EXHIBIT 99.1
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CWHEQ, INC.
Depositor
COUNTRYWIDE HOME LOANS, INC.
Sponsor and Master Servicer
CWHEQ REVOLVING HOME EQUITY LOAN TRUST,
SERIES 2006-C
Trust
JPMORGAN CHASE BANK, N.A.
Indenture Trustee
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SALE AND SERVICING AGREEMENT
Dated as of March 30, 2006
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REVOLVING HOME EQUITY LOAN ASSET BACKED NOTES,
SERIES 2006-C
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Table of Contents
Page
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions...............................................................................1
Section 1.02 Other Terms...............................................................................1
Section 1.03 Rules of Construction.....................................................................1
Section 1.04 Interest Calculations.....................................................................3
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01 Conveyance of Mortgage Loans; Retention of Obligation to Fund Advances Under Credit Line
Agreements.............................................................................3
Section 2.02 Acceptance by Indenture Trustee...........................................................8
Section 2.03 Representations, Warranties, and Covenants Regarding the Master Servicer.................10
Section 2.04 Representations and Warranties Regarding the Mortgage Loans; Retransfer of Certain
Mortgage Loans. .........................................................................11
Section 2.05 Covenants of the Depositor...............................................................14
Section 2.06 Transfers of Mortgage Loans at Election of the Holder of the Class R-1 Certificates......15
Section 2.07 Retransfers and Transfer Deficiencies....................................................16
Section 2.08 Tax Reporting............................................................................17
Section 2.09 Representations and Warranties of the Depositor..........................................18
Section 2.10 Substitution and Repurchase Opinions.....................................................18
Section 2.11 Sponsor Loss Coverage Obligation.........................................................19
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01 The Master Servicer......................................................................19
Section 3.02 Collection of Certain Mortgage Loan Payments; Establishment of Accounts..................23
Section 3.03 Deposits to Payment Account..............................................................25
Section 3.04 Maintenance of Hazard Insurance; Property Protection Expenses............................26
Section 3.05 Assumption and Modification Agreements...................................................26
Section 3.06 Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans..........27
Section 3.07 Indenture Trustee to Cooperate...........................................................29
Section 3.08 Servicing Compensation; Payment of Certain Expenses by Master Servicer...................30
Section 3.09 Annual Statement as to Compliance........................................................30
Section 3.10 Access to Certain Documentation and Information Regarding the Mortgage Loans.............31
Section 3.11 Maintenance of Certain Servicing Insurance Policies......................................31
Section 3.12 The Loan Insurance Policy................................................................31
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01 Servicing Certificate....................................................................32
Section 4.02 Acknowledgement and Cooperation..........................................................35
Section 4.03 Optional Advances of the Master Servicer.................................................36
Section 4.04 Statements to Noteholders................................................................36
ARTICLE V
THE MASTER SERVICER, THE SPONSOR, AND THE DEPOSITOR
Section 5.01 Liability of the Sponsor, the Master Servicer, and the Depositor.........................37
Section 5.02 Merger or Consolidation of, or Assumption of the Obligations of, the Master Servicer
or the Depositor.........................................................................37
Section 5.03 Limitation on Liability of the Master Servicer and Others................................37
Section 5.04 Master Servicer Not to Resign............................................................38
Section 5.05 Delegation of Duties.....................................................................39
Section 5.06 Indemnification by the Master Servicer...................................................39
ARTICLE VI
SERVICING TERMINATION
Section 6.01 Events of Servicing Termination..........................................................40
Section 6.02 Indenture Trustee to Act; Appointment of Successor.......................................42
Section 6.03 Notification to Noteholders and the Transferor...........................................43
ARTICLE VII
EXCHANGE ACT REPORTING
Section 7.01 Filing Obligations.......................................................................44
Section 7.02 Form 10-D Filings........................................................................44
Section 7.03 Form 8-K Filings.........................................................................45
Section 7.04 Form 10-K Filings........................................................................45
Section 7.05 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification.............................................................46
Section 7.06 Form 15 Filing...........................................................................46
Section 7.07 Report on Assessment of Compliance and Attestation.......................................46
Section 7.08 Use of Subservicers and Subcontractors...................................................48
Section 7.09 Amendments...............................................................................49
ARTICLE VIII
TERMINATION
Section 8.01 Termination..............................................................................50
Section 8.02 Additional Termination Requirements......................................................51
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01 Amendment................................................................................51
Section 9.02 Governing Law............................................................................52
Section 9.03 Notices..................................................................................52
Section 9.04 Severability of Provisions...............................................................54
Section 9.05 Assignment...............................................................................54
Section 9.06 Third-Party Beneficiaries................................................................54
Section 9.07 Counterparts; Electronic Delivery........................................................54
Section 9.08 Effect of Headings and Table of Contents.................................................54
EXHIBIT A - MORTGAGE LOAN SCHEDULE...................................................................A-1
EXHIBIT B - LETTER OF REPRESENTATIONS................................................................B-1
EXHIBIT C - FORM OF REQUEST FOR RELEASE..............................................................C-1
EXHIBIT D - Form of Transfer Document................................................................D-1
EXHIBIT E - Monthly Statement........................................................................E-1
EXHIBIT F - Form of Performance Certification........................................................F-1
EXHIBIT G - Form of Servicing Criteria to be Addressed in Assessment of Compliance Statement.........G-1
EXHIBIT H - Form of ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification (Replacement of Master Servicer)....................H-1
EXHIBIT I - Form of Reliance Ceritificate............................................................I-1
This SALE AND SERVICING AGREEMENT, dated as of March 30, 2006, among
CWHEQ, INC., as depositor, COUNTRYWIDE HOME LOANS, INC., as sponsor and master
servicer, CWHEQ REVOLVING HOME EQUITY LOAN TRUST, SERIES 2006-C, and JPMORGAN
CHASE BANK, N.A., as Indenture Trustee,
WITNESSETH THAT:
The parties agree as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions.
Unless the context requires a different meaning, capitalized terms are
used in this Agreement as defined in the Master Glossary of Defined Terms
attached as Annex 1 to the Indenture dated as of the date hereof among CWHEQ
Revolving Home Equity Loan Trust, Series 2006-C, JPMorgan Chase Bank, N.A., as
indenture trustee and Chase Bank USA, National Association as co-trustee.
Section 1.02 Other Terms.
Defined terms used in this Agreement are sometimes defined after their
first use without a reference such as "(as hereinafter defined)."
Section 1.03 Rules of Construction.
Except as otherwise expressly provided in this Agreement or unless the
context clearly requires otherwise:
(a) Defined terms include, as appropriate, all genders and the plural as
well as the singular.
(b) References to designated articles, sections, subsections, exhibits,
and other subdivisions of this Agreement, such as "Section 6.12 (a)," refer to
the designated article, section, subsection, exhibit, or other subdivision of
this Agreement as a whole and to all subdivisions of the designated article,
section, subsection, exhibit, or other subdivision. The exhibits and other
attachments to this Agreement are a part of this Agreement. The words
"herein," "hereof," "hereto," "hereunder," and other words of similar import
refer to this Agreement as a whole and not to any particular article, section,
exhibit, or other subdivision of this Agreement.
(c) Any term that relates to a document or a statute, rule, or
regulation includes any amendments, modifications, supplements, or any other
changes that may have occurred since the document, statute, rule, or
regulation came into being, including changes that occur after the date of
this Agreement. References to law are not limited to statutes. References to
statutes include any rules or regulations promulgated under them by a
governmental authority charged
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with the administration of the statute. Any reference to any person includes
references to its successors and assigns.
(d) Any party may execute any of the requirements under this Agreement
either directly or through others, and the right to cause something to be done
rather than doing it directly shall be implicit in every requirement under
this Agreement. Unless a provision is restricted as to time or limited as to
frequency, all provisions under this Agreement are implicitly available from
time to time.
(e) The term "including" and all its variations mean "including but not
limited to." Except when used in conjunction with the word "either," the word
"or" is always used inclusively (for example, the phrase "A or B" means "A or
B or both," not "either A or B but not both").
(f) A reference to "a [thing]" or "any [of a thing]" does not imply the
existence or occurrence of the thing referred to even though not followed by
"if any," and "any [of a thing]" is any and all of it. A reference to the
plural of anything as to which there could be either one or more than one does
not imply the existence of more than one (for instance, the phrase "the
obligors on a note" means "the obligor or obligors on a note"). "Until
[something occurs]" does not imply that it must occur, and will not be
modified by the word "unless." The word "due" and the word "payable" are each
used in the sense that the stated time for payment has passed. The word
"accrued" is used in its accounting sense, i.e., an amount paid is no longer
accrued. In the calculation of amounts of things, differences and sums may
generally result in negative numbers, but when the calculation of the excess
of one thing over another results in zero or a negative number, the
calculation is disregarded and an "excess" does not exist. Portions of things
may be expressed as fractions or percentages interchangeably. The word "shall"
is used in its imperative sense, as for instance meaning a party agrees to
something or something must occur or exist.
(g) All accounting terms used in an accounting context and not otherwise
defined, and accounting terms partly defined in this Agreement, to the extent
not completely defined, shall be construed in accordance with generally
accepted accounting principles in the United States. To the extent that the
definitions of accounting terms in this Agreement are inconsistent with their
meanings under generally accepted accounting principles, the definitions in
this Agreement shall control. Capitalized terms used in this Agreement without
definition that are defined in the Uniform Commercial Code of the relevant
jurisdiction are used in this Agreement as defined in that Uniform Commercial
Code.
(h) In the computation of a period of time from a specified date to a
later specified date or an open-ended period, the words "from" and "beginning"
mean "from and including," the word "after" means "from but excluding," the
words "to" and "until" mean "to but excluding," and the word "through" means
"to and including." Likewise, in setting deadlines or other periods, "by"
means "on or before." The words "preceding," "following," and words of similar
import, mean immediately preceding or following. References to a month or a
year refer to calendar months and calendar years.
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(i) Any reference to the enforceability of any agreement against a party
means that it is enforceable against the party in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, and other
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
Section 1.04 Interest Calculations.
All calculations of interest on the Asset Balance of a Mortgage Loan
under this Agreement are on a daily basis using a 365-day year. All
calculations of interest on the Notes are on the basis of the actual number of
days in an Interest Period and a year of 360 days. The calculation of the
Servicing Fee is on the basis of a 360-day year consisting of twelve 30-day
months. All dollar amounts calculated under this Agreement are rounded to the
nearest cent with one-half of one cent being rounded down.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; TAX TREATMENT
Section 2.01 Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements.
(a) Concurrently with the execution and delivery of this Agreement, the
Depositor hereby transfers to the Trust without recourse (subject to Sections
2.02 and 2.04) all of its right, title, and interest in
(1) each Initial Mortgage Loan, including its Asset Balance
(including all Additional Balances), the related Mortgage File, all
property that secures the Mortgage Loan, and all collections received on
it after the Cut-off Date (excluding payments due by the Cut-off Date);
(2) property that secured an Initial Mortgage Loan that is
acquired by foreclosure or deed in lieu of foreclosure;
(3) the Depositor's rights under the Purchase Agreement;
(4) the Depositor's rights under the hazard insurance policies;
(5) all rights under any guaranty executed in connection with a
Mortgage Loan;
(6) all other assets included or to be included in the Trust for
the benefit of the Secured Parties; and
(7) all proceeds of the foregoing.
This transfer to the Trust is to the Owner Trustee, on behalf of the Trust,
and each reference in this Agreement to this transfer shall be construed
accordingly. In addition, by the Closing Date, the Depositor shall cause the
Credit Enhancer to deliver the Policy to the Indenture Trustee for the benefit
of the Holders of the Insured Notes and shall cause the Loan Insurance Policy
Provider to deliver the Loan Insurance Policy to the Co-Trustee.
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(b) Additional Transfers; Conditions Precedent to Subsequent Additions.
(1) The Depositor may sell to the Trust Additional Home Equity
Loans on any Subsequent Closing Date designated by the Depositor by the
Latest Subsequent Closing Date. The Depositor shall notify the Owner
Trustee, the Indenture Trustee, the Credit Enhancer, and each Rating
Agency of its designation of a Subsequent Closing Date at least one
Business Day in advance. On each Subsequent Closing Date the Depositor
shall deliver a properly completed and executed Transfer Document to the
Owner Trustee and furnish to the Owner Trustee, the Credit Enhancer and
the Indenture Trustee
(A) the Officer's Certificate referred to in Section
2.01(b)(2)(H),
(B) the revised Mortgage Loan Schedule reflecting the
addition of the Additional Home Equity Loans covered by the
Transfer Document,
(C) an opinion of counsel relating to the Subsequent Closing
Date to the effect that a court in a bankruptcy context addressing
the transfer of the Additional Home Equity Loans would
characterize the transfer as a sale rather than as a secured
lending,
(D) an opinion of counsel relating to the perfection of
security interest in the Additional Home Equity Loans
substantially in the form delivered on the Closing Date, and
(E) an Opinion of Counsel to the effect that the purchase of
Additional Home Equity Loans will not result in the imposition of
the tax on prohibited transactions on the Trust or contributions
after the Startup Date, as defined in Sections 860F(a)(2) and
860G(d) of the Code, respectively or cause any REMIC created under
the Trust Agreement to fail to qualify as a REMIC,
and the Indenture Trustee shall pay, on behalf of the Trust, to the
order of the Depositor, from the Additional Loan Account, the purchase
price in an amount equal to the Cut-off Date Asset Balance specified in
the Transfer Document, up to the amount of funds remaining in that
Additional Loan Account.
Upon delivery of the Transfer Document and payment of the purchase
price, the Depositor hereby transfers to the Trust without recourse
(subject to Sections 2.02 and 2.04) all of its right, title, and
interest in each Additional Home Equity Loan identified in the Transfer
Document, including its Asset Balance (including all Additional
Balances) and all collections received on it after the relevant
Subsequent Cut-off Date (excluding payments due by the Subsequent
Cut-off Date) and all proceeds of the foregoing. This transfer to the
Trust is to the Owner Trustee, on behalf of the Trust, and each
reference in this Agreement to this transfer shall be construed
accordingly.
(2) The obligation of the Indenture Trustee on behalf of the Trust
to pay the purchase price from the relevant Additional Loan Account for
the benefit of the Depositor and the acceptance by the Owner Trustee of
the transfer of the Additional
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Home Equity Loans and the other property and rights relating to them on
the related Subsequent Closing Date are subject to the satisfaction of
each of the following conditions by the Subsequent Closing Date:
(A) as of the related Subsequent Closing Date, neither the
Sponsor nor the Depositor is insolvent nor shall either of them be
made insolvent by the transfer of the Additional Home Equity Loans
nor is either of them aware of any pending insolvency;
(B) the addition shall not result in a material adverse
federal tax consequence to the Trust, the Transferor, or the
Noteholders;
(C) the Subsequent Closing Date is not after the Latest
Subsequent Closing Date;
(D) neither the Depositor nor the Trust shall have been
advised in writing by any Rating Agency that the transfer of the
Additional Home Equity Loans would result in a reduction or
withdrawal of the Rating Agency's then current rating of the Notes
(without regard to the Policy);
(E) the Sponsor represents and warrants that on the
Subsequent Closing Date each of the representations and warranties
in Section 2.04(a) by virtue of repetition of Section 3.02(a) of
the Purchase Agreement (excluding clauses (18), (30), (32), (33),
and (34) of Section 3.02(a) of the Purchase Agreement) are true
with respect to the Additional Home Equity Loans;
(F) the Sponsor represents and warrants that the addition of
the Additional Home Equity Loans will not result in a significant
variance as of the Subsequent Closing Date from the Mortgage Loan
pool characteristics covered by the representations and warranties
in Section 3.02(a)(18), (30), (32), (33), and (34) of the Purchase
Agreement after taking into account the addition of the Additional
Home Equity Loans;
(G) as of the relevant Subsequent Closing Date, the Sponsor
is not aware of any mechanics' or similar liens or claims that
have been filed for work, labor, or material affecting the related
Mortgaged Property that are, or may be, liens prior or equal to
the lien of the related mortgage, except liens that are fully
insured against by the title insurance policy referred to in
Section 3.02(16) of the Purchase Agreement; and
(H) the Depositor shall have delivered or caused the Sponsor
to deliver to the Owner Trustee, the Indenture Trustee, and the
Credit Enhancer an Officer's Certificate confirming the
satisfaction of each of these conditions precedent.
Neither the Owner Trustee nor the Indenture Trustee need investigate or
otherwise verify compliance with these conditions, except for its
receipt of the documents
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specified to be delivered to it in Section 2.01(b)(1), and they may rely
on the Officer's Certificate specified in Section 2.01(b)(2)(H).
(c) Additional Balances; Future Fundings. Additional Balances shall be
part of the Asset Balance and are hereby transferred to the Trust on the
Closing Date for the Initial Mortgage Loans and on the relevant Subsequent
Closing Date for the Additional Home Equity Loans pursuant to this Section
2.01, and therefore are part of the Trust property. Neither the Owner Trustee
nor the Trust nor the Indenture Trustee assumes the obligation under any
Credit Line Agreement that provides for the funding of future advances to the
mortgagor under it, and neither the Trust nor the Owner Trustee nor the
Indenture Trustee may fund these future advances.
(d) Delayed Delivery. In connection with the transfer under Section
2.01(a) by the Depositor, the Depositor shall effect delivery of the Mortgage
Loan Schedule to the Trust and the Indenture Trustee by the Closing Date and
delivery of the Initial Mortgage Files to the Trust, and the Trust shall
deliver them to the Indenture Trustee,
(1) no later than the Closing Date, with respect to no less
than 50% of the Initial Mortgage Loans in each Loan Group,
(2) no later than the twentieth day after the Closing Date,
with respect to no less than 40% of the Initial Mortgage Loans in
each Loan Group in addition to those delivered on the Closing
Date, and
(3) within thirty days following the Closing Date, with
respect to the remaining Initial Mortgage Loans.
In connection with the transfers by the Depositor under Section 2.01(b),
the Depositor shall effect delivery of a revised Mortgage Loan Schedule
reflecting the addition of the Additional Home Equity Loans to the Indenture
Trustee within 15 days following the relevant Subsequent Closing Date and of
the relevant Initial Mortgage Files to the Custodian,
(A) no later than the relevant Subsequent Closing Date, with
respect to no less than 10% of the relevant Additional Home Equity
Loans, and
(B) within twenty days following the relevant Subsequent
Closing Date, with respect to the remaining relevant Additional
Home Equity Loans.
In lieu of delivery of original documentation, the Depositor may deliver
documents that have been imaged optically on delivery of an opinion of counsel
to the Indenture Trustee and the Credit Enhancer that the imaged documents are
enforceable to the same extent as the originals and do not impair the
enforceability of the transfer to the Trust of the Mortgage Loans, if the
retention of the imaged documents in the delivered format will not result in a
reduction in the then current rating of the Notes without regard to the
Policy.
(e) ▇▇▇▇ Records. The Sponsor hereby confirms to the Owner Trustee and
the Indenture Trustee, on behalf of itself and any other Seller, that each
Seller has caused the portions of the Electronic Ledgers relating to the
Initial Mortgage Loans to be clearly and unambiguously marked, and has made
the appropriate entries in its general accounting records,
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to indicate that the Initial Mortgage Loans have been transferred to the Trust
at the direction of the Depositor. The Master Servicer hereby confirms to the
Owner Trustee and the Indenture Trustee that it has clearly and unambiguously
made appropriate entries in its general accounting records indicating that
those Initial Mortgage Loans constitute part of the Trust and are serviced by
it on behalf of the Trust in accordance with this Agreement.
By the relevant Subsequent Closing Date, the Sponsor shall cause the
portions of the Electronic Ledgers relating to the Additional Home Equity
Loans to be clearly and unambiguously marked, and shall make appropriate
entries in its general accounting records, to indicate that those Additional
Home Equity Loans have been transferred to the Trust at the direction of the
Depositor. By the relevant Subsequent Closing Date, the Master Servicer shall
clearly and unambiguously make appropriate entries in its general accounting
records indicating that those Additional Home Equity Loans constitute part of
the Trust and are serviced by it on behalf of the Trust in accordance with
this Agreement.
(f) UCC Filings. The Depositor and the Trust agree (subject to Section
2.01(h)) to effect any actions and execute any documents necessary to perfect
and protect the Trust's, the Indenture Trustee's and the Secured Parties'
interests in each Cut-off Date Asset Balance and Additional Balances and their
proceeds, including filing all necessary Continuation Statements for the UCC1
Financing Statements filed in the State of Delaware (which shall have been
filed by the Closing Date) describing the Cut-off Date Asset Balances and
Additional Balances and naming the Depositor as debtor and the Trust as
secured party or naming the Trust as debtor and the Indenture Trustee as
secured party and any amendments to UCC1 Financing Statements required to
reflect a change in the UCC or in the name or organizational structure of the
Depositor or the Trust or the filing of any additional UCC1 Financing
Statements due to the change in the state of organization of the Depositor or
the Trust (within 30 days of any event necessitating the filing).
(g) Sponsor Rating Downgrade. If either an Event of Servicing
Termination has occurred and not been waived or the long term senior unsecured
corporate debt rating of Countrywide Home Loans, Inc. falls below "BBB" by
Standard & Poor's or "Baa2" by ▇▇▇▇▇'▇, then as promptly as practicable but in
any case within 90 days of the event, the Master Servicer shall, at its
expense, either
(x) request that the Indenture Trustee deliver to it the original
Assignment of Mortgage previously delivered to the Indenture Trustee
pursuant to Section 2.01(d) and then record the Assignment of Mortgage
in favor of the Indenture Trustee (which may be a blanket assignment if
permitted by applicable law) in the appropriate real property or other
records,
(y) deliver to the Indenture Trustee an Opinion of Counsel
addressed to the Indenture Trustee and the Credit Enhancer to the effect
that recording is not required to protect the Indenture Trustee's
interest in the related Mortgage Loan or, in case a court should
recharacterize the sale of the Mortgage Loans as a financing, to perfect
a first priority Security Interest in favor of the Indenture Trustee in
the related Mortgage Loan,
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which Opinion of Counsel also shall be reasonably acceptable to each of
the Rating Agencies (as evidenced in writing) and the Credit Enhancer,
or
(z) cause the MERS(R) System to indicate (and provide evidence to
the Indenture Trustee that it has done so) that the Mortgage Loans have
been assigned by the Trust to the Indenture Trustee in accordance with
this Agreement for the benefit of the Noteholders and the Credit
Enhancer by including (or deleting, in the case of Mortgage Loans that
are repurchased in accordance with this Agreement) in the MERS computer
files (a) the appropriate code that identifies the Indenture Trustee in
the field for identifying the assignee and (b) the appropriate code that
has been assigned to identify the Notes to the MERS(R) System in the
field "Pool Field" identifying the Notes issued in connection with the
Mortgage Loans.
(h) Sale Treatment. The transfer of the Mortgage Loans is a sale by each
Seller to the Depositor and by the Depositor to the Trust of all of each
Seller's and then all the Depositor's interest in the Mortgage Loans and other
property described above. From the time the Notes are issued until such time
as all or a portion of the Notes are sold to one or more unaffiliated parties,
each Seller will report the transfer of the Mortgage Loans and the related
Additional Balances to the Depositor as a transfer of assets in exchange for
beneficial interests in the form of asset-backed securities and servicing
rights. If the transfer were to be characterized as a transfer for security
and not as a sale, however, then the Depositor hereby grants to the Trust a
Security Interest in all of the Depositor's right, title, and interest in the
Mortgage Loans whether existing now or in the future, all monies due or to
become due on the Mortgage Loans, and all their proceeds; and this Agreement
shall constitute a Security Agreement under applicable law.
Section 2.02 Acceptance by Indenture Trustee.
(a) On the Closing Date, the Custodian shall execute and deliver to the
Depositor, the Master Servicer, and the Sponsor (with a copy to the Credit
Enhancer) the Initial Certification pursuant to the Custodial Agreement. If
Mortgage Files with respect to either Initial Mortgage Loans have been
delivered after the Closing Date or Additional Home Equity Loans have been
delivered after the Subsequent Closing date pursuant to Section 2.01(d), the
Custodian shall execute and deliver to the Depositor, the Master Servicer, and
the Sponsor (with a copy to the Credit Enhancer) a Delay Delivery
Certification pursuant to the Custodial Agreement within the period specified
in the Custodial Agreement. Within 180 days after the Closing Date, Custodian
shall deliver to the Depositor, the Master Servicer, and the Sponsor (with a
copy to the Credit Enhancer) a Final Certification pursuant to the Custodial
Agreement. The Sponsor shall correct any defect noted in the Final
Certification within 90 days of its receipt and in no event later than 270
days after the Closing Date.
(b) Upon the satisfaction of the requirements of Section 2.07, all
interest of the Trust in a Mortgage Loan shall automatically be retransferred
no later than the 270th day after the Closing Date without recourse,
representation, or warranty to the Sponsor and the Asset Balance of the
Mortgage Loan shall be deducted from the Loan Group Balance of the related
Loan Group, if
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(1) the Indenture Trustee does not receive the Mortgage File for
any Mortgage Loan as required by Section 2.01(d),
(2) the time to correct any defect in the Mortgage Loan noted on
the Final Certification has expired,
(3) the Trust ever incurs any loss on the Mortgage Loan because
any document in its Mortgage File is defective, or
(4) an Assignment of Mortgage to the Indenture Trustee has not
been recorded in accordance with Section 2.01(g) and the Mortgage Loan
is not registered on the MERS(R) System.
Subject to the prior satisfaction of the requirements of Section 2.07,
the Owner Trustee shall execute any documents of transfer presented by the
Sponsor, without recourse, representation, or warranty, and take any other
actions reasonably requested by the Sponsor to effect the transfer by the
Trust of the Defective Mortgage Loan pursuant to this Section as promptly as
practical.
The sole remedy of the Secured Parties, the Transferor, the Owner
Trustee, and the Indenture Trustee against the Sponsor for the transfer of a
Defective Mortgage Loan to the Trust is the Sponsor's obligation to accept a
transfer of a Defective Mortgage Loan and to convey an Eligible Substitute
Mortgage Loan or to make a deposit of any Transfer Deposit Amount into the
Collection Account in accordance with Section 2.07.
Promptly following the transfer of any Defective Mortgage Loan from the
Trust pursuant to this Section or Section 2.07, the Master Servicer shall
amend the Mortgage Loan Schedule, deliver the amended Mortgage Loan Schedule
to the Indenture Trustee, and make appropriate entries in its general account
records to reflect the transfer. Following the retransfer, the Master Servicer
shall appropriately ▇▇▇▇ its records to indicate that it is no longer
servicing the Mortgage Loan on behalf of the Trust. The Sponsor shall
appropriately ▇▇▇▇ its Electronic Ledger and make appropriate entries in its
general account records to reflect the transfer promptly following the
transfer.
(c) The Sponsor shall deliver to the Indenture Trustee any documents
required to be held by the Indenture Trustee in accordance with Section 2.01
with respect to any Eligible Substitute Mortgage Loans. The Master Servicer
shall determine the Transfer Deposit Amount in any Collection Period during
which the Sponsor substitutes Eligible Substitute Mortgage Loans and the
Sponsor shall deposit that amount in the Collection Account at the time of
substitution. All amounts received on the Eligible Substitute Mortgage Loans
during the Collection Period in which the circumstances giving rise to their
transfer to the Trust occur shall not be a part of the Trust and shall not be
deposited by the Master Servicer in the Collection Account. All amounts
received on a removed Defective Mortgage Loan during the Collection Period in
which the circumstances giving rise to its transfer to the Trust occur shall
be a part of the Trust and shall be deposited by the Master Servicer in the
Collection Account. An Eligible Substitute Mortgage Loan will be subject to
the terms of this Agreement in all respects when transferred to the Trust, and
the Sponsor hereby makes the representations, warranties, and
9
covenants in Section 2.04 with respect to the Eligible Substitute Mortgage
Loan as of the date of substitution.
(d) The Custodian shall retain possession of each Mortgage File on
behalf of the Indenture Trustee in accordance with the Custodial Agreement.
The Master Servicer shall promptly deliver to the Indenture Trustee the
originals of any other documents constituting the Mortgage File coming into
its possession on their execution or receipt. Any documents to be delivered to
the Indenture Trustee under this Agreement may be delivered to the Custodian
acting on behalf of the Indenture Trustee.
Section 2.03 Representations, Warranties, and Covenants Regarding the
Master Servicer.
The Master Servicer represents and warrants to the Indenture Trustee and
the Credit Enhancer that as of the Closing Date:
(1) The Master Servicer is a New York corporation, validly
existing and in good standing under the laws of the State of New York,
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Master Servicer is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of its business or
any properties owned or leased by it requires such qualification and in
which the failure so to qualify would have a material adverse effect on
the business, properties, assets, or condition (financial or other) of
the Master Servicer.
(2) The Master Servicer has the power and authority to make,
execute, deliver, and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate
action to authorize the execution, delivery, and performance of this
Agreement. When executed and delivered, this Agreement will constitute a
valid and legally binding obligation of the Master Servicer enforceable
in accordance with its terms.
(3) The Master Servicer is not required to obtain the consent of
any other party or any consent, license, approval or authorization from,
or registration or declaration with, any governmental authority, bureau,
or agency in connection with the execution, delivery, performance,
validity, or enforceability of this Agreement, except for consents,
licenses, approvals or authorizations, or registrations or declarations
that have been obtained or filed, as the case may be, before the Closing
Date.
(4) The execution, delivery, and performance of this Agreement by
the Master Servicer will not violate any existing law or regulation or
any order or decree of any court applicable to the Master Servicer or
the certificate of incorporation or bylaws of the Master Servicer, or
constitute a material breach of any mortgage, indenture, contract, or
other agreement to which the Master Servicer is a party or by which the
Master Servicer may be bound.
(5) No litigation or administrative proceeding of or before any
court, tribunal, or governmental body is currently pending, or to the
knowledge of the Master
10
Servicer threatened, against the Master Servicer or any of its
properties or with respect to this Agreement, the Indenture, or the
Notes that in the opinion of the Master Servicer has a reasonable
likelihood of resulting in a material adverse effect on the transactions
contemplated by the Transaction Documents.
(6) If any Mortgage Loan has been registered on the MERS(R)
System, the Master Servicer is a member of MERS in good standing.
The Master Servicer covenants that it will fully furnish, in accordance
with the Fair Credit Reporting Act and its implementing regulations, accurate
and complete information (i.e., favorable and unfavorable) on its credit files
for the related Mortgagor for each Mortgage Loan to Equifax, Experian, and
Trans Union Credit Information Company on a monthly basis.
The representations, warranties, and covenants in this Section shall
survive the transfer of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representation, warranty, or covenant that materially and
adversely affects the interests of the Transferor, the Noteholders, or the
Credit Enhancer, the person discovering the breach shall give prompt notice to
the other parties and to the Credit Enhancer. The Master Servicer shall cure
in all material respects any breach of any representation, warranty, or
covenant within 90 days of becoming aware of it or, if the Mortgage Loan
represents a "qualified mortgage" within the meaning of Section 860(a)(3) of
the Code (but without regard to the rule in Treasury Regulation ss.
1.860G-2(f)(2) that treats a defective obligation as a qualified mortgage, or
any substantially similar successor provision) and if a Responsible Officer of
the Indenture Trustee consents, any longer period specified in the consent.
Section 2.04 Representations and Warranties Regarding the Mortgage
Loans; Retransfer of Certain Mortgage Loans.
(a) The Sponsor by this reference repeats and incorporates in this
Agreement each representation and warranty made by it (as a Seller) in Section
3.02(a) of the Purchase Agreement (other than Section 3.02(a)(1) and (2)) to
the Indenture Trustee, the Credit Enhancer, and the Trust and, in addition,
represents and warrants to the Indenture Trustee, the Credit Enhancer, and the
Trust that as of the Cut-off Date, unless specifically stated otherwise:
(1) As of the Closing Date with respect to the Initial Mortgage
Loans, the relevant Subsequent Closing Date with respect to any
Additional Home Equity Loans, or the applicable date of substitution
with respect to any Eligible Substitute Mortgage Loan, this Agreement
constitutes a valid and legally binding obligation of the Sponsor,
enforceable against the Sponsor in accordance with its terms.
(2) As of the Closing Date with respect to the Initial Mortgage
Loans, the relevant Subsequent Closing Date with respect to any
Additional Home Equity Loans, or the applicable date of substitution
with respect to any Eligible Substitute Mortgage Loan, either
(A) the Purchase Agreement constitutes a valid transfer to
the Depositor of all right, title, and interest of the Sellers in
the applicable Mortgage Loans, all collections received from the
Mortgage Loans after the
11
Cut-off Date (excluding payments due by the Cut-off Date), all
proceeds of the applicable Mortgage Loans, and any funds from time
to time deposited in the Collection Account and in the Payment
Account and all other property specified in Section 2.01(a) or
(b), as applicable, and this Agreement constitutes a valid
transfer to the Trust of the foregoing property such that, on
execution of this Agreement, it is owned by the Trust free of all
liens and other encumbrances, and is part of the corpus of the
Trust conveyed to the Trust by the Depositor, and upon payment for
the Additional Balances, the Purchase Agreement and this Agreement
will constitute a valid transfer to the Trust of all right, title,
and interest of the Sellers in the Additional Balances, all monies
due or to become due on them, all proceeds of the Additional
Balances, and all other property specified in Section 2.01(a)
relating to the Additional Balances free of all liens and other
encumbrances, or
(B) the Purchase Agreement or this Agreement, as
appropriate, constitutes a Grant of a Security Interest to the
Owner Trustee on behalf of the Trust in the property described in
clause (A) above and the Indenture constitutes a Grant of a
Security Interest to the Indenture Trustee in the Collateral. The
Indenture Trustee has a first priority perfected Security Interest
in the Collateral, subject to the effect of Section 9-315 of the
UCC with respect to collections on the Mortgage Loans that are
deposited in the Collection Account in accordance with the next to
last paragraph of Section 3.02(b), and if this Agreement
constitutes the Grant of a Security Interest in the property
described in clause (A) above to the Trust, the Trust has a first
priority perfected Security Interest in the property, subject to
the same limitations. This Security Interest is enforceable as
such against creditors of and purchasers from the Trust, the
Depositor, and each Seller.
(b) If the substance of any representation and warranty in this Section
made to the best of the Sponsor's knowledge or as to which the Sponsor has no
knowledge is inaccurate and the inaccuracy materially and adversely affects
the interest of the Trust, the Noteholders or the Credit Enhancer in the
related Mortgage Loan then, notwithstanding that the Sponsor did not know the
substance of the representation and warranty was inaccurate at the time the
representation or warranty was made, the inaccuracy shall be a breach of the
applicable representation or warranty.
(c) The representations and warranties in this Section shall survive
delivery of the respective Mortgage Files to the Custodian pursuant to the
Custodial Agreement and the termination of the rights and obligations of the
Master Servicer pursuant to Section 5.04 or 6.02. If the Sponsor, the
Depositor, the Master Servicer, the Credit Enhancer, or a Responsible Officer
of the Indenture Trustee discovers a breach of any of the foregoing
representations and warranties, without regard to any limitation concerning
the knowledge of the Sponsor, that materially and adversely affects the
interests of the Trust, the Indenture Trustee under the Indenture, the
Noteholders, or the Credit Enhancer in the Mortgage Loan, the party
discovering the breach shall give prompt notice to the other parties and the
Credit Enhancer.
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(d) The Sponsor shall use all reasonable efforts to cure in all material
respects any breach of any of the foregoing representations and warranties
(other than a breach of the representation and warranty in Section 2.04 by
virtue of the repetition of Section 3.02(a)(5) of the Purchase Agreement)
within 90 days of becoming aware of it or, not later than the Business Day
before the Payment Date in the month following the Collection Period in which
the cure period expired (or any later date that the Indenture Trustee and the
Credit Enhancer consent to), all interest of the Trust in the Defective
Mortgage Loan shall, subject to the satisfaction of the requirements of
Section 2.07, automatically be retransferred without recourse, representation,
or warranty to the Sponsor and the Asset Balance of the Mortgage Loan shall be
deducted from the Loan Balance.
The cure for any breach of a representation and warranty relating to the
characteristics of the Mortgage Loans in the related Loan Group in the
aggregate shall be a repurchase of or substitution for only the Mortgage Loans
necessary to cause the characteristics to comply with the related
representation and warranty.
Subject to the prior satisfaction of the requirements of Section 2.07,
the Owner Trustee shall execute any documents of transfer presented by the
Sponsor, without recourse, representation, or warranty, and take any other
actions reasonably requested by the Sponsor to effect the transfer by the
Trust of the Defective Mortgage Loan pursuant to this Section as promptly as
practical.
Promptly following the transfer of any Defective Mortgage Loan from the
Trust pursuant to this Section, the Master Servicer shall amend the Mortgage
Loan Schedule, deliver the amended Mortgage Loan Schedule to the Indenture
Trustee, and make appropriate entries in its general account records to
reflect the transfer. Following the retransfer, the Master Servicer shall
appropriately ▇▇▇▇ its records to indicate that it is no longer servicing the
Mortgage Loan on behalf of the Trust. The Sponsor shall appropriately ▇▇▇▇ its
Electronic Ledger and make appropriate entries in its general account records
to reflect the transfer promptly following the transfer.
(e) The sole remedy of the Secured Parties, the Indenture Trustee on
behalf of Secured Parties, the Owner Trustee, and the Credit Enhancer against
the Sponsor for the breach of a representation or warranty (other than the
representation and warranty in Section 2.04(a) by virtue of the repetition of
Section 3.02(a)(5) of the Purchase Agreement) is the Sponsor's obligation to
accept a transfer of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit in the Collection Account or to
substitute an Eligible Substitute Mortgage Loan.
(f) If the representation and warranty in Section 2.04(a) by virtue of
the repetition of Section 3.02(a)(5) of the Purchase Agreement is breached,
the transfer of the affected Mortgage Loans to the Trust shall be void and the
Sponsor shall pay to the Trust the sum of (i) the amount of the related Asset
Balances, plus accrued interest on each Asset Balance at the applicable Loan
Rate to the date of payment and (ii) the amount of any loss or expense
incurred by the Transferor, the Noteholders, the Credit Enhancer, or the Trust
with respect to the affected Mortgage Loans. The Indenture Trustee may enforce
the Sponsor's obligations under this
13
Section in its own right or as the owner of the Trust's right to seek
enforcement as the assignee of the Trust's rights under this Agreement
pursuant to the Indenture.
(g) A breach of any one of the representations in Sections 3.02(a)(58)
to (66) of the Purchase Agreement will be considered to materially adversely
affect the interests of the Noteholders.
(h) The Sponsor shall defend and indemnify the Indenture Trustee, the
Owner Trustee, and the Secured Parties against all reasonable costs and
expenses, and all losses, damages, claims, and liabilities, including
reasonable fees and expenses of counsel and the amount of any settlement
entered into with the consent of the Sponsor (this consent not to be
unreasonably withheld), that may be asserted against or incurred by any of
them as a result of any third-party action arising out of any breach of a
representation and warranty.
Section 2.05 Covenants of the Depositor.
The Depositor covenants that:
(a) Security Interests. Except for the transfer under this Agreement,
the Depositor will not transfer any Mortgage Loan to any other person, or
create or suffer to exist any Lien on any Mortgage Loan or any interest in
one, whether existing now or in the future; the Depositor will notify the
Indenture Trustee of the existence of any Lien on any Mortgage Loan
immediately on its discovery; and the Depositor will defend the right, title,
and interest of the Trust in the Mortgage Loans, whether existing now or in
the future, against all claims of third parties claiming through the
Depositor. Nothing in this Section shall prohibit the Depositor from suffering
to exist on any Mortgage Loan any Liens for municipal or other local taxes and
other governmental charges if the taxes or governmental charges are not due at
the time or if the Depositor is contesting their validity in good faith by
appropriate proceedings and has set aside on its books adequate reserves with
respect to them.
(b) Negative Pledge. The Depositor shall not transfer or grant a
Security Interest in the Transferor Certificates except in accordance with
Section 3.10 of the Trust Agreement.
(c) Additional Indebtedness. So long as the Notes are outstanding the
Depositor will not incur any debt other than debt that (i) is non-recourse to
the assets of the Depositor other than the mortgage loans specifically pledged
as security for the debt, (ii) is subordinated in right of payment to the
rights of the Noteholders, or (iii) is assigned a rating by each of the Rating
Agencies that is the same as the then current rating of the Notes.
(d) Downgrading. The Depositor will not engage in any activity that
would result in a downgrading of the Notes without regard to the Policy.
(e) Amendment to Certificate of Incorporation. The Depositor will not
amend its Certificate of Incorporation or state of incorporation without prior
notice to the Rating Agencies and the Indenture Trustee, and the Credit
Enhancer.
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Section 2.06 Transfers of Mortgage Loans at Election of the Holder of
the Class R-1 Certificates.
Subject to the conditions below, the holder of the Class R-1
Certificates may require the transfer of Mortgage Loans in a Loan Group from
the Trust to the holder of the Class R-1 Certificates as of the close of
business on a Payment Date (the "Transfer Date") in an amount not in excess of
the sum of the outstanding related Net Draws at the time and the excess of the
related Allocated Transferor Interest over the related Required Transferor
Subordinated Amount the time . In connection with any transfer, the Net Draws
shall be reduced by the aggregate Asset Balances as of the Transfer Date of
the Mortgage Loans transferred, and the excess, if any, will be applied to
reduce the applicable Allocated Transferor Interest (but not below the related
Transferor Subordinated Amount). On the fifth Business Day (the "Transfer
Notice Date") before the Transfer Date designated in the notice, the holder of
the Class R-1 Certificates shall give the Owner Trustee, the Indenture
Trustee, the Master Servicer, and the Credit Enhancer a notice of the proposed
transfer that contains a list of the Mortgage Loans to be transferred. These
transfers of Mortgage Loans shall be permitted if the following conditions are
satisfied:
(1) No Rapid Amortization Event has occurred,
(2) On the Transfer Date
(A) the Allocated Transferor Interest with
respect to the related Loan Group (after giving effect
to the removal of the Mortgage Loans proposed to be
transferred) exceeds
(B) the related Required Transferor Subordinated
Amount.
(3) The transfer of any Mortgage Loans from either
Loan Group on any Transfer Date during the Managed
Amortization Period shall not, in the reasonable belief of
the holder of the Class R-1 Certificates, cause a Rapid
Amortization Event to occur or an event that with notice or
lapse of time or both would constitute a Rapid Amortization
Event.
(4) By the Transfer Date, the holder of the Class R-1
Certificates shall have delivered to the Indenture Trustee a
revised Mortgage Loan Schedule, reflecting the proposed
transfer and the Transfer Date, and the Master Servicer
shall have marked the Electronic Ledger to show that the
Mortgage Loans transferred to the holder of the Class R-1
Certificates are no longer owned by the Trust.
(5) The holder of the Class R-1 Certificates shall
represent and warrant that the Mortgage Loans to be removed
from the Trust were selected randomly.
(6) In connection with each transfer of Mortgage Loans
pursuant to this Section, each Rating Agency and the Credit
Enhancer shall have received by the related Transfer Notice
Date notice of the proposed transfer of Mortgage Loans and,
before the Transfer Date, each Rating Agency shall have
notified in writing the holder of the Class R-1 Certificates
and the Indenture Trustee, and the Credit Enhancer that the
transfer of
15
Mortgage Loans would not result in a reduction or withdrawal
of its then current rating of the Notes without regard to
the Policy.
(7) The holder of the Class R-1 Certificates shall
have delivered to the Owner Trustee, the Indenture Trustee,
and the Credit Enhancer an Officer's Certificate certifying
that the items in subparagraphs (1) through (4), inclusive,
have been performed or are true, as the case may be. The
Owner Trustee and the Indenture Trustee may conclusively
rely on the Officer's Certificate, shall have no duty to
make inquiries with regard to the matters in it, and shall
incur no liability in so relying.
(8) an Opinion of Counsel is furnished to the
Indenture Trustee that the transfer will not result in a tax
on any REMIC created under the Trust Agreement pursuant to
the REMIC Provisions or cause any REMIC created under the
Trust Agreement to fail to qualify as a REMIC at any time
that any Securities are outstanding.
(9) On or after the Stepdown Date, the holder of the
Class R-1 Certificates shall pay the purchase price of any
transferred Mortgage Loan allocated either Allocated
Transferor Interest for the benefit of the Class C
Certificates subject to the terms of the Trust Agreement.
Upon receiving the requisite information from the holder of the Class
R-1 Certificates, the Master Servicer shall perform in a timely manner those
acts required of it, as specified above. Upon satisfaction of the above
conditions, on the Transfer Date the Indenture Trustee shall effect delivery
to the holder of the Class R-1 Certificates the Mortgage File for each
Mortgage Loan being so transferred, and the Indenture Trustee shall execute
and deliver to the holder of the Class R-1 Certificates any other documents
prepared by the holder of the Class R-1 Certificates reasonably necessary to
transfer the Mortgage Loans to the holder of the Class R-1 Certificates. This
transfer of the Trust's interest in Mortgage Loans shall be without recourse,
representation, or warranty by the Indenture Trustee or the Trust to the
holder of the Class R-1 Certificates.
Section 2.07 Retransfers and Transfer Deficiencies.
(a) The Indenture Trustee shall determine if reducing the relevant Loan
Group Balance by the Asset Balance of any retransferred Mortgage Loan pursuant
to Section 2.02(b) or 2.04(d) would cause a Transfer Deficiency for the
related Loan Group. If so, the Indenture Trustee shall notify the Sponsor of
the deficiency, and the Sponsor shall transfer to the Trust within five
Business Days (but only if the transfer occurs within two years of the Closing
Date) Eligible Substitute Mortgage Loans or deposit into the Collection
Account an amount in immediately available funds equal to the amount of the
Transfer Deficiency reduced by the Asset Balance of any Eligible Substitute
Mortgage Loans transferred to the Trust (the "Transfer Deposit Amount").
(b) The Sponsor shall deliver to the Indenture Trustee any documents
required to be held by the Indenture Trustee in accordance with Section 2.01
with respect to any Eligible Substitute Mortgage Loans.
16
(c) All amounts received on Eligible Substitute Mortgage Loans during
the Collection Period in which the circumstances giving rise to their transfer
to the Trust occur shall not be a part of the Trust and shall not be deposited
by the Master Servicer in the Collection Account.
All amounts received on a removed Defective Mortgage Loan during the
Collection Period in which the circumstances giving rise to its transfer to
the Trust occur shall be a part of the Trust and shall be deposited by the
Master Servicer in the Collection Account.
(d) An Eligible Substitute Mortgage Loan will be subject to the terms of
this Agreement in all respects when transferred to the Trust, and the Sponsor
hereby makes the representations, warranties, and covenants in Section 2.04
with respect to the Eligible Substitute Mortgage Loan as of the date of its
transfer to the Trust.
(e) Promptly following the transfer of any Eligible Substitute Mortgage
Loan to the Trust pursuant to this Section, the Master Servicer shall amend
the Mortgage Loan Schedule, deliver the amended Mortgage Loan Schedule to the
Indenture Trustee, and make appropriate entries in its general account records
to reflect the transfer. The Sponsor shall appropriately ▇▇▇▇ its Electronic
Ledger and make appropriate entries in its general account records to reflect
the transfer promptly following the transfer.
Section 2.08 Tax Reporting.
(a) The Administrator pursuant to the Administration Agreement will
prepare and file all tax reports required under this Agreement on behalf of
the Trust, including tax reporting and withholding required by Sections 1445
and 6050J of the Code with respect to foreclosures and abandonments, the tax
reporting required by Section 6050H of the Code with respect to the receipt of
mortgage interest from individuals, and any tax reporting required by Section
6050P of the Code with respect to the cancellation of indebtedness by certain
financial entities, by preparing any tax and information returns required and
delivering them to the Owner Trustee for filing.
(b) The Indenture Trustee will act as agent on behalf of the Trust with
respect to certain tax matters pursuant to Section 9.06 of the Indenture.
(c) If any tax is imposed on "prohibited transactions" of any REMIC as
defined in Section 860F(a)(2) of the Code, on the "net income from foreclosure
property" of a REMIC as defined in section 860G(c) of the Code, on any
contribution to a REMIC after the Startup Day pursuant to Section 860G(d) of
the Code, or any other tax is imposed on any REMIC (including any federal,
state, or local tax), the tax shall be paid by
o the Indenture Trustee, if the tax arises out of a breach
by the Indenture Trustee of any of its obligations described in
Section 9.06(b) of the Indenture,
o the Master Servicer, in the case of any minimum tax
imposed on any REMIC pursuant to Sections 23153 and 24874 of the
California Revenue and Taxation Code, or if the tax arises out of
a breach by the Master Servicer or a Seller of any of their
obligations under any Transaction Document,
17
o the Seller, if the tax arises out of the Seller's
obligation to repurchase a Mortgage Loan pursuant to Section
2.02(b) or 2.04(d), or
o in all other cases, or if any liable party fails to honor
its obligations to pay the tax as provided above, the tax will be
paid
FIRST, from amounts otherwise to be distributed on the Class
C Certificates pursuant to the Trust Agreement,
SECOND, from amounts otherwise to be distributed on the
Class R-1 Certificates pursuant to the Trust Agreement, and
THIRD, from amounts otherwise to be distributed on the Notes
as provided in the Indenture.
Section 2.09 Representations and Warranties of the Depositor.
The Depositor represents and warrants to the Indenture Trustee on behalf
of the Noteholders and the Credit Enhancer as follows:
(1) This Agreement constitutes a valid and legally binding
obligation of the Depositor, enforceable against the Depositor in
accordance with its terms.
(2) Immediately before the sale and assignment by the Depositor to
the Trust of each Mortgage Loan, the Depositor was the sole beneficial
owner of each Mortgage Loan (insofar as the title was conveyed to it by
the Sellers) subject to no prior lien, claim, participation interest,
mortgage, Security Interest, pledge, charge, or other encumbrance or
other interest of any nature.
(3) As of the Closing Date with respect to the Initial Mortgage
Loans, the relevant Subsequent Closing Date with respect to any
Additional Home Equity Loans, or the applicable date of substitution
with respect to any Eligible Substitute Mortgage Loan, the Depositor has
transferred all right, title, and interest in the Eligible Substitute
Mortgage Loan to the Trust.
(4) The Depositor has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay, or defraud any of its creditors.
Section 2.10 Substitution and Repurchase Opinions.
Notwithstanding any contrary provision of this Agreement, with respect
to any Mortgage Loan that is not in default or as to which default is not
imminent, no repurchase or substitution pursuant to Sections 2.02, 2.03, 2.04,
or 2.06 shall be made unless the party repurchasing or substituting delivers
to the Indenture Trustee an Opinion of Counsel to the effect that the
repurchase or substitution would not result in the imposition of the tax on
prohibited transactions of the Trust or contributions after the Startup Date,
as defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively or
cause the any REMIC created under the Trust Agreement to fail to qualify as a
REMIC at any time that any Notes or Certificates are outstanding. Any Mortgage
Loan whose repurchase or substitution was delayed pursuant to this Section
shall be repurchased or substituted for upon the earlier of the
18
occurrence of a default or imminent default with respect to the Mortgage Loan
and satisfaction of the requirements of this Section.
Section 2.11 Sponsor Loss Coverage Obligation.
The Sponsor, for the benefit of the Noteholders and the Credit Enhancer,
agrees that it will pay the Sponsor Loss Coverage Obligation for any Payment
Date as reflected in the applicable Servicing Certificate to the Indenture
Trustee for deposit in the Payment Account no later than the Business Day
before the Payment Date.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01 The Master Servicer.
(a) The Master Servicer shall service and administer the Mortgage Loans
in a manner consistent with the terms of this Agreement and with general
industry practice and shall have full power and authority, acting alone or
through a subservicer,
o to execute and deliver, on behalf of the Secured Parties, the
Trust, and the Indenture Trustee, customary consents or waivers and
other instruments and documents,
o to consent to transfers of any Mortgaged Property and
assumptions of the Mortgage Notes and related Mortgages (but only in the
manner provided in this Agreement),
o to collect any Insurance Proceeds and other Liquidation
Proceeds, and
o to effectuate foreclosure or other conversion of the ownership
of the Mortgaged Property securing any Mortgage Loan.
The Master Servicer shall remain responsible to the parties to this
Agreement and the Credit Enhancer for its obligations under this Agreement.
Any amounts received by any subservicer on a Mortgage Loan shall be considered
to have been received by the Master Servicer whether or not actually received
by it. Without limiting the generality of the foregoing, the Master Servicer
may execute and deliver, on behalf of itself, the Noteholders, and the
Indenture Trustee, or any of them, any instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the Mortgaged Properties, in each case to the extent not inconsistent with
this Agreement. Notwithstanding anything herein to the contrary, the Master
Servicer shall not make or permit any modification, waiver, or amendment of
any term of any Mortgage Loan that would cause any REMIC created under the
Trust Agreement to fail to qualify as a REMIC or result in the imposition of
any tax under Section 860F(a) or Section 860G of the Code.
At the request of a Servicing Officer, the Indenture Trustee shall
furnish the Master Servicer with any powers of attorney and other documents
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties under this Agreement.
(b) The Master Servicer in this capacity may consent to the placing of a
lien senior to that of any mortgage on the related Mortgaged Property, if
19
(1) the new senior lien secures a mortgage loan that refinances an
existing first mortgage loan; and
(2) either
(A) the Loan-to-Value Ratio of the new mortgage loan
(without taking into account any closing costs that may be
financed by the new mortgage loan) is equal to or less than the
Loan-to-Value Ratio of the first mortgage loan to be replaced (for
purposes of calculating the Loan-to-Value Ratio, the Valuation of
the Mortgaged Property will be measured by the lesser of (A) the
Valuation of the Mortgaged Property as of the Cut-off Date and (B)
the Valuation of the Mortgaged Property as of the date of the
refinancing referenced in clause (1)) or
(B) the Combined Loan-to-Value Ratio of the new mortgage
loan (without taking into account any closing costs that may be
financed by the new mortgage loan) and the existing Mortgage Loan
is equal to less than 70% (for purposes of calculating the
Combined Loan-to-Value Ratio, the Valuation of the Mortgaged
Property will be measured as the lesser of (A) the Valuation of
the Mortgage Loan as of the Cut-off Date and (B) the Valuation of
the Mortgage Loan as of the date of the refinancing referenced in
clause (1)).
The aggregate Asset Balance of all the Mortgage Loans with respect to which
the senior lien may be so modified may not exceed 50% of the Original Note
Principal Balance.
(c) The Master Servicer may also, without approval from the Rating
Agencies or the Credit Enhancer, increase the Credit Limit on any Mortgage
Loan at any time if
(1) a new appraisal is obtained and the Combined Loan-to-Value
Ratio of the Mortgage Loan after giving effect to the increase is less
than or equal to the Combined Loan-to-Value Ratio of the Mortgage Loan
as of the Cut-off Date,
(2) the increases are consistent with the Master Servicer's
underwriting policies, and
(3) either:
(A) the Credit Line Agreement allows the mortgagee to
unilaterally increase the Credit Limit;
(B) the Credit Limit increase is made within 90 days of the
Cut-off Date; or
(C) the Sponsor purchases the Mortgage Loan from the Trust
in the manner described below for rate reduction loans.
(d) In addition, the Master Servicer may increase the Credit Limits on
Mortgage Loans having aggregate Asset Balances of up to an additional 5.0% of
the Original Note Principal Balance at any time, if
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(1) the increase does not cause the Combined Loan-to-Value Ratio
of the Mortgage Loans in the related Loan Group to exceed 100%,
(2) the increase in the Credit Limit of a Mortgage Loan does not
cause the Combined Loan-to-Value Ratio of the Mortgage Loan to exceed
100%,
(3) the increase in the Credit Limit of a Mortgage Loan does not
cause the Combined Loan-to-Value Ratio of the Mortgage Loan to increase
by more than 25% (for example, a Combined Loan-to-Value Ratio of 50% can
be increased to 75%, a Combined Loan-to-Value Ratio of 60% can be
increased to 85%, and so forth),
(4) the increase is consistent with the Master Servicer's
underwriting policies, and
(5) either:
(A) the Credit Line Agreement allows the mortgagee to
unilaterally increase the Credit Limit;
(B) the Credit Limit increase is made within 90 days of the
Cut-off Date, or
(C) the Sponsor purchases the Mortgage Loan from the Trust
in the manner described below for rate reduction loans.
(e) Furthermore, the Sponsor, without prior approval from the Rating
Agencies or the Credit Enhancer, may solicit mortgagors for a reduction in
Loan Rates. The Loan Rates of Mortgage Loans in a Loan Group having Asset
Balances at the time of the proposed modification that aggregate over time not
more than 5.0% of the related Original Note Principal Balance may be subject
to reduction. If a mortgagor notifies the Sponsor or the Master Servicer that
it wants a reduction in Loan Rate, the Sponsor shall purchase the Mortgage
Loan from the Trust as described below. Effective immediately on the same
Business Day on which the Sponsor delivers the Purchase Price for the relevant
Mortgage Loan to the Master Servicer, all interest of the Trust in the
relevant Mortgage Loan shall automatically be transferred and assigned to the
Sponsor and all benefits and burdens of ownership of the relevant Mortgage
Loan, including the right to accrued interest on it from the date of purchase
and the risk of default on the Mortgage Loan, shall pass to the Sponsor.
The Master Servicer shall promptly deliver to the Indenture Trustee a
certification signed by a Servicing Officer to the effect that all of the
requirements for a purchase of a Mortgage Loan in connection with a request by
a mortgagor for a reduction in Loan Rate have been satisfied with respect to
the relevant Mortgage Loan. The Sponsor shall deliver the Purchase Price for
the relevant Mortgage Loan to the Master Servicer promptly after a mortgagor
notifies the Sponsor or the Master Servicer that it wants a reduction in Loan
Rate, and the Master Servicer shall deposit the Purchase Price for the
modified Mortgage Loan in the Collection Account pursuant to Section 3.02
within one Business Day after its receipt of the Purchase Price for the
modified Mortgage Loan. Upon receipt by the Indenture Trustee of written
notification of the deposit signed by a Servicing Officer, the Indenture
Trustee shall
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release to the Sponsor the related Mortgage File and shall execute and deliver
any instruments of transfer or assignment delivered to it for execution and
reasonably acceptable to it, in each case without recourse, representation, or
warranty, necessary to release the Mortgage Loan from the lien of the
Indenture and vest in the Sponsor the Mortgage Loan previously transferred and
assigned pursuant to this provision. The certification and written
notification of the deposit each from a Servicing Officer may be delivered to
the Indenture Trustee electronically, and to the extent the transmission
originates on its face from a Servicing Officer, need not be manually signed.
(f) In addition, the Master Servicer may agree to changes in the terms
of a Mortgage Loan (other than changes referred to above in this Section) at
the request of the mortgagor at any time if the changes
o do not materially and adversely affect the interests of the
Secured Parties or the Holders of the Class C Certificates,
o are consistent with prudent and customary business practice as
evidenced by a certificate signed by a Servicing Officer delivered to
the Indenture Trustee and the Credit Enhancer,
o do not extend the maturity date of the Mortgage Loan beyond one
month prior to the Scheduled Maturity Date of the Notes of the related
Class, and
o the Master Servicer has received an Opinion of Counsel to the
effect that such action will not cause any REMIC created under the Trust
Agreement to fail to qualify as a REMIC or result in the imposition of
any tax under Section 860F(a) or Section 860G of the Code.
(g) In addition, the Master Servicer may solicit mortgagors to change
any other terms of the related Mortgage Loans at any time if the changes (i)
do not materially and adversely affect the interests of the Noteholders, the
Transferor, or the Credit Enhancer (ii) are consistent with prudent and
customary business practice as evidenced by a certificate signed by a
Servicing Officer delivered to the Indenture Trustee and the Credit Enhancer,
and (iii) the Master Servicer has received an Opinion of Counsel to the effect
that such action will not cause any REMIC created under the Trust Agreement to
fail to qualify as a REMIC or result in the imposition of any tax under
Section 860F(a) or Section 860G of the Code. Nothing in this Agreement shall
limit the right of the Master Servicer to solicit mortgagors with respect to
new loans (including mortgage loans) that are not Mortgage Loans.
(h) The Master Servicer may register any Mortgage Loan on the MERS(R)
System, or cause the removal from registration of any Mortgage Loan on the
MERS(R) System, and execute and deliver, on behalf of the Owner Trustee, any
instruments of assignment and other comparable instruments with respect to the
assignment or re-recording of a mortgage in the name of MERS, solely as
nominee for the Owner Trustee and its successors and assigns.
For so long as any Mortgage Loan is registered on the MERS(R) System,
the Master Servicer shall maintain in good standing its membership in MERS and
shall comply in all material respects with the rules and procedures of MERS in
connection with the servicing of the Mortgage Loans that are registered with
MERS. If any Mortgage Loans are registered on the
22
MERS(R) System, the Master Servicer may cause MERS to execute and deliver an
assignment of mortgage in recordable form to transfer any of the Mortgage
Loans registered on the MERS(R) System from MERS to the Owner Trustee. The
Master Servicer shall promptly notify MERS of any transfer of beneficial
ownership or release of any Security Interest in any MOM Loan.
The relationship of the Master Servicer to the Trust and the Indenture
Trustee under this Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner, or agent of
the Trust or the Indenture Trustee.
(i) If the rights and obligations of the Master Servicer are terminated
under this Agreement, any successor to the Master Servicer in its sole
discretion may terminate the existing subservicer arrangements with any
subservicer or assume the terminated Master Servicer's rights under those
subservicing arrangements to the extent permitted by applicable law and the
subservicing agreements.
(j) The Sponsor agrees to indemnify the Trust against any liability for
any prohibited transaction taxes and any related interest, additions, and
penalties imposed on the Trust as a result of any modification of a Mortgage
Loan effected pursuant to this Section, the holding of any Mortgage Loan
modified pursuant to this Section by the Trust, any purchase of a modified
Mortgage Loan by the Sponsor pursuant to this Section, or the removal of any
Mortgage Loan pursuant to Section 2.06 (but such obligation shall not prevent
the Sponsor or any other appropriate person from in good faith contesting any
such tax in appropriate proceedings and shall not prevent the Sponsor from
withholding payment of the tax, if permitted by law, pending the outcome of
the proceedings). The Sponsor shall have no right of reimbursement for any
amount paid pursuant to the foregoing indemnification, except to the extent
that the amount of any tax, interest, and penalties, together with interest
thereon, is refunded to the Trust or the Sponsor.
Section 3.02 Collection of Certain Mortgage Loan Payments; Establishment
of Accounts.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the Mortgage Loans, and shall follow the collection
procedures it follows for mortgage loans in its servicing portfolio comparable
to the Mortgage Loans, to the extent consistent with this Agreement.
Consistent with the foregoing, and without limiting the generality of the
foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge or any assumption fees or other fees that may be collected in
the ordinary course of servicing the Mortgage Loans and (ii) arrange with a
mortgagor a schedule for the payment of interest due and unpaid if the
arrangement is consistent with the Master Servicer's policies with respect to
the mortgage loans it owns or services. Notwithstanding any arrangement, the
Mortgage Loans will be included in the information regarding delinquent
Mortgage Loans in the Servicing Certificate and monthly statement to
Noteholders pursuant to Section 7.04 of the Indenture.
(b) The Master Servicer shall establish and maintain a trust account
(the "Collection Account") with the title specified in the Sale and Servicing
Agreement Adoption Annex. The Collection Account shall be an Eligible Account
and will initially be established by
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the Master Servicer at Countrywide Bank, N.A., which is an affiliate of the
Master Servicer. The Master Servicer or the Sponsor, as the case may be, shall
deposit or cause to be deposited in the Collection Account within two Business
Days following its receipt the following payments and collections received or
made by it (without duplication):
(1) all collections on the Mortgage Loans;
(2) the amounts deposited to the Collection Account pursuant to
Section 4.03;
(3) Net Liquidation Proceeds net of any related Foreclosure
Profit;
(4) Insurance Proceeds; and
(5) any amounts required to be deposited pursuant to Section 8.01.
No other amounts are to be deposited to the Collection Account,
including amounts representing Foreclosure Profits, fees (including annual
fees) or late charge penalties payable by mortgagors, or amounts received by
the Master Servicer for the accounts of mortgagors for application towards the
payment of taxes, insurance premiums, assessments, excess pay off amounts, and
similar items. The Master Servicer shall remit all Foreclosure Profits to the
Sponsor. The Master Servicer shall retain, from payments of interest on the
Mortgage Loans in each Loan Group in each Collection Period, the related
Servicing Fee for the Collection Period and any unreimbursed optional advance
with respect to the related Loan Group made by the Master Servicer pursuant to
Section 4.03.
The Master Servicer may make a net deposit in the Collection Account of
the amounts required by this Section.
Upon delivery of an Officer's Certificate to the Indenture Trustee, the
Master Servicer may withdraw funds from the Collection Account for the
following purposes (to the extent that the payment has not been otherwise
retained pursuant this Section 3.02(b)):
(1) to pay to the Master Servicer its Servicing Fee;
(2) to pay to the Master Servicer net earnings on amounts on
deposit in the Collection Account;
(3) to pay from Principal Collections the amounts provided for the
purchase of Additional Balances pursuant to Section 2.01;
(4) to pay the aggregate premiums due under the Loan Insurance
Policy to the Co-Trustee or any other amounts due under the Loan
Insurance Policy for distribution to the Loan Insurance Policy Provider
under the Loan Insurance Policy; and
(5) to pay to the Master Servicer amounts deposited by the Master
Servicer that are not required to be deposited or any amount
representing payments by mortgagors made by checks subsequently returned
uncollected.
On the Business Day before each Payment Date to the extent on deposit in
the Collection Account, the Master Servicer shall withdraw from the Collection
Account and remit
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to the Indenture Trustee, the amount to be applied on that Payment Date by the
Indenture Trustee pursuant to Section 8.03 of the Indenture with respect to
both Loan Groups, and the Indenture Trustee will deposit that amount in the
Payment Account pursuant to the Indenture.
The Indenture Trustee shall hold amounts deposited in the Payment
Account as trustee for the Noteholders, the Transferor, and the Credit
Enhancer. In addition, the Master Servicer shall notify the Indenture Trustee
and the Credit Enhancer on each Determination Date of the amount of
collections in the Collection Account to be transferred to the Payment Account
and their allocation to Interest Collections and Principal Collections for the
Mortgage Loans in each Loan Group for the related Payment Date. Following this
notification, the Master Servicer may withdraw from the Collection Account and
retain any amounts that constitute income realized from the investment of the
collections. The Master Servicer will be entitled to receive, as additional
servicing compensation, income earned on the collections in the Payment
Account.
Amounts on deposit in the Collection Account will be invested in
Eligible Investments maturing no later than the day before the next Payment
Date at the direction of the Master Servicer. All income realized from any
investment in Eligible Investments of funds in the Collection Account shall be
the property of the Master Servicer and may be withdrawn from time to time
from the Collection Account. Any losses incurred on these investments that
reduce their principal amount shall be deposited in the Collection Account by
the Master Servicer out of its own funds immediately as realized.
(c) Upon its receipt of the deliveries specified in Section 2.01(b)(1)
to be delivered to it, including the Officer's Certificate specified in
Section 2.01(b)(2)(H) confirming satisfaction of the conditions precedent to
subsequent additions in Section 2.01(b)(2) on a Subsequent Closing Date
designated by the Depositor, the Indenture Trustee shall withdraw from the
Additional Loan Account and deliver to the order of the Depositor an amount
equal to the Cut-off Date Asset Balance in the Transfer Document to purchase
the Additional Home Equity Loans covered by the Transfer Document.
Section 3.03 Deposits to Payment Account.
The Master Servicer shall
(1) on the Business Day before each of the first two Payment
Dates, deposit in the Payment Account any shortfall in the amount
required to pay the Note Interest on those Payment Dates for each Class
of Principal Amount Notes (and, if applicable, shortfall in the amount
required to pay interest on the Class A-IO Notes on the second Payment
Date), resulting solely from the failure of any Mortgage Loans to be
fully indexed and
(2) on the Business Day before the first Payment Date, deposit in
the Payment Account
(A) an amount for each Loan Group equal to the excess of the
aggregate amount payable pursuant to Sections 8.03(a)(i) and (ii)
of the Indenture for that Loan Group on the first Payment Date
over what the aggregate Investor Interest Collections for that
Loan Group would be if the
25
Minimum Monthly Payments on the related Mortgage Loans due during
the first Collection Period were made on each Mortgage Loan and
(B) for each Loan Group any amounts representing payments
on, and any collections in respect of, the Mortgage Loans in each
Loan Group received after the Cut-off Date and before the Closing
Date (exclusive of payments of accrued interest due by the Cut-off
Date).
Section 3.04 Maintenance of Hazard Insurance; Property Protection
Expenses.
The Master Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Master Servicer or the related subservicer as loss
payee under it providing extended coverage in an amount that is at least equal
to the lesser of (i) the maximum insurable value of the improvements securing
the Mortgage Loan from time to time or (ii) the combined principal balance
owing on the Mortgage Loan and any mortgage loan senior to the Mortgage Loan
from time to time. The Master Servicer shall also maintain on property
acquired through foreclosure, or by deed in lieu of foreclosure, hazard
insurance with extended coverage in an amount which is at least equal to the
lesser of (i) the maximum insurable value from time to time of the
improvements that are a part of the property or (ii) the combined principal
balance owing on the Mortgage Loan and any mortgage loan senior to the
Mortgage Loan at the time of the foreclosure or deed in lieu of foreclosure
plus accrued interest and the good-faith estimate of the Master Servicer of
related Liquidation Expenses to be incurred.
Amounts collected by the Master Servicer under these policies shall be
deposited in the Collection Account to the extent called for by Section 3.02.
The hazard insurance to be maintained for the related Mortgage Loan shall
include flood insurance when the Mortgaged Property is located in a federally
designated flood area. The flood insurance shall be in the amount required
under applicable guidelines of the Federal Flood Emergency Act. No other
insurance need be carried on any Mortgaged Properties pursuant to this
Agreement.
Section 3.05 Assumption and Modification Agreements.
When a Mortgaged Property has been or is about to be conveyed by the
mortgagor, the Master Servicer shall exercise its right to accelerate the
maturity of the Mortgage Loan consistent with the then current practice of the
Master Servicer and without regard to the inclusion of the Mortgage Loan in
the Trust. If it elects not to enforce its right to accelerate or if it is
prevented from doing so by applicable law, the Master Servicer (so long as its
action conforms with the underwriting standards generally acceptable in the
industry at the time for new origination) may enter into an assumption and
modification agreement with the person to whom the Mortgaged Property has been
or is about to be conveyed, pursuant to which that person becomes liable under
the Credit Line Agreement and, to the extent permitted by applicable law, the
mortgagor remains liable on it. The Master Servicer shall notify the Indenture
Trustee that any assumption and modification agreement has been completed by
delivering to the Indenture Trustee an Officer's Certificate certifying that
the agreement is in compliance with this Section and by forwarding the
original copy of the assumption and modification agreement to the Indenture
Trustee. Any assumption and modification agreement shall be a part of the
related Mortgage File. No change in the terms of the related Credit Line
26
Agreement may be made by the Master Servicer in connection with the assumption
to the extent that the change would not be permitted to be made in the
original Credit Line Agreement pursuant to Section 3.01. Any fee collected by
the Master Servicer for entering into the assumption and modification
agreement will be retained by the Master Servicer as additional servicing
compensation.
Section 3.06 Realization Upon Defaulted Mortgage Loans; Repurchase of
Certain Mortgage Loans.
The Master Servicer shall foreclose or otherwise comparably convert to
ownership Mortgaged Properties securing defaulted Mortgage Loans when, in the
opinion of the Master Servicer based on normal and usual practices and
procedures, no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.02. Alternatively, the Master
Servicer may forego foreclosure and charge off a defaulted Mortgage Loan if in
the Master Servicer's opinion the proceeds of foreclosure and liquidation are
likely to produce an amount less than the unpaid principal balance of senior
liens on the Mortgaged Property. If the Master Servicer has actual knowledge
or reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances and that the acquisition of the Mortgaged Property
would not be commercially reasonable, then the Master Servicer will not cause
the Trust to acquire title to the Mortgaged Property in a foreclosure or
similar proceeding. In connection with foreclosure or other conversion (or a
decision to forego foreclosure and charge off a defaulted Mortgage Loan), the
Master Servicer shall follow the practices and procedures it deems appropriate
and that are normal and usual in its general mortgage servicing activities,
including advancing funds to correct a default on a related senior mortgage
loan. However, the Master Servicer need not expend its own funds in connection
with any foreclosure or towards the correction of any default on a related
senior mortgage loan or restoration of any property unless it determines, in
its sole discretion, that the expenditure will increase Net Liquidation
Proceeds.
If title to any Mortgaged Property is acquired in foreclosure or by deed
in lieu of foreclosure, the deed or certificate of sale shall be issued to the
Indenture Trustee, or to its nominee on behalf of Noteholders. The Master
Servicer shall dispose of the Mortgaged Property as soon as practicable in a
manner that maximizes its Liquidation Proceeds.
The Master Servicer, in its sole discretion, may purchase for its own
account from the Trust any Mortgage Loan that is 151 days or more delinquent.
The price for any Mortgage Loan purchased shall be 100% of its Asset Balance
plus accrued interest on it at the applicable Loan Rate from the date through
which interest was last paid by the related mortgagor to the first day of the
month in which the purchase price is to be distributed to the Noteholders. The
purchase price shall be deposited in the Collection Account. The Master
Servicer may only exercise this right on or before the penultimate day of the
month in which the Mortgage Loan became 151 days delinquent. Any delinquent
Mortgage Loan that becomes current but thereafter again becomes 151 days or
more delinquent may be purchased by the Master Servicer pursuant to this
Section.
27
Upon receipt of a certificate from the Master Servicer in the form of
Exhibit C, the Indenture Trustee shall release to the Master Servicer the
related Mortgage File and shall execute and deliver any instruments of
transfer prepared by the Master Servicer, without recourse, necessary to vest
in the purchaser of the Mortgage Loan any Mortgage Loan released to it and the
Master Servicer shall succeed to all the Trust's interest in the Mortgage Loan
and all related security and documents. This assignment shall be an assignment
outright and not for security. The Master Servicer shall then own the Mortgage
Loan, and all security and documents, free of any further obligation to the
Trust, the Owner Trustee, the Indenture Trustee, the Credit Enhancer, the
Transferor, or the Noteholders with respect to it. The certification by the
Master Servicer may be delivered to the Indenture Trustee electronically, and
if it is, its form may differ from Exhibit C so long as it contains the
information required by Exhibit C (that is, the relevant loan number, at least
one of the five reasons for requesting file as found in Exhibit C, and the
acknowledgment that the Mortgage File will be held in accordance with this
Agreement and will promptly be returned to the Indenture Trustee when the need
for it by the Master Servicer no longer exists unless the Mortgage Loan has
been liquidated or retransferred), and to the extent the transmission
originates on its face from a Servicing Officer, need not be manually signed.
If the Trust acquires any Mortgaged Property in connection with a
default or imminent default on a Mortgage Loan, the Master Servicer shall
dispose of the Mortgaged Property as soon as practicable in a manner that
maximizes the liquidation proceeds, but in no event later than three years
after its acquisition by the Trust or, at the expense of the Trust, the Master
Servicer shall request, more than 60 days before the day on which the
three-year period would otherwise expire, an extension of the three-year grace
period. If the Indenture Trustee is supplied with an Opinion of Counsel to the
effect that the Trust's holding the Mortgaged Property after the three-year
period will not result in the imposition of taxes on prohibited transactions
of the Trust as defined in section 860F of the Code or cause any REMIC created
under the Trust Agreement to fail to qualify as a REMIC at any time that any
Notes or Certificates are outstanding, and the Trust may continue to hold the
Mortgaged Property (subject to any conditions in the Opinion of Counsel) after
the expiration of the three-year period. Notwithstanding any other provision
of this Agreement, no Mortgaged Property acquired by the Trust shall be rented
(or allowed to continue to be rented) or otherwise used for the production of
income by or on behalf of the Trust in such a manner or pursuant to any terms
that would cause the Mortgaged Property to fail to qualify as foreclosure
property within the meaning of section 860G(a)(8) of the Code or subject the
Trust to the imposition of any federal, state, or local income taxes on the
income earned from the Mortgaged Property under section 860G(c) of the Code or
otherwise, unless the Master Servicer has agreed to indemnify and hold
harmless the Trust with respect to the imposition of any such taxes.
If a default occurs on a Mortgage Loan one or more of whose obligors is
not a United States Person, as defined in Section 7701(a)(30) of the Code, in
connection with any foreclosure of the Mortgage Loan (including the
acquisition of a deed in lieu of foreclosure), the Master Servicer will cause
compliance with the provisions of Treasury Regulation Section 1.1445-2(d)(3)
(or any successor) necessary to assure that no withholding tax obligation
arises with
28
respect to the proceeds of the foreclosure except to the extent
that proceeds of the foreclosure are required to be remitted to the obligors
on the Mortgage Loan.
Section 3.07 Indenture Trustee to Cooperate.
By each Payment Date, the Master Servicer will notify the Indenture
Trustee whenever the Asset Balance of any Mortgage Loan has been paid in full
during the preceding Collection Period. A Servicing Officer shall certify that
the Mortgage Loan has been paid in full and that all amounts received in
connection with the payment that are required to be deposited in the
Collection Account pursuant to Section 3.02 have been so deposited or
credited. Upon payment in full pursuant to Section 3.01, the Master Servicer
is authorized to execute an instrument of satisfaction regarding the related
mortgage, which instrument of satisfaction shall be recorded by the Master
Servicer if required by applicable law and be delivered to the person entitled
to it.
If the mortgage has been registered on the MERS(R) System, the Master
Servicer shall cause the removal of the mortgage from registration on the
MERS(R) System and execute and deliver, on behalf of the Indenture Trustee and
the Noteholders, any instruments of satisfaction or cancellation or of partial
or full release. No expenses incurred in connection with the instrument of
satisfaction or transfer shall be reimbursed from amounts deposited in the
Collection Account or the Payment Account.
As appropriate for the servicing or foreclosure of any Mortgage Loan, or
in connection with the payment in full of the Asset Balance of any Mortgage
Loan, upon request of the Master Servicer and delivery to the Indenture
Trustee of a Request for Release substantially in the form of Exhibit C signed
by a Servicing Officer, the Indenture Trustee shall release the related
Mortgage File to the Master Servicer and the Indenture Trustee shall execute
any documents provided by the Master Servicer necessary to the prosecution of
any proceedings or the taking of other servicing actions. The Request for
Release by a Servicing Officer may be delivered to the Indenture Trustee
electronically, and if it is, its form may differ from Exhibit C so long as it
contains the information required by Exhibit C (that is, the relevant loan
number, at least one of the five reasons for requesting file as found in
Exhibit C, and the acknowledgment that the Mortgage File will be held in
accordance with this Agreement and will promptly be returned to the Indenture
Trustee when the need for it by the Master Servicer no longer exists unless
the Mortgage Loan has been liquidated or retransferred), and to the extent the
transmission originates on its face from a Servicing Officer, need not be
manually signed. The Master Servicer shall return the Mortgage File to the
Indenture Trustee when the need for it by the Master Servicer no longer
exists, unless the Mortgage Loan is liquidated, in which case, upon receipt of
a certificate of a Servicing Officer similar to that specified above, the
Request for Release shall be released by the Indenture Trustee to the Master
Servicer.
To facilitate the foreclosure of the mortgage securing any Mortgage Loan
that is in default following recordation of the assignments of mortgage in
accordance with this Agreement, if so requested by the Master Servicer, the
Indenture Trustee shall execute an appropriate assignment in the form provided
to the Indenture Trustee by the Master Servicer to assign the Mortgage Loan
for the purpose of collection to the Master Servicer or a subservicer. The
assignment shall unambiguously indicate that the assignment is for the purpose
of
29
collection only. The Master Servicer will then bring all required actions in
its own name and otherwise enforce the terms of the Mortgage Loan and deposit
the Net Liquidation Proceeds, exclusive of Foreclosure Profits, in the
Collection Account. If all delinquent payments due under the Mortgage Loan are
paid by the mortgagor and any other defaults are cured, then the Master
Servicer shall promptly reassign the Mortgage Loan to the Indenture Trustee
and return the related Mortgage File to the place where it was being
maintained.
Section 3.08 Servicing Compensation; Payment of Certain Expenses by
Master Servicer.
The Master Servicer may retain the Servicing Fee pursuant to Section
3.02 as compensation for its services in servicing the Mortgage Loans.
Moreover, additional servicing compensation in the form of late payment
charges or other receipts not required to be deposited in the Collection
Account (other than Foreclosure Profits) shall be retained by the Master
Servicer. The Master Servicer must pay all expenses incurred by it in
connection with its activities under this Agreement (including payment of all
other fees and expenses not expressly stated under this Agreement to be for
the account of another person) and shall not be entitled to reimbursement
under this Agreement except as specifically provided in this Agreement.
Liquidation Expenses are reimbursable to the Master Servicer
FIRST, from related Liquidation Proceeds and
SECOND, from the Payment Account from funds attributable to the related
Loan Group pursuant to Section 8.03(a)(xii) of the Indenture.
Section 3.09 Annual Statement as to Compliance.
(a) The Master Servicer will deliver to the Indenture Trustee, the
Credit Enhancer, and the Rating Agencies, by the date in each year specified
in the Sale and Servicing Agreement Adoption Annex, beginning on the date
specified in the Sale and Servicing Agreement Adoption Annex, an Officer's
Certificate stating that (i) a review of the activities of the Master Servicer
during the preceding fiscal year (or the applicable shorter period for the
first report) and of its performance under this Agreement has been made under
the officer's supervision and (ii) to the best of the officer's knowledge,
based on the review, the Master Servicer has fulfilled all of its obligations
under this Agreement in all material respects throughout the fiscal year, or,
if there has been a default in the fulfillment of those obligations in any
material respect, specifying each default known to the officer and its nature
and status.
(b) Within five Business Days after obtaining knowledge of it, the
Master Servicer shall notify the Indenture Trustee, the Credit Enhancer, and
each of the Rating Agencies of any event that with the giving of notice or the
lapse of time would become an Event of Servicing Termination by delivering an
Officer's Certificate describing the event.
(c) The Master Servicer shall cause each subservicer to deliver to the
Depositor, the Credit Enhancer and the Indenture Trustee on or before March 15
of each year, beginning with its 2007 fiscal year, an Officer's Certificate
stating, as to the signing officer, that a review of the activities of the
subservicer during the preceding year and of the performance of the
subservicer under the applicable subservicing agreement or primary servicing
agreement has
30
been made under the signing officer's supervision and to the best of the
signing officer's knowledge, based on such review, the subservicer has
fulfilled all its obligations under the applicable subservicing agreement or
primary servicing agreement in all material respects throughout its fiscal
year, or, if there has been a failure to fulfill any of its obligations in any
material respect, specifying each failure known to the signing officer and its
nature and status.
(d) Copies of the statement shall be provided by the Indenture Trustee
to any Noteholder or Note Owner on request at the Master Servicer's expense.
Section 3.10 Access to Certain Documentation and Information Regarding
the Mortgage Loans.
(a) The Master Servicer shall provide to the Indenture Trustee, the
Credit Enhancer, any Noteholders or Note Owners that are federally insured
savings and loan associations, the Office of Thrift Supervision, successor to
the Federal Home Loan Bank Board, the FDIC, and the supervisory agents and
examiners of the Office of Thrift Supervision access to the documentation
regarding the Mortgage Loans required by applicable regulations of the Office
of Thrift Supervision and the FDIC (acting as operator of the Savings
Association Insurance Fund or the Bank Insurance Fund). The Master Servicer
will provide access without charge but only after reasonable notice and during
normal business hours at the offices of the Master Servicer. Nothing in this
Section shall derogate from the obligation of the Master Servicer to observe
any applicable law prohibiting disclosure of information regarding the
mortgagors and the failure of the Master Servicer to provide access as
provided in this Section as a result of this obligation shall not constitute a
breach of this Section.
(b) The Master Servicer shall supply the information needed to make
required payments and to furnish required reports to Noteholders and to make
any claim under the Loan Insurance Policy, in the form the Indenture Trustee
reasonably requests, to the Indenture Trustee and any Paying Agent by the
start of the Determination Date preceding the related Payment Date.
Section 3.11 Maintenance of Certain Servicing Insurance Policies.
The Master Servicer shall during the term of its service as master
servicer maintain in force (i) policies of insurance covering errors and
omissions in the performance of its obligations as master servicer under this
Agreement and (ii) a fidelity bond covering its officers, employees, or
agents. Each policy and bond together shall comply with the requirements from
time to time of ▇▇▇▇▇▇ ▇▇▇ for persons performing servicing for mortgage loans
purchased by ▇▇▇▇▇▇ Mae.
Section 3.12 The Loan Insurance Policy
The Master Servicer shall take whatever action is appropriate to
maximize the amounts payable under the Loan Insurance Policy and to service
the Mortgage Loans in the manner required by the Loan Insurance Policy. The
Master Servicer shall prepare and submit all claims eligible for submission
under the Loan Insurance Policy and shall perform all of the obligations of
the insured under the Loan Insurance Policy other than those in Section
6.15(a) of the Indenture to be performed by the Co-Trustee. If the Loan
Insurance Policy is terminated for any
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reason other than the exhaustion of its coverage (including with respect to
non-compliance under the Item 1114 Agreement as described in the following
paragraph), or if the claims-paying ability rating of its issuer is reduced to
below investment grade, or, with respect to the initial issuer of such policy,
to "A+" or below by Standard & Poor's or "A1" or below by Moody's, the Master
Servicer will use its best efforts to obtain a comparable policy from an
insurer that is acceptable to the Rating Agencies and consented to by the
Credit Enhancer (which consent shall not be unreasonably withheld). The
replacement policy will provide coverage equal to the then remaining coverage
of the Loan Insurance Policy if available. However, if the premium cost of a
replacement policy exceeds the premium cost of the Loan Insurance Policy then
the Master Servicer, at the direction of the Credit Enhancer, will either (i)
obtain a replacement policy with reduced coverage amount so that the premium
cost will not exceed the premium cost of the Loan Insurance Policy or (ii)
from Interest Collections on the Mortgage Loans for each Collection Period,
deposit into a segregated trust account the amounts that would have been paid
as premium on the Loan Insurance Policy had it not been terminated, which
amounts will be available to pay Investor Loss Amount with respect to the
Mortgage Loans on future Payment Dates and, after the Principal Amount Notes
have been repaid, will be paid to the Issuer for payment to the Certificates
pursuant to the Trust Agreement. The Master Servicer will withdraw from the
Collection Account (to the extent of available funds) and forward to the
Co-Trustee (1) on or before 12:00 NOON (New York City time) on the 45th day
following the Closing Date, the initial premium due under the Loan Insurance
Policy, and (2) on or before 12:00 NOON (New York City time) on each Payment
Date, the aggregate monthly premium due under the Loan Insurance Policy for
that Payment Date. The Master Servicer will withdraw from the Collection
Account, on the due date therefor any other amount owed to the Loan Insurance
Policy Provider under the Loan Insurance Policy.
The Depositor may terminate the Loan Insurance Policy, with the consent
of the Credit Enhancer, if the Loan Insurance Policy Provider fails to comply
with its obligations under the Item 1114 Agreement that is expected to be
entered among the Depositor, CWABS, Inc., CWMBS, Inc., CWALT, Inc., the
Sponsor and the Loan Insurance Policy Provider.
ARTICLE IV
SERVICING CERTIFICATE
Section 4.01 Servicing Certificate.
Not later than each Determination Date, the Master Servicer shall
deliver (a) to the Indenture Trustee, the data necessary to prepare the
statement for Noteholders required to be prepared pursuant to Section 4.04 and
(b) to the Indenture Trustee, the Owner Trustee, the Sponsor, the Depositor,
the Paying Agent, the Credit Enhancer, and each Rating Agency a Servicing
Certificate (in written form or the form of computer readable media or such
other form as may be agreed to by the Indenture Trustee and the Master
Servicer), together with an Officer's Certificate to the effect that the
Servicing Certificate is correct in all material respects,
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stating the related Collection Period, Payment Date, the series number of the
Notes, the date of this Agreement, and
(1) the aggregate amount of collections received on the Mortgage
Loans in each Loan Group by the Determination Date for the related
Collection Period;
(2) the aggregate amount of (a) Interest Collections for each Loan
Group for the related Collection Period and (b) Principal Collections
for each Loan Group for the related Collection Period;
(3) any accrued Servicing Fees for the Mortgage Loans in each Loan
Group for previous Collection Periods and the Servicing Fee for the
related Collection Period;
(4) the Liquidation Loss Amount for each Loan Group for the
related Collection Period;
(5) the aggregate Asset Balance of the Mortgage Loans in each Loan
Group as of the end of the preceding Collection Period and as of the end
of the second preceding Collection Period;
(6) the Credit Enhancement Draw Amount for each Class of Notes for
the related Payment Date;
(7) the amount of claims made on the Loan Insurance Policy with
respect to each Loan Group, the amount of insurance proceeds paid with
respect to each Loan Group and the amount of insurance claims denied by
the Loan Insurance Policy Provider with respect to each Loan Group;
(8) the amount of payments received on the Sponsor Loss Coverage
Obligation with respect to each Loan Group, the amount of such payments
expected to be received for the next Payment Date with respect to each
Loan Group and the amount of its remaining coverage;
(9) the aggregate amount of Additional Balances created on the
Mortgage Loans in each Loan Group during the previous Collection Period;
(10) for each Loan Group, the number and aggregate Asset Balances
of Mortgage Loans (x) as to which the Minimum Monthly Payment is
delinquent for 30-59 days, 60-89 days, and 90 or more days, respectively
and (y) that have become REO, in each case as of the end of the
preceding Collection Period;
(11) the Weighted Average Gross Loan Rate for the Mortgage Loans
in each Loan Group;
(12) the amount of any optional advances pursuant to Section 4.03
by the Master Servicer on the Mortgage Loans in each Loan Group
remaining unpaid at the end of the Collection Period preceding the
related Collection Period;
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(13) the amount of any optional advances pursuant to Section 4.03
by the Master Servicer on the Mortgage Loans in each Loan Group made
during the related Collection Period and included in the payment on the
Payment Date;
(14) the aggregate amount of optional advances pursuant to Section
4.03 by the Master Servicer on the Mortgage Loans in each Loan Group
that will remain outstanding as of the close of business on the Payment
Date;
(15) the number and principal balances of any Mortgage Loans
transferred from each Loan Group to the Transferor pursuant to Section
2.06;
(16) with respect to the Collection Account during the Collection
Period related to the Payment Date:
(A) its balance at the beginning of the Collection Period;
(B) deposits of the aggregate Transfer Deposit amount for
retransferred Mortgage Loans pursuant to Section 2.06;
(C) deposits of the aggregate Purchase Price for delinquent
Mortgage Loans purchased by the Sponsor pursuant to Section 3.06;
(D) deposits of the aggregate Purchase Price made by the
Sponsor in connection with modification of Mortgage Loans pursuant
to Section 3.01;
(E) deposits by the Master Servicer to account for losses
accrued on Eligible Investments;
(F) income accrued on Eligible Investments;
(G) deposits of the termination purchase price in connection
with termination pursuant to Section 8.01;
(H) other deposits;
(I) withdrawals of investment income on Eligible
Investments;
(J) withdrawals for the purchase of Additional Balances;
(K) transfers to the Payment Account;
(L) other withdrawals; and
(M) its balance at the end of the Collection Period;
(17) with respect to the first and second Payment Dates, deposits
by the Master Servicer with respect to each class of Notes to account
for shortfalls in interest collections resulting from the failure of the
Mortgage Loans to be fully indexed pursuant to Section 3.03;
(18) with respect to the first Payment Date, deposits by the
Master Servicer with respect to each class of Notes to account for
shortfalls in interest collections
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resulting from the prefunding mechanism and the longer first Interest
Period, pursuant to Section 3.03;
(19) with respect to the first Payment Date, the amount of
collections on the Mortgage Loans in each Loan Group for the period
between the initial Cut-off Date and the Closing Date, specifying the
interest and principal portions thereof;
(20) Liquidation Expenses and indemnification payments paid to the
Master Servicer for the related Collection Period with respect to each
Loan Group;
(21) Liquidation Expenses and indemnification payments payable to
the Master Servicer on the Payment Date from Excess Interest pursuant to
Section 8.03(a)(xii) of the Indenture;
(22) the weighted average remaining term of the Mortgage Loans in
each Loan Group;
(23) in the Servicing Certificates for the first and second
Payment Dates, the number and Cut-off Date Asset Balance of Mortgage
Loans for each Loan Group for which the Mortgage Loan File was not
delivered to the Custodian acting on behalf Indenture Trustee within 30
days of the Closing Date;
(24) the number and aggregate Asset Balances of Mortgage Loans in
each Loan Group as to which the Minimum Monthly Payment is delinquent
for 180 or more days;
(25) the number and aggregate Asset Balances of Mortgage Loans in
each Loan Group that are in foreclosure; and
(26) the number and aggregate Asset Balances of Mortgage Loans in
each Loan Group for which the Master Servicer has received a written
notice of the filing of bankruptcy or insolvency proceedings with
respect to the mortgagor.
The Indenture Trustee and the Owner Trustee shall conclusively rely on
the information in a Servicing Certificate for purposes of making
distributions pursuant to Section 8.03 of the Indenture or distributions on
the Transferor Certificates, shall have no duty to inquire into this
information, and shall have no liability in so relying. The format and content
of the Servicing Certificate may be modified by the mutual agreement of the
Master Servicer, the Indenture Trustee, and the Credit Enhancer. The Master
Servicer shall give notice of any changes to the Rating Agencies.
Section 4.02 Acknowledgement and Cooperation.
The Depositor, the Master Servicer, and the Indenture Trustee
acknowledge that without the need for any further action on the part of the
Credit Enhancer, the Depositor, the Master Servicer, the Indenture Trustee, or
the Note Registrar (a) to the extent the Credit Enhancer makes payments,
directly or indirectly, on account of principal of or interest or other
amounts on any Notes to the Holders of the Notes, the Credit Enhancer will be
fully subrogated to the rights of these Holders to receive the principal and
interest from the Trust and (b) the
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Credit Enhancer shall be paid the principal and interest or other amounts but
only from the sources and in the manner provided in this Agreement for the
payment of the principal and interest or other amounts. The Indenture Trustee
and the Master Servicer shall cooperate in all respects at the Issuer's
expense with any reasonable request by the Credit Enhancer for action to
preserve or enforce the Credit Enhancer's rights or interests under this
Agreement and the Indenture without limiting the rights or affecting the
interests of the Holders as otherwise stated in this Agreement and the
Indenture.
Section 4.03 Optional Advances of the Master Servicer.
The Master Servicer, in its sole discretion, may advance the interest
component of any delinquent Minimum Monthly Payment (or any portion of it) by
depositing the amount into the Collection Account by the related Determination
Date.
Section 4.04 Statements to Noteholders.
Pursuant to Section 4.01, the Master Servicer shall deliver to the
Indenture Trustee the data necessary to prepare a statement (the "Monthly
Statement") for each Payment Date with the information in Exhibit E. Such
statement shall be based solely on the information provided to the Indenture
Trustee by the Master Servicer pursuant to the preceding sentence upon which
information the Indenture Trustee may conclusively rely.
If the Monthly Statement is not accessible to any of the Noteholders,
the Master Servicer, the Credit Enhancer, or either Rating Agency on the
Indenture Trustee's internet website, the Indenture Trustee shall forward a
hard copy of it to each Noteholder, the Master Servicer, the Credit Enhancer,
and each Rating Agency immediately after the Indenture Trustee becomes aware
that the Monthly Statement is not accessible to any of them via the Indenture
Trustee's internet website. The address of the Indenture Trustee's internet
website where the Monthly Statement will be accessible is
▇▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇/▇▇▇. Assistance in using the Indenture Trustee's
internet website may be obtained by calling the Indenture Trustee's customer
service desk at (▇▇▇) ▇▇▇-▇▇▇▇. The Indenture Trustee shall notify each
Noteholder, the Credit Enhancer, the Master Servicer, and each Rating Agency
in writing of any change in the address or means of access to the internet
website where the Monthly Statement is accessible.
Within 60 days after the end of each year, the Master Servicer shall
prepare and forward to the Indenture Trustee the information in clauses (5),
(6), (7) and (8) of the Monthly Statement aggregated for the year. This
requirement of the Master Servicer shall be satisfied if substantially
comparable information is provided by the Master Servicer or a Paying Agent
pursuant to any requirements of the Code.
The Indenture Trustee shall prepare (in a manner consistent with the
treatment of the Notes as indebtedness of the Transferor, or as may be
otherwise required by Section 3.14) Internal Revenue Service Form 1099 (or any
successor form) and any other tax forms required to be filed or furnished to
Noteholders for payments by the Indenture Trustee (or the Paying Agent) on the
Notes and shall file and distribute such forms as required by law.
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ARTICLE V
THE MASTER SERVICER, THE SPONSOR, AND THE DEPOSITOR
Section 5.01 Liability of the Sponsor, the Master Servicer, and the
Depositor.
The Sponsor, the Depositor, and the Master Servicer shall be liable only
for their express agreements under this Agreement.
Section 5.02 Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer or the Depositor.
Any corporation into which the Master Servicer or the Depositor may be
merged or consolidated, or any corporation resulting from any merger,
conversion, or consolidation to which the Master Servicer or the Depositor is
a party, or any corporation succeeding to the business of the Master Servicer
or the Depositor, shall be the successor of the Master Servicer or the
Depositor, as the case may be, under this Agreement, without the execution or
filing of any paper or any further act on the part of any of the parties to
this Agreement, notwithstanding anything in this Agreement to the contrary.
As a condition to the effectiveness of any merger or consolidation, at
least 15 days before the effective date of any merger or consolidation of the
Master Servicer, the Master Servicer shall provide written notice to the
Depositor of any successor pursuant to this Section and in writing and in form
and substance reasonably satisfactory to the Depositor, all information
reasonably requested by the Depositor to comply with its reporting obligation
under Item 6.02 of Form 8-K with respect to a replacement Master Servicer.
Section 5.03 Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of its directors, officers,
employees, or agents is liable to the Trust, the Owner Trustee, the
Transferor, or the Noteholders for the Master Servicer's taking any action or
refraining from taking any action in good faith pursuant to this Agreement, or
for errors in judgment. This provision shall not protect the Master Servicer
or any of its directors, officers, employees, or agents against any liability
that would otherwise be imposed for misfeasance, bad faith, or gross
negligence in the performance of the duties of the Master Servicer or for
reckless disregard of the obligations of the Master Servicer. The Master
Servicer and any of its directors, officers, employees, or agents may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any person about anything arising under this Agreement.
The Master Servicer and each of its directors, officers, employees, and
agents shall be indemnified by the Trust (but only from funds available from
the applicable Loan Group) and held harmless against any loss, liability, or
expense incurred in connection with any legal action relating to this
Agreement, the Transferor Certificates, or the Notes, other than any loss,
liability, or expense related to any specific Mortgage Loan that is otherwise
not reimbursable pursuant to this Agreement and any loss, liability, or
expense incurred due to its willful misfeasance, bad faith, or gross
negligence in the performance of duties under this Agreement or due to its
reckless disregard of its obligations under this Agreement.
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The Master Servicer need not appear in, prosecute, or defend any legal
action that is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability. The Master Servicer may in its sole discretion undertake
any action that it deems appropriate with respect to this Agreement and the
interests of the Noteholders. If so, the reasonable legal expenses and costs
of the action and any resulting liability shall be expenses, costs, and
liabilities of the Trust, and the Master Servicer shall only be entitled to be
reimbursed pursuant to Section 8.03(a)(xii) of the Indenture (but only from
funds available from the applicable Loan Group). The Master Servicer's right
to indemnity or reimbursement pursuant to this Section shall survive any
resignation or termination of the Master Servicer pursuant to Section 5.04 or
6.01 with respect to any losses, expenses, costs, or liabilities arising
before its resignation or termination (or arising from events that occurred
before its resignation or termination).
Section 5.04 Master Servicer Not to Resign.
Subject to Section 5.02, the Master Servicer shall not resign as Master
Servicer under this Agreement except
(1) if the performance of its obligations under this Agreement are
no longer permissible under applicable law or due to applicable law are
in material conflict with any other activities carried on by it or its
subsidiaries or Affiliates that are of a type and nature carried on by
the Master Servicer or its subsidiaries or Affiliates at the date of
this Agreement or
(2) if
(a) the Master Servicer has proposed a successor Master
Servicer to the Indenture Trustee and the proposed successor
Master Servicer is reasonably acceptable to the Indenture Trustee;
(b) each Rating Agency has delivered a letter to the
Indenture Trustee before the appointment of the successor Master
Servicer stating that the proposed appointment of the successor
Master Servicer as Master Servicer under this Agreement will not
result in the reduction or withdrawal of the then current rating
of the Notes without regard to the Policy; and
(c) the proposed successor Master Servicer is reasonably
acceptable to the Credit Enhancer in its sole discretion, as
evidenced by a letter to the Indenture Trustee.
No resignation by the Master Servicer shall become effective unless the
Master Servicer has notified the Depositor at least 15 days before the
effective date of the resignation of the successor pursuant to this Section
and has provided all information reasonably requested by the Depositor to
comply with its reporting obligation under Item 6.02 of Form 8-K with respect
to the resignation of the Master Servicer in form and substance reasonably
satisfactory to the Depositor.
No resignation by the Master Servicer shall become effective until the
Indenture Trustee or successor Master Servicer designated by the Master
Servicer has assumed the Master
38
Servicer's obligations under this Agreement or the Indenture Trustee has
designated a successor Master Servicer in accordance with Section 6.02. Any
resignation shall not relieve the Master Servicer of responsibility for any of
the obligations specified in Sections 6.01 and 6.02 as obligations that
survive the resignation or termination of the Master Servicer. Any
determination permitting the resignation of the Master Servicer pursuant to
clause (1) above shall be evidenced by an Opinion of Counsel to that effect
delivered to the Indenture Trustee and the Credit Enhancer. The Master
Servicer shall have no claim (whether by subrogation or otherwise) or other
action against the Transferor, any Noteholder, or the Credit Enhancer for any
amounts paid by the Master Servicer pursuant to any provision of this
Agreement.
Section 5.05 Delegation of Duties.
In the ordinary course of business, the Master Servicer may delegate any
of its duties under this Agreement at any time to any person who agrees to act
in accordance with standards comparable to those with which the Master
Servicer complies pursuant to Section 3.01, including any of its Affiliates or
any subservicer referred to in Section 3.01. This delegation shall not relieve
the Master Servicer of its obligations under this Agreement and shall not
constitute a resignation within the meaning of Section 5.04.
Section 5.06 Indemnification by the Master Servicer.
The Master Servicer shall indemnify the Trust, the Owner Trustee, and
the Indenture Trustee against any loss, liability, expense, damage, or injury
suffered or sustained due to the Master Servicer's actions or omissions in
servicing or administering the Mortgage Loans that are not in accordance with
this Agreement, including any judgment, award, settlement, reasonable
attorneys' fees, and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding, or claim. This
indemnification is not payable from the assets of the Trust. This indemnity
shall run directly to and be enforceable by an injured party subject to any
applicable limitations.
The Indenture Trustee and any director, officer, employee, or agent of
the Indenture Trustee shall be indemnified by the Master Servicer and held
harmless against any loss, liability or expense (i) incurred in connection
with any legal action relating to this Agreement, the Indenture, the Custodial
Agreement, the Administration Agreement, the Notes, or the Transferor
Certificates, or in connection with the performance of any of the Indenture
Trustee's duties thereunder, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of any of the Indenture Trustee's duties under this Agreement, the
Indenture, or the Custodial Agreement or by reason of reckless disregard of
the Indenture Trustee's obligations and duties under this Agreement.
The indemnity provisions of this Section shall survive the termination
of this Agreement or the resignation or removal of the Indenture Trustee under
the Indenture.
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ARTICLE VI
SERVICING TERMINATION
Section 6.01 Events of Servicing Termination.
If any one of the following events ("Events of Servicing Termination")
shall occur and be continuing:
(1) any failure by the Master Servicer to deposit in the
Collection Account any deposit required to be made under this Agreement
or to remit to the Indenture Trustee amounts required to be deposited to
the Payment Account that continues unremedied either beyond the relevant
Payment Date or for five Business Days after the date when notice of the
failure has been given to the Master Servicer by the Indenture Trustee
or to the Master Servicer and the Indenture Trustee by the Credit
Enhancer or Holders of Notes representing not less than 25% of the
Outstanding Amount of all Classes of Notes; or
(2) failure by the Master Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Master
Servicer in the Notes or in this Agreement (except with respect to a
failure related to a Limited Exchange Act Reporting Obligation) that
materially and adversely affects the interests of the Noteholders or the
Credit Enhancer and continues unremedied for 60 days after the date on
which notice of the failure, requiring it to be remedied, and stating
that the notice is a "Notice of Default" under this Agreement, has been
given to the Master Servicer by the Indenture Trustee or to the Master
Servicer and the Indenture Trustee by the Credit Enhancer or the Holders
of Notes representing not less than 25% of the Outstanding Amount of all
Classes of Notes; or
(3) an Insolvency Event occurs with respect to the Master
Servicer;
then, until the Event of Servicing Termination has been remedied by the Master
Servicer, either the Indenture Trustee (with the consent of the Credit
Enhancer), the Credit Enhancer, or the Holders of Notes representing not less
than 51% of the Outstanding Amount of all Classes of Notes with the consent of
the Credit Enhancer by notice then given to the Master Servicer (and to the
Indenture Trustee if given by the Credit Enhancer or the Holders of Notes) may
terminate all of the rights and obligations of the Master Servicer as servicer
under this Agreement.
In addition, if during the period that the Depositor is required to file
Exchange Act Reports with respect to the Trust, the Master Servicer fails to
perform any of the obligations that constitute a Limited Exchange Act
Reporting Obligation or the obligations in Section 3.09(a) or Section
7.07(a)(1) and (2), and the failure continues for the lesser of 10 days or the
period in which the applicable Exchange Act Report can be filed timely
(without taking into account any extensions), so long as the failure has not
been remedied, the Indenture Trustee shall, but only at the direction of the
Depositor (who shall designate a successor to the Master Servicer other than
the Indenture Trustee), terminate all of the rights and obligations of the
Master Servicer under this Agreement and in the Mortgage Loans and their
proceeds, other than its rights as a
40
Certificateholder or Noteholder. The Depositor will not be entitled to
terminate the rights and obligations of the Master Servicer if a failure of
the Master Servicer to identify a Subcontractor "participating in the
servicing function" within the meaning of Item 1122 of Regulation AB was
attributable solely to the role or functions of the Subcontractor with respect
to mortgage loans other than the Mortgage Loans.
Any notice of termination provided to the Master Servicer shall also be
given by the party providing that notice to the Depositor, each Rating Agency
and the Credit Enhancer.
Within five Business Days after obtaining knowledge of it, the Master
Servicer shall notify the Indenture Trustee, the Credit Enhancer and each
Rating Agency of any event that with the giving of notice or the lapse of time
would become an Event of Servicing Termination by delivering an Officer's
Certificate describing the event.
From the receipt by the Master Servicer of the notice, all the rights
and obligations of the Master Servicer under this Agreement, whether with
respect to the Notes or the Mortgage Loans or otherwise, shall pass to and be
vested in the Indenture Trustee pursuant to this Section; and the Indenture
Trustee is authorized to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any documents, and to do anything
else appropriate to effect the purposes of the notice of termination, whether
to complete the transfer and endorsement of each Mortgage Loan and related
documents, or otherwise. The Master Servicer agrees to cooperate with the
Indenture Trustee in effecting the termination of the rights and obligations
of the Master Servicer under this Agreement, including the transfer to the
Indenture Trustee for the administration by it of all cash amounts that are
held by the Master Servicer and are to be deposited by it in the Collection
Account, or that have been deposited by the Master Servicer in the Collection
Account or are subsequently received by the Master Servicer with respect to
the Mortgage Loans. All reasonable costs and expenses (including attorneys'
fees) incurred in connection with transferring the Mortgage Files to the
successor Master Servicer and amending this Agreement to reflect the
succession as Master Servicer pursuant to this Section shall be paid by the
predecessor Master Servicer (or if the predecessor Master Servicer is the
Indenture Trustee, the initial Master Servicer) on presentation of reasonable
documentation of the costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 6.01(1) for five or more Business Days or under Section 6.01(2)
for 60 or more days, shall not constitute an Event of Servicing Termination if
the delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and the delay or failure was caused by an act
of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods, or similar causes. The preceding sentence
shall not relieve the Master Servicer from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of this
Agreement, and the Master Servicer shall provide the Indenture Trustee, the
Depositor, the Transferor, the Credit Enhancer, and the Noteholders with an
Officers' Certificate giving prompt notice of its failure or delay, together
with a description of its efforts to perform its
41
obligations. The Master Servicer shall immediately notify the Indenture
Trustee of any Events of Servicing Termination.
In connection with the termination of the Master Servicer if any
mortgage is registered on the MERS(R) System, then, either (i) the successor
Master Servicer, including the Indenture Trustee if the Indenture Trustee is
acting as successor Master Servicer, shall represent and warrant that it is a
member of MERS in good standing and shall agree to comply in all material
respects with the rules and procedures of MERS in connection with the
servicing of the Mortgage Loans that are registered with MERS, or (ii) the
predecessor Master Servicer shall cooperate with the successor Master Servicer
in causing MERS to execute and deliver an assignment of mortgage in recordable
form to transfer all the mortgages registered on the MERS(R) System from MERS
to the Indenture Trustee and to execute and deliver any other notices and
documents appropriate to effect a transfer of those mortgages or the servicing
of the Mortgage Loan on the MERS(R) System to the successor Master Servicer.
The predecessor Master Servicer shall file the assignment in the appropriate
recording office. The successor Master Servicer shall deliver the assignment
to the Indenture Trustee promptly upon receipt of the original with evidence
of recording on it or a copy certified by the public recording office in which
the assignment was recorded.
If the Master Servicer is terminated, the Indenture Trustee will provide
the Depositor all information, in form and substance reasonably satisfactory
to the Depositor, reasonably requested by the Depositor to comply with its
reporting obligation under Item 6.02 of Form 8-K with respect to a successor
master servicer if the Indenture Trustee succeeds to the duties of the Master
Servicer as provided in this Agreement.
Section 6.02 Indenture Trustee to Act; Appointment of Successor.
(a) From the time the Master Servicer receives a notice of termination
pursuant to Section 6.01 or resigns pursuant to Section 5.04, the Indenture
Trustee shall be the successor in all respects to the Master Servicer in its
capacity as Master Servicer under this Agreement and the transactions
contemplated by this Agreement and shall be subject to all the obligations of
the Master Servicer under this Agreement except (i) the obligation to
repurchase or substitute for any Mortgage Loan, (ii) with respect to any
representation or warranty of the Master Servicer, or (iii) for any act or
omission of either a predecessor or successor Master Servicer other than the
Indenture Trustee. As its compensation under this Agreement, the Indenture
Trustee shall be entitled to the compensation the Master Servicer would have
been entitled to under this Agreement if no notice of termination had been
given. In addition, the Indenture Trustee will be entitled to compensation
with respect to its expenses in connection with conversion of certain
information, documents, and record keeping, as provided in Section 6.01.
Notwithstanding the above, (i) if the Indenture Trustee is unwilling to
act as successor Master Servicer, or (ii) if the Indenture Trustee is legally
unable to so act, the Indenture Trustee may (in the situation described in
clause (i)) or shall (in the situation described in clause (ii)) appoint, or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution, bank, or other mortgage loan or home equity loan
servicer having a net worth of not less than $15,000,000 as the successor to
the Master Servicer under this
42
Agreement to assume of any obligations of the Master Servicer under this
Agreement. The successor Master Servicer must be acceptable to the Credit
Enhancer in its sole discretion, as evidenced by the Credit Enhancer's prior
consent, as applicable, which consent shall not be unreasonably withheld. The
appointment of the successor Master Servicer must not result in the
qualification, reduction, or withdrawal of the ratings assigned to the Notes
by the Rating Agencies without regard to the Policy.
No appointment of a successor to the Master Servicer will be effective
unless at least 15 days before the effective date of the appointment, the
Indenture Trustee notifies the Depositor of the successor pursuant to this
Section 6.02 and the successor Master Servicer provides to the Depositor all
information, in form and substance reasonably satisfactory to the Depositor,
reasonably requested by the Depositor to comply with its reporting obligation
under Item 6.02 of Form 8-K with respect to a replacement master servicer.
Pending appointment of a successor to the Master Servicer, unless the
Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act as Master Servicer. In connection with this appointment and
assumption, the successor shall be entitled to receive compensation out of
payments on Mortgage Loans in an amount equal to the compensation that the
Master Servicer would otherwise have received pursuant to Section 3.08 (or any
lesser compensation the Indenture Trustee and the successor agree to). The
Indenture Trustee and the successor shall take any action, consistent with
this Agreement, necessary to effectuate the succession.
(b) The appointment of a successor Master Servicer shall not affect any
liability of the predecessor Master Servicer that may have arisen under this
Agreement before its termination as Master Servicer (including any deductible
under an insurance policy pursuant to Section 3.04), nor shall any successor
Master Servicer be liable for any acts or omissions of the predecessor Master
Servicer or for any breach by the predecessor Master Servicer of any of its
representations or warranties in this Agreement. Except for any compensation
agreement with the Indenture Trustee, any successor Master Servicer shall be
subject to all the terms of this Agreement from the time that it accepts its
appointment to the same extent as if it were originally named as Master
Servicer.
Section 6.03 Notification to Noteholders and the Transferor.
Upon any termination or appointment of a successor to the Master
Servicer pursuant to this Article or Section 5.04, the Indenture Trustee shall
give prompt notice of it to the Noteholders at their respective addresses
appearing in the Note Register, the Transferor, the Credit Enhancer, and each
Rating Agency.
43
ARTICLE VII
EXCHANGE ACT REPORTING
Section 7.01 Filing Obligations.
The Master Servicer, the Indenture Trustee, the Owner Trustee, and each
Seller shall reasonably cooperate with the Depositor in connection with the
satisfaction of the Depositor's reporting requirements under the Exchange Act
with respect to the Trust. In addition to the information specified below, if
so requested by the Depositor to satisfy its reporting obligation under the
Exchange Act, the Master Servicer, the Indenture Trustee, the Owner Trustee,
and each Seller shall (and the Master Servicer shall cause each subservicer
to) provide the Depositor (a) with any information available to such person
without unreasonable effort or expense and within the timeframe reasonably
requested by the Depositor to comply with the Depositor's reporting
obligations under the Exchange Act, and (b) to the extent the Master Servicer,
the Indenture Trustee, the Owner Trustee, or a Seller is a party (and the
Depositor is not a party) to any agreement or amendment required to be filed,
copies of the agreement or amendment in ▇▇▇▇▇-compatible form.
Section 7.02 Form 10-D Filings.
(a) The Indenture Trustee shall prepare for filing and file reports on
Form 10-D as required by Section 7.03(a) of the Indenture.
(b) No later than each Payment Date, each of the Master Servicer, the
Indenture Trustee, and the Owner Trustee shall notify (and the Master Servicer
shall cause any subservicer to notify) the Depositor, the Master Servicer and
the Indenture Trustee of any Form 10-D Disclosure Item, together with a
description of the Form 10-D Disclosure Item in form and substance reasonably
acceptable to the Depositor. In addition to the information the Master
Servicer and the Indenture Trustee are obligated to provide pursuant to other
provisions of this Agreement, if so requested by the Depositor, each of the
Master Servicer and the Indenture Trustee shall provide any information
available to it without unreasonable effort or expense regarding the
performance or servicing of the Mortgage Loans (in the case of the Indenture
Trustee, based on the information provided by the Master Servicer) reasonably
required to facilitate preparation of distribution reports in accordance with
Item 1121 of Regulation AB. This information shall be provided concurrently
with the information provided pursuant to Section 4.01 in the case of the
Master Servicer and the Monthly Statement in the case of the Indenture
Trustee, beginning with the first report due not less than five Business Days
following the request.
(c) The Indenture Trustee shall not have any responsibility to file any
items (other than those generated by it) that have not been received in a
format suitable (or readily convertible into a format suitable) for electronic
filing via the ▇▇▇▇▇ system and shall not have any responsibility to convert
any such items to a format suitable (or readily convertible into a format
suitable) for electronic filing via the ▇▇▇▇▇ system. The Indenture Trustee
shall have no liability to the Noteholders, the Certificateholders, the Trust,
the Master Servicer, the Depositor, or the Credit Enhancer with respect to any
failure to properly prepare or file any of
44
Form 10-D to the extent that the failure is not the result of any negligence,
bad faith, or willful misconduct on its part.
Section 7.03 Form 8-K Filings.
(a) The Master Servicer shall prepare and file on behalf of the Trust
any Form 8-K required by the Exchange Act. Each Form 8-K must be signed by the
Master Servicer. Each of the Master Servicer (and the Master Servicer shall
cause any subservicer to promptly notify) and the Indenture Trustee shall
promptly notify the Depositor and the Master Servicer (if the notifying party
is not the Master Servicer), but in no event later than two Business Days
after its occurrence, of any Reportable Event relating to it of which it (in
the case of the Indenture Trustee, a Responsible Officer of the Indenture
Trustee, or in the case of the Owner Trustee, any officer of the Owner Trustee
with direct responsibility for the administration of the Trust or with
knowledge or familiarity with the particular subject) has actual knowledge. A
person has actual knowledge of a Reportable Event to the extent that it
relates to it or any action or failure to act by it.
(b) Concurrently with any sale of Additional Home Equity Loans to the
Trust, the Sponsor shall notify the Depositor and the Master Servicer, if any
material pool characteristic of the actual asset pool at the time of issuance
of the Notes differs by 5% or more (other than as a result of the pool assets
converting into cash in accordance with their terms) from the description of
the asset pool in the Prospectus Supplement.
Section 7.04 Form 10-K Filings.
(a) Before March 30th of each year, beginning in 2007 (or any earlier
date required by the Exchange Act), the Depositor shall prepare and file on
behalf of the Trust a Form 10-K, in form and substance as required by the
Exchange Act. A senior officer in charge of the servicing function of the
Master Servicer shall sign each Form 10-K filed on behalf of the Trust. The
Form 10-K shall include as exhibits each
(1) annual compliance statement described under Section 3.09,
(2) annual Servicing Criteria Compliance Assessment Report
described under Section 7.07, and
(3) annual Accountant's Attestation described under Section 7.07.
Each Form 10-K shall also include any ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification
required to be included with it, as described in Section 7.05.
(b) If the Item 1119 Parties have changed since the Closing Date, by no
later than March 1 of each year, the Master Servicer shall provide each of the
Indenture Trustee and the Owner Trustee with an updated list of the Item 1119
Parties.
(c) No later than March 15 of each year, beginning in 2007, the Master
Servicer, the Indenture Trustee, and the Owner Trustee shall notify (and the
Master Servicer shall cause any subservicer to notify) the Depositor and the
Master Servicer of any Form 10-K Disclosure
45
Item, together with a description of it in form and substance reasonably
acceptable to the Depositor. Additionally, each of the Master Servicer, the
Indenture Trustee, and the Owner Trustee shall provide, and shall cause each
Reporting Subcontractor retained by the Master Servicer or the Indenture
Trustee, and in the case of the Master Servicer shall cause each subservicer,
to provide the following information no later than March 15 of each year in
which a Form 10-K is required to be filed on behalf of the Trust:
(1) if the report on assessment of compliance with servicing
criteria described under Section 7.07 or related registered public
accounting firm attestation report described under Section 7.07 relating
to the relevant person identifies any material instance of
noncompliance, notification of the instance of noncompliance and
(2) if the report on assessment of compliance with servicing
criteria or related registered public accounting firm attestation report
relating to the relevant person is not provided to be filed as an
exhibit to the Form 10-K, information detailing the explanation why the
report is not included.
Section 7.05 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification.
(a) Each Form 10-K shall include a ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification. No
later than March 15 of each year, beginning in 2007, the Master Servicer and
the Indenture Trustee shall (unless it is the Certifying Person), and the
Master Servicer shall cause each subservicer and Reporting Subcontractor and
the Indenture Trustee shall cause each Reporting Subcontractor to, provide to
the Certifying Person a Performance Certification on which the Certification
Parties may reasonably rely.
(b) The senior officer in charge of the servicing function of the Master
Servicer shall serve as the Certifying Person on behalf of the Trust. Neither
the Master Servicer nor the Depositor will request delivery of a certification
under this Section unless the Depositor is required under the Exchange Act to
file an annual report on Form 10-K with respect to the Trust. If before the
filing date of the Form 10-K in March of each year, a Responsible Officer of
the Indenture Trustee or the Depositor has actual knowledge of information
material to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification, the Indenture Trustee or the
Depositor, as the case may be, shall promptly notify the Master Servicer and
the Depositor. The respective parties to this Agreement agree to cooperate
with all reasonable requests made by any Certifying Person or Certification
Party in connection with the Certifying Person's or Certification Party's
attempt to conduct any due diligence that it reasonably believes to be
appropriate to allow it to deliver any ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification with
respect to the Trust.
Section 7.06 Form 15 Filing.
Before January 30 of the first year in which the Depositor is able to do
so under applicable law, the Indenture Trustee, on behalf of the Depositor,
shall file a Form 15 relating to the automatic suspension of reporting in
respect of the Trust under the Exchange Act.
Section 7.07 Report on Assessment of Compliance and Attestation.
(a) On or before March 15 of each year, beginning in 2007 and continuing
until the year in which a Form 15 is file pursuant to Section 7.06:
46
(1) Each of the Master Servicer and the Indenture Trustee shall
deliver to the Depositor, the Credit Enhancer and the Master Servicer a
Servicing Criteria Compliance Assessment Report for the pervious year so
long as a Servicing Criteria Compliance Assessment Report is required by
Regulation AB. The Servicing Criteria Compliance Assessment Report shall
be signed by an authorized officer of the Master Servicer or the
Indenture Trustee, as applicable, and shall address each of the
Servicing Criteria specified on a certification substantially in the
form of Exhibit G delivered to the Depositor concurrently with the
execution of this Agreement. To the extent any of the Servicing Criteria
are not applicable to the Master Servicer or the Indenture Trustee, as
applicable, with respect to asset-backed securities transactions taken
as a whole involving it and that are backed by the same asset type
backing the Notes, the report shall include a statement to that effect.
The Depositor and the Master Servicer, and each of their respective
officers and directors, will be entitled to rely on each Servicing
Criteria Compliance Assessment Report.
(2) Each of the Master Servicer and the Indenture Trustee shall
deliver to the Depositor, the Credit Enhancer and the Master Servicer an
Accountant's Attestation with respect to the Servicing Criteria
Compliance Assessment Report furnished by Master Servicer or the
Indenture Trustee, as applicable. To the extent any of the Servicing
Criteria are not applicable to the Master Servicer or the Indenture
Trustee, as applicable, with respect to asset-backed securities
transactions taken as a whole involving it and that are backed by the
same asset type backing the Notes, the Accountant's Attestation shall
include a statement that that effect.
(3) The Master Servicer shall cause each subservicer and each
Reporting Subcontractor to deliver to the Depositor and the Credit
Enhancer a Servicing Criteria Compliance Assessment Report and an
Accountant's Attestation as and when provided in Section 7.07(a)(1) and
(2).
(4) The Indenture Trustee shall cause each Reporting Subcontractor
to deliver to the Depositor, the Credit Enhancer and the Master Servicer
a Servicing Criteria Compliance Assessment Report and an Accountant's
Attestation as and when provided in Section 7.07(a)(1) and (2).
(5) The Master Servicer and the Indenture Trustee shall execute
(and the Master Servicer shall cause each subservicer to execute, and
the Master Servicer and the Indenture Trustee shall cause each Reporting
Subcontractor to execute) a reliance certificate in the form of Exhibit
I to enable the Certification Parties to rely on each
(A) annual compliance statement provided pursuant to Section
3.09, if applicable,
(B) Servicing Criteria Compliance Assessment Report provided
pursuant to this Section 7.07, and
(C) Accountant's Attestation provided pursuant to this
Section 7.07,
47
and shall include a certification that each Servicing Criteria
Compliance Assessment Report discloses any deficiencies or
defaults described to the applicable registered public accountants
to enable them to render the Accountant's Attestation provided for
in this Section 7.07.
(b) If the Master Servicer, any subservicer, the Indenture Trustee, or
any Reporting Subcontractor is terminated or resigns during the term of this
Agreement, that person shall provide documents and information required by
this Section 7.07 with respect to the period it was subject to this Agreement
or provided services with respect to the Trust, the Notes, or the Mortgage
Loans.
(c) Each Servicing Criteria Compliance Assessment Report provided by a
subservicer pursuant to Section 7.07(a)(3) shall address each of the Servicing
Criteria specified on a certification substantially in the form of Exhibit G
delivered to the Depositor concurrently with the execution of this Agreement
or, in the case of a subservicer subsequently appointed as such, on or before
the date of its appointment. An assessment of compliance provided by a
Subcontractor pursuant to Section 7.07(a)(3) or (4) need not address any
elements of the Servicing Criteria other than those specified by the Master
Servicer or the Indenture Trustee, as applicable, pursuant to Section
7.07(a)(1).
Section 7.08 Use of Subservicers and Subcontractors.
(a) The Master Servicer shall cause any subservicer used by the Master
Servicer (or by any subservicer) for the benefit of the Depositor to comply
with the provisions of Section 3.09(b) and this Article VII to the same extent
as if it were the Master Servicer (except with respect to the Master
Servicer's duties with respect to preparing and filing any Exchange Act
Reports or as the Certifying Person). The Master Servicer shall be responsible
for obtaining from each subservicer and delivering to the Depositor any
servicer compliance statement required to be delivered by the subservicer
under Section 3.09, any a Servicing Criteria Compliance Assessment Report and
Accountant's Attestation required to be delivered by the subservicer under
Section 7.07, and any certification required to be delivered to the Certifying
Person under Section 7.05 as and when required to be delivered.
No person may become a successor subservicer in connection with this
Agreement (whether by merger or consolidation with an existing subservicer or
by appointment as a successor to any subservicer) unless the Master Servicer
has notified the Depositor at least 15 days before the effective date of the
succession or appointment of the successor and has provided all information
reasonably requested by the Depositor to comply with its reporting obligation
under Item 6.02 of Form 8-K with respect to the succession or appointment of
the successor subservicer in form and substance reasonably satisfactory to the
Depositor.
(b) It shall not be necessary for the Master Servicer, any subservicer,
or the Indenture Trustee to seek the consent of the Depositor or any other
party to the use of any Subcontractor. The Master Servicer or the Indenture
Trustee, as applicable, shall promptly on request provide to the Depositor (or
any designee of the Depositor, such as the Master Servicer or administrator) a
description (in form and substance reasonably satisfactory to the Depositor)
of the role and function of each Subcontractor used by the Master Servicer or
the Indenture
48
Trustee (or in the case of the Master Servicer, any Subservicer). The
description shall specify for each Subcontractor
(1) its identity,
(2) whether it is "participating in the servicing function" within
the meaning of Item 1122 of Regulation AB, and
(3) which elements of the Servicing Criteria will be addressed in
Servicing Criteria Compliance Assessment Reports provided by it if it is
"participating in the servicing function" within the meaning of Item
1122 of Regulation AB.
(c) Neither the Master Servicer nor the Indenture Trustee shall use any
Subcontractor (or in the case of the Master Servicer, any subservicer) that
would be a Reporting Subcontractor unless the Subcontractor (or subservicer)
agrees for the benefit of the Depositor to comply with Sections 7.07 and 7.09
to the same extent as if the Subcontractor (or subservicer) were the Master
Servicer (except with respect to the Master Servicer's duties with respect to
preparing and filing any Exchange Act Reports or as the Certifying Person) or
the Indenture Trustee with respect to the actions being performed by the
Subcontractor (or subservicer), as applicable. The Master Servicer or the
Indenture Trustee, as applicable, shall be responsible for obtaining from each
Subcontractor and delivering to the Depositor and the Master Servicer any
Servicing Criteria Compliance Assessment Report and Accountant's Attestation
required to be delivered by the Subcontractor under Section 7.05 and Section
7.07, in each case as and when required to be delivered.
Section 7.09 Amendments.
(a) If the parties to this Agreement desire to further clarify or amend
any provision of this Article VII, this Agreement shall be amended to reflect
the new agreement between the parties covering matters in this Article VII
pursuant to Section 8.01, which amendment shall not require any Opinion of
Counsel or the satisfaction of the Rating Agency Condition or the consent of
any Noteholder.
(b) The Depositor shall assume the obligations and responsibilities of
the Master Servicer in this Article VII with respect to the preparation and
filing of the Exchange Act Reports and acting as the Certifying Person if
(1) during the period that the Depositor is required to file
Exchange Act Reports with respect to the Trust, the Master Servicer is
no longer an Affiliate of the Depositor,
(2) the successor Master Servicer has agreed to provide a
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Certification to the Depositor substantially in the form
of Exhibit I,
(3) the successor Master Servicer has agreed to provide the
Servicing Criteria Compliance Assessment Reports and Accountant's
Attestations as provided in Section 7.07(a)(1) and (2) and the reliance
certificate as provided in Section 7.07(a)(5),
(4) the successor Master Servicer has agreed to cause each
subservicer and each Reporting Subcontractor used by it to provide the
Servicing Criteria Compliance
49
Assessment Reports and Accountant's Attestations as provided in Section
7.07(a)(3), and
(5) the Depositor has received indemnity from the successor Master
Servicer satisfactory to the Depositor.
ARTICLE VIII
TERMINATION
Section 8.01 Termination.
(a) The respective obligations and responsibilities of the Sponsor, the
Master Servicer, the Depositor, the Trust, and the Indenture Trustee created
by this Agreement (other than the obligation of the Master Servicer to send
certain notices) shall terminate on the earlier of
(1) the transfer of all the Mortgage Loans pursuant to Section
8.01(b),
(2) the termination of the Trust Agreement or the Indenture, and
(3) the final payment or other liquidation of the last Mortgage
Loan remaining in the Trust or the disposition of all property acquired
in foreclosure or by deed in lieu of foreclosure of any Mortgage Loan.
Upon termination in accordance with this Section, the Indenture Trustee
shall execute any documents and instruments of transfer presented by the
Transferor, in each case without recourse, representation, or warranty, and
take any other actions the Transferor reasonably requests to effect the
transfer of the Mortgage Loans to the Transferor. Notwithstanding the
termination of this Agreement, the Master Servicer shall comply with this
Agreement in winding up activities under this Agreement after termination if
necessary.
(b) With the consent of the Credit Enhancer, the Master Servicer may
effect the transfer of all the Mortgage Loans at their termination purchase
price on any Payment Date on or after the Optional Termination Date and
require the Trust to redeem the Notes pursuant to Section 10.01 of the
Indenture with the proceeds. The termination purchase price is the sum of:
(1) the aggregate Note Principal Balance for the Principal Amount
Notes,
(2) accrued aggregate Note Interest through the day preceding the
final Payment Date, and
(3) interest accrued on any aggregate Unpaid Investor Interest
Shortfall, to the extent legally permissible.
(c) The Master Servicer must notify the Trust, the Indenture Trustee,
and the Credit Enhancer of any election to effect the transfer of the Mortgage
Loans pursuant to Section 8.01(b) no later than the first day of the month
before the month in which the transfer is to occur. The proceeds from the
purchase of the Mortgage Loans, for purposes of payments on the Notes, shall
be considered to have been received in the Collection Period before the
Collection Period in which the Payment Date on which the purchase takes place
occurs.
50
Section 8.02 Additional Termination Requirements.
(a) If the Master Servicer exercises its redemption option in Section
8.01(b), the Mortgage Loans then remaining in the Trust shall be liquidated in
accordance with the following additional requirements, unless the Indenture
Trustee has been supplied with an Opinion of Counsel to the effect that the
failure to comply with the requirements of this Section will not result in the
imposition of taxes on prohibited transactions on any REMIC as defined in
Section 860F of the Code, or cause any REMIC created under the Trust Agreement
to fail to qualify as a REMIC at any time that any Certificates are
outstanding:
(b) Within 90 days before the final Payment Date in the notice given by
the Indenture Trustee under Section 10.01(b) of the Indenture, the Master
Servicer shall prepare and the Indenture Trustee, at the expense of the tax
matters person, shall adopt a plan of complete liquidation within the meaning
of Section 860F(a)(4) of the Code that, as evidenced by an Opinion of Counsel,
meets the requirements of a qualified liquidation; and
(c) Within 90 days after the time of adoption of a plan of complete
liquidation, the Issuer shall sell all of the assets of the Trust to the
Master Servicer for cash greater than or equal to the sum of:
(1) 100% of the principal balance of each Mortgage Loan plus one
month's accrued interest thereon at the applicable Loan Rate,
(2) for each such property, the lesser of the appraised value of
any Mortgaged Property that has been acquired by the Trust in
foreclosure or by deed in lieu of foreclosure as determined by the
higher of two appraisals completed by two independent appraisers
selected by the Master Servicer at the expense of the Master Servicer
and the principal balance of the related Mortgage Loan, and
(3) any remaining unpaid costs and damages incurred by the Trust
that arise out of an actual violation of any predatory or abusive
lending law that also constitutes an actual breach of a representation
and warranty in Section 2.04, in all cases plus accrued and unpaid
interest thereon at the applicable Loan Rate.
The Indenture Trustee as agent for any REMIC created under the Trust
Agreement shall adopt and sign such a plan of complete liquidation upon the
written request of the Master Servicer and the receipt of the Opinion of
Counsel referred to in Section 8.02(a) and take any other action in connection
therewith reasonably requested by the Master Servicer.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01 Amendment.
This Agreement may be amended from time to time by the Sponsor, the
Master Servicer, the Depositor, the Owner Trustee, and the Indenture Trustee,
if the Rating Agency Condition is satisfied (in connection with which the
consent of the Credit Enhancer shall not be
51
unreasonably withheld). However, no amendment that significantly changes the
permitted activities of the Trust may be promulgated without the consent of a
majority of the aggregate Outstanding Amount of the Notes. For this purpose no
Notes owned by the Sponsor or any of its affiliates may vote, nor shall their
Notes be considered outstanding. This Agreement may also be amended from time
to time by the Sponsor, the Master Servicer, the Depositor, the Owner Trustee,
and the Indenture Trustee, with the consent of the Credit Enhancer (which
consent shall not be unreasonably withheld) and Holders of not less than 66?%
of the aggregate Outstanding Amount of the Principal Balance Notes.
The Indenture Trustee may enter into any amendment of this Agreement as
to which the Rating Agency Condition is satisfied, and when so requested by an
Issuer Request, the Indenture Trustee shall enter into any amendment of this
Agreement
(1) that does not impose further obligations or liabilities on the
Indenture Trustee, and
(2) as to which either the Rating Agency Condition is satisfied or
Holders of not less than 66?% of the aggregate Outstanding Amount of the
Principal Balance Notes and the Credit Enhancer have consented.
Following the execution and delivery of any amendment to this Agreement
or to the Policy to which the Credit Enhancer was required to consent, either
the Transferor, if the Transferor requested the amendment, or the Master
Servicer, if the Master Servicer requested the amendment, shall reimburse the
Credit Enhancer for the reasonable out-of-pocket costs and expenses incurred
by them in connection with the amendment.
Before the execution of the amendment, the party to this Agreement
requesting the amendment shall notify each Rating Agency of the substance of
the amendment. The Indenture Trustee shall deliver fully executed original
counterparts of the instruments effecting the amendment to the Credit
Enhancer.
Section 9.02 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS PROVISIONS THAT WOULD
RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER STATE.
Section 9.03 Notices.
All notices, demands, instructions, consents, and other communications
required or permitted under this Agreement shall be in writing and signed by
the party giving the same and shall be personally delivered or sent by first
class or express mail (postage prepaid), national overnight courier service,
or by facsimile transmission or other electronic communication device capable
of transmitting or creating a written record (confirmed by first class mail)
and shall be considered to be given for purposes of this Agreement on the day
that the writing is delivered when personally delivered or sent by facsimile
or overnight courier or three Business Days after it was sent to its intended
recipient if sent by first class mail. A facsimile has been delivered when the
sending machine issues an electronic confirmation of transmission. Unless
otherwise specified in a notice sent or delivered in accordance with the
provisions of this
52
Section, notices, demands, instructions, consents, and other communications in
writing shall be given to or made on the respective parties at their
respective addresses indicated below:
if to the Trust at:
CWHEQ Revolving Home Equity Loan Trust, Series ▇▇▇▇-▇
▇▇▇▇▇▇▇▇▇▇ Trust Company, as Owner Trustee
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Depositor at:
CWHEQ, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Master Servicer at:
Countrywide Home Loans, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department,
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Indenture Trustee at:
the Corporate Trust Office
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Credit Enhancer at:
Ambac Assurance Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Consumer Asset Backed Securities Group
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
if to ▇▇▇▇▇'▇ at:
Residential Loan Monitoring Group, 4th Floor
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
53
and if to Standard & Poor's at:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Whenever a notice or other communication to the Credit Enhancer refers
to an Event of Servicing Termination or with respect to which failure on the
part of the Credit Enhancer to respond would constitute consent or acceptance,
then a copy of the notice or other communication shall also be sent to the
attention of the General Counsel of the Credit Enhancer and shall be marked to
indicate "URGENT MATERIAL ENCLOSED."
Section 9.04 Severability of Provisions.
Any provisions of this Agreement that are held invalid for any reason or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of the invalidity or unenforceability without
invalidating the remaining provisions of this Agreement, and the prohibition
or unenforceability in a jurisdiction shall not invalidate or render
unenforceable that provision in any other jurisdiction.
Section 9.05 Assignment.
Except as provided in Sections 5.02 and 5.04, this Agreement may not be
assigned by the Depositor or the Master Servicer without the prior consent of
the Credit Enhancer.
Section 9.06 Third-Party Beneficiaries.
This Agreement will be binding on the parties to this Agreement, and
inure to the benefit of the parties to this Agreement, the Noteholders, the
Transferor, the Note Owners, the Owner Trustee and the Credit Enhancer, and
their respective successors and permitted assigns, and each is a third party
beneficiary of this Agreement. No other person will have any rights under this
Agreement.
Section 9.07 Counterparts; Electronic Delivery.
This Agreement may be executed in any number of copies, and by the
different parties on the same or separate counterparts, each of which shall be
considered to be an original instrument. Any signature page to this Agreement
containing a manual signature may be delivered by facsimile transmission or
other electronic communication device capable of transmitting or creating a
printable written record, and when so delivered shall have the effect of
delivery of an original manually signed signature page.
Section 9.08 Effect of Headings and Table of Contents.
The Article and Section headings in this Agreement and the Table of
Contents are for convenience only and shall not affect the construction of
this Agreement.
54
IN WITNESS WHEREOF, the Depositor, the Sponsor and Master Servicer, the
Trust, and the Indenture Trustee have caused this Agreement to be duly
executed by their respective officers all as of the day and year first above
written.
CWHEQ, INC.
Depositor
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Title: Vice President
COUNTRYWIDE HOME LOANS, INC.
Sponsor and Master Servicer
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Title: Senior Vice President
JPMORGAN CHASE BANK, N.A.,
Indenture Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Attorney-in-Fact
55
CWHEQ REVOLVING HOME EQUITY LOAN TRUST, SERIES 2006-C
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Financial Services Officer
56
State of CALIFORNIA )
) ss.:
County of LOS ANGELES )
On the 30th day of March, 2006 before me, a notary public in and for the
State of California, personally appeared ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇., known to me who,
being by me duly sworn, did depose and say that he resides at Calabasas,
California; that he is the Vice President of CWHEQ, Inc. a Delaware
corporation, one of the parties that executed the foregoing instrument; that
he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Notary Public
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Commission # 1609859
Notary Public - California
Los Angeles County
My Comm. Expires October 15, 2009.
1
State of CALIFORNIA )
) ss.:
County of LOS ANGELES )
On the 30th day of March, 2006 before me, a notary public in and for the
State of California, personally appeared ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇., known to me who,
being by me duly sworn, did depose and say that he resides at Calabasas,
California; that he is the Senior Vice President of Countrywide Home Loans,
Inc., a New York corporation, one of the parties that executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Notary Public
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Commission # 1609859
Notary Public - California
Los Angeles County
My Comm. Expires October 15, 2009.
2
State of ILLINOIS )
) ss.:
County of ▇▇▇▇ )
On the 30th day of March, 2006 before me, a notary public in and for the
State of Illinois, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, known to me who,
being by me duly sworn, did depose and say that he resides at Plainfield,
Illinois; that he is the Attorney-In-Fact of JPMorgan Chase Bank, N.A., a
national banking association, one of the parties that executed the foregoing
instrument; that he signed his name thereto by order of the Board of Directors
of said corporation.
/s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Notary Public
OFFICIAL ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Notary Public, State of Illinois
My Commission Expires: February 3, 2010
3
State of DELAWARE )
) ss.:
County of NEW CASTLE )
On the 30th day of March, 2006 before me, a notary public in and for the
State of Delaware, personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, known to me who,
being by me duly sworn, did depose and say that she resides at Wilmington,
Delaware; that she is a Financial Services Officer of Wilmington Trust
Company, not in its individual capacity but in its capacity as Owner Trustee
of CWHEQ Revolving Home Equity Loan Trust, Series 2006-C, one of the parties
that executed the foregoing instrument; that she signed her name thereto by
order of the Board of Directors of said corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Notary Public
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Notary Public - State of Delaware
My Commission Expires March 7, 2007
4
EXHIBIT A
MORTGAGE LOAN SCHEDULE
[Delivered to Indenture Trustee Only]
A-1
EXHIBIT B
FORM OF LETTER OF REPRESENTATIONS
B-1
EXHIBIT C
FORM OF REQUEST FOR RELEASE OF DOCUMENTS
[DATE]
JPMorgan Chase Bank, N.A.
as Indenture Trustee
▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Worldwide Securities Services/Structure Finance Services,
Countrywide HEL CWHEQ 2006-C
Attn: Corporate Trust Services Division
Re: CWHEQ, Inc. Revolving Home Equity Loan
Asset Backed Notes, Series 2006-C
---------------------------------
Gentlemen:
In connection with the administration of the Mortgage Loans held by you
as Indenture Trustee under the Sale and Servicing Agreement, dated as of March
30, 2006, among CWHEQ, Inc. as Depositor, Countrywide Home Loans, Inc., as
Sponsor and Master Servicer, CWHEQ Revolving Home Equity Loan Trust, Series
2006-C and you, as Indenture Trustee (the "Agreement"), we hereby request a
release of the Mortgage File held by you as Indenture Trustee with respect to
the following described Mortgage Loan for the reason indicated below.
Loan No.:
[MIN No.]
Reason for requesting file:
--------------------------
1. Mortgage Loan paid in full. (The Master Servicer hereby certifies that all
-------------------- amounts received in connection with the payment in full of the Mortgage
Loan which are required to be deposited in the Collection Account pursuant
to Section 3.02 of the Agreement have been so deposited).
2. Retransfer of Mortgage Loan. (The Master Servicer hereby certifies that the
-------------------- Transfer Deposit Amount has been deposited in the Collection Account
pursuant to the Agreement).
3. The Mortgage Loan is being foreclosed.
4. The Mortgage Loan is being re-financed by another depository institution.
-------------------- (The Master Servicer hereby certifies that all amounts received in
connection with the payment in full of the Mortgage Loan which are required
to be deposited in the Collection Account pursuant to Section 3.02 of the
Agreement have been so deposited).
5. Other (Describe).
--------------------
C-1
The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Agreement and will
promptly be returned to the Indenture Trustee when the need therefor by the
Master Servicer no longer exists unless the Mortgage Loan has been liquidated
or retransferred.
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
COUNTRYWIDE HOME LOANS, INC.
By:_______________________________
Name:
Title: Servicing Officer
C-2
EXHIBIT D
FORM OF TRANSFER DOCUMENT
The Sponsor hereby transfers to the Depositor, and the Depositor hereby
transfers to the Owner Trustee for the benefit of CWHEQ Revolving Home Equity
Loan Trust, Series 2006-C the below identified Additional Home Equity Loans.
Subsequent Closing Date: _________________
Subsequent Cut-off Date: __________________
Cut-off Date Asset Balance: $ ______________
Additional Home Equity Loans:
[Each of the Sponsor's funded Mortgage Loans owned by it for
securitization on the above referenced Subsequent Cut-off Date sequentially by
date beginning with the earliest date on which any of them were funded, and
within a date alphabetically, are hereby transferred to the Trust until either
their aggregate Cut-off Date Asset Balance is as close as possible to equal to
the Cut-off Date Asset Balance indicated above without exceeding it or all of
the loans through the Subsequent Cut-off Date have been transferred.]
This Transfer Document is delivered pursuant to the Purchase Agreement
and the Sale and Servicing Agreement, dated as of March 30, 2006, among CWHEQ,
Inc., Countrywide Home Loans, Inc., CWHEQ Revolving Home Equity Loan Trust,
Series 2006-C, and JPMorgan Chase Bank, N.A., and the capitalized terms used
in this document have the meanings given to them in those agreements.
Dated: __________ , 2006.
COUNTRYWIDE HOME LOANS, INC. CWHEQ, INC.
By : ___________________ By : ________________________
Name: Name:
Title: Title:
D-1
EXHIBIT E
MONTHLY STATEMENT
The following information is required in each Monthly Statement. The
format of the Monthly Statement is on file with the Indenture Trustee.
(1) the Investor Floating Allocation Percentage for each Loan Group for
the related Collection Period;
(2) the Investor Interest Collections and the Investor Principal
Collections for each Loan Group for the related Collection Period;
(3) the Interest Collections that are not Investor Interest Collections,
the Net Draws Principal Payment, and Interest Collections allocated to the Net
Draws, and Transferor Principal Collections, each for each Loan Group for the
related Collection Period;
(4) the aggregate amount to be paid to the each Class of Notes;
(5) the amount of Note Interest for each Class of Notes for the related
Interest Period, and the Note Rate for each Class of Notes for the related
Interest Period;
(6) the amount of the Note Interest that is not payable to the Holders
of each Class of Notes on the Payment Date because of insufficient Investor
Interest Collections and Subordinated Transferor Collections;
(7) the amount of any Unpaid Investor Interest Shortfall for each Class
of Notes for the Payment Date and the amount of interest on the shortfall at
the applicable Note Rate for each Class of Notes applicable from time to time
(separately stated) to be paid on the Payment Date;
(8) the amount of the remaining Unpaid Investor Interest Shortfall for
each Class of Notes after giving effect to the payment;
(9) the amount of principal in the payment for each Class of Notes,
separately stating its components;
(10) the amount of the Investor Loss Amounts for the Payment Date and
the amount of Investor Loss Amounts that will be reimbursed in the payment for
each Loan Group;
(11) the aggregate unreimbursed Investor Loss Amounts for each Loan
Group after giving effect to the payment;
(12) the amount of any Basis Risk Carryforward for each Class of
Principal Amount Notes in the payment and the amount of Rate Cap Shortfalls
for the Class 2-A Notes and any amounts due to the trust, and the amounts
received, in respect of the Cap Contract;
(13) the amount of the remaining Basis Risk Carryforward for each Class
of Principal Balance Notes giving effect to the payment;
E-1
(14) the Accelerated Principal Payment Amount and the portion of it that
will be distributed as principal on each Class of Notes pursuant to Section
8.03(a)(vii) and (ix) of the Indenture on the Payment Date;
(15) the amount of any Transfer Deposit Amount paid by the Sponsor or
the Depositor for each Loan Group during the related Collection Period in
connection with retransfer of Mortgage Loans pursuant to Section 2.07;
(16) the Servicing Fee for the Payment Date;
(17) the amount of the Sponsor Loss Coverage Obligation, the amount
expected to be received from the Sponsor for the payment under such obligation
for each Loan Group, and the remaining coverage under Sponsor Loss Coverage
Obligation after the payment on the Payment Date;
(18) the Note Principal Balance or Notional Balance of each Class of
Notes and the factor to seven decimal places obtained by dividing the Note
Principal Balance of each Class of Principal Balance Notes for the Payment
Date by the Original Note Principal Balance of the that Class of Principal
Amount Notes after giving effect to the payment on the Payment Date and to any
reduction in the Note Principal Balance with respect to Investor Loss Amount;
(19) the Allocated Transferor Interest for each Loan Group after giving
effect to the payment and to any reduction in with respect to the related
Investor Loss Amount on the Payment Date;
(20) whether a Rapid Amortization Event has occurred since the prior
Determination Date, specifying the Rapid Amortization Event if one has
occurred;
(21) whether an Event of Servicing Termination has occurred since the
prior Determination Date, specifying the Event of Servicing Termination if one
has occurred;
(22) whether the Stepdown Date has occurred since the prior
Determination Date;
(23) whether the Stepup Trigger Date has occurred since the prior
Determination Date;
(24) the amount to be distributed on the Mortgage Loans to the Issuer
pursuant to Section 8.03(a)(xvi) of the Indenture;
(25) the amount to be paid to the Master Servicer from Investor Interest
Collections pursuant to Section 8.03(a)(xii) of the Indenture;
(26) the Maximum Rate for each Loan Group for the related Collection
Period and the Weighted Average Net Loan Rate for the Mortgage Loans for each
Loan Group for the related Collection Period;
(27) each Loan Group Balance as of the end of the preceding Collection
Period;
(28) the number and aggregate Asset Balances of Mortgage Loans in each
Loan Group as to which the Minimum Monthly Payment is delinquent for 30-59
days, 60-89 days, and 90 or more days, respectively, as of the end of the
preceding Collection Period;
(29) the book value (within the meaning of 12 C.F.R. ss. 571.13 or
comparable provision) of any real estate acquired through foreclosure or grant
of a deed in lieu of foreclosure;
E-2
(30) the amount of any optional advances on the Mortgage Loans for each
Loan Group pursuant to Section 4.03 by the Master Servicer included in the
payment on the Payment Date and the aggregate amount of optional advances
pursuant to Section 4.03 on Mortgage Loans by the Master Servicer outstanding
as of the close of business on the Payment Date;
(31) the number and principal balances of any Mortgage Loans in each
Loan Group retransferred to the Transferor pursuant to each of Section 2.04
and Section 2.06;
(32) the amount of Subordinated Transferor Collections included in the
payment for each Class of Notes;
(33) for the first Payment Date, the number and Cut-off Date Asset
Balance of Mortgage Loans in each Loan Group for which the Mortgage Loan File
was not delivered to the Custodian acting on behalf of the Indenture Trustee
within 30 days of the Closing Date or Subsequent Closing Date, as applicable;
(34) the amount being paid to the Class R-1 Certificates,
(35) the Net Draws related to each Loan Group for the Payment Date;
(36) the Net Draws Principal Payment for the Payment Date;
(37) the Record Date for that Payment Date;
(38) the Determination Date;
(39) the Payment Date;
(40) the amount of funds received into any of the Collection Account,
Payment Account, and any other account or fund established under the
Transaction Documents, and the sources of the funds;
(41) fees paid to any party under the Transaction Documents, other than
the Servicing Fee;
(42) any insurance premiums and other payments to the Loan Insurance
Policy Provider and the purpose of the payments;
(43) the premium payable to the Credit Enhancer on the Policy included
in the payments with respect to each Loan Group;
(44) the applicable Mortgage Rate;
(45) the beginning and ending balance of any of the Collection Account,
Payment Account, and any other account or fund established under the
Transaction Documents;
(46) the number and principal balance of the Mortgage Loans in each Loan
Group at the beginning and the end applicable period, and the following
information for the Mortgage Loans in each Loan Group: the weighted average
Mortgage Rate, the weighted average remaining term to maturity, and the
weighted average loan age;
(47) the pool factor;
(48) amount of prepayments for each Loan Group;
(49) amount of prepayment charges for each Loan Group;
E-3
(50) delinquency and loss information for the Mortgage Loans in each
Loan Group;
(51) any material modifications, extensions, or waiver to any terms of
Mortgage Loan in each Loan Group during the applicable period;
(52) any material breaches by any party to the Transaction Documents of
any representation, warranty, or covenant;
(53) any repurchase or substitution of a Mortgage Loan in each Loan
Group; and
(54) any material changes to the underwriting, originating, acquisition
or pool selection criteria of any Seller.
The amounts furnished pursuant to clauses (4), (5) (for Note Interest),
(7), (8), (9), (10), and (11) above shall be expressed as a dollar amount per
$1,000 increment of Notes.
E-4
EXHIBIT F-1
FORM OF PERFORMANCE CERTIFICATION
(Subservicer)
[on file with Master Servicer]
F-1-1
EXHIBIT F-2
FORM OF PERFORMANCE CERTIFICATION
(Indenture Trustee)
[on file with Indenture Trustee]
F-2-1
EXHIBIT G
FORM OF SERVICING CRITERIA TO BE ADDRESSED IN
ASSESSMENT OF COMPLIANCE STATEMENT
Each assessment of compliance to be delivered shall address, at a
minimum, the criteria identified as below as "Applicable Servicing Criteria":
------------------------------------------------------------------------------------------ ----------------------
Applicable Servicing
Servicing Criteria Criteria
------------------------------------------------------------------------------------------ ----------------------
Reference Criteria
-------------------- --------------------------------------------------------------------- ----------------------
General Servicing Considerations
-------------------- ----------------------
1122(d)(1)(i) Policies and procedures are instituted to monitor any performance
or other triggers and events of default in accordance with the
transaction agreements.
-------------------- ----------------------
1122(d)(1)(ii) If any material servicing activities are outsourced to third
parties, policies and procedures are instituted to monitor the
third party's performance and compliance with such servicing
activities.
-------------------- ----------------------
1122(d)(1)(iii) Any requirements in the transaction agreements to maintain a
back-up servicer for the mortgage loans are maintained.
-------------------- ----------------------
1122(d)(1)(iv) A fidelity bond and errors and omissions policy is in effect on the
party participating in the servicing function throughout the
reporting period in the amount of coverage required by and
otherwise in accordance with the terms of the transaction
agreements.
-------------------- ----------------------
Cash Collection and Administration
-------------------- ----------------------
1122(d)(2)(i) Payments on mortgage loans are deposited into the appropriate
custodial bank accounts and related bank clearing accounts no more
than two business days following receipt, or such other number of
days specified in the transaction agreements.
-------------------- ----------------------
1122(d)(2)(ii) Disbursements made via wire transfer on behalf of an obligor or to
an investor are made only by authorized personnel.
-------------------- ----------------------
1122(d)(2)(iii) Advances of funds or guarantees regarding collections, cash flows
or distributions, and any interest or other fees charged for such
advances, are made, reviewed and approved as specified in the
transaction agreements.
-------------------- ----------------------
The related accounts for the transaction, such as cash reserve
accounts or accounts established as a form of
overcollateralization, are separately maintained (e.g., with
respect to commingling of cash) as set forth in the transaction
1122(d)(2)(iv) agreements.
-------------------- ----------------------
1122(d)(2)(v) Each custodial account is maintained at a federally insured
depository institution as set forth in the transaction agreements.
For purposes of this criterion, "federally insured depository
institution" with respect to a foreign
-------------------- ----------------------
G-1
------------------------------------------------------------------------------------------ ----------------------
Applicable Servicing
Servicing Criteria Criteria
------------------------------------------------------------------------------------------ ----------------------
Reference Criteria
-------------------- --------------------------------------------------------------------- ----------------------
financial institution means a foreign financial institution
that meets the requirements of Rule 13k-1(b)(1) of the Exchange Act.
-------------------- ----------------------
1122(d)(2)(vi) Unissued checks are safeguarded so as to prevent unauthorized
access.
-------------------- ----------------------
1122(d)(2)(vii) Reconciliations are prepared on a monthly basis for all
asset-backed securities related bank accounts, including custodial
accounts and related bank clearing accounts. These reconciliations
are (A) mathematically accurate; (B) prepared within 30 calendar
days after the bank statement cutoff date, or such other number of
days specified in the transaction agreements; (C) reviewed and
approved by someone other than the person who prepared the
reconciliation; and (D) contain explanations for reconciling items.
These reconciling items are resolved within 90 calendar days of
their original identification, or such other number of days
specified in the transaction agreements.
-------------------- ----------------------
Investor Remittances and Reporting
-------------------- ----------------------
1122(d)(3)(i) Reports to investors, including those to be filed with the
Commission, are maintained in accordance with the transaction
agreements and applicable Commission requirements. Specifically,
such reports (A) are prepared in accordance with timeframes and
other terms set forth in the transaction agreements; (B) provide
information calculated in accordance with the terms specified in
the transaction agreements; (C) are filed with the Commission as
required by its rules and regulations; and (D) agree with
investors' or the trustee's records as to the total unpaid
principal balance and number of mortgage loans serviced by the
Servicer.
-------------------- ----------------------
1122(d)(3)(ii) Amounts due to investors are allocated and remitted in accordance
with timeframes, distribution priority and other terms set forth in
the transaction agreements.
-------------------- ----------------------
Disbursements made to an investor are posted within two business
days to the Servicer's investor records, or such other number of
1122(d)(3)(iii) days specified in the transaction agreements.
-------------------- ----------------------
Amounts remitted to investors per the investor reports agree with
cancelled checks, or other form of payment, or custodial bank
1122(d)(3)(iv) statements.
-------------------- ----------------------
Pool Asset Administration
-------------------- ----------------------
1122(d)(4)(i) Collateral or security on mortgage loans is maintained as required
by the transaction agreements or related mortgage loan documents.
-------------------- ----------------------
Mortgage loan and related documents are safeguarded as required by
1122(d)(4)(ii) the transaction agreements.
-------------------- ----------------------
G-2
------------------------------------------------------------------------------------------ ----------------------
Applicable Servicing
Servicing Criteria Criteria
------------------------------------------------------------------------------------------ ----------------------
Reference Criteria
-------------------- --------------------------------------------------------------------- ----------------------
1122(d)(4)(iii) Any additions, removals or substitutions to the asset pool are
made, reviewed and approved in accordance with any conditions or
requirements in the transaction agreements.
-------------------- ----------------------
1122(d)(4)(iv) Payments on mortgage loans, including any payoffs, made in
accordance with the related mortgage loan documents are posted to
the Servicer's obligor records maintained no more than two business
days after receipt, or such other number of days specified in the
transaction agreements, and allocated to principal, interest or
other items (e.g., escrow) in accordance with the related mortgage
loan documents.
-------------------- ----------------------
1122(d)(4)(v) The Servicer's records regarding the mortgage loans agree with the
Servicer's records with respect to an obligor's unpaid principal
balance.
-------------------- ----------------------
1122(d)(4)(vi) Changes with respect to the terms or status of an obligor's
mortgage loans (e.g., loan modifications or re-agings) are made,
reviewed and approved by authorized personnel in accordance with
the transaction agreements and related pool asset documents.
-------------------- ----------------------
1122(d)(4)(vii) Loss mitigation or recovery actions (e.g., forbearance plans,
modifications and deeds in lieu of foreclosure, foreclosures and
repossessions, as applicable) are initiated, conducted and
concluded in accordance with the timeframes or other requirements
established by the transaction agreements.
-------------------- ----------------------
1122(d)(4)(viii) Records documenting collection efforts are maintained during the
period a mortgage loan is delinquent in accordance with the
transaction agreements. Such records are maintained on at least a
monthly basis, or such other period specified in the transaction
agreements, and describe the entity's activities in monitoring
delinquent mortgage loans including, for example, phone calls,
letters and payment rescheduling plans in cases where delinquency
is deemed temporary (e.g., illness or unemployment).
-------------------- ----------------------
1122(d)(4)(ix) Adjustments to interest rates or rates of return for mortgage loans
with variable rates are computed based on the related mortgage loan
documents.
-------------------- ----------------------
1122(d)(4)(x) Regarding any funds held in trust for an obligor (such as escrow
accounts): (A) such funds are analyzed, in accordance with the
obligor's mortgage loan documents, on at least an annual basis, or
such other period specified in the transaction agreements; (B)
interest on such funds is paid, or credited, to obligors in
accordance with applicable mortgage loan documents and state laws;
and (C) such funds are returned to the obligor within 30 calendar
days of full repayment of the related mortgage loans, or such other
number of days specified in the transaction agreements.
-------------------- ----------------------
G-3
------------------------------------------------------------------------------------------ ----------------------
Applicable Servicing
Servicing Criteria Criteria
------------------------------------------------------------------------------------------ ----------------------
Reference Criteria
-------------------- --------------------------------------------------------------------- ----------------------
1122(d)(4)(xi) Payments made on behalf of an obligor (such as tax or insurance
payments) are made on or before the related penalty or expiration
dates, as indicated on the appropriate bills or notices for such
payments, provided that such support has been received by the
servicer at least 30 calendar days prior to these dates, or such
other number of days specified in the transaction agreements.
-------------------- ----------------------
1122(d)(4)(xii) Any late payment penalties in connection with any payment to be
made on behalf of an obligor are paid from the servicer's funds and
not charged to the obligor, unless the late payment was due to the
obligor's error or omission.
-------------------- ----------------------
Disbursements made on behalf of an obligor are posted within two
business days to the obligor's records maintained by the servicer,
or such other number of days specified in the transaction
1122(d)(4)(xiii) agreements.
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1122(d)(4)(xiv) Delinquencies, charge-offs and uncollectible accounts are
recognized and recorded in accordance with the transaction
agreements.
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Any external enhancement or other support, identified in Item
1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained
1122(d)(4)(xv) as set forth in the transaction agreements.
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[NAME OF MASTER SERVICER] [NAME OF
INDENTURE TRUSTEE] [NAME OF
SUBSERVICER]
Date:________________________________
By: ________________________________
Name:
Title:
G-4
EXHIBIT H
▇▇▇▇▇▇▇▇-▇▇▇▇▇ CERTIFICATION
(Replacement of Master Servicer)
H-1
EXHIBIT I
FORM OF RELIANCE CERTIFICATE
[on file with Indenture Trustee]
I-1
SALE AND SERVICING AGREEMENT ADOPTION ANNEX
The Original Note Principal Balance of the Notes is $1,850,000,000, the
Original Note Principal Balance of the Class 1-A Notes is $520,000,000, and
the Original Note Principal Balance of the Class 2-A Notes is $1,330,000,000.
The title of the Collection Account is "JPMorgan Chase Bank, N.A. as
Indenture Trustee, Collection Account in trust for the registered holders of
Revolving Home Equity Loan Asset Backed Notes, Series 2006-C."
The date on which the Master Servicer delivers the Officer's Certificate
in each year is March 15, and the first Officer's Certificate pursuant to
Section 3.09 of the Sale and Servicing Agreement is March 15, 2007.
The Sponsor Loss Coverage Amount is 1.00% of Original Note Principal
Balance.
SSA-1