Exhibit 10.1
SALE AND SERVICING AGREEMENT
Dated as of March 1, 1998
Among
IMC HOME EQUITY LOAN OWNER TRUST 1998-2,
as Issuer,
BEAR ▇▇▇▇▇▇▇ ASSET BACKED SECURITIES, INC.
as Depositor,
IMC MORTGAGE COMPANY,
as Seller and Servicer
and
THE CHASE MANHATTAN BANK
as Indenture Trustee
IMC HOME EQUITY LOAN OWNER TRUST 1998-2
ADJUSTABLE RATE HOME EQUITY LOAN ASSET BACKED NOTES, SERIES 1998-2
CONTENTS
Page
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ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION..........................................................................1
Section 1.01 Definitions...............................................................................1
Section 1.02 Use of Words and Phrases.................................................................17
Section 1.03 Captions; Table of Contents..............................................................18
Section 1.04 Opinions.................................................................................18
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEPOSITOR,
THE SERVICER AND THE SELLER; COVENANT OF DEPOSITOR TO
CONVEY HOME EQUITY LOANS...................................................................................19
Section 2.01 Representations and Warranties of the Depositor..........................................19
Section 2.02 Representations and Warranties of the Servicer...........................................21
Section 2.03 Representations and Warranties of the Seller.............................................23
Section 2.04 Covenants of Seller to Take Certain Actions with Respect to the Home
Equity Loans in Certain Situations.......................................................26
Section 2.05 Conveyance of the Initial Home Equity Loans and Qualified
Replacement Mortgages....................................................................32
Section 2.06 Acceptance by Indenture Trustee; Certain Substitutions of Home Equity
Loans; Certification by Indenture Trustee................................................36
Section 2.07 Conveyance of the Subsequent Home Equity Loans...........................................38
Section 2.08 Custodian................................................................................39
Section 2.09 Books and Records........................................................................39
ARTICLE III
ACCOUNTS, DISBURSEMENTS AND RELEASES.......................................................................40
Section 3.01 Reserved.................................................................................40
Section 3.02 Establishment of Accounts................................................................40
Section 3.03 Flow of Funds............................................................................40
Section 3.04 Pre-Funding Account and Capitalized Interest Account.....................................42
Section 3.05 Investment of Accounts...................................................................43
Section 3.06 Payment of Trust Expenses................................................................44
Section 3.07 Eligible Investments.....................................................................44
Section 3.08 Accounting and Directions by Indenture Trustee...........................................45
Section 3.09 Reports by Indenture Trustee to Owners and Note Insurer..................................46
Section 3.10 Reports by Indenture Trustee. ..........................................................48
ARTICLE IV
SERVICING AND ADMINISTRATION
OF HOME EQUITY LOANS.......................................................................................49
Section 4.01 Servicer and Sub-Servicers...............................................................49
Section 4.02 Collection of Certain Home Equity Loan Payments..........................................50
Section 4.03 Sub-Servicing Agreements Between Servicer and Sub-Servicers..............................50
Section 4.04 Successor Sub-Servicers..................................................................51
Section 4.05 Liability of Servicer; Indemnification...................................................51
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Section 4.06 No Contractual Relationship Between Sub-Servicer, Indenture Trustee or
the Owners...............................................................................51
Section 4.07 Assumption or Termination of Sub-Servicing Agreement by Indenture
Trustee..................................................................................52
Section 4.08 Principal and Interest Account...........................................................52
Section 4.09 Delinquency Advances and Servicing Advances..............................................53
Section 4.10 Compensating Interest; Repurchase of Home Equity Loans...................................54
Section 4.11 Maintenance of Insurance.................................................................55
Section 4.12 Due-on-Sale Clauses; Assumption and Substitution Agreements..............................55
Section 4.13 Realization Upon Defaulted Home Equity Loans; Workout of Home
Equity Loans.............................................................................56
Section 4.14 Indenture Trustee to Cooperate; Release of Files.........................................57
Section 4.15 Servicing Compensation...................................................................58
Section 4.16 Annual Statement as to Compliance........................................................58
Section 4.17 Annual Independent Certified Public Accountants' Reports.................................59
Section 4.18 Access to Certain Documentation and Information Regarding the
Home Equity Loans........................................................................59
Section 4.19 Assignment of Agreement..................................................................59
Section 4.20 Removal of Servicer; Retention of Servicer; Resignation of Servicer......................59
Section 4.21 Inspections by Note Insurer; Errors and Omissions Insurance..............................63
Section 4.22 Reserved.................................................................................63
Section 4.23 Adjustable Rate Home Equity Loans........................................................63
Section 4.24 Administration of the Issuer.............................................................63
ARTICLE V
TERMINATION................................................................................................64
Section 5.01 Termination..............................................................................64
Section 5.02 Termination Upon Option of Holders of Certificates.......................................64
Section 5.03 Redemption of Notes......................................................................64
Section 5.04 Disposition of Proceeds..................................................................65
ARTICLE VI
MISCELLANEOUS..............................................................................................66
Section 6.01 Acts of Owners...........................................................................66
Section 6.02 Recordation of Agreement. ..............................................................66
Section 6.03 Duration of Agreement. .................................................................66
Section 6.04 Successors and Assigns...................................................................66
Section 6.05 Severability. ..........................................................................66
Section 6.06 Governing Law; Submission to Jurisdiction................................................66
Section 6.07 Counterparts. ..........................................................................67
Section 6.08 Amendment................................................................................67
Section 6.09 Specification of Certain Tax Matters. ..................................................68
Section 6.10 The Note Insurer.........................................................................68
Section 6.11 Third Party Rights.......................................................................68
Section 6.12 Notices..................................................................................68
Section 6.13 Benefits of Agreement....................................................................71
Section 6.14 Legal Holidays...........................................................................71
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Section 6.15 Usury....................................................................................71
Section 6.16 No Petition..............................................................................71
Section 6.17 Depositor's Obligations..................................................................71
ARTICLE VII
CERTAIN MATTERS REGARDING THE NOTE INSURER.................................................................72
Section 7.01 Trust Estate and Accounts Held for Benefit of the Note Insurer...........................72
Section 7.02 Claims Upon the Policy; Policy Payments Account..........................................72
Section 7.03 Effect of Payments by the Note Insurer; Subrogation......................................73
Section 7.04 Notices to the Note Insurer..............................................................73
Section 7.05 Rights to the Note Insurer To Exercise Rights of Owners..................................74
SCHEDULE I SCHEDULE OF HOME EQUITY LOANS
EXHIBIT A FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
EXHIBIT B-1 FORM OF INDENTURE TRUSTEE'S RECEIPT
EXHIBIT B-2 FORM OF CUSTODIAN'S RECEIPT
EXHIBIT C FORM OF POOL CERTIFICATION
EXHIBIT D HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
EXHIBIT E FORM OF SUBSEQUENT TRANSFER AGREEMENT
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SALE AND SERVICING AGREEMENT dated as of March 1, 1998 by and among
IMC HOME EQUITY LOAN OWNER TRUST 1998-2, a Delaware business trust (the "Issuer"
or the "Trust"), BEAR ▇▇▇▇▇▇▇ ASSET BACKED SECURITIES, INC., a Delaware
corporation, in its capacity as Depositor (the "Depositor"), IMC MORTGAGE
COMPANY, a Florida corporation in its capacities as the Seller and the Servicer
(respectively, the "Seller" or the "Servicer") and THE CHASE MANHATTAN BANK, a
New York banking corporation, in its capacity as the indenture trustee on behalf
of the Owners of the Notes (the "Indenture Trustee").
WHEREAS, the Seller is engaged in the business of originating,
purchasing and servicing home equity loans secured by first and second lien
mortgages and deeds of trust on residential property;
WHEREAS, the Seller desires to sell to the Depositor and the Depositor
desires to purchase from the Seller the Initial Home Equity Loans and the
Depositor desires to sell to the Issuer and the Issuer desires to purchase from
the Depositor the Initial Home Equity Loans and all monies due and to become due
thereunder after March 1, 1998;
WHEREAS, the Issuer desires to purchase a pool of Initial Home Equity
Loans which were originated or purchased by the Seller as well as Subsequent
Home Equity Loans which will be transferred to the Issuer pursuant to any
Subsequent Transfer Agreement;
WHEREAS, the Seller is willing to sell such Initial Home Equity Loans
to the Depositor and the Depositor is willing to sell such Initial Home Equity
Loans to the Issuer;
WHEREAS, the Servicer has agreed to service the Home Equity Loans, in
accordance with the terms of this Agreement;
WHEREAS, The Chase Manhattan Bank, is willing to serve in the capacity
of Indenture Trustee hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Note Insurer") is intended
to be a third party beneficiary of this Agreement and is hereby recognized by
the parties hereto to be a third-party beneficiary of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Issuer, the Depositor, the Seller, the
Servicer, and the Indenture Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions.
For all purposes of this Agreement, the following terms shall have the
meanings set forth below, unless the context clearly indicates otherwise:
"Account": Any account established in accordance with Section 3.02 or
4.08 hereof.
"Accrual Period": With respect to any Payment Date, the period
commencing on the immediately preceding Payment Date (or the Closing Date in the
case of the first Payment Date) to and including the day prior to the current
Payment Date. Calculations of interest will be made on the basis of the actual
number of days elapsed in the related Accrual Period and a year of 360 days.
"Addition Notice": With respect to the transfer of Subsequent Home
Equity Loans to the Issuer pursuant to Section 2.07 hereof, notice given not
less than five Business Days prior to the related Subsequent Transfer Date of
the Seller's designation of Subsequent Home Equity Loans to be sold to the
Issuer and the aggregate Loan Balance of such Subsequent Home Equity Loans.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Sale and Servicing Agreement, as it may be amended
from time to time, including the Exhibits and Schedules hereto.
"Annual Loss Percentage (Rolling Twelve Month)": As of any date of
determination thereof, a fraction, expressed as a percentage, the numerator of
which is the aggregate of the Realized Losses for each of the twelve immediately
preceding Remittance Periods and the denominator of which is the Maximum
Collateral Amount.
"Appraised Value": The appraised value of any Property based upon the
appraisal made at the time of the origination of the related Home Equity Loan,
or, in the case of a Home Equity Loan which is a purchase money mortgage, the
sales price of the Property at such time of origination, if such sales price is
less than such appraised value.
"Authorized Officer": With respect to any Person, any officer of such
Person who is authorized to act for such Person in matters relating to this
Agreement, and whose action is binding upon, such Person; with respect to the
Depositor and the Servicer, initially including those individuals whose names
appear on the lists of Authorized Officers delivered at the Closing; with
respect to the Indenture Trustee, any officer assigned to the Corporate Trust
Division (or any successor thereto), including any Vice President, Assistant
Vice President, Trust Officer, any Assistant Secretary, any trust officer or any
other officer of the Indenture Trustee customarily performing functions similar
to those performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement.
"Available Funds": As defined in Section 3.02(b) hereof.
"Available Funds Cap Carry-Forward Amortization Amount": As of any
Payment Date, any amount distributed from the Available Funds Cap Carry-Forward
Amount Account on such Payment Date pursuant to Section 3.03(c) hereof.
"Available Funds Cap Carry-Forward Amount": As of any Payment Date, the
sum of (I) the excess, if any, of (A) the sum of (i) the aggregate of the
Available Funds Cap Carry-Forward Amounts for all prior Payment Dates and (ii)
the difference between (a) the amount of interest due on the Notes on the
immediately preceding Payment Date calculated at the Formula Note Rate
applicable on such date and (b) the amount of interest due on the Notes on the
immediately preceding Payment Date calculated at the Note Rate applicable on
such date over (B) all Available Funds Cap Carry-Forward Amortization Amounts
actually paid on all prior Payment Dates and (II) the product of (x) one-twelfth
of the Formula Note Rate on such Payment Date and (y) the amount described in
clause (I) of this definition.
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"Available Funds Cap Carry-Forward Amount Account": The Available Funds
Cap Carry-Forward Amount Account established in accordance with Section 3.02
hereof and maintained by the Indenture Trustee.
"Available Funds Cap Rate": On each Payment Date the weighted average
of the Coupon Rates of the Home Equity Loans less 0.64375% per annum.
"Available Funds Shortfall": As defined in Section 3.03(b)(ii)(A).
"Backup Servicer": The Indenture Trustee shall initially serve as
Backup Servicer hereunder in the event of the termination of the Servicer,
subject to the right of the Indenture Trustee to assign such duties to a party
acceptable to the Note Insurer and the Owners of the majority of the Percentage
Interests of the Certificates.
"Business Day": Any day other than a Saturday, Sunday or a day on which
commercial banking institutions in The City of New York, Tampa, Florida, the
city in which the Corporate Trust Office is located or the city in which the
principal office of the Note Insurer is located are authorized or obligated by
law or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest Account
established in accordance with Section 3.02(b) hereof and maintained by the
Indenture Trustee. Funds on deposit in the Capitalized Interest Account shall be
invested in a trust deposit with the Indenture Trustee from the day following
the Closing Date until the end of the Funding Period.
"Capitalized Interest Requirement": With respect to Payment Dates in
April and May 1998, the excess, if any, of (x) the sum of the interest accruing
at a rate equal to the Note Rate plus the Premium Amount (expressed as a per
annum percentage of the Note Principal Balance) (1) on the aggregate Loan
Balances of the Subsequent Home Equity Loans transferred to the Issuer on each
Subsequent Transfer Date during the month preceding the related Payment Date for
the period from the first day of the related Remittance Period to the Subsequent
Cut-Off Date (provided, however, if the related Subsequent Cut-Off Date begins
on or prior to such Remittance Period, the related Loan Balances will be zero),
plus (2) on the Pre-Funded Amount outstanding as of the end of the Remittance
Period for a period equal to the Remittance Period over (y) any Pre-Funding
Account Earnings to be distributed to the Note Account on the related Payment
Date pursuant to Section 3.04(d).
"Carry-Forward Amount": The sum of (x) the amount, if any, by which (i)
the Current Interest for the immediately preceding Payment Date exceeded (ii)
the amount of the actual distribution made to the Owners on such immediately
preceding Payment Date pursuant to Section 3.03(b)(iv)(B) hereof plus (y) 30
days' interest on such excess at the Note Rate.
"Certificate": Any one of the Certificates issued pursuant to the Trust
Agreement.
"Certificate Distribution Account": The Certificate Distribution
Account established in accordance with the Trust Agreement.
"Civil Relief Interest Shortfalls": With respect to any Remittance
Period, for any Home Equity Loans as to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Remittance
Period as a result of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, the amount, if any, by which (i) interest collectible on such Home
Equity Loans during the most recently ended Remittance Period is less than (ii)
the sum of (a) one month's interest on the Loan Balance
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of such Home Equity Loans at a rate equal to the Note Rate plus (b) the
Servicing Fee and the Trust Fees and Expenses for such Remittance Period.
"Closing Date": On or about March 31, 1998.
"Code": The Internal Revenue Code of 1986, as amended.
"Compensating Interest": As defined in Section 4.10(a) hereof.
"Corporate Trust Office": The principal office of the Indenture
Trustee at The Chase Manhattan Bank, ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇, Attention: Corporate Trust Office or the principal office of any
successor Indenture Trustee hereunder.
"Coupon Rate": The rate of interest borne by each Mortgage Note from
time to time.
"Cram Down Loss": With respect to a Home Equity Loan, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Loan Balance or the Coupon Rate of such Home Equity Loan, the
amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on
the date of issuance of such order.
"Cumulative Loss Percentage": As of any date of determination thereof,
the aggregate of all Realized Losses since the Closing Date as a percentage of
the Maximum Collateral Amount.
"Current Interest": With respect to any Payment Date, an amount equal
to the amount of interest accrued on the Note Principal Balance immediately
prior to such Payment Date during the related Accrual Period at the Note Rate
plus the Preference Amount owed to the Owners of the Notes as it relates to
interest previously paid on the Notes plus the Carry-Forward Amount; provided,
however, such amount will be reduced by the amount of any Civil Relief Interest
Shortfalls relating to Home Equity Loans.
"Custodial Agreement": The Custodial Agreement dated as of March 1,
1998 among the Custodian, the Issuer, the Indenture Trustee, the Depositor, the
Seller and the Servicer.
"Custodian": BankBoston N.A., as Custodian on behalf of the Indenture
Trustee pursuant to the Custodial Agreement.
"Cut-Off Date": As of the close of business on March 1, 1998.
"Daily Collections": As defined in Section 4.08(c) hereof.
"Delinquency Advance": As defined in Section 4.09(a) hereof.
"Delinquent": A Home Equity Loan is "Delinquent" if any payment due
thereon is not made by the Mortgagor by the close of business on the related Due
Date. A Home Equity Loan is "30 days Delinquent" if such payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days Delinquent," "90
days Delinquent" and so on.
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"Depositor": Bear ▇▇▇▇▇▇▇ Asset Backed Securities, Inc., a Delaware
corporation, or any successor thereto.
"Depository": The Depository Trust Company, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇, and any successor Depository named herein.
"Designated Depository Institution": With respect to the Principal and
Interest Account, a trust account maintained by the trust department of a
federal or state chartered depository institution acceptable to the Note
Insurer, acting in its fiduciary capacity, having combined capital and surplus
of at least $50,000,000; provided, however, that if the Principal and Interest
Account is not maintained with the Indenture Trustee, (i) such institution shall
have a long-term debt rating of at least "A" by Standard & Poor's and "A2" by
▇▇▇▇▇'▇, (ii) a short-term debt rating of at least "A-1" by Standard & Poor's
and (iii) the Servicer shall provide the Indenture Trustee and the Note Insurer
with a statement, which the Indenture Trustee will send to the Owners,
identifying the location and account information of the Principal and Interest
Account upon a change in the location of such account.
"Determination Date": The 15th day of each month, or if such day is not
a Business Day, the preceding Business Day, commencing in April 1998.
"Due Date": With respect to any Home Equity Loan, the date on which the
Monthly Payment with respect to such Home Equity Loan is required to be paid
pursuant to the related Mortgage Note exclusive of any days of grace.
"Eligible Investments": Those investments so designated pursuant to
Section 3.07 hereof.
"Excess Overcollateralization Amount": With respect to any Payment
Date, the excess, if any, of (x) the Overcollateralization Amount that would
apply on such Payment Date after taking into account the payment of the
Principal Payment Amount on such Payment Date (except for any distributions of
Overcollateralization Reduction Amounts on such Payment Date), over (y) the
Specified Overcollateralization Amount for such Payment Date.
"▇▇▇▇▇▇ ▇▇▇": ▇▇▇▇▇▇ ▇▇▇, a federally-chartered and privately-owned
corporation existing under the Federal National Mortgage Association Charter
Act, as amended, or any successor thereof.
"▇▇▇▇▇▇ Mae Guide": ▇▇▇▇▇▇ Mae's Servicing Guide, as the same may be
amended by ▇▇▇▇▇▇ Mae from time to time, and the Servicer shall elect to apply
such amendments in accordance with Section 4.01 hereof.
"FDIC": The Federal Deposit Insurance Corporation, a corporate
instrumentality of the United States, or any successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Indenture Trustee pursuant to
Section 2.05(b) hereof pertaining to a particular Home Equity Loan and any
additional documents required to be added to the File pursuant to this
Agreement.
"Final Certification": As defined in Section 2.06(c) hereof.
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"Final Payment Date": April 20, 2029.
"Final Recovery Determination": With respect to any defaulted Home
Equity Loan or REO Property (other than a Home Equity Loan purchased by the
Seller, the Depositor or the Servicer), a determination made by the Servicer
that all Liquidation Proceeds which the Servicer, in its reasonable business
judgment expects to be finally recoverable in respect thereof have been so
recovered or that the Servicer believes in its reasonable business judgment the
cost of obtaining any additional recoveries therefrom would exceed the amount of
such recoveries. The Servicer shall maintain records of each Final Recovery
Determination.
"First Mortgage Loan": A Home Equity Loan which constitutes a first
priority mortgage lien with respect to any Property.
"Formula Note Rate": For any Payment Date, the rate determined by
clause (i) of the definition of "Note Rate" for such Payment Date.
"Funding Period": The period commencing on the Closing Date and ending
on the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any investment earnings) is less than
$100,000, (ii) the occurrence of a Servicer Termination Event pursuant to
Section 4.20(a) hereof or an "Event of Default" (as defined in the Indenture)
and (iii) April 30, 1998.
"Highest Lawful Rate": As defined in Section 6.15 hereof.
"Home Equity Loans": Such home equity loans (including Initial Home
Equity Loans and Subsequent Home Equity Loans) transferred and assigned to the
Trust pursuant to Section 2.05(a) and 2.07(a) hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the Home
Equity Loans originally so held being identified in the Schedule of Home Equity
Loans. The term "Home Equity Loan" includes any Home Equity Loan which is
Delinquent, which relates to a foreclosure or which relates to a Property which
is REO Property prior to such Property's disposition by the Trust. Any home
equity loan which, although intended by the parties hereto to have been, and
which purportedly was, transferred and assigned to the Trust by the Depositor,
in fact was not transferred and assigned to the Trust for any reason whatsoever,
including, without limitation, the incorrectness of the statement set forth in
Section 2.04(b)(x) hereof with respect to such home equity loan, shall
nevertheless be considered a "Home Equity Loan" for all purposes of this
Agreement.
"Indemnification Agreement": The Indemnification Agreement dated as of
March 20, 1998 among the Note Insurer, the Depositor, the Seller, the Issuer and
the Underwriters.
"Indenture": The Indenture, dated March 1, 1998, between the Issuer and
the Indenture Trustee.
"Indenture Trustee": The Chase Manhattan Bank, a New York banking
corporation, the Corporate Trust Department of which is located on the date of
execution of this Agreement at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, not in its individual capacity but solely as Indenture Trustee under the
Indenture, and any successor hereunder.
"Indenture Trustee Fee": The fee payable monthly to the Indenture
Trustee on each Payment Date in an amount equal to 0.00375% per annum, on the
outstanding aggregate Loan Balances of the Home Equity Loans as of the related
Determination Date.
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"Indenture Trustee Reimbursable Expenses": Any amounts payable pursuant
to the second sentence of Section 6.7 of the Indenture provided that the
aggregate amounts payable as Indenture Trustee Reimbursable Expenses shall not
exceed $50,000.
"Initial Home Equity Loans": The Home Equity Loans to be conveyed to
the Depositor by the Seller and to the Issuer by the Depositor on the Closing
Date.
"Insurance Agreement": The Insurance Agreement dated as of March 1,
1998, among the Issuer, the Depositor, the Seller, the Servicer, the Indenture
Trustee and the Note Insurer, as such agreement may be amended from time to
time.
"Insurance Policy": Any hazard, flood, title or primary mortgage
insurance policy relating to a Home Equity Loan plus any amount remitted under
Section 4.11 hereof.
"Insured Payment": As defined in the Note Insurance Policy.
"Interest Remittance Amount": As of any Monthly Remittance Date, the
sum, without duplication, of (i) all interest due during the related Remittance
Period with respect to the Home Equity Loans, (ii) all Compensating Interest
paid by the Servicer on such Monthly Remittance Date, (iii) the portion of the
Substitution Amount relating to interest on the Home Equity Loans, (iv) the
portion of any Loan Purchase Price relating to interest on any Home Equity Loan
repurchased during the related Remittance Period, (v) any amounts required to be
transferred from the Capitalized Interest Account to the Note Account pursuant
to Section 3.04(e) hereof on the related Payment Date and (vi) the portion of
Net Liquidation Proceeds relating to interest.
"Issuer" or "Trust": IMC Home Equity Loan Owner Trust 1998-2, a
Delaware business trust.
"Late Payment Rate": For any Monthly Remittance Date, the rate of
interest as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%. The Late Payment Rate shall be computed on the basis of a year of 365
days calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"LIBOR": With respect to any Accrual Period, the rate determined by the
Indenture Trustee on the related LIBOR Determination Date on the basis of the
British Bankers Association's "Interest Settlement Rate" for one-month U.S.
dollar deposits as such rate appears on Telerate Page 3750 as of 11:00 a.m.
(London time) on such date; provided that if such rate does not appear on
Telerate Page 3750, the rate for such date will be determined on the basis of
the rates at which one-month U.S. dollar deposits are offered by the Reference
Banks at approximately 11:00 a.m. (London time) on such date to prime banks in
the London interbank market. In such event, the Indenture Trustee will request
the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
for that date will be the arithmetic mean of the quotations (rounded upwards if
necessary to the nearest whole multiple of 1/16%). If fewer than two quotations
are provided as requested, the rate for that date will be the arithmetic mean of
the rates quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m. (New York City time) on such date for one-month U.S.
dollar loan to leading European banks.
"LIBOR Determination Date": With respect to any Accrual Period the
second London Business Day preceding the commencement of such Accrual Period.
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"Liquidated Loan": A Home Equity Loan as to which a Final Recovery
Determination has been made.
"Liquidation Proceeds": With respect to any Liquidated Loan, all
amounts (including the proceeds of any Insurance Policy) recovered by the
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Home Equity Loan and as of any
date of determination, the actual outstanding principal balance thereof on the
Cut-Off Date with respect to the Initial Home Equity Loans or relevant
Subsequent Cut-Off Date with respect to the Subsequent Home Equity Loans
excluding payments of principal due on or prior to the Cut-Off Date or
Subsequent Cut-Off Date, as the case may be, whether or not received, less any
principal payments relating to such Home Equity Loan included in previous
Monthly Remittance Amounts, provided, however, that the Loan Balance for any
Home Equity Loan that has become a Liquidated Loan shall be zero as of the first
day of the Remittance Period following the Remittance Period in which such Home
Equity Loan becomes a Liquidated Loan, and at all times thereafter.
"Loan Purchase Price": With respect to any Home Equity Loan purchased
from the Trust on or prior to a Monthly Remittance Date pursuant to Section
2.03, 2.04, 2.06(b) or 4.10(b) hereof, an amount equal to the Loan Balance of
such Home Equity Loan as of the date of purchase (assuming that the Monthly
Remittance Amount remitted by the Servicer on such Monthly Remittance Date has
already been remitted), plus all accrued and unpaid interest on such Home Equity
Loan at the Coupon Rate to but not including the date of such purchase together
with (without duplication) the aggregate amounts of (i) all unreimbursed
Delinquency Advances and Servicing Advances theretofore made with respect to
such Home Equity Loan, (ii) all Delinquency Advances which the Servicer has
theretofore failed to remit with respect to such Home Equity Loan and (iii) all
reimbursed Delinquency Advances to the extent that reimbursement is not made
from the Mortgagor or from Liquidation Proceeds from the respective Home Equity
Loan.
"Loan-to-Value Ratio": As of any particular date the percentage
obtained by dividing the Appraised Value into the original principal balance of
the Mortgage Note relating to such Home Equity Loan.
"London Business Day": Any day on which dealings in deposits of United
States dollars are transacted in the London interbank market.
"Maximum Collateral Amount": The sum of the Original Aggregate Loan
Balance and the Original Aggregate Pre-Funded Amount, which sum is equal to
$700,000,000.
"Monthly Payment Amount": With respect to any Payment Date, the sum of
(x) Current Interest and (y) the Principal Payment Amount for such Payment Date.
"Monthly Payment": With respect to any Home Equity Loan and any
Remittance Period, the payment of principal, if any, and interest due on the Due
Date in such Remittance Period pursuant to the related Mortgage Note.
"Monthly Remittance Amount": As of any Monthly Remittance Date, the sum
of (i) the Interest Remittance Amount for such Monthly Remittance Date and (ii)
the Principal Remittance Amount for such Monthly Remittance Date.
"Monthly Remittance Date": The 18th day of each month, or if such day
is not a Business Day, on the preceding Business Day, commencing in April 1998.
8
"Monthly Reporting Date": The Determination Date.
"Moody's": ▇▇▇▇▇'▇ Investors Service Inc. or any successor thereto.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple interest in real property securing a
Mortgage Note.
"Mortgage Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Home Equity Loan.
"Mortgagor": The obligor on a Mortgage Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of expenses incurred by the Servicer (including unreimbursed
Servicing Advances) in connection with the liquidation of any defaulted Home
Equity Loan and unreimbursed Delinquency Advances relating to such Home Equity
Loan. In no event shall Net Liquidation Proceeds with respect to any Liquidated
Loan be less than zero.
"Net Monthly Excess Cashflow": As defined in Section 3.03(b)(iii)
hereof.
"90-Day Delinquent Loan": With respect to any Determination Date, all
REO Properties and each Home Equity Loan, with respect to which any portion of a
Monthly Payment is, as of the last day of the prior Remittance Period, three
months (calculated from Due Date with respect to such Home Equity Loan to Due
Date) or more past due (without giving effect to any grace period).
"90+ Delinquency Percentage (Rolling Six Month)": With respect to any
Determination Date, the average of the percentage equivalents of the fractions
determined for each of the six immediately preceding Remittance Periods the
numerator of each of which is equal to the aggregate Loan Balance of 90-Day
Delinquent Loans as of the end of such Remittance Period and the denominator of
which is the Loan Balance of all of the Home Equity Loans as of the end of such
Remittance Period.
"Note": Any one of the Notes substantially in the form attached to the
Indenture as Exhibit A.
"Note Account": The segregated note account established in accordance
with Section 3.02(a) hereof and maintained at the Corporate Trust Office.
"Note Insurance Policy": The Note Guaranty Insurance Policy (number
_______) dated March 31, 1998 issued by the Note Insurer to the Indenture
Trustee for the benefit of the Owners pursuant to which the Note Insurer
guarantees Insured Payments.
"Note Insurer": MBIA Insurance Corporation, a New York insurance
company and any successor thereto, as issuer of the Note Insurance Policy.
"Note Insurer Default": The existence and continuance of any of the
following:
(a) the Note Insurer fails to make a payment required under the
Note Insurance Policy in accordance with its terms; or
(b)(i) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Note Insurer in an
involuntary case or proceeding under any applicable United States federal or
state bankruptcy, insolvency, rehabilitation, reorganization or other similar
law and the
9
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 90 consecutive days; or (B) a final
and nonappealable decree or order adjudging the Note Insurer as bankrupt or
insolvent, or approving as properly filed a petition seeking reorganizing,
rehabilitation, arrangement, adjustment or composition of or in respect of the
Note Insurer under any applicable United States federal or state law, or
appointing a custodian, receiver, liquidator, rehabilitator, assignee, indenture
trustee, sequestrator or other similar official of the Note Insurer or of any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs or
(ii) the commencement by the Note Insurer of a voluntary case
or proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated as bankrupt or insolvent, or the consent of the
Note Insurer to the entry of a decree or order for relief in respect of the Note
Insurer in an involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency case or proceeding against the Note
Insurer, or the filing by the Note Insurer to the filing of such petition or to
the appointment of or the taking possession by a custodian, receiver,
liquidator, assignee, indenture trustee, sequestrator or similar official of the
Note Insurer or of any substantial part of its property, or the failure of the
Note Insurer to pay debts generally as they become due, or the admission by the
Note Insurer in writing of its inability to pay its debts generally as they
become due.
"Note Principal Balance": As of any time of determination, the Original
Note Principal Balance less the aggregate of all amounts actually distributed on
account of the Principal Payment Amount pursuant to Section 3.03(b)(iv) hereof
with respect to principal thereon on all prior Payment Dates; provided, however,
that solely for purposes of determining the Note Insurer's rights, as subrogee,
the Note Principal Balance shall not be reduced by any principal amount paid to
the Owner thereof from Insured Payments.
"Note Rate": For any Payment Date, in any month up to and including the
month in which the Redemption Date occurs, the lesser of (i) LIBOR plus 0.19%
per annum and (ii) the Available Funds Cap Rate for such Payment Date and for
any month following the month in which the Redemption Date occurs, the lesser of
(i) LIBOR plus 0.50% per annum and (ii) the Available Funds Cap Rate for such
Payment Date.
"Officer's Certificate": A certificate signed by any Authorized Officer
of any Person delivering such certificate and delivered to the Indenture
Trustee.
"Operative Documents": Collectively, this Agreement, the Indenture, the
Certificate of Trust, the Trust Agreement, the Note Insurance Policy, the Notes,
any Subsequent Transfer Agreement, the Custodial Agreement, the Indemnification
Agreement and the Insurance Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances of all
Initial Home Equity Loans as of the Cut-Off Date, which is $525,682,092.25
"Original Aggregate Pre-Funded Amount": The amount deposited in the
Pre-Funding Account on the Closing Date from the proceeds of the sale of the
Notes, which amount is equal to $174,317,907.75
"Original Capitalized Interest Amount" $510,969.37
"Original Note Principal Balance": $700,000,000.
"Overcollateralization Amount": As of any Payment Date, the excess, if
any, of (x) the sum of (i) the aggregate Loan Balances of the Home Equity Loans
as of the close of business on the last day of the related Remittance Period and
(ii) any amount on deposit in the Pre-Funding Account at such time exclusive
10
of Pre-Funding Account Earnings over (y) the Note Principal Balance for such
Payment Date (after taking into account the payment of the Principal Payment
Amount thereon (except for any Overcollateralization Deficit and
Overcollateralization Increase Amount) on such Payment Date).
"Overcollateralization Deficiency Amount": With respect to any Payment
Date, the excess, if any, of (i) the Specified Overcollateralization Amount
applicable to such Payment Date over (ii) the Overcollateralization Amount
applicable to such Payment Date prior to taking into account the payment of any
Overcollateralization Increase Amounts on such Payment Date.
"Overcollateralization Deficit": With respect to any Payment Date, the
amount, if any, by which (x) the Note Principal Balance after taking into
account the payment of the Principal Payment Amount on such Payment Date
(without regard to any Insured Payment to be made on such Payment Date and
except for any Overcollateralization Deficit), exceeds (y) the sum of (i) the
aggregate Loan Balances of the Home Equity Loans as of the close of business on
the last day of the related Remittance Period and (ii) any amount on deposit in
the Pre-Funding Account at such time exclusive of the Pre-Funding Account
Earnings.
"Overcollateralization Increase Amount": With respect to any Payment
Date, the lesser of (i) the Overcollateralization Deficiency Amount as of such
Payment Date (after taking into account the payment of the Principal Payment
Amount on such Payment Date (except for any Overcollateralization Increase
Amount)) and (ii) the aggregate amount of Net Monthly Excess Cashflow pursuant
to Section 3.03(b)(iii)(A) on such Payment Date.
"Overcollateralization Reduction Amount": With respect to any Payment
Date, an amount equal to the lesser of (x) the Excess Overcollateralization
Amount for such Payment Date and (y) the Principal Remittance Amount for the
related Remittance Period.
"Overfunded Interest Amount": With respect to each Subsequent Transfer
Date, the excess, if any, of (i) interest accruing from the related Subsequent
Cut-Off Date to April 30, 1998 on the aggregate Loan Balances of the Subsequent
Home Equity Loans acquired by the Issuer on such Subsequent Transfer Date,
calculated at the Note Rate over (ii) interest accruing from the Subsequent
Cut-Off Date to April 30, 1998 on the aggregate Loan Balance of the Subsequent
Home Equity Loans acquired by the Issuer on such Subsequent Transfer Date,
calculated at the rate at which Pre-Funded Amounts are invested as of such
Subsequent Transfer Date.
"Owner": The Person in whose name a Note is registered in the Register,
and the Note Insurer, to the extent described in Sections 7.01 and 7.05.
"Owner Trustee": Wilmington Trust Company, as owner trustee under the
Trust Agreement, and any successor owner trustee under the Trust Agreement.
"Paying Agent": Initially, the Indenture Trustee, and thereafter, the
Indenture Trustee or any other Person that meets the eligibility standards for
the Paying Agent specified in Section 6.11 of the Indenture and is authorized by
the Indenture Trustee and the Depositor to make payments on the Certificates on
behalf of the Indenture Trustee.
"Payment Date": Any date on which the Indenture Trustee is required to
make distributions to the Owners, which shall be the 20th day of each month or
if such day is not a Business Day, the next Business Day thereafter, commencing
in the month following the Closing Date. The first Payment Date will be April
20, 1997.
11
"Percentage Interest": With respect to the Notes, a fraction, expressed
as a decimal, the numerator of which is the Original Note Principal Balance
represented by such Note and the denominator of which is the aggregate Original
Note Principal Balance represented by all the Notes. With respect to the
Certificates, the portion evidenced thereby, expressed as a percentage, as
stated on the face of such Certificate, all of which shall total 100% with
respect to the Certificates.
"Person": Any individual, corporation, limited partnership,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Policy Payments Account": The policy payments account maintained by
the Indenture Trustee pursuant to Section 7.02(b) hereof.
"Preference Amount": With respect to the Notes means any amounts of
interest and principal included in previous distributions of the Monthly Payment
Amount to the Owners of the Notes which are recoverable and sought to be
recovered as a voidable preference by a indenture trustee in bankruptcy pursuant
to the United States Bankruptcy Code (11 U.S.C.) as amended from time to time in
accordance with a final, nonappealable order of a court having competent
jurisdiction. Such amount will be paid in accordance with the terms of the Note
Insurance Policy.
"Preference Claim": As defined in Section 7.02(d) hereafter.
"Pre-Funded Amount": With respect to any Determination Date, the amount
remaining on deposit in the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 3.02 hereof and maintained by the Indenture Trustee.
"Pre-Funding Account Earnings": With respect to the April 20, 1998
Payment Date, the actual investment earnings earned during the period from the
Closing Date through April 17, 1998 (inclusive) on the portion of the Pre-Funded
Amount remaining during such period as calculated by the Indenture Trustee
pursuant to Section 2.07(d) hereof; and with respect to the May 20, 1998 Payment
Date, the actual investment earnings earned during the period from April 18,
1998 through May 19, 1998 (inclusive) on the portion of the Pre-Funded Amount,
remaining during such period as calculated by the Indenture Trustee pursuant to
Section 2.07(d) hereof.
"Premium Amount": As determined in the Insurance Agreement.
"Prepayment": Any payment of principal of a Home Equity Loan which is
received by the Servicer in advance of the scheduled Due Date for the payment of
such principal and which is not accompanied by an amount of interest
representing the full amount of scheduled interest due on any Due Date in any
month or months subsequent to the month of prepayment, Substitution Amounts, the
portion of the purchase price of any Home Equity Loan purchased from the Trust
pursuant to Section 2.03, 2.04, 2.06(b) or 4.10(b) hereof representing principal
and the proceeds of any Insurance Policy which are to be applied as a payment of
principal on the related Home Equity Loan shall be deemed to be Prepayments for
all purposes of this Agreement.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Home Equity Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
12
"Principal and Interest Account": The principal and interest account
established and maintained by the Servicer pursuant to Section 4.08(a) hereof.
"Principal Payment Amount": With respect to the Notes for any Payment
Date, the lesser of:
(a) the Total Available Funds plus any Insured Payment minus the
Current Interest and Trust Fees and Expenses for such Payment Date; and
(b) the excess, if any, of (i) the sum of (without duplication):
(A) the Preference Amount with respect to principal owed to the
Owners of the Notes that remains unpaid as of such Payment Date,
(B) the principal portion of all scheduled monthly payments on
the Home Equity Loans due on or prior to the related Due Date thereof,
to the extent actually received by the Servicer during the related
Remittance Period and any Prepayments made by the Mortgagors and
actually received by the Servicer during the related Remittance Period,
(C) the Loan Balance of each Home Equity Loan that was
repurchased by the Seller or purchased by the Servicer on or prior to
the related Monthly Remittance Date, to the extent such Loan Balance is
actually received by the Servicer during the related Remittance Period,
(D) any Substitution Amounts delivered by the Seller on the
related Monthly Remittance Date in connection with a substitution of a
Home Equity Loan (to the extent such Substitution Amounts relate to
principal), to the extent such Substitution Amounts are actually
received by the Servicer on the related Remittance Date,
(E) all Net Liquidation Proceeds actually collected by the
Servicer with respect to the Home Equity Loans during the related
Remittance Period (to the extent such Net Liquidation Proceeds relate
to principal),
(F) the amount of any Overcollateralization Deficit for such
Payment Date,
(G) the principal portion of the proceeds received by the
Indenture Trustee from any termination of the Trust (to the extent such
proceeds related to principal),
(H) on the Payment Date immediately following the actual end of
the Funding Period, all amounts remaining on deposit in the Pre-Funding
Account to the extent not used to purchase Subsequent Home Equity Loans
during the Funding Period; and
(I) the amount of any Overcollateralization Increase Amount for
such Payment Date, to the extent of any Net Monthly Excess Cashflow
available for such purpose,
over
(ii) the amount of any Overcollateralization Reduction Amount for such
Payment Date.
"Principal Remittance Amount": As of any Monthly Remittance Date, the
sum, without duplication, of (i) the principal actually collected by the
Servicer with respect to Home Equity Loans during the related
13
Remittance Period, (ii) the Loan Balance of each such Home Equity Loan that was
purchased from the Trust on or prior to such Monthly Remittance Date, to the
extent such Loan Balance was actually received by the Servicer, (iii) any
Substitution Amounts relating to principal delivered by the Seller in connection
with a substitution of a Home Equity Loan, to the extent such Substitution
Amounts were actually received by the Servicer on or prior to such Monthly
Remittance Date, (iv) the principal portion of all Net Liquidation Proceeds
actually collected by the Servicer with respect to such Home Equity Loans during
the related Remittance Period (to the extent such Net Liquidation Proceeds
related to principal), (v) any amounts required to be transferred from the
Pre-Funding Account to the Note Account pursuant to Section 3.04(c) and (vi) the
amount of investment losses required to be deposited pursuant to Sections
3.05(e) and 4.08(b).
"Property": The underlying property securing a Home Equity Loan.
"Prospectus": The Depositor's Prospectus dated January 23, 1998
constituting part of the Registration Statement.
"Prospectus Supplement": The IMC Home Equity Loan Owner Trust 1998-2
Prospectus Supplement dated March 20, 1998 to the Prospectus.
"Qualified Replacement Mortgage": A Home Equity Loan substituted for
another pursuant to Section 2.03, 2.04 and 2.06(b) hereof, which (i) has a
Coupon Rate at least equal to the Coupon Rate of the Home Equity Loan being
replaced; (ii) is of the same property type or is a single family dwelling and
the same occupancy status or is a primary residence as the Home Equity Loan
being replaced, (iii) shall mature no later than March 1, 2028 (iv) has a
Loan-to-Value Ratio as of the Replacement Cut-Off Date no higher than the
Loan-to-Value Ratio of the replaced Home Equity Loan at such time, (v) shall be
of the same or higher credit quality classification (determined in accordance
with the Seller's credit underwriting guidelines set forth in the Seller's
underwriting manual) as the Home Equity Loan which such Qualified Replacement
Mortgage replaces, (vi) shall be a First Mortgage Loan, (vii) has a Loan Balance
as of the related Replacement Cut-Off Date equal to or less than the Loan
Balance of the replaced Home Equity Loan as of such Replacement Cut-Off Date,
(viii) shall not provide for a "balloon" payment, (ix) shall be an adjustable
rate Home Equity Loan (x) shall adjust based on the same index, have no lower
margin, have the same interval between adjustment dates and have a maximum
Coupon Rate no lower than, and a minimum Coupon Rate no higher than the Home
Equity Loan being replaced. In the event that one or more home equity loans are
proposed to be substituted for one or more Home Equity Loans, the Note Insurer
may allow the foregoing tests to be met on a weighted average basis or other
aggregate basis acceptable to the Note Insurer, as evidenced by a written
approval delivered to the Indenture Trustee by the Note Insurer, except that the
requirements of clauses (i), (iv) and (ix) hereof must be satisfied as to each
Qualified Replacement Mortgage.
"Rating Agencies": Collectively, Moody's and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan (or, in the case of a Cram
Down Loss a Home Equity Loan that is not a Liquidated Loan), the amount (not
less than zero), if any, by which (A) the sum of (x) the Loan Balance thereof as
of the date of liquidation, (y) the amount of accrued but unpaid interest
thereon (to the extent that there are no outstanding advances for such interest
by the Servicer) and (z) the amount of any Cram Down Loss with respect thereto
is in excess of (B) the Net Liquidation Proceeds realized thereon applied in
reduction of such Loan Balance.
"Redemption Date": The first Monthly Remittance Date on which the
aggregate Loan Balances of the Home Equity Loans has declined to less than
$70,000,000.
"Redemption Price": As defined in Section 5.02(a) hereof.
14
"Reference Banks": Bankers Trust Company, Barclays Bank PLC, and
National Westminster Bank PLC, provided that if any of the foregoing banks are
not suitable to serve as a Reference Bank, then any leading banks selected by
the Indenture Trustee which are engaged in transactions in Eurodollar deposits
in the international Eurocurrency market (i) with an established place of
business in London, (ii) not controlling, under the control of or under common
control with the Seller or any affiliate thereof, (iii) whose quotations are
included in the calculation of LIBOR appearing on Telerate Page 3750 on the
relevant LIBOR Determination Date and (iv) which have been designated as such by
the Indenture Trustee.
"Register": The note register maintained by the Registrar in accordance
with Section 2.3 of the Indenture, in which the names of the Owners are set
forth.
"Registrar": The Indenture Trustee, acting in its capacity as Registrar
appointed pursuant to the Indenture, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by the
Depositor with the Securities and Exchange Commission (Registration Number
333-43091), including all amendments thereto and including the Prospectus
relating to the Notes.
"Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all
Insured Payments previously paid to the Indenture Trustee by the Note Insurer
and not previously repaid to the Note Insurer pursuant to Section 3.03(b)(ii)
hereof plus (ii) interest accrued on each such Insured Payment not previously
repaid calculated at the Late Payment Rate and (y)(i) any amounts then due and
owing to the Note Insurer under the Insurance Agreement (including, without
limitation, any unpaid Premium Amount relating to such Payment Date or an
earlier Payment Date) plus (ii) interest on such amounts at the Late Payment
Rate. The Note Insurer shall notify the Indenture Trustee, the Depositor and the
Seller of the amount of any Reimbursement Amount.
"Remittance Period": With respect to each Monthly Remittance Date, the
period commencing the second day of the calendar month immediately preceding
such Monthly Remittance Date and ending the first day of the calendar month in
which such Monthly Remittance Date occurs.
"REO Property": A Property acquired by the Servicer on behalf of the
Trust through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Home Equity Loan.
"Replacement Cut-Off Date": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"Residual Net Monthly Excess Cashflow": With respect to any Payment
Date, the aggregate Net Monthly Excess Cashflow, if any, remaining after the
making of all applications, transfers and disbursements described in Sections
3.03(b)(i), (ii), (iii) and (iv) hereof.
"Schedule of Home Equity Loans": The schedule of Home Equity Loans with
respect to the Initial Home Equity Loans listing each Initial Home Equity Loan
to be conveyed on the Closing Date and with respect to Subsequent Home Equity
Loans listing each Subsequent Home Equity Loan conveyed to the Issuer as of each
Subsequent Transfer Date. Such Schedules of Home Equity Loans shall identify
each Home Equity Loan by the Servicer's loan number, borrower's name and address
(including the state and zip code) of the Property and shall set forth as to
each Home Equity Loan the lien status thereof, the Loan-to-Value Ratio and the
Loan Balance as of the Cut-Off Date, the Coupon Rate thereof, the original Loan
Balance thereof, the current scheduled monthly payment of principal and interest
and the maturity date of the related
15
Mortgage Note, the property type, occupancy status, Appraised Value and the
original term-to-maturity thereof.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": IMC Mortgage Company, a Florida corporation.
"Servicer": IMC Mortgage Company, a Florida corporation, and its
permitted successors and assigns.
"Servicer Loss Test": The Servicer Loss Test for any period set out
below is satisfied, if the Cumulative Loss Percentage for such period does not
exceed the percentage set out for such period below (provided, that for purposes
of the calculations of the Servicer Loss Test, Realized Losses attributable
solely to Cram Down Losses should be excluded from the calculation of Cumulative
Loss Percentage).
Cumulative Loss
Period Percentage
------ ----------
March 2, 1998 - March 1, 1999 1.00%
March 2, 1999 - March 1, 2000 1.50%
March 2, 2000 - March 1, 2001 2.25%
March 2, 2001 - March 1, 2002 3.00%
March 2, 2002 - and thereafter 3.75%
"Servicer Termination Event": As defined in Section 4.20(a) hereof.
"Servicer Termination Test": The Servicer Termination Test is satisfied
for any date of determination thereof, if (x) the 90+ Delinquency Percentage
(Rolling Six Month) is less than 14.00%, (y) the Servicer Loss Test is satisfied
and (z) the Annual Loss Percentage (Rolling Twelve Month) for the twelve month
period immediately preceding the date of determination thereof is not greater
than 1.75%.
"Servicing Advance": As defined in Section 4.09(b) and Section 4.13(a)
hereof.
"Servicing Fee": With respect to any Home Equity Loan, an amount
retained by the Servicer as compensation for servicing and administration duties
relating to such Home Equity Loan pursuant to Section 4.15 and equal to one
month's interest at 0.50% per annum of the then outstanding principal balance of
such Home Equity Loan as of the first day of each Remittance Period payable on a
monthly basis; provided, however, that if a successor Servicer is appointed
pursuant to Section 4.20 hereof, the Servicing Fee shall be the amount as agreed
upon by the Indenture Trustee, the Note Insurer, the successor Servicer and the
Owners of a majority of the Percentage Interests of the Certificates, such
amount not to exceed 0.50% per annum.
"Specified Overcollateralization Amount": As defined in the Insurance
Agreement.
"Standard & Poor's": Standard & Poor's Ratings Services, a division of
The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or any successor thereto.
"Subsequent Cut-Off Date": The beginning of business on the date
specified in a Subsequent Transfer Agreement with respect to those Subsequent
Home Equity Loans which are sold, transferred and assigned by the Seller to the
Issuer pursuant to the related Subsequent Transfer Agreement.
16
"Subsequent Home Equity Loans": The Home Equity Loans sold to the
Issuer pursuant to Section 2.07 hereof, which shall be listed on the Schedule of
Home Equity Loans attached to a Subsequent Transfer Agreement.
"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement
dated as of a Subsequent Transfer Date executed by the Indenture Trustee and the
Seller substantially in the form of Exhibit E hereto, by which Subsequent Home
Equity Loans are sold and assigned by the Seller to the Issuer.
"Subsequent Transfer Date": The date specified in each Subsequent
Transfer Agreement.
"Sub-Servicer": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
4.03 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain Home
Equity Loans as permitted by Section 4.03.
"Substitution Amount": As defined in Section 2.03 hereof.
"Telerate Page 3750": The display designated as page "3750" on the Dow
▇▇▇▇▇ Telerate Capital Markets Report (or such other page as may replace page
3750 on that report for the purpose of displaying "Interest Settlement Rates" of
major banks).
"Total Available Funds": As defined in Section 3.02(b) hereof.
"Total Monthly Excess Cashflow": As defined in Section 3.03(b)(ii)
hereof.
"Total Monthly Excess Spread": With respect to any Payment Date, the
excess of (i) the aggregate of all interest which is collected on the Home
Equity Loans during the related Remittance Period (net of the Servicing Fee, the
Indenture Trustee Fee and the Indenture Trustee Reimbursable Expenses) plus (x)
any Delinquency Advances and (y) Compensating Interest paid by the Servicer for
such Remittance Period over (ii) the sum of the Current Interest and the Premium
Amount for such Payment Date.
"Trust" or "Issuer": IMC Home Equity Loan Owner Trust 1998-2, a
Delaware business trust.
"Trust Agreement": The Owner Trust Agreement dated as of March 1, 1998
between the Depositor and the Owner Trustee.
"Trust Estate": As defined in the Indenture.
"Trust Fees and Expenses": As of each Payment Date, an amount equal to
the Premium Amount, the Indenture Trustee Fee and any Indenture Trustee
Reimbursable Expenses.
"Underwriters": Bear, ▇▇▇▇▇▇▇ & Co. Inc., PaineWebber Incorporated,
Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc. and ▇. ▇. ▇▇▇▇▇▇ Securities Inc.
Section 1.02 Use of Words and Phrases.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore",
"hereinafter" and other equivalent words refer to this Agreement as a whole and
not solely to the particular section of this Agreement in which any
17
such word is used. The definitions set forth in Section 1.01 hereof include both
the singular and the plural. Whenever used in this Agreement, any pronoun shall
be deemed to include both singular and plural and to cover all genders.
Section 1.03 Captions; Table of Contents.
The captions or headings in this Agreement and the Table of Contents
are for convenience only and in no way define, limit or describe the scope and
intent of any provisions of this Agreement.
Section 1.04 Opinions.
Each opinion with respect to the validity, binding nature and
enforceability of documents or Notes may be qualified to the extent that the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether considered in a
proceeding or action in equity or at law) and may state that no opinion is
expressed on the availability of the remedy of specific enforcement, injunctive
relief or any other equitable remedy. Any opinion required to be furnished by
any Person hereunder must be delivered by counsel upon whose opinion the
addressee of such opinion may reasonably rely, and such opinion may state that
it is given in reasonable reliance upon an opinion of another, a copy of which
must be attached, concerning the laws of a foreign jurisdiction. Any opinion
delivered hereunder shall be addressed to the Rating Agencies, the Note Insurer
and the Indenture Trustee.
END OF ARTICLE I
18
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE DEPOSITOR, THE SERVICER AND THE SELLER;
COVENANT OF DEPOSITOR TO CONVEY HOME EQUITY LOANS
Section 2.01 Representations and Warranties of the Depositor.
The Depositor hereby represents, warrants and covenants to the
Indenture Trustee, the Owner Trustee, the Issuer, the Seller, the Servicer, the
Note Insurer and the Owners that as of the Closing Date:
(a) The Depositor is a corporation duly organized and validly existing
and in good standing under the laws governing its creation and existence and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it make such
qualification necessary. The Depositor has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative Documents
to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Depositor and its performance
and compliance with the terms of this Agreement and the other Operative
Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of the Depositor and will not violate the
Depositor's Certificate of Incorporation, or Bylaws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in a breach of, any material contract, agreement or
other instrument to which the Depositor is a party or by which the Depositor is
bound or violate any statute or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Depositor or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Depositor is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Depositor is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Depositor or its properties
or the consequences of which would materially and adversely affect its
performance hereunder and under the other Operative Documents to which the
Depositor is a party.
(e) No litigation is pending with respect to which the Depositor has
received service of process or, to the best of the Depositor's knowledge,
threatened against the Depositor which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Depositor or its
properties or might have consequences that would materially and adversely affect
its performance hereunder and under the other Operative Documents to which the
Depositor is a party.
19
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Depositor contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Depositor or matters or activities for which the Depositor is
responsible in accordance with the Operative Documents or which are attributable
to the Depositor therein are true and correct in all material respects, and the
Registration Statement does not contain any untrue statement of a material fact
with respect to the Depositor required to be stated therein or necessary to make
the statements contained therein with respect to the Depositor, in light of the
circumstances under which they were made, not misleading. The Registration
Statement does not contain any untrue statement of a material fact required to
be stated therein or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to the Depositor that
materially adversely affects or in the future may (so far as the Depositor can
now reasonably foresee) materially adversely affect the Depositor or the Home
Equity Loans that has not been set forth in the Registration Statement.
(h) [Reserved].
(i) [Reserved].
(j) The transactions contemplated by this Agreement are in the ordinary
course of business of the Depositor.
(k) The Depositor has received fair consideration and reasonably
equivalent value in exchange for the sale of its interest in the Home Equity
Loans.
(l) The Depositor did not sell any interest in any Home Equity Loan
with an intent to hinder, delay or defraud any of its creditors.
(m) The Depositor is not insolvent, nor will it be made insolvent by
the sale of the Home Equity Loans, nor is the Depositor aware of any pending
insolvency.
(n) [Reserved].
(o) [Reserved].
(p) The Depositor is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Depositor or legal
documents associated with the transaction contemplated by this Agreement.
(q) [Reserved].
It is understood and agreed that the representations and warranties set
forth in this Section 2.01 shall survive delivery of the respective Home Equity
Loans to the Issuer.
Upon discovery by any of the Depositor, the Issuer, the Seller, the
Servicer, the Custodian, any Sub- Servicer, the Note Insurer, any Owner or the
Indenture Trustee (each, for purposes of this paragraph, a party) of a breach of
any of the representations and warranties set forth in this Section 2.01 which
materially and adversely affects the interests of the Owners or of the Note
Insurer, the party discovering such breach shall
20
give prompt written notice to the other parties. As promptly as practicable, but
in any event, within 60 days of its discovery or its receipt of notice of
breach, the Depositor shall cure such breach in all material respects; provided,
however, that if the Depositor can establish to the reasonable satisfaction of
the Note Insurer that it is diligently pursuing remedial action, then the cure
period may be extended for an additional 90 days with the written approval of
the Note Insurer.
Section 2.02 Representations and Warranties of the Servicer.
The Servicer hereby represents, warrants and covenants to the
Depositor, the Issuer, the Owner Trustee, the Indenture Trustee, the Note
Insurer and the Owners that as of the Closing Date:
(a) The Servicer is a corporation duly organized and validly existing
and in good standing under the laws of the State of Florida, is, and each
Sub-Servicer is, in compliance with the laws of each state in which any Property
is located to the extent necessary to enable it to perform its obligations
hereunder and is in good standing in each jurisdiction in which the nature of
its business, or the properties owned or leased by it make such qualification
necessary. The Servicer and each Sub-Servicer have all requisite partnership or
corporate, as the case may be, power and authority to own and operate its or
their properties, to carry out its or their business as presently conducted and
as proposed to be conducted and to enter into and discharge its or their
obligations under this Agreement and the other Operative Documents to which the
Servicer is a party.
(b) The execution and delivery of this Agreement and any other
Operative Document to which it is a party by the Servicer and its performance
and compliance with the terms hereof and thereof have been duly authorized by
all necessary action on the part of the Servicer and will not violate the
Servicer's Articles of Incorporation or Bylaws or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or other
instrument to which the Servicer is a party or by which the Servicer is bound or
violate any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Servicer or any of
its properties.
(c) This Agreement and the Operative Documents to which the Servicer is
a party, assuming due authorization, execution and delivery by the other parties
hereto and thereto, each constitutes a valid, legal and binding obligation of
the Servicer, enforceable against it in accordance with the terms hereof and
thereof, except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which might have consequences that would materially and
adversely affect the condition (financial or otherwise) or operations of the
Servicer or its properties or might have consequences that would materially and
adversely affect its performance hereunder or under the other Operative
Documents to which the Servicer is a party.
21
(e) No litigation is pending with respect to which the Servicer has
received service of process or, to the best of the Servicer's knowledge,
threatened against the Servicer which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Document
or that would materially and adversely affect the condition (financial or
otherwise) or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect the validity or the
enforceability of the Home Equity Loans or its performance hereunder and the
other Operative Documents to which the Servicer is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Servicer contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Prospectus Supplement which
describe the Servicer or matters or activities for which the Servicer is
responsible or which are attributed to the Servicer therein are true and correct
in all material respects, and the Prospectus Supplement does not contain any
untrue statement of a material fact with respect to the Servicer or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein with respect to the Servicer, in light of the
circumstances under which they were made, not misleading.
(h) The Servicing Fee is a "current (normal) servicing fee rate" as
that term is used in Statement of Financial Accounting Standards No. 65 issued
by the Financial Accounting Standards Board. Neither the Servicer nor any
affiliate thereof will report on any financial statements any part of the
Servicing Fee as an adjustment to the sales price of the Home Equity Loans.
(i) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Servicer makes no such representation or warranty),
that are necessary or advisable in connection with the execution and delivery by
the Servicer of the Operative Documents to which it is a party, have been duly
taken, given or obtained, as the case may be, are in full force and effect on
the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement
and the other Operative Documents on the part of the Servicer and the
performance by the Servicer of its obligations under this Agreement and such of
the other Operative Documents to which it is a party.
(j) The collection practices used by the Servicer with respect to the
Home Equity Loans have been, in all material respects, legal, proper, prudent
and customary in the mortgage servicing business and in conformity with relevant
▇▇▇▇▇▇ Mae guidelines.
(k) The transactions contemplated by this Agreement are in the ordinary
course of business of the Servicer.
(l) No material adverse change affecting any security for the Notes has
occurred prior to delivery of and payment for the Notes.
(m) The Servicer is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Servicer or legal
documents associated with the transaction contemplated by this Agreement.
22
(n) To the best knowledge of the Servicer, there has been no material
adverse change in any information submitted by the Servicer in writing to the
Note Insurer with respect to the transactions contemplated by this Agreement
(unless such information was subsequently supplemented in writing).
It is understood and agreed that the representations and warranties set
forth in this Section 2.02 shall survive delivery of the Home Equity Loans to
the Issuer.
Upon discovery by any of the Depositor, the Seller, the Issuer, the
Custodian, any Sub-Servicer, the Note Insurer, any Owner or the Indenture
Trustee (each, for purposes of this paragraph, a party) of a breach of any of
the representations and warranties set forth in this Section 2.02 which
materially and adversely affects the interests of the Owners or of the Note
Insurer, the party discovering such breach shall give prompt written notice to
the other parties. As promptly as practicable, but in any event, within 60 days
of its discovery or its receipt of notice of breach, the Servicer shall cure
such breach in all material respects and, upon the Servicer's continued failure
to cure such breach, may thereafter be removed by the Note Insurer or by the
Indenture Trustee with the written consent of the Note Insurer pursuant to
Section 4.20 hereof; provided, however, that if the Servicer can establish to
the reasonable satisfaction of the Note Insurer that it is diligently pursuing
remedial action, then the cure period may be extended for an additional 90 days
with the written approval of the Note Insurer.
Section 2.03 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants to the Issuer, the
Depositor, the Owner Trustee, the Indenture Trustee, the Note Insurer and the
Owners that as of the Closing Date:
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the laws governing its creation and existence and is in good
standing in each jurisdiction in which the nature of its business, or the
properties owned or leased by it make such qualification necessary. The Seller
has all requisite authority to own and operate its properties, to carry out its
business as presently conducted and as proposed to be conducted and to enter
into and discharge its obligations under this Agreement and the other Operative
Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Seller and its performance and
compliance with the terms of this Agreement and the other Operative Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of the Seller and will not violate the Seller's Articles of
Incorporation and Bylaws Partnership or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
result in a breach of, any material contract, agreement or other instrument to
which the Seller is a party or by which the Seller is bound or violate any
statute or any order, rule or regulation of any court, governmental agency or
body or other tribunal having jurisdiction over the Seller or any of its
properties.
(c) This Agreement and the other Operative Documents to which the
Seller is a party, assuming due authorization, execution and delivery by the
other parties hereto and thereto, each constitutes a valid, legal and binding
obligation of the Seller, enforceable against it in accordance with the terms
hereof and thereof, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Seller is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
governmental agency, which default would materially and adversely affect the
condition (financial or other) or operations of the Seller or its properties
23
or the consequences of which would materially and adversely affect its
performance hereunder and under the other Operative Documents to which the
Seller is a party.
(e) No litigation is pending with respect to which the Seller has
received service of process or, to the best of the Seller's knowledge,
threatened against the Seller which litigation might have consequences that
would prohibit its entering into this Agreement or any other Operative Documents
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Seller or its properties
or might have consequences that would materially and adversely affect its
performance hereunder and under the other Operative Documents to which the
Seller is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Seller contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the certificate, statement or report not misleading.
(g) The statements contained in the Prospectus Supplement which
describe the Seller or matters or activities for which the Seller is responsible
in accordance with the Operative Documents or which are attributable to the
Seller therein are true and correct in all material respects, and the Prospectus
Supplement does not contain any untrue statement of a material fact with respect
to the Seller required to be stated therein or necessary to make the statements
contained therein with respect to the Seller, in light of the circumstances
under which they were made, not misleading. The Prospectus Supplement does not
contain any untrue statement of a material fact required to be stated therein or
omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Seller that materially adversely
affects or in the future may (so far as the Seller can now reasonably foresee)
materially adversely affect the Seller or the Home Equity Loans that has not
been set forth in the Prospectus Supplement.
(h) Upon the receipt of each Home Equity Loan (including the related
Mortgage Note) and other items of the Trust Estate by the Indenture Trustee, the
Issuer will have good title to such Home Equity Loan (including the related
Mortgage Note) and such other items of the Trust Estate free and clear of any
lien, charge, mortgage, encumbrance or rights of others, except as set forth in
Section 2.04(b)(ix) (other than liens which will be simultaneously released (and
except for the lien of the Indenture)).
(i) Neither the Seller nor any affiliate thereof will report on any
financial statement any part of the Servicing Fee as an adjustment to the sales
price of the Home Equity Loans.
(j) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Seller makes no such representation or warranty), that
are necessary or advisable in connection with the purchase and sale of the Notes
and the execution and delivery by the Seller of the Operative Documents to which
it is a party, have been duly taken, given or obtained, as the case may be, are
in full force and effect on the date hereof, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either the
time within which any appeal therefrom may be taken or review thereof may be
obtained has expired or no review thereof may be obtained or appeal therefrom
taken, and are adequate to authorize the consummation of the transactions
contemplated by this Agreement and the other Operative Documents on the part of
the Seller and the performance by the Seller of its obligations under this
Agreement and such of the other Operative Documents to which it is a party.
24
(k) The origination practices used by the Seller with respect to the
Home Equity Loans have been, in all material respects, legal, proper, prudent
and customary in the mortgage lending business.
(l) The transactions contemplated by this Agreement are in the ordinary
course of business of the Seller.
(m) Neither the Owner Trustee nor the Seller has any obligation to
register the Trust as an investment company under the Investment Company Act of
1940, as amended.
(n) The Seller is not insolvent, nor will it be made insolvent by the
transfer of the Home Equity Loans, nor is the Seller aware of any pending
insolvency.
(o) The Seller received fair consideration and reasonably equivalent
value in exchange for the sale of the interests in the Home Equity Loans.
(p) The Seller did not sell any interest in any Home Equity Loan with
any intent to hinder, delay or defraud any of its creditors.
(q) No material adverse change affecting any security for the Notes has
occurred prior to delivery of and payment for the Notes.
(r) The Seller is not in default under any agreement involving
financial obligations or on any outstanding obligation which would materially
adversely impact the financial condition or operations of the Seller or legal
documents associated with the transaction contemplated by this Agreement.
(s) To the best knowledge of the Seller, there has been no material
adverse change in any information submitted by the Seller in writing to the Note
Insurer with respect to the transactions contemplated by this Agreement (unless
such information was subsequently supplemented in writing).
It is understood and agreed that the representations and warranties set
forth in this Section 2.03 shall survive delivery of the respective Home Equity
Loans to the Indenture Trustee.
Upon discovery by any of the Issuer, the Depositor, the Servicer, the
Custodian, any Sub-Servicer, any Owner, the Seller, the Note Insurer or the
Indenture Trustee (each, for purposes of this paragraph, a "party") of a breach
of any of the representations and warranties set forth in this Section 2.03
which materially and adversely affects the interests of the Owners or the
interests of the Note Insurer, the party discovering such breach shall give
prompt written notice to the other parties. The Seller hereby covenants and
agrees that within 60 days of its discovery or its receipt of notice of breach,
it shall cure such breach in all material respects or, with respect to a breach
of clause (h) above, the Seller may (or may cause an affiliate of the Seller to)
on or prior to the second Monthly Remittance Date next succeeding such discovery
or receipt of notice (i) substitute in lieu of any Home Equity Loan not in
compliance with clause (h) a Qualified Replacement Mortgage and, if the
outstanding principal amount of such Qualified Replacement Mortgage as of the
applicable Replacement Cut-Off Date is less than the Loan Balance of such Home
Equity Loan as of such Replacement Cut-Off Date, deliver an amount (a
"Substitution Amount") equal to such difference together with the aggregate
amount of (A) all Delinquency Advances and Servicing Advances theretofore made
with respect to such Home Equity Loan and (B) all Delinquency Advances which the
Servicer has theretofore failed to remit with respect to such Home Equity Loan
to the Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Home Equity Loan from the Issuer at the Loan Purchase Price, which
purchase price shall be delivered to the Servicer for deposit in the Principal
and Interest Account. The Seller shall deliver an Officer's Certificate to the
Indenture Trustee and the Note Insurer concurrently with
25
the delivery of a Qualified Replacement Mortgage pursuant to Sections 2.03, 2.04
and 2.06 stating that such Home Equity Loan meets the requirements of the
definition of a Qualified Replacement Mortgage and that all other conditions to
the substitution thereof have been satisfied. Any Home Equity Loan as to which
repurchase or substitution was delayed pursuant to this Section shall be
repurchased or substituted for (subject to compliance with Section 2.03, 2.04 or
2.06, as the case may be) upon the occurrence of a default or imminent default
with respect to such Home Equity Loan.
Section 2.04 Covenants of Seller to Take Certain Actions with
Respect to the Home Equity Loans in Certain Situations.
(a) Upon the discovery by the Issuer, the Depositor, the Seller, the
Servicer, the Note Insurer, any Sub-Servicer, any Owner, the Custodian or the
Indenture Trustee that the representations and warranties set forth in clause
(b) below were untrue in any material respect as of the Closing Date (or in the
case of the Subsequent Home Equity Loans, as of the respective Subsequent
Transfer Date) with the result that the interests of the Owners or of the Note
Insurer are materially and adversely affected, the party discovering such breach
shall give prompt written notice to the other parties. Upon the earliest to
occur of the Seller's discovery, its receipt of notice of breach from any one of
the other parties or such time as a situation resulting from an existing
statement which is untrue materially and adversely affects the interests of the
Owners or of the Note Insurer, the Seller hereby covenants and warrants that it
shall promptly cure such breach in all material respects or subject to the last
three sentences of Section 2.03 it shall on or before the second Monthly
Remittance Date next succeeding such discovery, receipt of notice or such time
(i) substitute in lieu of each Home Equity Loan which has given rise to the
requirement for action by the Seller a Qualified Replacement Mortgage and
deliver the Substitution Amount to the Servicer for deposit in the Principal and
Interest Account or (ii) purchase such Home Equity Loan from the Trust at a
purchase price equal to the Loan Purchase Price thereof, which purchase price
shall be delivered to the Servicer for deposit in the Principal and Interest
Account; provided, however, that if the Seller can establish to the reasonable
satisfaction of the Note Insurer that it is diligently pursuing remedial action,
the period of time in which the Seller must substitute a Qualified Replacement
Mortgage or purchase such Home Equity Loan may be extended for an additional 30
days with the written approval of the Note Insurer. It is understood and agreed
that the obligation of the Seller so to substitute or purchase any Home Equity
Loan as to which such a statement set forth below is untrue in any material
respect and has not been remedied shall constitute the sole remedy respecting a
discovery of any such statement which is untrue in any material respect in this
Section 2.04 available to the Owners and the Indenture Trustee.
(b) The Seller hereby represents, warrants and covenants to the
Indenture Trustee, the Issuer, the Servicer, the Note Insurer and the Owners
that as of the Closing Date (with respect to the Initial Home Equity Loans) and
as of the respective Subsequent Transfer Date (with respect to the Subsequent
Home Equity Loans):
(i) The information with respect to each Initial Home Equity
Loan and Subsequent Home Equity Loan set forth in the related
Schedule of Home Equity Loans is true and correct as of the Cut-Off
Date (or in the case of the Subsequent Home Equity Loans, as of the
related Subsequent Transfer Date);
(ii) All the original or certified documentation set forth in
Section 2.05 (including all material documents related thereto) with
respect to each Initial Home Equity Loan has been or will be
delivered to the Custodian on behalf of the Indenture Trustee on the
Closing Date (or in the case of the Subsequent Home Equity Loans, on
the related Subsequent Transfer Date) or as otherwise provided in
Section 2.05;
26
(iii) Each Home Equity Loan being transferred to the Trust is
secured by a Mortgage;
(iv) Each Property is improved by a single (one-to-four) family
residential dwelling (except for 2.79% of the Initial Home Equity
Loans in the amount of $14,681,495.00, that are condominiums, planned
unit developments, townhouses, manufactured housing, or multifamily
residential, provided that no more than 0.28% of the Properties are
secured by manufactured homes, each of which is considered to be real
property under the applicable local law;
(v) As of the Cut-Off Date, no Initial Home Equity Loan has a
Loan-to-Value Ratio in excess of 90%, except for 60 Initial Home
Equity Loans in the amount of $6,849,845.06 that had a Loan-to-Value
Ratio not greater than 100%;
(vi) Each Home Equity Loan is being serviced by the Servicer in
accordance with the terms of this Agreement;
(vii) The Mortgage Note related to each Initial Home Equity
Loan bears a current Coupon Rate of at least 5.91% per annum;
(viii) Each Mortgage Note with respect to the Initial Home
Equity Loans will provide for a schedule of substantially level and
equal Monthly Payments which are sufficient to amortize fully the
principal balance of such Mortgage Note on or before its maturity
date except for 72 Initial Home Equity Loans in the amount of
$16,735,146.86 representing 3.18% of the aggregate Loan Balance of
the Initial Home Equity Loans as of the Cut-Off Date, which may
provide for a "balloon" payment due at the end up to the 15th year;
(ix) As of the Closing Date (with respect to the Initial Home
Equity Loans) and any Subsequent Transfer Date (with respect to the
Subsequent Home Equity Loans), each Mortgage is a valid and
subsisting first lien of record (or is in the process of being
recorded) on the Property as noted on Schedule I attached hereto
subject, in all cases, to the exceptions to title set forth in the
title insurance policy or attorney's opinion of title, with respect
to the related Home Equity Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular
mortgage lending activities, and such other exceptions to which
similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect
the benefits of the security intended to be provided by such
Mortgage;
(x) Immediately prior to the transfer and assignment of the
Home Equity Loans by the Seller to the Depositor herein contemplated,
the Seller held good and indefeasible title to, and was the sole
owner of, each Home Equity Loan (including the related Mortgage Note)
subject to no liens, charges, mortgages, encumbrances or rights of
others except as set forth in clause (ix) or other liens which will
be released simultaneously with such transfer and assignment; and
immediately upon the transfer and assignment herein contemplated, the
Issuer will hold good and indefeasible title to, and be the sole
owner of, each Home Equity Loan subject to no liens, charges,
mortgages, encumbrances or rights of others except as set forth in
paragraph (ix) or other liens which will be released simultaneously
with such transfer and assignment and except for the lien of the
Indenture;
(xi) As of the opening of business on the Cut-Off Date, no
Initial Home Equity Loan is 30 days or more Delinquent except that
there are 332 Initial Home Equity Loans with an outstanding aggregate
Loan Balance of $32,256,507.29 that are 30 or more days Delinquent
but
27
not more than 59 days Delinquent and there are no Initial Home Equity
Loans that are 60 or more days Delinquent but not more than 89 days
Delinquent;
(xii) There is no delinquent tax or assessment lien on any
Property, and each Property is free of substantial damage and is in
good repair;
(xiii) There is no valid and enforceable offset, defense or
counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note;
(xiv) There is no mechanics' lien or claim for work, labor or
material affecting any Property which is or may be a lien prior to,
or equal with, the lien of the related Mortgage except those which
are insured against by any title insurance policy referred to in
paragraph (xvi) below;
(xv) Each Home Equity Loan at the time it was made complied in
all material respects with applicable state and federal laws and
regulations, including, without limitation, the federal
Truth-in-Lending Act (as amended by the ▇▇▇▇▇▇ Community Development
and Regulatory Improvement Act of 1994) and other consumer protection
laws, usury, equal credit opportunity, disclosure and recording laws;
(xvi) With respect to each Home Equity Loan either (a) an
attorney's opinion of title has been obtained but no lender's title
insurance policy has been obtained, or (b) a lender's title insurance
policy, issued in standard American Land Title Association form by a
title insurance company authorized to transact business in the state
in which the related Property is situated, in an amount at least
equal to the original balance of such Home Equity Loan, insuring the
mortgagee's interest under the related Home Equity Loan as the holder
of a valid first mortgage lien of record on the real property
described in the related Mortgage, as the case may be, subject only
to exceptions of the character referred to in paragraph (ix) above,
was effective on the date of the origination of such Home Equity
Loan, and, as of the Closing Date, such policy is valid and
thereafter such policy shall continue in full force and effect
(provided that an attorney's opinion of title without a lender's
title insurance policy has been obtained with respect to no more than
2% of the Original Aggregate Loan Balance);
(xvii) The improvements upon each Property are covered by a
valid and existing hazard insurance policy with a carrier generally
acceptable to the Servicer that provides for fire and extended
coverage representing coverage not less than the least of (A) the
outstanding principal balance of the related Home Equity Loan, (B)
the minimum amount required to compensate for damage or loss on a
replacement cost basis or (C) the full insurable value of the
Property;
(xviii) If any 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 Property with a
carrier generally acceptable to the Servicer in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Home Equity 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;
(xix) Each Mortgage and Mortgage Note are the legal, valid and
binding obligation of the maker thereof and are enforceable in
accordance with their terms, except only as such
28
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law),
and all parties to each Home Equity Loan had full legal capacity to
execute all documents relating to such Home Equity Loan and convey
the estate therein purported to be conveyed;
(xx) The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and
remedies of the Indenture Trustee in any Insurance Policies
applicable to any Home Equity Loans delivered by the Seller
including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights
in favor of the Indenture Trustee;
(xxi) As of the Closing Date, no more than 0.25% of the
aggregate Loan Balance of the Initial Home Equity Loans will be
secured by Properties located within any single zip code area;
(xxii) Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original
Mortgage have been delivered for recordation or have been recorded in
the appropriate jurisdictions wherein such recordation is necessary
to perfect the lien thereof as against creditors of or purchasers
from the Seller (or, subject to Section 2.05 hereof, are in the
process of being recorded); each Mortgage and assignment of Mortgage
is in recordable form and is acceptable for recording under the laws
of the jurisdiction in which the property securing such Mortgage is
located;
(xxiii) The terms of each Mortgage Note and each Mortgage have
not been impaired, altered or modified in any respect, except by a
written instrument which has been recorded, if necessary, to protect
the interest of the Owners and the Note Insurer and which has been
delivered to the Indenture Trustee. The substance of any such
alteration or modification is reflected on the related Schedule of
Home Equity Loans;
(xxiv) The proceeds of each Home Equity Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. 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 such Home Equity Loans were paid;
(xxv) The related Mortgage Note is not and has not been secured
by any collateral, pledged account or other security except the lien
of the corresponding Mortgage;
(xxvi) No Home Equity Loan has a shared appreciation feature,
or other contingent interest feature;
(xxvii) Each Property is located in the state identified in the
respective Schedule of Home Equity Loans and consists of one or more
parcels of real property with a residential dwelling erected thereon;
(xxviii) Each Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of the
related Home Equity Loan in the event the related Property is sold
without the prior consent of the mortgagee thereunder;
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(xxix) Any advances made after the date of origination of a
Home Equity Loan but prior to the Cut-Off Date with respect to the
Initial Home Equity Loans (or the relevant Subsequent Transfer Date
with respect to the Subsequent Home Equity Loans) have been
consolidated with the outstanding principal amount secured by the
related Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term reflected on
the Schedule of Home Equity Loans. The consolidated principal amount
does not exceed the original principal amount of the related Home
Equity Loan. No Mortgage Note permits or obligates the Servicer to
make future advances to the related Mortgagor at the option of the
Mortgagor;
(xxx) There is no proceeding pending or threatened for the
total or partial condemnation of any Property, nor is such a
proceeding currently occurring, and each Property is undamaged by
waste, fire, water, flood, earthquake or earth movement;
(xxxi) All of the improvements which were included for the
purposes of determining the Appraised Value of any Property lie
wholly within the boundaries and building restriction lines of such
Property, and no improvements on adjoining properties encroach upon
such Property, and are stated in the title insurance policy and
affirmatively insured;
(xxxii) No improvement located on or being part of any Property
is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of each 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 and such Property is lawfully occupied under the
applicable law;
(xxxiii) 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 Owners or the Indenture Trust to the trustee under the
deed of trust, except in connection with a trustee's sale after
default by the related Mortgagor;
(xxxiv) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Property of the
benefits of the security, including (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (B) otherwise by
judicial foreclosure. There is no homestead or other exemption other
than any applicable Mortgagor redemption rights available to the
related Mortgagor which would materially interfere with the right to
sell the related Property at a trustee's sale or the right to
foreclose the related Mortgage;
(xxxv) Other than with respect to the Delinquencies noted in
item (xi) hereof, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note
and no 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; and neither the Servicer
nor the Seller has waived any default, breach, violation or event of
acceleration;
(xxxvi) No instrument of release or waiver has been executed in
connection with any Home Equity Loan, and no Mortgagor has been
released, in whole or in part, except in connection with an
assumption agreement which has been approved by the primary mortgage
guaranty insurer, if any, and which has been delivered to the
Custodian;
30
(xxxvii) Reserved;
(xxxviii) Each Home Equity Loan was underwritten in accordance
with the credit underwriting guidelines of the Seller as set forth in
the Seller's Policies and Procedures Manual, as in effect on the date
hereof and such Manual conforms in all material respects to the
description thereof set forth in the Prospectus Supplement;
(xxxix) Each Home Equity Loan was originated based upon a full
appraisal, which included an interior inspection of the subject
property;
(xl) The Home Equity Loans were not selected for sale to the
Depositor by the Seller on any basis intended to adversely affect the
Issuer;
(xli) No more than 5.08% of the aggregate Loan Balance of the
Initial Home Equity Loans are secured by Properties that are
non-owner occupied Properties (i.e., investor-owned and vacation);
(xlii) The Seller has no actual knowledge that there exist any
hazardous substances, hazard wastes or solid wastes, as such terms
are defined in the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation on
any Property;
(xliii) The Seller was properly licensed or otherwise
authorized, to the extent required by applicable law, to originate or
purchase each Home Equity Loan and the consummation of the
transactions herein contemplated, including, without limitation, the
receipt of interest by the Owners and the ownership of the Home
Equity Loans by the Issuer will not involve the violation of such
laws;
(xliv) With respect to each Property subject to a ground lease
(i) the current ground lessor has been identified and all ground
rents which have previously become due and owing have been paid; (ii)
the ground lease term extends, or is automatically renewable, for at
least five years beyond the maturity date of the related Home Equity
Loan; (iii) the ground lease has been duly executed and recorded;
(iv) the amount of the ground rent and any increases therein are
clearly identified in the lease and are for predetermined amounts at
predetermined times; (v) the ground rent payment is included in the
borrower's monthly payment as an expense item in determining the
qualification of the borrower for such Home Equity Loan; (vi) the
Issuer has the right to cure defaults on the ground lease; and (vii)
the terms and conditions of the leasehold do not prevent the free and
absolute marketability of the Property. As of the Cut-Off Date, the
Loan Balance of the Initial Home Equity Loans with related Properties
subject to ground leases does not exceed 1% of the Original Aggregate
Loan Balance;
(xlv) As of the Cut-Off Date, no more than 6.63% of the Initial
Home Equity Loans were fixed rate home equity loans;
(xlvi) No Home Equity Loan is subject to a temporary rate
reduction pursuant to a buydown program;
(xlvii) No more than 2.68% of the aggregate Loan Balance of the
Initial Home Equity Loans was originated under the Seller's
non-income verification program;
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(xlviii) The Coupon Rate on each Home Equity Loan is calculated
on the basis of a year of 360 days with twelve 30-day months (except
for 0.86% of the Initial Home Equity Loans on which the Coupon Rate
is calculated based on the number of days elapsed since the last
payment);
(xlix) Neither the operation of any of the terms of each
Mortgage Note and each Mortgage nor the exercise of any right
thereunder will render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, nor subject it to any right of
rescission, set-off, counterclaim or defense, including, without
limitation, the defense of usury;
(l) Any adjustment to the Coupon Rate on a Home Equity Loan has
been legal, proper and in accordance with the terms of the related
Mortgage Note;
(li) No Home Equity Loan is subject to negative amortization;
and
(lii) As of the Cut-Off Date, the FTC holder regulation
provided in 16 C.F.R. Part 433 applies to none of the Home Equity
Loans.
(c) In the event that any Qualified Replacement Mortgage is delivered
by the Seller to the Trust pursuant to Section 2.03, Section 2.04 or Section
2.06 hereof, the Seller shall be obligated to take the actions described in
Section 2.04(a) with respect to such Qualified Replacement Mortgage upon the
discovery by any of the Owners, the Seller, the Servicer, the Note Insurer, any
Sub-Servicer, the Custodian or the Indenture Trustee that the statements set
forth in subsection (b) above are untrue in any material respect on the date
such Qualified Replacement Mortgage is conveyed to the Trust such that the
interests of the Owners or the Note Insurer in the related Qualified Replacement
Mortgage are materially and adversely affected; provided, however, that for the
purposes of this subsection (c) the statements in subsection (b) above referring
to items "as of the Cut-Off Date" or "as of the Closing Date" shall be deemed to
refer to such items as of the date such Qualified Replacement Mortgage is
conveyed to the Trust. Notwithstanding the fact that a representation contained
in subsection (b) above may be limited to the Seller's knowledge, such
limitation shall not relieve the Seller of its repurchase obligation under this
Section and Section 2.05 hereof.
(d) It is understood and agreed that the covenants set forth in this
Section 2.04 shall survive delivery of the respective Home Equity Loans
(including Qualified Replacement Mortgages) to the Indenture Trustee or the
Custodian.
(e) The Indenture Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any Home
Equity Loan pursuant to this Article II or the eligibility of any Home Equity
Loan for the purpose of this Agreement.
Section 2.05 Conveyance of the Initial Home Equity Loans and Qualified
Replacement Mortgages.
(a) On the Closing Date, the Seller, concurrently with the execution
and delivery hereof, transfers, assigns, sets over and otherwise conveys without
recourse, to the Depositor and the Depositor, concurrently with the execution
and delivery hereof, transfers, assigns, sets over and otherwise conveys without
recourse, to the Issuer, all of its respective right, title and interest in and
to the Initial Home Equity Loans (other than payments of principal and interest
due on the Initial Home Equity Loans on or before the Cut-Off Date). The
transfer by the Seller to the Depositor and by the Depositor to the Issuer of
the Initial Home Equity Loans set forth on the Schedule of Home Equity Loans to
the Issuer is absolute and is intended by all parties hereto to be treated as a
sale by the Seller to the Depositor and by the Depositor to the Issuer. Pursuant
to the
32
Indenture, the Issuer will pledge the Trust Estate to the Indenture Trustee to
be held on behalf of the Owners of the Notes.
In the event that either such conveyance or a conveyance pursuant to
Section 2.07 and any Subsequent Transfer Agreement is deemed to be a loan, the
parties intend that the Seller shall be deemed to have granted to the Depositor
and the Depositor shall be deemed to have granted to the Issuer a security
interest in the Trust Estate, and that this Agreement shall constitute a
security agreement under applicable law.
In connection with the sale, transfer, assignment, and conveyance from
the Seller to the Depositor, the Seller has filed, in the appropriate office or
offices in the States of Delaware and Florida, a UCC-1 financing statement
executed by the Seller as debtor, naming the Depositor as secured party and
listing the Initial Home Equity Loans, the Subsequent Home Equity Loans, and the
other property described above as collateral. The characterization of the Seller
as the debtor and the Depositor as the secured party in such financing
statements is solely for protective purposes and shall in no way be construed as
being contrary to the intent of the parties that this transaction be treated as
a sale of the Seller's entire right, title and interest in the Trust Estate. In
connection with such filing, the Seller agrees that it shall cause to be filed
all necessary continuation statements thereof and to take or cause to be taken
such actions and execute such documents as are necessary to perfect and protect
the Depositor's interest in the Trust Estate.
In connection with the sale, transfer, assignment, and conveyance from
the Depositor to the Issuer, the Depositor has filed, in the appropriate office
or offices in the States of Delaware and Florida a UCC-1 financing statement
executed by the Depositor as debtor, naming the Issuer as secured party and
listing the Initial Home Equity Loans, the Subsequent Home Equity Loans and the
other property described above as collateral. The characterization of the
Depositor as a debtor and the Issuer as the secured party in such financing
statements is solely for protective purposes and shall in no way be construed as
being contrary to the intent of the parties that this transaction be treated as
a sale of the Depositor's entire right, title and interest in the Trust Estate.
In connection with such filing, the Depositor agrees that it shall cause to be
filed all necessary continuation statements thereof and to take or cause to be
taken such actions and execute such documents as are necessary to perfect and
protect the Issuer's, the Owners' and the Note Insurer's interest in the Trust
Estate.
In connection with the pledge of the Trust Estate from the Issuer to
the Indenture Trustee, on behalf of the Owners of the Notes, the Issuer has
filed, in the appropriate office or offices in the State of Delaware, a UCC-1
Financing Statement executed by the Issuer as debtor, naming the Indenture
Trustee, on behalf of the Owners of the Notes, as the secured party and listing
the Initial Home Equity Loans, the Subsequent Home Equity Loans and the other
property described above as collateral. In connection with such filing, the
Issuer agrees that it shall cause to be filed all necessary continuation
statements thereof and to take or cause to be taken such actions and execute
such documents as are necessary to perfect and protect the Indenture Trustee's
interest in the Trust Estate on behalf of the Owners of the Notes.
(b) In connection with the transfer and assignment of the Initial Home
Equity Loans, or on each Subsequent Transfer Date with respect to the Subsequent
Home Equity Loan, the Seller agrees to:
(i) deliver without recourse to the Custodian, on behalf of the
Indenture Trustee, on the Closing Date with respect to each Initial
Home Equity Loan or on each Subsequent Transfer Date with respect to
the Subsequent Home Equity Loans, (A) the original Mortgage Notes (or
in the case of not more than 0.50% of the Initial Home Equity Loans, a
lost note affidavit executed by an Authorized Officer of the Seller)
endorsed in blank or to the order of "The Chase Manhattan Bank, as
Indenture Trustee for the IMC Adjustable Rate Home Equity Loan Asset
Backed Notes, Series
33
1998-2 without recourse," (B) (I) the original title insurance
commitment or a copy thereof certified as a true copy by the closing
agent or the Seller, and when available, the original title insurance
policy or a copy certified by the issuer of the title insurance policy
or (II) the attorney's opinion of title, (C) originals or copies of all
intervening assignments certified as true copies by the closing agent
or the Seller, showing a complete chain of title from origination to
the Issuer, if any, including warehousing assignments, if recorded, (D)
originals of all assumption and modification agreements, if any and (E)
either: (1) the original Mortgage, with evidence of recording thereon
(if such original Mortgage has been returned to the Seller from the
applicable recording office) or a copy of the Mortgage certified as a
true copy by the closing agent or the Seller, or (2) a copy of the
Mortgage certified by the public recording office in those instances
where the original recorded Mortgage has been lost or retained by the
recording office;
(ii) cause, within 60 days following the Closing Date with
respect to the Initial Home Equity Loans or on each Subsequent Transfer
Date with respect to the Subsequent Home Equity Loans or assignments of
the Mortgages to "The Chase Manhattan Bank, as Indenture Trustee for
the "The Chase Manhattan Bank, as the Indenture Trustee for the IMC
Adjustable Rate Home Equity Loan Asset Backed Notes, Series 1998-2
without recourse," to be submitted for recording in the appropriate
jurisdictions; provided, however, that the Seller shall not be required
to prepare an assignment for any Mortgage described in subsection
(b)(i)(E)(2) above with respect to which the original recording
information has not yet been received from the recording office until
such information is received; provided, further, that the Seller shall
not be required to record an assignment of a Mortgage if the Seller
furnishes to the Indenture Trustee and the Note Insurer, on or before
the Closing Date, with respect to the Initial Home Equity Loans or on
each Subsequent Transfer Date with respect to the Subsequent Home
Equity Loans, at the Seller's expense, an opinion of counsel with
respect to the relevant jurisdiction that such recording is not
necessary to perfect the Indenture Trustee's interest in the related
Home Equity Loans (in form and substance satisfactory to the Indenture
Trustee, and the Note Insurer and the Rating Agencies); provided
further, however, notwithstanding the delivery of any legal opinions,
each assignment of Mortgage shall be recorded upon the earliest to
occur of: (i) reasonable direction by the Note Insurer or (ii) the
occurrence of a Servicer Termination Event;
(iii) deliver the title insurance policy or title searches, the
original Mortgages and such recorded assignments, together with
originals or duly certified copies of any and all prior assignments
(other than unrecorded warehouse assignments), to the Custodian, on
behalf of the Indenture Trustee, within 15 days of receipt thereof by
the Seller (but in any event, with respect to any Mortgage as to which
original recording information has been made available to the Seller,
within one year after the Closing Date with respect to the Initial Home
Equity Loans or on each Subsequent Transfer Date with respect to the
Subsequent Home Equity Loans); and
(iv) furnish to the Indenture Trustee and the Note Insurer at
the Seller's expense, an opinion of counsel with respect to the sale
and perfection of the Subsequent Home Equity Loans delivered to the
Issuer.
Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage, the assignment of a Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Seller and the Depositor shall be
deemed to have satisfied their obligations hereunder upon delivery to the
Custodian, on behalf of the Indenture Trustee of a copy of such Mortgage, such
assignment or assignments of Mortgage certified by the public recording office
to be a true copy of the recorded original thereof.
34
Not later than ten days following the end of the 60-day period referred
in clause (ii) of this subsection (b), the Seller shall deliver to the
Custodian, on behalf of the Indenture Trustee a list of all Mortgages for which
no Mortgage assignment has yet been submitted for recording by the Seller, which
list shall state the reason why the Seller has not yet submitted such Mortgage
assignments for recording. With respect to any Mortgage assignment disclosed on
such list as not yet submitted for recording for a reason other than a lack of
original recording information, the Custodian, on behalf of the Indenture
Trustee shall make an immediate demand on the Seller to prepare such Mortgage
assignments, and shall inform the Note Insurer, in writing, of the Seller's
failure to prepare such Mortgage assignments. Thereafter, the Custodian, on
behalf of the Indenture Trustee shall cooperate in executing any documents
prepared by the Note Insurer and submitted to the Custodian, on behalf of the
Indenture Trustee in connection with this provision. Following the expiration of
each 60-day period referred to in clause (ii) of this subsection (b), the Seller
shall promptly prepare a Mortgage assignment for any Mortgage for which original
recording information is subsequently received by the Seller, and shall promptly
deliver a copy of such Mortgage assignment to the Custodian, on behalf of the
Indenture Trustee. The Seller agrees that it will follow its normal servicing
procedures and attempt to obtain the original recording information necessary to
complete a Mortgage assignment. In the event that the Seller is unable to obtain
such recording information with respect to any Mortgage prior to the end of the
18th calendar month following the Closing Date with respect to the Initial Home
Equity Loans and the relevant Subsequent Transfer Date with respect to the
Subsequent Home Equity Loans and has not provided to the Custodian, on behalf of
the Indenture Trustee a Mortgage assignment with evidence of recording thereon
relating to the assignment of such Mortgage to the Indenture Trustee, the
Custodian, on behalf of the Indenture Trustee shall notify the Seller of the
Seller's obligation to provide a completed assignment (with evidence of
recording thereon) on or before the end of the 20th calendar month following the
Closing Date with respect to the Initial Home Equity Loans and the relevant
Subsequent Transfer Date with respect to the Subsequent Home Equity Loans. A
copy of such notice shall be sent by the Custodian, on behalf of the Indenture
Trustee to the Note Insurer. If no such completed assignment (with evidence of
recording thereon) is provided before the end of such 20th calendar month, the
related Home Equity Loan shall be deemed to have breached the representation
contained in clause (xxii) of Section 2.04(b) hereof; provided, however, that if
as of the end of such 20th calendar month the Seller demonstrates to the
satisfaction of the Note Insurer that it is exercising its best efforts to
obtain such completed assignment and, during each month thereafter until such
completed assignment is delivered to the Custodian, on behalf of the Indenture
Trustee, the Seller continues to demonstrate to the satisfaction of the Note
Insurer that it is exercising its best efforts to obtain such completed
assignment, the related Home Equity Loan will not be deemed to have breached
such representation. The requirement to deliver a completed assignment with
evidence of recording thereon will be deemed satisfied upon delivery of a copy
of the completed assignment certified by the applicable public recording office.
Copies of all Mortgage assignments received by the Custodian, on behalf
of the Indenture Trustee shall be retained in the related File.
All recording required pursuant to this Section 2.05 shall be
accomplished at the expense of the Seller.
(c) In the case of Initial Home Equity Loans which have been prepaid in
full after the Cut-Off Date and prior to the Closing Date, the Seller, in lieu
of the foregoing, will deliver within six (6) days after the Closing Date to the
Indenture Trustee a certification of an Authorized Officer in the form set forth
in Exhibit A.
(d) The Seller shall transfer, assign, set over and otherwise convey
without recourse, to the Issuer all right, title and interest of the Seller in
and to any Qualified Replacement Mortgage delivered to the Custodian, on behalf
of the Indenture Trustee on behalf of the Issuer by the Seller pursuant to
Section 2.03,
35
2.04 or 2.06 hereof and all its right, title and interest to principal and
interest due on such Qualified Replacement Mortgage after the applicable
Replacement Cut-Off Date; provided, however, that the Seller shall reserve and
retain all right, title and interest in and to payments of principal and
interest due on such Qualified Replacement Mortgage on or prior to the
applicable Replacement Cut-Off Date.
(e) As to each Home Equity Loan released from the lien of the Indenture
in connection with the conveyance of a Qualified Replacement Mortgage therefor,
the Indenture Trustee will transfer, assign, set over and otherwise convey
without recourse or representation, on the Seller's order, all of its and the
Issuer's right, title and interest in and to such released Home Equity Loan and
all the Issuer's right, title and interest to principal and interest due on such
released Home Equity Loan after the applicable Replacement Cut-Off Date;
provided, however, that the Issuer shall reserve and retain all right, title and
interest in and to payments of principal and interest due on such released Home
Equity Loan on or prior to the applicable Replacement Cut-Off Date.
(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Issuer, the Seller agrees to (i) deliver without
recourse to the Custodian, on behalf of the Indenture Trustee on the date of
delivery of such Qualified Replacement Mortgage the original Mortgage Note
relating thereto, endorsed in blank or to the order of "The Chase Manhattan
Bank, as Indenture Trustee for IMC Adjustable Rate Home Equity Loan Asset Backed
Notes, Series 1998-2 without recourse," (ii) cause promptly to be recorded an
assignment in the appropriate jurisdictions, (iii) deliver the original
Qualified Replacement Mortgage and such recorded assignment, together with
original or duly certified copies of any and all prior assignments, to the
Custodian, on behalf of the Indenture Trustee within 15 days of receipt thereof
by the Seller (but in any event within 60 days after the date of conveyance of
such Qualified Replacement Mortgage) and (iv) deliver the title insurance
policy, or where no such policy is required to be provided under Section
2.05(b)(i)(B), the other evidence of title in same required in Section
2.05(b)(i)(B).
(g) As to each Home Equity Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage the Custodian, on behalf
of the Indenture Trustee shall deliver on the date of conveyance of such
Qualified Replacement Mortgage and on the order of the Seller (i) the original
Mortgage Note relating thereto, endorsed without recourse or representation, to
the Seller, (ii) the original Mortgage so released and all assignments relating
thereto and (iii) such other documents as constituted the File with respect
thereto.
(h) If a Mortgage assignment is lost during the process of recording,
or is returned from the recorder's office unrecorded due to a defect therein,
the Seller shall prepare a substitute assignment or cure such defect, as the
case may be, and thereafter cause each such assignment to be duly recorded.
Section 2.06 Acceptance by Indenture Trustee; Certain
Substitutions of Home Equity Loans; Certification by
Indenture Trustee.
(a) The Indenture Trustee agrees to execute and deliver and to cause
the Custodian to execute and deliver on the Closing Date an acknowledgment of
receipt of the items delivered by the Seller in the forms attached as Exhibit
B-1 and Exhibit B-2 hereto, and declares through the Custodian that it will hold
such documents and any amendments, replacement or supplements thereto, as well
as any other assets included in the definition of Trust Estate and delivered to
the Custodian, on behalf of the Indenture Trustee, as Indenture Trustee in trust
upon and subject to the conditions set forth herein and in the Indenture for the
benefit of the Owners. The Indenture Trustee agrees, for the benefit of the
Owners, to cause the Custodian to review such items within 45 days after the
Closing Date (or, with respect to any document delivered after the Closing Date,
within 45 days of receipt and with respect to any Subsequent Home Equity Loan or
Qualified Replacement Mortgage, within 45 days after the assignment thereof) and
to deliver to the
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Depositor, the Seller, the Servicer, the Issuer and the Note Insurer a
certification in the form attached hereto as Exhibit C (a "Pool Certification")
to the effect that, as to each Home Equity Loan listed in the Schedule of Home
Equity Loans (other than any Home Equity Loan paid in full or any Home Equity
Loan specifically identified in such Pool Certification as not covered by such
Pool Certification), (i) all documents required to be delivered to it pursuant
to Section 2.05(b)(i) of this Agreement are in its possession, (ii) such
documents have been reviewed by it and have not been mutilated, damaged or torn
and relate to such Home Equity Loan and (iii) based on its examination and only
as to the foregoing documents, the information set forth on the Schedule of Home
Equity Loans accurately reflects the information set forth in the File. Neither
the Custodian on behalf of the Indenture Trustee, nor the Indenture Trustee
shall have any responsibility for reviewing any File except as expressly
provided in this subsection 2.06(a). Without limiting the effect of the
preceding sentence, in reviewing any File, the Custodian or the Indenture
Trustee shall have no responsibility for determining whether any document is
valid and binding, whether the text of any assignment is in proper form (except
to determine if the Indenture Trustee is the assignee), whether any document has
been recorded in accordance with the requirements of any applicable jurisdiction
or whether a blanket assignment is permitted in any applicable jurisdiction, but
shall only be required to determine whether a document has been executed, that
it appears to be what it purports to be, and, where applicable, that it purports
to be recorded. Neither the Custodian on behalf of the Indenture Trustee, nor
the Indenture Trustee shall be under any duty or obligation to inspect, review
or examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the represented
purpose or that they are other than what they purport to be on their face, nor
shall the Custodian or the Indenture Trustee be under any duty to determine
independently whether there are any intervening assignments or assumption or
modification agreements with respect to any Home Equity Loan.
(b) If the Custodian, on behalf of the Indenture Trustee during such
45-day period finds any document constituting a part of a File which is not
executed, has not been received, or is unrelated to the Home Equity Loans
identified in the Schedule of Home Equity Loans, or that any Home Equity Loan
does not conform to the description thereof as set forth in the Schedule of Home
Equity Loans, the Custodian, on behalf of the Indenture Trustee shall promptly
so notify the Depositor, the Seller, the Issuer, the Owners and the Note
Insurer. In performing any such review, the Custodian, on behalf of the
Indenture Trustee may conclusively rely on the Seller as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the review of the items delivered by the Seller pursuant to
Section 2.05(b)(i) is limited solely to confirming that the documents listed in
Section 2.05(b)(i) have been executed and received, relate to the Files
identified in the Schedule of Home Equity Loans and conform to the description
thereof in the Schedule of Home Equity Loans. The Seller agrees to use
reasonable efforts to remedy a material defect in a document constituting part
of a File of which it is so notified by the Custodian, on behalf of the
Indenture Trustee. If, however, within 90 days after such notice to it
respecting such defect the Seller has not remedied the defect and the defect
materially and adversely affects the interest in the related Home Equity Loan of
the Owners or the Note Insurer, the Seller will (or will cause an affiliate of
the Seller to) on the next succeeding Monthly Remittance Date (i) substitute in
lieu of such Home Equity Loan a Qualified Replacement Mortgage and deliver the
Substitution Amount to the Servicer for deposit in the Principal and Interest
Account or (ii) purchase such Home Equity Loan at a purchase price equal to the
Loan Purchase Price thereof, which purchase price shall be delivered to the
Servicer for deposit in the Principal and Interest Account.
(c) In addition to the foregoing, the Indenture Trustee also agrees to
cause the Custodian to make a review during the 12th month after the Closing
Date indicating the current status of the exceptions previously indicated on the
Pool Certification (the "Final Certification"). After delivery of the Final
Certification, the Custodian, on behalf of the Indenture Trustee and the
Servicer shall provide to the Note Insurer no less frequently than monthly
updated certifications indicating the then current status of exceptions, until
all such exceptions have been eliminated.
37
Section 2.07 Conveyance of the Subsequent Home Equity Loans.
(a) Subject to the satisfaction of the conditions set forth in Section
2.05 and paragraphs (b), (c) and (d) below (based on the Custodian's review of
such conditions) in consideration of the Issuer's delivery on the relevant
Subsequent Transfer Dates to or upon the order of the Seller of all or a portion
of the balance of funds in the Pre-Funding Account, the Seller shall, on any
Subsequent Transfer Date, sell, transfer, assign, set over and otherwise convey
without recourse, to the Issuer, and the Issuer shall purchase all of the
Seller's right, title and interest in and to any and all benefits accruing to
the Seller from the Subsequent Home Equity Loans (other than any principal and
interest due on or prior to the relevant Subsequent Cut-Off Date) which the
Seller is causing to be delivered to the Custodian, on behalf of the Indenture
Trustee herewith (and all substitutions therefor as provided by Section 2.03,
2.04 and 2.06), together with the related Subsequent Home Equity Loan documents
and the Seller's interest in any Property which secured a Subsequent Home Equity
Loan but which has been acquired by foreclosure or deed in lieu of foreclosure,
and all payments thereon and proceeds of the conversion, voluntary or
involuntary, of the foregoing and proceeds of all the foregoing (including, but
not by way of limitation, all proceeds of any mortgage insurance, hazard
insurance and title insurance policy relating to the Subsequent Home Equity
Loans, cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every
kind, and other forms of obligations and receivables which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing). Notwithstanding anything to the contrary herein, there shall be no
more than three Subsequent Transfer Dates during the Funding Period.
The transfer of the Subsequent Home Equity Loans set forth on the
related Schedule of Home Equity Loans by the Seller to the Issuer shall be
absolute and shall be intended by the Owners and all parties hereto to be
treated as a sale by the Seller to the Issuer. The amount released from the
Pre-Funding Account shall be one-hundred percent (100%) of the aggregate
principal balances of the Subsequent Home Equity Loans so transferred. Upon the
transfer by the Seller of the Subsequent Home Equity Loans hereunder, such
Subsequent Home Equity Loans (and all principal and interest due thereon
subsequent to the Subsequent CutOff Date) and all other rights and interests
with respect to such Subsequent Home Equity Loans transferred pursuant to a
Subsequent Transfer Agreement shall be deemed for all purposes hereunder to be
part of the Trust Estate.
(b) The obligation of the Indenture Trustee to accept the transfer of
the Subsequent Home Equity Loans and the other property and rights related
thereto described in paragraph (a) above is subject to the satisfaction of each
of the following conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Indenture Trustee and the Note
Insurer with an Addition Notice and shall have provided any information
reasonably requested by any of the foregoing with respect to the Subsequent
Home Equity Loans;
(ii) the Seller shall have delivered to the Indenture Trustee a duly
executed written Subsequent Transfer Agreement (including an acceptance by
the Indenture Trustee) in substantially the form of Exhibit E hereto, which
shall include a Schedule of Home Equity Loans, listing the Subsequent Home
Equity Loans and any other exhibits listed thereon;
(iii) the Seller shall have delivered to the Servicer for deposit in the
Principal and Interest Account all principal and interest due in respect of
such Subsequent Home Equity Loans after the related Subsequent Cut-Off
Date;
(iv) as of each Subsequent Transfer Date, the Seller was not insolvent,
nor will it be made insolvent by such transfer, nor is it aware of any
pending insolvency;
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(v) the Funding Period shall not have ended; and
(vi) the Seller shall have delivered to the Indenture Trustee and the
Note Insurer an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b) and in the related
Subsequent Transfer Agreement and the Note Insurer shall have consented to
such transfer (such consent not to be unreasonably withheld).
(c) The obligation of the Issuer to purchase a Subsequent Home Equity
Loan on any Subsequent Transfer Date is subject to the following requirements:
(i) the rating on the Notes shall not have been downgraded by any Rating Agency;
(ii) such Subsequent Home Equity Loan will not be 30 days or more contractually
Delinquent as of the Subsequent Cut-Off Date (except that Subsequent Home Equity
Loans representing not more than 1% of the aggregate Loan Balance of the
Subsequent Home Equity Loans may be not more than 60 days Delinquent as of the
related Subsequent Cut-Off Date); (iii) the weighted average margin of the
Subsequent Home Equity Loans will be at least 6.80%; (iv) such Subsequent Home
Equity Loan will be an adjustable rate Home Equity Loan; (v) the original term
to maturity of such Subsequent Home Equity Loan may not exceed 30 years; (vi)
such Subsequent Home Equity Loan must be a first lien; and (vii) following the
purchase of such Subsequent Home Equity Loan by the Trust, the Home Equity Loans
(including the Subsequent Home Equity Loans) (a) will have a weighted average
Coupon Rate of at least 10.15%; (b) will have a weighted average Loan-to-Value
Ratio of not more than 77.60%; (c) will have at least 93.00% Home Equity Loans
which are owner occupied; and (d) will have at least 91.00% Home Equity Loans
secured by single family detached properties.
(d) In connection with each Subsequent Transfer Date and, if
applicable, on the Payment Dates occurring during the Funding Period, the
Trustee shall determine: (i) the amount and correct dispositions of the
Capitalized Interest Requirement, Overfunded Interest Amount, Pre-Funding
Account Earnings and the Pre-Funded Amount and (ii) any other necessary matters
in connection with the administration of the Pre- Funding Account and of the
Capitalized Interest Account. In the event that any amounts are released as a
result of an error in calculation to the Owners, the Seller or the Depositor
from the Pre-Funding Account or from the Capitalized Interest Account, such
Owners, the Seller or the Depositor shall immediately repay such amounts to the
Indenture Trustee or the Indenture Trustee shall have the right to withhold such
amounts from future distributions on such Notes.
Section 2.08 Custodian.
Notwithstanding anything to the contrary in this Agreement, the parties
hereto acknowledge that the functions of the Indenture Trustee with respect to
the custody, acceptance, inspection and release of the Files pursuant to
Sections 2.05, 2.06, 2.07 and 4.14 and the related Pool Certification and Final
Certification shall be performed by the Custodian pursuant to the Custodial
Agreement. The fees and expenses of the Custodian will be paid by the Seller.
Section 2.09 Books and Records.
The sale of each Home Equity Loan shall be reflected in the Seller's
balance sheets and other financial statements as a sale of assets by the Seller
under generally accepted accounting principles.
END OF ARTICLE II
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ARTICLE III
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 3.01 Reserved.
Section 3.02 Establishment of Accounts.
(a) The Depositor shall cause to be established on the Closing Date,
and the Indenture Trustee shall maintain, at the Corporate Trust Office, the
Note Account, the Pre-Funding Account, the Capitalized Interest Account and the
Available Funds Cap Carry-Forward Amount Account each to be held by the
Indenture Trustee in the name of the Indenture Trustee, in trust for the Owners
of the IMC Adjustable Rate Home Equity Loan Asset Backed Notes, Series 1998-2
and the Note Insurer as their interests may appear.
(b) On each Determination Date the Indenture Trustee shall determine
(based solely on information provided to it by the Servicer) with respect to the
immediately following Payment Date, the amounts that are expected to be on
deposit in the Note Account (exclusive of any deposits from the Pre- Funding
Account and Capitalized Interest Account expected to be made and inclusive of
any investment earnings on Eligible Investments held in the Note Account) as of
such date on such Payment Date (disregarding the amounts of any Insured
Payments) and equal to the sum of (x) such amounts excluding the amount of any
Total Monthly Excess Cashflow included in such amounts plus (y) any amounts of
related Total Monthly Excess Cashflow to be applied on such Payment Date
pursuant to Section 3.03(b)(iii) plus (z) any deposit to the Note Account from
the Pre-Funding Account and the Capitalized Interest Account expected to be
made. The amount described in clause (x) of the preceding sentence with respect
to each Payment Date is the "Available Funds" and the sum of the amounts
described in clauses (x), (y) and (z) of the preceding sentence with respect to
each Payment Date is the "Total Available Funds."
Section 3.03 Flow of Funds.
(a) The Indenture Trustee shall deposit in the Note Account without
duplication, upon receipt, (i) any Insured Payments from the Policy Payment
Account pursuant to Section 7.02(b) hereof, (ii) the proceeds of any liquidation
of the assets of the Trust, (iii) all remittances made to the Indenture Trustee
pursuant to Section 4.08(d)(ii) and (iv) the Monthly Remittance Amount.
(b) With respect to funds on deposit in the Note Account, on each
Payment Date, the Indenture Trustee shall make the following allocations,
disbursements and transfers from amounts deposited therein pursuant to
subsection (a) in the following order of priority, and each such allocation,
transfer and disbursement shall be treated as having occurred only after all
preceding allocations, transfers and disbursements have occurred:
(i) first, on each Payment Date from amounts then on deposit in the
Note Account, (A) to itself, the Indenture Trustee Fee and the
Indenture Trustee Reimbursable Expenses, and (B) provided that
no Note Insurer Default has occurred and is continuing the
Premium Amount for such Payment Date shall be paid to the Note
Insurer;
(ii) second, on each Payment Date, the Indenture Trustee shall
allocate an amount equal to the sum of (x) the Total Monthly
Excess Spread with respect to such Payment Date, (y) any
Overcollateralization Reduction Amount with respect to such
Payment Date, and (z) any amounts required to be transferred
pursuant to Section 3.04(e) (such sum being the "Total Monthly
Excess Cashflow" with respect to such Payment Date) in the
following order of priority:
40
(A) first, such Total Monthly Excess Cashflow shall be
allocated to the payment of the Principal Payment
Amount pursuant to clause (b)(iv) below (excluding any
Overcollateralization Increase Amount) in an amount
equal to the amount, if any, by which (x) the Principal
Payment Amount (excluding any Overcollateralization
Increase Amount) exceeds (y) the Available Funds (net
of the Current Interest and the Trust Fees and
Expenses) and shall be paid as part of the Principal
Payment Amount pursuant to clause (iv)(C) below (the
amount of such difference being the "Available Funds
Shortfall"); and
(B) second, any portion of the Total Monthly Excess
Cashflow remaining after the allocations described in
clause (A) above shall be allocated to the payment to
the Note Insurer in respect of amounts owed on account
of any Reimbursement Amount pursuant to clause
(b)(iv)(A)(I).
(iii) third, the amount, if any, of the Total Monthly Excess Cashflow
on a Payment Date remaining after the allocations and payments
described in clause (ii) above (the "Net Monthly Excess
Cashflow" for such Payment Date) is required to be applied in
the following order or priority:
(A) first, such Net Monthly Excess Cashflow shall be used
to reduce to zero, through the payment to the Owners of
the Notes of an Overcollateralization Increase Amount
included in the Principal Payment Amount, which shall
be retained pursuant to clause (iv)(C) below, any
Overcollateralization Deficiency Amount as of such
Payment Date;
(B) second, an amount equal to the lesser of (i) any
portion of the Net Monthly Excess Cashflow remaining
after the applications described in clause (A) and (ii)
the excess of (a) the Available Funds Cap Carry-Forward
Amount for such Payment Date over (b) the amount then
on deposit in the Available Funds Cap CarryForward
Amount Account shall be deposited into the Available
Funds Cap CarryForward Amount Account;
(C) third, any Net Monthly Excess Cashflow remaining after
the application described in clauses (A) and (B) above
shall be allocated to the payment to the Servicer
pursuant to clause (iv)(A)(II) below to the extent of
any unreimbursed Delinquency Advances and unreimbursed
Servicing Advances;
(iv) fourth, following the making by the Indenture Trustee of all
allocations, transfers and disbursements described above from
amounts (including any related Insured Payment) then on deposit
in the Note Account, the Indenture Trustee shall:
(A) distribute (I) to the Note Insurer the amounts
described in clause (ii)(B) above and (II) to the
Servicer the amounts described in clause (iii)(C)
above;
(B) retain in the Note Account, the Current Interest
(including the proceeds of any Insured Payments
relating to interest made by the Note Insurer);
(C) retain in the Note Account, the Principal Payment
Amount (including the proceeds of any Insured Payments
relating to principal made by the Note Insurer);
41
(D) distribute to the Indenture Trustee, for the
reimbursement of expenses of the Indenture Trustee not
reimbursed pursuant to clause (b)(i) above which
expenses were incurred in connection with its duties
and obligations hereunder; and
(v) fifth, following the making by the Indenture Trustee of all
allocations, transfers and disbursements described above, the
Indenture Trustee shall distribute to the Certificate
Distribution Account, the Residual Net Monthly Excess Cashflow,
if any, for such Payment Date.
(c) On each Payment Date, the Indenture Trustee shall distribute to the
Owners, the amount, if any, then on deposit in the Available Funds Cap
Carry-Forward Amount Account.
(d) Notwithstanding any of the foregoing provisions, the aggregate
amounts distributed on all Payment Dates to the Owners of the Notes on account
of principal pursuant to clause (b)(iv)(C) shall not exceed the original Note
Principal Balance.
(e) Upon receipt of Insured Payments from the Note Insurer on behalf of
Owners of the Notes, the Indenture Trustee shall deposit such Insured Payments
in the Policy Payments Account. On each Payment Date, pursuant to Section
7.02(b) hereof, such amounts will be transferred from the Policy Payment Account
to the Note Account and the Indenture Trustee shall distribute such Insured
Payments, or the proceeds thereof in accordance with Section 3.03(b), to the
Owners of such Notes.
(f) The Indenture Trustee or Paying Agent shall (i) receive for each
Owner of the Notes any Insured Payment from the Note Insurer and (ii) disburse
the same to the Owners of the Notes as set forth in Section 3.03(b). Insured
Payments disbursed by the Indenture Trustee or Paying Agent from proceeds of the
Note Insurance Policy shall not be considered payment by the Trust, nor shall
such payments discharge the obligation of the Trust with respect to such Notes
and the Note Insurer shall be entitled to receive the Reimbursement Amount
pursuant to Section 3.03(b)(ii)(B) hereof. Nothing contained in this paragraph
shall be construed so as to impose duties or obligations on the Indenture
Trustee that are different from or in addition to those expressly set forth in
this Agreement.
Section 3.04 Pre-Funding Account and Capitalized Interest Account.
(a) On the Closing Date, the Indenture Trustee will deposit, on behalf
of the Owners of the Notes and the Note Insurer in the Pre-Funding Account the
Original Aggregate Pre-Funded Amount from the proceeds of the sale of the Notes.
(b) On any Subsequent Transfer Date, the Seller shall instruct the
Indenture Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Loan Balances of the Subsequent Home Equity Loans sold to
the Issuer on such Subsequent Transfer Date and pay such amount to or upon the
order of the Seller upon satisfaction of the conditions set forth in Sections
2.05 and 2.07 hereof with respect to such transfer. In no event shall the
Depositor be permitted to instruct the Indenture Trustee to release from the
Pre-Funding Account to the Note Account an amount in excess of the Original
Pre-Funded Amount.
(c) If the Pre-Funded Amount has been reduced to $100,000 or less on or
before the April 1998 Monthly Remittance Date, the Seller shall instruct the
Indenture Trustee to withdraw from the Pre-Funding Account the amount (exclusive
of any related Pre-Funding Account Earnings still on deposit therein) remaining
in the Pre-Funding Account and deposit such amount to the Note Account, on the
April 1998 Monthly Remittance Date and if the Pre-Funded Amount has been reduced
to $100,000 or less by April 30,
42
1998, then the Indenture Trustee shall withdraw from the Pre-Funding Account the
amount (exclusive of any related Pre-Funding Account Earnings still on deposit
therein) remaining in the Pre-Funding Account and deposit such amount to the
Note Account, on the May 1998 Monthly Remittance Date, which will be distributed
to the related Owners of the Notes.
(d) On the Payment Dates in April and May 1998, the Indenture Trustee
shall transfer from the Pre-Funding Account to the Capitalized Interest Account
the Pre-Funding Account Earnings, if any, applicable to such Payment Date.
(e) On the Payment Dates in April and May 1998, the Indenture Trustee
shall transfer from the Capitalized Interest Account to the Note Account, the
sum of the Capitalized Interest Requirement, if any, and any Pre-Funding Account
Earnings for such Payment Date.
(f) On each Subsequent Transfer Date the Indenture Trustee shall
distribute the Overfunded Interest Amount, if any (calculated by the Indenture
Trustee on the day prior to such Subsequent Transfer Date) from the Capitalized
Interest Account to the Seller and on the Payment Date immediately following the
Funding Period the Indenture Trustee shall distribute to the Seller any amounts
remaining in the Capitalized Interest Account after taking into account the
transfers on such Payment Date described above. The Capitalized Interest Account
shall be closed at the end of the Funding Period. All amounts, if any, remaining
in the Capitalized Interest Account on such day shall be transferred to the
Seller.
Section 3.05 Investment of Accounts.
(a) Consistent with any requirements of the Code, all or a portion of
any Account held by the Indenture Trustee for the benefit of the Owners shall be
invested and reinvested by the Indenture Trustee in trust for the benefit of the
Owners and the Note Insurer, as directed in writing by the Seller, in one or
more Eligible Investments bearing interest or sold at a discount. The bank
serving as Indenture Trustee or any affiliate thereof may be the obligor on any
investment which otherwise qualifies as an Eligible Investment. No investment in
any Account shall mature later than the Business Day immediately preceding the
next Payment Date.
(b) If any amounts are needed for disbursement from any Account held by
the Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. No
investments will be liquidated prior to maturity unless the proceeds thereof are
needed for disbursement.
(c) Subject to the terms of the Indenture, the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any Account held
by the Indenture Trustee resulting from any loss on any Eligible Investment
included therein (except to the extent that the bank serving as Indenture
Trustee is the obligor thereon).
(d) The Indenture Trustee shall invest and reinvest funds in the
Accounts held by the Indenture Trustee, in accordance with the written
instructions delivered to the Indenture Trustee on the Closing Date, but only in
one or more Eligible Investments bearing interest or sold at a discount.
If the Seller shall have failed to give investment directions to the
Indenture Trustee then the Indenture Trustee shall invest in money market funds
described in Section 3.07(j) to be redeemable without penalty no later than the
Business Day immediately preceding the next Payment Date.
43
(e) All income or other gain from investments in any Account held by
the Indenture Trustee shall be deposited in such Account immediately on receipt,
and any loss resulting from such investments shall be charged to such Account,
as appropriate, subject to the requirement of Section 4.08(b) that the Servicer
contribute funds in an amount equal to such loss in the case of the Principal
and Interest Account.
Section 3.06 Payment of Trust Expenses.
(a) The Seller shall pay the amount of the expenses of the Trust (other
than payments of premiums to the Note Insurer) (including the Indenture
Trustee's fees and expenses not covered or paid by Section 3.03(b)(i) and
3.03(b)(iv)(D)), and the Seller shall promptly pay such expenses directly to the
Persons to whom such amounts are due.
(b) The Seller shall pay directly on the Closing Date the reasonable
fees and expenses of counsel to the Indenture Trustee and the Owner Trustee.
(c) The Seller shall pay the fees and expenses (including any
"Expenses" (as defined in the Trust Agreement)) of the Owner Trustee.
Section 3.07 Eligible Investments.
The following are Eligible Investments:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States, FHLMC
senior debt obligations, and ▇▇▇▇▇▇ ▇▇▇ senior debt obligations, but excluding
any of such securities whose terms do not provide for payment of a fixed dollar
amount upon maturity or call for redemption;
(b) Federal Housing Administration debentures;
(c) FHLMC participation certificates which guaranty timely payment of
principal and interest and senior debt obligations;
(d) Consolidated senior debt obligations of any Federal Home Loan
Banks;
(e) ▇▇▇▇▇▇ Mae mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid principal)
and senior debt obligations;
(f) Federal funds, certificates of deposit, time deposits, and bankers'
acceptances (having original maturities of not more than 365 days) of any
domestic bank, the short-term debt obligations of which have been rated A-1 by
Standard & Poor's and P-1 by Moody's;
(g) Deposits of any bank or savings and loan association (the long-term
deposit rating of which is Baa3 or better by Moody's and BBB by Standard &
Poor's) which has combined capital, surplus and undivided profits of at least
$50,000,000 which deposits are insured by the FDIC and held up to the limits
insured by the FDIC;
(h) Repurchase agreements collateralized by securities described in
(a), (c), or (e) above with any registered broker/dealer subject to the
Securities Investors Protection Corporation's jurisdiction and subject to
applicable limits therein promulgated by Securities Investors Protection
Corporation or any
44
commercial bank, if such broker/dealer or bank has an uninsured, unsecured and
unguaranteed short-term or long-term obligation rated P-1 or Aa2, respectively,
or better by Moody's and A-1+ or AA, respectively, or better by Standard &
Poor's, provided:
a. A master repurchase agreement or specific written repurchase
agreement governs the transaction, and
b. The securities are held free and clear of any lien by the
Indenture Trustee or an independent third party acting solely as agent
for the Indenture Trustee, and such third party is (a) a Federal
Reserve Bank, (b) a bank which is a member of the FDIC and which has
combined capital, surplus and undivided profits of not less than $125
million, or (c) a bank approved in writing for such purpose by the Note
Insurer, and the Indenture Trustee shall have received written
confirmation from such third party that it holds such securities, free
and clear of any lien, as agent for the Indenture Trustee, and
c. A perfected first security interest under the Uniform
Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1
et seq. or 31 C.F.R. 350.0 et seq., in such securities is created for
the benefit of the Indenture Trustee, and
d. The repurchase agreement has a term of thirty days or less
and the Indenture Trustee will value the collateral securities no less
frequently than weekly and will liquidate the collateral securities if
any deficiency in the required collateral percentage is not restored
within two business days of such valuation, and
e. The fair market value of the collateral securities in
relation to the amount of the repurchase obligation, including
principal and interest, is equal to at least 106%.
(i) Commercial paper (having original maturities of not more than 270
days) rated in the highest short-term rating categories of Standard & Poor's and
Moody's;
(j) Investments in no load money market funds registered under the
Investment Company Act of 1940 whose shares are registered under the Securities
Act and rated AAAm or AAAm-G by Standard & Poor's and Aaa by Moody's; and
(k) Any other investment permitted by each of the Rating Agencies and
the Note Insurer;
provided that no instrument described above shall evidence either the right to
receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that all instruments described hereunder shall mature at par on or prior to the
next succeeding Payment Date unless otherwise provided in this Agreement and
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
Section 3.08 Accounting and Directions by Indenture Trustee.
By 12:00 noon, New York time, on each Payment Date (or such earlier
period as shall be agreed by the Seller and the Indenture Trustee), the
Indenture Trustee shall notify (based solely on information provided to the
Indenture Trustee by the Servicer and upon which the Indenture Trustee may rely)
the Seller,
45
the Depositor, each Owner and the Note Insurer, of the following information
with respect to such Payment Date (which notification may be given by facsimile,
or by telephone promptly confirmed in writing):
(1) The aggregate amount on deposit in the Note Account as of
the related Determination Date;
(2) The Monthly Payment Amount, on the next Payment Date;
(3) The amount of any Overcollateralization Increase Amount;
(4) The amount of any Insured Payment to be made by the Note
Insurer on such Payment Date;
(5) The application of the amounts described in clauses (1),
(3) and (4) above in respect of the distribution of the Monthly Payment
Amount on such Payment Date in accordance with Section 3.03 hereof;
(6) The Note Principal Balance;
(7) The amount, if any, of any Realized Losses for the related
Remittance Period;
(8) The amount of any Overcollateralization Reduction Amount;
and
(9) For the Payment Dates in April and May 1998, (A) the
Pre-Funded Amount previously used to purchase Subsequent Home Equity
Loans, (B) the Pre-Funded Amount distributed as principal, (C) the
Pre-Funding Account Earnings transferred to the Capitalized Interest
Account and (D) the amounts transferred from the Capitalized Interest
Account to the Note Account and the amount transferred to the Seller,
if any.
Section 3.09 Reports by Indenture Trustee to Owners and Note Insurer.
(a) On the Business Day preceding each Payment Date the Indenture
Trustee shall transmit a report in writing to each Owner, the Owner Trustee, the
Note Insurer, Standard & Poor's and Moody's, which report shall contain the
following:
(i) the amount of the distribution with respect to such Owners'
Notes (based on a Note in the original principal amount of $1,000);
(ii) the amount of such Owner's distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments in full or other Prepayments or other recoveries of
principal included therein and any Pre-Funded Amounts distributed as a
prepayment and any related Overcollateralization Increase Amount;
(iii) the amount of such Owner's distributions allocable to
interest (based on a Note in the original principal amount of $1,000);
(iv) if the interest portion of the Monthly Payment Amount (net
of any Insured Payment) paid to the Owners of the Notes on such Payment
Date was less than the Current Interest on such Payment Date, the Carry
Forward Amount resulting therefrom;
46
(v) the amount of any Insured Payment included in the amounts
distributed to the Owners of Notes on such Payment Date;
(vi) the principal amount of the Notes which will be
Outstanding and the aggregate Loan Balance after giving effect to any
payment of principal on such Payment Date;
(vii) the Overcollateralization Amount and
Overcollateralization Deficit, if any, remaining after giving effect to
all distributions and transfers on such Payment Date;
(viii) based upon information furnished by the Servicer, such
information as may be required by Section 6049(d)(7)(C) of the Code and
the regulations promulgated thereunder to assist the Owners in
computing their market discount;
(ix) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(x) the weighted average Coupon Rate of the Home Equity Loans;
(xi) such other information as the Note Insurer or any Owner
may reasonably request with respect to Delinquent Home Equity Loans;
(xii) the weighted average gross margin of the Home Equity
Loan;
(xiii) the Loan Balance of each of the three largest Home
Equity Loans outstanding;
(xiv) the Note Rate;
(xv) the Available Funds Cap Carry Forward Amortization Amount,
if any, and the Available Funds Cap Carry Forward Amount, if any; and
(xvi) for each Payment Date during the Funding Period, the
total remaining Pre-Funded Amount in the Pre-Funding Account.
The Servicer shall provide to the Indenture Trustee the information
described in Section 4.08(d)(iii) and in clause (b) below to enable the
Indenture Trustee to perform its reporting obligations under this Section, and
such obligations of the Indenture Trustee under this Section are conditioned
upon such information being received and the information provided in clauses
(ii), (ix) and (x) shall be based solely upon information contained in the
monthly servicing report provided by the Servicer to the Indenture Trustee
pursuant to Section 4.08 hereof.
(b) In addition, on the Business Day preceding each Payment Date the
Indenture Trustee will distribute to each Owner, the Owner Trustee, the Note
Insurer, Standard & Poor's and Moody's, together with the information described
in Subsection (a) preceding, the following information which is hereby required
to be prepared by the Servicer and furnished to the Indenture Trustee for such
purpose on or prior to the related Monthly Reporting Date:
47
(i) the number and aggregate principal balances of
Home Equity Loans (a) 30-59 days Delinquent, (b) 60-89 days Delinquent
and (c) 90 or more days Delinquent, as of the close of business on the
last Business Day of the calendar month immediately preceding the
Payment Date, (d) the numbers and aggregate Loan Balances of all Home
Equity Loans as of such Payment Date and (e) the percentage that each
of the amounts represented by clauses (a), (b) and (c) represent as a
percentage of the respective amounts in clause (d);
(ii) the status and the number and dollar amounts of
all Home Equity Loans in foreclosure proceedings as of the close of
business on the last Business Day of the calendar month immediately
preceding such Payment Date, separately stating, for this purpose, all
Home Equity Loans with respect to which foreclosure proceedings were
commenced in the immediately preceding calendar month;
(iii) the number of Mortgagors and the Loan Balances
of (a) the related Mortgages involved in bankruptcy proceedings as of
the close of business on the last Business Day of the calendar month
immediately preceding such Payment Date and (b) Home Equity Loans that
are "balloon" loans;
(iv) the existence and status of any REO Properties,
as of the close of business of the last Business Day of the month
immediately preceding the Payment Date;
(v) the book value of any REO Property as of the close
of business on the last Business Day of the calendar month immediately
preceding the Payment Date;
(vi) the Cumulative Loss Percentage, the amount of
cumulative Realized Losses, the current period Realized Losses, and the
Annual Loss Percentage (Rolling Twelve Month); and
(vii) the 90+ Delinquency Percentage (Rolling Six
Month) and the amount of 90- Day Delinquent Loans.
Section 3.10 Reports by Indenture Trustee.
(a) The Indenture Trustee shall report to the Depositor, the Seller,
the Note Insurer and each Owner, with respect to the amount on deposit in the
Note Account and the identity of the investments included therein, as the
Depositor, the Seller, any Owner or the Note Insurer may from time to time
reasonably request. Without limiting the generality of the foregoing, the
Indenture Trustee shall, at the reasonable request of the Issuer, the Seller,
any Owner or the Note Insurer transmit promptly to the Issuer, the Seller, any
Owner and the Note Insurer copies of all accountings of receipts in respect of
the Home Equity Loans furnished to it by the Servicer and shall notify the
Seller and the Note Insurer if any Monthly Remittance Amount has not been
received by the Indenture Trustee when due.
(b) The Indenture Trustee shall report to the Note Insurer and each
Owner with respect to any written notices it may from time to time receive which
provide an Authorized Officer with actual knowledge that any of the statements
set forth in Section 2.04(b) hereof are inaccurate.
END OF ARTICLE III
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ARTICLE IV
SERVICING AND ADMINISTRATION
OF HOME EQUITY LOANS
Section 4.01 Servicer and Sub-Servicers.
Acting directly or through one or more Sub-Servicers as provided in
Section 4.03, the Servicer shall service and administer the Home Equity Loans in
accordance with this Agreement, the terms of the respective Home Equity Loans,
and the servicing standards set forth in the ▇▇▇▇▇▇ Mae Guide and shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable but without regard to: (i) any relationship that the
Servicer, any Sub-Servicer or any Affiliate of the Servicer or any Sub-Servicer
may have with the related Mortgagor; (ii) the ownership of any Note by the
Servicer or any Affiliate of the Servicer; (iii) the Servicer's obligation to
make Delinquency Advances or Servicing Advances; or (iv) the Servicer's or any
Sub-Servicer's right to receive compensation for its services hereunder or with
respect to any particular transaction. It is the intent of the parties hereto
that the Servicer shall have all of the servicing obligations hereunder which a
lender would have under the ▇▇▇▇▇▇ ▇▇▇ Guide (as such provisions relate to
second lien mortgages); provided, however, that to the extent that such
standards, such obligations or the ▇▇▇▇▇▇ Mae Guide are amended by ▇▇▇▇▇▇ ▇▇▇
after the date hereof and the effect of such amendment would be to impose upon
the Servicer any material additional costs or other burdens relating to such
servicing obligations, the Servicer may, at its option, in accordance with the
servicing standards set forth herein, determine not to comply with such
amendment.
Subject to Section 4.03 hereof, the Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to all
or certain of the Home Equity Loans through a Sub-Servicer as it may from time
to time designate, but no such designation of a Sub-Servicer shall serve to
release the Servicer from any of its obligations under this Agreement. Such
Sub-Servicer shall have the rights and powers of the Servicer which have been
delegated to such Sub-Servicer with respect to such Home Equity Loans under this
Agreement.
Without limiting the generality of the foregoing, but subject to
Sections 4.13 and 4.14, the Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Indenture Trustee to execute and deliver, and may
be authorized and empowered by the Indenture Trustee, to execute and deliver, on
behalf of itself, the Owners, the Issuer and the Indenture Trustee or any of
them, (i) any and all instruments of satisfaction or cancellation or of partial
or full release or discharge and all other comparable instruments with respect
to the Home Equity Loans and with respect to the Properties, (ii) to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Property in the name of the Servicer on behalf of the Issuer
and Indenture Trustee, and (iii) to hold title to any Property upon such
foreclosure or deed in lieu of foreclosure on behalf of the Issuer and Indenture
Trustee; provided, however, that to the extent any instrument described in
clause (i) preceding would be delivered by the Servicer outside of its usual
procedures for home equity loans held in its own portfolio the Servicer shall,
prior to executing and delivering such instrument, obtain the prior written
consent of the Note Insurer, and provided further, however, that Section 4.13(a)
and Section 4.14(a) shall each constitute a revocable power of attorney from the
Issuer and Indenture Trustee to the Servicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Home Equity Loan held by the Indenture Trustee hereunder paid in full or
foreclosed (or with respect to which payment in full has been escrowed).
Revocation of the power of attorney created by the final proviso of the
preceding sentence shall take effect upon (i) the receipt by the Servicer of
written notice thereof from the Indenture Trustee, (ii) a Servicer Termination
Event or (iii) the termination of the Notes. The Indenture
49
Trustee shall execute any documentation furnished to it by the Servicer for
recordation by the Servicer in the appropriate jurisdictions, as shall be
necessary to effectuate the foregoing. Subject to Sections 4.13 and 4.14, the
Indenture Trustee shall execute a power of attorney to the Servicer or any
Sub-Servicer and furnish them with any other documents as the Servicer or such
Sub-Servicer shall reasonably request to enable the Servicer and such
Sub-Servicer to carry out their respective servicing and administrative duties
hereunder.
Upon the request of the Indenture Trustee or the Issuer, the Servicer
shall send to the Indenture Trustee or the Issuer, the details concerning the
servicing of the Home Equity Loans on computer generated tape, diskette or other
machine readable format.
The Servicer shall give prompt notice to the Indenture Trustee and the
Issuer of any action, of which the Servicer has actual knowledge, to (i) assert
a claim against the Trust or (ii) assert jurisdiction over the Trust.
Servicing Advances incurred by the Servicer or any Sub-Servicer in
connection with the servicing of the Home Equity Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Property shall be recoverable by the Servicer or such Sub-Servicer to the
extent described in Section 4.09(b) hereof.
Section 4.02 Collection of Certain Home Equity Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Home Equity Loans, and shall,
to the extent such procedures shall be consistent with this Agreement and the
terms and provisions of any applicable Insurance Policy, follow collection
procedures for all Home Equity Loans at least as rigorous as those described in
the ▇▇▇▇▇▇ ▇▇▇ Guide. Consistent with the foregoing, the Servicer may in its
discretion waive or permit to be waived any late payment charge, prepayment
charge, assumption fee or any penalty interest in connection with the prepayment
of a Home Equity Loan or any other fee or charge which the Servicer would be
entitled to retain hereunder as servicing compensation. In the event the
Servicer shall consent to the deferment of the due dates for payments due on a
Mortgage Note, the Servicer shall nonetheless make payment of any required
Delinquency Advance with respect to the payments so extended to the same extent
as if such installment were due, owing and Delinquent and had not been deferred,
and shall be entitled to reimbursement therefor in accordance with Section
4.09(a) hereof.
Section 4.03 Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
The Servicer may, with the prior written consent of the Note Insurer,
enter into Sub-Servicing Agreements for any servicing and administration of Home
Equity Loans with any institution which is acceptable to the Note Insurer and
which, (x) is in compliance with the laws of each state necessary to enable it
to perform its obligations under such Sub-Servicing Agreement, (y) has
experience servicing home equity loans that are similar to the Home Equity Loans
and (z) has equity of not less than $5,000,000 (as determined in accordance with
generally accepted accounting principles). The Servicer shall give notice to the
Indenture Trustee, the Owners, the Note Insurer and the Rating Agencies of the
appointment of any Sub-Servicer (and shall receive the confirmation of the
Rating Agencies that such Sub-Servicer shall not result in a withdrawal or
downgrading by any Rating Agency of the rating or the shadow rating of the
Notes). For purposes of this Agreement, the Servicer shall be deemed to have
received payments on Home Equity Loans when any Sub-Servicer has received such
payments. Each Sub-Servicer shall be required to service the Home Equity Loans
in accordance with this Agreement and any such Sub-Servicing Agreement shall be
consistent with and not violate the provisions of this Agreement. Each
Sub-Servicing Agreement shall provide that the Indenture Trustee (if acting as
successor Servicer) or any other successor Servicer shall have the option to
50
terminate such agreement without payment of any fees if the original Servicer is
terminated or resigns. The Servicer shall deliver to the Indenture Trustee and
the Note Insurer copies of all Sub-Servicing Agreements, and any amendments or
modifications thereof promptly upon the Servicer's execution and delivery of
such instrument.
Section 4.04 Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing Agreement
in accordance with the terms and conditions of such Sub-Servicing Agreement and
to either itself directly service the related Home Equity Loans or enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 4.03.
Section 4.05 Liability of Servicer; Indemnification.
(a) The Servicer shall not be relieved of its obligations under this
Agreement notwithstanding any Sub-Servicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Sub-Servicer and the Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Home Equity Loans. The Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Servicer by
such Sub-Servicer; provided, however, that nothing contained in such
Sub-Servicing Agreement shall be deemed to limit or modify this Agreement.
(b) The Servicer (except The Chase Manhattan Bank if it is required to
succeed the Servicer hereunder) agrees to indemnify and hold the Issuer, the
Indenture Trustee, the Note Insurer, the Depositor and each Owner harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that the
Issuer, the Indenture Trustee, the Note Insurer and any Owner may sustain in any
way related to the failure of the Servicer to perform its duties and service the
Home Equity Loans in compliance with the terms of this Agreement. The Servicer
shall immediately notify the Issuer, the Indenture Trustee, the Depositor, the
Note Insurer and each Owner if a claim is made by a third party with respect to
this Agreement, and the Servicer shall assume (with the consent of the Indenture
Trustee and the Note Insurer) the defense of any such claim and pay all expenses
in connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Issuer, the Servicer, the Indenture Trustee, the Depositor, the Note Insurer
and/or Owner in respect of such claim. The Indenture Trustee shall, in
accordance with instructions received from the Servicer, reimburse the Servicer
only from amounts otherwise distributable on the Certificates for all amounts
advanced by it pursuant to the preceding sentence, except when a final
nonpayable adjudication determines that the claim relates directly to the
failure of the Servicer to perform its duties in compliance with the Agreement.
The provisions of this Section 4.05(b) shall survive the termination of this
Agreement and the payment of the outstanding Notes.
Section 4.06 No Contractual Relationship Between Sub-Servicer,
Indenture Trustee or the Owners.
Any Sub-Servicing Agreement and any other transactions or services
relating to the Home Equity Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Servicer alone and the Indenture Trustee and
the Owners shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Sub-Servicer except as
set forth in Section 4.07.
51
Section 4.07 Assumption or Termination of Sub-Servicing Agreement by
Indenture Trustee. In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by the Indenture Trustee pursuant to Section 4.20, it is understood
and agreed that the Servicer's rights and obligations under any Sub-Servicing
Agreement then in force between the Servicer and a Sub-Servicer shall be assumed
simultaneously by the Indenture Trustee without act or deed on part of the
Indenture Trustee; provided, however, that the Indenture Trustee (if acting as
successor Servicer) or any other successor Servicer may terminate the
Sub-Servicer as provided in Section 4.03.
The Servicer shall, upon the reasonable request of the Indenture
Trustee, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub-Servicing Agreement and an accounting
of amounts collected and held by it and otherwise use its best reasonable
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
Section 4.08 Principal and Interest Account.
(a) The Servicer shall establish and maintain at one or more Designated
Depository Institutions the Principal and Interest Account to be held as a trust
account. Each Principal and Interest Account shall be identified on the records
of the Designated Depository Institution as follows: The Chase Manhattan Bank,
as Indenture Trustee in trust for the benefit of the Owners of the IMC
Adjustable Rate Home Equity Loan Asset Backed Notes, Series 1998-2 and the Note
Insurer. If the institution at any time holding the Principal and Interest
Account ceases to be eligible as a Designated Depository Institution hereunder,
then the Servicer shall immediately be required to name a successor institution
meeting the requirements for a Designated Depository Institution hereunder. If
the Servicer fails to name such a successor institution, then the Principal and
Interest Account shall thenceforth be held as a trust account with a qualifying
Designated Depository Institution selected by the Indenture Trustee. The
Servicer shall notify the Indenture Trustee, the Note Insurer and the Owners if
there is a change in the name, account number or institution holding the
Principal and Interest Account.
Subject to subsection (c) below, the Servicer shall deposit all
receipts required pursuant to subsection (c) below and related to the Home
Equity Loans to the Principal and Interest Account on a daily basis (but no
later than the first Business Day after receipt).
(b) All funds in the Principal and Interest Account shall be held (i)
uninvested up to the amount insured by the FDIC or (ii) invested in Eligible
Investments. Any investments of funds in the Principal and Interest Account
shall mature or be withdrawable at par on or prior to the immediately succeeding
Monthly Remittance Date. Any investment earnings on funds held in the Principal
and Interest Account shall be for the account of the Servicer and may only be
withdrawn from the Principal and Interest Account by the Servicer immediately
following the remittance of the Monthly Remittance Amount (and the Total Monthly
Excess Spread included therein) by the Servicer. Any investment losses on funds
held in the Principal and Interest Account shall be for the account of the
Servicer and promptly upon the realization of such loss shall be contributed by
the Servicer to the Principal and Interest Account. Any references herein to
amounts on deposit in the Principal and Interest Account shall refer to amounts
net of such investment earnings.
(c) The Servicer shall deposit to the Principal and Interest Account on
the Business Day after receipt all principal and interest collections on the
Home Equity Loans due after the Cut-Off Date, including any Prepayments and Net
Liquidation Proceeds, other recoveries or amounts related to the Home Equity
Loans received by the Servicer and any income from REO Properties, but net of
(i) Net Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed
the sum of (I) the Loan Balance of the related Home Equity Loan immediately
prior to liquidation, plus (II) accrued and unpaid interest on such Home Equity
52
Loan (net of the related Servicing Fee) to the date of such liquidation and
(III) any Realized Losses incurred during the related Remittance Period, (ii)
principal and interest due (and Prepayments collected) on the Home Equity Loans
on or prior to the Cut-Off Date or related Subsequent Cut-Off Date, (iii)
reimbursements for Delinquency Advances and (iv) reimbursements for amounts
deposited in the Principal and Interest Account representing payments of
principal and/or interest on a Mortgage Note by a Mortgagor which are
subsequently returned by a depository institution as unpaid (all such net amount
herein referred to as "Daily Collections").
(d) (i) The Servicer may make withdrawals for its own account from the
Principal and Interest Account, only in the following priority and for the
following purposes:
(A) on each Monthly Remittance Date, to pay itself
the related Servicing Fees;
(B) to withdraw investment earnings on amounts on
deposit in the Principal and Interest Account;
(C) to withdraw amounts that have been deposited to
the Principal and Interest Account in error;
(D) to reimburse itself pursuant to Section 4.09(a)
for unrecovered Delinquency Advances and for
any excess interest collected from a Mortgagor;
and
(E) to clear and terminate the Principal and
Interest Account following the termination of
the Trust pursuant to Article V.
(ii) The Servicer shall (a) remit to the Indenture Trustee for deposit
in the Note Account by wire transfer, or otherwise make funds available in
immediately available funds, without duplication, the Daily Collections
allocable to a Remittance Period not later than the related Monthly Remittance
Date and Loan Purchase Prices and Substitution Amounts two Business Days
following the related purchase or substitution, and (b) on each Monthly
Reporting Date, deliver to the Indenture Trustee and the Note Insurer, a monthly
servicing report containing (without limitation) the following information:
principal and interest collected in respect of the Home Equity Loans, scheduled
principal and interest that was due on the Home Equity Loans, relevant
information with respect to Liquidated Loans, if any, summary and detailed
delinquency reports, Liquidation Proceeds and other similar information
concerning the servicing of the Home Equity Loans. In addition, the Servicer
shall inform the Indenture Trustee and the Note Insurer in writing on each
Monthly Reporting Date, of the amounts of any Loan Purchase Prices or
Substitution Amounts so remitted during the related Remittance Period, and of
the Loan Balance of the Home Equity Loan having the largest Loan Balance as of
such date.
(iii) The Servicer shall provide to the Indenture Trustee in writing
the information described in Section 4.08(d)(ii)(b) and in Section 4.09(b) to
enable the Indenture Trustee to perform its reporting requirements under Section
3.09.
Section 4.09 Delinquency Advances and Servicing Advances.
(a) On each Monthly Remittance Date, the Servicer shall be required to
remit to the Indenture Trustee for deposit to the Note Account out of the
Servicer's own funds any Delinquent payment of interest with respect to each
Delinquent Home Equity Loan, which payment was not received on or prior to the
related Remittance Date and was not theretofore advanced by the Servicer. Such
amounts of the Servicer's own funds so deposited are "Delinquency Advances".
53
The Servicer shall be permitted to reimburse itself on any Business Day
for any Delinquency Advances paid from the Servicer's own funds, from
collections on any Home Equity Loans that are not required to be distributed on
the Payment Date occurring during the month in which such reimbursement is made
(all or any portion of such amount to be replaced on future Monthly Remittance
Dates to the extent required for distribution) or as provided in Section
3.03(b)(iii)(C).
Notwithstanding the foregoing, in the event that the Servicer
determines in its reasonable business judgment in accordance with the servicing
standards set out herein that any proposed Delinquency Advance would not be
recoverable, the Servicer shall not be required to make Delinquency Advances
with respect to such Home Equity Loan. To the extent that the Servicer
previously has made Delinquency Advances with respect to a Home Equity Loan that
the Servicer subsequently determines will be nonrecoverable, the Servicer shall
be entitled to reimbursement for such aggregate unreimbursed Delinquency
Advances as provided in the prior paragraph. The Servicer shall give written
notice of such determination as to why such amount would not be recoverable to
the Indenture Trustee and the Note Insurer; the Indenture Trustee shall promptly
furnish a copy of such notice to the Owners of the Notes; provided, further,
that the Servicer shall be entitled to recover any unreimbursed Delinquency
Advances from Liquidation Proceeds for the related Home Equity Loan.
(b) The Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, (i) Preservation Expenses, (ii) the cost of any enforcement or
judicial proceedings, including foreclosures, (iii) the cost of the management
and liquidation of REO Property and (iv) advances required by Section 4.13(a),
except to the extent that such amounts are determined by the Servicer in its
reasonable business judgment not to be recoverable. Such costs will constitute
"Servicing Advances". The Servicer may recover a Servicing Advance (x) from the
Mortgagors to the extent permitted by the Home Equity Loans or, if not
theretofore recovered from the Mortgagor on whose behalf such Servicing Advance
was made, from Liquidation Proceeds realized upon the liquidation of the related
Home Equity Loan and (y) as provided in Section 3.03(b)(iii)(C). The Servicer
shall be entitled to recover the Servicing Advances from the aforesaid
Liquidation Proceeds prior to the payment of the Liquidation Proceeds to any
other party to this Agreement. Except as provided in the previous sentence, in
no case may the Servicer recover Servicing Advances from the principal and
interest payments on any other Home Equity Loan except as provided in Section
3.03(b)(iii)(C).
Section 4.10 Compensating Interest; Repurchase of Home Equity Loans.
(a) If a Prepayment in full of a Home Equity Loan or a Prepayment of at
least six times a Mortgagor's Monthly Payment occurs during any calendar month,
any difference between (x) the interest collected from the Mortgagor in
connection with such payoff, and (y) the full month's interest at the Coupon
Rate that would be due on the related Due Date for such Home Equity Loan
("Compensating Interest") (but not in excess of the aggregate Servicing Fee for
the related Remittance Period) shall be deposited by the Servicer to the
Principal and Interest Account (or if such difference is an excess, the Servicer
shall retain such excess) on the next succeeding Monthly Remittance Date and
shall be included in the Monthly Remittance Amount to be made available to the
Indenture Trustee on such Monthly Remittance Date.
(b) Subject to the clause (c) below, the Servicer has the right and the
option, but not the obligation, to purchase for its own account any Home Equity
Loan which becomes Delinquent, in whole or in part, as to at least three
consecutive monthly installments or any Home Equity Loan as to which enforcement
proceedings have been brought by the Servicer pursuant to Section 4.13. Any such
Home Equity Loan so purchased shall be purchased by the Servicer on or prior to
a Monthly Remittance Date at a purchase price equal to the Loan Purchase Price
thereof, which purchase price shall be deposited in the Principal and Interest
Account.
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(c) If a Home Equity Loan to be repurchased by the Servicer pursuant to
clause (b) above, is the greatest number of days Delinquent of all then
Delinquent Home Equity Loans, the Servicer may repurchase such Home Equity Loans
without having first notified the Note Insurer of such repurchase. In all other
cases, the Servicer must notify the Note Insurer, in writing, of its intent to
repurchase a Home Equity Loan and the Servicer may not repurchase such Home
Equity Loan without the written consent of the Note Insurer; provided, that the
Note Insurer shall be deemed to have consented to such repurchase unless it
notifies the Servicer, in writing, of its objection to such repurchase within 5
days after its receipt of the notice of proposed repurchase.
(d) The Net Liquidation Proceeds from the disposition of any REO
Property shall be deposited in the Principal and Interest Account and remitted
to the Indenture Trustee as part of the Daily Collections remitted by the
Servicer to the Indenture Trustee.
Section 4.11 Maintenance of Insurance.
(a) The Servicer shall cause to be maintained with respect to each Home
Equity Loan a hazard insurance policy with a carrier generally acceptable to the
Servicer that provides for fire and extended coverage, and which provides for a
recovery by the Trust of insurance proceeds relating to such Home Equity Loan in
an amount not less than the least of (i) the outstanding principal balance of
the Home Equity Loan (plus the related senior lien loan, if any) (ii) the
minimum amount required to compensate for damage or loss on a replacement cost
basis and (iii) the full insurable value of the premises. The Servicer shall
maintain the insurance policies required hereunder in the name of the mortgagee,
its successors and assigns, as loss payee. The policies shall require the
insurer to provide the mortgagee with 30 days' notice prior to any cancellation
or as otherwise required by law. The Servicer may also maintain a blanket hazard
insurance policy or policies if the insurer or insurers of such policies are
rated investment grade by ▇▇▇▇▇'▇ and Standard & Poor's.
(b) If the Home Equity Loan at the time of origination (or if required
by federal law, at any time thereafter) relates to a Property in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, the Servicer will cause to be maintained with
respect thereto a flood insurance policy in a form meeting the requirements of
the then current guidelines of the Federal Insurance Administration with a
carrier generally acceptable to the Servicer in an amount representing coverage,
and which provides for a recovery by the Trust of insurance proceeds relating to
such Home Equity Loan of not less than the least of (i) the outstanding
principal balance of the Home Equity Loan (plus the related senior lien loan, if
any), (ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the maximum amount of insurance that is
available under the Flood Disaster Protection Act of 1973. The Servicer shall
indemnify the Trust out of the Servicer's own funds for any loss to the Trust
resulting from the Servicer's failure to advance premiums for such insurance
required by this Section when so permitted by the terms of the Mortgage as to
which such loss relates.
Section 4.12 Due-on-Sale Clauses; Assumption and Substitution
Agreements.
When a Property has been or is about to be conveyed by the Mortgagor,
the Servicer shall, to the extent it has knowledge of such conveyance or
prospective conveyance, exercise its rights to accelerate the maturity of the
related Home Equity Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law. An opinion of counsel,
provided at the expense of the Servicer, to the foregoing effect shall
conclusively establish the reasonableness of such belief. In such event, the
Servicer shall enter into an assumption and modification agreement with the
person to whom such property has been or is about to be conveyed, pursuant to
which
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such person becomes liable under the Mortgage Note and, unless prohibited by
applicable law or the Mortgage documents, the Mortgagor remains liable thereon.
If the foregoing is not permitted under applicable law, the Servicer is
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Mortgage Note;
provided, however, that to the extent any such substitution of liability
agreement would be delivered by the Servicer outside of its usual procedures for
home equity loans held in its own portfolio the Servicer shall, prior to
executing and delivering such agreement, obtain the prior written consent of the
Note Insurer. The Home Equity Loan, as assumed, shall conform in all material
respects to the requirements, representations and warranties of this Agreement.
The Servicer shall notify the Indenture Trustee that any such assumption or
substitution agreement has been completed by forwarding to the Indenture Trustee
or to the Custodian on the Indenture Trustee's behalf the original copy of such
assumption or substitution agreement (indicating the File to which it relates)
which copy shall be added by the Indenture Trustee or by the Custodian on the
Indenture Trustee's behalf to the related File and which shall, for all
purposes, be considered a part of such File to the same extent as all other
documents and instruments constituting a part thereof. The Servicer shall be
responsible for recording any such assumption or substitution agreements. In
connection with any such assumption or substitution agreement, no material term
of the Home Equity Loan (including, without limitation, the required monthly
payment on the related Home Equity Loan, the stated maturity, the outstanding
principal amount or the Coupon Rate) shall be changed nor shall any required
monthly payments of principal or interest be deferred or forgiven. Any fee
collected by the Servicer or the Sub-Servicer for consenting to any such
conveyance or entering into an assumption or substitution agreement shall be
retained by or paid to the Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Home Equity Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 4.13 Realization Upon Defaulted Home Equity Loans; Workout of
Home Equity Loans.
(a) The Servicer shall foreclose upon or otherwise comparably effect
the ownership in the name of the Indenture Trustee on behalf of the Trust of
Properties relating to defaulted Home Equity Loans as to which no satisfactory
arrangements can be made for collection of Delinquent payments and which the
Servicer has not purchased pursuant to Section 4.10(b). In connection with such
foreclosure or other conversion, the Servicer shall exercise such of the rights
and powers vested in it hereunder, and use the same degree of care and skill in
their exercise or use, as prudent mortgage lenders would exercise or use under
the circumstances in the conduct of their own affairs and consistent with the
servicing standards set forth in the ▇▇▇▇▇▇ ▇▇▇ Guide, including, but not
limited to, advancing funds for the payment of taxes, amount due with respect to
senior liens loans and insurance premiums. Any amounts so advanced shall
constitute "Servicing Advances" within the meaning of Section 4.09(b) hereof.
The Servicer shall sell any REO Property within 35 months of its acquisition by
the Trust, at such price as the Servicer in good ▇▇▇▇▇ ▇▇▇▇▇ necessary to comply
with this covenant unless the Servicer obtains for the Note Insurer and the
Indenture Trustee, an opinion of counsel (the expense of which opinion shall be
a Servicing Advance) experienced in federal income tax matters acceptable to the
Note Insurer and the Indenture Trustee, addressed to the Note Insurer, the
Indenture Trustee and the Servicer, to the effect that the holding by the Trust
of such REO Property for any greater period will not result in the imposition of
taxes on the Trust. Pursuant to its efforts to sell such REO Property, the
Servicer shall either itself or through an agent selected by the Servicer
protect and conserve such REO Property in the same manner and to such extent as
is customary in the locality where such REO Property is located and may,
incident to its conservation and protection of the interests of the Owners, rent
the same, or any part thereof, as the Servicer deems to be in the best interest
of the Owners for
56
the period prior to the sale of such REO Property. The Servicer shall take into
account the existence of any hazardous substances, hazardous wastes or solid
wastes, as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation, on a Property
in determining whether to foreclose upon or otherwise comparably convert the
ownership of such Property. The Servicer shall not take any such action with
respect to any Property known by the Servicer to contain such wastes or
substances or to be within one mile of the site of such wastes or substances,
without the prior written consent of the Note Insurer.
(b) The Servicer shall determine, with respect to each defaulted Home
Equity Loan and in accordance with the procedures set forth in the ▇▇▇▇▇▇ ▇▇▇
Guide, when it has recovered, whether through trustee's sale, foreclosure sale
or otherwise, all amounts it expects to recover from or on account of such
defaulted Home Equity Loan, whereupon such Home Equity Loan shall become a
"Liquidated Loan" and the Servicer shall promptly submit a Liquidation Report
(as defined in the Insurance Agreement) to the Note Insurer.
(c) The Servicer shall not agree to any modification, waiver or
amendment of any provision of any Home Equity Loan unless, in the Servicer's
good faith judgment, such modification, waiver or amendment would minimize the
loss that might otherwise be experienced with respect to such Home Equity Loan
and only in the event of a default with respect to such Home Equity Loan or in
the event that a default with respect to such Home Equity Loan is imminent;
provided, however, that no such modification, waiver or amendment shall extend
the maturity date of such Home Equity Loan beyond the Remittance Period related
to the Final Payment Date. Notwithstanding anything set out in this Section
4.13(c) or elsewhere in this Agreement to the contrary, the Servicer shall be
permitted to modify, waive or amend any provision of a Home Equity Loan if
required by statute or a court of competent jurisdiction to do so.
(d) The Servicer shall provide written notice to the Indenture Trustee
and the Note Insurer prior to the execution of any modification, waiver or
amendment of any provision of any Home Equity Loan; provided that if the Note
Insurer does not object in writing to the modification, waiver or amendment
specified in such notice within 5 Business Days after its receipt thereof, the
Servicer may effectuate such modification, waiver or amendment and shall deliver
to the Custodian, on behalf of the Indenture Trustee for deposit in the related
File, an original counterpart of the agreement relating to such modification,
waiver or amendment, promptly following the execution thereof.
(e) The Servicer has no intent to foreclose on any Mortgage based on
the delinquency characteristics as of the Closing Date; provided, that the
foregoing does not prevent the Servicer from initiating foreclosure proceedings
on any date hereafter if the facts and circumstances of such Mortgage including
delinquency characteristics in the Servicer's discretion so warrant such action.
Section 4.14 Indenture Trustee to Cooperate; Release of Files.
(a) Upon the payment in full of any Home Equity Loan (including any
liquidation of such Home Equity Loan through foreclosure or otherwise), or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes, the Servicer shall deliver to the
Custodian, on behalf of the Indenture Trustee the ▇▇▇▇▇▇ Mae "Request for
Release of Documents" (▇▇▇▇▇▇ ▇▇▇ Form 2009). Upon receipt of such Request for
Release of Documents, the Custodian, on behalf of the Indenture Trustee shall
promptly release the related File, in trust, in its reasonable discretion to (i)
the Servicer, (ii) an escrow agent or (iii) any employee, agent or attorney of
the Indenture Trustee. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Servicer is
authorized to give, as attorney-in-fact for the Indenture Trustee and the
mortgagee under the Mortgage which secured
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the Mortgage Note, an instrument of satisfaction (or assignment of Mortgage
without recourse) regarding the Property relating to such Mortgage, which
instrument of satisfaction or assignment, as the case may be, shall be delivered
to the Person or Persons entitled thereto against receipt therefor of payment in
full, it being understood and agreed that no expense incurred in connection with
such instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Principal and Interest Account or to the Indenture Trustee. In
lieu of executing any such satisfaction or assignment, as the case may be, the
Servicer may prepare and submit to the Custodian, on behalf of the Indenture
Trustee, a satisfaction (or assignment without recourse, if requested by the
Person or Persons entitled thereto) in form for execution by the Indenture
Trustee with all requisite information completed by the Servicer; in such event,
the Custodian, on behalf of the Indenture Trustee shall execute and acknowledge
such satisfaction or assignment, as the case may be, and deliver the same with
the related File, as aforesaid.
(b) The Servicer shall have the right (upon receiving the prior written
consent of the Note Insurer) to accept applications of Mortgagors for consent to
(i) partial releases of Mortgages, (ii) alterations and (iii) removal,
demolition or division of properties subject to Mortgages. No application for
approval shall be considered by the Servicer unless: (x) the provisions of the
related Mortgage Note and Mortgage have been complied with; (y) the
Loan-to-Value Ratio and debt-to-income ratio after any release does not exceed
the Loan-to-Value Ratio and debt-to-income ratio of such Mortgage Note on the
Cut-Off Date, or Subsequent Cut-Off Date, as applicable, and any increase in the
Loan-to-Value Ratio shall not exceed 5% unless approved in writing by the Note
Insurer; and (z) the lien priority of the related Mortgage is not affected. Upon
receipt by the Indenture Trustee of an Officer's Certificate executed on behalf
of the Servicer setting forth the action proposed to be taken in respect of a
particular Home Equity Loan and certifying that the criteria set forth in the
immediately preceding sentence have been satisfied, the Indenture Trustee shall
execute and deliver to the Servicer the consent or partial release so requested
by the Servicer. A proposed form of consent or partial release, as the case may
be, shall accompany any Officer's Certificate delivered by the Servicer pursuant
to this paragraph. The Servicer shall notify the Note Insurer and the Rating
Agencies if an application is approved under clause (y) above without approval
in writing by the Note Insurer.
Section 4.15 Servicing Compensation.
As compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the related Servicing Fee with respect to each
Home Equity Loan. Additional servicing compensation in the form of prepayment
charges, release fees, bad check charges, assumption fees, late payment charges,
prepayment penalties, or any other servicing-related fees, Net Liquidation
Proceeds not required to be deposited in the Principal and Interest Account
pursuant to Section 4.08(c)(ii) and similar items may, to the extent collected
from Mortgagors, be retained by the Servicer, unless a successor Servicer is
appointed pursuant to Section 4.20 hereof, in which case the successor Servicer
shall be entitled to such fees as are agreed upon by the Indenture Trustee, the
Note Insurer, the successor Servicer and the majority of the Percentage
Interests of the Certificates.
The right to receive the Servicing Fee may not be transferred in whole
or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement.
Section 4.16 Annual Statement as to Compliance.
The Servicer, at its own expense, will deliver to the Indenture
Trustee, the Note Insurer, the Depositor, the Issuer, and the Rating Agencies,
on or before April 30 of each year, commencing in 1999, an Officer's Certificate
stating, as to each signer thereof, that (i) a review of the activities of the
Servicer during such preceding calendar year and of performance under this
Agreement has been made under such officers'
58
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement for
such year, or, if there has been a default in the fulfillment of all such
obligations, specifying each such default known to such officers and the nature
and status thereof including the steps being taken by the Servicer to remedy
such default.
The Servicer shall deliver to the Issuer, the Indenture Trustee, the
Note Insurer and the Rating Agencies, promptly after having obtained knowledge
thereof but in no event later than five Business Days thereafter, written notice
by means of an Officer's Certificate of any event which with the giving of
notice or the lapse of time would become a Servicer Termination Event.
Section 4.17 Annual Independent Certified Public Accountants' Reports.
On or before April 30 of each year, commencing in 1999, the Servicer,
at its own expense (or if the Indenture Trustee is then acting as Servicer, at
the expense of the Seller, which in no event shall exceed $1,000 per annum),
shall cause to be delivered to the Issuer, the Indenture Trustee, the Note
Insurer, the Depositor, and the Rating Agencies a letter or letters of a firm of
independent, nationally recognized certified public accountants reasonably
acceptable to the Note Insurer stating that such firm has examined the
Servicer's overall servicing operations in accordance with the requirements of
the Uniform Single Attestation Procedure for Mortgage Bankers, and stating such
firm's conclusions relating thereto.
Section 4.18 Access to Certain Documentation and Information Regarding
the Home Equity Loans.
The Servicer shall provide to the Depositor, the Indenture Trustee, the
Note Insurer, the Office of Thrift Supervision (the "OTS"), the FDIC and the
supervisory agents and examiners of each of the FDIC and the OTS (which, in the
case of supervisory agents and examiners, may be required by applicable state
and federal regulations) access to the documentation regarding the Home Equity
Loans, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer
designated by it.
Section 4.19 Assignment of Agreement.
Other than with respect to entering into Sub-Servicing Agreements
pursuant to Section 4.03 hereof, the Servicer may not assign its obligations
under this Agreement, in whole or in part, unless it shall have first obtained
the written consent of the Indenture Trustee and the Note Insurer, which such
consent shall not be unreasonably withheld; provided, however, that any assignee
must meet the eligibility requirements set forth in Section 4.20(h) hereof for a
successor servicer.
Section 4.20 Removal of Servicer; Retention of Servicer; Resignation of
Servicer.
(a) The Note Insurer or the Indenture Trustee (with the prior written
consent of the Note Insurer) (or, except in the case of item (vi) below, the
Owners, with the consent of the Note Insurer) may remove the Servicer upon the
occurrence of any of the following events (each a "Servicer Termination Event"):
(i) The Servicer shall (A) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (B) admit in writing its
inability to pay its debts generally as they become due, (C) make a
general assignment for the benefit of creditors, (D) be adjudicated a
bankrupt or insolvent, (E) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with
creditors or an order for relief or seeking to
59
take advantage of any insolvency law or file an answer admitting the
material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or (F) take corporate action
for the purpose of effecting any of the foregoing; or
(ii) If without the application, approval or consent of
the Servicer, a proceeding shall be instituted in any court of
competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of
the Servicer an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of
a trustee, receiver, liquidator or custodian or similar entity with
respect to the Servicer or of all or any substantial part of its
assets, or other like relief in respect thereof under any bankruptcy or
insolvency law, and, if such proceeding is being contested by the
Servicer in good faith, the same shall (A) result in the entry of an
order for relief or any such adjudication or appointment or (B)
continue undismissed or pending and unstayed for any period of
seventy-five (75) consecutive days; or
(iii) The Servicer shall fail to perform any one or
more of its material obligations hereunder and shall continue in
default thereof for a period of thirty (30) days (one (1) Business Day
in the case of a delay in making a payment required of the Servicer
under this Agreement) after the earlier of (A) actual knowledge of an
officer of the Servicer or (B) receipt of notice from the Indenture
Trustee or the Note Insurer of said failure; provided, however, that if
the Servicer can demonstrate to the reasonable satisfaction of the Note
Insurer that it is diligently pursuing remedial action, then the cure
period may be extended with the written approval of the Note Insurer;
or
(iv) The Servicer shall fail to cure any breach of any
of its representations and warranties set forth in Section 2.02 which
materially and adversely affects the interests of the Owners or the
Note Insurer for a period of sixty (60) days after the earlier of the
Servicer's discovery or receipt of notice thereof; provided, however,
that if the Servicer can demonstrate to the reasonable satisfaction of
the Note Insurer that it is diligently pursuing remedial action, then
the cure period may be extended with the written approval of the Note
Insurer; or
(v) The merger, consolidation or other combination of
the Servicer with or into any other entity, unless (A) the Servicer or
an Affiliate of the Servicer is the surviving entity of such
combination or (B) the surviving entity (I) is servicing at least
$300,000,000 of home equity loans that are similar to the Home Equity
Loans, (II) has equity of not less than $10,000,000 (as determined in
accordance with generally acceptable account principles), (III) is
consented to by the Note Insurer (such consent not to be unreasonably
withheld) and (IV) agrees to assume the Servicer's obligations
thereunder; or
(vi) The failure of the Servicer (except the Indenture
Trustee in its capacity as successor Servicer) to satisfy the Servicer
Termination Test.
(b) Upon the occurrence of a Servicer Termination Event, the Servicer
shall act as servicer under this Agreement, subject to the right of removal set
forth in subsection (a) hereof, for an initial period commencing on the date on
which such Servicer Termination Event occurred and ending on the last day of the
calendar quarter in which such Servicer Termination Event occurred, which period
shall be extended for a succeeding quarterly period on December 31, March 31,
June 30 and September 30 of each year as provided below (each such quarterly
period for which the Servicer shall be designated to act as servicer hereunder,
a "Term of Service"); provided that nothing in this Section 4.20(b) shall
prohibit the Note Insurer or the Indenture Trustee from removing the Servicer
pursuant to Section 4.20(a). Notwithstanding the foregoing, the Note Insurer
may, in its sole discretion, extend the period for which the Servicer is to act
as
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such for a period in excess of one quarter (provided such extension shall be an
additional one or more quarters), but any such extension shall be revocable at
any time by the Note Insurer upon written notice delivered to the Indenture
Trustee and the Servicer at least fifteen days prior to the expiration of the
related quarterly period.
(c) The Note Insurer agrees to use its best efforts to inform the
Indenture Trustee of any materially adverse information regarding the Servicer's
servicing activities that comes to the attention of the Note Insurer from time
to time.
(d) The Servicer shall not resign from the obligations and duties
hereby imposed on it, except upon determination that its duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the Servicer so causing such a conflict being of a type and nature carried on
by the Servicer at the date of this Agreement. Any such determination permitting
the resignation of the Servicer shall be evidenced by an opinion of counsel
acceptable to the Indenture Trustee and the Note Insurer at the expense of the
Servicer to such effect which shall be delivered to the Indenture Trustee and
the Note Insurer.
(e) No removal or resignation of the Servicer shall become effective
until the Indenture Trustee or a successor Servicer shall have assumed the
Servicer's responsibilities and obligations in accordance with this Section.
(f) Upon removal or resignation of the Servicer, the Servicer at its
own expense also shall promptly deliver or cause to be delivered to a successor
servicer or the Indenture Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Servicer has maintained
for the Home Equity Loans, including all tax bills, assessment notices,
insurance premium notices and all other documents as well as all original
documents then in the Servicer's possession.
(g) Any collections then being held by the Servicer prior to its
removal and any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Indenture Trustee and remitted
directly and immediately to the Indenture Trustee or the successor Servicer.
(h) Upon removal or resignation of the Servicer, the Indenture Trustee
may (i) solicit bids for a successor servicer as described below or (ii) shall
appoint the Backup Servicer as Servicer. If the Indenture Trustee elects to
solicit bids for a successor Servicer, the Indenture Trustee agrees to act as
Backup Servicer during the solicitation process and shall assume all duties of
the Servicer (except as otherwise provided in this Agreement). The Indenture
Trustee shall, if it is unable to obtain a qualifying bid and is prevented by
law from acting as Servicer, appoint, or petition a court of competent
jurisdiction to appoint, any housing and home finance institution, bank or
mortgage servicing institution which has been designated as an approved
seller-servicer by ▇▇▇▇▇▇ Mae or FHLMC for first and second home equity loans
and having equity of not less than $5,000,000 (or such lower level as may be
acceptable to the Note Insurer), as determined in accordance with generally
accepted accounting principles and acceptable to the Note Insurer as the
successor to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder. The
compensation of any successor Servicer (other than the Indenture Trustee in its
capacity as successor Servicer) so appointed shall be the amount agreed to
between the successor Servicer, the Note Insurer and the majority of the
Percentage Interests of the Certificates, (up to a maximum of 0.50% per annum on
each Home Equity Loan) together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise as provided in
Sections 4.08 and 4.15; provided, however, that if the Indenture Trustee becomes
the successor Servicer it shall receive as its compensation the same
compensation paid to the Servicer immediately prior to the Servicer's removal or
resignation; provided, further, however, that if the Indenture Trustee acts as
successor Servicer then the Servicer agrees
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to pay to the Indenture Trustee at such time that the Indenture Trustee becomes
such successor Servicer a set-up fee of twenty-five dollars ($25.00) for each
Home Equity Loan then included in the Trust Estate. The amount payable in excess
of twenty-five dollars ($25.00) per Home Equity Loan, if any, shall be payable
to the successor Servicer and reimbursable pursuant to Section 3.03(b)(iii)(C)
hereof. The Indenture Trustee shall be obligated to serve as successor Servicer
whether or not the fee described in this section is paid by the Servicer, but
shall in any event be entitled to receive, and to enforce payment of, such fee
from the Servicer.
(i) In the event the Indenture Trustee elects to solicit bids as
provided above, the Indenture Trustee shall solicit, by public announcement,
bids from housing and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor Servicer shall be entitled to
servicing compensation in accordance with clause (h) above, together with the
other servicing compensation in the form of assumption fees, late payment
charges or otherwise as provided in Sections 4.08 and 4.15. Within thirty days
after any such public announcement, the Indenture Trustee shall negotiate and
effect the sale, transfer and assignment of the servicing rights and
responsibilities hereunder to the qualified party submitting the highest
satisfactory bid as to the price it will pay to obtain servicing. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder. After such
deductions, the remainder of such sum less any amounts due the Indenture Trustee
or the Trust from the Servicer shall be paid by the Indenture Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor.
(j) The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession, including the notification to all Mortgagors of the transfer of
servicing. The Servicer agrees to cooperate with the Indenture Trustee and any
successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor Servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor Servicer, as applicable, all amounts which then have been or should
have been deposited in the Principal and Interest Account by the Servicer or
which are thereafter received with respect to the Home Equity Loans. Neither the
Indenture Trustee nor any other successor Servicer shall be held liable by
reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer. If the Servicer resigns or is replaced hereunder, the Servicer agrees
to reimburse the Trust, the Owners and the Note Insurer for the costs and
expenses associated with the transfer of servicing to the replacement Servicer,
but subject to a maximum reimbursement to all such parties in the amount of
twenty-five dollars ($25.00) for each Home Equity Loan then included in the
Trust Estate. The amount payable in excess of twenty-five dollars ($25.00) per
Home Equity Loan, if any, shall be payable to the successor Servicer and
reimbursable pursuant to Section 3.03(b)(iii)(C) hereof.
(k) The Indenture Trustee or any other successor Servicer, upon
assuming the duties of Servicer hereunder, shall immediately (i) record all
assignments of Home Equity Loans not previously recorded in the name of the
Indenture Trustee pursuant to Section 2.05(b)(ii) as a result of an opinion of
counsel and (ii) make all Delinquency Advances and Compensating Interest
payments and deposit them to the Principal and Interest Account which the
Servicer has theretofore failed to remit with respect to the Home Equity Loans;
provided, however, that if the Indenture Trustee is acting as successor
Servicer, the Indenture Trustee shall only be required to make Delinquency
Advances (including the Delinquency Advances described in this
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clause (k)) if, in the Indenture Trustee's reasonable good faith judgment, such
Delinquency Advances will ultimately be recoverable from the Home Equity Loans.
(l) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors, to Moody's and to Standard & Poor's of the transfer of
the servicing to the successor.
(m) The Indenture Trustee shall give notice to the Note Insurer, the
Owners, the Owner Trustee, the Seller, Moody's and Standard & Poor's of the
occurrence of any event described in paragraph (a) above of which the Indenture
Trustee is aware.
Section 4.21 Inspections by Note Insurer; Errors and Omissions
Insurance.
(a) At any reasonable time and from time to time upon reasonable
notice, the Indenture Trustee, the Note Insurer, any Owner or the Issuer, or any
agents thereof may inspect the Servicer's servicing operations and discuss the
servicing operations of the Servicer during the Servicer's normal business hours
with any of its officers or directors; provided, however, that the costs and
expenses incurred by the Servicer or its agents or representatives in connection
with any such examinations or discussions shall be paid by the Servicer.
(b) The Servicer (including the Indenture Trustee if it shall become
the Servicer hereunder) agrees to maintain errors and omissions coverage and a
fidelity bond, each at least to the extent required by Section 305 of Part I of
▇▇▇▇▇▇ ▇▇▇ Guide or any successor provision thereof; provided, however, that in
any event that the fidelity bond or the errors and omissions coverage is no
longer in effect, the Indenture Trustee shall promptly give such notice to the
Note Insurer, the Issuer and the Owners.
Section 4.22 Reserved.
Section 4.23 Adjustable Rate Home Equity Loans.
The Servicer shall enforce each Home Equity Loan in accordance with its
terms and shall timely calculate, record, report and apply all interest rate
adjustments in accordance with the related Mortgage Note. The Servicer's records
shall, at all times, reflect the then Coupon Rate and monthly payment and the
Servicer shall timely notify the Mortgagor of any changes to the Coupon Rate or
the Mortgagor's monthly payment. If the Servicer fails to make either a timely
or accurate adjustment to the Coupon Rate or monthly payment or to notify the
Mortgagor of such adjustments, upon the Servicer's discovery of such error and
such continued failure, the Servicer shall pay from its own funds any shortage.
If the Servicer's continued failure after notice thereof to make a scheduled
change affects the Trust's rights to make future adjustments under the terms of
such Home Equity Loan, the Servicer shall repurchase such Home Equity Loan in
accordance with the provisions of Article II hereof. Any amounts paid by the
Servicer pursuant to this Section shall not be an advance and shall not be
reimbursable from the proceeds of any Home Equity Loan.
Section 4.24 Administration of the Issuer. The Servicer agrees to
assist the Issuer in performing its duties hereunder and under the Indenture.
END OF ARTICLE IV
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ARTICLE V
TERMINATION
Section 5.01 Termination.
This Agreement will terminate upon notice to the Indenture Trustee of
either: (a) the later of (i) the satisfaction and discharge of the Indenture
pursuant to Section 4.1 of the Indenture or (ii) the disposition of all funds
with respect to the last Home Equity Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable to the Indenture
Trustee, the Owner Trustee, the Issuer, the Custodian and the Note Insurer; or
(b) the mutual consent of the Servicer, the Seller, the Depositor, the Note
Insurer and all Owners in writing.
Section 5.02 Termination Upon Option of Holders of Certificates.
(a) On any Monthly Remittance Date after the Redemption Date, the
holders of a majority of the Percentage Interests represented by the
Certificates then Outstanding shall have the option to purchase all of the Trust
Estate by paying the Redemption Price to the Issuer by providing notice thereof
to the Indenture Trustee, Owner Trustee and Note Insurer. Such holders may
purchase the Trust Estate at a price equal to (i) the then outstanding Note
Principal Balance, plus all accrued and unpaid interest thereon (including any
Available Funds Cap Carry-Forward Amounts), (ii) any Trust Fees and Expenses due
and unpaid on such date, (iii) the payment of all amounts owed to the Note
Insurer and (iv) any unreimbursed Delinquency Advances and Servicing Advances
and Delinquency Advances which the Servicer has theretofore failed to remit
(such amount, the "Redemption Price"). In connection with such purchase, the
Servicer shall remit to the Indenture Trustee all amounts then on deposit in the
Principal and Interest Account for deposit to the Note Account, which deposit
shall be deemed to have occurred immediately preceding such purchase. The
proceeds from such sale will be distributed first, to the payment of any
outstanding Trust Fees and Expenses, second, to the Note Insurer, all amounts
owed thereto, third, to the Servicer for unreimbursed Servicing Advances and
Delinquency Advances, fourth, to the Owners of the Notes in an amount equal to
the then outstanding Note Principal Balance plus all accrued and unpaid interest
thereon (plus any Available Funds Cap Carry-Forward Amount) and, fifth, to the
holders of the Certificates, the remainder. Provided, however, that no such
termination shall occur unless the Owners of the Note have received an amount
equal to the then outstanding Note Principal Balance plus all accrued and unpaid
interest on the Notes.
(b) Promptly following any purchase described in this Section 5.02, the
Indenture Trustee will release the Files to the holders of such Certificates or
otherwise upon their order, in a manner similar to that described in Section
4.14 hereof.
(c) If the holders of the Certificates decline to exercise the option
to purchase the Home Equity Loans and REO Properties remaining in the Trust
Estate pursuant to Section 5.02(a), then, provided that IMC Mortgage Company is
not then the Servicer, the Note Insurer may do so subject to terms set out in
Section 5.02.
Section 5.03 Redemption of Notes. Upon any purchase described in
Section 5.02 by either the Majority Certificateholders or the Note Insurer, the
Issuer shall use the proceeds it receives to redeem the Notes, in whole and not
in part, and terminate the Indenture. The Notes will be redeemed upon payment of
the Redemption Price, and the payment of the amount set forth in clause (i) of
the definition of Redemption Price set forth in Section 5.02 to the Owners of
the Notes shall be in lieu of the payment otherwise required to be made to the
Owners on such Payment Date in respect of the Notes.
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Section 5.04 Disposition of Proceeds.
The Indenture Trustee shall, upon receipt thereof, deposit the proceeds
of any liquidation of the Trust Estate pursuant to this Article V to the Note
Account; provided, however, that any amounts representing unreimbursed
Delinquency Advances and Servicing Advances theretofore funded by the Servicer
from the Servicer's own funds shall be paid by the Indenture Trustee to the
Servicer from the proceeds of the Trust Estate.
END OF ARTICLE V
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ARTICLE VI
MISCELLANEOUS
Section 6.01 Acts of Owners.
Except as otherwise specifically provided herein, whenever Owner
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed to have been taken or given on behalf of,
and shall be binding upon, all Owners if the Owners of the majority of the
Percentage Interest of the Notes agree to take such action or give such consent
or approval.
Section 6.02 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Owners' expense on
direction of the Owners of the majority of the Percentage Interest of the Notes
or the Note Insurer, but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the interests
of the Owners or is necessary for the administration or servicing of the Home
Equity Loans.
Section 6.03 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 6.04 Successors and Assigns.
All covenants and agreements in this Agreement by any party hereto
shall bind its successors and assigns, whether so expressed or not.
Section 6.05 Severability.
In case any provision in this Agreement or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 6.06 Governing Law; Submission to Jurisdiction.
(a) In view of the fact that Owners are expected to reside in many
states and outside the United States and the desire to establish with certainty
that this Agreement will be governed by and construed and interpreted in
accordance with the law of a state having a well-developed body of commercial
and financial law relevant to transactions of the type contemplated herein, this
Agreement and each Note shall be construed in accordance with and governed by
the laws of the State of New York applicable to agreements made and to be
performed therein, without giving effect to the conflicts of law principles
thereof.
(b) The parties hereto hereby irrevocably submit to the jurisdiction of
the United States District Court for the Southern District of New York and any
court in the State of New York located in the City and County of New York, and
any appellate court from any thereof, in any action, suit or proceeding brought
66
against it or in connection with this Agreement or any of the related documents
or the transactions contemplated hereunder or for recognition or enforcement of
any judgment, and the parties hereto hereby irrevocably and unconditionally
agree that all claims in respect of any such action or proceeding may be heard
or determined in such New York State court or, to the extent permitted by law,
in such federal court. The parties hereto agree that a final judgment in any
such action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. To
the extent permitted by applicable law, the parties hereto hereby waive and
agree not to assert by way of motion, as a defense or otherwise in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such courts, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that the related documents or the subject matter thereof may not be
litigated in or by such courts.
(c) Each of the Depositor, the Issuer, the Seller and the Servicer
hereby irrevocably appoints and designates the Indenture Trustee as its true and
lawful attorney and duly authorized agent for acceptance of service of legal
process with respect to any action, suit or proceeding set forth in paragraph
(b) above. Each of the Issuer, the Seller and the Servicer agrees that service
of such process upon the Indenture Trustee shall constitute personal service of
such process upon it.
(d) Nothing contained in this Agreement shall limit or affect the right
of the Depositor, the Issuer, the Seller, the Servicer or the Note Insurer or
third-party beneficiary hereunder, as the case may be, to serve process in any
other manner permitted by law or to start legal proceedings relating to any of
the Home Equity Loans against any Mortgagor in the courts of any jurisdiction.
Section 6.07 Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 6.08 Amendment.
(a) The Indenture Trustee, the Depositor, the Issuer, the Seller and
the Servicer, may at any time and from time to time, with the prior written
approval of the Note Insurer but without the giving of notice to or the receipt
of the consent of the Owners, amend this Agreement, and the Indenture Trustee
shall consent to the amendment for the purposes of (i) curing any ambiguity,
(ii) correcting or supplementing any provisions of this Agreement which are
inconsistent with any other provisions of this Agreement or adding provisions to
this Agreement which are not inconsistent with the provisions of this Agreement,
(iii) adding any other provisions with respect to matters or questions arising
under this Agreement, or (iv) for any other purpose, provided that such
amendment shall not adversely affect in any material respect any Owner. Any such
amendment shall be deemed not to adversely affect in any material respect any
Owner if there is delivered to the Indenture Trustee written notification from
each Rating Agency that such amendment will not cause such Rating Agency to
reduce its then current rating assigned to the Notes without regard to the Note
Insurance Policy. Notwithstanding anything to the contrary, no such amendment
shall (A) change in any manner the amount of, or delay the timing of, payments
which are required to be distributed to any Owner without the consent of the
Owner of such Note, (B) change the percentages of Percentage Interest which are
required to consent to any such amendments, without the consent of the Owners of
all Notes affected then outstanding or (C) which affects in any manner the terms
or provisions of the Note Insurance Policy.
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(b) This Agreement may also be amended from time to time by the Seller,
the Servicer, the Depositor and the Issuer by written agreement, with the prior
written consent of the Owners of the majority of the Percentage Interests in the
Notes and the Note Insurer, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Owners; provided, however, that
no such amendment shall (i) reduce in any manner the amount of, or delay the
timing of, collections of payments on Home Equity Loans or distributions which
are required to be made on any Note, without the consent of the holders of 100%
of the Notes, (ii) adversely affect in any material respect the interests of the
holders of the Notes in any manner other than as described in (i), without the
consent of the holders of 100% of the Notes, or (iii) reduce the percentage of
Notes, the holders of which are required to consent to any such amendment,
without the consent of the holders of 100% of the Notes.
(c) The Note Insurer and the Rating Agencies shall be provided by the
Seller with copies of any amendments to this Agreement, together with copies of
any opinions or other documents or instruments executed in connection therewith.
Section 6.09 Specification of Certain Tax Matters.
Each Owner shall provide the Indenture Trustee with a completed and
executed From W-9 prior to purchasing a Note. The Indenture Trustee shall comply
with all requirements of the Code, and applicable state and local law, with
respect to the withholding from any distributions made to any Owner of any
applicable withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
Section 6.10 The Note Insurer.
Any right conferred to the Note Insurer hereunder shall be suspended
and shall run to the benefit of the Owners during any period in which there
exists a Note Insurer Default; provided, that the right of the Note Insurer to
receive the Premium Amount shall not be suspended if such Note Insurer Default
was a default other than a default under clause (a) of the definition thereof.
At such time as the Notes are no longer Outstanding hereunder and the Note
Insurer has received all Reimbursement Amounts, the Note Insurer's rights
hereunder shall terminate.
Section 6.11 Third Party Rights.
The Indenture Trustee, the Seller, the Issuer, the Depositor, the
Servicer, and the Owners agree that the Note Insurer shall be deemed a
third-party beneficiary of this Agreement as if it were a party hereto.
Section 6.12 Notices.
All notices hereunder shall be given as follows, until any superseding
instructions are given to all other Persons listed below:
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The Indenture Trustee: The Chase Manhattan Bank
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Structured Finance Services
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ - Fax
The Depositor: Bear ▇▇▇▇▇▇▇ Asset Backed Securities, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
The Issuer: IMC Home Equity Loan Owner Trust 1998-2
c/o Wilmington Trust Company, as Owner Trustee
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The Servicer
and Seller: IMC Mortgage Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ - Fax
The Note
Insurer: MBIA Insurance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
(IMC Adjustable Rate Home Equity Loan
Asset-Backed Notes, Series 1997-8)
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
69
The Underwriters: Bear ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
PaineWebber Incorporated
1285 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (cc: ▇▇▇▇ ▇▇▇▇▇▇)
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇. ▇. ▇▇▇▇▇▇ Securities Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Moody's: ▇▇▇▇▇'▇ Investors Service, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: The Residential Mortgage
Monitoring Department
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Standard & Poor's: Standard & Poor's Ratings Services, a division
of the ▇▇▇▇▇▇-▇▇▇▇
Companies
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Residential Mortgage Group
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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Section 6.13 Benefits of Agreement.
Nothing in this Agreement or in the Notes, expressed or implied, shall
give to any Person, other than the Owners, the Note Insurer and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 6.14 Legal Holidays.
In any case where the date of any Payment Date, any other date on which
any distribution to any Owner is proposed to be paid, or any date on which a
notice is required to be sent to any Person pursuant to the terms of this
Agreement (with the exception of any Monthly Remittance Date or any Monthly
Reporting Date) shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Agreement) payment or mailing need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made or mailed on the nominal date of any such Payment
Date, or such other date for the payment of any distribution to any Owner or the
mailing of such notice, as the case may be, and no interest shall accrue for the
period from and after any such nominal date, provided such payment is made in
full on such next succeeding Business Day. In any case where the date of any
Monthly Remittance Date or any Monthly Reporting Date shall not be a Business
Day, then payment or mailing need not be made on such date, but must be made on
the preceding Business Day.
Section 6.15 Usury.
The amount of interest payable or paid on any Note under the terms of
this Agreement shall be limited to an amount which shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the State of New
York or any applicable law of the United States permitting a higher maximum
nonusurious rate that preempts such applicable New York laws, which could
lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In
the event any payment of interest on any Note exceeds the Highest Lawful Rate,
the Trust stipulates that such excess amount will be deemed to have been paid to
the Owner of such Note as a result of an error on the part of the Indenture
Trustee acting on behalf of the Trust and the Owner receiving such excess
payment shall promptly, upon discovery of such error or upon notice thereof from
the Indenture Trustee on behalf of the Trust, refund the amount of such excess
or, at the option of such Owner, apply the excess to the payment of principal of
such Note, if any, remaining unpaid. In addition, all sums paid or agreed to be
paid to the Indenture Trustee for the benefit of Owners of Notes for the use,
forbearance or detention of money shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such Notes.
Section 6.16 No Petition. The Indenture Trustee, the Depositor, the
Seller and the Servicer, by entering into this Agreement, and each Owner, by
accepting a Note, hereby covenant and agree that they will not at any time
institute against the Seller, the Servicer, the Depositor or the Issuer, or join
in any institution against the Seller, the Servicer, the Depositor or the Issuer
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Agreement or any of the Operative Documents.
Section 6.17 Depositor's Obligations. The Depositor shall have no
obligations to monitor the performance of, and shall have no liability for any
breach of the obligations of, the other parties hereto.
END OF ARTICLE VI
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ARTICLE VII
CERTAIN MATTERS REGARDING THE NOTE INSURER
Section 7.01 Trust Estate and Accounts Held for Benefit of the Note
Insurer.
The Indenture Trustee shall hold the Trust Estate for the benefit of
the related Owners and the Note Insurer and all references in this Agreement and
in the Notes to the benefit of Owners of the Notes shall be deemed to include
the Note Insurer. The Indenture Trustee shall cooperate in all reasonable
respects with any reasonable request by the Note Insurer for action to preserve
or enforce the Note Insurer's rights or interests under this Agreement and the
Notes.
The Servicer hereby acknowledges and agrees that it shall service and
administer the Home Equity Loans and any REO Properties, and shall maintain the
Principal and Interest Account, for the benefit of the Owners and for the
benefit of the Note Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Owners shall be deemed to include the Note
Insurer. Unless a Note Insurer Default exists, the Servicer shall not terminate
any Sub-Servicing Agreements without cause without the prior consent of the Note
Insurer.
Section 7.02 Claims Upon the Policy; Policy Payments Account.
(a) In the event that an Insured Payment becomes due pursuant
to the terms of the Note Insurance Policy, the Indenture Trustee shall submit a
Notice (in the form attached to such Note Insurance Policy) in accordance with
the terms of such Note Insurance Policy.
(b) The Indenture Trustee shall establish a separate special
purpose trust account for the benefit of the Owners of the Notes and the Note
Insurer referred to herein as the "Policy Payments Account" over which the
Indenture Trustee shall have exclusive control and sole right of withdrawal. The
Indenture Trustee shall deposit any amount paid under a Note Insurance Policy in
the Policy Payments Account and distribute such amount only for purposes of
payment to the Owners of the Notes of the Insured Payments for which a claim was
made and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Seller, the Depositor, the Custodian, the
Indenture Trustee or the Trust. Amounts paid under the Note Insurance Policy
shall be transferred to the Note Account in accordance with the next succeeding
paragraph and disbursed by the Indenture Trustee to Owners of the Notes in
accordance with Section 3.03. It shall not be necessary for such payments to be
made by checks or wire transfers separate from the checks or wire transfers used
to pay the Insured Payments with other funds available to make such payment.
However, the amount of any payment of principal of or interest on the Notes to
be paid from funds transferred from the Policy Payments Account shall be noted
as provided in paragraph (c) below in the Register and in the statement to be
furnished to Owners of the Notes pursuant to Section 3.08. Funds held in the
Policy Payments Account shall not be invested by the Indenture Trustee.
On any Payment Date with respect to which a claim has been made
under the Note Insurance Policy, the amount of funds received by the Indenture
Trustee as a result of any claim under the Note Insurance Policy, to the extent
required to make the Insured Payment on such Payment Date shall be withdrawn
from the Policy Payments Account and deposited in the Note Account and applied
by the Indenture Trustee, together with the other funds to be withdrawn from the
Note Account, directly to the payment in full of the Insured Payment due on the
Notes. Funds received by the Indenture Trustee as a result of any claim under
the Note Insurance Policy shall be deposited by the Indenture Trustee in the
Policy Payments Account and used solely for payment to the Owners of the Notes
may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Seller, the Depositor, the Custodian, the Indenture Trustee
72
or the Trust. Any funds remaining in the Policy Payments Account on the first
Business Day following a Payment Date shall be remitted to the Note Insurer,
pursuant to the instructions of the Note Insurer, by the end of such Business
Day.
(c) The Indenture Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any Note from
moneys received under the Note Insurance Policy. The Note Insurer shall have the
right to inspect such records at reasonable times during normal business hours
upon one Business Day's prior notice to the Indenture Trustee.
(d) The Indenture Trustee shall promptly notify the Note
Insurer and the Fiscal Agent (as defined in the Note Insurance Policy) of any
proceeding or the institution of any action, of which an Authorized Officer of
the Indenture Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Notes. Each Owner of a Note by its purchase of such Note, the Servicer and the
Indenture Trustee hereby agree that, the Note Insurer (so long as no Note
Insurer Default exists) may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim, including without limitation, (i) the direction of any appeal
of any order relating to such Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Note Insurer shall be subrogated to the
rights of the Servicer, the Indenture Trustee and each Owner of a Note in the
conduct of any such Preference Claim, including, without limitation, all rights
of any party to an adversary proceeding action with respect to any court order
issued in connection with any such Preference Claim.
Section 7.03 Effect of Payments by the Note Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on any of the Notes which is made with
moneys received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of such Notes from the Trust and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Notes within the meaning of Section 3.03. The Depositor, the Servicer and
the Indenture Trustee acknowledge, and each Owner by its acceptance of a Note
agrees, that without the need for any further action on the part of the Note
Insurer, the Depositor, the Servicer, the Indenture Trustee or the Registrar (a)
to the extent the Note Insurer makes payments, directly or indirectly, on
account of principal of or interest on any Notes to the Owners of such Notes,
the Note Insurer will be fully subrogated to the rights of such Owners to
receive such principal and interest from the Trust and (b) the Note Insurer
shall be paid such principal and interest but only from the sources and in the
manner provided herein for the payment of such principal and interest.
The Indenture Trustee, the Seller, the Depositor and the
Servicer shall cooperate in all respects with any reasonable request by the Note
Insurer for action to preserve or enforce the Note Insurer's rights or interests
under this Agreement without limiting the rights or affecting the interests of
the Owners as otherwise set forth therein.
Section 7.04 Notices to the Note Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Owners shall also be sent to the Note Insurer.
73
Section 7.05 Rights to the Note Insurer To Exercise Rights of Owners.
By accepting its Note, each Owner agrees that unless a Note
Insurer Default exists, the Note Insurer shall have the right to exercise all
rights of the Owners as specified under this Agreement without any further
consent of the Owners.
END OF ARTICLE VII
74
IN WITNESS WHEREOF, the Issuer, the Depositor, the Seller, the Servicer
and the Indenture Trustee have caused this Agreement to be duly executed by
their respective officers thereunto duly authorized, all as of the day and year
first above written.
IMC HOME EQUITY LOAN OWNER TRUST 1998-2
By: WILMINGTON TRUST COMPANY,
as Owner Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title: Vice President
BEAR ▇▇▇▇▇▇▇ ASSET BACKED SECURITIES,
INC.
as Depositor
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Title: Managing Director
IMC MORTGAGE COMPANY,
as Servicer and Seller
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Title: President
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By: /s/ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
-----------------------------
Title: Trust Officer
STATE OF New York )
: ss.:
COUNTY OF New York )
On the 31st day of March, 1998, before me, a notary public in and for
the State of New York, personally appeared ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to me known to me,
who, being by me duly sworn, did depose and say that he resides at ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; that he is the Managing Director of Bear ▇▇▇▇▇▇▇
Asset Backed Securities, Inc., a Delaware corporation; one of the parties that
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------
Notary Public
STATE OF FLORIDA )
: ss.:
COUNTY OF HILLSBOROUGH )
On the 31st day of March, 1998, before me personally came ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, to me known, who, being by me duly sworn, did depose and say that
he/she resides at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇; that he is a
President of IMC Mortgage Company, a Florida corporation; and that he signed his
name thereto by order of the respective Boards of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Notary Public
STATE OF DELAWARE )
: ss.:
COUNTY OF NEW CASTLE )
On the 31st day of March, 1998, before me personally came ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, to me known, who, being by me duly sworn did depose and say that he
resides in Delaware; that he/she is a Vice President of Wilmington Trust
Company, a Delaware banking corporation described in and that executed the above
instrument as Owner Trustee; and that he/she signed his/her name thereto by
order of the Board of Directors of said Delaware banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 31st day of March, 1998, before me personally came ▇▇▇ ▇▇▇▇▇
▇▇▇▇, to me known, who, being by me duly sworn did depose and say that he/she
resides at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.; that he/she is a Trust Officer of The Chase
Manhattan Bank, the New York banking corporation described in and that executed
the above instrument as Indenture Trustee; and that he/she signed his/her name
thereto by order of the Board of Directors of said New York banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------
Notary Public
SCHEDULE I
SCHEDULE OF HOME EQUITY LOANS
A copy of this Schedule is maintained by the Indenture Trustee at the
Corporate Trust Office and by the Servicer.
FORM OF CERTIFICATE RE: HOME EQUITY LOANS
PREPAID IN FULL AFTER CUT-OFF DATE
CERTIFICATE RE: PREPAID LOANS
I, __________________________, _______________ of IMC Mortgage Company
("IMC"), hereby certify that between the "Cut-Off Date" (as defined in the Sale
and Servicing Agreement dated as of March 1, 1998 among Bear ▇▇▇▇▇▇▇ Asset
Backed Securities, Inc., as Depositor, IMC, as Seller and Servicer, IMC Home
Equity Loan Owner Trust 1998-2, as Issuer and The Chase Manhattan Bank, as
Indenture Trustee) and the "Closing Date," the following schedule of "Home
Equity Loans" (each as defined in the Sale and Servicing Agreement) have been
prepaid in full.
Account Original Current Date Paid
Number Name Amount Balance Off
------ ---- ------ ------- ---
Dated: March __, 1998
By:_______________________
Title:____________________
▇-▇
▇▇▇▇▇▇▇ ▇-▇
INDENTURE TRUSTEE'S ACKNOWLEDGEMENT OF RECEIPT
The Chase Manhattan Bank, in its capacity as Indenture Trustee (the
"Indenture Trustee") under that certain Sale and Servicing Agreement dated as of
March 1, 1998 (the "Sale and Servicing Agreement") among Bear ▇▇▇▇▇▇▇ Asset
Backed Securities, Inc., as Depositor, IMC Mortgage Company, a Florida
corporation, as seller and servicer ("IMC"), IMC Home Equity Loan Owner Trust
1998-2, as Issuer and The Chase Manhattan Bank, as Indenture Trustee, hereby
acknowledges receipt of the Insurance Policy (Policy No. ________) from MBIA
Insurance Corporation and all other assets of the Trust Estate received by the
Indenture Trustee as of the date hereof.
The Indenture Trustee hereby additionally acknowledges that it shall
cause the Custodian (as defined in the Sale and Servicing Agreement) to review
such items as required by Section 2.06(a) of the Sale and Servicing Agreement.
THE CHASE MANHATTAN BANK, as
Indenture Trustee
By:_________________________
Name:_______________________
Title:______________________
Dated: March __, 1998
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
CUSTODIAN'S ACKNOWLEDGMENT OF RECEIPT
BankBoston N.A., in its capacity as custodian (the "Custodian") under
the Custodial Agreement dated as of March 1, 1998 among the Custodian, IMC
Mortgage Company, as seller and servicer, Bear ▇▇▇▇▇▇▇ Asset Backed Securities,
Inc., as Depositor, IMC Home Equity Loan Owner Trust 1998-2, as Issuer and The
Chase Manhattan Bank, in its capacity as Indenture Trustee (the "Indenture
Trustee") under that certain Sale and Servicing Agreement dated as of March 1,
1998 ( the "Sale and Servicing Agreement") among Bear ▇▇▇▇▇▇▇ Asset Backed
Securities, Inc., as Depositor, IMC Mortgage Company, a Florida corporation, as
seller and servicer ("IMC"), the Issuer, and the Indenture Trustee hereby
acknowledges receipt (subject to review as required by Section 2.06(a) of the
Sale and Servicing Agreement) of the items delivered to it by IMC with respect
to the Home Equity Loans pursuant to Section 2.05(b)(i) of the Sale and
Servicing Agreement, except such items as are listed on Exhibit D to the Sale
and Servicing Agreement.
The Schedules of Home Equity Loans is attached to this Receipt.
The Custodian hereby additionally acknowledges that it shall review
such items as required by Section 2.06(a) of the Sale and Servicing Agreement
and shall otherwise comply with Section 2.06(b) and 2.06(c) of the Sale and
Servicing Agreement as required thereby.
BANKBOSTON N.A.,
as custodian
By:________________________
Name:______________________
Title:_____________________
Dated: March __, 1998
B-2-1
EXHIBIT C
FORM OF POOL CERTIFICATION
POOL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of BankBoston N.A.,
in its capacity as Custodian (the "Custodian") under the Custodial Agreement
dated March 1, 1998 between the Custodian, IMC Mortgage Company, as seller and
servicer, Bear ▇▇▇▇▇▇▇ Asset Backed Securities, Inc., as Depositor, IMC Home
Equity Loan Owner Trust 1998-2, as Issuer and The Chase Manhattan Bank, a New
York banking corporation, acting in its capacity as indenture trustee (the
"Indenture Trustee") of a certain pool of mortgage loans (the "Pool") heretofore
conveyed in trust to the Indenture Trustee, pursuant to that certain Sale and
Servicing Agreement dated as of March 1, 1998 (the "Sale and Servicing
Agreement") among Bear ▇▇▇▇▇▇▇ Asset Backed Securities, Inc., as Depositor, IMC
Mortgage Company, as Seller (the "Seller") and Servicer, IMC Home Equity Loan
Owner Trust 1998-2, as Issuer and the Indenture Trustee; and
WHEREAS, the Custodian is required, pursuant to Section 2.06(a) of the
Sale and Servicing Agreement, to review the Mortgage Files relating to the Pool
within a specified period following the Closing Date and to notify the Seller
promptly of any defects with respect to the Pool, and the Seller is required to
remedy such defects or take certain other action, all as set forth in Section
2.06(b) of the Sale and Servicing Agreement; and
WHEREAS, Section 2.06(a) of the Sale and Servicing Agreement requires
the Custodian to deliver this Pool Certification upon the satisfaction of
certain conditions set forth therein.
NOW, THEREFORE, the Custodian hereby certifies that it has determined
that all required documents (or certified copies of documents listed in Section
2.05 of the Sale and Servicing Agreement) have been executed or received, and
that such documents relate to the Home Equity Loans identified in the Schedule
of Home Equity Loans pursuant to Section 2.06(a) of the Sale and Servicing
Agreement or, in the event that such documents have not been executed and
received or do not so relate to such Home Equity Loans, any remedial action by
the Seller pursuant to Section 2.06(b) of the Sale and Servicing Agreement has
been completed. The Custodian makes no certification hereby, however, with
respect to any intervening assignments or assumption and modification
agreements.
BANKBOSTON N.A., as Custodian
By:__________________________
Title:_______________________
Dated: March __, 1998
C-1
EXHIBIT D TO THE SALE AND SERVICING AGREEMENT
HOME EQUITY LOANS WITH DOCUMENT EXCEPTIONS
Loan Number Borrower Name Original Loan Amount Exception
----------- ------------- -------------------- ---------
D-1
EXHIBIT E
FORM OF SUBSEQUENT TRANSFER AGREEMENT
IMC Mortgage Company (the "Seller"), as Seller, and IMC Home Equity
Loan Owner Trust 1998-2, as Purchaser, pursuant to the Sale and Servicing
Agreement dated as of March 1, 1998 among the Depositor, the Seller, as Seller
and Servicer and The Chase Manhattan Bank, as Indenture Trustee (the "Sale and
Servicing Agreement"), hereby confirm their understanding with respect to the
sale by the Seller and the purchase by the Depositor and the sale by the
Depositor and the purchase by the Purchaser of those Home Equity Loans (the
"Subsequent Home Equity Loans") listed on the attached Schedule of Home Equity
Loans.
Conveyance of Subsequent Home Equity Loans. As of ___________ __, 1998
(the "Subsequent Cut-Off Date"), the Seller does hereby irrevocably transfer,
assign, setover and otherwise convey to the Purchaser, without recourse (except
as otherwise explicitly provided for herein) all right, title and interest in
and to any and all benefits accruing from the Subsequent Home Equity Loans
(other than any principal and interest payments received thereon on or prior to
the Subsequent Cut-Off Date) which are delivered to the Custodian on behalf of
the Indenture Trustee herewith (and all substitutions therefor as provided by
Sections 2.03, 2.04 and 2.06 of the Sale and Servicing Agreement), together with
the related Subsequent Home Equity Loan documents and the interest in any
Property which secured a Subsequent Home Equity Loan but which has been acquired
by foreclosure or deed in lieu of foreclosure, and all payments thereon and
proceeds of the conversion, voluntary or involuntary, of the foregoing; and
proceeds of all the foregoing (including, but not by way of limitation, all
proceeds of any mortgage insurance, hazard insurance and title insurance policy
relating to the Subsequent Home Equity Loans, cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
rights to payment of any and every kind, and other forms of obligations and
receivables which at any time constitute all or part of or are included in the
proceeds of any of the foregoing). The Seller shall deliver the original
Mortgage or mortgage assignment with evidence of recording thereon (except as
otherwise provided by the Pooling and Servicing Agreement) and other required
documentation in accordance with the terms set forth in Sections 2.05 and 2.07
of the Sale and Servicing Agreement.
The costs relating to the delivery of the documents specified in this
Subsequent Transfer Agreement and the Sale and Servicing Agreement shall be
borne by the Seller.
Additional terms of the sale, if any, are attached hereto as
Attachment A.
The Seller hereby affirms the representations and warranties set forth
in the Sale and Servicing Agreement that relate to it and the Subsequent Home
Equity Loans as of the date hereof. The Seller hereby delivers notice and
confirms that each of the conditions set forth in Sections 2.07(b), 2.07(c) and
2.07(d) to the Sale and Servicing Agreement are satisfied as of the date hereof.
All terms and conditions of the Sale and Servicing Agreement are
hereby ratified, confirmed and incorporated herein, provided that in the event
of any conflict the provisions of this Subsequent Transfer Agreement shall
control over the conflicting provisions of the Sale and Servicing Agreement.
E-1
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Sale and Servicing Agreement.
IMC MORTGAGE COMPANY,
as Seller
By: _________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Indenture Trustee for IMC Home Equity
Loan Owner Trust 1998-2
By: __________________________
Name:
Title:
Dated:________________________
E-2