1
EXHIBIT 10.6
CMG FUNDING CORP.
OWNER
AND
ADVANTA MORTGAGE CORP. USA
SERVICER
LOAN SERVICING AGREEMENT
Dated as of October 10, 1997
Fixed and Adjustable Rate Non-Conforming Mortgage Loans
2
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS ........................................................... 1
Section 1.1 Definition of Terms ....................................... 1
ARTICLE II DELIVERY OF MORTGAGE LOAN FILES & SERVICING STANDARDS ................ 5
Section 2.1 Transfer of Mortgage Loan Files ........................... 5
Section 2.2 Agreement to Service Mortgage Loans ....................... 5
Section 2.3 Sub-Servicers ............................................. 5
ARTICLE III REPRESENTATIONS AND WARRANTIES ...................................... 6
Section 3.1 Representations and Warranties of the Servicer ............ 6
Section 3.2 Representations and Warranties of the Owner ............... 7
ARTICLE IV ACCOUNTING AND REPORTING ............................................. 9
Section 4.1 Collection of Mortgage Loan Payments ...................... 9
Section 4.2 Interest Calculations ..................................... 9
Section 4.3 Application of Mortgage Loan Payments ..................... 9
Section 4.4 Establishment of Collection Account; Deposits in Collection
Account ................................................... 9
Section 4.5 Withdrawals from the Collection Account ................... 10
Section 4.6 Establishment of Escrow Account; Deposits in Escrow Account 11
Section 4.7 Withdrawals From Escrow Account ........................... 12
Section 4.8 Servicing Advances ........................................ 12
Section 4.9 Monthly Remittance and Reports ............................ 12
Section 4.10 Servicing Compensation ................................... 13
ARTICLE V ADMINISTRATION AND SERVICING OF MORTGAGE LOANS ........................ 13
Section 5.1 Enforcement of Due-On-Sale Clause; Assumption ............. 13
Section 5.2 Maintenance of Insurance .................................. 14
Section 5.3 Cancellation of Mortgage Insurance ........................ 15
Section 5.4 Reserved For Future Use ................................... 15
Section 5.5 Liquidation of Defaulted Mortgage Loans ................... 15
Section 5.6 Deed-in-Lieu of Foreclosure ............................... 16
Section 5.7 Real Estate Owned ......................................... 16
Section 5.8 Possession of Mortgage Files by Servicer .................. 17
3
ARTICLE VI MISCELLANEOUS PROVISIONS ............................................. 17
Section 6.1 Owner to Cooperate ........................................ 17
Section 6.2 Assignment ................................................ 17
Section 6.3 Access to Certain Documentation Regarding the Loans ....... 18
Section 6.4 Default By Servicer ....................................... 18
Section 6.5 Default by Owner .......................................... 18
Section 6.6 Reserved for Future Use ................................... 19
Section 6.7 Indemnification By Owner .................................. 19
Section 6.8 Fidelity Bond and Errors and Omissions Insurance .......... 20
Section 6.9 Indemnification by Servicer ............................... 20
Section 6.10 Amendment ................................................ 21
Section 6.11 Governing Law ............................................ 21
Section 6.12 Notices .................................................. 21
Section 6.13 Severability of Provisions ............................... 21
Section 6.14 Document Deficiencies .................................... 21
Section 6.15 Termination .............................................. 22
Section 6.16 Continued Cooperation .................................... 22
Section 6.17 Master Servicer .......................................... 22
Section 6.18 Attorneys' Fees .......................................... 23
Section 6.19 No Solicitation .......................................... 23
Section 6.20 Counterparts ............................................. 24
4
This Servicing Agreement, dated as of October 10, 1997 is entered into
by and between CMG Funding Corp., as owner of the Mortgage Loans that are
referred to herein (the "Owner") and Advanta Mortgage Corp. USA, as Servicer
(together with its permitted successors and assigns, the "Servicer").
WHEREAS, the Owner is the owner of certain first and second lien, fixed
and adjustable rate, non-conforming residential mortgage loans; and
WHEREAS, the Owner desires to deliver to Servicer certain Mortgage
Loans, from time to time, to be serviced by Servicer in accordance with the
terms and conditions of the Mortgage Loans and this Agreement; and
WHEREAS, it is the intent of the parties that certain Mortgage Loans,
described in Exhibit A attached hereto, are to be delivered for servicing
concurrent with this Agreement and thereafter Owner may deliver additional
Mortgage Loans for Servicing pursuant to the terms hereof; and
NOW, THEREFORE, in consideration of the foregoing and mutual agreements
contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definition of Terms
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
"Accepted Servicing Practices": With respect to any Mortgage Loan, those usual
and customary mortgage servicing practices of prudent residential mortgage
lending institutions which service mortgage loans of the same type as such
Mortgage Loan in the jurisdiction where the related Mortgage Property is
located.
"Additional Servicing Compensation": Incidental fees or charges provided for in
the applicable Note and/or Mortgage that are customarily charged by the Servicer
in the ordinary course of performing its obligations herein including but not
limited to late payment charges, prepayment charges/penalties, assumption
processing charges and assumption fees, modification charges, demand fees,
insufficient funds fees and reconveyance charges,
"Agreement": This Loan Servicing Agreement, including all exhibits hereto, and
all amendments hereof and supplements hereto.
"Borrower": The individual or individuals obligated to repay the applicable
Mortgage Loan.
"Business Day": Any day other than (i) a Saturday or Sunday, or (ii) a day in
which banking or savings and loan institutions in San Diego, California or
Wilmington, Delaware are authorized or obligated by law or executive order to be
closed.
1
5
"Collection Account": The trust account or accounts which are created and
maintained by Servicer specifically for the collection of principal and
interest, Insurance Proceeds, Liquidation Proceeds and other amounts received
with respect to the Mortgage Loans.
"Eligible Account": An account that is established and maintained by Servicer
with an institution whose deposits are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC and which is either a federal
savings and loan association or national banking association duly organized,
validly existing and in good standing under federal banking laws.
"Errors and Omissions Policy": An insurance policy insuring against losses
caused by errors and omissions of the Servicer and its personnel, including, but
not limited to, losses caused by the failure to pay insurance premiums or taxes,
to record or perfect liens, or to properly service Mortgage Loans in accordance
with this Agreement.
"Escrow Account": For each Mortgage Loan, an account maintained by the Servicer
specifically for the payment of real estate tax assessments and insurance
premiums against Mortgaged Property.
"Escrow Payments": All funds collected by the Servicer to cover expenses of the
Borrower required to be paid under the Mortgage Loan Documents, including Hazard
Insurance and Flood Insurance, tax assessments and mortgage insurance premiums.
"Event of Default": Any one of the conditions or circumstances enumerated in
Sections 6.4 and 6.5.
"FHLMC": The Federal Home Loan Mortgage Corporation, or any successor thereto.
"Fidelity Bond": An insurance policy insuring against losses caused by negligent
or unlawful acts of the Servicer's personnel.
"Flood Insurance Policy": An insurance policy insuring against flood damage to a
Mortgaged Property, required by loan originators for Mortgaged Properties
located in "flood hazard" areas identified by the Secretary of HUD or the
Director of the Federal Emergency Management Agency.
"Flood Zone Service Contract": A transferable contract maintained for the
Mortgaged Property with a nationally recognized flood zone service provider for
the purpose of obtaining the current flood zone status relating to such
Mortgaged Property.
"FNMA": The Federal National Mortgage Association, or any successor thereto.
"Hazard Insurance Policy": A fire and casualty extended coverage insurance
policy insuring against loss or damage from fire and other perils covered within
the scope of standard extended hazard coverage, together with all riders and
endorsements thereto.
"Insurance Policy": Any insurance policy for a Mortgage Loan referred to in this
Agreement, including Mortgage Insurance Policy, Hazard Insurance Policy, Flood
Insurance Policy, and Title Insurance Policy, including all riders and
endorsements thereto,
2
6
"Liquidation Proceeds": Net proceeds received in connection with the liquidation
of a defaulted Mortgage Loan, whether through the sale or assignment of the
Mortgage Loan, trustee's sale, foreclosure sale, sale of the Mortgaged Property
or otherwise.
"Mortgage Insurance Policy": Insurance which insures the holder of the Note
against covered losses in the event the Borrower defaults under the Note or the
Security Instrument, including all riders and endorsements thereto.
"Mortgage Insurer": A mortgage guaranty insurance company that has issued a
Mortgage Insurance Policy in respect of a Mortgage Loan.
"Mortgage Loan": The individual mortgage loan which is the subject of this
Agreement delivered from time to time being identified by a Mortgage Loan
Schedule. To the extent applicable and as the context so permits, any and all
references to "Mortgage Loan" or "Mortgage Loans" herein shall be deemed to
include any Mortgage Loan that has become an REO Property.
"Mortgage Loan Documents": Any and all documents related to a Mortgage Loan,
including the Note, Security Instrument and insurance policies.
"Mortgage Loan Schedule": The schedule of Mortgage Loans in the form of Exhibit
A, attached hereto, delivered to Servicer on each Transfer Date, such schedule
setting forth the information as to each Mortgage Loan in form and substance
agreed to by the Servicer and the Owner.
"Mortgaged Property": The property securing a Note and subject to the lien of
the related Security Instrument, which property consists of a single parcel of
real property on which is located a one-to four-family detached residential
dwelling, condominium or attached townhouse or rowhouse.
"Nonrecoverable Advance": Any previously made or proposed servicing advance, in
the Servicer's good faith determination, that will not or would not be
ultimately recoverable from the related insurance proceeds or Liquidation
Proceeds.
"Note": A manually executed written instrument evidencing the Borrower's promise
to repay a stated sum of money, plus interest, to the noteholder by a specific
date according to a schedule of principal and interest payments.
"Owner": CMG Funding Corp.
"Permitted Investments": Any one or more of the investments detailed on Exhibit
B attached hereto.
"Person": Any individual, corporation, partnership, joint venture, limited
liability company, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof.
"Principal Prepayment": Any payment or other recovery of principal on a Mortgage
Loan which is received in advance of its scheduled due date, net of any
prepayment penalty or premium thereon which is retained by the Servicer, and is
not accompanied by an amount of interest
3
7
representing scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment.
"Remittance Date": The date each month on which Servicer distributes to the
Owner the Owner's portion of the collections on the Mortgage Loans. The
Remittance Date shall be the twenty-fifth (25th) day of each calendar month, or
the next succeeding Business Day if the twenty-fifth (25th) day of the month is
not a Business Day.
"Remittance Reports": Those monthly reports specified in Section 4.9.
"REO Property": Mortgaged Property the title to which is acquired on behalf of
the Owner through foreclosure or deed-in-lieu of foreclosure.
"Security Instrument": A written instrument creating a valid lien on the related
Mortgaged Property. A Security Instrument may be in the form of a mortgage, deed
of trust, deed to secure debt or security deed, including any riders and addenda
thereto.
"Servicer": Advanta Mortgage Corp. USA, its affiliates or its permitted
successors and permitted assigns.
"Servicing Advance": All customary, reasonable and necessary "out of pocket"
costs and expenses incurred in the performance by the Servicer of its servicing
obligations and not part of the Servicer's general and administrative expenses,
including but not limited to, the cost of (a) the preservation, restoration and
protection of the Mortgaged Property, (b) any enforcement or judicial
proceedings, including foreclosures, relating to Mortgage Loans or Mortgaged
Properties (c) the management and liquidation of the Mortgaged Property if the
Mortgaged Property is acquired in satisfaction of the Mortgage, and (d) the
maintenance of hazard insurance, payment of property taxes (including tax
penalties) or mortgage insurance premiums.
"Servicing Fee": For each Mortgage Loan, the compensation due the Servicer each
month.
"Servicing File": With respect to each Mortgage Loan all documents detailed in
Exhibit C, attached hereto and delivered to the Servicer, including photocopies
of the Note and Security Instrument and any other documents necessary for the
Servicer to service the Mortgage Loans in accordance with the terms of this
Agreement.
"Tax Service Contract": A transferable contract maintained for the Mortgaged
Property with a tax servicer provider for the purpose of obtaining current
information from local taxing authorities relating to such Mortgaged Property.
"Title Insurance Policy": An American Land Title Association (ALTA) mortgage
loan title policy form 1970, or other form of lender's title insurance policy,
insuring the lien priority of the Security Instrument on the Mortgaged Property.
"Transfer Date": For each Mortgage Loan, the date on which such Mortgage Loan is
delivered to Servicer for servicing hereunder.
4
8
ARTICLE II
DELIVERY OF MORTGAGE LOAN FILES & SERVICING STANDARDS
Section 2.1 Transfer of Mortgage Loan Files
On or prior to each Transfer Date, and from time to time thereafter in a
manner the parties mutually agree to (generally, in accordance with the "XYZ
Mortgage Company Sub Servicing Guide," as amended from time to time, a copy of
which is attached hereto), the Owner shall deliver the Servicing Files, to the
Servicer at the Owner's expense. Such delivery shall be effected at the
Servicer's facilities currently designated by Servicer as Advanta Mortgage Corp.
USA, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: Dept.
402. Each Servicing File shall be held in trust by Servicer exclusively for the
benefit of the Owner for the purpose of servicing the related Mortgage Loan. The
Servicer shall maintain custody of all documents constituting the Servicing
Files in accordance with Accepted Servicing Practices.
Section 2.2 Agreement to Service Mortgage Loans
(a) Servicer agrees to service and administer the Mortgage Loans on the
Owner's behalf, in accordance with the terms of this Agreement, the Mortgage
Loans and Accepted Servicing Practices, giving due consideration to customary
and usual standards of practice of prudent institutional residential mortgage
loan servicers of comparable Mortgage Loans and with a view to the maximization
of timely recovery of principal and interest on the Mortgage Loans, but without
regard to: (i) any relationship that Servicer or any of its affiliates may have
with any Borrower or affiliate or manager thereof, (ii) Servicer's obligations
to make advances or to incur servicing expenses with respect to the Mortgage
Loans, or (iii) Servicer's right to receive compensation for its services
hereunder.
(b) Subject to the provisions of Section 2.2(a), above, Servicer shall
have full power and authority to do or cause to be done any and all things in
connection with such servicing and administration which Servicer may deem
necessary or desirable. In accordance with this Agreement, the Owner will
provide Servicer upon request with any powers of attorney necessary to undertake
the duties of Servicer. Servicer agrees to use its best efforts to service and
administer the Mortgage Loans in accordance with applicable state and federal
law.
(c) Without limiting the generality of the foregoing, the Servicer shall
and is hereby authorized and empowered by the Owner to: (i) execute and deliver,
on behalf of the Owner, any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, with respect to the Mortgage Loans
and with respect to the related Mortgaged Property, (ii) consent to any
modification of the terms of the Note if the effect of any such modification
will not materially or adversely affect the security afforded by the related
Mortgaged Property, (iii) institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure on behalf of the Owner, (iv) execute subordination
agreements affecting the lien priority of the Security Instrument and (v) take
title in the name of the Owner to any Mortgaged Property upon such foreclosure
or delivery of deed in lieu of foreclosure.
Section 2.3 Sub-Servicers
The Servicer may perform its servicing responsibilities through agents
or independent contractors acting as sub-servicers, but shall not thereby be
released from any of its
5
9
responsibilities hereunder, and the Servicer shall diligently pursue all of its
rights against such sub-servicer. Notwithstanding any agreement with a
sub-servicer, any of the provisions of this Agreement relating to agreements or
arrangements between the Servicer and a sub-servicer or reference to actions
taken through a sub-servicer or otherwise, the Servicer shall remain obligated
and liable to the Owner for the servicing and administering of the Mortgage
Loans in accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such sub-servicing agreements or
arrangements or by virtue of indemnification from the sub-servicer for any acts
and omissions and to the same extent and under the same terms and conditions as
if the Servicer alone were servicing and administering the Mortgage Loans and
any other transactions or services relating to the Mortgage Loans involving the
sub-servicer shall be deemed to be between the sub-servicer and the Servicer
alone and the Owner shall have no obligations, duties or liabilities with
respect to the subservicer including no obligation, duty or liability of the
Owner to pay sub-servicer's fees and expenses. For purposes of this Agreement,
the Servicer shall be deemed to have received payments on Mortgage Loans when
the sub-servicer has received such payments. The Servicer shall pay all fees and
expenses of the sub-servicer from its own funds, the Servicing Fee or other
amounts permitted to be retained by or reimbursed to the Servicer hereunder.
Notwithstanding the foregoing, Servicer may in its sole judgment
delegate specific servicing obligations to computer bureaus, credit bureaus,
real estate tax service companies, real estate brokers or agents, attorneys,
trustees, and others, provided Servicer remains responsible for all action taken
or not taken by such companies, agents, representatives and others throughout
the term of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Servicer
Servicer represents and warrants to, and covenants with, the Owner that:
(a) Servicer is, and throughout the term of this Agreement will remain
(i) a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and (ii) duly qualified and in good standing
to transact any and all of its business, including the duties under this
Agreement;
(b) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action and the execution and delivery
of this Agreement by Servicer in the manner contemplated and the performance of
and compliance with the terms will not violate, contravene or create a default
under any applicable federal, state or local laws, licenses or permits;
(c) The execution and delivery of this Agreement by Servicer and the
performance of and compliance with its obligations and covenants do not require
the consent or approval of any governmental authority or, if such consent or
approval is required, it has been or will be obtained prior to such becoming
required;
6
10
(d) Assuming the due authorization and valid execution and delivery of
this Agreement by Owner, this Agreement, when executed and delivered by
Servicer, will constitute a valid, legal and binding obligation of Servicer,
enforceable against Servicer in accordance with its terms, except as the
enforcement thereof may be limited by applicable debtor relief laws and except
as certain equitable remedies may be available regardless of whether enforcement
is sought in equity or law; and
(e) There is no litigation pending or, to Servicer's knowledge
threatened, which, if determined adversely to Servicer, would adversely affect
the execution, delivery or enforceability of this Agreement or Servicer's
ability to perform its obligations hereunder.
Section 3.2 Representations and Warranties of the Owner
As of the date of this Agreement and each Transfer Date, Owner
represents and warrants to, and covenants with, the Servicer that:
(a) The Owner owns, without limitation, (i) all right, title and
interest in the Mortgage Loans (including, without limitation, the security
interest created thereby), (ii) all the rights as a lender under any Insurance
Policy relating to a Mortgaged Property securing a Mortgage Loan for the benefit
of the owner of such Mortgage Loan, and (iii) all proceeds derived from any of
the foregoing;
(b) Owner is, and throughout the term of this Agreement will remain (i)
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and (ii) duly qualified and in good
standing to transact any and all of its business;
(c) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action and the execution and delivery
of this Agreement by Owner in the manner contemplated and the performance of and
compliance with the terms hereof by it will not violate, contravene or create a
default under any charter document or bylaw of the Owner or any contract,
agreement, or instrument to which the Owner is a party or by which Owner or any
of its property is bound;
(d) The execution and delivery of this Agreement by Owner and the
performance of and compliance with its obligations and covenants do not require
the consent or approval of any governmental authority or, if such consent or
approval is required, it has been or will be obtained prior to such becoming
required;
(e) Assuming the due authorization and valid execution and delivery of
this Agreement by Servicer, this Agreement, when executed and delivered by
Owner, will constitute a valid, legal and binding obligation of Owner,
enforceable against Owner in accordance with its terms, except as the
enforcement may be limited by applicable debtor relief laws and except as
certain equitable remedies may be available regardless of whether enforcement is
sought in equity or law;
(f) There is no litigation pending or, to Owner's knowledge, threatened,
which, if determined adversely by Owner, would adversely affect the execution,
delivery or enforceability of this Agreement or Owner's ability to perform its
obligations;
7
11
(g) Owner holds legal right, title and interest to the Mortgage Loans
and no other party has the right to collect payments with respect thereto and
the Owner has the full power and authority to assign the servicing functions to
Servicer;
(h) All information provided to Servicer by Owner, including any copies
of Mortgage Loan Documents, information relating to the origination of such
Mortgage Loan, the prior servicing experience and any and all of the Mortgage
Loan balances and identification of any litigation affecting a contract or the
servicing thereof is true, correct and complete in all material respects;
(i) The information set forth in each Mortgage Loan Schedule is true and
correct in all material respects as of each Transfer Date;
(j) Each Security Instrument is a valid lien on the related Mortgaged
Property;
(k) To the Owner's best knowledge, no Mortgage Loan is subject to any
offset, defense or counterclaim;
(l) To the Owner's best knowledge, the physical property subject to each
Security Instrument is free of material damage;
(m) Each Mortgage Loan at the time it was made complied in all material
respects with applicable state and federal laws and regulations, including,
without limitation, usury, equal credit opportunity and disclosure laws and
regulations;
(n) The Owner has not received a written notice of default of any senior
mortgage loan related to a Mortgage Loan which has been cured by a party other
than such Owner;
(o) To the Owner's best knowledge, no Mortgage Loan is subject to (i)
any mechanics lien or claim for work, labor or material of which the Owner has
received written notice and that is or may be a lien prior to, or equal or
coordinate with, the lien of the related Security Instrument, or (ii) any
delinquent tax or assessment lien against the related Mortgage Property;
(p) A lender's title insurance policy or binder, or other assurance of
title customary in the relevant jurisdiction, is in full force and effect with
respect to each Mortgage Property;
(q) Each Mortgage Loan is covered by appropriate Hazard Insurance and,
if applicable, Flood Insurance;
(r) Each Mortgage Loan is covered by a Tax Service Contract which is
assignable to Servicer or, for each Mortgage Loan not covered by such Tax
Service Contract, the Owner agrees to purchase such Tax Service Contract; and
(s) Each Mortgage Loan is covered by a Flood Zone Service Contract which
is assignable to Servicer or, for each Mortgage Loan not covered by such Flood
Zone Service Contract, the Owner agrees to purchase such Flood Zone Service
Contract.
8
12
ARTICLE IV
ACCOUNTING AND REPORTING
Section 4.1 Collection of Mortgage Loan Payments
(a) Continuously from the date hereof until the principal and interest
on the Mortgage Loans is paid in full, Servicer agrees to proceed diligently to
collect all payments called for under the terms and provisions of the Mortgage
Loans, and shall follow such collection procedures mutually agreed to and as may
be amended from time to time by Owner and Servicer with respect to Mortgage
Loans to the extent such procedures are consistent with this Agreement and the
terms of any Insurance Policy and in accordance with Accepted Servicing
Practices.
(b) The Servicer may in its sole discretion (i) waive late payment
charges, prepayment penalties/charges, assumption fees, charges for checks
returned insufficient funds or other fees which may be collected in the ordinary
course of servicing the Mortgage Loans; or (ii) if a Borrower is in default (as
defined in the Mortgage Loan), arrange with the Borrower a schedule for the
payment of delinquent payments due on the related Mortgage Loan.
Section 4.2 Interest Calculations
Monthly interest calculations for periods of a full month must be based
on a 30-day month and 360-day year, if permitted by the Note or by the law.
Interest calculations for periods of less than a full month (such as for a
Liquidation) must be calculated on the basis of actual days elapsed in a month
and a 365-day year unless otherwise provided by applicable federal or state law.
Section 4.3 Application of Mortgage Loan Payments
A payment from the Borrower will normally consist of interest, principal
and, if applicable, deposits for insurance and taxes and late charges. Payments
received from Borrowers shall be applied in the following order unless otherwise
required by, the Mortgage Loan Documents, applicable state and federal
requirements or by a Mortgage Insurer:
(a) Deposits for taxes and insurance;
(b) Required monthly interest;
(c) Required monthly principal; and
(d) All other fees or penalties.
Section 4.4 Establishment of Collection Account; Deposits in Collection Account
(a) The Servicer shall establish and maintain a Collection Account, (the
"Collection Account"), which shall be an Eligible Account and may be interest
bearing, titled "Advanta Mortgage Corp. USA" in trust for the Owner.
9
13
(b) The Servicer shall deposit in the Collection Account within two (2)
Business Days of receipt, and retain therein the following payments and
collections received or made with respect to the Mortgage Loans:
(i) all principal collections;
(ii) all interest collections;
(iii) all Liquidation Proceeds net of expenses;
(iv) all proceeds received by the Servicer under any Insurance
Policy, other than proceeds to be held in the Escrow Account and applied
to the restoration or repair of the Mortgaged Property or released to
the Borrower in accordance with Accepted Servicing Procedures; and
(v) all awards or settlements in respect of condemnation
proceedings or eminent domain affecting any Mortgaged Property which are
not released to the Borrower in accordance with Accepted Servicing
Practices.
(c) The Servicer may invest all or a portion of the funds in the
Collection Account in Permitted Investments in the name of the Servicer. The
Servicer shall receive as Additional Servicing Compensation all income and gain
realized from any such Permitted Investment. If any principal losses are
incurred in respect of any Permitted Investments, Servicer shall reimburse and
restore to the Collection Account the amount of any such principal losses out of
Servicer's own funds immediately as realized. Notwithstanding the foregoing,
Servicer's right to invest funds in the Collection Account shall in no way limit
the rights of Servicer to be compensated for its services as provided in this
Agreement.
(d) The requirements in this Section 4.4 for deposit in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of assumption
processing charges, modification charges, demand fees, insufficient funds fees
and reconveyance fees need not be deposited by the Servicer in the Collection
Account.
Section 4.5 Withdrawals from the Collection Account
The Servicer shall, from time to time, withdraw funds from the
Collection Account for the following purposes:
(a) to reimburse itself for unreimbursed Servicing Advances, and for
accrued and unpaid Servicing Fees, the Servicer's right to reimburse itself
pursuant to this subclause (a) with respect to any Mortgage Loan being limited
to related Liquidation Proceeds, condemnation proceeds, REO Disposition
Proceeds, amounts representing proceeds of any Insurance Policy related to such
Mortgage Loan and such other amounts as may be collected by the Servicer from
the Borrower or otherwise relating to the Mortgage Loan, it being understood
that, in the case of any such reimbursement, the Servicer's right thereto shall
be prior to the rights of Owner;
(b) to reimburse itself for expenses incurred by and reimbursable to it
pursuant to Sections 4.10, 6.7, 6.15 and 6.16;
10
14
(c) to pay to itself any interest earned on funds deposited in the
Collection Account;
(d) to withdraw any amounts inadvertently deposited in the Collection
Account or not required to be deposited therein;
(e) to make payments to the Owner in the amounts and in the manner
provided herein; and
(f) to clear and terminate the Collection Account upon the termination
of this Agreement.
If after receipt and application of Liquidation Proceeds in accordance
with the foregoing, the Servicer has sustained an unrecovered loss in connection
with a Servicing Advance, the amount of unrecovered loss shall be reimbursed to
the Servicer, first, from amounts in the Collection Account, or if such funds
are insufficient, by payment to the Servicer by the Owner within ten (10)
Business Days of the receipt of notice by such Owner of such amount.
The Servicer shall distribute that portion of collections on the
Mortgage Loans due to the Owner in the amounts and in the manner provided herein
on each Remittance Date.
Section 4.6 Establishment of Escrow Account; Deposits in Escrow Account
(a) The Servicer shall establish and maintain an Escrow Account, in the
form of a time deposit or demand account, which may be interest bearing, titled,
with respect to Escrow Payments actually held by the Servicer, "Advanta Mortgage
Corp. USA in trust for Borrowers' Escrow Payments". Such Escrow Account shall be
established with a commercial bank, a savings bank or a savings and loan
association selected by Servicer in accordance with Accepted Servicing
Practices. The Escrow Account shall be drawable upon by the Servicer as provided
herein.
(b) The Servicer shall deposit in the Escrow Account within two (2)
Business Days of receipt or earlier if so required by law and retain therein:
(i) all Escrow Payments collected on account of the Mortgage Loans, for the
purpose of effecting timely payment of any such items as required under the
terms of this Agreement, and (ii) all amounts representing proceeds of any
Insurance Policy which are to be applied to the restoration or repair of any
Mortgaged Property. To the extent required by law, the Servicer shall at its
sole expense pay interest on escrowed funds to the Borrower notwithstanding that
the Escrow Account may not bear interest.
(c) The Servicer may invest the funds in an Escrow Account in Permitted
Investments which shall be in the name of the Servicer or its nominee, in either
case in the trust capacity in which the related Escrow Account is held. The
Servicer shall receive as Additional Servicing Compensation an amount equal to
all income and gain realized from any such Permitted Investment, but only to the
extent such gain to Servicer is (i) not prohibited by applicable law and (ii) in
excess of amounts necessary to make any interest payments required by the
Mortgage Loan Documents or applicable law to be made to the applicable Borrower.
If any losses are incurred in respect of any Permitted Investments, Servicer
shall immediately reimburse and restore to the applicable Escrow Account the
amount of any such losses out of Servicer's own funds as realized.
Notwithstanding the foregoing, Servicer's right to invest
11
15
funds in the Escrow Account shall in no way limit the rights of Servicer to be
compensated for its services as provided in this Agreement.
Section 4.7 Withdrawals From Escrow Account
Withdrawals from the Escrow Account shall be made by the Servicer, only
(a) to effect timely payment of taxes, mortgage insurance premiums,
flood, fire and hazard insurance premiums or other items constituting Escrow
Payments for the related Mortgage Loan;
(b) to reimburse the Servicer for any Servicing Advance made by the
Servicer to effect the payment of taxes or insurance required under the terms of
the related Mortgage Loan, but only from amounts received on the related
Mortgage Loan which represent late payments or 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 Mortgage Loan or applicable law;
(d) for application to restoration or repair of the Mortgaged Property;
(e) to pay to the Borrower, to the extent required by law, any interest
paid on the funds deposited in the Escrow Account;
(f) to pay to itself any interest earned on funds deposited in the
Escrow Account;
(g) to remove any deposits made in error; or
(h) to clear and terminate the Escrow Account upon termination of this
Agreement.
Section 4.8 Servicing Advances
As required, Servicer agrees to make Servicing Advances for the
preservation of any Mortgaged Property, including the payment of accrued and
unpaid taxes, forced placed hazard insurance and repayment of senior liens. It
is understood that Servicer's obligation to make such Servicing Advances shall
continue until (i) the payment in full of the Mortgage Loan or (ii) the date on
which the Mortgaged Property is liquidated; provided however, Servicer shall
have no obligation to make Servicing Advances if, in the sole determination of
Servicer, such Servicing Advance would constitute a Nonrecoverable Advance.
Section 4.9 Monthly Remittance and Reports
(a) The Servicer shall service the Mortgage Loans on an actual/actual
remittance basis with the accounting cutoff with respect to each Remittance Date
of the last day of the month immediately preceding such Remittance Date.
(b) Not later than the fifteenth (15th) day of each calendar month, or
the succeeding business day should the fifteenth not be a business day, the
Servicer shall prepare and deliver the following reports with respect to
activity for the most recently ended prior calendar month:
12
16
(i) a trial balance report including all Mortgage Loans;
(ii) a monthly remittance report;
(iii) a report setting forth any Mortgage Loans added or
deleted;
(iv) a report setting forth curtailment or prepayments; and
(v) reports setting forth delinquency detail (including
bankruptcy, foreclosure and REO status).
Section 4.10 Servicing Compensation
(a) As compensation for its activities hereunder, the Servicer shall be
entitled to retain as to each Mortgage Loan, a Servicing Fee of 0.25% per annum
(twenty-five basis points) with respect to each fixed rate Mortgage Loan and
0.37.5% per annum (thirty-seven and one-half basis points) with respect to each
adjustable rate Mortgage Loan which shall be retained by Servicer from the
interest portion of the Mortgage Loan payments as received from a Borrower and
from Liquidation Proceeds, as applicable.
(b) Servicer shall be entitled to retain the Additional Servicing
Compensation.
(c) In addition, Owner shall pay Servicer a set-up fee of $50.00 per
Mortgage Loan for each Mortgage Loan transferred to Servicer and serviced
hereunder. At such time as Owner is delivering 200 or more Mortgage Loans per
month pursuant to this Agreement for servicing, Servicer and Owner shall
diligently pursue implementation of a system of "electronic boarding" in order
to reduce the time required to set-up Mortgage Loans for servicing on Servicer's
loan servicing system. Owner shall not be charged a set-up fee in excess of the
amount set forth above for this service. Furthermore, in the event no "lifetime"
tax contracts are presently in force which are assignable to Servicer, Owner
agrees to reimburse Servicer the cost of purchasing a tax contract for each
Mortgage Loan in this category. Servicer shall furnish Owner with a monthly
statement detailing the Mortgage Loan set-up fees incurred and/or tax contracts
purchased during the immediately preceding month. Servicer shall have the right
to withdraw on a monthly basis from the Collection Account all accrued and
unpaid set-up fees and tax contract charges incurred in the prior month.
ARTICLE V
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 5.1 Enforcement of Due-On-Sale Clause; Assumption
The Servicer is required to enforce any due-on-sale clause in the Note
or Security Instrument to the extent permitted by applicable law upon the
transfer of title to the Mortgaged Property unless (i) the Mortgage Loan
Documents, including riders or addenda permit such a transfer or (ii)
enforcement of the due-on-sale clause will jeopardize the Mortgage Insurance
coverage, if any, on such Mortgage Loan. In all circumstances of unapproved
transfer initiated by the Borrower, the Servicer is required to promptly notify
the Mortgage Insurer, if any, of
13
17
such transfer, and obtain written approval from the Mortgage Insurer (if
required under the applicable Mortgage Insurance Policy) before initiating
enforcement proceedings.
Notwithstanding the preceding paragraph, Owner authorizes Servicer to
waive, in the sole discretion of Servicer, the enforcement of a due-on-sale
clause on any Mortgage Loan and permit the assumption of such Mortgage Loan,
subject to the following conditions:
(a) No material term of the Note, including, but not limited to, the
rate of interest on the Note and the remaining term to maturity, may be changed
in connection with such assumption, provided however, such limitation shall not
apply to interest rate, payment or amortization changes otherwise provided for
under the terms of the Note, such as in the case of an adjustable rate mortgage;
(b) The Servicer has performed a credit review of the new borrower and
determined that the new borrower is a prudent credit risk in the sole opinion of
the Servicer. Owner hereby authorizes Servicer to apply more liberal credit
standards and underwriting in connection with a request for an assumption of a
Mortgage Loan than Servicer would apply for comparable new loans which Servicer
is then originating for its own account, if Servicer in its sole discretion,
reasonably believes there is a risk of foreclosure on the Mortgage Loan in the
event the assumption is denied;
(c) The Mortgage Insurer has approved in writing the assumption of the
Mortgage Loan by the new borrower and such Mortgage Loan will continue to be
insured by such Mortgage Insurer;
(d) The new borrower executes documents assuming all the obligations of
the Borrower under the Mortgage Loan Documents;
(e) The Mortgage Loan will continue to be secured, and insured with a
Title Insurance Policy, if any, by a valid security interest upon the Mortgaged
Property of the same lien priority as existed immediately prior to such
assumption;
(f) The Servicer has determined that the estimated net realizable value
of the Mortgaged Property, in the sole judgment of the Servicer, is less than
the then unpaid principal balance of the related Note, plus accrued interest to
the estimated date of the closing of the sale of Mortgaged Property to the new
borrower; and
(g) The Servicer shall provide the Owner the original assumption
agreement following execution thereof.
Subject to the terms of the Note and Security Instrument, and applicable
law or regulation, the Servicer may charge a reasonable and customary assumption
fee, and the Servicer may retain such fee as Additional Servicing Compensation.
Section 5.2 Maintenance of Insurance
(a) The Servicer shall cause to be maintained with respect to each
Mortgage Loan a Hazard Insurance Policy with a generally acceptable carrier that
provides for fire and extended coverage, and for a recovery of any insurance
proceeds relating to such Mortgage Loan by the Servicer on behalf of the Owner.
14
18
(b) If the Mortgage Loan relates to a Mortgaged Property identified at
origination in the Federal Register by the Federal Emergency Management Agency
as having a special flood hazard, the Servicer will cause to be maintained with
respect thereto a Flood Insurance Policy with a generally acceptable carrier
which provides for a recovery of any insurance proceeds relating to such
Mortgage Loan by the Servicer on behalf of the Owner.
(C) With respect to each Mortgage Loan that provides for the collection
of escrow funds for the payment of fire and hazard insurance or flood insurance,
the Servicer shall effect the payment thereof prior to the applicable policy
termination date employing for such purpose deposits in the Escrow Account which
shall have been estimated and accumulated by the Servicer in the amounts
sufficient for such purposes. To the extent a Mortgage Loan does not provide for
escrow payments and the Borrower fails to maintain any required insurance
coverage, the Servicer shall by a Servicing Advance make the payment required to
effect the applicable in-force policy for the related Mortgaged Property.
(d) Notwithstanding the preceding paragraphs, the Servicer at its option
may obtain and maintain, with respect to all or any portion of the Mortgage
Loans, a blanket insurance policy with extended coverage insuring against fire,
hazard and flood, as applicable. The Servicer shall be deemed conclusively to
have satisfied its obligations with respect to Hazard Insurance and Flood
Insurance coverage under this Section if such blanket policy names the Servicer
as "Loss Payee" and provides coverage in an amount equal to the aggregate unpaid
principal balance of the Mortgage Loans without co-insurance.
Section 5.3 Cancellation of Mortgage Insurance
If a Borrower requests cancellation of the Mortgage Insurance Policy,
the Servicer shall ensure that the FNMA guidelines governing cancellation are
followed in connection with any cancellation.
Section 5.4 Reserved For Future Use
Section 5.5 Liquidation of Defaulted Mortgage Loans
(a) The Servicer, on behalf of the Owner, shall foreclose upon or
otherwise take title, in the name of Owner, to Mortgaged Property (such as by a
deed in lieu of foreclosure) for any Mortgage Loan which is in default and as to
which no satisfactory arrangements, in the sole reasonable opinion of Servicer,
can be made for collection of delinquent payments. In connection with such
foreclosure or other transfer of title, the Servicer shall exercise the rights
and powers vested in it hereunder, and use the same degree of care and skill in
such exercise or use, as prudent servicers would exercise or use under similar
circumstances in the conduct of their own affairs, including, but not limited
to, making Servicing Advances for the payment of taxes, amounts due with respect
to senior liens, and insurance premiums.
(b) In determining whether or not to foreclose upon or otherwise
comparably transfer title to such Mortgaged Property, the Servicer shall take
into account the existence of any condition upon or impacting the Mortgaged
Property in the nature of hazardous substances, hazardous wastes, infectious
waste, toxic substance, solid wastes and so forth, as such terms now or in the
future are defined or listed in, or otherwise classified pursuant to, or
regulated by, any applicable environmental laws, including but not limited to
all present and future federal, state or local laws, ordinances, rules,
regulations, decisions and other
15
19
requirements of governmental authorities relating to the environment or to any
hazardous substance.
Section 5.6 Deed-in-Lieu of Foreclosure
If the Owner and, if applicable, the Mortgage Insurer have approved the
liquidation of a Mortgage Loan by accepting a deed-in-lieu of foreclosure, the
Servicer may accept such deed provided that:
(a) Marketable title, as evidenced by a Title Insurance Policy, can be
conveyed to and acquired by the Owner or its designee;
(b) The transaction complies with all requirements of each Mortgage
Insurer, if any, and does not and will not violate or contravene any restriction
or prohibition of any Mortgage Insurance Policy, if any, or otherwise result in
any loss of or reduction in the coverage of benefits under such policies;
(c) No cash consideration is paid to the Borrower;
(d) The Mortgaged Property is vacant at the time of the Borrower's
conveyance thereof, unless occupancy has been approved by each Mortgage Insurer,
if any; and
(e) The Servicer has obtained from the Borrower a written acknowledgment
that the deed is being accepted as an accommodation to the Borrower and on the
condition that the Mortgaged Property will be transferred to the Owner that owns
such Mortgage Loan free and clear of all claims, liens, encumbrances,
attachments, reservations or restrictions except for those to which the
Mortgaged Property were subject at the time the Mortgaged Property became
subject to the lien of the Security Instrument.
Upon acquisition of any such Mortgaged Property, the Servicer shall
promptly advise the Owner and each Mortgage Insurer by letter, indicating the
details of the transaction and reasons for the conveyance and providing such
other information as is required by each Mortgage Insurer. Title shall be
conveyed directly from the Borrower to the Owner, or to such other Person
designated by the Owner.
Section 5.7 Real Estate Owned
Title, Management and Disposition of REO Property.
(a) In the event that title to the 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 Owner. The Owner agrees to cooperate with
Servicer and take such actions as shall be necessary for the Servicer to take
title to the Mortgaged Property in the name of the Owner.
(b) Notwithstanding the generality of the foregoing provision, the
Servicer shall manage, conserve, protect and operate each REO Property for the
Owner solely for the purpose of its prompt disposition and sale. Pursuant to its
efforts to sell such REO Property, the Servicer shall either itself or through
an agent selected by the Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, but shall not be obligated to, incident to its
conservation and protection of the interests of the Owner, rent the same, or any
part
16
20
thereof, as the Servicer deems to be in the best interests of the Owner for the
period prior to the sale of such REO Property. The Servicer shall attempt to
sell the same on such terms and conditions as the Servicer deems to be in the
best interest of the Owner.
(c) The Servicer shall cause to be deposited within two (2) Business
Days of receipt in the Collection Account all revenues received with respect to
the conservation and disposition of each REO Property and shall be permitted to
retain from such revenues funds necessary for the proper operation, management
and maintenance of the REO Property, including reimbursement for its Servicing
Advances and fees of any managing agent acting on behalf of the Servicer.
Section 5.8 Possession of Mortgage Files by Servicer.
From time to time in connection with the servicing of the Mortgage Loans
hereunder, the Servicer may take possession of all or a portion of the documents
relating to the Mortgage Loans as may be held by the Owner. Such documents shall
be held in trust by the Servicer for the benefit of the Owner as the owner
thereof and the Servicer's possession of such document or documents is at the
will of the Owner for the sole purpose of servicing the related Mortgage Loan,
and such retention and possession by the Servicer is in a custodial capacity
only.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Owner to Cooperate
From time to time and as appropriate in the servicing of any Mortgage
Loan, including without limitation, the payment in full of any Mortgage Loan,
notification that payment in full will be escrowed, foreclosure or other
comparable conversion of a Mortgage or collection under any applicable Insurance
Policy, the Owner, upon request of the Servicer shall, within three (3) Business
Days, release or cause the release and delivery of the related Mortgage Loan
Documents to the Servicer. Owner acknowledges that proper servicing of the
Mortgage Loans in accordance with Accepted Servicing Practices and applicable
law is dependent upon Servicer's ability to obtain Mortgage Loan Documents in a
timely manner.
Section 6.2 Assignment of Agreement
(a) Servicer agrees to not sell, transfer, pledge or otherwise dispose
of its right to receive all or any portion of the Servicing Fees, and any such
attempted sale, transfer, pledge or disposition shall be void, unless such
transfer is made to a successor servicer with the prior written consent of the
Owner.
(b) Owner agrees to not transfer its rights and obligations under this
Agreement to a new owner without the prior written consent of Servicer. Any
transfer in violation of this Section 6.2(b) shall be a default under the terms
of this Agreement and Servicer shall have no obligation pursuant to Section 4.5
or 4.9 to make payments or provide reports to the new owner.
17
21
Section 6.3 Access to Certain Documentation Regarding the Loans
Upon reasonable advance notice, Servicer shall provide reasonable access
during normal business hours at its offices to the Owner, or any agents or
representatives thereof, to any reports and to information and documentation
regarding the Mortgage Loans.
Section 6.4 Default By Servicer
Owner may terminate this Agreement upon the happening of any one or more
of the following events:
(a) Falsity in any material respect of any representation of warranty of
Servicer contained in this Agreement and failure of Servicer to cure the
condition or event causing any such representation or warranty to be false
within sixty (60) days after the Servicer's receipt of written notice from Owner
specifying such falsity and requesting that it be cured or corrected;
(b) Failure of Servicer to duly observe or perform in any material
respect any other covenant, condition, or agreement in this Agreement for a
period of forty-five (45) days after receipt of written notice by Servicer from
Owner, specifying such failure and requesting that it be remedied; provided,
however, if the failure stated in the notice cannot be corrected within the
applicable period, Owner shall consent to a reasonable extension of time if
corrective action is instituted by Servicer within the applicable period and is
diligently pursued until corrected;
(c) Decree or order of a court, agency or supervisory authority having
jurisdiction in the premises appointing a trustee, conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceeding affecting Servicer or any of its properties
utilized in connection with the performance of servicing, or for resolving the
liquidation of the affairs of Servicer, if such decree or order shall have
remained in force undischarged or unstayed for a period of ninety (90) days;
(d) Commencement by Servicer as debtor of any case or proceeding under
any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
law;
(e) Consent by Servicer to the appointment of a trustee, conservator,
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceeding affecting Servicer or
substantially all of its properties; or
(f) Admission in writing by Servicer of its inability to pay debts
generally as they mature, or the making of an assignment for the benefit of
creditors.
If any of the events specified in (c) through (f) above shall occur,
Servicer shall give written notice of such occurrence to Owner within ten (10)
days of the happening of such event. Any such termination shall be effective as
of the date stated in a written notice delivered to Servicer.
Section 6.5 Default by Owner
Servicer may terminate this Agreement upon the happening of any one or
more of the following events:
18
22
(a) Falsity in any material respect of any representation or warranty of
Owner contained in this Agreement and failure of Owner to cure the condition or
event causing such representation or warranty to be false within sixty (60) days
after Owner's receipt of written notice from Servicer specifying such falsity
and requesting that it be cured or corrected;
(b) Such other breach of this Agreement by Owner which materially and
adversely affects Servicer, which breach shall continue for a period of sixty
(60) days after receipt of written notice by Owner from Servicer, specifying
such breach and requesting that it be remedied; provided however, if the breach
stated in the notice cannot be remedied within the applicable period, Servicer
shall consent to a reasonable extension of time if corrective action is
instituted by Owner within the applicable period and is diligently pursued until
corrected;
(c) Decree or order of a court, agency or supervisory authority having
jurisdiction in the premises appointing a trustee, conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceeding affecting Owner or any of its properties
utilized in connection with the performance of Servicer's duties hereunder, or
the winding up or liquidation of the affairs of Owner, if such decree or order
shall have remained in force undischarged or unstayed for a period of ninety
(90) days;
(d) Commencement by Owner as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law;
(e) Consent by Owner to the appointment of a trustee, conservator,
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceeding affecting Owner or substantially
all of its properties; or
(f) Admission in writing by Owner of its inability to pay debts
generally as they mature, or the making of an assignment for the benefit of
creditors.
If any of the events specified in (c) through (f) above shall occur,
Owner shall give written notice of such occurrence to Servicer within ten (10)
days of the happening of such event. Any such termination shall be effective as
of the date stated in a written notice delivered to Owner.
Section 6.6 Reserved for Future Use
Section 6.7 Indemnification By Owner
Owner shall indemnify and hold Servicer harmless from and shall
reimburse Servicer for any losses, damages, deficiencies, claims, penalties,
forfeitures, causes of action or expenses of any nature (including reasonable
attorneys' fees) incurred by Servicer which arise out of or result from:
(a) The inaccuracy of any representation of Owner contained in this
Agreement or material breach of any warranty, covenant or agreement made or to
be performed by Owner pursuant to this Agreement;
(b) the failure of the originator of any Mortgage Loan to originate such
Mortgage Loan in accordance with applicable law;
19
23
(c) the failure of any prior servicer to service the Mortgage Loan in
accordance with any applicable law;
(d) any matters that occurred prior to the Transfer Date for the
Mortgage Loan involved or any incomplete or incorrect Mortgage Loan data,
records or information provided in connection with the origination or prior
servicing of any Mortgage Loan;
(e) Owner's failure to fulfill the servicing responsibilities not
assumed by Servicer or otherwise resulting from Owner preventing, hampering or
impeding Servicer's performance of its duties and responsibilities under this
Agreement; or
(f) Any litigation or claim with respect to the Mortgage Loans,
including any litigation relating to ARM Loans, not arising out of, or resulting
from, Servicer's failure to observe the terms and covenants of the Mortgage
Loans or this Agreement.
It is understood and agreed that the indemnification set forth in this
Section 6.7 shall survive termination of this Agreement. The Servicer shall
promptly notify the Owner if a claim is made by a third party with respect to
this Agreement or the Mortgage Loans, and the Servicer at its option may assume
the defense of any such claim. The Owner shall, within ten (10) Business Days
of receiving a statement of amounts advanced by the Servicer in connection with
the defense of any such claim, reimburse the Servicer for all amounts advanced
by it pursuant to this Section 6.7, except to the extent that such claim is
caused by the Servicer's failure to service the Mortgage Loans in compliance
with the terms of this Agreement.
Section 6.8 Fidelity Bond and Errors Omissions Insurance
Servicer agrees to obtain and maintain at its expense and shall keep in
full force and effect throughout the term of this Agreement, a blanket fidelity
bond and an errors and omissions insurance policy covering its officers and
employees and other persons acting on its behalf in connection with the
servicing activities hereunder. The amount of coverage shall be at least equal
to the corresponding amounts required by FNMA in the FNMA Servicing Guide or by
FHLMC in the FHLMC Sellers' and Servicers' Guide. In the event that any such
bond or policy ceases to be in effect, Servicer agrees to obtain a comparable
replacement bond or policy with equivalent coverage. No provision of this
Section shall operate to diminish or restrict or otherwise impair the Servicer's
responsibilities and obligations set forth in this Agreement.
Section 6.9 Indemnification by Servicer
Servicer shall indemnify and hold Owner harmless from and shall
reimburse Owner for any losses, damages, deficiencies, claims, penalties,
forfeitures, causes of action or expenses of any nature (including reasonable
attorneys' fees) incurred by Owner which arise out of or result from:
(a) The inaccuracy of any representation of Servicer contained in this
Agreement or material breach of any warranty, covenant or agreement made or to
be performed by Servicer pursuant to this Agreement;
(b) Any litigation or claim arising out of, or resulting from,
Servicer's failure to observe the terms and covenants of this Agreement;
20
24
(c) The failure of the Servicer to service such Mortgage Loan in
accordance with applicable law.
It is understood and agreed that the indemnification set forth in this
Section 6.9 shall survive termination of this Agreement.
Section 6.10 Amendment
This Agreement may be amended from time to time by written Agreement
signed by the Owner and the Servicer.
Section 6.11 Governing Law
This Agreement shall be construed in accordance with the laws of the
State of California, without regard to the conflict of laws or rules thereof,
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
Section 6.12 Notices
(a) 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, to (i) in case of the Servicer,
Advanta Mortgage Corp. USA, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: SVP Loan Servicing and (ii) in the case of the Owner, CMG
Mortgage Corp., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇, Senior Vice President or such other addressee as
the Owner or the Servicer may hereafter furnish.
(b) Any party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this Paragraph for giving of notice.
Section 6.13 Severability of Provisions
If any one or more of the covenants, agreements, provision 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 and terms of this Agreement and
shall in no way affect the validity or enforceability of the remaining
provisions of this Agreement.
Section 6.14 Document Deficiencies
The Servicer shall have no obligations to (i) address or any
deficiencies in Mortgage Loan documents transferred to it, (ii) seek any
document missing from any assignments relating to the transfer of any Mortgage
Loan to or from the Owner. The Servicer's responsibility is solely limited to
notifying the Owner as to any missing or document deficiency of which it becomes
aware.
21
25
Section 6.15 Termination
(a) The obligations and responsibilities of the Servicer shall terminate
with respect to each particular Mortgage Loan upon the earlier of (i) the
execution of a Pooling and Servicing Agreement with respect to a securitization
involving the Mortgage Loans, but only with respect to the Mortgage Loans
covered by such Pooling and Servicing Agreement, (ii) the whole loan sale of any
Mortgaged Loans by Owner, but only with respect to the Mortgage Loans covered in
the whole loan sale agreement, (iii) the final payment or other liquidation of
the last Mortgage Loan or (iv) the disposition of all property acquired upon
realization of any Mortgage Loan and the remittance of all funds due thereunder.
(b) Either Owner or Servicer may, at any time and in its sole
discretion, terminate this Agreement upon at least ninety (90) days prior
written notice to the other party; provided if the Owner terminates this
Agreement, Owner shall pay the Servicer a termination fee of $100.00 for each of
the terminated Mortgage Loans as of the last day of the related remittance
period. If Servicer terminates this Agreement it shall be liable to pay all
customary and reasonable costs associated with the transfer of Mortgage Loans to
a successor servicer.
(c) If Owner transfers servicing of some of the Mortgage Loans to
another servicer without terminating this Agreement, Owner shall pay to Servicer
$100.00 per Mortgage Loan transferred.
(d) The termination fees set forth in Sections 6.15(b) & (c) above shall
not be payable (i) upon termination of this Agreement pursuant to Section 6.4 or
(ii) with respect to those Mortgage Loans for which Servicer's obligations and
responsibilities under this Agreement terminate pursuant to Section 6.15(a)(i)
or (ii) concurrently with the engagement of Servicer as master servicer or
servicer pursuant to a pooling and servicing agreement or a whole loan sale
agreement. If payable, Servicer may deduct the termination fee from the
Collection Account on the first Remittance Date following the transfer of
servicing of each Mortgage Loan.
Section 6.16 Continued Cooperation
Servicer shall cooperate with Owner in Owner's future efforts to pool
the Mortgage Loans for securitization pursuant to which Servicer will be engaged
as a master servicer. Such cooperation shall include the Servicer's execution
and delivery of the appropriate pooling and servicing agreement. Servicer shall
furnish historical delinquency statistics evidenced by appropriate comfort
letters for Mortgage Loans serviced and administered by Servicer, estoppel
certificates and other information reasonably requested by Owner. Owner shall
bear all out-of-pocket expenses, including legal/professional expenses incurred
in connection with such securitizations and all other reasonable internal costs
of the Servicer for any services requested under this Section which are
significantly in excess of other services which the Servicer has agreed to
provide in this Agreement. Servicer shall have the right to withdraw from the
Collection Account all costs described in this Section 6.16.
Section 6.17 Master Servicer
(a) Owner and Servicer agree and acknowledge that the Owner shall
designate Servicer to act as master servicer for Mortgage Loans sold into a
securitization. Subsequent to the securitization, all Mortgage Loans which have
been securitized shall be serviced in
22
26
accordance with the terms of the related pooling and servicing agreement,
including but not limited to, the Servicer's obligation to:
(i) pay delinquency advances;
(ii) pay servicing advances;
(iii) dispose of any REO property within applicable REMIC
provision guidelines; and
(iv) provide applicable reports to the trustee.
(b) As compensation for its activity pursuant to this Section 6.17,
Servicer shall be entitled to retain or withdraw from the related trust
Collection Account as to each Mortgage Loan, a Servicing Fee of 0.25%
(twenty-five basis points) per annum for each fixed rate Mortgage Loan and
0.37.5% (thirty-seven and one-half basis points) per annum for each adjustable
rate loan serviced pursuant to the related pooling and servicing agreement. The
Servicing Fee shall be calculated and payable monthly and shall be computed on
the basis of the same principal amount and for the period respecting which any
related interest payment on a Mortgage Loan is computed.
Section 6.18 Attorneys' Fees
In the event any party hereto brings an action to enforce any of the
provisions of this Agreement, the party against whom judgment is rendered in
such action shall be liable to the others for reimbursement of their costs,
expenses and attorneys' fees, including such costs, expenses and fees as may be
incurred on appeal.
Section 6.19 No Solicitation
Unless specifically permitted by the Owner in advance, the Servicer
agrees not to use Servicer's records to specifically solicit any Borrower with
respect to the refinancing of a Mortgage Loan. Servicer agrees that it will not
take, permit or cause any action to be taken, directly or indirectly, to solicit
any Borrower to refinance the related Mortgage Loan or to purchase any financial
or insurance product or service, without the prior written consent of Owner;
provided, however, all promotions of any kind directed to the general public
derived from marketing lists of any nature shall not be considered solicitation
pursuant to this section and shall be permitted provided such marketing list
shall not have been generated from Servicer's servicing records. Furthermore,
Servicer shall not be prohibited from responding to unsolicited requests or
inquiries made by a Mortgagor.
23
27
Section 6.20 Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above mentioned.
Advanta Mortgage Corp. USA CMG Funding Corp.
By: BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President Title: Senior Vice President,
Correspondent Lending
24
28
Exhibit A
Schedule of Mortgage Loans
Prepared by:______________________________
Date: ______________________________
Next Original Current Lien
Borrower Due Principal Principal Escrow Per Diem PMI Position
Loan # Name Date Balance Balance Balance Interest (Y/N) (1st/2nd)
------ ---- ---- ------- ------- ------- -------- ----- ---------
Totals __________________ ___________ ______________ __________________
Number of Loans Total UPB Total Escrow Total Interest
_____________________ Received by:____________________
Total Wire
(Total Wire = Total Escrow + Total Interest) Date:___________________________
29
EXHIBIT B
Permitted Investments
(a) Direct general obligations of the United States or the obligation of
any agency or instrumentality of the United States fully and unconditionally
guaranteed, the timely payment or the guarantee of which constitutes a full
faith and credit obligation of the United States.
(b) Federal Housing Administration debentures.
(c) FHLMC participation certificates and senior debt obligations.
(d) Federal Home Loan Banks consolidated senior debt obligations.
(e) FNMA mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid principal)
and senior debt obligations.
(f) Federal funds, certificates of deposit, time and demand deposits;
and bankers acceptances (having original maturities of not more than 365 days)
of any domestic bank, the short-term debt obligations of which have been rated
A-1 or better by Standard & Poor's ("S&P") and P-1 by ▇▇▇▇▇'▇ Investment
Services ("Moody's").
(g) Investment agreements approved by the Owner provided:
(i) The agreement is with a bank or insurance company which
has an unsecured, uninsured and unguaranteed obligation (or
claims-paying ability) rated Aa2 or better by Moody's and AA or
better by S&P, or is the lead bank of a parent bank holding
company with an uninsured, unsecured and unguaranteed obligation
meeting such rating requirements, and
(ii) Moneys invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice
(provided such notice may be amended or canceled at any time
prior to the withdrawal date), and
(iii) The agreement is not subordinated to any other
obligations of such insurance company or bank, and
(iv) The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement, and
(v) The Owner receives an opinion of counsel that such
agreement is an enforceable obligation of such insurance company
or bank.
(h) Commercial paper (having original maturities of not more than 365
days) rated A-1 or better by S&P and P-1 or better by Moody's.
i
30
(i) Investments in money market funds rated AAAm or AAAm-G by S&P and
P-1 by Moody's.
(j) Investments approved in writing by the Owner and Servicer.
Provided that no instrument described above is permitted to evidence
either the right to receive (a) only interest with respect to obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provided a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations;
and provided further, that no instrument described above may be purchased at a
price greater than par if such instrument may be prepaid or called at a price
less than its purchase price prior to stated maturity.
ii
31
EXHIBIT C
SERVICING FILE
LOAN #: PREPARED BY:
------------------------------- ----------------------------
BORROWER NAME: DATE:
------------------------ -----------------------------------
LEFT SIDE
[ ] Loan Transaction History (if applicable)
[ ] Copy of Original Note
[ ] Copy of Original Recorded Security Instrument
(or copy of original RSI pending recordation)
[ ] Copy of Riders (if applicable)
[ ] ARM Rider
[ ] Balloon Rider
[ ] Prepayment Rider
[ ] Copy of W-9s
[ ] Copy of TransAmerica Tax Contract Transfer Notice
(if applicable)
[ ] Notice of Impounds
[ ] Initial Escrow Disclosure
[ ] Escrow Information Worksheet
[ ] PMI Certificate
[ ] Evidence of Hazard Insurance
(60 or 90 day Binder, Policy or Declarations Page)
[ ] Pinnacle Life of Loan Flood Certification/Determination
[ ] Evidence of Flood Insurance (if applicable)
[ ] Copy of Truth-In-Lending Disclosure (Reg Z)
[ ] Copy of Good Faith (itemization of amount financed)
[ ] Copy of HUD-1
RIGHT SIDE
[ ] Typed copy of 1003 (for all borrowers)
[ ] Copy of Appraisal (w/o pictures)
[ ] Copy of Borrower Notice of Servicing Transfer Letter
[ ] Copy of Lender Loss Payee Letter
(Hazard & Flood)
[ ] Copy of PMI Transfer Notice Letter
[ ] Copy of Original Title Policy
(or copy of Prelim until original Title Policy is rec'd.)
[ ] Verification of First Mortgage
(if loan is a second mortgage)
PLACE DOCUMENTS ON THE LEFT AND RIGHT SIDES OF THE FILE IN THE ABOVE
STACKING ORDER, USING SIDE TAB FOLDERS WITH DOUBLE ACCOS.