receipt by the Indenture
Trustee, or in the case of the Certificate Distribution Account, the Owner
Trustee or Co-Owner Trustee, as applicable. All Permitted Investments in which
funds in any Trust Account (other than the Certificate Distribution Account)
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are invested must be held by or registered in the name of "U.S. Bank National
Association, d/b/a First Bank National Association, as Indenture Trustee, in
trust for the Mego Mortgage Home Loan Asset Backed Securities, Series 1997-4".
While the Co-Owner Trustee holds the Certificate Distribution Account, all
Permitted Investments in which funds in the Certificate Distribution Account are
invested shall be held by or registered in the name of "U.S. Bank National
Association, d/b/a First Bank National Association, as Co-Owner Trustee, in
trust for the Mego Mortgage Home Loan Asset Backed Securities, Series 1997-4".
(2) Insufficiency and Losses in Trust Accounts. If any amounts are
needed for disbursement from any Trust Account and sufficient uninvested funds
are not available to make such disbursement, the Indenture Trustee, or Owner
Trustee or Co-Owner Trustee in the case of the Certificate Distribution Account,
shall cause to be sold or otherwise converted to cash a sufficient amount of the
investments in such Trust Account. The Indenture Trustee, or Owner Trustee or
Co-Owner Trustee in the case of the Certificate Distribution Account, shall not
be liable for any investment loss or other charge resulting therefrom, unless
such loss or charge is caused by the failure of the Indenture Trustee or Owner
Trustee or Co-Owner Trustee, respectively, to perform in accordance with this
Section 5.04.
If any losses are realized in connection with any investment in any
Trust Account pursuant to this Agreement and the Indenture, then Mego shall
deposit the amount of such losses (to the extent not offset by income from other
investments in such Trust Account) in such Trust Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in any Trust Account shall be taxed to the holders of the Residual
Instruments.
(c) Subject to Section 6.1 of the Indenture, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any Trust
Account held by the Indenture Trustee resulting from any investment loss on any
Permitted Investment included therein (except to the extent that the Indenture
Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture
Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts; and each such
Eligible Account shall be subject to the exclusive custody and control
of the Indenture Trustee, and the Indenture Trustee shall have sole
signature authority with respect thereto;
(2) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for the Indenture Trustee;
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(3) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and shall
be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's
(or its nominee's) ownership of such security.
Section 5.05 Servicer to Pay Owner Trustee Fee. On the Distribution
Date occurring in September each year during the term of this Agreement,
commencing in September 1998, the Servicer shall pay to the Owner Trustee, the
Owner Trustee Fee.
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ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Master Servicing Certificate. On each Determination Date,
the Master Servicer shall deliver to the Indenture Trustee, the Owner Trustee
and Co-Owner Trustee, a certificate containing the items described in Exhibit B
hereto (each, a "Master Servicer Certificate"), prepared as of the related
Determination Date and executed by a Master Servicing Officer. No later than the
Business Day following each Determination Date, the Master Servicer shall
deliver to the Indenture Trustee, in a format consistent with other electronic
loan level reporting supplied by the Master Servicer in connection with similar
transactions, "loan level" information with respect to the Home Loans as of the
related Determination Date, to the extent that such information has been
provided to the Master Servicer by the Servicer. The Indenture Trustee may rely
on the Master Servicer Certificate with respect to the matters set forth
therein.
Section 6.02 Statement to Securityholders. On or before the third
Business Day following each Distribution Date, the Indenture Trustee shall mail:
to each Holder of a Security (with a copy to the Depositor and the Rating
Agency) at its address shown on the Certificate Register or Note Register, as
applicable, a statement, based on information set forth in the Master Servicer
Certificate for such Distribution Date, substantially in the form of Statement
to Securityholders attached hereto as Exhibit C, respectively, together with a
copy of such related Master Servicer Certificate.
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ARTICLE VII.
THE MASTER SERVICER
Section 7.01 Indemnification; Third Party Claims.
(a) The Master Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically imposed upon and undertaken by the
Master Servicer herein and the representations made by the Master Servicer.
(b) The Master Servicer shall indemnify, defend and hold harmless the
Trust, the Indenture Trustee, Owner Trustee, the Co-Owner Trustee, Mego and the
Depositor, their respective officers, directors, agents and employees and the
Securityholders from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss, claim,
damage or liability arose out of, or was imposed upon the Trust, Indenture
Trustee, the Owner Trustee, the Co-Owner Trustee, Mego, the Depositor, or the
Securityholders through the breach of this Agreement by the Master Servicer, the
negligence, willful misfeasance, or bad faith of the Master Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement. Such
indemnification shall include, without limitation, reasonable fees and expenses
of counsel and expenses of litigation.
Section 7.02 Merger or Consolidation of the Master Servicer.
The Master Servicer shall not merge or consolidate with any other
person, convey, transfer or lease substantially all its assets as an entirety to
another Person, or permit any other Person to become the successor to the Master
Servicer's business unless, after the merger, consolidation, conveyance,
transfer, lease or succession, the successor or surviving entity (i) shall be an
Eligible Servicer, (ii) shall be capable of fulfilling the duties of the Master
Servicer contained in this Agreement and (iii) shall have a long-term debt
rating which is BBB and Baa2 by Standard & Poor's and ▇▇▇▇▇'▇ respectively. Any
corporation (i) into which the Master Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Master Servicer
shall be a party, (iii) which acquires by conveyance, transfer or lease
substantially all of the assets of the Master Servicer, or (iv) succeeding to
the business of the Master Servicer, in any of the foregoing cases shall execute
an agreement of assumption to perform every obligation of the Master Servicer
under this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to the Master Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein shall be
deemed to release the Master Servicer from any obligation. The Master Servicer
shall provide notice of any merger, consolidation or succession pursuant to this
Section 7.02 to the Owner Trustee, the Indenture Trustee and each Rating Agency.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred
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to in clauses (i) through (iv) above, (x) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Section 3.02
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction),
and (y) the Master Servicer shall have delivered to the Owner Trustee and the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 7.02 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with.
Section 7.03 Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of its directors, officers,
employees or agents shall be under any liability to the Trust or to the
Securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Master Servicer or
any such Person against any breach of warranties, representations or covenants
made herein or any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in performing or failing to perform
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. The Master Servicer and any of its directors, officers, employees or
agents 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.
Section 7.04 Master Servicer Not to Resign; Assignment.
(a) The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) with the consent of the Rating Agencies
or (ii) upon determination that by reason of a change in legal requirements the
performance of its duties under this Agreement would cause it to be in violation
of such legal requirements in a manner which would result in a material adverse
effect on the Master Servicer. Any such determination permitting the resignation
of the Master Servicer by reason of a change in such legal requirements shall be
evidenced by an Opinion of Counsel to such effect delivered and acceptable to
the Indenture Trustee. No resignation of the Master Servicer shall become
effective until the Indenture Trustee or a successor master servicer shall have
assumed the Master Servicer's servicing responsibilities and obligations in
accordance with Section 8.02.
(b) Notwithstanding anything to the contrary herein, the Master
Servicer shall remain liable for all liabilities and obligations incurred by it
as Master Servicer hereunder prior to the time that any resignation or
assignment referred to in subsection (a) above or termination under Section 8.01
becomes effective, including the obligation to indemnify the Indenture Trustee
pursuant to Section 7.01(b) hereof.
(c) The Master Servicer agrees to cooperate with any successor Master
Servicer in effecting the transfer of the Master Servicer's servicing
responsibilities and rights hereunder pursuant to subsection (a), including,
without limitation, the transfer to such successor of all
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relevant records and documents (including any Home Loan Files in the possession
of the Master Servicer and the Servicing Record) and all amounts credited to the
Servicing Record or thereafter received with respect to the Home Loans and not
otherwise permitted to be retained by the Master Servicer pursuant to this
Agreement. In addition, the Master Servicer, at its sole cost and expense, shall
prepare, execute and deliver any and all documents and instruments to the
successor Master Servicer including all Home Loan Files in its possession and do
or accomplish all other acts necessary or appropriate to effect such termination
and transfer of servicing responsibilities.
Section 7.05 Relationship of Master Servicer to Issuer and the
Indenture Trustee.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Issuer and the
Indenture Trustee under this Agreement is intended by the parties hereto to be
that of an independent contractor and not of a joint venturer, agent or partner
of the Issuer or the Indenture Trustee.
Section 7.06 Master Servicer May Own Notes.
Each of the Master Servicer and any affiliate of the Master Servicer
may in its individual or any other capacity become the owner or pledgee of Notes
with the same rights as it would have if it were not the Master Servicer or an
affiliate thereof except as otherwise specifically provided herein. Notes so
owned by or pledged to the Master Servicer or such affiliate shall have an equal
and proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Notes, provided that
any Notes owned by the Master Servicer or any affiliate thereof, during the time
such Notes are owned by them, shall be without voting rights for any purpose set
forth in this Agreement. The Master Servicer shall notify the Indenture Trustee
promptly after it or any of its affiliates becomes the owner or pledgee of a
Note.
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ARTICLE VIII.
DEFAULT
Section 8.01 Events of Default.
For purposes of this Agreement, each of the following shall constitute
an "Event of Default."
(a) failure by the Master Servicer to deposit or cause the Servicer to
deposit all applicable Payments in the Collection Account no later than the
second Business Day following receipt thereof by the Master Servicer or
Servicer, which failure continues unremedied for two Business Days; or
(b) failure on the part of the Master Servicer duly to observe or
perform in any material respect any of its other covenants or agreements
contained in this Agreement that continues unremedied for a period of 30 days
after the earlier of (x) the date on which the Master Servicer gives notice of
such failure to the Indenture Trustee pursuant to Section 4.04(b) and (y) the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Indenture Trustee, or to the
Master Servicer and the Indenture Trustee pursuant to the direction of the
Majority Securityholders; or
(c) failure by the Master Servicer to deliver to the Indenture Trustee
the Master Servicer Certificate by the fourth Business Day prior to each
Distribution Date; or
(d) the entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Master Servicer in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal or state, bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Master Servicer or of
any substantial part of its properties or ordering the winding up or liquidation
of the affairs of the Master Servicer and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days or the
commencement of an involuntary case under the federal bankruptcy laws, as now or
hereinafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law and such case is not dismissed within 60 days; or
(e) the commencement by the Master Servicer of a voluntary case under
the federal bankruptcy laws, as now or hereinafter in effect, or any other
present or future, federal or state bankruptcy, insolvency or similar law, or
the consent by the Master Servicer to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Master Servicer or of any substantial part of its
property or the making by the Master Servicer of an assignment for the benefit
of creditors or the failure by the Master Servicer generally to pay its debts as
such debts become due or the taking of corporate
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action by the Master Servicer in furtherance of any of the foregoing or the
admission in writing by the Master Servicer of an inability to pay its debts as
they become due; or
(f) any representation, warranty or statement of the Master Servicer
made in this Agreement or any certificate, report or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of the
time when the same shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the Trust
and, within 30 days of the earlier of (x) the date on which the Master Servicer
gives notice of such failure to the Indenture Trustee pursuant to Section
4.04(b) and (y) the date on which written notice thereof shall have been given
to the Master Servicer by the Indenture Trustee or the Majority Securityholders,
the circumstances or condition in respect of which such representation, warranty
or statement was incorrect shall not have been eliminated or otherwise cured; or
(g) failure on the part of the Master Servicer to deposit into the Note
Distribution Account within 3 Business Days following the related Determination
Date any Interest Advance pursuant to Section 4.08; or
(h) the Total Expected Loan Loss Percentage exceeds 21.1250% prior to
the fifth anniversary of the Cut-Off Date or 31.6875% thereafter.
Section 8.02 Consequences of an Event of Default.
If an Event of Default shall occur and be continuing, the Indenture
Trustee at the direction of the Majority Securityholders, by notice given in
writing to the Master Servicer may terminate all of the rights and obligations
of the Master Servicer under this Agreement. On or after the receipt by the
Master Servicer of such written notice, and the appointment of and acceptance by
a successor Master Servicer, all authority, power, obligations and
responsibilities of the Master Servicer under this Agreement, whether with
respect to the Securities or the Trust or otherwise, shall pass to, be vested in
and become obligations and responsibilities of the successor Master Servicer;
provided, however, that the successor Master Servicer shall have no liability
with respect to any obligation which was required to be performed by the prior
Master Servicer prior to the date that the successor Master Servicer becomes the
Master Servicer or any claim of a third party based on any alleged action or
inaction of the prior Master Servicer. The successor Master Servicer is
authorized and empowered by this Agreement to execute and deliver, on behalf of
the prior Master Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination.
The prior Master Servicer agrees to cooperate with the successor Master Servicer
in effecting the termination of the responsibilities and rights of the prior
Master Servicer under this Agreement, including, without limitation, the
transfer to the successor Master Servicer for administration by it of all cash
amounts that shall at the time be held by the prior Master Servicer for deposit,
or have been deposited by the prior Master Servicer, in the Collection Account
or thereafter received with respect to the Home Loans and the delivery to the
successor Master Servicer of all Home Loan Files in the Master Servicer's
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possession and a computer tape in readable form containing the Servicing Record
and any other information necessary to enable the successor Master Servicer to
service the Home Loans. In addition to any other amounts that are then payable
to the terminated Master Servicer under this Agreement, the terminated Master
Servicer shall then be entitled to receive (to the extent provided by Section
4.09) out of the Collected Amount, reimbursements for any outstanding Interest
Advances made during the period prior to the notice pursuant to this Section
8.02 which terminates the obligation and rights of the terminated Master
Servicer under this Agreement. The Indenture Trustee and the successor Master
Servicer may set off and deduct any amounts owed by the terminated Master
Servicer from any amounts payable to the terminated Master Servicer. The
terminated Master Servicer shall grant the Indenture Trustee, and the successor
Master Servicer reasonable access to the terminated Master Servicer's premises
at the terminated Master Servicer's expense.
Section 8.03 Appointment of Successor.
(a) On or after the time the Master Servicer receives a notice of
termination pursuant to Section 8.02 or upon the resignation of the Master
Servicer pursuant to Section 7.04, the Indenture Trustee shall be the successor
in all respects to the Master Servicer in its capacity as master servicer under
this Agreement and the transactions set forth or provided for in this Agreement,
and shall be subject to all the responsibilities, restrictions, duties,
liabilities and termination provisions relating thereto placed on the Master
Servicer by the terms and provisions of this Agreement. The Indenture Trustee
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. If the Indenture Trustee or any other successor
Master Servicer is acting as Master Servicer hereunder, it shall be subject to
termination under Section 8.02 upon the occurrence of an Event of Default
applicable to it as Master Servicer.
(b) Any successor Master Servicer appointed pursuant to the provisions
of this Agreement shall execute, acknowledge and deliver to the Indenture
Trustee and its predecessor Master Servicer an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Master Servicer shall become effective.
(c) Any successor Master Servicer shall be entitled to such
compensation (whether payable out of the Collected Amount or otherwise) as the
Master Servicer would have been entitled to under the Agreement if the Master
Servicer had not resigned or been terminated hereunder. In addition, any
successor Master Servicer shall be entitled, to reasonable transition expenses
incurred in acting as successor Master Servicer pursuant to Section
5.01(c)(iii)(c).
Section 8.04 Notification to Certificateholders.
Upon any termination of the Master Servicer or appointment of a
successor to the Master Servicer, the Indenture Trustee shall give prompt
written notice thereof to Securityholders at their respective addresses
appearing in the Note Register and Certificate Register.
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Section 8.05 Waiver of Past Defaults.
The Majority Securityholders may, on behalf of all Securityholders,
waive any default by the Master Servicer in the performance of its obligations
hereunder and its consequences. Upon any such 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.
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ARTICLE IX.
TERMINATION
Section 9.01 Termination.
(a) This Agreement shall terminate upon notice to the Indenture Trustee
of either: (a) the later of (i) the satisfaction and discharge of the Indenture
pursuant to Section 4.1 of the Indenture or (ii) the disposition of all funds
with respect to the last Home Loan and the remittance of all funds due hereunder
and the payment of all amounts due and payable to the Indenture Trustee, the
Owner Trustee, the Co-Owner Trustee, the Issuer, the Master Servicer and the
Servicer; or (b) the mutual consent of the Master Servicer, the Depositor, the
Seller and all Securityholders in writing.
(b) Subject to the provisions of the following sentence, Mego or, if
such option is not exercised by Mego, the Master Servicer may, at its option
upon not less than thirty days' prior notice given to the Indenture Trustee at
any time on or after the applicable Early Termination Notice Date, purchase on
the Termination Date specified in such notice, all, but not less than all, the
Home Loans and Foreclosed Properties then included in the Trust, at a purchase
price (the "Termination Price"), payable in cash, equal to the sum of:
(i) the Principal Balance of each Home Loan included in the
Trust as of such Monthly Cut-Off Date;
(ii) all unpaid interest accrued on the Principal Balance of
each such Loan at the related Home Loan Interest Rate to such Monthly
Cut-Off Date; and
(iii) the aggregate fair market value of each Foreclosed
Property included in the Trust on such Monthly Cut-Off Date, as
determined by an Independent appraiser acceptable to the Trustee as of
a date not more than thirty days prior to such Monthly Cut-Off Date.
The expense of any Independent appraiser required under this Section 9.01(b)
shall be a nonreimbursable expense of the party exercising the purchase option
pursuant to this Section 9.01(b). Mego or the Master Servicer shall effect the
purchase referred to in this Section 9.01(b) by deposit of the Termination Price
into the Note Distribution Account.
Section 9.02 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Securities shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with Section 2.6(b) of the Indenture and (ii) by the
Owner Trustee or Co-Owner Trustee to the Certificateholders and holders of
Residual Instruments in accordance with Section 9.1(d) of the Trust Agreement.
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ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.01 Acts of Securityholders.
Except as otherwise specifically provided herein, whenever
Securityholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 10.02 Amendment.
(a) This Agreement may be amended from time to time by the Depositor,
the Master Servicer, the Seller and the Issuer by written agreement with notice
thereof to the Securityholders, without the consent of any of the
Securityholders, to cure any error or ambiguity, to correct or supplement any
provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action will
not adversely affect in any material respect the interests of the
Securityholders. An amendment described above shall be deemed not to adversely
affect in any material respect the interests of the Securityholders if either
(i) an opinion of counsel is obtained to such effect, or (ii) the party
requesting the amendment obtains a letter from each of the Rating Agencies
confirming that the amendment, if made, would not result in the downgrading or
withdrawal of the rating then assigned by the respective Rating Agency to any
Class of Securities then outstanding.
(b) This Agreement may also be amended from time to time by the
Depositor, the Master Servicer, the Seller and the Issuer by written agreement,
with the prior written consent of the Indenture Trustee and the Majority
Securityholders, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of modifying
in any manner the rights of the Securityholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on Home Loans or distributions which are required to be
made on any Security, without the consent of the holders of 100% of each Class
of Notes, Certificates or Residual Instruments affected thereby, (ii) adversely
affect in any material respect the interests of the holders of any Class of
Notes, Certificates or Residual Instruments in any manner other than as
described in (i), without the consent of the holders of 100% of such Class of
Notes, the Certificates or Residual Instruments, respectively, or (iii) reduce
the percentage of any Class of Notes, Certificates or Residual Instruments, the
holders of which are required to consent to any such amendment, without the
consent of the holders of 100% of such Class of Notes or the Certificates or
Residual Instruments.
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(c) It shall not be necessary for the consent of Securityholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer
shall be entitled to receive and rely upon an opinion of counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Issuer may, but shall not be obligated to, enter into any such amendment
which affects the Issuer's own rights, duties or immunities under this
Agreement.
Section 10.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer at the
Securityholders' expense on direction of the Indenture Trustee or the Majority
Securityholders, but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the interests
of the Securityholders or is necessary for the administration or servicing of
the Home Loans.
Section 10.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 10.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 10.06 Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by overnight mail, certified mail or registered mail, postage prepaid, to: (i)
in the case of the Depositor, FINANCIAL ASSET SECURITIES CORP., ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, or such other
addresses as may hereafter be furnished to the Securityholders and the other
parties hereto in writing by the Depositor, (ii) in the case of the Issuer, Mego
Mortgage Home Loan Owner Trust 1997-4, c/o Wilmington Trust Company, ▇▇▇▇▇▇
Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such other
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address as may hereafter be furnished to the Securityholders and the other
parties hereto, (iii) in the case of the Seller and Servicer, MEGO MORTGAGE
CORPORATION, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇▇▇▇▇, President, or such other address as may hereafter be furnished to the
Securityholders and the other parties hereto, (iv) in the case of the Indenture
Trustee or Co-Owner Trustee, U.S. BANK NATIONAL ASSOCIATION, D/B/A FIRST BANK
NATIONAL ASSOCIATION, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Structured Finance: Mego 1997-4, (v) in the case of the Master
Servicer, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
Master Servicing Department, Mego Mortgage Home Loan Owner Trust 1997-4; and
(vi) in the case of the Securityholders, as set forth in the applicable Note
Register and Certificate Register. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such notice by
such party, except that notices to the Securityholders shall be effective upon
mailing or personal delivery.
Section 10.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 10.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Master Servicer shall be rendered as an independent contractor.
Section 10.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 10.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Master Servicer, the Seller, the Servicer, the Depositor, the Issuer, the
Indenture Trustee and the Securityholders and their respective successors and
permitted assigns.
Section 10.11 Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
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Section 10.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Master Servicer or the Issuer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Master Servicer and the Issuer if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner which the
Depositor, the Master Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Securityholder shall bind every holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Depositor, the Master Servicer or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Security.
(d) The Depositor, the Master Servicer or the Issuer may require
additional proof of any matter referred to in this Section 10.12 as it shall
deem necessary.
Section 10.13 Reports to Rating Agencies.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared by the
Master Servicer hereunder, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home
Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of either the Master Servicer or the Issuer;
(iv) notice of final payment on the Notes, the Certificates
and the Residual Instruments;
(v) notice of any Event of Default;
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(vi) copies of the annual independent auditor's report
delivered pursuant to Section 4.05, and copies of any compliance
reports delivered by the Master Servicer hereunder including Section
4.04; and
(vii) copies of any Master Servicer's Certificate pursuant to
Section 6.02(b); and
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Standard & Poor's, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Asset-Backed Monitoring Department; (ii) if to DCR,
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: MBS
Monitoring; or (iii) if to Fitch, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
Section 10.14 Inconsistencies Among Transaction Documents.
In the event certain provisions of a Transaction Document conflict with
the provisions of this Sale and Servicing Agreement, the parties hereto agree
that the provisions of this Sale and Servicing Agreement shall be controlling.
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IN WITNESS WHEREOF, the following have caused their names to be signed
by their respective officers thereunto duly authorized, as of the day and year
first above written, to this SALE AND SERVICING AGREEMENT.
MEGO MORTGAGE HOME
LOAN OWNER TRUST 1997-4,
By: Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee
By:
-------------------------------------------------
Name:
Title:
FINANCIAL ASSET SECURITIES CORP.,
as Depositor
By:
-------------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
MEGO MORTGAGE CORPORATION,
as Seller and Servicer
By:
-------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
U.S. BANK NATIONAL ASSOCIATION,
D/B/A FIRST BANK NATIONAL ASSOCIATION
as Indenture Trustee and Co-Owner Trustee
By:
-------------------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
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NORWEST BANK MINNESOTA, N.A. as Master
Servicer
By:
-------------------------------------------------
Name:
Title:
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THE STATE OF _____________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, known to me to be a person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said WILMINGTON TRUST COMPANY, NOT IN ITS INDIVIDUAL
CAPACITY BUT IN ITS CAPACITY AS OWNER TRUSTEE of MEGO MORTGAGE HOME LOAN OWNER
TRUST 1997-4, as Issuer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF WILMINGTON TRUST COMPANY, this the 29th
day of August, 1997.
_______________________________________________________
Notary Public, State of ________
THE STATE OF _____________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, known to me to be a person and officer whose
name is subscribed to the foregoing instrument and acknowledged to me that the
same was the act of the said FINANCIAL ASSET SECURITIES CORP., as the Depositor,
and that he executed the same as the act of such corporation for the purpose and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES CORP., this
the 29th day of August, 1997.
_______________________________________________________
Notary Public, State of ________
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THE STATE OF _____________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, known to me to be the person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me that
the same was the act of the said MEGO MORTGAGE CORPORATION, as the Seller and
Servicer, and that he executed the same as the act of such corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF MEGO MORTGAGE CORPORATION, this the
29th day of August, 1997.
_______________________________________________________
Notary Public, State of ________
THE STATE OF _____________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ▇▇▇▇ ▇▇▇▇▇▇▇, known to me to be the person and officer whose
name is subscribed to the foregoing instrument and acknowledged to me that the
same was the act of the said U.S. BANK NATIONAL ASSOCIATION, D/B/A FIRST BANK
NATIONAL ASSOCIATION, a national banking association, as the Indenture Trustee,
and Co-Owner Trustee, and that she executed the same as the act of such entity
for the purposes and consideration therein expressed, and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL OF FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, this the 29th day of August, 1997.
_______________________________________________________
Notary Public, State of ________
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THE STATE OF _____________ )
)
COUNTY OF ________________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _____________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said NORWEST BANK MINNESOTA, N.A., as the
Master Servicer, and that he executed the same as the act of such corporation
for the purpose and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF NORWEST BANK MINNESOTA, N.A., this the
29th day of August, 1997.
_______________________________________________________
Notary Public, State of ________
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