SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 23, 1999
(Date of earliest event reported)
Commission File No. 333-61785
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV (as depositor under the Sale and
Master Servicing Agreement, dated as of March 1, 1999, relating to the Fremont
Home Loan Owner Trust 1999-1, Home Loan Asset Backed Notes, Series 1999-1)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
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(Exact name of registrant as specified in its charter)
Delaware 06-1204982
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(State of Incorporation) (I.R.S. Employer Identification No.)
1285 Avenue of the Americas
New York, New York 10019
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(Address of principal executive offices) (Zip Code)
(212) 713-2000
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(Registrant's Telephone Number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 5. Other Events
On March 1, 1999, Fremont Home Loan Owner Trust 1999-1 (the "Owner
Trust") issued the Home Loan Asset Backed Notes, Series 1999-1 (the "Notes"),
having an aggregate original principal balance of $415,545,505. The Notes were
issued pursuant to an Indenture, dated as of November 1, 1998 (the "Indenture")
between Fremont Home Loan Owner Trust 1999-1 (the "Owner Trust") and First Union
National Bank ("First Union, in such capacity, the "Indenture Trustee"), a copy
of which is filed as an exhibit hereto. The Owner Trust was formed by
PaineWebber Mortgage Acceptance Corporation IV, a Delaware corporation (the
"Registrant"), pursuant to an Owner Trust Agreement, dated as of March 1, 1999
(the "Owner Trust Agreement") among the Registrant, Fremont Investment & Loan
(the "Transferor") and Wilmington Trust Company (the "Owner Trustee"), a copy of
which is filed as an exhibit hereto. The Notes are secured by the assets of the
Owner Trust, consisting primarily of a pool (the "Pool") of home loans (the
"Loans"). The Loans were sold by the Registrant to the Owner Trust pursuant to a
Sale and Master Servicing Agreement, dated as of March 1, 1999 (the "Sale and
Servicing Agreement"), among the Owner Trust, as issuer, the Registrant, the
Indenture Trustee and Fremont Investment & Loan, as master servicer and
transferor, a copy of which is filed as an exhibit hereto.
In addition, the Owner Trust and First Union, as administrator of the
Owner Trust have entered into an Administration Agreement, dated as of March 1,
1999 (the "Administration Agreement"), a copy of which is filed as an exhibit
hereto.
Interest on the Notes will be paid on each Payment Date (as defined in
the Sale and Servicing Agreement). Monthly payments in reduction of the
principal balance of the Notes will be allocated to the Notes in accordance with
the priorities set forth in the Sale and Servicing Agreement.
<PAGE>
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
Item 601(a)
of Regulation S-K
Exhibit No. Description
- ----------- -----------
(EX-4.1) Indenture, dated as of March 1, 1999,
between Fremont Home Loan Owner Trust
1999-1 and First Union National Bank.
(EX-4.2) Sale and Master Servicing Agreement, dated
as of March 1, 1999, among PaineWebber
Mortgage Acceptance Corporation IV,
Fremont Home Loan Owner Trust 1999-1,
Fremont Investment & Loan and First Union
National Bank.
(EX-99.1) Administration Agreement, dated as of
March 1, 1999, among Fremont Home Loan
Owner Trust 1999-1, Fremont Investment &
Loan and First Union National Bank.
(EX-99.2) Owner Trust Agreement, dated as of March
1, 1999, among PaineWebber Mortgage
Acceptance Corporation IV, Fremont
Investment & Loan, Wilmington Trust
Company and First Union National Bank.
(EX-99.3) Servicing Agreement, dated as of March 1,
1999, between Fremont Investment & Loan
and Fairbanks Capital Corp.
(EX-99.4) Financial Guaranty Insurance Policy, dated
as of March 23, 1999, between Financial
Security Assurance Inc. and First Union
National Bank.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV
April 5, 1999
By: /s/ Barbara Dawson
-----------------------------------
Name: Barbara Dawson
Title: Senior Vice President
<PAGE>
INDEX TO EXHIBITS
Paper (P) or
Exhibit No. Description Electronic(E)
- ----------- ----------- -------------
(EX-4.1) Indenture, dated as of March 1, 1999, E
between Fremont Home Loan Owner Trust
1999-1 and First Union National Bank.
(EX-4.2) Sale and Master Servicing Agreement, E
dated as of March 1, 1999, among
PaineWebber Mortgage Acceptance
Corporation IV, Fremont Home Loan Owner
Trust 1999-1, Fremont Investment & Loan
and First Union National Bank.
(EX-99.1) Administration Agreement, dated as of E
March 1, 1999, among Fremont Home Loan
Owner Trust 1999-1, Fremont Investment
& Loan and First Union National Bank.
(EX-99.2) Owner Trust Agreement, dated as of E
March 1, 1999, among PaineWebber
Mortgage Acceptance Corporation IV,
Fremont Investment & Loan, Wilmington
Trust Company and First Union National
Bank.
(EX-99.3) Servicing Agreement, dated as of March E
1, 1999, between Fremont Investment &
Loan and Fairbanks Capital Corp.
(EX-99.4) Financial Guaranty Insurance Policy, E
dated as of March 23, 1999, between
Financial Security Assurance Inc. and
First Union National Bank.
INDENTURE
between
FREMONT HOME LOAN OWNER TRUST 1999-1,
as Issuer
and
FIRST UNION NATIONAL BANK,
as Indenture Trustee
Dated as of March 1, 1999
FREMONT HOME LOAN OWNER TRUST 1999-1
Home Loan Asset Backed Notes,
Series 1999-1
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions...................................................
Section 1.02. Incorporation by Reference of Trust Indenture Act.............
Section 1.03. Rules of Construction.........................................
ARTICLE II
THE NOTES
Section 2.01. Form..........................................................
Section 2.02. Execution, Authentication, Delivery and Dating................
Section 2.03. Registration; Registration of Transfer and Exchange...........
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes....................
Section 2.05. Persons Deemed Note Owners....................................
Section 2.06. Payment of Principal and/or Interest; Defaulted Interest......
Section 2.07. Cancellation..................................................
Section 2.08. Conditions Precedent to the Authentication of the Notes.......
Section 2.09. Release of Collateral.........................................
Section 2.10. Book-Entry Notes..............................................
Section 2.11. Notices to Clearing Agency....................................
Section 2.12. Definitive Notes..............................................
Section 2.13. Tax Treatment.................................................
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and/or Interest..........................
Section 3.02. Maintenance of Office or Agency...............................
Section 3.03. Money for Payments to Be Held in Trust........................
Section 3.04. Existence.....................................................
Section 3.05. Protection of Collateral......................................
Section 3.06. Annual Opinions as to Collateral..............................
Section 3.07. Performance of Obligations....................................
Section 3.08. Negative Covenants............................................
Section 3.09. Annual Statement as to Compliance.............................
Section 3.10. Covenants of the Issuer.......................................
Section 3.11. Restricted Payments...........................................
Section 3.12. Treatment of Notes as Debt for Tax Purposes...................
Section 3.13. Notice of Events of Default...................................
Section 3.14. Further Instruments and Acts..................................
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.......................
Section 4.02. Application of Trust Money....................................
Section 4.03. Repayment of Moneys Held by Paying Agent......................
ARTICLE V
REMEDIES
Section 5.01. Events of Default.............................................
Section 5.02. Acceleration of Maturity; Rescission and Annulment............
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee............................................
Section 5.04. Remedies; Priorities..........................................
Section 5.05. Optional Preservation of the Collateral.......................
Section 5.06. Limitation of Suits...........................................
Section 5.07. Unconditional Rights of Noteholders to Receive Principal
and/or Interest..............................................
Section 5.08. Restoration of Rights and Remedies............................
Section 5.09. Rights and Remedies Cumulative................................
Section 5.10. Delay or Omission Not a Waiver................................
Section 5.11. Control by Noteholders........................................
Section 5.12. Waiver of Past Defaults.......................................
Section 5.13. Undertaking for Costs.........................................
Section 5.14. Waiver of Stay or Extension Laws..............................
Section 5.15. Action on Notes...............................................
Section 5.16. Performance and Enforcement of Certain Obligations............
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee...................................
Section 6.02. Rights of Indenture Trustee...................................
Section 6.03. Individual Rights of Indenture Trustee........................
Section 6.04. Indenture Trustee's Disclaimer................................
Section 6.05. Notices of Default............................................
Section 6.06. Reports by Indenture Trustee to Holders.......................
Section 6.07. Compensation and Indemnity....................................
Section 6.08. Replacement of Indenture Trustee..............................
Section 6.09. Successor Indenture Trustee by Merger.........................
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee......................................................
Section 6.11. Eligibility; Disqualification.................................
Section 6.12. Preferential Collection of Claims Against Issuer..............
Section 6.13. Waiver of Setoff..............................................
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders..................................................
Section 7.02. Preservation of Information; Communications to Noteholders....
Section 7.03. Reports by Issuer.............................................
Section 7.04. Reports by Indenture Trustee..................................
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money and Claims Under the Guaranty Policy......
Section 8.02. Trust Accounts; Payments......................................
Section 8.03. General Provisions Regarding Accounts.........................
Section 8.04. Servicer's Monthly Statements.................................
Section 8.05. Release of Collateral.........................................
Section 8.06. Opinion of Counsel............................................
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders........
Section 9.02. Supplemental Indentures with Consent of Noteholders...........
Section 9.03. Execution of Supplemental Indentures..........................
Section 9.04. Effect of Supplemental Indentures.............................
Section 9.05. Conformity with Trust Indenture Act...........................
Section 9.06. Reference in Notes to Supplemental Indentures.................
Section 9.07. Amendments to Owner Trust Agreement...........................
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption...................................................
Section 10.02. Form of Redemption Notice....................................
Section 10.03. Notes Payable on Redemption Date; Provision for Payment of
Indenture Trustee and Securities Insurer....................
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc....................
Section 11.02. Form of Documents Delivered to Indenture Trustee.............
Section 11.03. Acts of Noteholders..........................................
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, Rating
Agencies and Securities Insurer.............................
Section 11.05. Notices to Noteholders; Waiver...............................
Section 11.06. Conflict with Trust Indenture Act............................
Section 11.07. Effect of Headings and Table of Contents.....................
Section 11.08. Successors and Assigns.......................................
Section 11.09. Separability.................................................
Section 11.10. Benefits of Indenture........................................
Section 11.11. Legal Holidays...............................................
Section 11.12. GOVERNING LAW................................................
Section 11.13. Counterparts.................................................
Section 11.14. Recording of Indenture.......................................
Section 11.15. Owner Trust Obligation.......................................
Section 11.16. No Petition..................................................
Section 11.17. Inspection...................................................
Section 11.18. Grant of Noteholder Rights to Securities Insurer.............
Section 11.19. Third Party Beneficiary......................................
Section 11.20. Suspension and Termination of Securities Insurer's Rights....
EXHIBITS
EXHIBIT A - Forms of Notes
<PAGE>
This Indenture entered into effective March 1, 1999
("Indenture"), between FREMONT HOME LOAN OWNER TRUST 1999-1, a Delaware business
trust, as Issuer (the "Issuer"), and FIRST UNION NATIONAL BANK, as Indenture
Trustee (the "Indenture Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual covenants herein contained, the
Issuer and the Indenture Trustee hereby agree as follows for the benefit of each
of them and for the equal and ratable benefit of the holders of the Issuer's
Home Loan Asset Backed Notes, Series 1999-1 (the "Notes") and Financial Security
Assurance Inc. (the "Securities Insurer").
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby
Grants on the Closing Date, to the Indenture Trustee, as Indenture Trustee for
the benefit of the Holders of the Notes and the Securities Insurer, all of the
Issuer's right, title and interest in and to: (i) the Trust Estate (as defined
in the Sale and Servicing Agreement); (ii) the Sale and Servicing Agreement
(including the Issuer's right to cause the Transferor to repurchase the Home
Loans from the Issuer under certain circumstances described therein); (iii) all
present and future claims, demands, causes of action and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, property insurance proceeds, condemnation awards, rights to payment of
any and every kind and other forms of obligations and receivables, instruments
and other property which at any time constitute all or part of or are included
in the proceeds of any of the foregoing; (iv) all funds on deposit from time to
time in the Trust Accounts (including the Certificate Distribution Account); and
(v) all other property of the Owner Trust from time to time (collectively, the
"Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, and to secure compliance with the provisions of this Indenture, all as
provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Holders of the Notes and the Securities Insurer, acknowledges such Grant,
accepts the trusts hereunder and agrees to perform its duties required in this
Indenture to the best of its ability to the end that the interests of the
Holders of the Notes may adequately and effectively be protected. The Indenture
Trustee agrees and acknowledges that possession of the Indenture Trustee's Home
Loan Files will be held by the Custodian for the benefit of the Indenture
Trustee in Maryland. The Indenture Trustee further agrees and acknowledges that
each other item of Collateral that is physically delivered to the Indenture
Trustee will be held on behalf of the Indenture Trustee in North Carolina.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) Except as otherwise specified
herein or as the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this Indenture. Except
as otherwise specified herein or as the context may otherwise require,
capitalized terms used but not otherwise defined herein have the respective
meanings set forth in the Sale and Servicing Agreement for all purposes of this
Indenture.
"Act" has the meaning specified in Section 11.03(a) hereof.
"Administration Agreement" means the Administration Agreement,
dated as of March 1, 1999, among the Administrator, the Issuer and the Company.
"Administrator" means First Union National Bank, a national
banking association, or any successor Administrator under the Administration
Agreement.
"Affiliate" means, 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 Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any
officer of the Owner Trustee who is authorized to act for the Owner Trustee in
matters relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing
Date (as such list may be modified or supplemented from time to time thereafter)
and, so long as the Administration Agreement is in effect, any Vice President or
more senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee if the Administrator is not the Indenture Trustee (as such list may be
modified or supplemented from time to time thereafter).
"Basic Documents" means the Certificate of Owner Trust, the
Owner Trust Agreement, this Indenture, the Sale and Servicing Agreement, the
Servicing Agreement, the Home Loan Purchase Agreement, the Administration
Agreement, the Insurance Agreement, the Indemnification Agreement, the Custodial
Agreement, the Note Depository Agreement, the Notes and other documents and
certificates delivered in connection herewith or therewith.
"Book-Entry Notes" means a beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 hereof.
"Business Day" means any day other than (a) a Saturday or
Sunday, or (b) a day on which banking institutions are authorized or obligated
by law or executive order to be closed in a city at any of the following
locations: (i) The City of New York, (ii) where the corporate trust office of
the Indenture Trustee is located, (iv) where the servicing operations of the
Servicer are primarily located or (v) where the master servicing operations of
the Master Servicer are primarily located.
"Certificate of Owner Trust" means the certificate of trust of
the Issuer substantially in the form of Exhibit B to the Owner Trust Agreement.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for which from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date" means March 23, 1999.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause
of this Indenture.
"Commission" means the Securities and Exchange Commission.
"Company" means Fremont Investment & Loan, a California
industrial loan company, or any successor in interest thereto.
"Corporate Trust Office" means the principal office of the
Indenture Trustee at which at any particular time its corporate trust business
shall be administered, which office at date of execution of this Agreement is
located at 230 South Tryon Street, NC 1179, 9th Floor, Charlotte, North Carolina
28288-1179; Attention: Structured Finance Trust Group, or at such other address
as the Indenture Trustee may designate from time to time by notice to the
Noteholders and the Issuer, or the principal corporate trust office of any
successor Indenture Trustee at the address designated by such successor
Indenture Trustee by notice to the Noteholders and the Issuer.
"Default" means any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
"Definitive Notes" means the Notes as set forth in Section
2.12 hereof.
"Depositor" shall mean PaineWebber Mortgage Acceptance
Corporation IV, a Delaware corporation, in its capacity as depositor under the
Sale and Servicing Agreement, or any successor in interest thereto.
"Depository Institution" means any depository institution or
trust company, including the Indenture Trustee, that (a) is incorporated under
the laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and (c) has
outstanding unsecured commercial paper or other short-term unsecured debt
obligations that are rated A-1 by S&P (or comparable ratings if S&P is not the
Rating Agency).
"DTC" means The Depository Trust Company, a New York
corporation, or any successor thereto.
"Due Period" means, with respect to any Payment Date, the
period commencing on the 2nd day of the calendar month immediately preceding the
month of such Payment Date and ending on the 1st day of the month in which such
Payment Date occurs.
"Event of Default" has the meaning specified in Section 5.01
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer" means, with respect to any corporation,
the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation; and with respect to any partnership, any general
partner thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, create and grant a lien
upon and a security interest in and right of set-off against, deposit, set over
and confirm pursuant to this Indenture. A Grant of the Collateral or of any
other agreement or instrument shall include all rights, powers and options (but
none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give receipt
for principal and interest payments in respect of the Collateral and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring Proceedings in the name of the granting party or otherwise, and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Note Register.
"Indenture Trustee" means First Union National Bank, a
national banking association, as Indenture Trustee under this Indenture, or any
successor Indenture Trustee hereunder.
"Independent" means, when used with respect to any specified
Person, that the Person (a) is in fact independent of the Issuer, any other
obligor on the Notes, the Transferor, the Securities Insurer and any Affiliate
of any of the foregoing Persons, (b) does not have any direct financial interest
or any material indirect financial interest in the Issuer, any such other
obligor, the Transferor, the Securities Insurer or any Affiliate of any of the
foregoing Persons and (c) is not connected with the Issuer, any such other
obligor, the Transferor, the Securities Insurer or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 hereof,
made by an Independent appraiser or other expert appointed by an Issuer Order
and approved by the Indenture Trustee in the exercise of reasonable care, and
such opinion or certificate shall state that the signer has read the definition
of "Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Insurance Agreement" means the Insurance and Indemnification
Agreement, dated as of March 1, 1999, among the Securities Insurer, Fremont
Investment & Loan, as Transferor and Master Servicer, the Depositor and the
Issuer.
"Issuer" or "Owner Trust" means Fremont Home Loan Owner Trust
1999-1 until a successor replaces it and, thereafter, means the successor and,
for purposes of any provision contained herein and required by the TIA, each
other obligor on the Notes.
"Issuer Order" and "Issuer Request" mean a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"Majority Noteholders" means until such time as the Note
Principal Balance of the Notes has been reduced to zero, the holder or holders
of in excess of 50% of the Note Principal Balance of all Notes then Outstanding.
"Master Servicer" means Fremont Investment & Loan, a
California industrial loan company.
"Maturity Date" means, with respect to the Notes, March 25,
2030.
"Moody's" means Moody's Investors Service, Inc., or any
successor thereto.
"Note" means a Fremont Home Loan Owner Trust 1999-1, Home Loan
Asset Backed Note, Series 1999-1.
"Note Depository Agreement" means the agreement to be entered
into among the Issuer, the Indenture Trustee and The Depository Trust Company,
as the initial Clearing Agency, relating to the Book-Entry Notes.
"Note Owner" means, with respect to a Book-Entry Note, the
Person that is the beneficial owner of such Book-Entry Note, as reflected on the
books of the Clearing Agency or on the books of a Person maintaining an account
with such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 2.03 hereof.
"Officer's Certificate" means a certificate signed by any
Authorized Officer of the Issuer or, if authorized under the Administration
Agreement, the Administrator or the Master Servicer on behalf of the Issuer,
under the circumstances described in, and otherwise complying with, the
applicable requirements of Section 11.01 hereof, and delivered to the Indenture
Trustee. Unless otherwise specified, any reference in this Indenture to an
Officer's Certificate shall be to an Officer's Certificate of any Authorized
Officer of the Issuer or, if authorized under the Administration Agreement, the
Administrator.
"Opinion of Counsel" means one or more written opinions of
counsel who may, except as otherwise expressly provided in this Indenture, be an
employee of or counsel to the party required to provide such opinion or opinions
and, in each such case, who shall be satisfactory to the Indenture Trustee and
the Securities Insurer, and which opinion or opinions shall be addressed to the
Indenture Trustee, as Indenture Trustee, and the Securities Insurer and shall
comply with any applicable requirements of Section 11.01 hereof and shall be in
form and substance satisfactory to the Indenture Trustee and the Securities
Insurer.
"Outstanding" means, with respect to any Note and as of the
date of determination, any Note theretofore authenticated and delivered under
this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money
in the necessary amount has theretofore been deposited with the
Indenture Trustee or any Paying Agent in trust for the Holders of such
Notes (provided, however, that if such Notes are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or
provision for such notice satisfactory to the Indenture Trustee has
been made);
(iii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser; provided, however, that in
determining whether the Holders of the requisite percentage of
Outstanding Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes,
the Transferor or any Affiliate of any of the foregoing Persons shall
be disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the Indenture Trustee knows to be
owned in such manner shall be disregarded. Notes owned in such manner
that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee
that the pledgee has the right so to act with respect to such Notes and
that the pledgee is not the Issuer, any other obligor upon the Notes,
the Transferor or any Affiliate of any of the foregoing Persons; and
(iv) Notes for which the related Maturity Date has
occurred;
provided, that Notes that have been paid with funds provided under the Guaranty
Policy shall be deemed to be Outstanding until the Securities Insurer has been
reimbursed with respect thereto as evidenced by a written notice from the
Securities Insurer delivered to the Indenture Trustee, and the Securities
Insurer shall be deemed to the Holder thereof to the extent of any payments made
by the Securities Insurer.
"Outstanding Amount" means the aggregate principal amount of
the Notes, Outstanding at the date of determination.
"Owner Trust Agreement" means the Owner Trust Agreement, dated
as of March 1, 1999, among PaineWebber Mortgage Acceptance Corporation IV, as
Depositor, the Company, Wilmington Trust Company, as Owner Trustee, and First
Union National Bank, as Paying Agent.
"Owner Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee under the Owner Trust Agreement,
or any successor Owner Trustee under the Owner Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person
that meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 hereof and is authorized by the Issuer to make payments to and
payments from the Note Payment Account, including payment of principal of or
interest on the Notes on behalf of the Issuer.
"Payment Date" means the 25th day of any month or if such 25th
day is not a Business Day, the first Business Day immediately following such
day, commencing in April 1999.
"Person" means any individual, corporation, estate,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization, limited liability
company, limited liability partnership or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.04 hereof in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"Rating Agency" means either or both of (i) Moody's or (ii)
S&P. If no such organization or successor thereto is any longer in existence,
"Rating Agency" shall be a nationally recognized statistical rating organization
or other comparable Person designated by the Master Servicer and approved by the
Securities Insurer, notice of which designation shall have been given to the
Indenture Trustee, the Securities Insurer, the Servicer and the Issuer.
"Rating Agency Condition" means, with respect to any action to
which a Rating Agency Condition applies, that each Rating Agency shall have been
given 10 days (or such shorter period as is acceptable to each Rating Agency)
prior notice thereof and that each of the Depositor, the Servicer, the Master
Servicer, the Securities Insurer, the Owner Trustee and the Issuer shall have
been notified by the Rating Agencies in writing that such action will not result
in a reduction, withdrawal or qualification of the then current internal ratings
assigned to the Notes by each of the Rating Agencies without respect to the
Securities Insurer.
"Record Date" means, as to each Payment Date, the last
Business Day of the month immediately preceding the month in which such Payment
Date occurs.
"Redemption Date" means in the case of a redemption of the
Notes pursuant to Section 10.01 hereof, the Payment Date specified by the Master
Servicer or the Issuer pursuant to such Section 10.01.
"Registered Holder" means the Person in the name of which a
Note is registered on the Note Register on the applicable Record Date.
"Residual Interest Certificate" has the meaning assigned to
such term in Section 1.1 of the Owner Trust Agreement.
"Responsible Officer" means, with respect to the Indenture
Trustee, any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Assistant Treasurer,
Assistant Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"S&P" means Standard and Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. or any successor thereto.
"Sale and Servicing Agreement" means the Sale and Master
Servicing Agreement dated as of March 1, 1999, among the Issuer, the Depositor,
the Transferor and Master Servicer and First Union National Bank, as Indenture
Trustee.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Insurer" means Financial Security Assurance Inc.,
a New York monoline insurance company.
"Servicer" shall mean Fairbanks Capital Corp., a Utah
corporation, in its capacity as servicer under the Servicing Agreement, and any
successor Servicer thereunder.
"Servicing Agreement" shall mean the Servicing Agreement which
incorporates by reference the Agreement Regarding Standard Servicing Terms, each
dated as of March 1, 1999, between Fremont Investment & Loan and the Servicer.
"State" means any one of the States of the United States of
America or the District of Columbia.
"Transferor" means Fremont Investment & Loan, a California
industrial loan company.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the
Uniform Commercial Code as in effect in the relevant jurisdiction, as amended
from time to time.
Section 1.02. Incorporation by Reference of Trust Indenture
Act.
(a) Whenever this Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
(b) All other TIA terms used in this Indenture that are
defined in the TIA, defined by TIA reference to another statute or defined by
rule of the Securities and Exchange Commission have the respective meanings
assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect in the United States from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in
the plural include the singular; and
(vi) any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or statute as from
time to time amended, modified or supplemented (as provided in such
agreements) and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated
therein; references to a Person are also to its permitted successors
and assigns.
ARTICLE II
THE NOTES
Section 2.01. Form. The Notes shall be designated as the
"Fremont Home Loan Owner Trust 1999-1 Home Loan Asset Backed Notes, Series
1999-1". Each Note shall be in substantially the form set forth in Exhibit A
hereto, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution thereof. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed,
lithographed or engraved or produced by any combination of these methods, all as
determined by the officers executing such Notes, as evidenced by their execution
of such Notes.
Each Note shall be dated the date of its authentication. The
terms of the Notes are set forth in Exhibit A hereto. The terms of each Note are
part of the terms of this Indenture.
Section 2.02. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Issuer by an Authorized Officer of
the Owner Trustee or the Administrator. The signature of any such Authorized
Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals
who were at any time Authorized Officers of the Owner Trustee or the
Administrator shall bind the Issuer, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Notes or did not hold such offices at the date of such Notes.
Subject to the satisfaction of the conditions set forth in
Section 2.08 hereof, the Indenture Trustee shall upon Issuer Order authenticate
and deliver the Notes for original issue in the following principal amount:
$415,545,505. The aggregate principal of the Notes Outstanding at any time may
not exceed such amount.
The Notes that are authenticated and delivered by the
Indenture Trustee to or upon the order of the Issuer on the Closing Date shall
be dated March 23, 1999. All other Notes that are authenticated after the
Closing Date for any other purpose under the Indenture shall be dated the date
of their authentication. The Notes shall be issuable as registered Notes in the
minimum denomination of $25,000 initial principal amount and integral multiples
of $1,000 in excess thereof; provided however, that any Note may be issued in
such denominations as may be necessary to represent the remainder of the
aggregate principal amount of the Notes.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
Section 2.03. Registration; Registration of Transfer and
Exchange. The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by
the Issuer as Note Registrar, the Issuer will give the Indenture Trustee and the
Securities Insurer prompt written notice of the appointment of such Note
Registrar and of the location, and any change in the location, of the Note
Register, and the Indenture Trustee and the Securities Insurer shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee and the Securities Insurer shall have the
right to rely upon a certificate executed on behalf of the Note Registrar by an
Executive Officer thereof as to the names and addresses of the Holders of the
Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.02
hereof, the Issuer shall execute, and the Indenture Trustee shall authenticate
and the Noteholder shall obtain from the Indenture Trustee, in the name of the
designated transferee or transferees, one or more new Notes in any authorized
denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes in any authorized denominations, of a like aggregate principal amount upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Securities Transfer Agents' Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act.
No service charge shall be made to a Holder or the Securities
Insurer for any registration of transfer or exchange of Notes, but the Issuer
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 9.06 hereof not
involving any transfer.
The preceding provisions of this Section 2.03 notwithstanding,
the Issuer shall not be required to make, and the Note Registrar need not
register, transfers or exchanges of Notes selected for redemption or of any Note
for a period of 15 days preceding the due date for any payment with respect to
such Note.
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. If
(i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, and (ii) there is delivered to the Indenture Trustee and the
Securities Insurer such security or indemnity as may reasonably be required by
them to hold the Issuer, the Securities Insurer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
an Authorized Officer of the Owner Trustee or the Administrator on behalf of the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note; provided, however, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of which
such replacement Note was issued presents for payment such original Note, the
Issuer, the Securities Insurer and the Indenture Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to which it was
delivered or any Person taking such replacement Note from such Person to which
such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer, the Securities Insurer or the Indenture Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section
2.04, the Issuer may require the payment by the Holder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 2.04 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 2.04 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.05. Persons Deemed Note Owners. Prior to due
presentment for registration of transfer of any Note, the Issuer, the Securities
Insurer, the Indenture Trustee and any agent of the Issuer, the Securities
Insurer or the Indenture Trustee may treat the Person in the name of which any
Note is registered (as of the day of determination) as the Note Owner for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Securities Insurer, the Indenture Trustee or any agent
of the Issuer, the Securities Insurer or the Indenture Trustee shall be affected
by notice to the contrary.
Section 2.06. Payment of Principal and/or Interest; Defaulted
Interest.
(a) Each Note shall accrue interest at the Note Interest Rate,
and such interest shall be payable on each Payment Date as specified in Exhibit
A hereto, subject to Section 3.01 hereof. Any installment of interest or
principal, if any, payable on any Note that is punctually paid or duly provided
for by the Issuer on the applicable Payment Date shall be paid to the Person in
the name of which such Note (or one or more Predecessor Notes) is registered on
the Record Date by check mailed first-class postage prepaid to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.12 hereof, with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made
by wire transfer in immediately available funds to the account designated by
such nominee and except for the final installment of principal payable with
respect to such Note on a Payment Date or on the Maturity Date (and except for
the Termination Price for any Note called for redemption pursuant to Section
10.01 hereof), which shall be payable as provided in Section 2.06(b) below. The
funds represented by any such checks returned undelivered shall be held in
accordance with Section 3.03 hereof.
(b) The principal of each Note shall be payable in
installments on each Payment Date as provided in the form of Note set forth in
Exhibit A hereto. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
earlier of (i) the Maturity Date, (ii) the Redemption Date or (iii) the date on
which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee or the Majority Noteholders or the Securities Insurer shall
have declared the Notes to be immediately due and payable in the manner
provided; however, that if on the date any such Event of Default occurs, no
Securities Insurer Default exists and is continuing, the Securities Insurer, in
its sole discretion, may determine whether or not to accelerate payment on the
Notes.
All principal payments on the Notes shall be made pro rata to
the Noteholders. The Indenture Trustee shall notify the Person in the name of
which a Note is registered at the close of business on the Record Date preceding
the Payment Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Payment Date and shall specify
that such final installment will be payable only upon presentation and surrender
of such Note and shall specify the place where such Note may be presented and
surrendered for payment of such installment. A copy of such form of notice shall
be sent to the Securities Insurer by the Indenture Trustee. Notices in
connection with redemptions of Notes shall be mailed to Noteholders as provided
in Section 10.02 hereof. Promptly following the date on which all principal of
and interest on the Notes has been paid in full and the Notes have been
surrendered to the Indenture Trustee, the Indenture Trustee shall, if the
Securities Insurer has paid any amount in respect of the Notes under the
Guaranty Policy that has not been reimbursed to the Securities Insurer, deliver
such surrendered Notes to the Securities Insurer.
Section 2.07. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall promptly be cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall promptly be cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section 2.07, except as expressly
permitted by this Indenture. All canceled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided, however, that such
Issuer Order is timely and the Notes have not been previously disposed of by the
Indenture Trustee.
Section 2.08. Conditions Precedent to the Authentication of
the Notes. The Notes may be authenticated by the Indenture Trustee, upon Issuer
Request and upon receipt by the Indenture Trustee of the following:
(a) An Issuer Order authorizing the execution and
authentication of such Notes by the Issuer.
(b) All of the items of Collateral which shall be delivered to
the Indenture Trustee or its designee.
(c) An executed counterpart of the Owner Trust Agreement.
(d) An Opinion of Counsel addressed to the Indenture Trustee
and the Securities Insurer to the effect that:
(i) the Owner Trustee has full power, authority and legal
right to execute, deliver and perform its obligations under the Trust
Agreement and to consummate the transactions contemplated thereby;
(ii) the Issuer has been duly formed, is validly existing
as a business trust under the Business Trust Statute and has power and
authority to execute, deliver, issue, and perform, as applicable, this
Indenture, the Administration Agreement, the Sale and Servicing
Agreement, the Insurance Agreement, the Indemnification Agreement, the
Custodial Agreement and the Note Depository Agreement and to consummate
the transactions contemplated thereby;
(iii) assuming due authorization, execution and delivery
hereof by each party thereto, Indenture is the valid, legal and binding
agreement of the Issuer, enforceable against the Issuer in accordance
with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, receivership or
other laws relating to the creditors' rights generally and to general
principles of equity including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is
sought in a proceeding in equity or at law) and except that the
enforcement of rights with respect to indemnification and contribution
obligations may be limited by applicable law;
(iv) upon due authorization, execution and delivery of this
Indenture by each party hereto, and due execution, authentication, and
delivery of the Notes, such Notes will be legal, valid and binding
obligations of the Issuer, enforceable against the Issuer in accordance
with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, receivership or
other laws relating to creditors' rights generally, and to general
principles of equity including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity), and will be validly issued
and outstanding and entitled to the benefits of the Indenture;
(v) the conditions precedent to the authentication and
delivery of the Bonds as set forth in this Indenture have been complied
with;
(vi) on the Closing Date, the Issuer shall cause to be
furnished to the Indenture Trustee and the Securities Insurer an
Opinion of Counsel either stating that, in the opinion of such counsel,
this Indenture has been properly recorded and filed so as to make
effective the lien intended to be created thereby, and reciting the
details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien effective; and
(vii) any other matters as the Indenture Trustee may
reasonably request;
(e) An Officer's Certificate complying with the requirements
of Section 11.01 hereof and stating that:
(i) the Issuer is not in Default under this Indenture and
the issuance of the Notes applied for will not result in any breach of
any of the terms, conditions or provisions of, or constitute a default
under, the Owner Trust Agreement, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Issuer is a party
or by which it is bound, or any order of any court or administrative
agency entered in any Proceeding to which the Issuer is a party or by
which it may be bound or to which it may be subject, and that all
conditions precedent provided in this Indenture relating to the
authentication and delivery of the Notes applied for have been complied
with;
(ii) the Issuer is the owner of the all of the Home Loans,
has not assigned any interest or participation in the Home Loans (or,
if any such interest or participation has been assigned, it has been
released) and has the right to Grant all of the Home Loans to the
Indenture Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all
of its right, title and interest in and to the Collateral, and has
delivered or caused the same to be delivered to the Indenture Trustee;
(iv) letters signed by the Rating Agencies confirming that
the Notes have been rated "Aaa" by Moody's and "AAA" by S&P have been
delivered to the Indenture Trustee;
(v) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with;
and
(f) A fair value certificate from Vitek Real Estate Industries
Group, Inc. with respect to the Home Loans.
Section 2.09. Release of Collateral.
(a) Except as otherwise provided in subsections (b) and (c) of
this Section 2.09, Section 11.01 hereof and the terms of the Basic Documents,
the Indenture Trustee shall release property from the lien of this Indenture
only upon receipt of an Issuer Request accompanied by an Officer's Certificate,
an Opinion of Counsel and Independent Certificates in accordance with TIA
Sections 314(c) and 314(d)(l) or an Opinion of Counsel in lieu of such
Independent Certificates to the effect that the TIA does not require any such
Independent Certificates.
(b) The Servicer, on behalf of the Issuer, shall be entitled
to obtain a release from the lien of this Indenture for any Home Loan and the
related Mortgaged Property at any time (i) after a payment by the Transferor or
the Issuer of the Purchase Price of the Home Loan, (ii) after a Qualified
Substitute Home Loan is substituted for such Home Loan and payment of the
Substitution Adjustment, if any, (iii) after liquidation of the Home Loan in
accordance with Section 4.11 of the Sale and Servicing Agreement and the deposit
of all Recoveries thereon in the Collection Account, or (iv) upon the
termination of a Home Loan (due to, among other causes, a prepayment in full of
the Home Loan and sale or other disposition of the related Mortgaged Property),
if the Issuer delivers to the Indenture Trustee an Issuer Request (A)
identifying the Home Loan and the related Mortgaged Property to be released, (B)
requesting the release thereof, (C) setting forth the amount deposited in the
Collection Account with respect thereto, and (D) certifying that the amount
deposited in the Collection Account (x) equals the Purchase Price of the Home
Loan, in the event a Home Loan and the related Mortgaged Property are being
released from the lien of this Indenture pursuant to item (i) above, (y) equals
the Substitution Adjustment related to the Qualified Substitute Home Loan and
the Deleted Home Loan released from the lien of the Indenture pursuant to item
(ii) above, or (z) equals the entire amount of Recoveries received with respect
to such Home Loan and the related Mortgaged Property in the event of a release
from the lien of this Indenture pursuant to items (iii) or (iv) above.
(c) The Indenture Trustee shall, if requested by the Servicer,
temporarily release or cause the Custodian temporarily to release to the
Servicer the Indenture Trustee's Home Loan File pursuant to the provisions of
Section 7.02 of the Sale and Servicing Agreement upon compliance by the Servicer
with the provisions thereof; provided, however, that the Indenture Trustee's
Home Loan File shall have been stamped to signify the Issuer's pledge to the
Indenture Trustee under the Indenture.
Section 2.10. Book-Entry Notes. The Notes, when authorized by
an Issuer Order, will be issued in the form of typewritten Notes representing
the Book-Entry Notes, to be delivered to The Depository Trust Company, the
initial Clearing Agency, by or on behalf of the Issuer. The Book-Entry Notes
shall be registered initially on the Note Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no Note Owner will receive a
definitive Note representing such Note Owner's interest in such Note, except as
provided in Section 2.12 hereof. Unless and until definitive, fully registered
Notes (the "Definitive Notes") have been issued to such Note Owners pursuant to
Section 2.12 hereof:
(i) the provisions of this Section 2.10 shall be in full
force and effect;
(ii) the Note Registrar, the Indenture Trustee and the
Securities Insurer shall be entitled to deal with the Clearing Agency
for all purposes of this Indenture (including the payment of principal
of and interest on the Notes and the giving of instructions or
directions hereunder) as the sole Holder of the Notes, and shall have
no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
2.10 conflict with any other provisions of this Indenture, the
provisions of this Section 2.10 shall control;
(iv) the rights of Note Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Note Owners and the Clearing Agency
and/or the Clearing Agency Participants pursuant to the Note Depository
Agreement. Unless and until Definitive Notes are issued pursuant to
Section 2.12 hereof, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to
be taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Notes, the
Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from Note
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Notes and has delivered such instructions to the Indenture Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to such Note Owners pursuant
to Section 2.12 hereof, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency and shall have no obligation to such Note Owners.
Section 2.12. Definitive Notes.
If (i) the Administrator advises the Indenture Trustee in
writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Book-Entry Notes and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default, Owners of the Book-Entry Notes representing
beneficial interests aggregating at least a majority of the Outstanding Notes
advise the Clearing Agency in writing that the continuation of a book-entry
system through the Clearing Agency is no longer in the best interests of such
Note Owners, then the Clearing Agency shall notify all Note Owners, the
Securities Insurer and the Indenture Trustee of the occurrence of such event and
of the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar, the Securities Insurer
or the Indenture Trustee shall be liable for any delay in delivery of such
instructions and each of them may conclusively rely on, and shall be protected
in relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
Section 2.13. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that for all
purposes, including federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. The Issuer, by entering into this Indenture, and each
Noteholder, by its acceptance of a Note (and each Note Owner by its acceptance
of an interest in the applicable Book-Entry Note), agree to treat the Notes for
all purposes, including federal, state and local income, single business and
franchise tax purposes, as indebtedness of the Issuer.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and/or Interest. The Issuer
will duly and punctually pay (or will cause to be paid duly and punctually) the
principal of and interest on the Notes in accordance with the terms of the Notes
and this Indenture. Without limiting the foregoing, subject to and in accordance
with Section 8.02(c) hereof, the Issuer will cause to be paid to the Noteholders
all amounts on deposit in the Note Payment Account on each Payment Date
deposited therein pursuant to the Sale and Servicing Agreement (less any amounts
representing income from Permitted Investments) for the benefit of the Notes.
Amounts properly withheld under the Code by any Person from a payment to any
Noteholder of interest and/or principal shall be considered as having been paid
by the Issuer or the Securities Insurer, as applicable, to such Noteholder for
all purposes of this Indenture. The Notes shall be non-recourse obligations of
the Issuer and shall be limited in right of payment to amounts available from
the Collateral and any amounts received by the Indenture Trustee under the
Guaranty Policy in respect of the Notes, as provided in this Indenture. The
Issuer shall not otherwise be liable for payments on the Notes. If any other
provision of this Indenture shall be deemed to conflict with the provisions of
this Section 3.01, the provisions of this Section 3.01 shall control.
Section 3.02. Maintenance of Office or Agency. The Issuer will
or will cause the Administrator to maintain in the Borough of Manhattan in The
City of New York or in Charlotte, North Carolina an office or agency where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Administrator to serve as
its agent for the foregoing purposes and to serve as Paying Agent with respect
to the Notes and the Certificates. The Issuer will give prompt written notice to
the Indenture Trustee and the Securities Insurer of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
Section 3.03. Money for Payments to Be Held in Trust. As
provided in Section 8.02(a) and (b) hereof, all payments of amounts due and
payable with respect to any Notes that are to be made from amounts withdrawn
from the Note Payment Account pursuant to Section 8.02(c) hereof shall be made
on behalf of the Issuer by the Indenture Trustee or by the Paying Agent, and no
amounts so withdrawn from the Note Payment Account for payments of Notes shall
be paid over to the Issuer except as provided in this Section 3.03.
On or before the seventh Business Day preceding each Payment
Date and the Redemption Date, the Paying Agent shall deposit or cause to be
deposited in the Note Payment Account an aggregate sum sufficient to pay the
amounts due on such Payment Date or the Redemption Date under the Notes, such
sum to be held in trust for the benefit of the Persons entitled thereto, and
(unless the Paying Agent is the Indenture Trustee) shall promptly notify the
Indenture Trustee and the Securities Insurer of its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with
written notice thereof to the Indenture Trustee and the Securities Insurer. Any
Paying Agent appointed by the Issuer shall be a Person which would be eligible
to be Indenture Trustee hereunder as provided in Section 6.11 hereof. The Issuer
shall not appoint any Paying Agent (other than the Indenture Trustee) which is
not, at the time of such appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the
Administrator or the Indenture Trustee to execute and deliver to the Indenture
Trustee and the Securities Insurer an instrument in which such Paying Agent
shall agree with the Indenture Trustee (and if the Indenture Trustee acts as
Paying Agent, it hereby so agrees), subject to the provisions of this Section,
that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee and the Securities Insurer
notice of any default by the Issuer (or any other obligor upon the
Notes) of which it has actual knowledge in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as a Paying Agent and forthwith pay
to the Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards required to be
met by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect
to the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith; provided,
however, that with respect to withholding and reporting requirements
applicable to original issue discount (if any) on the Notes, the Issuer
shall have first provided the calculations pertaining thereto to the
Indenture Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds or
abandoned property, any money held by the Indenture Trustee or any Paying Agent
in trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two years after such amount has become due and payable
shall be discharged from such trust and be paid to either (i) the Issuer on
Issuer Request and with the prior written consent of the Securities Insurer as
long as no Securities Insurer Default has occurred and is continuing or (ii) if
such money or a portion thereof was paid by the Securities Insurer to the
Indenture Trustee for the payment of principal of or interest on such Note, to
the Securities Insurer in lieu of the Issuer to the extent of such unreimbursed
amount; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof (but only to the extent of
the amounts so paid to the Issuer), and all liability of the Indenture Trustee
or such Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense and direction of the
Issuer cause to be published, once in a newspaper of general circulation in The
City of New York customarily published in the English language on each Business
Day, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer
or the Securities Insurer, as applicable. The Indenture Trustee shall also adopt
and employ, at the expense and direction of the Issuer, any other reasonable
means of notification of such repayment (including, but not limited to, mailing
notice of such repayment to Holders whose Notes have been called but have not
been surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
Section 3.04. Existence.
(a) Subject to subparagraph (b) of this Section 3.04, the
Issuer will keep in full effect its existence, rights and franchises as a
business trust under the laws of the State of Delaware (unless, subject to the
prior written consent of the Securities Insurer, it becomes, or any successor
Issuer hereunder is or becomes, organized under the laws of any other State or
of the United States of America, in which case the Issuer will keep in full
effect its existence, rights and franchises under the laws of such other
jurisdiction) and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Notes and the
Collateral.
(b) Any successor to the Owner Trustee appointed pursuant to
Section 10.2 of the Owner Trust Agreement shall be the successor Owner Trustee
under this Indenture without the execution or filing of any paper, instrument or
further act to be done on the part of the parties hereto.
(c) Upon any consolidation or merger of or other succession to
the Owner Trustee, the Person succeeding to the Owner Trustee under the Owner
Trust Agreement may exercise every right and power of the Owner Trustee under
this Indenture with the same effect as if such Person had been named as the
Owner Trustee herein.
Section 3.05. Protection of Collateral. The Issuer will from
time to time and upon the direction of the Securities Insurer execute and
deliver all such reasonable supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) provide further assurance with respect to the Grant of
all or any portion of the Collateral;
(ii) maintain or preserve the lien and security interest
(and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any rights with respect to the Collateral; or
(v) preserve and defend title to the Collateral and the
rights of the Indenture Trustee, the Noteholders and the Securities
Insurer in such Collateral against the claims of all persons and
parties.
The Issuer hereby designates the Administrator, its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
Section 3.06. Annual Opinions as to Collateral. On or before
July 15th in each calendar year, beginning in 2000, the Issuer shall furnish to
the Indenture Trustee and the Securities Insurer an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until July 15th of the following calendar year.
Section 3.07. Performance of Obligations.
(a) The Issuer will not take any action and will use its best
efforts not to permit any action to be taken by others that would release any
Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the Collateral or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the
assistance of other Persons (including, without limitation, the Master Servicer
and the Administrator under the Administration Agreement) to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee and the Securities Insurer in an
Officer's Certificate of the Issuer shall be deemed to be action taken by the
Issuer. Initially, the Issuer has contracted with the Master Servicer and the
Administrator to assist the Issuer in performing its duties under this
Indenture. The Administrator must at all times be the same Person as the
Indenture Trustee.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, in the Basic Documents
and in the instruments and agreements included in the Collateral, including but
not limited to (i) filing or causing to be filed all UCC financing statements
and continuation statements required to be filed by the terms of this Indenture
and the Sale and Servicing Agreement and (ii) recording or causing to be
recorded all Mortgages, Assignments of Mortgage, all intervening Assignments of
Mortgage and all assumption and modification agreements required to be recorded
by the terms of the Sale and Servicing Agreement, in accordance with and within
the time periods provided for in this Indenture and/or the Sale and Servicing
Agreement, as applicable. Except as otherwise expressly provided therein, the
Issuer shall not waive, amend, modify, supplement or terminate any Basic
Document or any provision thereof without the consent of the Indenture Trustee,
the Securities Insurer and the Holders of at least a majority of the Outstanding
Notes.
(d) If the Issuer shall have knowledge of the occurrence of a
Master Servicer Event of Default under the Sale and Servicing Agreement, the
Issuer shall promptly notify the Indenture Trustee, the Securities Insurer, the
Servicer and the Rating Agencies thereof, and shall specify in such notice the
action, if any, the Issuer is taking with respect to such Master Servicer Event
of Default. If such a Master Servicer Event of Default shall arise from the
failure of the Master Servicer to perform any of its duties or obligations under
the Sale and Servicing Agreement with respect to the Home Loans, the Issuer
shall take all reasonable steps available to it to enforce the obligations of
the Master Servicer thereunder.
(e) Without derogating from the absolute nature of the
assignment granted to the Indenture Trustee under this Indenture or the rights
of the Indenture Trustee hereunder, the Issuer agrees (i) that it will not,
without the prior written consent of the Indenture Trustee and, if a Securities
Insurer Default has not occurred and is not continuing, the Securities Insurer,
amend, modify, waive, supplement, terminate or surrender, or agree to any
amendment, modification, supplement, termination, waiver or surrender of, the
terms of any Collateral (except to the extent otherwise provided in the Sale and
Servicing Agreement) or the Basic Documents, or waive timely performance or
observance by the Servicer, the Master Servicer or the Depositor under the Sale
and Servicing Agreement; and (ii) that any such amendment shall not (A) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
payments that are required to be made for the benefit of the Noteholders or (B)
reduce the aforesaid percentage of the Outstanding Notes that is required to
consent to any such amendment, without the consent of the Holders of all
Outstanding Notes. If any such amendment, modification, supplement or waiver
shall so be consented to by the Indenture Trustee and, if a Securities Insurer
Default has not occurred and is not continuing, the Securities Insurer, the
Issuer agrees, promptly following a request by the Indenture Trustee or the
Securities Insurer to do so, to execute and deliver, in its own name and at its
own expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Sale and Servicing Agreement, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer, including
those included in the Collateral, unless directed to do so by the
Indenture Trustee acting at the direction of the Securities Insurer,
unless a Securities Insurer Default has occurred and is continuing, or
the Securities Insurer;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the
Collateral;
(iii) engage in any business or activity other than as
permitted by the Owner Trust Agreement or other than in connection
with, or relating to, the issuance of Notes pursuant to this Indenture,
or amend the Owner Trust Agreement as in effect on the Closing Date
other than in accordance with Section 11.1 thereof;
(iv) issue debt obligations under any other indenture;
(v) incur or assume any indebtedness or guaranty any
indebtedness of any Person, except for such indebtedness as may be
incurred by the Issuer in connection with the issuance of the Notes
pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part or merge or
consolidate with any other Person;
(vii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may expressly be
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Collateral or any part thereof or any interest therein or
the proceeds thereof (other than tax liens, mechanics' liens and other
liens that arise by operation of law, in each case on any of the
Mortgaged Properties and arising solely as a result of an action or
omission of the related Obligors or (C) permit the lien of this
Indenture not to constitute a valid first priority (other than with
respect to such tax, mechanics' or other lien) security interest in the
Collateral;
(viii) remove the Administrator without cause unless the
Rating Agency Condition shall have been satisfied in connection with
such removal; or
(ix) take any other action or fail to take any action which
may cause the Issuer to be taxable as (a) an association pursuant to
Section 7701 of the Code and the corresponding regulations or (b) as a
taxable mortgage pool pursuant to Section 7701(i) of the Code and the
corresponding regulations.
Section 3.09. Annual Statement as to Compliance. The Issuer
will deliver to the Indenture Trustee and the Securities Insurer, within 120
days after the end of each fiscal year of the Issuer (commencing in the fiscal
year 2000), an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such
year and of its performance under this Indenture has been made under
such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 3.10. Covenants of the Issuer. All covenants of the
Issuer in this Indenture are covenants of the Issuer and are not covenants of
the Owner Trustee. The Owner Trustee is, and any successor Owner Trustee under
the Owner Trust Agreement will be, entering into this Indenture solely as Owner
Trustee under the Owner Trust Agreement and not in its respective individual
capacity, and in no case whatsoever shall the Owner Trustee or any such
successor Owner Trustee be personally liable on, or for any loss in respect of,
any of the statements, representations, warranties or obligations of the Issuer
hereunder, as to all of which the parties hereto agree to look solely to the
property of the Issuer.
Section 3.11. Restricted Payments. The Issuer shall not,
directly or indirectly, (i) pay any dividend or make any payment (by reduction
of capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer or Master Servicer, (ii) redeem,
purchase, retire or otherwise acquire for value any such ownership or equity
interest or security or (iii) set aside or otherwise segregate any amounts for
any such purpose; provided, however, that the Issuer may make, or cause to be
made, payments to the Servicer, the Master Servicer, the Indenture Trustee, the
Owner Trustee, the Securities Insurer, the Noteholders and the holders of the
Residual Interest Certificate as contemplated by Section 8.02(c) hereof, and to
the extent funds are available for such purpose under, the Sale and Servicing
Agreement or the Owner Trust Agreement. The Issuer will not, directly or
indirectly, make or cause to be made payments to or distributions from the
Collection Account except in accordance with this Indenture and the Basic
Documents.
Section 3.12. Treatment of Notes as Debt for Tax Purposes. The
Issuer shall, and shall cause the Administrator to, treat the Notes as
indebtedness for all purposes.
Section 3.13. Notice of Events of Default. The Issuer shall
give the Indenture Trustee, the Securities Insurer, the Master Servicer, the
Depositor and the Rating Agencies prompt written notice of each Event of Default
hereunder, each default on the part of the Master Servicer, the Servicer or the
Transferor of its obligations under the Sale and Servicing Agreement and each
default on the part of the Transferor of its obligations under the Home Loan
Purchase Agreement.
Section 3.14. Further Instruments and Acts. Upon request of
the Indenture Trustee or the Securities Insurer, the Issuer will execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect with respect to the Notes (except
as to (i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon including any such
right of the Securities Insurer pursuant to Section 2.06(b) or the proviso to
the definition of "Outstanding", (iv) Sections 3.03, 3.04, 3.05, 3.08 and 3.10
hereof, (v) the rights, obligations and immunities of the Indenture Trustee
hereunder (including the rights of the Indenture Trustee under Section 6.07
hereof and the obligations of the Indenture Trustee under Section 4.02 hereof)
and (vi) the rights of Noteholders as beneficiaries hereof with respect to the
property so deposited with the Indenture Trustee payable to all or any of them),
and the Indenture Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when all of the following have occurred:
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i) Notes
that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.04 hereof and (ii) Notes for the payment
of which money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03 hereof) shall
have been delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. shall have become due and payable, or
b. will become due and payable within one year following the
Maturity Date, or
c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the
giving of notice of redemption by the Indenture Trustee in the
name, and at the expense, of the Issuer,
d. and the Issuer, in the case of clause a., b. or c. above, has
irrevocably deposited or caused irrevocably to be deposited
with the Indenture Trustee cash or direct obligations of or
obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation when due to the Maturity Date or the Redemption
Date (if Notes shall have been called for redemption pursuant
to Section 10.01 hereof), as the case may be; and
(B) the latest of (a) 18 months after payment in full of all
outstanding obligations under the Notes, (b) the payment in full of all unpaid
Trust Fees and Expenses and all sums owing to the Securities Insurer under the
Insurance Agreement as confirmed in writing by the Securities Insurer, (c) the
Guaranty Policy is surrendered to the Securities Insurer and (d) the date on
which the Issuer has paid or caused to be paid all other sums payable hereunder
by the Issuer; and
(C) the Issuer shall have delivered to the Indenture Trustee
and the Securities Insurer an Officer's Certificate, an Opinion of Counsel and
(if required by the TIA or the Indenture Trustee) an Independent Certificate
from a firm of certified public accountants, each meeting the applicable
requirements of Section 11.01(a) hereof and, subject to Section 11.02 hereof,
each stating that all conditions precedent herein provided for, relating to the
satisfaction and discharge of this Indenture with respect to the Notes, have
been complied with.
Section 4.02. Application of Trust Money. All moneys deposited
with the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be
held in trust and applied by it, in accordance with the provisions of the Notes,
the Insurance Agreement and this Indenture, to the payment, either directly or
through any Paying Agent, as the Indenture Trustee may determine, to the
Securities Insurer and to the Holders of the particular Notes for the payment or
redemption of which such moneys have been deposited with the Indenture Trustee,
of all sums due and to become due thereon; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes shall,
upon demand of the Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.03 hereof and thereupon such Paying Agent shall
be released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
Section 5.01. Events of Default.
(a) "Event of Default," wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) Notwithstanding that there may be insufficient sums in
the Note Payment Account for payment thereof on the related Payment
Date, default in the payment of any interest on any Note when the same
becomes due and payable, and continuance of such default for a period
of five (5) days; or
(ii) Notwithstanding that there may be insufficient sums in
the Note Payment Account for payment thereof on the related Payment
Date, default in the payment of the principal of or any installment of
the principal of any Note (i) when the same becomes due and payable or
(ii) on the Maturity Date; or
(iii) default in the observance or performance of any
covenant or agreement of the Issuer made in this Indenture (other than
a covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture, the
Insurance Agreement, the Sale and Servicing Agreement or in any
certificate or other writing delivered pursuant hereto or in connection
herewith proving to have been incorrect in any material respect as of
the time when the same shall have been made, and such default shall
continue or not be cured, or the circumstance or condition in respect
of which such misrepresentation or warranty was incorrect shall not
have been eliminated or otherwise cured, for a period of 30 days after
there shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee at the direction of the Securities
Insurer, or to the Issuer and the Indenture Trustee by the Holders of
at least 25% of the Outstanding Notes and with the prior written
consent of the Securities Insurer (so long as no Securities Insurer
Default has occurred and is continuing), a written notice specifying
such default or incorrect representation or warranty and requiring it
to be remedied and stating that such notice is a notice of Default
hereunder; or
(iv) an Event of Default under ss.5.01 of the Insurance
Agreement or in any certificate or other writing delivered pursuant to
the Insurance Agreement or in connection therewith proving to have been
incorrect in any material respect as of the time when the same shall
have been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee at
the direction of the Securities Insurer, or to the Issuer and the
Indenture Trustee by the Holders of at least 25% of the Outstanding
Notes and with the prior written consent of the Securities Insurer (so
long as no Securities Insurer Default has occurred and is continuing),
a written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice
is a notice of Default hereunder; or
(v) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Collateral in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Collateral, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(vi) the commencement by the Issuer of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer to
the entry of an order for relief in an involuntary case under any such
law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Collateral, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
any action by the Issuer in furtherance of any of the foregoing.
The Issuer shall promptly deliver to the Indenture Trustee and
the Securities Insurer written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clauses (iii) and (iv) above, the status of such event
and what action the Issuer is taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default shall occur and a Securities Insurer Default
has occurred and is continuing then and in every such case the Indenture Trustee
may or the Indenture Trustee as directed in writing by the Majority Noteholders
shall declare all the Notes to be then immediately due and payable, by a notice
in writing to the Issuer (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration the Outstanding Amount of such Notes, together
with accrued and unpaid interest thereon through the date of acceleration, shall
become immediately due and payable; provided, however, that if on the date any
such Event of Default occurs or is continuing, and no Securities Insurer Default
exists and is continuing, then the Securities Insurer, in its sole discretion,
may determine whether or not to accelerate payment on the Notes. In the event of
any acceleration of the Notes by operation of this Section 5.02, the Indenture
Trustee shall continue to be entitled to make claims under the Guaranty Policy
pursuant to Section 8.02(e) hereof. Payments under the Guaranty Policy following
acceleration of the Notes shall be applied by the Indenture Trustee:
FIRST: to the payment of amounts due and unpaid on the Notes
in respect of interest, ratably, without preference or priority of any
kind; and
SECOND: to the payment of amounts due and unpaid on the Notes
in respect of principal, ratably, without preference or priority of any
kind, until the Notes are paid in full.
At any time after such declaration of acceleration of maturity
has been made and before a judgment or decree for payment of the moneys due has
been obtained by the Indenture Trustee as hereinafter in this Article V
provided, either the Securities Insurer (so long as a Securities Insurer Default
has not occurred and is continuing) or the Majority Noteholders (if a Securities
Insurer Default has occurred and is continuing), by written notice to the Issuer
and the Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
1. all payments of principal of and/or interest on all Notes and
all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
2. all sums paid or advanced by the Indenture Trustee or the
Securities Insurer hereunder and the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee
or the Securities Insurer and their respective agents and
counsel; and
(b) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration, have
been cured or waived as provided in Section 5.12 hereof. No such rescission
shall affect any subsequent default or impair any right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee.
(a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will, upon demand of the Indenture
Trustee made at the direction of the Securities Insurer, pay to the Indenture
Trustee, for the benefit of the Holders of the Notes and the Securities Insurer,
the whole amount then due and payable on such Notes for principal and/or
interest, with interest upon the overdue principal and, to the extent payment at
such rate of interest shall be legally enforceable, upon overdue installments of
interest at the rate borne by the Notes and in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and the Securities Insurer and their respective agents and
counsel.
(b) In case the Issuer shall fail forthwith to pay such
amounts upon such demand, the Indenture Trustee may, with the prior written
consent of the Securities Insurer (so long as no Securities Insurer Default has
occurred and is continuing) and shall at the direction of the Securities Insurer
(so long as no Securities Insurer Default has occurred and is continuing) or the
Majority Noteholders (if a Securities Insurer Default has occurred and is
continuing) institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable. At any time, so long as no Securities Insurer Default has occurred and
is continuing, if the Securities Insurer is the holder of any Note pursuant to
Section 2.06(b) hereof or all amounts due to all other Holders of the Notes
pursuant to the Notes and this Indenture have been paid in full, then the
Securities Insurer may, in its own name, institute any Proceedings or take any
action permitted under this Section 5.03 to collect amounts due hereunder from
the Issuer or any other obligor of the Notes.
(c) If an Event of Default occurs and is continuing, the
Indenture Trustee shall, at the direction of the Securities Insurer, and if a
Securities Insurer Default has occurred and is continuing, the Indenture Trustee
may, in its discretion, and shall at the direction of the majority of the
Holders of the Outstanding Notes, as more particularly provided in Section 5.04
hereof, proceed to protect and enforce its rights and the rights of the
Securities Insurer and the Noteholders by such appropriate Proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or
any other obligor upon the Notes or any Person having or claiming an ownership
interest in the Collateral, Proceedings under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, upon the direction of the Securities Insurer, by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and/or interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and the Securities Insurer,
and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith), the Securities
Insurer and the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations,
to vote on behalf of the Holders of Notes in any election of a trustee,
a standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders, the Securities
Insurer and the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee, the Securities Insurer or the Holders of
Notes allowed in any judicial proceedings relative to the Issuer, its
creditors and its property; and any trustee, receiver, liquidator,
custodian or other similar official in any such Proceeding is hereby
authorized by each of such Noteholders and the Securities Insurer to
make payments to the Indenture Trustee and, in the event that the
Indenture Trustee shall consent to the making of payments directly to
such Noteholders and the Securities Insurer, to pay to the Indenture
Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred and all advances made by the
Indenture Trustee and each predecessor Indenture Trustee except as a
result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder or the Securities Insurer any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof or the Securities Insurer or to authorize the Indenture Trustee
to vote in respect of the claim of any Noteholder in any such proceeding except,
as aforesaid, to vote for the election of a trustee in bankruptcy or similar
Person.
(f) All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Indenture Trustee
without the possession of any of the Notes or the production thereof in any
trial or other Proceedings relative thereto, and any such action or Proceedings
instituted by the Indenture Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents, attorneys and
counsel, shall be for the ratable benefit of the Holders of the Notes and the
Securities Insurer.
(g) In any Proceedings brought by the Indenture Trustee (and
also any Proceedings involving the interpretation of any provision of this
Indenture to which the Indenture Trustee shall be a party), the Indenture
Trustee shall be held to represent all the Noteholders, and it shall not be
necessary to make any Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities.
(a) If an Event of Default shall have occurred and be
continuing, the Indenture Trustee shall, at the direction of the Securities
Insurer, and if a Securities Insurer Default has occurred and is continuing, the
Indenture Trustee may, and at the direction of a majority of the Holders of the
Outstanding Notes shall, do one or more of the following (subject to Section
5.05 hereof):
(i) institute Proceedings in its own name and as trustee of
an express trust for the collection of all amounts then payable on the
Notes and amounts due to the Securities Insurer or under this Indenture
with respect thereto, whether by declaration or otherwise, enforce any
judgment obtained, and collect from the Issuer and any other obligor
upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure with respect to the Collateral;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee, the Securities Insurer or
the Noteholders; and
(iv) sell the Collateral or any portion thereof or rights
or interest therein in a commercially reasonable manner, at one or more
public or private sales called and conducted in any manner permitted by
law; provided, however, (x) if a Securities Insurer Default has
occurred and is continuing, the Indenture Trustee may not sell or
otherwise liquidate the Collateral following an Event of Default,
unless (A) the Holders of 100% of the Outstanding Notes consent
thereto, (B) the proceeds of such sale or liquidation distributable to
the Noteholders are sufficient to discharge in full all amounts then
due and unpaid upon such Notes for principal and/or interest or (C) the
Indenture Trustee determines that the Collateral will not continue to
provide sufficient funds for the payment of principal of and interest
on the Notes as they would have become due if the Notes had not been
declared due and payable, and the Indenture Trustee obtains the consent
of Holders of 66-2/3% of the Outstanding Notes, and (y) if no
Securities Insurer Default has occurred and is continuing, the
Securities Insurer may direct the Indenture Trustee and the Indenture
Trustee shall comply with any such direction, to sell or otherwise
liquidate the Collateral following an Event of Default if (1) the
conditions under either A, B or C in clause (x) above are met or (2)
the Securities Insurer has paid the Notes in full under the Guaranty
Policy. In determining such sufficiency or insufficiency with respect
to clause (B) and (C) of this subsection (a)(iv), the Indenture Trustee
may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the
Collateral for such purpose.
(b) If the Indenture Trustee collects any money or property
pursuant to this Article V, it shall pay out the money or property in the
following order:
FIRST: to the Indenture Trustee, any Indenture Trustee Fees
due and payable, for any costs or expenses incurred by it in connection
with the enforcement of the remedies provided for in this Article V and
any other amounts payable to the Indenture Trustee pursuant to Section
6.07 hereof;
SECOND: to the Servicer, any Servicing Compensation due and
payable under the Sale and Servicing Agreement;
THIRD: to the Master Servicer, any Master Servicing
Compensation due and unpaid;
FOURTH: to the Securities Insurer for any Guaranty Insurance
Premiums due and payable;
FIFTH: to the Owner Trustee, any Owner Trustee Fees due and
payable;
SIXTH: to the Noteholders for amounts due and unpaid on the
Notes for interest, pro rata among the Holders of the Notes for
interest, according to the amounts due and payable pursuant to Section
5.01(d) of the Sale and Servicing Agreement, until the Note Principal
Balance of the Notes is reduced to zero;
SEVENTH: to the Noteholders for amounts due and unpaid on the
Notes for principal, pro rata among the Holders of the Notes, according
to the amounts due and payable pursuant to Section 5.01(d) of the Sale
and Servicing Agreement, until the Note Principal Balance of the Notes
is reduced to zero;
EIGHTH: to the Securities Insurer for any amounts then due and
payable pursuant to Section 5.01(e) of the Sale and Servicing
Agreement;
NINTH: to the Noteholders for amounts due and unpaid on the
Notes of Excess Spread, pro rata among the Holders of the Notes,
according to the amounts due and payable pursuant to Section 5.01(e) of
the Sale and Servicing Agreement, until the Note Principal Balance is
reduced to zero;
TENTH: to the Noteholders for amounts due and unpaid on the
Notes of Noteholder's Interest Carry-Forward Amount, pro rata among the
Holders of the Notes, according to the amounts due and payable pursuant
to Section 5.01(e) of the Sale and Servicing Agreement, pro rata, the
Noteholders' Interest Carry Forward Amount due and unpaid; and
ELEVENTH: concurrently to the Servicer in an amount equal to
any outstanding Nonrecoverable Servicing Advances and to the Master
Servicer in an amount equal to any outstanding Nonrecoverable Monthly
Advances, then to reimburse the Servicer the Servicing Fee Recovery
Amount if, any, and then for deposit into the Certificate Distribution
Account for payment to the holders of the Residual Interest
Certificate.
The Indenture Trustee may fix a record date and payment date
for any payment to be made to the Noteholders pursuant to this Section. At least
15 days before such record date, the Indenture Trustee shall mail to each
Noteholder, the Securities Insurer and the Issuer a notice that states the
record date, the payment date and the amount to be paid.
Section 5.05. Optional Preservation of the Collateral. If the
Notes have been declared to be due and payable under Section 5.02 hereof
following an Event of Default and such declaration and its consequences have not
been rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Collateral. It is the desire of the parties hereto
and the Noteholders that there be at all times sufficient funds for the payment
of principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to maintain possession
of the Collateral. In determining whether to maintain possession of the
Collateral, the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Collateral for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall
have any right to institute any Proceeding, judicial or otherwise, with respect
to this Indenture or for the appointment of a receiver or trustee, or for any
other remedy hereunder for as long as a Securities Insurer Default has not
occurred or is not continuing and, if a Securities Insurer Default has occurred
and is continuing, unless:
(a) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the Outstanding Notes
have made written request to the Indenture Trustee to institute such Proceeding
in respect of such Event of Default in its own name as Indenture Trustee
hereunder;
(c) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(d) the Indenture Trustee for 30 days after its receipt of
such notice, request and offer of indemnity has failed to institute such
Proceeding; and
(e) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 30-day period by the Majority
Noteholders.
It is understood and intended that no one or more Holders of
Notes shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each group representing less than a Majority Noteholders, the Indenture
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders to Receive
Principal and/or Interest. Notwithstanding any other provisions in this
Indenture, the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the applicable Maturity Date thereof expressed in such
Note or in this Indenture (or, in the case of redemption, on or after the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the
Indenture Trustee, the Securities Insurer or any Noteholder has instituted any
Proceeding to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason or has been
determined adversely to the Indenture Trustee, the Securities Insurer or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee, the
Securities Insurer and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee, the Securities Insurer and the Noteholders shall continue as though no
such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee, the
Securities Insurer or to the Noteholders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee, the Securities Insurer or any Holder of any
Note to exercise any right or remedy accruing upon any Default or Event of
Default shall impair any such right or remedy or constitute a waiver of any such
Default or Event of Default or an acquiescence therein. Every right and remedy
given by this Article V or by law to the Indenture Trustee, the Securities
Insurer or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee, the Securities Insurer or
by the Noteholders, as the case may be, subject, in each case, however, to the
right of the Securities Insurer to control any such right and remedy, except as
provided in Section 11.20.
Section 5.11. Control by Noteholders. Subject to the rights of
the Securities Insurer under Section 11.18 hereof, the Majority Noteholders
shall have the right to direct the time, method and place of conducting any
Proceeding for any remedy available to the Indenture Trustee with respect to the
Notes or exercising any trust or power conferred on the Indenture Trustee;
provided, however, that:
(a) such direction shall not be in conflict with any rule of
law or with this Indenture;
(b) subject to the express terms of Section 5.04 hereof, any
direction to the Indenture Trustee to sell or liquidate the Collateral shall be
by Holders of Notes representing not less than 100% of the Notes Outstanding;
(c) if the conditions set forth in Section 5.05 hereof have
been satisfied and the Indenture Trustee elects to retain the Collateral
pursuant to such Section, then any direction to the Indenture Trustee by Holders
of Notes representing less than 100% of the Notes Outstanding to sell or
liquidate the Collateral shall be of no force and effect; and
(d) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Noteholders set forth in
this Section 5.11, subject to Section 6.01 hereof, the Indenture Trustee need
not take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
Section 5.12. Waiver of Past Defaults. The Securities Insurer
may, or at any time when a Securities Insurer Default has occurred and is
continuing, the Majority Noteholders may waive any past Default or Event of
Default and its consequences, except a Default (a) in the payment of principal
of or interest on any of the Notes or (b) in respect of a covenant or provision
hereof that cannot be modified or amended without the consent of the Securities
Insurer (so long as no Securities Insurer Default has occurred and is
continuing) or the Holder of each Note. In the case of any such waiver, the
Issuer, the Indenture Trustee, the Securities Insurer and the Holders of the
Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
Section 5.13. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by such Holder's acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Indenture Trustee for any action taken, suffered or omitted
by it as Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee or the Securities Insurer, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate more
than 10% of the Notes or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this Indenture (or, in
the case of redemption, on or after the Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee or the Securities Insurer, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.15. Action on Notes. The Indenture Trustee's right
to seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee, the Securities Insurer or the
Noteholders shall be impaired by the recovery of any judgment by the Indenture
Trustee against the Issuer or by the levy of any execution under such judgment
upon any portion of the Collateral or upon any of the assets of the Issuer. Any
money or property collected by the Indenture Trustee shall be applied in
accordance with Section 5.04(b) hereof.
Section 5.16. Performance and Enforcement of Certain
Obligations.
(a) Promptly following a request from the Indenture Trustee or
the Securities Insurer to do so and at the Master Servicer's expense, the Issuer
shall take all such lawful action as the Indenture Trustee or the Securities
Insurer may request to compel or secure the performance and observance by the
Transferor, the Servicer and the Master Servicer, as applicable, of each of
their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer, under or in connection with the
Sale and Servicing Agreement to the extent and in the manner directed by the
Indenture Trustee or the Securities Insurer, including the transmission of
notices of default on the part of the Transferor or the Master Servicer
thereunder and the institution of legal or administrative actions or proceedings
to compel or secure performance by the Transferor, the Master Servicer or the
Servicer of each of their obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall, at the direction of the Securities Insurer, and at the
direction (which direction shall be in writing or by telephone, confirmed in
writing promptly thereafter) of the Holders of 66-2/3% of the Notes Outstanding
shall, with the prior written consent of the Securities Insurer (so long as no
Securities Insurer Default has occurred and is continuing), exercise all rights,
remedies, powers, privileges and claims of the Issuer, as Securityholder,
against the Transferor, the Servicer or the Master Servicer under or in
connection with the Sale and Servicing Agreement, including the right or power
to take any action to compel or secure performance or observance by the
Transferor, the Servicer or the Master Servicer, as the case may be, of each of
their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension, or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
Section 5.17. Rights in Respect of Insolvency Proceedings.
(a) In the event that the Indenture Trustee has received a
certified copy of an order of the appropriate court that any scheduled payment
of principal of or interest on a Note has been voided in whole or in part as a
preference payment under applicable bankruptcy law, the Indenture Trustee shall
so notify the Securities Insurer, shall comply with the provisions of the
Guaranty Policy to obtain payment by the Securities Insurer of such voided
scheduled payment, and shall, at the time it provides notice to the Securities
Insurer, notify, by mail to Holders of the Notes that, in the event that any
Holder's scheduled payment is so recovered, such Holder will be entitled to
payment pursuant to the terms of the Policy, a copy of which shall be made
available through the Indenture Trustee, the Securities Insurer or the Fiscal
Agent, if any, and the Indenture Trustee shall furnish to the Securities Insurer
or its Fiscal Agent, if any, its records evidencing the payments of principal of
and interest on the Notes, if any, which have been made by the Indenture Trustee
and subsequently recovered from Holders, and the dates on which such payments
were made.
(b) The Indenture Trustee shall promptly notify the Securities
Insurer of either of the following as to which it has actual knowledge: (i) the
commencement of any proceeding by or against the Issuer commenced under the
United States Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding") and
(ii) the making of any claim in connection with any Insolvency Proceeding
seeking the avoidance as a preferential transfer (a "Preference Claim") of any
payment of principal of, or interest on, the Notes. Each Holder, by its purchase
of Notes, and the Indenture Trustee hereby agree that, so long as a the
Securities Insurer Default shall not have occurred and be continuing, the
Securities Insurer may at any time during the continuation of an Insolvency
Proceeding direct all matters relating to such Insolvency Proceeding, including,
without limitation, (i) all matters relating to any Preference Claim, (ii) the
direction of any appeal of any order relating to any Preference Claim at the
expense of the Securities Insurer but subject to reimbursement as provided in
the Insurance Agreement and (iii) the posting of any surety, supersedes or
performance Note pending any such appeal. In addition, and without limitation of
the foregoing, as set forth in Section 5.18, the Securities Insurer shall be
subrogated to, and each Holder and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law the rights of the Indenture
Trustee and each Holder in the conduct of any Insolvency Proceeding, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Insolvency
Proceeding.
(c) The Indenture Trustee shall furnish to the Securities
Insurer or its Fiscal Agent its records evidencing the payments of principal of
and interest on the Notes which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made.
Section 5.18. Effect of Payments by The Securities Insurer;
Subrogation.
(a) Anything herein to the contrary notwithstanding, any
payment with respect to the principal of or interest on the Notes which is made
with moneys received pursuant to the terms of the Policy shall not be considered
payment by the Issuer of the Notes, shall not discharge the Issuer in respect of
its obligation to make such payment and shall not result in the payment of or
the provision for the payment of the principal of or interest on the Notes
within the meaning of Section 4.01 hereof. The Issuer and the Indenture Trustee
acknowledge that without the need for any further action on the part of the
Securities Insurer, the Issuer, the Indenture Trustee or the Note Registrar (i)
to the extent the Securities Insurer makes payments, directly or indirectly, on
account of principal of or interest on the Notes to the Holders of such Notes,
the Securities Insurer will be fully subrogated to the rights of such Holders to
receive such principal and interest from the Issuer, and (ii) the Securities
Insurer shall be paid such principal and interest in its capacity as a Holder of
Notes but only from the sources and in the manner provided herein for the
payment of such principal and interest in each case only after the Holders of
the Notes have received payment of all scheduled payments of principal and
interest due thereon.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith or gross negligence on its
part, the Indenture Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; provided, however,
that the Indenture Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.11
hereof.
(d) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section 6.01.
(e) The Indenture Trustee shall not be liable for interest on
any money received by it except as the Indenture Trustee may agree in writing
with the Issuer.
(f) Money held in trust by the Indenture Trustee shall be
segregated from other funds held by the Indenture Trustee except to the extent
permitted by law or the terms of this Indenture or the Sale and Servicing
Agreement.
(g) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it; provided, however, that the Indenture Trustee
shall not refuse or fail to perform any of its duties hereunder solely as a
result of nonpayment of its normal fees and expenses and provided, further, that
nothing in this Section 6.01(g) shall be construed to limit the exercise by the
Indenture Trustee of any right or remedy permitted under this Indenture or
otherwise in the event of the Issuer's failure to pay the Indenture Trustee's
fees and expenses pursuant to Section 6.07 hereof. In determining that such
repayment or indemnity is not reasonably assured to it, the Indenture Trustee
must consider not only the likelihood of repayment or indemnity by or on behalf
of the Issuer but also the likelihood of repayment or indemnity from amounts
payable to it from the Collateral pursuant to Section 6.07 hereof.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section.
(i) The Indenture Trustee shall not be required to take notice
or be deemed to have notice or knowledge of any Event of Default (other than an
Event of Default pursuant to Section 5.01(a)(i) or (ii) hereof) unless a
Responsible Officer of the Indenture Trustee shall have received written notice
thereof or otherwise shall have actual knowledge thereof. In the absence of
receipt of notice or such knowledge, the Indenture Trustee may conclusively
assume that there is no Event of Default.
(j) The Indenture Trustee shall, and hereby agrees, that it
will hold the Guaranty Policy in trust and will hold any proceeds of any claim
on the Guaranty Policy in trust solely for the use and benefit of the
Noteholders. The Indenture Trustee will deliver to the Rating Agencies notice of
any change made to the Guaranty Policy.
Section 6.02. Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian or nominee so long as the Indenture
Trustee remains liable to the Issuer, the Noteholders and the Securities Insurer
for the performance of its duties hereunder.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that such action or omission by
the Indenture Trustee does not constitute willful misconduct, negligence or bad
faith.
(e) The Indenture Trustee may, at the expense of the
Transferor as provided under Section 6.07, consult with counsel, and the advice
or opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any Paying
Agent, Note Registrar, co-registrar or co-paying agent may do the same with like
rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12
hereof.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture
Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Notes, shall not be accountable
for the Issuer's use of the proceeds from the Notes, or responsible for any
statement of the Issuer in the Indenture or in any document issued in connection
with the sale of the Notes or in the Notes other than the Indenture Trustee's
certificate of authentication.
Section 6.05. Notices of Default. If a Default occurs and is
continuing and if it is known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs and to the Securities Insurer notice of such Default
promptly after it occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice to Noteholders if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The
Indenture Trustee shall deliver to each Noteholder such information reasonably
available to the Indenture Trustee as may be required to enable such Holder to
prepare its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. As compensation for
its services hereunder, the Indenture Trustee shall be entitled to receive, on
each Payment Date, the Indenture Trustee's Fee pursuant to Section 8.02(c)
hereof (which compensation shall not be limited by any law on compensation of a
trustee of an express trust) and shall be entitled to reimbursement by the
Master Servicer for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts and Opinions of Counsel hereunder. The Issuer agrees to
cause the Master Servicer, at its expense, to indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer, the Servicer and the Master Servicer promptly of any claim for which it
may seek indemnity. Failure by the Indenture Trustee so to notify the Issuer,
the Servicer and the Master Servicer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall or shall cause the Master Servicer to
defend any such claim, and the Indenture Trustee may have separate counsel
reasonably acceptable to the Master Servicer and the Issuer shall or shall cause
the Master Servicer to pay the reasonable fees and expenses of such counsel.
Neither the Issuer, the Servicer nor the Master Servicer need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee
pursuant to this Section 6.07 shall survive the discharge of this Indenture.
When the Indenture Trustee incurs expenses after the occurrence of a Default
specified in Section 5.01(a)(v) hereof with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation
or removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Securities Insurer.
The Securities Insurer or the Holders of a majority of the Outstanding Notes
with the consent of the Securities Insurer (so long as no Securities Insurer
Default has occurred and is continuing) may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture Trustee
subject to Section 6.11. The Issuer shall remove the Indenture Trustee upon the
prior written consent of the Securities Insurer if:
(a) the Indenture Trustee fails to comply with Section 6.11
hereof;
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(d) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Securities Insurer.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, the Securities
Insurer and to the Issuer. Thereupon the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the Indenture Trustee under this
Indenture. The successor Indenture Trustee shall mail a notice of its succession
to Noteholders. The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within
60 days after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Securities Insurer, the Issuer or the Holders of a
majority of the Outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11
hereof, any Noteholder may petition any court of competent jurisdiction for the
removal of the Indenture Trustee and the appointment of a successor Indenture
Trustee acceptable to the Securities Insurer.
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section 6.08, the Issuer's and the Master Servicer's
obligations under Section 6.07 hereof shall continue for the benefit of the
retiring Indenture Trustee acceptable to the Securities Insurer.
Section 6.09. Successor Indenture Trustee by Merger. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, however, that such corporation or banking association shall otherwise
be qualified and eligible under Section 6.11 hereof. The Indenture Trustee shall
provide the Securities Insurer and the Rating Agencies prior written notice of
any such transaction.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.
(a) Notwithstanding any other provisions of this Indenture, at
any time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the Collateral may at the time be located, the Indenture
Trustee shall have the power, with the prior written consent of the Securities
Insurer (so long as no Securities Insurer Default has occurred and is
continuing), and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Noteholders, such title to
the Collateral, or any part hereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Indenture
Trustee or the Securities Insurer may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 6.11 hereof and no notice to
Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 hereof; provided that the Indenture Trustee shall
deliver notice of any such co-trustee or separate trustee to the Securities
Insurer.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Collateral or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article VI. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, jointly with
the Indenture Trustee, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Indenture
Trustee. Every such instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Indenture Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture
Trustee shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall be acceptable to the Securities Insurer and shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Indenture Trustee shall comply
with TIA Section 310(b), including the optional provision permitted by the
second sentence of TIA Section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements
for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against
Issuer. The Indenture Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). An Indenture Trustee
which has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
Section 6.13. Waiver of Setoff. The Indenture Trustee hereby
expressly waives any and all rights of setoff that the Indenture Trustee may
otherwise at any time have under the applicable law with respect to any Trust
Account and agrees that amounts in the Trust Accounts shall at all times be held
and applied solely in accordance with the Basic Documents.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Indenture Trustee Names and
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
the Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Holders of Notes as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished. The Indenture Trustee, or if the Indenture Trustee
is not the Note Register, the Issuer, shall furnish to the Securities Insurer in
writing on an annual basis, and at such other times as the Securities Insurer
may request, a copy of the list of Noteholders.
Section 7.02. Preservation of Information; Communications to
Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 hereof and the names and addresses of Holders of Notes received
by the Indenture Trustee in its capacity as Note Registrar. The Indenture
Trustee may destroy any list furnished to it as provided in such Section 7.01
upon receipt of a new list so furnished. The Indenture Trustee shall make such
list available to the Securities Insurer on request.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee and the Securities
Insurer, within 15 days after the Issuer is required to file the same
with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules
and regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, the Securities
Insurer and the Commission in accordance with the rules and regulations
prescribed from time to time by the Commission such additional
information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.03(a) and by rules and regulations prescribed
from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA
Section 313(a), within 60 days after each March 1, beginning with March 1, 2000,
the Indenture Trustee shall mail to the Securities Insurer and to each
Noteholder as required by TIA Section 313(c) a brief report dated as of such
date that complies with TIA Section 313(a). The Indenture Trustee also shall
comply with TIA Section 313(b).
A copy of each report at the time of its mailing to
Noteholders shall be filed by the Indenture Trustee with the Commission and each
securities exchange, if any, on which the Notes are listed. The Issuer shall
notify the Indenture Trustee if and when the Notes are listed on any securities
exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money and Claims Under the
Guaranty Policy.
(a) Except as otherwise expressly provided herein, the
Indenture Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply
all such money received by it as provided in this Indenture. Except as otherwise
expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Collateral, the Indenture Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any right
to proceed thereafter as provided in Article V hereof.
(b) The Notes will be insured by the Guaranty Policy pursuant
to the terms set forth therein, notwithstanding any provisions to the contrary
contained in this Indenture or the Sale and Servicing Agreement. All amounts
received under the Guaranty Policy shall be used solely for the payment to
Noteholders of principal and interest on the Notes.
Section 8.02. Trust Accounts; Payments.
(a) On or prior to the Closing Date, the Issuer shall cause
the Master Servicer to establish and maintain, in the name of the Indenture
Trustee for the benefit of the Noteholders and the Securities Insurer, or on
behalf of the Owner Trustee for the benefit of the Securityholders, the
Collection Account as provided in Article V of the Sale and Servicing Agreement.
The Indenture Trustee shall establish and maintain, in the name of the Indenture
Trustee on behalf of the holders of the Notes, the Note Payment Account as
provided in Article V of the Sale and Servicing Agreement. The Indenture Trustee
shall establish and maintain, in the name of the Indenture Trustee on behalf of
the holders of the Notes, the Policy Payments Account as provided in Article V
of the Sale and Servicing Agreement. The Indenture Trustee shall also establish
and maintain an account (the "Certificate Distribution Account") in the name of
the Owner Trustee on behalf of the holders of the Residual Interest
Certificates. The Indenture Trustee shall deposit amounts into each of the
accounts in accordance with the terms hereof, the Sale and Servicing Agreement
and the Servicer's Monthly Remittance Report.
(b) On the fourth Business Day prior to each Payment Date, the
Servicer will remit to the Indenture Trustee for deposit into the Note Payment
Account, the applicable portions of the Available Collection Amount from the
Collection Account, pursuant to Section 5.01(b)(2) of the Sale and Servicing
Agreement and the Indenture Trustee will deposit such amount in the Note Payment
Account. On each Payment Date, to the extent funds are available in the Note
Payment Account, the Indenture Trustee shall either retain funds in the Note
Payment Account for payment on such day or make the withdrawals from the Note
Payment Account and deposits into the Certificate Distribution Account for
distribution on such Payment Date as required pursuant to Section 5.01(c) of the
Sale and Servicing Agreement.
(c) On each Payment Date and Redemption Date, to the extent
funds are available in the Note Payment Account, the Indenture Trustee shall
make the following payments from the amounts on deposit in the Note Payment
Account in the following order of priority (except as otherwise provided in
Section 5.04(b) hereof):
(i) (A) to the Indenture Trustee, an amount equal to the
Indenture Trustee Fee and all unpaid Indenture Trustee Fees from prior
Payment Dates; (B) to the Master Servicer, an amount equal to the
Master Servicer Compensation and all unpaid Master Servicing
Compensation from prior Payment Dates; (C) to the Servicer, on behalf
of the Owner Trustee, an amount equal to the Servicing Compensation
(net of the sum of any amounts retained prior to deposit into the
Collection Account pursuant to Section 5.01(b)(1) of the Sale and
Servicing Agreement) and all unpaid Servicing Compensation from prior
Payment Dates; (D) to the Securities Insurer, an amount equal to the
Guaranty Insurance Premium and all unpaid Guaranty Insurance Premiums
from prior Payment Dates; and
(ii) to the Noteholders and the Securities Insurer, the
amounts set forth in Sections 5.01(d) and (e) of the Sale and Servicing
Agreement.
(d) On each Payment Date and each Redemption Date, to the
extent of the interest of the Indenture Trustee in the Certificate Distribution
Account (as described in Section 5.03(a) of the Sale and Servicing Agreement),
the Indenture Trustee hereby authorizes the Owner Trustee or the Paying Agent,
as applicable, to make the distributions from the Certificate Distribution
Account as required pursuant to Sections 5.01(d) and (e) of the Sale and
Servicing Agreement.
Section 8.03. General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the funds in the Trust Accounts
shall be invested in Permitted Investments and reinvested by the Indenture
Trustee at the direction of the Master Servicer in accordance with the
provisions of Article V of the Sale and Servicing Agreement. All income or other
gain from investments of moneys deposited in the Trust Accounts shall be
deposited by the Indenture Trustee into the Note Payment Account, and any loss
resulting from such investments shall be charged to such account.
(b) Subject to Section 6.01(c) hereof, the Indenture Trustee
shall not in any way be held liable by reason of any insufficiency in any of the
Trust Accounts resulting from any loss on any Permitted Investment included
therein except for losses attributable to the Indenture Trustee's failure to
make payments on such Permitted Investments issued by the Indenture Trustee, in
its commercial capacity as principal obligor and not as trustee, in accordance
with their terms.
(c) If (i) the Issuer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the
Issuer and Indenture Trustee) on any Business Day or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Notes but the
Notes shall not have been declared due and payable pursuant to Section 5.02
hereof or (iii) if such Notes shall have been declared due and payable following
an Event of Default, amounts collected or receivable from the Collateral are
being applied in accordance with Section 5.05 hereof as if there had not been
such a declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Permitted Investments.
Section 8.04. Servicer's Monthly Statements. On each Payment
Date, the Indenture Trustee shall deliver the Servicer's Monthly Remittance
Report (as defined in the Sale and Servicing Agreement) with respect to such
Payment Date to DTC, the Master Servicer, the Rating Agencies and the Securities
Insurer.
Section 8.05. Release of Collateral.
(a) Subject to Section 11.01 and the terms of the Basic
Documents, the Indenture Trustee may, and when required by the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys. The Indenture Trustee shall
surrender the Guaranty Policy to the Securities Insurer upon the conditions in
Section 4.01 hereof.
(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding and all sums due to the Certificateholders pursuant to Section
5.02(b) of the Sale and Servicing Agreement, to the Servicer pursuant to Section
8.02(c)(i)(A) hereof, to the Master Servicer pursuant to Section 8.02(c)(i)(B)
hereof, to the Securities Insurer pursuant to Section 8.02(c)(i)(C) hereof, to
the Indenture Trustee pursuant to Section 8.02(c)(i)(D) hereof, to the Owner
Trustee pursuant to Section 8.02(c)(i)(E) hereof and to the Custodian pursuant
to Section 8.02(c)(i)(F) hereof have been paid, release any remaining portion of
the Collateral that secured the Notes from the lien of this Indenture and
release to the Issuer or any other Person entitled thereto any funds then on
deposit in the Trust Accounts. The Indenture Trustee shall release property from
the lien of this Indenture pursuant to this Subsection (b) only upon receipt by
it and the Securities Insurer of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.01 hereof.
Section 8.06. Opinion of Counsel. The Indenture Trustee and
the Securities Insurer shall receive at least seven days' prior notice when
requested by the Issuer to take any action pursuant to Section 8.05(a) hereof,
accompanied by copies of any instruments involved, and the Indenture Trustee and
the Securities Insurer may also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee
and the Securities Insurer, stating the legal effect of any such action,
outlining the steps required to complete the same, and concluding that all
conditions precedent to the taking of such action have been complied with and
such action will not materially and adversely impair the security for the Notes
or the rights of the Noteholders in contravention of the provisions of this
Indenture; provided, however, that such Opinion of Counsel shall not be required
to express an opinion as to the fair value of the Collateral. Counsel rendering
any such opinion may rely, without independent investigation, on the accuracy
and validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of
Noteholders.
(a) Without the consent of the Holders of any Notes but with
prior notice to the Rating Agencies and with the prior written consent of the
Securities Insurer (so long as no Securities Insurer Default has occurred and is
continuing), the Issuer and the Indenture Trustee, when authorized by an Issuer
Order, at any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property
at any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided, however, that such action shall not adversely
affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI hereof; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, with the prior
written consent of the Securities Insurer (so long as no Securities Insurer
Default has occurred and is continuing), when authorized by an Issuer Order,
may, also without the consent of any of the Holders of the Notes but with prior
consent of the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by (i) an
Opinion of Counsel or (ii) satisfaction of the Rating Agency Condition,
adversely affect in any material respect the interests of any Noteholder
including the interests of the Securities Insurer to the extent it is, or will
become, upon payment in full of all amounts due to any Noteholder hereunder or
pursuant to a Note, a Noteholder pursuant to Section 2.06(b) hereof.
Section 9.02. Supplemental Indentures with Consent of
Noteholders. The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, also may, with prior consent of the Rating Agencies, the Securities
Insurer (so long as no Securities Insurer Default has occurred and is
continuing) and with the consent of the Holders of not less than a majority of
the Outstanding Notes, by Act of such Holders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Note affected thereby and the Securities Insurer:
(a) change the date of payment of any installment of principal
of or interest on any Note, or reduce the Note Principal Balance thereof, the
interest rate thereon or the Termination Price with respect thereto, change the
provisions of this Indenture relating to the application of collections on, or
the proceeds of the sale of, the Collateral to payment of principal of or
interest on the Notes, or change any place of payment where, or the coin or
currency in which, any Note or the interest thereon is payable, or impair the
right to institute suit for the enforcement of the provisions of this Indenture
requiring the application of funds available therefor, as provided in Article V
hereof, to the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or after the
Redemption Date);
(b) reduce the percentage of the Outstanding Notes, the
consent of the Holders of which is required for any such supplemental indenture,
or the consent of the Holders of which is required for any waiver of compliance
with certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" or "Voting Rights";
(d) reduce the percentage of the Outstanding Notes required to
direct the Indenture Trustee to direct the Issuer to sell or liquidate the
Collateral pursuant to Section 5.04 hereof;
(e) modify any provision of this Section except to increase
any percentage specified herein or to provide that certain additional provisions
of this Indenture or the Basic Documents cannot be modified or waived without
the consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Payment Date (including the calculation of any
of the individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory redemption
of the Notes contained herein; or
(g) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Collateral or, except as otherwise permitted or contemplated herein, terminate
the lien of this Indenture on any property at any time subject hereto or deprive
the Holder of any Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether
or not any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders
pursuant to this Section 9.02, the Indenture Trustee shall mail to the Holders
of the Notes to which such amendment or supplemental indenture relates a notice
setting forth in general terms the substance of such supplemental indenture. It
shall not be necessary for any Act of Noteholders under this Section 9.02 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to receive,
and subject to Sections 6.01 and 6.02 hereof, shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties,
liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and shall be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every
amendment of this Indenture and every supplemental indenture executed pursuant
to this Article IX shall conform to the requirements of the Trust Indenture Act
as then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Owner Trust Agreement. Subject to
Section 11.1 of the Owner Trust Agreement, the Indenture Trustee shall, upon
Issuer Order, consent to any proposed amendment to the Owner Trust Agreement or
an amendment to or waiver of any provision of any other document relating to the
Owner Trust Agreement, such consent to be given without the necessity of
obtaining the consent of the Holders of any Notes upon satisfaction of the
requirements under Section 11.1 of the Owner Trust Agreement. Nothing in this
Section shall be construed to require that any Person obtain the consent of the
Indenture Trustee to any amendment or waiver or any provision of any document
where the making of such amendment or the giving of such waiver without
obtaining the consent of the Indenture Trustee is not prohibited by this
Indenture or by the terms of the document that is the subject of the proposed
amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption. The Majority Residual
Interestholders (as defined in the Owner Trust Agreement) may, at its option,
effect an early redemption of the Notes on any Payment Date on or after the
Payment Date on which the Pool Principal Balance declines to 10% or less of the
Original Pool Principal Balance. The Securities Insurer or the Master Servicer
may, at their respective options, effect an early termination of the Notes on
any Payment Date on which the Pool Principal Balance declines to 5% or less of
the Original Pool Principal Balance. The Majority Residual Interestholders, the
Servicer or the Securities Insurer, as applicable, shall effect such early
termination in the manner specified in and subject to the provisions of Section
11.02(b) of the Sale and Servicing Agreement.
The Master Servicer or the Issuer shall furnish the Rating
Agencies, the Servicer and, if redemption is effected by the Majority Residual
Interestholders, the Securities Insurer notice of any such redemption in
accordance with Section 10.02 hereof.
Section 10.02. Form of Redemption Notice. Notice of redemption
under Section 10.01 hereof shall be given by the Indenture Trustee by
first-class mail, postage prepaid, or by facsimile mailed or transmitted not
later than 10 days prior to the applicable Redemption Date to the Securities
Insurer and each Holder of Notes, as of the close of business on the Record Date
preceding the applicable Redemption Date, at such Holder's address or facsimile
number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) that on the Redemption Date Noteholders shall receive
the Note Redemption Amount; and
(iii) the place where such Notes are to be surrendered for
payment of the Termination Price (which shall be the office or agency
of the Issuer to be maintained as provided in Section 3.02 hereof).
Notice of redemption of the Notes shall be given by the
Indenture Trustee in the name of the Issuer and at the expense of the Master
Servicer. Failure to give to any Holder of any Note notice of redemption, or any
defect therein, shall not impair or affect the validity of the redemption of any
other Note.
Section 10.03. Notes Payable on Redemption Date; Provision for
Payment of Indenture Trustee and Securities Insurer. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.02 hereof (in
the case of redemption pursuant to Section 10.01) hereof, on the Redemption Date
become due and payable at the Note Redemption Amount and (unless the Issuer
shall default in the payment of the Note Redemption Amount) no interest shall
accrue thereon for any period after the date to which accrued interest is
calculated for purposes of calculating the Note Redemption Amount. The Issuer
may not redeem the Notes unless (i) all outstanding obligations under the Notes
have been paid in full and (ii) the Indenture Trustee has been paid all amounts
to which it is entitled hereunder and the Securities Insurer has been paid all
Securities Insurer Reimbursement Amounts to which it is entitled as of the
applicable Redemption Date.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the
Indenture Trustee to take any action under any provision of this Indenture
(except with respect to the Master Servicer's servicing activity in the ordinary
course of its business), the Issuer shall furnish to the Indenture Trustee and
the Securities Insurer (i) an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate
or opinion has read or has caused to be read such
covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the
statements or opinions contained in such certificate
or opinion are based;
(3) a statement that, in the opinion of each such
signatory, such signatory has made such examination
or investigation as is necessary to enable such
signatory to express an informed opinion as to
whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been
complied with.
(b) Prior to the deposit of any Collateral or other property
or securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a) hereof
or elsewhere in this Indenture, furnish to the Indenture Trustee and the
Securities Insurer an Officer's Certificate certifying or stating the opinion of
each person signing such certificate as to the fair value (within 90 days of
such deposit) to the Issuer of the Collateral or other property or securities to
be so deposited.
(c) Whenever the Issuer is required to furnish to the
Indenture Trustee and the Securities Insurer an Officer's Certificate certifying
or stating the opinion of any signer thereof as to the matters described in
subsection (b) above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to the Issuer
of the securities to be so deposited and of all other such securities made the
basis of any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the certificates
delivered pursuant to subsection (b) above and this subsection (c), is 10% or
more of the Outstanding Amount of the Notes, but such a certificate need not be
furnished with respect to any securities so deposited, if the fair value thereof
to the Issuer as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the Outstanding Amount of the Notes.
(d) Whenever any property or securities are to be released
from the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee and the Securities Insurer an Officer's Certificate certifying or
stating the opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities proposed to be
released and stating that in the opinion of such person the proposed release
will not impair the security under this Indenture in contravention of the
provisions hereof.
(e) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in subsection (d) above, the
Issuer shall also furnish to the Indenture Trustee and the Securities Insurer an
Independent Certificate as to the same matters if the fair value of the property
or securities and of all other property, other than securities released from the
lien of this Indenture since the commencement of the then-current calendar year,
as set forth in the certificates required by subsection (d) above and this
subsection (e), equals 10% or more of the Outstanding Amount of the Notes, but
such certificate need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the then
Outstanding Amount of the Notes.
Section 11.02. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Master Servicer, the Transferor, the
Issuer or the Administrator, stating that the information with respect to such
factual matters is in the possession of the Servicer, the Master Servicer, the
Transferor, the Issuer or the Administrator, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Whenever in this Indenture, in connection with any application
or certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof, it
is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application granted
or to the sufficiency of such certificate or report. The foregoing shall not,
however, be construed to affect the Indenture Trustee's right to rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI hereof.
Section 11.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01 hereof)
conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section 11.03.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any manner that the Indenture
Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer,
Rating Agencies and Securities Insurer. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other documents
provided or permitted by this Indenture shall be in writing and if such request,
demand, authorization, direction, notice, consent, waiver or act of Noteholders
is to be made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder, the Securities
Insurer or by the Issuer shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the
Indenture Trustee at its Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee, the Securities
Insurer or by any Noteholder shall be sufficient for every purpose
hereunder if in writing and made, given, furnished or filed with the
Issuer addressed to: Fremont Home Loan Owner Trust 1999-1, in care of
Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Emmett R. Harmon, or at
any other address previously furnished in writing to the Indenture
Trustee by the Issuer or the Administrator. The Issuer shall promptly
transmit any notice received by it from the Noteholders to the
Indenture Trustee.
Notices required to be given to the Rating Agencies by the
Issuer, the Indenture Trustee, the Securities Insurer or the Owner Trustee shall
be in writing, personally delivered or mailed by certified mail, return receipt
requested, to (i) in the case of Moody's, at the following address: 99 Church
Street, Corporate Department - 4th Floor, New York, New York 10007, Attention:
Residential Mortgage Monitoring Department and (ii) in the case of S&P, 25
Broadway, 12th Floor, New York, New York 10004 Attention: Residential Mortgage
Group.
Notices required to be given to the Securities Insurer by the
Issuer, the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered or mailed by certified mail, return receipt requested, to
the following address: Financial Security Assurance, Inc., 350 Park Avenue, New
York, New York 10022, Attention: Transaction Oversight Re: Fremont Home Loan
Owner Trust 1999-1, Telephone No.: (212) 339-3518, 212-339-3529, or at such
other address as shall be designated by written notice to the other parties.
Notices required to be given to the Master Servicer by the
Issuer, the Indenture Trustee, the Securities Insurer or the Owner Trustee shall
be in writing, personally delivered or mailed by certified mail, return receipt
requested to the following address: Fremont Investment & Loan, 175 North
Riverview Drive, Anaheim, California 92808, Attention: Kyle Walker; or to such
other address as shall be designated by written notice to the other parties.
Notices required to be given to the Depositor by the Issuer,
the Indenture Trustee, the Securities Insurer or the Owner Trustee shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested to the following address: PaineWebber Mortgage Acceptance Corporation
IV, 1285 Avenue of the Americas, 18th Floor, New York, New York 10019,
Attention: John Fearey, Esq., or to such other address as shall be designated by
written notice to the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have duly been given.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder, and shall not under any circumstance constitute a
Default or Event of Default.
Section 11.06. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this Indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose
duties on any person (including the provisions automatically deemed included
herein unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
Section 11.07. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 11.08. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors, co-trustees and
agents.
Section 11.09. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 11.10. Benefits of Indenture. Nothing in this
Indenture or in the Notes, express or implied, shall give to any Person (other
than the parties hereto and their successors hereunder, the Noteholders, any
other party secured hereunder, any other Person with an ownership interest in
any part of the Collateral) any benefit or any legal or equitable right, remedy
or claim under this Indenture, except that the Securities Insurer is an express
third party beneficiary to this Indenture as provided in Section 11.19.
Section 11.11. Legal Holidays. In any case where the date on
which any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 11.13. Counterparts. This Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.14. Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such recording
is to be effected by the Issuer and at the expense of the Master Servicer
accompanied by an Opinion of Counsel (which may be counsel to the Indenture
Trustee or any other counsel reasonably acceptable to the Indenture Trustee and
the Securities Insurer) to the effect that such recording is necessary either
for the protection of the Noteholders or any other Person secured hereunder or
for the enforcement of any right or remedy granted to the Indenture Trustee
under this Indenture.
Section 11.15. Owner Trust Obligation. No recourse may be
taken, directly or indirectly, with respect to the obligations of the Issuer,
the Owner Trustee or the Indenture Trustee on the Notes or, except as expressly
provided for in Article VI hereof, under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may expressly have agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Owner Trust
Agreement.
Section 11.16. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder, by accepting a Note, hereby covenant
and agree that they will not at any time institute against the Transferor, the
Servicer, the Master Servicer or the Issuer, or join in any institution against
the Transferor, the Servicer, the Master Servicer or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law, in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents.
Section 11.17. Inspection. The Issuer agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee or the Securities Insurer, during the Issuer's normal business hours, to
examine all the books of account, records, reports and other papers of the
Issuer, to make copies and extracts therefrom, to cause such books to be audited
by Independent certified public accountants, and to discuss the Issuer's
affairs, finances and accounts with the Issuer's officers, employees, and
Independent certified public accountants, all at such reasonable times and as
often as may reasonably be requested. The Indenture Trustee shall and shall
cause its representatives to hold in confidence all such information except to
the extent disclosure may be required by law (and all reasonable applications
for confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
Section 11.18. Grant of Noteholder Rights to Securities
Insurer. In consideration for the guarantee of the Notes by the Securities
Insurer pursuant to the Guaranty Policy, the Noteholders hereby grant to the
Securities Insurer the right to act as the holder of 100% of the outstanding
Notes for the purpose of exercising the rights of the Holders of the Notes
hereunder, including the voting rights of such Holders, but excluding those
rights requiring the consent of all such Holders under Section 9.02 and any
rights of such Holders to payments under Section 8.02 hereof; provided that the
preceding grant of rights to the Securities Insurer by the Noteholders shall be
subject to Section 11.20 hereof. The rights of the Securities Insurer to direct
certain actions and consent to certain actions of the Noteholders hereunder will
terminate at such time as the Note Principal Balance of the Notes has been
reduced to zero and the Securities Insurer has been reimbursed for all Insured
Payments and any other amounts owed under the Guaranty Policy and the Insurance
Agreement, the Securities Insurer has no further obligation under the Guaranty
Policy and the Guaranty Policy has been surrendered to the Securities Insurer.
Section 11.19. Third Party Beneficiary. The parties hereto
acknowledge that the Securities Insurer is an express third party beneficiary
hereof entitled to enforce any rights reserved to it hereunder as if it were
actually a party hereto.
Section 11.20. Suspension and Termination of Securities
Insurer's Rights.
(a) During the continuation of a Securities Insurer Default,
rights granted or reserved to the Securities Insurer hereunder shall vest
instead in the Noteholders; provided that the Securities Insurer shall be
entitled to any payments in reimbursement of the Securities Insurer
Reimbursement Amount, and the Securities Insurer shall retain those rights under
Sections 9.01 and 9.02 hereof to consent to any supplement to this Indenture.
(b) At such time as the Note Principal Balance of the Notes
has been reduced to zero and the Securities Insurer has been reimbursed for all
Insured Payments and any other amounts owed under the Guaranty Policy and the
Insurance Agreement (and the Securities Insurer no longer has any obligation
under the Guaranty Policy, except for breach thereof by the Securities Insurer),
then the rights and benefits granted or reserved to the Securities Insurer
hereunder (including the rights to direct certain actions and receive certain
notices) shall terminate and the Noteholders shall be entitled to the exercise
of such rights and to receive such benefits of the Securities Insurer following
such termination to the extent that such rights and benefits are applicable to
the Noteholders.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers,
thereunto duly authorized and duly attested, all as of the day and year first
above written.
FREMONT HOME LOAN
OWNER TRUST 1999-1
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By: ________________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
not in its individual capacity, but solely
as Indenture Trustee
By: ________________________________________
Name: Robert Ashbaugh
Title: Vice President
<PAGE>
STATE OF __________
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and
for said county and state, on this day personally appeared
___________________________, known to me to be the person and officer whose name
is subscribed to the foregoing instrument and acknowledged to me that the same
was the act of the said WILMINGTON TRUST COMPANY, not in its individual
capacity, but solely as Owner Trustee on behalf of FREMONT HOME LOAN OWNER TRUST
1999-1, a Delaware business trust, and that such person executed the same as the
act of said business trust for the purpose and consideration therein expressed,
and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
_______, 1999.
_____________________________________
Notary Public
My commission expires:
_____________________________________
<PAGE>
STATE OF __________
COUNTY OF __________
BEFORE ME, the undersigned authority, a Notary Public in and
for said county and state, on this day personally appeared Robert Ashbaugh,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of FIRST
UNION NATIONAL BANK, a national banking association, and that such person
executed the same as the act of said corporation for the purpose and
consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
_______, 1999.
_____________________________________
Notary Public
(Seal)
My commission expires:
_____________________________________
<PAGE>
EXHIBIT A
FORM OF NOTE
NOTE
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
EACH TRANSFEREE OF THIS NOTE OR A BENEFICIAL INTEREST HEREIN THAT IS A PLAN, OR
IS A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN, SHALL BE
DEEMED TO REPRESENT THAT THE RELEVANT CONDITIONS FOR EXEMPTIVE RELIEF UNDER AT
LEAST ONE OF THE FOLLOWING PROHIBITED TRANSACTION CLASS EXEMPTIONS HAVE BEEN
SATISFIED: PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23 (RELATING TO
TRANSACTIONS EFFECTED BY AN "IN-HOUSE ASSET MANAGER"), PTCE 95-60 (RELATING TO
TRANSACTIONS INVOLVING INSURANCE COMPANY GENERAL ACCOUNTS), PTCE 91-38 (RELATING
TO TRANSACTIONS INVOLVING BANK COLLECTIVE INVESTMENT FUNDS), PTCE 90-1 (RELATING
TO TRANSACTIONS INVOLVING INSURANCE COMPANY POOLED SEPARATE ACCOUNTS) AND PTCE
84-14 (RELATING TO TRANSACTIONS EFFECTED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER").
THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
<PAGE>
$[_______________]
No. __ CUSIP NO. 35729B AA 9
FREMONT HOME LOAN OWNER TRUST 1999-1
HOME LOAN ASSET BACKED NOTE
FREMONT HOME LOAN OWNER TRUST 1999-1, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of [_____________________] ($[__________])
payable on each Payment Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial principal
amount of this Note and the denominator of which is the aggregate principal
amount of all Notes by (ii) the aggregate amount, if any payable from the Note
Payment Account in respect of principal on the Notes pursuant to Section 5.01(d)
and (e) of the Sale and Servicing Agreement; provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
(i) the applicable Maturity Date, (ii) the date of termination, if any, pursuant
to Section 11.01 of the Sale and Servicing Agreement, (iii) the date on which
either the Majority Residual Interestholders, the Securities Insurer or the
Servicer, as applicable, exercises its option to terminate the Issuer pursuant
to Section 11.02 of the Sale and Servicing Agreement or (iv) the date on which
an Event of Default shall have occurred and be continuing if the Securities
Insurer declares the Notes due and payable, or, if a Securities Insurer Default
has occurred and is continuing, then if the Indenture Trustee declares or is
directed by the Majority Noteholders to declare the Notes to be immediately due
and payable, in each case in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture (the "Indenture") dated as of March 1, 1999 between the
Issuer and First Union National Bank, a national banking association, which also
contains rules as to construction that shall be applicable herein.
The Issuer will pay interest on this Note at a per annum rate
equal to the lesser of (i) One-Month LIBOR plus 0.30%, provided any Payment Date
after the Call Option Date, this rate shall be One-month LIBOR plus 0.60% and
(ii) the Net Interest Rate.
Such principal of and interest on this Note shall be paid in
the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer, as of the date
set forth below.
Date: March __, 1999
FREMONT HOME LOAN OWNER TRUST 1999-1
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Owner Trust Agreement
By: _____________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: March __, 1999
FIRST UNION NATIONAL BANK,
not in its individual capacity but solely
as Indenture Trustee
By: _____________________________________
Authorized Signatory
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the
Issuer, designated as its Home Loan Asset Backed Notes (herein called the
"Notes"), as issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Notes are subject to all terms of the Indenture.
The Notes will be secured by the collateral pledged as
security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Payment Date in
an amount described on the face hereof. "Payment Date" means the 25th day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing in April 1999.
As described on the face hereof, the entire unpaid principal
amount of this Note shall be due and payable on the earlier of the applicable
Maturity Date, the optional termination of the Issuer pursuant to Section 11.02
of the Sale and Servicing Agreement and the termination of the Sale and
Servicing Agreement pursuant to Section 11.01(a) thereof. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing and if the Securities Insurer declares the Notes due and payable, or
if a Securities Insurer Default has occurred and is continuing, if the Indenture
Trustee declares, or is directed by the Majority Noteholders to declare, the
Notes to be immediately due and payable in the manner provided in Section 5.02
of the Indenture. All principal payments on the Notes shall be made pro rata to
the holders of the Notes entitled thereto.
Payments of interest on this Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Note, shall be made by check mailed to the Person
whose name appears as the Registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that with respect to Notes registered on the Record Date in
the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Payment Date by notice mailed or transmitted by facsimile prior to such Payment
Date, and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Indenture Trustee's principal
Corporate Trust Office or at the office of the Indenture Trustee's agent
appointed for such purposes located in Charlotte, North Carolina.
Financial Security Assurance, Inc., as the Securities Insurer,
has issued a Guaranty Policy for the benefit of the Noteholders, which policy
guarantees payments on each Payment Date to the Indenture Trustee for the
benefit of the Noteholders of the related Noteholders' Interest Payment Amount
and the Noteholders' Principal Deficiency Amount then payable on the Notes.
Unless a Securities Insurer Default shall be continuing, the Securities Insurer
shall be deemed to be the Holder of 100% of the outstanding Notes for the
purpose of exercising certain rights, including voting rights, of the
Noteholders under the Indenture and the Sale and Servicing Agreement. In
addition, on each Payment Date, after the Noteholders have been paid all amounts
to which they are entitled, the Securities Insurer will be entitled to be
reimbursed for any unreimbursed Insured Payments and any other amounts owed
under the Guaranty Policy.
As provided in the Indenture and the Sale and Servicing
Agreement, the Notes may be redeemed in whole, but not in part, (a) at the
option of the holders of greater than 50% of the Residual Interest Certificates
on any Payment Date on and after the date on which the Pool Principal Balance is
less than 10% of the Original Pool Principal Balance or (b) at the option of the
Securities Insurer or the Servicer on any Payment Date on and after the date on
which the Pool Principal Balance is less than 5% of the Original Pool Principal
Balance.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, which requirements include membership or participation in
the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes
of authorized denominations and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged to a Holder or the Securities Insurer for any registration of transfer
or exchange of this Note, but the Issuer may require a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee in
its individual capacity, (ii) any owner of a beneficial interest in the Issuer
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note, covenants and agrees
by accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Transferor, the Servicer, the Master
Servicer or the Issuer, or join in any institution against the Transferor, the
Servicer, the Master Servicer or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness of
the Issuer secured by the Trust Estate. Each Noteholder, by acceptance of a Note
(and each Note Owner by acceptance of a beneficial interest in a Note), agrees
to treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Securities Insurer, the Indenture Trustee and any
agent of the Issuer, the Securities Insurer or the Indenture Trustee may treat
the Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and none of the
Issuer, the Securities Insurer, the Indenture Trustee or any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Holders of the Notes under the
Indenture at any time by the Issuer with the consent of the Rating Agencies, the
Securities Insurer (provided that no Securities Insurer Default has occurred and
is continuing) and the Holders of Notes representing not less than a majority of
the Outstanding Notes. The Indenture also contains provisions permitting the
Securities Insurer, or if a Securities Insurer Default has occurred and is
continuing, the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to
waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note (or any one or more Predecessor
Notes) shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee or the Securities Insurer to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Basic Documents, none of the Issuer in its individual
capacity, the Owner Trustee in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
omission to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
however, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ______
___________________________________*/
Signature Guaranteed:
___________________________________*/
- -----------------
*/NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
================================================================================
SALE AND MASTER SERVICING AGREEMENT
Dated as of March 1, 1999
among
FREMONT HOME LOAN OWNER TRUST 1999-1
(Issuer)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV
(Depositor)
FREMONT INVESTMENT & LOAN
(Transferor and Master Servicer)
and
FIRST UNION NATIONAL BANK
(Indenture Trustee)
FREMONT HOME LOAN OWNER TRUST 1999-1
HOME LOAN ASSET BACKED NOTES
SERIES 1999-1
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<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS
Section 1.01. Definitions................................................ 1
Section 1.02. Other Definitional Provisions..............................25
ARTICLE II CONVEYANCE OF THE HOME LOANS
Section 2.01. Conveyance of the Home Loans...............................25
Section 2.02. Ownership and Possession of Home Loan Files................26
Section 2.03. Books and Records..........................................26
Section 2.04. Delivery of Home Loan Documents............................27
Section 2.05. Acceptance by the Indenture Trustee of the Home
Loans; Certain Substitutions; Certification by
the Custodian.............................................29
ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Depositor............31
Section 3.02. Representations and Warranties of the Transferor...........32
Section 3.03. Representations, Warranties and Covenants of the
Master Servicer...........................................35
Section 3.04. Representations and Warranties Regarding Individual
Home Loans................................................37
Section 3.05. Purchase and Substitution..................................44
ARTICLE IV ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01. Appointment and Duties of the Master Servicer..............46
Section 4.02. Interim Servicer...........................................49
Section 4.03. Powers of Attorney.........................................49
Section 4.04. Filing of Continuation Statements..........................50
Section 4.05. Reports to the Securities and Exchange Commission..........50
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ARTICLE V ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account and Note Payment Account................51
Section 5.01A. Claims Under Guaranty Policy...............................54
Section 5.02. Certificate Distribution Account...........................56
Section 5.03. Trust Accounts; Trust Account Property.....................57
Section 5.04. Allocation of Losses.......................................60
ARTICLE VI STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01. Statements.................................................60
Section 6.02. Withholding................................................63
ARTICLE VII GENERAL SERVICING PROCEDURES
Section 7.01. [Reserved].................................................63
Section 7.02. Release of Home Loan Files.................................63
Section 7.03. Servicing Compensation.....................................64
Section 7.04. Statement as to Compliance and Financial Statements........64
Section 7.05. Independent Public Accountants' Servicing Report...........65
Section 7.06. Reports to the Indenture Trustee; Collection Account
Statements................................................66
Section 7.07. Financial Statements and Records of Servicer...............66
ARTICLE VIII (RESERVED)
ARTICLE IX THE MASTER SERVICER
Section 9.01. Indemnification; Third Party Claims........................66
Section 9.02. Merger or Consolidation of the Master Servicer.............67
Section 9.03. Limitation on Liability of the Master Servicer and
Others....................................................68
Section 9.04. Master Servicer Not to Resign; Assignment..................68
Section 9.05. [Reserved].................................................68
Section 9.06. Relationship of Master Servicer to the Issuer and the
Indenture Trustee.........................................68
Section 9.07. Master Servicer May Own Securities.........................68
Section 9.08. Right to Examine Master Servicer Records...................69
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Section 9.09. Financial Statements...........................................69
ARTICLE X DEFAULT
Section 10.01. Master Service Events of Default..........................70
Section 10.02. [Reserved]................................................72
Section 10.03. Waiver of Defaults........................................72
Section 10.04. Accounting Upon Termination of Master Servicer............72
ARTICLE XI TERMINATION
Section 11.01. Termination...............................................73
Section 11.02. Optional Termination......................................73
Section 11.03. Notice of Termination.....................................74
ARTICLE XII MISCELLANEOUS PROVISIONS
Section 12.01. Acts of Noteholders.......................................74
Section 12.02. Amendment.................................................74
Section 12.03. Recordation of Agreement..................................75
Section 12.04. Duration of Agreement.....................................75
Section 12.05. Governing Law.............................................75
Section 12.06. Notices...................................................75
Section 12.07. Severability of Provisions................................76
Section 12.08. No Partnership............................................77
Section 12.09. Counterparts..............................................77
Section 12.10. Successors and Assigns....................................77
Section 12.11. Headings..................................................77
Section 12.12. Actions of Securityholders................................77
Section 12.13. Reports to Rating Agencies................................78
Section 12.14. Holders of the Residual Interest Certificates.............78
Section 12.15. Year 2000 Compliance......................................79
Section 12.16. Grant of Noteholder Rights to Securities Insurer..........79
Section 12.17. Third Party Beneficiary...................................79
Section 12.18. Suspension and Termination of Securities Insurer's
Rights...................................................79
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EXHIBITS:
A - Home Loan Schedule
B - Form of Servicer's Monthly Remittance Report to Indenture Trustee
C - Form of Loan Liquidation Report
D - Form of Master Servicer Renewal Notice
E - Form of Standard Servicing Terms
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This SALE AND MASTER SERVICING AGREEMENT is entered into effective as
of March 1, 1999, (this "Agreement") among FREMONT HOME LOAN OWNER TRUST 1999-1,
a Delaware business trust (the "Issuer" or the "Trust"), PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, a Delaware corporation, as Depositor (the
"Depositor"), FREMONT INVESTMENT & LOAN, a California industrial loan company
("Fremont"), as Transferor (in such capacity, the "Transferor") and Master
Servicer (in such capacity, the "Master Servicer") and FIRST UNION NATIONAL
BANK, a national banking association, as Indenture Trustee on behalf of the
Noteholders (the "Indenture Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the parties
hereto hereby agree as follows for the benefit of each of them and for the
benefit of the holders of the Notes issued under the Indenture, the Residual
Interest Certificates issued under the Owner Trust Agreement and the Securities
Insurer for issuing the Guaranty Policy:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Article. Unless otherwise specified, all calculations of interest described
herein shall be made on the basis of the actual number of days elapsed during
the related Interest Accrual Period and a 360-day year.
Accepted Servicing Procedures: Servicing procedures that satisfy the
following: (a) meet at least the same standards the Servicer would follow in
exercising reasonable care in servicing mortgage loans such as the Home Loans
held for its own account; (b) comply with applicable state and federal law; (c)
comply with the provisions of the related Debt Instruments and Mortgages; and
(d) give due consideration to the accepted standards of practice of prudent loan
servicers that service sub-prime mortgage loans comparable to the Home Loans,
including the terms set forth in the Standard Servicing Terms set forth herein
as Exhibit E, and the reliance placed by the Securities Insurer, the Master
Servicer and Securityholders on the Servicer for the servicing of the Home
Loans, but without regard to:
(i) any relationship that the Servicer or any Affiliate
of the Servicer may have with the related Obligor;
(ii) the ownership of any Notes or the Residual Interest
Certificates by the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing
Advances; or
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(iv) the Servicer's right to receive compensation for its
services hereunder with respect to any particular transaction.
Accrual Period: With respect to the Notes and any Payment Date, the
period commencing on the Payment Date preceding the month in which the related
Payment Date occurs and ending on the day immediately preceding the related
Payment Date, except in the case of the first Payment Date, which shall be the
period commencing on the Closing Date and ending on the day immediately
preceding the first Payment Date.
Administration Agreement: The Administration Agreement, dated as of
March 1, 1999, by and among the Issuer, First Union National Bank and Fremont
Investment & Loan.
Affiliate: With respect to any specified Person, any other Person
controlling, controlled by, or under common control with such specified Person.
For the purposes of this definition, the term "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 corresponding meanings.
Agreement: This Sale and Master Servicing Agreement and all
amendments hereof and supplements hereto.
Annual Loss Percentage: With respect to any Payment Date, a fraction,
expressed as a percentage, the numerator of which is the aggregate of all
Realized Losses for the twelve preceding Due Periods ending on the last day of
the preceding Due Period and the denominator of which is the Pool Principal
Balance as of the first day of the twelfth preceding Due Period.
Assignment of Mortgage: With respect to each Home Loan, an assignment,
notice of transfer or equivalent instrument sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect or
record the sale of the related Home Loan which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
Available Collection Amount: With respect to any Payment Date, an
amount without duplication equal to the sum of: (i) all amounts received on the
Home Loans or required to be paid by the Master Servicer, the Servicer or the
Transferor during the related Due Period (exclusive of amounts not required to
be deposited in the Collection Account pursuant to Section 5.01(b)(1) hereof and
amounts permitted to be withdrawn by the Indenture Trustee from the Collection
Account pursuant to Section 5.01(b)(3) hereof); (ii) upon exercise of optional
redemption of the Notes and termination of the Issuer pursuant to Section 11.02
hereof, the Termination Price; and (iii) the Purchase Price paid for any Home
Loans purchased pursuant to Section 3.05 hereof prior to the related
Determination Date and the Substitution Adjustment to be deposited in the
Collection Account in connection with any substitution, in each case prior to
the related Determination Date.
Available Payment Amount: With respect to any Payment Date, the
Available Collection Amount deposited into the Note Payment Account, minus the
amount of any Trust
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Fees and Expenses required to be paid from the Note Payment Account pursuant to
Section 5.01(c)(i) hereof.
Business Day: Any day other than (a) a Saturday or Sunday, or (b) a day
on which the banking institutions are authorized or obligated by law or
executive order to be closed in a city at any of the following locations: (i)
The City of New York, (ii) where the Securities Insurer is located, (iii) where
the Corporate Trust Office of the Indenture Trustee is located, (iv) where the
servicing operations of the Servicer are located or (v) where the master
servicing operations of the Master Servicer are located.
Call Option Date: The first Payment Date on which the Pool Principal
Balance has declined to 10% or less of the Original Pool Principal Balance.
Certificate Distribution Account: The account designated as such,
established and maintained pursuant to Section 5.02 hereof.
Certificate Register: The register established pursuant to
Section 3.4 of the Owner Trust Agreement.
Certificateholder: A holder of a Residual Interest Certificate.
Closing Date: March 23, 1999.
Code: The Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
Collection Account: The Eligible Account established and maintained
by the Indenture Trustee pursuant to Section 5.01(a)(1) hereof.
Compensating Interest: With respect to any Due Period, the amount of
the shortfall in the interest portion of the Monthly Payments due on Home Loans
that prepay in full or in part during the related month other than on the date
the Monthly Payments were due.
Custodial Agreement: The custodial agreement dated as of March 1, 1999
by and among the Depositor, the Issuer, Fremont, as the Transferor and as the
Master Servicer, and First Union National Bank, a national banking association,
as the custodian, providing for the retention of the Indenture Trustee's Home
Loan Files by such custodian on behalf of the Owner Trust.
Custodian: Any custodian acceptable to the Securities Insurer and
appointed by the Indenture Trustee pursuant to the Custodial Agreement, which
custodian shall not be affiliated with the Master Servicer, the Transferor, the
Servicer or the Depositor. First Union National Bank, shall be the initial
Custodian pursuant to the terms of the Custodial Agreement.
Custodian's Final Certification: As defined in Section 1(c) of the
Custodial Agreement.
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Custodian's Initial Certification: As defined in Section 1(a) of the
Custodial Agreement.
Custodian's Updated Certification: As defined in Section 1(c) of the
Custodial Agreement.
Cut-Off Date: The close of business on March 1, 1999.
Debt Instrument: The mortgage note evidencing the indebtedness of an
Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any
Home Loan, including, without limitation, any Liquidated Home Loan with respect
to which any of the following has occurred as of the end of the preceding Due
Period: (a) foreclosure or similar proceedings have been commenced; or (b) the
Servicer has determined in good faith and in accordance with the Accepted
Servicing Procedures that such Home Loan is in default for a period in excess of
30 days or imminent default and that such default or imminent default involves
the nonpayment of any Monthly Payment or a default which has or would have a
material adverse affect on such Home Loan.
Defective Home Loan: As defined in Section 3.05 hereof.
Deficiency Amount: As of any Payment Date, the sum of (a) the amount by
which (1) the Noteholders' Interest Payment Amount for the Notes on such Payment
Date less Relief Act Shortfalls for such Payment Date, exceeds (2) the Available
Payment Amount for such Payment Date, and (b) the Noteholders' Principal
Deficiency Amount for such Payment Date.
Deleted Home Loan: A Home Loan replaced or to be replaced by one or
more than one Qualified Substitute Home Loan.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due
thereon is not made by the Due Date. A Home Loan shall be deemed to be "30 days
Delinquent" if the delinquency remains uncured for two calendar months, but not
three. The determination of whether a Home Loan is "60 days Delinquent," "90
days Delinquent", etc., shall be made in like manner.
Delivery: When used with respect to Trust Account Property means the
delivery of such Trust Account Property in a manner that results in the
transferee having either the status of a perfected security interest free of any
adverse claims or a holder in due course in accordance with the following: (a)
in the case of "certificated securities" or "uncertificated securities" (in
either case as defined in Article 8 of the UCC), the applicable provisions of
Article 8 of the UCC, and in the case of "instruments", "accounts" or "general
intangibles" (in either case as defined in Article 9 of the UCC), the applicable
provisions of Article 9 of the UCC; or (b) in the case of book-entry securities
governed by Federal law, the applicable provisions of Federal law.
Denomination: With respect to a Note, the portion of the Original
Note Principal Balance represented by such Note as specified on the face
thereof.
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Depositor: PaineWebber Mortgage Acceptance Corporation IV, a
Delaware corporation, and any successor thereto.
Determination Date: With respect to any Payment Date, the 18th calendar
day of the month in which such Payment Date occurs or if such day is not a
Business Day, the immediately preceding Business Day.
Due Date: With respect to a Monthly Payment, the day of the month on
which such Monthly Payment is due from the Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Payment Date, the
2nd day of the calendar month preceding the month in which the relevant
Determination Date or Payment Date occurs, and ending on the 1st day of the
month in which the relevant Determination Date or Payment Date occurs.
Eligible Account: At any time, an account that is either:
(a) A segregated account or accounts maintained with an institution
that satisfies the following: (1) whose deposits are insured by the FDIC; (2)
whose unsecured and uncollateralized long-term debt obligations of which are
then rated by each Rating Agency in one of their two highest short-term ratings;
and (3) which is either (i) a federal savings and loan association duly
organized, validly existing and in good standing under the federal banking laws,
(ii) an institution duly organized, validly existing and in good standing under
the applicable banking laws of any state, (iii) a national banking association
duly organized, validly existing and in good standing under the federal banking
laws, (iv) a principal subsidiary of a bank holding company, or (v) an
institution approved in writing by the Securities Insurer and each Rating
Agency; or
(b) A segregated trust account or accounts maintained with the
corporate trust department of a federal or state chartered depository
institution that satisfies the following: (1) is acceptable to the Securities
Insurer and each Rating Agency; (2) has capital and surplus of not less than
$100,000,000; and (3) is acting in its fiduciary capacity.
Eligible Servicer: A Person that (i) has demonstrated the ability
professionally and competently to service a portfolio of mortgage loans similar
to the Home Loans, (ii) has a net worth calculated in accordance with GAAP of at
least $500,000, and (iii) is acceptable to the Securities Insurer and each
Rating Agency.
Excess Spread: With respect to any Payment Date, the excess of (a)
the Available Payment Amount over (b) the Regular Payment Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: Freddie Mac (f/k/a Federal Home Loan Mortgage Corporation)
and any successor thereto.
Fremont: Fremont Investment & Loan, a California industrial loan
company.
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FNMA: Fannie Mae (f/k/a Federal National Mortgage Association) and
any successor thereto.
Foreclosed Loan: As of any date of determination, any Home Loan that
has been discharged as a result of (i) the completion of foreclosure or
comparable proceedings; (ii) the Issuer's acceptance of the deed or other
evidence of title to any related Mortgaged Property in lieu of foreclosure or
other comparable proceeding; or (iii) the acquisition by the Issuer of title to
any related Mortgaged Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that
has been acquired by the Servicer through foreclosure, deed in lieu of
foreclosure or similar proceedings in respect of the related Home Loan.
GAAP: Generally accepted accounting principles as in effect in the
United States.
Guaranty Insurance Premium: The premium payable monthly that is
specified in the Premium Letter.
Guaranty Policy: That certain financial guaranty insurance policy for
the Notes, number 50787-N dated March 23, 1999, and issued by the Securities
Insurer to the Indenture Trustee and guaranteeing payment of any Insured Payment
thereunder.
Home Loan: Any mortgage loan that is included in the Home Loan Pool. As
applicable, a Home Loan shall be deemed to refer to the related Debt Instrument,
the Mortgage and any related Foreclosure Property, and shall include, among
other items, all Monthly Payments with a Due Date after the Cut-Off Date.
Home Loan File: As to each Home Loan, the Indenture Trustee's Home
Loan File and the Servicer's Home Loan File.
Home Loan Interest Rate: The annual rate of interest borne by a Debt
Instrument, as shown on the related Home Loan Schedule.
Home Loan Pool: The pool of Home Loans conveyed to the Issuer pursuant
to this Agreement on the Closing Date, together with the payments thereon and
proceeds therefrom received after the applicable Cut-Off Date, as identified on
the Home Loan Schedule annexed hereto as Exhibit A.
Home Loan Purchase Agreement: The Home Loan Purchase Agreement
between the Transferor and the Depositor, dated as of March 1, 1999.
Home Loan Schedule: The schedule of Home Loans set forth on Exhibit A
attached hereto, as amended or supplemented from time to time specifying, with
respect to each Home Loan, the following information: (i) the Transferor's Home
Loan number; (ii) the Obligor's name and the street address; (iii) the current
principal balance; (iv) the original principal amount with respect to any Home
Loan originated by the Transferor and the principal amount purchased by the
Transferor with respect to a Home Loan acquired by the Transferor
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subsequent to its origination; (v) any related Loan-to-Value Ratio as of the
date of the origination of the related Home Loan; (vi) the paid through date;
(vii) whether the Home Loan pays interest at a fixed rate or an adjustable rate;
(viii) the current Home Loan Interest Rate; (ix) if such Home Loan has an
adjustable Home Loan Interest Rate, (A) the initial rate reset date, (B) the
frequency of the rate reset, (C) the initial periodic cap, (D) the subsequent
periodic cap, (E) the margin, (F) the maximum lifetime rate and (G) the minimum
lifetime rate; (x) the final maturity date under the Debt Instrument; (xi) the
current Monthly Payment; (xii) the occupancy status of the Mortgaged Property,
if any; and (xiii) the original term of the Debt Instrument.
Indemnification and Contribution Agreement: The Indemnification and
Contribution Agreement dated as of March 16, 1999 by and among Fremont
Investment & Loan, the Depositor, PaineWebber Incorporated, Credit Suisse
First Boston Corporation and Chase Securities Inc.
Indenture: The Indenture, dated as of March 1, 1999, between the
Issuer and the Indenture Trustee.
Indenture Trustee: First Union National Bank, a national banking
association, as Indenture Trustee under the Indenture and this Agreement acting
on behalf of the Noteholders, or any successor indenture trustee under the
Indenture or this Agreement.
Indenture Trustee Fee: As to any Payment Date, the one-twelfth (1/12)
of the Indenture Trustee Fee Rate times the Pool Principal Balance as of the
opening of business on the first day of the Due Period immediately preceding the
calendar month of such Payment Date (or, with respect to the first Payment Date,
the Original Pool Principal Balance).
Indenture Trustee Fee Rate: 0.0065% (0.65 basis points) per annum.
Indenture Trustee's Home Loan File: As defined in Section 2.04
hereof.
Independent: When used with respect to any specified Person, such
Person (i) is in fact independent of the Transferor, the Servicer, the Master
Servicer, the Depositor, the Securities Insurer, the Indenture Trustee or any of
their respective Affiliates, (ii) does not have any direct financial interest
in, or any material indirect financial interest in, any of the Transferor, the
Servicer, the Master Servicer, the Depositor, the Securities Insurer, the
Indenture Trustee or any of their respective Affiliates and (iii) is not
connected with any of the Transferor, the Servicer, the Depositor, the
Securities Insurer, the Indenture Trustee or any of their respective Affiliates,
as an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions; provided, however, that a Person shall not
fail to be Independent of the Transferor, the Servicer, the Depositor, the
Securities Insurer, the Indenture Trustee or any of their respective Affiliates
merely because such Person is the beneficial owner of 1% or less of any the
securities issued by the Transferor, the Servicer, the Depositor or any of their
respective Affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified
public accountants that is in fact Independent.
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Insurance Agreement: The Insurance and Indemnity Agreement, dated as of
March 1, 1999, among the Securities Insurer, the Transferor, the Master
Servicer, the Depositor and the Issuer.
Insured Payment: With respect to the Guaranty Policy, as of any
Payment Date (i) any Deficiency Amount and (ii) any Preference Amount.
Insured Securities: Each of the Notes.
Interest Reduction Amount: As to any Payment Date, the sum of the
Servicing Fee, the Master Servicer Fee, the Indenture Trustee Fee, and the
Guaranty Insurance Premium payable with respect to such Payment Date or the
related Interest Accrual Period or Due Period, as applicable, provided that on
any Payment Date on or after the Payment Date occurring in April 2000, the
Interest Reduction Amount shall increase by an amount equal to one-twelfth of
the product of 0.50% and the aggregate Principal Balance of the Home Loans as of
the first day of the related Due Period.
Issuer: Fremont Home Loan Owner Trust 1999-1, a Delaware business
trust.
Liquidated Home Loan: With respect to any date of determination, any
Foreclosure Property or any Home Loan in respect of which a Monthly Payment is
in excess of 30 days past due and as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to collect have been
recovered from or on account of such Home Loan or the related Foreclosure
Property; provided, however, that in any event any Home Loan or the related
Foreclosure Property shall be deemed uncollectible and therefore be a Liquidated
Home Loan upon the earliest to occur of: (i) the liquidation or disposition of
such Home Loan or the related Foreclosure Property; or (ii) the determination by
the Servicer in accordance with the Accepted Servicing Procedures that there is
no reasonable likelihood of (A) recovering an economically significant amount
attributable to the outstanding interest and principal owing on such Home Loan
from either the related Mortgaged Property or the Obligor, in excess of (B) the
costs and expenses to obtain such recovery (including without limitation any
Servicing Advances), and in relation to (C) the expected timing of such recovery
therefrom.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
amounts received in connection with the liquidation or disposition of such
Liquidated Home Loan, whether through trustee's sale, foreclosure sale or other
disposition, any cash amounts received in connection with the management of the
Foreclosure Properties from Foreclosed Home Loans and any other amounts required
to be deposited in the Collection Account pursuant to Section 5.01(b) hereof, in
each case other than Property Insurance Proceeds and Released Mortgaged Property
Proceeds.
Loan-to-Value Ratio: With respect to any Home Loan, the fraction,
expressed as a percentage, (a) the numerator of which is the principal balance
of such Home Loan at origination and (b) the denominator of which is the value
as determined pursuant to the Transferor's underwriting guidelines of the
related Mortgaged Property at the time of origination of such Home Loan.
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Majority Noteholders: The holder or holders of in excess of 50% of
the Note Principal Balance of all the Notes.
Majority Residual Interestholders: The holder or holders of more
than 50% of the Residual Interest.
Master Servicer: Fremont Investment & Loan, a California industrial
loan company, as Master Servicer hereunder, or any successor Master Servicer
hereunder.
Master Servicer Compensation: The Master Servicer Fee and other
amounts to which the Master Servicer is entitled pursuant to Section 4.01(a)
hereof.
Master Servicer Event of Default: As described in Section 10.01
hereof.
Master Servicer Fee: As to each Home Loan (including any Home Loan that
has been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Master Servicer on each
Payment Date, which shall equal the product of (a) one-twelfth (1/12) of 0.15%
(15 basis points) and (b) the Principal Balance of such Home Loan as of the
beginning of the immediately preceding Due Period.
Maturity Date: With respect to the Notes, the Payment Date occurring
in March 2030.
Monthly Advance: As defined in Section 4.01(h) hereof.
Monthly Advance Reimbursement Amount: With respect to any date of
determination and with respect to the receipt of proceeds from or the
liquidation of a Home Loan for which any Monthly Advances have been made, the
amount of any such Monthly Advances that have not been reimbursed as of such
date, including Nonrecoverable Monthly Advances.
Monthly Cut-Off Date: The last day of any calendar month and, with
respect to any Payment Date, the last day of the calendar month immediately
preceding such Payment Date.
Monthly Payment: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Home Loan, as set
forth in the related Debt Instrument.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
Mortgage: The mortgage, deed of trust or other security instrument
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a Home Loan.
Mortgaged Property: The real property encumbered by the Mortgage that
secures the Debt Instrument evidencing a Home Loan.
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Mortgaged Property States: Each state in which any Mortgaged Property
securing a Home Loan is located as set forth in the Home Loan Schedule.
Net Interest Rate: As to any Payment Date, the annualized percentage
derived from the fraction (which shall not be greater than 1), the numerator of
which is the positive difference, if any, between (x) the amount of all interest
due on the Home Loans during the related Due Period and (y) the Interest
Reduction Amount and the denominator of which is the aggregate principal amount
of the Notes immediately prior to such Payment Date.
Net Liquidation Proceeds: With respect to any Payment Date, Liquidation
Proceeds received during the related Due Period, net of any reimbursements to
the Servicer or the Master Servicer, as the case may be, made from such amounts
for the following: (i) any unreimbursed Servicing Compensation or Master
Servicing Compensation; and (ii) Servicing Advances (including Nonrecoverable
Servicing Advances) made, and (iii) Monthly Advances (including Nonrecoverable
Monthly Advances) made and any other fees and expenses paid in connection with
the foreclosure, conservation or liquidation of the related Liquidated Home Loan
or Foreclosure Property.
Net Loan Losses: With respect to any Defaulted Home Loan that is
subject to a modification, an amount equal to the portion of the Principal
Balance, if any, released in connection with such modification.
Nonrecoverable Monthly Advance: With respect to any Defaulted Home Loan
or any Foreclosure Property, any Monthly Advance previously made and not
reimbursed from late or other fee collections, Liquidation Proceeds, Property
Insurance Proceeds or the Released Mortgaged Property Proceeds following the
liquidation or disposition of such Defaulted Home Loan or Foreclosure Property,
as evidenced by an Officer's Certificate delivered to the Indenture Trustee and
the Securities Insurer.
Nonrecoverable Servicing Advance: With respect to any Defaulted Home
Loan or any Foreclosure Property, any Servicing Advance previously made and not
reimbursed from late or other fee collections, Liquidation Proceeds, Property
Insurance Proceeds or the Released Mortgaged Property Proceeds following the
liquidation or disposition of such Defaulted Home Loan or Foreclosure Property,
as evidenced by an Officer's Certificate delivered to the Indenture Trustee, the
Master Servicer and the Securities Insurer.
Note: Any of the Notes issued pursuant to the Indenture.
Note Factor: With respect to any date of determination, the Note
Principal Balance divided by the Original Note Principal Balance.
Note Interest Rate: As to any Payment Date, a per annum rate equal to
the lesser of (i) One-Month LIBOR plus 0.30%, provided that on any Payment Date
after the Call Option Date, this rate shall be One-Month LIBOR plus 0.60%; and
(ii) the Net Interest Rate.
Note Payment Account: The Eligible Account established and
maintained pursuant to Section 5.01(a)(2) hereof.
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Note Principal Balance: As of any date of determination, the Original
Note Principal Balance reduced by the sum of all amounts previously distributed
in respect of principal of such Notes on all previous Payment Dates.
Note Redemption Amount: As of any date of determination, an amount
without duplication equal to the sum of (i) the then outstanding Note Principal
Balance of all Notes plus all accrued and unpaid interest thereon including any
unpaid Noteholders' Interest Carry-Forward Amount, (ii) any Trust Fees and
Expenses due and unpaid on such date, (iii) any Servicing Advance Reimbursement
Amount and Monthly Advance Reimbursement Amount and (iv) any due and unpaid
Securities Insurer Reimbursement Amount.
Noteholder: A holder of a Note.
Noteholders' Interest Carry-Forward Amount: With respect to any Payment
Date, (A) if on the immediately preceding Payment Date the Note Interest Rate
was limited pursuant to clause (ii) of the definition of "Note Interest Rate,"
the excess, if any, of the amount of interest that would have accrued on the
Notes for the immediately preceding Payment Date pursuant to clause (i) of the
definition thereof, over the amount of interest that was due on the Notes for
the immediately preceding Payment Date pursuant to clause (ii) of the definition
thereof, plus (ii) any outstanding Noteholders' Interest Carry-Forward Amount
remaining unpaid from prior Payment Dates, together with interest thereon at the
Note Interest Rate (without regard to clause (ii) thereof).
Noteholders' Interest Payment Amount: With respect to any Payment Date,
the sum of the Noteholders' Monthly Interest Payment Amount for such Payment
Date and the Noteholders' Interest Shortfall Amount for such Payment Date.
Noteholders' Interest Shortfall Amount: With respect to any Payment
Date, the excess, if any, of (A) the Noteholders' Monthly Interest Payment
Amount for the preceding Payment Date plus any outstanding Noteholders' Interest
Shortfall Amount on such preceding Payment Date, over (B) the amount in respect
of interest that is actually deposited in the Note Payment Account on such
preceding Payment Date.
Noteholders' Monthly Interest Payment Amount: With respect to each
Payment Date and the Notes, the interest accrued during the related Accrual
Period at the Note Interest Rate on the Note Principal Balance of the Notes
immediately preceding such Payment Date (or, in the case of the first Payment
Date, beginning on the Closing Date) after giving effect to all payments of
principal to the holders of the Notes on or prior to such preceding Payment
Date.
Noteholders' Principal Deficiency Amount: (1) With respect to any
Payment Date (other than as set forth in (2) below), the excess, if any, of (a)
the Note Principal Balance as of such Payment Date (after giving effect to all
payments of principal on such Payment Date, but without giving effect to any
payments in respect of this Noteholders' Principal Deficiency Amount to be made
on such Payment Date), over (b) the Pool Principal Balance as of the end of the
related Due Period; and (2) with respect to the Maturity Date of the Notes or
any Payment Date upon which the Securities Insurer has exercised its option to
accelerate the Notes under the Indenture, the excess of (a) the Note Principal
Balance (after giving effect to all payments of
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principal on such Payment Date, but without giving effect to any payments in
respect of this Noteholders' Principal Deficiency Amount to be made on such
Payment Date), over (b) the Available Payment Amount remaining after the payment
of the Noteholders' Interest Payment Amount and the Regular Principal Payment
Amount for such Payment Date.
Obligor: Each obligor on a Debt Instrument.
OC Trigger Increase Event: With respect to any Payment Date, the
occurrence of any of the following: (1) the Six-Month Average Delinquency equals
or exceeds 13.5%; (2) the Annual Loss Percentage exceeds 1.25%; or (3)
cumulative Realized Losses as a percentage of the Original Pool Principal
Balance, equal or exceed the following percentages based on the month of
determination after the Closing Date:
MONTH OF CUMULATIVE
DETERMINATION REALIZED LOSSES
------------- ---------------
0 -12 0.75%
13 - 24 1.75%
25 - 36 3.00%
37 - 48 3.75%
49+ 4.25%
Officer's Certificate: A certificate delivered to the Indenture
Trustee, the Depositor, the Servicer, the Master Servicer, the Securities
Insurer, the Transferor or the Issuer signed by the President or a Vice
President or an Assistant Vice President or other officer of the Indenture
Trustee, the Depositor, the Servicer, the Master Servicer, the Securities
Insurer, the Issuer or the Transferor, in each case, as required by this
Agreement.
One-Month LIBOR: With respect to each Accrual Period, as determined by
the Indenture Trustee on the second Business Day preceding the beginning of such
Accrual Period, on the basis of the offered rates of the Reference Bank for
one-month U.S. dollar deposits as such rates appear on the Telerate Screen Page
3750 as of 11:00 a.m. (London time) on such LIBOR Determination Date. As used in
this paragraph, "business day" means a day on which banks are open for dealing
in foreign currency and exchange in London and New York City; and "Reference
Banks" means leading banks selected by the Indenture Trustee and engaged in
transactions in Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London, (ii) whose quotations appear on
the Telerate Screen Page 3750 on the LIBOR Determination Date in question, (iii)
which have been designated as such by the Indenture Trustee and (iv) not
controlling, controlled by or under common control with the Issuer, the
Depositor or the Transferor.
On each LIBOR Determination Date, One-Month LIBOR will be established
by the Indenture Trustee as follows:
(a) If on such LIBOR Determination Date two or more Reference Banks
provide such offered quotations, One-Month LIBOR shall be the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 0.0625%) of such
offered quotations.
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(b) If on such LIBOR Determination Date fewer than two Reference Banks
provide such offered quotations, One-Month LIBOR shall be the greater of (x)
One-Month LIBOR as determined on the previous LIBOR Determination Date and (y)
the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per
annum that the Indenture Trustee determines to be either (i) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 0.0625%) of the
one-month U.S. dollar lending rates which New York City banks selected by the
Indenture Trustee are quoting on the relevant LIBOR Determination Date to the
principal London offices of leading banks in the London interbank market or, in
the event that the Indenture Trustee can determine no such arithmetic mean, (ii)
the lowest one-month U.S. dollar lending rate which New York City banks selected
by the Indenture Trustee are quoting on such LIBOR Determination Date to leading
European banks.
The establishment of One-Month LIBOR on each LIBOR Determination Date by the
Indenture Trustee and the Indenture Trustee's calculation of the Note Interest
Rate for the related Accrual Period shall (in the absence of manifest error) be
final and binding.
Opinion of Counsel: A written opinion of counsel issued by counsel (a)
who is acceptable to the Master Servicer, the Indenture Trustee, the Rating
Agencies and the Securities Insurer, and (b) who may be employed or retained by
the Transferor, the Servicer, the Master Servicer, the Depositor, the Securities
Insurer or any of their respective Affiliates.
Original Note Principal Balance: $415,545,505.
Original Pool Principal Balance: $415,545,505, which is the Pool
Principal Balance as of the Cut-Off Date.
Outstanding: As defined in the Indenture.
Overcollateralization Amount: With respect to any Payment Date, the
amount equal to the excess of (A) the Pool Principal Balance as of the end of
the preceding Due Period, over (B) the Note Principal Balance of the Notes
(after giving effect to the payments made on such date pursuant to Section
5.01(d) and (e) hereof). As of the Closing Date, the initial
Overcollateralization Amount attributable to such excess shall be equal to zero.
Overcollateralization Deficiency Amount: With respect to any Payment
Date, the excess, if any, of the Overcollateralization Target Amount over the
Overcollateralization Amount prior to the application of Excess Spread on such
Payment Date.
Overcollateralization Reduction Amount: With respect to any Payment
Date that occurs on or after the Stepdown Date, the lesser of (1) the excess, if
any, of (a) the Overcollateralization Amount (assuming principal payments on the
Notes on such Payment Date are equal to the Regular Principal Payment Amount
without deduction of this Overcollateralization Reduction Amount), over (b) the
Overcollateralization Target Amount, and (2) the Regular Principal Payment
Amount (as determined without the deduction of this Overcollateralization
Reduction Amount therefrom) on such Payment Date. Prior to the occurrence of a
Stepdown Date, the Overcollateralization Reduction Amount shall be zero.
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Overcollateralization Target Amount: With respect to any Payment
Date, an amount determined as follows:
(1) with respect to any Payment Date occurring prior to the Stepdown
Date or on which the Step Down Test is not satisfied, an amount equal to 4.00%
of the Original Pool Principal Balance plus the Spread Squeeze Amount, if any;
(2) with respect to any other Payment Date occurring on or after the Stepdown
Date and on which the Step Down Test is satisfied, an amount equal to the
greatest of (a) the Stepped Down Percentage of the Pool Principal Balance plus
the Spread Squeeze Amount, (b) 0.50% of the Original Pool Principal Balance; and
(c) the aggregate Principal Balance of the three largest Home Loans then
outstanding; and
(3) with respect to any Payment Date occurring on which an OC Trigger
Increase Event is occurring, notwithstanding any of the preceding clauses (1)
through (2), an amount equal to 100% of the Pool Principal Balance;
provided, however, with respect to any Payment Date, notwithstanding any of the
preceding clauses (1) through (3), the Overcollateralization Target Amount shall
not exceed the Note Principal Balance and may be modified by the Securities
Insurer, but shall not be reduced below, (1) with respect to any Payment Date
occurring prior to the Stepdown Date, 2.00% of the Original Pool Principal
Balance or (2) with respect to any Payment Date occurring on or after the
Stepdown Date, an amount equal to the greater of (a) 4.00% of the Pool Principal
Balance as of the end of the related Due Period, (b) 0.50% of the Original Pool
Principal Balance or (c) an amount equal to the aggregate Principal Balance of
the three largest Home Loans then outstanding.
Owner Trust Agreement: The Owner Trust Agreement, dated as of March
1, 1999, among the Depositor, Fremont, the Owner Trustee and First Union
National Bank, a national banking association.
Owner Trustee: Wilmington Trust Company, as owner trustee under the
Owner Trust Agreement, and any successor owner trustee under the Owner Trust
Agreement.
Ownership Interest: As to any Note, any ownership or security interest
in such Note, including any interest in such Note as the holder thereof and any
other interest therein, whether direct or indirect, legal or beneficial, as
owner or as pledgee.
Payment Date: The 25th day of any month or if such 25th day is not a
Business Day, the first Business Day immediately following such day, commencing
in April 1999.
Payment Statement: As defined in Section 6.01 hereof.
Percentage Interest: As defined in the Owner Trust Agreement.
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Permitted Investments: Each of the following:
(1) direct obligations of, and obligations fully
guaranteed by, the United States of America, FHLMC, FNMA, the Federal Home Loan
Banks or any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America;
(2) (i) demand and time deposits in, certificates of deposit
of, bankers 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 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 the highest available rating category of Moody's 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;
(3) 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 principal) rated "A"
or higher by S&P and rated "A2" or higher by Moody's; 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 at least 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 certificated securities;
(4) 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 short-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the time of
such investment;
(5) 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;
(6) a guaranteed investment contract approved by each of
the Rating Agencies and the Securities Insurer and issued by an insurance
company or other corporation 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;
(7) money market funds having one of the two highest
available rating categories of S&P and the highest available rating category of
Moody's at the time of such investment, which invests only in other Permitted
Investments, including any such money market funds for which the Master Servicer
or the Indenture Trustee or any affiliate of the Master
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Servicer or the Indenture Trustee acts as the investment manager or advisor;
provided that any such money market funds which provide for demand withdrawals
shall be conclusively deemed to satisfy any maturity requirements for Permitted
Investments set forth in this Agreement; and
(8) any investment approved in writing by the Securities
Insurer and for which the Ratings Confirmation have been obtained with respect
to such investment.
The Indenture Trustee may purchase from or sell to itself or an
affiliate, as principal or agent, the Permitted Investments listed above. All
Permitted Investments in a trust account under this Agreement shall be made in
the name of the Indenture Trustee for the benefit of the Securityholders and the
Securities Insurer; provided, that the Master Servicer shall be entitled to all
investment earnings from the Note Payment Account and the Collection Account as
part of its Master Servicer Compensation hereunder.
Person: Any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, estate,
national banking association, unincorporated organization or government or any
agency or political subdivision thereof.
Pool Principal Balance: With respect to any date of determination, the
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period; provided, however, that the Pool Principal Balance on any Payment
Date on which the Termination Price is to be paid to Noteholders will be deemed
to have been equal to zero as of such date.
Preference Amount: Any amount previously distributed to the holder of
an Insured Security that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final,
non-appealable order of a court having jurisdiction.
Premium Letter: The letter agreement dated March 23, 1999 between the
Securities Insurer and Fremont relating to the premiums due in respect of the
Guaranty Policy.
Principal Balance: With respect to any Home Loan or related Foreclosure
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance of
the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as of
the last day of the preceding Due Period (after giving effect to all payments
received thereon or Monthly Advances in respect of principal made with respect
thereto and the allocation of any Net Loan Losses with respect thereto which
relates to such Due Period), without giving effect to amounts received in
respect of such Home Loan or related Foreclosure Property after such Due Period;
provided, however, that any Liquidated Home Loan shall have a Principal Balance
of zero and with respect to the valuation of the Issuer's assets such Liquidated
Home Loan shall not accrue interest thereon.
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Principal Prepayment: With respect to any Home Loan and any Due Period,
any principal amount received on a Home Loan in excess of the principal of the
Monthly Payment due in such Due Period and applied by the Servicer during such
Due Period in reduction of the Principal Balance of the Home Loan.
Property Insurance Proceeds: With respect to any Mortgaged Property,
all amounts collected in respect of any related insurance policy that insures
such Mortgaged Property or the related Obligor and not required to be applied to
the restoration of any such Mortgaged Property or paid to the related Obligor
(but excluding any Insured Payments).
Prospectus: The Depositor's final Prospectus dated March 18, 1999 as
supplemented by the Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated March 18,
1999 prepared by the Depositor and Transferor in connection with the issuance
and sale of the Notes.
Purchase Price: With respect to a Defective Home Loan, the Principal
Balance thereof as of the date of purchase, plus all accrued and unpaid interest
on such Defective Home Loan to and including the end of the Due Period in which
the repurchase occurs computed at the applicable Home Loan Interest Rate, plus
the amount of any unreimbursed Servicing Advances and Monthly Advances with
respect to such Defective Home Loan (after deducting therefrom any amounts
received in respect of such repurchased Defective Home Loan and being held in
the Collection Account for future distribution to the extent such amounts
represent recoveries of principal not yet applied to reduce the related
Principal Balance or interest (net of the Servicing Fee, Master Servicer Fee,
Indenture Trustee Fee and Guaranty Insurance Premium for such Defective Home
Loan) for the period from and after the date of repurchase).
Qualified Substitute Home Loan: A home loan or home loans substituted
for a Deleted Home Loan pursuant to Section 3.05 hereof, which satisfies the
following: (i) in the case of a fixed rate Home Loan, has or have a fixed
interest rate (a) no lower than the Home Loan Interest Rate for the Deleted Home
Loan, and (b) not more than 2.0 percentage points greater than the Home Loan
Interest Rate for the Deleted Home Loan; (ii) in the case of an adjustable rate
Home Loan has or have an adjustable rate and (a) has a current interest rate no
lower than the Home Loan Interest Rate for the Deleted Home Loan, (b) has a
gross margin not more than 2.0 percentage points different than the Home Loan
Interest Rate for the Deleted Home Loan, (c) has a lifetime interest rate cap
not more than 2.0 percentage points lower than the Home Loan Interest Rate for
the Deleted Home Loan, (d) has a lifetime interest rate floor not more than 2.0
percentage points lower than the Home Loan Interest Rate for the Deleted Home
Loan, and (e) pays interest based on the same index as the Deleted Home Loan;
(iii) matures or mature not more than one year later than, and not more than one
year earlier, than the maturity date of Deleted Home Loan, has a maturity date
no later than March 1, 2029 and an original term to maturity of less than or
equal to 30 years; (iv) has or have a principal balance or principal balances
(after application of all payments received on or prior to the date of
substitution) equal to or less than the Principal Balance or Balances of the
Deleted Home Loan or Loans as of such date; (v) has or have a borrower or
borrowers with a debt-to-income ratio no higher than the debt-to-income ratio of
the Obligor with respect to the Deleted Loan; (vi) complies or comply as of the
date of substitution with each representation and warranty set forth in Section
3.04 hereof and is or are not more than 89 days delinquent as of the date of
substitution for such Deleted Home Loan or Loans; (vii) has or have a lien
priority no lower than the Deleted Home Loan; and (viii) is otherwise
satisfactory to the Securities Insurer. For purposes of determining whether
multiple mortgage loans proposed to be substituted for one or more Deleted Home
Loans pursuant to Section 3.05 hereof are in fact "Qualified Substitute Home
Loans" as provided
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above, the criteria specified in clauses (i), (ii) and (iii) above may be
considered on an aggregate or weighted average basis, rather than on a
loan-by-loan basis (i.e., so long as the weighted average Home Loan Interest
Rate of any loans proposed to be substituted is not less than the Home Loan
Interest Rate for the designated Deleted Home Loan or Loans and not more than
two percentage points greater than the Home Loan Interest Rate for the
designated Deleted Home Loan or Loans, the requirements of clause (i) above
would be deemed satisfied).
Rating Agencies: Moody's and S&P. If no such organization or successor
is any longer in existence, "Rating Agency" shall be a nationally recognized
statistical rating organization or other comparable person designated by the
Master Servicer and approved by the Securities Insurer, notice of which
designation shall have been given to the Indenture Trustee, the Securities
Insurer, the Servicer and the Issuer.
Ratings: The ratings initially assigned to the Notes by the Rating
Agencies, as evidenced by letters from the Rating Agencies.
Ratings Confirmation: With respect to a contemplated action to be
undertaken or performed pursuant to this Agreement, a written confirmation from
each Rating Agency to the effect that such action will not result in or cause
the downgrading, withdrawal or qualification of the rating that would otherwise
be assigned by such Rating Agency to the Notes without the benefit of the
Guaranty Policy provided by the Securities Insurer.
Realized Losses: As of any Payment Date, the sum of (1) with respect to
all Home Loans that have become Liquidated Home Loans during the related Due
Period, the difference between (a) the aggregate Principal Balances of such
Liquidated Home Loans and accrued and unpaid interest thereon, minus (b) the
aggregate Net Liquidation Proceeds collected during the related Due Period, and
(2) with respect to all Defaulted Home Loans, the aggregate Net Loan Losses that
occurred during the related Due Period.
Record Date: With respect to each Payment Date, the close of business
on the last Business Day of the month immediately preceding the month in which
such Payment Date occurs.
Regular Payment Amount: With respect to any Payment Date, the lesser of
(a) the Available Payment Amount and (b) the sum of (i) the Noteholders'
Interest Payment Amount and (ii) the Regular Principal Payment Amount.
Regular Principal Payment Amount: On each Payment Date, an amount
equal to the lesser of:
(A) the Note Principal Balance of the Notes immediately prior to
such Payment Date; and
(B) the sum of (i) each scheduled payment of principal collected by the
Servicer or advanced by the Master Servicer or the Indenture Trustee in respect
of the related Due Period, (ii) all Principal Prepayments applied by the
Servicer during such related Due Period, (iii) the principal portion of all Net
Liquidation Proceeds, Property Insurance Proceeds and Released Mortgaged
Property Proceeds received during the related Due Period, (iv) that
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portion of the Purchase Price of any repurchased Home Loan which represents
principal received prior to the related Determination Date, (v) the principal
portion of any Substitution Adjustments required to be deposited in the
Collection Account as of the related Determination Date and (vi) on the Payment
Date on which the Issuer is to be terminated pursuant to Section 11.02 hereof,
the Termination Price (net of any accrued and unpaid interest, Trust Fees and
Expenses due and unpaid on such date and Servicing Advance Reimbursement Amounts
and Monthly Advance Reimbursement Amounts); provided, however, that if such
Payment Date is on or after a Stepdown Date, then with respect to the payment of
principal to the Noteholders the foregoing amount will be reduced (but not less
than zero) by the Overcollateralization Reduction Amount, if any, for such
Payment Date.
Released Mortgaged Property Proceeds: With respect to any Home Loan,
proceeds received by the Servicer in connection with (i) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise; which proceeds in
either case are not released to the Obligor in accordance with applicable law,
Accepted Servicing Procedures and this Agreement.
Relief Act Shortfall: Any shortfall in an Obligor's Monthly Payment
caused by the application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
Residual Interest: The meaning assigned thereto in the Owner Trust
Agreement.
Residual Interest Certificate: The meaning assigned thereto in the
Owner Trust Agreement.
Responsible Officer: When used with respect to the Indenture Trustee,
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Indenture Trustee, customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Issuer, any officer in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Owner Trust Agreement and this
Agreement on behalf of the Issuer. When used with respect to the Depositor, the
Servicer, the Master Servicer, the Transferor, the Servicer or any Custodian,
the President or any Vice President, Assistant Vice President, or any Secretary
or Assistant Secretary.
S&P: Standard and Poor's Ratings Services, a Division of the
McGraw-Hill Companies, Inc. or any successor thereto.
Securities: The Notes or Residual Interest Certificates.
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Securities Insurer: Financial Security Assurance Inc., as issuer of
the Guaranty Policy, and its successors and assigns.
Securities Insurer Default: The existence and continuation of any of
the following:
(a) The Securities Insurer fails to make a payment required under the
Guaranty Policy in accordance with its terms;
(b) The Securities Insurer (1) files any petition or commences any case
or proceeding under any provision or chapter of the United States Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (2) makes a general
assignment for the benefit of its creditors, or (3) has an order for relief
entered against it under the United States Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) A court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (1) appointing a custodian, trustee,
agent or receiver for the Securities Insurer or for all or any material portion
of its property or (2) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Securities Insurer (or the taking of
possession of all or any material portion of the property of the Securities
Insurer).
Securities Insurer Reimbursement Amount: At any time, an amount owed to
the Securities Insurer for any unreimbursed Insured Payments made under the
Guaranty Policy and any other amounts then owing to the Securities Insurer under
the Insurance Agreement, which have not previously been reimbursed, in each case
together with interest thereon at the rate specified in the Insurance Agreement.
Securityholder: Any Noteholder or Certificateholder.
Series or Series 1999-1: Fremont Home Loan Asset Backed Notes,
Series 1999-1.
Servicer: One or more servicers that enter into a Servicing Agreement
with the Master Servicer, which initially will be Fremont Investment & Loan, a
California industrial loan company for an interim period, and thereafter will be
Fairbanks Capital Corp., a Utah corporation.
Servicer Termination Delinquency Event: With respect to any date of
determination, a Servicer Termination Delinquency Event shall occur if the most
recent Six-Month Average Delinquency (including Foreclosure Property and real
estate owned) exceeds 15.00%.
Servicer Termination Loss Event: With respect to any date of
determination, a Servicer Termination Loss Event shall occur if either:
(i)......cumulative Realized Losses as a percentage of the
Original Pool Principal Balance equal or exceed the following percentages based
on the month of determination after the Closing Date:
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MONTH OF CUMULATIVE
DETERMINATION REALIZED LOSSES
------------- ---------------
0 -12 1.25%
13 - 24 2.00%
25 - 36 3.15%
37 - 48 3.85%
49+ 4.35%
or
(ii) cumulative Realized Losses as a percentage of the
Original Pool Principal Balance at the end of any 12 month period is greater
than or equal to 1.75% of such percentage as of the beginning of such 12 month
period.
Servicer's Home Loan Files: In respect of each Home Loan, all documents
customarily included in the Servicer's loan file for the related type of Home
Loan as specifically set forth in Section 4.4 of the Servicing Agreement.
Servicer's Monthly Remittance Report: A report prepared and computed
by the Servicer in substantially the form of Exhibit B attached hereto.
Servicing Advance Reimbursement Amount: With respect to any date of
determination and with respect to the receipt of proceeds from or the
liquidation of a Home Loan for which any Servicing Advances have been made, the
amount of any such Servicing Advances that have not been reimbursed as of such
date, including Nonrecoverable Servicing Advances.
Servicing Advances: All reasonable, customary and necessary "out of
pocket" costs and expenses advanced or paid by the Servicer with respect to the
Home Loans in accordance with the performance by the Servicer of its servicing
obligations under Section 6.6 of the Servicing Agreement, including, but not
limited to, the costs and expenses for (i) the preservation, restoration and
protection of any related Mortgaged Property, including without limitation
advances in respect of real estate taxes and assessments, (ii) any collection,
enforcement or judicial proceedings, including without limitation foreclosures,
collections and liquidations , (iii) the conservation, management and sale or
other disposition of a Foreclosure Property, and (iv) the satisfaction,
cancellation, release or discharge of any Home Loan or any related Mortgage in
accordance with this Agreement; provided, however, that such Servicing Advances
(plus accrued interest thereon from the date of such advance to the date of
reimbursement and at the rate equal to the Servicer's cost of funds) are
reimbursable to the Servicer out of the expected late collections, Liquidation
Proceeds, Property Insurance Proceeds or Released Mortgaged Property Proceeds
from the related Home Loan, Obligor or Mortgaged Property.
Servicing Agreement: The servicing agreement, incorporating by
reference the Agreement Regarding Standard Servicing Terms, each dated as of the
date hereof each between Fremont, as owner of the Home Loans and as the Master
Servicer and the Servicer, a form of which is attached hereto as Exhibit E.
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Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to this Agreement and the Servicing Agreement.
On any Payment Date Servicing Compensation shall include any Servicing Fee
Recovery Amounts due and unpaid, to the extent of Master Servicer Compensation
available after allocations under Section 4.01(k) hereof on such Payment Date.
Servicing Fee: As to each Home Loan (including any Home Loan that has
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each Payment
Date, which shall equal the product of (a) one-twelfth (1/12) of 0.35% (35 basis
points) and (b) the Principal Balance of such Home Loan as of the beginning of
the immediately preceding Due Period (or as of the Cut-Off Date with respect to
the first Due Period).
Servicing Fee Recovery Amount: The amount of any Servicing Fee used
to pay Compensating Interest for which the Servicer has not received
reimbursement.
Servicing Officer: Any officer of the Servicer or Master Servicer
involved in, or responsible for, the administration and servicing of the Home
Loans whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the Master
Servicer, respectively, to the Securities Insurer, the Master Servicer and the
Indenture Trustee, on behalf of the Securityholders and the Securities Insurer,
as such list may from time to time be amended.
Six-Month Average Delinquency: With respect to any Payment Date, the
average for such Payment Date and the five preceding Payment Dates of the
respective ratios, expressed as a percentage, equal to (x) the aggregate
Principal Balances of all Home Loans that are 90 days or more Delinquent
(excluding any Liquidated Home Loans but including Foreclosed Loans and real
estate owned and Home Loans in foreclosure proceedings) as of the end of each of
the related Due Periods, divided by (y) the respective Pool Principal Balance as
of the end of the applicable Due Period.
Spread Squeeze Amount: For any Payment Date on or after the Payment
Date in April 2000, an amount (not less than zero) equal to the product,
obtained by multiplying (i) three, (ii) the excess, if any, of 2.00% (with
respect to the 13th through the 24th Payment Date) or 3.00% (with respect to any
Payment Date after the 24th Payment Date) over the Spread Squeeze Percentage for
such Payment Date and (iii) the Original Pool Principal Balance.
Spread Squeeze Percentage: With respect to any Payment Date, the
percentage equivalent of a fraction, the numerator of which is the product of 12
and the excess of the Excess Spread for such Payment Date over the Securities
Insurer Reimbursement Amount for such Payment Date, and the denominator of which
is the Pool Principal Balance for such Payment Date.
Stepdown Date: The first Payment Date occurring on the later of: (a)
the twenty-fourth month after the month in which the Closing Date occurs; or (b)
the Payment Date on which the Pool Principal Balance as of the end of the
related Due Period has been reduced to an amount that is less than or equal to
50% of the Original Pool Principal Balance.
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Step Down Test: As of any Payment Date, each of the following
conditions:
(i) the most recent Six-Month Average Delinquency is
equal to or less than 10.50% of the Pool Principal Balance.
(ii) the cumulative Realized Losses as a percentage of the
Original Pool Principal Balance are equal to or less than the following
percentages through the month of determination after the Closing Date:
MONTH OF CUMULATIVE
DETERMINATION REALIZED LOSSES
------------- ---------------
24 1.25%
36 1.75%
48 2.50%
60+ 3.15%
and
(iii) aggregate Realized Losses during the 12 months
preceding a Payment Date, as a percentage of the Pool Principal Balance as of
the first day of such 12 month period, must be less than 100 basis points
(1.00%).
Stepped Down Percentage: For any Payment Date on or after the Step Down
Date on which the Step Down Test is satisfied, a percentage equal to (i) the
percentage equivalent of a fraction, the numerator of which is 4.00% of the
Original Pool Principal Balance and the denominator of which is the Pool
Principal Balance as of such Payment Date, minus (ii) the percentage equivalent
of a fraction, the numerator of which is the product of (A) the percentage
calculated under clause (i) above minus 8.00% multiplied by (B) the number of
consecutive Payment Dates through and including the Payment Date for which the
Stepped Down Percentage is being calculated, up to a maximum of six, for which
the Step Down Test has been satisfied and the denominator of which is six.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 3.05 hereof, the amount, if any, by which (a) the sum of the
aggregate principal balance (after application of principal payments received on
or before the date of substitution) of any Qualified Substitute Home Loans as of
the date of substitution, plus any accrued and unpaid interest thereon to the
date of substitution, is less than (b) the sum of the Principal Balance,
together with accrued and unpaid interest thereon to the date of substitution,
of the related Deleted Home Loans.
Tangible Net Worth: As defined in Section 10.01(a)(x) hereof.
Termination Price: As of any date of determination, an amount without
duplication equal to the greater of (A) the Note Redemption Amount and (B) the
sum of (i) the Principal Balance of each Home Loan as of the applicable Monthly
Cut-Off Date; (ii) all unpaid interest accrued on the Principal Balance of each
such Home Loan at the related Home Loan Interest Rate to such Monthly Cut-Off
Date; (iii) the aggregate fair market value of each
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Foreclosure Property on such Monthly Cut-Off Date, as determined by an appraiser
acceptable to the Indenture Trustee as of a date not more than 30 days prior to
such Monthly Cut-Off Date; and (iv) any due but unpaid Securities Insurer
Reimbursement Amount.
Transaction Documents: This Agreement, the Servicing Agreement, the
Indenture, the Home Loan Purchase Agreement, the Owner Trust Agreement, the
Custodial Agreement, the Administration Agreement, the Indemnification and
Contribution Agreement, the Insurance Agreement, the Premium Letter and the
Indemnification Agreement.
Transferor: Fremont, in its capacity as the transferor hereunder.
Treasury Regulations: Regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust: The Issuer.
Trust Account Property: The Trust Accounts, all amounts and
investments held from time to time in the Trust Accounts and all proceeds of
the foregoing.
Trust Accounts: The Note Payment Account, the Certificate
Distribution Account, the Policy Payment Account or the Collection Account.
Trust Estate: The assets subject to this Agreement, the Owner Trust
Agreement and the Indenture and assigned and conveyed to the Trust, which assets
consist of: (i) such Home Loans as from time to time are subject to this
Agreement as listed in the Home Loan Schedule, as the same may be amended or
supplemented from time to time including by the removal of Deleted Home Loans
and the addition of Qualified Substitute Home Loans, together with the Home Loan
File relating thereto and all proceeds thereof, (ii) the Mortgages and security
interests in Mortgaged Properties, (iii) all payments in respect of interest due
with respect to the Home Loans on or after the Cut-Off Date and all payments in
respect of principal received after the Cut-Off Date, (iv) such assets as from
time to time are identified as Foreclosure Property, (v) such assets and funds
as are from time to time are deposited in the Collection Account, the Note
Payment Account and the Certificate Distribution Account, including amounts on
deposit in such accounts which are invested in Permitted Investments, (vi) the
Issuer's rights under all insurance policies with respect to the Home Loans and
any Property Insurance Proceeds, (vii) Net Liquidation Proceeds and Released
Mortgaged Property Proceeds, (viii) all right, title and interest of the
Depositor in and to the obligations of the Transferor under the Home Loan
Purchase Agreement pursuant to which the Depositor acquired the Home Loans from
the Transferor, and (ix) all right, title and interest of the Depositor in and
to the Servicing Agreement and all proceeds of any of the foregoing.
Trust Fees and Expenses: As of each Payment Date, an amount equal to
the Master Servicer Compensation (which includes the Master Servicer Fee), the
Servicing Compensation (which includes the Servicing Fee), Guaranty Insurance
Premium and the Indenture Trustee Fee and reimbursement of the reasonable
expenses of the Indenture Trustee.
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UCC: The Uniform Commercial Code as in effect in the State of New
York.
Section 1.02. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture and the Owner Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under GAAP. To the extent that the definitions of accounting terms in this
Agreement or in any such certificate or other document are inconsistent with the
meanings of such terms under GAAP, the definitions contained in this Agreement
or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF THE HOME LOANS
Section 2.01. Conveyance of the Home Loans.
(a) As of the Closing Date, in consideration of the Issuer's delivery
of the Notes and the Residual Interest Certificates to the Depositor or its
designee, upon the order of the Depositor, the Depositor, as of the Closing Date
and concurrently with the execution and delivery hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse,
but subject to the other terms and provisions of this Agreement, all of the
right,
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title and interest of the Depositor in and to the Trust Estate. The foregoing
sale, transfer, assignment, set over and conveyance does not, and is not
intended to, result in a creation or an assumption by the Issuer of any
obligation of the Depositor, the Transferor or any other person in connection
with the Trust Estate or under any agreement or instrument relating thereto
except as specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the conveyance to
it of the Trust Estate, including all right, title and interest of the Depositor
in and to the Trust Estate, receipt of which is hereby acknowledged by the
Issuer. Concurrently with such delivery and in exchange therefor, the Issuer has
pledged the Trust Estate to the Indenture Trustee and executed the Notes, and
the Indenture Trustee, pursuant to the written instructions of the Issuer, has
caused the Notes to be authenticated and delivered to the Depositor or its
designee. In addition, concurrently with such delivery and in exchange therefor,
the Owner Trustee, pursuant to the instructions of the Depositor, has executed
(not in its individual capacity, but solely as Owner Trustee on behalf of the
Issuer) and caused the Residual Interest Certificates to be authenticated and
delivered to the Depositor or its designee, upon the order of the Depositor.
Section 2.02. Ownership and Possession of Home Loan Files.
Upon the issuance of the Notes, with respect to the Home Loans, the
ownership of each Debt Instrument, the related Mortgage and the contents of the
related Servicer's Home Loan File and the Indenture Trustee's Home Loan File
shall be vested in the Trust and pledged to the Indenture Trustee for the
benefit of the Noteholders, although possession of the Servicer's Home Loan
Files (other than items required to be maintained in the Indenture Trustee's
Home Loan Files) on behalf of and for the benefit of the Securityholders shall
remain with the Servicer, and the Custodian shall take possession of the
Indenture Trustee's Home Loan Files as contemplated in Section 2.05 hereof.
Section 2.03. Books and Records.
The sale of each Home Loan shall be reflected on the balance sheets and
other financial statements of the Depositor or the Transferor, as the case may
be, as a sale of assets by the Depositor or the Transferor, as the case may be,
under GAAP. Each of the Servicer and the Custodian shall be responsible for
maintaining, and shall maintain, a complete set of books and records for each
Home Loan which shall be clearly marked to reflect the ownership of each Home
Loan by the Owner Trustee and pledged to the Indenture Trustee for the benefit
of the Noteholders.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the Home
Loans and the other property specified in Section 2.01(a) hereof from the
Depositor to the Trust. If the assignment and transfer of the Home Loans and the
other property specified in Section 2.01(a) hereof to the Trust pursuant to this
Agreement or the conveyance of the Home Loans or any of such other property to
the Trust is held or deemed not to be a sale or is held or deemed to be a pledge
of security for a loan, the Depositor intends that the rights and obligations of
the parties shall be established pursuant to the terms of this Agreement and
that in such event, (i) the Depositor shall be deemed to have granted and does
hereby grant to the Trust a first priority security interest in
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the entire right, title and interest of the Depositor in and to the Home Loans
and all other property conveyed to the Trust pursuant to Section 2.01 hereof and
all proceeds thereof and (ii) this Agreement shall constitute a security
agreement under applicable law. Within ten (10) days of the Closing Date, the
Depositor shall cause to be filed UCC-1 financing statements naming the Trust as
a "secured party" and describing the Home Loans being sold by the Depositor to
the Trust with the office of the Secretary of State of the state in which the
Depositor is located.
Section 2.04. Delivery of Home Loan Documents.
(a) With respect to each Home Loan, the Transferor and/or the
Depositor, as applicable, shall, on the Closing Date, deliver or caused to be
delivered to the Custodian, as the designated agent of the Indenture Trustee,
each of the following documents (collectively, the "Indenture Trustee's Home
Loan Files"):
(i) The original Debt Instrument, endorsed by the
Transferor in blank or in the following form: "Pay to the order of First Union
National Bank as Trustee without recourse" with all prior and intervening
endorsements showing a complete chain or endorsement from origination of the
Home Loan to the Transferor, or a lost note affidavit acceptable to the
Indenture Trustee (not to exceed 15 Home Loans);
(ii) The original Mortgage with evidence of recording
thereon (or, if the original Mortgage has not been returned from the applicable
public recording office or is not otherwise available, a copy of the Mortgage
certified by a Responsible Officer of the Transferor or by the closing attorney
or by an officer of the title insurer or agent of the title insurer which issued
the related title insurance policy, if any, or commitment therefor to be a true
and complete copy of the original Mortgage submitted for recording) and, if the
Mortgage was executed pursuant to a power of attorney, the original power of
attorney with evidence of recording thereon (or, if the original power of
attorney has not been returned from the applicable public recording office or is
not otherwise available, a copy of the power of attorney certified by a
Responsible Officer of the Transferor or by the closing attorney or by an
officer of the title insurer or agent of the title insurer which issued the
related title insurance policy, if any, or commitment, thereof, to be a true and
complete copy of the original power of attorney submitted for recording);
(iii) The original executed Assignment of Mortgage, in
blank or in recordable form to "First Union National Bank, as Trustee." The
Assignment of Mortgage may be a blanket assignment, to the extent such
assignment is effective under applicable law, for Mortgages covering Mortgaged
Properties situated within the same county. If the Assignment of Mortgage is in
blanket form, an Assignment of Mortgage need not be included in the individual
Indenture Trustee's Home Loan File;
(iv) All original intervening assignments of mortgage,
with evidence of recording thereon, showing a complete chain of assignment from
origination of the Home Loan to the Transferor (or, if any such assignment of
mortgage has not been returned from the applicable public recording office or is
not otherwise available, a copy of such assignment of mortgage certified by a
Responsible Officer of the Transferor or by the
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closing attorney or by an officer of the title insurer or agent of the title
insurer which issued the related title insurance policy, if any, or commitment
therefor to be a true and complete copy of the original assignment submitted for
recording); provided that the chain of intervening recorded assignments shall
not be required to match the chain of intervening endorsements of the Debt
Instrument so long as the chain of intervening recorded assignments, if
applicable, evidences one or more assignments of the Mortgage from the original
mortgagee ultimately to the person who has executed the Assignment of Mortgage;
(v) The original, or a copy certified by the Transferor
to be a true and correct copy of the original, of each assumption, modification,
written assurance or substitute agreement, if any; and
(vi) The original policy of title insurance, including
riders and endorsements thereto, as if the policy has not yet been issued, a
written commitment or interim binder or preliminary report of title issued by
the title insurance or escrow company.
(b) With respect to each Home Loan, the Transferor and the Depositor
shall, on the Closing Date, deliver or caused to be delivered to the Servicer,
as the designated agent of the Indenture Trustee, the Servicer's Home Loan
Files.
(c) The Indenture Trustee shall cause the Custodian to take and
maintain continuous physical possession of the Indenture Trustee's Home Loan
Files in the State of Maryland and, in connection therewith, shall act solely as
agent for the Noteholders in accordance with the terms hereof and not as agent
for the Transferor or any other party.
(d) Within 60 days after the Closing Date, the Transferor, at its own
expense, shall record each Assignment of Mortgage (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property or
other records; provided, however, that the Transferor need not record any such
Assignment of Mortgage which relates to a Home Loan in any jurisdiction under
the laws of which, as evidenced by an Opinion of Counsel delivered by the
Transferor (at the Transferor's expense) to the Indenture Trustee, the
Securities Insurer and the Rating Agencies, that recordation of such Assignment
of Mortgage is not necessary to protect the Indenture Trustee's and the
Noteholders' interest in the related Home Loan. With respect to any Assignment
of Mortgage as to which the related recording information is unavailable within
60 days following the Closing Date, such Assignment of Mortgage shall be
submitted for recording within 30 days after receipt of such information but in
no event later than 360 days after the Closing Date. The Indenture Trustee shall
be required to retain a copy of each Assignment of Mortgage submitted for
recording. In the event that any such Assignment of Mortgage is lost or returned
unrecorded because of a defect therein, the Transferor shall promptly prepare a
substitute Assignment of Mortgage or cure such defect, as the case may be, and
thereafter the Transferor shall be required to submit each such Assignment of
Mortgage for recording.
(e) All recordings required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Transferor.
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Section 2.05. Acceptance by the Indenture Trustee of the Home Loans;
Certain Substitutions; Certification by the Custodian.
(a) The Indenture Trustee agrees to cause the Custodian to execute and
deliver on the Closing Date an acknowledgment of receipt of the Indenture
Trustee's Home Loan File for each Home Loan. The Indenture Trustee will cause
the Custodian to hold such documents and any amendments, replacements or
supplements thereto, as well as any other assets included in the Trust Estate
and delivered to the Custodian, in trust, upon and subject to the conditions set
forth herein. The Indenture Trustee agrees to cause the Custodian to review each
Indenture Trustee's Home Loan File within 45 days after the Closing Date (or,
with respect to any Qualified Substitute Home Loan, within 45 days after the
conveyance of the related Home Loan to the Trust) and to cause the Custodian to
deliver to the Transferor, the Depositor, the Servicer, the Indenture Trustee,
and the Securities Insurer a certification (the "Custodian's Initial
Certification") to the effect that, as to each Home Loan listed in the Home Loan
Schedule (other than any Home Loan paid in full or any Home Loan specifically
identified as an exception to such certification), (i) all documents required to
be delivered to the Indenture Trustee pursuant to this Agreement are in its
possession or in the possession of the Custodian on its behalf (other than as
expressly permitted by Section 2.04 hereof), (ii) such documents have been
reviewed by the Custodian and have not been mutilated or damaged and appear
regular on their face (handwritten additions, changes or corrections shall not
constitute irregularities if initialed by the Obligor) and relate to such Home
Loan, and (iii) based on the examination of the Custodian on behalf of the
Indenture Trustee, and only as to the foregoing documents, the information set
forth on the Home Loan Schedule with respect to items (i), (ii), (iv) (only as
to original principal amount), (vii), (ix), (x) and (xiii) specified under the
definition of Home Loan Schedule herein accurately reflects the information set
forth in the Indenture Trustee's Home Loan File. Neither the Indenture Trustee
nor the Custodian shall be under any duty or obligation to make an independent
examination of any documents contained in each Indenture Trustee's Home Loan
File beyond the review listed herein. Neither the Custodian nor the Indenture
Trustee makes any representations as to: (i) the validity, legality,
sufficiency, enforceability, execution by a responsible officer or genuineness
of any of the documents contained in each Indenture Trustee's Home Loan File of
any of the Home Loans identified on the Home Loan Schedule relating to such Home
Loans, or (ii) the collectibility, insurability, effectiveness or suitability of
any such Home Loan, or (iii) the existence of any document specified in clause
(v) of Section 2.04(a) of the this Agreement.
(b) The Servicer's Home Loan Files shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Noteholders and the Indenture
Trustee for so long as the Indenture continues in full force and effect; after
the Indenture is terminated in accordance with the terms thereof, the Servicer's
Home Loan Files shall be held in the custody of the Servicer for the benefit of,
and as agent for, the Certificateholders. It is intended that, by the Servicer's
agreement pursuant to this Section 2.05(b), the Indenture Trustee shall be
deemed to have possession of the Servicer's Home Loan Files for purposes of
Section 9-305 of the Uniform Commercial Code of the state in which such
documents or instruments are located. The Servicer shall promptly report to the
Indenture Trustee any failure by it to hold the Servicer's Home Loan File as
herein provided and shall promptly take appropriate action to remedy any such
failure. In acting as custodian of such documents and instruments, the Servicer
agrees not to assert any legal or beneficial ownership interest in the Home
Loans or such documents or
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instruments. The Servicer agrees to indemnify the Securityholders and the
Indenture Trustee for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever which may be imposed on,
incurred by or asserted against the Securityholders or the Indenture Trustee as
the result of any act or omission by the Servicer relating to the maintenance
and custody of such documents or instruments which have been delivered to the
Servicer; provided, however, that the Servicer will not be liable for any
portion of any such amount resulting from the negligence or misconduct of any
Securityholders or the Indenture Trustee; and provided, further, that the
Servicer will not be liable for any portion of any such amount resulting from
the Servicer's compliance with any instructions or directions consistent with
this Agreement issued to the Servicer by the Indenture Trustee. The Indenture
Trustee shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
(c) The Indenture Trustee agrees to cause the Custodian to review, for
the benefit of the Securityholders, each Indenture Trustee's Home Loan File
within 60 days after the date the Custodian delivered a Custodian's Initial
Certification and to deliver to the Transferor, the Depositor, the Servicer, the
Indenture Trustee and the Securities Insurer an updated certification (a
"Custodian's Updated Certification"), setting forth those exceptions listed on
the Custodian's Initial Certification which continue to exist on the date of
such Custodian's Updated Certification. With respect to any Home Loans which are
set forth as exceptions in the Custodian's Updated Certification because
recorded assignments or original or certified copies of Mortgages have not yet
been delivered to the Custodian, the Transferor shall cure such exceptions by
delivering such missing documents to the Custodian no later than 180 days after
the Closing Date.
The Indenture Trustee agrees to cause the Custodian to review for the
benefit of the Securityholders, each Indenture Trustee's Home Loan File within
180 days after the date it delivered a Custodian's Initial Certification and to
deliver to the Transferor, the Depositor, the Servicer, the Indenture Trustee,
and the Securities Insurer a final certification (a "Custodian's Final
Certification"), setting forth those exceptions listed on the Custodian's
Updated Certification which continue to exist on the date of such Custodian's
Final Certification.
In performing any such review, the Custodian may conclusively rely on
the Transferor as to the purported genuineness of any such document and any
signature thereon. Neither the Indenture Trustee nor the Custodian shall have
any responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction or whether a blanket assignment is permitted in
any applicable jurisdiction. If a material defect in a document constituting
part of a Indenture Trustee's Home Loan File is discovered, then the Depositor
and Transferor shall comply with the cure, substitution and repurchase
provisions of Section 3.05 hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, the
Master Servicer, the Servicer, the Indenture Trustee, the Owner Trustee, the
Securities Insurer and the Noteholders that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has, and had at all
relevant times, full power to own its property, to carry on its business as
currently conducted, to enter into and perform its obligations under each
Transaction Document to which the Depositor is a party and to create the Trust
pursuant to the Owner Trust Agreement.
(b) The execution and delivery of each Transaction Document to which
the Depositor is a party by the Depositor and its performance of and compliance
with the terms of thereof will not violate the Depositor's certificate of
incorporation or by-laws or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or result in the
breach or acceleration of, any material contract, agreement or other instrument
to which the Depositor is a party or which may be applicable to the Depositor or
any of its assets.
(c) The Depositor has the full power and authority to enter into and
consummate the transactions contemplated by each Transaction Document to which
the Depositor is a party, has duly authorized the execution, delivery and
performance of each Transaction Document to which the Depositor is a party and
has duly executed and delivered each Transaction Document to which the Depositor
is a party. Each Transaction Document to which the Depositor is a party,
assuming due authorization, execution and delivery by each other party thereto,
constitutes a valid, legal and binding obligation of the Depositor, enforceable
against it in accordance with the terms thereof, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(d) The Depositor is not in violation of, and the execution and
delivery of any Transaction Document by the Depositor and its performance and
compliance with the terms of any Transaction Document to which the Depositor is
a party will not constitute a violation with respect to, any order or decree of
any court or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, which violation would materially and
adversely affect the condition (financial or otherwise) or operations of the
Depositor or its properties or materially and adversely affect the performance
of its duties hereunder or thereunder.
(e) There are no actions or proceedings against, or investigations of,
the Depositor currently pending with regard to which the Depositor has received
service of process
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and no action or proceeding against, or investigation of, the Depositor is, to
the knowledge of the Depositor, threatened or otherwise pending before any
court, administrative agency or other tribunal that (A) if determined adversely,
would prohibit its entering into any Transaction Document to which the Depositor
is a party or render the Notes invalid, (B) seek to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by any
Transaction Document to which the Depositor is a party or (C) if determined
adversely, would prohibit or materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or enforceability of,
any Transaction Document to which the Depositor is a party or the Notes.
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, any
Transaction Document to which the Depositor is a party or the Notes, or for the
consummation of the transactions contemplated by any Transaction Document,
except for such consents, approvals, authorizations and orders, if any, that
have been obtained prior to the Closing Date.
(g) The Depositor is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by its execution and delivery of
any Transaction Document or its obligations hereunder; no petition of bankruptcy
(or similar insolvency proceeding) has been filed by or against the Depositor
prior to the date hereof.
(h) The Depositor did not sell the Home Loans to the Issuer, with any
intent to hinder, delay or defraud any of its creditors; the Depositor will not
be rendered insolvent as a result of the sale of the Home Loans to the Issuer.
(i) Immediately upon the transfer and assignment by the Depositor to
the Issuer herein contemplated, the Depositor will have delivered to the Issuer
all of the Depositor's right, title and interest in and to, the Home Loans free
and clear of any lien or options in favor of, or claims of, any other Person.
(j) No Officers' Certificate prepared by the Depositor and furnished or
to be furnished by it pursuant to this Agreement contains any untrue statement
of material fact.
(k) The Depositor is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.
Section 3.02. Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Servicer, the
Indenture Trustee, the Owner Trustee, the Securities Insurer, the Noteholders
and the Depositor that as of the Closing Date (except as otherwise specifically
provided herein):
(a) The Transferor is an industrial loan company duly organized,
validly existing and in good standing under the laws of the State of California
and has and had at all relevant times, full corporate power to originate or
purchase the Home Loans, to own its
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property, to carry on its business as presently conducted and to enter into and
perform its obligations under each Transaction Document to which it is a party.
(b) The execution and delivery of each Transaction Document to which it
is a party by the Transferor and its performance of and compliance with the
terms of each Transaction Document to which it is a party will not violate the
Transferor's certificate of incorporation or by-laws or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or result in the breach or acceleration of, any material
contract, agreement or other instrument to which the Transferor is a party or
which may be applicable to the Transferor or any of its assets.
(c) The Transferor has the full power and authority to enter into and
consummate all transactions to be consummated by it, contemplated by each
Transaction Document to which it is a party has duly authorized the execution,
delivery and performance of each Transaction Document to which it is a party and
has duly executed and delivered each Transaction Document to which it is a
party. Each Transaction Document to which the Transferor is a party, assuming
due authorization, execution and delivery by the other parties thereto,
constitutes a valid, legal and binding obligation of the Transferor, enforceable
against it in accordance with the terms thereof, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(d) The Transferor is not in violation of, and the execution and
delivery of any Transaction Documents by the Transferor and its performance and
compliance with the terms thereof will not constitute a violation with respect
to, any order or decree of any court or any order or regulation of any federal,
state, municipal or governmental agency having jurisdiction, which violation
would materially and adversely affect the condition (financial or otherwise) or
operations of the Transferor or its properties or materially and adversely
affect the performance of its duties hereunder or thereunder.
(e) There are no actions or proceedings against, or investigations of,
the Transferor currently pending with regard to which the Transferor has
received service of process and no action or proceeding against, or
investigation of, the Transferor is, to the knowledge of the Transferor,
threatened or otherwise pending, before any court, administrative agency or
other tribunal that (A) if determined adversely, would prohibit its entering
into this Agreement or render the Notes invalid, (B) seek to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement or (C) if determined adversely, would prohibit or
materially and adversely affect the sale of the Home Loans to the Depositor, the
performance by the Transferor of its obligations under, or the validity or
enforceability of, this Agreement or the Notes.
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution, delivery and
performance by the Transferor of, or compliance by the Transferor with, this
Agreement, (2) the issuance of the Notes, (3) the sale of the Home Loans under
the Home Loan Purchase Agreement or (4) the consummation of the
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transactions required of it by this Agreement, except such as shall have been
obtained before the Closing Date.
(g) The Transferor acquired title to the Home Loans in good faith,
without notice of any adverse claim.
(h) The collection practices used by the Transferor with respect to the
Home Loans have been, in all material respects, legal, proper, prudent and
customary in the servicing of loans of the same type as the Home Loans;
(i) No Officer's Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it pursuant to
any Transaction Document or in connection with the transactions contemplated
hereby contains any untrue statement of material fact.
(j) The Transferor is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
any Transaction Document or by the performance of its obligations hereunder; no
petition of bankruptcy (or similar insolvency proceeding) has been filed by or
against the Transferor prior to the date hereof.
(k) The Prospectus Supplement does not contain an untrue statement of a
material fact and does not omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the Transferor makes no statement with
respect to: (1) the statements set forth in the final paragraph of the cover of
the Prospectus Supplement; and (2) statements set forth under the following
captions: (i) "SUMMARY - Tax Status", "-- ERISA Considerations", and "-- Legal
Investment"; (ii) "DESCRIPTION OF CREDIT ENHANCEMENT"; (iii) "FEDERAL INCOME TAX
CONSEQUENCES"; (iv) "ERISA CONSIDERATIONS"; (v) "LEGAL INVESTMENT MATTERS"; and
(vi) "UNDERWRITING".
(l) The Transferor has transferred the Home Loans without any intent to
hinder, delay or defraud any of its creditors.
(m) The origination and collection practices used with respect to each
Debt Instrument and Mortgage have been in all material respects legal, proper,
prudent and customary in the mortgage origination and servicing business and in
compliance with the Transferor's underwriting criteria as described in the
Prospectus Supplement.
(n) Upon the receipt of each Indenture Trustee's Home Loan File by the
Custodian, the Indenture Trustee will have a first priority security interest in
each Home Loan and such other items comprising the corpus of the Trust free and
clear of any lien, charge or encumbrance other than the lien of the Indenture.
(o) The transfer, assignment and conveyance of the Debt Instruments and
the Mortgages by the Transferor pursuant to this Agreement are not subject to
the bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.
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It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the Indenture Trustee's
Home Loan Files to the Custodian and shall inure to the benefit of the
Securityholders, the Securities Insurer, the Depositor, the Master Servicer, the
Servicer, the Indenture Trustee, the Owner Trustee and the Trust. Upon discovery
by any of the Transferor, the Securities Insurer, the Depositor, the Master
Servicer, the Servicer, the Indenture Trustee or the Owner Trustee of a breach
of any of the foregoing representations and warranties that materially and
adversely affects the value of any Home Loan, the party discovering such breach
shall give prompt written notice (but in no event later than two Business Days
following such discovery) to the other parties. The obligations of the
Transferor set forth in Section 3.05 hereof shall constitute the sole remedies
available hereunder to the Securityholders, the Depositor, the Master Servicer,
the Servicer, the Indenture Trustee or the Owner Trustee respecting a breach of
the representations and warranties contained in this Section 3.02.
Section 3.03. Representations, Warranties and Covenants of the
Master Servicer.
The Master Servicer hereby represents and warrants to and covenants
with the Owner Trustee, the Indenture Trustee, the Securities Insurer, the
Noteholders, the Depositor, and the Transferor that as of the Closing Date or as
of such date specifically provided herein:
(a) The Master Servicer is a industrial loan company duly organized,
validly existing, and in good standing under the laws of the state of California
and has all licenses necessary to carry on its business as now being conducted
and is licensed, qualified and in good standing in each state where any property
securing the Home Loans is located if the laws of such state require licensing
or qualification in order to conduct business of the type conducted by the
Master Servicer and perform its obligations as Master Servicer hereunder and
under the Servicing Agreement; the Master Servicer has the power and authority
to execute and deliver this Agreement and under the Servicing Agreement and to
perform its obligations in accordance herewith and therewith; the execution,
delivery and performance of this Agreement and under the Servicing Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Master Servicer and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action; this Agreement and under the Servicing Agreement evidences the
valid, binding and enforceable obligation of the Master Servicer; and all
requisite action has been taken by the Master Servicer to make this Agreement
valid, binding and enforceable upon the Master Servicer in accordance with its
terms, subject to and under the Servicing Agreement the effect of bankruptcy,
insolvency, reorganization, moratorium and other, similar laws relating to or
affecting creditor's rights generally or the application of equitable principles
in any proceeding, whether at law or in equity.
(b) 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 purchase and sale of the Notes and the execution and delivery by the Master
Servicer of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect, are not subject to
any pending proceedings or appeals (administrative, judicial or otherwise) and
either the time
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within which any appeal therefrom may be taken or review thereof may be obtained
has expired or no review thereof may be obtained or appeal therefrom taken, and
are adequate to authorize the consummation of the transactions contemplated by
this Agreement and the other documents on the part of the Master Servicer and
the performance by the Master Servicer of its obligations as Master Servicer
under this Agreement and such other documents to which it is a party.
(c) The consummation of the transaction contemplated by this Agreement
and the Servicing Agreement will not result in the breach of any terms or
provisions of the certificate of incorporation or by-laws of the Master 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 for any obligation
under, any material agreement, indenture or loan or credit agreement or other
material instrument to which the Master Servicer or to its property is subject,
or result in the violation of any law, rule, regulation, order, judgment or
decree to which the Master Servicer or its property is subject;
(d) Neither this Agreement nor any report or other document prepared by
the Master Servicer and furnished or to be furnished pursuant to this Agreement
or in connection with the transactions contemplated hereby contains any untrue
statement of material fact; and the statements set forth in the Prospectus
Supplement under the caption "THE MASTER SERVICER" do not contain an untrue
statement of a material fact and do not omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(e) There is no action, suit, proceeding or investigation pending or,
to the best of the Master Servicer's knowledge, threatened against the Master
Servicer which, either in any one instance or in the aggregate, may result in
any material adverse change in the business, operations, financial condition,
properties or assets of the Master Servicer or in any material impairment of the
right or ability of the Master Servicer to carry on its business substantially
as now conducted, or in any material liability on the part of the Master
Servicer or which would draw into question the validity of this Agreement, the
Servicing Agreement or the Home Loans or of any action taken or to be taken in
connection with the obligations of the Master Servicer contemplated herein, or
which would be likely to impair the ability of the Master Servicer to perform
under the terms of this Agreement or the Servicing Agreement.
(f) The Master 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 might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Master Servicer or its properties or might have consequences
that would adversely affect its performance hereunder or under the Servicing
Agreement.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Home Loan Files to the Indenture Trustee and shall inure to the
benefit of the Depositor, the Noteholders, the Owner Trustee, the Securities
Insurer, and the Indenture Trustee. Upon discovery by any of the Transferor, the
Depositor, the Indenture Trustee, the Securities Insurer or the Owner Trustee of
a breach of any of the foregoing representations, warranties and covenants that
materially and
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adversely affects the value of any Home Loan or the interests of
such Person therein, the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following such discovery)
to the other parties.
Section 3.04. Representations and Warranties Regarding Individual
Home Loans.
The Transferor hereby represents and warrants to the Depositor, the
Issuer, the Indenture Trustee, the Owner Trustee, the Securities Insurer, the
Master Servicer and the Noteholders, with respect to each Home Loan as of the
Closing Date, except as otherwise expressly stated:
(a) Home Loan Schedule. The information with respect to each
Home Loan set forth in the Home Loan Schedule is complete, true and correct as
of the Cut-off-Date;
(b) Delivery of Home Loan File. All of the original or certified
documentation required to be delivered by the Transferor on the Closing Date or
as otherwise provided herein has or will be so delivered as provided; The Home
Loan File contains each of the documents and instruments specified to be
included therein duly executed and in due and proper form, and each such
document or instrument is in a form generally acceptable to prudent home loan
lenders that regularly originate or purchase mortgage loans comparable to the
Home Loans for sale to prudent investors in the secondary market that invest in
mortgage loans such as the Home Loans;
(c) Nature of Property. Each Mortgaged Property consists of a single
parcel of residential real property, separately assessed for tax purposes, owned
by the related Obligor in fee simple absolute and is improved by a
one-to-four-family residential dwelling, which does not include condominiums,
cooperatives, units in a planned urban development, town houses, or mobile homes
and does not constitute other than real property under the state law. No
Mortgage Property is a manufactured housing unit, as defined in the Fannie
Mae/Freddie Mac Seller-Servicer's Guide;
(d) Servicing. Each Home Loan is being serviced by the Master
Servicer;
(e) Fixed Interest Rate. The Debt Instrument related to approximately
9.25% of the Home Loans bear a fixed Home Loan Interest Rate. The Home Loan
Interest Rate on the fixed rate Home Loans is not less than 7.99% nor more than
15.25% and as of the Cut-Off-Date, the weighted average Home Loan Interest Rate
on the fixed rate Home Loans is approximately 10.538%;
(f) Adjustable Home Loan Interest Rates. The Debt Instrument related to
approximately 90.75% of the Home Loans bear an adjustable Home Loan Interest
Rate ("ARMs"). All of the terms of the Mortgage pertaining to interest rate
adjustments, payment adjustments and adjustments of the principal balance with
respect to the ARMs are enforceable, all such adjustments have been correctly
made in accordance with the terms of the related Debt Instrument and such
adjustments will not affect the priority of the Mortgage lien; all ARMs have an
index and there is no provision which would permit the Obligor to convert to a
fixed interest rate; as of the Cut-off Date, the weighted average margin on the
ARMs was approximately
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6.255%; the ARMs have a weighted average contractual maximum interest rate equal
to approximately 16.772%; the ARMs have a weighted average contractual minimum
interest rate equal to approximately 9.769%; approximately 70.01% of the ARMS
are 2/28's and have a subsequent adjustment frequency of six months,
approximately 21.65% of the ARMs are 3/27's and have a subsequent adjustment
frequency of six months and the remaining approximately 8.34% of the ARMs adjust
every 6 months;
(g) Priority of Lien. Each Mortgage is a valid and subsisting first
lien of record on a single parcel of real estate constituting the Mortgaged
Property, subject in all cases to the exceptions to title set forth in the title
insurance policy, with respect to the related Home Loan, which exceptions are
generally acceptable to mortgage lending companies, and such other exceptions to
which similar properties are commonly subject and which do not individually, or
in the aggregate, materially and adversely affect the benefits of the security
intended to be provided by such Mortgage;
(h) Title. Except with respect to liens released immediately prior to
the transfer herein contemplated, immediately prior to the transfer and
assignment herein contemplated the Transferor held good and indefeasible title
to, and was the sole owner of, each Home Loan, subject to no liens, charges,
mortgages, encumbrances or rights of others; and immediately upon the transfer
and assignment herein contemplated, the Owner Trust will hold good and
indefeasible title to, and be the sole owner of, each Home Loan, subject to no
liens, charges, mortgages, encumbrances or rights of others;
(i) Delinquencies. As of the Cut-Off Date, 159 Home Loans are 30 or
more days delinquent; 7 Home Loans are over 60 days delinquent; and no Home Loan
has ever been 89 or more days delinquent;
(j) Tax Liens; Status of Property. There is no delinquent tax
or assessment lien on any Mortgaged Property, and each Mortgaged Property is
free of material damage and is in good repair;
(k) No Defenses. The Home Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of the Debt Instrument or the
Mortgage, or the exercise of any right thereunder, render either the Debt
Instrument or the Mortgage unenforceable in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto;
(l) No Mechanics Lien. There is no mechanic's lien or claim for work,
labor or material affecting any Mortgaged Property which is or may be a lien
prior to, or equal to or on a parity with, the lien of such Mortgage except
those which are insured against by the title insurance policy referred to in
Section (n) below;
(m) Origination in Compliance with Laws. Each Home Loan complies, at
the time it was made complied and at all times has complied in all material
respects with applicable local, state and federal laws and regulations,
including, without limitation, usury, truth-in-lending, real estate settlement
procedure, consumer credit protection, equal credit
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opportunity, disclosure and recording laws and the Transferor has and shall
maintain in its possession available for inspection and shall deliver upon
demand, evidence of compliance with all such requirements; and, to the
Transferor's knowledge, no fraud or misrepresentation was committed by any
person or entity in connection with the origination of each Home Loan;
(n) Title Insurance. With respect to each Home Loan, a written
commitment for a lender's title insurance policy, issued in standard American
Land Title Association or California Land Title Association form, or other form
acceptable in a particular jurisdiction, by a title insurance company authorized
to transact business in the state in which the related Mortgaged Property is
situated, together with a condominium endorsement, if applicable, in an amount
at least equal to the original Principal Balance of such Home Loan insuring the
mortgagee's interest under the related Home Loan as the holder of a valid first
mortgage lien of record on the real property described in the Mortgage, subject
only to exceptions of the character referred to in paragraph (g) above, was
effective on the date of the origination of such Home Loan, and, as of the
Closing Date, such commitment will be valid and thereafter the policy issued
pursuant to such commitment shall continue in full force and effect. The
originator is the sole named insured of such mortgage title insurance policy,
the assignment to the Owner Trust, and the pledge to the Indenture Trustee, of
the originator's interest in such mortgage title insurance policy does not
require the consent of or notification to the insurer, and such mortgage title
insurance policy is in full force and effect and will be in full force and
effect and inure to the benefit of the Owner Trust upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and no prior holder of the related Mortgage,
including the originator, has done, by act or omission, anything that would
impair the coverage of such mortgage title insurance policy;
(o) Hazard Insurance. The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire and extended coverage representing
coverage not less than the least of (1) the outstanding principal balance of the
related Mortgage, (2) the minimum amount required to compensate for damage or
loss on a replacement cost basis or (3) the full insurable value of the
Mortgaged Property. All individual insurance policies (collectively, the "Hazard
insurance policy") are the valid and binding obligation of the insurer and
contain a standard mortgagee clause naming the originator, its successors and
assigns, as mortgagee. All premiums thereon have been paid. The Mortgage
obligated the Obligor thereunder to maintain all such insurance at the Obligor's
cost and expense, and upon the Obligor's failure to do so, authorizes the holder
of the Mortgage to obtain and maintain such insurance at the Obligor's cost and
expense and to seek reimbursement therefor from the Obligor;
(p) Flood Insurance. If any Mortgaged Property is in an area identified
in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A) the
outstanding principal balance of the related Home Loan, (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the National Flood Insurance
Act of 1968, as amended; The Mortgage obligated the Obligor thereunder to
maintain all such insurance at the Obligor's cost and expense, and upon the
Obligor's failure to do so, authorizes the holder of the Mortgage to obtain and
maintain such insurance at the Obligor's cost
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and expense and to seek reimbursement therefor from the Obligor;
(q) Enforceability. Each Mortgage and Debt Instrument is genuine and is
the legal, valid and binding obligation of the maker thereof and is enforceable
in accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law), and all parties to each Home Loan had full legal capacity to execute
all Home Loan documents and convey the estate therein purported to be conveyed
and the Mortgage and Debt Instrument have been duly and properly executed by
such parties; the Obligor is a natural person who is a party to the Debt
Instrument and the Mortgage in an individual capacity and not in the capacity of
a trustee or otherwise.
(r) Notice to Insurers. The Transferor has caused or will cause to be
performed any and all acts required to be performed to preserve the rights and
remedies of the Indenture Trustee in any insurance policies applicable to the
Home Loans including, without limitation, any necessary notifications of
insurers, assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the Indenture
Trustee;
(s) Geographic Concentration. No more than approximately 0.52% of the
Original Pool Principal Balance is secured by Mortgaged Properties located
within any single zip code area; no more than 5.00% of the Original Pool
Principal Balance is located within any single state, except as follows
California, Illinois, Washington, or Utah;
(t) Primary Residence. At least approximately 91.25% of the Original
Pool Principal Balance is secured by Mortgaged Properties that are maintained by
the Obligors as primary residence;
(u) No Modification. The terms of the Debt Instrument and the Mortgage
have not been impaired, altered or modified in any material respect, except by a
written instrument which has been recorded or is in the process of being
recorded, if necessary, to protect the interest of the Securityholders and which
has been or will be delivered to the Trustee or the Custodian. The substance of
any such alteration or modification is reflected on the Home Loan Schedule.
(v) Recordation. Each original Mortgage was recorded, and all
subsequent assignments of the original Mortgage have been recorded in the
appropriate jurisdictions wherein such recordation is necessary to perfect the
lien thereof as against creditors of the Transferor (or, subject to Section
2.04(d) hereof, are in the process of being recorded);
(w) No Waiver. No instrument or release or waiver has been executed
in connection with the Home Loan, and no Obligor has been released, in whole or
in part;
(x) Taxes and Insurance. All taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which
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previously became due and owing have been paid, or an escrow of funds has been
established in an amount sufficient to pay for every such item which remains
unpaid and which has been assessed but is not yet due and payable.
(y) No Advances. Except for payments in the nature of escrow payments,
including without limitation, taxes and insurance payments, the Master Servicer
has not advanced funds, or induced, solicited or knowingly received any advance
of funds by a party other than the Obligor, directly or indirectly, for the
payment of any amount required by the Mortgage, except for interest accruing
from the date of the Debt Instrument or date of disbursement of the Mortgage
proceeds, whichever is greater, to the day which precedes by one month the Due
Date of the first installment of principal and interest;
(z) Condemnation; Damage. There is no proceeding pending or threatened
for the total or partial condemnation of the Mortgaged Property, nor is such a
proceeding currently occurring. No Mortgaged Property is damaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado or other casualty, so as
to affect adversely the value of the Mortgaged Property as security for the Home
Loan or the use for which the premises were intended;
(aa) No Encroachments. All of the improvements which were included
for the purpose of determining the appraised value of the Mortgaged Property lie
wholly within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties encroach upon the Mortgaged
Property;
(bb) Property in Compliance with Law. No improvement located on or
being part of the Mortgaged Property is in violation of any applicable zoning
law or regulation. All inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities and the Mortgaged
Property is lawfully occupied under applicable law;
(cc) No Future Advances. The proceeds of the Home Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee or any person
to make, or option on the part of the mortgagor to request, future advances
thereunder. Any and all requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor have been
satisfied. All costs, fees and expenses incurred in making or closing or
recording the Home Loans were paid;
(dd) Mortgage as Sole Security. The related Debt Instrument is
not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage;
(ee) No-Buy-Down Loans. No Home Loan was originated under a buydown
plan.
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(ff) No Originator Payment Obligations. There is no obligation on the
part of the Master Servicer or any other party to make payments in addition to
those made by the Obligor;
(gg) Deeds of Trust. With respect to each Mortgage constituting a deed
of trust, a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Noteholders or the
Trust to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Obligor;
(hh) No Shared Appreciation. No Home Loan has a shared appreciation
feature, or other contingent interest feature;
(ii) State Qualification. All parties which have had any interest in
the Home Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (2)(A) organized under the
laws of such state, or (B) qualified to do business in such state, or (C)
federal savings and loans associations or national banks having principal
offices in such state or (D) not doing business in such state so as to require
qualification or licensing;
(jj) Due on Sale. The Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal balance of the Home Loan in
the event the related Mortgage Property is sold without the prior consent of the
mortgagee thereunder;
(kk) Obligor Bankruptcy. No Obligor is a debtor in any state or
federal insolvency or bankruptcy proceeding.
(ll) Enforcement Rights. The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security, including, (i) in the case of a Mortgage designated as
a deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure.
There is no homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose upon the related Mortgage;
(mm) No Default. Other than delinquent Home Loans set forth in clause
(i) of this Section 3.04, there is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Debt Instrument and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration; and neither the Master Servicer nor the Transferor has waived any
default, breach, violation or event of acceleration;
(nn) Deposit of Payments. All amounts received on and after the Cut-Off
Date with respect to the Home Loans to which the Transferor is not entitled to
have been deposited into the Collection Account and are, as of the Closing Date,
in the Collection Account;
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(oo) Underwriting. All of the Home Loans were originated and
underwritten by the Transferor, or purchased and re-underwritten by the
Transferor, in each case in accordance with the underwriting criteria set
forth in the Prospectus Supplement;
(pp) Conformity to Prospectus. Each Home Loan conforms, and all
such Home Loans in the aggregate conform, to the description thereof set forth
in the Prospectus and the Prospectus Supplement;
(qq) No Adverse Selection. The Home Loans were not selected by
the Transferor for inclusion in the Trust on any basis intended to adversely
affect the Trust;
(rr) Appraisal. A full appraisal on forms approved by FNMA or FHLMC was
performed in connection with the origination of the related Home Loan. Each
appraisal meets guidelines that would be generally acceptable to prudent
mortgage lenders that regularly originate or purchase mortgage loans comparable
to the Home Loan for sale to prudent investors in the secondary market that
invest in loans such as the Home Loans;
(ss) Loan-To-Value. As of the Cut-Off Date, no Home Loan had a
Loan-To-Value Ratio in excess of 90.00% and as of the Cut-off Date, the
weighted average Loan-To-Value Ratio is 77.00%;
(tt) Environmental Matters. To the best of the Transferor's knowledge,
(i) no Mortgaged Property was, as of the Cut-Off Date, (A) located within a
one-mile radius of any site containing environmental or hazardous waste risks,
and (B) in violation of any environmental law or regulation; and (ii) no
Mortgaged Property contained any environmentally hazardous material, substance
or waste; and
(uu) Status of Originators. Each Home Loan was either (i) originated by
a savings and loan association, savings bank, commercial bank, credit union,
insurance company, or similar institution which is supervised and examined by a
federal or state authority, or by a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act or (ii) such Home Loan was underwritten in accordance with standards
established by the Transferor, using application forms and related credit
documents approved by the Transferor; the Transferor approved each application
and the related credit documents before a commitment by the originator was
issued, and no such commitment was issued until the Transferor agreed to fund
such Home Loan; the closing documents for such Home Loan were prepared on forms
approved by the Transferor; and such Home Loan was actually funded by the
Transferor and was purchased by the Transferor at closing or soon thereafter.
(vv) Term. No Home Loan has a remaining term in excess of 360 months.
(ww) Monthly Payments. Each Debt Instrument will provide for a schedule
of substantially equal Monthly Payments which are, if timely made, sufficient to
fully amortize the principal balance of such Debt Instrument on or before its
maturity date.
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Section 3.05. Purchase and Substitution.
(a) Repurchase and Substitution of Defective Home Loans. It is
understood and agreed that the representations and warranties set forth in
Section 3.02 and Section 3.04 hereof shall survive the conveyance of the Home
Loans from the Transferor to the Depositor and from the Depositor to the Issuer,
the pledge of the Home Loans to the Indenture Trustee and the delivery of the
Notes to the Noteholders. Upon discovery by the Depositor, the Master Servicer,
the Servicer, the Transferor, any Custodian, the Issuer, the Indenture Trustee,
the Owner Trustee, the Securities Insurer or any Securityholder of a breach of
any of the representations and warranties set forth in Section 3.02 and Section
3.04 which materially and adversely affects the value of the Home Loans or the
interests of the Owner Trustee, the Securities Insurer or the Indenture Trustee
in the related Home Loan (notwithstanding that such representation and warranty
was made to the Transferor's best knowledge), the party discovering such breach
shall give prompt written notice to the others. The Transferor shall, within 60
days of the earlier of its discovery or its receipt of notice of any breach of a
representation or warranty, promptly cure such breach in all material respects.
If within 60 days after the earlier of the Transferor's discovery of such breach
or the Transferor's receiving notice thereof such breach has not been remedied
by the Transferor or waived by the Securities Insurer and such breach materially
and adversely affects the interests of the Owner Trustee or the Indenture
Trustee in, or the value of, the related Home Loan (the "Defective Home Loan"),
the Transferor shall on or before the Determination Date next succeeding the end
of such 60-day period either (i) remove such Defective Home Loan from the Trust
(in which case it shall become a Deleted Home Loan) and substitute one or more
Qualified Substitute Home Loans in the manner and subject to the conditions set
forth in this Section 3.05 or (ii) purchase such Defective Home Loan at a
purchase price equal to the Purchase Price by depositing such Purchase Price in
the Collection Account. The Transferor shall provide the Master Servicer, the
Servicer, the Indenture Trustee, the Securities Insurer and the Owner Trustee
with a certification of a Responsible Officer on the Determination Date next
succeeding the end of such 60-day period indicating whether the Transferor is
purchasing the Defective Home Loan or substituting in lieu of such Defective
Home Loan a Qualified Substitute Home Loan.
Any substitution of Home Loans pursuant to this Section 3.05(a) shall
be accompanied by payment by the Transferor of the Substitution Adjustment, if
any, to be deposited in the Collection Account. For purposes of calculating the
Available Collection Amount for any Payment Date, amounts paid by the Transferor
pursuant to this Section 3.05 in connection with the repurchase or substitution
of any Defective Home Loan that are on deposit in the Collection Account as of
the Determination Date for such Payment Date shall be deemed to have been paid
during the related Due Period and shall be transferred to the Note Payment
Account as part of the Available Collection Amount to be retained therein or
transferred to the Certificate Distribution Account, if applicable, pursuant to
Section 5.01(c) hereof.
In addition to such cure, repurchase or substitution obligation, the
Transferor shall indemnify the Issuer, the Depositor, the Master Servicer, the
Indenture Trustee, the Securities Insurer and the Securityholders against any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded upon, or resulting
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from, a breach by the Transferor of any of it representations and warranties
contained in Section 3.02 and Section 3.04.
(b) Repurchase of Defaulted Home Loans. In addition to the preceding
repurchase obligations, each of the Transferor and Master Servicer shall have
the option, exercisable in its sole discretion at any time, to repurchase from
the Owner Trustee any Home Loan that is delinquent 91 or more days (in which
case such Home Loan shall become a Deleted Home Loan); provided, however, that
any such repurchase of a Home Loan pursuant to this Subsection shall be
conducted in the same manner as the repurchase of a Defective Home Loan pursuant
to this Section 3.05. If the Home Loans repurchased pursuant to this Subsection
3.05(b) are in excess of 3.00% of the Original Pool Principal Balance, then such
repurchases of Home Loans that exceed 3.00% of the Original Pool Principal
Balance may be affected only with the consent of the Securities Insurer and
shall be included as Realized Losses for purposes of determining the Realized
Losses under the OC Trigger Increase Event (but not with respect to the
determination of a Master Servicer Event of Default under Section 10.01(a)
hereof).
(c) Substitutions. As to any Deleted Home Loan for which the Transferor
substitutes a Qualified Substitute Home Loan(s), the Transferor shall effect
such substitution by delivering to the Indenture Trustee, the Master Servicer
and Owner Trustee (i) a certification executed by a Responsible Officer of the
Transferor to the effect that the Substitution Adjustment has been credited to
the Collection Account and (ii) the documents constituting the Indenture
Trustee's Home Loan File for such Qualified Substitute Home Loan(s).
In accordance with Section 5.01(b)(1) hereof, the Master Servicer shall
cause the Servicer to deposit in the Collection Account all payments received in
connection with such Qualified Substitute Home Loan(s) after the date of such
substitution. Monthly Payments received with respect to Qualified Substitute
Home Loans on or before the date of substitution will be retained by the
Transferor. The Indenture Trustee will be entitled to all payments received on
the Deleted Home Loan on or before the date of substitution and the Transferor
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Home Loan. The Transferor shall give written notice to
the Owner Trustee, the Master Servicer, the Servicer (if the Transferor is not
then acting as such), the Indenture Trustee, the Securities Insurer and Owner
Trustee that such substitution has taken place and the Servicer shall amend the
Home Loan Schedule pursuant to Subsection (g) below. Upon such substitution,
such Qualified Substitute Home Loan(s) shall be subject to the terms of this
Agreement in all respects, and the Transferor shall be deemed to have made with
respect to such Qualified Substitute Home Loan(s), as of the date of
substitution, the covenants, representations and warranties set forth in Section
3.02 and Section 3.04 hereof. On the date of such substitution, the Transferor
will deposit into the Collection Account an amount equal to the related
Substitution Adjustment, if any.
(d) Reassignment of Defective Home Loans. With respect to all Defective
Home Loans or other Home Loans repurchased by the Transferor pursuant to this
Agreement, upon the deposit of the Purchase Price therefor into the Collection
Account, the Owner Trustee shall assign to the Transferor, without recourse,
representation or warranty, all the Owner Trustee's right, title and interest in
and to such Defective Home Loans or other Home Loans, which right, title and
interest were conveyed to the Owner Trustee pursuant to the Home Loan
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Purchase Agreement. The Owner Trustee shall take any actions as shall be
reasonably requested by the Transferor to effect the repurchase of any such Home
Loans.
(e) Sole Remedies Against Transferor. It is understood and agreed that
the obligations of the Transferor to cure or to repurchase or substitute any
such Home Loan, and to indemnify for any breach of any representation or
warranty with respect thereto, pursuant to this Section 3.05 shall constitute
the sole remedies against it with respect to such breach of the foregoing
representations or warranties or the existence of the foregoing conditions. Any
cause of action against the Transferor relating to or arising out of a defect in
an Indenture Trustee's Home Loan File as or against the Transferor relating to
or arising out of a breach of any representations and warranties made in Section
3.02 and Section 3.04 hereof shall accrue as to any Home Loan upon (i) discovery
of such defect or breach by any party and notice thereof to the Transferor or
notice thereof by the Transferor to the Indenture Trustee, (ii) failure by the
Transferor to cure such defect or breach or purchase or substitute such Home
Loan as specified above, and (iii) demand upon the Transferor, as applicable, by
the Owner Trustee for all amounts payable in respect of such Home Loan.
(f) No Duty to Investigate. Neither the Securities Insurer, the Master
Servicer, the Owner Trustee nor the Indenture Trustee shall have any duty to
conduct any affirmative investigation other than as specifically set forth in
this Agreement as to the occurrence of any condition requiring the repurchase or
substitution of any Home Loan pursuant to this Section or the eligibility of any
Home Loan for purposes of this Agreement.
(g) Amendment of Home Loan Schedule. In connection with a repurchase or
substitution of any Home Loan pursuant to this Section 3.05, the Master Servicer
shall cause the Servicer shall amend the Home Loan Schedule to reflect (i) the
removal of the applicable Deleted Home Loan from the terms of this Agreement,
and (ii) if applicable, the substitution of the applicable Qualified Substitute
Home Loan. In connection with its monthly reporting here under, the Master
Servicer shall cause the Servicer shall deliver a copy of the amended Home Loan
Schedule to the Securities Insurer, the Master Servicer, the Indenture Trustee,
and the Transferor.
ARTICLE IV
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01. Appointment and Duties of the Master Servicer.
(a) Appointment and Compensation of Master Servicer. The Issuer, the
Securityholders and the Indenture Trustee hereby assign and appoint the Master
Servicer to act as the Master Servicer for the Home Loans (including all of the
duties, obligations and rights of the Master Servicer) under this Agreement. The
Master Servicer hereby accepts its appointment as the Master Servicer hereunder.
The Master Servicer hereby undertakes to enter into the Servicing Agreement with
the Servicer. The Master Servicer may remove and replace the Servicer under the
terms of the Servicing Agreement, provided that the Securities Insurer consents
to such termination and such Servicer is replaced with an Eligible Servicer. The
Master Servicer shall not consent to any amendment or modification of any
Servicing Agreement
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without the consent of the Securities Insurer. The Master
Servicer shall not consent to any material amendment, modification or waiver of
the servicing provisions of this Agreement, without the consent of the
Securities Insurer and the Indenture Trustee. The Issuer, the Securityholders
and the Indenture Trustee hereby assign and appoint the Master Servicer to act
on behalf of the Issuer as "Owner" under the Servicing Agreement.
As compensation for its services hereunder, the Master Servicer shall
be entitled to receive from the Note Payment Account the Master Servicer Fee. In
addition to the Master Servicer Fee, additional compensation attributable to
prepayment penalties, 20% of any late charges collected on the Home Loans,
investment earnings from the Collection Account and the Note Payment Account
shall be part of the Master Servicer Compensation payable to the Master Servicer
pursuant to Section 5.01(c) hereof. Master Servicing Compensation shall be
reduced by the amount of any due and unpaid Servicing Fee Recovery Amounts. The
Master Servicer shall be required to pay all expenses incurred by it in
connection with its Master Servicer duties and activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided for
herein.
(b) Master Servicer Assumes Servicing Responsibility. If a Servicer
Termination Event occurs, then the Master Servicer shall be obligated (1) if
instructed by the Securities Insurer, to select a successor Servicer, that is
acceptable to the Securities Insurer, or (2) to act as the Servicer of the Home
Loans hereunder unless the Securities Insurer directs otherwise.
(c) Monitoring of Servicing. The Master Servicer shall: (i) review the
servicing reports and loan level information prepared by the Servicer (1) to
determine whether such reports are inaccurate or incomplete, in any material
respect, and (2) to ascertain that the Servicer is in compliance, in all
material respects, with its duties and obligations with respect to such reports
under this Agreement; (ii) otherwise monitor the performance by the Servicer of
its duties and obligations hereunder and notify the Indenture Trustee and the
Securities Insurer of any Servicer Event of Default of which it has received
notice or has actual knowledge; and (iii) be obligated to verify that the
Servicer has deposited all payments and proceeds required to be deposited into
the Collection Account pursuant to Section 5.01(b)(1) hereof. On the 19th
calendar day of each month (or the next Business Day, if the 19th is not a
Business Day), the Master Servicer shall provide the Indenture Trustee with an
Officer's Certificate to the effect that the Master Servicer has performed its
obligations under this Subsection 4.01(c) with respect to the servicing
information for such month.
(d) Successor Servicer. The Master Servicer agrees that it shall at all
times be prepared (and shall take all steps reasonably required by the
Securities Insurer to ensure such preparation), to perform the duties and
obligations of the Servicer and become the successor servicer, if the Servicer
fails to perform its duties and obligations hereunder.
(e) Servicer Termination or Non-Renewal. At the direction of the
Securities Insurer or the Majority Noteholders (with the prior consent of the
Securities Insurer), the Master Servicer, on behalf of the Issuer and the
Securityholders, shall terminate the Servicer upon the occurrence and
continuance of a Servicer Event of Default. The Master Servicer may, with the
prior consent of the Securities Insurer, on behalf of the Issuer and the
Securityholders, terminate
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the Servicer upon the occurrence and continuance of a
Servicer Event of Default. The renewal or non-renewal of the Servicer's term
shall be governed by the terms of the Servicing Agreement.
(f) Resignation of Master Servicer. The Master Servicer shall resign as
Master Servicer hereunder if 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,
provided that such determination shall be evidenced by an Opinion of Counsel
(which shall be Independent) to such effect delivered to the Owner Trustee, the
Indenture Trustee and the Securities Insurer. In addition, the Master Servicer
may resign for any reason with 30 day's prior written notice to the Owner
Trustee, the Indenture Trustee and the Securities Insurer. No resignation of the
Master Servicer shall become effective until a successor master servicer
acceptable to the Securities Insurer shall have assumed the obligations of the
Master Servicer hereunder.
(g) Limitation on Liability of Master Servicer. Except as set forth in
Section 9.01 herein, neither the Master Servicer nor any of the directors,
officers, employees or agents of the Master Servicer shall be under any
liability to the Owner Trustee, the Indenture Trustee, the Servicer, the
Securities Insurer, the Noteholders or any other Person for any action taken or
for refraining from the taking of any action at the direction of the Securities
Insurer or 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 non-performance of its express
non-discretionary obligations and duties under this Agreement. The Master
Servicer and any directors, 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.
(h) Monthly Advances. If any Obligor fails to make all or any portion
of its Monthly Payment for any Due Period by the related Determination Date, the
Master Servicer shall deposit such shortfall (net of the Servicing Fee and the
Master Servicer Fee in respect thereof) into the Collection Account on or before
such Determination Date, unless the Master Servicer, in its reasonable judgment,
determines that any such Monthly Advance would be non-recoverable from future
proceeds from the related Home Loan. The Indenture Trustee shall make any
Monthly Advance that the Master Servicer fails to make, unless the Indenture
Trustee, in its reasonable judgement, determines that any such Monthly Advance
would be non-recoverable from future proceeds from the related Home Loan. The
Indenture Trustee shall be reimbursed for funds so advanced as provided in this
Agreement and the Indenture with respect to reimbursement of Monthly Advances.
(i) Three Month Renewal of Master Servicer Term. The Master Servicer
hereby covenants and agrees to act as master servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on June 30, 1999
(the "Initial Term"). Thereafter, the Initial Term shall be extendible in the
sole discretion of the Securities Insurer by written notice (each, a "Master
Servicer Renewal Notice") of the Securities Insurer (or the Indenture Trustee if
a Securities Insurer Default is then occurring) for successive three month
terms. Each
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such Master Servicer Renewal Notice (if any) shall be delivered by the
Securities Insurer to the other parties to this Agreement. The Master Servicer
hereby agrees that, as of the date hereof and upon its receipt of any Master
Servicer Renewal Notice, the Master Servicer shall be bound for the duration of
the Initial Term and the term covered by any such Master Servicer Renewal Notice
to act as the Master Servicer, subject to and in accordance with the other
provisions of this Agreement. The Master Servicer agrees that if, as of the last
day of the calendar month preceding the last day of any such servicing term, the
Master Servicer shall not have received a Master Servicer Renewal Notice from
the Securities Insurer, the Master Servicer shall, within five days thereafter,
give written notice of such non-receipt to the Securities Insurer and the
Indenture Trustee. The failure of the Securities Insurer to deliver a Master
Servicer Renewable Notice by the end of any such three-month term shall result
in the automatic termination of the Master Servicer.
(j) Non-renewal or Termination. Upon any non-renewal or termination of
the Master Servicer pursuant to this Section 4.01, the master servicing of the
Home Loans hereunder shall be transferred to a successor master servicer in
accordance with the terms hereof.
(k) Compensating Interest. If Compensating Interest is owing with
respect to such Payment Date, then the Master Servicer shall cause the Servicer
to direct Compensating Interest, up to the amount of the sum of the Master
Servicer Fee and the Servicing Fee for such Payment Date, into the Collection
Account on or before the related Determination Date. The Master Servicer shall
fund the payment of Compensating Interest on any Payment Date first out of its
Master Servicer Compensation for the related Payment Date, and if and only if
such amount is not sufficient, shall cause any remaining amounts to be paid out
of the Servicing Fee for the related Payment Date. Any Servicing Fees used to
pay Compensating Interest hereunder shall be repaid to the Servicer through the
payment of Servicing Fee Recovery Amounts.
Section 4.02. Interim Servicer.
Until the transfer of servicing to the initial Servicer on the
"servicing transfer date" as specified in the Servicing Agreement, the Master
Servicer agrees, and the Issuer, Securityholders, the Security Insurer and the
Indenture Trustee hereby assign and appoint the Master Servicer as the Servicer
of the Home Loans. The Master Servicer shall be obligated to act as the Servicer
of the Home Loans and agrees to service the Home Loans in accordance with
Accepted Servicing Procedures until the transfer of servicing to the Servicer.
During the period in which the Master Servicer is acting as servicer, it shall
be entitled to any Servicing Fee earned during such period.
Section 4.03. Powers of Attorney.
The Indenture Trustee shall execute, at the written direction of the
Servicer or the Master Servicer, any limited or special powers of attorney and
other documents reasonably acceptable to the Indenture Trustee to enable the
Servicer or the Master Servicer to carry out their servicing and administrative
duties hereunder, including, without limitation, limited or special powers of
attorney with respect to any Foreclosure Property, and the Indenture Trustee
shall not be accountable for the actions of the Servicer or the Master Servicer
under such powers
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of attorney and shall be indemnified by the Master Servicer in accordance with
Section 9.01 hereof.
Section 4.04. Filing of Continuation Statements.
On or before the fifth (or twelfth, as appropriate) anniversary of the
filing of any financing statements by the Transferor and the Depositor,
respectively, with respect to the assets conveyed to the Owner Trustee or to the
Owner Trust, the Transferor and the Depositor shall prepare, have executed by
the necessary parties and file in the proper jurisdictions at their expense all
financing and continuation statements necessary to maintain the liens, security
interests and priorities of such liens and security interests that have been
granted by the Transferor and the Depositor, respectively, the Transferor and
the Depositor shall continue to file on or before each fifth (or twelfth)
anniversary of the filing of any financing and continuation statements such
additional financing and continuation statements until the Trust has terminated
pursuant to Section 9.1 of the Owner Trust Agreement. The Indenture Trustee and
Owner Trustee agree to cooperate with the Transferor and the Depositor in
preparing, executing and filing such statements. The filing of any such
statement with respect to the Transferor and the Depositor shall not be
construed as any indication of an intent of any party contrary to the expressed
intent set forth in Section 2.03 hereof and Section 2.04 of the Home Loan
Purchase Agreement. If the Transferor or the Depositor has ceased to do business
whenever any such financing and continuation statements must be filed or the
Transferor or the Depositor fails to file any such financing statements or
continuation statements at least one month prior to the expiration thereof, each
of the Transferor and the Depositor does hereby make, constitute and appoint the
Owner Trustee its attorney-in-fact, with full power and authority, to execute
and file in its name and on its behalf any such financing statements or
continuation statements required under this Section 4.04 relating to assets
conveyed to the Owner Trustee and the Depositor does hereby make, constitute and
appoint the Indenture Trustee its attorney-in-fact, with full power and
authority, to execute and file in its name and on its behalf any such financing
statements or continuation statements required under this Section 4.04 relating
to assets conveyed to the Owner Trust.
Section 4.05. Reports to the Securities and Exchange Commission.
The Indenture Trustee shall, on behalf of the Issuer, cause to be filed
with the Securities and Exchange Commission all monthly reports on Form 8-K and
annual reports on Form 10-K by EDGAR electronic format (or any successor format)
required to be filed under the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder. The Indenture Trustee shall obtain on behalf of the
Issuer, EDGAR access codes (or any successor codes) on behalf of the Issuer
required for filing with the Securities and Exchange Commission. Upon the
request of the Indenture Trustee, each of the Servicer, the Master Servicer and
the Transferor shall cooperate with the Indenture Trustee in the preparation of
any such report and shall provide to the Indenture Trustee in a timely manner
all such information or documentation as the Indenture Trustee may reasonably
request in connection with the performance of its duties and obligations under
this Section 4.05.
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ARTICLE V
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01. Collection Account and Note Payment Account.
(a) (1) Establishment of Collection Account. The Master Servicer,
for the benefit of the Securityholders, the Indenture Trustee and the Securities
Insurer, shall cause to be established and maintained by the Indenture Trustee
one or more Collection Accounts (collectively, the "Collection Account"), which
shall be separate Eligible Accounts and may be interest-bearing, and which shall
be entitled "Collection Account of First Union National Bank, as Indenture
Trustee, in trust for the Fremont Home Loan Asset Backed Notes, Series 1999-1".
The Collection Account may be maintained with the Indenture Trustee or any other
depository institution, which satisfies the requirements set forth in the
definition of Eligible Account. The creation of any Collection Account other
than one maintained with the Indenture Trustee shall be evidenced by a letter
agreement between the Servicer and the depository institution acceptable to the
Indenture Trustee and the Securities Insurer. A copy of such letter agreement
shall be furnished to the Securities Insurer and the Indenture Trustee. Funds in
the Collection Account shall be invested in accordance with Section 5.03 hereof.
The Collection Account shall be established, as of the Closing Date,
with First Union National Bank as an Eligible Account pursuant to the definition
thereof. The Collection Account may, upon written notice to the Indenture
Trustee, and upon the written consent of the Securities Insurer, be transferred
to a different depository institution so long as such transfer is to an Eligible
Account acceptable to the Securities Insurer.
(2) Establishment of Note Payment Account. No later than
the Closing Date, the Indenture Trustee, for the benefit of the Noteholders and
the Securities Insurer, shall cause to be established and maintained with the
Indenture Trustee one or more Note Payment Accounts (collectively, the "Note
Payment Account"), which shall be separate Eligible Accounts and may be
interest-bearing, and which shall be entitled "Note Payment Account of First
Union National Bank, as Indenture Trustee, in trust for the Fremont Home Loan
Asset Backed Notes, Series 1999-1". Funds in the Note Payment Account shall be
invested in accordance with Section 5.03 hereof.
(b) (1) Deposits to Collection Account. The Servicer shall use its
best efforts to deposit or cause to be deposited (without duplication), within
one (1) Business Day after receipt thereof, into the Collection Account and
retain therein in trust for the benefit of the Noteholders and the Securities
Insurer:
(i) all payments of principal and interest on the Home
Loans due after the Cut-Off Date;
(ii) all Net Liquidation Proceeds;
(iii) all Property Insurance Proceeds;
(iv) all Released Mortgaged Property Proceeds;
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(v) any amounts payable in connection with the repurchase
of any Home Loan and the amount of any Substitution Adjustment pursuant to
Section 3.05 hereof;
(vi) the deposit of the Termination Price under
Section 11.01 hereof;
(vii) interest and gains on funds held in the Collection
Account;
(viii) Monthly Advances pursuant to Section 4.02(h)
hereof; and
(ix) Compensating Interest pursuant to Section 4.02 (k)
hereof.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03 hereof.
(2) Deposits to Note Payment Account. By the close of
business on the fourth Business Day prior to each Payment Date, the Master
Servicer shall cause the Servicer to withdraw from the Collection Account the
Available Collection Amount and deposit such into the Note Payment Account for
such Payment Date.
(3) Withdrawals from Collection Account. The Master
Servicer shall cause the Servicer to also make the following withdrawals from
the Collection Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited
in the Collection Account or deposited therein in error;
(ii) to withdraw any Servicing Advance Reimbursement
Amounts and Monthly Advance Reimbursement Amounts; and
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement.
(c) Initial Withdrawals from Note Payment Account. To the extent funds
are available in the Note Payment Account, the Indenture Trustee (based on the
information provided by the Servicer contained in the Servicer's Monthly
Remittance Report for such Payment Date) shall make withdrawals therefrom by
9:00 a.m. (New York City time) on each Payment Date, for application in the
following order of priority:
(i) to distribute on such Payment Date the following amounts
related to such Payment Date pursuant to the Indenture in the following order;
(1) to the Indenture Trustee, an amount equal to the Indenture Trustee Fee and
all unpaid Indenture Trustee Fees from prior Payment Dates; (2) to the Servicer
an amount equal to the Servicing Compensation (net of the sum of any amounts
retained prior to deposit into the Collection Account pursuant to subsection
(b)(1) above) and all unpaid Servicing Compensation from prior Payment Dates;
(3) to the Master Servicer an amount equal to the Master Servicer Compensation
and all unpaid Master Servicer Compensation from prior Payment Dates; and (4) to
the Securities Insurer, an amount equal to the Guaranty
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Insurance Premium and all unpaid Guaranty Insurance Premiums from prior Payment
Dates; and
(ii) subject to the priority of payments in Subsections
5.01(d) and (e) below, to deposit into the Certificate Distribution Account the
applicable portions of the Available Payment Amount payable to the holders of
the Residual Interest Certificates as calculated pursuant to Subsection 5.01(e)
below on such Payment Date.
(d) Regular Payment Amount Withdrawals from Note Payment Account. On
each Payment Date, the Indenture Trustee (based on the information provided by
the Servicer contained in the Servicer's Monthly Remittance Report for such
Payment Date) shall distribute the Regular Payment Amount and any Deficiency
Amount paid by the Securities Insurer in respect of such Payment Date from the
Note Payment Account (in the case of all amounts distributable to Noteholders)
and from the Certificate Distribution Account (in the case of all amounts
distributable to Certificateholders), in the following order of priority:
(i) to pay the holders of the Notes the Noteholders'
Interest Payment Amount for such Payment Date;
(ii) to pay the holders of the Notes principal thereof in
an amount up to the sum of the Regular Principal Payment Amount and the
Noteholders' Principal Deficiency Amount, until the Note Principal Balances
thereof are reduced to zero;
(iii) to apply any remaining amount together with Excess
Spread in the manner specified in Subsection (e) below.
(e) Excess Spread Withdrawals from Note Payment Account. On each
Payment Date, the Indenture Trustee (based on the information provided by the
Servicer contained in the Servicer's Monthly Remittance Report for such Payment
Date) shall distribute the Excess Spread, if any, in the following order of
priority (in each case after giving effect to all payments specified in Section
5.01(d) hereof):
(i) to pay the Securities Insurer in an amount up to
the Securities Insurer Reimbursement Amount;
(ii) to pay the holders of the Notes, as principal
thereof, any remaining Excess Spread in an amount up to any
Overcollateralization Deficiency Amount (after giving effect to payments made
pursuant to subsection (d) above), until the Note Principal Balances thereof are
reduced to zero;
(iii) to pay the holder of the Notes, pro rata, the
Noteholders' Interest Carry-Forward Amount due and unpaid, if any; and
(iv) to pay any remaining Excess Spread (A) first,
concurrently to the Servicer in an amount equal to any outstanding
Nonrecoverable Servicing Advances and to the Master Servicer in an amount equal
to any outstanding Nonrecoverable Monthly Advances, (B) second, to repay the
Servicer the Servicing Fee Recovery Amount, if any and (C) then, for deposit
into the Certificate Distribution Account for payment to the
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holders of the
Residual Interest Certificates any amount remaining after the preceding clauses
(A) and (B).
(f) All payments made on the Notes on each Payment Date will be made on
a pro rata basis among the Noteholders of record of such Notes on the next
preceding Record Date, without preference or priority of any kind, and, except
as otherwise provided in the next sentence, shall be made by wire transfer of
immediately available funds to the account of such Noteholder, if such
Noteholder shall own of record Notes in original Denominations aggregating at
least $250,000 and shall have so notified the Indenture Trustee, and otherwise
by check mailed to the address of such Noteholder appearing in the Notes
Register. The final payment on each Note will be made in like manner, but only
upon presentment and surrender of such Note at the location specified in the
notice to Noteholders of such final payment.
Section 5.01A. Claims Under Guaranty Policy.
(a) If, on the second Business Day prior to the related Payment Date a
Deficiency Amount exists, the Indenture Trustee shall give notice to the
Securities Insurer in the form of Exhibit A to the Guaranty Policy and to its
direction by registered mail, personal delivery or telecopy of the amount of
such deficiency by 12:00 noon, New York City time, on such Business Day.
(b) At the time of the execution and delivery of this Agreement, and
for the purposes of this Agreement, the Indenture Trustee shall establish a
separate special purpose trust account for the benefit of the Noteholders called
the "Policy Payments Account" and over which the Indenture Trustee shall have
exclusive control and sole right of withdrawal. The Indenture Trustee shall
deposit any amount paid under the Guaranty Policy in the Policy Payments Account
and distribute such amount only for purposes of making the Insured Payments for
which a claim was made. Such amounts shall be disbursed by the Indenture Trustee
to Noteholders in the same manner as principal and interest payments are to be
made with respect to the Notes under Sections regarding payment of Notes hereof.
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the check or wire transfer used to pay Insured Payments
with other funds available to make such payments. However, the amount of any
payment of principal of or interest on the Notes to be paid from the Policy
Payments Account shall be noted as provided in (d) below in the Payment
Statement to be furnished to Noteholders. Funds held in the Policy Payments
Account shall not be invested by the Indenture Trustee.
(c) Any funds received by the Indenture Trustee as a result of any
claim under the Guaranty Policy shall be applied by the Indenture Trustee,
subject to Section 3.03 of the Indenture, together with the funds, if any, to be
withdrawn from the Note Payment Account, directly to the payment in full of the
Insured Payments due on the Notes (including Notes held for the Indenture
Trustee's own account). Funds received by the Indenture Trustee as a result of
any claim under the Guaranty Policy shall be deposited by the Indenture Trustee
in the Policy Payments Account and used solely for payment to the Noteholders
and may not be applied to satisfy any costs, expenses or liabilities of the
Indenture Trustee. Any funds remaining in the Policy Payments Account following
a Payment Date shall promptly be remitted to the Securities Insurer except for
funds held for the payment of Noteholders pursuant to Section 3.03 of the
Indenture.
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(d) The Indenture Trustee shall keep a complete and accurate record of
all funds deposited by the Securities Insurer into the Policy Payments Account
and the allocation of such funds to payment of interest on and principal paid in
respect of any Note. The Securities Insurer shall have the right to inspect such
records at reasonable times upon one Business Day's prior notice to the
Indenture Trustee.
(e) Subject to and conditioned upon payment of any interest or
principal with respect to the Notes by or on behalf of the Securities Insurer,
the Indenture Trustee shall assign to the Securities Insurer all rights to the
payment of interest or principal on the Notes which are then due to the extent
of all payments made by the Securities Insurer and the Securities Insurer may
exercise any option, vote, right, power or the like with respect to the Notes to
the extent it has made a principal payment pursuant to the Guaranty Policy. The
Indenture Trustee agrees that the Securities Insurer shall be subrogated to all
of the rights to payment of the Noteholders or in relation thereto to the extent
that any payment of principal or interest was made to such Holders with payments
made under the Guaranty Policy by the Securities Insurer.
(f) In the event that the Indenture Trustee has received a certified
copy of an order of the appropriate court that any scheduled payment of
principal of or interest on a Note has been voided in whole or in part as a
Preference Amount, the Indenture Trustee shall so notify the Securities Insurer,
shall comply with the provisions of the Guaranty Policy to obtain payment by the
Securities Insurer of such voided scheduled payment, and shall, at the time it
provides notice to the Securities Insurer, notify, by mail to Noteholders that,
in the event that any Noteholder's scheduled payment is so recovered, such
Noteholders will be entitled to payment pursuant to the terms of the Guaranty
Policy, a copy of which shall be made available through the Indenture Trustee,
the Securities Insurer or the fiscal agent, if any, and the Indenture Trustee
shall furnish to the Securities Insurer or its fiscal agent, if any, its records
evidencing the payments of principal of and interest on the Notes, if any, which
have been made by the Indenture Trustee and subsequently recovered from
Noteholders, and the dates on which such payments were made.
(g) The Indenture Trustee shall promptly notify the Securities Insurer
of either of the following as to which it has actual knowledge: (i) the
commencement of any proceeding by or against the Depositor or the Issuer
commenced under the United States Bankruptcy Code or any other applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (an
"Insolvency Proceeding") and (ii) the making of any claim in connection with any
Insolvency Proceeding seeking the avoidance as a preferential transfer (a
"Preference Claim") of any payment of principal of, or interest on, the Notes.
Each Noteholder, by its purchase of Notes, and the Indenture Trustee hereby
agree that, so long as a Securities Insurer Default shall not have occurred and
be continuing, the Securities Insurer may at any time during the continuation of
any Insolvency Proceeding direct all matters relating to such Insolvency
Proceeding, including, without limitation, (i) all matters relating to any
Preference Claim, (ii) the direction of any appeal of any order relating to any
Preference Claim at the expense of the Securities Insurer but subject to
reimbursement as provided in the Insurance Agreement and (iii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In
addition, and without limitation
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of the foregoing, as set forth (i) hereinbelow, the Securities Insurer shall be
subrogated to, and each Noteholder and the Indenture Trustee hereby delegate and
assign, to the fullest extent permitted by law the rights of the Indenture
Trustee and each Noteholder in the conduct of any Insolvency Proceeding,
including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court under issued in connection with any
such Insolvency Proceeding.
(h) The Indenture Trustee shall furnish to the Securities Insurer or
its fiscal agent its records evidencing the payments of principal of and
interest on the Notes which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made.
(i) Anything herein to the contrary notwithstanding, any payment with
respect to the principal of or interest on the Notes which is made with moneys
received pursuant to the terms of the Guaranty Policy shall not be considered
payment by the Issuer, shall not discharge the Issuer in respect of its
obligation to make such payment and shall not result in the payment of or the
provision for the payment of the principal of or interest on the Notes within
the meaning of Section 4.01 of the Indenture. The Issuer and the Indenture
Trustee acknowledge that without the need for any further action on the part of
the Securities Insurer, the Issuer, or the Indenture Trustee (i) to the extent
the Securities Insurer makes payments, directly or indirectly, on account of
principal of or interest on the Notes to the Noteholders, the Securities Insurer
will be fully subrogated to the rights of such Noteholders to receive such
principal and interest from the Issuer, and (ii) Noteholders shall be paid such
principal and interest in their capacity as Noteholders but only from the
sources and in the manner provided herein for the payment of such principal and
interest.
Section 5.02. Certificate Distribution Account.
(a) Establishment of Certificate Distribution Account. No later than
the Closing Date, the Master Servicer, for the benefit of the
Certificateholders, shall cause to be established and maintained with the
Indenture Trustee for the benefit of the Owner Trustee, on behalf of the Issuer
and the Certificateholders, one or more Certificate Distribution Accounts
(collectively, the "Certificate Distribution Account"), which shall be separate
Eligible Accounts and may be interest-bearing, entitled "Certificate
Distribution Account, First Union National Bank, as Indenture Trustee, in trust
for the Fremont Home Loan Owner Trust Series 1999-1". Funds in the Certificate
Distribution Account shall be invested in accordance with Section 5.03 hereof.
(b) Deposits to and Distributions from Certificate Distribution
Account. On each Payment Date the Indenture Trustee shall withdraw from the Note
Payment Account all amounts required to be deposited into the Certificate
Distribution Account with respect to such Payment Date pursuant to Section
5.01(c)(ii) hereof and, on behalf of the Owner Trustee, shall deposit such
amounts into the Certificate Distribution Account. The Indenture Trustee shall
make payments of all remaining amounts on deposit in the Note Payment Account to
the holders of the Notes to the extent of amounts due and unpaid on the Notes
for principal thereof and interest thereon in accordance with Section 5.01(d)
and (e) hereof. The Indenture Trustee, on behalf of the Owner Trustee, shall
distribute all amounts on deposit in the Certificate
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Distribution Account to the holders of the Residual Interest Certificates. The
Indenture Trustee, on behalf of the Owner Trustee, also shall withdraw from the
Certificate Distribution Account any amount not required to be deposited in the
Certificate Distribution Account or deposited therein in error.
(c) Distributions on the Residual Interest Certificates. All
distributions made on the Residual Interest Certificates on each Payment Date
will be made pro rata among the holders of the Residual Interest Certificates of
record on the next preceding Record Date based on their percentage holdings in
the Residual Interest, without preference or priority of any kind, and, except
as otherwise provided in the next succeeding sentence, shall be made by wire
transfer of immediately available funds to the account of each such holder, if
such holder shall own of record a Residual Interest Certificate in an original
denomination aggregating at least a 50% holding of the Residual Interest and
shall have so notified the Indenture Trustee at least 5 Business Days prior
thereto, and otherwise by check mailed to the address of such Residual Interest
holder appearing in the Certificate Register. The final distribution on each
Residual Interest Certificate will be made in like manner, but only upon
presentment and surrender of such Residual Interest Certificate at the location
specified in the notice to holders of the Residual Interest Certificates of such
final distribution. Any amount distributed to the holders of the Residual
Interest Certificates on any Payment Date shall not be subject to any claim or
interest of holders of the other Notes.
Section 5.03. Trust Accounts; Trust Account Property.
(a) Control of Trust Accounts. Each of the Trust Accounts (or interests
therein) established hereunder has been pledged by the Issuer to the Indenture
Trustee under the Indenture and shall be subject to the lien of the Indenture.
In addition to the provisions hereunder, each of the Trust Accounts shall also
be established and maintained pursuant to the Indenture. Amounts distributed
from each Trust Account in accordance with the Indenture and this Agreement
shall be released from the lien of the Indenture upon such distribution
thereunder or hereunder. Subject to Sections 5.01 and 5.02 hereof, the Indenture
Trustee shall possess all right, title and interest in and to all funds on
deposit from time to time in the Trust Accounts (other than the Certificate
Distribution Account) and in all proceeds thereof (including all income thereon)
and all such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Trust Estate. If, at any time, any Trust Account ceases
to be an Eligible Account, the Indenture Trustee (or the Servicer on its behalf)
shall, within ten Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency and the Securities Insurer may
consent) (i) establish a new Trust Account as an Eligible Account, (ii)
terminate the ineligible Trust Account, and (iii) transfer any cash and
investments from such ineligible Trust Account to such new Trust Account.
With respect to the Trust Accounts (other than the Certificate
Distribution Account), the Indenture Trustee agrees, by its acceptance hereof,
that each such Trust Account shall be subject to the sole and exclusive custody
and control of the Indenture Trustee for the benefit of the Securityholders, the
Securities Insurer and the Issuer, as the case may be, and the Indenture Trustee
shall have sole signature and withdrawal authority with respect thereto.
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In addition to this Agreement and the Indenture, the Certificate
Distribution Account established hereunder shall also be subject to and
established and maintained in accordance with the Owner Trust Agreement. Subject
to rights of the Indenture Trustee, the Noteholders and the Securities Insurer
hereunder and under the Indenture, the Owner Trustee shall possess for the
benefit of the Certificateholders and the Securities Insurer all right, title
and interest in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof (including all income thereon)
and all such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Trust Estate. Subject to the rights of the Indenture
Trustee, the Noteholders and the Securities Insurer, the Owner Trustee agrees,
by its acceptance hereof, that such Certificate Distribution Account shall be
subject to the sole and exclusive custody and control of the Owner Trustee for
the benefit of the Issuer and the parties entitled to payments and distributions
therefrom, including, without limitation, the Certificateholders and the
Securities Insurer, and the Owner Trustee shall have sole signature and
withdrawal authority with respect to the Certificate Distribution Account.
Notwithstanding the preceding, the distribution of amounts from the Certificate
Distribution Account in accordance with Section 5.01(c)(ii) hereof shall also be
made for the benefit of the Indenture Trustee (including without limitation with
respect to its duties under the Indenture and this Agreement relating to the
Trust Estate), and the Indenture Trustee (in its capacity as Indenture Trustee)
shall have the right, but not the obligation, to take custody and control of the
Certificate Distribution Account and to cause the distribution of amounts
therefrom in the event that the Owner Trustee fails to distribute such amounts
in accordance with subsections (b) and (c) of Section 5.02.
In accordance with Section 5.01 and 5.02 hereof, the Servicer or the
Master Servicer shall have the power, revocable by the Indenture Trustee or by
the Owner Trustee with the consent of the Indenture Trustee, to instruct the
Indenture Trustee or Owner Trustee to make withdrawals and payments from the
Trust Accounts for the purpose of permitting the Servicer, the Master Servicer
or the Issuer to carry out their respective duties hereunder or permitting the
Indenture Trustee or Owner Trustee to carry out their respective duties herein
or under the Indenture or the Owner Trust Agreement, as applicable.
(1) Investment of Funds. So long as no Master Servicer
Event of Default shall have occurred and be continuing, the funds held in any
Trust Account may be invested (to the extent practicable) in Permitted
Investments, as directed by the Master Servicer. Any directions for investment
of funds in any Trust Account shall be made in writing or by telephone or
facsimile transmission with confirmation in writing. In any case, funds in any
Trust Account must be available for withdrawal without penalty, and any
Permitted Investments must mature or otherwise be available for withdrawal, not
later than the Business Day immediately preceding the Payment Date next
following the date of such investment and shall not be sold or disposed of prior
to its maturity subject to subsection (a)(2) of this Section. All interest and
any other investment earnings on amounts or investments held in any Trust
Account shall be deposited into such Trust Account immediately upon receipt by
the Indenture Trustee. All Permitted Investments in which funds in any Trust
Account (other than the Certificate Distribution Account) are invested must be
held by or registered in the name OF First Union National Bank, as Indenture
Trustee, in trust for the Fremont Home Loan Asset Backed Notes, Series 1999-1.
While the Indenture Trustee holds the Certificate Distribution Account, on
behalf of the Owner Trustee, all Permitted Investments in which funds in the
Certificate Distribution Account are
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invested shall be held by or registered in the name First Union National Bank,
on behalf of the Owner Trustee, in trust for the Fremont Home Loan Asset Backed
Notes, Series 1999-1.
(2) Insufficiency and Losses in Trust Accounts. If any
amounts are needed for disbursement from any Trust Account held by or on behalf
of the Indenture Trustee and sufficient uninvested funds are not available to
make such disbursement, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such Trust
Account. The Indenture Trustee shall not be liable for any investment loss or
other charge resulting therefrom, unless such loss or charge is caused by the
failure of the Indenture Trustee or Owner Trustee, respectively, to perform in
accordance with this Section 5.03 hereof or the Indenture Trustee is the obligor
under the Permitted Investment and has defaulted thereon.
If any losses are realized in connection with any investment in any
Trust Account pursuant to this Agreement and the Indenture, then the Master
Servicer shall deposit the amount of such losses (to the extent not offset by
income from other investments in such Trust Account) into such Trust Account
immediately upon the realization of such loss. All interest and any other
investment earnings on amounts held in any Trust Account shall be the income of
the Issuer (or, when there is a single beneficial owner of a Residual Interest
Certificate, such owner), and for federal and state income tax purposes the
Issuer (or such single beneficial owner) shall be the owner (or beneficial owner
in the case of the Collection Account).
(b) No Liability for Losses. Subject to Section 6.01 of the Indenture,
the Indenture Trustee shall not in any way be held liable by reason of any
insufficiency in any Trust Account held by the Indenture Trustee resulting from
any investment loss on any Permitted Investment included therein (except to the
extent that the Indenture Trustee is the obligor and has defaulted thereon).
(c) Delivery of Trust Account Property. With respect to the Trust
Account Property, the Indenture Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts; and each such Eligible
Account shall be subject to the sole and exclusive dominion, custody and control
of the Indenture Trustee; and, without limitation on the foregoing, the
Indenture Trustee shall have sole signature authority with respect thereto;
(2) any Trust Account Property that constitutes property
within clause (a) of the definition of "Delivery" in Section 1.1 hereof shall be
delivered to and maintained by the Indenture Trustee in accordance with the
definition of "Delivery" in Section 1.1 hereof and shall be held, pending
maturity or disposition, solely by or on behalf of the Indenture Trustee; and
(3) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered to and maintained by the Indenture Trustee in
accordance with the definition of "Delivery" in Section 1.1 hereof.
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Section 5.04. Allocation of Losses.
In the event that Net Liquidation Proceeds, Property Insurance Proceeds
or Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than
the related Principal Balance plus accrued interest thereon, or any Obligor
makes a partial payment of any Monthly Payment due on a Home Loan, such Net
Liquidation Proceeds, Property Insurance Proceeds, Released Mortgaged Property
Proceeds or partial payment shall be applied to payment of the related Debt
Instrument, first, to interest accrued at the Home Loan Interest Rate and, then,
to principal.
ARTICLE VI
STATEMENTS AND REPORTS; WITHHOLDING
Section 6.01. Statements.
(a) No later than each Determination Date, the Master Servicer shall
cause the Servicer to deliver to the Indenture Trustee and the Master Servicer
by facsimile, the receipt and legibility of which shall be confirmed by
telephone, and with hard copy thereof to be delivered no later than one (1)
Business Day after such Determination Date, the Servicer's Monthly Remittance
Report, setting forth the date of such Report (day, month and year), the name of
the Issuer (i.e. "Fremont Home Loan Owner Trust 1999-1"), the Series designation
of the Notes (i.e. "Series 1999-1") and the date of this Agreement, all in
substantially the form set out in Exhibit B hereto. Furthermore, Master Servicer
shall cause the Servicer to deliver to the Master Servicer and the Indenture
Trustee no later than each Determination Date, a magnetic tape or computer disk
providing such information regarding the Servicer's activities in servicing the
Home Loans during the related Due Period as the Indenture Trustee or the Master
Servicer may reasonably require. The Master Servicer shall also cause the
Servicer to deliver any Loan Liquidation Reports pursuant to Section 4.10(a)
hereof.
(b) On each Payment Date, Indenture Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Payment
Statement") to the Depositor, the Securities Insurer, the Master Servicer, the
Securityholders and the Rating Agencies, stating the date of original issuance
of the Notes (day, month and year), the name of the Issuer (i.e. "Fremont Home
Loan Owner Trust 1999-1"), the Series designation of the Notes (i.e., "Series
1999-1"), the date of this Agreement and the following information:
(1) the Available Collection Amount, Available Payment
Amount, the Regular Payment Amount and the Excess Spread for the related
Payment Date;
(2) the Note Principal Balance of the Notes before and
after giving effect to payments made to the holders of such Notes on such
Payment Date, and the Pool Principal Balance as of the first and last day of the
related Due Period;
(3) the Note Factor with respect to the Notes then
outstanding;
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(4) the amount of principal, if any, and interest to be
distributed to the Notes on the related Payment Date;
(5) the Note Interest Rate and Noteholders' Interest
Carry-Forward Amount, if any, on the related Payment Date;
(6) as of such Payment Date, the Overcollateralization
Amount, the Overcollateralization Target Amount and any Overcollateralization
Deficiency Amount or any Overcollateralization Reduction Amount, and any such
amount to be distributed to the Noteholders or the holders of the Residual
Interest on such Payment Date;
(7) the Master Servicer Compensation, the Servicing
Compensation, the Indenture Trustee Fee, and the Guaranty Insurance Premium,
for such Payment Date;
(8) as of such Payment Date, the Net Loan Losses incurred
during the related Due Period, the cumulative Net Loan Losses as of such Payment
Date;
(9) the weighted average maturity of the Home Loans and
the weighted average Home Loan Interest Rate of the Home Loans;
(10) the number of and aggregate Principal Balance of all
Home Loans in foreclosure proceedings and the percent of the aggregate Principal
Balances of such Home Loans to the aggregate Principal Balances of all Home
Loans, all as of the close of business on the last day of the related Due
Period;
(11) the number of and the aggregate Principal Balance of
the Home Loans in bankruptcy proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal Balances of all
Home Loans, all as of the close of business on the last day of the related Due
Period;
(12) the number of Foreclosure Properties, the aggregate
Principal Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such Home
Loans to the aggregate Principal Balances of all Home Loans, all as of the close
of business on the last day of the related Due Period;
(13) during the related Due Period (and cumulatively, from
the Closing Date through the most current Due Period), the number and aggregate
Principal Balance of Home Loans for each of the following: (A) that became
Defaulted Home Loans, (B) that became Liquidated Home Loans, (C) that became
Deleted Home Loans pursuant to Section 3.05 hereof as a result of such Deleted
Home Loans being Defective Home Loans, and (D) that became Deleted Home loans
pursuant to Section 3.05 hereof as a result of such Deleted Home Loans being
Defaulted Home Loans or a Home Loan in default or imminent default;
(14) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due Period;
(15) the number and aggregate Principal Balance of Home
Loans that were 30, 60 or 90 days Delinquent as of the close of business on the
last day of the related Due Period and
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the Six Month Average Delinquency, the Three-Month Average Annualized Losses and
the cumulative Realized Losses;
(16) the amount of any Insured Payment included in the
amounts distributed to the Noteholders on such Payment Date;
(17) the amount of any Securities Insurer Reimbursement
Amount to be paid to the Securities Insurer on such Payment Date and the amount
of any Securities Insurer Reimbursement Amount remaining unsatisfied following
such payment; and
(18) if an OC Trigger Increase Event has occurred on
such Payment Date.
In the case of information furnished to Noteholders pursuant to
subclause (b)(4) of this Section 6.01, the amounts shall be expressed as a
dollar amount per Note with a $1,000 Denomination.
All reports prepared by the Indenture Trustee of the withdrawals from
and deposits in the Collection Account will be based in whole or in part upon
the information provided to the Indenture Trustee by the Servicer, and the
Indenture Trustee may fully rely upon and shall have no liability with respect
to such information provided by the Servicer. In no event shall the Indenture
Trustee be obligated to provide information required pursuant to this Section
6.01(b) if it has not timely received the necessary information from the
Servicer to provide such information.
(c) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who at
any time during the calendar year was a Noteholder such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b) of this Section 6.01, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Noteholder.
(d) On each Payment Date, the Indenture Trustee shall forward to The
Depository Trust Company and to the holders of the Residual Interest
Certificates a copy of the Payment Statement in respect of such Payment Date and
a statement setting forth the amounts actually distributed to such holders of
the Residual Interest Certificates on such Payment Date, together with such
other information as the Indenture Trustee deems necessary or appropriate.
(e) Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall prepare and distribute to each Person who at
any time during the calendar year was a holder of Residual Interest
Certificates, if requested in writing by such Person, a statement containing the
information provided pursuant to the previous paragraph aggregated for such
calendar year or applicable portion thereof during which such Person was a
holder of Residual Interest Certificates.
(f) The Indenture Trustee shall forward to each Noteholder and each
holder of a Residual Interest Certificate, during the term of this Agreement,
such periodic, special or other reports, including information tax returns or
reports required with respect to the Notes and the Residual Interest
Certificates, as shall be necessary, reasonable, or appropriate with respect to
the Noteholders or the holders of Residual Interest Certificates, or otherwise
with respect to the
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purposes of this Agreement, all such reports or information
in the case of the Residual Interest Certificates to be provided by and in
accordance with such applicable instructions and directions as the Majority
Residual Interestholders may reasonably require.
(g) The Master Servicer promptly shall notify each Rating Agency if the
Securities Insurer waives or changes the Overcollateralization Target Amount,
the OC Trigger Increase Event, the Spread Squeeze Amount or the Step Down Test.
(h) Reports and computer tapes furnished by the Servicer and the
Indenture Trustee, to the Master Servicer and the Securities Insurer pursuant to
this Agreement shall be deemed confidential and of a proprietary nature and
shall not be copied or distributed except in connection with the purposes and
requirements of this Agreement. No Person entitled to receive copies of such
reports or tapes shall use the information therein for the purpose of soliciting
the customers of the Transferor or the Servicer or for any other purpose except
as set forth in this Agreement.
Section 6.02. Withholding.
The Indenture Trustee shall comply with all requirements of the Code,
and applicable state and local laws, with respect to the withholding from any
payments made to any Noteholder of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in connection
therewith, giving due effect to any applicable exemptions from such withholding
and effective certifications or forms provided by the recipient. Any amounts
withheld pursuant to this Section 6.02 shall be deemed to have been paid to the
Noteholders for all purposes of this Agreement or the Indenture.
ARTICLE VII
GENERAL SERVICING PROCEDURES
Section 7.01. [Reserved].
Section 7.02. Release of Home Loan Files.
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan
plus all interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment
in full of such Home Loan in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has
been repurchased or a Qualified Substitute Home Loan has been conveyed to the
Owner Trustee pursuant to Section 3.05 hereof;
(iv) such Home Loan or the related Foreclosure Property
has been sold in connection with the termination of the Issuer pursuant to
Section 11.01 hereof; or
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(v) such Home Loan is a Defaulted Home Loan or a
Liquidated Home Loan that is liquidated or disposed of or the related
Foreclosure Property has been sold ;
then in each such case, an Officer's Certificate of the Servicer pursuant to
Section 4.5 of the Servicing Agreement to the effect that the Servicer has
complied with all of its obligations under this Agreement and the Servicing
Agreement with respect to such Home Loan and requesting that the Custodian
release to the Servicer the related Indenture Trustee's Home Loan File. Upon the
receipt of such Officer's Certificate, the Custodian shall, within five Business
Days or such shorter period as may be required by applicable law, release, or
cause the applicable Custodian to release (unless such Indenture Trustee's Home
Loan File has previously been released), the related Indenture Trustee's Home
Loan File to the Servicer and execute and deliver such instruments of transfer
or assignment, in each case without recourse, as shall be necessary to vest
ownership of such Home Loan in the Servicer or such other Person as may be
specified in such certificate, the forms of any such instrument to be appended
to such certificate.
(b) If a temporary release of the Indenture Trustee's Home Loan File is
necessary or appropriate for the servicing (which may include any modification
or foreclosure) of any Home Loan, then upon the request of the Servicer pursuant
to Section 3(b) of the Custodial Agreement the Custodian shall release the
related Indenture Trustee's Home Loan File (or any requested portion thereof) to
the Servicer.
Section 7.03. Servicing Compensation.
As compensation for its services under the Servicing Agreement, the
Servicer shall be entitled to receive from the Collection Account the Servicing
Fee, out of which the Servicer shall pay any subservicing fees to any
subservicer. Additional servicing compensation in the form of assumption fees,
80% of late charges collected, modification fees, and other administrative fees,
insufficient funds charges shall be part of the Servicing Compensation payable
to the Servicer hereunder and under Section 8.1 of the Servicing Agreement and
shall be paid either by the Servicer retaining such additional servicing
compensation prior to deposit in the Collection Account pursuant to Section
5.01(b)(1) hereof or, if deposited in the Collection Account, as part of the
Servicing Compensation withdrawn from the Collection Account or Note Payment
Account.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and under the Servicing
Agreement and shall not be entitled to reimbursement therefor except as
specifically provided for herein or in Section 8.1 thereof.
Section 7.04. Statement as to Compliance and Financial Statements.
The Master Servicer will deliver or cause to be delivered to the
Indenture Trustee, the Owner Trustee, the Depositor, the Securities Insurer, the
Master Servicer and the Rating Agencies not later than 90 days following the end
of each fiscal year of the Servicer (beginning with the fiscal year 1999), an
Officer's Certificate, required under Section 7.2 of the Servicing Agreement,
stating that (i) a review of the activities of the Servicer during the preceding
year and of performance under this Agreement and the Servicing Agreement has
been made under such
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officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Servicer has fulfilled all of its obligations under this
Agreement and the Servicing Agreement throughout such year, 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 and what action
the Servicer proposes to take with respect thereto.
Contemporaneously with the submission of the Officer's Certificate
required by the preceding paragraph, the Master Servicer shall deliver or cause
to be delivered to the Indenture Trustee, the Securities Insurer, the Master
Servicer and the Owner Trustee a copy of the Servicer's annual audited financial
statements prepared in the ordinary course of business. The Master Servicer
shall, upon the request of the Depositor, deliver to such party any unaudited
quarterly financial statements of the Servicer.
The Master Servicer shall also cause the Servicer to furnish and
certify to the requesting party such other information as to (i) the Servicer's
organization, activities and personnel relating to the performance of the
obligations of the Servicer hereunder, (ii) the Servicer's financial condition,
(iii) the Home Loans and (iv) the performance of the obligations of any
subservicer under the any subservicing agreements, in each case as the Indenture
Trustee, the Owner Trustee, the Master Servicer, the Securities Insurer or the
Depositor may reasonably request from time to time.
Section 7.05. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer (beginning with fiscal year 1999), the Master Servicer shall require
that the Servicer comply with Section 7.3 of the Servicing Agreement and cause
any nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Indenture Trustee, the Owner Trustee, the Rating Agencies, the Securities
Insurer, the Master Servicer and the Depositor to the effect that such firm has
examined certain documents and records relating to the servicing of the Home
Loans under this Agreement, the Servicing Agreement or of mortgage loans under
pooling or sale and servicing agreements (including the Home Loans and this
Agreement) substantially similar to one another (such statement to have attached
thereto a schedule setting forth the pooling or sale and servicing agreements
covered thereby) and that, on the basis of such examination conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, such
firm confirms that such servicing has been conducted in compliance with such
pooling or sale and servicing agreements except for such significant exceptions
or errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers or the Attestation Program for
Mortgages serviced for FHLMC requires it to report, each of which errors and
omissions shall be specified in such statement. In rendering such statement,
such firm may rely, as to matters relating to direct servicing of mortgage loans
by subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of independent public accountants with
respect to the related subservicer.
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Section 7.06. Reports to the Indenture Trustee; Collection Account
Statements.
If the Collection Account is not maintained with the Indenture Trustee,
then not later than 25 days after each Record Date, the Master Servicer shall
cause the Servicer to forward to the Indenture Trustee, the Securities Insurer
and the Master Servicer, a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
preceding Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of deposit
specified in Section 5.01(b)(1) hereof, the aggregate of withdrawals from the
Collection Account for each category of withdrawal specified in Section
5.01(b)(2) and (3) hereof, in each case, for the related Due Period.
Section 7.07. Financial Statements and Records of Servicer.
The Master Servicer shall require that the Servicer agree to provide
the books, records or information, and/or access thereto, of the types required
of the Master Servicer in Sections 9.07 and 9.08 herein, to the Indenture
Trustee, the Owner Trustee, the Depositor, the Securities Insurer and each of
their respective agents, upon terms substantially similar to the terms set forth
in Sections 9.07 and 9.08.
ARTICLE VIII
(RESERVED)
ARTICLE IX
THE MASTER SERVICER
Section 9.01. Indemnification; Third Party Claims.
(a) The Master Servicer shall indemnify the Transferor, the Owner
Trustee, the Issuer, the Depositor, the Securities Insurer and the Indenture
Trustee (each an "Indemnified Party") and hold harmless each of them against any
and all claims, losses, damages, penalties, fines, forfeitures, reasonable legal
fees and related costs, judgments, and other costs and expenses resulting from
any claim, demand, defense or assertion based on or grounded upon, or resulting
from, a breach of any of the Master Servicer's representations and warranties
and covenants contained in this Agreement or in any way relating to the failure
of the Master Servicer to perform its duties and service the Home Loans in
compliance with the terms of this Agreement.
(b) The Transferor, the Depositor, the Owner Trustee, the Securities
Insurer or the Indenture Trustee, as the case may be, shall promptly notify the
Master Servicer if a claim is made by a third party with respect to a breach of
any of the Master Servicer's representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the Master
Servicer to perform its duties and service the Home Loans in compliance with the
terms
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of this Agreement. The Master Servicer shall promptly notify the Indenture
Trustee, the Owner Trustee, the Securities Insurer and the Depositor of any
claim of which it has been notified pursuant to this Section 9.01 by a Person
other than the Depositor, and, in any event, shall promptly notify the Depositor
of its intended course of action with respect to any claim.
(c) The Master Servicer shall be entitled to participate in and, upon notice to
the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its own
counsel in any such action in addition to the counsel of the Master Servicer,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (i) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Master Servicer, (ii) the
Master Servicer has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Master Servicer and one or
more Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which are
different from or additional to those available to the Master Servicer. The
Master Servicer shall not be liable for any settlement of any such claim or
action unless the Master Servicer shall have consented thereto or be in default
on its obligations hereunder. Any failure by an Indemnified Party to comply with
the provisions of this Section 9.01 shall relieve the Master Servicer of
liability only if such failure is materially prejudicial to the position of the
Master Servicer and then only to the extent of such prejudice.
(d) The provisions of this Section 9.01 shall survive the replacement
of the Master Servicer; provided, that no successor master servicer shall be
liable for (or required to indemnify any party for) any act or omission of any
predecessor master servicer.
Section 9.02. Merger or Consolidation of the Master Servicer..
The Master Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its authorization or
qualification to do business as a foreign corporation and maintain, or cause an
affiliate approved by the other parties hereto to maintain, such other licenses
and permits in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement; provided, however, that the Master Servicer may
merge or consolidate with any other corporation upon the satisfaction of the
conditions set forth in the following paragraph.
With the consent of the Securities Insurer, any Person into which the
Master Servicer may be merged or consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Master Servicer shall be a
party, or any Person succeeding to the business of the Master Servicer, shall be
an Eligible Servicer and shall be the successor of the Master Servicer, as
applicable 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. The Master Servicer shall send notice of any such
merger, conversion, consolidation or succession to the Indenture Trustee, the
Owner Trustee, the Securities Insurer, the Servicer and the Issuer.
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Section 9.03. Limitation on Liability of the Master Servicer and
Others.
The Master Servicer and any director, officer, employee or agent of the
Master Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of Section 9.01 hereof, the Master Servicer shall have no obligation to
appear with respect to, prosecute or defend any legal action which is not
incidental to the Master Servicer's duty to service the Home Loans in accordance
with this Agreement.
Section 9.04. Master Servicer Not to Resign; Assignment.
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) with the consent of the Owner Trustee, the
Securities Insurer and Indenture Trustee or (b) upon determination that its
duties hereunder are no longer permissible under applicable law. Any such
determination pursuant to clause (b) of the preceding sentence permitting the
resignation of the Master Servicer shall be evidenced by an independent opinion
of counsel to such effect delivered (at the expense of the Master Servicer) to
the Owner Trustee, the Securities Insurer and the Indenture Trustee. No
resignation of the Master Servicer shall become effective until a successor
master servicer appointed by the Depositor and acceptable to the Rating
Agencies, the Securities Insurer and the Indenture Trustee shall have assumed
the Master Servicer's responsibilities, duties, liabilities (other than those
liabilities arising prior to the appointment of such successor) and obligations
under this Agreement.
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 and any agreement, instrument or act
purporting to effect any such assignment, transfer, delegation or appointment
shall be void.
The Master Servicer agrees to cooperate with any successor master
servicer in effecting the transfer of the Master Servicer's servicing
responsibilities and rights hereunder pursuant to the first paragraph of this
Section 9.04.
Section 9.05. [Reserved.]
Section 9.06. Relationship of Master Servicer to the Issuer and the
Indenture Trustee.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as master servicer under this Agreement) to the Issuer and the
Indenture Trustee under this Agreement is intended by the parties hereto to be
that of an independent contractor and not of a joint venturer, agent or partner
of the Issuer or the Indenture Trustee.
Section 9.07. Master Servicer May Own Securities.
Each of the Master Servicer and any Affiliate of the Master Servicer
may in its individual or any other capacity become the owner or pledgee of
Securities with the same rights
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as it would have if it were not the Master Servicer or an Affiliate thereof
except as otherwise specifically provided herein. Securities so owned by or
pledged to the Master Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided,
however, that any Securities owned by the Master Servicer or any Affiliate
thereof, during the time such Securities are owned by them, shall be without
voting rights for any purpose set forth in this Agreement. The Master Servicer
shall notify the Indenture Trustee and the Securities Insurer promptly after it
or any of its Affiliates becomes the owner or pledgee of a Security.
Section 9.08. Right to Examine Master Servicer Records.
The Indenture Trustee, the Owner Trustee, the Depositor, the Securities
Insurer and each of their respective agents shall have the right upon reasonable
prior notice, during normal business hours and as often as reasonably required,
to examine, audit and copy, at the expense of the Person making such
examination, any and all of the books, records or other information of the
Master Servicer (including, without limitation, the Servicer), whether held by
the Master Servicer or by another on behalf of the Master Servicer, which may be
relevant to the performance or observance by the Master Servicer of the terms,
covenants or conditions of this Agreement. In the case of the supervisory agents
and examiners of the Issuer, the Indenture Trustee, the Owner Trustee, the
Securities Insurer and the Securityholders, access to the documentation
regarding the Home Loans required by applicable state and federal regulations
shall be afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Master Servicer designated by it.
The Master Servicer also agrees to make available on a reasonable basis
to the Depositor, the Securityholders or any prospective Securityholder a
knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Depositor, the
Securityholders and any prospective Securityholder to inspect the Servicer's
servicing facilities during normal business hours for the purpose of satisfying
that the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
Each Securityholder, the Indenture Trustee, the Securities Insurer, the
Master Servicer and the Owner Trustee agree that any information obtained
pursuant to the terms of this Agreement shall be held confidential.
Section 9.09. Financial Statements.
The Master Servicer understands that, in connection with the transfer
of the Notes, Noteholders and the Securities Insurer may request that the Master
Servicer make available to the Noteholders and to prospective Noteholders annual
audited financial statements of the Servicer for one or more of the most
recently completed five fiscal years for which such statements are available,
which request shall not be unreasonably denied.
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ARTICLE X
DEFAULT
Section 10.01. Master Service Events of Default.
(a) Master Servicer Event of Default. A Master Servicer Event of
Default shall include the occurrence and continuation of one or more of the
following:
(i) (1) Any failure by the Servicer to deposit in the
Collection Account in accordance with Section 5.01(b) hereof any payments in
respect of the Home Loans received by the Servicer no later than the second
Business Day following the day on which such payments were received; (2) any
failure of the Servicer to pay when due any amount payable by it under the
Servicing Agreement or this Agreement; or (3) the occurrence and continuance of
any other Servicer Event of Default (as defined in Exhibit E hereto) which
Servicer Event of Default continues unremedied for a period of 30 days after the
date on which a Notice of Default requiring such failure to be remedied shall
have been given (a) to the Servicer and the Master Servicer by the Indenture
Trustee, or the Securities Insurer, or (b) to the Servicer, the Master Servicer,
the Indenture Trustee, the Owner Trustee and the Securities Insurer by the
Majority Noteholders.
(ii) The failure by the Master Servicer duly to observe or
perform, in any material respect, any other covenants, obligations or agreements
of the Master Servicer as set forth in this Agreement, which failure continues
unremedied for a period of 30 days after the date on which a Notice of Default
requiring such failure to be remedied shall have been given (a) to the Master
Servicer by the Indenture Trustee, the Owner Trustee or the Securities Insurer,
or (b) to the Master Servicer, the Indenture Trustee, the Owner Trustee and the
Securities Insurer by the Majority Noteholders.
(iii) A decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or receiver
or liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Master Servicer and such decree or
order shall have remained in force, undischarged or unstayed for a period of 60
days.
(iv) The Master Servicer shall consent to the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings of or relating
to the Master Servicer or of or relating to all or substantially all of the
Master Servicer's property.
(v) The Master Servicer shall admit in writing its
inability to pay its debts as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its obligations.
(vi) The Majority Noteholders and the Securities Insurer,
collectively, or the Securities Insurer, individually, shall determine, in their
reasonable judgment and based
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upon published reports (including wire services), which they reasonably believe
in good faith to be reliable, and shall give the Master Servicer a Notice of
Default, that:
(1) the Master Servicer or Servicer has experienced a
material adverse change in its business, assets, liabilities, operations,
condition (financial or otherwise) or prospects; or
(2) the Master Servicer or Servicer or any of their
subsidiaries or parent has defaulted on any of its material obligations; or
(3) the Master Servicer is no longer able to discharge
its duties under this Agreement or the Servicer is no longer able to discharge
its duties under the Servicing Agreement; or
(4) the Master Servicer has ceased to conduct its
business in the ordinary course;
provided, however, that the Master Servicer shall have five Business Days from
the receipt of such Notice of Default to cure such Master Servicer Event of
Default by providing the foregoing parties with written assurances that, in a
reasonable and good faith manner, substantiate the financial and operational
well-being of the Master Servicer or Servicer, as appropriate, and adequately
refute the occurrence of a material adverse change, including, without
limitation, information, reports or written assurances obtained from certain of
its lenders or lenders to the Servicer.
(vii) An event of default has occurred and is continuing
under the Indemnification Agreement.
(viii) Either a Servicer Termination Delinquency Event or
a Servicer Termination Loss Event has occurred.
(b) Remedies. If a Servicer Event of Default (as defined in Exhibit E
hereto) shall occur and be continuing or the Servicer's term of service has not
been renewed pursuant to Section 3 of the Servicing Agreement, then, and in each
and every such case, so long as such Servicer Event of Default shall not have
been remedied, the Securities Insurer or the Indenture Trustee, the Owner
Trustee or the Majority Noteholders, by a Notice of Default to the Master
Servicer may, in addition to whatever rights such Person may have at law or in
equity to damages, including injunctive relief and specific performance, with
the consent of the Securities Insurer may require the Master Servicer to
terminate all the rights and obligations of the Servicer under the Servicing
Agreement and in and to the Home Loans and the proceeds thereof, as servicer
under the Servicing Agreement. Upon termination of the Servicer following such
Notice of Default, all authority and power of the Servicer under the Servicing
Agreement, whether with respect to the Home Loans or otherwise, shall, at the
direction of the Securities Insurer, pass to, be transferred to, and be vested
in either: (1) a successor servicer acceptable to the Securities Insurer; or (2)
the Master Servicer, or (3) the Indenture Trustee. If a Master Servicer Event of
Default shall occur and be continuing, then, and in each and every such case, so
long as a Master Servicer Event of Default shall not have been remedied, the
Securities Insurer or the Indenture Trustee, or the Majority Noteholders, by a
Notice of Default to the
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Master Servicer may, in addition to whatever rights such Person may have at law
or in equity to damages, including injunctive relief and specific performance,
with the consent of the Securities Insurer, may terminate all the rights and
obligations of the Master Servicer under this Agreement and in and to the Home
Loans and the proceeds thereof, as Master Servicer under this Agreement. Upon
termination of the Master Servicer following such Notice of Default, all
authority and power of the Master Servicer under this Agreement, whether with
respect to the Home Loans or otherwise, shall, at the direction of the
Securities Insurer pass to, be transferred to, and be vested in either: (1) a
successor master servicer reasonably acceptable to the Securities Insurer; or
(2) the Indenture Trustee.
Upon the termination of the Master Servicer and transfer to a successor
master servicer, the Indenture Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and do or cause to be
done all other acts or things necessary or appropriate to effect the purposes of
such notice of termination, including, but not limited to, the transfer and
endorsement or assignment of the Home Loans and related documents. The Master
Servicer agrees to cooperate with the successor master servicer in effecting the
termination of the Master Servicer's responsibilities and rights hereunder.
Section 10.02. [Reserved].
Section 10.03. Waiver of Defaults.
The Securities Insurer, and the Majority Noteholders may with prior
consent of the Securities Insurer, on behalf of all Noteholders, waive any
events permitting removal of the Servicer or Master Servicer pursuant to this
Article X; provided, however, that the Majority Noteholders may not waive a
default in making a required payment on a Note or distribution on a Residual
Interest Certificate without the consent of the related Noteholder or holder of
the Residual Interest Certificate. Upon any waiver of a past default, such
default shall cease to exist and any Master Servicer Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.
Section 10.04. Accounting Upon Termination of Master Servicer.
Upon termination of the Master Servicer under this Article X, the
Master Servicer shall, at its own expense execute and deliver such instruments
and perform all acts reasonably requested in order to effect the orderly and
efficient transfer of master servicing of the Home Loans to its successor and to
more fully and definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Master Servicer under this
Agreement.
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ARTICLE XI
TERMINATION
Section 11.01. Termination.
This Agreement shall terminate upon notice to the Indenture Trustee of
either:
(a) the later of (i) the satisfaction and discharge of the Indenture
and the provisions thereof, or (ii) the disposition of all funds with respect to
the last Home Loan and the remittance of all funds due hereunder and the payment
of all amounts due and payable to the Servicer, the Indenture Trustee, the Owner
Trustee, the Issuer, the Master Servicer, the Securities Insurer and any
Custodian; or
(b) the mutual consent of the Servicer, the Master Servicer, the
Depositor, the Transferor, the Securities Insurer and all Securityholders in
writing.
Section 11.02. Optional Termination.
On or after any Payment Date on which the Pool Principal Balance
declines to 10% or less of the Original Pool Principal Balance, then the
Majority Residual Interestholders may, at their option, effect an early
termination of the Issuer. On or after any Payment Date on which the Pool
Principal Balance declines to 5% or less of the Original Pool Principal Balance,
then the Securities Insurer or the Master Servicer may, at their respective
options, effect an early termination of the Issuer. The Majority Residual
Interestholders, the Securities Insurer or the Master Servicer, as applicable,
shall effect such early termination by providing prior notice thereof to the
Servicer, the Indenture Trustee, the Master Servicer, the Securities Insurer and
Owner Trustee and by purchasing all of the Home Loans from the Issuer at a
purchase price, payable in cash, equal to or greater than the Termination Price.
The expense of any Independent appraiser required under this Section 11.02 shall
be a nonreimbursable expense of Majority Residual Interestholders, the
Securities Insurer or the Master Servicer, as applicable.
Any such early termination by the Majority Residual Interestholders,
the Securities Insurer or the Master Servicer, as applicable, shall be
accomplished by depositing into the Collection Account on the third Business Day
prior to the Payment Date on which the purchase is to occur the amount of the
Termination Price to be paid. The Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts not required to have
been deposited therein pursuant to Section 5.01(b)(1) hereof and any amounts
withdrawn therefrom by the Indenture Trustee pursuant to Section 5.01(b)(3)
hereof) shall be transferred to the Note Payment Account pursuant to Section
5.01(b)(2) hereof for payment to Noteholders and the Securities Insurer on the
succeeding Payment Date; and any amounts received with respect to the Home Loans
and Foreclosure Properties subsequent to the Due Period immediately preceding
such final Payment Date shall belong to the purchaser thereof or the Securities
Insurer, as applicable. For purposes of calculating the Available Payment Amount
for such final Payment Date, amounts transferred to the Note Payment Account
immediately preceding such final Payment Date shall in all cases be deemed to
have been received during the related Due Period, and amounts so transferred
shall be applied pursuant to Section 5.01(d) and (e) hereof.
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Section 11.03. Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Issuer shall be sent (i) by the Indenture Trustee to the
Noteholders and the Securities Insurer in accordance with section 10.02 of the
Indenture and (ii) by the Owner Trustee to the Certificateholders in accordance
with section 9.1(d) of the Owner Trust Agreement.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Acts of Noteholders.
Except as otherwise specifically provided herein, whenever action,
consent or approval of the Noteholders is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Noteholders if the Majority
Noteholders agree to take such action or give such consent or approval.
Section 12.02. Amendment.
(a) This Agreement may be amended from time to time by the Depositor,
the Master Servicer, the Transferor, the Indenture Trustee and the Issuer by
written agreement with notice thereof to the Securityholders, without the
consent of any of the Securityholders, but with the consent of the Securities
Insurer, to cure any error or ambiguity, to correct or supplement any provisions
hereof which may be defective or inconsistent with any other provisions hereof
or to add any other provisions with respect to matters or questions arising
under this Agreement; provided, however, that such action will not adversely
affect in any material respect the interests of the Noteholders. An amendment
described above shall be deemed not to adversely affect in any material respect
the interests of the Noteholders if either (i) an Opinion of Counsel is obtained
to such effect or (ii) the party requesting the amendment obtains the Ratings
Confirmation with respect to such amendment.
(b) This Agreement may also be amended from time to time by the
Depositor, the Master Servicer, the Transferor, the Indenture Trustee and the
Issuer by written agreement, with the prior written consent of the Majority
Noteholders and the Securities Insurer, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, collections of payments on Home Loans or
distributions which are required to be made on any Note, without the consent of
the holders of 100% of the Notes affected thereby and the Securities Insurer,
(ii) adversely affect in any material respect the interests of the holders of
any of the Notes or the Securities Insurer in any manner other than as described
in clause (i), without the consent of the holders of 100% of such Notes or the
Securities Insurer, or (iii) reduce the percentage of any of the Notes, the
consent of which is required for any such amendment, without the consent of the
holders of 100% of such Notes and the Securities Insurer.
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(c) It shall not be necessary for the consent of Noteholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Issuer
and the Indenture Trustee shall be entitled to receive and rely upon an Opinion
of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Issuer and the Indenture Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Issuer's
own rights, duties or immunities of the Issuer or the Indenture Trustee, as the
case may be, under this Agreement.
Section 12.03. Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the Noteholders'
expense on direction of the Majority Noteholders or the Securities Insurer, but
only when accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the Noteholders
or is necessary for the administration or servicing of the Home Loans.
Section 12.04. Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 12.05. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06. Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by overnight mail, certified mail or registered mail, postage prepaid, to:
(a) in the case of the Depositor, PaineWebber Mortgage Acceptance
Corporation IV, 1285 Avenue of the Americas, New York, New York 10019,
Attention: John Fearey, Esq., or such other addresses as may hereafter be
furnished to the Securityholders and the other parties hereto in writing by the
Depositor;
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<PAGE>
(b) in the case of the Issuer, at Fremont Home Loan Owner Trust 1999-1,
c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Emmett R. Harmon, or such other address
as may hereafter be furnished to the Securityholders and the other parties
hereto;
(c) in the case of the Transferor and Master Servicer, Fremont
Investment & Loan, 175 North Riverview Drive, Anaheim, California 92808,
Attention: Kyle Walker, or such other address as may hereafter be furnished to
the Securityholders and the other parties hereto in writing by the Servicer or
the Transferor;
(d) in the case of the Indenture Trustee, First Union National Bank,
230 South Tryon Street, NC 1179, 9th Floor, Charlotte, NC 28288-1179, Attention:
Structured Finance Trust Group;
(e) in the case of the Securityholders, as set forth in the applicable
Note Register;
(f) in the case of a claim under the Guaranty Policy, Financial
Security Assurance, Inc., 350 Park Avenue, New York, New York, 10022, Attention:
Senior Vice President - Surveillance (Fremont Home Loan Asset Banked Notes,
Series 1999-1), with a copy to each of the General Counsel and the Head -
Financial Guaranty Group, and shall be marked to indicate "URGENT MATERIAL
ENCLOSED", or such other address as may be furnished to the Securityholders and
the other parties hereto in writing by the Securities Insurer;
(g) in the case of the Securities Insurer, Financial Security
Assurance, Inc., 350 Park Avenue, New York 10022, Attention: Senior Vice
President - Surveillance (Fremont Home Loan Asset Backed Notes, Series 1999-1);
or
(h) in the case of the Servicer, to Fairbanks Capital Corp., 3815 South
West Temple, Salt Lake City, Utah 84115, Attention: Terrell W. Smith, Fremont
Series 1999-1; provided that during the period that the Master Servicer is
acting as Servicer, notices shall be sent to the Master Servicer.
Any such notices shall be deemed to be effective with respect to any
party hereto upon the receipt of such notice by such party, except that notices
to the Securityholders shall be effective upon mailing or personal delivery.
Section 12.07. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
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Section 12.08. No Partnership.
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 12.09. Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 12.10. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Indenture Trustee, the Issuer, the
Noteholders, the Securities Insurer, the Master Servicer and their respective
successors and permitted assigns.
Section 12.11. Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 12.12. Actions of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Securityholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by agent
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Depositor, the Servicer, the Indenture Trustee or the Issuer.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Depositor, the Servicer, the Indenture Trustee and the Issuer if
made in the manner provided in this Section 12.12.
(b) The fact and date of the execution by any Securityholder of any
such instrument or writing may be proved in any reasonable manner, which the
Depositor, the Servicer, the Indenture Trustee or the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Securityholder shall bind every holder of every
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Depositor, the Servicer, the Indenture Trustee, the Securities Insurer or
the Issuer in reliance thereon, whether or not notation of such action is made
upon such Security.
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(d) The Depositor, the Servicer, the Indenture Trustee or the Issuer
may require additional proof of any matter referred to in this Section 12.12 as
it shall deem necessary.
Section 12.13. Reports to Rating Agencies.
(a) The Indenture Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any
Home Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of the Servicer, the Master Servicer, any Custodian or
the Issuer;
(iv) notice of final payment on the Notes;
(v) any Notice of Default;
(vi) copies of the annual independent accountants' report
delivered pursuant to Section 7.05 hereof, and copies of any compliance reports
delivered by the Servicer including under Section 7.04 hereof; and
(vii) copies of any Payment Date Statement pursuant to
Section 6.01(b) hereof.
(b) With respect to the requirement of the Indenture Trustee to provide
statements, reports and notices to the Rating Agencies, such statements, reports
and notices shall be delivered to the Rating Agencies at the following
addresses: (i) if to Standard & Poor's Ratings Services, 25 Broadway, New York,
New York, 10004, Attention: Residential Mortgage Group; and (ii) if to Moody's
Investors Service, Inc., 99 Church Street, Corporate Department - 4th Floor, New
York, New York 10007, Attention: Residential Mortgage Monitoring Department.
Section 12.14. Holders of the Residual Interest Certificates.
(a) Any sums to be distributed or otherwise paid hereunder or under the
Owner Trust Agreement to the holders of the Residual Interest Certificates shall
be paid to such holders pro rata based on their percentage holdings in the
Residual Interest;
(b) Where any act or event hereunder is expressed to be subject to the
consent or approval of the holders of the Residual Interest Certificates, such
consent or approval shall be capable of being given by the holder or holders of
not less than 51% of the Residual Interest in aggregate.
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<PAGE>
Section 12.15. Year 2000 Compliance.
Each of the Servicer, the Master Servicer and the Indenture Trustee
shall assure that their respective computer systems are year 2000 compliant by
December 31, 1999.
Section 12.16. Grant of Noteholder Rights to Securities Insurer.
In consideration for the guarantee of the Insured Securities by the
Securities Insurer pursuant to the Guaranty Policy, and by acceptance of an
Insured Security, the Noteholders hereby grant to the Securities Insurer the
right to act as the holder of 100% of the outstanding Insured Securities for the
purpose of exercising the rights of the holders of the Insured Securities under
this Agreement, without the consent of any such Noteholders, including the
voting rights of such holders, but excluding those rights requiring the consent
of all such holders under Section 12.02(b), and any rights of such holders to
payments under Section 5.01 (d) and (e) hereof and under section 8.02(c) of the
Indenture; provided that the preceding grant of rights to the Securities Insurer
by the Noteholders shall be subject to Section 12.18 hereof. The rights of the
Securities Insurer to direct certain actions and consent to certain actions of
the Majority Noteholders hereunder will terminate at such time as the Principal
Balance of Insured Securities have been reduced to zero and the Securities
Insurer has been paid the Securities Insurer Reimbursement Amount in full and
all other amounts owed under the Guaranty Policy and Insurance Agreement and the
Securities Insurer has no further obligation under the Guaranty Policy.
Section 12.17. Third Party Beneficiary.
The parties hereto acknowledge that the Securities Insurer is an
express third party beneficiary hereof entitled to enforce any rights reserved
to it hereunder as if it were actually a party hereto.
Section 12.18. Suspension and Termination of Securities Insurer's
Rights.
(a) During the continuation of a Securities Insurer Default, the rights
granted or reserved to the Securities Insurer hereunder shall vest instead in
the Majority Noteholders; provided, however, that the Securities Insurer shall
be entitled to any payments of the Securities Insurer Reimbursement Amount, and
the Securities Insurer shall retain those rights under Section 11.01 to consent
to the termination of this Agreement and Section 12.02 to consent to any
amendment of this Agreement.
(b) At such time as either (i) the Principal Balances of the Insured
Securities have been reduced to zero or (ii) the Guaranty Policy has been
terminated, and in either case of (i) or (ii) the Securities Insurer has been
paid the Securities Insurer Reimbursement Amount in full and all other amounts
owed under the Guaranty Policy and the Insurance Agreement (and the Securities
Insurer no longer has any obligation under the Guaranty Policy, except for
breach thereof by the Securities Insurer), then the rights and benefits granted
or reserved to the Securities Insurer hereunder (including the rights to direct
certain actions and receive certain notices) shall terminate and the Noteholders
(including in certain instances the Majority Noteholders) shall be entitled to
the exercise of such rights and to receive such benefits of the
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Securities Insurer following such termination to the extent that such rights and
benefits are applicable to the Noteholders (including the Majority Noteholders).
IN WITNESS WHEREOF, the Issuer, the Depositor, the Transferor, the
Servicer, the Master Servicer and the Indenture Trustee have caused their names
to be signed by their respective officers thereunto duly authorized, as of the
day and year first above written, to this Sale and Servicing Agreement.
FREMONT HOME LOAN OWNER TRUST
SERIES 1999-1, as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By:
-----------------------------
Name:
Title:
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, as Depositor
By:
------------------------------
Name:
Title:
FREMONT INVESTMENT & LOAN, as
Transferor and Master Servicer
By:
------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK, not in
its individual capacity but
solely as Indenture Trustee
By:
------------------------------
Name:
Title:
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of March 1999, personally appeared _______________, known to me to be a
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said WILMINGTON TRUST
COMPANY, not in its individual capacity but in its capacity as Owner Trustee of
FREMONT HOME LOAN OWNER TRUST 1999-1 as Issuer, and that she executed the same
as the act of such corporation for the purpose and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF WILMINGTON TRUST COMPANY, this the ____
day of March, 1999.
Notary Public, State of ___________
<PAGE>
THE STATE OF [_________] )
)
COUNTY OF [____________] )
BEFORE ME, the undersigned authority, a Notary Public, on this _____
day of March 1999, personally appeared _______________, known to me to be a
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION IV, as the Depositor, and that he/she executed the same
as the act of such corporation for the purpose and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV, this the ____ day of March, 1999.
Notary Public, State of __________
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day
of March 1999, personally appeared _______________________, known to me to be
the person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said FREMONT INVESTMENT &
LOAN, as the Transferor and Master Servicer, and that he executed the same as
the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FREMONT INVESTMENT & LOAN, this the
____ day of March 1999.
Notary Public, State of ______
<PAGE>
THE STATE OF ___________ )
)
COUNTY OF ______________ )
BEFORE ME, the undersigned authority, a Notary Public, on this __ day
of March 1999, personally appeared ____________________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said First Union National
Bank, not in its individual capacity, but in its capacity as Indenture Trustee,
and that she executed the same as the act of such entity for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL, this the __ day of March 1999.
Notary Public, State of ____
<PAGE>
EXHIBIT A
HOME LOAN SCHEDULE
INFORMATION IS ON FILE WITH THE INDENTURE TRUSTEE AT
FIRST UNION NATIONAL BANK
230 TYRON STREET
CHARLOTTE, NORTH CAROLINA 28288
<PAGE>
EXHIBIT B
FORM OF SERVICER'S MONTHLY REMITTANCE REPORT TO INDENTURE TRUSTEE
INFORMATION IS AVAILABLE WITH THE SERVICER AT
FAIRBANKS CAPITAL CORP.
3815 SOUTH WEST TEMPLE
SALT LAKE CITY, UTAH 84165
<PAGE>
EXHIBIT C
FORM OF LOAN LIQUIDATION REPORT
Customer Name:
Account No.:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off) ___________
Date last paid ___________
Foreclosure
Date of Foreclosure ___________
Date of REO ___________
Date of REO Disposition
Property Sale Price/Estimated Market Value at disposition $___________
Settlement (short pay-off and collection actions)
Date of Settlement Payment ___________
Defaulted Loan Sale
Date of Sale
Charge-off or Bankruptcy ___________
Date of Charge-off or Bankruptcy Discharge
2. Liquidation Proceeds
Principal Prepayment $___________
Property Sale Proceeds $___________
Insurance Proceeds $___________
Settlement Payment Loan Sale Proceeds $___________
Other (Itemize) $___________
Total Proceeds $___________
Liquidation Expenses
Servicing Advances $___________
Servicing Fees $___________
Other Servicing Compensation $___________
Collection Agent or Attorney's Fees $___________
Total Advances $___________
3. Net Liquidation Proceeds $___________
(Item 2 minus Item 3)
4. Principal Balance of Mortgage Loan $___________
5. Loss, if any (Item 5 minus Item 4) $___________
<PAGE>
EXHIBIT D
FORM OF MASTER SERVICER RENEWAL NOTICE
[MASTER SERVICER]
Re: Fremont Home Loan Asset Backed Notes, Series 1999-1
Dear Ladies and Gentlemen:
Reference is hereby made to the Sale and Master Servicing Agreement
dated as of March 1, 1999 (the "Agreement") among Fremont Home Loan Owner Trust
1999-1, as Issuer, PaineWebber Mortgage Acceptance Corporation IV, as Depositor,
Fremont Investment & Loan, as Transferor, Master Servicer, and as Servicer, and
First Union National Bank, as Indenture Trustee. The Indenture Trustee has not
received notification from Financial Security Assurance, Inc., as the Securities
Insurer, that instructs the Indenture Trustee not to renew the term of
______________ as the Master Servicer under the Agreement. Therefore, pursuant
to Section 9.05 of the Agreement, the Indenture Trustee hereby notifies
________________________ that its term as Master Servicer has been extended for
a successive three calendar month period beginning with the month of __________,
_____.
FIRST UNION NATIONAL BANK,
as Indenture Trustee
By:
---------------------------------
Name:
Title:
cc: [Securities Insurer]
PaineWebber Mortgage Acceptance Corporation IV
1285 Avenue of the Americas
New York, New York 10019
Attn: John Fearey, Esq.
Fremont Home Loan Owner Trust 1999-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attn: Emmett R. Harmon
<PAGE>
EXHIBIT E
<PAGE>
AGREEMENT REGARDING
STANDARD SERVICING TERMS
BETWEEN
FAIRBANKS CAPITAL CORP.
AS SERVICER
AND
FREMONT INVESTMENT & LOAN
AS INITIAL OWNER AND MASTER SERVICER
RESIDENTIAL MORTGAGE LOANS
DATED AS OF MARCH 1, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.......................................................
Section 1.1. Definitions..............................................
Section 1.2. Interpretation of Agreement..............................
ARTICLE II DOCUMENTS TO BE DEPOSITED WITH CUSTODIAN.........................
Section 2.1. Custodial Agreement......................................
Section 2.2. Possession of Mortgage Files.............................
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................
Section 3.1. Servicer Representations and Warranties..................
Section 3.2. Owner Representations and Warranties.....................
Section 3.3. Breach of Representation or Warranty.....................
Section 3.4. Cooperation..............................................
ARTICLE IV LOAN ADMINISTRATION..............................................
Section 4.1. General..................................................
Section 4.2. Servicing Commencement Date..............................
Section 4.3. Duties Servicer May Delegate.............................
Section 4.4. Servicer Mortgage Loan Files.............................
Section 4.5. Release of Custodial Mortgage Loan Files.................
Section 4.6. Documents, Records, and Funds in Possession of Servicer
to be Held for Owner....................................
Section 4.7. Microfilmed Records......................................
Section 4.8. Enforcement of Due-On-Sale Clause; Assumption............
Section 4.9. Partial Release, Easement and Eminent Domain.............
Section 4.10. Insurance...............................................
Section 4.11. Evidence of Insurance...................................
Section 4.12. Insurance Notices.......................................
Section 4.13. Default by Insurer......................................
Section 4.14. Hazard Insurance........................................
Section 4.15. Hazard Insurance Loss Settlement........................
Section 4.16. Uninsured Hazard Loss...................................
Section 4.17. Flood Insurance.........................................
Section 4.18. Condominium and PUD Insurance Coverage Requirements.....
Section 4.19. Special Flood Hazard Insurance for Condominium or PUD...
Section 4.20. Name of Insured.........................................
Section 4.21. Mortgagee Clause........................................
Section 4.22. Title Insurance.........................................
Section 4.23. Tax and Insurance Reserves..............................
Section 4.24. Delinquencies...........................................
Section 4.25. Property Inspection.....................................
Section 4.26. Notification Matters....................................
Section 4.27. Abandonment.............................................
Section 4.28. Plans for Curing Delinquencies..........................
Section 4.29. Loan Modifications......................................
Section 4.30. Advance Responsibility During Delinquency...............
Section 4.31. Bankruptcies............................................
Section 4.32. [Intentionally Omitted].................................
Section 4.33. Deed-in-Lieu of Foreclosure.............................
Section 4.34. Actions Prior to Foreclosure............................
Section 4.35. Retention of Attorneys for Foreclosure - Foreclosure
Fees...................................................
Section 4.36. Foreclosure Procedures..................................
Section 4.37. Disbursement of Escrow Items............................
Section 4.38. Reinstatement of Mortgage Loans.........................
Section 4.39. Partial Payment Toward Reinstatement of Mortgage Loans..
Section 4.40. Servicing Requirements for REO..........................
Section 4.41. Marketing REO...........................................
Section 4.42. Rehabilitation..........................................
Section 4.43. Required REO Documentation..............................
Section 4.44. Satisfactions...........................................
Section 4.45. Disclosure Upon Transfer of Servicing...................
Section 4.46. Response to Borrower Inquiries..........................
Section 4.47. Environmental Problems..................................
Section 4.48. Limitation on Authority.................................
Section 4.49. Direction of Owner......................................
Section 4.50. Conflicts and Removal of Assets.........................
Section 4.51. Reports Pursuant to Requirements........................
Section 4.52. Computer Systems........................................
ARTICLE V LOAN ACCOUNTING...................................................
Section 5.1. General..................................................
Section 5.2. Individual Mortgage Loan Accounting Requirements.........
Section 5.3. Interest Calculations....................................
Section 5.4. Application of Mortgage Loan Payments....................
Section 5.5. Full Payment Not Received from Borrower..................
Section 5.6. Curtailments.............................................
Section 5.7. Reapplication of Prior Prepayments.......................
Section 5.8. Liquidations.............................................
ARTICLE VI ACCOUNTING.......................................................
Section 6.1. General..................................................
Section 6.2. Account Maintenance......................................
Section 6.3. P & I Account; Remittance................................
Section 6.4. T & I Account............................................
Section 6.5. Tax and Insurance Reserves...............................
Section 6.6. Protective Advances......................................
Section 6.7. Servicer's Overhead Not Reimbursable.....................
Section 6.8. Access to Records........................................
Section 6.9. Securitization Financing.................................
Section 6.10. Late Charge Payment.....................................
ARTICLE VII REPORTS TO THE OWNER............................................
Section 7.1. Reports to the Owner.....................................
Section 7.2. Annual Officer's Certificate as to Compliance............
Section 7.3. Annual Independent Public Accountants' Servicing Report..
Section 7.4. Monthly Document Report..................................
Section 7.5. Securitization Financing.................................
ARTICLE VIII COMPENSATION TO SERVICER......................................
Section 8.1. Compensation to the Servicer.............................
ARTICLE IX MERGER OR CONSOLIDATION OF SERVICER; RESIGNATION; DEFAULT........
Section 9.1. Merger or Consolidation..................................
Section 9.2. Assignment or Transfer of Servicing Agreement............
Section 9.3. Resignation of Servicer..................................
Section 9.4. Events of Default by Servicer............................
Section 9.5. Termination of the Servicer Without Cause................
Section 9.6. Indemnification by the Servicer..........................
Section 9.7. Indemnification by the Owner.............................
Section 9.8. Indemnification Procedures...............................
Section 9.9. Consent..................................................
ARTICLE X MISCELLANEOUS.....................................................
Section 10.1. Errors and Omissions Coverage and Fidelity Coverage.....
Section 10.2. No Assignment or Delegation of Duties by Servicer.......
Section 10.3. Binding Nature of Agreement; Assignment.................
Section 10.4. Assignment. Entire Agreement; Waivers..................
Section 10.5. Amendments and Supplements..............................
Section 10.6. CONTROLLING LAW.........................................
Section 10.7. No Joint Venture; Limited Agency........................
Section 10.8. Counterparts............................................
Section 10.9. Notices.................................................
Section 10.10. Provisions Separable; Interpretation...................
Section 10.11. Confidentiality........................................
Section 10.12. Expenses...............................................
EXHIBIT A - Form of Servicing Agreement
EXHIBIT B - Form of Receipt
EXHIBIT C - Reports to the Owner
SCHEDULE I - Servicing Policies and Procedures
<PAGE>
AGREEMENT REGARDING STANDARD SERVICING TERMS
This AGREEMENT REGARDING STANDARD SERVICING TERMS (this "Agreement"),
dated as of March 1, 1999, by and between FREMONT INVESTMENT & LOAN, having an
office at 175 NORTH RIVERVIEW DRIVE, ANAHEIM, CALIFORNIA 92808, as the initial
owner (in such capacity, the "Owner") and as master servicer (in such capacity,
the "Master Servicer") and FAIRBANKS CAPITAL CORP., a Utah corporation, having
an office at 3815 SOUTH WEST TEMPLE, SALT LAKE CITY, UTAH 84115-4412, as
servicer (the "Servicer").
RECITALS
WHEREAS, Owner currently owns certain sub-prime residential mortgage
loans;
WHEREAS, Owner, from time to time, intends to finance certain
residential mortgage loans, in one or more securitization transactions;
WHEREAS, Servicer is engaged in, among other things, the servicing of
residential mortgage loans; and
WHEREAS, Owner and Servicer desire to contract with each other from
time to time for the servicing responsibilities associated with certain of the
above-described types of mortgage loans by periodically executing servicing
agreements that adopt the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties hereinafter set forth and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Owner and the Servicer agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS.
The capitalized terms in this Agreement and not otherwise defined shall
have the meanings given below in this Section 1.1.
ACCEPTED SERVICING PRACTICES: With respect to any Mortgage Loan or REO,
those servicing, collection, resolution, or disposition practices as are
undertaken in good faith and in the best interests of Owner and as are performed
with the same care, skill, prudence, and diligence with which the Servicer
services and administers mortgage loans or properties for other portfolios
similar to the Mortgage Loan and REO, as the case may be, and in a manner
consistent with the customary practices of prudent institutions in the business
of servicing sub-prime mortgage loans, including the "Servicing Policies and
Procedures" set forth in Schedule I hereto, as such may be amended from time to
time upon the agreement of the Servicer and the Owner, but without regard to:
1. Any relationship that Servicer, or any Affiliate of Servicer
may have with the related Borrower; or
2. Servicer's right to receive compensation for its services
hereunder or with respect to any particular transaction; or
3. The ownership, or servicing, or management for others, by
Servicer of any other mortgage loans or property;
provided, however, that such services are performed in compliance with all
Requirements, the terms of this Agreement, any related Servicing Agreement, and
the terms and provisions of the Mortgage Loan Documents.
ACCOUNT CUSTODIAN OR CUSTODIAN: First Union National Bank, a national
banking association having an address at 9639 Dr. Perry Road, Suite 124,
Ijamsville, Maryland 21754, or such other institution designated by the Owner.
AFFILIATE: Any person or entity that directly or indirectly controls,
is controlled by or is under common control with such person or entity, and when
used in connection with this definition, "control" shall mean the power to
direct or cause the direction of the management and policies of such person or
entity, whether through the ownership of voting securities of such person or
entity, by contract or otherwise. "Controlling" and "Controlled" shall have
meanings correlative to the foregoing.
ANCILLARY INCOME: All ancillary income (other than interest, interest
on the P & I Account, any Prepayment Penalties and 20% of the Late Charges in
accordance with Section 6.10 hereof) from the Mortgage Loans and Mortgaged
Premises, including without limitation, insufficient fund fees, assumption fees,
modification fees received from a Borrower, fees associated with any repayment
plan or forbearance agreement and all other incidental and customary fees.
APPRAISAL REPORT: A report setting forth the fair market value of a
Mortgaged Premises as determined by an appraiser. For appraisals conducted prior
to the Servicing Commencement Date, such Appraisal Reports shall be in the form
received by the Servicer, and for appraisals conducted subsequent to the
Servicing Commencement Date, such Appraisal Reports shall be in a form
indicating that the related appraisals have been conducted in accordance with
the Uniform Standards of Professional Appraisal Practice, provided in each case
by an independent appraiser (i) who, at the time the appraisal was conducted,
met the minimum qualifications of Fannie Mae or Freddie Mac for appraisers of
conventional residential mortgage loans and (ii) who had no interest, direct or
indirect, in the Mortgaged Property or in any loan made on the security thereof,
and (iii) whose compensation was not affected by the results of the appraisal.
ASSIGNMENT: The assignment of a Security Instrument or equivalent
instrument, which is in recordable form and may be in the form of a blanket
assignment, sufficient under the laws of the jurisdiction wherein the related
Mortgaged Premises are located to transfer all the rights of the secured party
pursuant to such Security Instrument to a transferee for valid consideration.
ASSUMPTION: The process whereby, on sale or transfer of a legal or
beneficial interest in Mortgaged Premises, the new owner of the Mortgaged
Premises becomes legally obligated under the terms of the existing Security
Instrument, Note and any addenda and riders to the Security Instrument or Note.
Subsequent to the Assumption, the new owner of the property shall be deemed to
be the Borrower under the Mortgage Loan Documents.
ATTORNEY'S TITLE OPINION: With respect to Mortgaged Premises, an
opinion of title given by an attorney licensed to practice law in the
jurisdiction where the Mortgaged Premises are located, stating that the Security
Instrument is a first priority lien on the Mortgaged Premises subject only to
Permitted Encumbrances.
BANKRUPTCY "CRAM DOWN": With respect to any Mortgage Loan involved in a
bankruptcy proceeding, the reduction by the bankruptcy court of either the
Unpaid Principal Balance of the Note, accrued interest on the Note or the Note
Rate.
BORROWER: The Person or Persons obligated to make payments of principal
and interest on a Mortgage Loan, including but not limited to all borrowers
obligated jointly, severally or jointly and severally and all guarantors.
BUSINESS DAY: Any day other than a Saturday, Sunday or day when banks
are authorized or obligated to be closed under the laws of the State of Utah,
New York or California.
CONDOMINIUM INSURANCE (CONDOMINIUM INSURANCE POLICY): Multi-peril
insurance of required coverages covering the entire Condominium Project.
Coverage shall include fire and extended coverage and all other coverages based
on the construction, location and use of the Condominium Project. Coverage shall
be on a 100% replacement cost basis.
CONDOMINIUM PROJECT: Real estate, including the separate ownership in
fee, or on a satisfactory leasehold estate, of a particular residential unit
with an indivisible interest in the real estate designated for common ownership
strictly by unit owners.
CONDOMINIUM UNIT: A single family property within a Condominium
Project.
CURRENT SERVICER: Any other servicer, sub-servicer, document custodian,
owner, holder, originator, or other Person who, as of the date of this Agreement
or any related Servicing Agreement, has possession of any document or
information constituting a part of the Servicer Mortgage Loan File.
CURTAILMENT: Any partial prepayment of principal outstanding on a
Mortgage Loan that otherwise is current which prepayment is not accompanied by
an amount representing the full amount of scheduled interest due on the Mortgage
Loan.
CURTAILMENT INTEREST: When a Curtailment is applied retroactively by
the Servicer to the Unpaid Principal Balance of a Mortgage Loan outstanding on
the first day of the month in which the Curtailment is received, as set forth in
Section 505 herein, an amount equal to 30 days of interest on the Curtailment at
the Note Rate.
CUSTODIAL AGREEMENT: The respective agreement providing for custody of
Mortgage Loan Documents with respect to a particular group of Mortgage Loans
serviced pursuant to a Servicing Agreement.
CUSTODIAL MORTGAGE LOAN FILE: All documents, instruments and other
papers deposited with and held by the Custodian as to any Mortgage Loan,
including the documents specified in Section 403(a), as well as any other
documents that come into the Custodian's possession with respect to a Mortgage
Loan.
CUSTODIAL CLEARING ACCOUNT: An account maintained by the Servicer for
the benefit of the Owner for the deposit of all funds collected in connection
with the Mortgage Loans.
CUSTODIAL TAXES AND INSURANCE (T & I) ACCOUNT: As provided in Section
6.1.
DELINQUENCY: A Delinquency occurs when all or part of the Borrower's
Monthly Payment and, where applicable, Escrow is not paid on the Due Date. For
reporting purposes, a Delinquency that remains uncured for more than one
calendar month, but not more than two, is considered a 30-day Delinquency. A
Delinquency that has been uncured for more than two calendar months, but not
more than three, is considered a 60-day Delinquency. A Delinquency that has been
uncured for more than three calendar months or more is considered a 90-day and
over Delinquency.
DUE DATE: The day of each month on which the Borrower's Monthly Payment
and, where applicable, Escrow payment is due as stated in the Note.
DUE-ON-SALE CLAUSE: The clause in a Security Instrument requiring the
payment of the entire Mortgage Loan balance upon sale or transfer of an interest
in the Mortgaged Premises.
ENVIRONMENTAL PROBLEM PROPERTY: Shall have the meaning set forth in
Section 4.47.
ERRORS AND OMISSIONS POLICY: An insurance policy insuring against
losses caused by errors or omissions of the Servicer and its personnel,
including, but not limited to, losses caused by the failure to pay insurance
premiums or taxes, to record or perfect liens, to effect valid transfers of
Notes, or to properly service Mortgage Loans.
ESCROW: All funds collected by the Servicer to cover expenses of the
Borrower required to be paid under the Security Instrument, including, without
limitation, taxes, special assessments, association dues, ground rents, water,
sewer and other governmental impositions or charges that are or may become liens
on the Mortgaged Premises prior to that of the Mortgage Loan, as well as Hazard
Insurance and Flood Insurance.
FANNIE MAE: The entity formally known as The Federal National Mortgage
Association or any successor thereto.
FANNIE MAE GUIDELINES: The guidelines contained in the Fannie Mae
Seller's Guide and in the Fannie Mae Servicing Guide pertaining to
one-to-four-family, first lien, conventional residential mortgage loans, and
such other rules, regulations and guidelines adopted by Fannie Mae that
establish eligibility requirements for the purchase of conventional, residential
mortgage loans by Fannie Mae or establish loan service requirements for mortgage
loans purchased by Fannie Mae, as amended or supplemented from time to time.
Wherever the Servicer is required to follow Fannie Mae Guidelines herein, the
Servicer shall apply such Guidelines to all Mortgage Loans regardless of whether
a Mortgage Loan is not of a type purchased by Fannie Mae.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FIDELITY BOND: An insurance policy insuring against losses caused by
improper or unlawful acts of the Servicer's personnel. Any Fidelity Bond shall
name the Owner, its successors and assigns as a certificate owner.
FLOOD INSURANCE (FLOOD INSURANCE POLICY): An insurance policy insuring
against flood damage to a Mortgaged Premises, required for Mortgaged Premises
located in "flood hazard" areas identified by the Secretary of HUD or the
Director of the Federal Emergency Management Agency.
FREDDIE MAC: The Federal Home Loan Mortgage Corporation or any
successor thereto.
FULL PAYOFF: The amount required to satisfy a Mortgage Loan in full,
which amount includes the unpaid principal balance, interest due on account and
any other funds to be collected at the time of payoff, such as recording fees,
service fees, attorney fees, escrow advances, Prepayment Penalties, Late Charges
and other costs as applicable.
HAZARD INSURANCE (HAZARD INSURANCE POLICY): A fire and casualty
extended coverage insurance policy insuring against loss or damage from fire,
hazard, flood, wind, liability, and other perils covered within the scope of
standard extended hazard coverage, together with all riders and endorsements
thereto.
HUD: The United States Department of Housing and Urban Development.
INITIAL OWNER: Fremont Investment & Loan.
INSURANCE POLICY: Any insurance for a Mortgage Loan referred to in this
Agreement, including Hazard Insurance, Flood Insurance, Title Insurance and
Condominium or PUD Insurance, including all riders and endorsements thereto.
INSURANCE PROCEEDS: Proceeds payable from an Insurance Policy, to be
paid directly to the Tax and Insurance Reserve in the case of Hazard or Flood
Insurance, or to the P & I Account in the case of Title Insurance.
INSURER: An insurance company that provides an Insurance Policy.
LATE CHARGES: Any fees imposed on the Borrower by the Servicer for late
payments.
LIQUIDATION: Application of a payment to a Mortgage Loan which results
in the release in full of the lien of the Security Instrument on any Mortgaged
Premises, whether through foreclosure, condemnation, prepayment in full or
otherwise.
LIQUIDATION PROCEEDS: The amount received by the Servicer in connection
with any liquidation of a Mortgage Loan.
LOAN MATERIAL: Shall have the meaning specified in Section 10.11
hereof.
LOAN NUMBER: A unique number assigned by the Servicer to each Mortgage
Loan.
MASTER SERVICER: Fremont Investment & Loan, as master servicer of the
Mortgage Loans in connection with a securitization transaction, or any successor
thereto.
MODIFICATION AGREEMENT: A manually executed written instrument recorded
in the appropriate jurisdiction evidencing a change in the interest rate or
repayment terms of a Note.
MONTHLY CUT-OFF DATE: With respect to any Remittance Date, the last day
of the month preceding the month in which such Remittance Date occurs.
MONTHLY DOCUMENT REPORT: The monthly report prepared by the Servicer
and delivered to Owner pursuant to Section 7.4.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest due in the applicable month under the
terms of the Note. MORTGAGE LOAN: A loan that is secured by a mortgage, deed of
trust or deed to secure debt on the related Mortgaged Premises and that is
identified in a Mortgage Loan Schedule. The term "Mortgage Loan" includes all of
the Owner's right, title, and interest in and to the Mortgage Loan, including,
without limitation, the Mortgage Loan Documents and all other material and
information collected by the Servicer in connection with the Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: All documents held by the Owner (or its
designee), the Servicer or the Custodian, as set forth in Section 4.4.
MORTGAGE LOAN PROCEEDS: (i) The net sale proceeds of any REO, (ii) the
net sale proceeds at a foreclosure sale, (iii) the amount of a Full Payoff or
Short Payoff, (iv) any payment by a Borrower resulting in the Liquidation of a
Mortgage Loan, or (v) the proceeds from the sale by the Owner of a Mortgage Loan
that is the subject of this Agreement, in each case after deduction from the
proceeds or payment of an amount equal to all Protective Advances made by the
Servicer in connection with the related Mortgage Loan and not previously
reimbursed.
MORTGAGE LOAN SALE AGREEMENT: The agreement pursuant to which Owner,
other than the Initial Owner purchased a Mortgage Loan.
MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached as an
exhibit to a Servicing Agreement.
MORTGAGED PREMISES: The property securing a Note and subject to the
lien of the related Security Instrument, which property consists of real
property on which is located a one-to four-family detached residential dwelling,
condominium or attached town house or row house.
MORTGAGEE: The secured party to which the Security Instrument initially
grants a lien on the Mortgaged Premises.
NOTE: A manually executed written instrument evidencing the Borrower's
promise to repay a stated sum of money, plus interest, to the noteholder by a
specific date according to a schedule of principal and interest payments.
NOTE ASSUMPTION RIDER: A rider attached to the Note which states the
terms upon which an Assumption may occur.
NOTE RATE: The interest rate payable by the Borrower on the Mortgage
Loan according to the terms of the Note.
OFFICER: An officer or principal of a corporation or partnership,
respectively, who is authorized to execute documents on behalf of his
corporation or partnership.
OFFICER'S CERTIFICATE: For any Person, a certificate that has been
signed on behalf of that Person by an individual who is identified in that
Certificate as being an officer of that Person or any other individual
authorized to execute the certificate.
OWNER: Fremont Investment & Loan, its assigns and their respective
successors in interest; provided, however, that upon a transfer of its interest
in the Mortgage Loans in connection with a securitization transaction, the term
"Owner" shall, where applicable, refer to the Master Servicer acting on behalf
of the Owner.
PERMITTED ENCUMBRANCES: With respect to any Mortgage Loan, (i) the lien
created by the Security Instrument, (ii) liens for taxes and assessments due and
payable, (iii) covenants, conditions and restrictions, rights-of-way, easements
and other matters of public record as of the date of recording of such Security
Instrument acceptable to mortgage lending institutions in the area in which the
Mortgaged Premises are located or specifically referred to in the appraisal
performed in connection with the origination of the related Mortgage Loan, and
(iv) such other matters to which like properties are commonly subject which in
the view of the Servicer do not, individually or in the aggregate, materially
interfere with the benefits of the security intended to be provided by the
Security Instrument.
PERMITTED INVESTMENTS: Any one or more of the obligations or securities
listed below, which investments mature, unless payable on demand, not later than
the Business Day preceding the next occurring Remittance Date:
(i) direct obligations of, or obligations fully guaranteed as
to principal and interest by, the United States or any agency or
instrumentality thereof, provided that such obligations are backed by
the full faith and credit of the United States;
(ii) certificates of deposit, demand and time deposits and
bankers' acceptances of any bank or trust company incorporated under
the laws of the United States or any state, provided that the
short-term unsecured debt obligations of such bank or trust company at
the date of acquisition thereof have been rated by each of two or more
nationally recognized statistical rating organizations in its highest
rating category; and
(iii) any other demand, money market or time deposit account
or obligation, or interest-bearing or other security or investment,
acceptable to the Owner.
Notwithstanding the foregoing, Permitted Investments shall not include "stripped
securities" or any investments which contractually may return less than the
purchase price therefor; and provided, further, that in the event that the Owner
transfers the Mortgage Loans in connection with a securitization financing,
Permitted Investments shall be defined in accordance with the provisions of the
operative documents executed in connection with such securitization financing.
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 of any government.
PREPAYMENT PENALTIES: Any penalties imposed on the Borrower as the
result of the prepayment of the related Mortgage Loan.
PRINCIPAL AND INTEREST (P & I) ACCOUNT: As provided in Section 6.1.
PROTECTIVE ADVANCE: All customary, reasonable, and necessary
out-of-pocket costs and expenses paid or incurred in connection with the
Servicer's obligations hereunder or in connection with any special services to
be performed by the Servicer pursuant to this Agreement, including without
limitation:
(a) real estate taxes, assessments and similar charges;
(b) insurance premiums;
(c) any expense necessary in order to prevent or cure any violation of
applicable laws, regulations, codes, ordinances, rules, orders, judgments,
decrees, injunctions or restrictive covenants;
(d) any cost or expense necessary in order to maintain or release the
lien on each Mortgaged Property and related collateral, including any mortgage
registration taxes, release fees, or recording or filing fees;
(e) customary expenses for the collection, enforcement or foreclosure
of the Mortgage Loans and the collection of deficiency judgments against
Borrowers and guarantors (including but not limited to the fees and expenses of
any trustee under a deed of trust, foreclosure title searches and other lien
searches);
(f) costs and expenses of any appraisals, valuations, inspections,
environmental assessments (including but not limited to the fees and expenses of
environmental consultants), audits or consultations, engineers, architects,
accountants, on-site property managers, market studies, title and survey work
and financial investigating services;
(g) customary expenses for liquidation, restructuring, modification or
loan workouts, such as sales brokerage expenses and other costs of conveyance;
and
(h) any other reasonable costs and expenses, including without
limitation, costs and expenses related to travel and lodging and legal fees and
expenses incurred by the Servicer under this Agreement in connection with the
enforcement, collection, foreclosure, disposition, condemnation or destruction
of the Mortgage Loans or related Mortgaged Properties and the performance of
Loan Servicing by the Servicer under this Agreement.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that contains
property and improvements owned and maintained by a homeowners' association,
corporation or trust for the enjoyment and use of individual PUD Unit owners
within that parcel of land. The shared portions of the parcel are known as
common property.
PUD INSURANCE (PUD INSURANCE POLICY): Insurance which provides the same
coverage as Condominium Insurance, but for a PUD.
PUD UNIT: A single family property within a PUD.
REAL ESTATE OWNED (REO): Any Mortgaged Premises previously subject to
the lien of a Mortgage Loan after the title thereto has been acquired on behalf
of the Owner through foreclosure or similar proceedings, acceptance of
deed-in-lieu of foreclosure, acquisition of title in lieu of foreclosure or the
acquisition of title by operation of law.
RECEIPT: As provided in Section 4.5.
REMITTANCE DATE: The fifth Business Day of each month.
REPERFORMANCE: Any event or action, including payment by the Borrower,
that causes a Mortgage Loan that was previously sixty (60) days or more past due
to be less than sixty (60) days past due as of the first Business Day of any
calendar month.
REPRESENTATIVE: Shall have the meaning specified in Section 10.11
hereof.
REPURCHASE PRICE: With respect to a Mortgage Loan repurchased pursuant
to a Mortgage Loan Sale Agreement, the amount paid by the Seller upon repurchase
of a Mortgage Loan.
REQUIREMENTS: All federal, state or local laws and any other
requirements of any government or any agency or instrumentality thereof
applicable to the servicing of the Mortgage Loans, the management of the
Mortgaged Premises and the provision of services hereunder by the Servicer.
RESOLUTION: With respect to any Mortgage Loan, the Full Payoff, the
acceptance of a Short Payoff, any other Liquidation, the execution of a
Modification Agreement, or the Reperformance of such Mortgage Loan; provided,
however, that the execution of a Modification Agreement or Reperformance with
respect to any Mortgage Loan shall only be deemed to be a Resolution if the
Borrower with respect to such Mortgage Loan makes or causes to be made three
consecutive monthly payments after the execution of such Modification Agreement
or the Reperformance of such Mortgage Loan.
SECURITY INSTRUMENT: A written instrument creating a valid lien on the
Mortgaged Premises. A Security Instrument may be in the form of a mortgage, deed
of trust, deed to secure debt or security deed, including any riders and addenda
thereto.
SELLER: The seller of Mortgage Loans to the Owner pursuant to a
Mortgage Loan Sale Agreement.
SERVICER MORTGAGE LOAN FILE: A file maintained by the Servicer for each
Mortgage Loan that contains the documents, if applicable, specified in Section
4.4 (to the extent received by the Servicer), as well as any documents or other
information that, in any form, comes into the Servicer's possession with respect
to a Mortgage Loan.
SERVICING AGREEMENT: An agreement between the Servicer and the Owner in
the form of Exhibit A attached hereto.
SERVICING COMMENCEMENT DATE: The date set forth in a Servicing
Agreement as the "Servicing Commencement Date" with respect to the Mortgage
Loans serviced thereunder.
SERVICING FEE: The compensation to which the Servicer is entitled for
servicing the Mortgage Loans pursuant to this Agreement. The amount and method
of determining the Servicing Fee is described in Section 8.1.
SHORT PAYOFF: The amount received under an arrangement entered into
with a delinquent Borrower whereby the Servicer allows the Borrower to sell the
property to a third party at less than the outstanding balance owed by the
Borrower on a Mortgage Loan.
THIRD PARTIES: With respect to any Person, all persons and entities
other than (a) such Person, (b) its Affiliates and their respective successors
and (c) the officers, directors, partners, shareholders, employees (including
"contract employees"), agents and other representatives of such Person acting in
their respective capacities as such.
TITLE INSURANCE (TITLE INSURANCE POLICY): An American Land Title
Association (ALTA) mortgage loan title policy form 1970, or other form of
lender's title insurance policy acceptable to Fannie Mae or Freddie Mac,
including all riders and endorsements thereto, insuring that the Security
Instrument constitutes a valid lien on the Mortgaged Premises subject only to
Permitted Encumbrances.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan, the
outstanding principal balance payable by the Borrower under the terms of the
Note.
SECTION 1.2. INTERPRETATION OF AGREEMENT.
(a) All references in this Agreement to designated Sections,
Articles, Exhibits, and Schedules are to the designated sections and
articles of and exhibits and schedules to this Agreement.
(b) Use of the masculine gender is intended to include the
feminine and neuter genders.
(c) The headings and captions used in this Agreement are for
convenience of reference only and do not define, limit, or describe the
scope or intent of the provisions of this Agreement.
(d) Terms in the singular include the plural and vice versa.
(e) The terms "includes" or "including" are intended to be
inclusive rather than exclusive.
(f) The term "reasonable efforts" or "best efforts" shall mean
the efforts a prudent person desirous of achieving a result would take
in order to achieve that result but shall not be interpreted to require
the Owner or Servicer, as the case may be, to initiate or participate
in any litigation, arbitration, or other proceedings or to incur
expenses in excess of those contemplated by this Agreement or that are
otherwise commercially reasonable in light of the result to be
achieved.
ARTICLE II
DOCUMENTS TO BE DEPOSITED WITH CUSTODIAN
SECTION 2.1. CUSTODIAL AGREEMENT.
Pursuant to the Custodial Agreement, the Owner has or will deliver and
release to the Custodian on or prior to the Servicing Commencement Date the
Mortgage Loan Documents specified in the Custodial Agreement with respect to
each Mortgage Loan, including but not limited to those specified in Section
4.4(a). In the event of any conflict, inconsistency, or discrepancy between any
of the provisions of this Agreement and any of the provisions of the Custodial
Agreement, the provisions of this Agreement shall control and be binding upon
the Owner and the Servicer.
On or prior to the Servicing Commencement Date, the Custodian shall
have certified its receipt of the Mortgage Loan Documents that have been
delivered to the Custodian pursuant to the Custodial Agreement, as evidenced by
the Initial Certification of the Custodian in the form annexed to the Custodial
Agreement. The Owner shall pay all fees and expenses of the Custodian including
but not limited to, (i) any and all annual and warehousing fees, (ii) any and
all termination fees in the event the Custodian is terminated by the Owner or
the Servicer, and (iii) any and all fees due in connection with the deposit or
retrieval of a Mortgage Loan document or documents.
The Owner shall deliver and release to the Servicer any Mortgage Loan
Documents which are in the Owner's possession and which are not required to be
held by the Custodian as promptly as is reasonably possible after the Servicing
Commencement Date.
The Servicer shall forward to the Custodian original documents
evidencing an assumption, modification, consolidation, or extension of any
Mortgage Loan entered into in accordance with this Agreement or any related
Servicing Agreement within one week of their execution, provided, however, that
the Servicer shall provide the Custodian with a certified true copy of any such
document submitted for recordation within one week of its execution, and shall
provide the original of any document submitted for recordation or a copy of such
document certified by the appropriate public recording office to be a true and
complete copy of the original within sixty days of its submission for
recordation.
SECTION 2.2. POSSESSION OF MORTGAGE FILES.
The ownership of each Mortgage Loan, including the Note, the Security
Instrument, the related Mortgage Loan Documents and all rights, benefits,
payments, proceeds and obligations arising therefrom or in connection therewith,
is vested in the Owner, and the ownership of all records and documents with
respect to such Mortgage Loan prepared by or which come into the possession of
the Servicer shall immediately vest in the Owner and shall be retained and
maintained, in trust, by the Servicer at the will of the Owner in a custodial
capacity only. The Mortgage Loan Documents not delivered to the Owner or a
Custodian are and shall be held in trust by the Servicer for the benefit of the
Owner as the owner thereof and the Servicer's possession of the Mortgage Loan
Documents so retained is at the will of the Owner for the sole purpose of
servicing the related Mortgage Loan, and such retention and possession by the
Servicer is in a custodial capacity only. The Mortgage Loan Documents with
respect to each Mortgage Loan shall be segregated from the other books and
records of the Servicer and shall be appropriately marked to clearly reflect the
ownership of such Mortgage Loan by the Owner. The Servicer shall release its
custody of any Mortgage Loan Documents only in accordance with written
instructions from the Owner except where such release is required as incidental
to the Servicer's servicing of the related Mortgage Loans or is in connection
with a repurchase of any such Mortgage Loan pursuant to Section 3.03, or is
otherwise contemplated by this Agreement.
Any documents released to the Servicer in connection with the
foreclosure or servicing of any of the Mortgage Loans shall be held by the
Servicer in trust for the benefit of the Owner in accordance with this Section
2.2. The Servicer shall return to the Owner such documents when the Servicer's
need therefor in connection with such foreclosure or servicing no longer exists,
unless the Mortgage Loan shall be liquidated, in which case, upon receipt of an
additional request for release of documents and receipt certifying such
liquidation from the Servicer to the Owner, the Servicer's request and receipt
submitted pursuant to the first sentence of this paragraph shall be released by
the Owner to the Servicer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. SERVICER REPRESENTATIONS AND WARRANTIES.
The Servicer, in order to induce the consummation of the transactions
contemplated hereby, represents and warrants to Owner and to its successors,
Affiliates and assigns, as of the date of this Agreement, as of the date of any
Servicing Agreement and, except as otherwise provided, throughout the term of
this Agreement, that:
(a) The Servicer was duly formed and is validly existing and
in good standing under the laws of the state of its formation and has
the corporate power and authority to own its assets and to transact the
business in which it is currently engaged. The Servicer is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which the character of
the business transacted by it, in which the properties owned, leased,
or serviced by it or in which the performance of its duties under this
Agreement or any related Servicing Agreement requires such
qualification (except where the failure so to qualify would not have a
material adverse effect on the business, properties, assets, or
condition (financial or otherwise) of the Servicer or Owner, the
Servicer's performance of its obligations hereunder and the
enforceability of any Mortgage Loan).
(b) The Servicer has the power and authority to own its
properties and conduct any and all business required or contemplated by
this Agreement and any related Servicing Agreement and to perform the
covenants and obligations to be performed by it under this Agreement
and any related Servicing Agreement.
(c) The execution, delivery, and performance of this Agreement
and any related Servicing Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement and any Servicing
Agreement), and the performance of all transactions contemplated to be
performed by it under this Agreement and any related Servicing
Agreement, are within the corporate power of the Servicer and have been
duly authorized by all necessary actions on the part of the Servicer.
Neither the execution, delivery, and performance of this Agreement by
the Servicer, nor the consummation by the Servicer of the transactions
herein contemplated, nor compliance with the provisions hereof by the
Servicer, will (i) conflict with or result in a breach of, or
constitute a default under, any of the provisions of the charter or
bylaws of the Servicer or any law, governmental rule, or regulation, or
any judgment, decree, or order binding on the Servicer or any of its
properties, or any of the provisions of any indenture, mortgage, deed
of trust, contract, or other instrument to which it is a party or by
which it or any of its properties is bound or (ii) result in the
creation or imposition of any lien, charge, or encumbrance upon any of
its properties pursuant to the terms of any such indenture, mortgage,
deed of trust, contract, or other instrument.
(d) This Agreement and any related Servicing Agreement, when
duly executed and delivered by the Owner, constitutes a legal, valid,
and binding agreement of the Servicer, enforceable against it in
accordance with its terms, subject, as to enforcement or remedies, to
applicable bankruptcy, reorganization, insolvency, or other similar
laws affecting creditors' rights generally from time to time in effect,
and to general principles of equity.
(e) No consent, approval, order, or authorization of any other
party or of any governmental authority, bureau, or agency or
registration, qualification, or declaration with any such authority is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement or any related Servicing
Agreement.
(f) The Servicer is an approved servicer for Freddie Mac in
good standing and such approval is still in full force and effect. No
event has occurred that would make the Servicer unable to comply with
Freddie Mac eligibility requirements, would require notification to
Freddie Mac or that would result in a breach of the representation made
in the preceding sentence. The Servicer has the facilities, procedures
and experience necessary for the sound servicing of mortgage loans of
the same type as the Mortgage Loans.
(g) The Servicer is not, and, with passage of time, does not
expect to become, insolvent or bankrupt.
(h) At the date hereof, the Servicer does not believe, nor
does it have any reason or cause to believe, that it will not be able
to perform each and every covenant contained in this Agreement or any
related Servicing Agreement or any of the transactions contemplated
hereby or thereby.
(i) There is no litigation or administrative proceeding of or
before any court, tribunal, or governmental body, pending or, to the
Servicer's knowledge, threatened, against the Servicer or any of its
properties, or with respect to this Agreement or any related Servicing
Agreement, which if determined adversely to the Servicer, would
adversely affect the validity or enforceability of this Agreement, any
related Servicing Agreement or any transactions contemplated hereby or
thereby, or the ability of the Servicer to service the Mortgage Loans
hereunder in accordance with the terms hereof, or which would have a
material adverse effect on the financial condition of the Servicer.
(j) The consummation of the transactions contemplated by this
Agreement and any related Servicing Agreement is in the ordinary course
of business of the Servicer.
(k) Neither this Agreement nor any written statement, report,
or other document furnished or to be furnished pursuant to this
Agreement contains any material untrue statement of fact with respect
to Servicer.
(l) The Servicer is not in default under any agreement,
contract, instrument, or indenture of any nature whatsoever to which
the Servicer is a party or by which it is bound nor has any event
occurred which with notice or lapse of time or both would constitute a
default under any such agreement, contract, instrument, or indenture,
except for any default that would not have a material adverse effect on
the ability of the Servicer to perform its obligations under this
Agreement or any related Servicing Agreement.
(m) The Servicer has delivered to the Owner financial
statements as to its last three complete fiscal years and any later
quarter ended more than 60 days prior to the closing date of this
Agreement or any related Servicing Agreement. All such financial
statements fairly present the results of operations and changes in
financial position for each of such periods and the financial position
at the end of each such period of the Servicer and its subsidiaries.
All such financial statements are true, correct and complete as of
their respective dates and have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved, except as set forth in the notes
thereto.
SECTION 3.2. OWNER REPRESENTATIONS AND WARRANTIES.
The Owner, as a condition to the consummation of the transactions
contemplated hereby, represents and warrants to the Servicer and to its
successors, Affiliates, or assigns, as of the date of this Agreement that:
(a) The Owner was duly formed and is validly existing and in
good standing under the laws of the state of its formation, and is duly
qualified to do business and is in good standing under the laws of each
jurisdiction that requires such qualification as a result of Owner's
ownership of the Mortgage Loans or the performance of Owner's
obligations to effect the transactions contemplated by this Agreement
except where the failure to so qualify would not have a material
adverse effect on the Owner's performance of its obligations under this
Agreement.
(b) The Owner has the power and authority to own its
properties and conduct any and all business required or contemplated by
this Agreement and to perform the covenants and obligations to be
performed by it under such Agreement.
(c) The execution and delivery of this Agreement have been
duly authorized by all necessary actions on the part of the Owner;
neither the execution and delivery of this Agreement by the Owner, nor
the consummation by the Owner of the transactions herein contemplated,
nor compliance with the provisions hereof by the Owner, will conflict
with or result in a breach of, or constitute a default under, any of
the provisions of the limited partnership agreement or partnership
certificate of the Owner or any law, governmental rule or regulation,
or any judgment, decree or order binding on the Owner or any of its
properties, or any of the provisions of any indenture, mortgage, deed
of trust, agreement or other instrument to which it is a party or by
which it is bound
(d) This Agreement, when duly executed and delivered by the
Owner, constitutes a legal, valid and binding agreement of the Owner,
enforceable in accordance with its terms, subject, as to enforcement or
remedies, to applicable bankruptcy, reorganization, insolvency or other
similar laws affecting creditors' rights generally from time to time in
effect, and to general principles of equity.
(e) There is no litigation pending or, to the Owner's
knowledge, threatened that, if determined adversely to the Owner, would
have a materially adverse effect on the validity or enforceability
hereof.
(f) No consent, approval, order or authorization of any
governmental authority, or registration, qualification or declaration
with any such authority, other than such as have been obtained, is
required for the performance by Owner of its obligations under this
Agreement.
(g) This Agreement does not contain with respect to Owner any
material untrue statement of fact.
SECTION 3.3. BREACH OF REPRESENTATION OR WARRANTY.
Upon breach of any material requirement or representation or warranty
contained herein or in any related Servicing Agreement, the breaching party
shall notify the other party in writing of the nature of the breach, the date on
which the breach occurred or began, and the breaching party's plans, if any, for
curing the breach.
SECTION 3.4. COOPERATION.
(a) Upon reasonable request by the Servicer, Owner shall
promptly furnish the Servicer with such documents prepared by the
Servicer and satisfactory in form and substance to Owner as may be
necessary or appropriate to enable the Servicer to liquidate, collect
payments against and otherwise service and manage the Mortgage Loans
and Mortgaged Premises in accordance with this Agreement.
(b) The parties acknowledge that Owner will retain title to,
and ownership and exclusive control of, the Mortgage Loans and the
proceeds relating thereto (except to the extent that the Servicer is
entitled to any Protective Advances or Servicing Fees (including
Ancillary Income) prior to disbursing any such proceeds to Owner, to
the extent Servicer is so authorized pursuant to other terms and
provisions in this Agreement) and that, except as set forth in the
preceding parenthetical, the Servicer will not acquire any title to,
security interest in, or other rights of any kind in or to such
Mortgage Loans or proceeds.
(c) Each party agrees that it shall take all actions and
provide such documents and instruments as are reasonably necessary to
carry out the purposes of this Agreement and any related Servicing
Agreement and as may be reasonably requested to better assure and
confirm the respective rights and obligations of the parties under this
Agreement and any related Servicing Agreement. It is understood and
agreed that the foregoing provision shall not operate to preclude or
inhibit either party from the full exercise of its rights under this
Agreement or any related Servicing Agreement.
(d) The Servicer shall be responsible for responding promptly
and accurately to all reasonable requests from Owner, the Borrower or
other Persons for information relating to a Mortgage Loan or any
Mortgaged Premises or to the Borrower that the Servicer is required or
permitted to disclose to such Person, upon compliance by such Person of
any conditions to the release of such information.
(e) The Servicer shall promptly prepare all reports or other
information required to respond to any inquiry from or give any
necessary instructions to provider of hazard or flood insurance, or
other insurer or guarantor, taxing authority, tax servicer, homeowners
association, or condominium association.
(f) At the request and at the expense of the Owner, the
Servicer shall prepare and record or cause the preparation and
recordation of any and all deeds, assignments of mortgage, and
ancillary instruments relating to the conveyance of the Mortgaged
Premises and the Mortgage Loans to Owner or its designee, and shall
supervise the efforts of any third party in preparing and recording
such deeds and assignments of mortgage and ancillary instruments.
(g) At the request and expense of Owner, the Servicer shall
cooperate with Owner in facilitating any financing or securitization of
the Mortgage Loans (including furnishing such reports and information
with respect to the Mortgage Loans as Owner may reasonably request),
and facilitating the transfer of servicing of the Mortgage Loans to
such entity as Owner may designate in connection with a securitization
of the Mortgage Loans.
(h) The Servicer and any director, officer, employee or agent
of the Servicer may rely on any document of any kind which it in good
faith reasonably believes to be genuine and to have been adopted or
signed by the proper authorities respecting any mattters arising
hereunder. Subject to the terms of Section 9.06 hereof, the Servicer
shall have no obligation to appear with respect to, prosecute or defend
any legal action which is not incidental to the Servicer's duty to
service the Mortgage Loans in accordance with this Agreement.
(i) Except as set forth in Section 9.06 herein, neither the
Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to any Person 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 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 Servicer and any directors, 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.
ARTICLE IV
LOAN ADMINISTRATION
SECTION 4.1. GENERAL.
The Servicer agrees, as an independent contractor, to service the
Mortgage Loans and each Mortgaged Premises in accordance with the requirements
set forth herein and, to the extent not inconsistent therewith, in accordance
with Accepted Servicing Practices and generally in accordance with Fannie Mae
guidelines. The Servicer also shall maintain at all times an adequate system of
audit and internal controls, adequate facilities and an experienced staff to
carry out its obligations.
SECTION 4.2. SERVICING COMMENCEMENT DATE.
The Servicer shall commence administering the Mortgage Loans pursuant
to the terms and conditions of this Agreement on the Servicing Commencement
Date.
(a) Owner shall instruct the Current Servicer of any Mortgage
Loans to transfer to the Servicer on or prior to the related Servicing
Commencement Date the Servicer Mortgage Loan Files and/or servicing
records necessary to provide current data with respect to each of such
Mortgage Loans. In the event that not all of the related Servicer
Mortgage Loan Files and/or necessary servicing records are transferred
on the Servicing Commencement Date, the Owner and Servicer shall use
reasonable efforts to cause the Current Servicer to transfer to the
Servicer any Servicer Mortgage Loan Files and/or servicing records
necessary to provide current data with respect to each Mortgage Loan
and each Mortgaged Premises listed on the Mortgage Loan Schedule that
are not transferred to the Servicer on the Servicing Commencement Date.
The Servicer shall transfer and convert the Servicer Mortgage Loan
Files to the Servicer's system as soon as reasonably possible from the
date of receipt by the Servicer of the Servicer Mortgage Loan Files and
such other documents as are reasonably necessary to service the
Mortgage Loans and Mortgaged Premises from the Current Servicer.
(b) In the event Servicer determines that the Servicer
Mortgage Loan File for a Mortgage Loan or any Mortgaged Premises does
not contain all of the Mortgage Loan Documents or other documents
reasonably necessary to service the Mortgage Loan or Mortgaged
Premises, the Servicer shall notify Owner in writing promptly, but in
no event later than thirty (30) days after the date on which Servicer
had actual knowledge of such determination of all such missing
necessary documents. For the purposes of the immediately preceding
sentence and Section 7.4, the phrase "actual knowledge" shall mean that
the Servicer shall only be responsible for examining the "four corners"
of the Servicer Mortgage Loan File presented to the Servicer by the
Owner or the Current Servicer (as the case may be) and verifying that
each such Servicer Mortgage Loan File contains the Mortgage Loan
Documents specified in writing or that are customary for the type of
Mortgage Loan involved (e.g., a promissory note, deed of trust or
mortgage, mortgagee's title policy, and appropriate assignments of the
deed of trust or mortgage); the Servicer shall have no responsibility
for determining whether there are particular missing documents if the
documents (or any writing specifying such documents) presented to
Servicer do not disclose the existence of such missing document (e.g.,
a loan modification not included in the file delivered to the Servicer
by the Owner and not referenced in any of the Mortgage Loan Documents
in the file). Following such determination, the Servicer shall
determine in accordance with Accepted Servicing Practices what
additional documents and information should be obtained for the related
Servicer Mortgage Loan File and shall use reasonable efforts to obtain
such documents and information as soon as reasonably practicable.
(c) All documents provided to the Servicer pursuant to this
Section 4.2 shall be held in trust by the Servicer on behalf of the
Owner pursuant to the terms of Sections 2.2 and 4.4.
(d) Owner agrees to cooperate fully with the Servicer with
respect to all reasonable requests made by the Servicer in connection
with the transfer of servicing pursuant to this Section 4.2.
SECTION 4.3. DUTIES SERVICER MAY DELEGATE.
As set forth below, the Servicer is permitted to delegate certain
servicing responsibilities. No other duties may be delegated without the written
consent of the Owner. The Servicer may retain or subcontract with:
(a) Real estate brokers or listing agents to perform customary
services in connection with the disposition of Mortgaged Premises;
(b) Title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the condition of title
to any Mortgaged Premises and services incidental to the foreclosure or
acquisition in lieu of foreclosure of any Mortgaged Premises, or the
sale or disposition of Mortgaged Premises acquired by the Servicer;
(c) Attorneys licensed to practice in the state where the
Mortgaged Premises or Borrowers are located to perform customary legal
services in connection with the foreclosure or acquisition of Mortgaged
Premises or the sale or disposition of Mortgaged Premises acquired by
the Servicer at or in lieu of foreclosure, or for the collection of
delinquent sums owed on any Mortgage Loan;
(d) Professional property inspection companies to conduct
routine inspections of, and provide written inspection reports on,
Mortgaged Premises as required herein;
(e) Title companies, escrow companies, real estate tax service
companies and similar companies to provide periodic reports as to the
amount of real estate taxes due on any Mortgaged Premises and the due
date or dates of each required installment and to record Mortgage Loan
Documents;
(f) Credit bureaus or credit reporting companies to provide
routine credit reports on Borrowers or persons who have applied to
assume Mortgage Loans; and
(g) Construction companies, contractors and laborers to
provide labor, materials and supplies necessary to protect, preserve
and repair Mortgaged Premises as required herein.
The Servicer shall use reasonable efforts to assure that each Person
retained to provide any of the foregoing services is fully licensed and holds
all required governmental franchises, certificates and permits necessary to
conduct the business in which he is engaged and that such Person is reasonably
reputable, knowledgeable, skilled and experienced and has the necessary
personnel, facilities and equipment required to provide the services for which
he is retained. Any such Person shall be retained solely for the Servicer's
account and at the Servicer's sole expense (subject to any right of
reimbursement provided in this Agreement and shall not be deemed to be an agent
or representative of the Owner or its successors or assigns. The Servicer shall
remain liable to the Owner, its successors and assigns for the performance of
the Servicer's duties and obligations under this Agreement, notwithstanding the
delegation of any servicing function pursuant to this Section 4.3.
SECTION 4.4. SERVICER MORTGAGE LOAN FILES.
The Servicer shall maintain a Servicer Mortgage Loan File for each
Mortgage Loan, each of which is to be clearly marked with the Loan Number and to
be clearly marked to reflect the ownership by the Owner of the related Mortgage
Loan. Such Servicer Mortgage Loan Files shall conform to and will be maintained
in accordance with all applicable Requirements and Accepted Servicing Practices.
(a) The Servicer Mortgage Loan File shall contain the
following, to the extent received by the Servicer upon the Servicer's
request from the Custodian for photocopies of each:
(i) Note. The Note bearing all intervening
endorsements, endorsed in blank, without recourse;
(ii) Security Instrument. The Security Instrument,
with evidence of recording thereon;
(iii) Assumptions and Modifications. All assumption,
modification, consolidation or extension agreements, with
evidence of recording thereon;
(iv) Insurance. Evidence of insurance, as required by
Section 4.12 hereof;
(v) Assignments. An Assignment of the Security
Instrument, executed in blank, and all intervening Assignments
with evidence of recording thereon; and
(vi) Title Policy. A policy of title insurance
including riders and endorsements thereto, or the commitment
or interim binder or preliminary report of the title issued.
Notwithstanding any provisions herein to the contrary, blanket
assignments may be kept by the Servicer in a separate blanket file and need not
be included in each Servicer Mortgage Loan File.
(b) The Servicer Mortgage Loan File shall also contain the
following, to the extent received by the Servicer:
(i) The Appraisal Report made at the time the
Mortgage Loan was originated;
(ii) The settlement statement for the purchase and
financing or refinancing of the Mortgaged Premises under the
Note and Security Instrument;
(iii) The originals of any tax service contract;
(iv) Approval by the Owner of any modifications and
documentation of such modifications to the original Mortgage
Loan Documents, and approval by the Owner of all other actions
taken by the Servicer hereunder that require the approval of
Owner;
(v) Documentation, including appropriate approval by
the Owner, relating to any releases of any collateral
supporting the Mortgage Loan;
(vi) Collection letters or form notices sent to the
Borrower, but only if the Servicer does not maintain
collection files;
(vii) Foreclosure correspondence and legal
notifications, if applicable;
(viii) Water and irrigation company stock
certificates, if applicable;
(ix) The loan application, any credit reports,
verification of employment, verification of any deposit, and
tax returns;
(x) The originals of all RESPA and Truth in Lending
Act disclosure statements executed by the Borrower; and
(xi) All other Mortgage Documents which are
customarily maintained in a Mortgage Loan file in order to
properly service a Mortgage Loan.
The Servicer will promptly deliver to the Custodian any other Mortgage
Loan Document to be included in the Custodial Mortgage Loan File that comes into
the Servicer's possession.
The Servicer acknowledges that the Servicer will hold all Servicer
Mortgage Loan Files in accordance with Accepted Servicing Practices and as
bailee and agent for the Owner, its successors and assigns.
SECTION 4.5. RELEASE OF CUSTODIAL MORTGAGE LOAN FILES.
From time to time as is appropriate for the servicing or foreclosure of
a Mortgage Loan or the acquisition of Mortgaged Premises in lieu of foreclosure
or for the making of any claim against or collection under any Flood Insurance
Policy, Special or Standard Hazard Insurance Policy, the Servicer Fidelity Bond,
the Servicer Errors and Omissions Policy, or for purposes of effecting a partial
release of any Mortgaged Premises from the lien of the Security Instrument or
for making any corrections to the Note or the Security Instrument or other
documents constituting the Custodial Mortgage Loan File, the Servicer shall
deliver to the Custodian, (i) an Officer's Certificate of the Servicer
certifying as to the reason for such release and that such release will not
invalidate the insurance coverage provided in respect to the Mortgage Loan under
any of the foregoing insurance policies, and (ii) a "Receipt" in the form of
Exhibit B executed by an officer of the Servicer or by a Servicing Officer,
designating the Custodial Mortgage Loan File, or the part thereof requested, to
be released to the Servicer.
Upon receipt of the foregoing, the Custodian will deliver to the
Servicer the Custodial Mortgage Loan File or documents so requested. The
Servicer shall cause the Custodial Mortgage Loan File or documents so released
to be returned to the Custodian when the need therefor by the Servicer no longer
exists, unless the Mortgage Loan is liquidated and the proceeds thereof are
deposited in a P & I Account. Upon receipt of an Officer's Certificate of the
Servicer stating that such Mortgage Loan was liquidated and the Mortgage Loan
Proceeds were deposited in a P & I Account, the servicing receipt shall be
released by the Custodian to the Servicer.
The Servicer shall retain possession of any Custodial Mortgage Loan
File or documents therein which have been released to the Servicer by the
Custodian at all times unless (i) the Mortgage Loan has been liquidated and the
Insurance Proceeds or Liquidation Proceeds relating to the Mortgage Loan have
been deposited in a P & I Account, (ii) the Custodial Mortgage Loan File or
documents have been delivered to an attorney or to a public trustee or other
public official as required by law or is desirable for purposes of initiating
pursuing or evaluating possible legal action or other proceedings for the
foreclosure of the Mortgage Premises and the Servicer has delivered to the
Custodian a certificate of a Servicing Officer certifying as to the name and
address of the Person to which the Custodial Mortgage Loan File or documents
were delivered and the purpose or purposes of such delivery or (iii) the
Servicer's need therefor no longer exists and the Servicer returns the Custodial
Mortgage Loan File to the Custodian pursuant to the previous paragraph.
SECTION 4.6. DOCUMENTS, RECORDS, AND FUNDS IN POSSESSION OF SERVICER TO
BE HELD FOR OWNER.
The Servicer shall transmit to the Custodian the documents and
instruments required to be delivered under Section 2.1 hereof coming into the
possession of the Servicer from time to time and shall account fully to the
Owner for all funds received by the Servicer as Liquidation Proceeds or
Insurance Proceeds in respect of any Mortgage Loan. All Custodial Mortgage Loan
Files, Servicer Mortgage Loan Files and funds collected or held by, or under the
control of, the Servicer in respect of any Mortgage Loans, whether from the
collection of principal and interest payments or from Liquidation Proceeds or
Insurance Proceeds, shall be held by the Servicer for and on behalf of the Owner
and shall be and remain the sole and exclusive property of the Owner. The
Servicer also agrees that it shall not create, incur or subject any Servicer
Mortgage Loan File, Custodial Mortgage Loan File or funds that are deposited in
any P & I Account or Custodial T & I Account, or any funds that otherwise are or
may become due or payable to the Owner, to any claim, lien, security interest,
judgment, levy, writ of attachment or other encumbrance, nor assert by legal
action or otherwise any claim or right of set-off against any Servicer Mortgage
Loan File or Custodial Mortgage Loan File or any funds collected on, or in
connection with, a Mortgage Loan, except that the Servicer shall be entitled to
set-off against and deduct from any such funds any amounts that are properly due
and payable to the Servicer under this Agreement.
SECTION 4.7. MICROFILMED RECORDS.
The Servicer may duplicate the Servicer Mortgage Loan File on
microfilm, microfiche or magnetic media but may not destroy hard copies of the
documents required to be maintained in the Servicer Mortgage Loan File.
SECTION 4.8. ENFORCEMENT OF DUE-ON-SALE CLAUSE; ASSUMPTION.
In all circumstances of unapproved transfers initiated by a Borrower
under a Mortgage Loan that is not [more than 30 days] Delinquent, the Servicer
is required to notify the Owner (which notice may be contained in the Servicer's
monthly reports pursuant to Article VII) of such transfer and obtain written
approval before initiating enforcement proceedings with respect to such Mortgage
Loan. The Servicer will enforce the Due-on-Sale Clause on any such
non-Delinquent Mortgage Loan to the extent permitted by applicable law upon the
transfer of title to the Mortgaged Premises only with the prior written consent
of the Owner.
Notwithstanding the preceding paragraph, the Servicer may also in its
discretion waive the Due-On-Sale Clause on any Mortgage Loan and permit the
Assumption of such Mortgage Loan, provided that in processing any such
Assumption, the Servicer shall verify that:
(a) No material term of the Note (including, but not limited
to, the Note Rate and the remaining term to maturity) is to be changed
in connection with such Assumption;
(b) For conventional loans, based on a credit review performed
by the Servicer, the new Borrower is a prudent credit risk in the
opinion of the Servicer. The standards applied to such credit review
may be more liberal than those applied to newly-originated loans for
the Servicer's own account, to reflect the severity of loss on the
Mortgage Loan in the event the assumption is denied and foreclosure
results;
(c) For government insured or guaranteed loans, any credit
review required by an applicable regulation has been performed by the
Servicer.
(d) All documents relating to the Assumption are valid and
binding on the new Borrower; and
(e) The Mortgage Loan will continue to be a valid first
priority security interest upon the Mortgaged Premises.
Upon such verification and the execution by the new Borrower of an
Assumption agreement obligating the new Borrower to all of the terms of the
related Note and Security Instrument, the Servicer may approve such Assumption
and release the Previous Borrower from liability. The Servicer shall notify the
Owner of the completion of any approved Assumption (which notice may be
contained in Servicer's monthly reports pursuant to Article VII). The Servicer
shall provide to the Custodian the original assumption agreement.
Subject to the terms of the Note and Security Instrument, and
applicable law or regulation, the Servicer may charge a reasonable and customary
assumption fee, and the Servicer may retain such fee as additional servicing
compensation.
SECTION 4.9. PARTIAL RELEASE, EASEMENT AND EMINENT DOMAIN.
The Servicer shall take the following actions prior to permitting a
release:
(a) For any Partial Release or with respect to Eminent Domain,
obtain an acceptable Appraisal Report or broker's price opinion showing
the current market value of the property before and after the release;
(b) Ensure that the cash consideration received at least
equals the current market value of property to be released;
(c) Ensure that cash received is applied to the Unpaid
Principal Balance of the Mortgage loan;
(d) Prepare all legal documents for the transaction;
(e) Ensure that the remaining Mortgaged Premises adequately
secure the Unpaid Principal Balance and accrued interest of the
Mortgage Loan; and
(f) With respect to an easement, deliver an Officer's
Certificate to the Owner certifying that the creation of such easement
will not materially and adversely affect the marketability of title to
the Mortgaged Premises.
The Servicer shall notify immediately the Owner of any taking by
eminent domain of all or a part of any Mortgaged Premises.
SECTION 4.10. INSURANCE.
The Servicer shall verify that each Mortgage Loan (and Mortgaged
Premises) is covered by Hazard Insurance and, if applicable, Flood Insurance,
Condominium or PUD Insurance in accordance with this Agreement.
The Servicer shall prepare and present on behalf of the Owner all
claims under the Insurance Policies and take such actions (including the
negotiation, settlement, compromise or enforcement of the insured's claim) as
shall be reasonably necessary to realize recovery under such bonds and policies.
Any proceeds disbursed to the Servicer in respect of such policies or bonds
shall be promptly deposited in the P & I Account upon receipt or, if required to
be applied to the restoration or repair of the related Mortgaged Premises, in
the Custodial T & I Account upon receipt. The Servicer shall also prepare and
present on behalf of the Owner all claims under each applicable Insurance
Policy, and take such other actions (including the negotiation, settlement,
compromise and enforcement of the insured's claim) as is necessary to realize
recovery under such policies and deposit all claim proceeds in the appropriate
Custodial T & I Account or P & I Account.
If the Insurance Proceeds paid in respect of any Mortgage Loan reduce
the Unpaid Principal Balance of the Mortgage Loan to zero, then, to the extent
not required to apply to restoration of the related Mortgage Premises, the
Servicer shall treat the application of such proceeds as a Liquidation.
SECTION 4.11. EVIDENCE OF INSURANCE.
The Servicer shall maintain the following documentation with respect to
insurance coverage on each Mortgage Loan (and REO):
(a) For one- to four-unit dwellings, an original of the Hazard
Insurance Policy, if applicable, and any related endorsements;
(b) A copy of the Title Insurance Policy and any related
endorsements (or an Attorney's Title Opinion), to the extent such
insurance is evidenced in the Servicer Mortgage Loan File;
(c) An original of any Flood Insurance Policy, if Flood
Insurance is required herein, and any related endorsements; and
(d) A copy of the Condominium Insurance Policy or PUD
Insurance Policy, if applicable.
A certificate of insurance is acceptable in lieu of the above if it
contains the following information:
(a) Named insured and Mortgagee or, for PUD or Condominium
Units, named insured association, unit owner and unit owner Mortgagee;
(b) Address of Mortgaged Premises;
(c) Type, amount and effective dates of coverage;
(d) Deductible amount;
(e) Any endorsement or optional coverage obtained and made
part of the original policy;
(f) Insurer's agreement to provide at least ten days' prior
written notice to the Servicer and Borrower (or applicable unit owner
Mortgagee if for a PUD or Condominium Unit) before any reduction in
coverage or cancellation of the policy; and
(g) Signature of an authorized representative of the Insurer,
if required by applicable law.
SECTION 4.12. INSURANCE NOTICES.
The Servicer shall arrange for all insurance drafts, notices, policies,
invoices, etc. to be delivered directly to the Servicer. Subject to Section 6,
if the Servicer discovers that the Borrower does not have adequate insurance
coverage, the Servicer shall obtain and maintain at its own expense (subject to
any right of reimbursement provided in Section 6) the required insurance
coverage on the Mortgaged Premises.
SECTION 4.13. DEFAULT BY INSURER.
If the Servicer knows or has reasonable cause to suspect that an
Insurer under any applicable Insurance Policy will, for any reason, be unable to
pay a valid claim, the Servicer promptly shall notify the Owner and shall find a
substitute insurer approved by the Owner. In any case, the Servicer shall not be
liable in any way for the financial inability of any insurer under any Insurance
Policy to pay a valid claim.
SECTION 4.14. HAZARD INSURANCE.
Subject to Section 6, the Servicer shall ensure that each Mortgaged
Premises (and REO) is covered at all times by Hazard Insurance in an amount at
least equal to the lesser of (a) the Unpaid Principal Balance of the Mortgage
Loan, plus accrued interest and the aggregate of all Protective Advances, or (b)
100% of the replacement value of the improvements on the Mortgaged Premises, in
each case in an amount not less than such amount as is necessary to prevent the
mortgagor and/or the mortgagee from becoming a co-insurer or loss payee.
If Hazard Insurance is not available for any Mortgaged Premises (and
REO) because it consists of a dwelling unit in a Condominium Project or PUD, the
Servicer shall make reasonable efforts to assure that such insurance coverage is
obtained by the homeowners' or condominium association for such unit and for all
common elements and common facilities as a common expense under "master" or
"blanket"' policies as required under Fannie Mae guidelines, and the Servicer
shall verify with the association not less frequently than annually that each
such insurance coverage remains in effect. In respect of Mortgaged Premises
located within a Condominium Project or PUD, the Servicer shall make reasonable
efforts to assure that comprehensive public liability policies, flood insurance
policies and fidelity coverage for the condominium association or homeowners'
association such as is required by Fannie Mae guidelines is in full force and
effect at all times.
Each Mortgaged Premises (and REO) shall be protected against loss or
damage from fire and other perils covered within the scope of standard extended
coverage. All Hazard Insurance Policies shall be underwritten by a hazard
insurance carrier that has a current rating that is acceptable under Fannie Mae
Guidelines. In addition, the insurance carrier shall be licensed in accordance
with Fannie Mae Guidelines.
Each Hazard Insurance Policy shall contain or have attached a standard
mortgagee clause in the form customarily used by private institutional mortgage
loan investors. Such clause shall provide that the insurer will notify the named
Mortgagee at least ten days before any reduction in coverage or cancellation of
the policy. All mortgagee clauses shall be properly endorsed, necessary notices
of transfer shall be given and any other action shall be taken that is necessary
in order to protect the interests of the Owner, its successors and assigns. The
standard mortgagee clause should read as follows:
"Insuring Fairbanks Capital Corp., its successors and/or assigns."
SECTION 4.15. HAZARD INSURANCE LOSS SETTLEMENT.
Except as otherwise provided herein, the Servicer shall follow Fannie
Mae Guidelines in handling any insurance loss settlements.
SECTION 4.16. UNINSURED HAZARD LOSS.
Subject to Section 6.6(i), the Servicer shall take the following
actions promptly in the event of loss or damage to the Mortgaged Premises caused
by an earthquake, flood, tornado or other natural disaster not covered by an
Insurance Policy on the Mortgaged Premises (or REO, as applicable):
(a) Determine the extent of the losses or damages;
(b) Secure any abandoned Mortgaged Premises from vandalism or
the elements;
(c) Communicate with and counsel the Borrower on any disaster
relief programs or other assistance which is available; and
(d) Recommend appropriate action to protect the interests of
the Owner.
SECTION 4.17. FLOOD INSURANCE.
The Servicer shall ensure that Flood Insurance is maintained on
Mortgaged Premises (and REO) that are identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards (and the
flood insurance described below has been made available). Any such Flood
Insurance shall meet the current guidelines of the Federal Insurance
Administration and shall be with a generally acceptable insurance carrier.
The amount of the Flood Insurance Policy shall equal not less than the
least of (i) the lesser of (a) the Unpaid Principal Balance of the Mortgage
Loan, plus accrued interest and the aggregate of all Protective Advances, and
(b) the full insurable value of the Mortgaged Premises, but in each case not
less than such amount as is necessary to prevent the mortgagor and/or the
mortgagee from becoming a co-insurer or loss payee, and (ii) the maximum amount
of insurance which was available under the Flood Disaster Protection Act of
1973.
SECTION 4.18. CONDOMINIUM AND PUD INSURANCE COVERAGE REQUIREMENTS.
A Condominium Insurance Policy or PUD Insurance Policy shall be in
effect with respect to each Condominium Project or PUD in which a Mortgaged
Premises (or REO) is located. The minimum requirements are fire and extended
coverage and all other coverage in the types and amounts customarily required by
private institutional mortgage loan investors for projects similar in
construction, location and use. Coverage shall be on a replacement cost basis
for at least 100% of the insurable value based on replacement cost. In the event
that a Condominium Insurance Policy or PUD Insurance Policy is not maintained,
the Servicer shall notify the Owner (which notice may be contained in the
Servicer's monthly reports pursuant to Article VII) but shall not be required to
force-place a policy for the Condominium Project or PUD, except that the
Servicer shall obtain insurance with respect to the particular Condominium or
PUD Unit.
SECTION 4.19. SPECIAL FLOOD HAZARD INSURANCE FOR CONDOMINIUM OR PUD.
If the Condominium Project or PUD is in an area defined by the
Secretary of HUD as having special flood hazards, a blanket policy of flood
insurance shall be maintained on the Condominium Project or the PUD in the
amount of the maximum limit of coverage available under the National Flood
Insurance Program, as amended, whichever is less. In the event that such a
blanket policy of flood insurance is not maintained, the Servicer shall notify
the Owner (which notice may be contained in the Servicer's monthly reports
pursuant to Article VII) but shall not be required to force-place a policy for
the Condominium Project or PUD, except that the Servicer shall obtain insurance
with respect to the particular Condominium or PUD Unit if commercially
practicable.
SECTION 4.20. NAME OF INSURED.
The name of the insured stated under each required policy shall be
similar in form and substance to the following:
"Association of Owners of the [Name of Condominium Project or
PUD] for use and benefit of the individual Condominium or PUD
Unit owners" (designated by name, if required).
SECTION 4.21. MORTGAGEE CLAUSE.
Each Condominium Insurance Policy or PUD Insurance Policy shall contain
the standard mortgagee clause endorsed to provide that any disbursements will be
paid to the condominium or PUD homeowners' association for the use and benefit
of Mortgagees as their interest may appear, or otherwise endorsed to fully
protect the interest of the Owner.
SECTION 4.22. TITLE INSURANCE.
The Servicer shall not knowingly take any action as to each Mortgage
Loan, other than a Mortgage Loan for which an Attorney's Title Opinion was
delivered in lieu of a Title Insurance Policy, that would jeopardize the
coverage of a Title Insurance Policy. The Servicer shall make reasonable efforts
perform and comply with all requirements and conditions of each Title Insurance
Policy for each Mortgage Loan that are to be performed or observed by the
"Insured" or obligee thereunder as a condition to maintaining and keeping it in
force, or making a claim under, the Title Insurance Policy. Upon receipt of any
proceeds from a Title Insurance Policy, Servicer shall deposit such proceeds in
the P & I Account.
SECTION 4.23. TAX AND INSURANCE RESERVES.
All Tax and Insurance Reserves shall be established and maintained in
accordance with the Mortgage Loan Documents, Fannie Mae Guidelines and
applicable federal and state laws for Mortgage Loans. The Servicer will keep
records of Escrow funds collected from the Borrower for the payment of real
estate taxes, ground rents, Hazard Insurance and, if applicable, Flood Insurance
premiums, assessments and other charges credited to the Tax and Insurance
Reserve and deposited into the Custodial T & I Account. The Servicer shall
establish a Tax and Insurance Reserve for each Mortgage Loan and collect 1/12 of
the yearly charge for Escrow with each Monthly Payment. The Servicer is solely
responsible for the administration of the Borrower's Tax and Insurance Reserve.
Insurance premiums that are not Escrow items which are collected and disbursed
for payment, such as life, major medical, disability or other assessments, which
are not required as part of the Borrower's monthly installments, shall not be
recorded in the Borrower's Tax and Insurance Reserve. The Servicer shall follow
Fannie Mae Guidelines and federal and state requirements in connection with
Escrow items, insurance premiums other than Escrow items, and in connection with
the analysis of the Borrower's Tax and Insurance Reserve and any reports to the
Borrower related thereto.
The Servicer shall comply with all requirements concerning the handling
of Escrow Accounts contained in Section 941 of the National Affordable Housing
Act and all regulations promulgated thereunder and all other applicable law.
SECTION 4.24. DELINQUENCIES.
The Servicer shall be responsible, continuously from the Servicing
Commencement Date until the date each Mortgage Loan ceases to be subject to this
Agreement and the related Servicing Agreement, for using measures consistent
with the Accepted Servicing Practices (including the Servicing Policies and
Procedures attached hereto as Schedule I) to attempt to collect delinquent
payments on each Mortgage Loan and to otherwise resolve each Mortgage Loan.
The Servicer's collection staff shall be sufficiently skilled in
financial counseling and mortgage servicing techniques to assist Borrowers in
bringing their Mortgage Loans current and protecting their equity and credit
rating, while also protecting the Owner's interests.
The Servicer should treat each Delinquency individually. Discussions
with the Borrower shall cover the cause of the Delinquency and the time frame in
which the Delinquency will be cured. The Servicer shall use in its reasonable
discretion notices, letters, telegrams, telephone calls, face-to-face contact
and other responsible collection techniques employed by prudent mortgage loan
servicers. The Servicer is required to maintain all collection records. The
Servicer shall vary its collection techniques to fit individual circumstances,
avoiding a fixed collection pattern which may be ineffective in dealing with
chronically delinquent Borrowers.
SECTION 4.25. PROPERTY INSPECTION.
The Servicer is required to inspect the Mortgaged Premises by the 60th
day of Delinquency if no satisfactory arrangements have been made to cure the
Delinquency. The inspection should determine the physical condition and the
occupancy status of the Mortgaged Premises. The Servicer is required to continue
to inspect the property monthly after the 60th day of this Delinquency until the
Delinquency is cured but only if foreclosure has commenced or the Mortgaged
Premises are vacant. The results of any inspection should be used in determining
whether a recommendation for foreclosure or deed-in-lieu of foreclosure is
necessary. All required property inspections are at the Servicer's expense
(subject to reimbursement pursuant to this Agreement. The Servicer may not
charge its inspection expenses against any Escrow or Tax and Insurance Reserve.
SECTION 4.26. NOTIFICATION MATTERS.
For any Mortgage Loan that is more than sixty days delinquent, the
Servicer shall notify the Owner promptly (which notice may be contained in the
Servicer's monthly reports pursuant to Article VII) after discovering any of the
following:
(a) Sale or transfer of the Mortgaged Premises not approved by
the Servicer pursuant to this Agreement;
(b) Litigation involving the Mortgaged Premises;
(c) Default under the terms of the Security Instrument, Note,
Condominium Project or PUD constituent documents or similar obligations
of the Borrower;
(d) Any other situation that may adversely affect the Mortgage
Loan in any material respect known to Servicer; or
(e) The Servicer knows, or has reason to know, that the
related Mortgaged Premises are contaminated with toxic wastes, have
other significant environmental risks or are infested with insects,
rodents or other pests.
The Servicer shall maintain accurate records of the aforementioned
items.
SECTION 4.27. ABANDONMENT.
Subject to Sections 6.6, if the Servicer determines that the Mortgaged
Premises have been abandoned, the Servicer shall use reasonable efforts to
protect the Mortgaged Premises from waste, damage and vandalism.
SECTION 4.28. PLANS FOR CURING DELINQUENCIES.
The Servicer shall have reasonable discretion to extend appropriate
relief to Borrowers who encounter hardship and who are cooperative and
demonstrate proper regard for their obligations. [The Servicer shall be readily
available to Borrowers to offer skilled financial counsel and advice and shall
make personal contact with delinquent Borrowers as often as possible to achieve
a solution that will bring the Mortgage Loan current as soon as possible.] The
Servicer shall be fully familiar with the form of relief to Borrowers provided
for herein and will employ such relief. However, no such relief shall be granted
to any Borrower under a Mortgage Loan unless there is a reasonable expectation
that the Borrower will bring the Mortgage Loan current within one year following
the establishment of the plan and is willing and able to maintain the Mortgage
Loan current following such relief.
Prior to granting relief as herein provided, the Servicer shall inspect
the Mortgaged Premises and ascertain that the reasons for the default and the
attitude and circumstances of the Borrower justify the relief to be granted. The
Servicer is responsible for collection from the Borrower of any recording or
similar costs incidental to the granting of relief.
Where relief is appropriate, the Servicer shall arrange with the
Borrower a "Liquidating Plan" giving the Borrower a definite period in which to
reinstate the Mortgage Loan by immediately commencing payments in excess of the
regular Monthly Payments. To the extent that the priority of the lien
represented by the Mortgage Loan remains in effect and is not adversely
affected, the Servicer may enter into a Liquidating Plan that provides that the
total Delinquency will be repaid (commencing immediately) within the shortest
period practicable. With respect to each Mortgage Loan, the Liquidating Plan
shall provide that the Delinquency will be cured within one year from the
establishment of the Liquidating Plan. The Servicer shall use its best efforts
to have any Liquidating Plan set forth in writing and executed by the Borrower
and by the Servicer in the form of a letter agreement if the earliest unpaid
installment is more than 91 days past due.
SECTION 4.29. LOAN MODIFICATIONS.
In certain circumstances, the Servicer may deem it prudent to modify
the payment terms of a Mortgage Loan ("Modification"), to effect a sale of the
Mortgage Premises for less than the Unpaid Principal Balance of the related
Mortgage Loans (a "Short Sale") or to permit the Borrower to pay off the
Mortgage Loan at less that its Unpaid Principal Balance (a "Discounted Payoff").
All modifications, Short Sales and Discounted Payoffs shall require the prior
written consent of the Owner. The Servicer shall not allow a Modification unless
the Modification is properly documented and the priority of the related mortgage
and the enforceability of the Note are not affected by the Modification.
SECTION 4.30. ADVANCE RESPONSIBILITY DURING DELINQUENCY.
In the event of a Delinquency, the Servicer agrees to make Protective
Advances from its own funds for such Mortgage Loan and receive reimbursement
therefore in accordance with and subject to Section 6.6.
SECTION 4.31. BANKRUPTCIES.
If the Servicer has actual knowledge that a Borrower is the subject of
a proceeding under the bankruptcy code or any other similar law, has made an
assignment for the benefit of creditors, or has had a receiver or custodian
appointed for its property, the Servicer will retain an attorney to pursue
claims to payment on the Mortgage Loan and foreclosure on the Mortgaged
Premises. If the Mortgaged Premises is acquired in an insolvency proceeding, it
shall be acquired in the name of Owner or its designee. The Servicer will be
responsible for representing the Owner's interest in any bankruptcy proceedings
relating to the Borrower. The costs of protecting the Owner's interest shall be
paid in accordance with Section 6.6. If the Borrower, a creditor or a bankruptcy
trustee should propose to reduce the Unpaid Principal Balance of the Note,
reduce the Note Rate, "bifurcate" the debt into secured and unsecured portions
or otherwise modify a Borrower's obligations under a Mortgage Loan, the Servicer
shall challenge any such modification on a timely basis as appropriate.
SECTION 4.32. APPROVAL OF CERTAIN FORECLOSURES.
Prior to the commencement of any action to foreclose on a Mortgage Loan
(other than in accordance with the procedures set forth on Schedule I hereto),
the Servicer shall promptly notify in writing the Owner of the Servicer's
recommendation as to whether foreclosure should be commenced. The Servicer may
initiate such foreclosure s only after the prior written approval of the Owner
is obtained.
SECTION 4.33. DEED-IN-LIEU OF FORECLOSURE.
The Servicer may accept a deed-in-lieu of foreclosure, with the
approval of the Owner, provided that:
(a) Marketable title, as evidenced by a Title Insurance
Policy, can be conveyed to and acquired by the Owner or its designee;
and
(b) The Servicer has obtained from the Borrower a written
acknowledgment that the deed is being accepted as an accommodation to
the Borrower and on the condition that the Mortgaged Premises will be
transferred to the Owner that owns such Mortgage Loan free and clear of
all claims, liens, encumbrances, attachments, reservations or
restrictions except for those to which the Mortgaged Premises were
subject at the time the Mortgaged Premises became subject to the lien
of the Security Instrument.
Upon acquisition of the Mortgaged Premises, the Servicer shall promptly
notify the Owner in writing indicating the details of the transaction and
reasons for the conveyance. Title shall be conveyed directly from the Borrower
to the Owner, or to such other Person designated by the Owner.
SECTION 4.34. ACTIONS PRIOR TO FORECLOSURE.
The Servicer shall initiate or cause to be initiated the foreclosure
actions as are authorized by law and consistent with the practices in the
locality where the Mortgaged Premises are located. If the Mortgaged Premises
have been abandoned or vacated by the Borrower and the Borrower has evidenced no
intention of honoring his obligations under the Mortgage Loan, the foreclosure
shall be expedited to the extent permitted by law. The Servicer shall not take
any action to foreclose, or accept a deed in lieu of foreclosure, with respect
to any Mortgage Loan that the Servicer knows, that the related Mortgaged
Premises are contaminated with toxic wastes or have other significant
environmental risks, without prior consultation with the Owner.
The Servicer shall comply with applicable state law with respect to any
required notice to the Borrower regarding a default, rights to cure such
default, and the commencement of foreclosure proceedings.
SECTION 4.35. RETENTION OF ATTORNEYS FOR FORECLOSURE - FORECLOSURE
FEES.
All attorneys' fees, and other costs in respect of any foreclosure or
acquisition in lieu of foreclosure shall be negotiated in advance and the
estimated amount thereof shall be set forth in the Servicer's written
recommendation. Fees in excess of the amount provided in the Fannie Mae
Guidelines for routine cases, fees from non-FNMA approved legal counsel or fees
for extraordinary legal services shall be approved in writing in advance by the
Owner. The billing by the foreclosure attorney shall demonstrate the
appropriateness of any extraordinary fees by the services required. In cases of
full or partial reinstatement, the fees shall be reasonable and in proportion to
the authorized fee for services rendered for a completed foreclosure. Any
attorneys' fees, trustee's fees, witness fees, title search fees, court costs or
other expenses incurred by the Servicer in respect of any foreclosure or
acquisition in lieu of foreclose shall be advanced by the Servicer and subject
to reimbursement pursuant to Section 6.
SECTION 4.36. FORECLOSURE PROCEDURES.
During the period during which any Mortgage Loan is being foreclosed,
funds in the Borrower's Tax and Insurance Reserve, as well as any rent receipts,
shall be used to pay all taxes and insurance premiums that become due to the
extent permitted by law, with any excess rents being deposited into the P & I
Account. The Servicer shall advance (to the extent recoverable) payment of
attorneys' fees, trustee's fees and other foreclosure costs at the commencement
of foreclosure proceedings.
The Servicer shall give Notice to the Owner (which notice may be
contained in the Servicer's monthly reports pursuant to Article VII) of a
foreclosure sale. The Notice shall set forth the date, location and time of the
foreclosure sale.
The Servicer shall be responsible for the general management of the
Mortgaged Premises after any acquisition through foreclosure or deed-in-lieu of
foreclosure or after the Servicer shall have taken possession of the Mortgaged
Premises, whichever first occurs, until the Mortgaged Premises are otherwise
disposed of and shall take whatever action is necessary to protect the security
for the Mortgage Loan. Such action shall include management, maintenance and
protection against vandals or the elements if the Mortgaged Premises are
vacated. The Servicer shall also make monthly inspections to assure that the
Mortgaged Premises are not damaged by vandals or the elements.
SECTION 4.37. DISBURSEMENT OF ESCROW ITEMS.
The Servicer shall pay any obligation which could become a first lien
on the Mortgaged Premises. These obligations may include, but are not limited
to, taxes, special assessments and ground rents. The Servicer is also
responsible for the payment of any Hazard Insurance, Flood Insurance. The
aforementioned items should be paid from the Borrower's Escrow funds. If the
Borrower's Tax and Insurance Reserve balance is insufficient, the Servicer shall
advance funds in order to pay these expenses and be reimbursed therefore
pursuant to Section 6.7.
SECTION 4.38. REINSTATEMENT OF MORTGAGE LOANS.
If the Borrower offers to reinstate the Mortgage Loan fully during the
foreclosure process, the Servicer shall accept the offer. Full reinstatement
means payments in certified funds of all payments due to bring the Mortgage Loan
current, including Late Charges, if applicable, attorneys' and trustees' fees,
any additional legal costs and any other expenditures or advances made by the
Servicer during the foreclosure process.
Upon accepting the reinstatement, the Servicer shall contact the
attorney or trustee immediately to avoid incurring additional legal costs or
fees. The Servicer shall apply the funds upon receipt.
SECTION 4.39. PARTIAL PAYMENT TOWARD REINSTATEMENT OF MORTGAGE LOANS.
Except with respect to a bankruptcy or in connection with a repayment
plan giving the Mortgagor a definite period in which to reinstate the Mortgage
Loan where the foreclosure action is not terminated as a result thereof, the
Servicer shall not accept a partial payment toward reinstatement of a Mortgage
Loan in foreclosure without prior approval from the Owner and any mortgage
insurer. A partial reinstatement occurs when the Mortgagor offers to pay an
amount insufficient to satisfy the delinquent monthly payments, any fees or
costs, and any other expenditures or advances during the foreclosure process.
SECTION 4.40. SERVICING REQUIREMENTS FOR REO.
Upon acquisition of any Mortgaged Premises, the Servicer is responsible
for using reasonable effort in:
(a) Managing the property until it is conveyed or sold;
(b) Inspecting the property every month;
(c) Evicting Borrower if necessary;
(d) Paying all taxes, insurance and foreclosure costs;
(e) Processing any claims for redemption and otherwise
complying with any redemption procedures required by law;
(f) Hiring a licensed real estate broker and listing the
property for sale, if applicable;
(g) Marketing the property, including rehabilitating and
repairing the property pursuant to Section 6.7(j), if deemed necessary;
(h) Completing the sale of such REO;
(i) Depositing sales proceeds to the P & I Account; and
(j) Reporting all changes in status and expenses to the Owner
on a monthly basis.
The Servicer is also responsible for the security, management and
maintenance of any acquired property.
The Servicer shall service the REO through its disposition and shall
ensure that all funds received with respect to such REO are deposited to the P &
I Account.
SECTION 4.41. MARKETING REO.
Efforts to market an REO by the Servicer shall begin as soon as
reasonably practicable after marketable title is received by the Owner. The
Servicer shall get prior written approval of the Owner of any listing
arrangements, including the proposed list price and terms and shall promptly
notify the Owner in writing regarding purchase offers that are received.
SECTION 4.42. REHABILITATION.
The Servicer shall make reasonable efforts to ensure that any
rehabilitation work necessary is done and is done efficiently and properly.
SECTION 4.43. REQUIRED REO DOCUMENTATION.
The Servicer will supply the Owner with any documents reasonably
requested by the Owner in connection with any REO.
SECTION 4.44. SATISFACTIONS.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Custodian
by a certification of a Servicing Officer, which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 4.04 have been or will be so deposited
and shall request delivery to it of the portion of the Mortgage File held by the
Custodian. Upon receipt of such certification and request, the Custodian shall
promptly release the related mortgage documents to the Servicer and the Servicer
shall promptly prepare and process any satisfaction or release.
In the event the Servicer satisfies or releases a Mortgage without
having obtained payment in full of the indebtedness secured by the Mortgage or
should it otherwise prejudice any right the Owner may have under the mortgage
instruments, the Primary Insurance Policy, if any, or the Pool Policy, if
applicable, the Servicer, upon written demand, shall remit to the Owner the then
outstanding principal balance of the related Mortgage Loan plus accrued and
unpaid interest at the Mortgage Loan Remittance Rate through the last day of the
month in which such satisfaction or release occurs by deposit thereof in the
Collection Account. The Servicer shall maintain the Fidelity Bond insuring the
Servicer against any loss it may sustain with respect to any Mortgage Loan not
satisfied in accordance with the procedures set forth herein.
The Servicer shall make reasonable efforts to satisfy mortgages and
release their liens in a timely manner, including the preparation of any
required release or satisfaction document. Once the required release or
satisfaction documents are executed and the Note is canceled, The Servicer shall
promptly send the canceled documents to the Borrower if state law requires such
action or the Borrower specifically requests the return of the documents. In
other instances, the Servicer may either return the documents to the Borrower or
retain them (as long as they are not destroyed until after the retention period
required by applicable law). The Servicer should also take any other steps
required to release the lien and assure that no penalties are incurred because
the actions were not performed in a timely manner. The Servicer may not pass on
to the Owner or the Borrower any penalty fee that it has to pay because it
failed to process the release and satisfaction documents within the required
time frame. The Servicer shall generally follow the procedures set forth in the
Fannie Mae Guidelines regarding satisfactions of mortgages.
SECTION 4.45. DISCLOSURE UPON TRANSFER OF SERVICING.
The Servicer shall use reasonable efforts to prepare and distribute to
Borrowers all necessary disclosures in order to comply with all state and
federal laws regarding the disclosure of the transfer of servicing. If the
transfer of servicing results from the termination of the Servicer hereunder
without cause, the Owner shall pay the cost of preparing and distributing the
required notices.
SECTION 4.46. RESPONSE TO BORROWER INQUIRIES.
The Servicer is required to respond to all qualified written inquiries
by Borrowers as such are defined from time to time by Section 941 of the
National Affordable Housing Act, and act at all time in accordance with said Act
and all regulations promulgated thereunder.
SECTION 4.47. ENVIRONMENTAL PROBLEMS.
If the Servicer has actual knowledge that a Mortgaged Premises is being
or has been used in violation of any environmental Requirements or that there
has been a release of hazardous materials in, on, under or from such Mortgaged
Premises other than in accordance with such Requirements (an "Environmental
Problem Property"), the Servicer will notify Owner of the existence of the
Environmental Problem Property. Additionally, the Servicer shall set forth in
such notice a description of such problem, a recommendation to Owner relating to
the proposed action regarding the Environmental Problem Property and the
Servicer shall (i) carry out the recommendation set forth in such notice upon
receiving Owner's approval, if any, of such recommendation, or (ii) if failure
to act immediately would result in a material adverse effect upon Servicer,
Owner and/or the Environmental Problem Property, Servicer may take such actions
as may be necessary and/or advisable under Accepted Servicing Practices and/or
applicable Requirements after giving Owner notice in accordance with the terms
and provisions of Section 10.9 hereof. If Owner fails or refuses to respond to
any such recommendation as set forth in the immediately preceding sentence, the
Servicer shall have no liability to Owner therefor provided that the Servicer
acts in a manner consistent with such sentence.
SECTION 4.48. LIMITATION ON AUTHORITY.
Notwithstanding anything to the contrary herein, the Servicer shall
have no authority without the prior written consent of Owner in its sole
discretion to:
(a) Sign any document in the name or on behalf of Owner,
except pursuant to a duly authorized and executed instrument delivered
by Owner under Section 3.4; or
(b) Act on behalf of, or hold itself out as having authority
to act on behalf of, Owner in any manner that is beyond the scope of
this Agreement or the scope of any related Servicing Agreement.
SECTION 4.49. DIRECTION OF OWNER.
Notwithstanding anything to the contrary herein, Owner shall have the
right to direct the Servicer in writing from time to time to take any reasonable
action with respect to a Mortgage Loan or any Mortgaged Premises that is not
contrary to this Agreement or any Requirements or the terms of such Mortgage
Loan, subject to the Servicer's rights to require Owner to execute any necessary
instruments to effect any action or inaction with respect to the Mortgage Loans.
The Servicer shall have no liability to Owner in connection with the decision to
pursue (as distinguished from the actual performance of) such actions. Owner
shall initially, and throughout the term of this Agreement and any related
Servicing Agreement, identify two or more individual representatives, each of
which acting alone shall have full authority (a) to provide to the Servicer any
consent, approval, waiver, or agreement or any other action contemplated from
Owner under this Agreement and any related Servicing Agreement, (b) to execute
any instruments or take any other actions for Owner relating to the Loans, (c)
to execute and deliver any amendments or supplements to this Agreement and any
related Servicing Agreement, and (d) to direct the Servicer in writing to take
any actions contemplated under this Section 4.49.
SECTION 4.50. CONFLICTS AND REMOVAL OF ASSETS.
The Servicer shall use reasonable efforts not to and shall use
reasonable efforts to cause its Affiliates not to, acquire a conflict of
interest which could materially and adversely affect the Servicer's ability to
manage any Mortgage Loan or Mortgaged Premises in the best interests of Owner
(any such relationship or conflict, a "Conflicting Interest") without the
consent or waiver of Owner. If such Conflicting Interest should arise in the
future, the Servicer shall promptly inform Owner, who may remove such Mortgage
Loan or Mortgaged Premises from this Agreement or any related Servicing
Agreement upon written notice to the Servicer.
SECTION 4.51. REPORTS PURSUANT TO REQUIREMENTS.
The Servicer shall be responsible for preparation and filing of all
applicable reports and notices with respect to the Mortgage Loans and any REO in
accordance with any Requirements.
SECTION 4.52. COMPUTER SYSTEMS.
By June 30, 1999 and at all times thereafter, the Servicer shall
maintain hardware, firmware or software, or any system consisting of one or more
thereof, including, without limitation, any and all enhancements, upgrades,
customizations, modifications, maintenance and the like (collectively, a
"System"), used by or for the benefit of the Servicer in connection with the
performance with Servicer's obligations under this Agreement, in a manner that
permits the Servicer to record, store, process, provide and, where appropriate,
insert, true and accurate dates and calculations for dates and spans including
and following January 1, 2000 (herein referred to as "Year 2000 Compliant"). In
addition, "Year 2000 Compliant" shall mean that the System will support the
ability for its continued normal usage such that neither the performance nor the
correct functioning of the System will be affected by the approach, and passing
into, the year 2000. In particular:
(i) Year 2000 Compliant shall mean that no value for
current date will cause any interruption in the operation of
the System;
(ii) All manipulations of time-related data will
produce the desired results for all valid dates within the
application domain and in combination with other products,
prior to, through and beyond the year 2000;
(iii) Date elements in interfaces and data storage
will permit specifying the century to eliminate date ambiguity
without human intervention including leap year calculations;
(iv) Where any date element is represented without a
century, the correct century shall be unambiguous for all
manipulations involving that element; and
Authorization codes and passwords relative to expiration dates and CPU
serial numbers should function normally during year 2000 testing time horizons.
ARTICLE V
LOAN ACCOUNTING
SECTION 5.1. GENERAL.
The Servicer will account for and track payments on the Mortgage Loans
on a loan-by-loan basis. The Servicer shall maintain complete and accurate
records of all transactions affecting any Mortgage Loan. Each Mortgage Loan
shall be clearly marked to indicate that it is being serviced for the Owner.
SECTION 5.2. INDIVIDUAL MORTGAGE LOAN ACCOUNTING REQUIREMENTS.
All Mortgage Loans will amortize with interest calculated and paid in
accordance with the respective Note.
SECTION 5.3. INTEREST CALCULATIONS.
Monthly interest calculations for periods of a full month will be based
on a 30-day month and a 360-day year, if permitted by the Note or by law.
Factors used for such calculations will be carried to ten decimal places.
Interest calculations for periods of less than a full month (such as for a
Liquidation) will be calculated on the basis of actual days elapsed in a month
and a 360-day year unless otherwise provided by applicable federal or state law.
SECTION 5.4. APPLICATION OF MORTGAGE LOAN PAYMENTS.
A payment from the Borrower will normally consist of interest,
principal, deposits for insurance and taxes and Late Charges, if applicable.
Payments received from Borrowers shall be applied in the following order:
(a) Required monthly interest;
(b) Required monthly principal; and
(c) Deposits for taxes and insurance.
Only full Monthly Payments (and, following application of funds
received to full Monthly Payments, Curtailments) may be applied to a Mortgage
Loan. Capitalization is not permitted, except as provided by the terms of any
Mortgage Loan that provides for negative amortization or pursuant to a
Modification Agreement or as may be required by law in connection with a
Bankruptcy "Cram Down" or otherwise.
The Servicer may waive Prepayment Penalties otherwise due from a
Borrower under the terms of the related Note only with the prior consent of the
Master Servicer.
SECTION 5.5. FULL PAYMENT NOT RECEIVED FROM BORROWER.
If a full payment is not received from the Borrower, the payment may
not be applied to the outstanding balance. However, the Servicer shall hold such
payment until additional payment is received to make a full payment or, with the
prior written consent of the Owner, return the payment to the Borrower.
SECTION 5.6. CURTAILMENTS.
The Servicer may accept Curtailments at any time. All installments to
bring the Mortgage Loan current, however, shall have been made by the Borrower.
If a Mortgage Loan is delinquent, funds received shall be applied to bring the
Mortgage Loan current. If there are excess funds after the application of
amounts received from the Borrower to Monthly Payments, the excess funds
represent a Curtailment and may be applied as a partial principal prepayment.
A Curtailment may not be used to reduce the Monthly Payment or the Note
Rate for any Mortgage Loan, or to postpone the Due Date of any payment.
Curtailments shall be deposited into the P & I Account within one Business Day
of receipt.
SECTION 5.7. REAPPLICATION OF PRIOR PREPAYMENTS.
The Servicer may not automatically reapply prior prepayments or
accumulated Curtailments for payment of subsequent installments. Payments
advanced to satisfy future installments shall be accounted for as advanced
(prepaid) installments of principal and interest. The Servicer should contact
the Borrower if there is a question about the Borrower's intention in making any
unscheduled payment.
SECTION 5.8. LIQUIDATIONS.
A Liquidation is the application of a payment or a realized loss to a
Mortgage Loan which reduces the Unpaid Principal Balance to zero. The Servicer
shall report a liquidation to the Owner by the third Business Day after such
liquidation.
ARTICLE VI
ACCOUNTING
SECTION 6.1. GENERAL.
Upon the Servicing Commencement Date, the Servicer shall establish one
or more payment clearing accounts for the deposit of all funds collected in
connection with the Mortgage Loans (Payment Clearing Account), one or more
escrow accounts for the deposit of funds collected in connection with the
Mortgage Loans for taxes and insurance (T & I Account), and one or more
custodial accounts for the deposit of funds collected in connection with the
Mortgage Loans for principal and interest (P & I Account). All of the foregoing
accounts shall be maintained in accordance with sound and controlled practices.
Except for the Payment Clearing Account (which will be cleared on a daily basis
with respect to any funds therein on the first Business Day after the deposit of
such funds), the funds in the T & I Accounts and the P & I Accounts may not be
commingled with any other funds, including the proceeds of any other mortgage
loans or with funds serviced for other investors or for the Servicer's own
portfolio.
SECTION 6.2. ACCOUNT MAINTENANCE.
Each P & I Account, Payment Clearing Account and T & I Account shall
meet the following guidelines:
(a) The accounts, other than the Payment Clearing Account
shall be held as segregated accounts with a depository institution
(commercial bank, mutual savings bank or savings and loan association),
the deposits of which are insured by the FDIC and whose short-term
unsecured indebtedness for borrowed money is rated in one of the two
highest rating categories by Standard & Poor's Ratings Services,
Moody's Investors Service, Inc., Co. (a "Qualified Depository")
(b) The name of each P & I Account, Payment Clearing Account
and T & I Account shall be designated as:
(i) Payment Clearing Account: "[Name of Account]
Fairbanks Capital Corp. Payment Clearing Account";
(ii) T & I Account: "[Name of Account] Fairbanks
Capital Corp. as Trustee for ["Owner"} and
(iii) P & I Account: "P & I Account, ["Owner"]"
(c) All collections on the Mortgage Loans shall be deposited
to the Payment Clearing Account prior to the opening of business on the
Business Day following the day on which such amounts are received by
Servicer; and
(d) Each T & I Account will be an expense of the Servicer.
Such custodial accounts may be interest-bearing accounts provided that
such accounts comply with all local, state and federal laws and
regulations governing interest-bearing accounts and borrower escrow
accounts. The Servicer shall ensure that all interest credited to any
account that is not due the respective borrower is removed by the
Servicer within 30 days of receipt of such interest.
If the Servicer elects or is required by law to deposit borrowers'
escrow funds into an interest-bearing account, such funds shall be either (i)
immediately available or (ii) available in accordance with a schedule which will
permit the Servicer to meet its payment obligations hereunder and the Servicer
shall remain obligated to pay the Mortgagor's taxes and insurance premiums when
due, even if the Mortgagor's Escrow funds are not withdrawable on demand.
Any amounts held in the P&I Account may be, but are not required to be,
invested by Servicer in Permitted Investments; provided, however, that such
funds shall be either (i) immediately available or (ii) available in accordance
with a schedule that will permit the Servicers to meet its payment obligations
hereunder. Other than interest or other income received on Permitted
Investments, which shall belong to Servicer and which may be withdrawn by
Servicer from the P&I Account in accordance with Section 6.3 hereof, no other
amounts may be commingled in the P&I Account. Servicer shall promptly deposit in
the P&I Account from its own funds, without any right of reimbursement, the full
amount of any losses on its investment of funds in the P&I Account.
SECTION 6.3. P & I ACCOUNT; REMITTANCE.
(a) The following funds received with respect to the Mortgage
Loans shall be transferred into the P&I Account on each Business Day to
the extent deposited by the Servicer into the Payment Clearing Account
on the prior Business Day. Such funds may be net of reimbursements for
any unreimbursed Protective Advances and any unpaid servicing
compensation with respect to any Mortgage Loan:
(i) principal collections (including prepayments and
curtailments);
(ii) interest collections;
(iii) liquidation Proceeds and Insurance Proceeds
(except as set forth in Section 6.5);
(iv) the proceeds of any sale of an REO
(v) any amounts deposited accordance with the last
sentence of Section 6.2.
The Servicer shall maintain separate accounting for each of
the foregoing types of funds.
(b) The Servicer may from time to time withdraw funds from the
P&I Account for the following expenses:
(i) reimburse itself for any unreimbursed Protective
Advances in accordance with Section 6.6;
(ii) to pay itself Ancillary Income;
(iii) if applicable, to pay the Master Servicer, its
master servicing compensation in accordance with any master
servicing agreement with the Owner;
(iv) to make remittances to Owner;
(v) to clear and terminate the P&I Account; and
(vi) to transfer funds in any P & I Account to
another Qualified Depository.
(c) On each Remittance Date, the Servicer shall remit all
amounts in the P & I Account as of the close of business on the
preceding Business Day, net of allowable withdrawals under clauses of
(i), (iii), (iv) and (v) subsection (b), to the Owner by wire transfer
of immediately available funds to the account designated in writing by
the Owner.
(d) With respect to any remittance received by the Owner after
the Business Day on which such payment was due, the Servicer shall pay
to the Owner interest on any such late payment at an annual rate equal
to the rate of interest as is publicly announced from time to time by
The Chase Manhattan Bank, New York, New York, as its prime lending
rate, adjusted as of the date of each change, plus two (2) percentage
points, but in no event greater than the maximum amount permitted by
applicable law. Such interest shall be paid by the Servicer to the
Owner on the date such late payment is made and shall cover the period
commencing with the Business Day on which such payment was due and
ending with the Business Day on which such payment is made, both
inclusive. Such interest shall be remitted along with such late
payment. The payment by the Servicer of any such interest shall not be
deemed an extension of time for payment or a waiver of any Event of
Default by the Owner.
SECTION 6.4. T & I ACCOUNT.
(a) The following funds shall be deposited into the T & I
Account promptly after the Servicer's receipt and verification of such
amounts:
(i) Escrow Payments;
(ii) loss drafts;
(iii) unapplied funds; and
(iv) Liquidation Proceeds that offset a deficit
balance in Mortgagor's Tax and Insurance Reserve.
The Servicer shall maintain separate accounting for each of these types of
funds.
(b) The Servicer may make withdrawals from the T & I Account
for the following:
(i) timely payment of Mortgagors' taxes and insurance
premiums;
(ii) refunds to Mortgagors of excess Escrow funds
collected;
(iii) reimbursement to the Owner of all Servicing
Expenses paid or advanced by the Owner or to pay itself
interest in accordance with Section 6.6 hereof;
(iv) pay interest, if required, to Mortgagors on Tax
and Insurance Reserves;
(v) removal of any deposits made in error;
(vi) termination of the account;
(vii) disburse loss drafts to contractors for repairs
to Mortgaged Property damaged by hazard losses; and
(viii) pay loss drafts to Mortgagors to the extent a
loss draft exceeds total hazard loss repair charges and the T
& I reserve deficiency.
The Servicer shall not allow the T & I Account to become overdrawn. If there are
insufficient funds in the account, the Servicer shall request funds from the
Owner, and the Owner shall advance such amounts as are necessary, to cure the
overdraft.
(c) The T & I Account is to be designated in the name of the
Servicer in trust for the Owner acting as an agent for the Mortgagors'
payments in order to show that the account is custodial in nature. The
Servicer is required to keep records identifying each Mortgagor's
payment deposited into the account.
SECTION 6.5. TAX AND INSURANCE RESERVES.
If the law requires payment of interest on Tax and Insurance Reserves
to the Mortgagor, the Servicer is solely and fully responsible for payment of
such interest. Payment of such interest on Tax and Insurance Reserves shall not
be reflected in the Servicer's accounting for principal and interest.
SECTION 6.6. PROTECTIVE ADVANCES.
Notwithstanding any other provision hereof, Servicer shall obtain the
prior written approval of the Owner prior to incurring any Protective Advance
that is over $5,000 unless such Protective Advance is made in an emergency to
protect and preserve the Mortgaged Property or public safety in connection with
the Mortgaged Property.
The Servicer shall make advances from its own funds with respect to the
payment of such Protective Advances. Notwithstanding any other provision of this
Agreement, (i) Servicer shall not be obligated to make any Protective Advance if
Servicer deems such advance to be non-recoverable and (ii) Servicer shall have
no obligation, responsibility or liability with respect to advances or payments
not explicitly required by the terms of this Agreement, including, without
limitation, advances for delinquent principal or interest, Curtailment Interest
or similar payments or advances other than prepayment interest shortfalls to the
extent required pursuant to the transaction documents in a securitization
financing.
Servicer shall be entitled to reimbursement for Protective Advances
made in accordance with this Section 6.6 for any Protective Advance that the
Servicer later determines to be non-recoverable. Servicer's reimbursement shall
be made by Servicer offsetting deposits to the P & I Account by any unreimbursed
Protective Advances. In the event that there are insufficient receipts of
Liquidation Proceeds and other Mortgage Loan Payments to reimburse Servicer for
Protective Advances as such Protective Advances are made, Servicer shall be
required to wait until further Liquidation Proceeds or other Mortgage Loan
payments are received.
SECTION 6.7. SERVICER'S OVERHEAD NOT REIMBURSABLE.
Servicer shall be responsible for all costs and expenses of performing
loan servicing under this Agreement. Servicer shall contract for all such
services in its own name and not in the name of Owner:
(a) all overhead expenses of Servicer;
(b) all salaries and wages of Servicer's personnel; and
(c) all sub-servicing fees (not including expenses for
servicing functions required in connection with any foreclosure)
incurred by Servicer to service the Mortgage Loans.
SECTION 6.8. ACCESS TO RECORDS.
(a) The Servicer will establish and maintain a system of (i)
records of operational information relating to the collection of
Mortgage Loans, the conduct of default management services and the
administration, management, servicing, repair, maintenance, rental,
sale, or other disposition of Mortgage Loans and Mortgaged Premises and
(ii) books and accounts, which shall be maintained in accordance with
customary business practices, of financial information relating to the
Mortgage Loans and the Mortgaged Premises. Information may be
maintained on a computer or electronic system.
(b) Owner and its respective accountants, attorneys, agents,
or designees may at normal business hours of the Servicer and at
Owner's expense (without charge by Servicer), upon reasonable prior
written notice and at reasonable times during Servicer's regular
business hours, examine Servicer's books and records relating to the
Mortgage Loans and the Mortgaged Premises. Such records shall not
include any proprietary or confidential information, as reasonably
determined by the Servicer. In addition, Servicer shall provide to
Owner any other information, related to the Mortgage Loans and
Mortgaged Premises, reasonably requested by Owner (without charge by
Servicer other than for Servicer's out-of-pocket expenses).
(c) The Servicer shall provide the Owner access to its
computerized loan tracking, or "LTS" system for the purpose of
monitoring the information relating to the Mortgage Loans. Costs of any
such access shall be born by the Servicer.
SECTION 6.9. SECURITIZATION FINANCING.
Notwithstanding anything contained in this Article VI, in the event
that the Owner transfers the Mortgage Loans in connection with a securitization
financing, the Servicer will account for collections, and allocate and deposit
funds in accordance with the provisions of the operative documents executed in
connection with such securitization financing, provided, however, that Servicer
shall have the right in its sole discretion to resign as Servicer with respect
to such transferred Mortgage Loans (i) without payment or liability and (ii)
without prejudice to any reimbursement, compensation or fee due hereunder to
Servicer with respect to such transferred Mortgage Loans.
SECTION 6.10. LATE CHARGE PAYMENT.
Notwithstanding any other provision of this Section 6, Servicer shall
pay Owner on a monthly basis twenty (20) percent of all Late Charges actually
received by Servicer for the relevant monthly period by (i) paying such amount
directly to Servicer or (ii) setting such amount against any amount due Servicer
from Owner hereunder with reasonable notice to Owner.
ARTICLE VII
REPORTS TO THE OWNER
SECTION 7.1. REPORTS TO THE OWNER.
(a) Not later than the Remittance Date each month (or not
later than such other date as specifically set forth below) the
Servicer shall prepare and deliver to the Owner the reports identified
on Exhibit C attached hereto. The Servicer shall deliver to the Owner a
written remittance advice on each Remittance Date. Such remittance
advice shall be substantially in the form of Exhibit C.
(b) Reports to the Owner. The Owner shall pay the Servicer for
any extraordinary servicing reports Owner may request and which are
prepared by the Servicer, other than those reports specified in Section
7.01(a). The cost for such reports shall be agreed upon in advance.
SECTION 7.2. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
The Servicer shall deliver to the Owner on or before the 90th day after
the end of the Servicer's accounting period each year, an Officer's Certificate
with respect to this Agreement and any related Servicing Agreement certifying
that (i) a review of the Servicer's activities and performance has been made,
(ii) Servicer complied with the minimum servicing standards set forth in the
Uniform Single Attestation Program and performed its duties and obligations
hereunder and under all related Servicing Agreement in accordance herewith and
therewith throughout such year or, if there has been a failure to comply with
such standards or a default in the fulfillment of any such duties or
obligations, such Officer's Certificate shall specify each such failure or
default known to such officer and the nature and status thereof, and (iii) an
examination has been made of the Fidelity Bond and the Errors and Omissions
Policy maintained by the Servicer and each such bond and policy are in effect
and conform to the requirements of this Agreement and all related Servicing
Agreements. In addition, Servicer shall provide to Owner all information within
Servicer's control reasonably required to ensure completion and issuance of
Owner's annual financial statements and tax returns within thirty days after the
end of Owner's fiscal year.
SECTION 7.3. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
On or before the 90th day after the end of the Servicer's accounting
period each year, the Servicer, at its expense, shall cause a
nationally-recognized firm of independent certified public accountants to
furnish a report to the Owner to the effect that, on the basis of an examination
conducted in compliance with the standards of the American Institute of
Certified Public Accountants, such firm is of the opinion that the statement of
the Servicer made pursuant to Section 7.2, insofar as such statement relates to
the compliance by the Servicer with the minimum servicing standards set forth in
the Uniform Single Attestation Program and Sections 5.1 through 5.4, Sections
6.1 through 6.7, Section 6.9 and Sections 7.1 through 7.4, is fairly stated in
all material respects, except for exceptions that in the opinion of such firm,
the standards of the American Institute of Certified Public Accountants require
it to report, in which case such exceptions shall be set forth in such
statement.
SECTION 7.4. MONTHLY DOCUMENT REPORT.
(a) In addition to the monthly reports due hereunder, the
Servicer shall provide to Owner during the first six months of the term
of this Agreement and any related Servicing Agreement (or thereafter,
upon Owner's request) a Monthly Document Report in the form and manner
reasonably prescribed by Owner, which report shall include a listing
with respect to each Mortgage Loan and REO of all missing documents
reasonably necessary to service such Mortgage Loan of which servicer
has actual knowledge.
SECTION 7.5. SECURITIZATION FINANCING.
Subject to Servicers right to resign pursuant to Section 6.9, in
addition to the reports required pursuant to this Article VII, in the event that
the Owner transfers the Mortgage Loans in connection with a securitization
financing, the Servicer will modify the forms of reports or produce any
additional reports in accordance with the provisions of the operative documents
executed in connection with such securitization financing.
ARTICLE VIII
COMPENSATION TO SERVICER
SECTION 8.1. COMPENSATION TO THE SERVICER.
(a) As partial compensation for Servicer's services under this
Agreement, Servicer shall be entitled each month to the payment of an
amount equal to 1/12 of 0.35% of the principal balance of the Mortgage
Loans
(b) In connection with the execution of this Agreement, on the
Servicing Commencement Date, and "boarding" fee equal to $5.00 per
Mortgage Loan.
(c) Servicer shall be entitled to all Ancillary Income for any
month.
(d) Upon a termination of the Servicer without cause pursuant,
the Servicer shall be entitled to a termination fee equal to the
following:
(i) if terminated during the first year following the
Servicing Commencement Date, and amount equal to $25.00 per
Mortgage Loan;
(ii) if terminated during the second year following
the Servicing Commencement Date, an amount equal to $15.00 per
Mortgage Loan; and
(iii) if terminated after the second year following
the Servicing Commencement Date, or terminated after the
occurrence of an Event of Default or upon the expiration of
the term of this Agreement, an amount equal to $10.00 per
Mortgage Loan.
(e) Payment of the Servicing Fees shall be made by Servicer
offsetting the respective deposits to the P & I Account, pursuant to
Section 6.4 hereof or as otherwise agreed between Owner and Servicer.
The Servicer shall not be entitled to any other servicing compensation
from Owner hereunder or under any Servicing Agreement other than the
Servicing Fees.
ARTICLE IX
MERGER OR CONSOLIDATION OF SERVICER; RESIGNATION; DEFAULT
SECTION 9.1. MERGER OR CONSOLIDATION.
Anything herein to the contrary notwithstanding, any corporation into
which the Servicer may be merged or consolidated or any corporation resulting
from any merger or consolidation to which the Servicer shall be a party or any
corporation succeeding to the business of the Servicer shall be the successor of
the Servicer hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided, however, that
the successor or surviving person to the Servicer shall meet the qualifications
set forth in Section 3,[ shall be approved in advance by the Owner in its sole
discretion], and shall expressly assume the obligations of the Servicer under
this Agreement.
SECTION 9.2. ASSIGNMENT OR TRANSFER OF SERVICING AGREEMENT.
The Servicer may not assign or transfer any or all of its rights and
obligations under this Agreement without the prior written consent of the Owner.
The Owner may assign this Agreement without the consent of the Servicer upon
written notice to the Servicer with respect to any and all of the Mortgage
Loans, provided such Assignment is made in connection with the sale of the
related Mortgage Loans and Servicer shall have received prior to the transfer of
such Mortgage Loans all compensation due hereunder with respect to such
transferred Mortgage Loans, including without limitation, all servicing
compensation under Section 8 and unreimbursed Protective Advances.
Notwithstanding an other provision of this Agreement, Servicer shall have the
right to assign, transfer or pledge any right Servicer has to receive payment
under this Agreement without the consent of, or notice to, the Owner.
SECTION 9.3. RESIGNATION OF SERVICER.
Except as otherwise provided in this Section 9.3, the Servicer shall
not resign from the obligations and duties hereby imposed on it except upon the
determination that its duties hereunder are no longer permissible under
applicable law and that such incapacity cannot be cured by the Servicer. Any
such determination permitting the resignation of Servicer shall be evidenced by
an opinion of counsel, at the Servicer's expense, to such effect delivered to
Owner in form and substance reasonably acceptable to Owner. No such resignation
shall become effective until the Owner or its designee shall have assumed the
Servicer's responsibilities and obligations under this Agreement and any related
Servicing Agreement.
SECTION 9.4. EVENTS OF DEFAULT BY SERVICER.
The happening of any of the following events shall constitute a default
("Event of Default") by the Servicer under this Agreement and any related
Servicing Agreement:
(a) Any failure by the Servicer to make any deposit or
payment, or to remit any payment, required to be made under the terms
of this Agreement and any related Servicing Agreement which continues
unremedied for a period of 3 Business Days;
(b) Any failure on the part of the Servicer to perform any
obligations required under Article VII and such failure continues for 5
Business Days after the date on which the Owner shall have given to the
Servicer written notice of such failure and demanding that such failure
be cured;
(c) Any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or
agreements (other than those referred to in Section 9.4(a) and 9.4(b)
above) to be performed or observed by it in this Agreement and any
related Servicing Agreement, or any material breach of a representation
or warranty in Section 3,1, which continues uncured for a period of 10
days after the date on which the Owner shall have given to the Servicer
written notice of such failure or breach and demanding that such
default be cured;
(d) Any involuntary petition in bankruptcy or any other
similar petition shall be filed against the Servicer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal,
state or other statute, law, or regulation, and shall remain in force
undischarged or unstayed for 45 days, or if any custodian, trustee,
receiver or liquidator of all or any substantial part of the assets of
the Servicer shall be appointed or take possession of such assets
without the consent or acquiescence of the Servicer and such
appointment remains unvacated for 45 days;
(e) The Servicer shall consent to the appointment of a
trustee, conservator, or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities, or similar
proceedings of, or relating to, the Servicer, or all or substantially
all of the Servicer's property;
(f) The Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations or take any corporate action in furtherance
of the foregoing;
(g) the Servicer assigns or attempts to assign its rights to
the servicing compensation hereunder or attempts to assign this
Agreement or the servicing responsibilities hereunder or any related
Servicing Agreement without the consent of Owner except as otherwise
expressly permitted by the other terms and provisions of this
Agreement; or
(h) the Servicer fails to remain qualified as a mortgage
servicer for Freddie Mac loans and/or the Servicer disposes of
substantially all of its assets.
In case of any Event of Default, the Owner may provide the Servicer
with written notice of the termination of all of the Servicer's authority,
powers, and rights 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 or any related Servicing Agreement, whether with respect to the
Mortgage Loans or Mortgaged Premises shall terminate effective as of the date
specified in such written notice. Without limiting the generality of the
foregoing, the Owner is hereby authorized and empowered to execute and deliver
on behalf of the Servicer, as the Servicer's attorney-in-fact, any and all
documents and other instruments, and to do or accomplish all other acts or
things that in the Owner sole and absolute judgment may be necessary or
appropriate to effect termination (with or without cause). The Servicer shall
continue to provide services in accordance with this Agreement or any related
Servicing Agreement until such date and shall in good faith cooperate fully to
transfer the servicing and the management of the Mortgage Loans and Mortgaged
Premises and custody of the Servicer Mortgage Loan Files to the Person
designated by Owner. Notwithstanding the foregoing, upon any termination the
Servicer shall use reasonable efforts do all things reasonably requested by the
Owner to effect the termination of the Servicer's responsibilities, rights, and
powers hereunder, including, without limitation, providing to the Owner all
documents and records reasonably requested by the Owner to enable the Owner or
its designee to assume and carry out the duties and obligations that otherwise
were to have been performed and carried out by the Servicer hereunder but for
such termination. Upon the occurrence of an Event of Default that shall not have
been remedied, Owner may also pursue whatever rights it may have at law or in
equity to damages, including injunctive relief and specific performance.
SECTION 9.5. TERMINATION OF THE SERVICER WITHOUT CAUSE.
The Owner shall have the right to terminate this Agreement without
cause with respect to any or all of the Mortgage Loans at any time prior to the
expiration of the term of the Servicing Agreement (as set forth in Section 3
thereof), upon notifying the Servicer at least thirty days prior to such
termination. In the event of a termination of this Agreement without cause by
the Owner, the procedures set forth in Section 9.4 shall be followed and payment
made in accordance with Section 8.1 and 9.2 hereof.
SECTION 9.6. INDEMNIFICATION BY THE SERVICER.
Pursuant to the terms of Section 9.8, the Servicer, as an Indemnifying
Party, hereby agrees to defend, indemnify, and hold harmless the Owner, the
Master Servicer, any Indenture Trustee, and any of their successors and assigns,
their Affiliates, and all of their respective officers, directors, shareholders,
partners, employees and agents, as an Indemnified Party, from and against any
and all demands, claims, losses, damages, fines, penalties, attorney fees,
judgments and any other costs, fees, and expenses (collectively "Damages")
arising from third party claims or actions that were caused by or resulted from
a breach by the Servicer or its agents of any representation, warranty or
obligation contained in this Agreement or the failure of the servicer to service
the Mortgage Loans in compliance with this Agreement.
SECTION 9.7. INDEMNIFICATION BY THE OWNER.
Pursuant to the terms of Section 9.8, the Owner, as an Indemnifying
Party, hereby agrees to defend, indemnify, and hold harmless the Servicer, as an
Indemnified Party, from and against and any and all damages as defined in
Section 9.6, asserted against, resulting to, imposed from, or incurred by the
Servicer in favor of a third party by reason of or resulting from any breach by
the Owner of any representation or warranty contained in this Agreement.
SECTION 9.8. INDEMNIFICATION PROCEDURES.
If, for so long as this Agreement is in effect, a party entitled to
indemnification hereunder ("Indemnified Party") has actual notice or knowledge
of any claim or loss for which indemnification by an indemnifying party
hereunder ("Indemnifying Party") is asserted, the Indemnified Party shall give
to the Indemnifying Party written notice within such time as is reasonable under
the circumstances, describing such claim or loss in reasonable detail. In the
event that a demand or claim for indemnification is made hereunder with respect
to losses the amount or extent of which is not yet known or certain, the notice
of demand for indemnification shall so state, and, where practicable, shall
include an estimate of the amount of the losses.
(a) Unless applicable law mandates a cure within a shorter
period of time, the Indemnifying Party shall have 30 calendar days from
the date of receipt by Indemnifying Party of written notice of a breach
of the Indemnifying Party's representations within which to cure such
breach or if such breach cannot be cured within 30 days but Servicer
has commenced efforts to cure, then within 60 calendar days of such
notice. In the event a breach is cured by the Indemnifying Party, the
Indemnifying Party shall execute a written acknowledgment of the cure
in such form as is approved or provided by the Indemnified Party.
(b) In the case of actual notice of indemnification hereunder
involving any litigation, arbitration or legal proceeding, the
Indemnifying Party shall have responsibility to, and shall employ
counsel acceptable to the Indemnified Party, and shall assume all
expense with respect to, the defense or settlement of such claim;
provided however, that:
(i) the Indemnified Party shall be entitled to
participate in the defense of such claim and to employ counsel
at its own expense to assist in the handling of such claim;
and
(ii) the Indemnifying Party shall obtain the prior
written approval of the Indemnified Party before entering into
any settlement of such claim or ceasing to defend against such
claim if, pursuant to or as a result of such settlement or
cessation, (1) injunctive or other relief (excepting the
payment of money damages) would be imposed against any
Indemnified Party which could materially interfere with the
business, operations, assets, conditions (financial or
otherwise) or prospects of the Indemnified Party, or (2) the
settlement of cessation shall result in an indemnification
obligation of the Indemnifying Party that, in the reasonable
judgment of the Indemnified Party, cannot be fulfilled by the
Indemnifying Party in accordance with the terms of this
Agreement. If the Indemnifying Party does not provide to the
Indemnified Party, within fifteen (15) days after receipt of a
notice of indemnification, a written acknowledgment that the
Indemnifying Party shall assume responsibility for the defense
or settlement of such claim as provided in this Section 9.8,
the Indemnified Party shall have the right to defend and
settle the claim n such manner as it may deem appropriate at
the cost and expense of the Indemnifying Party, and the
Indemnifying Party shall promptly reimburse the Indemnified
Party therefor in accordance with this Agreement.
(c) All indemnifications provided for under this Agreement
shall survive any termination of this Agreement, the liquidation of any
Mortgage Loan or the transfer or assignment by Owner to another Person
of any Mortgage Loan or any interest in any Mortgage Loan.
SECTION 9.9. CONSENT.
Notwithstanding anything to the contrary herein, whenever the Owner's
consent is required in this Agreement, the Owner's consent shall not be required
with respect to a particular Mortgage Loan if the Owner has waived its right of
consent in writing.
If the Owner's consent for any act or omission is required under the
terms of this Agreement or any Servicing Agreement, and the Servicer has
attempted to obtain the Owner's consent pursuant to the provisions of Section
10.9 and the Owner has not responded to such consent request within 3 Business
Days, the Servicer may proceed with such action or omission in accordance with
the Accepted Servicing Practices and upon the determination that such action or
omission is in the best interest of the Owner.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. ERRORS AND OMISSIONS COVERAGE AND FIDELITY COVERAGE.
[The Servicer shall maintain, at all times at its own expense, in the
amounts described below: (i) an Errors and Omissions Policy and (ii) a Fidelity
Bond with broad coverage, in each case from an incorporated surety company
authorized to do business in the state in which the Servicer has its principal
place of business. The Servicer shall maintain the Errors and Omissions Policy
and Fidelity Bond in such form and amount that would meet the requirements of
Fannie Mae or Freddie Mac if either were the purchaser of the Mortgage Loans.
The Fidelity Bond may be in the form of either individual bonds or a blanket
bond. The coverage shall explicitly insure the Servicer, the Owner, and their
respective successors and assigns, against any losses resulting from dishonest,
fraudulent, criminal or negligent acts, errors or omissions on the part of
Officers, employees, or other persons acting on behalf of the Servicer. Such
bond and policy shall be obtained from companies with a general policyholder's
rating that would be acceptable to Fannie Mae or Freddie Mac if either were the
purchaser of the Mortgage Loans.
The Errors and Omissions Policy and Fidelity Bond may not be changed
except by an increase in the amount of coverage. The Servicer shall furnish to
the Owner on request, copies of all binders, and policies or certificates
evidencing that such bonds and insurance policies are in full force and effect
and a statement from the surety and the insurer that such Errors and Omissions
Policy or Fidelity Bond shall in no event be terminated or materially modified
without thirty (30) days prior written notice by registered mail to the Owner.
The Servicer shall also maintain at all times at its own expense
comprehensive general liability, automobile liability, worker's compensation,
and other insurance as necessary to protect the interest of the Servicer in
connection with the Servicer's performance of this Agreement and any related
Servicing Agreement which is not directly related to specific Mortgage Loans or
Mortgaged Premises.
SECTION 10.2. NO ASSIGNMENT OR DELEGATION OF DUTIES BY SERVICER.
Except as expressly provided in this Agreement, the Servicer shall not
pledge, assign, or transfer any of its rights, benefits, or privileges under
this Agreement to any other Person, or delegate to or subcontract with,
authorize, or appoint any other Person to perform any of the duties, covenants,
or obligations to be performed by the Servicer hereunder, without the prior
written consent of the Owner, which consent shall not be unreasonably withheld
and any agreement, instrument, or act purporting to effect any such assignment,
transfer, delegation, or appointment shall be void. Notwithstanding the
foregoing, the Servicer shall have the right without the prior written consent
of the Owner and hereby agrees to delegate to or subcontract with or authorize
or appoint an Affiliate of the Servicer to perform and carry out any duties,
covenants, or obligations to be performed and carried out by the Servicer
hereunder to the extent that such duties, covenants, or obligations are to be
performed in any state or states in which the Servicer is not authorized to do
business as a foreign corporation but in which the Affiliate is so authorized.
In no case, shall any permitted assignment relieve the Servicer of any liability
to the Owner hereunder. Notwithstanding an other provision of this Agreement,
Servicer shall have the right to assign, transfer or pledge any right Servicer
has to receive payment under this Agreement without the consent of, or notice
to, the Owner.
SECTION 10.3. BINDING NATURE OF AGREEMENT; ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. The Owner
may assign its rights and obligations hereunder in whole or in part without the
consent of the Servicer and shall notify the Servicer of any such assignment.
Upon such an assignment, the original Owner shall be released from any
obligations that arise on or after the effective date of such assignment with
respect to the Mortgage Loans assigned, and the new Owner shall assume any
obligations as of such date. In the event that an assignment relates to some,
but not all, of the Mortgage Loans, the Servicer hereby agrees to establish
separate, segregated servicing accounts for each separate Owner and shall
account for, remit and reimburse itself in a segregated manner.
SECTION 10.4. ASSIGNMENT. ENTIRE AGREEMENT; WAIVERS.
This Agreement contains the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements, understandings, inducements, and
conditions, express or implied, oral or written, or any nature whatsoever with
respect to the subject matter hereof.
Each of the Servicer or Owner may, by written notice to the other,
extend the time for or waive the performance of any of the obligations of such
other hereunder. The waiver by any party hereto of a breach of this Agreement or
any related Servicing Agreement shall not operate or be construed as a waiver of
any other or subsequent breach. No delay, omission, or act by a party shall be
deemed a waiver of such party's rights, powers, or remedies. No course of
dealing between the parties hereto shall operate as a waiver of any provision
hereof.
SECTION 10.5. AMENDMENTS AND SUPPLEMENTS.
This Agreement may not be modified, amended or superseded other than by
an agreement in writing between the Servicer and the Owner.
SECTION 10.6. CONTROLLING LAW.
THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT SHALL BE GOVERNED BY AND CONSTRUED,
INTERPRETED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
SECTION 10.7. NO JOINT VENTURE; LIMITED AGENCY.
The services provided by the Servicer are in each case those of an
independent contractor providing a service. Nothing contained in this Agreement
or any related Servicing Agreement: (i) shall constitute the Servicer and Owner
as members of any partnership, joint venture, association, syndicate,
unincorporated business, or other separate entity, (ii) shall be construed to
impose any liability as such on the Servicer or Owner, or (iii) shall constitute
a general or limited agency or be deemed to confer on it any express, implied or
apparent authority to incur any obligation or liability on behalf of the other.
SECTION 10.8. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
SECTION 10.9. NOTICES.
Notwithstanding any provision in this Agreement to the contrary, the
Servicer agrees to make reasonable efforts to contact Owner telephonically
following the delivery of any notice delivered pursuant to this Section 10.9 to
the extent (a) Servicer would be permitted to take certain actions under this
Agreement in the absence of a response to such notice by the Owner or (b)
approval of the Owner is required to take any action related to such notice. All
notices, requests, demands, and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made, and received: (a) upon receipt if delivered personally (unless subject to
clause (b)) or if mailed by registered or certified mail return receipt
requested, postage prepaid; (b) at 5:00 p.m. local time on the business day
after dispatch if sent by a nationally recognized overnight courier; or (c) upon
the completion of transmission (which is confirmed by telephone or by a
statement generated by the transmitting machine and confirmed by telephone) if
transmitted by telecopy or other means of facsimile which provides immediate or
near immediate transmission to compatible equipment in the possession of the
recipient, in any case to the parties at the following addresses or telecopy
numbers (or at such other address or telecopy number for a party as will be
specified by like notice):
(a) If to the Owner:
Fremont Investment & Loan
175 North Riverview Drive
Anaheim, California 92808
Attention: Mr. Kyle Walker
(b) If to the Servicer:
Fairbanks Capital Corp.
3815 South West Temple
Salt Lake City, Utah 84115-4412
or:
P.O. Box 65250
Salt Lake City, Utah 84165-4412
Attention: Mr. Thomas D. Basmajian, Facsimile: 801-293-
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20007-1420
Attention: Russell J. Bruemmer
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
SECTION 10.10. PROVISIONS SEPARABLE; INTERPRETATION.
The provisions of this Agreement are independent of and separable from
each other, and no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other or others of
them may be invalid or unenforceable in whole or in part. No provision of this
Agreement or any related Servicing Agreement shall be construed against or
interpreted to the disadvantage of any party hereto by any court or other
authority by reason of such party having or being deemed to have structured,
dictated, or drafted such provision. The parties hereto acknowledge that no
other agreement entered into by the Servicer for the provision of servicing,
default management services, and property management and disposition services
shall be used or referred to in construing the provisions of this Agreement or
any related Servicing Agreement.
SECTION 10.11. CONFIDENTIALITY.
(a) The Servicer shall treat confidentially (and not disclose
to any Third Party, other than its Representatives and its auditors,
accountants, and regulators, who shall agree to keep same confidential)
this Agreement and any related Servicing Agreement, the transactions
contemplated hereby, and all non-public information concerning the
Mortgage Loans and the servicing thereof in connection with this
Agreement and any related Servicing Agreement obtained or in the
possession of the Servicer or its directors, officers, employees,
agents, or advisors (collectively, "Representatives"), and all notes,
analyses, compilations, studies, or other documents which contain or
otherwise reflect such information in a manner that identifies or
permits identification of individual Mortgage Loans (this Agreement and
any related Servicing Agreement, the transactions contemplated hereby,
and such information and documents collectively, the "Loan Material").
The foregoing agreement shall not be applicable to any information that
is publicly available when provided, that thereafter becomes publicly
available or that is required to be disclosed by a party or its
Representatives by judicial, administrative, or legislative process in
connection with any action, suit, proceeding, or claim or otherwise by
applicable law, that becomes known to the Servicer from a source other
than Owner or any other source not known to the Servicer to be bound by
an agreement or duty to maintain the confidentiality of such
information, or that was known to the Servicer without a duty of
confidentiality prior to entering into this Agreement. Information
shall be deemed "publicly available" if it is contained in materials
available to the public.
(b) The Servicer agrees that it and its Representatives shall
use all Loan Material solely for the benefit of Owner in connection
with its servicing of the assets hereunder; and Owner agrees that the
Servicer is entitled to disclose Loan Material to Third Parties to the
extent it is reasonably necessary for the Servicer to reveal the Loan
Material in connection with the performance of the Servicer's
obligations under this Agreement or any related Servicing Agreement or
in the defense of legal proceedings against the Servicer, or if the
Servicer reasonably believes it is in the best interests of Owner, such
as disclosure of property sale information to multiple listing
services.
(c) The Servicer shall, and shall cause its Representatives:
(i) not to issue any news release or otherwise
publicize in any manner this Agreement, any related Servicing
Agreement, or the transactions contemplated hereby, without
the prior written consent of Owner;
(ii) not to identify to any Third Party, including
any Borrower with respect to an asset, the owners, officers,
or directors of Owner or its Affiliates, without the prior
written consent of Owner; and
(iii) not to use the name of the Owner or the name of
any Affiliate thereof, or identify any of the foregoing, in
connection with this Agreement, any related Servicing
Agreement, or the transactions contemplated hereby or any
marketing or promotional activity of the Servicer, without the
prior written consent of Owner.
SECTION 10.12. EXPENSES.
The parties shall bear their own legal and other expenses incurred in
the negotiation, execution and delivery of this Agreement and any related
Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
Regarding Standard Servicing Terms as of the date set forth above.
Servicer: FAIRBANKS CAPITAL CORP.,
a Utah corporation
By:____________________________________
Name:
Title:
Owner: FREMONT INVESTMENT & LOAN,
a California industrial loan company
By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT A TO AGREEMENT REGARDING STANDARD SERVICING TERMS
FORM OF SERVICING AGREEMENT
This Servicing Agreement, made this ___ day of ________, 199_, by and
between [FREMONT], having an office at [ ], (the "Owner") and FAIRBANKS CAPITAL
CORP., a Utah corporation, having an office at 3815 South West Temple, Salt Lake
City, Utah 84115-4412(the "Servicer"), recites and provides as follows:
R E C I T A L S
WHEREAS, Owner and Servicer executed and delivered that certain
Agreement Regarding Standard Servicing Terms dated [ ] 1, 199[ ] (the "Standard
Terms Agreement");
WHEREAS, the Standard Terms Agreement sets forth certain standard
provisions for the servicing of residential mortgage loans by Servicer on behalf
of Owner; and
WHEREAS, Owner and Servicer desire that Servicer service the mortgage
loans described on the attached Mortgage Loan Schedule pursuant to the terms
hereof and the terms of the Standard Terms Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Owner and the Servicer agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings specified in the Standard Terms
Agreement. The following terms shall have the meanings set forth below:
"Custodian" ___________________________________
"Custodial Agreement" That certain Custodial Agreement
between the Custodian, Servicer and
Owner dated as of even date
herewith.
"Servicing Commencement Date" ___________________________________
Section 2. Duties and Responsibilities of the Servicer. Servicer agrees
to service the Mortgage Loans on behalf of Owner, its successors and assigns, in
accordance with the provisions of this Servicing Agreement and the Standard
Terms Agreement.
Section 3. Term of Mortgage Loan Servicing Agreement. The duties,
responsibilities, and obligations to be performed and carried out by Servicer
under this Servicing Agreement shall commence upon the execution of this
Servicing Agreement and shall terminate (a) as to any Mortgage Loan upon the
distribution of the final payment or Liquidation Proceeds on the last Mortgage
Loan or REO Property subject to this Servicing Agreement and (b) as to all the
Mortgage Loans [(x) upon the expiration of a rolling 90 day term , if required
in connection with a securitized financing or (y) otherwise] in accordance with
the Standard Terms Agreement.
Section 4. Compensation. In consideration of the services rendered
under this Servicing Agreement, the Servicer shall be entitled to such fees as
are provided for in the Standard Terms Agreement.
Section 5. Standard Terms. Servicer acknowledges that the Standard
Terms Agreement prescribes additional terms and conditions under which Servicer
is to service the Mortgage Loans. The terms of the Standard Terms Agreement are
incorporated herein by reference and are made a part hereof. Servicer agrees to
perform and observe the duties, responsibilities and obligations that are to be
performed and observed by Servicer under the Standard Terms Agreement as said
Agreement may be amended from time to time, and further agrees that the Standard
Terms Agreement, as amended or supplemented, is and shall be a part of this
Servicing Agreement to the same extent as if set forth herein in full. If any
provision of the Standard Terms Agreement conflicts with any provision of this
Servicing Agreement, the terms of this Servicing Agreement shall govern.
Section 6. Representations and Warranties. Servicer and Owner hereby
remake the representations and warranties contained in the Standard Terms
Agreement with respect to this Servicing Agreement.
Section 7. Assignment and Delegation of Duties by Servicer. Except as
otherwise expressly provided in the Standard Terms Agreement, Servicer shall not
assign or transfer any of its duties, rights, benefits or privileges under this
Servicing Agreement.
Section 8. Assignment by Owner. Except as provided in the Standard
Terms Agreement, Servicer agrees that Owner, its successors and assigns, may at
any time, without the consent of Servicer, assign and transfer its right, title
and interest under this Servicing Agreement to any other Person.
Section 9. Notices. All notices under this Servicing Agreement shall be
made as provided in the Standard Terms Agreement.
Section 10. Severability. Each part of this Servicing Agreement is
intended to be severable. If any term, covenant, condition or provision hereof
is unlawful, invalid, or unenforceable for any reason whatsoever, and such
illegality, invalidity, or unenforceability does not affect the remaining parts
of this Servicing Agreement, then all such remaining parts hereof shall be valid
and enforceable and have full force and effect as if the invalid or
unenforceable part had not been included.
Section 11. Rights Cumulative; Waivers. The rights of each of the
parties under this Servicing Agreement are cumulative and may be exercised as
often as any party considers appropriate. The rights of each of the parties
hereunder shall not be capable of being waived or varied otherwise than by an
express waiver or variation in writing. Any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or variation of that
or any other such right. Any defective or partial exercise of any of such rights
shall not preclude any other or further exercise of that or any other such
right. No act or course of conduct or negotiation on the part of any party shall
in any way preclude such party from exercising any such right or constitute a
suspension or any variation of any such right.
Section 12. Headings. The headings of the Sections contained in this
Servicing Agreement are inserted for convenience only and shall not affect the
meaning or interpretation of this Servicing Agreement or any provision hereof.
Section 13. Construction. Unless the context otherwise requires,
singular nouns and pronouns, when used herein, shall be deemed to include the
plural of such noun or pronoun and pronouns of one gender shall be deemed to
include the equivalent pronoun of the other gender.
Section 14. Assignment. This Servicing Agreement and the terms,
covenants, conditions, provisions, obligations, undertakings, rights and
benefits hereof, including any Exhibits and Schedules hereto, shall be binding
upon, and shall inure to the benefit of, the undersigned parties and their
respective heirs, executors, administrators, representatives, successors, and
assigns.
Section 15. Counterparts. This Servicing Agreement may be executed in
any number of counterparts, each of which shall constitute one and the same
instrument, and either party hereto may execute this Servicing Agreement by
signing any such counterpart.
Section 16. Governing Law. This Servicing Agreement shall be construed,
and the rights and obligations of the Servicer and the Owner hereunder
determined, in accordance with the laws of the State of New York determined
without regard to its laws concerning conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Servicer: FAIRBANKS CAPITAL CORP.,
a Utah corporation
By:_____________________________________
Name:
Its:
Owner: FREMONT INVESTMENT & LOAN
a California industrial loan company
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT B TO AGREEMENT REGARDING STANDARD SERVICING TERMS
FORM OF RECEIPT
To: _________________________________ [Address]
Re: [The Custodial Agreement]
In connection with the administration of the Mortgage Loans held by you
as the Custodian on behalf of the Servicer, we request the release, and
acknowledge receipt, of the (Custodial File/(specify documents]) for the
Mortgage Loan described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code: Mortgage Loan Number:
Reason for Requesting Documents (check one)
o 1. Mortgage Loan Paid in Full.
(The Servicer hereby certifies that all amounts received in
connection therewith have been credited to the P & I Account
as provided in the Servicing Agreement.)
o 2. Repurchase Pursuant to the Mortgage Loan Sale Agreement.
(The Servicer hereby certifies that the repurchase price has
been credited to the account as provided in the Servicing
Agreement.)
o 3. Mortgage Loan Liquidated By ____________
(The Servicer hereby certifies that all proceeds of
foreclosure, insurance, condemnation or other liquidation have
been finally received and credited to the P & I Account
pursuant to the Servicing Agreement.)
o 4. Mortgage Loan in Foreclosure
o 5. Other (explain)
If box 1, 2 or 3 above is checked, and if all or part of the Custodial
File was previously released to us, please release to us our previous request
and receipt on file with you, as well as any additional documents in your
possession relating to the specified Mortgage Loan.
If box 4 or 5 above is checked, upon our return of all of the above
documents to you as the Custodian, please acknowledge receipt by signing in the
space indicated below, and returning this form.
______________________________
Servicer
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
Consent of Owner
By:________________________
Name:______________________
Title:_____________________
Date:______________________
Acknowledgment of Documents returned to the Custodian:
___________________________
Custodian
By:________________________
Name:______________________
Title:_____________________
Date:______________________
<PAGE>
EXHIBIT C
REPORTS TO THE OWNER
INFORMATION IS AVAILABLE WITH THE SERVICER AT
FAIRBANKS CAPITAL CORP.
3815 SOUTH WEST TEMPLE
SALT LAKE CITY, UTAH 84165
<PAGE>
SCHEDULE I
FAIRBANKS CAPITAL CORP.
SERVICING POLICIES AND PROCEDURES
COLLECTIONS
Fairbanks specializes in the servicing of non-performing loans which
frequently require an aggressive approach on the part of the Loan Servicing
Representative. Loan Servicing Representatives are required to have a thorough
working knowledge of and comply with the Federal Fair Debt Collection Practices
Act, the Real Estate Settlement Procedures Act (RESPA) and applicable FNMA
(Fannie Mae), FHLMC (Freddie Mac), HUD, VA and PMI requirements. Loan Servicing
Representatives are also required to be familiar with the applicable collection
requirements imposed by various servicing agreements.
Loan Servicing Representatives ("LSRs") are expected to make a note in
LTS each time activity is generated on the loan (contacts, attempts, letters,
and follow-ups). Notes describing telephone contacts must fully describe the
matters discussed including the reasons for deficiency or default and options or
plans to cure the deficiency or default. This information is used by other
departments and may be required by Fannie Mae, Freddie Mac, HUD, the VA or PMI
companies or investors under some circumstances.
Organizational Structure
Primary Collections
Primary Collection LSRs service delinquent loans which are
five to 31 days past due. LSRs attempt to resolve the
delinquencies through telephone and written contact.
Combat Collections
Combat LSRs service loans which are 31 days or more delinquent
and continue to service the loan through the resolution of the
loan. In their efforts to help the borrowers reinstate their
loans, Combat LSRs may offer alternative resolutions to
resolve loan delinquency, including loan modifications,
forbearance plans, and short sales. If the borrowers are
unable to reinstate the loan, Combat LSRs work closely with
the Legal Department to resolve the loan through liquidation.
Combat LSRs are required to have at least one year of debt
collection experience.
Time Tables
The following are general guidelines only. LSRs are required to be
familiar with and check the applicable servicing agreements and Fannie Mae,
Freddie Mac, PMI, HUD/FHA and VA guidelines for provisions, regulations or laws
pertaining to the collection and foreclosure of loans serviced by Fairbanks.
Sub-Prime Loans (with and without PMI)
Note: Each PMI company has its own guidelines for notices of
default and intent to foreclose. LSRs must review the
applicable guidelines prior to initiating foreclosure
proceedings.
(a) 5 Days Delinquent
Telephone contact is attempted with borrowers whose
payment has not been received by the fifth day after
the due date. The LSR will determine whether the
payment has been sent and if so, when and if not,
payment arrangements are negotiated. At this time, if
payment has not been received the "5-Day Notice" is
sent.
(b) 11 - 12 Days Delinquent
Mail late notice to borrowers whose payment has not
been received by the eleventh day after the due date
and call by the twelfth day. Continue with phone
contact attempts to make arrangements to bring the
loan current.
(c) 16 Days Delinquent
Borrowers whose loans are 16 days delinquent will
receive written notice that late fees have been
imposed. If the 16th day falls on a weekend or
holiday, notices will be sent after the payment
posting of the next business day. LSRs will continue
to attempt telephone contact with the delinquent
borrowers.
(d) 21 Days Delinquent
Within 5 days of sending the "16-Day Late Notice,"
LSRs will make at least two attempted phone contacts
per week with the borrowers to discuss the
delinquency of the loan and potential resolutions to
the delinquency. If payment has not been received by
the 21st day, the "21-Day Late Notice" is sent.
(e) 26 Days Delinquent
The 26 day delinquency notice advising of the
pending "Notice of Default" is sent via Western
Union. Simultaneously, efforts will be made to
contact borrower to make arrangements to bring loan
current.
(f) 25 - 31 Days Delinquent
If the borrowers fail to make a payment within the
month that it is due and the account is past due for
two payments, a demand for payment is mailed, subject
to the provisions of the applicable servicing
agreement. The demand is sent via certified mail,
return receipt requested, and regular, first class
mail. The demand requires the borrowers to pay the
full amount due to avoid further legal action. A
field inspection is ordered on the 31st day of
delinquency. Phone contact is continued to determine
reason for default.
(g) 31 - 60 Days Delinquent
LSRs attempt to make telephone contact with the
borrowers a minimum of two days a week to resolve the
delinquency prior to referral for foreclosure.
(h) 35 to 45 Days Delinquent
If possible, a face-to-face interview must be
arranged with the borrowers who are 35 to 45 days
delinquent for the purposes of determining the cause
of the default and developing a plan to cure the
default. If a face-to-face interview cannot be
arranged due to the borrower's lack of geographic
proximity to Fairbanks, the LSR will request a second
delinquency contact inspection (AKA property
inspection). Delinquency contact inspectors verify
who is living in the property or if the property has
been abandoned.
(i) Abandoned Property
If the property has been abandoned, the LSR must
arrange for the delinquency contact inspector to
secure the property and address any health or
personal injury hazards which may exist, in
accordance with the applicable servicing agreement.
Foreclosure proceedings must commence immediately.
(ii) Property Vacant and Listed for Sale
If the property is vacant and listed for sale, the
LSR will contact the listing agent to discuss the
status of any pending offers for the property.
Contact information for the borrowers must also be
obtained or verified with the listing agent.
Foreclosure proceedings must commence immediately.
(iii) Demand Expired - No Plan for Reinstatement
If the demand for payment has expired with no plan
for reinstatement, the LSR submits the loan to the
Default Review Committee. If the committee approves
the foreclosure, the loan is referred to the legal
department to commence foreclosure proceedings in
accordance with applicable servicing agreement
requirements.
(i) Approximately 45 Days Delinquent
If the loan is insured through a private mortgage
insurance ("PMP") company, the Claims Department will
send the NOD to the PMI company prior to the 20th day
of the second month of delinquency.
(j) 45 - 61 Days Delinquent
The LSR will prepare a foreclosure review worksheet
and submit the loan to the Default Review Committee.
If the committee approves the foreclosure, the loan
is referred to the Legal Department to commence
foreclosure proceedings as soon as the demand expires
in accordance with applicable servicing agreement
requirements. Foreclosure should be approved no later
than the 61st day of delinquency.
(k) 50 - 65 Days Delinquent
On approximately the 62nd day of delinquency and
after the expiration of the demand, if Fairbanks and
the borrowers have not agreed on a plan to cure the
default, the Legal Department will refer the loan to
local counsel for foreclosure. The LSR will continue
to contact the borrowers by telephone even after the
loan has been approved for foreclosure until all
avenues to cure the default have been exhausted.
(l) During and After Foreclosure and the Redemption
Period
LSRs will maintain contact with the borrowers
during the foreclosure process and attempt to cure
the default prior to the foreclosure sale. After
foreclosure, throughout and after the redemption
period, the LSRs will maintain contact with the
borrowers to pursue any deficiency amounts and, if
applicable under state law, possible reinstatement.
ADMINISTRATION AGREEMENT
dated as of March 1, 1999
among
FREMONT HOME LOAN OWNER TRUST 1999-1
(the "Issuer"),
FIRST UNION NATIONAL BANK,
(the "Administrator")
and
FREMONT INVESTMENT & LOAN
(the "Company" and "Master Servicer")
Home Loan Asset Backed Notes, Series 1999-1
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. Duties of the Administrator...................................
Section 2. Duties of the Master Servicer with Respect to the Indenture...
Section 3. Records.......................................................
Section 4. Compensation..................................................
Section 5. Additional Information to Be Furnished to the Issuer..........
Section 6. Independence of the Administrator.............................
Section 7. No Joint Venture..............................................
Section 8. Other Activities of Administrator and Master Servicer.........
Section 9. Term of Agreement; Resignation and Removal of Administrator
or Master Servicer...........................................
Section 10. Action upon Termination, Resignation or Removal of the
Administrator................................................
Section 11. Notices.......................................................
Section 12. Amendments....................................................
Section 13. Successor and Assigns.........................................
Section 14. Governing Law.................................................
Section 15. Headings......................................................
Section 16. Counterparts..................................................
Section 17. Severability..................................................
Section 18. Not Applicable to First Union in Other Capacities.............
Section 19. Limitation of Liability of Owner Trustee......................
Section 20. Benefit of Agreement..........................................
Section 21. Bankruptcy Matters............................................
Section 22. Capitalized Terms.............................................
Section 23. Third Party Beneficiary.......................................
<PAGE>
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT dated as of March 1, 1999, among
FREMONT HOME LOAN OWNER TRUST 1999-1, a Delaware business trust, as issuer (the
"Issuer"), FIRST UNION NATIONAL BANK, a national banking association, not in its
individual capacity but solely as administrator ("First Union" and in such
capacity, the "Administrator") and FREMONT INVESTMENT & LOAN, a California
industrial loan company, as the company and master servicer (respectively, the
"Company" and "Master Servicer").
W I T N E S S E T H:
WHEREAS, the Issuer is a business trust (the "Owner Trust")
under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.) created
by a Trust Agreement relating to the Owner Trust dated as of March 1, 1999 (the
"Owner Trust Agreement"), among PaineWebber Mortgage Acceptance Corporation IV,
as depositor (the "Depositor"), Wilmington Trust Company, as Owner Trustee,
First Union, as paying agent (in such capacity, the "Paying Agent") and Fremont
Investment & Loan;
WHEREAS, the Issuer will issue Home Loan Asset Backed Notes,
Series 1999-1 (the "Notes");
WHEREAS, the Notes will be secured by certain collateral, as
more particularly set forth in the Indenture dated as of March 1, 1999 (the
"Indenture"), between the Issuer and First Union, as indenture trustee (in such
capacity, the "Indenture Trustee");
WHEREAS, the Issuer has entered into certain agreements in
connection with the issuance of the Notes, including (i) a Sale and Master
Servicing Agreement dated as of March 1, 1999 (the "Sale and Servicing
Agreement"), among the Issuer, the Company, as Master Servicer and Transferor,
the Depositor and the Indenture Trustee , (ii) the Letter of Representations,
among the Issuer, the Indenture Trustee and The Depository Trust Company
relating to the Notes (the "Note Depository Agreement"), (iii) the Insurance and
Indemnity Agreement, dated as of March 1, 1999 (the "Insurance Agreement"),
among the Securities Insurer, the Company, as Transferor and Master Servicer,
the Depositor and the Issuer, (iv) the Indenture, (v) the Servicing Agreement
which incorporates the Agreement Regarding Standard Servicing Terms, each dated
as of March 1, 1999 (collectively, the "Servicing Agreement") between the
Company and Fairbanks Capital Corp. as Servicer and (vi) the Owner Trust
Agreement (the Sale and Servicing Agreement, the Note Depository Agreement, the
Insurance Agreement, the Indenture, the Servicing Agreement and the Owner Trust
Agreement being hereinafter referred to collectively as the "Related
Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer is
required to perform certain duties in connection with the Notes and the
collateral therefor pledged pursuant to the Indenture (the "Collateral");
WHEREAS, the Issuer desires to have the Administrator and the
Master Servicer, respectively, perform certain of the duties of the Issuer
referred to in the preceding clause, and to provide such additional services
consistent with the terms of this Agreement and the Related Agreements as the
Issuer may from time to time request; and
WHEREAS, the Administrator and the Master Servicer have the
capacity to provide the respective services required hereby and are willing to
perform such services for the Issuer on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
Section 1. Duties of the Administrator.
(a) Duties with Respect to the Note Depository Agreement, the
Sale and Servicing Agreement, the Insurance Agreement and the Indenture.
(i) The Administrator agrees to perform all of the
duties of the Issuer under the Note Depository Agreement and
those duties of the Administrator set forth herein. In
addition, when it deems necessary consistent with its
obligations hereunder, the Administrator shall consult with
the Owner Trustee regarding the duties of the Issuer under the
Sale and Servicing Agreement, the Insurance Agreement, the
Indenture and the Note Depository Agreement. The Administrator
shall notify the Owner Trustee when action is necessary to
comply with the Issuer's duties under Sections 4.05 and 11.03
of the Sale and Servicing Agreement, Sections 2.05, 2.08, 3.03
and 6.03 of the Insurance Agreement, the provisions of the
Indenture set forth below and the Note Depository Agreement.
The Administrator shall carry out in a timely fashion, and in
accordance with the provisions of the Indenture, all duties of
the Issuer pursuant to the terms of this Agreement. The
Administrator shall have absolute discretion in the
performance of its obligations hereunder and shall have no
obligation to notify the Owner Trustee of its actions except
as set forth in the Indenture. In addition to the foregoing,
the Administrator shall take, or cause to be taken, all
appropriate action that is the duty of the Issuer to take with
respect to the following matters under the Indenture
(parenthetical section references are to sections of the
Indenture):
(A) the preparation of the Notes and the
execution or directing the Owner Trustee to execute
the Notes upon the registration of any transfer or
exchange of the Notes (Sections 2.02 and 2.03);
(B) the duty to cause the Note Register to
be kept and to give the Indenture Trustee notice of
any appointment of a new Note Registrar and the
location, or change in location, of the Note Register
(Section 2.03);
(C) the notification of Noteholders and the
Securities Insurer of the final principal payment on
the Notes or of the redemption of the Notes or the
duty to cause the Indenture Trustee to provide such
notification (Sections 2.06(b) and 10.02);
(D) performing the function of the Issuer
with respect to the cancellation of the Notes
(Section 2.07);
(E) [Reserved.]
(F) the maintenance of an office in the City
of Charlotte, North Carolina, for registration of
transfer or exchange of Notes (Section 3.02);
(G) the delivery to the Indenture Trustee,
the Securities Insurer and the Rating Agencies of
prompt written notice of each Event of Default under
the Indenture of which it has knowledge (Section
3.13);
(H) the duty to act as Paying Agent for the
Issuer and the duty to cause newly appointed Paying
Agents, if any, to deliver to the Indenture Trustee
the instrument specified in the Indenture regarding
funds held in trust (Section 3.03);
(I) directing the Indenture Trustee to
deposit moneys with Paying Agents, if any, other than
the Indenture Trustee (Section 3.03);
(J) notifying the Indenture Trustee, the
Securities Insurer and the Rating Agencies of the
occurrence of an Event of Default of which the
Administrator has knowledge under the Sale and
Servicing Agreement by the Master Servicer or the
Transferor and, if such an Event of Default arises
from the failure of the Master Servicer or the
Transferor to perform any of their respective duties
under the Sale and Servicing Agreement, the taking of
all reasonable steps available to enforce the
obligations of such parties thereunder (Section
3.07(c));
(K) monitoring the Issuer's obligations as
to the satisfaction and discharge of the Indenture
(Section 4.01);
(L) opening one or more accounts in the
Owner Trust's name (Section 8.02(e));
(M) notifying the Rating Agencies, the
Master Servicer and the Securities Issuer of a
redemption of the Notes (Section 10.01);
(N) providing the Indenture Trustee with
calculations pertaining to original issue discount,
if any, on the Notes and, if applicable, the accrual
of market discount or the amortization of premium on
the Notes to the extent the Administrator has
received from the Master Servicer sufficient
information to calculate such amounts (Section 3.03);
(O) the preparation and filing of all
documents and reports by the Issuer on Forms 8-K and
10-K as required under the Exchange Act, the rules
and regulations of the Commission thereunder and the
TIA (Section 7.03);
(P) filing Internal Revenue Service Form
8811 within 30 days of the Closing Date, designating
the officer of the Indenture Trustee that Noteholders
may contact for original issue discount information
with respect to the Notes, and updating such Form at
the time or times required by the Code; and
(Q) executing and delivering any financing
statement, continuation statement or other instrument
necessary or required pursuant to Section 3.05 of the
Indenture (Section 3.05).
(ii) Notwithstanding anything in this Agreement or
the Related Agreements to the contrary, the Administrator
shall be responsible for performance of the duties of the
Owner Trustee set forth in the Owner Trust Agreement with
respect to accounting and reports to Owners and the
performance of the tax duties set forth in (i) Section 5.2(c)
of the Owner Trust Agreement and (ii) Section 5.5 of the Owner
Trust Agreement upon receipt of the Opinion of Counsel
specified in Section 5.5 of the Owner Trust Agreement stating
that it is necessary to perform such tax duties; provided,
however, that the Owner Trustee shall retain responsibility
for the distribution of the Schedule K-1's necessary to enable
each Owner to prepare its federal and state income tax
returns; provided further, that the Indenture Trustee and the
Administrator shall receive written notification if there
shall be two or more beneficial owners of the Owner Trust.
(b) Duties with respect to the Owner Trust Agreement.
(i) The Administrator shall perform the duties of
the Administrator specified in Section 10.02 of the Owner
Trust Agreement required to be performed in connection with
the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Administrator
under the Owner Trust Agreement.
(ii) In carrying out the foregoing duties or any
of its other obligations under this Agreement, the
Administrator may enter into transactions with or otherwise
deal with any of its affiliates; provided, however, that the
terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and
shall be, in the Administrator's opinion, no less favorable to
the Issuer than would be available from unaffiliated parties.
(c) Notwithstanding anything in this Agreement or the
Related Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax is
imposed on the Owner Trust's payments (or allocations of income) to an Owner as
contemplated in Section 5.2(c) of the Owner Trust Agreement. Any such notice
shall specify the amount of any withholding tax required to be withheld by the
Owner Trustee pursuant to such provision.
Section 2. Duties of the Master Servicer with Respect to the
Indenture.
(a) The Master Servicer shall take all appropriate action that
is the duty of the Issuer to take with respect to the following matters under
the Indenture (parenthetical section references are to sections of the
Indenture):
(i) preparing, obtaining or filing of the
instruments, opinions and certificates and other documents
required for the release of Collateral (Section 2.09);
(ii) preparation of all supplements, amendments,
financing statements, continuation statements, instruments of
further assurance and other instruments, in accordance with
Section 3.05 of the Indenture, necessary to protect the Trust
Estate (Section 3.05);
(iii) the annual delivery of Opinions of Counsel,
in accordance with Section 3.06 of the Indenture, as to the
Trust Estate, and the annual delivery of the Officers'
Certificate and certain other statements, in accordance with
Section 3.09 of the Indenture, as to compliance with the
Indenture (Sections 3.06 and 3.09);
(iv) monitoring the Issuer's compliance with its
negative covenants (Section 3.08) and the compliance of the
Servicer with certain of its obligations under the Sale and
Servicing Agreement or the Servicing Agreement (Section 3.07);
(v) compliance with any directive of the Indenture
Trustee with respect to the sale of the Trust Estate in a
commercially reasonable manner if an Event of Default shall
have occurred and be continuing under the Indenture (Section
5.04);
(vi) appointing a successor Indenture Trustee
pursuant to Section 6.08 of the Indenture (Section 6.08);
(vii) causing one or more accounts to be opened in
the Owner Trust's name and preparing Issuer Orders, Officers'
Certificates and Opinions of Counsel and all other actions
necessary with respect to investment and reinvestment of funds
in the Trust Accounts (Sections 8.02 and 8.03);
(viii) preparing an Issuer Request and Officers'
Certificate and obtaining an Opinion of Counsel and
Independent Certificates, if necessary, for the release of the
Trust Estate as defined in the Indenture (Sections 8.05 and
8.06);
(ix) preparing Issuer Orders and obtaining of
Opinions of Counsel with respect to any proposed amendment of
the Owner Trust Agreement or amendment to or waiver of any
provision of any other document relating to the Owner Trust
Agreement pursuant to Section 9.07 of the Indenture (Section
9.07);
(x) notifying the Rating Agencies, the Securities
Insurer or the Servicer upon the failure of the Indenture
Trustee to give such notification, of the information required
pursuant to Section 11.04 of the Indenture (Section 11.04);
and
(xi) where applicable, the preparation and
delivery on behalf of the Issuer, certificates of fair value
of the Collateral.
(b) The Company shall indemnify each of the Owner Trustee
and the Paying Agent, and their respective successors, assigns, agents and
servants (collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against any Indemnified Party in any way relating to or arising out of this
Agreement, the Related Agreements, the Trust Estate, the administration of the
Trust Estate or the action or inaction of the Owner Trustee hereunder or
thereunder other than any loss, liability or expense incurred as a result of the
gross negligence, willful misconduct or bad faith of the Owner Trustee or the
Paying Agent, respectively. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the Paying Agent
or the termination of this Agreement or the Owner Trust Agreement. In any event
of any claim, action or proceeding for which indemnity will be sought pursuant
to this Section, the Indemnified Party's choice of legal counsel shall be
subject to the approval of the Company, which approval shall not be unreasonably
withheld.
(c) Additional Duties. In addition to the duties of the
Master Servicer set forth above, the Master Servicer shall prepare for execution
by the Issuer or shall cause the preparation by other appropriate persons of all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Issuer to prepare, file or deliver pursuant to the
Related Agreements, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer to take pursuant to the
Related Agreements. Subject to Section 5 hereof and in accordance with the
directions of the Owner Trustee, the Master Servicer shall administer, perform
or supervise the performance of such other activities in connection with the
Collateral (including the Related Agreements) as are not covered by any of the
foregoing provisions and as are expressly requested by the Owner Trustee and are
reasonably within the capability of the Master Servicer.
Section 3. Records.
The Administrator shall maintain appropriate books of account
and records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Issuer, the Servicer and the
Master Servicer at any time during normal business hours upon reasonable prior
notice.
Section 4. Compensation.
The Administrator will perform the duties and provide the
services called for under Section 1 hereof in consideration for the compensation
it receives as Indenture Trustee for so long as the Indenture and the Sale and
Servicing Agreement remain in effect, and thereafter for such compensation as
shall be agreed upon among the Administrator, the Owner Trustee and the Master
Servicer. The Administrator shall be entitled to reimbursement by the Company
for all reasonable out-of-pocket expenses incurred or made by it hereunder. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Administrator's agents, counsel, accountants and experts and
Opinions of Counsel required hereunder. The Company agrees to indemnify the
Administrator against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the performance of its duties
hereunder. The Administrator shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Administrator so to notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend any such claim, and the Administrator may have separate counsel
reasonably acceptable to the Company and the Company shall pay the reasonable
fees and expenses of such counsel. The Company shall not be required to
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Company through the Administrator's own willful misconduct,
negligence or bad faith.
Section 5. Additional Information to Be Furnished to the
Issuer.
The Administrator shall furnish to the Issuer from time to
time such additional information regarding the Collateral reasonably available
to the Administrator as the Issuer shall reasonably request.
Section 6. Independence of the Administrator.
For all purposes of this Agreement, the Administrator shall be
an independent contractor and shall not be subject to the supervision of the
Issuer or the Owner Trustee with respect to the manner in which it accomplishes
the performance of its obligations hereunder. Unless expressly authorized by the
Issuer, the Administrator shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
Section 7. No Joint Venture.
Nothing contained in this Agreement (i) shall constitute the
Administrator or the Master Servicer, respectively, and either the Issuer or the
Owner Trustee as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.
Section 8. Other Activities of Administrator and Master
Servicer.
Nothing herein shall prevent the Administrator, the Master
Servicer or their respective Affiliates from engaging in other businesses or, in
its sole discretion, from acting in a similar capacity as an administrator for
any other person or entity even though such person or entity may engage in
business activities similar to those of the Issuer or the Owner Trustee.
Section 9. Term of Agreement; Resignation and Removal of
Administrator or Master Servicer.
(a) This Agreement shall continue in force until the
termination of the Owner Trust Agreement in accordance with its terms, upon
which event this Agreement shall automatically terminate.
(b) Subject to Section 9(e) hereof, the Administrator or the
Master Servicer may resign their respective duties hereunder by providing the
Issuer with at least 60 days' prior written notice.
(c) Subject to Section 9(e) hereof, the Issuer may remove the
Administrator without cause by providing the Administrator with at least 60
days' prior written notice.
(d) Subject to Section 9(e) hereof, the Issuer may remove the
Administrator or the Master Servicer immediately upon written notice of
termination from the Issuer to the Administrator or Master Servicer, as
applicable, if any of the following events occurs:
(i) the Administrator or the Master Servicer, as
applicable, defaults in the performance of any of its duties
under this Agreement and, after notice of such default, does
not cure such default within ten days (or, if such default
cannot be cured in such time, does not give within ten days
such assurance of cure as shall be reasonably satisfactory to
the Issuer);
(ii) a court having jurisdiction in the premises
enters a decree or order for relief, and such decree or order
shall not have been vacated within 60 days, in respect of the
Administrator or the Master Servicer, as applicable, in any
involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appoints a
receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or the
Master Servicer, as applicable, or any substantial part of its
property or orders the winding-up or liquidation of its
affairs; or
(iii) the Administrator or the Master Servicer, as
applicable, commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter
in effect, consents to the entry of an order for relief in an
involuntary case under any such law, consents to the
appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator or similar official for the
Administrator or the Master Servicer, as applicable, or any
substantial part of its property, consents to the taking of
possession by any such official of any substantial part of its
property, makes any general assignment for the benefit of
creditors or fails generally to pay its debts as they become
due.
The Administrator and the Master Servicer each agree that if
any of the events specified in clause (ii) or clause (iii) of this Section 9(d)
shall occur, it shall give written notice thereof to the Issuer, the Securities
Insurer and the Indenture Trustee within seven days after the happening of such
event.
(e) No resignation or removal of the Administrator or
Master Servicer, respectively, pursuant to this Section 9 shall be effective
until (i) a successor Administrator or Master Servicer, as the case may be,
shall have been appointed by the Issuer and (ii) such successor Administrator or
Master Servicer shall have agreed in writing to be bound by the terms of this
Agreement in the same manner as the Administrator or Master Servicer is bound
hereunder.
(f) The appointment of any successor Administrator or Master
Servicer shall be effective only after satisfaction of the Rating Agency
Condition with respect to the proposed appointment.
(g) Subject to Section 9(e) and (f) hereof, the
Administrator acknowledges that upon the appointment of a successor Indenture
Trustee pursuant to Section 6.08 of the Indenture, the Administrator shall
immediately resign and such successor Indenture Trustee shall automatically
become the Administrator under this Agreement. Any such successor Indenture
Trustee shall be required to agree to assume the duties of the Administrator
under the terms and conditions of this Agreement in its acceptance of
appointment as successor Indenture Trustee.
(h) The Master Servicer's appointment hereunder will terminate
automatically on the Master Servicer's resignation or removal under the Sale and
Servicing Agreement.
Section 10. Action upon Termination, Resignation or Removal of
the Administrator.
Promptly upon the effective date of termination of this
Agreement pursuant to Section 9(a) or the resignation or removal of the
Administrator pursuant to Section 9(b), (c) or (d), respectively, the
Administrator shall be entitled to be paid all reimbursable expenses accruing to
it to the date of such termination, resignation or removal. The Administrator
shall forthwith upon such termination pursuant to Section 9(a) deliver to the
Issuer all property and documents of or relating to the Collateral then in the
custody of the Administrator and, in the event of the resignation or removal of
the Administrator pursuant to Section 9(b), (c) or (d), the Administrator shall
cooperate with the Issuer and take all reasonable steps requested to assist the
Issuer in making an orderly transfer of the duties of the Administrator.
Section 11. Notices.
Any notice, report or other communication given hereunder
shall be in writing and addressed as follows:
(a) if to the Issuer, to
Fremont Home Loan Owner Trust 1999-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
with a copy to the Company at
Fremont Investment & Loan
175 North Riverview Drive
Anaheim, California 92808
Attention: Kyle Walker
(b) if to the Administrator, to
First Union National Bank
Corporate Trust Group, NC 1179
230 South Tyron Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Manager-Structured Finance Trust Group
(c) if to the Master Servicer, to
Fremont Investment & Loan
175 North Riverview Drive
Anaheim, California 92808
Attention: Kyle Walker
(d) if to the Servicer, to
Fairbanks Capital Corp.
3815 South West Temple
Salt Lake City, Utah 84165
Attention: Fremont Series 1999-1
(e) if to the Securities Insurer, to
Financial Security Assurance, Inc.
350 Park Avenue
New York, New York 10022
Attention: Transaction Oversight Re: Fremont Home
Loan Owner Trust 1999-1
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand delivered
to the address of such party as provided above.
Section 12. Amendments.
This Agreement may be amended from time to time by a written
amendment duly executed and delivered by the Issuer, the Administrator and the
Master Servicer, with the prior written consent of the Owner Trustee, without
the consent of the Noteholders or the Securities Insurer, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner, the rights of the
Noteholders or the Securities Insurer; provided, however, that such amendment
will not materially and adversely affect the interest of any Noteholder or the
Securities Insurer. An amendment described above shall be deemed not to
adversely affect in any material respects the interests of any Noteholder or the
Securities Insurer if either (i) an Opinion of Counsel is obtained to such
effect or (ii) the party requesting the amendment satisfies the Rating Agency
Condition with respect to such amendment. This Agreement may also be amended by
the Issuer, the Administrator and the Master Servicer with the prior written
consent of the Owner Trustee and, if no Securities Insurer Default has occurred
and is continuing, the Securities Insurer or, if a Securities Insurer Default
has occurred and is continuing, the holders of Notes evidencing at least a
majority of the Outstanding Amount of the Notes, 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 Securities
Insurer or the Noteholders; provided, however, that no such amendment may (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments in respect of the Home Loans or payments that
are required to be made for the benefit of the Securities Insurer or Noteholders
or (ii) reduce the aforesaid percentages of the holders of Notes which are
required to consent to any such amendment, in the case of either clause (i) or
clause (ii) hereof, without the consent of the holders of all the Outstanding
Notes. Notwithstanding the foregoing, the Administrator may not amend this
Agreement without the permission of the Master Servicer, which permission shall
not be withheld unreasonably.
Section 13. Successor and Assigns.
This Agreement may not be assigned by the Administrator unless
such assignment is previously consented to in writing by the Owner Trustee, the
Securities Insurer and the Master Servicer, subject to the satisfaction of the
Rating Agency Condition in respect thereof, provided however, that the consent
of the Securities Insurer shall not be required upon the occurrence of a
Securities Insurer Default. An assignment with such consent and satisfaction, if
accepted by the assignee, shall bind the assignee hereunder in the same manner
as the Administrator is bound hereunder. Notwithstanding the foregoing, this
Agreement may be assigned by the Administrator without the consent of the Owner
Trustee or the Master Servicer to a corporation or other organization that is a
successor (by merger, consolidation or purchase of assets) to the Administrator
or an affiliate of the Administrator; provided, however, that such successor
organization executes and delivers to the Issuer, the Owner Trustee and the
Master Servicer an agreement in which such corporation or other organization
agrees to be bound hereunder by the terms of said assignment in the same manner
as the Administrator is bound hereunder.
Subject to the foregoing, this Agreement shall bind any successors or assigns of
the parties hereto.
Section 14. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 15. Headings.
The section headings hereof have been inserted for convenience
of reference only and shall not be construed to affect the meaning, construction
or effect of this Agreement.
Section 16. Counterparts.
This Agreement may be executed in counterparts, each of which
when so executed shall together constitute but one and the same agreement.
Section 17. Severability.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 18. Not Applicable to First Union in Other Capacities.
Nothing in this Agreement shall affect any obligation that
First Union may have in any other capacity.
Section 19. Limitation of Liability of Owner Trustee.
Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or any
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder,
as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Articles VI, VII and VIII of the
Owner Trust Agreement.
Section 20. Benefit of Agreement.
It is expressly agreed that in performing its duties under
this Agreement, the Administrator will act for the benefit of holders of the
Notes and the Securities Insurer as well as for the benefit of the Owner Trust,
and that such obligations on the part of the Administrator shall be enforceable
at the insistence of the Indenture Trustee, the Securities Insurer and the Owner
Trust.
Section 21. Bankruptcy Matters.
No party to this Agreement shall take any action to cause the
Owner Trust to dissolve in whole or in part or file a voluntary petition or
otherwise initiate proceedings to have the Owner Trust adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency proceedings
against the Owner Trust, or file a petition seeking or consenting to
reorganization or relief of the Owner Trust as debtor under any applicable
federal or state law relating to bankruptcy, insolvency or other relief for
debtors with respect to the Owner Trust; or seek or consent to the appointment
of any trustee, receiver, conservator, assignee, sequestrator, custodian,
liquidator (or other similar official) of the Owner Trust or of all or any
substantial part of the properties and assets of the Owner Trust, or cause the
Owner Trust to make any general assignment for the benefit of creditors of the
Owner Trust or take any action in furtherance of any of the above actions.
Section 22. Capitalized Terms.
Capitalized terms used and not defined herein have the
meanings assigned to them in the Indenture. Capitalized terms used and not
defined herein or in the Indenture have the meanings assigned to them in the
Sale and Servicing Agreement.
Section 23. Third Party Beneficiary.
The parties hereto acknowledge that the Securities Insurer is
an express third party beneficiary hereof entitled to enforce any rights
reserved to it hereunder as if it were actually a party hereto.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
FREMONT HOME LOAN OWNER
TRUST 1999-1
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee,
By: _______________________________
Name:
Title:
FIRST UNION NATIONAL BANK, not in
its individual capacity but
solely as Administrator,
By: _______________________________
Name: Robert Ashbaugh
Title: Vice President
FREMONT INVESTMENT & LOAN,
as the Company and as Master
Servicer,
By: _______________________________
Name: Ronald R. Warwick
Title: Senior Vice President &
Chief Financial Officer
OWNER TRUST AGREEMENT
among
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV,
as Depositor,
FREMONT INVESTMENT & LOAN,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
FIRST UNION NATIONAL BANK,
as Paying Agent
Dated as of March 1, 1999
FREMONT HOME LOAN OWNER TRUST 1999-1
Home Loan Asset Backed Notes, Series 1999-1
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms.............................................
SECTION 1.2 Other Definitional Provisions.................................
ARTICLE II
ORGANIZATION
SECTION 2.1 Name..........................................................
SECTION 2.2 Office........................................................
SECTION 2.3 Purposes and Powers...........................................
SECTION 2.4 Appointment of Owner Trustee..................................
SECTION 2.5 Initial Capital Contribution of Trust Estate..................
SECTION 2.6 Declaration of Trust..........................................
SECTION 2.7 Title to Trust Property.......................................
SECTION 2.8 Sites of Trust................................................
SECTION 2.9 Representations and Warranties of the Depositor and the
Company; Covenants of the Company............................
ARTICLE III
RESIDUAL INTEREST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership.............................................
SECTION 3.2 The Residual Interest Certificates............................
SECTION 3.3 Execution, Authentication and Delivery of Residual Interest
Certificates.................................................
SECTION 3.4 Registration of Transfer and Exchange of Residual Interest
Certificates.................................................
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Residual Interest
Certificates.................................................
SECTION 3.6 Persons Deemed Owners.........................................
SECTION 3.7 Access to List of Owners' Names and Addresses.................
SECTION 3.8 Maintenance of Office or Agency...............................
SECTION 3.9 Appointment of Paying Agent...................................
SECTION 3.10 Restrictions on Transfer of Residual Interest Certificates....
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain Matters;
Covenants....................................................
SECTION 4.2 Action by Owners with Respect to Certain Matters..............
SECTION 4.3 Action by Owners with Respect to Bankruptcy...................
SECTION 4.4 Restrictions on Owners' Power.................................
SECTION 4.5 Majority Control..............................................
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account................................
SECTION 5.2 Application Of Trust Funds....................................
SECTION 5.3 Method of Payment.............................................
SECTION 5.4 Segregation of Moneys; No Interest............................
SECTION 5.5 Accounting and Reports to the Certificateholder, Owners,
the Internal Revenue Service and Others......................
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority.............................................
SECTION 6.2 General Duties................................................
SECTION 6.3 Action upon Instruction.......................................
SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions.................................
SECTION 6.5 No Action Except Under Specified Documents or Instructions....
SECTION 6.6 Restrictions..................................................
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties...............................
SECTION 7.2 Furnishing of Documents.......................................
SECTION 7.3 Representations and Warranties................................
SECTION 7.4 Reliance; Advice of Counsel...................................
SECTION 7.5 Not Acting in Individual Capacity.............................
SECTION 7.6 Owner Trustee Not Liable for Residual Interest Certificates
or Home Loans................................................
SECTION 7.7 Owner Trustee May Own Residual Interest Certificates and
Notes........................................................
SECTION 7.8 Licenses......................................................
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND PAYING AGENT
SECTION 8.1 Fees and Expenses.............................................
SECTION 8.2 Indemnification...............................................
SECTION 8.3 Payments to the Owner Trustee and Paying Agent................
ARTICLE IX
TERMINATION OF OWNER TRUST AGREEMENT
SECTION 9.1 Termination of Owner Trust Agreement..........................
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee....................
SECTION 10.2 Resignation or Removal of Owner Trustee.......................
SECTION 10.3 Successor Owner Trustee.......................................
SECTION 10.4 Merger or Consolidation of Owner Trustee......................
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee.....
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments....................................
SECTION 11.2 No Legal Title to Trust Estate in Owners......................
SECTION 11.3 Limitations on Rights of Others...............................
SECTION 11.4 Notices.......................................................
SECTION 11.5 Severability..................................................
SECTION 11.6 Separate Counterparts.........................................
SECTION 11.7 Successors and Assigns........................................
SECTION 11.8 No Petition...................................................
SECTION 11.9 No Recourse...................................................
SECTION 11.10 Headings......................................................
SECTION 11.11 GOVERNING LAW.................................................
SECTION 11.12 Residual Interest Transfer Restrictions.......................
SECTION 11.13 Third-Party Beneficiary.......................................
EXHIBIT A Form of Residual Interest Certificate
EXHIBIT B Form of Certificate of Trust
<PAGE>
THIS OWNER TRUST AGREEMENT, dated as of March 1, 1999
("Agreement"), among PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION IV, a Delaware
corporation, as Depositor (the "Depositor"), FREMONT INVESTMENT & LOAN, a
California industrial loan company (the "Company"), WILMINGTON TRUST COMPANY, a
Delaware banking corporation, as Owner Trustee (the "Owner Trustee") and FIRST
UNION NATIONAL BANK, a national banking association (the "Paying Agent").
WITNESSETH:
In consideration of the mutual agreements and covenants herein
contained, the Depositor, the Company, the Paying Agent and the Owner Trustee
hereby agree for the benefit of each of them and the holders of the Residual
Interest Certificates as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this
Agreement, the following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration
Agreement, dated as of March 1, 1999, among the Issuer, the Company, as the
Company and the Master Servicer, and First Union National Bank, as
Administrator, as the same may be amended from time to time.
"Administrator" shall mean First Union National Bank, or any
successor in interest thereto, in its capacity as Administrator under the
Administration Agreement.
"Agreement" shall mean this Owner Trust Agreement, as the same
may be amended and supplemented from time to time.
"Basic Documents" shall mean the Certificate of Owner Trust, this
Agreement, the Indenture, the Sale and Servicing Agreement, the Administration
Agreement, the Insurance Agreement, the Indemnification Agreement, the Custodial
Agreement, the Note Depository Agreement, the Notes, the Home Loan Purchase
Agreement, the Servicing Agreement and other documents and certificates
delivered in connection herewith or therewith.
"Benefit Plan Investor" shall have the meaning assigned to such
term in Section 3.10(b).
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from
time to time.
"Certificate Distribution Account" shall have the meaning
assigned to such term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the
form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name
a Residual Interest Certificate is registered.
"Corporate Trust Office" shall mean, with respect to the Trust,
the principal corporate trust office of the Trust located at Fremont Home Loan
Owner Trust 1999-1 c/o Wilmington Trust Co., Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; or at such other address in the State of Delaware as the Owner
Trustee may designate by notice to the Owners, the Securities Insurer and the
Company, or the principal corporate trust office of any successor Owner Trustee
(the address (which shall be in the State of Delaware) of which the successor
owner trustee will notify the Owners, the Securities Insurer and the Company).
"Definitive Certificate" means a certificated form of security
that represents a Residual Interest Certificate.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expenses" shall have the meaning assigned to such term in
Section 8.2.
"Indemnification Agreement" shall mean the Indemnification
Agreement, dated as of March 1, 1999, among the Securities Insurer, the Company,
the Issuer, the Depositor, PaineWebber Incorporated, Chase Securities Inc. and
Credit Suisse First Boston Corporation.
"Indenture" shall mean the Indenture, dated as of March 1, 1999,
by and between the Issuer and the Indenture Trustee, as the same may be amended
or supplemented from time to time.
"Indenture Trustee" means First Union National Bank, as Indenture
Trustee under the Indenture.
"Issuer" shall mean Fremont Home Loan Owner Trust 1999-1, the
Delaware business trust created pursuant to this Agreement.
"Majority Residual Interestholders" shall mean the Holders of
more than an aggregate 50% Percentage Interest of the Residual Interest.
"Owner" shall mean each holder of a Residual Interest
Certificate.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor owner trustee hereunder.
"Paying Agent" shall mean the Indenture Trustee or any successor
in interest thereto or any other paying agent or co-paying agent appointed
pursuant to Section 3.9 hereunder and authorized by the Issuer to make payments
to and distributions from the Certificate Distribution Account.
"Percentage Interest" shall mean with respect to each Residual
Interest Certificate, the percentage portion of all of the Residual Interest
evidenced thereby as stated on the face of such Residual Interest Certificate.
"Prospective Owner" shall have the meaning set forth in Section
3.10(a).
"Rating Agency Condition" means, with respect to any action to
which a Rating Agency Condition applies, that each Rating Agency shall have been
given 10 days (or such shorter period as is acceptable to each Rating Agency)
prior notice thereof and that each of the Depositor, the Servicer, the Master
Servicer, the Securities Insurer, the Owner Trustee and the Issuer shall have
been notified by the Rating Agencies in writing that such action will not result
in a reduction, withdrawal or qualification of the then current internal ratings
assigned to the Notes by each of the Rating Agencies without respect to the
Securities Insurer.
"Record Date" shall mean as to each Payment Date the last
Business Day of the month immediately preceding the month in which such Payment
Date occurs.
"Residual Interest" shall mean the right to receive distributions
of Excess Spread, if any, and certain other funds, if any, on each Payment Date,
pursuant to Section 5.2 of this Agreement, Sections 5.01(e) and 5.02(b) of the
Sale and Servicing Agreement and Section 5.04(b) of the Indenture.
"Residual Interest Certificate" shall mean a certificate
substantially in the form attached as Exhibit A hereto and evidencing the
Residual Interest.
"Residual Interestholder" shall mean any Holder of a Percentage
Interest of the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Master
Servicing Agreement dated as of the date hereof, among the Owner Trust as
Issuer, PaineWebber Mortgage Acceptance Corporation IV, as Depositor, First
Union National Bank, as Indenture Trustee and the Company, as Transferor and
Master Servicer, as the same may be amended or supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Securities Insurer" shall mean Financial Security Assurance,
Inc.
"Servicer" shall mean Fairbanks Capital Corp., a Utah
corporation, or any successor in interest thereto.
"Servicing Agreement" shall mean the Servicing Agreement
incorporating by reference the Agreement Regarding Standard Servicing Terms,
each dated as of the date hereof, between the Company and the Servicer, as the
same may be amended or supplemented from time to time.
"Trust" shall mean the trust established by this Agreement.
"U.S. Person" shall mean a citizen or resident of the United
States, a corporation or partnership (except as provided in applicable Treasury
regulations) created or organized in or under the laws of the United States, any
state or the District of Columbia, including any entity treated as a corporation
or partnership for federal income tax purposes an estate that is subject to U.S.
federal income tax regardless of the source of its income, or a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more such U.S. Persons have authority to
control all substantial decisions of the trust (or, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996 which are
eligible to be treated as U.S. Persons).
SECTION 1.2 Other Definitional Provisions.
(a)Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Sale and Servicing Agreement or, if
not defined therein, in the Indenture.
(b)All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c)As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d)The words "hereof", "herein", "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
(e)The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f)Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as
"Fremont Home Loan Owner Trust 1999-1", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of
the Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the Owners, the
Securities Insurer and the Company.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is
to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and to
sell such Notes;
(ii) with the proceeds of the sale of the Notes, to pay
the organizational, start-up and transactional expenses of the
Trust and to pay the balance to the Depositor and the Company, as
their interests may appear pursuant to the Sale and Servicing
Agreement;
(iii) to purchase, hold, assign, grant, transfer, pledge,
mortgage and convey the Trust Estate pursuant to the Indenture
and to hold, manage and distribute to the Owners pursuant to the
terms of the Sale and Servicing Agreement any portion of the
Trust Estate released from the lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the
Basic Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith;
(vi) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection
with conservation of the Trust Estate and the making of
distributions to the Owners and the Noteholders; and
(vii) to issue the Residual Interest Certificates pursuant
to this Agreement.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Trust Estate and
shall be deposited in the Certificate Distribution Account. The Depositor or the
Company shall pay reasonable organizational expenses of the Trust as they may
arise or shall, upon the request of the Owner Trustee, promptly reimburse the
Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby
declares that it will hold the Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
federal, state and local income and franchise tax purposes (i) so long as there
is a sole Owner, the Trust shall be treated as a security arrangement, with the
assets of the Trust being the Home Loans and the other assets held by the Trust,
the owner of the Home Loans being the sole Owner and the Notes being
non-recourse debt of the sole Owner, and (ii) if there is more than one Owner,
the Trust shall be treated as a partnership, with the assets of the partnership
being the Home Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Home Loans and the Notes being non-recourse
debt of the partnership. The Trust shall not elect to be treated as an
association under Treasury Regulations Section 301.7701-3(a) for federal income
tax purposes. The parties agree that, unless otherwise required by appropriate
tax authorities, the sole Owner or the Trust will file or cause to be filed
annual or other necessary returns, reports and other forms consistent with the
characterization of the Trust as provided in the second preceding sentence for
such tax purposes. Effective as of the date hereof, the Owner Trustee shall have
all rights, powers and duties set forth herein and in the Business Trust Statute
with respect to accomplishing the purposes of the Trust.
SECTION 2.7 Title to Trust Property.
(a)Subject to the Indenture, legal title to all the Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee and/or a separate trustee, as the case
may be.
(b)The Owners shall not have legal title to any part of the Trust
Estate. No transfer by operation of law or otherwise of any interest of the
Owners shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of any part of
the Trust Estate.
SECTION 2.8 Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York, except with respect to accounts maintained by the Indenture
Trustee on behalf of the Owner Trustee. The Trust shall not have any employees;
provided, however, that nothing herein shall restrict or prohibit the Owner
Trustee from having employees within or without the State of Delaware. Payments
will be received by the Trust only in Delaware or New York, and payments will be
made by the Trust only from Delaware or New York, except with respect to
payments made by the Indenture Trustee on behalf of the Owner Trustee. The only
offices of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.9 Representations and Warranties of the Depositor and
the Company; Covenants of the Company.
(a)The Depositor hereby represents and warrants to the Owner
Trustee and the Securities Insurer that:
(i) The Depositor is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware and has all licenses necessary to carry on its business
as now being conducted. The Depositor has the power and authority
to execute and deliver this Agreement and to perform 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 Depositor and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action of the
Depositor; this Agreement evidences the valid, binding and
enforceable obligation of the Depositor; and all requisite action
has been taken by the Depositor to make this Agreement valid,
binding and enforceable upon the Depositor 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 or the application of
equitable principles in any proceeding, whether at law or in
equity;
(ii) The consummation of the transactions contemplated by
this Agreement will not result in (i) the breach of any terms or
provisions of the Certificate of Incorporation or Bylaws of the
Depositor, (ii) 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 Depositor, or its property is subject, or
(iii) the violation of any law, rule, regulation, order, judgment
or decree to which the Depositor or its respective property is
subject;
(iii) The Depositor is not in default with respect to any
order or decree of any court or any order, regulation or demand
of any federal, state, municipal or other governmental agency,
which default might have consequences that would materially and
adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or might have
consequences that would materially and adversely affect its
performance hereunder.
(b)The Company hereby represents and warrants to the Owner
Trustee and the Securities Insurer that:
(i) The Company is duly organized and validly existing as
a California industrial loan company in good standing under the
laws of the State of California, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is presently conducted.
(ii) The Company is duly qualified to do business as a
foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which
the ownership or lease of property or the conduct of its business
shall require such qualifications.
(iii) The Company has the power and authority to execute
and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement has been
duly authorized by the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of
time) a default under, the certificate of incorporation or
by-laws of the Company, or any indenture, agreement or other
instrument to which the Company is a party or by which it is
bound; nor result in the creation or imposition of any lien upon
any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to
the Basic Documents); nor violate any law or, to the best of the
Company's knowledge, any order, rule or regulation applicable to
the Company of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending or,
to the Company's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its
properties: (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or (iii) seeking any determination
or ruling that might materially and adversely affect the
performance by the Company of its obligations under, or the
validity or enforceability of, this Agreement.
(vi) The Company is not (A) an "employee benefit plan"
within the meaning of Section 3(3) of ERISA, or (B) a "plan"
within the meaning of Section 4975(e)(1) of the Code or (C) an
entity, including an insurance company separate account or
general account, whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit
Plan Investor") and is not directly or indirectly purchasing such
Residual Interest Certificate on behalf of, as investment manager
of, as named fiduciary of, as trustee of, or with the assets of a
Benefit Plan Investor.
(vii) The Company is a U.S. Person.
(c)The Company covenants with the Owner Trustee that during the
continuance of this Agreement it will comply in all respects with the provisions
of its Certificate of Incorporation in effect from time to time.
ARTICLE III
RESIDUAL INTEREST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.5 and until the issuance
of the Residual Interest Certificates, the Depositor shall be the sole Owner of
the Trust.
SECTION 3.2 The Residual Interest Certificates. The Residual
Interest Certificates shall not be issued with a principal amount. The Residual
Interest Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of a Trust Officer of the Owner Trustee. Residual Interest
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Residual Interest
Certificates or did not hold such offices at the date of authentication and
delivery of such Residual Interest Certificates.
A transferee of a Residual Interest Certificate shall become an
Owner, and shall be entitled to the rights and subject to the obligations of an
Owner hereunder and under the Sale and Servicing Agreement, upon such
transferee's acceptance of a Residual Interest Certificate duly registered in
such transferee's name pursuant to Section 3.4.
SECTION 3.3 Execution, Authentication and Delivery of Residual
Interest Certificates. Concurrently with the initial sale of the Home Loans to
the Trust pursuant to the Sale and Servicing Agreement, the Owner Trustee on
behalf of the Trust shall cause the Residual Interest Certificates representing
100% of the Percentage Interests of the Residual Interest to be executed,
authenticated and delivered to or upon the written order of the Depositor,
signed by its chairman of the board, its president or any vice president,
without further corporate action by the Depositor, in authorized denominations.
No Residual Interest Certificate shall entitle its holder to any benefit under
this Agreement, or shall be valid for any purpose, unless there shall appear on
such Residual Interest Certificate a certificate of authentication substantially
in the form set forth in Exhibit A, executed by the Owner Trustee or the
Administrator, as the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Residual Interest Certificate shall have been duly authenticated and
delivered hereunder. All Residual Interest Certificates shall be dated the date
of their authentication. No Certificates, except the Residual Interest
Certificates, shall be issued by the Trust without the prior written consent of
the Securities Insurer.
SECTION 3.4 Registration of Transfer and Exchange of Residual
Interest Certificates. The Certificate Registrar shall keep or cause to be kept,
at the office or agency maintained pursuant to Section 3.8 a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the Owner Trustee shall provide for the registration of Residual Interest
Certificates and of transfers and exchanges of Residual Interest Certificates as
herein provided. The Administrator shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Residual
Interest Certificate at the office or agency maintained pursuant to Section 3.8,
the Owner Trustee shall execute, authenticate and deliver (or shall cause the
Administrator as its authenticating agent to authenticate and deliver), in the
name of the designated transferee or transferees, one or more new Residual
Interest Certificates in authorized denominations of a like aggregate amount
dated the date of authentication by the Owner Trustee or any authenticating
agent, provided that prior to such execution, authentication and delivery, the
Owner Trustee, the Administrator, the Securities Insurer and the Certificate
Registrar shall have received an Opinion of Counsel to the effect that the
proposed transfer will not cause the Trust to be characterized as an association
(or a publicly traded partnership) taxable as a corporation or alter the tax
characterization of the Notes for federal income tax or California state law
purposes. At the option of an Owner, Residual Interest Certificates may be
exchanged for other Residual Interest Certificates of authorized denominations
of a like aggregate amount upon surrender of the Residual Interest Certificates
to be exchanged at the office or agency maintained pursuant to Section 3.8.
Every Residual Interest Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Owner or his attorney duly authorized
in writing. In addition, each Residual Interest Certificate presented or
surrendered for registration of transfer and exchange must be accompanied by a
letter from the Prospective Owner certifying as to the representations set forth
in Sections 3.10(a) and (b). Each Residual Interest Certificate surrendered for
registration of transfer or exchange shall be in substantially the form attached
hereto as Exhibit A and shall be canceled and disposed of by the Owner Trustee
or the Certificate Registrar in accordance with its customary practice.
No service charge shall be made for any registration of transfer
or exchange of Residual Interest Certificates, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Residual Interest Certificates.
The preceding provisions of this Section notwithstanding, the
Owner Trustee shall not make and the Certificate Registrar shall not register
transfers or exchanges of Residual Interest Certificates for a period of 15 days
preceding the due date for any payment with respect to the Residual Interest
Certificates.
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Residual
Interest Certificates. If (a) any mutilated Residual Interest Certificate shall
be surrendered to the Certificate Registrar, or if the Certificate Registrar
shall receive evidence to its satisfaction of the destruction, loss or theft of
any Residual Interest Certificate and (b) there shall be delivered to the
Certificate Registrar and the Owner Trustee such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Residual Interest Certificate shall have been acquired by a bona fide
purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner
Trustee, or the Administrator as the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Residual Interest Certificate, a new Residual Interest
Certificate of like tenor and denomination. In connection with the issuance of
any new Residual Interest Certificate under this Section, the Owner Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Residual Interest Certificate issued pursuant to this
Section shall constitute conclusive evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Residual
Interest Certificate shall be found at any time.
SECTION 3.6 Persons Deemed Owners. Prior to due presentation of a
Residual Interest Certificate for registration of transfer, the Owner Trustee or
the Certificate Registrar may treat the Person in whose name any Residual
Interest Certificate shall be registered in the Certificate Register as the
owner of such Residual Interest Certificate for the purpose of receiving
distributions pursuant to Section 5.2 and for all other purposes whatsoever, and
neither the Owner Trustee nor the Certificate Registrar shall be bound by any
notice to the contrary.
SECTION 3.7 Access to List of Owners' Names and Addresses. The
Owner Trustee shall furnish or cause to be furnished to the Master Servicer, the
Servicer, the Depositor, the Securities Insurer and the Indenture Trustee,
within 15 days after receipt by the Owner Trustee of a request therefor from the
Master Servicer, the Servicer, the Depositor, the Securities Insurer or the
Indenture Trustee in writing, a list, in such form as the Master Servicer, the
Servicer, the Depositor, the Securities Insurer or the Indenture Trustee may
reasonably require, of the names and addresses of the Owners as of the most
recent Record Date. If a Certificateholder applies in writing to the Owner
Trustee, and such application states that the applicant desire to communicate
with other Certificateholders with respect to their rights under this Agreement
or under the Residual Interest Certificates and such application is accompanied
by a copy of the communication that such applicants propose to transmit, then
the Owner Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Owner, by receiving and holding a
Residual Interest Certificate, shall be deemed to have agreed not to hold any of
the Depositor, the Company, the Certificate Registrar, the Securities Insurer or
the Owner Trustee accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee
shall maintain an office or offices or agency or agencies where Residual
Interest Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee in respect
of the Residual Interest Certificates and the Basic Documents may be served. The
Owner Trustee initially designates the Administrator's office in the city of
Charlotte, North Carolina as its principal corporate trust office for such
purposes. The Owner Trustee shall give prompt written notice to the Company, the
Securities Insurer and to the Certificateholders of any change in the location
of the Certificate Register or any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Owner Trustee hereby
appoints the Indenture Trustee as Paying Agent under this Agreement. The Owner
Trustee hereby appoints the Paying Agent to establish and maintain the
Certificate Distribution Account. The Paying Agent shall make distributions to
Residual Interestholders from the Certificate Distribution Account pursuant to
Section 5.2 hereof and Section 5.02 of the Sale and Servicing Agreement and
shall report the amounts of such distributions to the Owner Trustee. The Paying
Agent shall have the revocable power to withdraw funds from the Certificate
Distribution Account for the purpose of making the distributions referred to
above. In the event that the Indenture Trustee shall no longer be the Paying
Agent hereunder, the Owner Trustee shall appoint a successor to act as Paying
Agent (which shall be a bank or trust company) acceptable to the Securities
Insurer. The Owner Trustee shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Owner Trustee to execute and deliver to
the Owner Trustee an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Owner Trustee that as Paying Agent,
such successor Paying Agent or additional Paying Agent will hold all sums, if
any, held by it for payment to the Owners in trust for the benefit of the
Residual Interestholders entitled thereto until such sums shall be paid to such
Owners. The Paying Agent shall return all unclaimed funds to the Owner Trustee,
and upon removal of a Paying Agent, such Paying Agent shall also return all
funds in its possession to the Owner Trustee. The provisions of Sections 7.1,
7.3, 7.4 and 8.1 shall apply to the Indenture Trustee also in its role as Paying
Agent, for so long as the Indenture Trustee shall act as Paying Agent and, to
the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise. Notwithstanding anything herein to
the contrary, the Paying Agent shall be the same entity as the Indenture Trustee
under the Indenture and the Sale and Servicing Agreement, unless the Securities
Insurer consents to a different Paying Agent or a Securities Insurer Default has
occurred and is continuing. Notwithstanding any other provision, if a Securities
Insurer Default occurs, then the Securities Insurer's consent or direction is
not required. If the Paying Agent ceases to be the same entity as the Indenture
Trustee under the Indenture and the Sale and Servicing Agreement, then, unless
the Securities Insurer otherwise consents, the Paying Agent shall resign and the
Owner Trustee shall assume the duties and obligations of the Paying Agent
hereunder and under the Sale and Servicing Agreement.
SECTION 3.10 Restrictions on Transfer of Residual Interest
Certificates.
(a)Each prospective purchaser and any subsequent transferee of a
Residual Interest Certificate (each, a "Prospective Owner"), other than the
Company, shall represent and warrant, in writing, to the Owner Trustee, the
Securities Insurer and the Certificate Registrar and any of their respective
successors that:
(i) Such Person is (A) a "qualified institutional buyer"
as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), and is aware that the seller of
the Residual Interest Certificate may be relying on the exemption
from the registration requirements of the Securities Act provided
by Rule 144A and is acquiring such Residual Interest Certificate
for its own account or for the account of one or more qualified
institutional buyers for whom it is authorized to act, or (B) an
institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act (an "Institutional Accredited Investor") that is
acquiring the Residual Interest Certificate for its own account,
or for the account of such an Institutional Accredited Investor,
for investment purposes and not with a view to, or for offer or
sale in connection with any distribution in violation of the
Securities Act.
(ii) Such Person understands that the Residual Interest
Certificate have not been and will not be registered under the
Securities Act and may be offered, sold or otherwise transferred
only to a person whom the seller reasonably believes is (A) a
qualified institutional buyer or (B) an Institutional Accredited
Investor, and in accordance with the terms hereof and any
applicable securities laws of any state of the United States.
(iii) Such Person understands that the Residual Interest
Certificates bear a legend to the following effect:
"THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS
RESIDUAL INTEREST CERTIFICATE HAS NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS
RESIDUAL INTEREST CERTIFICATE MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF BY
THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT PURSUANT
TO RULE 144A OR (II) AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE ACT (INCLUDING,
BUT NOT LIMITED TO, FREMONT INVESTMENT & LOAN) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS.
NO PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL
INTEREST CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
(iv) Such Person shall comply with the provisions of
Section 3.10(b), as applicable, relating to the ERISA
restrictions with respect to the acceptance or acquisition of
such Residual Interest Certificate.
(b)Each Prospective Owner shall either:
(i) represent and warrant, in writing, to the Owner
Trustee, the Securities Insurer and the Certificate Registrar and
any of their respective successors that the Prospective Owner is
not (A) an "employee benefit plan" within the meaning of Section
3(3) of ERISA, or (B) a "plan" within the meaning of Section
4975(e)(1) of the Code or (C) an entity, including an insurance
company separate account or general account, whose underlying
assets include plan assets by reason of a plan's investment in
the entity (each, a "Benefit Plan Investor") and is not directly
or indirectly purchasing such Residual Interest Certificate on
behalf of, as investment manager of, as named fiduciary of, as
trustee of, or with the assets of a Benefit Plan Investor; or
(ii) furnish to the Owner Trustee, the Securities Insurer
and the Certificate Registrar and any of their respective
successors an opinion of counsel acceptable to such persons that
(A) the proposed transfer of the Residual Interest Certificate to
such Prospective Owner will not cause any assets of the Trust to
be deemed "plan assets" within the meaning of United States
Department of Labor Regulation Section 2510.3-101, or (B) the
proposed transfer of the Residual Interest Certificate will not
give rise to a transaction described in Section 406 of ERISA or
Section 4975(c)(1) of the Code for which a statutory or
administrative exemption is unavailable.
(c)The Residual Interest Certificates shall bear an additional
legend referring to the foregoing restrictions contained in paragraph (b) above.
(d)Each Prospective Owner, other than the Company, shall
represent and warrant, in writing, to the Owner Trustee, the Securities Insurer
and the Certificate Registrar and any of their respective successors that it is
a person who is either (A)(i) a citizen or resident of the United States, (ii) a
corporation or partnership organized in or under the laws of the United States,
any state or the District of Columbia, including any entity treated as a
corporation or partnership for federal income tax purposes or (iii) a person not
described in (A)(i) or (ii) whose ownership of the Residual Interest Certificate
is effectively connected with such person's conduct of a trade or business
within the United States (within the meaning of the Code) and its ownership of
any interest in a Residual Interest Certificate will not result in any
withholding obligation with respect to any payments with respect to the Residual
Interest Certificates by any person (other than withholding, if any, under
Section 1446 of the Code) or (B) an estate the income of which is subject to
United States federal income tax, regardless of source, or a trust if a court
within the United States is able to exercise primary supervision over the
administration of such trust and one or more persons described in this paragraph
have the authority to control all substantial decisions of such trust (a person
described in (A)(i), (A)(ii), or B, a "U.S. Person"). It agrees that it will
provide a certification of non-foreign status signed under penalties of perjury
and, alternatively, that if it is a person described in clause (A)(iii) above,
it will furnish to the Administrator a properly executed IRS Form 4224 (or
successor form thereto) and a new IRS Form 4224 (or successor form thereto) upon
the expiration or obsolescence of any previously delivered form (and such other
certifications, representations or opinions of counsel as may be requested by
the Company).
(e)Each Certificateholder that is not a U.S. Person agrees that,
subsequent to delivery to the Owner Trustee, the Securities Insurer and the
Certificate Registrar of IRS Form 4224 or appropriate successor forms required
to evidence that the Certificateholder holds its Residual Interest
Certificate(s) in connection with a U.S. trade or business (within the meaning
of the Code), it will deliver to the Company and the Owner Trustee further
copies of the said IRS Form 4224 or such appropriate successor forms or other
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Company and
the Owner Trustee, and such extensions or renewals thereof as may reasonably be
requested by the Company and the Owner Trustee. Further, each Certificateholder
that is not a U.S. Person covenants as a condition to acquiring its Residual
Interest Certificate that for so long as it shall hold such Residual Interest
Certificate it shall be held in such manner that the income therefrom shall be
effectively connected with the conduct of a U.S. trade or business. In the event
that any Certificateholder shall breach the certifications, representations,
warranties or covenants set forth in this Article III, such Certificateholder
shall indemnify the Company, the Owner Trustee and the Trust for any amounts
(including interest and penalties thereon) payable by the Company, the Owner
Trustee or the Trust as a result of such breach.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Owners with Respect to Certain
Matters; Covenants. (a) With respect to the following matters, the Owner Trustee
shall not take action, and the Owners shall not direct the Owner Trustee to take
any action, unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Owners and the Securities Insurer in writing of
the proposed action and (i) the Securities Insurer shall have consented thereto
and (ii) the Owners shall not have notified the Owner Trustee in writing prior
to the 30th day after such notice is given that such Owners have withheld
consent or the Owners have provided alternative direction (any direction by the
Owners shall require the prior consent of the Securities Insurer):
(i) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the
collection of the Home Loans) and the compromise of any action,
claim or lawsuit brought by or against the Trust (except with
respect to the aforementioned claims or lawsuits for collection
of the Home Loans);
(ii) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be
filed under the Business Trust Statute);
(iii) the amendment or other change to this Agreement or
any Basic Document in circumstances where the consent of any
Noteholder or the Securities Insurer is required;
(iv) the appointment pursuant to the Indenture of a
successor Note Registrar, Paying Agent or Indenture Trustee or
pursuant to this Agreement of a successor Certificate Registrar,
or the consent to the assignment by the Note Registrar, Paying
Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable;
(v) the consent to the calling or waiver of any default of
any Basic Document;
(vi) the consent to the assignment by the Indenture
Trustee, the Master Servicer or Servicer of their respective
obligations under any Basic Document;
(vii) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(viii) merge or consolidate the Trust with or into any
other entity, or convey or transfer all or substantially all of
the Trust's assets to any other entity;
(ix) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement;
(x) do any act that conflicts with any other Basic
Document;
(xi) do any act which would make it impossible to carry on
the ordinary business of the Trust;
(xii) confess a judgment against the Trust;
(xiii) possess Trust assets, or assign the Trust's right
to property, for other than a Trust purpose;
(xiv) cause the Trust to lend any funds to any entity; or
(xv) change the Trust's purpose and powers from those set
forth in this Owner Trust Agreement.
(b)Notwithstanding any provision of Section 4.1(a), the Owner
Trustee on behalf of the Trust agrees to abide by the following restrictions:
(i) Other than as contemplated by the Basic Documents and
related documentation, the Trust shall not incur any
indebtedness.
(ii) Other than as contemplated by the Basic Documents and
related documentation, the Trust shall not engage in any
dissolution, liquidation, consolidation, merger or sale of
assets.
(iii) The Trust shall not engage in any business activity
in which it is not currently engaged other as contemplated by the
Basic Documents and related documentation.
(iv) The Trust shall not form, or cause to be formed, any
subsidiaries and shall not own or acquire any asset other than as
contemplated by the Basic Documents and related documentation.
(v) Other than as contemplated by the Basic Documents and
related documentation, the Trust shall not follow the directions
or instructions of the Company.
(c)The Owner Trustee on behalf of the Trust shall:
(i) Maintain the Trust's books and records separate from
any other person or entity.
(ii) Maintain the Trust's bank accounts separate from any
other person or entity.
(iii) Not commingle the Trust's assets with those of any
other person or entity.
(iv) Conduct the Trust's own business in its own name.
(v) Other than as contemplated by the Basic Documents and
related documentation, pay the Trust's own liabilities and
expenses only out of its own funds.
(vi) Observe all formalities required under the Business
Trust Statute.
(vii) Enter into transactions with Affiliates or the
Company only if each such transaction is intrinsically fair,
commercially reasonable, and on the same terms as would be
available in an arm's length transaction with a person or entity
that is not an Affiliate.
(viii) Not guarantee or become obligated for the debts of
any other entity or person.
(ix) Not hold out the Trust's credit as being available to
satisfy the obligation of any other person or entity.
(x) Not acquire the obligations or securities of the
Trust's Affiliates or the Company.
(xi) Other than as contemplated by the Basic Documents and
related documentation, not make loans to any other person or
entity or buy or hold evidence of indebtedness issued by any
other person or entity.
(xii) Other than as contemplated by the Basic Documents
and related documentation, not pledge the Trust's assets for the
benefit of any other person or entity.
(xiii) Hold the Trust out as a separate entity and conduct
any business only in its own name.
(xiv) Correct any known misunderstanding regarding the
Trust's separate identity.
(xv) Not identify the Trust as a division of any other
person or entity.
(xvi) Maintain appropriate minutes or other records of
appropriate actions and shall maintain its office separate from
the office of the Company, the Depositor and the Master Servicer.
So long as the Notes or any other amounts owed under the
Indenture remain outstanding, the Trust shall not amend this Section 4.1 without
the prior written consent of 100% of the Voting Interests of the Notes and the
consent of each Rating Agency, in addition to the requirements under Section
11.1.
(d)The Owner Trustee shall not have the power, except upon the
direction of the Owners with the consent of the Securities Insurer or upon the
direction of the Securities Insurer, and, subject to Section 11.18 of the
Indenture, 100% of the Noteholders, and to the extent otherwise consistent with
the Basic Documents, to (i) remove or replace the Servicer, the Master Servicer
or the Indenture Trustee, (ii) institute proceedings to have the Trust declared
or adjudicated a bankrupt or insolvent, (iii) consent to the institution of
bankruptcy or insolvency proceedings against the Trust, (iv) file a petition or
consent to a petition seeking reorganization or relief on behalf of the Trust
under any applicable federal or state law relating to bankruptcy, (v) consent to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
any similar official) of the Trust or a substantial portion of the property of
the Trust, (vi) make any assignment for the benefit of the Trust's creditors,
(vii) cause the Trust to admit in writing its inability to pay its debts
generally as they become due or (viii) take any action, or cause the Trust to
take any action, in furtherance of any of the foregoing (any of the above, a
"Bankruptcy Action"). So long as the Indenture and the Insurance Agreement
remain in effect and no Securities Insurer Default exists, no Certificateholder
shall have the power to take, and shall not take, any Bankruptcy Action with
respect to the Trust or direct the Owner Trustee to take any Bankruptcy Action
with respect to the Trust.
SECTION 4.2 Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the direction of the Owners
and with the consent of the Securities Insurer or upon the direction of the
Securities Insurer, to (a) remove the Administrator under the Administration
Agreement pursuant to Section 9 thereof, (b) appoint a successor Administrator
pursuant to Section 9 of the Administration Agreement, (c) remove the Master
Servicer under the Sale and Servicing Agreement pursuant to Section 10.01
thereof or (d) sell the Home Loans after the termination of the Indenture. The
Owner Trustee shall take the actions referred to in the preceding sentence only
upon written instructions signed by the Owners and, so long as no Securities
Insurer Default exists, only after obtaining the consent of the Securities
Insurer.
SECTION 4.3 Action by Owners with Respect to Bankruptcy. The
Owner Trustee shall not have the power to commence a voluntary Bankruptcy Action
relating to the Trust unless the conditions specified in Section 4.1(d) are
satisfied and the Trust is insolvent.
SECTION 4.4 Restrictions on Owners' Power. The Owners shall not
direct the Owner Trustee to take or refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this Agreement or any of the Basic Documents or would be contrary
to Section 2.3 nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided
herein, any action that may be taken by the Owners under this Agreement may be
taken by the Majority Residual Interestholders. Except as expressly provided
herein, any written notice of the Owners delivered pursuant to this Agreement
shall be effective if signed by the Majority Residual Interestholders at the
time of the delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account. The Owner Trustee
shall cause the Master Servicer, for the benefit of the Owners, the Noteholders
and the Securities Insurer, to establish and maintain with the Indenture Trustee
for the benefit of the Owner Trustee one or more Eligible Accounts which, so
long as the Indenture Trustee holds such Trust Account on behalf of the Owner
Trustee, shall be entitled "Certificate Distribution Account, First Union
National Bank, as Indenture Trustee on behalf of the Owner Trustee, the Owners,
the Noteholders and the Securities Insurer, in trust for the Fremont Home Loan
Owner Trust 1999-1". Funds shall be deposited in the Certificate Distribution
Account as required by the Sale and Servicing Agreement.
All of the right, title and interest of the Owner Trustee and the
Paying Agent in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof shall be held for the benefit
of the Owners and such other persons entitled to distributions therefrom. Except
as otherwise expressly provided herein or in the Sale and Servicing Agreement,
the Certificate Distribution Account shall be under the sole dominion and
control of the Owner Trustee or Paying Agent for the benefit of the Owners, the
Securities Insurer and the Noteholders.
In addition to the foregoing, the Certificate Distribution
Account is a Trust Account under the Sale and Servicing Agreement and
constitutes part of the Trust Estate pledged by the Trust to the Indenture
Trustee under the Indenture. The Certificate Distribution Account shall be
subject to and established and maintained in accordance with the applicable
provisions of the Sale and Servicing Agreement and the Indenture, including,
without limitation, the provisions of Section 5.02(b) of the Sale and Servicing
Agreement regarding distributions from the Certificate Distribution Account.
The Company agrees to direct and shall have the sole authority to
direct the Owner Trustee or Indenture Trustee or their successor in interest, as
to the Permitted Investments in which the funds on deposit in the Trust Accounts
(as such term is defined in the Sale and Servicing Agreement) may be invested.
SECTION 5.2 Application Of Trust Funds.
(a)On each Payment Date, the Owner Trustee or Indenture Trustee,
on behalf of the Owner Trustee, shall direct the Paying Agent to distribute to
the Master Servicer and the Residual Interestholders from amounts on deposit in
the Certificate Distribution Account the distributions as provided in Section
5.02(b) of the Sale and Servicing Agreement with respect to such Payment Date.
(b)On each Payment Date, the Owner Trustee shall cause the Paying
Agent to send to each Residual Interestholder the statement provided to the
Owner Trustee by the Master Servicer pursuant to Section 6.01 of the Sale and
Servicing Agreement with respect to such Payment Date.
(c)In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to an Owner, such tax shall reduce
the amount otherwise distributable to the Owner in accordance with this Section.
The Owner Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Owners sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Owner Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The amount of any withholding tax imposed with respect to an
Owner shall be treated as cash distributed to such Owner at the time it is
withheld by the Trust and remitted to the appropriate taxing authority. In the
event of any claimed overwithholding, Owners shall have no claim for recovery
against the Trust or other Owners. If the amount withheld was not withheld from
actual distributions, the Trust may, at its option, (i) require the Owner to
reimburse the Trust for such withholding (and each Owner agrees to reimburse the
Trust promptly following such request) or (ii) reduce any subsequent
distributions by the amount of such withholding. If the Owner Trustee determines
that a withholding tax is payable with respect to a distribution (such as a
distribution to an Owner (or any other beneficial owner of the Owner Trust) that
is not a U.S. Person and that has not established an applicable exemption from
withholding (such as an effective Form W-8, Form 1001 or Form 4224), the Owner
Trustee shall in its sole discretion withhold such amounts as it determines are
required to be withheld in accordance with this paragraph (c). In the event that
an Owner wishes to apply for a refund of any such withholding tax, the Owner
Trustee shall reasonably cooperate with such owner in making such claim so long
as such Owner agrees to reimburse the Owner Trustee for any out-of-pocket
expenses incurred.
SECTION 5.3 Method of Payment. Subject to Section 3.10,
distributions required to be made to Owners on any Payment Date shall be made to
each Owner of, record on the preceding Record Date either by wire transfer, in
immediately available funds, to the account of such Holder at a bank or other
entity having appropriate facilities therefor, if such Owner shall have provided
to the Certificate Registrar appropriate written instructions at least five
Business Days prior to such Payment Date; or, if not, by check mailed to such
Owner at the address of such holder appearing in the Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to
Sections 4.1, 5.1 and 5.2, moneys received by the Owner Trustee hereunder and
deposited into the Certificate Distribution Account will be segregated except to
the extent required otherwise by law or the Sale and Servicing Agreement and
shall be invested in Permitted Investments at the direction of the Company. The
Owner Trustee shall not be liable for payment of any interest in respect of such
moneys.
SECTION 5.5 Accounting and Reports to the Certificateholder,
Owners, the Internal Revenue Service and Others. The Owner Trustee shall deliver
to each Owner and the Securities Insurer, as may be required by the Code and
applicable Treasury Regulations, or as may be requested by such Owner and the
Securities Insurer, such information, reports or statements as may be necessary
to enable each Owner to prepare its federal and state income tax returns.
Consistent with the Trust's characterization for tax purposes as a security
arrangement for the issuance of non-recourse debt so long as the Company or any
other Person is the sole Owner, no federal income tax return shall be filed on
behalf of the Trust unless either (i) the Owner Trustee and the Securities
Insurer shall receive an Opinion of Counsel that, based on a change in
applicable law occurring after the date hereof, or as a result of a transfer by
the Company permitted by Section 3.4, the Code requires such a filing or (ii)
the Internal Revenue Service shall determine that the Trust is required to file
such a return. In the event that there shall be two or more beneficial owners of
the Trust, the Owner Trustee shall inform the Indenture Trustee and the
Securities Insurer in writing of such event, (x) the Owner Trustee shall prepare
or shall cause to be prepared federal and, if applicable, state or local
partnership tax returns required to be filed by the Trust and shall remit such
returns to the Company (or if the Company no longer owns any Residual Interest
Certificates, the Owner designated for such purpose by the Company to the Owner
Trustee in writing) at least (5) days before such returns are due to be filed,
and (y) capital accounts shall be maintained for each Owner (or beneficial
owner) in accordance with the Treasury Regulations under Section 704(b) of the
Code reflecting each such Owner's (or beneficial owner's) share of the income,
gains, deductions, and losses of the Trust and/or guaranteed payments made by
the Trust and contributions to, and distributions from, the Trust. The Company
(or such designee Owner, as applicable) shall promptly sign such returns and
deliver such returns after signature to the Owner Trustee and such returns shall
be filed by the Owner Trustee with the appropriate tax authorities. In the event
that a "tax matters partner" (within the meaning of Code Section 6231(a)(7)) is
required to be appointed with respect to the Trust, the Company is hereby
designated as tax matters partner or, if the Company is not an Owner, the Owner
selected by a majority of the Owners (by Percentage Interest) shall be
designated as tax matters partner. In no event shall the Owner Trustee or the
Company (or such designee Owner, as applicable) be liable for any liabilities,
costs or expenses of the Trust or the Noteholders arising out of the application
of any tax law, including federal, state, foreign or local income or excise
taxes or any other tax imposed on or measured by income (or any interest,
penalty or addition with respect thereto or arising from a failure to comply
therewith) except for any such liability, cost or expense attributable to any
act or omission by the Owner Trustee or the Company (or such designee Owner, as
applicable), as the case may be, in breach of its obligations under this
Agreement.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized
and directed to execute and deliver or cause to be executed and delivered the
Notes, the Residual Interest Certificates and the Basic Documents to which the
Trust is to be a party and each certificate or other document attached as an
exhibit to or contemplated by the Basic Documents to which the Trust is to be a
party and any amendment or other agreement or instrument described in Article
III, in each case, in such form as the Company shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof, and, on behalf of the
Trust, to direct the Indenture Trustee to authenticate and deliver the Notes in
the aggregate principal amount of $415,545,505. In addition to the foregoing,
the Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust, pursuant to the Basic Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
Trustee:
(a)to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic Documents
to which the Trust is a party and to administer the Trust in the interest of the
Owners, subject to the Basic Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator or the Indenture Trustee has agreed in
the Administration Agreement or this Agreement, respectively, to perform any act
or to discharge any duty of the Owner Trustee or the Trust hereunder or under
any Basic Document, and the Owner Trustee shall not be held liable for the
default or failure of the Administrator or the Indenture Trustee to carry out
its obligations under the Administration Agreement or this Agreement,
respectively; and
(b)to obtain and preserve, the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Collateral and each other instrument and agreement included in the
Trust Estate.
SECTION 6.3 Action upon Instruction.
(a)Subject to the terms of this Agreement and in accordance with
the terms of the Basic Documents, the Owners may by written instruction direct
the Owner Trustee in the management of the Trust but only to the extent
consistent with the limited purpose of the Trust. Such direction may be
exercised at any time by written instruction of the Owners pursuant to Article
IV.
(b)The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c)Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Owners and the Securities Insurer requesting instruction from the Owners and the
Securities Insurer as to the course of action to be adopted, and to the extent
the Owner Trustee acts in good faith in accordance with any written instruction
of the Securities Insurer, or with the prior consent of the Securities Insurer,
the Owners received, the Owner Trustee shall not be liable on account of such
action to any Person. Upon the occurrence of a Securities Insurer Default no
consent, approval or direction of the Securities Insurer shall be required. If
the Owner Trustee shall not have received appropriate instruction within 10 days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Owners, and shall have no liability to any Person
for such action or inaction.
(d)In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Securities
Insurer and the Owners requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received from the Securities Insurer, or with the prior consent of
the Securities Insurer, from the Owners, the Owner Trustee shall not be liable,
on account of such action or inaction, to any Person. If the Owner Trustee shall
not have received appropriate instruction within 10 days of such notice (or
within such shorter period of time as reasonably may be specified in such notice
or may be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action, not inconsistent with this
Agreement or the Basic Documents, as it shall deem to be in the best interests
of the Owners, and shall have no liability to any Person for such action or
inaction.
(e)Notwithstanding anything in this Agreement to the contrary,
upon the occurrence of a Securities Insurer Default no consent, approval or
direction of the Securities Insurer shall be required for any action otherwise
permitted hereunder.
SECTION 6.4 No Duties Except as Specified in this Agreement, the
Basic Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement, any Basic Document or in any document
or written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it
will, at its own cost and expense, promptly take all action as may be necessary
to discharge any liens on any part of the Trust Estate that result from actions
by, or claims against, the Owner Trustee that are not related to the ownership
or the administration of the Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Trust Estate except (i) in accordance
with the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) in accordance with the Basic Documents and
(iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for Federal income tax
purposes. The Owners shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement and the
Basic Documents. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty contained in Section
7.3 expressly made by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding sentence):
(a)the Owner Trustee shall not be liable for any error of
judgment made by a responsible officer of the Owner Trustee;
(b)the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the instructions of
the Administrator or the Owners;
(c)no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d)under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e)the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution hereof
by the Depositor or the Company or for the form, character, genuineness,
sufficiency, value or validity of any of the Trust Estate or for or in respect
of the validity or sufficiency of the Basic Documents, other than the
certificate of authentication on the Residual Interest Certificates, and the
Owner Trustee shall in no event assume or incur any liability, duty, or
obligation to any Noteholder or to any Owner, other than as expressly provided
for herein and in the Basic Documents;
(f)the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Depositor, the Company, the Indenture
Trustee, the Master Servicer or the Servicer under any of the Basic Documents or
otherwise and the Owner Trustee shall have no obligation or liability to perform
the obligations of the Trust under this Agreement or the Basic Documents that
are required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Master Servicer [or
Servicer] under the Sale and Servicing Agreement; and
(g)the Owner Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of any
of the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful misconduct in the
performance of any such act provided, that the Owner Trustee shall be liable for
its negligence or willful misconduct in the event that it assumes the duties and
obligations of the Indenture Trustee under the Sale and Servicing Agreement
pursuant to Section 10.5.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall
furnish (a) to the Owners and the Securities Insurer promptly upon receipt of a
written request therefor, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other instruments
furnished to the Owner Trustee under the Basic Documents and (b) to Noteholders
promptly upon written request therefor, copies of the Sale and Servicing
Agreement, the Administration Agreement and the Owner Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a)The Owner Trustee hereby represents and warrants to the
Depositor, the Securities Insurer and the Company, for the benefit of the
Owners, that:
(i) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this
Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and
this Agreement will be executed and delivered by one of its
officers who is duly authorized to execute and deliver this
Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Delaware law,
governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on
it, or constitute any default under its charter documents or
by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its
properties may be bound.
(b)The Paying Agent hereby represents and warrants to the
Depositor, the Securities Insurer and the Company that:
(i) It is a national banking association duly organized
and validly existing in good standing under the laws of the
United States. It has all requisite power and authority to
execute, deliver and perform its obligations under this
Agreement.
(ii) It has taken all action necessary to authorize the
execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers
who is duly authorized to execute and deliver this Agreement on
its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or State law,
governmental rule or regulation governing the banking or trust
powers of the Paying Agent or any judgment or order binding on
it, or constitute any default under its charter documents or
by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its
properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a)The Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the determination
of which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b)In the exercise or administration of the trusts hereunder and
in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the opinion or advice of any such counsel,
accountants or other such persons and not contrary to this Agreement or any
Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided
in this Agreement, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Residual Interest
Certificates or Home Loans. The recitals contained herein and in the Residual
Interest Certificates (other than the signature and countersignature of the
Owner Trustee on the Residual Interest Certificates) shall be taken as the
statements of the Depositor and the Company, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
Basic Document or of the Residual Interest Certificates (other than the
signature and countersignature of the Owner Trustee on the Residual Interest
Certificates and as specified in Section 7.3) or the Notes, or of any Home Loans
or related documents. The Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and enforceability of
any Home Loan, or the perfection and priority of any security interest created
by any Home Loan or the maintenance of any such perfection and priority, or for
or with respect to the sufficiency of the Trust Estate or its ability to
generate the payments to be distributed to Owners under this Agreement or the
Noteholders under the Indenture, including, without limitation: the existence,
condition and ownership of any Mortgaged Property; the existence and
enforceability of any insurance thereon; the existence and contents of any Home
Loan on any computer or other record thereof, the validity of the assignment of
the Home Loans to the Trust or of any intervening assignment; the completeness
of any Home Loan; the performance or enforcement of any Home Loan; the
compliance by the Depositor, the Company, the Master Servicer or the Servicer
with any warranty or representation made under any Basic Document or in any
related document or the accuracy of any such warranty or representation or any
action of the Administrator, the Indenture Trustee, the Master Servicer or the
Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Residual Interest Certificates
and Notes. The Owner Trustee in its individual or any other capacity may become
the owner or pledgee of Residual Interest Certificates or Notes and may deal
with the Depositor, the Company, the Administrator, the Indenture Trustee and
the Master Servicer in banking transactions with the same rights as it would
have if it were not Owner Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to
use its best efforts to obtain and maintain the effectiveness of any licenses
required in connection with this Agreement and the Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND PAYING AGENT
SECTION 8.1 Fees and Expenses. The Owner Trustee shall receive as
compensation for its services hereunder such fees as have been separately agreed
upon before the date hereof between the Company and the Owner Trustee, and the
Owner Trustee shall be entitled to be reimbursed by the Company for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder. The Paying Agent shall receive as compensation
for its services hereunder such fees, if any, as have been separately agreed
upon before the date hereof between the Company and the Paying Agent.
SECTION 8.2 Indemnification. The Company shall be liable as
primary obligor, and the Master Servicer as secondary obligor pursuant to the
Administration Agreement, for, and shall indemnify the Owner Trustee, the Paying
Agent and their successors, assigns, agents and servants (collectively, the
"Indemnified Parties") from and against, any and all liabilities, obligations,
losses, damages, taxes, claims, actions and suits, and any and all reasonable
costs, expenses and disbursements (including reasonable legal fees and expenses)
of any kind and nature whatsoever (collectively, "Expenses") which may at any
time be imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Trust Estate, the administration of the Trust Estate or the
action or inaction of the Owner Trustee or the Paying Agent hereunder. The
indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's or Paying Agent's choice of legal
counsel shall be subject to the approval of the Company, which approval shall
not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee and Paying Agent. Any
amounts paid to the Owner Trustee and/or Paying Agent pursuant to this Article
VIII shall be deemed not to be a part of the Trust Estate immediately after such
payment.
ARTICLE IX
TERMINATION OF OWNER TRUST AGREEMENT
SECTION 9.1 Termination of Owner Trust Agreement.
(a)This Agreement (other than Article VIII) and the Trust shall
terminate and be of no further force or effect on the earlier of: (i) the
satisfaction and discharge of the Indenture pursuant to Section 4.01 of the
Indenture and the termination of the Sale and Servicing Agreement and the
Insurance Agreement; and (ii) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy (the late ambassador of
the United States to the Court of St. James's) alive on the date hereof. The
bankruptcy, liquidation, dissolution, death or incapacity of any Owner shall not
(x) operate to terminate this Agreement or the Trust, nor (y) entitle such
Owner's legal representatives or heirs to claim an accounting or to take any
action or proceeding in any court for a partition or winding up of all or any
part of the Trust or Trust Estate nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b)The Residual Interest Certificates shall be subject to an
early redemption or termination at the option of the Majority Residual
Interestholders, the Securities Insurer or the Master Servicer in the manner and
subject to the provisions of Section 11.02 of the Sale and Servicing Agreement.
(c)Except as provided in Sections 9.1(a) and (b) above, none of
the Depositor, the Company, the Securities Insurer nor any Owner shall be
entitled to revoke or terminate the Trust.
(d)Notice of any termination of the Trust, specifying the Payment
Date upon which the Certificateholders shall surrender their Residual Interest
Certificates to the Paying Agent for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders, the
Securities Insurer and the Rating Agencies mailed within five Business Days of
receipt by the Owner Trustee of notice of such termination pursuant to Section
9.1(a) or (b) above, which notice given by the Owner Trustee shall state (i) the
Payment Date upon or with respect to which final payment of the Residual
Interest Certificates shall be made upon presentation and surrender of the
Residual Interest Certificates at the office of the Paying Agent therein
designated, (ii) the amount of any such final payment and (iii) that the Record
Date otherwise applicable to such Payment Date is not applicable, payments being
made only upon presentation and surrender of the Residual Interest Certificates
at the office of the Paying Agent therein specified. The Owner Trustee shall
give such notice to the Certificate Registrar (if other than the Owner Trustee)
and the Paying Agent at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Residual Interest Certificates, the
Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Payment Date pursuant to Section 5.02 of the Sale and
Servicing Agreement.
In the event that all of the Certificateholders shall not
surrender their Residual Interest Certificates for cancellation within six
months after the date specified in the above mentioned written notice, the Owner
Trustee shall give a second written notice to the remaining Certificateholders
to surrender their Residual Interest Certificates for cancellation and receive
the final distribution with respect thereto. If within one year after the second
notice all the Residual Interest Certificates shall not have been surrendered
for cancellation, the Owner Trustee may take appropriate steps, or may appoint
an agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Residual Interest Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Paying Agent to the Residual
Interestholders on a pro rata basis.
(e)Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3820 of the Business Trust Statute.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The
Owner Trustee shall at all times be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute; authorized to exercise corporate
powers having a combined capital and surplus of at least $50,000,000 and subject
to supervision or examination by Federal or state authorities; having (or having
a parent which has) a long-term rating of at least "A" by S&P and Moody's and
being acceptable to the Securities Insurer. If such corporation shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee . The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator, the Securities Insurer
and the Indenture Trustee. Upon receiving such notice of resignation, the
Administrator shall promptly appoint a successor Owner Trustee (acceptable to
the Securities Insurer) by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee. If no successor Owner Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Owner Trustee or the Securities Insurer may
petition any court of competent jurisdiction for the appointment of a successor
Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Administrator or the Securities Insurer, or if
at any time the Owner Trustee shall be legally unable to act, or shall be
adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Owner Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Securities Insurer, or the
Administrator with the consent of the Securities Insurer, may remove the Owner
Trustee. If the Securities Insurer or the Administrator shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the
Securities Insurer, or the Administrator with the prior consent of the
Securities Insurer, shall promptly appoint a successor Owner Trustee by written
instrument in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed and one copy to the successor Owner Trustee
and payment of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment
of a successor Owner Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.3, Securities Insurer provides written
approval and payment of all fees and expenses owed to the outgoing Owner
Trustee. The Administrator shall provide notice of such resignation or removal
of the Owner Trustee to each of the Rating Agencies and the Securities Insurer.
SECTION 10.3 Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Administrator, the Securities Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee (if acceptable to the Securities Insurer),
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties, and obligations of its predecessor under this
Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and monies held by it
under this Agreement; and the Administrator and the predecessor Owner Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided
in this Section unless at the time of such acceptance such successor Owner
Trustee shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section, the Administrator shall mail notice of the successor
of such Owner Trustee to all Owners, the Indenture Trustee, the Noteholders, the
Securities Insurer and the Rating Agencies. If the Administrator fails to mail
such notice within 10 days after acceptance of appointment by the successor
Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed
at the expense of the Administrator.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided further that the Owner Trustee shall mail notice of such merger or
consolidation to the Securities Insurer and the Rating Agencies.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Estate or any Mortgaged Property may at the time be
located, and for the purpose of performing certain duties and obligations of the
Owner Trustee with respect to the Trust and the Residual Interest Certificates
under the Sale and Servicing Agreement, the Administrator and the Owner Trustee
acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and
acceptable to the Securities Insurer to act as co-owner trustee, jointly with
the Owner Trustee, or separate trustee or separate trustees, of all or any part
of the Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the
Administrator, the Securities Insurer and the Owner Trustee may consider
necessary or desirable. If the Administrator shall not have joined in such
appointment within 25 days after the receipt by it of a request so to do, the
Owner Trustee (with the consent of the Securities Insurer) shall have the power
to make such appointment. No co-owner trustee or separate owner trustee under
this Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 10.1 and no notice of the appointment of any
co-trustee or separate owner trustee shall be required pursuant to Section 10.3
except that notice to, and the written consent of, the Securities Insurer shall
be required for the appointment of a co-trustee.
Each separate owner trustee and co-owner trustee shall, to the
extent permitted by law, be appointed and act subject to the following provision
and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Owner Trustee shall be conferred upon and
exercised or performed by the Owner Trustee and such separate
owner trustee or co-owner trustee jointly (it being understood
that such separate owner trustee or co-owner trustee is not
authorized to act separately without the Owner Trustee joining in
such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed, the Owner Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers,
duties, and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate owner trustee or
co-owner trustee, but solely at the direction of the Owner
Trustee; provided that Paying Agent, in performing its duties and
obligations under the Sale and Servicing Agreement, may act
separately in its capacity as Indenture Trustee without the Owner
Trustee joining in such Acts;
(ii) no owner trustee under this Agreement shall be
personally liable by reason of any act or omission of any other
owner trustee under this Agreement; and
(iii) the Administrator and the Owner Trustee acting
jointly may at any time accept the resignation of or remove any
separate owner trustee or co-owner trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to the separate owner trustees and co-owner
trustees, as if given to each of them. Every instrument appointing any separate
owner trustee or co-owner trustee, other than this Agreement, shall refer to
this Agreement and to the conditions of this Article. Each separate owner
trustee and co-owner trustee, upon its acceptance of appointment, shall be
vested with the estates specified in its instrument of appointment, either
jointly with the Owner Trustee or separately, as may be provided therein,
subject to all the provisions of this Agreement, specifically including every
provision of this Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.
Any separate owner trustee or co-owner trustee may at any time
appoint the Owner Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate owner
trustee or co-owner trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Owner Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
The Indenture Trustee, in its capacity as Paying Agent, shall not
have any rights, duties or obligations except as expressly provided in this
Agreement and the Sale and Servicing Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be
amended by the Depositor, the Company and the Owner Trustee, with the prior
consent of the Securities Insurer and with prior written notice to the Rating
Agencies, but without the consent of any of the Noteholders or the Owners or the
Indenture Trustee, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the Owners provided,
however, that such action shall not adversely affect in any material respect the
interests of any Noteholder or Owner, or, without its consent, the Paying Agent.
An amendment described above shall be deemed not to adversely affect in any
material respect the interests of any Noteholder or Owner if (i) an opinion of
counsel is obtained to such effect, and (ii) the party requesting the amendment
satisfies the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the
Depositor, the Company and the Owner Trustee, with the prior written consent of
the Rating Agencies, the Securities Insurer and with the prior written consent
of the Indenture Trustee, the Holders (as defined in the Indenture) of Notes
evidencing more than 50% of the Outstanding Amount of the Notes and the Majority
Residual Interestholders, and if affected thereby, the Paying Agent, 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 Noteholders or the Owners; provided, however, that no such amendment shall
(a) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the Home Loans or distributions that shall
be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes or the Percentage Interests required to consent to any such
amendment, in either case of clause (a) or (b) without the consent of the
holders of all the outstanding Notes, and in the case of clause (b) without the
consent of the holders of all the outstanding Residual Interest Certificates.
Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, the
Securities Insurer and each of the Rating Agencies.
It shall not be necessary for the consent of Owners, the
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Owners provided for in this Agreement
or in any other Basic Document) and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate
of Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 No Legal Title to Trust Estate in Owners. The Owners
shall not have legal title to any part of the Trust Estate. The Owners shall be
entitled to receive distributions with respect to their undivided ownership
interest therein only in accordance with Articles V and IX. No transfer, by
operation of law or otherwise, of any right, title, or interest of the Owners to
and in their ownership interest in the Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate.
SECTION 11.3 Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Owner Trustee, the Depositor,
the Company, the Owners, the Administrator, the Paying Agent, the Securities
Insurer and, to the extent expressly provided herein, the Indenture Trustee and
the Noteholders, and nothing in this Agreement, whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing, mailed by
certified mail, postage prepaid, return receipt requested, and shall be deemed
given upon actual receipt by the intended recipient, at the following addresses:
(i) if to the Owner Trustee, its Corporate Trust Office; (ii) if to the
Depositor, PaineWebber Mortgage Acceptance Corporation IV, 1285 Avenue of the
Americas, New York, New York 10019, Attention: John Fearey, Esq., General
Counsel; (iii) if to the Company, Fremont Investment & Loan, 175 North Riverview
Drive, Anaheim, California 92808, Attention: Kyle Walker; (iv) if to the
Indenture Trustee or the Paying Agent, First Union National Bank, Corporate
Trust Group, NC 1179, 230 South Tyron Street, 9th Floor, Charlotte, North
Carolina 28288-1179, Attention: Manager-Structured Finance Trust Group; (v) if
to the Securities Insurer, Financial Security Assurance Inc., 350 Park Avenue,
New York, New York 10022, Attention: Transaction Oversight Re: Fremont Home Loan
Owner Trust 1999-1, telephone: (212) 339-3518, (212) 339-3529, confirmation:
(212) 826-0100; or, as to each such party, at such other address as shall be
designated by such party in a written notice to each other party.
(b)Any notice required or permitted to be given to an Owner shall
be given by first-class mail, postage prepaid, at the address of such Owner as
shown in the Certificate 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 Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Company, the Securities Insurer, the Owner Trustee and its
successors and each owner and its successors and permitted assigns, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
SECTION 11.8 No Petition. The Owner Trustee, by entering into
this Agreement, each Owner, by accepting a Residual Interest Certificate, the
Depositor, the Company and the Indenture Trustee and each Noteholder by
accepting the benefits of this Agreement, hereby covenant and agree that they
will not at any time institute against the Company, the Depositor or the Trust,
as the case may be, or join in any institution against the Company or the Trust
of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or law in connection with any obligations relating to the Residual
Interest Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.9 No Recourse. Each Owner by accepting a Residual
Interest Certificate acknowledges that such Residual Interest Certificate
represents a beneficial interest in the Trust only and does not represent an
interest in or an obligation of the Company, the Master Servicer, the Depositor,
the Administrator, the Owner Trustee, the Indenture Trustee, the Securities
Insurer or any Affiliate thereof and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated in this
Agreement, the Residual Interest Certificates or the Basic Documents.
SECTION 11.10 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12 Residual Interest Transfer Restrictions. The
Residual Interest may not be acquired by or for the account of a Benefit Plan
Investor. By accepting and holding a Residual Interest Certificate, the Owner
thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan Investor.
SECTION 11.13 Third-Party Beneficiary. The parties hereto
acknowledge that the Securities Insurer is an express third party beneficiary
hereof entitled to enforce any rights reserved to it hereunder as if it were
actually a party hereto.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS OF, the parties hereto have caused this Owner Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
PAINEWEBBER MORTGAGE ACCEPTANCE
CORPORATION IV,
Depositor
By:_________________________________
Name: Barbara Dawson
Title: Senior Vice President
FREMONT INVESTMENT & LOAN,
Transferor
By:_________________________________
Name: Ronald R. Warwick
Title: Senior Vice President &
Chief Financial Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By:_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK, not in
its individual capacity but solely
as Paying Agent
By:_________________________________
Name: Robert Ashbaugh
Title: Vice President
<PAGE>
EXHIBIT A
TO THE OWNER TRUST AGREEMENT
FORM OF RESIDUAL INTEREST CERTIFICATE
THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL INTEREST
CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE
DISPOSED OF BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE ACT (INCLUDING, BUT NOT LIMITED TO,
FREMONT INVESTMENT & LOAN) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
RESIDUAL INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.
EXCEPT AS PROVIDED IN SECTION 3.10(B) OF THE OWNER TRUST AGREEMENT, NO TRANSFER
OF THIS RESIDUAL INTEREST CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE
MADE UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO
THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT (A) AN "EMPLOYEE BENEFIT PLAN" WITHIN
THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, (B) A "PLAN" WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH,
A "BENEFIT PLAN INVESTOR"), AND (II) IS NOT DIRECTLY OR INDIRECTLY PURCHASING
SUCH RESIDUAL INTEREST CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS
NAMED FIDUCIARY OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A BENEFIT PLAN
INVESTOR.
<PAGE>
FREMONT HOME LOAN OWNER TRUST 1999-1
RESIDUAL INTEREST CERTIFICATE
No. ___
THIS CERTIFIES THAT _______________________________ (the "Owner")
is the registered owner of a ____% residual interest in Fremont Home Loan Owner
Trust 1999-1 (the "Trust") existing under the laws of the State of Delaware and
created pursuant to the Owner Trust Agreement dated as of March 1, 1999 (the
"Owner Trust Agreement") between PaineWebber Mortgage Acceptance Corporation IV,
as Depositor, Fremont Investment & Loan, as the Company, Wilmington Trust
Company, not in its individual capacity but solely in its fiduciary capacity as
owner trustee under the Owner Trust Agreement (the "Owner Trustee") and First
Union National Bank, as Paying Agent (the "Paying Agent"). Initially capitalized
terms used but not defined herein have the meanings assigned to them in the
Owner Trust Agreement. The Owner Trustee, on behalf of the Issuer and not in its
individual capacity, has executed this Residual Interest Certificate by one of
its duly authorized signatories as set forth below. This Residual Interest
Certificate is one of the Residual Interest Certificates referred to in the
Owner Trust Agreement and is issued under and is subject to the terms,
provisions and conditions of the Owner Trust Agreement to which the holder of
this Residual Interest Certificate by virtue of the acceptance hereof agrees and
by which the holder hereof is bound. Reference is hereby made to the Owner Trust
Agreement and the Sale and Master Servicing Agreement for the rights of the
holder of this Residual Interest Certificate, as well as for the terms and
conditions of the Trust created by the Owner Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this
Residual Interest Certificate except in accordance with terms and provisions of
the Owner Trust Agreement.
THIS RESIDUAL INTEREST CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Residual Interest Certificate to
be duly executed.
FREMONT HOME LOAN OWNER TRUST 1999-1
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under the Owner Trust Agreement
By: _________________________________________
Authorized Signatory
DATED: ____________, 1999
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Owner Trust Agreement.
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under the Owner Trust Agreement,
as Authenticating Agent
By: _________________________________________
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________________________
________________ Attorney to transfer said Certificate on the books of the
Certificate Registrar, with full power of substitution in the premises.
Dated: _______________
____________________________________*/
Signature Guaranteed:
____________________________________*/
- -------------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
<PAGE>
EXHIBIT B
TO THE OWNER TRUST AGREEMENT
CERTIFICATE OF TRUST OF
FREMONT HOME LOAN OWNER TRUST 1999-1
THIS Certificate of Trust of Fremont Home Loan Owner Trust 1999-1
(the "Trust"), dated March ___, 1999, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, and First
Union National Bank, as paying agent, to form a business trust under the
Delaware Business Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is Fremont
Home Loan Owner Trust 1999-1.
2. Delaware Trustee. The name and business address of the trustee
of the Trust, in the State of Delaware is Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
* * *
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the owner trustee of
the Trust, have executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as owner trustee under an Owner Trust
Agreement dated as of March 1, 1999
By: ______________________________________
Name:
Title:
This Servicing Agreement, made as of this 1st day of March, 1999, by
and between FREMONT INVESTMENT & LOAN, a California industrial loan company,
having an office at 175 North Riverview Drive, Anaheim, California, as initial
owner and master servicer (the "Owner" or the "Master Server") and FAIRBANKS
CAPITAL CORP., a Utah corporation, having an office at 3815 South West Temple,
Salt Lake City, Utah 84115-4412 (the "Servicer"), recites and provides as
follows:
R E C I T A L S
WHEREAS, Owner and Servicer executed and delivered that certain
Agreement Regarding Standard Servicing Terms dated as of March 1, 1999 (the
"Standard Terms Agreement");
WHEREAS, the Standard Terms Agreement sets forth certain standard
provisions for the servicing of residential mortgage loans by Servicer on behalf
of Owner; and
WHEREAS, Owner and Servicer desire that Servicer service the mortgage
loans described on the attached Mortgage Loan Schedule pursuant to the terms
hereof and the terms of the Standard Terms Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Owner and the Servicer agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings specified in the Standard Terms
Agreement. The following terms shall have the meanings set forth below:
"Custodian" First Union National Bank
"Custodial Agreement" That certain
Custodial Agreement between
the Custodian, Servicer, the
Issuer and Owner dated as of
even date herewith.
"Servicing Commencement Date" April 12, 1999.
Section 2. Duties and Responsibilities of the Servicer. Servicer agrees
to service the Mortgage Loans on behalf of Owner, its successors and assigns, in
accordance with the provisions of this Servicing Agreement and the Standard
Terms Agreement.
Section 3. Term of Mortgage Loan Servicing Agreement. The duties,
responsibilities, and obligations to be performed and carried out by Servicer
under this Servicing Agreement shall commence upon the execution of this
Servicing Agreement and shall terminate (a) as to any Mortgage Loan upon the
distribution of the final payment or Liquidation Proceeds on the last Mortgage
Loan or REO Property subject to this Servicing Agreement and (b) as to all the
Mortgage Loans (x) in accordance with the Standard Terms Agreement, or (y) if
required in connection with a securitization financing, the Servicer hereby
covenants and agrees to act as servicer under this Servicing Agreement for an
initial term commencing on the Servicing Commencement Date and expiring on June
30, 1999 (the "Initial Term"), thereafter, the Initial Term shall be extendible
by the Financial Security Assurance Inc. as securities insurer (the "Securities
Insurer") written notice (each, a "Servicer Renewal Notice," of the Securities
Insurer (or the Indenture Trustee if a Securities Insurer Event of Default is
then occurring) for successive three month terms. The Master Servicer may, with
the consent of the Securities Insurer, appoint a replacement Service, which
shall be an eligible Service approved by the Securities Insurer. The Servicer
hereby agrees that, as of the date hereof and upon its receipt of any Servicer
Renewal Notice, the Servicer shall be bound for the duration of the Initial Term
and the term covered by any such Servicer Renewal Notice to act as the Servicer,
subject to and in accordance with the other provisions of this Servicing
Agreement. The Servicer agrees that if, as of the last day of the calendar month
preceding the last day of any such servicing term, the Servicer shall not have
received a Servicer Renewal Notice, the Servicer shall, within five days
thereafter, give written notice of such non-receipt to the Master Servicer, the
Note Insurer and the Indenture Trustee. The failure of the Securities Insurer or
any other party to deliver a Servicer Renewable Notice by the end of any such
three-month term shall result in the automatic termination of the Servicer.
Section 4. Compensation. In consideration of the services rendered
under this Servicing Agreement, the Servicer shall be entitled to such fees as
are provided for in the Standard Terms Agreement.
Section 5. Additional Servicer Events of Default. In addition to the
Events of Default set forth in Section 9.4 of the Standard Terms Agreement, the
following shall be additional Events of Default hereunder:
(i) the most recent Six-Month Average Delinquency
(including Foreclosure Property and real estate owned) exceeds
15.00%; and
(ii) cumulative Realized Losses as a percentage of
the Original Pool Principal Balance equal or exceed the
following percentages based on the month of determination
after the Closing Date:
Month of Cumulative
Determination Realized Losses
------------- ---------------
0-12 1.25%
13-24 2.00%
25-36 3.15%
37-48 3.85%
49+ 4.35%
(iii) cumulative Realized Losses as a percentage of
the Original Pool Principal Balance at the end of any 12 month
period is greater than or equal to 1.75% of such percentage as
of the beginning of such 12 month period.
Section 6. Standard Terms. Servicer acknowledges that the Standard
Terms Agreement prescribes additional terms and conditions under which Servicer
is to service the Mortgage Loans. The terms of the Standard Terms Agreement are
incorporated herein by reference and are made a part hereof. Servicer agrees to
perform and observe the duties, responsibilities and obligations that are to be
performed and observed by Servicer under the Standard Terms Agreement as said
Agreement may be amended from time to time, and further agrees that the Standard
Terms Agreement, as amended or supplemented, is and shall be a part of this
Servicing Agreement to the same extent as if set forth herein in full. If any
provision of the Standard Terms Agreement conflicts with any provision of this
Servicing Agreement, the terms of this Servicing Agreement shall govern.
Section 7. Representations and Warranties. Servicer and Owner hereby
remake the representations and warranties contained in the Standard Terms
Agreement with respect to this Servicing Agreement.
Section 8. Assignment and Delegation of Duties by Servicer. Except as
otherwise expressly provided in the Standard Terms Agreement, Servicer shall not
assign or transfer any of its duties, rights, benefits or privileges under this
Servicing Agreement.
Section 9. Assignment by Owner. Except as provided in the Standard
Terms Agreement, Servicer agrees that Owner, its successors and assigns, may at
any time, without the consent of Servicer, assign and transfer its right, title
and interest under this Servicing Agreement to any other Person. The parties
hereto acknowledge that the Owner will assign its rights under this Servicing
Agreement to Fremont Home Loan Owner Trust 1999-1, a Delaware business trust, as
the issuer in a securitization financing on or about March 23, 1999 and that
simultaneously therewith such issuer shall assign its rights to First Union
National Bank as indenture trustee under an indenture dated as of March 1, 1999
between such issuer and the indenture trustee. All representations, warranties
and covenants in the Standard Terms Agreement shall inure to the benefit of
First Union National Bank, as indenture trustee, Financial Security Assurance
Inc., as Securities Insurer, and the noteholders under the securitization
financing. Financial Security Assurance Inc., as Securities Insurer, shall be
vested (with the authority to make all decisions of the Owner during the term of
the securitization financing so long as note Insurer event of default has
occurred and is continuing.
Section 10. Notices. All notices under this Servicing Agreement shall
be made as provided in the Standard Terms Agreement.
Section 11. Severability. Each part of this Servicing Agreement is
intended to be severable. If any term, covenant, condition or provision hereof
is unlawful, invalid, or unenforceable for any reason whatsoever, and such
illegality, invalidity, or unenforceability does not affect the remaining parts
of this Servicing Agreement, then all such remaining parts hereof shall be valid
and enforceable and have full force and effect as if the invalid or
unenforceable part had not been included.
Section 12. Rights Cumulative; Waivers. The rights of each of the
parties under this Servicing Agreement are cumulative and may be exercised as
often as any party considers appropriate. The rights of each of the parties
hereunder shall not be capable of being waived or varied otherwise than by an
express waiver or variation in writing. Any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or variation of that
or any other such right. Any defective or partial exercise of any of such rights
shall not preclude any other or further exercise of that or any other such
right. No act or course of conduct or negotiation on the part of any party shall
in any way preclude such party from exercising any such right or constitute a
suspension or any variation of any such right.
Section 13. Headings. The headings of the Sections contained in this
Servicing Agreement are inserted for convenience only and shall not affect the
meaning or interpretation of this Servicing Agreement or any provision hereof.
Section 14. Construction. Unless the context otherwise requires,
singular nouns and pronouns, when used herein, shall be deemed to include the
plural of such noun or pronoun and pronouns of one gender shall be deemed to
include the equivalent pronoun of the other gender.
Section 15. Assignment. This Servicing Agreement and the terms,
covenants, conditions, provisions, obligations, undertakings, rights and
benefits hereof, including any Exhibits and Schedules hereto, shall be binding
upon, and shall inure to the benefit of, the undersigned parties and their
respective heirs, executors, administrators, representatives, successors, and
assigns.
Section 16. Counterparts. This Servicing Agreement may be executed in
any number of counterparts, each of which shall constitute one and the same
instrument, and either party hereto may execute this Servicing Agreement by
signing any such counterpart.
Section 17. Governing Law. This Servicing Agreement shall be construed,
and the rights and obligations of the Servicer and the Owner hereunder
determined, in accordance with the laws of the State of New York determined
without regard to its laws concerning conflicts of laws.
Section 18. Third Party Beneficiary. The parties hereto agree and
acknowledge that in respect of the securitization financing into which the
Mortgage Loans will be transferred on or about March 23, 1999, Financial
Security Assurance Inc., as note insurer, First Union National Bank, as
indenture trustee and Fremont Home Loan Owner Trust 1999-1, as issuer, each are
express third party beneficiaries hereof entitled to enforce any rights reserved
to it hereunder as if it were actually a party hereto.
Section 19. Amendment. The Master Servicer shall not change the duties
and obligations of the Servicer hereunder without the prior consent of the
Servicer.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Servicer: FAIRBANKS CAPITAL CORP.,
a Utah corporation
By:___________________________________
Name:
Its:
Owner: FREMONT INVESTMENT & LOAN
a California industrial loan company
By:___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF SERVICER RENEWAL NOTICE
[SERVICER]
Re: Fremont Home Loan Asset Backed Notes, Series 1999-1
Dear Ladies and Gentlemen:
Reference is hereby made to the Servicing Agreement dated as of March
1, 1999 (the "Servicing Agreement") between Fremont Investment & Loan, as
initial Owner and Master Servicer and [SERVICER], as Servicer. The Master
Servicer, pursuant to Section 3(b)(y) of the Servicing Agreement, hereby
notifies [SERVICER] that its term as Servicer has been extended for a successive
three calendar month period beginning with the month of __________, _____.
FREMONT INVESTMENT & LOAN,
as Master Servicer
By: ________________________________
Name: _________________________
Title: _________________________
cc: [Note Insurer]
PaineWebber Mortgage Acceptance Corporation IV
1285 Avenue of the Americas
New York, New York 10019
Attn: John Fearey, Esq.
Fremont Home Loan Owner Trust 1999-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attn: Emmett R. Harmon
FINANCIAL GUARANTY
INSURANCE POLICY
Obligor: As described in Endorsement No. 1 Policy No.: 50787-N
Obligations: $415,545,505 Fremont Home Date of Issuance: 3/23/99
Loan Owner Trust 1999-1,
Home Loan Asset Backed Notes,
Series 1999-1
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees :
(a) payment of the amount of any distribution of principal of, or
interest on, the Obliga-tions made during the Term of this Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by Financial
Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obliga-tion as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term of this Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereaf-ter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal on an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any
accrued interest to the date of acceleration. "Term of this Policy" shall have
the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the merger,
consolidation or dissolution of the Obligor. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatso-ever, including payment, or provision
being made for payment, of the Obligations prior to maturity. This Policy may
not be canceled or revoked during the Term of this Policy. THIS POLICY IS NOT
COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76
OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By________________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 100NY (5/89)
<PAGE>
ENDORSEMENT NO. 1
TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
OBLIGOR: Fremont Home Loan Owner Trust 1999-1, pursuant to the
Indenture dated as of March 1, 1999 between Fremont
Home Loan Owner Trust 1999-1 as Issuer and First Union
National Bank as Indenture Trustee
OBLIGATIONS: $415,545,505 Fremont Home Loan Owner Trust 1999-1, Home
Loan Asset Backed Notes, Series 1999-1
POLICY NO.: 50787-N
DATE OF ISSUANCE: March 23, 1999
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Indenture, dated as of March 1, 1999 (the "Indenture"), between Fremont Home
Loan Owner Trust 1999-1 as Issuer and First Union National Bank as Indenture
Trustee or in the Sale and Master Servicing Agreement, dated as of March 1, 1999
(the "Sale and Master Servicing Agreement"), among the Issuer, the Depositor,
the Indenture Trustee and the Company unless the context shall otherwise
require.
"Business Day" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in are authorized or obligated by law or
executive order to be closed in a city at any of the following locations: (i)
the City of New York, (ii) where the Securities Insurer is located, (iii) where
the Corporate Trust Office of the Indenture Trustee is located, (iv) where the
servicing operations of the Servicer are located or (v) where the master
servicing operations of the Master Servicer are located.
"Company" means Fremont Investment & Loan, a California industrial loan
company, and its successors and permitted assigns.
"Holder" shall not include the Obligor or any affiliates or successors
thereof in the event the Obligor, or any such affiliate or successor, is a
registered or beneficial owner of the Obligation.
"Indenture" means the Indenture dated as of March 1, 1999 between Fremont
Home Loan Owner Trust 1999-1 as Issuer and First Union National Bank as
Indenture Trustee, as amended from time to time with the consent of Financial
Security.
"Indenture Trustee" means First Union National Bank, in its capacity as
Indenture Trustee under the Indenture and any successor in such capacity.
<PAGE>
Policy No.: 50787-N Date of Issuance: March 23, 1999
"Insurance Account" means the "Policy Payments Account" as defined in the
Sale and Master Servicing Agreement.
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day, or
after 12:00 noon, New York City time, shall be deemed to be receipt on the next
succeeding Business Day. If any notice or certificate given hereunder by the
Indenture Trustee is not in proper form or is not properly completed, executed
or delivered, it shall be deemed not to have been Received, and Financial
Security or its Fiscal Agent shall promptly so advise the Indenture Trustee and
the Indenture Trustee may submit an amended notice.
"Scheduled Payments" means with respect to any Payment Date, the sum of (a)
the product of the Note Principal Balance and the Note Interest Rate less any
Relief Act Shortfalls and (b) the Noteholders Principal Deficiency Amount
(without regard to the second parenthetical in such definition). Scheduled
Payments shall not include any amounts due in respect of the Obligations
attributable to any increase in interest rate, penalty or other sum payable by
the Obligor by reason of any default or event of default in respect of the
Obligations, or by reason of any deterioration of the creditworthiness of the
Obligor, nor shall Scheduled Payments include, nor shall coverage be provided
under this Policy in respect of, any taxes, withholding or other charge imposed
by any governmental authority due in connection with the payment of any
Scheduled Payment to a Holder.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) all Scheduled Payments have been
paid that are required to be paid by the Obligor within the meaning of the
Indenture; (ii) any period during which any Scheduled Payment could have been
avoided in whole or in part as a preference payment under applicable bankruptcy,
insolvency, receivership or similar law shall have expired and (iii) if any
proceedings requisite to avoidance as a preference payment have been commenced
prior to the occurrence of (i) and (ii), a final and nonappealable order in
resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the date on
which such payment is due on the Obligations. Payments due hereunder in respect
of Scheduled Payments will be disbursed to the Indenture Trustee by wire
transfer of immediately available funds.
Financial Security shall be entitled to pay any amount hereunder in respect
of Scheduled Payments on the Obligations, including any amount due on the
Obligations on an accelerated
2
<PAGE>
Policy No.: 50787-N Date of Issuance: March 23, 1999
basis, whether or not any notice and certificate shall have been Received by
Financial Security as provided above provided, however, that by acceptance of
this Policy the Indenture Trustee agrees to provide upon request to Financial
Security a notice and certificate in respect of any such payments made by
Financial Security. Financial Security shall be entitled to pay hereunder any
amount due on the Obligations on an accelerated basis if Financial Security
shall so elect in its sole discretion, at any time or from time to time, in
whole or in part, prior to the scheduled date of payment thereof; Scheduled
Payments insured hereunder shall not include interest, in respect of principal
paid hereunder on an accelerated basis, accruing from after the date of such
payment of principal. Financial Security's obligations hereunder in respect of
Scheduled Payments shall be discharged to the extent such amounts are paid by
the Issuer in accordance with the Indenture or disbursed by Financial Security
as provided herein whether or not such funds are properly applied by the
Indenture Trustee except as otherwise provided in paragraph 3 of this
Endorsement.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (A) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal of or interest paid on the Obligations during the Term of this Policy
because such payments were avoidable as preference payments under applicable
bankruptcy law (the "Order"), (B) a certificate of the Holder that the Order has
been entered and is not subject to any stay and (C) an assignment duly executed
and delivered by the Holder, in such form as is reasonably required by Financial
Security, and provided to the Holder by Financial Security, irrevocably
assigning to Financial Security all rights and claims of the Holder relating to
or arising under the Obligations against the estate of the Obligor or otherwise
with respect to such preference payment or (ii) the date of Receipt by Financial
Security from the Indenture Trustee of the items referred to in clauses (A), (B)
and (C) above if, at least four Business Days prior to such date of Receipt,
Financial Security shall have Received written notice from the Indenture Trustee
that such items were to be delivered on such date and such date was specified in
such notice. Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order and not to the
Indenture Trustee or any Holder directly (unless a Holder has previously paid
such amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, in which case such payment shall be disbursed to
the Indenture Trustee for distribution to such Holder upon proof of such payment
reasonably satisfactory to Financial Security). In connection with the
foregoing, Financial Security shall have the rights provided pursuant to Section
5.01A of the Sale and Master Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Indenture specifying the name and notice
3
<PAGE>
Policy No.: 50787-N Date of Issuance: March 23, 1999
address of the Fiscal Agent. From and after the date of receipt of such notice
by the Indenture Trustee, (i) copies of all notices and documents required to be
delivered to Financial Security pursuant to this Policy shall be simultaneously
delivered to the Fiscal Agent and to Financial Security and shall not be deemed
Received until Received by both, and (ii) all payments required to be made by
Financial Security under this Policy may be made directly by Financial Security
or by the Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the
agent of Financial Security only and the Fiscal Agent shall in no event be
liable to any Holder for any acts of the Fiscal Agent or any failure of
Financial Security to deposit, or cause to be deposited, sufficient funds to
make payments due under the Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Senior Vice President - Surveillance
Re: Fremont Home Loan Owner Trust 1999-1
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Indenture Trustee.
8. Priorities. In the event that any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Holder shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
4
<PAGE>
Policy No.: 50787-N Date of Issuance: March 23, 1999
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By ______________________________
Authorized Officer
<PAGE>
Policy No.: 50787-N Date of Issuance: March 23, 1999
Exhibit A
To Endorsement No. 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of First Union National Bank
(the "Indenture Trustee"), hereby certifies to Financial Security Assurance Inc.
("Financial Security"), with reference to Financial Guaranty Insurance Policy
No. 50787-N dated March 23, 1999 (the "Policy") issued by Financial Security in
respect of the Fremont Home Loan Owner Trust 1999-1, Home Loan Asset Backed
Notes, Series 1999-1 (the "Obligations"), that:
(i) The Indenture Trustee is the Indenture Trustee under the Indenture
for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on deposit)
in the Note Payment Account and available for distribution to the Holders
pursuant to the Indenture will be $__________ (the "Shortfall") less than
the Scheduled Payments with respect to the Payment Date occurring on
[insert date].
(iii) The Indenture Trustee is making a claim under the Policy for the
Shortfall to be applied to the payment of Scheduled Payments.
(iv) The Indenture Trustee agrees that, following receipt of funds
from Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Scheduled Payments on the Obligations
when due; (b) not apply such funds for any other purpose; (c) not commingle
such funds with other funds held by the Indenture Trustee and (d) maintain
an accurate record of such payments with respect to each Obligation and the
corresponding claim on the Policy and proceeds thereof and, if the
Obligation is required to be surrendered or presented for such payment,
shall stamp on each such Obligation the legend "$[insert applicable amount]
paid by Financial Security and the balance hereof has been cancelled and
reissued" and then shall deliver such Obligation to Financial Security and
shall deliver such coupons so paid to Financial Security.
(v) The Indenture Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the
Obligations to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of securities
law violations arising from the offer and sale of the Obligations. The
foregoing assignment is in addition to, and not in limitation of, rights of
subrogation otherwise available to Financial Security in respect of such
payments.
<PAGE>
Policy No.: 50787-N Date of Issuance: March 23, 1999
Payments to Financial Security in respect of the foregoing assignment shall
in all cases be subject to and subordinate to the rights of the Holders to
receive all Scheduled Payments in respect of the Obligations. The Indenture
Trustee shall take such action and deliver such instruments as may be
reasonably requested or required by Financial Security to effectuate the
purpose or provisions of this clause (v).
(vi) The Indenture Trustee, on its behalf and on behalf of the
Holders, hereby appoints Financial Security as agent and attorney-in-fact
for the Indenture Trustee and each such Holder in any legal proceeding with
respect to the Obligations. The Indenture Trustee hereby agrees that, so
long as a Securities Insurer Default (as defined in the Indenture) shall
not exist, Financial Security may at any time during the continuation of
any proceeding by or against the Issuer under the United States Bankruptcy
Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") direct all
matters relating to such Insolvency Proceeding, including without
limitation, (A) all matters relating to any claim in connection with an
Insolvency Proceeding seeking the avoidance as a preferential transfer of
any payment made with respect to the Obligations (a "Preference Claim"),
(B) the direction of any appeal of any order relating to any Preference
Claim at the expense of Financial Security but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Indenture Trustee hereby agrees that Financial Security shall be subrogated
to, and the Indenture Trustee on its behalf and on behalf of each Holder,
hereby delegates and assigns, to the fullest extent permitted by law, the
rights of the Indenture Trustee and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any
party to an adversary proceeding or action with respect to any court order
issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
Insurance Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the
meanings provided in the Policy.
<PAGE>
Policy No.: 50787-N Date of Issuance: March 23, 1999
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice of Claim and Certificate as of the ____________ day of
________________,______.
FIRST UNION NATIONAL BANK
By: __________________
Title: __________________
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For Financial Security or Fiscal Agent Use Only
Wire transfer sent on _______________ By_____________________________
Confirmation Number _________________________________________________
