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SALE AND MASTER SERVICING AGREEMENT
Dated as of March 1, 1999
among
FREMONT HOME LOAN OWNER TRUST 1999-1
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
FREMONT INVESTMENT & LOAN
(Transferor and Master Servicer)
and
FIRST UNION NATIONAL BANK
(Indenture Trustee)
FREMONT HOME LOAN OWNER TRUST 1999-1
HOME LOAN ASSET BACKED NOTES
SERIES 1999-1
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS
Section 1.01. Definitions................................................ 1
Section 1.02. Other Definitional Provisions..............................25
ARTICLE II CONVEYANCE OF THE HOME LOANS
Section 2.01. Conveyance of the Home Loans...............................25
Section 2.02. Ownership and Possession of Home Loan Files................26
Section 2.03. Books and Records..........................................26
Section 2.04. Delivery of Home Loan Documents............................27
Section 2.05. Acceptance by the Indenture Trustee of the Home
Loans; Certain Substitutions; Certification by
the Custodian.............................................29
ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Depositor............31
Section 3.02. Representations and Warranties of the Transferor...........32
Section 3.03. Representations, Warranties and Covenants of the
Master Servicer...........................................35
Section 3.04. Representations and Warranties Regarding Individual
Home Loans................................................37
Section 3.05. Purchase and Substitution..................................44
ARTICLE IV ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01. Appointment and Duties of the Master Servicer..............46
Section 4.02. Interim Servicer...........................................49
Section 4.03. Powers of Attorney.........................................49
Section 4.04. Filing of Continuation Statements..........................50
Section 4.05. Reports to the Securities and Exchange Commission..........50
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ARTICLE V ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account and Note Payment Account................51
Section 5.01A. Claims Under Guaranty Policy...............................54
Section 5.02. Certificate Distribution Account...........................56
Section 5.03. Trust Accounts; Trust Account Property.....................57
Section 5.04. Allocation of Losses.......................................60
ARTICLE VI STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01. Statements.................................................60
Section 6.02. Withholding................................................63
ARTICLE VII GENERAL SERVICING PROCEDURES
Section 7.01. [Reserved].................................................63
Section 7.02. Release of Home Loan Files.................................63
Section 7.03. Servicing Compensation.....................................64
Section 7.04. Statement as to Compliance and Financial Statements........64
Section 7.05. Independent Public Accountants' Servicing Report...........65
Section 7.06. Reports to the Indenture Trustee; Collection Account
Statements................................................66
Section 7.07. Financial Statements and Records of Servicer...............66
ARTICLE VIII (RESERVED)
ARTICLE IX THE MASTER SERVICER
Section 9.01. Indemnification; Third Party Claims........................66
Section 9.02. Merger or Consolidation of the Master Servicer.............67
Section 9.03. Limitation on Liability of the Master Servicer and
Others....................................................68
Section 9.04. Master Servicer Not to Resign; Assignment..................68
Section 9.05. [Reserved].................................................68
Section 9.06. Relationship of Master Servicer to the Issuer and the
Indenture Trustee.........................................68
Section 9.07. Master Servicer May Own Securities.........................68
Section 9.08. Right to Examine Master Servicer Records...................69
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Section 9.09. Financial Statements...........................................69
ARTICLE X DEFAULT
Section 10.01. Master Service Events of Default..........................70
Section 10.02. [Reserved]................................................72
Section 10.03. Waiver of Defaults........................................72
Section 10.04. Accounting Upon Termination of Master Servicer............72
ARTICLE XI TERMINATION
Section 11.01. Termination...............................................73
Section 11.02. Optional Termination......................................73
Section 11.03. Notice of Termination.....................................74
ARTICLE XII MISCELLANEOUS PROVISIONS
Section 12.01. Acts of Noteholders.......................................74
Section 12.02. Amendment.................................................74
Section 12.03. Recordation of Agreement..................................75
Section 12.04. Duration of Agreement.....................................75
Section 12.05. Governing Law.............................................75
Section 12.06. Notices...................................................75
Section 12.07. Severability of Provisions................................76
Section 12.08. No Partnership............................................77
Section 12.09. Counterparts..............................................77
Section 12.10. Successors and Assigns....................................77
Section 12.11. Headings..................................................77
Section 12.12. Actions of Securityholders................................77
Section 12.13. Reports to Rating Agencies................................78
Section 12.14. Holders of the Residual Interest Certificates.............78
Section 12.15. Year 2000 Compliance......................................79
Section 12.16. Grant of Noteholder Rights to Securities Insurer..........79
Section 12.17. Third Party Beneficiary...................................79
Section 12.18. Suspension and Termination of Securities Insurer's
Rights...................................................79
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EXHIBITS:
A - Home Loan Schedule
B - Form of Servicer's Monthly Remittance Report to Indenture Trustee
C - Form of Loan Liquidation Report
D - Form of Master Servicer Renewal Notice
E - Form of Standard Servicing Terms
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This SALE AND MASTER SERVICING AGREEMENT is entered into effective as
of March 1, 1999, (this "Agreement") among FREMONT HOME LOAN OWNER TRUST 1999-1,
a Delaware business trust (the "Issuer" or the "Trust"), PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, a Delaware corporation, as Depositor (the
"Depositor"), FREMONT INVESTMENT & LOAN, a California industrial loan company
("Fremont"), as Transferor (in such capacity, the "Transferor") and Master
Servicer (in such capacity, the "Master Servicer") and FIRST UNION NATIONAL
BANK, a national banking association, as Indenture Trustee on behalf of the
Noteholders (the "Indenture Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the parties
hereto hereby agree as follows for the benefit of each of them and for the
benefit of the holders of the Notes issued under the Indenture, the Residual
Interest Certificates issued under the Owner Trust Agreement and the Securities
Insurer for issuing the Guaranty Policy:
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. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of the actual number of days elapsed during
the related Interest Accrual Period and a 360-day year.
Accepted Servicing Procedures: Servicing procedures that satisfy the
following: (a) meet at least the same standards the Servicer would follow in
exercising reasonable care in servicing mortgage loans such as the Home Loans
held for its own account; (b) comply with applicable state and federal law; (c)
comply with the provisions of the related Debt Instruments and Mortgages; and
(d) give due consideration to the accepted standards of practice of prudent loan
servicers that service sub-prime mortgage loans comparable to the Home Loans,
including the terms set forth in the Standard Servicing Terms set forth herein
as Exhibit E, and the reliance placed by the Securities Insurer, the Master
Servicer and Securityholders on the Servicer for the servicing of the Home
Loans, but without regard to:
(i) any relationship that the Servicer or any Affiliate
of the Servicer may have with the related Obligor;
(ii) the ownership of any Notes or the Residual Interest
Certificates by the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing
Advances; or
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(iv) the Servicer's right to receive compensation for its
services hereunder with respect to any particular transaction.
Accrual Period: With respect to the Notes and any Payment Date, the
period commencing on the Payment Date preceding the month in which the related
Payment Date occurs and ending on the day immediately preceding the related
Payment Date, except in the case of the first Payment Date, which shall be the
period commencing on the Closing Date and ending on the day immediately
preceding the first Payment Date.
Administration Agreement: The Administration Agreement, dated as of
March 1, 1999, by and among the Issuer, First Union National Bank and Fremont
Investment & Loan.
Affiliate: With respect to any specified Person, any other Person
controlling, controlled by, or under common control with such specified Person.
For the purposes of this definition, the term "control", when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have corresponding meanings.
Agreement: This Sale and Master Servicing Agreement and all
amendments hereof and supplements hereto.
Annual Loss Percentage: With respect to any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the aggregate of all
Realized Losses for the twelve preceding Due Periods ending on the last day of
the preceding Due Period and the denominator of which is the Pool Principal
Balance as of the first day of the twelfth preceding Due Period.
Assignment of Mortgage: With respect to each Home Loan, an assignment,
notice of transfer or equivalent instrument sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect or
record the sale of the related Home Loan which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
Available Collection Amount: With respect to any Payment Date, an
amount without duplication equal to the sum of: (i) all amounts received on the
Home Loans or required to be paid by the Master Servicer, the Servicer or the
Transferor during the related Due Period (exclusive of amounts not required to
be deposited in the Collection Account pursuant to Section 5.01(b)(1) hereof and
amounts permitted to be withdrawn by the Indenture Trustee from the Collection
Account pursuant to Section 5.01(b)(3) hereof); (ii) upon exercise of optional
redemption of the Notes and termination of the Issuer pursuant to Section 11.02
hereof, the Termination Price; and (iii) the Purchase Price paid for any Home
Loans purchased pursuant to Section 3.05 hereof prior to the related
Determination Date and the Substitution Adjustment to be deposited in the
Collection Account in connection with any substitution, in each case prior to
the related Determination Date.
Available Payment Amount: With respect to any Payment Date, the
Available Collection Amount deposited into the Note Payment Account, minus the
amount of any Trust
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Fees and Expenses required to be paid from the Note Payment Account pursuant to
Section 5.01(c)(i) hereof.
Business Day: Any day other than (a) a Saturday or Sunday, or (b) a day
on which the banking institutions are authorized or obligated by law or
executive order to be closed in a city at any of the following locations: (i)
The City of New York, (ii) where the Securities Insurer is located, (iii) where
the Corporate Trust Office of the Indenture Trustee is located, (iv) where the
servicing operations of the Servicer are located or (v) where the master
servicing operations of the Master Servicer are located.
Call Option Date: The first Payment Date on which the Pool Principal
Balance has declined to 10% or less of the Original Pool Principal Balance.
Certificate Distribution Account: The account designated as such,
established and maintained pursuant to Section 5.02 hereof.
Certificate Register: The register established pursuant to
Section 3.4 of the Owner Trust Agreement.
Certificateholder: A holder of a Residual Interest Certificate.
Closing Date: March 23, 1999.
Code: The Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
Collection Account: The Eligible Account established and maintained
by the Indenture Trustee pursuant to Section 5.01(a)(1) hereof.
Compensating Interest: With respect to any Due Period, the amount of
the shortfall in the interest portion of the Monthly Payments due on Home Loans
that prepay in full or in part during the related month other than on the date
the Monthly Payments were due.
Custodial Agreement: The custodial agreement dated as of March 1, 1999
by and among the Depositor, the Issuer, Fremont, as the Transferor and as the
Master Servicer, and First Union National Bank, a national banking association,
as the custodian, providing for the retention of the Indenture Trustee's Home
Loan Files by such custodian on behalf of the Owner Trust.
Custodian: Any custodian acceptable to the Securities Insurer and
appointed by the Indenture Trustee pursuant to the Custodial Agreement, which
custodian shall not be affiliated with the Master Servicer, the Transferor, the
Servicer or the Depositor. First Union National Bank, shall be the initial
Custodian pursuant to the terms of the Custodial Agreement.
Custodian's Final Certification: As defined in Section 1(c) of the
Custodial Agreement.
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Custodian's Initial Certification: As defined in Section 1(a) of the
Custodial Agreement.
Custodian's Updated Certification: As defined in Section 1(c) of the
Custodial Agreement.
Cut-Off Date: The close of business on March 1, 1999.
Debt Instrument: The mortgage note evidencing the indebtedness of an
Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any
Home Loan, including, without limitation, any Liquidated Home Loan with respect
to which any of the following has occurred as of the end of the preceding Due
Period: (a) foreclosure or similar proceedings have been commenced; or (b) the
Servicer has determined in good faith and in accordance with the Accepted
Servicing Procedures that such Home Loan is in default for a period in excess of
30 days or imminent default and that such default or imminent default involves
the nonpayment of any Monthly Payment or a default which has or would have a
material adverse affect on such Home Loan.
Defective Home Loan: As defined in Section 3.05 hereof.
Deficiency Amount: As of any Payment Date, the sum of (a) the amount by
which (1) the Noteholders' Interest Payment Amount for the Notes on such Payment
Date less Relief Act Shortfalls for such Payment Date, exceeds (2) the Available
Payment Amount for such Payment Date, and (b) the Noteholders' Principal
Deficiency Amount for such Payment Date.
Deleted Home Loan: A Home Loan replaced or to be replaced by one or
more than one Qualified Substitute Home Loan.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due
thereon is not made by the Due Date. A Home Loan shall be deemed to be "30 days
Delinquent" if the delinquency remains uncured for two calendar months, but not
three. The determination of whether a Home Loan is "60 days Delinquent," "90
days Delinquent", etc., shall be made in like manner.
Delivery: When used with respect to Trust Account Property means the
delivery of such Trust Account Property in a manner that results in the
transferee having either the status of a perfected security interest free of any
adverse claims or a holder in due course in accordance with the following: (a)
in the case of "certificated securities" or "uncertificated securities" (in
either case as defined in Article 8 of the UCC), the applicable provisions of
Article 8 of the UCC, and in the case of "instruments", "accounts" or "general
intangibles" (in either case as defined in Article 9 of the UCC), the applicable
provisions of Article 9 of the UCC; or (b) in the case of book-entry securities
governed by Federal law, the applicable provisions of Federal law.
Denomination: With respect to a Note, the portion of the Original
Note Principal Balance represented by such Note as specified on the face
thereof.
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Depositor: PaineWebber Mortgage Acceptance Corporation IV, a
Delaware corporation, and any successor thereto.
Determination Date: With respect to any Payment Date, the 18th calendar
day of the month in which such Payment Date occurs or if such day is not a
Business Day, the immediately preceding Business Day.
Due Date: With respect to a Monthly Payment, the day of the month on
which such Monthly Payment is due from the Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Payment Date, the
2nd day of the calendar month preceding the month in which the relevant
Determination Date or Payment Date occurs, and ending on the 1st day of the
month in which the relevant Determination Date or Payment Date occurs.
Eligible Account: At any time, an account that is either:
(a) A segregated account or accounts maintained with an institution
that satisfies the following: (1) whose deposits are insured by the FDIC; (2)
whose unsecured and uncollateralized long-term debt obligations of which are
then rated by each Rating Agency in one of their two highest short-term ratings;
and (3) which is either (i) a federal savings and loan association duly
organized, validly existing and in good standing under the federal banking laws,
(ii) an institution duly organized, validly existing and in good standing under
the applicable banking laws of any state, (iii) a national banking association
duly organized, validly existing and in good standing under the federal banking
laws, (iv) a principal subsidiary of a bank holding company, or (v) an
institution approved in writing by the Securities Insurer and each Rating
Agency; or
(b) A segregated trust account or accounts maintained with the
corporate trust department of a federal or state chartered depository
institution that satisfies the following: (1) is acceptable to the Securities
Insurer and each Rating Agency; (2) has capital and surplus of not less than
$100,000,000; and (3) is acting in its fiduciary capacity.
Eligible Servicer: A Person that (i) has demonstrated the ability
professionally and competently to service a portfolio of mortgage loans similar
to the Home Loans, (ii) has a net worth calculated in accordance with GAAP of at
least $500,000, and (iii) is acceptable to the Securities Insurer and each
Rating Agency.
Excess Spread: With respect to any Payment Date, the excess of (a)
the Available Payment Amount over (b) the Regular Payment Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: ▇▇▇▇▇▇▇ Mac (f/k/a Federal Home Loan Mortgage Corporation)
and any successor thereto.
Fremont: Fremont Investment & Loan, a California industrial loan
company.
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FNMA: ▇▇▇▇▇▇ Mae (f/k/a Federal National Mortgage Association) and
any successor thereto.
Foreclosed Loan: As of any date of determination, any Home Loan that
has been discharged as a result of (i) the completion of foreclosure or
comparable proceedings; (ii) the Issuer's acceptance of the deed or other
evidence of title to any related Mortgaged Property in lieu of foreclosure or
other comparable proceeding; or (iii) the acquisition by the Issuer of title to
any related Mortgaged Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that
has been acquired by the Servicer through foreclosure, deed in lieu of
foreclosure or similar proceedings in respect of the related Home Loan.
GAAP: Generally accepted accounting principles as in effect in the
United States.
Guaranty Insurance Premium: The premium payable monthly that is
specified in the Premium Letter.
Guaranty Policy: That certain financial guaranty insurance policy for
the Notes, number 50787-N dated March 23, 1999, and issued by the Securities
Insurer to the Indenture Trustee and guaranteeing payment of any Insured Payment
thereunder.
Home Loan: Any mortgage loan that is included in the Home Loan Pool. As
applicable, a Home Loan shall be deemed to refer to the related Debt Instrument,
the Mortgage and any related Foreclosure Property, and shall include, among
other items, all Monthly Payments with a Due Date after the Cut-Off Date.
Home Loan File: As to each Home Loan, the Indenture Trustee's Home
Loan File and the Servicer's Home Loan File.
Home Loan Interest Rate: The 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 conveyed to the Issuer pursuant
to this Agreement on the Closing Date, together with the payments thereon and
proceeds therefrom received after the applicable Cut-Off Date, as identified on
the Home Loan Schedule annexed hereto as Exhibit A.
Home Loan Purchase Agreement: The Home Loan Purchase Agreement
between the Transferor and the Depositor, dated as of March 1, 1999.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit A
attached hereto, as amended or supplemented from time to time specifying, with
respect to each Home Loan, the following information: (i) the Transferor's Home
Loan number; (ii) the Obligor's name and the street address; (iii) the current
principal balance; (iv) the original principal amount with respect to any Home
Loan originated by the Transferor and the principal amount purchased by the
Transferor with respect to a Home Loan acquired by the Transferor
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subsequent to its origination; (v) any related Loan-to-Value Ratio as of the
date of the origination of the related Home Loan; (vi) the paid through date;
(vii) whether the Home Loan pays interest at a fixed rate or an adjustable rate;
(viii) the current Home Loan Interest Rate; (ix) if such Home Loan has an
adjustable Home Loan Interest Rate, (A) the initial rate reset date, (B) the
frequency of the rate reset, (C) the initial periodic cap, (D) the subsequent
periodic cap, (E) the margin, (F) the maximum lifetime rate and (G) the minimum
lifetime rate; (x) the final maturity date under the Debt Instrument; (xi) the
current Monthly Payment; (xii) the occupancy status of the Mortgaged Property,
if any; and (xiii) the original term of the Debt Instrument.
Indemnification and Contribution Agreement: The Indemnification and
Contribution Agreement dated as of March 16, 1999 by and among Fremont
Investment & Loan, the Depositor, PaineWebber Incorporated, Credit Suisse
First Boston Corporation and Chase Securities Inc.
Indenture: The Indenture, dated as of March 1, 1999, between the
Issuer and the Indenture Trustee.
Indenture Trustee: First Union National Bank, 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 or this Agreement.
Indenture Trustee Fee: As to any Payment Date, the one-twelfth (1/12)
of the Indenture Trustee Fee Rate times the Pool Principal Balance as of the
opening of business on the first day of the Due Period immediately preceding the
calendar month of such Payment Date (or, with respect to the first Payment Date,
the Original Pool Principal Balance).
Indenture Trustee Fee Rate: 0.0065% (0.65 basis points) per annum.
Indenture Trustee's Home Loan File: As defined in Section 2.04
hereof.
Independent: When used with respect to any specified Person, such
Person (i) is in fact independent of the Transferor, the Servicer, the Master
Servicer, the Depositor, the Securities Insurer, the Indenture Trustee or any of
their respective Affiliates, (ii) does not have any direct financial interest
in, or any material indirect financial interest in, any of the Transferor, the
Servicer, the Master Servicer, the Depositor, the Securities Insurer, the
Indenture Trustee or any of their respective Affiliates and (iii) is not
connected with any of the Transferor, the Servicer, the Depositor, the
Securities Insurer, the Indenture Trustee or any of their respective Affiliates,
as an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions; provided, however, that a Person shall not
fail to be Independent of the Transferor, the Servicer, the Depositor, the
Securities Insurer, the Indenture Trustee or any of their respective Affiliates
merely because such Person is the beneficial owner of 1% or less of any the
securities issued by the Transferor, the Servicer, the Depositor or any of their
respective Affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified
public accountants that is in fact Independent.
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Insurance Agreement: The Insurance and Indemnity Agreement, dated as of
March 1, 1999, among the Securities Insurer, the Transferor, the Master
Servicer, the Depositor and the Issuer.
Insured Payment: With respect to the Guaranty Policy, as of any
Payment Date (i) any Deficiency Amount and (ii) any Preference Amount.
Insured Securities: Each of the Notes.
Interest Reduction Amount: As to any Payment Date, the sum of the
Servicing Fee, the Master Servicer Fee, the Indenture Trustee Fee, and the
Guaranty Insurance Premium payable with respect to such Payment Date or the
related Interest Accrual Period or Due Period, as applicable, provided that on
any Payment Date on or after the Payment Date occurring in April 2000, the
Interest Reduction Amount shall increase by an amount equal to one-twelfth of
the product of 0.50% and the aggregate Principal Balance of the Home Loans as of
the first day of the related Due Period.
Issuer: Fremont Home Loan Owner Trust 1999-1, a Delaware business
trust.
Liquidated Home Loan: With respect to any date of determination, any
Foreclosure Property or any Home Loan in respect of which a Monthly Payment is
in excess of 30 days past due and as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to collect have been
recovered from or on account of such Home Loan or the related Foreclosure
Property; provided, however, that in any event any Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore be a Liquidated
Home Loan upon the earliest to occur of: (i) the liquidation or disposition of
such Home Loan or the related Foreclosure Property; or (ii) the determination by
the Servicer in accordance with the Accepted Servicing Procedures that there is
no reasonable likelihood of (A) recovering an economically significant amount
attributable to the outstanding interest and principal owing on such Home Loan
from either the related Mortgaged Property or the Obligor, in excess of (B) the
costs and expenses to obtain such recovery (including without limitation any
Servicing Advances), and in relation to (C) the expected timing of such recovery
therefrom.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation or disposition of such
Liquidated Home Loan, whether through trustee's sale, foreclosure sale or other
disposition, any cash amounts received in connection with the management of the
Foreclosure Properties from Foreclosed Home Loans and any other amounts required
to be deposited in the Collection Account pursuant to Section 5.01(b) hereof, in
each case other than Property Insurance Proceeds and Released Mortgaged Property
Proceeds.
Loan-to-Value Ratio: With respect to any Home Loan, the fraction,
expressed as a percentage, (a) the numerator of which is the principal balance
of such Home Loan at origination and (b) the denominator of which is the value
as determined pursuant to the Transferor's underwriting guidelines of the
related Mortgaged Property at the time of origination of such Home Loan.
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Majority Noteholders: The holder or holders of in excess of 50% of
the Note Principal Balance of all the Notes.
Majority Residual Interestholders: The holder or holders of more
than 50% of the Residual Interest.
Master Servicer: Fremont Investment & Loan, a California industrial
loan company, as Master Servicer hereunder, or any successor Master Servicer
hereunder.
Master Servicer Compensation: The Master Servicer Fee and other
amounts to which the Master Servicer is entitled pursuant to Section 4.01(a)
hereof.
Master Servicer Event of Default: As described in Section 10.01
hereof.
Master Servicer Fee: As to each Home Loan (including any Home Loan that
has been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Master Servicer on each
Payment Date, which shall equal the product of (a) one-twelfth (1/12) of 0.15%
(15 basis points) and (b) the Principal Balance of such Home Loan as of the
beginning of the immediately preceding Due Period.
Maturity Date: With respect to the Notes, the Payment Date occurring
in March 2030.
Monthly Advance: As defined in Section 4.01(h) hereof.
Monthly Advance Reimbursement Amount: With respect to any date of
determination and with respect to the receipt of proceeds from or the
liquidation of a Home Loan for which any Monthly Advances have been made, the
amount of any such Monthly Advances that have not been reimbursed as of such
date, including Nonrecoverable Monthly Advances.
Monthly Cut-Off Date: The last day of any calendar month and, with
respect to any Payment Date, the last day of the calendar month immediately
preceding such Payment Date.
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Home Loan, as set
forth in the related Debt Instrument.
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc., or any successor thereto.
Mortgage: The mortgage, deed of trust or other security instrument
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a Home Loan.
Mortgaged Property: The real property encumbered by the Mortgage that
secures the Debt Instrument evidencing a Home Loan.
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Mortgaged Property States: Each state in which any Mortgaged Property
securing a Home Loan is located as set forth in the Home Loan Schedule.
Net Interest Rate: As to any Payment Date, the annualized percentage
derived from the fraction (which shall not be greater than 1), the numerator of
which is the positive difference, if any, between (x) the amount of all interest
due on the Home Loans during the related Due Period and (y) the Interest
Reduction Amount and the denominator of which is the aggregate principal amount
of the Notes immediately prior to such Payment Date.
Net Liquidation Proceeds: With respect to any Payment Date, Liquidation
Proceeds received during the related Due Period, net of any reimbursements to
the Servicer or the Master Servicer, as the case may be, made from such amounts
for the following: (i) any unreimbursed Servicing Compensation or Master
Servicing Compensation; and (ii) Servicing Advances (including Nonrecoverable
Servicing Advances) made, and (iii) Monthly Advances (including Nonrecoverable
Monthly Advances) made and any other fees and expenses paid in connection with
the foreclosure, conservation or liquidation of the related Liquidated Home Loan
or Foreclosure Property.
Net Loan Losses: With respect to any Defaulted Home Loan that is
subject to a modification, an amount equal to the portion of the Principal
Balance, if any, released in connection with such modification.
Nonrecoverable Monthly Advance: With respect to any Defaulted Home Loan
or any Foreclosure Property, any Monthly Advance previously made and not
reimbursed from late or other fee collections, Liquidation Proceeds, Property
Insurance Proceeds or the Released Mortgaged Property Proceeds following the
liquidation or disposition of such Defaulted Home Loan or Foreclosure Property,
as evidenced by an Officer's Certificate delivered to the Indenture Trustee and
the Securities Insurer.
Nonrecoverable Servicing Advance: With respect to any Defaulted Home
Loan or any Foreclosure Property, any Servicing Advance previously made and not
reimbursed from late or other fee collections, Liquidation Proceeds, Property
Insurance Proceeds or the Released Mortgaged Property Proceeds following the
liquidation or disposition of such Defaulted Home Loan or Foreclosure Property,
as evidenced by an Officer's Certificate delivered to the Indenture Trustee, the
Master Servicer and the Securities Insurer.
Note: Any of the Notes issued pursuant to the Indenture.
Note Factor: With respect to any date of determination, the Note
Principal Balance divided by the Original Note Principal Balance.
Note Interest Rate: As to any Payment Date, a per annum rate equal to
the lesser of (i) One-Month LIBOR plus 0.30%, provided that on any Payment Date
after the Call Option Date, this rate shall be One-Month LIBOR plus 0.60%; and
(ii) the Net Interest Rate.
Note Payment Account: The Eligible Account established and
maintained pursuant to Section 5.01(a)(2) hereof.
-10-
Note Principal Balance: As of any date of determination, the Original
Note Principal Balance reduced by the sum of all amounts previously distributed
in respect of principal of such Notes on all previous Payment Dates.
Note Redemption Amount: As of any date of determination, an amount
without duplication equal to the sum of (i) the then outstanding Note Principal
Balance of all Notes plus all accrued and unpaid interest thereon including any
unpaid Noteholders' Interest Carry-Forward Amount, (ii) any Trust Fees and
Expenses due and unpaid on such date, (iii) any Servicing Advance Reimbursement
Amount and Monthly Advance Reimbursement Amount and (iv) any due and unpaid
Securities Insurer Reimbursement Amount.
Noteholder: A holder of a Note.
Noteholders' Interest Carry-Forward Amount: With respect to any Payment
Date, (A) if on the immediately preceding Payment Date the Note Interest Rate
was limited pursuant to clause (ii) of the definition of "Note Interest Rate,"
the excess, if any, of the amount of interest that would have accrued on the
Notes for the immediately preceding Payment Date pursuant to clause (i) of the
definition thereof, over the amount of interest that was due on the Notes for
the immediately preceding Payment Date pursuant to clause (ii) of the definition
thereof, plus (ii) any outstanding Noteholders' Interest Carry-Forward Amount
remaining unpaid from prior Payment Dates, together with interest thereon at the
Note Interest Rate (without regard to clause (ii) thereof).
Noteholders' Interest Payment Amount: With respect to any Payment Date,
the sum of the Noteholders' Monthly Interest Payment Amount for such Payment
Date and the Noteholders' Interest Shortfall Amount for such Payment Date.
Noteholders' Interest Shortfall Amount: With respect to any Payment
Date, the excess, if any, of (A) the Noteholders' Monthly Interest Payment
Amount for the preceding Payment Date plus any outstanding Noteholders' Interest
Shortfall Amount on such preceding Payment Date, over (B) the amount in respect
of interest that is actually deposited in the Note Payment Account on such
preceding Payment Date.
Noteholders' Monthly Interest Payment Amount: With respect to each
Payment Date and the Notes, the interest accrued during the related Accrual
Period at the Note Interest Rate on the Note Principal Balance of the Notes
immediately preceding such Payment Date (or, in the case of the first Payment
Date, beginning on the Closing Date) after giving effect to all payments of
principal to the holders of the Notes on or prior to such preceding Payment
Date.
Noteholders' Principal Deficiency Amount: (1) With respect to any
Payment Date (other than as set forth in (2) below), the excess, if any, of (a)
the Note Principal Balance as of such Payment Date (after giving effect to all
payments of principal on such Payment Date, but without giving effect to any
payments in respect of this Noteholders' Principal Deficiency Amount to be made
on such Payment Date), over (b) the Pool Principal Balance as of the end of the
related Due Period; and (2) with respect to the Maturity Date of the Notes or
any Payment Date upon which the Securities Insurer has exercised its option to
accelerate the Notes under the Indenture, the excess of (a) the Note Principal
Balance (after giving effect to all payments of
-11-
principal on such Payment Date, but without giving effect to any payments in
respect of this Noteholders' Principal Deficiency Amount to be made on such
Payment Date), over (b) the Available Payment Amount remaining after the payment
of the Noteholders' Interest Payment Amount and the Regular Principal Payment
Amount for such Payment Date.
Obligor: Each obligor on a Debt Instrument.
OC Trigger Increase Event: With respect to any Payment Date, the
occurrence of any of the following: (1) the Six-Month Average Delinquency equals
or exceeds 13.5%; (2) the Annual Loss Percentage exceeds 1.25%; or (3)
cumulative Realized Losses as a percentage of the Original Pool Principal
Balance, equal or exceed the following percentages based on the month of
determination after the Closing Date:
MONTH OF CUMULATIVE
DETERMINATION REALIZED LOSSES
------------- ---------------
0 -12 0.75%
13 - 24 1.75%
25 - 36 3.00%
37 - 48 3.75%
49+ 4.25%
Officer's Certificate: A certificate delivered to the Indenture
Trustee, the Depositor, the Servicer, the Master Servicer, the Securities
Insurer, the Transferor or the Issuer signed by the President or a Vice
President or an Assistant Vice President or other officer of the Indenture
Trustee, the Depositor, the Servicer, the Master Servicer, the Securities
Insurer, the Issuer or the Transferor, in each case, as required by this
Agreement.
One-Month LIBOR: With respect to each Accrual Period, as determined by
the Indenture Trustee on the second Business Day preceding the beginning of such
Accrual Period, on the basis of the offered rates of the Reference Bank for
one-month U.S. dollar deposits as such rates appear on the Telerate Screen Page
3750 as of 11:00 a.m. (London time) on such LIBOR Determination Date. As used in
this paragraph, "business day" means a day on which banks are open for dealing
in foreign currency and exchange in London and New York City; and "Reference
Banks" means leading banks selected by the Indenture Trustee and engaged in
transactions in Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London, (ii) whose quotations appear on
the Telerate Screen Page 3750 on the LIBOR Determination Date in question, (iii)
which have been designated as such by the Indenture Trustee and (iv) not
controlling, controlled by or under common control with the Issuer, the
Depositor or the Transferor.
On each LIBOR Determination Date, One-Month LIBOR will be established
by the Indenture Trustee as follows:
(a) If on such LIBOR Determination Date two or more Reference Banks
provide such offered quotations, One-Month LIBOR shall be the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 0.0625%) of such
offered quotations.
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(b) If on such LIBOR Determination Date fewer than two Reference Banks
provide such offered quotations, One-Month LIBOR shall be the greater of (x)
One-Month LIBOR as determined on the previous LIBOR Determination Date and (y)
the Reserve Interest Rate. The "Reserve Interest Rate" shall be 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 U.S. dollar lending rates which New York City banks selected by the
Indenture Trustee are quoting on the relevant LIBOR Determination Date to the
principal London offices of leading banks in the London interbank market or, in
the event that the Indenture Trustee can determine no such arithmetic mean, (ii)
the lowest one-month U.S. dollar lending rate which New York City banks selected
by the Indenture Trustee are quoting on such LIBOR Determination Date to leading
European banks.
The establishment of One-Month LIBOR on each LIBOR Determination Date by the
Indenture Trustee and the Indenture Trustee's calculation of the Note Interest
Rate for the related Accrual Period shall (in the absence of manifest error) be
final and binding.
Opinion of Counsel: A written opinion of counsel issued by counsel (a)
who is acceptable to the Master Servicer, the Indenture Trustee, the Rating
Agencies and the Securities Insurer, and (b) who may be employed or retained by
the Transferor, the Servicer, the Master Servicer, the Depositor, the Securities
Insurer or any of their respective Affiliates.
Original Note Principal Balance: $415,545,505.
Original Pool Principal Balance: $415,545,505, which is the Pool
Principal Balance as of the Cut-Off Date.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Payment Date, the
amount equal to the excess of (A) the Pool Principal Balance as of the end of
the preceding Due Period, over (B) the Note Principal Balance of the Notes
(after giving effect to the payments made on such date pursuant to Section
5.01(d) and (e) hereof). As of the Closing Date, the initial
Overcollateralization Amount attributable to such excess shall be equal to zero.
Overcollateralization Deficiency Amount: With respect to any Payment
Date, the excess, if any, of the Overcollateralization Target Amount over the
Overcollateralization Amount prior to the application of Excess Spread on such
Payment Date.
Overcollateralization Reduction Amount: With respect to any Payment
Date that occurs on or after the Stepdown Date, the lesser of (1) the excess, if
any, of (a) the Overcollateralization Amount (assuming principal payments on the
Notes on such Payment Date are equal to the Regular Principal Payment Amount
without deduction of this Overcollateralization Reduction Amount), over (b) the
Overcollateralization Target Amount, and (2) the Regular Principal Payment
Amount (as determined without the deduction of this Overcollateralization
Reduction Amount therefrom) on such Payment Date. Prior to the occurrence of a
Stepdown Date, the Overcollateralization Reduction Amount shall be zero.
-13-
Overcollateralization Target Amount: With respect to any Payment
Date, an amount determined as follows:
(1) with respect to any Payment Date occurring prior to the Stepdown
Date or on which the Step Down Test is not satisfied, an amount equal to 4.00%
of the Original Pool Principal Balance plus the Spread Squeeze Amount, if any;
(2) with respect to any other Payment Date occurring on or after the Stepdown
Date and on which the Step Down Test is satisfied, an amount equal to the
greatest of (a) the Stepped Down Percentage of the Pool Principal Balance plus
the Spread Squeeze Amount, (b) 0.50% of the Original Pool Principal Balance; and
(c) the aggregate Principal Balance of the three largest Home Loans then
outstanding; and
(3) with respect to any Payment Date occurring on which an OC Trigger
Increase Event is occurring, notwithstanding any of the preceding clauses (1)
through (2), an amount equal to 100% of the Pool Principal Balance;
provided, however, with respect to any Payment Date, notwithstanding any of the
preceding clauses (1) through (3), the Overcollateralization Target Amount shall
not exceed the Note Principal Balance and may be modified by the Securities
Insurer, but shall not be reduced below, (1) with respect to any Payment Date
occurring prior to the Stepdown Date, 2.00% of the Original Pool Principal
Balance or (2) with respect to any Payment Date occurring on or after the
Stepdown Date, an amount equal to the greater of (a) 4.00% of the Pool Principal
Balance as of the end of the related Due Period, (b) 0.50% of the Original Pool
Principal Balance or (c) an amount equal to the aggregate Principal Balance of
the three largest Home Loans then outstanding.
Owner Trust Agreement: The Owner Trust Agreement, dated as of March
1, 1999, among the Depositor, Fremont, the Owner Trustee and First Union
National Bank, a national banking association.
Owner Trustee: Wilmington Trust Company, as owner trustee under the
Owner Trust Agreement, and any successor owner trustee under the Owner Trust
Agreement.
Ownership Interest: As to any Note, any ownership or security interest
in such Note, including any interest in such Note as the holder thereof and any
other interest therein, whether direct or indirect, legal or beneficial, as
owner or as pledgee.
Payment 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 April 1999.
Payment Statement: As defined in Section 6.01 hereof.
Percentage Interest: As defined in the Owner Trust Agreement.
-14-
Permitted Investments: Each of the following:
(1) direct obligations of, and obligations fully
guaranteed by, the United States of America, FHLMC, FNMA, the Federal Home Loan
Banks or any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America;
(2) (i) demand and time deposits in, certificates of deposit
of, bankers acceptances issued by, or federal funds sold by, any depository
institution or trust company (including the Indenture Trustee or its agent
acting in their respective commercial capacities) incorporated under the laws of
the United States of America or any state thereof and subject to supervision and
examination by federal or state authorities, so long as, at the time of such
investment or contractual commitment providing for such investment, such
depository institution or trust company or its ultimate parent has a short-term
unsecured debt rating in one of the two highest available rating categories of
S&P and the highest available rating category of Moody's and provided that each
such investment has an original maturity of no more than 365 days, and (ii) any
other demand or time deposit or deposit which is fully insured by the FDIC;
(3) repurchase obligations with a term not to exceed 30
days with respect to any security described in clause (a) above and entered into
with a depository institution or trust company (acting as principal) rated "A"
or higher by S&P and rated "A2" or higher by Moody's; provided, however, that
collateral transferred pursuant to such repurchase obligation must be of the
type described in clause (a) above and must (i) be valued daily at current
market price plus accrued interest, (ii) pursuant to such valuation, be equal,
at all times, to at least 105% of the cash transferred by the Indenture Trustee
in exchange for such collateral, and (iii) be delivered to the Indenture
Trustee, or if the Indenture Trustee is supplying the collateral, an agent for
the Indenture Trustee, in such a manner as to accomplish perfection of a
security interest in the collateral by possession of certificated securities;
(4) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States of
America or any state thereof which has a short-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the time of
such investment;
(5) commercial paper having an original maturity of less
than 365 days and issued by an institution having a short-term unsecured debt
rating in the highest available rating category of each of the Rating Agencies
at the time of such investment;
(6) a guaranteed investment contract approved by each of
the Rating Agencies and the Securities Insurer and issued by an insurance
company or other corporation having a short-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the time of
such investment;
(7) money market funds having one of the two highest
available rating categories of S&P and the highest available rating category of
Moody's at the time of such investment, which invests only in other Permitted
Investments, including any such money market funds for which the Master Servicer
or the Indenture Trustee or any affiliate of the Master
-15-
Servicer or the Indenture Trustee acts as the investment manager or advisor;
provided that any such money market funds which provide for demand withdrawals
shall be conclusively deemed to satisfy any maturity requirements for Permitted
Investments set forth in this Agreement; and
(8) any investment approved in writing by the Securities
Insurer and for which the Ratings Confirmation have been obtained with respect
to such investment.
The Indenture Trustee may purchase from or sell to itself or an
affiliate, as principal or agent, the Permitted Investments listed above. All
Permitted Investments in a trust account under this Agreement shall be made in
the name of the Indenture Trustee for the benefit of the Securityholders and the
Securities Insurer; provided, that the Master Servicer shall be entitled to all
investment earnings from the Note Payment Account and the Collection Account as
part of its Master Servicer Compensation hereunder.
Person: Any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, estate,
national banking association, unincorporated organization or government or any
agency or political subdivision thereof.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period; provided, however, that the Pool Principal Balance on any Payment
Date on which the Termination Price is to be paid to Noteholders will be deemed
to have been equal to zero as of such date.
Preference Amount: Any amount previously distributed to the holder of
an Insured Security that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final,
non-appealable order of a court having jurisdiction.
Premium Letter: The letter agreement dated March 23, 1999 between the
Securities Insurer and Fremont relating to the premiums due in respect of the
Guaranty Policy.
Principal Balance: With respect to any Home Loan or related Foreclosure
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance of
the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as of
the last day of the preceding Due Period (after giving effect to all payments
received thereon or Monthly Advances in respect of principal made with respect
thereto and the allocation of any Net Loan Losses with respect thereto which
relates to such Due Period), without giving effect to amounts received in
respect of such Home Loan or related Foreclosure Property after such Due Period;
provided, however, that any Liquidated Home Loan shall have a Principal Balance
of zero and with respect to the valuation of the Issuer's assets such Liquidated
Home Loan shall not accrue interest thereon.
-16-
Principal Prepayment: With respect to any Home Loan and any Due Period,
any principal amount received on a Home Loan in excess of the principal of the
Monthly Payment due in such Due Period and applied by the Servicer during such
Due Period in reduction of the Principal Balance of the Home Loan.
Property Insurance Proceeds: With respect to any Mortgaged Property,
all amounts collected in respect of any related insurance policy that insures
such Mortgaged Property or the related Obligor and not required to be applied to
the restoration of any such Mortgaged Property or paid to the related Obligor
(but excluding any Insured Payments).
Prospectus: The Depositor's final Prospectus dated March 18, 1999 as
supplemented by the Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated March 18,
1999 prepared by the Depositor and Transferor in connection with the issuance
and sale of the Notes.
Purchase Price: With respect to a Defective Home Loan, the Principal
Balance thereof as of the date of purchase, plus all accrued and unpaid interest
on such Defective Home Loan to and including the end of the Due Period in which
the repurchase occurs computed at the applicable Home Loan Interest Rate, plus
the amount of any unreimbursed Servicing Advances and Monthly Advances with
respect to such Defective Home Loan (after deducting therefrom any amounts
received in respect of such repurchased Defective Home Loan and being held in
the Collection Account for future distribution to the extent such amounts
represent recoveries of principal not yet applied to reduce the related
Principal Balance or interest (net of the Servicing Fee, Master Servicer Fee,
Indenture Trustee Fee and Guaranty Insurance Premium for such Defective Home
Loan) for the period from and after the date of repurchase).
Qualified Substitute Home Loan: A home loan or home loans substituted
for a Deleted Home Loan pursuant to Section 3.05 hereof, which satisfies the
following: (i) in the case of a fixed rate Home Loan, has or have a fixed
interest rate (a) no lower than the Home Loan Interest Rate for the Deleted Home
Loan, and (b) not more than 2.0 percentage points greater than the Home Loan
Interest Rate for the Deleted Home Loan; (ii) in the case of an adjustable rate
Home Loan has or have an adjustable rate and (a) has a current interest rate no
lower than the Home Loan Interest Rate for the Deleted Home Loan, (b) has a
gross margin not more than 2.0 percentage points different than the Home Loan
Interest Rate for the Deleted Home Loan, (c) has a lifetime interest rate cap
not more than 2.0 percentage points lower than the Home Loan Interest Rate for
the Deleted Home Loan, (d) has a lifetime interest rate floor not more than 2.0
percentage points lower than the Home Loan Interest Rate for the Deleted Home
Loan, and (e) pays interest based on the same index as the Deleted Home Loan;
(iii) matures or mature not more than one year later than, and not more than one
year earlier, than the maturity date of Deleted Home Loan, has a maturity date
no later than March 1, 2029 and an original term to maturity of less than or
equal to 30 years; (iv) has or have a principal balance or principal balances
(after application of all payments received on or prior to the date of
substitution) equal to or less than the Principal Balance or Balances of the
Deleted Home Loan or Loans as of such date; (v) has or have a borrower or
borrowers with a debt-to-income ratio no higher than the debt-to-income ratio of
the Obligor with respect to the Deleted Loan; (vi) complies or comply as of the
date of substitution with each representation and warranty set forth in Section
3.04 hereof and is or are not more than 89 days delinquent as of the date of
substitution for such Deleted Home Loan or Loans; (vii) has or have a lien
priority no lower than the Deleted Home Loan; and (viii) is otherwise
satisfactory to the Securities Insurer. For purposes of determining whether
multiple mortgage loans proposed to be substituted for one or more Deleted Home
Loans pursuant to Section 3.05 hereof are in fact "Qualified Substitute Home
Loans" as provided
-17-
above, the criteria specified in clauses (i), (ii) and (iii) above may be
considered on an aggregate or weighted average basis, rather than on a
loan-by-loan basis (i.e., so long as the weighted average Home Loan Interest
Rate of any loans proposed to be substituted is not less than the Home Loan
Interest Rate for the designated Deleted Home Loan or Loans and not more than
two percentage points greater than the Home Loan Interest Rate for the
designated Deleted Home Loan or Loans, the requirements of clause (i) above
would be deemed satisfied).
Rating Agencies: ▇▇▇▇▇'▇ and S&P. 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
Master Servicer and approved by the Securities Insurer, notice of which
designation shall have been given to the Indenture Trustee, the Securities
Insurer, the Servicer and the Issuer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Ratings Confirmation: With respect to a contemplated action to be
undertaken or performed pursuant to this Agreement, a written confirmation from
each Rating Agency to the effect that such action will not result in or cause
the downgrading, withdrawal or qualification of the rating that would otherwise
be assigned by such Rating Agency to the Notes without the benefit of the
Guaranty Policy provided by the Securities Insurer.
Realized Losses: As of any Payment Date, the sum of (1) with respect to
all Home Loans that have become Liquidated Home Loans during the related Due
Period, the difference between (a) the aggregate Principal Balances of such
Liquidated Home Loans and accrued and unpaid interest thereon, minus (b) the
aggregate Net Liquidation Proceeds collected during the related Due Period, and
(2) with respect to all Defaulted Home Loans, the aggregate Net Loan Losses that
occurred during the related Due Period.
Record Date: With respect to each Payment Date, the close of business
on the last Business Day of the month immediately preceding the month in which
such Payment Date occurs.
Regular Payment Amount: With respect to any Payment Date, the lesser of
(a) the Available Payment Amount and (b) the sum of (i) the Noteholders'
Interest Payment Amount and (ii) the Regular Principal Payment Amount.
Regular Principal Payment Amount: On each Payment Date, an amount
equal to the lesser of:
(A) the Note Principal Balance of the Notes immediately prior to
such Payment Date; and
(B) the sum of (i) each scheduled payment of principal collected by the
Servicer or advanced by the Master Servicer or the Indenture Trustee in respect
of the related Due Period, (ii) all Principal Prepayments applied by the
Servicer during such related Due Period, (iii) the principal portion of all Net
Liquidation Proceeds, Property Insurance Proceeds and Released Mortgaged
Property Proceeds received during the related Due Period, (iv) that
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portion of the Purchase Price of any repurchased Home Loan which represents
principal received prior to the related Determination Date, (v) the principal
portion of any Substitution Adjustments required to be deposited in the
Collection Account as of the related Determination Date and (vi) on the Payment
Date on which the Issuer is to be terminated pursuant to Section 11.02 hereof,
the Termination Price (net of any accrued and unpaid interest, Trust Fees and
Expenses due and unpaid on such date and Servicing Advance Reimbursement Amounts
and Monthly Advance Reimbursement Amounts); provided, however, that if such
Payment Date is on or after a Stepdown Date, then with respect to the payment of
principal to the Noteholders the foregoing amount will be reduced (but not less
than zero) by the Overcollateralization Reduction Amount, if any, for such
Payment Date.
Released Mortgaged Property Proceeds: With respect to any Home Loan,
proceeds received by the Servicer in connection with (i) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise; which proceeds in
either case are not released to the Obligor in accordance with applicable law,
Accepted Servicing Procedures and this Agreement.
Relief Act Shortfall: Any shortfall in an Obligor's Monthly Payment
caused by the application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
Residual Interest: The meaning assigned thereto in the Owner Trust
Agreement.
Residual Interest Certificate: The meaning assigned thereto in the
Owner Trust Agreement.
Responsible Officer: When used with respect to the Indenture Trustee,
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Indenture Trustee, customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Owner Trust Agreement and this
Agreement on behalf of the Issuer. When used with respect to the Depositor, the
Servicer, the Master Servicer, the Transferor, the Servicer or any Custodian,
the President or any Vice President, Assistant Vice President, or any Secretary
or Assistant Secretary.
S&P: Standard and Poor's Ratings Services, a Division of the
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or any successor thereto.
Securities: The Notes or Residual Interest Certificates.
-19-
Securities Insurer: Financial Security Assurance Inc., as issuer of
the Guaranty Policy, and its successors and assigns.
Securities Insurer Default: The existence and continuation of any of
the following:
(a) The Securities Insurer fails to make a payment required under the
Guaranty Policy in accordance with its terms;
(b) The Securities Insurer (1) files any petition or commences any case
or proceeding under any provision or chapter of the United States Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (2) makes a general
assignment for the benefit of its creditors, or (3) has an order for relief
entered against it under the United States Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) A court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (1) appointing a custodian, trustee,
agent or receiver for the Securities Insurer or for all or any material portion
of its property or (2) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Securities Insurer (or the taking of
possession of all or any material portion of the property of the Securities
Insurer).
Securities Insurer Reimbursement Amount: At any time, an amount owed to
the Securities Insurer for any unreimbursed Insured Payments made under the
Guaranty Policy and any other amounts then owing to the Securities Insurer under
the Insurance Agreement, which have not previously been reimbursed, in each case
together with interest thereon at the rate specified in the Insurance Agreement.
Securityholder: Any Noteholder or Certificateholder.
Series or Series 1999-1: Fremont Home Loan Asset Backed Notes,
Series 1999-1.
Servicer: One or more servicers that enter into a Servicing Agreement
with the Master Servicer, which initially will be Fremont Investment & Loan, a
California industrial loan company for an interim period, and thereafter will be
Fairbanks Capital Corp., a Utah corporation.
Servicer Termination Delinquency Event: With respect to any date of
determination, a Servicer Termination Delinquency Event shall occur if the most
recent Six-Month Average Delinquency (including Foreclosure Property and real
estate owned) exceeds 15.00%.
Servicer Termination Loss Event: With respect to any date of
determination, a Servicer Termination Loss Event shall occur if either:
(i)......cumulative Realized Losses as a percentage of the
Original Pool Principal Balance equal or exceed the following percentages based
on the month of determination after the Closing Date:
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MONTH OF CUMULATIVE
DETERMINATION REALIZED LOSSES
------------- ---------------
0 -12 1.25%
13 - 24 2.00%
25 - 36 3.15%
37 - 48 3.85%
49+ 4.35%
or
(ii) cumulative Realized Losses as a percentage of the
Original Pool Principal Balance at the end of any 12 month period is greater
than or equal to 1.75% of such percentage as of the beginning of such 12 month
period.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
customarily included in the Servicer's loan file for the related type of Home
Loan as specifically set forth in Section 4.4 of the Servicing Agreement.
Servicer's Monthly Remittance Report: A report prepared and computed
by the Servicer in substantially the form of Exhibit B attached hereto.
Servicing Advance Reimbursement Amount: With respect to any date of
determination and with respect to the receipt of proceeds from or the
liquidation of a Home Loan for which any Servicing Advances have been made, the
amount of any such Servicing Advances that have not been reimbursed as of such
date, including Nonrecoverable Servicing Advances.
Servicing Advances: All reasonable, customary and necessary "out of
pocket" costs and expenses advanced or paid by the Servicer with respect to the
Home Loans in accordance with the performance by the Servicer of its servicing
obligations under Section 6.6 of the Servicing Agreement, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of any related Mortgaged Property, including without limitation
advances in respect of real estate taxes and assessments, (ii) any collection,
enforcement or judicial proceedings, including without limitation foreclosures,
collections and liquidations , (iii) the conservation, management and sale or
other disposition of a Foreclosure Property, and (iv) the satisfaction,
cancellation, release or discharge of any Home Loan or any related Mortgage in
accordance with this Agreement; provided, however, that such Servicing Advances
(plus accrued interest thereon from the date of such advance to the date of
reimbursement and at the rate equal to the Servicer's cost of funds) are
reimbursable to the Servicer out of the expected late collections, Liquidation
Proceeds, Property Insurance Proceeds or Released Mortgaged Property Proceeds
from the related Home Loan, Obligor or Mortgaged Property.
Servicing Agreement: The servicing agreement, incorporating by
reference the Agreement Regarding Standard Servicing Terms, each dated as of the
date hereof each between Fremont, as owner of the Home Loans and as the Master
Servicer and the Servicer, a form of which is attached hereto as Exhibit E.
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Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to this Agreement and the Servicing Agreement.
On any Payment Date Servicing Compensation shall include any Servicing Fee
Recovery Amounts due and unpaid, to the extent of Master Servicer Compensation
available after allocations under Section 4.01(k) hereof on such Payment Date.
Servicing Fee: As to each Home Loan (including any Home Loan that has
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each Payment
Date, which shall equal the product of (a) one-twelfth (1/12) of 0.35% (35 basis
points) and (b) the Principal Balance of such Home Loan as of the beginning of
the immediately preceding Due Period (or as of the Cut-Off Date with respect to
the first Due Period).
Servicing Fee Recovery Amount: The amount of any Servicing Fee used
to pay Compensating Interest for which the Servicer has not received
reimbursement.
Servicing Officer: Any officer of the Servicer or Master Servicer
involved in, or responsible for, the administration and servicing of the Home
Loans whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the Master
Servicer, respectively, to the Securities Insurer, the Master Servicer and the
Indenture Trustee, on behalf of the Securityholders and the Securities Insurer,
as such list may from time to time be amended.
Six-Month Average Delinquency: With respect to any Payment Date, the
average for such Payment Date and the five preceding Payment Dates of the
respective ratios, expressed as a percentage, equal to (x) the aggregate
Principal Balances of all Home Loans that are 90 days or more Delinquent
(excluding any Liquidated Home Loans but including Foreclosed Loans and real
estate owned and Home Loans in foreclosure proceedings) as of the end of each of
the related Due Periods, divided by (y) the respective Pool Principal Balance as
of the end of the applicable Due Period.
Spread Squeeze Amount: For any Payment Date on or after the Payment
Date in April 2000, an amount (not less than zero) equal to the product,
obtained by multiplying (i) three, (ii) the excess, if any, of 2.00% (with
respect to the 13th through the 24th Payment Date) or 3.00% (with respect to any
Payment Date after the 24th Payment Date) over the Spread Squeeze Percentage for
such Payment Date and (iii) the Original Pool Principal Balance.
Spread Squeeze Percentage: With respect to any Payment Date, the
percentage equivalent of a fraction, the numerator of which is the product of 12
and the excess of the Excess Spread for such Payment Date over the Securities
Insurer Reimbursement Amount for such Payment Date, and the denominator of which
is the Pool Principal Balance for such Payment Date.
Stepdown Date: The first Payment Date occurring on the later of: (a)
the twenty-fourth month after the month in which the Closing Date occurs; or (b)
the Payment Date on which the Pool Principal Balance as of the end of the
related Due Period has been reduced to an amount that is less than or equal to
50% of the Original Pool Principal Balance.
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Step Down Test: As of any Payment Date, each of the following
conditions:
(i) the most recent Six-Month Average Delinquency is
equal to or less than 10.50% of the Pool Principal Balance.
(ii) the cumulative Realized Losses as a percentage of the
Original Pool Principal Balance are equal to or less than the following
percentages through the month of determination after the Closing Date:
MONTH OF CUMULATIVE
DETERMINATION REALIZED LOSSES
------------- ---------------
24 1.25%
36 1.75%
48 2.50%
60+ 3.15%
and
(iii) aggregate Realized Losses during the 12 months
preceding a Payment Date, as a percentage of the Pool Principal Balance as of
the first day of such 12 month period, must be less than 100 basis points
(1.00%).
Stepped Down Percentage: For any Payment Date on or after the Step Down
Date on which the Step Down Test is satisfied, a percentage equal to (i) the
percentage equivalent of a fraction, the numerator of which is 4.00% of the
Original Pool Principal Balance and the denominator of which is the Pool
Principal Balance as of such Payment Date, minus (ii) the percentage equivalent
of a fraction, the numerator of which is the product of (A) the percentage
calculated under clause (i) above minus 8.00% multiplied by (B) the number of
consecutive Payment Dates through and including the Payment Date for which the
Stepped Down Percentage is being calculated, up to a maximum of six, for which
the Step Down Test has been satisfied and the denominator of which is six.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 3.05 hereof, the amount, if any, by which (a) the sum of the
aggregate principal balance (after application of principal payments received on
or before the date of substitution) of any Qualified Substitute Home Loans as of
the date of substitution, plus any accrued and unpaid interest thereon to the
date of substitution, is less than (b) the sum of the Principal Balance,
together with accrued and unpaid interest thereon to the date of substitution,
of the related Deleted Home Loans.
Tangible Net Worth: As defined in Section 10.01(a)(x) hereof.
Termination Price: As of any date of determination, an amount without
duplication equal to the greater of (A) the Note Redemption Amount and (B) the
sum of (i) the Principal Balance of each Home Loan as of the applicable Monthly
Cut-Off Date; (ii) all unpaid interest accrued on the Principal Balance of each
such Home Loan at the related Home Loan Interest Rate to such Monthly Cut-Off
Date; (iii) the aggregate fair market value of each
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Foreclosure Property on such Monthly Cut-Off Date, as determined by an appraiser
acceptable to the Indenture Trustee as of a date not more than 30 days prior to
such Monthly Cut-Off Date; and (iv) any due but unpaid Securities Insurer
Reimbursement Amount.
Transaction Documents: This Agreement, the Servicing Agreement, the
Indenture, the Home Loan Purchase Agreement, the Owner Trust Agreement, the
Custodial Agreement, the Administration Agreement, the Indemnification and
Contribution Agreement, the Insurance Agreement, the Premium Letter and the
Indemnification Agreement.
Transferor: Fremont, in its capacity as the transferor hereunder.
Treasury Regulations: Regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and
investments held from time to time in the Trust Accounts and all proceeds of
the foregoing.
Trust Accounts: The Note Payment Account, the Certificate
Distribution Account, the Policy Payment Account or the Collection Account.
Trust Estate: The assets subject to this Agreement, the Owner Trust
Agreement and the Indenture and assigned and conveyed to the Trust, which assets
consist of: (i) such Home Loans as from time to time are subject to this
Agreement as listed in the Home Loan Schedule, as the same may be amended or
supplemented from time to time including by the removal of Deleted Home Loans
and the addition of Qualified Substitute Home Loans, together with the Home Loan
File relating thereto and all proceeds thereof, (ii) the Mortgages and security
interests in Mortgaged Properties, (iii) all payments in respect of interest due
with respect to the Home Loans on or after the Cut-Off Date and all payments in
respect of principal received after the Cut-Off Date, (iv) such assets as from
time to time are identified as Foreclosure Property, (v) such assets and funds
as are from time to time are deposited in the Collection Account, the Note
Payment 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 all insurance policies with respect to the Home Loans and
any Property Insurance Proceeds, (vii) Net Liquidation Proceeds and Released
Mortgaged Property Proceeds, (viii) all right, title and interest of the
Depositor in and to the obligations of the Transferor under the Home Loan
Purchase Agreement pursuant to which the Depositor acquired the Home Loans from
the Transferor, and (ix) all right, title and interest of the Depositor in and
to the Servicing Agreement and all proceeds of any of the foregoing.
Trust Fees and Expenses: As of each Payment Date, an amount equal to
the Master Servicer Compensation (which includes the Master Servicer Fee), the
Servicing Compensation (which includes the Servicing Fee), Guaranty Insurance
Premium and the Indenture Trustee Fee and reimbursement of the reasonable
expenses of the Indenture Trustee.
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UCC: The Uniform Commercial Code as in effect in the State of New
York.
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 Owner 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 GAAP. 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 GAAP, 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 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.
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 and the Residual Interest Certificates 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,
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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 Transferor 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 all right, title and interest of the Depositor
in and to the Trust Estate, receipt of which is hereby acknowledged by the
Issuer. Concurrently with such delivery and in exchange therefor, the Issuer has
pledged the Trust Estate to the Indenture Trustee and executed the Notes, and
the Indenture Trustee, pursuant to the written instructions of the Issuer, has
caused the Notes to be authenticated and delivered to the Depositor or its
designee. 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 the Residual Interest Certificates to be authenticated and
delivered to the Depositor or its designee, upon the order of the Depositor.
Section 2.02. Ownership and Possession of Home Loan Files.
Upon the issuance of the Notes, 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 Trust 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 the Servicer, and the Custodian shall take possession of the
Indenture Trustee's Home Loan Files as contemplated in Section 2.05 hereof.
Section 2.03. Books and Records.
The sale of each Home Loan shall be reflected on the balance sheets and
other financial statements of the Depositor or the Transferor, as the case may
be, as a sale of assets by the Depositor or the Transferor, as the case may be,
under GAAP. Each of the Servicer and the Custodian shall be responsible for
maintaining, and shall maintain, 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 pledged to the Indenture Trustee for the benefit
of the Noteholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Home
Loans and the other property specified in Section 2.01(a) hereof from the
Depositor to the Trust. If the assignment and transfer of the Home Loans and the
other property specified in Section 2.01(a) hereof to the Trust pursuant to this
Agreement or the conveyance of the Home Loans or any of such other property to
the Trust is held or deemed not to be a sale or is held or deemed to be a pledge
of security for a loan, the Depositor intends that the rights and obligations of
the parties shall be established pursuant to the terms of this Agreement and
that in such event, (i) the Depositor shall be deemed to have granted and does
hereby grant to the Trust a first priority security interest in
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the entire right, title and interest of the Depositor in and to the Home Loans
and all other property conveyed to the Trust pursuant to Section 2.01 hereof and
all proceeds thereof and (ii) this Agreement shall constitute a security
agreement under applicable law. Within ten (10) days of the Closing Date, the
Depositor shall cause to be filed UCC-1 financing statements naming the Trust as
a "secured party" 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 2.04. Delivery of Home Loan Documents.
(a) With respect to each Home Loan, the Transferor and/or the
Depositor, as applicable, shall, on the Closing Date, deliver or caused to be
delivered to the Custodian, as the designated agent of the Indenture Trustee,
each of the following documents (collectively, the "Indenture Trustee's Home
Loan Files"):
(i) The original Debt Instrument, endorsed by the
Transferor in blank or in the following form: "Pay to the order of First Union
National Bank as Trustee without recourse" with all prior and intervening
endorsements showing a complete chain or endorsement from origination of the
Home Loan to the Transferor, or a lost note affidavit acceptable to the
Indenture Trustee (not to exceed 15 Home Loans);
(ii) The original Mortgage with evidence of recording
thereon (or, if the original Mortgage has not been returned from the applicable
public recording office or is not otherwise available, a copy of the Mortgage
certified by a Responsible Officer of the Transferor or by the closing attorney
or by an officer of the title insurer or agent of the title insurer which issued
the related title insurance policy, if any, or commitment therefor to be a true
and complete copy of the original Mortgage submitted for recording) and, if the
Mortgage was executed pursuant to a power of attorney, the original power of
attorney with evidence of recording thereon (or, if the original power of
attorney has not been returned from the applicable public recording office or is
not otherwise available, a copy of the power of attorney certified by a
Responsible Officer of the Transferor or by the closing attorney or by an
officer of the title insurer or agent of the title insurer which issued the
related title insurance policy, if any, or commitment, thereof, to be a true and
complete copy of the original power of attorney submitted for recording);
(iii) The original executed Assignment of Mortgage, in
blank or in recordable form to "First Union National Bank, as Trustee." The
Assignment of Mortgage may be a blanket assignment, to the extent such
assignment is 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
Indenture Trustee's Home Loan File;
(iv) All original intervening assignments of mortgage,
with evidence of recording thereon, showing a complete chain of assignment from
origination of the Home Loan to the Transferor (or, if any such assignment of
mortgage has not been returned from the applicable public recording office or is
not otherwise available, a copy of such assignment of mortgage certified by a
Responsible Officer of the Transferor or by the
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closing attorney or by an officer of the title insurer or agent of the title
insurer which issued the related title insurance policy, if any, or commitment
therefor to be a true and complete copy of the original assignment submitted for
recording); provided that the chain of intervening recorded assignments shall
not be required to match the chain of intervening endorsements of the Debt
Instrument so long as the chain of intervening recorded assignments, if
applicable, evidences one or more assignments of the Mortgage from the original
mortgagee ultimately to the person who has executed the Assignment of Mortgage;
(v) The original, or a copy certified by the Transferor
to be a true and correct copy of the original, of each assumption, modification,
written assurance or substitute agreement, if any; and
(vi) The original policy of title insurance, including
riders and endorsements thereto, as if the policy has not yet been issued, a
written commitment or interim binder or preliminary report of title issued by
the title insurance or escrow company.
(b) With respect to each Home Loan, the Transferor and the Depositor
shall, on the Closing Date, deliver or caused to be delivered to the Servicer,
as the designated agent of the Indenture Trustee, the Servicer's Home Loan
Files.
(c) The Indenture Trustee shall cause the Custodian to take and
maintain continuous physical possession of the Indenture Trustee's Home Loan
Files in the State of Maryland and, in connection therewith, shall act solely as
agent for the Noteholders in accordance with the terms hereof and not as agent
for the Transferor or any other party.
(d) Within 60 days after the Closing Date, the Transferor, at its own
expense, shall 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, that the Transferor need not record any such
Assignment of Mortgage which relates to a Home Loan in any jurisdiction under
the laws of which, as evidenced by an Opinion of Counsel delivered by the
Transferor (at the Transferor's expense) to the Indenture Trustee, the
Securities Insurer and the Rating Agencies, that recordation of such Assignment
of Mortgage is not necessary to protect the Indenture Trustee's and the
Noteholders' interest in the related Home Loan. 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 360 days 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, the Transferor shall promptly prepare a
substitute Assignment of Mortgage or cure such defect, as the case may be, and
thereafter the Transferor shall be required to submit each such Assignment of
Mortgage for recording.
(e) All recordings required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Transferor.
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Section 2.05. Acceptance by the Indenture Trustee of the Home Loans;
Certain Substitutions; Certification by the Custodian.
(a) The Indenture Trustee agrees to cause the Custodian 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 will cause
the Custodian to hold such documents and any amendments, replacements or
supplements thereto, as well as any other assets included in the Trust Estate
and delivered to the Custodian, in trust, upon and subject to the conditions set
forth herein. The Indenture Trustee agrees to cause the Custodian 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 cause the Custodian to
deliver to the Transferor, the Depositor, the Servicer, the Indenture Trustee,
and the Securities Insurer a certification (the "Custodian's Initial
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 as an exception to such certification), (i) all documents required to
be delivered to the Indenture Trustee pursuant to this Agreement are in its
possession or in the possession of the Custodian on its behalf (other than as
expressly permitted by Section 2.04 hereof), (ii) such documents have been
reviewed by the Custodian 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, and (iii) based on the examination of the Custodian on behalf of the
Indenture Trustee, and only as to the foregoing documents, the information set
forth on the Home Loan Schedule with respect to items (i), (ii), (iv) (only as
to original principal amount), (vii), (ix), (x) and (xiii) specified under the
definition of Home Loan Schedule herein accurately reflects the information set
forth in the Indenture Trustee's Home Loan File. Neither the Indenture Trustee
nor the Custodian shall be under any duty or obligation to make an independent
examination of any documents contained in each Indenture Trustee's Home Loan
File beyond the review listed herein. Neither the Custodian nor the Indenture
Trustee makes any representations as to: (i) the validity, legality,
sufficiency, enforceability, execution by a responsible officer or genuineness
of any of the documents contained in each Indenture Trustee's Home Loan File of
any of the Home Loans identified on the Home Loan Schedule relating to such Home
Loans, or (ii) the collectibility, insurability, effectiveness or suitability of
any such Home Loan, or (iii) the existence of any document specified in clause
(v) of Section 2.04(a) of the this Agreement.
(b) The Servicer's Home Loan Files shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Noteholders and the Indenture
Trustee for so long as the Indenture continues in full force and effect; after
the Indenture is terminated in accordance with the terms thereof, the Servicer's
Home Loan Files shall be held in the custody of the Servicer for the benefit of,
and as agent for, the Certificateholders. It is intended that, by the Servicer's
agreement pursuant to this Section 2.05(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. The Servicer 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, the Servicer
agrees not to assert any legal or beneficial ownership interest in the Home
Loans or such documents or
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instruments. The Servicer agrees to indemnify the Securityholders and the
Indenture Trustee for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever which may be imposed on,
incurred by or asserted against the Securityholders or the Indenture Trustee as
the result of any act or omission by the Servicer relating to the maintenance
and custody of such documents or instruments which have been delivered to the
Servicer; provided, however, that the Servicer will not be liable for any
portion of any such amount resulting from the negligence or misconduct of any
Securityholders or the Indenture Trustee; and provided, further, that the
Servicer will not be liable for any portion of any such amount resulting from
the Servicer's compliance with any instructions or directions consistent with
this Agreement issued to the Servicer by the Indenture Trustee. The Indenture
Trustee shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
(c) The Indenture Trustee agrees to cause the Custodian to review, for
the benefit of the Securityholders, each Indenture Trustee's Home Loan File
within 60 days after the date the Custodian delivered a Custodian's Initial
Certification and to deliver to the Transferor, the Depositor, the Servicer, the
Indenture Trustee and the Securities Insurer an updated certification (a
"Custodian's Updated Certification"), setting forth those exceptions listed on
the Custodian's Initial Certification which continue to exist on the date of
such Custodian's Updated Certification. With respect to any Home Loans which are
set forth as exceptions in the Custodian's Updated Certification because
recorded assignments or original or certified copies of Mortgages have not yet
been delivered to the Custodian, the Transferor shall cure such exceptions by
delivering such missing documents to the Custodian no later than 180 days after
the Closing Date.
The Indenture Trustee agrees to cause the Custodian to review for the
benefit of the Securityholders, each Indenture Trustee's Home Loan File within
180 days after the date it delivered a Custodian's Initial Certification and to
deliver to the Transferor, the Depositor, the Servicer, the Indenture Trustee,
and the Securities Insurer a final certification (a "Custodian's Final
Certification"), setting forth those exceptions listed on the Custodian's
Updated Certification which continue to exist on the date of such Custodian's
Final Certification.
In performing any such review, the Custodian may conclusively rely on
the Transferor as to the purported genuineness of any such document and any
signature thereon. Neither the Indenture Trustee nor the Custodian shall have
any responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction or whether a blanket assignment is permitted in
any applicable jurisdiction. If a material defect in a document constituting
part of a Indenture Trustee's Home Loan File is discovered, then the Depositor
and Transferor 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 and warrants to the Transferor, the
Master Servicer, the Servicer, the Indenture Trustee, the Owner Trustee, the
Securities Insurer and the Noteholders that 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, and had at all
relevant times, full power to own its property, to carry on its business as
currently conducted, to enter into and perform its obligations under each
Transaction Document to which the Depositor is a party and to create the Trust
pursuant to the Owner Trust Agreement.
(b) The execution and delivery of each Transaction Document to which
the Depositor is a party by the Depositor and its performance of and compliance
with the terms of thereof will not violate the Depositor's certificate of
incorporation or by-laws or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or result in the
breach or acceleration of, any material contract, agreement or other instrument
to which the Depositor is a party or which may be applicable to the Depositor or
any of its assets.
(c) The Depositor has the full power and authority to enter into and
consummate the transactions contemplated by each Transaction Document to which
the Depositor is a party, has duly authorized the execution, delivery and
performance of each Transaction Document to which the Depositor is a party and
has duly executed and delivered each Transaction Document to which the Depositor
is a party. Each Transaction Document to which the Depositor is a party,
assuming due authorization, execution and delivery by each other party thereto,
constitutes a valid, legal and binding obligation of the Depositor, enforceable
against it in accordance with the terms thereof, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(d) The Depositor is not in violation of, and the execution and
delivery of any Transaction Document by the Depositor and its performance and
compliance with the terms of any Transaction Document to which the Depositor is
a party will not constitute a violation with respect to, any order or decree of
any court or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations of the
Depositor or its properties or materially and adversely affect the performance
of its duties hereunder or thereunder.
(e) There are no actions or proceedings against, or investigations of,
the Depositor currently pending with regard to which the Depositor has received
service of process
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and no action or proceeding against, or investigation of, the Depositor is, to
the knowledge of the Depositor, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined adversely,
would prohibit its entering into any Transaction Document to which the Depositor
is a party or render the Notes invalid, (B) seek to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by any
Transaction Document to which the Depositor is a party or (C) if determined
adversely, would prohibit or materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or enforceability of,
any Transaction Document to which the Depositor is a party or the Notes.
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, any
Transaction Document to which the Depositor is a party or the Notes, or for the
consummation of the transactions contemplated by any Transaction Document,
except for such consents, approvals, authorizations and orders, if any, that
have been obtained prior to the Closing Date.
(g) The Depositor is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by its execution and delivery of
any Transaction Document or its obligations hereunder; no petition of bankruptcy
(or similar insolvency proceeding) has been filed by or against the Depositor
prior to the date hereof.
(h) The Depositor did not sell the Home Loans to the Issuer, with any
intent to hinder, delay or defraud any of its creditors; the Depositor will not
be rendered insolvent as a result of the sale of the Home Loans to the Issuer.
(i) Immediately upon the transfer and assignment by the Depositor to
the Issuer herein contemplated, the Depositor will have delivered to the Issuer
all of the Depositor's right, title and interest in and to, the Home Loans free
and clear of any lien or options in favor of, or claims of, any other Person.
(j) No Officers' Certificate prepared by the Depositor and furnished or
to be furnished by it pursuant to this Agreement contains any untrue statement
of material fact.
(k) The Depositor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.
Section 3.02. Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Servicer, the
Indenture Trustee, the Owner Trustee, the Securities Insurer, the Noteholders
and the Depositor that as of the Closing Date (except as otherwise specifically
provided herein):
(a) The Transferor is an industrial loan company duly organized,
validly existing and in good standing under the laws of the State of California
and has and had at all relevant times, full corporate power to originate or
purchase the Home Loans, to own its
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property, to carry on its business as presently conducted and to enter into and
perform its obligations under each Transaction Document to which it is a party.
(b) The execution and delivery of each Transaction Document to which it
is a party by the Transferor and its performance of and compliance with the
terms of each Transaction Document to which it is a party will not violate the
Transferor's certificate of incorporation or by-laws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Transferor is a party or
which may be applicable to the Transferor or any of its assets.
(c) The Transferor has the full power and authority to enter into and
consummate all transactions to be consummated by it, contemplated by each
Transaction Document to which it is a party has duly authorized the execution,
delivery and performance of each Transaction Document to which it is a party and
has duly executed and delivered each Transaction Document to which it is a
party. Each Transaction Document to which the Transferor is a party, assuming
due authorization, execution and delivery by the other parties thereto,
constitutes a valid, legal and binding obligation of the Transferor, enforceable
against it in accordance with the terms thereof, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(d) The Transferor is not in violation of, and the execution and
delivery of any Transaction Documents by the Transferor and its performance and
compliance with the terms thereof will not constitute a violation with respect
to, any order or decree of any court or any order or regulation of any federal,
state, municipal or governmental agency having jurisdiction, which violation
would materially and adversely affect the condition (financial or otherwise) or
operations of the Transferor or its properties or materially and adversely
affect the performance of its duties hereunder or thereunder.
(e) There are no actions or proceedings against, or investigations of,
the Transferor currently pending with regard to which the Transferor has
received service of process and no action or proceeding against, or
investigation of, the Transferor is, to the knowledge of the Transferor,
threatened or otherwise pending, before any court, administrative agency or
other tribunal that (A) if determined adversely, would prohibit its entering
into this Agreement or render the Notes invalid, (B) seek to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement or (C) if determined adversely, would prohibit or
materially and adversely affect the sale of the Home Loans to the Depositor, the
performance by the Transferor of its obligations under, or the validity or
enforceability of, this Agreement or the Notes.
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution, delivery and
performance by the Transferor of, or compliance by the Transferor with, this
Agreement, (2) the issuance of the Notes, (3) the sale of the Home Loans under
the Home Loan Purchase Agreement or (4) the consummation of the
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transactions required of it by this Agreement, except such as shall have been
obtained before the Closing Date.
(g) The Transferor acquired title to the Home Loans in good faith,
without notice of any adverse claim.
(h) The collection practices used by the Transferor with respect to the
Home Loans have been, in all material respects, legal, proper, prudent and
customary in the servicing of loans of the same type as the Home Loans;
(i) No Officer's Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it pursuant to
any Transaction Document or in connection with the transactions contemplated
hereby contains any untrue statement of material fact.
(j) The Transferor is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
any Transaction Document or by the performance of its obligations hereunder; no
petition of bankruptcy (or similar insolvency proceeding) has been filed by or
against the Transferor prior to the date hereof.
(k) The Prospectus Supplement does not contain an untrue statement of a
material fact and does not omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the Transferor makes no statement with
respect to: (1) the statements set forth in the final paragraph of the cover of
the Prospectus Supplement; and (2) statements set forth under the following
captions: (i) "SUMMARY - Tax Status", "-- ERISA Considerations", and "-- Legal
Investment"; (ii) "DESCRIPTION OF CREDIT ENHANCEMENT"; (iii) "FEDERAL INCOME TAX
CONSEQUENCES"; (iv) "ERISA CONSIDERATIONS"; (v) "LEGAL INVESTMENT MATTERS"; and
(vi) "UNDERWRITING".
(l) The Transferor has transferred the Home Loans without any intent to
hinder, delay or defraud any of its creditors.
(m) The origination and collection practices used with respect to each
Debt Instrument and Mortgage have been in all material respects legal, proper,
prudent and customary in the mortgage origination and servicing business and in
compliance with the Transferor's underwriting criteria as described in the
Prospectus Supplement.
(n) Upon the receipt of each Indenture Trustee's Home Loan File by the
Custodian, the Indenture Trustee will have a first priority security interest in
each Home Loan and such other items comprising the corpus of the Trust free and
clear of any lien, charge or encumbrance other than the lien of the Indenture.
(o) The transfer, assignment and conveyance of the Debt Instruments and
the Mortgages by the Transferor pursuant to this Agreement are not subject to
the bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.
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It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the Indenture Trustee's
Home Loan Files to the Custodian and shall inure to the benefit of the
Securityholders, the Securities Insurer, the Depositor, the Master Servicer, the
Servicer, the Indenture Trustee, the Owner Trustee and the Trust. Upon discovery
by any of the Transferor, the Securities Insurer, the Depositor, the Master
Servicer, the Servicer, the Indenture Trustee or the Owner Trustee of a breach
of any of the foregoing representations and warranties that materially and
adversely affects the value of any Home Loan, the party discovering such breach
shall give prompt written notice (but in no event later than two Business Days
following such discovery) to the other parties. The obligations of the
Transferor set forth in Section 3.05 hereof shall constitute the sole remedies
available hereunder to the Securityholders, the Depositor, the Master Servicer,
the Servicer, the Indenture Trustee or the Owner Trustee respecting a breach of
the representations and warranties contained in this Section 3.02.
Section 3.03. Representations, Warranties and Covenants of the
Master Servicer.
The Master Servicer hereby represents and warrants to and covenants
with the Owner Trustee, the Indenture Trustee, the Securities Insurer, the
Noteholders, the Depositor, and the Transferor that as of the Closing Date or as
of such date specifically provided herein:
(a) The Master Servicer is a industrial loan company duly organized,
validly existing, and in good standing under the laws of the state of California
and has all licenses necessary to carry on its business as now being conducted
and is licensed, qualified and in good standing in each state where any property
securing the Home Loans is located if the laws of such state require licensing
or qualification in order to conduct business of the type conducted by the
Master Servicer and perform its obligations as Master Servicer hereunder and
under the Servicing Agreement; the Master Servicer has the power and authority
to execute and deliver this Agreement and under the Servicing Agreement and to
perform its obligations in accordance herewith and therewith; the execution,
delivery and performance of this Agreement and under the Servicing Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Master Servicer and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action; this Agreement and under the Servicing Agreement evidences the
valid, binding and enforceable obligation of the Master Servicer; and all
requisite action has been taken by the Master Servicer to make this Agreement
valid, binding and enforceable upon the Master Servicer in accordance with its
terms, subject to and under the Servicing Agreement the effect of bankruptcy,
insolvency, reorganization, moratorium and other, similar laws relating to or
affecting creditor's rights generally or the application of equitable principles
in any proceeding, whether at law or in equity.
(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency, that are necessary in connection with
the purchase and sale of the Notes and the execution and delivery by the Master
Servicer of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect, are not subject to
any pending proceedings or appeals (administrative, judicial or otherwise) and
either the time
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within which any appeal therefrom may be taken or review thereof may be obtained
has expired or no review thereof may be obtained or appeal therefrom taken, and
are adequate to authorize the consummation of the transactions contemplated by
this Agreement and the other documents on the part of the Master Servicer and
the performance by the Master Servicer of its obligations as Master Servicer
under this Agreement and such other documents to which it is a party.
(c) The consummation of the transaction contemplated by this Agreement
and the Servicing Agreement will not result in the breach of any terms or
provisions of the certificate of incorporation or by-laws of the Master Servicer
or result in the breach of any term or provision of, or conflict with or
constitute a default under or result in the acceleration for any obligation
under, any material agreement, indenture or loan or credit agreement or other
material instrument to which the Master Servicer or to its property is subject,
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) Neither this Agreement nor any report or other document prepared by
the Master Servicer and furnished or to be furnished pursuant to this Agreement
or in connection with the transactions contemplated hereby contains any untrue
statement of material fact; and the statements set forth in the Prospectus
Supplement under the caption "THE MASTER SERVICER" do not contain an untrue
statement of a material fact and do not omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(e) There is no action, suit, proceeding or investigation pending or,
to the best of the Master Servicer's knowledge, threatened against the Master
Servicer which, either in any one instance or in the aggregate, may result in
any material adverse change in the business, operations, financial condition,
properties or assets of the Master Servicer or in any material impairment of the
right or ability of the Master Servicer to carry on its business substantially
as now conducted, or in any material liability on the part of the Master
Servicer or which would draw into question the validity of this Agreement, the
Servicing Agreement or the Home Loans or of any action taken or to be taken in
connection with the obligations of the Master Servicer contemplated herein, or
which would be likely to impair the ability of the Master Servicer to perform
under the terms of this Agreement or the Servicing Agreement.
(f) The Master Servicer 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 the Master Servicer or its properties or might have consequences
that would adversely affect its performance hereunder or under the Servicing
Agreement.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Home Loan Files to the Indenture Trustee and shall inure to the
benefit of the Depositor, the Noteholders, the Owner Trustee, the Securities
Insurer, and the Indenture Trustee. Upon discovery by any of the Transferor, the
Depositor, the Indenture Trustee, the Securities Insurer or the Owner Trustee of
a breach of any of the foregoing representations, warranties and covenants that
materially and
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adversely affects the value of any Home Loan or the interests of
such Person therein, the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following such discovery)
to the other parties.
Section 3.04. Representations and Warranties Regarding Individual
Home Loans.
The Transferor hereby represents and warrants to the Depositor, the
Issuer, the Indenture Trustee, the Owner Trustee, the Securities Insurer, the
Master Servicer and the Noteholders, with respect to each Home Loan as of the
Closing Date, except as otherwise expressly stated:
(a) Home Loan Schedule. The information with respect to each
Home Loan set forth in the Home Loan Schedule is complete, true and correct as
of the Cut-off-Date;
(b) Delivery of Home Loan File. All of the original or certified
documentation required to be delivered by the Transferor on the Closing Date or
as otherwise provided herein has or will be so delivered as provided; The Home
Loan File contains each of the documents and instruments specified to be
included therein duly executed and in due and proper form, and each such
document or instrument is in a form generally acceptable to prudent home loan
lenders that regularly originate or purchase mortgage loans comparable to the
Home Loans for sale to prudent investors in the secondary market that invest in
mortgage loans such as the Home Loans;
(c) Nature of Property. Each Mortgaged Property consists of a single
parcel of residential real property, separately assessed for tax purposes, owned
by the related Obligor in fee simple absolute and is improved by a
one-to-four-family residential dwelling, which does not include condominiums,
cooperatives, units in a planned urban development, town houses, or mobile homes
and does not constitute other than real property under the state law. No
Mortgage Property is a manufactured housing unit, as defined in the ▇▇▇▇▇▇
▇▇▇/▇▇▇▇▇▇▇ Mac Seller-Servicer's Guide;
(d) Servicing. Each Home Loan is being serviced by the Master
Servicer;
(e) Fixed Interest Rate. The Debt Instrument related to approximately
9.25% of the Home Loans bear a fixed Home Loan Interest Rate. The Home Loan
Interest Rate on the fixed rate Home Loans is not less than 7.99% nor more than
15.25% and as of the Cut-Off-Date, the weighted average Home Loan Interest Rate
on the fixed rate Home Loans is approximately 10.538%;
(f) Adjustable Home Loan Interest Rates. The Debt Instrument related to
approximately 90.75% of the Home Loans bear an adjustable Home Loan Interest
Rate ("ARMs"). All of the terms of the Mortgage pertaining to interest rate
adjustments, payment adjustments and adjustments of the principal balance with
respect to the ARMs are enforceable, all such adjustments have been correctly
made in accordance with the terms of the related Debt Instrument and such
adjustments will not affect the priority of the Mortgage lien; all ARMs have an
index and there is no provision which would permit the Obligor to convert to a
fixed interest rate; as of the Cut-off Date, the weighted average margin on the
ARMs was approximately
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6.255%; the ARMs have a weighted average contractual maximum interest rate equal
to approximately 16.772%; the ARMs have a weighted average contractual minimum
interest rate equal to approximately 9.769%; approximately 70.01% of the ARMS
are 2/28's and have a subsequent adjustment frequency of six months,
approximately 21.65% of the ARMs are 3/27's and have a subsequent adjustment
frequency of six months and the remaining approximately 8.34% of the ARMs adjust
every 6 months;
(g) Priority of Lien. Each Mortgage is a valid and subsisting first
lien of record on a single parcel of real estate constituting the Mortgaged
Property, subject in all cases to the exceptions to title set forth in the title
insurance policy, with respect to the related Home Loan, which exceptions are
generally acceptable to mortgage lending companies, and such other exceptions to
which similar properties are commonly subject and which do not individually, or
in the aggregate, materially and adversely affect the benefits of the security
intended to be provided by such Mortgage;
(h) Title. Except with respect to liens released immediately prior to
the transfer herein contemplated, immediately prior to the transfer and
assignment herein contemplated the Transferor held good and indefeasible title
to, and was the sole owner of, each Home Loan, subject to no liens, charges,
mortgages, encumbrances or rights of others; and immediately upon the transfer
and assignment herein contemplated, the Owner Trust will hold good and
indefeasible title to, and be the sole owner of, each Home Loan, subject to no
liens, charges, mortgages, encumbrances or rights of others;
(i) Delinquencies. As of the Cut-Off Date, 159 Home Loans are 30 or
more days delinquent; 7 Home Loans are over 60 days delinquent; and no Home Loan
has ever been 89 or more days delinquent;
(j) Tax Liens; Status of Property. There is no delinquent tax
or assessment lien on any Mortgaged Property, and each Mortgaged Property is
free of material damage and is in good repair;
(k) No Defenses. The Home Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of the Debt Instrument or the
Mortgage, or the exercise of any right thereunder, render either the Debt
Instrument or the Mortgage unenforceable in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto;
(l) No Mechanics Lien. There is no mechanic's lien or claim for work,
labor or material affecting any Mortgaged Property which is or may be a lien
prior to, or equal to or on a parity with, the lien of such Mortgage except
those which are insured against by the title insurance policy referred to in
Section (n) below;
(m) Origination in Compliance with Laws. Each Home Loan complies, at
the time it was made complied and at all times has complied in all material
respects with applicable local, state and federal laws and regulations,
including, without limitation, usury, truth-in-lending, real estate settlement
procedure, consumer credit protection, equal credit
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opportunity, disclosure and recording laws and the Transferor has and shall
maintain in its possession available for inspection and shall deliver upon
demand, evidence of compliance with all such requirements; and, to the
Transferor's knowledge, no fraud or misrepresentation was committed by any
person or entity in connection with the origination of each Home Loan;
(n) Title Insurance. With respect to each Home Loan, a written
commitment for a lender's title insurance policy, issued in standard American
Land Title Association or California Land Title Association form, or other form
acceptable in a particular jurisdiction, by a title insurance company authorized
to transact business in the state in which the related Mortgaged Property is
situated, together with a condominium endorsement, if applicable, in an amount
at least equal to the original Principal Balance of such Home Loan insuring the
mortgagee's interest under the related Home Loan as the holder of a valid first
mortgage lien of record on the real property described in the Mortgage, subject
only to exceptions of the character referred to in paragraph (g) above, was
effective on the date of the origination of such Home Loan, and, as of the
Closing Date, such commitment will be valid and thereafter the policy issued
pursuant to such commitment shall continue in full force and effect. The
originator is the sole named insured of such mortgage title insurance policy,
the assignment to the Owner Trust, and the pledge to the Indenture Trustee, of
the originator's interest in such mortgage title insurance policy does not
require the consent of or notification to the insurer, and such mortgage title
insurance policy is in full force and effect and will be in full force and
effect and inure to the benefit of the Owner Trust upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and no prior holder of the related Mortgage,
including the originator, has done, by act or omission, anything that would
impair the coverage of such mortgage title insurance policy;
(o) Hazard Insurance. The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire and extended coverage representing
coverage not less than the least of (1) the outstanding principal balance of the
related Mortgage, (2) the minimum amount required to compensate for damage or
loss on a replacement cost basis or (3) the full insurable value of the
Mortgaged Property. All individual insurance policies (collectively, the "Hazard
insurance policy") are the valid and binding obligation of the insurer and
contain a standard mortgagee clause naming the originator, its successors and
assigns, as mortgagee. All premiums thereon have been paid. The Mortgage
obligated the Obligor thereunder to maintain all such insurance at the Obligor's
cost and expense, and upon the Obligor's failure to do so, authorizes the holder
of the Mortgage to obtain and maintain such insurance at the Obligor's cost and
expense and to seek reimbursement therefor from the Obligor;
(p) Flood Insurance. If any Mortgaged Property is in an area identified
in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A) the
outstanding principal balance of the related Home Loan, (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the National Flood Insurance
Act of 1968, as amended; The Mortgage obligated the Obligor thereunder to
maintain all such insurance at the Obligor's cost and expense, and upon the
Obligor's failure to do so, authorizes the holder of the Mortgage to obtain and
maintain such insurance at the Obligor's cost
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and expense and to seek reimbursement therefor from the Obligor;
(q) Enforceability. Each Mortgage and Debt Instrument is genuine and is
the legal, valid and binding obligation of the maker thereof and is enforceable
in accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law), and all parties to each Home Loan had full legal capacity to execute
all Home Loan documents and convey the estate therein purported to be conveyed
and the Mortgage and Debt Instrument have been duly and properly executed by
such parties; the Obligor is a natural person who is a party to the Debt
Instrument and the Mortgage in an individual capacity and not in the capacity of
a trustee or otherwise.
(r) Notice to Insurers. The Transferor has caused or will cause to be
performed any and all acts required to be performed to preserve the rights and
remedies of 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 Indenture
Trustee;
(s) Geographic Concentration. No more than approximately 0.52% of the
Original Pool Principal Balance is secured by Mortgaged Properties located
within any single zip code area; no more than 5.00% of the Original Pool
Principal Balance is located within any single state, except as follows
California, Illinois, Washington, or Utah;
(t) Primary Residence. At least approximately 91.25% of the Original
Pool Principal Balance is secured by Mortgaged Properties that are maintained by
the Obligors as primary residence;
(u) No Modification. The terms of the Debt Instrument and the Mortgage
have not been impaired, altered or modified in any material respect, except by a
written instrument which has been recorded or is in the process of being
recorded, if necessary, to protect the interest of the Securityholders and which
has been or will be delivered to the Trustee or the Custodian. The substance of
any such alteration or modification is reflected on the Home Loan Schedule.
(v) Recordation. Each original Mortgage was recorded, and all
subsequent assignments of the original Mortgage have been recorded in the
appropriate jurisdictions wherein such recordation is necessary to perfect the
lien thereof as against creditors of the Transferor (or, subject to Section
2.04(d) hereof, are in the process of being recorded);
(w) No Waiver. No instrument or release or waiver has been executed
in connection with the Home Loan, and no Obligor has been released, in whole or
in part;
(x) Taxes and Insurance. All taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which
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previously became due and owing have been paid, or an escrow of funds has been
established in an amount sufficient to pay for every such item which remains
unpaid and which has been assessed but is not yet due and payable.
(y) No Advances. Except for payments in the nature of escrow payments,
including without limitation, taxes and insurance payments, the Master Servicer
has not advanced funds, or induced, solicited or knowingly received any advance
of funds by a party other than the Obligor, directly or indirectly, for the
payment of any amount required by the Mortgage, except for interest accruing
from the date of the Debt Instrument or date of disbursement of the Mortgage
proceeds, whichever is greater, to the day which precedes by one month the Due
Date of the first installment of principal and interest;
(z) Condemnation; Damage. There is no proceeding pending or threatened
for the total or partial condemnation of the Mortgaged Property, nor is such a
proceeding currently occurring. No Mortgaged Property is damaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado or other casualty, so as
to affect adversely the value of the Mortgaged Property as security for the Home
Loan or the use for which the premises were intended;
(aa) No Encroachments. All of the improvements which were included
for the purpose of determining the appraised value of the Mortgaged Property lie
wholly within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon the Mortgaged
Property;
(bb) Property in Compliance with Law. No improvement located on or
being part of the Mortgaged Property is in violation of any applicable zoning
law or regulation. All inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities and the Mortgaged
Property is lawfully occupied under applicable law;
(cc) No Future Advances. The proceeds of the Home Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee or any person
to make, or option on the part of the mortgagor to request, future advances
thereunder. Any and all requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor have been
satisfied. All costs, fees and expenses incurred in making or closing or
recording the Home Loans were paid;
(dd) Mortgage as Sole Security. The related Debt Instrument is
not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage;
(ee) No-Buy-Down Loans. No Home Loan was originated under a buydown
plan.
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(ff) No Originator Payment Obligations. There is no obligation on the
part of the Master Servicer or any other party to make payments in addition to
those made by the Obligor;
(gg) Deeds of Trust. With respect to each Mortgage constituting 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 such Mortgage,
and no fees or expenses are or will become payable by the Noteholders or the
Trust to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Obligor;
(hh) No Shared Appreciation. No Home Loan has a shared appreciation
feature, or other contingent interest feature;
(ii) State Qualification. All parties which have had any interest in
the Home Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (2)(A) organized under the
laws of such state, or (B) qualified to do business in such state, or (C)
federal savings and loans associations or national banks having principal
offices in such state or (D) not doing business in such state so as to require
qualification or licensing;
(jj) Due on Sale. The Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal balance of the Home Loan in
the event the related Mortgage Property is sold without the prior consent of the
mortgagee thereunder;
(kk) Obligor Bankruptcy. No Obligor is a debtor in any state or
federal insolvency or bankruptcy proceeding.
(ll) Enforcement Rights. The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security, including, (i) in the case of a Mortgage designated as
a deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure.
There is no homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose upon the related Mortgage;
(mm) No Default. Other than delinquent Home Loans set forth in clause
(i) of this Section 3.04, there is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Debt Instrument and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration; and neither the Master Servicer nor the Transferor has waived any
default, breach, violation or event of acceleration;
(nn) Deposit of Payments. All amounts received on and after the Cut-Off
Date with respect to the Home Loans to which the Transferor is not entitled to
have been deposited into the Collection Account and are, as of the Closing Date,
in the Collection Account;
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(oo) Underwriting. All of the Home Loans were originated and
underwritten by the Transferor, or purchased and re-underwritten by the
Transferor, in each case in accordance with the underwriting criteria set
forth in the Prospectus Supplement;
(pp) Conformity to Prospectus. Each Home Loan conforms, and all
such Home Loans in the aggregate conform, to the description thereof set forth
in the Prospectus and the Prospectus Supplement;
(qq) No Adverse Selection. The Home Loans were not selected by
the Transferor for inclusion in the Trust on any basis intended to adversely
affect the Trust;
(rr) Appraisal. A full appraisal on forms approved by FNMA or FHLMC was
performed in connection with the origination of the related Home Loan. Each
appraisal meets guidelines that would be generally acceptable to prudent
mortgage lenders that regularly originate or purchase mortgage loans comparable
to the Home Loan for sale to prudent investors in the secondary market that
invest in loans such as the Home Loans;
(ss) Loan-To-Value. As of the Cut-Off Date, no Home Loan had a
Loan-To-Value Ratio in excess of 90.00% and as of the Cut-off Date, the
weighted average Loan-To-Value Ratio is 77.00%;
(tt) Environmental Matters. To the best of the Transferor's knowledge,
(i) no Mortgaged Property was, as of the Cut-Off Date, (A) located within a
one-mile radius of any site containing environmental or hazardous waste risks,
and (B) in violation of any environmental law or regulation; and (ii) no
Mortgaged Property contained any environmentally hazardous material, substance
or waste; and
(uu) Status of Originators. Each Home Loan was either (i) originated by
a savings and loan association, savings bank, commercial bank, credit union,
insurance company, or similar institution which is supervised and examined by a
federal or state authority, or by a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act or (ii) such Home Loan was underwritten in accordance with standards
established by the Transferor, using application forms and related credit
documents approved by the Transferor; the Transferor approved each application
and the related credit documents before a commitment by the originator was
issued, and no such commitment was issued until the Transferor agreed to fund
such Home Loan; the closing documents for such Home Loan were prepared on forms
approved by the Transferor; and such Home Loan was actually funded by the
Transferor and was purchased by the Transferor at closing or soon thereafter.
(vv) Term. No Home Loan has a remaining term in excess of 360 months.
(ww) Monthly Payments. Each Debt Instrument will provide for a schedule
of substantially equal Monthly Payments which are, if timely made, sufficient to
fully amortize the principal balance of such Debt Instrument on or before its
maturity date.
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Section 3.05. Purchase and Substitution.
(a) Repurchase and Substitution of Defective Home Loans. It is
understood and agreed that the representations and warranties set forth in
Section 3.02 and Section 3.04 hereof shall survive the conveyance of the Home
Loans from the Transferor to the Depositor and from the Depositor to the Issuer,
the pledge of the Home Loans to the Indenture Trustee and the delivery of the
Notes to the Noteholders. Upon discovery by the Depositor, the Master Servicer,
the Servicer, the Transferor, any Custodian, the Issuer, the Indenture Trustee,
the Owner Trustee, the Securities Insurer or any Securityholder of a breach of
any of the representations and warranties set forth in Section 3.02 and Section
3.04 which materially and adversely affects the value of the Home Loans or the
interests of the Owner Trustee, the Securities Insurer or the Indenture Trustee
in the related Home Loan (notwithstanding that such representation and warranty
was made to the Transferor's best knowledge), the party discovering such breach
shall give prompt written notice to the others. The Transferor shall, within 60
days of the earlier of its discovery or its receipt of notice of any breach of a
representation or warranty, promptly cure such breach in all material respects.
If within 60 days after the earlier of the Transferor's discovery of such breach
or the Transferor's receiving notice thereof such breach has not been remedied
by the Transferor or waived by the Securities Insurer and such breach materially
and adversely affects the interests of the Owner Trustee or the Indenture
Trustee in, or the value of, the related Home Loan (the "Defective Home Loan"),
the Transferor shall on or before the Determination Date next succeeding the end
of such 60-day period either (i) remove such Defective Home Loan from the Trust
(in which case it shall become a Deleted Home Loan) and substitute one or more
Qualified Substitute Home Loans in the manner and subject to the conditions set
forth in this Section 3.05 or (ii) purchase such Defective Home Loan at a
purchase price equal to the Purchase Price by depositing such Purchase Price in
the Collection Account. The Transferor shall provide the Master Servicer, the
Servicer, the Indenture Trustee, the Securities Insurer and the Owner Trustee
with a certification of a Responsible Officer on the Determination Date next
succeeding the end of such 60-day period indicating whether the Transferor is
purchasing the Defective Home Loan or substituting in lieu of such Defective
Home Loan a Qualified Substitute Home Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall
be accompanied by payment by the Transferor of the Substitution Adjustment, if
any, to be deposited in the Collection Account. For purposes of calculating the
Available Collection Amount for any Payment Date, amounts paid by the Transferor
pursuant to this Section 3.05 in connection with the repurchase or substitution
of any Defective Home Loan that are on deposit in the Collection Account as of
the Determination Date for such Payment Date shall be deemed to have been paid
during the related Due Period and shall be transferred to the Note Payment
Account as part of the Available Collection Amount to be retained therein or
transferred to the Certificate Distribution Account, if applicable, pursuant to
Section 5.01(c) hereof.
In addition to such cure, repurchase or substitution obligation, the
Transferor shall indemnify the Issuer, the Depositor, the Master Servicer, the
Indenture Trustee, the Securities Insurer and the Securityholders against any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded upon, or resulting
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from, a breach by the Transferor of any of it representations and warranties
contained in Section 3.02 and Section 3.04.
(b) Repurchase of Defaulted Home Loans. In addition to the preceding
repurchase obligations, each of the Transferor and Master Servicer shall have
the option, exercisable in its sole discretion at any time, to repurchase from
the Owner Trustee any Home Loan that is delinquent 91 or more days (in which
case such Home Loan shall become a Deleted Home Loan); provided, however, that
any such repurchase of a Home Loan pursuant to this Subsection shall be
conducted in the same manner as the repurchase of a Defective Home Loan pursuant
to this Section 3.05. If the Home Loans repurchased pursuant to this Subsection
3.05(b) are in excess of 3.00% of the Original Pool Principal Balance, then such
repurchases of Home Loans that exceed 3.00% of the Original Pool Principal
Balance may be affected only with the consent of the Securities Insurer and
shall be included as Realized Losses for purposes of determining the Realized
Losses under the OC Trigger Increase Event (but not with respect to the
determination of a Master Servicer Event of Default under Section 10.01(a)
hereof).
(c) Substitutions. As to any Deleted Home Loan for which the Transferor
substitutes a Qualified Substitute Home Loan(s), the Transferor shall effect
such substitution by delivering to the Indenture Trustee, the Master Servicer
and Owner Trustee (i) a certification executed by a Responsible Officer of the
Transferor to the effect that the Substitution Adjustment has been credited to
the Collection Account and (ii) the documents constituting the Indenture
Trustee's Home Loan File for such Qualified Substitute Home Loan(s).
In accordance with Section 5.01(b)(1) hereof, the Master Servicer shall
cause the Servicer to deposit in the Collection Account all payments received in
connection with such Qualified Substitute Home Loan(s) after the date of such
substitution. Monthly Payments received with respect to Qualified Substitute
Home Loans on or before the date of substitution will be retained by the
Transferor. The Indenture Trustee will be entitled to all payments received on
the Deleted Home Loan on or before the date of substitution and the Transferor
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Home Loan. The Transferor shall give written notice to
the Owner Trustee, the Master Servicer, the Servicer (if the Transferor is not
then acting as such), the Indenture Trustee, the Securities Insurer and Owner
Trustee that such substitution has taken place and the Servicer shall amend the
Home Loan Schedule pursuant to Subsection (g) below. Upon such substitution,
such Qualified Substitute Home Loan(s) shall be subject to the terms of this
Agreement in all respects, and the Transferor shall be deemed to have made with
respect to such Qualified Substitute Home Loan(s), as of the date of
substitution, the covenants, representations and warranties set forth in Section
3.02 and Section 3.04 hereof. On the date of such substitution, the Transferor
will deposit into the Collection Account an amount equal to the related
Substitution Adjustment, if any.
(d) Reassignment of Defective Home Loans. With respect to all Defective
Home Loans or other Home Loans repurchased by the Transferor pursuant to this
Agreement, upon the deposit of the Purchase Price therefor into the Collection
Account, the Owner Trustee shall assign to the Transferor, without recourse,
representation or warranty, all the Owner Trustee's right, title and interest in
and to such Defective Home Loans or other Home Loans, which right, title and
interest were conveyed to the Owner Trustee pursuant to the Home Loan
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Purchase Agreement. The Owner Trustee shall take any actions as shall be
reasonably requested by the Transferor to effect the repurchase of any such Home
Loans.
(e) Sole Remedies Against Transferor. It is understood and agreed that
the obligations of the Transferor to cure or to repurchase or substitute any
such Home Loan, and to indemnify for any breach of any representation or
warranty with respect thereto, pursuant to this Section 3.05 shall constitute
the sole remedies against it with respect to such breach of the foregoing
representations or warranties or the existence of the foregoing conditions. Any
cause of action against the Transferor relating to or arising out of a defect in
an Indenture Trustee's Home Loan File as or against the Transferor relating to
or arising out of a breach of any representations and warranties made in Section
3.02 and Section 3.04 hereof shall accrue as to any Home Loan upon (i) discovery
of such defect or breach by any party and notice thereof to the Transferor or
notice thereof by the Transferor to the Indenture Trustee, (ii) failure by the
Transferor to cure such defect or breach or purchase or substitute such Home
Loan as specified above, and (iii) demand upon the Transferor, as applicable, by
the Owner Trustee for all amounts payable in respect of such Home Loan.
(f) No Duty to Investigate. Neither the Securities Insurer, the Master
Servicer, the Owner Trustee nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase or
substitution of any Home Loan pursuant to this Section or the eligibility of any
Home Loan for purposes of this Agreement.
(g) Amendment of Home Loan Schedule. In connection with a repurchase or
substitution of any Home Loan pursuant to this Section 3.05, the Master Servicer
shall cause the Servicer shall amend the Home Loan Schedule to reflect (i) the
removal of the applicable Deleted Home Loan from the terms of this Agreement,
and (ii) if applicable, the substitution of the applicable Qualified Substitute
Home Loan. In connection with its monthly reporting here under, the Master
Servicer shall cause the Servicer shall deliver a copy of the amended Home Loan
Schedule to the Securities Insurer, the Master Servicer, the Indenture Trustee,
and the Transferor.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01. Appointment and Duties of the Master Servicer.
(a) Appointment and Compensation of Master Servicer. The Issuer, the
Securityholders and the Indenture Trustee hereby assign and appoint the Master
Servicer to act as the Master Servicer for the Home Loans (including all of the
duties, obligations and rights of the Master Servicer) under this Agreement. The
Master Servicer hereby accepts its appointment as the Master Servicer hereunder.
The Master Servicer hereby undertakes to enter into the Servicing Agreement with
the Servicer. The Master Servicer may remove and replace the Servicer under the
terms of the Servicing Agreement, provided that the Securities Insurer consents
to such termination and such Servicer is replaced with an Eligible Servicer. The
Master Servicer shall not consent to any amendment or modification of any
Servicing Agreement
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without the consent of the Securities Insurer. The Master
Servicer shall not consent to any material amendment, modification or waiver of
the servicing provisions of this Agreement, without the consent of the
Securities Insurer and the Indenture Trustee. The Issuer, the Securityholders
and the Indenture Trustee hereby assign and appoint the Master Servicer to act
on behalf of the Issuer as "Owner" under the Servicing Agreement.
As compensation for its services hereunder, the Master Servicer shall
be entitled to receive from the Note Payment Account the Master Servicer Fee. In
addition to the Master Servicer Fee, additional compensation attributable to
prepayment penalties, 20% of any late charges collected on the Home Loans,
investment earnings from the Collection Account and the Note Payment Account
shall be part of the Master Servicer Compensation payable to the Master Servicer
pursuant to Section 5.01(c) hereof. Master Servicing Compensation shall be
reduced by the amount of any due and unpaid Servicing Fee Recovery Amounts. The
Master Servicer shall be required to pay all expenses incurred by it in
connection with its Master Servicer duties and activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided for
herein.
(b) Master Servicer Assumes Servicing Responsibility. If a Servicer
Termination Event occurs, then the Master Servicer shall be obligated (1) if
instructed by the Securities Insurer, to select a successor Servicer, that is
acceptable to the Securities Insurer, or (2) to act as the Servicer of the Home
Loans hereunder unless the Securities Insurer directs otherwise.
(c) Monitoring of Servicing. The Master Servicer shall: (i) review the
servicing reports and loan level information prepared by the Servicer (1) to
determine whether such reports are inaccurate or incomplete, in any material
respect, and (2) to ascertain that the Servicer is in compliance, in all
material respects, with its duties and obligations with respect to such reports
under this Agreement; (ii) otherwise monitor the performance by the Servicer of
its duties and obligations hereunder and notify the Indenture Trustee and the
Securities Insurer of any Servicer Event of Default of which it has received
notice or has actual knowledge; and (iii) be obligated to verify that the
Servicer has deposited all payments and proceeds required to be deposited into
the Collection Account pursuant to Section 5.01(b)(1) hereof. On the 19th
calendar day of each month (or the next Business Day, if the 19th is not a
Business Day), the Master Servicer shall provide the Indenture Trustee with an
Officer's Certificate to the effect that the Master Servicer has performed its
obligations under this Subsection 4.01(c) with respect to the servicing
information for such month.
(d) Successor Servicer. The Master Servicer agrees that it shall at all
times be prepared (and shall take all steps reasonably required by the
Securities Insurer to ensure such preparation), to perform the duties and
obligations of the Servicer and become the successor servicer, if the Servicer
fails to perform its duties and obligations hereunder.
(e) Servicer Termination or Non-Renewal. At the direction of the
Securities Insurer or the Majority Noteholders (with the prior consent of the
Securities Insurer), the Master Servicer, on behalf of the Issuer and the
Securityholders, shall terminate the Servicer upon the occurrence and
continuance of a Servicer Event of Default. The Master Servicer may, with the
prior consent of the Securities Insurer, on behalf of the Issuer and the
Securityholders, terminate
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the Servicer upon the occurrence and continuance of a
Servicer Event of Default. The renewal or non-renewal of the Servicer's term
shall be governed by the terms of the Servicing Agreement.
(f) Resignation of Master Servicer. The Master Servicer shall resign as
Master Servicer hereunder if it determines that its duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it and cannot be cured,
provided that such determination shall be evidenced by an Opinion of Counsel
(which shall be Independent) to such effect delivered to the Owner Trustee, the
Indenture Trustee and the Securities Insurer. In addition, the Master Servicer
may resign for any reason with 30 day's prior written notice to the Owner
Trustee, the Indenture Trustee and the Securities Insurer. No resignation of the
Master Servicer shall become effective until a successor master servicer
acceptable to the Securities Insurer shall have assumed the obligations of the
Master Servicer hereunder.
(g) Limitation on Liability of Master Servicer. Except as set forth in
Section 9.01 herein, neither the Master Servicer nor any of the directors,
officers, employees or agents of the Master Servicer shall be under any
liability to the Owner Trustee, the Indenture Trustee, the Servicer, the
Securities Insurer, the Noteholders or any other Person for any action taken or
for refraining from the taking of any action at the direction of the Securities
Insurer or 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 liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in its
performance of its duties or by reason of non-performance of its express
non-discretionary obligations and duties under this Agreement. The Master
Servicer and any directors, officer, employee or agent of the Master Servicer
may rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising hereunder.
(h) Monthly Advances. If any Obligor fails to make all or any portion
of its Monthly Payment for any Due Period by the related Determination Date, the
Master Servicer shall deposit such shortfall (net of the Servicing Fee and the
Master Servicer Fee in respect thereof) into the Collection Account on or before
such Determination Date, unless the Master Servicer, in its reasonable judgment,
determines that any such Monthly Advance would be non-recoverable from future
proceeds from the related Home Loan. The Indenture Trustee shall make any
Monthly Advance that the Master Servicer fails to make, unless the Indenture
Trustee, in its reasonable judgement, determines that any such Monthly Advance
would be non-recoverable from future proceeds from the related Home Loan. The
Indenture Trustee shall be reimbursed for funds so advanced as provided in this
Agreement and the Indenture with respect to reimbursement of Monthly Advances.
(i) Three Month Renewal of Master Servicer Term. The Master Servicer
hereby covenants and agrees to act as master servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on June 30, 1999
(the "Initial Term"). Thereafter, the Initial Term shall be extendible in the
sole discretion of the Securities Insurer by written notice (each, a "Master
Servicer Renewal Notice") of the Securities Insurer (or the Indenture Trustee if
a Securities Insurer Default is then occurring) for successive three month
terms. Each
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such Master Servicer Renewal Notice (if any) shall be delivered by the
Securities Insurer to the other parties to this Agreement. The Master Servicer
hereby agrees that, as of the date hereof and upon its receipt of any Master
Servicer Renewal Notice, the Master Servicer shall be bound for the duration of
the Initial Term and the term covered by any such Master Servicer Renewal Notice
to act as the Master Servicer, subject to and in accordance with the other
provisions of this Agreement. The Master Servicer agrees that if, as of the last
day of the calendar month preceding the last day of any such servicing term, the
Master Servicer shall not have received a Master Servicer Renewal Notice from
the Securities Insurer, the Master Servicer shall, within five days thereafter,
give written notice of such non-receipt to the Securities Insurer and the
Indenture Trustee. The failure of the Securities Insurer to deliver a Master
Servicer Renewable Notice by the end of any such three-month term shall result
in the automatic termination of the Master Servicer.
(j) Non-renewal or Termination. Upon any non-renewal or termination of
the Master Servicer pursuant to this Section 4.01, the master servicing of the
Home Loans hereunder shall be transferred to a successor master servicer in
accordance with the terms hereof.
(k) Compensating Interest. If Compensating Interest is owing with
respect to such Payment Date, then the Master Servicer shall cause the Servicer
to direct Compensating Interest, up to the amount of the sum of the Master
Servicer Fee and the Servicing Fee for such Payment Date, into the Collection
Account on or before the related Determination Date. The Master Servicer shall
fund the payment of Compensating Interest on any Payment Date first out of its
Master Servicer Compensation for the related Payment Date, and if and only if
such amount is not sufficient, shall cause any remaining amounts to be paid out
of the Servicing Fee for the related Payment Date. Any Servicing Fees used to
pay Compensating Interest hereunder shall be repaid to the Servicer through the
payment of Servicing Fee Recovery Amounts.
Section 4.02. Interim Servicer.
Until the transfer of servicing to the initial Servicer on the
"servicing transfer date" as specified in the Servicing Agreement, the Master
Servicer agrees, and the Issuer, Securityholders, the Security Insurer and the
Indenture Trustee hereby assign and appoint the Master Servicer as the Servicer
of the Home Loans. The Master Servicer shall be obligated to act as the Servicer
of the Home Loans and agrees to service the Home Loans in accordance with
Accepted Servicing Procedures until the transfer of servicing to the Servicer.
During the period in which the Master Servicer is acting as servicer, it shall
be entitled to any Servicing Fee earned during such period.
Section 4.03. Powers of Attorney.
The Indenture Trustee shall execute, at the written direction of the
Servicer or the Master Servicer, any limited or special powers of attorney and
other documents reasonably acceptable to the Indenture Trustee to enable the
Servicer or the Master Servicer to carry out their servicing and administrative
duties hereunder, including, without limitation, limited or special powers of
attorney with respect to any Foreclosure Property, and the Indenture Trustee
shall not be accountable for the actions of the Servicer or the Master Servicer
under such powers
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of attorney and shall be indemnified by the Master Servicer in accordance with
Section 9.01 hereof.
Section 4.04. Filing of Continuation Statements.
On or before the fifth (or twelfth, as appropriate) anniversary of the
filing of any financing statements by the Transferor and the Depositor,
respectively, with respect to the assets conveyed to the Owner Trustee or to the
Owner Trust, the Transferor and the Depositor shall prepare, have executed by
the necessary parties and file in the proper jurisdictions at their expense 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 the Transferor and the Depositor, respectively, the Transferor and
the Depositor shall continue to file on or before each fifth (or twelfth)
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 Owner Trust Agreement. The Indenture Trustee and
Owner Trustee agree to cooperate with the Transferor and the Depositor in
preparing, executing and filing such statements. The filing of any such
statement with respect to the Transferor 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 2.03 hereof and Section 2.04 of the Home Loan
Purchase Agreement. If the Transferor or the Depositor has ceased to do business
whenever any such financing and continuation statements must be filed or the
Transferor or the Depositor fails to file any such financing statements or
continuation statements at least one month prior to the expiration thereof, each
of the Transferor and the Depositor does hereby make, constitute and appoint the
Owner Trustee its attorney-in-fact, with full power and authority, to execute
and file in its name and on its behalf any such financing statements or
continuation statements required under this Section 4.04 relating to assets
conveyed to the Owner Trustee and the Depositor does hereby make, constitute and
appoint the Indenture Trustee its attorney-in-fact, with full power and
authority, to execute and file in its name and on its behalf any such financing
statements or continuation statements required under this Section 4.04 relating
to assets conveyed to the Owner Trust.
Section 4.05. Reports to the Securities and Exchange Commission.
The Indenture Trustee shall, on behalf of the Issuer, cause to be filed
with the Securities and Exchange Commission all monthly reports on Form 8-K and
annual reports on Form 10-K by ▇▇▇▇▇ electronic format (or any successor format)
required to be filed under the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder. The Indenture Trustee shall obtain on behalf of the
Issuer, ▇▇▇▇▇ access codes (or any successor codes) on behalf of the Issuer
required for filing with the Securities and Exchange Commission. Upon the
request of the Indenture Trustee, each of the Servicer, the Master Servicer and
the Transferor shall cooperate with the Indenture Trustee in the preparation of
any such report and shall provide to the Indenture Trustee in a timely manner
all such information or documentation as the Indenture Trustee may reasonably
request in connection with the performance of its duties and obligations under
this Section 4.05.
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ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account and Note Payment Account.
(a) (1) Establishment of Collection Account. The Master Servicer,
for the benefit of the Securityholders, the Indenture Trustee and the Securities
Insurer, shall cause to be established and maintained by the Indenture Trustee
one or more Collection Accounts (collectively, the "Collection Account"), which
shall be separate Eligible Accounts and may be interest-bearing, and which shall
be entitled "Collection Account of First Union National Bank, as Indenture
Trustee, in trust for the Fremont Home Loan Asset Backed Notes, Series 1999-1".
The Collection Account may be maintained with the Indenture Trustee or any other
depository institution, which satisfies the requirements set forth in the
definition of Eligible Account. The creation of any Collection Account other
than one maintained with the Indenture Trustee shall be evidenced by a letter
agreement between the Servicer and the depository institution acceptable to the
Indenture Trustee and the Securities Insurer. A copy of such letter agreement
shall be furnished to the Securities Insurer and the Indenture Trustee. Funds in
the Collection Account shall be invested in accordance with Section 5.03 hereof.
The Collection Account shall be established, as of the Closing Date,
with First Union National Bank as an Eligible Account pursuant to the definition
thereof. The Collection Account may, upon written notice to the Indenture
Trustee, and upon the written consent of the Securities Insurer, be transferred
to a different depository institution so long as such transfer is to an Eligible
Account acceptable to the Securities Insurer.
(2) Establishment of Note Payment Account. No later than
the Closing Date, the Indenture Trustee, for the benefit of the Noteholders and
the Securities Insurer, shall cause to be established and maintained with the
Indenture Trustee one or more Note Payment Accounts (collectively, the "Note
Payment Account"), which shall be separate Eligible Accounts and may be
interest-bearing, and which shall be entitled "Note Payment Account of First
Union National Bank, as Indenture Trustee, in trust for the Fremont Home Loan
Asset Backed Notes, Series 1999-1". Funds in the Note Payment Account shall be
invested in accordance with Section 5.03 hereof.
(b) (1) Deposits to Collection Account. The Servicer shall use its
best efforts to deposit or cause to be deposited (without duplication), within
one (1) Business Day after receipt thereof, into the Collection Account and
retain therein in trust for the benefit of the Noteholders and the Securities
Insurer:
(i) all payments of principal and interest on the Home
Loans due after the Cut-Off Date;
(ii) all Net Liquidation Proceeds;
(iii) all Property Insurance Proceeds;
(iv) all Released Mortgaged Property Proceeds;
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(v) any amounts payable in connection with the repurchase
of any Home Loan and the amount of any Substitution Adjustment pursuant to
Section 3.05 hereof;
(vi) the deposit of the Termination Price under
Section 11.01 hereof;
(vii) interest and gains on funds held in the Collection
Account;
(viii) Monthly Advances pursuant to Section 4.02(h)
hereof; and
(ix) Compensating Interest pursuant to Section 4.02 (k)
hereof.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03 hereof.
(2) Deposits to Note Payment Account. By the close of
business on the fourth Business Day prior to each Payment Date, the Master
Servicer shall cause the Servicer to withdraw from the Collection Account the
Available Collection Amount and deposit such into the Note Payment Account for
such Payment Date.
(3) Withdrawals from Collection Account. The Master
Servicer shall cause the Servicer to also make the following withdrawals from
the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited
in the Collection Account or deposited therein in error;
(ii) to withdraw any Servicing Advance Reimbursement
Amounts and Monthly Advance Reimbursement Amounts; and
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement.
(c) Initial Withdrawals from Note Payment Account. To the extent funds
are available in the Note Payment Account, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Payment Date) shall make withdrawals therefrom by
9:00 a.m. (New York City time) on each Payment Date, for application in the
following order of priority:
(i) to distribute on such Payment Date the following amounts
related to such Payment Date pursuant to the Indenture in the following order;
(1) to the Indenture Trustee, an amount equal to the Indenture Trustee Fee and
all unpaid Indenture Trustee Fees from prior Payment Dates; (2) to the Servicer
an amount equal to the Servicing Compensation (net of the sum of any amounts
retained prior to deposit into the Collection Account pursuant to subsection
(b)(1) above) and all unpaid Servicing Compensation from prior Payment Dates;
(3) to the Master Servicer an amount equal to the Master Servicer Compensation
and all unpaid Master Servicer Compensation from prior Payment Dates; and (4) to
the Securities Insurer, an amount equal to the Guaranty
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Insurance Premium and all unpaid Guaranty Insurance Premiums from prior Payment
Dates; and
(ii) subject to the priority of payments in Subsections
5.01(d) and (e) below, to deposit into the Certificate Distribution Account the
applicable portions of the Available Payment Amount payable to the holders of
the Residual Interest Certificates as calculated pursuant to Subsection 5.01(e)
below on such Payment Date.
(d) Regular Payment Amount Withdrawals from Note Payment Account. On
each Payment Date, the Indenture Trustee (based on the information provided by
the Servicer contained in the Servicer's Monthly Remittance Report for such
Payment Date) shall distribute the Regular Payment Amount and any Deficiency
Amount paid by the Securities Insurer in respect of such Payment Date from the
Note Payment Account (in the case of all amounts distributable to Noteholders)
and from the Certificate Distribution Account (in the case of all amounts
distributable to Certificateholders), in the following order of priority:
(i) to pay the holders of the Notes the Noteholders'
Interest Payment Amount for such Payment Date;
(ii) to pay the holders of the Notes principal thereof in
an amount up to the sum of the Regular Principal Payment Amount and the
Noteholders' Principal Deficiency Amount, until the Note Principal Balances
thereof are reduced to zero;
(iii) to apply any remaining amount together with Excess
Spread in the manner specified in Subsection (e) below.
(e) Excess Spread Withdrawals from Note Payment Account. On each
Payment Date, the Indenture Trustee (based on the information provided by the
Servicer contained in the Servicer's Monthly Remittance Report for such Payment
Date) shall distribute the Excess Spread, if any, in the following order of
priority (in each case after giving effect to all payments specified in Section
5.01(d) hereof):
(i) to pay the Securities Insurer in an amount up to
the Securities Insurer Reimbursement Amount;
(ii) to pay the holders of the Notes, as principal
thereof, any remaining Excess Spread in an amount up to any
Overcollateralization Deficiency Amount (after giving effect to payments made
pursuant to subsection (d) above), until the Note Principal Balances thereof are
reduced to zero;
(iii) to pay the holder of the Notes, pro rata, the
Noteholders' Interest Carry-Forward Amount due and unpaid, if any; and
(iv) to pay any remaining Excess Spread (A) first,
concurrently to the Servicer in an amount equal to any outstanding
Nonrecoverable Servicing Advances and to the Master Servicer in an amount equal
to any outstanding Nonrecoverable Monthly Advances, (B) second, to repay the
Servicer the Servicing Fee Recovery Amount, if any and (C) then, for deposit
into the Certificate Distribution Account for payment to the
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holders of the
Residual Interest Certificates any amount remaining after the preceding clauses
(A) and (B).
(f) All payments made on the Notes on each Payment Date will be made on
a pro rata basis among the Noteholders of record of such Notes on the next
preceding Record Date, without preference or priority of any kind, and, except
as otherwise provided in the next 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 in original Denominations aggregating at
least $250,000 and shall have so notified the Indenture Trustee, and otherwise
by check mailed to the address of such Noteholder appearing in the Notes
Register. The final payment 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 payment.
Section 5.01A. Claims Under Guaranty Policy.
(a) If, on the second Business Day prior to the related Payment Date a
Deficiency Amount exists, the Indenture Trustee shall give notice to the
Securities Insurer in the form of Exhibit A to the Guaranty Policy and to its
direction by registered mail, personal delivery or telecopy of the amount of
such deficiency by 12:00 noon, New York City time, on such Business Day.
(b) At the time of the execution and delivery of this Agreement, and
for the purposes of this Agreement, the Indenture Trustee shall establish a
separate special purpose trust account for the benefit of the Noteholders called
the "Policy Payments Account" and over which the Indenture Trustee shall have
exclusive control and sole right of withdrawal. The Indenture Trustee shall
deposit any amount paid under the Guaranty Policy in the Policy Payments Account
and distribute such amount only for purposes of making the Insured Payments for
which a claim was made. Such amounts shall be disbursed by the Indenture Trustee
to Noteholders in the same manner as principal and interest payments are to be
made with respect to the Notes under Sections regarding payment of Notes hereof.
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the check or wire transfer used to pay Insured Payments
with other funds available to make such payments. However, the amount of any
payment of principal of or interest on the Notes to be paid from the Policy
Payments Account shall be noted as provided in (d) below in the Payment
Statement to be furnished to Noteholders. Funds held in the Policy Payments
Account shall not be invested by the Indenture Trustee.
(c) Any funds received by the Indenture Trustee as a result of any
claim under the Guaranty Policy shall be applied by the Indenture Trustee,
subject to Section 3.03 of the Indenture, together with the funds, if any, to be
withdrawn from the Note Payment Account, directly to the payment in full of the
Insured Payments due on the Notes (including Notes held for the Indenture
Trustee's own account). Funds received by the Indenture Trustee as a result of
any claim under the Guaranty Policy shall be deposited by the Indenture Trustee
in the Policy Payments Account and used solely for payment to the Noteholders
and may not be applied to satisfy any costs, expenses or liabilities of the
Indenture Trustee. Any funds remaining in the Policy Payments Account following
a Payment Date shall promptly be remitted to the Securities Insurer except for
funds held for the payment of Noteholders pursuant to Section 3.03 of the
Indenture.
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(d) The Indenture Trustee shall keep a complete and accurate record of
all funds deposited by the Securities Insurer into the Policy Payments Account
and the allocation of such funds to payment of interest on and principal paid in
respect of any Note. The Securities Insurer shall have the right to inspect such
records at reasonable times upon one Business Day's prior notice to the
Indenture Trustee.
(e) Subject to and conditioned upon payment of any interest or
principal with respect to the Notes by or on behalf of the Securities Insurer,
the Indenture Trustee shall assign to the Securities Insurer all rights to the
payment of interest or principal on the Notes which are then due to the extent
of all payments made by the Securities Insurer and the Securities Insurer may
exercise any option, vote, right, power or the like with respect to the Notes to
the extent it has made a principal payment pursuant to the Guaranty Policy. The
Indenture Trustee agrees that the Securities Insurer shall be subrogated to all
of the rights to payment of the Noteholders or in relation thereto to the extent
that any payment of principal or interest was made to such Holders with payments
made under the Guaranty Policy by the Securities Insurer.
(f) In the event that the Indenture Trustee has received a certified
copy of an order of the appropriate court that any scheduled payment of
principal of or interest on a Note has been voided in whole or in part as a
Preference Amount, the Indenture Trustee shall so notify the Securities Insurer,
shall comply with the provisions of the Guaranty Policy to obtain payment by the
Securities Insurer of such voided scheduled payment, and shall, at the time it
provides notice to the Securities Insurer, notify, by mail to Noteholders that,
in the event that any Noteholder's scheduled payment is so recovered, such
Noteholders will be entitled to payment pursuant to the terms of the Guaranty
Policy, a copy of which shall be made available through the Indenture Trustee,
the Securities Insurer or the fiscal agent, if any, and the Indenture Trustee
shall furnish to the Securities Insurer or its fiscal agent, if any, its records
evidencing the payments of principal of and interest on the Notes, if any, which
have been made by the Indenture Trustee and subsequently recovered from
Noteholders, and the dates on which such payments were made.
(g) The Indenture Trustee shall promptly notify the Securities Insurer
of either of the following as to which it has actual knowledge: (i) the
commencement of any proceeding by or against the Depositor or the Issuer
commenced under the United States Bankruptcy Code or any other applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (an
"Insolvency Proceeding") and (ii) the making of any claim in connection with any
Insolvency Proceeding seeking the avoidance as a preferential transfer (a
"Preference Claim") of any payment of principal of, or interest on, the Notes.
Each Noteholder, by its purchase of Notes, and the Indenture Trustee hereby
agree that, so long as a Securities Insurer Default shall not have occurred and
be continuing, the Securities Insurer may at any time during the continuation of
any Insolvency Proceeding direct all matters relating to such Insolvency
Proceeding, including, without limitation, (i) all matters relating to any
Preference Claim, (ii) the direction of any appeal of any order relating to any
Preference Claim at the expense of the Securities Insurer but subject to
reimbursement as provided in the Insurance Agreement and (iii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In
addition, and without limitation
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of the foregoing, as set forth (i) hereinbelow, the Securities Insurer shall be
subrogated to, and each Noteholder and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law the rights of the Indenture
Trustee and each Noteholder in the conduct of any Insolvency Proceeding,
including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court under issued in connection with any
such Insolvency Proceeding.
(h) The Indenture Trustee shall furnish to the Securities Insurer or
its fiscal agent its records evidencing the payments of principal of and
interest on the Notes which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made.
(i) Anything herein to the contrary notwithstanding, any payment with
respect to the principal of or interest on the Notes which is made with moneys
received pursuant to the terms of the Guaranty Policy shall not be considered
payment by the Issuer, shall not discharge the Issuer in respect of its
obligation to make such payment and shall not result in the payment of or the
provision for the payment of the principal of or interest on the Notes within
the meaning of Section 4.01 of the Indenture. The Issuer and the Indenture
Trustee acknowledge that without the need for any further action on the part of
the Securities Insurer, the Issuer, or the Indenture Trustee (i) to the extent
the Securities Insurer makes payments, directly or indirectly, on account of
principal of or interest on the Notes to the Noteholders, the Securities Insurer
will be fully subrogated to the rights of such Noteholders to receive such
principal and interest from the Issuer, and (ii) Noteholders shall be paid such
principal and interest in their capacity as Noteholders but only from the
sources and in the manner provided herein for the payment of such principal and
interest.
Section 5.02. Certificate Distribution Account.
(a) Establishment of Certificate Distribution Account. No later than
the Closing Date, the Master Servicer, for the benefit of the
Certificateholders, shall cause to be established and maintained with the
Indenture Trustee for the benefit of the Owner Trustee, on behalf of the Issuer
and the Certificateholders, one or more Certificate Distribution Accounts
(collectively, the "Certificate Distribution Account"), which shall be separate
Eligible Accounts and may be interest-bearing, entitled "Certificate
Distribution Account, First Union National Bank, as Indenture Trustee, in trust
for the Fremont Home Loan Owner Trust Series 1999-1". Funds in the Certificate
Distribution Account shall be invested in accordance with Section 5.03 hereof.
(b) Deposits to and Distributions from Certificate Distribution
Account. On each Payment Date the Indenture Trustee shall withdraw from the Note
Payment Account all amounts required to be deposited into the Certificate
Distribution Account with respect to such Payment Date pursuant to Section
5.01(c)(ii) hereof and, on behalf of the Owner Trustee, shall deposit such
amounts into the Certificate Distribution Account. The Indenture Trustee shall
make payments of all remaining amounts on deposit in the Note Payment Account to
the holders of the Notes to the extent of amounts due and unpaid on the Notes
for principal thereof and interest thereon in accordance with Section 5.01(d)
and (e) hereof. The Indenture Trustee, on behalf of the Owner Trustee, shall
distribute all amounts on deposit in the Certificate
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Distribution Account to the holders of the Residual Interest Certificates. The
Indenture Trustee, on behalf of the Owner Trustee, also shall withdraw from the
Certificate Distribution Account any amount not required to be deposited in the
Certificate Distribution Account or deposited therein in error.
(c) Distributions on the Residual Interest Certificates. All
distributions made on the Residual Interest Certificates on each Payment Date
will be made pro rata among the holders of the Residual Interest Certificates of
record on the next preceding Record Date based on their percentage holdings in
the Residual Interest, without preference or priority of any kind, and, except
as otherwise provided in the next succeeding sentence, shall be made by wire
transfer of immediately available funds to the account of each such holder, if
such holder shall own of record a Residual Interest Certificate in an original
denomination aggregating at least a 50% holding of the Residual Interest and
shall have so notified the Indenture Trustee at least 5 Business Days prior
thereto, and otherwise by check mailed to the address of such Residual Interest
holder appearing in the Certificate Register. The final distribution on each
Residual Interest Certificate will be made in like manner, but only upon
presentment and surrender of such Residual Interest Certificate at the location
specified in the notice to holders of the Residual Interest Certificates of such
final distribution. Any amount distributed to the holders of the Residual
Interest Certificates on any Payment Date shall not be subject to any claim or
interest of holders of the other Notes.
Section 5.03. Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts (or interests
therein) 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. Subject to Sections 5.01 and 5.02 hereof, the Indenture
Trustee shall possess all right, title and interest in and to all funds on
deposit from time to time in the Trust Accounts (other than 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. If, at any time, any Trust Account ceases
to be an Eligible Account, the Indenture Trustee (or the Servicer on its behalf)
shall, within ten Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency and the Securities Insurer 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, the
Securities Insurer 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 shall also be subject to and
established and maintained in accordance with the Owner Trust Agreement. Subject
to rights of the Indenture Trustee, the Noteholders and the Securities Insurer
hereunder and under the Indenture, the Owner Trustee shall possess for the
benefit of the Certificateholders and the Securities Insurer all right, title
and interest 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 Noteholders and the Securities Insurer, the Owner Trustee agrees,
by its acceptance hereof, that such Certificate Distribution Account shall be
subject to the sole and exclusive custody and control of the Owner Trustee for
the benefit of the Issuer and the parties entitled to payments and distributions
therefrom, including, without limitation, the Certificateholders and the
Securities Insurer, and the 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 5.01(c)(ii) hereof shall also be
made for the benefit of the Indenture Trustee (including without limitation with
respect to its duties under the Indenture and this Agreement relating to the
Trust Estate), and the Indenture Trustee (in its capacity as Indenture Trustee)
shall have the right, but not the obligation, to take custody and control of the
Certificate Distribution Account and to cause the distribution of amounts
therefrom in the event that the Owner Trustee fails to distribute such amounts
in accordance with subsections (b) and (c) of Section 5.02.
In accordance with Section 5.01 and 5.02 hereof, the Servicer or the
Master Servicer shall have the power, revocable by the Indenture Trustee or by
the Owner Trustee with the consent of the Indenture Trustee, to instruct the
Indenture Trustee or Owner Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer, the Master Servicer
or the Issuer to carry out their respective duties hereunder or permitting the
Indenture Trustee or Owner Trustee to carry out their respective duties herein
or under the Indenture or the Owner Trust Agreement, as applicable.
(1) Investment of Funds. So long as no Master Servicer
Event of Default shall have occurred and be continuing, the funds held in any
Trust Account may be invested (to the extent practicable) in Permitted
Investments, as directed by the Master Servicer. Any directions for investment
of funds in any Trust Account shall be made in writing or by telephone or
facsimile transmission with confirmation in writing. In any case, funds in any
Trust Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for withdrawal, not
later than the Business Day immediately preceding the Payment Date next
following the date of such investment and shall not be sold or disposed of prior
to its maturity subject to subsection (a)(2) of this Section. 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. All Permitted Investments in which funds in any Trust
Account (other than the Certificate Distribution Account) are invested must be
held by or registered in the name OF First Union National Bank, as Indenture
Trustee, in trust for the Fremont Home Loan Asset Backed Notes, Series 1999-1.
While the Indenture Trustee holds the Certificate Distribution Account, on
behalf of the Owner Trustee, all Permitted Investments in which funds in the
Certificate Distribution Account are
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invested shall be held by or registered in the name First Union National Bank,
on behalf of the Owner Trustee, in trust for the Fremont Home Loan Asset Backed
Notes, Series 1999-1.
(2) Insufficiency and Losses in Trust Accounts. If any
amounts are needed for disbursement from any Trust Account held by or on behalf
of the Indenture Trustee and sufficient uninvested funds are not available to
make such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such Trust
Account. The Indenture Trustee 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, respectively, to perform in
accordance with this Section 5.03 hereof or the Indenture Trustee is the obligor
under the Permitted Investment and has defaulted thereon.
If any losses are realized in connection with any investment in any
Trust Account pursuant to this Agreement and the Indenture, then the Master
Servicer shall deposit the amount of such losses (to the extent not offset by
income from other investments in such Trust Account) into 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 the income of
the Issuer (or, when there is a single beneficial owner of a Residual Interest
Certificate, such owner), and for federal and state income tax purposes the
Issuer (or such single beneficial owner) shall be the owner (or beneficial owner
in the case of the Collection Account).
(b) No Liability for Losses. Subject to Section 6.01 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).
(c) Delivery of Trust Account Property. 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 sole and exclusive dominion, custody and control
of the Indenture Trustee; and, without limitation on the foregoing, the
Indenture Trustee shall have sole signature authority with respect thereto;
(2) any Trust Account Property that constitutes property
within clause (a) of the definition of "Delivery" in Section 1.1 hereof shall be
delivered to and maintained by the Indenture Trustee in accordance with the
definition of "Delivery" in Section 1.1 hereof and shall be held, pending
maturity or disposition, solely by or on behalf of the Indenture Trustee; and
(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 to and maintained by the Indenture Trustee in
accordance with the definition of "Delivery" in Section 1.1 hereof.
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Section 5.04. Allocation of Losses.
In the event that Net Liquidation Proceeds, Property Insurance Proceeds
or Released Mortgaged Property Proceeds on a Liquidated 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 Net
Liquidation Proceeds, Property Insurance Proceeds, Released Mortgaged Property
Proceeds or partial payment shall be applied to payment of the related Debt
Instrument, first, to interest accrued at the Home Loan Interest Rate and, then,
to principal.
ARTICLE VI
STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01. Statements.
(a) No later than each Determination Date, the Master Servicer shall
cause the Servicer to deliver to the Indenture Trustee and the Master Servicer
by facsimile, the receipt and legibility of which shall be confirmed by
telephone, and with hard copy thereof to be delivered no later than one (1)
Business Day after such Determination Date, the Servicer's Monthly Remittance
Report, setting forth the date of such Report (day, month and year), the name of
the Issuer (i.e. "Fremont Home Loan Owner Trust 1999-1"), the Series designation
of the Notes (i.e. "Series 1999-1") and the date of this Agreement, all in
substantially the form set out in Exhibit B hereto. Furthermore, Master Servicer
shall cause the Servicer to deliver to the Master Servicer and the Indenture
Trustee no later than each Determination Date, a magnetic tape or computer disk
providing such information regarding the Servicer's activities in servicing the
Home Loans during the related Due Period as the Indenture Trustee or the Master
Servicer may reasonably require. The Master Servicer shall also cause the
Servicer to deliver any Loan Liquidation Reports pursuant to Section 4.10(a)
hereof.
(b) On each Payment Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Payment
Statement") to the Depositor, the Securities Insurer, the Master Servicer, the
Securityholders and the Rating Agencies, stating the date of original issuance
of the Notes (day, month and year), the name of the Issuer (i.e. "Fremont Home
Loan Owner Trust 1999-1"), the Series designation of the Notes (i.e., "Series
1999-1"), the date of this Agreement and the following information:
(1) the Available Collection Amount, Available Payment
Amount, the Regular Payment Amount and the Excess Spread for the related
Payment Date;
(2) the Note Principal Balance of the Notes before and
after giving effect to payments made to the holders of such Notes on such
Payment Date, and the Pool Principal Balance as of the first and last day of the
related Due Period;
(3) the Note Factor with respect to the Notes then
outstanding;
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(4) the amount of principal, if any, and interest to be
distributed to the Notes on the related Payment Date;
(5) the Note Interest Rate and Noteholders' Interest
Carry-Forward Amount, if any, on the related Payment Date;
(6) as of such Payment Date, the Overcollateralization
Amount, the Overcollateralization Target Amount and any Overcollateralization
Deficiency Amount or any Overcollateralization Reduction Amount, and any such
amount to be distributed to the Noteholders or the holders of the Residual
Interest on such Payment Date;
(7) the Master Servicer Compensation, the Servicing
Compensation, the Indenture Trustee Fee, and the Guaranty Insurance Premium,
for such Payment Date;
(8) as of such Payment Date, the Net Loan Losses incurred
during the related Due Period, the cumulative Net Loan Losses as of such Payment
Date;
(9) the weighted average maturity of the Home Loans and
the weighted average Home Loan Interest Rate of the Home Loans;
(10) the number of and aggregate Principal Balance of all
Home Loans in foreclosure proceedings and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all Home
Loans, all as of the close of business on the last day of the related Due
Period;
(11) the number of and the aggregate Principal Balance of
the Home Loans in bankruptcy proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the last day of the related Due
Period;
(12) the number of Foreclosure Properties, the aggregate
Principal Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such Home
Loans to the aggregate Principal Balances of all Home Loans, all as of the close
of business on the last day of the related Due Period;
(13) during the related Due Period (and cumulatively, from
the Closing Date through the most current Due Period), the number and aggregate
Principal Balance of Home Loans for each of the following: (A) that became
Defaulted Home Loans, (B) that became Liquidated Home Loans, (C) that became
Deleted Home Loans pursuant to Section 3.05 hereof as a result of such Deleted
Home Loans being Defective Home Loans, and (D) that became Deleted Home loans
pursuant to Section 3.05 hereof as a result of such Deleted Home Loans being
Defaulted Home Loans or a Home Loan in default or imminent default;
(14) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due Period;
(15) the number and aggregate Principal Balance of Home
Loans that were 30, 60 or 90 days Delinquent as of the close of business on the
last day of the related Due Period and
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the Six Month Average Delinquency, the Three-Month Average Annualized Losses and
the cumulative Realized Losses;
(16) the amount of any Insured Payment included in the
amounts distributed to the Noteholders on such Payment Date;
(17) the amount of any Securities Insurer Reimbursement
Amount to be paid to the Securities Insurer on such Payment Date and the amount
of any Securities Insurer Reimbursement Amount remaining unsatisfied following
such payment; and
(18) if an OC Trigger Increase Event has occurred on
such Payment Date.
In the case of information furnished to Noteholders pursuant to
subclause (b)(4) of this Section 6.01, the amounts shall be expressed as a
dollar amount per Note with a $1,000 Denomination.
All reports prepared by the Indenture Trustee of the withdrawals from
and deposits in the Collection Account will be based in whole or in part upon
the information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with respect
to such information provided by the Servicer. In no event shall the Indenture
Trustee be obligated to provide information required pursuant to this Section
6.01(b) if it has not timely received the necessary information from the
Servicer to provide such information.
(c) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who at
any time during the calendar year was a Noteholder such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b) of this Section 6.01, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Noteholder.
(d) On each Payment Date, the Indenture Trustee shall forward to The
Depository Trust Company and to the holders of the Residual Interest
Certificates a copy of the Payment Statement in respect of such Payment Date and
a statement setting forth the amounts actually distributed to such holders of
the Residual Interest Certificates on such Payment Date, together with such
other information as the Indenture Trustee deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who at
any time during the calendar year was a holder of Residual Interest
Certificates, if requested in writing by such Person, a statement containing the
information provided pursuant to the previous paragraph aggregated for such
calendar year or applicable portion thereof during which such Person was a
holder of Residual Interest Certificates.
(f) The Indenture Trustee shall forward to each Noteholder and each
holder of a Residual Interest Certificate, during the term of this Agreement,
such periodic, special or other reports, including information tax returns or
reports required with respect to the Notes and the Residual Interest
Certificates, as shall be necessary, reasonable, or appropriate with respect to
the Noteholders or the holders of Residual Interest Certificates, or otherwise
with respect to the
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purposes of this Agreement, all such reports or information
in the case of the Residual Interest Certificates to be provided by and in
accordance with such applicable instructions and directions as the Majority
Residual Interestholders may reasonably require.
(g) The Master Servicer promptly shall notify each Rating Agency if the
Securities Insurer waives or changes the Overcollateralization Target Amount,
the OC Trigger Increase Event, the Spread Squeeze Amount or the Step Down Test.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee, to the Master Servicer and the Securities Insurer pursuant to
this Agreement shall be deemed confidential and of a proprietary nature and
shall not be copied or distributed except in connection with the purposes and
requirements of this Agreement. No Person entitled to receive copies of such
reports or tapes shall use the information therein for the purpose of soliciting
the customers of the Transferor or the Servicer or for any other purpose except
as set forth in this Agreement.
Section 6.02. Withholding.
The Indenture Trustee shall comply with all requirements of the Code,
and applicable state and local laws, with respect to the withholding from any
payments made to any Noteholder of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in connection
therewith, giving due effect to any applicable exemptions from such withholding
and effective certifications or forms provided by the recipient. Any amounts
withheld pursuant to this Section 6.02 shall be deemed to have been paid to the
Noteholders for all purposes of this Agreement or the Indenture.
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01. [Reserved].
Section 7.02. Release of Home Loan 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 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
Owner Trustee pursuant to Section 3.05 hereof;
(iv) such Home Loan or the related Foreclosure Property
has been sold in connection with the termination of the Issuer pursuant to
Section 11.01 hereof; or
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(v) such Home Loan is a Defaulted Home Loan or a
Liquidated Home Loan that is liquidated or disposed of or the related
Foreclosure Property has been sold ;
then in each such case, an Officer's Certificate of the Servicer pursuant to
Section 4.5 of the Servicing Agreement to the effect that the Servicer has
complied with all of its obligations under this Agreement and the Servicing
Agreement with respect to such Home Loan and requesting that the Custodian
release to the Servicer the related Indenture Trustee's Home Loan File. Upon the
receipt of such Officer's Certificate, the Custodian shall, within five Business
Days or such shorter period as may be required by applicable law, release, or
cause the applicable Custodian to release (unless such Indenture Trustee's Home
Loan File has previously been released), the related Indenture Trustee's 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) If a temporary release of the Indenture Trustee's Home Loan File is
necessary or appropriate for the servicing (which may include any modification
or foreclosure) of any Home Loan, then upon the request of the Servicer pursuant
to Section 3(b) of the Custodial Agreement the Custodian shall release the
related Indenture Trustee's Home Loan File (or any requested portion thereof) to
the Servicer.
Section 7.03. Servicing Compensation.
As compensation for its services under the Servicing Agreement, the
Servicer shall be entitled to receive from the Collection Account the Servicing
Fee, out of which the Servicer shall pay any subservicing fees to any
subservicer. Additional servicing compensation in the form of assumption fees,
80% of late charges collected, modification fees, and other administrative fees,
insufficient funds charges shall be part of the Servicing Compensation payable
to the Servicer hereunder and under Section 8.1 of the Servicing Agreement and
shall be paid either by the Servicer retaining such additional servicing
compensation prior to deposit in the Collection Account pursuant to Section
5.01(b)(1) hereof or, if deposited in the Collection Account, as part of the
Servicing Compensation withdrawn from the Collection Account or Note Payment
Account.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and under the Servicing
Agreement and shall not be entitled to reimbursement therefor except as
specifically provided for herein or in Section 8.1 thereof.
Section 7.04. Statement as to Compliance and Financial Statements.
The Master Servicer will deliver or cause to be delivered to the
Indenture Trustee, the Owner Trustee, the Depositor, the Securities Insurer, the
Master Servicer and the Rating Agencies not later than 90 days following the end
of each fiscal year of the Servicer (beginning with the fiscal year 1999), an
Officer's Certificate, required under Section 7.2 of the Servicing Agreement,
stating that (i) a review of the activities of the Servicer during the preceding
year and of performance under this Agreement and the Servicing Agreement has
been made under such
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officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Servicer has fulfilled all of its obligations under this
Agreement and the Servicing Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof and what action
the Servicer proposes to take with respect thereto.
Contemporaneously with the submission of the Officer's Certificate
required by the preceding paragraph, the Master Servicer shall deliver or cause
to be delivered to the Indenture Trustee, the Securities Insurer, the Master
Servicer and the Owner Trustee a copy of the Servicer's annual audited financial
statements prepared in the ordinary course of business. The Master Servicer
shall, upon the request of the Depositor, deliver to such party any unaudited
quarterly financial statements of the Servicer.
The Master Servicer shall also cause the Servicer to furnish and
certify to the requesting party such other information as to (i) the Servicer's
organization, activities and personnel relating to the performance of the
obligations of the Servicer hereunder, (ii) the Servicer's financial condition,
(iii) the Home Loans and (iv) the performance of the obligations of any
subservicer under the any subservicing agreements, in each case as the Indenture
Trustee, the Owner Trustee, the Master Servicer, the Securities Insurer or the
Depositor may reasonably request from time to time.
Section 7.05. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer (beginning with fiscal year 1999), the Master Servicer shall require
that the Servicer comply with Section 7.3 of the Servicing Agreement and cause
any nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Indenture Trustee, the Owner Trustee, the Rating Agencies, the Securities
Insurer, the Master Servicer and the Depositor to the effect that such firm has
examined certain documents and records relating to the servicing of the Home
Loans under this Agreement, the Servicing Agreement or of mortgage loans under
pooling or sale and servicing agreements (including the Home Loans and this
Agreement) substantially similar to one another (such statement to have attached
thereto a schedule setting forth the pooling or sale and servicing agreements
covered thereby) and that, on the basis of such examination conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, such
firm confirms that such servicing has been conducted in compliance with such
pooling or sale and servicing agreements except for such significant exceptions
or errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers or the Attestation Program for
Mortgages serviced for FHLMC requires it to report, each of which errors and
omissions shall be specified in such statement. In rendering such statement,
such firm may rely, as to matters relating to direct servicing of mortgage loans
by subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of independent public accountants with
respect to the related subservicer.
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Section 7.06. Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Master Servicer shall
cause the Servicer to forward to the Indenture Trustee, the Securities Insurer
and the Master Servicer, a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
preceding Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of deposit
specified in Section 5.01(b)(1) hereof, the aggregate of withdrawals from the
Collection Account for each category of withdrawal specified in Section
5.01(b)(2) and (3) hereof, in each case, for the related Due Period.
Section 7.07. Financial Statements and Records of Servicer.
The Master Servicer shall require that the Servicer agree to provide
the books, records or information, and/or access thereto, of the types required
of the Master Servicer in Sections 9.07 and 9.08 herein, to the Indenture
Trustee, the Owner Trustee, the Depositor, the Securities Insurer and each of
their respective agents, upon terms substantially similar to the terms set forth
in Sections 9.07 and 9.08.
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE MASTER SERVICER
Section 9.01. Indemnification; Third Party Claims.
(a) The Master Servicer shall indemnify the Transferor, the Owner
Trustee, the Issuer, the Depositor, the Securities Insurer and the Indenture
Trustee (each an "Indemnified Party") and hold harmless each of them against any
and all claims, losses, damages, penalties, fines, forfeitures, reasonable legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded upon, or resulting
from, a breach of any of the Master Servicer's representations and warranties
and covenants contained in this Agreement or in any way relating to the failure
of the Master Servicer to perform its duties and service the Home Loans in
compliance with the terms of this Agreement.
(b) The Transferor, the Depositor, the Owner Trustee, the Securities
Insurer or the Indenture Trustee, as the case may be, shall promptly notify the
Master Servicer if a claim is made by a third party with respect to a breach of
any of the Master Servicer's representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the Master
Servicer to perform its duties and service the Home Loans in compliance with the
terms
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of this Agreement. The Master Servicer shall promptly notify the Indenture
Trustee, the Owner Trustee, the Securities Insurer and the Depositor of any
claim of which it has been notified pursuant to this Section 9.01 by a Person
other than the Depositor, and, in any event, shall promptly notify the Depositor
of its intended course of action with respect to any claim.
(c) The Master Servicer shall be entitled to participate in and, upon notice to
the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Master Servicer,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (i) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Master Servicer, (ii) the
Master Servicer has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Master Servicer and one or
more Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which are
different from or additional to those available to the Master Servicer. The
Master Servicer shall not be liable for any settlement of any such claim or
action unless the Master Servicer shall have consented thereto or be in default
on its obligations hereunder. Any failure by an Indemnified Party to comply with
the provisions of this Section 9.01 shall relieve the Master Servicer of
liability only if such failure is materially prejudicial to the position of the
Master Servicer and then only to the extent of such prejudice.
(d) The provisions of this Section 9.01 shall survive the replacement
of the Master Servicer; provided, that no successor master servicer shall be
liable for (or required to indemnify any party for) any act or omission of any
predecessor master servicer.
Section 9.02. Merger or Consolidation of the Master Servicer..
The Master Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its authorization or
qualification to do business as a foreign corporation and maintain, or cause an
affiliate approved by the other parties hereto to maintain, such other licenses
and permits in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement; provided, however, that the Master Servicer may
merge or consolidate with any other corporation upon the satisfaction of the
conditions set forth in the following paragraph.
With the consent of the Securities Insurer, any Person into which the
Master Servicer may be merged or consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Master Servicer shall be a
party, or any Person succeeding to the business of the Master Servicer, shall be
an Eligible Servicer and shall be the successor of the Master Servicer, as
applicable hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Master Servicer shall send notice of any such
merger, conversion, consolidation or succession to the Indenture Trustee, the
Owner Trustee, the Securities Insurer, the Servicer and the Issuer.
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Section 9.03. Limitation on Liability of the Master Servicer and
Others.
The Master Servicer and any director, officer, employee or agent of the
Master Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of Section 9.01 hereof, the Master Servicer shall have no obligation to
appear with respect to, prosecute or defend any legal action which is not
incidental to the Master Servicer's duty to service the Home Loans in accordance
with this Agreement.
Section 9.04. Master Servicer Not to Resign; Assignment.
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) with the consent of the Owner Trustee, the
Securities Insurer and Indenture Trustee or (b) upon determination that its
duties hereunder are no longer permissible under applicable law. Any such
determination pursuant to clause (b) of the preceding sentence permitting the
resignation of the Master Servicer shall be evidenced by an independent opinion
of counsel to such effect delivered (at the expense of the Master Servicer) to
the Owner Trustee, the Securities Insurer and the Indenture Trustee. No
resignation of the Master Servicer shall become effective until a successor
master servicer appointed by the Depositor and acceptable to the Rating
Agencies, the Securities Insurer and the Indenture Trustee shall have assumed
the Master Servicer's responsibilities, duties, liabilities (other than those
liabilities arising prior to the appointment of such successor) and obligations
under this Agreement.
Except as expressly provided herein, the Master Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder and any agreement, instrument or act
purporting to effect any such assignment, transfer, delegation or appointment
shall be void.
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 the first paragraph of this
Section 9.04.
Section 9.05. [Reserved.]
Section 9.06. Relationship of Master Servicer to the Issuer and the
Indenture Trustee.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as master servicer under this Agreement) to the Issuer and the
Indenture Trustee under this Agreement is intended by the parties hereto to be
that of an independent contractor and not of a joint venturer, agent or partner
of the Issuer or the Indenture Trustee.
Section 9.07. Master Servicer May Own Securities.
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
Securities with the same rights
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as it would have if it were not the Master Servicer or an Affiliate thereof
except as otherwise specifically provided herein. Securities 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 Securities; provided,
however, that any Securities owned by the Master Servicer or any Affiliate
thereof, during the time such Securities 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 and the Securities Insurer promptly after it
or any of its Affiliates becomes the owner or pledgee of a Security.
Section 9.08. Right to Examine Master Servicer Records.
The Indenture Trustee, the Owner Trustee, the Depositor, the Securities
Insurer and each of their respective agents shall have the right upon reasonable
prior notice, during normal business hours and as often as reasonably required,
to examine, audit and copy, at the expense of the Person making such
examination, any and all of the books, records or other information of the
Master Servicer (including, without limitation, the Servicer), whether held by
the Master Servicer or by another on behalf of the Master Servicer, which may be
relevant to the performance or observance by the Master Servicer of the terms,
covenants or conditions of this Agreement. In the case of the supervisory agents
and examiners of the Issuer, the Indenture Trustee, the Owner Trustee, the
Securities Insurer and the Securityholders, access to the documentation
regarding the Home Loans required by applicable state and federal regulations
shall be afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Master Servicer designated by it.
The Master Servicer also agrees to make available on a reasonable basis
to the Depositor, the Securityholders or any prospective Securityholder a
knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor, the
Securityholders and any prospective Securityholder to inspect the Servicer's
servicing facilities during normal business hours for the purpose of satisfying
that the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
Each Securityholder, the Indenture Trustee, the Securities Insurer, the
Master Servicer and the Owner Trustee agree that any information obtained
pursuant to the terms of this Agreement shall be held confidential.
Section 9.09. Financial Statements.
The Master Servicer understands that, in connection with the transfer
of the Notes, Noteholders and the Securities Insurer may request that the Master
Servicer make available to the Noteholders and to prospective Noteholders annual
audited financial statements of the Servicer for one or more of the most
recently completed five fiscal years for which such statements are available,
which request shall not be unreasonably denied.
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ARTICLE X
DEFAULT
Section 10.01. Master Service Events of Default.
(a) Master Servicer Event of Default. A Master Servicer Event of
Default shall include the occurrence and continuation of one or more of the
following:
(i) (1) Any failure by the Servicer to deposit in the
Collection Account in accordance with Section 5.01(b) hereof any payments in
respect of the Home Loans received by the Servicer no later than the second
Business Day following the day on which such payments were received; (2) any
failure of the Servicer to pay when due any amount payable by it under the
Servicing Agreement or this Agreement; or (3) the occurrence and continuance of
any other Servicer Event of Default (as defined in Exhibit E hereto) which
Servicer Event of Default continues unremedied for a period of 30 days after the
date on which a Notice of Default requiring such failure to be remedied shall
have been given (a) to the Servicer and the Master Servicer by the Indenture
Trustee, or the Securities Insurer, or (b) to the Servicer, the Master Servicer,
the Indenture Trustee, the Owner Trustee and the Securities Insurer by the
Majority Noteholders.
(ii) The failure by the Master Servicer duly to observe or
perform, in any material respect, any other covenants, obligations or agreements
of the Master Servicer as set forth in this Agreement, which failure continues
unremedied for a period of 30 days after the date on which a Notice of Default
requiring such failure to be remedied shall have been given (a) to the Master
Servicer by the Indenture Trustee, the Owner Trustee or the Securities Insurer,
or (b) to the Master Servicer, the Indenture Trustee, the Owner Trustee and the
Securities Insurer by the Majority Noteholders.
(iii) A decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or receiver
or liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Master Servicer and such decree or
order shall have remained in force, undischarged or unstayed for a period of 60
days.
(iv) The Master Servicer shall consent to the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings of or relating
to the Master Servicer or of or relating to all or substantially all of the
Master Servicer's property.
(v) The Master Servicer shall admit in writing its
inability to pay its debts as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its obligations.
(vi) The Majority Noteholders and the Securities Insurer,
collectively, or the Securities Insurer, individually, shall determine, in their
reasonable judgment and based
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upon published reports (including wire services), which they reasonably believe
in good faith to be reliable, and shall give the Master Servicer a Notice of
Default, that:
(1) the Master Servicer or Servicer has experienced a
material adverse change in its business, assets, liabilities, operations,
condition (financial or otherwise) or prospects; or
(2) the Master Servicer or Servicer or any of their
subsidiaries or parent has defaulted on any of its material obligations; or
(3) the Master Servicer is no longer able to discharge
its duties under this Agreement or the Servicer is no longer able to discharge
its duties under the Servicing Agreement; or
(4) the Master Servicer has ceased to conduct its
business in the ordinary course;
provided, however, that the Master Servicer shall have five Business Days from
the receipt of such Notice of Default to cure such Master Servicer Event of
Default by providing the foregoing parties with written assurances that, in a
reasonable and good faith manner, substantiate the financial and operational
well-being of the Master Servicer or Servicer, as appropriate, and adequately
refute the occurrence of a material adverse change, including, without
limitation, information, reports or written assurances obtained from certain of
its lenders or lenders to the Servicer.
(vii) An event of default has occurred and is continuing
under the Indemnification Agreement.
(viii) Either a Servicer Termination Delinquency Event or
a Servicer Termination Loss Event has occurred.
(b) Remedies. If a Servicer Event of Default (as defined in Exhibit E
hereto) shall occur and be continuing or the Servicer's term of service has not
been renewed pursuant to Section 3 of the Servicing Agreement, then, and in each
and every such case, so long as such Servicer Event of Default shall not have
been remedied, the Securities Insurer or the Indenture Trustee, the Owner
Trustee or the Majority Noteholders, by a Notice of Default to the Master
Servicer may, in addition to whatever rights such Person may have at law or in
equity to damages, including injunctive relief and specific performance, with
the consent of the Securities Insurer may require the Master Servicer to
terminate all the rights and obligations of the Servicer under the Servicing
Agreement and in and to the Home Loans and the proceeds thereof, as servicer
under the Servicing Agreement. Upon termination of the Servicer following such
Notice of Default, all authority and power of the Servicer under the Servicing
Agreement, whether with respect to the Home Loans or otherwise, shall, at the
direction of the Securities Insurer, pass to, be transferred to, and be vested
in either: (1) a successor servicer acceptable to the Securities Insurer; or (2)
the Master Servicer, or (3) the Indenture Trustee. If a Master Servicer Event of
Default shall occur and be continuing, then, and in each and every such case, so
long as a Master Servicer Event of Default shall not have been remedied, the
Securities Insurer or the Indenture Trustee, or the Majority Noteholders, by a
Notice of Default to the
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Master Servicer may, in addition to whatever rights such Person may have at law
or in equity to damages, including injunctive relief and specific performance,
with the consent of the Securities Insurer, may terminate all the rights and
obligations of the Master Servicer under this Agreement and in and to the Home
Loans and the proceeds thereof, as Master Servicer under this Agreement. Upon
termination of the Master Servicer following such Notice of Default, all
authority and power of the Master Servicer under this Agreement, whether with
respect to the Home Loans or otherwise, shall, at the direction of the
Securities Insurer pass to, be transferred to, and be vested in either: (1) a
successor master servicer reasonably acceptable to the Securities Insurer; or
(2) the Indenture Trustee.
Upon the termination of the Master Servicer and transfer to a successor
master servicer, the Indenture Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and do or cause to be
done all other acts or things necessary or appropriate to effect the purposes of
such notice of termination, including, but not limited to, the transfer and
endorsement or assignment of the Home Loans and related documents. The Master
Servicer agrees to cooperate with the successor master servicer in effecting the
termination of the Master Servicer's responsibilities and rights hereunder.
Section 10.02. [Reserved].
Section 10.03. Waiver of Defaults.
The Securities Insurer, and the Majority Noteholders may with prior
consent of the Securities Insurer, on behalf of all Noteholders, waive any
events permitting removal of the Servicer or Master Servicer pursuant to this
Article X; provided, however, that the Majority Noteholders may not waive a
default in making a required payment on a Note or distribution on a Residual
Interest Certificate without the consent of the related Noteholder or holder of
the Residual Interest Certificate. Upon any waiver of a past default, such
default shall cease to exist and any Master Servicer Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.
Section 10.04. Accounting Upon Termination of Master Servicer.
Upon termination of the Master Servicer under this Article X, the
Master Servicer shall, at its own expense execute and deliver such instruments
and perform all acts reasonably requested in order to effect the orderly and
efficient transfer of master servicing of the Home Loans to its successor and to
more fully and definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Master Servicer under this
Agreement.
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ARTICLE XI
TERMINATION
Section 11.01. Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either:
(a) the later of (i) the satisfaction and discharge of the Indenture
and the provisions thereof, 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 Servicer, the Indenture Trustee, the Owner
Trustee, the Issuer, the Master Servicer, the Securities Insurer and any
Custodian; or
(b) the mutual consent of the Servicer, the Master Servicer, the
Depositor, the Transferor, the Securities Insurer and all Securityholders in
writing.
Section 11.02. Optional Termination.
On or after any Payment Date on which the Pool Principal Balance
declines to 10% or less of the Original Pool Principal Balance, then the
Majority Residual Interestholders may, at their option, effect an early
termination of the Issuer. On or after any Payment Date on which the Pool
Principal Balance declines to 5% or less of the Original Pool Principal Balance,
then the Securities Insurer or the Master Servicer may, at their respective
options, effect an early termination of the Issuer. The Majority Residual
Interestholders, the Securities Insurer or the Master Servicer, as applicable,
shall effect such early termination by providing prior notice thereof to the
Servicer, the Indenture Trustee, the Master Servicer, the Securities Insurer and
Owner Trustee and by purchasing all of the Home Loans from the Issuer at a
purchase price, payable in cash, equal to or greater than the Termination Price.
The expense of any Independent appraiser required under this Section 11.02 shall
be a nonreimbursable expense of Majority Residual Interestholders, the
Securities Insurer or the Master Servicer, as applicable.
Any such early termination by the Majority Residual Interestholders,
the Securities Insurer or the Master Servicer, as applicable, shall be
accomplished by depositing into the Collection Account on the third Business Day
prior to the Payment Date on which the purchase is to occur the amount of the
Termination Price to be paid. The Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts not required to have
been deposited therein pursuant to Section 5.01(b)(1) hereof and any amounts
withdrawn therefrom by the Indenture Trustee pursuant to Section 5.01(b)(3)
hereof) shall be transferred to the Note Payment Account pursuant to Section
5.01(b)(2) hereof for payment to Noteholders and the Securities Insurer on the
succeeding Payment Date; and any amounts received with respect to the Home Loans
and Foreclosure Properties subsequent to the Due Period immediately preceding
such final Payment Date shall belong to the purchaser thereof or the Securities
Insurer, as applicable. For purposes of calculating the Available Payment Amount
for such final Payment Date, amounts transferred to the Note Payment Account
immediately preceding such final Payment Date shall in all cases be deemed to
have been received during the related Due Period, and amounts so transferred
shall be applied pursuant to Section 5.01(d) and (e) hereof.
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Section 11.03. Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Issuer shall be sent (i) by the Indenture Trustee to the
Noteholders and the Securities Insurer in accordance with section 10.02 of the
Indenture and (ii) by the Owner Trustee to the Certificateholders in accordance
with section 9.1(d) of the Owner Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Acts of Noteholders.
Except as otherwise specifically provided herein, whenever action,
consent or approval of the Noteholders 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 Noteholders if the Majority
Noteholders agree to take such action or give such consent or approval.
Section 12.02. Amendment.
(a) This Agreement may be amended from time to time by the Depositor,
the Master Servicer, the Transferor, the Indenture Trustee and the Issuer by
written agreement with notice thereof to the Securityholders, without the
consent of any of the Securityholders, but with the consent of the Securities
Insurer, 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 Noteholders. An amendment
described above shall be deemed not to adversely affect in any material respect
the interests of the Noteholders if either (i) an Opinion of Counsel is obtained
to such effect or (ii) the party requesting the amendment obtains the Ratings
Confirmation with respect to such amendment.
(b) This Agreement may also be amended from time to time by the
Depositor, the Master Servicer, the Transferor, the Indenture Trustee and the
Issuer by written agreement, with the prior written consent of the Majority
Noteholders and the Securities Insurer, 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 Noteholders;
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 Note, without the consent of
the holders of 100% of the Notes affected thereby and the Securities Insurer,
(ii) adversely affect in any material respect the interests of the holders of
any of the Notes or the Securities Insurer in any manner other than as described
in clause (i), without the consent of the holders of 100% of such Notes or the
Securities Insurer, or (iii) reduce the percentage of any of the Notes, the
consent of which is required for any such amendment, without the consent of the
holders of 100% of such Notes and the Securities Insurer.
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(c) It shall not be necessary for the consent of Noteholders 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
and the Indenture Trustee shall be entitled to receive and rely upon an Opinion
of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Issuer and the Indenture Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Issuer's
own rights, duties or immunities of the Issuer or the Indenture Trustee, as the
case may be, under this Agreement.
Section 12.03. Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the Noteholders'
expense on direction of the Majority Noteholders or the Securities Insurer, but
only when accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the Noteholders
or is necessary for the administration or servicing of the Home Loans.
Section 12.04. Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 12.05. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06. Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by overnight mail, certified mail or registered mail, postage prepaid, to:
(a) in the case of the Depositor, PaineWebber Mortgage Acceptance
Corporation IV, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq., or such other addresses as may hereafter be
furnished to the Securityholders and the other parties hereto in writing by the
Depositor;
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(b) in the case of the Issuer, at Fremont Home Loan Owner Trust 1999-1,
c/o Wilmington Trust Company, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such other address
as may hereafter be furnished to the Securityholders and the other parties
hereto;
(c) in the case of the Transferor and Master Servicer, Fremont
Investment & Loan, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇, or such other address as may hereafter be furnished to
the Securityholders and the other parties hereto in writing by the Servicer or
the Transferor;
(d) in the case of the Indenture Trustee, First Union National Bank,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 1179, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
Structured Finance Trust Group;
(e) in the case of the Securityholders, as set forth in the applicable
Note Register;
(f) in the case of a claim under the Guaranty Policy, Financial
Security Assurance, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention:
Senior Vice President - Surveillance (Fremont Home Loan Asset Banked Notes,
Series 1999-1), with a copy to each of the General Counsel and the Head -
Financial Guaranty Group, and shall be marked to indicate "URGENT MATERIAL
ENCLOSED", or such other address as may be furnished to the Securityholders and
the other parties hereto in writing by the Securities Insurer;
(g) in the case of the Securities Insurer, Financial Security
Assurance, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Senior Vice
President - Surveillance (Fremont Home Loan Asset Backed Notes, Series 1999-1);
or
(h) in the case of the Servicer, to Fairbanks Capital Corp., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Fremont
Series 1999-1; provided that during the period that the Master Servicer is
acting as Servicer, notices shall be sent to the Master Servicer.
Any such notices shall be deemed to be effective with respect to any
party hereto upon the receipt of such notice by such party, except that notices
to the Securityholders shall be effective upon mailing or personal delivery.
Section 12.07. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
-76-
Section 12.08. No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09. Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Indenture Trustee, the Issuer, the
Noteholders, the Securities Insurer, the Master Servicer and their respective
successors and permitted assigns.
Section 12.11. Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 12.12. Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Servicer, the Indenture Trustee or the Issuer.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Depositor, the Servicer, the Indenture Trustee and the Issuer if
made in the manner provided in this Section 12.12.
(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner, which the
Depositor, the Servicer, the Indenture Trustee or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Securityholder shall bind every holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Depositor, the Servicer, the Indenture Trustee, the Securities Insurer or
the Issuer in reliance thereon, whether or not notation of such action is made
upon such Security.
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(d) The Depositor, the Servicer, the Indenture Trustee or the Issuer
may require additional proof of any matter referred to in this Section 12.12 as
it shall deem necessary.
Section 12.13. Reports to Rating Agencies.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any
Home Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of the Servicer, the Master Servicer, any Custodian or
the Issuer;
(iv) notice of final payment on the Notes;
(v) any Notice of Default;
(vi) copies of the annual independent accountants' report
delivered pursuant to Section 7.05 hereof, and copies of any compliance reports
delivered by the Servicer including under Section 7.04 hereof; and
(vii) copies of any Payment Date Statement pursuant to
Section 6.01(b) hereof.
(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 Ratings Services, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: Residential Mortgage Group; and (ii) if to ▇▇▇▇▇'▇
Investors Service, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ Department - ▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Residential Mortgage Monitoring Department.
Section 12.14. Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Owner Trust Agreement to the holders of the Residual Interest Certificates shall
be paid to such holders pro rata based on their percentage holdings in the
Residual Interest;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest Certificates, such
consent or approval shall be capable of being given by the holder or holders of
not less than 51% of the Residual Interest in aggregate.
-78-
Section 12.15. Year 2000 Compliance.
Each of the Servicer, the Master Servicer and the Indenture Trustee
shall assure that their respective computer systems are year 2000 compliant by
December 31, 1999.
Section 12.16. Grant of Noteholder Rights to Securities Insurer.
In consideration for the guarantee of the Insured Securities by the
Securities Insurer pursuant to the Guaranty Policy, and by acceptance of an
Insured Security, the Noteholders hereby grant to the Securities Insurer the
right to act as the holder of 100% of the outstanding Insured Securities for the
purpose of exercising the rights of the holders of the Insured Securities under
this Agreement, without the consent of any such Noteholders, including the
voting rights of such holders, but excluding those rights requiring the consent
of all such holders under Section 12.02(b), and any rights of such holders to
payments under Section 5.01 (d) and (e) hereof and under section 8.02(c) of the
Indenture; provided that the preceding grant of rights to the Securities Insurer
by the Noteholders shall be subject to Section 12.18 hereof. The rights of the
Securities Insurer to direct certain actions and consent to certain actions of
the Majority Noteholders hereunder will terminate at such time as the Principal
Balance of Insured Securities have been reduced to zero and the Securities
Insurer has been paid the Securities Insurer Reimbursement Amount in full and
all other amounts owed under the Guaranty Policy and Insurance Agreement and the
Securities Insurer has no further obligation under the Guaranty Policy.
Section 12.17. Third Party Beneficiary.
The parties hereto acknowledge that the Securities Insurer is an
express third party beneficiary hereof entitled to enforce any rights reserved
to it hereunder as if it were actually a party hereto.
Section 12.18. Suspension and Termination of Securities Insurer's
Rights.
(a) During the continuation of a Securities Insurer Default, the rights
granted or reserved to the Securities Insurer hereunder shall vest instead in
the Majority Noteholders; provided, however, that the Securities Insurer shall
be entitled to any payments of the Securities Insurer Reimbursement Amount, and
the Securities Insurer shall retain those rights under Section 11.01 to consent
to the termination of this Agreement and Section 12.02 to consent to any
amendment of this Agreement.
(b) At such time as either (i) the Principal Balances of the Insured
Securities have been reduced to zero or (ii) the Guaranty Policy has been
terminated, and in either case of (i) or (ii) the Securities Insurer has been
paid the Securities Insurer Reimbursement Amount in full and all other amounts
owed under the Guaranty Policy and the Insurance Agreement (and the Securities
Insurer no longer has any obligation under the Guaranty Policy, except for
breach thereof by the Securities Insurer), then the rights and benefits granted
or reserved to the Securities Insurer hereunder (including the rights to direct
certain actions and receive certain notices) shall terminate and the Noteholders
(including in certain instances the Majority Noteholders) shall be entitled to
the exercise of such rights and to receive such benefits of the
-79-
Securities Insurer following such termination to the extent that such rights and
benefits are applicable to the Noteholders (including the Majority Noteholders).
IN WITNESS WHEREOF, the Issuer, the Depositor, the Transferor, the
Servicer, the Master Servicer and the Indenture Trustee 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.
FREMONT HOME LOAN OWNER TRUST
SERIES 1999-1, as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By:
-----------------------------
Name:
Title:
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor
By:
------------------------------
Name:
Title:
FREMONT INVESTMENT & LOAN, as
Transferor and Master Servicer
By:
------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK, not in
its individual capacity but
solely as Indenture Trustee
By:
------------------------------
Name:
Title:
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of March 1999, 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
FREMONT HOME LOAN OWNER TRUST 1999-1 as Issuer, and that she 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 ____
day of March, 1999.
Notary Public, State of ___________
THE STATE OF [_________] )
)
COUNTY OF [____________] )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of March 1999, 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 PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, as the Depositor, and that he/she 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 PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, this the ____ day of March, 1999.
Notary Public, State of __________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day
of March 1999, 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 FREMONT INVESTMENT &
LOAN, as the Transferor and Master 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 FREMONT INVESTMENT & LOAN, this the
____ day of March 1999.
Notary Public, State of ______
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day
of March 1999, 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 First Union National
Bank, not in its individual capacity, but in its capacity as Indenture 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, this the __ day of March 1999.
Notary Public, State of ____
EXHIBIT A
HOME LOAN SCHEDULE
INFORMATION IS ON FILE WITH THE INDENTURE TRUSTEE AT
FIRST UNION NATIONAL BANK
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT B
FORM OF SERVICER'S MONTHLY REMITTANCE REPORT TO INDENTURE TRUSTEE
INFORMATION IS AVAILABLE WITH THE SERVICER AT
FAIRBANKS CAPITAL CORP.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
EXHIBIT C
FORM OF LOAN LIQUIDATION REPORT
Customer Name:
Account No.:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off) ___________
Date last paid ___________
Foreclosure
Date of Foreclosure ___________
Date of REO ___________
Date of REO Disposition
Property Sale Price/Estimated Market Value at disposition $___________
Settlement (short pay-off and collection actions)
Date of Settlement Payment ___________
Defaulted Loan Sale
Date of Sale
Charge-off or Bankruptcy ___________
Date of Charge-off or Bankruptcy Discharge
2. Liquidation Proceeds
Principal Prepayment $___________
Property Sale Proceeds $___________
Insurance Proceeds $___________
Settlement Payment Loan Sale Proceeds $___________
Other (Itemize) $___________
Total Proceeds $___________
Liquidation Expenses
Servicing Advances $___________
Servicing Fees $___________
Other Servicing Compensation $___________
Collection Agent or Attorney's Fees $___________
Total Advances $___________
3. Net Liquidation Proceeds $___________
(Item 2 minus Item 3)
4. Principal Balance of Mortgage Loan $___________
5. Loss, if any (Item 5 minus Item 4) $___________
EXHIBIT D
FORM OF MASTER SERVICER RENEWAL NOTICE
[MASTER SERVICER]
Re: Fremont Home Loan Asset Backed Notes, Series 1999-1
Dear Ladies and Gentlemen:
Reference is hereby made to the Sale and Master Servicing Agreement
dated as of March 1, 1999 (the "Agreement") among Fremont Home Loan Owner Trust
1999-1, as Issuer, PaineWebber Mortgage Acceptance Corporation IV, as Depositor,
Fremont Investment & Loan, as Transferor, Master Servicer, and as Servicer, and
First Union National Bank, as Indenture Trustee. The Indenture Trustee has not
received notification from Financial Security Assurance, Inc., as the Securities
Insurer, that instructs the Indenture Trustee not to renew the term of
______________ as the Master Servicer under the Agreement. Therefore, pursuant
to Section 9.05 of the Agreement, the Indenture Trustee hereby notifies
________________________ that its term as Master Servicer has been extended for
a successive three calendar month period beginning with the month of __________,
_____.
FIRST UNION NATIONAL BANK,
as Indenture Trustee
By:
---------------------------------
Name:
Title:
cc: [Securities Insurer]
PaineWebber Mortgage Acceptance Corporation IV
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fremont Home Loan Owner Trust 1999-1
c/o Wilmington Trust Company
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT E
AGREEMENT REGARDING
STANDARD SERVICING TERMS
BETWEEN
FAIRBANKS CAPITAL CORP.
AS SERVICER
AND
FREMONT INVESTMENT & LOAN
AS INITIAL OWNER AND MASTER SERVICER
RESIDENTIAL MORTGAGE LOANS
DATED AS OF MARCH 1, 1999
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.......................................................
Section 1.1. Definitions..............................................
Section 1.2. Interpretation of Agreement..............................
ARTICLE II DOCUMENTS TO BE DEPOSITED WITH CUSTODIAN.........................
Section 2.1. Custodial Agreement......................................
Section 2.2. Possession of Mortgage Files.............................
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................
Section 3.1. Servicer Representations and Warranties..................
Section 3.2. Owner Representations and Warranties.....................
Section 3.3. Breach of Representation or Warranty.....................
Section 3.4. Cooperation..............................................
ARTICLE IV LOAN ADMINISTRATION..............................................
Section 4.1. General..................................................
Section 4.2. Servicing Commencement Date..............................
Section 4.3. Duties Servicer May Delegate.............................
Section 4.4. Servicer Mortgage Loan Files.............................
Section 4.5. Release of Custodial Mortgage Loan Files.................
Section 4.6. Documents, Records, and Funds in Possession of Servicer
to be Held for Owner....................................
Section 4.7. Microfilmed Records......................................
Section 4.8. Enforcement of Due-On-Sale Clause; Assumption............
Section 4.9. Partial Release, Easement and Eminent Domain.............
Section 4.10. Insurance...............................................
Section 4.11. Evidence of Insurance...................................
Section 4.12. Insurance Notices.......................................
Section 4.13. Default by Insurer......................................
Section 4.14. Hazard Insurance........................................
Section 4.15. Hazard Insurance Loss Settlement........................
Section 4.16. Uninsured Hazard Loss...................................
Section 4.17. Flood Insurance.........................................
Section 4.18. Condominium and PUD Insurance Coverage Requirements.....
Section 4.19. Special Flood Hazard Insurance for Condominium or PUD...
Section 4.20. Name of Insured.........................................
Section 4.21. Mortgagee Clause........................................
Section 4.22. Title Insurance.........................................
Section 4.23. Tax and Insurance Reserves..............................
Section 4.24. Delinquencies...........................................
Section 4.25. Property Inspection.....................................
Section 4.26. Notification Matters....................................
Section 4.27. Abandonment.............................................
Section 4.28. Plans for Curing Delinquencies..........................
Section 4.29. Loan Modifications......................................
Section 4.30. Advance Responsibility During Delinquency...............
Section 4.31. Bankruptcies............................................
Section 4.32. [Intentionally Omitted].................................
Section 4.33. Deed-in-Lieu of Foreclosure.............................
Section 4.34. Actions Prior to Foreclosure............................
Section 4.35. Retention of Attorneys for Foreclosure - Foreclosure
Fees...................................................
Section 4.36. Foreclosure Procedures..................................
Section 4.37. Disbursement of Escrow Items............................
Section 4.38. Reinstatement of Mortgage Loans.........................
Section 4.39. Partial Payment Toward Reinstatement of Mortgage Loans..
Section 4.40. Servicing Requirements for REO..........................
Section 4.41. Marketing REO...........................................
Section 4.42. Rehabilitation..........................................
Section 4.43. Required REO Documentation..............................
Section 4.44. Satisfactions...........................................
Section 4.45. Disclosure Upon Transfer of Servicing...................
Section 4.46. Response to Borrower Inquiries..........................
Section 4.47. Environmental Problems..................................
Section 4.48. Limitation on Authority.................................
Section 4.49. Direction of Owner......................................
Section 4.50. Conflicts and Removal of Assets.........................
Section 4.51. Reports Pursuant to Requirements........................
Section 4.52. Computer Systems........................................
ARTICLE V LOAN ACCOUNTING...................................................
Section 5.1. General..................................................
Section 5.2. Individual Mortgage Loan Accounting Requirements.........
Section 5.3. Interest Calculations....................................
Section 5.4. Application of Mortgage Loan Payments....................
Section 5.5. Full Payment Not Received from Borrower..................
Section 5.6. Curtailments.............................................
Section 5.7. Reapplication of Prior Prepayments.......................
Section 5.8. Liquidations.............................................
ARTICLE VI ACCOUNTING.......................................................
Section 6.1. General..................................................
Section 6.2. Account Maintenance......................................
Section 6.3. P & I Account; Remittance................................
Section 6.4. T & I Account............................................
Section 6.5. Tax and Insurance Reserves...............................
Section 6.6. Protective Advances......................................
Section 6.7. Servicer's Overhead Not Reimbursable.....................
Section 6.8. Access to Records........................................
Section 6.9. Securitization Financing.................................
Section 6.10. Late Charge Payment.....................................
ARTICLE VII REPORTS TO THE OWNER............................................
Section 7.1. Reports to the Owner.....................................
Section 7.2. Annual Officer's Certificate as to Compliance............
Section 7.3. Annual Independent Public Accountants' Servicing Report..
Section 7.4. Monthly Document Report..................................
Section 7.5. Securitization Financing.................................
ARTICLE VIII COMPENSATION TO SERVICER......................................
Section 8.1. Compensation to the Servicer.............................
ARTICLE IX MERGER OR CONSOLIDATION OF SERVICER; RESIGNATION; DEFAULT........
Section 9.1. Merger or Consolidation..................................
Section 9.2. Assignment or Transfer of Servicing Agreement............
Section 9.3. Resignation of Servicer..................................
Section 9.4. Events of Default by Servicer............................
Section 9.5. Termination of the Servicer Without Cause................
Section 9.6. Indemnification by the Servicer..........................
Section 9.7. Indemnification by the Owner.............................
Section 9.8. Indemnification Procedures...............................
Section 9.9. Consent..................................................
ARTICLE X MISCELLANEOUS.....................................................
Section 10.1. Errors and Omissions Coverage and Fidelity Coverage.....
Section 10.2. No Assignment or Delegation of Duties by Servicer.......
Section 10.3. Binding Nature of Agreement; Assignment.................
Section 10.4. Assignment. Entire Agreement; Waivers..................
Section 10.5. Amendments and Supplements..............................
Section 10.6. CONTROLLING LAW.........................................
Section 10.7. No Joint Venture; Limited Agency........................
Section 10.8. Counterparts............................................
Section 10.9. Notices.................................................
Section 10.10. Provisions Separable; Interpretation...................
Section 10.11. Confidentiality........................................
Section 10.12. Expenses...............................................
EXHIBIT A - Form of Servicing Agreement
EXHIBIT B - Form of Receipt
EXHIBIT C - Reports to the Owner
SCHEDULE I - Servicing Policies and Procedures
AGREEMENT REGARDING STANDARD SERVICING TERMS
This AGREEMENT REGARDING STANDARD SERVICING TERMS (this "Agreement"),
dated as of March 1, 1999, by and between FREMONT INVESTMENT & LOAN, having an
office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as the initial
owner (in such capacity, the "Owner") and as master servicer (in such capacity,
the "Master Servicer") and FAIRBANKS CAPITAL CORP., a Utah corporation, having
an office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, as
servicer (the "Servicer").
RECITALS
WHEREAS, Owner currently owns certain sub-prime residential mortgage
loans;
WHEREAS, Owner, from time to time, intends to finance certain
residential mortgage loans, in one or more securitization transactions;
WHEREAS, Servicer is engaged in, among other things, the servicing of
residential mortgage loans; and
WHEREAS, Owner and Servicer desire to contract with each other from
time to time for the servicing responsibilities associated with certain of the
above-described types of mortgage loans by periodically executing servicing
agreements that adopt the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties hereinafter set forth and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Owner and the Servicer agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS.
The capitalized terms in this Agreement and not otherwise defined shall
have the meanings given below in this Section 1.1.
ACCEPTED SERVICING PRACTICES: With respect to any Mortgage Loan or REO,
those servicing, collection, resolution, or disposition practices as are
undertaken in good faith and in the best interests of Owner and as are performed
with the same care, skill, prudence, and diligence with which the Servicer
services and administers mortgage loans or properties for other portfolios
similar to the Mortgage Loan and REO, as the case may be, and in a manner
consistent with the customary practices of prudent institutions in the business
of servicing sub-prime mortgage loans, including the "Servicing Policies and
Procedures" set forth in Schedule I hereto, as such may be amended from time to
time upon the agreement of the Servicer and the Owner, but without regard to:
1. Any relationship that Servicer, or any Affiliate of Servicer
may have with the related Borrower; or
2. Servicer's right to receive compensation for its services
hereunder or with respect to any particular transaction; or
3. The ownership, or servicing, or management for others, by
Servicer of any other mortgage loans or property;
provided, however, that such services are performed in compliance with all
Requirements, the terms of this Agreement, any related Servicing Agreement, and
the terms and provisions of the Mortgage Loan Documents.
ACCOUNT CUSTODIAN OR CUSTODIAN: First Union National Bank, a national
banking association having an address at ▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other institution designated by the Owner.
AFFILIATE: Any person or entity that directly or indirectly controls,
is controlled by or is under common control with such person or entity, and when
used in connection with this definition, "control" shall mean the power to
direct or cause the direction of the management and policies of such person or
entity, whether through the ownership of voting securities of such person or
entity, by contract or otherwise. "Controlling" and "Controlled" shall have
meanings correlative to the foregoing.
ANCILLARY INCOME: All ancillary income (other than interest, interest
on the P & I Account, any Prepayment Penalties and 20% of the Late Charges in
accordance with Section 6.10 hereof) from the Mortgage Loans and Mortgaged
Premises, including without limitation, insufficient fund fees, assumption fees,
modification fees received from a Borrower, fees associated with any repayment
plan or forbearance agreement and all other incidental and customary fees.
APPRAISAL REPORT: A report setting forth the fair market value of a
Mortgaged Premises as determined by an appraiser. For appraisals conducted prior
to the Servicing Commencement Date, such Appraisal Reports shall be in the form
received by the Servicer, and for appraisals conducted subsequent to the
Servicing Commencement Date, such Appraisal Reports shall be in a form
indicating that the related appraisals have been conducted in accordance with
the Uniform Standards of Professional Appraisal Practice, provided in each case
by an independent appraiser (i) who, at the time the appraisal was conducted,
met the minimum qualifications of ▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇ Mac for appraisers of
conventional residential mortgage loans and (ii) who had no interest, direct or
indirect, in the Mortgaged Property or in any loan made on the security thereof,
and (iii) whose compensation was not affected by the results of the appraisal.
ASSIGNMENT: The assignment of a Security Instrument or equivalent
instrument, which is in recordable form and may be in the form of a blanket
assignment, sufficient under the laws of the jurisdiction wherein the related
Mortgaged Premises are located to transfer all the rights of the secured party
pursuant to such Security Instrument to a transferee for valid consideration.
ASSUMPTION: The process whereby, on sale or transfer of a legal or
beneficial interest in Mortgaged Premises, the new owner of the Mortgaged
Premises becomes legally obligated under the terms of the existing Security
Instrument, Note and any addenda and riders to the Security Instrument or Note.
Subsequent to the Assumption, the new owner of the property shall be deemed to
be the Borrower under the Mortgage Loan Documents.
ATTORNEY'S TITLE OPINION: With respect to Mortgaged Premises, an
opinion of title given by an attorney licensed to practice law in the
jurisdiction where the Mortgaged Premises are located, stating that the Security
Instrument is a first priority lien on the Mortgaged Premises subject only to
Permitted Encumbrances.
BANKRUPTCY "CRAM DOWN": With respect to any Mortgage Loan involved in a
bankruptcy proceeding, the reduction by the bankruptcy court of either the
Unpaid Principal Balance of the Note, accrued interest on the Note or the Note
Rate.
BORROWER: The Person or Persons obligated to make payments of principal
and interest on a Mortgage Loan, including but not limited to all borrowers
obligated jointly, severally or jointly and severally and all guarantors.
BUSINESS DAY: Any day other than a Saturday, Sunday or day when banks
are authorized or obligated to be closed under the laws of the State of Utah,
New York or California.
CONDOMINIUM INSURANCE (CONDOMINIUM INSURANCE POLICY): Multi-peril
insurance of required coverages covering the entire Condominium Project.
Coverage shall include fire and extended coverage and all other coverages based
on the construction, location and use of the Condominium Project. Coverage shall
be on a 100% replacement cost basis.
CONDOMINIUM PROJECT: Real estate, including the separate ownership in
fee, or on a satisfactory leasehold estate, of a particular residential unit
with an indivisible interest in the real estate designated for common ownership
strictly by unit owners.
CONDOMINIUM UNIT: A single family property within a Condominium
Project.
CURRENT SERVICER: Any other servicer, sub-servicer, document custodian,
owner, holder, originator, or other Person who, as of the date of this Agreement
or any related Servicing Agreement, has possession of any document or
information constituting a part of the Servicer Mortgage Loan File.
CURTAILMENT: Any partial prepayment of principal outstanding on a
Mortgage Loan that otherwise is current which prepayment is not accompanied by
an amount representing the full amount of scheduled interest due on the Mortgage
Loan.
CURTAILMENT INTEREST: When a Curtailment is applied retroactively by
the Servicer to the Unpaid Principal Balance of a Mortgage Loan outstanding on
the first day of the month in which the Curtailment is received, as set forth in
Section 505 herein, an amount equal to 30 days of interest on the Curtailment at
the Note Rate.
CUSTODIAL AGREEMENT: The respective agreement providing for custody of
Mortgage Loan Documents with respect to a particular group of Mortgage Loans
serviced pursuant to a Servicing Agreement.
CUSTODIAL MORTGAGE LOAN FILE: All documents, instruments and other
papers deposited with and held by the Custodian as to any Mortgage Loan,
including the documents specified in Section 403(a), as well as any other
documents that come into the Custodian's possession with respect to a Mortgage
Loan.
CUSTODIAL CLEARING ACCOUNT: An account maintained by the Servicer for
the benefit of the Owner for the deposit of all funds collected in connection
with the Mortgage Loans.
CUSTODIAL TAXES AND INSURANCE (T & I) ACCOUNT: As provided in Section
6.1.
DELINQUENCY: A Delinquency occurs when all or part of the Borrower's
Monthly Payment and, where applicable, Escrow is not paid on the Due Date. For
reporting purposes, a Delinquency that remains uncured for more than one
calendar month, but not more than two, is considered a 30-day Delinquency. A
Delinquency that has been uncured for more than two calendar months, but not
more than three, is considered a 60-day Delinquency. A Delinquency that has been
uncured for more than three calendar months or more is considered a 90-day and
over Delinquency.
DUE DATE: The day of each month on which the Borrower's Monthly Payment
and, where applicable, Escrow payment is due as stated in the Note.
DUE-ON-SALE CLAUSE: The clause in a Security Instrument requiring the
payment of the entire Mortgage Loan balance upon sale or transfer of an interest
in the Mortgaged Premises.
ENVIRONMENTAL PROBLEM PROPERTY: Shall have the meaning set forth in
Section 4.47.
ERRORS AND OMISSIONS POLICY: An insurance policy insuring against
losses caused by errors or omissions of the Servicer and its personnel,
including, but not limited to, losses caused by the failure to pay insurance
premiums or taxes, to record or perfect liens, to effect valid transfers of
Notes, or to properly service Mortgage Loans.
ESCROW: All funds collected by the Servicer to cover expenses of the
Borrower required to be paid under the Security Instrument, including, without
limitation, taxes, special assessments, association dues, ground rents, water,
sewer and other governmental impositions or charges that are or may become liens
on the Mortgaged Premises prior to that of the Mortgage Loan, as well as Hazard
Insurance and Flood Insurance.
▇▇▇▇▇▇ ▇▇▇: The entity formally known as The Federal National Mortgage
Association or any successor thereto.
▇▇▇▇▇▇ MAE GUIDELINES: The guidelines contained in the ▇▇▇▇▇▇ ▇▇▇
Seller's Guide and in the ▇▇▇▇▇▇ Mae Servicing Guide pertaining to
one-to-four-family, first lien, conventional residential mortgage loans, and
such other rules, regulations and guidelines adopted by ▇▇▇▇▇▇ ▇▇▇ that
establish eligibility requirements for the purchase of conventional, residential
mortgage loans by ▇▇▇▇▇▇ Mae or establish loan service requirements for mortgage
loans purchased by ▇▇▇▇▇▇ ▇▇▇, as amended or supplemented from time to time.
Wherever the Servicer is required to follow ▇▇▇▇▇▇ Mae Guidelines herein, the
Servicer shall apply such Guidelines to all Mortgage Loans regardless of whether
a Mortgage Loan is not of a type purchased by ▇▇▇▇▇▇ ▇▇▇.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FIDELITY BOND: An insurance policy insuring against losses caused by
improper or unlawful acts of the Servicer's personnel. Any Fidelity Bond shall
name the Owner, its successors and assigns as a certificate owner.
FLOOD INSURANCE (FLOOD INSURANCE POLICY): An insurance policy insuring
against flood damage to a Mortgaged Premises, required for Mortgaged Premises
located in "flood hazard" areas identified by the Secretary of HUD or the
Director of the Federal Emergency Management Agency.
▇▇▇▇▇▇▇ MAC: The Federal Home Loan Mortgage Corporation or any
successor thereto.
FULL PAYOFF: The amount required to satisfy a Mortgage Loan in full,
which amount includes the unpaid principal balance, interest due on account and
any other funds to be collected at the time of payoff, such as recording fees,
service fees, attorney fees, escrow advances, Prepayment Penalties, Late Charges
and other costs as applicable.
HAZARD INSURANCE (HAZARD INSURANCE POLICY): A fire and casualty
extended coverage insurance policy insuring against loss or damage from fire,
hazard, flood, wind, liability, and other perils covered within the scope of
standard extended hazard coverage, together with all riders and endorsements
thereto.
HUD: The United States Department of Housing and Urban Development.
INITIAL OWNER: Fremont Investment & Loan.
INSURANCE POLICY: Any insurance for a Mortgage Loan referred to in this
Agreement, including Hazard Insurance, Flood Insurance, Title Insurance and
Condominium or PUD Insurance, including all riders and endorsements thereto.
INSURANCE PROCEEDS: Proceeds payable from an Insurance Policy, to be
paid directly to the Tax and Insurance Reserve in the case of Hazard or Flood
Insurance, or to the P & I Account in the case of Title Insurance.
INSURER: An insurance company that provides an Insurance Policy.
LATE CHARGES: Any fees imposed on the Borrower by the Servicer for late
payments.
LIQUIDATION: Application of a payment to a Mortgage Loan which results
in the release in full of the lien of the Security Instrument on any Mortgaged
Premises, whether through foreclosure, condemnation, prepayment in full or
otherwise.
LIQUIDATION PROCEEDS: The amount received by the Servicer in connection
with any liquidation of a Mortgage Loan.
LOAN MATERIAL: Shall have the meaning specified in Section 10.11
hereof.
LOAN NUMBER: A unique number assigned by the Servicer to each Mortgage
Loan.
MASTER SERVICER: Fremont Investment & Loan, as master servicer of the
Mortgage Loans in connection with a securitization transaction, or any successor
thereto.
MODIFICATION AGREEMENT: A manually executed written instrument recorded
in the appropriate jurisdiction evidencing a change in the interest rate or
repayment terms of a Note.
MONTHLY CUT-OFF DATE: With respect to any Remittance Date, the last day
of the month preceding the month in which such Remittance Date occurs.
MONTHLY DOCUMENT REPORT: The monthly report prepared by the Servicer
and delivered to Owner pursuant to Section 7.4.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest due in the applicable month under the
terms of the Note. MORTGAGE LOAN: A loan that is secured by a mortgage, deed of
trust or deed to secure debt on the related Mortgaged Premises and that is
identified in a Mortgage Loan Schedule. The term "Mortgage Loan" includes all of
the Owner's right, title, and interest in and to the Mortgage Loan, including,
without limitation, the Mortgage Loan Documents and all other material and
information collected by the Servicer in connection with the Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: All documents held by the Owner (or its
designee), the Servicer or the Custodian, as set forth in Section 4.4.
MORTGAGE LOAN PROCEEDS: (i) The net sale proceeds of any REO, (ii) the
net sale proceeds at a foreclosure sale, (iii) the amount of a Full Payoff or
Short Payoff, (iv) any payment by a Borrower resulting in the Liquidation of a
Mortgage Loan, or (v) the proceeds from the sale by the Owner of a Mortgage Loan
that is the subject of this Agreement, in each case after deduction from the
proceeds or payment of an amount equal to all Protective Advances made by the
Servicer in connection with the related Mortgage Loan and not previously
reimbursed.
MORTGAGE LOAN SALE AGREEMENT: The agreement pursuant to which Owner,
other than the Initial Owner purchased a Mortgage Loan.
MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached as an
exhibit to a Servicing Agreement.
MORTGAGED PREMISES: The property securing a Note and subject to the
lien of the related Security Instrument, which property consists of real
property on which is located a one-to four-family detached residential dwelling,
condominium or attached town house or row house.
MORTGAGEE: The secured party to which the Security Instrument initially
grants a lien on the Mortgaged Premises.
NOTE: A manually executed written instrument evidencing the Borrower's
promise to repay a stated sum of money, plus interest, to the noteholder by a
specific date according to a schedule of principal and interest payments.
NOTE ASSUMPTION RIDER: A rider attached to the Note which states the
terms upon which an Assumption may occur.
NOTE RATE: The interest rate payable by the Borrower on the Mortgage
Loan according to the terms of the Note.
OFFICER: An officer or principal of a corporation or partnership,
respectively, who is authorized to execute documents on behalf of his
corporation or partnership.
OFFICER'S CERTIFICATE: For any Person, a certificate that has been
signed on behalf of that Person by an individual who is identified in that
Certificate as being an officer of that Person or any other individual
authorized to execute the certificate.
OWNER: Fremont Investment & Loan, its assigns and their respective
successors in interest; provided, however, that upon a transfer of its interest
in the Mortgage Loans in connection with a securitization transaction, the term
"Owner" shall, where applicable, refer to the Master Servicer acting on behalf
of the Owner.
PERMITTED ENCUMBRANCES: With respect to any Mortgage Loan, (i) the lien
created by the Security Instrument, (ii) liens for taxes and assessments due and
payable, (iii) covenants, conditions and restrictions, rights-of-way, easements
and other matters of public record as of the date of recording of such Security
Instrument acceptable to mortgage lending institutions in the area in which the
Mortgaged Premises are located or specifically referred to in the appraisal
performed in connection with the origination of the related Mortgage Loan, and
(iv) such other matters to which like properties are commonly subject which in
the view of the Servicer do not, individually or in the aggregate, materially
interfere with the benefits of the security intended to be provided by the
Security Instrument.
PERMITTED INVESTMENTS: Any one or more of the obligations or securities
listed below, which investments mature, unless payable on demand, not later than
the Business Day preceding the next occurring Remittance Date:
(i) direct obligations of, or obligations fully guaranteed as
to principal and interest by, the United States or any agency or
instrumentality thereof, provided that such obligations are backed by
the full faith and credit of the United States;
(ii) certificates of deposit, demand and time deposits and
bankers' acceptances of any bank or trust company incorporated under
the laws of the United States or any state, provided that the
short-term unsecured debt obligations of such bank or trust company at
the date of acquisition thereof have been rated by each of two or more
nationally recognized statistical rating organizations in its highest
rating category; and
(iii) any other demand, money market or time deposit account
or obligation, or interest-bearing or other security or investment,
acceptable to the Owner.
Notwithstanding the foregoing, Permitted Investments shall not include "stripped
securities" or any investments which contractually may return less than the
purchase price therefor; and provided, further, that in the event that the Owner
transfers the Mortgage Loans in connection with a securitization financing,
Permitted Investments shall be defined in accordance with the provisions of the
operative documents executed in connection with such securitization financing.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government, or any agency or political
subdivision of any government.
PREPAYMENT PENALTIES: Any penalties imposed on the Borrower as the
result of the prepayment of the related Mortgage Loan.
PRINCIPAL AND INTEREST (P & I) ACCOUNT: As provided in Section 6.1.
PROTECTIVE ADVANCE: All customary, reasonable, and necessary
out-of-pocket costs and expenses paid or incurred in connection with the
Servicer's obligations hereunder or in connection with any special services to
be performed by the Servicer pursuant to this Agreement, including without
limitation:
(a) real estate taxes, assessments and similar charges;
(b) insurance premiums;
(c) any expense necessary in order to prevent or cure any violation of
applicable laws, regulations, codes, ordinances, rules, orders, judgments,
decrees, injunctions or restrictive covenants;
(d) any cost or expense necessary in order to maintain or release the
lien on each Mortgaged Property and related collateral, including any mortgage
registration taxes, release fees, or recording or filing fees;
(e) customary expenses for the collection, enforcement or foreclosure
of the Mortgage Loans and the collection of deficiency judgments against
Borrowers and guarantors (including but not limited to the fees and expenses of
any trustee under a deed of trust, foreclosure title searches and other lien
searches);
(f) costs and expenses of any appraisals, valuations, inspections,
environmental assessments (including but not limited to the fees and expenses of
environmental consultants), audits or consultations, engineers, architects,
accountants, on-site property managers, market studies, title and survey work
and financial investigating services;
(g) customary expenses for liquidation, restructuring, modification or
loan workouts, such as sales brokerage expenses and other costs of conveyance;
and
(h) any other reasonable costs and expenses, including without
limitation, costs and expenses related to travel and lodging and legal fees and
expenses incurred by the Servicer under this Agreement in connection with the
enforcement, collection, foreclosure, disposition, condemnation or destruction
of the Mortgage Loans or related Mortgaged Properties and the performance of
Loan Servicing by the Servicer under this Agreement.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that contains
property and improvements owned and maintained by a homeowners' association,
corporation or trust for the enjoyment and use of individual PUD Unit owners
within that parcel of land. The shared portions of the parcel are known as
common property.
PUD INSURANCE (PUD INSURANCE POLICY): Insurance which provides the same
coverage as Condominium Insurance, but for a PUD.
PUD UNIT: A single family property within a PUD.
REAL ESTATE OWNED (REO): Any Mortgaged Premises previously subject to
the lien of a Mortgage Loan after the title thereto has been acquired on behalf
of the Owner through foreclosure or similar proceedings, acceptance of
deed-in-lieu of foreclosure, acquisition of title in lieu of foreclosure or the
acquisition of title by operation of law.
RECEIPT: As provided in Section 4.5.
REMITTANCE DATE: The fifth Business Day of each month.
REPERFORMANCE: Any event or action, including payment by the Borrower,
that causes a Mortgage Loan that was previously sixty (60) days or more past due
to be less than sixty (60) days past due as of the first Business Day of any
calendar month.
REPRESENTATIVE: Shall have the meaning specified in Section 10.11
hereof.
REPURCHASE PRICE: With respect to a Mortgage Loan repurchased pursuant
to a Mortgage Loan Sale Agreement, the amount paid by the Seller upon repurchase
of a Mortgage Loan.
REQUIREMENTS: All federal, state or local laws and any other
requirements of any government or any agency or instrumentality thereof
applicable to the servicing of the Mortgage Loans, the management of the
Mortgaged Premises and the provision of services hereunder by the Servicer.
RESOLUTION: With respect to any Mortgage Loan, the Full Payoff, the
acceptance of a Short Payoff, any other Liquidation, the execution of a
Modification Agreement, or the Reperformance of such Mortgage Loan; provided,
however, that the execution of a Modification Agreement or Reperformance with
respect to any Mortgage Loan shall only be deemed to be a Resolution if the
Borrower with respect to such Mortgage Loan makes or causes to be made three
consecutive monthly payments after the execution of such Modification Agreement
or the Reperformance of such Mortgage Loan.
SECURITY INSTRUMENT: A written instrument creating a valid lien on the
Mortgaged Premises. A Security Instrument may be in the form of a mortgage, deed
of trust, deed to secure debt or security deed, including any riders and addenda
thereto.
SELLER: The seller of Mortgage Loans to the Owner pursuant to a
Mortgage Loan Sale Agreement.
SERVICER MORTGAGE LOAN FILE: A file maintained by the Servicer for each
Mortgage Loan that contains the documents, if applicable, specified in Section
4.4 (to the extent received by the Servicer), as well as any documents or other
information that, in any form, comes into the Servicer's possession with respect
to a Mortgage Loan.
SERVICING AGREEMENT: An agreement between the Servicer and the Owner in
the form of Exhibit A attached hereto.
SERVICING COMMENCEMENT DATE: The date set forth in a Servicing
Agreement as the "Servicing Commencement Date" with respect to the Mortgage
Loans serviced thereunder.
SERVICING FEE: The compensation to which the Servicer is entitled for
servicing the Mortgage Loans pursuant to this Agreement. The amount and method
of determining the Servicing Fee is described in Section 8.1.
SHORT PAYOFF: The amount received under an arrangement entered into
with a delinquent Borrower whereby the Servicer allows the Borrower to sell the
property to a third party at less than the outstanding balance owed by the
Borrower on a Mortgage Loan.
THIRD PARTIES: With respect to any Person, all persons and entities
other than (a) such Person, (b) its Affiliates and their respective successors
and (c) the officers, directors, partners, shareholders, employees (including
"contract employees"), agents and other representatives of such Person acting in
their respective capacities as such.
TITLE INSURANCE (TITLE INSURANCE POLICY): An American Land Title
Association (ALTA) mortgage loan title policy form 1970, or other form of
lender's title insurance policy acceptable to ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac,
including all riders and endorsements thereto, insuring that the Security
Instrument constitutes a valid lien on the Mortgaged Premises subject only to
Permitted Encumbrances.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan, the
outstanding principal balance payable by the Borrower under the terms of the
Note.
SECTION 1.2. INTERPRETATION OF AGREEMENT.
(a) All references in this Agreement to designated Sections,
Articles, Exhibits, and Schedules are to the designated sections and
articles of and exhibits and schedules to this Agreement.
(b) Use of the masculine gender is intended to include the
feminine and neuter genders.
(c) The headings and captions used in this Agreement are for
convenience of reference only and do not define, limit, or describe the
scope or intent of the provisions of this Agreement.
(d) Terms in the singular include the plural and vice versa.
(e) The terms "includes" or "including" are intended to be
inclusive rather than exclusive.
(f) The term "reasonable efforts" or "best efforts" shall mean
the efforts a prudent person desirous of achieving a result would take
in order to achieve that result but shall not be interpreted to require
the Owner or Servicer, as the case may be, to initiate or participate
in any litigation, arbitration, or other proceedings or to incur
expenses in excess of those contemplated by this Agreement or that are
otherwise commercially reasonable in light of the result to be
achieved.
ARTICLE II
DOCUMENTS TO BE DEPOSITED WITH CUSTODIAN
SECTION 2.1. CUSTODIAL AGREEMENT.
Pursuant to the Custodial Agreement, the Owner has or will deliver and
release to the Custodian on or prior to the Servicing Commencement Date the
Mortgage Loan Documents specified in the Custodial Agreement with respect to
each Mortgage Loan, including but not limited to those specified in Section
4.4(a). In the event of any conflict, inconsistency, or discrepancy between any
of the provisions of this Agreement and any of the provisions of the Custodial
Agreement, the provisions of this Agreement shall control and be binding upon
the Owner and the Servicer.
On or prior to the Servicing Commencement Date, the Custodian shall
have certified its receipt of the Mortgage Loan Documents that have been
delivered to the Custodian pursuant to the Custodial Agreement, as evidenced by
the Initial Certification of the Custodian in the form annexed to the Custodial
Agreement. The Owner shall pay all fees and expenses of the Custodian including
but not limited to, (i) any and all annual and warehousing fees, (ii) any and
all termination fees in the event the Custodian is terminated by the Owner or
the Servicer, and (iii) any and all fees due in connection with the deposit or
retrieval of a Mortgage Loan document or documents.
The Owner shall deliver and release to the Servicer any Mortgage Loan
Documents which are in the Owner's possession and which are not required to be
held by the Custodian as promptly as is reasonably possible after the Servicing
Commencement Date.
The Servicer shall forward to the Custodian original documents
evidencing an assumption, modification, consolidation, or extension of any
Mortgage Loan entered into in accordance with this Agreement or any related
Servicing Agreement within one week of their execution, provided, however, that
the Servicer shall provide the Custodian with a certified true copy of any such
document submitted for recordation within one week of its execution, and shall
provide the original of any document submitted for recordation or a copy of such
document certified by the appropriate public recording office to be a true and
complete copy of the original within sixty days of its submission for
recordation.
SECTION 2.2. POSSESSION OF MORTGAGE FILES.
The ownership of each Mortgage Loan, including the Note, the Security
Instrument, the related Mortgage Loan Documents and all rights, benefits,
payments, proceeds and obligations arising therefrom or in connection therewith,
is vested in the Owner, and the ownership of all records and documents with
respect to such Mortgage Loan prepared by or which come into the possession of
the Servicer shall immediately vest in the Owner and shall be retained and
maintained, in trust, by the Servicer at the will of the Owner in a custodial
capacity only. The Mortgage Loan Documents not delivered to the Owner or a
Custodian are and shall be held in trust by the Servicer for the benefit of the
Owner as the owner thereof and the Servicer's possession of the Mortgage Loan
Documents so retained is at the will of the Owner for the sole purpose of
servicing the related Mortgage Loan, and such retention and possession by the
Servicer is in a custodial capacity only. The Mortgage Loan Documents with
respect to each Mortgage Loan shall be segregated from the other books and
records of the Servicer and shall be appropriately marked to clearly reflect the
ownership of such Mortgage Loan by the Owner. The Servicer shall release its
custody of any Mortgage Loan Documents only in accordance with written
instructions from the Owner except where such release is required as incidental
to the Servicer's servicing of the related Mortgage Loans or is in connection
with a repurchase of any such Mortgage Loan pursuant to Section 3.03, or is
otherwise contemplated by this Agreement.
Any documents released to the Servicer in connection with the
foreclosure or servicing of any of the Mortgage Loans shall be held by the
Servicer in trust for the benefit of the Owner in accordance with this Section
2.2. The Servicer shall return to the Owner such documents when the Servicer's
need therefor in connection with such foreclosure or servicing no longer exists,
unless the Mortgage Loan shall be liquidated, in which case, upon receipt of an
additional request for release of documents and receipt certifying such
liquidation from the Servicer to the Owner, the Servicer's request and receipt
submitted pursuant to the first sentence of this paragraph shall be released by
the Owner to the Servicer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. SERVICER REPRESENTATIONS AND WARRANTIES.
The Servicer, in order to induce the consummation of the transactions
contemplated hereby, represents and warrants to Owner and to its successors,
Affiliates and assigns, as of the date of this Agreement, as of the date of any
Servicing Agreement and, except as otherwise provided, throughout the term of
this Agreement, that:
(a) The Servicer was duly formed and is validly existing and
in good standing under the laws of the state of its formation and has
the corporate power and authority to own its assets and to transact the
business in which it is currently engaged. The Servicer is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which the character of
the business transacted by it, in which the properties owned, leased,
or serviced by it or in which the performance of its duties under this
Agreement or any related Servicing Agreement requires such
qualification (except where the failure so to qualify would not have a
material adverse effect on the business, properties, assets, or
condition (financial or otherwise) of the Servicer or Owner, the
Servicer's performance of its obligations hereunder and the
enforceability of any Mortgage Loan).
(b) The Servicer has the power and authority to own its
properties and conduct any and all business required or contemplated by
this Agreement and any related Servicing Agreement and to perform the
covenants and obligations to be performed by it under this Agreement
and any related Servicing Agreement.
(c) The execution, delivery, and performance of this Agreement
and any related Servicing Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement and any Servicing
Agreement), and the performance of all transactions contemplated to be
performed by it under this Agreement and any related Servicing
Agreement, are within the corporate power of the Servicer and have been
duly authorized by all necessary actions on the part of the Servicer.
Neither the execution, delivery, and performance of this Agreement by
the Servicer, nor the consummation by the Servicer of the transactions
herein contemplated, nor compliance with the provisions hereof by the
Servicer, will (i) conflict with or result in a breach of, or
constitute a default under, any of the provisions of the charter or
bylaws of the Servicer or any law, governmental rule, or regulation, or
any judgment, decree, or order binding on the Servicer or any of its
properties, or any of the provisions of any indenture, mortgage, deed
of trust, contract, or other instrument to which it is a party or by
which it or any of its properties is bound or (ii) result in the
creation or imposition of any lien, charge, or encumbrance upon any of
its properties pursuant to the terms of any such indenture, mortgage,
deed of trust, contract, or other instrument.
(d) This Agreement and any related Servicing Agreement, when
duly executed and delivered by the Owner, constitutes a legal, valid,
and binding agreement of the Servicer, enforceable against it in
accordance with its terms, subject, as to enforcement or remedies, to
applicable bankruptcy, reorganization, insolvency, or other similar
laws affecting creditors' rights generally from time to time in effect,
and to general principles of equity.
(e) No consent, approval, order, or authorization of any other
party or of any governmental authority, bureau, or agency or
registration, qualification, or declaration with any such authority is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement or any related Servicing
Agreement.
(f) The Servicer is an approved servicer for ▇▇▇▇▇▇▇ Mac in
good standing and such approval is still in full force and effect. No
event has occurred that would make the Servicer unable to comply with
▇▇▇▇▇▇▇ Mac eligibility requirements, would require notification to
▇▇▇▇▇▇▇ Mac or that would result in a breach of the representation made
in the preceding sentence. The Servicer has the facilities, procedures
and experience necessary for the sound servicing of mortgage loans of
the same type as the Mortgage Loans.
(g) The Servicer is not, and, with passage of time, does not
expect to become, insolvent or bankrupt.
(h) At the date hereof, the Servicer does not believe, nor
does it have any reason or cause to believe, that it will not be able
to perform each and every covenant contained in this Agreement or any
related Servicing Agreement or any of the transactions contemplated
hereby or thereby.
(i) There is no litigation or administrative proceeding of or
before any court, tribunal, or governmental body, pending or, to the
Servicer's knowledge, threatened, against the Servicer or any of its
properties, or with respect to this Agreement or any related Servicing
Agreement, which if determined adversely to the Servicer, would
adversely affect the validity or enforceability of this Agreement, any
related Servicing Agreement or any transactions contemplated hereby or
thereby, or the ability of the Servicer to service the Mortgage Loans
hereunder in accordance with the terms hereof, or which would have a
material adverse effect on the financial condition of the Servicer.
(j) The consummation of the transactions contemplated by this
Agreement and any related Servicing Agreement is in the ordinary course
of business of the Servicer.
(k) Neither this Agreement nor any written statement, report,
or other document furnished or to be furnished pursuant to this
Agreement contains any material untrue statement of fact with respect
to Servicer.
(l) The Servicer is not in default under any agreement,
contract, instrument, or indenture of any nature whatsoever to which
the Servicer is a party or by which it is bound nor has any event
occurred which with notice or lapse of time or both would constitute a
default under any such agreement, contract, instrument, or indenture,
except for any default that would not have a material adverse effect on
the ability of the Servicer to perform its obligations under this
Agreement or any related Servicing Agreement.
(m) The Servicer has delivered to the Owner financial
statements as to its last three complete fiscal years and any later
quarter ended more than 60 days prior to the closing date of this
Agreement or any related Servicing Agreement. All such financial
statements fairly present the results of operations and changes in
financial position for each of such periods and the financial position
at the end of each such period of the Servicer and its subsidiaries.
All such financial statements are true, correct and complete as of
their respective dates and have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth in the notes
thereto.
SECTION 3.2. OWNER REPRESENTATIONS AND WARRANTIES.
The Owner, as a condition to the consummation of the transactions
contemplated hereby, represents and warrants to the Servicer and to its
successors, Affiliates, or assigns, as of the date of this Agreement that:
(a) The Owner was duly formed and is validly existing and in
good standing under the laws of the state of its formation, and is duly
qualified to do business and is in good standing under the laws of each
jurisdiction that requires such qualification as a result of Owner's
ownership of the Mortgage Loans or the performance of Owner's
obligations to effect the transactions contemplated by this Agreement
except where the failure to so qualify would not have a material
adverse effect on the Owner's performance of its obligations under this
Agreement.
(b) The Owner has the power and authority to own its
properties and conduct any and all business required or contemplated by
this Agreement and to perform the covenants and obligations to be
performed by it under such Agreement.
(c) The execution and delivery of this Agreement have been
duly authorized by all necessary actions on the part of the Owner;
neither the execution and delivery of this Agreement by the Owner, nor
the consummation by the Owner of the transactions herein contemplated,
nor compliance with the provisions hereof by the Owner, will conflict
with or result in a breach of, or constitute a default under, any of
the provisions of the limited partnership agreement or partnership
certificate of the Owner or any law, governmental rule or regulation,
or any judgment, decree or order binding on the Owner or any of its
properties, or any of the provisions of any indenture, mortgage, deed
of trust, agreement or other instrument to which it is a party or by
which it is bound
(d) This Agreement, when duly executed and delivered by the
Owner, constitutes a legal, valid and binding agreement of the Owner,
enforceable in accordance with its terms, subject, as to enforcement or
remedies, to applicable bankruptcy, reorganization, insolvency or other
similar laws affecting creditors' rights generally from time to time in
effect, and to general principles of equity.
(e) There is no litigation pending or, to the Owner's
knowledge, threatened that, if determined adversely to the Owner, would
have a materially adverse effect on the validity or enforceability
hereof.
(f) No consent, approval, order or authorization of any
governmental authority, or registration, qualification or declaration
with any such authority, other than such as have been obtained, is
required for the performance by Owner of its obligations under this
Agreement.
(g) This Agreement does not contain with respect to Owner any
material untrue statement of fact.
SECTION 3.3. BREACH OF REPRESENTATION OR WARRANTY.
Upon breach of any material requirement or representation or warranty
contained herein or in any related Servicing Agreement, the breaching party
shall notify the other party in writing of the nature of the breach, the date on
which the breach occurred or began, and the breaching party's plans, if any, for
curing the breach.
SECTION 3.4. COOPERATION.
(a) Upon reasonable request by the Servicer, Owner shall
promptly furnish the Servicer with such documents prepared by the
Servicer and satisfactory in form and substance to Owner as may be
necessary or appropriate to enable the Servicer to liquidate, collect
payments against and otherwise service and manage the Mortgage Loans
and Mortgaged Premises in accordance with this Agreement.
(b) The parties acknowledge that Owner will retain title to,
and ownership and exclusive control of, the Mortgage Loans and the
proceeds relating thereto (except to the extent that the Servicer is
entitled to any Protective Advances or Servicing Fees (including
Ancillary Income) prior to disbursing any such proceeds to Owner, to
the extent Servicer is so authorized pursuant to other terms and
provisions in this Agreement) and that, except as set forth in the
preceding parenthetical, the Servicer will not acquire any title to,
security interest in, or other rights of any kind in or to such
Mortgage Loans or proceeds.
(c) Each party agrees that it shall take all actions and
provide such documents and instruments as are reasonably necessary to
carry out the purposes of this Agreement and any related Servicing
Agreement and as may be reasonably requested to better assure and
confirm the respective rights and obligations of the parties under this
Agreement and any related Servicing Agreement. It is understood and
agreed that the foregoing provision shall not operate to preclude or
inhibit either party from the full exercise of its rights under this
Agreement or any related Servicing Agreement.
(d) The Servicer shall be responsible for responding promptly
and accurately to all reasonable requests from Owner, the Borrower or
other Persons for information relating to a Mortgage Loan or any
Mortgaged Premises or to the Borrower that the Servicer is required or
permitted to disclose to such Person, upon compliance by such Person of
any conditions to the release of such information.
(e) The Servicer shall promptly prepare all reports or other
information required to respond to any inquiry from or give any
necessary instructions to provider of hazard or flood insurance, or
other insurer or guarantor, taxing authority, tax servicer, homeowners
association, or condominium association.
(f) At the request and at the expense of the Owner, the
Servicer shall prepare and record or cause the preparation and
recordation of any and all deeds, assignments of mortgage, and
ancillary instruments relating to the conveyance of the Mortgaged
Premises and the Mortgage Loans to Owner or its designee, and shall
supervise the efforts of any third party in preparing and recording
such deeds and assignments of mortgage and ancillary instruments.
(g) At the request and expense of Owner, the Servicer shall
cooperate with Owner in facilitating any financing or securitization of
the Mortgage Loans (including furnishing such reports and information
with respect to the Mortgage Loans as Owner may reasonably request),
and facilitating the transfer of servicing of the Mortgage Loans to
such entity as Owner may designate in connection with a securitization
of the Mortgage Loans.
(h) The Servicer and any director, officer, employee or agent
of the Servicer may rely on any document of any kind which it in good
faith reasonably believes to be genuine and to have been adopted or
signed by the proper authorities respecting any mattters arising
hereunder. Subject to the terms of Section 9.06 hereof, the Servicer
shall have no obligation to appear with respect to, prosecute or defend
any legal action which is not incidental to the Servicer's duty to
service the Mortgage Loans in accordance with this Agreement.
(i) Except as set forth in Section 9.06 herein, neither the
Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to any Person 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 Servicer or any such
Person against any liability that would otherwise be imposed by reason
of willful misfeasance, bad faith or negligence in its performance of
its duties or by reason of reckless disregard for its obligations and
duties under this Agreement. The Servicer and any directors, officer,
employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder.
ARTICLE IV
LOAN ADMINISTRATION
SECTION 4.1. GENERAL.
The Servicer agrees, as an independent contractor, to service the
Mortgage Loans and each Mortgaged Premises in accordance with the requirements
set forth herein and, to the extent not inconsistent therewith, in accordance
with Accepted Servicing Practices and generally in accordance with ▇▇▇▇▇▇ ▇▇▇
guidelines. The Servicer also shall maintain at all times an adequate system of
audit and internal controls, adequate facilities and an experienced staff to
carry out its obligations.
SECTION 4.2. SERVICING COMMENCEMENT DATE.
The Servicer shall commence administering the Mortgage Loans pursuant
to the terms and conditions of this Agreement on the Servicing Commencement
Date.
(a) Owner shall instruct the Current Servicer of any Mortgage
Loans to transfer to the Servicer on or prior to the related Servicing
Commencement Date the Servicer Mortgage Loan Files and/or servicing
records necessary to provide current data with respect to each of such
Mortgage Loans. In the event that not all of the related Servicer
Mortgage Loan Files and/or necessary servicing records are transferred
on the Servicing Commencement Date, the Owner and Servicer shall use
reasonable efforts to cause the Current Servicer to transfer to the
Servicer any Servicer Mortgage Loan Files and/or servicing records
necessary to provide current data with respect to each Mortgage Loan
and each Mortgaged Premises listed on the Mortgage Loan Schedule that
are not transferred to the Servicer on the Servicing Commencement Date.
The Servicer shall transfer and convert the Servicer Mortgage Loan
Files to the Servicer's system as soon as reasonably possible from the
date of receipt by the Servicer of the Servicer Mortgage Loan Files and
such other documents as are reasonably necessary to service the
Mortgage Loans and Mortgaged Premises from the Current Servicer.
(b) In the event Servicer determines that the Servicer
Mortgage Loan File for a Mortgage Loan or any Mortgaged Premises does
not contain all of the Mortgage Loan Documents or other documents
reasonably necessary to service the Mortgage Loan or Mortgaged
Premises, the Servicer shall notify Owner in writing promptly, but in
no event later than thirty (30) days after the date on which Servicer
had actual knowledge of such determination of all such missing
necessary documents. For the purposes of the immediately preceding
sentence and Section 7.4, the phrase "actual knowledge" shall mean that
the Servicer shall only be responsible for examining the "four corners"
of the Servicer Mortgage Loan File presented to the Servicer by the
Owner or the Current Servicer (as the case may be) and verifying that
each such Servicer Mortgage Loan File contains the Mortgage Loan
Documents specified in writing or that are customary for the type of
Mortgage Loan involved (e.g., a promissory note, deed of trust or
mortgage, mortgagee's title policy, and appropriate assignments of the
deed of trust or mortgage); the Servicer shall have no responsibility
for determining whether there are particular missing documents if the
documents (or any writing specifying such documents) presented to
Servicer do not disclose the existence of such missing document (e.g.,
a loan modification not included in the file delivered to the Servicer
by the Owner and not referenced in any of the Mortgage Loan Documents
in the file). Following such determination, the Servicer shall
determine in accordance with Accepted Servicing Practices what
additional documents and information should be obtained for the related
Servicer Mortgage Loan File and shall use reasonable efforts to obtain
such documents and information as soon as reasonably practicable.
(c) All documents provided to the Servicer pursuant to this
Section 4.2 shall be held in trust by the Servicer on behalf of the
Owner pursuant to the terms of Sections 2.2 and 4.4.
(d) Owner agrees to cooperate fully with the Servicer with
respect to all reasonable requests made by the Servicer in connection
with the transfer of servicing pursuant to this Section 4.2.
SECTION 4.3. DUTIES SERVICER MAY DELEGATE.
As set forth below, the Servicer is permitted to delegate certain
servicing responsibilities. No other duties may be delegated without the written
consent of the Owner. The Servicer may retain or subcontract with:
(a) Real estate brokers or listing agents to perform customary
services in connection with the disposition of Mortgaged Premises;
(b) Title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the condition of title
to any Mortgaged Premises and services incidental to the foreclosure or
acquisition in lieu of foreclosure of any Mortgaged Premises, or the
sale or disposition of Mortgaged Premises acquired by the Servicer;
(c) Attorneys licensed to practice in the state where the
Mortgaged Premises or Borrowers are located to perform customary legal
services in connection with the foreclosure or acquisition of Mortgaged
Premises or the sale or disposition of Mortgaged Premises acquired by
the Servicer at or in lieu of foreclosure, or for the collection of
delinquent sums owed on any Mortgage Loan;
(d) Professional property inspection companies to conduct
routine inspections of, and provide written inspection reports on,
Mortgaged Premises as required herein;
(e) Title companies, escrow companies, real estate tax service
companies and similar companies to provide periodic reports as to the
amount of real estate taxes due on any Mortgaged Premises and the due
date or dates of each required installment and to record Mortgage Loan
Documents;
(f) Credit bureaus or credit reporting companies to provide
routine credit reports on Borrowers or persons who have applied to
assume Mortgage Loans; and
(g) Construction companies, contractors and laborers to
provide labor, materials and supplies necessary to protect, preserve
and repair Mortgaged Premises as required herein.
The Servicer shall use reasonable efforts to assure that each Person
retained to provide any of the foregoing services is fully licensed and holds
all required governmental franchises, certificates and permits necessary to
conduct the business in which he is engaged and that such Person is reasonably
reputable, knowledgeable, skilled and experienced and has the necessary
personnel, facilities and equipment required to provide the services for which
he is retained. Any such Person shall be retained solely for the Servicer's
account and at the Servicer's sole expense (subject to any right of
reimbursement provided in this Agreement and shall not be deemed to be an agent
or representative of the Owner or its successors or assigns. The Servicer shall
remain liable to the Owner, its successors and assigns for the performance of
the Servicer's duties and obligations under this Agreement, notwithstanding the
delegation of any servicing function pursuant to this Section 4.3.
SECTION 4.4. SERVICER MORTGAGE LOAN FILES.
The Servicer shall maintain a Servicer Mortgage Loan File for each
Mortgage Loan, each of which is to be clearly marked with the Loan Number and to
be clearly marked to reflect the ownership by the Owner of the related Mortgage
Loan. Such Servicer Mortgage Loan Files shall conform to and will be maintained
in accordance with all applicable Requirements and Accepted Servicing Practices.
(a) The Servicer Mortgage Loan File shall contain the
following, to the extent received by the Servicer upon the Servicer's
request from the Custodian for photocopies of each:
(i) Note. The Note bearing all intervening
endorsements, endorsed in blank, without recourse;
(ii) Security Instrument. The Security Instrument,
with evidence of recording thereon;
(iii) Assumptions and Modifications. All assumption,
modification, consolidation or extension agreements, with
evidence of recording thereon;
(iv) Insurance. Evidence of insurance, as required by
Section 4.12 hereof;
(v) Assignments. An Assignment of the Security
Instrument, executed in blank, and all intervening Assignments
with evidence of recording thereon; and
(vi) Title Policy. A policy of title insurance
including riders and endorsements thereto, or the commitment
or interim binder or preliminary report of the title issued.
Notwithstanding any provisions herein to the contrary, blanket
assignments may be kept by the Servicer in a separate blanket file and need not
be included in each Servicer Mortgage Loan File.
(b) The Servicer Mortgage Loan File shall also contain the
following, to the extent received by the Servicer:
(i) The Appraisal Report made at the time the
Mortgage Loan was originated;
(ii) The settlement statement for the purchase and
financing or refinancing of the Mortgaged Premises under the
Note and Security Instrument;
(iii) The originals of any tax service contract;
(iv) Approval by the Owner of any modifications and
documentation of such modifications to the original Mortgage
Loan Documents, and approval by the Owner of all other actions
taken by the Servicer hereunder that require the approval of
Owner;
(v) Documentation, including appropriate approval by
the Owner, relating to any releases of any collateral
supporting the Mortgage Loan;
(vi) Collection letters or form notices sent to the
Borrower, but only if the Servicer does not maintain
collection files;
(vii) Foreclosure correspondence and legal
notifications, if applicable;
(viii) Water and irrigation company stock
certificates, if applicable;
(ix) The loan application, any credit reports,
verification of employment, verification of any deposit, and
tax returns;
(x) The originals of all RESPA and Truth in Lending
Act disclosure statements executed by the Borrower; and
(xi) All other Mortgage Documents which are
customarily maintained in a Mortgage Loan file in order to
properly service a Mortgage Loan.
The Servicer will promptly deliver to the Custodian any other Mortgage
Loan Document to be included in the Custodial Mortgage Loan File that comes into
the Servicer's possession.
The Servicer acknowledges that the Servicer will hold all Servicer
Mortgage Loan Files in accordance with Accepted Servicing Practices and as
bailee and agent for the Owner, its successors and assigns.
SECTION 4.5. RELEASE OF CUSTODIAL MORTGAGE LOAN FILES.
From time to time as is appropriate for the servicing or foreclosure of
a Mortgage Loan or the acquisition of Mortgaged Premises in lieu of foreclosure
or for the making of any claim against or collection under any Flood Insurance
Policy, Special or Standard Hazard Insurance Policy, the Servicer Fidelity Bond,
the Servicer Errors and Omissions Policy, or for purposes of effecting a partial
release of any Mortgaged Premises from the lien of the Security Instrument or
for making any corrections to the Note or the Security Instrument or other
documents constituting the Custodial Mortgage Loan File, the Servicer shall
deliver to the Custodian, (i) an Officer's Certificate of the Servicer
certifying as to the reason for such release and that such release will not
invalidate the insurance coverage provided in respect to the Mortgage Loan under
any of the foregoing insurance policies, and (ii) a "Receipt" in the form of
Exhibit B executed by an officer of the Servicer or by a Servicing Officer,
designating the Custodial Mortgage Loan File, or the part thereof requested, to
be released to the Servicer.
Upon receipt of the foregoing, the Custodian will deliver to the
Servicer the Custodial Mortgage Loan File or documents so requested. The
Servicer shall cause the Custodial Mortgage Loan File or documents so released
to be returned to the Custodian when the need therefor by the Servicer no longer
exists, unless the Mortgage Loan is liquidated and the proceeds thereof are
deposited in a P & I Account. Upon receipt of an Officer's Certificate of the
Servicer stating that such Mortgage Loan was liquidated and the Mortgage Loan
Proceeds were deposited in a P & I Account, the servicing receipt shall be
released by the Custodian to the Servicer.
The Servicer shall retain possession of any Custodial Mortgage Loan
File or documents therein which have been released to the Servicer by the
Custodian at all times unless (i) the Mortgage Loan has been liquidated and the
Insurance Proceeds or Liquidation Proceeds relating to the Mortgage Loan have
been deposited in a P & I Account, (ii) the Custodial Mortgage Loan File or
documents have been delivered to an attorney or to a public trustee or other
public official as required by law or is desirable for purposes of initiating
pursuing or evaluating possible legal action or other proceedings for the
foreclosure of the Mortgage Premises and the Servicer has delivered to the
Custodian a certificate of a Servicing Officer certifying as to the name and
address of the Person to which the Custodial Mortgage Loan File or documents
were delivered and the purpose or purposes of such delivery or (iii) the
Servicer's need therefor no longer exists and the Servicer returns the Custodial
Mortgage Loan File to the Custodian pursuant to the previous paragraph.
SECTION 4.6. DOCUMENTS, RECORDS, AND FUNDS IN POSSESSION OF SERVICER TO
BE HELD FOR OWNER.
The Servicer shall transmit to the Custodian the documents and
instruments required to be delivered under Section 2.1 hereof coming into the
possession of the Servicer from time to time and shall account fully to the
Owner for all funds received by the Servicer as Liquidation Proceeds or
Insurance Proceeds in respect of any Mortgage Loan. All Custodial Mortgage Loan
Files, Servicer Mortgage Loan Files and funds collected or held by, or under the
control of, the Servicer in respect of any Mortgage Loans, whether from the
collection of principal and interest payments or from Liquidation Proceeds or
Insurance Proceeds, shall be held by the Servicer for and on behalf of the Owner
and shall be and remain the sole and exclusive property of the Owner. The
Servicer also agrees that it shall not create, incur or subject any Servicer
Mortgage Loan File, Custodial Mortgage Loan File or funds that are deposited in
any P & I Account or Custodial T & I Account, or any funds that otherwise are or
may become due or payable to the Owner, to any claim, lien, security interest,
judgment, levy, writ of attachment or other encumbrance, nor assert by legal
action or otherwise any claim or right of set-off against any Servicer Mortgage
Loan File or Custodial Mortgage Loan File or any funds collected on, or in
connection with, a Mortgage Loan, except that the Servicer shall be entitled to
set-off against and deduct from any such funds any amounts that are properly due
and payable to the Servicer under this Agreement.
SECTION 4.7. MICROFILMED RECORDS.
The Servicer may duplicate the Servicer Mortgage Loan File on
microfilm, microfiche or magnetic media but may not destroy hard copies of the
documents required to be maintained in the Servicer Mortgage Loan File.
SECTION 4.8. ENFORCEMENT OF DUE-ON-SALE CLAUSE; ASSUMPTION.
In all circumstances of unapproved transfers initiated by a Borrower
under a Mortgage Loan that is not [more than 30 days] Delinquent, the Servicer
is required to notify the Owner (which notice may be contained in the Servicer's
monthly reports pursuant to Article VII) of such transfer and obtain written
approval before initiating enforcement proceedings with respect to such Mortgage
Loan. The Servicer will enforce the Due-on-Sale Clause on any such
non-Delinquent Mortgage Loan to the extent permitted by applicable law upon the
transfer of title to the Mortgaged Premises only with the prior written consent
of the Owner.
Notwithstanding the preceding paragraph, the Servicer may also in its
discretion waive the Due-On-Sale Clause on any Mortgage Loan and permit the
Assumption of such Mortgage Loan, provided that in processing any such
Assumption, the Servicer shall verify that:
(a) No material term of the Note (including, but not limited
to, the Note Rate and the remaining term to maturity) is to be changed
in connection with such Assumption;
(b) For conventional loans, based on a credit review performed
by the Servicer, the new Borrower is a prudent credit risk in the
opinion of the Servicer. The standards applied to such credit review
may be more liberal than those applied to newly-originated loans for
the Servicer's own account, to reflect the severity of loss on the
Mortgage Loan in the event the assumption is denied and foreclosure
results;
(c) For government insured or guaranteed loans, any credit
review required by an applicable regulation has been performed by the
Servicer.
(d) All documents relating to the Assumption are valid and
binding on the new Borrower; and
(e) The Mortgage Loan will continue to be a valid first
priority security interest upon the Mortgaged Premises.
Upon such verification and the execution by the new Borrower of an
Assumption agreement obligating the new Borrower to all of the terms of the
related Note and Security Instrument, the Servicer may approve such Assumption
and release the Previous Borrower from liability. The Servicer shall notify the
Owner of the completion of any approved Assumption (which notice may be
contained in Servicer's monthly reports pursuant to Article VII). The Servicer
shall provide to the Custodian the original assumption agreement.
Subject to the terms of the Note and Security Instrument, and
applicable law or regulation, the Servicer may charge a reasonable and customary
assumption fee, and the Servicer may retain such fee as additional servicing
compensation.
SECTION 4.9. PARTIAL RELEASE, EASEMENT AND EMINENT DOMAIN.
The Servicer shall take the following actions prior to permitting a
release:
(a) For any Partial Release or with respect to Eminent Domain,
obtain an acceptable Appraisal Report or broker's price opinion showing
the current market value of the property before and after the release;
(b) Ensure that the cash consideration received at least
equals the current market value of property to be released;
(c) Ensure that cash received is applied to the Unpaid
Principal Balance of the Mortgage loan;
(d) Prepare all legal documents for the transaction;
(e) Ensure that the remaining Mortgaged Premises adequately
secure the Unpaid Principal Balance and accrued interest of the
Mortgage Loan; and
(f) With respect to an easement, deliver an Officer's
Certificate to the Owner certifying that the creation of such easement
will not materially and adversely affect the marketability of title to
the Mortgaged Premises.
The Servicer shall notify immediately the Owner of any taking by
eminent domain of all or a part of any Mortgaged Premises.
SECTION 4.10. INSURANCE.
The Servicer shall verify that each Mortgage Loan (and Mortgaged
Premises) is covered by Hazard Insurance and, if applicable, Flood Insurance,
Condominium or PUD Insurance in accordance with this Agreement.
The Servicer shall prepare and present on behalf of the Owner all
claims under the Insurance Policies and take such actions (including the
negotiation, settlement, compromise or enforcement of the insured's claim) as
shall be reasonably necessary to realize recovery under such bonds and policies.
Any proceeds disbursed to the Servicer in respect of such policies or bonds
shall be promptly deposited in the P & I Account upon receipt or, if required to
be applied to the restoration or repair of the related Mortgaged Premises, in
the Custodial T & I Account upon receipt. The Servicer shall also prepare and
present on behalf of the Owner all claims under each applicable Insurance
Policy, and take such other actions (including the negotiation, settlement,
compromise and enforcement of the insured's claim) as is necessary to realize
recovery under such policies and deposit all claim proceeds in the appropriate
Custodial T & I Account or P & I Account.
If the Insurance Proceeds paid in respect of any Mortgage Loan reduce
the Unpaid Principal Balance of the Mortgage Loan to zero, then, to the extent
not required to apply to restoration of the related Mortgage Premises, the
Servicer shall treat the application of such proceeds as a Liquidation.
SECTION 4.11. EVIDENCE OF INSURANCE.
The Servicer shall maintain the following documentation with respect to
insurance coverage on each Mortgage Loan (and REO):
(a) For one- to four-unit dwellings, an original of the Hazard
Insurance Policy, if applicable, and any related endorsements;
(b) A copy of the Title Insurance Policy and any related
endorsements (or an Attorney's Title Opinion), to the extent such
insurance is evidenced in the Servicer Mortgage Loan File;
(c) An original of any Flood Insurance Policy, if Flood
Insurance is required herein, and any related endorsements; and
(d) A copy of the Condominium Insurance Policy or PUD
Insurance Policy, if applicable.
A certificate of insurance is acceptable in lieu of the above if it
contains the following information:
(a) Named insured and Mortgagee or, for PUD or Condominium
Units, named insured association, unit owner and unit owner Mortgagee;
(b) Address of Mortgaged Premises;
(c) Type, amount and effective dates of coverage;
(d) Deductible amount;
(e) Any endorsement or optional coverage obtained and made
part of the original policy;
(f) Insurer's agreement to provide at least ten days' prior
written notice to the Servicer and Borrower (or applicable unit owner
Mortgagee if for a PUD or Condominium Unit) before any reduction in
coverage or cancellation of the policy; and
(g) Signature of an authorized representative of the Insurer,
if required by applicable law.
SECTION 4.12. INSURANCE NOTICES.
The Servicer shall arrange for all insurance drafts, notices, policies,
invoices, etc. to be delivered directly to the Servicer. Subject to Section 6,
if the Servicer discovers that the Borrower does not have adequate insurance
coverage, the Servicer shall obtain and maintain at its own expense (subject to
any right of reimbursement provided in Section 6) the required insurance
coverage on the Mortgaged Premises.
SECTION 4.13. DEFAULT BY INSURER.
If the Servicer knows or has reasonable cause to suspect that an
Insurer under any applicable Insurance Policy will, for any reason, be unable to
pay a valid claim, the Servicer promptly shall notify the Owner and shall find a
substitute insurer approved by the Owner. In any case, the Servicer shall not be
liable in any way for the financial inability of any insurer under any Insurance
Policy to pay a valid claim.
SECTION 4.14. HAZARD INSURANCE.
Subject to Section 6, the Servicer shall ensure that each Mortgaged
Premises (and REO) is covered at all times by Hazard Insurance in an amount at
least equal to the lesser of (a) the Unpaid Principal Balance of the Mortgage
Loan, plus accrued interest and the aggregate of all Protective Advances, or (b)
100% of the replacement value of the improvements on the Mortgaged Premises, in
each case in an amount not less than such amount as is necessary to prevent the
mortgagor and/or the mortgagee from becoming a co-insurer or loss payee.
If Hazard Insurance is not available for any Mortgaged Premises (and
REO) because it consists of a dwelling unit in a Condominium Project or PUD, the
Servicer shall make reasonable efforts to assure that such insurance coverage is
obtained by the homeowners' or condominium association for such unit and for all
common elements and common facilities as a common expense under "master" or
"blanket"' policies as required under ▇▇▇▇▇▇ ▇▇▇ guidelines, and the Servicer
shall verify with the association not less frequently than annually that each
such insurance coverage remains in effect. In respect of Mortgaged Premises
located within a Condominium Project or PUD, the Servicer shall make reasonable
efforts to assure that comprehensive public liability policies, flood insurance
policies and fidelity coverage for the condominium association or homeowners'
association such as is required by ▇▇▇▇▇▇ Mae guidelines is in full force and
effect at all times.
Each Mortgaged Premises (and REO) shall be protected against loss or
damage from fire and other perils covered within the scope of standard extended
coverage. All Hazard Insurance Policies shall be underwritten by a hazard
insurance carrier that has a current rating that is acceptable under ▇▇▇▇▇▇ ▇▇▇
Guidelines. In addition, the insurance carrier shall be licensed in accordance
with ▇▇▇▇▇▇ Mae Guidelines.
Each Hazard Insurance Policy shall contain or have attached a standard
mortgagee clause in the form customarily used by private institutional mortgage
loan investors. Such clause shall provide that the insurer will notify the named
Mortgagee at least ten days before any reduction in coverage or cancellation of
the policy. All mortgagee clauses shall be properly endorsed, necessary notices
of transfer shall be given and any other action shall be taken that is necessary
in order to protect the interests of the Owner, its successors and assigns. The
standard mortgagee clause should read as follows:
"Insuring Fairbanks Capital Corp., its successors and/or assigns."
SECTION 4.15. HAZARD INSURANCE LOSS SETTLEMENT.
Except as otherwise provided herein, the Servicer shall follow ▇▇▇▇▇▇
▇▇▇ Guidelines in handling any insurance loss settlements.
SECTION 4.16. UNINSURED HAZARD LOSS.
Subject to Section 6.6(i), the Servicer shall take the following
actions promptly in the event of loss or damage to the Mortgaged Premises caused
by an earthquake, flood, tornado or other natural disaster not covered by an
Insurance Policy on the Mortgaged Premises (or REO, as applicable):
(a) Determine the extent of the losses or damages;
(b) Secure any abandoned Mortgaged Premises from vandalism or
the elements;
(c) Communicate with and counsel the Borrower on any disaster
relief programs or other assistance which is available; and
(d) Recommend appropriate action to protect the interests of
the Owner.
SECTION 4.17. FLOOD INSURANCE.
The Servicer shall ensure that Flood Insurance is maintained on
Mortgaged Premises (and REO) that are identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards (and the
flood insurance described below has been made available). Any such Flood
Insurance shall meet the current guidelines of the Federal Insurance
Administration and shall be with a generally acceptable insurance carrier.
The amount of the Flood Insurance Policy shall equal not less than the
least of (i) the lesser of (a) the Unpaid Principal Balance of the Mortgage
Loan, plus accrued interest and the aggregate of all Protective Advances, and
(b) the full insurable value of the Mortgaged Premises, but in each case not
less than such amount as is necessary to prevent the mortgagor and/or the
mortgagee from becoming a co-insurer or loss payee, and (ii) the maximum amount
of insurance which was available under the Flood Disaster Protection Act of
1973.
SECTION 4.18. CONDOMINIUM AND PUD INSURANCE COVERAGE REQUIREMENTS.
A Condominium Insurance Policy or PUD Insurance Policy shall be in
effect with respect to each Condominium Project or PUD in which a Mortgaged
Premises (or REO) is located. The minimum requirements are fire and extended
coverage and all other coverage in the types and amounts customarily required by
private institutional mortgage loan investors for projects similar in
construction, location and use. Coverage shall be on a replacement cost basis
for at least 100% of the insurable value based on replacement cost. In the event
that a Condominium Insurance Policy or PUD Insurance Policy is not maintained,
the Servicer shall notify the Owner (which notice may be contained in the
Servicer's monthly reports pursuant to Article VII) but shall not be required to
force-place a policy for the Condominium Project or PUD, except that the
Servicer shall obtain insurance with respect to the particular Condominium or
PUD Unit.
SECTION 4.19. SPECIAL FLOOD HAZARD INSURANCE FOR CONDOMINIUM OR PUD.
If the Condominium Project or PUD is in an area defined by the
Secretary of HUD as having special flood hazards, a blanket policy of flood
insurance shall be maintained on the Condominium Project or the PUD in the
amount of the maximum limit of coverage available under the National Flood
Insurance Program, as amended, whichever is less. In the event that such a
blanket policy of flood insurance is not maintained, the Servicer shall notify
the Owner (which notice may be contained in the Servicer's monthly reports
pursuant to Article VII) but shall not be required to force-place a policy for
the Condominium Project or PUD, except that the Servicer shall obtain insurance
with respect to the particular Condominium or PUD Unit if commercially
practicable.
SECTION 4.20. NAME OF INSURED.
The name of the insured stated under each required policy shall be
similar in form and substance to the following:
"Association of Owners of the [Name of Condominium Project or
PUD] for use and benefit of the individual Condominium or PUD
Unit owners" (designated by name, if required).
SECTION 4.21. MORTGAGEE CLAUSE.
Each Condominium Insurance Policy or PUD Insurance Policy shall contain
the standard mortgagee clause endorsed to provide that any disbursements will be
paid to the condominium or PUD homeowners' association for the use and benefit
of Mortgagees as their interest may appear, or otherwise endorsed to fully
protect the interest of the Owner.
SECTION 4.22. TITLE INSURANCE.
The Servicer shall not knowingly take any action as to each Mortgage
Loan, other than a Mortgage Loan for which an Attorney's Title Opinion was
delivered in lieu of a Title Insurance Policy, that would jeopardize the
coverage of a Title Insurance Policy. The Servicer shall make reasonable efforts
perform and comply with all requirements and conditions of each Title Insurance
Policy for each Mortgage Loan that are to be performed or observed by the
"Insured" or obligee thereunder as a condition to maintaining and keeping it in
force, or making a claim under, the Title Insurance Policy. Upon receipt of any
proceeds from a Title Insurance Policy, Servicer shall deposit such proceeds in
the P & I Account.
SECTION 4.23. TAX AND INSURANCE RESERVES.
All Tax and Insurance Reserves shall be established and maintained in
accordance with the Mortgage Loan Documents, ▇▇▇▇▇▇ Mae Guidelines and
applicable federal and state laws for Mortgage Loans. The Servicer will keep
records of Escrow funds collected from the Borrower for the payment of real
estate taxes, ground rents, Hazard Insurance and, if applicable, Flood Insurance
premiums, assessments and other charges credited to the Tax and Insurance
Reserve and deposited into the Custodial T & I Account. The Servicer shall
establish a Tax and Insurance Reserve for each Mortgage Loan and collect 1/12 of
the yearly charge for Escrow with each Monthly Payment. The Servicer is solely
responsible for the administration of the Borrower's Tax and Insurance Reserve.
Insurance premiums that are not Escrow items which are collected and disbursed
for payment, such as life, major medical, disability or other assessments, which
are not required as part of the Borrower's monthly installments, shall not be
recorded in the Borrower's Tax and Insurance Reserve. The Servicer shall follow
▇▇▇▇▇▇ Mae Guidelines and federal and state requirements in connection with
Escrow items, insurance premiums other than Escrow items, and in connection with
the analysis of the Borrower's Tax and Insurance Reserve and any reports to the
Borrower related thereto.
The Servicer shall comply with all requirements concerning the handling
of Escrow Accounts contained in Section 941 of the National Affordable Housing
Act and all regulations promulgated thereunder and all other applicable law.
SECTION 4.24. DELINQUENCIES.
The Servicer shall be responsible, continuously from the Servicing
Commencement Date until the date each Mortgage Loan ceases to be subject to this
Agreement and the related Servicing Agreement, for using measures consistent
with the Accepted Servicing Practices (including the Servicing Policies and
Procedures attached hereto as Schedule I) to attempt to collect delinquent
payments on each Mortgage Loan and to otherwise resolve each Mortgage Loan.
The Servicer's collection staff shall be sufficiently skilled in
financial counseling and mortgage servicing techniques to assist Borrowers in
bringing their Mortgage Loans current and protecting their equity and credit
rating, while also protecting the Owner's interests.
The Servicer should treat each Delinquency individually. Discussions
with the Borrower shall cover the cause of the Delinquency and the time frame in
which the Delinquency will be cured. The Servicer shall use in its reasonable
discretion notices, letters, telegrams, telephone calls, face-to-face contact
and other responsible collection techniques employed by prudent mortgage loan
servicers. The Servicer is required to maintain all collection records. The
Servicer shall vary its collection techniques to fit individual circumstances,
avoiding a fixed collection pattern which may be ineffective in dealing with
chronically delinquent Borrowers.
SECTION 4.25. PROPERTY INSPECTION.
The Servicer is required to inspect the Mortgaged Premises by the 60th
day of Delinquency if no satisfactory arrangements have been made to cure the
Delinquency. The inspection should determine the physical condition and the
occupancy status of the Mortgaged Premises. The Servicer is required to continue
to inspect the property monthly after the 60th day of this Delinquency until the
Delinquency is cured but only if foreclosure has commenced or the Mortgaged
Premises are vacant. The results of any inspection should be used in determining
whether a recommendation for foreclosure or deed-in-lieu of foreclosure is
necessary. All required property inspections are at the Servicer's expense
(subject to reimbursement pursuant to this Agreement. The Servicer may not
charge its inspection expenses against any Escrow or Tax and Insurance Reserve.
SECTION 4.26. NOTIFICATION MATTERS.
For any Mortgage Loan that is more than sixty days delinquent, the
Servicer shall notify the Owner promptly (which notice may be contained in the
Servicer's monthly reports pursuant to Article VII) after discovering any of the
following:
(a) Sale or transfer of the Mortgaged Premises not approved by
the Servicer pursuant to this Agreement;
(b) Litigation involving the Mortgaged Premises;
(c) Default under the terms of the Security Instrument, Note,
Condominium Project or PUD constituent documents or similar obligations
of the Borrower;
(d) Any other situation that may adversely affect the Mortgage
Loan in any material respect known to Servicer; or
(e) The Servicer knows, or has reason to know, that the
related Mortgaged Premises are contaminated with toxic wastes, have
other significant environmental risks or are infested with insects,
rodents or other pests.
The Servicer shall maintain accurate records of the aforementioned
items.
SECTION 4.27. ABANDONMENT.
Subject to Sections 6.6, if the Servicer determines that the Mortgaged
Premises have been abandoned, the Servicer shall use reasonable efforts to
protect the Mortgaged Premises from waste, damage and vandalism.
SECTION 4.28. PLANS FOR CURING DELINQUENCIES.
The Servicer shall have reasonable discretion to extend appropriate
relief to Borrowers who encounter hardship and who are cooperative and
demonstrate proper regard for their obligations. [The Servicer shall be readily
available to Borrowers to offer skilled financial counsel and advice and shall
make personal contact with delinquent Borrowers as often as possible to achieve
a solution that will bring the Mortgage Loan current as soon as possible.] The
Servicer shall be fully familiar with the form of relief to Borrowers provided
for herein and will employ such relief. However, no such relief shall be granted
to any Borrower under a Mortgage Loan unless there is a reasonable expectation
that the Borrower will bring the Mortgage Loan current within one year following
the establishment of the plan and is willing and able to maintain the Mortgage
Loan current following such relief.
Prior to granting relief as herein provided, the Servicer shall inspect
the Mortgaged Premises and ascertain that the reasons for the default and the
attitude and circumstances of the Borrower justify the relief to be granted. The
Servicer is responsible for collection from the Borrower of any recording or
similar costs incidental to the granting of relief.
Where relief is appropriate, the Servicer shall arrange with the
Borrower a "Liquidating Plan" giving the Borrower a definite period in which to
reinstate the Mortgage Loan by immediately commencing payments in excess of the
regular Monthly Payments. To the extent that the priority of the lien
represented by the Mortgage Loan remains in effect and is not adversely
affected, the Servicer may enter into a Liquidating Plan that provides that the
total Delinquency will be repaid (commencing immediately) within the shortest
period practicable. With respect to each Mortgage Loan, the Liquidating Plan
shall provide that the Delinquency will be cured within one year from the
establishment of the Liquidating Plan. The Servicer shall use its best efforts
to have any Liquidating Plan set forth in writing and executed by the Borrower
and by the Servicer in the form of a letter agreement if the earliest unpaid
installment is more than 91 days past due.
SECTION 4.29. LOAN MODIFICATIONS.
In certain circumstances, the Servicer may deem it prudent to modify
the payment terms of a Mortgage Loan ("Modification"), to effect a sale of the
Mortgage Premises for less than the Unpaid Principal Balance of the related
Mortgage Loans (a "Short Sale") or to permit the Borrower to pay off the
Mortgage Loan at less that its Unpaid Principal Balance (a "Discounted Payoff").
All modifications, Short Sales and Discounted Payoffs shall require the prior
written consent of the Owner. The Servicer shall not allow a Modification unless
the Modification is properly documented and the priority of the related mortgage
and the enforceability of the Note are not affected by the Modification.
SECTION 4.30. ADVANCE RESPONSIBILITY DURING DELINQUENCY.
In the event of a Delinquency, the Servicer agrees to make Protective
Advances from its own funds for such Mortgage Loan and receive reimbursement
therefore in accordance with and subject to Section 6.6.
SECTION 4.31. BANKRUPTCIES.
If the Servicer has actual knowledge that a Borrower is the subject of
a proceeding under the bankruptcy code or any other similar law, has made an
assignment for the benefit of creditors, or has had a receiver or custodian
appointed for its property, the Servicer will retain an attorney to pursue
claims to payment on the Mortgage Loan and foreclosure on the Mortgaged
Premises. If the Mortgaged Premises is acquired in an insolvency proceeding, it
shall be acquired in the name of Owner or its designee. The Servicer will be
responsible for representing the Owner's interest in any bankruptcy proceedings
relating to the Borrower. The costs of protecting the Owner's interest shall be
paid in accordance with Section 6.6. If the Borrower, a creditor or a bankruptcy
trustee should propose to reduce the Unpaid Principal Balance of the Note,
reduce the Note Rate, "bifurcate" the debt into secured and unsecured portions
or otherwise modify a Borrower's obligations under a Mortgage Loan, the Servicer
shall challenge any such modification on a timely basis as appropriate.
SECTION 4.32. APPROVAL OF CERTAIN FORECLOSURES.
Prior to the commencement of any action to foreclose on a Mortgage Loan
(other than in accordance with the procedures set forth on Schedule I hereto),
the Servicer shall promptly notify in writing the Owner of the Servicer's
recommendation as to whether foreclosure should be commenced. The Servicer may
initiate such foreclosure s only after the prior written approval of the Owner
is obtained.
SECTION 4.33. DEED-IN-LIEU OF FORECLOSURE.
The Servicer may accept a deed-in-lieu of foreclosure, with the
approval of the Owner, provided that:
(a) Marketable title, as evidenced by a Title Insurance
Policy, can be conveyed to and acquired by the Owner or its designee;
and
(b) The Servicer has obtained from the Borrower a written
acknowledgment that the deed is being accepted as an accommodation to
the Borrower and on the condition that the Mortgaged Premises will be
transferred to the Owner that owns such Mortgage Loan free and clear of
all claims, liens, encumbrances, attachments, reservations or
restrictions except for those to which the Mortgaged Premises were
subject at the time the Mortgaged Premises became subject to the lien
of the Security Instrument.
Upon acquisition of the Mortgaged Premises, the Servicer shall promptly
notify the Owner in writing indicating the details of the transaction and
reasons for the conveyance. Title shall be conveyed directly from the Borrower
to the Owner, or to such other Person designated by the Owner.
SECTION 4.34. ACTIONS PRIOR TO FORECLOSURE.
The Servicer shall initiate or cause to be initiated the foreclosure
actions as are authorized by law and consistent with the practices in the
locality where the Mortgaged Premises are located. If the Mortgaged Premises
have been abandoned or vacated by the Borrower and the Borrower has evidenced no
intention of honoring his obligations under the Mortgage Loan, the foreclosure
shall be expedited to the extent permitted by law. The Servicer shall not take
any action to foreclose, or accept a deed in lieu of foreclosure, with respect
to any Mortgage Loan that the Servicer knows, that the related Mortgaged
Premises are contaminated with toxic wastes or have other significant
environmental risks, without prior consultation with the Owner.
The Servicer shall comply with applicable state law with respect to any
required notice to the Borrower regarding a default, rights to cure such
default, and the commencement of foreclosure proceedings.
SECTION 4.35. RETENTION OF ATTORNEYS FOR FORECLOSURE - FORECLOSURE
FEES.
All attorneys' fees, and other costs in respect of any foreclosure or
acquisition in lieu of foreclosure shall be negotiated in advance and the
estimated amount thereof shall be set forth in the Servicer's written
recommendation. Fees in excess of the amount provided in the ▇▇▇▇▇▇ ▇▇▇
Guidelines for routine cases, fees from non-FNMA approved legal counsel or fees
for extraordinary legal services shall be approved in writing in advance by the
Owner. The billing by the foreclosure attorney shall demonstrate the
appropriateness of any extraordinary fees by the services required. In cases of
full or partial reinstatement, the fees shall be reasonable and in proportion to
the authorized fee for services rendered for a completed foreclosure. Any
attorneys' fees, trustee's fees, witness fees, title search fees, court costs or
other expenses incurred by the Servicer in respect of any foreclosure or
acquisition in lieu of foreclose shall be advanced by the Servicer and subject
to reimbursement pursuant to Section 6.
SECTION 4.36. FORECLOSURE PROCEDURES.
During the period during which any Mortgage Loan is being foreclosed,
funds in the Borrower's Tax and Insurance Reserve, as well as any rent receipts,
shall be used to pay all taxes and insurance premiums that become due to the
extent permitted by law, with any excess rents being deposited into the P & I
Account. The Servicer shall advance (to the extent recoverable) payment of
attorneys' fees, trustee's fees and other foreclosure costs at the commencement
of foreclosure proceedings.
The Servicer shall give Notice to the Owner (which notice may be
contained in the Servicer's monthly reports pursuant to Article VII) of a
foreclosure sale. The Notice shall set forth the date, location and time of the
foreclosure sale.
The Servicer shall be responsible for the general management of the
Mortgaged Premises after any acquisition through foreclosure or deed-in-lieu of
foreclosure or after the Servicer shall have taken possession of the Mortgaged
Premises, whichever first occurs, until the Mortgaged Premises are otherwise
disposed of and shall take whatever action is necessary to protect the security
for the Mortgage Loan. Such action shall include management, maintenance and
protection against vandals or the elements if the Mortgaged Premises are
vacated. The Servicer shall also make monthly inspections to assure that the
Mortgaged Premises are not damaged by vandals or the elements.
SECTION 4.37. DISBURSEMENT OF ESCROW ITEMS.
The Servicer shall pay any obligation which could become a first lien
on the Mortgaged Premises. These obligations may include, but are not limited
to, taxes, special assessments and ground rents. The Servicer is also
responsible for the payment of any Hazard Insurance, Flood Insurance. The
aforementioned items should be paid from the Borrower's Escrow funds. If the
Borrower's Tax and Insurance Reserve balance is insufficient, the Servicer shall
advance funds in order to pay these expenses and be reimbursed therefore
pursuant to Section 6.7.
SECTION 4.38. REINSTATEMENT OF MORTGAGE LOANS.
If the Borrower offers to reinstate the Mortgage Loan fully during the
foreclosure process, the Servicer shall accept the offer. Full reinstatement
means payments in certified funds of all payments due to bring the Mortgage Loan
current, including Late Charges, if applicable, attorneys' and trustees' fees,
any additional legal costs and any other expenditures or advances made by the
Servicer during the foreclosure process.
Upon accepting the reinstatement, the Servicer shall contact the
attorney or trustee immediately to avoid incurring additional legal costs or
fees. The Servicer shall apply the funds upon receipt.
SECTION 4.39. PARTIAL PAYMENT TOWARD REINSTATEMENT OF MORTGAGE LOANS.
Except with respect to a bankruptcy or in connection with a repayment
plan giving the Mortgagor a definite period in which to reinstate the Mortgage
Loan where the foreclosure action is not terminated as a result thereof, the
Servicer shall not accept a partial payment toward reinstatement of a Mortgage
Loan in foreclosure without prior approval from the Owner and any mortgage
insurer. A partial reinstatement occurs when the Mortgagor offers to pay an
amount insufficient to satisfy the delinquent monthly payments, any fees or
costs, and any other expenditures or advances during the foreclosure process.
SECTION 4.40. SERVICING REQUIREMENTS FOR REO.
Upon acquisition of any Mortgaged Premises, the Servicer is responsible
for using reasonable effort in:
(a) Managing the property until it is conveyed or sold;
(b) Inspecting the property every month;
(c) Evicting Borrower if necessary;
(d) Paying all taxes, insurance and foreclosure costs;
(e) Processing any claims for redemption and otherwise
complying with any redemption procedures required by law;
(f) Hiring a licensed real estate broker and listing the
property for sale, if applicable;
(g) Marketing the property, including rehabilitating and
repairing the property pursuant to Section 6.7(j), if deemed necessary;
(h) Completing the sale of such REO;
(i) Depositing sales proceeds to the P & I Account; and
(j) Reporting all changes in status and expenses to the Owner
on a monthly basis.
The Servicer is also responsible for the security, management and
maintenance of any acquired property.
The Servicer shall service the REO through its disposition and shall
ensure that all funds received with respect to such REO are deposited to the P &
I Account.
SECTION 4.41. MARKETING REO.
Efforts to market an REO by the Servicer shall begin as soon as
reasonably practicable after marketable title is received by the Owner. The
Servicer shall get prior written approval of the Owner of any listing
arrangements, including the proposed list price and terms and shall promptly
notify the Owner in writing regarding purchase offers that are received.
SECTION 4.42. REHABILITATION.
The Servicer shall make reasonable efforts to ensure that any
rehabilitation work necessary is done and is done efficiently and properly.
SECTION 4.43. REQUIRED REO DOCUMENTATION.
The Servicer will supply the Owner with any documents reasonably
requested by the Owner in connection with any REO.
SECTION 4.44. SATISFACTIONS.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Custodian
by a certification of a Servicing Officer, which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 4.04 have been or will be so deposited
and shall request delivery to it of the portion of the Mortgage File held by the
Custodian. Upon receipt of such certification and request, the Custodian shall
promptly release the related mortgage documents to the Servicer and the Servicer
shall promptly prepare and process any satisfaction or release.
In the event the Servicer satisfies or releases a Mortgage without
having obtained payment in full of the indebtedness secured by the Mortgage or
should it otherwise prejudice any right the Owner may have under the mortgage
instruments, the Primary Insurance Policy, if any, or the Pool Policy, if
applicable, the Servicer, upon written demand, shall remit to the Owner the then
outstanding principal balance of the related Mortgage Loan plus accrued and
unpaid interest at the Mortgage Loan Remittance Rate through the last day of the
month in which such satisfaction or release occurs by deposit thereof in the
Collection Account. The Servicer shall maintain the Fidelity Bond insuring the
Servicer against any loss it may sustain with respect to any Mortgage Loan not
satisfied in accordance with the procedures set forth herein.
The Servicer shall make reasonable efforts to satisfy mortgages and
release their liens in a timely manner, including the preparation of any
required release or satisfaction document. Once the required release or
satisfaction documents are executed and the Note is canceled, The Servicer shall
promptly send the canceled documents to the Borrower if state law requires such
action or the Borrower specifically requests the return of the documents. In
other instances, the Servicer may either return the documents to the Borrower or
retain them (as long as they are not destroyed until after the retention period
required by applicable law). The Servicer should also take any other steps
required to release the lien and assure that no penalties are incurred because
the actions were not performed in a timely manner. The Servicer may not pass on
to the Owner or the Borrower any penalty fee that it has to pay because it
failed to process the release and satisfaction documents within the required
time frame. The Servicer shall generally follow the procedures set forth in the
▇▇▇▇▇▇ Mae Guidelines regarding satisfactions of mortgages.
SECTION 4.45. DISCLOSURE UPON TRANSFER OF SERVICING.
The Servicer shall use reasonable efforts to prepare and distribute to
Borrowers all necessary disclosures in order to comply with all state and
federal laws regarding the disclosure of the transfer of servicing. If the
transfer of servicing results from the termination of the Servicer hereunder
without cause, the Owner shall pay the cost of preparing and distributing the
required notices.
SECTION 4.46. RESPONSE TO BORROWER INQUIRIES.
The Servicer is required to respond to all qualified written inquiries
by Borrowers as such are defined from time to time by Section 941 of the
National Affordable Housing Act, and act at all time in accordance with said Act
and all regulations promulgated thereunder.
SECTION 4.47. ENVIRONMENTAL PROBLEMS.
If the Servicer has actual knowledge that a Mortgaged Premises is being
or has been used in violation of any environmental Requirements or that there
has been a release of hazardous materials in, on, under or from such Mortgaged
Premises other than in accordance with such Requirements (an "Environmental
Problem Property"), the Servicer will notify Owner of the existence of the
Environmental Problem Property. Additionally, the Servicer shall set forth in
such notice a description of such problem, a recommendation to Owner relating to
the proposed action regarding the Environmental Problem Property and the
Servicer shall (i) carry out the recommendation set forth in such notice upon
receiving Owner's approval, if any, of such recommendation, or (ii) if failure
to act immediately would result in a material adverse effect upon Servicer,
Owner and/or the Environmental Problem Property, Servicer may take such actions
as may be necessary and/or advisable under Accepted Servicing Practices and/or
applicable Requirements after giving Owner notice in accordance with the terms
and provisions of Section 10.9 hereof. If Owner fails or refuses to respond to
any such recommendation as set forth in the immediately preceding sentence, the
Servicer shall have no liability to Owner therefor provided that the Servicer
acts in a manner consistent with such sentence.
SECTION 4.48. LIMITATION ON AUTHORITY.
Notwithstanding anything to the contrary herein, the Servicer shall
have no authority without the prior written consent of Owner in its sole
discretion to:
(a) Sign any document in the name or on behalf of Owner,
except pursuant to a duly authorized and executed instrument delivered
by Owner under Section 3.4; or
(b) Act on behalf of, or hold itself out as having authority
to act on behalf of, Owner in any manner that is beyond the scope of
this Agreement or the scope of any related Servicing Agreement.
SECTION 4.49. DIRECTION OF OWNER.
Notwithstanding anything to the contrary herein, Owner shall have the
right to direct the Servicer in writing from time to time to take any reasonable
action with respect to a Mortgage Loan or any Mortgaged Premises that is not
contrary to this Agreement or any Requirements or the terms of such Mortgage
Loan, subject to the Servicer's rights to require Owner to execute any necessary
instruments to effect any action or inaction with respect to the Mortgage Loans.
The Servicer shall have no liability to Owner in connection with the decision to
pursue (as distinguished from the actual performance of) such actions. Owner
shall initially, and throughout the term of this Agreement and any related
Servicing Agreement, identify two or more individual representatives, each of
which acting alone shall have full authority (a) to provide to the Servicer any
consent, approval, waiver, or agreement or any other action contemplated from
Owner under this Agreement and any related Servicing Agreement, (b) to execute
any instruments or take any other actions for Owner relating to the Loans, (c)
to execute and deliver any amendments or supplements to this Agreement and any
related Servicing Agreement, and (d) to direct the Servicer in writing to take
any actions contemplated under this Section 4.49.
SECTION 4.50. CONFLICTS AND REMOVAL OF ASSETS.
The Servicer shall use reasonable efforts not to and shall use
reasonable efforts to cause its Affiliates not to, acquire a conflict of
interest which could materially and adversely affect the Servicer's ability to
manage any Mortgage Loan or Mortgaged Premises in the best interests of Owner
(any such relationship or conflict, a "Conflicting Interest") without the
consent or waiver of Owner. If such Conflicting Interest should arise in the
future, the Servicer shall promptly inform Owner, who may remove such Mortgage
Loan or Mortgaged Premises from this Agreement or any related Servicing
Agreement upon written notice to the Servicer.
SECTION 4.51. REPORTS PURSUANT TO REQUIREMENTS.
The Servicer shall be responsible for preparation and filing of all
applicable reports and notices with respect to the Mortgage Loans and any REO in
accordance with any Requirements.
SECTION 4.52. COMPUTER SYSTEMS.
By June 30, 1999 and at all times thereafter, the Servicer shall
maintain hardware, firmware or software, or any system consisting of one or more
thereof, including, without limitation, any and all enhancements, upgrades,
customizations, modifications, maintenance and the like (collectively, a
"System"), used by or for the benefit of the Servicer in connection with the
performance with Servicer's obligations under this Agreement, in a manner that
permits the Servicer to record, store, process, provide and, where appropriate,
insert, true and accurate dates and calculations for dates and spans including
and following January 1, 2000 (herein referred to as "Year 2000 Compliant"). In
addition, "Year 2000 Compliant" shall mean that the System will support the
ability for its continued normal usage such that neither the performance nor the
correct functioning of the System will be affected by the approach, and passing
into, the year 2000. In particular:
(i) Year 2000 Compliant shall mean that no value for
current date will cause any interruption in the operation of
the System;
(ii) All manipulations of time-related data will
produce the desired results for all valid dates within the
application domain and in combination with other products,
prior to, through and beyond the year 2000;
(iii) Date elements in interfaces and data storage
will permit specifying the century to eliminate date ambiguity
without human intervention including leap year calculations;
(iv) Where any date element is represented without a
century, the correct century shall be unambiguous for all
manipulations involving that element; and
Authorization codes and passwords relative to expiration dates and CPU
serial numbers should function normally during year 2000 testing time horizons.
ARTICLE V
LOAN ACCOUNTING
SECTION 5.1. GENERAL.
The Servicer will account for and track payments on the Mortgage Loans
on a loan-by-loan basis. The Servicer shall maintain complete and accurate
records of all transactions affecting any Mortgage Loan. Each Mortgage Loan
shall be clearly marked to indicate that it is being serviced for the Owner.
SECTION 5.2. INDIVIDUAL MORTGAGE LOAN ACCOUNTING REQUIREMENTS.
All Mortgage Loans will amortize with interest calculated and paid in
accordance with the respective Note.
SECTION 5.3. INTEREST CALCULATIONS.
Monthly interest calculations for periods of a full month will be based
on a 30-day month and a 360-day year, if permitted by the Note or by law.
Factors used for such calculations will be carried to ten decimal places.
Interest calculations for periods of less than a full month (such as for a
Liquidation) will be calculated on the basis of actual days elapsed in a month
and a 360-day year unless otherwise provided by applicable federal or state law.
SECTION 5.4. APPLICATION OF MORTGAGE LOAN PAYMENTS.
A payment from the Borrower will normally consist of interest,
principal, deposits for insurance and taxes and Late Charges, if applicable.
Payments received from Borrowers shall be applied in the following order:
(a) Required monthly interest;
(b) Required monthly principal; and
(c) Deposits for taxes and insurance.
Only full Monthly Payments (and, following application of funds
received to full Monthly Payments, Curtailments) may be applied to a Mortgage
Loan. Capitalization is not permitted, except as provided by the terms of any
Mortgage Loan that provides for negative amortization or pursuant to a
Modification Agreement or as may be required by law in connection with a
Bankruptcy "Cram Down" or otherwise.
The Servicer may waive Prepayment Penalties otherwise due from a
Borrower under the terms of the related Note only with the prior consent of the
Master Servicer.
SECTION 5.5. FULL PAYMENT NOT RECEIVED FROM BORROWER.
If a full payment is not received from the Borrower, the payment may
not be applied to the outstanding balance. However, the Servicer shall hold such
payment until additional payment is received to make a full payment or, with the
prior written consent of the Owner, return the payment to the Borrower.
SECTION 5.6. CURTAILMENTS.
The Servicer may accept Curtailments at any time. All installments to
bring the Mortgage Loan current, however, shall have been made by the Borrower.
If a Mortgage Loan is delinquent, funds received shall be applied to bring the
Mortgage Loan current. If there are excess funds after the application of
amounts received from the Borrower to Monthly Payments, the excess funds
represent a Curtailment and may be applied as a partial principal prepayment.
A Curtailment may not be used to reduce the Monthly Payment or the Note
Rate for any Mortgage Loan, or to postpone the Due Date of any payment.
Curtailments shall be deposited into the P & I Account within one Business Day
of receipt.
SECTION 5.7. REAPPLICATION OF PRIOR PREPAYMENTS.
The Servicer may not automatically reapply prior prepayments or
accumulated Curtailments for payment of subsequent installments. Payments
advanced to satisfy future installments shall be accounted for as advanced
(prepaid) installments of principal and interest. The Servicer should contact
the Borrower if there is a question about the Borrower's intention in making any
unscheduled payment.
SECTION 5.8. LIQUIDATIONS.
A Liquidation is the application of a payment or a realized loss to a
Mortgage Loan which reduces the Unpaid Principal Balance to zero. The Servicer
shall report a liquidation to the Owner by the third Business Day after such
liquidation.
ARTICLE VI
ACCOUNTING
SECTION 6.1. GENERAL.
Upon the Servicing Commencement Date, the Servicer shall establish one
or more payment clearing accounts for the deposit of all funds collected in
connection with the Mortgage Loans (Payment Clearing Account), one or more
escrow accounts for the deposit of funds collected in connection with the
Mortgage Loans for taxes and insurance (T & I Account), and one or more
custodial accounts for the deposit of funds collected in connection with the
Mortgage Loans for principal and interest (P & I Account). All of the foregoing
accounts shall be maintained in accordance with sound and controlled practices.
Except for the Payment Clearing Account (which will be cleared on a daily basis
with respect to any funds therein on the first Business Day after the deposit of
such funds), the funds in the T & I Accounts and the P & I Accounts may not be
commingled with any other funds, including the proceeds of any other mortgage
loans or with funds serviced for other investors or for the Servicer's own
portfolio.
SECTION 6.2. ACCOUNT MAINTENANCE.
Each P & I Account, Payment Clearing Account and T & I Account shall
meet the following guidelines:
(a) The accounts, other than the Payment Clearing Account
shall be held as segregated accounts with a depository institution
(commercial bank, mutual savings bank or savings and loan association),
the deposits of which are insured by the FDIC and whose short-term
unsecured indebtedness for borrowed money is rated in one of the two
highest rating categories by Standard & Poor's Ratings Services,
▇▇▇▇▇'▇ Investors Service, Inc., Co. (a "Qualified Depository")
(b) The name of each P & I Account, Payment Clearing Account
and T & I Account shall be designated as:
(i) Payment Clearing Account: "[Name of Account]
Fairbanks Capital Corp. Payment Clearing Account";
(ii) T & I Account: "[Name of Account] Fairbanks
Capital Corp. as Trustee for ["Owner"} and
(iii) P & I Account: "P & I Account, ["Owner"]"
(c) All collections on the Mortgage Loans shall be deposited
to the Payment Clearing Account prior to the opening of business on the
Business Day following the day on which such amounts are received by
Servicer; and
(d) Each T & I Account will be an expense of the Servicer.
Such custodial accounts may be interest-bearing accounts provided that
such accounts comply with all local, state and federal laws and
regulations governing interest-bearing accounts and borrower escrow
accounts. The Servicer shall ensure that all interest credited to any
account that is not due the respective borrower is removed by the
Servicer within 30 days of receipt of such interest.
If the Servicer elects or is required by law to deposit borrowers'
escrow funds into an interest-bearing account, such funds shall be either (i)
immediately available or (ii) available in accordance with a schedule which will
permit the Servicer to meet its payment obligations hereunder and the Servicer
shall remain obligated to pay the Mortgagor's taxes and insurance premiums when
due, even if the Mortgagor's Escrow funds are not withdrawable on demand.
Any amounts held in the P&I Account may be, but are not required to be,
invested by Servicer in Permitted Investments; provided, however, that such
funds shall be either (i) immediately available or (ii) available in accordance
with a schedule that will permit the Servicers to meet its payment obligations
hereunder. Other than interest or other income received on Permitted
Investments, which shall belong to Servicer and which may be withdrawn by
Servicer from the P&I Account in accordance with Section 6.3 hereof, no other
amounts may be commingled in the P&I Account. Servicer shall promptly deposit in
the P&I Account from its own funds, without any right of reimbursement, the full
amount of any losses on its investment of funds in the P&I Account.
SECTION 6.3. P & I ACCOUNT; REMITTANCE.
(a) The following funds received with respect to the Mortgage
Loans shall be transferred into the P&I Account on each Business Day to
the extent deposited by the Servicer into the Payment Clearing Account
on the prior Business Day. Such funds may be net of reimbursements for
any unreimbursed Protective Advances and any unpaid servicing
compensation with respect to any Mortgage Loan:
(i) principal collections (including prepayments and
curtailments);
(ii) interest collections;
(iii) liquidation Proceeds and Insurance Proceeds
(except as set forth in Section 6.5);
(iv) the proceeds of any sale of an REO
(v) any amounts deposited accordance with the last
sentence of Section 6.2.
The Servicer shall maintain separate accounting for each of
the foregoing types of funds.
(b) The Servicer may from time to time withdraw funds from the
P&I Account for the following expenses:
(i) reimburse itself for any unreimbursed Protective
Advances in accordance with Section 6.6;
(ii) to pay itself Ancillary Income;
(iii) if applicable, to pay the Master Servicer, its
master servicing compensation in accordance with any master
servicing agreement with the Owner;
(iv) to make remittances to Owner;
(v) to clear and terminate the P&I Account; and
(vi) to transfer funds in any P & I Account to
another Qualified Depository.
(c) On each Remittance Date, the Servicer shall remit all
amounts in the P & I Account as of the close of business on the
preceding Business Day, net of allowable withdrawals under clauses of
(i), (iii), (iv) and (v) subsection (b), to the Owner by wire transfer
of immediately available funds to the account designated in writing by
the Owner.
(d) With respect to any remittance received by the Owner after
the Business Day on which such payment was due, the Servicer shall pay
to the Owner interest on any such late payment at an annual rate equal
to the rate of interest as is publicly announced from time to time by
The Chase Manhattan Bank, New York, New York, as its prime lending
rate, adjusted as of the date of each change, plus two (2) percentage
points, but in no event greater than the maximum amount permitted by
applicable law. Such interest shall be paid by the Servicer to the
Owner on the date such late payment is made and shall cover the period
commencing with the Business Day on which such payment was due and
ending with the Business Day on which such payment is made, both
inclusive. Such interest shall be remitted along with such late
payment. The payment by the Servicer of any such interest shall not be
deemed an extension of time for payment or a waiver of any Event of
Default by the Owner.
SECTION 6.4. T & I ACCOUNT.
(a) The following funds shall be deposited into the T & I
Account promptly after the Servicer's receipt and verification of such
amounts:
(i) Escrow Payments;
(ii) loss drafts;
(iii) unapplied funds; and
(iv) Liquidation Proceeds that offset a deficit
balance in Mortgagor's Tax and Insurance Reserve.
The Servicer shall maintain separate accounting for each of these types of
funds.
(b) The Servicer may make withdrawals from the T & I Account
for the following:
(i) timely payment of Mortgagors' taxes and insurance
premiums;
(ii) refunds to Mortgagors of excess Escrow funds
collected;
(iii) reimbursement to the Owner of all Servicing
Expenses paid or advanced by the Owner or to pay itself
interest in accordance with Section 6.6 hereof;
(iv) pay interest, if required, to Mortgagors on Tax
and Insurance Reserves;
(v) removal of any deposits made in error;
(vi) termination of the account;
(vii) disburse loss drafts to contractors for repairs
to Mortgaged Property damaged by hazard losses; and
(viii) pay loss drafts to Mortgagors to the extent a
loss draft exceeds total hazard loss repair charges and the T
& I reserve deficiency.
The Servicer shall not allow the T & I Account to become overdrawn. If there are
insufficient funds in the account, the Servicer shall request funds from the
Owner, and the Owner shall advance such amounts as are necessary, to cure the
overdraft.
(c) The T & I Account is to be designated in the name of the
Servicer in trust for the Owner acting as an agent for the Mortgagors'
payments in order to show that the account is custodial in nature. The
Servicer is required to keep records identifying each Mortgagor's
payment deposited into the account.
SECTION 6.5. TAX AND INSURANCE RESERVES.
If the law requires payment of interest on Tax and Insurance Reserves
to the Mortgagor, the Servicer is solely and fully responsible for payment of
such interest. Payment of such interest on Tax and Insurance Reserves shall not
be reflected in the Servicer's accounting for principal and interest.
SECTION 6.6. PROTECTIVE ADVANCES.
Notwithstanding any other provision hereof, Servicer shall obtain the
prior written approval of the Owner prior to incurring any Protective Advance
that is over $5,000 unless such Protective Advance is made in an emergency to
protect and preserve the Mortgaged Property or public safety in connection with
the Mortgaged Property.
The Servicer shall make advances from its own funds with respect to the
payment of such Protective Advances. Notwithstanding any other provision of this
Agreement, (i) Servicer shall not be obligated to make any Protective Advance if
Servicer deems such advance to be non-recoverable and (ii) Servicer shall have
no obligation, responsibility or liability with respect to advances or payments
not explicitly required by the terms of this Agreement, including, without
limitation, advances for delinquent principal or interest, Curtailment Interest
or similar payments or advances other than prepayment interest shortfalls to the
extent required pursuant to the transaction documents in a securitization
financing.
Servicer shall be entitled to reimbursement for Protective Advances
made in accordance with this Section 6.6 for any Protective Advance that the
Servicer later determines to be non-recoverable. Servicer's reimbursement shall
be made by Servicer offsetting deposits to the P & I Account by any unreimbursed
Protective Advances. In the event that there are insufficient receipts of
Liquidation Proceeds and other Mortgage Loan Payments to reimburse Servicer for
Protective Advances as such Protective Advances are made, Servicer shall be
required to wait until further Liquidation Proceeds or other Mortgage Loan
payments are received.
SECTION 6.7. SERVICER'S OVERHEAD NOT REIMBURSABLE.
Servicer shall be responsible for all costs and expenses of performing
loan servicing under this Agreement. Servicer shall contract for all such
services in its own name and not in the name of Owner:
(a) all overhead expenses of Servicer;
(b) all salaries and wages of Servicer's personnel; and
(c) all sub-servicing fees (not including expenses for
servicing functions required in connection with any foreclosure)
incurred by Servicer to service the Mortgage Loans.
SECTION 6.8. ACCESS TO RECORDS.
(a) The Servicer will establish and maintain a system of (i)
records of operational information relating to the collection of
Mortgage Loans, the conduct of default management services and the
administration, management, servicing, repair, maintenance, rental,
sale, or other disposition of Mortgage Loans and Mortgaged Premises and
(ii) books and accounts, which shall be maintained in accordance with
customary business practices, of financial information relating to the
Mortgage Loans and the Mortgaged Premises. Information may be
maintained on a computer or electronic system.
(b) Owner and its respective accountants, attorneys, agents,
or designees may at normal business hours of the Servicer and at
Owner's expense (without charge by Servicer), upon reasonable prior
written notice and at reasonable times during Servicer's regular
business hours, examine Servicer's books and records relating to the
Mortgage Loans and the Mortgaged Premises. Such records shall not
include any proprietary or confidential information, as reasonably
determined by the Servicer. In addition, Servicer shall provide to
Owner any other information, related to the Mortgage Loans and
Mortgaged Premises, reasonably requested by Owner (without charge by
Servicer other than for Servicer's out-of-pocket expenses).
(c) The Servicer shall provide the Owner access to its
computerized loan tracking, or "LTS" system for the purpose of
monitoring the information relating to the Mortgage Loans. Costs of any
such access shall be born by the Servicer.
SECTION 6.9. SECURITIZATION FINANCING.
Notwithstanding anything contained in this Article VI, in the event
that the Owner transfers the Mortgage Loans in connection with a securitization
financing, the Servicer will account for collections, and allocate and deposit
funds in accordance with the provisions of the operative documents executed in
connection with such securitization financing, provided, however, that Servicer
shall have the right in its sole discretion to resign as Servicer with respect
to such transferred Mortgage Loans (i) without payment or liability and (ii)
without prejudice to any reimbursement, compensation or fee due hereunder to
Servicer with respect to such transferred Mortgage Loans.
SECTION 6.10. LATE CHARGE PAYMENT.
Notwithstanding any other provision of this Section 6, Servicer shall
pay Owner on a monthly basis twenty (20) percent of all Late Charges actually
received by Servicer for the relevant monthly period by (i) paying such amount
directly to Servicer or (ii) setting such amount against any amount due Servicer
from Owner hereunder with reasonable notice to Owner.
ARTICLE VII
REPORTS TO THE OWNER
SECTION 7.1. REPORTS TO THE OWNER.
(a) Not later than the Remittance Date each month (or not
later than such other date as specifically set forth below) the
Servicer shall prepare and deliver to the Owner the reports identified
on Exhibit C attached hereto. The Servicer shall deliver to the Owner a
written remittance advice on each Remittance Date. Such remittance
advice shall be substantially in the form of Exhibit C.
(b) Reports to the Owner. The Owner shall pay the Servicer for
any extraordinary servicing reports Owner may request and which are
prepared by the Servicer, other than those reports specified in Section
7.01(a). The cost for such reports shall be agreed upon in advance.
SECTION 7.2. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
The Servicer shall deliver to the Owner on or before the 90th day after
the end of the Servicer's accounting period each year, an Officer's Certificate
with respect to this Agreement and any related Servicing Agreement certifying
that (i) a review of the Servicer's activities and performance has been made,
(ii) Servicer complied with the minimum servicing standards set forth in the
Uniform Single Attestation Program and performed its duties and obligations
hereunder and under all related Servicing Agreement in accordance herewith and
therewith throughout such year or, if there has been a failure to comply with
such standards or a default in the fulfillment of any such duties or
obligations, such Officer's Certificate shall specify each such failure or
default known to such officer and the nature and status thereof, and (iii) an
examination has been made of the Fidelity Bond and the Errors and Omissions
Policy maintained by the Servicer and each such bond and policy are in effect
and conform to the requirements of this Agreement and all related Servicing
Agreements. In addition, Servicer shall provide to Owner all information within
Servicer's control reasonably required to ensure completion and issuance of
Owner's annual financial statements and tax returns within thirty days after the
end of Owner's fiscal year.
SECTION 7.3. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
On or before the 90th day after the end of the Servicer's accounting
period each year, the Servicer, at its expense, shall cause a
nationally-recognized firm of independent certified public accountants to
furnish a report to the Owner to the effect that, on the basis of an examination
conducted in compliance with the standards of the American Institute of
Certified Public Accountants, such firm is of the opinion that the statement of
the Servicer made pursuant to Section 7.2, insofar as such statement relates to
the compliance by the Servicer with the minimum servicing standards set forth in
the Uniform Single Attestation Program and Sections 5.1 through 5.4, Sections
6.1 through 6.7, Section 6.9 and Sections 7.1 through 7.4, is fairly stated in
all material respects, except for exceptions that in the opinion of such firm,
the standards of the American Institute of Certified Public Accountants require
it to report, in which case such exceptions shall be set forth in such
statement.
SECTION 7.4. MONTHLY DOCUMENT REPORT.
(a) In addition to the monthly reports due hereunder, the
Servicer shall provide to Owner during the first six months of the term
of this Agreement and any related Servicing Agreement (or thereafter,
upon Owner's request) a Monthly Document Report in the form and manner
reasonably prescribed by Owner, which report shall include a listing
with respect to each Mortgage Loan and REO of all missing documents
reasonably necessary to service such Mortgage Loan of which servicer
has actual knowledge.
SECTION 7.5. SECURITIZATION FINANCING.
Subject to Servicers right to resign pursuant to Section 6.9, in
addition to the reports required pursuant to this Article VII, in the event that
the Owner transfers the Mortgage Loans in connection with a securitization
financing, the Servicer will modify the forms of reports or produce any
additional reports in accordance with the provisions of the operative documents
executed in connection with such securitization financing.
ARTICLE VIII
COMPENSATION TO SERVICER
SECTION 8.1. COMPENSATION TO THE SERVICER.
(a) As partial compensation for Servicer's services under this
Agreement, Servicer shall be entitled each month to the payment of an
amount equal to 1/12 of 0.35% of the principal balance of the Mortgage
Loans
(b) In connection with the execution of this Agreement, on the
Servicing Commencement Date, and "boarding" fee equal to $5.00 per
Mortgage Loan.
(c) Servicer shall be entitled to all Ancillary Income for any
month.
(d) Upon a termination of the Servicer without cause pursuant,
the Servicer shall be entitled to a termination fee equal to the
following:
(i) if terminated during the first year following the
Servicing Commencement Date, and amount equal to $25.00 per
Mortgage Loan;
(ii) if terminated during the second year following
the Servicing Commencement Date, an amount equal to $15.00 per
Mortgage Loan; and
(iii) if terminated after the second year following
the Servicing Commencement Date, or terminated after the
occurrence of an Event of Default or upon the expiration of
the term of this Agreement, an amount equal to $10.00 per
Mortgage Loan.
(e) Payment of the Servicing Fees shall be made by Servicer
offsetting the respective deposits to the P & I Account, pursuant to
Section 6.4 hereof or as otherwise agreed between Owner and Servicer.
The Servicer shall not be entitled to any other servicing compensation
from Owner hereunder or under any Servicing Agreement other than the
Servicing Fees.
ARTICLE IX
MERGER OR CONSOLIDATION OF SERVICER; RESIGNATION; DEFAULT
SECTION 9.1. MERGER OR CONSOLIDATION.
Anything herein to the contrary notwithstanding, any corporation into
which the Servicer may be merged or consolidated or any corporation resulting
from any merger or consolidation to which the Servicer shall be a party or any
corporation succeeding to the business of the Servicer shall be the successor of
the Servicer hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, however, that
the successor or surviving person to the Servicer shall meet the qualifications
set forth in Section 3,[ shall be approved in advance by the Owner in its sole
discretion], and shall expressly assume the obligations of the Servicer under
this Agreement.
SECTION 9.2. ASSIGNMENT OR TRANSFER OF SERVICING AGREEMENT.
The Servicer may not assign or transfer any or all of its rights and
obligations under this Agreement without the prior written consent of the Owner.
The Owner may assign this Agreement without the consent of the Servicer upon
written notice to the Servicer with respect to any and all of the Mortgage
Loans, provided such Assignment is made in connection with the sale of the
related Mortgage Loans and Servicer shall have received prior to the transfer of
such Mortgage Loans all compensation due hereunder with respect to such
transferred Mortgage Loans, including without limitation, all servicing
compensation under Section 8 and unreimbursed Protective Advances.
Notwithstanding an other provision of this Agreement, Servicer shall have the
right to assign, transfer or pledge any right Servicer has to receive payment
under this Agreement without the consent of, or notice to, the Owner.
SECTION 9.3. RESIGNATION OF SERVICER.
Except as otherwise provided in this Section 9.3, the Servicer shall
not resign from the obligations and duties hereby imposed on it except upon the
determination that its duties hereunder are no longer permissible under
applicable law and that such incapacity cannot be cured by the Servicer. Any
such determination permitting the resignation of Servicer shall be evidenced by
an opinion of counsel, at the Servicer's expense, to such effect delivered to
Owner in form and substance reasonably acceptable to Owner. No such resignation
shall become effective until the Owner or its designee shall have assumed the
Servicer's responsibilities and obligations under this Agreement and any related
Servicing Agreement.
SECTION 9.4. EVENTS OF DEFAULT BY SERVICER.
The happening of any of the following events shall constitute a default
("Event of Default") by the Servicer under this Agreement and any related
Servicing Agreement:
(a) Any failure by the Servicer to make any deposit or
payment, or to remit any payment, required to be made under the terms
of this Agreement and any related Servicing Agreement which continues
unremedied for a period of 3 Business Days;
(b) Any failure on the part of the Servicer to perform any
obligations required under Article VII and such failure continues for 5
Business Days after the date on which the Owner shall have given to the
Servicer written notice of such failure and demanding that such failure
be cured;
(c) Any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or
agreements (other than those referred to in Section 9.4(a) and 9.4(b)
above) to be performed or observed by it in this Agreement and any
related Servicing Agreement, or any material breach of a representation
or warranty in Section 3,1, which continues uncured for a period of 10
days after the date on which the Owner shall have given to the Servicer
written notice of such failure or breach and demanding that such
default be cured;
(d) Any involuntary petition in bankruptcy or any other
similar petition shall be filed against the Servicer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal,
state or other statute, law, or regulation, and shall remain in force
undischarged or unstayed for 45 days, or if any custodian, trustee,
receiver or liquidator of all or any substantial part of the assets of
the Servicer shall be appointed or take possession of such assets
without the consent or acquiescence of the Servicer and such
appointment remains unvacated for 45 days;
(e) The Servicer shall consent to the appointment of a
trustee, conservator, or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities, or similar
proceedings of, or relating to, the Servicer, or all or substantially
all of the Servicer's property;
(f) The Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations or take any corporate action in furtherance
of the foregoing;
(g) the Servicer assigns or attempts to assign its rights to
the servicing compensation hereunder or attempts to assign this
Agreement or the servicing responsibilities hereunder or any related
Servicing Agreement without the consent of Owner except as otherwise
expressly permitted by the other terms and provisions of this
Agreement; or
(h) the Servicer fails to remain qualified as a mortgage
servicer for ▇▇▇▇▇▇▇ Mac loans and/or the Servicer disposes of
substantially all of its assets.
In case of any Event of Default, the Owner may provide the Servicer
with written notice of the termination of all of the Servicer's authority,
powers, and rights under this Agreement. On or after the receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Agreement or any related Servicing Agreement, whether with respect to the
Mortgage Loans or Mortgaged Premises shall terminate effective as of the date
specified in such written notice. Without limiting the generality of the
foregoing, the Owner is hereby authorized and empowered to execute and deliver
on behalf of the Servicer, as the Servicer's attorney-in-fact, any and all
documents and other instruments, and to do or accomplish all other acts or
things that in the Owner sole and absolute judgment may be necessary or
appropriate to effect termination (with or without cause). The Servicer shall
continue to provide services in accordance with this Agreement or any related
Servicing Agreement until such date and shall in good faith cooperate fully to
transfer the servicing and the management of the Mortgage Loans and Mortgaged
Premises and custody of the Servicer Mortgage Loan Files to the Person
designated by Owner. Notwithstanding the foregoing, upon any termination the
Servicer shall use reasonable efforts do all things reasonably requested by the
Owner to effect the termination of the Servicer's responsibilities, rights, and
powers hereunder, including, without limitation, providing to the Owner all
documents and records reasonably requested by the Owner to enable the Owner or
its designee to assume and carry out the duties and obligations that otherwise
were to have been performed and carried out by the Servicer hereunder but for
such termination. Upon the occurrence of an Event of Default that shall not have
been remedied, Owner may also pursue whatever rights it may have at law or in
equity to damages, including injunctive relief and specific performance.
SECTION 9.5. TERMINATION OF THE SERVICER WITHOUT CAUSE.
The Owner shall have the right to terminate this Agreement without
cause with respect to any or all of the Mortgage Loans at any time prior to the
expiration of the term of the Servicing Agreement (as set forth in Section 3
thereof), upon notifying the Servicer at least thirty days prior to such
termination. In the event of a termination of this Agreement without cause by
the Owner, the procedures set forth in Section 9.4 shall be followed and payment
made in accordance with Section 8.1 and 9.2 hereof.
SECTION 9.6. INDEMNIFICATION BY THE SERVICER.
Pursuant to the terms of Section 9.8, the Servicer, as an Indemnifying
Party, hereby agrees to defend, indemnify, and hold harmless the Owner, the
Master Servicer, any Indenture Trustee, and any of their successors and assigns,
their Affiliates, and all of their respective officers, directors, shareholders,
partners, employees and agents, as an Indemnified Party, from and against any
and all demands, claims, losses, damages, fines, penalties, attorney fees,
judgments and any other costs, fees, and expenses (collectively "Damages")
arising from third party claims or actions that were caused by or resulted from
a breach by the Servicer or its agents of any representation, warranty or
obligation contained in this Agreement or the failure of the servicer to service
the Mortgage Loans in compliance with this Agreement.
SECTION 9.7. INDEMNIFICATION BY THE OWNER.
Pursuant to the terms of Section 9.8, the Owner, as an Indemnifying
Party, hereby agrees to defend, indemnify, and hold harmless the Servicer, as an
Indemnified Party, from and against and any and all damages as defined in
Section 9.6, asserted against, resulting to, imposed from, or incurred by the
Servicer in favor of a third party by reason of or resulting from any breach by
the Owner of any representation or warranty contained in this Agreement.
SECTION 9.8. INDEMNIFICATION PROCEDURES.
If, for so long as this Agreement is in effect, a party entitled to
indemnification hereunder ("Indemnified Party") has actual notice or knowledge
of any claim or loss for which indemnification by an indemnifying party
hereunder ("Indemnifying Party") is asserted, the Indemnified Party shall give
to the Indemnifying Party written notice within such time as is reasonable under
the circumstances, describing such claim or loss in reasonable detail. In the
event that a demand or claim for indemnification is made hereunder with respect
to losses the amount or extent of which is not yet known or certain, the notice
of demand for indemnification shall so state, and, where practicable, shall
include an estimate of the amount of the losses.
(a) Unless applicable law mandates a cure within a shorter
period of time, the Indemnifying Party shall have 30 calendar days from
the date of receipt by Indemnifying Party of written notice of a breach
of the Indemnifying Party's representations within which to cure such
breach or if such breach cannot be cured within 30 days but Servicer
has commenced efforts to cure, then within 60 calendar days of such
notice. In the event a breach is cured by the Indemnifying Party, the
Indemnifying Party shall execute a written acknowledgment of the cure
in such form as is approved or provided by the Indemnified Party.
(b) In the case of actual notice of indemnification hereunder
involving any litigation, arbitration or legal proceeding, the
Indemnifying Party shall have responsibility to, and shall employ
counsel acceptable to the Indemnified Party, and shall assume all
expense with respect to, the defense or settlement of such claim;
provided however, that:
(i) the Indemnified Party shall be entitled to
participate in the defense of such claim and to employ counsel
at its own expense to assist in the handling of such claim;
and
(ii) the Indemnifying Party shall obtain the prior
written approval of the Indemnified Party before entering into
any settlement of such claim or ceasing to defend against such
claim if, pursuant to or as a result of such settlement or
cessation, (1) injunctive or other relief (excepting the
payment of money damages) would be imposed against any
Indemnified Party which could materially interfere with the
business, operations, assets, conditions (financial or
otherwise) or prospects of the Indemnified Party, or (2) the
settlement of cessation shall result in an indemnification
obligation of the Indemnifying Party that, in the reasonable
judgment of the Indemnified Party, cannot be fulfilled by the
Indemnifying Party in accordance with the terms of this
Agreement. If the Indemnifying Party does not provide to the
Indemnified Party, within fifteen (15) days after receipt of a
notice of indemnification, a written acknowledgment that the
Indemnifying Party shall assume responsibility for the defense
or settlement of such claim as provided in this Section 9.8,
the Indemnified Party shall have the right to defend and
settle the claim n such manner as it may deem appropriate at
the cost and expense of the Indemnifying Party, and the
Indemnifying Party shall promptly reimburse the Indemnified
Party therefor in accordance with this Agreement.
(c) All indemnifications provided for under this Agreement
shall survive any termination of this Agreement, the liquidation of any
Mortgage Loan or the transfer or assignment by Owner to another Person
of any Mortgage Loan or any interest in any Mortgage Loan.
SECTION 9.9. CONSENT.
Notwithstanding anything to the contrary herein, whenever the Owner's
consent is required in this Agreement, the Owner's consent shall not be required
with respect to a particular Mortgage Loan if the Owner has waived its right of
consent in writing.
If the Owner's consent for any act or omission is required under the
terms of this Agreement or any Servicing Agreement, and the Servicer has
attempted to obtain the Owner's consent pursuant to the provisions of Section
10.9 and the Owner has not responded to such consent request within 3 Business
Days, the Servicer may proceed with such action or omission in accordance with
the Accepted Servicing Practices and upon the determination that such action or
omission is in the best interest of the Owner.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. ERRORS AND OMISSIONS COVERAGE AND FIDELITY COVERAGE.
[The Servicer shall maintain, at all times at its own expense, in the
amounts described below: (i) an Errors and Omissions Policy and (ii) a Fidelity
Bond with broad coverage, in each case from an incorporated surety company
authorized to do business in the state in which the Servicer has its principal
place of business. The Servicer shall maintain the Errors and Omissions Policy
and Fidelity Bond in such form and amount that would meet the requirements of
▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac if either were the purchaser of the Mortgage Loans.
The Fidelity Bond may be in the form of either individual bonds or a blanket
bond. The coverage shall explicitly insure the Servicer, the Owner, and their
respective successors and assigns, against any losses resulting from dishonest,
fraudulent, criminal or negligent acts, errors or omissions on the part of
Officers, employees, or other persons acting on behalf of the Servicer. Such
bond and policy shall be obtained from companies with a general policyholder's
rating that would be acceptable to ▇▇▇▇▇▇ Mae or ▇▇▇▇▇▇▇ Mac if either were the
purchaser of the Mortgage Loans.
The Errors and Omissions Policy and Fidelity Bond may not be changed
except by an increase in the amount of coverage. The Servicer shall furnish to
the Owner on request, copies of all binders, and policies or certificates
evidencing that such bonds and insurance policies are in full force and effect
and a statement from the surety and the insurer that such Errors and Omissions
Policy or Fidelity Bond shall in no event be terminated or materially modified
without thirty (30) days prior written notice by registered mail to the Owner.
The Servicer shall also maintain at all times at its own expense
comprehensive general liability, automobile liability, worker's compensation,
and other insurance as necessary to protect the interest of the Servicer in
connection with the Servicer's performance of this Agreement and any related
Servicing Agreement which is not directly related to specific Mortgage Loans or
Mortgaged Premises.
SECTION 10.2. NO ASSIGNMENT OR DELEGATION OF DUTIES BY SERVICER.
Except as expressly provided in this Agreement, the Servicer shall not
pledge, assign, or transfer any of its rights, benefits, or privileges under
this Agreement to any other Person, or delegate to or subcontract with,
authorize, or appoint any other Person to perform any of the duties, covenants,
or obligations to be performed by the Servicer hereunder, without the prior
written consent of the Owner, which consent shall not be unreasonably withheld
and any agreement, instrument, or act purporting to effect any such assignment,
transfer, delegation, or appointment shall be void. Notwithstanding the
foregoing, the Servicer shall have the right without the prior written consent
of the Owner and hereby agrees to delegate to or subcontract with or authorize
or appoint an Affiliate of the Servicer to perform and carry out any duties,
covenants, or obligations to be performed and carried out by the Servicer
hereunder to the extent that such duties, covenants, or obligations are to be
performed in any state or states in which the Servicer is not authorized to do
business as a foreign corporation but in which the Affiliate is so authorized.
In no case, shall any permitted assignment relieve the Servicer of any liability
to the Owner hereunder. Notwithstanding an other provision of this Agreement,
Servicer shall have the right to assign, transfer or pledge any right Servicer
has to receive payment under this Agreement without the consent of, or notice
to, the Owner.
SECTION 10.3. BINDING NATURE OF AGREEMENT; ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The Owner
may assign its rights and obligations hereunder in whole or in part without the
consent of the Servicer and shall notify the Servicer of any such assignment.
Upon such an assignment, the original Owner shall be released from any
obligations that arise on or after the effective date of such assignment with
respect to the Mortgage Loans assigned, and the new Owner shall assume any
obligations as of such date. In the event that an assignment relates to some,
but not all, of the Mortgage Loans, the Servicer hereby agrees to establish
separate, segregated servicing accounts for each separate Owner and shall
account for, remit and reimburse itself in a segregated manner.
SECTION 10.4. ASSIGNMENT. ENTIRE AGREEMENT; WAIVERS.
This Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements, understandings, inducements, and
conditions, express or implied, oral or written, or any nature whatsoever with
respect to the subject matter hereof.
Each of the Servicer or Owner may, by written notice to the other,
extend the time for or waive the performance of any of the obligations of such
other hereunder. The waiver by any party hereto of a breach of this Agreement or
any related Servicing Agreement shall not operate or be construed as a waiver of
any other or subsequent breach. No delay, omission, or act by a party shall be
deemed a waiver of such party's rights, powers, or remedies. No course of
dealing between the parties hereto shall operate as a waiver of any provision
hereof.
SECTION 10.5. AMENDMENTS AND SUPPLEMENTS.
This Agreement may not be modified, amended or superseded other than by
an agreement in writing between the Servicer and the Owner.
SECTION 10.6. CONTROLLING LAW.
THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT SHALL BE GOVERNED BY AND CONSTRUED,
INTERPRETED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
SECTION 10.7. NO JOINT VENTURE; LIMITED AGENCY.
The services provided by the Servicer are in each case those of an
independent contractor providing a service. Nothing contained in this Agreement
or any related Servicing Agreement: (i) shall constitute the Servicer and Owner
as members of any partnership, joint venture, association, syndicate,
unincorporated business, or other separate entity, (ii) shall be construed to
impose any liability as such on the Servicer or Owner, or (iii) shall constitute
a general or limited agency or be deemed to confer on it any express, implied or
apparent authority to incur any obligation or liability on behalf of the other.
SECTION 10.8. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
SECTION 10.9. NOTICES.
Notwithstanding any provision in this Agreement to the contrary, the
Servicer agrees to make reasonable efforts to contact Owner telephonically
following the delivery of any notice delivered pursuant to this Section 10.9 to
the extent (a) Servicer would be permitted to take certain actions under this
Agreement in the absence of a response to such notice by the Owner or (b)
approval of the Owner is required to take any action related to such notice. All
notices, requests, demands, and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made, and received: (a) upon receipt if delivered personally (unless subject to
clause (b)) or if mailed by registered or certified mail return receipt
requested, postage prepaid; (b) at 5:00 p.m. local time on the business day
after dispatch if sent by a nationally recognized overnight courier; or (c) upon
the completion of transmission (which is confirmed by telephone or by a
statement generated by the transmitting machine and confirmed by telephone) if
transmitted by telecopy or other means of facsimile which provides immediate or
near immediate transmission to compatible equipment in the possession of the
recipient, in any case to the parties at the following addresses or telecopy
numbers (or at such other address or telecopy number for a party as will be
specified by like notice):
(a) If to the Owner:
Fremont Investment & Loan
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇ ▇▇▇▇▇▇
(b) If to the Servicer:
Fairbanks Capital Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
or:
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Facsimile: 801-293-
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
SECTION 10.10. PROVISIONS SEPARABLE; INTERPRETATION.
The provisions of this Agreement are independent of and separable from
each other, and no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other or others of
them may be invalid or unenforceable in whole or in part. No provision of this
Agreement or any related Servicing Agreement shall be construed against or
interpreted to the disadvantage of any party hereto by any court or other
authority by reason of such party having or being deemed to have structured,
dictated, or drafted such provision. The parties hereto acknowledge that no
other agreement entered into by the Servicer for the provision of servicing,
default management services, and property management and disposition services
shall be used or referred to in construing the provisions of this Agreement or
any related Servicing Agreement.
SECTION 10.11. CONFIDENTIALITY.
(a) The Servicer shall treat confidentially (and not disclose
to any Third Party, other than its Representatives and its auditors,
accountants, and regulators, who shall agree to keep same confidential)
this Agreement and any related Servicing Agreement, the transactions
contemplated hereby, and all non-public information concerning the
Mortgage Loans and the servicing thereof in connection with this
Agreement and any related Servicing Agreement obtained or in the
possession of the Servicer or its directors, officers, employees,
agents, or advisors (collectively, "Representatives"), and all notes,
analyses, compilations, studies, or other documents which contain or
otherwise reflect such information in a manner that identifies or
permits identification of individual Mortgage Loans (this Agreement and
any related Servicing Agreement, the transactions contemplated hereby,
and such information and documents collectively, the "Loan Material").
The foregoing agreement shall not be applicable to any information that
is publicly available when provided, that thereafter becomes publicly
available or that is required to be disclosed by a party or its
Representatives by judicial, administrative, or legislative process in
connection with any action, suit, proceeding, or claim or otherwise by
applicable law, that becomes known to the Servicer from a source other
than Owner or any other source not known to the Servicer to be bound by
an agreement or duty to maintain the confidentiality of such
information, or that was known to the Servicer without a duty of
confidentiality prior to entering into this Agreement. Information
shall be deemed "publicly available" if it is contained in materials
available to the public.
(b) The Servicer agrees that it and its Representatives shall
use all Loan Material solely for the benefit of Owner in connection
with its servicing of the assets hereunder; and Owner agrees that the
Servicer is entitled to disclose Loan Material to Third Parties to the
extent it is reasonably necessary for the Servicer to reveal the Loan
Material in connection with the performance of the Servicer's
obligations under this Agreement or any related Servicing Agreement or
in the defense of legal proceedings against the Servicer, or if the
Servicer reasonably believes it is in the best interests of Owner, such
as disclosure of property sale information to multiple listing
services.
(c) The Servicer shall, and shall cause its Representatives:
(i) not to issue any news release or otherwise
publicize in any manner this Agreement, any related Servicing
Agreement, or the transactions contemplated hereby, without
the prior written consent of Owner;
(ii) not to identify to any Third Party, including
any Borrower with respect to an asset, the owners, officers,
or directors of Owner or its Affiliates, without the prior
written consent of Owner; and
(iii) not to use the name of the Owner or the name of
any Affiliate thereof, or identify any of the foregoing, in
connection with this Agreement, any related Servicing
Agreement, or the transactions contemplated hereby or any
marketing or promotional activity of the Servicer, without the
prior written consent of Owner.
SECTION 10.12. EXPENSES.
The parties shall bear their own legal and other expenses incurred in
the negotiation, execution and delivery of this Agreement and any related
Servicing Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
Regarding Standard Servicing Terms as of the date set forth above.
Servicer: FAIRBANKS CAPITAL CORP.,
a Utah corporation
By:____________________________________
Name:
Title:
Owner: FREMONT INVESTMENT & LOAN,
a California industrial loan company
By:____________________________________
Name:
Title:
EXHIBIT A TO AGREEMENT REGARDING STANDARD SERVICING TERMS
FORM OF SERVICING AGREEMENT
This Servicing Agreement, made this ___ day of ________, 199_, by and
between [FREMONT], having an office at [ ], (the "Owner") and FAIRBANKS CAPITAL
CORP., a Utah corporation, having an office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇(▇▇▇ "Servicer"), recites and provides as follows:
R E C I T A L S
WHEREAS, Owner and Servicer executed and delivered that certain
Agreement Regarding Standard Servicing Terms dated [ ] 1, 199[ ] (the "Standard
Terms Agreement");
WHEREAS, the Standard Terms Agreement sets forth certain standard
provisions for the servicing of residential mortgage loans by Servicer on behalf
of Owner; and
WHEREAS, Owner and Servicer desire that Servicer service the mortgage
loans described on the attached Mortgage Loan Schedule pursuant to the terms
hereof and the terms of the Standard Terms Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Owner and the Servicer agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings specified in the Standard Terms
Agreement. The following terms shall have the meanings set forth below:
"Custodian" ___________________________________
"Custodial Agreement" That certain Custodial Agreement
between the Custodian, Servicer and
Owner dated as of even date
herewith.
"Servicing Commencement Date" ___________________________________
Section 2. Duties and Responsibilities of the Servicer. Servicer agrees
to service the Mortgage Loans on behalf of Owner, its successors and assigns, in
accordance with the provisions of this Servicing Agreement and the Standard
Terms Agreement.
Section 3. Term of Mortgage Loan Servicing Agreement. The duties,
responsibilities, and obligations to be performed and carried out by Servicer
under this Servicing Agreement shall commence upon the execution of this
Servicing Agreement and shall terminate (a) as to any Mortgage Loan upon the
distribution of the final payment or Liquidation Proceeds on the last Mortgage
Loan or REO Property subject to this Servicing Agreement and (b) as to all the
Mortgage Loans [(x) upon the expiration of a rolling 90 day term , if required
in connection with a securitized financing or (y) otherwise] in accordance with
the Standard Terms Agreement.
Section 4. Compensation. In consideration of the services rendered
under this Servicing Agreement, the Servicer shall be entitled to such fees as
are provided for in the Standard Terms Agreement.
Section 5. Standard Terms. Servicer acknowledges that the Standard
Terms Agreement prescribes additional terms and conditions under which Servicer
is to service the Mortgage Loans. The terms of the Standard Terms Agreement are
incorporated herein by reference and are made a part hereof. Servicer agrees to
perform and observe the duties, responsibilities and obligations that are to be
performed and observed by Servicer under the Standard Terms Agreement as said
Agreement may be amended from time to time, and further agrees that the Standard
Terms Agreement, as amended or supplemented, is and shall be a part of this
Servicing Agreement to the same extent as if set forth herein in full. If any
provision of the Standard Terms Agreement conflicts with any provision of this
Servicing Agreement, the terms of this Servicing Agreement shall govern.
Section 6. Representations and Warranties. Servicer and Owner hereby
remake the representations and warranties contained in the Standard Terms
Agreement with respect to this Servicing Agreement.
Section 7. Assignment and Delegation of Duties by Servicer. Except as
otherwise expressly provided in the Standard Terms Agreement, Servicer shall not
assign or transfer any of its duties, rights, benefits or privileges under this
Servicing Agreement.
Section 8. Assignment by Owner. Except as provided in the Standard
Terms Agreement, Servicer agrees that Owner, its successors and assigns, may at
any time, without the consent of Servicer, assign and transfer its right, title
and interest under this Servicing Agreement to any other Person.
Section 9. Notices. All notices under this Servicing Agreement shall be
made as provided in the Standard Terms Agreement.
Section 10. Severability. Each part of this Servicing Agreement is
intended to be severable. If any term, covenant, condition or provision hereof
is unlawful, invalid, or unenforceable for any reason whatsoever, and such
illegality, invalidity, or unenforceability does not affect the remaining parts
of this Servicing Agreement, then all such remaining parts hereof shall be valid
and enforceable and have full force and effect as if the invalid or
unenforceable part had not been included.
Section 11. Rights Cumulative; Waivers. The rights of each of the
parties under this Servicing Agreement are cumulative and may be exercised as
often as any party considers appropriate. The rights of each of the parties
hereunder shall not be capable of being waived or varied otherwise than by an
express waiver or variation in writing. Any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or variation of that
or any other such right. Any defective or partial exercise of any of such rights
shall not preclude any other or further exercise of that or any other such
right. No act or course of conduct or negotiation on the part of any party shall
in any way preclude such party from exercising any such right or constitute a
suspension or any variation of any such right.
Section 12. Headings. The headings of the Sections contained in this
Servicing Agreement are inserted for convenience only and shall not affect the
meaning or interpretation of this Servicing Agreement or any provision hereof.
Section 13. Construction. Unless the context otherwise requires,
singular nouns and pronouns, when used herein, shall be deemed to include the
plural of such noun or pronoun and pronouns of one gender shall be deemed to
include the equivalent pronoun of the other gender.
Section 14. Assignment. This Servicing Agreement and the terms,
covenants, conditions, provisions, obligations, undertakings, rights and
benefits hereof, including any Exhibits and Schedules hereto, shall be binding
upon, and shall inure to the benefit of, the undersigned parties and their
respective heirs, executors, administrators, representatives, successors, and
assigns.
Section 15. Counterparts. This Servicing Agreement may be executed in
any number of counterparts, each of which shall constitute one and the same
instrument, and either party hereto may execute this Servicing Agreement by
signing any such counterpart.
Section 16. Governing Law. This Servicing Agreement shall be construed,
and the rights and obligations of the Servicer and the Owner hereunder
determined, in accordance with the laws of the State of New York determined
without regard to its laws concerning conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Servicer: FAIRBANKS CAPITAL CORP.,
a Utah corporation
By:_____________________________________
Name:
Its:
Owner: FREMONT INVESTMENT & LOAN
a California industrial loan company
By:_____________________________________
Name:
Title:
EXHIBIT B TO AGREEMENT REGARDING STANDARD SERVICING TERMS
FORM OF RECEIPT
To: _________________________________ [Address]
Re: [The Custodial Agreement]
In connection with the administration of the Mortgage Loans held by you
as the Custodian on behalf of the Servicer, we request the release, and
acknowledge receipt, of the (Custodial File/(specify documents]) for the
Mortgage Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code: Mortgage Loan Number:
Reason for Requesting Documents (check one)
o 1. Mortgage Loan Paid in Full.
(The Servicer hereby certifies that all amounts received in
connection therewith have been credited to the P & I Account
as provided in the Servicing Agreement.)
o 2. Repurchase Pursuant to the Mortgage Loan Sale Agreement.
(The Servicer hereby certifies that the repurchase price has
been credited to the account as provided in the Servicing
Agreement.)
o 3. Mortgage Loan Liquidated By ____________
(The Servicer hereby certifies that all proceeds of
foreclosure, insurance, condemnation or other liquidation have
been finally received and credited to the P & I Account
pursuant to the Servicing Agreement.)
o 4. Mortgage Loan in Foreclosure
o 5. Other (explain)
If box 1, 2 or 3 above is checked, and if all or part of the Custodial
File was previously released to us, please release to us our previous request
and receipt on file with you, as well as any additional documents in your
possession relating to the specified Mortgage Loan.
If box 4 or 5 above is checked, upon our return of all of the above
documents to you as the Custodian, please acknowledge receipt by signing in the
space indicated below, and returning this form.
______________________________
Servicer
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
Consent of Owner
By:________________________
Name:______________________
Title:_____________________
Date:______________________
Acknowledgment of Documents returned to the Custodian:
___________________________
Custodian
By:________________________
Name:______________________
Title:_____________________
Date:______________________
EXHIBIT C
REPORTS TO THE OWNER
INFORMATION IS AVAILABLE WITH THE SERVICER AT
FAIRBANKS CAPITAL CORP.
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SCHEDULE I
FAIRBANKS CAPITAL CORP.
SERVICING POLICIES AND PROCEDURES
COLLECTIONS
Fairbanks specializes in the servicing of non-performing loans which
frequently require an aggressive approach on the part of the Loan Servicing
Representative. Loan Servicing Representatives are required to have a thorough
working knowledge of and comply with the Federal Fair Debt Collection Practices
Act, the Real Estate Settlement Procedures Act (RESPA) and applicable FNMA
(▇▇▇▇▇▇ ▇▇▇), FHLMC (▇▇▇▇▇▇▇ Mac), HUD, VA and PMI requirements. Loan Servicing
Representatives are also required to be familiar with the applicable collection
requirements imposed by various servicing agreements.
Loan Servicing Representatives ("LSRs") are expected to make a note in
LTS each time activity is generated on the loan (contacts, attempts, letters,
and follow-ups). Notes describing telephone contacts must fully describe the
matters discussed including the reasons for deficiency or default and options or
plans to cure the deficiency or default. This information is used by other
departments and may be required by ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ Mac, HUD, the VA or PMI
companies or investors under some circumstances.
Organizational Structure
Primary Collections
Primary Collection LSRs service delinquent loans which are
five to 31 days past due. LSRs attempt to resolve the
delinquencies through telephone and written contact.
Combat Collections
Combat LSRs service loans which are 31 days or more delinquent
and continue to service the loan through the resolution of the
loan. In their efforts to help the borrowers reinstate their
loans, Combat LSRs may offer alternative resolutions to
resolve loan delinquency, including loan modifications,
forbearance plans, and short sales. If the borrowers are
unable to reinstate the loan, Combat LSRs work closely with
the Legal Department to resolve the loan through liquidation.
Combat LSRs are required to have at least one year of debt
collection experience.
Time Tables
The following are general guidelines only. LSRs are required to be
familiar with and check the applicable servicing agreements and ▇▇▇▇▇▇ Mae,
▇▇▇▇▇▇▇ Mac, PMI, HUD/FHA and VA guidelines for provisions, regulations or laws
pertaining to the collection and foreclosure of loans serviced by Fairbanks.
Sub-Prime Loans (with and without PMI)
Note: Each PMI company has its own guidelines for notices of
default and intent to foreclose. LSRs must review the
applicable guidelines prior to initiating foreclosure
proceedings.
(a) 5 Days Delinquent
Telephone contact is attempted with borrowers whose
payment has not been received by the fifth day after
the due date. The LSR will determine whether the
payment has been sent and if so, when and if not,
payment arrangements are negotiated. At this time, if
payment has not been received the "5-Day Notice" is
sent.
(b) 11 - 12 Days Delinquent
Mail late notice to borrowers whose payment has not
been received by the eleventh day after the due date
and call by the twelfth day. Continue with phone
contact attempts to make arrangements to bring the
loan current.
(c) 16 Days Delinquent
Borrowers whose loans are 16 days delinquent will
receive written notice that late fees have been
imposed. If the 16th day falls on a weekend or
holiday, notices will be sent after the payment
posting of the next business day. LSRs will continue
to attempt telephone contact with the delinquent
borrowers.
(d) 21 Days Delinquent
Within 5 days of sending the "16-Day Late Notice,"
LSRs will make at least two attempted phone contacts
per week with the borrowers to discuss the
delinquency of the loan and potential resolutions to
the delinquency. If payment has not been received by
the 21st day, the "21-Day Late Notice" is sent.
(e) 26 Days Delinquent
The 26 day delinquency notice advising of the
pending "Notice of Default" is sent via Western
Union. Simultaneously, efforts will be made to
contact borrower to make arrangements to bring loan
current.
(f) 25 - 31 Days Delinquent
If the borrowers fail to make a payment within the
month that it is due and the account is past due for
two payments, a demand for payment is mailed, subject
to the provisions of the applicable servicing
agreement. The demand is sent via certified mail,
return receipt requested, and regular, first class
mail. The demand requires the borrowers to pay the
full amount due to avoid further legal action. A
field inspection is ordered on the 31st day of
delinquency. Phone contact is continued to determine
reason for default.
(g) 31 - 60 Days Delinquent
LSRs attempt to make telephone contact with the
borrowers a minimum of two days a week to resolve the
delinquency prior to referral for foreclosure.
(h) 35 to 45 Days Delinquent
If possible, a face-to-face interview must be
arranged with the borrowers who are 35 to 45 days
delinquent for the purposes of determining the cause
of the default and developing a plan to cure the
default. If a face-to-face interview cannot be
arranged due to the borrower's lack of geographic
proximity to Fairbanks, the LSR will request a second
delinquency contact inspection (AKA property
inspection). Delinquency contact inspectors verify
who is living in the property or if the property has
been abandoned.
(i) Abandoned Property
If the property has been abandoned, the LSR must
arrange for the delinquency contact inspector to
secure the property and address any health or
personal injury hazards which may exist, in
accordance with the applicable servicing agreement.
Foreclosure proceedings must commence immediately.
(ii) Property Vacant and Listed for Sale
If the property is vacant and listed for sale, the
LSR will contact the listing agent to discuss the
status of any pending offers for the property.
Contact information for the borrowers must also be
obtained or verified with the listing agent.
Foreclosure proceedings must commence immediately.
(iii) Demand Expired - No Plan for Reinstatement
If the demand for payment has expired with no plan
for reinstatement, the LSR submits the loan to the
Default Review Committee. If the committee approves
the foreclosure, the loan is referred to the legal
department to commence foreclosure proceedings in
accordance with applicable servicing agreement
requirements.
(i) Approximately 45 Days Delinquent
If the loan is insured through a private mortgage
insurance ("PMP") company, the Claims Department will
send the NOD to the PMI company prior to the 20th day
of the second month of delinquency.
(j) 45 - 61 Days Delinquent
The LSR will prepare a foreclosure review worksheet
and submit the loan to the Default Review Committee.
If the committee approves the foreclosure, the loan
is referred to the Legal Department to commence
foreclosure proceedings as soon as the demand expires
in accordance with applicable servicing agreement
requirements. Foreclosure should be approved no later
than the 61st day of delinquency.
(k) 50 - 65 Days Delinquent
On approximately the 62nd day of delinquency and
after the expiration of the demand, if Fairbanks and
the borrowers have not agreed on a plan to cure the
default, the Legal Department will refer the loan to
local counsel for foreclosure. The LSR will continue
to contact the borrowers by telephone even after the
loan has been approved for foreclosure until all
avenues to cure the default have been exhausted.
(l) During and After Foreclosure and the Redemption
Period
LSRs will maintain contact with the borrowers
during the foreclosure process and attempt to cure
the default prior to the foreclosure sale. After
foreclosure, throughout and after the redemption
period, the LSRs will maintain contact with the
borrowers to pursue any deficiency amounts and, if
applicable under state law, possible reinstatement.