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EXHIBIT 10.4
SERVICING AGREEMENT
BETWEEN
FRANKLIN FINANCE CORPORATION
PURCHASER
FRANKLIN BANK, N.A.
SELLER
DATED AS OF [___________], 1997
CONVENTIONAL COMMERCIAL MORTGAGE LOANS
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS..................................................................................... 1
Section 1. Definitions............................................................... 1
ARTICLE II
SERVICING....................................................................................... 5
Section 2.01 Seller to Act as Servicer................................................ 5
Section 2.02 Liquidation of Mortgage Loans............................................ 6
Section 2.03 Collection of Mortgage Loan Payments..................................... 7
Section 2.04 Establishment of and Deposits to Custodial Account....................... 7
Section 2.05 Permitted Withdrawals From Custodial Account............................. 9
Section 2.06 Establishment of and Deposits to Escrow Account.......................... 10
Section 2.07 Permitted Withdrawals From Escrow Account................................ 10
Section 2.08 Payment of Taxes, Insurance and Other Charges, Tax Contracts............. 11
Section 2.09 Protection of Accounts................................................... 11
Section 2.10 Maintenance of Hazard Insurance.......................................... 11
Section 2.11 Maintenance of Mortgage Impairment Insurance............................. 12
Section 2.12 Maintenance of Fidelity Bond and Errors and Omissions
Insurance..................................................... 13
Section 2.13 Inspections.............................................................. 13
Section 2.14 Restoration of Mortgaged Property........................................ 13
Section 2.15 Deteriorating Mortgage Loans............................................. 14
Section 2.16 Title, Management and Disposition of REO Property........................ 14
Section 2.17 Permitted Withdrawals with respect to REO Property....................... 16
Section 2.18 Real Estate Owned Reports................................................ 16
Section 2.19 Liquidation Reports...................................................... 16
Section 2.20 Reports Of Foreclosures and Abandonments................................. 16
Section 2.21 Notification of Adjustments.............................................. 16
Section 2.22 Notification of Maturity Date............................................ 17
ARTICLE III
PAYMENTS TO PURCHASER........................................................................... 17
Section 3.01 Remittances.............................................................. 17
Section 3.02 Statements to Purchaser.................................................. 18
Section 3.03 Advances by Seller........................................................ 18
ARTICLE IV
GENERAL SERVICING PROCEDURES.................................................................... 19
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Section 4.01 Transfers of Mortgaged Property.......................................... 19
Section 4.02 Satisfaction of Mortgages and Release of Mortgage Files.................. 19
Section 4.03 Servicing Compensation................................................... 20
Section 4.04 Annual Statement as to Compliance........................................ 20
Section 4.05 Annual Independent Public Accountants' Servicing Report.................. 20
Section 4.06 Right to Examine Seller Records.......................................... 21
ARTICLE V
SELLER TO COOPERATE............................................................................. 21
Section 5.01 Provision of Information................................................. 21
Section 5.02 Financial Statements; Servicing Facilities............................... 21
ARTICLE VI
TERMINATION..................................................................................... 22
Section 6.01 Damages.................................................................. 22
Section 6.02 Termination.............................................................. 22
Section 6.03 Termination Without Cause................................................ 22
ARTICLE VII
BOOKS AND RECORDS............................................................................... 22
Section 7.01 Possession of Servicing Files............................................ 22
ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT.................................................................. 23
Section 8.01 Indemnification.......................................................... 23
Section 8.02 Limitation on Liability of Seller and Others............................. 23
Section 8.03 Limitation on Registration and Assignment by Seller...................... 24
Section 8.04 Assignment by Purchaser.................................................. 24
Section 8.05 Merger or Consolidation of the Seller.................................... 25
Section 8.06 Successor to the Seller.................................................. 25
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.......................................... 26
Section 9.01 Due Organization and Authority........................................... 26
Section 9.02 No Conflicts............................................................. 26
Section 9.03 Ability to Perform....................................................... 27
Section 9.04 No Litigation Pending.................................................... 27
Section 9.05 No Consent Required...................................................... 27
Section 9.06 Assistance............................................................... 27
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ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SELLER........................................................ 27
Section 10.01 Due Organization and Authority.......................................... 27
Section 10.02 Ordinary Course of Business............................................. 28
Section 10.03 No Conflicts............................................................ 28
Section 10.05 Ability to Service...................................................... 28
Section 10.05 Ability to Perform...................................................... 28
Section 10.06 No Litigation Pending................................................... 28
Section 10.07 No Consent Required..................................................... 28
Section 10.08 No Untrue Information................................................... 29
Section 10.09 Reasonable Servicing Fee................................................ 29
Section 10.10 Financial Statements.................................................... 29
Section 10.11 Conflict of Interest.................................................... 29
ARTICLE XI
DEFAULT......................................................................................... 29
Section 11.01 Events of Default....................................................... 29
Section 11.02 Waiver of Defaults...................................................... 31
ARTICLE XII
MISCELLANEOUS PROVISIONS........................................................................ 31
Section 12.01 Notices................................................................. 31
Section 12.02 Waivers................................................................. 31
Section 12.03 Entire Agreement; Amendment............................................. 32
Section 12.04 Execution; Binding Effect............................................... 32
Section 12.05 Headings................................................................ 32
Section 12.06 Applicable Law.......................................................... 32
Section 12.07 Relationship of Parties................................................. 32
Section 12.08 Severability of Provisions.............................................. 32
Section 12.09 Recordation of Assignments of Mortgage.................................. 32
Section 12.10 Exhibits................................................................ 33
EXHIBITS
EXHIBIT 1 FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT 2 FORM OF CUSTODIAL ACCOUNT CERTIFICATION
EXHIBIT 3 FORM OF CUSTODIAL ACCOUNT LETTER AGREEMENT
EXHIBIT 4 FORM OF ESCROW ACCOUNT CERTIFICATION
EXHIBIT 5 FORM OF ESCROW ACCOUNT LETTER AGREEMENT
EXHIBIT 6 FORM OF CONFIDENTIALITY AGREEMENT
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SERVICING AGREEMENT
This Servicing Agreement (the "Servicing Agreement" or the
"Agreement") is entered into as of [________,] 1997, by and between FRANKLIN
BANK, N.A. (the "Seller"), a national bank, and FRANKLIN FINANCE CORPORATION, a
Michigan corporation (the "Purchaser").
WHEREAS, the Purchaser and the Seller entered into a Mortgage Loan
Purchase and Warranties Agreement dated as of [________,] 1997 (the "Purchase
Agreement") pursuant to which the Purchaser agreed to purchase from the Seller
certain conventional, commercial, adjustable rate first mortgage loans (the
"Mortgage Loans") to be delivered as whole loans, with the Seller retaining
servicing rights in connection with the purchase of such Mortgage Loans; and
WHEREAS, the Purchaser desires to have the Seller service the Mortgage
Loans, the Seller desires to service and administer the Mortgage Loans on
behalf of the Purchaser, and the parties desire to provide the terms and
conditions of such servicing by the Seller.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein and for other good and valuable consideration, the receipt and
the sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein have the respective meanings set forth in the Purchase
Agreement. The following terms are defined as follows:
"Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loan in the jurisdiction where the related Mortgaged Property is located.
"Ancillary Income" means all late charges, escrow account benefits,
reinstatement fees, and similar types of fees arising from or in connection
with any Mortgage Loan to the extent not otherwise payable to the Mortgagor
under applicable law or pursuant to the terms of the related Mortgage Note.
"Bank" means Franklin Bank, N.A.
"Best's" means Best's Key Rating Guide.
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"BIF" means The Bank Insurance Fund, or any successor thereto.
"Closing Date" means [_______,] 1997, or such other date as is
mutually agreed upon by the parties hereto.
"Condemnation Proceeds" means all awards or settlements in respect of
a Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
"Custodial Account" means the separate account or accounts created and
maintained pursuant to Section 2.04.
"Cut-off Date" means [__________,] 1997.
"Due Period" means with respect to each Remittance Date, the period
commencing on the second day of the month preceding the month of the Remittance
Date and ending on the first day of the month of the Remittance Date.
"Errors and Omissions Insurance Policy" means an errors and omissions
insurance policy to be maintained by the Seller pursuant to Section 2.12.
"Escrow Account" means the separate account or accounts created and
maintained pursuant to Section 2.06.
"Escrow Payment" means, with respect to any Mortgage Loan, any
payments required to be escrowed by the Mortgagor with the mortgagee pursuant
to the Mortgage or any other document, including without limitation the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums.
"Event of Default" means any one of the conditions or circumstances
enumerated in Section 11.01.
"FDIC" means The Federal Deposit Insurance Corporation, or any
successor thereto.
"Fidelity Bond" means a fidelity bond to be maintained by the Seller
pursuant to Section 2.12.
"Insurance Proceeds" means, with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
"Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan,
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trustee's sale, foreclosure sale or otherwise, or the sale of the related
Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the
Mortgage Loan.
"Monthly Remittance Advice" means the monthly remittance advice, in
the form of Exhibit A annexed hereto, to be provided to the Purchaser pursuant
to Section 3.02.
"Mortgage Impairment Insurance Policy" means a mortgage impairment or
blanket hazard insurance policy as described in Section 2.11.
"Nonrecoverable Advance" means any advance of principal and interest
previously made or proposed to be made in respect of a Mortgage Loan which, in
the good faith judgment of the Seller, will not or, in the case of a proposed
advance of principal and interest, would not, be ultimately recoverable from
related Insurance Proceeds, Liquidation Proceeds or otherwise. The
determination by the Seller that it has made a Nonrecoverable Advance or that
any proposed advance of principal and interest, if made, would constitute a
Nonrecoverable Advance, shall be evidenced by an Officers' Certificate
delivered to the Purchaser.
"OCC" means Office of Comptroller of the Currency, or any successor
thereto.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board or the Vice Chairman of the Board or a President or a Vice President
and by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Seller, and delivered to the Purchaser as required
by this Agreement.
"Prime Rate" means the prime rate announced to be in effect from time
to time, as published as the average rate in The Wall Street Journal (Chicago
edition).
"Principal Prepayment" means any payment or other recovery of
principal on a Mortgage Loan which is received in advance of its scheduled due
date, including any prepayment penalty or premium thereon and which is not
accompanied by an amount of interest representing scheduled interest due on any
date or dates in any month or months subsequent to the month of prepayment.
"Purchase Agreement" means the Mortgage Loan Purchase and Warranties
Agreement between the Purchaser and the Seller related to the purchase of the
Mortgage Loans dated as of [_________], 1997.
"Qualified Depository" means a depository the accounts of which are
insured by the FDIC through the BIF or the SAIF.
"Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located,
duly authorized and licensed in such states to transact the applicable
insurance business and to write the insurance provided, and in the two highest
rating categories by Best's with respect to hazard and flood insurance.
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"Record Date" means the close of business of the last Business Day of
the month preceding the month of the related Remittance Date.
"Remittance Date" means the 18th day (or if such 18th day is not a
Business Day, the first Business Day immediately following) of any month,
beginning with the first Remittance Date on [________], 1997.
"REO Property" means a Mortgaged Property acquired by the Seller on
behalf of the Purchaser through foreclosure or by deed in lieu of foreclosure,
as described in Section 2.16.
"SAIF" means the Savings Association Insurance Fund, or any successor
thereto.
"Seller Employees" has the meaning set forth in Section 2.12.
"Servicing Advances" means all customary, reasonable and necessary
"out of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Seller of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
judicial proceedings, including foreclosures, (c) the management and
liquidation of the Mortgaged Property if the Mortgaged Property is acquired in
satisfaction of the Mortgage and (d) compliance with the obligations under
Section 2.08 (except with respect to any expenses incurred in connection with
procuring or transferring Tax Service Contracts, as provided therein).
"Servicing Agreement" means this agreement between the Purchaser and
the Seller for the servicing and administration of the Mortgage Loans.
"Servicing Fee" means, with respect to each Mortgage Loan, the amount
of the annual fee the Purchaser shall pay to the Seller, which shall, for a
period of one (1) full month, be equal to one-twelfth of the product of the
Servicing Fee Rate and the Stated Principal Balance of such Mortgage Loan. Such
fee shall be payable monthly, computed on the basis of the same principal
amount and period in respect of which any related interest payment on a
Mortgage Loan is computed and shall be pro rated for any portion of a month
during which the Mortgage Loan is serviced by the Seller under this Agreement.
The obligation of the Purchaser to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion (including
recoveries with respect to interest from Liquidation Proceeds, to the extent
permitted by Section 4.03) of such Monthly Payment collected by the Seller, or
as otherwise provided under Section 4.03.
"Servicing Fee Rate" means, with respect to each Mortgage Loan, the
rate specified in the Mortgage Loan Schedule with respect to such Mortgage
Loan.
"Servicing File" means, with respect to each Mortgage Loan, the file
retained by the Seller consisting of originals of all documents in the Mortgage
File which are not delivered to the Purchaser or its designee and copies of the
Mortgage Loan Documents listed on Exhibit A to the Purchase Agreement.
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"Servicing Officer" means any officer of the Seller involved in or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished by the Seller to the
Purchaser upon request, as such list may from time to time be amended.
"Termination Fee" means the amount paid by the Purchaser to the Seller
in the event of the Seller's termination, without cause, as servicer. Such fee
shall equal the percentage amount set forth in Section 6.03 hereof of the then
current aggregate unpaid principal balance of the related Mortgage Loans.
ARTICLE II
SERVICING
SECTION 2.01 Seller to Act as Servicer. From and after the Closing
Date, the Seller, as an independent contractor, shall service and administer
the Mortgage Loans and shall have full power and authority, acting alone, to do
any and all things in connection with such servicing and administration which
the Seller may deem necessary or desirable, consistent with the terms of this
Agreement and with Accepted Servicing Practices.
Consistent with the terms of this Agreement, the Seller may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Seller's reasonable and prudent determination such waiver,
modification, postponement or indulgence is not materially adverse to the
Purchaser, provided, however, that unless the Seller has obtained the prior
written consent of the Purchaser, the Seller shall not permit any modification
with respect to any Mortgage Loan that would change the Mortgage Interest Rate,
defer or forgive the payment of principal or interest, reduce or increase the
outstanding principal balance (except for actual payments of principal) or
change the final maturity date on such Mortgage Loan. In the event of any such
modification which permits the deferral of interest or principal payments on
any Mortgage Loan, the Seller shall, on the Business Day immediately preceding
the Remittance Date in any month in which any such principal or interest
payment has been deferred, deposit in the Custodial Account from its own funds,
in accordance with Section 2.04, the difference between (a) such month's
principal and one (1) month's interest at the Mortgage Interest Rate on the
unpaid principal balance of such Mortgage Loan and (b) the amount paid by the
Mortgagor. The Seller shall be entitled to reimbursement for such advances to
the same extent as for all other advances made pursuant to Section 2.05.
Without limiting the generality of the foregoing, the Seller shall continue,
and is hereby authorized and empowered, to execute and deliver on behalf of
itself and the Purchaser, all instruments of satisfaction or cancellation, or
of partial or full release, discharge and all other comparable instruments,
with respect to the Mortgage Loans and with respect to the Mortgaged
Properties. If reasonably required by the Seller, the Purchaser shall furnish
the Seller with any powers of attorney and other documents necessary or
appropriate to enable the Seller to carry out its servicing and administrative
duties under this Agreement.
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In servicing and administering the Mortgage Loans, the Seller shall
employ procedures (including collection procedures) and exercise the same care
that it customarily employs and exercises in servicing and administering
mortgage loans for its own account, giving due consideration to Accepted
Servicing Practices where such practices do not conflict with the requirements
of this Agreement, and the Purchaser's reliance on the Seller. The Seller
shall keep at its servicing office books and records in which, subject to such
reasonable regulations as it may prescribe, the Seller shall note transfers of
Mortgage Loans. No transfer of a Mortgage Loan may be made unless such transfer
is in compliance with the terms hereof. For the purposes of this Agreement,
Seller shall be under no obligation to deal with any Person with respect to
this Agreement or the Mortgage Loans unless the Seller has been notified of
such transfers as provided in this Section 2.01. The Purchaser may sell and
transfer, in whole or in part, the Mortgage Loans, provided that no such sale
and transfer shall be binding upon the Seller unless such transferee shall
agree in writing in the form of the Assignment and Assumption Agreement
attached to the Purchase Agreement as Exhibit G, to be bound by the terms of
this Agreement and the Purchase Agreement, and an executed copy of the same
shall have been delivered to the Seller. Upon receipt thereof, the Seller shall
▇▇▇▇ its books and records to reflect the ownership of the Mortgage Loans by
such assignee, and the previous Purchaser shall be released from its
obligations hereunder. The Seller shall be required to remit all amounts
required to be remitted to the Purchaser hereunder to said transferee
commencing with the first Remittance Date falling after receipt of said copy of
the related Assignment and Assumption Agreement provided that the Seller
receives said copy no later than three (3) Business Days immediately prior to
the first day of the month of the related Remittance Date. This Agreement shall
be binding upon and inure to the benefit of the Purchaser and the Seller and
their permitted successors, assignees and designees. The Servicing File
retained by the Seller pursuant to this Agreement shall be appropriately marked
and identified in the Seller's computer system to clearly reflect the sale of
the related Mortgage Loan to the Purchaser. The Seller shall release from its
custody the contents of any Servicing File retained by it only in accordance
with this Agreement, except when such release is required in connection with a
repurchase of any such Mortgage Loan pursuant to Section 8.03 of the Purchase
Agreement. The Seller must have an internal quality control program that
verifies, on a regular basis, the existence and accuracy of the legal
documents, credit documents, property appraisals, and underwriting decisions.
The program must be capable of evaluating and monitoring the overall quality of
its loan production and servicing activities. The program is to ensure that the
Mortgage Loans are serviced in accordance with prudent mortgage banking
practices and accounting principles; guard against dishonest, fraudulent, or
negligent acts; and guard against errors and omissions by officers, employees,
or other authorized persons.
SECTION 2.02 Liquidation of Mortgage Loans. In the event that any
payment due under any Mortgage Loan and not postponed pursuant to Section 2.01
is not paid when the same becomes due and payable, or in the event the
Mortgagor fails to perform any other covenant or obligation under the Mortgage
Loan and such failure continues beyond any applicable grace period, the Seller
shall take such action as (1) the Seller would take under similar circumstances
with respect to a similar mortgage loan held for its own account for
investment, (2) shall be consistent with Accepted Servicing Practices and (3)
the Seller shall determine prudently to be in the best interest of Purchaser.
In the event that any payment due under any Mortgage Loan is not postponed
pursuant to Section 2.01 and remains delinquent for a period of ninety (90)
days or any
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other default continues for a period of ninety (90) days beyond the expiration
of any grace or cure period (or such other period as is required by law in the
jurisdiction where the related Mortgaged Property is located), the Seller shall
commence foreclosure proceedings, provided that, prior to commencing
foreclosure proceedings, the Seller shall notify the Purchaser in writing of
the Seller's intention to do so, and the Seller shall not commence foreclosure
proceedings if the Purchaser objects to such action within ten (10) Business
Days of receiving such notice or, if the provisions of the next two paragraphs
apply, in any event without the prior written consent of Purchaser. In such
connection, the Seller shall from its own funds make all necessary and proper
Servicing Advances, provided, however, that the Seller shall not be required to
expend its own funds in connection with any foreclosure or towards the
restoration or preservation of any Mortgaged Property, unless it shall
determine (a) that such preservation, restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan to Purchaser after
reimbursement to itself for such expenses and (b) that such expenses will be
recoverable by it either through Liquidation Proceeds (in respect of which it
shall have priority for purposes of withdrawals from the Custodial Account
pursuant to Section 2.05) or through Insurance Proceeds (in respect of which it
shall have similar priority). Notwithstanding anything to the contrary
contained herein, in connection with a foreclosure, in the event the Seller has
reasonable cause to believe that a Mortgaged Property is contaminated by
hazardous or toxic substances or wastes, or if the Purchaser otherwise requests
an environmental inspection or review of such Mortgaged Property to be
conducted by a qualified inspector, the Seller shall cause the Mortgaged
Property to be so inspected at 7 the expense of the Purchaser. Upon completion
of the inspection, the Seller shall promptly provide the Purchaser with a
written report of the environmental inspection. After reviewing the
environmental inspection report, the Purchaser shall determine how the Seller
shall proceed with respect to the Mortgaged Property. In the event (a) the
environmental inspection report indicates that the Mortgaged Property is
contaminated by hazardous or toxic substances or wastes and (b) the Purchaser
directs the Seller to proceed with foreclosure or acceptance of a deed in lieu
of foreclosure, the Seller shall be reimbursed for all reasonable costs
associated with such foreclosure or acceptance of a deed in lieu of foreclosure
and any related environmental clean up costs, as applicable, from the related
Liquidation Proceeds, or if the Liquidation Proceeds are insufficient to fully
reimburse the Seller, the Seller shall be entitled to be reimbursed from
amounts in the Custodial Account pursuant to Section 2.05 hereof and to the
extent amounts in the Custodial Account are insufficient to fully reimburse the
Seller, the Seller shall be entitled to be reimbursed by the Purchaser for such
deficiencies (upon presentation of evidence of such deficiency). In the event
the Purchaser directs the Seller not to proceed with foreclosure or acceptance
of a deed in lieu of foreclosure, the Seller shall be reimbursed for all
Servicing Advances made with respect to the related Mortgaged Property from the
Custodial Account pursuant to Section 2.05 hereof.
SECTION 2.03 Collection of Mortgage Loan Payments. Continuously from
the Closing Date the Seller shall proceed diligently to collect all payments
due under each of the Mortgage Loans when the same shall become due and payable
and shall take special care in ascertaining and estimating Escrow Payments and
all other charges that will become due and payable with respect to the Mortgage
Loans and each related Mortgaged Property, to the end that the installments
payable by the Mortgagors will be sufficient to pay such charges as and when
they become due and payable.
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SECTION 2.04 Establishment of and Deposits to Custodial Account. The
Seller shall segregate and hold all funds collected and received pursuant to
the Mortgage Loans separate and apart from any of its own funds and general
assets and shall establish and maintain one or more Custodial Accounts, in the
form of time deposit or demand accounts, titled "Franklin Bank, N.A., in trust
for Purchaser of Conventional Commercial Mortgage Loans, and various
Mortgagors". The Custodial Account shall be established with a Qualified
Depository acceptable to the Purchaser. Any funds deposited in the Custodial
Account shall at all times be fully insured to the full extent permitted under
applicable law; provided, however, that to the extent the Custodial Account is
established with the Corporate Trust Department of the Seller, the Seller may
maintain the Custodial Account as a single account. Funds deposited in the
Custodial Account may be drawn on by the Seller in accordance with Section
2.05. The creation of any Custodial Account shall be evidenced by a
certification in the form of Exhibit 2 hereto, in the case of an account
established with the Seller, or by a letter agreement in the form of Exhibit 3
hereto, in the case of an account held by a depository other than the Seller. A
copy of such certification or letter agreement shall be furnished to the
Purchaser and, upon request, to any subsequent Purchaser.
The Seller shall deposit in the Custodial Account within one Business
Day of receipt, and retain therein, the following collections received by the
Seller and payments made by the Seller after the Closing Date, other than
payments of principal and interest due on or before the Closing Date, or
received by the Seller prior to the Closing Date but allocable to a period
subsequent thereto:
(i) all payments on account of principal on the Mortgage Loans,
including all Principal Prepayments;
(ii) all payments on account of interest on the Mortgage;
(iii) all Liquidation Proceeds and any amount received with respect
to REO Property;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Section 2.10 (other than proceeds to be
held in the Escrow Account and applied to the restoration or
repair of the Mortgaged Property or released to the Mortgagor
in accordance with Section 2.14), and Section 2.11;
(v) all Condemnation Proceeds which are not applied to the
restoration or repair of the Mortgaged Property or released to
the Mortgagor in accordance with Section 2.14;
(vi) any amount required to be deposited in the Custodial Account
pursuant to Section 2.01, 2.09, 2.14, 2.16, 3.01, 3.03 or 4.02;
(vii) any amounts payable in connection with the repurchase of any
Mortgage Loan pursuant to Section 8.03 of the Purchase
Agreement; and
(viii) any amounts required to be deposited by the Seller pursuant to
Section 2.11 in connection with the deductible clause in any
blanket hazard insurance policy. The
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foregoing requirements for deposit into the Custodial
Account shall be exclusive, it being understood and agreed
that, without limiting the generality of the foregoing,
Ancillary Income need not be deposited by the Seller into the
Custodial Account. Any interest paid on funds deposited in the
Custodial Account by the depository institution shall accrue
to the benefit of the Seller and the Seller shall be entitled
to retain and withdraw such interest from the Custodial
Account pursuant to Section 2.05.
SECTION 2.05 Permitted Withdrawals From Custodial Account. Subject to
Section 2.16 hereof, the Seller shall, from time to time, withdraw funds from
the Custodial Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the
manner provided for in Section 3.01;
(ii) to pay to itself the Servicing Fee;
(iii) to reimburse itself for advances of the Seller's funds made
pursuant to Section 3.03, the Seller's right to reimburse
itself pursuant to this subclause (iii) being limited to
amounts received on the related Mortgage Loan which represent
late payments of principal and/or interest in respect of which
any such advance was made, it being understood that, in the
case of any such reimbursement, the Seller's right thereto
shall be prior to the rights of Purchaser, except that, where
the Seller is required to repurchase a Mortgage Loan pursuant
to Section 8.03 of the Purchase Agreement or Section 4.02 of
this Agreement, respectively, the Seller's right to such
reimbursement shall be subsequent to the payment to the
Purchaser of the Repurchase Price pursuant to such sections
and all other amounts required to be paid to the Purchaser
with respect to such Mortgage Loan;
(iv) to reimburse itself for unreimbursed Servicing Advances
(except to the extent reimbursed pursuant to Section 2.07),
any accrued but unpaid Servicing Fees and for unreimbursed
advances of Seller funds made pursuant to Sections 2.16, 2.16
or 3.03, the Seller's right to reimburse itself pursuant to
this subclause (iv) with respect to any Mortgage Loan being
limited to related Liquidation Proceeds, Condemnation
Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Seller from the Mortgagor or otherwise
relating to the Mortgage Loan, it being understood that, in
the case of any such reimbursement, the Seller's right thereto
shall be prior to the rights of the Purchaser except that,
where the Seller is required to repurchase a Mortgage Loan
pursuant to Section 8.03 of the Purchase Agreement or Section
4.02 of this Agreement, respectively, the Seller's right to
such reimbursement shall be subsequent to the payment to the
Purchaser of the Repurchase Price pursuant to such sections
and all other amounts required to be paid to the Purchaser
with respect to such Mortgage Loan;
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(v) to pay itself any interest earned on funds deposited in the
Custodial Account (all such interest to be withdrawn monthly
not later than each Remittance Date); and
(vi) to clear and terminate the Custodial Account upon the
termination of this Agreement. In the event that the
Custodial Account is interest bearing, on each Remittance
Date, the Seller shall withdraw all funds from the Custodial
Account except for those amounts which, pursuant to Section
3.01, the Seller is not obligated to remit on such Remittance
Date. The Seller may use such withdrawn funds only for the
purposes described in this Section 2.05.
SECTION 2.06 Establishment of and Deposits to Escrow Account. The
Seller shall segregate and hold all funds collected and received pursuant to a
Mortgage Loan constituting Escrow Payments separate and apart from any of its
own funds and general assets and shall establish and maintain one or more
Escrow Accounts, in the form of time deposit or demand accounts. The Escrow
Account or Accounts shall be established with a Qualified Depository, in a
manner which shall provide maximum available insurance thereunder. Funds
deposited in the Escrow Accounts may be drawn on by the Seller in accordance
with Section 2.07. The creation of any Escrow Account shall be evidenced by a
certification in the form of Exhibit 2 hereto, in the case of an account
established with the Seller, or by a letter agreement in the form of Exhibit 5
hereto, in the case of an account held by a depository other than the Seller. A
copy of such certification shall be furnished to the Purchaser and, upon
request, to any subsequent Purchaser. The Seller shall deposit in the Escrow
Account or Accounts within one Business Day of receipt, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any such
items as required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or Condemnation
Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property. The Seller shall make withdrawals
from the Escrow Account only to effect such payments as are
required under this Agreement, as set forth in Section 2.07.
The Seller shall be entitled to retain any interest paid on
funds deposited in the Escrow Account by the depository
institution, other than interest on escrowed funds required by
law to be paid to the Mortgagor. To the extent required by
law, the Seller shall pay from its own funds interest on
escrowed funds to the Mortgagor notwithstanding that the
Escrow Account may be noninterest bearing or that interest
paid thereon is insufficient for such purposes.
SECTION 2.07 Permitted Withdrawals From Escrow Account. Withdrawals
from each Escrow Account may be made by the Seller only:
(i) to effect timely payments of ground rents, taxes, assessments,
water rates, fire and hazard insurance premiums or other
items constituting Escrow Payments for the related Mortgage;
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(ii) to reimburse the Seller for any Servicing Advance made by the
Seller pursuant to Section 2.08 with respect to a related
Mortgage Loan, but only from amounts received on the related
Mortgage Loan which represent late collections of Escrow
Payments thereunder;
(iii) to refund to the related Mortgagor any funds found to be in
excess of the amounts required under the terms of the related
Mortgage Loan or applicable federal or state law or judicial
or administrative ruling;
(iv) for transfer to the Custodial Account and application to
reduce the principal balance of the Mortgage Loan in
accordance with the terms of the related Mortgage and Mortgage
Note;
(v) for application to restoration or repair of the related
Mortgaged Property in accordance with the procedures outlined
in Section 2.14;
(vi) to pay to the Seller, or any Mortgagor to the extent required
by law, any interest paid on the funds deposited in the Escrow
Account; and
(vii) to clear and terminate the Escrow Account on the termination
of this Agreement.
SECTION 2.08 Payment of Taxes, Insurance and Other Charges, Tax
Contracts. With respect to each Mortgage Loan, the Seller shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates, sewer rents, and other charges, as applicable, which are or may
become a lien upon the Mortgaged Property and the status of fire and hazard
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date, employing for such
purpose deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Seller in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage. To the extent that a
Mortgage does not provide for Escrow Payments, the Seller shall determine that
any such payments relating to taxes or maintaining insurance policies are made
by the Mortgagor at the time they first become due. The Seller assumes full
responsibility for the timely payment of all such bills to the extent it has or
should have notice of such bills and shall effect timely payment of all such
charges irrespective of each Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments, and the Seller shall make advances
from its own funds to effect such payments, such advances to be reimbursable to
the same extent as Servicing Advances.
SECTION 2.09 Protection of Accounts. The Seller may transfer the
Custodial Account or the Escrow Account to a different Qualified Depository
from time to time. Such transfer shall be made only upon obtaining the consent
of the Purchaser, which consent shall not be withheld unreasonably. The Seller
shall bear any expenses, losses or damages sustained by the Purchaser because
the Custodial Account and/or the Escrow Account are not demand deposit
accounts.
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SECTION 2.10 Maintenance of Hazard Insurance. The Seller shall cause
to be maintained for each Mortgage Loan, hazard insurance such that all
buildings upon the Mortgaged Property are insured by a generally acceptable
insurer rated A:VI or better in the current Best's against loss by fire and
hazards of extended coverage, in an amount which is at least equal to the
lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan and (ii) the greater of (a) the outstanding principal balance of
the Mortgage Loan and (b) an amount such that the proceeds thereof shall be
sufficient to prevent the Mortgagor or the loss payee from becoming a
co-insurer. If required by the Flood Disaster Protection Act of 1973, as
amended, each Mortgage Loan is covered by a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
in effect with a generally acceptable insurance carrier rated A:VI or better in
Best's in an amount representing coverage not less than the lesser of (i) the
outstanding principal balance of the related Mortgage Loan and (ii) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended. If at any time during the term of the Mortgage Loan, the
Seller determines in accordance with applicable law that a Mortgaged Property
is located in a special flood hazard area and is not covered by flood insurance
or is covered in an amount less than the amount required by the Flood Disaster
Protection Act of 1973, as amended, the Seller shall notify the related
Mortgagor that the Mortgagor must obtain such flood insurance coverage, and if
said Mortgagor fails to obtain the required flood insurance coverage within
forty five (45) days after such notification, the Seller shall immediately
purchase the required flood insurance on the Mortgagor's behalf. The Seller
shall cause to be maintained on each Mortgaged Property such other or
additional insurance as may be required pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance, or pursuant to the requirements of any primary mortgage
guaranty insurer. All policies required hereunder shall name the Seller and
its successors and assigns as mortgagee and shall be endorsed with
non-contributory standard Michigan mortgagee clauses which shall provide for at
least thirty (30) days' prior written notice of any cancellation, reduction in
amount or material change in coverage. The Seller shall not interfere with the
Mortgagor's freedom of choice in selecting either his insurance carrier or
agent, provided, however, that the Seller shall not accept any such insurance
policies from insurance companies unless such companies are rated A:VI or
better in Best's and are licensed to do business in the jurisdiction in which
the Mortgaged Property is located. The Seller shall determine that such
policies provide sufficient risk coverage and amounts, that they insure the
property owner, and that they properly describe the property address. To the
extent reasonably possible the Seller shall furnish to the Mortgagor a formal
notice of expiration of any such insurance in sufficient time for the Mortgagor
to arrange for renewal coverage by the expiration date; provided, however, that
in the event that no such notice is furnished by the Seller, the Seller shall
ensure that replacement insurance policies are in place in the required
coverages and the Seller shall be solely liable for any losses in the event
such coverage is not provided.
Pursuant to Section 2.04, any amounts collected by the Seller under
any such policies (other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the related Mortgaged Property, or
property acquired in liquidation of the Mortgage Loan, or to be released to the
Mortgagor, in accordance with the Seller's normal servicing procedures as
specified in Section 2.14) shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 2.05.
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SECTION 2.11 Maintenance of Mortgage Impairment Insurance. In the
event that the Seller shall obtain and maintain a blanket policy insuring
against losses arising from fire and hazards covered under extended coverage on
all of the Mortgage Loans, then, to the extent such policy provides coverage in
an amount equal to the amount required pursuant to Section 2.11 and otherwise
complies with all other requirements of Section 2.11, it shall conclusively be
deemed to have satisfied its obligations as set forth in Section 2.11. Any
amounts collected by the Seller under any such policy relating to a Mortgage
Loan shall be deposited in the Custodial Account subject to withdrawal pursuant
to Section 2.05. Such policy may contain a deductible clause, in which case, in
the event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 2.11, and there shall have been a loss
which would have been covered by such policy, the Seller shall deposit in the
Custodial Account at the time of such loss the amount not otherwise payable
under the blanket policy because of such deductible clause, such amount to be
deposited from the Seller's funds, without reimbursement therefor. Upon request
of the Purchaser, the Seller shall cause to be delivered to the Purchaser a
certified true copy of such policy and a statement from the insurer thereunder
that such policy shall in no event be terminated or materially modified without
thirty (30) days' prior written notice to the Purchaser.
SECTION 2.12 Maintenance of Fidelity Bond and Errors and Omissions
Insurance. The Seller shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy,
with broad coverage on all officers, employees or other persons acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the Mortgage Loans ("Seller Employees"). Any such Fidelity Bond and
Errors and Omissions Insurance Policy shall be in the form of the Mortgage
Banker's Blanket Bond and shall protect and insure the Seller against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Seller Employees. Such Fidelity Bond and Errors and
Omissions Insurance Policy also shall protect and insure the Seller against
losses in connection with the release or satisfaction of a Mortgage Loan
without having obtained payment in full of the indebtedness secured thereby. No
provision of this Section 2.12 requiring such Fidelity Bond and Errors and
Omissions Insurance Policy shall diminish or relieve the Seller from its duties
and obligations as set forth in this Agreement. Upon the request of the
Purchaser, the Seller shall cause to be delivered to the Purchaser a certified
true copy of such Fidelity Bond and Errors and Omissions Insurance Policy and a
statement from the surety and the insurer that such Fidelity Bond and Errors
and Omissions Insurance Policy shall in no event be terminated or materially
modified without thirty (30) days' prior written notice to the Purchaser. In
the event that the surety or insurer charges the Seller a fee for providing
such evidence, the Purchaser shall reimburse the Seller for the reasonable
expense incurred by the Seller in furnishing such evidence.
SECTION 2.13 Inspections. The Seller shall inspect the Mortgaged
Property as often as deemed necessary by the Seller to assure itself that the
value of the Mortgaged Property is being preserved. In addition, if any
Mortgage Loan is more than sixty (60) days delinquent, the Seller immediately
shall inspect the Mortgaged Property and shall conduct subsequent inspections
in accordance with Accepted Servicing Practices or as may be required by the
primary mortgage guaranty insurer. The Seller shall keep a written report of
each such inspection.
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SECTION 2.14 Restoration of Mortgaged Property. The Seller need not
obtain the approval of the Purchaser prior to releasing any Insurance Proceeds
or Condemnation Proceeds to the Mortgagor to be applied to the restoration or
repair of the Mortgaged Property if such release is in accordance with Accepted
Servicing Practices and the terms of this Agreement. At a minimum, the Seller
shall comply with the following conditions in connection with any such release
of Insurance Proceeds or Condemnation Proceeds:
(i) the Seller shall receive satisfactory independent verification
of completion of repairs and issuance of any required
approvals with respect thereto;
(ii) the Seller shall take all steps necessary to preserve the
priority of the lien of the Mortgage, including, but not
limited to requiring waivers with respect to mechanics' and
materialmen's liens;
(iii) the Seller shall verify that the Mortgage Loan is not in
default; and
(iv) pending repairs or restoration, the Seller shall place the
Insurance Proceeds or Condemnation Proceeds in the Escrow
Account.
If the Purchaser is named as an additional mortgagee, the Seller is
hereby empowered to endorse any loss draft issued in respect of such a claim in
the name of the Purchaser.
SECTION 2.15 Deteriorating Mortgage Loans. If, in the course of
carrying out its obligations under this Agreement, the Seller discovers that a
Mortgage Loan (or an interest therein) (i) is or has been, at any time during
the preceding twelve months, (a) classified, (b) in nonaccrual status or (c)
renegotiated due to the financial deterioration of the Mortgagor or (ii) has
been, more than once during the preceding twelve months, more than 30 days past
due in the payment of principal and interest, the Seller shall notify the
Purchaser as soon as possible and cooperate with the Purchaser in the
disposition of any such Mortgage Loan as soon as possible.
SECTION 2.16 Title, Management and Disposition of REO Property. In the
event that title to any Mortgaged Property is acquired in foreclosure or by
deed in lieu of foreclosure, the deed or certificate of sale shall be taken in
the name of the Purchaser, or in the event the Purchaser is not authorized or
permitted to hold title to real property in the state where the REO Property is
located, or would be adversely affected under the "doing business" or tax laws
of such state by so holding title, the deed or certificate of sale shall be
taken in the name of such Person or Persons as shall be consistent with an
Opinion of Counsel obtained by the Seller from any attorney duly licensed to
practice law in the state where the REO Property is located. The Person or
Persons holding such title other than the Purchaser shall acknowledge in
writing that such title is being held as nominee for the Purchaser.
The Seller shall manage, conserve, protect and operate each REO
Property for the Purchaser solely for the purpose of its prompt disposition and
sale. The Seller, either itself or through an agent selected by the Seller and
reasonably acceptable to the Purchaser, shall manage, conserve, protect and
operate the REO Property in the same manner that it manages, conserves,
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protects and operates other foreclosed property for its own account,
and in the same manner that similar property in the same locality as the REO
Property is managed. The Seller shall attempt to sell the same (and may
temporarily rent the same for a period not greater than one (1) year, except as
otherwise provided below) on such terms and conditions as the Seller deems to
be in the best interest of the Purchaser.
The Seller shall use its best efforts to dispose of the REO Property
as soon as possible and shall sell such REO Property in any event within one
year after title has been taken to such REO Property, unless the Seller
determines, and gives an appropriate notice to the Purchaser to such effect,
that a longer period is necessary for the orderly liquidation of such REO
Property. If a period longer than one (1) year is permitted under the foregoing
sentence and is necessary to sell any REO Property, the Seller shall report
monthly to the Purchaser as to the progress being made in selling such REO
Property.
The Seller shall also maintain on each REO Property fire and hazard
insurance with extended coverage in an amount which is at least equal to the
maximum insurable value of the improvements which are a part of such property,
liability insurance and, to the extent required and available under the Flood
Disaster Protection Act of 1973, as amended, flood insurance in the amount
required above. The disposition of REO Property shall be carried out by the
Seller at such price, and upon such terms and conditions, as the Seller deems
to be in the best interests of the Purchaser. The proceeds of sale of the REO
Property shall be promptly deposited in the Custodial Account. As soon as
practical thereafter the expenses of such sale shall be paid and the Seller
shall reimburse itself pursuant to Section 2.05(iii) or 2.05(iv) hereof, as
applicable, for any related unreimbursed Servicing Advances, unpaid Servicing
Fees and unreimbursed advances made pursuant to this Section, and on the
Remittance Date immediately following the Due Period in which such sale
proceeds are received the net cash proceeds of such sale remaining in the
Custodial Account shall be distributed to the Purchaser; provided that such
distribution shall, in any event, be made within ninety (90) days from and
after the closing of the sale of such REO Property.
In addition to the Seller's obligations set forth in this Section
2.16, the Seller shall deliver written notice to the Purchaser whenever title
to any Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure together with a copy of the drive-by appraisal of the related
Mortgaged Property obtained by the Seller on or prior to the date of such
acquisition. Notwithstanding anything to the contrary contained herein, the
Purchaser may, at the Purchaser's sole option, terminate the Seller as servicer
of any such REO Property without payment of any Termination Fee with respect
thereto, provided that (i) the Purchaser gives the Seller notice of such
termination within ten (10) Business Days of receipt of said written notice
from the Seller which termination shall be effective no more than fifteen (15)
Business Days from and after the date of said notice from the Purchaser and
(ii) the Seller shall on the date said termination takes effect be reimbursed
by Purchaser for any unreimbursed advances of the Seller's funds made pursuant
to Section 3.02 and any unreimbursed Servicing Advances in each case relating
to the Mortgage Loan underlying such REO Property. In the event of any such
termination, the provisions of Section 8.06 hereof shall apply to said
termination and the transfer of servicing responsibilities with respect to such
REO Property to the Purchaser or its designee.
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With respect to each REO Property, the Seller shall deposit all funds
collected and received in connection with the operation of the REO Property in
the Custodial Account. The Seller shall cause to be deposited on a daily basis
upon the receipt thereof in the Custodial Account all revenues received with
respect to the conservation and disposition of the related REO Property.
SECTION 2.17 Permitted Withdrawals with respect to REO Property. For
so long as the Seller is acting as servicer of any Mortgage Loan relating to
any REO Property, the Seller shall withdraw funds on deposit in the Custodial
Account with respect to each related REO Property necessary for the proper
operation, management and maintenance of the REO Property, including the cost
of maintaining any hazard insurance pursuant to Section 2.10 and the fees of
any managing agent acting on behalf of the Seller. The Seller shall make
monthly distributions on each Remittance Date to the Purchaser of the net cash
flow from the REO Property (which shall equal the revenues from such REO
Property net of the expenses described in Section 2.16 and of any reserves
reasonably required from time to time to be maintained to satisfy anticipated
liabilities for such expenses).
SECTION 2.18 Real Estate Owned Reports. For so long as the Seller is
acting as servicer of any Mortgage Loan relating to any REO Property, the
Seller shall furnish to the Purchaser on or before the 15th day of each month a
statement with respect to any REO Property covering the operation of such REO
Property for the previous month and the Seller's efforts in connection with the
sale of such REO Property and any rental of such REO Property incidental to the
sale thereof for the previous month. That statement shall be accompanied by
such other information as the Purchaser shall reasonably request.
SECTION 2.19 Liquidation Reports. For so long as the Seller is acting
as servicer of any Mortgage Loan relating to any REO Property, upon the
foreclosure sale of any Mortgaged Property or the acquisition thereof by the
Purchaser pursuant to a deed in lieu of foreclosure, the Seller shall submit to
the Purchaser a liquidation report with respect to such Mortgaged Property.
SECTION 2.20 Reports Of Foreclosures and Abandonments. For so long as
the Seller is acting as servicer of any Mortgage Loan relating to any REO
Property, following the foreclosure sale or abandonment of any Mortgaged
Property, the Seller shall report such foreclosure or abandonment as required
pursuant to Section 6050J of the Internal Revenue Code of 1986, as amended
("Code").
SECTION 2.21 Notification of Adjustments. With respect to each
Variable Rate Mortgage Loan, the Seller shall adjust the Mortgage Interest Rate
on the related Interest Rate Adjustment Date and shall adjust the Monthly
Payment accordingly in compliance with the requirements of applicable law and
the related Mortgage and Mortgage Note. If, pursuant to the terms of the
Mortgage Note, another index is selected for determining the Mortgage Interest
Rate, the same index will be used with respect to each Mortgage Note which
requires a new index to be selected, provided that such selection does not
conflict with the terms of the related Mortgage Note. The Seller shall execute
and deliver any and all necessary notices required under applicable law and the
terms of the related Mortgage Note and Mortgage regarding the Mortgage Interest
Rate and the Monthly Payment adjustments. The Seller shall promptly upon
written request therefor, deliver
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to the Purchaser such notifications and any additional applicable data
regarding such adjustments and the methods used to calculate and implement such
adjustments. Upon the discovery by the Seller or the Purchaser that the Seller
has failed to adjust a Mortgage Interest Rate or a Monthly Payment pursuant to
the terms of the related Mortgage Note and Mortgage, the Seller shall
immediately deposit in the Custodial Account from its own funds the amount of
any interest loss caused the Purchaser thereby.
SECTION 2.22 Notification of Maturity Date. With respect to each
Fixed Rate Mortgage Loan, the Purchaser shall execute and deliver to the
Mortgagor any and all necessary notices required under applicable law and the
terms of the related Mortgage Note and Mortgage regarding the maturity date if
required under applicable law.
ARTICLE III
PAYMENTS TO PURCHASER
SECTION 3.01 Remittances. On each Remittance Date the Seller shall
remit by wire transfer of immediately available funds to the Purchaser (a) all
amounts deposited in the Custodial Account as of the close of business on the
Determination Date, except Principal Prepayments received on or after the first
day of the month in which the Remittance Date occurs which shall be remitted to
the Purchaser on the next following Remittance Date; plus (b) an amount
representing compensating interest (up to a maximum amount equal to the
aggregate Servicing Fee for the Mortgage Loans held by the Purchaser with
respect to such Mortgage Loans) which, when added to all amounts allocable to
interest received in connection with such Principal Prepayment equals thirty
(30) days' interest at the Mortgage Interest Rate net of the Servicing Fee on
the amount of principal so prepaid (net of charges against or withdrawals from
the Custodial Account pursuant to Section 2.05), plus (c) all amounts, if any,
which the Servicer is obligated to distribute pursuant to Section 3.03 and
minus (d) any amounts attributable to Monthly Payments collected but due on a
Due Date or Dates subsequent to the first day of the month of the Remittance
Date, which amounts shall be remitted on the Remittance Date next succeeding
the Due Period for such amounts.
With respect to any Principal Prepayment in full, the Seller shall
remit such Principal Prepayment to the Purchaser within five (5) Business Days
of receipt of such Principal Prepayment by the Seller.
With respect to any remittance received by the Purchaser after the
second Business Day following the Business Day on which such payment was due,
the Seller shall pay to the Purchaser interest on any such late payment at an
annual rate equal to the Prime Rate, adjusted as of the date of each change,
plus one (1) percentage point, but in no event greater than the maximum amount
permitted by applicable law. Such interest shall be deposited in the Custodial
Account by the Seller on the date such late payment is made and shall cover the
period commencing with and including the day following such second Business Day
and ending with the Business Day on which such payment is made, exclusive of
such Business Day; provided, however, that in the event that
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the Seller remits such amounts after 11:00 A.M. (Michigan time) on any day,
such period shall include such day. Such interest shall be remitted along with
the distribution payable on the next succeeding Remittance Date. The payment by
the Seller of any such interest shall not be deemed an extension of time for
payment or a waiver of any Event of Default by the Seller.
SECTION 3.02 Statements to Purchaser. Not later than the twentieth
day of each month, the Seller shall furnish by modem and/or diskette to the
Purchaser or its designee a listing of the outstanding Mortgage Loans,
including with respect to each Mortgage Loan: the Mortgage Loan number, the
actual balance, the actual paid-through dates, the Mortgage Interest Rate and
principal and interest payment, and with respect to Variable Rate Mortgage
Loans, the next Interest Rate Adjustment Date, the Mortgage Interest Rate and
the principal and interest payment effective as of the next Interest Rate
Adjustment Date (if available), and shall furnish to the Purchaser manually a
Monthly Remittance Advice, with a trial balance report attached thereto, in the
form of Exhibit 1 annexed hereto as to the preceding remittance and the period
ending on the preceding Determination Date. In addition, not more than sixty
(60) days after the end of each calendar year, the Seller shall furnish to each
Person who was a Purchaser at any time during such calendar year an annual
statement in accordance with the requirements of applicable federal income tax
law as to the aggregate of remittances for the applicable portion of such year.
Such obligation of the Seller shall be deemed to have been satisfied
to the extent that substantially comparable information shall be provided by
the Seller pursuant to any requirements of the Code as from time to time are in
force.
The Seller shall prepare and file, with respect to each Mortgage Loan,
any and all tax returns, information statements or other filings required to be
delivered to any governmental taxing authority or to the Purchaser pursuant to
any applicable law with respect to the Mortgage Loans and the transactions
contemplated hereby. In addition, the Seller shall provide the Purchaser with
such information concerning the Mortgage Loans as is necessary for the
Purchaser to prepare its federal income tax return as the Purchaser may
reasonably request from time to time.
SECTION 3.03 Advances by Seller. On the Business Day immediately
preceding each Remittance Date, the Seller shall deposit in the Custodial
Account from its own funds an amount equal to all Monthly Payments which were
due on the Mortgage Loans during the applicable Due Period and which were
delinquent at the close of business on the immediately preceding Determination
Date or which were deferred pursuant to Section 2.01, provided that the Seller
shall only be required to make such advances with respect to a Mortgage Loan
until such advances are, in the Seller's good faith determination as evidenced
by an Officer's Certificate of the Seller delivered to the Purchaser on the
Business Day next following the Determination Date on or prior to which said
determination is or was made, deemed to be a Nonrecoverable Advance. The
Seller's obligation to make such advances as to any Mortgage Loan will continue
through the earlier of (i) the disposition of such Mortgage Loan and (ii) the
date of foreclosure sale with respect to such Mortgage Loan. Except as
otherwise provided herein, the Seller shall be entitled to first priority
reimbursement pursuant to Section 2.05 hereof for principal and interest
advances and for servicing advances from recoveries from the related mortgagor
or from all Liquidation
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Proceeds and other payments or recoveries (including Insurance Proceeds and
Condemnation Proceeds) with respect to the related Mortgage Loan.
ARTICLE IV
GENERAL SERVICING PROCEDURES
SECTION 4.01 Transfers of Mortgaged Property. The Seller shall be
required to enforce any "due-on-sale" provision contained in any Mortgage or
Mortgage Note and to deny assumption by the person to whom the Mortgaged
Property has been or is about to be sold whether by absolute conveyance or by
contract of sale, whether or not the Mortgagor remains liable on the Mortgage
and the Mortgage Note. When the Mortgaged Property has been conveyed by the
Mortgagor, the Seller shall, to the extent it has knowledge of such conveyance,
exercise its rights to accelerate the maturity of such Mortgage Loan under the
"due-on-sale" clause applicable thereto.
If the Seller reasonably believes it is unable under applicable law to
enforce such "due-on-sale" clause, the Seller, in the Purchaser's name, shall,
to the extent permitted by applicable law, enter into (i) an assumption and
modification agreement with the person to whom such property has been conveyed,
pursuant to which such person becomes liable under the Mortgage Note and the
original Mortgagor remains liable thereon or (ii) in the event the Seller is
unable under applicable law to require that the original Mortgagor remain
liable under the Mortgage Note, a substitution of liability agreement with the
purchaser of the Mortgaged Property pursuant to which the original Mortgagor is
released from liability and the purchaser of the Mortgaged Property is
substituted as Mortgagor and becomes liable under the Mortgage Note. In
connection with any such assumption, neither the Mortgage Interest Rate borne
by the related Mortgage Note, the term of the Mortgage Loan nor the outstanding
principal amount of the Mortgage Loan shall be changed.
To the extent that any Mortgage Loan is assumable, the Seller shall
inquire diligently into the creditworthiness of the proposed transferee, and
shall use the underwriting criteria for approving the credit of the proposed
transferee which are used by the Seller with respect to underwriting mortgage
loans of the same type as the Mortgage Loans. If the credit of the proposed
transferee does not meet such underwriting criteria, the Seller diligently
shall, to the extent permitted by the Mortgage or the Mortgage Note and by
applicable law, accelerate the maturity of the Mortgage Loan.
SECTION 4.02 Satisfaction of Mortgages and Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the Seller of
a notification that payment in full will be escrowed in a manner customary for
such purposes, the Seller shall notify the Purchaser in the Monthly Remittance
Advice as provided in Section 3.02, and may request the release of any Mortgage
Loan Documents from the Purchaser in accordance with this Section 4.02 hereof.
The Seller shall obtain discharge of the related Mortgage Loan as of record
within any related time limit required by applicable law.
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If the Seller satisfies or releases a Mortgage without first having
obtained payment in full of the indebtedness secured by the Mortgage or should
the Seller otherwise prejudice any rights the Purchaser may have under the
mortgage instruments, upon written demand of the Purchaser, the Seller shall
repurchase the related Mortgage Loan at the Repurchase Price by deposit thereof
in the Custodial Account within two (2) Business Days of receipt of such demand
by the Purchaser. Upon such repurchase, all funds maintained in the Escrow
Account with respect to such repurchased Mortgage Loan shall be transferred to
the Seller. The Seller shall maintain the Fidelity Bond and Errors and
Omissions Insurance Policy as provided for in Section 2.12 insuring the Seller
against any loss it may sustain with respect to any Mortgage Loan not satisfied
in accordance with the procedures set forth herein.
SECTION 4.03 Servicing Compensation. As consideration for servicing
the Mortgage Loans hereunder, the Seller shall withdraw the Servicing Fee with
respect to each Mortgage Loan from the Custodial Account pursuant to Section
2.05 hereof. Such Servicing Fee shall be payable monthly, computed on the basis
of the same principal amount and period in respect of which any related
interest payment on a Mortgage Loan is computed. The Servicing Fee shall be
pro-rated when servicing is for less than one month. The obligation of the
Purchaser to pay, and the Seller's right to withdraw, the Servicing Fee is
limited to, and the Servicing Fee is payable solely from, the interest portion
(including recoveries with respect to interest from Liquidation Proceeds, to
the extent permitted by Section 2.05), of such Monthly Payment collected by the
Seller, or as otherwise provided under Section 2.05.
Additional servicing compensation in the form of Ancillary Income
shall be retained by the Seller. The Seller shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement thereof except as specifically
provided for herein.
SECTION 4.04 Annual Statement as to Compliance. The Seller shall
deliver to the Purchaser, on or before March 31 each year beginning with March
31, 1998, an Officer's Certificate, stating that (i) a review of the activities
of the Seller during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (ii) the Seller
has complied in all material respects with the provisions of Article II and
Article IV, and (iii) to the best of such officer's knowledge, based on such
review, the Seller has fulfilled all its obligations under this Agreement
throughout such year or part thereof, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and the action being taken by the
Seller to cure such default.
SECTION 4.05 Annual Independent Public Accountants' Servicing Report.
On or before March 31 of each year, beginning with the first March 31 that
occurs at least six months after the Closing Date, the Seller at its expense
shall cause a firm of independent public accountants (who may also render other
services to the Seller, or any affiliate thereof) which is a member of the
American Institute of Certified Public Accountants to furnish a statement to
the Purchaser to the effect that such firm has, as part of their examination of
the financial statements of the Seller performed tests embracing the records
and documents relating to mortgage loans serviced by the
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Seller in accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers and that their examination disclosed no exceptions that,
in their opinion were material, relating to mortgage loans serviced by the
Seller.
SECTION 4.06 Right to Examine Seller Records. The Purchaser, upon
reasonable notice, shall have the right to examine and audit any and all of the
books, records, or other information of the Seller, whether held by the Seller
or by another on its behalf, with respect to or concerning this Agreement or
the Mortgage Loans, during business hours or at such other times as may be
reasonable under applicable circumstances, upon reasonable advance notice.
ARTICLE V
SELLER TO COOPERATE
SECTION 5.01 Provision of Information. During the term of this
Agreement, the Seller shall furnish to the Purchaser such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
necessary, reasonable, or appropriate with respect to the Purchaser or the
purposes of this Agreement. All such reports or information shall be provided
by and in accordance with all reasonable instructions and directions which the
Purchaser may give.
The Seller shall execute and deliver all such instruments and take all
such action as the Purchaser may reasonably request from time to time, in order
to effectuate the purposes and to carry out the terms of this Agreement.
SECTION 5.02 Financial Statements; Servicing Facilities. In
connection with disposition of Mortgage Loans, the Purchaser may make available
to a prospective purchaser audited financial statements of the Seller for the
most recently completed two (2) fiscal years for which such statements are
available, as well as a Consolidated Statement of Condition at the end of the
last two (2) fiscal years covered by any Consolidated Statement of Operations.
If it has not already done so, the Seller shall furnish promptly to the
Purchaser or a prospective purchaser copies of the statements specified above;
provided, however, that prior to furnishing such statements or information to
any prospective purchaser, the Seller may require such prospective purchaser to
execute a confidentiality agreement in form reasonably satisfactory to it.
The Seller shall make available to the Purchaser or any prospective
Purchaser a knowledgeable financial or accounting officer for the purpose of
answering questions with respect to recent developments affecting the Seller or
the financial statements of the Seller, and to permit any prospective purchaser
to inspect the Seller's servicing facilities for the purpose of satisfying such
prospective purchaser that the Seller has the ability to service the Mortgage
Loans as provided in this Agreement.
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ARTICLE VI
TERMINATION
SECTION 6.01 Damages. The Purchaser shall have the right at any time
to seek and recover from the Seller any damages or losses suffered by it as a
result of any failure by the Seller to observe or perform any duties,
obligations, covenants or agreements herein contained.
SECTION 6.02 Termination. The respective obligations and
responsibilities of the Seller shall terminate upon: (i) the later of the final
payment or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan serviced by the Seller or the disposition of all REO Property
serviced by the Seller and the remittance of all funds due hereunder; or (ii)
by mutual consent of the Seller and the Purchaser in writing, unless earlier
terminated pursuant to this Agreement.
SECTION 6.03 Termination Without Cause. The Purchaser may, at its
sole option, upon not less than thirty (30) days' prior written notice to the
Seller terminate any rights the Seller may have hereunder with respect to any
or all of the Mortgage Loans, without cause, upon written notice, provided that
the Seller shall have an additional period of not more than sixty (60) days
from and after the date of said notice from the Purchaser within which to
effect the related transfer of servicing. Any such notice of termination shall
be in writing and delivered to the Seller as provided in Section 12.01 of this
Agreement. In the event of such termination, the Seller shall be entitled to a
Termination Fee, equal to 1.50% of the then current aggregate unpaid principal
balance of the related Mortgage Loans; provided, however, that the successor
servicer is not an Affiliate of the Seller.
ARTICLE VII
BOOKS AND RECORDS
SECTION 7.01 Possession of Servicing Files. The contents of each
Servicing File are and shall be held in trust by the Seller for the benefit of
the Purchaser as the owner thereof. The Seller shall maintain in the Servicing
File a copy of the contents of each Mortgage File and the originals of the
documents in each Mortgage File not delivered to the Purchaser. The possession
of the Servicing File by the Seller is at the will of the Purchaser for the
sole purpose of servicing the related Mortgage Loan, pursuant to this
Agreement, and such retention and possession by the Seller is in its capacity
as Seller only and at the election of the Purchaser. The Seller shall release
its custody of the contents of any Servicing File only in accordance with
written instructions from the Purchaser or other termination of the Seller with
respect to the related Mortgage Loans, unless such release is required as
incidental to the Seller's servicing of the Mortgage Loans pursuant to this
Agreement, or is in connection with a repurchase of any Mortgage Loan pursuant
to Section 8.03 of the Purchase Agreement or Section 4.02 of this Agreement.
The Seller shall be responsible for maintaining, and shall maintain, a complete
set of books and records for each Mortgage Loan which shall be marked clearly
to reflect the ownership of each Mortgage Loan by the Purchaser. In particular,
the Seller shall maintain in its possession, available for inspection by
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the Purchaser or its designee during normal business hours, and shall deliver
to the Purchaser or its designee upon reasonable notice, evidence of compliance
with all federal, state and local laws, rules and regulations, including but
not limited to documentation as to the method used in determining the
applicability of the provisions of the Flood Disaster Protection Act of 1973,
as amended, to the Mortgaged Property, documentation evidencing insurance
coverage and periodic inspection reports as required by Section 2.13. To the
extent that original documents are not required for purposes of realization of
Liquidation Proceeds or Insurance Proceeds, documents maintained by the Seller
may be in the form of microfilm or microfiche.
The Seller shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the Seller
shall note transfers of Mortgage Loans. No transfer of a Mortgage Loan may be
made unless such transfer is in compliance with the terms hereof. For the
purposes of this Agreement, the Seller shall be under no obligation to deal
with any person with respect to this Agreement or the Mortgage Loans unless the
books and records show such person as the owner of the Mortgage Loan. The
Purchaser may, subject to the terms of this Agreement, sell or transfer one or
more of the Mortgage Loans. The Purchaser also shall advise the Seller of the
transfer. Upon receipt of notice of the transfer, the Seller shall ▇▇▇▇ its
books and records to reflect the ownership of the Mortgage Loans of such
assignee, and shall release the Purchaser from its obligations hereunder with
respect to the Mortgage Loans sold or transferred.
ARTICLE VIII
INDEMNIFICATION AND ASSIGNMENT
SECTION 8.01 Indemnification. The Seller agrees to indemnify and hold
the Purchaser harmless from any liability, claim, loss or damage (including,
without limitation, any reasonable legal fees, judgments or expenses relating
to such liability, claim, loss or damage) to the Purchaser directly or
indirectly resulting from the Seller's failure to observe and perform any or
all of Seller's duties, obligations, covenants, agreements, warranties or
representations contained in this Agreement or in the Purchase Agreement or the
Seller's failure to comply with all applicable requirements with respect to the
transfer of Servicing Rights as set forth herein. The Seller shall notify the
Purchaser as soon as reasonably possible if a claim is made by a third party
with respect to this Agreement.
SECTION 8.02 Limitation on Liability of Seller and Others. Neither
the Seller nor any of the directors, officers, employees or agents of the
Seller shall be under any liability to the Purchaser 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 Seller or any such person against any breach of
warranties or representations made herein, or failure to perform its
obligations in material compliance with any standard of care set forth in this
Agreement, or any liability which would otherwise be imposed by reason of any
breach of the terms and conditions of this Agreement. The Seller and any
director, officer, employee or agent of the Seller may rely in good faith on
any document of any kind prima facie
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properly executed and submitted by any Person with respect to any matter
arising hereunder. The Seller shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its duties to
service the Mortgage Loans in accordance with this Agreement and which in its
opinion may involve it in any expense or liability, provided, however, that the
Seller may, with the prior written consent of the Purchaser, undertake any such
action which it may deem necessary or desirable in respect to this Agreement
and the rights and duties of the parties hereto. In such event, the Seller
shall be entitled to reimbursement from the Purchaser of the reasonable legal
expenses and costs of such action.
SECTION 8.03 Limitation on Registration and Assignment by Seller. The
Purchaser has entered into this Agreement with the Seller in reliance upon the
independent status of the Seller, and the representations as to the adequacy of
its servicing facilities, plant, personnel, records and procedures, its
integrity, reputation and financial standing, and the continuance thereof.
Nonetheless, the Seller may subcontract all or a portion of its servicing
obligations under this Agreement to one or more of its affiliates. However, if
none of its affiliates is engaged in the business of servicing mortgage loans,
the Seller may subcontract all or a portion of its obligations under this
Agreement to an unrelated third party subject to approval of a majority of the
Independent Directors. Any delegation of such rights or duties shall not
release the Seller from its obligations hereunder and the Seller shall remain
responsible hereunder for all acts and omissions of any delegee as if such acts
or omissions were those of the Seller and (b) any such assignee or designee
shall satisfy the requirements for a successor or surviving Person set forth in
Section 8.05 and Section 8.06 hereof. The Seller shall notify the Purchaser in
writing at least 30 days prior to selling or otherwise disposing of all or
substantially all of its assets and receipt of such notice shall entitle the
Purchaser to terminate this Agreement except as set forth in Section 8.06
hereof.
The Seller shall not resign from the obligations and duties hereby
imposed on it except by mutual consent of the Seller and the Purchaser or upon
the determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Seller. Any such
determination permitting the resignation of the Seller shall be evidenced by an
Opinion of Counsel to such effect delivered to the Purchaser which Opinion of
Counsel shall be in form and substance acceptable to the Purchaser. No such
resignation shall become effective until a successor shall have assumed the
Seller's responsibilities and obligations hereunder in the manner provided in
Section 8.06.
Without in any way limiting the generality of this Section 8.03, in
the event that the Seller either shall assign this Agreement or the servicing
responsibilities hereunder or delegate its duties hereunder or any portion
thereof without satisfying the requirements set forth herein, then the
Purchaser shall have the right to terminate this Agreement as set forth in
Section 6.03, without any payment of any penalty or damages and without any
liability whatsoever to the Seller (other than with respect to accrued but
unpaid Servicing Fees and Servicing Advances remaining unpaid) or any third
party.
SECTION 8.04 Assignment by Purchaser. The Purchaser shall have the
right, without the consent of the Seller, to assign, in whole or in part, its
interest under this Agreement with
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respect to some or all of the Mortgage Loans, and designate any person to
exercise any rights of the Purchaser hereunder, by executing an Assignment and
Assumption Agreement substantially in the form of Exhibit G to the Purchase
Agreement and the assignee or designee shall accede to the rights and
obligations hereunder of the Purchaser with respect to such Mortgage Loans. All
references to the Purchaser in this Agreement shall be deemed to include its
assignee or designee. Notwithstanding the foregoing, at any one time there
shall not be more than fifteen (15) separate Purchasers under this Agreement.
SECTION 8.05 Merger or Consolidation of the Seller. The Seller will
keep in full effect its existence, rights and franchises as a corporation under
the laws of the state of its incorporation except as permitted herein, and will
obtain and preserve its qualification to do business as a foreign corporation
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its duties under this Agreement.
Any Person into which the Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Seller shall be a party, or any Person succeeding to the business of the
Seller, shall be the successor of the Seller hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however,
that the successor or surviving Person shall be an institution whose deposits
are insured by FDIC or a company whose business includes the origination and
servicing of mortgage loans and shall satisfy the requirements of Section 8.06
with respect to the qualifications of a successor to the Seller.
SECTION 8.06 Successor to the Seller. Prior to termination of Seller's
responsibilities and duties under this Agreement pursuant to Sections 2.16,
6.03, 8.03 or 11.01, the Purchaser shall (i) succeed to and assume all of the
Seller's responsibilities, rights, duties and obligations under this Agreement,
or (ii) appoint a successor having a tangible net worth of not less than
$30,000,000 and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Seller under this Agreement
prior to the termination of Seller's responsibilities, duties and liabilities
under this Agreement. In connection with such appointment and assumption, the
Purchaser may make such arrangements for the compensation of such successor out
of payments on Mortgage Loans as it and such successor shall agree. In the
event that the Seller's duties, responsibilities and liabilities under this
Agreement should be terminated pursuant to the aforementioned sections, the
Seller shall discharge such duties and responsibilities during the period from
the date it acquires knowledge of such termination until the effective date
thereof with the same degree of diligence and prudence which it is obligated to
exercise under this Agreement, and shall take no action whatsoever that might
impair or prejudice the rights or financial condition of its successor. The
resignation or removal of Seller pursuant to the aforementioned Sections shall
not become effective until a successor shall be appointed pursuant to Article X
hereof this Section and shall in no event relieve the Seller of the
representations, warranties and covenants made pursuant to and the remedies
available to the Purchaser with respect thereto, it being understood and agreed
that the provisions of such Article X shall be applicable to the Seller
notwithstanding any such resignation or termination of the Seller, or the
termination of this Agreement.
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Any successor appointed as provided herein shall execute, acknowledge
and deliver to the Seller and to the Purchaser, an instrument accepting such
appointment, whereupon such successor shall become fully vested with all the
rights, powers, duties, responsibilities, obligations and liabilities of the
Seller, with like effect as if originally named as a party to this Agreement.
Any termination of this Agreement pursuant to Section 2.16, 6.03, 8.03 or 11.01
shall not affect any claims that the Purchaser may have against the Seller
arising prior to any such termination or resignation.
The Seller shall timely deliver to the successor the funds in the
Custodial Account and the Escrow Account and the Mortgage Files and related
documents and statements held by it hereunder and the Seller shall account for
all funds. The Seller shall execute and deliver such instruments and do such
other things all as may reasonably be required to more fully and definitely
vest and confirm in the successor all such rights, powers, duties,
responsibilities, obligations and liabilities of the Seller. The successor
shall make arrangements as it may deem appropriate to reimburse the Seller for
amounts the Seller actually expended pursuant to this Agreement which the
successor is entitled to retain hereunder and which would otherwise have been
recovered by the Seller pursuant to this Agreement but for the appointment of
the successor servicer.
Upon a successor's acceptance of appointment as such, the Seller shall
notify by mail the Purchaser of such appointment.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
As of the Closing Date, the Purchaser warrants and represents to, and
covenants and agrees with, the Seller as follows:
SECTION 9.01 Due Organization and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Michigan. The Purchaser has the full corporate power and
authority to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement by the
Purchaser and the consummation of the transactions contemplated hereby have
been duly and validly authorized; this Agreement evidences the valid, binding
and enforceable obligation of the Purchaser; and all requisite corporate action
has been taken by the Purchaser to make this Agreement valid and binding upon
the Purchaser in accordance with its terms.
SECTION 9.02 No Conflicts. Neither the execution and delivery of this
Agreement, nor the fulfillment of or compliance with the terms and conditions
of this Agreement, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Purchaser's certificate of incorporation
or by-laws or any legal restriction or any agreement or instrument to which the
Purchaser is now a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree to which the
Purchaser or its property is subject.
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SECTION 9.03 Ability to Perform. The Purchaser does not believe, nor
does it have any reason or cause to believe, that it cannot perform each and
every covenant made by it in this Agreement.
SECTION 9.04 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Purchaser, before
any court, administrative agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Purchaser, or in
any material impairment of the right or ability of the Purchaser to carry on
its business substantially as now conducted, or in any material liability on
the part of the Purchaser, or which would draw into question the validity of
this Agreement or of any action taken or to be taken in connection with the
obligations of the Purchaser contemplated herein.
SECTION 9.05 No Consent Required. No consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance by the Purchaser of, or compliance by the
Purchaser with, this Agreement as evidenced by the consummation of the
transactions contemplated by this Agreement, or if required, such approval has
been obtained prior to the Closing Date.
SECTION 9.06 Assistance. To the extent reasonably possible, the
Purchaser shall cooperate with and assist the Seller as requested by the
Seller, in carrying out Seller's covenants, agreements, duties and
responsibilities under the Purchase Agreement and in connection therewith shall
execute and deliver all such papers, documents and instruments as nay be
necessary and appropriate in furtherance thereof.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the Closing Date, the Seller warrants and represents to, and
covenants and agrees with, the Purchaser as follows:
SECTION 10.01 Due Organization and Authority. The Seller is a
national bank duly organized and validly existing under the laws of the United
States and is licensed, qualified and in good standing in each state where a
Mortgaged Property is located if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the Seller,
and in any event the Seller is in compliance with the laws of any such state to
the extent necessary to ensure the enforceability of the related Mortgage Loan
in accordance with the terms of this Agreement; the Seller has the full
corporate power and authority to execute and deliver this Agreement and to
perform in accordance herewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant to
this Agreement) by the Seller and the consummation of the transactions
contemplated hereby have been duly and
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validly authorized; this Agreement evidences the valid, legal, binding and
enforceable obligation of the Seller subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject
to the application of the rules of equity, including those respecting the
availability of specific performance, none of which will materially interfere
with the realization of the benefits provided thereunder, regardless of whether
such enforcement is sought in a proceeding in equity or at law; and all
requisite corporate action has been taken by the Seller to make this Agreement
valid and binding upon the Seller in accordance with its terms.
SECTION 10.02 Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Seller.
SECTION 10.03 No Conflicts. Neither the execution and delivery of
this Agreement, nor the fulfillment of or compliance with the terms and
conditions of this Agreement, will conflict with or result in a breach of any
of the terms, conditions or provisions of the Seller's Articles of Association
or by-laws or any legal restriction or any agreement or instrument to which the
Seller is now a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree to which the
Seller or its property is subject, or impair the ability of the Purchaser to
realize on the Mortgage Loans, or impair the value of the Mortgage Loans, or
impair the ability of the Purchaser to realize the full amount of any mortgage
insurance benefits accruing pursuant to this Agreement.
SECTION 10.04 Ability to Service. The Seller is duly qualified,
licensed, registered and otherwise authorized under all applicable federal,
state and local laws and regulations, meets the minimum capital requirements
set forth by OCC, and is in good standing to enforce, originate, sell mortgage
loans, and service mortgage loans in the jurisdiction wherein the Mortgaged
Properties are located.
SECTION 10.05 Ability to Perform. The Seller does not believe, nor
does it have any reason to believe, that it cannot perform each and every
covenant contained in this Agreement.
SECTION 10.06 No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Seller, before
any court, administrative agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Seller, or in any
material impairment of the right or ability of the Seller to carry on its
business substantially as now conducted, or in any material liability on the
part of the Seller, or which would draw into question the validity of this
Agreement or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Seller contemplated herein, or which
would be likely to impair materially the ability of the Seller to perform under
the terms of this Agreement.
SECTION 10.07 No Consent Required. No consent, approval,
authorization or order of any court or governmental agency or body is required
for the execution, delivery and performance
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by the Seller of or compliance by the Seller with this Agreement or the
servicing of the Mortgage Loans as evidenced by the consummation of the
transactions contemplated by this Agreement, or if required, such approval has
been obtained prior to the Closing Date.
SECTION 10.08 No Untrue Information. Neither this Agreement nor any
statement, tape, diskette, form, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of fact or omits to state a
fact necessary to make the statements contained therein not misleading.
SECTION 10.09 Reasonable Servicing Fee. The Seller acknowledges and
agrees that the Servicing Fee represents reasonable compensation for performing
such services and that the entire Servicing Fee shall be treated by the Seller,
for accounting and tax purposes, as compensation for the servicing and
administration of the Mortgage Loans pursuant to this Agreement.
SECTION 10.10 Financial Statements. The Servicer has delivered to the
Purchaser financial statements as to its last two complete fiscal years. All
such financial statements fairly present the pertinent results of operations
and changes in financial position for each of such periods and the financial
position at the end of each such period of the Servicer and its subsidiaries
and have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as set
forth in the notes thereto. There has been no change in the business,
operations, financial condition, properties or assets of the Servicer since the
date of the Servicer's financial statements that would have a material adverse
effect on its ability to perform its obligations under this Agreement.
SECTION 10.11 Conflict of Interest. The Seller agrees that it shall
service the Mortgage Loans hereunder solely with a view toward the interests of
the Purchaser, and without regard to the interests of the Seller or its other
affiliates.
ARTICLE XI
DEFAULT
SECTION 11.01 Events of Default. The following shall constitute an
Event of Default under this Agreement on the part of the Seller:
(a) any failure by the Seller to remit to the Purchaser any
payment required to be made under the terms of this Agreement
which continues unremedied for a period of five (5) Business
Days after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Seller by the Purchaser; or
(b) the failure by the Seller duly to observe or perform in any
material respect any other of the covenants or agreements on
the part of the Seller set forth in this Agreement which
continues unremedied for a period of thirty (30) days (except
that
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such number of days shall be fifteen (15) in the case of
a failure to pay any premium for any insurance policy required
to be maintained under this Agreement) after the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Seller by the Purchaser;
or
(c) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a
conservator or receiver or liquidator in any insolvency,
bankruptcy, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against
the Seller and such decree or order shall have remained in
force undischarged or unstayed for a period of sixty (60)
days; or
(d) the Seller shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, bankruptcy,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Seller or of or
relating to all or substantially all of its property; or
(e) the Seller shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations; or
(f) the Seller, without the consent of the Purchaser, attempts to
assign this Agreement or the servicing responsibilities
hereunder or to delegate any substantial part of its duties
hereunder or any portion thereof; or
(g) the Seller fails to maintain its license to do business or
service commercial mortgage loans in any jurisdiction where
the Mortgaged Properties are located and such failure results
in a material adverse effect on the Mortgage Loans, the
servicing of the Mortgage Loans, or the Purchaser's rights
with respect to the Mortgage Loans.
In each and every such case, so long as an Event of Default shall not
have been remedied, in addition to whatsoever rights the Purchaser may have at
law or equity to damages, including injunctive relief and specific performance,
the Purchaser, by notice in writing to the Seller, may terminate without
compensation or reimbursement (other than Servicing Fees previously earned but
remaining unpaid and Servicing Advances remaining unreimbursed) all the rights
and obligations of the Seller under this Agreement and in and to the Mortgage
Loans and the proceeds thereof.
Upon receipt by the Seller of such written notice, all authority and
power of the Seller under this Agreement, whether with respect to the Mortgage
Loans or otherwise, shall pass to and be vested in the successor appointed
pursuant to Section 8.06. Upon written request from the Purchaser, the Seller
shall prepare, execute and deliver any and all documents and other instruments
reasonably requested by the Purchaser, place in such successor's possession all
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Mortgage Files (to the extent not properly delivered to the Purchaser by the
Seller previously), and do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise, at the Seller's sole expense. The Seller
agrees to reasonably cooperate with the Purchaser and such successor in
effecting the termination of the Seller's responsibilities and rights
hereunder, including, without limitation, the transfer to such successor for
administration by it of all cash amounts which shall at the time be credited by
the Seller to the Custodial Account or Escrow Account or thereafter received
with respect to the Mortgage Loans.
SECTION 11.02 Waiver of Defaults. The Purchaser may waive any default
by the Seller in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01 Notices. All notices, requests, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given upon the
delivery or mailing thereof, as the case may be, sent by registered or
certified mail, return receipt requested:
(a) If to Purchaser to:
Franklin Finance Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
(b) If to Seller to:
Franklin Bank, N.A.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
SECTION 12.02 Waivers. Either the Seller or the Purchaser may upon
consent of all parties, by written notice to the others:
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(a) Waive compliance with any of the terms, conditions or
covenants required to be complied with by the others
hereunder; and
(b) Waive or modify performance of any of the obligations of the
others hereunder.
The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other subsequent
breach.
SECTION 12.03 Entire Agreement; Amendment. This Agreement and the
Purchase Agreement constitute the entire agreement between the parties with
respect to servicing of the Mortgage Loans. This Agreement may be amended and
any provision hereof waived, but, only in writing signed by the party against
whom such enforcement is sought.
SECTION 12.04 Execution; Binding Effect. 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. Subject to Sections 8.03 and 8.04, this Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their
respective successors and assigns.
SECTION 12.05 Headings. Headings of the Articles and Sections in this
Agreement are for reference purposes only and shall not be deemed to have any
substantive effect.
SECTION 12.06 Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Michigan and the obligations, rights
and remedies hereunder shall be determined in accordance with the substantive
laws of the State of Michigan (without regard to conflicts of laws principles),
except to the extent preempted by Federal law.
SECTION 12.07 Relationship of Parties. Nothing herein contained shall
be deemed or construed to create a partnership or joint venture between the
parties. The duties and responsibilities of the Seller shall be rendered by it
as an independent contractor and not as an agent of the Purchaser. The Seller
shall have full control of all of its acts, doings, proceedings, relating to or
requisite in connection with the discharge of its duties and responsibilities
under this Agreement.
SECTION 12.08 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 provisions of this Agreement.
SECTION 12.09 Recordation of Assignments of Mortgage. To the extent
permitted by applicable law, each of the Assignments of Mortgage is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public
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recording office or elsewhere, such recordation to be effected by the Purchaser
or the Purchaser's designee, but in any event, at the Servicer's expense for a
single recordation relating to each Assignment of Mortgage in the event
recordation is either necessary under applicable law or requested by the
Purchaser at its sole option.
SECTION 12.10 Exhibits. The exhibits to this Agreement are hereby
incorporated and made a part hereof and are integral parts of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date and year first above written.
FRANKLIN FINANCE CORPORATION
(the Purchaser)
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
FRANKLIN BANK, N.A.
(the Seller)
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
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EXHIBIT 1
MONTHLY REMITTANCE ADVICE
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EXHIBIT 2
CUSTODIAL ACCOUNT CERTIFICATION
___________, 1997
_________________ hereby certifies that it has established the account
described below as a Custodial Account pursuant to Section 2.04 of the
Servicing Agreement, dated as of _________, 1997.
Title of Account: "Franklin Bank, N.A., in trust for Purchaser of Commercial
Mortgage Loans, and various Mortgagors."
Account Number: ________________________
Address of office or branch of the Seller at which Account is maintained:
______________________________
______________________________
______________________________
______________________________
______________________________
FRANKLIN BANK, N.A.
By:___________________________________
Name:_________________________________
Title:________________________________
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EXHIBIT 3
CUSTODIAL ACCOUNT LETTER AGREEMENT
_____________, 1997
To: ____________________ ____________________ ____________________
(the "Depository"). As Seller under the Servicing Agreement, dated as of
______, 1997,(the "Agreement"), we hereby authorize and request you to
establish an account, as a Custodial Account pursuant to Section 2.04 of the
Agreement, to be designated as Franklin Bank, N.A., in trust for Purchaser of
Commercial Mortgage Loans, and various Mortgagors." All deposits in the account
shall be subject to withdrawal therefrom by order signed by the Seller. You may
refuse any deposit which would result in violation of the requirement that the
account be fully insured as described below. This letter is submitted to you in
duplicate. Please execute and return one original to us.
FRANKLIN BANK, N.A.
By:________________________________________
Name:______________________________________
Title:_____________________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number [_________ ], at
the office of the Depository indicated above, and agrees to honor withdrawals
on such account as provided above. The full amount deposited at any time in the
account will be insured by the Federal Deposit Insurance Corporation through
the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF").
___________________________________________
Depository
By:________________________________________
Name:______________________________________
Title:_____________________________________
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EXHIBIT 4
ESCROW ACCOUNT CERTIFICATION
_____________, 1997
_____________________________ hereby certifies that it has established
the account described below as an Escrow Account pursuant to Section 2.06 of
the Servicing Agreement, dated as of ________, 1997.
Title of Account: "Franklin Bank, N.A., in trust for Purchaser of
Commercial Mortgage Loans, and various Mortgagors."
Account Number: _____________________________
Address of office or branch of the Seller at which Account is
maintained:
______________________________
______________________________
______________________________
______________________________
______________________________
FRANKLIN BANK, N.A.
By:____________________________________
Name:__________________________________
Title:_________________________________
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EXHIBIT 5
ESCROW ACCOUNT LETTER AGREEMENT
______________, 1997
To: ____________________
____________________
____________________
(the "Depository")
As Seller under the Servicing Agreement, dated as of ____________,
1997, (the "Agreement"), we hereby authorize and request you to establish an
account, as an Escrow Account pursuant to Section 2.06 of the Agreement, to be
designated as "Franklin Bank, N.A., in trust for the Purchaser of Commercial
Mortgage Loans, and various Mortgagors." All deposits in the account shall be
subject to withdrawal therefrom by order signed by the Seller. You may refuse
any deposit which would result in violation of the requirement that the account
be fully insured as described below. This letter is submitted to you in
duplicate. Please execute and return one original to us.
FRANKLIN BANK, N.A.
By:___________________________________
Name:_________________________________
Title:________________________________
Date:____________________________
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number [_______], at the
office of the Depository indicated above, and agrees to honor withdrawals on
such account as provided above. The full amount deposited at any time in the
account will be insured by the Federal Deposit Insurance Corporation through
the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF").
______________________________________
Depository
By:___________________________________
Name:_________________________________
Title:________________________________