BARCLAYS BANK PLC, Agent, PHH MORTGAGE CORPORATION Seller and Servicer, and PHH CORPORATION Guarantor SERVICING AGREEMENT dated as of October 30, 2006
Exhibit
10.2
BARCLAYS
BANK PLC,
Agent,
PHH
MORTGAGE CORPORATION
Seller
and Servicer,
and
PHH
CORPORATION
Guarantor
dated
as of October 30, 2006
S-1
TABLE
OF CONTENTS
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Page
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DEFINITIONS
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1
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ARTICLE
II
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POSSESSION
OF MORTGAGE FILES; BOOKS AND RECORDS; CUSTODIAL AGREEMENT; DELIVERY
OF
DOCUMENTS
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1
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Section
2.1
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Possession
of Mortgage Loan Files; Maintenance of Mortgage Loan Files.
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1
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Section
2.2
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Books
and Records; Transfers of Eligible Mortgage Loans; Custodial
Agreement.
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2
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Section
2.3
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Servicer
Daily Calculation of Collateral Values and Aggregate Margin Value;
Agent
Calculation of Collateral Value and Aggregate Margin Value.
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3
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Section
2.4
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Protection
of Ownership Interest of the Agent (on behalf of the
Principals).
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3
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Section
2.5
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Fees.
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4
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Section
2.6
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Payments
and Computations, Etc.
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4
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ARTICLE
III
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REPRESENTATIONS
AND WARRANTIES; COVENANTS; REMEDIES AND BREACH
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4
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Section
3.1
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Representations
and Warranties of The Company.
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4
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Section
3.2
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[Reserved].
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7
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Section
3.3
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Remedies
for Breach of Representations and Warranties.
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7
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Section
3.4
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Covenants.
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7
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ARTICLE
IV
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ADMINISTRATION
AND SERVICING OF ELIGIBLE LOANS
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8
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Section
4.1
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The
Company to Act as Servicer; Servicing and Administration of the
Eligible
Mortgage Loans.
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8
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Section
4.2
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Sales
and Securitizations.
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9
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Section
4.3
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Liquidation
of Eligible Mortgage Loans.
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10
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Section
4.4
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Collection
of Eligible Mortgage Loan Payments.
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10
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Section
4.5
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Establishment
of, and Deposits to, Funding Account and Collection Account.
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11
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Section
4.6
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Permitted
Withdrawals From Margin Call Account.
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11
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Section
4.7
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Establishment
of, and Deposits to, Escrow Account.
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11
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Section
4.8
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Permitted
Withdrawals From Escrow Account.
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12
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Section
4.9
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Payment
of Taxes, Insurance and Other Charges.
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12
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S-2
TABLE
OF
CONTENTS
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Page
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Section
4.10
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Protection
of Accounts; Investment of Funds.
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13
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Section
4.11
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Maintenance
of Hazard Insurance.
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13
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Section
4.12
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Maintenance
of Mortgage Impairment Insurance.
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15
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Section
4.13
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Maintenance
of Fidelity Bond and Errors and Omissions Insurance.
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15
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Section
4.14
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Inspections.
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15
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Section
4.15
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Restoration
of Mortgaged Property.
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15
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Section
4.16
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Maintenance
of PMI Policy; Claims.
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16
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Section
4.17
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Title,
Management and Disposition of REO Property.
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17
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Section
4.18
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Daily
Servicer Reports.
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17
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Section
4.19
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Real
Estate Owned Reports.
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18
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Section
4.20
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Liquidation
Reports.
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18
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Section
4.21
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Reports
of Foreclosures and Abandonments of Mortgaged Property.
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18
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ARTICLE
V
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GENERAL
SERVICING PROCEDURES
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18
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Section
5.1
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Transfers
of Mortgaged Property.
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18
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Section
5.2
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Satisfaction
of Mortgages and Release of Mortgage Loan Files.
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19
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Section
5.3
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Servicing
Compensation.
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19
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Section
5.4
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Annual
Statement as to Compliance.
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19
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Section
5.5
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Annual
Independent Public Accountants' Servicing Report; Audited
Financials.
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20
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Section
5.6
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Right
to Examine Servicer Records.
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21
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ARTICLE
VI
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REPURCHASE
OBLIGATION
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21
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Section
6.1
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Servicer's
Purchase Obligations.
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21
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ARTICLE
VII
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SERVICER
TO COOPERATE
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21
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Section
7.1
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Provision
of Information.
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22
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ARTICLE
VIII
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THE
SERVICER
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22
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Section
8.1
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Indemnification
of Third-Party Claims.
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22
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Section
8.2
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Corporate
Existence of the Servicer.
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22
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Section
8.3
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Limitation
on Liability of Servicer and Others.
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22
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Section
8.4
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Limitation
on Resignation and Assignment by the Servicer.
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23
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S-3
TABLE
OF CONTENTS
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Page
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Section
8.5
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Limitation
on Assignment of Right.
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23
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ARTICLE
IX
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SERVICER
DEFAULT
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23
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Section
9.1
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Servicer
Default.
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23
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Section
9.2
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Waiver
of Defaults.
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26
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ARTICLE
X
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TERMINATION
AND LIQUIDATION
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26
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Section
10.1
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Termination
of Agreement.
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26
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Section
10.2
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Termination
of Servicing With Respect to Any Eligible Mortgage Loan.
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26
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ARTICLE
XI
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[RESERVED]
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26
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ARTICLE
XII
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MISCELLANEOUS
PROVISIONS
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27
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Section
12.1
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Successor
to Servicer.
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27
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Section
12.2
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Amendment.
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27
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Section
12.3
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Governing
Law.
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28
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Section
12.4
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Duration
of Agreement.
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28
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Section
12.5
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Notices.
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28
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Section
12.6
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Severability
of Provisions.
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28
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Section
12.7
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Relationship
of Parties.
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28
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Section
12.8
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Execution;
Successors and Assigns.
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28
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Section
12.9
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Recordation
of Assignments of Mortgage.
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29
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Section
12.10
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[RESERVED].
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29
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Section
12.11
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[RESERVED].
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29
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Section
12.12
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Waiver
of Offset.
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29
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ARTICLE
XIII
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PHH
CORPORATION GUARANTEE
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29
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Section
13.1
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Guarantee
of Seller's Representations and Warranties, Servicer’s Performance and
Payment Obligations.
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29
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S-4
THIS
SERVICING AGREEMENT, dated as of October 30, 2006 (as amended, supplemented
or
otherwise modified and in effect from time to time, this “Agreement”),
among
PHH Mortgage Corporation, a New Jersey corporation (the “Company”),
as
Seller (in such capacity, the “Seller”)
and as
Servicer (in such capacity, the “Servicer”),
Barclays Bank PLC, as Agent (the “Agent”),
and
PHH Corporation, a Maryland corporation, as Performance Guarantor of the
Servicer's obligations (the “Performance
Guarantor”).
W
I T N E
S S E T H
WHEREAS,
the Seller, the Agent and the other parties thereto from time to time are
parties to that certain Fifth Amended and Restated Master Repurchase Agreement,
dated as of the date hereof (amended, supplemented or otherwise modified and
in
effect from time to time, “Repurchase
Agreement”)
pursuant to which such parties have prescribed the manner of sale of each
Eligible Mortgage Loan and the Related Security;
WHEREAS,
the Agent, the Servicer and the Performance Guarantor wish to enter into this
Agreement to prescribe for the management, control and servicing of the Eligible
Mortgage Loans and the guaranty by the Performance Guarantor of the performance
of the obligations of the Servicer; and
NOW,
THEREFORE, in consideration of the mutual agreements hereinafter set forth,
and
for other good and valuable consideration, the receipt and adequacy of which
is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Capitalized
terms used, but not otherwise defined herein, are used as defined in the
Repurchase Agreement.
ARTICLE
II
POSSESSION
OF MORTGAGE FILES; BOOKS AND RECORDS; CUSTODIAL AGREEMENT; DELIVERY OF
DOCUMENTS
Section
2.1 Possession
of Mortgage Loan Files; Maintenance of Mortgage Loan Files.
Pursuant
to Section 2.2(b), as soon as practicable but in any event on or before the
date
which is 30 days after any sale of Eligible Mortgage Loans to the Agent (on
behalf of the Principals), the Seller shall deliver each Mortgage Note, to
the
Custodian as agent of the Agent. The Seller shall deliver the related Loan
Documents to the Servicer and the contents of each Mortgage Loan File shall
be
held in trust by the Servicer for the benefit of the Principals. The possession
of each Mortgage Loan File by the Servicer is at the will of the Agent for
the
sole purpose of servicing the related Eligible Mortgage Loan and such retention
and possession by the Servicer is in a custodial capacity only. Upon the sale
of
the Eligible Mortgage Loans, each Mortgage Note, the related Mortgage, the
Related Security and all Collections and the related Mortgage Loan File shall
vest immediately in the Agent (on behalf of the Principals), and the ownership
of all records and documents with respect to the related Eligible Mortgage
Loan
prepared by or which come into the possession of the Servicer shall vest
immediately in the Agent (on behalf of the Principals) and shall be retained
and
maintained by the Servicer, in trust, at the will of the Agent (on behalf of
the
Principals) and only in such custodial capacity. The Servicer's master data
processing records shall be marked appropriately to reflect clearly the transfer
of the related Eligible Mortgage Loans to the Agent (on behalf of the
Principals). The Custodian shall only release its custody of the contents of
any
Mortgage Loan File in its possession in accordance with the Custodial
Agreement.
S-5
Section
2.2 Books
and Records; Transfers of Eligible Mortgage Loans; Custodial
Agreement.
(a) From
and
after each related Purchase Date, all rights arising with respect to the
Eligible Mortgage Loans transferred (not including (i) servicing rights with
respect to the Eligible Mortgage Loans, which shall be retained by the Servicer
subject to the terms of the Repurchase Agreement or (ii) the Seller's obligation
to fund future advances for any HELOC pursuant to the related Home Equity Line
Agreement up to the Credit Limit) pursuant to any Transaction Notice including
but not limited to all funds received on or in connection with the Eligible
Mortgage Loans, shall be received and held by the Servicer in trust for the
benefit of the Agent (on behalf of the Principals and shall be applied in
accordance with Section 6 of the Repurchase Agreement). Pursuant to the
Custodial Agreement, the Custodian shall hold all of the Mortgage Notes as
described in such Custodial Agreement.
The
Servicer shall be responsible for maintaining, and shall maintain, a complete
set of books and records for each Eligible Mortgage Loan which shall be marked
clearly to reflect the transfer of each Eligible Mortgage Loan to the Agent
(on
behalf of the Principals). In particular, the Servicer shall maintain in its
possession, available for inspection by the Agent, the Principals or their
respective designees, evidence of compliance with applicable laws, rules and
regulations. To the extent that original documents are not required for purposes
of realization of Liquidation Proceeds, Insurance Proceeds, VA Guaranty
Proceeds, FHA Proceeds or Securitization proceeds, documents maintained by
the
Servicer may be in the form of microfilm or microfiche or such other reliable
means of recreating original documents, including but not limited to, optical
imagery techniques so long as the Servicer complies with the requirements of
the
Guidelines.
The
Servicer shall maintain with respect to each Eligible Mortgage Loan and shall
make available for inspection, upon reasonable advance notice, at the offices
of
the Servicer during normal business hours by the Agent, any Principal or any
of
their respective designees the related Mortgage Loan File during the time the
Agent retains ownership of an Eligible Mortgage Loan and thereafter in
accordance with applicable laws and regulations.
(b) Pursuant
to the Custodial Agreement, the Seller shall, from time to time in connection
with each Transaction pursuant to the terms of the Repurchase Agreement, deliver
to the Custodian, on or before the date which is 30 days after the related
Purchase Date, the Mortgage Note for each Eligible Mortgage Loan transferred.
The Custodian shall hold all Mortgage Notes in trust as agent for the Agent
(on
behalf of the Principals).
S-6
Section
2.3 Servicer
Daily Calculation of Collateral Values and Aggregate Margin Value; Agent
Calculation of Collateral Value and Aggregate Margin Value.
(a) The
Servicer shall, before 4 p.m. (eastern time) on each Business Day, provide
a
transmission of the Collateral Value and Aggregate Margin Value of the Eligible
Mortgage Loans at such time to the Agent. Such transmission shall be in a form
mutually agreed upon by the Servicer and the Agent at such times in all material
respects.
(b) The
Agent
shall provide, at least once per calendar month, but as often as the Agent
deems
necessary, before noon (eastern time) on any Business Day, a transmission of
the
aggregate Collateral Value of the Eligible Mortgage Loans (as determined by
the
Agent or its designee) and the Aggregate Margin Value (as determined by the
Agent or its designee) at such time to the Servicer. Such transmission shall
be
in a form mutually agreed upon by the Agent and the Servicer at such times
in
all material respects. In connection with the foregoing, the Servicer shall
promptly deliver to the Agent (for its use and for use by any third party that
the Agent selects to calculate the aggregate Collateral Value and the Aggregate
Margin Value) any books, records, documents, data tapes or diskettes or other
information relating to the Eligible Mortgage Loans as the Agent may reasonably
request.
Section
2.4 Protection
of Ownership Interest of the Agent (on behalf of the Principals).
The
Servicer agrees that it will from time to time, at its expense, promptly execute
and deliver all instruments and documents and take all actions as may be
necessary or as the Agent may reasonably request in order to perfect or protect
the interest of the Agent (on behalf of the Principals) in the Eligible Mortgage
Loans or to enable the Agent or the Principals to exercise or enforce any of
their respective rights hereunder. Without limiting the foregoing, the Seller
will upon the request of the Agent or any of the Principals, in order to
accurately reflect any assignment, transfer and conveyance transaction under
the
Repurchase Agreement, authorize and file such financing or continuation
statements or amendments thereto or assignments thereof as may be requested
by
the Agent or any of the Principals. The Servicer shall upon request of the
Agent
or any of the Principals obtain such additional search reports as the Agent
or
any of the Principals shall request. To the fullest extent permitted by
applicable law, the Agent shall be permitted to file continuation statements
and
amendments thereto and assignments thereof without the Seller’s signature.
Carbon, photographic or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement.
The
Servicer agrees that it will at its expense, on or prior to the related Purchase
Date indicate clearly and unambiguously in its master data processing records
that the Eligible Mortgage Loans have been conveyed to the Agent, for the
benefit of the Principals pursuant to the Repurchase Agreement. The Servicer
further agrees to deliver to the Agent a computer file or microfiche list
containing a true and complete list of all such Eligible Mortgage Loans,
identified by loan number and by Outstanding Principal Balance as of the related
Purchase Date. The Servicer agrees to deliver to the Agent within five (5)
Business Days of the request therefor by the Agent a computer file or microfiche
list containing a true and complete list of all Eligible Mortgage Loans in
existence as of the last day of the prior Due Period, identified by loan number
and by Outstanding Principal Balance as of the last day of the prior Due Period.
The Servicer agrees, on behalf of the Seller, at its own expense, by the end
of
each Due Period in which any Eligible Mortgage Loans have been originated to
indicate clearly and unambiguously in its master data processing records that
the Eligible Mortgage Loans created have been conveyed to the Agent, for the
benefit of the Principals, pursuant to the Repurchase Agreement.
S-7
Section
2.5 Fees.
The
Seller shall pay the non-refundable fees set forth in the Fee Letter. Any of
the
fees described in the Fee Letter which are accrued but unpaid on the Termination
Date shall be paid in full by the Seller on the Termination Date.
Section
2.6 Payments
and Computations, Etc.
All
per
annum fees payable under this Agreement shall be calculated for the actual
days
elapsed on the basis of a 360-day year. All amounts to be paid or deposited
by
the Seller or the Servicer hereunder shall be paid or deposited in accordance
with the terms hereof in immediately available funds no later than 2:00 p.m.
(eastern time) on the day when due; if such amounts are payable to any Principal
or Principals they shall be paid or deposited in the Funding Account unless
otherwise notified by the Agent. The Seller shall, to the extent permitted
by
Law, pay to the Agent for the account of each Principal upon demand of the
Agent, interest on all amounts not paid or deposited when due to the Agent
for
the account of each Principal hereunder at a rate equal to the Default Rate.
All
computations of interest hereunder shall be made on the basis of a year of
360
days for the actual number of days (including the first but excluding the last
day) elapsed other than computations of interest calculated by reference to
the
Base Rate which shall be calculated on the basis of a 365- or 366- day year,
as
applicable.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES; COVENANTS; REMEDIES AND BREACH
Section
3.1 Representations
and Warranties of The Company.
The
Company, as Seller and Servicer, represents and warrants to the Agent (and
for
the benefit of the Principals) that as of each applicable Purchase Date and
as
of the date of the sale or Securitization of each Eligible Mortgage
Loan:
(a) Due
Organization and Authority.
The
Company is duly organized, validly existing and in good standing under the
laws
of New Jersey and has all licenses necessary to carry on its business as now
being conducted and is licensed, qualified and in good standing in each state
where a Mortgaged Property is located if required to conduct business of the
type conducted by it, and in any event the Company is in compliance with the
laws of any such state to the extent necessary to ensure the enforceability
of
any Eligible Mortgage Loan sold hereunder and the servicing of any such Eligible
Mortgage Loan in accordance with the terms of this Agreement and any Transaction
Notice; the Company has the full power and authority to execute and deliver
this
Agreement and any Transaction Notice and to perform its obligations in
accordance herewith and therewith; the execution, delivery and performance
of
this Agreement and any Transaction Notice by the Company and the consummation
of
the transactions contemplated hereby and thereby have been duly and validly
authorized by the Company; all requisite corporate action has been taken by
the
Company to make this Agreement and any Transaction Notice valid and binding
upon
the Company in accordance with its terms; this Agreement and any Transaction
Notice each evidences the valid, binding and enforceable obligation of the
Company, except that (i) the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, receivership and other similar laws relating
to creditors' rights generally and (ii) the remedy of specific performance
and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought.
S-8
(b) Ordinary
Course of Business.
The
consummation of the transactions contemplated by this Agreement are in the
ordinary course of business of the Company, and the transfer, assignment and
conveyance of the Mortgage Notes and the Mortgages by the Company pursuant
to
this Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
(c) No
Conflicts.
Neither
the execution and delivery of this Agreement or any Transaction Notice, the
acquisition of Eligible Mortgage Loans by the Company, the sale of Eligible
Mortgage Loans to the Agent (on behalf of the Principals) or the transactions
contemplated hereby or thereby, nor the fulfillment of or compliance with the
terms and conditions of this Agreement or any Transaction Notice, will conflict
with or result in a breach of any of the terms, conditions or provisions of
the
Company's charter or by-laws or any material agreement or instrument to which
the Company 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
in any material respect of any applicable law, rule, regulation, order, judgment
or decree to which the Company or its property is subject, or impair the ability
of the Agent (on behalf of the Principals) to realize on the Eligible Mortgage
Loans in any material respect, or impair the value of the Eligible Mortgage
Loans in any material respect, or impair in any material respect the ability
of
the Agent (on behalf of the Principals) to realize the full mortgage insurance
benefits (i) of the FHA Mortgage Insurance Contract with respect to FHA Loans;
(ii) of the VA Loan Guaranty Certificate with respect to VA Loans; or (iii)
other insurance benefits accruing pursuant to this Agreement, including but
not
limited to any PMI Policy.
(d) Ability
to Service.
The
Company is an Approved Seller/Servicer of Eligible Mortgage Loans for at least
two of GNMA, FNMA and FHLMC with the facilities, procedures, and experienced
personnel necessary for the servicing of Eligible Mortgage Loans. The Company
is
in good standing to sell mortgage loans to and service mortgage loans for at
least two of GNMA, FNMA and FHLMC and no event has occurred, including but
not
limited to a change in insurance coverage, which would make the Company unable
to comply with the eligibility requirements in all material respects of at
least
two of GNMA, FNMA and FHLMC. As of each Purchase Date, the Company is an FHA
Approved Mortgagee and a VA Approved Lender and has the facilities, procedures,
and experienced personnel necessary for the servicing of mortgage loans of
the
same type as the Eligible Mortgage Loans. As of each Purchase Date, the Company
is in good standing to service mortgage loans for FHA and VA, and no event
has
occurred, including but not limited to a change in insurance coverage, which
would make the Company unable to comply with FHA or VA eligibility requirements
in all material respects.
S-9
(e) Reasonable
Servicing Fee.
The
Servicer acknowledges and agrees that the Servicing Fee represents reasonable
compensation for performing such services as compensation for the servicing
and
administration and arranging for the sale or Securitization of the Eligible
Mortgage Loans pursuant to this Agreement and, if paid shall be treated by
the
Servicer, for accounting and tax purposes, as compensation for the servicing
and
administration of the Eligible Mortgage Loans pursuant to this Agreement. As
of
the date hereof, the Seller does not, and is not expected at a later date to,
pay any Servicing Fee to any Servicer party hereto on the date this Servicing
Agreement was first executed and delivered. However, the Seller is expected
to
pay Servicing Fees to any Servicer who is not an Affiliate of the
Seller.
(f) No
Litigation Pending.
There
is no action, suit, proceeding or investigation pending or to its knowledge
threatened against the Company (other than Previously Disclosed Matters) 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 Company, or in any material impairment of the right or ability
of
the Company to carry on its business substantially as now conducted, or in
any
material liability on the part of the Company, or which would draw into question
the validity of this Agreement or any Transaction Notice or the Eligible
Mortgage Loans or of any action taken or to be taken in connection with the
obligations of the Company contemplated herein, or which would be likely to
impair materially the ability of the Company to perform under the terms of
this
Agreement or any Transaction Notice.
(g) No
Consent Required.
No
consent, approval, authorization or order of any court or governmental agency
or
body including, without limitation, HUD, FHA or VA, is required for the
execution, delivery and performance by the Company of or compliance by it with
this Agreement or any Transaction Notice or the sale of the Eligible Mortgage
Loans, or if required, such consent, approval or authorization has been
obtained.
(h) No
Untrue Information.
Neither
this Agreement, any Transaction Notice nor any statement, report or other
document prepared by the Seller or to be prepared by the Company pursuant to
this Agreement or any other Transaction Document or in connection with the
transactions contemplated hereby or thereby (other than Subject Adjustments)
contains any untrue statement of a material fact relating to the Company or
the
Eligible Mortgage Loans or omits to state a fact necessary to make the
statements herein or therein not materially misleading.
(i) Ability
to Perform.
The
Company does not believe, nor does it have any reason or cause to believe,
that
it cannot perform each and every covenant contained in this Agreement and each
other Transaction Document in all material respects. The Company is solvent
and
the sale of the Eligible Mortgage Loans is not undertaken to hinder, delay
or
defraud any of the Company's creditors.
S-10
Section
3.2 [Reserved].
Section
3.3 Remedies
for Breach of Representations and Warranties.
It
is
understood and agreed that the representations and warranties set forth in
Section 3.1 shall survive the sale of the Eligible Mortgage Loans to the Agent
(on behalf of the Principals) and the delivery of the Loan Documents to the
Servicer and delivery of the Mortgage Notes to the Custodian and shall inure
to
the benefit of the Agent (on behalf of the Principals) notwithstanding any
restrictive or qualified endorsement on any Mortgage Note or Assignment of
Mortgage or the examination or failure to examine any Mortgage Loan File. Upon
discovery by either the Seller, the Servicer or the Agent (on behalf of the
Principals) of a breach of any of the foregoing representations and warranties
which materially and adversely affects the value of the Eligible Mortgage Loans
or the interest of the Agent (on behalf of the Principals) (or which materially
and adversely affects the interest of the Agent (on behalf of the Principals)
in
the related Eligible Mortgage Loan in the case of a representation and warranty
relating to a particular Eligible Mortgage Loan), the party discovering such
breach shall give prompt written notice to the other, the Agent and the
Principals.
Section
3.4 Covenants.
(a) Licenses.
The
Servicer shall maintain its qualifications to do business and all licenses
necessary to perform its obligations hereunder.
(b) Servicing
Standards/Sales and Securitizations.
The
Servicer will administer and service Eligible Mortgage Loans, and arrange for
the sale and Securitization of Eligible Mortgage Loans, in accordance with
the
terms of this Agreement, the Mortgage Notes and Accepted Servicing
Practices.
(c) Delivery
of Mortgage Note.
The
Servicer shall deliver each Mortgage Note to the Custodian as soon as
practicable, but in any event within 30 days of the purchase and, if any
Mortgage Note is not delivered within 30 days of the purchase, it shall be
repurchased on such 30th
day by
the Seller at the Repurchase Price.
(d) Assignment.
The
Servicer shall assign to the Agent all right, title and interest of the Company
under the Additional Collateral Transaction Agreement with respect to Additional
Collateral Mortgage Loans transferred.
(e) [Reserved].
(f) [Reserved].
(g) Financial
Covenants.
For so
long as any amount shall remain outstanding or unpaid under the Repurchase
Agreement, unless the Required Principals shall otherwise consent in writing,
the Company shall not, directly or indirectly, (i) permit PHH Corporation’s
Consolidated Net Worth on the last day of any fiscal quarter to be less than
the
sum of (A) $1,000,000,000 plus
(B) 25% of Consolidated Net Income, if positive, for each fiscal quarter
ended after December 31, 2004; or (ii) permit, at any time, the ratio of
Indebtedness of PHH Corporation and its Subsidiaries to Tangible Net Worth
to
exceed 10.0 to 1.0.
S-11
ARTICLE
IV
ADMINISTRATION
AND SERVICING OF ELIGIBLE LOANS
Section
4.1 The
Company to Act as Servicer; Servicing and Administration of the Eligible
Mortgage Loans.
(a) The
Company, as an independent contractor and owner of the servicing rights to
the
Eligible Mortgage Loans, shall diligently service and administer the Eligible
Mortgage Loans, and shall comply with the Eligibility Criteria, the Portfolio
Criteria, Portfolio Aging Limitations and Wet Funded Loan Limitation, in the
best interest of and for the benefit of the Agent and the Principals in
accordance with applicable law, the terms of this Agreement and the terms of
the
respective Eligible Mortgage Loans, with a view to the maximization of timely
recovery of principal and interest on the Mortgage Notes. Except to the extent
that this Agreement provides for a contrary specific course of action, the
Servicer will be required to service and administer the Eligible Mortgage Loans
(y) in the same manner in which, and with the same care, skill, prudence and
diligence with which it services and administers similar mortgage loans for
other third-party portfolios, giving due consideration to customary and usual
standards of practice of prudent institutional residential mortgage loan
servicers used with respect to loans comparable to the Eligible Mortgage Loans,
or (z) in the same manner in which, and with the same care, skill, prudence
and
diligence with which, it services and administers similar mortgage loans which
it owns, whichever standard of care is higher, and taking into account its
other
obligations under this Agreement, but without regard to (i) any other
relationship that Servicer, any sub-servicer or any affiliate of the Servicer
or
any sub-servicer may have with the borrowers or any affiliate of such borrowers;
(ii) the ownership of any interest in an Eligible Mortgage Loan by the Servicer
or any affiliate; (iii) the Servicer's obligations to incur servicing expenses
with respect to the Eligible Mortgage Loans; (iv) the Servicer's or any
sub-servicer's right to receive compensation for its services under this
Agreement or with respect to any particular transaction; or (v) the ownership,
servicing or management for others by the Servicer or any sub-servicer of any
other mortgage loans or property. The Servicer shall maintain its qualification
to do business and all licenses necessary to perform its obligations
hereunder.
(b) The
Servicer shall be obligated to service and administer the Eligible Mortgage
Loans. The Servicer may enter into additional servicing or sub-servicing
agreements with third parties with respect to any of its respective obligations
hereunder, provided that any such agreement shall be consistent with the
provisions of this Agreement and no sub-servicer (or its agent or
subcontractors) shall grant any modification, waiver or amendment to any
Eligible Mortgage Loan without the approval of the Servicer. Notwithstanding
any
servicing or sub-servicing agreement, any of the provisions of this Agreement
relating to agreements or arrangements between the Servicer and any Person
acting as servicer or sub-servicer (or its agents or subcontractors) or any
reference to action taken through any Person acting as servicer or sub-servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Agent (on behalf of the Principals) for the servicing and administering of
the
Eligible Mortgage Loans and arranging for the sale and Securitization of the
Eligible Mortgage Loans in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue of such servicing
or sub-servicing agreements or arrangements or by virtue of indemnification
from
any Person acting as servicer or sub-servicer (or its agents or subcontractors)
to the same extent and under the same terms and conditions as if the Servicer
alone were engaging in such activities. In the event the Servicer is a
sub-servicer, the Agent (on behalf of the Principals) shall be entitled to
proceed directly against the Servicer as sub-servicer to enforce the Servicer's
obligations to the Agent (on behalf of the Principals).
S-12
(c) Subject
to the above-described servicing standards, the further provisions of this
Agreement, including but not limited to the Wet Funded Loan Limitation, the
Eligibility Criteria, the Portfolio Criteria and Portfolio Aging Limitation,
and
the terms of the respective Eligible Mortgage Loans, the Servicer shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration that it may deem
necessary or desirable in connection with the servicing and administration
of
the Eligible Mortgage Loans. Without limiting the generality of the foregoing,
the Servicer is hereby authorized and empowered to waive, modify or vary any
term of any Eligible Mortgage Loan or consent to the postponement of compliance
with any such term or in any manner grant indulgence to any Borrower if in
the
Servicer's reasonable and prudent determination such waiver, modification,
postponement or indulgence is not materially adverse to the Agent or any of
the
Principals; provided, however, that the Servicer shall not make any future
advances to a Borrower with respect to an Eligible Mortgage Loan and (unless
the
Borrower is in default with respect to the Eligible Mortgage Loan or such
default is, in the judgment of the Servicer, imminent) the Servicer shall not
permit any modification with respect to any Eligible Mortgage Loan that would
change the interest rate for the related Mortgage, defer or forgive the payment
of principal or interest, reduce or increase the outstanding principal balance
(except for actual payments of principal), release any collateral from the
Eligible Mortgage Loan or change the final maturity date on such Eligible
Mortgage Loan. Without limiting the generality of the foregoing, the Servicer
shall continue, and is hereby authorized and empowered, to execute and deliver
on behalf of itself and the Agent all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Eligible Mortgage Loans and with respect to
the
Mortgaged Properties. If reasonably required by the Servicer, the Principals
shall furnish the Servicer with any powers of attorney, in recordable form,
and
other documents necessary or appropriate to enable the Servicer to carry out
its
servicing and administrative duties under this Agreement.
S-13
Section
4.2 Sales
and Securitizations.
Subject
to the servicing standards described in Section 4.1, the Servicer shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration that it may deem
necessary and desirable in connection with the sale and/or Securitization of
Eligible Mortgage Loans with the Seller or third-party purchasers. In connection
with any Securitization of Eligible Mortgage Loans, in the event the Agent
(on
behalf of the Principals) receives securities from the Securitization Vehicle
in
exchange for the Eligible Mortgage Loans subject to such Securitization
(“Securitization
Securities”),
the
Servicer shall, on behalf of the Agent (on behalf of the Principals), arrange
for the sale of such Securitization Securities. The Servicer shall use its
best
efforts to realize for the Agent (on behalf of the Principals) the market value
for the Securitization Securities but shall have no liability to the Principals
with respect to any Securitization or Securitization Security provided that
the
Servicer arranges for such Securitization or sale in good faith in accordance
with the procedures utilized by the Servicer in connection with any
Securitization and Securitization Securities held for its own account. The
share
of the proceeds of sale of any Securitization Security due the Principals and
the proceeds of sale of any whole loan will be remitted to the Collection
Account for application in accordance with the Repurchase
Agreement.
All
mortgage loans not sold or transferred pursuant to a sale or Securitization
shall continue to be serviced in accordance with the terms of this
Agreement.
Section
4.3 Liquidation
of Eligible Mortgage Loans.
In
the
event that any payment due under any Eligible Mortgage Loan is not paid when
the
payment becomes due and payable, or in the event that the Borrower fails to
perform any other covenant or obligation under the Eligible Mortgage Loan and
such failure continues beyond any applicable grace period, the Servicer shall
take such action as (1) the Servicer would take under similar circumstances
with
respect to a similar Eligible Mortgage Loan held for its own account for
investment, (2) shall be consistent with Accepted Servicing Practices, (3)
the
Servicer shall determine in accordance with Accepted Servicing Practices to
be
in the best interest of the Agent and the Principals, and (4) is consistent
with
the related PMI Policy, if any; provided,
however,
any
Defaulted Loan will be sold by the Servicer on behalf of the Principals as
soon
as practicable after becoming a Defaulted Loan.
Section
4.4 Collection
of Eligible Mortgage Loan Payments.
The
Servicer shall proceed diligently, in accordance with Accepted Servicing
Practices, to collect all payments called for under the terms and provisions
of
the Eligible Mortgage Loans it is obligated to service hereunder and shall
follow such collection procedures as are consistent with the Transaction
Documents (including without limitation, the servicing standards set forth
in
Section 4.1 hereof). The Servicer shall ascertain and estimate, in accordance
with Accepted Servicing Practices, Escrow Payments and all other charges that
will become due and payable with respect to the Eligible Mortgage Loans and
the
Mortgaged Property, to the end that the installments payable by the Borrowers
will be sufficient to pay such charges as and when they become due and payable.
The Servicer shall segregate and hold all payments received by it separate
and
apart from any of its funds and general assets and in trust for the Principals
and shall apply such payments as provided in the Repurchase Agreement. The
accounts established by the Servicer pursuant to this Article IV may include
any
number of sub-accounts for convenience in administering the Eligible Mortgage
Loans.
S-14
Section
4.5 Establishment
of, and Deposits to, Funding Account and Collection Account.
The
Servicer shall establish single, segregated trust accounts which shall be
designated as the Funding Account and the Collection Account, respectively,
which shall be held in trust in the name of the Agent for the benefit of the
Principals and which shall be subject to Blocked Account Control Agreements,
into which the Servicer shall from time to time deposit, within two Business
Days of the receipt thereof, and retain therein, all Collections. The Funding
Account and the Collection Account shall be established with a Qualified
Depository acceptable to the Agent. Any funds deposited in the Funding Account
and the Collection Account shall at all times be fully insured to the full
extent permitted under applicable law. Any interest earnings on amounts on
deposit from time to time in the Funding Account and the Collection Account
shall be remitted to the Servicer in accordance with such arrangements, as
shall
be agreed upon by the Servicer and the Agent; provided
that the
Servicer shall deposit promptly from its own funds to the Funding Account or
the
Collection Account, as applicable, an amount equal to any loss incurred with
respect to an investment of funds in the Funding Account or the Collection
Account, as applicable.
Section
4.6 Permitted
Withdrawals From Margin Call Account.
(a) In
connection with any withdrawals of amounts deposited by the Servicer into the
Margin Call Account by mistake or overpayment or as otherwise required to make
adjustments to amounts deposited therein in accordance with ordinary and normal
servicing adjustments the Servicer shall provide the Agent with a written
request, including such information with respect to such withdrawals as such
Agent may reasonably request to justify such withdrawal. Upon approval by the
Agent of such request, the Agent shall authorize the withdrawal of such amount
from such account; provided that if such request is for an amount less than
$10,000 and the aggregate amount withdrawn from such account under this proviso
in the current Due Period is less than $50,000, such withdrawal may be made
without approval from the Agent.
(b) The
proceeds of any sales and Securitizations, the Repurchase Price of any Eligible
Mortgage Loans and any other amounts payable in connection with the repurchase
to the Seller or Servicer of any Eligible Mortgage Loan and repayments in full
of Eligible Mortgage Loans shall be deposited directly into the Funding Account
on the same day of receipt for application in accordance with the Repurchase
Agreement.
Section
4.7 Establishment
of, and Deposits to, Escrow Account.
The
Servicer shall segregate and hold all funds collected and received pursuant
to
an Eligible 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, in a
manner which shall provide maximum available insurance thereunder. Funds
deposited in any Escrow Account may be invested by the Servicer which shall
be
entitled to any investment income therefrom except as otherwise required by
law.
Funds deposited in any Escrow Account may be drawn on by the Servicer in
accordance with Section 4.8 hereof.
S-15
The
Servicer shall deposit in such Escrow Account within two Business Days of
receipt thereof and retain therein (a) all Escrow Payments collected on account
of the Eligible Mortgage Loans, for the purpose of effecting timely payment
of
any such items as required under the terms of this Agreement and the other
Transaction Documents; and (b) all amounts representing Insurance Proceeds
or
Condemnation Proceeds which are to be applied to the restoration or repair
of
any Mortgaged Property.
The
Servicer shall make withdrawals from any Escrow Account only to effect such
payments as are required under this Agreement, as set forth in Section 4.8
hereof. To the extent required by law, the Servicer shall pay interest on
escrowed funds to the Borrower notwithstanding that such Escrow Account may
be
non-interest bearing or that interest paid thereon is insufficient for such
purposes.
The
Seller shall deposit to the Escrow Account an amount equal to all Escrow
Payments, Insurance Proceeds and Condemnation Proceeds collected on account
of
each Eligible Mortgage Loan and held by the Seller as of the date of the
transfer of such Eligible Mortgage Loan to the Agent (on behalf of the
Principals).
Section
4.8 Permitted
Withdrawals From Escrow Account.
Withdrawals
from any Escrow Account may be made by the Servicer only:
(a) To
effect
timely payments of ground rents, taxes, assessments, mortgage insurance
premiums, fire and hazard insurance premiums or other items constituting Escrow
Payments for the related Mortgage;
(b) To
reimburse the Servicer for any servicing advances made by the Servicer pursuant
to Section 4.9 hereof with respect to a related Eligible Mortgage Loan, but
only
from amounts received on the related Eligible Mortgage Loan which represent
late
collections of Escrow Payments thereunder;
(c) To
refund
to any Borrower any funds found to be in excess of the amounts required under
the terms of the related Eligible Mortgage Loan;
(d) For
application to restoration or repair of the Mortgaged Property in accordance
with the procedures outlined in Section 4.15 hereof; and
(e) To
pay to
the Borrower, to the extent required by law, any interest paid on the funds
deposited in the Escrow Account.
S-16
Section
4.9 Payment
of Taxes, Insurance and Other Charges.
With
respect to each Eligible Mortgage Loan, the Servicer shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water rates,
sewer rents, and other charges which are or may become a lien upon the Mortgaged
Property and the status of PMI Policy premiums, if any, and 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 Borrower in the Escrow Account which shall have been
estimated and accumulated by the Servicer 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 Servicer shall determine
that
any such payments are made by the Borrower at the time they first become due.
The Servicer assumes full responsibility for the timely payment of all such
bills and shall effect timely payment of all such charges irrespective of each
Borrower's faithful performance in the payment of an Eligible Mortgage Loan
or
the making of the Escrow Payments, and the Servicer shall make such
payments.
Section
4.10 Protection
of Accounts; Investment of Funds.
Amounts
on deposit in the Margin Call Account may at the option of the Seller be
invested in Eligible Investments; provided that in the event that amounts on
deposit in each such account (which shall be properly titled to insure the
funds
in such account on a loan-by-loan basis) exceed the amount fully insured by
the
FDIC (the “Insured
Amount”)
the
Servicer shall be obligated to invest the excess amount over the Insured Amount
in Eligible Investments on the next Business Day as such excess amount becomes
present in the Margin Call Account. Monies held in the Margin Call Account
shall
be invested in Eligible Investments having maturities of no greater than one
day; provided,
that if
there are no Short-Term Notes then outstanding, monies held in each such account
shall be invested in Eligible Investments having maturities of no greater than
30 days. If a Termination Event has not occurred and is not continuing, earnings
on all such Eligible Investments (after deducting any losses), if any, shall
be
paid to the Seller. All such Eligible Investments shall be made in the name
of,
and shall be payable to, the Agent.
Section
4.11 Maintenance
of Hazard Insurance.
The
Servicer shall cause to be maintained for each Eligible Mortgage Loan (other
than HELOCs and Closed End Second Mortgage Loans) 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 Key Rating Guide
(“Best's”)
against loss by fire, hazards of extended coverage and such other hazards as
are
customary in the area where the Mortgaged Property is located, in an amount
which is at least equal to the lesser of (i) the maximum insurable value of
the
improvements securing such Eligible Mortgage Loan and (ii) the greater of (a)
the outstanding principal balance of the Eligible Mortgage Loan and (b) an
amount such that the proceeds thereof shall be sufficient to prevent the
Borrower or the loss payee from becoming a co-insurer.
S-17
If
upon
origination or acquisition of the Eligible Mortgage Loan, the related Mortgaged
Property was located in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available) the Servicer shall cause to be in
effect a flood insurance policy meeting the requirements of the current
guidelines of the Flood Insurance Administration with a generally acceptable
insurance carrier rated A:VI or better in Best's in an amount representing
coverage equal to the lesser of (i) the minimum amount required, under the
terms
of coverage, to compensate for any damage or loss on a replacement cost basis
(or the unpaid balance of the mortgage if replacement cost coverage is not
available for the type of building insured) 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 Eligible Mortgage Loan, the
Servicer determines in accordance with applicable law and pursuant to the
Guidelines 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
Servicer shall notify the related Borrower that the Borrower must obtain such
flood insurance coverage, and if said Borrower fails to obtain the required
flood insurance coverage within forty-five (45) days after such notification,
the Servicer shall immediately force place the required flood insurance on
the
Borrower’s behalf.
The
Servicer shall cause to be maintained on each Mortgaged Property such 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 private mortgage guaranty insurer, or as
may
be required to conform with Accepted Servicing Practices.
In
the
event that the Servicer shall determine, in accordance with Accepted Services
Practices that the Mortgaged Property should be insured against loss or damage
by hazards and risks not covered by the insurance required to be maintained
by
the Borrower pursuant to the terms of the Mortgage, the Servicer shall
communicate and consult with the Borrower with respect to the need for such
insurance and bring to the Borrower's attention the desirability of protection
of the Mortgaged Property.
The
Servicer shall not interfere with the Borrower's freedom of choice in selecting
either his insurance carrier or agent; provided,
however,
that
the Servicer 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 Servicer 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. The Servicer shall furnish to the
Borrower a formal notice of expiration of any such insurance in sufficient
time
for the Borrower to arrange for renewal coverage by the expiration
date.
Pursuant
to Section 4.5 hereof, any amounts collected by the Servicer under any such
policies (other than amounts to be deposited in any Escrow Account and applied
to the restoration or repair of the related Mortgaged Property, or property
acquired in liquidation of the Eligible Mortgage Loan, or to be released to
the
Borrower, in accordance with Accepted Servicing Practices as specified in
Section 4.15 hereof) shall be deposited in the Collection Account.
S-18
Section
4.12 Maintenance
of Mortgage Impairment Insurance.
If
the
Servicer shall obtain and maintain a blanket policy insuring against losses
arising from fire and hazards covered under extended coverage on all of the
Eligible Mortgage Loans, then, to the extent such policy provides coverage
in an
amount equal to the amount required pursuant to Section 4.11 hereof and
otherwise complies with all other requirements of Section 4.11, it shall
conclusively be deemed to have satisfied its obligations as set forth in such
Section 4.11. Any amounts collected by the Servicer under any such policy
relating to an Eligible Mortgage Loan shall be deposited in the Collection
Account. 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 4.11 hereof, and there shall have
been
a loss which would have been covered by such policy, the Servicer shall deposit
in the Collection 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 Servicer's funds, without reimbursement therefor.
Upon
request of the Agent, the Servicer shall cause to be delivered to the Agent
a
certified true copy of such policy.
Section
4.13 Maintenance
of Fidelity Bond and Errors and Omissions Insurance.
The
Servicer 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 Eligible Mortgage Loans (“Company
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
Servicer against losses, including forgery, theft, embezzlement, fraud, errors
and omissions and negligent acts of such Company Employees. Such Fidelity Bond
and Errors and Omissions Insurance Policy also shall protect and insure the
Servicer against losses in connection with the release or satisfaction of an
Eligible Mortgage Loan without having obtained payment in full of the
indebtedness secured thereby. No provision of this Section 4.13 requiring such
Fidelity Bond and Errors and Omissions Insurance Policy shall diminish or
relieve the Servicer from its duties and obligations as set forth in this
Agreement. The minimum coverage under any such bond and insurance policy shall
be at least equal to the corresponding amounts required by the Guidelines.
Upon
the request of the Agent, the Servicer shall cause to be delivered to the Agent
a certified true copy of such fidelity bond and insurance policy.
Section
4.14 Inspections.
The
Servicer shall inspect the Mortgaged Property as often as deemed necessary
by
the Servicer to assure itself that the value of the Mortgaged Property is being
preserved.
Section
4.15 Restoration
of Mortgaged Property.
The
Servicer need not obtain the approval of the Agent or the Principals prior
to
releasing any Insurance Proceeds or Condemnation Proceeds to the Borrower to
be
applied to the restoration or repair of the Mortgaged Property if such release
is in accordance with Accepted Servicing Practices. At a minimum, the Servicer
shall comply with the following conditions in connection with any such release
of Insurance Proceeds or Condemnation Proceeds:
S-19
(a) The
Servicer shall receive satisfactory independent verification of completion
of
repairs and issuance of any required approvals with respect
thereto;
(b) The
Servicer 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;
(c) The
Servicer shall verify that the Eligible Mortgage Loan is not in default;
and
(d) Pending
repairs or restoration, the Servicer shall place the Insurance Proceeds or
Condemnation Proceeds in any Escrow Account.
Section
4.16 Maintenance
of PMI Policy; Claims.
Except
where the Guidelines exempt certain Eligible Mortgage Loans from this
requirement, for each Eligible Mortgage Loan (other than FHA Loans, VA Loans,
Uninsured Loans, HELOCs and Closed End Second Mortgage Loans) with a
Loan-to-Value Ratio in excess of 80%, the Servicer shall, without any cost
to
the Agent or any Principal, maintain or cause the Borrower to maintain in full
force and effect a PMI Policy insuring that portion of the Eligible Mortgage
Loan in excess of 80% of value, and shall pay or shall cause the Borrower to
pay
the premium thereon on a timely basis, until the Loan-to-Value Ratio of such
Eligible Mortgage Loan is reduced to 80% or less. In the event that such PMI
Policy shall be terminated, the Servicer shall, prior to any such termination,
obtain from another Qualified Insurer a comparable replacement policy, with
a
total coverage equal to the remaining coverage of such terminated PMI Policy.
If
the insurer shall cease to be a Qualified Insurer, the Servicer shall determine
whether recoveries under the PMI Policy are jeopardized for reasons related
to
the financial condition of such insurer, it being understood that the Servicer
shall in no event have any responsibility or liability for any failure to
recover under the PMI Policy for such reason. If the Servicer determines that
recoveries are so jeopardized, it shall notify the Agent and the Borrower,
if
required, and obtain from another Qualified Insurer a replacement insurance
policy. The Servicer shall not take any action which would result in noncoverage
under any applicable PMI Policy of any loss which, but for the actions of the
Servicer, would have been covered thereunder. In connection with any assumption
or substitution agreement entered into or to be entered into pursuant to Section
5.1 hereof, the Servicer shall promptly notify the insurer under the related
PMI
Policy, if any, of such assumption or substitution of liability in accordance
with the terms of such PMI Policy and shall take all actions which may be
required by such insurer as a condition to the continuation of coverage under
such PMI Policy. If such PMI Policy is terminated as a result of such assumption
or substitution of liability, the Servicer shall obtain a replacement PMI Policy
as provided above.
S-20
In
connection with its activities as Servicer, the Servicer agrees to prepare
and
present claims to the insurer under any PMI Policy in a timely fashion in
accordance with the terms of such PMI Policy and, in this regard, to take such
action as shall be necessary to permit recovery under any PMI Policy respecting
a Defaulted Loan. Pursuant to Section 4.5 hereof, any amounts collected by
the
Servicer under any PMI Policy shall be deposited in the Collection Account,
subject to withdrawal pursuant to Section 4.6 hereof.
Section
4.17 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 Servicer as agent for the Agent, or in the event the Servicer 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
reasonably acceptable to the Agent. The Person or Persons holding such title
other than the Servicer shall acknowledge in writing that such title is being
held as nominee for the Servicer.
The
Servicer shall manage, conserve, protect and operate each REO Property for
the
Principals solely for the purpose of its prompt disposition and sale. The
Servicer, either itself or through an agent selected by the Servicer, shall
manage, conserve, protect and operate the REO Property in the manner that it
manages, conserves, protects and operates other foreclosed property for its
own
account, and in the manner that similar property in the locality as the REO
Property is managed. The Servicer shall attempt to sell the Eligible Mortgage
Loan on such terms and conditions as the Servicer deems to be in the best
interest of the Agent and the Principals. The Servicer shall dispose of the
REO
Property in accordance with Accepted Servicing Practices as soon as
possible.
The
Servicer 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.
The
disposition of REO Property shall be carried out by the Servicer at such price
and, upon such terms and conditions, as the Servicer deems to be in the best
interest of the Agent and the Principals. The proceeds of sale of the REO
Property shall be promptly deposited in the Collection Account.
Section
4.18 Daily
Servicer Reports.
On
a
daily basis, the Servicer shall prepare and forward to the Agent, the Custodian
and each Principal (i) a report, substantially in the form of Exhibit D (a
“Daily
Servicer Report”),
as of
the close of business on the immediately preceding Business Day (which shall
include, without limitation, (a) the aggregate Outstanding Principal
Balance of the Eligible Mortgage Loans, (b) Collections on the Eligible Mortgage
Loans, (c) the aggregate Outstanding Principal Balance of Delinquent Loans
and Defaulted Loans and (d) the yield on the Eligible Mortgage Loans, (e) the
Aggregate Purchase Price, (f) the Aggregate Margin Value, (g) the amount on
deposit in the Margin Call Account, if any, and (h) the amount of repayment
of
maturing related Short-Term Notes, if any, as of the date of such Daily Servicer
Report), (ii) an updated Daily Loan Inventory and (iii) if requested by the
Agent, a listing of all Eligible Mortgage Loans together with an aging of such
Eligible Mortgage Loans and such other information concerning actual historical
collections experience and other matters as the Agent may reasonably
request.
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The
Seller shall, or shall cause the Servicer to, furnish to the Agent at any time
and from time to time, such other or further information in respect of the
Eligible Mortgage Loans, the Seller and the Borrowers as the Agent may
reasonably request.
Section
4.19 Real
Estate Owned Reports.
The
Servicer shall furnish to the Agent on a monthly basis an REO Property report
in
form and substance satisfactory to the Agent, together with such other
information as the Agent shall reasonably request.
Section
4.20 Liquidation
Reports.
Upon
the
foreclosure sale of any Mortgaged Property or the acquisition thereof by the
Agent pursuant to a deed in lieu of foreclosure, the Servicer shall submit
to
the Agent a liquidation report with respect to such Mortgaged
Property.
Section
4.21 Reports
of Foreclosures and Abandonments of Mortgaged Property.
Following
the foreclosure sale or abandonment of any Mortgaged Property, the Servicer
shall report such foreclosure or abandonment as required pursuant to Section
5050J of the Code.
ARTICLE
V
GENERAL
SERVICING PROCEDURES
Section
5.1 Transfers
of Mortgaged Property.
The
Servicer shall enforce any “due-on-sale” provision in accordance with Accepted
Servicing Practices and applicable law 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, and whether or not the Borrower remains liable on the Mortgage and the
Mortgage Note. When the Mortgaged Property has been conveyed by the Borrower,
the Servicer shall, to the extent it has knowledge of such conveyance, exercise
its rights to accelerate the maturity of such Eligible Mortgage Loan under
the
“due-on-sale” clause applicable thereto; provided,
however,
that
the Servicer shall not exercise such rights if prohibited by law from doing
so
or if the exercise of such rights would impair or threaten to impair any
recovery under the related PMI Policy, if any.
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If
the
Servicer reasonably believes it is unable under applicable law to enforce such
“due-on-sale” clause, the Servicer shall 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 Borrower remains liable thereon or (ii) in the event that the Servicer
is unable under applicable law to require that the original Borrower remain
liable under the Mortgage Note and the Servicer has the prior consent of the
primary mortgage guaranty insurer, a substitution of liability agreement with
the purchaser of the Mortgaged Property pursuant to which the original Borrower
is released from liability and the purchaser of the Mortgaged Property is
substituted as Borrower and becomes liable under the Mortgage Note.
Section
5.2 Satisfaction
of Mortgages and Release of Mortgage Loan Files.
Upon
the
payment in full of any Eligible Mortgage Loan, or the receipt by the Servicer
of
a notification that payment in full will be escrowed in a manner customary
for
such purposes, the Servicer shall notify the Agent.
If
the
Servicer satisfies or releases a Mortgage without first having obtained payment
in full of the indebtedness secured by the Mortgage or should the Servicer
otherwise prejudice any rights the Agent or the Principals may have under the
mortgage instruments, upon written demand of the Agent, the Servicer shall
repurchase the related Eligible Mortgage Loan at the Repurchase Price by deposit
thereof in the Funding Account within two Business Days of receipt of such
demand by the Agent for application in reduction of the Aggregate Purchase
Price. The Servicer shall maintain the Fidelity Bond and Errors and Omissions
Insurance Policy as provided for in Section 4.13 hereof insuring the Servicer
against any loss it may sustain with respect to any Eligible Mortgage Loan
not
satisfied in accordance with the procedures set forth herein.
Section
5.3 Servicing
Compensation.
As
compensation for its services hereunder, the Servicer shall be entitled to
the
Servicing Fee. If the Servicer or an affiliate thereof ceases to be the
Servicer, the Agent and such successor Servicer may agree to amend such
Servicing Fee (but not to exceed an amount equal to 110% of the aggregate
reasonable costs and expenses incurred by such successor Servicer in connection
with performance of its obligations as Servicer hereunder). The Servicing Fee
shall be payable only from Collections pursuant to and in accordance with the
terms of Section 6 of the Repurchase Agreement. To the extent such Collections
are not sufficient to pay the Servicing Fee in full, none of the Agent or any
Principal shall have any liability for such deficiency. Each Servicer shall
be
required to pay all expense incurred by it in connection with its servicing
activities hereunder and shall not be entitled to reimbursement therefor except
as specifically provided herein.
S-23
Section
5.4 Annual
Statement as to Compliance.
The
Servicer shall deliver to the Agent and each Bank Principal, on or before
April 5 each year beginning in April 2007, an Officer's Certificate,
stating that (i) a review of the activities of the Servicer during the preceding
fiscal year ended December 31 and of performance under this Agreement has been
made under such officer's supervision, (ii) the Servicer has complied with
the
provisions of Article II and Article IV hereof, and (iii) to the best of such
officer's knowledge, based on such review, the Servicer has fulfilled its
obligations in all material respects under this Agreement throughout such year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof and the action being taken by the Servicer to cure such
default.
Section
5.5 Annual
Independent Public Accountants' Servicing Report; Audited
Financials.
(a) On
the
Effective Date and on or before or before April 6 of each year beginning in
April 2007, the Servicer, at its expense, shall cause a firm of nationally
recognized independent public accountants which is a member of the American
Institute of Certified Public Accountants (or such other accountants acceptable
to the Agent) to furnish a report to the Agent and each Bank Principal stating
that such firm has examined PHH Mortgage’s overall servicing operation in
accordance with the minimum standards identified in the Mortgage Bankers
Association of America’s Uniform Single Attestation Program for Mortgage Bankers
(USAP), and stating such firm’s conclusions relating thereto.
(b) The
financial statements of PHH Corporation and its Consolidated Subsidiaries for
the fiscal year ended December 31, 2005 shall be furnished no later than
November 30, 2006. The Performance Guarantor shall furnish or cause to be
furnished to the Agent and each Bank Principal, as soon as available, and in
any
event within 100 days after the end of each fiscal year of PHH Corporation
subsequent to its 2005 fiscal year, the following financial statements:
(i) either (A) consolidated statements of income (or operations) and
consolidated statements of cash flows and changes in stockholders’ equity of PHH
Corporation and its Consolidated Subsidiaries for such year and the related
consolidated balance sheets as at the end of such year, or (B) the Form
10-K filed by PHH Corporation with the Securities and Exchange Commission and
(ii) if not included in such Form 10-K, an opinion of independent certified
public accountants of recognized national standing, which opinion shall state
that said consolidated financial statements present fairly the consolidated
financial position and results of operations of PHH Corporation and its
Consolidated Subsidiaries as of the end of such fiscal year and that such
financial statements were prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods.
(c) The
financial statements of PHH Corporation and its Consolidated Subsidiaries for
the fiscal quarters ending March 31, 2006, June 30, 2006 and September 30,
2006
shall be furnished no later than December 29, 2006. The Performance Guarantor
shall furnish or cause to be furnished to the Agent and each Bank Principal,
as
soon as is practicable, and in any event within 60 days after the end of each
of
the first three fiscal quarters of each fiscal year subsequent to the fiscal
quarter ended on December 31, 2006, either (i) the Form 10-Q filed by PHH
Corporation with the Securities and Exchange Commission or (ii) the
unaudited consolidated balance sheet of PHH Corporation and its Consolidated
Subsidiaries, as of the end of such fiscal quarter, and the related unaudited
consolidated statements of income and cash flows for such quarter and for the
period from the beginning of the then current fiscal year to the end of such
fiscal quarter and the corresponding figures as of the end of the preceding
fiscal year, and for the corresponding period in the preceding fiscal year,
in
each case, together with a certificate (substantially in the form of Exhibit
C
to this Agreement) signed by the chief financial officer, the chief accounting
officer or a vice president responsible for financial administration of PHH
Corporation to the effect that such financial statements, while not examined
by
independent public accountants, reflect, in his\her opinion and in the opinion
of PHH Corporation, all adjustments necessary to present fairly the consolidated
financial position of PHH Corporation and its Consolidated Subsidiaries, as
of
the end of the fiscal quarter, and the consolidated results of their operations
for the quarter then ended, in conformity with GAAP consistently applied,
subject only to year-end audit adjustments and to the absence of footnote
disclosure.
S-24
Section
5.6 Right
to Examine Servicer Records.
The
Agent
shall each have the right to reasonable access to the books, records, or other
information of the Servicer, whether held by the Servicer or by another on
its
behalf, with respect to or concerning this Agreement or the Eligible Mortgage
Loans, during regular business hours or at such other times as may be reasonable
under applicable circumstances, upon reasonable advance notice.
ARTICLE
VI
REPURCHASE
OBLIGATION
Section
6.1 Servicer's
Purchase Obligations.
Upon
receipt by the Servicer of notice from the Agent of a breach of any
representation or warranty of it contained in this Agreement or any action
resulting in prejudice to the Principals in accordance with Section 5.2 hereof,
the Servicer shall promptly notify the Seller and shall, at the direction of
the
Agent use its best efforts to cure and correct any such breach, and, in the
event such breach is not cured and corrected within the applicable grace period,
if any, the Servicer shall repurchase the related Eligible Mortgage Loan at
the
Repurchase Price.
Upon
deposit by the Servicer of the Repurchase Price in the Funding Account, the
Servicer shall arrange for the repurchase of Eligible Mortgage Loans adversely
affected by such breach, and the delivery from the Custodian of any documents
constituting the Mortgage Loan Files for such repurchased mortgage loans. In
the
event of a repurchase, the Servicer shall, simultaneously with such repurchase,
give written notice to the Seller and the Agent that such repurchase has taken
place, and amend the Mortgage Loan Schedule to reflect the subtraction of the
repurchased Eligible Mortgage Loan from the Repurchase
Agreement.
S-25
ARTICLE
VII
SERVICER
TO COOPERATE
Section
7.1 Provision
of Information.
During
the term of this Agreement and the other Transaction Documents, the Servicer
shall furnish to the Agent such periodic, special, or other reports or
information, including the Daily Servicer Report required to be delivered to
the
Agent, the Bank Principals and the Custodian on each Payment Date, and copies
or
originals of any documents contained in the Mortgage Loan File for each Eligible
Mortgage Loan, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Principals. All such reports,
documents or information shall be provided by and in accordance with all
reasonable instructions and directions which the Agent may give.
The
Servicer shall execute and deliver all such instruments and take all such action
as the Agent and the Custodian may reasonably request from time to time, in
order to effectuate the purposes and to carry out the terms of this
Agreement.
ARTICLE
VIII
THE
SERVICER
Section
8.1 Indemnification
of Third-Party Claims.
The
Servicer agrees to indemnify and hold harmless each of the Principals and the
Agent against any and all claims, losses, penalties, fines, forfeitures,
reasonable legal fees and related costs, judgments, and any other costs, fees
and expenses that they may sustain in any way related to the failure of the
Servicer to perform its duties and service the mortgage loans in strict
compliance with the terms of this Agreement or for any losses related to the
investment of funds in the Escrow Account. The Servicer shall immediately notify
the Agent if a claim is made by a third party with respect to this Agreement
or
the mortgage loans and the Servicer shall assume the defense of any such claim
and pay all expenses in connection therewith, including counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Principals and the Agent in respect of such claim. The Servicer's
indemnification obligation pursuant to this Section 8.1 shall survive the
termination of this Agreement.
Section
8.2 Corporate
Existence of the Servicer.
The
Servicer shall keep in full effect its existence, rights and franchises as
a
corporation, and shall 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 Eligible Mortgage Loans and to perform its duties under this
Agreement.
Section
8.3 Limitation
on Liability of Servicer and Others.
Neither
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Agent or any Principal for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided,
however,
that
this provision shall not protect the Servicer or any such person against any
breach of warranties or representations made herein, or failure to perform
its
obligations in 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 Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document which
it in good faith reasonably believes to be genuine and have been adopted or
signed by the proper authorities respecting any matters arising hereunder.
The
Servicer 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 Eligible
Mortgage Loans in accordance with this Agreement and which in its opinion may
involve it in any expense or liability; provided,
however,
that
the Servicer may, with the consent of the Required Principals undertake any
such
action which it may deem necessary or desirable with respect to this Agreement
and the rights and duties of the parties hereto. In such event, the Servicer
shall be entitled to reimbursement from the Agent of the reasonable legal
expenses and costs of such action.
S-26
Section
8.4 Limitation
on Resignation and Assignment by the Servicer.
The
Agent
and the Principals have entered into this Agreement and the other Transaction
Documents to which they are a party with the Company, as Servicer, in reliance
upon 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. The Servicer shall not resign from the
obligations and duties hereby imposed on it as to any Eligible Mortgage Loan
except by consent of the Required Principals and the Agent or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot reasonably be cured by the Servicer.
Notice of any such determination permitting the resignation of the Servicer
shall be delivered to the Agent and each Bank Principal and any such
determination shall evidenced by an Opinion of Counsel to such effect delivered
to the Agent (on behalf of the Principals) which Opinion of Counsel shall be
in
form and substance acceptable to the Agent. No such resignation shall become
effective until a successor shall have assumed the Servicer's responsibilities
and obligations hereunder in the manner provided in Section 12.1
hereof.
Section
8.5 Limitation
on Assignment of Right.
Except
pursuant to a resignation approved pursuant to Section 8.4 hereof, the Servicer
shall not assign, sell or otherwise transfer its right to receive any payments
(including the Servicing Fee) hereunder.
ARTICLE
IX
SERVICER
DEFAULT
Section
9.1 Servicer
Default.
Each
of
the following shall constitute a “Servicer
Default”
on
the
part of the Servicer:
S-27
(a) Any
failure by the Servicer or the Performance Guarantor to observe or perform
any
of the terms, covenants or agreements on the part of the Servicer set forth
in
this Agreement (other than those which are incapable of cure) which continues
unremedied for a period of thirty (30) days after the earlier of the date on
which the Servicer or the Performance Guarantor has actual knowledge or written
notice of such failure;
(b) Any
representation, warranty, statement or certification made by the Servicer or
the
Performance Guarantor shall prove to have been materially incorrect as of the
time when made, and which continues to be materially incorrect for thirty (30)
days after the earlier of the date on which the Servicer or the Performance
Guarantor has actual knowledge or written notice of such
inaccuracy;
(c) Any
failure by the Servicer to maintain any required licenses to do business in
any
jurisdiction where the Mortgaged Property is located, except where such failure
could not reasonably be expected to result in a material adverse effect or
any
failure by the Servicer to be an Approved Seller/Servicer for any two of FNMA,
GNMA or FHLMC;
(d) Application
for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, including bankruptcy, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or liquidation
of
its affairs, shall have been entered against the Servicer and a decree or order
shall have remained in force undischarged or unstayed for a period of 60
days;
(e) the
Servicer shall consent to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of its property;
(f) the
Servicer 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,
bankruptcy or reorganization statute, make an assignment for the benefit of
its
creditors, voluntarily suspend payment of its obligations or cease its normal
business operations;
(g) the
Servicer or the Performance Guarantor enters into a consent agreement or
otherwise agrees in writing with any federal or state regulatory agency or
authority to restrict its activities, if the default of such agreement by the
Servicer or the Performance Guarantor entitles such applicable federal or state
agency to place the Servicer in receivership or conservatorship;
(h) failure
of the Servicer to deposit into the Funding Account on or before 2 Business
Days
after the date of sale or Securitization of an Eligible Mortgage Loan the
proceeds of any such sale or Securitization;
(i) [reserved];
S-28
(j) (i)
The
Servicer, Performance Guarantor or any of their respective Subsidiaries shall
fail to (x) pay any Indebtedness or Interest Rate Protection Agreements where
the amount or amounts of such Indebtedness or Interest Rate Protection Agreement
exceeds $50,000,000 (or its equivalent thereof in any other currency) in the
aggregate; or (y) perform any other term, provision or condition with respect
to
any Indebtedness or Interest Rate Protection Agreements of greater than
$50,000,000 (or its equivalent thereof in any other currency), which failure
results in such Indebtedness becoming due prior to the scheduled date of
maturity thereof or enables or permits the holder or holders of such
Indebtedness or any trustee or agent on its or their behalf to cause such
Indebtedness to become due, or to require the prepayment (other than by a
regularly scheduled payment), repurchase, redemption or defeasance thereof,
prior to the scheduled date of maturity thereof; or (ii) any other circumstance
shall arise (other than the mere passage of time) by reason of which the
Servicer, the Performance Guarantor or any of their respective Subsidiaries
is
required to redeem or repurchase, or offer to holders the opportunity to have
redeemed or repurchased, any such Indebtedness or Interest Rate Protection
Agreement where the amount or amounts of such Indebtedness or Interest Rate
Protection Agreement exceeds $50,000,000 (or its equivalent thereof in any
other
currency) in the aggregate;
(k) at
any
time the Delinquency Ratio shall be greater than seven percent (7%) of the
Aggregate Purchase Price at such time; or
(l) any
financial covenant of PHH Corporation contained in Section 3.4(g) shall not
be
satisfied; or
(m) the
failure on the part of the Servicer to make any payment or deposit required
under this Agreement or any other Transaction Document on or before 2 Business
Days after the date such payment or deposit is required to be made.
In
each
and every such case, so long as a Servicer Default shall not have been remedied,
in addition to whatsoever rights the Agent and the Principals may have at law
or
in equity to damages, including injunctive relief and specific performance,
the
Agent, by notice in writing to the Servicer may terminate all of the rights
and
obligations of the Servicer under this Agreement and in and to the Eligible
Mortgage Loans and the proceeds thereof other than unpaid Servicing Fees. The
Agent will only remove the Servicer as described above upon the affirmative
vote
of the Required Principals.
Upon
receipt by the Servicer of such written notice, all authority and power of
the
Servicer under this Agreement, whether with respect to the Eligible Mortgage
Loans or otherwise, shall pass to and be vested in the successor appointed
pursuant to Section 12.1 hereof. Upon written request from the Agent, the
Servicer shall prepare, execute and deliver to the successor entity designated
by the Agent any and all documents and other instruments, place in such
successor's possession all Mortgage Loan Files, and do or cause to be done
all
other acts or things necessary or appropriate to effect the purposes of such
notice of termination, including but not limited to the transfer and endorsement
or assignment of the Eligible Mortgage Loans and related documents, at the
Servicer's sole expense. The Servicer shall cooperate with such successor in
effecting the termination of the Servicer'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 Servicer to Margin Call Account or Escrow Account or thereafter received
with respect to the Eligible Mortgage Loans.
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Section
9.2 Waiver
of Defaults.
With
the
consent of the Required Principals, the Agent may waive any default by the
Servicer in the performance of its obligations hereunder and its consequences.
Upon any 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
X
TERMINATION
AND LIQUIDATION
Section
10.1 Termination
of Agreement.
This
Agreement shall terminate upon the final payment or other liquidation (or any
advance with respect thereto) of the last Eligible Mortgage Loan sold under
the
Repurchase Agreement.
Section
10.2 Termination
of Servicing With Respect to Any Eligible Mortgage Loan.
This
Agreement shall terminate with respect to any Eligible Mortgage Loan upon the
occurrence of the following: (i) the receipt into the Funding Account of
the proceeds of any sale or Securitization of such Eligible Mortgage Loan or
the
Repurchase Price or Principal Prepayment in full of such Eligible Mortgage
Loan;
or (ii) the effectiveness of the termination of the Company pursuant to
Section 12.1. No termination shall become effective until a successor shall
have
assumed the Servicer's responsibilities and obligations hereunder in the manner
provided in Section 12.1.
Upon
written request from the Agent, the Servicer shall prepare, execute and deliver
to the successor entity designated by the Agent any and all documents and other
instruments, place in such successor's possession all Mortgage Loan Files,
and
do or cause to be done all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, including but not limited
to
the transfer and endorsement or assignment of the Eligible Mortgage Loans and
related documents, at the Servicer's sole expense. The Servicer shall cooperate
with such successor in effecting the termination of the Servicer'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 Servicer to the Funding Account, Collection
Account or Escrow Account or thereafter received with respect to the Eligible
Mortgage Loans.
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ARTICLE
XI
[RESERVED]
ARTICLE
XII
MISCELLANEOUS
PROVISIONS
Section
12.1 Successor
to Servicer.
Prior
to
termination of the Servicer's responsibilities and duties under this Agreement
pursuant to Sections 8.4 or 10.1 hereof, the Agent shall appoint a successor
which shall succeed to all rights and assume all of the responsibilities, duties
and liabilities of the Servicer under this Agreement prior to the termination
of
the Servicer's responsibilities, duties and liabilities under this Agreement.
In
connection with such appointment and assumption, the Agent may make such
arrangements for the compensation of such successor out of payments on Eligible
Mortgage Loans as it and such successor shall agree. In the event that the
Servicer's duties, responsibilities and liabilities under this Agreement should
be terminated pursuant to the aforementioned sections, the Servicer shall
discharge such duties, responsibilities and liabilities during the period from
the date it acquires knowledge of such termination until the effective date
thereof with the 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 the Servicer pursuant to the aforementioned Sections
shall not become effective until a successor shall be appointed pursuant to
this
Section 12.1 and such resignation or removal shall in no event relieve the
Servicer of the representations and warranties made pursuant to Section 3.1
hereof and the remedies available to the Agent under Section 3.3 hereof, it
being understood and agreed that the provisions of such Sections 3.1 and 3.3
shall be applicable to the Servicer notwithstanding any such sale, assignment,
resignation or termination of the Servicer, or the termination of this
Agreement.
Any
successor appointed as provided herein shall execute, acknowledge and deliver
to
the Servicer and the Agent an instrument accepting such appointment, wherein
the
successor shall make the representations and warranties set forth in Section
3.1
hereof, whereupon such successor shall become fully vested with all the rights,
powers, duties, responsibilities, obligations and liabilities of the Servicer,
with like effect as if originally named as a party to this Agreement. Any
termination or resignation of the Servicer or termination of this Agreement
pursuant to Sections 8.4, or 10.1 hereof shall not affect any claims that the
Agent or any Principal may have against the Servicer arising out of the
Servicer's actions or failure to act prior to any such termination or
resignation.
The
Servicer shall deliver promptly to the successor Servicer the funds in the
Margin Call Account, the Collection Account, the Funding Account and the Escrow
Account and all Mortgage Loan Files and related documents and statements held
by
it hereunder and the Servicer shall account for all funds and shall execute
and
deliver such instruments and do such other things as may reasonably be required
to more fully and definitively vest in the successor all such rights, powers,
duties, responsibilities, obligations and liabilities of the
Servicer.
S-31
Section
12.2 Amendment.
This
Agreement may only be amended with the written consent of the Seller, the Agent,
the Required Principals, the Performance Guarantor and the Servicer. The costs
and expenses associated with any such amendment shall be borne by the
Seller.
Section
12.3 Governing
Law.
This
Agreement shall be construed in accordance with the laws of the State of New
York and the obligations, rights and remedies of the parties hereunder shall
be
determined in accordance with such laws.
Section
12.4 Duration
of Agreement.
This
Agreement shall continue in existence and effect until terminated as herein
provided.
Section
12.5 Notices.
All
demands, notices and communications hereunder shall be in writing and shall
be
deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid, addressed as follows:
|
(i)
|
if
to PHH Mortgage Corporation, to it at its address set forth in Section
29
of the Repurchase Agreement or such other address as may hereafter
be
furnished to the Agent in writing;
|
|
(ii)
|
if
to the Agent, to it at its address set forth in Section 29 of the
Repurchase Agreement; and
|
(iii) if
to the
Performance Guarantor, to it at PHH Mortgage Corporation’s address set forth in
Section 29 of the Repurchase Agreement.
Section
12.6 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
12.7 Relationship
of Parties.
Nothing
herein contained shall be deemed or construed to create a partnership or joint
venture between the parties hereto and the services of the Servicer shall be
rendered as an independent contractor and not as agent for the Agent or any
Principal.
S-32
Section
12.8 Execution;
Successors and Assigns.
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
agreement. This Agreement shall inure to the benefit of and be binding upon
the
parties hereto and their respective successors and assigns; provided,
however,
that
the rights of the Principals to an indemnity from the Servicer pursuant to
Section 3.3 hereof are not assignable and shall inure only to the benefit of
the
Principals and to no other Person.
Section
12.9 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 recording office or elsewhere, such recordation to be effected at the
Servicer's expense in the event recordation is either necessary under applicable
law or requested by the Agent at its sole option.
Section
12.10 [RESERVED].
Section
12.11 [RESERVED].
Section
12.12 Waiver
of Offset.
The
Servicer agrees to deliver to the Agent (for itself and for the benefit of
each
Principal) all amounts required by this Agreement to be delivered by the
Servicer to such Persons free and clear of any offset, counterclaim or other
deduction on account of, or in respect of, any such Person to the Servicer
hereunder.
ARTICLE
XIII
PHH
CORPORATION GUARANTEE
Section
13.1 Guarantee
of Seller's Representations and Warranties, Servicer’s Performance and Payment
Obligations.
For
value
received, and in consideration of the financial accommodation accorded to the
Company by the Agent and the Principals under the Transaction Documents,
PHH Corporation (the “Performance
Guarantor”)
hereby
fully, unconditionally, and irrevocably guarantees to the Agent, each Principal,
the holders of all the holders of the Short-Term Notes and the APA Purchasers
(i) with respect to the Seller, the representations and warranties set forth
herein and in the other Transaction Documents, and (ii) as to the Servicer,
the
due performance of, and punctual payment of all amounts payable by, the Company,
in its capacity as Servicer under this Agreement and the other Transaction
Documents when and as such obligations hereunder shall become due and, in the
case of any payments, payable. The Performance Guarantor will ensure the
performance and payment of every act, duty, obligation, agreement and
responsibility of the Servicer set forth herein.
S-33
In
case
of the failure or inability of (i) the Seller, regarding its obligations
pursuant to Section 3.3 hereof with respect to a breach of a representation
or
warranty made in any Transaction Document, (iii) the Seller, with respect to
its
obligations pursuant to Section 2.2(b) and 3.5 hereof and (iii) the Servicer
to
punctually perform any such act, duty, obligation, responsibility or agreement
or to pay punctually any such amounts, the Performance Guarantor hereby agrees,
upon written demand by the Agent, to, as applicable, (i) perform any such act,
duty, obligation, responsibility or agreement and (ii) pay or cause to be paid
any such amount, punctually when and as the same shall become due and, in the
case of any payment, payable (exclusive of any grace period).
(a) Performance
Guarantor hereby agrees that its obligations under this Section 13.1 constitute
a guarantee of performance and payment when due and not of
collection.
(b) Performance
Guarantor hereby agrees that its obligations under this Section 13.1 shall
be
unconditional, irrespective of the validity, regularity or enforceability of
this Agreement or any other Transaction Document against the Company, the
absence of any action to enforce the Company's obligations under any Transaction
Document, any waiver or consent by the Agent, and Principal or any APA Purchaser
with respect to any provisions thereof, the entry by the Company and the Agent
and the Principals into additional transactions under the Repurchase Agreement
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor (other than the defenses of statute of
limitations or payment, which are not waived); provided,
however,
that
Performance Guarantor shall be entitled to exercise any right that the Servicer
could have exercised under any Transaction Document to cure any default in
respect of its obligations thereunder or to set-off, counterclaim or withhold
payment in respect of any event of default or potential event of default in
respect of the Agent or any Principal or any Affiliate, but only to the extent
such right is provided to the Company under the applicable Transaction Document.
The Performance Guarantor acknowledges that the Servicer and the Agent (for
and
on behalf of the Principals) may from time to time enter into one or more
transactions pursuant to the Repurchase Agreement and agrees that the
obligations of the Performance Guarantor under this Section 13.1 will upon
the
execution of any such transaction extend to all such transactions without the
taking of further action by the Performance Guarantor.
(c) The
Performance Guarantor hereby waives (i) promptness, diligence, presentment,
demand of payment, protest, order and, except as set forth in paragraph (a)
hereof, notice of any kind in connection with any Transaction Document and
this
Section 13.1, or (ii) any requirement that the Agent, any Principal or any
APA
Purchaser exhaust any right to take any action against the Company or any other
person prior to or contemporaneously with proceeding to exercise any right
against the Performance Guarantor under this Section 13.1.
S-34
IN
WITNESS WHEREOF, the Company, the Guarantor and the Agent have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the day and year first above written.
PHH
MORTGAGE CORPORATION,
as
Seller
and Servicer
By:
/s/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name:
▇▇▇▇. ▇. ▇▇▇▇▇▇▇
Title:
Vice President & Treasurer
PHH
CORPORATION, solely in its capacity as Performance Guarantor
By:
/s/
▇▇▇▇▇▇▇ We. ▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
Chief Executive Officer
S-35
BARCLAYS
BANK PLC, as Agent
By:
/s/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Director
S-36
EXHIBIT
C
FORM
OF COMPLIANCE CERTIFICATE
[PERIOD
END _______]
I,
[ ]
hereby certify:
1. I
am the
duly elected and authorized [Chief Financial Officer or Vice President
responsible for financial administration or Chief Accounting Officer] of PHH
Corporation, a Maryland corporation (the “Company”).
2. I
am
familiar with the terms and conditions of (i) the Fifth Amended and Restated
Master Repurchase Agreement, dated as of October 30, 2006, among PHH Mortgage
Corporation, a New Jersey corporation (“PHH
Mortgage”),
as
seller, Barclays Bank PLC, as agent (in such capacity, the “Agent”)
and
the various financial institutions from time to time party thereto (as such
agreement may be amended, supplemented or otherwise modified, renewed or
replaced from time to time, the “Repurchase
Agreement”;
capitalized terms used but not defined herein are used as defined in the
Repurchase Agreement) and (ii) the Servicing Agreement, dated as of October
30,
2006, among PHH Mortgage, as servicer (in such capacity, the “Servicer”),
the
Company, as performance guarantor and the Agent (as such agreement may be
amended, supplemented or otherwise modified, renewed or replaced from time
to
time, the “Servicing
Agreement”);
3. The
attached financial statements of the Company and its Consolidated Subsidiaries
for the end of the fiscal period referred to above have been prepared from
the
books of the Company and its Consolidated Subsidiaries in accordance with the
generally accepted accounting principles used in the preparation of the fiscal
[
] financial statements and, to the best of my knowledge, information, and
belief, upon due inquiry, present fairly the financial position of the Company
and its Consolidated Subsidiaries as at the end of such fiscal period and the
results of their operations for the period then ended[, subject, in the case
of
quarterly statements, to year-end audit and audit adjustments and to the absence
of footnote disclosure.]1
4. To
the
best of my knowledge, information, and belief, after due inquiry, there exists
no Event of Default, Default, Servicer Default or unmatured Servicer Default,
except as otherwise may be set forth herein.
5. Attached
hereto, in reasonable detail, are the computations and comparisons required
to
demonstrate compliance with the provisions of Section 3.4(g) of the Servicing
Agreement.
H-1
The
foregoing certifications, together with the computations and comparisons set
forth in the attachments hereto and the financial statements attached to this
certificate in support hereof, are made and delivered this _____ day of
________, _____ pursuant to [Section 5.5 (c)] of the Servicing
Agreement.
By: __________________________
____________
1 Only
applicable to quarterly financial statements.
H-2
Attachments
1. financial
statements; and
2. the
computations and comparisons (in reasonable detail) required to demonstrate
compliance with the provisions of Section 3.4(g) of the Servicing
Agreement.
H-3
EXHIBIT
D
FORM
OF DAILY SERVICER REPORT
[TO
BE INSERTED]