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[FORM OF SERVICING AGREEMENT]
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Master Servicer)
and
NORWEST MORTGAGE, INC.
(Servicer)
SERVICING AGREEMENT
Dated as of , 199_
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TABLE OF CONTENTS
ARTICLE 1
Page
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ACH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Adjusted Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . .1
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Amounts Held for Future Distribution . . . . . . . . . . . . . . . . . . . . .2
Applicable Unscheduled Principal Receipt Period. . . . . . . . . . . . . . . .2
Appraisal Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARM Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Balloon Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Balloon Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Bankruptcy Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
BIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Buydown Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Buydown Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Certificate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Condominium Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Condominium Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Converted Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Co-op Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Current Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Curtailment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Custodial Buydown Account. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Custodial Principal and Interest (P&I) Account . . . . . . . . . . . . . . . .4
Custodial Subsidy Account. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Custodial Taxes and Insurance (T&I) Account. . . . . . . . . . . . . . . . . .4
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Debt Service Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Deficient Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Delinquency/Delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
-ii-
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Directly Operate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Due-On-Sale Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Eligible Custodial P&I Account . . . . . . . . . . . . . . . . . . . . . . . .5
Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Errors and Omissions Policy. . . . . . . . . . . . . . . . . . . . . . . . . .6
Escrow Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Escrow Item. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
FHA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
FHLMC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Fidelity Bond. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Final Title Condition Report . . . . . . . . . . . . . . . . . . . . . . . . .6
Flood Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Full Unscheduled Principal Receipt . . . . . . . . . . . . . . . . . . . . . .6
GNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
GPM (or GPARM) Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Group I Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Group II Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Hazard Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
HUD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Interest Adjustment Date . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Loan Originator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Loan-to-Value (LTV). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Master Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Master Servicer Loan Number. . . . . . . . . . . . . . . . . . . . . . . . . .8
Maximum Lifetime Mortgage Interest Rate. . . . . . . . . . . . . . . . . . . .8
Maximum Negative Amortization Amount . . . . . . . . . . . . . . . . . . . . .8
Mid-Month Receipt Period . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Minimum Lifetime Mortgage Interest Rate. . . . . . . . . . . . . . . . . . . .8
Month End Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Month End Interest Shortfall . . . . . . . . . . . . . . . . . . . . . . . . .9
-iii-
Monthly Accounting Reports . . . . . . . . . . . . . . . . . . . . . . . . . .9
Monthly Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Monthly Remittance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Mortgage Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Mortgage Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Mortgage Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Mortgage Note Assumption Rider . . . . . . . . . . . . . . . . . . . . . . . 10
Mortgage Asset-Backed Pass-Through Certificates. . . . . . . . . . . . . . . 10
Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Mortgagee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Net Mortgage Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . 10
Non-Recoverable Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Notice of Periodic Adjustment. . . . . . . . . . . . . . . . . . . . . . . . 10
Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
P&I Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Partial Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 11
Partial Liquidation Receipt Period . . . . . . . . . . . . . . . . . . . . . 11
Partial Unscheduled Principal Receipt. . . . . . . . . . . . . . . . . . . . 11
Payment Adjustment Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Periodic Payment Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Periodic Rate Cap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Pool Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Pool Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Pooling and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . 12
Preliminary Title Report . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Prepayment In Full . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Primary Mortgage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 12
Primary Mortgage Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Prior Month Receipt Period . . . . . . . . . . . . . . . . . . . . . . . . . 12
Property Inspection Report . . . . . . . . . . . . . . . . . . . . . . . . . 12
Prudent Servicing Practices. . . . . . . . . . . . . . . . . . . . . . . . . 13
PUD (Planned Unit Development) . . . . . . . . . . . . . . . . . . . . . . . 13
PUD Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Real Estate Owned (REO). . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Realized Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Reference Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
REMIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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REMIC Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Remittance Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Rents from Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . 14
REO Disposition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Representing Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
S&P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Scheduled Principal Balance. . . . . . . . . . . . . . . . . . . . . . . . . 14
Security Instrument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Servicer Loan Mortgage Number. . . . . . . . . . . . . . . . . . . . . . . . 15
Servicer Mortgage Loan File. . . . . . . . . . . . . . . . . . . . . . . . . 15
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Servicing Fee Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Single Family Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Subsidy Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Subsidy Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
T&I Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Threshold Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Title Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Transfer of Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Trust Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Unpaid Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Unscheduled Principal Receipt. . . . . . . . . . . . . . . . . . . . . . . . 16
Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2
CONSTRUCTION
Section 2.1 Legal Construction . . . . . . . . . . . . . . . . . . . . 18
2.1.1 Compliance with Applicable Law . . . . . . . . . . . . . . 18
2.1.2 Potential Conflict . . . . . . . . . . . . . . . . . . . . 18
2.1.3 Consistent Legal Compliance. . . . . . . . . . . . . . . . 18
2.1.4 General Interpretive Rules . . . . . . . . . . . . . . . . 18
2.1.5 Construction of Provisions . . . . . . . . . . . . . . . . 18
Section 2.2 Servicer Practices . . . . . . . . . . . . . . . . . . . . 18
2.2.1 Prudent Servicing Practices. . . . . . . . . . . . . . . . 19
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2.2.2 Non-Discrimination Practices . . . . . . . . . . . . . . . 19
Section 2.3 General Provisions . . . . . . . . . . . . . . . . . . . . 19
2.3.1 Servicer's Agreement . . . . . . . . . . . . . . . . . . . 19
2.3.2 Term of Agreement. . . . . . . . . . . . . . . . . . . . . 19
2.3.3 Amended Mortgage Loan Schedule . . . . . . . . . . . . . . 19
2.3.4 Assignment and Replacement . . . . . . . . . . . . . . . . 20
2.3.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.3.6 Change of Accountants . . . . . . . . . . . . . . . . . . 21
ARTICLE 3
REMIC COMPLIANCE
Section 3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.1 Applicability. . . . . . . . . . . . . . . . . . . . . . . 22
3.1.2 Modifications of Mortgage Loans. . . . . . . . . . . . . . 22
3.1.3 Indemnification with Respect to Certain Taxes and Loss
of REMIC Status . . . . . . . . . . . . . . . . . . . . . 22
Section 3.2 REO Qualification. . . . . . . . . . . . . . . . . . . . . 23
3.2.1 Foreclosure Property Qualification . . . . . . . . . . . . 23
3.2.2 Foreclosure Property Qualification Restrictions. . . . . . 23
3.2.3 REO Disposition Accounting . . . . . . . . . . . . . . . . 24
Section 3.3 Prohibited Transactions and Activities . . . . . . . . . . 25
3.3.1 Mortgage Loan Disposition Restriction. . . . . . . . . . . 25
3.3.2 Personal Property. . . . . . . . . . . . . . . . . . . . . 25
Section 3.4 Eligible Investments . . . . . . . . . . . . . . . . . . . 25
3.4.1 Custodial Account Investments. . . . . . . . . . . . . . . 25
3.4.2 Escrow Account Investments . . . . . . . . . . . . . . . . 26
ARTICLE 4
SERVICER CONSIDERATIONS
Section 4.1 Servicer Eligibility Standards . . . . . . . . . . . . . . 27
4.1.1 Regulatory Approvals and Licensing . . . . . . . . . . . . 27
4.1.2 Net Worth and Portfolio Requirements . . . . . . . . . . . 27
4.1.3 Auditor's Opinion and Other Annual Reports . . . . . . . . 27
4.1.4 Servicing Experience . . . . . . . . . . . . . . . . . . . 28
4.1.5 Material Changes . . . . . . . . . . . . . . . . . . . . . ▇▇
-▇▇-
▇▇▇▇▇▇▇ 4.2 Errors and Omissions Insurance . . . . . . . . . . . . . . 29
4.2.1 E & O Requirement. . . . . . . . . . . . . . . . . . . . . 29
4.2.2 E & O Scope. . . . . . . . . . . . . . . . . . . . . . . . 30
4.2.3 E & O Policy Maintenance . . . . . . . . . . . . . . . . . 30
4.2.4 E & O Deductible . . . . . . . . . . . . . . . . . . . . . 30
4.2.5 E & O Qualifications . . . . . . . . . . . . . . . . . . . 30
4.2.6 Notice of Claim. . . . . . . . . . . . . . . . . . . . . . 30
Section 4.3 Fidelity Bond Coverage . . . . . . . . . . . . . . . . . . 30
4.3.1 Fidelity Bond Requirement. . . . . . . . . . . . . . . . . 30
4.3.2 Fidelity Bond Coverage . . . . . . . . . . . . . . . . . . 30
4.3.3 Fidelity Bond Scope. . . . . . . . . . . . . . . . . . . . 30
4.3.4 Fidelity Bond Maintenance. . . . . . . . . . . . . . . . . 30
4.3.5 Fidelity Bond Deductible . . . . . . . . . . . . . . . . . 31
4.3.6 Fidelity Bond Rating Requirement . . . . . . . . . . . . . 31
4.3.7 Notice of Event. . . . . . . . . . . . . . . . . . . . . . 31
Section 4.4 Servicer's Liability . . . . . . . . . . . . . . . . . . . 31
4.4.1 Liability Exposure . . . . . . . . . . . . . . . . . . . . 31
4.4.2 Scope of Liability . . . . . . . . . . . . . . . . . . . . 31
Section 4.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . 32
4.5.1 Scope of Indemnity . . . . . . . . . . . . . . . . . . . . 32
4.5.2 Survival of Indemnity. . . . . . . . . . . . . . . . . . . 32
Section 4.6 Servicer's Compensation. . . . . . . . . . . . . . . . . . 32
4.6.1 Servicing Fee Amount . . . . . . . . . . . . . . . . . . . 32
4.6.2 Servicing Fee Source . . . . . . . . . . . . . . . . . . . 33
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.1.1 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.1.2 Survival of Representations and Warranties . . . . . . . . 34
5.1.3 Breach of Representation or Warranty . . . . . . . . . . . 34
5.1.4 Assignment of Representations and Warranties . . . . . . . 34
Section 5.2 Servicer Representations and Warranties. . . . . . . . . . 35
5.2.1 Qualification of Servicer. . . . . . . . . . . . . . . . . 35
5.2.2 Requisite. . . . . . . . . . . . . . . . . . . . . . . . . 35
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5.2.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . 35
5.2.4 Enforceable Agreement. . . . . . . . . . . . . . . . . . . 36
5.2.5 No Consents. . . . . . . . . . . . . . . . . . . . . . . . 36
5.2.6 Agency Approval. . . . . . . . . . . . . . . . . . . . . . 36
5.2.7 Financial Condition. . . . . . . . . . . . . . . . . . . . 36
5.2.8 Servicing. . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2.9 No Impairment. . . . . . . . . . . . . . . . . . . . . . . 36
5.2.10 No Inquiries . . . . . . . . . . . . . . . . . . . . . . . 37
5.2.11 Custodial and Escrow Accounts Current. . . . . . . . . . . 37
5.2.12 Insurance Maintenance. . . . . . . . . . . . . . . . . . . 37
ARTICLE 6
CUSTODIAL ACCOUNTING
Section 6.1 In General . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1.1 Custodial Account Establishment. . . . . . . . . . . . . . 38
6.1.2 Custodial Account Separateness . . . . . . . . . . . . . . 38
6.1.3 Custodial Account Maintenance. . . . . . . . . . . . . . . 38
6.1.4 Escrow Investment. . . . . . . . . . . . . . . . . . . . . 40
6.1.5 Clearing Account . . . . . . . . . . . . . . . . . . . . . 40
6.1.6 Custodial Buydown Account. . . . . . . . . . . . . . . . . 41
6.1.7 Certificate Account. . . . . . . . . . . . . . . . . . . . 41
6.1.8 Custodial Subsidy Account. . . . . . . . . . . . . . . . . 41
Section 6.2 Custodial P&I Account. . . . . . . . . . . . . . . . . . . 41
6.2.1 Mandatory Deposits . . . . . . . . . . . . . . . . . . . . 41
6.2.2 Optional Deposits. . . . . . . . . . . . . . . . . . . . . 42
6.2.3 Permissible Withdrawals. . . . . . . . . . . . . . . . . . 42
6.2.4 Account Beneficiary. . . . . . . . . . . . . . . . . . . . 43
6.2.5 Use of Accounts. . . . . . . . . . . . . . . . . . . . . . 43
Section 6.3 Custodial T&I Account. . . . . . . . . . . . . . . . . . . 43
6.3.1 Mandatory Deposits . . . . . . . . . . . . . . . . . . . . 43
6.3.2 Permissible Withdrawals. . . . . . . . . . . . . . . . . . 44
6.3.3 Account Requirements . . . . . . . . . . . . . . . . . . . 44
6.3.4 Account Balance. . . . . . . . . . . . . . . . . . . . . . 44
Section 6.4 Eligible Account Investments . . . . . . . . . . . . . . . 44
6.4.1 Eligible Investments Permitted . . . . . . . . . . . . . . 44
6.4.2 Eligible Investment Restrictions . . . . . . . . . . . . . 45
6.4.3 Eligible Investment Income . . . . . . . . . . . . . . . . 45
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6.4.4 Eligible Investment Losses . . . . . . . . . . . . . . . . 45
6.4.5 Eligible Investments Reports . . . . . . . . . . . . . . . 45
ARTICLE 7
MORTGAGE LOAN ACCOUNTING
Section 7.1 In General . . . . . . . . . . . . . . . . . . . . . . . . 46
7.1.1 Mortgage Loan Accounting Practices . . . . . . . . . . . . 46
7.1. Record Keeping . . . . . . . . . . . . . . . . . . . . . . 46
7.1.3 Record Review. . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.2 Mortgage Loan Records. . . . . . . . . . . . . . . . . . . 46
7.2.1 Account Records. . . . . . . . . . . . . . . . . . . . . . 46
7.2.2 Account Record Information . . . . . . . . . . . . . . . . 46
7.2.3 Accounting Practice. . . . . . . . . . . . . . . . . . . . 47
7.2.4 Access to Certain Documentation and Information Regarding
the Mortgage Loans . . . . . . . . . . . . . . . . . . . 47
Section 7.3 Accounting Procedures. . . . . . . . . . . . . . . . . . . 47
7.3.1 Principal and Interest Computation . . . . . . . . . . . . 47
7.3.2 Amortization Requirement . . . . . . . . . . . . . . . . . 48
7.3.3 Negative Amortization. . . . . . . . . . . . . . . . . . . 48
7.3.4 Interest Calculations. . . . . . . . . . . . . . . . . . . 48
7.3.5 Buydown Loans. . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.4 Application Procedure. . . . . . . . . . . . . . . . . . . 49
7.4.1 Application Priority . . . . . . . . . . . . . . . . . . . 49
7.4.2 Reapplication of Prior Payments. . . . . . . . . . . . . . 49
7.4.3 Advance Payments . . . . . . . . . . . . . . . . . . . . . 49
Section 7.5 Curtailments . . . . . . . . . . . . . . . . . . . . . . . 49
7.5.1 Curtailment Amount . . . . . . . . . . . . . . . . . . . . 49
7.5.2 Curtailment Application. . . . . . . . . . . . . . . . . . 50
7.5.3 Effect of Curtailment. . . . . . . . . . . . . . . . . . . 50
7.5.4 Curtailment Transmission . . . . . . . . . . . . . . . . . 50
Section 7.6 Liquidations . . . . . . . . . . . . . . . . . . . . . . . 50
7.6.1 Month End Interest . . . . . . . . . . . . . . . . . . . . 50
7.6.2 Liquidation Reports. . . . . . . . . . . . . . . . . . . . 50
7.6.3 Deposit of Funds . . . . . . . . . . . . . . . . . . . . . 50
7.6.4 Document Request . . . . . . . . . . . . . . . . . . . . . 51
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Section 7.7 Realized Losses. . . . . . . . . . . . . . . . . . . . . . 51
7.7.1 Liquidation Realized Loss Determination. . . . . . . . . . 51
7.7.2 Bankruptcy Realized Loss Determination . . . . . . . . . . 52
7.7.3 Reporting Requirement. . . . . . . . . . . . . . . . . . . 52
7.7.4 Servicer's Liability . . . . . . . . . . . . . . . . . . . 52
ARTICLE 8
ARM LOANS
Section 8.1 ARM Loan Servicing . . . . . . . . . . . . . . . . . . . . 53
8.1.1 In General . . . . . . . . . . . . . . . . . . . . . . . . 53
8.1.2 Servicer's Liability . . . . . . . . . . . . . . . . . . . 53
8.1.3 Adjustment Reports . . . . . . . . . . . . . . . . . . . . 53
8.1.4 Substitute Index . . . . . . . . . . . . . . . . . . . . . 53
Section 8.2 Notice of Periodic Adjustment. . . . . . . . . . . . . . . 54
8.2.1 Notice Requirement . . . . . . . . . . . . . . . . . . . . 54
8.2.2 Notice Contents. . . . . . . . . . . . . . . . . . . . . . 54
Section 8.3 ARM Loan Conversion. . . . . . . . . . . . . . . . . . . . 54
8.3.1 Servicer's Determination . . . . . . . . . . . . . . . . . 54
8.3.2 Conversion Notification. . . . . . . . . . . . . . . . . . 54
8.3.3 Purchase by Servicer . . . . . . . . . . . . . . . . . . . 54
ARTICLE 9
MORTGAGE LOAN FILES
Section 9.1 Owner Mortgage Loan Files. . . . . . . . . . . . . . . . . 55
9.1.1 Owner Mortgage Loan File Requirements. . . . . . . . . . . 55
9.1.2 Custodian. . . . . . . . . . . . . . . . . . . . . . . . . 57
9.1.3 Release of Documents from Owner Mortgage Loan File . . . . 58
9.1.4 Execution by Trustee . . . . . . . . . . . . . . . . . . . 58
9.1.5 Representing Party Officers' Certificate . . . . . . . . . 59
9.1.6 Custodial Fees . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.2 Servicer Mortgage Loan Files . . . . . . . . . . . . . . . 59
9.2.1 Servicer Mortgage Loan File Requirements . . . . . . . . . 59
9.2.2 Servicer Mortgage Loan File Access . . . . . . . . . . . . 60
9.2.3 Alternate Media. . . . . . . . . . . . . . . . . . . . . . 61
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Section 9.3 Requisite Form . . . . . . . . . . . . . . . . . . . . . . 62
9.3.1 Form of Endorsements . . . . . . . . . . . . . . . . . . . 62
9.3.2 Form of Assignment . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 10
ESCROWS
Section 10.1 Escrow Criteria. . . . . . . . . . . . . . . . . . . . . . 63
10.1.1 Escrow Requirement . . . . . . . . . . . . . . . . . . . . 63
10.1.2 Mortgage Loans without Escrow. . . . . . . . . . . . . . . 63
Section 10.2 Payment of Escrow Items. . . . . . . . . . . . . . . . . . 63
10.2.1 Escrow Payment Obligation. . . . . . . . . . . . . . . . . 63
10.2.2 Escrow Item Payments . . . . . . . . . . . . . . . . . . . 63
10.2.3 Escrow Fund Insufficiency. . . . . . . . . . . . . . . . . 63
10.2.4 Nonpayment Notice. . . . . . . . . . . . . . . . . . . . . 64
Section 10.3 Escrow Fund Determination. . . . . . . . . . . . . . . . . 64
10.3.1 Escrow Funds Analysis. . . . . . . . . . . . . . . . . . . 64
10.3.2 Escrow Fund Surplus. . . . . . . . . . . . . . . . . . . . 64
10.3.3 Escrow Fund Deficiency . . . . . . . . . . . . . . . . . . 64
Section 10.4 Records. . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.4.1 Escrow Funds Records . . . . . . . . . . . . . . . . . . . 64
10.4.2 Escrow Obligations Records . . . . . . . . . . . . . . . . 64
Section 10.5 Escrow Waiver. . . . . . . . . . . . . . . . . . . . . . . 64
10.5.1 Waiver Conditions. . . . . . . . . . . . . . . . . . . . . 64
10.5.2 Waiver Rescission. . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 11
COLLECTION AND SERVICING PRACTICES
Section 11.1 General Servicing Requirements . . . . . . . . . . . . . . 66
11.1.1 Servicing Practices. . . . . . . . . . . . . . . . . . . . 66
11.1.2 Tax Returns and Other Reports. . . . . . . . . . . . . . . 66
11.1.3 Servicer Internal Controls . . . . . . . . . . . . . . . . 66
11.1.4 Pool Insurance Compliance. . . . . . . . . . . . . . . . . 66
11.1.5 Primary Mortgage Insurance Compliance. . . . . . . . . . . 66
Section 11.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . 67
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11.2.1 Permissible Delegations. . . . . . . . . . . . . . . . . . 67
11.2.2 Delegee's Qualifications . . . . . . . . . . . . . . . . . 68
11.2.3 Responsibility for Costs . . . . . . . . . . . . . . . . . 68
11.2.4 Servicer's Liability . . . . . . . . . . . . . . . . . . . 68
Section 11.3 Due-on-Sale Clause Enforcement . . . . . . . . . . . . . . 68
11.3.1 Enforcement Requirement. . . . . . . . . . . . . . . . . . 68
11.3.2 Litigation Considerations. . . . . . . . . . . . . . . . . 68
11.3.3 Approval Requirement . . . . . . . . . . . . . . . . . . . 69
11.3.4 Exempt Transactions. . . . . . . . . . . . . . . . . . . . 69
Section 11.4 Assumptions. . . . . . . . . . . . . . . . . . . . . . . . 71
11.4.1 Assumption Requirements. . . . . . . . . . . . . . . . . . 71
11.4.2 Approval and Release . . . . . . . . . . . . . . . . . . . 72
11.4.3 Notification of Assumption . . . . . . . . . . . . . . . . 72
11.4.4 Assumption Fees. . . . . . . . . . . . . . . . . . . . . . 72
11.4.5 Disclosure Requirement . . . . . . . . . . . . . . . . . . 72
Section 11.5 Partial Releases and Easements . . . . . . . . . . . . . . 72
11.5.1 Prerequisites. . . . . . . . . . . . . . . . . . . . . . . 72
11.5.2 Release or Modification of Lien. . . . . . . . . . . . . . 73
11.5.3 Master Servicer's Approval . . . . . . . . . . . . . . . . 73
Section 11.6 Recordation of Assignments . . . . . . . . . . . . . . . . 73
11.6.1 Recordation Requirement. . . . . . . . . . . . . . . . . . 73
11.6.2 Extension of Recording Period. . . . . . . . . . . . . . . 74
11.6.3 Delivery Requirement . . . . . . . . . . . . . . . . . . . 74
11.6.4 Waiver of Recordation. . . . . . . . . . . . . . . . . . . 74
Section 11.7 General Servicing Considerations . . . . . . . . . . . . . 74
11.7.1 Abandonment. . . . . . . . . . . . . . . . . . . . . . . . 74
11.7.2 Buydown Funds. . . . . . . . . . . . . . . . . . . . . . . 75
11.7.3 Notification Matters . . . . . . . . . . . . . . . . . . . 75
11.7.4 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . 75
11.7.5 Late Charges . . . . . . . . . . . . . . . . . . . . . . . 76
Section 11.8 Borrower Bankruptcy. . . . . . . . . . . . . . . . . . . . 76
11.8.1 Servicer's Duty. . . . . . . . . . . . . . . . . . . . . . 76
11.8.2 Responsibility for Costs . . . . . . . . . . . . . . . . . 76
11.8.3 Challenge Bankruptcy Reductions. . . . . . . . . . . . . . 76
11.8.4 Bankruptcy Adjustments . . . . . . . . . . . . . . . . . . 76
11.8.5 Bankruptcy Plan Surveillance . . . . . . . . . . . . . . . 76
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ARTICLE 12
DELINQUENCY MANAGEMENT
Section 12.1 In General . . . . . . . . . . . . . . . . . . . . . . . . 77
12.1.1 Servicing Practices. . . . . . . . . . . . . . . . . . . . 77
12.1.2 Servicer's Capabilities. . . . . . . . . . . . . . . . . . 77
12.1.3 Servicing Objectives . . . . . . . . . . . . . . . . . . . 77
12.1.4 Servicer's Expenses. . . . . . . . . . . . . . . . . . . . 77
Section 12.2 Delinquency Servicing Procedures . . . . . . . . . . . . . 78
12.2.1 Late Notice. . . . . . . . . . . . . . . . . . . . . . . . 78
12.2.2 Telephonic Inquiry . . . . . . . . . . . . . . . . . . . . 78
12.2.3 Notice of Default. . . . . . . . . . . . . . . . . . . . . 78
12.2.4 Borrower Interview . . . . . . . . . . . . . . . . . . . . 78
12.2.5 Continuing Contacts. . . . . . . . . . . . . . . . . . . . 78
12.2.6 Property Inspection. . . . . . . . . . . . . . . . . . . . 78
Section 12.3 Relief of Borrowers. . . . . . . . . . . . . . . . . . . . 78
12.3.1 Servicer's Role. . . . . . . . . . . . . . . . . . . . . . 79
12.3.2 Servicer's Discretion. . . . . . . . . . . . . . . . . . . 79
12.3.3 Relief Requirement . . . . . . . . . . . . . . . . . . . . 79
12.3.4 Primary Mortgage Insurance Considerations. . . . . . . . . 79
12.3.5 Responsibility for Costs . . . . . . . . . . . . . . . . . 79
12.3.6 Forbearance Plan . . . . . . . . . . . . . . . . . . . . . 79
12.3.7 Accommodation Limitations. . . . . . . . . . . . . . . . . 80
12.3.8 Pool Insurance Considerations. . . . . . . . . . . . . . . 80
Section 12.4 Special Delinquency Servicing Considerations . . . . . . . 80
12.4.1 Advance Responsibility During Delinquency. . . . . . . . . 80
12.4.2 Primary Mortgage Insurance Compliance. . . . . . . . . . . 81
12.4.3 Pool Insurance Compliance. . . . . . . . . . . . . . . . . 81
ARTICLE 13
FORECLOSURE ADMINISTRATION
Section 13.1 Foreclosure Prerequisites. . . . . . . . . . . . . . . . . 82
13.1.1 Foreclosure/Alternative to Foreclosure Initiation. . . . . 82
13.1.2 Foreclosure Expenses . . . . . . . . . . . . . . . . . . . 82
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13.1.3 Hazardous Wastes . . . . . . . . . . . . . . . . . . . . . 83
Section 13.2 Deed-in-Lieu of Foreclosure. . . . . . . . . . . . . . . . 83
13.2.1 Conditions . . . . . . . . . . . . . . . . . . . . . . . . 83
13.2.2 Subsequent Actions . . . . . . . . . . . . . . . . . . . . 84
Section 13.3 Actions Prior to Foreclosure . . . . . . . . . . . . . . . 84
13.3.1 Notice Requirements. . . . . . . . . . . . . . . . . . . . 84
13.3.2 Initiation of Proceedings. . . . . . . . . . . . . . . . . 85
13.3.3 Short Sale of Defaulted Mortgage Loans in Lieu of
Foreclosure. . . . . . . . . . . . . . . . . . . . . . . 85
Section 13.4 Foreclosure Procedures . . . . . . . . . . . . . . . . . . 85
13.4.1 Foreclosure Expenses . . . . . . . . . . . . . . . . . . . 85
13.4.2 Bidding Instructions . . . . . . . . . . . . . . . . . . . 85
13.4.3 Buydown Funds Use. . . . . . . . . . . . . . . . . . . . . 86
13.4.4 Servicer's Responsibilities. . . . . . . . . . . . . . . . 86
13.4.5 Conveyance Documents . . . . . . . . . . . . . . . . . . . 86
Section 13.5 Mortgage Loan Reinstatement. . . . . . . . . . . . . . . . 87
13.5.1 Borrower's Full Payment. . . . . . . . . . . . . . . . . . 87
13.5.2 Borrower's Partial Payment . . . . . . . . . . . . . . . . 87
13.5.3 Obligations upon Reinstatement . . . . . . . . . . . . . . 87
13.5.4 Certain Assumptions Permitted. . . . . . . . . . . . . . . 87
ARTICLE 14
REO ADMINISTRATION
Section 14.1 General Provisions . . . . . . . . . . . . . . . . . . . . 88
14.1.1 REO Action Plan. . . . . . . . . . . . . . . . . . . . . . 88
Section 14.2 REO Servicing. . . . . . . . . . . . . . . . . . . . . . . 88
14.2.1 REO Servicing Requirements . . . . . . . . . . . . . . . . 88
14.2.2 Servicer's Responsibilities. . . . . . . . . . . . . . . . 88
14.2.3 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 14.3 REO Records and Reports. . . . . . . . . . . . . . . . . . 89
14.3.1 Records Retention. . . . . . . . . . . . . . . . . . . . . 89
14.3.2 Evidence of Title. . . . . . . . . . . . . . . . . . . . . 89
14.3.3 REO Expenses . . . . . . . . . . . . . . . . . . . . . . . 90
14.3.4 REO Documents. . . . . . . . . . . . . . . . . . . . . . . 90
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Section 14.4 REO Marketing. . . . . . . . . . . . . . . . . . . . . . . 90
14.4.1 REO Marketing Efforts. . . . . . . . . . . . . . . . . . . 90
14.4.2 REO Sales. . . . . . . . . . . . . . . . . . . . . . . . . 91
14.4.3 Primary Mortgage Insurance Considerations. . . . . . . . . 91
14.4.4 Master Servicer Instructions . . . . . . . . . . . . . . . 91
14.4.5 Pool Insurance Considerations. . . . . . . . . . . . . . . 91
Section 14.5 REO Rehabilitation . . . . . . . . . . . . . . . . . . . . 91
14.5.1 REO Rehabilitation Requirement . . . . . . . . . . . . . . 91
14.5.2 Master Servicer Approval . . . . . . . . . . . . . . . . . 92
14.5.3 Written Contractor Bids. . . . . . . . . . . . . . . . . . 92
14.5.4 Primary Mortgage Insurance Considerations. . . . . . . . . 92
Section 14.6 REO Administration Failure . . . . . . . . . . . . . . . . 92
14.6.1 Servicer Removal . . . . . . . . . . . . . . . . . . . . . 92
14.6.2 Servicer's Continuing Obligations. . . . . . . . . . . . . 93
14.6.3 Servicer's Duty to Compensate. . . . . . . . . . . . . . . 93
ARTICLE 15
INSURANCE
Section 15.1 General Provisions . . . . . . . . . . . . . . . . . . . . 94
15.1.1 Insurance Requirements . . . . . . . . . . . . . . . . . . 94
15.1.2 Uninsured Losses . . . . . . . . . . . . . . . . . . . . . 94
15.1.3 Servicer's Obligation to Maintain Insurance. . . . . . . . 95
15.1.4 Insurance Notices. . . . . . . . . . . . . . . . . . . . . 95
15.1.5 Default by Insurer . . . . . . . . . . . . . . . . . . . . 95
15.1.6 Insurance Carrier Rating . . . . . . . . . . . . . . . . . 95
15.1.7 Insurance Carrier Licenses . . . . . . . . . . . . . . . . 95
15.1.8 Risk Exposure. . . . . . . . . . . . . . . . . . . . . . . 96
15.1.9 Evidence of Insurance. . . . . . . . . . . . . . . . . . . 96
Section 15.2 Primary Mortgage Insurance . . . . . . . . . . . . . . . . 97
15.2.1 Primary Mortgage Insurance Requirement. . . . . . . . . . . 97
15.2.2 Primary Mortgage Insurance Coverage. . . . . . . . . . . . 97
15.2.3 Primary Mortgage Insurer Downgrading . . . . . . . . . . . 97
15.2.4 Primary Mortgage Insurance Cancellation. . . . . . . . . . 97
15.2.5 Primary Mortgage Insurance Claims. . . . . . . . . . . . . 98
Section 15.3 Hazard Insurance . . . . . . . . . . . . . . . . . . . . . 98
15.3.1 Hazard Insurance Requirement . . . . . . . . . . . . . . . 98
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15.3.2 Hazard Insurance Coverage. . . . . . . . . . . . . . . . . 98
15.3.3 Hazard Insurance Deductible. . . . . . . . . . . . . . . . 99
15.3.4 Hazard Insurance Vacancy Coverage. . . . . . . . . . . . . 99
15.3.5 Hazard Insurance Mortgagee Provisions. . . . . . . . . . . 99
Section 15.4 Flood Insurance. . . . . . . . . . . . . . . . . . . . . . 99
15.4.1 Flood Insurance Requirement. . . . . . . . . . . . . . . . 99
15.4.2 Flood Insurance Coverage . . . . . . . . . . . . . . . . . 99
15.4.3 Flood Insurance Deductible . . . . . . . . . . . . . . . . 99
Section 15.5 Title Insurance. . . . . . . . . . . . . . . . . . . . . .100
15.5.1 Servicer's Obligations . . . . . . . . . . . . . . . . . .100
15.5.2 Policy Custody . . . . . . . . . . . . . . . . . . . . . .100
15.5.3 Title Insurance Claims . . . . . . . . . . . . . . . . . .100
Section 15.6 Insurance Loss Settlements . . . . . . . . . . . . . . . .100
15.6.1 Settlement Approval. . . . . . . . . . . . . . . . . . . .100
15.6.2 Settlement Disbursements . . . . . . . . . . . . . . . . .100
15.6.3 Settlement Funds . . . . . . . . . . . . . . . . . . . . .101
15.6.4 Settlement Notice. . . . . . . . . . . . . . . . . . . . .102
15.6.5 Continuing Coverage. . . . . . . . . . . . . . . . . . . .102
15.6.6 Property Inspections . . . . . . . . . . . . . . . . . . .102
ARTICLE 16
CONDOMINIUM AND PUD INSURANCE
Section 16.1 General Provisions . . . . . . . . . . . . . . . . . . . .103
16.1.1 Applicability. . . . . . . . . . . . . . . . . . . . . . .103
16.1.2 Premiums . . . . . . . . . . . . . . . . . . . . . . . . .103
16.1.3 Deductible Reserves. . . . . . . . . . . . . . . . . . . .103
16.1.4 Name of Insured. . . . . . . . . . . . . . . . . . . . . .103
16.1.5 Mortgagee Clause . . . . . . . . . . . . . . . . . . . . .103
16.1.6 Reconstruction Coverage. . . . . . . . . . . . . . . . . .103
Section 16.2 Common Area Multiple Peril Insurance . . . . . . . . . . .103
16.2.1 Common Area Multiple Peril Insurance Requirement . . . . .104
16.2.2 Common Area Multiple Peril Insurance Coverage. . . . . . .104
16.2.3 Common Area Multiple Peril Insurance Deductible. . . . . .104
16.2.4 Boiler and Machinery Coverage. . . . . . . . . . . . . . .104
Section 16.3 Blanket Hazard Insurance . . . . . . . . . . . . . . . . .104
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16.3.1 Blanket Hazard Insurance Requirement . . . . . . . . . . .104
16.3.2 Blanket Hazard Insurance Coverage. . . . . . . . . . . . .105
16.3.3 Blanket Hazard Insurance Deductible. . . . . . . . . . . .105
Section 16.4 Common Area Comprehensive General Liability (CGL)
Insurance. . . . . . . . . . . . . . . . . . . . . . . .105
16.4.1 Common Area CGL Insurance Requirement. . . . . . . . . . .105
16.4.2 Common Area CGL Insurance Coverage . . . . . . . . . . . .105
Section 16.5 Owners' Association Fidelity Insurance . . . . . . . . . .105
16.5.1 Owners' Association Fidelity Insurance Requirement . . . .105
16.5.2 Owners' Association Fidelity Insurance Coverage. . . . . .105
Section 16.6 Blanket Flood Insurance. . . . . . . . . . . . . . . . . .106
16.6.1 Blanket Flood Insurance Requirement. . . . . . . . . . . .106
16.6.2 Blanket Flood Insurance Coverage . . . . . . . . . . . . .106
16.6.3 Blanket Flood Insurance Deductible . . . . . . . . . . . .106
ARTICLE 17
ADVANCES
Section 17.1 Principal and Interest Advances. . . . . . . . . . . . . .107
17.1.1 P&I Advance Requirement. . . . . . . . . . . . . . . . . .107
17.1.2 P&I Advance Limitation . . . . . . . . . . . . . . . . . .107
17.1.3 P&I Advance Recovery . . . . . . . . . . . . . . . . . . .107
17.1.4 Advance During Bankruptcy and Foreclosure. . . . . . . . .107
Section 17.2 Foreclosure Advances . . . . . . . . . . . . . . . . . . .108
17.2. Foreclosure Advance Requirement. . . . . . . . . . . . . .108
17.2.2 Foreclosure Advance Limitation . . . . . . . . . . . . . .108
17.2.3 Foreclosure Advance Recovery . . . . . . . . . . . . . . .108
17.2.4 Foreclosure Advance Records. . . . . . . . . . . . . . . .108
Section 17.3 Tax & Insurance Advances . . . . . . . . . . . . . . . . .108
17.3.1 T&I Advance Requirement. . . . . . . . . . . . . . . . . .108
17.3.2 T&I Advance Recovery . . . . . . . . . . . . . . . . . . .109
17.3.3 T&I Advance Limitation . . . . . . . . . . . . . . . . . .109
17.3.4 Advance During Bankruptcy and Foreclosure. . . . . . . . .109
Section 17.4 Non-Recoverable Advances . . . . . . . . . . . . . . . . .109
17.4.1 Ordinary Recovery. . . . . . . . . . . . . . . . . . . . .109
17.4.2 Final Recovery . . . . . . . . . . . . . . . . . . . . . .109
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17.4.3 Non-Recoverable Advance Determination. . . . . . . . . . .109
Section 17.5 Failure to Advance . . . . . . . . . . . . . . . . . . . .110
17.5.1 Grounds for Termination. . . . . . . . . . . . . . . . . .110
17.5.2 Servicer Reimbursement . . . . . . . . . . . . . . . . . .110
Section 17.6 Rehabilitation Advance . . . . . . . . . . . . . . . . . .110
17.6.1 Rehabilitation Advance Requirement . . . . . . . . . . . .110
17.6.2 Rehabilitation Advance Limitation. . . . . . . . . . . . .110
17.6.3 Rehabilitation Advance Recovery. . . . . . . . . . . . . .110
ARTICLE 18
REPORTING REQUIREMENTS
Section 18.1 Monthly Accounting Reports . . . . . . . . . . . . . . . .112
18.1.1 Monthly Accounting Report Requirement. . . . . . . . . . .112
18.1.2 Monthly Accounting Report Elements . . . . . . . . . . . .112
18.1.3 Automated Reports. . . . . . . . . . . . . . . . . . . . .112
18.1.4 Electronic Reporting . . . . . . . . . . . . . . . . . . .112
18.1.5 Machine Readable Records . . . . . . . . . . . . . . . . .113
Section 18.2 Account Reconciliations. . . . . . . . . . . . . . . . . .113
18.2.1 Reconciliation Preparation . . . . . . . . . . . . . . . .113
18.2.2 Account Records. . . . . . . . . . . . . . . . . . . . . .113
Section 18.3 Monthly Remittance Requirements. . . . . . . . . . . . . .113
18.3.1 Remittance of Funds. . . . . . . . . . . . . . . . . . . .113
18.3.2 Servicer Compensation. . . . . . . . . . . . . . . . . . .114
ARTICLE 19
TRANSFERS AND TERMINATION OF SERVICING
Section 19.1 Transfer of Servicing. . . . . . . . . . . . . . . . . . .115
19.1.1 Transfer Prohibition . . . . . . . . . . . . . . . . . . .115
19.1.2 Transfer Request . . . . . . . . . . . . . . . . . . . . .115
19.1.3 Servicer Liability . . . . . . . . . . . . . . . . . . . .115
19.1.4 Master Servicer's Determination. . . . . . . . . . . . . .115
Section 19.2 Termination of Servicing . . . . . . . . . . . . . . . . .115
19.2.1 Grounds for Termination. . . . . . . . . . . . . . . . . .115
19.2.2 Trustee Notification . . . . . . . . . . . . . . . . . . .116
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19.2.3 Servicer Termination . . . . . . . . . . . . . . . . . . .117
19.2.4 Consequences of Termination. . . . . . . . . . . . . . . .117
19.2.5 Effect of Termination. . . . . . . . . . . . . . . . . . .117
19.2.6 Custodial Account Threshold Reduction. . . . . . . . . . .117
ARTICLE 20
MISCELLANEOUS PROVISIONS
Section 20.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . .118
20.1.1 Unilateral Authority . . . . . . . . . . . . . . . . . . .118
20.1.2 Consensual Amendment . . . . . . . . . . . . . . . . . . .118
20.1.3 Trustee Notification . . . . . . . . . . . . . . . . . . .118
20.1.4 Trustee Disapproval. . . . . . . . . . . . . . . . . . . .118
Section 20.2 General Construction . . . . . . . . . . . . . . . . . . .119
20.2.1 Binding Nature . . . . . . . . . . . . . . . . . . . . . .119
20.2.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . .119
20.2.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . .119
20.2.4 Indulgences Not Waivers. . . . . . . . . . . . . . . . . .119
20.2.5 Titles Not to Affect Interpretation. . . . . . . . . . . .119
20.2.6 Provisions Severable . . . . . . . . . . . . . . . . . . .119
20.2.7 Servicer an Independent Contractor . . . . . . . . . . . .119
20.2.8 Third Party Beneficiary. . . . . . . . . . . . . . . . . .120
20.2.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . .120
SCHEDULE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122
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This Servicing Agreement, made as of this __th day of ________, 199_ (the
"Agreement"), between Norwest Mortgage, Inc., a California corporation (the
"Servicer") and Norwest Bank Minnesota, National Association, a national banking
association, (the "Master Servicer"), recites and provides as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing residential
mortgage loans and the Servicer desires to be retained to service the Mortgage
Loans identified on Schedule I hereto subject to and in accordance with the
terms of this Agreement; and
WHEREAS, the Servicer will service the Mortgage Loans identified on
Schedule I hereto as Group I Mortgage Loans from its mortgage loan servicing
facilities in locations other than Frederick, Maryland and will service the
Mortgage Loans identified on Schedule I hereto as Group II Mortgage Loans from
its mortgage loan servicing facilities located in Frederick, Maryland; and
WHEREAS, the Master Servicer, acting pursuant to the Pooling and Servicing
Agreement related to the Norwest Structured Assets, Inc., Mortgage Asset-Backed
Pass-Through Certificates, Series 199 - , will supervise, monitor and oversee
the performance of the Servicer under this Agreement.
NOW THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Servicer and the Master Servicer agree as follows:
ARTICLE 1
DEFINITIONS
ACH: Automated Clearing House.
ADJUSTED TANGIBLE NET WORTH: As of the date of determination thereof,
the sum of: (i) Servicer's Tangible Net Worth; plus (ii) one percent (1%) of
the amount of Servicer's servicing portfolio, as determined by the Master
Servicer in the Master Servicer's reasonable discretion.
ADVANCE: Any payment made with respect to a Mortgage Loan or the
related Mortgaged Property by the Servicer from its own funds made in the nature
of an advance pursuant to the provisions of this Agreement.
AFFILIATE: Any person or entity controlling, controlled by or under
common control with a specified entity. The term "control" means the power to
direct the management and policies of a person or entity, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "controlling" and "controlled" shall have meanings correlative to
the foregoing.
AMOUNTS HELD FOR FUTURE DISTRIBUTION: As to any Remittance Date,
amounts on account of (i) all Unscheduled Principal Receipts received after the
last day of the Applicable Unscheduled Principal Receipt Period ending in the
month of such Remittance Date and all related payments of interest on such
principal prepayments and amounts received from the Servicer or a Representing
Party in the month of such Remittance Date as the Purchase Price for any
repurchased Mortgage Loan and (ii) payments which represent early receipt of
scheduled payments of principal and interest due on a date or dates subsequent
to the related Due Date.
APPLICABLE UNSCHEDULED PRINCIPAL RECEIPT PERIOD: With respect to the
Group I Mortgage Loans and both Full Unscheduled Principal Receipts and Partial
Unscheduled Principal Receipts, the Prior Month Receipt Period. With respect to
the Group II Mortgage Loans and both Full Unscheduled Principal Receipts and
Partial Unscheduled Principal Receipts, the Mid-Month Receipt Period.
APPRAISAL REPORT: A report setting forth the fair market value of a
Mortgaged Property as determined by an appraiser who, at the time the appraisal
was conducted, met the minimum qualifications of FNMA and FHLMC for appraisers
of conventional residential mortgage loans.
ARM LOAN: A Mortgage Loan, if any, the Mortgage Interest Rate of
which is subject to periodic adjustment in accordance with the terms of the
related Mortgage Note.
ASSIGNMENT: The document which transfers all the rights of the
secured party pursuant to a Security Instrument to a transferee for valid
consideration.
ASSUMPTION: The process whereby, on sale or transfer of a legal or
beneficial interest in a Mortgaged Property, the new owner of such Mortgaged
Property becomes legally obligated under the terms of the related existing
Security Instrument, Mortgage Note and any addenda and riders to such Security
Instrument or Mortgage Note. Subsequent to the Assumption, the new owner of the
property shall be deemed to be the Borrower under the related Mortgage Loan
Documents.
BALLOON AMOUNT: The remaining principal balance to be paid at
maturity of a Balloon Loan by the related Borrower pursuant to the terms of the
related Mortgage Note.
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BALLOON LOAN: A Mortgage Loan, if any, which amortizes its principal
payments over a period which is longer than the stated maturity of such Mortgage
Loan pursuant to the terms of the related Mortgage Note so as to require the
payment of the Balloon Amount at maturity in order to retire the Mortgage Loan.
BANKRUPTCY CODE: The Bankruptcy Code of 1978, as amended.
BIF: The Bank Insurance Fund.
BORROWER: The individual obligated to repay a Mortgage Loan. (The
Borrower may be the beneficiary or beneficiaries of an Illinois land trust when
the Mortgaged Property is located in Illinois.)
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii)
a legal holiday in the City of New York, State of Maryland, State of Minnesota
or State of Iowa or (iii) a day on which banking institutions in the City of New
York, or the State of Maryland, State of Minnesota or State of Iowa are
authorized or obligated by law or executive order to be closed.
BUYDOWN AGREEMENT: An agreement governing the application of Buydown
Funds with respect to a Mortgage Loan.
BUYDOWN FUNDS: Money advanced by a builder, seller or other
interested party to reduce a Borrower's Monthly Payment during the initial years
of a Mortgage Loan.
CERTIFICATE ACCOUNT: A segregated custodial account established by
the Master Servicer into which the Servicer shall remit funds from the related
Custodial P&I Account.
CODE: The Internal Revenue Code of 1986, as it may be amended from
time to time, any successor statutes thereto, and applicable U.S. Department of
the Treasury temporary or final regulations promulgated thereunder.
CONDOMINIUM PROJECT: Real estate including the separate ownership in
fee, or on a satisfactory leasehold estate, of a particular residential unit
with an indivisible interest in the real estate designated for common ownership
strictly by unit owners.
CONDOMINIUM UNIT: A Single Family Property within a Condominium
Project.
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CONVERTED MORTGAGE LOAN: An ARM Loan with respect to which the
Borrower has complied with the applicable requirements of the related Mortgage
Note to convert the related Mortgage Interest Rate to a fixed rate of interest,
and the Servicer has processed such conversion.
CO-OP SHARES: Shares issued by private non-profit housing
corporations.
CURRENT VALUE: The appraised value of the related Mortgaged Property
from an Appraisal Report conducted within six (6) months of the use of such
value under this Agreement.
CURTAILMENT: A partial prepayment by the Borrower of principal on a
Mortgage Loan that otherwise is current, which prepayment is not accompanied by
an amount representing the full amount of scheduled interest due on the related
Mortgage Loan.
CUSTODIAL BUYDOWN ACCOUNT: An account maintained by the Servicer
specifically to hold all Buydown Funds to be applied to individual Mortgage
Loans.
CUSTODIAL PRINCIPAL AND INTEREST (P&I) ACCOUNT: An account
maintained by the Servicer, specifically for the collection of principal and
interest, Insurance Proceeds, Liquidation Proceeds and other amounts received
with respect to Mortgage Loans.
CUSTODIAL SUBSIDY ACCOUNT: An account maintained by the Servicer
specifically to hold all Subsidy Funds to be applied to individual Mortgage
Loans.
CUSTODIAL TAXES AND INSURANCE (T&I) ACCOUNT: An account maintained
by the Servicer, specifically for the payment of real estate tax assessments and
insurance premiums in respect of Mortgaged Property related to Mortgage Loans.
CUSTODIAN: Initially, either the Trustee or, if applicable, the Trust
Administrator, as specified in the Pooling and Servicing Agreement, and
thereafter the custodian, if any, hereafter appointed by the Trustee or, if
applicable, the Trust Administrator pursuant to Section 8.13 of the Pooling and
Servicing Agreement.
CUT-OFF DATE: As specified in Section 11.02 of the Pooling and
Servicing Agreement.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting a Deficient Valuation.
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DEFICIENT VALUATION: With respect to any Mortgage Loan the related
Mortgaged Property of which is involved in a bankruptcy proceeding, the
reduction by the bankruptcy court of the Unpaid Principal Balance of the
Mortgage Note.
DELINQUENCY/DELINQUENT: A Delinquency with respect to a Mortgage
Loan occurs, or a Mortgage Loan is Delinquent when all or part of a Borrower's
Monthly Payment or, where applicable, an Escrow Item is paid after the
applicable Due Date. For reporting purposes, a Delinquency that remains uncured
for 30 days or more, but less than 60 days, is considered a 30-day Delinquency.
A Delinquency that has been uncured for more than 60 days, but less than 90
days, is considered a 60-day Delinquency. A Delinquency that has been uncured
for 90 days or more is considered a 90-day Delinquency. The foregoing shall be
determined based on an assumption of a year comprised of twelve 30-day months.
DETERMINATION DATE: The 17th day of the month in which the related
Remittance Date occurs, or if such 17th day is not a Business Day, the Business
Day preceding such 17th day.
DIRECTLY OPERATE: With respect to any REO, the direct or indirect
furnishing or rendering of services to the tenants thereof, management or
operation of such REO, the holding of such REO primarily for sale to customers,
performance of any construction work thereon or any use of such REO in a trade
or business, in each case other than with the approval of the Master Servicer;
provided, however, that the Servicer shall not be considered to Directly Operate
an REO solely because it establishes rental terms, chooses tenants, enters into
or renews leases, deals with taxes and insurance, or makes decisions as to
repairs or capital expenditures with respect to such REO.
DUE DATE: With respect to a Mortgage Loan, the day of each month on
which a Monthly Payment and, where applicable, any Escrow Funds payment is due
as stated in the related Mortgage Note. The Due Date for all Mortgage Loans
shall be the first day of each month.
DUE-ON-SALE CLAUSE: The clause in a Security Instrument requiring
the payment of the Unpaid Principal Balance of the related Mortgage Loan upon
the sale of, or the transfer of an interest in, the related Mortgaged Property.
ELIGIBLE ACCOUNT: As defined in the Pooling and Servicing Agreement.
ELIGIBLE CUSTODIAL P&I ACCOUNT: As defined in Section 6.1.2.
ELIGIBLE INVESTMENTS: As defined in the Pooling and Servicing
Agreement.
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ERRORS AND OMISSIONS POLICY: An insurance policy naming the Trustee,
its successors and assigns as loss payees relative to losses caused by errors or
omissions of the Servicer and its personnel, including, but not limited to
losses caused by the failure to pay insurance premiums or taxes, to record or
perfect liens, to effect valid transfers of Mortgage Notes, or to properly
service Mortgage Loans.
ESCROW FUNDS: All funds collected with respect to a Mortgage Loan by
the Servicer to cover related Escrow Items according to the provisions of this
Agreement.
ESCROW ITEM: An expense required to be paid by a Borrower under the
related Security Instrument including, without limitation, taxes, special
assessments, ground rents, water, sewer and other governmental impositions or
charges that are or may become liens on the related Mortgaged Property prior to
that of the related Security Instrument, as well as Hazard Insurance, Flood
Insurance and Primary Mortgage Insurance premiums.
FDIC: Federal Deposit Insurance Corporation and its successors.
FHA: The Federal Housing Administration and its successors.
FHLMC: Federal Home Loan Mortgage Corporation and its successors.
FIDELITY BOND: An insurance policy naming the Trustee, its
successors and assigns as loss payees relative to losses caused by improper or
unlawful acts of the Servicer's personnel.
FINAL TITLE CONDITION REPORT. A title condition report issued by
American Land Title Company, Inc., a wholly-owned subsidiary of the Servicer,
evidencing that according to the records of the county in which the Mortgaged
Property is located, the Security Instrument is a valid first lien on the
related Mortgaged Property subject only to permitted encumbrances.
FLOOD INSURANCE: An insurance policy insuring against flood damage
to a Mortgaged Property, where required.
FNMA: Federal National Mortgage Association and its successors.
FULL UNSCHEDULED PRINCIPAL RECEIPT: Any Unscheduled Principal Receipt
with respect to a Mortgage Loan (i) in the amount of the outstanding principal
balance of such Mortgage Loan and resulting in the full satisfaction of such
Mortgage Loan or (ii) representing Liquidation Proceeds other than Partial
Liquidation Proceeds.
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GNMA: Government National Mortgage Association and its successors.
GPM (OR GPARM) LOAN: A fixed rate Mortgage Loan or ARM Loan, if any,
that provides during a portion of its term that the interest portion of the
Monthly Payment on such Mortgage Loan shall be less than the full amount of
interest due on such Mortgage Loan based on the related Mortgage Interest Rate.
GROSS MARGIN: With respect to each ARM Loan, the fixed percentage
specified in the related Mortgage Note that is added to the applicable Index on
each Interest Adjustment Date to determine the new Mortgage Interest Rate for
such ARM Loan.
GROUP I MORTGAGE LOANS: The Mortgage Loans identified on Schedule I
as Group I Mortgage Loans.
GROUP II MORTGAGE LOANS: The Mortgage Loans identified on Schedule I
as Group II Mortgage Loans.
HAZARD INSURANCE: A fire and casualty extended coverage insurance
policy insuring against loss or damage from fire and other perils covered within
the scope of standard extended hazard coverage naming the Servicer, its
successors and assigns, as a mortgagee under a standard mortgagee clause,
together with all riders and endorsements thereto.
HUD: The United States Department of Housing and Urban Development
and its successors.
INDEX: With respect to each ARM Loan, the applicable index specified
in the related Mortgage Note that is added to the related Gross Margin on each
Interest Adjustment Date to determine the new Mortgage Interest Rate for such
ARM Loan.
INSURANCE POLICY: Any insurance policy for a Mortgage Loan required
hereunder, including, without limitation, Primary Mortgage Insurance, Hazard
Insurance, Flood Insurance, Pool Insurance and Title Insurance policies.
INSURANCE PROCEEDS: Proceeds from an Insurance Policy, other than
such proceeds which are applied by the Borrower or held to be applied by the
Borrower to the restoration of the related Mortgaged Property.
INTEREST ADJUSTMENT DATE: With respect to each ARM Loan, the date on
which the related Mortgage Interest Rate changes in accordance with the terms of
such Mortgage
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Note, the first of which is set forth in such Mortgage Note and on the
respective Mortgage Loan Schedule.
LIQUIDATION: Application of full payment to a Mortgage Loan which
results in the release of the lien of the related Security Instrument on any
related Mortgaged Property, whether through foreclosure and sale of the related
REO, condemnation, prepayment in full or otherwise, or the realization of all
sums from the final disposition of the related REO.
LIQUIDATION PROCEEDS: The amount received by the Servicer which
ultimately relate to the Liquidation of a Mortgage Loan.
LOAN ORIGINATOR: The entity that closes a Mortgage Loan in its own
name.
LOAN-TO-VALUE (LTV): The ratio that results when the Unpaid
Principal Balance of a Mortgage Loan is divided by the Value of the related
Mortgaged Property.
MASTER SERVICER: Norwest Bank Minnesota, National Association, or
any successors or assigns.
MASTER SERVICER LOAN NUMBER: A unique number assigned by the Master
Servicer to each Mortgage Loan set forth in Schedule I.
MAXIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each ARM
(or GPARM) Loan, the interest rate set forth in the related Mortgage Note as the
maximum Mortgage Interest Rate thereunder.
MAXIMUM NEGATIVE AMORTIZATION AMOUNT: With respect to any Mortgage
Loan that provides for negative amortization, the maximum principal balance
which is permitted under the terms of the related Mortgage Note.
MID-MONTH RECEIPT PERIOD: With respect to each Remittance Date, the
one month period beginning on the Determination Date occurring in the calendar
month preceding the month in which such Remittance Date occurs and ending on the
day preceding the Determination Date immediately preceding such Remittance Date.
MINIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each ARM
Loan, the interest rate set forth in the related Mortgage Note as the minimum
Mortgage Interest Rate thereunder, if any.
MONTH END INTEREST: In the event that any Prepayments in Full of any
Mortgage Loans are received by the Servicer after the Applicable Unscheduled
Principal
-8-
Receipt Period in the month in which such prepayments occurred, the lesser of
(i) the aggregate of the difference for each such Mortgage Loan between the
interest payment that would have been paid on such Mortgage Loan that was
prepaid through the last day of the month in which such prepayment occurred and
the interest payment actually received by the Servicer on such Mortgage Loan
that was prepaid and (ii) the product of 1/12th of _____% and the aggregate of
the Scheduled Principal Balance of all the Mortgage Loans serviced hereunder.
MONTH END INTEREST SHORTFALL: The excess of the amount described in
clause (i) of the definition of Month End Interest over the amount described in
clause (ii) of the definition thereof.
MONTHLY ACCOUNTING REPORTS: The reports due from the Servicer on a
monthly basis (in the case of Group I Mortgage Loans, due no later than the
tenth calender day of the month, or the preceding Business Day if the tenth day
is not a Business Day and, in the case of Group II Mortgage Loans, due no later
than the 18th calendar day of the month, or the preceding Business Day if the
18th day is not a Business Day) relative to all Mortgage Loans serviced by the
Servicer, which reports are required to be submitted to the Master Servicer.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest due in the applicable month under the
terms of the related Mortgage Note.
MONTHLY REMITTANCE: The Servicer's aggregate payment due each month
to the Certificate Account as specified in Section 18.3.1.
MORTGAGE INTEREST RATE: The interest rate payable by the Borrower on
a Mortgage Loan according to the terms of the Mortgage Note which, in the case
of ARM Loans, may be adjusted periodically as provided in such Mortgage Note.
MORTGAGE LOAN: A mortgage loan identified on Schedule I. "Mortgage
Loan" includes all of the Trustee's right, title and interest in and to such
Mortgage Loan, including, without limitation, the related Mortgage Loan
Documents and all other material and information collected by the Servicer in
connection with the Mortgage Loan including Monthly Payments, Liquidation
Proceeds, Insurance Proceeds and all other rights, benefits and proceeds arising
from or in connection with such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: With respect to a Mortgage Loan, the
original related Mortgage Note with applicable addenda and riders, the original
related Security Instrument and the originals of any required addenda and
riders, the original related Assignment and any original intervening related
Assignments, the original related Title
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Insurance policy, related Primary Mortgage Insurance policy, if any, and the
related Appraisal Report made at the time such Mortgage Loan was originated, and
all other documents described in Article 9 hereof.
MORTGAGE NOTE: A manually executed written instrument evidencing the
related Borrower's promise to repay a stated sum of money, plus interest, to the
related Loan Originator by a specific date according to a schedule of monthly
principal and interest payments.
MORTGAGE NOTE ASSUMPTION RIDER: A rider attached to a Mortgage Note
which states the terms upon which an Assumption may occur, including, but not
limited to, consent in writing by the insurer under any Primary Mortgage
Insurance Policy with respect to the related Mortgage Loan.
MORTGAGE ASSET-BACKED PASS-THROUGH CERTIFICATES: The specific series
of Norwest Structured Assets, Inc. mortgage-backed certificates specified on
page 1 of this Agreement.
MORTGAGED PROPERTY: Land, improvements thereon and other property
subject to the lien of a Security Instrument, which may include Co-op Shares or
residential long-term leases, securing repayment of the debt evidenced by the
related Mortgage Note.
MORTGAGEE: The secured party to which a Security Instrument
initially grants a lien on the related Mortgaged Property.
NET MORTGAGE INTEREST RATE: With respect to a Mortgage Loan, the
difference between (a) the Mortgage Interest Rate on such Mortgage Loan and (b)
the Servicing Fee Percentage.
NON-RECOVERABLE ADVANCE: Any amount previously advanced by the
Servicer with respect to a Mortgage Loan which the Servicer has determined,
pursuant to the terms of this Agreement, not to be recoverable from Insurance
Proceeds, Liquidation Proceeds or other payments with respect to such Mortgage
Loan.
NOTICE OF PERIODIC ADJUSTMENT: With respect to each ARM Loan, a
notice provided to the Borrower of any changes or adjustments to the related
Mortgage Interest Rate or the related Monthly Payment.
OFFICER: An officer of a corporation or a principal of a
partnership, who is authorized to execute documents on behalf of his corporation
or partnership, respectively.
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OPINION OF COUNSEL: A written opinion of counsel, reasonably
acceptable in form and substance to the Master Servicer, and who may be in-house
or outside counsel to the Servicer but which must be Independent outside counsel
with respect to any such opinion of counsel concerning the taxation, or status
for tax purposes, of the Trustee.
OWNER MORTGAGE LOAN FILE: With respect to each Mortgage Loan, a file
maintained by the Trustee or the Custodian for such Mortgage Loan, which file
contains the documents specified in Section 9.1 hereof, as well as any other
documents that come into the Custodian's possession with respect to such
Mortgage Loan.
P&I ADVANCE: An advance by the Servicer of any principal and interest
payments not timely paid by the related Borrower (other than with respect to a
Balloon Loan, any amounts of principal payments in respect of Balloon Amounts)
to ensure that there are sufficient funds to cover the Monthly Remittance on
each Remittance Date.
PARTIAL LIQUIDATION PROCEEDS: As to any Remittance Date, Liquidation
Proceeds received by the Servicer on a Mortgage Loan during the related Partial
Liquidation Receipt Period other than those Liquidation Proceeds received during
such Partial Liquidation Receipt Period which result from the complete and final
Liquidation of such Mortgage Loan.
PARTIAL LIQUIDATION RECEIPT PERIOD: As to any Remittance Date, the
period from and including the Determination Date occurring in the month
preceding the month of such Remittance Date (or, in the case of the first
Remittance Date, from and including the Cut-off Date) to but not including the
Determination Date occurring in the month of such Remittance Date.
PARTIAL UNSCHEDULED PRINCIPAL RECEIPT: An Unscheduled Principal
Receipt which is not a Full Unscheduled Principal Receipt.
PAYMENT ADJUSTMENT DATE: With respect to each ARM Loan, the date on
which the Borrower's Monthly Payment changes in accordance with the terms of the
related Mortgage Note.
PERIODIC PAYMENT CAP: With respect to an ARM Loan, the limit on the
percentage increase that may be made on the related Monthly Payment on any
Payment Adjustment Date, as set forth in the related Mortgage Note.
PERIODIC RATE CAP: With respect to an ARM Loan, the limit, expressed
as incremental percentage points, on the increase or decrease that may be made
to the related Mortgage Interest Rate on any Interest Adjustment Date from such
Mortgage Interest Rate immediately prior to such Interest Adjustment Date, as
set forth in the related Mortgage Note.
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PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust or unincorporated organization.
POOL INSURANCE: An insurance policy insuring against certain credit
risk losses on certain Mortgage Loans up to a certain amount.
POOL INSURER: With respect to any Mortgage Loan, the insurer under
the Pool Insurance policy relating to such Mortgage Loan.
POOLING AND SERVICING AGREEMENT: The pooling and servicing agreement
among Norwest Structured Assets, Inc., as seller, Norwest Bank Minnesota,
National Association, as master servicer, the Trustee, and, if applicable, the
Trust Administrator, relating to the issuance of the Mortgage Asset-Backed Pass-
Through Certificates.
PRELIMINARY TITLE REPORT: A report issued by a title insurance
company in anticipation of issuing a Title Insurance policy which evidences
existing liens and gives a preliminary opinion as to the absence of any
encumbrance on title to a Mortgaged Property, except liens to be removed on or
before purchase or refinance, as the case may be, by the Borrower and Permitted
Encumbrances.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, any payment by
the Borrower in the amount of the outstanding principal balance of such Mortgage
Loan which is received in advance of its Due Date and is not accompanied by an
amount representing scheduled interest for any period subsequent to the date of
prepayment.
PRIMARY MORTGAGE INSURANCE: Insurance obtained from a Primary
Mortgage Insurer which insures the holder of a Mortgage Note against loss in the
event the related Borrower defaults under such Mortgage Note or the related
Security Instrument, including all riders and endorsements thereto.
PRIMARY MORTGAGE INSURER: With respect to any Mortgage Loan, the
insurer under the Primary Mortgage Insurance policy relating to such Mortgage
Loan.
PRIOR MONTH RECEIPT PERIOD: With respect to each Remittance Date, the
calendar month preceding the month in which such Remittance Date occurs.
PROPERTY INSPECTION REPORT: A report, submitted by the Servicer to
the Master Servicer, describing the related Mortgaged Property.
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PRUDENT SERVICING PRACTICES: Such practices observed generally by
servicers in discharging their servicing obligations in a prudent manner in
accordance with industry standards for mortgage loans similar to the Mortgage
Loans.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that
contains property and improvements owned and maintained by a homeowners'
association, corporation or trust for the enjoyment and use of individual PUD
Unit owners within that parcel of land. The shared portions of the parcel are
known as common property.
PUD UNIT: A single family residential property within a PUD.
PURCHASE PRICE: With respect to any Mortgage Loan required to be
purchased by the Servicer pursuant to Section 5.1.3 or Section 8.3.3 hereof, an
amount equal to (a) the Unpaid Principal Balance of the Mortgage Loan, plus (b)
accrued interest thereon at the Mortgage Interest Rate through the last day of
the month in which the purchase occurs, and, if the Servicer is the entity
paying the Purchase Price, minus (c) any unreimbursed advances of principal and
interest made by the Servicer on such Mortgage Loan and any outstanding
Servicing Fee owed with respect to such Mortgage Loan. Further, in connection
with any such purchase of a Mortgage Loan as a result of a breach of a
representation or warranty under this Agreement, the Servicer shall provide the
Trustee with an indemnity, in form and substance satisfactory to the Master
Servicer, against additional costs, expenses and taxes arising out of the
repurchase. With respect to any Mortgage Loan purchased or repurchased from the
Trustee pursuant to an agreement other than this Agreement, the purchase price
specified in such other agreement.
REAL ESTATE OWNED (REO): Any Mortgaged Property the title to which
is acquired on behalf of the Trustee through foreclosure, deed-in-lieu of
foreclosure, abandonment or reclamation from bankruptcy in connection with a
defaulted Mortgage Loan.
REALIZED LOSS: As to any defaulted Mortgage Loan, any loss realized
by the Trustee of such Mortgage Loan as calculated pursuant to Section 7.7
hereof.
REFERENCE BANK: Norwest Bank Minnesota, National Association or if
such entity is no longer lending money or no longer quoting a prime rate, such
other entity as the Master Servicer may specify by written notice to the
Servicer.
REMIC: The segregated pool or pools of assets designated as one or
more real estate mortgage investment conduits, within the meaning of the REMIC
Provisions, pursuant to the Pooling and Servicing Agreement.
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REMIC PROVISIONS: The provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time and including any proposed legislation or regulations which, as proposed,
would have an effective date prior to enactment thereof.
REMITTANCE DATE: The 24th day of each month (or the preceding
Business Day if the 24th day is not a Business Day). Each month, the Servicer
must transfer all required funds from the Custodial P&I Account to the
Certificate Account on or before the Remittance Date.
RENTS FROM REAL PROPERTY: With respect to any REO, gross income of
the character described in Section 856(d) of the Code (generally, rent for the
use of real property, the amount of which is not dependent, in whole or in part,
upon the income or profit of any person, including certain payments for certain
services and personal property incidental to and customarily provided in
connection with the rental of such real property.)
REO DISPOSITION: The receipt by the Servicer of Liquidation Proceeds
and other payments and recoveries (including proceeds of a final sale) from the
sale or other disposition of the REO.
REPRESENTING PARTY: A Person that has transferred Mortgage Loans,
directly or through one or more intermediaries, to the Trustee pursuant to an
agreement for the sale of Mortgage Loans pursuant to which a Representing Party
has made representations and warranties with respect to certain Mortgage Loans,
and under which the Trustee, its successors and assigns has recourse against
such Representing Party for any breach thereunder with respect to such Mortgage
Loans.
SAIF: The Savings Association Insurance Fund.
SCHEDULED PRINCIPAL BALANCE: With respect to each Mortgage Loan (or
related REO), the principal balance of such Mortgage Loan as of the applicable
Due Date calculated by taking into account the application of any Monthly
Payments due on or before such Due Date (whether or not such Monthly Payments
were received from the Borrower), and Curtailments, Insurance Proceeds or
Liquidation Proceeds, and Realized Losses received or realized by the Servicer
prior to such Due Date.
SECURITY INSTRUMENT: A written instrument creating a valid first
lien on a Mortgaged Property. A Security Instrument may be in the form of a
mortgage, deed of trust, deed to secure debt or security deed, including any
riders and addenda thereto.
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SERVICER: Norwest Mortgage, Inc., the entity that has entered into
this Agreement with the Master Servicer and any successors or assigns of
Norwest Mortgage, Inc..
SERVICER LOAN MORTGAGE NUMBER: A unique number assigned by the
Servicer to a Mortgage Loan.
SERVICER MORTGAGE LOAN FILE: A file maintained by the Servicer for
each Mortgage Loan that contains the documents specified in Section 9.2 hereof,
as well as any other documents that come into the Servicer's possession with
respect to a Mortgage Loan.
SERVICING FEE: For each Mortgage Loan, the compensation due the
Servicer in an amount equal to the product of (i) one-twelfth of the Servicing
Fee Percentage and (ii) the Scheduled Principal Balance of the Mortgage Loan as
of the immediately preceding Due Date (without taking into account any payment
of principal due on such Due Date).
SERVICING FEE PERCENTAGE: With respect to each Mortgage Loan, the
percentage specified on Schedule I hereto.
SINGLE FAMILY PROPERTY: A one-unit residential property.
SUBSIDY FUNDS: Funds contributed by the employer of a Borrower in
order to reduce the payments required from the Borrower for a specified period
in specified amounts.
SUBSIDY LOAN: A Mortgage Loan, if any, subject to a temporary
interest subsidy agreement pursuant to which the monthly interest payments made
by the related Borrower will be less than the scheduled monthly interest
payments on such Mortgage Loan, with the resulting difference in interest
payments being provided by the employer of the Borrower.
TANGIBLE NET WORTH: As of the date of determination thereof, the par
value (or value stated on the Servicer's books) of the capital stock of all
classes of the Servicer, plus, or minus in the case of a deficiency, the amount
of paid in capital and retained earnings of the Servicer, all determined in
accordance with generally accepted accounting principles as are then in effect.
The Master Servicer may exclude assets that are unacceptable, in the Master
Servicer's reasonable discretion, from the determination of the Servicer's
Tangible Net Worth.
T&I ADVANCE: An advance by the Servicer of any taxes and insurance
premiums due with respect to any Mortgage Loan.
THRESHOLD AMOUNT: With respect to any Custodial P&I Account, (i)
$100,000 or, in the case of any Eligible Custodial P&I Account, the aggregate
amount on deposit therein
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(I.E., an unlimited amount); or (ii) after any notice has been given pursuant to
Section 19.2.6, the amount specified in such notice.
TITLE INSURANCE: An American Land Title Association (ALTA) mortgage
loan title policy form 1970, or other form of Title Insurance Policy acceptable
to FNMA or FHLMC, including all riders and endorsements thereto, insuring that
the Security Instrument constitutes a valid first lien on the related Mortgaged
Property subject only to permitted encumbrances.
TRANSFER OF OWNERSHIP: Includes, but is not limited to, the
conveyance of a Mortgaged Property, whether legal or equitable, voluntary or
involuntary, by any of the following methods:
(a) outright sale;
(b) deed;
(c) installment sale contract;
(d) land contract;
(e) contract for deed;
(f) leasehold interest with the term greater than three years;
(g) lease with option to purchase;
(h) land trust; or
(i) any other conveyance of an interest in real property, including
those involving secondary financing.
TRUST ADMINISTRATOR: If applicable, the trust administrator specified
in the Pooling and Servicing Agreement, its successors and assigns.
TRUSTEE: The trustee specified in the Pooling and Servicing
Agreement, its successors and assigns.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan, the
outstanding principal balance payable by the Borrower under the terms of the
Mortgage Note.
UNSCHEDULED PRINCIPAL RECEIPT: Any Mortgagor payment or other recovery
of principal on a Mortgage Loan which is received in advance of its Due Date and
is not accompanied by an amount representing scheduled interest for any period
subsequent to the date of prepayment, including, without limitation, prepayments
of principal (whether full or partial), Liquidation Proceeds, Partial
Liquidation Proceeds, Insurance Proceeds, proceeds of REO Dispositions and
proceeds received from any condemnation award or proceeds in lieu of
condemnation other than that portion of such proceeds released to the mortgagor
in accordance
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with the terms of the Mortgage Loan Documents or Prudent Servicing Practices and
excluding any proceeds of a repurchase of a Mortgage Loan by the Servicer or a
Representing Party.
VALUE: The lesser of the appraised value or sales price of the
related Mortgaged Property at the time the Mortgage Loan is closed. For a
refinanced Mortgage Loan, the Value of the related Mortgaged Property is its
appraised value at the time the refinanced Mortgage Loan is closed.
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ARTICLE 2
CONSTRUCTION
Section 2.1 LEGAL CONSTRUCTION
2.1.1 COMPLIANCE WITH APPLICABLE LAW. The obligations of the Servicer
pursuant to this Agreement shall at all times be performed in compliance
with all applicable laws.
2.1.2 POTENTIAL CONFLICT. If any obligation of the Servicer pursuant
to this Agreement shall give rise to a potential conflict with applicable
law, such obligation shall be construed so as to (a) comply with all
applicable laws and (b) effectuate with respect to such obligations, to the
fullest extent permitted by law, the intention of the parties hereto as
expressed in this Agreement.
2.1.3 CONSISTENT LEGAL COMPLIANCE. The fact that certain provisions of
this Agreement contain language which expressly requires compliance with
all applicable laws, shall not give rise to an implication that other
provisions, which do not expressly include such language, operate in
derogation of the requirement for such legal compliance.
2.1.4 GENERAL INTERPRETIVE RULES. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires, (i) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the
other gender; (ii) reference herein to "Article", "Section", "Clause", and
other subdivisions, and to "Exhibits", without reference to a document, are
to designated Articles, Sections, Clauses and other subdivisions of, and to
Exhibits to, this Agreement; (iii) reference to a Clause without further
reference to a Section is a reference to such Clause as contained in the
same Section in which the reference appears, and this rule shall also apply
to other subdivisions; (iv) "including" means "including but not limited
to"; and (v) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision.
2.1.5 CONSTRUCTION OF PROVISIONS. Although certain provisions of this
Agreement contain express language which precludes the Servicer's recovery
of, or reimbursement for, expenses incurred hereunder, no inference to the
contrary shall be drawn from absence of such, or similar, language in any
other provision hereof regarding expenses.
Section 2.2 SERVICER PRACTICES
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2.2.1 PRUDENT SERVICING PRACTICES. Where not inconsistent with the
provisions of this Agreement, the Servicer shall at all times perform its
obligations hereunder in accordance with Prudent Servicing Practices, which
shall not be less exacting than the Servicer employs and exercises in
servicing and administering mortgage loans for its own account, or for the
account of FNMA or FHLMC, including exploring alternatives to foreclosure
to mitigate Realized Losses.
2.2.2 NON-DISCRIMINATION PRACTICES. The Servicer shall at all times
perform its obligations under this Agreement so as to (a) treat Borrowers
on the basis of their individual merits and (b) not discriminate against
Borrowers on the basis of their race, creed or national origin.
Section 2.3 GENERAL PROVISIONS
2.3.1 SERVICER'S AGREEMENT. The Servicer agrees with the Master
Servicer to service the Mortgage Loans in accordance with the provisions of
this Agreement and, to the extent of any instructions of the Master
Servicer that are given, such instructions and, subject to the provisions
hereof and without any further instruction by the Master Servicer except as
shall be expressly provided for herein, shall have full power and authority
to do all things necessary in connection therewith.
2.3.2 TERM OF AGREEMENT. Except as otherwise provided herein, the
duties, responsibilities and obligations to be performed and carried out by
the Servicer under this Agreement shall commence upon the execution of this
Agreement and shall continue until (a) each Mortgage Loan is (i) liquidated
or (ii) otherwise paid in full, (b) all payments related thereto are
remitted in accordance with this Agreement, and (c) all obligations
hereunder related thereto are discharged.
2.3.3 AMENDED MORTGAGE LOAN SCHEDULE. From time to time as additional
Mortgage Loans are transferred to be serviced hereunder by the Servicer,
Schedule I shall be amended by the Master Servicer to include the new
Mortgage Loans. Due to defects in documentation and for other reasons,
certain Mortgage Loans referred to in the Mortgage Loan Schedule may be
deleted and other Mortgage Loans may be added. The Servicer hereby agrees
to any such addition and/or deletion of any Mortgage Loans and, in the
event any Mortgage Loans are added and/or deleted from the Mortgage Loan
Schedule, the Servicer authorizes the Master Servicer to amend and attach
hereto a corrected Mortgage Loan Schedule, as Schedule I, reflecting only
those Mortgage Loans that are serviced hereunder. The Master Servicer
shall provide the Servicer with the corrected and updated Mortgage Loan
Schedule.
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2.3.4 ASSIGNMENT AND REPLACEMENT. The Servicer acknowledges and agrees
that in the event that the Master Servicer resigns as Master Servicer under
this Agreement, any successor master servicer has the right to assume the
Master Servicer's rights and obligations and to enforce the Servicer's
obligations under this Agreement.
2.3.5 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(a) if to the Master Servicer:
Norwest Bank Minnesota, National Association
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - 3562
Attention: Director of Master Servicing
(b) if to the Servicer:
Norwest Mortgage, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President, Servicing
(c) if to the Custodian:
[CUSTODIAN]
[STREET ADDRESS]
[ADDRESS]
ATTENTION:
(d) if to the Trustee:
[TRUSTEE]
[STREET ADDRESS]
[ADDRESS]
ATTENTION:
Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
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2.3.6 CHANGE OF ACCOUNTANTS. During the term of this Agreement, the
Servicer shall not change, or make any substitution of, its certified
public accountants except upon written notice to the Master Servicer given
30 days prior to such change or substitution.
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ARTICLE 3
REMIC COMPLIANCE
Section 3.1 GENERAL
3.1.1 APPLICABILITY. The provisions of this Article 3 apply to all the
Mortgage Loans or Mortgaged Property unless the Mortgage Loan has not been
transferred (or been identified for a future transfer) to an entity with
respect to which an election to be characterized as a REMIC has been (or is
expected to be) made.
3.1.2 MODIFICATIONS OF MORTGAGE. With the prior written consent of the
Master Servicer, the Servicer may modify the terms of a Mortgage Loan which
is in default or a Mortgage Loan as to which default is reasonably
foreseeable; PROVIDED, however, that (i) such modification may not reduce
the amount of principal owed under the related Mortgage Note or permanently
reduce the Mortgage Interest Rate for such Mortgage Loan and (ii) the
Servicer and the Master Servicer have determined that such modification is
likely to increase the proceeds of such Mortgage Loan over the amount
expected to be collected pursuant to foreclosure. Notwithstanding anything
to the contrary in this Agreement, the Servicer shall not permit any
modification of any material term of a Mortgage Loan (including the
Mortgage Interest Rate, the principal balance, the amortization schedule,
or any other term affecting the amount or timing of payments on the
Mortgage Loan) where such modification is not the result of a default or as
to which default is reasonably foreseeable under the Mortgage Loan unless
the Master Servicer has consented thereto and the Servicer has received an
Opinion of Counsel or a ruling from the Internal Revenue Service (at the
expense of the Servicer or the party making the request of the Servicer to
modify the Mortgage Loan) to the effect that such modification would not be
treated as giving rise to a new debt instrument for federal income tax
purposes or a disposition of the modified Mortgage Loan and that such
modification is permitted under the REMIC Provisions.
3.1.3 INDEMNIFICATION WITH RESPECT TO CERTAIN TAXES AND LOSS OF REMIC
STATUS. In the event that the REMIC fails to qualify as a REMIC, loses its
status as a REMIC, or incurs state or local taxes, or tax as a result of a
prohibited transaction or contribution subject to taxation under the REMIC
Provisions due to the negligent performance by the Servicer of its duties
and obligations set forth herein, the Servicer shall indemnify the Trustee,
the Trust Administrator (if applicable), the Master Servicer and the
holders of the related Certificates against any and all losses, claims,
damages, liabilities or expenses ("REMIC Failure Losses")
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resulting from such negligence; PROVIDED, HOWEVER, that the Servicer shall
not be liable for any such REMIC Failure Losses attributable to the action
or inaction of the Master Servicer or the holders of such Certificates nor
for any such REMIC Failure Losses resulting from misinformation provided by
the Master Servicer on which the Servicer has relied. The foregoing shall
not be deemed to limit or restrict the rights and remedies of the other
holders of the Certificates now or hereafter existing at law or in equity.
Section 3.2 REO QUALIFICATION
3.2.1 FORECLOSURE PROPERTY. Notwithstanding any other provision of
this Agreement, the Servicer, shall not rent, lease, or otherwise earn
income on behalf of the REMIC with respect to any REO which might cause
such REO to fail to qualify as "foreclosure" property within the meaning of
section 860G(a)(8) of the Code (E.G., rent based upon the earnings of the
lessee) or result in the receipt by the REMIC of any "income from non-
permitted assets" within the meaning of section 860F(a)(2) of the Code
(E.G., income attributable to any asset which is not a qualified mortgage,
a cash flow or reserve fund investment, or personal property not incidental
to the REO) or any "net income from foreclosure property" which is subject
to tax under the REMIC Provisions unless the Master Servicer has received
an Opinion of Counsel (at the Servicer's expense) to the effect that, under
the REMIC Provisions and (where appropriate, any relevant proposed
legislation) any income generated for the REMIC by the REO would not result
in the imposition of a tax upon the REMIC. In general, the purpose of this
Section 3.2 and the REMIC Provisions (which this section is intended to
implement) is to ensure that the income earned by the REMIC is passive type
income such as interest on mortgages and passive type rental income on real
property.
3.2.2 FORECLOSURE PROPERTY QUALIFICATION RESTRICTIONS. Without
limiting the generality of the foregoing, the Servicer shall not:
(i) permit the REMIC to enter into, renew or extend any lease
with respect to any REO, if the lease by its terms will give
rise to any income that does not constitute Rents from Real
Property;
(ii) permit any amount to be received or accrued under any lease
other than amounts that will constitute Rents from Real
Property;
(iii) authorize or permit any construction on any REO, other than
the completion of a building or other improvement thereon,
and then only if more than ten percent of the construction
of such building or other improvement was completed before
default on the related Mortgage
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Loan became imminent, all within the meaning of Section
856(e)(4)(B) of the Code; or
(iv) Directly Operate or allow any other Person to Directly
Operate, any REO on any date more than 90 days after its
acquisition date, other than through an "independent
contractor," within the meaning of Section 856(e) of the
Code;
unless, in any such case, the Servicer has requested and received an
Opinion of Counsel (at the Servicer's expense) to the effect that such
action will not cause such REO to fail to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code at any time that it is
held by the REMIC, in which case the Servicer may take such actions as are
specified in such Opinion of Counsel.
3.2.3 REO DISPOSITION. Within 30 days following an REO Disposition,
the Servicer shall provide to the Master Servicer a statement of accounting
for the related REO, including without limitation, (i) the loan number of
the related Mortgage Loan, (ii) the date such Mortgaged Property was
acquired in foreclosure or by deed in lieu of foreclosure, (iii) the date
of REO Disposition, (iv) the gross sales price and related selling and
other expenses, (v) accrued interest calculated from the date of
acquisition to the disposition date and (vi) such other information as the
related trustee may reasonably request.
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Section 3.3 PROHIBITED TRANSACTIONS AND ACTIVITIES
3.3.1 MORTGAGE LOAN DISPOSITION RESTRICTION. The Servicer shall not
permit the sale, disposition or substitution for any of the Mortgage Loans
(except in a disposition pursuant to (i) the foreclosure or default of a
Mortgage Loan, (ii) the bankruptcy or insolvency of the REMIC, (iii) the
termination of the REMIC in a "qualified liquidation" or "clean-up" call as
defined in Section 860F of the Code or (iv) a substitution of a Qualifying
Substitution Mortgage Loan as permitted under the REMIC Provisions), nor
acquire any assets for the REMIC, after the startup day of the REMIC, nor
sell or dispose of any investments in any of the accounts established by
the Servicer for the REMIC for gain, nor accept any contributions to the
REMIC (other than certain cash contributions permitted by Section 860G(c)
of the Code) unless it has received an Opinion of Counsel (at the expense
of the Person requesting the Servicer to take such action) to the effect
that such disposition, acquisition, substitution, or acceptance will not
(a) affect adversely the status of the REMIC as a REMIC or of the
Certificates, other than the Certificates representing the residual
interest in the REMIC, as the regular interests therein within the meaning
of the REMIC Provisions, (b) affect the distribution of interest or
principal on the Certificates, (c) result in the encumbrance of the assets
transferred or assigned to the REMIC (except pursuant to the provisions of
this Agreement) or (d) cause the REMIC to be subject to a tax on
"prohibited transactions" or "prohibited contributions" pursuant to the
REMIC Provisions.
3.3.2 PERSONAL PROPERTY. The Servicer shall not acquire any personal
property relating to any Mortgage Loan unless either:
(a) such personal property is incident to real property (within
the meaning of Section 856(e)(1) of the Code) so acquired by the
Servicer; or
(b) the Servicer shall have requested and received an Opinion of
Counsel, at the expense of the Servicer, to the effect that the
holding of such personal property by the REMIC will not cause the
imposition of a tax on the REMIC under the REMIC Provisions or
cause the REMIC to fail to qualify as a REMIC at any time that
any Certificate is outstanding.
Section 3.4 ELIGIBLE INVESTMENTS
3.4.1 CUSTODIAL ACCOUNT. Funds in any custodial accounts established
by the Servicer and maintained in respect of the REMIC may be invested and,
if invested, shall be invested in Eligible Investments selected by the
Servicer which shall mature not later than the Business Day immediately
preceding the next Remittance Date, and any such Eligible Investment shall
not be sold or disposed of prior to its maturity. All such
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Eligible Investments shall be made in the name of the REMIC or its nominee.
All income and gain realized from any such investment shall be, as long as
the Servicer is servicing the Mortgage Loans held by the REMIC, for the
benefit of the Servicer as additional compensation and shall be subject to
its withdrawal or order from time to time. The amount of any losses
incurred in respect of any such investments shall be deposited in the
relevant account by the Servicer out of its own funds immediately as
realized. The foregoing requirements for deposit in such account are
exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments of interest on funds in such account
and, as long as the Servicer is servicing the Mortgage Loans held by the
REMIC, payments in the nature of prepayment fees, late payment charges,
assumption fees or any similar fees customarily associated with the
servicing mortgage loans paid by any mortgagor need not be deposited by the
Servicer in such account and may be retained by the Servicer as additional
servicing compensation. If the Servicer deposits in such account any
amount not required to be deposited therein, it may at any time withdraw
such amount, any provision herein to the contrary notwithstanding.
3.4.2 ESCROW ACCOUNT. Subject to the terms of the related Mortgage
Notes and Security Instrument, and further subject to applicable law, any
funds in any escrow account shall be invested in Eligible Investments that
mature prior to the date on which payments have to be made out of the
related escrow account and any such Eligible Investment shall not be sold
or disposed of prior to its maturity; provided that, if any loss is
incurred on any such investment, the Servicer shall cover such loss by
making a deposit into the appropriate escrow account out of its own funds
in the amount of such loss. Withdrawals from any escrow account may be
made (to the extent amounts have been escrowed for such purpose and to the
extent permitted by the related Security Interest and Mortgage Note) only
(i) to effect timely payment of Escrow Items in connection with the related
Mortgage Loan, (ii) to reimburse the Master Servicer or Servicer out of
related collections for advances with respect to Escrow Items, (iii) to
refund to any mortgagors any sums determined to be overages, (iv) to pay
interest, if any, owed to mortgagors on such account to the extent required
by law, (v) for application to restoration or repair of the Mortgaged
Property, (vi) to clear and terminate the escrow account on the termination
of this Agreement or (vii) to remove funds placed in such escrow account in
error. The Servicer shall be entitled to all investment income on any
escrow account not required to be paid to mortgagors pursuant to the
preceding sentence.
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ARTICLE 4
SERVICER CONSIDERATIONS
Section 4.1 SERVICER ELIGIBILITY STANDARDS
To service Mortgage Loans under this Agreement the Servicer must satisfy
the eligibility standards set forth in this Section 4.1 initially and at
all times thereafter.
4.1.1 REGULATORY APPROVALS AND LICENSING. The Servicer must be:
(a) FNMA or FHLMC approved and in good standing;
(b) a HUD approved mortgagee in good standing;
(c) in compliance with all applicable capital requirements and
other requirements from time to time specified by any
governmental agency or quasi-governmental authority having
jurisdiction over the Servicer; and
(d) properly licensed to service the Mortgage Loans in all
relevant jurisdictions where such licenses are required.
4.1.2 NET WORTH AND PORTFOLIO REQUIREMENTS.
(a) The Servicer must maintain a Tangible Net Worth of at least
$1,000,000.
(b) The Servicer must maintain an Adjusted Tangible Net Worth of
at least $1,000,000.
(c) The Servicer must maintain a servicing portfolio of at least
$1,000,000,000.
4.1.3 AUDITOR'S OPINION AND OTHER ANNUAL REPORTS. The Servicer must
provide the Master Servicer, as part of the application process (except as
to clause (c)) and annually thereafter within 120 days after the close of
the Servicer's fiscal year, with the following reports and opinions:
(a) financial statements for the most recently closed fiscal
year, together with an unqualified opinion thereon of an
independent certified public
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accountant who is a member of the American Institute of
Certified Public Accountants, unless the Master Servicer, in
its reasonable discretion, decides to waive this requirement
regarding qualification;
(b) a statement from the independent certified public accountant
who prepared the above-referenced financial statements for
the Servicer (i) certifying that, on the basis of an
examination of certain documents and records relating to the
mortgage loans being serviced by the Servicer conducted
substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers, the servicing of
such mortgage loans was conducted in compliance with the
provisions of this Agreement or other similar agreements,
except for (a) such exceptions as such firm believes to be
immaterial and (b) such other exceptions as are set forth in
such statement and (ii) including a management assertion
letter signed by an officer of the Servicer; and
(c) a certificate signed by any Officer of the Servicer involved
in, or responsible for, the administration and servicing of
the Mortgage Loans certifying that the Officer signing such
certificate has supervised a review of the activities of the
Servicer during the preceding fiscal year and of the
Servicer's performance during the most recently closed
fiscal year under this Agreement and that to the best of
such officer's knowledge, based on such review, the Servicer
has fulfilled its duties, responsibilities and obligations
under this Agreement throughout such year, or, if there has
been failure by the Servicer to fulfill any duty,
responsibility or obligation under this Agreement,
specifying the nature and status of each such failure.
4.1.4 SERVICING EXPERIENCE. The Servicer shall satisfactorily
demonstrate to the Master Servicer, in the Master Servicer's reasonable
discretion, the following experience:
(a) that it has at least three (3) years of conventional
mortgage loan servicing experience;
(b) that it has a staff knowledgeable in servicing of Mortgage
Loans and the administration of REO; and
(c) that it has experience maintaining a servicing portfolio in
excess of $1 billion.
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4.1.5 MATERIAL CHANGES. The Servicer shall promptly report to the
Master Servicer any change in its business operations, financial
condition, properties or assets since the date of the latest submitted
financial statements which could have a material adverse effect on the
Servicer's ability to perform its obligations hereunder. Events for which
the Master Servicer must receive notice include, but are not limited to,
the following:
(a) any change in the Servicer's business address and/or
telephone number;
(b) any merger, consolidation, or significant reorganization;
(c) any changes in the Servicer's ownership whether by direct or
indirect means. Indirect means include any change in
ownership of the Servicer's parent;
(d) any change in the Servicer's corporate name;
(e) if the Servicer is a savings and loan association, any
change in the Servicer's charter from federal to state or
vice versa;
(f) any decreases in capital, adverse alteration of debt/equity
ratios, or changes in management ordered or required by a
regulatory authority supervising or licensing the Servicer;
(g) any significant adverse change in the Servicer's financial
position;
(h) entry of any court judgment or regulatory order in which the
Servicer is or may be required to pay a claim or claims
which, in the Master Servicer's reasonable opinion, have a
material adverse effect on the Servicer's financial
condition; and
(i) the Servicer admits to committing, or is found to have
committed, a material, in the Master Servicer's reasonable
opinion, violation of any law, regulation, or order.
Section 4.2 ERRORS AND OMISSIONS INSURANCE
4.2.1 E & O REQUIREMENT. A Servicer must maintain, at all times and at
its own expense, an Errors and Omissions Policy in an amount and with an
insurer acceptable to FNMA or FHLMC.
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4.2.2 E & O SCOPE. The Errors and Omissions Policy must explicitly
insure the Servicer, its successors and assigns, against any losses
resulting from negligence, errors or omissions on the part of officers,
employees or other persons acting on behalf of the Servicer in the
performance of its duties as a Servicer pursuant to this Agreement.
4.2.3 E & O POLICY MAINTENANCE. The Servicer must maintain in effect
the Errors and Omissions Policy at all times and the Errors and Omissions
Policy may not be canceled, permitted to lapse or otherwise terminated
without thirty Business Days' prior written notice by registered mail to
the Master Servicer. Further, the Errors and Omissions Policy must provide
that, or the insurer must state in writing to the Master Servicer that, the
Errors and Omissions Policy shall not be cancelable without the giving of
notice as provided for in the prior sentence.
4.2.4 E & O DEDUCTIBLE. The terms of the Errors and Omissions Policy
must provide for a deductible amount that is acceptable to FNMA or FHLMC.
4.2.5 E & O QUALIFICATIONS. The Errors and Omissions Policy must be
obtained by the Servicer from an insurer which satisfies FNMA or FHLMC
standards in this regard.
4.2.6 NOTICE OF CLAIM. The Servicer must immediately report to the
Master Servicer all claims made against the insurer under the Errors and
Omissions Policy, and shall promptly follow such report with a written
notice to the Master Servicer.
Section 4.3 FIDELITY BOND COVERAGE
4.3.1 FIDELITY BOND REQUIREMENT. A Servicer must maintain, at all
times, at its own expense, a Fidelity Bond in an amount and with an insurer
acceptable to FNMA or FHLMC and having terms that are acceptable to FNMA
or FHLMC.
4.3.2 FIDELITY BOND COVERAGE. The amount of Fidelity Bond coverage
shall be an amount acceptable to FNMA or FHLMC.
4.3.3 FIDELITY BOND SCOPE. The coverage of the Fidelity Bond must
explicitly insure the Servicer, its successors and assigns, against any
losses resulting from dishonest, fraudulent or criminal acts on the part of
Officers, employees or other persons acting on behalf of the Servicer.
4.3.4 FIDELITY BOND MAINTENANCE. The Servicer must maintain in effect
the Fidelity Bond at all times and the Fidelity Bond may not be canceled,
permitted to lapse or
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otherwise terminated without thirty Business Days' prior written notice by
registered mail to the Master Servicer. Further, the Fidelity Bond must
provide that, or the insurer must state in writing to the Master Servicer
that, the Fidelity Bond shall not be cancelable without the giving of
notice as provided for in the prior sentence.
4.3.5 FIDELITY BOND DEDUCTIBLE. The terms of the Fidelity Bond must
provide for a deductible amount that does not exceed FNMA or FHLMC
requirements.
4.3.6 FIDELITY BOND RATING REQUIREMENT. The Fidelity Bond must be
obtained from a company which satisfies FNMA or FHLMC standards in this
regard.
4.3.7 NOTICE OF EVENT. The Servicer must promptly report to the Master
Servicer any and all occurrences against the Fidelity Bond of the Servicer.
Section 4.4 SERVICER'S LIABILITY
4.4.1 LIABILITY EXPOSURE. Any and all losses not covered under the
Fidelity Bond or Errors and Omissions Policy, as a result of (i) the
respective deductible provisions thereof, (ii) the limits of coverage of
the Fidelity Bond or Errors and Omissions Policy or (iii) any claim denied
which should have been covered by the Fidelity Bond or the Errors and
Omissions Policy, as the case may be, according to the terms of this
Agreement had the Fidelity Bond or Errors and Omissions Policy been
properly obtained and maintained and respective claim been properly
submitted for payment, shall be borne by the Servicer, where the Servicer
has acted in a manner in which the Servicer is not relieved from liability
as described in Section 4.4.2 hereof.
4.4.2 SCOPE OF LIABILITY. Neither the Servicer or any subservicer
appointed by it, nor any of their respective partners, directors, officers,
employees or agents, or its delegees pursuant to Section 11.2.1 hereof,
shall be under any liability to the Master Servicer, the Trustee or, if
applicable, the Trust Administrator for any action taken or for refraining
from the taking of any action in good faith pursuant to this Agreement, or
for errors in judgment; PROVIDED, HOWEVER, that this provision shall not
protect the Servicer, any subservicer or any of their respective partners,
directors, officers, employees or agents, or its delegees pursuant to
Section 11.2.1 hereof, against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of his or its duties or by reason of reckless disregard of
his or its obligations and duties hereunder. The Servicer, any subservicer
and any of their respective partners, directors, officers, employees or
agents, or its delegees pursuant to Section 11.2.1 hereof, 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.
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Section 4.5 INDEMNIFICATION
4.5.1 SCOPE OF INDEMNITY. The Servicer hereby agrees to indemnify and
hold harmless (a) the Master Servicer, (b) the Trustee, (c) the Trust
Administrator (if applicable) and (d) the officers, directors, employees,
agents and Affiliates of any of the foregoing (any of the foregoing
hereinafter referred to as the "Indemnified Party"), from and against any
and all claims, losses, damages, liabilities, fines, settlements, awards,
offsets, defenses, counterclaims, actions, penalties, forfeitures, legal
fees, judgments and any other costs, fees and expenses (including, without
limitation, reasonable attorneys' fees and court costs) (any of the
foregoing which satisfy the criteria of this paragraph are collectively
referred to as "Claims"), either directly or indirectly arising out of,
based upon, or relating to (i) a breach by the Servicer, its officers,
directors, employees, or agents, or its delegees pursuant to Section 11.2.1
hereof, of any representation or warranty contained herein, or any failure
to disclose any matter that makes such representation and warranty
misleading or inaccurate, or any inaccuracy in material information
furnished by the Servicer regarding itself, (ii) a breach of any
representation or warranty made by any Indemnified Party in reliance upon
any such representation or warranty, failure to disclose, or inaccuracy in
information furnished by the Servicer regarding itself, (iii) any failure
of the Servicer, its officers, directors, employees, or agents, or its
delegees pursuant to Section 11.2.1 hereof, to perform any of its
obligations under this Agreement in a manner in which the Servicer is not
relieved from liability as described in Section 4.4.2 hereof and (iv) any
acts or omissions of the Servicer, its officers, directors, employees, or
agents, or its delegees pursuant to Section 11.2.1 hereof, in a manner in
which the Servicer is not relieved from liability as described in Section
4.4.2 hereof. Each Indemnified Party shall cooperate with the Servicer in
the defense of such Claims and shall not settle any such Claim without the
prior written consent of the Servicer.
4.5.2 SURVIVAL OF INDEMNITY. This indemnification shall survive
purchase, transfer of any interest in a Mortgage Loan by any indemnified
party, the Liquidation of such Mortgage Loan, termination of the Servicer's
servicing rights with respect to such Mortgage Loan and termination or
expiration of this Agreement between the Servicer and the Master Servicer
and its successors and assigns.
Section 4.6 SERVICER'S COMPENSATION
4.6.1 SERVICING FEE AMOUNT. In consideration of the services rendered
under this Agreement, absent default by the Servicer, the Servicer shall on
each Remittance Date be entitled to a monthly aggregate servicing
compensation (the "Monthly Servicing Compensation") for the preceding month
which shall equal the sum of (a) the Servicing
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Fee payable with respect to each Mortgage Loan serviced during such month
and (b) any interest earnings on each Custodial P&I Account with respect to
such month other than interest earnings thereon which are payable to the
Borrower pursuant to the Security Instrument or applicable law, subject to
any adjustment for Month End Interest as described in Section 7.6.1.
Absent default by the Servicer, the Servicer shall also be entitled to
retain in addition to the Monthly Servicing Compensation any late charges,
prepayment fees, penalty interest, assumption fees, modification fees or
deficiency recovery fees paid by the Borrower or any other customary income
or any payments of interest related to any Prepayment in Full received by
the Servicer prior to the Applicable Unscheduled Receipt Period, which
amounts are not required to be deposited into the Custodial P&I Account.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be
entitled to reimbursement therefor except as specifically provided for
herein.
4.6.2 SERVICING FEE SOURCE. The Servicing Fee for each Mortgage Loan
shall be payable solely from the interest portion of the related Monthly
Payment paid by the Borrower or other payment of interest paid with respect
to the Mortgage Loan, whether from the proceeds of foreclosure or any
judgment, writ of attachment or levy against the Borrower or his assets, or
from funds paid in connection with any prepayment in full or from Insurance
Proceeds or Liquidation Proceeds.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 GENERAL
5.1.1 RELIANCE. The Master Servicer relies upon the representations
and warranties contained in this Article 5 hereof, in the acceptance of the
Servicer. The representations and warranties contained herein shall inure
to the benefit of the Master Servicer, the Trustee and, if applicable, the
Trust Administrator.
5.1.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made herein shall survive termination of this Agreement, and
shall inure to the benefit of the Master Servicer, its respective
successors, Affiliates and assigns and each indemnified party under Section
4.5.1, its respective successors, Affiliates and assigns, in each case,
regardless of any review or investigation made by or on behalf of such
parties with respect to any Mortgage Loan.
5.1.3 BREACH OF REPRESENTATION OR WARRANTY. Upon breach of any
requirement or representation or warranty included in this Agreement
relative to any Mortgage Loan, the Servicer must:
(a) Promptly notify the Master Servicer in writing of the nature
of the breach, the date on which the breach occurred or
began and the Servicer's plans, if any, for curing the
breach;
(b) Effect a cure of the breach within 30 days after its
occurrence or onset and a reasonable extension will be
granted if warranted and necessary to fully cure the breach
but in no event greater than 90 days; and
(c) If no complete cure has been effected within such period in
the Master Servicer's reasonable discretion, purchase any
Mortgage Loan in which the Trustee's interest has been
impaired or which, in the reasonable opinion of the Master
Servicer, has suffered a material impairment of Value;
provided that purchase shall be within five days after
receipt by the Servicer of written notice from the Master
Servicer requesting the Servicer's purchase of the Mortgage
Loan at the Purchase Price.
5.1.4 ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES. The Servicer
agrees that each of the Trustee and, if applicable, Trust Administrator
may, at any time, assign the representations and warranties given by the
Servicer as set forth in this Article 5 which
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it then possesses, in whole or in part, or an undivided interest therein,
to one or more Persons.
Section 5.2 SERVICER REPRESENTATIONS AND WARRANTIES
The Servicer represents and warrants, as of the date of this Agreement and,
except as otherwise provided, throughout the term of this Agreement, that
the statements set forth below in this Section 5.2 are true and accurate.
RELATIVE TO THE SERVICER:
5.2.1 QUALIFICATION OF SERVICER. The Servicer is duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation and is duly qualified to do business and is in good standing
under the laws of each jurisdiction that requires such qualification
wherein it owns or leases any material properties, or in which it conducts
any material business or in which the performance of its duties under this
Agreement would require such qualification, except where the failure to so
qualify would not have a material adverse effect on (a) the Servicer's
performance of its obligations under this Agreement, (b) the value or
marketability of the Mortgage Loans, or (c) the ability to foreclose on the
related Mortgaged Properties.
5.2.2 REQUISITE. The Servicer has the corporate power and authority to
own its properties and conduct any and all business required or
contemplated by this Agreement and to perform the covenants and obligations
to be performed by it under this Agreement. The Servicer holds all
material licenses, certificates and permits from all governmental
authorities necessary for conducting its business as it is presently
conducted.
5.2.3 NO CONFLICTS. The execution and delivery of this Agreement are
within the corporate power of the Servicer and have been duly authorized by
all necessary actions on the part of the Servicer; neither the execution
and delivery of this Agreement by the Servicer, nor the consummation by the
Servicer of the transactions herein contemplated, nor compliance with the
provisions hereof by the Servicer, will (i) conflict with or result in a
breach of, or constitute a default under, any of the provisions of the
articles of incorporation or bylaws of the Servicer or any law,
governmental rule or regulation, or any judgment, decree or order binding
on the Servicer or any of its properties, or any of the provisions of any
indenture, mortgage, deed of trust, contract or other instrument to which
it is a party or by which it is bound or (ii) result in the creation or
imposition of any lien, charge or encumbrance upon any of its properties
pursuant to the terms of any such indenture, mortgage, deed of trust,
contract or other instrument.
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5.2.4 ENFORCEABLE AGREEMENT. This Agreement, when duly executed and
delivered by the Servicer, will constitute a legal, valid and binding
agreement of the Servicer, enforceable in accordance with its terms,
subject, as to enforcement or remedies, to applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally from time to time in effect, and to general principles of
equity.
5.2.5 NO CONSENTS. No consent, approval, order or authorization of
any governmental authority or registration, qualification or declaration
with any such authority is required in order for the Servicer to perform
its obligations under this Agreement.
5.2.6 AGENCY APPROVAL. The Servicer has been approved by FNMA or FHLMC
and will remain approved as an "eligible seller/servicer" of conventional,
residential mortgage loans as provided in FNMA or FHLMC guidelines and in
good standing. The Servicer has not received any notification from FNMA or
FHLMC that the Servicer is not in compliance with the requirements of the
approved seller/servicer status or that such agencies have threatened the
servicer with revocation of its approved seller/servicer status.
5.2.7 FINANCIAL CONDITION. The Servicer is not, and, with passage of
time, does not expect to become, insolvent or bankrupt. The Servicer shall
promptly notify the Master Servicer of any material adverse change of its
financial condition.
5.2.8 SERVICING. The servicing practices used by the Servicer under
this Agreement have been and are in all respects in compliance with all
federal, state and local laws, rules, regulations and requirements in
connection therewith and are in accordance with Prudent Servicing
Practices.
5.2.9 NO IMPAIRMENT. There is no action, suit, proceeding or
investigation pending or, to the best of the Servicer's knowledge after due
inquiry, threatened, against the Servicer which, either in any one instance
or in the aggregate, may result in any material adverse change in 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 which if adversely determined
would affect the validity of this Agreement or of any action taken or to be
taken in connection with the obligations of the Servicer contemplated
herein, or which would be likely to impair materially the ability of the
Servicer to perform under the terms of this Agreement.
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5.2.10 NO INQUIRIES. The Servicer has not been the subject of an audit
by any of the Master Servicer, FHA, HUD, FDIC, FNMA, FHLMC, GNMA or any
Primary Mortgage Insurer, which audit included material allegations of
failure to comply with applicable loan origination, servicing or claims
procedures, or resulted in a request for repurchase of Mortgage Loans or
indemnification in connection with the Mortgage Loans.
RELATIVE TO THE MORTGAGE LOANS:
5.2.11 CUSTODIAL AND ESCROW ACCOUNTS CURRENT. All Custodial P&I
Accounts, Custodial T&I Accounts, Custodial Buydown Accounts and Escrow
Funds are maintained by the Servicer and have been maintained in accordance
with applicable law and the terms of the Mortgage Loans. The Escrow Items
required by the Mortgages which have been paid to the Servicer for the
account of the Borrower are on deposit in the appropriate Custodial
Account. All funds received by the Servicer in connection with the
Mortgage Loans, including, without limitation, foreclosure proceeds,
Insurance Proceeds, condemnation proceeds and principal reductions, have
promptly been deposited in the appropriate Custodial Account, and all such
funds have been applied to reduce the principal balance of the Mortgage
Loans in question, or for reimbursement of repairs to the Mortgaged
Property or as otherwise required by applicable law.
5.2.12 INSURANCE MAINTENANCE. Pursuant to the terms of the related
Security Instrument, all buildings or other improvements upon the related
Mortgaged Property are insured by an insurance policy or policies meeting
the requirements of Articles 15 and 16 hereof. The related Security
Instrument obligates the Borrower thereunder to maintain the hazard
insurance policy at the Borrower's cost and expense and, upon the
Borrower's failure to do so, authorizes the Mortgagee under the related
Security Instrument to obtain and maintain such insurance at the Borrower's
cost and expense and to seek reimbursement therefor from the Borrower. The
hazard insurance policy is the valid and binding obligation of the insurer,
is in full force and effect, and will be in full force and effect and inure
to the benefit of the Trustee. The Servicer and the Borrower have not
engaged in any act or omission that would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the
validity and binding effect of either. The Mortgage Loan Documents permit
the maintenance of an escrow account to pay the premiums for the above
mentioned insurance, and the requirement for such escrows has not been
waived, unless otherwise required by applicable state law.
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ARTICLE 6
CUSTODIAL ACCOUNTING
Section 6.1 IN GENERAL
6.1.1 CUSTODIAL ACCOUNT ESTABLISHMENT. The Servicer must establish
appropriate custodial accounts for the benefit of the Trustee, its
successors and assigns for the deposit of funds collected in connection
with such Mortgage Loans. All custodial accounts and related records must
be maintained in accordance with sound and controlled accounting practices.
The custodial accounts maintained pursuant to this Agreement may be
custodial accounts for one or more other series of mortgage asset-backed
pass-through certificates issued by Norwest Structured Assets, Inc.;
PROVIDED, however, that (a) the trustee for such other series under the
related pooling and servicing agreement(s) is the Trustee and (b) the
master servicer for such other series under the related pooling and
servicing agreement(s) is the Master Servicer.
6.1.2 CUSTODIAL ACCOUNT SEPARATENESS. (a) At least one custodial
account for principal and interest (I.E., a Custodial P&I Account), one
custodial account for taxes and insurance (I.E., a Custodial T&I Account),
one custodial account for Subsidy Funds, if applicable (I.E., a Custodial
Subsidy Account) and one custodial account for Buydown Funds, if applicable
(I.E., a Custodial Buydown Account), shall be established and maintained
for the Mortgage Loans. Except as specified in 6.1.2(b), without the
written consent of the Master Servicer, funds in these accounts may not be
commingled with other funds held by the Servicer. Each Custodial P&I
Account shall be established as an Eligible Account ("Eligible Custodial
P&I Account").
(b) Notwithstanding anything to the contrary elsewhere in this Agreement,
the Servicer may employ the Custodial T&I Account as the Custodial Subsidy
Account and/or the Custodial Buydown Account to the extent that the
Servicer can separately identify any Subsidy Funds or Buydown Funds, as
applicable, deposited therein.
6.1.3 CUSTODIAL ACCOUNT MAINTENANCE. The Servicer must ensure that
each Custodial P&I Account, Custodial T&I Account, Custodial Subsidy
Account and Custodial Buydown Account (if applicable) meets the following
guidelines:
(a) the accounts must be Eligible Accounts;
(b) the name of each Custodial P&I Account, Custodial T&I
Account and Custodial Buydown Account shall include a
reference to the name of the Trustee and the designation of
the series of Mortgage Asset-Backed
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Pass-Through Certificates or, where such accounts are
accounts maintained for multiple series of mortgage asset-
backed pass-through certificates as described in Section
6.1.1, a reference to "[Trustee], as trustee for Norwest
Structured Assets, Inc., Mortgage Asset-Backed Pass-Through
Certificates;"
(c) the Servicer must transfer all funds on hand relating to
such Mortgage Loans, Monthly Payments due on or after the
related Cut-Off Date and any principal prepayments received
after the related Cut-Off Date, into the appropriate
custodial accounts meeting the requirements of Sections
6.1.1 and 6.1.2 hereof;
(d) beginning with any payment due on or after the related Cut-
Off Date, all collections on the Mortgage Loans must be
credited to the appropriate custodial account no later than
the first Business Day following receipt;
(e) (i) the Servicer shall not permit the balance of any
Custodial P&I Account to exceed the Threshold Amount or
include any amounts then required to be remitted to the
Certificate Account pursuant to Section 18.3.1, (ii) in the
event the Servicer collects amounts in excess of the
Threshold Amount prior to the next scheduled transfer of
funds to the respective Certificate Account, the Servicer
must transfer the excess funds directly to the related
Certificate Account by wire before the close of business on
any day on which the amount on deposit in such account
exceeds the Threshold Amount and (iii) in the event that the
Servicer fails to transfer the funds in excess of the
Threshold Amount to the related Certificate Account or to
remit to the Certificate Account the Monthly Remittance on
the Remittance Date pursuant to Section 18.3.1, the Master
Servicer is authorized to debit such Custodial P&I Account
and transfer such amounts to the related Certificate
Account;
(f) (i) the Servicer must file with the Master Servicer the
appropriate ACH Debit Form for each Custodial P&I Account;
(ii) the Master Servicer may monitor the principal balance
of each Custodial P&I Account and may issue an ACH debit for
amounts on deposit in any such account in excess of the
Threshold Amount or otherwise in violation of Section
6.1.3(e); (iii) such amounts will immediately be deposited
into the appropriate Certificate Account; and (iv) the
ability of the Master Servicer to withdraw and remit such
funds to the appropriate Certificate Account does not
relieve the Servicer of its obligations to remit such funds
to the related Certificate Account;
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(g) upon the establishment of a Custodial P&I Account, Custodial
T&I Account or Custodial Buydown Account, the Servicer shall
promptly advise the Master Servicer in writing of, or of any
change in, the name and address of the depository, the
individual employee of the depository who is responsible for
overseeing such account, the account number, the title of
the account and the individuals whose names appear on the
signature card; and
(h) (i) establishment and maintenance of the Custodial P&I
Account, Custodial T&I Account and Custodial Buydown Account
will be an expense of the Servicer; (ii) such custodial
accounts may be interest-bearing accounts provided that such
accounts comply with all local, state and federal laws and
regulations governing interest-bearing accounts and, in the
case of a Custodial T&I Account or Custodial Buydown
Account, governing Borrower escrow accounts; and (iii) the
Servicer must ensure that all interest credited to any
custodial account that is not due the Borrower is removed by
the Servicer within 30 days after receipt of such interest.
6.1.4 ESCROW INVESTMENT. If the Servicer elects or is required by law
to deposit the Borrower's Escrow Funds into an interest-bearing custodial
account, the Servicer shall either (a) deposit such funds into an account
which permits withdrawal on demand so as to pay Escrow Items as they come
due, or (b) invest such funds in an Eligible Account so that adequate funds
mature the Business Day prior to the date payment is due for each Escrow
Item.
6.1.5 CLEARING ACCOUNT. If the Servicer finds it necessary to use a
clearing account, the following guidelines must be followed:
(a) the titles of such accounts must reflect that they are
custodial in nature, and the depository in which the
accounts are maintained must be informed in writing that the
accounts are custodial accounts;
(b) a check drawn on or funds transferred from a Custodial P&I
Account or Custodial T&I Account must be deposited to a
disbursement clearing account before or at the same time as
any checks on the clearing account are issued;
(c) a single clearing account must not be utilized both as a
collection and disbursement clearing account;
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(d) the accounts must be held at depository institutions in
which accounts are insured by the FDIC, through either the
BIF or SAIF;
(e) the Servicer must maintain adequate records and audit trails
to support all debits and credits of each Borrower's payment
records and accounts; and
(f) collections deposited to a depository clearing account must
be credited to the appropriate custodial account no later
than one Business Day following receipt by the Servicer.
6.1.6 CUSTODIAL BUYDOWN ACCOUNT. The Servicer must establish a
separate custodial account to hold Buydown Funds on Mortgage Loans being
serviced for the Trustee, its successors and assigns. These accounts must
be clearly marked to indicate that the Servicer is a custodian for Buydown
Funds being held for the Trustee, its successors and assigns.
6.1.7 CERTIFICATE ACCOUNT. The Master Servicer shall establish a
segregated Certificate Account in accordance with Section 3.01 of the
Pooling and Servicing Agreement.
6.1.8 CUSTODIAL SUBSIDY ACCOUNT. The Servicer must establish a
separate custodial account to hold Subsidy Funds on Mortgage Loans being
serviced for the Trustee, its successors and assigns. These accounts must
be clearly marked to indicate that the Servicer is a custodian for Subsidy
Funds being held for the Trustee, its successors and assigns.
Section 6.2 CUSTODIAL P&I ACCOUNT
6.2.1 MANDATORY DEPOSITS. The following funds must be deposited into
each related Custodial P&I Account within one Business Day after the
Servicer's receipt of such amounts, or in the case of clause (d) hereof, on
the Remittance Date or, in the case of clause (f) hereof, on the Business
Day after the Servicer's receipt of the Borrower's required monthly payment
under the related subsidy agreement:
(a) Principal collections from related Mortgage Loans (including
Prepayments in Full and Curtailments), together with Month
End Interest, if applicable;
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(b) Interest collections from related Mortgage Loans (net of
Servicing Fees or other compensation of the Servicer as set
forth in Section 4.6.1);
(c) Liquidation Proceeds and Insurance Proceeds from related
Mortgage Loans other than proceeds held in an escrow account
and applied to the restoration and repair of the related
Mortgaged Property;
(d) related P&I Advances;
(e) the proceeds of any purchase, or substitution under a
purchase agreement, of a related Mortgage Loan by the
Servicer or a Representing Party, or sale of an REO; and
(f) an amount from the Custodial Subsidy Account that when added
to the Borrower's payment will equal the full monthly amount
due under the related Mortgage Note.
6.2.2 OPTIONAL DEPOSITS. The following funds may, but are not required
to, be deposited into each related Custodial P&I Account:
(a) late charges;
(b) prepayment fees;
(c) penalty interest;
(d) assumption fees; and
(e) unapplied funds if the Borrower that remitted such funds is
not required to maintain Escrow Funds.
The Servicer shall maintain separate accounting for each of the foregoing
types of funds. Provided that the Servicer is not in default of its
obligations hereunder, the Servicer may retain any late charges, prepayment
fees, penalty interest and assumption fees as additional servicing
compensation.
6.2.3 PERMISSIBLE WITHDRAWALS. The Servicer may make withdrawals from
each related Custodial P&I Account solely for the following:
(a) remittances to the related Certificate Account;
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(b) reimbursement to itself for advances which have been
recovered by subsequent collections including late payments,
Liquidation Proceeds or Insurance Proceeds, to the extent
funds on deposit recovered by such subsequent collections
relate to the Mortgage Loans as to which such advances were
made;
(c) interest earnings on deposits to the related Custodial P&I
Account, but only to the extent that such interest has been
credited;
(d) removal of amounts deposited in error;
(e) removal of charges or other such amounts deposited on a
temporary basis in the account;
(f) removal of Servicing Fees to the extent deposited therein;
and
(g) termination of the account.
6.2.4 ACCOUNT BENEFICIARY. Each Custodial P&I Account (other than any
Eligible Custodial P&I Account) must be titled to show the respective
interests of the Servicer as trustee and of the Master Servicer as
beneficiary.
6.2.5 USE OF ACCOUNTS. The Servicer shall not use the Custodial P&I
Account as a collection clearing account.
Section 6.3 CUSTODIAL T&I ACCOUNT
6.3.1 MANDATORY DEPOSITS. The following funds must be deposited into
each respective Custodial T&I Account:
(a) related Borrowers' Escrow Funds;
(b) related T&I Advances;
(c) the remaining balance of Title Insurance loss drafts;
(d) rent receipts to offset any related T&I Advances by the
Servicer;
(e) unapplied funds; and
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(f) Liquidation Proceeds from a related Mortgage Loan that
offset a deficit balance in the related Borrower's Escrow
Funds.
6.3.2 PERMISSIBLE WITHDRAWALS. With respect to each related Borrower,
the Servicer may make withdrawals from each respective Custodial T&I
Account to the extent of the balance of such related Borrower's Escrow
Funds for the following:
(a) timely payment of such related Borrower's taxes and
insurance premiums;
(b) refunds to such related Borrower of excess Escrow Funds
collected from such Borrower;
(c) recovering T&I Advances made with respect to such related
Borrower by the Servicer;
(d) payment of interest, if required, to such related Borrower
on his Escrow Funds;
(e) removal of any deposits made in error; and
(f) termination of the account.
6.3.3 ACCOUNT REQUIREMENTS. Each Custodial T&I Account is to be
designated in the name of the Servicer acting as an agent for the
individual related Borrowers to make such Escrow Item payments in order to
show that the account is custodial in nature. The Servicer is required to
keep records identifying each Borrower's payment deposited into the
account.
6.3.4 ACCOUNT BALANCE. The Servicer must never allow any Custodial T&I
Account to become overdrawn as to any individual related Borrower. If
there are insufficient funds in the account, the Servicer must advance its
own funds to cure the overdraft.
Section 6.4 ELIGIBLE ACCOUNT INVESTMENTS
6.4.1 ELIGIBLE INVESTMENTS PERMITTED. Unless prevented or restricted
by written notice of the Master Servicer pursuant to Section 6.4.5 hereof,
the Servicer may, from time to time, withdraw funds from a Custodial P&I
Account, Custodial Subsidy Account or Custodial Buydown Account, and
immediately invest such funds in Eligible Investments in accordance with
this Agreement. Upon the maturity of such Eligible
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Investments, such funds shall be redeposited into the Eligible Account from
which they were drawn or into the Certificate Account.
6.4.2 ELIGIBLE INVESTMENT RESTRICTIONS. No Eligible Investment shall
be sold or disposed of at a gain prior to maturity unless the Servicer has
obtained the consent of the Master Servicer.
6.4.3 ELIGIBLE INVESTMENT INCOME. All income (other than any gain from
a sale or disposition of the type referred to in Section 6.4.2 hereof)
realized from any such Eligible Investment shall be for the benefit of the
Servicer as additional servicing compensation.
6.4.4 ELIGIBLE INVESTMENT LOSSES. The amount of any losses incurred in
respect of any investments permitted under this Section 6.4 shall be
deposited in the Certificate Account by the Servicer out of its own funds
immediately as realized. The Master Servicer may, in its reasonable
discretion, from time to time, require the Servicer to provide a reasonable
amount of security to cover the risk of such investment losses. To the
extent that the Servicer shall not immediately deposit the amount of such
losses in the Certificate Account, the Master Servicer may immediately act
against such security as well as pursue all other remedies permitted by
law.
6.4.5 ELIGIBLE INVESTMENTS REPORTS. The Servicer shall, at any time
provide such information and reports regarding its Eligible Investments
under this Agreement as the Master Servicer may request.
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ARTICLE 7
MORTGAGE LOAN ACCOUNTING
Section 7.1 IN GENERAL
7.1.1 MORTGAGE LOAN ACCOUNTING PRACTICES. The Servicer shall
administer the application and accounting of payments made on the Mortgage
Loans in accordance with the provisions of this Agreement.
7.1.2 RECORD KEEPING. The Servicer must maintain complete and accurate
records of all transactions affecting any Mortgage Loan. Each Mortgage
Loan must be clearly marked to indicate that it is being serviced for the
Trustee, its successors and assigns.
7.1.3 RECORD REVIEW. The Master Servicer and its designee have the
right to:
(a) conduct reviews and audits of the Servicer's records and
operating procedures during any Business Day; and
(b) examine the Servicer's financial records, the Borrowers'
Escrow Funds records and any and all other relevant
documents and materials, whether held by the Servicer or by
another on behalf of the Servicer, to ensure compliance with
terms and conditions of this Agreement and the Master
Servicer's standards.
Section 7.2 MORTGAGE LOAN RECORDS
7.2.1 ACCOUNT RECORDS. Permanent Mortgage Loan account records must be
maintained by the Servicer for each Mortgage Loan. Each account record
must be identifiable by the Servicer Loan Number.
7.2.2 ACCOUNT RECORD INFORMATION. The Servicer shall maintain the
following information for each Mortgage Loan in a readily accessible form:
(a) the Master Servicer Loan Number;
(b) the current Unpaid Principal Balance;
(c) the date of receipt, amount of payment and distribution of
such payment for each Monthly Payment received with respect
to such Mortgage Loan as to each related Due Date;
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(d) for ARM Loans, the current Mortgage Interest Rate, all
limitations contained in the Mortgage Note with respect to
periodic adjustments in the Mortgage Interest Rate, the
scheduled Interest Adjustment Dates, Payment Adjustment
Dates, the Gross Margin and the Index;
(e) other transactions affecting the amounts due from or payable
to the related Borrower;
(f) the current outstanding balances of principal and interest
deposits, advances, taxes and insurance deposits and
unapplied payments with respect to such Mortgage Loan;
(g) any overdraft of the Borrower's Escrow Funds;
(h) any servicing reports or loan histories; and
(i) any other information customarily maintained by a mortgage
loan servicer of one to four family residential mortgages.
7.2.3 ACCOUNTING PRACTICE. Except as otherwise provided herein, all
Mortgage Loan account records must be maintained according to (a) the
Uniform Single Attestation Program for Mortgage Bankers and (b) where
applicable, sound and generally accepted accounting practices.
7.2.4 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS. At the request of the Master Servicer, the Servicer shall
provide to the Master Servicer, the Office of Thrift Supervision, the FDIC
and the supervisory agents and examiners of the Office of Thrift
Supervision and the examiners of the FDIC, as appropriate, access to the
documentation regarding the Mortgage Loans required by applicable
regulations of the Office of Thrift Supervision or the FDIC, such access
being afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Servicer designated by it. The
Servicer shall permit such representatives to photocopy any such
documentation and shall provide equipment for that purpose at a charge
reasonably approximating the cost of such photocopying to the Servicer.
Section 7.3 ACCOUNTING PROCEDURES
7.3.1 PRINCIPAL AND INTEREST COMPUTATION. All Mortgage Loans must
amortize with interest calculated and paid in arrears. Under this method,
the interest due from a
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Borrower on a Due Date is calculated based on (a) the Unpaid Principal
Balance of the related Mortgage Loan prior to application of the principal
portion of the related current Monthly Payment, (b) thirty days interest at
the related Mortgage Interest Rate and (c) adjusted as herein provided for
the effects of Curtailments, Partial Liquidation Proceeds, Prepayments in
Full and Liquidations. The calculated interest portion is then subtracted
from the related Monthly Payment to obtain the principal portion. The
principal portion is then applied to the Unpaid Principal Balance of the
related Mortgage Loan. The amount to be applied to interest for a multiple
installment must be calculated using the Unpaid Principal Balance of the
related Mortgage Loan remaining after the previous interest calculation and
principal application.
7.3.2 AMORTIZATION REQUIREMENT. The amortization of each Mortgage Loan
must reduce to zero, or as to Balloon Loans, the respective Balloon Amount,
at the end of the Mortgage Loan term through the application of regular
monthly payments. Capitalization of interest is not permitted, except as
provided by the terms of any Mortgage Loan that provides for negative
amortization.
7.3.3 NEGATIVE AMORTIZATION. To the extent any Mortgage Loan provides
for negative amortization, such as a GPM or GPARM Loan, the Servicer must
assure that the Unpaid Principal Balance of such Mortgage Loan never
exceeds the related Maximum Negative Amortization Amount, and that the
related Monthly Payment is recast as provided for in the Mortgage Note such
that the balance fully amortizes within the remaining term of such Mortgage
Loan.
7.3.4 INTEREST CALCULATIONS. Monthly interest calculations for periods
of a full month must be based on a 30-day month and a 360-day year.
Factors used for such calculations should be carried to a minimum of three
decimal places. The dollar amount of any interest payment shall be carried
out to a minimum of three decimal places. Interest calculations for a
period of less than a full month must be based on a 365-day year.
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7.3.5 BUYDOWN LOANS. The Servicer must amortize a Mortgage Loan for
which Buydown Funds are applied at the Mortgage Interest Rate, not at the
buy-down rate, in order to ensure that payments are collected to amortize
properly the Mortgage Loan.
Section 7.4 APPLICATION PROCEDURE
7.4.1 APPLICATION PRIORITY. A payment from a Borrower will normally
consist of interest, principal, deposits for insurance and taxes and late
charges, if applicable. Payments received from Borrowers must be applied
in the order provided for in the related Security Instrument. To the
extent not inconsistent with the related Security Instrument, such payments
shall be applied in the following order:
(a) required monthly interest;
(b) required monthly principal;
(c) deposits for taxes and insurance;
(d) prepayment charges; and
(e) any fees which may be retained by the Servicer, including
late charges, returned check fees, and assumption fees.
7.4.2 REAPPLICATION OF PRIOR PAYMENTS. If the Servicer reapplies prior
prepayments or accumulated Curtailments for payment of subsequent
installments it shall promptly notify the Master Servicer of such
reapplication and shall follow any instructions of the Master Servicer in
respect of such reapplication.
7.4.3 ADVANCE PAYMENTS. Payments made by the Borrower to satisfy
future installments must be accounted for as prepaid installments of
principal and interest. The Servicer should contact the Borrower if there
is a question about the Borrower's intention in making any unscheduled
payment.
Section 7.5 CURTAILMENTS
7.5.1 CURTAILMENT AMOUNT. The Servicer may accept Curtailments at any
time. If a Mortgage Loan is delinquent, funds received must first be
applied to bring the Mortgage Loan current. If there are excess funds
after the application of amounts received from the Borrower to pay the
related Monthly Payment, the excess funds represent a Curtailment and may
be applied as a partial principal prepayment.
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7.5.2 CURTAILMENT APPLICATION. If a Curtailment is received on or
after the Due Date, the Servicer may either (i) retroactively apply the
Curtailment to the Scheduled Principal Balance of the related Mortgage Loan
as of the Due Date, or (ii) to the extent permitted by law and the Mortgage
Loan, apply such Curtailment at the end of the current period. The
interest portion of the next installment due is then calculated based on
the Unpaid Principal Balance of the related Mortgage Loan after application
of the Curtailment.
7.5.3 EFFECT OF CURTAILMENT. A Curtailment may not be used to reduce
the related Monthly Payment or the related Mortgage Interest Rate for any
Mortgage Loan, or to postpone the Due Date of any payment.
7.5.4 CURTAILMENT TRANSMISSION. Each Curtailment must be deposited into
the related Custodial P&I Account within one Business Day after receipt and
must be remitted no later than the regularly scheduled Monthly Remittance
to the related Certificate Account.
Section 7.6 LIQUIDATIONS
7.6.1 MONTH END INTEREST. If a Prepayment in Full of a Mortgage Loan
occurs, such prepayment is received by the Servicer after the Applicable
Unscheduled Receipt Period ending in the month in which such prepayment
occurs, and the Servicer does not receive a full 30 days of interest
(calculated on a 30-day month, 360-day year basis) on the prepaid amount
for the month in which such Prepayment in Full occurs, the Servicer must
pay the Month End Interest on all such Mortgage Loans so prepaid in full on
the Remittance Date in the month following the month of such prepayment.
Any Month End Interest Shortfall for any month shall not be recoverable
from the Servicer or any other source in the future. The payment of Month
End Interest by the Servicer, as provided for above, shall not be an
"advance" and shall not be reimbursable from the proceeds of any Mortgage
Loan.
7.6.2 LIQUIDATION REPORTS. The Servicer will report information with
respect to Liquidations in the monthly reports delivered to the Master
Servicer by the eighteenth calendar day of each succeeding month.
7.6.3 DEPOSIT OF FUNDS. Within one day after the Liquidation of a
Mortgage Loan, the Servicer shall deposit the related Liquidation Proceeds
together with the related Month End Interest into the related Custodial P&I
Account.
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7.6.4 DOCUMENT REQUEST. After any Liquidation, the Servicer must
complete and send a Request for Release of Documents to the Master Servicer
to ensure the release of documents within the period required by applicable
state law.
Section 7.7 REALIZED LOSSES
7.7.1 LIQUIDATION REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss suffered on the related Mortgage Loan on a
Liquidation of such Mortgage Loan, the amount of such Realized Loss is
equal to (a) the sum of:
(i) Unpaid Principal Balance;
(ii) unpaid interest accrued at the related Mortgage Interest
Rate;
(iii) attorneys' fees and other foreclosure and sale expenses;
(iv) unpaid taxes;
(v) unpaid property maintenance expenses;
(vi) unpaid insurance premiums; and
(vii) hazard loss expenses;
less (b) the sum of:
(i) the balance of Escrow Funds, if any;
(ii) any refund of any Hazard Insurance premium;
(iii) rental income receipts;
(iv) Insurance Proceeds;
(v) cash proceeds of any foreclosure sale;
(vi) proceeds from sale of a REO; and
(vii) any amounts received pursuant to bankruptcy or insolvency
proceedings.
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7.7.2 BANKRUPTCY REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss on a Mortgage Loan subject to a Deficient
Valuation, the amount of the Realized Loss is the difference between the
Unpaid Principal Balance of the related Mortgage Loan immediately prior to
the Deficient Valuation and the Unpaid Principal Balance as reduced by the
Deficient Valuation.
7.7.3 REPORTING REQUIREMENT. As to any defaulted Mortgage Loan, the
Servicer must account to, and report in writing to, the Master Servicer as
to any Realized Loss (or gain) upon the Liquidation or Deficient Valuation
in respect of such Mortgage Loan.
7.7.4 SERVICER'S LIABILITY. Except in the case of a purchase by the
Servicer of a Mortgage Loan from the Trustee thereof due to a breach of a
representation or warranty by the Servicer or failure to perform the
servicing procedures as set forth in this Agreement, the Servicer is not
liable for any Realized Loss on any Mortgage Loan.
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ARTICLE 8
ARM LOANS
Section 8.1 ARM LOAN SERVICING
8.1.1 IN GENERAL. It is the Servicer's responsibility to enforce each
ARM Loan (and any other Mortgage Loan) according to its terms and in
conformity with all applicable law. The Servicer's records must, at all
times, reflect the then-current Mortgage Interest Rate and Monthly Payment
for such ARM Loan and the Servicer must timely notify the Borrower of any
changes to the Mortgage Interest Rate and/or the Borrower's Monthly
Payment.
8.1.2 SERVICER'S LIABILITY. If the Servicer fails to make either a
timely or accurate adjustment to the Mortgage Interest Rate or Monthly
Payment for an ARM Loan or to notify the Borrower of such adjustments, and
subsequently receives a short Monthly Payment, the Servicer must pay from
its own funds any shortage until the Servicer has made the necessary
corrections in conformance with applicable law so as to secure the correct
Monthly Payment from the Borrower. In the event that such error results in
the Borrower making a Monthly Payment in excess of the amount which he
should have made if such adjustment were properly calculated, then the
Servicer shall promptly (a) make the required adjustment to the Borrower's
Monthly Payment and Mortgage Interest Rate so that they reflect the amounts
as properly calculated as of the related Payment Adjustment Date, (b)
refund to the Borrower the amount of any such excess received by the
Servicer from the related Payment Adjustment Date and (c) deduct from the
respective Custodial P&I Account or the Certificate Account the amount of
such refund to reimburse the Servicer for making such refund. If the
Servicer's failure to make a scheduled change affects the Trustee's or
Servicer's rights to make future adjustments under the terms of the ARM
Loan, the Servicer shall be required to purchase the ARM Loan. Any amounts
paid by the Servicer pursuant to this Section shall not be an advance and
shall not be reimbursable from the proceeds of any Mortgage Loan.
8.1.3 ADJUSTMENT REPORTS. All Mortgage Interest Rate and Monthly
Payment adjustments must be reported to the Master Servicer in a ARM Loan
change report.
8.1.4 SUBSTITUTE INDEX. If the Index required to be used to determine
the Mortgage Interest Rate for a Mortgage Loan is not available on an
Interest Adjustment Date, the Servicer, will select an index that is based
on comparable information, over which the Servicer has no control and that
is readily verifiable.
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Section 8.2 NOTICE OF PERIODIC ADJUSTMENT
8.2.1 NOTICE REQUIREMENT. The Notice of Periodic Adjustment is the
legal and official announcement to the Borrower of an ARM Loan of a change
in the Mortgage Interest Rate or the Monthly Payment. The Servicer must
send this notice to the Borrower, as stated in the related Mortgage Note
and in accordance with applicable law, and at least 25 days before each
Payment Adjustment Date.
8.2.2 NOTICE CONTENTS. Each Notice of Periodic Adjustment pertaining to
an ARM Loan shall meet the requirements and specifications of the Security
Instrument, the Mortgage Loan, and applicable federal or state laws or
regulations.
Section 8.3 ARM LOAN CONVERSION
8.3.1 SERVICER'S DETERMINATION. In the event a Borrower with a
convertible ARM Loan exercises its option to convert such Mortgage Loan to
a fixed interest rate, the Servicer will determine whether the conditions
and qualifications for conversion have been met and determine the fixed
rate to be applied to such Mortgage Loan pursuant to the terms of the
related Mortgage Note.
8.3.2 CONVERSION NOTIFICATION. Upon any such conversion, the Servicer
shall prepare an ARM Loan conversion notification and send such
notification to the Master Servicer within three Business Days after the
conversion.
8.3.3 PURCHASE BY SERVICER. The Servicer shall purchase such Converted
Mortgage Loan from the applicable Trustee at the Purchase Price by
depositing the Purchase Price into the Custodial P&I Account.
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ARTICLE 9
MORTGAGE LOAN FILES
Section 9.1 OWNER MORTGAGE LOAN FILES
9.1.1 OWNER MORTGAGE LOAN FILE REQUIREMENTS. For each Mortgage Loan,
the Servicer shall ensure that an appropriate Custodian will maintain an
Owner Mortgage Loan File on behalf of the Trustee that contains each of the
following documents:
(a) the original related Mortgage Note pertaining to such
Mortgage Loan endorsed by the respective prior owner of such
Mortgage Loan to the Trustee or, if applicable, to the Trust
Administrator, in the manner described in Section 9.3.1
hereof (which may be endorsed in blank); the Servicer shall
assure that the related Mortgage Note shall include all
prior and intervening endorsements as are necessary to show
a complete chain of endorsements from the respective Loan
Originator to the respective prior owner of such Mortgage
Loan;
(b) either the recorded original related Security Instrument
pertaining to such Mortgage Loan, together with any addenda
and riders, certified by the recording office, or, if the
related Security Instrument is in the process of being
recorded, a photocopy of the related Security Instrument,
certified by an Officer of the respective prior owner of
such Mortgage Loan or by the applicable title insurance
company, closing/settlement/escrow agent or company or
closing attorney to be a true and correct copy of the
related Security Instrument transmitted for recordation;
(c) either a recorded original Assignment of the related
Security Instrument from the respective prior owner of such
Mortgage Loan assigning the related Security Instrument to
the Trustee or, if applicable, to the Trust Administrator,
on behalf of the Trustee, in the manner described in Section
9.3.2 hereof (which may be assigned in blank), certified by
the recording office, or, if such Assignment is in the
process of being recorded, a photocopy of the related
Security Instrument transmitted for recordation certified by
an Officer of the respective prior owner of such Mortgage
Loan to be a true and correct copy of such Assignment
submitted for recordation; if recordation is waived by the
Servicer pursuant to the provisions of Section 11.6.4
hereof, the Custodian will hold such an Assignment in
recordable form (which may be assigned in blank);
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(d) each recorded original intervening Assignment of the
Security Instrument as is necessary to show a complete chain
of title from the respective Loan Originator to the
respective prior owner of such Mortgage Loan or, if any such
original is unavailable because it is in the process of
being recorded, a photocopy of such intervening Assignment
certified by an Officer of the prior owner of such Mortgage
Loan to be a true and correct copy of such intervening
Assignment submitted for recordation;
(e) either an original Title Insurance policy or a Final Title
Condition Report pertaining to such Mortgage Loan or, with
respect to loans secured by properties in jurisdictions
where title policies are not available, the original
attorney's opinion of title; in the event that the policy
has not been issued or is not otherwise available, (i) a
written binding ALTA commitment for such a policy (or a
photocopy thereof) issued by the respective title insurance
company or (ii) a Preliminary Title Report (or a photocopy
thereof) if the Mortgaged Property are in a state designated
by the Master Servicer as a Preliminary Title Report state;
(f) for each Mortgage Loan listed on Schedule I to this
Agreement which is required to have Primary Mortgage
Insurance pursuant to this Agreement or the related Mortgage
Loan Documents, a Primary Mortgage Insurance policy or a
certificate of Primary Mortgage Insurance (or a photocopy
thereof) issued by the respective insurer or its agent
indicating that such a policy is in effect;
(g) for each Mortgage Loan listed on Schedule I to this
Agreement which is required to have Pool Insurance pursuant
to this Agreement or the related Mortgage Loan Documents, a
Pool Insurance certificate (or a photocopy thereof) issued
by the respective insurer or its agent indicating the
eligibility of such Mortgage Loan for such Pool Insurance;
(h) originals of each assumption agreement, modification,
written assurance or substitution agreement pertaining to
such Mortgage Loan, if any, or, if any such document is in
the process of being recorded, a photocopy of such document,
certified by an Officer of the respective prior owner of
such Mortgage Loan or by the applicable title insurance
company, closing/settlement/escrow agent or company or
closing attorney to be a true and correct copy of such
document transmitted for recordation;
(i) for each Mortgage Loan which is secured by a residential
long-term lease, a copy of the lease with evidence of
recording indicated thereon, or, if the lease is in the
process of being recorded, a photocopy of the
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lease, certified by an Officer of the respective prior owner
of such Mortgage Loan or by the applicable title insurance
company, closing/settlement/escrow agent or company or
closing attorney to be a true and correct copy of the lease
transmitted for recordation; and
(j) for each Mortgage Loan secured by Co-op Shares, the
originals of the following documents or instruments:
(i) The stock certificate;
(ii) The stock power executed in blank;
(iii) The executed proprietary lease;
(iv) The executed recognition agreement;
(iv) The executed assignment of recognition agreement;
(v) The executed UCC-1 financing statement with evidence of
recording thereon; and
(vi) Executed UCC-3 financing statements or other
appropriate UCC financing statements required by state
law, evidencing a complete and unbroken line from the
mortgagee to the Trustee with evidence of recording
thereon (or in a form suitable for recordation).
9.1.2 CUSTODIAN. The Custodian shall hold originals of all documents
included in each Owner Mortgage Loan File charged to his custody except
that copies of recorded Security Instruments or Assignments will be held if
the originals are held by the recording office. If the original Security
Instrument, Assignment from the respective prior owner of the related
Mortgage Loan to the Trustee or, if applicable, to the Trust Administrator,
on behalf of the Trustee, or any prior Assignment of the Security
Instrument has not been delivered to the Custodian on the date of the
transfer of ownership of such Mortgage Loan to the Trustee because it is in
the process of being recorded, the Servicer shall, within five Business
Days after its receipt of the original recorded document, deliver it to the
Custodian. The Servicer shall promptly deliver to the Custodian any other
Mortgage Loan Document to be included in an Owner Mortgage Loan File,
charged to the custody of the Custodian, that comes into Servicer's
possession.
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9.1.3 RELEASE OF DOCUMENTS FROM OWNER MORTGAGE LOAN FILE. In the event
any document contained in an Owner Mortgage Loan File is needed by the
Servicer for the proper servicing of a Mortgage Loan, the Servicer must
send to the Trustee or the Custodian, as the case may be, a request for
release of documents. The Master Servicer hereby authorizes the Trustee or
the Custodian, as the case may be, to release such Mortgage Loan Documents
after receipt of such Servicer's request (i) upon payment in full of such
Mortgage Loan, (ii) when necessary for foreclosure or (iii) for such other
cause as the Master Servicer deems appropriate, in its reasonable
discretion. The Servicer shall be responsible for such Mortgage Loan
Documents while they are in its possession and will be deemed to hold such
Mortgage Loan Documents in trust for the benefit of the Trustee. If such
Mortgage Loan has not been paid in full or otherwise liquidated, the
Servicer shall promptly return such Mortgage Loan Documents when they are
no longer required. Notwithstanding the foregoing, unless such Mortgage
Loan has been liquidated or the related Mortgage Loan Documents have been
delivered to an attorney, a public trustee or other public official in
order to foreclose on the related Mortgaged Property, all such Mortgage
Loan Documents released by the Trustee or the respective Custodian, as the
case may be, must be returned within 21 calendar days after their release.
9.1.4 EXECUTION BY TRUSTEE. In the event the Trustee's signature is
required on any document with respect to a Mortgage Loan for any reason,
including payment in full, assumption or foreclosure, the Servicer shall
deliver to the Master Servicer a written notice requesting that the Trustee
execute such documents and certifying as to the reason such documents are
required. Upon receipt of such executed documents, the Servicer shall
record, file or deliver such documents as appropriate for the proper
servicing of such Mortgage Loan.
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9.1.5 REPRESENTING PARTY OFFICERS' CERTIFICATE. If it is necessary for
the respective Representing Party to deliver an Officers' certificate with
respect to the existence of a Title Insurance policy or a Primary Mortgage
Insurance policy for several Mortgage Loans, the Master Servicer may
consent to the delivery of a single Officers' certificate of the respective
Representing Party for a schedule of mortgage loans in lieu of a separate
Officers' certificate for each such Mortgage Loan.
9.1.6 CUSTODIAL FEES. The Servicer is responsible for the related ongoing
fees of each Custodian. Each Custodian shall ▇▇▇▇ the Servicer directly
for its fees. If for any reason at any time the Master Servicer pays
custodial fees, the Servicer will promptly reimburse the Master Servicer
for such payments.
Section 9.2 SERVICER MORTGAGE LOAN FILES
9.2.1 SERVICER MORTGAGE LOAN FILE REQUIREMENTS. The Servicer must
maintain a Servicer Mortgage Loan File for each Mortgage Loan, which may be
distributed among several different files, each of which shall be clearly
marked with the Servicer Loan Number and shall be readily accessible to the
Master Servicer during regular business hours, that includes the following:
(a) copies of each of the documents listed in Section 9.1.1 that
are held by the Custodian;
(b) where such coverage is not provided under a blanket policy
maintained by the Servicer, an original Hazard Insurance
policy, or a copy thereof, or a certificate of insurance
issued by the applicable insurer or its agent indicating
such a policy is in effect for the related Mortgaged
Property;
(c) a Flood Insurance policy or a certificate of insurance
issued by the insurer or its agent indicating that such a
policy is in effect with respect to the related Mortgaged
Property, if Flood Insurance is required pursuant to the
provisions of Section 15.4 or Section 16.6 hereof for such
Mortgaged Property;
(d) originals or copies of all documents submitted to a Primary
Mortgage Insurer for credit and property underwriting
approval with respect to the related Mortgaged Property, if
Primary Mortgage Insurance is required pursuant to the
provisions of Section 15.2 hereof for such Mortgaged
Property;
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(e) the originals of all RESPA and Regulation Z disclosure
statements executed by the Borrower with respect to such
Mortgage Loan;
(f) the related Appraisal Report made at the time such Mortgage
Loan was originated;
(g) the HUD-1 or other settlement statement for the purchase or
refinance, as the case may be, of the Mortgaged Property by
the Borrower and mortgagor under the related Mortgage Note
and Security Instrument with respect to such Mortgage Loan;
(h) evidence of any tax service contract, if any;
(i) copies of documentation, including the appropriate approval
by the Master Servicer, relating to any modifications to the
related original Mortgage Loan Documents;
(j) documentation, including the appropriate approval by the
Master Servicer, relating to any releases of any collateral
supporting such Mortgage Loan;
(k) collection letters or form notices sent to the Borrower with
respect to such Mortgage Loan, but only if the Servicer does
not maintain separate collection files, including all
collection letters or notices, indexed by Borrower;
(l) foreclosure correspondence, bankruptcy correspondence and
legal notifications, if applicable with respect to the
related Mortgaged Property; and
(m) all other related Mortgage Loan Documents which are
customarily maintained in accordance with Prudent Servicing
Practices in a mortgage loan file in order to properly
service a mortgage loan including, without limitation,
documents regarding title claims.
9.2.2 SERVICER MORTGAGE LOAN FILE ACCESS. The Servicer acknowledges
that each Servicer Mortgage Loan File shall be held in trust for the Trustee.
The Servicer further acknowledges that the Master Servicer may, from time-to-
time, request immediate delivery of any or all Mortgage Loan records and
documents to the Master Servicer, the Trustee, the Custodian or another entity
designated by the Master Servicer, and the Servicer shall thereupon immediately
deliver such records and
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documents, at the expense of the Servicer. The Servicer agrees to permit the
Master Servicer, from time to time to conduct audits or inspections of any
Servicer Mortgage Loan Files at one or more of the Servicer's offices during
normal business hours with advance notice. The Servicer must grant the Master
Servicer access to all books, records and files relating to the Servicer's
systems and procedures for servicing Mortgage Loans as to all Servicer Mortgage
Loan Files or to the Servicer's compliance with the terms and conditions of this
Agreement.
9.2.3 ALTERNATE MEDIA. Subject to any applicable law concerning
document retention requirements, the Servicer may maintain any Servicer
Mortgage Loan File, or any portion thereof, on microfilm, microfiche,
optical storage or magnetic media and may retain the microfilm, microfiche,
optical storage or magnetic media in lieu of hard copies of the documents
required to be maintained in such Servicer Mortgage Loan Files. The
following requirements must be met:
(a) the process must accurately reproduce originals onto a
durable medium;
(b) unless the Master Servicer provides otherwise by notice to
the Servicer, the Master Servicer Loan Number must be
clearly marked on the copies or optical storage or magnetic
media;
(c) the copies or optical storage or magnetic media must be
easily transferable to legible hard copies of the material
relating to the Mortgage Loans; and
(d) backup copies of the microfilm, microfiche, optical storage
or magnetic media must be made by the Servicer and retained
off-site to protect against fire and other hazard losses.
If the copies, optical storage or magnetic media become damaged or lost for
any reason, the Servicer must bear the entire cost of restoring each Servicer
Mortgage Loan File and any other related documents which had been transferred to
microfilm, microfiche, optical storage or magnetic media. The Servicer also
must bear all costs of reproducing legible hard copies reasonably requested by
the Master Servicer. The Master Servicer may reasonably request copies of any
Servicer Mortgage Loan File in optical storage or magnetic media which the
Servicer has previously transferred to magnetic media or optical storage, as the
case may be. The Servicer shall furnish to the Master Servicer optical storage
or magnetic media copies of the requested Servicer Mortgage Loan File in such
format as maintained by the Servicer at the Servicer's expense.
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Section 9.3 REQUISITE FORM
9.3.1 FORM OF ENDORSEMENTS. Except where endorsements in blank are
authorized by the Master Servicer, the Servicer shall require that endorsements
of any Mortgage Notes comply with the following format:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Trustee or, if applicable, Trust Administrator], AS
[TRUSTEE][TRUST ADMININSTRATOR] under the pooling and servicing
agreement dated as of [date],
and its successors and assigns,
Norwest Mortgage Inc.
[Signature of Officer]
[Officer's Name and Title]
9.3.2 FORM OF ASSIGNMENT. Except where assignments in blank are
authorized by the Master Servicer, the Servicer shall require that assignments
of any Security Instrument comply with the following format:
[Trustee or, if applicable, Trust Administrator], , AS
[TRUSTEE] [TRUST ADMINISTRATOR] under the pooling and servicing
agreement dated [date],
and its successors and assigns
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ARTICLE 10
ESCROWS
Section 10.1 ESCROW CRITERIA
10.1.1 ESCROW REQUIREMENT. Unless, (a) at the origination of a Mortgage
Loan the Borrower is not required to make Escrow Item payments thereafter,
(b) Escrow Funds collection has been waived pursuant to Section 10.5.1
hereof, or (c) the collection of Escrow Funds is precluded by applicable
law, the Servicer must continue to collect 1/12th of the annual total for
all Escrow Items with each Monthly Payment on such Mortgage Loan, as
determined pursuant to Section 10.3.1 hereof.
10.1.2 MORTGAGE LOANS WITHOUT ESCROW. If the Servicer is not required
to collect Escrow Funds on a Mortgage Loan, the Servicer shall require
proof of payment of all taxes, ground rents, assessments, insurance or
other charges, or use other means commonly used in the mortgage industry to
ascertain that such items are paid on a timely basis.
Section 10.2 PAYMENT OF ESCROW ITEMS
10.2.1 ESCROW PAYMENT OBLIGATION. Where the Servicer is responsible for
the collection of Escrow Funds with respect to a Mortgage Loan, the
Servicer shall promptly pay all bills for any Escrow Items in such a manner
as to avoid late charges or penalties and to take advantage of any
available discount.
10.2.2 ESCROW ITEM PAYMENTS. Where (a) the Servicer has been collecting
Escrow Funds with respect to a Mortgage Loan, or (b) the Borrower has not
been obliged to make Escrow Funds payments or such payments have been
waived and such Borrower has failed to timely pay obligations which
otherwise would be Escrow Items, the Servicer must pay any obligation (i)
which could become a first lien on the related Mortgaged Property, or (ii)
to maintain in force the applicable Insurance Policies. Where Escrow
Funds are maintained by the Servicer, such obligations should be paid from
the Borrower's Escrow Funds, or in accordance with Section 10.2.3 hereof.
10.2.3 ESCROW FUND INSUFFICIENCY. When a Borrower's Escrow Funds are
insufficient to pay taxes, assessments and premiums, when due, subject to
applicable law, the Servicer must attempt to obtain the additional funds
from such Borrower. If sufficient additional funds have not been recovered
by the time the payment is due, the Servicer must advance its own funds to
ensure prompt payment. The Servicer may elect to advance funds prior to
attempting to obtain the additional funds from such
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Borrower; however, to the extent permitted by applicable law, the Servicer
shall thereafter attempt to obtain the advanced funds from the Borrower or
collect such advanced funds as described in Section 10.3.3.
10.2.4 NONPAYMENT NOTICE. The Servicer must notify the Master Servicer
immediately of any Escrow Item that does not conform to either FNMA or
FHLMC standards.
Section 10.3 ESCROW FUND DETERMINATION
10.3.1 ESCROW FUNDS ANALYSIS. Subject to all applicable Federal, State
and local laws, the Servicer must conduct an analysis of each Borrower's
Escrow Funds at least annually to determine the monthly deposits which must
be made by such Borrower. The analysis shall be performed based upon (a)
reasonable projections of the expenses to be paid from the Escrow Funds and
(b) that as such expenses come due, the Escrow Funds balance shall at all
times be sufficient to effect the payment of such expenses, unless a lower
amount is required by applicable law. Each Borrower must receive a
statement of this analysis. The analysis also must determine whether there
is a surplus or deficiency in such Borrower's Escrow Funds.
10.3.2 ESCROW FUND SURPLUS. A surplus in a Borrower's Escrow Funds shall
be refunded to such Borrower or taken into consideration in determining the
amount to be collected for Escrow Funds.
10.3.3 ESCROW FUND DEFICIENCY. Where it is determined that a deficiency
exists in such Borrower's Escrow Funds, such Borrower may be requested to
pay the shortage in full or the deficiency may be taken into consideration
in determining the amount to be collected for Escrow Funds during the next
twelve months.
Section 10.4 RECORDS
10.4.1 ESCROW FUNDS RECORDS. The Servicer shall keep records of Escrow
Funds collected from each Borrower.
10.4.2 ESCROW OBLIGATIONS RECORDS. The Servicer must maintain accurate
records of the imposition of Escrow Item obligations and the payment of
Escrow Items.
Section 10.5 ESCROW WAIVER
10.5.1 WAIVER CONDITIONS. For any Mortgage Loan (other than a GPM or
GPARM Loan which provides for negative amortization in the future) that has
amortized down
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so that its current LTV is 80% or less, the Servicer may waive the
Borrower's future obligation to make Escrow Funds payments provided:
(a) the Unpaid Principal Balance of such Mortgage Note divided
by the value of the Mortgaged Property based on an appraisal
made within 60 days of the date of determination is 80% or
less;
(b) such Mortgage Loan is at least 12 months old; and
(c) such Mortgage Loan has not been more than 30 days delinquent
during the preceding 12 months.
10.5.2 WAIVER RESCISSION. The Servicer shall enforce the Escrow Funds
requirements with respect to any Mortgage Loan if the related Borrower fails to
act responsibly in making the required payments.
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ARTICLE 11
COLLECTION AND SERVICING PRACTICES
Section 11.1 GENERAL SERVICING REQUIREMENTS
11.1.1 SERVICING PRACTICES. The Servicer agrees to service Mortgage
Loans in accordance with the requirements of this Agreement. In general,
where not otherwise expressly required by the provisions of this Agreement,
the Servicer shall service the Mortgage Loans in accordance with Prudent
Servicing Practices and generally in accordance with FNMA guidelines. As
to each Mortgage Loan, the Servicer shall take all such actions as may be
necessary to preserve the lien of the related Security Instrument upon the
related Mortgaged Property.
11.1.2 TAX RETURNS AND OTHER REPORTS. Unless otherwise instructed by
notice from the Master Servicer, the Servicer shall forward to each
Mortgagor such forms and furnish such information within the control of the
Servicer as are required by the Code to be furnished to them and shall
prepare and file annual reports required by the state authorities. By way
of example, the Servicer shall provide the Mortgagors with the reports
required under Code Sections 6050H (E.G., reporting on Form 1098 any
mortgage interest, including points, received and any reimbursements of
qualified mortgage interest) and 6050J (Abandonments and Foreclosure of
Real Property, Form 1099-A).
11.1.3 SERVICER INTERNAL CONTROLS. The Servicer shall maintain at all
times an adequate system of audit and internal controls in accordance with
Prudent Servicing Practices.
11.1.4 POOL INSURANCE COMPLIANCE. Notwithstanding any other provision
of this Agreement, the Servicer shall at all times comply with all
applicable Pool Insurance policy requirements so as to assure the full
benefit of such Pool Insurance policy to the Trustee.
11.1.5 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Notwithstanding any other
provision of this Agreement, the Servicer shall at all times comply with
all applicable Primary Mortgage Insurance policy requirements so as to
assure the full benefit of such Primary Mortgage Insurance policy to the
Trustee.
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Section 11.2 DELEGATION OF DUTIES
11.2.1 PERMISSIBLE DELEGATIONS. Without the written consent of the
Master Servicer authorizing further delegations, the only servicing duties
which the Servicer may elect to delegate, by agency, subcontract or
otherwise, and the only categories of such delegees, are as follows:
(a) professional collection agencies to perform those duties and
functions for the collection of delinquent amounts due on
any Mortgage Loan that are customarily performed by such
agencies in the locality where the related Mortgaged
Property are located;
(b) title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the
condition of title to any Mortgaged Property and services
incidental to the foreclosure or acquisition in lieu of
foreclosure of any Mortgaged Property, or the sale or
disposition of any Mortgaged Property acquired by the
Servicer;
(c) attorneys licensed to practice in the state where the
related Mortgaged Property is located to perform customary
legal services in connection with the foreclosure or
acquisition of such Mortgaged Property or the sale or
disposition of such Mortgaged Property acquired by the
Servicer at or in lieu of foreclosure, or for the collection
of delinquent sums owed on any Mortgage Loan;
(d) professional property inspection companies and appraisers to
conduct routine inspections of, and provide written
inspection reports on, any Mortgaged Property as required by
this Agreement;
(e) title companies, escrow companies and real estate tax
service companies to provide periodic reports as to the
amount of real estate taxes due on any Mortgaged Property
and the due date or dates of each required installment;
(f) credit bureaus or credit reporting companies to provide
credit reports on Borrowers or persons who have applied to
assume any Mortgage Loans;
(g) construction companies, contractors and laborers to provide
labor, materials and supplies necessary to protect, preserve
and repair any Mortgaged Property as required by this
Agreement;
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(h) lock box providers or payment processing administrators to
provide payment processing services;
(i) hazard insurance servicing companies to provide periodic
reports as to the amount of hazard insurance premiums due on
any Mortgaged Property and the Due Date or Due Dates of each
required premium payment; and
(j) such other third party service providers as the Servicer, in
accordance with Prudent Servicing Practices, may deem
appropriate.
11.2.2 DELEGEE'S QUALIFICATIONS. The Servicer shall assure that each
Person retained to provide any of the services set forth in Section 11.2.1
hereof is fully licensed and holds all required Federal, State or local
governmental franchises, certificates and permits necessary to conduct the
business in which he is engaged and that such Person is reputable,
knowledgeable, skilled and experienced and has the necessary personnel,
facilities and equipment required to provide the services for which he is
retained.
11.2.3 RESPONSIBILITY FOR COSTS. Any Person retained in accordance with
Section 11.2.1 hereof shall be retained solely for the Servicer's account
and at the Servicer's sole expense and shall not be deemed to be an agent
or representative of the Trustee, its successors or assigns, or the Master
Servicer or its successors or assigns.
11.2.4 SERVICER'S LIABILITY. The Servicer shall remain liable to the
Master Servicer for the performance of the Servicer's duties and
obligations under this Agreement, notwithstanding the delegation of any
servicing function pursuant to this Section 11.2.
Section 11.3 DUE-ON-SALE CLAUSE ENFORCEMENT
11.3.1 ENFORCEMENT REQUIREMENT. The Servicer is required to enforce the
Due-on-Sale Clause on any Mortgage Loan to the extent permitted by
applicable law upon the transfer of title of the related Mortgaged Property
unless (a) a Mortgage Loan is assumable pursuant to the terms of the
related Mortgage Note Assumption Rider, or (b) enforcement of the Due-on-
Sale Clause will jeopardize the Primary Mortgage Insurance coverage on such
Mortgage Loan.
11.3.2 LITIGATION CONSIDERATIONS. Where, in the Servicer's judgment,
the issue of enforceability is reasonably expected to be litigated, the
Servicer shall obtain the written consent of the Master Servicer before
enforcing any Due-on-Sale Clause.
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11.3.3 APPROVAL REQUIREMENT. In all circumstances of an unapproved
transfer of a Mortgaged Property initiated by the Borrower, the Servicer is
required to promptly notify the Master Servicer and, where applicable, the
respective Primary Mortgage Insurer and/or the respective Pool Insurer, of
such transfer and obtain written approval before initiating enforcement
proceedings.
11.3.4 EXEMPT TRANSACTIONS. (a) The Servicer shall not be required to
enforce the due-on-sale (or transfer) provision of this Agreement for
certain types of property transfers or related transactions. The Servicer
shall process these exempt transactions without the approval or
notification of the Master Servicer. In each case, the Mortgaged Property
shall remain subject to the lien of the related Mortgage Loan, and each
transferee or grantee described below shall take subject to such lien. The
following transactions shall be deemed to be exempt transactions and shall
require the review and approval of the Servicer only prior to transfer:
(i) a transfer of the Mortgaged Property to the surviving party on
the death of a joint tenant or a tenant by the entirety;
(ii) a transfer of the Mortgaged Property to a junior lienholder as
the result of a foreclosure or the acceptance of a deed in lieu
of foreclosure for the subordinate mortgage;
(iii) a transfer of the Mortgaged Property (or, if the Borrower is an
INTER VIVOS revocable trust, a transfer of a beneficial interest
in such trust) to a relative of a deceased Borrower (or, in the
case of an INTER VIVOS revocable trust Borrower, to a relative of
the individual who established the trust), provided that the
transferee will occupy the Mortgaged Property;
(iv) a transfer of the Mortgaged Property (or, if the Borrower is an
INTER VIVOS revocable trust, a transfer of a beneficial interest
in such trust) to the spouse, child(ren), parent(s), brother(s),
or sister(s), grandparent(s), or grandchild(ren) of the Borrower
(or, in the case of an INTER VIVOS revocable trust Borrower, of
the individual who established the trust), provided that the
transferee will occupy the Mortgaged Property;
(v) a transfer of the Mortgaged Property (or, if the Borrower is an
INTER VIVOS revocable trust, a transfer of a beneficial interest
in such trust) to a spouse of the Borrower (or, in the case of an
INTER VIVOS revocable trust Borrower, of the individual who
established the trust) under a divorce decree or legal separation
agreement or from an incidental property
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settlement agreement, provided that the transferee will occupy
the Mortgaged Property;
(vi) a transfer of a Mortgaged Property that is jointly owned by
unrelated co-borrowers from one of the Borrowers to the other,
provided that the Borrower who is gaining full ownership of the
Mortgaged Property shall continue to occupy it and the transfer
occurs after at least 12 months have elapsed since the Mortgage
Loan was closed;
(vii) a transfer of the Mortgaged Property (or, if the Borrower is an
INTER VIVOS revocable trust, a transfer of a beneficial interest
in such trust) into an INTER VIVOS revocable trust (or, if the
Borrower is an INTER VIVOS revocable trust, into a new trust), so
long as the Borrower (or the individual who established the
original INTER VIVOS revocable trust) will be the beneficiary of
the trust and the occupant of the Mortgaged Property;
(viii) the granting of a leasehold interest in the Mortgaged Property
that has a term of three or fewer years and does not provide an
option to purchase the Mortgaged Property, or a renewal option
that would allow the term to extend beyond three years;
(ix) the creation of a subordinate lien upon the Mortgaged Property,
provided that there is no transfer of occupancy rights therein;
or
(x) the creation of a purchase money security interest for household
appliances which are situated in or upon the Mortgaged Property.
(b) If the individual or entity transferring the Mortgaged Property
requests a release of liability, the Servicer must review the credit and
financial capacity of the individual or entity receiving the Mortgaged
Property. The Servicer may approve the release of liability if it believes
the recipient is capable of assuming the mortgage obligations and, where
applicable, with the consent of the respective Primary Mortgage Insurer
and/or the respective Pool Insurer. If the Servicer does not believe that
the recipient is credit worthy or if the consent of the respective Primary
Mortgage Insurer and/or the respective Pool Insurer is required but not
obtained, the Servicer shall deny the request for the release of liability,
although the transfer may still be processed without the release. If the
request is denied based solely on the Primary Mortgage Insurer's or the
respective Pool Insurer's decision, the denial letter should state that
fact.
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(c) The Servicer shall advise (i) each insurance company providing Hazard
Insurance and Flood Insurance, where applicable, (ii) the relevant tax
authorities, where applicable, (iii) the respective Primary Mortgage
Insurer and/or the respective Pool Insurer and (iv) other interested
parties when it processes transactions under this Section 11.3.4. The
Master Servicer does not need to be notified about such a transaction
unless the Servicer agrees to a release of liability under Section
11.3.4(b).
Section 11.4 ASSUMPTIONS
11.4.1 ASSUMPTION REQUIREMENTS. Any Assumption permitted under this
Agreement shall be performed in accordance with Prudent Servicing
Practices. In connection with an Assumption of an assumable Mortgage Loan,
the Servicer shall process such Assumption as provided for in the Mortgage
Note or the Mortgage Note Assumption Rider and shall verify that:
(a) no material term of the Mortgage Note (including, but not
limited to, the Mortgage Interest Rate, the remaining term
to maturity, the Gross Margin, the Index, the Maximum
Lifetime Mortgage Interest Rate, the Minimum Lifetime
Mortgage Interest Rate, and any Periodic Rate Cap or any
Periodic Payment Cap) may be changed in connection with such
Assumption;
(b) that the new Borrower qualifies for credit under the Master
Servicer's criteria and standards for similar loans;
(c) where applicable, the respective Primary Mortgage Insurer,
and/or the respective Pool Insurer has in advance approved
in writing such Assumption of such Mortgage Loan by the new
Borrower and such Mortgage Loan will continue to be insured
by such Primary Mortgage Insurer and/or such Pool Insurer;
(d) the documents relating to such Assumption (i) create a valid
and enforceable promise to pay the Unpaid Principal Balance
of the related Mortgage Loan, together with interest thereon
in accordance with the related Mortgage Note by the new
Borrower and (ii) the related Security Instrument continues
to evidence a valid and perfected first lien on the related
Mortgaged Property; and
(e) such Mortgage Loan will continue to be a valid first
priority security interest upon the related Mortgaged
Property.
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11.4.2 APPROVAL AND RELEASE. In connection with an Assumption of an
assumable Mortgage Loan and in accordance with the provisions of the
related Mortgage Loan Documents, upon such verification, (a) the Servicer
may approve such Assumption and (b) only with the prior written approval
of, where applicable, the Primary Mortgage Insurer and/or the Pool Insurer,
unless such approval is precluded by the terms of the Mortgage Loan
Documents, release the previous Borrower from liability.
11.4.3 NOTIFICATION OF ASSUMPTION. The Servicer shall notify the Master
Servicer of any Assumption by the eighteenth calendar day of the month
following the month in which the Assumption took place using the Assumption
Report and shall provide to the Custodian the original assumption
agreement.
11.4.4 ASSUMPTION FEES. Subject to applicable law or regulation and the
provisions of the related Mortgage Note, the Servicer may charge the
Borrower and retain a reasonable and customary assumption fee. Such fee is
receivable only from the Borrower directly and may not be withdrawn from
any of the custodial accounts maintained hereunder.
11.4.5 DISCLOSURE REQUIREMENT. In connection with an Assumption of an
assumable Mortgage Loan, the Servicer shall make all disclosures required
by applicable law.
Section 11.5 PARTIAL RELEASES AND EASEMENTS
11.5.1 PREREQUISITES. The Servicer must take the following actions
prior to permitting the grant of a partial release of a Mortgaged Property
from the lien of the related Security Instrument, easement, consent to
substantial alterations and any other changes affecting the related
Mortgage Loan or such Mortgaged Property:
(a) where applicable, obtain the respective Primary Mortgage
Insurer's and/or the respective Pool Insurer's prior written
approval;
(b) if the value of the released property is more than five
thousand ($5,000) dollars, obtain an acceptable Appraisal
Report showing the current market value of such Mortgaged
Property before and after the release and showing
individually both the value of the land and of the
improvements thereon;
(c) ensure that any and all cash consideration received at least
equals the current market value of property or rights to be
released regarding such Mortgaged Property;
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(d) ensure that any and all cash consideration received is
applied to the Unpaid Principal Balance of such Mortgage
Loan to the extent of the diminution of the value of such
Mortgaged Property;
(e) cause all legal documents for the transaction to be
reviewed;
(f) ensure that such Mortgaged Property, following such release
or change, adequately secures the Unpaid Principal Balance
of the Mortgage Loan and accrued interest thereon and that
the related Loan-to-Value ratio will not be greater than
80%, after giving effect to clause (d) hereof; and
(g) obtain written notification from the respective Title
Insurer that the related Title Insurance policy remains
fully in effect with respect to such Mortgaged Property, as
modified, following such release or change.
11.5.2 RELEASE OR MODIFICATION OF LIEN. With the consent, where
applicable, of the respective Primary Mortgage Insurer, and/or the
respective Pool Insurer, the Servicer may approve applications for partial
release of a Mortgaged Property from the lien of the related Security
Instrument, easements, consent to substantial alterations and any other
changes affecting the related Mortgage Loan or such Mortgaged Property if
the perquisites in Section 11.5.1 have been satisfied. The Servicer shall
promptly notify the Master Servicer of any approval under Section 11.5.1.
and this Section 11.5.2 affecting the lien upon a Mortgaged Property.
11.5.3 MASTER SERVICER'S APPROVAL. If the Servicer is not able to meet
the prerequisites specified in Section 11.5.1 or if the amount of
consideration received is less than the reduction in the value of the
Mortgaged Property due to the partial release or other changes, the
Servicer must obtain the approval of the Master Servicer prior to
permitting an application described in Section 11.5.2. The Servicer shall
furnish such information as the Master Servicer shall request in connection
with an application under this Section 11.5.3.
Section 11.6 RECORDATION OF ASSIGNMENTS
11.6.1 RECORDATION REQUIREMENT. Regarding the initial acquisition of
the Mortgage Loans pursuant to the Sales Agreement, the Servicer must, at
its own expense, record the Assignment of each Security Instrument to the
Trustee or, if applicable, to the Trust Administrator on behalf of the
Trustee, as well as any previously unrecorded intervening Assignments. If
any such Security Instrument or Assignment is not recorded within the later
to occur of (i) the date 120 days after the acquisition of the a Mortgage
Loan by the Trustee or, if applicable, the Trust Administrator on behalf of
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the Trustee, if the Servicer has been servicing such Mortgage Loan from the
Trustee's or, if applicable, the Trust Administrator's date of acquisition
or (ii) the date 120 days after the date the Servicer began servicing such
Mortgage Loan, the Master Servicer shall have the right to so effect such
recordation at the Servicer's expense.
11.6.2 EXTENSION OF RECORDING PERIOD. The time to record an Assignment
of a Security Instrument may be extended from the end of permissible
recordation period set forth in Section 11.6.1 if the Servicer provides an
Officer's certificate acceptable to the Master Servicer certifying that the
Servicer has used its best efforts to complete the recordation process for
the Security Instrument and/or Assignment, as applicable, and that the
factors preventing completion of the recordation process are beyond the
Servicer's control.
11.6.3 DELIVERY REQUIREMENT. Promptly following the recordation of any
Security Instrument or an Assignment, the Servicer shall deliver to the
Custodian, unless otherwise directed in writing by the Master Servicer,
such Security Instrument or Assignment bearing evidence of recordation or,
if the original Security Instrument or Assignment is retained by the
recording office, a certified copy of the original recorded Security
Instrument or Assignment.
11.6.4 WAIVER OF RECORDATION. The Master Servicer shall generally
require the Servicer to record an Assignment of the Security Instrument for
each Mortgage Loan to the Trustee or, if applicable, to the Trust
Administrator on behalf of the Trustee. However, the recordation
requirement with respect to an Assignment may be waived for a Mortgage Loan
if (a) the related Mortgaged Property is in a state in which recordation of
such an Assignment is not required to protect the Trustee's right, title
and interest in and to the related Mortgage Loan and (b) the Seller or the
Servicer has delivered to the Master Servicer an Opinion of Counsel,
acceptable to the Master Servicer, to that effect.
Section 11.7 GENERAL SERVICING CONSIDERATIONS
11.7.1 ABANDONMENT. If the Servicer discovers that any Mortgaged
Property is not occupied, the Servicer must immediately attempt to contact
the Borrower in order to determine the reason for the vacancy. If the
Servicer determines that such Mortgaged Property has been abandoned, the
Servicer, at its own expense, must take all necessary actions to protect
such Mortgaged Property from waste, damage and vandalism. Such expenses
shall be recoverable by the Servicer solely from the Liquidation Proceeds
of the related Mortgage Loan, if any, or directly from the Borrower.
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11.7.2 BUYDOWN FUNDS. The Servicer must distribute any Buydown Funds in
each Custodial Buydown Account in accordance with the terms of the
applicable Buydown Agreement.
11.7.3 NOTIFICATION MATTERS. Based upon information obtained pursuant
to its obligations under Section 12.2.6, the Servicer shall (i) maintain
accurate records of and (ii) except in the case of paragraph (f) hereof
involving a monetary default of the Borrower addressed by Article 12
hereof, immediately notify the Master Servicer upon discovering any of the
following:
(a) deterioration of, waste of, or lack of repair to, any
Mortgaged Property, which materially and adversely affects
the Value of such Mortgaged Property and the Borrower
refuses or is not financially able to make the necessary
repairs;
(b) sale or transfer of any Mortgaged Property in a manner not
approved by the Servicer pursuant to the provisions of this
Agreement;
(c) material litigation involving any Mortgaged Property;
(d) abandonment of any Mortgaged Property;
(e) a material default, determined in accordance with Prudent
Servicing Practices, under the terms of any Security
Instrument, Mortgage Note, Condominium Project or PUD
constituent document or similar obligations of a Borrower;
or
(f) any other situation that may materially and adversely affect
the value of any Mortgage Loan.
11.7.4 EMINENT DOMAIN. The Servicer must submit appropriate
recommendations and documentation to the Master Servicer and, where
applicable the respective Primary Mortgage Insurer and/or the respective
Pool Insurer, of any taking by eminent domain if:
(a) the Mortgaged Property will be taken in whole and the consideration to
be paid to the Borrower will be insufficient to satisfy the Unpaid
Principal Balance (plus any unreimbursed Advances) of the related
Mortgage Loan, or
(b) the Mortgaged Property will be taken in part and (i) the ratio of the
(A) Unpaid Principal Balance (plus any unreimbursed Advances) of the
Mortgage Loan to
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(B) the Current Value of the remaining Mortgaged Property is higher
than (ii) the LTV ratio of the Mortgage Loan immediately before the
taking, even after applying any consideration to the Unpaid Principal
Balance of the Mortgage Loan.
The Servicer must take all steps necessary to prevent loss of any Primary
Mortgage Insurance or Pool Insurance benefits due to any taking by eminent
domain.
11.7.5 LATE CHARGES. Late charges may not be assessed unless a Borrower
failed to make payments in accordance with the Mortgage Note.
Section 11.8 BORROWER BANKRUPTCY
11.8.1 SERVICER'S DUTY. The Servicer shall be responsible for
representing the interests of the Trustee in any bankruptcy proceedings
involving a Borrower.
11.8.2 RESPONSIBILITY FOR COSTS. The costs of protecting the interests
of the Trustee shall be advanced by the Servicer and are not (a) chargeable
to the related Borrower's Escrow Funds or (b) reimbursable from the Master
Servicer.
11.8.3 CHALLENGE BANKRUPTCY REDUCTIONS. If the bankruptcy judge or
trustee should propose to (a) reduce the Unpaid Principal Balance of a
Mortgage Note, (b) reduce the related Mortgage Interest Rate, (c) extend
the final maturity of such Mortgage Note, or (d) reduce the level of any
monthly payment on such Mortgage Note, the Servicer shall (i) challenge any
such modification on a timely basis, (ii) notify the Master Servicer
immediately and (iii) follow the Master Servicer's instructions regarding
the bankruptcy proceedings, and in the absence of explicit instructions,
exercise reasonable judgment to protect the interests of the Trustee.
11.8.4 BANKRUPTCY ADJUSTMENTS. If the action of any court results in a
Deficient Valuation or Debt Service Reduction, the Servicer shall provide a
calculation of the effects of such modification notifying the Master
Servicer of the new principal balance, Mortgage Interest Rate, new final
maturity, or monthly payment level, as the case may be, of such Mortgage
Loan.
11.8.5 BANKRUPTCY PLAN SURVEILLANCE. With respect to each Mortgage Loan
which is the subject of a Deficient Valuation or a Debt Service Reduction,
the Servicer shall verify that payments are being made in accordance with
the plan approved in the related bankruptcy proceedings.
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ARTICLE 12
DELINQUENCY MANAGEMENT
Section 12.1 IN GENERAL
12.1.1 SERVICING PRACTICES. The provisions set forth in this Article
constitute the minimum guidelines and procedures for servicing Delinquent
Mortgage Loans. The Servicer must use collection procedures which meet or
exceed these guidelines. The Servicer's procedures must be sufficient for
promptly dealing with delinquencies. The Master Servicer retains the right
to require the Servicer to perform additional collection procedures which
the Master Servicer deems, in its reasonable discretion, necessary to
realize the objectives set forth herein or otherwise to protect the
interests of the Trustee.
12.1.2 SERVICER'S CAPABILITIES. The Servicer's collection staff must be
sufficiently skilled in financial counseling and mortgage servicing
techniques to assist a Borrower to bring his Mortgage Loan current and to
protect his equity and credit rating, while at the same time protecting the
interests of the Trustee and of the Master Servicer.
12.1.3 SERVICING OBJECTIVES. The purpose of any collection effort is to
cure a Delinquency in the shortest possible time. The Servicer should
treat each Delinquency individually. Discussions with the Borrower must
cover the cause of such Delinquency and the time frame in which such
Delinquency shall be cured. The Servicer should use notices, letters,
telegrams, telephone calls, face-to-face contact and other responsible
collection techniques consistent with Prudent Servicing Practices. The
Servicer is required to maintain all collection records. The Servicer must
vary its collection techniques to fit individual circumstances, avoiding a
fixed collection pattern which may be ineffective in dealing with
particular Borrowers. The Servicer should recognize the importance of
telephone and face-to-face contact in any collection program. As part of
its collection procedures, the Servicer shall closely monitor all newly
originated Mortgage Loans.
12.1.4. SERVICER'S EXPENSES. Unless otherwise specified, the cost of any
of the servicing procedures detailed in this Agreement shall be borne
solely by the Servicer. The Servicer may not charge such expenses against
the Borrower's Escrow Funds. The foregoing shall not preclude the Servicer
from recovering such expenses from the Borrower to the extent permitted by
applicable law and the related Mortgage Loan Documents.
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Section 12.2 DELINQUENCY SERVICING PROCEDURES
12.2.1 LATE NOTICE. A late notice shall be mailed by the Servicer to
the Borrower by the 18th day of such Delinquency.
12.2.2 TELEPHONIC INQUIRY. The Servicer shall use best efforts to make
telephone contact with the Borrower by the 22nd day of such Delinquency.
12.2.3 NOTICE OF DEFAULT. Notification of default of such Mortgage Loan
shall be mailed by the Servicer to the Borrower by the 35th day of such
Delinquency.
12.2.4 BORROWER INTERVIEW. The Servicer shall comply with applicable
FNMA and FHLMC requirements with regard to Borrower interviews.
12.2.5 CONTINUING CONTACTS. If satisfactory arrangements have not been
made to cure such Delinquency by the 90th day, the Servicer must continue
to contact the Borrower until either the related Mortgage Loan has been
brought current or the Servicer has made a recommendation in writing to the
Master Servicer for foreclosure of such Mortgaged Property or other action.
12.2.6 PROPERTY INSPECTION. The Servicer is required to inspect each
Mortgaged Property no later than the 60th day of the Delinquency if no
satisfactory arrangements have been made to cure such Delinquency of the
related Mortgage Loan. The inspection should determine the physical
condition and the occupancy status of such Mortgaged Property. The
Servicer is required to inspect such Mortgaged Property monthly after the
60th day of such Delinquency until such Delinquency is cured or the related
Mortgage Loan is Liquidated. The results of any inspection should be used
in determining whether a recommendation for foreclosure or for the transfer
of deed-in-lieu of foreclosure is necessary. The Servicer must prepare a
Property Inspection Report following each inspection. All Property
Inspection Reports must be retained by the Servicer and copies thereof must
be forwarded to the Master Servicer promptly upon request. All expenses
related to the foregoing shall be borne by the Servicer and such expenses
shall not be recoverable by the Servicer from the Master Servicer or the
Principal or from Liquidation Proceeds, Insurance Proceeds, payments on the
related Mortgage Loan or any other source relating to the related Mortgage
Loan or the related Mortgaged Property. The foregoing shall not preclude
the Servicer from recovering such expenses from the Borrower to the extent
permitted by applicable law and the related Mortgage Loan Documents.
Section 12.3 RELIEF OF BORROWERS
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12.3.1 SERVICER'S ROLE. The Servicer shall be readily available to
Borrowers to offer skilled financial counsel and advice and shall make
personal contact with delinquent Borrowers as often as possible to achieve
a solution that will bring the Mortgage Loan current as soon as possible.
The Servicer shall be fully familiar with the form of relief to Borrowers
provided for herein and shall employ such relief.
12.3.2 SERVICER'S DISCRETION. The Servicer shall have reasonable
discretion to extend appropriate relief to Borrowers who encounter hardship
and who are cooperative and demonstrate proper regard for their
obligations. However, no such relief shall be granted to any Borrower
under a Mortgage Loan unless the Servicer reasonably believes that there is
a reasonable expectation that such Borrower shall bring his Mortgage Loan
current within 180 days following the onset of Delinquency. Further,
without the consent of the Master Servicer, no such relief shall be granted
other than with respect to a Mortgage Loan that has at least a 31-day
Delinquency.
12.3.3 RELIEF REQUIREMENT. Prior to granting relief with respect to a
delinquent Mortgage Loan as herein provided, the Servicer shall ascertain
that (i) the reasons for the default and (ii) the attitude and
circumstances of such Borrower justify the relief to be granted.
12.3.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. Where applicable, the
Servicer shall satisfy all requirements under the applicable Primary
Mortgage Insurance policy regarding the relief granted with respect to a
delinquent Mortgage Loan.
12.3.5 RESPONSIBILITY FOR COSTS. The Servicer is responsible for
collection from such Borrower of any recording or similar costs or expenses
incidental to the granting of relief with respect to a delinquent Mortgage
Loan.
12.3.6 FORBEARANCE PLAN. (a) Where relief is appropriate, the Servicer
shall arrange with a Borrower a "Forbearance Plan" giving such Borrower a
definite period in which to reinstate his Mortgage Loan by immediately
commencing payments in excess of the regular Monthly Payments. Without the
prior written consent of the Master Servicer, special forbearance relief
agreements reducing or suspending the regular Monthly Payment of the
related Mortgage Loan for a specified period of time are not permitted. To
the extent that (i) the priority of the lien represented by such Mortgage
Loan remains in effect and is not adversely affected, (ii) where
applicable, the related Primary Mortgage Insurance policy remains in full
force and effect and (iii) where applicable, the related Pool Insurance
policy remains in full force and effect, the Servicer, in its discretion,
may enter into a Forbearance Plan that provides that the total amount owed
during such Delinquency, including costs and expenses, will be repaid
within the shortest period practicable, commencing immediately. With
respect to such
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Mortgage Loan, the Forbearance Plan shall provide that such Delinquency
will be cured within 180 days after the Due Date of the earliest unpaid
installment, unless the Master Servicer and, where applicable, the
respective Pool Insurer and/or the respective Primary Mortgage Insurer,
consent to a longer period of time. The Forbearance Plan for such Mortgage
Loan shall be set forth in writing and executed by the Borrower and by the
Servicer in the form of a letter agreement if the earliest unpaid
installment is more than 60 days past due.
(b) With the consent of the Master Servicer, the Servicer may modify the
payment terms of Mortgage Loans that are in default, or as to which default
is reasonably foreseeable; provided that no such modification shall reduce
the Unpaid Principal Balance of such Mortgage Loan or permanently reduce
the Mortgage Interest Rate of such Mortgage Loan; and provided further that
prior to entering into any such modification the Servicer and the Master
Servicer shall determine that such modification is likely to increase the
proceeds of such Mortgage Loan over the amount expected to be collected
pursuant to a foreclosure or other similar procedure.
12.3.7 ACCOMMODATION LIMITATIONS. No modification, recast, extension,
or capitalization of delinquent payments of a Mortgage Loan other than as
provided in Section 12.3.6 hereof shall be permitted with respect to a
Mortgage Loan.
12.3.8 POOL INSURANCE CONSIDERATIONS. Where applicable, the Servicer
shall satisfy all requirements under the applicable Pool Insurance policy
regarding the relief granted with respect to a delinquent Mortgage Loan,
including, without limitation, securing the prior written consent of the
respective Pool Insurer regarding (a) any change in any term of such
Mortgage Loan, (b) the release of the related Borrower from any liability
related to such Mortgage Loan, or (c) the release of any portion of, or
interest in, the Mortgaged Property from the lien of the related Security
Instrument.
Section 12.4 SPECIAL DELINQUENCY SERVICING CONSIDERATIONS
12.4.1 ADVANCE RESPONSIBILITY DURING DELINQUENCY. In the event of a
Delinquency with respect to a Mortgage Loan, the Servicer agrees to advance
from its own funds the full amount of Monthly Payments (which may be net of
the related Servicing Fee) for such Mortgage Loan. These advances shall
provide the Trustee with a regular flow of funds on such delinquent
Mortgage Loan. The advance obligation stated above is in addition to any
other advance obligations which the Servicer has pursuant to the provisions
of this Agreement. The Servicer must still advance funds in accordance
with the provisions of this Agreement even if a forbearance has been
granted.
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12.4.2 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Where applicable, the
Servicer shall be familiar with and shall satisfy all requirements of the
applicable Primary Mortgage Insurance policy with respect to a delinquent
Borrower. The Servicer shall have adequate controls to assure timely
filing of all notices to the appropriate Primary Mortgage Insurer. The
Servicer shall prepare and file all appropriate claims with respect to the
applicable Primary Mortgage Insurance policy, and the Servicer shall
prepare and deliver to the Master Servicer copies of all claims forms and
other papers received from or presented to any Primary Mortgage Insurer in
connection with any claims presented under any such policy, unless the
Servicer is otherwise instructed by the Master Servicer.
12.4.3 POOL INSURANCE COMPLIANCE. Where applicable, the Servicer shall
be familiar with and shall satisfy all requirements of the applicable Pool
Insurance policy with respect to a delinquent Borrower. The Servicer shall
have adequate controls to assure timely filing of all notices to the
appropriate Pool Insurer. Copies of all such notices shall be sent to the
Master Servicer upon request. The Servicer shall prepare and file all
appropriate claims with respect to the applicable Pool Insurance policy,
and the Servicer shall prepare and deliver to the Master Servicer copies of
all claims forms and other papers received from or presented to any Pool
Insurer in connection with any claims presented under any such policy,
unless the Servicer is otherwise instructed by the Master Servicer.
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ARTICLE 13
FORECLOSURE ADMINISTRATION
Section 13.1 FORECLOSURE PREREQUISITES
13.1.1 FORECLOSURE/ALTERNATIVE TO FORECLOSURE INITIATION. (a) When a
Borrower reaches the 90th day of Delinquency and the Servicer has exhausted
all reasonable means of curing the Delinquency, the Servicer shall either
begin the foreclosure process or suggest an alternative to foreclosure in
accordance with Prudent Servicing Practices. In conjunction with the
Servicer's decision to begin the foreclosure action or seek an alternative
to foreclosure, the Servicer shall provide written notice to the Master
Servicer and, where applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer no later than ten days after the
initiation of foreclosure proceedings or the alternative to foreclosure.
Notwithstanding anything to the contrary in this Section 13.1.1, the Master
Servicer may direct the Servicer to stop the foreclosure action or to
modify any alternative to foreclosure. The Servicer shall prepare all
necessary documentation to initiate the foreclosure proceedings.
(b) Notwithstanding anything to the contrary in this Section 13.1, if the
Master Servicer has entered into a special servicing agreement pursuant to
Section 3.08 of the Pooling and Servicing Agreement, the Master Servicer
may direct the Servicer to commence foreclosure proceedings as contemplated
by such special servicing agreement.
13.1.2 FORECLOSURE EXPENSES. All fees and expenses shall be consistent
with FNMA standards and, where applicable, shall not exceed those permitted
under the respective Pool Insurance policy and/or the respective Primary
Mortgage Insurance policy. Fees in excess of the amount permitted by FNMA
guidelines or extraordinary legal services must be approved in writing in
advance by the Master Servicer, and, where applicable, by the respective
Primary Mortgage Insurer or the respective Pool Insurer, as the case may
be, if required by the applicable policy. All attorneys' fees, and other
costs in excess of FNMA's standards in respect of any foreclosure or
acquisition in lieu of foreclosure shall be identified in advance and a
detailed estimate of the amounts thereof shall be set forth in the
Servicer's written recommendation. The billing by a foreclosure attorney
must demonstrate the appropriateness of any extraordinary fees by the
services required. In cases of full or partial reinstatement of the
related Mortgage Loan, the fees shall be reasonable and in proportion to
the authorized fee for services rendered for a completed foreclosure.
Unless otherwise expressly agreed in writing, neither the Master Servicer,
any of its Affiliates, their respective officers, directors,
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employees, agents, successors or assigns, the Trustee nor, if applicable,
the Trust Administrator shall be liable for any attorneys' fees, trustees'
fees, witness fees, title search fees, court costs or other expenses
incurred by the Servicer in respect of any foreclosure or acquisition in
lieu of foreclosure, except to the extent that such fees, costs and
expenses are fully reimbursable under a Primary Mortgage Insurance policy
and in fact are reimbursed.
13.1.3 HAZARDOUS WASTES. In the event that the Mortgaged Property,
related to a Mortgage Loan which is being considered for liquidation by
foreclosure or the transfer of a deed-in-lieu of foreclosure, contains, and
the Servicer has reason to believe that it contains, hazardous or regulated
substances which may impose liability, for damages, remediation or
otherwise, upon the owner of such Mortgaged Property pursuant to Federal,
State or local law, the Servicer shall not, except with the express prior
written approval of the Master Servicer, which approval makes specific
reference to the presence of such hazardous or regulated substances,
undertake or continue the process of foreclosure with respect to such
Mortgaged Property.
Section 13.2 DEED-IN-LIEU OF FORECLOSURE
13.2.1 CONDITIONS. If the Master Servicer and the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, if applicable, have
approved the liquidation of a Mortgage Loan by accepting a deed-in-lieu of
foreclosure of the related Mortgaged Property, the Servicer may accept such
deed without any further action or approval by the Master Servicer or,
where applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, provided that:
(a) the Servicer determines that the pursuit of a deficiency
judgment is not practical or warranted;
(b) the Mortgaged Property has been listed for sale at a market
value for three months or more without a reasonable sales
offer;
(c) there reasonably appear to be legal impediments to pursuing
foreclosure;
(d) the acceptance of the deed-in-lieu of foreclosure will
enable the Trustee to acquire the Mortgaged Property earlier
than under a foreclosure action;
(e) the Borrower acknowledges in writing that the deed is being
accepted as an accommodation to him or her;
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(f) where applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer has agreed to the
acceptance of a deed-in-lieu;
(g) the Borrower has not received cash consideration to deed the
Mortgaged Property over to the Trustee, unless the Master
Servicer otherwise approves;
(h) the Borrower can convey acceptable marketable title,
evidenced by a Title Insurance policy;
(i) the Mortgaged Property is vacant (unless, where applicable,
the respective Primary Mortgage Insurer and/or the
respective Pool Insurer has agreed to accept an occupied
property);
(j) the Mortgaged Property is not subject to liens (held by
others), judgments, or attachments; and
(k) the Borrower agrees to assign and transfer to the benefit of
the Trustee, where applicable, any rents if the Mortgaged
Property is rented, and the Servicer agrees to collect any
rental income.
13.2.2 SUBSEQUENT ACTIONS. Upon acquisition by the Trustee, the
Servicer shall promptly notify the Master Servicer and, if applicable, the
respective Primary Mortgage Insurer and/or the respective Pool Insurer,
indicating the details of the transaction and reasons for the conveyance
and providing such other information as is required under a Primary
Inspection Report to the Master Servicer and, if applicable, to the Primary
Mortgage Insurer and/or the Pool Insurer. Title shall be conveyed directly
from the Borrower to the Trustee or to such other Person designated by the
Master Servicer.
Section 13.3 ACTIONS PRIOR TO FORECLOSURE
13.3.1 NOTICE REQUIREMENTS. The Servicer shall send the Borrower a
letter, not less than 30 days before the commencement of foreclosure
proceedings, setting out (i) the nature of the default, (ii) the steps that
must be taken by the Borrower to cure the default and (iii) the date when
foreclosure proceedings will begin. If the Servicer has reason to believe
that the related Mortgaged Property has been abandoned or if the Borrower
has displayed an obvious disregard for his obligations under such Mortgage
Loan, the foregoing notice shall be forwarded at the earliest possible date
following the Borrower's default.
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13.3.2 INITIATION OF PROCEEDINGS. If foreclosure approval has not been
withheld by the Master Servicer and, where applicable, by the respective
Primary Mortgage Insurer and/or the respective Pool Insurer, with respect
to a Mortgaged Property, including Co-op Shares, the Servicer shall, unless
it arranges for the sale by the Borrower of the Mortgaged Property to a
third party pursuant to Section 13.3.3, initiate or cause to be initiated
such foreclosure actions as are authorized by law and consistent with
practices in the locality where the Mortgaged Property is located,
including, in the case where such Mortgaged Property includes a residential
long-term lease, the succession by the Servicer to the rights of the
Borrower under the lease by foreclosure, assignment in lieu of foreclosure
or other comparable means. If such Mortgaged Property has been abandoned
or vacated by the Borrower and the Borrower has evidenced no intention of
honoring his obligations under the related Mortgage Loan, the foreclosure
process shall be expedited to the fullest extent permitted by law.
13.3.3 SHORT SALE OF DEFAULTED MORTGAGE LOANS IN LIEU OF FORECLOSURE.
With respect to any defaulted Mortgage Loan for which the Servicer would
otherwise be required to initiate foreclosure proceedings, the Servicer may
arrange for the sale of the Mortgaged Property by the Borrower to a third
party if, in the good faith judgment of the Servicer, the net proceeds from
such sale would be equal to or greater than the net proceeds of a bid
conducted in accordance with Section 13.4.2(b).
Section 13.4 FORECLOSURE PROCEDURES
13.4.1 FORECLOSURE EXPENSES. During the period in which the Mortgaged
Property related to a Mortgage Loan is being foreclosed, remaining Escrow
Funds, if any, as well as any rent receipts, shall be used to pay all taxes
and insurance premiums that become due with respect to such Mortgaged
Property to the extent permitted by law. Except where other arrangements
have been made with the applicable Primary Mortgage Insurer, the Servicer
shall, with respect to each Mortgaged Property undergoing foreclosure,
advance payment of attorneys' fees, trustees' fees and other foreclosure
costs from the commencement of foreclosure proceedings pertaining to such
Mortgaged Property.
13.4.2 BIDDING INSTRUCTIONS. (a) The Servicer shall issue bidding
instructions to the attorney or trustee in a foreclosure proceeding. Where
applicable, the Servicer shall incorporate any bidding requirements issued
by the respective Primary Mortgage Insurer and/or the respective Pool
Insurer. Any proceeds received from an insurance loss settlement shall be
included as part of the bid amount. Where a claim or claim settlement
under a Hazard Insurance or Flood Insurance policy is pending, the Servicer
shall contact the Hazard Insurance or Flood Insurance carrier to verify
that the proposed bid will not invalidate the claim, in that, in certain
jurisdictions, a bid for the
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total indebtedness will be considered as satisfaction of the debt and would
thus bar the Hazard Insurance or Flood Insurance claim.
(b) The Servicer's bidding instructions to the attorney or trustee in a
foreclosure proceeding shall be to enter a bid amount which is the lesser
of (i) the total amount of indebtedness, which shall include the Unpaid
Principal Balance, unpaid accrued interest up to, and including, the date
of the sale (calculated using the interest rate in effect for each payment
on the date it became due), any T&I Advances and other servicing Advances
including, without limitation, foreclosure costs and any reimbursable
property inspection fees or (ii) the fair market value of the related
Mortgaged Property established by a current broker's price opinion.
(c) If the Servicer is not able to comply with the bidding instructions
outlined in subsection (b) hereof, the Servicer shall request from the
Master Servicer an initial bid amount and bidding instructions for the
Servicer to follow at the applicable foreclosure sale. In no event shall
the bidding instructions from the Master Servicer supersede or invalidate
the bidding instructions provided by the respective Primary Mortgage
Insurer and/or respective Pool Insurer, where applicable.
13.4.3 BUYDOWN FUNDS USE. Unless the related Buydown Agreement provides
otherwise, the Servicer may not use Buydown Funds relating to a Mortgage
Loan to cure a Delinquency with respect to such Mortgage Loan. Any Buydown
Funds remaining in the associated Custodial Buydown Account of a Mortgage
Loan in foreclosure must be disposed of in accordance with the terms of the
related Buydown Agreement.
13.4.4 SERVICER'S RESPONSIBILITIES. Subject to the provisions of
Article Three hereof, after acquisition of a Mortgaged Property, through
foreclosure or a deed-in-lieu of foreclosure, or after the Servicer shall
have taken possession of the Mortgaged Property, whichever occurs first,
the Servicer shall be responsible for the management of such Mortgaged
Property. The Servicer shall remain responsible until possession has been
assumed by the applicable Primary Mortgage Insurer or the applicable Pool
Insurer or until such Mortgaged Property are otherwise disposed of, as the
case may be. The Servicer shall take such action as is necessary to
protect the Trustee's security or, after acquisition thereof, ownership
interest in such Mortgaged Property. Such action shall include, without
limitation, (i) management of such Mortgaged Property, (ii) maintenance of
such Mortgaged Property and (iii) if such Mortgaged Property are vacant,
protection of such Mortgaged Property against vandals and the elements.
13.4.5 CONVEYANCE DOCUMENTS. Where applicable, any conveyance by the
Servicer to the respective Primary Mortgage Insurer or the respective Pool
Insurer of a
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Mortgaged Property shall be made by the form of deed commonly used in the
particular jurisdiction where such Mortgaged Property is located. The
Servicer shall prepare the necessary documents within two weeks after the
date of sale at foreclosure or confirmation of sale, if applicable, or
within a reasonable time frame. The documents shall be forwarded to the
Master Servicer for approval and execution. After execution by the
Trustee, such documents will be returned to the Servicer for delivery to
the respective Primary Mortgage Insurer or the respective Pool Insurer
which is acquiring such Mortgaged Property.
Section 13.5 MORTGAGE LOAN REINSTATEMENT
13.5.1 BORROWER'S FULL PAYMENT. If a Borrower offers to fully reinstate
his Mortgage Loan during the foreclosure process, the Servicer shall accept
the offer. To achieve full reinstatement of his Mortgage Loan, a Borrower
shall make payment of all (i) payments due to bring such Mortgage Loan
current, (ii) attorneys' fees, (iii) trustees' fees, (iv) any additional
legal costs, (v) all applicable late fees and (vi) any other expenditures
or Advances made by the Servicer during the foreclosure process.
13.5.2 BORROWER'S PARTIAL PAYMENT. Except where otherwise required by
applicable law, the Servicer may not accept an amount in payment from a
Borrower which is less than the amount required for full reinstatement
pursuant to Section 13.5.1 hereof toward reinstatement of a Mortgage Loan
during the foreclosure process without the prior written approval from the
Master Servicer and, where applicable, the respective Primary Mortgage
Insurer and/or the respective Pool Insurer.
13.5.3 OBLIGATIONS UPON REINSTATEMENT. Upon accepting the reinstatement
of a Mortgage Loan, the Servicer shall immediately contact the appropriate
foreclosure attorney or trustee to avoid incurring additional legal costs
or fees. The Servicer must apply the reinstatement Funds upon receipt from
a Borrower in payment of the expenses enumerated in Section 13.5.1 hereof.
Upon receipt of the reinstatement funds from a Borrower the Servicer must
(i) notify the Master Servicer of the reinstatement of the related Mortgage
Loan and (ii) return to the Master Servicer, the related Mortgage Note and
other related Mortgage Loan Documents for reinclusion in the related
Mortgage Loan File.
13.5.4 CERTAIN ASSUMPTIONS PERMITTED. The Servicer is authorized,
notwithstanding the other provisions of this Article 13, to permit the
assumption of a defaulted Mortgage Loan rather than to foreclose or accept
a deed-in-lieu of foreclosure if, in the Servicer's judgment, the default
is unlikely to be cured and the assuming borrower meets the underwriting
guidelines that originally applied to such Mortgage Loan.
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ARTICLE 14
REO ADMINISTRATION
Section 14.1 GENERAL PROVISIONS
14.1.1 REO ACTION PLAN. With regard to each REO which is acquired, the
Servicer shall prepare a plan of action within 30 Business Days after the
date on which the Trustee acquires marketable title to such REO. Each plan
of action shall set forth (i) a recommendation for the most effective
manner to dispose of the REO, based on a current appraisal report, a
broker's price opinion and a market analysis; (ii) the steps to be taken by
the Servicer to secure such REO; and (iii) an estimate of the amount of
time that is required to dispose of such REO. The Servicer shall promptly
submit copies of each plan of action to the Master Servicer and, where
applicable, to the respective Primary Mortgage Insurer, and/or the
respective Pool Insurer. Unless otherwise directed by the Master Servicer,
the Servicer shall implement each plan of action in an expeditious manner.
Further, the Master Servicer may instruct the Servicer to modify any plan
of action as the Master Servicer shall direct. The Servicer shall provide
the Master Servicer with monthly progress reports with regard to each plan
of action detailing the status of the related REO and the progress achieved
in implementing the plan of action.
Section 14.2 REO SERVICING
14.2.1 REO SERVICING REQUIREMENTS. The Servicer shall service each REO
from its acquisition through its disposition and shall ensure that all
funds received with respect to such REO are deposited to the appropriate
Custodial P&I Account for remittance to the Trustee, unless the Master
Servicer has relieved the Servicer of these responsibilities by written
notification.
14.2.2 SERVICER'S RESPONSIBILITIES. In addition to any other
obligations set forth herein, upon acquisition of each REO, the Servicer
shall be responsible for:
(a) managing, maintaining, securing and, where applicable,
renting such REO until it is conveyed or sold;
(b) inspecting such REO at least once every 30 days and promptly
sending the Master Servicer an updated Property Inspection
Report upon request;
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(c) paying all taxes, insurance, maintenance, management and
foreclosure costs relating to such REO;
(d) submitting recommendations for listing and soliciting offers
on such REO;
(e) marketing such REO;
(f) completing the sale of such REO;
(g) depositing sales proceeds relating to such REO into the
appropriate Custodial P&I Account for remittance to the
Trustee;
(h) where applicable, satisfying all of the Primary Mortgage
Insurer's procedural requirements and filing all required
forms and claims;
(i) where applicable, depositing Primary Mortgage Insurance or
Pool Insurance proceeds relating to such REO into the
applicable Custodial P&I Account for remittance to the
Trustee;
(j) processing the conveyance of such REO to the Primary
Mortgage Insurer, where applicable; and
(k) reporting (1) all changes in status of such REO and (2) all
material expenses relating to such REO to the Master
Servicer on a monthly basis.
14.2.3 NOTICE. The Servicer shall notify the Master Servicer in writing
as soon as each REO is acquired.
Section 14.3 REO RECORDS AND REPORTS
14.3.1 RECORDS RETENTION. The Servicer shall retain in its files copies
of all documents, reports and invoices described in this Section.
14.3.2 EVIDENCE OF TITLE. Evidence that title to a REO is held by the
Trustee shall be submitted by the Servicer to the Master Servicer and, if
applicable, to the Primary Mortgage Insurer and/or the Pool Insurer, within
ten Business Days after marketable title to such REO has been acquired.
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14.3.3 REO EXPENSES. At the request of the Master Servicer, Primary
Mortgage Insurer and/or the Pool Insurer, the Servicer shall send a report
listing all expenses in administering each REO. The Servicer shall retain
such invoices in its records and shall, by request, (i) produce any such
invoices for inspection or (ii) at its own expense, provide copies of any
such invoices to the Master Servicer and, if applicable, to the Primary
Mortgage Insurer and/or the Pool Insurer, as directed. The foregoing
expense invoices shall include, without limitation, the following:
(a) insurance premiums;
(b) real estate tax bills;
(c) special assessments;
(d) owners' association dues; and
(e) utility bills.
14.3.4 REO DOCUMENTS. Upon request, the Servicer shall send copies to
the Master Servicer and, where applicable, to the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, of the following
documents relating to each REO:
(a) any forced placed Hazard Insurance policy or Flood Insurance
policy, if applicable;
(b) any maintenance contracts;
(c) any contractor bids relating to the rehabilitation of such
REO pursuant to Section 14.5.3 hereof;
(d) an updated Title Insurance policy which reflects the
occurrence of foreclosure; and
(e) plat map or house location survey, if already available.
Section 14.4 REO MARKETING
14.4.1 REO MARKETING EFFORTS. The Servicer shall begin efforts to
market a REO as soon as marketable title is acquired by the Trustee.
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14.4.2 REO SALES. (a) The Servicer shall obtain the best market price
for a REO for the Trustee while disposing of such REO in a timely and
efficient manner. Unless otherwise directed by the Master Servicer, the
Servicer, acting on behalf of the Trustee, shall dispose or cooperate with
the Trustee in disposing of such REO within 24 months after its acquisition
by the Trustee or, if an extension has been obtained from the Internal
Revenue Service pursuant to Section 14.4.2(b), within such period. If the
Servicer is otherwise unable to sell such REO, unless otherwise directed by
the Master Servicer, the Servicer shall before the end of the 24-month
period or, if an extension has been obtained from the Internal Revenue
Service pursuant to Section 14.4.2(b), before the end of such period,
following the acquisition of such REO, auction such REO to the highest
bidder in an auction reasonably designed to bring a fair price. The
Servicer shall consult with the Master Servicer prior to holding such
auction. The Servicer is eligible to bid in such an auction.
(b) The Master Servicer may apply to the Internal Revenue Service, in the
manner contemplated by Code Section 856(e)(3), for an extension of the 24-
month disposition period with respect to an REO.
14.4.3 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. The Servicer must
ensure that any action taken with respect to the sale of a REO does not
jeopardize the maximum benefits available under the related Primary
Mortgage Insurance Policy, if any, with respect to the related Mortgage
Loan. The Servicer must inform the related Primary Mortgage Insurer of any
listing agreements or purchase offers that are received before the related
Primary Mortgage Insurer has finalized the disposition of the claim.
14.4.4 MASTER SERVICER INSTRUCTIONS. Where the Servicer receives
instructions from the Master Servicer regarding the marketing and sale of a
REO, either with respect to a specific property or generally, such
instructions shall govern the Servicer's actions, notwithstanding any
provision herein.
14.4.5 POOL INSURANCE CONSIDERATIONS. The Servicer must ensure that any
action taken with respect to the sale of a REO does not jeopardize the
maximum benefits available under the related Pool Insurance Policy, if any,
with respect to the related Mortgage Loan. The Servicer must inform the
related Pool Insurer of any listing agreements or purchase offers that are
received before the Primary Mortgage Insurer has finalized the disposition
of the claim.
Section 14.5 REO REHABILITATION
14.5.1 REO REHABILITATION REQUIREMENT. Unless the Master Servicer shall
otherwise direct, and subject to Section 3.2.2(ii) and Section 17.6.2, the
Servicer must ensure
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that any rehabilitation work (which shall not include the cleaning of a
recently acquired REO property) to any REO which is necessary to restore
such REO to a marketable condition is performed and that such work is
performed in a professional and workmanlike manner.
14.5.2 MASTER SERVICER APPROVAL. The Servicer must obtain the Master
Servicer's prior written approval for rehabilitation work (which shall not
include the cleaning of a recently acquired REO property) when the
aggregate rehabilitation expenses with regard to a REO exceeds seven
thousand five hundred dollars ($7,500.00).
14.5.3 WRITTEN CONTRACTOR BIDS. The Servicer shall solicit detailed
written bids from independent contractors when the value of a contract for
rehabilitation of a REO exceeds five hundred dollars ($500.00) (which shall
not include the cleaning of a recently acquired REO property). Where the
value of a contract exceeds five thousand dollars ($5,000.00) (which shall
not include the cleaning of a recently acquired REO property), the Servicer
shall receive bids from a minimum of two independent and unrelated
contractors and, upon request, forward copies of such bids to the Master
Servicer. Where the value of a contract exceeds fifty thousand dollars
($50,000.00) (which shall not include the cleaning of a recently acquired
REO property), the Servicer shall receive bids from a minimum of three
independent and unrelated contractors and, upon request, forward copies of
such bids to the Master Servicer.
14.5.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. If a Mortgaged
Property which has become a REO and the related Mortgage Loan is covered by
a policy of Primary Mortgage Insurance, the Servicer shall notify the
related Primary Mortgage Insurer of such rehabilitation plans before the
completion of the Primary Mortgage Insurance claim to ensure reimbursement
from the Primary Mortgage Insurer. If the related Primary Mortgage Insurer
elects not to reimburse all rehabilitation expenses, work should be
postponed until after final disposition of the Primary Mortgage Insurance
claim.
Section 14.6 REO ADMINISTRATION FAILURE.
14.6.1 SERVICER REMOVAL. The Master Servicer may in its reasonable
discretion, in the event that the Servicer's actions or omissions result in
damage to any REO or a failure to sell any REO property within a reasonable
time, the Master Servicer may remove the servicing of such REO from the
Servicer and assume responsibility for management, control, maintenance,
security, rehabilitation and disposition of such REO.
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14.6.2 SERVICER'S CONTINUING OBLIGATIONS. In the event that the
Servicer is removed from servicing a REO by virtue of the provisions of
Section 14.6.1, the Servicer, as to such REO, shall nevertheless remain
responsible to (a) pay when due all insurance premiums, property taxes and
assessments; (b) file when due all claims for Primary Mortgage Insurance,
Pool Insurance, Hazard Insurance and, if applicable, Flood Insurance
benefits; and (c) fulfill any other related responsibilities required by
the Master Servicer.
14.6.3 SERVICER'S DUTY TO COMPENSATE. Whether or not a Servicer is
removed from servicing with respect to a particular REO, the Servicer must
compensate the Master Servicer for any damages caused as a result of the
Servicer's breach of its obligation to service efficiently each REO. The
Servicer acknowledges that any damages suffered as a result of the
Servicer's inefficiency in managing a REO may not be quantified in advance
of the Master Servicer assuming responsibility for such REO.
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ARTICLE 15
INSURANCE
Section 15.1 GENERAL PROVISIONS
15.1.1 INSURANCE REQUIREMENTS
The Servicer must verify that each Mortgage Loan has the insurance coverage
required pursuant to Article 15 and 16. All claims arising under Insurance
Policies maintained hereunder must be settled or otherwise disposed of by
the Servicer, and all such Insurance Policies must be maintained,
including, without limitation, the payment of premiums on a timely basis,
by the Servicer at no expense to the Trustee, the Trust Administrator (if
applicable) or the Master Servicer.
If the Insurance Proceeds paid in respect of any Mortgage Loan are not used
to repair the related Mortgaged Property due to the particular
circumstances of the loss, and instead such Insurance Proceeds are applied
to reduce the Unpaid Principal Balance of such Mortgage Loan and such
application causes the Unpaid Principal Balance of such Mortgage Loan to
reduce to zero, the Servicer must treat the application of such proceeds as
a Liquidation, and notify the Master Servicer of such Liquidation.
15.1.2 UNINSURED LOSSES. The Servicer must take the following actions
in the event of loss or damage to any Mortgaged Property caused by an
earthquake, flood, tornado or other natural disaster immediately following,
the earlier to occur of (x) its notification or discovery of such loss or
damage or (y) the time at which the Servicer reasonably should have known
of such loss or damage in the exercise of Prudent Servicing Practices:
(a) determine the extent of the losses or damages;
(b) secure any abandoned Mortgaged Property from vandalism and
the elements;
(c) communicate with and counsel the respective Borrower on any
disaster relief programs or other assistance which is
available; and
(d) notify the Master Servicer and recommend appropriate action
to protect the interests of the Trustee and the respective
Borrower.
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15.1.3 SERVICER'S OBLIGATION TO MAINTAIN INSURANCE. If the Servicer
discovers that a Borrower does not have adequate insurance coverage as
required pursuant to the provisions of this Article, the Servicer must
obtain and maintain at its own expense the required insurance coverage on
the related Mortgaged Property. The Servicer may, in its discretion, cause
the required coverage to be maintained through a blanket insurance policy.
Such expenses shall not be recoverable by the Servicer from the Master
Servicer or from payments on the Mortgage Loan or any other source relating
to the related Mortgage Loan or the related Mortgaged Property, other than
from Liquidation Proceeds or Insurance Proceeds from the related Mortgage
Loan. To the extent permitted by applicable law and the related Mortgage
Loan Documents, the Servicer may initiate forced placed coverage with
respect to such Mortgaged Property and thereafter attempt to recover such
expenses from the related Borrower.
15.1.4 INSURANCE NOTICES. The Servicer must arrange for all insurance
drafts, notices, policies, invoices, or other correspondence to be
delivered directly to the Servicer. The Servicer, its successors and
assigns must be named as the Mortgagee, the endorsement must show the
Servicer's address as shown in the following example:
Norwest Mortgage, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
15.1.5 DEFAULT BY INSURER. If the Servicer knows or has reasonable
cause to suspect that an insurer under any applicable insurance policy
required pursuant to the provisions of this Article will, for any reason,
be unable to pay a valid claim, the Servicer shall immediately notify the
Master Servicer upon receipt of such information or formulation of such
belief. The Servicer shall then (i) find a substitute insurer and (ii) pay
any premiums to the insurer. In any case, the Servicer shall not be liable
in any way for the financial inability of any insurer under any insurance
policy required herein to pay a valid claim so long as the provisions of
Article 15 and 16 hereof are complied with.
15.1.6 INSURANCE CARRIER RATING. Each Insurance Policy must be
underwritten by an insurance carrier that is a FNMA or FHLMC approved
Mortgage Insurer.
15.1.7 INSURANCE CARRIER LICENSES. Each insurance carrier must be
licensed or otherwise authorized by law to conduct business in each state
in which a related Mortgaged Property is located.
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15.1.8 RISK EXPOSURE. If any Mortgaged Property is exposed to hazards
not fully covered by Hazard Insurance or Flood Insurance, the Servicer must
notify the Master Servicer immediately with a recommendation for additional
coverage.
15.1.9 EVIDENCE OF INSURANCE. (a) The Servicer must maintain the
following documentation with respect to insurance coverage on each Mortgage
Loan:
(i) if Primary Mortgage Insurance is required, a copy of the
Primary Mortgage Insurance policy and any related
endorsements;
(ii) for one- to four-unit dwellings where such coverage is not
provided under a blanket policy maintained by the Servicer,
an original of the Hazard Insurance policy, if applicable,
and any related endorsements;
(iii) a copy of the Title Insurance policy and any related
endorsements, unless a Final Title Condition Report was
obtained;
(iv) For properties covered under a blanket policy, an original
of any blanket policy, and any related endorsements; and
(v) an original of any Flood Insurance policy, if Flood
Insurance is required, and any related endorsements.
(b) A certificate of insurance is acceptable in lieu of any of the
foregoing policies if it contains the following information:
(i) named insured and Mortgagee or, for PUD or Condominium
Units, named insured association, unit owner and unit owner
Mortgagee;
(ii) address of the Mortgaged Property;
(iii) type, amount and effective dates of coverage;
(iv) deductible amount;
(v) any endorsement or optional coverage obtained and made part
of the original policy;
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(vi) insurer's agreement to provide at least ten day's prior
written notice to the Servicer and Borrower (or applicable
unit owner Mortgagee if for a PUD or Condominium Unit)
before any reduction in coverage or cancellation of the
policy; and
(vii) signature of an authorized representative of the insurer, if
required by applicable law.
Section 15.2 PRIMARY MORTGAGE INSURANCE
15.2.1 PRIMARY MORTGAGE INSURANCE REQUIREMENT. Unless Primary Mortgage
Insurance coverage with respect to a Mortgage Loan is canceled as provided
in Section 15.2.4 herein, the Servicer must maintain at all times Primary
Mortgage Insurance on any Mortgage Loan with an original LTV ratio in
excess of 80%.
15.2.2 PRIMARY MORTGAGE INSURANCE COVERAGE. As to each Mortgage Loan
which is required to have Primary Mortgage Insurance, pursuant to this
Agreement or the related Mortgage Loan Documents, Primary Mortgage
Insurance must at least provide coverage which insures against loss of that
portion of the Unpaid Principal Balance of the Mortgage Loan that exceeds
75% of the Value of the Mortgaged Property. If the Mortgage Loan provides
for negative amortization or for the potential of negative amortization,
the Primary Mortgage Insurance policy must also insure any increase in the
Unpaid Principal Balance from the original principal balance of the related
Mortgage Note.
15.2.3 PRIMARY MORTGAGE INSURER DOWNGRADING. In the event that the
rating assigned by a Rating Agency to the claims paying ability of any
Primary Mortgage Insurer is reduced below the level permitted under Section
15.1.6, the Servicer shall use its best efforts to replace each Primary
Mortgage Insurance Policy issued by such Primary Mortgage Insurer with a
new Primary Mortgage Insurance policy issued by an insurer whose claims
paying ability is acceptable to the Master Servicer. The premium for any
replacement Primary Mortgage Insurance policy shall not exceed the premium
for the discontinued Primary Mortgage Insurance policy.
15.2.4 PRIMARY MORTGAGE INSURANCE CANCELLATION. If a Borrower requests
cancellation of the Primary Mortgage Insurance policy with respect to his
Mortgaged Property, the following requirements must be met:
(a) The current LTV ratio must be 80% or less. The current LTV
ratio must be calculated by dividing the Unpaid Principal
Balance of the related Mortgage Loan by the Current Value of
the Mortgaged Property;
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(b) The related Mortgage Loan may not have been 30 days or more
delinquent within the preceding twelve months; and
(c) There may not have been any other default under the terms of
the related Mortgage Loan at any time during the preceding
twelve months.
If the foregoing requirements are met, the Servicer may request the
cancellation of such Primary Mortgage Insurance policy by submitting to the
Master Servicer a Request for Primary Mortgage Insurance Cancellation. If
there are indications that the Current Value of the Mortgaged Property has
declined, the Servicer shall obtain an Appraisal Report with respect to
such Mortgaged Property that is not more than 60 days old. The expense of
such an Appraisal Report shall not be borne by the Master Servicer. The
Current Value of such Mortgaged Property set forth the Appraisal Report
shall be used as the divisor in clause (a) hereof to determine whether the
recalculated current LTV is 80% or less. If the recalculated current LTV
is greater, the Primary Mortgage Insurance cancellation request will be
denied. In addition, the Master Servicer may deny such a request if it
determines, in its reasonable discretion, that the interests of the Trustee
may be harmed by such cancellation.
15.2.5 PRIMARY MORTGAGE INSURANCE CLAIMS. The Servicer must take all
steps to ensure the payment of the maximum benefits payable under the terms
of any Primary Mortgage Insurance policy. The Servicer must work
diligently with each Primary Mortgage Insurer to determine whether such
insurer will settle the claim by taking title to the Mortgaged Property in
question or in some other manner. The Servicer also must notify the Master
Servicer immediately in writing of any decision made by the applicable
Primary Mortgage Insurer relative to a claim. Upon receipt of any Primary
Mortgage Insurance proceeds, the Servicer must deposit such amounts in the
appropriate Custodial P&I Account. The Servicer shall promptly notify the
Master Servicer in writing if any Primary Mortgage Insurer at any time
denies any or all of a claim filed under its Primary Mortgage Insurance
policy.
Section 15.3 HAZARD INSURANCE
15.3.1 HAZARD INSURANCE REQUIREMENT. Unless alternative coverage is
provided pursuant to Section 16.3 hereunder, the Servicer must ensure that
each Mortgaged Property is covered at all times by Hazard Insurance.
15.3.2 HAZARD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Hazard Insurance must be at least equal to the lesser of (a) the
Unpaid Principal Balance of the related Mortgage Loan or (b) 100% of the
insurable value of the
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improvements on the Mortgaged Property; provided, however, that in no case
shall the amount of Hazard Insurance be less than the amount required to
fully compensate for any damage to the improvements on the Mortgaged
Property on a replacement cost basis.
15.3.3 HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by an applicable law, each Hazard Insurance deductible may not
exceed FNMA or FHLMC's required deductible.
15.3.4 HAZARD INSURANCE VACANCY COVERAGE. The Servicer must ensure that
each Mortgaged Property is adequately covered even when vacant and, where
available, must obtain a vacancy permit endorsement.
15.3.5 HAZARD INSURANCE MORTGAGEE PROVISIONS. Each Hazard Insurance
Policy must contain or have attached a standard mortgagee clause in the
form customarily used by or required by private institutional mortgage loan
investors. Such clause must provide that the Hazard Insurance carrier
shall notify the named Mortgagee at least ten days before any reduction in
coverage or cancellation of the policy. All mortgagee clauses must be
properly endorsed, necessary notices of transfer must be given and any
other action must be taken that is necessary in order to protect the
interests of the Trustee, its successors and/or assigns. The standard
mortgagee clause should read as follows: "Insuring Norwest Mortgage, Inc.,
as agent for [Trustee], its successors and/or assigns."
Section 15.4 FLOOD INSURANCE
15.4.1 FLOOD INSURANCE REQUIREMENT. Unless alternate coverage is
provided pursuant to Section 16.6 hereunder, the Servicer must ensure that
Flood Insurance is maintained at all times on Mortgaged Property that are
in a special flood hazard area identified by the Secretary of HUD or the
Director of the Federal Emergency Management Agency.
15.4.2 FLOOD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Flood Insurance must be at least equal to the lesser of (a) the
maximum amount available under the National Flood Insurance Program's
regular program or its emergency program, (b) the Unpaid Principal Balance
of the related Mortgage Loan or (c) 100% of the replacement cost of the
improvements on the Mortgaged Property.
15.4.3 FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by applicable law, each Flood Insurance deductible may not exceed
the lesser of (a) $1,000 or (b) one percent of the applicable amount of
coverage.
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Section 15.5 TITLE INSURANCE
15.5.1 SERVICER'S OBLIGATIONS. The Servicer shall perform and comply
with all requirements and conditions of each Title Insurance policy for
each Mortgage Loan and the related Mortgaged Property that are to be
performed or observed by the "Insured" or obligee thereunder as a condition
to maintaining and keeping it in force, or making a claim under, such Title
Insurance policy. The Servicer shall be named as a payee on all Title
Insurance policy loss drafts, and upon receipt thereof, the funds shall be
credited to the extent of the sum of (i) the Unpaid Principal Balance of
such Mortgage Loan and any interest accrued thereon, (ii) any outstanding
advances thereon and (iii) any expenses owed by such Borrower which are due
the Trustee, the Master Servicer or the Servicer, whether for its own
account or others, to the appropriate Custodial P&I Account and the balance
of such funds, if any, shall be credited to the appropriate Custodial T&I
Account.
15.5.2 POLICY CUSTODY. The Servicer shall cause the original of such
Title Insurance policy to be sent directly to the Custodian.
15.5.3 TITLE INSURANCE CLAIMS. The Master Servicer must be notified
contemporaneously with the making of any claim under the Title Insurance
policy. The Servicer shall disburse the proceeds of any such settlement in
accordance with the instructions and requirements of the Master Servicer.
Section 15.6 INSURANCE LOSS SETTLEMENTS
15.6.1 SETTLEMENT APPROVAL. The approval of the Master Servicer need
not be requested for disposition of insurance loss settlements where
property damage is $10,000 or less, and the Servicer may disburse the loss
proceeds as provided herein. The Master Servicer must be notified before
disposition of any insurance loss settlement involving property damage over
$10,000.
15.6.2 SETTLEMENT DISBURSEMENTS. For each Mortgage Loan, including a
Mortgage Loan secured by Mortgaged Property located in a Condominium
Project or PUD, the Servicer is fully responsible for the disbursement of
insurance loss settlements under each Hazard Insurance policy and each
Flood Insurance policy where property damage is $10,000 or more, including
but not limited to:
(a) arranging for and authorizing the restoration and
rehabilitation of the related damaged Mortgaged Property in
cooperation with the Borrower;
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(b) subject to applicable law, applying the Insurance Proceeds
to reduction of the Unpaid Principal Balance of such
Mortgage Loan, provided that the Servicer (i) shall have
determined that such proceeds are insufficient to repair and
restore the related Mortgaged Property, or that the repair
and restoration of such Mortgaged Property is not feasible;
and (ii) shall have obtained authorization of the Master
Servicer to make such application of the Insurance Proceeds;
(c) collecting, endorsing and disbursing the Insurance Proceeds
and arranging for progress inspections and payments, if
necessary;
(d) complying with all requirements of any Primary Mortgage
Insurance policy pertaining to the filing of claims and the
settlement of insurance losses to assure that the security
of such Mortgage Loan is not impaired and that the coverage
of such Primary Mortgage Insurance policy is not jeopardized
or otherwise adversely affected;
(e) assuring, through the receipt of Borrower's affidavits,
repair contract copies, lien waivers and the like, that the
priority of the lien of the Security Instrument is
preserved, and that the Insurance Proceeds are applied to
the restoration or repair of the related Mortgaged Property
if not applied in payment of such Mortgage Loan;
(f) obtain releases or waivers of liens and taking such other
actions as are necessary to avoid the filing of laborers',
materialmen's or mechanic's liens against the related
Mortgaged Property; and
(g) maintaining procedures and practices acceptable to the
Master Servicer and in conformity with Prudent Servicing
Practices for the control and disposition of insurance loss
drafts.
15.6.3 SETTLEMENT FUNDS. The Servicer shall be named as a payee on all
insurance loss drafts and upon receipt thereof, the funds shall be credited
to the Borrower's Insurance Proceeds balance and deposited into (a) where
such funds will be applied to the repair and restoration of the related
Mortgaged Property and where required by applicable state law, one or more
separate escrow accounts, so that the balance on deposit in such accounts
is fully insured at all times by the FDIC through either the BIF or SAIF or
(b) where such funds will not be applied to the repair and restoration of
the related Mortgaged Property, the respective Custodial P&I Account.
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15.6.4 SETTLEMENT NOTICE. The Servicer shall report any such settlement
to the Master Servicer on a Hazard Insurance Loss Draft Notification,
together with a summary of the disposition of the proceeds.
15.6.5 CONTINUING COVERAGE. If a letter of assurance is obtained from
any insurer under a Hazard Insurance policy or a Flood Insurance policy
that the insurance coverage shall continue in full force and effect, the
Servicer shall deposit such letter in the appropriate Servicer Mortgage
Loan File.
15.6.6 PROPERTY INSPECTIONS. The Servicer shall conduct property
inspections in accordance with the milestones of the repair and
rehabilitation plan for such Mortgaged Property and prepare Property
Inspection Reports on any Mortgaged Property involving property damage over
$15,000. The Servicer shall furnish a copy of the repair and
rehabilitation plan for such Mortgaged Property to the Master Servicer upon
request.
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ARTICLE 16
CONDOMINIUM AND PUD INSURANCE
Section 16.1 GENERAL PROVISIONS
16.1.1 APPLICABILITY. The provisions of this Article pertain solely to
Mortgage Loans secured by Condominium Units or PUD Units.
16.1.2 PREMIUMS. The premiums for insurance policies required pursuant
to this Article must be paid as a common expense by the Owners'
Association.
16.1.3 DEDUCTIBLE RESERVES. Funds for each of the deductibles
associated with the insurance policies required pursuant to this Article
must be included in the Owners' Association's reserves and must be so
designated.
16.1.4 NAME OF INSURED. The name of the insured stated under each
Insurance Policy required pursuant to the provisions of this Article must
be similar in form and substance to the following:
"Association of Owners of the [Name of Condominium Project or PUD] for
use and benefit of the individual Condominium or PUD Unit owners"
(designated by name, if required).
16.1.5 MORTGAGEE CLAUSE. Each insurance policy required pursuant to the
provisions of this Article must contain the standard mortgagee clause
endorsed to provide that any disbursements shall be paid to the Owners'
Association for the use and benefit of Mortgagees as their interests may
appear, or otherwise endorsed to fully protect the interest of (a) the
Trustee and (b) the holders of a beneficial interest therein, if any.
16.1.6 RECONSTRUCTION COVERAGE. If, with respect to a PUD or
Condominium Project in which a Mortgaged Property is located, there is a
construction code provision that would require changes to undamaged
portions of the PUD or Condominium Project's building(s) even when only
part of a building is destroyed by an insured hazard, then the Servicer
must ensure that each insurance policy required by this Article contains
the necessary construction code endorsements to cover this exposure.
▇▇▇▇▇▇▇ ▇▇.▇ ▇▇▇▇▇▇ ▇▇▇▇ MULTIPLE PERIL INSURANCE
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16.2.1 COMMON AREA MULTIPLE PERIL INSURANCE REQUIREMENT. The Servicer
must ensure that the Owner's Association maintains, with respect to the PUD
or Condominium Project in which a Mortgaged Property is located, a policy
of Common Area Multiple Peril Insurance, with premiums being paid as a
common expense. The Common Area Multiple Peril Insurance policy must at
least protect against loss or damage by fire and all other hazards that are
normally covered by the standard extended coverage endorsement, and all of
the perils customarily covered for similar types of projects, including
those covered by the standard "all risk" endorsement.
16.2.2 COMMON AREA MULTIPLE PERIL INSURANCE COVERAGE. As to each
Condominium Project or PUD in which a Mortgaged Property is located, a
Common Area Multiple Peril Insurance policy must cover 100% of the current
replacement cost of all of the common areas (other than the land and
foundation), common elements including fixtures and building service
equipment, as well as common personal property and supplies.
16.2.3 COMMON AREA MULTIPLE PERIL INSURANCE DEDUCTIBLE. Except as a
greater amount may be required by applicable law, each Common Area Multiple
Peril Insurance deductible may not exceed the lesser of (a) $10,000 or (b)
one percent of the applicable amount of coverage.
16.2.4 BOILER AND MACHINERY COVERAGE. If a steam boiler is operating
within the Condominium Project or PUD in which a Mortgaged Property is
located, then the Servicer must ensure that boiler and machinery coverage
is in force at all times. This coverage must be evidenced by the standard
form of boiler and machinery endorsement. The minimum liability coverage
per accident under boiler and machinery coverage must equal the insurable
value of the boiler and equipment and the building housing such boiler or
machinery, based upon current replacement cost, or $2 million, whichever is
less.
Section 16.3 BLANKET HAZARD INSURANCE
16.3.1 BLANKET HAZARD INSURANCE REQUIREMENT. Unless alternative
coverage is provided pursuant to Section 16.3 hereunder, the Servicer must
verify that each such Mortgaged Property is covered at all times by Hazard
Insurance policy which provides blanket coverage for the individual units
in the Condominium Project or PUD.
16.3.2 BLANKET HAZARD INSURANCE COVERAGE. As to each Condominium
Project or PUD which contains a Mortgaged Property for which its Hazard
Insurance coverage is provided through a blanket policy, the amount of
Hazard Insurance for a blanket policy a Condominium Project or PUD must be
at least equal to the lesser of (a) the aggregate
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of the outstanding principal balances of all mortgage notes secured by
units within the Condominium Project or PUD (including the Mortgage Notes
secured by Mortgaged Properties) or (b) 100% of the replacement cost of the
improvements on the Condominium Project or PUD Unit site.
16.3.3 BLANKET HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by an applicable law, each Hazard Insurance deductible for
a blanket policy covering a Condominium Project or PUD may not exceed the
lesser of (a) $10,000 or (b) one percent of the applicable amount of
coverage.
Section 16.4 COMMON AREA COMPREHENSIVE GENERAL LIABILITY (CGL) INSURANCE
16.4.1 COMMON AREA CGL INSURANCE REQUIREMENT. The Servicer must ensure
that the Owners' Association maintains a Comprehensive General Liability
Insurance policy covering all of the common areas, common elements,
commercial spaces and public ways in the Condominium Project or PUD in
which a Mortgaged Property is located.
16.4.2 COMMON AREA CGL INSURANCE COVERAGE. As to each Condominium
Project or PUD in which a Mortgaged Property is located, a CGL Insurance
policy should provide coverage of at least $1,000,000 for personal injury,
bodily injury or property damage for any single occurrence. Each CGL
Insurance policy must contain a severability of interest endorsement
preventing the insurer from denying the claim of a Condominium or PUD Unit
owner because of negligent acts of the Owners' Association or other unit
owners. Each CGL Insurance policy must include all other types of coverage
and endorsements in the types and amounts required by private institutional
mortgage loan investors for developments similar in construction, location
and use.
Section 16.5 OWNERS' ASSOCIATION FIDELITY INSURANCE
16.5.1 OWNERS' ASSOCIATION FIDELITY INSURANCE REQUIREMENT. The Servicer
must ensure that the Owners' Association maintains a fidelity bond or
insurance against dishonest and fraudulent acts on the part of directors,
managers, trustees, employees or volunteers responsible for handling funds
belonging to or administered by the association.
16.5.2 OWNERS' ASSOCIATION FIDELITY INSURANCE COVERAGE. The Owners'
Association fidelity bond or insurance must name the Owners' Association as
the insured and must be written in an amount sufficient to provide
protection at least 150% of the insured's estimated annual operating
expenses and reserves. An appropriate endorsement to the policy to cover
any persons who serve without remuneration must be added if the
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policy would not otherwise cover volunteers. Owners' Association fidelity
insurance coverage must be in an amount equal to at least 3 months
assessments on all units in the Condominium Project or PUD. Owners'
Association fidelity insurance coverage is not required if the Condominium
Project or the PUD have fewer than 20 units.
Section 16.6 BLANKET FLOOD INSURANCE
16.6.1 BLANKET FLOOD INSURANCE REQUIREMENT. Where a Mortgaged Property
is a Condominium Unit or PUD Unit and is not individually covered by a
Flood Insurance policy in accordance with the provisions of Section 15.4
hereof, the Servicer must verify that a Flood Insurance policy which
provides blanket coverage for the individual units in the Condominium
Project or PUD, is maintained at all times on Mortgaged Property that are
in a special flood hazard area identified by the Secretary of HUD or the
Director of the Federal Emergency Management Agency.
16.6.2 BLANKET FLOOD INSURANCE COVERAGE. As to each Condominium Project
or PUD which contains a Mortgaged Property for which its Flood Hazard
Insurance coverage is provided through a blanket policy, the amount of
Flood Insurance must be at least equal to the lesser of (a) the maximum
amount available under the National Flood Insurance Program's regular
program or the its emergency program, (b) the aggregate of the outstanding
principal balances of all mortgage notes secured by units within the
Condominium Project or PUD (including the Mortgage Notes secured by
Mortgaged Properties), or (c) 100% of the replacement cost of the
improvements on the Condominium Project or PUD Unit site.
16.6.3 BLANKET FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by applicable law, each Flood Insurance deductible for a
blanket policy covering a Condominium Project or PUD may not exceed the
lesser of (a) $5,000 or (b) one percent of the applicable amount of
coverage.
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ARTICLE 17
ADVANCES
Section 17.1 PRINCIPAL AND INTEREST ADVANCES
17.1.1 P&I ADVANCE REQUIREMENT. The Servicer shall advance P&I Advances
and deposit to the respective Custodial P&I Account on or before each
Remittance Date an amount equal to the aggregate of the difference between
(a) the Monthly Payment that each Borrower was required to pay to the
Servicer on the immediately preceding Due Date (excluding the amount of the
related Servicing Fee) and (b) the amount actually received with respect to
the related Monthly Payment by the Servicer (excluding the amount of the
related Servicing Fee), which deposit may be made in whole or in part from
any Amounts Held for Future Distribution. Any Amount Held for Future
Distribution so used shall be replaced by the Servicer from its own funds
by deposit in the Custodial P&I Account on or before the Business Day
preceding any future Remittance Date to the extent that funds in the
Custodial P&I Account on such Remittance Date shall be less than the amount
required to be remitted on such date
The Servicer shall designate on its records the specific Mortgage Loans and
related installments (or portions thereof) as to which such P&I Advance
shall be deemed to have been made, such determination and related
reimbursement allocations pursuant to the following paragraphs being
conclusive for purposes of Section 17.1.3.
17.1.2 P&I ADVANCE LIMITATION. The Servicer is required to make P&I
Advances with respect to a Mortgage Loan unless a P&I Advance is reasonably
determined by the Servicer to be eventually non-recoverable from any
Insurance Proceeds, Liquidation Proceeds, or the Borrower.
17.1.3 P&I ADVANCE RECOVERY. The Servicer's P&I Advance shall be
recoverable from subsequent Borrower Monthly Payments, Insurance Proceeds,
Liquidation Proceeds related to the Mortgage Loan as to which such P&I
Advance was made or, if the Representing Party is obligated to purchase
such Mortgage Loan from the Trustee, from the price paid for such Mortgage
Loan or pursuant to Section 17.4.
17.1.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Trustee through foreclosure
or a deed-in-lieu of foreclosure is held by the Trustee or its successors,
the Servicer must continue to make monthly P&I Advances in respect of each
such Mortgage Loan or REO to the respective Custodial
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P&I Account. Subject to the provisions of Section 17.1.2 hereof, these P&I
Advances must be made until the (i) Liquidation of each Mortgage Loan
subject to such proceedings or (ii) in the case of REO transferred to the
Trustee through foreclosure or a deed-in-lieu of foreclosure, the
Liquidation of such REO. Advances with respect to REO shall be made as if
the related Mortgage Loan and Mortgage Note remained in effect.
Section 17.2 FORECLOSURE ADVANCES
17.2.1 FORECLOSURE ADVANCE REQUIREMENT. During foreclosure proceedings,
the Servicer must advance from its own funds all foreclosure expenses as
they occur in accordance with the terms of this Agreement. Such advances
must be made by the Servicer up to the time of final disposition of the
related Mortgaged Property.
17.2.2 FORECLOSURE ADVANCE LIMITATION. The Servicer is required to make
advances pursuant to Section 17.2.1 with respect to a Mortgage Loan unless
the Servicer reasonably determines (i) that such foreclosure will not
increase the proceeds to the Trustee of liquidation of such Mortgage Loan
after reimbursement of the Servicer for its expenses or (ii) that such
expenses will be eventually non-recoverable from any Insurance Proceeds,
Liquidation Proceeds or the Borrower.
17.2.3 FORECLOSURE ADVANCE RECOVERY. If foreclosure proceedings are
terminated, the Servicer must collect all legal fees and costs from the
Borrower. Otherwise, the Servicer's advances for reasonable foreclosure
expenses shall be recoverable from Insurance Proceeds, Liquidation Proceeds
or, if the Representing Party is obligated to purchase a Mortgage Loan from
the Trustee, from the price paid for such Mortgage Loan.
17.2.4 FORECLOSURE ADVANCE RECORDS. All foreclosure advances by the
Servicer and reimbursements to the Servicer must be clearly identifiable in
the respective Custodial T & I Account.
Section 17.3 TAX & INSURANCE ADVANCES
17.3.1 T&I ADVANCE REQUIREMENT. If a Borrower's Escrow Funds are
insufficient to pay taxes or insurance premiums, the Servicer must advance
from its own funds to the respective Custodial T&I Account an amount
sufficient to cover the shortage and so as to assure the maintenance of a
first lien position of the related Security Instrument on the related
Mortgaged Property.
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17.3.2 T&I ADVANCE RECOVERY. T&I Advances may be recovered from the
Borrower's subsequent monthly escrow payments, Insurance Proceeds,
Liquidation Proceeds or the Borrower, but must never be recovered from
scheduled principal or interest collections. The Servicer may not recover
T&I Advances from another Borrower's Escrow Funds.
17.3.3 T&I ADVANCE LIMITATION. The Servicer is required to make a T&I
Advance with respect to a Mortgage Loan unless such T&I Advance is
reasonably determined by the Servicer to be eventually non-recoverable from
any Insurance Proceeds, Liquidation Proceeds, or the Borrower.
17.3.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Trustee through foreclosure
or a deed-in-lieu of foreclosure is held by the Trustee, the Servicer must
continue to make required T&I Advances in respect of each such Mortgage
Loan or REO to the respective Custodial T&I Account. These T&I Advances
must be made until each Mortgage Loan subject to such proceedings is
liquidated or in the case of REO transferred to the Trustee through
foreclosure or a deed-in-lieu of foreclosure is liquidated. Advances with
respect to REO shall be made as if the related Mortgage Loan and Mortgage
Note remained in effect.
Section 17.4 NON-RECOVERABLE ADVANCES
17.4.1 ORDINARY RECOVERY. If at any time an advance made by a Servicer
hereunder is determined by the Servicer to be a Non-Recoverable Advance,
then the Servicer shall be entitled to be reimbursed for such advance by
withdrawing from the Custodial P&I Account an amount equal to the Non-
Recoverable Advance.
17.4.2 FINAL RECOVERY. If the amounts on deposit in the related
Custodial P&I Account are insufficient to reimburse the Servicer, then
prior to any distribution to the Trustee, the Servicer shall be entitled to
reimbursement from the payments made and the proceeds received with respect
to such Mortgage Loan.
17.4.3 NON-RECOVERABLE ADVANCE DETERMINATION. To determine whether an
Advance is a Non-Recoverable Advance, the Servicer shall employ a broker's
price opinion, which is no more than twelve months old when so employed, of
the fair market value of the Mortgaged Property related to the Mortgage
Loan which is subject to such Advance, and calculate the difference between
(a) the fair market value of such Mortgaged Property and (b) the sum of (i)
a reasonable estimate of foreclosure costs which may be incurred in the
foreclosure of such Mortgaged Property, and (ii) the amount of unreimbursed
Advances made by the Servicer with respect to the related
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Mortgage Loan pursuant to the terms of this Agreement, is greater than
zero. If such a difference is greater than zero, then such difference
represents the maximum amount of additional Advances which the Servicer
shall make before determining that any additional Advances in excess of
such amount are Non-Recoverable Advances. If such difference is negative,
then the magnitude of such difference is the amount of previously made
unreimbursed Advances which the Servicer may now regard as Non-Recoverable
Advances. The Servicer shall provide the Master Servicer with an Officer's
certificate upon the determination that any Advance is a Non-Recoverable
Advance.
Section 17.5 FAILURE TO ADVANCE
17.5.1 GROUNDS FOR TERMINATION. The failure of the Servicer to advance
any funds required to be advanced by the Servicer under this Article 17 is
cause for termination of Servicer under this Agreement.
17.5.2 SERVICER REIMBURSEMENT. To the extent the Master Servicer or the
respective trustee, if any, must advance their respective funds due to the
failure of the Servicer to advance as provided for in this Agreement or to
remit funds to the Certificate Account as required by Section 18.3.1, the
Servicer shall reimburse the advancing party for such amounts, on demand,
together with all costs and expenses incurred by the advancing party,
including, but not limited to, interest on the funds advanced. Such
interest shall be calculated at the lesser of the "prime rate" publicly
announced in effect from time to time at the Reference Bank plus one
percentage point and the maximum interest rate permitted by law.
Section 17.6 REHABILITATION ADVANCE
17.6.1 REHABILITATION ADVANCE REQUIREMENT. The Servicer must advance
from its own funds such amounts as are necessary to restore any damaged REO
not covered by Hazard Insurance or Special Hazard Insurance in accordance
with Section 14.5.
17.6.2 REHABILITATION ADVANCE LIMITATION. The Servicer is required to
make advances pursuant to Sections 17.6.1 and 14.5 with respect to a
Mortgage Loan unless the Servicer reasonably determines (i) that such
rehabilitation will not increase the proceeds to the Trustee on liquidation
of such Mortgage Loan after reimbursement of the Servicer for its expenses
or (ii) that such expenses will be eventually non-recoverable from any
Insurance Proceeds, Liquidation Proceeds or the Borrower.
17.6.3 REHABILITATION ADVANCE RECOVERY. The Servicer's advances for
reasonable rehabilitation expenses shall be recoverable from Insurance
Proceeds, Liquidation
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Proceeds, or, if the Representing Party is obligated to purchase a Mortgage
Loan from the Trustee, from the price paid for such Mortgage Loan.
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ARTICLE 18
REPORTING REQUIREMENTS
Section 18.1 MONTHLY ACCOUNTING REPORTS
18.1.1 MONTHLY ACCOUNTING REPORT REQUIREMENT. With respect to any
Remittance Date, the period for monthly accounting reports shall be from
the first Business Day of the prior month through the last Business Day of
the prior month, provided that (I) the reporting period for Prepayments in
Full, Curtailments and Partial Liquidation Proceeds shall be from the
Determination Date in the month of such Remittance Date, and (ii) such
report shall include only (a) Monthly Payments received by the Servicer by
the close of business on the Business Day preceding the Determination Date
in the month of such Remittance Date which relate to the Due Date in such
month, or in prior months to the extent not previously remitted and
reported, and (b) any P&I Advances made in respect of such Monthly
Payments. With respect to Group I Mortgage Loans, all monthly reports
prepared by the Servicer must be complete and must be received by the
Master Servicer by the tenth calendar day of the following month. With
respect to Group II Mortgage Loans, all monthly reports prepared by the
Servicer must be complete and must be received by the Master Servicer by
the eighteenth calendar day of the following month. All monthly accounting
reports must show information in, and must be submitted in, a sequence
according to Servicer Loan Number order.
18.1.2 MONTHLY ACCOUNTING REPORT ELEMENTS. The Servicer shall forward
to the Master Servicer a Monthly Accounting Report setting forth
substantially the information required by FNMA Form 2010.
The Servicer must also complete and forward to the Master Servicer any
other form or report as provided for in this Agreement, or as reasonably
requested by the Master Servicer.
18.1.3 AUTOMATED REPORTS. The Servicer may submit to the Master
Servicer for review the Servicer's automated reports which include all of
the information required by the provisions of Section 18.1.2 hereof. Upon
approval by the Master Servicer, the Servicer may submit approved automated
reports to the Master Servicer instead of the Forms listed in Section
18.1.2 hereof.
18.1.4 ELECTRONIC REPORTING. With the prior written consent of the
Master Servicer, all reports to be made by the Servicer to the Master
Servicer may be transmitted electronically in lieu of written reporting.
If the Servicer services more than one
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hundred Mortgage Loans for the Master Servicer, it shall arrange for
electronic transmission of the required reports. Any expenses occasioned
by the electronic transmission of reports shall be borne by the Servicer.
18.1.5 MACHINE READABLE RECORDS. At the request of the Master Servicer,
the Servicer shall provide to the Master Servicer, in a mutually agreed
machine readable format, the current names and mailing addresses of each
Borrower. The Master Servicer shall utilize such information solely for
audit purposes, or in the event the Servicer is terminated hereunder.
Section 18.2 ACCOUNT RECONCILIATIONS
18.2.1 RECONCILIATION PREPARATION. The Servicer shall prepare
reconciliations for each Custodial P&I Account, Custodial T&I Account and
Custodial Buydown Account on a monthly basis and shall forward the same to
the Master Servicer upon request.
18.2.2 ACCOUNT RECORDS. Upon request of the Master Servicer, the
Servicer shall also cause the depository for each of the accounts described
in Section 18.2.1 hereof to forward directly to the Master Servicer, copies
of all monthly account statements for the preceding monthly reporting
period.
Section 18.3 MONTHLY REMITTANCE REQUIREMENTS
18.3.1 REMITTANCE OF FUNDS. On each Remittance Date the Servicer shall
transfer, to the extent not previously transferred as required pursuant to
Section 6.1.3(e), from the funds in (or required hereunder to be in) the
respective Custodial P&I Account as of the close of the Business Day
immediately preceding the Determination Date in the month of such
Remittance Date to the related Certificate Account, the following (other
than any Amounts Held for Future Distribution in respect of such Remittance
Date not exceeding the Threshold Amount and any amounts permitted to be
retained by the Servicer or withdrawn from such account by the Servicer
pursuant to the terms of this Agreement):
(i) all payments on account of principal (including Prepayments
in Full and Curtailments received during the Applicable
Unscheduled Principal Receipt Period) and interest (other
than payments of interest related to any Unscheduled
Principal Receipt as to which the Applicable Unscheduled
Principal Receipt Period is a Mid-Month Receipt Period
received by the Servicer on or before the last day of the
Applicable Unscheduled Principal Receipt Period ending in
the month in which such prepayment occurs), all net REO
Disposition proceeds and proceeds
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received from any condemnation award or proceeds in lieu of
condemnation other than that portion of such proceeds
released to the mortgagor in accordance with the terms of
the Mortgage Loan Documents or Prudent Servicing Practices;
(ii) all net Liquidation Proceeds, all net Partial Liquidation
Proceeds and Insurance Proceeds, other than any portion of
Insurance Proceeds to be applied to the restoration or
repair of the related Mortgaged Property or released to the
Borrower in accordance with the requirements of law or
Prudent Servicing Practices;
(iii) all P&I Advances made by the Servicer;
(iv) the Purchase Price, or portion thereof, paid for any
Mortgage Loans or property acquired in respect thereof
repurchased or substituted by the Servicer or a Representing
Party; and
(v) all other amounts required to be deposited in the Custodial
P&I Account or the Certificate Account pursuant to this
Agreement.
Notwithstanding Section 18.3.1, the Servicer shall be entitled to withhold
and to pay to itself the applicable Servicing Fee (as adjusted pursuant to
Section 7.6.1) from any payment on account of interest or other recovery
(including Net REO Proceeds) as received and prior to deposit of such
payments in the Certificate Account; PROVIDED FURTHER that with respect to
any payment of interest received by the Servicer in respect of a Mortgage
Loan (whether paid by the Mortgagor or received as Liquidation Proceeds,
Insurance Proceeds or otherwise) which is less than the full amount of
interest then due with respect to such Mortgage Loan, only that portion of
such payment that bears the same relationship to the total amount of such
payment of interest as the per annum rate used to calculate the Servicing
Fee, as set forth in Section 4.6, bears to the Mortgage Interest Rate borne
by such Mortgage Loan shall be allocated to the Servicing Fee with respect
to such Mortgage Loan.
18.3.2 SERVICER COMPENSATION. The Servicer shall withdraw its Servicing
Fee for each Mortgage Loan net of any Month End Interest payable pursuant
to Section 7.6.1 from the related Custodial P&I Account prior to the
remittance of such amounts to the Certificate Account with all other
payments received with respect to the Mortgage Loans.
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ARTICLE 19
TRANSFERS AND TERMINATION OF SERVICING
Section 19.1 TRANSFER OF SERVICING
19.1.1 TRANSFER PROHIBITION. The Servicer may not sell or transfer its
portfolio serviced hereunder without the prior written consent of the
Master Servicer, which consent cannot be unreasonably withheld. Further,
the Servicer may not subcontract any of its servicing duties, except as set
forth in Section 11.2.1.
19.1.2 TRANSFER REQUEST. Any request for sale or transfer of servicing
shall be reviewed on an individual basis. For a request to be considered,
however, the transferor must submit a written request to the Master
Servicer. The transferee must agree to enter into a servicing agreement
with the Master Servicer substantially in the form of this Agreement and
must be approved by the Master Servicer, and, if applicable, any rating
agency with respect Mortgage Loans which are owned by a trust which has
issued mortgage-backed securities, securitized by such Mortgage Loans,
which have been rated at the request of such trust by such rating agency.
The Master Servicer must receive this documentation at least 45 days prior
to the requested date of transfer. The transferor shall be notified in
writing of the Master Servicer's approval or denial. Such transfer shall
be denied if the transferee does not meet the approval requirements of the
Master Servicer, or any such rating agency.
19.1.3 SERVICER LIABILITY. The transferor of servicing shall be liable
to the Master Servicer and the Trustee for any servicing obligation
violations that occur before, during, and up to and including the day the
portfolio is actually transferred. The transferee of servicing shall be
liable for any breach of servicing obligations that occurs after the
transfer of the servicing portfolio.
19.1.4 MASTER SERVICER'S DETERMINATION. If the transferor and
transferee disagree about liability for violations of representations and
warranties and servicing requirements hereunder, the Master Servicer has
the right, in its reasonable discretion, to determine which party or
parties are liable for such violations.
Section 19.2 TERMINATION OF SERVICING
19.2.1 GROUNDS FOR TERMINATION. The Trustee shall have the right to
terminate for cause the servicing privileges of the Servicer under this
Agreement, either with respect to certain Mortgage Loans serviced hereunder
or with respect to all Mortgage Loans
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serviced hereunder in the event that (i) any of the following occur, (ii)
the Trustee or the Master Servicer on its behalf has given the Servicer
prior written notice of the occurrence of such event and (iii) with respect
to clauses (a), (b) or (f) hereof, the Servicer has failed to cure such
event within a reasonable time, which shall in all cases be no less than
ninety (90) days:
(a) the Servicer has breached any material obligation set forth
or incorporated by reference in this Agreement or any Sales
Agreement, including, without limitation, the Servicer's
failure to maintain the requisite Fidelity Bond and Errors
and Omissions Policy in the amounts specified herein;
(b) the Servicer has made one or more false or misleading
representations or warranties in this Agreement or any Sales
Agreement, or in any documents relating to the foregoing
agreements;
(c) the appointment of a trustee or receiver for the Servicer or
any of its property;
(d) the execution by the Servicer of an assignment for the
benefit of its creditors;
(e) any material change in the financial status of the Servicer
that, in the opinion of the Master Servicer, could
materially adversely affect the Trustee, the Master Servicer
or the Servicer's ability to service the Mortgage Loans;
(f) the Servicer's placement on probation or suspension by a
federal or state government agency, including, without
limitation, FHLMC, FNMA or GNMA;
(g) the Servicer's assignment or attempted assignment of any of
its interests, rights, or obligations set forth herein
without the Master Servicer's prior written consent; or
(h) the Servicer has been terminated for cause pursuant to the
terms of another servicing agreement with the Master
Servicer.
19.2.2 TRUSTEE NOTIFICATION. The Master Servicer shall notify the
Trustee of the occurrence of any of the events set forth in Section 19.2.1,
together with the Master Servicer's recommended course of action regarding
the termination of the Servicer.
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19.2.3 SERVICER TERMINATION. (a) Following the occurrence of any of the
events set forth in Section 19.2.1, the Trustee may elect, at its
reasonable discretion, to terminate the Servicer under this Agreement with
respect to the Mortgage Loans. The Trustee shall provide a written
termination notice to the Servicer.
(b) Notwithstanding anything to the contrary in this Agreement, the
Trustee or, if applicable, the Trust Administrator may terminate the
Servicer following the occurrence of any of the events set forth in Section
3.09 of the Pooling and Servicing Agreement, in accordance with the
procedure for termination set forth therein.
19.2.4 CONSEQUENCES OF TERMINATION. If this Agreement with the Servicer
is terminated pursuant to Section 19.2.3 hereof, the Servicer shall deliver
all Servicer Mortgage Loan Files, in their entirety, for those Mortgage
Loans serviced under this Agreement, as well as any other documents or
reports held by the Servicer concerning such Mortgage Loans, to the
transferee designated by the Master Servicer, which may be the Master
Servicer, and shall assist in the efficient and timely transfer of the
servicing to such transferee. The Servicer shall not be entitled to
compensation for servicing following its termination.
19.2.5 EFFECT OF TERMINATION. In the event of the termination of this
Agreement, the Servicer is not released from its obligations under this
Agreement. If its servicing is terminated for cause, the Servicer must pay
the expenses of the Master Servicer incurred in connection with transfer of
the servicing and any actual and direct damages, including, without
limitation, actual and direct damages or losses of the Trustee and the
Master Servicer resulting from such termination.
19.2.6 CUSTODIAL ACCOUNT THRESHOLD REDUCTION. In the event that any of
the events specified in clauses (a) through (h) of Section 19.2.1 or in
clauses (g), (h) or (i) of Section 4.1.5 occur, the Master Servicer, in its
reasonable discretion, may notify the Servicer in writing that the
applicable Threshold Amount has been reduced to such amount not less than
$1,000 as shall be specified in such notice.
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ARTICLE 20
MISCELLANEOUS PROVISIONS
Section 20.1 AMENDMENTS
20.1.1 UNILATERAL AUTHORITY. The Servicer acknowledges that the Master
Servicer may, upon written notice, supplement or amend the provisions of
this Agreement from time to time, without the need to obtain the Servicer's
consent to (a) correct ambiguous or erroneous provisions in this Agreement;
(b) make changes necessary or helpful to maintain compliance with
applicable law; (c) conform to evolving industry standards regarding the
servicing of residential mortgage loans generally; (d) modify Schedule I to
reflect the purchase of any Mortgage Loan pursuant to this Agreement or
another agreement or to change the applicable loan group for any Mortgage
Loan; (e) to change the definition of Applicable Unscheduled Receipt Period
with respect to any Mortgage Loan and any type of Unscheduled Principal
Receipt from a Mid-Month Receipt Period to a Prior Month Receipt Period or
from a Prior Month Receipt Period to a Mid-Month Receipt Period; or (f)
make such other modifications or amendments thereto, which the Master
Servicer deems advisable, provided that no such modification or amendment
shall have a material adverse impact so as to materially increase the
obligations of, or to materially decrease the benefits to, the Servicer.
20.1.2 CONSENSUAL AMENDMENT. Except as provided for in Section 20.1.1
hereof, the Master Servicer must obtain the written consent of the Servicer
to any amendment hereto that would either increase materially the
obligations of the Servicer or decrease materially the benefits to the
Servicer.
20.1.3 TRUSTEE NOTIFICATION. The Trustee shall be provided with notice
of the substance of any amendments or modifications made to this Servicing
Agreement pursuant to the provisions of this Section 20.1.
20.1.4 TRUSTEE DISAPPROVAL. With regard to any proposed modification or
amendment to this Agreement which shall have a material adverse impact upon
the beneficial rights enjoyed hereunder by the Trustee, the Trustee shall
receive written notice of the substance of any proposed amendments or
modifications at least ten business days prior to the proposed date of
enactment of such amendment or modification which shall also state therein
the proposed date of enactment. If the Trustee notifies the Master
Servicer in writing, prior to the proposed date of enactment, of its
opposition to the adoption of such an amendment or modifications, the
Master Servicer shall not proceed with such modification or amendment.
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Section 20.2 GENERAL CONSTRUCTION
20.2.1 BINDING NATURE. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
20.2.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous servicing
agreements, understandings, inducements and conditions, expressed or
implied, oral or written, of any nature whatsoever with respect to the
subject matter thereof. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of
the terms hereof.
20.2.3 GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by,
construed, interpreted and enforced in accordance with the laws of the
State of New York, notwithstanding any New York or other choice-of-law
rules to the contrary.
20.2.4 INDULGENCES NOT WAIVERS. Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or
privilege, with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the
party asserted to have granted such waiver.
20.2.5 TITLES NOT TO AFFECT INTERPRETATION. The titles of the articles
and sections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
20.2.6 PROVISIONS SEVERABLE. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that
for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
20.2.7 SERVICER AN INDEPENDENT CONTRACTOR. All services, duties and
responsibilities of the Servicer under this Agreement shall be performed
and carried out by the Servicer as an independent contractor, and none of
the provisions of this Agreement
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shall be deemed to make, authorize or appoint the Servicer as agent or
representative of any Trustee of any Mortgage Loans or of the Master
Servicer.
20.2.8 THIRD PARTY BENEFICIARY. The parties agree that the Trustee and,
if applicable, the Trust Administrator are intended third party
beneficiaries of the representations, warranties, covenants and agreements
of the Servicer set forth in this Agreement. The Trustee shall have full
authorization to enforce directly against the Servicer any of the
obligations of the Servicer provided for herein.
20.2.9 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date set forth above.
NORWEST MORTGAGE, INC.
as Servicer
By:
-------------------------------------
Name:
Title: Vice President
NORWEST BANK MINNESOTA;
NATIONAL ASSOCIATION
as Master Servicer
By:
-------------------------------------
Name:
Title: Vice President
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SCHEDULE I
MORTGAGE LOAN SCHEDULE
Cut-Off Date
Cut-Off Date Regarding
Unpaid initial coverage
Master Servicer Principal under this Servicing Fee Loan
Loan Number Balance Agreement Percentage Group Custodian
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