EXHIBIT 4.2
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BEAR ▇▇▇▇▇▇▇ ASSET BACKED SECURITIES, INC.,
as Depositor,
▇▇▇▇▇ UNION BANK AND TRUST COMPANY,
as Master Servicer,
▇▇▇▇▇ WHOLE LOAN HOME EQUITY TRUST 2002-A,
as Issuer,
and
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee
SALE AND SERVICING AGREEMENT
Dated as of May 31, 2002
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.............................................................................1
Section 1.01. Definitions.......................................................................1
Section 1.02. Interpretive Provisions...........................................................1
Section 1.03. Interest Calculations.............................................................2
ARTICLE II CONVEYANCE OF MORTGAGE LOANS............................................................2
Section 2.01. Conveyance of Mortgage Loans......................................................2
Section 2.02. Treatment of Transfer.............................................................3
Section 2.03. Mortgage File.....................................................................3
Section 2.04. Representations and Warranties of the Master Servicer.............................4
Section 2.05. Representations and Warranties of the Issuer......................................5
Section 2.06. Representations and Warranties of the Depositor...................................6
Section 2.07. Representations and Warranties Regarding the Mortgage Loans.......................7
Section 2.08. Enforcement of Representations and Warranties.....................................8
Section 2.09. Future Advances...................................................................9
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS..........................................9
Section 3.01. Appointment of the Master Servicer................................................9
Section 3.02. Subservicing Agreements Between the Master Servicer and Subservicers.............11
Section 3.03. Collection of Mortgage Loan Payments.............................................13
Section 3.04. Permitted Withdrawals from the Collection Account................................14
Section 3.05. Maintenance of Insurance.........................................................15
Section 3.06. Fidelity Bond; Errors and Omissions Policy.......................................16
Section 3.07. Enforcement of Due-on-Sale Clauses; Assumption Agreements........................17
Section 3.08. Realization upon Defaulted Mortgage Loans........................................18
Section 3.09. Indenture Trustee to Cooperate; Release of Mortgage Files; Trust Estates;
Related Documents ...............................................................19
Section 3.10. Servicing Fee; Payment of Certain Expenses by Master Servicer....................21
Section 3.11. Access to Certain Documentation and Information Regarding the Mortgage Loans.....21
Section 3.12. Reserved.........................................................................22
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TABLE OF CONTENTS
(continued)
PAGE
Section 3.13. Recordation of Assignments.......................................................22
Section 3.14. Annual Statement as to Compliance................................................22
Section 3.15. Annual Independent Public Accountants' Servicing Report..........................22
Section 3.16. Reserved.........................................................................23
Section 3.17. Indemnification; Third-Party Claims..............................................23
Section 3.18. Maintenance of Existence and Licenses; Merger or Consolidation of the
Master Servicer .................................................................24
Section 3.19. Excluded Amounts.................................................................24
ARTICLE IV SERVICING CERTIFICATE..................................................................24
Section 4.01. Servicing Certificate............................................................24
ARTICLE V THE ACCOUNTS...........................................................................27
Section 5.01. Accounts.........................................................................27
Section 5.02. Collection Account...............................................................27
Section 5.03. Trustee Collection Account.......................................................28
ARTICLE VI THE MASTER SERVICER....................................................................26
Section 6.01. Liability of the Master Servicer.................................................29
Section 6.02. Merger or Consolidation or Assumption of the Obligations of the Master Servicer..29
Section 6.03. Limitation on Liability of the Master Servicer and Others........................30
Section 6.04. Master Servicer Not to Resign....................................................30
Section 6.05. Delegation of Duties.............................................................31
Section 6.06. Indenture Trustee Fees and Expenses; Indemnification.................................31
Section 6.07. Indemnification of Owner Trustee by Master Servicer..............................33
ARTICLE VII DEFAULT................................................................................33
Section 7.01. Default..........................................................................33
Section 7.02. Indenture Trustee to Act; Appointment of Successor...............................35
Section 7.03. Notification to Securityholders..................................................36
ARTICLE VIII MISCELLANEOUS PROVISIONS...............................................................36
Section 8.01. Amendment........................................................................36
Section 8.02. Governing Law....................................................................37
Section 8.03. Notices..........................................................................37
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TABLE OF CONTENTS
(continued)
PAGE
Section 8.04. Severability of Provisions.......................................................38
Section 8.05. Third-Party Beneficiaries........................................................38
Section 8.06. Counterparts.....................................................................38
Section 8.07. Effect of Headings and Table of Contents.........................................38
Section 8.08. Termination; Clean-Up Call.......................................................38
Section 8.09. Certain Matters Affecting the Indenture Trustee..................................39
Section 8.10. Owner Trustee Not Liable for Mortgage Documents or Related Documents.............39
Section 8.11. Rights of the Enhancer...........................................................40
Section 8.12. Limitation of Liability of Owner Trustee.........................................40
Section 8.13 Tax Treatment of Servicing Fee and Other Amounts.................................40
This SALE AND SERVICING AGREEMENT (the "Agreement"), dated as of May
31, 2002, is among Bear ▇▇▇▇▇▇▇ Asset Backed Securities, Inc., as depositor (the
"Depositor"), ▇▇▇▇▇ Union Bank and Trust Company, as master servicer (the
"Master Servicer"), ▇▇▇▇▇ Whole Loan Home Equity Trust 2002-A, as issuer (the
"Issuer"), and ▇▇▇▇▇ Fargo Bank Minnesota, National Association, as indenture
trustee (the "Indenture Trustee").
WITNESSETH:
WHEREAS, pursuant to the terms of the Mortgage Loan Purchase and
Servicing Agreement attached as Exhibit A hereto, the Seller sold to the
Depositor the Mortgage Loans, together with the applicable Mortgage Documents
and Related Documents on March 28, 2002, and thereafter, until the end of the
Managed Amortization Period, the Seller will sell to the Issuer all Additional
Balances relating thereto created after the Cut-Off Date;
WHEREAS, the Depositor will sell the Mortgage Loans and assign all of
its rights under the Mortgage Loan Purchase and Servicing Agreement to the
Issuer, together with the applicable Mortgage Documents and Related Documents,
on the Closing Date;
WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer will
issue the Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer will issue
the Notes; and
WHEREAS, pursuant to the terms of this Agreement, the Master Servicer
will service the Mortgage Loans directly or through one or more Subservicers.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Agreement, except
as otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in Appendix A to the indenture dated as of May 31,
2002 (the "Indenture"), between the Issuer and the Indenture Trustee, which is
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
Section 1.02. Interpretive Provisions. Unless the context otherwise
requires, (i) a term has the meaning assigned to it; (ii) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time to time; (iii) "or"
includes "and/or"; (iv) "including" means including without limitation; (v)
words in the singular include the plural and words in the plural include the
singular; (vi) the term "proceeds" has the meaning ascribed thereto in the UCC;
(vii) any agreement, instrument or statute defined or referred to herein or in
any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated
therein; and (viii) references to a Person are also to such Person's permitted
successors and assigns.
Section 1.03. Interest Calculations. All calculations of interest
hereunder that are made in respect of any HELOC originated by the Master
Servicer shall be made on an average daily balance basis using a 365/366 day
year. All calculations of interest hereunder that are made in respect of any
High LTV Mortgage Loan or any HEL originated before January 1, 2000 shall be
made either on a daily basis using a 365/366-day year or on the basis of a
360-day year assumed to consist of twelve 30-day months, except upon loan
payoff, when interest is calculated on an actual 365/366 day basis. All
calculations of interest on the Class IA-1 Notes and the Class IIA-1 Notes shall
be made on the basis of the actual number of days in the related Interest Period
and a year assumed to consist of 360 days. All calculations of interest on any
other Security shall be made on the basis of a 360-day year assumed to consist
of twelve 30-day months. The calculation of the Servicing Fee shall be made on
the basis of the actual number of days in the related Interest Period and a
360-day year.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Conveyance of Mortgage Loans. In consideration of the
Issuer's delivery to or upon the order of the Depositor of executed and
authenticated Notes and Certificates, in authorized denominations and in
aggregate amounts equal to the aggregate Initial Note Balance, the Depositor
does hereby sell, transfer, assign and otherwise convey to the Issuer, in trust
for the benefit of the Securityholders and, with respect to the Mortgage Loans
in Group I, the Enhancer, without recourse, subject to the Depositor's
obligations herein:
(a) all right, title and interest of the Depositor in and to the
Mortgage Loans listed in Exhibit B hereto and all principal and interest
collected after the Cut-Off Date relating to the Cut-Off Date Principal Balances
of the Mortgage Loans, and any Additional Balances relating thereto created
after the Cut-Off Date;
(b) all right, title and interest of the Depositor in the Lien on the
Mortgaged Properties created by the related Mortgage Documents;
(c) all right, title and interest of the Depositor in any Liquidation
Proceeds and Insurance Proceeds covering the Mortgage Loans or the related
Mortgaged Properties or Mortgagors;
(d) all right, title and interest (but none of the obligations) of
the Depositor under the Mortgage Loan Purchase and Servicing Agreement,
including, but not limited to, the right to enforce, on behalf of the Depositor,
the representations and warranties made by the Seller to the Depositor relating
to itself and the representations and warranties relating to the Mortgage Loans
made therein by the Seller to the Depositor, as listed in Exhibit C (giving the
meaning to such
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terms set forth in the Mortgage Loan Purchase and Servicing Agreement) hereto
and the rights of the Depositor under Section 7.03 of the Mortgage Loan Purchase
and Servicing Agreement; and
(e) any proceeds of the foregoing and all other assets included or to
be included in the Trust for the benefit of the Securityholders and, in the case
of the Mortgage Loans assigned to Group I, the Enhancer.
Section 2.02. Treatment of Transfer. It is the intention of the
Depositor that the transfer and assignment contemplated by this Agreement shall
constitute, as of its execution, a sale of all of its right, title and interest
in and to the Mortgage Loans and other property of the Trust Estate from the
Depositor to the Issuer and the beneficial interest in and title to the Mortgage
Loans and the other property shall not be part of the Depositor's estate in the
event of the filing of a bankruptcy petition by or against the Depositor under
any bankruptcy law. In the event that, notwithstanding the intent of the
Depositor, the transfer and assignment contemplated hereby is held not to be a
sale, this Agreement shall be deemed to have constituted a grant of a security
interest in the property referred to in this Section for the benefit of the
Securityholders and, with respect to the Mortgage Loans in Group I, the
Enhancer.
Notwithstanding the characterization of certain classes of the Notes as
debt for federal, state and local income and franchise tax purposes, the parties
hereto intend to treat the transfer of the Mortgage Loans to the Trust as
provided herein as a sale, for certain non-tax purposes, of all the Depositor's
right, title and interest in and to the Mortgage Loans, whether now existing or
hereafter created, and the other property described above and all proceeds
thereof. In the event such transfer is deemed not to be a sale for such
purposes, the Depositor shall be deemed to have granted to the Trust a security
interest in all of the Depositor's right, title and interest in, to and under
the Mortgage Loans, whether now existing or hereafter created, and the other
property described above and all proceeds thereof; and this Agreement shall
constitute a security agreement under applicable law.
The Issuer hereby appoints the Indenture Trustee as its custodian for
purposes of taking possession of the Trust Estate in order to perfect any
security interest arising as a result of the operation of this Section 2.02.
Section 2.03. Mortgage File. In connection with the sale of the
Mortgage Loans to the Depositor pursuant to the Mortgage Loan Purchase and
Servicing Agreement, the Mortgage File with respect to each Mortgage Loan was
delivered to ▇▇▇▇▇ Fargo Bank Minnesota, National Association. In connection
with the transfer of the Mortgage Loans on the Closing Date, the Indenture
Trustee will deliver an initial certification, certifying that it has received a
Mortgage File containing a Mortgage Note or Loan Agreement for each such
Mortgage Loan listed on the Mortgage Loan Schedule to the Depositor and, with
respect to the Mortgage Loans in Group I, the Enhancer. The Indenture Trustee
shall not distribute the initial certification to any other party. Within 120
days following each such delivery of Mortgage Files, the Indenture Trustee shall
review each such Mortgage File to ascertain that the Mortgage Documents are
contained therein and that such Mortgage Documents relate to the Mortgage Loans
identified on the Mortgage Loan Schedule. Furthermore, the Indenture Trustee
shall review the following data elements contained in the Mortgage Loan Schedule
(a) the Seller's loan number, (b) the Mortgagor's name, (c) the address
(including city and state) of the related Mortgaged Property,
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(d) the original principal balance and (e) the maturity of the related Mortgage
Note. In so doing, the Indenture Trustee may rely on the purported due execution
and genuineness of any signature thereon. If, within such 120 day period, the
Indenture Trustee finds any Mortgage Document (other than a Mortgage Note for
which the Indenture Trustee has received a lost note affidavit) constituting a
part of a Mortgage File not to have been executed or received or to be unrelated
to the Mortgage Loan identified in the Mortgage Loan Schedule, the Indenture
Trustee shall, promptly upon the conclusion of its review, notify the Master
Servicer, the Depositor and, with respect to the Mortgage Loans in Group I, the
Enhancer in the form of the certificate attached as Exhibit F hereto. The list
of noted exceptions included on such Exhibit F or of any exceptions still
existing after delivery of the initial certification shall not be provided by
the Indenture Trustee to any Securityholder (or beneficial owner thereof). The
Master Servicer shall cause the Seller or, if applicable, the Depositor within
120 days of its receipt of such notice, to correct or cure any such defect or to
cause such defect to be corrected or cured or to substitute for or repurchase
the affected Mortgage Loan pursuant to the terms of the Mortgage Loan Purchase
and Servicing Agreement.
The Indenture Trustee shall have no responsibility for reviewing any
Mortgage File except as expressly provided in this Section. In reviewing any
Mortgage File pursuant to this Section, the Indenture Trustee shall have,
without limitation, no responsibility for determining whether any document is
valid and binding, whether the text of any assignment or endorsement is in
proper or recordable form (except, if applicable, to determine if the Indenture
Trustee is the assignee or endorsee thereof), whether any document has been
recorded in accordance with the requirements of any applicable jurisdiction,
whether a blanket assignment is permitted in any applicable jurisdiction,
whether any Person executing any document is authorized to do so or whether any
signature thereon is genuine, but shall only be required to determine whether a
document has been executed and that it appears to be what it purports to be.
Section 2.04. Representations and Warranties of the Master Servicer.
The Master Servicer represents and warrants to the Issuer and for the benefit of
the Indenture Trustee, as pledgee of the Mortgage Loans, and, with respect to
the Mortgage Loans in Group I, the Enhancer, as of the Closing Date:
(a) the Master Servicer is a bank duly organized and validly existing
under the laws of the State of Indiana, and has full power and authority to own
its assets and to transact the business in which it is currently engaged. The
Master Servicer (including, where appropriate, through its subsidiaries), is
duly qualified to do business and is in good standing in each jurisdiction in
which the character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure to so qualify
would have a material adverse effect on the business, properties, assets or
condition (financial or otherwise) of the Master Servicer;
(b) the Master Servicer has full power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated hereunder (including, where appropriate, through its subsidiaries),
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement;
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(c) the Master Servicer is not required to obtain the consent of any
other Person or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, except for such consent, license, approval or
authorization or registration or declaration as shall have been obtained or
filed, as the case may be;
(d) the execution and delivery of this Agreement and the performance
of the transactions contemplated hereby by the Master Servicer will not violate
any material provision of any existing law or regulation or any order or decree
of any court applicable to the Master Servicer or any provision of the articles
or bylaws of the Master Servicer, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Master Servicer is
a party or by which it may be bound; and
(e) Except as disclosed in the Prospectus Supplement, no Proceeding
of or before any court, tribunal or governmental body is currently pending or,
to the knowledge of the Master Servicer, threatened against the Master Servicer
or any of its properties or with respect to this Agreement or the Securities
that in the opinion of the Master Servicer has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated by this
Agreement.
The foregoing representations and warranties shall survive the transfer
of the Mortgage Loans to the Trust and any termination of the Master Servicer
hereunder. Upon discovery of a breach of any representation or warranty that
materially and adversely affects the interests of the Securityholders or, with
respect to the Mortgage Loans in Group I and so long as the Policy is in effect
or amounts are owed to the Enhancer under the Insurance Agreement, the Enhancer,
the party discovering such breach or the Enhancer shall give prompt written
notice to the other parties hereto. Within 90 days of its discovery or its
receipt of notice of such breach or, with the prior written consent of a
Responsible Officer of the Indenture Trustee and, with respect to the Mortgage
Loans in Group I and so long as the Policy is in effect or amounts are owed to
the Enhancer under the Insurance Agreement, the Enhancer, such longer period
specified in such consents, the Master Servicer shall cure such breach in all
material respects.
Section 2.05. Representations and Warranties of the Issuer. The Issuer
hereby represents and warrants to the Master Servicer and for the benefit of
Indenture Trustee, as pledgee of the Mortgage Loans, and, with respect to the
Mortgage Loans in Group I, the Enhancer, as of the Cut-Off Date, that:
(a) the Issuer is a business trust duly formed and in good standing
under the laws of the State of Delaware and has full power, authority and legal
right to execute and deliver this Agreement and to perform its obligations under
this Agreement, and has taken all necessary action to authorize the execution,
delivery and performance by it of this Agreement; and
(b) the execution and delivery by the Issuer of this Agreement and
the performance by the Issuer of its obligations under this Agreement will not
violate any provision of any law or regulation governing the Issuer or any
order, writ, judgment or decree of any court, arbitrator or governmental
authority or agency applicable to the Issuer or any of its assets. Such
execution,
5
delivery, authentication and performance will not require the authorization,
consent or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action with respect to, any governmental
authority or agency regulating the activities of business trusts. Such
execution, delivery, authentication and performance will not conflict with, or
result in a breach or violation of, any mortgage, deed of trust, lease or other
agreement or instrument to which the Issuer is a party or by which it may be
bound.
Section 2.06. Representations and Warranties of the Depositor. The
Depositor represents and warrants to the Indenture Trustee and, with respect to
the Mortgage Loans in Group I, the Enhancer, as of the Closing Date, that:
(a) Depositor is a corporation, validly existing and in good standing
under the laws of the State of Delaware, and has full power and authority to own
its assets and to transact the business in which it is currently engaged. The
Depositor is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the business
transacted by it or any properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets or condition (financial or
otherwise) of the Depositor;
(b) Depositor has full power and authority to make, execute, deliver
and perform this Agreement and all of the transactions contemplated hereunder,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation of the
Depositor enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and by
the availability of equitable remedies;
(c) Depositor is not required to obtain the consent of any other
Person or any consent, license, approval or authorization from, or registration
or declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement;
(d) the execution, delivery and performance of this Agreement by the
Depositor will not violate any provision of any existing law or regulation or
any order decree of any court applicable to the Depositor or any provision of
the articles of incorporation or bylaws of the Depositor, or constitute a
material breach of any mortgage, indenture, contract or other agreement to which
the Depositor is a party or by which it may be bound;
(e) no Proceeding of or before any court, tribunal or governmental
body is currently pending or, to the knowledge of the Depositor, threatened
against the Depositor or any of its properties or with respect to this Agreement
or the Securities;
(f) this Agreement (i) constitutes a valid transfer and assignment to
the Trust of all right, title and interest of the Depositor in and to the
Mortgage Loans, all monies due or to become due with respect thereto, all
proceeds of such Mortgage Loans, such funds as are from time to time on deposit
in the Collection Account or Trustee Collection Account and all other property
specified in the definition of "Trust Estate" as being part of the Trust Estate;
and upon
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payment for Additional Balances relating thereto, if any, will constitute a
valid transfer and assignment to the Trust of all right, title and interest of
the Depositor in and to such Additional Balances, all monies due or to become
due with respect thereto, all proceeds of such Additional Balances and all other
property relating thereto that is specified in the definition of "Trust Estate"
relating to Additional Balances or (ii) constitutes a grant of a security
interest, as defined in the UCC as in effect in the State of New York, in such
property in favor of the Trust or the Owner Trustee on behalf of the Trust;
provided, that if the Indenture Trustee obtains and maintains possession of the
Mortgage File for each Mortgage Loan, the Trust shall have a first priority
perfected security interest in such property; and
(g) Immediately prior to the transfer and assignment to the Trust of
all of its right, title and interest in and to the Mortgage Loans in Group I,
the Depositor was the sole owner of record and was the holder of the Mortgage
Loans in Group I and the indebtedness evidenced by the related Mortgage Notes or
Loan Agreements. Upon the transfer and assignment to the Issuer, the Mortgage
Loans in Group I, including the related Mortgage Notes or Loan Agreements and
the Mortgages, were not subject to an assignment, sale or pledge to any person
other than Issuer and the Depositor had good and marketable title to and was the
sole owner thereof and had full right to transfer and sell the Mortgage Loan in
Group I to the Issuer free and clear of any encumbrance, equity, lien, pledge,
charge, claim or security interest and has the full right and authority subject
to no interest or participation of, or agreement with, any other party, to sell
and assign the Mortgage Loans in Group I pursuant to this Agreement and
following the sale of the Mortgage Loans in Group I, the Issuer will own the
Mortgage Loans in Group I free and clear of any encumbrance, equity,
participation interest, lien other than Permitted Liens, pledge, charge, claim
or security interest. The Depositor intends to relinquish all rights to possess,
control and monitor the Mortgage Loans in Group I. The Depositor acquired any
right, title and interest in and to the Mortgage Loans in Group I in good faith
and without notice of any adverse claim.
The foregoing representations and warranties shall survive the sale and
assignment of the Mortgage Loans to the Trust. Upon discovery of a breach of any
representation or warranty that materially and adversely affects the interests
of the Securityholders and, with respect to the Mortgage Loans in Group I, the
Enhancer, the party discovering such breach or the Enhancer shall give prompt
written notice to the other parties hereto. Within 90 days of its discovery or
its receipt of notice of such breach or, with the prior written consent of a
Responsible Officer of the Indenture Trustee and, with respect to the Mortgage
Loans in Group I, the Enhancer, such longer period specified in such consents,
the Depositor shall cure such breach in all material respects.
Section 2.07. Representations and Warranties Regarding the Mortgage
Loans.
(a) In addition to the representations and warranties made by the
Seller in the Mortgage Loan Purchase and Servicing Agreement and assigned to the
Issuer in Section 2.01, the Depositor hereby makes, for the benefit of the
Issuer and the Enhancer, the representations and warranties as to the Mortgage
Loans contained in Exhibit C for the period of time from, and excluding, March
28, 2002 to, and including, the Closing Date (the "Applicable Period"). The
representations and warranties with respect to the Mortgage Loans made by the
Depositor shall be deemed to be breached by the Depositor if any such
representation and warranty is inaccurate at any time during the Applicable
Period and such inaccuracy is due to events occurring or facts arising with
respect to the Mortgage Loans during the Applicable Period. The Depositor shall
7
have an obligation pursuant to Section 2.08 to cure or repurchase a Mortgage
Loan for which there is a breach of its representations and warranties. In the
case of any Eligible Substitute Mortgage Loans, the representations and
warranties of the Depositor shall be deemed to be made as of the related
Subsequent Transfer Date. With respect to any representation or warranty
contained in Exhibit C of this Agreement that was made to the Seller's
knowledge, if the substance of such representation or warranty is inaccurate and
such inaccuracy materially and adversely affects the value of the related
Mortgage Loan or the interests of the Trust, then such inaccuracy shall be
deemed a breach of the representation or warranty for all purposes under this
Agreement notwithstanding such qualification.
(b) The representations and warranties of both the Seller in the
Mortgage Loan Purchase and Servicing Agreement and the representations and
warranties of the Depositor herein shall survive the sale, transfer and
assignment of the Mortgage Loans to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture. The representations and warranties
set forth in this Section shall survive delivery of the Mortgage Files to the
Indenture Trustee pursuant to Section 2.04 and the termination of the rights and
obligations of the Master Servicer pursuant to Section 6.04 or Article VII.
Section 2.08. Enforcement of Representations and Warranties. The Master
Servicer, on behalf of and subject to the direction of the Indenture Trustee, as
pledgee of the Mortgage Loans, and, in the case of the Mortgage Loans assigned
to Group I, the Enhancer or the Issuer, shall enforce the representations and
warranties of the Seller in Section 7.01 and Section 7.02 of the Mortgage Loan
Purchase and Servicing Agreement and of the Depositor in Section 2.07 hereof, as
applicable. Upon the discovery by the Depositor, the Master Servicer, the
Issuer, the Indenture Trustee, the Enhancer, or the Custodian of a breach of any
of the representations and warranties made by the Seller in the Mortgage Loan
Purchase and Servicing Agreement or the Depositor in Section 2.07 in respect of
any Mortgage Loan that materially and adversely affects the interests of any
Securityholder or the Enhancer (or upon the occurrence of a Repurchase Event),
the Person discovering such breach shall give prompt written notice to the other
foregoing Persons and to the Seller. The Master Servicer shall promptly demand
of the Seller or the Depositor, as applicable, that within 60 days of receipt of
notice making such demand it (i) cure such breach in all material respects with
respect to a breach of the representations and warranties contained in Section
7.01 or Section 7.02 of the Mortgage Loan Purchase and Servicing Agreement, or
with respect to a breach of the representations and warranties contained in
Section 2.07 herein, respectively, or (ii) purchase the related Mortgage Loan
from the Issuer or substitute an Eligible Substitute Mortgage Loan (and remit to
the Trustee Collection Account any related Substitution Adjustment Amount), in
each case in the manner set forth in Section 7.03 of the Mortgage Loan
Purchasing and Servicing Agreement.
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The obligation of the Seller or the Depositor, as the case may be, to
accept a retransfer of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit into the Collection Account or
Trustee Collection Account or to substitute an Eligible Substitute Mortgage
Loan, as the case may be, shall constitute the sole and exclusive remedy
hereunder against the Seller or the Depositor, as applicable, respecting such
breach available therefor. Notwithstanding the foregoing limitation, the
Indenture Trustee shall enforce the obligations of the Seller in the Mortgage
Loan Purchase and Servicing Agreement, to indemnify the Depositor, the Issuer,
the Owner Trustee and the Indenture Trustee as "Purchaser" under the Mortgage
Loan Purchase and Servicing Agreement for the breach of any covenant,
representation or warranty of the Seller pursuant to the terms of Section 12.01
of such agreement.
In connection with the purchase or substitution of any Mortgage Loan,
the Issuer shall assign to the Seller or the Depositor, as applicable, all of
its right, title and interest in and to such Mortgage Loan. Upon receipt of the
Repurchase Price, or upon the completion of such substitution, the Master
Servicer shall notify the Custodian thereof, and the Custodian shall deliver the
Mortgage Files to the Master Servicer, together with all relevant endorsements
and assignments prepared by the Master Servicer that the Indenture Trustee shall
execute.
Section 2.09. Future Advances. With respect to the HELOCs,
notwithstanding Section 2.01, neither the Indenture Trustee nor the Trust
assumes any obligation under any Loan Agreement that provides for the funding of
future advances to any Mortgagor thereunder, and neither the Trust nor the
Indenture Trustee shall be obligated or permitted to fund any such future
advances. Additional Balances that do not constitute Excluded Amounts shall be
part of the related Principal Balance of such HELOCs as they are created and are
hereby transferred to the Trust as part of the Trust Estate on the Closing Date
pursuant to this Section.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 3.01. Appointment of the Master Servicer.
(a) ▇▇▇▇▇ Union Bank and Trust Company agrees to act as the Master
Servicer and to perform all servicing duties under this Agreement, subject to
the terms hereof.
(b) The Master Servicer shall service and administer the Mortgage
Loans in a manner consistent with the terms of this Agreement and as shall be
normal and usual in its general mortgage servicing activities and consistent
with mortgage servicing practices of prudent mortgage lending institutions which
service mortgage loans of the same type as the Mortgage Loans for their own
accounts in the jurisdictions in which the related Mortgaged Properties are
located, and shall have full power and authority, acting alone or through
Subservicers, to do any and all things in connection with such servicing and
administration as it may deem necessary or desirable; provided, that the Master
Servicer shall at all times remain responsible to the Issuer, the Indenture
Trustee, as pledgee of the Mortgage Loans, and the Enhancer, in the case of the
Mortgage Loans assigned to Group I, for the performance of its duties and
obligations hereunder in accordance with the terms hereof. Without limiting the
generality of the foregoing, the Master
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Servicer shall continue, and is hereby authorized and empowered by the Issuer
and the Indenture Trustee, as pledgee of the Mortgage Loans, to execute and
deliver, on behalf of itself, the Issuer, the Indenture Trustee or any of them,
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments with respect to the
Mortgage Loans and the Mortgaged Properties. The Issuer, the Indenture Trustee
and the Custodian, as applicable, shall furnish the Master Servicer with any
powers of attorney or other documents necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative duties hereunder.
In addition, the Master Servicer may, at its own discretion and on behalf of the
Issuer, obtain credit information in the form of a "credit score" from a credit
repository. Within 30 days of the Closing Date, the Indenture Trustee shall
deliver to the Master Servicer no less than 50 original limited powers of
attorney substantially in the form of Exhibit D hereto. Following the Closing
Date, the Indenture Trustee shall promptly deliver further powers of attorney as
reasonably requested by the Master Servicer.
In servicing and administering the Mortgage Loans, the Master Servicer
(i) shall employ procedures consistent with the Master Servicer's normal
servicing practices and in a manner consistent with recovery under any insurance
policy required to be maintained by a Mortgagor pursuant to the related Mortgage
Documents or by the Master Servicer pursuant to this Agreement, and (ii) may
take reasonable actions to encourage or effect the termination of Loan
Agreements that have not had an outstanding Principal Balance for at least 6
months. With respect to the Mortgage Loans in Group I and so long as the
Enhancer has rights pursuant to Section 8.11 of this Agreement, the Master
Servicer, in accordance with its customary servicing practices, may make an
increase or decrease of up to 100 basis points in the Mortgage Interest Rate of
a Mortgage Loan for which the Mortgagor is not in default with respect to the
payment of all or any portion of a Monthly Payment; provided, however, that
without the prior written consent of the Enhancer the aggregate Principal
Balance of the Mortgage Loans in Group I so modified by the Master Servicer
pursuant to this sentence shall not exceed 1% of the Initial Aggregate Principal
Balance of Group I. In addition, with respect to the Mortgage Loans in Group I
and subject to the prior written consent of the Enhancer so long as the Enhancer
has rights pursuant to Section 8.11 of this Agreement, the Master Servicer may
allow the substitution of collateral with respect to any such Mortgage Loan in
accordance with its customary servicing practices.
With respect to the Mortgage Loans in Group II and, to the extent the
Enhancer's rights under Section 8.11 of this Agreement have terminated, the
Mortgage Loans in Group I, the Master Servicer may perform rate modifications
and substitute collateral in accordance with the Master Servicer's customary
servicing practices; provided, however, that the aggregate Principal Balance of
the Mortgage Loans in Group II and Group I for which rate modifications have
been performed by the Master Servicer pursuant to this sentence (and the
preceding paragraph in the case of the Mortgage Loans in Group I) shall not
exceed 5% of the Initial Aggregate Principal Balance of Group II and Group I,
respectively.
The Master Servicer may, without prior approval from any Person,
increase the Credit Limit on any HELOC in a manner consistent with the Master
Servicer's customary servicing practices. The Master Servicer may, without prior
approval from any Person, repurchase Mortgage Loans from the Trust at the
Repurchase Price in cases where Mortgage Loans are found to be in breach of the
related purchase agreement that the Master Servicer has with brokers
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or correspondent lenders, even if such Mortgage Loans are not otherwise in
breach of this Agreement.
The relationship of the Master Servicer, and of any successor to the
Master Servicer as master servicer hereunder, to the Issuer under this Agreement
is intended by the parties to be that of an independent contractor and not that
of a joint venturer, partner or general agent.
The Master Servicer shall make any Mortgage Interest Rate adjustments
on each Interest Adjustment Date for any Mortgage Loan with an adjustable
Mortgage Interest Rate in compliance with applicable regulatory adjustable
mortgage loan requirements and the related Loan Agreements. The Master Servicer
shall establish procedures to monitor the Interest Adjustment Dates in order to
ensure that it uses a published interest rate in determining an interest rate
change, and it will comply with such procedures. In the event that a published
interest rate is no longer available, the Master Servicer shall choose a new
comparable published interest rate in accordance with the provisions hereof, the
related Loan Agreements and the Master Servicer's normal servicing practices,
and shall provide the related Mortgagor, the Issuer, the Indenture Trustee and,
in the case of the Mortgage Loans assigned to Group I, the Enhancer with notice
of the new published interest rate sufficient under law and the related Loan
Agreement. The Master Servicer shall execute and deliver all appropriate notices
required by the applicable adjustable mortgage loan laws and regulations and the
related Loan Agreements regarding such adjustments. If the Master Servicer fails
to make a timely Mortgage Interest Rate adjustment in accordance with the terms
of the related Loan Agreement, the Master Servicer shall use its own funds to
satisfy any shortfall in Collections resulting therefrom for so long as such
shortfall shall continue. Any such amount paid by the Master Servicer shall be
reimbursable to it from any subsequent amounts collected on account of the
related Mortgage Loan with respect to such adjustments.
(c) On and after such time as the Owner Trustee receives the
resignation of, or notice of the removal of, the Master Servicer from its rights
and obligations under this Agreement, and with respect to a resignation pursuant
to Section 6.04, after receipt by the Owner Trustee of the Opinion of Counsel
required pursuant to Section 6.04, the Indenture Trustee or its designee shall
assume all of the rights and obligations of the Master Servicer, subject to
Section 7.02. The Master Servicer shall, upon request of the Indenture Trustee
and at the expense of the Master Servicer, deliver to the Indenture Trustee all
documents and records relating to the Mortgage Loans and an accounting of
amounts collected and held by the Master Servicer, and shall otherwise use its
best efforts to effect the orderly and efficient transfer of servicing rights
and obligations to the assuming Person.
(d) The Master Servicer shall deliver a list of Servicing Officers to
the Issuer and the Indenture Trustee by the Closing Date, which list may from
time to time be amended, modified or supplemented by the subsequent delivery to
the Issuer and the Indenture Trustee of any superseding list of Servicing
Officers.
(e) The Master Servicer and the Depositor hereby agree that all of the
servicing duties and obligations of ▇▇▇▇▇ Union Bank and Trust Company under the
Mortgage Loan Purchase and Servicing Agreement are hereby superseded in their
entirety by the servicing duties and obligations set forth in this Sale and
Servicing Agreement.
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Section 3.02. Subservicing Agreements Between the Master Servicer and
Subservicers.
(a) The Master Servicer may enter into Subservicing Agreements with
Subservicers for the servicing and administration of certain of the Mortgage
Loans and for the performance of any and all other activities of the Master
Servicer hereunder. References in this Agreement to actions taken or to be taken
by the Master Servicer in servicing the Mortgage Loans include actions taken or
to be taken by a Subservicer on behalf of the Master Servicer, and any amount
actually received by such Subservicer in respect of a Mortgage Loan shall be
deemed to have been received by the Master Servicer, whether or not actually
received by the Master Servicer. Each Subservicing Agreement shall be upon such
terms and conditions as are not inconsistent with this Agreement and as the
Master Servicer and the Subservicer shall have agreed. With the approval of the
Master Servicer, a Subservicer may delegate its servicing obligations to
third-party servicers, but such Subservicers shall remain obligated under the
related Subservicing Agreements. The Master Servicer and the related
Subservicers may enter into amendments to the Subservicing Agreements; provided,
that any such amendments shall not cause the Mortgage Loans to be serviced in a
manner that would be materially inconsistent with the standards set forth in
this Agreement. The Master Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions thereof and
without any limitation by virtue of this Agreement; provided, that in the event
of the termination of any Subservicing Agreement by the Master Servicer or the
related Subservicer, the Master Servicer shall either act as servicer of the
related Mortgage Loans or enter into a Subservicing Agreement with a successor
Subservicer that will be bound by the terms of the related Subservicing
Agreement. The Master Servicer shall be entitled to enter into any agreement
with a Subservicer for indemnification of the Master Servicer, and nothing
contained herein shall be deemed to limit or modify such indemnification.
Each Subservicer shall be (i) a depository institution the accounts of
which are insured by the FDIC or (ii) another entity that engages in the
business of originating, acquiring or servicing mortgage loans, and in either
case shall be authorized to transact business in those States in which (x) the
related Mortgaged Properties are situated and (y) qualification is required to
conduct a subservicing business operation. In addition, each Subservicer shall
obtain and preserve its qualifications to do business as a foreign corporation
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Securities or any
Mortgage Loan, and to perform or cause to be performed its duties under the
related Subservicing Agreement, which shall provide that the Subservicer's
rights will automatically terminate upon the termination, resignation or other
removal of the Master Servicer under this Agreement. Each account used by any
Subservicer for the deposit of payments on any Mortgage Loan shall be an
Eligible Account. ▇▇▇▇▇ Home Equity Corporation shall be the initial
Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Master
Servicer and a Subservicer or any references to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Issuer and the Indenture Trustee for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement, without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
related Subservicer, and to
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the same extent and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the Mortgage Loans.
As part of its servicing activities hereunder, the Master Servicer, for
the benefit of the Issuer, the Indenture Trustee and, with respect to the
Mortgage Loans in Group I, the Enhancer, shall use reasonable efforts to enforce
the obligations of each Subservicer under the related Subservicing Agreement to
the extent that the non-performance of any such obligation would have a material
adverse effect on any Mortgage Loan. Such enforcement, including the legal
prosecution of claims, termination of Subservicing Agreements and the pursuit of
other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Master Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense, and
shall be reimbursed therefor only from (i) a general recovery resulting from
such enforcement to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loan or (ii) a specific recovery of
costs, expenses or attorneys' fees against the Person against whom such
enforcement is directed.
In the event the Master Servicer shall for any reason no longer be the
Master Servicer, the Indenture Trustee or its designee may (i) assume all of the
rights and obligations of the Master Servicer under each Subservicing Agreement
that the Master Servicer may have entered into, which assumption shall not
violate the terms of the related Subservicing Agreement, (ii) notwithstanding
anything to the contrary contained in each such Subservicing Agreement,
terminate the related Subservicer without being required to pay any fee in
connection therewith or (iii) assume the terminated Master Servicer's rights and
obligations under such subservicing arrangements, which termination or
assumption shall not violate the terms of the related Subservicing Agreement.
(c) With respect to each Payment Date, on the twenty-first (21st)
calendar day of each month (or if such day is not a Business Day, the following
Business Day), the Master Servicer shall furnish a statement to the Indenture
Trustee, in writing or in an electronic format as the Indenture Trustee shall
reasonably request, setting forth all information reasonably necessary to allow
the Indenture Trustee to make the distributions contemplated by Section 3.05 of
the Indenture and to deliver the statement required to be delivered pursuant to
Section 3.25 of the Indenture and Section 4.01 hereof.
Section 3.03. Collection of Mortgage Loan Payments. The Master Servicer
shall use its best efforts to collect all payments called for under the terms
and provisions of the Mortgage Documents and shall, to the extent such
procedures shall be consistent with this Agreement, follow such collection
procedures as shall constitute the Master Servicer's collection procedures for
mortgage loans serviced by it for its own account. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge, overlimit fee,
prepayment penalty or other fees that may be collected in the ordinary course of
servicing a Mortgage Loan and (ii) arrange with a Mortgagor a schedule for the
payment of principal and interest due and unpaid; provided, that such
arrangement is consistent with the Master Servicer's policies with respect to
mortgage loans; and provided further, that notwithstanding such arrangement,
such Mortgage Loans shall be included in the information regarding delinquent
Mortgage Loans set forth in the Servicing Certificate, but shall
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not be separately identified as being subject to a payment arrangement. The
Master Servicer may also extend the due date for payment due on a Mortgage Loan
in accordance with its normal servicing practices; provided, that the Master
Servicer shall first determine that any such waiver or extension will not
materially adversely affect the Lien of the related Mortgage Documents or the
interests of the Issuer, the Indenture Trustee or, in the case of the Mortgage
Loans in Group I, the Enhancer and with respect to any Mortgage Loan in Group I,
the due date for any payment due under any Mortgage Loan in Group I may not be
extended more than six months beyond the maturity date of the Mortgage Loan in
Group I with the latest maturity date as of the Cut-Off Date. Consistent with
the terms of this Agreement, the Master Servicer may waive, modify or vary any
term of any Mortgage Loan, subject, if applicable, to the second paragraph of
Section 3.01(b).
Consistent with the terms of this Agreement, the Master Servicer may
consent to the postponement of strict compliance with any such term or in any
manner grant indulgence to any Mortgagor; provided, that in the Master
Servicer's determination, such waiver, modification, postponement or indulgence
relates to a reasonable business purpose; and provided further, that such
waiver, modification, postponement or indulgence shall not materially and
adversely affect the interests of the Securityholders or, in the case of the
Mortgage Loans in Group I, the Enhancer. In addition, and without limitation, if
a HELOC is in default or, in the judgment of the Master Servicer, such default
is reasonably foreseeable, the Master Servicer may, through modification,
convert such HELOC to a fully amortizing HEL.
Section 3.04. Permitted Withdrawals from the Collection Account. The
Master Servicer is hereby authorized from time to time to make withdrawals from
the Collection Account for the following purposes:
(a) on each Master Servicer Remittance Date, to deposit the amount
required by Section 5.03 hereof for the related Payment Date into the Trustee
Collection Account;
(b) on each Master Servicer Remittance Date prior to the end of the
Managed Amortization Period for Group I, Principal Collections with respect to
Mortgage Loans assigned to Group I shall be applied toward the purchase from the
Seller of Additional Balances to be assigned to Group I; provided, that the
aggregate amount so paid to the Seller in respect of Additional Balances at any
time during any related Collection Period shall not exceed the amount of
Principal Collections for Mortgage Loans assigned to Group I received during
such Collection Period;
(c) to the extent deposited into the Collection Account, to reimburse
itself or the related Subservicer for previously unreimbursed expenses incurred
in maintaining insurance policies pursuant to Section 3.05, for Liquidation
Expenses paid pursuant to Section 3.08 or for expenses otherwise reimbursable
pursuant to the terms of this Agreement to the extent not payable pursuant to
Section 3.08 (other than expenses incurred by the Master Servicer pursuant to
Sections 6.03, 6.06 and 6.07 of this Agreement); such withdrawal right being
limited to amounts received in respect of the Mortgage Loans, other than any
Repurchase Price in respect thereof, that represent late recoveries of the
payments for which such advances were made, or from Liquidation Proceeds or the
proceeds of the purchase of such Mortgage Loans;
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(d) to pay to itself out of each payment received in respect of
interest on a Mortgage Loan as contemplated by clause (b) of the last paragraph
of Section 3.08, an amount equal to the Servicing Fee, to the extent not
retained pursuant to Section 5.02;
(e) to pay to the Seller or the Depositor, as applicable, with
respect to any Mortgage Loan or Mortgaged Property that has been purchased or
otherwise transferred to the Seller or the Depositor, all amounts received
thereon that are not required to be distributed to the Securityholders as of the
date on which the related Purchase Price or Repurchase Price is determined; and
(f) to withdraw any other amount deposited into the Collection
Account that was not required to be deposited therein pursuant to Section 5.02.
On each Master Servicer Remittance Date, the Master Servicer shall
transfer from the Collection Account to the Trustee Collection Account the
amount necessary for the Indenture Trustee to make the required distributions
pursuant to Section 3.05(a) and (b) of the Indenture. The Master Servicer shall
keep and maintain separate accounting on a loan-by-loan basis for the purpose of
justifying any withdrawal from the Collection Account pursuant to the foregoing
paragraphs. Notwithstanding any other provision of this Agreement, the Master
Servicer shall be entitled to reimburse itself for any previously unreimbursed
expenses relating to a Mortgage Loan incurred pursuant to Section 3.08 or
otherwise reimbursable pursuant to the terms of this Agreement that the Master
Servicer determines to be otherwise nonrecoverable, except with respect to any
Mortgage Loan as to which the Purchase Price or Repurchase Price shall have been
paid, by withdrawal from the Collection Account, on any Business Day prior to
the Payment Date succeeding the date of such determination, of amounts on
deposit therein attributable to the Mortgage Loan.
Section 3.05. Maintenance of Insurance.
(a) With respect to each Mortgage Loan, the Master Servicer shall
maintain accurate records reflecting the fire and casualty insurance coverage
maintained by the related Mortgagors with respect to the Mortgaged Properties in
accordance with its normal servicing practices. The Master Servicer may, if it
has received notice of a default or deficiency in respect of the payment of any
ground rents, taxes, assessments, water rates or casualty insurance premiums or
other charges that are or may become a Lien upon the related Mortgaged Property,
notify the related Mortgagor and the holder of the first Lien on the related
Mortgaged Property.
(b) To the extent permitted under the related Mortgage Documents, and
to the extent the Master Servicer receives notice that a hazard insurance policy
has been cancelled, the Master Servicer shall, to the extent consistent with its
normal servicing practices, cause to be maintained for each Mortgage Loan hazard
insurance naming the Master Servicer or the related Subservicer as loss payee
thereunder, and providing extended coverage in an amount at least equal to the
lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan from time to time or (ii) the principal balance owing on such
Mortgage Loan from time to time. The Master Servicer shall monitor the
maintenance of any such hazard insurance so obtained in accordance with its
normal servicing practices.
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(c) The Master Servicer shall cause to be maintained with respect to
any REO Property fire insurance with extended coverage in an amount at least
equal to the lesser of (i) the full insurable value of the improvements that are
a part of such property and (ii) the Principal Balance owing on the related
Mortgage Loan at the time of such foreclosure or deed in lieu of foreclosure.
Such insurance may be maintained in the form of one or more blanket insurance
policies. Amounts collected by the Master Servicer under any such policies,
other than amounts to be applied to the restoration or repair of Mortgaged
Property or REO Property or amounts released to the Mortgagor in accordance with
the Master Servicer's normal servicing practices, shall be deposited into the
Collection Account to the extent provided in Section 5.02.
(d) If, upon the origination of a Mortgage Loan, the related
Mortgaged Property was in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, and flood
insurance has been made available, the Master Servicer shall cause to be
maintained, to the extent required by the related Mortgage Documents, a flood
insurance policy meeting the requirements of the current guidelines of the
Federal Insurance Administration with a generally acceptable insurance carrier,
in an amount representing coverage at least equal to the lesser of (i) the
unpaid Principal Balance of such Mortgage Loan, (ii) the full insurable value of
such Mortgaged Property or (iii) the maximum amount of insurance available under
the Flood Disaster Protection Act of 1973, as amended. With respect to any REO
Property identified as being in a flood zone at origination, the Master Servicer
shall also maintain, if applicable, flood insurance in an amount at least equal
to the lesser of (i) the maximum insurable value of the improvements that are a
part of such property and (ii) the Principal Balance owing on the related
Mortgage Loan at the time of foreclosure or grant of deed in lieu of foreclosure
plus accrued interest and related Liquidation Expenses.
(e) Pursuant to Section 3.03, any amounts collected by the Master
Servicer under any insurance policy maintained pursuant to this Section, other
than amounts to be applied to the restoration or repair of Mortgaged Property or
released to a Mortgagor in accordance with the Master Servicer's normal
servicing practices, shall be deposited into the Collection Account, subject to
withdrawal pursuant to Section 3.04. Any cost incurred by the Master Servicer in
maintaining any such insurance shall be added to the amount owing under the
related Mortgage Loan where the terms of the related Mortgage Documents so
permit; provided, that the addition of any such cost shall not be taken into
account for purposes of calculating the Principal Balance of such Mortgage Loan
or distributions to be made to Securityholders. Such costs shall be recoverable
by the Master Servicer pursuant to Section 3.04.
(f) The Master Servicer shall be under no obligation to maintain or
require any Mortgagor to maintain earthquake, title or other additional
insurance, and shall be under no obligation itself to maintain any such
additional insurance on property acquired in respect of any Mortgage Loan, other
than pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance.
Section 3.06. Fidelity Bond; Errors and Omissions Policy.
(a) The Master Servicer shall maintain with a responsible company,
and at its own expense, a banker's blanket fidelity bond (a "Fidelity Bond") and
a mortgage errors and omissions insurance policy (an "Errors and Omissions
Policy"), in amounts as required by
16
FNMA and FHLMC and as are commercially available and at costs that are not
generally regarded as excessive by industry standards. Any fidelity bond shall
protect against dishonest act of officers and employees. Any such Fidelity Bond
or Errors and Omissions Policy shall not be canceled or modified by the Master
Servicer in a manner materially adverse to the Securityholders and, with respect
to the Mortgage Loans in Group I and so long as the Policy is in effect or
amounts are owed to the Enhancer under the Insurance Agreement, the Enhancer
without the prior written consent of the Issuer, the Indenture Trustee and, with
respect to the Mortgage Loans in Group I, the Enhancer.
(b) The Master Servicer shall be deemed to have complied with this
provision if any of its Affiliates has such a Fidelity Bond and Errors and
Omissions Policy and, by the terms of such policy, the coverage afforded
thereunder extends to the Master Servicer. The Master Servicer shall cause each
Subservicer to maintain an Errors and Omissions Policy and a Fidelity Bond
meeting the requirements of this Section.
Section 3.07. Enforcement of Due-on-Sale Clauses; Assumption
Agreements. In any case in which a Mortgaged Property is about to be conveyed by
the related Mortgagor, whether by absolute conveyance, contract of sale or
otherwise, and whether or not such Mortgagor remains liable thereon, and the
Master Servicer has knowledge of such prospective conveyance, the Master
Servicer shall enforce any due-on-sale provision contained in such Mortgage
Documents to the extent permitted by such Mortgage Documents, unless such
provision in the reasonable judgment of the Master Servicer is not exercisable
under applicable law, governmental regulations or in the Master Servicer's
reasonable judgment that it would be in the best financial interests of the
Trust, in which case the Master Servicer may enter into an assumption and
modification agreement or a substitution of liability agreement with such
Mortgagor.
The Master Servicer or the related Subservicer, as the case may be,
shall be entitled to (i) execute assumption agreements, substitution agreements
and instruments of satisfaction or cancellation or of partial or full release or
discharge, or any other document contemplated by this Agreement or other
comparable instruments with respect to the Mortgage Loans and the related
Mortgaged Properties; and the Issuer and the Indenture Trustee each shall
promptly execute any such documents upon the request of the Master Servicer, and
(ii) approve the granting of an easement on Mortgaged Property in favor of
another Person, any alteration or demolition of such Mortgaged Property or other
similar matters, if it has determined, exercising its good faith business
judgment in the same manner as it would if it were the owner of the related
Mortgage Loan, that the security for, and the timely and full collection of,
such Mortgage Loan would not be adversely affected thereby. The Master Servicer
shall notify the Indenture Trustee that any such assumption or substitution
agreement has been completed by forwarding to the Indenture Trustee the original
copy of such assumption or substitution agreement, which the Indenture Trustee
shall add to the related Mortgage File and which shall, for all purposes, be
considered part of such Mortgage File to the same extent as all other documents
and instruments constituting a part thereof. The Master Servicer shall retain as
servicing compensation any fee collected by the Master Servicer for entering
into an assumption or substitution of liability agreement. A partial release
pursuant to this Section shall be permitted only if the Combined Loan-to-Value
Ratio for the related Mortgage Loan after such partial release does not exceed
the Combined Loan-to-Value Ratio for such Mortgage Loan as of the related
Cut-Off Date.
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Notwithstanding the provisions of this Section or any other provision
of this Agreement, the Master Servicer shall not be deemed to be in default,
breach or violation of any of its obligations hereunder by reason of any
conveyance by a Mortgagor of the related Mortgaged Property or any assumption of
a Mortgage Loan by operation of law with respect to which the Master Servicer
determines in good faith that it may be restricted by law from preventing, for
any reason whatsoever, or if the exercise of such right would impair or threaten
to impair any recovery under any applicable insurance policy or, in the Master
Servicer's judgment, would be reasonably likely to result in legal action by
such Mortgagor.
Section 3.08. Realization upon Defaulted Mortgage Loans. With respect
to each Mortgage Loan that comes into and continues in default, the Master
Servicer shall exercise its reasonable judgment to determine whether to (a)
foreclose on the related Mortgaged Property, (b) write off the unpaid Principal
Balance thereof as bad debt, (c) take a deed in lieu of foreclosure, (d) accept
a short sale, (e) arrange for a repayment plan, (f) agree to a modification
thereof in accordance with this Section, (g) ▇▇▇ on the underlying promissory
note, (h) sell the Mortgage Loan as a nonperforming asset to a third party not
an Affiliate of the Master Servicer or Depositor or (i) take an unsecured note,
in each case subject to the rights of any related senior lienholder, provided,
however, that the Master Servicer may sell the Mortgage Loan or take an
unsecured note pursuant to clauses (h) and (i), respectively, only if the
Mortgage Loan has been charged off or constitutes a Liquidated Mortgage Loan.
The Master Servicer shall in no event expend funds in connection with any
foreclosure or attempted foreclosure that is not completed or towards the
correction of any default on a related senior mortgage loan or restoration of
any property if it shall determine that such expenditure would not increase the
related Liquidation Proceeds. In the event of a determination by the Master
Servicer that any such expenditure previously made pursuant to this Section will
not be reimbursable from Liquidation Proceeds, the Master Servicer shall be
entitled to reimbursement of its funds so expended pursuant to Section 3.04(c).
With respect to the Mortgage Loans in Group I and so long as the
Enhancer has rights pursuant to Section 8.11 of this Agreement, the Master
Servicer, in accordance with its customary servicing practices, may modify the
Mortgage Interest Rates of defaulted Mortgage Loans; provided, however, that
without the prior written consent of the Enhancer the aggregate Principal
Balance of the Mortgage Loans in Group I so modified by the Master Servicer
pursuant to this paragraph shall not exceed 1% of the Initial Aggregate
Principal Balance of Group I.
With respect to the Mortgage Loans in Group II and, to the extent the
Enhancer's rights under Section 8.11 of this Agreement have terminated, the
Mortgage Loans in Group I, the Master Servicer may perform rate modifications in
accordance with the Master Servicer's customary servicing practices; provided,
however, that the aggregate Principal Balance of the Mortgage Loans in Group II
and Group I for which rate modifications have been performed by the Master
Servicer pursuant to this sentence (and the preceding paragraph in the case of
the Mortgage Loans in Group I) shall not exceed 5% of the Initial Aggregate
Principal Balance of Group II and Group I, respectively.
Notwithstanding the foregoing provisions of this Subsection 3.08, with
respect to any Mortgage Loan in Group I as to which the Master Servicer has
received actual notice of, or has actual knowledge of, the presence of any toxic
or hazardous substance on the related Mortgaged
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Property, the Master Servicer shall not either (i) obtain title to such
Mortgaged Property as a result of or in lieu of foreclosure or otherwise, or
(ii) otherwise acquire possession of, or take any other action, with respect to,
such Mortgaged Property if, as a result of any such action, the Trust would be
considered to hold title to, to be a mortgagee-in-possession of, or to be an
owner or operator of such Mortgaged Property within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Master Servicer has
received approval from the Enhancer and has also previously determined, based on
its reasonable judgment and a prudent report prepared by a Person who regularly
conducts environmental audits using customary industry standards, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best economic interest of
the Purchaser to take such actions as are necessary to bring the Mortgaged
Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged Property
relating to the use, management or disposal of any hazardous substances,
hazardous materials, hazardous wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation could
be required under any federal, state or local law or regulation, or that if any
such materials are present for which such action could be required, that it
would be in the best economic interest of the Trust to take such actions with
respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Subsection 3.08 shall be advanced by the Master Servicer, subject to the Master
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.04(c).
If the Master Servicer determines, in consultation with the Enhancer,
as described above, that it is in the best economic interest of the Trust to
take such actions as are necessary to bring any such Mortgaged Property into
compliance with applicable environmental laws, or to take such action with
respect to the containment, clean-up or remediation of hazardous substances,
hazardous materials, hazardous wastes, or petroleum-based materials affecting
any such Mortgaged Property, then the Master Servicer shall take such action as
it deems to be in the best economic interest of the Trust. The cost of any such
compliance, containment, cleanup or remediation shall be advanced by the Master
Servicer, subject to the Master Servicer's right to be reimbursed therefor from
the Collection Account as provided in Section 3.04(c).
Notwithstanding any other provision of this Agreement, a defaulted
Mortgage Loan may be deemed to be finally liquidated if substantially all
amounts expected by the Master Servicer to be received in connection therewith
have been received; provided, that any subsequent collections with respect to
any such Mortgage Loan shall be deposited into the Collection Account. For
purposes of determining the amount of any Liquidation Proceeds or Insurance
Proceeds, or other unscheduled collections, the Master Servicer may take into
account amounts of additional receipts it expects to receive or any estimated
additional Liquidation Expenses it expects to incur in connection with such
Mortgage Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Master Servicer, which
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shall hold the same on behalf of the Issuer. Notwithstanding any such
acquisition of title and cancellation of the related Mortgage Loan, such
Mortgaged Property shall, except as otherwise expressly provided herein, be
considered to be an outstanding Mortgage Loan held as part of the Trust Estate
until such time as such Mortgaged Property shall be sold. Consistent with the
foregoing, for purposes of all calculations hereunder, so long as such Mortgaged
Property shall be considered to be an outstanding Mortgage Loan, it shall be
assumed that, notwithstanding that the indebtedness evidenced by the related
Mortgage Documents shall have been discharged, such Mortgage Documents in effect
at the time of any such acquisition of title before any adjustment thereto by
reason of any bankruptcy or similar Proceeding or any moratorium or similar
waiver or grace period will remain in effect.
Any proceeds from foreclosure Proceedings or the purchase or repurchase
of any Mortgage Loan pursuant to the terms of this Agreement and any recovery
resulting from a collection of Liquidation Proceeds or Insurance Proceeds, shall
be applied in the following order of priority: (a) to reimburse the Master
Servicer or the related Subservicer in accordance with this Section; (b) to pay
to the Master Servicer or the related Subservicer all Servicing Fees payable
therefrom (without duplication for any proceeds applied pursuant to clause (a));
(c) as accrued and unpaid interest on such Mortgage Loan at the related Mortgage
Interest Rate to the Payment Date in respect of which such amounts are to be
deposited into the Trustee Collection Account; and (d) as a recovery of
principal on such Mortgage Loan.
Section 3.09. Indenture Trustee to Cooperate; Release of Mortgage
Files; Trust Estates; Related Documents.
(a) On or before each Payment Date, the Master Servicer shall notify
the Indenture Trustee or the Custodian (with a copy to the Issuer) of the
termination or payment in full of any Mortgage Loan during the preceding
Collection Period. Upon receipt of payment in full, the Master Servicer shall be
authorized to execute, pursuant to the authorization contained in the first
paragraph of Section 3.01(b), if the Assignments of Mortgage have been recorded
if required pursuant hereto or pursuant to the Mortgage Loan Purchase and
Servicing Agreement, an instrument of satisfaction regarding the related
Mortgage Documents, which instrument of satisfaction shall be recorded by the
Master Servicer if required by applicable law, and shall be delivered to the
Person entitled thereto. Any expenses incurred in connection with such
instrument of satisfaction or transfer shall be reimbursable from amounts on
deposit in the Collection Account. From time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, the Indenture Trustee or the
Custodian shall, upon request of the Master Servicer and delivery to the
Indenture Trustee or the Custodian (with a copy to the Issuer) of two copies of
a Request for Release in the form of Exhibit E hereto, which shall be signed by
a Servicing Officer or be in a mutually agreeable electronic format that, in
lieu of being manually signed by a Servicing Officer, emanate from a Servicing
Officer, release or cause to be released the related Mortgage File to the Master
Servicer, and the Issuer and the Indenture Trustee shall promptly execute such
documents, in the forms provided by the Master Servicer, as shall be necessary
for the prosecution of any such Proceedings or the taking of other servicing
actions. The Request for Release shall obligate the Master Servicer to return
such Mortgage File to the Indenture Trustee or the Custodian (as specified
therein) when the need therefor by the Master Servicer no longer exists, unless
such Mortgage Loan shall have been liquidated.
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If an Assignment of Mortgage has been recorded, in order to facilitate
the foreclosure of the Mortgaged Property securing a Mortgage Loan that is in
default following such recordation, the Indenture Trustee or the Issuer shall,
if so requested in writing by the Master Servicer, promptly execute an
appropriate assignment in the form provided by the Master Servicer to assign
such Mortgage Loan for the purpose of collection to the Master Servicer, and any
such assignment shall unambiguously indicate that such assignment is for the
purpose of collection only. Upon such assignment, the Master Servicer, as
assignee for collection, will thereupon bring all required actions in its own
name and otherwise enforce the terms of such Mortgage Loan and deposit into or
credit to the Collection Account any Liquidation Proceeds received with respect
thereto. In the event that all delinquent payments due under any such Mortgage
Loan are paid by the related Mortgagor and any other defaults are cured, then
the Master Servicer, as assignee for collection, shall promptly reassign such
Mortgage Loan to the Indenture Trustee and return all Mortgage Documents and
Related Documents to the place where the related Mortgage File was being
maintained.
The Indenture Trustee, as pledgee of the Mortgage Loans and as assignee
of record of the Mortgage Loans on behalf of the Issuer pursuant to Section 3.13
of the Indenture, shall, on behalf of the Issuer, take all such actions on
behalf of the Issuer and promptly execute and return all instruments reasonably
required by the Master Servicer in connection therewith; provided, that if the
Master Servicer requests a signature of the Indenture Trustee on behalf of the
Issuer, the Master Servicer shall deliver to the Indenture Trustee an Officer's
Certificate stating that such signature is necessary or appropriate to enable
the Master Servicer to carry out its servicing and administrative duties under
this Agreement.
(b) Where the Issuer or the Indenture Trustee is required by this
Agreement to execute instruments to release property from the terms of the Trust
Agreement or the Indenture, as applicable, or convey the Issuer's or the
Indenture Trustee's interests in the same, the Issuer or the Indenture Trustee,
as applicable, shall do so in a manner and under circumstances that are not
inconsistent with the provisions of this Agreement. No Person relying upon any
instrument executed by the Issuer or the Indenture Trustee shall be bound to
ascertain the Issuer's or the Indenture Trustee's authority in connection
therewith, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.
(c) If from time to time the Master Servicer shall deliver to the
Custodian copies of any written assurance, assumption agreement or substitution
agreement or other similar agreement pursuant to Section 3.07, the Custodian
shall check that each of such documents purports to be an original executed copy
or, if the original executed copy has been submitted for recordation and has not
yet been returned, a copy of the original executed document; and if so, shall
file such documents, and upon receipt of the original executed copy from the
applicable recording office or receipt of a copy thereof certified by the
applicable recording office, shall file such originals or certified copies in
the related Mortgage File. If any such documents submitted by the Master
Servicer shall not meet the above qualifications, then the Custodian shall
promptly give the Master Servicer written notice of such occurrence or return
such documents to the Master Servicer, with a direction to the Master Servicer
to forward the correct documentation.
(d) Upon receipt of two copies of a Request for Release from the Master
Servicer, substantially in the form of Exhibit E hereto, to the effect that a
Mortgage Loan has been the
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subject of a final payment or a prepayment in full and has been terminated or
that substantially all Liquidation Proceeds determined by the Master Servicer in
its reasonable judgment to be finally recoverable have been recovered, and upon
deposit into the Collection Account of such final payment, prepayment in full or
Liquidation Proceeds, the Custodian shall promptly release the related Mortgage
File to the Master Servicer, and the Indenture Trustee shall execute the same,
along with such documents as the Master Servicer or the related Mortgagor may
request to evidence satisfaction and discharge of such Mortgage Loan.
Section 3.10. Servicing Fee; Payment of Certain Expenses by Master
Servicer. The Master Servicer shall be entitled to receive the Servicing Fee in
accordance with Section 3.04(d) as compensation for its services in connection
with servicing the Mortgage Loans. Moreover, additional servicing compensation
in the form of late payment charges and other receipts not required to be
deposited into the Collection Account as specified in Section 5.02 may be
retained by the Master Servicer. The Master Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder,
including payment of all fees and expenses not expressly stated hereunder to be
for the account of the Securityholders, and shall not be entitled to
reimbursement therefor. The Issuer shall pay the initial fees and expenses of
the Indenture Trustee from the proceeds of the Notes.
Section 3.11. Access to Certain Documentation and Information Regarding
the Mortgage Loans. Whenever required by statute or regulation, the Master
Servicer shall provide each Securityholder or any regulator therefor, the
Indenture Trustee and, with respect to the Mortgage Loans in Group I, the
Enhancer with reasonable access to all documentation relating to the Mortgage
Loans, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Master Servicer
or any Subservicer. Nothing in this Section shall limit the obligation of the
Master Servicer to observe any applicable law prohibiting disclosure of
information regarding Mortgagors, and the failure of the Master Servicer to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.
Section 3.12. Reserved.
Section 3.13. Recordation of Assignments. In the case of any Non-MERS
Mortgage Loan, the original assignment of Mortgage, in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect the conveyance of the Mortgage Loan, which may be
in the form of one or more "blanket" assignments covering the Mortgage Loans
secured by Mortgaged Properties located in the same jurisdiction, shall be
recorded by the Master Servicer, at the expense of the Seller, upon the earlier
to occur of (i) the occurrence and continuation of a Servicing Default or (ii)
in the case of the Mortgage Loans assigned to Group I: (a) a bankruptcy or
insolvency proceeding involving the Mortgagor is initiated, (b) the resignation
of the Master Servicer, (c) the occurrence of an event of default relating to
the Master Servicer, or (d) at the written request of the Enhancer to record
assignments of the Mortgage Loans assigned to Group I because the Enhancer has
determined, in the exercise of its reasonable judgment, (1) a material adverse
change in (i) the ability of the Seller to perform its obligations under the
Mortgage Loan Purchase and Servicing Agreement or (ii) the ability of the Master
Servicer to perform its obligations under the Sale and Servicing Agreement has
occurred, or (2) the Enhancer has been advised by counsel that recordation of
22
assignments is necessary as a result of a change that occurred after the Closing
Date in applicable law or the interpretation thereof. While such assignment is
being recorded, the Custodian shall retain a photocopy thereof. If any
assignment is lost or returned unrecorded to the Custodian because of any defect
therein, the Master Servicer shall prepare at its expense a substitute
assignment or cure such defect, and the Master Servicer shall cause such
assignment to be recorded in accordance with this Section.
Section 3.14. Annual Statement as to Compliance. The Master Servicer
shall deliver to the Issuer, the Indenture Trustee, and each Rating Agency with,
so long as the Policy is outstanding or amounts are owed to the Enhancer under
the Insurance Agreement, a copy to the Enhancer, not later than May 31 of each
year, commencing in 2003, an Officer's Certificate stating as to each signer
thereof that (i) a review of the activities of the Master Servicer during the
preceding calendar year and of its performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Master Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof. The statement required
pursuant to Section 3.15 shall accompany such Officer's Certificate.
Section 3.15. Annual Independent Public Accountants' Servicing Report.
Not later than May 31 of each year, commencing in 2003, the Master Servicer
shall deliver or cause to be delivered to the Issuer, the Indenture Trustee and,
in the case of the Mortgage Loans assigned to Group I, the Enhancer a report,
prepared by the Independent Accountants of the Master Servicer, stating that
such Independent Accountants (i) have conducted an examination of certain
documents and records of the Master Servicer (or an appropriate Affiliate
thereof) relating to the servicing of the mortgage loans being serviced by the
Master Servicer under servicing agreements similar to this Agreement (which
agreements shall be described in a schedule to such report) substantially as
required by the Uniform Single Attestation Program for Mortgage Bankers and (ii)
did not discover any exceptions or errors relating to the servicing activities
of the Master Servicer (including the servicing of Mortgage Loans subject to
this Agreement) that, in the opinion of such Independent Accountants, are
material, except for such exceptions as shall be set forth in such report. In
the event such firm requires the Indenture Trustee to agree to the procedures
performed by such firm, the Master Servicer shall direct the Indenture Trustee
in writing to so agree; it being understood and agreed that the Indenture
Trustee shall deliver such letter of agreement in conclusive reliance upon the
direction of the Master Servicer, and the Indenture Trustee need not make any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
Section 3.16. Reserved.
Section 3.17. Indemnification; Third-Party Claims. The Master Servicer
(solely for the purpose of this Section, the "Indemnifying Party") agrees to
indemnify and to hold each of the Depositor, the Issuer, the Owner Trustee, the
Indenture Trustee and, in the case of the Mortgage Loans assigned to Group I,
the Enhancer (solely for the purpose of this Section, the "Indemnified Parties")
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and expenses
that the Indemnified Parties may sustain in any way related to the failure of
the Indemnifying Party to perform its respective duties
23
in compliance with the terms of this Agreement. In the case of the Mortgage
Loans assigned to Group I, each Indemnified Party and the Master Servicer shall
immediately notify the other Indemnified Parties if a claim is made by a third
party with respect to this Agreement, and the Master Servicer shall, with the
consent of the Enhancer, such consent not to be unreasonably withheld, assume
the defense of such claim and pay all expenses in connection therewith,
including reasonable counsel fees approved by the Enhancer, and promptly pay,
discharge and satisfy any judgment or decree which may be entered into against
the Indemnified Parties in respect of such claim. In the case of the Mortgage
Loans assigned to Group II, each Indemnified Party (other than the Enhancer) and
the Master Servicer shall immediately notify the other Indemnified Parties
(other than the Enhancer) if a claim is made by a third party with respect to
this Agreement, and the Master Servicer shall assume the defense of such claim
and pay all expenses in connection therewith, including reasonable counsel fees,
and promptly pay, discharge and satisfy any judgment or decree which may be
entered into against the Indemnified Parties (other than the Enhancer) in
respect of such claim. The Indenture Trustee, shall, out of the assets of the
Trust Estate attributable to Group I and Group II, as applicable, reimburse the
Master Servicer in accordance with Section 3.04(c) hereof for all amounts
advanced by it pursuant to the preceding two sentences except where the claim
relates directly to the failure of the Master Servicer to service and administer
the Mortgage Loans in compliance with the terms of this Agreement; provided,
however, that the Master Servicer's indemnity hereunder shall not in any manner
be conditioned on the availability of funds for such reimbursement. If the
Master Servicer is unable to pay any such amounts owed to the Indenture Trustee,
such amounts shall be paid to the Indenture Trustee out of the Trust Estate
pursuant to Section 3.05(a)(x) or Section 3.05(b) of the Indenture, as
applicable. Solely to the extent that the Holders of the Certificate fail to
indemnify the Owner Trustee as required by Section 7.02 of the Trust Agreement,
the Master Servicer shall undertake such indemnification in accordance with the
terms of Section 7.02 of the Trust Agreement.
Section 3.18. Maintenance of Existence and Licenses; Merger or
Consolidation of the Master Servicer. The Master Servicer (or an appropriate
Affiliate thereof) shall keep in full force and effect its existence, rights and
franchises, shall obtain and preserve its qualification to do business in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any Mortgage Loan and to perform its duties hereunder, and shall
otherwise operate its business so as to cause the representations and warranties
under Section 2.04 to be true and correct at all times.
Section 3.19. Excluded Amounts. After the end of the Managed
Amortization Period, the portion of the principal balance of any HELOC
attributable to Draws made subsequent to the end of the Managed Amortization
Period (each, an "Excluded Amount") shall not be transferred to the Trust, and
the portion of the Principal Collections and Interest Collections on such HELOC
for each Collection Period shall be allocated to the Excluded Amount pro rata
between the Excluded Amount and the Principal Balance of such HELOC in
proportion to the respective amounts outstanding as of the end of the calendar
month preceding such Collection Period.
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ARTICLE IV
SERVICING CERTIFICATE
Section 4.01. Servicing Certificate. With respect to each Payment Date,
on the twenty-first (21st) calendar day of each month (or if such day is not a
Business Day, the following Business Day), the Master Servicer shall forward to
the Depositor and the Indenture Trustee, and the Indenture Trustee, pursuant to
Section 3.25 of the Indenture, shall make available to each Securityholder, the
Owner Trustee, each Paying Agent (if other than the Indenture Trustee), each
Rating Agency and, in the case of the Mortgage Loans assigned to Group I so long
as the Policy is outstanding or amounts are owed to the Enhancer under the
Insurance Agreement, the Enhancer, a Servicing Certificate setting forth the
following information, to the extent applicable:
(a) the aggregate amount of Collections received on the Mortgage
Loans during the related Collection Period;
(b) the aggregate amount of (i) Interest Collections and (ii)
Principal Collections and, in the case of the Managed Amortization Period, Net
Principal Collections (in each case stated separately for each Group and also in
the aggregate) for such Collection Period;
(c) the Principal Collection Distribution Amount for such Collection
Period;
(d) the amount distributable to each Class of Offered Notes and the
Variable Funding Notes in respect of interest;
(e) the amount of any Interest Carry-Forward Amounts;
(f) the Policy Draw Amount, if any, for such Payment Date and the
aggregate amount of prior draws on the Policy thereunder not yet reimbursed;
(g) the amount, if any, to be distributed to the Certificateholders;
(h) any accrued and unpaid Servicing Fees for previous Collection
Periods and the Servicing Fee for such Collection Period;
(i) the Excess Spread, if any, for such Collection Period (stated
separately for each Group);
(j) the Liquidation Loss Amount and Principal Balance of Liquidated
Mortgage Loans (in each case stated separately for each Group and also in the
aggregate) for (i) such Collection Period, (ii) such Collection Period and the
immediately preceding eleven Collection Periods and (iii) such Collection Period
and all previous Collection Periods and any Overcollateralization Increase
Amounts and Overcollateralization Release Amounts for such Collection Period;
25
(k) the aggregate Principal Balance of the Mortgage Loans (stated
separately for each Group and also in the aggregate) as of the end of the
preceding Collection Period and as of the end of the second preceding Collection
Period;
(l) the Offered Note Balance and the Variable Funding Balance for
each Class of Notes after giving effect to any distribution on such Payment Date
and to any reduction on account of Liquidation Loss Amounts;
(m) the Overcollateralization Amount and the Overcollateralization
Target Amount and whether the Loss and Delinquency Test has not been satisfied;
(n) the number and aggregate Principal Balances of Mortgage Loans (in
each case stated separately for each Group and also in the aggregate) (i) as to
which the related Monthly Payment is delinquent for 30-59 days, 60-89 days and
90 or more days and, as to HELOCs in Group I, is 180 days or more delinquent,
respectively, those Mortgage Loans in foreclosure, and those Mortgage Loans as
to which the related Mortgagor has commenced bankruptcy proceedings and (ii)
that have become related to REO Property, in each case as of the end of the
preceding Collection Period; in addition, with respect to the High LTV Mortgage
Loans, the number and aggregate Principal Balance of Mortgage Loans as to which
the related monthly Payment is delinquent for 30-59 days, 60-89 days, 90-119
days, 120-149 days, 150-179 days and 180 days or more separately identifying for
each bucket those Mortgage Loans subject to bankruptcy proceedings, those
Mortgage Loans that have become related to REO Property and the remaining
("purely delinquent") Mortgage Loans.
(o) prior to the end of the Managed Amortization Period with respect
to Group I, the aggregate amount of Additional Balances, if any, (i) created and
(ii) purchased during the preceding Collection Period;
(p) whether an Amortization Event, specifying such event, has
occurred since the prior Determination Date;
(q) whether a Servicing Default has occurred since the prior
Determination Date, specifying such Servicing Default;
(r) the Net Loan Rate for the related Collection Period;
(s) the number, Group and Principal Balances of any Mortgage Loans
removed from the Trust;
(t) the Group I Excess Cash Rate for such Collection Period;
(u) for Group I only, the sum of the Principal Balances of the three
largest Mortgage Loans in Group I as of the last day of such Collection Period;
(v) for Group I only, the Group I Rolling Twelve-Month Liquidation
Loss Amount Percentage for such Collection Period;
26
(w) for Group I only, the Group I Rolling Three-Month Average 90-Day
Delinquency Rate for such Collection Period; and
(x) the Group I Loss Percentage for such Collection Period.
The Indenture Trustee shall conclusively rely upon the information
contained in a Servicing Certificate for purposes of making distributions
pursuant to Section 3.05 of the Indenture, shall have no duty to inquire into
such information and shall have no liability in so relying. The format and
content of the Servicing Certificate may be modified by the mutual agreement of
the Master Servicer, the Indenture Trustee and, in the case of the Mortgage
Loans in Group I, the Enhancer. The Master Servicer shall give notice of any
such change to each Rating Agency.
The amounts furnished pursuant to clauses (d) above shall be expressed
as an aggregate dollar amount per each Class of Offered Notes or Variable
Funding Notes, as the case may be, with a $1,000 denomination.
The Master Servicer shall forward to the Indenture Trustee and, in the
case of the Mortgage Loans in Group I, the Enhancer any other information
reasonably requested by the Indenture Trustee or, in the case of the Mortgage
Loans in Group I, the Enhancer to make distributions pursuant to Section 3.05 of
the Indenture. Prior to the close of business on the twenty-first (21st)
calendar day of each month (or if such day is not a Business Day, the following
Business Day), the Master Servicer shall furnish a written statement to the
Paying Agent and the Indenture Trustee setting forth the aggregate amounts
required to be withdrawn from the Collection Account. The determination by the
Master Servicer of such amounts shall be presumptively deemed to be correct for
all purposes hereunder, and the Owner Trustee and the Indenture Trustee shall be
protected in relying upon the same without any independent verification thereof.
In addition, upon the Issuer's written request, the Master Servicer shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Master Servicer to enable the Issuer to perform its
federal and state income tax reporting obligations.
ARTICLE V
THE ACCOUNTS
Section 5.01. Accounts. Prior to the Closing Date, the Master Servicer
shall establish or cause to be established the following accounts, each of which
shall be an Eligible Account:
(a) an account (the "Collection Account") bearing a designation
clearly indicating that the funds on deposit therein are held for the benefit of
the Issuer, the Indenture Trustee, the Securityholders and the Enhancer; and
(b) an account in the name of the Indenture Trustee (the "Trustee
Collection Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Securityholders and the
Enhancer.
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Section 5.02. Collection Account. The Master Servicer shall deposit or
cause to be deposited any amounts representing payments and collections in
respect of the Mortgage Loans received by it subsequent to the Cut-Off Date,
other than in respect of the payments referred to in the following paragraph,
into the Collection Account within two (2) Business Days following receipt
thereof (or otherwise on or prior to the Closing Date), including the following
payments and collections received or made by it:
(a) all payments of principal and interest in respect of the Mortgage
Loans received by the Master Servicer from the Mortgagors or the related
Subservicer (net of any portion of the interest thereof retained by such
Subservicer as subservicing fees);
(b) the aggregate Purchase Price or Repurchase Price of any Mortgage
Loans purchased by Seller or the Depositor pursuant to Sections 2.03 or 2.08;
(c) any Liquidation Proceeds and Insurance Proceeds;
(d) any Substitution Adjustment Amounts; and
(e) from the Master Servicer, any losses incurred upon Permitted
Investments of amounts deposited into the Collection Account;
provided, that with respect to each Collection Period, the Master Servicer shall
be permitted to retain from payments in respect of interest on the Mortgage
Loans, the Servicing Fee for such Collection Period and any prepayment
penalties, late fees and other similar fees.
The foregoing requirements respecting deposits into the Collection
Account are exclusive; provided, that without limiting the generality of the
foregoing, the Master Servicer need not deposit into the Collection Account any
amounts representing fees or late charges payable by Mortgagors. In the event
that any amount not required to be deposited into the Collection Account is so
deposited, the Master Servicer may at any time withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding.
Notwithstanding such commingling of funds, the Master Servicer shall keep
records that accurately reflect the funds on deposit in the Collection Account
that have been identified by it as being attributable to the Mortgage Loans and
shall hold all collections in the Collection Account to the extent they
represent collections on the Mortgage Loans for the benefit of the Issuer, the
Indenture Trustee, the Securityholders and, in the case of the Mortgage Loans in
Group I only, the Enhancer.
The Master Servicer shall direct in writing the institution maintaining
the Collection Account to invest funds therein only in Permitted Investments. No
Permitted Investment may be sold or disposed of at a gain prior to maturity,
unless the Master Servicer shall have obtained an Opinion of Counsel at the
Master Servicer's expense addressed to the Indenture Trustee and, in the case of
the Mortgage Loans assigned to Group I, the Enhancer that such sale or
disposition will not cause the Trust to be to be treated as an association (or a
publicly-traded partnership) taxable as a corporation for federal income tax
purposes. All net income, other than any gain from a sale or disposition of the
type referred to in the preceding sentence, received from any such Permitted
Investment shall be paid to the Master Servicer as additional servicing
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compensation. The amount of any losses incurred in respect therewith shall be
deposited into the Collection Account by the Master Servicer out of its own
funds immediately as incurred.
The Master Servicer shall require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Master Servicer, in one or more accounts meeting the requirements of an
Eligible Account (and amounts on deposit therein shall be invested in Permitted
Investments), unless all such collections are remitted on a daily basis to the
Master Servicer for deposit into the Collection Account.
The Collection Account may, upon written notice to the Issuer, the
Indenture Trustee and, in the case of the Mortgage Loans assigned to Group I,
the Enhancer, be transferred to a different institution, provided that such
transfer is to an Eligible Account.
On any Payment Date during the Managed Amortization Period with respect
to Mortgage Loans assigned to Group I, the Master Servicer shall withdraw from
the Collection Account and deliver to the Seller, as payment for Additional
Balances, the lesser of (i) the aggregate amount of Additional Balances created
during the related Collection Period and (ii) Principal Collections with respect
to Mortgage Loans assigned to Group I.
Section 5.03. Trustee Collection Account. On each Master Servicer
Remittance Date, the Master Servicer shall transfer from the Collection Account
to the Trustee Collection Account the amount necessary for the Indenture Trustee
to make the required distributions pursuant to Section 3.05(a) and (b) of the
Indenture. Such requirement respecting deposits into the Trustee Collection
Account is exclusive. In the event that any amount not required to be deposited
into the Trustee Collection Account is so deposited, the Master Servicer may at
any time direct the Indenture Trustee to withdraw such amount from the Trustee
Collection Account and deliver it to or at the direction of Master Servicer, any
provision herein to the contrary notwithstanding.
The Indenture Trustee may, but need not, invest funds in the Trustee
Collection Account, and if such funds are invested, they shall be invested only
in Permitted Investments. No Permitted Investment may be sold or disposed of at
a gain prior to maturity, unless the Indenture Trustee shall have obtained an
Opinion of Counsel at the Indenture Trustee's expense addressed to the Indenture
Trustee and, so long as any Group I Notes are Outstanding, the Enhancer that
such sale or disposition will not cause the Trust to be to be treated as an
association (or a publicly-traded partnership) taxable as a corporation for
federal income tax purposes. All net income shall be for the account of the
Indenture Trustee and the Depositor, as mutually agreed by those parties. The
amount of any losses incurred in respect therewith shall be deposited into the
Trustee Collection Account by the Indenture Trustee and/or the Depositor out of
their own funds immediately as incurred.
On the Closing Date the Depositor shall remit to the Indenture Trustee
for deposit in the Trustee Collection Account, or a subaccount of the Trustee
Collection Account created by the Indenture Trustee, an amount equal to
$1,586,040.41 representing the excess of the aggregate initial Note Balance of
the Offered Notes over the aggregate Principal Balance of the Mortgage Loans as
of the Cut-Off Date. The amount deposited shall be paid on the first Payment
Date as principal to the Holders of the Offered Notes entitled to receive
principal on such Payment Date. All net income on such deposit from the Closing
Date up to and not including the first Payment
29
Date shall be for the account of the Depositor. In addition to such net income,
the Depositor shall also be entitled to the payment of a fee equal to 0.03% per
annum of the aggregate Principal Balance of the Mortgage Loans pursuant to
Section 3.05(a)(i) and 3.05(b)(i) of the Indenture as compensation to it for
providing administrative services to the Trust.
ARTICLE VI
THE MASTER SERVICER
Section 6.01. Liability of the Master Servicer. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by it hereunder.
Section 6.02. Merger or Consolidation or Assumption of the Obligations
of the Master Servicer. Any Person into which the Master Servicer may be merged
or consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any Person
succeeding to the business of the Master Servicer, shall be an established
mortgage loan servicing institution reasonably acceptable to the Enhancer that
has a net worth of at least $15,000,000 (the "Merger Criteria"), and in all
events shall be the successor of the Master Servicer, without the execution or
filing of any paper or any further action on the part of any of the parties
hereto, anything herein to the contrary notwithstanding. The Master Servicer
shall send advance notice of any such proposed merger or consolidation to the
Enhancer. If the Enhancer has not objected in writing to such proposed merger or
consolidation within 30 days of the receipt of such notice, the Enhancer shall
be conclusively deemed to have accepted the successor. The Master Servicer shall
send timely notice of any such merger or consolidation to the Indenture Trustee
and the Enhancer. Notwithstanding the foregoing, the Merger Criteria shall not
be applicable and no notice shall be sent to the Enhancer if the Policy is no
longer in effect and no amounts are owed to the Enhancer under the Insurance
Agreement.
The Master Servicer may assign its rights and delegate its duties and
obligations under this Agreement; provided, that the Person accepting such
assignment or delegation shall be a Person qualified to service the Mortgage
Loans, shall be reasonably satisfactory to the Issuer and the Enhancer; and the
Indenture Trustee, as pledgee of the Mortgage Loans, shall be willing to service
the Mortgage Loans and shall execute and deliver to the Indenture Trustee and
the Issuer (with a copy to the Enhancer) an agreement, in form and substance
reasonably satisfactory to the Indenture Trustee, the Issuer and the Enhancer,
containing an assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Master Servicer under this Agreement; and provided further, that no Rating
Agency, after notice thereto, shall have notified the Indenture Trustee in
writing that such assignment and delegation would result in a Rating Event, if
determined without regard to the Policy; and provided further, that the Owner
Trustee and, in the case of the Mortgage Loans in Group I only, the Enhancer
shall have received an Opinion of Counsel to the effect that such assignment or
delegation would not cause the Trust to be treated as an association (or a
publicly-traded partnership) taxable as a corporation for federal income tax
purposes.
Section 6.03. Limitation on Liability of the Master Servicer and
Others. Neither the Master Servicer nor any of its directors, officers,
employees or agents shall be under any liability
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to the Issuer, the Owner Trustee, the Indenture Trustee or the Securityholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to this Agreement; provided, that this provision shall not
protect the Master Servicer or any such Person against any liability that would
otherwise be imposed on it by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties hereunder or by reason of its
reckless disregard thereof. The Master Servicer and any director, officer,
employee or agent thereof may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Master Servicer and any director, officer, employee or
agent thereof shall be indemnified by the Issuer and held harmless against any
loss, liability or expense incurred in connection with any Proceeding relating
to this Agreement or the Securities, including any amount paid to the Indenture
Trustee pursuant to Section 6.06(b), other than any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder or by reason of its reckless disregard
thereof. The Master Servicer shall be under no obligation to appear in,
prosecute or defend any legal action not incidental to its duties to service the
Mortgage Loans in accordance with this Agreement, and that in its opinion may
involve it in any expense or liability; provided, that the Master Servicer may
in its sole discretion undertake any action that it may deem necessary or
desirable in respect of this Agreement, the rights and duties of the parties
hereto and the interests of the Securityholders and, in the case of the Mortgage
Loans in Group I only, the Enhancer. In such event, the reasonable legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Issuer, and the Master Servicer shall be
entitled to reimbursement therefor pursuant to Section 3.05(a)(x) with respect
to Group I and pursuant to Section 3.05(b)(xiv) with respect to Group II. The
Master Servicer's right to indemnity or reimbursement pursuant to this Section
shall survive any resignation or termination of the Master Servicer pursuant to
Section 6.04 or Article VII in respect to any losses, expenses, costs or
liabilities arising prior to such resignation or termination or from events that
occurred prior to such resignation or termination.
Section 6.04. Master Servicer Not to Resign. Subject to the provisions
of Section 6.02, the Master Servicer shall not assign this Agreement or resign
from the obligations and duties hereby imposed upon it except (a) upon a
determination that the performance of its obligations or duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with other activities carried on by it or any Affiliate thereof,
the other activities of the Master Servicer so causing such a conflict being of
a type and nature carried on by the Master Servicer or such Affiliate at the
date of this Agreement or (b) upon the satisfaction of the following conditions:
(i) the Master Servicer shall have proposed a successor master servicer to the
Issuer, the Indenture Trustee and, in the case of the Mortgage Loans in Group I,
the Enhancer in writing, and such proposed successor master servicer shall be
reasonably acceptable to the Issuer, the Indenture Trustee and the Enhancer; and
(ii) each Rating Agency, after prior notice thereto, shall have delivered a
letter to the Issuer, the Indenture Trustee and the Enhancer prior to the
appointment of such proposed successor master servicer stating that such
proposed appointment would not result in a Rating Event, if determined without
regard to the Policy; provided, that no such resignation by the Master Servicer
shall become effective until such successor master servicer shall have assumed
the Master Servicer's responsibilities and obligations hereunder or the
Indenture Trustee shall have designated a successor master servicer in
accordance with Section 7.02. An Opinion of Counsel delivered to the Issuer, the
Indenture
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Trustee and the Enhancer and shall be required in connection with any
such determination permitting the resignation of the Master Servicer.
Section 6.05. Delegation of Duties. In the ordinary course of its
business, the Master Servicer may at any time delegate any of its duties
hereunder to any Person (including any Affiliate of the Master Servicer), that
agrees to conduct such duties in accordance with standards comparable to those
applicable to the Master Servicer hereunder. Such delegation shall not relieve
the Master Servicer of liability or responsibility with respect to such duties,
and shall not constitute a resignation of the Master Servicer pursuant to
Section 6.04.
Section 6.06. Indenture Trustee Fees and Expenses; Indemnification.
(a) After the Closing Date, the Indenture Trustee and any co-trustee
from time to time shall be entitled to compensation in an amount equal to net
investment earnings on amounts on deposit in the Trustee Collection Account as
specified in Section 5.03, which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust,
for all services rendered by each of them in the execution of the trusts created
under the Indenture and in the exercise and performance of any of the powers and
duties under the Indenture of the Indenture Trustee and any such co-trustee. In
the case of the collections on the Mortgage Loans in Group II, the Indenture
Trustee and any such co-trustee shall be entitled to payment or reimbursement in
accordance with the Indenture from amounts on deposit in the Collection Account
with respect to the Mortgage Loans in Group II, upon request therefrom for all
reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee or any such co-trustee, respectively, in accordance with any
of the provisions of this Agreement or the other Basic Documents, except any
such expenses, disbursements or advances as may arise from the negligence,
willful misfeasance or bad faith of the Indenture Trustee or such co-trustee, as
the case may be. The Indenture Trustee shall be entitled to be reimbursed by the
Master Servicer (or, if the Master Servicer is unable to fulfill such
obligation, in accordance with Section 3.05(a)(x) and 3.05(b), as applicable, of
the Indenture) for all costs associated with the transfer of servicing from the
Master Servicer to the Indenture Trustee, including without limitation, any
costs or expenses associated with the complete transfer of all servicing data
and the completion, correction or manipulation of such servicing data as may be
required by the Indenture Trustee to correct any errors or insufficiencies in
the servicing data or otherwise to enable the Indenture Trustee to service the
Mortgage Loans properly and effectively. If the Indenture Trustee or an
Affiliate thereof becomes the successor Master Servicer, any custody fees and
expenses shall also be paid pursuant to Section 3.05(a)(x) and 3.05(b), as
applicable, of the Indenture.
(b) The Indenture Trustee shall be indemnified and held harmless by
the Master Servicer for any loss, liability or expense incurred without
negligence, bad faith or willful misconduct on the part of the Indenture
Trustee, arising out of or in connection with the performance of its duties
under the Basic Documents (but not with respect to the performance of any of its
duties under the Administration Agreement), including the costs and expenses
(including reasonable attorneys' fees and expenses) of defending the Indenture
Trustee against any claim in connection with the exercise or performance of any
of its powers or duties under any Basic Document; provided, that:
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(i) with respect to any such claim, the Indenture Trustee
shall have given the Master Servicer written notice thereof promptly
after the Indenture Trustee shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the
Indenture Trustee shall cooperate and consult fully with the Master
Servicer in preparing such defense; and
(iii) notwithstanding anything herein to the contrary, the
Master Servicer shall not be liable for the settlement of any claim by
the Indenture Trustee entered into without the prior written consent of
the Master Servicer.
No termination of this Agreement shall affect the obligations created
by this Section of the Master Servicer to indemnify the Indenture Trustee under
the conditions and to the extent set forth herein.
Notwithstanding the foregoing, the indemnification provided pursuant to
this paragraph shall not pertain to any loss, liability or expense of the
Indenture Trustee, including the costs and expenses of defending itself against
any claim, incurred in connection with (i) any actions taken by the Indenture
Trustee at the direction of the Securityholders and, in the case of the Mortgage
Loans assigned to Group I, the Enhancer pursuant to the terms of the Basic
Documents unless consented to by the Master Servicer (whose consent shall not be
unreasonably withheld) or (ii) any actions taken by the Indenture Trustee in its
capacity as administrator under the Administration Agreement.
Section 6.07. Indemnification of Owner Trustee by Master Servicer. The
Owner Trustee and its successors, assigns, agents and servants (collectively the
"Indemnified Parties") shall be indemnified, defended and held harmless by the
Master Servicer for any liabilities, obligations, losses, damages, taxes,
claims, actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable attorney's fees and expenses) of any kind
and nature whatsoever (collectively, "Expenses") that may at any time be imposed
on, incurred by, or asserted against the Owner Trustee or any Indemnified Party
in any way relating to or arising out of the Basic Documents, the Trust Estate
or the administration of the Trust Estate or the action or inaction of the Owner
Trustee, provided that:
(a) The Master Servicer shall not be liable for or required to
indemnify an Indemnified Party from and against Expenses arising or resulting
from the Owner Trustee's negligence with respect to the handling of funds, or
gross negligence with respect to any other acts, willful misconduct or bad
faith, or as a result of any inaccuracy of an express representation or warranty
contained in Section 6.03 of the Trust Agreement;
(b) With respect to any such claim, the Indemnified Party shall have
given the Master Servicer written notice thereof promptly after the Indemnified
Party shall have actual knowledge thereof;
(c) While maintaining control over its own defense, the Indemnified
Party shall cooperate and consult fully with the Master Servicer in preparing
such defense;
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(d) Notwithstanding anything to the contrary, the Master Servicer
shall not be liable for the settlement of any claim by an Indemnified Party
entered into without the prior written consent of the Master Servicer.
No termination of this Agreement shall affect the obligation created by
this Section of the Master Servicer to indemnify the Owner Trustee and the
Indemnified Parties under the conditions and to the extent set forth herein.
ARTICLE VII
DEFAULT
Section 7.01. Default. If any one of the following events (each, a
"Servicing Default") shall occur and be continuing:
(a) any failure by the Master Servicer to deposit into any Collection
Account or the Trustee Collection Account any deposit required to be made under
the terms of this Agreement that continues unremedied for a period of five (5)
Business Days after the date upon which written notice of such failure shall
have been given to the Master Servicer by the Issuer or the Indenture Trustee,
or to the Master Servicer, the Issuer and the Indenture Trustee by the Enhancer
if such default relates to the Mortgage Loans assigned to Group I;
(b) any failure on the part of the Master Servicer to duly observe or
perform in any material respect any other covenants or agreements of the Master
Servicer set forth in this Agreement, which failure materially and adversely
affects the interests of any Securityholder, and which failure continues
unremedied for a period of 45 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Master Servicer by the Issuer or the Indenture Trustee, or to the Master
Servicer, the Issuer and the Indenture Trustee by the Enhancer if such default
relates to the Mortgage Loans assigned to Group I;
(c) solely with respect to the Mortgage Loans in Group I, the Group I
Rolling Twelve-Month Liquidation Loss Amount Percentage exceeds 1.50%;
(d) solely with respect to the Mortgage Loans in Group I, the Group I
Rolling Three-Month Average Delinquency Rate exceeds 6.00%;
(e) solely with respect to the Mortgage Loans in Group I, the Group I
Cumulative Liquidation Loss Amount Percentage exceeds the percentages set forth
below during the specified periods:
34
MONTHS AFTER
CLOSING DATE PERCENTAGES
1 - 36 2.50%
37 - 48 3.35%
49 - 60 4.00%
61 and thereafter 4.50%
(f) solely with respect to the Mortgage Loans in Group I, the
Enhancer shall notify the Indenture Trustee of an Insurance Agreement Event of
Default (as that term is defined in the Insurance Agreement) affecting the
Master Servicer and the Mortgage Loans assigned to Group I;
then, in the case of paragraphs (a) or (b), the Master Servicer shall
immediately notify the Indenture Trustee and the Owner Trustee in writing
thereof and, for so long as such Servicing Default shall not have been remedied
by the Master Servicer, then the Issuer or the Indenture Trustee may, with the
written consent of the Enhancer in the case of the Group I Mortgage Loans, by
notice then given in writing to the Master Servicer, terminate all rights and
obligations of the Master Servicer hereunder, other than the Master Servicer's
right to receive servicing compensation and reimbursement of expenses hereunder
during any period prior to the date of such termination, and the Indenture
Trustee, the Owner Trustee or the Issuer may exercise any and all other remedies
available at law or in equity; and further, in the case of paragraphs (c), (d),
(e) and (f), the Enhancer shall immediately notify the Master Servicer and the
Indenture Trustee in writing thereof and then the Enhancer may direct the Master
Servicer to remove the current Subservicer of the Mortgage Loans assigned to
Group I and replace it with a successor Subservicer that is not an Affiliate of
the Master Servicer. Any such notice to the Master Servicer and the Indenture
Trustee shall also be given to each Rating Agency, the Issuer and the Enhancer.
Subject to Section 7.02, on or after receipt by the Master Servicer of such
written notice in the case of paragraphs (a) or (b), all authority and power of
the Master Servicer under this Agreement shall pass to and be vested in the
Indenture Trustee as pledgee of the Mortgage Loans pursuant to this Section.
Without limitation, the Indenture Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the Master Servicer, as attorney in-fact or
otherwise, any and all documents or other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination under paragraphs (a) or (b), whether to complete the
transfer and endorsement of each Mortgage Loan or the related Mortgage Documents
or Related Documents, or otherwise. The Master Servicer agrees to cooperate
fully with the Owner Trustee, the Indenture Trustee and the Enhancer, as the
case may be, in effecting the termination under paragraphs (a) or (b) of the
rights and responsibilities of the Master Servicer hereunder, including the
transfer to the Indenture Trustee (or other applicable successor) for the
administration by it of all cash relating to the Mortgage Loans that shall at
the time be held by the Master Servicer for deposit into the Collection Account,
or that have been thereafter received by the Master Servicer with respect to the
Mortgage Loans. All reasonable costs and expenses (including attorneys' fees)
incurred in
35
connection with amending this Agreement to reflect such succession as Master
Servicer pursuant to this Section shall be paid by the predecessor Master
Servicer (or if the predecessor Master Servicer is the Indenture Trustee, the
initial Master Servicer and, in any event, if the initial Master Servicer cannot
pay any such amount, in accordance with Section 3.05 of the Indenture) upon
presentation of reasonable documentation of such costs and expenses.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a payment on a Mortgage Loan that was due prior to the notice
terminating the Master Servicer's rights and obligations hereunder and received
after such notice, that portion thereof to which the Master Servicer would have
been entitled hereunder, its Servicing Fee in respect thereof and any other
amounts payable to the Master Servicer hereunder the entitlement to which arose
prior to such termination.
Notwithstanding the foregoing, a delay in or failure of performance
under paragraph (a) or (b) above, after the expiration of the applicable grace
periods, shall not constitute a Servicing Default if such delay or failure could
not have been prevented by the exercise of reasonable diligence by the Master
Servicer and such delay or failure was caused by an Act of God, any act of the
public enemy, declared or undeclared war, public disorder, rebellion or
sabotage, or epidemic, landslide, lightning, fire, hurricane, earthquake or
flood. The preceding sentence shall not relieve the Master Servicer from using
reasonable efforts to perform its obligations hereunder in a timely manner in
accordance with the terms hereof, and the Master Servicer shall provide the
Owner Trustee, the Indenture Trustee, the Enhancer and the Securityholders with
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations.
Section 7.02. Indenture Trustee to Act; Appointment of Successor.
(a) Within 90 days after the date the Master Servicer and the
Indenture Trustee receive a notice of termination of the Master Servicer
pursuant to Section 7.01 or sends a resignation notice pursuant to Section 6.04,
the Indenture Trustee, as pledgee of the Mortgage Loans, shall be the successor
in all respects to the Master Servicer in its capacity as Master Servicer
hereunder and with respect to the transactions set forth herein, and shall be
subject to all responsibilities, duties and liabilities relating thereto placed
on the Master Servicer by the terms hereof. Nothing in any Basic Document shall
be construed to permit or require the Indenture Trustee to (i) be responsible or
accountable for any act or omission of any prior Master Servicer prior to the
issuance of the related notice of termination hereunder, (ii) in its capacity as
successor Master Servicer, purchase, repurchase or substitute any Mortgage Loan
or fund any Additional Balances with respect thereto, (iii) fund any losses on
any Permitted Investment directed by any prior Master Servicer hereunder or (iv)
be responsible for the representations or warranties of any such prior Master
Servicer. As compensation therefor, the Indenture Trustee shall be entitled to
such compensation as the Master Servicer would have been entitled to hereunder
if no such notice of termination had been given. If the Indenture Trustee is (i)
unwilling to act as successor Master Servicer or (ii) legally unable so to act,
then the Indenture Trustee may appoint, or may petition a court of competent
jurisdiction to appoint any established mortgage loan servicing institution
having a net worth of not less than $10,000,000 as the successor to the Master
Servicer hereunder with respect to all or any part of the Master Servicer's
responsibilities, duties or liabilities hereunder; provided, that such successor
Master
36
Servicer shall be acceptable to the Enhancer, as evidenced by the Enhancer's
prior written consent, which consent shall not be unreasonably withheld; and
provided further, that no Rating Agency, after prior notice thereto, shall have
notified the Indenture Trustee in writing that the appointment of such successor
Master Servicer would result in a Rating Event, if determined without regard to
the Policy. Notwithstanding the foregoing, pending the appointment of a
successor Master Servicer hereunder, unless the Indenture Trustee is prohibited
by law from so acting, the Indenture Trustee shall act in such capacity as
provided above. In connection with such appointment and assumption, the
successor shall be entitled to receive compensation out of payments on Mortgage
Loans in an amount equal to the compensation that the Master Servicer would
otherwise have received pursuant to Section 3.10 (or such lesser compensation as
the Indenture Trustee and such successor shall agree). The appointment of a
successor Master Servicer shall not affect any liability of the predecessor
Master Servicer that may have arisen under this Agreement prior to its
termination as Master Servicer, nor shall any successor Master Servicer be
liable for any acts or omissions of any predecessor Master Servicer or for any
breach by such Master Servicer of any of its representations or warranties
contained herein or in any other Basic Document. The Indenture Trustee and such
successor Master Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
(b) Any successor Master Servicer, including the Indenture Trustee
shall not be deemed to be in default or to have breached its duties hereunder if
the predecessor Master Servicer shall fail to make any required deposit into the
Collection Account or otherwise cooperate with any required servicing transfer
or succession hereunder.
Section 7.03. Notification to Securityholders. Upon any termination of
or appointment of a successor Master Servicer hereunder, the Indenture Trustee
shall give prompt written notice thereof to the Issuer, the Indenture Trustee,
the Enhancer and each Rating Agency.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment. This Agreement may be amended from time to
time by the parties hereto (i) to cure any ambiguity, correct or supplement any
provision of this Agreement that may be inconsistent with any other provision of
this Agreement, add any provision that provides additional rights to the
Certificateholders or Noteholders or ensure that the Trust is not classified as
an association (or a publicly traded partnership) taxable as a corporation for
federal income tax purposes; provided, that (A) (i) such amendment will not, in
the good faith judgment of the parties thereto, materially and adversely affect
the interest of any Certificateholder, Noteholder or, in the case of the Group I
Notes, the Enhancer and (ii) an Opinion of Counsel is delivered to the Indenture
Trustee and, in the case of the Group I Notes, the Enhancer to the effect that
such amendment will not materially and adversely affect the interest of any
Certificateholder, Noteholder or, in the case of the Group I Notes, the Enhancer
or (B) to the extent affected thereby, with the consent of the Holders of Notes
evidencing not less than a majority of the Note Balance of the Notes and, to the
extent affected thereby, the consent of the Holders of Certificates evidencing
not less than a majority of the Percentage Interests of the Certificates for the
purpose of adding any provisions to or changing in any manner or eliminating
37
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; provided that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Mortgage Loans or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Note Balance of
the Notes and the Percentage Interests of the Certificates required to consent
to any such amendment, without the consent of the Holders of all the outstanding
Notes and Holders of all outstanding Certificates; and provided further, that
the Enhancer and the Indenture Trustee shall consent thereto.
Promptly after the execution of any such amendment or consent, the
Master Servicer shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and the
Enhancer. It shall not be necessary for the consent of the Certificateholder or
Noteholder pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of the Certificateholder or Noteholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by the Certificateholder or Noteholders shall be subject
to such reasonable requirements as the Owner Trustee or Indenture Trustee may
prescribe from time to time.
Section 8.02. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT CONSIDERATION OF THE
CHOICE OF LAW PRINCIPLES THEREOF, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 8.03. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or mailed by certified mail, return receipt requested or by
facsimile, (a) if to the Depositor, to ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed Securities Group; (b) if to the Master
Servicer, to ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇▇▇, Esq. and ▇▇▇▇▇▇ ▇▇▇▇▇ (with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇, Esq. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ 94583);
(c) if to ▇▇▇▇▇'▇, to ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Home Mortgage Loan Monitoring Group; (d) if to Standard & Poor's, to
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Residential Mortgage
Surveillance Group and Structured Finance Residential Department; (e) if to the
Owner Trustee, to ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ Whole Loan Home Equity Trust 2002-A (with
a copy to each Rating Agency); (f) if to the Issuer, to c/o Wilmington Trust
Company, as Owner Trustee, ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ Whole Loan Home Equity Trust
2002-A; (g) if to the Indenture Trustee, to ▇▇▇▇▇ Fargo Bank Minnesota, N.A.,
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (with a copy to the Indenture
Trustee at ▇▇▇▇▇ Fargo Bank Minnesota, N.A., Attn.: Corporate Trust, Sixth and
Marquette, Minneapolis, Minnesota 55479); (h) if to the Enhancer, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention: Insured Portfolio Management -
Structured Finance (▇▇▇▇▇ Whole Loan Home Equity Trust 2002-A); and (i) as to
each of the foregoing
38
Persons, at such other address or facsimile numbers as shall be designated by
such Person in a written notice to the other foregoing Persons.
Section 8.04. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement, and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the Securities
or the rights of the Securityholders.
Section 8.05. Third-Party Beneficiaries. This Agreement shall inure to
the benefit of and be binding upon the parties hereto, the Securityholders, the
Enhancer, the Owner Trustee, and their respective successors and permitted
assigns. Except as otherwise provided herein, no other Person shall have any
right or obligation hereunder.
Section 8.06. Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all of which shall together constitute but one and the same
instrument.
Section 8.07. Effect of Headings and Table of Contents. The Article and
Section headings herein and in the Table of Contents are for convenience of
reference only and shall not affect the construction hereof.
Section 8.08. Termination; Clean-Up Call.
(a) The respective obligations and responsibilities of the parties
hereto shall terminate upon the last action required to be taken by the Issuer
pursuant to the Trust Agreement and by the Indenture Trustee pursuant to the
Indenture, following the earlier of (i) the date on or before which the
Indenture or the Trust Agreement is terminated; or (ii) the purchase by the
Depositor or the Master Servicer of all Mortgage Loans assigned to the final
outstanding Group pursuant to paragraph (b) below.
(b) Subject to the provisions of paragraphs (d) and (e) below,
Depositor, or if the Depositor declines the Master Servicer with the permission
of the Depositor, shall have the right to purchase the Mortgage Loans assigned
to each Group and the related portion of the Trust Estate on any date on which
the aggregate Principal Balance of the Mortgage Loans in such Group is less than
10% of the Initial Aggregate Principal Balance of such Group, at a price equal
to the lesser of (i) 100% of the aggregate unpaid Principal Balance of all such
remaining Mortgage Loans, plus accrued and unpaid interest thereon at the
weighted average of the Mortgage Interest Rates thereon up to the date preceding
the Payment Date on which such amounts are to be distributed to the
Securityholders (and any unpaid Servicing Fee shall be deemed to have been paid
at such time) and (ii) the fair market value of all such remaining Mortgage
Loans.
(c) Notwithstanding the provisions in paragraph (b) above, the
Depositor or the Master Servicer, as applicable, may not exercise the option in
paragraph (b) above unless the purchase price for the Mortgage Loans assigned to
a Group equals or exceeds the sum of (i) all accrued and unpaid interest
(including any Interest Carry-Forward Amounts) on the related Class
39
or Classes of Notes, (ii) the outstanding Note Balances of the related Class or
Classes of Notes, including the adjusted issue prices payable pursuant to the
immediately following two sentences, (iii) any unpaid amounts owed to the
Indenture Trustee, the Owner Trustee and the Administrator with respect to such
Group and (iv) in the case of the purchase of Mortgage Loans in Group I, all
amounts due and owing the Enhancer under the Insurance Agreement with interest
thereon at the Late Payment Rate as specified in the Insurance Agreement. If the
Group II Notes are redeemed prior to the Payment Date in December 2004, the
Class IIA-IO Notes will be entitled to receive their adjusted issue price, which
will be equal to the present value of the remaining payments on the Class IIA-IO
Notes, using a discount rate equal to the discount rate reflected in the price
paid by the initial purchaser of the Class IIA-IO Notes on the Closing Date. If
the Group II Notes are redeemed on any Payment Date, the Class IIX-IO Notes will
be entitled to receive their adjusted issue price, which will be equal to the
present value of the expected remaining payments on the Class IIX-IO Notes,
using a prepayment assumption for the Mortgage Loans assigned to Group II equal
to 100% of the prepayment assumption set forth in the Prospectus Supplement, and
a discount rate equal to 9%. If the Depositor or the Master Servicer exercises
any such right, the Depositor or the Master Servicer, as applicable, shall
deposit the amount calculated above with the Indenture Trustee for distribution
to the Securityholders and, upon the receipt of such deposit, the Indenture
Trustee or the Custodian shall release the related Mortgage Files to the
Depositor or the Master Servicer, as applicable.
(d) The Master Servicer, at its expense, shall prepare and deliver to
the Indenture Trustee for execution at the time the Mortgage Loans are to be
released to the Depositor or the Master Servicer, appropriate documents
assigning each such Mortgage Loan from the Indenture Trustee or the Issuer to
the Depositor or the Master Servicer, as applicable.
(e) No purchase of the Mortgage Loans assigned to Group I pursuant to
paragraph (b) above may be made without the prior written consent of the
Enhancer if such purchase would result in a Draw on the Policy or there would be
insufficient funds to pay amounts then due and owing to the Enhancer under the
Insurance Agreement with interest thereon at the Late Payment Rate as specified
in the Insurance Agreement.
Section 8.09. Certain Matters Affecting the Indenture Trustee. For all
purposes of this Agreement, in the performance of any of its duties or in the
exercise of any of its powers hereunder, the Indenture Trustee shall be subject
to and entitled to the benefits of Article VI of the Indenture.
Section 8.10. Owner Trustee Not Liable for Mortgage Documents or
Related Documents. The Owner Trustee makes no representations as to the validity
or sufficiency of this Agreement, any Basic Document, the Securities (other than
the signature of the Owner Trustee on the Certificate), or any Mortgage Document
or Related Document. The Owner Trustee shall at no time have any responsibility
or liability with respect to the sufficiency of the Trust Estate or its ability
to generate the payments to be distributed to the Securityholders, including the
compliance by the Depositor or the Seller with any representation or warranty
made in any Basic Document or the accuracy of any such representation or
warranty, or any action of the Paying Agent, the Certificate Paying Agent, the
Certificate Registrar or the Indenture Trustee taken in the name of the Owner
Trustee.
40
Section 8.11. Rights of the Enhancer. Except to the extent otherwise
provided in this Agreement, (i) the rights and benefits of the Enhancer in this
Agreement relate only to the Group I Notes and the Mortgage Loans assigned to
Group I and (ii) all provisions in this Agreement referring to the consent or
approval of the Enhancer or actions with respect to the Enhancer shall apply and
be implemented only to the extent that such consent, approval or actions affect
or concern the Group I Notes (or the Enhancer's obligations in respect thereof)
or the Mortgage Loans assigned to Group I. Notwithstanding any provision in this
Agreement to the contrary, all rights and benefits of the Enhancer in this
Agreement (including but not limited to consent rights, rights to notices and
rights with respect to opinions) shall terminate upon the later of (a) the
repayment in full of the Group I Notes and the payment to the Enhancer of any
unpaid amounts owed to it under the Insurance Agreement with interest thereon at
the Late Payment Rate as specified in the Insurance Agreement and (b) the
termination of all of the Enhancer's obligations under the Policy.
Section 8.12. Limitation of Liability of Owner Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been countersigned
by Wilmington Trust Company not in its individual capacity but solely in its
capacity as Owner Trustee, and in no event shall Wilmington Trust Company in its
individual capacity or any beneficial owner of the Issuer have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder, as to all of which recourse shall be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
Section 8.13. Tax Treatment of Servicing Fee and Other Amounts. The
Master Servicer covenants and agrees that it and its Affiliates will treat all
compensation derived by it or any of its Affiliates under this Agreement,
including, without limitation, the Servicing Fee, late payment charges and other
receipts not required to be deposited into the Collection Account as specified
in Section 5.02 and net income from Permitted Investments of funds in the
Collection Account, as compensation for services for all federal, state and
local income tax purposes. In addition, the Master Servicer covenants and agrees
that it and its Affiliates will treat, for all federal, state and local income
tax purposes, all amounts not provided for in this Agreement that are to be paid
to it or any of its Affiliates in respect of its activities as Master Servicer
or that are determined directly or indirectly by reference to payments on the
Mortgage Loans as compensation for services.
* * *
41
IN WITNESS WHEREOF, the Depositor, the Master Servicer, the Issuer and
the Indenture Trustee have caused this Agreement to be duly executed by their
respective officers or representatives as of the date and year first above
written.
BEAR ▇▇▇▇▇▇▇ ASSET BACKED SECURITIES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Managing Director
▇▇▇▇▇ UNION BANK AND TRUST
COMPANY, as Master Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President-Business Development
Home Equity Lending
▇▇▇▇▇ WHOLE LOAN HOME EQUITY
TRUST 2002-A,
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner
Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Financial Services Officer
▇▇▇▇▇ FARGO BANK MINNESOTA NATIONAL
ASSOCIATION, not in its individual capacity but solely
as Indenture Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
42
EXHIBIT A
MORTGAGE LOAN PURCHASE AND SERVICING AGREEMENT
1
EXHIBIT B
MORTGAGE LOAN SCHEDULE
B-1
EXHIBIT C
REPRESENTATIONS AND WARRANTIES REGARDING
INDIVIDUAL MORTGAGE LOANS
Subsection 7.02. Representations and Warranties Regarding
Individual Mortgage Loans.
The Seller hereby represents and warrants to the Depositor, with
respect to each Mortgage Loan, as of March 28, 2002 or such other date specified
herein (all capitalized terms used herein and not defined in this Exhibit C
shall have the meanings given to such terms in the Mortgage Loan Purchase and
Servicing Agreement):
i. The information set forth in the Mortgage Loan
Schedule to the Mortgage Loan Purchase and Servicing Agreement is
complete, true and correct in all material respects;
ii. 99% of the Mortgage Loans by Stated Principal Balance
have no payment which is greater than 29 days past due and the
remainder of the Mortgage Loans have no payment which is greater than
59 days past due. No Mortgage Loan has been dishonored. To the best of
Seller's knowledge, there are no material defaults under the terms of
the Mortgage Loan, except as set forth in this paragraph;
iii. To the best of Seller's knowledge, there is no valid
offset, right of rescission, defense or counterclaim of any obligor
under any Mortgage Note, Loan Agreement or Mortgage, including the
obligation of the Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or Loan Agreement, and any applicable right of
rescission has expired, nor will the operation of any of the terms of
such Mortgage Note, Loan Agreement or Mortgage, or the exercise of any
right thereunder, render either the Mortgage Note, Loan Agreement or
the Mortgage unenforceable, in whole or in part, or subject to any
right of rescission, set-off, recoupment, counterclaim or defense,
including, without limitation, the defense of usury, and no such right
of rescission, set-off, recoupment, counterclaim or defense has been
asserted with respect thereto. To the best of Seller's knowledge, no
Mortgage Loan is subject to any pending bankruptcy, insolvency,
reorganization or moratorium;
iv. Other than amounts that constitute Permitted Liens,
to the best of Seller's knowledge, there are no mechanics' liens or
similar liens or claims for work, labor or material affecting any
Mortgaged Property which have been filed (and no rights are outstanding
that under law could give rise to such liens), which are or may be a
lien prior to, or equal with, the lien of such Mortgage;
v. To the best of Seller's knowledge, as of March 28,
2002, there was and there currently is no material damage to any
Mortgaged Property. To the best of Seller's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation
of any of the Mortgaged Properties. The Seller has not received
notification that any such proceedings are scheduled to commence at a
future date.
C-1
vi. To the best of Seller's knowledge, each Mortgage is a
valid, subsisting, enforceable and perfected first, second or third
lien on the Mortgaged Property securing the related Mortgage Note or
Loan Agreement, including all buildings on the Mortgaged Property and
all installations and mechanical, electrical, plumbing, heating and air
conditioning systems affixed to such buildings, and all additions,
alterations and replacements made at any time with respect to the
foregoing securing the Mortgage Note or Loan Agreement's original
principal balance subject to principles of equity, bankruptcy,
insolvency and other laws of general application affecting the rights
of creditors. Each Mortgaged Property is owned by the Mortgagor in fee
simple and is free and clear of all adverse claims, encumbrances and
liens other than Permitted Liens having priority over the lien of the
Mortgage. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting enforceable, and perfected
lien and security interest on the property described therein, and
immediately prior to the sale of such Mortgage Loan to the Depositor
pursuant to the Mortgage Loan Purchase and Servicing Agreement and the
related Term Sheet, the Company had full right to sell and assign the
same to the Depositor;
vii. Each Mortgage Loan complies with, and the Seller has
complied with, applicable local, state and federal laws, regulations
and other requirements including, without limitation, usury, equal
credit opportunity, real estate settlement procedures, the Federal
Truth-In-Lending Act and disclosure laws and consummation of the
transactions contemplated hereby, including without limitation, the
receipt of interest by the owner of such Mortgage Loan, will not
involve the violation of any such laws, rules or regulations. Not more
than 50% of the Mortgage Loans are classified as a "high cost" loan
under Section 32 of the Home Ownership and Equity Protection Act of
1994. Each Mortgage Loan is being (and has been) serviced in accordance
with Accepted Servicing Practices and applicable state and federal
laws, including, without limitation, the Federal Truth-In-Lending Act
and other consumer protection laws, real estate settlement procedures,
usury, equal credit opportunity and disclosure laws. Seller shall
maintain in its possession, available for the Depositor's inspection,
as appropriate, and shall deliver to the Depositor or its designee upon
demand, evidence of compliance with all such requirements;
viii. Neither the Seller nor any prior holder of any
Mortgage Loan has in any material manner impaired, waived, altered or
modified the Mortgage, Mortgage Note or Loan Agreement (except that a
Mortgage Loan may have been modified by a written instrument (a copy of
which is in the Mortgage File and the terms of which are reflected on
the Mortgage Loan Schedule to the Mortgage Loan Purchase and Servicing
Agreement) which has been recorded, if necessary to protect the
interests of the owner of such Mortgage Loan; satisfied, canceled,
rescinded or subordinated such Mortgage in whole or in part; released
the applicable Mortgaged Property in whole or in part from the lien of
such Mortgage; or executed any instrument of cancellation, rescission
or satisfaction with respect thereto. No instrument of release or
waiver has been executed in connection with any Mortgage Loan, and no
Mortgagor has been released, in whole or in part from its obligations
in connection with a Mortgage Loan;
C-2
ix. A property profile, title search, limited coverage
policy or title insurance policy was obtained with respect to each
Mortgage Loan, to the extent consistent with the normal credit and
underwriting policies of Seller.
x. To the best of Seller's knowledge, all of the
improvements which were included for the purpose of determining the
Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property (and wholly
within the project with respect to a condominium unit), and no
improvements on adjoining properties encroach upon the Mortgaged
Property;
xi. To the best of Seller's knowledge, all parties that
have had any interest in the Mortgage, whether as mortgagee, assignee,
pledgee or otherwise, are (or, during the period in which they held and
disposed of such interest, were) (A) in compliance with or exempt from
any and all applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located, and (B) (1) organized under
the laws of such state, or (2) qualified to do business in such state,
or (3) federal savings and loan associations or national banks having
principal offices in such state, or (4) not doing business in such
state;
xii. Each Mortgage Note or Loan Agreement and the
applicable Mortgage are original and genuine, and each is the legal,
valid and binding obligation of the maker thereof, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws
relating to creditors' rights generally or by equitable principles
(regardless of whether such enforcement is considered in a proceeding
in equity or at law) and the Seller has taken all action necessary to
transfer such rights of enforceability to the Depositor. All parties to
the Mortgage Note or Loan Agreement and the Mortgage had legal capacity
to execute the Mortgage Note or Loan Agreement and the Mortgage and
each Mortgage Note or Loan Agreement and Mortgage has been duly and
properly executed by such parties;
xiii. Other than with respect to the undrawn portion of the
HELOCs as of the March 21, 2002, the proceeds of the Mortgage Loan have
been fully disbursed; there is no requirement for future advances
thereunder and any and all requirements as to completion of any on-site
or off-site improvements. All costs, fees and expenses incurred in
making, closing or recording the Mortgage Loan were paid and the
Mortgagor is not entitled to any refund of amounts paid or due under
the Mortgage Note or Loan Agreement or Mortgage;
xiv. Each Mortgage contains customary and enforceable
provisions that render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the
benefits of the security, including (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure or if applicable, non-judicial foreclosure. Upon
default by a Mortgagor on a Mortgage Loan and foreclosure on, or
trustee's sale of, the Mortgaged Property pursuant to the proper
procedures, the holder of the Mortgage Loan will be able to deliver
good and merchantable title to the property subject to any senior
liens. There is no homestead or other exemption available to the
Mortgagor which would interfere with such right to foreclose;
C-3
xv. With respect to each Mortgage constituting a deed of
trust, either a trustee, duly qualified under applicable law to serve
as such, has been properly designated and currently so serves and is
named in such Mortgage or if no duly qualified trustee has been
properly designated and so serves, the Mortgage contains satisfactory
provisions for the appointment of such trustee by the holder of the
Mortgage at no cost or expense to such holder, and no fees or expenses
are or will become payable by the Depositor to the trustee under the
deed of trust, except in connection with a trustee's sale after default
by the Mortgagor;
xvi. There are no defaults by Seller in complying with the
terms of the Mortgage, and to the best of Seller's knowledge all taxes,
governmental assessments, water, sewer and municipal charges, leasehold
payments or ground rents or other outstanding charges affecting the
Mortgaged Property which previously became due and owing have been
paid;
xvii. The Mortgage Note or Loan Agreement is not and has
not been secured by any collateral, pledged account or other security
other than the lien of the corresponding Mortgage and such collateral
does not serve as security for any other obligation and no Mortgage
Loan is secured by more than one Mortgaged Property;
xviii. There is no material default, breach or event of
acceleration existing under the Mortgage or the applicable Mortgage
Note or Loan Agreement; and no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration, and
none of (i) the Seller and any of its affiliates (ii) any servicer or
subservicer and (iii) any prior mortgagee, of any Mortgage Loan has
waived any material default, breach or event of acceleration; no
foreclosure action is threatened or has been commenced with respect to
the Mortgage Loan;
xix. There is no obligation on the part of the Seller or
any other party to make any payments with respect to the related
Mortgage Loan in addition to the Monthly Payments required to be made
by the applicable Mortgagor and except in the case of the undrawn
portion of the HELOCs as of the March 21, 2002, the Mortgage Note or
Loan Agreement with respect to any Mortgage Loan does not permit or
obligate the Seller to make future advances to the Mortgagor at the
option of the Mortgagor;
xx. The Seller has not advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other
than the Mortgagor, directly or indirectly, for the payment of any
amount required by the Mortgage Loan;
xxi. Reserved.
xxii. Each of the Mortgaged Properties consists of a single
parcel of real property with a detached single-family residence erected
thereon (including a manufactured dwelling deemed to be real estate
under applicable state law), or a two- to four-family dwelling, or a
townhouse, or an individual condominium unit in a condominium project,
or an individual unit in a planned unit development. No Mortgaged
Property consists of cooperative housing or stock in a cooperative
housing corporation;
C-4
xxiii. None of the Mortgage Loans provide for deferred
interest or negative amortization. No Mortgaged Property is a
timeshare;
xxiv. The Mortgage Loan does not contain provisions
pursuant to which Monthly Payments are paid or partially paid with
funds deposited in any separate account established by the Seller, the
Mortgagor or anyone on behalf of the Mortgagor, or paid by any source
other than the Mortgagor. The Mortgage Loan is not a graduated payment
Mortgage Loan;
xxv. Seller is the sole owner of record and is the holder
of the Mortgage Loan and the indebtedness evidenced by the Mortgage
Note or Loan Agreement. Upon the sale of the Mortgage Loan to the
Depositor, the Seller will retain the Mortgage File or any part thereof
with respect thereto not delivered to the Depositor or the Depositor's
designee in trust only for the purpose of servicing and supervising the
servicing of the Mortgage Loan. Upon the transfer and assignment to the
Depositor, the Mortgage Loan, including the Mortgage Note or Loan
Agreement and the Mortgage, was not subject to an assignment sale or
pledge to any person other than Depositor and the Seller had good and
marketable title to and was the sole owner thereof and had full right
to transfer and sell the Mortgage Loan to the Depositor free and clear
of any encumbrance, equity, lien, pledge, charge, claim or security
interest and has the full right and authority subject to no interest or
participation of, or agreement with, any other party, to sell and
assign the Mortgage Loan pursuant to the Mortgage Loan Purchase and
Servicing Agreement and following the sale of the Mortgage Loan, the
Depositor will own such Mortgage Loan free and clear of any
encumbrance, equity, participation interest, lien other than Permitted
Liens, pledge, charge, claim or security interest. The Seller intends
to relinquish all rights to possess, control and monitor the Mortgage
Loan, except for the purposes of servicing the Mortgage Loan as set
forth in the Mortgage Loan Purchase and Servicing Agreement. After
March 28, 2002, the Seller will not have any right to modify or alter
the terms of the sale of the Mortgage Loan and the Seller will not have
any obligation or right to repurchase the Mortgage Loan or substitute
another Mortgage Loan, except as provided in the Mortgage Loan Purchase
and Servicing Agreement, or as otherwise agreed to by the Seller and
the Depositor. The Seller acquired any right, title and interest in and
to the Mortgage Loans in good faith and without notice of any adverse
claim;
xxvi. Other than with respect to the HELOCs, all of the
Mortgage Loans are fixed rate mortgage loans. Unless otherwise
indicated on the Mortgage Loan Schedule to the Mortgage Loan Purchase
and Servicing Agreement, other than with respect to the HELOCs, the
Mortgage Note is payable in monthly installments of principal and
interest, with interest calculated and payable in arrears, sufficient
to amortize the Mortgage Loan fully by the stated maturity date, over
an original term of not more than thirty years from origination. Each
HELOC provides for an initial period (the "Revolving Period") during
which the Mortgagor is required to make monthly payments of interest
payable in arrears and requires repayment of the unpaid principal
balance thereof over a period following the Revolving Period which is
not in excess of 122 months. Except with respect to the HELOCs,
principal payments on the Mortgage Loan commenced no more than sixty
(60) days after the funds were disbursed in connection with the
Mortgage Loan. All required notices of interest rate and payment amount
adjustments have been sent to the Mortgagor
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on a timely basis and the computations of such adjustments were
properly calculated. Installments of interest are subject to change due
to the adjustments to the Mortgage Interest Rate of each interest rate
adjustment, with interest calculated and payable in arrears. All
Mortgage interest rate adjustments have been made in strict compliance
with state and federal law and the terms of the related Note. Any
interest paid has been properly credited pursuant to state and local
law.
xxvii. The Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event that the Mortgaged Property is sold or
transferred without the prior written consent of the mortgagee
thereunder, at the option of the mortgagee and such provision is
enforceable;
xxviii. Each of the Mortgage and the Assignment of Mortgage
is in recordable form and is acceptable for recording under the laws of
the jurisdiction in which the Mortgaged Property is located;
xxix. Except with respect to two Mortgage Loans, the
Mortgagor has not notified the Seller, and the Seller has no knowledge
of any relief requested or allowed to the Mortgagor under the Soldiers'
and Sailors' Civil Relief Act of 1940;
xxx. To the best knowledge of Seller, there exists no
violation of any local, state, or federal environmental law, rule or
regulation with respect to the Mortgaged Property which violation has
or could have a material adverse effect on the market value of such
Mortgaged Property. The Seller has no knowledge of any pending action
or proceeding directly involving the related Mortgaged Property in
which compliance with any environmental law, rule or regulation is an
issue; and nothing further remains to be done to satisfy in full all
requirements of each such law, rule or regulation constituting a
prerequisite to the use and enjoyment of such Mortgaged Property;
xxxi. For each Mortgage Loan, the related Mortgage File is
complete and contains a true, accurate and correct copy of each of the
documents and instruments specified to be included therein;
xxxii. Each Mortgage Note, each Loan Agreement, each
Mortgage, each Assignment of Mortgage and any other documents required
pursuant to the Mortgage Loan Purchase and Servicing Agreement to be
delivered by the Seller hereunder has been delivered to the Depositor
or its agent;
xxxiii. As of March 28, 2002, no more than 45% (by Stated
Principal Balance) of the HELS and High LTV Mortgage Loans constitute
"real estate mortgages" for the purposes of Treasury Regulation ss.
301.7701(i)-1(d) under the Code. For this purpose a Mortgage Loan
constitutes a "real estate mortgage" if it satisfies either test set
out in paragraph (i) or paragraph (ii) below:
(i) The fair market value of the interest in real
property securing the obligation was at least equal to 80 percent
of the adjusted issue price of the obligation at the time the
obligation was originated (or, if later, the time the obligation
was significantly modified). For purposes of this paragraph, the
fair
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market value of the real property interest must be first
reduced by the amount of any lien on the real property interest
that is senior to the obligation being tested, and must be
further reduced by a proportionate amount of any lien that is in
parity with the obligation being tested. The adjusted issue price
of an obligation is its issue price plus the amount of accrued
original issue discount, if any, as of the date of determination.
(ii) Substantially all of the proceeds of the
obligation were used for one or more of the following purposes:
(a) to acquire an interest in real property; (b) to improve an
interest in real property; or (c) to protect an interest in real
property, that, at the origination date, is the only security for
the obligation. For this purpose only, substantially all of the
proceeds of the obligations means two-thirds or more of the gross
proceeds. For purposes of this paragraph, the use of the proceeds
of the related Mortgage Loan to retire an existing lien against
the related Mortgaged Property is considered use of the proceeds
to protect an interest in real property;
xxxiv. The Seller used no selection procedures that
identified the Mortgage Loans as being less desirable or valuable than
other comparable mortgage loans in the Seller's portfolio; No
statement, tape, diskette, form, report or other document furnished or
to be furnished by Seller pursuant to the Mortgage Loan Purchase and
Servicing Agreement or in connection with the transactions contemplated
hereby contains or will contain any statement that is or will be
inaccurate or misleading in any material respect or omits to state a
material fact required to be stated therein or necessary to make the
information and statements therein not misleading;
xxxv. No fraud, error, negligence, misrepresentation or
material omission of fact with respect to a Mortgage Loan has taken
place on the part of the Seller or the Mortgagor or any other party
involved in the origination or servicing of the Mortgage Loan;
xxxvi. The Mortgagor has received and has executed, where
applicable, prior to origination of the Mortgage Loan, all disclosure
and rescission materials required by applicable law with respect to the
making of the Mortgage Loan;
xxxvii. To the best of the Seller's knowledge, there has been
no default on any senior mortgage loan relating to a Mortgaged Property
that has not been cured by a person other than the Seller or an
affiliate thereof;
xxxviii. No HEL or HELOC has a Combined Loan-to-Value Ratio in
excess of 100%. No High LTV Mortgage Loan has a Combined Loan-to-Value
Ratio in excess of 125%. "Combined Loan-to-Value Ratio" means, with
respect to any Mortgage Loan, the ratio, expressed as a percentage, of
the sum of (a)(i) with respect to HELs or High LTV Mortgage Loans, the
original Principal Balance thereof or (ii) with respect to HELOCs, the
credit limit of such HELOC at origination and (b) the outstanding
principal balance at origination of such Mortgage Loan of all other
mortgage loans, if any, secured by senior liens on the related
Mortgaged Property, to the Appraised Value.
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xxxix. The Seller has no knowledge of any circumstances or
condition with respect to the Mortgage, the Mortgaged Property, the
Mortgagor or the Mortgagor's credit standing that could reasonably be
expected to cause investors to regard the Mortgage Loan as an
unacceptable investment, cause such Mortgage Loan to become delinquent
or adversely affect the value or the marketability of the Mortgage
Loan. The Seller did not select the Mortgage Loans sold to Depositor
based on any adverse selection of mortgage loans in its portfolio that
met Depositor's purchase parameters for this transaction, including
without limitation, the location or condition of the Mortgaged
Property, payment pattern of the borrower or any other factor that may
adversely affect the expected cost of foreclosing, owning or holding
the Mortgage Loans or related Mortgaged Property or collecting the
insurance or guarantee proceeds related thereto;
xl. Each Mortgage Loan was originated by or for the
Seller pursuant to, and conforms with, the Seller's underwriting
guidelines attached as Exhibit 9 to the Mortgage Loan Purchase and
Servicing Agreement;
xli. No less than 60 percent by Stated Principal Balance
of the Mortgage Loans have a prepayment penalty and at least 25 percent
by Stated Principal Balance have a prepayment penalty for at least
three years. With respect to each Mortgage Loan that has a prepayment
penalty feature, each such prepayment penalty is enforceable and will
be enforced by the Seller and each prepayment penalty is permitted
pursuant to federal, state and local law. No Mortgage Loan will impose
a prepayment penalty for a term in excess of five years from the date
such Mortgage Loan was originated;
xlii. Each Mortgage Loan where the related Mortgage is in
first lien position or where the balance at origination exceeded
$100,000.00 is covered by a valid and transferable tax service contract
with Transamerica Real Estate Tax Services, Inc. or such other vendor
as may be reasonably acceptable to the Depositor, which may be assigned
without the payment of any fee by the Depositor;
xliii. Not more than 0.5% of the Mortgage Loan by Stated
Principal Balance were originated under a reduced documentation
program;
xliv. The Mortgage Loans conform to the characteristics set
forth in the Term Sheet; and
xlv. At least 70% of the Mortgage Loans by Stated
Principal Balance in each of the Groups have conforming balances under
▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇ Mac published underwriting guidelines.
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EXHIBIT D
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PREMISES:
That ▇▇▇▇▇ Fargo Bank Minnesota, National Association, as indenture
trustee (the "Indenture Trustee") under the indenture dated as of May 31, 2002
(the "Indenture"), between ▇▇▇▇▇ Whole Loan Home Equity Trust 2002-A and the
Indenture Trustee, a national banking association existing under the laws of the
United States of America and having its principal office located at ▇▇▇▇▇ Fargo
Center, Sixth and Marquette, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, hath made,
constituted and appointed, and does by these presents make, constitute and
appoint ▇▇▇▇▇ Union Bank and Trust Company ("▇▇▇▇▇"), a bank organized and
existing under the laws of the State of Indiana, as Master Servicer under the
Sale and Servicing Agreement (defined below) and ▇▇▇▇▇ Home Equity Corporation,
an Indiana corporation, as initial subservicer thereunder, its true and lawful
attorney-in-fact, with full power and authority to sign, execute, acknowledge,
deliver, file for recordation and record any instrument on its behalf and to
perform such other act or acts as may be customarily and reasonably necessary
and appropriate to effectuate the following enumerated transactions in respect
of any of the Mortgage Loans or the related Mortgaged Properties, Mortgage
Documents or Related Documents, for which the undersigned is acting as Indenture
Trustee (whether the undersigned is named therein as mortgagee or beneficiary or
has become mortgagee by virtue of endorsement of related Mortgage Documents) and
for which ▇▇▇▇▇ is acting as Master Servicer pursuant to the sale and servicing
agreement dated as of May 31, 2002 (the "Sale and Servicing Agreement").
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in Appendix A to the Indenture.
This appointment shall apply to the following enumerated transactions
only:
1. The modification or re-recording of a Mortgage Loan, where such
modification or re-recording is for the purpose of correcting the
Mortgage Loan to conform same to the original intent of the parties
thereto or to correct title errors discovered after such title
insurance was issued and such modification or re-recording, in either
instance, does not adversely affect the Lien of the Mortgage Loan as
insured.
2. The subordination of the Lien of a Mortgage Loan to an easement in
favor of a public utility company or a government agency or unit with
powers of eminent domain; this paragraph shall include the execution of
partial satisfactions/releases, partial reconveyances or the execution
of requests to trustees to accomplish the same.
3. With respect to a Mortgage Loan, the foreclosure, the taking of a deed
in lieu of foreclosure, or the completion of judicial or non-judicial
foreclosure or termination, cancellation or rescission of any such
foreclosure, including any and all of the following acts:
a. the substitution of trustee(s) serving under a deed of trust, in
accordance with state law and such deed of trust;
b. statements of breach or non-performance;
c. notices of default;
d. cancellations/rescissions of notices of default and/or notices
of sale;
e. the taking of a deed in lieu of foreclosure; and
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f. such other documents and actions as may be necessary under the
terms of the Mortgage Loan or state law to expeditiously
complete such transactions.
4. The conveyance of mortgaged properties to a mortgage insurer, or the
closing of the title to the property to be acquired as real estate
owned, or conveyance of title to real estate owned.
5. The completion of loan assumption agreements.
6. The full satisfaction and/or release of a Mortgage Loan or full
reconveyance upon payment and discharge of all sums secured thereby,
including cancellation of any related Mortgage Documents.
7. The assignment of any Mortgage Loan and the related Mortgage Documents
in connection with the repurchase of such Mortgage Loan.
8. The full assignment of a Mortgage Loan upon payment and discharge of
all sums secured thereby in conjunction with the refinancing thereof
including, without limitation, the endorsement of the related Mortgage
Documents.
9. The subordination of the Lien of a Mortgage Loan, where such
subordination is in connection with any modification pursuant to
Section 3.01(b) of the Sale and Servicing Agreement, and the execution
of partial satisfactions or releases in connection with such Section.
10. The modification or re-recording of a Mortgage Loan, where such
modification or re-recording is for the purpose of any modification
pursuant to Section 3.03 of the Sale and Servicing Agreement.
11. Any other modification of the terms of a Mortgage Loan (including the
Mortgage Interest Rate thereon) made in accordance with the Sale and
Servicing Agreement.
The undersigned gives such attorneys-in-fact full power and authority
to execute such instruments and to do and perform all and every act and thing
necessary and proper to carry into effect the power or powers granted by or
under this Limited Power of Attorney as fully as the undersigned might or could
do, and does hereby ratify and confirm to all that such attorneys-in-fact shall
lawfully do or cause to be done by authority hereof.
Third parties without actual notice may rely upon the exercise of the
power granted under this Limited Power of Attorney, and may be satisfied that
this Limited Power of Attorney shall continue in full force and effect has not
been revoked unless an instrument of revocation shall have been made in writing
by the undersigned.
▇▇▇▇▇ FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION, not in its individual
capacity but solely as Indenture Trustee
By:
-----------------------------------------
Name:
Title:
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EXHIBIT E
REQUEST FOR RELEASE OF DOCUMENTS
To: ▇▇▇▇▇ Fargo Bank Minnesota, N.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Inventory Control
Re: Sale and Servicing Agreement dated as of May 31, 2002, among Bear
▇▇▇▇▇▇▇ Asset Backed Securities, Inc., ▇▇▇▇▇ Union Bank and Trust
Company, ▇▇▇▇▇ Whole Loan Home Equity Trust 2002-A and ▇▇▇▇▇
Fargo Bank Minnesota, National Association
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In connection with the administration of the Mortgage Loans held by you
as Indenture Trustee pursuant to the above-captioned Agreement, we request the
release, and hereby acknowledge receipt, of the Mortgage File for the Mortgage
Loan described below, for the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
_____ 1. Mortgage Paid in Full
_____ 2. Foreclosure
_____ 3. Substitution
_____ 4. Other Liquidation (Repurchased, etc.)
_____ 5. Nonliquidation Reason:______________________
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Address to which Indenture Trustee should
Deliver the Mortgage File: ____________________________
____________________________
____________________________
By:
----------------------------------
(authorized signer)
Issuer:
----------------------------------
Address:
----------------------------------
----------------------------------
Date:
----------------------------------
▇▇▇▇▇ Fargo Bank Minnesota, National Association
Please acknowledge the execution of the above request by your signature and date
below:
------------------------------ ---------------
Signature Date
Documents returned to Indenture Trustee:
------------------------------ ---------------
Indenture Trustee Date
E-2
EXHIBIT F
FORM OF INITIAL/FINAL CERTIFICATION OF TRUSTEE
Bear ▇▇▇▇▇▇▇ Asset Backed Securities, Inc.
▇▇▇▇▇ Union Bank and Trust Company
▇▇▇▇▇ Funding Corp., Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
MBIA Insurance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Insured Portfolio Management Structured Finance
(▇▇▇▇▇ Whole Loan Home Equity Trust 2002-A)
Re: ▇▇▇▇▇ WHOLE LOAN HOME EQUITY TRUST 2002-A
The undersigned, a duly authorized representative of ▇▇▇▇▇ Fargo Bank
Minnesota, National Association, as Indenture Trustee (the "Indenture Trustee")
and pursuant to the Sale and Servicing Agreement dated May 31, 2002, between
Bear ▇▇▇▇▇▇▇ Asset Backed Securities, Inc. as Depositor of the Trust, ▇▇▇▇▇
Union Bank and Trust Company as Master Servicer, the ▇▇▇▇▇ Whole Loan Home
Equity Trust 2002-A and Indenture Trustee, (hereinafter as such agreement may
have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Sale and Servicing Agreement"), does hereby certify as follows:
A. Capitalized terms used in this Certificate have their
respective meanings set forth in the Sale and Servicing Agreement. References
herein to certain subsections are references to the respective subsections of
the Sale and Servicing Agreement.
B. This Certificate is being delivered pursuant to
Section 2.03.
C. The Undersigned is a Responsible Officer.
D. This Certificate is being delivered by the date
specified in Section 2.03
E. [Pursuant to and in accordance with the limitations set
forth in Section 2.03, the Indenture Trustee hereby certifies and declares that,
with noted exceptions on attached schedule, (i) all documents required to be
delivered pursuant to Section 2.03 are in its possession, (ii) each such
document has been reviewed by it and has not been mutilated, damaged, torn, or
otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) it has received
a Mortgage File containing the Mortgage and Mortgage Note or Loan Agreement, as
applicable, for each Mortgage Loan listed on the attached schedule.] [For each
120-day check-in -- in place of Paragraph E.] [Pursuant to and in accordance
with the
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limitations set forth in Section 2.03, the Indenture Trustee hereby
certifies and declares that, with the exceptions noted on the attached schedule,
that with respect to the Mortgage Documents relating to each Mortgage Loan
listed on the attached Mortgage Loan Schedule to the Sale and Servicing
Agreement, the following data elements on such Mortgage Documents are the same
as set forth on the Mortgage Loan Schedule to the Sale and Servicing Agreement
for such Mortgage Loan: (a) the Seller's loan number, (b) the Mortgagor's name,
(c) the address (including city and state) of the related Mortgaged Property,
(d) the original principal balance, and (e) the maturity of the related Mortgage
Note.]
IN WITNESS WHEREOF, the Indenture Trustee has caused this Certificate
to be duly executed this _____ day of ___________, 20__.
▇▇▇▇▇ FARGO BANK MINNESOTA
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
------------------------------------
Authorized Officer
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