Exhibit 10.3
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SERVICING AGREEMENT
Dated as of November 1, 1998
among
CITY CAPITAL HOME LOAN TRUST 1998-4,
as Issuer,
CITY NATIONAL BANK OF WEST VIRGINIA,
as Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee and as Master Servicer
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Home Loans
Pledged under an Indenture dated as of November 1, 1998
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.01. Definitions...............................................................................1
Section 1.02. Interest Calculations....................................................................15
Section 1.03. Determination of Material Adverse Effect.................................................15
ARTICLE II ADMINISTRATION AND SERVICING OF HOME LOANS............................................................15
Section 2.01. Servicing Generally......................................................................15
Section 2.02. Collection of Certain Home Loan Payments; Collection Account.............................16
Section 2.03. Hazard Insurance Policies................................................................19
Section 2.04. Assumption and Modification Agreements...................................................20
Section 2.05. Servicer's Protection of Trust Estate; Realization upon Defaulted Home Loans.............21
Section 2.06. Custodian and Indenture Trustee to Cooperate; Release of Home Loan Files.................23
Section 2.07. Servicing Compensation; Payment of Certain Expenses by the Servicer......................24
Section 2.08. Annual Statement as to Compliance........................................................25
Section 2.09. Annual Independent Public Accountants' Servicing Report..................................25
Section 2.10. Access to Certain Documentation and Information Regarding the Home Loans.................25
Section 2.11. Maintenance of Fidelity Bond and Errors and Omissions Policy.............................26
Section 2.12. Notices to the Issuer, the Rating Agencies, the Master Servicer,
the Indenture Trustee and the Note Insurer...............................................26
Section 2.13. Reports of Foreclosures and Abandonment of Mortgaged Properties..........................26
Section 2.14. Sub-Servicers and Sub-Servicing Agreements...............................................27
Section 2.15. Servicing for Benefit of the Note Insurer................................................27
Section 2.16. RESERVED.................................................................................28
Section 2.17. Filing of Financing Statements and Continuation Statements...............................28
ARTICLE III SERVICER REMITTANCE REPORT; MASTER SERVICER..........................................................28
Section 3.01. Servicer Remittance Report...............................................................28
Section 3.02. Master Servicer Duties...................................................................28
Section 3.03. RESERVED.................................................................................29
Section 3.04. Master Servicer Compensation.............................................................29
Section 3.05. Master Servicer Default.................................................................29
Section 3.06. Merger or Consolidation of Master Servicer...............................................30
Section 3.07. Resignation of Master Servicer...........................................................30
Section 3.08. Assignment or Delegation of Duties by the Master Servicer................................30
Section 3.09. Limitation on Liability of the Master Servicer and Others................................31
ARTICLE IV SERVICING ADVANCES....................................................................................31
Section 4.01. Servicing Advances.......................................................................31
ARTICLE V THE SERVICER...........................................................................................32
Section 5.01. Representations and Warranties of the Servicer...........................................32
Section 5.02. Liability of the Servicer................................................................33
Section 5.03. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer............34
Section 5.04. Limitation on Liability of the Servicer and Others.......................................34
Section 5.05. Servicer Not to Resign...................................................................35
ARTICLE VI DEFAULT...............................................................................................35
Section 6.01. Events of Default........................................................................35
Section 6.02. Master Servicer to Act; Appointment of Successor.........................................37
Section 6.03. Notifications to Noteholders.............................................................38
Section 6.04. Assumption or Termination of Sub-Servicing Agreements by
the Master Servicer, Indenture Trustee or any Successor Servicer.........................38
Section 6.05. Indemnification..........................................................................39
ARTICLE VII TERMINATION..........................................................................................39
Section 7.01. Termination..............................................................................39
ARTICLE VIII MISCELLANEOUS PROVISIONS............................................................................40
Section 8.01. Amendment................................................................................40
Section 8.02. Governing Law............................................................................41
Section 8.03. Notices..................................................................................41
Section 8.04. Severability of Provisions...............................................................41
Section 8.05. Assignment...............................................................................42
Section 8.06. Third Party Beneficiary; Rating..........................................................42
Section 8.07. Counterparts.............................................................................42
Section 8.08. Intention of the Parties.................................................................42
Section 8.09. Waivers and Modifications................................................................42
Section 8.10. Further Agreements.......................................................................43
Section 8.11. Attorney-in-Fact.........................................................................43
SCHEDULES AND EXHIBITS
Schedule I Home Loan Schedule
Exhibit A Form of Annual Statement as to Compliance
Exhibit B Form of Request for Release
Exhibit C Form of Liquidation Report
Exhibit D Data Fields for Monthly Reporting
Exhibit E Form of Initial Notice of Advance Recovery
for Liquidated Home Loan
THIS SERVICING AGREEMENT (this "Agreement"), dated as of November 1, 1998,
among CITY CAPITAL HOME LOAN TRUST 1998-4, as Issuer of its Asset-Backed Notes,
Series ▇▇▇▇-▇ (▇▇▇ "▇▇▇▇▇▇"), ▇▇▇▇ NATIONAL BANK OF WEST VIRGINIA, as Servicer
(in such capacity, together with permitted successors hereunder, the
"Servicer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its
individual capacity but as trustee (the "Indenture Trustee") pursuant to that
certain Indenture (the "Indenture"), dated as of November 1, 1998, among the
Issuer and Norwest Bank Minnesota, National Association, as Indenture Trustee,
Note Administrator and Custodian, and as Master Servicer hereunder (the "Master
Servicer"), recites and provides as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing home loans;
WHEREAS, the Issuer desires to pledge to the Indenture Trustee certain home
loans, identified on Schedule I hereto (the "Home Loans") in connection with the
issuance of the Issuer's Asset-Backed Notes, Series 1998-4 (the "Notes");
WHEREAS, the Issuer desires to contract with the Servicer for the servicing
responsibilities associated with the Home Loans and the Servicer desires to
assume the servicing responsibilities associated with such Home Loans;
WHEREAS, the Issuer desires to contract with the Master Servicer, and the
Master Servicer desires to assume the obligation, to supervise and oversee the
performance of the Servicer hereunder, in accordance with the terms hereof; and
WHEREAS, the Issuer, the Servicer, the Master Servicer, and the Indenture
Trustee desire to execute this Agreement to define each party's rights, duties
and obligations relating to the servicing of the Home Loans.
NOW, THEREFORE, in consideration of the above premises and of the mutual
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Issuer, the
Servicer, the Master Servicer, and the Indenture Trustee hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01.00 Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Section 1.01. Terms capitalized and not otherwise defined herein shall have the
meanings assigned to such terms in the Indenture, even after the Indenture shall
have been terminated.
"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 corresponding to the foregoing.
"AGGREGATE PRINCIPAL BALANCE": As defined in the Indenture.
"AGREEMENT": This Servicing Agreement, dated as of November 1, 1998, among
the Issuer, the Servicer, the Master Servicer, and the Indenture Trustee, and
all amendments hereof and supplements hereto.
"APPRAISAL": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇ Mac standards, and must meet
the appraisal standards of the Uniform Standards of Professional Appraisal
Practice.
"APPRAISED VALUE": With respect to any Mortgaged Property, the lesser of
(a) the value thereof as determined by an Appraisal and (b) the purchase price
paid for the related Mortgaged Property by the Obligor with the proceeds of the
related Home Loan; provided, however, that in the case of a Refinanced Home
Loan, the Appraised Value of the Mortgaged Property shall be equal to the value
thereof as determined by an Appraisal.
"ANCILLARY SERVICING COMPENSATION": Prepayment fees, assumption fees, fees
for insufficient funds, and other amounts in the nature of additional fees paid
by the Obligor.
"BUSINESS DAY": Any day other than (a) a Saturday or a Sunday or (b) a day
on which banking institutions in the State of West Virginia, the State of New
York, the State of Delaware, the State of Maryland, the State of Minnesota, the
State of California, or the state in which the principal office of the Note
Insurer is located are required or authorized by law, executive order or
governmental decree to be closed.
"CERTIFICATE DISTRIBUTION ACCOUNT": As defined in the Deposit Trust
Agreement.
"CLOSING DATE": On or about November 30, 1998.
"CODE": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form and proposed regulations thereunder to the extent that,
by reason of their proposed effective date, such proposed regulations would
apply.
"COLLECTION ACCOUNT": The segregated account or accounts, which shall at
all times be an Eligible Account, established and maintained pursuant to Section
2.02(b) and entitled "[Servicer], in trust for the benefit of Holders of City
Capital Home Loan Trust 1998-4 Asset-Backed Notes, Series 1998-4 and MBIA as
Note Insurer, Collection Account". References herein to the Collection Account
shall include any Sub-Servicing Account as the context requires. If a Servicer
Termination Event described in Section 6.01(f) hereof occurs, the Servicer shall
close the existing Collection Account and cause it to be re-established in the
name of the Indenture Trustee, and transfer all funds from the old Collection
Account to the new Collection Account.
"COLLECTION PERIOD": As to any Deposit Date, the period beginning on the
first day of the calendar month immediately preceding the month in which such
Deposit Date occurs and ending on the last day of such calendar month.
"COMBINED LOAN-TO-VALUE RATIO": With respect to any Home Loan, the
fraction, expressed as a percentage, the numerator of which is the Principal
Balance of such Home Loan at origination plus, in the case of a Home Loan
secured by a junior lien, the aggregate outstanding principal balance of the
related senior lien loans on the date of origination of such Home Loan, and the
denominator of which is the Appraised Value of the related Mortgaged Property at
the time of origination of such Home Loan.
"CUMULATIVE LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of the fraction obtained by dividing (1) the principal amount of
Cumulative Realized Losses on the Home Loans from the applicable Cut-off Dates
through the end of the related Collection Period by (2) the Initial Pool
Principal Balance.
"CUMULATIVE LOSS RATE TRIGGER": The "Cumulative Loss Rate Trigger" occurs
on a Deposit Date if the Cumulative Loss Percentage equals or exceeds 10.00%.
"DELINQUENCY LOSS FACTOR": As of any Payment Date, the sum of (A) the
Principal Balance of all Home Loans that are 30-59 days delinquent multiplied by
25%, (B) the Principal Balance of all Home Loans that are 60-89 days delinquent
multiplied by 50%, (C) the Principal Balance of all Home Loans that are 90 or
more days delinquent multiplied by 100%, and (D) the Principal Balance of all
Home Loans modified in excess of the 3% limitation in Section 2.04 hereof.
"DELINQUENCY PERCENTAGE": For any Payment Date, the percentage equivalent
of the fraction obtained by dividing (1) the Aggregate Principal Balances of all
Home Loans that were more than 60 days contractually delinquent, REO Property,
in foreclosure, or for which the related Obligor was in a bankruptcy proceeding
or paying a reduced Monthly Payment as a result of a bankruptcy workout, as of
the end of the related Collection Period or that were modified in excess of the
3% limitation in Section 2.04 hereof, by (2) the Aggregate Principal Balance of
all of the Home Loans as of the related Determination Date.
"DELINQUENCY RATE TRIGGER": The Rolling Delinquency Percentage exceeds 8.0%
as of any Payment Date.
"DEPOSIT DATE": As to any Payment Date, the 18th day of the month in which
such Payment Date occurs or, if such 18th day is not a Business Day, the next
succeeding Business Day.
"DEPOSIT TRUST AGREEMENT": The Deposit Trust Agreement, dated as of
November 1, 1998, between the Depositor, Wilmington Trust Company, as Owner
Trustee, the Servicer, and Norwest Bank Minnesota, National Association, as
Trust Paying Agent, pursuant to which the Issuer was formed.
"DEPOSITOR": Financial Asset Securities Corp., as transferor of the Home
Loans to the Issuer pursuant to the terms of that certain Deposit Trust
Agreement.
"DETERMINATION DATE": As to any Deposit Date, the close of business on the
last day of the calendar month preceding the calendar month in which such
Deposit Date occurs.
"ELIGIBLE ACCOUNT": Either (A) a segregated account or accounts maintained
with an institution the deposits of which are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC, the unsecured and
uncollateralized debt obligations of which shall be rated "AA" or better by
Standard & Poor's and "Aa2" or better by Moody's or in the highest short-term
rating category by Standard & Poor's and Moody's (A1 and P1, respectively), and
that is either (1) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (2) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (3) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(4) a principal subsidiary of a bank holding company or (5) approved in writing
by the Note Insurer or (B) a trust account maintained with the trust department
of a federal or state chartered depository institution or trust company, having
capital and surplus of not less than $100,000,000, acting in its fiduciary
capacity, the unsecured and uncollateralized debt obligations of which shall be
rated "Baa3" or better by Moody's.
"EVENT OF DEFAULT": As defined in Section 6.01.
"▇▇▇▇▇▇ MAE": ▇▇▇▇▇▇ ▇▇▇ and its successors in interest.
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"FEMA": The Federal Emergency Management Agency and its successors in
interest.
"▇▇▇▇▇▇▇ MAC": ▇▇▇▇▇▇▇ Mac and its successors in interest.
"HOME LOAN": Each of the Home Loans pledged to the Indenture Trustee
pursuant to the Indenture that from time to time comprise part of the Trust
Estate, all of which originally so held being identified in the Home Loan
Schedule attached hereto as Schedule I.
"HOME LOAN DOCUMENTS": As defined in the Home Loan Sale Agreement.
"HOME LOAN FILE": As defined in the Home Loan Sale Agreement.
"HOME LOAN SALE AGREEMENT": The Home Loan Sale Agreement, dated as of
November 1, 1998, among the Seller, the Transferor and the Depositor, pursuant
to which the Depositor acquired the Home Loans.
"HOME LOAN SCHEDULE": As of any date, the schedule of Home Loans then
subject to this Agreement. The initial schedule of Home Loans as of the Cut-off
Dates therefor is attached hereto as Schedule I. The Home Loan Schedule shall be
amended from time to time by the Seller to reflect the addition of Home Loans
to, and the removal of Home Loans from, the Trust Estate pursuant to the
Indenture. The Home Loan Schedule shall include the information required by the
Indenture. The Home Loan Schedule and any amendment thereto shall be delivered
to the Indenture Trustee in both physical and computer-readable form.
"INDENTURE": The Indenture, dated as of November 1, 1998, among the Issuer
and Norwest Bank Minnesota, National Association, as Indenture Trustee, Note
Administrator and Custodian, pursuant to which the Home Loans and certain other
assets included in the Trust Estate are pledged as collateral for the Notes, and
any supplements or amendments thereto.
"INDENTURE TRUSTEE": Norwest Bank Minnesota, National Association, a
national banking association, and its successors in interest or any successor
trustee appointed as provided pursuant to the Indenture.
"INDENTURE TRUSTEE FEE": The monthly fee of the Indenture Trustee, which
shall be determined as set forth in the Indenture.
"INITIAL POOL PRINCIPAL BALANCE": The aggregate of the Principal Balances
of the Home Loans determined as of their respective Cut-off Dates (after
application of all payments of principal received in respect of any such Home
Loan before such Cut-off Dates), which aggregate amount is $182,598,309.53.
"INSURANCE PROCEEDS": With respect to any Deposit Date, proceeds paid by
any insurer (other than the Note Insurer) and received by the Servicer during
the related Collection Period pursuant to any insurance policy covering a Home
Loan or the related Mortgaged Property, including any deductible payable by the
Servicer with respect to a blanket insurance policy pursuant to Section 2.03 and
the proceeds from any fidelity bond or errors and omission policy pursuant to
Section 2.11, net of any component thereof covering any expenses incurred by or
on behalf of the Servicer and specifically reimbursable under this Agreement.
"INSURED PAYMENT": As defined in the Indenture.
"ISSUER": City Capital Home Loan Trust 1998-4, as issuer of the Notes
pursuant to the Indenture.
"LIQUIDATED HOME LOAN": As to any Deposit Date, any Home Loan shall be a
Liquidated Home Loan on the earlier of (1) the date as to which the Servicer has
determined, in accordance with the servicing procedures specified herein, that
all Liquidation Proceeds that it expects to recover from or on account of such
Home Loan have been recovered and (2) the date as to which any portion of the
Monthly Payment is 180 or more days past due.
"LIQUIDATION EXPENSES": Expenses that are incurred by the Servicer in
connection with the liquidation of any Home Loan and not recovered under any
insurance policy or from any Obligor. Such expenses with respect to any
Liquidated Home Loan shall include, without limitation, the outstanding amount
of any liens superior in priority, if any, to the lien of the foreclosed Home
Loan, legal fees and expenses, real estate brokerage commissions, any
unreimbursed amount expended by the Servicer pursuant to Section 2.05 respecting
the related Home Loan, and any other related and previously unreimbursed
Servicing Advances.
"LIQUIDATION PROCEEDS": Cash (other than Insurance Proceeds) received in
connection with the liquidation of any Mortgaged Property, whether through
trustee's sale, foreclosure sale, condemnation, taking by eminent domain or
otherwise received in respect of any Home Loan foreclosed upon as described in
Section 2.05 (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"LIQUIDATION REPORT": A liquidation report in the form of Exhibit C
attached hereto.
"MASTER SERVICING FEE": With respect to any Payment Date, 1/12 of the
product of 0.10% per annum and the Aggregate Principal Balance of the Home Loans
as of the first day of the related Collection Period (or, in the case of the
first Collection Period, the Initial Pool Principal Balance).
"MBIA PAYMENT DEFAULT": As defined in the Indenture.
"MONTHLY PAYMENT": With respect to any Mortgage Note, the amount of each
monthly payment payable by the Obligor under such Mortgage Note in accordance
with its terms, including one month's accrued interest on the related Principal
Balance at the then applicable Mortgage Interest Rate, but net of any portion of
such monthly payment that represents late payment charges, prepayment or
extension fees or collections allocable to payments to be made by Obligors for
payment of insurance premiums or similar items.
"MOODY'S": ▇▇▇▇▇'▇ Investors Service, Inc. and its successors in interest.
"MORTGAGE": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Home Loan.
"MORTGAGE INTEREST RATE": As defined in the Indenture.
"MORTGAGE NOTE": The note or other instrument evidencing the indebtedness
of an Obligor under the related Home Loan.
"MORTGAGED PROPERTY": The underlying property securing a Home Loan.
"NET LIQUIDATION PROCEEDS": As to any Home Loan, Liquidation Proceeds net
of Liquidation Expenses, but in no event shall the portion of Net Liquidation
Proceeds in respect of such Home Loan allocable to principal exceed the
outstanding Principal Balance of the related Home Loan.
"NET WORTH": For any fiscal quarter, the sum of the Servicer's assets
reflected on a balance sheet for such fiscal quarter prepared in accordance with
GAAP consistently applied minus the sum of the Servicer's liabilities required
to be shown as such on a balance sheet for such fiscal quarter prepared in
accordance with GAAP consistently applied.
"NOTE ACCOUNT": The segregated account established and maintained by the
Indenture Trustee pursuant to Section 8.02 of the Indenture.
"NOTE BALANCE": Note Balance, as defined in the Indenture.
"NOTEHOLDER" or "HOLDER": The Person in whose name a Note is registered in
the Note Register, except that, solely for the purpose of taking any action
under Article VI or giving any consent pursuant to this Agreement, any Note
registered in the name of the Issuer or the Servicer or any Person actually
known to a Responsible Officer of the Indenture Trustee to be an Affiliate of
the Issuer or the Servicer shall be deemed not to be outstanding and the Voting
Interest evidenced thereby shall not be taken into account in determining
whether Holders of the requisite Voting Interests necessary to take any such
action or effect any such consent have acted or consented unless the Issuer, the
Servicer or any such Person is an owner of record of all of the Notes.
"NOTE INSURANCE POLICY": The Financial Guaranty Insurance Policy (No.
28860) dated November 30, 1998, including any endorsements thereto, issued by
the Note Insurer for the benefit of the Noteholders, pursuant to which the Note
Insurer guarantees payment of Insured Payments.
"NOTE INSURER": MBIA Insurance Corporation, a stock insurance company
organized and created under the laws of the State of New York, and any
successors thereto.
"NOTE INSURER DEFAULT": The existence and continuance of any of the
following:
(a) an MBIA Payment Default;
(b) entry by a court having jurisdiction in the premises of (1) a
final and nonappealable 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 or (2) a final and nonappealable decree
or order adjudging the Note Insurer bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, 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, liquidation, rehabilitator, assignee, 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, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(c) 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 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 of a petition
or answer or consent seeking reorganization or relief under any applicable
United States federal or state law, or the consent 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, trustee,
sequestrator or similar official of the Note Insurer or of any substantial
part of its property, or the failure by 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, or
the taking of corporate action by the Note Insurer in furtherance of any
such action.
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Note Insurer Default, the consent by the Note
Insurer shall not be required for any action or inaction hereunder and the Note
Insurer shall not have any rights with respect thereto except that the Note
Insurer shall be entitled to an Opinion of Counsel to the effect that such
amendment does not materially and adversely impair the Note Insurer's interests
if an amendment is requested while a Note Insurer Default is continuing.
"NOTE INSURER PARTIES": The Note Insurer or its respective agents,
representatives, directors, officers or employees.
"NOTE REGISTER": The register maintained pursuant to Section 2.06 of the
Indenture.
"NOTES": The Issuer's Asset-Backed Notes, Series 1998-4, issued pursuant to
the Indenture.
"OBLIGOR": The borrower under a Mortgage Note.
"OFFICER'S CERTIFICATE": A certificate signed by the Chairman of the Board,
the Vice Chairman of the Board, the President, Chief Operating Officer or a Vice
President of the Seller, the Depositor, the Servicer or, in the case of the
Issuer, an authorized signatory of the Owner Trustee, as the case may be, and
delivered to the Indenture Trustee, Note Insurer or each Rating Agency, as the
case may be.
"ORIGINAL PRINCIPAL AMOUNT": With respect to any Home Loan, the original
principal amount due under the related Mortgage Note as of its date of
origination.
"PAYMENT AHEAD": Any payment remitted by a Obligor with respect to a
Mortgage Note during a Collection Period in excess of the Monthly Payment due
during such Collection Period with respect to such Mortgage Note, which excess
sums the related Obligor has instructed the Servicer to apply to Monthly
Payments due in one or more subsequent Collection Periods. A Monthly Payment
that was a Payment Ahead shall, for purposes of computing certain amounts under
this Agreement, be deemed to have been received by the Servicer on the date in
the related Collection Period on which such Monthly Payment would have been due
if such Monthly Payment had not been paid as part of a Payment Ahead.
"PAYMENT DATE": The date of payment on the Notes pursuant to the Indenture,
which date is the 25th day of each month or, if such day is not a Business Day,
the Business Day immediately following such 25th day, beginning in December
1998.
"PERCENTAGE INTEREST": As defined in the Indenture.
"PERMITTED INVESTMENTS": One or more of the following obligations,
instruments and securities:
(a) direct obligations of, and obligations fully guaranteed by, the
United States of America, ▇▇▇▇▇▇▇ Mac, ▇▇▇▇▇▇ ▇▇▇, the Federal Home Loan
Banks or any agency or instrumentality of the United States of America
rated "Aa3" or higher by ▇▇▇▇▇'▇, the obligations of which are backed by
the full faith and credit of the United States of America;
(b) (i) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or its agent
acting in their respective commercial capacities) incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by federal and/or state authorities, so long
as, at the time of such investment or contractual commitment providing for
such investment, such depository institution or trust company or its
ultimate parent has a short-term unsecured debt rating in one of the two
highest available rating categories of S&P and ▇▇▇▇▇'▇ and provided that
each such investment has an original maturity of no more than 365 days, and
(ii) any other demand or time deposit or deposit which is fully insured by
the FDIC;
(c) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (a) above and entered into with
a depository institution or trust company (acting as a principal) rated "A"
or higher by S&P and rated "A2" or higher by ▇▇▇▇▇'▇; provided, however,
that collateral transferred pursuant to such repurchase obligation must be
of the type described in clause (a) above and must (i) be valued daily at
current market price plus accrued interest, (ii) pursuant to such
valuation, be equal, at all times, to 105% of the cash transferred by the
Indenture Trustee in exchange for such collateral and (iii) be delivered to
the Indenture Trustee or, if the Indenture Trustee is supplying the
collateral, an agent for the Indenture Trustee, in such a manner as to
accomplish perfection of a security interest in the collateral by
possession of certified securities;
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof which has a long-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the
time of such investment;
(e) commercial paper having an original maturity of less than 365 days
and issued by an institution having a short-term unsecured debt rating in
the highest available rating category of each of the Rating Agencies at the
time of such investment;
(f) a guaranteed investment contract approved by each of the Rating
Agencies and the Note Insurer and issued by an insurance company or other
corporation having a long-term unsecured debt rating in the highest
available rating category of each of the Rating Agencies at the time of
such investment;
(g) money market funds having ratings in the highest available rating
categories of ▇▇▇▇▇'▇ and one of the two highest available rating
categories by S&P at the time of such investment (any such money market
funds which provide for demand withdrawals being conclusively deemed to
satisfy any maturity requirements for Permitted Investments set forth
herein), including money market funds of the Indenture Trustee and any such
funds that are managed by the Indenture Trustee or its affiliates or for
which the Indenture Trustee or any affiliate acts as advisor as long as
such money market funds satisfy the criteria of this subparagraph (g); and
(h) any investment otherwise acceptable to the Note Insurer and each
Rating Agency.
"PERSON": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"PRINCIPAL BALANCE": As to any Home Loan and any Determination Date, the
actual outstanding principal amount thereof as of the close of business on the
Determination Date in the preceding month (or, in the case of the first
Determination Date, as of the applicable Cut-off Date) less (1) all scheduled
payments of principal received in respect of such Home Loan and due during the
related Collection Period, (2) all other amounts collected, received, or
otherwise recovered in respect of principal on the Home Loans (including
Principal Prepayments, but not including Payments Ahead that are not allocable
to principal for the related Collection Period) during or in respect of the
related Collection Period, (3) Net Liquidation Proceeds and Trust Insurance
Proceeds allocable to principal recovered or collected in respect of such Home
Loan during the related Collection Period, (4) the portion of the Purchase Price
allocable to principal to be remitted to the Indenture Trustee on or prior to
the next succeeding Deposit Date in connection with a release and removal of
such Home Loan pursuant to the Indenture, to the extent such amount is actually
remitted on or prior to such Deposit Date; provided, however, that a Home Loan
that has become a Liquidated Home Loan since the preceding Determination Date
(or, in the case of the first Determination Date, since the applicable Cut-off
Date) will be deemed to have a Principal Balance of zero on the current
Determination Date, and (5) any other reduction in the principal balance of the
related Mortgage Note, including a reduction as a result of any bankruptcy or
other court order; provided that the principal balance of the Home Loan shall be
zero on the Stated Maturity Date.
"PRINCIPAL PREPAYMENT": As to any Home Loan and Collection Period, any
payment by a Obligor or other recovery in respect of principal on a Home Loan
(including the portion of Net Liquidation Proceeds in respect of such Home Loan
allocable to principal) that, in the case of a payment by an Obligor, is
received in advance of its scheduled due date and is not a Payment Ahead.
"PURCHASE PRICE": As defined in the Indenture.
"RATING AGENCIES": Standard & Poor's and ▇▇▇▇▇'▇ (each, a "Rating Agency").
If either such agency or a successor is no longer in existence, "Rating Agency"
shall be such nationally recognized statistical credit rating agency, or other
comparable Person, designated by the Servicer, notice of which designation shall
be given to the Indenture Trustee.
"REALIZED LOSS": With respect to any Liquidated Home Loan, the amount, if
any, by which the Principal Balance of such Home Loan (determined as of the
Determination Date immediately prior to such Home Loan becoming a Liquidated
Home Loan) exceeds the portion of Net Liquidation Proceeds, if any, in respect
of such Home Loan allocable to principal, which amount shall in no event exceed
the Principal Balance of such Home Loan (determined as of the Determination Date
immediately prior to such Home Loan becoming a Liquidated Home Loan); provided
however, that Realized Losses shall be reduced by 80% of any amounts recovered
by the Servicer subsequent to the date on which a Home Loan became a Liquidated
Home Loan.
"REFINANCED HOME LOAN": A Home Loan the proceeds of which were not used to
purchase the related Mortgaged Property.
"REMITTABLE FUNDS": With respect to any Deposit Date, the amount equal to
the aggregate of the following amounts:
(a) all payments in respect of or allocable to interest received with
respect to the Home Loans during the related Collection Period and all
other interest payments on or in respect of the Home Loans received by or
on behalf of the Servicer during the related Collection Period (including
Payments Ahead that are allocable to interest for the related Collection
Period), and any net income from related REO Properties collected during
the related Collection Period;
(b) all scheduled payments of principal received (or deemed to have
been received, in the case of Payments Ahead) with respect to the Home
Loans during the related Collection Period, and all other principal
payments (including Principal Prepayments, but excluding amounts described
elsewhere in this definition) received or deemed to have been received
during the related Collection Period (including Payments Ahead that are
allocable as principal for the related Collection Period) in respect of the
Home Loans; and
(c) all Trust Insurance Proceeds, Net Liquidation Proceeds received
during the related Collection Period, and any subsequent collections on any
Liquidated Home Loan to the extent of any Realized Loss incurred with
respect to such Home Loan, after payment to the Servicer of any additional
compensation permitted in respect of such Home Loan under Section 2.07;
but net of the following amounts:
(1) the Servicing Fee and any other compensation payable to the
Servicer pursuant to Section 2.07 for the related Collection Period to
the extent not previously paid to or retained by the Servicer;
(2) the aggregate amount of Servicing Advances, not to exceed
$250 per Home Loan, made by the Servicer with respect to any Home Loan
and not previously reimbursed to the Servicer;
(3) the aggregate amount of Servicing Advances to the extent of
amounts recovered on the Home Loans with respect to which the Servicer
made such Servicing Advances (other than those included in the related
Liquidation Expenses or netted out by the Servicer from related
Insurance Proceeds or reimbursed pursuant to clause (2) above) or
reimbursed to the Servicer pursuant to Section 8.02(c) of the
Indenture;
(4) any amount deposited into the Collection Account that may not
be withdrawn therefrom pursuant to a final and nonappealable order of
a United States bankruptcy court of competent jurisdiction imposing a
stay pursuant to ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code and
that would otherwise have been included in Remittable Funds on such
Deposit Date; and
(5) excess Net Liquidation Proceeds as described in the second
paragraph of Section 2.05.
"REO PROPERTY": Any Mortgaged Property acquired by the Indenture Trustee,
on behalf of the Trust, by foreclosure, deed in lieu of foreclosure, or similar
action.
"RESPONSIBLE OFFICER": When used with respect to the Indenture Trustee, the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, the Secretary, any Assistant Secretary, the Treasurer, any
Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or
Assistant Trust Officer, the Controller and any Assistant Controller or any
other officer of the Indenture Trustee customarily performing functions similar
to those performed by any of the above designated officers and to whom, with
respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"ROLLING DELINQUENCY PERCENTAGE": As of any Payment Date, the average of
the Delinquency Percentages as of the last day of each of the three (or one,
two, and three in the case of the first three Payment Dates, as applicable) most
recently ended Collection Periods.
"ROLLING LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of a fraction, the numerator of which is the aggregate amount of
Realized Losses incurred during the preceding 12 Collection Periods, and the
denominator of which is the aggregate Principal Balances of the Home Loans as of
the first day of the 12th preceding Collection Period.
"ROLLING LOSS RATE TRIGGER": The Rolling Loss Percentage exceeds 2.50% as
of any Payment Date on or after the Payment Date occurring in December 1998.
"SELLER": City National Bank of West Virginia, as seller of the Home Loans.
"SERVICER": City National Bank of West Virginia, or any successor servicer
appointed as provided pursuant to this Agreement.
"SERVICER REMITTANCE REPORT": The monthly report prepared by the Servicer
and delivered to the parties specified in Section 3.01.
"SERVICER TERMINATION EVENT": As defined in Section 6.01.
"SERVICING ADVANCES": All reasonable and customary "out-of-pocket" costs
and expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (1) the preservation,
restoration, and protection of the Mortgaged Properties, including without
limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
to the extent not paid by the related Obligors, (2) any enforcement or judicial
proceedings with respect to the Home Loans or Mortgaged Properties, including
collections and foreclosures, (3) the management and liquidation of any REO
Property and (4) compliance with the Servicer's obligations under Section 2.03
(other than its obligation to deposit in the Collection Account amounts
representing the deductible in respect of any blanket hazard insurance policy).
"SERVICING FEE": With respect to any Payment Date, 1/12 of the product of
the Servicing Fee Rate and the Aggregate Principal Balance of the Home Loans as
of the first day of the related Collection Period (or, in the case of the first
Collection Period, the Initial Pool Principal Balance).
"SERVICING FEE RATE": 1.00% per annum.
"SERVICING OFFICER": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Home Loans whose name
and specimen signature appear on a list of servicing officers annexed to an
Officer's Certificate furnished to the Indenture Trustee by the Servicer, as
such list may from time to time be amended.
"STANDARD & POOR'S" OR "S&P": Standard & Poor's Ratings Services, a
division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and its successors in interest.
"SUB-SERVICER": Any Person, including an Affiliate of the Servicer, with
whom the Servicer has entered into a Sub-Servicing Agreement and who satisfies
the requirements set forth in Section 2.14 hereof in respect of the
qualification of a Sub-Servicer.
"SUB-SERVICING ACCOUNT": Any segregated account, which shall at all times
be an Eligible Account, established and maintained as though it were a
Collection Account pursuant to Section 2.02(b) and entitled "[Sub-Servicer], in
trust for the benefit of Holders of City Capital Home Loan Trust 1998-4
Asset-Backed Notes, Series 1998-4, and MBIA as Note Insurer Collection Account".
References herein to the Collection Account shall include any Sub-Servicing
Account as the context requires.
"SUB-SERVICING AGREEMENT": A written contract between the Servicer and any
Sub-Servicer relating to the servicing and/or administration of certain Home
Loans.
"TOTAL EXPECTED LOSSES": As of any Payment Date, the sum of (1) cumulative
Realized Losses on the Home Loans from the applicable Cut-off Dates through the
end of the related Collection Period and (2) the Delinquency Loss Factor.
"TOTAL EXPECTED LOSSES TRIGGER": As of any Payment Date, (1) from the
Closing Date through and including the fifth anniversary of the Closing Date,
the Total Expected Losses equal or exceed 13.00% of the Initial Pool Principal
Balance of the Home Loans and (2) from the date immediately following the fifth
anniversary of the Closing Date and thereafter, the Total Expected Losses equal
or exceed 16.00% of the Initial Pool Principal Balance of the Home Loans.
"TRANSFEROR": City Capital Markets Corporation, as transferor of the Home
Loans to the Depositor pursuant to the terms of that certain Home Loan Sale
Agreement.
"TRUST CERTIFICATES": The certificates of beneficial ownership of the
Issuer.
"TRUST ESTATE": As defined in the Indenture.
"TRUST INSURANCE PROCEEDS": Insurance Proceeds that (1) are applied by the
Servicer to reduce the Principal Balance of the related Home Loan and (2) not
applied to the restoration or repair of the related Mortgaged Property or
released to the related Obligor in accordance with the Servicer's normal
servicing procedures, applicable law or the terms of the related Home Loan.
"TRUST PAYING AGENT": As defined in the Deposit Trust Agreement.
"VICE PRESIDENT": Any vice president, whether or not designated by a number
or a word or words added before or after the title "vice president".
"VOTING INTEREST": With respect to any provisions hereof providing for the
action, consent or approval of the Holders of all Notes evidencing specified
Voting Interests in the Trust Estate, the Noteholders will collectively be
entitled to 100% of the aggregate Voting Interests represented by all Notes.
Voting Interests allocated to the Notes shall be allocated in proportion to the
Note Balance. With respect to any provision hereof providing for action, consent
or approval of the Notes, each Holder of the Notes will have a Voting Interest
in the Notes equal to such Holder's Percentage Interest in the Notes.
Section 1.02.00 Interest Calculations.
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All calculations of interest at the Mortgage Interest Rate that are made in
respect of the Principal Balance of a Home Loan, shall be made on a monthly
basis using a 360-day year of twelve 30 day months.
Section 1.03.00 Determination of Material Adverse Effect.
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Whenever a determination is to be made under this agreement as to whether a
given action, course of conduct, event or set of facts or circumstances could or
would have a material adverse effect on the Trust Estate, the Note Insurer or
any Noteholder (or any similar or analogous determination), such determination
shall be made without giving effect to the insurance provided by the Note
Insurance Policy.
ARTICLE II
ADMINISTRATION AND SERVICING OF HOME LOANS
Section 2.01.00 Servicing Generally.
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(a) General Duties; Licensing. Acting directly or through one or more
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Sub-Servicers as provided in Section 2.14, the Servicer, as servicer, shall
administer the Home Loans with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to all comparable home loans
that it services for itself or others and in conformance with standard industry
practice for servicing of home loans similar to the Home Loans. The Servicer
shall follow its customary standards, policies and procedures in performing its
duties as Servicer, to the extent not in conflict with the provisions of this
Agreement. Notwithstanding the appointment of any Sub-Servicer, the Servicer
shall remain liable for the performance of all of the servicing obligations and
responsibilities under this Agreement. The Servicer shall maintain all licenses
and qualifications necessary under the laws of any jurisdiction where Mortgaged
Properties are located for it to perform the servicing obligations hereunder
legally. The Servicer shall cause any Sub-Servicer to maintain for it all
licenses and qualifications necessary to perform its servicing obligations in
the states where the Mortgaged Properties to which the applicable Sub-Servicing
Agreement relates are located. The Servicer shall cooperate with the Issuer, the
Indenture Trustee, and the Note Administrator and furnish to the Issuer, the
Indenture Trustee, and the Note Administrator such information in its possession
as may be necessary or otherwise reasonably requested to enable the Issuer, the
Indenture Trustee, and the Note Administrator, to perform their respective tax
reporting duties under the Indenture. The Issuer and the Indenture Trustee shall
furnish the Servicer with any powers of attorney and other documents requested
by the Servicer and the Master Servicer necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder, within
5 days of receipt of such request. The forms of such documents shall be appended
to such requests.
(b) Interest Rate and Monthly Payments. The Servicer shall enforce each
------------------------------------
Home Loan. The Servicer's records shall, at all times, reflect the Mortgage
Interest Rate and Monthly Payment.
(c) Servicer Authority. Without limiting the generality of the foregoing,
-------------------
the Servicer (1) shall continue, and is hereby authorized and empowered by the
Issuer and the Indenture Trustee, to execute and deliver, on behalf of itself,
the Issuer, the Noteholders, the Note Insurer and the Indenture Trustee or any
of them, 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 Loans and with respect to the related Mortgaged Properties and (2)
subject to Section 2.05, to institute foreclosure proceedings or obtain deeds in
lieu of foreclosure so as to convert ownership of Mortgaged Properties into the
name of the Indenture Trustee pursuant to Section 2.05 of this Agreement. The
Servicer may ▇▇▇ to enforce or collect on any of the Home Loans or any insurance
policy covering a Home Loan, in its own name if possible, or on behalf of the
Issuer or the Indenture Trustee. If the Servicer commences a legal proceeding to
enforce a Home Loan or any such insurance policy, the Issuer and the Indenture
Trustee shall thereupon be deemed to have automatically assigned the Home Loan
or the rights under such insurance policy to the Servicer for purposes of
collection only. If, however, in any suit or legal proceeding for enforcement,
it is held that the Servicer may not enforce or collect on a Home Loan or any
insurance policy covering a Home Loan on the ground that it is not a real party
in interest or a holder entitled to enforce such Home Loan or such insurance
policy, as the case may be, then the Issuer and the Indenture Trustee shall,
upon the written request of a Servicing Officer, execute and return to the
Servicer such powers of attorney and other documents as are necessary or
appropriate to enable the Servicer to enforce such Home Loan or insurance
policy, as the case may be, and which are prepared by the Servicer and submitted
to the Issuer or the Indenture Trustee for execution.
The Servicer, on behalf of the Issuer, the Noteholders and the Note
Insurer, shall prepare, execute, deliver and take all actions reasonably
necessary to protect the Trust Estate pursuant to Section 3.05 of the Indenture
and shall, on behalf of the Issuer, execute and deliver and take any additional
actions as shall be deemed necessary to effect the administrative obligations of
the Issuer under the Indenture.
(d) Independent Contractor Relationship. The relationship of the Servicer
------------------------------------
to the Issuer and the Indenture Trustee under this Agreement is intended by the
parties to be that of an independent contractor and not that of a joint
venturer, partner or agent.
Section 2.02.00 Collection of Certain Home Loan Payments; Collection
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Account.
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(a) Collection Procedures. The Servicer shall, to the extent such
----------------------
procedures shall be consistent with this Agreement, follow such collection
procedures as it follows from time to time with respect to Home Loans in its
servicing portfolio that are comparable to the Home Loans. The Servicer shall
not amend or modify these procedures, policies and practices with respect to the
Home Loans (other than as required by applicable laws and regulations) without
the prior consent of the Note Insurer and the Master Servicer, and a copy of any
such amendment or modification shall be furnished to the Indenture Trustee.
Consistent with the foregoing, the Servicer may in its discretion (1) waive any
assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees that may be collected
in the ordinary course of servicing the Home Loans, (2) if an Obligor is in
default or appears about to be in default because of an Obligor's financial
condition, arrange with the Obligor a schedule for the payment of delinquent
payments due on the related Home Loan or (3) modify payments of monthly
principal and interest on any Home Loan becoming subject to the terms of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief Act"),
in accordance with the Servicer's general policies for comparable Home Loans
subject to the Relief Act; provided, however, that the Servicer shall not,
without the prior written consent of the Note Insurer, permit any waiver,
modification or variance of a Home Loan unless permitted under Section 2.04. The
Servicer will not consent to the placement of a deed of trust or mortgage, as
applicable, on any Mortgaged Property that has a priority equal to or higher
than the lien securing the related Home Loan unless such Home Loan is prepaid in
full. No partial release of a Home Loan shall be made if it would cause the
current Combined Loan-to-Value Ratio of the Home Loan (taking into account the
partial release) to be higher than the original Combined Loan-to-Value Ratio of
the Home Loan.
(b) Collection Account. The Servicer shall establish and maintain, or cause
------------------
to be established and maintained, one or more Eligible Accounts that in the
aggregate are the Collection Account. At the Servicer's option, amounts held in
the Collection Account shall be invested by the depository institution or trust
company then maintaining the account at the written direction of the Servicer in
Permitted Investments that mature not later than the Deposit Date next
succeeding the date of investment. The Servicer shall not retain any cash or
investment in the Collection Account for a period in excess of 12 months and
cash therein shall be considered transferred on a first-in, first-out basis to
the Indenture Trustee for inclusion in the Note Account, as described in Section
2.02(d). All net income and gain realized from any such investment shall be for
the benefit of the Servicer as additional servicing compensation and shall be
subject to its withdrawal or order from time to time. Any losses realized in
connection with any such investment shall be for the account of the Servicer and
the Servicer shall deposit or cause to be deposited the amount of such loss (to
the extent not offset by income from other investments) in the Collection
Account immediately upon the realization of such loss and shall have no right to
reimbursement therefor. Any benefit resulting from deposits, maintenance or
investment of funds in the Collection Account shall be for the Servicer's
benefit.
(c) Deposits to Collection Account. Subject to the last paragraph of this
-------------------------------
Section 2.02(c), the Servicer shall deposit in the Collection Account each of
the following payments on and collections in respect of the Home Loans as soon
as practicable, but in no event later than the close of business on the second
Business Day after its receipt thereof:
(i) all payments in respect of or allocable to interest on the Home
Loans (including any net income from REO Properties), net of the Servicing
Fees attributable to such payments;
(ii) all collections of principal on or with respect to the Home
Loans;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds;
(v) all Trust Insurance Proceeds (including, for this purpose, any
amounts required to be credited by the Servicer pursuant to the last
sentence of Section 2.03); and
(vi) any subsequent collections on any Liquidated Home Loan to the
extent of any Realized Loss incurred with respect to such Home Loan, after
payment to the Servicer of any additional compensation permitted in respect
of such Home Loan under Section 2.07;
in any case net of its Servicing Fees, Ancillary Servicing Compensation,
reimbursable outstanding Servicing Advances, and fees payable to the Servicer in
respect of any subsequent collections on Liquidated Home Loans to the extent the
Servicer's automated system deducts such amounts from collected funds prior to
deposit of such collected funds into the Collection Account.
The Servicer shall replace all amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of a
Servicing Advance pursuant to Section 4.01 by depositing into the Collection
Account on or prior to the Deposit Date immediately following such withdrawal an
amount equal to the total of all such amounts so applied since the immediately
preceding Deposit Date.
The foregoing requirements respecting deposits to the Collection Account
are exclusive, it being understood that, without limiting the generality of the
foregoing, the Servicer need not deposit in the Collection Account amounts
representing fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or extension or other
administrative charges paid by Obligors or amounts received by the Servicer for
the account of Obligors for application towards the payment of taxes, insurance
premiums, assessments and similar items. The amounts deposited in the Collection
Account are subject to withdrawal by the Servicer, from time to time, (1) to
make transfers to the Indenture Trustee for deposit into the Note Account
pursuant to Section 2.02(d), (2) to pay itself the Servicing Fee, to the extent
not already paid to or retained by the Servicer, pursuant to Section 2.07,
Ancillary Servicing Compensation, and investment income on Permitted
Investments, (3) to make Servicing Advances or to reimburse itself for Servicing
Advances, as applicable, in either case in accordance with Section 4.01, (4) to
withdraw amounts that have been deposited into the Collection Account in error
or (5) to clear and terminate the Collection Account in accordance with the
Indenture. In addition, if the Servicer deposits in the Collection Account any
amount not required to be so deposited or any amount in respect of payments by
Obligors made by checks subsequently returned for insufficient funds or other
reason for non-payment, it may at any time withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding.
Upon such terms as the Note Insurer, Standard & Poor's and Moody's may
approve, the Servicer may make the deposits to the Collection Account referred
to in Section 2.02(c) on a later day than the second Business Day after receipt
of the amounts required to be so deposited, which terms and later day shall be
specified by the Note Insurer, Standard & Poor's and Moody's and confirmed to
the Indenture Trustee and the Servicer in writing; provided, however, that in
any event such amounts shall be deposited into the Collection Account no later
than the next succeeding Deposit Date.
(d) Remittances to Indenture Trustee. At or before 12:00 noon Charleston,
---------------------------------
West Virginia time on each Deposit Date, the Servicer shall withdraw from the
Collection Account all amounts on deposit therein that constitute any portion of
Remittable Funds for the related Deposit Date and remit such amounts to the
Indenture Trustee for deposit into the Note Account. In addition, any amounts
required pursuant to the Indenture to be deposited into the Note Account in
connection with a purchase of any Home Loans by the Servicer pursuant to the
Indenture and any other amounts required by this Agreement to be deposited by
the Servicer with the Indenture Trustee shall be remitted to the Indenture
Trustee for deposit into the Note Account on the applicable Deposit Date. On
each Deposit Date after the Indenture has been satisfied and released for so
long as the Deposit Trust Agreement remains in effect, the Servicer shall remit
all Remittable Funds to the Trust Paying Agent, for deposit into the Certificate
Distribution Account in accordance with the Deposit Trust Agreement.
In the event that the Servicer does not remit all Remittable Funds for the
related Payment Date on the Deposit Date, the Servicer also shall pay to the
Indenture Trustee on demand, for its own account and not for the account of the
Noteholders, an amount equal to the income that the Indenture Trustee would have
received on the investment of such funds in Permitted Investments, as reasonably
calculated by the Indenture Trustee, from the Deposit Date until the date that
such Remittable Funds have been remitted to the Indenture Trustee.
Section 2.03.00 Hazard Insurance Policies.
-------------------------
The Servicer shall cause to be maintained for each Home Loan as to which
the related Mortgaged Property has been acquired on behalf of the Indenture
Trustee upon foreclosure, by deed in lieu of foreclosure or comparable
conversion, hazard insurance (including flood insurance coverage, if obtainable,
to the extent such property is located in a federally designated flood area in
such amount as is required under applicable FEMA guidelines) with extended
coverage in an amount that is not less than the lesser of (1) the maximum
insurable value from time to time of the improvements securing such Home Loan
from time to time, (2) the combined principal balance owing on such Home Loan
and any loan senior to such Home Loan and (3) the minimum amount required to
compensate for damage or loss on a replacement cost basis; provided, further,
that such hazard insurance shall be in an amount not less than such amount as is
necessary to avoid the application of any coinsurance clause contained in the
related hazard insurance policy. Each such hazard insurance policy shall contain
a standard mortgagee loss payable clause naming the originator, its successors
and assigns, as mortgagee. The Servicer shall be under no obligation to require
that any Obligor maintain earthquake or other additional insurance and shall be
under no obligation itself to maintain any such additional insurance on property
acquired in respect of a Home Loan, other than pursuant to such applicable laws
and regulations as shall at any time be in force and as shall require such
additional insurance. Amounts collected by the Servicer under any such policies
shall be deposited into the Collection Account in accordance with Section 2.02
to the extent that they constitute Net Liquidation Proceeds or Trust Insurance
Proceeds. If the Servicer shall obtain and maintain a blanket policy, issued by
an insurer acceptable to each Rating Agency and the Note Insurer, insuring
against such hazard losses, it shall conclusively be deemed to have satisfied
its obligations as set forth in the first sentence of this Section, it being
understood and agreed that such policy may contain a deductible clause that is
in form and substance consistent with standard industry practice, in which case
the Servicer shall, in the event that there shall not have been maintained on
the related Mortgaged Property a policy complying with the first sentence of
this Section 2.03, and there shall have been a loss that would have been covered
by such policy, deposit in the Collection Account in accordance with Section
2.02 the amount not otherwise payable under the blanket policy because of such
deductible clause from its own funds, and such amount shall not be reimbursable
to the Servicer.
Section 2.04.00 Assumption and Modification Agreements.
--------------------------------------
In any case in which property subject to a Mortgage is voluntarily conveyed
by the Obligor, the Servicer may enter into an assumption agreement with the
Person to whom such Mortgaged Property has been or is about to be conveyed,
pursuant to which such Person becomes liable under the related Mortgage Note
and, to the extent permitted by applicable law or the related mortgage
documents, the Obligor remains liable thereon. The Servicer shall not enter into
any assumption agreement which modifies the Mortgage Interest Rate or payment
terms of the Mortgage Note without the consent of the Note Insurer. If the
Person to whom such Mortgaged Property has been or is about to be conveyed
satisfies the Servicer's then-current underwriting standards as to borrower
creditworthiness for home loans similar to the Home Loans and is in the same
Seller credit rating category as that which was assigned to the borrower under
the Home Loan being replaced, the Servicer may enter into a substitution of
liability agreement with such person, under which the previous Obligor is
released from liability thereon and the transferee is substituted as an Obligor
and becomes liable under the Mortgage Note. The Servicer shall not permit an
assumption agreement or a substitution of liability agreement with respect to a
Home Loan unless permitted by applicable law and unless the Servicer determines
that such action would not materially increase the risk of default or
delinquency on such Home Loan or materially impair the security for such Home
Loan. The Servicer will not enter into any assumption agreement or substitution
of liability agreement unless such agreement complies with the Servicer's
standard servicing procedures and the Servicer would enter into such agreement
with respect to a home loan in its own portfolio. The Servicer shall notify the
Indenture Trustee and the Master Servicer that any assumption agreement or
substitution of liability agreement has been completed and the Servicer shall
forward to the Custodian the original of such assumption agreement or
substitution of liability agreement. Such assumption agreement or substitution
of liability agreement shall, for all purposes, be considered a part of the
related Home Loan File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the Mortgage
Interest Rate shall not be reduced (but may be increased), the Principal Balance
of such Home Loan shall not be changed and the term of such Home Loan will not
be extended beyond the existing term of such Home Loan. Any fee collected by the
Servicer for entering into any such agreement shall be retained by the Servicer
as Ancillary Servicing Compensation.
Notwithstanding any other provision hereof 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 reasons of any assumption of a
Home Loan, or transfer of any Mortgaged Property without the assumption thereof,
by operation of law or any assumption or transfer that the Servicer reasonably
believes it may be restricted by law from preventing, for any reason whatsoever.
Subject to the limitations in the following paragraph, the Servicer shall
not agree to any modification, waiver, or amendment of any provision of any Home
Loan unless, in the Servicer's good faith judgment, (i) such modification,
waiver or amendment would minimize the loss that might otherwise be experienced
with respect to such Home Loan, and (ii) such Home Loan has experienced a
payment default or a payment default is reasonably foreseeable by the Servicer.
Notwithstanding the foregoing, no modification, waiver, or amendment of a Home
Loan shall be permitted which, without the prior written consent of the Note
Insurer, would (1) change the Mortgage Interest Rate, (2) forgive the payment of
any principal or interest, (3) impair the priority of the lien represented by
the related Mortgage, (4) extend the final maturity date of the Home Loan beyond
September 25, 2029 in any case except to the extent required under the Relief
Act, or (5) provide for any modified Monthly Payment in an amount less than the
current accrued interest on the Principal Balance of such Home Loan.
Pursuant to the restrictions set forth in the preceding paragraph, the
Servicer shall have the right to modify, waive or amend any provisions of the
Home Loans, in an aggregate amount (as measured by the Principal Balances of
such Home Loans) not to exceed 3.0% of the Initial Pool Principal Balance of the
Home Loans without the consent of the Note Insurer. Any modification, waiver or
amendment of Home Loans in excess of the foregoing 3.0% limitation shall be
subject to prior written consent of the Note Insurer and the Principal Balance
of any Home Loan so modified, waived or amended shall be included in the
calculation of the Delinquency Percentage and the Delinquency Loss Factor.
In conjunction with the foregoing, the Servicer shall notify the Indenture
Trustee of any modification, waiver or amendment of any provision of any Home
Loan and the date thereof, and shall deliver to the Custodian for deposit in the
related Home Loan File, an original counterpart of the agreement relating to
such modification, waiver or amendment, promptly following the execution
thereof. Such notice shall state that the conditions contained in this Section
2.04 have been satisfied.
Section 2.05.00 Servicer's Protection of Trust Estate; Realization upon
----------------------------------------------------------
Defaulted Home Loans
--------------------
(a) Servicer's Protection of Trust Estate. Subject to the servicing
standard and the terms of this Agreement and of the respective Home Loans, the
Servicer shall have full power and authority, to do or cause to be done any and
all things in connection with such servicing and administration which it may
deem necessary or desirable (including exercising any remedy under any Home
Loan, retaining counsel in connection with the performance of any of its
obligations hereunder, and instigating litigation to enforce any obligation of
any Obligor, without the consent or approval of the Indenture Trustee, unless
any such consent or approval is expressly required hereunder or under applicable
law), subject only to the specific requirements and prohibitions of applicable
law, this Agreement (particularly Section 2.04 hereof), and the respective Home
Loans and, with respect to any delinquent or defaulted Home Loan, subject to the
Servicer's good faith determination that such action is necessary or desirable
to realize maximum value for such Home Loan. In performing its obligations
hereunder the Servicer shall at all times act in good faith in a commercially
reasonable manner in accordance with all requirements of law applicable to the
Home Loans. In connection with the servicing of the Home Loans, the Servicer
shall prepare and execute any and all documents or instruments necessary to
maintain the lien created by any Home Loan on the related Mortgaged Property.
The Servicer may agree to modifications, waivers, amendments, subordinations,
consents to or with respect to any documents related to the Home Loan only as
permitted by Section 2.04. The Servicer shall notify the Indenture Trustee, the
Master Servicer and the Note Insurer of any such action and the date thereof,
and shall promptly provide the Indenture Trustee, the Master Servicer, and the
Note Insurer a status report with respect to such actions. The Servicer shall
deliver to the Custodian for deposit in the related Home Loan File an original
counterpart of the agreement relating to such action and a copy of such
agreement for the Custodian's records promptly following the execution thereof.
The Indenture Trustee shall execute, at the direction of the Servicer, any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder and
necessary to maintain the lien created by any Mortgage on the related Mortgaged
Property or any portion thereof.
(b) Realization Upon Default. The Servicer, on behalf of and as the agent
of the Indenture Trustee, shall foreclose upon or otherwise comparably convert
the ownership of Mortgaged Properties securing such of the Home Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 2.02(a) into the
name of the Indenture Trustee; provided, however, that if the Servicer has
actual knowledge or reasonably believes that any Mortgaged Property is affected
by hazardous or toxic wastes or substances, then the Servicer will cause to be
undertaken an environmental inspection of the Mortgaged Property that complies
with ▇▇▇▇▇▇ Mae's selling and servicing guide applicable to single family homes
and its servicing procedures. If the environmental inspection reveals any
potentially hazardous substances, the Servicer will notify the Indenture Trustee
and the Note Insurer, and the Servicer will not foreclose or accept a deed in
lieu of foreclosure on the Mortgaged Property without the consent of the Note
Insurer. In connection with such foreclosure or other conversion, the Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general loan servicing
activities. The foregoing is subject to the proviso that the Servicer shall not
be required to expend its own funds in connection with any foreclosure or
restoration of any Mortgaged Property unless, in the reasonable judgment of the
Servicer, such foreclosure, correction or restoration will increase Net
Liquidation Proceeds (taking into account the reimbursement of such expenses to
the Servicer and any unreimbursed Servicing Advances made or expected to be made
with respect to such Home Loan).
To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the Principal Balance of the related Home Loan
and accrued interest thereon at the applicable Mortgage Interest Rate through
the Determination Date during the Collection Period in which such foreclosure or
conversion occurs, such excess shall be paid directly to the Servicer as
additional Servicing Compensation and shall be free from the lien of the
Indenture.
In the event that title to any Mortgaged Property is acquired as REO
Property by the Indenture Trustee in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be issued to the Indenture
Trustee, or to its nominee, on behalf of the Noteholders and the Note Insurer,
and the Servicer shall manage, conserve, protect and operate each such REO
Property for the Noteholders solely for the purpose of its prompt disposition
and sale. The Servicer shall use its best efforts to dispose of each such REO
Property as expeditiously as possible consistent with the goal of maximizing Net
Liquidation Proceeds (taking into account any unreimbursed Servicing Advances
made or expected to be made with respect to such REO Property). None of the
Issuer, the Indenture Trustee or the Servicer, acting on behalf of the Trust
Estate, shall provide financing from the Trust Estate to any purchaser of any
such REO Property.
The Servicer must determine, as to each defaulted Home Loan, when such Home
Loan has become a Liquidated Home Loan.
Section 2.06.00 Custodian and Indenture Trustee to Cooperate; Release of
----------------------------------------------------------
Home Loan Files.
---------------
(a) Upon the payment in full of the principal balance of any Home Loan, the
Servicer shall notify the Custodian and Indenture Trustee by a certification in
the form of Exhibit B hereto (a "Request for Release") (which certification
shall include a statement to the effect that all amounts received in connection
with such payment which are required to be deposited to the Collection Account
pursuant to Section 2.02 have been so deposited) of a Servicing Officer. Such
notification shall be made from time to time as necessary and consistent with
the servicing standards, but not later than the time that the Servicer delivers
its Servicer Remittance Report to the Issuer, the Master Servicer, the Note
Insurer, and the Indenture Trustee pursuant to Section 3.01. The Custodian
shall, within five Business Days after its receipt of such Request for Release,
release the related Home Loan File or the specified documents to the Servicer.
Upon any such payment in full, the Servicer is authorized to procure a deed of
full reconveyance covering the related Mortgaged Property encumbered by such
Mortgage, which deed, except as otherwise provided in applicable law, shall be
recorded in the office of the County Recorder in which the Mortgage is recorded,
or, as the case may be, to procure an instrument of satisfaction or, if the
related Obligor so requests, an assignment without recourse, in each case
prepared by the Servicer at its expense and executed by the Indenture Trustee,
which deed of reconveyance, instrument of satisfaction or assignment shall be
delivered by the Servicer to the Person entitled thereto, it being understood
and agreed that no expenses incurred in connection with such deed of
reconveyance, assignment or instrument of satisfaction shall be reimbursed from
amounts at the time on deposit in the Collection Account.
(b) From time to time and as appropriate for the servicing or foreclosure
of any Home Loan or to effect a partial release of any Mortgaged Property from
the lien of the related Mortgage, the Servicer shall deliver to the Custodian,
as agent for the Indenture Trustee a Request for Release requesting the related
Home Loan File. The Custodian shall, within five Business Days after its receipt
of such Request for Release, release the related Home Loan File to the Servicer.
Any such Request for Release shall obligate the Servicer to return each and
every document previously requested from the Home Loan File to the Custodian by
the twenty-first day following the release thereof, unless (1) the Home Loan has
been liquidated and the Net Liquidation Proceeds relating to the Home Loan have
been deposited in the Collection Account or the Note Account or (2) the Home
Loan File or such document has been delivered to an attorney, or to a public
trustee or other public official as required by law, for the purposes of
initiating or pursuing legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or non-judicially, and the Servicer has
delivered to the Indenture Trustee a certificate of the Servicer certifying as
to the name and address of the Person to which such Home Loan File or such
document was delivered and the purpose or purposes of such delivery. Upon
receipt of an officer's certificate of the Servicer stating that such Home Loan
was liquidated and that all amounts received or to be received in connection
with such liquidation which are required to be deposited into the Collection
Account or the Note Account have been so deposited, or that such Home Loan has
become an REO Property (each, a "Servicing Officer's Certificate"), the Request
for Release shall be released by the Custodian to the Servicer.
(c) Upon receipt of a Servicing Officer's Certificate, the Indenture
Trustee shall execute any documents prepared by the Servicer and delivered to it
as necessary or appropriate to enable the Servicer to perform its obligations
hereunder, including, without limitation, documents to enable the Servicer to
convey title to a Mortgaged Property to the Obligor or its designee upon payment
of the Home Loan in full or to convey title to an REO Property to the purchaser
thereof, or to convey title to a Mortgaged Property into the name of the
Indenture Trustee pursuant to Section 2.05.
Section 2.07.00 Servicing Compensation; Payment of Certain Expenses by the
-----------------------------------------------------------
Servicer.
--------
On each Deposit Date, the Servicer shall be entitled to receive, by
withdrawal by the Servicer from the Collection Account, out of collections of
interest on the Home Loans for the related Collection Period, as servicing
compensation for such Collection Period, the Servicing Fee, to the extent not
retained by the Servicer from amounts remitted to the Collection Account
pursuant to Section 2.02(c)(i). The Servicer shall also be entitled to retain
any Ancillary Servicing Compensation when received. In addition, if (a) the
Servicer obtains any collections on a Liquidated Home Loan subsequent to the
date on which it became a Liquidated Home Loan and to the extent of any Realized
Loss on such Home Loan, (b) the Required Overcollateralization Amount at such
date is calculated in accordance with clause (d) of the definition of "Required
Overcollateralization Amount" and (c) the Note Insurer consents to such
additional compensation, then the Servicer shall be entitled to receive, as
additional servicing compensation, 20% of such recovery amount in the priority
specified in the Indenture.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of the fees and
expenses relating to the Annual Independent Public Accountant's Servicing Report
described in Section 2.09, and all other fees and expenses not otherwise
expressly stated hereunder for the account of the Noteholders) and shall be
entitled to reimbursement therefor only as provided in Section 8.02(c) of the
Indenture.
Section 2.08.00 Annual Statement as to Compliance.
---------------------------------
The Servicer will deliver to the Issuer, the Indenture Trustee, the Note
Insurer, the Master Servicer and each Rating Agency, on or before March 31 of
each year, beginning with March 31, 1999, an Officer's Certificate of the
Servicer substantially in the form set forth in Exhibit A hereto stating that
(1) a review of the activities of the Servicer during the preceding calendar
year (or since the Closing Date in the case of the first such statement) and of
its performance under this Agreement has been made under such officer's
supervision and (2) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its material obligations under this
Agreement throughout such year (or since the Closing Date in the case of the
first such statement), or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof.
The Servicer shall deliver to the Issuer, the Master Servicer, and the
Indenture Trustee, with a copy to the Note Insurer and each Rating Agency,
promptly after having obtained knowledge thereof, but in no event later than ten
Business Days thereafter, written notice by means of an Officer's Certificate of
any event that with the giving of notice or the lapse of time, or both, would
become a Servicer Termination Event. Without duplication of the foregoing, the
Servicer will deliver to the Master Servicer and the Indenture Trustee a copy of
any information it provides to the Note Insurer under Section 2.02(f) of the
Insurance Agreement.
Section 2.09.00 Annual Independent Public Accountants' Servicing Report.
-------------------------------------------------------
On or before March 31 of each year, beginning with March 31, 1999, the
Servicer at its expense shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish a report to the Issuer, the Indenture Trustee, the Note Insurer, the
Master Servicer and each Rating Agency, to the effect that such firm has
examined certain documents and records relating to the servicing activities of
the Servicer for the period covered by such report, and that such examination,
which has been conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers (to the extent that the procedures in
such audit guide are applicable to the servicing obligations set forth in this
Agreement), has disclosed no exceptions or errors in records relating to the
servicing activities of the Servicer that, in the opinion of such firm, are
material, except for such exceptions as shall be set forth in such report.
Section 2.10.00 Access to Certain Documentation and Information Regarding
-----------------------------------------------------------
the Home Loans.
--------------
(a) The Servicer shall provide to supervisory agencies or entities for
regulated Noteholders and to Noteholders that are federally insured savings
associations and the FDIC and its supervisory agents and examiners access to the
documentation regarding the Home Loans required by applicable regulations of the
Office of Thrift Supervision, and to the Issuer, the Master Servicer, the
Indenture Trustee and the Note Insurer (provided, however, that if a Note
Insurer Default has occurred and is continuing, then each Noteholder shall have
such right of access) and their respective agents all documentation relating to
the Home Loans that is in the possession of the Servicer, such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer. Nothing in this Section 2.10(a)
shall derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure of
the Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section.
(b) The Servicer shall supply information to the Indenture Trustee or the
Note Administrator, as the case may be, upon reasonable advance notice, in such
form as the Indenture Trustee or the Note Administrator shall reasonably
request, as is required in the Indenture Trustee's or the Note Administrator's
reasonable judgment to enable the Indenture Trustee or the Note Administrator,
as the case may be, to make required payments and to furnish the certificates,
statements, and reports to Noteholders and the Note Insurer as required of the
Indenture Trustee or the Note Administrator pursuant to the Indenture, it being
understood that the Servicer is responsible for supplying information concerning
the Home Loans and not for any other information, including, without limitation,
calculation of payments due on the Notes. The Servicer shall also supply
information upon reasonable advance notice, in such form as the Note Insurer or
the Master Servicer shall reasonably request, as is reasonably requested by the
Note Insurer to enable the Note Insurer to monitor the performance of the Home
Loans or the Master Servicer to monitor the Servicer's performance of its
obligations hereunder.
Section 2.11.00 Maintenance of Fidelity Bond and Errors and Omissions
---------------------------------------------------------
Policy.
------
The Servicer shall during the term of its service as Servicer maintain in
force a (1) policy or policies of insurance covering errors and omissions in the
performance of its obligations as Servicer hereunder and (2) fidelity bond in
respect of its officers, employees and agents, in each case in such form and
amount as is customary for entities acting in similar capacities and in an
amount that conforms to ▇▇▇▇▇▇ ▇▇▇ levels.
Section 2.12.00 Notices to the Issuer, the Rating Agencies, the Master
Servicer, the Indenture Trustee and the Note Insurer.
In addition to the other notices required to be given to the Issuer, the
Rating Agencies, the Master Servicer, the Indenture Trustee, and the Note
Insurer by the provisions of this Agreement, the Servicer shall give prompt
notice to the Issuer, each Rating Agency, the Master Servicer, the Indenture
Trustee, and the Note Insurer of (1) any amendment to this Agreement and (2) the
occurrence of a Servicer Termination Event. Furthermore, the Home Loan Schedule
and any amendment thereto shall be delivered to the Indenture Trustee in both
physical and computer-readable form.
Section 2.13.00 Reports of Foreclosures and Abandonment of Mortgaged
---------------------------------------------------------
Properties.
----------
On or before February 28 of each year beginning in 1999, the Servicer shall
file the reports of foreclosures and abandonments of any Mortgaged Property
required by Code Section 6050J with the Internal Revenue Service and provide a
copy of such filing to the Indenture Trustee. The reports from the Servicer
shall be in form and substance sufficient to meet the reporting requirements
imposed by such Section 6050J.
Section 2.14.00 Sub-Servicers and Sub-Servicing Agreements.
------------------------------------------
(a) The Servicer may enter into Sub-Servicing Agreements for any servicing
and administration of Home Loans with any institution that is acceptable to the
Note Insurer, the Master Servicer, and the Indenture Trustee and that is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Sub-Servicing Agreement. The Servicer shall give notice
to the Master Servicer, the Indenture Trustee, and the Note Insurer of the
appointment of any Sub-Servicer. The Servicer shall not enter into any
Sub-Servicing Agreement that does not provide for the servicing of the Home
Loans specified therein on a basis consistent with the terms of this Agreement
or that otherwise violates the provisions of this Agreement. The Servicer may
enter into, and make amendments to, any Sub-Servicing Agreement or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or forms shall be consistent with and not violate the provisions of
this Agreement.
(b) For purposes of this Agreement the Servicer shall be deemed to have
received payments on Home Loans when any Sub-Servicer has received such
payments. With respect to the Servicer's obligations under Section 2.01 to make
deposits into the Collection Account, the Servicer shall be deemed to have made
such deposits when any Sub-Servicer has made such deposits into a Sub-Servicing
Account if permitted by the related Sub-Servicing Agreement.
(c) Any Sub-Servicing Agreement and any other transactions or services
relating to the Home Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Servicer alone and the Note Insurer, the Master
Servicer, and the Indenture Trustee shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
any Sub-Servicer, except that the Indenture Trustee shall have such claims or
rights that arise as a result of any funds held by a Sub-Servicer in trust for
or on behalf of the Trust Estate, the Noteholders and the Note Insurer.
Notwithstanding the execution of any Sub-Servicing Agreement, the Servicer shall
not be relieved of any liability hereunder and shall remain obligated and liable
for the servicing and administration of the Home Loans.
Section 2.15.00 Servicing for Benefit of the Note Insurer.
-----------------------------------------
Provided there does not exist a Note Insurer Default, the Servicer hereby
acknowledges and agrees that it shall service and administer the Home Loans and
any REO Properties, and shall maintain the Collection Account for the benefit of
the Noteholders and for the benefit of the Note Insurer, and all references in
this Agreement to the benefit of or actions on behalf of the Noteholders shall
be deemed to include the Note Insurer.
All notices, statements, reports, certificates or opinions required by this
Agreement to be sent to any other party hereto or to the Noteholders shall also
be sent to the Note Insurer.
Section 2.16.00 RESERVED.
--------
Section 2.17.00 Filing of Financing Statements and Continuation Statements.
----------------------------------------------------------
Promptly following the Closing Date and on or before the fifth anniversary
of the filing of any financing statements by the Seller, the Transferor, the
Issuer or the Depositor, respectively, with respect to the assets conveyed to
the Trust Estate, the Servicer shall cause to be prepared and have executed by
the necessary parties and file in the proper jurisdictions all financing and
continuation statements necessary to maintain the liens, security interests, and
priorities of such liens and security interests. The Servicer agrees to file all
such financing statements, and the Indenture Trustee agrees to cooperate with
the Servicer in preparing, executing and filing such statements.
ARTICLE III
SERVICER REMITTANCE REPORT; MASTER SERVICER
Section 3.01.00 Servicer Remittance Report.
--------------------------
Not later than the sixth Business Day of each month, the Servicer shall
deliver to the Issuer, the Indenture Trustee, the Note Insurer, the Master
Servicer and the Note Administrator a computer-readable magnetic tape (the
"Tape" for such month) and a series of hard copy reports generally including the
same information included on the Tape (the "Report," and, together with the
Tape, the "Servicer Remittance Report" for such month) detailing the payments
and collections received in respect of the Home Loans during the immediately
preceding Collection Period. The Servicer Remittance Report shall contain the
data fields described in Exhibit D hereto, including loan-by-loan information
that specifies account number, borrower name, outstanding principal balance and
activity for the preceding Collection Period, and any other information
sufficient to enable the Note Administrator to report the items specified in
clause (x) of clause (i) and clauses (vi) through (xvi) of the definition of
"Payment Date Statement" in the Indenture, as well as (a) the information set
forth on Exhibit C hereto as to Home Loans that became Liquidated Home Loans
during the related Collection Period, and may be delivered in a separate report
in the form of Exhibit C hereto or as part of the Servicer Remittance Report and
(b) any other information regarding the Home Loans as may be required to enable
the Master Servicer to perform its obligations under this Article III or as may
from time to time be agreed to by the Servicer, the Indenture Trustee, the
Master Servicer, the Note Administrator and the Note Insurer. The Servicer shall
only be required to report information concerning the Home Loans, and shall not
be required to calculate any required payments on the Notes or to the Note
Insurer.
Section 3.02.00 Master Servicer Duties.
----------------------
The Master Servicer shall supervise, monitor, and oversee the obligations
of the Servicer in accordance with the terms of this Agreement on behalf of the
Indenture Trustee and for the benefit of the Noteholders, in accordance with
this Agreement and applicable laws and regulations. The Master Servicer shall
(i) oversee and consult with the Servicer as appropriate from time to time to
fulfill the Master Servicer's obligations hereunder, (ii) receive, review and
evaluate all reports, information and other data and documents provided to the
Master Servicer by the Servicer and (iii) otherwise exercise its best efforts to
cause the Servicer to perform and observe the covenants, obligations and
conditions required to be performed under this Agreement.
Section 3.03.00 RESERVED.
--------
Section 3.04.00 Master Servicer Compensation.
----------------------------
As compensation for the performance of its obligations as Master Servicer
under this Agreement, the Master Servicer shall be entitled to receive on each
Payment Date the Master Servicing Fee for such Payment Date, payable as provided
in Section 8.02(c) of the Indenture; provided, however, that, upon the discharge
and release of the Indenture and until termination of this Agreement as provided
herein, the Servicer shall remit the Master Servicing Fee directly to the Master
Servicer on the 25th day of each month (or, if such date is not a Business Day,
the immediately following Business Day). As compensation for the Note
Administrator's services under the Indenture, the Master Servicer shall pay the
reasonable fees of the Note Administrator, as agreed to between the Master
Servicer and the Note Administrator.
Section 3.05.00 Master Servicer Default.
-----------------------
In the event that the Master Servicer fails to observe or perform in any
material respect any of its obligations under this Agreement, which failure
continues unremedied for a period of 30 days after the date on which written
notice of such failure requiring the same to be remedied shall have been given
to the Master Servicer (each, a "Master Servicer Default") by (i) the Indenture
Trustee, at the direction of the Note Insurer (unless the Indenture Trustee and
the Master Servicer are at that time one and the same Person), (ii) by the Note
Insurer, or (iii) by the Indenture Trustee in the event a Note Insurer Default
has occurred and is continuing, unless the Indenture Trustee and the Master
Servicer are one and the same Person, in which case the notice may be given by
the percentage of Noteholders entitled to act in the case of an Event of Default
under the Indenture. If such Master Servicer Default shall not have been
remedied by the Master Servicer, either the Note Insurer or the Indenture
Trustee (unless the Indenture Trustee and the Master Servicer are at that time
one and the same Person), at the direction of the Note Insurer, or the Indenture
Trustee in the event a Note Insurer Default exists and is continuing (or, if at
such time the Indenture Trustee and the Master Servicer are one and the same
Person, by the percentage of Noteholders entitled to act in the case of an Event
of Default under the Indenture), by notice given in writing to the Master
Servicer with a copy to the Note Insurer or the Indenture Trustee, as
applicable, may terminate all of the rights, responsibilities and obligations of
the Master Servicer under this Agreement (except its rights to indemnification
by the Servicer under this Agreement and any other rights accruing to the Master
Servicer prior to the date of termination). On or after the receipt by the
Master Servicer of such written notice, unless a successor Master Servicer
acceptable to the Note Insurer (so long as no Note Insurer Default then exists)
shall have been appointed, the Indenture Trustee (unless it and the Master
Servicer are one and the same Person) shall assume the rights and obligations of
the Master Servicer hereunder.
Upon the occurrence of a Master Servicer Default, a successor Master
Servicer acceptable to the Note Insurer (unless a Note Insurer Default then
exists) shall be appointed (i) by the Indenture Trustee (so long as it is not
also the Master Servicer), (ii) if the Indenture Trustee and the Master Servicer
are one and the same Person, by the Note Insurer (so long as no Note Insurer
Default then exists), or (iii) if the Indenture Trustee and the Master Servicer
are one and the same Person and a Note Insurer Default then exists, by the
percentage of Noteholders entitled to act under the Indenture upon the
occurrence of an Event of Default thereunder.
Section 3.06.00 Merger or Consolidation of Master Servicer.
------------------------------------------
Any Person into which the Master Servicer may be merged or consolidated, or
any Person resulting from any merger, conversion, other change in form or
consolidation to which the Master Servicer shall be a party, or any Person
succeeding to the business of the Master Servicer, shall be the successor to the
Master Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that the successor or resulting
Person to the Master Servicer shall be a Person that shall have a net worth of
not less than $15,000,000 and is acceptable to the Note Insurer (so long as no
Note Insurer Default exists) and the Indenture Trustee.
Section 3.07.00 Resignation of Master Servicer.
------------------------------
Except as otherwise provided in Sections 3.05 and 3.08 hereof, the Master
Servicer shall not resign from the obligations and duties hereby imposed on it
unless it determines 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 and cannot be cured, or it obtains the prior
written consent of the Note Insurer (so long as no Note Insurer Default exists)
and the Indenture Trustee. Any such determination permitting the resignation of
the Master Servicer shall be evidenced by an Opinion of Counsel that shall be
Independent to such effect delivered to the Indenture Trustee and the Note
Insurer. No such resignation shall become effective until the Indenture Trustee
(unless it and the Master Servicer are one and the same Person) shall have
assumed, or a successor Master Servicer acceptable to the Note Insurer shall
have been appointed by the Indenture Trustee and until such successor shall have
assumed, the Master Servicer's responsibilities and obligations under this
Agreement. Notice of such resignation shall be given promptly by the Master
Servicer to the Indenture Trustee, Servicer and Note Insurer.
Section 3.08.00 Assignment or Delegation of Duties by the Master Servicer.
---------------------------------------------------------
Except as expressly provided herein, the Master Servicer shall not assign
or transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Master Servicer hereunder; provided, however, that the Master Servicer shall
have the right without the prior written consent of the Indenture Trustee, the
Note Insurer (so long as no Note Insurer Default exists) or the Servicer to
delegate or assign to or subcontract with or authorize or appoint an Affiliate
of the Master Servicer to perform and carry out any duties, covenants or
obligations to be performed and carried out by the Master Servicer hereunder. In
no case, however, shall any such delegation, subcontracting or assignment to an
Affiliate of the Master Servicer relieve the Master Servicer of any liability
hereunder. Notice of such permitted assignment shall be given promptly by the
Master Servicer to the Indenture Trustee, Servicer and Note Insurer. If,
pursuant to any provision hereof, the duties of the Master Servicer are
transferred to a successor Master Servicer, the entire amount of the Master
Servicing Fee and other compensation payable to the Master Servicer pursuant
hereto or under the Indenture, shall thereafter be payable to such successor
master servicer.
Section 3.09.00 Limitation on Liability of the Master Servicer and Others.
---------------------------------------------------------
Neither the Master Servicer nor any of the directors, officers, employees
or agents of the Master Servicer shall be under any liability to the Indenture
Trustee, the Note Insurer, the Noteholders or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Master Servicer or any such person against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in its performance of its duties or by reason of
reckless disregard for its obligations and duties under this Agreement. The
Master Servicer and any director, officer, employee or agent of the Master
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Master Servicer shall be under no obligation to appear in, prosecute or
defend any legal action that is not incidental to its duties to master service
the Home Loans in accordance with this Agreement and that in its opinion may
involve it in any expenses or liability.
Neither the Master Servicer nor the Indenture Trustee shall be liable for
any acts or omissions of the Servicer. In particular, neither the Master
Servicer nor the Indenture Trustee shall be liable for any servicing errors or
interruption in servicing resulting from any failure of the Servicer to maintain
computer and other information systems that are year-2000 compliant.
ARTICLE IV
SERVICING ADVANCES
Section 4.01.00 Servicing Advances.
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(a) Servicing Advances. The Servicer may from time to time during the term
------------------
of this Agreement make such Servicing Advances as the Servicer shall deem
appropriate or advisable under the circumstances and are required pursuant to
the terms of this Agreement. Servicing Advances may be paid by the Servicer out
of amounts on deposit in the Collection Account from time to time; provided,
however, that the Servicer shall be required to replace any such amounts by
deposit into the Collection Account on or before the first Deposit Date
occurring after the payment of a Servicing Advance with such amounts, and the
amount of such deposit shall thereafter be considered a Servicing Advance for
purposes of reimbursement under this Agreement. Servicing Advances shall be
reimbursable upon notice to the Master Servicer substantially in the form of
Exhibit E hereto as follows: (i) the first $250 of Servicing Advances made by
the Servicer for each Home Loan shall be reimbursable from amounts on deposit in
the Collection Account, (ii) Servicing Advances made by the Servicer in excess
of $250 per Home Loan shall be reimbursable from collections or recoveries
relating to the Home Loan including Liquidation Proceeds and Insurance Proceeds,
and such other amounts as may be collected by the Servicer from the Obligor, and
(iii) any Servicing Advance made by the Servicer and not recovered pursuant to
clauses (i) or (ii) shall be reimbursable from the Note Account in accordance
with the terms of the Indenture.
(b) The Master Servicer may promptly pay any Servicing Advance if and to
the extent that the Servicer fails to do so, provided, however, in no event
shall the Master Servicer be required to make any Servicing Advance, and
provided, further, that the aggregate amount of Servicing Advances made by the
Master Servicer in respect of any Payment Date shall not exceed the Master
Servicer's compensation for such Payment Date.
ARTICLE V
THE SERVICER
Section 5.01.00 Representations and Warranties of the Servicer.
----------------------------------------------
(a) The Servicer hereby represents and warrants to the Issuer, the
Indenture Trustee, the Master Servicer, the Note Insurer and the Noteholders
that, as of the Closing Date:
(i) The Servicer is a national banking association duly organized,
validly existing and in good standing under the laws of the United States
of America. The Servicer is in compliance with the laws of each state in
which it is acting as Servicer with respect to a Home Loan to the extent
necessary to perform all servicing obligations with respect to the related
Mortgaged Property hereunder. The Servicer has the power and authority to
execute and deliver this Agreement and to perform its obligations in
accordance herewith. The execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant
to this Agreement) by the Servicer and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action. This Agreement evidences the valid and binding obligation of the
Servicer enforceable against the Servicer in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, the application of equitable principles in any proceeding,
whether at law or in equity, or any notice, order or directive or similar
action by a federal banking agency which would be enforceable pursuant to
Section 8 of the Federal Deposit Insurance Act to the extent that such
notice, order, directive or action prohibits or enjoins performance by the
Servicer. The consummation of the transactions contemplated hereby will not
result in the breach of any terms or provisions of the articles of
association or charter of the Servicer or result in the breach of any term
or provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any material agreement,
indenture or loan or credit agreement or other material instrument to which
the Servicer or its property is subject, or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Servicer or
its property is subject.
(ii) 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, that are necessary in
connection with the execution and delivery by the Servicer of this
Agreement, have been duly taken, given or obtained, as the case may be, are
in full force and effect, are not subject to any pending proceedings
(administrative, judicial or otherwise) with respect to which 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 on the part of the Servicer and
the performance by the Servicer of its obligations under this Agreement.
(iii) There is no action, suit, proceeding or investigation pending
or, to the best of the Servicer's knowledge, threatened against the
Servicer that, either in any one instance or in the aggregate, should
reasonably be expected to result in any material adverse change in the
business, operations, financial condition, properties or assets of the
Servicer or in any material impairment of the right or ability of the
Servicer to carry on its business substantially as now conducted, or in any
material liability on the part of the Servicer or that would draw into
question the validity of this Agreement or the Home Loans or of any action
taken or to be taken in connection with the obligations of the Servicer
contemplated herein, or that should be reasonably expected to impair the
ability of the Servicer to perform under the terms of this Agreement.
(iv) 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 default should reasonably be
expected to have consequences that would materially and adversely affect
the condition (financial or other) or operations of the Servicer or its
properties or to have consequences that should reasonably be expected to
adversely affect its performance hereunder;
(v) The collection practices used by the Servicer are in all material
respects legal and customary in the non-conforming home loan servicing
business.
(b) Upon discovery by any party hereto of a breach of any of the foregoing
representations and warranties that materially and adversely affects the
interests of the Noteholders, the party discovering such breach shall give
prompt written notice to the other parties hereto and the Note Insurer. Within
30 days of its discovery or its receipt of notice of breach, the Servicer shall
cure such breach in all material respects.
Section 5.02.00 Liability of the Servicer.
-------------------------
The Servicer shall be liable in accordance herewith only to the extent of
the obligations specifically imposed upon and undertaken by the Servicer herein.
Section 5.03.00 Merger or Consolidation of, or Assumption of the
-----------------------------------------------------------
Obligations of, the Servicer.
----------------------------
Any corporation or other entity (1) into which the Servicer may be merged
or consolidated, (2) that may result from any merger, conversion or
consolidation to which the Servicer shall be a party, or (3) that may succeed to
all or substantially all of the business of the Servicer, which corporation or
other entity shall be the successor to the Servicer under this Agreement without
the execution or filing of any document or any further act by any of the parties
to this Agreement; provided that if the Servicer is not the surviving entity, or
if the assumption by the surviving entity is not effective by operation of law,
then the surviving entity shall execute and deliver to the Issuer, the Master
Servicer, and the Indenture Trustee an agreement of assumption to perform every
obligation of the Servicer hereunder and provided further that if the surviving
entity is not the Servicer, the surviving entity must (A) have a net worth of
not less than $10,000,000, (B) be acceptable to the Note Insurer, the Indenture
Trustee and the Master Servicer (provided however, that if the Note Insurer, the
Master Servicer, and Indenture Trustee cannot reasonably agree in good faith on
a successor servicer, then the Note Insurer shall have the right to approve the
surviving entity), and (C) each Rating Agency must have issued written
confirmation that the succession of such successor will not result in a
downgrading of the implied rating then assigned by such Rating Agency to the
Notes (without taking into account the Note Insurance Policy).
Section 5.04.00 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Indenture Trustee, the
Trust Estate, the Note Insurer, the Master Servicer, or the Noteholders for any
action taken or for refraining from the taking of any action by the Servicer
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Servicer or any such person against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the duties of the Servicer or by
reason of reckless disregard of the obligations and duties of the Servicer
hereunder. The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to its duties to service the Home Loans
in accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.
Section 5.05.00 Servicer Not to Resign.
----------------------
Subject to the provisions of Section 5.03 regarding the merger or
consolidation of the Servicer into or with another entity, the Servicer shall
not resign from the obligations and duties hereby imposed on it except upon
determination that the performance of its duties or obligations hereunder is no
longer permissible under applicable law or regulation or is in material conflict
by reason of applicable law or regulation with any other activities carried on
by it at the date of this Agreement. Any such determination permitting the
resignation of the Servicer pursuant to this Section shall be evidenced by an
Opinion of Counsel to such effect delivered to the Issuer, the Indenture
Trustee, the Master Servicer, and the Note Insurer and obtained by the Servicer
at its own expense. No resignation pursuant to this Section 5.05 shall become
effective until the Master Servicer shall have appointed a successor servicer
which shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 6.02 or the Master Servicer shall have assumed such
duties in accordance with Section 6.02, or (b) shall relieve the Servicer of
responsibility for any obligations pursuant to this Agreement that specifically
survive the resignation or termination of the Servicer. Each of the Rating
Agencies shall be given written notice of a resignation of the Servicer pursuant
to this Section.
Notwithstanding the foregoing, the Servicer may resign effective upon its
appointment of a successor the appointment of whom has been approved by the
Master Servicer, the Note Insurer and the Indenture Trustee in writing, but only
if each Rating Agency shall have confirmed in writing that the appointment of
such successor will not result in the downgrading of the then-current implied
ratings assigned by them to the Notes (without taking into account the Note
Insurance Policy).
ARTICLE VI
DEFAULT
Section 6.01.00 Events of Default.
-----------------
If any one of the following events (each a "Servicer Termination Event")
shall occur and be continuing:
(a) Any failure by the Servicer to deposit into the Collection Account or
transfer to the Indenture Trustee for deposit in the Note Account any amount
required to be deposited therein under this Agreement on the related Deposit
Date;
(b) Failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Agreement or so long as the Servicer and Seller under the Home Loan Sale
Agreement are the same, the failure of the Seller, which failure (1) materially
and adversely affects the Noteholders or the Note Insurer and (2) continues
unremedied for a period of 30 days after the earlier of (i) the date on which
the Servicer acquires knowledge of such failure or (ii) the date on which
written notice of such failure (which notice shall refer specifically to this
Section), requiring the same to be remedied, shall have been given to the
Servicer by the Master Servicer or the Indenture Trustee;
(c) The entry against the Servicer of a decree or order by a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days;
(d) The consent by the Servicer to the appointment of a trustee,
conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to substantially
all of its property; or the admission by the Servicer in writing of its
inability to pay its debts generally as they become due, the Servicer's filing
of a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, the Servicer's making of an assignment for the benefit
of its creditors, or the Servicer's voluntary suspension of payment of its
obligations;
(e) The occurrence of a Delinquency Rate Trigger, a Cumulative Loss Rate
Trigger a Rolling Loss Rate Trigger, or a Total Expected Losses Trigger; or
(f) Breach by City National Bank of West Virginia, as Seller, in any
material respect of any of its representations and warranties made herein or in
the Home Loan Sale Agreement (not including Section 4(b) thereof), or in any
certificate delivered pursuant hereto or thereto, and the failure of the Seller
to cure such breach in all material respects within 30 days after the notice of
such breach shall have been given to the Seller by the Issuer, the Indenture
Trustee or the Note Insurer; then, and in each and every such case, so long as
such Servicer Termination Event shall not have been remedied by the Servicer,
the Master Servicer may (with the prior written consent of the Note Insurer,
which consent shall not be unreasonably withheld), or at the written direction
of the Note Insurer (so long as no Note Insurer Default has occurred and is
continuing, or if a Note Insurer Default has occurred and is continuing, the
Indenture Trustee) shall, by notice then given in writing to the Servicer with a
copy to the Note Insurer and to the Indenture Trustee, terminate all of the
rights, responsibilities and obligations of the Servicer as servicer under this
Agreement. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Home Loans or otherwise, shall pass to and be vested in the Master
Servicer (or, if the Master Servicer is then serving as the Servicer, the
Indenture Trustee) (unless a successor Servicer has been appointed by the Master
Servicer pursuant to Section 6.02) pursuant to and under this Section and,
without limitation, the Master Servicer, the Indenture Trustee or successor
Servicer is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Mortgage Notes and related
documents, or otherwise. Notwithstanding anything herein to the contrary, the
Master Servicer shall not be deemed to have notice of a Servicer Termination
Event unless and until a responsible officer of the Master Servicer (x) has
actual knowledge of the occurrence of such Servicer Termination Event or (y) has
received a notice of the occurrence of such Servicer Termination Event from the
Servicer pursuant to Section 2.12 hereof or from the Indenture Trustee or the
Note Insurer, and the Master Servicer shall not be in default of its obligations
under Section 3.05 hereof with respect to any failure to give a default notice
to the Servicer in the absence of either actual knowledge on the part of a
responsible officer of the Master Servicer or the receipt of such notice from
the Servicer, the Indenture Trustee or the Master Servicer. The Servicer agrees
to cooperate with the Master Servicer and the Indenture Trustee in effecting the
termination of its responsibilities and rights as Servicer hereunder, including,
without limitation, the transfer to the Master Servicer, the Indenture Trustee
or successor Servicer for the administration by it of all cash amounts that
shall at the time be held by the Servicer that have been deposited by the
Servicer in the Collection Account or transferred to the Indenture Trustee for
deposit into the Note Account or thereafter received by the Servicer with
respect to the Home Loans.
All reasonable costs and expenses (including attorneys' fees) incurred in
connection with transferring the Home Loan Files held by the Servicer to a
successor Servicer, amending this Agreement to reflect the appointment of a
successor as Servicer pursuant to this Section 6.01 or otherwise in connection
with the assumption by a successor Servicer of the duties of the predecessor
Servicer hereunder shall be paid by the predecessor Servicer upon presentation
of reasonable documentation of such costs and expenses. The Indenture Trustee
shall promptly notify each Noteholder of any Servicer Termination Event by
telecopy.
Section 6.02.00 Master Servicer to Act; Appointment of Successor.
------------------------------------------------
On and after the time the Servicer receives a notice of termination
pursuant to Section 6.01, the Master Servicer shall appoint a successor Servicer
meeting the criteria described below and, if it does not appoint a successor, or
until the successor's appointment takes effect, the Master Servicer shall be the
successor in all respects to the Servicer in its capacity as Servicer under this
Agreement (hereinafter in this Section, the "Servicer") and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof. As compensation therefor, the Master Servicer shall be
entitled to such compensation as the Servicer would have been entitled to
hereunder if no such notice of termination had been given. In the event the
Master Servicer fails to appoint a successor Servicer, and the Master Servicer
is legally unable to act as successor Servicer itself, it may petition a court
of competent jurisdiction to appoint, any established housing and home finance
institution or any institution that regularly services home loans that is then
servicing a home loan portfolio and having all licenses, permits and approvals
required by applicable law, and having a net worth of not less than $10,000,000,
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;
provided that any such successor Servicer (other than the Master Servicer or the
Indenture Trustee) shall be acceptable to the Note Insurer (if no Note Insurer
Default has occurred and is continuing), which acceptance shall not be
unreasonably withheld; and provided further that the appointment of any such
successor Servicer will not result in the qualification, reduction or withdrawal
of the implied rating assigned to the Notes by any Rating Agency, without taking
into account the existence of the Note Insurance Policy. Pending appointment of
a successor to the Servicer hereunder, unless the Master Servicer is prohibited
by law from so acting, the Master Servicer shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Master Servicer may make such arrangements for the compensation of such
successor out of payments on Home Loans as it and such successor shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the Servicer hereunder. The Master Servicer and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effect any such succession. The appointment of a successor Servicer shall not
affect any liability of the predecessor Servicer that may have arisen under this
Agreement prior to its termination as Servicer, nor shall any successor Servicer
be liable for any acts or omissions of the predecessor Servicer or for any
breach by such Servicer or the Issuer of any of its representations or
warranties contained herein or in any related document or agreement. Each of the
Rating Agencies shall be given written notice of the appointment of a successor
Servicer pursuant to this Section.
Notwithstanding the foregoing paragraph, if the Master Servicer has assumed
the obligations of the defaulting Servicer hereunder, then the Indenture Trustee
shall be entitled to exercise the rights of the Master Servicer under this
Section 6.02.
Section 6.03.00 Notifications to Noteholders.
----------------------------
Upon any termination or appointment of a successor to the Servicer pursuant
to this Article VI, the Indenture Trustee shall give prompt written notice
thereof to Noteholders at their respective addresses appearing in the Note
Register, the Issuer, the Note Insurer and to each Rating Agency.
Within 10 days of obtaining actual knowledge of the occurrence of any
Servicer Termination Event or Master Servicer Default that remains uncured, the
Indenture Trustee shall transmit by mail to all Noteholders notice of such
Servicer Termination Event or Master Servicer Default.
Section 6.04.00 Assumption or Termination of Sub-Servicing Agreements by
-----------------------------------------------------------
the Master Servicer, Indenture Trustee or any Successor Servicer.
----------------------------------------------------------------
Upon the termination of the Servicer as servicer under this Agreement, the
Master Servicer or any other successor to the Servicer hereunder may, subject to
the terms of any Sub-Servicing Agreement, in its sole and absolute discretion
elect to assume or terminate any Sub-Servicing Agreement then in force and
effect between the Servicer and the Sub-Servicer. Notwithstanding the foregoing,
any termination fee due to a Sub-Servicer because of its termination by the
Master Servicer or the successor servicer hereunder shall be the responsibility
of the terminated Servicer and not the Master Servicer or the successor
servicer. Upon the assumption of any Sub-Servicing Agreement, the terminated
Servicer agrees to deliver to the assuming party any and all documents and
records relating to the applicable Sub-Servicing Agreement and an accounting of
amounts collected and held by it and otherwise use its best reasonable efforts
to effectuate the orderly transfer of the Sub-Servicing Agreement.
Section 6.05.00 Indemnification.
---------------
(a) The Servicer agrees to, and does hereby indemnify and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Note Administrator, the
Master Servicer, and their respective directors, officers, employees, and
agents, and their successors and assigns against, and shall reimburse each of
the foregoing indemnified parties, as applicable, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever, including
reasonable fees and expenses of counsel of litigation which may be imposed on,
incurred by or asserted against any of such indemnified parties, in any way
related to, or arising out of, this Agreement or any of the transactions
contemplated herein, to the extent that any of the same results from or arises
out of (1) any material breach of any representation or warranty made by the
Servicer in this Agreement, (2) any material breach by the Servicer of any
covenant or obligation of the Servicer under this Agreement or any schedule,
written statement, document, or certificate furnished by Servicer pursuant to
this Agreement, or (3) the negligence, willful misfeasance, or bad faith of the
Servicer in the performance of its duties under this Agreement. The indemnities
contained in this Section 6.05 shall survive the termination of this Agreement.
The indemnity obligations set forth in this Section 6.05 shall be in addition to
(but not exclusive of) any other remedies set forth in this Agreement, but in no
event shall this indemnity or any other remedy to which a party may be entitled
provide recovery for amounts already recovered under any other provision of this
Agreement or any other agreement or from any other source. The Servicer shall
not be under any obligation to appear in, prosecute, or defend any legal action
which is not incidental to its duties to service the Home Loans and which in its
opinion may involve it in any expense or liability.
(b) The Servicer may rely on the written instructions and directions of the
Master Servicer pursuant to the terms of this Agreement and shall not be liable
to the Trust, the Owner Trustee, the Indenture Trustee, or the Master Servicer
for any action taken or for refraining from the taking of any action in good
faith pursuant to such instructions and directions; provided, however, that this
provision shall not protect the Servicer against any material breach of any
representation or warranty made herein or material failure to perform its
obligations in compliance with any standard of care set forth in this Agreement,
or any liability that would otherwise be imposed by reason of any material
breach of the terms and conditions of this Agreement.
(c) The Master Servicer agrees to, and does hereby indemnify and hold the
Servicer harmless against, and shall reimburse the Servicer for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses, and disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Servicer with
respect to any action taken or not taken in good faith pursuant to the
instructions and directions of the Master Servicer as provided herein.
ARTICLE VII
TERMINATION
Section 7.01.00 Termination.
-----------
Except as otherwise specifically set forth herein, the obligations and
responsibilities of the Servicer shall terminate upon the earliest to occur of
(1) the final payment or other liquidation of the Home Loans and the disposition
of all REO Properties and the remittance of all funds due hereunder with respect
to such Home Loans and REO Properties and (2) the satisfaction and discharge of
the indebtedness evidenced by the Notes and the payment of all amounts due the
Note Insurer under the Insurance Agreement and the termination of the Deposit
Trust Agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01.00 Amendment.
---------
This Agreement may be amended from time to time by the Servicer, the
Issuer, the Master Servicer and the Indenture Trustee, without the consent of
any of the Noteholders but, so long as no Note Insurer Default has occurred and
is continuing, with the prior written consent of the Note Insurer (which consent
shall not be unreasonably withheld), (1) to cure any error or any ambiguity, (2)
to correct or supplement any provisions herein which may be inconsistent with
any other provisions herein, (3) to comply with the requirements of the Code, or
(4) to amend any other provisions with respect to matters or questions arising
under this Agreement, which shall not be inconsistent with the provisions of
this Agreement; provided that in all such cases the Indenture Trustee shall have
received written confirmation from each Rating Agency that any such
modifications to this Agreement will not result in a qualification, reduction or
withdrawal of the implied rating assigned to the Notes by such Rating Agency
(without taking into account the Note Insurance Policy).
This Agreement may also be amended from time to time by the Servicer, the
Issuer, the Master Servicer and the Indenture Trustee, with the consent of the
Note Insurer (which consent shall not be unreasonably withheld) and the Holders
of Notes evidencing Voting Interests of the Notes affected thereby aggregating
greater than 50%, 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 Holders of Notes; provided, however, that no
such amendment shall (1) reduce in any manner the amount of, or delay the timing
of, collections of payments on Home Loans or payments which are required to be
deposited into the Note Account without the consent of all Noteholders or (2)
reduce the aforesaid percentage of the Notes the Holders of which are required
to consent to any such amendment, without the consent of the Holders of all
Notes then outstanding.
Promptly after the execution of any such amendment or consent pursuant to
the second preceding paragraph, the Indenture Trustee shall furnish an executed
copy of such amendment to each Noteholder and to each Rating Agency.
The manner of obtaining such consents and of evidencing the authorization
of the execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Indenture
Trustee, the Master Servicer, and the Note Insurer shall be entitled to receive
and rely upon an Opinion of Counsel furnished by and at the expense of the party
requesting such amendment stating that the execution of such amendment is
authorized or permitted by this Agreement. The Indenture Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Indenture
Trustee's own rights, duties or immunities under this Agreement.
Section 8.02.00 Governing Law.
-------------
This Agreement shall be construed in accordance with the laws of the State
of New York (without regard to conflict of laws principles and the application
of the laws of any other jurisdiction), and the obligations, rights and remedies
of the parties hereunder shall be determined in accordance with such laws.
Section 8.03.00 Notices.
-------
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered to (a) in the case of the
Issuer, to Wilmington Trust Company at ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, with copies to the Indenture Trustee,
and to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, at City National Bank of West Virginia, ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇; (b) in the case
of the Servicer, at City National Bank of West Virginia, ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇, Attention: A. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇., (c) in the case of the Master Servicer or Note Administrator, at
Norwest Bank Minnesota, National Association, as Master Servicer or Note
Administrator, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy
(▇▇▇) ▇▇▇-▇▇▇▇, Attention: City Capital Home Loan Trust 1998-4; (d) in the case
of the Note Insurer, MBIA Insurance Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇, Attention: Insured Portfolio Management -
Structured Finance (IPM-SF) (City Capital Home Loan Trust 1998-4 Asset-Backed
Notes, Series 1998-4); (e) in the case of S&P, to Standard & Poor's, ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Mortgage Surveillance
Group; (f) in the case of Moody's, to ▇▇▇▇▇'▇ Investors Service Inc., ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and (g) in the case of the Indenture Trustee,
at Norwest Bank Minnesota, National Association, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇, Attention: City
Capital Home Loan Trust 1998-4; or, as to each party, at such other address as
shall be designated by such party in a written notice to each other party. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at its address shown in the Note Register.
Any notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the Noteholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee to any Rating Agency shall be given on a best
efforts basis and only as a matter of courtesy and accommodation and the
Indenture Trustee shall have no liability for failure to deliver such notice or
document to any such Rating Agency.
Section 8.04.00 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Notes or the rights of the Holders thereof.
Section 8.05.00 Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 5.03 and 5.05, this Agreement may not be assigned by the
Issuer or the Servicer without the prior written consent of the Note Insurer and
the Holders of Notes evidencing not less than 662/3% of the Voting Interests of
all Notes.
Section 8.06.00 Third Party Beneficiary; Rating.
-------------------------------
(a) The Note Insurer is an intended third-party beneficiary of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
Note Insurer; provided that, notwithstanding the foregoing, for so long as a
Note Insurer Default is continuing, the Noteholders shall succeed to the Note
Insurer's rights hereunder. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement that expressly confer rights upon
the Note Insurer shall be for the benefit of and run directly to the Note
Insurer, and the Note Insurer (including any rights of consent) shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Agreement.
(b) In the event the rating of the Note Insurer by any of the Rating
Agencies is reduced to a rating that is below "investment grade" (as that term
is then commonly used), the Servicer shall, at its own expense, seek to obtain
ratings of the Notes (apart from the rating related to the Note Insurance
Policy) from such Rating Agency.
(c) The Note Administrator is an intended third-party beneficiary of this
Agreement for the purpose of enforcing its right to compensation pursuant to
Section 3.04 of this Agreement.
Section 8.07.00 Counterparts.
------------
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
Section 8.08.00 Intention of the Parties.
------------------------
It is the intention of the parties that the Issuer is conveying, and the
Servicer is receiving, only a contract for servicing and administering the Home
Loans. Accordingly, the parties hereby acknowledge that the Indenture Trustee
remains the sole and absolute record holder of the Home Loans and all rights
related thereto.
Section 8.09.00 Waivers and Modifications.
-------------------------
No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.
Section 8.10.00 Further Agreements.
------------------
The Servicer and the Issuer each agree to execute and deliver to the other
such reasonable and appropriate additional documents, instruments or agreements
as may be necessary or appropriate to effectuate the purposes of this Agreement.
Section 8.11.00 Attorney-in-Fact.
----------------
The Issuer hereby designates the Servicer its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
required pursuant to this Agreement or the Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
CITY CAPITAL HOME LOAN TRUST 1998-4,
AS ISSUER
By: Wilmington Trust Company, not in its
individual capacity, but solely
as Owner Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Authorized Signatory
CITY NATIONAL BANK OF WEST VIRGINIA,
AS SERVICER
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
AS MASTER SERVICER
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
AS INDENTURE TRUSTEE AND NOT IN
ITS INDIVIDUAL CAPACITY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
ACKNOWLEDGED:
The Custodian hereby acknowledges its obligations as Custodian under this
Agreement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, AS CUSTODIAN
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President