DB DRAFT OF DECEMBER 5, 2002
SALE AND SERVICING AGREEMENT
dated as of November 1, 2002
by and among
ACCREDITED HOME CAPITAL, INC.,
as Seller,
ACCREDITED HOME LENDERS, INC.,
as Sponsor and Master Servicer,
ACCREDITED MORTGAGE LOAN TRUST 2002-2,
as Issuer,
COUNTRYWIDE HOME LOANS SERVICING LP,
as Backup Servicer,
and
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms...........................................2
Section 1.02. Provisions of General Application...............................2
ARTICLE II
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Purchase and Sale of Mortgage Loans; Deposit of
Derivatives...................................................2
Section 2.02. Reserved........................................................3
Section 2.03. Purchase Price..................................................3
Section 2.04. Possession of Mortgage Files; Access to Mortgage Files..........3
Section 2.05. Delivery of Mortgage Loan Documents.............................4
Section 2.06. Acceptance of the Trust Estate; Certain Substitutions;
Certification by the Indenture Trustee........................6
Section 2.07. Grant of Security Interest......................................8
Section 2.08. Further Action Evidencing Assignments...........................9
Section 2.09. Assignment of Agreement.........................................9
Section 2.10. Conveyance of the Subsequent Mortgage Loans....................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Master Servicer.........................12
Section 3.02. Representations, Warranties and Covenants of the Sponsor.......14
Section 3.03. Representations, Warranties and Covenants of the Backup
Servicer.....................................................15
Section 3.04. Representations, Warranties and Covenants of the Indenture
Trustee......................................................16
Section 3.05. Covenants and Representations of the Sponsor and Master
Servicer Regarding Prepayment Charges........................17
Section 3.06. Representations, Warranties and Covenants of the Seller........18
ARTICLE IV
THE MORTGAGE LOANS
Section 4.01. Representations and Warranties Concerning the Mortgage
Loans........................................................19
Section 4.02. Purchase and Substitution......................................26
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. The Master Servicer............................................28
Section 5.02. Collection of Certain Mortgage Loan Payments; Collection
Account......................................................30
Section 5.03. Permitted Withdrawals from the Collection Account..............31
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Section 5.04. Hazard Insurance Policies; Property Protection Expenses........33
Section 5.05. Assumption and Modification Agreements.........................34
Section 5.06. Realization Upon Defaulted Mortgage Loans......................35
Section 5.07. Indenture Trustee to Cooperate.................................36
Section 5.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer..............................................37
Section 5.09. Annual Statement as to Compliance..............................37
Section 5.10. Annual Independent Public Accountants' Servicing Report........38
Section 5.11. Access to Certain Documentation................................38
Section 5.12. Maintenance of Fidelity Bond...................................38
Section 5.13. Subservicing Agreements Between the Master Servicer and
Subservicer and Subservicers.................................38
Section 5.14. Reports to the Indenture Trustee; Collection Account
Statements...................................................40
Section 5.15. Optional Purchase of Defaulted Mortgage Loans..................40
Section 5.16. Reports to be Provided by the Master Servicer and the
Backup Servicer..............................................41
Section 5.17. [Reserved].....................................................42
Section 5.18. Periodic Advances..............................................42
Section 5.19. Indemnification; Third Party Claims............................43
Section 5.20. Maintenance of Corporate Existence and Licenses; Merger or
Consolidation of the Master Servicer and Backup Servicer.....43
Section 5.21. Assignment of Agreement by Master Servicer and Backup
Servicer; Master Servicer and Backup Servicer Not to Resign..44
Section 5.22. Periodic Filings with the Securities and Exchange
Commission Additional Information............................44
Section 5.23. Administrative Duties..........................................45
Section 5.24. Pre-Funding Account............................................46
Section 5.25. Capitalized Interest Account...................................47
ARTICLE VI
APPLICATION OF FUNDS
Section 6.01. Deposits to the Payment Account................................47
Section 6.02. Collection of Money............................................47
Section 6.03. Application of Principal and Interest..........................48
Section 6.04. [Reserved].....................................................48
Section 6.05. Compensating Interest..........................................48
Section 6.06. Effect of Payments by the Note Insurer; Subrogation............48
ARTICLE VII
SERVICER DEFAULT
Section 7.01. Servicer Events of Default.....................................49
Section 7.02. Backup Servicer to Act: Appointment of Successor...............52
Section 7.03. Waiver of Defaults.............................................55
Section 7.04. Rights of the Note Insurer to Exercise Rights of the
Noteholders..................................................55
Section 7.05. Indenture Trustee To Act Solely with Consent of the Note
Insurer......................................................56
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Section 7.06. Mortgage Loans, Trust Estate and Accounts Held for Benefit
of the Note Insurer..........................................56
Section 7.07. Note Insurer Default...........................................57
ARTICLE VIII
TERMINATION
Section 8.01. Termination....................................................57
Section 8.02. Additional Termination Requirements............................58
Section 8.03. Accounting Upon Termination of Master Servicer.................58
Section 8.04. Termination of Backup Servicer as Successor Master Servicer....59
ARTICLE IX
[RESERVED]
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Limitation on Liability........................................59
Section 10.02. Acts of Noteholders............................................60
Section 10.03. Amendment......................................................60
Section 10.04. Recordation of Agreement.......................................61
Section 10.05. Duration of Agreement..........................................61
Section 10.06. Notices........................................................61
Section 10.07. Severability of Provisions.....................................62
Section 10.08. No Partnership.................................................62
Section 10.09. Counterparts...................................................62
Section 10.10. Successors and Assigns.........................................62
Section 10.11. Headings.......................................................62
Section 10.12. No Petition....................................................62
Section 10.13. Third Party Beneficiary........................................62
Section 10.14. Intent of the Parties..........................................63
Section 10.15. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL........................................................63
EXHIBITS
Exhibit A Contents of the Mortgage File
Exhibit B Indenture Trustee's Acknowledgement of Receipt
Exhibit C Indenture Trustee's Acknowledgement of Receipt
Exhibit D Initial Certification of Indenture Trustee
Exhibit E Final Certification of Indenture Trustee
Exhibit F Request for Release of Documents
Exhibit G Subsequent Mortgage Loan Criteria
Exhibit H Form of Subsequent Transfer Instrument
iii
SCHEDULES
Schedule 1 Mortgage Loan Schedule
iv
SALE AND SERVICING AGREEMENT, dated as of November 1, 2002 (this
"Agreement"), by and among ACCREDITED HOME CAPITAL, INC., a Delaware
corporation, as seller (the "Seller"), ACCREDITED HOME LENDERS, INC., a
California corporation, as sponsor (the "Sponsor"), ACCREDITED MORTGAGE LOAN
TRUST 2002-2, a Delaware statutory trust, as issuer (the "Trust"), ACCREDITED
HOME LENDERS, INC., a California corporation, as master servicer (the "Master
Servicer"), COUNTRYWIDE HOME LOANS SERVICING LP, a Texas limited partnership, as
backup servicer (the "Backup Servicer"), and DEUTSCHE BANK NATIONAL TRUST
COMPANY, a national banking association, as indenture trustee (the "Indenture
Trustee").
WITNESSETH
WHEREAS, the Sponsor has sold the initial mortgage loans (the "Initial
Mortgage Loans") listed on Schedule I to this Agreement and the subsequent
mortgage loans (the "Subsequent Mortgage Loans", and together with the Initial
Mortgage Loans, the "Mortgage Loans") to the Seller, pursuant to the Master Sale
and Purchase Agreement, dated as of December 29, 2001, between the Sponsor and
the Seller;
WHEREAS, the Seller desires to sell to the Trust, and the Trust desires to
purchase from the Seller, the Initial Mortgage Loans;
WHEREAS, the Seller will sell to Trust, and the Trust will purchase from
the Seller, the Subsequent Mortgage Loans pursuant to this Agreement and any
Subsequent Transfer Instrument;
WHEREAS, immediately after such purchase, the Trust will pledge such
Mortgage Loans to the Indenture Trustee pursuant to the terms of an Indenture,
dated as of November 1, 2002 (the "Indenture"), between the Trust and the
Indenture Trustee, and issue the Accredited Mortgage Loan Trust 2002-2,
Asset-Backed Notes (the "Notes");
WHEREAS, the Master Servicer has agreed to service the Mortgage Loans,
which constitute the principal assets of the Trust;
WHEREAS, the Backup Servicer has agreed to act as backup servicer of the
Mortgage Loans, which constitute the principal assets of the Trust; and
WHEREAS, the Indenture Trustee will hold the Mortgage Loans and certain
other assets pledged to the Indenture Trustee pursuant to the Indenture;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Seller, the Sponsor, the Trust, the Master Servicer, the
Backup Servicer and the Indenture Trustee hereby agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Capitalized terms used herein but not
defined herein shall have the meanings ascribed to such terms in Appendix I
attached hereto.
Section 1.02. Provisions of General Application.
(a) The terms defined herein and in Appendix I to the Indenture
include the plural as well as the singular.
(b) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. Unless otherwise noted, all
references to Articles and Sections shall be deemed to refer to Articles and
Sections of this Agreement.
(c) Any reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(d) All calculations of interest with respect to the Class A-1 Notes
provided for herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months. All calculations of interest with respect to the Class A-2
Notes and Class A-3 Notes provided for herein shall be on the basis of a 360-day
year and the actual number of days elapsed in the related Accrual Period. All
calculations of interest with respect to any Mortgage Loan provided for herein
shall be made in accordance with the terms of the related Mortgage Note and
Mortgage or, if such documents do not specify the basis upon which interest
accrues thereon, on the basis of a 360 day year consisting of twelve 30-day
months, to the extent permitted by applicable law.
(e) Any Mortgage Loan payment is deemed to be received on the date
such payment is actually received by the Master Servicer; provided, however,
that, for purposes of calculating payments on the Notes, prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with Accepted Servicing Practices consistent with the
terms of the related Mortgage Note and Mortgage to reduce the outstanding
Principal Balance of such Mortgage Loan on which interest accrues.
ARTICLE II
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Purchase and Sale of Mortgage Loans; Deposit of Derivatives.
(a) The Sponsor hereby directs the Seller to sell, transfer, assign, set over
and convey, and the Seller does hereby sell, transfer, assign, set over and
convey to the Trust, to be included as part of Sub-Trust 1, Sub-Trust 2 or
Sub-Trust 3, as specified in the Mortgage Loan Schedule, in each case without
recourse, but subject to the terms and provisions of this Agreement, all of the
right, title and interest of the Seller in and to the Initial Mortgage Loans,
including the Cut-Off Date Principal Balance of, and interest due on, such
Initial Mortgage Loans listed on Schedule I attached hereto,
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and all other assets included or to be included in the Trust Estate. In
addition, on or prior to the Closing Date, the Sponsor shall cause the Note
Insurer to deliver the Note Insurance Policy.
(a) The Seller may cause the deposit of derivatives at any time into
the Accredited Mortgage Loan Trust 2002-2 and any such deposited derivatives
shall become part of the Trust Estate.
Section 2.02. Reserved.
Section 2.03. Purchase Price. On the Closing Date, as full consideration
for the Seller's sale of the Initial Mortgage Loans to the Trust, the
Underwriter, on behalf of the Trust, will deliver to, or at the direction of,
the Seller an amount in cash equal to the sum of (A) 99.966051%, 100.0000% and
100.0000% of the Original Note Principal Balance as of the Closing Date of the
Class A-1 Notes, Class A-2 Notes and the Class A-3 Notes, respectively, plus (B)
accrued interest on the Original Note Principal Balance of the Class A-1 Notes
at the rate of 4.48% per annum from (and including) November 1, 2002 to (but not
including) the Closing Date. Additionally, the Seller will receive the
Certificates issued by the Trust pursuant to the Trust Agreement.
Section 2.04. Possession of Mortgage Files; Access to Mortgage Files.
(a)
(i) Upon the receipt by the Seller, or its designee, of the
purchase price for the Mortgage Loans set forth in Section 2.03 hereof,
the ownership of each Mortgage Note, each Mortgage and the contents of the
Mortgage File related to each Mortgage Loan (other than the Subsequent
Mortgage Loans) will be vested in the Trust, and will be pledged to the
Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer.
(ii) Upon the conveyance of the Subsequent Mortgage Loans
pursuant to Section 2.10, the ownership of each Mortgage Note, each
Mortgage and the contents of the Mortgage File related to each Subsequent
Mortgage Loan will be vested in the Trust, and will be pledged to the
Indenture Trustee for the benefit of the Noteholders and the Note Insurer.
(b) Pursuant to Section 2.05 hereof, the Seller has delivered, or
caused to be delivered (or in the case of the Subsequent Mortgage Loans, on or
prior to the Subsequent Transfer Date, will deliver or cause to be delivered)
the Indenture Trustee's Mortgage File related to each Mortgage Loan to the
Indenture Trustee.
(c) The Indenture Trustee will hold the Indenture Trustee's Mortgage
Files in trust pursuant to the terms of the Indenture for the benefit of all
present and future Noteholders and the Note Insurer.
(d) Consistent with the terms of the Indenture, the Indenture
Trustee shall afford the Seller, the Sponsor, the Trust, the Note Insurer, the
Master Servicer and the Backup Servicer reasonable access to all records and
documentation regarding the Mortgage Loans
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relating to this Agreement, such access being afforded at customary charges,
upon reasonable prior written request and during normal business hours at the
offices of the Indenture Trustee.
Section 2.05. Delivery of Mortgage Loan Documents. (a) In connection with
the transfer and assignment of (1) the Initial Mortgage Loans, on or before the
Closing Date, and (2) the Subsequent Mortgage Loans, on or prior to the
Subsequent Transfer Date, the last assignee thereof shall deliver, or cause to
be delivered, to the Indenture Trustee (as pledgee of the Trust pursuant to the
Indenture), the following documents or instruments constituting the Indenture
Trustee's Mortgage File with respect to each Mortgage Loan so transferred or
assigned:
(i) the original Mortgage Note, endorsed without recourse in
blank by the Sponsor, including all intervening endorsements showing a
complete chain of endorsement;
(ii) the related original Mortgage with evidence of recording
indicated thereon or a copy thereof certified by the applicable recording
office;
(iii) each intervening mortgage assignment, with evidence of
recording indicated thereon or if the original is not available, a copy
thereof certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related Mortgage
Loan to the Sponsor (which assignment may, at the Sponsor's option, be
combined with the assignment referred to in subpart (iv) hereof, in which
case it must be in recordable form, but need not have been previously
recorded);
(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction as evidenced by an
opinion of counsel addressed to the Indenture Trustee, may be included in
a blanket assignment or assignments) of each Mortgage from the Sponsor to
the Indenture Trustee;
(v) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a Mortgage
or Mortgage Note have been modified or such Mortgage or Mortgage Note has
been assumed (if any); and
(vi) an original title insurance policy or title opinion (or
(A) a copy of the title insurance policy or title opinion, or (B) the
related binder, commitment or preliminary report, or copy thereof in which
case the Sponsor hereby certifies that the original Mortgage has been
delivered to the title insurance company that issued such binder,
commitment or preliminary report).
In instances where the original recorded Mortgage or any intervening
mortgage assignment or a completed assignment of the Mortgage in recordable form
cannot be delivered by the Sponsor to the Indenture Trustee prior to or
concurrently with the execution and delivery of this Agreement due to a delay in
connection with recording, the Sponsor may:
(x) in lieu of delivering such original recorded Mortgage or
intervening mortgage assignment, deliver to the Indenture Trustee, a copy
thereof and the Sponsor hereby certifies that the original Mortgage has
been delivered to a title insurance
4
company for recordation after receipt of its policy of title insurance or
the related binder, commitment or preliminary report therefor; and
(y) with respect to clause (iii) above, in lieu of delivering the
completed assignment in recordable form, deliver to the Indenture Trustee,
the assignment in recordable form, otherwise complete except for recording
information.
The Indenture Trustee is hereby authorized and directed, promptly upon receipt
thereof, with respect to each Mortgage Note described in Section 2.05(a)(i)
hereof and each assignment described in Section 2.05(a)(iv) hereof, to endorse
such Mortgage Note and assignment as follows: "Deutsche Bank National Trust
Company, as Indenture Trustee under the Indenture dated as of November 1, 2002,
Accredited Mortgage Loan Trust 2002-2."
(b) As promptly as practicable, but in any event within thirty (30)
days from the Closing Date, the Sponsor shall promptly submit, or cause to be
submitted for recording in the appropriate public office for real property
records, each assignment referred to in Section 2.05(a)(iv); provided however,
the Sponsor need not cause to be recorded any assignment which relates to a
Mortgage Loan in any jurisdiction under the laws of which, as evidenced by an
Opinion of Counsel delivered by the Sponsor (at the Sponsor's expense) to the
Indenture Trustee, acceptable to the Rating Agencies and the Note Insurer, the
recordation of such assignment is not necessary to protect the Indenture
Trustee's, the Note Insurer's, the Noteholders' and the Certificates' interest
in the related Mortgage Loan. The Indenture Trustee, shall retain a copy of each
assignment submitted for recording. In the event that any such assignment is
lost or returned unrecorded because of a defect therein, the Sponsor shall
promptly prepare a substitute assignment or cure such defect, as the case may
be, and thereafter the Sponsor shall submit each such assignment for recording.
The costs relating to the delivery and recordation of the documents in
connection with the Mortgage Loans as specified in this Article II shall be
borne by the Sponsor.
(c) The Sponsor shall, within five (5) Business Days after the
receipt thereof, deliver, or cause to be delivered, to the Indenture Trustee:
(i) the original recorded Mortgage and related power of attorney, if any, in
those instances where a copy thereof certified by the Sponsor was delivered to
the Indenture Trustee; (ii) the original recorded assignment of Mortgage from
the Seller to the Indenture Trustee, which, together with any intervening
assignments of Mortgage, evidences a complete chain of assignment from the
originator of the Mortgage Loan to the Indenture Trustee, in those instances
where copies of such assignments certified by the Sponsor were delivered to the
Indenture Trustee; and (iii) the title insurance policy or title opinion
required in Section 2.05(a)(vi).
Notwithstanding anything to the contrary contained in this Section 2.05,
in those instances where the public recording office retains the original
Mortgage, power of attorney, if any, assignment or assignment of Mortgage after
it has been recorded or such original has been lost, the Sponsor shall be deemed
to have satisfied its obligations hereunder upon delivery to the Indenture
Trustee, of a copy of such Mortgage, power of attorney, if any, assignment or
assignment of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
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From time to time the Sponsor may forward, or cause to be forwarded, to
the Indenture Trustee, additional original documents evidencing any assumption
or modification of a Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that are
not required to be delivered to the Indenture Trustee, pursuant to Section
2.05(a) hereof are, and shall be, held by the Master Servicer, the Sponsor or
the Seller, as the case may be, in trust for the benefit of the Indenture
Trustee, on behalf of the Noteholders and the Note Insurer. In the event that
any such original document is required pursuant to the terms of this Section
2.05 to be a part of an Indenture Trustee's Mortgage File, such document shall
be delivered promptly to the Indenture Trustee. From and after the sale of the
Mortgage Loans to the Trust pursuant hereto, to the extent that the last
assignee thereof retains title of record to any Mortgage Loans prior to the
vesting of legal title in the Trust, such title shall be retained in trust for
the Trust as the owner of the Mortgage Loans, and the Indenture Trustee, as the
pledgee of the Trust under the Indenture. In acting as custodian of any original
document which is part of the Indenture Trustee's Mortgage Files, the Master
Servicer agrees further that it does not and will not have or assert any
beneficial ownership interest in the related Mortgage Loans or the Mortgage
Files. Promptly upon the Master Servicer's receipt of any such original
document, the Master Servicer, on behalf of the Trust, shall ▇▇▇▇ conspicuously
each such original document, and its master data processing records with a
legend evidencing that the Trust has purchased the related Mortgage Loan and all
right and title thereto and interest therein, and pledged such Mortgage Loan and
all right and title thereto and interest therein to the Indenture Trustee, on
behalf of the Noteholders and the Note Insurer.
Section 2.06. Acceptance of the Trust Estate; Certain Substitutions;
Certification by the Indenture Trustee. (a) The Indenture Trustee agrees to
execute and deliver to the Seller, the Sponsor, the Note Insurer, the Master
Servicer and the Backup Servicer on or prior to the Closing Date an
acknowledgement of receipt of the Note Insurance Policy in the form attached as
Exhibit B hereto.
(b) The Indenture Trustee is authorized and directed to, and agrees
to, do the following:
(i) execute and deliver to the Seller, the Sponsor, the Note
Insurer, the Master Servicer and the Backup Servicer, on or prior to the
Closing Date with respect to each Mortgage Loan transferred on such date,
an acknowledgement of receipt, in the form attached as Exhibit C hereto,
of the original Mortgage Note as required to be included in the Indenture
Trustee's Mortgage File (with any exceptions noted) and declares that it
will hold such documents and any amendments, replacements or supplements
thereto, as well as any other assets included in the definition of Trust
Estate and delivered to the Indenture Trustee, subject to the conditions
set forth in the Indenture, for the benefit of the Noteholders and the
Note Insurer.
(ii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within sixty (60) days after the Closing Date (or,
with respect to any Qualified Substitute Mortgage Loans or Subsequent
Mortgage Loans, within sixty (60) days after receipt thereof), and to
deliver to the Master Servicer, the Backup Servicer,
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the Seller, the Sponsor, and the Note Insurer a certification, in the form
attached hereto as Exhibit D, to the effect that, except as otherwise
noted, as to each Mortgage Loan listed in the related Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents specified in Section 2.05(a)(i)-(iv) and
(vi) are in its possession, (ii) each such document has been reviewed by
it and appears, on its face, not to have been mutilated, damaged, torn or
otherwise physically altered (handwritten additions, changes or
corrections shall not constitute physical alteration if they reasonably
appear to have been initialed), appears regular on its face and relates to
such Mortgage Loan, and (iii) based on its examination and only as to the
foregoing documents, the information set forth on the Mortgage Loan
Schedule as to the information set forth in (i), (ii) (with respect to
property address only, excluding zip code), (iii) and (vi) of the
definition of "Mortgage Loan Schedule" accurately reflects the information
set forth in the Indenture Trustee's Mortgage File delivered on such date;
provided however, no certification of the Indenture Trustee shall
constitute a determination by the Indenture Trustee of the proper form,
adequacy or enforceability of any document included in the Indenture
Trustee's Mortgage File.
(iii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within one hundred eighty (180) days after the
Closing Date (or, with respect to any Qualified Substitute Mortgage Loans
or Subsequent Mortgage Loans, within one hundred eighty (180) days after
receipt thereof), and to deliver to the Master Servicer, the Backup
Servicer, the Sponsor and the Note Insurer a certification in the form
attached hereto as Exhibit E to the effect that, except as otherwise
noted, as to each Mortgage Loan listed in the related Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents specified in Section 2.05(a)(i)-(iv) and
(vi) 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 they reasonably appear to be initialed
by the Mortgagor), appears regular on its face and relates to such
Mortgage Loan, and (iii) based on its examination and only as to the
foregoing documents, the information set forth in items (i), (ii) (with
respect to property address only, excluding zip code), (iii) and (vi) of
the definition of "Mortgage Loan Schedule" accurately reflects the
information set forth in the Indenture Trustee's Mortgage File delivered
on such date.
In performing any such review, the Indenture Trustee may conclusively rely
on the Sponsor as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Indenture Trustee's
review of the Indenture Trustee's Mortgage Files is limited solely to confirming
that the documents listed in Section 2.05 have been executed and received and
relate to the Indenture Trustee's Mortgage Files identified in the related
Mortgage Loan Schedule. The Indenture Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face.
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(c) If the Indenture Trustee during the process of reviewing the
Indenture Trustee's Mortgage Files finds any document constituting a part of a
Indenture Trustee's Mortgage File which is not executed, has not been received,
is unrelated to the Mortgage Loan identified in the related Mortgage Loan
Schedule, or does not conform to the requirements of Section 2.05 or the
description thereof as set forth in the related Mortgage Loan Schedule, the
Indenture Trustee shall promptly so notify the Master Servicer, the Backup
Servicer, the Sponsor, the Note Insurer and the Indenture Trustee. Upon receipt
of such notice respecting such defect, the Sponsor shall have a sixty (60) day
period after such notice within which to correct or cure any such defect. If,
however, within such sixty (60) day period, the Sponsor has not caused to be
remedied the defect and the Master Servicer or the Note Insurer determines that
the defect materially and adversely affects the value of the related Mortgage
Loan or the interest of the Noteholders and the Note Insurer in the related
Mortgage Loan, the Sponsor will be obligated to either (i) substitute in lieu of
such Mortgage Loan a Qualified Substitute Mortgage Loan in the manner and
subject to the conditions set forth in this Section 2.06 or (ii) purchase such
Mortgage Loan at a purchase price equal to the Loan Repurchase Price. Upon
receipt by the Indenture Trustee of two copies of a certification, in the form
attached hereto as Exhibit F, of a Servicing Officer of such substitution or
purchase and, in the case of a substitution, upon receipt by the Indenture
Trustee, of the related Indenture Trustee's Mortgage File, and the deposit of
the Loan Repurchase Price, in the case of a purchase, or the Substitution
Adjustment, if any, in connection with a substitution, in the Collection
Account, the Indenture Trustee shall release to the Master Servicer for release
to the Sponsor the related Indenture Trustee's Mortgage File and the Indenture
Trustee shall execute, without recourse, and deliver such instruments of
transfer furnished by the Sponsor as may be necessary to transfer such Mortgage
Loan to the Sponsor. The Indenture Trustee shall provide notice to the Note
Insurer if the Sponsor fails to repurchase or substitute for a Mortgage Loan in
accordance with the foregoing.
Section 2.07. Grant of Security Interest. (a) It is intended that the
conveyance of the Mortgage Loans and other property by the Seller to the Trust
as provided in this Article II be, and be construed for all purposes other than
tax and accounting purposes as, a sale of the Mortgage Loans and such other
property by the Seller to the Trust. It is, for all purposes other than tax and
accounting purposes further, not intended that such conveyance be deemed a
pledge of the Mortgage Loans or such other property by the Seller to the Trust
to secure a debt or other obligation of the Seller. However, in the event that
the Mortgage Loans or any of such other property are held to be property of the
Seller, or if for any reason this Agreement is held or deemed to create a
security interest in the Mortgage Loans or any of such other property, then it
is intended that: (i) this Agreement shall also be deemed to be a security
agreement within the meaning of the Uniform Commercial Code; (ii) the conveyance
provided for in this Article II shall be deemed to be a grant by the Seller to
the Trust of a security interest in all of the Seller's right, title and
interest in and to the Mortgage Loans and such other property and all amounts
payable to the holders of the Mortgage Loans in accordance with the terms
thereof and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including,
without limitation, all amounts from time to time held or invested in the
Accounts whether in the form of cash, instruments, securities or other property;
(iii) the possession by the Indenture Trustee, of the Mortgage Notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to the Uniform Commercial
Code; and (iv) notifications to persons holding such
8
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from financial intermediaries, bailees or agents, as applicable,
of the Indenture Trustee for the purpose of perfecting such security interest
under applicable law. The Seller, the Sponsor, the Master Servicer, on behalf of
the Trust and the Indenture Trustee, shall, to the extent consistent with this
Agreement, take such actions as may be reasonably necessary to ensure that, if
this Agreement were deemed to create a security interest in the Mortgage Loans
or any of such other property, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement.
(b) The Seller, the Sponsor, the Master Servicer and the Backup
Servicer shall take no action inconsistent with the Trust's ownership of the
Trust Estate and each shall indicate or shall cause to be indicated in its
records and records held on its behalf that ownership of each Mortgage Loan and
the other assets in the Trust Estate is vested in the Trust, as owner, and is
pledged to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer pursuant to the terms of the Indenture. The Indenture Trustee is
authorized to act, pursuant to the terms of this Agreement for the benefit of
the Noteholders and Note Insurer and shall be authorized to act at the direction
of such parties. In addition, the Seller, the Sponsor, the Master Servicer and
the Backup Servicer shall respond to any inquiries from third parties with
respect to ownership of a Mortgage Loan or any other asset in the Trust Estate
by stating that it is not the owner of such asset and that the Trust is the
owner of such Mortgage Loan or other asset in the Trust Estate, which is pledged
to the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer.
Section 2.08. Further Action Evidencing Assignments. (a) The Master
Servicer agrees that, from time to time, at its expense, it shall cause the
Sponsor or Seller, as the case may be, to, and each of the Sponsor and Seller
agree that it shall, promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or appropriate, or
that the Master Servicer or the Indenture Trustee may reasonably request, in
order to perfect, protect or more fully evidence the transfer of ownership of
the Mortgage Loans and other assets in the Trust Estate or to enable the
Indenture Trustee, to exercise or enforce any of its rights hereunder. Without
limiting the generality of the foregoing, the Master Servicer, the Sponsor and
the Seller shall, upon the request of the Master Servicer or the Indenture
Trustee execute and file (or cause to be executed and filed) such real estate
filings, financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be necessary
or appropriate.
(b) Each of the Sponsor and the Seller hereby grants to the Master
Servicer, the Backup Servicer and the Indenture Trustee powers of attorney to
execute all documents on its behalf under this Agreement as may be necessary or
desirable to effectuate the foregoing.
Section 2.09. Assignment of Agreement. The Sponsor, the Seller and the
Master Servicer hereby acknowledge and agree that the Trust may assign its
interest under this Agreement to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, as may be required to effect the purposes of
the Indenture, without further notice to, or consent of, the Sponsor or the
Master Servicer, and the Indenture Trustee shall succeed to such of the rights
of the Trust hereunder as shall be so assigned. The Trust shall, pursuant to the
Indenture, assign
9
all of its right, title and interest in and to the Mortgage Loans and its right
to exercise the remedies created by Section 4.02 of this Agreement for breaches
of the representations, warranties, agreements and covenants of the Sponsor
contained in Sections 3.02 and 4.01 of this Agreement, assign such right, title
and interest to the Indenture Trustee, for the benefit of the Noteholders and
the Note Insurer. The Sponsor agrees that, upon such assignment to the Indenture
Trustee, such representations, warranties, agreements and covenants will run to
and be for the benefit of the Indenture Trustee and the Indenture Trustee may
enforce, without joinder of the Sponsor or the Trust, the repurchase obligations
of the Sponsor set forth herein with respect to breaches of such
representations, warranties, agreements and covenants.
Section 2.10. Conveyance of the Subsequent Mortgage Loans.
(a) Subject to the conditions set forth in paragraph (b) below in
consideration of the Indenture Trustee's delivery on the related Subsequent
Transfer Dates of all or a portion of the balance of funds in the Pre-Funding
Accounts, the Seller, at the direction of the Sponsor, shall on each such
Subsequent Transfer Date sell, transfer, assign, set over and convey, without
recourse, to the Trust, all of the right, title and interest of the Seller, in
and to (i) the Subsequent Mortgage Loans identified on the related Mortgage Loan
Schedule attached to the related Subsequent Transfer Instrument delivered by the
Seller on such Subsequent Transfer Date, (ii) principal due and interest
accruing on the Subsequent Mortgage Loans after the related Subsequent Cut-off
Date and (iii) with respect to such Subsequent Mortgage Loans all items to be
delivered pursuant to Section 2.05 above and the other items in the related
Mortgage Files; provided, however, that the Seller reserves and retains all
right, title and interest in and to principal received and interest accruing on
the Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date. The
transfer by the Seller to the Trust of the Subsequent Mortgage Loans identified
on each Mortgage Loan Schedule attached to the related Subsequent Transfer
Instrument shall be absolute and is intended by the Indenture Trustee, the
Sponsor and the Seller to constitute and to be treated as a sale of the
Subsequent Mortgage Loans (except for tax and accounting purposes) by the Seller
to the Trust.
In the event such transactions shall be deemed not to be a sale, the
Seller hereby grants to the Trust as of each Subsequent Transfer Date a security
interest in all of the Seller's right, title and interest in, to and under the
related Subsequent Mortgage Loans and such other property, to secure all of the
Seller's obligations hereunder, and this Agreement shall constitute a security
agreement under applicable law, and in such event, the parties hereto
acknowledge that the Indenture Trustee holds the Subsequent Mortgage Loans on
behalf of the Trust for the benefit of the Noteholders and the Note Insurer. The
Seller agrees to take or cause to be taken such actions and to execute such
documents, including, without limitation, the filing of all necessary UCC-1
financing statements filed in the State of Delaware (which shall be submitted
for filing as of the related Subsequent Transfer Date), any continuation
statements with respect thereto and any amendments thereto required to reflect a
change in the name or corporate structure of the Seller or the filing of any
additional UCC-1 financing statements due to a change in the state of
incorporation of the Seller as are necessary to perfect and protect the
interests of the Trust in the Subsequent Mortgage Loans.
The Indenture Trustee on each Subsequent Transfer Date shall
acknowledge by signing receipt thereof its acceptance of all right, title and
interest to the related Subsequent
10
Mortgage Loans and other property, existing on the Subsequent Transfer Date and
thereafter created, conveyed to it pursuant to this Section 2.10.
The Trust shall be entitled to all scheduled principal payments due
after the Subsequent Cut-off Date, all other payments of principal due and
collected after the Subsequent Cut-off Date, and all payments of interest on the
Subsequent Mortgage Loans after the Subsequent Cut-off Date, minus that portion
of any such payment which is allocable to the period prior to the related
Subsequent Cut-off Date. No scheduled payments of principal due on or before the
related Subsequent Cut-off Date and collected after the related Subsequent
Cut-off Date shall belong to the Trust pursuant to the terms of this Agreement.
The purchase price paid by the Indenture Trustee on behalf of the
Trust, from amounts released from the related Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Principal Balances of the Subsequent
Mortgage Loans so transferred into the related Sub-Trust (as identified on the
Mortgage Loan Schedule attached to the related Subsequent Transfer Instrument
provided by the Seller).
(b) The Seller shall transfer to the Trust, the Subsequent Mortgage
Loans and the other property and rights related thereto and the Indenture
Trustee shall cause to be released funds from the related Pre-Funding Account,
only upon the satisfaction of each of the following conditions on or prior to
the related Subsequent Transfer Date:
(i) the Seller shall have provided the Indenture Trustee and
the Note Insurer with a timely Addition Notice, which notice shall be
given no fewer than four Business Days prior to the related Subsequent
Transfer Date and shall designate the Subsequent Mortgage Loans to be sold
to the Trust and the aggregate Principal Balances of such Subsequent
Mortgage Loans as of the related Subsequent Cut-off Date and any other
information reasonably requested by the Indenture Trustee with respect to
the Subsequent Mortgage Loans;
(ii) each of the Seller and the Sponsor shall have delivered
to the Indenture Trustee and the Note Insurer a duly executed Subsequent
Transfer Instrument substantially in the form of Exhibit 2(A) or 2(B), as
applicable, (A) confirming the satisfaction of each condition precedent
and representations specified in this Sections 2.10, 3.02, 3.06 and 4.01,
as applicable and in the related Subsequent Transfer Instrument and (B)
including a Mortgage Loan Schedule attached thereto listing the Subsequent
Mortgage Loans;
(iii) as of each Subsequent Transfer Date, as evidenced by
delivery of the Seller's Subsequent Transfer Instrument in the form of
Exhibit 2(A) and the Sponsor's Subsequent Transfer Instrument is the form
of Exhibit 2(B), neither the Seller nor the Sponsor shall be insolvent or
have been made insolvent by such transfers, nor shall they be aware of any
pending insolvency;
(iv) the Pre-Funding Period shall not have terminated; and
(v) the Seller shall have delivered to the Indenture Trustee,
the Note Insurer and the Rating Agencies Opinions of Counsel addressed to
the Rating Agencies
11
and the Indenture Trustee with respect to the transfers of the Subsequent
Mortgage Loans substantially in the form of the Opinions of Counsel
delivered to the Indenture Trustee, the Note Insurer and the Rating
Agencies on the Closing Date (1) regarding certain corporate and security
interest matters and (2) confirming the existence of a true sale.
(c) The obligation of the Trust to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the following conditions: (1)
each such Subsequent Mortgage Loan shall satisfy the representations and
warranties specified in the related Subsequent Transfer Instrument and this
Agreement; (2) the Seller shall not select such Subsequent Mortgage Loans in a
manner that it reasonably believes is adverse to the interests of the
Noteholders or Note Insurer; (3) the Seller shall have delivered certain
Opinions of Counsel required pursuant to Section 2.10(b)(v) hereof; (4) as of
the related Subsequent Cut-off Date, the Subsequent Mortgage Loans shall satisfy
the following criteria:
(i) no Subsequent Mortgage Loan shall be a cash-out refinance
and manufactured housing loan;
(ii) no Subsequent Mortgage Loan shall have a Loan-to-Value
ratio greater than 90%; and
(iii) as described in Exhibit G attached hereto.
The acceptance of the Subsequent Mortgage Loans by the Indenture
Trustee is subject to the Seller receiving and providing to the Trustee a
written consent from each of the Rating Agencies that states that the addition
of such Subsequent Mortgage Loans will not cause the Rating Agencies to
downgrade any of their ratings on the Notes without taking into account the Note
Insurance Policy.
(d) Within five Business Days after the end of the Funding Period,
the Seller shall cause to be delivered to the Rating Agencies, the Note Insurer
and the Indenture Trustee a copy of the updated Mortgage Loan Schedule including
the Subsequent Mortgage Loans in electronic format.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Master Servicer. The Master Servicer
hereby represents and warrants to the Indenture Trustee, the Seller, the
Sponsor, the Trust, the Note Insurer, the Backup Servicer and the Noteholders as
of the Closing Date and during the term of this Agreement that:
(a) The Master Servicer is duly organized, validly existing and in
good standing under the laws of its state of incorporation and has the power to
own its assets and to transact the business in which it is currently engaged.
The Master Servicer is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it or the performance
of its obligations hereunder requires such qualification and in which the
failure so to qualify
12
could reasonably be expected to have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Master Servicer or
the performance of its obligations hereunder.
(b) The Master Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement, and
assuming the due authorization, execution and delivery hereof by the other
parties hereto constitutes, or will constitute, the legal, valid and binding
obligation of the Master Servicer, enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(c) The Master Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
which consent already has not been obtained in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, except such
as have been obtained prior to the Closing Date.
(d) The execution, delivery and performance of this Agreement by the
Master Servicer will not violate any provision of any existing law or regulation
or any order or decree of any court or the charter or bylaws of the Master
Servicer, or constitute a breach of any mortgage, indenture, contract or other
Agreement to which the Master Servicer is a party or by which it may be bound.
(e) There is no action, suit, proceeding or investigation pending or
threatened against the Master Servicer which, either in any one instance or in
the aggregate, is, in the Master Servicer's judgment, likely to result in any
material adverse change in the business, operations, financial condition,
properties, or assets of the Master Servicer, or in any material impairment of
the right or ability of the Master Servicer to carry on its business
substantially as now conducted, or in any material liability on the part of the
Master Servicer, or which would draw into question the validity of this
Agreement, the Notes, or the Mortgage Loans or of any action taken or to be
taken in connection with the obligations of the Master Servicer contemplated
herein or therein, or which would be likely to impair materially the ability of
the Master Servicer to perform its obligations hereunder.
(f) Neither this Agreement nor any statement, report, or other
document furnished by the Master Servicer pursuant to this Agreement or in
connection with the transactions contemplated hereby, including, without
limitation, the sale or placement of the Notes, contains any untrue statement of
fact provided by or on behalf of the Master Servicer or omits to state a fact
necessary to make the statements provided by or on behalf of the Master Servicer
contained herein or therein not misleading.
(g) The Master Servicer does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement.
13
(h) The Master Servicer is not an "investment company" or a company
"controlled by an investment company," within the meaning of the Investment
Company Act of 1940, as amended.
(i) The Master Servicer shall take all necessary steps to maintain
the Indenture Trustee's perfection and priority in the Mortgage Loans.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.01 shall survive the delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and inure
to the benefit of the Indenture Trustee.
Section 3.02. Representations, Warranties and Covenants of the Sponsor.
The Sponsor hereby represents, warrants and covenants to the Indenture Trustee,
the Seller, the Trust, the Backup Servicer, the Note Insurer and the Master
Servicer that as of the date of this Agreement or as of such date specifically
provided herein:
(a) The Sponsor is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
(b) The Sponsor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement.
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Sponsor, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes or will constitute the legal, valid and binding
agreement of the Sponsor, enforceable against the Sponsor in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is required
for the execution, delivery and performance of or compliance by the Sponsor with
this Agreement or the consummation by the Sponsor of any of the transactions
contemplated hereby, except as have been made on or prior to the Closing Date.
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of incorporation or bylaws of the Sponsor,
or (B) of any term, condition or provision of any material indenture, deed of
trust, contract or other agreement or instrument to which the Sponsor or any of
its subsidiaries is a party or by which it or any of its subsidiaries is bound;
(ii) results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Sponsor of any court or governmental
authority having jurisdiction over the Sponsor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or
14
encumbrance which would have a material adverse effect upon the Mortgage Loans
or any documents or instruments evidencing or securing the Mortgage Loans.
(f) There are no actions, suits or proceedings before or against or
investigations of, the Sponsor pending, or to the knowledge of the Sponsor,
threatened, before any court, administrative agency or other tribunal, and no
notice of any such action, which, in the Sponsor's reasonable judgment, might
materially and adversely affect the performance by the Sponsor of its
obligations under this Agreement, or the validity or enforceability of this
Agreement.
(g) The Sponsor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency that may materially and adversely affect its
performance hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee.
Section 3.03. Representations, Warranties and Covenants of the Backup
Servicer. The Backup Servicer hereby represents, warrants and covenants to the
Indenture Trustee, the Trust, the Master Servicer, the Note Insurer, the Seller
and the Sponsor that as of the date of this Agreement:
(a) The Backup Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
(b) The Backup Servicer has the corporate power and authority to
execute, deliver and perform, and to enter into and consummate transactions
contemplated by this Agreement.
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Backup Servicer, all requisite corporate action having been
taken, and, assuming the due authorization, execution and delivery hereof by the
other parties hereto, constitutes or will constitute the legal, valid and
binding agreement of the Backup Servicer, enforceable against the Backup
Servicer in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is required
for the execution, delivery and performance of or compliance by the Backup
Servicer with this Agreement or the consummation by the Backup Servicer of any
of the transactions contemplated hereby, except as have been made on or prior to
the Closing Date.
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result
15
in a breach of, or constitutes or will constitute a default or results or will
result in an acceleration under (A) the certificate of incorporation or bylaws
of the Backup Servicer, or (B) of any term, condition or provision of any
material indenture, deed of trust, contract or other agreement or instrument to
which the Backup Servicer or any of its subsidiaries is a party or by which it
or any of its subsidiaries is bound; (ii) results or will result in a violation
of any law, rule, regulation, order, judgment or decree applicable to the Backup
Servicer of any court or governmental authority having jurisdiction over the
Backup Servicer or its subsidiaries; or (iii) results in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or against or
investigations of, the Backup Servicer pending, or to the knowledge of the
Backup Servicer, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Backup Servicer's
reasonable judgment, might materially and adversely affect the performance by
the Backup Servicer of its obligations under this Agreement, or the validity or
enforceability of this Agreement; and
(g) The Backup Servicer is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency that may materially and adversely affect its
performance hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee.
Section 3.04. Representations, Warranties and Covenants of the Indenture
Trustee. The Indenture Trustee hereby represents, warrants and covenants to the
Backup Servicer, the Trust, the Master Servicer, the Seller, the Note Insurer
and the Sponsor that as of the date of this Agreement or as of such date
specifically provided herein:
(a) The Indenture Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America.
(b) The Indenture Trustee has the requisite power and authority to
execute, deliver and perform, and to enter into and consummate transactions
contemplated by this Agreement.
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Indenture Trustee, all requisite action having been taken,
and, assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes or will constitute the legal, valid and binding
agreement of the Indenture Trustee, enforceable against the Indenture Trustee in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
16
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is required
for the execution, delivery and performance of or compliance by the Indenture
Trustee with this Agreement or the consummation by the Indenture Trustee of any
of the transactions contemplated hereby, except as have been made on or prior to
the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of association or bylaws of the Indenture
Trustee, or (B) to the best of its knowledge, of any term, condition or
provision of any material indenture, deed of trust, contract or other agreement
or instrument to which the Indenture Trustee is a party or by which it is bound;
or (ii) results or will result in a violation of any statute, rule, regulation,
order, judgment or decree applicable to the Indenture Trustee of any court or
governmental authority having jurisdiction over the Indenture Trustee or its
subsidiaries which violation would materially and adversely affect the Indenture
Trustee's performance of its duties hereunder; and
(f) There are no actions, suits or proceedings before or against or
investigations of, the Indenture Trustee, pending or to the knowledge of the
Indenture Trustee threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Indenture Trustee's
reasonable judgment, would materially and adversely affect the performance by
the Indenture Trustee of its obligations under this Agreement, or the validity
or enforceability of this Agreement.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.04 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee.
Section 3.05. Covenants and Representations of the Sponsor and Master
Servicer Regarding Prepayment Charges. (a) The Master Servicer will not waive
any Prepayment Charge or part of a Prepayment Charge unless in connection with a
Mortgage Loan that is in default or for which a default is reasonably
foreseeable.
(a) The Sponsor hereby represents and warrants that the information
set forth in the Prepayment Charge Schedule is complete, true and correct in all
material respects at the date or dates respecting which such information is
furnished and each Prepayment Charge is permissible and enforceable in
accordance with its terms (except to the extent that the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally) under applicable law.
(b) Upon discovery by the Sponsor or the Indenture Trustee of a
breach of the foregoing, the party discovering such breach shall give prompt
written notice to the other parties. Within 60 days of the earlier of discovery
by the Master Servicer or receipt of notice by the Master Servicer of breach,
the Master Servicer shall cure such breach in all material respects. If the
covenant made by the Master Servicer in clause (a) above is breached the Master
Servicer must pay into the Collection Account the amount of the waived
Prepayment Charge. If the
17
representation made by the Sponsor in clause (b) above is breached, the Sponsor
must pay into the Collection Account the amount of the scheduled Prepayment
Charge, less any amount previously collected and paid by the Master Servicer
into the Collection Account. The foregoing obligations of the Master Servicer
and the Sponsor shall be the sole and exclusive remedies for a breach of this
Section 3.05(a) or (b).
Section 3.06. Representations, Warranties and Covenants of the Seller. The
Seller, hereby represents, warrants and covenants to the Indenture Trustee, the
Trust, the Sponsor, the Backup Servicer, the Note Insurer and the Master
Servicer that as of the date of this Agreement or as of such date specifically
provided herein:
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The Seller has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement.
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Seller, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes or will constitute the legal, valid and binding
agreement of the Seller, enforceable against the Seller in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is required
for the execution, delivery and performance of or compliance by the Seller with
this Agreement or the consummation by the Seller of any of the transactions
contemplated hereby, except as have been made on or prior to the Closing Date.
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of incorporation or bylaws of the Seller, or
(B) of any term, condition or provision of any material indenture, deed of
trust, contract or other agreement or instrument to which the Seller or any of
its subsidiaries is a party or by which it or any of its subsidiaries is bound;
(ii) results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Seller of any court or governmental
authority having jurisdiction over the Seller or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans.
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(f) There are no actions, suits or proceedings before or against or
investigations of, the Seller pending, or to the knowledge of the Seller,
threatened, before any court, administrative agency or other tribunal, and no
notice of any such action, which, in the Seller's reasonable judgment, might
materially and adversely affect the performance by the Seller of its obligations
under this Agreement, or the validity or enforceability of this Agreement.
(g) The Seller is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency that may materially and adversely affect its performance
hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.05 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee.
ARTICLE IV
THE MORTGAGE LOANS
Section 4.01. Representations and Warranties Concerning the Mortgage
Loans. The Sponsor makes the following representations and warranties to the
Seller, the Master Servicer, the Backup Servicer, the Indenture Trustee, the
Note Insurer and the Trust as to the Mortgage Loans on which the Trust relies in
accepting the Mortgage Loans in trust and executing the Notes. With respect to
the representations and warranties stated in Sections 4.01(i), (r), (ddd), (eee)
and (fff), the Sponsor makes such representations and warranties on behalf of
itself and the Seller. Such representations, warranties and covenants are made
or deemed to be made as of the Closing Date and as of each Subsequent Transfer
Date.
(a) The information with respect to each Mortgage Loan set forth in
the Mortgage Loan Schedule is true and correct as of the Cut-Off Date, based on
Cut-Off Date Principal Balances.
(b) Each Mortgage Loan is being serviced either (i) through the
Master Servicer or (ii) a Person controlling, controlled by or under common
control with the Master Servicer and qualified to service mortgage loans.
(c) Each Mortgage Loan was underwritten or reunderwritten pursuant
to the Underwriting Guidelines which conform in all material respects to the
description thereof set forth in the Prospectus Supplement.
(d) All of the original or certified documentation required to be
delivered to the Indenture Trustee pursuant to this Agreement (including all
material documents related thereto) with respect to each Mortgage Loan has been
or will be delivered to the Indenture Trustee in accordance with the terms of
this Agreement. Each of the documents and instruments specified to be included
therein has been duly executed and in due and proper form, and each such
document or instrument is in a form generally acceptable to prudent mortgage
lenders that regularly originate or purchase mortgage loans comparable to the
Mortgage Loans for sale to prudent investors in the secondary market that invest
in mortgage loans such as the Mortgage Loans.
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(e) [Reserved].
(f) Each Mortgaged Property is improved by a single (one to four)
family residential dwelling, which may include condominiums, individual units in
a planned unit development and townhouses but shall not include cooperatives.
(g) No Mortgage Loan had an LTV in excess of 90%.
(h) Each Mortgage Loan is a valid and subsisting first lien as
identified on the Mortgage Loan Schedule on the Mortgaged Property and subject
in all cases to the exceptions to title set forth in the title insurance policy,
with respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular mortgage
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Mortgage. At the time each Mortgage Loan was originated, the originator was
a mortgagee approved by the Secretary of Housing and Urban Development pursuant
to Sections 203 and 211 of the National Housing Act or a savings and loan
association, a savings bank, a commercial bank or similar banking institution
which was supervised and examined by a Federal or State authority or a mortgage
banker or broker licensed or authorized to do business in the jurisdiction in
which the related Mortgaged Property is located, applying the same standards and
procedures used by the Sponsor in originating Mortgage Loans directly.
(i) Immediately prior to the transfer and assignment of the Mortgage
Loans to the Seller pursuant to the Master Sale and Purchase Agreement, the
Sponsor held good and marketable title to, and was the sole owner of each
Mortgage Loan, subject to no liens, charges, mortgages or encumbrances or rights
of others; and immediately prior to the transfer and assignment herein
contemplated, the Seller held good and marketable title to, and was the sole
owner of, each Mortgage Loan subject to no liens, charges, mortgages,
encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Indenture Trustee will hold
good and marketable title to, and be the sole owner of, each Mortgage Loan
subject to no liens, charges, mortgages, encumbrances or rights of others except
liens which will be released simultaneously with such transfer and assignment.
(j) There is no delinquent tax or assessment lien on any Mortgaged
Property, and each Mortgaged Property is free of substantial damage and is in
good repair.
(k) There is no valid and enforceable right of rescission, offset,
defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto.
20
(l) There is no mechanics' lien or claim for work, labor or material
affecting any Mortgaged Property which is or may be a lien prior to, or equal
with, the lien of the related Mortgage except those which are insured against by
any title insurance policy referred to in paragraph (n) below.
(m) Each Mortgage Loan at the time it was made complied with, and
each Mortgage Loan at all times was serviced in compliance with, in each case,
in all material respects, applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, the Home Ownership and Equity Protection Act of 1994,
real estate settlement procedure, usury, equal credit opportunity, disclosure
and recording laws.
(n) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard California Land Title Association form or American
Land Title Association form, or other form acceptable in a particular
jurisdiction by a title insurance company authorized to transact business in the
state in which the related Mortgaged Property is situated, in an amount at least
equal to the original Principal Balance of such Mortgage Loan insuring the
mortgagee's interest under the related Mortgage Loan as the holder of a valid
first mortgage lien of record on the real property described in the related
Mortgage, as the case may be, subject only to exceptions of the character
referred to in paragraph (h) above, was effective on the date of the origination
of such Mortgage Loan, and, as of the Closing Date such policy will be valid and
inure to the benefit of the Indenture Trustee on behalf of the Noteholders.
(o) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy (which may be a blanket policy of the
type described in this Agreement) with a generally acceptable carrier that
provides for fire and extended coverage representing coverage not less than the
least of (i) the outstanding Principal Balance of the related Mortgage Loan,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis or (iii) the full insurable value of the Mortgaged
Property.
(p) If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in this Agreement) in a form meeting the requirements of the
current guidelines of the Federal Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (i) the outstanding
Principal Balance of the related Mortgage Loan (together, in the case of a
second mortgage loan, with the outstanding principal balance of the first
mortgage loan), (ii) the minimum amount required to compensate for damage or
loss on a replacement cost basis or (iii) the maximum amount of insurance that
is available under the Flood Disaster Protection Act of 1973.
(q) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law), and all
21
parties to each Mortgage Loan had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein purported to be
conveyed.
(r) The Sponsor has directed and the Seller has caused to be
performed any and all acts required to be performed to preserve the rights and
remedies of the Indenture Trustee in any Insurance Policies applicable to any
Mortgage Loan delivered by the Sponsor or the Seller including, to the extent
such Mortgage Loan is not covered by a blanket policy described in this
Agreement, any necessary notifications of insurers, assignments of policies or
interests therein, and establishments of coinsured, joint loss payee and
mortgagee rights in favor of the Indenture Trustee.
(s) The Sponsor has caused or will have caused, within ten days, the
filing of all appropriate financing statements in the proper filing office in
the appropriate jurisdictions under applicable law in order to perfect the
security interest in the original Mortgage Note and all subsequent assignments
of the original Mortgage, granted to the Indenture Trustee hereunder, subject to
the provisions of Section 2.05(b) of this Agreement.
(t) The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the
Noteholders and which has been delivered to the Indenture Trustee
(u) The proceeds of each Mortgage Loan have been fully disbursed,
and there is no obligation on the part of the mortgagee to make future advances
thereunder. All costs, fees and expenses incurred in making or closing or
recording such Mortgage Loans were paid.
(v) Except as otherwise required by law or pursuant to the statute
under which the related Mortgage Loan was made, the related Mortgage Note is not
and has not been secured by any collateral, pledged account or other security
except the lien of the corresponding Mortgage.
(w) No Mortgage Loan was originated under a buydown plan.
(x) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature.
(y) Each Mortgaged Property is located in the state identified in
the Mortgage Loan Schedule and consists of one or more parcels of real property
with a residential dwelling erected thereon.
(z) Each Mortgage securing a Mortgage Note contains a provision for
the acceleration of the payment of the unpaid Principal Balance of the related
Mortgage Loan in the event the related Mortgaged Property is sold without the
prior consent of the mortgagee thereunder.
(aa) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-Off Date, have been consolidated with the outstanding
principal amount secured by the related Mortgage, and the secured principal
amount, as consolidated, bears a single
22
interest rate and single repayment term reflected on the Mortgage Loan Schedule.
The consolidated principal amount does not exceed the original principal amount
of the related Mortgage Loan. No Mortgage Note permits or obligates the Seller,
the Master Servicer, the Backup Servicer, the Sponsor or any other Person to
make future advances to the related Mortgagor at the option of the Mortgagor.
(bb) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended.
(cc) All of the improvements which were included for the purposes of
determining the Appraised Value of any Mortgaged Property lie wholly within the
boundaries and building restriction lines of such Mortgaged Property, and no
improvements on adjoining properties encroach upon such Mortgaged Property,
except as stated in the related title insurance policy and affirmatively
insured.
(dd) No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. As of the
related date of origination, all inspections, licenses and certificates required
to be made or issued with respect to all occupied portions of each Mortgaged
Property and, with respect to the use and occupancy of the same, including, but
not limited to, certificates of occupancy and fire underwriting certificates,
have been made or obtained from the appropriate authorities and such Mortgaged
Property is lawfully occupied under the applicable law.
(ee) With respect to each Mortgage constituting a deed of trust, 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, and no fees or
expenses are or will become payable by the Sponsor, the Seller, or the Trust to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the related Mortgagor.
(ff) [Reserved].
(gg) [Reserved].
(hh) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of trust,
by trustee's sale and (ii) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage.
(ii) Except for a Mortgage Payment not more than 29 days
contractually delinquent, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note 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,
23
violation or event of acceleration; and the Seller has not waived any default,
breach, violation or event of acceleration.
(jj) 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.
(kk) [Reserved]
(ll) The Sponsor has no actual knowledge that there exists on any
Mortgaged Property any hazardous substances, hazardous wastes or solid wastes,
as such terms are defined in the CERCLA, the Resource Conservation and Recovery
Act of 1976, or other federal, state or local environmental legislation.
(mm) No action, error, omission, misrepresentation, negligence,
fraud or similar occurrence with respect to a Mortgage Loan has taken place on
the part of any person, including, without limitation, the Mortgagor, any
appraiser, any builder or developer, or any other party involved in the
origination of the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan.
(nn) The Sponsor has not solicited the Mortgagor in connection with
any refinancing.
(oo) If the Mortgage Loan is an adjustable rate Mortgage Loan, all
of the adjustments to the Mortgage Interest Rate, to the amount of the monthly
payment, and to the principal balance have been made in accordance with the
terms of the related Mortgage Note.
(pp) The origination and collection practices used with respect to
the Mortgage Loan have been in all respects legal, proper, prudent and customary
in the mortgage origination and servicing business.
(qq) An appraisal of the related Mortgaged Property was made and
signed, prior to the approval of the Mortgage Loan application, by a qualified
appraiser who met the requirements of the Sponsor's appraisal policy and
procedures and who had no interest, direct or indirect in the Mortgaged Property
or in any loan made on the security thereof, whose compensation was not affected
by the approval or disapproval of the Mortgage Loan.
(rr) The Mortgagor has received all disclosure materials required by
applicable law with respect to the making of adjustable rate mortgage loans; and
if the Mortgage Loan is a refinanced Mortgage Loan, the Mortgagor has received
all disclosure and rescission materials required by applicable law with respect
to the making of a refinanced Mortgage Loan, and evidence of such receipt is and
will remain in the Master Servicer's file.
(ss) If the residential dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development), such condominium or planned unit development
project meets the Sponsor's eligibility requirements.
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(tt) As of the Cut-Off Date, no more than 0.15% of the Mortgage
Loans were more than 29 days contractually delinquent or had been dishonored. No
more than 0.04% of the Mortgage Loans have been thirty or more days delinquent
more than one time in the twelve months preceding the Cut-Off Date.
(uu) The Sponsor has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a person other than the Mortgagor,
directly or indirectly, for the payment of any amount required under the
Mortgage Loan, except for interest prepaid upon the closing of the Mortgage
Loan. No Mortgage Loan contains any provision pursuant to which Monthly Payments
are: (i) paid or partially paid with funds deposited in any separate account
established by the Sponsor, the Mortgagor, or anyone on behalf of the Mortgagor
or (ii) paid by any source other than the Mortgagor. The Mortgage Loan is not
deemed a graduated payment mortgage loan and the Mortgage Loan does not have a
shared appreciation or other contingent interest feature.
(vv) No foreclosure proceedings are pending against the Mortgaged
Property and the Mortgage Loan is not subject to any pending bankruptcy or
insolvency proceeding, and to the Sponsor's best knowledge, no material
litigation or material lawsuit relating to the Mortgage Loan is pending.
(ww) Principal payments on the Mortgage Loan commenced or will
commence within sixty days after the proceeds of the Mortgage Loan were
disbursed.
(xx) With respect to escrow deposits, if any, all such payments are
in the possession of, or under the control of, the Master Servicer and there
exists no deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made or could be made. No escrow deposits or
escrow advances or other charges or payments due the Master Servicer have been
capitalized under any Mortgage or the related Mortgage Note.
(yy) With respect to the conveyance of the Mortgage Loans by the
Sponsor to the Seller, the Sponsor used no selection procedures that identified
the Mortgage Loans as being less desirable or valuable than other comparable
mortgage loans originated or acquired by the Sponsor. The Mortgage Loans are
representative of the Sponsor's portfolio of fixed-rate or adjustable-rate
mortgage loans, as applicable. With respect to the conveyance of the Mortgage
Loans pursuant to this Agreement, the Seller used no selection procedures that
identified the Mortgage Loans as being less desirable or valuable than other
comparable mortgage loans originated or acquired by the Seller. The Mortgage
Loans are representative of the Seller's portfolio of fixed-rate or
adjustable-rate mortgage loans, as applicable.
(zz) Each Mortgage Loan conforms, and all such Mortgage Loans in the
aggregate conform in all material respects to the description thereof set forth
in the Prospectus Supplement.
(aaa) All requirements for the valid transfer of each Insurance
Policy, including any assignments or notices required in each Insurance Policy,
have been satisfied.
(bbb) This Agreement creates a valid and continuing security
interest (as defined in the applicable UCC) in the Mortgage Loans in favor of
the Indenture Trustee, which security
25
interest is prior to all other liens, and is enforceable as such as against
creditors of and purchasers from the Seller.
(ccc) The Mortgage Loans constitute "instruments" within the meaning
of the applicable UCC.
(ddd) The Sponsor received all consents and approvals required by
the terms of the Mortgage Loans to the sale of the Mortgage Loans pursuant to
the Master Sale and Purchase Agreement to the Seller and the Seller has received
all consents and approvals required by the terms of the Mortgage Loans to the
sale of the Mortgage Loans hereunder to the Owner Trustee and the subsequent
pledge to the Indenture Trustee.
(eee) Other than the security interest granted to the Indenture
Trustee pursuant to the Indenture, neither the Sponsor nor the Seller has
pledged, assigned, sold, granted a security interest in, or otherwise conveyed
any of the Mortgage Loans. Neither the Sponsor nor the Seller has authorized the
filing of nor is aware of any financing statements against the Sponsor or the
Seller that include a description of collateral covering the Mortgage Loans
other than any financing statement relating to the security interest granted to
the Indenture Trustee hereunder or that has been terminated. Neither the Sponsor
nor the Seller is aware of any judgment or tax lien filings affecting the
Mortgage Loans against either the Seller or the Sponsor.
(fff) All financing statements filed or to be filed against the
Sponsor or the Seller in favor of the Indenture Trustee in connection herewith
describing the Mortgage Loans contain a statement to the following effect: "A
purchase of or security interest in any collateral described in this financing
statement will violate the rights of the Indenture Trustee."
(ggg) None of the Mortgage Loans is a "High Cost Home Loan" within
the meaning of the Georgia Fair Lending Act (the "Georgia Act"). The Mortgage
Loans in the Trust Estate that are "Covered Loans" within the meaning of the
Georgia Act comply with all material provisions of the Georgia Act, and the
Sponsor has ensured, among other things, that if a borrower under a "Covered
Loan" has refinanced an existing "Home Loan" that was consummated within the
previous five years, the "Covered Loan" has provided a reasonable, tangible net
benefit to such borrower considering all of the circumstances.
(hhh) None of the Mortgage Loans is a Section 32 Mortgage Loan under
the Home Ownership Equity Protection Act of 1994.
(iii) None of the Mortgage Loans encumbering property located in
Georgia was originated after October 1, 2002.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 4.01 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee on behalf of the Noteholders and
the Note Insurer.
Section 4.02. Purchase and Substitution. (a) It is understood and agreed
that the representations and warranties set forth in Section 4.01 shall survive
the transfer of the Mortgage Loans by the Seller to the Trust, the subsequent
pledge thereof by the Trust to the Indenture
26
Trustee, for the benefit of the Noteholders and the Note Insurer, and the
delivery of the Notes to the Noteholders, and shall continue in full force and
effect, notwithstanding any restrictive or qualified endorsement on the Mortgage
Notes and notwithstanding subsequent termination of this Agreement.
(b) Upon discovery by the Seller, the Sponsor, the Master Servicer,
the Indenture Trustee, the Note Insurer or a Noteholder of a breach of any of
the representations and warranties in Section 4.01 which materially and
adversely affects the value of any Mortgage Loan, or which materially and
adversely affects the interests of the Note Insurer or the Noteholders in the
related Mortgage Loan, the party discovering such breach or failure shall
promptly (and in any event within five (5) days of the discovery) give written
notice thereof to the others. Within sixty (60) days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, the Sponsor shall (a) promptly cure such breach in all material
respects, (b) purchase such Mortgage Loan on the next succeeding Servicer
Payment Date, in the manner and at the price specified in Section 2.06(c) and
this Section 4.02, or (c) remove such Mortgage Loan from the Trust Estate (in
which case it shall become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans in the manner specified in Section 2.06 and
this Section 4.02. The Indenture Trustee shall deliver prompt written notice to
the Note Insurer and the Rating Agencies of any repurchase or substitution made
pursuant to this Section 4.02 or Section 2.06(c).
(c) As to any Deleted Mortgage Loan for which the Sponsor
substitutes a Qualified Substitute Mortgage Loan or Loans, the Master Servicer
shall cause the Sponsor to effect such substitution by delivering to the
Indenture Trustee a certification, in the form attached hereto as Exhibit F,
executed by a Servicing Officer, and the documents described in Sections
2.05(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.
(d) The Master Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments due with respect to
Qualified Substitute Mortgage Loans in or before the Due Period in which the
substitution occurs shall not be part of the Trust Estate and will be retained
by the Sponsor on the next succeeding Payment Date. For the Due Period in which
the substitution occurs, distributions to Noteholders will include the Monthly
Payment due on any Deleted Mortgage Loan for such Due Period and thereafter the
Sponsor shall be entitled to retain all amounts received in respect of such
Deleted Mortgage Loan. The Master Servicer shall give written notice to the
Backup Servicer, the Indenture Trustee and the Note Insurer that such
substitution has taken place and shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage Loan or
Loans. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans
shall be subject to the terms of this Agreement in all respects.
(e) With respect to any Mortgage Loan that has been converted to an
REO Mortgage Loan, all references in this Section 4.02 or Section 2.06 to
"Mortgage Loan" shall be deemed to also refer to the REO Mortgage Loan. With
respect to any Mortgage Loan that the Sponsor is required to repurchase that is
or becomes a Liquidated Mortgage Loan, in lieu of repurchasing such Mortgage
Loan, the Master Servicer shall deposit into the related Payment
27
Account, pursuant to Section 8.01 of the Indenture, an amount equal to the
amount of the Liquidated Loan Loss, if any, incurred in connection with the
liquidation of such Mortgage Loan within the same time period in which the
Master Servicer or Sponsor would have otherwise been required to repurchase such
Mortgage Loan.
(f) It is understood and agreed that the obligations of the Sponsor
set forth in Sections 2.06 and 4.02 to cure, purchase or substitute for a
defective Mortgage Loan, or to indemnify as described in Section 4.02(g)
constitute the sole remedies of the Indenture Trustee, the Note Insurer and the
Noteholders respecting a breach of the representations and warranties of the
Sponsor set forth in Section 4.01 of this Agreement.
(g) The Sponsor shall be obligated to indemnify the Seller, the
Indenture Trustee, the Trust, the Owner Trustee, the Noteholders and the Note
Insurer for any third party claims arising out of a breach by the Sponsor of
representations or warranties regarding the Mortgage Loans.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. The Master Servicer. (a) The Master Servicer shall service
and administer the Mortgage Loans in accordance with this Agreement and in
accordance with Accepted Servicing Practices, and shall have full power and
authority, acting alone, to do or cause to be done any and all things in
connection with such servicing and administration which it may deem necessary or
desirable.
(b) The Master Servicer shall exercise its discretion consistent
with Accepted Servicing Practices and the terms of this Agreement, with respect
to the enforcement of defaulted Mortgage Loans in such manner as will maximize
the receipt of principal and interest with respect thereto, including but not
limited to the sale of such Mortgage Loan to a third party, the modification of
such Mortgage Loan, or foreclosure upon the related property with a Mortgage and
disposition thereof.
(c) The duties of the Master Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Indenture Trustee with respect
to distributions, paying Compensating Interest and making Periodic Advances and
Servicing Advances pursuant hereto. The Master Servicer shall follow its
customary standards, policies and procedures in performing its duties as Master
Servicer. The Master Servicer shall cooperate with the Indenture Trustee and
furnish to the Indenture Trustee with reasonable promptness information in its
possession as may be necessary or appropriate to enable the Indenture Trustee to
perform its tax reporting duties hereunder. The Indenture Trustee shall furnish
the Master Servicer, or the Backup Servicer with any powers of attorney and
other documents as the Indenture Trustee shall deem necessary or appropriate to
enable the Master Servicer, and the Backup Servicer to carry out its servicing
and administrative duties hereunder; provided,
28
however, the Master Servicer, or the Backup Servicer shall prepare for and
deliver to the Indenture Trustee for its execution any such powers of attorney;
provided, further, that the Indenture Trustee shall not be responsible for any
misuse of any such power of attorney.
(d) [Reserved].
(e) The Master Servicer shall, in accordance with Accepted Servicing
Practices, have the right to approve requests of Mortgagors for consent to (i)
partial releases of Mortgage Loans and (ii) alterations, removal, demolition or
division of Mortgaged Properties subject to Mortgage Loans. No such request
shall be approved by the Master Servicer unless: (x) the provisions of the
related Mortgage Note have been complied with; (y) the LTV (which may, for this
purpose, be determined at the time of any such action in a manner reasonably
acceptable to the Note Insurer) after any release does not exceed the LTV set
forth for such Mortgage Loan in the Mortgage Loan Schedule; and (z) the lien
priority, monthly payment, Mortgage Interest Rate or maturity date of the
related Mortgage is not affected except in accordance with Section 5.02;
provided, however, that the foregoing requirements (x), (y) and (z) shall not
apply to any such situation described in this paragraph if such situation
results from any condemnation or easement activity by a governmental entity.
(f) Notwithstanding anything else contained herein, the Master
Servicer may not, without the consent of the Note Insurer, agree to a
modification or extension of any Mortgage Loan unless both (i) such Mortgage
Loan is in default or a default thereon is reasonably foreseeable and (ii) such
modification or extension would not result in the Master Servicer agreeing to
modifications or extensions on Mortgage Loans with aggregate Cut-Off Date
Principal Balances of more than 5.0% of the Maximum Collateral Amount. In
addition, the Master Servicer may not agree to more than (i) one modification or
extension with respect to any individual Mortgage Loan in a calendar year or
(ii) three modifications or extensions of an individual Mortgage Loan during the
life of such Mortgage Loan.
(g) [Reserved].
(h) Without limiting the generality of the foregoing, but subject to
Sections 5.05 and 5.06, the Master Servicer in its own name may be authorized
and empowered pursuant to a power of attorney executed and delivered by the
Indenture Trustee to execute and deliver, and may be authorized and empowered by
the Indenture Trustee, to execute and deliver, on behalf of itself, the
Noteholders and the Indenture Trustee or any of them, (i) any and all
instruments of satisfaction or cancellation or of partial or full release or
discharge and all other comparable instruments with respect to the Mortgage
Loans and with respect to the Mortgaged Properties, (ii) and to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Mortgaged Property on behalf of the Indenture Trustee, and
(iii) to hold title to any Mortgaged Property upon such foreclosure or deed in
lieu of foreclosure on behalf of the Indenture Trustee; provided, however, that
Section 5.07(a) shall constitute a power of attorney from the Indenture Trustee
to the Master Servicer to execute an instrument of satisfaction (or assignment
of mortgage without recourse) with respect to any Mortgage Loan paid in full (or
with respect to which payment in full has been escrowed). Subject to Sections
5.05 and 5.06, the Indenture Trustee shall furnish the Master Servicer with any
powers of attorney and other documents as the Master Servicer shall reasonably
request to enable the
29
Master Servicer to carry out their respective servicing and administrative
duties hereunder; provided, however, the Master Servicer shall prepare for and
deliver to the Indenture Trustee for its execution any such powers of attorney;
provided, further, that the Indenture Trustee shall not be responsible for any
misuse of any such power of attorney.
(i) The Master Servicer shall give prompt notice to the Backup
Servicer, the Indenture Trustee and the Note Insurer of any action, of which the
Master Servicer has actual knowledge, to (i) assert a claim against the Trust or
(ii) assert jurisdiction over the Trust.
(j) Servicing Advances incurred by the Master Servicer in connection
with the servicing of the Mortgage Loans (including any penalties in connection
with the payment of any taxes and assessments or other charges) on any Mortgaged
Property shall be recoverable by the Master Servicer to the extent described
herein.
(k) The Master Servicer shall be entitled to rely, and shall be
fully protected in relying, upon any promissory note, writing, resolution,
notice, consent, certificate, affidavit, letter, e-mail, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by the proper person or persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Mortgagor(s)),
independent accountants and other experts selected by the Master Servicer.
(l) The Master Servicer shall have no liability to the Seller, the
Sponsor, the Indenture Trustee, the Owner Trustee, the Note Insurer, any
Noteholder or any other Person for any action taken, or for refraining from the
taking of any action, in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that the foregoing shall not apply to any breach of
representations or warranties made by the Master Servicer herein, or to any
specific liability imposed upon the Master Servicer pursuant to this Agreement
or any liability that would otherwise be imposed upon the Master Servicer by
reason of its willful misconduct, bad faith or negligence in the performance of
its duties hereunder or by reason of its failure to perform its obligations or
duties hereunder.
Section 5.02. Collection of Certain Mortgage Loan Payments; Collection
Account. (a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow Accepted Servicing Practices. Consistent with the foregoing, the Master
Servicer may in its discretion waive any assumption fees or other fees which may
be collected in the ordinary course of servicing such Mortgage Loans.
(b) The Master Servicer shall establish and maintain, in the name of
the Indenture Trustee, the Collection Account, in trust for the benefit of the
Noteholders and the Note Insurer. The Collection Account shall be established
and maintained as an Eligible Account.
(c) The Master Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after the related Cut-Off Date (or, in the case of the Initial
Mortgage Loans, Monthly Payments due or to
30
be applied after November 1, 2002 and in the case of the Subsequent Mortgage
Loans, Monthly Payments due or to be applied after December 1, 2002), and
thereafter, on each Business Day, but not less than two Business Days after the
date of collection, the following payments and collections received or made by
it (other than in respect of monthly payments of principal on and interest of
(1) the Initial Mortgage Loans that were due on or before the related Cut-Off
Date and Monthly Payments due on November 1, 2002 and (2) the Subsequent
Mortgage Loans that were due on or before the related Cut-Off Date and Monthly
Payments due on December 1, 2002):
(i) payments of interest on the Mortgage Loans including
Prepayment Charges;
(ii) payments of principal of the Mortgage Loans, including
Principal Prepayments;
(iii) the Loan Repurchase Price of Mortgage Loans repurchased
pursuant to Sections 2.06(c) or 4.02;
(iv) the Substitution Adjustment received in connection with
Mortgage Loans for which Qualified Substitute Mortgage Loans are received
pursuant to Sections 2.06 and 4.02;
(v) all Net REO Proceeds;
(vi) all Net Liquidation Proceeds; and
(vii) all Insurance Proceeds (including, for this purpose, any
amounts required to be deposited by the Master Servicer pursuant to
Section 5.04 hereof).
It is understood that the Master Servicer need not deposit amounts
representing fees, late payment charges or extension or other administrative
charges (other than Prepayment Charges) payable by Mortgagors, or amounts
received by the Master Servicer for the account of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments and similar items
or foreclosure proceeds to the extent payable to the related Mortgagor.
(d) The Master Servicer shall invest any funds in the Collection
Account in Permitted Investments, which shall mature not later than the Business
Day next preceding the Servicer Payment Date next following the date of such
investment (except that any investment held by the Indenture Trustee may mature
on such Servicer Payment Date) and shall not be sold or disposed of prior to its
maturity. All net income and gain realized from any such investment shall be for
the benefit of the Master Servicer and shall be subject to its withdrawal or
order on a Servicer Payment Date. The Master Servicer shall deposit from its own
funds the amount of any loss, to the extent not offset by investment income or
earnings, in the Collection Account upon the realization of such loss.
Section 5.03. Permitted Withdrawals from the Collection Account. The
Master Servicer may make withdrawals from the Collection Account, on or prior to
any Servicer Payment Date, for the following purposes:
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(a) to pay to the Sponsor amounts received in respect of any
Defective Mortgage Loan purchased or substituted for by the Sponsor to the
extent that the payment of any such amounts on the Servicer Payment Date upon
which the proceeds of such purchase are paid would make the total amount
distributed in respect of any such Mortgage Loan on such Servicer Payment Date
greater than the Loan Repurchase Price or the Substitution Adjustment therefor;
(b) to reimburse the Master Servicer for unreimbursed Periodic
Advances and unreimbursed Servicing Advances with respect to the Mortgage Loans
for which it has made a Periodic Advance or Servicing Advance, from late or
deferred payments collected, collections other than timely Monthly Payments,
Liquidation Proceeds, Insurance Proceeds and/or the Loan Repurchase Price or
Substitution Adjustment of or relating to such Mortgage Loans;
(c) to reimburse the Master Servicer for any Periodic Advances and
Servicing Advances determined in good faith to have become Nonrecoverable
Advances, such reimbursement to be made from any funds in the Collection
Account;
(d) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction;
(e) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein;
(f) to pay the Master Servicer the Servicing Compensation pursuant
to Section 5.08 hereof to the extent not retained or paid;
(g) to pay the Backup Servicer the Backup Servicing Fee pursuant to
Section 5.08 hereof to the extent payments in respect of these amounts have not
been previously retained or paid;
(h) without duplication, and solely out of amounts which are payable
to a former master servicer pursuant to Section 7.02(g), to pay to the Backup
Servicer, the Indenture Trustee or any successor master servicer amounts paid by
them in connection with the transfer of the Master Servicer's servicing
obligations pursuant to Article VII hereof and required under such Article VII
to be borne by the Master Servicer;
(i) to withdraw income on the Collection Account as provided in
Section 5.02(d); and
(j) amounts deposited into the Collection Account in respect of late
fees, assumption fees and similar fees (other than Prepayment Charges).
The Master Servicer shall keep and maintain a separate accounting for each
Mortgage Loan for the purpose of accounting for withdrawals from the Collection
Account pursuant to this Section 5.03. Furthermore, in the event that servicing
has been transferred to the Backup Servicer, all reimbursements in respect of
Servicer Advances and Periodic Advances shall be
32
made on a first in, first out priority basis (i.e. the longest outstanding
reimbursable Servicer Advance or Periodic Advance will be reimbursed first).
Section 5.04. Hazard Insurance Policies; Property Protection Expenses. (a)
The Master Servicer shall cause to be maintained with respect to each Mortgage
Loan a hazard insurance policy with a carrier licensed in the state in which the
Mortgaged Property is located that provides for fire and extended coverage, and
which provides for a recovery by the named insured of insurance proceeds
relating to such Mortgage Loan in an amount not less than the least of (i) the
outstanding Principal Balance of the Mortgage Loan plus the outstanding
principal balance of any mortgage loan senior to such Mortgage Loan, but in no
event shall such amount be less than is necessary to prevent the Mortgagor from
becoming a coinsurer thereunder, (ii) the minimum amount required to compensate
for loss or damage on a replacement cost basis and (iii) the full insurable
value of the related Mortgage Property. The Master Servicer shall also maintain
on property acquired upon foreclosure, or by deed in lieu of foreclosure, hazard
insurance with extended coverage in an amount which is at least equal to the
lesser of (i) the maximum insurable value from time to time of the improvements
which are a part of such property or (ii) the sum of the Principal Balance of
such Mortgage Loan and the principal balance of any mortgage loan senior to such
Mortgage Loan at the time of such foreclosure plus accrued interest and the
good-faith estimate of the Master Servicer of related Liquidation Expenses to be
incurred in connection therewith. Amounts collected by the Master Servicer under
any such policies shall be deposited in the Collection Account to the extent
that they constitute Liquidation Proceeds or Insurance Proceeds. Each hazard
insurance policy shall contain a standard mortgage clause naming the Master
Servicer, its successors and assigns, as mortgagee. The Master Servicer shall be
under no obligation to require that any Mortgagor maintain earthquake (except as
provided herein) or other additional insurance and shall be under no obligation
itself to maintain any such additional insurance on property acquired in respect
of a Mortgage Loan, other than pursuant to such applicable laws and regulations
as shall at any time be in force and as shall require such additional insurance.
(b) In the event that the Master Servicer shall obtain and maintain
a blanket policy with an insurer either (i) which satisfies the corresponding
requirements of ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac or (ii) approved in writing by the
Note Insurer, such approval not to be unreasonably withheld, insuring against
fire, flood and hazards of extended coverage on all of the Mortgage Loans, then,
to the extent such policy names the Master Servicer as loss payee and provides
coverage in an amount equal to the aggregate unpaid Principal Balance on the
Mortgage Loans without co-insurance, and otherwise complies with the
requirements of this Section 5.04, the Master Servicer shall be deemed
conclusively to have satisfied its obligations with respect to fire and hazard
insurance coverage under this Section 5.04, it being understood and agreed that
such blanket policy may contain a deductible clause, in which case the Master
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property a policy complying with the preceding paragraph of
this Section 5.04, and there shall have been a loss which would have been
covered by such policy, deposit in the Collection Account from the Master
Servicer's own funds the difference, if any, between the amount that would have
been payable under a policy complying with the preceding paragraph of this
Section 5.04 and the amount paid under such blanket policy. Upon the request of
the Indenture Trustee or the Note Insurer, the Master Servicer shall cause to be
delivered to the Indenture Trustee or the Note Insurer, a certified true copy of
such policy.
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(c) If the Mortgage Loan at the time of origination relates to a
Mortgaged Property in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards as designated to the
Master Servicer by the Sponsor, the Master Servicer will cause to be maintained
with respect thereto a flood insurance policy in a form meeting the requirements
of the current guidelines of the Federal Insurance Administration with a
generally acceptable carrier in an amount representing coverage, and which
provides for a recovery by the Master Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan of not less than the least of
(i) the outstanding Principal Balance of the related Mortgage Loan, plus the
principal balance of the related first lien, if any, (ii) the minimum amount
required to compensate for damage or loss on a replacement cost basis and (iii)
the maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973. The Master Servicer shall indemnify the Trust and the
Note Insurer out of the Master Servicer's own funds for any loss to the Trust
and the Note Insurer resulting from the Master Servicer's failure to maintain
the insurance required by this Section.
Section 5.05. Assumption and Modification Agreements. When a Mortgaged
Property has been or is about to be conveyed by the Mortgagor, the Master
Servicer shall, to the extent it has knowledge of such conveyance or prospective
conveyance, exercise its rights to accelerate the maturity of the related
Mortgage Loan under any "due-on-sale" clause contained in the related Mortgage
or Mortgage Note; provided, however, that the Master Servicer shall not exercise
any such right if (i) the "due-on-sale" clause, in the reasonable belief of the
Master Servicer, is not enforceable under applicable law or (ii) the Master
Servicer reasonably believes that to permit an assumption of the Mortgage Loan
would not materially and adversely affect the interest of the Noteholders or of
the Note Insurer. In such event, the Master Servicer shall enter into an
assumption and modification agreement with the Person to whom such property has
been or is about to be conveyed, pursuant to which such Person becomes liable
under the Mortgage Note and, unless prohibited by applicable law or the mortgage
documents, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Master Servicer is authorized to enter into
a substitution of liability agreement with such Person, pursuant to which the
original Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the Mortgage Note; provided, however, that to
the extent any such substitution of liability agreement would be delivered by
the Master Servicer outside of its usual procedures for mortgage loans held in
its own portfolio the Master Servicer shall, prior to executing and delivering
such agreement, obtain the prior written consent of the Note Insurer. The
Mortgage Loan, if assumed, shall conform in all respects to the requirements and
representations and warranties of this Agreement. The Master Servicer shall
notify the Indenture Trustee that any applicable assumption or substitution
agreement has been completed by forwarding to the Indenture Trustee the original
copy of such assumption or substitution agreement, which copy shall be added by
the Indenture Trustee to the related Indenture Trustee's Mortgage File and which
shall, for all purposes, be considered a part of such Indenture Trustee's
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. The Master Servicer shall be responsible for
promptly recording any such assumption or substitution agreements. In connection
with any such assumption or substitution agreement, the required monthly payment
on the related Mortgage Loan shall not be changed but shall remain as in effect
immediately prior to the assumption or substitution, the stated maturity or
outstanding Principal Balance of such Mortgage Loan shall not be changed, the
Mortgage Interest Rate shall not be changed nor shall any required monthly
payments of principal or interest be deferred or
34
forgiven. Any fee collected by the Master Servicer for consenting to any such
conveyance or entering into an assumption or substitution agreement shall be
retained by or paid to the Master Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption which the Master Servicer
may be restricted by law from preventing, for any reason whatsoever.
Section 5.06. Realization Upon Defaulted Mortgage Loans. (a) The Master
Servicer shall foreclose upon or otherwise comparably effect the ownership on
behalf of the Trust of Mortgaged Properties relating to defaulted Mortgage Loans
as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Sponsor has not purchased pursuant to Section
5.15, unless the Master Servicer reasonably believes that Net Liquidation
Proceeds with respect to such Mortgage Loan would not be increased as a result
of such foreclosure or other action, in which case, such Mortgage Loan will be
charged-off and will become a Liquidated Mortgage Loan. The Master Servicer
shall have no obligation to purchase any Mortgaged Property at any foreclosure
sale. In connection with such foreclosure or other conversion, the Master
Servicer shall exercise foreclosure procedures with the same degree of care and
skill in their exercise or use, as it would ordinarily exercise or use under the
circumstances in the conduct of their own affairs. Any amounts including
Liquidation Expenses, advanced by the Master Servicer in connection with such
foreclosure or other action shall constitute Servicing Advances.
Pursuant to its efforts to sell any REO Property, the Master Servicer
either itself or through an agent selected by the Master Servicer shall manage,
conserve, protect and operate such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the Master
Servicer, rent the same, or any part thereof, as the Master Servicer deems to be
in the best interest of the Trust and Note Insurer for the period prior to the
sale of such REO Property. The net income generated from the REO Property and
the proceeds from a sale of any REO Property shall be deposited in the
Collection Account.
(b) If the Master Servicer has reason to believe that a Mortgaged
Property which the Master Servicer is contemplating acquiring in foreclosure or
by deed in lieu of foreclosure contains environmental or hazardous waste risks
known to the Master Servicer, the Master Servicer shall notify the Backup
Servicer, the Indenture Trustee and the Note Insurer and obtain the consent of
the Note Insurer prior to acquiring the Mortgaged Property. The Master Servicer
shall not institute foreclosure actions with respect to such a property if it
reasonably believes that such action would not be consistent with the Accepted
Servicing Practices, and in no event shall the Master Servicer be required to
manage, operate or take any other action with respect thereto which the Master
Servicer in good faith believes will result in "clean-up" or other liability
under applicable law, unless the Master Servicer receives an indemnity
acceptable to it in its sole discretion.
35
(c) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts if any it expects to recover from or
on account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a Liquidated Mortgage Loan.
(d) Net Foreclosure Profits, if any, shall be paid directly to the
Sponsor.
(e) With respect to its obligations under this Section 5.06, the
Master Servicer shall take all such actions as it reasonably believes are
consistent with Accepted Servicing Practices.
Section 5.07. Indenture Trustee to Cooperate. (a) Upon the payment in full
of any Mortgage Loan or the receipt by the Master Servicer of a notification
that payment in full will be escrowed in a manner customary for such purposes,
the Master Servicer shall deliver to the Indenture Trustee one copy of a Request
for Release. Upon receipt of such copy of the Request for Release, the Indenture
Trustee shall promptly release the related Indenture Trustee's Mortgage File, in
trust to (i) the Master Servicer (ii) an escrow agent or (iii) any employee,
agent or attorney of the Indenture Trustee, in each case pending its release by
the Master Servicer, such escrow agent or such employee, agent or attorney of
the Indenture Trustee, as the case may be. Upon any such payment in full, or the
receipt of such notification that such funds have been placed in escrow, the
Master Servicer is authorized to give, as attorney-in-fact for the Indenture
Trustee and the mortgagee under the Mortgage which secured the Mortgage Note, an
instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Mortgaged Property relating to such Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of payment in full, it
being understood and agreed that no expense incurred in connection with such
instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Collection Account.
(b) (i) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Indenture Trustee shall (except in the case of the payment or
liquidation pursuant to which the related Indenture Trustee's Mortgage File is
released to an escrow agent or an employee, agent or attorney of the Indenture
Trustee), upon request of the Master Servicer and delivery to the Indenture
Trustee of one copy of a Request for Release, release the related Indenture
Trustee's Mortgage File to the Master Servicer and shall execute such documents
as shall be necessary to the prosecution of any such proceedings, including,
without limitation, an assignment without recourse of the related Mortgage to
the Master Servicer. The Indenture Trustee shall complete in the name of the
Indenture Trustee any endorsement in blank on any Mortgage Note prior to
releasing such Mortgage Note to the Master Servicer. Such receipt shall obligate
the Master Servicer to return the Indenture Trustee's Mortgage File to the
Indenture Trustee when the need therefor by the Master Servicer no longer exists
unless the Mortgage Loan shall be liquidated, in which case, the Master Servicer
shall deliver one copy of a Request for Release indicating such loan has been
paid in full.
(ii) Each Request for Release may be delivered to the
Indenture Trustee (x) via mail or courier, (y) via facsimile or (z) by
such other means, including,
36
without limitation, electronic or computer readable medium, as the Master
Servicer and the Indenture Trustee shall mutually agree. The Indenture
Trustee shall promptly release the related Indenture Trustee's Mortgage
File(s) within three (3) Business Days of receipt of one copy of a
properly completed Request for Release pursuant to clauses (x), (y) or (z)
above or such shorter period as may be agreed upon by the Master Servicer
and the Indenture Trustee. Receipt of a Request for Release pursuant to
clauses (x), (y) or (z) above shall be authorization to the Indenture
Trustee to release such Indenture Trustee's Mortgage Files, provided the
Indenture Trustee has determined that such Request for Release has been
executed, with respect to clauses (x) or (y) above, or approved, with
respect to clause (z) above, by a Servicing Officer of the Master
Servicer. If the Indenture Trustee is unable to release the Indenture
Trustee's Mortgage Files within the time frames previously specified, the
Indenture Trustee shall immediately notify the Master Servicer, indicating
the reason for such delay, but in no event shall such notification be
later than five Business Days after receipt of a Request for Release. If
the Master Servicer, is required to pay penalties or damages due solely to
the Indenture Trustee's negligent failure to release the related Indenture
Trustee's Mortgage File or the Indenture Trustee's negligent failure to
execute and release documents in a timely manner, the Indenture Trustee
shall be liable for such penalties or damages.
(c) No costs associated with the procedures described in this
Section 5.07 shall be an expense of the Trust.
Section 5.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer. The Master Servicer shall be entitled to receive and retain,
out of collections on the Mortgage Loans for each Due Period, as servicing
compensation for such Due Period, an amount (the "Servicing Fee") equal to the
product of one-twelfth of the Servicing Fee Rate and the aggregate Stated
Principal Balance of the Mortgage Loans in each Loan Group as of the beginning
of such Due Period. Additional servicing compensation in the form of assumption
fees, late payment charges or extension and other administrative charges (other
than Prepayment Charges) shall 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 the Indenture Trustee Fee to the
extent that monies in the Collection Account are insufficient therefor, as
provided in Section 6.16 of the Indenture, and all other fees and expenses not
expressly stated hereunder to be payable by or from another source) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
The Backup Servicer shall be entitled to receive, and the Master Servicer
shall pay, out of collections on the Mortgage Loans for each Due Period, as
servicing compensation for such Due Period, an amount (the "Backup Servicing
Fee") equal to the product of one-twelfth of the Backup Servicing Fee Rate and
the aggregate Stated Principal Balance of the Mortgage Loans in each Loan Group
as of the beginning of such Due Period. The Backup Servicer will also be
entitled to an upfront fee of $7,500.00.
Section 5.09. Annual Statement as to Compliance. The Master Servicer will
deliver to the Backup Servicer, the Trust, the Indenture Trustee, the Rating
Agencies, the Note Insurer and, the Sponsor on or before April 30 of each year,
beginning April 30, 2003, an Officer's Certificate of the Master Servicer
stating that (a) a review of the activities of the Master Servicer
37
during the preceding calendar year and of its performance under this Agreement
has been made under such officer's supervision and (b) to the best of such
officer's knowledge, based on such review, the Master Servicer has fulfilled all
its material 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.
Section 5.10. Annual Independent Public Accountants' Servicing Report. On
or before March 1 of each year, beginning April 30, 2003, the Master Servicer at
its expense shall cause a firm of independent public accountants that is a
member of the American Institute of Certified Public Accountants (who may also
render other services to the Master Servicer) to furnish a report to the Backup
Servicer, the Trust, the Indenture Trustee, the Rating Agencies, the Note
Insurer and the Sponsor to the effect that such firm has examined certain
documents and records relating to the servicing of mortgage loans under
servicing agreements (including this Agreement) substantially similar to this
Agreement, and that such examination, which has been conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
the Audit Guide for Audits of HUD Approved Nonsupervised Mortgagees (to the
extent that the procedures in such audit guide are applicable to the servicing
obligations set forth in such agreements), has disclosed no items of
noncompliance with the provisions of this Agreement which, in the opinion of
such firm, are material, except for such items of noncompliance as shall be set
forth in such report.
Section 5.11. Access to Certain Documentation. The Master Servicer shall
provide to the Backup Servicer, the Indenture Trustee, the Note Insurer, the
FDIC and the supervisory agents and examiners (as required in the latter case by
applicable State and federal regulations) of each of the foregoing access to the
documentation regarding 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 designated by it.
Upon any change in the format of the computer tape maintained by the
Master Servicer in respect of the Mortgage Loans, the Master Servicer shall
deliver a copy of such computer tape to the Indenture Trustee and the Backup
Servicer and in addition shall provide a copy of such computer tape to the
Indenture Trustee, the Backup Servicer and the Note Insurer at such other times
as the Indenture Trustee or the Note Insurer may reasonably request.
The Master Servicer shall keep confidential (including from affiliates
thereof) information concerning the Mortgage Loans, except as required by law.
Section 5.12. Maintenance of Fidelity Bond. The Master Servicer and the
Backup Servicer shall each, during the term of its service as Master Servicer
and Backup Servicer, respectively, maintain in force a fidelity bond and errors
and omissions insurance in respect of their respective officers, employees or
agents. Such bond and insurance shall comply with the requirements from time to
time of ▇▇▇▇▇▇ ▇▇▇ for Persons performing servicing for mortgage loans purchased
by such association.
Section 5.13. Subservicing Agreements Between the Master Servicer and
Subservicer and Subservicers. (a) The Master Servicer may enter into
subservicing agreements for any servicing and administration of Mortgage Loans
with any institution which is in compliance with
38
the laws of each state necessary to enable it to perform its obligations under
such subservicing agreement. The Master Servicer shall give notice to the Backup
Servicer, the Note Insurer and the Indenture Trustee of the appointment of any
subservicer and shall furnish to the Backup Servicer, the Note Insurer and the
Indenture Trustee a copy of the subservicing agreement. The Master Servicer
shall give notice to each Rating Agency of the appointment of any subservicer.
No such appointment of a subservicer shall be effective without the consent of
the Note Insurer. For purposes of this Agreement, the Master Servicer shall be
deemed to have received payments on Mortgage Loans when any subservicer has
received such payments. Any such subservicing agreement shall be consistent with
and not violate the provisions of this Agreement.
(b) The Master Servicer may, with the consent of the Note Insurer,
terminate any subservicing agreement in accordance with the terms and conditions
of such subservicing agreement and thereafter directly service the related
Mortgage Loans itself or enter into a subservicing agreement with a successor
subservicer that qualifies under Subsection (a) of this Section 5.13. The Master
Servicer shall give notice to each Rating Agency of the termination of any
subservicer and the appointment of any successor subservicer.
(c) The Master Servicer shall not be relieved of its obligations
under this Agreement notwithstanding any subservicing agreement or any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a subservicer or otherwise, and the Master Servicer shall be
obligated to the same extent and under the same terms and conditions as if it
alone were servicing and administering the Mortgage Loans. The Master Servicer
shall be entitled to enter into any agreement with a subservicer for
indemnification of the Master Servicer by such subservicer and nothing contained
in such subservicing agreement shall be deemed to limit or modify this
Agreement. The Trust shall not indemnify the Master Servicer for any losses due
to the Master Servicer's negligence.
(d) Any subservicing agreement and any other transactions or
services relating to the Mortgage Loans involving a subservicer shall be deemed
to be between the subservicer and the Master Servicer alone and the Backup
Servicer, the Note Insurer, the Indenture Trustee and the Noteholders shall not
be deemed parties thereto and shall have no claims, rights, obligations, duties
or liabilities with respect to any Subservicer except as set forth in Subsection
(e) of this Section 5.13 and the related Subservicing Agreement.
(e) Notwithstanding any contrary provision contained herein, in
connection with the assumption of the responsibilities, duties and liabilities
and of the authority, power and rights of the Master Servicer hereunder by the
Backup Servicer, the Indenture Trustee or any other successor master servicer
pursuant to Section 7.02, it is understood and agreed that the Master Servicer's
rights and obligations under any subservicing agreement then in force between
the Master Servicer and a subservicer may be assumed or terminated (without
cost) by the Backup Servicer, the Indenture Trustee or any other successor
master servicer at its option as successor to the Master Servicer.
The Master Servicer shall, upon request of the Backup Servicer, the
Indenture Trustee or the Note Insurer, but at the expense of the Master
Servicer, deliver to the assuming party documents and records relating to each
subservicing agreement and an accounting of amounts collected and held by it and
otherwise use its best reasonable efforts to effect the orderly and
39
efficient transfer of the subservicing agreements to the assuming party, without
the payment of any fee by the Backup Servicer, the Indenture Trustee, any
Noteholders or the Note Insurer, notwithstanding any contrary provision in any
subservicing agreement.
Section 5.14. Reports to the Indenture Trustee; Collection Account
Statements. Not later than twenty-five (25) days after each Payment Date, the
Master Servicer shall provide to the Indenture Trustee, the Backup Servicer and
the Note Insurer a statement, certified by a Servicing Officer, setting forth
the status of the Collection Account as of the close of business on the last day
of the Due Period preceding such Payment Date, stating that all payments
required by this Agreement to be made by the Master Servicer on behalf of the
Indenture Trustee have been made (or if any required payment has not been made
by the Master Servicer, specifying the nature and status thereof) and showing,
for the period covered by such statement, the aggregate of deposits into and
withdrawals from the Collection Account and the aggregate of deposits into each
Payment Account as specified in Section 6.01. Such statement shall also state
the aggregate Stated Principal Balance and the aggregate unpaid principal
balance of all the Mortgage Loans as of the close of business on the last day of
the month preceding the month in which such Payment Date occurs.
Section 5.15. Optional Purchase of Defaulted Mortgage Loans. (a) The
Sponsor, in its sole discretion, shall have the right to elect (by written
notice sent to the Master Servicer, the Indenture Trustee and the Note Insurer),
but shall not be obligated, to purchase for its own account from the Trust any
Mortgage Loan which is ninety (90) days or more Delinquent in the manner at the
Loan Repurchase Price (except that the amount described in the definition of
Loan Repurchase Price shall in no case be net of the Servicing Fee and the
Backup Servicing Fee). The purchase price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account and the Indenture
Trustee, upon the Indenture Trustee's receipt of written notice by the Master
Servicer of such deposit, shall release or cause to be released to the purchaser
of such Mortgage Loan the related Indenture Trustee's Mortgage File and shall
execute and deliver such instruments of transfer or assignment prepared by the
purchaser of such Mortgage Loan, in each case without recourse, as shall be
necessary to vest in the purchaser of such Mortgage Loan any Mortgage Loan
released pursuant hereto and the purchaser of such Mortgage Loan shall succeed
to all the Indenture Trustee's right, title and interest in and to such Mortgage
Loan and all security and documents related thereto. Such assignment shall be an
assignment outright and not for security. The purchaser of such Mortgage Loan
shall thereupon own such Mortgage Loan, and all security and documents, free of
any further obligation to the Indenture Trustee, the Note Insurer or the
Noteholders with respect thereto. The purchaser of such Mortgage Loan shall give
written notice to the Note Insurer of the means by which any Mortgage Loan
purchased pursuant to this Section 5.15 is ultimately disposed of and any other
information regarding any such Mortgage Loan reasonably requested by the Note
Insurer.
(b) After the Sponsor or an Affiliate of the Sponsor has repurchased
any Mortgage Loans which are 90 days or more Delinquent in an aggregate amount
equal to 1% of the Maximum Collateral Amount, then notwithstanding the
foregoing, unless the Note Insurer consents, the Sponsor or an Affiliate of the
Sponsor may only exercise its option pursuant to this Section 5.15 with respect
to the Mortgage Loan or Mortgage Loans (including REO Mortgage Loans) that have
been Delinquent for the longest period at the time of such repurchase. Any
request by the Sponsor or an Affiliate of the Sponsor to the Note Insurer for
consent to
40
repurchase Mortgage Loans that are not the most Delinquent shall be accompanied
by a description of the Mortgage Loans that have been Delinquent longer than the
Mortgage Loan or Mortgage Loans the Sponsor or such Affiliate proposes to
repurchase. If the Note Insurer fails to respond to such request within ten (10)
Business Days after receipt thereof, the Sponsor or such Affiliate may
repurchase the Mortgage Loan or Mortgage Loans proposed to be repurchased
without the consent of, or any further action by, the Note Insurer. Notice to
the Note Insurer shall be delivered in accordance with the terms of the
Insurance Agreement.
Section 5.16. Reports to be Provided by the Master Servicer and the Backup
Servicer. (a) By 3:00 p.m. eastern time on the second Business Day following the
fifteenth (15th) day of each month (the "Servicer Reporting Date"), the Master
Servicer shall deliver to the Indenture Trustee, the Backup Servicer, the
Underwriter, Intex, Bloomberg and the Note Insurer a Servicer Remittance Report
for the related Servicer Payment Date setting forth the following information
with respect to all Mortgage Loans as well as a break out as to each Loan Group
as of the close of business on the last Business Day of the prior calendar month
(except as otherwise provided in clause (v) below):
(i) the total number of Mortgage Loans and the Aggregate
Principal Balances thereof, together with the number, Aggregate Principal
Balances of such Mortgage Loans and the percentage (based on the Aggregate
Principal Balances of the Mortgage Loans) of the Aggregate Principal
Balances of such Mortgage Loans to the Aggregate Principal Balance of all
Mortgage Loans (A) 30-59 days Delinquent, (B) 60-89 days Delinquent and
(C) 90 or more days Delinquent;
(ii) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage Loans
to the Aggregate Principal Balance of all Mortgage Loans in foreclosure
proceedings and the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of any such Mortgage Loans also included in any of the
statistics described in the foregoing clause (i);
(iii) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage Loans
to the Aggregate Principal Balance of all Mortgage Loans relating to
Mortgagors in bankruptcy proceedings and the number, Aggregate Principal
Balances of all Mortgage Loans and percentage (based on the Aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing clause (i);
(iv) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage Loans
to the Aggregate Principal Balance of all Mortgage Loans relating to REO
Properties and the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of any such Mortgage Loans also included in any of the
statistics described in the foregoing clause (i);
41
(v) the weighted average Mortgage Interest Rate for the
Mortgage Loans in Loan Group 1, Loan Group 2 and Loan Group 3, in each
case, as of the Due Date occurring in the Due Period related to such
Payment Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Cumulative Loan Losses during the related
Collection Period;
(ix) the number and the Aggregate Principal Balance of
Mortgage Loans repurchased pursuant to Section 5.15; and
(x) such other loan level information as either (a) the
Indenture Trustee may reasonably request to enable it to prepare the
Indenture Trustee's Remittance Report or (b) the Note Insurer may
reasonably request.
(b) [Reserved].
(c) In addition to the contingent obligations of the Backup Servicer
under this Agreement, the Backup Servicer shall establish and maintain a system
of transaction accounting in regard to the Mortgage Loans substantially similar
to that maintained by the Master Servicer and post to such system all
information relating to the Mortgage Loans obtained by the Backup Servicer
pursuant to Section 5.16 and 5.18, to enable the Backup Servicer to perform the
obligations of a successor master servicer immediately upon any termination or
resignation of the Master Servicer. The Backup Servicer's obligations described
in this Section 5.16(c) and its obligations pursuant to Section 7.02 shall be
the only obligations of the Backup Servicer under this Agreement. All such
obligations of the Backup Servicer are effective as of the date of this
Agreement.
Section 5.17. [Reserved].
Section 5.18. Periodic Advances. If, on any Servicer Payment Date, the
Master Servicer determines that any Monthly Payments due during the related Due
Period have not been received as of the end of the related Due Period, the
Master Servicer shall determine the amount of any Periodic Advance required to
be made with respect to the related Payment Date. The Master Servicer shall
deliver, one (1) Business Day after such Servicer Payment Date, a magnetic tape,
diskette (or such other electronic medium used by the Master Servicer for such
purpose) to the Backup Servicer indicating the payment status of each Mortgage
Loan as of the date which is two Business Days prior to such Servicer Payment
Date. The Master Servicer shall include in the amount to be deposited in the
related Payment Account on such Servicer Payment Date an amount equal to the
Periodic Advance, if any, which deposit may be made in whole or in part from
funds in the Collection Account being held for future payment or withdrawal on
or in connection with Payment Dates in subsequent months, other than any such
amounts which are voluntary Principal Prepayments in full. Any funds being held
for future payment to Noteholders and so used shall be replaced by the Master
Servicer from its own funds by deposit in the Collection Account on or before
the Business Day preceding any future Servicer Payment
42
Date to the extent that funds in the Collection Account on such Servicer Payment
Date shall be less than the Servicer Remittance Amount for such Payment Date.
The Master Servicer shall designate on its records the specific Mortgage
Loans and related installments (or portions thereof) as to which such Periodic
Advance shall be deemed to have been made, such determination being conclusive
for purposes of withdrawals from the Collection Account pursuant to Section 5.03
hereof.
Section 5.19. Indemnification; Third Party Claims. The Master Servicer
agrees to indemnify and to hold each of the Trust, the Owner Trustee, the
Seller, the Sponsor, the Backup Servicer, the Indenture Trustee, the Note
Insurer and each Noteholder harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses (including attorneys' fees and expenses) that the
Trust, the Owner Trustee, the Seller, the Sponsor, the Backup Servicer, the
Indenture Trustee, the Note Insurer and any Noteholder (or any director,
officer, employee or agent of the foregoing) may sustain in any way related to
the failure of the Master Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement and the other
Basic Documents and in connection with the Indenture as provided in Section 6.16
thereof. 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 other Basic Documents and the Master Servicer shall
assume the defense of any 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 against the Trust, the Owner
Trustee, the Seller, the Sponsor, the Backup Servicer, the Master Servicer, the
Indenture Trustee, the Note Insurer and/or a Noteholder (or any director,
officer, employee or agent of the foregoing) in respect of such claim. The
obligations of the Master Servicer under this Section 5.19 arising prior to any
resignation or termination of the Master Servicer hereunder shall survive the
resignation or termination of the Master Servicer or the termination of this
Agreement or the Indenture.
Section 5.20. Maintenance of Corporate Existence and Licenses; Merger or
Consolidation of the Master Servicer and Backup Servicer. (a) Each of the Master
Servicer and the Backup Servicer will keep in full effect its existence, rights
and franchises as a corporation, will obtain and preserve its qualification to
do business as a foreign corporation in each jurisdiction necessary to protect
the validity and enforceability of this Agreement or any of the Mortgage Loans
and to perform its duties under this Agreement and will otherwise operate its
business so as to cause the representations and warranties under Section 3.01
hereof to be true and correct at all times under this Agreement.
(b) Any corporation into which the Master Servicer or the Backup
Servicer may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer or the Backup Servicer shall be a party, or any corporation
succeeding to all or substantially all of the business of the Master Servicer or
the Backup Servicer, shall be the successor of the Master Servicer or the Backup
Servicer, as applicable, hereunder, only with the consent of the Note Insurer
but without the execution or filing of any paper or any further act on the part
of any of the parties hereto provided that, in the case of the Master Servicer,
such corporation meets the qualifications set forth in Section 7.02(b). The
Master Servicer or the Backup Servicer, as applicable, shall
43
send notice of any such merger or consolidation to the Owner Trustee, the
Indenture Trustee, the Note Insurer and the Master Servicer or the Backup
Servicer, as applicable.
Section 5.21. Assignment of Agreement by Master Servicer and Backup
Servicer; Master Servicer and Backup Servicer Not to Resign. Neither the Master
Servicer nor the Backup Servicer shall assign this Agreement nor resign from the
obligations and duties hereby imposed on it except with the prior consent of the
Note Insurer (a copy of which will be provided to the Indenture Trustee), or
upon the determination that the Master Servicer's or Backup Servicer's duties
hereunder are no longer permissible under applicable law and that such
incapacity cannot be cured by the Master Servicer or the Backup Servicer, as
applicable, without incurring, in the reasonable judgment of the Note Insurer,
unreasonable expense. Any such determination that the Master Servicer's or the
Backup Servicer's duties hereunder are no longer permissible under applicable
law permitting the resignation of the Master Servicer or the Backup Servicer, as
applicable, shall be evidenced by a written Opinion of Counsel (who may be
counsel for the Master Servicer or the Backup Servicer) to such effect delivered
to the Indenture Trustee, the Trust, the Seller, the Sponsor, the Note Insurer
and the Backup Servicer or the Master Servicer, as applicable. No such
resignation of the Master Servicer shall become effective until the Backup
Servicer or a successor master servicer appointed in accordance with the terms
of this Agreement has assumed the Master Servicer's responsibilities and
obligations hereunder in accordance with Section 7.02. The Master Servicer or
the Backup Servicer, as applicable, shall provide the Indenture Trustee, the
Rating Agencies and the Note Insurer with 30 days' prior written notice of its
intention to resign pursuant to this Section 5.21.
Section 5.22. Periodic Filings with the Securities and Exchange Commission
Additional Information.
(a) The Indenture Trustee shall reasonably cooperate with the Master
Servicer in connection with the satisfaction of the reporting requirements under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Indenture Trustee shall prepare on behalf of the Trust Fund any Forms 8-K and
10-K customary for similar securities as required by the Exchange Act and the
Rules and Regulations of the Securities and Exchange Commission (the
"Commission") thereunder, and shall file (via the Commission's Electronic Data
Gathering and Retrieval System) such Forms on behalf of the Master Servicer. The
Master Servicer hereby grants to the Indenture Trustee a limited power of
attorney to execute and file each such Form 8-K but only to the extent no
accompanying certification is required to be filed on behalf of the Master
Servicer. Such power of attorney shall continue until the earlier of (i) receipt
by the Indenture Trustee from the Master Servicer of written termination of such
power of attorney and (ii) termination of the Trust Fund. The Master Servicer
shall execute the Form 10-Ks. The Indenture Trustee shall have no liability with
respect to any failure to properly prepare or file such periodic reports
resulting from or relating to the Indenture Trustee's inability or failure to
obtain any information not resulting from its own negligence or willful
misconduct.
(b) Each Form 8-K shall be filed by the Indenture Trustee within 15
days after each Payment Date, with a copy of the statement to Certificateholders
for such Payment Date as an exhibit thereto. Prior to March 30th of each year
(or such earlier date as may be required by the Exchange Act and the Rules and
Regulations of the Commission), the Indenture Trustee shall file a Form 10-K, in
substance as required by applicable law or the Commission's staff
44
interpretations. Such Form 10-K shall include as exhibits the Master Servicer's
annual statement of compliance described under Section 5.09 and the accountant's
report described under Section 5.10, in each case to the extent they have been
timely delivered to the Indenture Trustee. If they are not so timely delivered,
the Indenture Trustee shall file an amended Form 10-K including such documents
as exhibits reasonably promptly after they are delivered to the Indenture
Trustee. The Indenture Trustee shall have no liability with respect to any
failure to properly prepare or file such periodic reports resulting from or
relating to the Indenture Trustee's inability or failure to obtain any
information not resulting from its own negligence or willful misconduct. The
Form 10-K shall also include a certification in the form attached hereto as
Exhibit N (the "Certification"), which shall be signed by the senior officer of
the Master Servicer in charge of securitization. The Indenture Trustee shall
prepare and deliver each Form 10-K to the Sponsor for execution no later than
March 20th of each year. The Master Servicer shall return the executed Form 10-K
to the Indenture Trustee for filing no later than March 25th of each year.
(c) The Master Servicer shall indemnify and hold harmless the
Indenture Trustee and its officers, directors and affiliates from and against
any losses, damages, penalties, fines, forfeitures, reasonable and necessary
legal fees and related costs, judgments and other costs and expenses arising out
of or based upon a breach of the Master Servicer's obligations under this
Section or the Sponsor's negligence, bad faith or willful misconduct in
connection therewith.
(d) Upon any filing with the Commission, the Indenture Trustee shall
promptly deliver to the Master Servicer a copy of any executed report, statement
or information.
Section 5.23. Administrative Duties. (a) Duties with Respect to the Basic
Documents. The Master Servicer shall perform all its duties and the duties of
the Trust under the Basic Documents. In addition, the Master Servicer shall
consult with the Owner Trustee as the Master Servicer deems appropriate
regarding the duties of the Trust under the Basic Documents. The Master Servicer
shall monitor the performance of the Trust and shall advise the Owner Trustee
when action is necessary to comply with the Trust's duties under the Basic
Documents. The Master Servicer shall prepare for execution by the Trust or shall
cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Trust to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Master Servicer shall take all necessary
action that is the duty of the Trust to take pursuant to the Basic Documents.
(b) Duties with Respect to the Trust. In addition to the duties of
the Master Servicer set forth in this Agreement or any of the Basic Documents,
the Master Servicer shall perform such calculations and shall prepare for
execution by the Trust or the Owner Trustee or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Trust or the Owner
Trustee to prepare, file or deliver pursuant to this Agreement or any of the
Basic Documents or under state and federal tax and securities laws shall take
all appropriate action that it is the duty of the Trust to take pursuant to this
Agreement or any of the Basic Documents. In accordance with the directions of
the Trust or the Owner Trustee, the Master Servicer shall administer, perform,
or supervise the performance of such other activities in connection with the
Basic Documents as are
45
not covered by any of the foregoing provisions and as are expressly requested by
the Trust or the Owner Trustee and are reasonably within the capability of the
Master Servicer.
In carrying out the foregoing duties under this Agreement, the Master
Servicer may enter into transactions with or otherwise deal with any of its
Affiliates; provided, however, that the terms of any such transactions or
dealings shall be in accordance with any directions received from the Trust and
shall be, in the Master Servicer's opinion, no less favorable to the Trust in
any material respect.
(c) Additional Information to be Furnished to the Issuer. The Master
Servicer shall furnish to the Owner Trustee from time to time such additional
information regarding the Trust or the Basic Documents as the Owner Trustee
shall reasonably request. The Master Servicer shall prepare, execute and deliver
all certificates or other documents required to be delivered by the Issuer
pursuant to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or the rules and regulations
promulgated thereunder.
Section 5.24. Pre-Funding Account.
(a) No later than the Closing Date, the Indenture Trustee shall
establish and maintain, on behalf of the Noteholders and the Note Insurer, three
segregated trust accounts that are Eligible Accounts, which shall relate to each
of the Groups of Mortgage Loans (each, a "Prefunding Account"). The Sponsor
shall deposit in each Pre-Funding Account and retain therein the related
Original Pre-Funding Amount on the Closing Date. Funds deposited in each
Pre-Funding Account shall be held in trust by the Indenture Trustee, on behalf
of the Noteholders and the Note Insurer for the uses and purposes set forth
herein.
(b) The Indenture Trustee will invest funds deposited in each
Pre-Funding Account as directed by the Master Servicer in Permitted Investments
with a maturity date (i) no later than the Business Day immediately preceding
the date on which such funds are required to be withdrawn from such account
pursuant to this Agreement, if a Person other than the Indenture Trustee or an
Affiliate manages or advises such investment, and (ii) no later than the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Indenture Trustee or an Affiliate manages or advises such
investment. For federal income tax purposes, the Master Servicer shall be the
owner of each Pre-Funding Account and shall report all items of income,
deduction, gain or loss arising therefrom. All income and gain realized from
investment of funds deposited in each Pre-Funding Account shall be withdrawn and
deposited in the Capitalized Interest Account.
(c) Amounts on deposit in each Pre-Funding Account shall be
withdrawn by the Indenture Trustee as follows:
(i) On any Subsequent Transfer Date, the Indenture Trustee
shall withdraw from each Pre-Funding Account an amount equal to 100% of
the Principal Balances of the related Subsequent Mortgage Loans
transferred and assigned to the Indenture Trustee for deposit in the
related Sub-Trust (as specified in the Mortgage Loan Schedule delivered on
the Subsequent Transfer Date) of the Trust Estate on such Subsequent
Transfer Date.
46
(ii) If the amount on deposit in each Pre-Funding Account
(exclusive of investment income) has not been reduced to zero during the
Pre-Funding Period, on the date of the termination of the Pre-Funding
Period, the Indenture Trustee shall deposit into the Collection Account
any amounts remaining in the related Pre-Funding Account (exclusive of
investment income) for distribution in accordance with the terms hereof;
(iii) To withdraw investment income for deposit in the
Capitalized Interest Account;
(iv) To withdraw any amount not required to be deposited in
the related Pre-Funding Account or deposited therein in error; and
(v) To clear and terminate the related Pre-Funding Account
upon the earlier to occur of (A) the Payment Date immediately following
the end of the Pre-Funding Period but not later than the Payment Date in
December 2002 and (B) the termination of this Agreement, with any
investment income amounts remaining on deposit therein being paid to the
holders of the Certificates.
Section 5.25. Capitalized Interest Account. (a) No later than the Closing
Date, the Indenture Trustee, at the direction of the Master Servicer, shall
establish and maintain, on behalf of the Noteholders and Note Insurer, a
segregated trust account that is an Eligible Account (the "Capitalized Interest
Account"). The Indenture Trustee shall, promptly upon receipt, deposit in the
Capitalized Interest Account and retain therein (i) the Capitalized Interest
Amount (which amount is $250,000) remitted on the Closing Date to the Indenture
Trustee by the Master Servicer and (ii) income and gain realized from
investments in the Pre-Funding Accounts. Funds deposited in the Capitalized
Interest Account shall be held in trust by the Indenture Trustee, on behalf of
the Noteholders and Note Insurer.
(b) Amounts on deposit in the Capitalized Interest Account shall be
withdrawn by the Indenture Trustee on the December 2002 Payment Date to cover
shortfalls in the Interest Payment Amounts during the Pre-Funding Period.
(c) Any amounts on deposit in the Capitalized Interest Account at
the end of the Pre-Funding Period shall be remitted by the Indenture Trustee to
the Sponsor.
ARTICLE VI
APPLICATION OF FUNDS
Section 6.01. Deposits to the Payment Account. By 12:00 noon (Eastern
Time) on each Servicer Payment Date, the Master Servicer shall cause to be
deposited in the related Payment Account, from funds on deposit in the
Collection Account, an amount equal to the Servicer Remittance Amount with
respect to the related Payment Date, minus any portion thereof payable to the
Master Servicer or the Backup Servicer pursuant to Section 5.03.
Section 6.02. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Indenture Trustee pursuant to
this Agreement, including (a) all payments
47
due on the Mortgage Loans in accordance with the respective terms and conditions
of such Mortgage Loans and required to be paid over to the Indenture Trustee by
the Master Servicer and (b) Insured Amounts. The Indenture Trustee shall hold
all such money and property received by it, as part of the Trust Estate and
shall apply it as provided in the Indenture.
Section 6.03. Application of Principal and Interest. In the event that Net
Liquidation Proceeds on a Liquidated Mortgage Loan are less than the Principal
Balance of the related Mortgage Loan plus accrued interest thereon, or any
Mortgagor makes a partial payment of any Monthly Payment due on a Mortgage Loan,
such Net Liquidation Proceeds or partial payment shall be applied to payment of
the related Mortgage Note as provided therein, and if not so provided, first to
interest accrued at the Mortgage Interest Rate and then to principal.
Section 6.04. [Reserved].
Section 6.05. Compensating Interest. Not later than the Servicer Payment
Date, the Master Servicer shall remit to the Indenture Trustee (without right to
reimbursement therefor) for deposit into the related Payment Account, an amount
equal to, for all of the Mortgage Loans, the lesser of (a) the Prepayment
Interest Shortfalls for all of the Mortgage Loans for the related Payment Date
resulting from Principal Prepayments in full during the related Prepayment
Period and (b) its aggregate Servicing Fee with respect to all of the Mortgage
Loans for the related Due Period (the "Compensating Interest").
Section 6.06. Effect of Payments by the Note Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Notes which is made with moneys received
pursuant to the terms of the Note Insurance Policy shall not be considered
payment of the Notes from the Trust Estate. The Seller, the Sponsor, the Master
Servicer, the Trust and the Indenture Trustee acknowledge and agree, that
without the need for any further action on the part of the Note Insurer, the
Seller, the Sponsor, the Master Servicer, the Trust, the Indenture Trustee or
the Note Registrar (a) to the extent the Note Insurer makes payments, directly
or indirectly, on account of principal of or interest on the Notes to the
Holders of such Notes, the Note Insurer will be fully subrogated to, and each
Noteholder, the Master Servicer, the Seller, the Sponsor, the Trust and the
Indenture Trustee hereby delegate and assign to the Note Insurer, to the fullest
extent permitted by law, the rights of such Holders to receive such principal
and interest from the Trust Estate, including, without limitation, any amounts
due to the Noteholders in respect of securities law violations arising from the
offer and sale of the Notes, and (b) the Note Insurer shall be paid such amounts
from the sources and in the manner provided herein for the payment of such
amounts and as provided in the Insurance Agreement. The Indenture Trustee and
the Master Servicer shall cooperate in all respects with any reasonable request
by the Note Insurer for action to preserve or enforce the Note Insurer's rights
or interests under this Agreement without limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.
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ARTICLE VII
SERVICER DEFAULT
Section 7.01. Servicer Events of Default. (a) I. The following events
shall each constitute a "Servicer Event of Default" hereunder:
(i) any failure by the Master Servicer to remit to the
Indenture Trustee any payment required to be made by the Master Servicer
under the terms of this Agreement (other than Servicing Advances covered
by clause (ii) below), which continues unremedied for one (1) Business Day
after the date upon which written notice of such failure, requiring the
same to be remedied, shall have been given to the Master Servicer by the
Indenture Trustee or to the Master Servicer and the Indenture Trustee by
the Note Insurer or Noteholders affected thereby evidencing Percentage
Interests of at least 25%;
(ii) the failure by the Master Servicer to make any required
Servicing Advance, which failure continues unremedied for a period of
thirty (30) 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 Indenture Trustee or to the Master Servicer and the
Indenture Trustee by the Note Insurer or Noteholders affected thereby
evidencing Percentage Interests of at least 25%;
(iii) any failure on the part of the Master Servicer duly to
observe or perform in any material respect any other of the covenants or
agreements on the part of the Master Servicer contained in this Agreement,
or the failure of any representation and warranty made pursuant to Section
3.01(a) hereof to be true and correct which continues unremedied for a
period of thirty (30) 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 Indenture Trustee or to the Master Servicer and the
Indenture Trustee by the Note Insurer or Noteholders affected thereby
evidencing Percentage Interests of at least 25%;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law or for the
appointment of a conservator or receiver or liquidation in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Master Servicer and such decree or order
shall have remained in force, undischarged or unstayed for a period of
ninety (90) days;
(v) the Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to all or substantially
all of the Master Servicer's property;
(vi) the Master Servicer shall admit in writing its inability
generally to pay its debts as they become due, file a petition to take
advantage of any applicable
49
insolvency or reorganization statute, make an assignment for the benefit
of its creditors, or voluntarily suspend payment of its obligations;
(vii) the Note Insurer shall notify the Indenture Trustee of
any "event of default" under the Insurance Agreement;
(viii) if on any Payment Date the Rolling Six Month
Delinquency Rate exceeds 14.0%;
(ix) if on any Payment Date, the Twelve Month Loss Amount
exceeds 2.50% of the Aggregate Principal Balance of the Mortgage Loans, as
of the close of business on the first day of the twelfth preceding
calendar month;
(x) if the total stockholders' equity of the Master Servicer,
as determined by the Master Servicer's independent accountants in
accordance with generally accepted accounting principles, shall be less
than the sum of (1) $30 million and (2) 75% of the net proceeds to the
Master Servicer of any initial public offering of its common stock;
(xi) if the total on- or off-balance sheet financing available
to the Master Servicer shall be less than $400 million; or
(xii) the occurrence of an Event of Default under the
Indenture;
II. The following events shall each constitute a "Backup Servicer
Event of Default" hereunder:
(i) any failure on the part of the Backup Servicer duly to
observe or perform in any material respect any other of the covenants or
agreements on the part of the Backup Servicer contained in this Agreement,
or the failure of any representation and warranty made pursuant to Section
3.03(a) hereof to be true and correct which continues unremedied for a
period of thirty (30) days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Backup Servicer by the Indenture Trustee or to the Backup Servicer and the
Indenture Trustee by the Note Insurer or Noteholders affected thereby
evidencing Percentage Interests of at least 25%;
(ii) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law or for the
appointment of a conservator or receiver or liquidation in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Backup Servicer and such decree or order
shall have remained in force, undischarged or unstayed for a period of
ninety (90) days;
(iii) the Backup Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Backup Servicer or of or relating to all or substantially
all of the Backup Servicer's property; and
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(iv) the Backup Servicer shall admit in writing its inability
generally to pay its debts as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations.
So long as a Servicer Event of Default shall have occurred and not have
been remedied: (x) with respect solely to Section 7.01(a)(I)(i), if such payment
is in respect of Periodic Advances or Compensating Interest owing by the Master
Servicer and such payment is not made by 12:00 noon New York time on the second
Business Day prior to the applicable Payment Date, the Indenture Trustee, upon
receipt of written notice or discovery by a Responsible Officer of the Indenture
Trustee of such failure, shall give immediate telephonic and facsimile notice of
such failure to a Servicing Officer of the Master Servicer and the Backup
Servicer and to the Note Insurer, and the Indenture Trustee may, with the
consent of the Note Insurer, and shall, at the direction of the Note Insurer,
terminate all of the rights and obligations of the Master Servicer under this
Agreement, except for the Master Servicer's indemnification obligation under
Section 5.19, and the Backup Servicer, the Indenture Trustee (if it is the
successor master servicer) or a successor master servicer appointed in
accordance with Section 7.02, shall immediately make such Periodic Advance or
payment of Compensating Interest as provided in Section 7.02 and assume,
pursuant to Section 7.02 hereof, the duties of a successor master servicer; (y)
with respect to that portion of Section 7.01(a)(I)(i) not referred to in the
preceding clause (x) and with respect to clauses (ii), (iii), (iv), (v), (vi),
(vii) and (xi) of Section 7.01(a)(I) or clauses (i) through (iv) of Section
7.01(a)(II), upon receipt of written notice or actual knowledge by a Responsible
Officer of the Indenture Trustee, the Indenture Trustee shall, but only at the
direction of the Note Insurer or the Majority Noteholders, by notice in writing
to the Master Servicer, the Backup Servicer and a Responsible Officer of the
Indenture Trustee and subject to the prior written consent of the Note Insurer
in the case of any removal at the direction of the Majority Noteholders, and in
addition to whatever rights such Noteholders may have at law or equity to
damages, including injunctive relief and specific performance, terminate all the
rights and obligations of the Master Servicer or Backup Servicer, as applicable,
under this Agreement, except for the Master Servicer's indemnification
obligations under Section 5.19, and in and to the Mortgage Loans and the
proceeds thereof, as Master Servicer; and (z) with respect to clauses
(viii)-(xi) of Section 7.01(a)(I), upon receipt of written notice or actual
knowledge by a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall, but only at the direction of the Note Insurer, after notice in
writing to the Master Servicer, the Backup Servicer and a Responsible Officer of
the Indenture Trustee, terminate all the rights and obligations of the Master
Servicer under this Agreement, except for the Master Servicer's indemnification
obligations under Section 5.19, and in and to the Mortgage Loans and the
proceeds thereof, as Master Servicer. Upon receipt by the Master Servicer of
such written notice, all authority and power of the Master Servicer under this
Agreement, whether with respect to the Mortgage Loans or otherwise, shall,
subject to Section 7.02, pass to and be vested in the Backup Servicer, or
another successor master servicer selected by the Note Insurer, and the Backup
Servicer or another successor master servicer is hereby authorized and empowered
to execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, at the expense of the Master Servicer, any and all documents and
other instruments and do or cause to be done all other acts or things necessary
or appropriate to effect the purposes of such notice of termination, including,
but not limited to, the transfer and endorsement or assignment of the Mortgage
Loans and related documents. The Master Servicer agrees to cooperate (and to pay
any related costs and expenses)
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with the Indenture Trustee and the Backup Servicer or another successor master
servicer in effecting the termination of the Master Servicer's responsibilities
and rights hereunder, including, without limitation, the transfer to the Backup
Servicer or another successor master servicer, for administration by it of all
amounts which shall at the time be credited by the Master Servicer to the
Collection Account or thereafter received with respect to the Mortgage Loans.
The Indenture Trustee shall promptly notify the Note Insurer and the Rating
Agencies of the occurrence of a Servicer Event of Default upon discovery or
receipt of notice by a Responsible Officer of the Indenture Trustee; provided,
however, the Indenture Trustee shall not be obligated to monitor the Master
Servicer's compliance with the terms hereof or to determine the occurrence of
any Servicer Event of Default.
Section 7.02. Backup Servicer to Act: Appointment of Successor. (a) (i) On
and after the time the Master Servicer receives a notice of termination pursuant
to Section 7.01, or the Indenture Trustee receives the resignation of the Master
Servicer evidenced by an Opinion of Counsel pursuant to Section 5.21, or the
Master Servicer is removed as Master Servicer pursuant to this Article VII, in
which event the Indenture Trustee shall promptly notify the Rating Agencies, and
except as otherwise provided in this Section 7.02, the Backup Servicer (provided
the Backup Servicer receives 20 days' prior written notice) or another successor
master servicer selected by the Note Insurer shall be the successor in all
respects to the Master Servicer in its capacity as master servicer under this
Agreement and the transactions set forth or provided for in this Agreement, and
shall be subject to all the responsibilities, restrictions, duties, liabilities
and termination provisions relating thereto placed on the Master Servicer by the
terms and provisions of this Agreement. The Backup Servicer or another successor
master servicer and the Indenture Trustee shall take such action, consistent
with this Agreement, as shall be necessary to effect any such succession. If the
Backup Servicer or any other successor master servicer is acting as Master
Servicer hereunder, it shall be subject to termination under Section 7.01 upon
the occurrence or continuation of a Servicer Event of Default applicable to it
as Master Servicer. The Backup Servicer hereby agrees to act as successor master
servicer pursuant to the terms of this Agreement upon the termination or
resignation of the Master Servicer as provided in this Section 7.02, provided
that the Backup Servicer receives all of the necessary documents relating to the
Mortgage Loans and computer records reflecting the status of the Mortgage Loans
as of the date of such transfer of servicing. The Backup Servicer will not be
obligated to incur any expenses or costs (including, without limitation, legal
fees and the preparation and recording of all intervening assignments of
mortgage) in connection with the transfer of servicing of the Mortgage Loans to
the Backup Servicer, or to compel the performance of any obligations by any
party to this Agreement. Any successor master servicer and the Backup Servicer
prior to its becoming the successor master servicer shall not be liable for any
actions, omissions or defaults of any master servicer prior to it or breaches of
representations and warranties of the master servicer prior to it. The Backup
Servicer or any other successor master servicer, as successor master servicer,
shall be obligated to pay Compensating Interest pursuant to Section 6.05 in any
event and to make Periodic Advances pursuant to Section 5.18 unless, and only to
the extent the Backup Servicer determines reasonably and in good faith that such
advances would not be recoverable from the proceeds of the related Mortgage Loan
pursuant to Section 5.03, such determination to be evidenced by a certification
of a Responsible Officer of the Backup Servicer delivered to the Note Insurer.
Furthermore, the Backup Servicer shall not be obligated to fund any resulting
discrepancy or shortfall in the Collection Account. Upon the transfer of the
servicing of the Mortgage Loans, the Indenture Trustee shall provide the Backup
Servicer with
52
an officer's certificate that contains: (i) a complete description of all
material breaches by the Master Servicer under the Agreement known by the
Indenture Trustee which have not been fully cured and (ii) confirmation that all
reports required to be filed with the Indenture Trustee have been timely filed
by the Master Servicer.
(ii) In the event that the Backup Servicer is terminated or
resigns pursuant to this Agreement or otherwise becomes unable to perform
its obligations under this Agreement, the Note Insurer may (or if the Note
Insurer fails to do so promptly the Indenture Trustee will) appoint a
successor backup servicer in accordance with the provisions of this
Section 7.02; provided, that any successor backup servicer, shall satisfy
the requirements set forth in Section 7.02(b) and shall be approved by the
Rating Agencies and the Note Insurer.
(b) Any successor master servicer or successor backup servicer
hereunder (other than the Indenture Trustee) shall be a housing and home finance
institution, bank or mortgage servicing institution which has been designated as
an approved seller-servicer by ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac, having equity of not
less than $5,000,000 as determined in accordance with GAAP, as the successor to
the Master Servicer or the Backup Servicer hereunder in the assumption of all or
any part of the responsibilities, duties or liabilities of the Master Servicer
or the Backup Servicer, as applicable, hereunder.
(c) In the event the Backup Servicer is the successor master
servicer, it shall be entitled to the same Servicing Compensation (including the
Servicing Fee as adjusted pursuant to the definition thereof) and other funds
pursuant to Section 5.08 hereof as the Master Servicer if the Master Servicer
had continued to act as master servicer hereunder, and shall continue to be
entitled to the Backup Servicing Fee.
(d) The Indenture Trustee, the Backup Servicer and any successor
master servicer or backup servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The Master
Servicer agrees to cooperate with the Indenture Trustee, the Backup Servicer and
any successor master servicer in effecting the termination of the Master
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Indenture Trustee, the Backup Servicer or such successor master
servicer, as applicable, at the Master Servicer's cost and expense, all
documents and records reasonably requested by it to enable it to assume the
Master Servicer's functions hereunder and shall promptly also transfer to the
Indenture Trustee, the Backup Servicer or such successor master servicer, as
applicable, all amounts that then have been or should have been deposited in the
Collection Account by the Master Servicer or that are thereafter received with
respect to the Mortgage Loans, including without limitation all Liquidation
Proceeds and Insurance Proceeds, and payments of insurance deductible amounts by
the Master Servicer pursuant to Section 5.04(b) with respect to all insurance
claims arising during the Master Servicer's tenure. Any collections received by
the Master Servicer after such removal or resignation shall be endorsed by it to
the Backup Servicer or (if the Backup Servicer is not the successor master
servicer) to the Indenture Trustee and remitted directly to the Backup Servicer
or the Indenture Trustee, as applicable (or, at the direction of the Indenture
Trustee, to any other successor master servicer). Neither the Backup Servicer,
the Indenture Trustee nor any other successor master servicer shall be held
liable by reason of any failure to make, or any delay in making, any payment
hereunder
53
or any portion thereof caused by (i) the failure of the Master Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Master Servicer hereunder. Notwithstanding anything to the contrary herein, no
appointment of a successor master servicer under this Agreement shall be
effective until the Note Insurer shall have consented thereto, and written
notice of such proposed appointment shall have been provided by the Indenture
Trustee to the Note Insurer and the Backup Servicer. The Indenture Trustee shall
not resign as Master Servicer until a successor master servicer reasonably
acceptable to the Note Insurer has been appointed. The Note Insurer shall have
the right to remove the Indenture Trustee as successor Master Servicer under
this Section 7.02 without cause, and the Indenture Trustee shall appoint such
other successor master servicer as directed by the Note Insurer.
(e) In the event that the Master Servicer is terminated hereunder
and no Backup Servicer is obligated to act as successor master servicer and no
other successor master servicer has been appointed hereunder, the Indenture
Trustee may appoint a successor master servicer (which may be an affiliate of
the Indenture Trustee) or petition a court of competent jurisdiction to appoint
a successor master servicer. Pending appointment of such a successor master
servicer hereunder, the Indenture Trustee shall be the successor master servicer
and act in such capacity; provided, however, that the Indenture Trustee, in its
capacity as successor master servicer pending appointment of another successor
master servicer, (i) shall be obligated to make Periodic Advances or Servicing
Advances only to the extent that the Indenture Trustee deems such advances to be
recoverable, (ii) shall be obligated to make Compensating Interest payments in
respect of any Payment Date only to the extent of any Servicing Fee received by
the Indenture Trustee in respect of such Payment Date, (iii) shall not be
obligated to perform any other duties or obligations of the Master Servicer
hereunder until the Indenture Trustee has received all master servicing records
and files from the predecessor master servicer or backup servicer and in no
event later than 90 days following the termination of the Master Servicer;
provided, however, the Indenture Trustee shall use its reasonable efforts to
perform the duties and obligations of the Master Servicer prior to the end of
such 90 day period, (iv) shall not be obligated to perform any of the
administrative duties specified in Section 5.23 hereof, and (v) shall be
entitled to payment of all Servicing Compensation and the Backup Servicing Fee.
In connection with any appointment and assumption of duties of a successor
master servicer, the Indenture Trustee may make such arrangements for the
compensation of such successor master servicer out of payments on Mortgage Loans
as the Note Insurer and such successor shall agree; provided, however, that such
compensation may not be in excess of that permitted the Master Servicer pursuant
to Section 5.08, together with other Servicing Compensation and the Backup
Servicing Fee. The Master Servicer, 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.
(f) In the event the Backup Servicer, the Indenture Trustee, or any
successor master servicer incurs out-of-pocket expenses other than Servicing
Advances or Periodic Advances in connection with the transfer of master
servicing hereunder, which expenses are required to be borne by the Master
Servicer hereunder, and such expenses are not promptly reimbursed by the Master
Servicer or recoverable out of amounts reimbursable to the Master Servicer out
of the Collection Account, the Indenture Trustee shall make such reimbursement
to the applicable party out of funds in each Payment Account on any Payment Date
after all Payments to Noteholders on such Payment Date have been made and the
Reserve Payment
54
Amount has been made to the Reserve Account but before any distribution to the
Certificateholders. The right of the Indenture Trustee to reimbursement from any
Payment Account for any of the Indenture Trustee's costs and expenses in
connection with the transfer of any master servicing hereunder shall be in
addition to any rights of the Indenture Trustee to indemnification and
reimbursement under the Indenture.
(g) In the event that the Master Servicer is terminated or resigns
hereunder, and at such time the Master Servicer has made unreimbursed Periodic
Advances or Servicing Advances out of its own funds,
(i) any such Periodic Advances or Servicing Advances shall be
allocated by the successor master servicer in whole or in part to specific
Mortgage Loans which are delinquent at the time of the transfer of master
servicing, which allocation shall be based on loan-level accounts of the
portion of each Periodic Advance or Servicing Advance which has been
funded by the Master Servicer from its own funds consistently maintained
by the former Master Servicer, or, if no such accounts exist, then in the
successor master servicer's discretion;
(ii) following the transfer of master servicing, the successor
master servicer shall reimburse the former Master Servicer for such
Periodic Advances and Servicing Advances in accordance with the
allocations determined in accordance with clause (i) above only out of the
proceeds of the Mortgage Loans to which they relate and otherwise subject
to Section 5.03, or, to the extent the successor master servicer
determines any such Periodic Advance or Servicing Advance to be a
Nonrecoverable Advance, out of any funds in the Collection Account.
Section 7.03. Waiver of Defaults. The Note Insurer or the Majority
Noteholders may, on behalf of all Noteholders, and subject to the consent of the
Note Insurer, waive any events permitting removal of the Master Servicer as
master servicer pursuant to this Article VII; provided, however, that the
Majority Noteholders may not waive a default in making a required payment on a
Note without the consent of the Holder of such Note. Upon any waiver of a past
default, such default shall cease to exist, and any Servicer Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto except to the extent expressly so waived.
Notice of any such waiver shall be given by the Indenture Trustee to the Rating
Agencies and the Note Insurer.
Section 7.04. Rights of the Note Insurer to Exercise Rights of the
Noteholders. By accepting its Note, each Noteholder agrees that unless a Note
Insurer Default exists, the Note Insurer shall be deemed to be the Noteholders
for all purposes (other than with respect to the receipt of payment on the
Notes) and shall have the right to exercise all rights of the Noteholders under
this Agreement and under the Notes without any further consent of the
Noteholders, including, without limitation:
(a) the right to require the Sponsor to repurchase or substitute
Mortgage Loans pursuant to Sections 2.06 and 4.02 hereof to the extent set forth
therein;
55
(b) the right to give notices of breach or to terminate the rights
and obligations of the Master Servicer as master servicer pursuant to Section
7.01 hereof and to consent to or direct waivers of Master Servicer defaults
pursuant to Section 7.03 hereof;
(c) the right to direct the actions of the Indenture Trustee during
the continuance of a Servicer Event of Default pursuant to Sections 7.01 and
7.02 hereof;
(d) the right to institute proceedings against the Master Servicer
pursuant to Section 7.01 hereof;
(e) the right to remove the Indenture Trustee pursuant to Section
6.09 of the Indenture;
(f) the right to direct foreclosures upon the failure of the Master
Servicer to do so in accordance with the provisions of Section 5.06 of this
Agreement; and
(g) any rights or remedies expressly given the Majority Noteholders.
In addition, each Noteholder agrees that, subject to Section 10.02, unless
a Note Insurer Default exists, the rights specifically enumerated above may only
be exercised by the Noteholders with the prior written consent of the Note
Insurer.
Section 7.05. Indenture Trustee To Act Solely with Consent of the Note
Insurer. Unless a Note Insurer Default exists, the Indenture Trustee shall not,
without the Note Insurer's consent or unless directed by the Note Insurer:
(a) terminate the rights and obligations of the Master Servicer as
master servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03 hereof; or
(c) undertake any litigation.
The Note Insurer may, in writing and in its sole discretion renounce all
or any of its rights under Sections 7.04, 7.05 or 7.06 or any requirement for
the Note Insurer's consent for any period of time.
Section 7.06. Mortgage Loans, Trust Estate and Accounts Held for Benefit
of the Note Insurer. (a) The Indenture Trustee shall hold the Trust Estate and
the Indenture Trustee's Mortgage Files, for the benefit of the Noteholders and
the Note Insurer, and all references in this Agreement, the Notes and in any of
the other Basic Documents to the benefit of Noteholders shall be deemed to
include the Note Insurer. The Indenture Trustee shall cooperate in all
reasonable respects with any reasonable request by the Note Insurer for action
to preserve or enforce the Note Insurer's rights or interests under this
Agreement, the Notes and in any of the Basic Documents unless, as stated in an
Opinion of Counsel addressed to the Indenture Trustee and the Note Insurer, such
action is adverse to the interests of the Noteholders or diminishes the rights
of the Noteholders or imposes additional burdens or restrictions on the
Noteholders.
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(b) The Master Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Noteholders and for the
benefit of the Note Insurer, and all references in this Agreement and in any of
the other Basic Documents to the benefit of or actions on behalf of the
Noteholders shall be deemed to include the Note Insurer.
Section 7.07. Note Insurer Default. During the continuation of a Note
Insurer Default, rights granted or reserved to the Note Insurer hereunder shall
vest instead in the Noteholders; provided, that the Note Insurer shall be
entitled to any distributions of reimbursements as set forth in the Indenture
and the Insurance Agreement and the Note Insurer shall retain those rights under
Section 10.03 to consent to any amendment of this Agreement.
At such time as either (i) the outstanding Note Principal Balance of the
Notes has been reduced to zero or (ii) the Note Insurance Policy has been
terminated and in either case of (i) or (ii) the Note Insurer has been
reimbursed for all amounts owed under the Note Insurance Policy and the
Insurance Agreement (and the Note Insurer no longer has any obligation under the
Note Insurance Policy, except for breach thereof by the Note Insurer), then the
rights and benefits granted or reserved to the Note Insurer hereunder (including
the rights to direct certain actions and receive certain notices) shall
terminate and the Certificateholders shall be entitled to the exercise of such
rights and to receive such benefits of the Note Insurer following such
termination to the extent that such rights and benefits are applicable to the
Certificateholders.
ARTICLE VIII
TERMINATION
Section 8.01. Termination. (a) Subject to Section 8.02, this Agreement
shall terminate upon notice to the Indenture Trustee of either: (i) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Note Insurer and the Indenture Trustee or (ii) mutual consent of
the Owner Trustee, on behalf of the Trust, at the direction of all the
Certificateholders, the Indenture Trustee, the Master Servicer, the Note Insurer
and all Noteholders in writing.
(b) In addition, subject to Section 8.02, the Sponsor may, at its
sole option, cost and expense, terminate the Trust in accordance with the terms
of Section 10.01 of the Indenture.
(c) If on any date, the Master Servicer determines that there are no
outstanding Mortgage Loans and no other funds or assets in the Trust Estate
other than funds in the Payment Accounts, the Master Servicer shall send a final
payment notice promptly to the Indenture Trustee, who shall forward notice to
each Noteholder in accordance with Section 8.01(d).
(d) Notice of any termination, specifying the Payment Date upon
which the Trust will terminate and the Noteholders shall surrender their Notes
to the Indenture Trustee for final payment and cancellation, shall be given
promptly by the Master Servicer to the Indenture Trustee, who shall forward the
notice by letter to Noteholders mailed during the month of such final payment
before the Servicer Payment Date in such month, specifying (i) the Payment Date
57
upon which final payment of the Notes will be made upon presentation and
surrender of Notes at the office of the Indenture Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Payment Date is not applicable, payments being made
only upon presentation and surrender of the Notes at the office of the Indenture
Trustee therein specified. The obligations of the Note Insurer hereunder shall
terminate upon the deposit by the Sponsor with the Indenture Trustee of a sum
sufficient to purchase all of the Mortgage Loans and REO Properties as set forth
in Section 10.01 of the Indenture or when the Note Principal Balance of the
Notes has been reduced to zero.
(e) In the event that all of the Noteholders do not surrender their
Notes for cancellation within six (6) months after the time specified in the
above-mentioned written notice, the Indenture Trustee shall give a second
written notice to the remaining Noteholders to surrender their Notes for
cancellation and receive the final payment with respect thereto. If within six
(6) months after the second notice, all of the Notes shall not have been
surrendered for cancellation, the Indenture Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Noteholders concerning surrender of their Notes and the cost thereof shall be
paid out of the funds and other assets which remain subject hereto. If within
nine (9) months after the second notice all the Notes shall not have been
surrendered for cancellation, the Certificateholders shall be entitled to all
unclaimed funds and other assets which remain subject hereto and the Indenture
Trustee upon transfer of such funds shall be discharged of any responsibility
for such funds and the Noteholders shall look only to the Certificateholders for
payment and not to the Note Insurer. Such funds shall remain uninvested.
Section 8.02. Additional Termination Requirements. By their acceptance of
the Notes, the Holders thereof hereby agree to appoint the Master Servicer as
their attorney in fact to: (i) adopt a plan of complete liquidation (and the
Noteholders hereby appoint the Indenture Trustee as their attorney in fact to
sign such plan) as appropriate or upon the written request of the Note Insurer
and (ii) to take such other action in connection therewith as may be reasonably
required to carry out such plan of complete liquidation all in accordance with
the terms hereof.
Section 8.03. Accounting Upon Termination of Master Servicer. Upon
termination of the Master Servicer, the Master Servicer shall, at its expense:
(a) deliver to the successor master servicer or, if none shall yet
have been appointed, to the Indenture Trustee, the funds in any Account
administered by the Master Servicer;
(b) deliver to the successor master servicer or, if none shall yet
have been appointed, to the Indenture Trustee all Mortgage Files and related
documents and statements held by it hereunder and a Mortgage Loan portfolio
computer tape (such delivery to take place within 24 hours if the successor
master servicer is the Backup Servicer);
(c) deliver to the successor master servicer, or, if none shall yet
have been appointed, to the Indenture Trustee a full accounting of all funds,
including a statement showing the Monthly Payments collected by it and a
statement of monies held in trust by it for the payments or charges with respect
to the Mortgage Loans; and
58
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to the successor master servicer and to more
fully and definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Master Servicer under this
Agreement.
Section 8.04. Termination of Backup Servicer as Successor Master Servicer.
In the event the Backup Servicer becomes the successor master servicer and is
terminated for reasons other than the occurrence of a Servicer Event of Default,
then the Backup Servicer will be entitled to a release fee of $10.00 per
Mortgage Loan (subject to a minimum of $5,000.00).
ARTICLE IX
[RESERVED]
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Limitation on Liability. (a) None of the Trust, the Owner
Trustee, the Seller, the Sponsor, the Master Servicer, the Backup Servicer, the
Indenture Trustee or any of the directors, officers, employees or agents of such
Persons shall be under any liability to the Trust, the Noteholders or the Note
Insurer for any action taken, or for refraining from the taking of any action,
in good faith pursuant to this Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Trust, the Owner Trustee, the
Seller, the Sponsor, the Master Servicer, the Backup Servicer, the Indenture
Trustee or any such Person against liability for any breach of warranties or
representations made herein by such party, or against any specific liability
imposed on each such party pursuant to this Agreement or against any liability
which would otherwise be imposed upon such party by reason of willful
misfeasance, bad faith or negligence in the performance of duties or by reason
of failure to perform its obligations or duties hereunder. The Trust, the Owner
Trustee, the Seller, the Sponsor, the Master Servicer, the Backup Servicer, the
Indenture Trustee and any director, officer, employee or agent of such Person
may rely in good faith on any document of any kind which, prima facie, is
properly executed and submitted by any appropriate Person respecting any matters
arising hereunder.
(b) It is expressly understood and agreed by the parties hereto that
(i) this Agreement is executed and delivered by U.S. Bank Trust National
Association, not individually or personally but solely as Owner Trustee under
the Trust Agreement, in the exercise of the powers and authority conferred and
vested in it under the Trust Agreement, (ii) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by U.S.
Bank Trust National Association but is made and intended for the purpose for
binding only the Trust, (iii) nothing herein contained shall be construed as
creating any liability on U.S. Bank Trust National Association, individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (iv)
under no circumstances shall U.S. Bank Trust National Association be personally
liable for the payment of any indebtedness
59
or expenses of the Trust or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the Trust
under this Agreement or any other related documents.
Section 10.02. Acts of Noteholders. (a) Subject to Section 7.04 and except
as otherwise specifically provided herein, whenever Noteholder action, consent
or approval is required under this Agreement, such action, consent or approval
shall be deemed to have been taken or given on behalf of, and shall be binding
upon, all Noteholders if the Majority Noteholders or the Note Insurer agrees to
take such action or give such consent or approval.
(b) The death or incapacity of any Noteholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Noteholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(c) No Noteholder shall have any right to vote (except as expressly
provided for herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Notes, be construed
so as to constitute the Noteholders from time to time as partners or members of
an association; nor shall any Noteholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision hereof.
Section 10.03. Amendment. (a) This Agreement may be amended from time to
time by the Owner Trustee, on behalf of the Trust, the Master Servicer, the
Seller, Sponsor, the Backup Servicer and the Indenture Trustee by written
agreement, upon the prior written consent of the Note Insurer, without notice to
or consent of the Noteholders to cure any ambiguity, to correct or supplement
any provisions herein, to comply with any changes in the Code, or to make any
other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with the provisions of this Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any Noteholder, as evidenced by (i) an Opinion of
Counsel, at the expense of the party requesting the change, delivered to the
Indenture Trustee to such effect or (ii) a letter from each Rating Agency
confirming that such action will not result in the reduction, qualification or
withdrawal of the then-current ratings on the Notes (without taking into account
the Note Insurance Policy). The Indenture Trustee shall give prompt written
notice to the Rating Agencies of any amendment made pursuant to this Section
10.03.
(b) This Agreement may be amended from time to time by the Owner
Trustee, on behalf of the Trust, the Master Servicer, the Seller, the Sponsor,
the Backup Servicer and the Indenture Trustee, with the consent of the Note
Insurer, the Noteholders representing at least 51% of the outstanding Principal
Balance of the Notes of each affected Class and all of the Certificateholders;
provided, however, that no such amendment shall reduce in any manner the amount
of, or delay the timing of, payments received on Mortgage Loans which are
required to be paid on any Class of Notes without the consent of the Holders of
such Class of Notes or reduce the percentage for the Holders of which are
required to consent to any such amendment without the consent of the Holders of
100% of such Class of Notes affected thereby.
60
(c) It shall not be necessary for the consent of Holders under this
Section 10.03 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
(d) In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by Article IX of the Indenture or the
modifications thereby of the trusts created by the Indenture, the Indenture
Trustee shall be entitled to receive, and (subject to Section 6.01 of the
Indenture) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by the Indenture. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties or immunities under the Indenture or
otherwise. The Master Servicer, on behalf of the Trust, shall cause executed
copies of any supplemental indentures to be delivered to the Note Insurer and
the Rating Agencies.
Section 10.04. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Master Servicer at the Noteholders' expense on direction
and at the expense of Majority Noteholders requesting such recordation, but only
when accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Noteholders or is
necessary for the administration or servicing of the Mortgage Loans.
Section 10.05. Duration of Agreement. This Agreement shall continue in
existence and effect until terminated as herein provided.
Section 10.06. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
to (i) in the case of the Master Servicer, Accredited Home Lenders, Inc., ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Director
of Operations with a copy to General Counsel; (ii) in the case of the Backup
Servicer, Countrywide Home Loans Servicing LP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: Accredited Mortgage Loan Trust 2002-2; (iii) in the case
of the Trust, Accredited Mortgage Loan Trust 2002-2, c/o the Owner Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration; (iv) in
the case of the Indenture Trustee, Deutsche Bank National Trust Company, ▇▇▇▇
▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Trust
Administration - AC0202; (v) in the case of the Sponsor, Accredited Home
Lenders, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Investor Reporting; (vi) in the case of the Underwriter, ▇▇▇▇▇▇
Brothers Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇▇▇▇▇; (vii) in the case of the Note Insurer, Ambac Assurance
Corporation, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇▇▇▇ (in each case in which notice or other communication to the Note Insurer
refers to an Event of Default, a Servicer Event of Default or a claim on the
Note Insurance Policy or with respect to which failure on the part of the Note
Insurer to respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the attention
of each of the General Counsel and the Head-
61
Financial Guaranty Group, and shall be marked to indicate "URGENT MATERIAL
ENCLOSED"); (viii) in the case of Standard & Poor's Rating Services, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Residential Mortgage Surveillance
Group; (ix) in the case of ▇▇▇▇▇'▇ Investors Service, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇; (x) in the case of the
Seller, Accredited Home Capital, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel and (xi) in the case of the
Noteholders, as set forth in the Note Register. Any such notices shall be deemed
to be effective with respect to any party hereto upon the receipt of such notice
by such party, except that notices to the Noteholders shall be effective upon
mailing or personal delivery.
Section 10.07. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement.
Section 10.08. No Partnership. Nothing herein contained shall be deemed or
construed to create a co-partnership or joint venture between the parties hereto
and the services of the Master Servicer shall be rendered as an independent
contractor and not as agent for the Noteholders.
Section 10.09. Counterparts. This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
Section 10.10. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Trust, the Master Servicer, the Backup
Servicer, the Seller, the Sponsor, the Indenture Trustee and the Noteholders and
their respective successors and permitted assigns.
Section 10.11. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
Section 10.12. No Petition. The Master Servicer and the Backup Servicer,
by entering into this Agreement, hereby covenant and agree that they will not at
any time institute against the Sponsor, the Seller or the Trust, or join in any
institution against the Sponsor, the Seller or the Trust of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy law in
connection with any obligations relating to the Certificates, the Notes, this
Agreement or any of the other Basic Documents.
This Section 10.12 will survive for one year and one day following the
termination of this Agreement.
Section 10.13. Third Party Beneficiary. The parties agree that each of the
Owner Trustee and the Note Insurer is intended and shall have all rights of a
third-party beneficiary of this
62
Agreement. Without limiting the generality of the foregoing, all covenants and
agreements in this Agreement that expressly confer rights upon the Insurer shall
be for the benefit of and run directly to the Note Insurer, and the Note Insurer
shall be entitled to rely on and enforce such covenants to the same extent as if
it were a party to this Agreement.
Section 10.14. Intent of the Parties. It is the intent of the parties
hereto and Noteholders that, for federal income taxes, state and local income or
franchise taxes and other taxes imposed on or measured by income, the Notes be
treated as debt. The parties to this Agreement and the Holder of each Note, by
acceptance of its Note, and each Beneficial Owner thereof, agree to treat, and
to take no action inconsistent with the treatment of, the related Notes in
accordance with the preceding sentence for purposes of federal income taxes,
state and local income and franchise taxes and other taxes imposed on or
measured by income.
Section 10.15. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE TRUST, THE MASTER SERVICER, THE SELLER, THE SPONSOR, THE
BACKUP SERVICER AND THE INDENTURE TRUSTEE HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S.
MAILS, POSTAGE PREPAID. THE TRUST, THE SELLER, THE SPONSOR, THE MASTER SERVICER,
THE BACKUP SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 10.15
SHALL AFFECT THE RIGHT OF THE TRUST, THE SELLER, THE SPONSOR, THE MASTER
SERVICER, THE BACKUP SERVICER OR THE INDENTURE TRUSTEE TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS TO BRING ANY
ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE TRUST, THE SELLER, THE SPONSOR, THE MASTER SERVICER, THE
BACKUP SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A
JURY.
63
[Remainder of Page Intentionally Left Blank]
64
IN WITNESS WHEREOF, the Master Servicer, the Backup Servicer, the Trust,
the Indenture Trustee, the Seller and the Sponsor have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
ACCREDITED HOME LENDERS, INC.,
as Sponsor and Master Servicer
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice-President
ACCREDITED MORTGAGE LOAN TRUST 2002-2
By: U.S. BANK TRUST NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner
Trustee under the Trust Agreement
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice-President
ACCREDITED HOME CAPITAL, INC.,
as Seller
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Counsel
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Associate
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Assistant Secretary
65
COUNTRYWIDE HOME LOANS SERVICING LP,
as Backup Servicer
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice-President
[Signature Page to Sale and Servicing Agreement]
66
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[On file with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP]
I-1
APPENDIX I
DEFINED TERMS
[See Appendix I to Indenture]
I-2
EXHIBITS TO SALE AND SERVICING AGREEMENT
I-3
EXHIBIT A
CONTENTS OF THE MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include each
of the following items (copies to the extent the originals have been delivered
to the Indenture Trustee for the benefit of the Noteholders and the Note
Insurer, pursuant to Section 2.05 of the Sale and Servicing Agreement), all of
which shall be available for inspection by the Noteholders, to the extent
required by applicable laws:
1. the original Mortgage Note, endorsed without recourse in blank from the
last assignee thereof, including all intervening endorsements showing a complete
chain of endorsement;
2. the related original Mortgage with evidence of recording indicated
thereon or a copy thereof certified by the applicable recording office;
3. each intervening mortgage assignment, with evidence of recording
indicated thereon or if the original is not available, a copy thereof certified
by the applicable recording office, if any, showing a complete chain of
assignment from the last assignee thereof of the related Mortgage Loan to the
Seller (which assignment may, at the Sponsor's option, be combined with the
assignment referred to in subpart (4) hereof, in which case it must be in
recordable form, but need not have been previously recorded);
4. a mortgage assignment in recordable form (which, if acceptable for
recording in the relevant jurisdiction as evidenced by an opinion of counsel
addressed to the Indenture Trustee, may be included in a blanket assignment or
assignments) of each Mortgage from the Sponsor to the Indenture Trustee;
5. originals of all assumption, modification and substitution agreements
in those instances where the terms or provisions of a Mortgage or Mortgage Note
have been modified or such Mortgage or Mortgage Note has been assumed (if any);
and
6. an original title insurance policy or title opinion (or (A) a copy of
the title insurance policy or title opinion, or (B) the related binder,
commitment or preliminary report, or copy thereof in which case the Sponsor
hereby certifies that the original Mortgage has been delivered to the title
insurance company that issued such binder, commitment or preliminary report).
In instances where the original recorded Mortgage or any intervening
mortgage assignment or a completed assignment of the Mortgage in recordable form
cannot be delivered by the Sponsor to the Indenture Trustee prior to or
concurrently with the execution and delivery of this Agreement, due to a delay
in connection with recording, the Sponsor may:
(a) with respect to item (3) above, in lieu of delivering such original
recorded Mortgage or intervening mortgage assignment, deliver to the Indenture
Trustee, a copy thereof; provided, that the Sponsor certifies that the original
Mortgage has been delivered to a title
A-1
insurance company for recordation after receipt of its policy of title insurance
or the related binder, commitment or preliminary report; and
(b) in lieu of delivering the completed assignment in recordable form,
deliver to the Indenture Trustee, the assignment in recordable form, otherwise
complete except for recording information.
A-2
EXHIBIT B
INDENTURE TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
November ___, 2002
▇▇▇▇▇▇ Brothers Inc. Accredited Home Lenders, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 15030 Avenue of Science, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Countrywide Home Loans Servicing LP Ambac Assurance Corporation
4500 Park Granada, Mail Stop CH-143, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Accredited Home Capital, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Sale and Servicing Agreement, dated as of November 1, 2002 among
Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
Accredited Home Capital, Inc., as seller, Accredited Mortgage Loan
Trust 2002-2, Countrywide Home Loans Servicing LP, as Backup
Servicer, and Deutsche Bank National Trust Company, as Indenture
Trustee
Ladies and Gentlemen:
In accordance with Section 2.06(a) of the above-captioned Sale and
Servicing Agreement, the undersigned, as Indenture Trustee, hereby acknowledges
receipt by it in good faith without notice of adverse claims, of the Note
Insurance Policy and declares that it holds and will hold such Note Insurance
Policy in trust for the exclusive use and benefit of all present and future
Noteholders pursuant to the terms of the Indenture dated as of November 1, 2002,
by and between Accredited Mortgage Loan Trust 2002-2 and the Indenture Trustee.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in Appendix I to the Indenture.
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
By:
--------------------------------
Name:
Title:
B-1
EXHIBIT C
INDENTURE TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
November ___, 2002
▇▇▇▇▇▇ Brothers Inc. Accredited Home Lenders, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 15030 Avenue of Science, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Countrywide Home Loans Servicing LP Ambac Assurance Corporation
4500 Park Granada, Mail Stop CH-143, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Accredited Home Capital, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Sale and Servicing Agreement, dated as of November 1, 2002 among
Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
Accredited Home Capital, Inc., as seller, Accredited Mortgage Loan
Trust 2002-2, Countrywide Home Loans Servicing LP, as Backup
Servicer, and Deutsche Bank National Trust Company, as Indenture
Trustee
Ladies and Gentlemen:
In accordance with Section 2.06(b)(i) of the above-captioned Sale and
Servicing Agreement, the undersigned, as Indenture Trustee, hereby acknowledges
receipt by it in good faith without notice of adverse claims, subject to the
provisions of Sections 2.04 and 2.05 of the Sale and Servicing Agreement (as
such provisions relate to the Mortgage Loan), of, with respect to each Mortgage
Loan, a Mortgage File containing the original Mortgage Note, except with respect
to the list of exceptions attached hereto, and based on its examination and only
as to the foregoing, the information set forth in items (i), (ii) (with respect
to property address only, excluding zip code), (iii) and (vi) of the definition
of the "Mortgage Loan Schedule" accurately reflects information set forth in the
Mortgage Note, and declares that it holds and will hold such documents and the
other documents delivered to it constituting the Indenture Trustee's Mortgage
Files, and that it holds or will hold all such assets and such other assets
included in the definition of "Trust Estate" that are delivered to it for the
exclusive use and benefit of all present and future Noteholders and the Note
Insurer.
The Indenture Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced Sale
and Servicing Agreement. The Indenture Trustee makes no representations as to:
(i) the validity, legality, sufficiency, perfection, priority, enforceability or
genuineness of any such documents or any of the Mortgage
C-1
Loans identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
The Mortgage Loan Schedule is attached to this Receipt.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in Appendix I to the Indenture, dated as of November
1, 2002, by and between Accredited Mortgage Loan Trust 2002-2 and the Indenture
Trustee.
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
By:
----------------------------------
Name:
Title:
C-2
EXHIBIT D
INITIAL CERTIFICATION OF INDENTURE TRUSTEE
_________, 2002
▇▇▇▇▇▇ Brothers Inc. Accredited Home Lenders, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 15030 Avenue of Science, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Countrywide Home Loans Servicing LP,
as Backup Servicer Ambac Assurance Corporation
4500 Park Granada, Mail Stop CH-143, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Accredited Home Capital, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Sale and Servicing Agreement, dated as of November 1, 2002 among
Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
Accredited Home Capital, Inc., as seller, Accredited Mortgage Loan
Trust 2002-2, Countrywide Home Loans Servicing LP, as Backup
Servicer, and Deutsche Bank National Trust Company, as Indenture
Trustee
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06(b)(ii) of the
above-referenced Sale and Servicing Agreement, the undersigned, as Indenture
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05(a) of the Sale and Servicing Agreement and has
determined that, except as noted on the attachment hereto, (i) all documents
required to be delivered to it pursuant to Section 2.05(a)(i)-(iv) and (vi) of
the above-referenced Sale and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered
(handwritten additions, changes or corrections do not constitute physical
alteration if they reasonably appear to have been initialed by the Mortgagor)
and relates to such Mortgage Loan and (iii) based on its examination and only as
to the foregoing documents, the information set forth in the Mortgage Loan
Schedule as to the information in clauses (i), (ii) (with respect to property
address only, excluding zip code), (iii) and (vi) of the definition of "Mortgage
Loan Schedule" respecting such Mortgage Loan accurately reflects the information
set forth in Indenture Trustee's Mortgage
D-1
File. The Indenture Trustee has made no independent examination of such
documents beyond the review specifically required in the above-referenced Sale
and Servicing Agreement. The Indenture Trustee makes no representations as to:
(x) the validity, legality, recordability, sufficiency, perfection, priority,
enforceability or genuineness of any such documents contained in each or any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (y) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
By:
----------------------------------
Name:
Title:
D-2
EXHIBIT E
FINAL CERTIFICATION OF INDENTURE TRUSTEE
___________, 2002
▇▇▇▇▇▇ Brothers Inc. Accredited Home Lenders, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 15030 Avenue of Science, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Countrywide Home Loans Servicing LP,
as Backup Servicer Ambac Assurance Corporation
4500 Park Granada, Mail Stop CH-143, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Accredited Home Capital, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Sale and Servicing Agreement, dated as of November 1, 2002 among
Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
Accredited Home Capital, Inc., as seller, Accredited Mortgage Loan
Trust 2002-2, Countrywide Home Loans Servicing LP, as Backup
Servicer, and Deutsche Bank National Trust Company, as Indenture
Trustee
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06(b)(iii) of the
above-referenced Sale and Servicing Agreement, the undersigned, as Indenture
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05(a) of the Sale and Servicing Agreement and has
determined that (i) all documents required to be delivered to it pursuant to
Section 2.05(a)(i)-(iv) and (vi) of the above referenced Sale and Servicing
Agreement are in its possession, (ii) such documents have been reviewed by it
and appear regular on their face and have not been mutilated, damaged, torn or
otherwise physically altered (handwritten additions, changes or corrections do
not constitute physical alteration if they reasonably appear to have been
initialed by the Mortgagor) and relates to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing documents, the information set
forth in items (i), (ii) (with respect to property address only, excluding zip
code), (iii) and (vi) of the definition of the Mortgage Loan Schedule respecting
E-1
such Mortgage Loan that can be determined from the face of such documents
accurately reflects the information set forth in the Indenture Trustee's
Mortgage File. The Indenture Trustee has made no independent examination of such
documents beyond the review specifically required in the above-referenced Sale
and Servicing Agreement. The Indenture Trustee makes no representations as to:
(x) the validity, legality, recordability, sufficiency, perfection, priority,
enforceability or genuineness of any such documents contained in each or any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (y) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Indenture Trustee
By:
----------------------------------
Name:
Title:
E-2
EXHIBIT F
REQUEST FOR RELEASE OF DOCUMENTS
To: Deutsche Bank National Trust Company
▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Trust Administration - AC0202
Re: Sale and Servicing Agreement, dated as of November 1, 2002 among
Accredited Home Lenders, Inc., as Sponsor and Master Servicer,
Accredited Home Capital, Inc., as seller, Accredited Mortgage Loan
Trust 2002-2, Countrywide Home Loans Servicing LP, as Backup
Servicer, and Deutsche Bank National Trust Company, as Indenture
Trustee ("Custodian/Indenture Trustee")
In connection with the administration of the Mortgage Loans held by you as
Indenture Trustee for the Issuer pursuant to the above-captioned Sale and
Servicing Agreement, we request the release, and hereby acknowledge receipt, of
the Indenture Trustee's 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 (Repurchases, etc.)
____ 5. Nonliquidation Reason: Reason:_________________
Address to which Indenture Trustee should
Deliver the Mortgage File: ______________________________
______________________________
______________________________
F-1
By: ________________________________
(authorized signer)
Issuer: ____________________________
Address:____________________________
____________________________
Date:
______________________________
F-2
EXHIBIT G
ACCREDITED MORTGAGE LOAN TRUST 2002-2
ASSET-BACKED NOTES, SERIES 2002-2
SUBSEQUENT MORTGAGE LOAN CRITERIA
____________ __, 2002
A. Profile of Subsequent Mortgage Loans:
1. Subsequent Cut-off Date: ____________ __, 2002
2. Subsequent Transfer Date: ____________ __, 2002
3. Aggregate Principal Balance of the Subsequent Mortgage Loans as
of the Subsequent Cut-off Date: $__________________
4. Purchase Price: 100.00%
B. As to the Group I Mortgage Loans after the Subsequent Transfer:
I. Weighted Average Mortgage Rate: At least 7.28%
II. First Lien Mortgage Loans 100%
III. WALTV of all Group I Mortgage Loans: Less than 79%
IV. Owner occupied Mortgaged Properties: At least 94%
V. Full Documentation At least 78%
VI. Single state concentration: Less than 45%
VII. Single-family: At least 82%
VIII. Weighted average remaining term: Not to exceed 320
months
IX. Weighted average FICO score: At least 648
X. Weighted average debt-to-income ration: Less than 42%
C. As to the Group II Mortgage Loans after the Subsequent Transfer:
I. Weighted Average Mortgage Rate: At least 7.42%
II. First Lien Mortgage Loans 100%
III. WALTV of all Group II Mortgage Loans: Less than 82%
IV. Weighted Average Margin of all Mortgage Loans: Not less than 6.10%
V. Owner occupied Mortgaged Properties: At least 96%
VI. Full Documentation At least 70%
VII. Single state concentration: Less than 50%
VIII. Single-family: At least 71 %
IX. Weighted average remaining term: Not to exceed 360
months
X. Weighted average FICO score: At least 630
XI. Weighted average debt-to-income ration: Less than 44%
G-1
D. As to the Group III Mortgage Loans after the Subsequent Transfer:
I. Weighted Average Mortgage Rate: At least 7.42%
II. First Lien Mortgage Loans 100%
III. WALTV of all Group I Mortgage Loans: Less than 83%
IV. Weighted Average Margin of all Mortgage Loans: Not less than 6.10%
V. Owner occupied Mortgaged Properties: At least 96%
VI. Full Documentation At least 72%
VII. Single state concentration: Less than 50%
VIII. Single-family: At least 76%
IX. Weighted average remaining term: 360 months
X. Weighted average FICO score: At least 630
XI. Weighted average debt-to-income ration: Less than 44%
G-2
EXHIBIT H
FORM OF SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Subsequent Transfer Instrument (the "Instrument"),
dated as of ____________ __, 2002, between Accredited Home Capital, Inc. as
seller (the "Seller"), and Accredited Mortgage Loan Trust 2002-2 (the "Trust"),
and pursuant to the Sale and Servicing Agreement, dated as of November 1, 2002
(the "Sale and Servicing Agreement"), among the Trust, the Seller, Accredited
Home Lenders, Inc., as the sponsor (the "Sponsor") and Deutsche Bank National
Trust Company, as indenture trustee (the "Indenture Trustee"), the Seller and
the Trust agree to the sale by the Seller and the purchase by the Trust of the
subsequent Mortgage Loans listed on the attached Mortgage Loan Schedule (the
"Subsequent Mortgage Loans") and the related insurance policies.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in the appendix to the Sale
and Servicing Agreement, which definitions are incorporated by reference herein.
All other capitalized terms used herein shall have the meanings specified
herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Seller does hereby sell, transfer, assign, set over and
convey to the Trust, without recourse, all of its right, title and interest in
and to the Subsequent Mortgage Loans and the related insurance policies, all
scheduled payments of principal and interest on the Subsequent Mortgage Loans
due after the Subsequent Cut-off Date, and all other payments of principal and
interest on the Subsequent Mortgage Loans collected after the Subsequent Cut-off
Date (minus that portion of any such payment which is allocable to the period
prior to the Subsequent Cut-off Date); provided, however, that no scheduled
payments of principal and interest due on or before the Subsequent Cut-off Date
and collected after the Subsequent Cut-off Date shall belong to the Trust
pursuant to the terms of this Instrument. The Seller, contemporaneously with the
delivery of this Instrument, has delivered or caused to be delivered to the
Indenture Trustee, at the direction of the Sponsor, each item set forth in
Section 2.05 of the Sale and Servicing Agreement with respect to such Subsequent
Mortgage Loans and the related insurance policies. The transfer to the Trust by
the Seller of the Subsequent Mortgage Loans identified on the attached Mortgage
Loan Schedule shall be absolute and is intended by the Seller, the Trust, the
Indenture Trustee and the Noteholders to constitute and to be treated as a sale
by the Seller, except for tax and accounting purposes.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Trust on the Subsequent Transfer Date of
all the Seller's right, title and interest in and to the Subsequent Mortgage
Loans and the related insurance policies, and other property as and to the
extent described above. In the event the transactions set forth herein shall be
deemed not to be such a sale, the Seller hereby grants to the Trust as of the
Subsequent Transfer Date a security interest in all of the Seller's right, title
and interest in, to and under the Subsequent Mortgage Loans, and such other
property, to secure all of the Seller's obligations hereunder, and this
Subsequent Transfer Instrument shall constitute a security agreement under
applicable law, and in such event, the parties hereto acknowledge that the
Indenture Trustee, in addition to holding the Subsequent Mortgage Loans and the
related insurance policies for the benefit of the Noteholders and the Note
Insurer, holds the Subsequent Mortgage Loans and the
related insurance policies as designee and agent of the Trust. The Seller agrees
to take or cause to be taken such actions and to execute such documents,
including without limitation the filing of all necessary UCC-1 financing
statements filed in the State of Delaware (which shall be submitted for filing
as of the Subsequent Transfer Date), any continuation statements with respect
thereto and any amendments thereto required to reflect a change in the name or
corporate structure of the Seller or the filing of any additional UCC-1
financing statements due to the change in the state of incorporation of the
Seller as are necessary to perfect and protect the interests of the Trust and
its assignees in each Subsequent Mortgage Loan, the related insurance policies
and the proceeds thereof.
(b) The expenses and costs relating to the delivery of the
Subsequent Mortgage Loans, this Instrument and such other items required under
the Sale and Servicing Agreement shall be borne by the Seller.
(c) Additional terms of the sale are set forth on Attachment A
hereto.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Seller hereby affirms the representations and warranties set
forth in Section 3.06 of the Sale and Servicing Agreement that relate to the
Seller as of the date hereof. The Seller hereby confirms that each of the
conditions set forth in Section 4.01 of the Sale and Servicing Agreement are
satisfied as of the date hereof and further represents and warrants that each
Subsequent Mortgage Loan complies with the requirements of this Instrument and
Section 2.05 of the Sale and Servicing Agreement.
(b) The Seller is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
this Instrument or by the performance of its obligations hereunder nor is it
aware of any pending insolvency; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Seller prior to the date
hereof;
(c) All terms and conditions of the Sale and Servicing Agreement are
hereby ratified and confirmed; provided, however, that in the event of any
conflict the provisions of this Instrument shall control over the conflicting
provisions of the Sale and Servicing Agreement.
Section 3. Recordation of the Seller's Instrument.
To the extent permitted by applicable law, this Instrument, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Servicer,
but only when accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the Noteholders
or is necessary for the administration or servicing of the Mortgage Loans.
Section 4. Governing Law.
2
This Instrument shall be construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to principles of conflicts of law.
Section 5. Counterparts.
This Instrument may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same instrument.
Section 6. Successors and Assigns.
This Seller's Instrument shall inure to the benefit of and be
binding upon the Seller and the Trust and their respective successors and
assigns. The Indenture Trustee shall be express third party beneficiary hereto.
[Signature Page to Follow]
3
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Instrument as of the day and year first written above.
ACCREDITED HOME CAPITAL, INC.,
as Seller
By:
----------------------------------------
Name:
Title:
ACCREDITED MORTGAGE LOAN TRUST 2002-2,
By: U.S. BANK TRUST NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By:
----------------------------------------
Name:
Title:
[Signature Page to ______'s Subsequent Transfer Instrument]
4