EXECUTION
MASTER SERVICING AGREEMENT
Dated as of June 1, 1998
among
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1998-1, Issuer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Master Servicer
and
FIRST UNION NATIONAL BANK, Trustee
Relating to the Mortgage Loans
Pledged as Collateral for the Issuer's
Collateralized Callable Mortgage Bonds,
in the Aggregate Initial
Principal Amount of $456,822,000
TABLE OF CONTENTS
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Page
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PRELIMINARY STATEMENT
Section 1. Defined Terms................................................ 1
Section 2. Mortgage Documents........................................... 15
(a) Trustee to Retain Possession of Documents through
Custodians............................................. 15
(b) Trustee and Custodians to Cooperate; Release of
Trustee Mortgage Files................................. 19
(c) Representations, Warranties and Covenants of the
Master Servicer, the Seller and the Issuer............. 20
(d) Covenants of the Master Servicer....................... 23
Section 3. General Duties of the Master Servicer........................ 23
(a) Master Servicer to Master Service Mortgage Loans....... 23
(b) Servicing; Enforcement of the Obligations of
Servicers.............................................. 23
(c) Successor Servicers.................................... 24
(d) Reserved............................................... 25
(e) Rights of the Issuer and the Trustee in Respect of
the Master Servicer.................................... 25
(f) Trustee to Act as Master Servicer...................... 25
(g) Collection of Mortgage Loan Payments; Bond Account;
Distribution Account................................... 26
(h) Determination of LIBOR................................. 29
(i) Master Servicer Monthly Data........................... 30
(j) Standard Hazard and Flood Insurance Policies........... 32
(k) Presentment of Claims and Collection of Proceeds....... 33
(l) Maintenance of the Primary Mortgage Insurance
Policies............................................... 33
(m) "Due-on-Sale" Clauses; Assumption Agreements........... 34
(n) Realization Upon Defaulted Mortgage Loans.............. 34
(o) REO Property........................................... 34
(p) Collection of Taxes, Assessments and Similar Items..... 35
(q) Annual Officer's Certificate as to Compliance.......... 35
(r) Annual Independent Public Accountants' Servicing
Statement; Financial Statements........................ 36
(s) Master Servicer Fidelity Bond and Master Servicer
Errors and Omissions Insurance Policy.................. 37
(t) Access to Certain Documentation and Indemnification.... 37
(u) Solicitation of Bids................................... 37
Section 4. Advances .................................................... 38
Section 5. Master Servicing Compensation and Expenses................... 38
(a) Master Servicer Compensation........................... 38
(b) Servicer Compensation.................................. 38
Section 6. Master Servicer.............................................. 39
(a) Liabilities of the Master Servicer..................... 39
(b) Merger or Consolidation of the Master Servicer......... 39
(c) Resignation of Master Servicer......................... 39
(d) Assignment or Delegation of Duties by the Master
Servicer............................................... 39
(e) Limitation on Liability of the Master Servicer and
Others................................................. 40
Section 7. Master Servicing Default; Termination and Liabilities........ 41
(a) Master Servicing Default............................... 41
(b) Trustee to Act; Appointment of Successor............... 43
(c) Notification to Bondholders............................ 44
Section 8. Miscellaneous................................................ 44
(a) Term of Master Servicing Agreement..................... 44
(b) Assignment............................................. 44
(c) Notices................................................ 44
(d) Governing Law.......................................... 45
(e) Amendments............................................. 45
(f) Severability........................................... 46
(g) No Joint Venture....................................... 46
(h) Execution in Counterparts.............................. 46
(i) Limitation of Liability of Wilmington Trust Company.... 46
(j) Noncompetition Covenants............................... 46
SCHEDULE I - Schedule of Mortgage Loans
SCHEDULE II - Representations and Warranties of the Master Servicer
SCHEDULE III - Representations and Warranties as to the Mortgage Loans
SCHEDULE IV - Representations and Warranties of the Issuer
SCHEDULE V - Servicing Agreements
SCHEDULE VI - Payment Schedule - June 25, 1998
SCHEDULE VII - Purchase and Sale Agreements
MASTER SERVICING AGREEMENT
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THIS MASTER SERVICING AGREEMENT is made and entered into as of June 1,
1998, by and among American Residential Eagle Bond Trust 1998-1, a statutory
business trust formed under the laws of the State of Delaware (the "Issuer"),
Norwest Bank Minnesota, National Association ("Norwest"), a national banking
association (the "Master Servicer") and First Union National Bank, a national
banking association (in its capacity as bond trustee under the Indenture
referred to below, the "Trustee").
PRELIMINARY STATEMENT
The Issuer was formed for the purpose of issuing bonds secured by
mortgage collateral. The Issuer has entered into a trust indenture, dated as
of June 1, 1998 (the "Indenture"), between the Issuer and the Trustee,
pursuant to which the Issuer intends to issue its Collateralized Callable
Mortgage Bonds, in the aggregate initial principal amount of $456,822,000 (the
"Bonds"). Pursuant to the Indenture, as security for the indebtedness
represented by such Bonds, the Issuer is and will be pledging to the Trustee,
or granting the Trustee a security interest in, among other things, certain
Mortgage Loans, its rights under this Agreement, the Servicing Agreements, the
Mortgage Loan Purchase Agreement, the Bond Account, the Distribution Account
and certain Insurance Policies (as each such term is defined herein).
The parties desire to enter into this Agreement to provide, among other
things, for the master servicing of the Mortgage Loans by the Master Servicer.
The Master Servicer acknowledges that, in order further to secure the Bonds,
the Issuer is and will be granting to the Trustee a security interest in,
among other things, its rights under this Agreement, and the Master Servicer
agrees that all covenants and agreements made by the Master Servicer herein
with respect to the Mortgage Loans shall also be for the benefit and security
of the Trustee and Holders of the Bonds. For its services hereunder, the
Master Servicer will receive a Master Servicing Fee (as defined herein).
American Residential Investment Trust, Inc. (the "Seller") has entered
into Servicing Agreements (as defined herein) with Servicers (as defined
herein) to perform, as independent contractors, servicing functions with
respect to the Mortgage Loans. For its services under a Servicing Agreement,
each Servicer will receive a Servicing Fee (as provided therein) with respect
to each Mortgage Loan serviced by it thereunder.
In addition, the Issuer will enter into a Management Agreement, dated as
of the date hereof, with the Seller (in such capacity, the "Manager"),
pursuant to which the Manager will conduct certain operations of the Issuer.
Actions by or required of the Issuer hereunder may be performed on its behalf
by the Manager or any sub-manager appointed to act for the Issuer.
1. DEFINED TERMS.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Agreement, and the definitions of such terms are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms. Capitalized terms
that are used but not defined in this Agreement and which are defined in the
Indenture have the meanings assigned to them therein.
"ADJUSTED NET MORTGAGE RATE" means, as to each Mortgage Loan and at any
time, the per annum rate equal to the Mortgage Rate less the sum of the Master
Servicing Fee Rate and the related Servicing Fee Rate.
"ADJUSTMENT DATE" means, as to any Mortgage Loan, a date on which the
related Mortgage Rate adjusts pursuant to the terms thereof.
"ADVANCE" means any advance of a payment of principal and interest due on
a Mortgage Loan required to be made by a Servicer with respect to any
Distribution Date pursuant to the related Servicing Agreement.
"AGREEMENT" means this Master Servicing Agreement, as the same may be
amended or supplemented from time to time.
"AMOUNT HELD FOR FUTURE DISTRIBUTION" means, as to any Distribution Date,
the aggregate amount held in the Bond Account at the close of business on the
related Calculation Date on account of (i) Principal Prepayments and
Liquidation Proceeds credited by the related Servicer as having been received
after the month prior to the month of such Distribution Date and (ii) all
Scheduled Payments due after the related Due Date.
"APPRAISED VALUE" means (i) with respect to a Mortgage Loan other than a
Refinancing Mortgage Loan, the lesser of (a) the value of the Mortgaged
Property based upon the appraisal made at the time of the origination of such
Mortgage Loan and (b) the sales price of the Mortgaged Property at the time of
the origination of such Mortgage Loan; or (ii) with respect to a Refinancing
Mortgage Loan, the value of the Mortgaged Property based upon the appraisal
made at the time of the origination of such Refinancing Mortgage Loan.
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act of 1978,
as amended from time to time.
"BOND ACCOUNT" means, with respect to the Bonds, the separate Eligible
Account created and maintained by the Master Servicer pursuant to Section 3(g)
with a depository institution in the name of the Master Servicer for the
benefit of the Trustee on behalf of the Bondholders and designated "Bond
Account - Norwest Bank Minnesota, National Association, in trust for the
registered holders of Collateralized Callable Mortgage Bonds."
"BONDHOLDER" or "HOLDER" means the Person in whose name a Bond is
registered in the Bond Register (as defined in the Indenture).
"BONDS" mean the Issuer's Collateralized Callable Mortgage Bonds, Class
A.
"BUSINESS DAY" means any day other than (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions in the States of Maryland or
Minnesota or The City of New York or the city in which the Corporate Trust
Office (as defined in the Indenture) is located are authorized or obligated by
law or executive order to be closed.
"CALCULATION DATE" means, as to any Distribution Date, the second
Business Day prior to such Distribution Date.
"CERTIFICATE PAYING AGENT" means the Person acting in such capacity
pursuant to the Deposit Trust Agreement which shall initially be the Trustee.
"CERTIFICATES" means the Mortgage-Backed Certificates issued pursuant to
the Trust Agreement.
"CLASS A BONDS" means the Bonds issued under the Indenture.
"CLOSING DATE" means June 17, 1998.
"CODE" means the Internal Revenue Code of 1986, including any successor
or amendatory provisions.
"COMPANY" means American Residential Eagle, Inc., a Delaware corporation,
which, as of the Closing Date, owns all of the outstanding beneficial
interests in the Issuer.
"CONTROLLING CLASS" means the Class A Bonds.
"CUSTODIAL AGREEMENTS" means the agreements between the Trustee, the
Seller and each Custodian.
"CUSTODIAN" means Bankers Trust Company of California, N.A., and Chase
Bank of Texas, N.A., each as custodian under a Custodial Agreement.
"CUT-OFF DATE" means, with respect to the Mortgage Loans, May 1, 1998.
"CUT-OFF DATE PRINCIPAL BALANCE" means, as to any Mortgage Loan, the
Stated Principal Balance thereof as of the close of business on the Cut-off
Date.
"DEBT SERVICE REDUCTION" means, with respect to any Mortgage Loan, a
reduction in the Scheduled Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of
principal.
"DEBT SERVICE REDUCTION MORTGAGE LOAN" means any Mortgage Loan that
became the subject of a Debt Service Reduction.
"DEFICIENT VALUATION" means, with respect to any Mortgage Loan, a
valuation by a court of competent jurisdiction of the Mortgaged Property in an
amount less than the then outstanding indebtedness under the Mortgage Loan, or
any reduction in the amount of principal to be paid in connection with any
Scheduled Payment that results in a permanent forgiveness of principal, which
valuation or reduction results from an order of such court which is final and
non-appealable in a proceeding under the Bankruptcy Code.
"DELETED MORTGAGE LOAN" has the meaning ascribed thereto in Section
2(c)(iv) hereof.
"DEPOSIT TRUST AGREEMENT" means the Deposit Trust Agreement, dated as of
June 1, 1998, between the Company and the Owner Trustee, as such Deposit Trust
Agreement may be amended or supplemented from time to time.
"DISTRIBUTION ACCOUNT" means the Eligible Account or Accounts created and
maintained with the Trustee pursuant to Section 8.02 of the Indenture, to
which shall be remitted from time to time certain of the funds the Master
Servicer has collected and deposited in the Bond Account with respect to the
Mortgage Loans, as required hereunder and under the Indenture.
"DISTRIBUTION ACCOUNT DEPOSIT DATE" means, as to any Distribution Date,
the Withdrawal Date with respect thereto.
"DISTRIBUTION DATE" means, with respect to the Bonds and the Investor
Certificate, the 25th day of each calendar month after the initial issuance of
the Bonds and the Investor Certificate or, if such 25th day is not a Business
Day, the next succeeding Business Day, commencing in June 1998.
"DUE DATE" means, with respect to each Distribution Date, the date on
which the monthly payment of principal and interest on such Mortgage Loan
became due during the period beginning on the second day of the month
preceding the month of such Distribution Date and ending on the first day of
the month of such Distribution Date.
"ELIGIBLE ACCOUNT" means any of (i) a segregated account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of
a depository institution or trust company that is the principal subsidiary of
a holding company, the debt obligations of such holding company, but only if
▇▇▇▇▇'▇ is not a Rating Agency) have the highest short-term ratings of each
Rating Agency at the time any amounts are held on deposit therein and the long
term debt obligations of which shall be rated AA or higher by S&P and Aa or
higher by Moody's, or (ii) a segregated trust account or accounts maintained
with the trust department of a federal or state chartered depository
institution or trust company, acting in its fiduciary capacity acceptable to
each Rating Agency, having capital and surplus not less than $100,000,000 or
(iii) any other account acceptable to each Rating Agency. Eligible Accounts
may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Master Servicer or the Trustee.
"ESCROW ACCOUNT" means the Eligible Account or Accounts established and
maintained pursuant to the applicable Servicing Agreement.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC" means ▇▇▇▇▇▇▇ Mac, formerly known as the Federal Home Loan
Mortgage Corporation, a corporate instrumentality of the United States created
and existing under Title III of the Emergency Home Finance Act of 1970, as
amended, or any successor thereto.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
"FNMA" means ▇▇▇▇▇▇ Mae, formerly known as the Federal National Mortgage
Association, a federally chartered and privately owned corporation organized
and existing under the Federal National Mortgage Association Charter Act, or
any successor thereto.
"INDENTURE" means the trust indenture, dated as of the date hereof,
between the Issuer and the Trustee, as such Indenture may be amended or
supplemented from time to time in accordance with its terms.
"INDEPENDENT ACCOUNTANTS" shall have the meaning ascribed to such term
under the Indenture.
"INDEX" means, as to each Mortgage Loan, the index from time to time in
effect for the adjustment of the Mortgage Rate set forth as such on the
related Mortgage Note.
"INSURANCE POLICY" means, with respect to any Mortgage Loan, any primary
mortgage guaranty insurance policy or other insurance policy with respect to
the Mortgage Loans, including all riders and endorsements thereto in effect,
including any replacement policy or policies for any Insurance Policies.
"INSURANCE PROCEEDS" means proceeds paid by an insurer pursuant to any
Insurance Policy, other than any amount included in such Insurance Proceeds in
respect of Insured Expenses.
"INSURED EXPENSES" means amounts applied out of payments made by an
insurer under an Insurance Policy to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the applicable
Servicing Agreement.
"INVESTOR CERTIFICATE" shall have the meaning ascribed thereto in the
Deposit Trust Agreement.
"LIBOR" means, for each Accrual Period, the per annum rate established in
accordance with the provisions of Section 3(h) of this Agreement.
"LIBOR BUSINESS DAY" means a day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
"LIBOR DETERMINATION DATE" means the second LIBOR Business Day prior to
the commencement of each Accrual Period for the Class A Bonds after the
initial Accrual Period.
"LIQUIDATED MORTGAGE LOAN" means with respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in
the calendar month preceding the month of such Distribution Date and as to
which the Master Servicer has certified (in accordance with this Agreement)
that it has received all amounts it expects to receive in connection with the
liquidation of such Mortgage Loan including the final disposition of an REO
Property.
"LIQUIDATION PROCEEDS" means amounts, including Insurance Proceeds,
received in connection with the partial or complete liquidation of defaulted
Mortgage Loans, whether through trustee's sale, foreclosure sale or otherwise
or amounts received in connection with any condemnation or partial release of
a Mortgaged Property and any other proceeds received in connection with an REO
Property, less the sum of related unreimbursed Master Servicing Fees,
Servicing Fees, Master Servicer Advances, Servicing Advances and Advances and
net of any other unreimbursed expenses incurred in connection with liquidation
or foreclosure.
"LOAN-TO-VALUE RATIO" means, with respect to any Mortgage Loan and as to
any date of determination, the fraction (expressed as a percentage) the
numerator of which is the principal balance of the related Mortgage Loan at
such date of determination and the denominator of which is the Appraised Value
of the related Mortgaged Property.
"MANAGEMENT AGREEMENT" means the management agreement dated as of June 1,
1998 between the Issuer and the Seller, as Manager.
"MANAGEMENT FEE" means the compensation payable to the Seller under the
Management Agreement which shall equal $1,000 per month.
"MARGIN" means as to each Mortgage Loan, the percentage amount set forth
on the related Mortgage Note which is to be added to the Index in calculating
the Mortgage Rate thereon.
"MASTER SERVICER" means Norwest Bank Minnesota, National Association, a
national banking association, and its successors and assigns, in its capacity
as master servicer hereunder.
"MASTER SERVICER ADVANCE" means the payment required to be made by the
Master Servicer with respect to any Distribution Date pursuant to Section 4,
the amount of any such payment being equal to the aggregate of payments of
principal and interest (net of the Master Servicing Fee and the applicable
Servicing Fee and net of any net income in the case of any REO Property) on
the Mortgage Loans that were due on the related Due Date and not received as
of the close of business on the related Calculation Date, less the aggregate
amount of any such delinquent payments that the Master Servicer has determined
would constitute a Nonrecoverable Advance if advanced.
"MASTER SERVICER ADVANCE DATE" means as to any Distribution Date, the
Withdrawal Date prior to such Distribution Date.
"MASTER SERVICING DEFAULT" means a master servicing default as described
under Section 7(a) of this Agreement.
"MASTER SERVICING FEE" means as to any Distribution Date, the amount
specified in Section 5(a) of this Agreement.
"MASTER SERVICING FEE RATE" means, with respect to each Mortgage Loan,
0.0075% per annum.
"MAXIMUM RATE" means as to any Mortgage Loan, the maximum rate set forth
on the related Mortgage Note at which interest can accrue on such Mortgage
Loan.
"MINIMUM RATE" means as to any Mortgage Loan, the minimum rate set forth
on the related Mortgage Note at which interest can accrue on such Mortgage
Loan.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc., or any successor
thereto. If ▇▇▇▇▇'▇ is designated as a Rating Agency in the Indenture, for
purposes of Section 9(c) the address for notices to Moody's shall be ▇▇▇▇▇'▇
Investors Service, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Residential Pass-Through Monitoring, or such other address as
Moody's may hereafter furnish to the Issuer and the Master Servicer.
"MORTGAGE" means the mortgage, deed of trust or other instrument creating
a first lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.
"MORTGAGE DOCUMENTS" mean the mortgage documents pertaining to a
particular Mortgage Loan and delivered to the related Custodian pursuant to
this Agreement and the related Custodial Agreement.
"MORTGAGE LOAN" means such of the mortgage loans granted by the Issuer to
the Trustee under the Indenture as security for the Bonds, as from time to
time are held as part of the Trust Estate (including any REO Property), the
Mortgage Loans so held being identified in the Schedule of Mortgage Loans,
notwithstanding foreclosure or other acquisition of title of the related
Mortgaged Property.
"MORTGAGE LOAN PURCHASE AGREEMENT" means the mortgage loan purchase
agreement dated as of June 1, 1998 among the Seller, the Company and the
Issuer.
"MORTGAGE NOTE" means the original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"MORTGAGE RATE" means the annual rate of interest borne by a Mortgage
Note from time to time.
"MORTGAGED PROPERTY" means the underlying property securing a Mortgage
Loan.
"MORTGAGOR" means the obligor(s) on a Mortgage Note.
"NET MORTGAGE RATE" means, as to any Mortgage Loan and Distribution Date,
the related Mortgage Rate as of the Due Date in the month preceding the month
of such Distribution Date reduced by the related Expense Fee Rate.
"NONRECOVERABLE ADVANCE" means any portion of an Advance or Master
Servicer Advance previously made or proposed to be made by the related
Servicer or the Master Servicer, as the case may be, that, in the good faith
judgment of the related Servicer or such Master Servicer, will not be
ultimately recoverable from the related Mortgagor, related Liquidation
Proceeds or otherwise.
"OFFICER'S CERTIFICATE" means a certificate (i) signed by the Chairman of
the Board, the Vice Chairman of the Board, the President, a Managing Director,
a Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Master Servicer, or (ii) if provided for in this Agreement,
signed by a Servicing Officer, as the case may be, and delivered to the
Trustee as required by this Agreement.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for a Servicer, the Master Servicer or the Issuer, as applicable,
including, in-house counsel, reasonably acceptable to the Trustee. Except as
specifically provided herein, no Opinion of Counsel shall be at the expense of
the Master Servicer.
"ORIGINAL CLASS A PRINCIPAL AMOUNT" means $456,822,000.
"ORIGINAL MORTGAGE LOAN" means the Mortgage Loan refinanced in connection
with the origination of a Refinancing Mortgage Loan.
"ORIGINAL POOL PRINCIPAL BALANCE" means the Pool Principal Balance as of
the Cut-off Date which is equal to $463,075,879.91.
"OTS" means the Office of Thrift Supervision.
"OUTSTANDING" shall have the meaning ascribed thereto in the Indenture.
"OUTSTANDING MORTGAGE LOAN" means, as of any Due Date, a Mortgage Loan
with a Stated Principal Balance greater than zero which was not the subject of
a Principal Prepayment in Full prior to such Due Date and which did not become
a Liquidated Mortgage Loan prior to such Due Date.
"OWNER TRUSTEE" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Deposit Trust Agreement, until a successor Person shall have become the
Owner Trustee pursuant to the applicable provisions of the Deposit Trust
Agreement, and thereafter "Owner Trustee" shall mean such successor Person.
"PERIODIC RATE CAP" means, as to any Mortgage Loan and any Adjustment
Date, the maximum allowable percent increase to the related Mortgage Rate on
any such Adjustment Date, as specified in the related Mortgage Note.
"PERMITTED INVESTMENTS" means, at the time, any one or more of the
following obligations and securities.
(i) obligations of the United States or any agency thereof, provided
such obligations are backed by the full faith and credit of the United
States;
(ii) general obligations of or obligations guaranteed by any state
of the United States or the District of Columbia receiving the highest
long-term debt rating of each Rating Agency;
(iii) commercial paper which is then receiving the highest
commercial paper rating of each Rating Agency;
(iv) certificates of deposit, demand or time deposits, or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof
and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or long-term
unsecured debt obligations of such depository institution or trust
company (or in the case of the principal depository institution in a
holding company system, the commercial paper or long-term unsecured debt
obligations of such holding company, but only if ▇▇▇▇▇'▇ Investors
Service, Inc. ("▇▇▇▇▇'▇") is a Rating Agency) are then rated one of the
two highest long-term and the highest short-term ratings of each Rating
Agency for such securities;
(v) demand or time deposits or certificates of deposit issued by any
bank or trust company or savings institution to the extent such deposits
are fully insured by the FDIC;
(vi) repurchase obligations with respect to any security described
in clauses (i) above, in either case entered into with a depository
institution or trust company (acting as principal) described in clause
(iv) above;
(vii) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the face amount
thereof) bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States or any state thereof
which have the highest rating of each Rating Agency (except if the Rating
Agency is Moody's, such rating shall be the highest commercial paper
rating of Moody's for any such securities);
(viii) interests in any money market fund which invests only in
other Permitted Investments which at the date of acquisition of the
interests in such fund and throughout the time such interests are held in
such fund has the highest applicable rating by each applicable Rating
Agency;
(ix) short term investment funds which invest only in other
Permitted Investments sponsored by any trust company or national banking
association incorporated under the laws of the United States or any state
thereof which are rated by each applicable Rating Agency in their
respective highest applicable rating category;
(x) such other investments having a specified stated maturity and
bearing interest or sold at a discount acceptable to each applicable
Rating Agency as will not result in a change in the rating then assigned
to the Bonds by each Rating Agency, as evidenced by a signed writing
delivered by each Rating Agency; and
(xi) any mutual fund, money market funds, common trust fund or other
pooled investment vehicle, the assets of which are limited to instruments
that otherwise would constitute Permitted Investments hereunder,
including any fund managed by the Master Servicer or any affiliate of the
Master Servicer or any fund to which the Master Servicer or any affiliate
of the Master Servicer acts as an advisor, provided that such fund has
the highest applicable rating by each Rating Agency,
provided, that no such instrument shall be a Permitted Investment if
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(i) such instrument evidences the right to receive interest only payments
with respect to the obligations underlying such instrument or (ii) such
instrument would require the Issuer to register as an investment company
under the Investment Company Act of 1940, as amended.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
"POOL PRINCIPAL BALANCE" means, with respect to any Distribution Date,
the aggregate of the Stated Principal Balances of the Mortgage Loans which
were Outstanding Mortgage Loans on the Due Date in the month preceding the
month of such Distribution Date.
"PREPAYMENT INTEREST SHORTFALL" means, as to any Distribution Date,
Mortgage Loan and Principal Prepayment, the amount, if any, by which one
month's interest at the related Mortgage Rate on such Principal Prepayment
exceeds the amount of interest paid in connection with such Principal
Prepayment.
"PRIMARY INSURANCE POLICY" means each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any Mortgage
Loan.
"PRINCIPAL AMOUNT" shall have the meaning ascribed thereto in the
Indenture.
"PRINCIPAL PREPAYMENT" means any payment of principal by a Mortgagor on a
Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.
"PRINCIPAL PREPAYMENT IN FULL" means any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.
"PROSPECTUS SUPPLEMENT" means the Prospectus Supplement dated June 15,
1998 relating to the Bonds.
"PUD" means Planned Unit Development.
"PURCHASE PRICE" means, with respect to the purchase of any Mortgage Loan
from the Issuer an amount equal to the sum of (i) 100% of the unpaid principal
balance of the Mortgage Loan on the date of such purchase, and (ii) accrued
interest thereon at the applicable Mortgage Rate from the date through which
interest was last paid by the Mortgagor to the Due Date in the month prior to
the month in which the Purchase Price is to be distributed to Bondholders.
"QUALIFIED INSURER" means a mortgage guaranty insurance company duly
qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connection
with the insurance policy issued by such insurer, duly authorized and licensed
in such states to transact a mortgage guaranty insurance business in such
states and to write the insurance provided by the insurance policy issued by
it, approved as a FNMA- or FHLMC-approved mortgage insurer or having a claims
paying ability rating of at least "AA" or equivalent rating by a nationally
recognized statistical rating organization. Any replacement insurer with
respect to a Mortgage Loan must have at least as high a claims paying ability
rating as the insurer it replaces had on the Closing Date.
"RATING AGENCY" shall mean each of the Rating Agencies specified in the
Indenture. If any such organization or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by the Issuer,
notice of which designation shall be given to the Trustee. References herein
to a given rating or rating category of a Rating Agency shall mean such rating
category without giving effect to any modifiers.
"REALIZED LOSS" means, with respect to each Liquidated Mortgage Loan, an
amount (not less than zero or more than the Stated Principal Balance of the
Liquidated Mortgage Loan) as of the date of such liquidation, equal to (i) the
Stated Principal Balance of the Liquidated Mortgage Loan as of the date of
such liquidation, plus (ii) interest at the Adjusted Net Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and not
reimbursed) to Bondholders up to the Due Date in the month prior to the month
in which Liquidation Proceeds are required to be distributed on the Stated
Principal Balance of such Liquidated Mortgage Loan from time to time, minus
(iii) the Liquidation Proceeds, if any, received during the month in which
such liquidation occurred, to the extent applied as recoveries of interest at
the Adjusted Net Mortgage Rate and to principal of the Liquidated Mortgage
Loan. With respect to each Mortgage Loan which has become the subject of a
Deficient Valuation, if the principal amount due under the related Mortgage
Note has been reduced, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and
the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation. With respect to each Mortgage Loan which has become the subject of
a Debt Service Reduction and any Distribution Date, the amount, if any, by
which the principal portion of the related Scheduled Payment has been reduced.
"REFINANCING MORTGAGE LOAN" means any Mortgage Loan originated in
connection with the refinancing of an existing mortgage loan.
"RELIEF ACT" means the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
"RELIEF ACT REDUCTIONS" means, with respect to any Distribution Date and
any Mortgage Loan as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended calendar month as a
result of the application of the Relief Act, the amount, if any, by which (i)
interest collectible on such Mortgage Loan for the most recently ended
calendar month is less than (ii) interest accrued thereon for such month
pursuant to the Mortgage Note.
"REO PROPERTY" means a Mortgaged Property acquired by the Trust Estate
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.
"REPLACEMENT MORTGAGE LOAN" means a Mortgage Loan substituted for a
Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form attached to the
related Custodial Agreement, (i) have a principal balance, after deduction of
the principal portion of the Scheduled Payment due in the month of
substitution, not in excess of, and not more than 20% less than, the Stated
Principal Balance of the Deleted Mortgage Loan; (ii) be accruing interest at a
rate no lower than and not more than 1.0% per annum higher than, that of the
Deleted Mortgage Loan and bear interest based on an Index that is Libor; (iii)
have a Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan;
(iv) have a Mortgage Rate not lower than, and not more than 1.0% per annum
higher than that of the Deleted Mortgage Loan; (v) have a remaining term to
maturity no greater than (and not more than 36 months less than) that of the
Deleted Mortgage Loan; and (vi) comply with each representation and warranty
set forth in Schedule III hereto.
"REQUEST FOR RELEASE" means the Request for Release submitted by a
Servicer or the Seller to the Trustee, substantially in one of the forms
attached to the related Custodial Agreement, as appropriate.
"REQUIRED INSURANCE POLICY" means with respect to any Mortgage Loan, any
insurance policy that is required to be maintained from time to time under the
related Servicing Agreement.
"SAIF" means the Savings Association Insurance Fund, or any successor
thereto.
"S&P" means Standard & Poor's Ratings Services, a division of ▇▇▇▇▇▇-▇▇▇▇
Inc. If S&P is designated as a Rating Agency in the Indenture, for purposes of
Section 8(c) the address for notices to S&P shall be Standard & Poor's Ratings
Group, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Mortgage
Surveillance Monitoring, or such other address as S&P may hereafter furnish to
the Issuer and the Master Servicer.
"SCHEDULE OF MORTGAGE LOANS" means the schedule attached hereto as
Schedule I listing the Mortgage Loans to be master serviced by the Master
Servicer pursuant to this Agreement (as from time to time amended by the
Issuer to reflect the addition of Replacement Mortgage Loans and the deletion
of Deleted Mortgage Loans pursuant to the provisions of this Agreement and
Section 8.04 of the Indenture) pledged to the Trustee as part of the Trust
Estate and from time to time subject to this Agreement and the Indenture,
setting forth the following information with respect to each Mortgage Loan:
(i) the loan number;
(ii) the Mortgagor's name and the street address of the Mortgaged
Property, including the zip code;
(iii) the maturity date;
(iv) the original principal balance;
(v) the Original Pool Principal Balance;
(vi) the first payment date of the Mortgage Loan;
(vii) the Scheduled Payment in effect as of the Cut-off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) a code indicating whether the residential dwelling at the time
of origination was represented to be owner-occupied;
(x) a code indicating whether the residential dwelling is either (a)
a detached single family dwelling, (b) attached single family dwelling,
(c) a dwelling in a PUD, (d) a condominium unit, (e) a two- to four-unit
residential property or (f) a Cooperative Unit;
(xi) the Mortgage Rate in effect as of the Cut-off Date;
(xii) the Servicing Fee Rate;
(xiii) the Maximum Rate and the Minimum Rate;
(xiv) the Periodic Rate Cap;
(xv) the Adjustment Date;
(xvi) the Margin;
(xvii) the purpose for the Mortgage Loan; and
(xviii) the type of documentation program pursuant to which the
Mortgage Loan was originated.
Such schedule shall also set forth (a) the total of the amounts described
under (iv) and (vii) above and (b) the weighted average, weighted on the basis
of the Original Pool Principal Balance, of the amounts described under (xi)
and (xii) above, in each case for all of the Mortgage Loans and shall indicate
for each Mortgage Loan the applicable Custodian.
"SCHEDULED PAYMENT" means the scheduled monthly payment on a Mortgage
Loan due on any Due Date allocable to principal and/or interest on such
Mortgage Loan which, unless otherwise specified herein, shall give effect to
any related Debt Service Reduction and any Deficient Valuation that affects
the amount of the monthly payment due on such Mortgage Loan.
"SELLER" means American Residential Investment Trust, Inc., a Maryland
corporation, and its successors and assigns.
"SERVICER" means any person acting as the Servicer pursuant to a
Servicing Agreement.
"SERVICING ACCOUNT" means the separate Eligible Account or Accounts
created and maintained pursuant to each Servicing Agreement.
"SERVICING ADVANCES" means all customary, reasonable and necessary "out
of pocket" costs and expenses incurred in the performance by a Servicer of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, and (iii) the
management and liquidation of any REO Property.
"SERVICING AGREEMENT" means any agreement entered into by or assigned to
the Seller relating to servicing and/or administration of Mortgage Loans as
provided in Schedule V, including the Special Servicing Agreement.
"SERVICING FEE" means, as to each Mortgage Loan and any Distribution
Date, an amount equal to one month's interest at the applicable Servicing Fee
Rate on the Stated Principal Balance of such Mortgage Loan.
"SERVICING FEE RATE" means, with respect to any Mortgage Loan, the per
annum rate set forth in the Schedule of Mortgage Loans for such Mortgage Loan.
"SERVICING OFFICER" means any officer of the Master Servicer or any
Servicer involved in, or responsible for, the administration and servicing of
the Mortgage Loan whose name and facsimile signature appear on a list of
servicing officers furnished to the Trustee by the Master Servicer or any
Servicer on the Closing Date pursuant to this Agreement, as such list may from
time to time be amended.
"SPECIAL SERVICER" means Ocwen Federal Bank FSB, as servicer under the
Special Servicing Agreement.
"SPECIAL SERVICING AGREEMENT" means the Reconstituted Special Servicing
Agreement between ▇▇▇▇▇▇ Capital, A Division of ▇▇▇▇▇▇ Brothers Holdings,
Inc., the Seller and the Special Servicer dated as of June 1, 1998, as
assigned to the Trustee in respect of the Mortgage Loans and as amended and
supplemented from time to time.
"STATED MATURITY" shall have the meaning ascribed thereto in the
Indenture.
"STATED PRINCIPAL BALANCE" means, as to any Mortgage Loan and Due Date,
the unpaid principal balance of such Mortgage Loan as of such Due Date as
specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any moratorium or
similar waiver or grace period) after giving effect to any previous partial
Principal Prepayments and Liquidation Proceeds allocable to principal (other
than with respect to any Liquidated Mortgage Loan) and to the payment of
principal due on such Due Date and irrespective of any delinquency in payment
by the related Mortgagor.
"SUBSTITUTION AMOUNT" has the meaning ascribed to such term pursuant to
Section 2(c)(iv).
"TRUST AGREEMENT" means the Trust Agreement, dated as of June 1, 1998,
between the Company and the Certificate Trustee, as such Trust Agreement may
be amended or supplemented from time to time.
"TRUST ESTATE" shall have the meaning ascribed to such term in the
Indenture.
"TRUST RECEIPT" means, as applicable, either the Initial Trust Receipt in
the form of Exhibit One-A to a Custodial Agreement or the Final Trust Receipt
in the form of Exhibit One-B to a Custodial Agreement.
"TRUSTEE MORTGAGE FILE" means, with respect to each Mortgage Loan, the
original documents and instruments relating thereto to be retained in the
custody and possession of the related Custodian pursuant to the related
Custodial Agreement.
"WEIGHTED AVERAGE NET MORTGAGE RATE" means, as to any Distribution Date,
the weighted average of the Net Mortgage Rates weighted on the basis of the
Stated Principal Balances of the Mortgage Loans as of the related Due Date.
"WITHDRAWAL DATE" means, with respect to a Distribution Date, one
Business Day prior to such Distribution Date.
2. MORTGAGE DOCUMENTS.
(a) Trustee to Retain Possession of Documents through Custodians.
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(i) Concurrently with the execution and delivery hereof, the
Issuer has pledged, transferred and assigned to the Trustee for the
benefit of the Bondholders and to the Certificate Trustee for the
benefit of the Certificateholders for so long as all of the Bonds
are held by the Certificate Trustee, as collateral for the payment
of principal and interest on the Bonds, all right, title and
interest of the Issuer in and to the Trust Estate for the Bonds,
including the Mortgage Loans. Prior to or contemporaneous with the
execution of this Agreement, or within the applicable time periods
specified below, the Issuer shall have delivered or caused to be
delivered to the applicable Custodian, with respect to each Mortgage
Loan, all originals of the Mortgage Documents and any other
instruments relating thereto specified in the related Custodial
Agreements, including each item in the Trustee Mortgage File.
In the event that in connection with any Mortgage Loan the
Issuer cannot deliver (A) the original recorded Mortgage, (B) all
interim recorded assignments or (C) the lender's title policy
(together with all riders thereto) satisfying the requirements set
forth in the Custodial Agreements, concurrently with the execution
and delivery hereof, the Issuer shall promptly deliver to the
applicable Custodian, in accordance with the terms and conditions of
the related Custodial Agreement, (x) in the case of (A) or (B)
above, such original Mortgage or such interim assignment, as the
case may be, with evidence of recording indicated thereon upon
receipt thereof from the public recording office, or a copy thereof,
certified, if appropriate, by the relevant recording office, but in
no event shall any such delivery of the original Mortgage Loan and
each such interim assignment or a copy thereof, certified, if
appropriate, by the relevant recording office, be made later than 90
days following the Closing Date, or, (y) in the case of (C) above,
such title policy, no later than 90 days following the Closing Date;
provided, however, that in the event the Issuer is unable to deliver
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by such date each Mortgage and each such interim assignment by
reason of the fact that any such documents have not been returned by
the appropriate recording office, or, in the case of each such
interim assignment, because the related Mortgage has not been
returned by the appropriate recording office, the Issuer shall
deliver such documents to the related Custodian as promptly as
possible upon receipt thereof and, in any event, within 180 days
following the Closing Date. The Issuer shall forward or cause to be
forwarded to the related Custodian (I) from time to time additional
original documents evidencing an assumption or modification of a
Mortgage Loan and (II) any other documents required to be delivered
by the Issuer to a Custodian. In the event that the original
Mortgage is not delivered and in connection with the payment in full
of the related Mortgage Loan the public recording office requires
the presentation of a "lost instruments affidavit and indemnity" or
any equivalent document, because only a copy of the Mortgage can be
delivered with the instrument of satisfaction or reconveyance, the
Issuer shall execute and deliver or cause to be executed and
delivered such a document to the public recording office. In the
case where a public recording office retains the original recorded
Mortgage or in the case where a Mortgage is lost after recordation
in a public recording office, the Issuer shall deliver to the
related Custodian a copy of such Mortgage certified by such public
recording office to be a true and complete copy of the original
recorded Mortgage.
As promptly as practicable subsequent to the Issuer's pledge,
transfer and assignment, and in any event within thirty (30) days
thereafter, the Issuer shall (X) affix the Trustee's name to each
assignment of Mortgage, as the assignee thereof, (Y) cause such
assignment to be in proper form for recording in the appropriate
public office for real property records within thirty (30) days
after receipt thereof and (Z) cause to be delivered for recording in
the appropriate public office for real property records the
assignments of the Mortgages to the Trustee, except that, with
respect to any assignment of a Mortgage as to which the Issuer has
not received the information required to prepare such assignment in
recordable form, the Issuer's obligation to do so and to deliver the
same for such recording shall be as soon as practicable after
receipt of such information and in any event within thirty (30) days
after the receipt thereof, and the Issuer need not cause to be
recorded any assignment which relates to a Mortgage Loan the
Mortgage Property relating to which is located in any jurisdiction
under the laws of which, as evidenced by an Opinion of Counsel from
local counsel, delivered by the Issuer (at the Issuer's expense) to
the Trustee in accordance with Section 3.11 of the Indenture, the
recordation of such assignment is not necessary to protect the
Trustee's and the Bondholders' interest in the related Mortgage
Loan; provided, however, notwithstanding the delivery of any legal
opinions, each assignment of Mortgage shall be recorded upon the
earliest to occur of (I) a default under the Indenture, or (II) any
bankruptcy, insolvency or foreclosure with respect to the related
Mortgagor.
In the case of Mortgage Loans that have been prepaid in full as
of the Closing Date, the Issuer, in lieu of delivering the above
documents to the related Custodian, will deposit in the Bond Account
the portion of such payment that is required to be deposited in the
Bond Account pursuant to Section 3(g).
Until the Bonds have been paid in full and the Issuer has
otherwise fulfilled its obligations under the Indenture, each
Custodian shall retain possession and custody of each Trustee
Mortgage File in accordance with and subject to the terms and
conditions set forth in the related Custodial Agreement, the
Indenture and this Agreement.
(ii) On the Closing Date, the Trustee shall receive a Trust
Receipt from each Custodian, whereby the Custodian acknowledges
receipt of the documents identified in the applicable Trust Receipt
and declares that it holds and will hold such documents and the
other documents delivered to it constituting the Trustee Mortgage
Files in trust for the exclusive use and benefit of the Trustee, as
the holder of the Trust Receipts acting on behalf of all present and
future Bondholders. The related Custodian acknowledges that it will
maintain possession of the Mortgage Notes in the State provided in
the applicable Custodial Agreement, unless otherwise permitted by
the Trustee and the Rating Agencies.
Each Custodian has agreed, pursuant to the related Custodial
Agreement, to execute and deliver on the Closing Date to the Issuer,
the Master Servicer, the Seller and the Trustee a Trust Receipt
constituting an initial such receipt in the form attached to the
related Custodial Agreement. Based on its review and examination
required by and in accordance with the applicable Custodial
Agreement, and only as to the documents identified in such initial
certification, the related Custodian acknowledges that such
documents appear regular on their face and relate to the specified
Mortgage Loan; provided that the related Custodian shall be under no
obligation to ascertain that, except as therein provided, any
information set forth in said Trust Receipt is accurate. Neither the
Trustee nor the related Custodian shall be under any duty or
obligation to inspect, review or examine said documents,
instruments, certificates or other papers to determine that the same
are genuine, enforceable or appropriate for the represented purpose
or that they have actually been recorded in the real estate records
or that they are other than what they purport to be on their face.
Not later than 180 days after the Closing Date, each Custodian
shall deliver to the Trustee the applicable Trust Receipt in final
form, with any applicable exceptions noted thereon.
If, in the course of its review, a Custodian finds any document
constituting a part of a Trustee Mortgage File which does not meet
the requirements of the applicable Custodial Agreement, such
Custodian shall list such as an exception in the Trust Receipt;
provided, however, that such Custodian shall not make any
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determination as to whether (A) any endorsement is sufficient to
transfer all right, title and interest of the party so endorsing, as
noteholder or assignee thereof, in and to that Mortgage Note or (B)
that any assignment is in recordable form or is sufficient to effect
the assignment of and transfer to the assignee thereof under the
mortgage to which the assignment relates. Subject to the time
extensions for certain documents set forth in subclause (i) above,
the Seller shall promptly correct or cure such defect within 90 days
from the date it was so notified of such defect and, if the Seller
does not correct or cure such defect within such period, the Seller
shall either (I) substitute for the related Mortgage Loan a
Replacement Mortgage Loan, which substitution shall be accomplished
in the manner and subject to the conditions set forth in Section
2(c)(iv), or (II) purchase such Mortgage Loan from the Trustee
within 90 days from the date the Seller was notified of such defect
in writing at the Purchase Price of such Mortgage Loan. Any such
substitution pursuant to clause (I) above shall not be effected
prior to the delivery to the related Custodian of a Request for
Release. The Purchase Price for any such Mortgage Loan purchased
pursuant to clause (II) shall be deposited by the Seller in the Bond
Account on or prior to the applicable Withdrawal Date in the month
following the month of purchase and, upon the making of such deposit
and the delivery of related Request for Release, the related
Custodian shall release the related Trustee Mortgage File to the
Seller and shall execute and deliver at Issuer's request such
instruments of transfer or assignment prepared by the Issuer and the
Trustee, in each case without recourse, as shall be necessary to
vest in the Seller, or a designee, the Issuer's and the Trustee's
interest in any Mortgage Loan released pursuant hereto.
Each Custodian shall retain possession and custody of each
Trustee Mortgage File in accordance with and subject to the terms
and conditions set forth in the related Custodial Agreement. The
Issuer or the Trustee shall promptly deliver to the related
Custodian, upon the execution or receipt thereof, the originals of
such other documents or instruments constituting the Trustee
Mortgage File as come into the possession of the respective Issuer
or Trustee from time to time.
It is understood and agreed that the obligation of the Seller
to substitute for or to purchase any Mortgage Loan which does not
meet the requirements set forth in the related Custodial Agreement
shall constitute the sole remedy respecting such defect available to
the Trustee and any Bondholder against the Seller.
(b) Trustee and Custodians to Cooperate; Release of Trustee
---------------------------------------------------------------
Mortgage Files.
--------------
(i) The Master Servicer hereby acknowledges that concurrently
with the execution of this Agreement, the Trustee has acquired and
holds a security interest in the Trustee Mortgage Files and in all
Mortgage Loans represented by such Trustee Mortgage Files and in all
funds now or hereafter held by, or under the control of, the Master
Servicer that are collected by the Master Servicer in connection
with the Mortgage Loans, whether as Scheduled Payments, as Principal
Prepayments, or as Liquidation Proceeds or Insurance Proceeds, and
in all proceeds of the foregoing and proceeds of proceeds (but
excluding any Master Servicing Fees and any other amounts or
reimbursements to which the Master Servicer is entitled under this
Agreement). The Master Servicer agrees that so long as the Mortgage
Loans are assigned to the Trustee, all Trustee Mortgage Files (and
any documents or instruments constituting a part of such files), and
such funds which come into the possession or custody of, or which
are subject to the control of, the Master Servicer shall be held by
the Master Servicer for and on behalf of the Trustee as the
Trustee's agent and bailee for purposes of perfecting the Trustee's
security interest therein, as provided by Section 9-305 of the
Uniform Commercial Code of the State in which such property is
located, or by other laws, as specified in Section 8.10 of the
Indenture. The Master Servicer hereby accepts such agency and
acknowledges that the Trustee, as secured party, will be deemed to
have possession at all times of all Trustee Mortgage Files and any
other documents or instruments constituting a part of such files,
such funds and other items for purposes of Section 9-305 of the
Uniform Commercial Code of the State in which such property may be
held by the Master Servicer. Notwithstanding such appointment of the
Master Servicer as agent, the Trustee agrees to execute all
satisfactions of Mortgages. The Master Servicer also agrees that it
shall not create, incur or subject any Trustee Mortgage File or
other documents relating to a Mortgage Loans which are in the
possession of the Master Servicer with respect to each Mortgage Loan
or any funds that are deposited in the Distribution Account, the
Bond Account, or any funds that otherwise are or may become due or
payable to the Trustee for the benefit of the Bondholders, to any
claim, lien, security interest, judgment, levy, writ of attachment
or other encumbrance (other than the claims of the Bondholders), or
assert by legal action or otherwise any claim or right of set-off
against any such Trustee Mortgage File or any funds collected or
held by, or under the control of, the Master Servicer from time to
time in respect of a Mortgage Loan.
(ii) Upon the payment in full of any Mortgage Loan, or the
receipt by a Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, or for any other
servicing procedure to be performed in connection with a Mortgage
Loan, the related Servicer will immediately notify the Trustee by
delivering, or causing to be delivered, a Request for Release, all
in accordance with Section 8.08(c) of the Indenture. Upon receipt of
such request, the Trustee shall promptly notify the related
Custodian, who will release the related Trustee Mortgage File to the
Servicer in accordance with the terms of the applicable Custodial
Agreement. Subject to the further limitations set forth below, the
related Servicer shall cause the Trustee Mortgage File or documents
so released to be returned to the Trustee when the need therefor by
the related Servicer no longer exists, unless the Mortgage Loan is
liquidated and the proceeds thereof are deposited in the Bond
Account, in which case the related Servicer shall deliver to the
Trustee a Request for Release, signed by a Servicing Officer of the
related Servicer.
If the related Servicer at any time seeks to initiate a
foreclosure proceeding in respect of any Mortgaged Property as
authorized by the related Servicing Agreement, the related Servicer
shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for
trustee's sale or other documents necessary to effectuate such
foreclosure or any legal action brought to obtain judgment against
the Mortgagor on the Mortgage Note or the Mortgage or to obtain a
deficiency judgment or to enforce any other remedies or rights
provided by the Mortgage Note or the Mortgage or otherwise available
at law or in equity.
(c) Representations, Warranties and Covenants of the Master
--------------------------------------------------------------
Servicer, the Seller and the Issuer.
------------------------------------
(i) Norwest Bank Minnesota, National Association, in its
capacity as Master Servicer, hereby makes the representations and
warranties set forth in Schedule II hereto, and by this reference
incorporated herein, to the Issuer and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(ii) The Seller has made in the Mortgage Loan Purchase
Agreement the representations and warranties as set forth in
Schedule III hereto, as of the Closing Date, or if so specified
therein, as of the Cut-off Date, and such representations and
warranties, and the obligations associated therewith, have been
assigned to the Issuer and the Trustee;
(iii) The Issuer hereby makes the representations and
warranties set forth in Schedule IV hereto, and by this reference
incorporated herein, to the Trustee and the Master Servicer, as of
the Closing Date.
(iv) Upon discovery by any of the parties hereto, of a breach
of a representation or warranty described in Section 2(c)(ii)
(without regard to any limitation regarding the knowledge of the
Seller contained therein) that materially and adversely affects the
value of any Mortgage Loan or the interests of the Bondholders in
any Mortgage Loan, the party discovering such breach shall give
prompt written notice thereof to the other parties. The Seller has
covenanted in the Mortgage Loan Purchase Agreement to comply with
the following: within 90 days of the earlier of its discovery or its
receipt of written notice from any party of a breach of any
representation or warranty (without regard to any limitation
regarding the knowledge of the Seller contained therein) made
pursuant to Section 2(c)(ii) which materially and adversely affects
the value of any Mortgage Loan or the interests of the Bondholders,
in any Mortgage Loan, the Seller shall cure such breach in all
material respects, and if such breach is not so cured, shall, (A)
remove such Mortgage Loan (a "Deleted Mortgage Loan") from the Trust
Estate and substitute in its place a Replacement Mortgage Loan, in
the manner and subject to the conditions set forth in this Section
2(c); or (B) purchase the affected Mortgage Loan or Mortgage Loans
from the Issuer (with the Trustee releasing its lien thereon) at the
Purchase Price in the manner set forth below; provided, however,
that any such substitution pursuant to (A) above shall not be
effected prior to the delivery to the Trustee of a Request for
Release for the Deleted Mortgage Loan Trustee Mortgage File, and the
delivery to the applicable Custodian of the Trustee Mortgage File
for any such Replacement Mortgage Loan. The Seller shall promptly
reimburse the Trustee for any expenses reasonably incurred by the
Trustee in respect of enforcing the remedies for such breach.
With respect to the representations and warranties described in
this Section 2(c) which are made to the best of the Seller's
knowledge, if it is discovered by either the Issuer or the Trustee
that the substance of such representation and warranty is inaccurate
and such inaccuracy materially and adversely affects the value of
any Mortgage Loan, or the interests of the Bondholders therein,
notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation or warranty, such inaccuracy shall
be deemed a breach of the applicable representation or warranty.
With respect to any Replacement Mortgage Loan or Loans, the
Seller shall deliver to the applicable Custodian for the benefit of
the Bondholders the Mortgage Note, the Mortgage, the related
assignment of the Mortgage, and such other documents and agreements
as are required by the applicable Custodial Agreement, with the
Mortgage Note endorsed and the Mortgage assigned as required by
Custodial Agreement. No substitution is permitted to be made in any
calendar month after the Withdrawal Date for such month. Scheduled
Payments due with respect to Replacement Mortgage Loans in the month
of substitution shall not be part of the Trust Estate and will be
retained by the Seller on the next succeeding Distribution Date. For
the month of substitution, Available Funds will include the monthly
payment due on any Deleted Mortgage Loans for such month and
thereafter the Seller shall be entitled to retain all amounts
received in respect of such Deleted Mortgage Loans.
The Issuer shall amend the Schedule of Mortgage Loans for the
benefit of the Bondholders to reflect the removal of such Deleted
Mortgage Loans and the substitution of the Replacement Mortgage
Loans and the Issuer shall deliver the amended Schedule of Mortgage
Loans to the Trustee. Upon such substitution, the Replacement
Mortgage Loans shall be subject to the terms of this Agreement in
all respects, and the Seller shall be deemed to have made with
respect to such Replacement Mortgage Loans, as of the date of
substitution, the representations and warranties made pursuant to
Section 2(c)(ii) with respect to such Mortgage Loans. Upon any such
substitution and the deposit to the Bond Account of the amount
required to be deposited therein in connection with such
substitution as described in the following paragraph, the Trustee
shall release the Trustee Mortgage File held for the benefit of the
Bondholders relating to such Deleted Mortgage Loans to the Seller
and shall execute and deliver at the Seller's direction such
instruments of transfer or assignment prepared by the Seller, in
each case without recourse, as shall be necessary to vest title in
the Seller, or its designee, the Trustee's interest in any Deleted
Mortgage Loan substituted for pursuant to this Section 2(c).
For any month in which the Seller substitutes one or more
Replacement Mortgage Loans for one or more Deleted Mortgage Loans,
the Seller will determine the amount (if any) by which the aggregate
principal balance of all such Replacement Mortgage Loans as of the
date of substitution is less than the aggregate Stated Principal
Balance of all such Deleted Mortgage Loans (after application of the
scheduled principal portion of the monthly payments due in the month
of substitution). The amount of such shortage (the "Substitution
Amount") shall be deposited into the Bond Account by the Seller on
or before the Distribution Account Deposit Date for the Distribution
Date in the month succeeding the calendar month during which the
related Mortgage Loan became replaced hereunder.
In the event that the Seller shall have purchased a Mortgage
Loan, the Purchase Price therefor shall be deposited in the Bond
Account pursuant to Section 3(g) and in compliance with the
provisions of Section 8.04 of the Indenture on or before the
Distribution Account Deposit Date for the Distribution Date in the
month following the month during which the Seller became obligated
hereunder to purchase or replace such Mortgage Loan and upon such
deposit of the Purchase Price and receipt of a Request for Release,
the Trustee shall release the related Trustee Mortgage File held for
the benefit of the Bondholders to the Seller, and the Trustee shall
execute and deliver at the Seller's direction such instruments of
transfer or assignment prepared by the Seller, in each case without
recourse, as shall be necessary to transfer title from the Trustee
pursuant to Sections 8.08(c) and 8.12 of the Indenture. It is
understood and agreed that the obligation under this Agreement of
the Seller to cure, purchase or replace any Mortgage Loan as to
which a breach has occurred and is continuing shall constitute the
sole remedy against the Seller respecting such breach available to
Bondholders or the Trustee on their behalf.
The representations and warranties made pursuant to this
Section 2(c) shall survive delivery of the respective Trustee
Mortgage Files to the Custodians for the Trustee for the benefit of
the Bondholders.
(d) Covenants of the Master Servicer.
--------------------------------
The Master Servicer hereby covenants to the Issuer and the Trustee that
no written information, certificate of an officer, statement furnished in
writing or written report delivered to the Issuer, any affiliate of the Issuer
or the Trustee and prepared by the Master Servicer pursuant to this Agreement
will contain any untrue statement of a material fact or omit to state a
material fact necessary to make such information, certificate, statement or
report not misleading.
3. GENERAL DUTIES OF THE MASTER SERVICER.
(a) Master Servicer to Master Service Mortgage Loans.
------------------------------------------------
The parties agree that, subject to the provisions of Section 7 hereof,
the Master Servicer shall master service the Mortgage Loans in accordance with
the terms of this Agreement. In that regard, the Master Servicer shall
supervise, administer, monitor and oversee the servicing of the Mortgage Loans
by each Servicer pursuant to the terms of its Servicing Agreement, on behalf
of the Issuer and the Trustee and for the benefit of the Bondholders, in
accordance with this Agreement and applicable laws and regulations and giving
due consideration to customary and usual standards of practice of prudent
mortgage lenders and master servicers. In addition, the Master Servicer shall
(i) oversee and consult with each Servicer as appropriate from time to time to
fulfill the Master Servicer's obligations hereunder, (ii) receive and review
all reports, information and other data and documents provided to the Master
Servicer by each Servicer and (iii) otherwise exercise its best efforts, as
more fully set forth in Section 3(b), to cause each Servicer to perform and
observe the covenants, obligations and conditions required to be performed
under its Servicing Agreement.
Subsections (j), (k), (l), (m), (n) and (p) of this Section 3 describe,
in summary form, provisions of the Servicing Agreements with the various
Servicers who will service the Mortgage Loans. To the extent that any
Servicing Agreement conflicts with the summaries set forth in this Agreement,
the provisions of the applicable Servicing Agreement will govern. These
subsections are for informational purposes only and do not establish
responsibilities and shall not be construed to impose any obligations or
duties on any Person, including, in particular, the Master Servicer or any
Servicer.
(b) Servicing; Enforcement of the Obligations of Servicers.
------------------------------------------------------
(i) The Seller has entered into or is the assignee of the
Servicing Agreements listed on Schedule V hereto, and on the Closing
Date it assigned all of its right, title and interest in and to such
Servicing Agreements to the Issuer. The Issuer, the Trustee and the
Bondholders, by their purchase and acceptance of the Bonds,
acknowledge and agree that the Mortgage Loans shall be serviced by
the Servicers in accordance with the terms and provisions of the
Servicing Agreements and authorize the Master Servicer to enforce
the Servicing Agreements pursuant to the terms of this Agreement.
The Seller has (A) provided to each Servicer notice of the
assignment of the related Servicing Agreement to the Issuer, in
accordance with the provisions of such Servicing Agreement, and of
the appointment of Norwest as Master Servicer hereunder, and has
instructed each Servicer to remit all amounts required to be paid to
the owner of the related Mortgage Loans under its Servicing
Agreement to the Master Servicer, and (B) has received from each
Servicer acknowledgement of such assignment and appointment and of
the Master Servicer's authority to enforce the related Servicing
Agreement on behalf of the Trust and such Servicer's agreement to
remit all such amounts to the Master Servicer.
(ii) (A) Each Servicing Agreement requires the applicable
Servicer to service the Mortgage Loans in accordance with the
provisions thereof. References in this Agreement to actions taken or
to be taken by the Master Servicer include actions taken or to be
taken by a Servicer on behalf of the Master Servicer. Any fees and
other amounts payable to such Servicers shall be deducted from
amounts remitted to the Master Servicer by the applicable Servicer
and shall not be an obligation of the Issuer or the Trust Estate. As
part of its master servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee and the Bondholders, shall
use its best reasonable efforts to enforce the obligations of each
Servicer under the related Servicing Agreement, to the extent that
the non-performance of any such obligation would have material and
adverse effect on a Mortgage Loan. Such enforcement, including,
without limitation, the legal prosecution of claims, termination of
Servicing Agreements and the pursuit of other appropriate remedies,
shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans;
provided, that, the Master Servicer shall be entitled to be
reimbursed for the costs and expenses associated with any such
enforcement (X) from a general recovery resulting from such
enforcement to the extent, if any, that such recovery exceeds all
amounts due in respect of the related Mortgage Loan, (Y) from a
specific recovery of costs, expenses or attorneys fees against the
party against whom such enforcement is directed, and (Z) if the
amounts described in the preceding clauses (X) and (Y) are
insufficient to reimburse the Master Servicer for all amounts so
advanced, then the outstanding amount of any such advance shall be
reimbursable out of amounts distributable to the Master Servicer out
of the Distribution Account pursuant to Section 2(b) of the
Indenture.
(c) Successor Servicers.
-------------------
(i) The Issuer as owner of the Mortgage Loans and the Trustee
as lienholder with respect thereto, pursuant to the Servicing
Agreements, hereby authorize and appoint the Master Servicer as
their agent to exercise all rights of the party entitled to exercise
ownership rights with respect to the Mortgage Loans in accordance
with the terms of the Servicing Agreements, including, without
limitation, the power to terminate the Servicing Agreements and the
related Servicers according to the terms and conditions of such
Servicing Agreements, without any limitation by virtue of this
Agreement; provided, however, that in the event of termination of
any Servicing Agreement by the Master Servicer or the related
Servicer, the Master Servicer shall either act as servicer of the
related Mortgage Loans in accordance with the terms of the related
Servicing Agreement (with such modifications as described in this
Agreement) or enter into a Servicing Agreement with a successor
Servicer acceptable to the Trustee which will be bound by the terms
of the related Servicing Agreement in accordance with the terms of
related Servicing Agreement (with such modifications as described in
this Agreement).
Notwithstanding the foregoing provisions to the extent
applicable to termination of the rights and obligations of the
Special Servicer, the Directing Holder, if any, shall have the
rights accorded to it under the Special Servicing Agreement.
(ii) If the Master Servicer acts as Servicer, it will not
assume liability for the representations and warranties of the
Servicer, if any, that it replaces. The Master Servicer shall use
reasonable efforts to have the successor Servicer assume liability
for the representations and warranties made by the terminated
Servicer in respect of the related Mortgage Loans, and in the event
of any such assumption by the successor Servicer, the Trustee or the
Master Servicer, as applicable, may, in the exercise of its business
judgment, release the terminated Servicer from liability for such
representations and warranties.
(iii) Notwithstanding the provisions of this Section 3 or of
any Servicing Agreement, the Master Servicer shall be under no
obligation, either as Master Servicer or as successor Servicer under
a Servicing Agreement, to purchase any Mortgage Loan.
(d) Reserved.
--------
(e) Rights of the Issuer and the Trustee in Respect of the
--------------------------------------------------------------
Master Servicer.
---------------
The Issuer may, but is not obligated to, enforce the obligations of the
Master Servicer hereunder and may, but is not obligated to, perform, or cause
a designee to perform, any defaulted obligation of the Master Servicer
hereunder and in connection with any such defaulted obligation to exercise the
related rights of the Master Servicer hereunder; provided that the Master
Servicer shall not be relieved of any of its obligations hereunder by virtue
of such performance by the Issuer or its designee. Neither the Trustee nor the
Issuer shall have any responsibility or liability for any action or failure to
act by the Master Servicer nor shall the Trustee or the Issuer be obligated to
supervise the performance of the Master Servicer hereunder or otherwise.
(f) Trustee to Act as Master Servicer.
---------------------------------
In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of a Master Servicing
Default), unless a successor Master Servicer acceptable to the Trustee has
been appointed, the Trustee or its successor shall thereupon assume all of the
rights and obligations of the Master Servicer hereunder arising thereafter,
except that the Trustee shall not be (i) liable for losses of the Master
Servicer pursuant to Section 3(g)(viii) or any acts or omissions of the
predecessor Master Servicer hereunder, (ii) obligated to make Servicing
Advances or Master Servicing Advances if it is prohibited from doing so by
applicable law, or (iii) deemed to have made any representations and
warranties of the Master Servicer hereunder. Any such assumption shall be
subject to Section 7(b). If the Master Servicer shall for any reason no longer
be the Master Servicer (including by reason of any Master Servicing Default),
unless a successor Master Servicer acceptable to the Trustee has been
appointed, the Trustee or its successor shall succeed to any rights of the
Master Servicer under this Agreement and any obligations of the Master
Servicer under this Agreement arising thereafter including, with respect to
the Servicing Agreements, all rights and obligations of the Master Servicer
related thereto as contemplated by Section 3(b).
(g) Collection of Mortgage Loan Payments; Bond Account;
---------------------------------------------------------------
Distribution Account.
--------------------
(i) The Master Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of
the Servicing Agreements from the related Servicers.
(ii) The Master Servicer shall establish and maintain a Bond
Account, which shall be an Eligible Account, into which the Master
Servicer shall deposit or cause to be deposited on a daily basis, or
to the extent same day deposit is unavailable, within one Business
Day of receipt, the following payments and collections remitted by
Servicers or received by it in respect of Mortgage Loans subsequent
to the Cut-off Date (other than in respect of principal and interest
due on the Mortgage Loans on or before the Cut-off Date) and the
following amounts required to be deposited hereunder:
(A) all payments on account of principal on the Mortgage
Loans, including Principal Prepayments and the principal
component of any Advance remitted to it by the Servicers;
(B) all payments on account of interest on the Mortgage
Loans, net of the sum of the related Servicing Fee, and the
interest component of any Advance remitted to it by the
Servicers;
(C) all Insurance Proceeds and Liquidation Proceeds;
(D) any other payments, collections and other amounts
remitted to it by a Servicer pursuant to the related Servicing
Agreement in respect of the Mortgage Loans, including
Compensating Interest;
(E) any amount required to be deposited by the Seller in
connection with any realized losses on Permitted Investments
pursuant to subclause (viii) of this Subsection;
(F) all Purchase Prices from the Seller or any other
person and all Substitution Amounts;
(G) all Master Servicing Advances made by the Master
Servicer pursuant to Section 4;
(H) any amount contributed by the Issuer to be used for
payment of principal and/or interest on the Bonds for any other
purpose identified by the Issuer; and
(I) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master
Servicer shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the
nature of late payment charges or assumption fees, but excluding
prepayment penalties, if collected, need not be remitted by the
Master Servicer. In the event that the Master Servicer shall remit
any amount not required to be remitted, it may at any time withdraw
or direct the institution maintaining the Bond Account to withdraw
such amount from the Bond Account, any provision herein to the
contrary notwithstanding. The Master Servicer shall maintain
adequate records with respect to all withdrawals made pursuant to
this subsection. All funds deposited in the Bond Account shall be
held in trust for the Bondholders until withdrawn in accordance with
the subclauses of this subsection.
(iii) The Master Servicer may from time to time make
withdrawals from the Bond Account for the following purposes:
(A) to pay the Master Servicer the Master Servicing Fee
and to reimburse the Master Servicer or Servicer, as
applicable, for unreimbursed Master Servicer Advances,
Advances, or Servicing Advances made by it, such right of
reimbursement pursuant to this subclause being limited to
amounts received on the Mortgage Loan(s) (including Insurance
Proceeds and Liquidation Proceeds) in respect of which any such
Master Servicer Advance, Advance or Servicing Advance was made;
(B) to reimburse the related Servicer or Master Servicer
for any Nonrecoverable Advance previously made;
(C) to pay to the purchaser, with respect to each Mortgage
Loan or property acquired in respect thereof that has been
purchased pursuant to any Section of this Agreement, all
amounts received thereon after the date of such purchase,
except as otherwise herein provided;
(D) to withdraw any amount deposited in the Bond Account
and not required to be deposited therein;
(E) to withdraw investment earnings payable to the Master
Servicer;
(F) on each Withdrawal Date to withdraw the Interest
Remittance Amount and the Principal Remittance Amount for such
Distribution Date, to the extent on deposit, and remit such
amount to the Distribution Account; and
(G) to clear and terminate the Bond Account upon
termination of this Agreement pursuant to Section 8(a).
The Master Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the
purpose of justifying any withdrawal from the Bond Account pursuant
to such subclauses (A), (B) and (D). Prior to making any withdrawal
from the Bond Account pursuant to subclause (B), the Master Servicer
shall deliver to the Trustee an Officer's Certificate of a Servicing
Officer indicating the amount of any previous Master Servicer
Advance, Advance, or Servicing Advance determined by the Master
Servicer or the Servicer to be a Nonrecoverable Advance and
identifying the related Mortgage Loan(s).
(iv) On each Withdrawal Date, after payment of any amounts
described in clauses (A) through (E) of Section 3(g)(iii) of this
Agreement, the Master Servicer will withdraw from the Bond Account
the Interest Remittance Amount and the Principal Remittance Amount
for the related Distribution Date, and will deposit such amount in
the Distribution Account.
(v) Reserved.
(vi) On the first Distribution Date, in June, 1998, the Master
Servicer shall withdraw and deposit in the Distribution Account the
amounts set forth in Schedule VI hereof.
(vii) On each Distribution Date beginning in July, 1998, the
Master Servicer shall instruct the Trustee to distribute the funds
on deposit in the Distribution Account, and the Trustee upon being
so instructed will distribute such funds on each such Distribution
Date, in the various amounts, to the several parties and in the
order of priority set forth in Section 2(b) of the Indenture and as
set forth in the Master Servicer's instructions.
(viii) Each institution at which the Bond Account is maintained
may invest the funds therein as directed in writing by the Master
Servicer in Permitted Investments, which shall mature not later than
the Withdrawal Date with respect to available funds to be withdrawn
on that date and, in each case, shall not be sold or disposed of
prior to its maturity. All such Permitted Investments shall be made
in the name of the Trustee, for the benefit of the Bondholders. All
income and gain (net of any losses) realized from any such
investment of funds on deposit in the Bond Account shall be for the
benefit of the Master Servicer and shall be retained or withdrawn by
it monthly as provided herein. The amount of any realized losses in
the Bond Account incurred in any such account in respect of any such
investments shall promptly be deposited by the Master Servicer in
the Bond Account. The Trustee in its fiduciary capacity shall not be
liable for the amount of any loss incurred in respect of any
investment or lack of investment of funds held in the Bond Account
and made in accordance with this subsection.
(ix) The Master Servicer shall give notice to the Trustee, the
Issuer and each Rating Agency of any proposed change of the location
of the Bond Account not later than 30 days and not more than 45 days
prior to any change thereof.
(h) Determination of LIBOR.
----------------------
(i) With respect to the Class A Bonds, LIBOR will be determined
as follows:
On the second LIBOR Business Day prior to the commencement of
each Accrual Period after the Initial Accrual Period for the Class A
Bonds (each a "LIBOR Determination Date"), the Master Servicer will
determine LIBOR on the basis of the offered LIBOR quotations of the
Reference Banks as of 11:00 a.m. London time on such LIBOR
Determination Date, and promptly advise the Trustee of its
determination, as follows:
(A) If on any LIBOR Determination Date two or more of the
Reference Banks provide such offered quotations, LIBOR for the
next Accrual Period will be the arithmetic mean of such offered
quotations (rounding such arithmetic mean if necessary to the
nearest five decimal places);
(B) If on any LIBOR Determination Date only one or none of
the Reference Banks provides such offered quotations, LIBOR for
the next Accrual Period will be whichever is the higher of (x)
LIBOR as determined on the previous LIBOR Determination Date or
(y) the Reserve Interest Rate. The "Reserve Interest Rate" will
be either (I) the rate per annum which the Master Servicer
determines to be the arithmetic mean (rounding such arithmetic
mean if necessary to the nearest five decimal places) of the
one-month Eurodollar lending rates that New York City banks
selected by the Master Servicer are quoting, on the relevant
LIBOR Determination Date, to the principal London offices of at
least two leading banks in the London interbank market or (II)
in the event that the Master Servicer can determine no such
arithmetic mean, the lowest one-month Eurodollar lending rate
that the New York City banks selected by the Master Servicer
are quoting on such LIBOR Determination Date to leading
European banks; and
(C) If on any LIBOR Determination Date the Master Servicer
is required but is unable to determine the Reserve Interest
Rate in the manner provided in paragraph (B) above, LIBOR for
the next Accrual Period will be LIBOR as determined on the
previous LIBOR Determination Date.
(ii) The establishment of LIBOR by the Master Servicer and the
Master Servicer's subsequent calculation of the Bond Interest Rate
for the relevant Accrual Period, in the absence of manifest error,
will be final and binding. In all cases, the Master Servicer may
conclusively rely on quotations of LIBOR for the Reference Banks as
such quotations appear on the display designated "LIUS01M" on the
Bloomberg Financial Markets Commodities News.
(iii) As used herein, "Reference Banks" shall mean four leading
banks engaged in transactions in Eurodollar deposits in the
international Eurocurrency market with an established place of
business in London, England, (ii) whose quotations appear on the
display designated as page "LIUS01M" on the Bloomberg Financial
Markets Commodities News (or such other page as may replace such
page on that service for the purpose of displaying London interbank
offered quotations of major banks) on the applicable LIBOR
Determination Date and (iii) which have been designated as such by
the Trustee and are able and willing to provide such quotations to
the Trustee on each LIBOR Determination Date. The Reference Banks
initially shall be: Barclay's plc, Bank of Tokyo, National
Westminster Bank and Trust Company and Bankers Trust Company. If any
of the initial Reference Banks should be removed from the Bloomberg
Screen LIUS01M Index Page or in any other way fail to meet the
qualifications of a Reference Bank, the Trustee shall use its best
efforts to designate alternate Reference Banks.
(iv) If (A) with respect to any LIBOR Determination Date LIBOR
is determined pursuant to clause (i)(C) of this Section and (B) on
the next succeeding LIBOR Determination Date LIBOR would, without
giving effect to this paragraph (iv), be determined pursuant to such
clause (i)(C), then the Trustee shall select an alternative interest
rate index over which the Trustee has no control that is used for
determining Eurodollar lending rates and is calculated and published
(or otherwise made available) by an independent third party, and the
Trustee shall direct the Master Servicer to use such alternative
interest rate index for calculating LIBOR for all purposes hereof.
(i) Master Servicer Monthly Data.
----------------------------
Not later than each Distribution Date, the Master Servicer shall prepare
and forward to the Trustee, the Issuer and each Rating Agency a statement
(each, a "Distribution Date Statement") setting forth with respect to the
related distribution:
(i) the amount thereof allocable to principal on the Bonds,
separately identifying the aggregate amount of any Principal
Prepayments and Liquidation Proceeds in respect of the Mortgage
Loans included therein;
(ii) the amount thereof allocable to interest on the Bonds;
(iii) if the distribution to the Holders of the Bonds is less
than the full amount that would be distributable to such Holders
pursuant to the terms of the Bonds and the Indenture on such
Distribution Date if there were sufficient funds available therefor,
the amount of the shortfall and the allocation thereof as between
principal and interest;
(iv) the Principal Amount of the Bonds after giving effect to
the distribution of principal on such Distribution Date;
(v) the Pool Principal Balance for the following Distribution
Date;
(vi) the amount of the Servicing Fees paid to or retained by
the Servicers (with respect to the Servicers, in the aggregate) with
respect to such Distribution Date;
(vii) the Bond Interest Rate for the Class A Bonds with respect
to such Distribution Date;
(viii) the amount of Advances and Master Servicing Advances
included in the distribution on such Distribution Date and the
aggregate amount of Advances and Master Servicing Advances
outstanding as of the close of business on such Distribution Date;
(ix) the number and aggregate principal amounts of Mortgage
Loans (A) delinquent (exclusive of Mortgage Loans in foreclosure)
(1) 30 to 59 days (2) 60 to 89 days and (3) 90 or more days and (B)
in foreclosure and delinquent (1) 1 to 29 days (2) 60 to 89 days and
(3) 90 or more days, as of the close of business on the last day of
the calendar month preceding such Distribution Date;
(x) for each of the preceding 3 calendar months, or all
calendar months since the Cut-off Date, whichever is less and in
each case ending with the calendar month prior to the month of such
Distribution Date, the aggregate dollar amount of the Scheduled
Payments (A) due on all Outstanding Mortgage Loans on each of the
Due Dates in each such month and (B) delinquent 60 days or more on
each of the Due Dates in each such month;
(xi) with respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the loan number and
Stated Principal Balance of such Mortgage Loan as of the close of
business on the Calculation Date preceding such Distribution Date
and the date of acquisition thereof;
(xii) the total number and principal balance of any REO
Properties (and market value, if available) as of the close of
business on the Calculation Date preceding such Distribution Date;
(xiii) the aggregate amount of Realized Losses incurred during
the preceding calendar month;
(xiv) all amounts required to be reported to Certificate
Trustee pursuant to Sections 4.03 and 4.05 of the Trust Agreement
and all amounts of distributions and deposits and withdrawals to be
made by the Certificate Trustee pursuant to Article V of the Trust
Agreement.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer shall furnish to each Person who at any time during the
calendar year was a Bondholder and has provided a written request for such
information, a statement containing the information set forth in subclauses
(i), (ii) and (vi) of this subsection aggregated for such calendar year or
applicable portion thereof during which such Person was a Bondholder. Such
obligation of the Master Servicer shall be deemed to have been satisfied to
the extent that substantially comparable information shall be provided by the
Master Servicer pursuant to any requirements of the Code as from time to time
in effect.
The Master Servicer upon request, as required by law, shall supply to the
Trustee at least fifteen calendar days prior to any applicable filing date
prescribed by law of Internal Revenue Service regulation, and the Trustee, as
agent for the Issuer, and upon receipt from the Master Servicer, shall
transmit by mail to each Bondholder, as such Bondholder's name and address
appears in the Bond Register, and to the Internal Revenue Service, within the
time limits prescribed by law, the amount of interest and original issue
discount (which original issue discount shall be calculated by the Master
Servicer), if any, paid or accrued with respect to Bonds held by such
Bondholder.
As required by the Code or the Treasury regulations thereunder, the
Master Servicer shall supply to the Trustee and the Trustee and upon receipt
from the Master Servicer, shall transmit by mail to each Bondholder
appropriate tax accounting information, and any other tax accounting
information that a Bondholder reasonably requests, to enable it to prepare its
tax returns.
(j) Standard Hazard and Flood Insurance Policies.
--------------------------------------------
For each Mortgage Loan, the Servicer shall maintain or cause to be
maintained standard fire and casualty insurance and, where applicable, flood
insurance, all in accordance with the provisions of this Agreement and the
related Servicing Agreement, as applicable. It is understood and agreed that
such insurance shall be with insurers meeting the eligibility requirements set
forth in the applicable Servicing Agreement and that no earthquake or other
additional insurance is to be required of any Mortgagor or to be maintained on
property acquired in respect of a defaulted loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance.
Any amounts collected by any Servicer, under any insurance policies
maintained pursuant to this subsection (other than amounts to be applied to
the restoration or repair of the property subject to the related Mortgage or
released to the Mortgagor in accordance with the applicable Servicing
Agreement) shall be deposited into the Bond Account, subject to withdrawal
pursuant to Section 3(g). Any cost incurred by any Servicer in maintaining any
such insurance if the Mortgagor defaults in its obligation to do so shall be
added to the amount owing under the Mortgage Loan where the terms of the
Mortgage Loan so permit; PROVIDED, HOWEVER, that the addition of any such cost
shall not be taken into account for purposes of calculating the distributions
to be made to Bondholders and shall be recoverable by the Master Servicer or
such Servicer pursuant to Section 3(g).
(k) Presentment of Claims and Collection of Proceeds.
------------------------------------------------
Each Servicer shall (to the extent provided in the applicable Servicing
Agreement) to, prepare and present on behalf of the Trustee and the
Bondholders all claims under the Insurance Policies with respect to the
Mortgage Loans, and take such actions (including the negotiation, settlement,
compromise or enforcement of the insured's claim) as shall be necessary to
realize recovery under such policies. Any proceeds disbursed to a Servicer and
remitted to the Master Servicer in respect of such policies or bonds shall be
promptly deposited in the Bond Account upon receipt, except that any amounts
realized that are to be applied to the repair or restoration of the related
Mortgaged Property as a condition requisite to the presentation of claims on
the related Mortgage Loan to the insurer under any applicable Insurance Policy
need not be so deposited (or remitted).
(l) Maintenance of the Primary Mortgage Insurance Policies.
------------------------------------------------------
(i) No Servicer shall take (consistent with the applicable
Servicing Agreement) any action that would result in noncoverage
under any applicable Primary Mortgage Insurance Policy of any loss
which, but for the actions of such Servicer, would have been covered
thereunder. The Servicer shall use its best reasonable efforts to
keep in force and effect (to the extent that the Mortgage Loan
requires the Mortgagor to maintain such insurance), primary mortgage
insurance applicable to each Mortgage Loan in accordance with the
provisions of this Agreement and the related Servicing Agreement, as
applicable. The Servicer shall not cancel or refuse to renew any
such Primary Mortgage Insurance Policy that is in effect at the date
of the initial issuance of the Bonds and is required to be kept in
force hereunder except in accordance with the provisions of this
Agreement and the related Servicing Agreement, as applicable.
(ii) The Servicer agrees to present, on behalf of the Trustee
and the Bondholders, claims to the insurer under any Primary
Mortgage Insurance Policies and, in this regard, to take such
reasonable action as shall be necessary to permit recovery under any
Primary Mortgage Insurance Policies respecting defaulted Mortgage
Loans. Pursuant to Section 3(g), any amounts collected by the Master
Servicer or any Servicer under any Primary Mortgage Insurance
Policies shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3(g).
(m) "Due-on-Sale" Clauses; Assumption Agreements.
--------------------------------------------
To the extent provided in the applicable Servicing Agreement, to the
extent Mortgage Loans contain enforceable due-on-sale clauses, the Servicers
shall enforce such clauses in accordance with the applicable Servicing
Agreement. If applicable law prohibits the enforcement of a due-on-sale clause
or such clause is otherwise not enforced in accordance with the applicable
Servicing Agreement, and, as a consequence, a Mortgage Loan is assumed, the
original Mortgagor may be released from liability in accordance with the
applicable Servicing Agreement.
(n) Realization Upon Defaulted Mortgage Loans.
-----------------------------------------
Subject to the provisions of the Special Servicing Agreement, the Special
Servicer shall use its reasonable best efforts to foreclose upon, repossess or
otherwise comparably convert the ownership of Mortgaged Properties securing
such of the Mortgage Loans as come into and continue in default and as to
which no satisfactory arrangements can be made for collection of delinquent
payments, all in accordance with the applicable Servicing Agreement.
(o) REO Property.
------------
(i) In the event the Trust Estate acquires ownership of any REO
Property in respect of any Mortgage Loan, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of
the Bondholders. Subject to the provisions of the Special Servicing
Agreement, the Special Servicer shall use its reasonable best
efforts to sell, any REO Property as expeditiously as possible and
in accordance with the provisions of this Agreement and the related
Servicing Agreement, as applicable. Pursuant to its efforts to sell
such REO Property, the Special Servicer shall protect and conserve,
such REO Property in the manner and to such extent required by the
applicable Servicing Agreement.
(ii) The Special Servicer shall deposit or cause to be
deposited all funds collected and received in connection with the
operation of any REO Property in the Bond Account.
(iii) The Master Servicer and the applicable Servicer, upon the
final disposition of any REO Property, shall be entitled to
reimbursement for any related unreimbursed Advances and other
unreimbursed advances as well as any unpaid Master Servicing Fees or
Servicing Fees from Liquidation Proceeds received in connection with
the final disposition of such REO Property; provided, that any such
unreimbursed Advances as well as any unpaid Master Servicing Fees or
Servicing Fees may be reimbursed or paid, as the case may be, prior
to final disposition, out of any net rental income or other net
amounts derived from such REO Property.
(iv) The Liquidation Proceeds from the final disposition of the
REO Property, net of any payment to the Master Servicer and the
applicable Servicer as provided above and in the Special Servicing
Agreement, shall be deposited in the Bond Account on or prior to the
Calculation Date in the month following receipt thereof (and the
Servicer shall provide prompt written notice to the Master Servicer
upon such deposit) and be remitted by wire transfer in immediately
available funds to the Trustee for deposit into the Distribution
Account on the next succeeding Distribution Date.
(p) Collection of Taxes, Assessments and Similar Items.
--------------------------------------------------
(i) To the extent provided in the applicable Servicing
Agreement, each Servicer shall establish and maintain one or more
custodial accounts at a depository institution (which may be a
depository institution with which any Servicer establishes accounts
in the ordinary course of its servicing activities), the accounts of
which are insured to the maximum extent permitted by the FDIC (each,
an "Escrow Account") and shall deposit therein any collections of
amounts received with respect to amounts due for taxes, assessments,
water rates, Standard Hazard Insurance Policy premiums or any
comparable items for the account of the Mortgagors. Withdrawals from
any Escrow Account may be made (to the extent amounts have been
escrowed for such purpose) only in accordance with the applicable
Servicing Agreement. Each Servicer shall be entitled to all
investment income not required to be paid to Mortgagors on any
Escrow Account maintained by such Servicer. The Master Servicer
shall make (or cause to be made) to the extent provided in the
applicable Servicing Agreement advances to the extent necessary in
order to effect timely payment of taxes, water rates, assessments,
Standard Hazard Insurance Policy premiums or comparable items in
connection with the related Mortgage Loan (to the extent that the
Mortgagor is required, but fails, to pay such items), provided that
it has determined that the funds so advanced are recoverable from
escrow payments, reimbursement pursuant to Section 3(g) or
otherwise.
(ii) Costs incurred by the Master Servicer or by Servicers in
effecting the timely payment of taxes and assessments on the
properties subject to the Mortgage Loans may be added to the amount
owing under the related Mortgage Note where the terms of the
Mortgage Note so permit; PROVIDED, HOWEVER, that the addition of any
such cost shall not be taken into account for purposes of
calculating the distributions to be made to Bondholders. Such costs,
to the extent that they are unanticipated, extraordinary costs, and
not ordinary or routine costs shall be recoverable by the Master
Servicer pursuant to Section 2(b) of the Indenture.
(q) Annual Officer's Certificate as to Compliance.
---------------------------------------------
(i) The Master Servicer shall deliver to the Trustee and the
Rating Agencies on or before May 31 of each year, commencing on May
31, 1999, a Servicing Officer's Certificate, certifying that with
respect to the period ending on the immediately preceding December
31: (A) such Servicing Officer has reviewed the activities of such
Master Servicer during the preceding calendar year or portion
thereof and its performance under this Agreement, (B) to the best of
such Servicing Officer's knowledge, based on such review, such
Master Servicer has performed and fulfilled its duties,
responsibilities and obligations under this Agreement in all
material respects throughout such year, or, if there has been a
default in the fulfillment of any such duties, responsibilities or
obligations, specifying each such default known to such Servicing
Officer and the nature and status thereof, (C) nothing has come to
the attention of such Servicing Officer to lead such Servicing
Officer to believe that any Servicer has failed to perform any of
its duties, responsibilities and obligations under its Servicing
Agreement in all material respects throughout such year, or, if
there has been a material default in the performance or fulfillment
of any such duties, responsibilities or obligations, specifying each
such default known to such Servicing Officer and the nature and
status thereof, and (D) the Master Servicer has received from each
Servicer such Servicer's annual certificate of compliance and a copy
of such Servicer's annual audit report, in each case to the extent
required under the applicable Servicing Agreement, or, if any such
certificate or report has not been received by the Master Servicer,
the Master Servicer is using its best reasonable efforts to obtain
such certificate or report .
(ii) Copies of such statements shall be provided to any
Bondholder upon request, by the Master Servicer or by the Trustee at
the Master Servicer's expense if the Master Servicer failed to
provide such copies (unless (A) the Master Servicer shall have
failed to provide the Trustee with such statement or (B) the Trustee
shall be unaware of the Master Servicer's failure to provide such
statement).
(r) Annual Independent Public Accountants' Servicing Statement;
---------------------------------------------------------------
Financial Statements.
--------------------
Pursuant to the Servicing Agreements, on or before 120 days after the end
of each Servicer's fiscal year, commencing with its 1998 fiscal year, each
Servicer at its expense is required to cause a nationally recognized firm of
independent public accountants (who may also render other services to a
Servicer or any affiliate thereof) which is a member of the American Institute
of Certified Public Accountants to furnish a statement to the Master Servicer
to the effect that such firm has examined certain documents and records
relating to the servicing of Mortgage Loans under the related Servicing
Agreement or of mortgage loans under servicing agreements substantially
similar to the related Servicing Agreement (such statement to have attached
thereto a schedule setting forth the servicing agreements covered thereby) and
that, on the basis of such examination, conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FNMA and FHLMC, such servicing has been
conducted in compliance with such servicing agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FNMA and FHLMC requires it to report.
Copies of such statement shall be provided by each Servicer to the Master
Servicer who will, (i) in turn provide such statements to the Trustee and the
Issuer and (ii) notify the Trustee and the Issuer of the failure of any
Servicer to provide such statements as required under the applicable Servicing
Agreement.
(s) Master Servicer Fidelity Bond and Master Servicer Errors and
---------------------------------------------------------------
Omissions Insurance Policy.
---------------------------
The Master Servicer shall obtain and maintain in force (i) a policy or
policies of insurance covering errors and omissions on the performance of its
obligations as Master Servicer hereunder, and (ii) a fidelity bond in respect
of its officers, employees and agents. In the event that any such policy or
bond ceases to be in effect, the Master Servicer shall obtain a comparable
replacement policy or bond. The coverage under each such policy and bond shall
be in such an amount as is customary therefor for the business of master
servicing residential mortgage loans.
(t) Access to Certain Documentation and Indemnification.
---------------------------------------------------
The Master Servicer shall afford the Issuer and the Trustee reasonable
access to all records and documentation regarding the Mortgage Loans within
the Master Servicer's possession and all accounts, insurance information and
other matters relating to this Agreement maintained by the Master Servicer,
such access being afforded without charge, but only upon reasonable request
and during normal business hours at the office designated by the Master
Servicer or reasonably accessible to it pursuant to the Servicing Agreements.
The Master Servicer shall also provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Bonds and the
examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans within
the possession of the Master Servicer (or reasonably accessible to it pursuant
to the Servicing Agreements) and required by applicable regulations of the OTS
and the FDIC. Such access shall be afforded without charge, but only upon
reasonable and prior written request and during normal business hours at the
offices designated by the Master Servicer. Nothing in this Section 3(t) shall
limit the obligation of the Master Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Master Servicer to provide access as provided in this Section 3(t) as a
result of such obligation shall not constitute a breach of this Section 3(t).
(u) Solicitation of Bids.
--------------------
On any Distribution Date on which the Pool Principal Balance is equal to
10% or less of the initial Pool Principal Balance, upon the Master Servicer's
receipt of written notice of election by the Servicer, pursuant to the
Indenture, to direct the Master Servicer to solicit bids for the Mortgage
Loans. The Master Servicer will proceed as soon as practicable to obtain three
bids from the dealer firms specified to it by the Issuer. The Master Servicer
will deliver the three bids to the Trustee promptly upon receipt. If the
purchase price would be less than the Minimum Purchase Price, the Master
Servicer may be directed by the Servicer to continue to solicit bids as
described above, at quarterly intervals, until a bid at least equal to the
Minimum Purchase Price is received.
4. ADVANCES.
The Master Servicer shall determine on or before each Master Servicer
Advance Date whether any Servicer has failed to make any Advance of any
Scheduled Payment of principal and interest required to be made by such
Servicer pursuant to the terms of its Servicing Agreement. If the Master
Servicer determines that any such Servicer has failed to make any such
required Advance the Master Servicer shall make such Advance (a "Master
Servicer Advance") on or before the Master Servicer Advance Date, by either
(i) depositing into the Bond Account an amount equal to the Master Servicer
Advance or (ii) making an appropriate entry in its records relating to the
Bond Account that any Amount Held for Future Distribution has been used by the
Master Servicer in discharge of its obligation to make any such Master
Servicer Advance (any funds so applied shall be replaced by the Master
Servicer by deposit in the Bond Account no later than the close of business on
the next Master Servicer Advance Date); provided, however, in no event shall
the Master Servicer be required to make any Master Servicer Advance that the
Master Servicer determines would constitute a Nonrecoverable Advance. The
Master Servicer shall be entitled to be reimbursed from the Bond Account for
all Master Servicer Advances of its own funds made pursuant to this Section 4
as provided in Section 3(g). The Master Servicer shall inform the Trustee of
the amount of the Advance to be made on each Master Servicer Advance Date no
later than the second Business Day before the related Distribution Date.
The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer
indicating the amount of any proposed Master Servicer Advance determined by
the Master Servicer to be a Nonrecoverable Advance.
5. MASTER SERVICING COMPENSATION AND EXPENSES.
(a) Master Servicer Compensation.
----------------------------
As compensation for its activities hereunder, in addition to any
investment earnings on the Bond Account, the Master Servicer shall be entitled
out of each payment of interest on a Mortgage Loan (or portion thereof) to
retain or withdraw from the Bond Account an amount equal to the Master
Servicing Fee for such Distribution Date.
The Master Servicer shall be required to pay all internal costs and
expenses incurred by it in connection with its master servicing activities
hereunder and shall not be entitled to reimbursement therefor except as
specifically provided in this Agreement.
(b) Servicer Compensation.
---------------------
As compensation for its activities under its Servicing Agreement, each
Servicer shall be entitled to retain out of each payment of interest on a
Mortgage Loan (or portion thereof) an amount equal to interest at the
applicable Servicing Fee Rate on the Stated Principal Balance of the related
Mortgage Loan for the period covered by such interest payment as provided in
the related Servicing Agreement.
Additional servicing compensation in the form of assumption fees, late
payment charges and such other amounts as may be provided in the Servicing
Agreements shall be retained by the Servicers to the extent provided in the
related Servicing Agreement. Each Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities under its
Servicing Agreement (including payment of any premium for hazard insurance and
any Primary Insurance Policy and maintenance of the other forms of insurance
coverage required by this Agreement and its Servicing Agreement) and shall not
be entitled to reimbursement therefor except as specifically provided in its
Servicing Agreement and not inconsistent with this Agreement.
6. MASTER SERVICER.
(a) Liabilities of the Master Servicer.
----------------------------------
The Master Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by it
herein.
(b) Merger or Consolidation of the Master Servicer.
----------------------------------------------
Any Person into which the Master Servicer may be merged or consolidated,
or any Person resulting from any merger, conversion, other change in form or
consolidation to which the Master Servicer shall be a party, or any Person
succeeding to the business of the Master Servicer, shall be the successor to
the Master Servicer hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding; PROVIDED, HOWEVER, that the successor or
resulting Person to the Master Servicer shall be a Person that shall be
qualified to act as Master Servicer hereunder and shall have a net worth of
not less than $15,000,000.
(c) Resignation of Master Servicer.
------------------------------
Except as otherwise provided in subsections (b) and (d) hereof, the
Master Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) upon appointment of a successor servicer and receipt
by the Trustee of a letter from each Rating Agency that such a resignation and
appointment will not result in a downgrading of the rating of any of the Bonds
or (b) upon determination that its duties hereunder are no longer permissible
under applicable law. Any such determination under clause (b) permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
to such effect delivered to the Trustee. No such resignation shall become
effective until the Trustee shall have assumed, or a successor master servicer
shall have been appointed by the Trustee and until such successor shall have
assumed, the Master Servicer's responsibilities and obligations under this
Agreement. Notice of such resignation shall be given promptly by the Master
Servicer to the Depositor.
(d) Assignment or Delegation of Duties by the Master Servicer.
--------------------------------------------------------------
Except as expressly provided herein, the Master Servicer shall not assign
or transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed
by the Master Servicer hereunder; PROVIDED, HOWEVER, that the Master Servicer
shall have the right without the prior written consent of the Trustee, the
Issuer or the Rating Agencies to delegate or assign to or subcontract with or
authorize or appoint an Affiliate of the Master Servicer to perform and carry
out any duties, covenants or obligations to be performed and carried out by
the Master Servicer hereunder. In no case, however, shall any such delegation,
subcontracting or assignment to an Affiliate of the Master Servicer relieve
the Master Servicer of any liability hereunder. Notice of such permitted
assignment shall be given promptly by the Master Servicer to the Issuer and
the Trustee. If, pursuant to any provision hereof, the duties of the Master
Servicer are transferred to a successor master servicer, the entire amount of
the Master Servicing Fees and other compensation payable to the Master
Servicer pursuant hereto, including amounts payable to or permitted to be
retained or withdrawn by the Master Servicer pursuant to provision hereof,
shall thereafter be payable to such successor master servicer.
(e) Limitation on Liability of the Master Servicer and Others.
--------------------------------------------------------------
Neither the Master Servicer nor any of the directors, officers, employees or
agents of the Master Servicer shall be under any liability to the Trustee or
the Bondholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
PROVIDED, HOWEVER, that this provision shall not protect the Master Servicer
or any such person against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in its performance of
its duties or by reason of reckless disregard for its obligations and duties
under this Agreement. The Master Servicer and any director, officer, employee
or agent of the Master Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Seller hereby agrees to, and does hereby
indemnify and hold harmless the Master Servicer each of its directors,
officers, employees and agents, and its and their respective successors and
assigns, as applicable, from and against any and all losses, liabilities,
claims, charges, damages, fines, penalties, judgments, actions, suits, costs
and expenses of any kind or nature whatsoever (including reasonable attorneys'
fees and expenses and reasonable fees and expenses of experts) imposed on,
incurred by, or asserted against the Master Servicer or any of its directors,
officers, employees, agents, or any of their respective successors or assigns,
in any way related to or arising out of this Agreement other than any such
loss, liability or claim resulting solely from the Master Servicer's willful
misfeasance, bad faith or negligence in the performance of its duties
hereunder. This indemnification will survive the termination of the Master
Servicer or this Agreement. The Master Servicer shall be under no obligation
to appear in, prosecute or defend any legal action that is not incidental to
its duties to master service the Mortgage Loans in accordance with this
Agreement and that in its opinion may involve it in any expenses or liability;
PROVIDED, HOWEVER, that the Master Servicer may in its sole discretion
undertake any such action that it may deem necessary or desirable in respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Bondholders hereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust Estate and the Master Servicer shall be
entitled to be reimbursed therefor out of the Bond Account as provided by
Section 3(g).
The Master Servicer shall not be liable for any acts or omissions of any
Servicer. In particular, the Master Servicer shall not be liable for any
servicing errors or interruptions resulting from any failure of any Servicer
to maintain computer and other information systems that are year-2000
compliant.
7. MASTER SERVICING DEFAULT; TERMINATION AND LIABILITIES.
(a) Master Servicing Default.
------------------------
Any of the following acts or occurrences shall constitute a Master
Servicing Default by the Master Servicer under this Agreement:
(i) any failure by the Master Servicer to deposit in the Bond
Account or remit to the Trustee any payment required to be made
under the terms of this Agreement, which failure shall continue
unremedied for three days after the date upon which written notice
of such failure shall have been given to the Master Servicer by the
Trustee or the Issuer or to the Master Servicer, the Trustee and the
Issuer by the Holders of Bonds representing more than 50% of the
aggregate Principal Amount of the Bonds; or
(ii) any failure by the Master Servicer to observe or perform
in any material respect any other of the covenants or agreements on
the part of the Master Servicer contained in this Agreement, which
failure shall continue unremedied for a period of 30 days after the
date on which written notice of such failure shall have been given
to the Master Servicer by the Trustee or the Issuer or to the Master
Servicer, the Trustee and the Issuer by the Holders of Bonds
representing more than 50% of the aggregate Principal Amount of the
Bonds provided that such 30 day period shall be extended by an
additional 30 days upon delivery by the Master Servicer to the
Trustee and the Issuer of written notice of the steps being taken by
the Master Servicer to remedy such failure; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of
a receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall have been
entered against the Master Servicer and such decree or order shall
have remained in force undischarged or unstayed for a period of 60
consecutive days; or
(iv) the Master Servicer shall consent to the appointment of a
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or all or substantially all of the
property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure of the Master Servicer to make any Master
Servicer Advance in the manner and at the time required to be made
pursuant to Section 4 which continues unremedied for a period of one
Business Day after the date of such failure.
If a Master Servicing Default described in clauses (i) to (v) of this
Section 7(a) shall occur, then, and in each and every such case, so long as
such Master Servicing Default shall not have been remedied the Trustee may,
and shall at the direction of the Holders of Bonds representing more than 50%
of the aggregate Principal Amount of Bonds, by notice in writing to the Master
Servicer (with a copy to each Rating Agency), and in addition to any other
rights the Trustee may have on behalf of the Bondholders as a result of such
Master Servicing Default, terminate all of the rights and obligations of the
Master Servicer thereafter arising under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, other than its rights as a Bondholder
under the Indenture and its obligations which are not assumed by the Trustee
pursuant to clauses (i), (iii) and (v) of Section 3(g). If a Master Servicing
Default described in clause (vi) shall occur, the Trustee shall, by notice in
writing to the Master Servicer and the Issuer, terminate all of the rights and
obligations of the Master Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, other than its rights as a Bondholder
under the Indenture and its obligations which are not assumed by the Trustee
pursuant to clauses (i), (iii) and (v) of Section 3(g). On and after the
receipt by the Master Servicer of such written notice, all authority and power
of the Master Servicer hereunder, whether with respect to the Mortgage Loans
or otherwise, unless an alternative successor Master Servicer reasonably
acceptable to the Issuer shall have been appointed, shall pass to and be
vested in the Trustee. The Trustee shall thereupon make any Master Servicer
Advance described in clause (vi) subject to clause (ii) of the first sentence
of Section 3(g). The Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice
of termination, whether to complete the transfer and endorsement or assignment
of the Mortgage Loans and related documents, or otherwise. The Master Servicer
agrees to cooperate with the Trustee in effecting the termination of the
Master Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee of all cash amounts which shall at the
time be credited to the Bond Account or thereafter be received by the Master
Servicer with respect to the Mortgage Loans.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to
the notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to
which such Master Servicer would have been entitled pursuant to Section 3(g),
and any other amounts payable to such Master Servicer hereunder the
entitlement to which arose prior to the termination of its activities
hereunder.
(b) Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7(a), the Trustee shall, subject to and to the
extent provided in Section 3(f), unless an alternative Master Servicer has
been appointed by the Issuer, be the successor to the Master Servicer in its
capacity as master servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Master Servicer by the
terms and provisions hereof and applicable law including the obligation to
make Master Servicer Advances pursuant to Section 4. As compensation therefor,
the Trustee shall be entitled to all funds relating to the Mortgage Loans that
the Master Servicer would have been entitled to hereunder if the Master
Servicer had continued to act hereunder. Notwithstanding the foregoing, if the
Trustee has become the successor to the Master Servicer in accordance with
Section 7(a), the Trustee may, if it shall be unwilling to so act, or shall,
if it is prohibited by applicable law from making Master Servicer Advances
pursuant to Section 4 or if it is otherwise unable to so act, appoint, or
petition a court of competent jurisdiction to appoint, any established
mortgage loan servicing institution acceptable to the Issuer the appointment
of which does not adversely affect the then current rating of the Bonds by
each Rating Agency as the successor to the Master Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities
of the Master Servicer hereunder. Any successor to the Master Servicer shall
be an institution which is a FNMA and FHLMC approved seller/servicer in good
standing, which has a net worth of at least $15,000,000, which is willing to
master service the Mortgage Loans and which executes and delivers to the
Issuer and the Trustee an agreement accepting such delegation and assignment,
containing an assumption by such Person of the rights, powers, duties,
responsibilities, obligations and liabilities of the Master Servicer (other
than liabilities of the Master Servicer under Section 6(f) incurred prior to
termination of the Master Servicer under Section 7(a)), with like effect as if
originally named as a party to this Agreement; provided that each Rating
Agency acknowledges that its rating of the Bonds in effect immediately prior
to such assignment and delegation will not be qualified or reduced as a result
of such assignment and delegation. Pending appointment of a successor to the
Master Servicer hereunder, the Trustee, unless the Trustee is prohibited by
law from so acting, shall, subject to Section 3(g), act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out
of earnings on the accounts as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of the Master Servicing
Fee permitted the Master Servicer hereunder. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary
to effectuate any such succession. Neither the Trustee nor any other successor
master servicer shall be deemed to be in default hereunder by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof or any failure to perform, or any delay in performing, any
duties or responsibilities hereunder, in either case caused by the failure of
the preceding Master Servicer to deliver or provide, or any delay in
delivering or providing, any cash, information, documents or records to it.
Any successor to the Master Servicer as master servicer shall give notice
to the Servicers of such change of master servicer and shall, during the term
of its service as master servicer, maintain in force the policy or policies
that the Master Servicer is required to maintain pursuant to Section 3(s).
(c) Notification to Bondholders.
---------------------------
(i) Upon any termination of or appointment of a successor to
the Master Servicer, the Trustee shall give prompt written notice
thereof to Bondholders, the Issuer and each Rating Agency.
(ii) Within 60 days after the occurrence of any Master
Servicing Default, the Trustee shall transmit by mail to all
Bondholders and the Issuer notice of each such Master Servicing
Default hereunder known to the Trustee, unless such Master Servicing
Default shall have been cured or waived.
8. MISCELLANEOUS.
(a) Term of Master Servicing Agreement.
----------------------------------
The obligations to be performed by the Master Servicer under this
Agreement shall commence on and as of the date on which the Issuer issues the
Bonds and shall terminate as to each Mortgage Loan upon (i) the payment in
full of all principal and interest due under such Mortgage Loan or other
liquidation of such Mortgage Loan as contemplated by this Agreement, (ii) the
termination of the Master Servicer's rights and powers under this Agreement by
the Trustee as provided in Section 7(a) of this Agreement, or (iii) the
release by the Trustee of its security interest in such Mortgage Loan.
(b) Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6(d), this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and the Issuer.
(c) Notices.
-------
All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when delivered at the following
addresses:
The Master
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Servicer: Norwest Bank Minnesota, National Association
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Attention: Master Servicing Department
(AMREIT 1998-1)
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
The Issuer: American Residential Eagle Bond Trust (1998-1)
---------- c/o Wilmington Trust Company,
as Owner Trustee
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Attention: Corporate Trust
Administration
With a copy to:
American Residential Eagle, Inc.
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Attention: Eagle Trust 1998-1 Officer
Seller: American Residential Investment Trust, Inc.
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Attention: Chief Financial Officer
The Trustee: First Union National Bank
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Attention: Corporate Trust Department
Any Rating Agency: The address specified therefor in the
----------------- definition corresponding to the name of such
Rating Agency.
Any of the above entities may at any time give notice in writing to the
others of a change of its address for the purpose of this Section 7(c).
(d) Governing Law.
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This Agreement shall be construed in accordance with and governed by the
substantive laws of the State of New York applicable to agreements made and to
be performed in the State of New York and the obligations, rights and remedies
of the parties hereto and the Bondholders shall be determined in accordance
with such laws.
(e) Amendments.
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This Agreement shall not be amended, changed, modified, terminated or
discharged in whole or in part except (i) by an instrument in writing signed
by all parties hereto, or their respective successors or assigns, and (ii) in
compliance with Section 8.09 of the Indenture.
(f) Severability.
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If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement.
(g) No Joint Venture.
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The Master Servicer and the Issuer are not partners or joint venturers
with each other and nothing herein shall be construed to make them such
partners or joint venturers or impose any liability as such of either of them.
(h) Execution in Counterparts.
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This Agreement may be executed in one or more counterparts, any of which
shall constitute an original as against any party whose signature appears on
it, and all of which shall together constitute a single instrument. This
Agreement shall become binding when one or more counterparts, individually or
taken together, bear the signatures of all parties.
(i) Limitation of Liability of Wilmington Trust Company.
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It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of American Residential
Eagle Bond Trust 1998-1 under the Deposit Trust Agreement, in the exercise of
the powers and authority conferred and vested in it as Owner Trustee, (b) each
of the representations, undertakings and agreements herein made on the part of
the Issuer is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Agreement or the other Operative
Agreements.
(j) Nonpetition Covenants.
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Notwithstanding any prior termination of this Agreement, the Master
Servicer and the Trustee shall not, prior to the date which is one year and
one day after the termination of this Agreement with respect to the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer (or any assignee)
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer.
IN WITNESS WHEREOF, each party has caused this Master Servicing Agreement
to be executed by its duly authorized officer or officers as of the day and
year first above written.
AMERICAN RESIDENTIAL EAGLE BOND
TRUST 1998-1,
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By:
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Its:
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NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Master Servicer
By:
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Its: Assistant Vice President
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FIRST UNION NATIONAL BANK,
as Bond Trustee
By:
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Its:
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ACKNOWLEDGED AS TO SECTION 6(e):
AMERICAN RESIDENTIAL INVESTMENT
TRUST, INC.
By:
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Its:
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SCHEDULE I
Schedule of Mortgage Loans
SCHEDULE II
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1998-1
Collateralized Callable Mortgage Bonds
Representations and Warranties of the Master Servicer
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Norwest Bank Minnesota, National Association ("Norwest"), hereby makes
the representations and warranties set forth in this Schedule II to the Issuer
and the Trustee, as of the Closing Date. Capitalized terms used but not
otherwise defined in this Schedule II shall have the meanings ascribed thereto
in the Master Servicing Agreement (the "Master Servicing Agreement") relating
to the above-referenced Bonds, among Norwest, as Master Servicer, American
Residential Eagle Bond Trust 1998-1, as Issuer, and First Union National Bank,
as Trustee.
(1) Norwest is duly organized as a national banking association and
is validly existing and in good standing under the laws of the United
States of America and is duly authorized and qualified to transact any
and all business contemplated by the Master Servicing Agreement to be
conducted by Norwest.
(2) Norwest has the full power and authority to master service the
Mortgage Loans, and to execute, deliver and perform its obligations
under, the Master Servicing Agreement and has duly authorized by all
necessary action on the part of Norwest the execution, delivery and
performance of the Master Servicing Agreement; and the Master Servicing
Agreement, and, assuming the due authorization, execution and delivery
thereof by the other parties thereto, constitutes a legal, valid and
binding obligation of Norwest, enforceable against Norwest in accordance
with its terms, except that (a) the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, receivership and other similar
laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(3) The execution and delivery of the Master Servicing Agreement by
Norwest, the master servicing of the Mortgage Loans by Norwest under the
Master Servicing Agreement, the consummation of any other of the
transactions contemplated by the Master Servicing Agreement, and the
fulfillment of or compliance with the terms thereof will not (A) result
in a material breach of any term or provision of the charter or by-laws
of Norwest or (B) materially conflict with, result in a material breach,
violation or acceleration of, or result in a material default under, the
terms of any other material agreement or instrument to which Norwest is a
party or by which it may be bound, or (C) constitute a material violation
of any statute, order or regulation applicable to Norwest of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over Norwest.
(4) No litigation is pending or, to the best of Norwest's knowledge,
threatened against Norwest that would materially and adversely affect the
execution or delivery of the Master Servicing Agreement by Norwest or
enforceability of the Master Servicing Agreement against Norwest or the
ability of Norwest to master service the Mortgage Loans or to perform any
of its other obligations under the Master Servicing Agreement in
accordance with the terms thereof.
(5) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by Norwest of its obligations under the Master Servicing
Agreement, or if any such consent, approval, authorization or order is
required, Norwest has obtained the same.
SCHEDULE III
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1998-1
Collateralized Callable Mortgage Bonds
Representations and Warranties as to the Mortgage Loans
-------------------------------------------------------
In the Mortgage Loan Purchase Agreement (which has been assigned to the
Trustee), American Residential Investment Trust, Inc. (the "Seller") makes the
representations and warranties set forth in this Schedule III, as of the
Closing Date, or if so specified herein, as of the Cut-off Date. Capitalized
terms used but not otherwise defined in this Schedule III shall have the
meanings ascribed thereto in the Master Servicing Agreement (the "Master
Servicing Agreement") relating to the above-referenced Series of Bonds, issued
by American Residential Eagle Bond Trust 1998-1.
(1) The information set forth on Schedule I to the Master Servicing
Agreement with respect to each Mortgage Loan and the computer tape
describing the Mortgage Loans delivered to the Master Servicer prior to
closing are true and correct in all material respects as of the Closing
Date.
(2) The Mortgage Loans , individually and in the aggregate, conform
in all material respects to the descriptions thereof in the Prospectus
Supplement. The Mortgage Loans are not being transferred with any intent
to hinder, delay or defraud any creditors.
(3) With respect to any Mortgage Loan that is not a Cooperative
Loan, each Mortgage is a valid and enforceable first lien on the
Mortgaged Property subject only to (a) the lien of non-delinquent current
real property taxes and assessments, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record
as of the date of recording of such Mortgage, such exceptions appearing
of record being acceptable to mortgage lending institutions generally or
specifically reflected in the appraisal made in connection with the
origination of the related Mortgage Loan, and (c) other matters to which
like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by such
Mortgage.
(4) Immediately prior to sale to the Company and the Issuer for
pledge to the Trustee for the benefit of the Bondholders, the Seller had
good title to, and was the sole owner of, each Mortgage Loan free and
clear of any pledge, lien, encumbrance or security interest and had full
right and authority, subject to no interest or participation of, or
agreement with, any other party, to pledge and assign the same pursuant
to the Indenture. Immediately after the sale by the Company to the
Issuer, the Issuer had good title to, and was the sole owner of, each
Mortgage Loan free and clear of any pledge, lien, encumbrance or security
interest and had full right and authority, subject to no interest or
participation of, or agreement with, any other party (other than the
Servicers pursuant to the Servicing Agreements) to pledge and assign the
same pursuant to the Indenture. The rights with respect to each Mortgage
Loan are assignable by the Seller without the consent of any Person other
than consents which will have been obtained on or before the Closing
Date.
(5) There is no delinquent tax or assessment lien against any
Mortgaged Property.
(6) There is no valid offset, claim, defense or counterclaim to any
Mortgage Note or Mortgage, including the obligation of the Mortgagor to
pay the unpaid principal of or interest on such Mortgage Note.
(7) To best of Seller's knowledge there are no mechanics' liens or
claims for work, labor or material affecting any Mortgaged Property which
are or may be a lien prior to, or equal with, the lien of such Mortgage,
except those which are insured against by the title insurance policy
referred to in item (11) below. No Mortgaged Property is damaged by
waste, fire, earthquake or earth movement, windstorm, flood, other types
of water damage, tornado or other casualty so as to affect adversely the
value of the property as security for such Mortgage Loan or the use for
which the premises was intended.
(8) To the best of Seller's knowledge, each Mortgaged Property is
free of material damage, and is in good repair.
(9) Each Mortgage Loan at origination complied in all material
respects with applicable state and federal laws, including, without
limitation, usury, equal credit opportunity, real estate settlement
procedures, truth-in-lending and disclosure laws, and consummation of the
transactions contemplated hereby will not involve the violation of any
such laws.
(10) As of the Closing Date, no prior holder of any Mortgage has
modified the Mortgage in any material respect (except that a Mortgage
Loan may have been modified by a written instrument which has been
recorded or submitted for recordation, if necessary, to protect the
interests of the Bondholders and which has been delivered to the
Trustee); satisfied, cancelled, subordinated or rescinded such Mortgage
in whole or in part; released the related Mortgaged Property in whole or
in part from the lien of such Mortgage; or executed any instrument of
release, cancellation, subordination, rescission, modification or
satisfaction with respect thereto. No action on the part of any Mortgagor
which would otherwise cause the related Mortgage Loan to be in default
has been waived.
(11) A lender's policy of title insurance together with a
condominium endorsement and an extended coverage endorsement, if
applicable, and a variable rate endorsement in an amount at least equal
to the Cut-off Date Stated Principal Balance of each such Mortgage Loan
or a commitment (binder) to issue the same was effective on the date of
the origination of each Mortgage Loan, each such policy is valid and
remains in full force and effect, and each such policy was issued by a
title insurer qualified to do business in the jurisdiction where the
Mortgaged Property is located and acceptable to FNMA or FHLMC and is in a
form acceptable to FNMA or FHLMC, which policy insures the Seller and
successor owners of indebtedness secured by the insured Mortgage, (a) as
to the first priority lien of the Mortgage subject to the exceptions set
forth in paragraph (3) above and (b) against loss by reason of the
invalidity or unenforceability of the lien resulting from the provisions
of the Mortgage Note and Mortgage with respect to adjustment in the
Mortgage Rate and Scheduled Payment; to the best of the Seller's
knowledge, no claims have been made under such mortgage title insurance
policy and no prior holder of the related Mortgage, including the Seller,
the Company or the Issuer, has done, by act or omission, anything which
would impair the coverage of such mortgage title insurance policy.
(12) Each Mortgage Loan was originated by an entity that satisfied
at the time of origination the requirements of Section 3(a)(41) of the
Securities Exchange Act of 1934, as amended.
(13) To the best of Seller's knowledge, all of the improvements
which were included for the purpose of determining the Appraised Value of
the Mortgaged Property lie wholly within the boundaries and building
restriction lines of such property, and no improvements on adjoining
properties encroach upon the Mortgaged Property.
(14) To the best of Seller's knowledge, no improvement located on or
being part of the Mortgaged Property is in violation of any applicable
zoning law or regulation. To the best of Seller's knowledge, all
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property and, with
respect to the use and occupancy of the same, including but not limited
to certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities, unless the lack
thereof would not have a material adverse effect on the value of such
Mortgaged Property, and the Mortgaged Property is lawfully occupied under
applicable law. To the best of the Seller's knowledge, all parties which
have had any interest in each Mortgage Loan whether as Mortgagee,
assignee, pledgee or otherwise, and including, without limitation, the
Seller and/or during the period in which they held and disposed such
interest, were, in compliance with any and all applicable licensing
requirements of the laws of the State where in the Property securing the
Mortgage Loan is located.
(15) The Mortgage Note and the related Mortgage are genuine, and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms and under applicable law. To the
best of Seller's knowledge, all parties to the Mortgage Note and the
Mortgage had legal capacity to execute the Mortgage Note and the Mortgage
and each Mortgage Note and Mortgage have been duly and properly executed
by such parties. Each Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in appropriate
jurisdictions where recordation is necessary to perfect the lien thereof
as against creditors of the Seller. Each Mortgage and assignment of
Mortgage is in recordable form and is acceptable for recording under the
laws of the jurisdiction in the property securing such Mortgage is
located. The sale of the Mortgage Loans and the related Mortgage Notes
does not violate the terms and provisions of any loan or agreement to
which the Seller is party or to which it is bound.
(16) The proceeds of the Mortgage Loans have been fully disbursed,
there is no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements and
as to disbursements of any escrow funds therefor have been complied with.
All costs, fees and expenses incurred in making, or closing or recording
the Mortgage Loans were paid.
(17) The related Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the
benefits of the security, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure. Each Mortgage Loan contains a provision for the
acceleration of the unpaid principal balance of the related Mortgage Loan
in the event that the property securing such Mortgage Loan is sold or
transferred without the prior written consent of the Mortgagee
thereunder.
(18) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such
Mortgage, and no fees or expenses are or will become payable by the Trust
Estate to the trustee under the deed of trust, except in connection with
a trustee's sale after default by the Mortgagor.
(19) Each Mortgage Note and each Mortgage is in substantially one of
the forms acceptable to FNMA or FHLMC, with such riders as have been
acceptable to FNMA or FHLMC, as the case may be.
(20) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for
repayment thereof have not been made, and no escrow deposits or payments
of other charges or payments due Seller have been capitalized under the
Mortgage or the related Mortgage Note.
(21) There is no pledged account or other security other than real
estate securing the Mortgagor's obligations.
(22) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature. With respect to each Mortgage Loan, the
payments required of the Mortgagor are and will be such that the Mortgage
Loan will fully amortize over its term. No Mortgage Loan requires a
balloon payment at the end of its term.
(23) Each Mortgage Loan is assumable if the proposed transferee
submits certain information required to evaluate the transferee's ability
to repay the Mortgage Loan and the holder of the Mortgage Note reasonably
determines that the security for the Mortgage Loan would not be impaired
by the assumption.
(24) At the Cut-off Date, the improvements upon each Mortgaged
Property are covered by a valid and existing hazard insurance policy with
a generally acceptable carrier that provides for fire and extended
coverage and coverage for such other hazards as are customary in the area
where the Mortgaged Property is located in an amount which is at least
equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan or (ii) the greater of (a) the
outstanding principal balance of the Mortgage Loan and (b) an amount such
that the proceeds of such policy shall be sufficient to prevent the
Mortgagor and/or the mortgagee from becoming a co-insurer. If the
Mortgaged Property is a condominium unit, it is included under the
coverage afforded by a blanket policy for the condominium unit. All such
individual insurance policies and all flood policies referred to in item
(26) below contain a standard mortgagee clause naming the applicable
Servicer or the original mortgagee, and its successors in interest, as
mortgagee, and the Seller has received no notice that any premiums due
and payable thereon have not been paid; the Mortgage obligates the
Mortgagor thereunder to maintain all such insurance including flood
insurance at the Mortgagor's cost and expense, and upon the Mortgagor's
failure to do so, authorizes the holder of the Mortgage to obtain and
maintain such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor.
(25) If the Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Mortgaged Property with
a generally acceptable carrier in an amount representing coverage not
less than the least of (A) the original outstanding principal balance of
the Mortgage Loan, (B) the minimum amount required to compensate for
damage or loss on a replacement cost basis, or (C) the maximum amount of
insurance that is available under the Flood Disaster Protection Act of
1973, as amended.
(26) To the best of the Seller's knowledge, there is no proceeding
pending or threatened for the total or partial condemnation of any
Mortgaged Property, nor is such a proceeding currently occurring. There
are no proceedings pending, or to the best of the Seller's knowledge
threatened, wherein the Mortgagor or any governmental agency has alleged
that any Mortgage Loan is illegal or unenforceable.
(27) Except as discussed in the Prospectus Supplement, there is no
material monetary default existing under any Mortgage or the related
Mortgage Note and, to the best of the Seller's knowledge, there is no
material event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration under the Mortgage or the
related Mortgage Note; and Seller has not waived any default, breach,
violation or event of acceleration.
(28) Other than with respect to Mortgaged Property underlying a
Cooperative Loan, each Mortgaged Property is improved by a one- to
four-family residential dwelling including condominium units and dwelling
units in PUDs, which, to the best of Seller's knowledge, does not include
mobile homes and does not constitute other than real property under state
law.
(29) Each Mortgage Loan is being serviced by the Master Servicer or
a Servicer as provided in Section 3(b) of the Master Servicing Agreement.
(30) There is no obligation on the part of the Seller or any other
party under the terms of the Mortgage or related Mortgage Note to make
payments in addition to those made by the Mortgagor. The Seller has
clearly fulfilled all obligations under or in connection with the
acquisition and assignment on the Mortgage Loans and the related Mortgage
Notes, including, without limitation, giving any notices or consents
necessary to affect the acquisition of the Mortgage Loans and the related
Mortgage Notes by the Trustee on behalf of the Trust and has done nothing
to impair the rights of the Trustee or the Bondholders with respect
therein.
(31) Any future advances made prior to the Cut-off Date have been
consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term reflected on the Schedule
of Mortgage Loans. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan. The Mortgage Note does
not permit or obligate the Master Servicer to make future advances to the
Mortgagor at the option of the Mortgagor. The applicable interest rate is
adjusted in accordance with the terms of the related Mortgage Note. All
required notices of interest rate adjustments have been sent to each
Mortgagor on a timely basis and the computations of such adjustments were
properly calculated. All interest rate adjustments have been made in
accordance with all applicable law.
(32) There are no defaults in complying with the terms of the
Mortgage, and all taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of
funds has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed, but is not yet due
and payable. Except for (A) payments in the nature of escrow payments,
and (B) interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage proceeds, whichever is later, to the day
which precedes by one month the Due Date of the first installment of
principal and interest, including without limitation taxes and insurance
payments, the related Servicer has not advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other
than the Mortgagor, directly or indirectly, for the payment of any amount
required by the Mortgage.
(33) Each Mortgage Loan was acquired by Seller in all material
respects in accordance with the guidelines set forth in the Prospectus
Supplement. The Seller used no selection procedure that identified the
Mortgage Loans as being less desirable or valuable than other comparable
mortgage loans acquired by the Seller.
(34) Prior to the approval of the Mortgage Loan application, an
appraisal of the related Mortgaged Property was obtained from a qualified
appraiser, duly appointed by the originator, who had no interest, direct
or indirect in the Mortgaged Property or in any loan made on the security
thereof, and whose compensation is not affected by the approval or
disapproval of the Mortgage Loan; such appraisal is in a form acceptable
to FNMA or FHLMC.
(35) None of the Mortgage Loans is a graduated payment mortgage loan
or a growing equity mortgage loan or subject to a buy down or similar
arrangement.
(36) Any leasehold estate securing a Mortgage Loan has a term of not
less than five years in excess of the term of the related Mortgage Loan.
(37) The sale, transfer, assignment and conveyance of Mortgage Loans
by the Seller pursuant to the Mortgage Loan Purchase Agreement is not
subject to and will not result in any tax, fee or governmental charge
payable by the Seller, the Issuer, the Depositor or the Trustee to any
federal, state or local government ("Transfer Taxes") other than Transfer
Taxes which have or will be paid by the Seller as due. In the event that
the Issuer, the Depositor or the Trustee receives actual notice of any
Transfer Taxes arising out of the transfer, assignment and conveyance of
the Mortgage Loans, on written demand by the Issuer, the Depositor or the
Trustee, or upon the Seller's otherwise being given notice thereof by the
Issuer, the Depositor or the Trustee, the Seller shall pay, and otherwise
indemnify and hold the Issuer, the Trustee and the Depositor harmless, on
an after-tax basis, from and against any and all such Transfer Taxes (it
being understood that the Bondholders, the Trustee, the Issuer, the
Depositor and the Depositor shall have no obligation to pay such Transfer
Taxes).
SCHEDULE IV
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1998-1
Collateralized Callable Mortgage Bonds
Representations and Warranties of the Issuer
--------------------------------------------
American Residential Eagle Bond Trust 1998-1 (the "Issuer") hereby makes
the representations and warranties set forth in this Schedule IV to the Master
Servicer and the Trustee, as of the Closing Date. Capitalized terms used but
not otherwise defined in this Schedule IV shall have the meanings ascribed
thereto in the Master Servicing Agreement (the "Master Servicing Agreement")
relating to the above-referenced Series, among Norwest Bank Minnesota,
National Association, as Master Servicer, the Issuer, and First Union National
Bank, as Trustee.
(A) The Issuer is a statutory business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware,
and possesses all requisite authority, power, licenses, permits and
franchises to conduct any and all business contemplated by the Master
Servicing Agreement and to comply with its obligations under the terms of
that Agreement, the performance of which have been duly authorized by all
necessary action.
(B) Neither the execution and delivery of the Master Servicing
Agreement by the Issuer, nor the performance and compliance with the
terms thereof by the Issuer will (A) result in a material breach of any
term or provision of the instruments creating the Issuer or governing its
operations, or (B) materially conflict with, result in a material breach,
violation or acceleration of, or result in a material default under, the
terms of any other material agreement or instrument to which the Issuer
is a party or by which it may be bound, or (C) constitute a material
violation of any statute, order or regulation applicable to the Issuer of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over the Issuer; and the Issuer is not in breach or
violation of any material indenture or other material agreement or
instrument, or in violation of any statute, order or regulation of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over it which breach or violation may materially impair the
Issuer's ability to perform or meet any of its obligations under the
Master Servicing Agreement.
(C) The Master Servicing Agreement, and all documents and
instruments contemplated hereby, which are executed and delivered by the
Issuer, will, assuming due authorization, execution by and delivery to
the other parties hereto and thereto, constitute valid, legal and binding
obligations of the Issuer, enforceable in accordance with their
respective terms, except that (a) the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(D) No litigation is pending or, to the best of the Issuer's
knowledge, threatened against the Issuer that would materially and
adversely affect the execution, delivery or enforceability of the Master
Servicing Agreement or the ability of the Issuer to perform its
obligations thereunder.
(E) Immediately prior to the pledge of the Mortgage Loans to the
Trustee, the Issuer had good title to, and was the sole owner of, each
Mortgage Loan free and clear of any liens, charges or encumbrances or any
ownership or participation interests in favor of any other Person.
SECTION V
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1998-1
Collateralized Callable Mortgage Bonds
Servicing Agreements
--------------------
1. Reconstituted Servicing Agreement, dated as of June 1, 1998, between
▇▇▇▇▇▇ Capital, a division of ▇▇▇▇▇▇ Brothers Holdings Inc., American
Residential Investment Trust, Inc. and Aurora Loan Services Inc.
2. Reconstituted Special Servicing Agreement, dated as of June 1, 1998,
among ▇▇▇▇▇▇ Capital, a division of ▇▇▇▇▇▇ Brothers Holdings Inc.,
American Residential Investment Trust, Inc. and Ocwen Federal Bank FSB.
SCHEDULE VI
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1998-1
Collateralized Callable Mortgage Bonds
Payment Schedule
June 25,1998
------------
In addition to the Interest Remittance Amount and the Principal
Remittance Amount determined as provided in the Indenture with respect to the
June 18 remittance from the Servicers, the following amounts need to be
included in the amounts transferred to the Distribution Account and the June
Distribution Date:
Principal amount received in May: $__________
Interest on such principal amount for
June 17-25 (8 days): $__________
SCHEDULE VII
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1998-1
Collateralized Callable Mortgage Bonds
Purchase and Sale Agreements
----------------------------
1. Purchase and Warranties Agreement, dated as of October 1, 1997, between
▇▇▇▇▇▇ Capital, a division of ▇▇▇▇▇▇ Brothers Holdings Inc. and Long
Beach Mortgage Company.
2. Master Mortgage Loan Sale and Purchase Agreement, dated as of December
10, 1997, between Accredited Home Lenders, Inc. and American Residential
Investment Trust, Inc.
3. Master Mortgage Loan Sale and Purchase Agreement, dated as of January 29,
1998, between Provident Funding Associates, L.P. and American Residential
Investment Trust, Inc.