SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of
1934
For the fiscal year ended December 31, 1998 ($250 fee required)
Commission File Number 33-49370-06
Asset Securitization Corporation
Commercial Mortgage Pass-Through Certificates
Series 1997-D5
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(Exact Name of registrant as specified in its charter)
Delaware 13-3672337
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(State or Other Juris- (I.R.S. Employer
diction of Incorporation) Identification Number)
Two World Financial Center, Building B, New York, New York 10281
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(Address of Principal Executive Office)
Registrant's telephone number, including area code: (212) 667-9300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Not applicable.
Aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 31, 1998.
Not applicable.
Number of shares of common stock outstanding as of December 31, 1998. Not
applicable.
TABLE OF CONTENTS
Part I
Item 1. Business 3
Item 2. Properties 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3
Part II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial Condition
And Results of Operations 4
Item 8. Financial Statements and Supplementary Data 4
Item 9. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure 4
Part III
Item 10. Directors and Executive Officers of the Registrant 4
Item 11. Executive Compensation 4
Item 12. Security Ownership of Certain Beneficial Owners and
Management 4
Item 13. Certain Relationships and Related Transactions 4
Part IV
Item 14. Exhibits, Financial Statements Schedules and Reports on
Form 8-K 5
Signatures 6
Exhibit Index 7
PART I
ITEM 1. BUSINESS
This Annual Report on Form 10K relates to the Trust Fund formed, and the
Commercial Mortgage Pass-Through Certificates Series 1997-D5 issued pursuant
to a Pooling and Servicing Agreement, dated as of October 24, 1997 (the
"Pooling and Servicing Agreement"), by and among Asset Securitization
Corporation (the "Company"), as depositor, AMRESCO Services, L.P., as
servicer, LaSalle National Bank, as trustee, and ABN AMRO Bank, N.V., as
fiscal agent. The Certificates have been registered pursuant to the Act und
Form S-3 (No. 33-99502) (the "Registration Statement").
Capitalized terms used herein and not defined have the same meanings
ascribed to such terms in the Pooling and Servicing Agreement.
This Annual Report is being filed by the Servicer, in its capacity as such
under the Pooling and Servicing Agreement, on behalf of Registrant. The
information reported and contained herein has been supplied to the Servicer
by one or more of the Borrowers or other third parties without independent
review or investigation by the Servicer. Pursuant to the Pooling and
Servicing Agreement, the Servicer is not responsible for the accuracy or
completeness of such information.
ITEM 2. PROPERTIES
Not applicable.
ITEM 3. LEGAL PROCEEDINGS
Except for claims arising in the ordinary course of business and which are
covered by liability insurance, there are no material pending legal
proceedings involving the Trust Fund, the Mortgages comprising the Trust
Fund or the Trustee or the Servicer with respect to or affecting their
respective duties under the Pooling and Servicing Agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Certificateholders during the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There was one registered holder of the Certificate representing an equity
interest in the Trust as of December 31, 1998. To the Registrant's
knowledge, as of that date, there was no principal market in which the
Certificates representing an equity interest in the Trust were traded.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Not applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information required by Items 10, 11, 12 and 13 is not applicable as
the Trust Fund does not have directors or officers and Certificateholders
have no right to vote (except with respect to required consents to certain
amendments to the Pooling and Servicing Agreement and upon certain events of
default) or control the Trust Fund.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Servicer's Annual Statement of compliance for the period ended
12/31/98.
2. Servicer's Independent Accountant's Report on Servicer's servicing
activities.
(b) Current Reports on Form 8-K for the Trust were filed on January 20, 1998;
February 28, 1998;
March 17, 1998; April 13, 1998; May 13, 1998; June 23, 1998; July 20, 1998;
August 17, 1998;
September 18, 1998; October 22, 1998; November 24, 1998; and December 21,
1998.
(c) No consent of auditors with respect to the audit reports filed herewith
are required.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on behalf of the Registrant by the undersigned thereunto duly
authorized.
AMRESCO MORTGAGE CAPITAL, INC.
AS GENERAL PARTNER OF
AMRESCO SERVICES, L.P., IN
ITS CAPACITY AS SERVICER UNDER
THE POOLING AND SERVICING
AGREEMENT ON BEHALF OF ASSET
SECURITIZATION CORPORATION,
REGISTRANT
By: /s/___________________________________
Name: Sean Reilly
Title: Vice President
By: /s/___________________________________
Name: John W. Benson
Title: Assistant Secretary and Deputy
General Counsel
Date: March 17, 1999
EXHIBIT INDEX
Exhibit No. Description
99.1 Servicer's Annual Statement of Compliance.
99.2 Servicer's Independent Accountant's Report on Servicer's servicing
activities.
EXHIBIT 99.1
SERVICER'S ANNUAL STATEMENT OF COMPLIANCE
(See Attached)
March 3, 1999
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
LaSalle National Bank
135 South LaSalle Street
Suite 1740
Chicago, Illinois 60674-4107
Attention: Asset Backed Securities Trust Services -- Nomura 1997-D5
Ladies & Gentlemen:
Reference is made to the Pooling and Servicing Agreement dated as of October
24, 1997, among Asset Securitization Corporation, as Depositor, AMRESCO
Services, L.P., ("AMRESCO") as Servicer, AMRESCO Management, Inc. ("AMI") as
Initial Special Servicer, LaSalle National Bank, as Trustee, and ABN AMRO
Bank, N.V., as Fiscal Agent, entered into in connection with Asset
Securitization Corporation Commercial Mortgage Pass-Through Certificates,
Series 1997-D5 (the "PSA").
As Senior Vice President of AMRESCO, I have delegated to specified officers
("Officers") the responsibility for reviewing and monitoring the activities
of AMRESCO, and of our performance under the PSA.
Accordingly, pursuant to Section 3.14 of the PSA and in accordance with
certifications made to me by each of the Officers, AMRESCO certifies the
following:
(1) A review of the activities of AMRESCO for the period from January 1,
1998 to December 31, 1998, and of its performance under this PSA has been
made under the supervision of the Officers, who have in turn been under my
supervision;
(2) To the best of my knowledge and the Officers' knowledge, based on such
review, AMRESCO has fulfilled its obligations as Servicer in all material
respects under the PSA throughout the period from January 1, 1998 to
December 31, 1998;
(3) No sub-servicers, other than affiliates of AMRESCO, were used by AMRESCO
with respect to its duties under the PSA during the period from January 1,
1998 to December 31, 1998; and
LaSalle National Bank
March 3, 1999
Page 2
(4) To the best of my knowledge and the Officers' knowledge, AMRESCO has
not received any notice regarding the qualification, or challenging the
status, of the Series 1997-D5 Upper-Tier REMIC or Lower-Tier REMIC as a
REMIC from the Internal Revenue Service or any other governmental agency or
body.
Please refer to the enclosed independent accountants' report dated February
4, 1999, delivered pursuant to Section 3.15 of the PSA, which discusses the
results of their review of our activities under this PSA and which is
incorporated herein by reference.
Very truly yours,
/s/
Daniel B. Kirby
Senior Vice President
AMRESCO Services, L.P.
Enclosures
cc: Asset Securitization Corporation
2 World Financial Center
Building B, 21st Floor
New York, NY 10281-1198
Attention: Ms. Sheryl McAfee
Fitch Investors Service, L.P.
One State Street Plaza
New York, NY 10004
Attention: CMBS Surveillance
Moody's Investor Service, Inc.
99 Church Street, 4th Floor
New York, NY 10007
Attention: CMBS Surveillance
Standard & Poor's Rating Service
26 Broadway, 10th Floor
New York, NY 10004
Attention: CMBS Surveillance
LaSalle National Bank
March 3, 1999
Page 3
Enclosures:
cc: Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Anna H. Glick, Esq.
EXHIBIT 99.2
SERVICER'S INDEPENDENT ACCOUNTANT'S
REPORT ON SERVICER'S SERVICING ACTIVITY
(See Attached)
February 4, 1999
Deloitte & Touche LLP
Texas Commerce Tower
220 Ross Avenue
Suite 1600
Dallas, Texas 75201
Dear Sirs:
As of and for the year ended December 31, 1998, AMRESCO Services, L. P., a
subsidiary of AMRESCO, INC., has complied in all material respects with the
minimum servicing standards set forth in Appendix A. Such standards were
established by AMRESCO Services, L. P. based on Mortgage Bankers Association
of America's Uniform Single Attestation Program for Mortgage Bankers (USAP).
A list of the securitized and bond-related servicing contracts covered by
this representation is included in Appendix B.
For the period January 1, 1998 through December 30, 1998, AMRESCO Services,
L. P. had in effect a fidelity bond in the amount of $23,000,000, errors and
omissions liability coverage in the amount of $10,000,000, and mortgage
impairment protection in the amount of $23,000,000. Beginning December 31,
1998, AMRESCO Services, L. P. increased its coverage, resulting in a
fidelity bond in the amount of $43,000,000, and mortgage impairment
protection in the amount of $43,000,000. Errors and omissions liability c
.
/s/________________________________ __February 4, 1999____
Donnie M. Skidmore Date
President
/s/________________________________ __February 4, 1999___
Daniel B. Kirby Date
Senior Vice President
Appendix A, Page 1
AMRESCO Services, L. P. Servicing Standards
I. CUSTODIAL BANK ACCOUNTS
1. Reconciliations shall be prepared on a monthly basis for all custodial
bank accounts and related bank clearing accounts. These reconciliations
shall:
* be mathematically accurate;
* be prepared within forty-five (45) calendar days after the cutoff date;
* be reviewed and approved by someone other than the person who prepared the
reconciliation; and
* document explanations for reconciling items. These reconciling items
shall be resolved within ninety (90) calendar days of their original
identification.
2. Each custodial account shall be maintained at a federally insured
depository institution in trust for the applicable investor.
3. Escrow funds held in trust for a mortgagor shall be returned to the
mortgagor within thirty (30) calendar days of payoff of the mortgage loan.
I. II. MORTGAGE PAYMENTS
1. Scheduled mortgage payments shall be deposited into the custodial bank
accounts and related bank clearing accounts within two business days of
receipt.
2. Scheduled mortgage payments made in accordance with the mortgagor's loan
documents shall be posted to the applicable mortgagor records within two
business days of receipt.
3. Scheduled mortgage payments shall be allocated to principal, interest,
insurance, taxes or other escrow items in accordance with the mortgagor's
loan documents.
4. Mortgage payments identified as loan payoffs or other nonscheduled
payments shall be allocated in accordance with the mortgagor's loan
documents.
II. DISBURSEMENTS
1. Disbursements made via wire transfer on behalf of a mortgagor or investor
shall be made only be authorized personnel.
2. Disbursements made on behalf of a mortgagor or investor shall be posted
within two business days to the mortgagor's or investor's records maintained
by the servicing entity.
Appendix A, Page 2
AMRESCO Services, L. P. Servicing Standards
3. Tax and insurance payments shall be made on or before the penalty or
insurance policy expiration dates, as indicated on tax bills and insurance
premium notices, respectively, provided that such support has been received
by the servicing entity at least thirty (30) calendar days prior to these
dates.
4. Any late payment penalties paid in conjunction with the payment of any
tax bill or insurance premium notice shall be paid from the servicing
entity's funds and not charged to the mortgagor, unless the late payment was
due to the mortgagor's error or omission.
5. Amounts remitted to investors per the servicer's investor reports shall
agree with canceled checks, or other form of payment, or custodial bank
statements.
6. Unused checks shall be safeguarded so as to prevent unauthorized access.
III. INVESTOR ACCOUNTING AND REPORTING
1. The servicing entity's investor reports shall agree with, or reconcile
to, investors records on a monthly basis as to the total unpaid principal
balance and number of loans serviced by the servicing entity.
IV. MORTGAGOR LOAN ACCOUNTING
1. The servicing entity's mortgage loan records shall agree with, or
reconcile to, the records of mortgagors with respect to the unpaid principal
balance on a monthly basis.
2. Adjustments on ARM loans shall be computed based on the related mortgage
note and any ARM rider.
3. Escrow accounts shall be analyzed, in accordance with the mortgagor's
loan documents, on an annual basis or as required by the servicing agreement.
4. Interest on escrow accounts shall be paid, or credited, to mortgagors in
accordance with the servicing agreements.
V. DELINQUENCIES
1. Records documenting collection efforts shall be maintained during the
period a loan is in default and shall be updated at least monthly. Such
records shall describe the entity's activities in monitoring delinquent
loans including, for example, phone calls, letters and mortgage payment
rescheduling plans.
VII. INSURANCE POLICIES
1. A fidelity bond and errors and omissions policy shall be in effect on the
servicing entity throughout the reporting period in the amount of coverage
represented to investors in management's assertion.
Appendix B, Page 1
AMRESCO Services, L. P.
Following is a list of the securitized and bond-related servicing contracts
which are covered by the attached USAP representation.
Contract Date Reference Name Seller, Depositor or other Primary Party
Aug. 1, 1991 RTC 1991 M-1 Resolution Trust Corporation
Nov. 1, 1991 RTC 1991 M-5 Resolution Trust Corporation
Mar. 1, 1992 RTC 1992 C-2 Resolution Trust Corporation
Apr. 1, 1992 RTC 1992 C-3 Resolution Trust Corporation
Sept. 1, 1992 RTC 1992 C-6 Resolution Trust Corporation
Nov. 1, 1992 RTC 1992 C-8 Resolution Trust Corporation
Jan. 1, 1993 RTC 1993 C-1 Resolution Trust Corporation
Mar. 15, 1993 Investors Savings 1988-A NationsBank of Virginia, N.A.
Aug. 12, 1993 Ross Park Mall 1993-A Penn Ross Joint Venture
Sept. 10, 1993 Salomon 1993 C-1 Salomon Brothers Mortgage Securities VII,
Inc.
Oct. 26, 1993 Kidder 1993 C1 (Crown) Kidder Peabody Acceptance Corporation
I
Nov. 12, 1993 DLJ 1993 MF17 DLJ Mortgage Acceptance Corp.
Dec. 1, 1993 New England 1993-1 New England Mutual Life Insurance Company
Feb. 1, 1994 Forest City 1994-1 Nomura Asset Securities Corporation
Apr. 5, 1994 Freehold Raceway Mall Freemall Finance, Inc.
June 1, 1995 NationsBanc 1995 M2 NationsBanc Mortgage Capital Corporation
Aug. 15, 1995 Lakewood 1995 C-1
Lakewood Mall Finance Company
Sept. 1, 1995 Oregon 1995-1 Oregon Commercial Mortgage, Inc. 1995-1
Oct. 1, 1995 Nomura 1995 MD IV Asset Securitization Corporation
July 1, 1995 JP Morgan 1995 C-1 J.P. Morgan Commercial Mortgage Finance
Corp.
Jan. 1, 1996 JP Morgan 1996 C-2 J.P. Morgan Commercial Mortgage Finance
Corp.
June 1, 1996 JP Morgan 1996 C-3 J.P. Morgan Commercial Mortgage Finance
Corp.
Apr. 2, 1996 Nomura 1996 MD V Nomura Asset Securities Corporation
May 1, 1996 NationsLink 1996-1 NationsLink Funding Corporation
May 29, 1996 Equitable S/A 174 The Equitable Life Assurance Society of the
U.S.
June 28, 1996 Colonial Realty LP Colonial Realty Limited Partnership
July 1, 1996 Security Capital Atlantic Security Capital Atlantic
Multifamily, Inc.
Aug. 1, 1996 Crystal Mortgage 1996-1 Crystal Run Property, Inc.
Oct. 1, 1996 SASCO 1996 C-1 Structured Asset Securities Corporation
Oct. 23, 1996 Nomura 1996 D-3 Asset Securitization Corporation
Nov. 25, 1996 Hospitality 1996 C-1 Hospitality Properties Mortgage
Acceptance Corp.
Dec. 17, 1996 Nomura 1996 MD VI Asset Securitization Corporation
Dec. 17, 1996 Potomac Gurnee Finance Potomac Gurnee Finance Corp.
Appendix B, Page 2
AMRESCO Services, L. P.
Contract Date Reference Name Seller, Depositor or other Primary Party
Feb. 1, 1997 IDB 1993-A Nomura Securities International, Inc.
Feb. 6, 1997 JP Morgan 1997 C-4 J.P. Morgan Commercial Mortgage Finance
Corp.
Mar. 27, 1997 Nomura 1997 D-4 Asset Securitization Corporation
Apr. 30, 1997 Franklin Park Finance Franklin Park Finance, Inc.
Apr. 30, 1997 Willowbrook Finance Willowbrook Finance Corporation
June 30, 1997 MSCI 1997 HF1 Morgan Stanley Capital I, Inc.
June 30, 1997 MSCI 1997 WF1 Morgan Stanley Capital I, Inc.
July 8, 1997 ACMF 1997 C-1 AMRESCO Commercial Mortgage Funding I Corp.
Aug. 14, 1997 GSM 1997-GL I GS Mortgage Securities Corporation II
Sep. 29, 1997 SASCO 1997 C-1 Structured Asset Securities Corporation
Oct. 24, 1997 Nomura 1997 D-5 Asset Securitization Corporation
Nov. 3, 1997 USC Oakbrook 1997-1 USC Oakbrook, Inc.
Nov. 25, 1997 CSFB 1997-PS1 Credit Suisse First Boston Mortgage Securities
Corp.
Dec. 1, 1997 BSF Participation Trust BSF III Limited Partnership
I. Feb. 4, 1998 Nomura 1998-ST I Nomura Depositor Trust ST I
II. Feb. 27, 1998 FNMA 1998-M1 Federal National Mortgage Association
III. Mar. 1, 1998 MSC 1998-WF1 Morgan Stanley Capital I, Inc.
Mar. 1, 1998 FUL 1997-C2 First Union Commercial Mortgage Securities, Inc.
Mar. 1, 1998 Lehman 1998-C1 Structured Asset Securities Corporation
Mar. 27, 1998 MSC 1998-HF1 Morgan Stanley Capital I, Inc.
Mar. 27, 1998 Nomura 1998-D6 Nomura Asset Securities Corporation
Mar. 30, 1998 DMARC 1998-C1 Deutsche Mortgage and Asset Receiving Corporation
Apr. 29, 1998 MCF 1998-MC1 Mortgage Capital Funding, Inc.
Apr. 29, 1998 SASCO 1998-C2 Structured Asset Securities Corporation
I. May 15, 1998 GS 1998-GSFL I GS Mortgage Securities Corporation II
II. Jun. 1, 1998 MSC 1998-WF2 Morgan Stanley Capital I, Inc.
Jun. 1, 1998 MSC 1998-XL1 Morgan Stanley Capital I, Inc.
Jul. 7, 1998 Telcom/Goldman Telcom Properties, Ltd.
Aug. 27, 1998 MSC 1998-CF1 Morgan Stanley Capital I, Inc.
Sept. 30, 1998 CAPCO 1998-D7 CAPCO America Securitization Corp.
Oct. 27, 1998 CSFB 1998-PS2 Credit Suisse First Boston Mortgage Securities
Corp.
Dec. 30, 1998 MCF 1998-MC3 Mortgage Capital Funding, Inc.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of AMRESCO Services, L.P.:
We have examined management's assertion about AMRESCO Services, L.P.'s (the
"Company") (a wholly owned subsidiary of AMRESCO, INC.) compliance with the
Company's servicing standards identified in the Appendix as of and for the
year ended December 31, 1998, included in the accompanying management
assertion. Such standards were established by the Company's management
based on the Mortgage Bankers Association of America's Uniform Single A
ttestation Program for Mortgage Bankers ("USAP"). Management is respons
ce with these servicing standards. Our responsibility is to express an
opinion on management's assertion about the Company's compliance based on
our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and accordingly,
included examining, on a test basis, evidence about the Company's
compliance with the servicing standards and performing such other
procedures as we considered necessary in the circumstances. We believe that
our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination on the Company's
compliance with the servicin
reements.
In our opinion, management's assertion that AMRESCO Services, L.P. complied
with its established servicing standards identified in the Appendix as of
and for the year ended December 31, 1998, is fairly stated, in all material
respects.
/s/ DELOITTE & TOUCHE LLP
February 4, 1999
AMRESCO SERVICES, L.P. SERVICING STANDARDS
I. CUSTODIAL BANK ACCOUNTS
1. Reconciliations shall be prepared on a monthly basis for all custodial
bank accounts and related bank clearing accounts. These reconciliations
shall:
* be mathematically accurate;
* be prepared within forty-five (45) calendar days after the cutoff date;
* be reviewed and approved by someone other than the person who prepared the
reconciliation; and
* document explanations for reconciling items. These reconciling items shall
be resolved within ninety (90) calendar days of their original
identification.
2. Each custodial account shall be maintained at a federally insured
depository institution in trust for the applicable investor.
3. Escrow funds held in trust for a mortgagor shall be returned to the
mortgagor within thirty (30) calendar days of payoff of the mortgage loan.
II. MORTGAGE PAYMENTS
1. Scheduled mortgage payments shall be deposited into the custodial bank
accounts and related bank clearing accounts within two business days of
receipt.
2. Scheduled mortgage payments made in accordance with the mortgagor's loan
documents shall be posted to the applicable mortgagor records within two
business days of receipt.
3. Scheduled mortgage payments shall be allocated to principal, interest,
insurance, taxes or other escrow items in accordance with the mortgagor's
loan documents.
4. Mortgage payments identified as loan payoffs or other nonscheduled
payments shall be allocated in accordance with the mortgagor's loan
documents.
III. DISBURSEMENTS
1. Disbursements made via wire transfer on behalf of a mortgagor or investor
shall be made only by authorized personnel.
2. Disbursements made on behalf of a mortgagor or investor shall be posted
within two business days to the mortgagor's or investor's records maintained
by the servicing entity.
3. Tax and insurance payments shall be made on or before the penalty or
insurance policy expiration dates, as indicated on tax bills and insurance
premium notices, respectively, provided that such support has been received
by the servicing entity at least thirty (30) calendar days prior to these
dates.
4. Any late payment penalties paid in conjunction with the payment of any
tax bill or insurance premium notice shall be paid from the servicing
entity's funds and not charged to the mortgagor, unless the late payment was
due to the mortgagor's error or omission.
5. Amounts remitted to investors per the servicer's investor reports shall
agree with canceled checks, or other form of payment, or custodial bank
statements.
6. Unused checks shall be safeguarded so as to prevent unauthorized access.
IV. INVESTOR ACCOUNTING AND REPORTING
1. The servicing entity's investor reports shall agree with, or reconcile to,
investors' records on a monthly basis as to the total unpaid principal
balance and number of loans serviced by the servicing entity.
V. MORTGAGOR LOAN ACCOUNTING
1. The servicing entity's mortgage loan records shall agree with, or
reconcile to, the records of mortgagors with respect to the unpaid principal
balance on a monthly basis.
2. Adjustments on ARM loans shall be computed based on the related mortgage
note and any ARM rider.
3. Escrow accounts shall be analyzed, in accordance with the mortgagor's loan
documents, on an annual basis or as required by the servicing agreement.
4. Interest on escrow accounts shall be paid, or credited, to mortgagors in
accordance with the servicing agreements.
VI. DELINQUENCIES
1. Records documenting collection efforts shall be maintained during the
period a loan is in default and shall be updated at least monthly. Such
records shall describe the entity's activities in monitoring delinquent
loans including, for example, phone calls, letters and mortgage payment
rescheduling plans.
VII. INSURANCE POLICIES
1. A fidelity bond and errors and omissions policy shall be in effect on the
servicing entity throughout the reporting period in the amount of coverage
represented to investors in management's assertion.
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