1
EXHIBIT 10.3
===========================================
SERVICING AGREEMENT
Dated as of June 1, 1998
among
FUND AMERICA INVESTORS TRUST 1998-NMC1,
as Issuer,
NATIONAL MORTGAGE CORPORATION,
as Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
===========================================
Adjustable Rate Mortgage Loans
Pledged under an Indenture dated as of June 1, 1998
2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.01. Definitions...............................................................................1
Section 1.02. Interest Calculations....................................................................14
Section 1.03. [Reserved.]..............................................................................14
ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................................15
Section 2.01. Servicing Generally......................................................................15
Section 2.02. Collection of Certain Mortgage Loan Payments; Collection Account.........................16
Section 2.03. Hazard Insurance Policies................................................................19
Section 2.04. Enforcement of Due-on-Sale Clauses; Assumption and Modification Agreements...............20
Section 2.05. Realization upon Defaulted Mortgage Loans; Options to Purchase Mortgage Loans............21
Section 2.06. Indenture Trustee to Cooperate; Release of Mortgage Files................................22
Section 2.07. Servicing Compensation; Payment of Certain Expenses by the Servicer;
Compensation Interest.................................................................23
Section 2.08. Annual Statement as to Compliance........................................................24
Section 2.09. Annual Independent Public Accountants' Servicing Report..................................24
Section 2.10. Access to Certain Documentation and Information Regarding the Mortgage Loans.............25
Section 2.11. Maintenance of Fidelity Bond and Errors and Omissions Policy.............................25
Section 2.12. Notices to the Issuer, the Rating Agencies and the Indenture Trustee.....................25
Section 2.13. Reports of Foreclosures and Abandonment of Mortgaged Properties..........................25
Section 2.14. Sub-Servicers and Sub-Servicing Agreements...............................................26
Section 2.15. Annual Lien Opinions; Bond Redemptions...................................................26
Section 2.16. Year 2000 Program........................................................................27
ARTICLE III SERVICER REMITTANCE REPORT...........................................................................27
Section 3.01. Servicer Remittance Report...............................................................27
i
3
ARTICLE IV MONTHLY ADVANCES AND SERVICING ADVANCES...............................................................27
Section 4.01. Monthly Advances; Servicing Advances.....................................................27
ARTICLE V THE SERVICER...........................................................................................29
Section 5.01. Representations and Warranties of the Servicer...........................................29
Section 5.02. Liability of the Servicer................................................................30
Section 5.03. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer............30
Section 5.04. Limitation on Liability of the Servicer and Others.......................................31
Section 5.05. Servicer Not to Resign...................................................................31
ARTICLE VI DEFAULT...............................................................................................31
Section 6.01. Events of Default........................................................................31
Section 6.02. Indenture Trustee to Act; Appointment of Successor.......................................33
Section 6.03. Notifications to Bondholders.............................................................34
Section 6.04. Assumption or Termination of Sub-Servicing Agreements by the Indenture Trustee
or any Successor Servicer.............................................................34
Section 6.05. Payment of Indenture Trustee's Fees and Expenses.........................................35
ARTICLE VII TERMINATION..........................................................................................36
Section 7.01. Termination..............................................................................36
ARTICLE VIII MISCELLANEOUS PROVISIONS............................................................................36
Section 8.01. Amendment................................................................................36
Section 8.02. Governing Law............................................................................37
Section 8.03. Notices..................................................................................37
Section 8.04. Severability of Provisions...............................................................38
Section 8.05. Assignment...............................................................................38
Section 8.06. Counterparts.............................................................................38
Section 8.07. Intention of the Parties.................................................................38
Section 8.08. Waivers and Modifications................................................................38
Section 8.09. Further Agreements.......................................................................39
Section 8.10. Attorney-in-Fact.........................................................................39
Section 8.11. No Indenture Trustee Liability...........................................................39
ii
4
SCHEDULES AND EXHIBITS
Schedule I Mortgage Loan Schedule
Exhibit A Form of Annual Statement as to Compliance
Exhibit B Form of Request for Release
Exhibit C Ancillary Servicing Compensation
Exhibit D Summary of Servicer's Collection Procedures
Exhibit E Form of Liquidation Report
iii
5
THIS SERVICING AGREEMENT (this "Agreement"), dated as of June 1, 1998,
among Fund America Investors Trust 1998-NMC1, as issuer of its Collateralized
Mortgage Obligations, Series 1998-NMC1 (the "Issuer"), National Mortgage
Corporation, as servicer (in such capacity, together with permitted successors
hereunder, the "Servicer"), and Norwest Bank Minnesota, National Association,
not in its individual capacity but as trustee pursuant to that certain indenture
(the "Indenture"), dated as of June 1, 1998 (the "Indenture Trustee"), between
the Issuer and the Indenture Trustee, recites and provides as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing sub-prime
mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture Trustee certain
sub-prime residential mortgage loans, identified on Schedule I hereto (the
"Mortgage Loans") in connection with the issuance of the Issuer's Collateralized
Mortgage Obligations, Series 1998-NMC1 (the "Bonds");
WHEREAS, the Issuer desires to contract with the Servicer for the
servicing responsibilities associated with the Mortgage Loans and the Servicer
desires to assume the servicing responsibilities associated with such Mortgage
Loans; and
WHEREAS, the Issuer, the Servicer and the Indenture Trustee desire to
execute this Agreement to define each party's rights, duties and obligations
relating to the servicing of the Mortgage Loans.
NOW, THEREFORE, in consideration of the above premises and of the
mutual agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Issuer, the Servicer and the Indenture Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Section 1.01. Terms capitalized and not otherwise defined herein shall have the
meanings assigned to such terms in the Indenture, even after the Indenture shall
have been terminated.
"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, "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
6
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings corresponding to the foregoing.
"Aggregate Principal Balance": As defined in the Indenture.
"Agreement": This Servicing Agreement, dated as of June 1, 1998, among
the Issuer, the Servicer and the Indenture Trustee, and all amendments hereof
and supplements hereto.
"Ancillary Servicing Compensation": Prepayment charges (other than
prepayment premiums or penalties), assumption fees, fees for insufficient funds,
and other items listed on Exhibit C hereto collected by the Servicer from
Mortgagors.
"Appraisal": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, FNMA and FHLMC standards, and must meet the
appraisal standards of the Uniform Standards of Professional Appraisal Practice.
"Appraised Value": With respect to any Mortgaged Property, the lesser
of (a) the value thereof as determined by an Appraisal and (b) the purchase
price paid for the related Mortgaged Property by the Mortgagor with the proceeds
of the related Mortgage Loan; provided, however, that in the case of a
Refinanced Mortgage Loan, the Appraised Value of the Mortgaged Property shall be
equal to the value thereof as determined by an Appraisal.
"Bond Account": The segregated trust account established and maintained
by the Indenture Trustee pursuant to Section 8.02 of the Indenture.
"Bond Balance": As defined in the Indenture.
"Bondholder" or "Holder": The Person in whose name a Bond is registered
in the Bond Register, except that, solely for the purpose of taking any action
under Article Six or giving any consent pursuant to this Agreement, any Bond
registered in the name of the Issuer or the Servicer or any Person actually
known to a Responsible Officer of the Indenture Trustee to be an Affiliate of
the Issuer or the Servicer shall be deemed not to be outstanding and the Voting
Interest evidenced thereby shall not be taken into account in determining
whether Holders of the requisite Voting Interests necessary to take any such
action or effect any such consent have acted or consented unless the Issuer, the
Servicer or any such Person is an owner of record of all of the Bonds.
"Bond Register": The register maintained pursuant to Section 2.06 of
the Indenture.
"Bonds": The Issuer's Collateralized Mortgage Obligations, Series
1998-NMC1, which will consist of four Classes of bonds, designated as Class A
Bonds, Class M-1 Bonds, Class M-2 Bonds and Class M-3 Bonds, issued pursuant to
the Indenture.
2
7
"Business Day": Any day other than (a) a Saturday or a Sunday or (b) a
day on which banking institutions in the State of Colorado, the State of New
York, the State of Delaware or the State of Minnesota are required or authorized
by law, executive order or governmental decree to be closed.
"Certificate Distribution Account": As defined in the Deposit Trust
Agreement.
"Class": Collectively, all of the Bonds bearing the same class
designation pursuant to the Indenture.
"Closing Date": On or about June 29, 1998.
"Code": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form and proposed regulations thereunder to the extent that,
by reason of their proposed effective date, such proposed regulations would
apply.
"Collection Account": The segregated trust account or accounts, which
shall at all times be an Eligible Account, established and maintained pursuant
to Section 2.02(b) and entitled "[Servicer], in trust for the benefit of Holders
of Fund America Investors Trust 1998-NMC1 Collateralized Mortgage Obligations,
Series 1998-NMC1, Collection Account". References herein to the Collection
Account shall include any Sub-Servicing Account as the context requires. If an
Event of Default described in Section 6.01(f) hereof occurs, the Servicer shall
close the existing Collection Account and cause it to be re-established in the
name of the Indenture Trustee, and transfer all funds from the old Collection
Account to the new Collection Account.
"Collection Period": As to any Deposit Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Deposit Date occurs and ending on the last day of such calendar month.
"Compensating Interest": With respect to any Mortgage Loan as to which
a prepayment in whole or in part was received by the Servicer from the related
Mortgagor during a Collection Period, an amount equal to the lesser of (a) the
Monthly Servicing Fee for such Collection Period and (b) the difference between
(1) 30 days' interest at the related Mortgage Interest Rate on the Principal
Balance of such Mortgage Loan (immediately prior to such prepayment) and (2) the
amount of interest actually collected by the Servicer on such Mortgage Loan
during the related Due Period.
"Cumulative Loss Percentage": As of any Payment Date, the percentage
equivalent of the fraction obtained by dividing (1) the principal amount of
cumulative Realized Losses on the Mortgage Loans from the Cut-off Date through
the end of the related Collection Period by (2) the Initial Pool Balance.
3
8
"Cut-Off Date": For any Mortgage Loan, June 1, 1998.
"Deposit Date": As to any Payment Date, the 18th day of the month in
which such Payment Date occurs or, if such 18th day is not a Business Day, the
next succeeding Business Day.
"Deposit Trust Agreement": The Deposit Trust Agreement, dated as of
June 1, 1998, between Fund America Investors Corporation II, as depositor,
Wilmington Trust Company, as owner trustee, Norwest Bank Minnesota, National
Association, as trust paying agent, and the Servicer, pursuant to which the
Issuer was formed.
"Determination Date": As to any Deposit Date, the close of business on
the last day of the calendar month preceding the calendar month in which such
Deposit Date occurs.
"Due Period": As defined in the Indenture.
"Eligible Account": Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by Standard & Poor's and Fitch and in the highest short-term rating
category by Standard & Poor's and Fitch, and that is either (1) a federal
savings and loan association duly organized, validly existing and in good
standing under the federal banking laws, (2) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (3) a national banking association duly organized, validly existing and
in good standing under the federal banking laws or (4) a principal subsidiary of
a bank holding company or (B) a trust account maintained with the trust
department of a federal or state chartered depository institution or trust
company, having capital and surplus of not less than $100,000,000, acting in its
fiduciary capacity. Any Eligible Accounts maintained with the Indenture Trustee
shall conform to the preceding clause (B).
"Event of Default": As defined in Section 6.01.
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"FEMA": The Federal Emergency Management Agency and its successors in
interest.
"FHLMC": The Federal Home Loan Mortgage Corporation and its successors
in interest.
"FNMA": ▇▇▇▇▇▇ ▇▇▇ and its successors in interest.
"Fitch": Fitch IBCA, Inc., and its successors in interest.
"Gross Margin": With respect to any Mortgage Loan, the fixed percentage
amount set forth in the related Mortgage Note, which amount is added to the
Index in accordance with the terms of the related Mortgage Note to determine the
Mortgage Interest Rate.
4
9
"Indenture": The indenture, dated as of June 1, 1998, between the
Issuer and the Indenture Trustee pursuant to which the Mortgage Loans and
certain other assets included in the Trust Estate are pledged as collateral for
the Bonds, and any supplements or amendments thereto.
"Indenture Trustee": Norwest Bank Minnesota, National Association, a
national banking association, and its successors in interest or any successor
trustee appointed as provided pursuant to the Indenture.
"Indenture Trustee Fee": The monthly fee of the Indenture Trustee,
which shall be determined as set forth in the Indenture.
"Index": With respect to any Mortgage Loan, the applicable index for
computing the Mortgage Interest Rate as specified in the Mortgage Note. The
Index for each Mortgage Loan shall be Six-Month LIBOR.
"Initial Pool Balance": The aggregate of the Principal Balances of the
Mortgage Loans determined as of the Cut-off Date (after application of all
payments of principal received in respect of any such Mortgage Loan before such
Cut-off Date), which aggregate amount is $243,841,234.
"Insurance Proceeds": With respect to any Deposit Date, proceeds paid
by any insurer and received by the Servicer during the related Collection Period
pursuant to any insurance policy covering a Mortgage Loan or the related
Mortgaged Property, including any deductible payable by the Servicer with
respect to a blanket insurance policy pursuant to Section 2.03 and the proceeds
from any fidelity bond or errors and omission policy pursuant to Section 2.11,
net of any component thereof covering any expenses incurred by or on behalf of
the Servicer and specifically reimbursable under this Agreement.
"Insured Payment": As defined in the Indenture.
"Issuer": Fund America Investors Trust 1998-NMC1, as issuer of the
Bonds pursuant to the Indenture.
"Liquidated Mortgage Loan": As to any Deposit Date, any Mortgage Loan
(1) as to which the Servicer has determined, in accordance with the servicing
procedures specified herein, that all Liquidation Proceeds that it expects to
recover from or on account of such Mortgage Loan have been recovered, (2) that
has been purchased by the Servicer pursuant to Section 2.05 on or prior to such
Deposit Date or (3) that has been repurchased by the Seller pursuant to Section
7 of the Mortgage Loan Sale Agreement on or prior to such Deposit Date.
"Liquidation Expenses": Expenses that are incurred by the Servicer in
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor. Such expenses with respect to any
Liquidated Mortgage Loan shall include, without limitation, legal fees and
expenses, real estate brokerage commissions, any unreimbursed amount
5
10
expended by the Servicer pursuant to Section 2.05 respecting the related
Mortgage Loan, and any other related and previously unreimbursed Servicing
Advances.
"Liquidation Proceeds": Cash (other than Insurance Proceeds) received
in connection with the liquidation of any Mortgaged Property, whether through
trustee's sale, foreclosure sale, condemnation, taking by eminent domain or
otherwise received in respect of any Mortgage Loan foreclosed upon as described
in Section 2.05 (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"Liquidation Report": A liquidation report in the form of Exhibit E
attached hereto.
"Loan-to-Value Ratio": With respect to any Mortgage Loan as of its date
of origination, the ratio as of its date of origination borne by the outstanding
principal amount of the Mortgage Loan to the Appraised Value of the related
Mortgaged Property.
"Maximum Rate": With respect to any Mortgage Loan, any absolute maximum
Mortgage Interest Rate set by provisions in the related Mortgage Note.
"Minimum Rate": With respect to any Mortgage Loan, any absolute minimum
Mortgage Interest Rate, set by provisions in the related Mortgage Note, subject
to the initial Mortgage Interest Rate first adjusting to a level in excess of
such minimum Mortgage Interest Rate in accordance with the terms of the Mortgage
Note.
"Monthly Advance": As defined in Section 4.01(a).
"Monthly Payment": With respect to any Mortgage Note, the amount of
each monthly payment payable by the Mortgagor under such Mortgage Note in
accordance with its terms, including one month's accrued interest on the related
Principal Balance at the then applicable Mortgage Interest Rate, but net of any
portion of such monthly payment that represents late payment charges, prepayment
or extension fees or collections allocable to payments to be made by Mortgagors
for payment of insurance premiums or similar items.
"Monthly Servicing Fee": With respect to any Payment Date, 1/12 of the
product of the Servicing Fee Rate and the Aggregate Principal Balance of the
Mortgage Loans as of the first day of the related Due Period (or, in the case of
the first Collection Period, the Initial Pool Balance).
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
"Mortgage File": As defined in the Mortgage Loan Sale Agreement.
"Mortgage Interest Rate": As defined in the Indenture.
6
11
"Mortgage Loan": Each of the mortgage loans pledged to the Indenture
Trustee pursuant to the Indenture that from time to time comprise part of the
Trust Estate, all of which originally so held being identified in the Mortgage
Loan Schedule attached hereto as Schedule I.
"Mortgage Loan Documents": As defined in the Mortgage Loan Sale
Agreement and the Indenture.
"Mortgage Loan Sale Agreement": That certain agreement, dated as of
June 1, 1998, between National Mortgage Corporation, as seller, and the
Transferor, as purchaser, pursuant to which the Transferor acquired the Mortgage
Loans.
"Mortgage Loan Schedule": As of any date, the schedule of Mortgage
Loans then subject to this Agreement. The initial schedule of Mortgage Loans as
of the Cut-off Date is attached hereto as Schedule I. The Mortgage Loan Schedule
shall be amended from time to time by the Servicer to reflect the addition of
Mortgage Loans to, and the removal of Mortgage Loans from, the Trust Estate
pursuant to the Indenture. The Mortgage Loan Schedule shall identify each
Mortgage Loan by the Servicer's loan number and address (including the state) of
the related Mortgaged Property and shall set forth as to each Mortgage Loan the
initial Loan-to-Value Ratio, the Cut-off Date, the Index, the Gross Margin, the
current Monthly Payment amount and the stated maturity date of the related
Mortgage Note. The Mortgage Loan Schedule shall be delivered to the Indenture
Trustee in both physical and computer-readable form.
"Mortgage Note": The note or other instrument evidencing the
indebtedness of a Mortgagor under the related Mortgage Loan.
"Mortgaged Property": The underlying property securing a Mortgage
Loan.
"Mortgagor": The obligor under a Mortgage Note.
"Net Liquidation Proceeds": As to any Mortgage Loan, Liquidation
Proceeds net of Liquidation Expenses. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan through the end of the Collection Period in which the
related liquidation occurred, and then to the Principal Balance thereof.
"Nonrecoverable Advance": Any Servicing Advance or Monthly Advance
that, in the Servicer's reasonable judgment, would not be ultimately recoverable
by the Servicer from late collections, Insurance Proceeds or Liquidation
Proceeds on the related Mortgage Loan or otherwise, as evidenced by an Officer's
Certificate delivered to the Indenture Trustee no later than the Business Day
following the Servicer's determination thereof.
"Officer's Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Transferor, the Servicer or, in the case of the Issuer,
an authorized signatory of the Owner
7
12
Trustee, as the case may be, and delivered to the Indenture Trustee or each
Rating Agency, as the case may be.
"Opinion of Counsel": A written opinion of counsel in form and
substance reasonably acceptable to the Indenture Trustee. Any expense related to
obtaining an Opinion of Counsel for an action requested by a party shall be
borne by the party required to obtain such opinion or seeking to effect the
action that requires the delivery of such Opinion of Counsel.
"Original Principal Amount": With respect to any Mortgage Loan, the
original principal amount due under the related Mortgage Note as of its date of
origination.
"Payment Ahead": Any payment remitted by a Mortgagor with respect to a
Mortgage Note during a Due Period in excess of the Monthly Payment due during
such Due Period with respect to such Mortgage Note, which excess sums the
related Mortgagor has instructed the Servicer to apply to Monthly Payments due
in one or more subsequent Due Periods. A Monthly Payment that was a Payment
Ahead shall, for purposes of computing certain amounts under this Agreement, be
deemed to have been received by the Servicer on the date in the related Due
Period on which such Monthly Payment would have been due if such Monthly Payment
had not been paid as part of a Payment Ahead.
"Payment Date": The date of payment on the Bonds pursuant to the
Indenture, which date is the 25th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
July 27, 1998.
"Percentage Interest": As defined in the Indenture.
"Permitted Investments": One or more of the following obligations,
instruments and securities:
(a) direct obligations of, and obligations fully
guaranteed by, the United States of America, FHLMC, FNMA, the Federal Home Loan
Banks or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America;
(b) (i) demand and time deposits in, certificates of
deposit of, banker's acceptances issued by or federal funds sold by any
depository institution or trust company (including the Indenture Trustee or its
agent acting in their respective commercial capacities) incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by federal and/or state authorities, so long as, at
the time of such investment or contractual commitment providing for such
investment, such depository institution or trust company or its ultimate parent
has a short-term unsecured debt rating in one of the two highest available
rating categories of S&P and Fitch (or, if not rated by Fitch, ▇▇▇▇▇'▇ Investors
Service, Inc.) and provided that each such investment has an original maturity
of no more than 365 days, and (ii) any other demand or time deposit or deposit
which is fully insured by the Federal Deposit Insurance Corporation;
8
13
(c) repurchase obligations with a term not to exceed 30
days with respect to any security described in clause (a) above and entered into
with a depository institution or trust company (acting as a principal) rated "A"
or higher by "S&P" and Fitch (or, if not rated by Fitch, ▇▇▇▇▇'▇ Investors
Service, Inc.); provided, however, that collateral transferred pursuant to such
repurchase obligation must be of the type described in clause (a) above and must
(i) be valued daily at current market price plus accrued interest, (ii) pursuant
to such valuation, be equal, at all times, to 105% of the cash transferred by
the Indenture Trustee in exchange for such collateral and (iii) be delivered to
the Indenture Trustee or, if the Indenture Trustee is supplying the collateral,
an agent for the Indenture Trustee, in such a manner as to accomplish perfection
of a security interest in the collateral by possession of certified securities;
(d) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United States of
America or any state thereof which has a long-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies (or, if not
rated by Fitch, ▇▇▇▇▇'▇ Investors Service, Inc.) at the time of such investment;
(e) commercial paper having an original maturity of less
than 365 days and issued by an institution having a short-term unsecured debt
rating in the highest available rating category of each of the Rating Agencies
at the time of such investment;
(f) a guaranteed investment contract approved by each of
the Rating Agencies and issued by an insurance company or other corporation
having a long-term unsecured debt rating in the highest available rating
category of each of the Rating Agencies (or, if not rated by Fitch, ▇▇▇▇▇'▇
Investors Service, Inc.) at the time of such investment;
(g) money market funds having ratings in one of the two
highest available rating categories of S&P and Fitch (or, if not rated by Fitch,
▇▇▇▇▇'▇ Investors Service, Inc.) at the time of such investment which invest
only in other Permitted Investments (any such money market funds which provide
for demand withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth herein), including money market
funds of the Indenture Trustee and any such funds that are managed by the
Indenture Trustee or its affiliates or for which the Indenture Trustee or any
affiliate acts as advisor as long as such money market funds satisfy the
criteria of this subparagraph (g); and
(h) any other investment that will not result in a
downgrading or withdrawal of the rating by either Rating Agency on the Bonds, as
confirmed in writing by such Rating Agency.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Principal Balance": As to any Mortgage Loan and any Determination
Date, the actual outstanding principal amount thereof as of the close of
business on the Determination Date in
9
14
the preceding month (or, in the case of the first Determination Date, as of the
Cut-off Date) less (1) all scheduled payments of principal received or advanced
in respect of such Mortgage Loan and due during the related Due Period, (2) all
other amounts collected, received or otherwise recovered in respect of principal
on the Mortgage Loans (including Principal Prepayments, but not including
Payments Ahead that are not allocable to principal for the related Due Period)
during or in respect of the related Collection Period, (3) Net Liquidation
Proceeds and Trust Insurance Proceeds allocable to principal recovered or
collected in respect of such Mortgage Loan during the related Collection Period,
(4) the portion of the Purchase Price allocable to principal to be remitted to
the Indenture Trustee on or prior to the next succeeding Deposit Date in
connection with a release and removal of such Mortgage Loan pursuant to the
Indenture, to the extent such amount is actually remitted on or prior to such
Deposit Date, and (5) the amount to be remitted by the Seller to the Indenture
Trustee on the next succeeding Deposit Date in connection with a substitution of
a Qualified Replacement Mortgage Loan for such Mortgage Loan pursuant to the
Indenture, to the extent such amount is actually remitted on or prior to such
Deposit Date; provided, however, that a Mortgage Loan that has become a
Liquidated Mortgage Loan since the preceding Determination Date (or, in the case
of the first Determination Date, since the Cut-off Date) will be deemed to have
a Principal Balance of zero on the current Determination Date.
"Principal Prepayment": As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
Mortgage Loan (including Net Liquidation Proceeds) that, in the case of a
payment by a Mortgagor, is received in advance of its scheduled due date and is
not a Payment Ahead.
"Purchase Price": As defined in the Indenture.
"Rating Agencies": Standard & Poor's and Fitch (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Servicer, notice of which
designation shall be given to the Indenture Trustee.
"Realized Loss": With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance of such Mortgage Loan and accrued
and unpaid interest thereon (determined as of the Determination Date immediately
prior to such Mortgage Loan becoming a Liquidated Mortgage Loan) exceeds the Net
Liquidation Proceeds, if any, in respect of such Mortgage Loan, which amount
shall in no event exceed the Principal Balance of such Mortgage Loan (determined
as of the Determination Date immediately prior to such Mortgage Loan becoming a
Liquidated Mortgage Loan).
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.
"Remittable Funds": With respect to any Deposit Date, the amount equal
to the aggregate of the following amounts:
10
15
(a) all payments in respect of or allocable to interest
received (or deemed to have been received in the case of Payments Ahead) with
respect to the Mortgage Loans and due during the related Due Period and all
other interest payments on or in respect of the Mortgage Loans received by or on
behalf of the Servicer during the related Collection Period, net of amounts
representing interest accrued on such Mortgage Loans in respect of any period
prior to the Cut-off Date, plus any Compensating Interest payments made by the
Servicer and any net income from related REO Properties collected during the
related Collection Period;
(b) all scheduled payments of principal received (or deemed
to have been received, in the case of Payments Ahead) with respect to the
Mortgage Loans and due during the related Due Period, and all other principal
payments (including Principal Prepayments) received or deemed to have been
received during the related Collection Period;
(c) all Trust Insurance Proceeds and Net Liquidation Proceeds
received during the related Collection Period;
(d) all prepayment premiums and penalties received with
respect to the Mortgage Loans received during the related Collection Period; and
(e) the amount of Monthly Advances made by the Servicer in
respect of such Deposit Date pursuant to Section 4.01(a);
but net of the following amounts:
(1) the Monthly Servicing Fee and any
other compensation payable to the Servicer pursuant
to Section 2.07 for the related Collection Period
(except to the extent used to pay Compensating
Interest) to the extent not previously paid to or
retained by the Servicer;
(2) the aggregate amount of Monthly
Advances, if not theretofore recovered from the
Mortgagor on whose behalf such Monthly Advance was
made, from subsequent collections on the related
Mortgage Loan (other than those included in the
related Liquidation Expenses or netted out by the
Servicer from related Insurance Proceeds);
(3) the aggregate amount of Servicing
Advances, if not theretofore recovered from the
Mortgagor on whose behalf such Servicing Advance was
made, from subsequent collections on the related
Mortgage Loan (other than those included in the
related Liquidation Expenses or netted out by the
Servicer from related Insurance Proceeds);
(4) the aggregate amount of
Nonrecoverable Advances not previously reimbursed to
the Servicer;
11
16
(5) any amount deposited into the
Collection Account that may not be withdrawn
therefrom pursuant to a final and nonappealable order
of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to ▇▇▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code and that would
otherwise have been included in Remittable Funds on
such Deposit Date; and
(6) excess Net Liquidation Proceeds as
described in the second paragraph of Section 2.05.
"REO Property": As defined in Section 4.01(a).
"Responsible Officer": When used with respect to the Indenture Trustee,
the Chairman or Vice Chairman of the Board of Directors or Trustees, the
Chairman or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any
Trust Officer or Assistant Trust Officer, the Controller and any Assistant
Controller or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
to whom, with respect to a particular matter, such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Seller": National Mortgage Corporation, as seller of the Mortgage
Loans pursuant to the Mortgage Loan Sale Agreement.
"Servicer": National Mortgage Corporation or any successor servicer
appointed as provided pursuant to this Agreement.
"Servicer Mortgage File": As to each Mortgage Loan, a file maintained
by the Servicer that contains (1) an original hazard insurance policy (and flood
insurance policy, if required pursuant to Section 2.03 hereof) relating to the
underlying Mortgaged Property or a certificate of insurance issued by the
insurer or its agent indicating that a hazard insurance policy (and flood
insurance policy, if required pursuant to Section 2.03 hereof) is in effect with
respect to such Mortgaged Property, (2) the originals of all RESPA and
Regulation Z disclosure statements executed by the related Mortgagors, (3) the
appraisal report made in connection with the origination of the Mortgage Loan
(4) the settlement statement for the purchase and/or refinancing of the
underlying Mortgaged Property by the related Mortgagor under the related
Mortgage Note and Mortgage, (5) the originals of any tax service contracts, (6)
documentation relating to any approvals by the Servicer of any modifications of
the original related Mortgage Loan Documents and any releases of collateral
supporting the related Mortgage Loan, together with copies of the documentation
effecting any such modifications or releases, (7) collection notices or form
notices sent to the related Mortgagor, (8) foreclosure correspondence and legal
notifications, if applicable, (9) water and irrigation company stock
certificates, if applicable, and (10) all other documents relating to such
Mortgage Loan which would customarily be maintained in a mortgage loan file by
the Servicer in order to service the mortgage loan properly, as well as any
12
17
other documents relating to such Mortgage Loan (other than Mortgage Loan
documents) that come into the Servicer's possession.
"Servicer Remittance Report": The monthly report prepared by the
Servicer and delivered to the parties specified in Section 3.01.
"Servicing Advances": All reasonable and customary "out-of-pocket"
costs and expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (1) the preservation,
restoration and protection of the Mortgaged Properties, including without
limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
to the extent not paid by the related Mortgagors, (2) any enforcement or
judicial proceedings with respect to the Mortgage Loans or Mortgaged Properties,
including foreclosures, (3) the management and liquidation of any REO Property
and (4) compliance with the Servicer's obligations under Section 2.03 (other
than its obligation to deposit in the Collection Account amounts representing
the deductible in respect of any blanket hazard insurance policy).
"Servicing Fee Rate": 0.50%.
"Servicing Officer": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers annexed to an
Officer's Certificate furnished to the Indenture Trustee by the Servicer, as
such list may from time to time be amended.
"Six-Month LIBOR": For any Mortgage Loan as of an interest rate
adjustment date for such loan, a per annum rate equal to the average of
interbank offered rates for six-month U.S. dollar-denominated deposits in the
London market based on quotations of major banks as published in The Wall Street
Journal and as most recently available (i) as of the first business day of the
month immediately preceding the month in which the adjustment date occurs or
(ii) as of the date 45 days prior to the adjustment date.
"Standard & Poor's" or "S&P": Standard & Poor's Ratings Services, a
Division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and its successors in interest.
"Sub-Servicer": Any Person, including an Affiliate of the Servicer,
with whom the Servicer has entered into a Sub-Servicing Agreement and who
satisfies the requirements set forth in Section 2.14 hereof in respect of the
qualification of a Sub-Servicer.
"Sub-Servicing Account": Any segregated trust account, which shall at
all times be an Eligible Account, established and maintained as though it were a
Collection Account pursuant to Section 2.02(b) and entitled "[Sub-Servicer], in
trust for the benefit of Holders of Fund America Investors Trust 1998-NMC1
Collateralized Mortgage Obligations, Series 1998-NMC1, Collection Account".
References herein to the Collection Account shall include any Sub-Servicing
Account as the context requires.
13
18
"Sub-Servicing Agreement": A written contract between the Servicer and
any Sub- Servicer relating to the servicing and/or administration of certain
Mortgage Loans.
"Transferor": Fund America Investors Corporation II, as transferor of
the Mortgage Loans to the Issuer pursuant to the terms of that certain Mortgage
Loan Contribution Agreement, dated as of June 1, 1998, between Fund America
Investors Corporation II and the Issuer.
"Trust Certificates": The certificates of beneficial ownership of the
Issuer.
"Trust Estate": As defined in the Indenture.
"Trust Insurance Proceeds": Insurance Proceeds that (1) are applied by
the Servicer to reduce the Principal Balance of the related Mortgage Loan and
(2) not applied to the restoration or repair of the related Mortgaged Property
or released to the related Mortgagor in accordance with the Servicer's normal
servicing procedures, applicable law or the terms of the related Mortgage Loan.
"Trust Paying Agent": As defined in the Deposit Trust Agreement.
"Underwriter": Salomon Brothers Inc, doing business as ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇.
"Underwriting Agreement": The underwriting agreement, dated as of June
24, 1998, between Fund America Investors Corporation II and the Underwriter.
"Vice President": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
"Voting Interest": With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Bonds evidencing specified
Voting Interests in the Trust Estate, the Bondholders will collectively be
entitled to 100% of the aggregate Voting Interests represented by all Bonds.
Voting Interests allocated to the Bonds shall be allocated in proportion to the
Bond Balance. With respect to any provision hereof providing for action, consent
or approval of the Bonds, each Holder of the Bonds will have a Voting Interest
in the Bonds equal to such Holder's Percentage Interest in the Bonds.
SECTION 1.02. Interest Calculations.
All calculations of interest at the Mortgage Loan Rate that are made in
respect of the Principal Balance of a Mortgage Loan, shall be made on a daily
basis using a 360-day year of twelve 30-day months.
SECTION 1.03. [Reserved.]
14
19
ARTICLE II
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 2.01. Servicing Generally.
(a) General Duties; Licensing. Acting directly or through one
or more Sub-Servicers as provided in Section 2.14, the Servicer, as servicer,
shall administer the Mortgage Loans with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to all comparable
mortgage loans that it services for itself or others. The Servicer shall follow
its customary standards, policies and procedures in performing its duties as
Servicer, to the extent not in conflict with the provisions of this Agreement.
Notwithstanding the appointment of any Sub-Servicer, the Servicer shall remain
liable for the performance of all of the servicing obligations and
responsibilities under this Agreement. The Servicer shall maintain all licenses
and qualifications necessary under the laws of any jurisdiction where Mortgaged
Properties are located for it to perform the servicing obligations hereunder
legally. The Servicer shall cause any Sub-Servicer to maintain for it all
licenses and qualifications necessary to perform its servicing obligations in
the states where the Mortgaged Properties to which the applicable Sub-Servicing
Agreement relates are located. The Servicer shall cooperate with the Issuer and
the Indenture Trustee and furnish to the Issuer and the Indenture Trustee such
information in its possession as may be necessary or otherwise reasonably
requested to enable the Issuer and the Indenture Trustee to perform their
respective tax reporting duties under the Indenture. The Issuer and the
Indenture Trustee shall furnish the Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
(b) Interest Rate and Monthly Payment Adjustments. The Servicer
shall enforce each Mortgage Loan and shall timely calculate, record, report and
apply all Mortgage Interest Rate adjustments in accordance with the related
Mortgage Note. The Servicer's records shall, at all times, reflect the
then-current Mortgage Interest Rate and Monthly Payment and the Servicer shall
timely notify the Mortgagor of any changes to the Mortgage Interest Rate and the
Monthly Payment.
(c) Servicer Authority. Without limiting the generality of the
foregoing, the Servicer (1) shall continue, and is hereby authorized and
empowered by the Issuer and the Indenture Trustee, to execute and deliver, on
behalf of itself, the Issuer, the Bondholders and the Indenture Trustee 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 Mortgage Loans and with respect to the related Mortgaged Properties and
(2) subject to Section 2.05, to institute foreclosure proceedings or obtain
deeds in lieu of foreclosure so as to convert ownership of Mortgaged Properties
into the name of the Indenture Trustee pursuant to Section 2.05 of this
Agreement. The Servicer may ▇▇▇ to enforce or collect on any of the Mortgage
Loans or any insurance policy covering a Mortgage Loan, in its own name if
possible, or on behalf of the Issuer or the Indenture Trustee. If the Servicer
commences a legal proceeding to enforce a Mortgage Loan or any such insurance
policy, the Issuer and the Indenture Trustee shall
15
20
thereupon be deemed to have automatically assigned the Mortgage Loan or the
rights under such insurance policy to the Servicer for purposes of collection
only. If, however, in any suit or legal proceeding for enforcement, it is held
that the Servicer may not enforce or collect on a Mortgage Loan or any insurance
policy covering a Mortgage Loan on the ground that it is not a real party in
interest or a holder entitled to enforce such Mortgage Loan or such insurance
policy, as the case may be, then the Issuer and the Indenture Trustee shall,
upon the written request of a Servicing Officer, execute and return to the
Servicer such powers of attorney and other documents as are necessary or
appropriate to enable the Servicer to enforce such Mortgage Loan or insurance
policy, as the case may be, and which are prepared by the Servicer and submitted
to the Issuer or the Indenture Trustee for execution.
The Servicer, on behalf of the Issuer and the Bondholders, shall
prepare, execute, deliver and take all actions reasonably necessary to protect
the Trust Estate pursuant to Section 3.05 of the Indenture and shall, on behalf
of the Issuer, execute and deliver and take any additional actions as shall be
deemed necessary to effect the administrative obligations of the Issuer under
the Indenture.
(d) Independent Contractor Relationship. The relationship of
the Servicer to the Issuer and the Indenture Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.
SECTION 2.02. Collection of Certain Mortgage Loan Payments; Collection
Account.
(a) Collection Procedures. The Servicer shall, to the extent
such procedures shall be consistent with this Agreement, follow such collection
procedures as it follows from time to time with respect to mortgage loans in its
servicing portfolio that are comparable to the Mortgage Loans. A summary of the
Servicer's collection procedures as of the Closing Date is attached hereto as
Exhibit D. Consistent with the foregoing, the Servicer may in its discretion (1)
waive any assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment charges (other than prepayment premiums and
penalties), if any, or other fees that may be collected in the ordinary course
of servicing the Mortgage Loans, (2) if a Mortgagor is in default or appears
about to be in default because of a Mortgagor's financial condition, arrange
with the Mortgagor a schedule for the payment of delinquent payments due on the
related Mortgage Loan or (3) modify payments of monthly principal and interest
on any Mortgage Loan becoming subject to the terms of the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended (the "Relief Act"), in accordance with the
Servicer's general policies for comparable mortgage loans subject to the Relief
Act. Notwithstanding the foregoing, in the event that any Mortgage Loan is in
default or, in the judgment of the Servicer, such default is reasonably
foreseeable, the Servicer, consistent with the servicing standard set forth in
Section 2.01, may waive, modify or vary any term of such Mortgage Loan
(including modifications that change the Mortgage Interest Rate, forgive the
payment of principal or interest or extend the final maturity date of such
Mortgage Loan), accept payment from the related Mortgagor of an amount less than
the unpaid principal balance in final satisfaction of such Mortgage Loan, or
consent to the postponement of such compliance with any such term or otherwise
grant indulgence to any Mortgagor if in the
16
21
Servicer's determination such waiver, modification, postponement or indulgence
will maximize the recovery with respect to such Mortgage Loan. In no event,
however, may the Servicer waive prepayments premiums or penalties, if any. The
Servicer will not consent to the placement of a deed of trust or mortgage, as
applicable, on any Mortgaged Property that has a priority equal to or higher
than the lien securing the related Mortgage Loan unless such Mortgage Loan is
prepaid in full. No partial release of a Mortgage Loan shall be made if it would
cause the Loan-to-Value Ratio of the Mortgage Loan (taking into account the
partial release) to be higher than the Loan-to-Value Ratio of the Mortgage Loan
at origination.
(b) Collection Account. The Servicer shall establish and
maintain, or cause to be established and maintained, one or more Eligible
Accounts that in the aggregate are the Collection Account. At the Servicer's
option, amounts held in the Collection Account shall be invested by the
depository institution or trust company then maintaining the account at the
written direction of the Servicer in Permitted Investments that mature not later
than the Deposit Date next succeeding the date of investment. The Servicer shall
not retain any cash or investment in the Collection Account for a period in
excess of 12 months and cash therein shall be considered transferred on a
first-in, first-out basis to the Indenture Trustee for inclusion in the Bond
Account, as described in Section 2.02(d). All net income and gain realized from
any such investment shall be for the benefit of the Servicer as additional
servicing compensation and shall be subject to its withdrawal or order from time
to time. Any losses realized in connection with any such investment shall be for
the account of the Servicer and the Servicer shall deposit or cause to be
deposited the amount of such loss (to the extent not offset by income from other
investments) in the Collection Account immediately upon the realization of such
loss and shall have no right to reimbursement therefor. Any benefit resulting
from deposits, maintenance or investment of funds in the Collection Account
shall be for the Servicer's benefit.
(c) Deposits to Collection Account. Subject to the last
paragraph of this Section 2.02(c), the Servicer shall deposit in the Collection
Account each of the following payments on and collections in respect of the
Mortgage Loans as soon as practicable, but in no event later than the close of
business on the second Business Day after its receipt thereof:
(i) all payments in respect of or allocable to interest on
the Mortgage Loans (including any net income from REO Properties), net
of the Monthly Servicing Fees attributable to such payments;
(ii) all collections of principal on or with respect to the
Mortgage Loans;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds;
(v) all Trust Insurance Proceeds (including, for this
purpose, any amounts required to be credited by the Servicer pursuant
to the last sentence of Section 2.03); and
17
22
(vi) all prepayment premiums or penalties received with
respect to the Mortgage Loans;
in any case net of its Monthly Servicing Fees, Ancillary Servicing Compensation,
and reimbursable outstanding Servicing Advances and Monthly Advances, to the
extent the Servicer's automated system deducts such amounts from collected funds
prior to deposit of such collected funds into the Collection Account.
The Servicer shall replace all amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of a Monthly
Advance pursuant to Section 4.01(a) or towards the payment of a Servicing
Advance pursuant to Section 4.01(b) by depositing into the Collection Account on
or prior to the Deposit Date immediately following such withdrawal an amount
equal to the total of all such amounts so applied since the immediately
preceding Deposit Date.
The foregoing requirements respecting deposits to the Collection
Account are exclusive, it being understood that, without limiting the generality
of the foregoing, the Servicer need not deposit in the Collection Account
amounts representing fees, late payment charges, charges for checks returned for
insufficient funds, prepayment charges (other than prepayment premiums and
penalties), if any, or extension or other administrative charges paid by
Mortgagors or amounts received by the Servicer for the account of Mortgagors for
application towards the payment of taxes, insurance premiums, assessments and
similar items. The amounts deposited in the Collection Account are subject to
withdrawal by the Servicer, from time to time, (1) to make transfers to the
Indenture Trustee for deposit into the Bond Account pursuant to Section 2.02(d),
(2) to pay itself the Monthly Servicing Fee, to the extent not already paid to
or retained by the Servicer, pursuant to Section 2.07, Ancillary Servicing
Compensation, and investment income on Permitted Investments, (3) to make
Servicing Advances or to reimburse itself for Servicing Advances, as applicable,
in either case in accordance with Section 4.01(b), (4) to make Monthly Advances
in accordance with Section 4.01(a) or to reimburse itself for payments of
Monthly Advances as described in Section 4.01(a), and (5) to clear and terminate
the Collection Account. In addition, if the Servicer deposits in the Collection
Account any amount not required to be so deposited or any amount in respect of
payments by Mortgagors made by checks subsequently returned for insufficient
funds or other reason for non-payment, it may at any time withdraw such amount
from the Collection Account, any provision herein to the contrary
notwithstanding.
Upon such terms as the Rating Agencies may approve, the Servicer may
make the deposits to the Collection Account referred to in Section 2.02(c) on a
later day than the second Business Day after receipt of the amounts required to
be so deposited, which terms and later day shall be specified by the Rating
Agencies and confirmed to the Indenture Trustee and the Servicer in writing;
provided, however, that in any event such amounts shall be deposited into the
Collection Account no later than the next succeeding Deposit Date.
(d) Remittances to Indenture Trustee. At or before 12:00 noon
Denver time on each Deposit Date, the Servicer shall withdraw from the
Collection Account all amounts on
18
23
deposit therein that constitute any portion of Remittable Funds for the related
Deposit Date (including any amounts therein that are being held for remittance
on a subsequent Deposit Date and are applied toward the Monthly Advance for the
related Deposit Date pursuant to Section 4.01(a)) and remit such amounts to the
Indenture Trustee for deposit into the Bond Account. In addition, any amounts
required pursuant to the Indenture to be deposited into the Bond Account in
connection with a purchase of any Mortgage Loans by the Servicer pursuant to the
Indenture and any other amounts (including Monthly Advances and Compensating
Interest for such Deposit Date) required by this Agreement to be deposited by
the Servicer with the Indenture Trustee shall be remitted to the Indenture
Trustee for deposit into the Bond Account on the applicable Deposit Date. On
each Deposit Date after the Indenture has been satisfied and released for so
long as the Deposit Trust Agreement remains in effect, the Servicer shall remit
all Remittable Funds to the Trust Paying Agent, for deposit into the Certificate
Distribution Account in accordance with the Deposit Trust Agreement.
In the event that the Servicer does not remit all Remittable Funds for
the related Payment Date on the Deposit Date, the Servicer also shall pay to the
Indenture Trustee on demand, for its own account and not for the account of the
Bondholders, an amount equal to the income that the Indenture Trustee would have
received on the investment of such funds in Permitted Investments, as reasonably
calculated by the Indenture Trustee, from the Deposit Date until the date that
such Remittable Funds have been remitted to the Indenture Trustee.
SECTION 2.03. Hazard Insurance Policies.
The Servicer shall cause to be maintained for each Mortgage Loan
(including any Mortgage Loan as to which the related Mortgaged Property has been
acquired on behalf of the Indenture Trustee upon foreclosure, by deed in lieu of
foreclosure or comparable conversion), hazard insurance (including flood
insurance coverage, if obtainable, to the extent such property is located in a
federally designated flood area in such amount as is required under applicable
FEMA guidelines) with extended coverage in an amount that is not less than the
lesser of (1) the maximum insurable value from time to time of the improvements
that are a part of such property or a replacement cost basis, or (2) the
principal balance of such Mortgage Loan, determined in the case of a Mortgage
Loan that has been foreclosed at the time of such foreclosure; provided,
further, that such hazard insurance shall be in an amount not less than such
amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. Each such hazard insurance
policy shall contain a standard mortgagee loss payable clause naming the
originator, its successors and assigns, as mortgagee. The Servicer shall be
under no obligation to require that any Mortgagor maintain earthquake or other
additional insurance and shall be under no obligation itself to maintain any
such additional insurance on property acquired in respect of a Mortgage Loan,
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. Amounts collected by
the Servicer under any such policies shall be deposited into the Collection
Account in accordance with Section 2.02 to the extent that they constitute Net
Liquidation Proceeds or Trust Insurance Proceeds. If the Servicer shall obtain
and maintain a blanket policy, issued by an insurer acceptable to each Rating
Agency, insuring
19
24
against such hazard losses, it shall conclusively be deemed to have satisfied
its obligations as set forth in the first sentence of this Section, it being
understood and agreed that such policy may contain a deductible clause that is
in form and substance consistent with standard industry practice, in which case
the Servicer shall, in the event that there shall not have been maintained on
the related Mortgaged Property a policy complying with the first sentence of
this Section 2.03, and there shall have been a loss that would have been covered
by such policy, deposit in the Collection Account in accordance with Section
2.02 the amount not otherwise payable under the blanket policy because of such
deductible clause from its own funds, and such amount shall not be reimbursable
to the Servicer.
SECTION 2.04. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements.
In any case in which property subject to a Mortgage is voluntarily
conveyed by the Mortgagor, the Servicer may enter into an assumption agreement
with the Person to whom such Mortgaged Property has been or is about to be
conveyed, pursuant to which such Person becomes liable under the related
Mortgage Note and, to the extent permitted by applicable law or the related
mortgage documents, the Mortgagor remains liable thereon. If the Person to whom
such Mortgaged Property has been or is about to be conveyed satisfies the
Servicer's then-current underwriting standards as to borrower creditworthiness
for mortgage loans similar to the Mortgage Loans and is in the same Seller
credit rating category as that which was assigned to the borrower under the
Mortgage Loan being replaced, the Servicer may enter into a substitution of
liability agreement with such person, under which the previous Mortgagor is
released from liability thereon and the transferee is substituted as a Mortgagor
and becomes liable under the Mortgage Note. The Servicer shall not permit an
assumption agreement or a substitution of liability agreement with respect to a
Mortgage Loan unless permitted by applicable law and unless the Servicer
determines that such action would not materially increase the risk of default or
delinquency on such Mortgage Loan or materially impair the security for such
Mortgage Loan. The Servicer will not enter into any assumption agreement or
substitution of liability agreement unless such agreement complies with the
Servicer's standard servicing procedures and the Servicer would enter into such
agreement with respect to a mortgage loan in its own portfolio. The Servicer
shall notify the Indenture Trustee that any assumption agreement or substitution
of liability agreement has been completed and the Servicer shall forward to the
Indenture Trustee the original of such assumption agreement or substitution of
liability agreement. Such assumption agreement or substitution of liability
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any such agreement, the Mortgage Interest Rate
shall not be reduced (but may be increased), the Principal Balance of such
Mortgage Loan shall not be changed and the term of such Mortgage Loan will not
be extended beyond the existing term of such Mortgage Loan. Any fee collected by
the Servicer for entering into any such agreement shall be retained by the
Servicer as Ancillary Servicing Compensation.
20
25
In the event the Servicer does not approve an assumption of a Mortgage
Loan as described above, the Servicer will enforce any related due-on-sale
clause to the extent permitted by the related Mortgage Note and Mortgage and by
all applicable laws and regulations, but only to the extent the Servicer does
not believe that such enforcement will (1) adversely affect or jeopardize
coverage under any related insurance policy, (2) result in legal action by the
Mortgagor, or (3) materially increase the risk of default or delinquency on, or
materially impair the security for, such Mortgage Loan.
Notwithstanding the foregoing paragraph of this Section 2.04 or any
other provision of this Agreement, the Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reasons
of any assumption of a Mortgage Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer that the Servicer reasonably believes it may be restricted by law from
preventing, for any reason whatsoever.
SECTION 2.05. Realization upon Defaulted Mortgage Loans; Options to
Purchase Mortgage Loans.
The Servicer, on behalf of and as the agent of the Indenture Trustee,
shall foreclose upon or otherwise comparably convert the ownership of Mortgaged
Properties securing such of the Mortgage Loans as come into and continue in
default and as to which no satisfactory arrangements can be made for collection
of delinquent payments pursuant to Section 2.02(a) into the name of the
Indenture Trustee; provided, however, that if the Servicer has actual knowledge
or reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances, then the Servicer will cause to be undertaken an
environmental inspection of the Mortgaged Property that complies with ▇▇▇▇▇▇
Mae's selling and servicing guide applicable to single family homes and its
servicing procedures. If the environmental inspection reveals any potentially
hazardous substances, the Servicer will notify the Indenture Trustee, and the
Servicer will not foreclose or accept a deed in lieu of foreclosure on the
Mortgaged Property without the consent of the Indenture Trustee. In connection
with such foreclosure or other conversion, the Servicer shall follow such
practices and procedures as it shall deem necessary or advisable and as shall be
normal and usual in its general first lien one- to four-family mortgage loan
servicing activities. The foregoing is subject to the proviso that the Servicer
shall not be required to expend its own funds in connection with any foreclosure
or restoration of any Mortgaged Property unless, in the reasonable judgment of
the Servicer, such foreclosure, correction or restoration will increase Net
Liquidation Proceeds (taking into account the reimbursement of such expenses to
the Servicer and any unreimbursed Servicing Advances and Monthly Advances made
or expected to be made with respect to such Mortgage Loan).
To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the Principal Balance of the related Mortgage
Loan and accrued interest thereon at the applicable Mortgage Interest Rate
through the Determination Date during the Collection Period in which such
foreclosure or conversion occurs (net of any Monthly Advances or Servicing
Advances made by the Servicer with respect to such Mortgage Loan and that were
21
26
unreimbursed prior to the receipt of such Net Liquidation Proceeds), such excess
shall be paid directly to the Servicer as additional Servicing Compensation and
shall be free from the lien of the Indenture.
The Servicer must determine, as to each defaulted Mortgage Loan, when
such Mortgage Loan has become a Liquidated Mortgage Loan.
The Servicer, at its sole option, may purchase from the Trust Estate on
any Deposit Date any Mortgage Loan as to which the related Mortgagor has failed
to make full Monthly Payments as required under the related Mortgage Note for
three consecutive months at any time following the Cut-off Date and prior to
such Deposit Date at a price equal to the Purchase Price by transferring such
amount to the Indenture Trustee for deposit into the Bond Account on such
Deposit Date pursuant to Section 2.02; provided, however, that the aggregate
Principal Balances of the Mortgage Loans purchased by the Servicer pursuant to
the exercise of the option granted in this sentence shall not exceed 10% of the
Initial Pool Balance. Upon the receipt by the Indenture Trustee of the Purchase
Price for any Mortgage Loan as to which the Servicer has exercised its option to
purchase pursuant to this paragraph, the Indenture Trustee shall release to the
Servicer the Mortgage File pertaining to each such Mortgage Loan and the
Indenture Trustee and the Issuer shall execute and deliver such instruments of
transfer and all other documents furnished by the Servicer as are necessary to
transfer their respective interests in such Mortgage Loans to the Servicer. For
purposes of this Agreement, any purchase effected in accordance with this
paragraph shall be deemed to be a prepayment of each Mortgage Loan so purchased.
The Servicer also shall have certain rights to redeem the Bonds pursuant to
Section 10.01 of the Indenture.
In the event that title to any Mortgaged Property is acquired as REO
Property by the Indenture Trustee in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be issued to the Indenture
Trustee, or to its nominee, on behalf of the Bondholders, and the Servicer shall
manage, conserve, protect and operate each such REO Property for the Bondholders
solely for the purpose of its prompt disposition and sale. The Servicer shall
use its best efforts to dispose of each such REO Property as expeditiously as
possible consistent with the goal of maximizing Net Liquidation Proceeds (taking
into account any unreimbursed Servicing Advances and Monthly Advances made or
expected to be made with respect to such REO Property). None of the Issuer, the
Indenture Trustee or the Servicer, acting on behalf of the Trust Estate, shall
provide financing from the Trust Estate to any purchaser of any such REO
Property.
SECTION 2.06. Indenture Trustee to Cooperate; Release of Mortgage
Files.
(a) Upon the payment in full of the principal balance of any
Mortgage Loan, the Servicer shall notify the Indenture Trustee by a
certification in the form of Exhibit B hereto (a "Request for Release") (which
certification shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited to the
Collection Account pursuant to Section 2.02 have been so deposited) of a
Servicing Officer. Such notification shall be made each month at the time that
the Servicer delivers its Servicer Remittance Report to the Issuer and the
Indenture Trustee pursuant to Section 3.01. Upon any
22
27
such payment in full, the Servicer is authorized to procure a deed of full
reconveyance covering the related Mortgaged Property encumbered by such
Mortgage, which deed, except as otherwise provided in applicable law, shall be
recorded in the office of the County Recorder in which the Mortgage is recorded,
or, as the case may be, to procure an instrument of satisfaction or, if the
related Mortgagor so requests, an assignment without recourse, in each case
prepared by the Servicer at its expense and executed by the Indenture Trustee,
which deed of reconveyance, instrument of satisfaction or assignment shall be
delivered by the Servicer to the Person entitled thereto, it being understood
and agreed that no expenses incurred in connection with such deed of
reconveyance, assignment or instrument of satisfaction shall be reimbursed from
amounts at the time on deposit in the Collection Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan or to effect a partial release of any Mortgaged
Property from the lien of the related Mortgage, the Servicer shall deliver to
the Indenture Trustee a Request for Release requesting the related Trustee
Mortgagee Loan File. The Indenture Trustee shall, within five Business Days
after its receipt of such Request for Release, release the related Mortgage File
to the Servicer. Any such Request for Release shall obligate the Servicer to
return the Mortgage File to the Trustee by the twenty-first day following the
release thereof, unless (1) the Mortgage Loan has been liquidated and the Net
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Collection Account or the Bond Account or (2) the Mortgage File or such document
has been delivered to an attorney, or to a public trustee or other public
official as required by law, for the purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Servicer has delivered to the Indenture
Trustee a certificate of the Servicer certifying as to the name and address of
the Person to which such Mortgage File or such document was delivered and the
purpose or purposes of such delivery.
(c) Upon receipt of an officer's certificate of the Servicer
stating that such Mortgage Loan was liquidated and that all amounts received or
to be received in connection with such liquidation which are required to be
deposited into the Collection Account or the Bond Account have been so
deposited, or that such Mortgage Loan has become an REO Property (each, a
"Servicing Officer's Certificate"), the Indenture Trustee shall execute any
documents prepared by the Servicer and delivered to it as necessary or
appropriate to enable the Servicer to perform its obligations hereunder,
including, without limitation, documents to enable the Servicer to convey title
to a Mortgaged Property to the Mortgagor or its designee upon payment of the
Mortgage Loan in full or to convey title to an REO Property to the purchaser
thereof, or to convey title to a Mortgaged Property into the name of the
Indenture Trustee pursuant to Section 2.05.
SECTION 2.07. Servicing Compensation; Payment of Certain Expenses by
the Servicer; Compensation Interest.
On each Deposit Date, the Servicer shall be entitled to receive, by
withdrawal by the Servicer from the Collection Account, out of collections of
interest on the Mortgage Loans for
23
28
the related Collection Period, as servicing compensation for such Collection
Period, the Monthly Servicing Fee, to the extent not retained by the Servicer
from amounts remitted to the Collection Account pursuant to Section 2.02(c)(i).
The Servicer shall also be entitled to retain any Ancillary Servicing
Compensation when received.
The Servicer shall pay Compensating Interest to the Indenture Trustee
on behalf of the Bondholders out of the related Monthly Servicing Fee on each
Deposit Date, to the extent of the amount of the Monthly Servicing Fee, and
shall not be entitled to reimbursement therefor. The Servicer shall be required
to pay all expenses incurred by it in connection with its activities hereunder
(including payment of the fees and expenses relating to the Annual Independent
Public Accountant's Servicing Report described in Section 2.09, and all other
fees and expenses not otherwise expressly stated hereunder for the account of
the Bondholders) and shall not be entitled to reimbursement therefor except as
specifically provided herein.
SECTION 2.08. Annual Statement as to Compliance.
(a) The Servicer will deliver to the Issuer, the Indenture
Trustee and each Rating Agency, with a copy to the Underwriter, on or before
March 31 of each year, beginning with March 31, 1999, an Officer's Certificate
of the Servicer substantially in the form set forth in Exhibit A hereto stating
that (1) a review of the activities of the Servicer during the preceding
calendar year (or since the Closing Date in the case of the first such
statement) and of its performance under this Agreement has been made under such
officer's supervision and (2) to the best of such officer's knowledge, based on
such review, the Servicer has fulfilled all its material obligations under this
Agreement throughout such year (or since the Closing Date in the case of the
first such statement), 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.
(b) The Servicer shall deliver to the Issuer and the Indenture
Trustee, with a copy to each Rating Agency and to the Underwriter, promptly
after having obtained knowledge thereof, but in no event later than ten Business
Days thereafter, written notice by means of an Officer's Certificate of any
event that with the giving of notice or the lapse of time, or both, would become
an Event of Default.
SECTION 2.09. Annual Independent Public Accountants' Servicing Report.
On or before March 31 of each year, beginning with March 31, 1999, the
Servicer at its expense shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish a report to the Issuer, the Indenture Trustee and each Rating Agency,
with a copy to the Underwriter, to the effect that such firm has examined
certain documents and records relating to the servicing activities of the
Servicer for the period covered by such report, and that such examination, which
has been conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers (to the extent that the procedures in
such audit guide are applicable to the servicing obligations set forth in this
Agreement), has disclosed no exceptions or errors in records relating to the
24
29
servicing activities of the Servicer that, in the opinion of such firm, are
material, except for such exceptions as shall be set forth in such report.
SECTION 2.10. Access to Certain Documentation and Information Regarding
the Mortgage Loans.
(a) The Servicer shall provide to Bondholders that are
federally insured savings associations and the FDIC and its supervisory agents
and examiners access to the documentation regarding the Mortgage Loans required
by applicable regulations of the Office of Thrift Supervision, and to the
Issuer, the Indenture Trustee and their respective agents all documentation
relating to the Mortgage Loans that is in the possession of the Servicer, such
access being afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Servicer. Nothing in this Section
2.10(a) shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors,
and the failure of the Servicer to provide access as provided in this Section as
a result of such obligation shall not constitute a breach of this Section.
(b) The Servicer shall supply information to the Indenture
Trustee, upon reasonable advance notice, in such form as the Indenture Trustee
shall reasonably request, as is required in the Indenture Trustee's reasonable
judgment to enable the Indenture Trustee to make required payments and to
furnish the certificates, statements and reports to Bondholders as required of
the Indenture Trustee pursuant to the Indenture, it being understood that the
Servicer is responsible for supplying information concerning the Mortgage Loans
and not for any other information, including, without limitation, calculation of
payments due on the Bonds.
SECTION 2.11. Maintenance of Fidelity Bond and Errors and Omissions
Policy.
The Servicer shall during the term of its service as Servicer maintain
in force a (1) policy or policies of insurance covering errors and omissions in
the performance of its obligations as Servicer hereunder and (2) fidelity bond
in respect of its officers, employees and agents, in each case having coverage
amounts deemed by the Servicer to be adequate to its operations.
SECTION 2.12. Notices to the Issuer, the Rating Agencies and the
Indenture Trustee.
In addition to the other notices required to be given to the Issuer,
the Rating Agencies, and the Indenture Trustee by the provisions of this
Agreement, the Servicer shall give prompt notice to the Issuer, each Rating
Agency and the Indenture Trustee of (1) any amendment to this Agreement, (2) the
occurrence of an Event of Default and (3) the purchase of any Mortgage Loan
pursuant to Section 2.01 or 2.05 by the Servicer, as the case may be.
SECTION 2.13. Reports of Foreclosures and Abandonment of Mortgaged
Properties.
On or before February 28 of each year beginning in 1999, the Servicer
shall file the reports of foreclosures and abandonments of any Mortgaged
Property required by Code Section 6050J with the Internal Revenue Service and
provide a copy of such filing to the Indenture
25
30
Trustee. The reports from the Servicer shall be in form and substance sufficient
to meet the reporting requirements imposed by such Section 6050J.
SECTION 2.14. Sub-Servicers and Sub-Servicing Agreements.
(a) The Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution that is
acceptable to the Indenture Trustee and that is in compliance with the laws of
each state necessary to enable it to perform its obligations under such
Sub-Servicing Agreement. The Servicer shall not enter into any Sub-Servicing
Agreement that does not provide for the servicing of the Mortgage Loans
specified therein on a basis consistent with the terms of this Agreement or that
otherwise violates the provisions of this Agreement. The Servicer may enter
into, and make amendments to, any Sub-Servicing Agreement or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or forms shall be consistent with and not violate the provisions of
this Agreement.
(b) For purposes of this Agreement the Servicer shall be deemed
to have received payments on Mortgage Loans when any Sub-Servicer has received
such payments. With respect to the Servicer's obligations under Section 2.01 to
make deposits into the Collection Account, the Servicer shall be deemed to have
made such deposits when any Sub-Servicer has made such deposits into a
Sub-Servicing Account if permitted by the related Sub-Servicing Agreement.
(c) Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer alone and the Indenture Trustee
shall not be deemed a party thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Sub-Servicer, except that
the Indenture Trustee shall have such claims or rights that arise as a result of
any funds held by a Sub-Servicer in trust for or on behalf of the Trust Estate
and the Bondholders. Notwithstanding the execution of any Sub-Servicing
Agreement, the Servicer shall not be relieved of any liability hereunder and
shall remain obligated and liable for the servicing and administration of the
Mortgage Loans.
SECTION 2.15. Annual Lien Opinions; Bond Redemptions.
(a) The Servicer shall procure, at its own expense, the
Opinions of Counsel required to be delivered annually to the Indenture Trustee
pursuant to Section 3.06 of the Indenture.
(b) In the event the Servicer exercises its right to redeem the
Bonds pursuant to Section 10.01 of the Indenture, the Servicer shall, at its own
expense, prepare all documents necessary for the Issuer to sign in connection
with such redemption, and deposit amounts required to be deposited by the Issuer
in connection with such redemption, in each case pursuant to Section 4.01 and
Article X of the Indenture, and shall advise the Issuer as to the actions it
must
26
31
take in accordance with the Indenture in order to effect such redemption. The
Issuer shall follow all such directions of the Servicer.
SECTION 2.16. Year 2000 Program.
Servicer has taken, or will by June 30, 1999 have taken, all steps
necessary and appropriate to prevent any problems in its computer and
information systems arising from or in connection with the information
processing challenges associated with the Year 2000, and will provide to the
Indenture Trustee such information and reports as the Indenture Trustee may
reasonably request from time to time with respect to such steps or have or will
be taken with respect thereto.
ARTICLE III
SERVICER REMITTANCE REPORT
SECTION 3.01. Servicer Remittance Report.
Not later than the third Business Day prior to each Deposit Date, the
Servicer shall deliver to the Issuer, the Indenture Trustee and the Underwriter
a computer-readable magnetic tape (the "Tape" for such month) and a series of
hard copy reports generally including the same information included on the Tape
(the "Report," and, together with the Tape, the "Servicer Remittance Report" for
such month) detailing the payments and collections received in respect of the
Mortgage Loans during the immediately preceding Collection Period. The Servicer
Remittance Report shall include loan-by-loan information that specifies account
number, borrower name, outstanding principal balance and activity for the
preceding Collection Period and Due Period, as applicable, and any other loan
level information sufficient to enable the Indenture Trustee to report the items
specified in "Payment Date Statement" in the Indenture, as well as (a) the
amount of prepayment penalties received on the Mortgage Loans during the related
Collection Period, (b) the information set forth on Exhibit E hereto as to
Mortgage Loans that became Liquidated Mortgage Loans during the related
Collection Period, and may be delivered in a separate report in the form of
Exhibit E hereto or as part of the Servicer Remittance Report and (c) any other
information regarding the Mortgage Loans as may from time to time be agreed to
by the Servicer and the Indenture Trustee. The Servicer shall only be required
to report information concerning the Mortgage Loans, and shall not be required
to calculate any required payments on the Bonds.
ARTICLE IV
MONTHLY ADVANCES AND SERVICING ADVANCES
SECTION 4.01. Monthly Advances; Servicing Advances.
(a) Monthly Advances. On or before each Deposit Date, the
Servicer will transfer to the Indenture Trustee for deposit in the Bond Account,
in same day funds, an amount (a "Monthly Advance") equal to the sum of (1) with
respect to all Mortgage Loans for which the Monthly Payment due on the first day
of the month in which the Deposit Date occurs has not yet
27
32
been paid, the amount of such late Monthly Payment (net of the Monthly Servicing
Fee attributable to such Mortgage Loan), plus (2) with respect to each Mortgaged
Property that was acquired in foreclosure or similar action (each, an "REO
Property") during or prior to the related Collection Period and as to which a
final sale did not occur during the related Collection Period, an amount equal
to the excess, if any, of the Monthly Payment that would have been due on the
related Mortgage Loan (net of the Monthly Servicing Fee attributable to such REO
Property) over the net income from such REO Property transferred to the Bond
Account for such Payment Date; provided, however, that in no case will the
Servicer be required to make advances with respect to any period following the
final due date with respect to any Mortgage Loan. All or a portion of any
Monthly Advance required to be made on a Deposit Date may be paid out of amounts
on deposit in the Collection Account that are not required to be transferred on
such Deposit Date to the Indenture Trustee for deposit into the Bond Account as
any portion of Remittable Funds for the related Deposit Date; provided, however,
that the Servicer shall be required to replace any such amounts by deposit into
the Collection Account on or before the next Deposit Date and the amount of such
deposit shall thereafter be considered a Monthly Advance for purposes of
reimbursement under this Agreement.
The Servicer may recover Monthly Advances, if not theretofore recovered
from the Mortgagor on whose behalf such Monthly Advance was made, from
collections on the related Mortgage Loan, including Liquidation Proceeds,
Insurance Proceeds and such other amounts as may be collected by the Servicer
from the Mortgagor or otherwise relating to the Mortgage Loan. In addition, if
the Servicer determines, in its good faith business judgment, that a previously
made Monthly Advance has become a Nonrecoverable Advance, the Servicer may
reimburse itself for such Nonrecoverable Advances from amounts on deposit in the
Collection Account, regardless of whether such amounts are attributable to such
Mortgage Loan. Notwithstanding anything herein to the contrary, no Monthly
Advance need be made hereunder if such Monthly Advance would, if made,
constitute a Nonrecoverable Advance.
(b) Servicing Advances. The Servicer shall from time to
time during the term of this Agreement make such Servicing Advances as the
Servicer shall deem appropriate or advisable under the circumstances and are
required pursuant to the terms of this Agreement. Servicing Advances may be paid
by the Servicer out of amounts on deposit in the Collection Account from time to
time; provided, however, that the Servicer shall be required to replace any such
amounts by deposit into the Collection Account on or before the first Deposit
Date occurring after the payment of a Servicing Advance with such amounts, and
the amount of such deposit shall thereafter be considered a Servicing Advance
for purposes of reimbursement under this Agreement. All Servicing Advances made
by the Servicer shall be reimbursable from collections or recoveries relating to
the Mortgage Loans in respect of which such Servicing Advances have been made
including Liquidation Proceeds and Insurance Proceeds, and such other amounts as
may be collected by the Servicer from the Mortgagor, or from other amounts on
deposit in the Collection Account after the Servicer shall have determined, in
its good faith business judgment that such Servicing Advance has become a
Nonrecoverable Advance. Notwithstanding anything herein to the contrary, no
Servicing Advances need be made hereunder if such Servicing Advance would, if
made, constitute a Nonrecoverable Advance.
28
33
ARTICLE V
THE SERVICER
SECTION 5.01. Representations and Warranties of the Servicer.
(a) The Servicer hereby represents and warrants to the Issuer and the
Indenture Trustee, that as of the Closing Date:
(i) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado.
The Servicer is in compliance with the laws of each state in which it
is acting as Servicer with respect to a Mortgage Loan to the extent
necessary to perform all servicing obligations with respect to the
related Mortgaged Property hereunder. The Servicer has the power and
authority to execute and deliver this Agreement and to perform its
obligations in accordance herewith. The execution, delivery and
performance of this Agreement (including all instruments of transfer to
be delivered pursuant to this Agreement) by the Servicer and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action. This Agreement
evidences the valid and binding obligation of the Servicer enforceable
against the Servicer in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or
the application of equitable principles in any proceeding, whether at
law or in equity. The consummation of the transactions contemplated
hereby will not result in the breach of any terms or provisions of the
articles of incorporation or by-laws of the Servicer or result in the
breach of any term or provision of, or conflict with or constitute a
default under or result in the acceleration of any obligation under,
any material agreement, indenture or loan or credit agreement or other
material instrument to which the Servicer or its property is subject,
or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Servicer or its property is subject.
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or
agency, that are necessary in connection with the execution and
delivery by the Servicer of this Agreement, have been duly taken, given
or obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings (administrative, judicial or
otherwise) with respect to which the time within which any appeal
therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are
adequate to authorize the consummation of the transactions contemplated
by this Agreement on the part of the Servicer and the performance by
the Servicer of its obligations under this Agreement.
(iii) There is no action, suit, proceeding or investigation
pending or, to the best of the Servicer's knowledge, threatened against
the Servicer that, either in any one instance or in the aggregate,
should reasonably be expected to result in any material
29
34
adverse change in the business, operations, financial condition,
properties or assets of the Servicer or in any material impairment of
the right or ability of the Servicer to carry on its business
substantially as now conducted, or in any material liability on the
part of the Servicer or that would draw into question the validity of
this Agreement or the Mortgage Loans or of any action taken or to be
taken in connection with the obligations of the Servicer contemplated
herein, or that should be reasonably expected to impair the ability of
the Servicer to perform under the terms of this Agreement.
(iv) The Servicer is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default should
reasonably be expected to have consequences that would materially and
adversely affect the condition (financial or other) or operations of
the Servicer or its properties or to have consequences that should
reasonably be expected to adversely affect its performance hereunder.
(v) The collection practices used by the Servicer are in all
material respects legal and customary in the non-conforming mortgage
loan servicing business.
(b) Upon discovery by any party hereto of a breach of any of
the foregoing representations and warranties that materially and adversely
affects the interests of the Bondholders, the party discovering such breach
shall give prompt written notice to the other parties hereto. Within 30 days of
its discovery or its receipt of notice of breach, the Servicer shall cure such
breach in all material respects.
SECTION 5.02. Liability of the Servicer.
The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Servicer
herein.
SECTION 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer.
Any corporation or other entity (1) into which the Servicer may be
merged or consolidated, (2) that may result from any merger, conversion or
consolidation to which the Servicer shall be a party, or (3) that may succeed to
all or substantially all of the business of the Servicer, which corporation or
other entity shall be the successor to the Servicer under this Agreement without
the execution or filing of any document or any further act by any of the parties
to this Agreement; provided that if the Servicer is not the surviving entity, or
if the assumption by the surviving entity is not effective by operation of law,
then the surviving entity shall execute and deliver to the Issuer and the
Indenture Trustee an agreement of assumption to perform every obligation of the
Servicer hereunder.
30
35
SECTION 5.04. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Indenture Trustee, the
Trust Estate, or the Bondholders for any action taken or for refraining from the
taking of any action by the Servicer pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of the duties of the Servicer or by reason of reckless disregard of
the obligations and duties of the Servicer hereunder. The Servicer and any
director, officer, employee or agent of the Servicer may rely in good faith on
any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. The Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties to service the Mortgage Loans in accordance with this
Agreement, and that in its opinion may involve it in any expense or liability.
SECTION 5.05. Servicer Not to Resign.
Subject to the provisions of Section 5.03 regarding the merger or
consolidation of the Servicer into or with another entity, the Servicer shall
not resign from the obligations and duties hereby imposed on it except upon
determination that the performance of its duties or obligations hereunder is no
longer permissible under applicable law or regulation or are in material
conflict by reason of applicable law or regulation with any other activities
carried on by it at the date of this Agreement. Any such determination
permitting the resignation of the Servicer pursuant to this Section shall be
evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee obtained by the Servicer at its own expense. No resignation pursuant to
this Section 5.05(a) shall become effective until the Indenture Trustee or a
successor servicer shall have assumed the responsibilities and obligations of
the Servicer in accordance with Section 6.02 or (b) shall relieve the Servicer
of responsibility for any obligations pursuant to this Agreement that
specifically survive the resignation or termination of the Servicer. Each of the
Rating Agencies shall be given written notice of a resignation of the Servicer
pursuant to this Section.
Notwithstanding the foregoing, the Servicer may resign effective upon
its appointment of a successor the appointment of whom has been approved by the
Indenture Trustee in writing, but only if each Rating Agency shall have
confirmed in writing that the appointment of such successor will not result in
the downgrading of the then-current implied ratings assigned by them to the
Bonds.
ARTICLE VI
DEFAULT
SECTION 6.01. Events of Default.
If any one of the following events (each an "Event of Default") shall
occur and be continuing:
31
36
(a) Any failure by the Servicer to (1) make a required Monthly
Advance on the related Deposit Date or (2) deposit into the Collection Account
or transfer to the Indenture Trustee for deposit in the Bond Account any other
amount required to be deposited therein under this Agreement on the related
Deposit Date, which failure, in the case of only clause (2) hereof, is not
remedied by the close of business on the Business Day after the date upon which
written notice of such failure shall have been given to the Servicer by the
Indenture Trustee or to the Servicer and the Indenture Trustee by Holders of
Bonds evidencing Voting Interests represented by all Bonds aggregating not less
than 51%;
(b) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or in the Mortgage Loan Sale Agreement,
which failure (1) materially and adversely affects the Bondholders and (2)
continues unremedied for a period of 30 days after the date on which written
notice of such failure (which notice shall refer specifically to this Section),
requiring the same to be remedied, shall have been given to the Servicer by the
Indenture Trustee or to the Servicer by the Holders of Bonds evidencing Voting
Interests represented by all Bonds aggregating not less than 51%.
(c) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a trustee, conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days;
(d) The consent by the Servicer to the appointment of a
trustee, conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to substantially
all of its property; or the admission by the Servicer in writing of its
inability to pay its debts generally as they become due, the Servicer's filing
of a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, the Servicer's making of an assignment for the benefit
of its creditors, or the Servicer's voluntary suspension of payment of its
obligations; or
(e) The occurrence of a Cumulative Loss Rate Percentage in
excess of 7.0%.
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, either the Indenture Trustee or the
Holders of Bonds evidencing Voting Interests represented by all Bonds
aggregating not less than 51%, by notice then given in writing to the Servicer
with a copy to the Indenture Trustee, may terminate all of the rights,
responsibilities and obligations of the Servicer as servicer under this
Agreement. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Mortgage Loans or otherwise, shall pass to and be vested in the Indenture
Trustee (unless a successor Servicer has been appointed pursuant to Section
6.02) pursuant to and under this Section and, without limitation, the Indenture
Trustee or
32
37
successor Servicer 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 to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Mortgage Notes and
related documents, or otherwise. Notwithstanding anything herein to the
contrary, the Indenture Trustee shall not be deemed to have notice of an Event
of Default unless and until a Responsible Officer of the Indenture Trustee (x)
has actual knowledge of the occurrence of such Event of Default or (y) has
received a notice of the occurrence of such Event of Default from the Servicer
pursuant to Section 2.12 hereof and the Indenture Trustee shall not be in
default of its obligations hereunder with respect to any failure to give a
default notice to the Servicer in the absence of either actual knowledge on the
part of a Responsible Officer of the Indenture Trustee or the receipt of such
notice from the Servicer. The Servicer agrees to cooperate with the Indenture
Trustee in effecting the termination of its responsibilities and rights as
Servicer hereunder, including, without limitation, the transfer to the Indenture
Trustee or successor Servicer for the administration by it of all cash amounts
that shall at the time be held by the Servicer that have been deposited by the
Servicer in the Collection Account or transferred to the Indenture Trustee for
deposit into the Bond Account or thereafter received by the Servicer with
respect to the Mortgage Loans.
The Indenture Trustee shall notify the Servicer in writing immediately
upon its becoming aware of a default described in Section 6.01(a).
All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the Servicer Mortgage Files to a successor
Servicer, amending this Agreement to reflect the appointment of a successor as
Servicer pursuant to this Section 6.01 or otherwise in connection with the
assumption by a successor Servicer of the duties of the predecessor Servicer
hereunder shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses.
SECTION 6.02. Indenture Trustee to Act; Appointment of Successor.
On and after the time the Servicer receives a notice of termination
pursuant to Section 6.01, the Indenture Trustee shall appoint a successor
Servicer meeting the criteria described below and, if it does not appoint a
successor, or until the successor's appointment takes effect, the Indenture
Trustee shall 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,
including without limitation, the obligation to make Monthly Advances and to pay
Compensating Interest. As compensation therefor, the Indenture Trustee shall be
entitled to such compensation as the Servicer would have been entitled to
hereunder if no such notice of termination had been given. In the event the
Indenture Trustee fails to appoint a successor Servicer, and the Indenture
Trustee is unwilling or legally unable to act as successor Servicer itself, it
may petition a court of competent jurisdiction to appoint, any established
housing and home finance institution or any institution that regularly services
non-conforming
33
38
residential mortgage loans that is then servicing a non-conforming residential
mortgage loan portfolio and having all licenses, permits and approvals required
by applicable law, and having a net worth of not less than $10,000,000, as the
successor to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided that
the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the then current ratings assigned to
the Bonds by any Rating Agency. Pending appointment of a successor to the
Servicer hereunder, unless the Indenture Trustee is prohibited by law from so
acting, the Indenture Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Indenture
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Servicer hereunder. The Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effect any such
succession. The appointment of a successor Servicer shall not affect any
liability of the predecessor Servicer that may have arisen under this Agreement
prior to its termination as Servicer, nor shall any successor Servicer be liable
for any acts or omissions of the predecessor Servicer or for any breach by such
Servicer or the Issuer of any of its representations or warranties contained
herein or in any related document or agreement. Each of the Rating Agencies
shall be given written notice of the appointment of a successor Servicer
pursuant to this Section.
SECTION 6.03. Notifications to Bondholders.
Upon any termination or appointment of a successor to the Servicer
pursuant to this Article Six, the Indenture Trustee shall give prompt written
notice thereof to Bondholders at their respective addresses appearing in the
Bond Register, the Issuer and to each Rating Agency.
Within 60 days of obtaining actual knowledge of the occurrence of any
Event of Default that remains uncured, the Indenture Trustee shall transmit by
mail to all Bondholders notice of such Event of Default.
SECTION 6.04. Assumption or Termination of Sub-Servicing Agreements by
the Indenture Trustee or Any Successor Servicer.
Upon the termination of the Servicer as servicer under this Agreement,
the Indenture Trustee as successor to the Servicer hereunder or any other
successor to the Servicer hereunder may, subject to the terms of any
Sub-Servicing Agreement, in its sole and absolute discretion elect to assume or
terminate any Sub-Servicing Agreement then in force and effect between the
Servicer and the Sub-Servicer. Notwithstanding the foregoing, any termination
fee due to a Sub-Servicer because of its termination by the Indenture Trustee
hereunder shall be the responsibility of the terminated Servicer and not the
Indenture Trustee. Upon the assumption of any Sub-Servicing Agreement, the
terminated Servicer agrees to deliver to the assuming party any and all
documents and records relating to the applicable Sub-Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effectuate the orderly transfer of the Sub-Servicing
Agreement.
34
39
SECTION 6.05. Payment of Indenture Trustee's Fees and Expenses.
(a) On each Payment Date, the Indenture Trustee will be
entitled to retain its Indenture Trustee Fee from amounts deposited into the
Bond Account on the related Deposit Date. The Indenture Trustee Fee constitutes
compensation for all services rendered by the Indenture Trustee in the exercise
and performance of any of the powers and duties hereunder or under the
Indenture. The Indenture Trustee does not and will not have any lien on the
Trust Estate for payment of any such fees or expenses.
(b) The Servicer shall pay or reimburse the Indenture Trustee,
from its own funds, upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Indenture Trustee (as Indenture Trustee or
as Manager) in accordance with any of the provisions of this Agreement, the
Indenture and the Management Agreement, dated as of June 1, 1998, between the
Issuer and Norwest Bank Minnesota, National Association, as manager (the
"Management Agreement"), (including but not limited to the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith or that is otherwise
reimbursed to the Indenture Trustee, and except for routine, recurring or
nominal expenses, disbursements and advances; provided, however, that the
Indenture Trustee shall not refuse to perform any of its duties hereunder or
under the Indenture or the Management Agreement solely as a result of the
failure of the Servicer to pay or reimburse such expenses, disbursements or
advances.
(c) The Servicer agrees to indemnify the Indenture Trustee,
Paying Agent, and their respective agents, directors, employees and officers
(each an "Indemnified Party") from, and hold it harmless against, any and all
losses and liabilities, damages, claims or expenses (including reasonable
attorneys' fees, expenses and disbursements), incurred or in connection with
this Agreement, the Indenture, the Bonds or the Management Agreement, including,
but not limited to, any such loss, liability or expense incurred, arising in
respect of or in connection with any legal action against the Trust Estate, the
Issuer or the Indenture Trustee or any director, officer, employee or agent
thereof, or the performance of any of the Indenture Trustee's duties hereunder
(except in the event it assumes the duties and obligations of the Servicer
hereunder as the result of an Event of Default), the Indenture or the Management
Agreement, other than any loss, liability or expense incurred by reason of the
negligence, bad faith or intentional misconduct of the Indenture Trustee.
Notwithstanding the generality of the foregoing, if any action, suit or other
proceeding is brought against an Indemnified Party for which the Indemnified
Party seeks indemnification hereunder, the Indemnified Party shall promptly
notify the Servicer of the commencement thereof, whereupon the Servicer will be
entitled to participate therein, and to assume the defense thereof, with counsel
selected by the Servicer and reasonably satisfactory to such Indemnified Party;
provided, that, if in the Indemnified Party's reasonable judgment the
Indemnified Party has any claims or defenses that conflict with or differ from
the interests of the Servicer, the Indemnified Party shall be entitled to select
counsel of its choosing and pursue such claims and defenses separately and all
related costs, expenses and liabilities associated with such separate claims or
defenses will continue to be covered by the Servicer's indemnification
35
40
obligation hereunder. The Servicer shall not be entitled to settle any
proceeding without the consent of any Indemnified Party with any right of
indemnification hereunder with respect to such proceeding except upon such terms
as will provide each such Indemnified Party reasonable assurance of full
indemnity hereunder.
(d) This Section 6.05 shall survive the termination of this
Agreement or the resignation or removal of the Indenture Trustee or the Servicer
as regards rights accrued prior to such resignation or removal.
(e) Amounts required to be paid by the Servicer to the
Indenture Trustee under subsections (b) and (c) above shall be paid by the
Servicer out of its own funds, and shall not be reimbursable to the Servicer
from the Collection Account or netted by the Servicer out of funds it is
required to deposit into the Collection Account.
ARTICLE VII
TERMINATION
SECTION 7.01. Termination.
Except as otherwise specifically set forth herein, the obligations and
responsibilities of the Servicer shall terminate upon the earliest to occur of
(1) the final payment or other liquidation of the Mortgage Loans and the
disposition of all REO Properties and the remittance of all funds due hereunder
with respect to such Mortgage Loans and REO Properties and (2) the satisfaction
and discharge of the indebtedness evidenced by the Bonds and the termination of
the Deposit Trust Agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. Amendment.
This Agreement may be amended at any time and from time to time by the
Servicer, the Issuer and the Indenture Trustee, without the consent of any of
the Bondholders, (1) to cure any error or any ambiguity or to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein, or (2) to comply with the requirements of the Code; provided
that in all such cases the Indenture Trustee shall have received written
confirmation from each Rating Agency that any such modifications to this
Agreement will not result in a qualification, reduction or withdrawal of the
current ratings assigned to the Bonds by such Rating Agency.
This Agreement may also be amended at any time and from time to time by
the Servicer, the Issuer and the Indenture Trustee, with the consent of Holders
of Bonds evidencing Voting Interests of the Bonds affected thereby aggregating
greater than 50%, 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 Holders of Bonds of such Bonds;
36
41
provided, however, that no such amendment shall (1) reduce in any manner the
amount of, or delay the timing of, collections of payments on Mortgage Loans or
payments which are required to be deposited into the Bond Account without the
consent of all Bondholders or (2) reduce the aforesaid percentage of the Bonds
the Holders of which are required to consent to any such amendment, without the
consent of the Holders of all Bonds then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the second preceding paragraph, the Indenture Trustee shall furnish written
notification of the substance of such amendment to each Bondholder and an
executed copy of such amendment to each Rating Agency, with a copy to the
Underwriter.
It shall not be necessary for the consent of Bondholders under this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Bondholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the
Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel furnished by and at the expense of the party requesting such amendment
stating that the execution of such amendment is authorized or permitted by this
Agreement. The Indenture Trustee may, but shall not be obligated to, enter into
any such amendment that affects the Indenture Trustee's own rights, duties or
immunities under this Agreement.
SECTION 8.02. Governing Law.
This Agreement shall be construed in accordance with the laws of the
State of New York (without regard to conflict of laws principles and the
application of the laws of any other jurisdiction), and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 8.03. Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case of
the Issuer, to Wilmington Trust Company at ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, with copies to the Indenture Trustee,
as Manager, and to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., at Plaza Tower One, Suite 1200,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy (303)
741- 6944, (b) in the case of the Servicer, at National Mortgage Corporation,
Harlequin Plaza, Suite 330S, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇-▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; (c) in the
case of the Indenture Trustee, at its Corporate Trust Office at Norwest Bank
Minnesota, National Association, as trustee, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇ Attention: Fund America
1998-NMC1; (d) in the case of S&P, to Standard & Poor's, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Mortgage Surveillance Group; and (e)
in the case
37
42
of Fitch, to Fitch IBCA, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party; and (f) in the case of the Underwriter,
to the respective addresses specified in the Indenture. Any notice required or
permitted to be mailed to a Bondholder shall be given by first class mail,
postage prepaid, at its address shown in the Bond Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Bondholder receives such notice. Any
notice or other document required to be delivered or mailed by the Indenture
Trustee to any Rating Agency shall be given on a best efforts basis and only as
a matter of courtesy and accommodation and the Indenture Trustee shall have no
liability for failure to deliver such notice or document to any such Rating
Agency.
SECTION 8.04. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Bonds or the rights of the Holders thereof.
SECTION 8.05. Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 5.03 and 5.05, this Agreement may not be assigned by the
Issuer or the Servicer without the prior written consent of the Holders of Bonds
evidencing not less than 66% of the Voting Interests of all Bonds.
SECTION 8.06. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
SECTION 8.07. Intention of the Parties.
It is the intention of the parties that the Issuer is conveying, and
the Servicer is receiving, only a contract for servicing and administering the
Mortgage Loans. Accordingly, the parties hereby acknowledge that the Indenture
Trustee remains the sole and absolute record holder of the Mortgage Loans and
all rights related thereto.
SECTION 8.08. Waivers and Modifications.
No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.
38
43
SECTION 8.09. Further Agreements.
The Servicer and the Issuer each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.
SECTION 8.10. Attorney-in-Fact.
The Issuer hereby designates the Servicer its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Agreement or the Indenture.
SECTION 8.11. No Indenture Trustee Liability.
The Indenture Trustee shall not be liable for any acts or omissions of
any Servicer. In particular, the Indenture Trustee shall not be liable for any
servicing errors or interruption resulting from any failure of any Servicer to
maintain computer and other information systems that are year-2000 compliant.
39
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
FUND AMERICA INVESTORS
TRUST 1998-NMC1,
as Issuer
By: Wilmington Trust Company, not in its
individual capacity, but solely
as Owner Trustee
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Authorized Signatory
NATIONAL MORTGAGE CORPORATION,
as Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee and Not in Its
Individual Capacity
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
40