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SALE AND SERVICING AGREEMENT
Dated as of December 1, 1997
among
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
LIFE BANK
(Servicer and Originator)
LIFE INVESTMENT HOLDINGS, INC.
(Transferor)
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Indenture Trustee)
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
HOME LOAN ASSET BACKED NOTES
SERIES 1997-3
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions
Section 1.02 Other Definitional Provisions
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans
Section 2.02 Ownership and Possession of Home Loan Files
Section 2.03 Books and Records
Section 2.04 Delivery of Home Loan Documents
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans; Certain
Substitutions; Certification by the
Custodian
Section 2.06 Subsequent Transfers
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor
Section 3.02 Representations and Warranties of the Transferor
Section 3.03 Representations, Warranties and Covenants of the Servicer
and the Originator
Section 3.04 Representations and Warranties Regarding Individual Home Loans
Section 3.05 Purchase and Substitution
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer
Section 4.02 Payment of Taxes, Insurance and Other Charges
Section 4.03 Fidelity Bond; Errors and Omissions Insurance
Section 4.04 Filing of Continuation Statements
Section 4.05 Superior Liens
Section 4.06 Subservicing
Section 4.07 Successor Servicers
Section 4.08 Maintenance of Insurance
Section 4.09 Reports to the Securities and Exchange Commission
Section 4.10 Foreclosure
Section 4.11 Title, Management and Disposition of Foreclosure Property
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Payment Account
Section 5.02 Certificate Distribution Account
Section 5.03 Trust Accounts; Trust Account Property
Section 5.04 Allocation of Losses
Section 5.05 Pre-Funding Account
Section 5.06 Capitalized Interest Account
ARTICLE VI
STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01 Statements
Section 6.02 Withholding
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance
Section 7.02 Release of Home Loan Files
Section 7.03 Servicing Compensation
Section 7.04 Statement as to Compliance and Financial Statements
Section 7.05 Independent Public Accountants' Servicing Report
Section 7.06 Right to Examine Servicer Records
Section 7.07 Reports to the Indenture Trustee; Collection Account Statements
Section 7.08 Financial Statements
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims
Section 9.02 Merger or Consolidation of the Servicer
Section 9.03 Limitation on Liability of the Servicer and Others
Section 9.04 Servicer Not to Resign; Assignment
Section 9.05 Relationship of Servicer to the Issuer and the Indenture
Trustee
Section 9.06 Servicer May Own Securities
ARTICLE X
DEFAULT
Section 10.01 Events of Default
Section 10.02 Indenture Trustee to Act; Appointment of Successor
Section 10.03 Waiver of Defaults
Section 10.04 Accounting Upon Termination of Servicer
ARTICLE XI
TERMINATION
Section 11.01 Termination
Section 11.02 Optional Termination
Section 11.03 Notice of Termination
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders
Section 12.02 Amendment
Section 12.03 Recordation of Agreement
Section 12.04 Duration of Agreement
Section 12.05 Governing Law
Section 12.06 Notices
Section 12.07 Severability of Provisions
Section 12.08 No Partnership
Section 12.09 Counterparts
Section 12.10 Successors and Assigns
Section 12.11 Headings
Section 12.12 Actions of Securityholders
Section 12.13 Reports to Rating Agencies
Section 12.14 Holders of the Residual Interest Certificates
EXHIBIT A - Home Loan Schedule
EXHIBIT B - Reserved
EXHIBIT C - Form of Subsequent Transfer Agreement
EXHIBIT D - Collection Account Certification
This Sale and Servicing Agreement is entered into effective as of December
1, 1997, among LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3, a Delaware business
trust (the "Issuer" or the "Owner Trust"), PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, a Delaware corporation, as Depositor (the "Depositor"), LIFE
INVESTMENT HOLDINGS, INC., a Delaware corporation, as Transferor (the
"Transferor") and LIFE BANK, a federally chartered stock savings bank ("Life"),
as Servicer and Originator (the "Servicer" or the "Originator") and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as Indenture
Trustee on behalf of the Noteholders (in such capacity, the "Indenture
Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the Issuer, the
Depositor, Transferor, the Servicer and the Indenture Trustee hereby agree as
follows for the benefit of each of them and for the benefit of the holders of
the Notes issued under the Indenture and the Residual Interest Certificates
issued hereunder:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months, except that with respect to the Class A-1 Notes, calculations of accrued
interest shall be made on the basis of a 360-day year and the actual number of
days elapsed in each Accrual Period.
Accepted Servicing Procedures: Servicing procedures that meet at least the
same standards the Servicer would follow in servicing mortgage loans such as the
Home Loans held for its own account, giving due consideration to standards of
practice of prudent mortgage lenders and loan servicers that originate and
service mortgage loans comparable to the Home Loans and the reliance placed by
the Securityholders on the Servicer for the servicing of the Home Loans but
without regard to:
(i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the related
Obligor;
(ii) the ownership of any Notes or the Residual Interest
Certificates by the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder with respect to any particular
transaction.
Accrual Period: With respect to the Class A-1 Notes, the period beginning
on the Payment Date in the calendar month preceding the month in which the
related Payment Date occurs (or, in the case of the first Payment Date, December
16, 1997) and ending on the day preceding the related Payment Date. With respect
to the other Classes of Notes, the calendar month preceding the month in which
the related Payment Date occurs.
Addition Notice: For any date during the Pre-Funding Period, a notice
(which shall be in writing) given to the Rating Agencies, the Indenture Trustee
and the Owner Trustee pursuant to Section 2.06 hereof.
Adjustable Rate Loan: Each Home Loan identified on the Home Loan Schedule
as having an adjustable Home Loan Interest Rate.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, the term "control", when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have corresponding meanings.
Agreement: This Sale and Servicing Agreement and all amendments hereof and
supplements hereto.
Allocable Loss Amount: With respect to each Payment Date, the excess, if
any, of (a) the aggregate of the Class Principal Balances of all Classes of
Notes (after giving effect to all distributions on such Payment Date) over (b)
the sum of the Pool Principal Balance and the Pre-Funding Amount, each as of the
end of the preceding Due Period.
Allocable Loss Amount Priority: With respect to any Payment Date,
sequentially, to Class B Notes, the Class M-2 Notes and the Class M-1 Notes, in
that order.
Appraised Value: The appraised value of any Mortgaged Property, based upon
the appraisal made at the time the related Home Loan is originated.
Assignment of Mortgage: With respect to each Home Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect or record the sale of the related Home Loan which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering Mortgages secured by Mortgaged Properties located
in the same county, if permitted by law.
Available Collection Amount: With respect to any Payment Date, an amount
without duplication equal to the sum of: (i) all amounts received on the Home
Loans or required to be paid by the Servicer, Life or the Transferor during the
related Due Period (exclusive of amounts not required to be deposited by the
Servicer in the Collection Account pursuant to Section 5.01(b)(1) hereof and
amounts permitted to be withdrawn by the Indenture Trustee from the Collection
Account pursuant to Section 5.01(b)(3) hereof) as reduced by any portion thereof
that may not be withdrawn therefrom pursuant to an order of a United States
bankruptcy court of competent jurisdiction imposing a stay pursuant to ▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code; (ii) any and all income or gain from
investments in the Collection Account (including, with respect to the first
Payment Date, the Required Interest Deposit), Note Payment Account and
Certificate Distribution Account; (iii) upon exercise of optional termination of
the Notes pursuant to Section 11.02 hereof, the Termination Price; (iv) the
Purchase Price paid for any Home Loans required to be purchased pursuant to
Section 3.05 hereof prior to the related Determination Date and the Substitution
Adjustment to be deposited in the Collection Account in connection with any
substitution, in each case prior to the related Determination Date; and (v) the
Capitalized Interest Requirement, if any, with respect to such Payment Date.
Available Payment Amount: With respect to any Payment Date, the Available
Collection Amount minus the amount required to be paid from the Note Payment
Account pursuant to Section 5.01(c)(i), plus on the Payment Date relating to the
Due Period in which the termination of the Pre-Funding Period shall have
occurred, the amount on deposit in the Pre-Funding Account at such time net of
any Pre-Funding Earnings.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions in The City of New York or in the city in which the
corporate trust office of the Indenture Trustee is located or the city in which
the Servicer's servicing operations are located and are authorized or obligated
by law or executive order to be closed.
Capitalized Interest Account: The account designated as such, established
and maintained pursuant to Section 5.06 hereof.
Capitalized Interest Initial Deposit: $1,045,601.65.
Capitalized Interest Requirement: With respect to the Payment Date in
January 1998, (i) the product of (a) the Pre-Funding Amount on the Closing Date
and (b) one-twelfth and (c) the weighted average of the applicable Note Interest
Rates for the Notes (assuming that the Class A-1 Notes bear interest at 6.18%
per annum), minus (ii) in the case of any Subsequent Loan transferred to the
Owner Trust during the related Due Period, the amount of any interest collected
after the Cut-Off Date applicable to such Subsequent Loan and during such
related Due Period.
With respect to the Payment Date in February 1998, (i) the product of (a)
the Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 6.18% per
annum), minus (ii) in the case of any Subsequent Loan transferred to the Owner
Trust during the related Due Period, the amount of any interest collected after
the Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Payment Date in March 1998, (i) the product of (a) the
Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 6.18% per
annum) ,minus (iii) in the case of any Subsequent Loan transferred to the Owner
Trust during the related Due Period, the amount of any interest collected after
the Cut-Off Date applicable to such Subsequent Loan and during such related Due
Period.
With respect to the Payment Date in April 1998, (i) the product of (a) the
Pre-Funding Amount on the first day of the related Due Period and (b)
one-twelfth and (c) the weighted average of the applicable Note Interest Rates
for the Notes (assuming that the Class A-1 Notes bear interest at 6.18% per
annum), minus (ii) any Pre-Funding Earnings for the related Due Period and minus
(iii) in the case of any Subsequent Loan transferred to the Owner Trust during
the related Due Period, the amount of any interest collected after the Cut-Off
Date applicable to such Subsequent Loan and during such related Due Period.
Capitalized Interest Subsequent Deposit: As defined in Section
2.06(b)(vii)(B)(IV).
Certificate Distribution Account: The account designated as such,
established and maintained pursuant to Section 5.02 hereof.
Certificate Register: The register established pursuant to Section 3.4 of
the Owner Trust Agreement.
Certificateholder: A holder of a Residual Interest Certificate.
Class: With respect to the Notes, all Notes bearing the same class
designation.
Class A Notes: Collectively the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes.
Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class M-1
Note, Class M-2 Note and Class B Note: The respective meanings assigned thereto
in the Indenture.
Class B Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; and with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes and the Mezzanine Notes
(after taking into account any distributions made on such Payment Date in
reduction of the Class Principal Balances of the Classes of Class A Notes and
Mezzanine Notes) and (ii) the Overcollateralization Target Amount for such
Payment Date; provided, however, that such amount shall never be less than zero
or greater than the Original Class Principal Balance of the Class B Notes.
Class Factor: With respect to each Class and any date of determination, the
then applicable Class Principal Balance of such Class divided by the Original
Class Principal Balance thereof.
Class M-1 Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; and with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes (after taking into
account distributions made on such Payment Date in reduction of the Class
Principal Balances of the Classes of Class A Notes) and (ii) the greater of (x)
the sum of (1) 33.00% of the Pool Principal Balance as of the related
Determination Date and (2) the Overcollateralization Target Amount for such
Payment Date (calculated without giving effect to the proviso in the definition
thereof) and (y) 0.50% of the Maximum Collateral Amount; provided, however, that
such amount shall never be less than zero or greater than the Original Class
Principal Balance of the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any Payment Date prior
to the Stepdown Date, zero; with respect to any other Payment Date, the Pool
Principal Balance as of the related Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Class A Notes (after taking into
account any distributions made on such Payment Date in reduction of the Class
Principal Balances of the Classes of Class A Notes) plus the Class Principal
Balance of the Class M-1 Notes (after taking into account any distributions made
on such Payment Date in reduction of the Class Principal Balance of the Class
M-1 Notes) and (ii) the greater of (x) the sum of (1) 15.00% of the Pool
Principal Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Payment Date (without giving effect
to the proviso in the definition thereof) and (y) 0.50% of the Maximum
Collateral Amount; provided, however, that such amount shall never be less than
zero or greater than the Original Class Principal Balance of the Class M-2
Notes.
Class Principal Balance: With respect to each Class, and as of any date of
determination, the Original Class Principal Balance of such Class reduced by the
sum of (i) all amounts previously distributed in respect of principal of such
Class on all previous Payment Dates and (ii) with respect to the Class M-1,
Class M-2 and Class B Notes, all Allocable Loss Amounts applied in reduction of
principal of such Classes on all previous Payment Dates.
Clean-up Call Date: The first Payment Date on which the Pool Principal
Balance declines to 10% or less of the Maximum Collateral Amount.
Closing Date: December 16, 1997.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
Treasury Regulations promulgated thereunder.
Collection Account: The account designated as such, established and
maintained by the Servicer in accordance with Section 5.01 hereof.
Combination Loan: A loan, the proceeds of which were used by the Obligor in
combination to finance property improvements and for debt consolidation or other
purposes.
Combined Loan-to-Value Ratio: With respect to any Home Loan, the fraction,
expressed as a percentage, the numerator of which is the principal balance of
such Home Loan at origination plus, in the case of a junior lien Home Loan, the
aggregate outstanding principal balance of each related Superior Lien on the
date of origination of such Home Loan, and the denominator of which is the
stated value of the related Mortgaged Property at the time of origination of
such Home Loan.
Credit Score: The credit evaluation scoring methodology developed by Fair,
▇▇▇▇▇ and Company.
Custodial Agreement: The custodial agreement dated as of December 1, 1997
by and among the Issuer, the Depositor, the Transferor, the Servicer, the
Indenture Trustee and Norwest Bank Minnesota, National Association, a national
banking association, as the Custodian, providing for the retention of the
Indenture Trustee's Home Loan Files by the Custodian on behalf of the Indenture
Trustee.
Custodian: Any custodian appointed by the Indenture Trustee pursuant to the
Custodial Agreement, which custodian shall not be affiliated with the Servicer,
the Transferor, any Subservicer or the Depositor. Norwest Bank Minnesota
National Association, shall be the initial Custodian pursuant to the terms of
the Custodial Agreement.
Custodian's Final Certification: As defined in Section 2.05(c).
Custodian's Initial Certification: As defined in Section 2.05(a).
Custodian's Updated Certification: As defined in Section 2.05(c).
Cut-Off Date: With respect to the Initial Loans, the close of business on
November 30, 1997 (or the date of origination for those Initial Loans originated
after November 30, 1997), and, with respect to any Subsequent Loan, the date
designated as such in the related Subsequent Transfer Agreement.
Debt Consolidation Loan: A loan, the proceeds of which were primarily used
by the related Obligor for debt consolidation purposes or purposes other than to
finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any Home
Loan, including, without limitation, any Liquidated Home Loan with respect to
which any of the following has occurred as of the end of the preceding Due
Period: (a) foreclosure or similar proceedings have been commenced; (b) any
portion of a Monthly Payment becomes 180 days past due by the related Obligor;
or (c) the Servicer or any Subservicer has determined in good faith and in
accordance with customary servicing practices that such Home Loan is in default
or imminent default.
Defective Home Loan: As defined in Section 3.05 hereof.
Deleted Home Loan: A Home Loan replaced or to be replaced by one or more
than one Qualified Substitute Home Loan.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due thereon
is not made by the close of business on the day such Monthly Payment is
scheduled to be paid. A Home Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such Monthly Payment was
due or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was due on the 31st day of such
month), then on the last day of such immediately succeeding month. The
determination of whether a Home Loan is "60 days Delinquent," "90 days
Delinquent", etc. shall be made in like manner.
Delivery: When used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
the Indenture Trustee or its nominee or custodian by physical delivery
to the Indenture Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC), transfer thereof (i)
by delivery of such certificated security endorsed to, or registered in
the name of, the Indenture Trustee or its nominee or custodian or
endorsed in blank to a financial intermediary (as defined in Section
8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated
securities as belonging to the Indenture Trustee or its nominee or
custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of the
transferor and increasing the appropriate securities account of a
financial intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in Section
8-102(4) of the UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its
nominee or custodian of such securities and the making by such
financial intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or
its nominee or custodian (all of the foregoing, "Physical Property")
and, in any event, any such Physical Property in registered form shall
be in the name of the Indenture Trustee or its nominee or custodian;
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Trust Account Property (as defined herein) to the Indenture Trustee or
its nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, FNMA or FHLMC that is a book-entry security held through the
Federal Reserve System pursuant to federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC: the
making by a Federal Reserve Bank of an appropriate entry crediting such
Trust Account property to an account of a financial intermediary that
is also a "participant" pursuant to applicable federal regulations; the
making by such financial intermediary of entries in its books and
records crediting such book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations to the
securities account of the Indenture Trustee or its nominee or custodian
and indicating that such custodian holds such Trust Account Property
solely as agent for the Indenture Trustee or its nominee or custodian
and the sending by such financial intermediary of confirmation of the
purchase by the Indenture Trustee or its nominee or custodian of such
book-entry security; and such additional or alternative procedures as
may hereafter become appropriate to effect complete transfer of
ownership of any such Trust Account Property to the Indenture Trustee
or its nominee or custodian, consistent with changes in applicable law
or regulations or the interpretation thereof including, without
limitation, Article 8 of the UCC; and
(c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Indenture Trustee or its nominee or custodian of such
uncertificated security, and the making by such financial intermediary
of entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or
custodian.
Denomination: With respect to a Note, the portion of the Original Class
Principal Balance represented by such Note as specified on the face thereof.
Depositor: PaineWebber Mortgage Acceptance Corporation IV, a Delaware
corporation, and any successor thereto.
Determination Date: With respect to any Payment Date, the 14th calendar day
of the month in which such Payment Date occurs or if such day is not a Business
Day, the immediately preceding Business Day.
Due Date: The day of the month on which the Monthly Payment is due from the
Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Payment Date, the
calendar month immediately preceding such Determination Date or Payment Date, as
the case may be.
Eligible Account: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories or (B) the short-term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account the deposits in which are fully
insured by either the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC; (iii) a trust account (which shall be a "segregated trust
account") maintained with the corporate trust department of a federal or state
chartered depository institution or trust company with trust powers and acting
in its fiduciary capacity for the benefit of the Indenture Trustee and the
Issuer, which depository institution or trust company shall have capital and
surplus of not less than $50,000,000; or (iv) an account that will not cause any
Rating Agency to downgrade or withdraw its then-current rating(s) assigned to
the Notes, as evidenced in writing by such Rating Agency. (Each reference in
this definition of "Eligible Account" to the Rating Agency shall be construed as
a reference to Moody's and Fitch).
Eligible Servicer: A Person that (i) has demonstrated the ability
professionally and competently to service a portfolio of mortgage loans similar
to the Home Loans and (ii) has a net worth calculated in accordance with GAAP of
at least $500,000.
Event of Default: As described in Section 10.01 hereof.
Excess Spread: With respect to any Payment Date, the excess of (a) the
Available Payment Amount over (b) the Regular Payment Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Fidelity Bond: As described in Section 4.03 hereof.
Fitch: Fitch IBCA, Inc. or any successor thereto.
Fixed Rate Loan: Each Home Loan identified on the Home Loan Schedule as
bearing a fixed Home Loan Interest Rate.
FNMA: The Federal National Mortgage Association and any successor thereto.
Foreclosed Loan: As of any date of determination, any Home Loan that has
been discharged as a result of (i) the completion of foreclosure or comparable
proceedings; (ii) the Owner Trustee's acceptance of the deed or other evidence
of title to the related Property in lieu of foreclosure or other comparable
proceeding; or (iii) the acquisition by the Owner Trustee of title to the
related Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that has
been acquired by the Servicer through foreclosure, deed in lieu of foreclosure
or similar proceedings in respect of the related Home Loan.
GAAP: Generally accepted accounting principles as in effect in the United
States.
Gross Margin: As to each Adjustable Rate Loan, the fixed percentage set
forth in the related Debt Instrument and indicated in the Home Loan Schedule as
the "Gross Margin," which percentage is added to the Index on each Interest
Adjustment Date to determine (subject to rounding, any applicable statutory
maximum interest rate, the Periodic Rate Caps, the Lifetime Floor and the
Lifetime Cap) the Mortgage Interest Rate on such Loan until the next Interest
Adjustment Date.
Home Loan: Any Debt Consolidation Loan or Combination Loan that is included
in the Home Loan Pool. As applicable, a Home Loan shall be deemed to refer to
the related Debt Instrument, the Mortgage, if any, and any related Foreclosure
Property. The term "Home Loan" includes each Subsequent Loan.
Home Loan File: As to each Home Loan, the Indenture Trustee's Home Loan
File and the Servicer's Home Loan File.
Home Loan Interest Rate: With respect to each Fixed Rate Loan, the fixed
annual rate of interest borne by a Debt Instrument, as shown on the related Home
Loan Schedule as the same may be modified by the Servicer in accordance with
Section 4.01(c). With respect to each Adjustable Rate Loan, subject to
applicable Periodic Rate Cap, the Lifetime Cap and the Lifetime Floor, the
related Index plus the applicable Gross Margin, as shown by the related Home
Loan Schedule as the same may be modified by the Servicer in accordance with
Section 4.01(c).
Home Loan Pool: The pool of Home Loans conveyed to the Issuer pursuant to
this Agreement on the Closing Date and pursuant to the Subsequent Transfer
Agreements on the Subsequent Transfer Dates, together with the rights and
obligations of a holder thereof, and the payments thereon and proceeds therefrom
received after the applicable Cut-Off Date, as identified on the Home Loan
Schedule annexed hereto as Exhibit A.
Home Loan Purchase Agreement: The home loan purchase agreement among Life,
the Transferor and the Depositor, dated as of December 1, 1997.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit A
attached hereto and provided to the Indenture Trustee in computer readable form
in a format acceptable to the Indenture Trustee, as amended or supplemented from
time to time specifying, with respect to each Home Loan, the following
information: (i) the Originator's Home Loan number; (ii) the Obligor's name and
the street address; (iii) the current principal balance; (iv) the original
principal amount with respect to any Home Loan originated by the Originator and
the principal amount purchased by the Originator with respect to a Home Loan
acquired by the Originator subsequent to its origination; (v) the combined
loan-to-value ratio as of the date of the origination of the related Home Loan;
(vi) the paid through date; (vii) the Home Loan Interest Rate; (viii) the final
maturity date under the Debt Instrument; (ix) the Monthly Payment; (x) the
occupancy status of the Mortgaged Property, if any; (xi) the lien priority of
the Mortgage, if any; (xii) the original term of the Debt Instrument; (xiii) the
Credit Score, if applicable; and (xiv) whether an Adjustable Rate Loan or a
Fixed Rate Loan, and if an Adjustable Rate Loan, the Gross Margin, the Lifetime
Cap and Lifetime Floor.
Indenture: The Indenture, dated as of December 1, 1997, between the Issuer
and the Indenture Trustee.
Indenture Trustee: Norwest Bank Minnesota, National Association, a national
banking association, as Indenture Trustee under the Indenture and this Agreement
acting on behalf of the Noteholders, or any successor indenture trustee under
the Indenture or this Agreement.
Indenture Trustee Fee: As to any Payment Date one-twelfth of 0.02% times
the Pool Principal Balance as of the opening of business on the first day of the
calendar month preceding the calendar month of such Payment Date (or, with
respect to the first Payment Date, the Original Pool Principal Balance).
Indenture Trustee's Home Loan Files: As defined in Section 2.04(a).
Independent: When used with respect to any specified Person, such Person
(i) is in fact independent of the Transferor, the Servicer, the Depositor or any
of their respective Affiliates, (ii) does not have any direct financial interest
in, or any material indirect financial interest in, any of the Transferor, the
Servicer, the Depositor or any of their respective Affiliates and (iii) is not
connected with any of the Transferor, the Servicer, the Depositor or any of
their respective Affiliates, as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions; provided,
however, that a Person shall not fail to be Independent of the Transferor, the
Servicer, the Depositor or any of their respective Affiliates merely because
such Person is the beneficial owner of 1% or less of any class of securities
issued by the Transferor, the Servicer, the Depositor or any of their respective
Affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified public
accountants which is Independent.
Index: The LIBOR Index.
Initial Loan: Each Home Loan conveyed to the Issuer pursuant to this
Agreement on the Closing Date.
Insurance Policies: With respect to any Property, any related insurance
policy.
Insurance Proceeds: With respect to any Property, all amounts collected in
respect of Insurance Policies and not required to be applied to the restoration
of the related Property or paid to the related Obligor.
Interest Adjustment Date: With respect to any Adjustable Rate Loan, the
date on which the Home Loan Interest Rate is or may be adjusted with respect to
such Home Loan.
LIBOR: With respect to each Accrual Period (other than the initial Accrual
Period) and each Class of LIBOR Notes, the rate for United States dollar
deposits for one month that appears on the Telerate Screen Page 3750 as of 11:00
a.m., London time, on the related LIBOR Determination Date. If such rate does
not appear on such page (or such other page as may replace that page on that
service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Indenture Trustee), LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Indenture
Trustee and no Reference Bank Rate is available, LIBOR will be LIBOR applicable
to the preceding Accrual Period. LIBOR for the initial Accrual Period will be
6.00%.
LIBOR Business Day: Any day on which banks are open for dealing in foreign
currency and exchange in London and New York City.
LIBOR Determination Date: With respect to each Accrual Period, the second
LIBOR Business Day before the first day of such Accrual Period, as determined by
the Indenture Trustee.
LIBOR Index: The London Interbank Offered Rate for six month U.S. dollar
deposits either as announced by the Federal National Mortgage Association and
available as of the date 45 days before each Interest Adjustment Date or as
published in the Wall Street Journal generally on a day of the month preceding
the month of the Interest Adjustment Date.
LIBOR Notes: The Class A-1 Notes.
Life: Life Bank, a federally chartered stock savings bank.
Lifetime Cap: As to any Adjustable Rate Loan, the maximum Home Loan
Interest Rate set forth in the related Debt Instrument and indicated in the Home
Loan Schedule.
Lifetime Floor: As to any Adjustable Rate Loan, the minimum Home Loan
Interest Rate set forth in the related Debt Instrument and indicated in the Home
Loan Schedule.
Liquidated Home Loan: With respect to any date of determination, any
Foreclosure Property or any Home Loan in respect of which a Monthly Payment is
in excess of 30 days past due and as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to collect have been
recovered from or on account of such Home Loan or the related Foreclosure
Property; provided, however, that in any event such Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore be a Liquidated
Home Loan upon the earliest to occur of: (a) the liquidation of the related
Foreclosure Property, (b) the determination by the Servicer in accordance with
customary servicing practices that no further amounts are collectible from the
Home Loan and any related Mortgaged Property, or (c) the date on which any
portion of a Monthly Payment on any Home Loan is in excess of 180 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition, any
cash amounts received in connection with the management of the Mortgaged
Properties from Defaulted Home Loans and any other amounts required to be
deposited in the Collection Account pursuant to Section 5.01(b) hereof, in each
case other than Insurance Proceeds and Released Mortgaged Property Proceeds.
Loss Reimbursement Deficiency: With respect to any Payment Date and the
Class M-1 Notes, Class M-2 Notes or the Class B Notes, the amount of Allocable
Loss Amounts applied to the reduction of the Class Principal Balance of such
Class and not reimbursed pursuant to Section 5.01 hereof as of such Payment Date
plus interest accrued on the unreimbursed portion thereof at the applicable Note
Interest Rate through the end of the Due Period immediately preceding such
Payment Date; provided, however, that no interest shall accrue on any amount of
such accrued and unpaid interest.
Majority Noteholders: Until such time as the sum of the Class Principal
Balances of all Classes of Notes has been reduced to zero, the holder or holders
of in excess of 50% of the Class Principal Balance of all Classes of Notes.
Majority Residual Interestholders: The holder or holders of in excess of
50% of the Residual Interest.
Mandatory Redemption Date: The Payment Date immediately following the end
of the Pre-Funding Period.
Maturity Date means, with respect to each Class of Notes, the applicable
maturity date set forth below:
Class Maturity Date
----- -------------
A-1 January 2009
A-2 September 2011
A-3 February 2014
A-4 April 2024
M-1 April 2024
M-2 April 2024
B April 2024
Maximum Collateral Amount: The sum of the Original Pool Balance and the
Original Pre-Funding Amount.
Mezzanine Noteholders' Interest Carry-Forward Amount: With respect to any
Payment Date, the excess, if any, of (A) the Mezzanine Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Mezzanine Noteholders' Interest Carry-Forward Amount for preceding Payment
Dates, over (B) the amount in respect of interest that is actually deposited in
the Note Payment Account on such preceding Payment Date net of the Senior
Noteholders' Interest Payment Amount for such preceding Payment Date; it being
understood that the interest of the Class M-1 Noteholders in the Mezzanine
Noteholders' Interest Carry-Forward Amount is senior to that of the Class M-2
Noteholders.
Mezzanine Noteholders' Interest Payment Amount: With respect to any Payment
Date, the sum of the Mezzanine Noteholders' Monthly Interest Payment Amount for
such Payment Date and the Mezzanine Noteholders' Interest Carry-Forward Amount
for such Payment Date.
Mezzanine Noteholders' Monthly Interest Payment Amount: With respect to
each Payment Date and the Classes of Mezzanine Notes, the interest accrued at
the respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Payment Date (or, in the case of the
first Payment Date, on the Closing Date) after giving effect to all payments of
principal to the holders of such Classes of Notes on or prior to such preceding
Payment Date.
Mezzanine Notes: The Class M-1 Notes and Class M-2 Notes.
Monthly Cut-Off Date: The last day of any calendar month and, with respect
to any Payment Date, the last day of the calendar month immediately preceding
such Payment Date.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by an Obligor on the related Home Loan, as set forth in the
related Debt Instrument.
Moody's: ▇▇▇▇▇'▇ Investors Service, or any successor thereto.
Mortgage: The mortgage, deed of trust or other security instrument creating
a lien in accordance with applicable law on a Mortgaged Property to secure the
Debt Instrument which evidences a secured Home Loan.
Mortgage Loan: As of any date of determination, each of the Home Loans,
secured by an interest in a Property, transferred and assigned to the Indenture
Trustee pursuant to Section 2.01(a) hereof.
Mortgaged Property: The real property encumbered by the Mortgage which
secures the Debt Instrument evidencing a secured Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
securing a Home Loan is located as set forth in the Home Loan Schedule.
Multiplier: The Multiplier will initially equal 2.5 and may from time to
time be permanently modified to a lesser amount (including zero) in the event
that the Issuer shall have delivered to the Indenture Trustee written
confirmation from each Rating Agency that the rating assigned by it to each
Class of Notes which it originally rated will not be downgraded or withdrawn as
a result of such reduction.
Net Delinquency Calculation Amount: With respect to any Payment Date, the
excess, if any, of (x) the product of the Multiplier and the Six-Month Rolling
Delinquency Average over (y) the aggregate of the amounts of Excess Spread for
the three preceding Payment Dates.
Net Liquidation Proceeds: With respect to any Payment Date, Liquidation
Proceeds received during the related Due Period, net of any reimbursements to
the Servicer made from such amounts for any unreimbursed Servicing Compensation
and Servicing Advances (including Nonrecoverable Servicing Advances) made and
any other fees and expenses paid in connection with the foreclosure,
conservation and liquidation of the related Liquidated Home Loans or Foreclosure
Properties pursuant to Section 4.11 hereof.
Net Loan Losses: With respect to any Defaulted Home Loan that is subject to
a modification pursuant to Section 4.01(c) hereof, an amount equal to the
portion of the Principal Balance, if any, released in connection with such
modification.
Net Loan Rate: With respect to each Home Loan, the related Home Loan
Interest Rate, less the rate at which the Servicing Fee is calculated.
Net Weighted Average Rate: With respect to any Accrual Period, a rate per
annum equal to the weighted average (by principal balance) of the Home Loan
Interest Rates as of the first day of the related Due Period less 1.02%.
Nonrecoverable Servicing Advance: With respect to any Foreclosure Property,
(a) any Servicing Advance previously made and not reimbursed from late
collections, Liquidation Proceeds, Insurance Proceeds or the Released Mortgaged
Property Proceeds or (b) a Servicing Advance proposed to be made in respect of a
Home Loan or Foreclosure Property either of which, in the good faith business
judgment of the Servicer, as evidenced by an Officer's Certificate delivered to
the Indenture Trustee, would not be ultimately recoverable.
Note: Any of the Senior Notes, the Mezzanine Notes or the Subordinate
Notes.
Note Interest Rate: With respect to each Class of Notes, the annual rate of
interest payable to the holders of such Class of Notes, as specified below:
Class Note Interest Rate
----- ------------------
Class A-1 (1)
Class A-2 6.79%
Class A-3 7.12%
Class A-4 7.54% through the last day of the month
immediately preceding the Clean-up Call
Date and 8.04% thereafter;
Class M-1 7.76% through the last day of the month
immediately preceding the Clean-up Call
Date and 8.36% thereafter;
Class M-2 7.96% through the last day of the month
immediately preceding the Clean-up Call
Date and 8.46% thereafter;
Class B 9.09% through the last day of the month
immediately preceding the Clean-up Call
Date and 9.59% thereafter;
(1) Interest will accrue on the Class A-1 Notes during each
Accrual Period at a per annum interest rate equal to
LIBOR for the related LIBOR Determination Date plus
0.18%, subject to a maximum rate equal to the Net
Weighted Average Rate. The Note Interest Rate
applicable to the Class A-1 Notes for the initial
Accrual Period will be 6.18% per annum.
Note Payment Account: The account established and maintained pursuant to
Section 5.01(a)(2) hereof.
Note Redemption Amount: As of any date of determination, an amount without
duplication equal to the sum of (i) the then outstanding Class Principal
Balances of the Classes of Notes plus all accrued and unpaid interest thereon,
(ii) any Trust Fees and Expenses due and unpaid on such date and (iii) any
Servicing Advance Reimbursement Amount.
Noteholder: A holder of a Note.
Noteholders' Interest Payment Amount: The sum of the Senior Noteholders'
Interest Payment Amount, the Mezzanine Noteholders' Interest Payment Amount and
the Subordinate Noteholders' Interest Payment Amount.
Obligor: Each obligor on a Debt Instrument.
Officer's Certificate: A certificate delivered to the Indenture Trustee or
the Issuer signed by the President or a Vice President or an Assistant Vice
President of the Depositor, the Servicer or the Transferor, in each case, as
required by this Agreement.
Opinion of Counsel: A written opinion of counsel (who is acceptable to the
Rating Agencies), who may be employed by the Transferor, the Servicer, the
Depositor or any of their respective Affiliates.
Original Class Principal Balance: With respect to the Classes of Notes, as
follows: Class A-1: $80,000,000; Class A-2: $48,890,000; Class A-3: $27,570,000;
Class A-4: $24,790,000; Class M-1: $27,500,000; Class M-2: $22,500,000; and
Class B: $18,750,000.
Original Pool Principal Balance: $187,350,664, which is the Pool Principal
Balance as of the Cut-Off Date.
Original Pre-Funding Amount: $62,649,336.
Originator: Life Bank, a federally chartered stock savings bank.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Payment Date, the amount
equal to the excess of (A) the sum of the Pool Principal Balance and the
Pre-Funding Amount, each as of the end of the preceding Due Period, over (B) the
aggregate of the Class Principal Balances of the Notes (after giving effect to
the distributions made on such date pursuant to Section 5.01(d)) hereof.
Overcollateralization Deficiency Amount: With respect to any Payment Date,
the excess, if any, of the Overcollateralization Target Amount over the
Overcollateralization Amount (after giving effect to all prior distributions on
the Classes of Notes and to any prior distribution on the Residual Interest
Certificates on such Payment Date pursuant to Section 5.01(d) hereof).
Overcollateralization Target Amount: (I) With respect to any Payment Date
occurring prior to the Stepdown Date, an amount equal to the greater of (x)
6.25% of the Maximum Collateral Amount and (y) the Net Delinquency Calculation
Amount; and (II) with respect to any other Payment Date, an amount equal to the
greater of (x) 12.50% of the Pool Principal Balance as of the end of the related
Due Period and (y) the Net Delinquency Calculation Amount; provided, however,
that the Overcollateralization Target Amount shall in no event be less than
0.50% of the Maximum Collateral Amount or greater than the sum of the aggregate
Class Principal Balances of all Classes of Notes.
Owner Trust: The Issuer.
Owner Trust Agreement: The Trust Agreement dated as of December 1, 1997,
among the Depositor, the Company and the Owner Trustee.
Owner Trust Estate: The assets subject to this Agreement, the Owner Trust
Agreement and the Indenture and assigned to the Issuer, which assets consist of:
(i) such Home Loans as from time to time are subject to this Agreement as listed
in the Home Loan Schedule, as the same may be amended or supplemented from time
to time including by the addition of Subsequent Loans, the removal of Deleted
Home Loans and the addition of Qualified Substitute Home Loans, together with
the Servicer's Home Loan Files and the Indenture Trustee's Home Loan Files
relating thereto and all proceeds thereof, (ii) the Mortgages and security
interests in Mortgaged Properties, (iii) all payments in respect of interest due
with respect to the Home Loans on or after the Cut-Off Date and all payments in
respect of principal received after the Cut-Off Date and the Required Interest
Deposit, (iv) such assets as from time to time identified as Foreclosure
Property, (v) such assets and funds as are from time to time are deposited in
the Collection Account, the Note Distribution Account, the Certificate
Distribution Account, the Capitalized Interest Account and the Pre-Funding
Account, including amounts on deposit in such accounts which are invested in
Permitted Investments, (vi) the Issuer's rights under all insurance policies
with respect to the Home Loans and any Insurance Proceeds, (vii) Net Liquidation
Proceeds and Released Mortgaged Property Proceeds, and (viii) all right, title
and interest of the Depositor in and to the obligations of the Transferor under
the Home Loan Purchase Agreement pursuant to which the Depositor acquired the
Home Loans from the Transferor, and all proceeds of any of the foregoing.
Owner Trustee: Wilmington Trust Company, as owner trustee under the Owner
Trust Agreement, and any successor owner trustee under the Owner Trust
Agreement.
Owner Trustee Fee: The annual fee of $2,500 in equal monthly installments
to the Servicer which shall in turn pay such $2,500 to the Owner Trustee on the
Payment Date occurring in December each year during the term of this Agreement
commencing in December 1998; provided, however, that the initial Owner Trustee
Fee shall be paid by the Transferor on the Closing Date.
Ownership Interest: As to any Note, any ownership or security interest in
such Note, including any interest in such Note as the holder thereof and any
other interest therein, whether direct or indirect, legal or beneficial, as
owner or as pledgee.
Payment Date: The 25th day of any month or if such 25th day is not a
Business Day, the first Business Day immediately following such day, commencing
in January 1998.
Payment Statement: As defined in Section 6.01 hereof.
Percentage Interest: As defined in the Owner Trust Agreement.
Periodic Rate Cap: With respect to any Adjustable Rate Loan the periodic
rate cap set forth in the Debt Instrument related thereto.
Permitted Investments: Each of the following:
(1) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(2) a repurchase agreement that satisfies the following
criteria: (A) it must be between the Indenture Trustee and either (x)
primary dealers on the Federal Reserve reporting dealer list which are
rated in one of the two highest categories for long-term unsecured debt
obligations by each Rating Agency or (y) banks rated in the highest
categories for long-term unsecured debt obligations by each Rating
Agency; and (B) it must be in writing and include the following terms:
(a) the securities acceptable for transfer are either (i) direct U.S.
government obligations or (ii) obligations of a federal agency that are
backed by the full faith and credit of the U.S. government or by FNMA
or FHLMC; (b) a term no greater than 60 days for any repurchase
transaction; (c) the collateral must be delivered to the Indenture
Trustee or a third party custodian acting as agent for the Indenture
Trustee by appropriate book entries and confirmation statements, and
must have been delivered before or simultaneously with payment (i.e.,
perfection by possession of certificated securities); and (d) the
securities sold thereunder must be valued weekly, marked-to-market at
current market price plus accrued interest and the value of the
collateral must be equal to at least 104% of the amount of cash
transferred by the Indenture Trustee under the repurchase agreement
and, if the value of the securities held as collateral declines to an
amount below 104% of the cash transferred by the Indenture Trustee plus
accrued interest (i.e., a margin call), then additional cash and/or
acceptable securities must be transferred to the Indenture Trustee to
satisfy such margin call; provided, however, that if the securities
used as collateral are obligations of FNMA or FHLMC, then the value of
the securities held as collateral must equal at least 105% of the cash
transferred by the Indenture Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust
company incorporated under the laws of the United States or any state,
including the Indenture Trustee; provided, however, that the debt
obligations of such depository institution or trust company at the date
of the acquisition thereof have been rated by each Rating Agency in the
highest long-term rating categories;
(4) deposits, including deposits with the Indenture Trustee,
which are fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
Affiliates of the Indenture Trustee, which at the date of acquisition
is rated by each Rating Agency in its highest short-term rating
category and which has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time
at which the investment is made in its highest long-term rating
category (or those investments specified in (3) above with depository
institutions which have debt obligations rated by each Rating Agency in
the highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency
at the time at which the investment is made in its highest long-term
rating category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at
the time at which the investment is made;
provided, however, that no instrument described in the foregoing subparagraphs
shall evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to each of Moody's and Fitch.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, national banking
association, unincorporated organization or government or any agency or
political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period; provided, however, that the Pool Principal Balance on any Payment
Date on which the Termination Price is to be paid to Noteholders will be deemed
to have been equal to zero as of such date.
Pre-Funding Account: The account created and maintained by the Indenture
Trustee pursuant to Section 5.05 hereof.
Pre-Funding Amount: With respect to any date, the amount on deposit in the
Pre-Funding Account (net of any Pre-Funding Earnings).
Pre-Funding Earnings: With respect to the Payment Date in February 1998,
the actual investment earnings earned on amounts on deposit in the Pre-Funding
Account during the period from December 16, 1997 through and including January
31, 1998. With respect to the Payment Date in March 1998, the actual investment
earnings earned on amounts on deposit in the Pre-Funding Account from February
1, 1998 through and including February 28, 1997. With respect to the Payment
Date in April 1998, the actual investment earnings earned on amounts on deposit
in the Pre-Funding Account from March 1, 1998 through and including March 31,
1997.
Pre-Funding Payment Trigger: With respect to the Payment Date following the
Due Period in which the termination of the Pre-Funding Period occurs, a
Pre-Funding Payment Trigger will be deemed to have occurred if, at such time,
the Pre-Funding Amount is greater than or equal to $50,000.
Pre-Funding Period: The period commencing on the Closing Date and ending on
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any Pre-Funding Earnings) is less than
$50,000, (ii) the date on which any Event of Default relating to the Servicer
occurs and (iii) March 16, 1997.
Principal Balance: With respect to any Home Loan or related Foreclosure
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance of
the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as of
the last day of the preceding Due Period (after giving effect to all payments
received thereon and the allocation of any Net Loan Losses with respect thereto
for a Defaulted Home Loan which relates to such Due Period), without giving
effect to amounts received in respect of such Home Loan or related Foreclosure
Property after such Due Period; provided, however, that any Liquidated Home Loan
shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due Period, any
principal amount received on a Home Loan in excess of the principal of the
Monthly Payment due in such Due Period.
Property: The property (real, personal or mixed) encumbered by the Mortgage
which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus dated November 18, 1997 as
supplemented by the Prospectus Supplement dated December 10, 1997.
Prospectus Supplement: The Prospectus Supplement December 10, 1997 to be
prepared by the Depositor in connection with the issuance and sale of the Class
▇-▇, ▇▇▇▇▇ ▇-▇, Class A-3, Class A-4, Class M-1, Class M-2 and Class B Notes.
Purchase Price: With respect to a Defective Home Loan, the Principal
Balance thereof as of the date of purchase, plus all accrued and unpaid interest
on such Defective Home Loan to and including the date of repurchase computed at
the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Defective Home Loan
(after deducting therefrom any amounts received in respect of such repurchased
Defective Home Loan and being held in the Collection Account for future
distribution to the extent such amounts represent recoveries of principal not
yet applied to reduce the related Principal Balance or interest (net of the
Servicing Fee) for the period from and after the date of repurchase).
Qualified Substitute Home Loan: A home loan or home loans substituted for a
Deleted Home Loan pursuant to Section 2.05 or Section 3.05 hereof, which (i) is
or are Adjustable Rate Loans if the Deleted Home Loan is an Adjustable Rate Loan
or a Fixed Rate Loan if the Deleted Home Loan is a Fixed Rate Loan and, has or
have an interest rate or rates of not less than, and not more than two
percentage points greater than, the Home Loan Interest Rate for the Deleted Home
Loan, (ii) matures or mature not more than one year than, and not more than one
year earlier, than the maturity date of Deleted Home Loan, (iii) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance or Balances of the Deleted Home Loan or Loans as of such date,
(iv) has or have a lien priority equal or superior to that of the Deleted Home
Loan or Loans, (v) has or have a borrower or borrowers with a comparable credit
grade classification to the credit grade classification of the Obligor on the
Deleted Home Loan or Loans, including a Credit Score equal to or greater than
such Deleted Home Loan, (vi) has or have a borrower or borrowers with a
debt-to-income ratio no higher than the debt-to-income ratio of the Obligor with
respect to the Deleted Loan, and (vii) complies or comply as of the date of
substitution with each representation and warranty set forth in Section 3.04
hereof and is or are not more than 29 days delinquent as of the date of
substitution for such Deleted Home Loan or Loans. For purposes of determining
whether multiple mortgage loans proposed to be substituted for one or more
Deleted Home Loans pursuant to Section 2.05 or Section 3.05 hereof are in fact
"Qualified Substitute Home Loans" as provided above, the criteria specified in
clauses (i) and (iii) above may be considered on an aggregate or weighted
average basis, rather than on a loan-by-loan basis (i.e., so long as the
weighted average Home Loan Interest Rate of any loans proposed to be substituted
is not less than two percentage points less than and not more than two
percentage points greater than the Home Loan Interest Rate for the designated
Deleted Home Loan or Loans, the requirements of clause (i) above would be deemed
satisfied).
Rating Agencies: ▇▇▇▇▇'▇ and Fitch. If no such organization or successor is
any longer in existence, "Rating Agency" shall be a nationally recognized
statistical rating organization or other comparable person designated by the
Servicer, notice of which designation shall have been given to the Indenture
Trustee and the Issuer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Payment Date, the close of business on
the last Business Day of the month immediately preceding the month in which such
Payment Date occurs.
Reference Bank Rate: With respect to any Accrual Period, the arithmetic
mean (rounded upwards, if necessary, to the nearest one sixteenth of a percent)
of the offered rates for United States dollar deposits for one month that are
offered by the Reference Banks as of 11:00 a.m., New York City time, on the
second LIBOR Business Day prior to the first day of such Accrual Period to prime
banks in the London interbank market for a period of one month in amounts
approximately equal to the outstanding Class Principal Balance of the Class A-1
Notes, provided that at least two such Reference Banks provide such rate. If
fewer than two offered rates appear, the Reference Bank Rate will be arithmetic
mean of the rates quoted by one or more major banks in New York City, selected
by the Indenture Trustee, as of 11:00 a.m., New York City time, on such date for
loans in U.S. Dollars to leading European Banks for a period of one month in
amounts approximately equal to the outstanding Class Principal Balance of the
Class A-1 Notes. If no such quotation can be obtained, the Reference Bank Rate
will be the Reference Bank Rate applicable to the preceding Accrual Period.
Reference Banks: Three money center banks selected by the Indenture
Trustee.
Regular Payment Amount: With respect to any Payment Date, the lesser of (a)
the Available Payment Amount and (b) the sum of (i) the Noteholders' Interest
Payment Amount and (ii) the Regular Principal Payment Amount.
Regular Principal Payment Amount: On each Payment Date, an amount equal to
the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes
of Notes immediately prior to such Payment Date; and
(B) the sum of (i) each scheduled payment of principal
collected by the Servicer in the related Due Period, (ii) all full and
partial principal prepayments applied by the Servicer during such
related Due Period, (iii) the principal portion of all Net Liquidation
Proceeds, Insurance Proceeds and Released Mortgaged Property Proceeds
received during the related Due Period, (iv) that portion of the
Purchase Price of any repurchased Home Loan which represents principal
received prior to the related Determination Date, (v) the principal
portion of any Substitution Adjustments required to be deposited in the
Collection Account as of the related Determination Date, (vi) if such
Payment Date relates to the Due Period in which the Pre-Funding Period
shall have ended and at the termination of such Pre-Funding Period a
Pre-Funding Payment Trigger shall have occurred, the amount on deposit
in the Pre-Funding Account on such date, and (vii) on the Payment Date
on which the Issuer is to be terminated pursuant to Section 11.02
hereof, the Termination Price (net of any accrued and unpaid interest,
Trust Fees and Expenses due and unpaid on such date and Servicing
Advance Reimbursement Amount).
Released Mortgaged Property Proceeds: With respect to any secured Home
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which proceeds in either case are not released to the Obligor in accordance with
applicable law, Accepted Servicing Procedures and this Agreement.
Remittance Date: The 20th day of each month, or if such 20th day is not a
Business Day, the first Business Day immediately following such day, commencing
in January 1998.
Required Interest Deposit: $247,552.50 to be deposited into the Collection
Account on the Closing Date, which represents, with respect to each Home Loan
for which the first payment will occur after December 31, 1997, one month of
interest at the applicable Home Loan Interest Rate.
Residual Interest: The interest which represents the right to the amount
remaining, if any, after all prior distributions have been made under this
Agreement, the Indenture and the Owner Trust Agreement on each Payment Date and
certain other rights to receive amounts hereunder and under the Owner Trust
Agreement.
Residual Interest Certificate: The meaning assigned thereto in the Owner
Trust Agreement.
Responsible Officer: When used with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary, Assistant Secretary or
any other officer of the Indenture Trustee, customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Owner Trust Agreement and this
Agreement on behalf of the Issuer. When used with respect to the Depositor, the
Transferor, the Servicer or the Custodian, the President or any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.
Securities: The Notes or Residual Interest Certificates.
Securityholder: Any Noteholder or Certificateholder.
Senior Noteholders' Interest Carry-Forward Amount: With respect to any
Payment Date, the excess, if any, of (A) the Senior Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Senior Noteholders' Interest Carry-Forward Amount for preceding Payment Dates,
over (B) the amount in respect of interest that is actually deposited in the
Note Payment Account on such preceding Payment Date.
Senior Noteholders' Interest Payment Amount: With respect to any Payment
Date, the sum of the Senior Noteholders' Monthly Interest Payment Amount for
such Payment Date and the Senior Noteholders' Interest Carry-Forward Amount for
such Payment Date.
Senior Noteholders' Monthly Interest Payment Amount: With respect to each
Payment Date and the Classes of Class A Notes, the interest accrued at the
respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Payment Date (or, in the case of the
first Payment Date, on the Closing Date) after giving effect to all payments of
principal to the holders of such Classes of Notes on or prior to such preceding
Payment Date (or, in the case of the first Payment Date, on the Closing Date)
after giving effect to all payments of principal to the holders of the other
Classes of Notes on or prior to such preceding Payment Date.
Senior Notes: The Class A-1, Class A-2, Class A-3 and Class A-4 Notes.
Senior Optimal Principal Balance: With respect to any Payment Date prior to
the Stepdown Date, zero; with respect to any other Payment Date, an amount equal
to the Pool Principal Balance as of the related Determination Date minus the
greater of (a) the sum of (1) 55.00% of the Pool Principal Balance as of the
related Determination Date and (2) the Overcollateralization Target Amount for
such Payment Date (without giving effect to the proviso in the definition
thereof) and (b) 0.50% of the Maximum Collateral Amount; provided, however, that
such amount shall never be less than zero or greater than the sum of the
Original Class Principal Balances of the Notes.
Series or Series 1997-3: Life Financial Home Loan Asset Backed Notes,
Series 1997-3.
Servicer: Life Bank, a federally chartered stock savings bank or any
successor appointed as herein provided.
Servicer Termination Event: The termination of the Servicer pursuant to
Section 10.01(b) hereof.
Servicer's Fiscal Year: January 1st through December 31st of each year.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
customarily included in the Servicer's loan file for the related type of Home
Loan as specifically set forth in Section 2.04(b).
Servicer's Monthly Remittance Report: As defined in Section 6.01(a).
Servicing Advance Reimbursement Amount: With respect to any date of
determination, the amount of any Servicing Advances that have not been
reimbursed as of such date, including Nonrecoverable Servicing Advances.
Servicing Advances: Subject to Section 4.01(b) hereof, all reasonable,
customary and necessary "out of pocket" costs and expenses advanced or paid by
the Servicer with respect to the Home Loans in accordance with the performance
by the Servicer of its servicing obligations hereunder, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of a Mortgaged Property, including without limitation advances in
respect of real estate taxes and assessments, (ii) any collection, enforcement
or judicial proceedings, including without limitation foreclosures, collections
and liquidations pursuant to Section 4.10 hereof, (iii) the conservation,
management and sale or other disposition of a Foreclosure Property pursuant to
Section 4.11 hereof, (iv) the preservation of the security for a Home Loan if
any lienholder under a Superior Lien has accelerated or intends to accelerate
the obligations secured by such Superior Lien pursuant to Section 4.05 hereof;
provided, however, that such Servicing Advances are reimbursable to the Servicer
out of Net Liquidation Proceeds.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 7.03 hereof.
Servicing Fee: As to each Home Loan (including any Home Loan that has been
foreclosed and has become a Foreclosure Property, but excluding any Liquidated
Home Loan), the fee payable monthly to the Servicer on each Payment Date, which
shall be the product of 1.00% (100 basis points) and the Principal Balance of
such Home Loan as of the beginning of the immediately preceding Due Period,
divided by 12. The Servicing Fee includes any servicing fees owed or payable to
any Subservicer, which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved in,
or responsible for, the administration and servicing of the Home Loans whose
name and specimen signature appears on a list of servicing officers annexed to
an Officer's Certificate furnished by the Servicer or the Subservicer,
respectively, to the Issuer and the Indenture Trustee, on behalf of the
Noteholders, as such list may from time to time be amended.
Six-Month Rolling Delinquency Average: With respect to any Payment Date,
the average of the applicable 60-Day Delinquency Amounts for each of the six
immediately preceding Due Periods, where the 60-Day Delinquency Amount for any
Due Period is the aggregate of the Principal Balances of all Home Loans that are
60 or more days delinquent, in foreclosure or Foreclosure Property as of the end
of such Due Period.
Stepdown Date: The first Payment Date occurring after December 2000, upon
which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.0% of the
Maximum Collateral Amount;
(2) the Net Delinquency Calculation Amount is less than 6.25% of
the Maximum Collateral Amount; and
(3) the aggregate of the Class Principal Balances of the Class A
Notes will be able to be reduced on such Payment Date (such
determination to be made by the Indenture Trustee prior to giving
effect to distribution of principal on such Payment Date) to the
excess of:
(I) the Pool Principal Balance as of the related
Determination Date over
(II) the greater of
(a) the sum of
(1) 55.00% of the Pool Principal Balance
as of the related Determination Date
and
(2) the Overcollateralization Target
Amount for such Payment Date (such
amount to be calculated (x) without
giving effect to the proviso in the
definition thereof and (y) pursuant
only to clause (II) of the
definition thereof); and
(b) 0.50% of the Maximum Collateral Amount.
Subordinate Noteholders' Interest Carry-Forward Amount: With respect to any
Payment Date, the excess, if any, of (A) the Subordinate Noteholders' Monthly
Interest Payment Amount for the preceding Payment Date plus any outstanding
Subordinate Noteholders' Interest Carry-Forward Amount for preceding Payment
Dates, over (B) the amount in respect of interest that is actually deposited in
the Note Payment Account on such preceding Payment Date net of the Senior
Noteholders' Interest Payment Amount and the Mezzanine Noteholders' Interest
Payment Amount for such preceding Payment Date.
Subordinate Noteholders' Interest Payment Amount: With respect to any
Payment Date, the sum of the Subordinate Noteholders' Monthly Interest Payment
Amount for such Payment Date and the Subordinate Noteholders' Interest
Carry-Forward Amount for such Payment Date.
Subordinate Noteholders' Monthly Interest Payment Amount: With respect to
each Payment Date and the Classes of Subordinate Notes, the interest accrued at
the respective Note Interest Rates on the respective Class Principal Balances of
such Classes immediately preceding such Payment Date (or, in the case of the
first Payment Date, on the Closing Date) after giving effect to all payments of
principal to the holders of such Classes of Notes on or prior to such preceding
Payment Date.
Subordinate Notes: The Class B Notes.
Subsequent Cut-Off Date Deposit: With respect to any Subsequent Transfer
Date and any Subsequent Loan transferred to the Owner Trust during any month,
which Subsequent Loan does not have a Monthly Payment due until the second Due
Period following such month, an amount equal to the product of (a) the Loan
Balance of such Subsequent Loan on the related Cut-Off Date and (b) one-twelfth
of the Net Loan Rate on such Subsequent Loan.
Subsequent Loan: Each Home Loan sold to the Owner Trust for inclusion
pursuant to Section 2.06 hereof and the related Subsequent Transfer Agreement,
which Home Loan shall be listed on the related Subsequent Loan Schedule.
Subsequent Loan Schedule: The schedule of Subsequent Loans transferred to
the Owner Trust pursuant to the related Subsequent Transfer Agreement and
attached thereto.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement executed
by the Owner Trustee, Indenture Trustee and Life substantially in the form of
Exhibit C attached hereto by which Subsequent Loans are sold and assigned to the
Owner Trust.
Subsequent Transfer Date: The date specified in each Subsequent Transfer
Agreement; provided, however, that in no event shall there be more than three
(3) such Subsequent Transfer Agreements.
Subservicer: Any Person with which the Servicer has entered into a
Subservicing Agreement and which is an Eligible Servicer and satisfies any
requirements set forth in Section 4.06(a) hereof in respect of the
qualifications of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant to a
Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.06(a) hereof, copies of which shall be made
available, along with any modifications thereto, to the Issuer and the Indenture
Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 2.05 or Section 3.05 hereof, the amount, if any, by which
(a) the sum of the aggregate principal balance (after application of principal
payments received on or before the date of substitution) of any Qualified
Substitute Home Loans as of the date of substitution, plus any accrued and
unpaid interest thereon to the date of substitution, is less than (b) the sum of
the aggregate of the Principal Balances, together with accrued and unpaid
interest thereon to the date of substitution, of the related Deleted Home Loans.
Superior Lien: With respect to any Home Loan which is secured by a lien
other than a first priority lien, the mortgage loan(s) having a superior
priority lien on the related Mortgaged Property .
Termination Date: The earlier of (a) the Payment Date in April 2024 and (b)
the Payment Date next following the Monthly Cut-Off Date coinciding with or next
following the date of the liquidation or disposition of the last asset held by
the Issuer pursuant to Section 11.01 hereof.
Termination Price: As of any date of determination, an amount without
duplication equal to the greater of (A) the Note Redemption Amount and (B) the
sum of (i) the Principal Balance of each Home Loan included in the Owner Trust
as of the applicable Monthly Cut-Off Date; (ii) all unpaid interest accrued on
the Principal Balance of each such Home Loan at the related Net Loan Rate to
such Monthly Cut-Off Date; and (iii) the aggregate fair market value of each
Foreclosure Property included in the Owner Trust on such Monthly Cut-Off Date,
as determined by an Independent appraiser acceptable to the Indenture Trustee as
of a date not more than 30 days prior to such Monthly Cut-Off Date.
Transferor: Life Investment Holdings, Inc., a Delaware corporation.
Trust Account Property: The Trust Accounts, all amounts and investments
held from time to time in the Trust Accounts and all proceeds of the foregoing.
Trust Accounts: The Note Payment Account, the Certificate Distribution
Account, the Collection Account, the Pre-Funding Account and the Capitalized
Interest Account.
Trust Fees and Expenses: As of each Payment Date, an amount equal to the
Servicing Compensation, the Indenture Trustee Fee and the Owner Trustee Fee, if
any.
UCC: The Uniform Commercial Code as in effect in the State of New York.
Underwriting Guidelines: The underwriting guidelines of Life, a copy of
which is attached as an exhibit to the Home Loan Purchase Agreement.
Section 1.02 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture and the Owner Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
GAAP. To the extent that the definitions of accounting terms in this Agreement
or in any such certificate or other document are inconsistent with the meanings
of such terms under GAAP, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans.
(a) As of the Closing Date, in consideration of the Issuer's delivery of
the Notes and the Residual Interest Certificates to the Depositor or its
designee, upon the order of the Depositor, the Depositor, as of the Closing Date
and concurrently with the execution and delivery hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
but subject to the other terms and provisions of this Agreement, all of the
right, title and interest of the Depositor in and to the Owner Trust Estate. The
foregoing sale, transfer, assignment, set over and conveyance does not, and is
not intended to, result in a creation or an assumption by the Issuer of any
obligation of the Depositor, Life, the Transferor or any other person in
connection with the Owner Trust Estate or under any agreement or instrument
relating thereto except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to it of
the Owner Trust Estate, including all right, title and interest of the Depositor
in and to the Owner Trust Estate, receipt of which is hereby acknowledged by the
Issuer. Concurrently with such delivery and in exchange therefor, the Issuer has
pledged the Owner Trust Estate to the Indenture Trustee, and the Indenture
Trustee, pursuant to the written instructions of the Issuer, has executed and
caused the Notes to be authenticated and delivered to the Depositor or its
designee, upon the order of the Issuer. In addition, concurrently with such
delivery and in exchange therefor, the Owner Trustee, pursuant to the
instructions of the Depositor, has executed (not in its individual capacity, but
solely as Owner Trustee on behalf of the Issuer) and caused the Residual
Interest Certificates to be authenticated and delivered to the Depositor or its
designee, upon the order of the Depositor.
Section 2.02 Ownership and Possession of Home Loan Files.
Upon the issuance of the Notes, with respect to the Home Loans, the
ownership of each Debt Instrument, the related Mortgage and the contents of the
related Servicer's Home Loan File and the Indenture Trustee's Home Loan File
shall be vested in the Owner Trustee and pledged to the Indenture Trustee for
the benefit of the Securityholders, although possession of the Servicer's Home
Loan Files (other than items required to be maintained in the Indenture
Trustee's Home Loan Files) on behalf of and for the benefit of the
Securityholders shall remain with the Servicer, and the Custodian shall take
possession of the Indenture Trustee's Home Loan Files as contemplated in Section
2.05 hereof.
Section 2.03 Books and Records.
The sale of each Home Loan shall be reflected on the balance sheets and
other financial statements of the Depositor or Life or the Transferor, as the
case may be, as a sale of assets by the Depositor or Life or the Transferor, as
the case may be, under GAAP. The Servicer shall be responsible for maintaining,
and shall maintain, a complete set of books and records for each Home Loan which
shall be clearly marked to reflect the ownership of each Home Loan by the Owner
Trustee and pledged to the Indenture Trustee for the benefit of the Noteholders.
The Custodian, pursuant to the terms of the Custodial Agreement, shall keep the
Indenture Trustee's Home Loan Files and shall maintain a record to reflect the
pledge of each Home Loan for the benefit of the Noteholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Home
Loans and the other property specified in Section 2.01(a) hereof from the
Depositor to the Issuer and such property shall not be property of the
Depositor. If the assignment and transfer of the Home Loans and the other
property specified in Section 2.01(a) hereof to the Issuer pursuant to this
Agreement or the conveyance of the Home Loans or any of such other property to
the Owner Trustee is held or deemed not to be a sale or is held or deemed to be
a pledge of security for a loan, the Depositor intends that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, (i) the Depositor shall be deemed to have
granted and does hereby grant to the Issuer a first priority security interest
in the entire right, title and interest of the Depositor in and to the Home
Loans and all other property conveyed to the Issuer pursuant to Section 2.01
hereof and all proceeds thereof and (ii) this Agreement shall constitute a
security agreement under applicable law. Within ten (10) days of the Closing
Date, the Depositor shall cause to be filed UCC-1 financing statements naming
the Owner Trustee as "secured party" and describing the Home Loans being sold by
the Depositor to the Issuer with the office of the Secretary of State of the
state in which the Depositor is located.
Section 2.04 Delivery of Home Loan Documents.
(a) With respect to each Home Loan, the Depositor, the Originator and/or
the Transferor shall, on the Closing Date, or the applicable Subsequent Transfer
Date in the case of Subsequent Loans, deliver or cause to be delivered to the
Custodian, as the designated agent of the Indenture Trustee, each of the
following documents (collectively, the "Indenture Trustee's Home Loan Files"):
(i) The original Debt Instrument, endorsed by the Originator
in blank, with all prior and intervening endorsements showing a
complete chain of endorsement from origination of the Home Loan to the
Originator;
(ii) The original Mortgage with evidence of recording thereon
(or, if the original Mortgage has not been returned from the applicable
public recording office or is not otherwise available, a copy of the
Mortgage certified by a Responsible Officer of the Originator or by the
closing attorney or by an officer of the title insurer or agent of the
title insurer which issued the related title insurance policy, if any,
or commitment therefor to be a true and complete copy of the original
Mortgage submitted for recording) and, if the Mortgage was executed
pursuant to a power of attorney, the original power of attorney with
evidence of recording thereon (or, if the original power of attorney
has not been returned from the applicable public recording office or is
not otherwise available, a copy of the power of attorney certified by a
Responsible Officer of the Originator or by the closing attorney or by
an officer of the title insurer or agent of the title insurer which
issued the related title insurance policy, if any, or commitment
therefor, to be a true and complete copy of the original power of
attorney submitted for recording);
(iii) The original executed Assignment of Mortgage, in
recordable form. The Assignment of Mortgage may be a blanket
assignment, to the extent such assignment is effective under applicable
law, for Mortgages covering Mortgaged Properties situated within the
same county. If the Assignment of Mortgage is in blanket form, an
Assignment of Mortgage need not be included in the individual Indenture
Trustee's Home Loan File;
(iv) All original intervening assignments of mortgage, with
evidence of recording thereon, showing a complete chain of assignment
from origination of the Home Loan to the Originator (or, if any such
assignment of mortgage has not been returned from the applicable public
recording office or is not otherwise available, a copy of such
assignment of mortgage certified by a Responsible Officer of the
Originator or by the closing attorney or by an officer of the title
insurer or agent of the title insurer which issued the related title
insurance policy, if any, or commitment therefor to be a true and
complete copy of the original assignment submitted for recording); and
(v) The original, or a copy certified by the Originator to be
a true and correct copy of the original, of each assumption,
modification, written assurance or substitution agreement, if any.
(b) With respect to each Home Loan, the Transferor, the Originator and the
Depositor shall, on the Closing Date, or the applicable Subsequent Transfer Date
in the case of Subsequent Loans, deliver or cause to be delivered to the
Servicer, as the designated agent of the Indenture Trustee, each of the
following documents (collectively, the "Servicer's Home Loan Files"): (i) an
original or copy of truth-in-lending disclosure, (ii) an original or copy of the
credit application, (iii) an original or copy of the consumer credit report,
(iv) an original or copy of verification of employment and income, or
verification of self-employment income, (v) if the Home Loan is a Combination
Loan, an original or copy of contract of work or written description with cost
estimates, if any, (vi) if the Home Loan is a Combination Loan for which the
Transferor prepares an inspection report, an original or copy of the report of
inspection of improvements to the Property, (vii) to the extent not included in
(clause (ii) of this Section 2.04(b), an original or copy of a written
verification (or a notice of telephonic verification, with written verification
to follow) that the Obligor at the time of origination was not more than 30 days
delinquent on any Superior Lien on the Mortgaged Property, (viii) a copy of the
HUD-1 or HUD 1-A Closing Statement indicating the sale price, or an existing
Uniform Residential Appraisal Report, or a Drive-by Appraisal documented on
FHLMC Form 704, or a tax assessment, or a full Uniform Residential Appraisal
Report prepared by a national appraisal firm in accordance with Life's
guidelines, and (ix) an original or a copy of a title search as of the time of
origination with respect to the Property in accordance with Life's guidelines.
(c) The Indenture Trustee shall cause the Custodian to take and maintain
continuous physical possession of the Indenture Trustee's Home Loan Files in the
State of Minnesota and, in connection therewith, shall act solely as agent for
the Securityholders in accordance with the terms hereof and not as agent for the
Originator, the Transferor or any other party.
(d) Within 35 days after the Closing Date in the case of Initial Loans or,
in the case of the Subsequent Loans, within 35 days of the related Subsequent
Transfer Date, the Originator or the Transferor, at its own expense, shall
record each Assignment of Mortgage (which may be a blanket assignment if
permitted by applicable law) in the appropriate real property or other records;
provided, however, that the Originator or the Transferor need not record any
such Assignment of Mortgage in any jurisdiction under the laws of which, as
evidenced by an Opinion of Counsel delivered by the Originator or Transferor (at
the Originator's or Transferor's expense) to the Indenture Trustee and the
Rating Agencies, the recordation of such Assignment of Mortgage is not necessary
to protect the Indenture Trustee's and the Securityholders' interest in the
related Home Loan. With respect to any Assignment of Mortgage as to which the
related recording information is unavailable within 5 days following the Closing
Date in the case of Initial Loans or, in the case of Subsequent Loans, within 5
days of the related Subsequent Transfer Date, such Assignment of Mortgage shall
be submitted for recording within 5 days after receipt of such information but
in no event later than one year after the Closing Date. The Originator or the
Transferor shall request in writing from the Custodian the Assignments of
Mortgage to be recorded pursuant to this subsection (d) and shall return to the
Custodian the recorded Assignments of Mortgage as promptly as practicable upon
receipt thereof. The Indenture Trustee shall be required to retain a copy,
provided to the Indenture Trustee by the Originator or the Transferor, of each
Assignment of Mortgage submitted for recording. In the event that any such
Assignment of Mortgage is lost or returned unrecorded because of a defect
therein, the Originator or the Transferor shall promptly prepare a substitute
Assignment of Mortgage or cure such defect, as the case may be, and thereafter
the Originator or the Transferor shall be required to submit each such
Assignment of Mortgage for recording.
(e) All recordings required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Originator or the Transferor.
Section 2.05 Acceptance by the Indenture Trustee of the Home Loans;
Certain Substitutions; Certification by the Custodian
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date, or the applicable Subsequent Transfer Date in the
case of Subsequent Loans, an acknowledgment of receipt of each Indenture
Trustee's Home Loan File received by the Indenture Trustee on the Closing Date
or a Subsequent Transfer Date, as applicable. The Indenture Trustee declares
that it will cause the Custodian to hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included in the
Owner Trust Estate and delivered to the Custodian, in trust, upon and subject to
the conditions set forth herein. The Indenture Trustee agrees to cause the
Custodian to review each Indenture Trustee's Home Loan File within 45 days after
the Closing Date (or, with respect to any Qualified Substitute Home Loan or
Subsequent Loan, within 45 days after the conveyance of the related Home Loan to
the Owner Trust) and to cause the Custodian to deliver to the Transferor, the
Depositor, the Indenture Trustee and the Servicer a certification (the
"Custodian's Initial Certification") to the effect that, as to each Home Loan
listed in the Home Loan Schedule (other than any Home Loan paid in full or any
Home Loan specifically identified as an exception to such certification), (i)
all documents required to be delivered to the Indenture Trustee pursuant to this
Agreement are in its possession or in the possession of the Custodian on its
behalf (other than as expressly permitted by Section 2.04 hereof), (ii) all
documents delivered by the Depositor, the Originator and the Transferor to the
Custodian pursuant to Section 2.04 hereof have been reviewed by the Custodian
and have not been mutilated or damaged and appear regular on their face
(handwritten additions, changes or corrections shall not constitute
irregularities if initialed by the Obligor) and relate to such Home Loan, (iii)
based on the examination of the Custodian on behalf of the Indenture Trustee,
and only as to the foregoing documents, the information set forth on the Home
Loan Schedule accurately reflects the information set forth in the Indenture
Trustee's Home Loan File and (iv) each Debt Instrument has been endorsed as
provided in Section 2.04 hereof. Neither the Indenture Trustee nor the Custodian
shall be under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable, valid, legal, executed by a Responsible Officer,
sufficient or appropriate for the represented purpose or that they are other
than what they purport to be on their face, (ii) determine or make
representations as to the collectibility, insurability, effectiveness or
suitability of any Home Loan or (iii) to determine whether any Indenture
Trustee's Home Loan File should include any of the documents specified in
Section 2.04(a)(v) hereof.
(b) The Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Securityholders and the
Indenture Trustee as the owner thereof for so long as this Agreement continues
in full force and effect. It is intended that, by the Servicer's agreement
pursuant to this Section 2.05(b), the Indenture Trustee shall be deemed to have
possession of the Servicer's Home Loan Files for purposes of Section 9-305 of
the Uniform Commercial Code of the state in which such documents or instruments
are located. The Servicer shall promptly report to the Indenture Trustee any
failure by it to hold the Servicer's Home Loan File as herein provided and shall
promptly take appropriate action to remedy any such failure. In acting as
custodian of such documents and instruments, the Servicer agrees not to assert
any legal or beneficial ownership interest in the Home Loans or such documents
or instruments. The Servicer agrees to indemnify the Securityholders and the
Indenture Trustee for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever which may be imposed on,
incurred by or asserted against the Securityholders or the Indenture Trustee as
the result of any act or omission by the Servicer relating to the maintenance
and custody of such documents or instruments which have been delivered to the
Servicer; provided, however, that the Servicer will not be liable for any
portion of any such amount resulting from the negligence or misconduct of any
Securityholders or the Indenture Trustee; and provided, further, that the
Servicer will not be liable for any portion of any such amount resulting from
the Servicer's compliance with any instructions or directions consistent with
this Agreement issued to the Servicer by the Indenture Trustee. The Indenture
Trustee shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
(c) The Custodian shall, for the benefit of the Securityholders, review
each Indenture Trustee's Home Loan File within 60 days after the date it
delivered a Custodian's Initial Certification and deliver to the Transferor, the
Depositor, the Indenture Trustee and the Servicer an updated certification (a
"Custodian's Updated Certification"), setting forth those exceptions listed on
the Custodian's Initial Certification which continue to exist on the date of
such Custodian's Updated Certification. With respect to any Home Loans which are
set forth as exceptions in the Custodian's Updated Certification because
recorded assignments or original or certified copies of Mortgages have not yet
been delivered to the Custodian, the Originator or the Transferor shall cure
such exceptions by delivering such missing documents to the Custodian no later
than 360 days after the Closing Date.
The Custodian agrees, for the benefit of the Securityholders, to review
each Indenture Trustee's Home Loan File within 360 days after the Closing Date
with respect to Initial Loans or within 360 days after the applicable Subsequent
Transfer Date with respect to the Subsequent Loans, and to deliver to the
Transferor, the Depositor, the Indenture Trustee and the Servicer a final
certification (a "Custodian's Final Certification"), setting forth those
exceptions listed on the Custodian's Updated Certification which continue to
exist on the date of such Custodian's Final Certification.
In performing any review pursuant to this Agreement or the Custodial
Agreement, the Custodian may conclusively rely on the Originator or the
Transferor as to the purported genuineness of any such document and any
signature thereon. Neither the Indenture Trustee nor the Custodian shall have
any responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction or whether a blanket assignment is permitted in
any applicable jurisdiction. Neither the Indenture Trustee nor the Custodian
shall be under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable, valid, legal, executed by a Responsible Officer,
sufficient or appropriate for the represented purpose or that they are other
than what they purport to be on their face, (ii) determine or make
representations as to the collectibility, insurability, effectiveness or
suitability of any Home Loan or (iii) to determine whether any Indenture
Trustee's Home Loan File should include any of the documents specified in
Section 2.04(a)(v) hereof. If a material defect in a document constituting part
of a Indenture Trustee's Home Loan File is discovered, then the Depositor, the
Originator and the Transferor shall comply with the cure, substitution and
repurchase provisions of Section 3.05.
Section 2.06 Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in this Article
II and pursuant to the terms of the related Subsequent Transfer Agreement, in
consideration of the Issuer's delivery on each Subsequent Transfer Date to or
upon the order of Life, of all or a portion of the balance of funds in the
Pre-Funding Account, Life shall on such Subsequent Transfer Date sell, transfer,
assign, set over and otherwise convey without recourse to the Owner Trust, all
of its right, title and interest in and to each Subsequent Loan listed on the
related Subsequent Loan Schedule. The transfer by Life to the Owner Trust of the
Subsequent Loans set forth in the related Subsequent Transfer Agreement shall be
absolute and shall be intended by all parties hereto to be treated as a sale by
Life to the Owner Trust. If the assignment and transfer of the Subsequent Loans
and the other property specified in this Section 2.06(a) from Life to the Owner
Trust pursuant to this Agreement is held or deemed not to be a sale or is held
or deemed to be a pledge of security for a loan, Life intends that the rights
and obligations of the parties shall be established pursuant to the terms of
this Agreement and that, in such event, (i) Life shall be deemed to have granted
and does hereby grant to the Owner Trust as of each Subsequent Transfer Date a
perfected, first priority security interest in the entire right, title and
interest of Life in and to the related Subsequent Loans and all other property
conveyed to the Owner Trust pursuant to this Section 2.06(a) and all proceeds
thereof, and (ii) this Agreement shall constitute a security agreement under
applicable law. The amount released to Life from the Pre-Funding Account shall
be one hundred percent (100%) of the aggregate Principal Balances of the
Subsequent Loans as of the related Cut-Off Date so transferred.
(b) The Indenture Trustee, at the direction of the Issuer, shall contribute
from the Pre-Funding Account funds in an amount equal to one hundred percent
(100%) of the aggregate Principal Balances of the Subsequent Loans as of the
related Cut-Off Date so transferred to the Owner Trust and use such cash to
purchase the Subsequent Loans on behalf of the Owner Trust, along with the other
property and rights related thereto described in paragraph (a) above only upon
the satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(i) Life shall have provided the Indenture Trustee and the
Rating Agencies with an Addition Notice, which notice shall be given no
fewer than four Business Days prior to the related Subsequent Transfer
Date and shall designate the Subsequent Loans to be sold to the Owner
Trust and the aggregate Principal Balances of such Subsequent Loans as
of the related Cut-Off Date and the Rating Agencies shall have provided
written confirmation that the purchase of such Subsequent Loans will
not result in a downgrade, withdrawal or qualification of the ratings
then in effect for the Outstanding Notes;
(ii) Life shall have deposited in the Collection Account all
principal collected after the related Cut-Off Date and interest
payments collected after the related Cut-Off Date in respect of each
Subsequent Loan and the related Subsequent Cut-Off Date Deposit;
(iii) Life shall have delivered an Officer's Certificate to
the Indenture Trustee confirming that, as of each Subsequent Transfer
Date, Life was not insolvent, would not be made insolvent by such
transfer and was not aware of any pending insolvency;
(iv) the Pre-Funding Period shall not have ended;
(v) Life shall have delivered to the Indenture Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) (including those set forth in
clause (B) of subparagraph (vii) below) and in the related Subsequent
Transfer Agreement;
(vi) Life shall have delivered an Officer's Certificate to the
Indenture Trustee confirming that the representations and warranties of
Life pursuant to Section 3.04 (other than to the extent representations
and warranties relate to statistical information as to the
characteristics of the Initial Loans in the aggregate) and pursuant to
Section 3.02 are true and correct with respect to the Subsequent Loans
and Life, as applicable, as of the Subsequent Transfer Date;
(vii) the Owner Trust shall not purchase a Subsequent
Loan unless:
(A) each Rating Agency shall consent thereto (which
consent shall be evidenced by a letter from the Rating
Agency);
(B) the following conditions shall have been
satisfied: (I) no Subsequent Loans may be 30 or more days
contractually delinquent as of the applicable Cut-Off Date;
(II) the lien securing any such Subsequent Loan must not be
lower than third priority; (III) such Subsequent Loan must
have an outstanding Principal Balance of at least $2,500 as of
the applicable Cut-Off Date; (IV) the first payment on such
Subsequent Loan must be due no later than the last day of the
Due Period immediately succeeding the Due Period in which it
is transferred, unless Life deposits into the Collection
Account 30 days' interest on such Subsequent Loan at the Home
Loan Interest Rate less the applicable Servicing Fee rate
(each such amount, a "Capitalized Interest Subsequent
Deposit"), in which event the first payment on such Subsequent
Loan must be due no later than the last day of the second Due
Period following the Due Period in which the transfer occurs;
(V) such Subsequent Loan is a fully amortizing loan with level
payments over the remaining term of no fewer than 10 years and
no more than 25 years and the scheduled maturity will be no
later than April 2023; (VI) such Subsequent Loan, if a Fixed
Rate Loan, must have a Home Loan Interest Rate of at least
9.10%, and, if an Adjustable Rate Loan, must have a Home Loan
Interest Rate of at least 9.25%; (VII) any such Subsequent
Loan must have an original Combined Loan-to-Value Ratio of no
more than 135%, (VIII) such Subsequent Loan must be
underwritten, re-underwritten or reviewed, as applicable, in
accordance with the underwriting guidelines of Life in effect
at such time or in a manner similar to the Initial Loans, and
(IX) following the purchase of such Subsequent Loans by the
Owner Trust, the Home Loans included in the Pool must have a
weighted average interest rate and a weighted average
remaining term to maturity as of each respective Cut-Off Date
comparable to those of the Initial Loans included in the
initial Pool; and
(C) the Transferor shall have delivered an Officer's
Certificate to the Indenture Trustee confirming that, as a
result of such purchase, the percentage of the Pool Principal
Balance comprised of Home Loans that do not constitute "real
estate mortgages" (as set forth in Section 3.04(af)) remains
the same or increases.
(viii) in connection with the transfer and assignment of the
Subsequent Loans, Life shall satisfy the document delivery requirements
set forth in Section 2.05 hereof; and
(ix) each proposed Subsequent Loan must be listed on the Home
Loan Schedule hereto as the same may be amended from time to time with
the approval of the Depositor.
(c) In connection with each Subsequent Transfer Date and on the related
Payment Date, the Indenture Trustee shall determine (i) the amount and correct
dispositions of the Capitalized Interest Requirement and Pre-Funding Account
Earnings for such Payment Date in accordance with the provisions of this
Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and the Capitalized Interest Account.
In the event that any amounts are released as a result of calculation error by
the Indenture Trustee from the Pre-Funding Account or from the Capitalized
Interest Account, the Indenture Trustee shall not be liable therefor and Life
shall immediately repay such amounts to the Indenture Trustee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, the
Servicer, the Indenture Trustee, the Owner Trustee and the Noteholders that as
of the Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its property,
to carry on its business as currently conducted, to enter into and
perform its obligations under this Agreement and to create the Owner
Trust pursuant to the Owner Trust Agreement;
(b) The execution and delivery of this Agreement by the
Depositor and its performance of and compliance with the terms of this
Agreement will not violate the Depositor's certificate of incorporation
or by-laws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in
the breach or acceleration of, any material contract, agreement or
other instrument to which the Depositor is a party or which may be
applicable to the Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter
into and consummate the transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement and has duly executed and delivered this Agreement. This
Agreement, assuming due authorization, execution and delivery by the
Owner Trustee, the Indenture Trustee, the Transferor and the Servicer,
constitutes a valid, legal and binding obligation of the Depositor,
enforceable against it in accordance with the terms hereof, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution
and delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Depositor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There are no actions or proceedings against, or
investigations of, the Depositor currently pending with regard to which
the Depositor has received service of process and no action or
proceeding against, or investigation of, the Depositor is, to the
knowledge of the Depositor, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined
adversely, would prohibit its entering into this Agreement or render
the Notes invalid, (B) seek to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement
or (C) if determined adversely, would prohibit or materially and
adversely affect the performance by the Depositor of its obligations
under, or the validity or enforceability of, this Agreement or the
Notes;
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Depositor of, or compliance by the Depositor
with, this Agreement or the Notes, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or its obligations hereunder;
no petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Depositor prior to the date hereof;
(h) The Depositor did not sell the Home Loans to the Issuer,
with any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of the
Home Loans to the Issuer;
(i) As of the Closing Date, the Depositor had good title to,
and was the sole owner of, each Home Loan free and clear of any lien
other than any such lien released simultaneously with the sale
contemplated herein, and, immediately upon each transfer and assignment
herein contemplated, the Depositor will have delivered to the Issuer
good title to, and the Issuer will be the sole owner of, each Home Loan
free and clear of any lien;
(j) The Depositor acquired title to the Home Loans in
good faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other
document prepared by the Depositor and furnished or to be furnished by
it pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading; and
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended.
Section 3.02 Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Servicer, the
Indenture Trustee, the Owner Trustee, the Noteholders and the Depositor that as
of the Closing Date or the Subsequent Transfer Date, as the case may be (except
as otherwise specifically provided herein):
(a) The Transferor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all licenses necessary to carry on its business as now being
conducted and is licensed, qualified and in good standing in each state
where a Mortgaged Property is located if the laws of such state require
licensing or qualification in order for the Transferor to conduct such
business and to perform its obligations as the Transferor hereunder,
and in any event the Transferor is in compliance with the laws of any
such state to the extent necessary to ensure the enforceability of the
related Home Loans, and had at all relevant times, full corporate power
to originate or purchase the Home Loans, to own its property, to carry
on its business as presently conducted and to enter into and perform
its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the
Transferor and its performance of and compliance with the terms of this
Agreement will not violate the Transferor's articles of incorporation
or by-laws or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in
the breach or acceleration of, any material contract, agreement or
other instrument to which the Transferor is a party or which may be
applicable to the Transferor or any of its assets;
(c) The Transferor has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement to
be consummated by it, has duly authorized the execution, delivery and
performance of this Agreement and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the Owner Trustee, the Indenture Trustee and the Depositor,
constitutes a valid, legal and binding obligation of the Transferor,
enforceable against it in accordance with the terms hereof, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
(d) The Transferor is not in violation of, and the execution
and delivery of this Agreement by the Transferor and its performance
and compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any
order or regulation of any federal, state, municipal or governmental
agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations
of the Transferor or its properties or materially and adversely affect
the performance of its duties hereunder;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Transferor, threatened, before any
court, administrative agency or governmental tribunal against the
Transferor which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Transferor, or in any
material impairment of the right or ability of the Transferor to carry
on its business substantially as now conducted, or in any material
liability on the part of the Transferor, or which would draw into
question the validity of this Agreement, the Loans, or of any action
taken or to be taken in connection with the obligations of the
Transferor contemplated herein, or which would impair materially the
ability of the Transferor to perform under the terms of this Agreement
or that might prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for: (1) the execution,
delivery and performance by the Transferor of, or compliance by the
Transferor with, this Agreement, (2) the issuance of the Notes, (3) the
sale of the Home Loans under the Home Loan Purchase Agreement or (4)
the consummation of the transactions required of it by this Agreement,
except such as shall have been obtained before the Closing Date;
(g) The Transferor acquired title to the Home Loans in
good faith, without notice of any adverse claim;
(h) The collection practices used by the Transferor with
respect to the Home Loans have been, in all material respects, legal,
proper, prudent and customary in the non-conforming mortgage servicing
business;
(i) No Officer's Certificate, statement, report or other
document prepared by the Transferor and furnished or to be furnished by
it pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Transferor is duly licensed where required as a
"Licensee" or is otherwise qualified in each state in which it
transacts business and is not in default of such state's applicable
laws, rules and regulations, except where the failure to so qualify or
such default would not have a material adverse effect on the ability of
the Transferor to conduct its business or perform its obligations
hereunder;
(k) The Transferor does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement. The Transferor is solvent, is
able to pay its debts as they become due and has capital sufficient to
carry on its business and its obligations hereunder; it will not be
rendered insolvent by the execution and delivery of this Agreement or
by the performance of its obligations hereunder; no petition of
bankruptcy (or similar insolvency proceeding) has been filed by or
against the Transferor prior to the date hereof;
(l) The Transferor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended;
(m) Upon the receipt of each Indenture Trustee's Home Loan
File by the Depositor or the Custodian, as agent for the Depositor
under this Agreement, the Depositor, or the Custodian, as agent for the
Depositor will have good title to each related Home Loan and such other
items comprising the corpus of the Owner Trust Estate free and clear of
any lien created by the Transferor (other than liens which will be
simultaneously released);
(n) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Transferor, and
the transfer, assignment and conveyance of the Debt Instruments and the
Mortgages by the Transferor to the Depositor pursuant to the Home Loan
Purchase Agreement are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction;
(o) The Home Loans are not intentionally selected in a manner
so as to affect adversely the interests of the Depositor or any
transferee of the Depositor (including the Indenture Trustee);
(p) The Transferor has determined that it will treat the
disposition of the Home Loans pursuant to the Home Loan Purchase
Agreement as a sale for accounting purposes, but not for tax purposes;
(q) The Transferor has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in
connection with the sale of the Home Loans to the Depositor other than
to the Depositor or an affiliate thereof; and
(r) The consideration received by the Transferor upon the sale
of the Home Loans under the Home Loan Purchase Agreement constitutes
fair consideration and reasonably equivalent value for the Loans.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Indenture
Trustee's Home Loan Files to the Custodian (as the agent of the Indenture
Trustee) and shall inure to the benefit of the Securityholders, the Depositor,
the Servicer, the Indenture Trustee, the Owner Trustee and the Owner Trust. Upon
discovery by any of the Transferor, the Depositor, the Servicer, the Indenture
Trustee or the Owner Trustee of a breach of any of the foregoing representations
and warranties that materially and adversely affects the value of any Home Loan
or the interests of the Securityholders therein, the party discovering such
breach shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the other parties. The obligations of the
Transferor and Life set forth in Section 3.05 hereof to cure any breach or to
substitute for or repurchase an affected Home Loan shall constitute the sole
remedies available hereunder to the Securityholders, the Depositor, the
Servicer, the Indenture Trustee or the Owner Trustee respecting a breach of the
representations and warranties contained in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the Servicer and
the Originator.
Each of the Servicer and the Originator hereby represents and warrants to
and covenants with the Owner Trustee, the Indenture Trustee, the Noteholders,
the Depositor and the Transferor that as of the Closing Date or as of such date
specifically provided herein:
(a) It is a federal savings bank duly organized, validly
existing and in good standing under the laws of the United States of
America and has all licenses necessary to carry on its business as now
being conducted and is licensed, qualified and in good standing in each
state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order for the Servicer to conduct
such business and to perform its obligations as the Servicer hereunder
and is in any event in compliance with the laws of each state in which
any Mortgaged Property is located to the extent necessary to ensure the
enforceability of each Loan in accordance with the terms of this
Agreement;
(b) The execution and delivery of this Agreement by it and its
performance of and compliance with the terms of this Agreement will not
violate the its articles of incorporation or by-laws or constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument
to which it is a party or which may be applicable to it or any of its
assets;
(c) It has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement
and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Indenture
Trustee, the Owner Trustee and the Depositor, constitutes a valid,
legal and binding obligation of it, enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) It is not in violation of, and the execution and delivery
of this Agreement by it and its performance and compliance with the
terms of this Agreement will not constitute a violation with respect
to, any order or decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having jurisdiction,
which violation would materially and adversely affect the condition
(financial or otherwise) or operations of it or materially and
adversely affect the performance of its duties hereunder or impair the
ability of the Indenture Trustee (or the Servicer as agent of the
Indenture Trustee) to realize on the Loans or impair the value of the
Home Loans;
(e) There is no action, suit, proceeding or investigation
pending or, to its knowledge, threatened, before any court,
administrative agency or government tribunal against it that, either in
any one instance or in the aggregate, may result in any material
adverse change in its business, operations, financial condition,
properties or assets, or in any material impairment of its right or
ability to carry on its business substantially as now conducted, or in
any material liability on its part, or which would draw into question
the validity of this Agreement, the Home Loans, or of any action taken
or to be taken in connection with its obligations contemplated herein,
or which would impair materially its ability to perform under the terms
of this Agreement or that might prohibit its entering into this
Agreement or the consummation of any of the transactions contemplated
hereby;
(f) The Servicer will examine each Subservicing Agreement and
will be familiar with the terms thereof. Each designated Subservicer
and the terms of each Subservicing Agreement will be required to comply
with the provisions of Section 4.07. The terms of any Subservicing
Agreement will not be inconsistent with any of the provisions of this
Agreement;
(g) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by it of, or compliance by it with, this Agreement or
the Notes, or for the consummation of the transactions contemplated by
this Agreement, except for such consents, approvals, authorizations and
orders, if any, that have been obtained prior to the Closing Date;
(h) The collection practices used by it with respect to the
Home Loans have been, in all material respects, legal, proper, prudent
and customary in the nonconforming mortgage servicing business;
(i) The transactions contemplated by this Agreement are in
the ordinary course of its business;
(j) It is duly licensed where required as a "Licensee" or is
otherwise qualified in each state in which it transacts business and is
not in default of such state's applicable laws, rules and regulations,
except where the failure to so qualify or such default would not have a
material adverse effect on the ability of the Servicer to conduct its
business or perform its obligations hereunder;
(k) It is an Eligible Servicer and services mortgage loans in
accordance with Accepted Servicing Procedures and the computer systems
utilized by the Servicer in the performance of its servicing activities
hereunder will be capable of properly performing any calculations and
recordkeeping functions with respect to the Home Loans on and after
January 1, 2000;
(l) No Officer's Certificate, statement, report or other
document prepared by it and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements contained herein or
therein not misleading;
(m) It is solvent and will not be rendered insolvent as a
result of the performance of its obligations pursuant to this
Agreement;
(n) It has not waived any default, breach, violation or event
of acceleration existing under any Debt Instrument or the related
Mortgage;
(o) It is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended;
(p) It will cause to be performed any and all acts required to
be performed by the Servicer to preserve the rights and remedies of the
Owner Trustee and the Indenture Trustee in any Insurance Policies
applicable to the Home Loans including, without limitation, in each
case, any necessary notifications of insurers, assignments of policies
or interests therein, and establishments of co-insured, joint loss
payee and mortgagee rights in favor of the Owner Trustee and the
Indenture Trustee;
(q) The Servicer shall comply with, and shall service, or
cause to be serviced, each Home Loan, in accordance with all applicable
laws;
(r) The Servicer agrees that, so long as it shall continue to
serve in the capacity contemplated under the terms of this Agreement,
it shall remain in good standing under the laws governing its creation
and existence and qualified under the laws of each state in which it is
necessary to perform its obligations under this Agreement or in which
the nature of its business requires such qualification; it shall
maintain all licenses, permits and other approvals required by any law
or regulations as may be necessary to perform its obligations under
this Agreement and to retain all rights to service the Loans; and it
shall not dissolve or otherwise dispose of all or substantially all of
its assets;
(s) The Prospectus Supplement (other than (i) the statements
set forth in the paragraph immediately preceding the final paragraph of
the cover of the Prospectus Supplement and the first sentence of the
final paragraph of the cover of the Prospectus Supplement and (ii) the
statements under the following captions: "SUMMARY -- Securities
Issued", "-- Priority of Payments", "--Maturity Date", "-Credit
Enhancement", "-- Tax Status", "-- ERISA", "-- Legal Investment",
"DESCRIPTION OF THE NOTES", "DESCRIPTION OF CREDIT ENHANCEMENT",
"FEDERAL INCOME TAX CONSEQUENCES", "ERISA CONSIDERATIONS", "LEGAL
INVESTMENT MATTERS" and "UNDERWRITING", as to which the Transferor
makes no statement) does not contain an untrue statement of a material
fact and does not omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and
(t) The Originator has transferred the Home Loans without any
intent to hinder, delay or defraud any of its creditors.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Indenture Trustee's Home Loan Files to the Indenture Trustee and
shall inure to the benefit of the Depositor, the Noteholders, the Owner Trustee
and the Indenture Trustee. Upon discovery by any of the Transferor, the
Depositor, the Servicer, the Indenture Trustee or the Owner Trustee of a breach
of any of the foregoing representations, warranties and covenants that
materially and adversely affects the value of any Home Loan or the interests of
Noteholders therein, the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following such discovery)
to the other parties.
Section 3.04 Representations and Warranties Regarding Individual Home
Loans.
Each of the Transferor and the Originator hereby represents and warrants to
the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee and the
Noteholders, with respect to each Home Loan as of the Closing Date, and with
respect to each Subsequent Loan, as of the related Subsequent Transfer Date,
except as otherwise expressly stated:
(a) The information set forth in each Home Loan Schedule is complete, true
and correct;
(b) The information to be provided by the Originator and the Transferor to
the Depositor or the Owner Trustee in connection with a Subsequent Loan will be
true and correct in all material respects at the date or dates respecting which
such information is furnished;
(c) Each Mortgage is a valid first or second lien on a fee simple (or its
equivalent under applicable state law) estate in the real property securing the
amount owed by the Obligor under the Debt Instrument subject only to (i) the
lien of current real property taxes and assessments which are not delinquent,
(ii) any related first mortgage loan, (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally in the area wherein
the related Mortgaged Property is located and specifically referred to in the
title insurance policy delivered to the originator of the Home Loan and referred
to or otherwise considered in the appraisal obtained in connection with the
origination of the related Home Loan and (iv) other matters to which like
properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by such Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property;
(d) Immediately prior to the sale of the Home Loan to the Depositor (i) the
Transferor or the Originator, as the case may be, was the sole owner and holder
of each Home Loan, (ii) each Home Loan was not otherwise assigned or pledged,
(iii) the Transferor or the Originator, as the case may be, had good,
indefeasible and marketable title thereto, (iv) the Transferor or the
Originator, as the case may be, had full right to transfer and sell the Home
Loan therein to the Depositor or the Transferor, as the case may be, hereunder
free and clear of any encumbrance, equity interest, participation interest,
lien, pledge, charge, claim or security interest, and (v) the Transferor or the
Originator, as the case may be, had full right and authority subject to no
interest or participation of, or agreement with, any other party, to sell and
assign each Home Loan to the Depositor or the Transferor, as the case may be, or
the Originator, as the case may be, hereunder and following the sale of each
Home Loan by the Depositor to the Owner Trustee, the Owner Trustee will own such
Home Loan free and clear of any encumbrance, equity interest, participation
interest, lien, pledge, charge, claim or security interest (other than the lien
created by this Agreement);
(e) As of the Cut-Off Date, no payment of principal or interest on or in
respect of any Home Loan remains unpaid for 30 or more days past the date the
same was due in accordance with the related Debt Instrument without regard to
applicable grace periods;
(f) No Fixed Rate Loan has a Home Loan Interest Rate less than, 9.10% per
annum and the weighted average interest rate of the Fixed Rate Loans as of the
Cut-Off Date was 14.11% and no Adjustable Rate Loan has a Lifetime Floor less
than 9.25% per annum and the weighted average interest rate of the Adjustable
Rate Loans as of the Cut-Off Date was 11.50%;
(g) At origination, no Home Loan had an original term to maturity of
greater than 360 months;
(h) As of the Cut-Off Date, the weighted average remaining term to maturity
of the Home Loans was 108.0 months;
(i) There is no mechanics' or similar lien or claim for work, labor or
material (and no rights are outstanding that under law could give rise to such
lien) affecting the Mortgaged Property; the related Mortgaged Property is not
subject to any lien or claim which is or may be a lien prior to, or equal or
coordinate with, the lien of such Mortgage, except those which are insured
against by the title insurance policy referred to in (ag) below;
(j) There is no delinquent tax or assessment lien against any Mortgaged
Property;
(k) Such Home Loan, the Mortgage, and the Debt Instrument, including,
without limitation, the obligation of the Obligor to pay the unpaid principal of
and interest on the Debt Instrument, are each not subject to any right of
rescission (or any such rescission right has expired in accordance with
applicable law), set-off, counterclaim, or defense, including the defense of
usury, nor will the operation of any of the terms of the Debt Instrument or the
Mortgage, or the exercise of any right thereunder, render either the Debt
Instrument or the Mortgage unenforceable, in whole or in part, or subject to any
right of rescission, set-off, counterclaim, or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim, or defense has
been asserted with respect thereto;
(l) The Mortgaged Property is free of material damage and is in good
repair, and there is no pending or threatened proceeding for the total or
partial condemnation of the Mortgaged Property;
(m) The Transferor has not received a notice of default of any first
mortgage loan secured by the Mortgaged Property which has not been cured by a
party other than the Transferor;
(n) Each Debt Instrument and Mortgage are in substantially the forms
previously provided to the Owner Trustee;
(o) No Home Loan had, at the date of origination, a Combined Loan-to-Value
Ratio in excess of 135%, and the weighted average Combined Loan-to-Value ratio
of all Home Loans as of the Cut-Off Date was 108.0%;
(p) The Home Loan was not originated in a program in which the amount of
documentation in the underwriting process was limited in comparison to the
originator's normal documentation requirements for similar type loans;
(q) No more than the following percentages of the Home Loans by Principal
Balance as of the Cut-Off Date were secured by Mortgaged Properties located in
the following states:
Percent of
State Principal Balance
----- -----------------
California 17.2%
Virginia 8.2%
Florida 5.9%
Oklahoma 5.8%
Maryland 5.6%
(r) The Home Loans were not selected by the Originator or the Transferor
for sale to the Transferor or the Depositor on any basis adverse to the
Depositor relative to the portfolio of similar mortgage loans of the Transferor;
(s) None of the Home Loans constitutes a lien on leasehold interests;
(t) Each Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security including (A) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (B) otherwise by judicial foreclosure. To the best of the
Originator's or the Transferor's knowledge, there is no homestead or other
exemption available to the related Obligor which would materially interfere with
the right to sell the related Mortgaged Property at a trustee's sale or the
right to foreclose the related Mortgage. The Mortgage contains customary and
enforceable provisions for the acceleration of the payment of the Principal
Balance of such Home Loan in the event all or any part of the related Mortgaged
Property is sold or otherwise transferred without the prior written consent of
the holder thereof;
(u) Each Home Loan has been closed and the proceeds of such Home Loan have
been fully disbursed, including reserves set aside by the Originator or the
Transferor, there is no requirement for, and the Originator or the Transferor
shall not make any, future advances thereunder. Any future advances made prior
to the Cut-Off Date have been consolidated with the principal balance secured by
the Mortgage, and such principal balance, as consolidated, bears a single
interest rate and single repayment term reflected on the applicable Home Loan
Schedule. The Principal Balance as of the Cut-Off Date does not exceed the
original principal amount of such Home Loan. Any and all requirements as to
completion of any on-site or off site improvements and as to disbursements of
any escrow funds therefor have been complied with. All costs, fees, and expenses
incurred in making, or recording such Home Loan have been paid and the related
Obligor is not entitled to any refund of any amounts paid or due under the
related Debt Instrument or Mortgage;
(v) All Home Loans were originated in compliance with Life's Underwriting
Guidelines and conform in all material respects to the description thereof set
forth in the Prospectus Supplement;
(w) The terms of the Mortgage and Debt Instrument have not been impaired,
waived, altered, or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the Indenture
Trustee and which has been delivered to the Indenture Trustee. The substance of
any such alteration or modification is or as to Subsequent Loans will be
reflected on the applicable Home Loan Schedule and, to the extent necessary, has
been or will be approved by (i) the insurer under the applicable mortgage title
insurance policy, and (ii) the insurer under any other insurance policy required
hereunder for such Home Loan where such insurance policy requires approval and
the failure to procure approval would impair coverage under such policy;
(x) No instrument of release, satisfaction, subordination, rescission,
waiver, alteration, or modification has been executed in connection with such
Home Loan, no Home Loan has been satisfied, canceled, subordinated or rescinded,
in whole or in part, and no Home Loan has been released, in whole or in part,
except in connection with an assumption agreement which has been approved by the
insurer under any insurance policy required hereunder for such Home Loan where
such policy requires approval and the failure to procure approval would impair
coverage under such policy, and which is part of the Mortgage File and has been
delivered to the Indenture Trustee, and the terms of which are reflected in the
applicable Home Loan Schedule;
(y) There is no default, breach, violation, or event of acceleration
existing under the Mortgage or the Debt Instrument and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event of acceleration, and
neither the Originator nor the Transferor has waived any such default, breach,
violation or event of acceleration. All taxes, governmental assessments
(including assessments payable in future installments), insurance premiums,
water, sewer, and municipal charges, leaseholder payments, or ground rents which
previously became due and owing in respect of or affecting the related Mortgaged
Property have been paid. Neither the Originator nor the Transferor has not
advanced funds, or induced, solicited, or knowingly received any advance of
funds by a party other than the Obligor, directly or indirectly, for the payment
of any amount required by the Mortgage or the Debt Instrument;
(z) All of the improvements which were included for the purposes of
determining the Appraised Value of the Mortgaged Property were completed at the
time that such Home Loan was originated and lie wholly within the boundaries and
building restriction lines of such Mortgaged Property. No improvements on
adjoining properties encroach upon the Mortgaged Property. No improvement
located on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation. All inspections, licenses, and certificates
required to be made or issued with respect to all occupied portions of the
Mortgaged Property (including all such improvements which were included for the
purpose of determining such Appraised Value) and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriters certificates, have been made or obtained from the
appropriate authorities and the Mortgaged Property is lawfully occupied under
applicable law;
(aa) There do not exist any circumstances or conditions with respect to the
Mortgage, the Mortgaged Property, the Obligor, or the Obligor's credit standing
that can be reasonably expected to cause such Home Loan to become delinquent or
adversely affect the value or marketability of such Home Loan, other than any
such circumstances or conditions permitted under Life's Underwriting Guidelines;
(ab) All parties which have had any interest in the Mortgage, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (i) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located and (ii) (A) organized under the laws of such
state, (B) qualified to do business in such state, (C) federal savings
associations or national banks, (D) not doing business in such state, or (E) not
required to qualify to do business in such state;
(ac) The Debt Instrument, the Mortgage and every other agreement, if any,
executed by the applicable Obligor in connection with such Home Loan, are
genuine, and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally and except
that the equitable remedy of specific performance and other equitable remedies
are subject to the discretion of the courts. All parties to the Debt Instrument,
the Mortgage and every other such agreement had legal capacity to execute the
Debt Instrument, the Mortgage and every other such agreement and convey the
estate therein purported to be conveyed, and the Debt Instrument, the Mortgage
and every other such agreement have been duly and properly executed by such
parties or pursuant to a valid power-of-attorney that has been recorded with the
Mortgage;
(ad) The transfer of the Debt Instrument and the Mortgage as and in the
manner contemplated by the Home Loan Purchase Agreement is sufficient either (i)
fully to transfer to the Transferor or the Depositor all right, title, and
interest of the Originator and the Transferor thereto, respectively, as note
holder and mortgagee or (ii) to grant to the Depositor the security interest
referred to in Section 2.3 of the Home Loan Purchase Agreement. The Mortgage has
been duly assigned and the Debt Instrument has been duly endorsed. The
assignment of Mortgage delivered to the Indenture Trustee pursuant to Section
2.04 of this Agreement is in recordable form and is acceptable for recording
under the laws of the applicable jurisdiction. The endorsement of the Debt
Instrument, the delivery to the Indenture Trustee of the endorsed Debt
Instrument, and such assignment of Mortgage, and the delivery of such assignment
of Mortgage for recording to, and the due recording of such assignment of
Mortgage in, the appropriate public recording office in the jurisdiction in
which the Mortgaged Property is located are sufficient to permit the Indenture
Trustee to avail itself of all protection available under applicable law against
the claims of any present or future creditors of the Originator or the
Transferor, and are sufficient to prevent any other sale, transfer, assignment,
pledge, or hypothecation of the Debt Instrument and Mortgage by the Originator
or the Transferor from being enforceable;
(ae) Any and all requirements of any federal, state, or local law
including, without limitation, usury, truth-in-lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity, or disclosure
laws applicable to such Home Loan have been complied with, and the Servicer
shall maintain in its possession, available for the Indenture Trustee's
inspection, and shall deliver to the Indenture Trustee or its designee upon
demand, evidence of compliance with all such requirements. The consummation of
the transactions contemplated by this Agreement will not cause the violation of
any such laws;
(af) With respect to the Initial Loans, on the Closing Date, and with
respect to the Subsequent Loans, as of the Subsequent Transfer Date, 55% or more
(by aggregate Principal Balance) of the Home Loans do not constitute "real
estate mortgages" for the purpose of Treasury Regulations 301.7701(i) under the
Code. For this purpose a Home Loan does not constitute a "real estate mortgage"
if:
(i) The Home Loan is not secured by an interest in real
property, or
(ii) The Home Loan is not an "obligation principally
secured by an interest in real property."
For this purpose an "obligation is principally
secured by an interest in real property" if it satisfies
either the test set out in paragraph (1) or paragraph (2)
below.
(1) The 80-percent test. An obligation is principally
secured by an interest in real property if the fair
market value of the interest in real property
securing the obligation (A) was at least equal to 80
percent of the adjusted issue price of the obligation
at the time the obligation was originated (or, if
later, the time the obligation was significantly
modified); or (B) is at least equal to 80 percent of
the adjusted issue price of the obligation on the
Closing Date.
For purposes of this paragraph (1), the fair market
value of the real property interest must be first reduced by
the amount of any lien on the real property interest that is
senior to the obligation being tested, and must be further
reduced by a proportionate amount of any lien that is in
parity with the obligation being tested, in each case before
the percentages set forth in (1)(A) and (1)(B) are determined.
The adjusted issue price of an obligation is its issue price
plus the amount of accrued original issue discount, if any, as
of the date of determination.
(2) Alternative test. An obligation is principally
secured by an interest in real property if
substantially all of the proceeds of the obligation
were used to acquire or to improve or protect an
interest in real property that, at the origination
date, is the only security for the obligation. For
purposes of this test, loan guarantees made by the
United States or any state (or any political
subdivision, agency, or instrumentality of the United
States or of any state), or other third party credit
enhancement are not viewed as additional security for
a loan. An obligation is not considered to be secured
by property other than real property solely because
the obligor is personally liable on the obligation.
For this purpose only, substantially all of the
proceeds of the obligations means 66% or more of the
gross proceeds.
(ag) Such Home Loan, if a first lien, is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of policy and
such Home Loan, if a second lien, is covered by a PERT policy, issued by and the
valid and binding obligation of a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring Life, and its
successors and assigns, as to the first or second, as applicable, priority lien,
of the Mortgage in the original principal amount of such Home Loan. The
assignment to the Indenture Trustee of the Transferor's interest in such
mortgage title insurance policy does not require the consent of or notification
to the insurer. Such mortgage title insurance policy is in full force and effect
and will be in full force and effect and inure to the benefit of the Indenture
Trustee and the Owner Trustee upon the consummation of the transactions
contemplated by this Agreement, the Home Loan Purchase Agreement and the
Indenture. No claims have been made under such mortgage title insurance policy
and neither the Transferor nor any prior holder of the Mortgage has done, by act
or omission, anything which would impair the coverage of such mortgage title
insurance policy;
(ah) All improvements upon the Mortgaged Property are insured against loss
by fire, hazards of extended coverage, and such other hazards as are customary
in the area where the Mortgaged Property is located pursuant to fire and hazard
insurance policies naming the Servicer as loss payee thereunder. If the
Mortgaged Property at origination was located in an area identified on a flood
hazard boundary map or flood insurance rate map issued by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Indenture Trustee upon the
consummation of the transactions contemplated by this Agreement, and contain a
standard mortgagee clause naming the originator of such Home Loan, and its
successors and assigns, as mortgagee and loss payee. All premiums thereon have
been paid. The Mortgage obligates the Obligor to maintain all such insurance at
the Obligor's cost and expense, and upon the Obligor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Obligor's cost and expense and to seek reimbursement therefor from the
Obligor, and neither the Originator, the Transferor nor any prior holder of the
Mortgage has acted or failed to act so as to impair the coverage of any such
insurance policy or the validity, binding effect, and enforceability thereof;
(ai) If the Mortgage constitutes a deed of trust, a trustee, authorized and
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Indenture Trustee or the holders of
Notes to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Obligor;
(aj) The Mortgaged Property consists of one or more parcels of real
property separately assessed for tax purposes. Each Mortgaged Property is
improved by a one-to-four-family residential dwelling, which does not include
(i) a unit in a cooperative apartment, (ii) a property constituting part of a
syndication, (iii) a time share unit, (iv) a property held in trust, (v) a
mobile home, (vi) a manufactured dwelling, (vii) a log-constructed home, or
(viii) a recreational vehicle, and each such Mortgaged Property does not
constitute other than real property under applicable state law;
(ak) There exist no material deficiencies with respect to escrow deposits
and payments, if such are required, for which customary arrangements for
repayment thereof have not been made or which the Originator and the Transferor
expects not to be cured, and no escrow deposits or payments of other charges or
payments due the Originator and the Transferor have been capitalized under the
Mortgage or the Debt Instrument;
(al) Such Home Loan was not originated at a below market interest rate.
Such Home Loan does not have a shared appreciation feature, or other contingent
interest feature;
(am) The origination and collection practices used by the Originator and
the Transferor with respect to such Home Loan have been in all respects legal,
proper, prudent, and customary in the mortgage origination and servicing
business;
(an) The Obligor has, to the extent required by applicable law, executed a
statement to the effect that the Obligor has received all disclosure materials,
if any, required by applicable law with respect to the making of fixed-rate
mortgage loans. The Servicer shall maintain or cause to be maintained such
statement in the Mortgage File;
(ao) All amounts received by the Originator or the Transferor with respect
to such Home Loan after the Cut-Off Date and required to be deposited in the
Collection Account have been so deposited in the Collection Account and are, as
of the Closing Date, or will be as of the Subsequent Transfer Date, as
applicable, in the Collection Account;
(ap) Any appraisal report with respect to a Mortgaged Property contained in
the Home Loan File was signed prior to the approval of the application for such
Home Loan by a qualified appraiser, duly appointed by the originator of such
Home Loan, who had no interest, direct or indirect, in the Mortgaged Property or
in any loan made on the security thereof and whose compensation is not affected
by the approval or disapproval of such application;
(aq) When measured by the Cut-Off Date Principal Balances as of the Cut-Off
Date, the Obligors with respect to at least 100% of the Home Loans represented
at the time of origination that the Obligor would occupy the Mortgaged Property
as the Obligor's primary residence;
(ar) The Home Loan Interest Rate and Monthly Payment with respect to the
Adjustable Rate Loans are adjusted in accordance with the terms of the related
Debt Instrument. All required notices of interest rate and payment amount
adjustments have been sent to the Obligor on a timely basis and the computations
of such adjustments were properly calculated. Installments of interest on the
Adjustable Rate Loans are subject to change due to the adjustments to the Home
Loan Interest Rate on each Interest Adjustment Date, with interest calculated
and payable in arrears, sufficient to amortize the Home Loan fully by the stated
maturity date over the original term of the Home Loan. All Home Loan Interest
Rate adjustments have been made in strict compliance with state and federal law
and the terms of the related Debt Instrument. Any interest required to be paid
pursuant to state and local law has been properly paid and credited. As of the
Cut-Off Date, for each Adjustable Rate Loan, the Lifetime Cap is not lower than
approximately 12.80% per annum, the Lifetime Floor is not lower than
approximately 9.25% per annum, the Gross Margin is not less than approximately
4.63%, the related Debt Instrument does not provide for negative amortization,
limits in the amount of monthly payments or a conversion feature, the Home Loan
Interest Rate is subject to adjustment on each Interest Adjustment Date to equal
the sum of LIBOR plus the applicable Gross Margin, subject to rounding, the
Periodic Rate Cap, the applicable Lifetime Floor and the applicable Lifetime Cap
on each Interest Adjustment Date;
(as) To the best of the Originator's and the Transferor's knowledge, there
exists no violation of any local, state, or federal environmental law, rule or
regulation in respect of the Mortgaged Property which violation has or could
have a material adverse effect on the market value of such Mortgaged Property.
Neither the Originator nor the Transferor has knowledge of any pending action or
proceeding directly involving the related Mortgaged Property in which compliance
with any environmental law, rule or regulation is in issue; and, to the best of
the Originator's or the Transferor's knowledge, nothing further remains to be
done to satisfy in full all requirements of each such law, rule or regulation
constituting a prerequisite to the use and employment of such Mortgaged
Property;
(at) With respect to second lien Home Loans:
(i) neither the Originator nor the Transferor has knowledge
that the Obligor has received notice from the holder of the
prior mortgage that such prior mortgage is in default;
(ii) no consent from the holder of the prior mortgage is
needed for the creation of the second lien Mortgage or, if
required, has been obtained and is in the related Home Loan
File;
(iii) if the prior mortgage has a negative amortization
features, the Combined Loan-to-Value Ratio was determined
using the maximum loan amount of such prior mortgage; and
(iv) the related first mortgage loan encumbering the related
Mortgaged Property does not have a mandatory future advance
provision;
(au) the maturity date of the Home Loan is prior to the maturity date of
the related prior lien if such provides for a balloon payment;
(av) Each Home Loan conforms, and all such Home Loans in the aggregate
conform, to the individual and aggregate descriptions thereof in the Prospectus
Supplement;
(aw) The Originator and the Transferor further represent and warrant to the
Owner Trustee, the Indenture Trustee and the Noteholders that as of the
Subsequent Cut-Off Date all representations and warranties set forth in clauses
(a) through (av) above and clause (ax) through (bf) below are correct in all
material respects as to each Subsequent Loan, and (i) no Subsequent Loans may be
30 or more days contractually delinquent as of the applicable Cut-Off Date; (ii)
the lien securing any such Subsequent Loan must not be lower than second
priority; (iii) such Subsequent Loan must have an outstanding Principal Balance
of at least $2,500 as of the applicable Cut-Off Date; (iv) the first payment on
such Subsequent Loan must be due no later than the last day of the Due Period
immediately succeeding the Due Period in which it is transferred, unless the
Transferor deposits into the Collection Account 30 days' interest on such
Subsequent Loan at the Loan Rate less the applicable Servicing Fee rate, in
which event the first payment on such Subsequent Loan must be due no later than
the last day of the second Due Period following the Due Period in which the
transfer occurs; (v) such Subsequent Loan is a fully amortizing loan with level
payments over the remaining term of no fewer than 10 years and no more than 25
years and the scheduled maturity will be no later than April 2023; (vi) such
Subsequent Loan, if an Adjustable Rate Loan must have an adjustable Loan Rate of
at least 9.25%, and if a Fixed Rate Loan, must have a fixed Loan Rate of at
least 9.10%; (vii) any such Subsequent Loan must have an original Combined
Loan-to-Value Ratio of no more than 135%; (viii) such Subsequent Loan must be
underwritten, re-underwritten or reviewed, as applicable, in accordance with the
Underwriting Guidelines of Life in effect at such time or in a manner similar to
the Initial Loans; and (ix) following the purchase of such Subsequent Loans by
the Owner Trust, the Loans included in the Owner Trust must have a weighted
average interest rate and a weighted average remaining term to maturity as of
each respective Cut-Off Date comparable to those of the Initial Loans.
(ax) To the best of the Originator's and the Transferor's knowledge, no
error, omission, misrepresentation, negligence, fraud or similar occurrence with
respect to a Home Loan has taken place on the part of any person, including
without limitation the Obligor, any appraiser, a builder or developer, or any
other party involved in the origination of the Home Loan or in the application
of any insurance in relation to such Home Loan;
(ay) Each Debt Instrument held by the Indenture Trustee is the sole
original Debt Instrument and no copies exist which are not stamped duplicate;
(az) Each Mortgage was recorded, and all subsequent assignments of the
original Mortgage have been recorded in the appropriate jurisdictions wherein
such recordation is necessary to perfect the lien thereof as against creditors
of the Originator and the Transferor;
(ba) No more than 3.5% of the Fixed Rate Loans, and 4.9% of the Adjustable
Rate Loans are secured by properties sharing a single ZIP code;
(bb) With respect to each Home Loan, the payments required of the related
Obligor are and will be such that the Home Loan will fully amortize over its
term;
(bc) No Home Loan contains any provisions pursuant to which payments are
paid or partially paid with funds deposited in any separate account established
by the Originator, the Transferor, the Obligor or anyone else on behalf of the
Obligor, or paid by any source other than the Obligor. No Home Loan contains any
other similar provision which may constitute a "buydown" provision. No Home Loan
is a graduated payment mortgage loan. No Home Loan has a shared appreciation or
other contingent interest feature;
(bd) The Home Loans are not being transferred with any intent to hinder,
delay or defraud any creditor;
(be) No Obligor has or will have a claim or defense under any express or
implied warranty or otherwise with respect to goods or services provided under
such Home Loan;
(bf) The Mortgage and the Debt Instrument contain the entire agreement of
the parties and all obligations of the seller or subcontractor under the related
Home Loan, and no other agreement defines, modifies, or expands the obligations
of the seller or subcontractor under the Home Loan.
Section 3.05 Purchase and Substitution.
(a) It is understood and agreed that the representations and warranties set
forth in Section 3.04 hereof shall survive the conveyance of the Home Loans to
the Issuer, the grant of the Home Loans to the Indenture Trustee and the
delivery of the Notes to the Noteholders. Upon discovery by the Depositor, the
Servicer, the Transferor, the Custodian, the Issuer, the Indenture Trustee, the
Owner Trustee or any Securityholder of a breach of any of such representations
and warranties or the representations and warranties set forth in Section 3.02
which materially and adversely affects the value of the Home Loans or the
interests of the Securityholders in the related Home Loan (notwithstanding that
such representation and warranty was made to the Transferor's best knowledge),
the party discovering such breach shall give prompt written notice to the
others. The Transferor or Life shall within 60 days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, including any breach of the representation set forth in Section
3.04(af) hereof as a result of an aggregate of Home Loans which would not
otherwise cause a breach of any other representation or warranty, promptly cure
such breach in all material respects. If within 60 days after the earlier of the
Transferor's or the Originator's discovery of such breach or the Transferor's or
the Originator's receiving notice thereof such breach has not been remedied by
the Transferor or the Originator and such breach materially and adversely
affects the interests of Securityholders or in the related Home Loan (the
"Defective Home Loan"), the Transferor or the Originator shall on or before the
Determination Date next succeeding the end of such 60-day period either (i)
remove such Defective Home Loan from the Owner Trust (in which case it shall
become a Deleted Home Loan) and substitute one or more Qualified Substitute Home
Loans in the manner and subject to the conditions set forth in this Section 3.05
or (ii) purchase such Defective Home Loan at a purchase price equal to the
Purchase Price by depositing such Purchase Price in the Collection Account. The
Transferor or the Originator shall provide the Servicer, the Indenture Trustee
and the Owner Trustee with a certification of a Responsible Officer on the
Determination Date next succeeding the end of such 60-day period indicating
whether the Transferor or the Originator is purchasing the Defective Home Loan
or substituting in lieu of such Defective Home Loan a Qualified Substitute Home
Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall be
accompanied by payment by the Transferor or the Originator of the Substitution
Adjustment, if any, to be deposited in the Collection Account. For purposes of
calculating the Available Collection Amount for any Payment Date, amounts paid
by the Transferor or the Originator pursuant to this Section 3.05 in connection
with the repurchase or substitution of any Defective Home Loan that are on
deposit in the Collection Account as of the Determination Date for such Payment
Date shall be deemed to have been paid during the related Due Period and shall
be transferred to the Note Payment Account as part of the Available Collection
Amount to be retained therein or transferred to the Certificate Distribution
Account, if applicable, pursuant to Section 5.01(c) hereof.
It is understood and agreed that the obligation of the Transferor or the
Originator to repurchase or substitute any such Home Loan pursuant to this
Section 3.05 shall constitute the sole remedy against it with respect to such
breach of the foregoing representations and warranties of the Transferor or the
Originator or the existence of the foregoing conditions. With respect to
representations and warranties made by the Transferor pursuant to Section 3.04
hereof that are made to the Transferor's best knowledge, if it is discovered by
any of the Depositor, the Transferor, the Originator, the Indenture Trustee or
the Owner Trustee that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related Home Loan, notwithstanding the Transferor's lack of knowledge, such
inaccuracy shall be deemed a breach of the applicable representation and
warranty.
(b) As to any Deleted Home Loan for which the Transferor or the Originator
substitutes a Qualified Substitute Home Loan or Loans, the Transferor or the
Originator shall effect such substitution by delivering (i) to the Indenture
Trustee and Owner Trustee a certification executed by a Responsible Officer of
the Transferor or the Originator to the effect that the Substitution Adjustment
has been credited to the Collection Account and (ii) to the Indenture Trustee
(or Custodian on the Indenture Trustee's behalf, if applicable) the documents
constituting the Indenture Trustee's Home Loan File for such Qualified
Substitute Home Loan or Loans.
The Servicer shall deposit in the Collection Account all payments received
in connection with such Qualified Substitute Home Loan or Loans after the date
of such substitution. Monthly Payments received with respect to Qualified
Substitute Home Loans on or before the date of substitution will be retained by
the Transferor (or Life, if substituted by Life). The Issuer will be entitled to
all payments received on the Deleted Home Loan on or before the date of
substitution and the Transferor shall thereafter be entitled to retain all
amounts subsequently received in respect of such Deleted Home Loan. The
Transferor or the Originator shall give written notice to the Issuer, the
Servicer (if the Originator is not then acting as such), the Indenture Trustee
and Owner Trustee that such substitution has taken place and the Servicer shall
amend the Home Loan Schedule to reflect (i) the removal of such Deleted Home
Loan from the terms of this Agreement and (ii) the substitution of the Qualified
Substitute Home Loan. The Transferor or the Originator shall promptly deliver to
the Issuer, the Servicer (if the Transferor is not then acting as such), the
Indenture Trustee and Owner Trustee, a copy of the amended Home Loan Schedule.
Upon such substitution, such Qualified Substitute Home Loan or Loans shall be
subject to the terms of this Agreement in all respects, and the Originator and
the Transferor shall be deemed to have made with respect to such Qualified
Substitute Home Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Section 3.04 hereof. On the date of
such substitution, the Transferor or the Originator, as the case may be, will
deposit into the Collection Account an amount equal to the related Substitution
Adjustment, if any. In addition, on the date of such substitution, the Servicer
shall cause the Indenture Trustee to release the Deleted Home Loan from the lien
of the Indenture and the Servicer will cause such Qualified Substitute Home Loan
to be pledged to the Indenture Trustee under the Indenture as part of the Owner
Trust Estate.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor or the Originator pursuant to this Agreement, upon
the deposit of the Purchase Price therefor into the Collection Account, the
Indenture Trustee shall assign to the Transferor or the Originator, as the case
may be, without recourse, representation or warranty, all the Indenture
Trustee's right, title and interest in and to such Defective Home Loans or Home
Loans, which right, title and interest were conveyed to the Indenture Trustee
pursuant to Section 2.01 hereof. The Indenture Trustee shall take any actions as
shall be reasonably requested by the Transferor or the Originator to effect the
repurchase of any such Home Loans.
(d) It is understood and agreed that the obligations of the Transferor and
the Originator set forth in this Section 3.05 to cure, purchase or substitute
for a Defective Home Loan (and to indemnify the Owner Trust for certain losses
as described herein in connection with a Defective Home Loan) constitute the
sole remedies hereunder of the Depositor, the Indenture Trustee, the Owner
Trustee and the Securityholders respecting a breach of the representations and
warranties contained in Section 3.02 and Section 3.04 hereof. Any cause of
action against the Transferor or the Originator relating to or arising out of a
defect in an Indenture Trustee's Home Loan File as contemplated by Section 2.05
hereof or against the Transferor or the Originator relating to or arising out of
a breach of any representations and warranties made in Section 3.04 hereof shall
accrue as to any Home Loan upon (i) discovery of such defect or breach by any
party and notice thereof to the Transferor or the Originator or notice thereof
by the Transferor or the Originator to the Indenture Trustee, (ii) failure by
the Transferor or the Originator to cure such defect or breach or purchase or
substitute such Home Loan as specified above, and (iii) demand upon the
Transferor or the Originator, as applicable, by the Issuer or the Majority
Noteholders for all amounts payable in respect of such Home Loan.
(e) Neither the Owner Trustee nor the Indenture Trustee shall have any duty
to conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase or
substitution of any Home Loan pursuant to this Section or the eligibility of any
Home Loan for purposes of this Agreement.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer.
(a) Servicing Standard. The Servicer, as an independent contractor, shall
service and administer the Home Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and the ordinary servicing practices of prudent
mortgage lending institutions. Notwithstanding anything to the contrary
contained herein, the Servicer, in servicing and administering the Home Loans,
shall employ or cause to be employed procedures (including collection,
foreclosure, liquidation and Foreclosure Property management and liquidation
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering loans of the same type as the Home Loans for its
own account, all in accordance with Accepted Servicing Procedures of prudent
lending institutions and servicers of loans of the same type as the Home Loans
and giving due consideration to the Securityholders' reliance on the Servicer.
The Servicer has and shall maintain the facilities, procedures and experienced
personnel necessary to comply with the servicing standard set forth in this
subsection (a) and the duties of the Servicer set forth in this Agreement
relating to the servicing and administration of the Home Loans. In performing
its obligations hereunder the Servicer shall at all times act in good faith in a
commercially reasonable manner in accordance with applicable law and the Debt
Instruments and Mortgages.
(b) Servicing Advances. In accordance with the preceding general servicing
standard, the Servicer, or any Subservicer on behalf of the Servicer, shall make
all Servicing Advances in connection with the servicing of each Home Loan
hereunder. Notwithstanding any provision to the contrary herein, neither the
Servicer nor any Subservicer on behalf of the Servicer shall have any obligation
to advance its own funds for any delinquent scheduled payments of principal and
interest on any Home Loan or to satisfy or keep current the indebtedness secured
by any Superior Liens on the related Mortgaged Property. No costs incurred by
the Servicer or any Subservicer in respect of Servicing Advances shall, for the
purposes of distributions to Securityholders, be added to the amount owing under
the related Home Loan. Notwithstanding any obligation by the Servicer to make a
Servicing Advance hereunder with respect to a Home Loan, before making any
Servicing Advance that is material in relation to the outstanding principal
balance of such Home Loan, the Servicer shall assess the reasonable likelihood
of (i) recovering such Servicing Advance and any prior Servicing Advances for
such Home Loan and (ii) recovering any amounts attributable to outstanding
interest and principal owing on such Home Loan for the benefit of the
Securityholders in excess of the costs, expenses and other deductions to obtain
such recovery, including without limitation any Servicing Advances therefor and,
if applicable, the outstanding indebtedness of all Superior Liens. The Servicer
shall only make a Servicing Advance with respect to a Home Loan to the extent
that the Servicer determines in its reasonable, good faith judgment that such
Servicing Advance would likely be recovered as aforesaid; provided, however,
that the Servicer will be entitled to be reimbursed for any Nonrecoverable
Servicing Advance pursuant to this Agreement.
(c) Waivers, Modifications and Extensions. The Servicer shall make
reasonably diligent efforts to collect all payments called for under the terms
and provisions of the Home Loans and shall, to the extent such procedures shall
be consistent with this Agreement, follow Accepted Servicing Procedures. The
Servicer may in its discretion waive or permit to be waived any penalty interest
or any other fee or charge which the Servicer would be entitled to retain
hereunder as servicing compensation and extend the Due Date on a Debt Instrument
for a period (with respect to each payment as to which the Due Date is extended)
not greater than 90 days after the initially scheduled due date for such
payment. Notwithstanding anything in this Agreement to the contrary, the
Servicer shall not permit any additional extension or modification with respect
to any Home Loan other than that permitted by the immediately preceding sentence
unless the Home Loan is a Defaulted Home Loan.
(d) Instruments of Satisfaction or Release. Without limiting the generality
of subsection (c) of this Section 4.01, the Servicer, in its own name or in the
name of a Subservicer, is hereby authorized and empowered, when the Servicer
believes it appropriate in its best judgment, to execute and deliver, on behalf
of the Securityholders and the Issuer or any of them, any and all instruments of
satisfaction or cancellation or of partial or full release or discharge, and all
other comparable instruments with respect to the Home Loans and the Mortgaged
Properties and to institute foreclosure proceedings or obtain a deed in lieu of
foreclosure so as to convert the ownership of such properties, and to hold or
cause to be held title to such properties, on behalf of the Issuer and
Securityholders. The Servicer shall service and administer the Home Loans in
accordance with applicable state and federal law and shall provide to the
Obligors any reports required to be provided to them thereby. The Indenture
Trustee shall execute, at the written direction of the Servicer, any limited or
special powers of attorney and other documents reasonably acceptable to the
Indenture Trustee to enable the Servicer or any Subservicer to carry out their
servicing and administrative duties hereunder, including, without limitation,
limited or special powers of attorney with respect to any Foreclosure Property,
and the Indenture Trustee shall not be accountable for the actions of the
Servicer or any Subservicers under such powers of attorney and shall be
indemnified by such parties with respect to such actions.
Section 4.02 Payment of Taxes, Insurance and Other Charges.
The Servicer may and, if required by the Servicer, the Subservicers shall,
establish and maintain one or more accounts (each, a "Servicing Account") into
which any collections from the Obligors (or related advances from Subservicers)
for the payment of taxes, assessments, hazard insurance premiums and comparable
items for the account of the Obligors shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. Withdrawals of amounts so collected from a
Servicing Account may be made only to (i) effect timely payment of taxes,
assessments, hazard insurance premiums and comparable items; (ii) reimburse the
Servicer (or a Subservicer to the extent provided in the related Subservicing
Agreement) out of related collections for any advances with respect to taxes,
assessments, hazard insurance premiums and comparable items; (iii) refund to
Obligors any sums as may be determined to be overages; (iv) pay interest, if
required and as described below, to Obligors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
this Agreement in accordance with Section 11.01 hereof. As part of its servicing
duties, the Servicer or Subservicers shall pay to the Obligors interest on funds
in Servicing Accounts to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement from the
Indenture Trustee, the Owner Trustee or the Depositor. Upon request of the
Indenture Trustee, the Transferor or the Servicer shall cause the bank, savings
association or other depository for each Servicing Account to forward to the
Indenture Trustee copies of such statements or reports as the Indenture Trustee,
the Depositor or any Securityholder shall reasonably request.
Section 4.03 Fidelity Bond; Errors and Omissions Insurance.
The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy in
such amounts as required by, and satisfying any other requirements of, the
Federal Housing Administration and the FHLMC, with broad coverage on all
officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Home Loans
("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer against losses, including losses
resulting from forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts (including acts relating to the origination and servicing of
loans of the same type as the Home Loans) of such Servicer Employees. Such
fidelity bond shall also protect and insure the Servicer against losses in
connection with the release or satisfaction of a Home Loan without having
obtained payment in full of the indebtedness secured thereby. In the event of
any loss of principal or interest on a Home Loan for which reimbursement is
received from the Servicer's fidelity bond or errors and omissions insurance,
the proceeds from any such insurance will be deposited in the Collection
Account. No provision of this Section 4.03 requiring such fidelity bond and
errors and omission insurance shall diminish or relieve the Servicer from its
duties and obligations as set forth in this Agreement. The Servicer shall also
cause each Subservicer to maintain a policy of insurance covering errors and
omissions and a fidelity bond which would meet the requirements set forth above.
Upon the request of the Issuer or the Indenture Trustee, the Servicer shall
cause to be delivered to the requesting party a certified true copy of such
fidelity bond and insurance policy.
Section 4.04 Filing of Continuation Statements.
On or before the fifth anniversary of the filing of any financing
statements by Life, the Transferor and the Depositor, respectively, with respect
to the assets conveyed to the Owner Trust, Life, the Transferor and the
Depositor shall prepare, have executed by the necessary parties and file in the
proper jurisdictions all financing and continuation statements necessary to
maintain the liens, security interests and priorities of such liens and security
interests that have been granted by Life, the Transferor and the Depositor,
respectively, and Life, the Transferor and the Depositor shall continue to file
on or before each fifth anniversary of the filing of any financing and
continuation statements such additional financing and continuation statements
until the Owner Trust has terminated pursuant to Section 9.1 of the Owner Trust
Agreement. The Indenture Trustee agrees to cooperate with Life, the Transferor
and the Depositor in preparing, executing and filing such statements. The
Indenture Trustee agrees to notify Life, the Transferor and the Depositor on the
third Payment Date prior to each such fifth anniversary of the requirement that
they file such financing and continuation statements. The filing of any such
statement with respect to Life, the Transferor and the Depositor shall not be
construed as any indication of an intent of any party contrary to the expressed
intent set forth in Section 2.03 hereof. If Life, the Transferor or the
Depositor has ceased to do business whenever any such financing and continuation
statements must be filed or Life, the Transferor or the Depositor fails to file
any such financing statements or continuation statements at least one month
prior to the expiration thereof and the Indenture Trustee is notified of such
failure or has actual knowledge thereof, each of Life, the Transferor and the
Depositor does hereby make, constitute and appoint the Indenture Trustee its
attorney-in-fact, with full power and authority, to execute and file in its name
and on its behalf any such financing statements or continuation statements
required under this Section 4.04 relating to assets conveyed to the Owner Trust
and the Depositor does hereby make, constitute and appoint the Owner Trustee its
attorney-in-fact, with full power and authority, to execute and file in its name
and on its behalf any such financing statements or continuation statements
required under this Section 4.04 relating to assets conveyed to the Owner Trust.
Section 4.05 Superior Liens.
If the Servicer is notified that any lienholder under a Superior Lien has
accelerated or intends to accelerate the obligations secured by such Superior
Lien, or has declared or intends to declare a default under the related mortgage
or the promissory note secured thereby, or has filed or intends to file an
election to have any Mortgaged Property sold or foreclosed, subject to Section
4.01(b), the Servicer shall take, on behalf of the Issuer and the Indenture
Trustee, all reasonable actions that are necessary to protect the interests of
the Securityholders and/or to preserve the security of the related Home Loan.
The Servicer shall promptly notify the Indenture Trustee if it takes any such
action.
Section 4.06 Subservicing.
(a) The Servicer may enter into Subservicing Agreements for any servicing
and administration of Home Loans with any institution that is an Eligible
Servicer and in compliance with the laws of each state necessary to enable it to
perform its obligations under such Subservicing Agreement. The Servicer shall
give prior written notice to the Issuer and the Indenture Trustee of the
appointment of any Subservicer. The Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement and to either service the related Home Loans directly or
enter into a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall service directly the related Home Loans.
Each Subservicing Agreement shall include the provision that such agreement
may be immediately terminated by the Indenture Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer. In no event shall any
Subservicing Agreement require the Indenture Trustee, as Successor Servicer, for
any reason whatsoever to pay compensation to a Subservicer in order to terminate
such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Indenture
Trustee and the Securityholders for the servicing and administration of the Home
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Home Loans. For purposes of this Agreement,
the Servicer shall be deemed to have received payments on Home Loans when the
Subservicer has actually received such payments and, unless the context
otherwise requires, references in this Agreement to actions taken or to be taken
by the Servicer in servicing the Home Loans include actions taken or to be taken
by a Subservicer on behalf of the Servicer. The Servicer shall be entitled to
enter into any agreement with a Subservicer for indemnification of the Servicer
by such Subservicer, and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor Servicer,
on behalf of the Issuer, the Indenture Trustee and the Securityholders pursuant
to Section 4.07 hereof, shall thereupon assume all of the rights and obligations
of the Servicer under each Subservicing Agreement that the Servicer may have
entered into, unless the successor Servicer elects to terminate any Subservicing
Agreement in accordance with its terms. The successor Servicer shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements which accrued prior to the transfer of servicing to the
successor Servicer. The Servicer, at its expense and without right of
reimbursement therefor, shall, upon request of the successor Servicer, deliver
to the assuming party all documents and records relating to each Subservicing
Agreement and the Home Loans then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Subservicing Agreements to the assuming
party.
(d) As part of its servicing activities hereunder, the Servicer for the
benefit, of the Issuer, the Indenture Trustee and the Securityholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement. Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be in
such form and carried out to such an extent and at such time as the Servicer, in
its good faith business judgment, would require were it the owner of the related
Home Loans. The Servicer shall pay the costs of such enforcement at its own
expense and shall be reimbursed therefor only (i) from a general recovery
resulting from such enforcement to the extent, if any, that such recovery
exceeds all amounts due in respect of the related Home Loan or (ii) from a
specific recovery of costs, expenses or attorneys' fees against the party
against which such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none of
the Issuer, the Indenture Trustee or the Securityholders shall be deemed parties
thereto or shall have any claims, rights, obligations, duties or liabilities
with respect to the Subservicer in its capacity as such except as set forth in
subsection (c) of this Section 4.06.
(f) In those cases where a Subservicer is servicing a Home Loan pursuant to
a Subservicing Agreement, the Subservicer will be required to establish and
maintain one or more accounts (collectively, the "Subservicing Account"). The
Subservicing Account shall be an Eligible Account. The Subservicer will be
required to deposit into the Subservicing Account, no later than the first
Business Day after receipt, all proceeds of Home Loans received by the
Subservicer and remit such proceeds to the Servicer for deposit in the
Collection Account not later than the Business Day following receipt thereof by
the Subservicer. Notwithstanding anything in this subsection (f) to the
contrary, the Subservicer shall only be able to withdraw funds from the
Subservicing Account for the purpose of remitting such funds to the Servicer for
deposit into the Collection Account. The Servicer shall require the Subservicer
to cause any collection agent of the Subservicer to send a copy to the Servicer
of each statement of monthly payments collected by or on behalf of the
Subservicer within five Business Days after the end of every month, and the
Servicer shall compare the information provided in such reports with the
deposits made by the Subservicer into the Collection Account for the same
period. The Servicer shall be deemed to have received payments on the Home Loans
on the date on which the Subservicer has received such payments.
Section 4.07 Successor Servicers.
In the event that the Servicer is terminated pursuant to Section 10.01
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes unable
to perform its obligations under this Agreement, the Indenture Trustee will
become the successor servicer or will appoint a successor servicer in accordance
with the provisions of Section 10.02 hereof; provided, however, that any
successor servicer, excluding the Indenture Trustee, shall satisfy the
requirements of an Eligible Servicer and shall be approved by the Rating
Agencies.
Section 4.08 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained for each Foreclosure Property
acquired by the Owner Trust such types and amounts of insurance coverage as the
Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance Policies
shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Home Loan:
(A) for the restoration or repair of the
affected Property, in which event such
amounts shall be released to the Obligor in
accordance with the terms of the related
Debt Instrument or
(B) to the extent not so used, in reduction of
the Principal Balance of the related Home
Loan, in which event such amounts shall be
deposited into the Collection Account,
unless the related instruments require a different application, in which case
such amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.10 hereof, in the case of amounts
received in respect of any Foreclosure Property, for the restoration or
repair of such Foreclosure Property, unless the Servicer determines,
consistent with the servicing standard set forth in Section 4.01
hereof, that such restoration or repair is not in the best economic
interest of the Owner Trust, in which event such amounts shall be
deposited into the Collection Account as a payment received from the
operation of such Foreclosure Property.
Section 4.09 Reports to the Securities and Exchange Commission.
The Indenture Trustee shall, on behalf of the Issuer, cause to be filed
with the Securities and Exchange Commission all monthly reports on Form 8-K and
annual reports on Form 10-K required to be filed under the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder. Upon the request of the
Indenture Trustee, each of the Servicer and the Transferor shall cooperate with
the Indenture Trustee in the preparation of any such report and shall provide to
the Indenture Trustee in a timely manner all such information or documentation
as the Indenture Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section 4.09. The Indenture
Trustee shall indemnify and hold harmless each of the Issuer and the Depositor
for any costs, expenses or liability arising as a result of the failure of the
Indenture Trustee to perform its duties and obligations under this Section 4.09.
Section 4.10 Foreclosure.
(a) If any monthly payment due under any Home Loan is not paid when the
same is due and payable, or if the Obligor fails to perform any other covenant
or obligation under such Home Loan and such failure continues beyond any
applicable grace period, the Servicer shall, in accordance with the standard of
care specified in Section 4.01(a), take such action as it shall deem to be in
the best interest of the Securityholders, including but not limited to
proceeding against the Mortgaged Property securing such Home Loan, and any other
actions that in the reasonable judgment of the Servicer will be likely to
maximize the proceeds realizable therefrom under the circumstances. In the event
that the Servicer determines not to proceed against the Mortgaged Property or
Obligor, as applicable, on or before the Determination Date following such
determination, the Servicer shall determine in good faith in accordance with
customary servicing practices that all amounts which it expects to receive with
respect to such Home Loan have been received. If the Servicer makes such a
determination, it shall give notice to such effect to the Issuer and the
Indenture Trustee.
(b) In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, unless otherwise
prohibited by applicable law or court or administrative order, the Servicer, on
behalf of the Issuer and the Indenture Trustee, may, at any time, institute
foreclosure proceedings to the extent permitted by law, exercise any power of
sale to the extent permitted by law, obtain a deed in lieu of foreclosure, or
otherwise acquire possession of or title to the related Mortgaged Property, by
operation of law or otherwise.
In accordance with the criteria for proceeding against the Mortgaged
Property set forth in subsection (a) of this Section 4.10, the Servicer shall
institute foreclosure proceedings, repossess, exercise any power of sale to the
extent permitted by law, obtain a deed in lieu of foreclosure or otherwise
acquire possession of or title to any Property, by operation of law or
otherwise, only in the event that in the Servicer's reasonable judgment such
action is likely to result in a positive economic benefit to the Owner Trust by
creating net liquidation proceeds (after reimbursement of all amounts owed with
respect to such Home Loan to the Servicer).
Prior to acquiring any Foreclosure Property, however, the Servicer shall
cause a review to be performed, in accordance with Accepted Servicing
Procedures, on the related Mortgaged Property by a company such as Equifax, Inc.
or Toxicheck, and the scope of such review shall be limited to the review of
public records and documents for indications that such Mortgaged Property has on
it, has under it, or is near hazardous or toxic material or waste. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental problem,
the Servicer shall provide a copy to the Indenture Trustee of the related report
with an attached certification of a Responsible Officer that based on an
analysis of all available information (including potential clean up costs and
liability claims) at the time it is the best judgment of such Responsible
Officer that such foreclosure shall increase Net Liquidation Proceeds to the
Owner Trust and the Owner Trust shall take title to such Mortgaged Property. The
Indenture Trustee shall promptly forward such report and certification to the
Noteholders.
(c) The Indenture Trustee shall furnish the Servicer, within 5 days after
request of the Servicer therefor, any powers of attorney and other documents
necessary and appropriate to carry out its duties hereunder, including any
documents or powers of attorney necessary to foreclose any Mortgage and the
Indenture Trustee shall not be accountable for the actions of the Servicer under
such powers of attorney or other documents and shall be indemnified by the
Servicer with respect to such actions. The forms of any such powers or documents
shall be appended to such requests.
Section 4.11 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Indenture Trustee
for the benefit of the Securityholders. The Servicer shall manage, conserve,
protect and operate each Foreclosure Property for the Indenture Trustee and the
Securityholders solely for the purpose of the prudent and prompt disposition and
sale of such Foreclosure Property. The Servicer shall, either itself or through
an agent selected by the Servicer, manage, conserve, protect and operate the
Foreclosure Property in the same manner that it manages, conserves, protects and
operates other foreclosure property for its own account.
Subject to Section 4.10 hereof, the Servicer shall, consistent with the
servicing standards set forth herein, foreclose upon or otherwise comparably
convert the ownership of Properties securing such of the Home Loans as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. In connection with realization upon
defaulted Home Loans, the Servicer shall follow such practices and procedures as
it shall deem necessary or advisable, as shall be normal and usual in accordance
with Accepted Servicing Procedures and as shall meet the requirements of
insurers under any insurance policy required to be maintained hereunder with
respect to the related Home Loan. The Servicer shall be responsible for all
costs and expenses incurred by it in any such proceedings; provided, however,
that such costs and expenses will be recoverable as Servicing Advances by the
Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property that shall have suffered damage from
any cause of damage to a Mortgaged Property such that the complete restoration
of such property is not fully reimbursable by the hazard insurance policies
required to be maintained pursuant to this Agreement unless it shall determine
in its reasonable judgment, as evidenced by a certificate of a Servicing
Officer, that such foreclosure or restoration, as the case may be, will increase
the proceeds of liquidation of the related Home Loan after reimbursement to
itself of Servicing Advances. Any Servicing Advances made with respect to a Home
Loan shall be recoverable by the Servicer only from recoveries on such Home Loan
except to the extent such Servicing Advance is deemed a Nonrecoverable Servicing
Advance.
The Servicer may offer to sell to any Person any Foreclosure Property, if
and when the Servicer determines, in a manner consistent with Accepted Servicing
Procedures, that such a sale would be in the best interests of the Owner Trust.
The Servicer shall give the Indenture Trustee not less than five days' prior
notice of its intention to sell any Foreclosure Property and shall accept the
highest bid received from any Person for any Foreclosure Property in an amount
at least equal to the sum of:
(1) the Principal Balance of the related foreclosed
Home Loan plus the outstanding amount of any Superior Liens;
and
(2) all unpaid interest accrued thereon at the related
Home Loan Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosure Property by the Servicer, if the highest bidder is a Person other
than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of any
bid determined to be fair as aforesaid, the Servicer shall offer the affected
Foreclosure Property for sale to any Person, other than an Interested Person, in
a commercially reasonable manner for a period of not less than 10 or more than
30 days, and shall accept the highest cash bid received therefor in excess of
the highest bid previously submitted. If no such bid is received, any Interested
Person may resubmit its original bid and the Servicer shall accept the highest
outstanding cash bid, regardless of from whom received. No Interested Person
shall be obligated to submit a bid to purchase any Foreclosure Property and,
notwithstanding anything to the contrary herein, neither the Owner Trustee nor
the Indenture Trustee, in its individual capacity, nor any of its Affiliates may
bid for or purchase any Foreclosure Property pursuant hereto.
In determining whether any bid constitutes a fair price for any Foreclosure
Property, the Servicer shall take into account, and any appraiser or other
expert in real estate matters shall be instructed to take into account, as
applicable, among other factors, the financial standing of any tenant of the
Foreclosure Property, the physical condition of the Foreclosure Property and the
state of the local and national economies.
Subject to the provisions of Section 4.10 hereof, the Servicer shall act on
behalf of the Indenture Trustee in negotiating and taking any other action
necessary or appropriate in connection with the sale of any Foreclosure
Property, including the collection of all amounts payable in connection
therewith. Any sale of a Foreclosure Property shall be without recourse to the
Indenture Trustee, the Servicer or the Owner Trust and, if consummated in
accordance with the terms of this Agreement, neither the Servicer nor the
Indenture Trustee shall have any liability to any Securityholder with respect to
the purchase price therefor accepted by the Servicer or the Indenture Trustee.
The Servicer may contract with any independent contractor for the operation
and management of any Foreclosure Property; provided, however, that:
(i) the terms and conditions of any such contract shall
not be inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered
to require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later
than 30 days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this Section 4.11 relating to
any such contract or to actions taken through any such independent
contractor shall be deemed to relieve the Servicer of any of its duties
and obligations hereunder with respect to the operation and management
of any such Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to
the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of such
Foreclosure Property.
The Servicer shall be entitled to enter into any agreement with any
independent contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Servicer by such independent
contractor, and nothing in this Agreement shall be deemed to limit or modify
such indemnification. The Servicer shall not be liable for any fees owed by it
to any such independent contractor and any amounts so expended shall be deemed
Servicing Advances. Each liquidation of a Foreclosure Property shall be carried
by the Servicer at such price and upon such terms and conditions as the Servicer
shall deem necessary or advisable and as shall be normal and usual in its
several servicing activities, and the resulting Liquidation Proceeds shall be
distributed in accordance with Section 5.01 hereof.
ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Payment Account.
(a) (1) Establishment of Collection Account. The Servicer, for the
benefit of the Securityholders, shall cause to be established and
maintained one or more Collection Accounts (collectively, the
"Collection Account"), which shall be separate Eligible Accounts and
may be interest-bearing, entitled "Collection Account, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the
Life Financial Home Loan Asset Backed Notes, Series 1997-3". The
Collection Account may be maintained with the Indenture Trustee or any
other depository institution which satisfies the requirements set forth
in the definition of Eligible Account. The creation of any Collection
Account other than one maintained with the Indenture Trustee shall be
evidenced by a certification, substantially in the Form of Exhibit D
attached hereto, by the Servicer and acknowledged by the depository
institution. A copy of such letter agreement shall be furnished to the
Indenture Trustee and, upon request of any Securityholder, to such
Securityholder. Funds in the Collection Account shall be invested in
accordance with Section 5.03 hereof.
The Collection Account shall be established, as of the Closing Date, with
the Indenture Trustee as an Eligible Account pursuant to the definition thereof.
The Collection Account may, upon written notice to the Issuer and the Indenture
Trustee, and in accordance with the preceding paragraph, be transferred to a
different depository institution so long as such transfer is to an Eligible
Account acceptable to the Indenture Trustee.
(2) Establishment of Note Payment Account. No later than the
Closing Date, the Servicer, for the benefit of the Noteholders, shall
cause to be established and maintained with the Indenture Trustee one
or more Note Payment Accounts (collectively, the "Note Payment
Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Note Payment Account, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the
Life Financial Home Loan Asset Backed Notes, Series 1997-3". Funds in
the Note Payment Account shall be invested in accordance with Section
5.03 hereof.
(b) (1) Deposits to Collection Account. The Servicer shall use its best
efforts to deposit or cause to be deposited (without duplication),
within two (2) Business Days after receipt thereof, into the Collection
Account and retain therein in trust for the benefit of the
Securityholders:
(i) all payments on account of principal and interest
on the Home Loans collected after the Cut-Off Date, including
(A) any Capitalized Interest Subsequent Deposit and (B) on the
Closing Date, the Required Interest Deposit;
(ii) all Net Liquidation Proceeds pursuant to
Section 4.11 hereof;
(iii) all Insurance Proceeds;
(iv) all Released Mortgaged Property Proceeds;
(v) any amounts payable in connection with the
repurchase of any Home Loan and the amount of any Substitution
Adjustment pursuant to Sections 2.05 and 3.05 hereof;
(vi) the deposit of the Termination Price under
Section 11.01 hereof;
(vii) any amount to be deposited from the Pre-
Funding Account or the Capitalized Interest Account; and
(viii) interest and gains on funds held in the
Collection Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03 hereof,
and such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to the
Servicer from the Note Payment Account on the next Payment Date following such
Due Period.
(2) Deposits to Note Payment Account. On the Remittance Date
of each month the Servicer shall instruct the Indenture Trustee
to withdraw from the Collection Account the Available Collection
Amount and deposit such into the Note Payment Account for such
Payment Date.
(3) Withdrawals from Collection Account. The Indenture
Trustee, at the direction of the Servicer, shall also make the
following withdrawals from the Collection Account, in no
particular order of priority:
(i) to withdraw any amount not required to be deposited
in the Collection Account or deposited therein in error;
(ii) to withdraw the Servicing Advance Reimbursement
Amount;
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement; and
(iv) to make the payments set forth in Section 9.01(e)
hereof.
(c) Withdrawals from Note Payment Account. To the extent funds are
available in the Note Payment Account, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Payment Date) shall make withdrawals therefrom by
9:00 a.m. (New York City time) on each Payment Date, for application in the
following order of priority:
(i) to distribute on such Payment Date the following
amounts pursuant to the Indenture in the following order: (a)
to the Servicer, an amount equal to (i) the Servicing
Compensation (net of any amounts retained prior to deposit
into the Collection Account pursuant to subsection (b)(1)
above) and all unpaid Servicing Compensation from prior
Payment Dates and (ii) all Nonrecoverable Servicing Advances
not previously reimbursed, (b) to the Indenture Trustee, an
amount equal to the sums of the Indenture Trustee Fee all
unpaid Indenture Trustee Fees from prior Payment Dates and
interest and gains on funds held in the Note Payment Account
and (c) to the Servicer, in trust for the Owner Trustee, an
amount equal to the Owner Trustee Fee and all unpaid Owner
Trustee Fees from prior Due Periods; and
(ii) to deposit into the Certificate Distribution
Account the applicable portions of the Available Payment
Amount distributable in respect of the Residual Interest
calculated pursuant subsections (d) and (e) of this Section
5.01 on such Payment Date.
Notwithstanding that the Notes have been paid in full, the Indenture
Trustee and the Servicer shall continue to maintain the Collection Account and
the Note Payment Account hereunder until the Class Principal Balance of each
Class of Notes has been reduced to zero.
(d) On each Payment Date, the Indenture Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance Report
for such Payment Date) shall distribute the Regular Payment Amount from the Note
Payment Account (in the case of all amounts distributable to Noteholders) and
from the Certificate Distribution Account (in the case of all amounts
distributable to Certificateholders), in the following order of priority:
(i) to the holders of the Senior Notes pro rata, the
Senior Noteholders Interest Payment Amount for such Payment
Date;
(ii) sequentially, to the holders of the Class M-1
and Class M-2 Notes, in that order, their respective portions
of the Mezzanine Noteholders' Interest Payment Amount for such
Payment Date;
(iii) to the holders of the Class B Notes, the
Subordinate Noteholders' Interest Payment Amount for such
Payment Date;
(iv) if with respect to such Payment Date the
Pre-Funding Payment Trigger shall have occurred, the amount on
deposit in the Pre-Funding Account at the end of the
Pre-Funding Period will be distributed as principal to all
Classes of Notes pro rata based on the Original Class
Principal Balances thereof;
(v) sequentially, to the holders of the Class A-1,
Class A-2, Class A-3 and Class A-4 Notes, in that order, until
the respective Class Principal Balances thereof are reduced to
zero, the amount necessary to reduce the aggregate Class
Principal Balance of the Class A Notes to the Senior Optimal
Principal Balance for such Payment Date; provided, however,
that on each Payment Date occurring on or after any reduction
of the Class Principal Balances of the Class M-1 Notes, Class
M-2 Notes and the Class B Notes to zero through the
application of Allocable Loss Amounts, amounts shall be
distributed among the remaining Class A Notes pro rata in
accordance with their outstanding Class Principal Balances and
not sequentially;
(vi) sequentially, to the holders of the Class M-1
Notes and Class M-2 Notes in that order, the amount necessary
to reduce the Class Principal Balances thereof to the Class
M-1 Optimal Principal Balance and the Class M-2 Optimal
Principal Balance, respectively, for such Payment Date;
(vii) to the holders of the Class B Notes, the amount
necessary to reduce the Class Principal Balances thereof to
the Class B Optimal Principal Balance for such Payment Date;
(viii) to the appropriate Classes of Notes, an amount
equal to the Overcollateral Deficiency Amount, if any, in the
priorities and amounts specified in Section 5.01 (d) (after
giving effect to payments made pursuant to clauses (i) through
(vii) above, and thereafter, sequentially, to the Class M-1
Notes, Class M-2 Notes and the Class B Notes, in that order,
until their respective Loss Reimbursement Deficiencies have
been paid in full (first, to the reimbursement of Allocable
Loss Amounts, until completely reimbursed and then, to any
accrued interest thereon); and
(ix) any remaining amount to the holders of the
Residual Interest Certificates.
(e) On each Payment Date, the Indenture Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance Report
for such Payment Date) shall distribute the Excess Spread, if any, in the
following order of priority:
(i) in an amount equal to the Overcollateralization
Deficiency Amount, if any, as follows:
(A) sequentially, to the holders of the Class
A-1, Class A-2, Class A-3 and Class A-4
Notes, in that order, until the respective
Class Principal Balances thereof are reduced
to zero and until the aggregate of their
Class Balances have been reduced to the
Senior Optimal Principal Balance for such
Payment Date;
(B) sequentially, to the holders of the Class
M-1 Notes and Class M-2 Notes, in that
order, until the respective Class Principal
Balances thereof have been reduced to the
Class M-1 Optimal Principal Balance and
Class M-2 Optimal Principal Balance,
respectively, for such Payment Date; and
(C) (i) to the holders of the Class B Notes,
until the Class Principal Balance thereof
has been reduced to the Class B Optimal
Principal Balance for such Payment Date; and
(ii) sequentially, to the Class M-1 Notes, the Class M-2
Notes and the Class B Notes, in that order, until
their respective Loss Reimbursement Deficiencies, if
any, have been paid in full (first, to the
reimbursement of Allocable Loss Amounts until
completely reimbursed and, then, to any accrued
interest thereon); and
(iii) any remaining amount to the holders of the Residual
Interest Certificates.
Section 5.02 Certificate Distribution Account.
(a) Establishment of Certificate Distribution Account. No later than the
Closing Date, the Servicer, for the benefit of the Certificateholders, shall
cause to be established and maintained with the Indenture Trustee for the
benefit of the Owner Trustee on behalf of the Certificateholders one or more
Certificate Distribution Accounts (collectively, the "Certificate Distribution
Account"), which shall be separate Eligible Accounts and may be
interest-bearing, entitled "Certificate Distribution Account, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the Life
Financial Home Loan Asset Backed Notes, Series 1997-3". Funds in the Certificate
Distribution Account shall be invested in accordance with Section 5.03 hereof.
(b) Distributions. On each Payment Date the Indenture Trustee shall
withdraw from the Note Payment Account all amounts required to be deposited into
the Certificate Distribution Account with respect to such Payment Date pursuant
to Section 5.01(c)(ii) hereof and, on behalf of the Owner Trustee, shall deposit
such amounts into the Certificate Distribution Account. The Indenture Trustee
shall distribute all remaining amounts on deposit in the Note Payment Account to
the holders of the Notes to the extent of amounts due and unpaid on the Notes
for principal thereof and interest thereon. The Indenture Trustee, on behalf of
the Owner Trustee shall distribute all amounts on deposit in the Certificate
Distribution Account to the holders of the Residual Interest Certificates.
(c) All distributions made on each Class of Notes on each Payment Date will
be made on a pro rata basis among the Noteholders of record of such Class of
Notes on the next preceding Record Date based on the Percentage Interest
represented by their respective Notes, without preference or priority of any
kind, and, except as otherwise provided in the next succeeding sentence, shall
be made by wire transfer of immediately available funds to the account of such
Noteholder, if such Noteholder shall own of record Notes in original
Denominations aggregating at least $250,000 and shall have so notified the
Indenture Trustee, and otherwise by check mailed to the address of such
Noteholder appearing in the Notes Register. The final distribution on each Note
will be made in like manner, but only upon presentment and surrender of such
Note at the location specified in the notice to Noteholders of such final
distribution.
(d) All distributions made on the Residual Interest Certificates on each
Payment Date will be made pro rata among the holders of the Residual Interest
Certificates of record on the next preceding Record Date based on their
percentage holdings in the Residual Interest, without preference or priority of
any kind, and, except as otherwise provided in the next succeeding sentence,
shall be made by wire transfer of immediately available funds to the account of
each such holder, if such holder shall own of record a Residual Interest
Certificate in an original denomination aggregating at least a 50% holding of
the Residual Interest and shall have so notified the Indenture Trustee, and
otherwise by check mailed to the address of such Residual Interest holder
appearing in the Certificate Register. The final distribution on each Residual
Interest Certificate will be made in like manner, but only upon presentment and
surrender of such Residual Interest Certificate at the location specified in the
notice to holders of the Residual Interest Certificates of such final
distribution. Any amount distributed to the holders of the Residual Interest
Certificates on any Payment Date shall not be subject to any claim or interest
of holders of the other Classes of Notes.
Section 5.03 Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts established
hereunder has been pledged by the Issuer to the Indenture Trustee under the
Indenture and shall be subject to the lien of the Indenture. In addition to the
provisions hereunder, each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts distributed from each Trust
Account in accordance with the Indenture and this Agreement shall be released
from the lien of the Indenture upon such distribution thereunder or hereunder.
The Indenture Trustee shall possess all right, title and interest in and to all
funds on deposit from time to time in the Trust Accounts (other than the
Certificate Distribution Account) and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Account Property and the Owner Trust Estate. If, at any time,
any Trust Account ceases to be an Eligible Account, the Indenture Trustee (or
the Servicer on its behalf) shall, within ten Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency may
consent) (i) establish a new Trust Account as an Eligible Account, (ii)
terminate the ineligible Trust Account, and (iii) transfer any cash and
investments from such ineligible Trust Account to such new Trust Account.
With respect to the Trust Accounts (other than the Certificate Distribution
Account), the Indenture Trustee agrees, by its acceptance hereof, that each such
Trust Account shall be subject to the sole and exclusive custody and control of
the Indenture Trustee for the benefit of the Noteholders and the Issuer, as the
case may be, and the Indenture Trustee shall have sole signature and withdrawal
authority with respect thereto.
In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder shall also be subject to and
established and maintained in accordance with the Owner Trust Agreement. Subject
to rights of the Indenture Trustee hereunder and under the Indenture, the Owner
Trustee shall possess for the benefit of the Certificateholders all right, title
and interest in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof (including all income thereon)
and all such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Owner Trust Estate. Subject to the rights of the
Indenture Trustee, the Owner Trustee agrees, by its acceptance hereof, that such
Certificate Distribution Account shall be subject to the sole and exclusive
custody and control of the Owner Trustee for the benefit of the Issuer and the
parties entitled to distributions therefrom, including, without limitation, the
Certificateholders, and the Owner Trustee shall have sole signature and
withdrawal authority with respect to the Certificate Distribution Account.
Notwithstanding the preceding, the distribution of amounts from the Certificate
Distribution Account in accordance with Section 5.01(c)(ii) hereof shall also be
made for the benefit of the Indenture Trustee (including without limitation with
respect to its duties under the Indenture and this Agreement relating to the
Owner Trust Estate), and the Indenture Trustee (in its capacity as Indenture
Trustee) shall have the right, but not the obligation, to take custody and
control of the Certificate Distribution Account and to cause the distribution of
amounts therefrom in the event that the Owner Trustee fails to distribute such
amounts in accordance with subsections (c) and (d) of Section 5.02.
The Servicer shall have the power, revocable by the Indenture Trustee or by
the Owner Trustee with the consent of the Indenture Trustee, to instruct the
Indenture Trustee or Owner Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer to carry out its
duties hereunder or permitting the Indenture Trustee or Owner Trustee to carry
out their respective duties herein or under the Indenture or the Owner Trust
Agreement, as applicable.
(b) (1) Investment of Funds. So long as no Event of Default
shall have occurred and be continuing, the funds held in any Trust
Account may be invested (to the extent practicable and consistent with
any requirements of the Code) in Permitted Investments, as directed by
the Transferor in writing or by telephone or facsimile transmission
confirmed in writing by the Servicer, except that funds held in the
Note Payment Account shall be invested by the Indenture Trustee in
Permitted Investments selected by it. In any case, funds in any Trust
Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for
withdrawal, not later than the Business Day immediately preceding the
Payment Date, or the Remittance Date in the case of funds in and
Permitted Investments relating to the Collection Account, next
following the date of such investment and shall not be sold or disposed
of prior to its maturity subject to subsection (b)(2) of this Section.
All interest and any other investment earnings on amounts or
investments held in the Collection Account and the Certificate
Distribution Account shall be deposited into such account immediately
upon receipt by the Indenture Trustee. All interest and any other
investment earnings on amounts or investments held in the Note Payment
Account shall be payable to the Indenture Trustee. All Permitted
Investments in which funds in any Trust Account (other than the
Certificate Distribution Account) are invested must be held by or
registered in the name of "Norwest Bank Minnesota, National
Association, as Indenture Trustee, in trust for the Life Financial Home
Loan Asset Backed Notes, Series 1997-3". While the Indenture Trustee
holds the Certificate Distribution Account, on behalf of the Owner
Trustee, all Permitted Investments in which funds in the Certificate
Distribution Account are invested shall be held by or registered in the
name of "Norwest Bank Minnesota, National Association, as Indenture
Trustee, on behalf of the Owner Trustee, in trust for the Life
Financial Home Loan Asset Backed Notes, Series 1997-3".
(2) Insufficiency and Losses in Trust Accounts. If any amounts
are needed for disbursement from any Trust Account held by or on behalf
of the Indenture Trustee and sufficient uninvested funds are not
available to make such disbursement, the Indenture Trustee shall cause
to be sold or otherwise converted to cash a sufficient amount of the
investments in such Trust Account. The Indenture Trustee shall not be
liable for any investment loss or other charge resulting therefrom,
unless such loss or charge is caused by the failure of the Indenture
Trustee or Owner Trustee, respectively, to perform in accordance with
this Section 5.03.
If any losses are realized in connection with any investment in any Trust
Account pursuant to this Agreement and the Indenture, then the Servicer shall
deposit the amount of such losses (to the extent not offset by income from other
investments in such Trust Account) into such Trust Account immediately upon the
realization of such loss. All interest and any other investment earnings on
amounts held in any Trust Account shall be taxed to the Issuer and for federal
and state income tax purposes the Issuer shall be deemed to be the owner of each
Trust Account.
(c) Subject to Section 6.01 of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Trust
Account held by the Indenture Trustee resulting from any investment loss on any
Permitted Investment included therein (except to the extent that the Indenture
Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Indenture Trustee
acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts, subject to the
last sentence of subsection (a) of this Section 5.03; and each such
Eligible Account shall be subject to the sole and exclusive dominion,
custody and control of the Indenture Trustee; and, without limitation
on the foregoing, the Indenture Trustee shall have sole signature
authority with respect thereto;
(2) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance with
paragraph (a) of the definition of "Delivery" in Section 1.01 hereof
and shall be held, pending maturity or disposition, solely by the
Indenture Trustee or a financial intermediary (as such term is defined
in Section 8-313(4) of the UCC) acting solely for the Indenture
Trustee;
(3) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" in Section 1.01 hereof and shall be maintained
by the Indenture Trustee, pending maturity or disposition, through
continued book-entry registration of such Trust Account Property as
described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" in
Section 1.01 hereof and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued registration of the
Indenture Trustee's (or its nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Indenture Trustee
or by the Issuer with the consent of the Indenture Trustee, to instruct the
Indenture Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer or the Issuer to carry out their
respective duties hereunder or permitting the Indenture Trustee to carry out its
duties under the Indenture.
Section 5.04 Allocation of Losses.
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than the
related Principal Balance plus accrued interest thereon, or any Obligor makes a
partial payment of any Monthly Payment due on a Home Loan, such Net Liquidation
Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds or partial
payment shall be applied to payment of the related Debt Instrument, first, to
interest accrued at the Home Loan Interest Rate and, then, to principal.
(b) On any Payment Date, any Allocable Loss Amounts shall be applied to the
reduction of the Class Principal Balances of the Class B Notes, the Class M-1
Notes and Class M-2 Notes in accordance with the Allocable Loss Amount Priority.
Section 5.05 Pre-Funding Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained in the name of the Indenture Trustee a Pre-Funding
Account (the "Pre-Funding Account"), which shall be a separate Eligible Account
and may be interest-bearing, entitled "Pre-Funding Account, Norwest Bank
Minnesota, National Association, as Indenture Trustee, in trust for the Life
Financial Home Loan Asset Backed Notes, Series 1997-3." The Pre-Funding Account
may be maintained with the Indenture Trustee or any other depository institution
which satisfies the requirements set forth in the definition of Eligible
Account. The creation of a Pre-Funding Account other than one maintained with
the Indenture Trustee shall be evidenced by a letter agreement between the
Servicer and the depository institution acceptable to the Indenture Trustee. A
copy of such letter agreement shall be furnished to the Indenture Trustee and,
upon request of any Securityholder, to such Securityholder. Funds in the
Pre-Funding Account shall be invested in accordance with Section 5.03 hereof.
On the Closing Date, the Owner Trustee will deposit in the Pre-Funding
Account the Pre-Funding Amount (which Pre-Funding Amount was received from the
Depositor and derived from the net proceeds of the sale of the Notes). On each
Subsequent Transfer Date, upon satisfaction of the conditions set forth in
Section 2.06 hereof with respect to such transfer, the Indenture Trustee shall
withdraw from the Pre-Funding Account an amount equal to the Principal Balances
of the Subsequent Loans transferred to the Issuer on such Subsequent Transfer
Date and distribute such amount to or upon the order of the Transferor.
(b) If the Pre-Funding Amount has not been reduced to zero on the last day
of the Pre-Funding Period after giving effect to any reductions in the
Pre-Funding Amount on such date pursuant to paragraph (a) above, the Indenture
Trustee in writing shall withdraw from the Pre-Funding Account on the Mandatory
Redemption Date (i) if the Pre-Funding Amount is equal to or less than $50,000,
and deposit such amount in the Note Payment Account to be applied to reduce the
Outstanding Amount of the Class of Notes then entitled to distributions of
principal and (ii) if the Pre-Funding Amount is greater than $50,000, and
deposit such amounts to the Note Payment Account to be applied in reduction of
the Class Principal Balance of each Class of Notes, pro rata, based on the
respective Original Class Principal Balances.
(c) On the Business Day preceding each of the second and third Payment
Dates, if applicable, the Indenture Trustee shall withdraw the related
Pre-Funding Earnings for the related Due Period and remit such amounts to the
Transferor.
Section 5.06 Capitalized Interest Account.
(a) The Servicer, for the benefit of the Securityholders, shall cause to be
established and maintained in the name of the Indenture Trustee a Capitalized
Interest Account (the "Capitalized Interest Account"), which shall be a separate
Eligible Account and may be interest-bearing, entitled "Capitalized Interest
Account, Norwest Bank Minnesota, National Association, as Indenture Trustee, in
trust for the Life Financial Home Loan Asset Backed Notes, Series 1997-3." The
Capitalized Interest Account may be maintained with the Indenture Trustee or any
other depository institution which satisfies the requirements set forth in the
definition of Eligible Account. The creation of a Capitalized Interest Account
other than one maintained with the Indenture Trustee shall be evidenced by a
letter agreement between the Servicer and the depository institution acceptable
to the Indenture Trustee. A copy of such letter agreement shall be furnished to
the Indenture Trustee and, upon request of any Securityholder, to such
Securityholder. Funds in the Capitalized Interest Account shall be invested in
accordance with Section 5.03 hereof.
On the Closing Date, the Owner Trustee will deposit in the Capitalized
Interest Account the Capitalized Interest Initial Deposit from the net proceeds
of the sale of the Notes and the Certificates and on each Subsequent Transfer
Date the Owner Trustee will deposit in the Capitalized Interest Account any
applicable Capitalized Interest Subsequent Deposit with respect to each
Subsequent Loan.
(b) On each Determination Date during the Pre-Funding Period (including the
Determination Date in the month following the Due Period during which the
Pre-Funding Period ends), the Indenture Trustee will withdraw from the
Capitalized Interest Account an amount equal to the Capitalized Interest
Requirement and deposit such amount into the Collection Account.
(c) On the Mandatory Redemption Date, any amounts remaining in the
Capitalized Interest Account shall be paid to the Transferor.
ARTICLE VI
STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01 Statements.
(a) No later than each Determination Date, the Servicer shall deliver to
the Indenture Trustee by facsimile, the receipt and legibility of which shall be
confirmed by telephone, and with hard copy thereof to be delivered no later than
one (1) Business Day after such Determination Date, the following report (the
"Servicer's Monthly Remittance Report") setting forth (i) the date of such
Report (day, month and year), the name of the Issuer (i.e. "Life Financial Home
Loan Owner Trust 1997-3"), the Series designation of the Notes (i.e. "Series
1997-3") and the date of this Agreement, (ii) the payments and collections
received with respect to the Home Loans during the Due Period for the month
immediately preceding the month in which such Determination Date occurs and
(iii) if not included in the Servicer's Monthly Remittance Report, a printed
report, setting forth the information described in clauses (xii)-(xvii) of
Section 6.01(b). Furthermore, no later than each Determination Date, the
Servicer shall deliver to the Indenture Trustee a magnetic tape or computer disk
providing such information regarding the Servicer's activities in servicing the
Home Loans during the related Due Period as the Indenture Trustee may reasonably
require.
(b) On each Payment Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Payment
Statement") to the Depositor, the Securityholders and the Rating Agencies,
stating the date of original issuance of the Notes (day, month and year), the
name of the Issuer (i.e. "Life Financial Home Loan Owner Trust 1997-3"), the
Series designation of the Notes (i.e., "Series 1997-3"), the date of this
Agreement and the following information:
(i) the Available Collection Amount and Available
Payment Amount for the related Payment Date;
(ii) the Class Principal Balance of each Class of Notes
before and after giving effect to distributions made to the
holders of such Notes on such Payment Date, and the Pool
Principal Balance as of the first and last day of the
related Due Period;
(iii) the Class Factor with respect to each Class of
the Notes then outstanding;
(iv) the amount of principal, if any, and interest to
be distributed to each Class of Notes on the related Payment
Date;
(v) with respect to each Class of Notes, the Optimal
Principal Balance thereof;
(vi) the Overcollateralization Deficiency Amount, and
any amount to be distributed to the Noteholders or the
holders of the Residual Interest on such Payment Date;
(vii) the Servicing Compensation, the Indenture Trustee
Fee and the Owner Trustee Fee, if any, for such Payment
Date;
(viii) the Overcollateralization Amount on such Payment
Date, the Overcollateralization Target Amount as of such
Payment Date, the Net Loan Losses incurred during the
related Due Period, the cumulative Net Loan Losses as of
such Payment Date, the Allocable Loss Amount for such
Payment Date and the application of the Allocable Loss
Amount Priority for such Payment Date;
(ix) the weighted average maturity of the Home Loans
and the weighted average Home Loan Interest Rate of the Home
Loans;
(x) certain performance information, including, without
limitation, delinquency and foreclosure information with
respect to the Home Loans and 60-Day Delinquency Amounts (as
defined in the definition of "Six-Month Rolling Delinquency
Average" in Section 1.01 hereof), as set forth in the
Servicer's Monthly Remittance Report;
(xi) the Pre-Funding Amount of the end of the related
Due Period;
(xii) the number of and aggregate Principal Balance of
all Home Loans in foreclosure proceedings and the percent of
the aggregate Principal Balances of such Home Loans to the
aggregate Principal Balances of all Home Loans, all as of
the close of business on the last day of the related Due
Period;
(xiii) the number of and the aggregate Principal
Balance of the Home Loans in bankruptcy proceedings and the
percent of the aggregate Principal Balances of such Home Loans
to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the last day of the related Due
Period;
(xiv) the number of Foreclosure Properties, the
aggregate Principal Balance of the related Home Loans, the
book value of such Foreclosure Properties and the percent of
the aggregate Principal Balances of such Home Loans to the
aggregate Principal Balances of all Home Loans, all as of the
close of business on the last day of the related Due Period;
(xv) during the related Due Period (and cumulatively,
from the Closing Date through the most current Due Period),
the number and aggregate Principal Balance of Home Loans for
each of the following: (A) that became Defaulted Home Loans,
(B) that became Liquidated Home Loans, (C) that became Deleted
Home Loans pursuant to Section 3.05 hereof as a result of such
Deleted Home Loans being Defective Home Loans, and (D) that
became Deleted Home loans pursuant to Section 3.05 hereof as a
result of such Deleted Home Loans being Defaulted Home Loans
or a Home Loan in default or imminent default, including the
foregoing amounts by loan type (i.e., Combination Loans, or
Debt Consolidation Loans);
(xvi) the scheduled principal payments and the
principal prepayments received with respect to the Home Loans
during the Due Period; and
(xvii) the number and aggregate Principal Balance of
Home Loans that were 30, 60 or 90 days Delinquent as of the
close of business on the last day of the related Due Period.
In the case of information furnished to Securityholders pursuant to
subclause (b)(iv) of this Section 6.01, the amounts shall be expressed as a
dollar amount per Note with a $1,000 Denomination.
All reports prepared by the Indenture Trustee pursuant to this Section 6.01
will be based in whole or in part upon the information provided to the Indenture
Trustee by the Servicer, and the Indenture Trustee may fully rely upon and shall
have no liability with respect to such information provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a Securityholder such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b)(iv) of this Section 6.01, aggregated for
such calendar year or applicable portion thereof during which such Person was a
Securityholder. Such information shall be deemed to have been furnished to the
extent included in information returns provided to Securityholders under the
provisions of the Code as from time to time in force.
(d) On each Payment Date, the Indenture Trustee shall forward to the
holders of the Residual Interest Certificates a copy of the Payment Statement in
respect of such Payment Date and a statement setting forth the amounts actually
distributed to such holders of the Residual Interest Certificates on such
Payment Date, together with such other information as the Indenture Trustee
deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar year,
the Indenture Trustee shall prepare and distribute to each Person that at any
time during the calendar year was a holder of Residual Interest Certificates, if
requested in writing by such Person, a statement containing the information
provided pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a holder of Residual
Interest Certificates.
(f) The Indenture Trustee shall forward to each Noteholder and each holder
of a Residual Interest Certificate, during the term of this Agreement, such
periodic, special or other reports, including information tax returns or reports
required with respect to the Notes and the Residual Interest Certificates, as
shall be necessary, reasonable, or appropriate with respect to the Noteholders
or the holders of Residual Interest Certificates, or otherwise with respect to
the purposes of this Agreement, all such reports or information in the case of
the Residual Interest Certificates to be provided by and in accordance with such
applicable instructions and directions as the Majority Residual Interestholders
may reasonably require.
(g) Reports and computer tapes furnished by the Servicer and the Indenture
Trustee pursuant to this Agreement shall be deemed confidential and of a
proprietary nature and shall not be copied or distributed except in connection
with the purposes and requirements of this Agreement. No Person entitled to
receive copies of such reports or tapes shall use the information therein for
the purpose of soliciting the customers of the Depositor or the Servicer or for
any other purpose except as set forth in this Agreement.
Section 6.02 Withholding.
The Indenture Trustee shall comply with all requirements of the Code and
applicable state and local law with respect to the withholding from any
distributions made to any Noteholder of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in connection
therewith, giving due effect to any applicable exemptions from such withholding
and effective certifications or forms provided by the recipient. Any amounts
withheld pursuant to this Section 6.02 shall be deemed to have been distributed
to the Noteholders for all purposes of this Agreement or the Indenture.
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance.
(a) If any Home Loan contains a provision, in the nature of a "due-on-
sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
related lender's option) become due and payable upon the sale
or other transfer of an interest in the related Property; or
(ii) provides that such Home Loan may not be assumed
without the consent of the related lender in connection with
any such sale or other transfer,
then, for so long as such Home Loan is included in the Owner Trust, the
Servicer, on behalf of the Indenture Trustee, shall exercise any right the Owner
Trust or the Indenture Trustee may have as the lender of record with respect to
such Home Loan (x) to accelerate the payments thereon or (y) to withhold its
consent to any such sale or other transfer, in a manner consistent with Accepted
Servicing Procedures.
(b) If any Home Loan contains a provision in the nature of a "due-on-
encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
related lender's option) become due and payable upon the
creation of any lien or other encumbrance on the related
Property; or
(ii) requires the consent of the related lender to the
creation of any such lien or other encumbrance on the
related Property,
then, for so long as such Home Loan is included in the Owner Trust, the
Servicer, on behalf of the Owner Trust, or the Indenture Trustee, shall exercise
any right the Indenture Trustee may have as the lender of record with respect to
such Home Loan (x) to accelerate the payments thereon or (y) to withhold its
consent to the creation of any such lien or other encumbrance, in a manner
consistent with Accepted Servicing Standards.
(c) Nothing in this Section 7.01 shall constitute a waiver of the Indenture
Trustee's right to receive notice of any assumption of a Home Loan, any sale or
other transfer of the related Mortgaged Property or the creation of any lien or
other encumbrance with respect to such Mortgaged Property.
Section 7.02 Release of Home Loan Files.
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan
plus all interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow,
payment in full of such Home Loan in a manner customary for
such purposes;
(iii) such Home Loan has become a Defective Loan and
has been repurchased or a Qualified Substitute Home Loan has
been conveyed to the Owner Trust pursuant to Section 3.05
hereof;
(iv) such Home Loan or the related Foreclosure Property
has been sold in connection with the termination of the
Owner Trust pursuant to Section 11.01 hereof; or
(v) the related Foreclosure Property has been sold
pursuant to Section 4.11 hereof.
In each such case, the Servicer shall deliver a certificate to the effect
that the Servicer has complied with all of its obligations under this Agreement
with respect to such Home Loan and requesting that the Indenture Trustee release
to the Servicer the related Indenture Trustee's Home Loan File, and the
Indenture Trustee shall, within five Business Days or such shorter period as may
be required by applicable law, release, or cause the Custodian to release
(unless such Indenture Trustee's Home Loan File has previously been released),
the related Indenture Trustee's Home Loan File to the Servicer and execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest ownership of such Home Loan in the
Servicer or such other Person as may be specified in such certificate, the forms
of any such instrument to be appended to such certificate.
(b) From time to time and as appropriate for the servicing or foreclosure
of any Home Loan, the Indenture Trustee shall, upon request of the Servicer, in
the form of Exhibit C to the Custodial Agreement, release the related Indenture
Trustee's Home Loan File to the Servicer in accordance with Section 3(b) of the
Custodial Agreement.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be entitled
to receive from the Collection Account the Servicing Fee, out of which the
Servicer shall pay any servicing fees owed or payable to any Subservicer.
Additional servicing compensation in the form of assumption fees, modification
fees, and other administrative fees, insufficient funds charges, amounts
remitted pursuant to Section 7.01 hereof and late payment charges shall be part
of the Servicing Compensation payable to the Servicer hereunder and shall be
paid either by the Servicer's retaining such additional servicing compensation
prior to deposit into the Collection Account pursuant to Section 5.01(b)(1)
hereof or, if deposited into the Collection Account, as part of the Servicing
Compensation withdrawn from the Note Payment Account pursuant to Section
5.01(c)(1) hereof.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The
Transferor also agrees to pay (i) all reasonable costs and expenses incurred by
any successor Servicer or the Indenture Trustee in replacing the Servicer in the
event of a default by the Servicer in the performance of its duties under the
terms and conditions of this Agreement and (ii) the annual monitoring fees of
the Rating Agencies.
Section 7.04 Statement as to Compliance and Financial Statements.
The Servicer will deliver to the Indenture Trustee, the Depositor and the
Rating Agencies not later than 90 days following the end of each fiscal year of
the Servicer (beginning with fiscal year ending in 1998), an Officer's
Certificate stating that (i) a review of the activities of the Servicer during
the preceding year and of performance under this Agreement has been made under
such officer's supervision and (ii) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all of its obligations under
this Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and what action the Servicer proposes
to take with respect thereto.
Contemporaneously with the submission of the Officer's Certificate required
by the preceding paragraph, the Servicer shall deliver to the Indenture Trustee
a copy of its annual audited financial statements prepared in the ordinary
course of business. The Servicer shall, upon the request of the Depositor,
deliver to such party any unaudited quarterly financial statements of the
Servicer.
The Servicer agrees to make available to the Depositor on a reasonable
basis a knowledgeable officer of the Servicer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor on
reasonable notice to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Depositor that the Servicer has
the ability to service the Home Loans in accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel relating
to the performance of the obligations of the Servicer hereunder, (ii) its
financial condition, (iii) the Home Loans and (iv) the performance of the
obligations of any Subservicer under the related Subservicing Agreement, in each
case as the Indenture Trustee or the Depositor may reasonably request from time
to time.
Section 7.05 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer (beginning with fiscal year 1998), the Servicer at its expense shall
cause any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., Coopers & ▇▇▇▇▇▇▇ LLP, Deloitte & Touche
LLP, Ernst & Young LLP, KPMG Peat Marwick LLP and Price Waterhouse & Co. or some
other nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Indenture Trustee, the Rating Agencies and the Depositor to the effect that
such firm has examined certain documents and records relating to the servicing
of the Home Loans under this Agreement or of mortgage loans under pooling and
servicing agreements (including the Home Loans and this Agreement) substantially
similar to one another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby) and that, on
the basis of such examination conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC, such firm confirms that such servicing has been
conducted in compliance with such pooling and servicing agreements except for
such significant exceptions or errors in records that, in the opinion of such
firm, the Uniform Single Attestation Program for Mortgage Bankers or the
Attestation Program for Mortgages serviced for FHLMC requires it to report, each
of which errors and omissions shall be specified in such statement. In rendering
such statement, such firm may rely, as to matters relating to direct servicing
of mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC (rendered within one year of such statement) of independent public
accountants with respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
Each Securityholder, the Indenture Trustee, the Owner Trustee and each of
their respective agents shall have the right upon reasonable prior notice,
during normal business hours and as often as reasonably required, to examine,
audit and copy, at the expense of the Person making such examination, any and
all of the books, records or other information of the Servicer (including
without limitation any Subservicer to the extent provided in the related
Subservicing Agreement), whether held by the Servicer or by another on behalf of
the Servicer, which may be relevant to the performance or observance by the
Servicer of the terms, covenants or conditions of this Agreement. In the case of
the supervisory agents and examiners of the Issuer, the Indenture Trustee, the
Owner Trustee and the Securityholders, access to the documentation regarding the
Home Loans required by applicable state and federal regulations shall be
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer designated by it. Each
Securityholder, the Indenture Trustee and the Owner Trustee agree that any
information obtained pursuant to the terms of this Agreement shall be held
confidential.
The Servicer also agrees to make available on a reasonable basis to the
Securityholders or any prospective Securityholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and to permit the Securityholders and any prospective Securityholder to
inspect the Servicer's servicing facilities during normal business hours for the
purpose of satisfying the Securityholders and such prospective Securityholder
that the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
Section 7.07 Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Servicer shall forward
to the Indenture Trustee a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
preceding Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of deposit
specified in Section 5.01(b)(1) hereof, the aggregate of withdrawals from the
Collection Account for each category of withdrawal specified in Section
5.01(b)(2) and (3) hereof, in each case, for the related Due Period.
Section 7.08 Financial Statements.
The Servicer understands that, in connection with the transfer of the
Notes, Noteholders may request that the Servicer make available to the
Noteholders and to prospective Noteholders annual audited financial statements
of the Servicer for one or more of the most recently completed five fiscal years
for which such statements are available, which request shall not be unreasonably
denied.
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Transferor, the Owner Trustee, the
Issuer, the Depositor and the Indenture Trustee (each an "Indemnified Party")
and hold harmless each of them against any and all claims, losses, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
any of the Servicer's representations and warranties and covenants contained in
this Agreement or in any way relating to the failure of the Servicer to perform
its duties and service the Home Loans in compliance with the terms of this
Agreement; provided, however, that if the Servicer is not liable pursuant to the
provisions of Section 9.01(d) hereof for its failure to perform its duties and
service the Home Loans in compliance with the terms of this Agreement, then the
provisions of this Section 9.01 shall have no force and effect with respect to
such failure.
(b) The Transferor, the Depositor, the Owner Trustee or the Indenture
Trustee, as the case may be, shall promptly notify the Servicer if a claim is
made by a third party with respect to a breach of any of the Servicer's
representations and warranties and covenants contained in this Agreement or in
any way relating to the failure of the Servicer to perform its duties and
service the Home Loans in compliance with the terms of this Agreement. The
Servicer shall promptly notify the Indenture Trustee, the Owner Trustee and the
Depositor of any claim of which it has been notified pursuant to this Section
9.01 by a Person other than the Depositor, and, in any event, shall promptly
notify the Depositor of its intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice to
the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Servicer, but the
fees and expenses of such counsel will be at the expense of such Indemnified
Party, unless (i) the employment of counsel by the Indemnified Party at its
expense has been authorized in writing by the Servicer, (ii) the Servicer has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Servicer and one or more Indemnified
Parties, and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to them which are different
from or additional to those available to the Servicer. The Servicer shall not be
liable for any settlement of any such claim or action unless the Servicer shall
have consented thereto or be in default on its obligations hereunder. Any
failure by an Indemnified Party to comply with the provisions of this Section
9.01 shall relieve the Servicer of liability only if such failure is materially
prejudicial to the position of the Servicer and then only to the extent of such
prejudice.
(d) None of the Transferor, the Depositor, the Servicer or any of the
directors, officers, employees or agents of the Transferor, the Depositor or the
Servicer, or members or Affiliates of the Depositor shall be under any liability
to the Issuer or the Securityholders for any action taken, or for refraining
from the taking of any action, in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Transferor, the Depositor, the Servicer or any such person against the remedies
provided herein for the breach of any warranties, representations or covenants
made herein, or against any specific liability imposed on the Transferor, the
Depositor or the Servicer herein, or against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of the duties of the Servicer, the Depositor or the Transferor, as
the case may be, or by reason of reckless disregard of the obligations and
duties of the Servicer, the Depositor or the Transferor, as the case may be,
hereunder. The Transferor, the Depositor, the Servicer and any director,
officer, employee or agent of the Transferor, the Depositor or the Servicer, or
any member or Affiliate of the Depositor may rely in good faith on any document
of any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Issuer and held harmless against any loss, liability
or expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Securities, other than any loss, liability or
expense related to any specific Home Loan or Home Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. Except as
otherwise provided herein, none of the Transferor, the Depositor or the Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not related to its respective duties under this Agreement; provided,
however, that, except as otherwise provided herein, any of the Transferor, the
Depositor or the Servicer may, with the prior consent of the Indenture Trustee,
in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Securityholders hereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust, and the
Transferor, the Depositor and the Servicer shall be entitled to be reimbursed
therefor out of the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and will obtain and preserve its qualification to do business
as a foreign corporation and maintain such other licenses and permits in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Home Loans and to perform its duties under this
Agreement; provided, however, that the Servicer may merge or consolidate with
any other corporation upon the satisfaction of the conditions set forth in the
following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Servicer shall send notice of any such merger,
conversion, consolidation or succession to the Indenture Trustee, the Owner
Trustee and the Issuer.
Section 9.03 Limitation on Liability of the Servicer and Others.
The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
hereof, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Home Loans in accordance with this Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Indenture Trustee or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the preceding
sentence permitting the resignation of the Servicer shall be evidenced by an
independent opinion of counsel to such effect delivered (at the expense of the
Servicer) to the Indenture Trustee. No resignation of the Servicer shall become
effective until the Indenture Trustee or a successor servicer, appointed
pursuant to the provisions of Section 10.02 hereof and satisfying the
requirements of Section 4.07 hereof with respect to the qualifications of a
successor Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder and any agreement, instrument or act purporting to effect
any such assignment, transfer, delegation or appointment shall be void.
The Servicer agrees to cooperate with any successor Servicer in effecting
the transfer of the Servicer's servicing responsibilities and rights hereunder
pursuant to the first paragraph of this Section 9.04, including, without
limitation, the transfer to such successor of all relevant records and documents
(including any Home Loan Files in the possession of the Servicer) and all
amounts received with respect to the Home Loans and not otherwise permitted to
be retained by the Servicer pursuant to this Agreement. In addition, the
Servicer, at its sole cost and expense, shall prepare, execute and deliver any
and all documents and instruments to the successor Servicer including all Home
Loan Files in its possession and do or accomplish all other acts necessary or
appropriate to effect such termination and transfer of servicing
responsibilities.
Section 9.05 Relationship of Servicer to the Issuer and the Indenture
Trustee.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Issuer and the Indenture Trustee under
this Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Issuer or the
Indenture Trustee.
Section 9.06 Servicer May Own Securities.
Each of the Servicer and any Affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Securities with
the same rights as it would have if it were not the Servicer or an Affiliate
thereof except as otherwise specifically provided herein. Securities so owned by
or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided,
however, that any Securities owned by the Servicer or any Affiliate thereof,
during the time such Securities are owned by them, shall be without voting
rights for any purpose set forth in this Agreement. The Servicer shall notify
the Indenture Trustee promptly after it or any of its Affiliates becomes the
owner or pledgee of a Security.
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by the Servicer
shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the
Collection Account in accordance with Section 5.01(b) hereof
any payments in respect of the Home Loans received by the
Servicer no later than the second Business Day following the
day on which such payments were received; or
(ii) failure by the Servicer duly to observe or
perform, in any material respect, any other covenants,
obligations or agreements of the Servicer as set forth in this
Agreement, which failure continues unremedied for a period of
30 days after the date on which written notice of such
failure, requiring the same to be remedied and stating that
such notice is a "Notice of Default" hereunder, shall have
been given (a) to the Servicer by the Indenture Trustee or the
Issuer, or (b) to the Servicer, the Indenture Trustee or the
Issuer by the Majority Noteholders; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction for the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force,
undischarged or unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of the Servicer's
property; or
(v) the Servicer shall admit in writing its inability
to pay its debts as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations; or
(vi) the Majority Noteholders (A) shall receive
notice from the Servicer that the Servicer is no longer able
to discharge its duties under this Agreement or (B) shall
determine, in their reasonable judgment and based upon
published reports (including wire services), which they
reasonably believe in good faith to be reliable, that the
Servicer:
a) has experienced a material adverse change in its
business, assets, liabilities, operations, condition
(financial or otherwise) or prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary
course, or
d) as of any Determination Date, the total Expected
Loan Loss Percentage (as defined below) exceeds (1) up to
the fifth (5th) anniversary of the November 30, 1997 Cut-Off
Date, 21.75%, or (2) thereafter 32.625% (where the "Expected
Loan Loss Percentage" shall be the sum of (A) the cumulative
Net Loan Losses divided by the Original Pool Principal
Balance, plus (B) 25% of the aggregate Principal Balance of
the Home Loans which are then more than 30 but less than 60
days delinquent divided by the Original Pool Principal
Balance, plus (C) 50% of the aggregate Principal Balance of
the Home Loans which are then more than 60 but less than 90
days delinquent divided by the Original Pool Principal
Balance, plus (D) 100% of the aggregate Principal Balance of
the Home Loans which are then more than 90 days delinquent
divided by the Original Pool Principal Balance).
(b) then, and in each and every such case, so long as an Event of Default
shall not have been remedied and the Indenture Trustee has been informed or has
actual knowledge thereof, the Indenture Trustee or the Majority Noteholders, by
notice in writing to the Servicer may, in addition to whatever rights such
Person may have at law or in equity to damages, including injunctive relief and
specific performance, may terminate all the rights and obligations of the
Servicer under this Agreement and in and to the Home Loans and the proceeds
thereof, as servicer under this Agreement. Upon receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Home Loans or otherwise, shall, subject to Section
10.02 hereof, pass to and be vested in a successor servicer, or the Indenture
Trustee if a successor servicer cannot be retained in a timely manner, and the
successor servicer, or Indenture Trustee, as applicable, is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
do or cause to be done all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, including, but not limited
to, the transfer and endorsement or assignment of the Home Loans and related
documents. The Servicer agrees to cooperate with the successor servicer in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the successor servicer
for administration by it of all amounts which shall at the time be credited by
the Servicer to each Collection Account or thereafter received with respect to
the Home Loans.
Section 10.02 Indenture Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01 hereof, or the Indenture Trustee receives the
resignation of the Servicer evidenced by an Opinion of Counsel or accompanied by
the consents required by Section 9.04 hereof, or the Servicer is removed as
servicer pursuant to this Article X, then, subject to Section 4.07 hereof, the
Indenture Trustee shall appoint a successor servicer to be the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof; provided, however, that the
successor servicer shall not be liable for any actions of any servicer prior to
it; and, provided further, that if a successor servicer cannot be retained in a
timely manner, the Indenture Trustee shall act as successor Servicer. In the
event the Indenture Trustee assumes the responsibilities of the Servicer
pursuant to this Section 10.02, the Indenture Trustee will make reasonable
efforts consistent with applicable law to become licensed, qualified and in good
standing in each Mortgaged Property State the laws of which require licensing or
qualification in order to perform its obligations as Servicer hereunder or,
alternatively, shall retain an agent that is so licensed, qualified and in good
standing in any such Mortgaged Property State.
In the case that the Indenture Trustee serves as successor servicer, the
Indenture Trustee in such capacity shall not be liable for any servicing of the
Home Loans prior to its date of appointment and shall not be subject to any
obligations to repurchase any Home Loans. The successor servicer shall be
obligated to make Servicing Advances hereunder. As compensation therefor, the
successor servicer appointed pursuant to the following paragraph, shall be
entitled to all funds relating to the Home Loans which the Servicer would have
been entitled to receive from the Note Payment Account pursuant to Section
5.01(c) hereof as if the Servicer had continued to act as servicer hereunder,
together with other Servicing Compensation in the form of assumption fees, late
payment charges or otherwise as provided in Section 7.03 hereof. The Servicer
shall not be entitled to any termination fee if it is terminated pursuant to
Section 10.01 hereof but shall be entitled to any accrued and unpaid Servicing
Fee to the date of termination.
Any collections received by the Servicer after removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor servicer. The compensation of any successor servicer (including,
without limitation, the Indenture Trustee) so appointed shall be the Servicing
Fee, together with other Servicing Compensation provided for herein. In the
event the Indenture Trustee is required to solicit bids to appoint a successor
servicer, the Indenture Trustee shall solicit, by public announcement, bids from
Eligible Servicers. Such public announcement shall specify that the successor
servicer shall be entitled to the full amount of the Servicing Fee and Servicing
Compensation provided for herein. Within 30 days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the amount
of any unpaid Servicing Fees and unreimbursed Servicing Advances made by the
Indenture Trustee. After such deductions, the remainder of such sum shall be
paid by the Indenture Trustee to the Servicer at the time of such sale, transfer
and assignment to the Servicer's successor. The Indenture Trustee, the Issuer,
any Custodian, the Servicer and any such successor servicer shall take such
action, consistent with this Agreement, as shall be necessary to effect any such
succession. The Servicer agrees to cooperate with the Indenture Trustee and any
successor servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in any Trust Account maintained by the Servicer or which are
thereafter received with respect to the Home Loans. Neither the Indenture
Trustee nor any other successor servicer shall be held liable by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay in delivering, cash, documents or records to it or (ii) restrictions
imposed by any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Indenture Trustee to each Securityholder, the Owner Trustee and
the Depositor and, except in the case of the appointment of the Indenture
Trustee as successor to the Servicer (when no consent shall be required), the
Depositor and the Majority Noteholders shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the Indenture
Trustee shall act as servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Indenture Trustee may make such
arrangements for the compensation of such successor servicer out of payments on
the Home Loans as it and such successor servicer shall agree; provided, however,
that no such compensation shall be in excess of that permitted the Servicer
pursuant to Section 7.03 hereof, together with other Servicing Compensation in
the form of assumption fees, late payment charges or otherwise as provided in
this Agreement.
Section 10.03 Waiver of Defaults.
The Majority Noteholders may waive any events permitting removal of the
Servicer as servicer pursuant to this Article X; provided, however, that the
Majority Noteholders may not waive a default in making a required distribution
on a Note or Residual Interest Certificate without the consent of the related
Noteholder or holder of the Residual Interest Certificate. Upon any waiver of a
past default, such default shall cease to exist and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
Upon termination of the Servicer under this Article X, the Servicer shall,
at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed, to
the Indenture Trustee the funds in any Trust Account maintained by the Servicer;
(b) deliver to its successor or, if none shall yet have been appointed, to
the Indenture Trustee all Home Loan Files and related documents and statements
held by it hereunder and a Home Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed, to
the Indenture Trustee and to the Securityholders a full accounting of all funds,
including a statement showing the Monthly Payments collected by it and a
statement of monies held in trust by it for payments or charges with respect to
the Home Loans; and
(d) execute and deliver such instruments and perform all acts reasonably
requested in order to effect the orderly and efficient transfer of servicing of
the Home Loans to its successor and to more fully and definitively vest in such
successor all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer under this Agreement.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either: (a)the later of (i) the satisfaction and discharge of the Indenture and
the provisions thereof or (ii) the disposition of all funds with respect to the
last Home Loan and the remittance of all funds due hereunder and the payment of
all amounts due and payable to the Indenture Trustee, the Owner Trustee, the
Issuer and the Custodian; or (b) the mutual consent of the Servicer, the
Depositor, the Transferor and all Securityholders in writing.
Section 11.02 Optional Termination.
The Majority Residual Interestholders may, at their option, effect an early
termination of the Issuer on or after any Payment Date on which the Pool
Principal Balance declines to 10% or less of the Maximum Collateral Amount. The
Majority Residual Interestholders shall effect such early termination by
providing notice thereof to the Indenture Trustee and Owner Trustee and by
purchasing all of the Home Loans at a purchase price, payable in cash, equal to
or greater than the Termination Price. The expense of any Independent appraiser
required under this Section 11.02 shall be a nonreimbursable expense of Majority
Residual Interestholders.
Any such early termination by the Majority Residual Interestholders shall
be accomplished by depositing into the Collection Account on the third Business
Day prior to the Payment Date on which the purchase is to occur the amount of
the Termination Price to be paid. The Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts not required to have
been deposited therein pursuant to Section 5.01(b)(1) hereof and any amounts
withdrawable therefrom by the Indenture Trustee pursuant to Section 5.01(b)(3)
hereof) shall be transferred to the Note Payment Account pursuant to Section
5.01(b)(2) hereof for distribution to Noteholders on the succeeding Payment
Date; and any amounts received with respect to the Home Loans and Foreclosure
Properties subsequent to the Due Period immediately preceding such final Payment
Date shall belong to the purchaser thereof. For purposes of calculating the
Available Payment Amount for such final Payment Date, amounts transferred to the
Note Payment Account immediately preceding such final Payment Date shall in all
cases be deemed to have been received during the related Due Period, and amounts
so transferred shall be applied pursuant to Section 5.01(d) and (e) hereof.
Section 11.03 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Issuer shall be sent (i) by the Indenture Trustee to the
Noteholders in accordance with Section 10.02 of the Indenture and (ii) by the
Owner Trustee to the Certificateholders in accordance with Section 9.1(d) of the
Owner Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Noteholders.
Except as otherwise specifically provided herein, whenever action, consent
or approval of the Securityholders is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Securityholders if the Majority
Securityholders agree to take such action or give such consent or approval.
Section 12.02 Amendment.
(a) This Agreement may be amended from time to time by the Depositor, the
Servicer, the Transferor, the Indenture Trustee and the Issuer by written
agreement with notice thereof to the Securityholders, without the consent of any
of the Securityholders, to cure any error or ambiguity, to correct or supplement
any provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action will
not adversely affect in any material respect the interests of the
Securityholders. An amendment described above shall be deemed not to adversely
affect in any material respect the interests of the Securityholders if either
(i) an Opinion of Counsel is obtained to such effect and (ii) the party
requesting the amendment obtains a letter from each of the Rating Agencies
confirming that the amendment, if made, would not result in the downgrading or
withdrawal of the rating then assigned by the respective Rating Agency to any
Class of Notes then outstanding.
(b) This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Transferor, the Indenture Trustee and the Issuer by written
agreement, with the prior written consent of the Majority Noteholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Securityholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
Home Loans or distributions which are required to be made on any Security,
without the consent of the holders of 100% of each Class of Notes affected
thereby, (ii) adversely affect in any material respect the interests of the
holders of any Class of Notes in any manner other than as described in clause
(i), without the consent of the holders of 100% of such Class of Notes, or (iii)
reduce the percentage of any Class of Notes, the consent of which is required
for any such amendment, without the consent of the holders of 100% of such Class
of Notes.
(c) It shall not be necessary for the consent of Securityholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer and
the Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Issuer and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Issuer's own
rights, duties or immunities of the Issuer or the Indenture Trustee, as the case
may be, under this Agreement.
Section 12.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Noteholders' expense on
direction of the Majority Noteholders but only when accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Noteholders or is necessary for the administration or
servicing of the Home Loans.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated as
herein provided.
Section 12.05 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to: (i) in
the case of the Depositor, PaineWebber Mortgage Acceptance Corporation IV, ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.,
or such other addresses as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Depositor; (ii) in the case of the
Issuer, Life Financial Home Loan Owner Trust 1997-3, c/o Wilmington Trust
Company, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or such other address as may hereafter be
furnished to the Securityholders and the other parties hereto; (iii) in the case
of the Transferor and Servicer, Life Financial Corp., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: L. ▇▇▇▇▇ ▇▇▇▇▇, or such other
address as may hereafter be furnished to the Securityholders and the other
parties hereto in writing by the Servicer or the Transferor; (iv) in the case of
the Indenture Trustee, Norwest Bank Minnesota, National Association, Norwest
Place, Sixth and ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Structured Finance/Life
1997-3; and (v) in the case of the Securityholders, as set forth in the
applicable Note Register. Any such notices shall be deemed to be effective with
respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Securityholders shall be effective upon mailing or
personal delivery.
Section 12.07 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 12.08 No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Indenture Trustee, the Issuer and
the Noteholders and their respective successors and permitted assigns.
Section 12.11 Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
Section 12.12 Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Servicer or the Issuer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this
Section 12.12.
(b) The fact and date of the execution by any Securityholder of any such
instrument or writing may be proved in any reasonable manner which the
Depositor, the Servicer or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Securityholder shall bind every holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Depositor, the Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Servicer or the Issuer may require additional proof
of any matter referred to in this Section 12.12 as it shall deem necessary.
Section 12.13 Reports to Rating Agencies.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any
Home Loans;
(iii) notice of any termination, replacement,
succession, merger or consolidation of the Servicer, any
Custodian or the Issuer;
(iv) notice of final payment on the Notes;
(v) notice of any Event of Default;
(vi) copies of the annual independent accountants'
report delivered pursuant to Section 7.05 hereof, and copies
of any compliance reports delivered by the Servicer
including under Section 7.04 hereof; and
(vii) copies of any Payment Date Statement pursuant to
Section 6.01(b) hereof.
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies, such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Fitch IBCA, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: Structured Finance - Residential Mortgage or (ii) if to
▇▇▇▇▇'▇ Investors Service, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Residential Mortgage Pass-Through Group.
Section 12.14 Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Owner Trust Agreement to the holders of the Residual Interest Certificates shall
be paid to such holders pro rata based on their percentage holdings in the
Residual Interest;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest Certificates, such
consent or approval shall be capable of being given by the holder or holders of
not less than 51% of the Residual Interest in aggregate.
IN WITNESS WHEREOF, the Issuer, the Depositor, the Transferor, the Servicer
and the Indenture Trustee have caused their names to be signed by their
respective officers thereunto duly authorized, as of the day and year first
above written, to this Sale and Servicing Agreement.
LIFE FINANCIAL HOME LOAN OWNER
TRUST 1997-3,
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee
By:
---------------------------------------
Name:
Title:
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
LIFE INVESTMENT HOLDINGS, INC., as
Transferor
By:
---------------------------------------
Name:
Title:
LIFE BANK, as Servicer
By:
---------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By:
---------------------------------------
Name:
Title:
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
December 1997 personally appeared _______________, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said WILMINGTON TRUST
COMPANY, not in its individual capacity but in its capacity as Owner Trustee of
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3 as Issuer, and that he executed the
same as the act of such corporation for the purpose and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF WILMINGTON TRUST COMPANY, this the ____ day
of December, 1997.
-----------------------------------
Notary Public, State of ___________
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on this _____ day of
December 1997 personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, known to me to be a person
and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, as the Depositor, and that he executed the same as
the act of such corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES CORP., this the
____ day of December, 1997.
-----------------------------------
Notary Public, State of ___________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day of
December 1997 personally appeared _______________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said LIFE BANK, as the
Servicer, and that he executed the same as the act of such corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF LIFE BANK, this the ____ day of December,
1997.
-----------------------------------
Notary Public, State of ___________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day of
December 1997 personally appeared _______________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said LIFE INVESTMENT
HOLDINGS, INC., as the Transferor, and that he executed the same as the act of
such corporation for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF LIFE INVESTMENT HOLDINGS, INC., this the
____ day of December, 1997.
-----------------------------------
Notary Public, State of ___________
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day of
December 1997 personally appeared ____________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, as the Indenture Trustee,
and that she executed the same as the act of such entity for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, this the __ day of December, 1997.
-----------------------------------
Notary Public, State of ___________
EXHIBIT A
to
Sale and Servicing Agreement
Requests for a copy of the Home Loan Schedule should be made in writing to
the Office of General Counsel of PaineWebber Mortgage Acceptance Corporation IV,
at 1285 Avenue of the Americas, New York, Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
EXHIBIT C
SUBSEQUENT TRANSFER AGREEMENT (the "Subsequent Transfer Agreement"), dated
as of [________, 199_], among Life Bank ("Life"), Life Investment Holding, Inc.
(the "Transferor"), Life Financial Home Loan Owner Trust 1997-3 (the "Issuer" or
the "Owner Trust") and Norwest Bank Minnesota, National Association, as
indenture trustee (in such capacity, the "Indenture Trustee").
W I T N E S S E T H
WHEREAS, pursuant to the terms of a Home Loan Purchase Agreement, dated as
of December 1, 1997 (the "Purchase Agreement"), among PaineWebber Mortgage
Acceptance Corporation IV, as Depositor (the "Depositor"), Life and Life
Investment Holdings, Inc. (the "Transferor"), Life has sold, transferred,
assigned and otherwise conveyed to the Transferor all its right, title and
interest in and to certain Home Loans and the Transferor has sold, transferred,
assigned and otherwise conveyed to the Depositor all its right, title and
interest in and to such Home Loans.
WHEREAS, pursuant to the terms of a Sale and Servicing Agreement, dated as
of December 1, 1997 (the "Sale and Servicing Agreement"), among Life Financial
Home Loan Owner Trust 1997-3 (the "Owner Trust"), Life, the Transferor, the
Originator and the Indenture Trustee, Life has the obligation to sell, transfer,
assign and otherwise convey to the Owner Trust all its right, title and interest
in and to certain home loans as listed on Schedule I attached hereto and the
Related Documents thereto (as defined below) (the "Subsequent Loans") pursuant
to and in accordance with this Subsequent Transfer Agreement;
WHEREAS, the parties hereto desire that Life sell all its right, title and
interest in and to the Subsequent Loans and the Related Documents to the Owner
Trust pursuant to the terms of this Subsequent Transfer Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1 Definitions. Capitalized terms used but not defined herein have the
meanings assigned thereto in the Sale and Servicing Agreement.
2. Sale of Subsequent Loans to Owner Trust. Life, concurrently with the
execution and delivery of this Subsequent Transfer Agreement, does hereby sell,
transfer, assign, set over, and otherwise convey to the Owner Trust, without
recourse but subject to the other terms and provisions of this Agreement and the
Sale and Servicing Agreement, all of its right, title and interest in and to the
following, whether now existing or hereafter acquired and wherever located: (i)
such Subsequent Loans as listed in the Subsequent Loan Schedule, as of the
[_________ 1, 199_] (the "Cut-Off Date"), together with the Servicer's Home Loan
Files and the Indenture Trustee's Home Loan Files relating thereto and all
proceeds thereof, (ii) the Mortgages and security interests in Mortgaged
Properties, (iii) all payments in respect of interest due with respect to such
Subsequent Loans on or after the Cut-Off Date and all payments in respect of
principal received after the Cut-Off Date, (iv) Life's rights under all
insurance policies with respect to such Subsequent Loans and any Insurance
Proceeds, and (v) all proceeds of any of the foregoing.
3. Obligations of Life Upon Sale. In connection with any transfer pursuant
to Section 2 hereof, Life further agrees, at its own expense, on or prior to the
Subsequent Transfer Date (a) to indicate in its books and records that the
Subsequent Loans have been sold to the Owner Trust pursuant to this Subsequent
Transfer Agreement and (b) to deliver to the Indenture Trustee a computer file
containing a true and complete list of all Subsequent Loans in the format
required by Section 2.2 of the Purchase Agreement.
In connection with any conveyance by Life, Life shall on behalf of the
Owner Trust deliver to, and deposit with the Custodian, on behalf of the Owner
Trustee, on or before the Subsequent Transfer Date the Related Documents (as
defined in the Purchase Agreement) with respect to each Subsequent Loan.
In connection with any conveyance by Life, Life shall on behalf of the
Owner Trust deliver to, and deposit with the Servicer, as the designated agent
of the Owner Trustee, on or before the Subsequent Transfer Date the Servicer's
Home Loan File with respect to each Subsequent Loan.
Life further hereby confirms to the Indenture Trustee that, as of the
Subsequent Transfer Date it has caused the portions of Life's electronic ledger
relating to the Subsequent Loans to be clearly and unambiguously marked to
indicate that the Subsequent Loans have been sold to the Owner Trust.
The parties hereto intend that each of the transactions set forth herein be
a sale by Life to the Owner Trust of all of Life's right, title and interest in
and to the Subsequent Loans and other property described above. In the event the
transactions set forth herein are deemed not to be a sale, Life hereby grants to
the Owner Trust a security interest in all of the Life's right, title and
interest in, to and under the Subsequent Loans and other property described
above, whether now existing or hereafter created, to secure all of Life's
obligations hereunder; and this Subsequent Transfer Agreement shall constitute a
security agreement under applicable law.
4. Payment of Purchase Price for the Subsequent Loans.
(a) In consideration of the sale of the Subsequent Loans from Life to the
Owner Trust on the Subsequent Transfer Date, the Owner Trust agrees to pay to
Life on the Subsequent Transfer Date by transfer of immediately available funds,
an amount equal to 100% of the aggregate Principal Balances of the Subsequent
Loans as of the Cut-Off Date.
(b) Within 60 days of the Subsequent Transfer Date, Transferor, at its own
expense, shall record each Assignment of Mortgage in favor of the Indenture
Trustee to the same extent required under Section 2.4 of the Purchase Agreement.
5. Representations and Warranties. (a) Each of Life and the Transferor
hereby makes the representations and warranties to the Issuer as of the Cut-Off
Date and the Subsequent Transfer Date specified in Section 3.1(a) of the
Purchase Agreement.
(b) Each of Life and the Transferor further represents and warrants to the
Owner Trust that with respect to the Subsequent Loans as of the Subsequent
Transfer Date each of the representations and warranties contained in Section
3.04 of the Sale and Servicing Agreement are true and correct.
It is understood and agreed that the representations and warranties set
forth in this Section 5(b) shall survive delivery of the respective Subsequent
Loan Files to the Indenture Trustee on behalf of the Owner Trust. In the event
that (a) any of the representations and warranties of Life or the Transferor in
Section 3.04 of the Sale and Servicing Agreement are determined to be untrue in
a manner that materially and adversely affects the value of, or the interests of
the Securityholders in, any Subsequent Loan with respect to which such
representation or warranty is made and (b) Life or the Transferor shall fail to
cure such breach within the time period specified in Section 3.05 of the Sale
and Servicing Agreement, Life or the Transferor shall be obligated to repurchase
or substitute the affected Subsequent Loan(s) in accordance with the provisions
of Section 3.05 of the Sale and Servicing Agreement.
With respect to representations and warranties made by Life or the
Transferor pursuant to this Section 5(b) that are made to Life's or the
Transferor's best knowledge, if it is discovered by any of Life, the Transferor
or the Indenture Trustee that the substance of such representation and warranty
is inaccurate and such inaccuracy materially and adversely affects the value of
the related Subsequent Loan, notwithstanding the Life's or the Transferor's lack
of knowledge, such inaccuracy shall be deemed a breach of the applicable
representation and warranty.
6. Covenants of Life. Life hereby covenants that except for the transfer
hereunder, Life will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur, assume or suffer to exist any lien on, any Subsequent
Loan, or any interest therein; and Life will defend the right, title and
interest of the Owner Trust, in, to and under the Subsequent Loans, against all
claims of third parties claiming through or under Life.
Whenever and so often as requested by the Indenture Trustee, Life or the
Transferor, the other party promptly will execute and deliver or cause to be
executed and delivered all such other and further instruments, documents, or
assurances, and promptly do or cause to be done all such other things, as may be
necessary and reasonably required to vest more fully in the requesting party all
rights, interests, powers, benefits, privileges and advantages conferred or
intended to be conferred upon it by this Agreement.
7. Termination. The respective obligations and responsibilities of Life,
the Transferor and the Owner Trust created hereby shall terminate, except for
Life's, the Transferor's and the Owner Trust's indemnity obligations as provided
herein, upon the termination of the Owner Trust as provided in Article XI of the
Sale and Servicing Agreement.
8. Governing Law. This Subsequent Transfer Agreement shall be governed by
and construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
9. Intention of the Parties. It is the intention of the parties that the
Owner Trust is purchasing, and Life is selling, the Subsequent Loans rather than
pledging the Subsequent Loans to secure a loan by the Owner Trust to Life. The
parties hereto each intend to treat the transaction for accounting purposes as a
sale by Life, and a purchase by the Owner Trust, of the Subsequent Loans. For
federal income tax purposes, the parties hereto each intend to treat the Notes
as debt. The Indenture Trustee will have the right to review the Subsequent
Loans and the related Subsequent Loan Files to determine the characteristics of
the Subsequent Loans which will affect the federal income tax consequences of
owning the Subsequent Loans and Life will cooperate with all reasonable requests
made by the Issuer in the course of such review.
10. The representations and warranties set forth in Article III shall
survive the purchase of the Subsequent Loans hereunder.
11. This Subsequent Transfer Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Except as otherwise provided in this Section 11 no other Person shall
have the right or obligation hereunder.
IN WITNESS WHEREOF, Life, the Transferor, the Indenture Trustee and the
Owner Trust have caused this Subsequent Transfer Agreement to be duly executed
on their behalf by their respective officers thereunto duly authorized as of the
day and year first above written.
LIFE BANK
By:
--------------------------------------
Name:
Title:
LIFE INVESTMENT HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
LIFE FINANCIAL HOME LOAN OWNER TRUST 1997-3
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee
By:
--------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By:
--------------------------------------
Name:
Title:
SCHEDULE I
Subsequent Loan Schedule
------------------------
EXHIBIT D
COLLECTION ACCOUNT CERTIFICATION
Life Bank ("Life") hereby certifies that it has established the account
described below as a Collection Account pursuant to Section 5.1(a)(1) of the
Sale and Servicing Agreement, dated as of December 1, 1997, among Life Financial
Home Loan Owner Trust 1997-3, PaineWebber Mortgage Acceptance Corporation IV,
Life, Life Investment Holdings, Inc. and Norwest Bank Minnesota, National
Association, as Indenture Trustee.
Title of Account: Collection Account, Norwest Bank Minnesota,
National Association, as Indenture Trustee, in
trust for the Life Financial Home Loan Asset
Backed Notes, Series 1997-3.
Account Number: ______________________
Name and Address
of office or branch
of the institution
at which Account is
maintained: ______________________
______________________
______________________
Life Bank
By: ______________________
L. ▇▇▇▇▇ ▇▇▇▇▇
Executive Vice President,
Secretary and Treasurer
Acknowledged:
[ ]
_________________________
Name:
Title: