[LOGO] PMI(SM) BULK PRIMARY
FIRST LIEN MASTER POLICY
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PMI Mortgage Insurance Co. (an Arizona corporation hereinafter called the
"Company") agrees to pay to the Insured, in consideration of the premium or
premiums to be paid as hereinafter specified and in reliance upon the Insured's
representations and statements made in any Application for coverage under this
Policy, any loss due to the Default by a Borrower on a Loan, subject to the
terms and conditions contained herein.
To obtain information about this Policy, to register a complaint or to obtain
information about related mortgage guaranty insurance products and services
offered by the Company, the insured or its servicer may call the Company toll
free at 800-288-1970.
Insured's Name and Mailing Address Policy Number
Bank of America Securities ▇▇▇▇▇-▇▇▇▇-▇
Global Structured Finance
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IN WITNESS WHEREOF, the Company has caused its Corporate Seal to be affixed
hereto and these presents to be signed by its duly authorized officers in
facsimile to become effective as its original seal and signature and binding on
the Company.
PMI Mortgage Insurance Co.
[SEAL]
/s/ L. ▇▇▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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L. ▇▇▇▇▇▇▇ ▇▇▇▇▇, President ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Secretary
UW 2510.00 (09/00)
TERMS AND CONDITIONS
I. Definitions
A. Acquisition Option means the method of determining the amount of the
Insurance Benefit with respect to a Loan as set forth in Section V., C.,
1.
B. Advances means the reasonable and necessary sums paid by the Insured with
respect to Loan after Default, for the following:
1. Hazard insurance premiums;
2. Real estate property taxes;
3. Property protection and preservation expenses;
4. Property sales expenses;
5. Customary foreclosure costs including Court Expenses and reasonable
attorney's fees;
6. Costs of other customary legal proceedings, as may be necessary to
obtain Good and Merchantable Title to or Possession of the Property;
and
7. Loss mitigation expenses.
C. Anticipated Loss means, in connection with a Claim, an amount equal to the
Company's cost of paying the full Claim Amount calculated in accordance
with Section V., B., less the amount the Company reasonably anticipates
receiving as net proceeds of the sale of the Property, subtracting also
from such proceeds all anticipated costs of the sale and holding costs,
but in any event, such amount shall never be greater than the Loss
calculated under the Percentage Option in accordance with Section V., C.,
2.
D. Application means the Insured's statements and descriptions, both oral and
written, relative to the Loan made in connection with the application or
negotiation for the insurance provided by this Policy, including the
representations made, and documents executed by the Borrower, as evidenced
by documents, writings, electronic media transfers, telephone data
transmissions, and the like.
E. Appropriate Proceedings means any legal or administrative action or
proceeding by the Insured affecting either the Loan or the title to the
Property, and include, but are not limited to:
1. enforcing the terms of the Loan as allowed by the laws where the
Property is located; or
2. establishing a deficiency amount where appropriate and permissible
and where directed by the Company; or
3. acquiring all the Borrower's right and title to the Property in the
Insured's name, but excluding any voluntary conveyance under Section
IV., D., (Voluntary Conveyance); or
4. asserting the Insured's interest in the Property in a Borrower's
bankruptcy or similar proceeding.
F. Borrower means any Person required to repay the debt obligation created
pursuant to the Loan. The Borrower may be more than one Person, and the
term shall include any co-signer or guarantor of the Loan.
G. Borrower's Own Funds means any funds owned by the Borrower and neither
borrowed from other sources, nor subject to refund, rebate, or repayment.
H. Borrower's Title means such title to a Property as was vested in the
Borrower at the time of a conveyance to the Insured extinguishing all of
the Borrower's rights in the Property; provided, however, if the Insured
so elects, the redemption period need not have expired. The deed
evidencing such title in the Insured need not be recorded unless required
by applicable law.
I. Certificate means once all conditions for coverage have been satisfied,
the number issued by the Company to a Loan, as listed on a Certificate
Schedule.
J. Certificate Schedule means a list of Loans to which coverage has been
extended under this Policy, and which is attached to this Policy, or added
thereto by endorsement, and any document issued by the Company pursuant to
this Policy amending coverage for a Loan.
K. Claim means the timely filed written request, made on a form provided by
or in a manner approved by the Company, to receive benefits of this
Policy. A Claim received by the Company containing all information or
proof required by the Company shall be called a Perfected Claim.
L. Claim Amount means the actual loss incurred by the Insured with respect to
a Loan as calculated in accordance with Section V., B., (Calculation of
Claim Amount) giving effect to adjustments made by the Company due to
failure of the Insured to mitigate loss.
M. Claim Settlement Period means a sixty (60) day period following the filing
of a Claim with the Company provided that such period shall be extended by
the number of days elapsed from the date the Company sends notice of
deficiency of a Claim to the Insured to the date that the Insured files a
Perfected Claim with the Company.
N. Closed means the later of:
1. The date on which all Loan documents were executed and delivered; or
2. The date on which the funds under the Loan were initially disbursed
to or for the benefit of the Borrower.
O. Court Expenses means the out-of-pocket cost of initiating and conducting
Appropriate Proceedings or any eviction proceedings. These expenses
include costs of filing or serving pleadings, conducting discovery and
enforcing judgment. These expenses do not include reimbursement for any
time spent by the Insured or the Insured's employees, officers or agents,
nor do these expenses include attorney's fees.
P. Default means the failure by a Borrower to pay when due: (i) an amount
equal to or greater than one (1) regular periodic payment due under the
terms of a Loan, or (ii) the failure by a Borrower to pay when due all
amounts due under a Loan after the exercise by the Insured of the "due on
sale" provision of such Loan, provided however, that a Default as defined
in (i) above which is cured within 59 days of the payment due date, will
not be deemed to be a Default for purposes of administration of this
Policy unless the missed payment is the first payment due under a Loan.
Default does not mean any other non-monetary default or violation of any
other term or condition of the Loan, which would allow for acceleration of
the debt or foreclosure or other action to realize upon the security
provided by the Loan.
A Loan is deemed to be in Default for the period for which, as of the
close of business on the installment due date, a scheduled installment
payment has not been made. For example, a Loan is "four periodic payments
in Default" if the periodic payments due on January 1 through April 1
remain unpaid as of the close of business on April 1.
Q. Default Amount means the unpaid principal balance of a Loan as of the date
of Default excluding any Negative Amortization. If a Loan has been divided
into secured and unsecured portions pursuant to proceedings under the
federal bankruptcy laws, the Default Amount shall include the unpaid
principal balance due under the unsecured portion of the Loan even if the
Insured has written off such unsecured portion of the Loan, provided that
the premium paid has been calculated based on both the secured and
unsecured portions of the Loan.
R. Deficiency Expenses means reasonable attorneys fees and necessary court
costs incurred by the Insured for those Appropriate Proceedings necessary
to pursue or establish a deficiency against the Borrower and which are in
addition to those incurred in standard and customary foreclosure
proceedings, plus additional interest accruing on the Loan, real estate
taxes, casualty insurance premiums and Property preservation expenses
incurred during such Appropriate Proceedings and any additional related
redemption period.
S. Down Payment means (i) a cash contribution made by the Borrower, either
prior to or at the time the Loan is Closed, from the Borrower's Own Fund's
towards the purchase price of the Property, or (ii) a verifiable equity in
the Property vested in the Borrower only, after completion of the
improvements in accordance with the Original Appraisal.
T. Effective Date means, provided that the premium has been paid as required
herein, 12:01 a.m. on the date of coverage as indicated on the Certificate
Schedule.
U. Environmental Impairment means Physical Damage to a Property occurring by
reason of environmental contamination including, but not limited to,
nuclear reaction or radioactive waste, toxic waste, poisoning or pollution
of earth or water subjacent to the Property or of the atmosphere above the
Property; or similar hazard including any condition giving rise to
liability under the Comprehensive Environmental Response, Compensation and
Liability Act or any similar law existing under either federal law or the
law of the state where the Property is located.
V. First Party means (a) the Insured or any officer, employee or agent of the
Insured or (b) any of the following Persons: the correspondent lender,
mortgage loan broker or other intermediary underwriting or originating the
Loan on behalf of the Insured or originating lender, or escrow or closing
agents or anyone under contract with the Insured or originating lender in
connection with the origination of such Loan, such as an appraiser.
W. FMV means the fair market value of a Property as of a specific date which
shall be equal to the lesser of the appraised value or the sale price of
the Property on that date; or in the event of a foreclosure sale, the
appraised value or estimated value determined in accordance with customary
servicing practices, or the value as determined under applicable law,
where such law prescribes a method for determining the value of a
Property.
X. Good and Merchantable Title means title to the Property, free and clear of
all liens and encumbrances, covenants, conditions, restrictions, easements
and rights of redemption, except for:
1. Any lien established by public bond, assessment or tax, when no
installment, call or payment of or under such bond, assessment or
tax is delinquent; and
2. Any municipal or zoning ordinances, building restrictions or other
restrictions, covenants, regulations of use, provided the Property
is in compliance with, and its intended use and occupancy is not
materially adversely affected by, such restrictions, covenants,
regulations or ordinances; and
3. Easements, rights of way, sewer and utility rights, mineral, oil or
timber rights, or any impediments which will not have a materially
adverse effect on either the transferability of the Property or the
sale thereof to a bona fide purchaser.
The Property must have, at a minimum, the following characteristics to
establish Good and Merchantable Title: (i) adequate means of ingress and
egress; (ii) the right to use of water and sewer facilities appertaining
to the Property, whether such rights be by virtue of public easement or
private grant; (iii) the Property must be free of any lien for any toxic
waste or environmental contamination or similar hazard or claim of such
hazard pursuant to the Comprehensive Environmental Response Compensation
and Liability Act, as amended, or similar federal or state law providing
for liens in connection with the clean up of environmental conditions, and
no proceedings to initiate such a lien may be pending, unless otherwise
agreed to by the Company.
Y. Insurance Benefit means the liability of the Company with respect to a
Loan calculated in accordance with this Policy. A right to receive an
Insurance Benefit shall be deemed to have arisen when a Default occurs
while the Policy is in force for a Loan, notwithstanding that the amount
of the Insurance Benefit is not then either presently ascertainable or due
and payable.
Z. Insured means with respect to any Loan:
1. The Person designated on the face of this Policy; or
2. Any Person, other than a natural Person, who owns the Loan, either
for its own benefit or as trustee for the benefit of a third party.
AA. Loan means any note or other evidence of indebtedness and the indebtedness
it so evidences, together with the mortgage, bond, deed of trust, or other
instrument securing said indebtedness, and to which coverage under this
Policy has been extended.
BB. Negative Amortization means the additions to the principal amount of a
Loan arising from the insufficiency of regularly scheduled payments to
cover interest as it accrues against the principal amount of the Loan as
provided for therein.
CC. Original Appraisal means the appraisal, other report or description of the
Property, obtained by the lender under the Loan at the time it was
originated, which establishes the value of the Property at that time.
DD. Percentage Option means the method of determining the amount of the
Insurance Benefit with respect to a Loan set forth in Section V., C., 2.
EE. Person means any individual natural person, or any corporation,
partnership, association or other legally recognized entity.
FF. Physical Damage means tangible damage to a Property that materially
adversely affects the use, marketability, or value of the Property,
whether caused by accident or otherwise, including, but not limited to
damage caused by reason of fire, destruction of tangible property, defects
in construction, land subsidence, earth movement or slippage, flood,
earthquake, war, civil insurrection, or riot; and further, Physical Damage
includes Environmental Impairment and the destruction or removal of
chattel items that are considered part of the Property (see Section I.,
KK., [Property]) For purposes of this definition "material" shall mean an
amount equal to or greater than $1,500.00 such that the estimated cost to
repair a Property is $1,500.00 or more before the exclusion set forth in
Section III., G., (Physical Damage Exclusion) would apply to exclude
coverage for a Loan. The presence of radon gas, lead paint or asbestos in
the dwelling on the Property shall not be deemed to be Physical Damage.
GG. Policy means this contract of insurance together with all Applications,
all endorsements, and the Certificate Schedule, all of which are
incorporated herein for all purposes.
HH. Possession of the Property means actual and physical occupancy and control
of the Property.
II. Pre-Arranged Sale means:
1. A sale of a Property, with the prior approval of the Company,
arranged by the Insured (or by the Borrower and approved by the
Insured) prior to foreclosure because of a Default by a Borrower, or
by the Insured after foreclosure and before expiration of the Claim
Settlement Period; or
2. A foreclosure or trustee's sale of a Property to a third party, or
redemption from foreclosure, at a price equal to or greater than the
minimum amount specified by the Company to be bid by the Insured at
such sale.
JJ. Pre-Arranged Sale Option means the method of determining the amount of the
Insurance Benefit with respect to a Loan set forth in Section V., C., 3.
KK. Property means the real property and all improvements thereon including
any chattel items (including any built-in appliances) which are noted in
the Original Appraisal, including all replacements or additions thereto,
together with all easements and appurtenances, all rights of access, all
rights to use, as well as any co-ownership interests in common areas,
recreational and appurtenant facilities, and all replacements or additions
thereto.
LL. Residential means:
1. A type of building which is designed for occupancy by not more than
four families; or
2. A single-family condominium or planned unit development unit; or
3. Any other single-family residence unit as to which Good and
Merchantable Title may be held or conveyed freely under law, and
which the Company has approved in writing.
MM. Servicer means that Person, other than a natural Person, who at any time
is servicing a Loan (as a master servicer, if subservicing is also
involved) with respect to the Insured's obligations under the Policy. The
Insured shall be presumed to be the Servicer unless the Company is
notified otherwise.
NN. Uninsured Casualty means Physical Damage to a Property which is either not
covered by casualty insurance, or not covered in an amount sufficient to
restore such Physical Damage to the Property.
OO. Uninsured Loan Balance means, at any time, with respect to a Loan, the
estimated Claim Amount less the Insurance Benefit estimated pursuant to
the Percentage Option.
PP. Any pronouns, when used herein, shall mean the single or plural, masculine
or feminine, as the case may be.
II. Coverage
A. Extension of and Level of Coverage- Extension of coverage to a Loan under
this Policy shall be evidenced by issuance of a Certificate number on the
Certificate Schedule. The Certificate Schedule and the Application for
each Loan are incorporated herein by reference and made a part hereof for
all purposes. The Policy is issued in reliance upon the Application and on
the representations made in connection therewith. Coverage shall commence
upon the payment of the initial premium, as of the Effective Date of the
Certificate Schedule. The coverage level for each Loan shall be indicated
on the Certificate Schedule.
B. Initial Premium - On the Effective Date of the Certificate Schedule, the
Insured shall forward the appropriate initial premium due to the Company
to establish coverage as of the Effective Date.
C. Payment of Renewal Premium - For coverage to be renewed, the entire
renewal premium must be paid no later than the fifteenth (15th) day of the
second month following the month in which each anniversary of the
Effective Date occurs. For example, if the Effective Date was January 12,
renewal premium must be paid by March 15. The Company shall give the
Servicer, if a Servicer is shown on the records of the Company, or
otherwise, the Insured, notice of the renewal premium due date. If the
renewal premium is not paid by the last day of the grace period provided
above, then the liability of the Company shall terminate as of 12:01 a.m.
on the later of the last anniversary of the Effective Date through which
the premium has been paid, or, if a non-payment notice is required by
applicable law, the last day of the cure period specified in such
non-payment notice or as may be required by applicable law (the "Lapse
Date"). However, failure to pay a renewal premium will not impair or
terminate coverage for Defaults occurring prior to the Lapse Date.
Notwithstanding the foregoing, if the renewal premium is not paid by the
last day of the above-stated grace period and such Loan is among a group
of Loans whose coverage has lapsed due to the transfer, seizure or
surrender of the servicing for such Loans, the Insured shall have an
additional sixty (60) day grace period in which to pay the renewal premium
for such Loan.
D. Full Premium Payment - The Company shall have the right to hold in a
suspense account for up to ninety (90) days any premium payment received,
without obligation to apply such premium to coverage while any of the
following circumstances exist:
1. The payment received is less than the full amount of the premium due
with respect to a Certificate;
2. Information received with the payment is insufficient to identify
the Loan to which the payment applies.
At the end of the ninety (90) day period if the Company has not been able
to resolve the suspended premium payment with the Insured, then the
Company shall either refund the payment or be deemed to have accepted and
applied it without lapse of coverage. Where the Company has received
notice that there is a Servicer for a Loan then, if a premium is refunded,
the Insured shall be notified that such refund was made and shall have
sixty (60) days from such notice to cure or perform the conditions
precedent to coverage.
E. Cancellation by the Insured of Coverage for a Loan - The Insured may
cancel coverage with respect to a Loan by making a request for
cancellation to the Company in writing or via any medium acceptable to the
Company. Upon receipt thereof, for coverage having refundable premiums,
the Company shall refund such sum as may be determined to be due in
accordance with the appropriate cancellation or premium schedule. The
Company reserves the right to net out any unpaid premium from any premium
refund. However, no refund on a Certificate will be paid if a notice of
Default has been filed unless the Insured waives its rights to the
Insurance Benefit with respect to that Loan. Cancellation of coverage for
a Loan will not cancel this Policy.
F. Cancellation of Policy - Once coverage has become effective with respect
to a Loan, this Policy may not be canceled by the Company for as long as
any Certificate assigned under this Policy remains in force. If the
Insured desires to cancel this Policy, it may do so by canceling all
outstanding Certificates that have been issued under this Policy.
G. Loan Modifications - Unless prior written approval is obtained from the
Company, the Insured shall not make any change in the terms of any Loan
including, but not limited to, any change in the amount of the
indebtedness, the interest rate, the use of escrow funds or other funds,
term or amortization schedule of the Loan, change in the Property, nor
release any Borrower from liability on a Loan, provided, however, that
changes in the Loan permitted by the instrument evidencing the Loan shall
be deemed approved without prior approval.
H. Assumptions and Balloon Restructures - The renewal or restructure of a
Loan at the maturity of a Balloon Payment (hereinafter defined) and the
assumption of a Loan by a purchaser of the Property, with or without the
release of the original Borrower, are changes to a Loan requiring the
Company's prior approval as set forth in Section II., G., (Loan
Modifications) above, provided, however, that if under applicable law, the
Insured cannot enforce the "Due on Sale" provision of a Loan, then the
Company will be deemed to have approved the assumption of such Loan.
Notwithstanding anything to the contrary in this Section II., H., the
Company will be deemed to have approved the assumption of any Loan where
no release is requested and under Section II-406.02 of the Federal
National Mortgage Association's Servicing Guide or any successor provision
thereof, or any similar provision of the Federal Home Loan Corporation's
Sellers' & Servicers' Guide, the assumption is an "exempt transaction"
that the Servicer is to approve without review of the terms of the
transaction.
I. Increase in Loan Amount - In addition to the approval requirement of
Section II., G., (Loan Modifications) above, if the principal balance of a
Loan is increased (excluding any Negative Amortization), the Insured shall
pay an additional premium corresponding to the increase in coverage, at
the then prevailing premium rate.
J. Approval of Loan Modifications - The Company shall not unreasonably
withhold any approval required to be obtained in connection with any of
the changes listed in Sections II., G., and H.,; however, failure by the
Insured to obtain any such approval with respect to any Loan shall
constitute a waiver of coverage for that Loan and the Company shall refund
premium for the period following such waiver.
K. Servicing - The Loans will be serviced by one of five servicers qualified
and approved by the Company and the Insured. Unless the prior written
approval of the Company is obtained, the Servicing of any of the Loans may
not be transferred, sold, or assigned unless such transfer, sale or
assignment is approved in writing by the Company. The Company shall not
unreasonably withhold approval of a proposed servicer. The Company's
approval shall be deemed to be given for the transfer, sale or assignment
of all or part of the Loans to a federally insured bank or savings
association, an institutional investor, the Federal Home Loan Mortgage
Corporation ("▇▇▇▇▇▇▇ Mac"), ▇▇▇▇▇▇ Mae, or to a ▇▇▇▇▇▇ ▇▇▇ or ▇▇▇▇▇▇▇ Mac
approved mortgage banker, provided that notice of the same is given as
required by this paragraph.
L. Change of Insured - If all of the Loans are transferred, sold or assigned
by the Insured, coverage will continue PROVIDED THAT (a) notice thereof is
given to the Company within thirty (30) days of such change, (b) the
change in ownership, however denominated, is not occasioned by the
redemption, repurchase, cancellation or other method of extinguishing the
transaction pursuant to which the Loans were securitized, and (c) the
Company approves the change in writing. The Company shall not unreasonably
withhold approval of an new Insured.
M. Coordination and Duplication of Insurance Benefits -
1. If any portion of a Loan is uninsured, all payments made by the
Borrower on the Loan shall be allocated to the insured portion of
the Loan in the same ratio as the insured principal amount bears to
the total principal amount of the Loan. The Insurance Benefit
hereunder shall likewise be calculated on the same pro rata basis.
2. The Insured shall not carry duplicate mortgage guaranty insurance
(other than mortgage guaranty pool insurance or supplemental
mortgage guaranty insurance) on any Loan.
3. If at the time of Default there is any other valid and collectible
insurance in effect for the Loan which would attach if this
insurance were not in effect, then the coverage under this Policy
shall apply only as excess coverage and in no event as contributing
insurance.
N. Mitigation of Loss - The Insured and its Servicer shall attempt to limit
and mitigate loss by adhering to customary servicing standards applicable
to delinquent Loans, which may include in appropriate cases, but is not
limited to, trying to obtain a cure of Defaults and trying to effectuate a
Pre-Arranged Sale or voluntary conveyance of the Property. The Insured
shall permit the Company to participate in workout activities for any Loan
in Default. Failure of the Insured to materially comply with this Section
II., N., with respect to any Loan shall entitle the Company to adjust the
Claim Amount by the amount the Company was damaged by such noncompliance.
The Company shall attempt to limit and mitigate any loss to the Insured
which will not be covered by the Insurance Benefit provided under this
Policy.
III. Exclusions from Coverage
The Company shall not be liable for, and the Policy shall not apply to, extend
to or cover the exclusions listed below. In the event that coverage is excluded
for any Loan, the Company will refund all premium for that Loan for the period
following the occurrence of the event giving rise to such exclusion. Except
where prohibited by law, if the damage to the Company arising from an excluded
event can be reasonably quantified, the Company shall adjust the Claim Amount by
the amount of such damage rather than exclude coverage altogether for such Loan,
unless a refund of premium as provided for in the preceding sentence would
provide a greater payment to the Insured.
A. Balloon Payment Exclusion - Any Claim arising out of or in connection with
the failure of the Borrower to make any payment of principal and interest
due under the Loan, which payment becomes due when the Insured exercises
its right to call the Loan when not in default or because the term of the
Loan is shorter than the amortization period, and which payment is for an
amount more than twice the regular periodic payment of principal and
interest that are set forth in the Loan (commonly referred to as a
"Balloon Payment"); provided, however, that this Exclusion shall not apply
if the Insured or its Servicer offers the Borrower in writing, before the
due date of the Balloon Payment, a renewal or extension of the Loan, or a
new loan at then current market rates, in an amount not less than the then
outstanding principal balance and with no decrease in the amortization
period and the Borrower declines to seek such renewal or refinancing.
B. Effective Date Exclusion - Any Claim resulting from a Default occurring
before the Effective Date of the Policy or after its lapse, cancellation,
or expiration; or after coverage is canceled with respect to the Loan.
C. Incomplete Construction Exclusion - Any Claim when, as of the date of such
Claim, construction of the Property had not been completed in accordance
with the construction plans and specifications approved by the Loan
originator at the time the Loan was originated or in accordance with the
Original Appraisal. (This Incomplete Construction Exclusion shall not
apply if the construction of the Property has been fully completed and, if
Physical Damage occurs during construction, any repairs necessary to
restore the Property to its complete condition, reasonable wear and tear
excepted, have been completed.) However, coverage for a Default occurring
during construction may be excluded by Section III., B., (Effective Date
Exclusion) above.
D. Residential Property Exclusion - Any Claim where the Property is not, as
of the date the Loan is Closed, on the Effective Date, and on the date the
Claim is filed, Residential real property.
E. Negligence and Fraud Exclusion - Any Claim involving or arising out of, or
any Claim where the origination of the Loan or extension of coverage
hereunder involved or arose out of, any dishonest, fraudulent, criminal,
or knowingly wrongful act (including error or omission) by the Insured,
the Servicer or any agent of the Insured or Servicer; or any Claim
involving or arising out of the negligence of the Insured or the Servicer,
which negligence is material either to the acceptance of the risk or to
the hazard assumed by the Company.
F. Non-Approved Servicer Exclusion - Any Claim occurring when the Servicer,
at the time of Default or thereafter, was not approved by the Company,
provided, however, that this Non-Approved Servicer Exclusion shall not
apply to any Loan for which a Default occurs within 150 days after the
Company withdraws approval of the Servicer for such Loan. If the Company
decides to withdraw approval of a Servicer it shall give written notice of
that decision to the Insured for each affected Loan as shown in the
Company's records.
G. Physical Damage Exclusion - Any Claim where there is Physical Damage to
the Property, occurring or manifesting itself after the Effective Date;
provided, however, that this exclusion will not apply (i.e., the Company
will provide coverage for a Claim) where Physical Damage has occurred to
the Property if:
1. The Default giving rise to a Claim was not primarily caused by an
Uninsured Casualty occurring prior to such Default, and the Company
has elected to pay either the Percentage Option or the Pre-Arranged
Sale Option as the Insurance Benefit for the Loan; or
2. The Property has been restored to its condition as reported in the
Original Appraisal (as fully completed), reasonable wear and tear
excepted. The Insured may elect to accept a reduction in the Claim
Amount by an amount equal to the estimated cost to completely
restore the Property as would otherwise be required by this
exclusion rather than be required to restore the Property to obtain
an Insurance Benefit under this Policy. In the event the Company
relies on an estimate for such restoration that is not obtained by
the Insured, then the Company shall, at the request of the Insured,
provide a copy of such estimate to the Insured.
H. Loan to Value Ratio Exclusion - Any Claim where the original principal
balance of the Loan exceeded one hundred percent (100%) of the FMV of the
Property at the time the Loan was originated, and such fact was not
disclosed to the Company at the time coverage under this Policy was
extended to such Loan.
I. Negative Amortization Exclusion - Unless otherwise endorsed, any Negative
Amortization with respect to a Loan.
J. Defenses to Loan Exclusion - That portion of any Claim equal to the amount
of the indebtedness from which the Borrower is released, or any Claim
against which the Borrower successfully asserts defenses that have the
effect of releasing, in whole or in part, the Borrower's obligations to
repay the Loan, provided, however, this Defenses to Loan Exclusion shall
not apply where the release of the Borrower is the result of a bankruptcy
"cram down" so long as the Insured has continued to pay premium on the
full amount of the indebtedness and that all other conditions of this
Policy have met.
K. Environmental Impairment Exclusion - Any Claim where there is
Environmental Impairment to the Property which existed prior to the
Effective Date if the existence, or suspected existence, of the
Environmental Impairment was not disclosed in the Application and the
Environmental Impairment (i) is a principal cause of the Default, and (ii)
has made the principal Residential structure on the Property
uninhabitable. A structure will be considered "uninhabitable" if generally
recognized standards for residential occupancy are violated or if, in the
absence of such standards, a fully informed and reasonable person would
conclude that such structure was not safe to live in without fear of
injury to health or safety. Notwithstanding the foregoing, this exclusion
shall not apply if the Insured has removed or remedied the condition that
constitutes the Environmental Impairment or the Insured has removed the
hazardous character of such condition in accordance with applicable
federal, state or local laws.
IV. Conditions Precedent to Payment of Claim
The following Claim payment procedures contain the conditions precedent to, and
additional limitations upon the Company's obligation to pay Insurance Benefits
under this Policy:
A. Notice of Default - The Insured shall give the Company notice:
1. Within forty-five (45) days of Default, if it occurs when the first
payment is due under a Loan; or
2. Not later than the last business day of the month following the
month in which the first of the following events occur:
a. The date when the Borrower becomes three (3) periodic payments in
Default on the Loan if the periodic payments are made monthly, and
not later than ninety (90) days after the occurrence of a Default
for Loans having periodic payments more often than once a month; or
b. Foreclosure or other Appropriate Proceedings have been commenced.
Such notice shall be on forms provided by or approved by the Company or
via a medium acceptable to the Company. Unavailability of Company forms is
not a valid reason for delay in reporting. Failure to report a Default as
required by this Section IV., B., shall entitle the Company to deduct from
the Claimable Amount of a Claim thirty (30) days of interest accruing on
the Loan during the period between the date the notice of Default should
have been filed and the date it was submitted to the Company.
B. Monthly Reports - Following a notice of Default on a Loan or the
commencement of Appropriate Proceedings, the Insured shall give the
Company monthly reports on forms furnished or approved by the Company or
via a medium acceptable to the Company, on the status of the Loan and on
the servicing efforts undertaken to remedy the Default or conclude the
Appropriate Proceedings. These monthly reports shall continue until the
Borrower is no longer in Default, the Appropriate Proceedings terminate,
or until title to the Property has been transferred to the Insured.
C. Company's Options after Notice of Default - If the Company so directs, at
any time after receiving the Insured's notice of Default, the Insured
shall file a Claim within twenty (20) days and the Company may elect to
pay the Insurance Benefit pursuant to the Percentage Option. Thereafter,
following the Insured's acquisition of the Borrower's Title to the
Property, the Insured shall be entitled to file a supplemental Claim in an
amount equal to the sum of the Advances not included in the initial Claim,
plus any Deficiency Expenses (See Section I.,R.) subject to the
limitations and deductions of Section V., B., (Calculation of Claim
Amount) and such supplemental Claim shall be paid by the Company in
accordance with the Percentage Option.
D. Voluntary Conveyance - The Insured may accept a conveyance of title from
the Borrower in lieu of foreclosure or other proceedings if:
1. The ability of the Insured to preserve, transfer and assign to the
Company the Insured's rights against the Borrower is not impaired;
and
2. The rights of the Company under this Policy against such Borrower
are not adversely affected; or if
3. The written approval of the Company has been obtained; provided,
however, it is understood that such approval shall not constitute
nor be deemed an admission of liability by the Company with respect
to coverage for the related Loan.
E. Appropriate Proceedings - The Insured MUST begin Appropriate Proceedings
when the Loan becomes six (6) months in Default unless the Company
provides written instructions that some other action be taken. The Company
reserves the right to direct the Insured to institute Appropriate
Proceedings at any time after Default. When either defending against or
bringing Appropriate Proceedings, the Insured shall report the status of
these proceedings to the Company as reasonably and expeditiously as
possible.
In conducting Appropriate Proceedings, the Insured shall:
1. Diligently pursue the Appropriate Proceedings once they have begun;
2. Apply for the appointment of a receiver and assignment of rents, if
permitted by law, requested by the Company, and appropriate for the
Property;
3. At the request of the Company, furnish the Company with copies of
all notices and pleadings filed or required in the Appropriate
Proceedings;
4. Act so that its ability to preserve, transfer and assign to the
Company its rights against the Borrower is not impaired; and so that
the rights of the Company under this Policy against the Borrower are
not adversely affected, including any rights to obtain a deficiency
judgment, provided that the Insured shall not be required to pursue
or establish a deficiency against the Borrower in those states where
the Company is not permitted to pursue such a deficiency;
5. Bid an amount at the foreclosure sale which is not less than the
minimum amount nor more than the maximum amount set forth below,
unless the Company notifies the Insured of other instructions or
waives its right to give bidding instructions, in writing.
a. If the FMV of a Property is less than the Uninsured Loan Balance,
the Insured shall start bidding at not less than the FMV of the
Property and may continue bidding up to a maximum of the Uninsured
Loan Balance.
b. If the FMV of a Property is greater than the Uninsured Loan
Balance, the Insured shall start bidding at not less than the
Uninsured Loan Balance up to a maximum amount equal to the Claim
Amount.
If other bidding instructions are provided they will not specify a
maximum bid that is less than the Uninsured Loan Balance, and, if
the Property is subject to redemption for less than the outstanding
amount of the Loan, then such other bidding instructions will not
specify an opening bid of less than the Uninsured Loan Balance.
F. Pre-Arranged Sales - In the event of Default on a Loan, it shall be a
condition precedent to payment of any Insurance Benefit on the Loan that
(i) the Insured attempt to obtain a Pre-Arranged Sale of the Property
whenever reasonable, and (ii) the Insured shall authorize its broker, when
requested by the Company, to release marketing information for the
Property to the Company, if requested by the Company, unless the Insured
shall have notified the broker that the Company's right to acquire the
Property has expired or been waived. For purposes of this section, a
"Pre-Arranged Sale Offer" means an offer to purchase the Property received
by the Insured, together with a schedule of (i) expense items proposed by
the Insured to be included in the settlement amount of the Pre-Arranged
Sale Offer is accepted and the proposed Property sale closes, and (ii) the
Insured's then-estimated amounts thereof. Pre-Arranged Sale Offers that
the Insured chooses to submit to the Company will be approved or rejected
by the Company.
G. Claim Requirements - The Insured must provide the Company with:
1. A completed form furnished or approved by the Company for payment of
a Claim ("Claim for Loss Form"); and
2. All information reasonably requested on the Claim for Loss Form
together with all documentation requested on or necessary to
complete such Claim for Loss Form; and
3. Evidence satisfactory to the Company that the Insured has acquired
the Borrower's Title to the Property, except where the Company has
elected the Pre-Arranged Sale Option provided, however, if the
primary cause of the Default was a circumstance or event which would
prevent the Insured from obtaining Good and Merchantable Title, then
no matter which settlement option the Company elects, the Insured
must comply with the requirements of Section IV., G., 4, as if the
Company had elected the Acquisition Option; and
4. In the event the Company elects the Acquisition Option, a recordable
deed in normal and customary form containing the usual warranties
and covenants conveying to the Company or its designee Good and
Merchantable Title to the Property, along with evidence satisfactory
to the Company that the Insured has acquired and can convey to the
Company or its designee Good and Merchantable Title to the Property;
and
5. All other documentation or information reasonably requested by the
Company for purposes of investigating and/or adjusting the Claim;
and
6. Access to the Property for purposes of determining its value, and
for investigating and/or adjusting the Claim; provided, however, if
the Company elects the Acquisition Option, then Possession of the
Property must be provided by the Insured, unless the Company waives
this requirement in writing.
V. Loss Payment Procedure
A. Filing of Claim - The Insured shall file a Claim no later than sixty (60)
days after the earlier of acquiring the Borrower's Title to the Property
or a Pre-Arranged Sale, provided that if the Company elects to acquire the
Property, then no later than sixty (60) days after the Insured acquires
Good and Merchantable Title to the Property. Failure of the Insured to
file a Claim within this time period shall (i) relieve the Company of any
obligation to include in the Claim Amount interest and Advances accruing
on the Loan after such sixty (60) day period has expired, and (ii) entitle
the Company to adjust such Claim to the extent that the Company is
prejudiced by such late filing of the Claim, up to 100% of the Insurance
Benefit.
Unavailability of Company forms is not a valid reason to delay filing a
Claim. If a Claim filed by the Insured is incomplete the Company shall
within twenty (20) days of receipt of a Claim, notify the Insured of all
items needed to perfect such Claim. If no notice of deficiency of the
Claim is sent within the twenty (20) day period following receipt of the
Claim by the Company, then the Claim shall be deemed to be perfected as of
the date the Company received the Claim.
B. Calculation of Claim Amount - The Claim Amount for any Loan shall be an
amount equal to the sum of:
1. The Default Amount but excluding any portion of the principal
balance attributable to any increase therein after the first payment
is due and payable, and excluding capitalized penalty interest or
late payment charges. (See Section III., I., (Negative Amortization
Exclusion) THIS POLICY DOES NOT COVER NEGATIVE AMORTIZATION UNLESS
SUCH COVERAGE IS ENDORSED FOR A LOAN); and
2. The amount of accumulated delinquent interest due on the Loan at the
contract rate stated in the Loan from the date of Default through
the date that the Claim is submitted to the Company, but excluding
applicable late charges and penalty interest; additional interest
computed on the Default Amount until the Pre-Arranged Sale of the
Property, and thereafter until the Pre-Arranged Sale closing
information is submitted, computed on the Default Amount reduced by
the net proceeds of such Pre-Arranged Sale (For purposes of this
Section, "late charges and penalty interest" includes, but is not
limited to, increases in interest rate caused by non-performance of
the Borrower. In no event will the Claim Amount include interest at
a rate other than what the Insured would receive if the Loan were
paid as current in accordance with its own terms); and
3. The amount of Advances made by the Insured; provided that:
a. Attorney's fees advanced thereunder shall not exceed three
percent (3%) of the sum of the (1) and (2) above; and
b. Payment for Advances other than Attorney's fees, shall be
prorated through the earlier of the date the Claim is submitted to
the Company or the Pre-Arranged Sale of the Property;
less:
4. All rents and other payments (excluding proceeds of fire and
extended coverage insurance and proceeds of a Pre-Arranged Sale)
collected or received by the Insured, which are derived from or in
any way related to the Property;
5. The amount of cash available to the Insured remaining in any escrow
account as of the last payment date;
6. The amount of cash to which the Insured has retained the right of
possession as security for the Loan; and
7. The amount paid under applicable fire and extended coverage policies
which has not been applied to either the restoration of the
Property, if the Property suffered Physical Damage, or to the
payment of the Loan; and
8. The amount expended by the Insured for Advances requiring approval
by the Company which are not in compliance with the Company's
guidelines and which have not been approved by the Company.
C. Payment of Insurance Benefit - The Company, at its sole option, shall
elect one of the following three options and pay to the Insured, on or
before the last day of the Claim Settlement Period, as the Insurance
Benefit, either:
1. The Acquisition Option which shall equal the Claim Amount less the
amount of any payments of Loss previously made by the Company with
respect to the Loan, payable in exchange for the conveyance of Good
and Merchantable Title to and Possession of the Property; provided,
however, that if the Insured is unable to perform any conditions
precedent to payment of a Claim within the later of thirty (30) days
after the redemption period or ninety (90) days after the Claim
Adjustment Period, then, so long as the Claim is not otherwise
excluded, the Insured may retain title to the Property and the
Insurance Benefit under this Acquisition Option shall be an amount
equal to the Company's Anticipated Loss in connection with such
Property ; or
2. The Percentage Option which is an amount equal to the Claim Amount
multiplied by the percentage of coverage specified in this Policy,
or
3. The Pre-Arranged Sale Option is an amount equal to the lesser of the
Percentage Option or the Insured's actual loss in connection with a
Pre-Arranged Sale of the Property. The Insured's actual loss shall
be an amount equal to the Claim Amount plus all reasonable costs
incurred in obtaining and closing such sale less the proceeds of the
Pre-Arranged Sale.
In addition to payment under one of the foregoing options, the Company
will pay whatever Deficiency Expenses are payable to the Insured pursuant
to Section V., D. (Deficiency Expenses).
In the event that a Pre-Arranged Sale fails to close prior to the end of
the Claim Settlement Period, the Company may postpone payment of the
Insurance Benefit for up to (90) ninety days, or if earlier, until such
Pre-Arranged Sale closes or is terminated, provided that interest on the
Default Amount at the rate due upon the Loan during such postponement is
paid to the Insured.
Further, in the event the Property is redeemed after the payment of the
Percentage Option, the Insured shall be obligated to promptly refund to
the Company the amount, if any, by which the redemption price plus the
Insurance Benefit exceeds the Claim Amount.
In the event the Company does not pay the Insurance Benefit within the
Claim Settlement Period, it will pay interest on the Insurance Benefit at
the rate due under the Loan from the last day of the Claim Settlement
Period until the Claim is paid.
D. Deficiency Expenses - Notwithstanding the provisions of Section V., C.,
(Payment of Insurance Benefit) above, in the case where a deficiency
against the Borrower is being pursued solely at the request of the
Company, then any Deficiency Expenses shall be added to the amount of the
Insurance Benefit. If a deficiency against a Borrower is being pursued as
part of Appropriate Proceedings, for the benefit of both the Insured and
the Company, then at the time such deficiency rights are established or a
deficiency judgment is obtained, whichever shall occur first, the
Deficiency Expenses plus any similar expenses incurred by the Company in
connection with such deficiency shall be settled between the parties on
the same pro rata basis set forth in Section VI., B. (Subrogation) for the
settlement of deficiency recoveries. Expenses and costs arising after that
point shall be treated as collection expenses to be netted against the
deficiency recovery, if any, (and, if none, to be shared between the
parties on the same pro rata basis when it becomes clear that nothing will
be recovered).
To facilitate the decision of whether to pursue or establish a deficiency
against a Borrower, the Insured shall provide the Company with any
information it may have relevant to collecting on a deficiency judgment
for that case. The Company will discuss all such information it may have
with the Insured so that the parties can decide whether any Appropriate
Proceedings (necessary to establishing or pursuing a deficiency) are to be
pursued for the benefit of both parties or whether one of the parties will
elect not to participate in any recovery. The Insured will be deemed to be
participating in Appropriate Proceedings solely at the request of the
Company when such proceedings are not a condition precedent to obtaining
Borrower's Title to or Possession of a Property and, after the parties
have exchanged information on the Loan, the Insured has advised the
Company in writing why the Insured does not wish to participate in such
proceedings.
E. Discharge of Obligation - Any payment by the Company in accordance with
Section V., C., (Payment of Insurance Benefit) and, if applicable, Section
V., D., (Deficiency Expenses) or Section IV., C., (Company's Options after
Notice of Default), taking into account appropriate adjustments, shall be
a full and final discharge of the Company's obligation under this Policy
with respect to the related Loan. Notwithstanding the preceding sentence,
the Company shall not be relieved of its obligation to pay any appropriate
supplemental Claims filed pursuant to Section IV., C., (Company's Options
after Notice of Default) or as may otherwise be agreed to by the Company.
VI. Additional Conditions
A. Proceedings of Eminent Domain - In the event that part or all of the
Property is taken by eminent domain, condemnation or by any other
proceedings by federal, state or local governmental unit or agency, the
Insured shall require that the Borrower apply the maximum permissible
amount of any compensation awarded in such proceedings to reduce the
principal balance of the Loan, in accordance with the law of the
jurisdiction where the Property is located.
B. Subrogation - The Company shall be subrogated pro rata, to the full extent
permitted by law (except where the Company is prohibited by law from
pursuing recovery of a Loan), to all of the Insured's Recovery Rights with
respect to a Loan, upon payment of a Claim hereunder. "Recovery Rights"
shall mean all rights of recovery against the Borrower and any other
Person or organization relating to the Loan or to the Property. The
Company's pro rata share of the net deficiency recovered (i.e., amounts
recovered less reasonable costs and expenses) with respect to any Loan
shall be the amount of the Insurance Benefit divided by the amount of the
deficiency judgment. Internal staff costs and overhead expenses shall not
be deducted in determining the amount of a net deficiency recovery unless
specifically agreed to in writing by the parties.
The Insured hereby designates the Company its exclusive agent (i) to
pursue all of the Insured's Recovery Rights to which the Company has not
become subrogated by payment of a Claim (i.e., the Insured's share of the
Recovery Rights), (ii) to file any action in the Company's name as
assignee of the Insured, to collect on the Insured's Recovery Rights, and
(iii) to settle and compromise any such Recovery Rights on behalf of the
Insured, it being understood and agreed that the Company shall have the
exclusive rights to pursue and settle all Recovery Rights for any Loan on
which a Claim payment is made hereunder, unless waived in writing by the
Company. If the Company decides not to pursue Recovery Rights with respect
to a Loan, then the Company shall issue a written waiver of its
subrogation and management rights to the Insured. The Insured shall
execute and deliver at the request of the Company such instruments and
documents, and undertake such actions as may be necessary to transfer,
assign and secure such Recovery Rights to the Company. The Insured shall
refrain from any action, either before or after payment of a Claim
hereunder that shall prejudice such Recovery Rights.
Notwithstanding any provision in the foregoing paragraph to the contrary,
in the event the Insured has, in addition to Recovery Rights against a
Borrower or any other Person, a claim or claims against such Borrower or
other Person not related to the Recovery Rights, then the Insured shall
have the right to pursue in its own name all the Recovery Rights in
conjunction with the Insured's other claim or claims, and the Company will
waive its right to manage the pursuit of the Recovery Rights.
The execution by the authorized party, even if it be a party other than
the Insured, of a release or waiver of the right to collect the unpaid
balance of a Loan, if it has such effect, shall release the Company from
its obligations hereunder to the extent and amount of such release or
waiver, unless the Company is prohibited by law from pursuing recovery of
such Loan.
C. Representations and Reliance; Incontestability - All statements made by
the Insured, the Servicer, the Borrower or any other Person in any part of
the Application, including the Original Appraisal, plans and
specifications, or any exhibits or documents submitted therewith, are
deemed to be the Insured's representations. The Company has issued this
Policy and has extended coverage to each Loan listed on the Certificate
Schedule in reliance on the correctness and completeness of such
representations as made or deemed to be made by the Insured.
No Claim otherwise payable under this Policy with respect to a Loan will
be denied, nor will the coverage for such Loan be rescinded, based on any
misrepresentation in the Application made by the Borrower or any Person
other than a First Party, once twelve (12) regularly scheduled periodic
payments have been made on that Loan from the Borrower's Own Funds.
Notwithstanding the foregoing provisions of this Section VI., C.,, the
Company will not be precluded from denying a Claim or rescinding coverage
for a Loan where prior to the Borrower making twelve (12) regularly
scheduled payments from the Borrower's Own Funds, the Company notifies the
Insured in writing that the Company has sufficient evidence to establish a
reasonable belief that there was a material misrepresentation made in the
Application with respect to such Loan and the Company provides a
reasonable description of such misrepresentation.
D. Notice - Premium payments are to be paid as provided in Sections II., B.,
and C., and sent to the Company at the address listed on the Commitment,
or as otherwise instructed by the Company in writing. All other notices,
Claims, tenders, reports and other data required to be submitted to the
Company by the Insured shall be either (i) mailed postpaid, (ii) sent by
overnight courier, (iii) transmitted electronically or via magnetic tape
or other media in a manner approved by the Company, or (iv) sent by
telephonic facsimile transmission, to the Company's home office at the
following address and facsimile number:
For Claim matters:
PMI Mortgage Insurance Co.
P. O. ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Claim Department
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
For Customer Service matters:
PMI Mortgage Insurance Co.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Customer Service Department
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
All notices to the Insured shall be given to the Servicer unless the
Company has not been notified that a Loan is being serviced by a Person
other than the Insured, and shall be either (i) mailed postpaid, (ii) sent
by overnight courier, (iii) transmitted electronically or magnetically in
a manner approved by the Insured, or (iv) sent by telephonic facsimile
transmission, to the Servicer, at the address and facsimile number
provided in writing by the Insured to the Company, or to the last known
address and facsimile number for that Servicer, except that for facsimile
transmissions, the Company shall confirm telephonically or otherwise the
accuracy of the facsimile number used. Nonpayment notices under Section
II., C. and notices required under Section III., F. shall be sent to both
the Insured and the Servicer whenever the Company has been notified that
the Servicer is a Person other than the Insured. All notices to the
Insured and Servicer will be sent to those Persons whom the Company was
last notified as owning or servicing the Loan, respectively, at the last
known address for such Persons as reflected in the records of the Company.
Either party may notify the other of a change in address in the same
manner as provided for giving notice. All notices, Claims, tenders,
reports and other data required to be submitted to the Company or to the
Insured shall be deemed to have been given five (5) days after the same is
deposited in the U.S. Mail, delivered to an overnight courier, or
transmitted in a manner approved above, unless actually received earlier.
If the Insured requests that notices be sent to a third party other than
the Insured and Servicer, the Company agrees to use its best efforts to
give such notices but the Company shall not incur any liability for
failure to send any notice to any third parties.
E. Reports and Examinations - As pertinent to any Loan or the Policy, the
Company may call on the Insured for such reports as it may deem reasonably
necessary, and may inspect the files, books and records of the Insured as
they pertain to any Loan or to the Policy. The Company has the right to
require that any information which the Insured is required to provide
under this Policy be certified as to its truthfulness and accuracy by an
officer or properly authorized employee of either or both the Insured and
the Servicer.
F. Arbitration - Unless prohibited by applicable law, any controversy or
dispute, including any Claim made hereunder, arising out of or relating to
this Policy, may, upon the mutual consent of all parties to the dispute,
be settled by binding arbitration in accordance with the title insurance
rules of the American Arbitration Association in effect on the date the
demand for arbitration is made. If this remedy is elected by all parties
to the dispute, then the decision of the arbitrator(s) shall be final and
binding on all the parties, and shall be enforceable in any court of
competent jurisdiction in the United States of America.
G. Suit -
1. No suit or action for recovery of any Claim or Insurance Benefit
under this Policy shall be sustained in any court of law or equity
unless the Insured has materially and substantially complied with
the terms and conditions of this Policy, and unless the suit or
action in equity is commenced within three (3) years or such longer
period of time as may be required by applicable law, after (i) the
Claim has been presented to the Company or (ii) the date on which
the cause of action accrued, whichever is earlier. No suit or action
on a Claim or Insurance Benefit may be brought against the Company
until sixty (60) days have elapsed from the later of the date that
the Insured is notified that Claim is perfected or from the date the
Claim is deemed to be a Perfected Claim, unless the subject matter
of the suit or action is whether a Perfected Claim has been filed.
2. If a dispute arises concerning the Loan and involving either the
Property or the Insured, the Company has the right to protect its
interest by defending any action arising from such dispute, even if
the allegations involved are groundless, false or fraudulent. The
Company is NOT REQUIRED to defend any lawsuit involving either the
Insured, the Property or the Loan. The Company shall also have the
right to direct the Insured to institute suit on the Insured's
behalf, if this suit is necessary or appropriate to preserve the
Company's rights in connection with a Loan or Property. If any
litigation costs and expenses incurred by either the Company or the
Insured under this Section VI., G., arise out of an action involving
the negligent or wrongful conduct or breach of contract on the part
of the Insured, then the Insured shall bear all such costs and
expenses, and in all other cases, the Company shall bear such costs
and expenses.
H. Parties in Interest - This contract shall be binding upon and inure to the
benefit of the Company and its successors and assigns and the Insured and
its permitted successors and assigns. Neither the Borrower, nor any
successive owner of a Property, nor any pool insurance carrier, nor any
other Person is included or intended as a third party beneficiary to this
Policy. Payments made to the Insured hereunder are intended as
indemnification for actual loss and shall not affect nor impair the
Insured's rights of recovery against the Borrower subject, however, to the
provisions of Section VI., B., (Subrogation). Because the Company and the
Insured are the only parties to the Policy, they may agree to modify or
amend or terminate this Policy or any Certificate without the consent of,
or notice to, any Borrower, Servicer or any other Person.
I. Agency - Neither the Insured, its Servicer, its originators, nor any of
their respective employees or agents shall be or shall be deemed to be
agents of the Company, nor shall the Company be or be deemed to be an
agent of the Insured or Servicer except to the extent of the Recovery
Rights assigned to the Company pursuant to Section IV., B., (Subrogation).
The Servicer is deemed to be an agent of the Insured for all purposes
under this Policy, including, but not limited to, for receiving notices,
payments of Insurance Benefit, settling Claims, and performing acts
required of the Insured under this Policy excepting for receipt of notices
required under Section III., F., (Non-Approved Servicer).
J. Governing Law; Conformity to Statute - This Policy, including the
Certificate Schedule, Claim or Insurance Benefit related to any Loan,
shall be governed by the law of the jurisdiction in which the original
named Insured is located as shown in on the face page hereof. Any
provision of this Policy which is in conflict with the law of the
aforesaid jurisdiction is hereby amended to conform to the minimum
requirements of that law.
K. Electronic Data Storage - It is understood that the Company may store
information, the contents or images of documents or other data on
electronic media or other media generally accepted for business records
(such as microfiche). The Company and Insured agree that the data stored
on such electronic or other media are equally acceptable between the
parties for all purposes as information, documents or other data
maintained in printed or written form, including but not limited to, for
the purposes of litigation or arbitration.
L. No Waiver - Except as provided in Section VI., C., Representations and
Reliance; Incontestability, nothing contained in this Policy shall be
deemed to waive or limit the Company's rights arising at law or in equity
to rescind or reform this Policy or the Certificate in the event that
material misrepresentations of fact or fraudulent statements were relied
upon by the Company in issuing this Policy or extending coverage hereunder
to any Loan.