SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
March 30, 1998
STRUCTURED ASSET SECURITIES CORPORATION (as depositor under the Trust
Agreement, dated as of March 1, 1998, providing for the issuance of
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1998-3)
Structured Asset Securities Corporation
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 333-47499 74-2440850
--------------------------- ------------- --------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
200 Vesey Street
New York, New York 10285
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (212) 526-5594
No Change
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events
------------
A. The Registrant registered issuances of Structured Asset Securities
Corporation Mortgage Pass-Through Certificates on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Act"), by a Registration Statement on Form S-3 (Registration File No. 333-
47499) (the "Registration Statement"). Pursuant to the Registration
Statement, the Registrant issued $769,725,000 in aggregate principal amount
of Class A-1, Class A-2, Class M-1, Class M-2 and Class B Certificates of its
Structured Asset Securities Corporation Mortgage Pass-Through Certificates,
Series 1998-3 on March 30, 1998. This Current Report on Form 8-K is being
filed to satisfy an undertaking, contained in the definitive Prospectus dated
March 18, 1998, as supplemented by the Prospectus Supplement dated March 26,
1998 (the "Prospectus Supplement"), to file a copy of the Trust Agreement (as
defined below) executed in connection with the issuance of the Certificates,
a form of which was filed as an exhibit to the Registration Statement.
The Certificates were issued pursuant to a Trust Agreement (the "Trust
Agreement"), attached hereto as Exhibit 4.1, dated as of March 1, 1998, among
-----------
Structured Asset Securities Corporation, as depositor (the "Depositor"),
Norwest Bank Minnesota, National Association, as master servicer and First
Union National Bank, as trustee (the "Trustee"). The "Certificates" consist
of the following classes: Class A-1, Class A-2, Class M-1, Class M-2, Class
B, Class X and Class R. The Certificates evidence all the beneficial
ownership interest in a trust fund (the "Trust Fund") that consists primarily
of a pool of fixed and adjustable rate, fully amortizing and balloon,
conventional, first lien residential mortgage loans (the "Mortgage Loans")
with an aggregate outstanding principal balance of $769,725,543.18 as of
March 1, 1998, together with certain other assets. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in
the Trust Agreement.
Item 7. Financial Statements; Pro Forma Financial Information and
---------------------------------------------------------
Exhibits
- - --------
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
1.1 Terms Agreement, dated March 1, 1998, between Structured
Asset Securities Corporation and Lehman Brothers Inc.
4.1 Trust Agreement, dated as of March 1, 1998, among
Structured Asset Securities Corporation, as Depositor,
Norwest Bank Minnesota, National Association, as Master
Servicer and First Union National Bank, as Trustee.
99.1 Mortgage Loan Sale and Assignment Agreement, dated as of
March 1, 1998, between Lehman Capital, A Division of
Lehman Brothers Holdings Inc., as Seller, and Structured
Asset Securities Corporation, as Purchaser.
99.2 Special Servicing Agreement, dated as of March 1, 1998,
between Lehman Capital, A Division of Lehman Brothers
Holdings Inc., and Ocwen Federal Bank FSB, as special
servicer.
99.3 Servicing Agreement, dated as of December 1, 1997,
between Lehman Capital, A Division of Lehman Brothers
Holdings Inc., and Ocwen Federal Bank FSB, as special
servicer.
99.4 Servicing Agreement, dated as of March 1, 1998, between
Lehman Capital, A Division of Lehman Brothers Holdings
Inc., and Aurora Loan Services Inc., as servicer.
99.5 Flow Servicing Agreement, dated as of September 1, 1997,
between Lehman Capital, A Division of Lehman Brothers
Holdings Inc., and Aurora Loan Services Inc., as
servicer.
99.6 Servicing Agreement, dated as of March 1, 1998, between
Lehman Capital, A Division of Lehman Brothers Holdings
Inc., and Option One Mortgage Corporation, as servicer.
99.7 Seller's Warranties and Servicing Agreement, dated as of
September 30, 1997, between Lehman Capital, A Division of
Lehman Brothers Holdings Inc., and Option One Mortgage
Corporation, as servicer.
SIGNATURES
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.
STRUCTURED ASSET SECURITIES
CORPORATION
By: /c/ Theodore P. Janulis
-----------------------------------------
Name: Theodore P. Janulis
Title: Managing Director
Dated:
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- - ----------- -----------
No.
1.1 Terms Agreement, dated March 1, 1998, between
Structured Asset Securities Corporation and
Lehman Brothers Inc.
4.1 Trust Agreement, dated as of March 1, 1998,
among Structured Asset Securities Corporation,
as Depositor, Norwest Bank Minnesota, National
Association, as Master Servicer and First Union
National Bank, as Trustee.
99.1 Mortgage Loan Sale and Assignment Agreement,
dated as of March 1, 1998, between Lehman
Capital, A Division of Lehman Brothers Holdings
Inc., as Seller, and Structured Asset
Securities Corporation, as Purchaser.
99.2 Special Servicing Agreement, dated as of March
1, 1998, between Lehman Capital, A Division of
Lehman Brothers Holdings Inc., and Ocwen
Federal Bank FSB, as special servicer.
99.3 Servicing Agreement, dated as of December 1,
1997, between Lehman Capital, A Division of Lehman
Brothers Holdings Inc., and Ocwen Federal Bank
FSB, as special servicer.
99.4 Servicing Agreement, dated as of March 1, 1998,
between Lehman Capital, A Division of Lehman
Brothers Holdings Inc., and Aurora Loan
Services Inc., as servicer.
99.5 Flow Servicing Agreement, dated as of September
1, 1997, between Lehman Capital, A Division of
Lehman Brothers Holdings Inc., and Aurora Loan
Services Inc., as servicer.
99.6 Servicing Agreement, dated as of March 1, 1998,
between Lehman Capital, A Division of Lehman
Brothers Holdings Inc., and Option One Mortgage
Corporation, as servicer.
99.7 Seller's Warranties and Servicing Agreement,
dated as of September 30, 1997, between Lehman
Capital, A Division of Lehman Brothers Holdings
Inc., and Option One Mortgage Corporation, as
servicer.
EXECUTION
STRUCTURED ASSET SECURITIES CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-3
TERMS AGREEMENT
---------------
Dated: March 26, 1998
To: Structured Asset Securities Corporation, as Depositor under the Trust
Agreement dated as of March 1, 1998 (the "Trust Agreement").
Re: Underwriting Agreement Standard Terms dated as of April 16, 1996 (the
"Standard Terms," and together with this Terms Agreement, the
"Agreement").
Series Designation: Series 1998-3.
- - ------------------
Terms of the Series 1998-3 Certificates: Structured Asset Securities
- - ---------------------------------------
Corporation Series 1998-3 Mortgage Pass-Through Certificates, Class A-1,
Class A-2, Class M-1, Class M-2, Class B, Class X and Class R (the
"Certificates") will evidence, in the aggregate, the entire beneficial
ownership interest in a trust fund (the "Trust Fund"). The primary assets of
the Trust Fund will consist of fixed and adjustable rate, fully amortizing
and balloon, conventional, first lien residential mortgage loans (the
"Mortgage Loans"). Only the Class A-1, Class A-2, Class M-1, Class M-2 and
Class B Certificates (the "Offered Certificates") are being sold pursuant to
the terms hereof.
Registration Statement: File Number 333-47499
- - ----------------------
Certificate Ratings: It is a condition to the issuance of the Class A
- - -------------------
Certificates that they be rated "AAA" by each of Fitch IBCA, Inc. ("Fitch")
and Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"). It is a condition to the issuance of the Class M-1
Certificates that they be rated "AA" by Fitch; it is a condition to the
issuance of the Class M-2 Certificates that they be rated "A" by Fitch; and
it is a condition to the issuance of the Class B Certificates that they be
rated "BBB" by Fitch.
Terms of Sale of Offered Certificates: The Depositor agrees to sell to
- - -------------------------------------
Lehman Brothers Inc. (the "Underwriter") and the Underwriter agrees to
purchase from the Depositor, the Offered Certificates in the principal
amounts and prices set forth on Schedule 1 annexed hereto. The purchase
price for the Offered Certificates shall be the Purchase Price Percentage set
forth in Schedule 1 plus accrued interest at the initial interest rate per
annum from and including the Cut-off Date up to, but not including, the
Closing Date.
The Underwriter will offer the Offered Certificates to the public from time
to time in negotiated transactions or otherwise at varying prices to be
determined at the time of sale.
Cut-off Date: March 1, 1998.
- - ------------
Closing Date: 10:00 A.M., New York time, on or about March 30, 1998. On the
- - ------------
Closing Date, the Depositor will deliver the Offered Certificates to the
Underwriter against payment therefor for the account of the Underwriter.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement
between the Depositor and the Underwriter in accordance with its terms.
LEHMAN BROTHERS INC.
By:
-----------------------------------------
Name:
Title:
Accepted:
STRUCTURED ASSET SECURITIES
CORPORATION
By:
--------------------------------------------
Name:
Title:
Schedule 1
----------
Initial
Certificate Certificate Purchase
Principal Interest Price
Class Amount(1) Rate Percentage
Class A $296,935,000 (2) 100%
Class A-2 296,934,000 (2) 100%
Class M-1 95,034,000 (2) 100%
Class M-2 50,032,000 (2) 100%
Class B 30,790,000 (2) 100%
________________________________
(1) Approximate.
(2) Interest will accrue on the Class A-1, Class A-2 Class M-1, Class M-2
and Class B, Certificates at the applicable per annum rate described in
the Prospectus Supplement.
EXECUTION
STRUCTURED ASSET SECURITIES CORPORATION, as Depositor,
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Master Servicer,
and
FIRST UNION NATIONAL BANK, as Trustee
___________________________
TRUST AGREEMENT
Dated as of March 1, 1998
___________________________
STRUCTURED ASSET SECURITIES CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-3
TABLE OF CONTENTS
Section Page
- - --------------------------------------------------------------------------
ARTICLE I
DEFINITIONS
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.02. Calculations Respecting Mortgage Loans. . . . . . . . . . . . . . 32
1.03. Calculations Respecting Accrued Interest . . . . . . . . . . . . . 32
ARTICLE II
DECLARATION OF TRUST;
ISSUANCE OF CERTIFICATES
2.01. Creation and Declaration of Trust Fund; Conveyance of
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.02. Acceptance of Trust Fund by Trustee: Review of Documentation for Trust
Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.03. Representations and Warranties of the Depositor . . . . . . . . . 37
2.04. Discovery of Breach . . . . . . . . . . . . . . . . . . . . . . . 39
2.05. Repurchase, Purchase or Substitution of Mortgage Loans . . . . . . 39
2.06. Grant Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.07. Purchase of Defaulted Mortgage Loans. . . . . . . . . . . . . . . 41
ARTICLE III
THE CERTIFICATES
3.01. The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.02. Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.03. Transfer and Exchange of Certificates . . . . . . . . . . . . . . 42
3.04. Cancellation of Certificates . . . . . . . . . . . . . . . . . . . 45
3.05. Replacement of Certificates . . . . . . . . . . . . . . . . . . . 45
3.06. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . 45
3.07. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . 46
3.08. Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . 46
3.09. Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IV
ADMINISTRATION OF THE TRUST FUND
4.01. Collection Account . . . . . . . . . . . . . . . . . . . . . . . . 48
4.02. Application of Funds in the Collection Account . . . . . . . . . . 50
4.03. Reports to Certificateholders . . . . . . . . . . . . . . . . . . 52
4.04. Certificate Account . . . . . . . . . . . . . . . . . . . . . . . 54
4.05. Determination of LIBOR . . . . . . . . . . . . . . . . . . . . . . 55
4.06. Determination of Fed Funds Average Rate. . . . . . . . . . . . . . 57
ARTICLE V
DISTRIBUTIONS TO HOLDERS OF CERTIFICATES
5.01. Distributions Generally . . . . . . . . . . . . . . . . . . . . . 58
5.02. Distributions from the Certificate Account . . . . . . . . . . . . 59
5.03. Allocation of Realized Losses . . . . . . . . . . . . . . . . . . 62
5.04. Advances by Master Servicer and Trustee . . . . . . . . . . . . . 63
5.05. Compensating Interest Payments . . . . . . . . . . . . . . . . . . 64
5.06. REMIC 1, REMIC 2, REMIC 3 and REMIC 4 Allocations . . . . . . . . 64
5.07. Directing Holder Servicing Fee . . . . . . . . . . . . . . . . . . 67
5.08. Basis Risk Reserve Fund . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE VI
CONCERNING THE TRUSTEE; EVENTS OF DEFAULT
6.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 68
6.02. Certain Matters Affecting the Trustee . . . . . . . . . . . . . . 69
6.03. Trustee Not Liable for Certificates . . . . . . . . . . . . . . . 70
6.04. Trustee May Own Certificates . . . . . . . . . . . . . . . . . . . 71
6.05. Eligibility Requirements for Trustee . . . . . . . . . . . . . . . 71
6.06. Resignation and Removal of Trustee . . . . . . . . . . . . . . . . 71
6.07. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . 72
6.08. Merger or Consolidation of Trustee . . . . . . . . . . . . . . . . 73
6.09. Appointment of Co-Trustee, Separate Trustee or Custodian . . . . . 73
6.10. Authenticating Agents . . . . . . . . . . . . . . . . . . . . . . 74
6.11. Indemnification of Trustee . . . . . . . . . . . . . . . . . . . . 75
6.12. Fees and Expenses of Trustee . . . . . . . . . . . . . . . . . . . 76
6.13. Collection of Monies . . . . . . . . . . . . . . . . . . . . . . . 76
6.14. Trustee To Act; Appointment of Successor . . . . . . . . . . . . . 76
6.15. Additional Remedies of Trustee Upon Event of Default . . . . . . . 80
6.16. Waiver of Defaults . . . . . . . . . . . . . . . . . . . . . . . . 80
6.17. Notification to Holders . . . . . . . . . . . . . . . . . . . . . 80
6.18. Directions by Certificateholders and Duties of Trustee During
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 81
6.19. Action Upon Certain Failures of the Master Servicer and Upon
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE VII
PURCHASE AND TERMINATION OF THE
TRUST FUND
7.01. Termination of Trust Fund Upon Repurchase or Liquidation of All
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.02. Procedure Upon Termination of Trust Fund . . . . . . . . . . . . . 84
7.03. Additional Trust Fund Termination Requirements . . . . . . . . . . 84
ARTICLE VIII
RIGHTS OF CERTIFICATEHOLDERS
8.01. Limitation on Rights of Holders . . . . . . . . . . . . . . . . . 85
8.02. Access to List of Holders . . . . . . . . . . . . . . . . . . . . 86
8.03. Acts of Holders of Certificates . . . . . . . . . . . . . . . . . 87
ARTICLE IX
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
BY THE MASTER SERVICER
9.01. Duties of the Master Servicer . . . . . . . . . . . . . . . . . . 88
9.02. Master Servicer Fidelity Bond and Master Servicer Errors and Omissions
Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . 88
9.03. Master Servicer's Financial Statements and Related Information . . 89
9.04. Power to Act; Procedures . . . . . . . . . . . . . . . . . . . . . 89
9.05. Servicing Agreements Between the Master Servicer and Servicers;
Enforcement of Servicers' Obligations. . . . . . . . . . . . . . 91
9.06. Collection of Taxes, Assessments and Similar Items . . . . . . . . 91
9.07. Termination of Servicing Agreements; Successor Servicers . . . . . 92
9.08. Master Servicer Liable for Enforcement . . . . . . . . . . . . . . 93
9.09. No Contractual Relationship Between Servicers and Trustee or
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.10. Assumption of Servicing Agreement by Trustee . . . . . . . . . . . 93
9.11. "Due-on-Sale" Clauses; Assumption Agreements . . . . . . . . . . . 94
9.12. Release of Mortgage Files . . . . . . . . . . . . . . . . . . . . 94
9.13. Documents, Records and Funds in Possession of Master Servicer To Be
Held for Trustee . . . . . . . . . . . . . . . . . . . . . . . . 95
9.14. Representations and Warranties of the Master Servicer . . . . . . 96
9.15. Closing Certificate and Opinion . . . . . . . . . . . . . . . . . 98
9.16. Standard Hazard and Flood Insurance Policies . . . . . . . . . . . 99
9.17. Presentment of Claims and Collection of Proceeds . . . . . . . . . 99
9.18. Maintenance of the Primary Mortgage Insurance Policies . . . . . . 99
9.19. Trustee To Retain Possession of Certain Insurance Policies and
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
9.20. Realization Upon Defaulted Mortgage Loans . . . . . . . . . . . . 100
9.21. Compensation to the Master Servicer . . . . . . . . . . . . . . . 100
9.22. REO Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.23. Preparation of Tax Returns and Other Reports . . . . . . . . . . . 102
9.24. Reports to the Trustee . . . . . . . . . . . . . . . . . . . . . . 103
9.25. Annual Officer's Certificate as to Compliance . . . . . . . . . . 103
9.26. Annual Independent Accountants' Servicing Report . . . . . . . . . 104
9.27. Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . 104
9.28. Resignation of Master Servicer . . . . . . . . . . . . . . . . . . 104
9.29. Assignment or Delegation of Duties by the Master Servicer . . . . 105
9.30. Limitation on Liability of the Master Servicer and Others . . . . 105
9.31. Indemnification; Third-Party Claims . . . . . . . . . . . . . . . 106
9.32. Alternative Index . . . . . . . . . . . . . . . . . . . . . . . . 106
ARTICLE X
REMIC ADMINISTRATION
10.01. REMIC Administration . . . . . . . . . . . . . . . . . . . . . . 106
10.02. Prohibited Transactions and Activities . . . . . . . . . . . . . 108
10.03. Indemnification with Respect to Certain Taxes and Loss of REMIC
Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
10.04. REO Property . . . . . . . . . . . . . . . . . . . . . . . . . . 109
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01. Binding Nature of Agreement; Assignment . . . . . . . . . . . . . 110
11.02. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 111
11.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
11.04. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 112
11.05. Provision of Information . . . . . . . . . . . . . . . . . . . . 112
11.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 113
11.07. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
11.08. Severability of Provisions . . . . . . . . . . . . . . . . . . . 113
11.09. Indulgences; No Waivers . . . . . . . . . . . . . . . . . . . . . 113
11.10. Headings Not To Affect Interpretation . . . . . . . . . . . . . . 113
11.11. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . 114
11.12. Special Notices to the Rating Agencies. . . . . . . . . . . . . . 114
11.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 115
11.14. Transfer of Servicing . . . . . . . . . . . . . . . . . . . . . . 115
ATTACHMENTS
Exhibit A Forms of Certificates
Exhibit B-1 Form of Initial Certification
Exhibit B-2 Form of Interim Certification
Exhibit B-3 Form of Final Certification
Exhibit B-4 Form of Endorsement
Exhibit C Request for Release of Documents and Receipt
Exhibit D-l Residual Certificate Transfer Affidavit (Transferee)
Exhibit D-2 Residual Certificate Transfer Affidavit (Transferor)
Exhibit E Servicing Agreements
Exhibit F Form of Rule 144A Transfer Certificate
Exhibit G Form of Purchaser's Letter for Institutional Accredited
Investors
Exhibit H Form of ERISA Transfer Affidavit
Exhibit I Monthly Remittance Advice
Exhibit J Monthly Electronic Data Transmission
Exhibit K Custodial Agreement
Exhibit L Special Servicing Compensation Agreement
Schedule A Mortgage Loan Schedule
This TRUST AGREEMENT, dated as of March 1, 1998 (the "Agreement"), is by
and among STRUCTURED ASSET SECURITIES CORPORATION, a Delaware corporation, as
depositor (the "Depositor"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
master servicer (the "Master Servicer"), and FIRST UNION NATIONAL BANK, a
national banking association with its main office in Charlotte, North
Carolina, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Depositor has acquired the Mortgage Loans from Lehman Capital, A
Division of Lehman Brothers Holdings Inc. (the "Seller"), and at the Closing
Date is the owner of the Mortgage Loans and the other property being conveyed
by it to the Trustee for inclusion in the Trust Fund. On the Closing Date,
the Depositor will acquire the Certificates from the Trust Fund, as
consideration for its transfer to the Trust Fund of the Mortgage Loans and
the other property constituting the Trust Fund. The Depositor has duly
authorized the execution and delivery of this Agreement to provide for the
conveyance to the Trustee of the Mortgage Loans and the other property
constituting the Trust Fund. All covenants and agreements made by the
Depositor, the Master Servicer and the Trustee herein with respect to the
Mortgage Loans and the other property constituting the Trust Fund are for the
benefit of the Holders from time to time of the Certificates. The Depositor
and the Master Servicer are entering into this Agreement, and the Trustee is
accepting the Trust Fund created hereby, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged.
As provided herein, the Trustee shall elect that the Trust Fund be
treated for federal income tax purposes as four separate real estate mortgage
investment conduits (each a "REMIC" or, in the alternative, "REMIC 1," "REMIC
2," "REMIC 3," and "REMIC 4," respectively, REMIC 4 also being referred to as
the "Upper Tier REMIC"). The Class A-1, Class A-2, Class M-1. Class M-2 and
Class B Certificates and the Class X Certificate represent ownership of all
of the "regular interests" in REMIC 4 (the Class T4-1, Class T4-2, Class T4-
3, Class T4-4, Class T4-5, Class T4-6, Class T4-7, Class T4-8, Class T4-9,
and Class T4-10 Interests), and the Class R4 Interests represent the sole
class of "residual interest" in REMIC 4 for purposes of the REMIC Provisions.
Each of the Class R1, R2, and R3 Certificates represents the sole class of
"residual interest" in REMIC 1, REMIC 2, and REMIC 3, respectively, for
purposes of the REMIC Provisions. There are also three classes of
uncertificated REMIC 1 Regular Interests issued under this Agreement (the
Class T1-1, Class T1-2, and Class T1-3 Interests), each of which will
constitute regular interests in REMIC 1, four classes of uncertificated REMIC
2 Regular Interests (the Class T2-1, Class T2-2, Class T2-3, and Class T2-4
Interests), each of which will constitute regular interests in REMIC 2, and
eight classes of uncertificated REMIC 3 Regular Interests (the Class T3-1,
Class T3-2, Class T3-3, Class T3-4, Class T3-5, Class T3-6, Class T3-7, and
Class T3-8 Interests), each of which will constitute regular interests in
REMIC 3. The REMIC 1 Regular Interests will be held as assets of REMIC 2,
the REMIC 2 Regular Interests will be held as assets of REMIC 3, and the
REMIC 3 Regular Interests will be held as assets of REMIC 4.
The following table sets forth (or describes) the Class designation,
Certificate Interest Rate, initial Class Certificate Principal Amount and
minimum denomination for each Class of Certificates comprising the interests
in the Trust Fund created hereunder.
<TABLE>
<CAPTION>
Initial Certificate Minimum
Class Designation Certificate Interest Rate Principal Amount Denominations
<S> <C> <C> <C>
Class A-1 (1) $296,935,000.00 $100,000
Class A-2 (2) 296,934,000.00 100,000
Class M-1 (3) 95,034,000.00 100,000
Class M-2 (4) 50,032,000.00 100,000
Class B (5) 30,790,000.00 100,000
Class X (6) (6) (7)
Class R (6) (6) (7)
</TABLE>
___________________________
(1) The Certificate Interest Rate with respect to any Distribution Date for
the Class A-1 Certificates is a per annum rate equal to the least of (i)
the Fed Funds Average Rate plus 0.25%, (ii) 9.50% and (iii) the Net
Funds Cap for such Distribution Date; provided, that if the Class X
Certificateholder does not exercise its option to purchase the assets of
the Trust Fund pursuant to Section 7.01(c) or to purchase the Class A-1,
Class A-2, Class M-1, Class M-2 and Class B Certificates pursuant to
Section 7.01(d) on the first Distribution Date on which it is first
entitled to do so, with respect to each subsequent Distribution Date the
per annum rate calculated pursuant to clause (i) above will be the Fed
Funds Average Rate plus 0.50%.
(2) The Certificate Interest Rate with respect to any Distribution Date for
the Class A-2 Certificates is a per annum rate equal to the least of (i)
LIBOR plus 0.25%, (ii) 9.50% and (iii) the Net Funds Cap for such
Distribution Date; provided, that if the Class X Certificateholder does
not exercise its option to purchase the assets of the Trust Fund
pursuant to Section 7.01(c) or to purchase the Class A-1, Class A-2,
Class M-1, Class M-2 and Class B Certificates pursuant to Section
7.01(d) on the first Distribution Date on which it is first entitled to
do so, with respect to each subsequent Distribution Date the per annum
rate calculated pursuant to clause (i) above will be LIBOR plus 0.50%.
(3) The Certificate Interest Rate with respect to any Distribution Date for
the Class M-1 Certificates is a per annum rate equal to the least of (i)
LIBOR plus 0.50%, (ii) 9.50% and (iii) the Net Funds Cap for such
Distribution Date; provided, that if the Class X Certificateholder does
not exercise its option to purchase the assets of the Trust Fund
pursuant to Section 7.01(c) or to purchase the Class A-1, Class A-2,
Class M-1, Class M-2 and Class B Certificates pursuant to Section
7.01(d) on the first Distribution Date on which it is first entitled to
do so, with respect to each subsequent Distribution Date the per annum
rate calculated pursuant to clause (i) above will be LIBOR plus 1.00%.
(4) The Certificate Interest Rate with respect to any Distribution Date for
the Class M-2 Certificates is a per annum rate equal to the least of (i)
LIBOR plus 0.80%, (ii) 9.50% and (iii) the Net Funds Cap for such
Distribution Date; provided, that if the Class X Certificateholder does
not exercise its option to purchase the assets of the Trust Fund
pursuant to Section 7.01(c) or to purchase the Class A-1, Class A-2,
Class M-1, Class M-2 and Class B Certificates pursuant to Section
7.01(d) on the first Distribution Date on which it is first entitled to
do so, with respect to each subsequent Distribution Date the per annum
rate calculated pursuant to clause (i) above will be LIBOR plus 1.30%.
(5) The Certificate Interest Rate with respect to any Distribution Date for
the Class B Certificates is a per annum rate equal to the least of (i)
LIBOR plus 1.15%, (ii) 9.50% and (iii) the Net Funds Cap for such
Distribution Date; provided, that if the Class X Certificateholder does
not exercise its option to purchase the assets of the Trust Fund
pursuant to Section 7.01(c) or to purchase the Class A-1, Class A-2,
Class M-1, Class M-2 and Class B Certificates pursuant to Section
7.01(d) on the first Distribution Date on which it is first entitled to
do so, with respect to each subsequent Distribution Date the per annum
rate calculated pursuant to clause (i) above will be LIBOR plus 1.65%.
(6) The Class X and Class R Certificates will be issued without a
Certificate Principal Amount and will not bear interest.
(7) The Class X and Class R Certificates will each be issued as a single
Certificate evidencing the entire Percentage Interest in such Class.
As of the Cut-off Date, the Mortgage Loans had an aggregate Scheduled
Principal Balance of $769,725,543.18, including $294,013.44 in cash to be
deposited in the Collection Account by the Depositor on the Closing Date.
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following words and phrases, unless
-----------
the context otherwise requires, shall have the following meanings:
Accepted Servicing Practices: With respect to any Mortgage Loan, as
----------------------------
applicable, either (x) those customary mortgage servicing practices of
prudent mortgage servicing institutions that service or master service
mortgage loans of the same type and quality as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located, to the extent
applicable to the Trustee or the Master Servicer (except in its capacity as
successor to a Servicer), or (y) as provided in the applicable Servicing
Agreement, to the extent applicable to any Servicer.
Accountant: A person engaged in the practice of accounting who
----------
(except when this Agreement provides that an Accountant must be Independent)
may be employed by or affiliated with the Depositor or an Affiliate of the
Depositor.
Accrual Period: With respect to any Distribution Date and any Class
--------------
of LIBOR Certificates or Fed Funds Certificates, the one-month period
beginning on the immediately preceding Distribution Date (or on the Closing
Date, in the case of the first Accrual Period) and ending on the day
immediately preceding the related Distribution Date.
Additional Collateral: None.
---------------------
Adjustable Rate Mortgage Loan: Any Mortgage Loan as to which the
-----------------------------
related Mortgage Note provides for the adjustment of the Mortgage Rate
applicable thereto.
Adjusted Overcollateralization Amount: With respect to any
-------------------------------------
Distribution Date, the amount, if any, by which (a) the Aggregate Loan
Balance as of the end of the related Collection Period (reduced to give
effect to any Realized Losses and Advances of principal) exceeds (b) the
aggregate of the balances of the Class T3-4, Class T3-5. Class T3-6, and
Class T3-7 Interests as of such Distribution Date (after giving effect to the
distribution of principal on such Regular Interests on such Distribution
Date).
Adjusted Overcollateralization Release Amount: With respect to any
---------------------------------------------
Distribution Date, the lesser of (x) the Principal Remittance Amount for such
Distribution Date and (y) the amount, if any, by which (i) the Adjusted
Overcollateralization Amount for such date, calculated for this purpose on
the basis of the assumption that 100% of the Principal Remittance Amount for
such date is applied on such date in reduction of the principal balances of
the Class T3-4, Class T3-5, Class T3-6, and Class T3-7 Interests, exceeds
(ii) the Targeted Overcollateralization Amount for such date.
Advance: An advance of the aggregate of payments of principal and
-------
interest (net of the Master Servicing Fee and the applicable Servicing Fee)
on one or more Mortgage Loans that were due on the Due Date in the related
Collection Period and not received as of the close of business on the related
Determination Date, required to be made by or on behalf of the Master
Servicer and any Servicer (or by the Trustee) pursuant to Section 5.04.
Affiliate: With respect to any specified Person, any other Person
---------
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Aggregate Master Servicing Compensation: As to any Distribution
---------------------------------------
Date, the sum of (x) the aggregate of the Master Servicing Fees payable to
the Master Servicer in respect of such Distribution Date and (y) all income
and gain realized from the investment of funds in the Collection Account
during the period from and including the Deposit Date in the calendar month
immediately preceding the month in which such Distribution Date occurs, to
but excluding the Deposit Date relating to such Distribution Date.
Aggregate Loan Balance: The aggregate of the Scheduled Principal
----------------------
Balances for all Mortgage Loans at the date of determination.
Aggregate Voting Interests: The aggregate of the Voting Interests of
--------------------------
all the Certificates under this Agreement.
Agreement: This Trust Agreement and all amendments and supplements
---------
hereto.
Applied Loss Amount: With respect to any Distribution Date, the
-------------------
amount, if any, by which (x) the aggregate Certificate Principal Amount after
giving effect to distributions on such date, but before giving effect to any
application of the Applied Loss Amount on such date, exceeds (y) the
Aggregate Loan Balance as of the close of the related Collection Period.
Appraised Value: With respect to any Mortgage Loan, the amount set
---------------
forth in an appraisal made in connection with the origination of such
Mortgage Loan as the value of the related Mortgaged Property.
Aurora: Aurora Loan Services Inc., as Servicer under the applicable
------
Servicing Agreement.
Assignment of Mortgage: An assignment of the Mortgage, notice of
----------------------
transfer or equivalent instrument, in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Trustee, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction, if permitted by law; provided, however,
that the Trustee shall not be responsible for determining whether any such
assignment is in recordable form.
Authenticating Agent: Any authenticating agent appointed by the
--------------------
Trustee pursuant to Section 6.10.
Authorized Officer: Any Person who may execute an Officer's
------------------
Certificate on behalf of the Depositor.
Balloon Mortgage Loan: Any Mortgage Loan having an original term to
---------------------
maturity that is shorter than its amortization schedule, and a final
Scheduled Payment that is disproportionately large in comparison to other
Scheduled Payments.
Balloon Payment: The final Scheduled Payment in respect of a Balloon
---------------
Mortgage Loan.
Bankruptcy: As to any Person, the making of an assignment for the
----------
benefit of creditors, the filing of a voluntary petition in bankruptcy,
adjudication as a bankrupt or insolvent, the entry of an order for relief in
a bankruptcy or insolvency proceeding, the seeking of reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief, or seeking, consenting to or acquiescing in the appointment of a
trustee, receiver or liquidator, dissolution, or termination, as the case may
be, of such Person pursuant to the provisions of either the United States
Bankruptcy Code of 1986, as amended, or any other similar state laws.
Basis Risk Reserve Fund: A fund created as part of the Trust Fund
-----------------------
pursuant to Section 5.08 of this Agreement but which is not an asset of any
of the REMICs.
Basis Risk Shortfall: With respect to any Distribution Date and any
--------------------
Class of LIBOR Certificates, the amount by which the Certificate Interest
Rate applicable to such Class for such date, determined without regard to the
Net Funds Cap for such date, exceeds such Net Funds Cap.
Benefit Plan Opinion: An Opinion of Counsel satisfactory to the
--------------------
Trustee to the effect that any proposed transfer will not (i) cause the
assets of the Trust Fund to be regarded as plan assets for purposes of the
Plan Asset Regulations or (ii) give rise to any fiduciary duty on the part of
the Depositor or the Trustee.
Blanket Mortgage: The mortgage or mortgages encumbering a
----------------
Cooperative Property.
Book-Entry Certificates: Beneficial interests in Certificates
-----------------------
designated as "Book-Entry Certificates" in this Agreement, ownership and
transfers of which shall be evidenced or made through book entries by a
Clearing Agency as described in Section 3.09; provided, that after the
occurrence of a condition whereupon book-entry registration and transfer are
no longer permitted and Definitive Certificates are to be issued to
Certificate Owners, such Book-Entry Certificates shall no longer be
"Book-Entry Certificates." As of the Closing Date, the following Classes of
Certificates constitute Book-Entry Certificates: the Class A-1, Class A-2,
Class M-1, Class M-2 and Class B Certificates.
Business Day: Any day other than (i) a Saturday or a Sunday, (ii) a
------------
day on which banking institutions in New York, New York or, if other than New
York, the city in which the Corporate Trust Office of the Trustee is located,
or the State of Maryland, or (iii) with respect to any Remittance Date or any
Servicer reporting date, the States specified in the definition of "Business
Day" in the applicable Servicing Agreement, are authorized or obligated by
law or executive order to be closed.
Carryforward Interest: With respect to any Distribution Date and
---------------------
each Class of Class A-1, Class A-2, Class M-1, Class M-2 and Class B
Certificates, the sum of (i) the amount, if any, by which (x) the sum of (A)
Current Interest for such Class for the immediately preceding Distribution
Date and (B) any unpaid Carryforward Interest for such Class from previous
Distribution Dates exceeds (y) the amount distributed in respect of interest
on such Class on such immediately preceding Distribution Date, and (ii)
interest on such amount for the related Accrual Period at the applicable
Certificate Interest Rate.
Certificate: Any one of the certificates signed and countersigned by
-----------
the Trustee in substantially the forms attached hereto as Exhibit A.
Certificate Account: The account maintained by the Trustee in
-------------------
accordance with the provisions of Section 4.04.
Certificate Interest Rate: With respect to each Class of
-------------------------
Certificates, the applicable per annum rate set forth or described in the
Preliminary Statement hereto.
Certificate Owner: With respect to a Book-Entry Certificate, the
-----------------
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant, in
accordance with the rules of such Clearing Agency).
Certificate Principal Amount: With respect to any Certificate other
----------------------------
than a Class X or Class R Certificate or a Notional Certificate, at the time
of determination, the maximum specified dollar amount of principal to which
the Holder thereof is then entitled hereunder, such amount being equal to the
initial principal amount set forth on the face of such Certificate, less the
amount of all principal distributions previously made with respect to such
Certificate and all Applied Loss Amounts previously allocated to such
Certificate.
Certificate Register and Certificate Registrar: The register
-------------------- ---------------------
maintained and the registrar appointed pursuant to Section 3.02.
Certificateholder: The meaning provided in the definition of
-----------------
"Holder."
Class: All Certificates bearing the same class designation.
-----
Class B Principal Distribution Amount: With respect to any
-------------------------------------
Distribution Date on or after the Stepdown Date and as long as a Trigger
Event is not continuing (or has not occurred), the amount, if any, by which
(x) the sum of (i) the Class Certificate Principal Amounts of the Class A-1,
Class A-2, Class M-1 and Class M-2 Certificates after giving effect to
distributions on such Distribution Date and (ii) the Class Certificate
Principal Amount of the Class B Certificates immediately prior to such
Distribution Date exceeds (y) the lesser of (A) the product of (i) 96.50% and
(ii) the Aggregate Loan Balance as of the last day of the related Collection
Period and (B) the amount, if any, by which (i) the Aggregate Loan Balance as
of the last day of the related Collection Period exceeds (ii) $3,848,356.
Class Certificate Principal Amount: With respect to a Class of
----------------------------------
Certificates other than any Class of Notional Certificates, the aggregate of
the Certificate Principal Amounts of all Certificates of such Class at the
date of determination.
Class M-1 Principal Distribution Amount: With respect to any
---------------------------------------
Distribution Date on or after the Stepdown Date and as long as a Trigger
Event is not continuing (or has not occurred), the amount, if any, by which
(x) the sum of (i) the Class Certificate Principal Amount of the Class A-1
and Class A-2 Certificates after giving effect to distributions on such
Distribution Date and (ii) the Class Certificate Principal Amount of the
Class M-1 Certificates immediately prior to such Distribution Date exceeds
(y) the lesser of (A) the product of (i) 75.50% and (ii) the Aggregate Loan
Balance as of the last day of the related Collection Period and (B) the
amount, if any, by which (i) the Aggregate Loan Balance as of the last day of
the related Collection Period exceeds (ii) $3,848,356.
Class M-2 Principal Distribution Amount: With respect to any
---------------------------------------
Distribution Date on or after the Stepdown Date and as long as a Trigger
Event is not continuing (or has not occurred), the amount, if any, by which
(x) the sum of (i) the Class Certificate Principal Amounts of the Class A-1,
Class A-2 and Class M-1 Certificates after giving effect to distributions on
such Distribution Date and (ii) the Class Certificate Principal Amount of the
Class M-2 Certificates immediately prior to such Distribution Date exceeds
(y) the lesser of (A) the product of (i) 88.50% and (ii) the Aggregate Loan
Balance as of the last day of the related Collection Period and (B) the
amount, if any, by which (i) the Aggregate Loan Balance as of the last day of
the related Collection Period exceeds (ii) $3,848,356.
Class R Certificate: The Class R Certificate executed by the
-------------------
Trustee, and authenticated and delivered by the Certificate Registrar,
substantially in the form annexed hereto as Exhibit A-3 and evidencing the
ownership of the Class R1 Interest, the Class R2 Interest, the Class R3
Interest, and the Class R4 Interest.
Class R1 Interest: The uncertificated Residual Interest in REMIC 1.
-----------------
Class R2 Interest: The uncertificated Residual Interest in REMIC 2.
-----------------
Class R3 Interest: The uncertificated Residual Interest in REMIC 3.
-----------------
Class R4 Interest: The uncertificated Residual Interest in REMIC 4.
-----------------
Class T1-1 Interest: A regular interest in REMIC 1 held as an asset
-------------------
of REMIC 2 that has an initial principal balance equal to 98% of the Cut-off
Date Aggregate Loan Balance, bears interest at a per annum rate equal to the
Net Funds Cap and has such other terms as are described in Section 5.06.
Class T1-2 Interest: A regular interest in REMIC 1 held as an asset
-------------------
of REMIC 2 that has an initial principal balance equal to 1% of the Cut-off
Date Aggregate Loan Balance, bears interest at a per annum rate equal to the
Net Funds Cap and has such other terms as are described in Section 5.06.
Class T1-3 Interest: A regular interest in REMIC 1 held as an asset
-------------------
of REMIC 2 that has an initial principal balance equal to 1% of the Cut-off
Date Aggregate Loan Balance, bears interest at a per annum rate equal to the
Net Funds Cap and has such other terms as are described in Section 5.06.
Class T2-1 Interest: A regular interest in REMIC 2 held as an asset
-------------------
of REMIC 3 that has an initial principal balance equal to 98% of the Cut-off
Date Aggregate Loan Balance, bears interest at a per annum rate equal to the
Net Funds Cap and has such other terms as are described in Section 5.06.
Class T2-2 Interest: A regular interest in REMIC 2 held as an asset
-------------------
of REMIC 3 that has an initial principal balance equal to 1% of the Cut-off
Date Aggregate Loan Balance, bears interest at a per annum rate equal to the
Standard Rate and has such other terms as are described in Section 5.06.
Class T2-3 Interest: A regular interest in REMIC 2 held as an asset
-------------------
of REMIC 3 that has an initial principal balance equal to 1% of the Cut-off
Date Aggregate Loan Balance, bears interest at a per annum rate equal to the
Net Funds Cap and has such other terms as are described in Section 5.06.
Class T2-4 Interest: A regular interest in REMIC 2 held as an asset
-------------------
of REMIC 3 that is entitled to 100% of the interest accruals on the Class T1-
2 Interest in excess of the Standard Rate and has such other terms as are
described in Section 5.06 hereof. The Class T2-4 Interest shall not have a
principal balance.
Class T3-1 Distributable Amount: With respect to any Distribution
-------------------------------
Date, an amount equal to the product of (i) a fraction, the numerator of
which is the number of days in the related Accrual Period and the denominator
of which is 360, (ii) the Class T3-1 Notional Balance immediately prior to
such Distribution Date and (iii) the Class T3-1 Pass-Through Rate.
Class T3-1 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that has such terms as are described in Section 5.06.
Class T3-1 Notional Balance: A notional principal balance equal as
---------------------------
of any date to the sum of the principal balances of the Class T2-1 and T2-3
Interests for such date.
Class T3-1 Pass-Through Rate: With respect to any Distribution Date,
----------------------------
a per annum rate equal to the excess of (i) the Net Funds Cap for such date
over (ii) the product of (x) two and (y) a fraction, the numerator of which
is the product of the Standard Rate and the principal balance of the Class
T2-2 Interest immediately prior to such Distribution Date and the denominator
of which is the sum of the principal balances of the Class T2-2 and Class T2-
3 Interests immediately prior to such Distribution Date.
Class T3-2 Distributable Amount: With respect to any Distribution
-------------------------------
Date, an amount equal to the product of (i) a fraction, the numerator of
which is the number of days in the related Accrual Period and the denominator
of which is 360, (ii) the Class T3-2 Notional Balance immediately prior to
such Distribution Date and (iii) the Class T3-2 Pass-Through Rate.
Class T3-2 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that has such terms as are described in Section 5.06.
Class T3-2 Notional Balance: A notional principal balance equal as
---------------------------
of any date to the principal balance of the Class T2-2 Interest for such
date.
Class T3-2 Pass-Through Rate: With respect to any Distribution Date,
----------------------------
a per annum rate equal to the excess of (i) the Standard Rate over (ii) the
product of (x) two and (y) a fraction, the numerator of which is the product
of the Standard Rate and the principal balance of the Class T2-2 Interest
immediately prior to such Distribution Date and the denominator of which is
the sum of the principal balances of the Class T2-2 and Class T2-3 Interests
immediately prior to such Distribution Date.
Class T3-3 Distributable Amount: With respect to any Distribution
-------------------------------
Date, an amount equal to the amount distributable in respect of the Class T2-
4 Interest for such date.
Class T3-3 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that is entitled to the Class T3-3 Distributable Amount.
Class T3-4 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that has an initial principal balance of $296,935,000 as of the
Cut-off Date, bears interest at the Standard Rate and has such other terms as
are described in Section 5.06.
Class T3-5 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that has an initial principal balance of $296,934,000 as of the
Cut-off Date, bears interest at the Standard Rate and has such other terms as
are described in Section 5.06.
Class T3-6 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that has an initial principal balance of $95,034,000 as of the
Cut-off Date, bears interest at the Standard Rate and has such other terms as
are described in Section 5.06.
Class T3-7 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that has an initial principal balance of $50,032,000 as of the
Cut-off Date, bears interest at the Standard Rate and has such other terms as
are described in Section 5.06.
Class T3-8 Interest: A regular interest in REMIC 3 held as an asset
-------------------
of REMIC 4 that has an initial principal balance of 30,790,000 as of the Cut-
off Date and bears interest at the Standard Rate and has such other terms as
are described in Section 5.06.
Class T4-1 Interest: A regular interest in REMIC 4 that has an
-------------------
initial principal balance of $296,935,000 as of the Cut-off Date and bears
interest at the Class A-1 Certificate Interest Rate. Ownership of the Class
T4-1 Interest is evidenced by the Class A-1 Certificates.
Class T4-2 Interest: A regular interest in REMIC 4 that has an
-------------------
initial principal balance of $296,934,000 as of the Cut-off Date and bears
interest at the Class A-2 Certificate Interest Rate. Ownership of the Class
T4-2 Interest is evidenced by the Class A-2 Certificates.
Class T4-3 Interest: A regular interest in REMIC 4 that has an
-------------------
initial principal balance of $95,034,000 as of the Cut-off Date and bears
interest at the Class M-1 Certificate Interest Rate. Ownership of the Class
T4-3 Interest is evidenced by the Class M-1 Certificates.
Class T4-4 Interest: A regular interest in REMIC 4 that has an
-------------------
initial principal balance of $50,032,000 as of the Cut-off Date and bears
interest at the Class M-2 Certificate Interest Rate. Ownership of the Class
T4-4 Interest is evidenced by the Class M-2 Certificates.
Class T4-5 Interest: A regular interest in REMIC 4 that has an
-------------------
initial principal balance of $30,790,000 as of the Cut-off Date and bears
interest at the Class B Certificate Interest Rate. Ownership of the Class
T4-4 Interest is evidenced by the Class B Certificates.
Class T4-6 Interest: A regular interest in REMIC 4 that is entitled
-------------------
to 100% of the interest accruals on the Class T3-4 Interest in excess of the
Class A-1 Certificate Interest Rate. The Class T4-6 Interest shall not have
a principal balance. Ownership of the Class T4-6 Interest is evidenced by
the Class X Certificate.
Class T4-7 Interest: A regular interest in REMIC 4 that is entitled
-------------------
to 100% of the interest accruals on the Class T3-5 Interest in excess of the
Class A-2 Certificate Interest Rate. The Class T4-7 Interest shall not have
a principal balance. Ownership of the Class T4-7 Interest is evidenced by
the Class X Certificate.
Class T4-8 Interest: A regular interest in REMIC 4 that is entitled
-------------------
to 100% of the interest accruals on the Class T3-6 Interest in excess of the
Class M-1 Certificate Interest Rate. The Class T4-8 Interest shall not have
a principal balance. Ownership of the Class T4-8 Interest is evidenced by
the Class X Certificate.
Class T4-9 Interest: A regular interest in REMIC 4 that is entitled
-------------------
to 100% of the interest accruals on the Class T3-7 Interest in excess of the
Class M-2 Certificate Interest Rate. The Class T4-9 Interest shall not have
a principal balance. Ownership of the Class T4-9 Interest is evidenced by
the Class X Certificate.
Class T4-10 Distributable Amount: With respect to any Distribution
--------------------------------
Date, an amount equal to the sum of the Class T3-1 Distributable Amount, the
Class T3-2 Distributable Amount and the Class T3-3 Distributable Amount for
such date.
Class T4-10 Interest: A regular interest in REMIC 4 that is entitled
--------------------
to 100% of the T4-8 Distributable Amount. Ownership of the Class T4-8
Interest is evidenced by the Class X Certificate.
Class X Distributable Amount: With respect to any Distribution Date,
----------------------------
the aggregate of the amounts distributable on the Class T4-6, Class T4-7,
Class T4-8, Class T4-9, and Class T4-10 Interests on such date.
Clearing Agency: An organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
As of the Closing Date, the Clearing Agency shall be The Depository Trust
Company.
Clearing Agency Participant: A broker, dealer, bank, other financial
---------------------------
institution or other Person for whom from time to time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
Closing Date: March 30, 1998.
------------
Code: The Internal Revenue Code of 1986, as amended, and as it may
----
be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
Collection Account: A separate account established and maintained by
------------------
the Master Servicer pursuant to Section 4.01.
Collection Period: With respect to any Distribution Date, the period
-----------------
commencing on the second day of the month immediately preceding the month in
which such Distribution Date occurs and ending on the first day of the month
in which such Distribution Date occurs.
Compensating Interest Payment: With respect to any Distribution
-----------------------------
Date, an amount equal to the excess of (x) the aggregate of any Prepayment
Interest Shortfalls with respect to such Distribution Date over (y) the
aggregate of any amounts paid by the Servicers in respect of such shortfalls;
provided, that such amount shall not exceed the Aggregate Master Servicing
Compensation that would be payable to the Master Servicer in respect of such
Distribution Date without giving effect to any Compensating Interest Payment.
Conventional Loan: A Mortgage Loan that is not insured by the United
-----------------
States Federal Housing Administration or guaranteed by the United States
Veterans Administration.
Converted Mortgage Loan: None.
-----------------------
Convertible Mortgage Loan: None.
-------------------------
Cooperative Corporation: The entity that holds title (fee or an
-----------------------
acceptable leasehold estate) to the real property and improvements
constituting the Cooperative Property and which governs the Cooperative
Property, which Cooperative Corporation must qualify as a Cooperative Housing
Corporation under Section 216 of the Code.
Cooperative Loan: Any Mortgage Loan secured by Cooperative Shares
----------------
and a Proprietary Lease.
Cooperative Loan Documents: As to any Cooperative Loan, (i) the
--------------------------
Cooperative Shares, together with a stock power in blank; (ii) the original
executed Security Agreement and the assignment of the Security Agreement
endorsed in blank; (iii) the original executed Proprietary Lease and the
assignment of the Proprietary Lease endorsed in blank; (iv) the original
executed Recognition Agreement and the assignment of the Recognition
Agreement (or a blanket assignment of all Recognition Agreements) endorsed in
blank; (v) the executed UCC-1 financing statement with evidence of recording
thereon, which has been filed in all places required to perfect the security
interest in the Cooperative Shares and the Proprietary Lease; and (vi)
executed UCC-3 financing statements (or copies thereof) or other appropriate
UCC financing statements required by state law, evidencing a complete and
unbroken line from the mortgagee to the Trustee with evidence of recording
thereon (or in a form suitable for recordation).
Cooperative Property: The real property and improvements owned by
--------------------
the Cooperative Corporation, that includes the allocation of individual
dwelling units to the holders of the Cooperative Shares of the Cooperative
Corporation.
Cooperative Shares: Shares issued by a Cooperative Corporation.
------------------
Cooperative Unit: A single family dwelling located in a Cooperative
----------------
Property.
Corporate Trust Office: The principal corporate trust office of the
----------------------
Trustee at which, at any particular time, its corporate trust business shall
be administered, which office at the date hereof is located at 230 South
Tryon Street NC1179, Charlotte, North Carolina 28288, Attention: Structured
Finance.
Current Interest: With respect to each Class of Class A-1, Class A
----------------
2, Class M-1, Class M-2 and Class B Certificates and any Distribution Date,
the aggregate amount of interest accrued during the related Accrual Period at
the applicable Certificate Interest Rate on the Class Certificate Principal
Amount of such Class immediately prior to such Distribution Date
Custodial Agreement: The custodial agreement attached as Exhibit K
-------------------
hereto, and any custodial agreement subsequently executed by the Trustee
substantially in the form thereof.
Custodian: Each custodian appointed by the Trustee pursuant to a
---------
Custodial Agreement, and any successor thereto.
Cut-off Date: March 1, 1998.
------------
Cut-off Date Aggregate Loan Balance: With respect to the Mortgage
-----------------------------------
Loans in the Trust Fund on the Closing Date, the Aggregate Loan Balance as of
the Cut-off Date, which amount shall be deemed to include $294,013.44 in cash
to be deposited in the Collection Account by the Depositor on the Closing
Date.
DCR: Duff & Phelps Credit Rating Co., or any successor in interest.
---
Deferred Amount: With respect to any Distribution Date and each
---------------
Class of Subordinate Certificates, the aggregate of Applied Loss Amounts
previously applied in reduction of the Class Certificate Principal Amount
thereof, less any amounts previously reimbursed in respect thereof.
Deferred Interest: With respect to any Class of Negative
-----------------
Amortization Certificates and any Distribution Date, the lesser of (x) the
applicable Interest Distribution Amount for such date (without giving effect
to any Deferred Interest) and (y) the aggregate Mortgage Loan Negative
Amortization, if any, for the related Collection Period.
Definitive Certificate: A Certificate of any Class issued in
----------------------
definitive, fully registered, certificated form.
Deleted Mortgage Loan: A Mortgage Loan that is repurchased from the
---------------------
Trust Fund pursuant to the terms hereof or as to which one or more Qualifying
Substitute Mortgage Loans are substituted therefor.
Deposit Date: With respect to each Distribution Date, the Business
------------
Day immediately preceding such Distribution Date.
Depositor: Structured Asset Securities Corporation, a Delaware
---------
corporation having its principal place of business in New York, or its
successors in interest.
Determination Date: With respect to each Distribution Date, the 18th
------------------
day of the month in which such Distribution Date occurs, or, if such 18th day
is not a Business Day, the next succeeding Business Day.
Directing Holder: As defined in the Special Servicing Agreement.
----------------
Directing Holder Servicing Fee: Amounts payable to the Directing
------------------------------
Holder under Section 5.07 of this Agreement.
Disqualified Organization: Either (i) the United States, (ii) any
-------------------------
state or political subdivision thereof, (iii) any foreign government, (iv)
any international organization, (v) any agency or instrumentality of any of
the foregoing, (vi) any tax-exempt organization (other than a cooperative
described in section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code unless such organization is subject to the tax imposed
by section 511 of the Code, (vii) any organization described in section
1381(a)(2)(C) of the Code, or (viii) any other entity designated as a
Disqualified Organization by relevant legislation amending the REMIC
Provisions and in effect at or proposed to be effective as of the time of the
determination. In addition, a corporation will not be treated as an
instrumentality of the United States or of any state or political subdivision
thereof if all of its activities are subject to tax and, with the exception
of the Federal Home Loan Mortgage Corporation, a majority of its board of
directors is not selected by such governmental unit.
Distribution Date: The 25th day of each month or, if such 25th day
-----------------
is not a Business Day, the next succeeding Business Day, commencing in April
1998.
Due Date: With respect to any Mortgage Loan, the date on which a
--------
Scheduled Payment is due under the related Mortgage Note.
Eligible Account: Either (i) an account or accounts maintained with
----------------
a federal or state chartered depository institution or trust company
acceptable to the Rating Agencies or (ii) an account or accounts the deposits
in which are insured by the FDIC to the limits established by such
corporation, provided that any such deposits not so insured shall be
maintained in an account at a depository institution or trust company whose
commercial paper or other short term debt obligations (or, in the case of a
depository institution or trust company which is the principal subsidiary of
a holding company, the commercial paper or other short term debt or deposit
obligations of such holding company or depository institution, as the case
may be) have been rated by each Rating Agency in its highest short-term
rating category, or (iii) a segregated trust account or accounts (which shall
be a "special deposit account") maintained with the Trustee or any other
federal or state chartered depository institution or trust company, acting in
its fiduciary capacity, in a manner acceptable to the Trustee and the Rating
Agencies. Eligible Accounts may bear interest.
Eligible Investments: Any one or more of the following obligations
--------------------
or securities:
(i) direct obligations of, and obligations fully guaranteed as to
timely payment of principal and interest by, the United States of
America 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 ("Direct Obligations");
(ii) federal funds, or demand and time deposits in, certificates of
deposits of, or bankers' acceptances issued by, any depository
institution or trust company (including U.S. subsidiaries of foreign
depositories and the Trustee or any agent of the Trustee, acting in its
respective commercial capacity) incorporated or organized under the laws
of the United States of America or any state thereof and subject to
supervision and examination by federal or state banking authorities, so
long as at the time of investment or the contractual commitment
providing for such investment the commercial paper or other short-term
debt obligations of such depository institution or trust company (or, in
the case of a depository institution or trust company which is the
principal subsidiary of a holding company, the commercial paper or other
short-term debt or deposit obligations of such holding company or
deposit institution, as the case may be) have been rated by each Rating
Agency in its highest short-term rating category or one of its two
highest long-term rating categories;
(iii) repurchase agreements collateralized by Direct
Obligations or securities guaranteed by GNMA, FNMA or FHLMC with any
registered broker/dealer subject to Securities Investors' Protection
Corporation jurisdiction or any commercial bank insured by the FDIC, if
such broker/dealer or bank has an uninsured, unsecured and unguaranteed
obligation rated by each Rating Agency in its highest short-term rating
category;
(iv) 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 have a credit rating from each Rating
Agency, at the time of investment or the contractual commitment
providing for such investment, at least equal to one of the two highest
long-term credit rating categories of each Rating Agency; provided,
however, that securities issued by any particular corporation will not
be Eligible Investments to the extent that investment therein will cause
the then outstanding principal amount of securities issued by such
corporation and held as part of the Trust Fund to exceed 20% of the sum
of the Aggregate Loan Balance and the aggregate principal amount of all
Eligible Investments in the Certificate Account; provided, further, that
such securities will not be Eligible Investments if they are published
as being under review with negative implications from either Rating
Agency;
(v) commercial paper (including both noninterest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than 180 days after the date of issuance
thereof) rated by each Rating Agency in its highest short-term rating
category;
(vi) a Qualified GIC;
(vii) certificates or receipts representing direct ownership
interests in future interest or principal payments on obligations of the
United States of America or its agencies or instrumentalities (which
obligations are backed by the full faith and credit of the United States
of America) held by a custodian in safekeeping on behalf of the holders
of such receipts; and
(viii) any other demand, money market, common trust fund or time
deposit or obligation, or interest-bearing or other security or
investment, (A) rated in the highest rating category by each Rating
Agency or (B) that would not adversely affect the then current rating by
either Rating Agency of any of the Certificates;
provided, however, that no such instrument shall be an Eligible Investment if
such instrument evidences either (i) a right to receive only interest
payments with respect to the obligations underlying such instrument, or (ii)
both principal and interest payments derived from obligations underlying such
instrument and the principal and interest payments with respect to such
instrument provide a yield to maturity of greater than 120% of the yield to
maturity at par of such underlying obligations, provided that any such
investment will be a "permitted investment" within the meaning of Section
860G(a)(5) of the Code.
ERISA-Restricted Certificate: Any Subordinate Certificate.
----------------------------
Escrow Account: Any account established and maintained by the
--------------
applicable Servicer pursuant to the applicable Servicing Agreement.
Event of Default: Any one of the conditions or circumstances
----------------
enumerated in Section 6.14(a).
Extra Principal Distribution Amount: With respect to any
-----------------------------------
Distribution Date, the lesser of (a) Monthly Excess Interest for such
Distribution Date and (b) the Overcollateralization Deficiency for such date.
FDIC: The Federal Deposit Insurance Corporation or any successor
----
thereto.
Fed Funds Average Rate: With respect to each Accrual Period other
----------------------
than the initial Accrual Period, the fraction, expressed as a percentage, the
numerator of which will be equal to the sum of each day's Fed Funds Rate,
determined as provided in Section 4.06, during the applicable Fed Funds
Calculation Period and the denominator of which will be equal to the number
of days in such Fed Funds Calculation Period.
Fed Funds Business Day: Any day other than a Saturday or Sunday or a
----------------------
day on which banking institutions in New York, New York are closed.
Fed Funds Calculation Period: With respect to each Accrual Period
----------------------------
other than the initial Accrual Period, the period commencing the 19th day of
the calendar month immediately preceding the month in which the related
Distribution Date occurs and ending on the 18th day of the month in which the
related Distribution Date occurs.
Fed Funds Certificate: Any Class A-1 Certificate.
---------------------
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of
the Emergency Home Finance Act of 1970, as amended, or any successor thereto.
Final Scheduled Distribution Date: March 25, 2028.
---------------------------------
Financial Intermediary: A broker, dealer, bank or other financial
----------------------
institution or other Person that clears through or maintains a custodial
relationship with a Clearing Agency Participant.
Fitch: Fitch IBCA, Inc., or any successor in interest.
-----
FNMA: The Federal National Mortgage Association, a federally
----
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
GNMA: The Government National Mortgage Association, a wholly owned
----
corporate instrumentality of the United States within HUD.
Holder or Certificateholder: The registered owner of any Certificate
------ -----------------
as recorded on the books of the Certificate Registrar except that, solely for
the purposes of taking any action or giving any consent pursuant to this
Agreement, any Certificate registered in the name of the Depositor, the
Master Servicer, any Servicer or any Affiliate thereof shall be deemed not to
be outstanding in determining whether the requisite percentage necessary to
effect any such consent has been obtained, except that, in determining
whether the Trustee shall be protected in relying upon any such consent, only
Certificates which a Responsible Officer of the Trustee knows to be so owned
shall be disregarded. The Trustee may request and conclusively rely on
certifications by the Depositor, the Master Servicer and any Servicer in
determining whether any Certificates are registered to an Affiliate of the
Depositor, the Master Servicer or such Servicer.
HUD: The United States Department of Housing and Urban Development,
---
or any successor thereto.
Independent: When used with respect to any Accountants, a Person who
-----------
is "independent" within the meaning of Rule 2-01(b) of the Securities and
Exchange Commission's Regulation S-X. When used with respect to any other
Person, a Person who (a) is in fact independent of another specified Person
and any Affiliate of such other Person, (b) does not have any material direct
financial interest in such other Person or any Affiliate of such other
Person, and (c) is not connected with such other Person or any Affiliate of
such other Person as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions.
Index: The index specified in the related Mortgage Note for
-----
calculation of the Mortgage Rate thereof.
Initial LIBOR Rate: 5.6875%.
------------------
Initial Fed Funds Average Rate: 5.5000%.
------------------------------
Insurance Proceeds: Amounts paid by the insurer under any Insurance
------------------
Policy, other than amounts to be applied to restoration or repair of the
related Mortgaged Property or required to be paid over to the Mortgagor
pursuant to law or the related Mortgage Note.
Interest Distribution Amount: Not applicable.
----------------------------
Interest Remittance Amount: With respect to any Distribution Date,
--------------------------
the sum of (i) all interest collected (other than Payaheads) or advanced in
respect of Scheduled Payments on the Mortgage Loans, including any prepayment
premiums or penalties, during the related Collection Period (less (x) the
Master Servicing Fee and the applicable Servicing Fee and (y) unreimbursed
Advances and other amounts due to the Master Servicer, the Servicers or the
Trustee, to the extent allocable to interest), (ii) any amounts paid by the
Servicers with respect to Prepayment Interest Shortfalls and any Compensating
Interest Payment with respect to the related Prepayment Period, (iii) the
portion of any Substitution Amount paid during the related Prepayment Period
allocable to interest and (iv) all Net Liquidation Proceeds, Insurance
Proceeds and other recoveries collected during the related Prepayment Period,
to the extent allocable to interest, as reduced in each case by unreimbursed
interest Advances and other amounts due the Master Servicer, the Servicers or
the Trustee, to the extent allocable to interest.
Intervening Assignments: The original intervening assignments of the
-----------------------
Mortgage, notice of transfer or equivalent instrument.
Latest Possible Maturity Date: March 25, 2030.
-----------------------------
Lehman Capital: Lehman Capital, A Division of Lehman Brothers
--------------
Holdings Inc., or any successor in interest.
LIBOR: The per annum rate determined pursuant to Section 4.05 on the
-----
basis of London interbank offered rate quotations for one-month Eurodollar
deposits, as such quotations may appear on the display designated as page
"LIUS01M" on the Bloomberg Financial Markets Commodities News (or such other
page as may replace such page on that service for the purpose of displaying
London interbank offered quotations of major banks).
LIBOR Certificate: Any Class A-2, Class M-1, Class M-2 or Class B
-----------------
Certificate.
LIBOR Determination Date: The second London Business Day immediately
------------------------
preceding the commencement of each Accrual Period for any LIBOR Certificates.
Liquidated Mortgage Loan: Any defaulted Mortgage Loan as to which
------------------------
the Master Servicer or the applicable Servicer has determined that all
amounts that it expects to recover on behalf of the Trust Fund from or on
account of such Mortgage Loan have been recovered.
Liquidation Expenses: Expenses that are incurred by the Master
--------------------
Servicer or a Servicer in connection with the liquidation of any defaulted
Mortgage Loan and are not recoverable under the applicable Primary Mortgage
Insurance Policy, including, without limitation, foreclosure and
rehabilitation expenses, legal expenses and unreimbursed amounts expended
pursuant to Sections 9.06, 9.16 or 9.22.
Liquidation Proceeds: Cash received in connection with the
--------------------
liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan, trustee's sale, foreclosure sale or
otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage Loan, including any
amounts remaining in the related Escrow Account.
Loan-to-Value Ratio: With respect to any Mortgage Loan, the ratio of
-------------------
the principal balance of such Mortgage Loan at origination, or such other
date as is specified, to the Original Value thereof.
London Business Day: Any day on which banks are open for dealing in
-------------------
foreign currency and exchange in London, England and New York City.
Maintenance: With respect to any Cooperative Unit, the rent or fee
-----------
paid by the Mortgagor to the Cooperative Corporation pursuant to the
Proprietary Lease.
Master Servicer: Norwest Bank Minnesota, National Association, or
---------------
any successor in interest, or if any successor master servicer shall be
appointed as herein provided, then such successor master servicer.
Master Servicing Fee: As to any Distribution Date and each Mortgage
--------------------
Loan, an amount equal to the product of the Master Servicing Fee Rate and the
outstanding principal balance of such Mortgage Loan as of the first day of
the related Collection Period. The Master Servicing Fee for any Mortgage
Loan shall be payable in respect of any Distribution Date solely from the
interest portion of the Scheduled Payment or other payment or recovery with
respect to such Mortgage Loan.
Master Servicing Fee Rate: 0.0075% per annum.
-------------------------
Material Defect: As defined in Section 2.02(c) hereof.
---------------
Monthly Excess Cashflow: With respect to any Distribution Date, the
-----------------------
sum of (x) Monthly Excess Interest for such date and (y) the
Overcollateralization Release Amount for such date.
Monthly Excess Interest: With respect to any Distribution Date, the
-----------------------
amount of any Interest Remittance Amount remaining after application pursuant
to clauses (i) through (v) of Section 5.02(b) on such date.
Moody's: Moody's Investors Service, or any successor in interest.
-------
Mortgage: A mortgage, deed of trust or other instrument encumbering
--------
a fee simple interest in real property securing a Mortgage Note, together
with improvements thereto.
Mortgage File: The mortgage documents listed in Section 2.01(b)
-------------
pertaining to a particular Mortgage Loan required to be delivered to the
Trustee pursuant to this Agreement.
Mortgage Loan: A Mortgage and the related notes or other evidences
-------------
of indebtedness secured by each such Mortgage conveyed, transferred, sold,
assigned to or deposited with the Trustee pursuant to Section 2.01 or Section
2.05, including without limitation, each Mortgage Loan listed on the Mortgage
Loan Schedule, as amended from time to time.
Mortgage Loan Negative Amortization: Not applicable.
-----------------------------------
Mortgage Loan Sale Agreement: The agreement, dated as of March 1,
----------------------------
1998, for the sale of the Mortgage Loans by Lehman Capital, A Division of
Lehman Brothers Holdings Inc., to the Depositor.
Mortgage Loan Schedule: The schedule attached hereto as Schedule A,
----------------------
which shall identify each Mortgage Loan, as such schedule may be amended from
time to time pursuant to Section 2.02.
Mortgage Note: The note or other evidence of the indebtedness of a
-------------
Mortgagor secured by a Mortgage under a Mortgage Loan.
Mortgage Rate: As to any Mortgage Loan, the per annum rate at which
-------------
interest accrues on such Mortgage Loan.
Mortgaged Property: Either of (x) the fee simple interest in real
------------------
property, together with improvements thereto including any exterior
improvements to be completed within 120 days of disbursement of the related
Mortgage Loan proceeds, or (y) in the case of a Cooperative Loan, the related
Cooperative Shares and Proprietary Lease, securing the indebtedness of the
Mortgagor under the related Mortgage Loan.
Mortgagor: The obligor on a Mortgage Note.
---------
Negative Amortization Certificate: None.
---------------------------------
Net Excess Spread: With respect to any Distribution Date, the
-----------------
fraction, expressed as a percentage, the numerator of which is equal to the
amount, if any, by which (a) the product of (i) the Aggregate Loan Balance as
of the end of the related Collection Period and (ii) the weighted average (by
Scheduled Principal Balance) of the Net Mortgage Rates exceeds (b) the
Interest Remittance Amount for such Distribution Date, and the denominator of
which is the product of (x) the Aggregate Loan Balance and (y) the actual
number of days in the related Accrual Period divided by 360.
Net Funds Cap: The weighted average (by Scheduled Principal Balance)
-------------
of the Net Mortgage Rates of the Mortgage Loans as of the first day of the
related Accrual Period.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage
------------------------
Loan, the related Liquidation Proceeds net of unreimbursed expenses incurred
in connection with liquidation or foreclosure and unreimbursed Advances, if
any, received and retained in connection with the liquidation of such
Mortgage Loan.
Net Mortgage Rate: With respect to any Mortgage Loan, the Mortgage
-----------------
Rate thereof reduced by the sum of the applicable Servicing Fee Rate, the
Master Servicing Fee Rate and the Trustee Fee Rate.
Net Prepayment Interest Shortfall: With respect to any Distribution
---------------------------------
Date, the excess, if any, of any Prepayment Interest Shortfalls for such date
over the sum of any amounts paid by the Servicers with respect to such
shortfalls and any amount that is required to be paid by the Master Servicer
in respect of such shortfalls pursuant to this Agreement.
Non-Book-Entry Certificate: Any Certificate other than a Book-Entry
--------------------------
Certificate.
Notional Amount: With respect to any Notional Certificate and any
---------------
Distribution Date, such Certificate's Percentage Interest of the Aggregate
Notional Amount of such Class of Certificates for such Distribution Date.
Notional Certificate: None.
--------------------
Offering Document: The Prospectus.
-----------------
Officer's Certificate: A certificate signed by the Chairman of the
---------------------
Board, any Vice Chairman, the President, any Vice President or any Assistant
Vice President of a Person, and in each case delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel, reasonably
------------------
acceptable in form and substance to the Trustee, and who may be in-house or
outside counsel to the Depositor, the Master Servicer or a Servicer but which
must be Independent outside counsel with respect to any such opinion of
counsel concerning the transfer of any Residual Certificate or concerning
certain matters with respect to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or the taxation, or the federal income tax
status, of each REMIC.
Option One: Option One Mortgage Corporation, as Servicer under the
----------
applicable Servicing Agreement.
Original Value: The lesser of (a) the Appraised Value of a Mortgaged
--------------
Property at the time the related Mortgage Loan was originated and (b) if the
Mortgage Loan was made to finance the acquisition of the related Mortgaged
Property, the purchase price paid for the Mortgaged Property by the Mortgagor
at the time the related Mortgage Loan was originated.
Overcollateralization Amount: With respect to any Distribution Date,
----------------------------
the amount, if any, by which (x) the Aggregate Loan Balance as of the last
day of the related Collection Period exceeds (y) the aggregate Certificate
Principal Amount of the Certificates after giving effect to distributions on
such Distribution Date.
Overcollateralization Deficiency: With respect to any Distribution
--------------------------------
Date, the amount, if any, by which (x) the Targeted Overcollateralization
Amount for such Distribution Date exceeds (y) the Overcollateralization
Amount for such Distribution Date, calculated for this purpose after giving
effect to the reduction on such Payment Date of the Certificate Principal
Amounts of the Certificates resulting from the distribution of the Principal
Remittance Amount (but not the Extra Principal Distribution Amount) on such
Distribution Date, but prior to allocation of any Applied Loss Amount on such
Distribution Date.
Overcollateralization Release Amount: With respect to any
------------------------------------
Distribution Date, the lesser of (x) the Principal Remittance Amount for such
Distribution Date and (y) the amount, if any, by which (i) the
Overcollateralization Amount for such date, calculated for this purpose on
the basis of the assumption that 100% of the Principal Remittance Amount for
such date is applied on such date in reduction of the Certificate Principal
Amounts of the Certificates, exceeds (ii) the Targeted Overcollateralization
Amount for such date.
Payahead: With respect to any Mortgage Loan and any Due Date
--------
therefor, any Scheduled Payment received by the applicable Servicer during
any Collection Period in addition to the Scheduled Payment due on such Due
Date, intended by the related Mortgagor to be applied on a subsequent Due
Date.
Paying Agent: Any paying agent appointed pursuant to Section 3.08.
------------
Percentage Interest: With respect to any Certificate, its percentage
-------------------
interest in the undivided beneficial ownership interest in the Trust Fund
evidenced by all Certificates of the same Class as such Certificate. With
respect to any Certificate other than the Class X Certificate, the Percentage
Interest evidenced thereby shall equal the initial Certificate Principal
Amount thereof divided by the initial Class Certificate Principal Amount of
all Certificates of the same Class. With respect to the Class X Certificate,
the Percentage Interest evidenced thereby shall be 100%.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
Placement Agent: Lehman Brothers Inc.
---------------
Plan Asset Regulations: The Department of Labor regulations set
----------------------
forth in 29 C.F.R. 2510.3-101.
Pool Delinquency Rate: With respect to any Collection Period, the
---------------------
fraction, expressed as a percentage, the numerator of which is the aggregate
outstanding principal balance of all Mortgage Loans 60 or more days
delinquent (including all foreclosures and REO Properties) as of the close of
business on the last day of such Collection Period, and the denominator of
which is the Aggregate Loan Balance as of the close of business on the last
day of such Collection Period.
Premium Mortgage Loan: None.
---------------------
Prepayment Interest Shortfall: With respect to any full or partial
-----------------------------
Principal Prepayment of a Mortgage Loan, the difference between (i) one full
month's interest at the applicable Mortgage Rate (giving effect to any
applicable Relief Act Reduction), as reduced by the Master Servicing Fee Rate
and the applicable Servicing Fee Rate, on the outstanding principal balance
of such Mortgage Loan immediately prior to such prepayment and (ii) the
amount of interest actually received with respect to such Mortgage Loan in
connection with such Principal Prepayment.
Prepayment Period: The applicable period specified in the applicable
-----------------
Servicing Agreement (whether or not specifically defined as a "Prepayment
Period") during which amounts required to be remitted by the related Servicer
in respect of Mortgage Loan prepayments on the applicable Servicer Remittance
Date are received by such Servicer.
Primary Mortgage Insurance Policy: Mortgage guaranty insurance, if
---------------------------------
any, on an individual Mortgage Loan, as evidenced by a policy or certificate.
Principal Distribution Amount: With respect to any Distribution
-----------------------------
Date, the sum of (i) the Principal Remittance Amount for such date minus,
with respect to each Distribution Date occurring on and after the Stepdown
Date, the Overcollateralization Release Amount, if any, for such date and
(ii) the Extra Principal Distribution Amount, if any, for such date.
Principal Only Certificate: None.
--------------------------
Principal Prepayment: Any Mortgagor payment of principal (other than
--------------------
a Balloon Payment) or other recovery of principal on a Mortgage Loan that is
recognized as having been received or recovered in advance of its scheduled
Due Date and applied to reduce the principal balance of the Mortgage Loan in
accordance with the terms of the Mortgage Note or the applicable Servicing
Agreement.
Principal Remittance Amount: With respect to any Distribution Date,
---------------------------
the sum of (i) all principal collected (other than Payaheads) or advanced in
respect of Scheduled Payments on the Mortgage Loans during the related
Collection Period (less amounts due to the Master Servicer, the Servicers or
the Trustee, to the extent allocable to principal), (ii) the outstanding
principal balance of each Mortgage Loan that was purchased from the Trust
Fund during the related Prepayment Period, (iii) the portion of any
Substitution Amount paid during the related Prepayment Period allocable to
principal, and (iv) all Net Liquidation Proceeds, Insurance Proceeds and
other recoveries collected during the related Prepayment Period, to the
extent allocable to principal, as reduced in each case by unreimbursed
Advances and other amounts due to the Master Servicer, the Servicers or the
Trustee, to the extent allocable to principal.
Proceeding: Any suit in equity, action at law or other judicial or
----------
administrative proceeding.
Proprietary Lease: With respect to any Cooperative Unit, a lease or
-----------------
occupancy agreement between a Cooperative Corporation and a holder of related
Cooperative Shares.
Prospectus: The prospectus supplement dated March 26, 1998, together
----------
with the accompanying prospectus dated March 18, 1998, relating to the Class
A-1, Class A-2, Class M-1, Class M-2 and Class B Certificates.
Purchase Price: With respect to the repurchase of a Mortgage Loan
--------------
pursuant to Article II of this Agreement or the Special Servicing Agreement,
an amount equal to the sum of (a) 100% of the unpaid principal balance of
such Mortgage Loan, (b) accrued interest thereon at the Mortgage Rate, from
the date as to which interest was last paid to (but not including) the Due
Date immediately preceding the related Distribution Date and (c) any amounts
advanced by the Master Servicer or any Servicer and not previously
reimbursed, together with any unpaid Master Servicing Fees and Servicing
Fees. The Master Servicer or the applicable Servicer shall be reimbursed
from the Purchase Price for any Mortgage Loan or related REO Property for any
Advances made with respect to such Mortgage Loan that are reimbursable to the
Master Servicer or the applicable Servicer under this Agreement or the
applicable Servicing Agreement.
Qualified GIC: A guaranteed investment contract or surety bond
-------------
providing for the investment of funds in the Collection Account or the
Certificate Account and insuring a minimum, fixed or floating rate of return
on investments of such funds, which contract or surety bond shall:
(a) be an obligation of an insurance company or other corporation
whose long-term debt is rated by each Rating Agency in one of its two
highest rating categories or, if such insurance company has no long-term
debt, whose claims paying ability is rated by each Rating Agency in one
of its two highest rating categories, and whose short-term debt is rated
by each Rating Agency in its highest rating category;
(b) provide that the Trustee may exercise all of the rights under
such contract or surety bond without the necessity of taking any action
by any other Person;
(c) provide that if at any time the then current credit standing
of the obligor under such guaranteed investment contract is such that
continued investment pursuant to such contract of funds would result in
a downgrading of any rating of the Certificates, the Trustee shall
terminate such contract without penalty and be entitled to the return of
all funds previously invested thereunder, together with accrued interest
thereon at the interest rate provided under such contract to the date of
delivery of such funds to the Trustee;
(d) provide that the Trustee's interest therein shall be
transferable to any successor trustee hereunder: and
(e) provide that the funds reinvested thereunder and accrued
interest thereon be returnable to the Collection Account or the
Certificate Account, as the case may be, not later than the Business Day
prior to any Distribution Date.
Qualified Insurer: An insurance company duly qualified as such under
-----------------
the laws of the states in which the related Mortgaged Properties are located,
duly authorized and licensed in such states to transact the applicable
insurance business and to write the insurance provided and whose claims
paying ability is rated by each Rating Agency in its highest rating category
or whose selection as an insurer will not adversely affect the rating of the
Certificates.
Qualifying Substitute Mortgage Loan: In the case of a Mortgage Loan
-----------------------------------
substituted for a Deleted Mortgage Loan, a Mortgage Loan that, on the date of
substitution, (i) has a Scheduled Principal Balance (together with that of
any other mortgage loan substituted for the same Deleted Mortgage Loan) as of
the Due Date in the month in which such substitution occurs not in excess of
the Scheduled Principal Balance of the related Deleted Mortgage Loan,
provided, however, that, to the extent that the Scheduled Principal Balance
of such Mortgage Loan is less than the Scheduled Principal Balance of the
related Deleted Mortgage Loan, then such differential in principal amount,
together with interest thereon at the applicable Mortgage Rate net of the
Master Servicing Fee and the applicable Servicing Fee from the date as to
which interest was last paid through the end of the Collection Period in
which such substitution occurs (such amount, a "Substitution Amount"), shall
be paid by the party effecting such substitution to the Trustee for deposit
into the Certificate Account, and shall be treated as a Principal Prepayment
hereunder; (ii) has a Net Mortgage Rate not lower than the Net Mortgage Rate
of the related Deleted Mortgage Loan; (iii) if the total principal balance of
Qualifying Substitute Mortgage Loans in the Trust is less than 5% of the
initial principal balance of the Mortgage Loans, has a remaining stated term
to maturity not longer than, and not more than one year shorter than, the
remaining term to stated maturity of the related Deleted Mortgage Loan; (iv)
has a Loan-to-Value Ratio as of the date of such substitution not greater
than that of the related Deleted Mortgage Loan; (v) will comply with all of
the representations and warranties relating to Mortgage Loans set forth
herein, as of the date as of which such substitution occurs; (vi) is not a
Cooperative Loan unless the related Deleted Mortgage Loan was a Cooperative
Loan; (vii) if applicable, has the same index as and a margin not less than
that of the related Deleted Mortgage Loan and (viii) has not been delinquent
for a period of more than 30 days more than twice in the twelve months
immediately preceding such date of substitution. In the event that either
one mortgage loan is substituted for more than one Deleted Mortgage Loan or
more than one mortgage loan is substituted for one or more Deleted Mortgage
Loans, then (a) the Scheduled Principal Balance referred to in clause (i)
above shall be determined on a loan-by-loan basis, (b) the rate referred to
in clause (ii) above shall be determined on a loan-by-loan basis and (c) the
remaining term to stated maturity referred to in clause (iii) above shall be
determined on a weighted average basis, provided that the final scheduled
maturity date of any Qualifying Substitute Mortgage Loan shall not exceed the
Final Scheduled Distribution Date of any Class of Certificates. Whenever a
Qualifying Substitute Mortgage Loan is substituted for a Deleted Mortgage
Loan pursuant to this Agreement, the party effecting such substitution shall
certify such qualification in writing to the Trustee.
Rating Agency: Each of Fitch and S&P; provided, that with respect to
-------------
the Class M-1, Class M-2 and Class B Certificates, Fitch will be the sole
Rating Agency.
Realized Loss: With respect to each Liquidated Mortgage Loan, an
-------------
amount equal to (i) the unpaid principal balance of such Mortgage Loan as of
the date of liquidation, plus (ii) interest at the applicable Net Mortgage
Rate from the date as to which interest was last paid up to the last day of
the month of such liquidation, minus (iii) Liquidation Proceeds received, net
of amounts that are reimbursable to the Master Servicer with respect to such
Mortgage Loan (other than Advances of principal and interest) including
expenses of liquidation. In determining whether a Realized Loss is a
Realized Loss of interest or principal, Liquidation Proceeds shall be
allocated, first, to payment of expenses related to such Liquidated Mortgage
Loan, then to accrued unpaid interest and finally to reduce the principal
balance of the Mortgage Loan.
Recognition Agreement: With respect to any Cooperative Loan, an
---------------------
agreement between the Cooperative Corporation and the originator of such
Mortgage Loan to establish the rights of such originator in the Cooperative
Property.
Record Date: With respect to any Distribution Date, the close of
-----------
business on the Business Day immediately preceding such Distribution Date.
Reference Banks: As defined in Section 4.05.
---------------
Reimbursement Amount: As defined in Section 5.02.
--------------------
REMIC: Each pool of assets in the Trust Fund designated as a REMIC
-----
pursuant to Section 10.01(a) hereof.
REMIC 1 Regular Interest: Any of the Class T1-1, Class T1-2 and T1-3
------------------------
Interests.
REMIC 2 Regular Interest: Any of the Class T2-1, Class T2-2, Class
------------------------
T2-3 and Class T2-4 Interests.
REMIC 3 Regular Interest: Any of the Class T3-1, Class T3-2, Class
------------------------
T3-3, Class T3-4, Class T3-5, Class T3-6 and Class T3-7 Interests.
REMIC 4 Regular Interest: Any of the Class T4-1, Class T4-2, Class
------------------------
T4-3, Class T4-4, Class T4-5, Class T4-6, Class T4-7 and Class T4-8
Interests.
REMIC Provisions: The provisions of the federal income tax law
----------------
relating to real estate mortgage investment conduits, which appear at
sections 860A through 86OG of Subchapter M of Chapter 1 of the Code, and
related provisions, and regulations, including proposed regulations and
rulings, and administrative pronouncements promulgated thereunder, as the
foregoing may be in effect from time to time.
Remittance Date: The day in each month on which each Servicer is
---------------
required to remit payments to the account maintained by the Master Servicer,
as specified in the related Servicing Agreement.
REO Property: A Mortgaged Property acquired by the Trust Fund
------------
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan or otherwise treated as having been acquired pursuant
to the REMIC Provisions.
Required Reserve Fund Deposit: With respect to any Distribution Date
-----------------------------
on which the Net Excess Spread is less than 0.25%, the amount, if any by
which (a) the product of 0.50% and the Aggregate Loan Balance for such date
exceeds (b) the amount on deposit in the Basis Risk Reserve Fund immediately
prior to such date. With respect to any Distribution Date on which the Net
Excess Spread is equal to or greater than 0.25%, the amount, if any, by which
(i) $1,000 exceeds (ii) the amount on deposit in the Basis Risk Reserve Fund
immediately prior to such date.
Reserve Interest Rate: As defined in Section 4.05.
---------------------
Residual Certificate: Any Class R Certificate.
--------------------
Responsible Officer: When used with respect to the Trustee, any Vice
-------------------
President, Assistant Vice President, the Secretary, any assistant secretary,
the Treasurer, or any assistant treasurer, working in its corporate trust
department, or any other officer of the Trustee to whom a matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
Restricted Certificate: Any Class X or Class R Certificate.
----------------------
Reuters Screen NYAA Page: The display designated as page "Reuters
------------------------
Screen NYAA Page" on the Reuters Monitor Money Rates Service (or such other
page selected by the Trustee as may replace the NYAA page on that service for
the purpose of displaying Federal Funds rates).
Rolling Three Month Delinquency Rate: With respect to any
------------------------------------
Distribution Date, the fraction, expressed as a percentage, equal to the
average of the Pool Delinquency Rates for each of the three (or one and two,
in the case of the first and second Distribution Dates) immediately preceding
Collection Periods.
S&P: Standard & Poor's Rating Services, a division of the
---
McGraw-Hill Companies, Inc., or any successor in interest.
Scheduled Payment: Each scheduled payment of principal and interest
-----------------
(or of interest only, if applicable) to be paid by the Mortgagor on a
Mortgage Loan, as reduced (except where otherwise specified herein) by the
amount of any related Debt Service Reduction (excluding all amounts of
principal and interest that were due on or before the Cut-off Date whenever
received) and, in the case of an REO Property, an amount equivalent to the
Scheduled Payment that would have been due on the related Mortgage Loan if
such Mortgage Loan had remained in existence. In the case of any bi-weekly
payment Mortgage Loan, all payments due on such Mortgage Loan during any
Collection Period shall be deemed collectively to constitute the Scheduled
Payment due on such Mortgage Loan in such Collection Period.
Scheduled Principal Balance: With respect to (i) any Mortgage Loan
---------------------------
as of any Distribution Date, the principal balance of such Mortgage Loan at
the close of business on the Cut-off Date, after giving effect to principal
payments due on or before the Cut-off Date, whether or not received, less an
amount equal to principal payments due after the Cut-off Date and on or
before the Due Date in the related Collection Period, whether or not received
from the Mortgagor or advanced by the Master Servicer, all amounts allocable
to unscheduled principal payments (including Principal Prepayments,
Liquidation Proceeds, Insurance Proceeds and condemnation proceeds, in each
case to the extent identified and applied prior to or during the Prepayment
Period ending in the month prior to the month of such Distribution Date) and
(ii) with respect to any REO Property as of any Distribution Date, the
Scheduled Principal Balance of the related Mortgage Loan on the Due Date
immediately preceding the date of acquisition of such REO Property by or on
behalf of the Trustee (reduced by any amount applied as a reduction of
principal on the Mortgage Loan). With respect to any Mortgage Loan and the
Cut-off Date, as specified in the Mortgage Loan Schedule.
Security Agreement: With respect to any Cooperative Loan, the
------------------
agreement between the owner of the related Cooperative Shares and the
originator of the related Mortgage Note that defines the terms of the
security interest in such Cooperative Shares and the related Proprietary
Lease.
Seller: Lehman Capital, A Division of Lehman Brothers Holdings Inc.,
------
or any successor in interest.
Senior Enhancement Percentage: With respect to any Distribution
-----------------------------
Date, the fraction, expressed as a percentage, the numerator of which is the
sum of the aggregate Certificate Principal Amount of the Subordinate
Certificates and the Overcollateralization Amount, in each case after giving
effect to distributions on such Distribution Date, and the denominator of
which is the Aggregate Loan Balance as of the last day of the related
Collection Period.
Senior Principal Distribution Amount: With respect to any
------------------------------------
Distribution Date (a) prior to the Stepdown Date or with respect to which a
Trigger Event has occurred and is continuing, the Principal Distribution
Amount and (b) on or after the Stepdown Date and as long as a Trigger Event
is not continuing (or has not occurred), the amount, if any, by which (x) the
aggregate Certificate Principal Amount of the Senior Certificates immediately
prior to such Distribution Date exceeds (y) the lesser of (A) the product of
(i) 50.80% and (ii) the Aggregate Loan Balance as of the last day of the
related Collection Period and (B) the amount, if any, by which (i) the
Aggregate Loan Balance as of the last day of the related Collection Period
exceeds (ii) $3,848,356.
Servicer: Any Servicer, including the Special Servicer, that has
--------
entered into any of the Servicing Agreements attached as Exhibit E hereto, or
any successor in interest.
Servicing Agreement: Each Servicing Agreement, including the Special
-------------------
Servicing Agreement, among a Servicer and Lehman Capital attached hereto as
Exhibit E.
Servicing Fee: The Servicing Fee or, in the case of the Special
-------------
Servicer, the Base Servicing Fee, specified in the applicable Servicing
Agreement.
Servicing Fee Rate: With respect to any Servicer, as specified in
------------------
the applicable Servicing Agreement.
Servicing Officer: Any officer of the Master Servicer involved in or
-----------------
responsible for the administration and servicing or master servicing of the
Mortgage Loans whose name appears on a list of servicing officers furnished
by the Master Servicer to the Trustee, as such list may from time to time be
amended.
Special Servicer: Ocwen Federal Bank FSB, as special servicer under
----------------
the Special Servicing Agreement.
Special Servicing Agreement: The Special Servicing Agreement between
---------------------------
the Seller and the Special Servicer dated as of March 1, 1998, attached as
part of Exhibit E hereto.
Special Servicing Compensation Agreement: The agreement attached as
----------------------------------------
Exhibit L hereto specifying the compensation to which the Special Servicer is
entitled, in addition to the Basic Fee, for its services under the Special
Servicing Agreement.
Standard Rate: With respect to any Distribution Date, the higher of
-------------
(x) the rate at which interest accrues on the Class A-1 Certificates and (y)
the rate at which interest accrues on the Class B Certificates, in each case
during the related Accrual Period.
Startup Day: The day designated as such pursuant to Section 10.01(b)
-----------
hereof.
Stepdown Date: The later to occur of (x) the Distribution Date in
-------------
April 2001 and (y) the first Distribution Date on which the Senior
Enhancement Percentage (calculated for this purpose after giving effect to
payments or other recoveries in respect of the Mortgage Loans during the
related Collection Period but before giving effect to distributions on the
Certificates on such Distribution Date) is greater than to equal to 49.20%.
Subordinate Certificate: Any Class M-1, Class M-2, Class B or Class
-----------------------
X Certificate.
Substitution Amount: As defined in the definition of Qualifying
-------------------
Substitute Mortgage Loan.
Targeted Overcollateralization Amount: With respect to any
-------------------------------------
Distribution Date, (x) prior to the Stepdown Date, the product of 1.75% and
the Aggregate Loan Balance as of the Cut-Off Date and (y) on and after the
Stepdown Date, the greater of (i) the product of 3.50% and the Aggregate Loan
Balance as of the last day of the related Collection Period and (ii)
$3,848,356.
Tax Matters Person: The "tax matters person" as specified in the
------------------
REMIC Provisions.
Telerate Page 120: The display designated as "Page 120" on the Dow
-----------------
Jones Telerate Service (or such other page selected by the Trustee as may
replace Page 120 on that service for the purpose of displaying daily Federal
Funds rates).
Termination Price: As defined in Section 7.01 hereof.
-----------------
Title Insurance Policy: A title insurance policy maintained with
----------------------
respect to a Mortgage Loan.
Total Distribution Amount: With respect to any Distribution Date,
-------------------------
the sum of the Interest Remittance Amount for such date and the Principal
Remittance Amount for such date.
Transfer Agreement: As defined in the Mortgage Loan Sale Agreement.
------------------
Transferor: Each seller of Mortgage Loans to the Seller pursuant to
----------
a Transfer Agreement.
Trigger Event: A Trigger Event will have occurred or be continuing
-------------
with respect to any Distribution Date if the Rolling Three Month Delinquency
Rate as of the last day of the immediately preceding Collection Period equals
or exceeds 50% of the Senior Enhancement Percentage for such Distribution
Date.
Trust Fund: The corpus of the trust created pursuant to this
----------
Agreement, consisting of the Mortgage Loans, the assignment of the
Depositor's rights under the Mortgage Loan Sale Agreement, such amounts as
shall from time to time be held in the Collection Account, the Certificate
Account and any Escrow Account, the Insurance Policies, any REO Property and
the other items referred to in, and conveyed to the Trustee under, Section
2.01(a).
Trustee: First Union National Bank, or any successor in interest, or
-------
if any successor trustee or any co-trustee shall be appointed as herein
provided, then such successor trustee and such co-trustee, as the case may
be.
Trustee Fee: As to any Distribution Date, an amount equal to the
-----------
product of the Trustee Fee Rate and the Aggregate Loan Balance as of the
first day of the related Collection Period.
Trustee Fee Rate: 0.00175% per annum.
----------------
Unpaid Basis Risk Shortfall: With respect to any Distribution Date
---------------------------
and any Class of LIBOR Certificates, the aggregate of all Basis Risk
Shortfalls with respect to such Class remaining unpaid from previous
Distribution Dates, plus interest accrued thereon at the applicable
Certificate Interest Rate (calculated without giving effect to the Net Funds
Cap).
Upper Tier REMIC: REMIC 4.
----------------
Voting Interests: The portion of the voting rights of all the
----------------
Certificates that is allocated to any Certificate for purposes of the voting
provisions of this Agreement. At all times during the term of this
Agreement, 93% of all Voting Interests shall be allocated to the Certificates
other than the Class X Certificate, and 7% of all Voting Interests shall be
allocated to the Class X Certificate. Voting Interests shall be allocated
among the other Classes of Certificates (and among the Certificates within
each such Class) in proportion to their Class Certificate Principal Amounts
(or Certificate Principal Amounts).
Section 1.02. Calculations Respecting Mortgage Loans. Calculations
--------------------------------------
required to be made pursuant to this Agreement with respect to any Mortgage
Loan in the Trust Fund shall be made based upon current information as to the
terms of the Mortgage Loans and reports of payments received from the
Mortgagor on such Mortgage Loans and payments to be made to the Trustee as
supplied to the Trustee by the Master Servicer. The Trustee shall not be
required to recompute, verify or recalculate the information supplied to it
by the Master Servicer.
Section 1.03. Calculations Respecting Accrued Interest. Accrued
----------------------------------------
interest, if any, on any Certificate shall be calculated based upon a 360-day
year and the actual number of days in each Accrual Period.
ARTICLE II
DECLARATION OF TRUST;
ISSUANCE OF CERTIFICATES
Section 2.01. Creation and Declaration of Trust Fund; Conveyance of
-----------------------------------------------------
Mortgage Loans. (a) Concurrently with the execution and delivery of this
- - --------------
Agreement, the Depositor does hereby transfer, assign, set over, deposit with
and otherwise convey to the Trustee, without recourse, in trust, all the
right, title and interest of the Depositor in and to the Mortgage Loans.
Such conveyance includes, without limitation, the right to all distributions
of principal and interest received on or with respect to the Mortgage Loans
on and after the Cut-off Date (other than payments of principal and interest
due before such date), and all such payments due on or after such date but
received prior to such date and intended by the related Mortgagors to be
applied on or after such date, together with all of the Depositor's right,
title and interest in and to the Collection Account and all amounts from time
to time credited to and the proceeds of the Collection Account, including
$294,013.44 to be deposited in the Collection Account by the Depositor
concurrently with the execution hereof, the Certificate Account and all
amounts from time to time credited to and the proceeds of the Certificate
Account, any Escrow Account established pursuant to Section 9.06 hereof and
all amounts from time to time credited to and the proceeds of any such Escrow
Account, any REO Property and the proceeds thereof, the Depositor's rights
under any Insurance Policies related to the Mortgage Loans, the Depositor's
security interest in any collateral pledged to secure the Mortgage Loans,
including the Mortgaged Properties and any Additional Collateral, and any
proceeds of the foregoing, to have and to hold, in trust; and the Trustee
declares that, subject to the review provided for in Section 2.02, it has
received and shall hold the Trust Fund, as trustee, in trust, for the benefit
and use of the Holders of the Certificates and for the purposes and subject
to the terms and conditions set forth in this Agreement, and, concurrently
with such receipt, has caused to be executed, authenticated and delivered to
or upon the order of the Depositor, in exchange for the Trust Fund,
Certificates in the authorized denominations evidencing the entire ownership
of the Trust Fund.
Concurrently with the execution and delivery of this Agreement, the
Depositor does hereby assign to the Trustee all of its rights and interest
under the Mortgage Loan Sale Agreement, including all rights of the Seller
under the Servicing Agreements and the Transfer Agreements to the extent
assigned thereunder, and delegates its obligations thereunder. The Trustee
hereby accepts such assignment and delegation, and shall be entitled to
exercise all rights of the Depositor under the Mortgage Loan Sale Agreement
as if, for such purpose, it were the Depositor.
(b) In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, or cause to be delivered to and
deposited with, the Trustee, and/or any custodian acting on the Trustee's
behalf, if applicable, the following documents or instruments with respect to
each Mortgage Loan (each a "Mortgage File") so transferred and assigned:
(i) with respect to each Mortgage Loan, the original Mortgage Note
endorsed without recourse in proper form to the order of the Trustee, or
in blank (in each case, with all necessary intervening endorsements as
applicable);
(ii) the original of any guarantee executed in connection with the
Mortgage Note, assigned to the Trustee;
(iii) with respect to any Mortgage Loan other than a
Cooperative Loan, the original recorded Mortgage with evidence of
recording indicated thereon. If, in connection with any Mortgage Loan,
the Depositor cannot deliver the Mortgage with evidence of recording
thereon on or prior to the Closing Date because of a delay caused by the
public recording office where such Mortgage has been delivered for
recordation or because such Mortgage has been lost, the Depositor shall
deliver or cause to be delivered to the Trustee (or its custodian), in
the case of a delay due to recording, a true copy of such Mortgage,
pending delivery of the original thereof, together with an Officer's
Certificate of the Depositor certifying that the copy of such Mortgage
delivered to the Trustee (or its custodian) is a true copy and that the
original of such Mortgage has been forwarded to the public recording
office, or, in the case of a Mortgage that has been lost, a copy thereof
(certified as provided for under the laws of the appropriate
jurisdiction) and a written Opinion of Counsel acceptable to the Trustee
and the Depositor that an original recorded Mortgage is not required to
enforce the Trustee's interest in the Mortgage Loan;
(iv) The original of each assumption, modification or substitution
agreement, if any, relating to the Mortgage Loans, or, as to any
assumption, modification or substitution agreement which cannot be
delivered on or prior to the Closing Date because of a delay caused by
the public recording office where such assumption, modification or
substitution agreement has been delivered for recordation, a photocopy
of such assumption, modification or substitution agreement, pending
delivery of the original thereof, together with an Officer's Certificate
of the Depositor certifying that the copy of such assumption,
modification or substitution agreement delivered to the Trustee (or its
custodian) is a true copy and that the original of such agreement has
been forwarded to the public recording office;
(v) with respect to any Mortgage Loan other than a Cooperative
Loan, the original Assignment of Mortgage for each Mortgage Loan;
(vi) If applicable, such original intervening assignments of the
Mortgage, notice of transfer or equivalent instrument (each, an
"Intervening Assignment"), as may be necessary to show a complete chain
of assignment from the originator, or, in the case of an Intervening
Assignment that has been lost, a written Opinion of Counsel acceptable
to the Trustee that such original Intervening Assignment is not required
to enforce the Trustee's interest in the Mortgage Loans;
(vii) the original Primary Mortgage Insurance Policy or
certificate, if private mortgage guaranty insurance is required;
(viii) with respect to any Mortgage Loan other than a
Cooperative Loan, the original mortgagee title insurance policy or
attorney's opinion of title and abstract of title;
(ix) the original of any security agreement, chattel mortgage or
equivalent executed in connection with the Mortgage or as to any
security agreement, chattel mortgage or their equivalent that cannot be
delivered on or prior to the Closing Date because of a delay caused by
the public recording office where such document has been delivered for
recordation, a photocopy of such document, pending delivery of the
original thereof, together with an Officer's Certificate of the
Depositor certifying that the copy of such security agreement, chattel
mortgage or their equivalent delivered to the Trustee (or its custodian)
is a true copy and that the original of such document has been forwarded
to the public recording office;
(x) with respect to any Cooperative Loan, the Cooperative Loan
Documents; and
(xi) in connection with any pledge of Additional Collateral, the
original additional collateral pledge and security agreement executed in
connection therewith, assigned to the Trustee.
The parties hereto acknowledge and agree that the form of endorsement
attached hereto as Exhibit B-4 is intended to effect the transfer to the
Trustee, for the benefit of the Certificateholders, of the Mortgage Notes and
the Mortgages.
(c) Assignments of Mortgage shall be recorded; provided, however, that
such Assignments need not be recorded if, in the Opinion of Counsel (which
must be Independent counsel) acceptable to the Trustee and the Rating
Agencies, recording in such states is not required to protect the Trustee's
interest in the related Mortgage Loans. Subject to the preceding sentence,
as soon as practicable after the Closing Date, the Trustee, at the expense of
the Depositor, shall cause to be properly recorded in each public recording
office where the Mortgages are recorded each Assignment of Mortgage referred
to in subsection (b)(v) above.
(d) In instances where a Title Insurance Policy is required to be
delivered to the Trustee under clause (b)(viii) above and is not so
delivered, the Depositor will provide a copy of such Title Insurance Policy
to the Trustee as promptly as practicable after the execution and delivery
hereof, but in any case within 180 days of the Closing Date.
(e) For Mortgage Loans (if any) that have been prepaid in full after
the Cut-off Date and prior to the Closing Date, the Depositor, in lieu of
delivering the above documents, herewith delivers to the Trustee an Officer's
Certificate which shall include a statement to the effect that all amounts
received in connection with such prepayment that are required to be deposited
in the applicable Collection Account pursuant to Section 4.01 have been so
deposited. All original documents that are not delivered to the Trustee
shall be held by the Master Servicer or the applicable Servicer in trust for
the benefit of the Trustee and the Certificateholders.
Section 2.02. Acceptance of Trust Fund by Trustee: Review of
----------------------------------------------
Documentation for Trust Fund. (a) The Trustee, by execution and delivery
- - ----------------------------
hereof, acknowledges receipt of the Mortgage Files pertaining to the Mortgage
Loans listed on the Mortgage Loan Schedule, subject to review thereof by the
Trustee, or by the applicable Custodian on behalf of the Trustee, under this
Section 2.02. The Trustee, or the applicable Custodian on behalf of the
Trustee, will execute and deliver on the Closing Date to the Depositor and
the Master Servicer an Initial Certification in the form annexed hereto as
Exhibit B-1.
(b) Within 45 days after the Closing Date, the applicable Custodian
will, on behalf of the Trustee and for the benefit of Holders of the
Certificates, review each Mortgage File to ascertain that all required
documents set forth in Section 2.01 have been received and appear on their
face to contain the requisite signatures by or on behalf of the respective
parties thereto, and shall deliver to the Depositor, the Master Servicer and
the Special Servicer an Interim Certification in the form annexed hereto as
Exhibit B-2 to the effect that, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan prepaid in full or any
Mortgage Loan specifically identified in such certification as not covered by
such certification), (i) all of the applicable documents specified in Section
2.01(b) are in its possession and (ii) such documents have been reviewed by
it and appear to relate to such Mortgage Loan. The Trustee, or the
applicable Custodian on behalf of the Trustee, shall make sure that the
documents are executed and endorsed, but shall be under no duty or obligation
to inspect, review or examine any such documents, instruments, certificates
or other papers to determine that the same are valid, binding, legally
effective, properly endorsed, genuine, enforceable or appropriate for the
represented purpose or that they have actually been recorded or are in
recordable form or that they are other than what they purport to be on their
face. Neither the Trustee nor any Custodian shall have any responsibility
for verifying the genuineness or the legal effectiveness of or authority for
any signatures of or on behalf of any party or endorser.
(c) If in the course of the review described in paragraph (b) above the
Trustee or any Custodian discovers any document or documents constituting a
part of a Mortgage File that is missing, does not appear regular on its face
(i.e., is mutilated, damaged, defaced, torn or otherwise physically altered)
or appears to be unrelated to the Mortgage Loans identified in the Mortgage
Loan Schedule (each, a "Material Defect"), the Trustee, or the applicable
Custodian on behalf of the Trustee, shall promptly identify the Mortgage Loan
to which such Material Defect relates in the Interim Certificate delivered to
the Depositor or the Master Servicer (and to the Trustee). Within 90 days of
its receipt of such notice, the applicable Transferor, or, if such Transferor
does not do so, the Depositor shall be required to cure such Material Defect
(and, in such event, the Depositor shall provide the Trustee with an
Officer's Certificate confirming that such cure has been effected). If the
applicable Transferor or the Depositor, as applicable, does not so cure such
Material Defect, the applicable Transferor, or, if such Transferor does not
do so, the Depositor, shall repurchase the related Mortgage Loan from the
Trust Fund at the Purchase Price. Within the two year period following the
Closing Date, the Depositor may, in lieu of repurchasing a Mortgage Loan
pursuant to this Section 2.02, substitute for such Mortgage Loan a Qualifying
Substitute Mortgage Loan subject to the provisions of Section 2.05. The
failure of the Trustee or the applicable Custodian to give the notice
contemplated herein within 45 days after the Closing Date shall not affect or
relieve the Depositor of its obligation to repurchase any Mortgage Loan
pursuant to this Section 2.02 or any other Section of this Agreement
requiring the repurchase of Mortgage Loans from the Trust Fund.
(d) Within 180 days following the Closing Date, the Trustee, or the
applicable Custodian, shall deliver to the Depositor, the Master Servicer and
the Special Servicer a Final Certification substantially in the form annexed
hereto as Exhibit B-3 evidencing the completeness of the Mortgage Files in
its possession or control.
(e) Nothing in this Agreement shall be construed to constitute an
assumption by the Trust Fund, the Trustee or the Certificateholders of any
unsatisfied duty, claim or other liability on any Mortgage Loan or to any
Mortgagor.
Section 2.03. Representations and Warranties of the Depositor. (a)
-----------------------------------------------
The Depositor hereby represents and warrants to the Trustee, for the benefit
of Certificateholders, and to the Master Servicer, as of the Closing Date or
such other date as is specified, that:
(i) the Depositor is a corporation duly organized, validly
existing and in good standing under the laws governing its creation and
existence and has full corporate power and authority to own its
property, to carry on its business as presently conducted, to enter into
and perform its obligations under this Agreement, and to create the
trust pursuant hereto;
(ii) the execution and delivery by the Depositor of this Agreement
have been duly authorized by all necessary corporate action on the part
of the Depositor; neither the execution and delivery of this Agreement,
nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof, will conflict with or result in a
breach of, or constitute a default under, any of the provisions of any
law, governmental rule, regulation, judgment, decree or order binding on
the Depositor or its properties or the certificate of incorporation or
bylaws of the Depositor;
(iii) the execution, delivery and performance by the Depositor
of this Agreement and the consummation of the transactions contemplated
hereby do not require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in respect
of, any state, federal or other governmental authority or agency, except
such as has been obtained, given, effected or taken prior to the date
hereof;
(iv) this Agreement has been duly executed and delivered by the
Depositor and, assuming due authorization, execution and delivery by the
Trustee and the Master Servicer, constitutes a valid and binding
obligation of the Depositor enforceable against it in accordance with
its terms except as such enforceability may be subject to (A) applicable
bankruptcy and insolvency laws and other similar laws affecting the
enforcement of the rights of creditors generally and (B) general
principles of equity regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(v) there are no actions, suits or proceedings pending or, to the
knowledge of the Depositor, threatened or likely to be asserted against
or affecting the Depositor, before or by any court, administrative
agency, arbitrator or governmental body (A) with respect to any of the
transactions contemplated by this Agreement or (B) with respect to any
other matter which in the judgment of the Depositor will be determined
adversely to the Depositor and will if determined adversely to the
Depositor materially and adversely affect it or its business, assets,
operations or condition, financial or otherwise, or adversely affect its
ability to perform its obligations under this Agreement; and
(vi) immediately prior to the transfer and assignment of the
Mortgage Loans to the Trustee, the Depositor was the sole owner of
record and holder of each Mortgage Loan, and the Depositor had good and
marketable title thereto, and had full right to transfer and sell each
Mortgage Loan to the Trustee free and clear, subject only to (1) liens
of current real property taxes and assessments not yet due and payable
and, if the related Mortgaged Property is a condominium unit, any lien
for common charges permitted by statute, (2) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording of such Mortgage acceptable to
mortgage lending institutions in the area in which the related Mortgaged
Property is located and specifically referred to in the lender's Title
Insurance Policy or attorney's opinion of title and abstract of title
delivered to the originator of such Mortgage Loan, and (3) such other
matters to which like properties are commonly subject which do not,
individually or in the aggregate, materially interfere with the benefits
of the security intended to be provided by the Mortgage, of any
encumbrance, equity, participation interest, lien, pledge, charge, claim
or security interest, and had full right and authority, subject to no
interest or participation of, or agreement with, any other party, to
sell and assign each Mortgage Loan pursuant to this Agreement.
(b) The representations and warranties of each Transferor with respect
to the related Mortgage Loans in the applicable Transfer Agreement, which
have been assigned to the Trustee hereunder, were made as of the date
specified in the applicable Transfer Agreement (or underlying agreement, if
such Transfer Agreement is in the form of an assignment of a prior
agreement). To the extent that any fact, condition or event with respect to
a Mortgage Loan constitutes a breach of both (i) a representation or warranty
of the applicable Transferor under the applicable Transfer Agreement and (ii)
a representation or warranty of Lehman Capital under the Mortgage Loan Sale
Agreement, the only right or remedy of the Trustee or of any
Certificateholder shall be the Trustee's right to enforce the obligations of
the applicable Transferor under any applicable representation or warranty
made by it. The Trustee acknowledges that the representations and warranties
of Lehman Capital in Section 1.04(b) of the Mortgage Loan Sale Agreement are
applicable only to facts or conditions that arise or events that occur
subsequent to the date as of which the representations and warranties with
respect to the related Mortgage Loans in the Transfer Agreements were made,
and which do not constitute a breach of any representation or warranty made
by the applicable Transferor in the applicable Transfer Agreement. The
Trustee acknowledges that Lehman Capital shall have no obligation or
liability with respect to any breach of a representation or warranty made by
it with respect to the Mortgage Loans if the fact, condition or event
constituting such breach also constitutes a breach of a representation or
warranty made by the applicable Transferor in the applicable Transfer
Agreement, without regard to whether such Transferor fulfills its contractual
obligations in respect of such representation or warranty. The Trustee
further acknowledges that the Depositor shall have no obligation or liability
with respect to any breach of any representation or warranty with respect to
the Mortgage Loans (except as set forth in Section 2.03(a)(vi)) under any
circumstances.
Section 2.04. Discovery of Breach. It is understood and agreed that
-------------------
the representations and warranties (i) set forth in Section 2.03, (ii) of the
Seller set forth in the Mortgage Loan Sale Agreement and assigned to the
Trustee by the Depositor hereunder and (iii) of each Transferor and each
Servicer, assigned by the Seller to the Depositor pursuant to the Mortgage
Loan Sale Agreement and assigned to the Trustee by the Depositor hereunder
shall each survive delivery of the Mortgage Files and the Assignment of
Mortgage of each Mortgage Loan to the Trustee and shall continue throughout
the term of this Agreement. Upon discovery by either the Depositor, the
Master Servicer or the Trustee of a breach of any of such representations and
warranties that adversely and materially affects the value of the related
Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties. Within 90 days of the discovery of a breach of
any representation or warranty given to the Trustee by the Depositor or given
by the Seller and assigned to the Trustee, the Depositor or the Seller, as
applicable, shall either (a) cure such breach in all material respects, (b)
repurchase such Mortgage Loan or any property acquired in respect thereof
from the Trustee at the Purchase Price or (c) within the two year period
following the Closing Date, substitute a Qualifying Substitute Mortgage Loan
for the affected Mortgage Loan. In the event of discovery of a breach of any
representation and warranty of any Transferor assigned to the Trustee, the
Trustee shall enforce its rights under the applicable Transfer Agreement for
the benefit of Certificateholders.
Section 2.05. Repurchase, Purchase or Substitution of Mortgage
------------------------------------------------
Loans. (a) With respect to any Mortgage Loan repurchased by the
- - -----
Depositor pursuant to this Article II, by the Seller pursuant to the Mortgage
Loan Sale Agreement or by any Transferor pursuant to the applicable Transfer
Agreement, the principal portion of the funds received by the Trustee in
respect of such repurchase of a Mortgage Loan will be considered a Principal
Prepayment and shall be deposited in the Collection Account. The Trustee,
upon receipt of the full amount of the Purchase Price for a Deleted Mortgage
Loan, or upon receipt of the Mortgage File for a Qualifying Substitute
Mortgage Loan substituted for a Deleted Mortgage Loan, shall release or cause
to be released and reassign to the Depositor, the Seller or the applicable
Transferor, as applicable, the related Mortgage File for the Deleted Mortgage
Loan and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, representation or warranty, as
shall be necessary to vest in the Depositor or its designee or assignee title
to any Deleted Mortgage Loan released pursuant hereto, free and clear of all
security interests, liens and other encumbrances created by this Agreement,
which instruments shall be prepared by the Trustee, and the Trustee shall
have no further responsibility with respect to the Mortgage File relating to
such Deleted Mortgage Loan.
(b) With respect to each Qualifying Substitute Mortgage Loan to be
delivered to the Trustee pursuant to the terms of this Article II in exchange
for a Deleted Mortgage Loan: (i) the Depositor must deliver to the Trustee
the Mortgage File for the Qualifying Substitute Mortgage Loan containing the
documents set forth in Section 2.01(b) along with a written certification
certifying as to the delivery of such Mortgage File and containing the
granting language set forth in Section 2.01(a); and (ii) the Depositor will
be deemed to have made each of the representations and warranties set forth
in Section 2.03(f). As soon as practicable after the delivery of any
Qualifying Substitute Mortgage Loan hereunder, the Trustee shall cause the
Assignment of Mortgage with respect to such Qualifying Substitute Mortgage
Loan to be recorded if required pursuant to the first sentence of Section
2.01(c).
(c) Notwithstanding any other provision of this Agreement, the right to
substitute Mortgage Loans pursuant to this Article II shall be subject to the
additional limitations that no substitution of a Qualifying Substitute
Mortgage Loan for a Deleted Mortgage Loan shall be made unless the Trustee
has received an Opinion of Counsel (at the expense of the party seeking to
make the substitution) that, under current law, such substitution will not
(A) affect adversely the status of any REMIC established hereunder as a
REMIC, or of the related "regular interests" as "regular interests" in any
such REMIC, or (B) cause any such REMIC to engage in a "prohibited
transaction" or prohibited contribution pursuant to the REMIC Provisions.
Section 2.06. Grant Clause. It is intended that the conveyance of
------------
the Depositor's right, title and interest in and to property constituting the
Trust Fund pursuant to this Agreement shall constitute, and shall be
construed as, a sale of such property and not a grant of a security interest
to secure a loan. However, if such conveyance is deemed to be in respect of
a loan, it is intended that: (1) the rights and obligations of the parties
shall be established pursuant to the terms of this Agreement; (2) the
Depositor hereby grants to the Trustee for benefit of the Holders of the
Certificates a first priority security interest in all of the Depositor's
right, title and interest in, to and under, whether now owned or hereafter
acquired, the Trust Fund and all proceeds of any and all property
constituting the Trust Fund to secure payment of the Certificates; and (3)
this Agreement shall constitute a security agreement under applicable law.
If such conveyance is deemed to be in respect of a loan and the Trust created
by this Agreement terminates prior to the satisfaction of the claims of any
Person holding any Certificate, the security interest created hereby shall
continue in full force and effect and the Trustee shall be deemed to be the
collateral agent for the benefit of such Person, and all proceeds shall be
distributed as herein provided.
Section 2.07. Purchase of Defaulted Mortgage Loans. (a) The initial
------------------------------------
Holder (other than the Placement Agent or any nominee thereof) of the Class X
Certificate shall have the right to purchase defaulted Mortgage Loans from
the Trust Fund as and to the extent provided in the Special Servicing
Agreement. Such right shall be transferable to and exercisable by subsequent
Holders of the Class X Certificate only upon satisfaction of the conditions
set forth in the Special Servicing Agreement.
(b) In addition to the purchase option provided under subsection (a)
above, the Special Servicer and the initial Holder (other than the Placement
Agent or any nominee thereof) of the Class X Certificate shall have the right
to purchase Severely Delinquent Loans from the Trust Fund as and to the
extent provided in the Special Servicing Agreement. Such right of such
initial Holder shall be transferable to and exercisable by subsequent Holders
of the Class X Certificate only upon satisfaction of the conditions set forth
in the Special Servicing Agreement. The aggregate of any such purchases of
Mortgage Loans pursuant to this Section 2.07(b) shall not exceed 5% of the
Cut-off Date Aggregate Loan Balance.
ARTICLE III
THE CERTIFICATES
Section 3.01. The Certificates. (a) The Certificates shall be
----------------
issuable in registered form only and shall be securities governed by Article
8 of the New York Uniform Commercial Code. The Book-Entry Certificates will
be evidenced by one or more certificates, beneficial ownership of which will
be held in the dollar denominations in Certificate Principal Amount or
Notional Principal Amount, as applicable, or in the Percentage Interests,
specified herein. Each Class of Book-Entry Certificates will be issued in
the minimum denominations in Certificate Principal Amount specified in the
Preliminary Statement hereto and in integral multiples of $1 in excess
thereof. The Class X and Class R Certificates will each be issued as a
single Certificate and maintained in definitive, fully registered form in a
denomination equal to 100% of the Percentage Interest of such Class. The
Certificates may be issued in the form of typewritten certificates.
(b) The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized officer. Each Certificate shall,
on original issue, be authenticated by the Trustee upon the order of the
Depositor upon receipt by the Trustee of the Mortgage Files described in
Section 2.01. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form
provided for herein, executed by an authorized officer of the Trustee or the
Authenticating Agent, if any, by manual signature, and such certification
upon any Certificate shall be conclusive evidence, and the only evidence,
that such Certificate has been duly authenticated and delivered hereunder.
All Certificates shall be dated the date of their authentication. At any
time and from time to time after the execution and delivery of this
Agreement, the Depositor may deliver Certificates executed by the Depositor
to the Trustee or the Authenticating Agent for authentication and the Trustee
or the Authenticating Agent shall authenticate and deliver such Certificates
as in this Agreement provided and not otherwise.
Section 3.02. Registration. The Trustee is hereby appointed, and
------------
hereby accepts its appointment as, Certificate Registrar in respect of the
Certificates and shall maintain books for the registration and for the
transfer of Certificates (the "Certificate Register"). The Trustee may
appoint a bank or trust company to act as Certificate Registrar. A
registration book shall be maintained for the Certificates collectively. The
Certificate Registrar may resign or be discharged or removed and a new
successor may be appointed in accordance with the procedures and requirements
set forth in Sections 6.06 and 6.07 hereof with respect to the resignation,
discharge or removal of the Trustee and the appointment of a successor
Trustee. The Certificate Registrar may appoint, by a written instrument
delivered to the Holders and the Master Servicer, any bank or trust company
to act as co-registrar under such conditions as the Certificate Registrar may
prescribe; provided, however, that the Certificate Registrar shall not be
relieved of any of its duties or responsibilities hereunder by reason of such
appointment.
Section 3.03. Transfer and Exchange of Certificates. (a) A
-------------------------------------
Certificate (other than Book-Entry Certificates which shall be subject to
Section 3.09 hereof) may be transferred by the Holder thereof only upon
presentation and surrender of such Certificate at the office of the
Certificate Registrar duly endorsed or accompanied by an assignment duly
executed by such Holder or his duly authorized attorney in such form as shall
be satisfactory to the Certificate Registrar. Upon the transfer of any
Certificate in accordance with the preceding sentence, the Trustee shall
execute, and the Trustee or any Authenticating Agent shall authenticate and
deliver to the transferee, one or more new Certificates of the same Class and
evidencing, in the aggregate, the same aggregate Certificate Principal Amount
as the Certificate being transferred. No service charge shall be made to a
Certificateholder for any registration of transfer of Certificates, but 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
registration of transfer of Certificates.
(b) A Certificate may be exchanged by the Holder thereof for any number
of new Certificates of the same Class, in authorized denominations,
representing in the aggregate the same Certificate Principal Amount as the
Certificate surrendered, upon surrender of the Certificate to be exchanged at
the office of the Certificate Registrar duly endorsed or accompanied by a
written instrument of transfer duly executed by such Holder or his duly
authorized attorney in such form as is satisfactory to the Certificate
Registrar. Certificates delivered upon any such exchange will evidence the
same obligations, and will be entitled to the same rights and privileges, as
the Certificates surrendered. No service charge shall be made to a
Certificateholder for any exchange of Certificates, but 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 exchange of
Certificates. Whenever any Certificates are so surrendered for exchange, the
Trustee shall execute, and the Trustee or the Authenticating Agent shall
authenticate, date and deliver the Certificates which the Certificateholder
making the exchange is entitled to receive.
(c) By acceptance of a Restricted Certificate, whether upon original
issuance or subsequent transfer, each Holder of such a Certificate
acknowledges the restrictions on the transfer of such Certificate set forth
thereon and agrees that it will transfer such a Certificate only as provided
herein.
The following restrictions shall apply with respect to the transfer and
registration of transfer of a Restricted Certificate to a transferee that
takes delivery in the form of a Definitive Certificate:
(i) The Certificate Registrar shall register the transfer of a
Restricted Certificate if the requested transfer is (x) to the Depositor
or the Placement Agent, an affiliate (as defined in Rule 144(a)(1) under
the 1933 Act) of the Depositor or the Placement Agent or (y) being made
to a "qualified institutional buyer" as defined in Rule 144A under the
Securities Act of 1933, as amended (the "Act") by a transferor who has
provided the Trustee with a certificate in the form of Exhibit F hereto;
and
(ii) The Certificate Registrar shall register the transfer of a
Restricted Certificate if the requested transfer is being made to an
"accredited investor" under Rule 501(a)(1), (2), (3) or (7) under the
Act by a transferor who furnishes to the Trustee a letter of the
transferee substantially in the form of Exhibit G hereto.
(d) (i) No transfer of an ERISA-Restricted Certificate in the
form of a Definitive Certificate shall be made to any Person unless the
Trustee has received (A) a certificate substantially in the form of Exhibit H
hereto from such transferee or (B) an Opinion of Counsel satisfactory to the
Trustee and the Depositor to the effect that the purchase and holding of such
a Certificate will not constitute or result in the assets of the Trust Fund
being deemed to be "plan assets" subject to the prohibited transactions
provisions of ERISA or Section 4975 of the Code and will not subject the
Trustee or the Depositor to any obligation in addition to those undertaken in
the Agreement; provided, however, that the Trustee will not require such
certificate or opinion in the event that, as a result of a change of law or
otherwise, counsel satisfactory to the Trustee has rendered an opinion to the
effect that the purchase and holding of an ERISA-Restricted Certificate by a
Plan or a Person that is purchasing or holding such a Certificate with the
assets of a Plan will not constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code. The preparation and delivery of
the certificate and opinions referred to above shall not be an expense of the
Trust Fund, the Trustee or the Depositor. Notwithstanding the foregoing, no
opinion or certificate shall be required for the initial issuance of the
ERISA-Restricted Certificates.
(e) As a condition of the registration of transfer or exchange of any
Certificate, the Certificate Registrar may require the certified taxpayer
identification number of the owner of the Certificate and the payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith; provided, however, that the Certificate Registrar shall
have no obligation to require such payment or to determine whether or not any
such tax or charge may be applicable. No service charge shall be made to the
Certificateholder for any registration, transfer or exchange of Certificate.
(f) Notwithstanding anything to the contrary contained herein, no
Residual Certificate may be owned, pledged or transferred, directly or
indirectly, by or to a Disqualified Organization.
Prior to and as a condition of the registration of any transfer, sale or
other disposition of a Residual Certificate, the proposed transferee shall
deliver to the Trustee an affidavit in substantially the form attached hereto
as Exhibit D-1 representing and warranting, among other things, that such
transferee is neither a Disqualified Organization nor an agent or nominee
acting on behalf of a Disqualified Organization (any such transferee, a
"Permitted Transferee"), and the proposed transferor shall deliver to the
Trustee an affidavit in substantially the form attached hereto as Exhibit D-
2. In addition, the Trustee may (but shall have no obligation to) require,
prior to and as a condition of any such transfer, the delivery by the
proposed transferee of an Opinion of Counsel, addressed to the Depositor and
the Trustee satisfactory in form and substance to the Depositor, that such
proposed transferee or, if the proposed transferee is an agent or nominee,
the proposed beneficial owner, is not a Disqualified Organization.
Notwithstanding the registration in the Certificate Register of any transfer,
sale, or other disposition of a Residual Certificate to a Disqualified
Organization or an agent or nominee acting on behalf of a Disqualified
Organization, such registration shall be deemed to be of no legal force or
effect whatsoever and such Disqualified Organization (or such agent or
nominee) shall not be deemed to be a Certificateholder for any purpose
hereunder, including, but not limited to, the receipt of distributions on
such Residual Certificate. The Trustee shall not be under any liability to
any person for any registration or transfer of a Residual Certificate to a
Disqualified Organization or for the maturity of any payments due on such
Residual Certificate to the Holder thereof or for taking any other action
with respect to such Holder under the provisions of the Agreement, so long as
the transfer was effected in accordance with this Section 3.03(f), unless the
Trustee shall have actual knowledge at the time of such transfer or the time
of such payment or other action that the transferee is a Disqualified
Organization (or an agent or nominee thereof). The Trustee shall be entitled
to recover from any Holder of a Residual Certificate that was a Disqualified
Organization (or an agent or nominee thereof) at the time it became a Holder
or any subsequent time it became a Disqualified Organization all payments
made on such Residual Certificate at and after either such times (and all
costs and expenses, including but not limited to attorneys' fees, incurred in
connection therewith). Any payment (not including any such costs and
expenses) so recovered by the Trustee shall be paid and delivered to the last
preceding Holder of such Residual Certificate.
If any purported transferee shall become a registered Holder of a
Residual Certificate in violation of the provisions of this Section 3.03(f),
then upon receipt of written notice to the Trustee that the registration of
transfer of such Residual Certificate was not in fact permitted by this
Section 3.03(f), the last preceding Permitted Transferee shall be restored to
all rights as Holder thereof retroactive to the date of such registration of
transfer of such Residual Certificate. The Trustee shall be under no
liability to any Person for any registration of transfer of a Residual
Certificate that is in fact not permitted by this Section 3.03(f), for making
any payment due on such Certificate to the registered Holder thereof or for
taking any other action with respect to such Holder under the provisions of
this Agreement so long as the transfer was registered upon receipt of the
affidavit described in the preceding paragraph of this Section 3.03(f).
(g) Each Holder of a Residual Certificate, by such Holder's acceptance
thereof, shall be deemed for all purposes to have consented to the provisions
of this section.
Section 3.04. Cancellation of Certificates. Any Certificate
----------------------------
surrendered for registration of transfer or exchange shall be cancelled and
retained in accordance with normal retention policies with respect to
cancelled certificates maintained by the Trustee or the Certificate
Registrar.
Section 3.05. Replacement of Certificates. If (i) any Certificate
---------------------------
is mutilated and is surrendered to the Trustee or any Authenticating Agent or
(ii) the Trustee or any Authenticating Agent receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate, and there
is delivered to the Trustee or the Authenticating Agent such security or
indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Depositor and any Authenticating Agent that such
destroyed, lost or stolen Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute and the Trustee or any Authenticating
Agent shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and Certificate Principal Amount. Upon the issuance of any new
Certificate under this Section 3.05, the Trustee and Authenticating Agent may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee or the
Authenticating Agent) connected therewith. Any replacement Certificate
issued pursuant to this Section 3.05 shall constitute complete and
indefeasible evidence of ownership in the applicable Trust Fund, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 3.06. Persons Deemed Owners. Subject to the provisions of
---------------------
Section 3.09 with respect to Book-Entry Certificates, the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar and any agent of any
of them may treat the Person in whose name any Certificate is registered upon
the books of the Certificate Registrar as the owner of such Certificate for
the purpose of receiving distributions pursuant to Sections 5.01 and 5.02 and
for all other purposes whatsoever, and neither the Depositor, the Master
Servicer, the Trustee, the Certificate Registrar nor any agent of any of them
shall be affected by notice to the contrary.
Section 3.07. Temporary Certificates. (a) Pending the preparation
----------------------
of definitive Certificates, upon the order of the Depositor, the Trustee
shall execute and shall authenticate and deliver temporary Certificates that
are printed, lithographed, typewritten, mimeographed or otherwise produced,
in any authorized denomination, substantially of the tenor of the definitive
Certificates in lieu of which they are issued and with such variations as the
authorized officers executing such Certificates may determine, as evidenced
by their execution of such Certificates.
(b) If temporary Certificates are issued, the Depositor will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Trustee without charge to the
Holder. Upon surrender for cancellation of any one or more temporary
Certificates, the Trustee shall execute and authenticate and deliver in
exchange therefor a like aggregate Certificate Principal Amount of definitive
Certificates of the same Class in the authorized denominations. Until so
exchanged, the temporary Certificates shall in all respects be entitled to
the same benefits under this Agreement as definitive Certificates of the same
Class.
Section 3.08. Appointment of Paying Agent. The Trustee may appoint
---------------------------
a Paying Agent (which may be the Trustee) for the purpose of making
distributions to Certificateholders hereunder. The Trustee shall cause such
Paying Agent to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee that such Paying Agent will
hold all sums held by it for the payment to Certificateholders in an Eligible
Account in trust for the benefit of the Certificateholders entitled thereto
until such sums shall be paid to the Certificateholders. All funds remitted
by the Trustee to any such Paying Agent for the purpose of making
distributions shall be paid to Certificateholders on each Distribution Date
and any amounts not so paid shall be returned on such Distribution Date to
the Trustee. If the Paying Agent is not the Trustee, the Trustee shall cause
to be remitted to the Paying Agent on or before the Business Day prior to
each Distribution Date, by wire transfer in immediately available funds, the
funds to be distributed on such Distribution Date. Any Paying Agent shall be
either a bank or trust company or otherwise authorized under law to exercise
corporate trust powers.
Section 3.09. Book-Entry Certificates. (a) Each Class of
-----------------------
Book-Entry Certificates, upon original issuance, shall be issued in the form
of one or more typewritten Certificates representing the Book-Entry
Certificates, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Depositor. The Book-Entry
Certificates shall initially be registered on the Certificate Register in the
name of the nominee of the Clearing Agency, and no Certificate Owner will
receive a definitive certificate representing such Certificate Owner's
interest in the Book-Entry Certificates, except as provided in Section
3.09(c). Unless Definitive Certificates have been issued to Certificate
Owners of Book-Entry Certificates pursuant to Section 3.09(c):
(i) the provisions of this Section 3.09 shall be in full force and
effect;
(ii) the Depositor, the Master Servicer, the Paying Agent, the
Registrar and the Trustee may deal with the Clearing Agency for all
purposes (including the making of distributions on the Book-Entry
Certificates) as the authorized representatives of the Certificate
Owners and the Clearing Agency shall be responsible for crediting the
amount of such distributions to the accounts of such Persons entitled
thereto, in accordance with the Clearing Agency's normal procedures;
(iii) to the extent that the provisions of this Section 3.09
conflict with any other provisions of this Agreement, the provisions of
this Section 3.09 shall control; and
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and
shall be limited to those established by law and agreements between such
Certificate Owners and the Clearing Agency and/or the Clearing Agency
Participants. Unless and until Definitive Certificates are issued
pursuant to Section 3.09(c), the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit distributions of principal of and interest on the
Book-Entry Certificates to such Clearing Agency Participants.
(b) Whenever notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive Certificates shall
have been issued to Certificate Owners pursuant to Section 3.09(c), the
Trustee shall give all such notices and communications specified herein to be
given to Holders of the Book-Entry Certificates to the Clearing Agency.
(c) If (i)(A) the Depositor advises the Trustee in writing that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities with respect to the Book-Entry Certificates, and (B) the
Trustee or the Depositor is unable to locate a qualified successor, (ii) the
Depositor, at its option, advises the 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, Certificate Owners representing
beneficial interests aggregating not less than 50% of the Class Certificate
Principal Amount of a Class of Book-Entry Certificates identified as such to
the Trustee by an Officer's Certificate from the Clearing Agency advise the
Trustee and the Clearing Agency through the Clearing Agency Participants in
writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interests of the Certificate Owners of a
Class of Book-Entry Certificates, the Trustee shall notify or cause the
Certificate Registrar to notify the Clearing Agency to effect notification to
all Certificate Owners, through the Clearing Agency, of the occurrence of any
such event and of the availability of Definitive Certificates to Certificate
Owners requesting the same. Upon surrender to the Trustee of the Book-Entry
Certificates by the Clearing Agency, accompanied by registration instructions
from the Clearing Agency for registration, the Trustee shall issue the
Definitive Certificates. Neither the Transferor nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates all references herein to obligations
imposed upon or to be performed by the Clearing Agency shall be deemed to be
imposed upon and performed by the Trustee, to the extent applicable, with
respect to such Definitive Certificates and the Trustee shall recognize the
holders of the Definitive Certificates as Certificateholders hereunder.
ARTICLE IV
ADMINISTRATION OF THE TRUST FUND
Section 4.01. Collection Account. (a) On the Closing Date, the
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Master Servicer shall open and shall thereafter maintain an account held in
trust (the "Collection Account"), entitled "Norwest Bank Minnesota, National
Association, as Master Servicer, in trust for the benefit of the Holders of
Structured Asset Securities Corporation Mortgage Pass-Through Certificates,
Series 1998-3." The Collection Account shall relate solely to the
Certificates issued by the Trust Fund hereunder, and funds in such Collection
Account shall not be commingled with any other monies.
(b) The Collection Account shall be an Eligible Account. If an
existing Collection Account ceases to be an Eligible Account, the Master
Servicer shall establish a new Collection Account that is an Eligible Account
within 30 days and transfer all funds on deposit in such existing Collection
Account into such new Collection Account.
(c) The Master Servicer will give to the Trustee prior written notice
of the name and address of the depository institution at which the Collection
Account is maintained and the account number of such Collection Account. The
Master Servicer shall take such actions as are necessary to cause the
depository institution holding the Collection Account to hold such account in
the name of the Trustee (subject to such Master Servicer's right to direct
payments and investments and its rights of withdrawal) under this Agreement.
On the Deposit Date, the entire amount on deposit in the Collection Account
(subject to permitted withdrawals set forth in Section 4.02), other than
amounts not included in the Total Distribution Amount for such Distribution
Date, shall be remitted to the Trustee for deposit into the Certificate
Account by wire transfer in immediately available funds. The Master
Servicer, at its option, may choose to make daily remittances from the
Collection Account to the Trustee for deposit into the Certificate Account.
(d) The Master Servicer shall deposit or cause to be deposited into the
Collection Account, no later than the Business Day following the Closing
Date, any amounts representing Scheduled Payments on the Mortgage Loans due
after the Cut-off Date and received by the Master Servicer on or before the
Closing Date. Thereafter, the Master Servicer shall deposit or cause to be
deposited in the Collection Account on the applicable Remittance Date the
following amounts received or payments made by it (other than in respect of
principal of and interest on the Mortgage Loans due on or before the Cut-Off
Date):
(i) all payments on account of principal, including Principal
Prepayments and late collections, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans
(other than payments due prior to the Cut-off Date), including
prepayment premiums or penalties, net of the Servicing Fee and Master
Servicing Fee with respect to each such Mortgage Loan, but only to the
extent of the amount permitted to be withdrawn or withheld from the
Collection Account in accordance with Sections 5.04 and 9.21;
(iii) any unscheduled payment or other recovery with respect to
a Mortgage Loan not otherwise specified in this paragraph (d), including
all Liquidation Proceeds with respect to the Mortgage Loans and REO
Property, and all amounts received in connection with the operation of
any REO Property, net of any unpaid Servicing Fees and Master Servicing
Fees with respect to such Mortgage Loans (but only to the extent of the
amount permitted to be withdrawn or withheld from the Collection Account
in accordance with Sections 5.04 and 9.21);
(iv) all Insurance Proceeds;
(v) all Advances made by the Master Servicer or any Servicer
pursuant to Section 5.04; and
(vi) all proceeds of any Mortgage Loan repurchased by the
Depositor, the Seller, the Master Servicer or any other Person.
(e) Funds in the Collection Account may be invested in Eligible
Investments (selected by and at the written direction of the Master Servicer)
which shall mature not later than the earlier of (a) the Deposit Date (except
that if such Eligible Investment is an obligation of the Trustee or the
Paying Agent, if other than the Trustee, and such Collection Account is
maintained with the Trustee or the Paying Agent, if other than the Trustee,
then such Eligible Investment shall mature not later than such applicable
Distribution Date) or (b) the day on which the funds in such Collection
Account are required to be remitted to the Trustee for deposit into the
Certificate Account, and any such Eligible Investment shall not be sold or
disposed of prior to its maturity. All such Eligible Investments shall be
made in the name of the Trustee (in its capacity as such) or its nominee.
All income and gain realized from any such investment shall be for the
benefit of the Master Servicer and shall be subject to its withdrawal or
order from time to time, subject to Section 5.05, and shall not be part of
the Trust Fund. The amount of any losses incurred in respect of any such
investments shall be deposited in such Collection Account by the Master
Servicer out of its own funds, without any right of reimbursement therefor,
immediately as realized. The foregoing requirements for deposit in the
Collection Account are exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments of interest on
funds in the Collection Account and payments in the nature of late payment
charges, assumption fees and other incidental fees and charges relating to
the Mortgage Loans (other than prepayment premiums or penalties) need not be
deposited by the Master Servicer in the Collection Account and may be
retained by the Master Servicer or the applicable Servicer as additional
servicing compensation. If the Master Servicer deposits in the Collection
Account any amount not required to be deposited therein, it may at any time
withdraw such amount from such Collection Account.
Section 4.02. Application of Funds in the Collection Account. The
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Master Servicer may, from time to time, make, or cause to be made,
withdrawals from the Collection Account for the following purposes:
(i) to reimburse itself or any Servicer for Advances made by it or
by such Servicer pursuant to Section 5.04; the Master Servicer's right
to reimburse itself pursuant to this subclause (i) is limited to amounts
received on or in respect of particular Mortgage Loans (including, for
this purpose, Liquidation Proceeds and amounts representing Insurance
Proceeds with respect to the property subject to the related Mortgage)
which represent late recoveries (net of the applicable Servicing Fee and
the Master Servicing Fee) of payments of principal or interest
respecting which any such Advance was made, it being understood, in the
case of any such reimbursement, that the Master Servicer's or Servicer's
right thereto shall be prior to the rights of the Certificateholders;
(ii) to reimburse itself or any Servicer, following a final
liquidation of a Mortgage Loan, for any amounts advanced by it or by
such Servicer that it determines in good faith will not be recoverable
from amounts representing late recoveries of payments of principal or
interest respecting the particular Mortgage Loan as to which such
Advance was made or from Liquidation Proceeds or Insurance Proceeds with
respect to such Mortgage Loan, it being understood, in the case of any
such reimbursement, that such Master Servicer's or Servicer's right
thereto shall be prior to the rights of the Certificateholders;
(iii) to reimburse itself from Liquidation Proceeds for
Liquidation Expenses and for amounts expended by it pursuant to Sections
9.20 and 9.22(a) in good faith in connection with the restoration of
damaged property and, to the extent that Liquidation Proceeds after such
reimbursement exceed the unpaid principal balance of the related
Mortgage Loan, together with accrued and unpaid interest thereon at the
applicable Mortgage Rate less the applicable Servicing Fee and the
Master Servicing Fee for such Mortgage Loan to the Due Date next
succeeding the date of its receipt of such Liquidation Proceeds, to pay
to itself out of such excess the amount of any unpaid assumption fees,
late payment charges or other Mortgagor charges on the related Mortgage
Loan and to retain any excess remaining thereafter as additional
servicing compensation, it being understood, in the case of any such
reimbursement or payment, that such Master Servicer's right thereto
shall be prior to the rights of the Certificateholders;
(iv) in the event it has elected not to pay itself the Master
Servicing Fee out of any Mortgagor payment on account of interest or
other recovery with respect to a particular Mortgage Loan prior to the
deposit of such Mortgagor payment or recovery in the Collection Account,
to pay to itself the Master Servicing Fee for each Distribution Date and
any unpaid Master Servicing Fees for prior Distribution Dates, as
reduced pursuant to Section 5.05, from any Mortgagor payment as to
interest or such other recovery with respect to that Mortgage Loan, as
is permitted by this Agreement;
(v) to reimburse itself for expenses incurred by and recoverable
by or reimbursable to it or such Servicer pursuant to Section 9.04,
9.06, 9.16 or 9.22(a), and to reimburse itself for any expenses
reimbursable to it pursuant to Section 10.01(c);
(vi) to pay to the Depositor, the Seller, the applicable
Transferor, the Special Servicer or the Directing Holder, as applicable,
with respect to each Mortgage Loan or REO Property acquired in respect
thereof that has been purchased pursuant to this Agreement, all amounts
received thereon and not distributed on the date on which the related
repurchase was effected, and to pay to the applicable Person any
Advances to the extent specified in the definition of Purchase Price;
(vii) subject to Section 5.04, to pay to itself income earned
on the investment of funds deposited in the Collection Account;
(viii) to make payments to the Trustee for deposit into the
Certificate Account in the amounts and in the manner provided for in
Section 4.04;
(ix) to make payment to itself and others pursuant to any provision
of this Agreement;
(x) to withdraw funds deposited in error in the Collection
Account;
(xi) to clear and terminate any Collection Account pursuant to
Section 7.02;
(xii) to reimburse a successor Master Servicer (solely in its
capacity as successor Master Servicer), for any fee or advance
occasioned by a termination of the Master Servicer, and the assumption
of such duties by the Trustee or a successor Master Servicer appointed
by the Trustee pursuant to Section 6.14, in each case to the extent not
reimbursed by the terminated Master Servicer, it being understood, in
the case of any such reimbursement or payment, that the right of the
Master Servicer or the Trustee thereto shall be prior to the rights of
the Certificateholders; and
(xiii) to reimburse any Servicer for such amounts as are due
thereto under the applicable Servicing Agreement and have not been
retained by or paid to such Servicer, to the extent provided in such
Servicing Agreement.
In connection with withdrawals pursuant to subclauses (i), (ii), (iii),
(iv) and (vi) above, the Master Servicer's or Servicer's entitlement thereto
is limited to collections or other recoveries on the related Mortgage Loan.
The Master Servicer shall therefore keep and maintain a separate accounting
for each Mortgage Loan it master services for the purpose of justifying any
withdrawal from the Collection Account it maintains pursuant to such
subclause (i), (ii), (iii), (iv) and (vi).
Section 4.03. Reports to Certificateholders. (a) On each
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Distribution Date, the Trustee shall deliver or cause to be delivered by
first class mail to each Certificateholder a written report setting forth the
following information, which information the Master Servicer will determine
(on the basis of information obtained from the Servicers) and deliver to the
Trustee no later than one Business Day prior to such Distribution Date:
(i) the aggregate amount of the distribution to be made on such
Distribution Date to the Holders of each Class of Certificates, other
than any Class of Notional Certificates, allocable to principal on the
Mortgage Loans, including Liquidation Proceeds and Insurance Proceeds,
stating separately the amount attributable to scheduled principal
payments and unscheduled payments in the nature of principal;
(ii) the aggregate amount of the distribution to be made on such
Distribution Date to the Holders of each Class of Certificates (other
than any Class of Principal Only Certificates) allocable to interest;
(iii) the amount, if any, of any distribution to the Holders of
the Class X Certificate and the Residual Certificate;
(iv) (A) the aggregate amount of any Advances required to be made
by or on behalf of the Master Servicer or any Servicer with respect to
such Distribution Date, (B) the aggregate amount of such Advances
actually made, and (C) the amount, if any, by which (A) above exceeds
(B) above;
(v) the Aggregate Loan Balance as of the close of business on the
last day of the related Collection Period, after giving effect to
payments allocated to principal reported under clause (i) above;
(vi) the Class Certificate Principal Amount (or Aggregate Notional
Amount) of each Class of Certificates as of such Distribution Date after
giving effect to payments allocated to principal reported under clause
(i) above, separately identifying any reduction of any of the foregoing
Certificate Principal Amounts due to Applied Loss Amounts:
(vii) any Realized Losses realized with respect to the Mortgage
Loans (x) in the applicable Prepayment Period and (y) in the aggregate
since the Cut-off Date;
(viii) the amount of the Master Servicing Fees, Servicing Fees
and Trustee Fee paid during the Collection Period to which such
distribution relates;
(ix) the number and aggregate Scheduled Principal Balance of
Mortgage Loans, as reported to the Trustee by the Master Servicer, (a)
remaining outstanding (b) delinquent 30 to 59 days on a contractual
basis, (c) delinquent 60 to 89 days on a contractual basis, (d)
delinquent 90 or more days on a contractual basis, and (e) as to which
foreclosure proceedings have been commenced as of the close of business
on the last Business Day of the calendar month immediately preceding the
month in which such Distribution Date occurs;
(x) the deemed principal balance of each REO Property as of the
close of business on the last Business Day of the calendar month
immediately preceding the month in which such Distribution Date occurs;
(xi) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the principal balance of such
Mortgage Loan and the number of such Mortgage Loans as of the close of
business on the Distribution Date in such preceding month;
(xii) with respect to substitution of Mortgage Loans in the
preceding calendar month, the Scheduled Principal Balance of each
Deleted Mortgage Loan, and of each Qualifying Substitute Mortgage Loan;
(xiii) the aggregate outstanding Carryforward Interest, Net
Prepayment Interest Shortfalls, Basis Risk Shortfalls and Unpaid Basis
Risk Shortfalls, if any, if any, for each Class of Certificates, after
giving effect to the distribution made on such Distribution Date;
(xiv) the Certificate Interest Rate applicable to such
Distribution Date with respect to each Class of Certificates;
(xv) if applicable, the amount of any shortfall (i.e., the
difference between the aggregate amounts of principal and interest which
Certificateholders would have received if there were sufficient
available amounts in the Certificate Account and the amounts actually
distributed); and
(xvi) any other "loan-level" information for any Mortgage Loans
that are delinquent 90 or more days on a contractual basis and any REO
Property held by the Trust that is reported by the Master Servicer to
the Trustee.
In the case of information furnished pursuant to subclauses (i), (ii)
and (viii) above, the amounts shall be expressed as a dollar amount per
$1,000 of original principal amount of Certificates.
In preparing or furnishing the foregoing information to the Trustee, the
Master Servicer shall be entitled to rely conclusively on the accuracy of the
information or data regarding the Mortgage Loans and the related REO Property
that has been provided to the Master Servicer by each Servicer, and the
Master Servicer shall not be obligated to verify, recompute, reconcile or
recalculate any such information or data.
(b) Upon the reasonable advance written request of any
Certificateholder that is a savings and loan, bank or insurance company,
which request, if received by the Trustee, will be promptly forwarded to the
Master Servicer, the Master Servicer shall provide, or cause to be provided,
(or, to the extent that such information or documentation is not required to
be provided by a Servicer under the applicable Servicing Agreement, shall use
reasonable efforts to obtain such information and documentation from such
Servicer, and provide) to such Certificateholder such reports and access to
information and documentation regarding the Mortgage Loans as such
Certificateholder may reasonably deem necessary to comply with applicable
regulations of the Office of Thrift Supervision or its successor or other
regulatory authorities with respect to investment in the Certificates;
provided, however, that the Master Servicer shall be entitled to be
reimbursed by such Certificateholder for such Master Servicer's actual
expenses incurred in providing such reports and access.
(c) Within 90 days, or such shorter period as may be required by
statute or regulation, after the end of each calendar year, the Trustee shall
send to each Person who at any time during the calendar year was a
Certificateholder of record, and make available to Certificate Owners
(identified as such by the Clearing Agency) in accordance with applicable
regulations, a report summarizing the items provided to Certificateholders
pursuant to Section 4.03(a) on an annual basis as may be required to enable
such Holders to prepare their federal income tax returns. Such information
shall include the amount of original issue discount accrued on each Class of
Certificates and information regarding the expenses of the Trust Fund. The
Master Servicer shall provide the Trustee with such information as is
necessary for the Trustee to prepare such reports.
Section 4.04. Certificate Account. (a) The Trustee shall establish
-------------------
and maintain in its name, as trustee, a special deposit trust account (the
"Certificate Account"), to be held in trust for the benefit of the
Certificateholders until disbursed pursuant to the terms of this Agreement.
The Certificate Account shall be an Eligible Account. If the existing
Certificate Account ceases to be an Eligible Account, the Trustee shall
establish a new Certificate Account that is an Eligible Account within 20
Business Days and transfer all funds on deposit in such existing Certificate
Account into such new Certificate Account. The Certificate Account shall
relate solely to the Certificates issued hereunder and funds in the
Certificate Account shall be held separate and apart from and shall not be
commingled with any other monies including, without limitation, other monies
of the Trustee held under this Agreement.
(b) The Trustee shall cause to be deposited into the Certificate
Account on the day on which, or, if such day is not a Business Day, the
Business Day immediately following the day on which, any monies are remitted
by the Master Servicer to the Trustee, all such amounts. The Trustee shall
make withdrawals from the Certificate Account only for the following
purposes:
(i) to withdraw amounts deposited in the Certificate Account in
error;
(ii) to pay itself any investment income earned with respect to
funds in the Certificate Account invested in Eligible Investments as set
forth in subsection (c) below;
(iii) to make payments of the Master Servicing Fee (to the
extent not already withheld or withdrawn from the Collection Account by
the Master Servicer) to the Master Servicer;
(iv) to make distributions to the Certificateholders pursuant to
Article V; and
(v) to clear and terminate the Certificate Account pursuant to
Section 7.02.
(c) The Trustee shall invest, or cause to be invested, funds held in
the Certificate Account in Eligible Investments (which may be obligations of
the Trustee). All such investments must mature no later than the next
Distribution Date, and shall not be sold or disposed of prior to their
maturity. All such Eligible Investments will be made in the name of the
Trustee (in its capacity as such) or its nominee. All income and gain
realized from any such investment shall be compensation for the Trustee and
shall be subject to its withdrawal on order from time to time. The amount of
any losses incurred in respect of any such investments shall be paid by the
Trustee for deposit in the Certificate Account out of its own funds, without
any right of reimbursement therefor, immediately as realized.
Section 4.05. Determination of LIBOR. (a) If the outstanding
Certificates include any LIBOR Certificates, then on each LIBOR--------------
- - -------- Determination Date the Trustee shall determine LIBOR on the basis of
the offered LIBOR quotations of the Reference Banks as of 11:00 a.m. London
time on such LIBOR Determination Date as follows:
(i) If on any LIBOR Determination Date two or more of the
Reference Banks provide such offered quotations, LIBOR for the next
Accrual Period will be the arithmetic mean of such offered quotations
(rounding such arithmetic mean if necessary to the nearest five decimal
places;
(ii) If on any LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Accrual Period will be whichever is the higher of (x) LIBOR as
determined on the previous LIBOR Determination Date or (y) the Reserve
Interest Rate. The "Reserve Interest Rate" will be either (A) the rate
per annum which the Trustee determines to be the arithmetic mean
(rounding such arithmetic mean if necessary to the nearest five decimal
places) of the one-month Eurodollar lending rates that New York City
banks selected by the Trustee are quoting, on the relevant LIBOR
Determination Date, to the principal London offices of at least two
leading banks in the London interbank market or (B) in the event that
the Trustee can determine no such arithmetic mean, the lowest one-month
Eurodollar lending rate that the New York City banks selected by the
Trustee are quoting on such LIBOR Determination Date to leading European
banks; and
(iii) If on any LIBOR Determination Date the Trustee is
required but is unable to determine the Reserve Interest Rate in the
manner provided in paragraph (ii) above, LIBOR for the next Accrual
Period will be LIBOR as determined on the previous LIBOR Determination
Date or, in the case of the first LIBOR Determination Date, the Initial
LIBOR Rate.
(b) The establishment of LIBOR by the Trustee and the Trustee's
subsequent calculation of the Certificate Interest Rate or Rates applicable
to the LIBOR Certificates for the relevant Accrual Period, in the absence of
manifest error, will be final and binding. In all cases, the Trustee may
conclusively rely on quotations of LIBOR for the Reference Banks as such
quotations appear on the display designated "LIUS01M" on the Bloomberg
Financial Markets Commodities News.
(c) As used herein, "Reference Banks" shall mean four leading
banks engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London,
England, (ii) whose quotations appear on the "Bloomberg Screen LIUS01M Index
Page" (as described in the definition of LIBOR) on the applicable LIBOR
Determination Date and (iii) which have been designated as such by the
Trustee and are able and willing to provide such quotations to the Trustee on
each LIBOR Determination Date. The Reference Banks initially shall be:
Barclay's plc, Bank of Tokyo, National Westminster Bank and Trust Company and
Bankers Trust Company. If any of the initial Reference Banks should be
removed from the Bloomberg Screen LIUS01M Index Page or in any other way fail
to meet the qualifications of a Reference Bank, the Trustee shall use its
best efforts to designate alternate Reference Banks.
(d) If (i) with respect to any LIBOR Determination Date LIBOR is
determined pursuant to clause (a)(iii) of this Section and (ii) on the next
succeeding LIBOR Determination Date LIBOR would, without giving effect to
this paragraph (d), be determined pursuant to such clause (a)(iii), then the
Trustee shall select an alternative interest rate index over which the
Trustee has no control that is used for determining Eurodollar lending rates
and is calculated and published (or otherwise made available) by an
independent third party, and such alternative interest rate index shall
constitute LIBOR for all purposes hereof.
Section 4.06. Determination of Fed Funds Average Rate. (a) If the
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outstanding Certificates include any Fed Funds Certificates, then with
respect to each Fed Funds Calculation Period the Trustee shall determine the
Fed Funds Average Rate for such Fed Funds Calculation Period by determining
the Fed Funds Rate for each related Fed Funds Business Day as follows:
The Fed Funds Rate will reset on each Fed Funds Business Day (each, a
"Fed Funds Interest Reset Date"). The Fed Funds Rate in effect on each day
of each Fed Funds Calculation Period will be (a) if such day is a Fed Funds
Interest Reset Date, the Fed Funds Rate determined as of such Fed Funds
Business Day (each a "Fed Funds Interest Determination Date"), or (b) if such
day is not a Fed Funds Interest Reset Date, the Fed Funds Rate in effect on
the immediately preceding Fed Funds Interest Reset Date.
(i) the rate with respect to the related Fed Funds Interest
Determination Date (expressed as a percentage per annum) that appears
opposite the caption "Federal Funds Effective" on Telerate Page 120 (as
defined below) as of 11:00 a.m. New York City time on such Fed Funds
Interest Reset Date;
(ii) if such rate does not appear on Telerate Page 120 as of 11:00
a.m. New York City time on such Fed Funds Interest Reset Date, then the
Fed Funds Rate with respect to such Fed Funds Interest Reset Date will
be the rate with respect to the related Fed Funds Interest Determination
Date (expressed as a percentage per annum) that appears on Reuters
Screen NYAA Page (as defined below) as of 11:00 a.m. New York City time
on such Fed Funds Interest Reset Date;
(iii) if such rate does not appear on Reuters Screen NYAA Page
as of 11:00 a.m. New York City time on such Fed Funds Interest Reset
Date, the Trustee will request three leading brokers of Federal Funds
transactions in New York City to provide the rate (expressed as a
percentage per annum) for the last transaction in overnight Federal
Funds arranged by such broker on the related Fed Funds Interest
Determination Date. If rates are provided by such three brokers, then
the Fed Funds Rate with respect to such Fed Funds Interest Reset Date
will be the arithmetic mean (rounded to the nearest one hundred-
thousandth of one percentage point) of such rates; and
(iv) if fewer than three such rates are provided, then the Fed
Funds rate with respect to such Fed Funds Interest Reset Date will be
the Fed Funds Rate for the preceding Fed Funds Interest Reset Date (or,
in the case of the first Fed Funds Interest Reset Date, the immediately
preceding Fed Funds Business Day on which a rate appeared on Telerate
Page 120 as described in (a) above).
If a rate that initially appears on Telerate Page 120 or the Reuters
Screen NYAA Page, as the case may be, as of 11:00 a.m. New York City time on
the applicable Fed Funds Interest Reset Date is superseded on Telerate Page
120 or the Reuters Screen NYAA Page, as the case may be, by a corrected rate
before 12:00 noon New York City time on such Fed Funds Interest Reset Date,
such corrected rate as so superseded on the applicable page shall be the
applicable rate for calculating the applicable Fed Funds Rate for such Fed
Funds Interest Determination Date.
(b) The establishment of the Fed Funds Average Rate by the Trustee and
the Trustee's subsequent calculation of the Certificate Interest Rate or
Rates applicable to the Fed Funds Certificates for the relevant Accrual
Period, in the absence of manifest error, will be final and binding. In all
cases, the Trustee may conclusively rely on quotations of the Fed Funds Rate
as they appear on Telerate Page 120 or on the Reuters Screen NYAA Page, as
applicable.
The Fed Funds Average Rate for the initial Accrual Period will be the
Initial Fed Funds Average Rate.
ARTICLE V
DISTRIBUTIONS TO HOLDERS OF CERTIFICATES
Section 5.01. Distributions Generally. (a) Subject to Section 7.01
-----------------------
respecting the final distribution on the Certificates, on each Distribution
Date the Trustee or the Paying Agent shall make distributions in accordance
with this Article V. Such distributions shall be made by check mailed to
each Certificateholder's address as it appears on the Certificate Register of
the Certificate Registrar (which shall initially be the Trustee) or, upon
written request made to the Trustee at least three Business Days prior to the
related Distribution Date by any Certificateholder owning an aggregate
initial Certificate Principal Amount of at least $2,500,000, or, in the case
of a Class X Certificate, a Percentage Interest of 100%, by wire transfer in
immediately available funds to an account specified in the request and at the
expense of such Certificateholder; provided, however, that the final
distribution in respect of any Certificate shall be made only upon
presentation and surrender of such Certificate at the Corporate Trust Office.
Wire transfers will be made at the expense of the Holder requesting such wire
transfer by deducting a wire transfer fee from the related distribution.
Notwithstanding such final payment of principal of any of the Certificates,
the Residual Certificates will remain outstanding until the termination of
each REMIC and the payment in full of all other amounts due with respect to
the Residual Certificates and at such time such final payment in retirement
of any Residual Certificates will be made only upon presentation and
surrender of such Certificate at the Corporate Trust Office of the Trustee or
at the office of the New York Presenting Agent. If any payment required to
be made on the Certificates is to be made on a day that is not a Business
Day, then such payment will be made on the next succeeding Business Day.
(b) All distributions or allocations made with respect to
Certificateholders within each Class on each Distribution Date shall be
allocated among the outstanding Certificates in such Class equally in
proportion to their respective initial Class Certificate Principal Amounts
(or initial Notional Amounts).
Section 5.02. Distributions from the Certificate Account. (a) On
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each Distribution Date the Trustee (or the Paying Agent on behalf of the
Trustee) shall withdraw from the Certificate Account the Total Distribution
Amount for such date, shall allocate such amount to the interests issued in
respect of REMIC 1, REMIC 2, and REMIC 3, and shall distribute such amount as
specified in this Section.
(b) On each Distribution Date, the Trustee shall distribute the
Interest Remittance Amount for such date in the following order of priority:
(i) to the Trustee, the Trustee Fee for such Distribution Date;
(ii) concurrently, to the Class A-1 and Class A-2 Certificates, in
proportion to the amount of interest distributable on each such Class,
Current Interest for each such Class and such Distribution Date and any
Carryforward Interest for each such Class and such date;
(iii) to the Class M-1 Certificates, Current Interest for such
Class and such Distribution Date;
(iv) to the Class M-2 Certificates, Current Interest for such Class
and such Distribution Date;
(v) to the Class B Certificates, Current Interest for such Class
and such Distribution Date; and
(vi) for application as part of Monthly Excess Cashflow for such
Distribution Date, as provided in subsection (d) of this Section, any
Interest Remittance Amount remaining after application pursuant to
clauses (i) through (v) above.
(c) On each Distribution Date, the Trustee shall distribute the
Principal Distribution Amount for such date as follows:
(i) On each Distribution Date (x) prior to the Stepdown Date or
(y) on which a Trigger Event has occurred and is continuing, the Trustee
shall distribute the Principal Distribution Amount for such date in the
following order of priority:
(1) to the Class A-1 Certificates, until the Class
Certificate Principal Amount of such Class has been reduced to
zero;
(2) to the Class A-2 Certificates, until the Class
Certificate Principal Amount of such Class has been reduced to
zero;
(3) to the Class M-1 Certificates, until the Class
Certificate Principal Amount of such Class has been reduced to
zero;
(4) to the Class M-2 Certificates, until the Class
Certificate Principal Amount of such Class has been reduced to
zero;
(5) to the Class B Certificates, until the Class Certificate
Principal Amount of such Class has been reduced to zero; and
(6) for application as part of Monthly Excess Cashflow for
such Distribution Date, as provided in subsection (d) of this
Section, any Principal Distribution Amount remaining after
application pursuant to clauses (1) through (5) above.
(ii) On each Distribution Date (x) on or after the Stepdown Date
and (y) with respect to which a Trigger Event is not continuing (or has
not occurred), the Trustee shall distribute the Principal Distribution
Amount for such date in the following order of priority:
(1) to the Class A-1 and Class A-2 Certificates, an amount
equal to the lesser of (A) the Principal Distribution Amount for
such Distribution Date and (B) the Senior Principal Distribution
Amount for such date, in the following order of priority:
first, to the Class A-1 Certificates, until the Class
Certificate Principal Amount of such Class has been reduced to
zero, and
second, to the Class A-2 Certificates, until the Class
Certificate Principal Amount of such Class has been reduced to
zero;
(2) to the Class M-1 Certificates, an amount equal to the
lesser of (A) the excess of (I) the Principal Distribution Amount
for such Distribution Date over (II) the amount distributed to the
Class A-1 and Class A-2 Certificates on such date pursuant to
clause (1) above and (B) the Class M-1 Principal Distribution
Amount for such date, until the Class Certificate Principal Amount
of such Class has been reduced to zero;
(3) to the Class M-2 Certificates, an amount equal to the
lesser of (A) the excess of (I) the Principal Distribution Amount
for such Distribution Date over (II) the amount distributed to the
Class A-1, Class A-2 and Class M-1 Certificates on such date
pursuant to clauses (1) and (2) above and (B) the Class M-2
Principal Distribution Amount for such date, until the Class
Certificate Principal Amount of such Class has been reduced to
zero;
(4) to the Class B Certificates, an amount equal to the
lesser of (A) the excess of (1) the Principal Distribution Amount
for such Distribution Date over (II) the amount distributed to the
Class A-1, Class A-2, Class M-1 and Class M-2 Certificates on such
date pursuant to clauses (1), (2) and (3) above and (B) the Class B
Principal Distribution Amount for such date, until the Class
Certificate Principal Amount of such Class has been reduced to
zero; and
(5) for application as part of Monthly Excess Cashflow for
such Distribution Date, as in subsection (d) of this Section, any
Principal Distribution Amount remaining after application pursuant
to clauses (1) through (4) above.
Notwithstanding the foregoing, on any Distribution Date on which the
Class Certificate Principal Amount of each Class of Certificates having
a higher priority of distribution has been reduced to zero, any
remaining Principal Distribution Amount will be distributed to the
remaining Classes of Class A-1, Class A-2, Class M-1, Class M-2 and
Class B Certificates, in the order of priority set forth above, until
the Class Certificate Principal Amount of each such Class has been
reduced to zero.
(d) On each Distribution Date, the Trustee shall distribute the Monthly
Excess Cashflow for such date in the following order of priority:
(i) to the Basis Risk Reserve Fund, and then, concurrently, to the
Class A-1 and Class A-2 Certificates, in proportion to any outstanding
Basis Risk Shortfall and Unpaid Basis Risk Shortfall with respect to
each such Class, and then to the Class M-1, Class M-2 and Class B
Certificates, in that order, from the Basis Risk Reserve Fund, in an
amount equal to the unpaid amount of any Basis Risk Shortfall for such
date and any Unpaid Basis Risk Shortfall for such date, as required by
Section 5.08 of this Agreement;
(ii) to the extent of Monthly Excess Interest for such Distribution
Date, to fund the Extra Principal Distribution Amount for such date,
(iii) to the Class M-1 Certificates, any Carryforward Interest
for such Class and such date;
(iv) to the Class M-1 Certificates, any Deferred Amount for such
Class and such date;
(v) to the Class M-2 Certificates, any Carryforward Interest for
such Class and such date;
(vi) to the Class M-2 Certificates, any Deferred Amount for such
Class and such date;
(vii) to the Class B Certificates, any Carryforward Interest
for such Class and such date;
(viii) to the Class B Certificates, any Deferred Amount for such
Class and such date;
(ix) to the Special Servicer, any Special Servicing Fee, Extended
Special Servicing Fee and Incentive Fee with respect to the related
Collection Period, in each case as defined in the Special Servicing
Compensation Agreement;
(x) to the Basis Risk Reserve Fund, an amount equal to the
Required Reserve Fund Deposit;
(xi) to the Class X Certificate, the Class X Distributable Amount
for such Distribution Date, together with any amounts withdrawn from the
Basis Risk Reserve Fund for distribution to the Class X Certificates
pursuant to Section 5.08(c) and (d) on such date;
(xii) to the Directing Holder, if any, on such Distribution
Date, the Directing Holder Servicing Fee for such Distribution Date to
the extent such Directing Holder Servicing Fee is due and payable under
Section 5.07 of this Agreement; and
(xiii) to the Class R Certificate, any amount remaining on such
date after application pursuant to clauses (i) through (xii) above.
Section 5.03. Allocation of Realized Losses. On each Distribution
-----------------------------
Date, the Class Certificate Principal Amount of each Class of Class M-1,
Class M-2 and Class B Certificates will be reduced by the amount of any
Applied Loss Amount for such date, in the following order of priority:
(i) to the Class B Certificates, until the Class Certificate
Principal Amount thereof has been reduced to zero;
(ii) to the Class M-2 Certificates, until the Class Certificate
Principal Amount thereof has been reduced to zero; and
(iii) to the Class M-1 Certificates, until the Class
Certificate Principal Amount thereof has been reduced to zero.
Section 5.04. Advances by Master Servicer and Trustee. (a) Advances
---------------------------------------
shall be made in respect of each Deposit Date as provided herein. If, on any
Determination Date, the Master Servicer determines that any Scheduled
Payments due during the related Collection Period (other than Balloon
Payments) have not been received, the Master Servicer shall, or cause the
applicable Servicer to, advance such amount, less an amount, if any, to be
set forth in an Officer's Certificate to be delivered to the Trustee on such
Determination Date, which if advanced the Master Servicer or the applicable
Servicer has determined would not be recoverable from amounts received with
respect to such Mortgage Loan, including late payments, Liquidation Proceeds,
Insurance Proceeds or otherwise. If the Master Servicer determines that an
Advance is required, it shall on the Deposit Date immediately following such
Determination Date either (i) remit to the Trustee from its own funds (or
funds advanced by the applicable Servicer) for deposit in the Certificate
Account an amount equal to such Advance, (ii) cause to be made an appropriate
entry in the records of the Collection Account that funds in such account
being held for future distribution or withdrawal have been, as permitted by
this Section 5.04, used by the Master Servicer to make such Advance, and
remit such funds to the Trustee for deposit in the Certificate Account or
(iii) make Advances in the form of any combination of clauses (i) and (ii)
aggregating the amount of such Advance. Any funds being held in the
Collection Account for future distribution to Certificateholders and so used
shall be replaced by the Master Servicer from its own funds by remittance to
the Trustee for deposit in the Certificate Account on or before any future
Deposit Date to the extent that funds in the Certificate Account on such
Deposit Date shall be less than payments to Certificateholders required to be
made on the related Distribution Date. The Master Servicer and each Servicer
shall be entitled to be reimbursed from the Collection Account for all
Advances made by it as provided in Section 4.02.
(b) In the event that the Master Servicer fails for any reason to make
an Advance required to be made pursuant to Section 5.04 on or before the
Deposit Date, the Trustee shall, on or before the related Distribution Date,
deposit in the Certificate Account an amount equal to the excess of (a)
Advances required to be made by the Master Servicer or any Servicer that
would have been deposited in such Certificate Account over (b) the amount of
any Advance made by the Master Servicer or any Servicer with respect to such
Distribution Date; provided, however, that the Trustee shall be required to
make such Advance only if it is not prohibited by law from doing so and it
has determined that such Advance would be recoverable from amounts to be
received with respect to such Mortgage Loan, including late payments,
Liquidation Proceeds, Insurance Proceeds, or otherwise. The Trustee shall be
entitled to be reimbursed from the Certificate Account for Advances made by
it pursuant to this Section 5.04 as if it were the Master Servicer.
Section 5.05. Compensating Interest Payments. The amount of the
------------------------------
Aggregate Master Servicing Compensation payable to the Master Servicer in
respect of any Distribution Date shall be reduced by the amount of any
Compensating Interest Payment for such Distribution Date. Such amount shall
not be treated as an Advance and shall not be reimbursable to the Master
Servicer.
Section 5.06. REMIC 1, REMIC 2, REMIC 3 and REMIC 4 Allocations.
-------------------------------------------------
(a) The initial principal balances of the Class T1-1, Class T1-2 and
Class T1-3 Interests shall equal 98%, 1% and 1%, respectively, of the Cut-off
Date Aggregate Loan Balance. On each Distribution Date, 98% of all
collections and other recoveries allocable to principal of the Mortgage Loans
will be allocated to the Class T1-1 Interest. Remaining amounts allocable to
principal of the Mortgage Loans on such Distribution Date will be allocated
first to the Class T1-3 Interest up to an amount equal to 2% of any amount
that represents an Adjusted Overcollateralization Release Amount with respect
to such Distribution Date and then equally to the Class T1-2 and Class T1-3
Interests. Interest accruing on the Class T1-3 Interest in respect of each
Distribution Date in an amount equal to 1% of the increase in the Adjusted
Overcollateralization Amount from the immediately preceding Distribution Date
will be deferred and added to the principal balance of the Class T1-3
Interest. The amount of interest accrued and deferred on the Class T1-3
Interest in accordance with the preceding sentence in respect of each
Distribution Date shall be distributed as principal on such date to the Class
T1-2 Interest.
(b) On each Distribution Date, the Applied Loss Amount for such date
shall be allocated 98% to the Class T1-1 Interest. The remaining 2% of such
Applied Loss Amount shall be allocated to the Class T1-3 Interest to the
extent that the principal balance of the Class T1-3 Interest exceeds 1% of
the Aggregate Loan Balance and then equally between the Class T1-2 Interest
and the Class T1-3 Interest.
(c) On each Distribution Date, Net Prepayment Interest Shortfalls shall
be allocated ratably among the Class T1-1, Class T1-2 and Class T1-3
Interests in proportion to their rights to receive interest on such
Distribution Date, and prepayment premiums and penalties shall be allocated
to the Class T1-3 Interest and treated as additional interest distributable
with respect to the Class T1-3 Interest on such Distribution Date.
(d) The initial principal balances of the Class T2-1 Interest, Class
T2-2 Interest and Class T2-3 Interest shall equal 98%, 1% and 1%,
respectively, of the Cut-off Date Aggregate Loan Balance. The Class T2-4
shall not have a principal balance. On each Distribution Date, all
collections and other recoveries allocable to principal of the Mortgage Loans
will be allocated 98% to the Class T1-1 Interest. Remaining amounts
allocable to principal of the Mortgage Loans on such Distribution Date will
be allocated first to the Class T2-3 Interest up to an amount equal to 2% of
any amount that represents an Adjusted Overcollateralization Release Amount
for such Distribution Date and then equally to the Class T2-2 and Class T2-3
Interests. Interest accruing on the Class T2-3 Interest in respect of such
Distribution Date in an amount equal to 1% of the increase in the Adjusted
Overcollateralization Amount from the immediately preceding Distribution Date
will be deferred and added to the principal balance of the Class T2-3
Interest. The amount of interest accrued and deferred on the Class T2-3
Interest in accordance with the preceding sentence in respect of each
Distribution Date shall be distributed as principal to the Class T2-2
Interest.
(e) On each Distribution Date, the Applied Loss Amount for such date
shall be allocated 98% to the Class T2-1 Interest. The remaining 2% of such
Applied Loss Amount shall be allocated to the Class T2-3 Interest to the
extent that the principal balance of the Class T2-3 Interest exceeds 1% of
the Aggregate Loan Balance and then equally between the Class T2-2 Interest
and the Class T2-3 Interest.
(f) On each Distribution Date, Net Prepayment Interest Shortfalls shall
be allocated ratably among the Class T2-1, Class T2-2 and the Class T2-3
Interests in proportion to their rights to receive interest on such
Distribution Date, and prepayment premiums and penalties shall be allocated
to the Class T2-3 Interest and treated as additional interest distributable
with respect to the Class T2-3 Interest on such Distribution Date.
(g) On each Distribution Date, the Class T3-4, Class T3-5, Class T3-6,
Class T3-7, and Class T3-8 Interests shall be entitled to receive principal
distributions that correspond to the Principal Distribution Amount paid with
respect to the corresponding class of Interests in REMIC 4 (the Class T4-1,
Class T4-2, Class T4-3, Class T4-4, and Class T4-5 Interests, respectively).
(h) On each Distribution Date, interest that accrues with respect to
the Class T3-1, Class T3-2 and Class T3-3 Interests during the related
Accrual Period shall be distributed as principal on the Class T3-4. Class T3-
5, Class T3-6, Class T3-7, and Class T3-8 Interests to the extent needed to
achieve the Targeted Overcollateralization Amount for such Distribution Date,
and, to the extent not needed for this purpose, shall be distributed with
respect to the Class T3-1. Class T3-2, and Class T3-3 Interests in proportion
to their entitlements to current and accrued undistributed interest.
Interest that accrues on the Class T3-1, Class T3-2, and Class T3-3 Interests
shall not itself bear interest.
(i) On each Distribution Date, the Applied Loss Amount with respect to
REMIC 3 and any Distribution Date shall be allocated as follows:
first, to the Class T3-4 Interest, to the extent that its principal
balance exceeds the principal balance of the Class T4-1 Interest as of
such Distribution Date (after giving effect to any distributions made on
such date);
second, to the Class T3-5 Interest, to the extent that its
principal balance exceeds the principal balance of the Class T4-2
Interest as of such Distribution Date (after giving effect to any
distributions made on such date);
third, to the Class T3-6 Interest, to the extent that its principal
balance exceeds the principal balance of the Class T4-3 Interest as of
such Distribution Date (after giving effect to any distributions made on
such date);
fourth, to the Class T3-7 Interest, to the extent that its
principal balance exceeds the principal balance of the Class T4-4
Interest as of such Distribution Date (after giving effect to any
distributions made on such date);
fifth, to the Class T3-8 Interest, to the extent that its
principal balance exceeds the principal balance of the Class T4-5
Interest as of such Distribution Date (after giving effect to any
distributions made on such date);
sixth, proportionately, to the accrued interest balances of the
Class T3-1, Class T3-2, and Class T3-3 Interests; and
seventh, in a manner that will cause any amount due on each REMIC 3
Regular Interest to equal the amount due on the corresponding Class of
Regular interests in REMIC 4.
(j) On each Distribution Date, Net Prepayment Interest Shortfalls shall
be allocated ratably among the REMIC 3 Regular Interests according to their
right to receive interest on such Distribution Date, and prepayment premiums
and penalties shall be allocated ratably among the Class T3-1, Class T3-2 and
Class T3-4 Interests in proportion to the interest accruing on those
Interests and shall be treated as additional interest distributable with
respect to those Interests on such Distribution Date.
(k) On each Distribution Date, the Class T4-1, Class T4-2, Class T4-3
and Class T4-4, and Class T4-5 Interests shall be entitled to receive
distributions of principal and interest equal to the interest and principal
distributions required to be paid with respect to the corresponding Class of
Certificates (determined as if the distributions on the Certificates were
computed without regard to amounts distributed under Section 5.02(d)(i)
hereof from the Basis Risk Reserve Fund). On each Distribution Date,
interest that accrues with respect to the Class T4-5, Class T4-6, T4-7, Class
T4-8, Class T4-9, and Class T4-10 Interests during the related Accrual Period
shall be distributed as principal on the Class T4-1, Class T4-2, Class T4-3,
Class T4-4, and Class T4-5 Interests to the extent needed to fund the Excess
Principal Distribution Amount for the corresponding Classes of Certificates,
and, to the extent not needed for this purpose, shall be distributed with
respect to the Class T4-5, Class T4-6, Class T4-7, Class T4-8, Class T4-9,
and Class T4-10 Interests in proportion to their entitlement to current and
accrued undistributed interest. Interest that accrues on the Class T4-5,
Class T4-6, Class T4-7, Class T4-8, Class T4-9, and Class T4-10 Interests
shall not itself bear interest.
(l) On each Distribution Date, the Applied Loss Amount with respect to
REMIC 4 and any Distribution Date shall be allocated among the REMIC 4
Regular Interests in accordance with the allocations provided in Section 5.03
hereof for the corresponding Classes of Certificates.
(m) On each Distribution Date, Net Prepayment Interest Shortfalls shall
be allocated ratably among the Class T4-5, Class T4-6, Class T4-7, Class T4-
8, Class T4-9, and Class T4-10 Interests in proportion to the interest
accruing on those Interests with resect to such Distribution Date, and
prepayment premiums and penalties shall be allocated ratably among the Class
T4-5, Class T4-6, Class T4-7, Class T4-8, Class T4-9, and Class T4-10
Interests in proportion to the interest accruing on those interests and shall
be treated as additional interest distributable with respect to those
Interests on such Distribution Date.
Section 5.07. Directing Holder Servicing Fee. REMIC 4 shall pay to
------------------------------
the Directing Holder the Director Holding Servicing Fee as an additional fee
for services rendered as Special Servicer. Such fee shall be due and payable
on any Distribution Date only to the extent that there are amounts remaining
after all amounts required to be distributed with respect to the REMIC 4
Regular Interests have been made for that Distribution Date. With respect to
each Distribution Date, the Directing Holder Servicing Fee shall equal the
sum of the following:
(i) an amount equal to the product of the Class A-1 Certificate
Interest Rate for such Distribution Date and the excess of the Class T3-
4 Interest principal balance over the Class T4-1 Interest principal
balance (before giving effect to any reductions of such balances on such
Distribution Date);
(ii) an amount equal to the product of the Class A-2 Certificate
Interest Rate for such Distribution Date and the excess of the Class T3-
5 Interest principal balance over the Class T4-2 Interest principal
balance (before giving effect to any reductions of such balances on such
Distribution Date);
(iii) an amount equal to the product of the Class M-1 Certificate
Interest Rate for such Distribution Date and the excess of the Class T3-
6 Interest principal balance over the Class T4-3 Interest principal
balance (before giving effect to any reductions of such balances on such
Distribution Date); and
(iv) an amount equal to the product of the Class M-2 Certificate
Interest Rate for such Distribution Date and the excess of the
Class T3-7 Interest principal balance over the Class T4-4 Interest
principal balance (before giving effect to any reductions of such
balances on such Distribution Date).
Section 5.08. Basis Risk Reserve Fund. (a) On the Closing Date the
-----------------------
Trustee shall establish and maintain in its name, in trust for the benefit of
the holders of the Class A-1, Class A-2, Class M-1, Class M-2 and Class B
Certificates, the Basis Risk Reserve Fund, into which the Depositor shall
deposit $1,000. The Basis Risk Reserve Fund shall be an Eligible Account,
and funds on deposit therein shall be held separate and apart from, and shall
not be commingled with, any other moneys, including, without limitation,
other moneys of the Trustee held pursuant to this Agreement.
(b) On each Distribution Date on which the Net Excess Spread is less
than 0.25%, the Trustee shall transfer the Required Reserve Fund Deposit from
the Certificate Account to the Basis Risk Reserve Fund pursuant to Section
5.02(d)(x). The Trustee shall make withdrawals from the Basis Risk Reserve
Fund to make distributions pursuant to Section 5.02(d)(i).
(c) Funds in the Basis Risk Reserve Fund may be invested in Permitted
Investments. Any earnings on such amounts shall be distributed to the Class
X Certificate pursuant to Section 5.02(d)(xi). The Class X Certificate shall
evidence ownership of the Basis Risk Reserve Fund for federal income tax
purposes and the Holder thereof shall direct the Trustee, in writing, as to
investment of amounts on deposit therein.
(d) Upon termination of the Trust Fund, any amounts remaining in the
Basis Risk Reserve Fund shall be distributed to the Class X Certificateholder
pursuant to Section 5.02(d)(xi).
ARTICLE VI
CONCERNING THE TRUSTEE; EVENTS OF DEFAULT
Section 6.01. Duties of Trustee. (a) The Trustee, except during
-----------------
the continuance of an Event of Default, undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement. Any
permissive right of the Trustee provided for in this Agreement shall not be
construed as a duty of the Trustee. If an Event of Default has occurred and
has not otherwise been cured or waived, the Trustee shall exercise such of
the rights and powers vested in it by this Agreement 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 unless
the Trustee is acting as Master Servicer, in which case it shall use the same
degree of care and skill as the Master Servicer hereunder.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Trustee which are specifically required to be furnished
pursuant to any provision of this Agreement, shall examine them to determine
whether they are in the form required by this Agreement; provided, however,
that the Trustee shall not be responsible for the accuracy or content of any
such resolution, certificate, statement, opinion, report, document, order or
other instrument furnished by the Master Servicer, to the Trustee pursuant to
this Agreement.
(c) The Trustee shall not have any liability arising out of or in
connection with this Agreement, except for its negligence or willful
misconduct. No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided, however, that:
(i) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of Certificates as provided in
Section 6.19 hereof;
(ii) For all purposes under this Agreement, the Trustee shall not
be deemed to have notice of any Event of Default (other than resulting
from a failure by the Master Servicer (i) to remit funds (or to make
Advances) or (ii) to furnish information to the Trustee when required to
do so) unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office, and
such notice references the Holders of the Certificates and this
Agreement;
(iii) No provision of this Agreement shall require the Trustee
to expend or risk its own funds or otherwise incur any 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 for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it; and
(iv) The Trustee shall not be responsible for any act or omission
of the Master Servicer.
(d) The Trustee shall have no duty hereunder with respect to any
complaint, claim, demand, notice or other document it may receive or which
may be alleged to have been delivered to or served upon it by the parties as
a consequence of the assignment of any Mortgage Loan hereunder; provided,
however, that the Trustee shall use its best efforts to remit to the Master
Servicer upon receipt any such complaint, claim, demand, notice or other
document (i) which is delivered to the Corporate Trust Office of the Trustee,
(ii) of which a Responsible Officer has actual knowledge, and (iii) which
contains information sufficient to permit the Trustee to make a determination
that the real property to which such document relates is a Mortgaged
Property.
(e) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Certificateholders of any Class holding
Certificates which evidence, as to such Class, Percentage Interests
aggregating not less than 25% as to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Agreement.
(f) The Trustee shall pay, out of its own funds, any fees assessed by
the Rating Agencies after the Closing Date in connection with maintaining the
ratings of the Certificates.
Section 6.02. Certain Matters Affecting the Trustee. Except as
-------------------------------------
otherwise provided in Section 6.01:
(i) The Trustee may request, and may rely and shall be protected
in acting or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(ii) The Trustee may consult with counsel and any advice of its
counsel or Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted by
it hereunder in good faith and in accordance with such advice or Opinion
of Counsel;
(iii) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and reasonably believed
by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(iv) Unless an Event of Default shall have occurred and be
continuing, the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document (provided the same appears
regular on its face), unless requested in writing to do so by Holders of
at least a majority in Class Certificate Principal Amount (or Aggregate
Notional Amount) of each Class of Certificates; provided, however, that,
if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against
such expense or liability or payment of such estimated expenses as a
condition to proceeding. The reasonable expense thereof shall be paid
by the Holders requesting such investigation; and
(v) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
or attorneys, which agents or attorneys shall have any or all of the
rights, powers, duties and obligations of the Trustee conferred on them
by such appointment provided that the Trustee shall continue to be
responsible for its duties and obligations hereunder.
Section 6.03. Trustee Not Liable for Certificates. The Trustee
-----------------------------------
makes no representations as to the validity or sufficiency of this Agreement
or of the Certificates (other than the certificate of authentication on the
Certificates) or of any Mortgage Loan, or related document save that the
Trustee represents that, assuming due execution and delivery by the other
parties hereto, this Agreement has been duly authorized, executed and
delivered by it and constitutes its valid and binding obligation, enforceable
against it in accordance with its terms except that such enforceability may
be subject to (A) applicable bankruptcy and insolvency laws and other similar
laws affecting the enforcement of the rights of creditors generally, and (B)
general principles of equity regardless of whether such enforcement is
considered in a proceeding in equity or at law. The Trustee shall not be
accountable for the use or application by the Depositor of funds paid to the
Depositor in consideration of the assignment of the Mortgage Loans to the
Trust Fund by the Depositor or for the use or application of any funds
deposited into the Collection Account, the Certificate Account, any Escrow
Account or any other fund or account maintained with respect to the
Certificates.
Section 6.04. Trustee May Own Certificates. The Trustee and any
----------------------------
Affiliate or agent of the Trustee in its individual or any other capacity may
become the owner or pledgee of Certificates and may transact banking and
trust with the other parties hereto with the same rights it would have if it
were not Trustee or such agent.
Section 6.05. Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times be (i) an institution insured by the FDIC and
(ii) a corporation or national banking association, organized and doing
business under the laws of any State or the United States of America,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by federal or state authority. If such
corporation or national banking association publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purposes of this Section,
the combined capital and surplus of such corporation or national banking
association 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 Trustee shall cease to be eligible in accordance with provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 6.06.
Section 6.06. Resignation and Removal of Trustee. (a) The Trustee
----------------------------------
may at any time resign and be discharged from the trust hereby created by
giving written notice thereof to the Depositor and the Master Servicer. Upon
receiving such notice of resignation, the Depositor will promptly appoint a
successor trustee by written instrument, one copy of which instrument shall
be delivered to the resigning Trustee, one copy to the successor trustee and
one copy to the Master Servicer. If no successor trustee shall have been so
appointed and shall have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court
of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time (i) the Trustee shall cease to be eligible in
accordance with the provisions of Section 6.05 and shall fail to resign after
written request therefor by the Depositor, (ii) the Trustee shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, (iii)
a tax is imposed or threatened with respect to the Trust Fund by any state in
which the Trustee or the Trust Fund held by the Trustee is located, or (iv)
the continued use of the Trustee would result in a downgrading of the rating
by the Rating Agencies of any Class of Certificates with a rating, then the
Depositor shall remove the Trustee and appoint a successor trustee by written
instrument, one copy of which instrument shall be delivered to the Trustee so
removed, one copy to the successor trustee and one copy to the Master
Servicer.
(c) The Holders of more than 50% of the Class Certificate Principal
Amount (or Percentage Interest) of each Class of Certificates may at any time
upon 30 days' written notice to the Trustee and to the Depositor remove the
Trustee by such written instrument, signed by such Holders or their
attorney-in-fact duly authorized, one copy of which instrument shall be
delivered to the Depositor, one copy to the Trustee so removed and one copy
to the Master Servicer; the Depositor shall thereupon use its best efforts to
appoint a mutually acceptable successor trustee in accordance with this
Section.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 6.07.
Section 6.07. Successor Trustee. (a) Any successor trustee
-----------------
appointed as provided in Section 6.06 shall execute, acknowledge and deliver
to the Depositor, the Master Servicer and to its predecessor trustee an
instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of
its predecessor hereunder, with like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and documents and statements related to each Mortgage Files
held by it hereunder, and shall duly assign, transfer, deliver and pay over
to the successor trustee the entire Trust Fund, together with all necessary
instruments of transfer and assignment or other documents properly executed
necessary to effect such transfer and such of the record or copies thereof
maintained by the predecessor trustee in the administration hereof as may be
requested by the successor trustee and shall thereupon be discharged from all
duties and responsibilities under this Agreement. In addition, the Master
Servicer and the predecessor trustee shall execute and deliver such other
instruments and do such other things as may reasonably be required to more
fully and certainly vest and confirm in the successor trustee all such
rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section unless at the time of such appointment such successor trustee shall
be eligible under the provisions of Section 6.05.
(c) Upon acceptance of appointment by a successor trustee as provided
in this Section, the Master Servicer shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to the Rating Agencies. The expenses
of such mailing shall be borne by the Master Servicer.
Section 6.08. Merger or Consolidation of Trustee. Any Person into
----------------------------------
which the Trustee may be merged or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Persons succeeding to the business of the
Trustee, shall be the successor to the Trustee hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding, provided
that such Person shall be eligible under the provisions of Section 6.05.
Section 6.09. Appointment of Co-Trustee, Separate Trustee or
----------------------------------------------
Custodian. (a) Notwithstanding any other provisions hereof, at any time,
- - ---------
the Trustee, the Depositor or the Certificateholders evidencing more than 50%
of the Class Certificate Principal Amount (or Aggregate Notional Amount) of
each Class of Certificates shall each have the power from time to time to
appoint one or more Persons to act either as co-trustees jointly with the
Trustee, or as separate trustees, or as custodians, for the purpose of
holding title to, foreclosing or otherwise taking action with respect to any
Mortgage Loan outside the state where the Trustee has its principal place of
business where such separate trustee or co-trustee is necessary or advisable
(or the Trustee has been advised by the Master Servicer that such separate
trustee or co-trustee is necessary or advisable) under the laws of any state
in which a property securing a Mortgage Loan is located or for the purpose of
otherwise conforming to any legal requirement, restriction or condition in
any state in which a property securing a Mortgage Loan is located or in any
state in which any portion of the Trust Fund is located. The separate
Trustees, co-trustees, or custodians so appointed shall be trustees or
custodians for the benefit of all the Certificateholders and shall have such
powers, rights and remedies as shall be specified in the instrument of
appointment; provided, however, that no such appointment shall, or shall be
deemed to, constitute the appointee an agent of the Trustee. The obligation
of the Trustee to make Advances pursuant to Section 5.04 and 6.14 hereof
shall not be affected or assigned by the appointment of a co-trustee.
(b) Every separate trustee, co-trustee, and custodian shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all powers, duties, obligations and rights conferred upon the
Trustee in respect of the receipt, custody and payment of moneys shall
be exercised solely by the Trustee;
(ii) all other rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee,
co-trustee, or custodian jointly, except to the extent that under any
law of any jurisdiction in which any particular act or acts are to be
performed the 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 Fund or any
portion thereof in any such jurisdiction, shall be exercised and
performed by such separate trustee, co-trustee, or custodian;
(iii) no trustee or custodian hereunder shall be personally
liable by reason of any act or omission of any other trustee or
custodian hereunder; and
(iv) the Trustee or the Certificateholders evidencing more than 50%
of the Aggregate Voting Interests of the Certificates may at any time
accept the resignation of or remove any separate trustee, co-trustee or
custodian, so appointed by it or them, if such resignation or removal
does not violate the other terms of this Agreement.
(c) Any notice, request or other writing given to the 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, co-trustee or custodian 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, either
jointly with the 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 Trustee. Every such instrument
shall be filed with the Trustee.
(d) Any separate trustee, co-trustee or custodian may, at any time,
constitute the 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, co-trustee or custodian 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 Trustee, to the extent permitted
by law, without the appointment of a new or successor trustee.
(e) No separate trustee, co-trustee or custodian hereunder shall be
required to meet the terms of eligibility as a successor trustee under
Section 6.05 hereunder and no notice to Certificateholders of the appointment
shall be required under Section 6.07 hereof.
(f) The Trustee agrees to instruct the co-trustees, if any, to the
extent necessary to fulfill the Trustee's obligations hereunder.
(g) The Trustee shall pay the reasonable compensation of the
co-trustees to the extent, and in accordance with the standards, specified in
Section 6.12 hereof (which compensation shall not reduce any compensation
payable to the Trustee under such Section).
Section 6.10. Authenticating Agents. (a) The Trustee may appoint
---------------------
one or more Authenticating Agents which shall be authorized to act on behalf
of the Trustee in authenticating Certificates. Wherever reference is made in
this Agreement to the authentication of Certificates by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent must be a corporation
organized and doing business under the laws of the United States of America
or of any state, having a combined capital and surplus of at least
$15,000,000, authorized under such laws to do a trust business and subject to
supervision or examination by federal or state authorities.
(b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any Person succeeding to the corporate agency business
of any Authenticating Agent, shall continue to be the Authenticating Agent
without the execution or filing of any paper or any further act on the part
of the Trustee or the Authenticating Agent.
(c) Any Authenticating Agent may at any time resign by giving at least
30 days' advance written notice of resignation to the Trustee and the
Depositor. The Trustee may at any time terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and the Depositor. Upon receiving a notice of
resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.10, the Trustee may appoint a successor
Authenticating Agent, shall give written notice of such appointment to the
Depositor and shall mail notice of such appointment to all Holders of
Certificates. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers, duties
and responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section 6.10.
No Authenticating Agent shall have responsibility or liability for any action
taken by it as such at the direction of the Trustee. Any Authenticating
Agent shall be entitled to reasonable compensation for its services and, if
paid by the Trustee, it shall be a reimbursable expense pursuant to Section
6.12.
Section 6.11. Indemnification of Trustee. The Trustee and its
--------------------------
directors, officers, employees and agents shall be entitled to
indemnification from the Trust Fund for any loss, liability or expense
incurred in connection with any legal proceeding and incurred without
negligence or willful misconduct on their part, arising out of, or in
connection with, the acceptance or administration of the trusts created
hereunder, including the costs and expenses of defending themselves against
any claim in connection with the exercise or performance of any of their
powers or duties hereunder, provided that:
(i) with respect to any such claim, the Trustee shall have given
the Depositor, the Master Servicer and the Holders written notice
thereof promptly after the Trustee shall have knowledge thereof;
(ii) while maintaining control over its own defense, the Trustee
shall cooperate and consult fully with the Depositor in preparing such
defense; and
(iii) notwithstanding anything to the contrary in this Section
6.11, the Trust Fund shall not be liable for settlement of any such
claim by the Trustee entered into without the prior consent of the
Depositor, which consent shall not be unreasonably withheld.
The provisions of this Section 6.11 shall survive any termination of
this Agreement and the resignation or removal of the Trustee and shall be
construed to include, but not be limited to any loss, liability or expense
under any environmental law.
Section 6.12. Fees and Expenses of Trustee. The Trustee shall be
----------------------------
entitled to receive, and is authorized to pay to itself the amount of income
or gain earned from the investment of funds in the Certificate Account.
Section 6.13. Collection of Monies. Except as otherwise expressly
--------------------
provided in this Agreement, the Trustee may demand payment or delivery of,
and shall receive and collect, all money and other property payable to or
receivable by the Trustee pursuant to this Agreement. The Trustee shall hold
all such money and property received by it as part of the Trust Fund and
shall distribute it as provided in this Agreement. If the Trustee shall not
have timely received amounts to be remitted with respect to the Mortgage
Loans from the Master Servicer, the Trustee shall request the Master Servicer
to make such distribution as promptly as practicable or legally permitted.
If the Trustee shall subsequently receive any such amount, it may withdraw
such request.
Section 6.14. Trustee To Act; Appointment of Successor. (a) The
----------------------------------------
occurrence of any one or more of the following events shall constitute an
"Event of Default"):
(i) Any failure by the Master Servicer to furnish the Trustee the
Mortgage Loan data sufficient to prepare the reports described in
Section 4.03(a) which continues unremedied for a period of one Business
Day after the date upon which written notice of such failure shall have
been given to such Master Servicer by the Trustee or to such Master
Servicer and the Trustee by the Holders of not less than 25% of the
Class Certificate Principal Amount (or Percentage Interest) of each
Class of Certificates affected thereby; or
(ii) Any failure on the part of the Master Servicer duly to observe
or perform in any material respect any other of the covenants or
agreements on the part of such Master Servicer contained in this
Agreement which continues unremedied for a period of 30 days (or 15
days, in the case of a failure to maintain any Insurance Policy required
to be maintained pursuant to this Agreement) after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to such Master Servicer by the Trustee, or to such
Master Servicer and the Trustee by the Holders of not less than 25% of
the Class Certificate Principal Amount (or Percentage Interest) of each
Class of Certificates affected thereby; or
(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,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Master Servicer, and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days or
any Rating Agency reduces or withdraws or threatens to reduce or
withdraw the rating of the Certificates because of the financial
condition or loan servicing capability of such Master Servicer; or
(iv) The Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities, voluntary liquidation or
similar proceedings of or relating to such Master Servicer or of or
relating to all or substantially all of its property; or
(v) The Master Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; or
(vi) The Master Servicer shall be dissolved, or shall dispose of
all or substantially all of its assets, or consolidate with or merge
into another entity or shall permit another entity to consolidate or
merge into it, such that the resulting entity does not meet the criteria
for a successor servicer as specified in Section 9.27 hereof; or
(vii) If a representation or warranty set forth in Section 9.14
hereof shall prove to be incorrect as of the time made in any respect
that materially and adversely affects the interests of the
Certificateholders, and the circumstance or condition in respect of
which such representation or warranty was incorrect shall not have been
eliminated or cured within 60 days after the date on which written
notice of such incorrect representation or warranty shall have been
given to the Master Servicer by the Trustee, or to the Master Servicer
and the Trustee by the Holders of not less than 25% of the Aggregate
Certificate Principal Amount of each Class of Certificates; or
(viii) A sale or pledge of the any of the rights of the Master
Servicer hereunder or an assignment of this Agreement by the Master
Servicer or a delegation of the rights or duties of the Master Servicer
hereunder shall have occurred in any manner not otherwise permitted
hereunder and without the prior written consent of the Trustee and
Certificateholders holding more than 50% of the Class Certificate
Principal Amount (or Percentage Interest) of each Class of Certificates;
or
(ix) Any Servicer at any time is not either an FNMA- or FHLMC-
approved Seller/Servicer, and the Master Servicer has not terminated the
rights and obligations of such Servicer under the applicable Servicing
Agreement and replaced such Servicer with an FNMA- or FHLMC-approved
servicer within 45 days of the absence of such approval; or
(x) Any failure of the Master Servicer to remit to the Trustee any
payment required to be made to the Trustee for the benefit of
Certificateholders under the terms of this Agreement, including any
Advance, on any Deposit Date.
If an Event of Default described in clauses (i) through (ix) of this
Section 6.14 shall occur, then, in each and every case, subject to applicable
law, so long as any such Event of Default shall not have been remedied within
any period of time prescribed by this Section 6.14, the Trustee, by notice in
writing to the Master Servicer may, and shall, if so directed by
Certificateholders evidencing more than 50% of the Class Certificate
Principal Amount (or Percentage Interest) of each Class of Certificates
affected thereby, terminate all of the rights and obligations of the Master
Servicer hereunder and in and to the Mortgage Loans and the proceeds thereof.
If an Event of Default described in clause (x) of this Section 6.14 shall
occur, then, in each and every case, subject to applicable law, the Trustee,
by notice in writing to the Master Servicer, shall promptly terminate all of
the rights and obligations of the Master Servicer hereunder and in and to the
Mortgage Loans and the proceeds thereof. On or after the receipt by the
Master Servicer of such written notice, all authority and power of the Master
Servicer, and only in its capacity as Master Servicer under this Agreement,
whether with respect to the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee pursuant to and under the terms of this Agreement; and
the Trustee is hereby authorized and empowered to execute and deliver, on
behalf of the defaulting Master Servicer as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all
other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of the Mortgage Loans and related documents or otherwise. The
defaulting Master Servicer agrees to cooperate with the Trustee in effecting
the termination of the defaulting Master Servicer's responsibilities and
rights hereunder as Master Servicer including, without limitation, notifying
Mortgagors of the assignment of the master servicing function and providing
the Trustee or its designee all documents and records in electronic or other
form reasonably requested by it to enable the Trustee or its designee to
assume the defaulting Master Servicer's functions hereunder and the transfer
to the Trustee for administration by it of all amounts which shall at the
time be or should have been deposited by the defaulting Master Servicer in
the Collection Account maintained by such defaulting Master Servicer and any
other account or fund maintained with respect to the Certificates or
thereafter received with respect to the Mortgage Loans. The Master Servicer
being terminated shall bear all costs of a master servicing transfer,
including but not limited to those of the Trustee reasonably allocable to
specific employees and overhead, legal fees and expenses, accounting and
financial consulting fees and expenses, and costs of amending the Agreement,
if necessary.
Notwithstanding the termination of its activities as Master Servicer,
each terminated Master Servicer shall continue to be entitled to
reimbursement to the extent provided in Section 4.02(i), (ii), (iii), (iv),
(v), (vi), (vii) and (ix) to the extent such reimbursement relates to the
period prior to such Master Servicer's termination.
If any Event of Default shall occur, the Trustee shall promptly notify
the Rating Agencies of the nature and extent of such Event of Default. The
Trustee shall immediately give written notice to the Master Servicer upon
such Master Servicer's failure to remit funds on the Deposit Date.
(b) On and after the time the Master Servicer receives a notice of
termination from the Trustee pursuant to Section 6.14(a) or the Trustee
receives the resignation of the Master Servicer evidenced by an Opinion of
Counsel pursuant to Section 9.29, the Trustee, unless another master servicer
shall have been appointed, shall be the successor in all respects to the
Master Servicer in its capacity as such under this Agreement and the
transactions set forth or provided for herein and shall have all the rights
and powers and be subject to all the responsibilities, duties and liabilities
relating thereto and arising thereafter placed on the Master Servicer
hereunder, including the obligation to make Advances; provided, however, that
any failure to perform such duties or responsibilities caused by the Master
Servicer's failure to provide information required by this Agreement shall
not be considered a default by the Trustee hereunder. In addition, the
Trustee shall have no responsibility for any act or omission of the Master
Servicer prior to the issuance of any notice of termination and shall have no
liability relating to the representations and warranties of the Master
Servicer set forth in Section 9.14. In the Trustee's capacity as such
successor, the Trustee shall have the same limitations on liability herein
granted to the Master Servicer. As compensation therefor, the Trustee shall
be entitled to receive all compensation payable to the Master Servicer under
this Agreement, including the Master Servicing Fee.
(c) Notwithstanding the above, the Trustee may, if it shall be
unwilling to continue to so act, or shall, if it is unable to so act,
appoint, or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution servicer, master servicer,
servicing or mortgage servicing institution having a net worth of not less
than $15,000,000 and meeting such other standards for a successor master
servicer as are set forth in this Agreement, as the successor to such Master
Servicer in the assumption of all of the responsibilities, duties or
liabilities of a master servicer, like the Master Servicer. Any entity
designated by the Trustee as a successor master servicer may be an Affiliate
of the Trustee; provided, however, that, unless such Affiliate meets the net
worth requirements and other standards set forth herein for a successor
master servicer, the Trustee, in its individual capacity shall agree, at the
time of such designation, to be and remain liable to the Trust Fund for such
Affiliate's actions and omissions in performing its duties hereunder. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided, however, that
no such compensation shall be in excess of that permitted to the Master
Servicer hereunder. The Trustee and such successor shall take such actions,
consistent with this Agreement, as shall be necessary to effectuate any such
succession and may make other arrangements with respect to the servicing to
be conducted hereunder which are not inconsistent herewith. The Master
Servicer shall cooperate with the Trustee and any successor master servicer
in effecting the termination of the Master Servicer's responsibilities and
rights hereunder including, without limitation, notifying Mortgagors of the
assignment of the master servicing functions and providing the Trustee and
successor master servicer, as applicable, all documents and records in
electronic or other form reasonably requested by it to enable it to assume
the Master Servicer's functions hereunder and the transfer to the Trustee or
such successor master servicer, as applicable, all amounts which shall at the
time be or should have been deposited by the Master Servicer in the
Collection Account and any other account or fund maintained with respect to
the Certificates or thereafter be received with respect to the Mortgage
Loans. Neither the Trustee nor any other successor master servicer shall be
deemed to be in default hereunder by reason of any failure to make, or any
delay in making, any distribution hereunder or any portion thereof caused by
(i) the failure of the Master Servicer to deliver, or any delay in
delivering, cash, documents or records to it, (ii) the failure of the Master
Servicer to cooperate as required by this Agreement, (iii) the failure of the
Master Servicer to deliver the Mortgage Loan data to the Trustee as required
by this Agreement or (iv) restrictions imposed by any regulatory authority
having jurisdiction over the Master Servicer.
Section 6.15. Additional Remedies of Trustee Upon Event of Default.
----------------------------------------------------
During the continuance of any Event of Default, so long as such Event of
Default shall not have been remedied, the Trustee, in addition to the rights
specified in Section 6.14, shall have the right, in its own name and as
trustee of an express trust, to take all actions now or hereafter existing at
law, in equity or by statute to enforce its rights and remedies and to
protect the interests, and enforce the rights and remedies, of the
Certificateholders (including the institution and prosecution of all
judicial, administrative and other proceedings and the filings of proofs of
claim and debt in connection therewith). Except as otherwise expressly
provided in this Agreement, no remedy provided for by this Agreement shall be
exclusive of any other remedy, and each and every remedy shall be cumulative
and in addition to any other remedy, and no delay or omission to exercise any
right or remedy shall impair any such right or remedy or shall be deemed to
be a waiver of any Event of Default.
Section 6.16. Waiver of Defaults. 35% or more of the Aggregate
------------------
Voting Interests of Certificateholders may waive any default or Event of
Default by the Master Servicer in the performance of its obligations
hereunder, except that a default in the making of any required deposit to the
Certificate Account that would result in a failure of the Trustee to make any
required payment of principal of or interest on the Certificates may only be
waived with the consent of 100% of the affected Certificateholders. Upon any
such waiver of a past default, such default shall cease to exist, and any
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 thereon except to
the extent expressly so waived.
Section 6.17. Notification to Holders. Upon termination of the
-----------------------
Master Servicer or appointment of a successor to the Master Servicer, in each
case as provided herein, the Trustee shall promptly mail notice thereof by
first class mail to the Certificateholders at their respective addresses
appearing on the Certificate Register. The Trustee shall also, within 45
days after the occurrence of any Event of Default known to the Trustee, give
written notice thereof to Certificateholders, unless such Event of Default
shall have been cured or waived prior to the issuance of such notice and
within such 45-day period.
Section 6.18. Directions by Certificateholders and Duties of Trustee
------------------------------------------------------
During Event of Default. Subject to the provisions of Section 8.01
- - -----------------------
hereof, during the continuance of any Event of Default, Holders of
Certificates evidencing not less than 25% of the Class Certificate Principal
Amount (or Percentage Interest) of each Class of Certificates affected
thereby may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement; provided, however, that the
Trustee shall be under no obligation to pursue any such remedy, or to
exercise any of the trusts or powers vested in it by this Agreement
(including, without limitation, (i) the conducting or defending of any
administrative action or litigation hereunder or in relation hereto and (ii)
the terminating of the Master Servicer or any successor master servicer from
its rights and duties as master servicer hereunder) at the request, order or
direction of any of the Certificateholders, unless such Certificateholders
shall have offered to the Trustee reasonable security or indemnity against
the cost, expenses and liabilities which may be incurred therein or thereby;
and, provided further, that, subject to the
-------
provisions of Section 8.01, the Trustee shall have the right to decline to
follow any such direction if the Trustee, in accordance with an Opinion of
Counsel, determines that the action or proceeding so directed may not
lawfully be taken or if the Trustee in good faith determines that the action
or proceeding so directed would involve it in personal liability or be
unjustly prejudicial to the non-assenting Certificateholders.
Section 6.19. Action Upon Certain Failures of the Master Servicer
---------------------------------------------------
and Upon Event of Default. In the event that the Trustee shall have
- - -------------------------
actual knowledge of any action or inaction of the Master Servicer that would
become an Event of Default upon the Master Servicer's failure to remedy the
same after notice, the Trustee shall give notice thereof to the Master
Servicer.
ARTICLE VII
PURCHASE AND TERMINATION OF THE
TRUST FUND; PURCHASE OF CERTIFICATES
Section 7.01. Termination of Trust Fund Upon Repurchase or
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Liquidation of All Mortgage Loans. (a) The respective obligations and
- - ---------------------------------
responsibilities of the Trustee and the Master Servicer created hereby (other
than the obligation of the Trustee to make payments to Certificateholders as
set forth in Section 7.02, the obligation of the Master Servicer to make a
final remittance to the Trustee for deposit into the Certificate Account
pursuant to Section 4.01 and the obligations of the Master Servicer to the
Trustee pursuant to Sections 9.10 and 9.14) shall terminate on the earlier of
(i) the final payment or other liquidation of the last Mortgage Loan
remaining in the Trust Fund and the disposition of all REO Property and (ii)
the sale of the property held by the Trust Fund in accordance with Section
7.01(b) or (c); provided, however, that in no event shall the Trust Fund
created hereby continue beyond the earlier of (i) 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, living
on the date hereof, and (ii) the Latest Possible Maturity Date. Any
termination of the Trust Fund shall be carried out in such a manner so that
the termination of each REMIC included therein shall qualify as a "qualified
liquidation" under the REMIC Provisions.
(b) On any Distribution Date occurring after the date on which the
Aggregate Loan Balance is less than 10% of the Cut-off Date Aggregate Loan
Balance, the Special Servicer shall have the option to cause the Trust Fund
to adopt a plan of complete liquidation pursuant to Section 7.03(a)(i) hereof
to sell all of its property. Upon exercise of such option, the property of
the Trust Fund shall be sold at a price (the "Termination Price") equal to:
(i) 100% of the unpaid principal balance of each Mortgage Loan on the day of
such purchase plus interest accrued thereon at the applicable Mortgage Rate
with respect to any Mortgage Loan to the Due Date in the Collection Period
immediately preceding the related Distribution Date to the date of such
repurchase and (ii) the fair market value of any REO Property and any other
property held by any REMIC, such fair market value to be determined by an
appraiser or appraisers mutually agreed upon by the Master Servicer and the
Trustee.
(c) On any Distribution Date occurring on or after the Distribution
Date on which the aggregate Certificate Principal Amount of the Senior
Certificates is less than 35% of the Class Certificate Principal Amount
thereof as of the Closing Date, the Class X Certificateholder shall have the
option to cause the Trust Fund to adopt a plan of complete liquidation
pursuant to Section 7.03(a)(i) hereof to sell all of its property. Upon
exercise of such option, the property of the Trust Fund shall be sold to the
Class X Certificateholder for the Termination Price.
(d) (i) On any Distribution Date occurring on or after the Distribution
Date on which the aggregate Certificate Principal Amount of the Senior
Certificates is less than 35% of the Class Certificate Principal Amount
thereof as of the Closing Date, Ocwen Partnership, L.P. ("OPLP"), shall, if
it is the Holder of the Class X Certificate and has remained the Holder of
the Class X Certificate continuously since its initial acquisition thereof,
have the option to purchase all, but not less than all, of the Class A-1,
Class A-2, Class M-1, Class M-2 and Class B Certificates (the "Purchase
Certificates") for a price equal to the outstanding Certificate Principal
Amount of each such Certificate plus interest accrued thereon at the
applicable Certificate Interest Rate and unpaid (the "Acquisition Price").
In order to exercise such option, OPLP must deliver to the Trustee written
notice of its intent to purchase all of the Purchase Certificates and of the
Distribution Date on which it intends to do so not less than 20 days prior to
such Distribution Date.
(ii) On or before the date of delivery of the notice specified in
paragraph (i) above, OPLP shall deposit with the Trustee cash, certificates
of deposit or a letter of credit in an amount sufficient to provide for
payment of the Acquisition Price. Such amount shall be paid by the Trustee
to Holders of Purchase Certificates upon surrender for purchase as provided
below.
(iii) Notice of any purchase of the Purchase Certificates pursuant
to the provisions of this subsection, specifying the Distribution Date upon
which such purchase shall be made, shall be given promptly by the Trustee by
first class mail to Holders of the Purchase Certificates mailed no later than
five Business Days after the Trustee has received notice from OPLP of its
intent to exercise its right to repurchase the Purchase Certificates. Such
notice shall specify (A) the Distribution Date upon which the Acquisition
Price will be paid upon transfer of the Purchase Certificates (the
"Acquisition Date"), and the time and place at which any Purchase Certificate
held in definitive form by other than the Clearing Agency (a "Definitive
Purchase Certificate") must be surrendered for cancellation and (B) that the
Acquisition Price applicable to each Purchase Certificate constitutes payment
in full therefor, and that no further amounts in respect of interest or
principal will be distributable to the Holders from whom such Certificates
are purchased by OPLP. The Trustee shall give such notice to the Master
Servicer and the Certificate Registrar at the time such notice is given to
Holders of the Certificates.
(iv) On the Acquisition Date, the Trustee shall (i) make payment to each
Holder of a Purchase Certificate of the Acquisition Price therefor in the
manner in which distributions are effected under this Agreement and (ii)
effect the transfer of each such Certificate (or interest therein) to OPLP,
which shall thereafter (unless it transfers such Certificate in accordance
with this Agreement) be the Holder (or Certificate Owner) of such Certificate
for all purposes. Notwithstanding the foregoing, in the event that all of
the Holders of Definitive Purchase Certificates do not surrender their
Certificates for purchase at the time specified in the above-mentioned
written notice, the Trustee shall give a second written notice to such
remaining Certificateholders to surrender their Certificates for purchase.
If within ten days after the second notice any Definitive Purchase
Certificates shall not have been surrendered for cancellation, the Trustee
may take appropriate steps to contact the remaining Certificateholders
concerning surrender of such Certificates, and the cost thereof shall be paid
out of the amounts distributable to such Holders. Subject to applicable law,
The Trustee shall hold all amounts payable to such Holders for the benefit of
such Holders. No interest shall accrue on any amount held by the Trustee and
not distributed to a Certificateholder due to such Certificateholder's
failure to surrender its Certificate(s) for payment of the Acquisition Price
thereon in accordance with this Section. Notwithstanding that any Definitive
Purchase Certificate has not been surrendered after notice and deposit of the
Acquisition Price as provided above, on the Acquisition Date the Trustee
shall cancel such Certificate and effect a transfer of such Certificate (or
interest therein) to OPLP, which shall thereafter (unless it transfers such
Certificate in accordance with this Agreement) be the Holder (or Certificate
Owner) of such Certificate for all purposes.
Section 7.02. Procedure Upon Termination of Trust Fund. (a) Notice
----------------------------------------
of any termination pursuant to the provisions of Section 7.01, specifying the
Distribution Date upon which the final distribution shall be made, shall be
given promptly by the Trustee by first class mail to Certificateholders
mailed upon (x) the sale of the property of the Trust Fund by the Trustee
pursuant to Section 7.01 (c), (y) no later than five Business Days after the
Trustee has received notice from the Class R Certificateholder of its intent
to exercise its right to cause the termination of the Trust Fund pursuant to
Section 7.01(b) or (z) upon the final payment or other liquidation of the
last Mortgage Loan or REO Property in the Trust Fund. Such notice shall
specify (A) the Distribution Date upon which final distribution on the
Certificates of all amounts required to be distributed to Certificateholders
pursuant to Section 5.02 will be made upon presentation and surrender of the
Certificates at the Corporate Trust Office, and (B) that the Record Date
otherwise applicable to such Distribution Date is not applicable,
distribution being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified. The
Trustee shall give such notice to the Master Servicer and the Certificate
Registrar at the time such notice is given to Holders of the Certificates.
Upon any such termination, the duties of the Certificate Registrar with
respect to the Certificates shall terminate and the Trustee shall terminate,
or request the Master Servicer to terminate, the Collection Account it
maintains, the Certificate Account and any other account or fund maintained
with respect to the Certificates, subject to the Trustee's obligation
hereunder to hold all amounts payable to Certificateholders in trust without
interest pending such payment.
(b) In the event that all of the Holders do not surrender their
Certificates for cancellation within three months after the time specified in
the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates
for cancellation and receive the final distribution with respect thereto. If
within one year after the second notice any Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps to
contact the remaining Certificateholders concerning surrender of such
Certificates, and the cost thereof shall be paid out of the amounts
distributable to such Holders. If within two years after the second notice
any Certificates shall not have been surrendered for cancellation, the
Trustee shall, subject to applicable state law relating to escheatment, hold
all amounts distributable to such Holders for the benefit of such Holders.
No interest shall accrue on any amount held by the Trustee and not
distributed to a Certificateholder due to such Certificateholder's failure to
surrender its Certificate(s) for payment of the final distribution thereon in
accordance with this Section.
Section 7.03. Additional Trust Fund Termination Requirements. (a)
----------------------------------------------
The Trust Fund shall be terminated in accordance with the following
additional requirements, unless the Trustee seeks (at the request of the
Master Servicer), and subsequently receives, an Opinion of Counsel (at the
expense of the Master Servicer), addressed to the Trustee to the effect that
the failure of the Trust Fund to comply with the requirements of this Section
7.03 will not (i) result in the imposition of taxes on any REMIC under the
REMIC Provisions or (ii) cause any REMIC established hereunder to fail to
qualify as a REMIC at any time that any Certificates are outstanding:
(i) Within 89 days prior to the time of the making of the final
payment on the Certificates, the Trustee (upon notification by the
Special Servicer or the Class X Certificateholder that it intends to
exercise its option to cause the termination of the Trust Fund) shall
adopt a plan of complete liquidation of the Trust Fund on behalf of each
REMIC, meeting the requirements of a qualified liquidation under the
REMIC Provisions;
(ii) The sale of the assets of the Trust Fund pursuant to Section
7.02 shall be a sale for cash and shall occur at or after the time of
adoption of such a plan of complete liquidation and prior to the time of
making of the final payment on the Certificates;
(iii) On the date specified for final payment of the
Certificates, the Trustee shall make final distributions of principal
and interest on the Certificates in accordance with Section 5.02 and,
after payment of, or provision for any outstanding expenses, distribute
or credit, or cause to be distributed or credited, to the Holders of the
Residual Certificates all cash on hand after such final payment (other
than cash retained to meet claims), and the Trust Fund (and each REMIC)
shall terminate at that time; and
(iv) In no event may the final payment on the Certificates or the
final distribution or credit to the Holders of the Residual Certificates
be made after the 89th day from the date on which the plan of complete
liquidation is adopted.
(b) By its acceptance of a Residual Certificate, each Holder
thereof hereby (i) authorizes the Trustee to take such action as may be
necessary to adopt a plan of complete liquidation of the related REMIC and
(ii) agrees to take such other action as may be necessary to adopt a plan of
complete liquidation of the related REMIC, which authorization shall be
binding upon all successor Residual Certificateholders.
ARTICLE VIII
RIGHTS OF CERTIFICATEHOLDERS
Section 8.01. Limitation on Rights of Holders. (a) The death or
-------------------------------
incapacity of any Certificateholder shall not operate to terminate this
Agreement or this Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or take any action or
proceeding in any court for a partition or winding up of this Trust Fund, nor
otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them. Except as otherwise expressly provided herein, no
Certificateholder, solely by virtue of its status as a Certificateholder,
shall have any right to vote or in any manner otherwise control the Master
Servicer or the operation and management of the Trust Fund, or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates, be construed so as to constitute
the Certificateholders from time to time as partners or members of an
association, nor shall any Certificateholder be under any liability to any
third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
(b) No Certificateholder, solely by virtue of its status as
Certificateholder, shall have any right by virtue or by availing of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of an
Event of Default and of the continuance thereof, as hereinbefore provided,
and unless also the Holders of Certificates evidencing not less than 25% of
the Class Certificate Principal Amount (or Percentage Interest) of
Certificates of each Class affected thereby shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name
as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the cost, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for sixty days after its
receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request has been given such Trustee during
such sixty-day period by such Certificateholders; it being understood and
intended, and being expressly covenanted by each Certificateholder with every
other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing of any provision of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of such Certificates, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Agreement, except in the manner herein provided
and for the benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 8.02. Access to List of Holders. (a) If the Trustee is not
-------------------------
acting as Certificate Registrar, the Certificate Registrar will furnish or
cause to be furnished to the Trustee, within fifteen days after receipt by
the Certificate Registrar of a request by the Trustee in writing, a list, in
such form as the Trustee may reasonably require, of the names and addresses
of the Certificateholders of each Class as of the most recent Record Date.
(b) If three or more Holders or Certificate Owners (hereinafter
referred to as "Applicants") apply in writing to the Trustee, and such
application states that the Applicants desire to communicate with other
Holders with respect to their rights under this Agreement or under the
Certificates and is accompanied by a copy of the communication which such
Applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, afford such Applicants reasonable
access during the normal business hours of the Trustee to the most recent
list of Certificateholders held by the Trustee or shall, as an alternative,
send, at the Applicants' expense, the written communication proffered by the
Applicants to all Certificateholders at their addresses as they appear in the
Certificate Register.
At the request of any Holder of a Senior Certificate, the Trustee shall
promptly inform such Holder of the identity of the Holder of the Class X
Certificate as of the date of such request.
(c) Every Holder or Certificate Owner, if the Holder is a Clearing
Agency, by receiving and holding a Certificate, agrees with the Depositor,
the Master Servicer, the Certificate Registrar and the Trustee that neither
the Depositor, the Master Servicer, the Certificate Registrar nor the Trustee
shall be held accountable by reason of the disclosure of any such information
as to the names and addresses of the Certificateholders hereunder, regardless
of the source from which such information was derived.
Section 8.03. Acts of Holders of Certificates. (a) Any request,
-------------------------------
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by Holders or Certificate
Owner, if the Holder is a Clearing Agency, may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such
Holders 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 Trustee and, where
expressly required herein, to the Master Servicer. Such instrument or
instruments (as the action embodies therein and evidenced thereby) are herein
sometimes referred to as an "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agents shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and Master Servicer, if made
in the manner provided in this Section. Each of the Trustee and Master
Servicer shall promptly notify the other of receipt of any such instrument by
it, and shall promptly forward a copy of such instrument to the other.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments or deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Whenever such execution is by an officer of a corporation
or a member of a partnership on behalf of such corporation or partnership,
such certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the individual executing the same, may also be
proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Certificates (whether or not such Certificates
shall be overdue and notwithstanding any notation of ownership or other
writing thereon made by anyone other than the Trustee) shall be proved by the
Certificate Register, and neither the Trustee, the Master Servicer, nor the
Depositor shall be affected by any notice to the contrary.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Certificate shall bind every
future Holder of the same Certificate and the Holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done
by the Trustee or the Master Servicer in reliance thereon, whether or not
notation of such action is made upon such Certificate.
ARTICLE IX
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
BY THE MASTER SERVICER
Section 9.01. Duties of the Master Servicer. The
-----------------------------
Certificateholders, by their purchase and acceptance of the Certificates,
appoint Norwest Bank Minnesota, National Association, as Master Servicer.
For and on behalf of the Depositor, the Trustee and the Certificateholders,
the Master Servicer shall master service the Mortgage Loans in accordance
with the provisions of this Agreement and the provisions of the applicable
Servicing Agreement.
Section 9.02. Master Servicer Fidelity Bond and Master Servicer
-------------------------------------------------
Errors and Omissions Insurance Policy. (a) The Master Servicer, at its
- - -------------------------------------
expense, shall maintain in effect a Master Servicer Fidelity Bond and a
Master Servicer Errors and Omissions Insurance Policy, affording coverage
with respect to all directors, officers, employees and other Persons acting
on such Master Servicer's behalf, and covering errors and omissions in the
performance of the Master Servicer's obligations hereunder. The Master
Servicer Errors and Omissions Insurance Policy and the Master Servicer
Fidelity Bond shall be in such form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Master Servicer shall (i) require each Servicer to maintain an Errors and
Omissions Insurance Policy and a Servicer Fidelity Bond in accordance with
the provisions of the applicable Servicing Agreement, (ii) cause each
Servicer to provide to the Master Servicer certificates evidencing that such
policy and bond is in effect and to furnish to the Master Servicer any notice
of cancellation, non-renewal or modification of the policy or bond received
by it, as and to the extent provided in the applicable Servicing Agreement,
and (iii) furnish copies of the certificates and notices referred to in
clause (ii) to the Trustee upon its request.
(b) The Master Servicer shall promptly report to the Trustee any
material changes that may occur in the Master Servicer Fidelity Bond or the
Master Servicer Errors and Omissions Insurance Policy and shall furnish to
the Trustee, on request, certificates evidencing that such bond and insurance
policy are in full force and effect. The Master Servicer shall promptly
report to the Trustee all cases of embezzlement or fraud, if such events
involve funds relating to the Mortgage Loans. The total losses, regardless
of whether claims are filed with the applicable insurer or surety, shall be
disclosed in such reports together with the amount of such losses covered by
insurance. If a bond or insurance claim report is filed with any of such
bonding companies or insurers, the Master Servicer shall promptly furnish a
copy of such report to the Trustee. Any amounts relating to the Mortgage
Loans collected by the Master Servicer under any such bond or policy shall be
promptly remitted by the Master Servicer to the Trustee for deposit into the
Certificate Account. Any amounts relating to the Mortgage Loans collected by
any Servicer under any such bond or policy shall be remitted to the Master
Servicer to the extent provided in the applicable Servicing Agreement.
Section 9.03. Master Servicer's Financial Statements and Related
--------------------------------------------------
Information. For each year this Agreement is in effect, the Master
- - -----------
Servicer shall submit to the Trustee, each Rating Agency and the Depositor a
copy of its annual unaudited financial statements on or prior to May 31 of
each year. Such financial statements shall include a balance sheet, income
statement, statement of retained earnings, statement of additional paid-in
capital, statement of changes in financial position and all related notes and
schedules and shall be in comparative form, certified by a nationally
recognized firm of Independent Accountants to the effect that such statements
were examined and prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of the preceding year.
Section 9.04. Power to Act; Procedures. (a) The Master Servicer
------------------------
shall master service the Mortgage Loans and shall have full power and
authority, subject to the REMIC Provisions and the provisions of Article X
hereof, and each Servicer shall have full power and authority (to the extent
delegated to such Servicer by the Master Servicer under the applicable
Servicing Agreement) to do any and all things that it may deem necessary or
desirable in connection with the servicing and administration of the Mortgage
Loans, including but not limited to the power and authority (i) to execute
and deliver, on behalf of the Certificateholders and the Trustee, customary
consents or waivers and other instruments and documents, (ii) to consent to
transfers of any Mortgaged Property and assumptions of the Mortgage Notes and
related Mortgages, (iii) to collect any Insurance Proceeds and Liquidation
Proceeds, and (iv) to effectuate foreclosure or other conversion of the
ownership of the Mortgaged Property securing any Mortgage Loan, in each case,
in accordance with the provisions of this Agreement and the related Servicing
Agreement, as applicable; provided that the Master Servicer shall not take,
or knowingly permit any Servicer to take, any action that is inconsistent
with or prejudices the interests of the Trust Fund or the Certificateholders
in any Mortgage Loan or the rights and interests of the Depositor, the
Trustee and the Certificateholders under this Agreement. The Master Servicer
shall represent and protect the interests of the Trust Fund in the same
manner as it protects its own interests in mortgage loans in its own
portfolio in any claim, proceeding or litigation regarding a Mortgage Loan
and shall not make or permit any Servicer to make any modification, waiver or
amendment of any term of any Mortgage Loan that would cause the Trust Fund to
fail to qualify as a REMIC or result in the imposition of any tax under
Section 860F(a) or Section 860G(d) of the Code. Without limiting the
generality of the foregoing, the Master Servicer in its own name or in the
name of a Servicer, and each Servicer, to the extent such authority is
delegated to such Servicer by the Master Servicer under the applicable
Servicing Agreement, is hereby authorized and empowered by the Trustee when
the Master Servicer or a Servicer, as the case may be, believes it
appropriate in its best judgment and in accordance with Accepted Servicing
Practices and the applicable Servicing Agreement, to execute and deliver, on
behalf of itself and the Certificateholders, the Trustee or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the Mortgaged Properties. The Trustee
shall furnish the Master Servicer, upon request, with any powers of attorney
empowering the Master Servicer or any Servicer to execute and deliver
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and to foreclose upon or otherwise liquidate Mortgaged Property,
and to appeal, prosecute or defend in any court action relating to the
Mortgage Loans or the Mortgaged Property, in accordance with the applicable
Servicing Agreement and this Agreement, and the Trustee shall execute and
deliver such other documents, as the Master Servicer may request, necessary
or appropriate to enable the Master Servicer to master service and administer
the Mortgage Loans and carry out its duties hereunder, in each case in
accordance with Accepted Servicing Practices (and the Trustee shall have no
liability for misuse of any such powers of attorney by the Master Servicer or
any Servicer). If the Master Servicer or the Trustee has been advised that
it is likely that the laws of the state in which action is to be taken
prohibit such action if taken in the name of the Trustee or that the Trustee
would be adversely affected under the "doing business" or tax laws of such
state if such action is taken in its name, then upon request of the Trustee,
the Master Servicer shall join with the Trustee in the appointment of a
co-trustee pursuant to Section 6.09 hereof. In the performance of its duties
hereunder, the Master Servicer shall be an independent contractor and shall
not, except in those instances where it is taking action in the name of the
Trustee, be deemed to be the agent of the Trustee.
(b) In master servicing and administering the Mortgage Loans, the
Master Servicer shall employ procedures, and shall cause each Servicer to
employ procedures (including, but not limited to, collection procedures),
consistent with the applicable Servicing Agreement. Consistent with the
foregoing, the Master Servicer may, and may permit any Servicer to, in its
discretion (i) waive any late payment charge or any prepayment charge or
penalty interest in connection with the prepayment of a Mortgage Loan and
(ii) extend the due dates for payments due on a Mortgage Note for a period
not greater than 120 days; provided, however, that the maturity of any
Mortgage Loan shall not be extended past the date on which the final payment
is due on the latest maturing Mortgage Loan as of the Cut-off Date. In the
event of any extension described in clause (ii) above, the Master Servicer
shall make or cause to be made Advances on the related Mortgage Loan in
accordance with the provisions of Section 5.04 on the basis of the
amortization schedule of such Mortgage Loan without modification thereof by
reason of such extension. Notwithstanding anything to the contrary in this
Agreement, the Master Servicer shall not, unless default by the related
Mortgagor is, in the reasonable judgment of the Master Servicer, imminent,
permit any modification, waiver or amendment of any material term of any
Mortgage Loan (including but not limited to the interest rate, the principal
balance, the amortization schedule, or any other term affecting the amount or
timing of payments on the Mortgage Loan or the collateral therefor) unless
the Master Servicer shall have provided or caused to be provided to the
Trustee an Opinion of Counsel in writing to the effect that such
modification, waiver or amendment would not be treated as giving rise to a
new debt instrument for federal income tax purposes and would not adversely
affect the status of the REMIC.
9.05. Servicing Agreements Between the Master Servicer and
----------------------------------------------------
Servicers; Enforcement of Servicers' Obligations. (a) Each Servicing
- - ------------------------------------------------
Agreement requires the applicable Servicer to service the Mortgage Loans in
accordance with the provisions thereof. References in this Agreement to
actions taken or to be taken by the Master Servicer include actions taken or
to be taken by a Servicer on behalf of the Master Servicer. Any fees paid to
such Servicers shall be paid by the Master Servicer (or deducted from amounts
remitted to the Master Servicer by the applicable Servicer) and shall not be
an obligation of the Trust.
(b) The Master Servicer, for the benefit of the Trustee and the
Certificateholders, shall enforce the obligations of each Servicer under the
related Servicing Agreement, and shall, in the event that a Servicer fails to
perform its obligations in accordance with the related Servicing Agreement,
terminate the rights and obligations of such Servicer thereunder and either
act as servicer of the related Mortgage Loans or enter into a Servicing
Agreement with a successor Servicer. Such enforcement, including, without
limitation, the legal prosecution of claims, termination of Servicing
Agreements and the pursuit of other appropriate remedies, shall be in such
form and carried out to such an extent and at such time as the Master
Servicer, in its good faith business judgment, would require were it the
owner of the related Mortgage Loans. The Master Servicer shall pay the costs
of such enforcement at its own expense, and shall be reimbursed therefor only
(i) from a general recovery resulting from such enforcement only to the
extent, if any, that such recovery exceeds all amounts due in respect of the
related Mortgage Loans or (ii) from a specific recovery of costs, expenses or
attorneys' fees against the party against whom such enforcement is directed.
Section 9.06. Collection of Taxes, Assessments and Similar Items.
--------------------------------------------------
(a) To the extent provided in the applicable Servicing Agreement, the Master
Servicer shall cause each Servicer to establish and maintain one or more
custodial accounts at a depository institution (which may be a depository
institution with which the Master Servicer or any Servicer establishes
accounts in the ordinary course of its servicing activities), the accounts of
which are insured to the maximum extent permitted by the FDIC (each, an
"Escrow Account") and shall deposit therein any collections of amounts
received with respect to amounts due for taxes, assessments, water rates,
Standard Hazard Insurance Policy premiums or any comparable items for the
account of the Mortgagors. Withdrawals from any Escrow Account may be made
(to the extent amounts have been escrowed for such purpose) only in
accordance with the applicable Servicing Agreement. Each Servicer shall be
entitled to all investment income not required to be paid to Mortgagors on
any Escrow Account maintained by such Servicer. The Master Servicer shall
make (or cause to be made) to the extent provided in the applicable Servicing
Agreement advances to the extent necessary in order to effect timely payment
of taxes, water rates, assessments, Standard Hazard Insurance Policy premiums
or comparable items in connection with the related Mortgage Loan (to the
extent that the Mortgagor is required, but fails, to pay such items),
provided that it has determined that the funds so advanced are recoverable
from escrow payments, reimbursement pursuant to Section 4.02(v) or otherwise.
(b) Costs incurred by the Master Servicer or by Servicers in effecting
the timely payment of taxes and assessments on the properties subject to the
Mortgage Loans may be added to the amount owing under the related Mortgage
Note where the terms of the Mortgage Note so permit; provided, however, that
the addition of any such cost shall not be taken into account for purposes of
calculating the distributions to be made to Certificateholders. Such costs,
to the extent that they are unanticipated, extraordinary costs, and not
ordinary or routine costs shall be recoverable by the Master Servicer
pursuant to Section 4.02(v).
Section 9.07. Termination of Servicing Agreements; Successor
----------------------------------------------
Servicers. (a) The Master Servicer shall be entitled to terminate the
- - ---------
rights and obligations of any Servicer under the applicable Servicing
Agreement in accordance with the terms and conditions of such Servicing
Agreement and without any limitation by virtue of this Agreement; provided,
however, that in the event of termination of Servicing Agreement by the
Master Servicer or the related Servicer, the Master Servicer shall provide
for the servicing of the related Mortgage Loans as follows: (i) upon any
such termination of Option One as Servicer, servicing of the related Mortgage
Loans shall be transferred to Aurora, provided that Aurora exercises its
option to acquire such servicing as provided below; (ii) upon any such
termination of Aurora as Servicer, servicing of the related Mortgage Loans
shall be transferred to the Special Servicer, provided that the Special
Servicer exercises its option to acquire such servicing as provided below;
and (iii) upon any such termination of Ocwen, a successor special servicer
shall be appointed as provided in the Special Servicing Agreement. In each
such case, servicing of the related Mortgage Loans shall be performed by the
applicable successor in accordance with the provisions of the Servicing
Agreement to which such successor is a party. In the event that any such
successor servicer fails to notify the Master Servicer within 15 days of such
proposed transfer described in clause (i) or (ii) above of its intention to
exercise its option to acquire such servicing and to service the related
Mortgage Loans in accordance with the terms of the applicable Servicing
Agreement, the Master Servicer shall appoint a successor servicer or special
servicer or shall itself (or through an Affiliate) act as servicer or special
servicer of the related Mortgage Loans.
Notwithstanding the foregoing provisions to the extent applicable to
termination of the rights and obligations of the Special Servicer, the
Directing Holder, if any, shall have the rights accorded to it under the
Special Servicing Agreement.
(b) If the Master Servicer acts as Servicer, it will not assume
liability for the representations and warranties of the Servicer, if any,
that it replaces. The Master Servicer shall use reasonable efforts to have
the successor Servicer assume liability for the representations and
warranties made by the terminated Servicer in respect of the related Mortgage
Loans, and in the event of any such assumption by the successor Servicer, the
Trustee or the Master Servicer, as applicable, may, in the exercise of its
business judgment, release the terminated Servicer from liability for such
representations and warranties.
Section 9.08. Master Servicer Liable for Enforcement.
--------------------------------------
Notwithstanding any Servicing Agreement, the Master Servicer shall remain
obligated and liable to the Trustee and the Certificateholders in accordance
with the provisions of this Agreement, to the extent of its obligations
hereunder, without diminution of such obligation or liability by virtue of
such Servicing Agreements or arrangements. The Master Servicer shall ensure
that the Mortgage Loans are serviced in accordance with the provisions of
this Agreement and shall enforce the provisions of each Servicing Agreement
for the benefit of the Certificateholders. The Master Servicer shall be
entitled to enter into any agreement with its Servicers for indemnification
of the Master Servicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
Section 9.09. No Contractual Relationship Between Servicers and
-------------------------------------------------
Trustee or Depositor. Any Servicing Agreement that may be entered into
- - --------------------
and any other transactions or services relating to the Mortgage Loans
involving a Servicer in its capacity as such and not as an originator shall
be deemed to be between such Servicer, Lehman Capital and the Master
Servicer, and the Trustee and the Depositor shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to such Servicer except as set forth in Section 9.10 hereof.
Section 9.10. Assumption of Servicing Agreement by Trustee. (a) In
--------------------------------------------
the event the Master Servicer shall for any reason no longer be the Master
Servicer (including by reason of any Event of Default under this Agreement),
the Trustee shall thereupon assume all of the rights and obligations of such
Master Servicer hereunder and under each Servicing Agreement entered into
with respect to the Mortgage Loans. The Trustee, its designee or any
successor master servicer appointed by the Trustee shall be deemed to have
assumed all of the Master Servicer's interest herein and therein to the same
extent as if such Servicing Agreement had been assigned to the assuming
party, except that the Master Servicer shall not thereby be relieved of any
liability or obligations of the Master Servicer under such Servicing
Agreement accruing prior to its replacement as Master Servicer, and shall be
liable to the Trustee, and hereby agrees to indemnify and hold harmless the
Trustee from and against all costs, damages, expenses and liabilities
(including reasonable attorneys' fees) incurred by the Trustee as a result of
such liability or obligations of the Master Servicer and in connection with
the Trustee's assumption (but not its performance, except to the extent that
costs or liability of the Trustee are created or increased as a result of
negligent or wrongful acts or omissions of the Master Servicer prior to its
replacement as Master Servicer) of the Master Servicer's obligations, duties
or responsibilities thereunder.
(b) The Master Servicer that has been terminated shall, upon request of
the Trustee but at the expense of such Master Servicer, deliver to the
assuming party all documents and records relating to each Servicing Agreement
and the related Mortgage Loans and an accounting of amounts collected and
held by it and otherwise use its best efforts to effect the orderly and
efficient transfer of each Servicing Agreement to the assuming party.
Section 9.11. "Due-on-Sale" Clauses; Assumption Agreements. To the
--------------------------------------------
extent provided in the applicable Servicing Agreement, to the extent Mortgage
Loans contain enforceable due-on-sale clauses, the Master Servicer shall
cause the Servicers to enforce such clauses in accordance with the applicable
Servicing Agreement. If applicable law prohibits the enforcement of a
due-on-sale clause or such clause is otherwise not enforced in accordance
with the applicable Servicing Agreement, and, as a consequence, a Mortgage
Loan is assumed, the original Mortgagor may be released from liability in
accordance with the applicable Servicing Agreement.
Section 9.12. Release of Mortgage Files. (a) Upon becoming aware
-------------------------
of the payment in full of any Mortgage Loan, or the receipt by the Master
Servicer of a notification that payment in full has been escrowed in a manner
customary for such purposes for payment to Certificateholders on the next
Distribution Date, the Master Servicer will, or will cause the applicable
Servicer to, promptly notify the Trustee (or the applicable Custodian) by a
certification (which certification shall include a statement to the effect
that all amounts received in connection with such payment that are required
to be deposited in the Collection Account maintained by the Master Servicer
pursuant to Section 4.01 have been or will be so deposited) of a Servicing
Officer and shall request the Trustee or the applicable Custodian, to deliver
to the applicable Servicer the related Mortgage File. Upon receipt of such
certification and request, the Trustee or the applicable Custodian (with the
consent, and at the direction of the Trustee), shall promptly release the
related Mortgage File to the applicable Servicer and the Trustee shall have
no further responsibility with regard to such Mortgage File. Upon any such
payment in full, the Master Servicer is authorized, and each Servicer, to the
extent such authority is delegated to such Servicer by the Master Servicer
under the applicable Servicing Agreement, is authorized, to give, as agent
for the Trustee, as the mortgagee under the Mortgage that secured the
Mortgage Loan, an instrument of satisfaction (or assignment of mortgage
without recourse) regarding the Mortgaged Property subject to the Mortgage,
which instrument of satisfaction or assignment, as the case may be, shall be
delivered to the Person or Persons entitled thereto against receipt therefor
of such payment, it being understood and agreed that no expenses incurred in
connection with such instrument of satisfaction or assignment, as the case
may be, shall be chargeable to the Collection Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan and in accordance with Accepted Servicing
Practices and the applicable Servicing Agreement, the Trustee shall execute
such documents as shall be prepared and furnished to the Trustee by the
Master Servicer, or by a Servicer (in form reasonably acceptable to the
Trustee) and as are necessary to the prosecution of any such proceedings.
The Trustee or the applicable Custodian, shall, upon request of the Master
Servicer, or of a Servicer, and delivery to the Trustee or the applicable
Custodian, of a trust receipt signed by a Servicing Officer substantially in
the form of Exhibit C, release the related Mortgage File held in its
possession or control to the Master Servicer (or the applicable Servicer).
Such trust receipt shall obligate the Master Servicer or applicable Servicer
to return the Mortgage File to the Trustee or applicable Custodian, as
applicable, when the need therefor by the Master Servicer or applicable
Servicer no longer exists unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of a certificate of a Servicing Officer similar to
that hereinabove specified, the trust receipt shall be released by the
Trustee or the applicable Custodian, as applicable, to the Master Servicer
(or the applicable Servicer).
Section 9.13. Documents, Records and Funds in Possession of Master
----------------------------------------------------
Servicer To Be Held for Trustee. (a) The Master Servicer shall transmit,
- - -------------------------------
or cause the applicable Servicer to transmit, to the Trustee such documents
and instruments coming into the possession of the Master Servicer or such
Servicer from time to time as are required by the terms hereof to be
delivered to the Trustee. Any funds received by the Master Servicer or by a
Servicer in respect of any Mortgage Loan or which otherwise are collected by
the Master Servicer or by a Servicer as Liquidation Proceeds or Insurance
Proceeds in respect of any Mortgage Loan shall be held for the benefit of the
Trustee and the Certificateholders subject to the Master Servicer's right to
retain or withdraw from the Collection Account the Master Servicing Fee and
other amounts provided in this Agreement, and to the right of each Servicer
to retain its Servicing Fee as provided in the applicable Servicing
Agreement. The Master Servicer shall, and shall (to the extent provided in
the applicable Servicing Agreement) cause each Servicer to, provide access to
information and documentation regarding the Mortgage Loans to the Trustee,
its agents and accountants at any time upon reasonable request and during
normal business hours, and to Certificateholders that are savings and loan
associations, banks or insurance companies, the Office of Thrift Supervision,
the FDIC and the supervisory agents and examiners of such Office and
Corporation or examiners of any other federal or state banking or insurance
regulatory authority if so required by applicable regulations of the Office
of Thrift Supervision or other regulatory authority, such access to be
afforded without charge but only upon reasonable request in writing and
during normal business hours at the offices of the Master Servicer designated
by it. In fulfilling such a request the Master Servicer shall not be
responsible for determining the sufficiency of such information.
(b) All Mortgage Files and funds collected or held by, or under the
control of, the Master Servicer, or any 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 Master
Servicer, or by any Servicer, for and on behalf of the Trustee and the
Certificateholders and shall be and remain the sole and exclusive property of
the Trustee; provided, however, that the Master Servicer and each Servicer
shall be entitled to setoff against, and deduct from, any such funds any
amounts that are properly due and payable to the Master Servicer or such
Servicer under this Agreement or the applicable Servicing Agreement.
(c) The Master Servicer hereby acknowledges that concurrently with the
execution of this Agreement, the Trustee shall own or, to the extent that a
court of competent jurisdiction shall deem the conveyance of the Mortgage
Loans from the Seller to the Depositor not to constitute a sale, the Trustee
shall have a security interest in the Mortgage Loans and in all Mortgage
Files representing such Mortgage Loans and in all funds now or hereafter held
by, or under the control of, a Servicer or the Master Servicer that are
collected by any Servicer or the Master Servicer in connection with the
Mortgage Loans, whether as scheduled installments of principal and interest
or as full or partial prepayments of principal or interest or as Liquidation
Proceeds or Insurance Proceeds or otherwise, and in all proceeds of the
foregoing and proceeds of proceeds (but excluding any fee or other amounts to
which a Servicer is entitled under its Servicing Agreement, or the Master
Servicer or the Depositor is entitled to hereunder); and the Master Servicer
agrees that so long as the Mortgage Loans are assigned to and held by the
Trustee, all documents or instruments constituting part of the Mortgage
Files, and such funds relating to the Mortgage Loans which come into the
possession or custody of, or which are subject to the control of, the Master
Servicer or any Servicer shall be held by the Master Servicer or such
Servicer for and on behalf of the Trustee as the Trustee's agent and bailee
for purposes of perfecting the Trustee's security interest therein as
provided by the applicable Uniform Commercial Code or other laws.
(d) The Master Servicer agrees that it shall not, and shall not
authorize any Servicer to, create, incur or subject any Mortgage Loans, or
any funds that are deposited in any custodial account, Escrow Account or the
Collection Account, or any funds that otherwise are or may become due or
payable to the Trustee, 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 setoff against any Mortgage Loan or any funds
collected on, or in connection with, a Mortgage Loan.
Section 9.14. Representations and Warranties of the Master Servicer.
-----------------------------------------------------
(a) The Master Servicer hereby represents and warrants to the Depositor and
the Trustee, for the benefit of the Certificateholders, as of the Closing
Date that:
(i) it is validly existing and in good standing under the laws of
the United States of America as a national banking association, and as
Master Servicer has full power and authority to transact any and all
business contemplated by this Agreement and to execute, deliver and
comply with its obligations under the terms of this Agreement, the
execution, delivery and performance of which have been duly authorized
by all necessary corporate action on the part of the Master Servicer;
(ii) the execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this
Agreement will not (A) violate the Master Servicer's charter or bylaws,
(B) violate any law or regulation or any administrative decree or order
to which it is subject or (C) constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or
other instrument to which the Master Servicer is a party or by which it
is bound or to which any of its assets are subject, which violation,
default or breach would materially and adversely affect the Master
Servicer's ability to perform its obligations under this Agreement;
(iii) this Agreement constitutes, assuming due authorization,
execution and delivery hereof by the other respective parties hereto, a
legal, valid and binding obligation of the Master Servicer, enforceable
against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors' rights
in general, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(iv) the Master Servicer is not in default with respect to any
order or decree of any court or any order or regulation of any federal,
state, municipal or governmental agency to the extent that any such
default would materially and adversely affect its performance hereunder;
(v) the Master Servicer is not a party to or bound by any
agreement or instrument or subject to any charter provision, bylaw or
any other corporate restriction or any judgment, order, writ,
injunction, decree, law or regulation that may materially and adversely
affect its ability as Master Servicer to perform its obligations under
this Agreement or that requires the consent of any third person to the
execution of this Agreement or the performance by the Master Servicer of
its obligations under this Agreement;
(vi) no litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which would
prohibit its entering into this Agreement or performing its obligations
under this Agreement;
(vii) the Master Servicer, or an affiliate thereof the primary
business of which is the servicing of conventional residential mortgage
loans, is an FNMA- and FHLMC-approved seller/servicer;
(viii) no consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Master Servicer of or compliance by the Master
Servicer with this Agreement or the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders (if any) as have been obtained;
(ix) the consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Master Servicer;
and
(x) the Master Servicer has obtained an Errors and Omissions
Insurance Policy and a Fidelity Bond, each of which is in full force and
effect, and each of which provides at least such coverage as is required
hereunder.
(b) It is understood and agreed that the representations and warranties
set forth in this Section 9.14 shall survive the execution and delivery of
this Agreement. The Master Servicer shall indemnify the Depositor and the
Trustee and hold them harmless against any loss, damages, penalties, fines,
forfeitures, 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 the Master Servicer's
representations and warranties contained in Section 9.14(a). It is
understood and agreed that the enforcement of the obligation of the Master
Servicer set forth in this Section to indemnify the Depositor and the Trustee
as provided in this Section constitutes the sole remedy (other than as set
forth in Section 6.14) of the Depositor and the Trustee, respecting a breach
of the foregoing representations and warranties. Such indemnification shall
survive any termination of the Master Servicer as Master Servicer hereunder,
and any termination of this Agreement.
Any cause of action against the Master Servicer relating to or arising
out of the breach of any representations and warranties made in this Section
shall accrue upon discovery of such breach by either the Depositor, the
Master Servicer or the Trustee or notice thereof by any one of such parties
to the other parties.
(c) It is understood and agreed that the representations and warranties
of the Depositor set forth in Sections 2.03(a) through (f) shall survive the
execution and delivery of this Agreement. The Depositor shall indemnify the
Master Servicer and hold it harmless against any loss, damages, penalties,
fines, forfeitures, 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 the Depositor's representa-
tions and warranties contained in Sections 2.03(a) through (f) hereof. It is
understood and agreed that the enforcement of the obligation of the Depositor
set forth in this Section to indemnify the Master Servicer as provided in
this Section constitutes the sole remedy of the Master Servicer respecting a
breach by the Depositor of the representations and warranties in Sections
2.03(a) through (f) hereof.
Any cause of action against the Depositor relating to or arising out of
the breach of the representations and warranties made in Sections 2.03(a)
through (f) hereof shall accrue upon discovery of such breach by either the
Depositor or the Master Servicer or notice thereof by any one of such parties
to the other parties.
Section 9.15. Closing Certificate and Opinion. On or before the
-------------------------------
Closing Date, the Master Servicer shall cause to be delivered to the
Depositor and Lehman Brothers Inc. an Opinion of Counsel, dated the Closing
Date, in form and substance reasonably satisfactory to the Depositor and
Lehman Brothers Inc., as to the due authorization, execution and delivery of
this Agreement by the Master Servicer and the enforceability thereof. The
Master Servicer shall also deliver an Officer's Certificate, dated the
Closing Date, to the effect that no Event of Default by the Master Servicer
has occurred hereunder.
Section 9.16. Standard Hazard and Flood Insurance Policies. For
--------------------------------------------
each Mortgage Loan, the Master Servicer shall maintain or cause to be
maintained standard fire and casualty insurance and, where applicable, flood
insurance, all in accordance with the provisions of this Agreement and the
related Servicing Agreement, as applicable. It is understood and agreed that
such insurance shall be with insurers meeting the eligibility requirements
set forth in the applicable Servicing Agreement and that no earthquake or
other additional insurance is to be required of any Mortgagor or to be
maintained on property acquired in respect of a defaulted loan, other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance.
Pursuant to Section 4.01, any amounts collected by the Master Servicer,
or by any Servicer, under any insurance policies maintained pursuant to this
Section 9.16 (other than amounts to be applied to the restoration or repair
of the property subject to the related Mortgage or released to the Mortgagor
in accordance with the applicable Servicing Agreement) shall be deposited
into the Collection Account, subject to withdrawal pursuant to Section 4.02.
Any cost incurred by the Master Servicer or any Servicer in maintaining any
such insurance if the Mortgagor defaults in its obligation to do so shall be
added to the amount owing under the Mortgage Loan where the terms of the
Mortgage Loan so permit; provided, however, that the addition of any such
cost shall not be taken into account for purposes of calculating the
distributions to be made to Certificateholders and shall be recoverable by
the Master Servicer or such Servicer pursuant to Section 4.02(v).
Section 9.17. Presentment of Claims and Collection of Proceeds. The
------------------------------------------------
Master Servicer shall, or shall cause each Servicer (to the extent provided
in the applicable Servicing Agreement) to, prepare and present on behalf of
the Trustee and the Certificateholders all claims under the Insurance
Policies with respect to the Mortgage Loans, and take such actions (including
the negotiation, settlement, compromise or enforcement of the insured's
claim) as shall be necessary to realize recovery under such policies. Any
proceeds disbursed to the Master Servicer (or disbursed to a Servicer and
remitted to the Master Servicer) in respect of such policies or bonds shall
be promptly deposited in the Collection Account upon receipt, except that any
amounts realized that are to be applied to the repair or restoration of the
related Mortgaged Property as a condition requisite to the presentation of
claims on the related Mortgage Loan to the insurer under any applicable
Insurance Policy need not be so deposited (or remitted).
Section 9.18. Maintenance of the Primary Mortgage Insurance
---------------------------------------------
Policies. (a) The Master Servicer shall not take, or permit any Servicer
- - --------
(consistent with the applicable Servicing Agreement) to take, any action that
would result in noncoverage under any applicable Primary Mortgage Insurance
Policy of any loss which, but for the actions of such Master Servicer or
Servicer, would have been covered thereunder. The Master Servicer shall use
its best reasonable efforts to keep in force and effect, or to cause each
Servicer to keep in force and effect (to the extent that the Mortgage Loan
requires the Mortgagor to maintain such insurance), primary mortgage
insurance applicable to each Mortgage Loan in accordance with the provisions
of this Agreement and the related Servicing Agreement, as applicable. The
Master Servicer shall not, and shall not permit any Servicer to, cancel or
refuse to renew any such Primary Mortgage Insurance Policy that is in effect
at the date of the initial issuance of the Certificates and is required to be
kept in force hereunder except in accordance with the provisions of this
Agreement and the related Servicing Agreement, as applicable.
(b) The Master Servicer agrees to present, or to cause each Servicer to
present, on behalf of the Trustee and the Certificateholders, claims to the
insurer under any Primary Mortgage Insurance Policies and, in this regard, to
take such reasonable action as shall be necessary to permit recovery under
any Primary Mortgage Insurance Policies respecting defaulted Mortgage Loans.
Pursuant to Section 4.01, any amounts collected by the Master Servicer or any
Servicer under any Primary Mortgage Insurance Policies shall be deposited in
the Collection Account, subject to withdrawal pursuant to Section 4.02.
Section 9.19. Trustee To Retain Possession of Certain Insurance
-------------------------------------------------
Policies and Documents. The Trustee (or its custodian, if any, as
- - ----------------------
directed by the Trustee), shall retain possession and custody of the
originals of the Primary Mortgage Insurance Policies or certificate of
insurance if applicable and any certificates of renewal as to the foregoing
as may be issued from time to time as contemplated by this Agreement. Until
all amounts distributable in respect of the Certificates have been
distributed in full and the Master Servicer otherwise has fulfilled its
obligations under this Agreement, the Trustee (or its custodian, if any, as
directed by the Trustee) shall also retain possession and custody of each
Mortgage File in accordance with and subject to the terms and conditions of
this Agreement. The Master Servicer shall promptly deliver or cause to be
delivered to the Trustee (or its custodian, if any, as directed by the
Trustee), upon the execution or receipt thereof the originals of the Primary
Mortgage Insurance Policies and any certificates of renewal thereof, and such
other documents or instruments that constitute portions of the Mortgage File
that come into the possession of the Master Servicer from time to time.
Section 9.20. Realization Upon Defaulted Mortgage Loans. Subject to
-----------------------------------------
the provisions of the Special Servicing Agreement, the Master Servicer shall
use its reasonable best efforts to, or to cause the Special Servicer to,
foreclose upon, repossess or otherwise comparably convert the ownership of
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments, all in accordance with the applicable
Servicing Agreement.
Section 9.21. Compensation to the Master Servicer. The Master
-----------------------------------
Servicer shall (i) be entitled, at its election, either (a) to pay itself the
Master Servicing Fee, as reduced pursuant to Section 5.05, in respect of the
Mortgage Loans out of any Mortgagor payment on account of interest prior to
the deposit of such payment in the Collection Account it maintains or (b) to
withdraw from the Collection Account, subject to Section 5.05, the Master
Servicing Fee to the extent permitted by Section 4.02(iv). The Master
Servicer shall also be entitled, at its election, either (a) to pay itself
the Master Servicing Fee in respect of each delinquent Mortgage Loan master
serviced by it out of Liquidation Proceeds in respect of such Mortgage Loan
or other recoveries with respect thereto to the extent permitted in Section
4.02 or (b) to withdraw from the Collection Account it maintains the Master
Servicing Fee in respect of each Liquidated Mortgage Loan to the extent of
such Liquidation Proceeds or other recoveries, to the extent permitted by
Section 4.02. Servicing compensation in the form of assumption fees, if any,
late payment charges, as collected, if any, or otherwise (but not including
any prepayment premium or penalty) shall be retained by the Master Servicer
(or the applicable Servicer) and shall not be deposited in the Collection
Account. If the Master Servicer does not retain or withdraw the Master
Servicing Fee from the Collection Account as provided herein, the Master
Servicer shall be entitled to direct the Trustee to pay the Master Servicing
Fee to such Master Servicer by withdrawal from the Certificate Account to the
extent that payments have been received with respect to the applicable
Mortgage Loan. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder and shall not be
entitled to reimbursement therefor except as provided in this Agreement.
Pursuant to Section 4.01(e), all income and gain realized from any investment
of funds in the Collection Account shall be for the benefit of the Master
Servicer as additional compensation. The provisions of this Section 9.21 are
subject to the provisions of Section 6.14(b).
Section 9.22. REO Property. (a) In the event the Trust Fund
------------
acquires ownership of any REO Property in respect of any Mortgage Loan, the
deed or certificate of sale shall be issued to the Trustee, or to its
nominee, on behalf of the Certificateholders. Subject to the provisions of
the Special Servicing Agreement, the Master Servicer shall use its reasonable
best efforts to sell, or, to the extent provided in the applicable Servicing
Agreement, cause the Special Servicer to sell, any REO Property as
expeditiously as possible and in accordance with the provisions of this
Agreement and the related Servicing Agreement, as applicable, but in all
events within the time period, and subject to the conditions set forth in
Article X hereof. Pursuant to its efforts to sell such REO Property, the
Master Servicer shall protect and conserve, or cause the Special Servicer to
protect and conserve, such REO Property in the manner and to such extent
required by the applicable Servicing Agreement, subject to Article X hereof.
(b) The Master Servicer shall deposit or cause to be deposited all
funds collected and received in connection with the operation of any REO
Property in the Collection Account it maintains.
(c) The Master Servicer and the applicable Servicer, upon the final
disposition of any REO Property, shall be entitled to reimbursement for any
related unreimbursed Advances and other unreimbursed advances as well as any
unpaid Master Servicing Fees or Servicing Fees from Liquidation Proceeds
received in connection with the final disposition of such REO Property;
provided, that any such unreimbursed Advances as well as any unpaid Master
Servicing Fees or Servicing Fees may be reimbursed or paid, as the case may
be, prior to final disposition, out of any net rental income or other net
amounts derived from such REO Property.
(d) The Liquidation Proceeds from the final disposition of the REO
Property, net of any payment to the Master Servicer and the applicable
Servicer as provided above and in the Special Servicing Agreement, shall be
deposited in the Collection Account on or prior to the Determination Date in
the month following receipt thereof (and the Master Servicer shall provide
prompt written notice to the Trustee upon such deposit) and be remitted by
wire transfer in immediately available funds to the Trustee for deposit into
the Certificate Account on the next succeeding Deposit Date.
Section 9.23. Preparation of Tax Returns and Other Reports. (a)
--------------------------------------------
The Master Servicer shall prepare or cause to be prepared on behalf of the
Trust Fund, based upon information calculated in accordance with this
Agreement pursuant to instructions given by the Depositor, and the Trustee
shall file, federal tax returns and appropriate state income tax returns and
such other returns as may be required by applicable law relating to the Trust
Fund, and the Trustee shall forward copies to the Depositor of all such
returns and Form 1099 information and such other information within the
control of the Trustee as the Depositor may reasonably request in writing,
and shall forward to each Certificateholder such forms and furnish such
information within the control of the Trustee as are required by the Code and
the REMIC Provisions to be furnished to them, and will prepare and file
annual reports required by applicable state authorities, will file copies of
this Agreement with the appropriate state authorities as may be required by
applicable law, and will prepare and disseminate to Certificateholders Form
1099 (or otherwise furnish information within the control of the Trustee) to
the extent required by applicable law. The Master Servicer will indemnify
the Trustee for any liability of or assessment against the Trustee resulting
from any error in any of such tax or information returns resulting from
errors in the information provided by such Master Servicer (other than any
such information that is derived solely from information provided by a
Servicer).
(b) The Master Servicer shall prepare and file with the Internal
Revenue Service ("IRS"), on behalf of the Trust Fund, an application on IRS
Form SS-4. The Master Servicer, upon receipt from the IRS of the Notice of
Taxpayer Identification Number Assigned, shall promptly forward a copy of
such notice to the Trustee and the Depositor.
(c) The Depositor shall prepare or cause to be prepared the initial
current report on Form 8-K and thereafter the Master Servicer will prepare or
cause to be prepared Form 10-Ks and Form 10-Qs (if necessary), or monthly
current reports on Form 8-K, on behalf of the Trust Fund, as may be required
by applicable law, for filing with the Securities and Exchange Commission
(the "SEC"). The Trustee will sign each such report on behalf of the Trust.
The Master Servicer will forward a copy of each such report to the Depositor
promptly after such report has been filed with the SEC. The Depositor agrees
to use its best efforts to seek to terminate such filing obligation after the
period during which such filings are required under the Securities Exchange
Act of 1934.
Section 9.24. Reports to the Trustee. (a) Not later than 30 days
----------------------
after each Distribution Date, the Master Servicer shall forward to the
Trustee a statement, deemed to have been certified by a Servicing Officer,
setting forth the status of the Collection Account maintained by the Master
Servicer as of the close of business on the related Distribution Date,
stating that all distributions required by this Agreement to be made by the
Master Servicer have been made (or if any required distribution has not been
made by the Master Servicer, specifying the nature and status thereof) and
showing, for the period covered by such statement, the aggregate of deposits
into and withdrawals from the Collection Account maintained by the Master
Servicer for each category of deposit specified in Section 4.01 and each
category of withdrawal specified in Section 4.02. Copies of such statement
shall be provided by the Master Servicer to the Depositor, Attention:
Contract Finance, and, upon request, to any Certificateholders (or by the
Trustee at the Master Servicer's expense if the Master Servicer shall fail to
provide such copies (unless (i) the Master Servicer shall have failed to
provide the Trustee with such statement or (ii) the Trustee shall be unaware
of the Master Servicer's failure to provide such statement)).
(b) Not later than two Business Days following each Distribution Date,
the Master Servicer shall deliver to the Person designated by the Depositor,
in a format consistent with other electronic loan level reporting supplied by
the Master Servicer in connection with similar transactions, "loan level"
information with respect to the Mortgage Loans as of the related
Determination Date, to the extent that such information has been provided to
the Master Servicer by the Servicers or by the Depositor.
Section 9.25. Annual Officer's Certificate as to Compliance. (a)
---------------------------------------------
The Master Servicer shall deliver to the Trustee and the Rating Agencies on
or before May 31 of each year, commencing on May 31, 1998, an Officer's
Certificate, certifying that with respect to the period ending December 31:
(i) such Servicing Officer has reviewed the activities of such Master
Servicer during the preceding calendar year or portion thereof and its
performance under this Agreement, (ii) to the best of such Servicing
Officer's knowledge, based on such review, such Master Servicer has performed
and fulfilled its duties, responsibilities and obligations under this
Agreement in all material respects throughout such year, or, if there has
been a default in the fulfillment of any such duties, responsibilities or
obligations, specifying each such default known to such Servicing Officer and
the nature and status thereof, (iii) such Servicing Officer has conducted an
examination of the activities of each Servicer during the preceding calendar
year and its performance under the related Servicing Agreement, (iv) the
Master Servicer has received from each Servicer such Servicer's annual
certificate of compliance, (v) to the best of such Servicing Officer's
knowledge, based on such examination, each Servicer has performed and
fulfilled its duties, responsibilities and obligations under its Servicing
Agreement in all material respects throughout such year, or, if there has
been a material default in the performance or fulfillment of any such duties,
responsibilities or obligations, specifying each such default known to such
Servicing Officer and the nature and status thereof.
(b) Copies of such statements shall be provided to any
Certificateholder upon request, by the Master Servicer or by the Trustee at
the Master Servicer's expense if the Master Servicer failed to provide such
copies (unless (i) the Master Servicer shall have failed to provide the
Trustee with such statement or (ii) the Trustee shall be unaware of the
Master Servicer's failure to provide such statement).
Section 9.26. Annual Independent Accountants' Servicing Report. If
------------------------------------------------
the Master Servicer has, during the course of any fiscal year, directly
serviced any of the Mortgage Loans, then the Master Servicer at its expense
shall cause a nationally recognized firm of independent certified public
accountants to furnish a statement to the Trustee, the Rating Agencies and
the Depositor on or before May 31 of each year, commencing on May 31, 1999 to
the effect that, with respect to the most recently ended fiscal year, such
firm has examined certain records and documents relating to the Master
Servicer's performance of its servicing obligations under this Agreement and
pooling and servicing and trust agreements in material respects similar to
this Agreement and to each other and that, on the basis of such examination
conducted substantially in compliance with the audit program for mortgages
serviced for FHLMC or the Uniform Single Attestation Program for Mortgage
Bankers, such firm is of the opinion that the Master Servicer's activities
have been conducted in compliance with this Agreement, or that such
examination has disclosed no material items of noncompliance except for (i)
such exceptions as such firm believes to be immaterial, (ii) such other
exceptions as are set forth in such statement and (iii) such exceptions that
the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages Serviced by FHLMC requires it to report. Copies of
such statements shall be provided to any Certificateholder upon request by
the Master Servicer, or by the Trustee at the expense of the Master Servicer
if the Master Servicer shall fail to provide such copies. If such report
discloses exceptions that are material, the Master Servicer shall advise the
Trustee whether such exceptions have been or are susceptible of cure, and
will take prompt action to do so.
Section 9.27. Merger or Consolidation. Any Person into which the
-----------------------
Master Servicer may be merged or consolidated, or any Person resulting from
any merger, conversion, other change in form or consolidation to which the
Master Servicer shall be a party, or any Person succeeding to the business of
the Master Servicer, shall be the successor to the Master Servicer hereunder,
without the execution or filing of any paper or any further act on the part
of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or resulting Person to
the Master Servicer shall be a Person that shall be qualified and approved to
service mortgage loans for FNMA or FHLMC and shall have a net worth of not
less than $15,000,000.
Section 9.28. Resignation of Master Servicer. Except as otherwise
------------------------------
provided in Sections 9.27 and 9.29 hereof, the Master Servicer shall not
resign from the obligations and duties hereby imposed on it unless it or the
Trustee determines that the Master Servicer's 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. Any such determination permitting the resignation of the Master
Servicer shall be evidenced by an Opinion of Counsel that shall be
Independent to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee shall have assumed, or a successor
master servicer shall have been appointed by the Trustee and until such
successor shall have assumed, the Master Servicer's responsibilities and
obligations under this Agreement. Notice of such resignation shall be given
promptly by the Master Servicer to the Depositor.
Section 9.29. Assignment or Delegation of Duties by the Master
------------------------------------------------
Servicer. Except as expressly provided herein, the Master Servicer shall
- - --------
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or subcontract with, or authorize or appoint
any other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder; provided, however, that the
Master Servicer shall have the right without the prior written consent of the
Trustee, the Depositor or the Rating Agencies to delegate or assign to or
subcontract with or authorize or appoint an Affiliate of the Master Servicer
to perform and carry out any duties, covenants or obligations to be performed
and carried out by the Master Servicer hereunder. In no case, however, shall
any such delegation, subcontracting or assignment to an Affiliate of the
Master Servicer relieve the Master Servicer of any liability hereunder.
Notice of such permitted assignment shall be given promptly by the Master
Servicer to the Depositor and the Trustee. If, pursuant to any provision
hereof, the duties of the Master Servicer are transferred to a successor
master servicer, the entire amount of the Master Servicing Fees and other
compensation payable to the Master Servicer pursuant hereto, including
amounts payable to or permitted to be retained or withdrawn by the Master
Servicer pursuant to Section 9.21 hereof, shall thereafter be payable to such
successor master servicer.
Section 9.30. Limitation on Liability of the Master Servicer and
--------------------------------------------------
Others. Neither the Master Servicer nor any of the directors, officers,
- - ------
employees or agents of the Master Servicer shall be under any liability to
the Trustee or the Certificateholders for any action taken or for refraining
from the taking of any action in good faith pursuant to this Agreement, or
for errors in judgment; provided, however, that this provision shall not
protect the Master Servicer or any such person against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in its performance of its duties or by reason of reckless
disregard for its obligations and duties under this Agreement. The Master
Servicer and any director, officer, employee or agent of the Master Servicer
may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising
hereunder. The Master Servicer shall be under no obligation to appear in,
prosecute or defend any legal action that is not incidental to its duties to
master service the Mortgage Loans in accordance with this Agreement and that
in its opinion may involve it in any expenses or liability; provided,
however, that the Master Servicer may in its sole discretion undertake any
such action that it may deem necessary or desirable in respect to this
Agreement and the rights and duties of the parties hereto and the interests
of the Certificateholders hereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust Fund and the Master Servicer shall be
entitled to be reimbursed therefor out of the Collection Account it maintains
as provided by Section 4.02.
The Master Servicer shall not be liable for any acts or omissions of any
Servicer. In particular, the Master Servicer shall not be liable for any
servicing errors or interruptions resulting from any failure of any Servicer
to maintain computer and other information systems that are year-2000
compliant.
Section 9.31. Indemnification; Third-Party Claims. The Master
-----------------------------------
Servicer agrees to indemnify the Depositor and the Trustee, and hold them
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, liability, fees
and expenses that the Depositor and the Trustee may sustain as a result of
the failure of the Master Servicer to perform its duties and master service
the Mortgage Loans in compliance with the terms of this Agreement. The
Depositor and the Trustee shall immediately notify the Master Servicer if a
claim is made by a third party with respect to this Agreement or the Mortgage
Loans entitling the Depositor or the Trustee to indemnification hereunder,
whereupon the Master Servicer shall assume the defense of any such claim and
pay all expenses in connection therewith, including counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be
entered against it or them in respect of such claim.
Section 9.32. Alternative Index. In the event that the Index for
-----------------
any Mortgage Loan, as specified in the related Mortgage Note, becomes
unavailable for any reason, the Master Servicer shall select an alternative
index, which in all cases shall be an index that constitutes a qualified rate
on a regular interest under the REMIC Provisions, in accordance with the
terms of such Mortgage Note or, if such Mortgage Note does not make provision
for the selection of an alternative index in such event, the Master Servicer
shall, subject to applicable law, select an alternative index based on
information comparable to that used in connection with the original Index
and, in either case, such alternative index shall thereafter be the Index for
such Mortgage Loan.
ARTICLE X
REMIC ADMINISTRATION
Section 10.01. REMIC Administration. (a) REMIC elections as set
--------------------
forth in the Preliminary Statement shall be made by the Trustee on Forms 1066
or other appropriate federal tax or information return for the taxable year
ending on the last day of the calendar year in which the Certificates are
issued. The regular interests and residual interest in each REMIC shall be
as designated in the Preliminary Statement.
(b) The Closing Date is hereby designated as the "Startup Day" of each
REMIC within the meaning of section 86OG(a)(9) of the Code.
(c) The Master Servicer shall pay any and all tax related expenses (not
including taxes) of each REMIC, including but not limited to any professional
fees or expenses related to audits or any administrative or judicial
proceedings with respect to such REMIC that involve the Internal Revenue
Service or state tax authorities, but only to the extent that (i) such
expenses are ordinary or routine expenses, including expenses of a routine
audit but not expenses of litigation (except as described in (ii)); or (ii)
such expenses or liabilities (including taxes and penalties) are attributable
to the negligence or willful misconduct of the Master Servicer in fulfilling
its duties hereunder (including its duties as tax return preparer). The
Master Servicer shall be entitled to reimbursement of expenses to the extent
provided in clause (i) above from the Collection Account.
(d) The Master Servicer shall prepare, and the Trustee shall sign and
file, all of each REMIC's federal and state tax and information returns as
such REMIC's direct representative. The expenses of preparing and filing
such returns shall be borne by the Master Servicer.
(e) The Master Servicer shall act as Tax Matters Person for each REMIC.
The Master Servicer or its designee shall perform on behalf of each REMIC all
reporting and other tax compliance duties that are the responsibility of such
REMIC under the Code, the REMIC Provisions, or other compliance guidance
issued by the Internal Revenue Service or any state or local taxing
authority. Among its other duties, if required by the Code, the REMIC
Provisions, or other such guidance, the Master Servicer shall provide (i) to
the Treasury or other governmental authority such information as is necessary
for the application of any tax relating to the transfer of a Residual
Certificate to any disqualified person or organization and (ii) to the
Certificateholders such information or reports as are required by the Code or
REMIC Provisions.
(f) The Trustee, the Master Servicer and the Holders of Certificates
shall take any action or cause the REMIC to take any action necessary to
create or maintain the status of such REMIC as a REMIC under the REMIC
Provisions and shall assist each other as necessary to create or maintain
such status. Neither the Trustee, the Master Servicer nor the Holder of any
Residual Certificate shall take any action, cause the REMIC to take any
action or fail to take (or fail to cause to be taken) any action that, under
the REMIC Provisions, if taken or not taken, as the case may be, could (i)
endanger the status of such REMIC as a REMIC or (ii) result in the imposition
of a tax upon such REMIC (including but not limited to the tax on prohibited
transactions as defined in Code Section 860F(a)(2) and the tax on prohibited
contributions set forth on Section 860G(d) of the Code) (either such event,
an "Adverse REMIC Event") unless the Trustee and the Master Servicer have
received an Opinion of Counsel (at the expense of the party seeking to take
such action) to the effect that the contemplated action will not endanger
such status or result in the imposition of such a tax. In addition, prior to
taking any action with respect to the REMIC or the assets therein, or causing
such REMIC to take any action, which is not expressly permitted under the
terms of this Agreement, any Holder of a Residual Certificate will consult
with the Trustee and the Master Servicer, or their respective designees, in
writing, with respect to whether such action could cause an Adverse REMIC
Event to occur with respect to such REMIC, and no such Person shall take any
such action or cause such REMIC to take any such action as to which the
Trustee or the Master Servicer has advised it in writing that an Adverse
REMIC Event could occur.
(g) Each Holder of a Residual Certificate shall pay when due any and
all taxes imposed on the related REMIC by federal or state governmental
authorities. To the extent that such Trust taxes are not paid by a Residual
Certificateholder, the Trustee shall pay any remaining REMIC taxes out of
current or future amounts otherwise distributable to the Holder of the
Residual Certificate in such REMIC or, if no such amounts are available, out
of other amounts held in the Collection Account, and shall reduce amounts
otherwise payable to holders of regular interests in such REMIC, as the case
may be.
(h) The Master Servicer shall, for federal income tax purposes,
maintain books and records with respect to each REMIC on a calendar year and
on an accrual basis.
(i) No additional contributions of assets shall be made to any REMIC,
except as expressly provided in this Agreement with respect to eligible
substitute mortgage loans.
(j) Neither the Trustee nor the Master Servicer shall enter into any
arrangement by which any REMIC will receive a fee or other compensation for
services.
(k) On or before April 15 of each calendar year beginning in 1999, the
Master Servicer shall deliver to the Trustee and each Rating Agency an
Officer's Certificate stating the Master Servicer's compliance with the
provisions of this Section 10.01.
(l) The Trustee shall treat the Basis Risk Reserve Fund as an outside
reserve fund within the meaning of Treasury Regulation Section 1.860G-2(h)
that is owned by the Class X Certificateholder and that is not an asset of
the REMIC. The Trustee shall treat the rights of the Class A-1, Class A-2,
Class M-1, Class M-2, and Class B Certificateholders to receive payments from
the Basis Risk Reserve Fund in the event of a Basis Risk Shortfall as rights
in an interest rate cap contract written by the Class X Certificateholder in
favor of the Class A-1, Class A-2, Class M-1, Class M-2, and Class B
Certificateholders. Thus, each Class A-1, Class A-2, Class M-1, Class M-2,
and Class B Certificate shall be treated as representing not only ownership
of regular interests in REMIC 4, but also ownership of an interest in an
interest rate cap contract. For purposes of determining the issue prices of
the REMIC 4 regular interests, the Trustee shall assume that the interest
rate cap contract has a value of $1,000.
Section 10.02. Prohibited Transactions and Activities. Neither the
--------------------------------------
Depositor, the Master Servicer nor the Trustee shall sell, dispose of, or
substitute for any of the Mortgage Loans, except in a disposition pursuant to
(i) the foreclosure of a Mortgage Loan, (ii) the bankruptcy of the Trust
Fund, (iii) the termination of each REMIC pursuant to Article VII of this
Agreement, (iv) a substitution pursuant to Article II of this Agreement or
(v) a repurchase of Mortgage Loans pursuant to Article II of this Agreement,
nor acquire any assets for any REMIC, nor sell or dispose of any investments
in the Certificate Account for gain, nor accept any contributions to the
REMIC after the Closing Date, unless it has received an Opinion of Counsel
(at the expense of the party causing such sale, disposition, or substitution)
that such disposition, acquisition, substitution, or acceptance will not (a)
affect adversely the status of such REMIC as a REMIC or of the interests
therein other than the Residual Certificates as the regular interests
therein, (b) affect the distribution of interest or principal on the
Certificates, (c) result in the encumbrance of the assets transferred or
assigned to the Trust Fund (except pursuant to the provisions of this
Agreement) or (d) cause such REMIC to be subject to a tax on prohibited
transactions or prohibited contributions pursuant to the REMIC Provisions.
Section 10.03. Indemnification with Respect to Certain Taxes and
-------------------------------------------------
Loss of REMIC Status. (a) In the event that any REMIC fails to qualify
- - --------------------
as a REMIC, loses its status as a REMIC, or incurs federal, state or local
taxes as a result of a prohibited transaction or prohibited contribution
under the REMIC Provisions due to the negligent performance by the Master
Servicer of its duties and obligations set forth herein, the Master Servicer
shall indemnify the Holder of the related Residual Certificate against any
and all losses, claims, damages, liabilities or expenses ("Losses") resulting
from such negligence; provided, however, that the Master Servicer shall not
be liable for any such Losses attributable to the action or inaction of the
Trustee, the Depositor, the Class X Certificateholder or the Holder of such
Residual Certificate, as applicable, nor for any such Losses resulting from
misinformation provided by the Holder of such Residual Certificate on which
the Master Servicer has relied. The foregoing shall not be deemed to limit
or restrict the rights and remedies of the Holder of such Residual
Certificate now or hereafter existing at law or in equity. Notwithstanding
the foregoing, however, in no event shall the Master Servicer have any
liability (1) for any action or omission that is taken in accordance with and
in compliance with the express terms of, or which is expressly permitted by
the terms of, this Agreement, (2) for any Losses other than arising out of a
negligent performance by the Master Servicer of its duties and obligations
set forth herein, and (3) for any special or consequential damages to
Certificateholders (in addition to payment of principal and interest on the
Certificates).
(b) If the Internal Revenue Service determines that one of the REMICs
established hereunder recognized income from a prohibited transaction within
the meaning of Section 860F(a)(2) of the Code as a result of the lapse of the
Class X Certificateholder's right to effect a Special Termination of the
Trust Fund by purchasing the assets of the Trust Fund, then the Seller shall
indemnify the Trust Fund for any such tax.
Section 10.04. REO Property. (a) Notwithstanding any other
------------
provision of this Agreement, the Master Servicer, acting on behalf of the
Trustee hereunder, shall not, and shall, to the extent provided in the
applicable Servicing Agreement, not permit any Servicer to, rent, lease, or
otherwise earn income on behalf of any REMIC with respect to any REO Property
which might cause such REO Property to fail to qualify as "foreclosure"
property within the meaning of section 860G(a)(8) of the Code or result in
the receipt by any REMIC of any "income from non-permitted assets" within the
meaning of section 860F(a)(2) of the Code or any "net income from foreclosure
property" which is subject to tax under the REMIC Provisions unless the
Master Servicer has advised, or has caused the applicable Servicer to advise,
the Trustee in writing to the effect that, under the REMIC Provisions, such
action would not adversely affect the status of the REMIC as a REMIC and any
income generated for such REMIC by the REO Property would not result in the
imposition of a tax upon such REMIC.
(b) The Master Servicer shall make, or shall cause the Special Servicer
to make, reasonable efforts to sell any REO Property for its fair market
value. In any event, however, the Master Servicer shall, or shall cause the
Special Servicer to, dispose of any REO Property within three years of its
acquisition by the Trust Fund unless the Trustee has received a grant of
extension from the Internal Revenue Service to the effect that, under the
REMIC Provisions and any relevant proposed legislation and under applicable
state law, the REMIC may hold REO Property for a longer period without
adversely affecting the REMIC status of such REMIC or causing the imposition
of a Federal or state tax upon such REMIC. If the Trustee has received such
an extension, then the Trustee, or the Master Servicer, acting on its behalf
hereunder, shall, or shall cause the Special Servicer to, continue to attempt
to sell the REO Property for its fair market value for such period longer
than three years as such extension permits (the "Extended Period"). If the
Trustee has not received such an extension and the Trustee, or the Master
Servicer acting on behalf of the Trustee hereunder, or the Special Servicer
is unable to sell the REO Property within 33 months after its acquisition by
the Trust Fund or if the Trustee has received such an extension, and the
Trustee, or the Master Servicer acting on behalf of the Trustee hereunder, is
unable to sell the REO Property within the period ending three months before
the close of the Extended Period, the Master Servicer shall, or shall cause
the Special Servicer to, before the end of the three year period or the
Extended Period, as applicable, (i) purchase such REO Property at a price
equal to the REO Property's fair market value or (ii) auction the REO
Property to the highest bidder (which may be the Master Servicer or the
Special Servicer) in an auction reasonably designed to produce a fair price
prior to the expiration of the three-year period or the Extended Period, as
the case may be.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. 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.
Section 11.02. Entire Agreement. This Agreement contains the entire
----------------
agreement and understanding among 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, of any nature whatsoever with respect to the subject matter
hereof. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms
hereof.
Section 11.03. Amendment. (a) This Agreement may be amended from
---------
time to time by the Depositor, the Master Servicer and the Trustee, without
notice to or the consent of any of the Holders, (i) to cure any ambiguity,
(ii) to cause the provisions herein to conform to or be consistent with or in
furtherance of the statements made with respect to the Certificates, the
Trust Fund or this Agreement in any Offering Document, or to correct or
supplement any provision herein which may be inconsistent with any other
provisions herein, (iii) to make any other provisions with respect to matters
or questions arising under this Agreement or (iv) to add, delete, or amend
any provisions to the extent necessary or desirable to comply with any
requirements imposed by the Code and the REMIC Provisions. No such amendment
effected pursuant to the preceding sentence shall, as evidenced by an Opinion
of Counsel, adversely affect the status of any REMIC created pursuant to this
Agreement, nor shall such amendment effected pursuant to clause (iii) of such
sentence adversely affect in any material respect the interests of any
Holder. Prior to entering into any amendment without the consent of Holders
pursuant to this paragraph, the Trustee may require an Opinion of Counsel (at
the expense of the party requesting such amendment) to the effect that such
amendment is permitted under this paragraph. Any such amendment shall be
deemed not to adversely affect in any material respect any Holder, if the
Trustee receives written confirmation from each Rating Agency that such
amendment will not cause such Rating Agency to reduce the then current rating
assigned to the Certificates (and any Opinion of Counsel requested by the
Trustee in connection with any such amendment may rely expressly on such
confirmation as the basis therefor).
(b) This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the
Holders of not less than 66-2/3% of the Class Certificate Principal Amount
(or Percentage Interest) of each Class of Certificates affected thereby for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders; provided, however, that no such amendment
shall be made unless the Trustee receives an Opinion of Counsel, at the
expense of the party requesting the change, that such change will not
adversely affect the status of any REMIC as a REMIC or cause a tax to be
imposed on such REMIC; and provided further, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, payments received
on Mortgage Loans which are required to be distributed on any Certificate,
without the consent of the Holder of such Certificate or (ii) reduce the
aforesaid percentages of Class Certificate Principal Amount (or Aggregate
Notional Amount) of Certificates of each Class, the Holders of which are
required to consent to any such amendment without the consent of the Holders
of 100% of the Class Certificate Principal Amount (or Aggregate Notional
Amount) of each Class of Certificates affected thereby. For purposes of this
paragraph, references to "Holder" or "Holders" shall be deemed to include, in
the case of any Class of Book-Entry Certificates, the related Certificate
Owners.
(c) Promptly after the execution of any such amendment, the Trustee
shall furnish written notification of the substance of such amendment to each
Holder, the Depositor and to the Rating Agencies.
(d) It shall not be necessary for the consent of Holders under this
Section 11.03 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.
The manner of obtaining such consents and of evidencing the authorization of
the execution thereof by Holders shall be subject to such reasonable
regulations as the Trustee may prescribe.
(e) Notwithstanding anything to the contrary in any Servicing
Agreement, the Trustee shall not consent to any amendment of any Servicing
Agreement except pursuant to the standards provided in this Section with
respect to amendment of this Agreement.
Section 11.04. Voting Rights. Except to the extent that the consent
-------------
of all affected Certificateholders is required pursuant to this Agreement,
with respect to any provision of this Agreement requiring the consent of
Certificateholders representing specified percentages of aggregate
outstanding Certificate Principal Amount (or Percentage Interest),
Certificates owned by the Depositor, the Master Servicer, the Trustee or any
Servicer or Affiliates thereof are not to be counted so long as such
Certificates are owned by the Depositor, the Master Servicer, the Trustee or
any Servicer or any Affiliate thereof.
Section 11.05. Provision of Information. (a) For so long as any of
------------------------
the Certificates of any Series or Class are "restricted securities" within
the meaning of Rule 144(a)(3) under the Act, each of the Depositor and the
Trustee agree to cooperate with each other to provide to any
Certificateholders and to any prospective purchaser of Certificates
designated by such Certificateholder, upon the request of such
Certificateholder or prospective purchaser, any information required to be
provided to such holder or prospective purchaser to satisfy the condition set
forth in Rule 144A(d)(4) under the Act. Any reasonable, out-of-pocket
expenses incurred by the Trustee in providing such information shall be
reimbursed by the Depositor.
(b) The Trustee will provide to any person to whom a Prospectus was
delivered, upon the request of such person specifying the document or
documents requested, (i) a copy (excluding exhibits) of any report on Form 8-
K or Form 10-K filed with the Securities and Exchange Commission pursuant to
Section 9.23(c) and (ii) a copy of any other document incorporated by
reference in the Prospectus. Any reasonable out-of-pocket expenses incurred
by the Trustee in providing copies of such documents shall be reimbursed by
the Depositor.
(c) On each Distribution Date, the Trustee shall deliver or cause to be
delivered by first class mail to the Depositor, Attention: Contract Finance,
a copy of the report delivered to Certificateholders pursuant to Section
4.03.
Section 11.06. 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 REGARD TO CONFLICT OF LAWS PRINCIPLES
APPLIED IN NEW YORK.
Section 11.07. Notices. All demands, notices and communications
-------
hereunder shall be in writing and shall be deemed to have been duly given
when received by (a) in the case of the Depositor, Structured Asset
Securities Corporation, 200 Vesey Street, 12th Floor, New York, New York
10285, Attention: Mark Zusy, (b) in the case of the Trustee, First Union
National Bank, 230 South Tryon Street NC1179, Charlotte, North Carolina
28288, Attention: Structured Finance, and (c) in the case of the Master
Servicer, Norwest Bank Minnesota, National Association, 11000 Broken Land
Parkway, Columbia, Maryland 21044; Attention: Master Servicing, or as to
each party such other address as may hereafter be furnished by such party to
the other parties in writing. Any notice required or permitted to be mailed
to a Holder shall be given by first class mail, postage prepaid, at the
address of such Holder 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 Holder receives such
notice.
Section 11.08. Severability of Provisions. If any one or more of
--------------------------
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or
of the Certificates or the rights of the Holders thereof.
Section 11.09. Indulgences; No Waivers. Neither the failure nor any
-----------------------
delay on the part of a party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or of any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power
or privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.
Section 11.10. Headings Not To Affect Interpretation. The headings
-------------------------------------
contained in this Agreement are for convenience of reference only, and they
shall not be used in the interpretation hereof.
Section 11.11. Benefits of Agreement. Nothing in this Agreement or
---------------------
in the Certificates, express or implied, shall give to any Person, other than
the parties to this Agreement and their successors hereunder and the Holders
of the Certificates, any benefit or any legal or equitable right, power,
remedy or claim under this Agreement, except to the extent specified in
Section 11.14.
Section 11.12. Special Notices to the Rating Agencies. (a) The
--------------------------------------
Depositor shall give prompt notice to the Rating Agencies of the occurrence
of any of the following events of which it has notice:
(i) any amendment to this Agreement pursuant to Section
11.03;
(ii) any Assignment by the Master Servicer of its rights
hereunder or delegation of its duties hereunder;
(iii) the occurrence of any Event of Default described in
Section 6.14;
(iv) any notice of termination given to the Master Servicer
pursuant to Section 6.14 and any resignation of the Master Servicer
hereunder;
(v) the appointment of any successor to any Master Servicer
pursuant to Section 6.14; and
(vi) the making of a final payment pursuant to Section 7.02.
(vii) any termination of the rights and obligations of any
Servicer under the applicable Servicing Agreement.
(b) All notices to the Rating Agencies provided for this Section
shall be in writing and sent by first class mail, telecopy or overnight
courier, as follows:
If to Fitch, to:
Fitch IBCA, Inc.
1201 East 7th Street
Powell, Wyoming 82435
Attention: Residential Mortgage Surveillance
If to S&P, to:
Standard & Poor's Rating Services
26 Broadway, 15th Floor
New York, New York 10004
Attention: Residential Mortgages
(c) The Trustee shall deliver to the Rating Agencies reports
prepared pursuant to Section 4.03.
Section 11.13. Counterparts. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed to be an original, and
all of which together shall constitute one and the same instrument.
Section 11.14. Transfer of Servicing. Lehman Capital agrees that it
---------------------
shall provide written notice to the Trustee and the Master Servicer thirty
days prior to any transfer or assignment by Lehman Capital of its rights
under any Servicing Agreement or of the servicing thereunder or delegation of
its rights or duties thereunder or any portion thereof to any Person other
than the initial Servicer under such Servicing Agreement. In addition, the
ability of Lehman Capital to transfer or assign its rights and delegate its
duties under any Servicing Agreement or to transfer the servicing thereunder
to a successor servicer shall be subject to the following conditions:
(i) Such successor servicer must be qualified to service loans for
FNMA or FHLMC;
(ii) Such successor servicer must satisfy the seller/servicer
eligibility standards in the applicable Servicing Agreement, exclusive
of any experience in mortgage loan origination, and must be reasonably
acceptable to the Master Servicer, whose approval shall not be
unreasonably withheld;
(iii) Such successor servicer must execute and deliver to the
Trustee and the Master Servicer an agreement, in form and substance
reasonably satisfactory to the Trustee and the Master Servicer, that
contains an assumption by such successor servicer of the due and
punctual performance and observance of each covenant and condition to be
performed and observed by the Servicer under the applicable Servicing
Agreement;
(iv) There must be delivered to the Trustee a letter from each
Rating Agency to the effect that such transfer of servicing will not
result in a qualification, withdrawal or downgrade of the then-current
rating of any of the Certificates;
(v) Lehman Capital shall, at its cost and expense, take such
steps, or cause the terminated Servicer to take such steps, as may be
necessary or appropriate to effectuate and evidence the transfer of the
servicing of the Mortgage Loans to such successor servicer, including,
but not limited to, the following: (A) to the extent required by the
terms of the Mortgage Loans and by applicable federal and state laws and
regulations, Lehman Capital shall cause the prior Servicer to timely
mail to each obligor under a Mortgage Loan any required notices or
disclosures describing the transfer of servicing of the Mortgage Loans
to the successor servicer; (B) prior to the effective date of such
transfer of servicing, Lehman Capital shall cause the prior Servicer to
transmit to any related insurer notification of such transfer of
servicing; (C) on or prior to the effective date of such transfer of
servicing, Lehman Capital shall cause the prior Servicer to deliver to
the successor servicer all Mortgage Loan Documents and any related
records or materials; (D) on or prior to the effective date of such
transfer of servicing, Lehman Capital shall cause the prior Servicer to
transfer to the successor servicer, or, if such transfer occurs after a
Remittance Date but before the next succeeding Deposit Date, to the
Master Servicer, all funds held by the Servicer in respect of the
Mortgage Loans; (E) on or prior to the effective date of such transfer
of servicing, Lehman Capital shall cause the prior Servicer to, after
the effective date of the transfer of servicing to the successor
servicer, continue to forward to such successor servicer, within one
Business Day of receipt, the amount of any payments or other recoveries
received by the prior Servicer, and to notify the successor servicer of
the source and proper application of each such payment or recovery; and
(F) Lehman Capital shall cause the prior Servicer to, after the
effective date of transfer of servicing to the successor servicer,
continue to cooperate with the successor servicer to facilitate such
transfer in such manner and to such extent as the successor servicer may
reasonably request.
IN WITNESS WHEREOF, the Depositor, the Trustee and the Master Servicer
have caused their names to be signed hereto by their respective officers
hereunto duly authorized as of the day and year first above written.
STRUCTURED ASSET SECURITIES
CORPORATION, as Depositor
By:
------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
-----------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Master Servicer
By:
-----------------------------
Name:
Title:
Solely for purposes of Section 11.14,
accepted and agreed to by:
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
By:___________________________________
Name:
Title:
EXHIBIT A
---------
FORMS OF CERTIFICATES
EXHIBIT B-1
-----------
FORM OF INITIAL CERTIFICATION
----------------------------
Date
Structured Asset Securities Corporation
200 Vesey Street
New York, New York 10285
Re: Trust Agreement (the "Trust Agreement"), dated as of March 1,
---------------
1998 among Structured Asset Securities Corporation, as Depositor,
First Union National Bank, as Trustee, and Norwest Bank Minnesota,
National Association, as Master Servicer, with respect to Structured
Asset Securities Corporation Mortgage Pass-Through Certificates,
Series 1998-3
Ladies and Gentlemen:
In accordance with Section 2.02(a) of the Trust Agreement, subject to
review of the contents thereof, the undersigned, as Trustee, hereby certifies
that it (or its custodian) has received the documents listed in Section
2.01(b) of the Trust Agreement for each Mortgage File pertaining to each
Mortgage Loan listed on Schedule A, to the Trust Agreement, subject to any
exceptions noted on Schedule I hereto.
Capitalized words and phrases used herein and not otherwise defined
herein shall have the respective meanings assigned to them in the Trust
Agreement. This Certificate is subject in all respects to the terms of
Section 2.02 of the Trust Agreement and the Trust Agreement sections
cross-referenced therein.
((Custodian), on behalf of)
FIRST UNION NATIONAL BANK,
as Trustee
By:______________________________
Name:
Title:
EXHIBIT B-2
-----------
FORM OF INTERIM CERTIFICATION
---------------------------
Date
Structured Asset Securities Corporation
200 Vesey Street
New York, New York 10285
Re: Trust Agreement (the "Trust Agreement"), dated as of March 1, 1998
among Structured Asset Securities Corporation, as Depositor, First
Union National Bank, as Trustee, and Norwest Bank Minnesota,
National Association, as Master Servicer, with respect to
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1998-3
Ladies and Gentlemen:
In accordance with Section 2.02(b) of the Trust Agreement, the
undersigned, as Trustee, hereby certifies that as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or listed on Schedule I hereto) it (or its custodian) has received the
applicable documents listed in Section 2.01(b) of the Trust Agreement.
The undersigned hereby certifies that as to each Mortgage Loan
identified on the Mortgage Loan Schedule, other than any Mortgage Loan listed
on Schedule I hereto, it has reviewed the documents identified above and has
determined that each such document appears regular on its face and appears to
relate to the Mortgage Loan identified in such document.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Trust Agreement. This Certificate is
qualified in all respects by the terms of said Trust Agreement including, but
not limited to, Section 2.02(b).
((Custodian), on behalf of)
FIRST UNION NATIONAL BANK,
as Trustee
By:_______________________________
Name:
Title:
EXHIBIT B-3
-----------
FORM OF FINAL CERTIFICATION
----------------------------
Date
Structured Asset Securities Corporation
200 Vesey Street
New York, New York 10285
Re: Trust Agreement (the "Trust Agreement"), dated as of March 1, 1998
among Structured Asset Securities Corporation, as Depositor, First
Union National Bank, as Trustee, and Norwest Bank Minnesota,
National Association, as Master Servicer, with respect to
Structured Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 1998-3
Ladies and Gentlemen:
In accordance with Section 2.02(d) of the Trust Agreement, the
undersigned, as Trustee, hereby certifies that as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or listed on Schedule I hereto) it (or its custodian) has received the
applicable documents listed in Section 2.01(b) of the Trust Agreement.
The undersigned hereby certifies that as to each Mortgage Loan
identified on the Mortgage Loan Schedule, other than any Mortgage Loan listed
on Schedule I hereto, it has reviewed the documents listed above and has
determined that each such document appears to be complete and, based on an
examination of such documents, the information set forth in the Mortgage Loan
Schedule is correct.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Trust Agreement. This Certificate is
qualified in all respects by the terms of said Trust Agreement.
((Custodian), on behalf of)
FIRST UNION NATIONAL BANK,
as Trustee
By:________________________________
Name:
Title:
EXHIBIT B-4
-----------
FORM OF ENDORSEMENT
Pay to the order of First Union National Bank, as trustee (the
"Trustee") under the Trust Agreement dated as of March 1, 1998, among
Structured Asset Securities Corporation, as Depositor, the Trustee and the
Master Servicer relating to Structured Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 1998-3, without recourse.
__________________________________
(current signatory on note)
By:_______________________________
Name:
Title:
EXHIBIT C
---------
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
---------------------------
Date
(Addressed to Trustee
or, if applicable, custodian)
In connection with the administration of the mortgages held by you as
Trustee under a certain Trust Agreement dated as of March 1, 1998 among
Structured Asset Securities Corporation, as Depositor, Norwest Bank
Minnesota, National Association, as Master Servicer, and you, as Trustee (the
"Trust Agreement"), the undersigned Master Servicer hereby requests a release
of the Mortgage File held by you as Trustee with respect to the following
described Mortgage Loan for the reason indicated below.
Mortgagor's Name:
Address:
Loan No.:
Reason for requesting file:
1. Mortgage Loan paid in full. (The Master Servicer hereby certifies
that all amounts received in connection with the loan have been or will be
credited to the Collection Account or the Certificate Account (whichever is
applicable) pursuant to the Trust Agreement.)
2. The Mortgage Loan is being foreclosed.
3. Mortgage Loan substituted. (The Master Servicer hereby certifies that
a Qualifying Substitute Mortgage Loan has been assigned and delivered to you
along with the related Mortgage File pursuant to the Trust Agreement.)
4. Mortgage Loan purchased. (The Master Servicer hereby certifies that
the Purchase Price has been credited to the Collection Account or the
Certificate Account (whichever is applicable) pursuant to the Trust
Agreement.)
5. Other. (Describe)
The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Trust Agreement
and will be returned to you within ten (10) days of our receipt of the
Mortgage File, except if the Mortgage Loan has been paid in full, or
repurchased or substituted for a Qualifying Substitute Mortgage Loan (in
which case the Mortgage File will be retained by us permanently) and except
if the Mortgage Loan is being foreclosed (in which case the Mortgage File
will be returned when no longer required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed to them
in the Trust Agreement.
__________________________________
(Name of Master Servicer)
By:_______________________________
Name:
Title: Servicing Officer
EXHIBIT D-1
-----------
FORM OF RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEREE)
STATE OF )
) ss.:
COUNTY OF )
(NAME OF OFFICER), _________________ being first duly sworn,
deposes and says:
1. That he (she) is (title of officer) ___________
_____________ of (name of Purchaser) ________________________
_________________ (the "Purchaser"), a _______________________ (description
of type of entity) duly organized and existing under the laws of the (State
of __________) (United States), on behalf of which he (she) makes this
affidavit.
2. That the Purchaser's Taxpayer Identification Number is
( ).
3. That the Purchaser is not a "disqualified organization" within
the meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as
amended (the "Code") and will not be a "disqualified organization" as of
(date of transfer), and that the Purchaser is not acquiring a Residual
Certificate (as defined in the Agreement) for the account of, or as agent
(including a broker, nominee, or other middleman) for, any person or entity
from which it has not received an affidavit substantially in the form of this
affidavit. For these purposes, a "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of
any of the foregoing (other than an instrumentality if all of its activities
are subject to tax and a majority of its board of directors is not selected
by such governmental entity), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas as
described in Code Section 1381(a)(2)(C), or any organization (other than a
farmers' cooperative described in Code Section 521) that is exempt from
federal income tax unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511.
4. That the Purchaser is not, and on __________ (insert date of
transfer of Residual Certificate to Purchaser) will not be, and is not and on
such date will not be investing the assets of, an employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a plan subject to Code Section 4975 or a person or entity that
is using the assets of any employee benefit plan or other plan to acquire a
Residual Certificate.
5. That the Purchaser hereby acknowledges that under the terms of
the Trust Agreement (the "Agreement") among Structured Asset Securities
Corporation, First Union National Bank, as Trustee and Norwest Bank
Minnesota, National Association, as Master Servicer, dated as of March 1,
1998, no transfer of the Residual Certificates shall be permitted to be made
to any person unless the Trustee has received a certificate from such
transferee to the effect that such transferee is not an employee benefit plan
subject to ERISA or a plan subject to Section 4975 of the Code and is not
using the assets of any employee benefit plan or other plan to acquire
Residual Certificates.
6. That the Purchaser does not hold REMIC residual securities as
nominee to facilitate the clearance and settlement of such securities through
electronic book-entry changes in accounts of participating organizations
(such entity, a "Book-Entry Nominee").
7. That the Purchaser does not have the intention to impede the
assessment or collection of any federal, state or local taxes legally
required to be paid with respect to such Residual Certificate.
8. That the Purchaser will not transfer a Residual Certificate to
any person or entity (i) as to which the Purchaser has actual knowledge that
the requirements set forth in paragraph 3, paragraph 6 or paragraph 10 hereof
are not satisfied or that the Purchaser has reason to believe does not
satisfy the requirements set forth in paragraph 7 hereof, and (ii) without
obtaining from the prospective Purchaser an affidavit substantially in this
form and providing to the Trustee a written statement substantially in the
form of Exhibit G to the Agreement.
9. That the Purchaser understands that, as the holder of a
Residual Certificate, the Purchaser may incur tax liabilities in excess of
any cash flows generated by the interest and that it intends to pay taxes
associated with holding such Residual Certificate as they become due.
10. That the Purchaser (i) is not a Non-U.S. Person or (ii) is a
Non-U.S. Person that holds a Residual Certificate in connection with the
conduct of a trade or business within the United States and has furnished the
transferor and the Trustee with an effective Internal Revenue Service Form
4224 or successor form at the time and in the manner required by the Code or
(iii) is a Non-U.S. Person that has delivered to both the transferor and the
Trustee an opinion of a nationally recognized tax counsel to the effect that
the transfer of such Residual Certificate to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and that
such transfer of a Residual Certificate will not be disregarded for federal
income tax purposes. "Non-U.S. Person" means an individual, corporation,
partnership or other person other than a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or
an estate or trust that is subject to U.S. federal income tax regardless of
the source of its income.
11. That the Purchaser agrees to such amendments of the Trust
Agreement as may be required to further effectuate the restrictions on
transfer of any Residual Certificate to such a "disqualified organization,"
an agent thereof, a Book-Entry Nominee, or a person that does not satisfy the
requirements of paragraph 7 and paragraph 10 hereof.
12. That the Purchaser consents to the designation of the Master
Servicer as its agent to act as "tax matters person" of the Trust Fund
pursuant to the Trust Agreement.
IN WITNESS WHEREOF, the Purchaser has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by
its (title of officer) this _____ day of __________, 19__.
_________________________________
(name of Purchaser)
By:______________________________
Name:
Title:
Personally appeared before me the above-named (name of officer)
________________, known or proved to me to be the same person who executed
the foregoing instrument and to be the (title of officer) _________________
of the Purchaser, and acknowledged to me that he (she) executed the same as
his (her) free act and deed and the free act and deed of the Purchaser.
Subscribed and sworn before me this _____ day of __________, 19__.
NOTARY PUBLIC
______________________________
COUNTY OF_____________________
STATE OF______________________
My commission expires the _____ day of __________, 19__.
EXHIBIT D-2
-----------
RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT (TRANSFEROR)
--------------------------
Date
Re: Structured Asset Securities Corporation
Mortgage Pass-Through Certificates
---------------------------------------
_______________________ (the "Transferor") has reviewed the
attached affidavit of _____________________________ (the "Transferee"), and
has no actual knowledge that such affidavit is not true and has no reason to
believe that the information contained in paragraph 7 thereof is not true,
and has no reason to believe that the Transferee has the intention to impede
the assessment or collection of any federal, state or local taxes legally
required to be paid with respect to a Residual Certificate. In addition, the
Transferor has conducted a reasonable investigation at the time of the
transfer and found that the Transferee had historically paid its debts as
they came due and found no significant evidence to indicate that the
Transferee will not continue to pay its debts as they become due.
Very truly yours,
_______________________________
Name:
Title:
EXHIBIT E
---------
SERVICING AGREEMENTS
EXHIBIT F
---------
FORM OF RULE 144A TRANSFER CERTIFICATE
Re: Structured Asset Securities Corporation
Mortgage Pass-Through Certificates
Series 1998-3
---------------------------------------
Reference is hereby made to the Trust Agreement dated as of March
1, 1998 (the "Trust Agreement") among Structured Asset Securities
Corporation, as Depositor, Norwest Bank Minnesota, National Association, as
Master Servicer and First Union National Bank, as Trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Trust Agreement.
This letter relates to $_________ initial Certificate Balance of
Class Certificates which are held in the form of Definitive
-----
Certificates registered in the name of
--------------------------------
(the "Transferor"). The Transferor has requested a transfer of such
Definitive Certificates for Definitive Certificates of such Class registered
in the name of (insert name of transferee).
In connection with such request, and in respect of such
Certificates, the Transferor hereby certifies that such Certificates are
being transferred in accordance with (i) the transfer restrictions set forth
in the Trust Agreement and the Certificates and (ii) Rule 144A under the
Securities Act to a purchaser that the Transferor reasonably believes is a
"qualified institutional buyer" within the meaning of Rule 144A purchasing
for its own account or for the account of a "qualified institutional buyer,"
which purchaser is aware that the sale to it is being made in reliance upon
Rule 144A, in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United
States or any other applicable jurisdiction.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Placement Agent and the Depositor.
_____________________________________
(Name of Transferor)
By:__________________________________
Name:
Title:
Dated: ___________, ____
EXHIBIT G
---------
FORM OF PURCHASER'S LETTER FOR
INSTITUTIONAL ACCREDITED INVESTOR
--------------------------
Date
Dear Sirs:
In connection with our proposed purchase of $______________ principal
amount of Mortgage Pass-Through Certificates, Series 1998-3 (the "Privately
Offered Certificates") of Structured Asset Securities Corporation (the
"Depositor"), we confirm that:
(1) We understand that the Privately Offered Certificates have not been, and
will not be, registered under the Securities Act of 1933, as amended
(the "Securities Act"), and may not be sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we
should sell any Privately Offered Certificates within three years of the
later of the date of original issuance of the Privately Offered
Certificates or the last day on which such Privately Offered
Certificates are owned by the Depositor or any affiliate of the
Depositor (which includes the Placement Agent) we will do so only (A) to
the Depositor, (B) to "qualified institutional buyers" (within the
meaning of Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act ("QIBs"), (C) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act, or (D)
to an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act that
is not a QIB (an "Institutional Accredited Investor") which, prior to
such transfer, delivers to the Trustee under the Trust Agreement dated
as of March 1, 1998 among the Depositor, Norwest Bank Minnesota,
National Association, as Master Servicer and First Union National Bank,
as Trustee (the "Trustee"), a signed letter in the form of this letter;
and we further agree, in the capacities stated above, to provide to any
person purchasing any of the Privately Offered Certificates from us a
notice advising such purchaser that resales of the Privately Offered
Certificates are restricted as stated herein.
(2) We understand that, in connection with any proposed resale of any
Privately Offered Certificates to an Institutional Accredited Investor,
we will be required to furnish to the Trustee and the Depositor a
certification from such transferee in the form hereof to confirm that
the proposed sale is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act. We further understand that the Privately Offered
Certificates purchased by us will bear a legend to the foregoing effect.
(3) We are acquiring the Privately Offered Certificates 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. We have such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the
Privately Offered Certificates, and we and any account for which we are
acting are each able to bear the economic risk of such investment.
(4) We are an Institutional Accredited Investor and we are acquiring the
Privately Offered Certificates purchased by us for our own account or
for one or more accounts (each of which is an Institutional Accredited
Investor) as to each of which we exercise sole investment discretion.
(5) We have received such information as we deem necessary in order to make
our investment decision.
Terms used in this letter which are not otherwise defined herein have
the respective meanings assigned thereto in the Trust Agreement.
You and the Depositor are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
__________________________________
(Purchaser)
By________________________________
Name:
Title:
EXHIBIT H
---------
(FORM OF ERISA TRANSFER AFFIDAVIT)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The undersigned, being first duly sworn, deposes and says as
follows:
1. The undersigned is the ______________________ of (the
"Investor"), a (corporation duly organized) and existing under the laws of
__________, on behalf of which he makes this affidavit.
2. The Investor either (x) is not an employee benefit plan
subject to Section 406 or Section 407 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Trustee of any such plan
or a person acting on behalf of any such plan nor a person using the assets
of any such plan or (2) if the Investor is an insurance company, such
Investor is purchasing such Certificates with funds contained in an
"Insurance Company General Account" (as such term is defined in Section v(e)
of the Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that
the purchase and holding of such Certificates are covered under PTCE 95-60;
or (y) shall deliver to the Trustee and the Depositor an opinion of counsel
(a "Benefit Plan Opinion") satisfactory to the Trustee and the Depositor, and
upon which the Trustee and the Depositor shall be entitled to rely, to the
effect that the purchase or holding of such Certificate by the Investor will
not result in the assets of the Trust Fund being deemed to be plan assets and
subject to the prohibited transaction provisions of ERISA or the Code and
will not subject the Trustee or the Depositor to any obligation in addition
to those undertaken by such entities in the Trust Agreement, which opinion of
counsel shall not be an expense of the Trustee or the Depositor.
3. The Investor hereby acknowledges that under the terms of the
Trust Agreement (the "Agreement") among Structured Asset Securities
Corporation, as Depositor, Norwest Bank Minnesota, National Association, as
Master Servicer, and First Union National Bank, as Trustee, dated as of March
1, 1998, no transfer of the ERISA-Restricted Certificates shall be permitted
to be made to any person unless the Depositor and Trustee have received a
certificate from such transferee in the form hereof.
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to proper authority, by its duly
authorized officer, duly attested, this ____ day of _______________, 199 .
-
_________________________________
(Investor)
By:______________________________
Name:
Title:
EXHIBIT I
---------
MONTHLY REMITTANCE ADVICE
EXHIBIT J
---------
MONTHLY ELECTRONIC DATA TRANSMISSION
EXHIBIT K
---------
CUSTODIAL AGREEMENT
EXHIBIT L
---------
SPECIAL SERVICING COMPENSATION AGREEMENT
SCHEDULE A
----------
MORTGAGE LOAN SCHEDULE
EXECUTION
LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.,
SELLER
and
STRUCTURED ASSET SECURITIES CORPORATION,
PURCHASER
MORTGAGE LOAN SALE AND ASSIGNMENT AGREEMENT
Dated as of March 1, 1998
TABLE OF CONTENTS
ARTICLE I
CONVEYANCE OF MORTGAGE LOANS
Section Page
- - --------------------------------------------------------------------------
1.01. Sale of Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . 2
1.03. Review of Documentation . . . . . . . . . . . . . . . . . . . . . 2
1.04. Representations and Warranties of Lehman Capital . . . . . . . . . 3
1.05. Grant Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.06 Assignment by Depositor . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
MISCELLANEOUS PROVISIONS
2.01. Binding Nature of Agreement; Assignment . . . . . . . . . . . . . 7
2.02. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.04. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.05. Severability of Provisions . . . . . . . . . . . . . . . . . . . . 9
2.06. Indulgences; No Waivers . . . . . . . . . . . . . . . . . . . . . 9
2.07. Headings Not to Affect Interpretation . . . . . . . . . . . . . . 9
2.08. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . 9
2.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SCHEDULES
SCHEDULE A Mortgage Loan Schedule
This MORTGAGE LOAN SALE AND ASSIGNMENT AGREEMENT is executed by and
between Lehman Capital, A Division of Lehman Brothers Holdings Inc. ("Lehman
Capital"), and Structured Asset Securities Corporation (the "Depositor"),
dated as of the 1st day of March, 1998.
All capitalized terms not defined herein shall have the same meanings
assigned to such terms in that certain Trust Agreement (the "Trust
Agreement"), dated as of March 1, 1998, between the Depositor, Norwest Bank
Minnesota, N.A., as Master Servicer and First Union National Bank, as Trustee
(the "Trustee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the following specified mortgage loan transfer
agreements (each a "Transfer Agreement", and together the "Transfer
Agreements"), Lehman Capital has purchased from certain transferors (each a
"Transferor", and together the "Transferors"), certain mortgage loans
identified on the Mortgage Loan Schedule attached hereto as Exhibit A:
1. Seller's Warranties and Servicing Agreement, dated as of
January 23, 1998, between Lehman Capital, a Division of Lehman
Brothers Holdings, Inc., and Option One Mortgage Corporation;
2. Seller's Warranties and Servicing Agreement, dated as of
January 23, 1998, between Lehman Capital and Option One Mortgage
Corporation;
3. Assignment, Assumption and Recognition Agreement, dated
December 13, 1997, among DLJ Mortgage Capital, Inc. ("DLJ"), Lehman
Capital, BNC Mortgage, Inc. ("BNC") and Temple-Inland Mortgage
Corporation pursuant to which DLJ transferred and assigned all of
its right, title and interest in the Master Mortgage Loan Purchase
Agreement, dated as of October 31, 1995, between DLJ, as purchaser,
and BNC, as seller;
4. Purchase and Warranties Agreement, dated as of October 1,
1997, between Lehman Capital and Long Beach Mortgage Company;
5. Purchase and Warranties Agreement, dated as of December
1, 1997, between Lehman Capital and Long Beach Mortgage Company;
6. Mortgage Loan Purchase and Warranties Agreement, date as
of January 23, 1998, between Lehman Capital and Chase Manhattan
Mortgage Corporation.
WHEREAS, each Transfer Agreement permits the purchaser to assign its
rights and interests in such agreement and to delegate its obligations
thereunder;
WHEREAS, Lehman Capital desires to sell, without recourse, all of its
right, title and interest in the Mortgage Loans to the Depositor, to assign
all of its rights and interest under the Transfer Agreements, and to delegate
all of its obligations thereunder, to the Depositor; and
WHEREAS, Lehman Capital and the Depositor acknowledge and agree that the
Depositor will assign all of its rights and delegate all of its obligations
hereunder to the Trustee, and that each reference herein to the Depositor is
intended, unless otherwise specified, to mean the Depositor or the Trustee,
as assignee, whichever is the owner of the Mortgage Loans from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lehman Capital and the Depositor
agree as follows:
ARTICLE I
CONVEYANCE OF MORTGAGE LOANS
Section 1.01. Sale of Mortgage Loans. Concurrently with the
----------------------
execution and delivery of this Agreement, Lehman Capital does hereby
transfer, assign, set over, deposit with and otherwise convey to the
Depositor, without recourse, all the right, title and interest of Lehman
Capital in and to the Mortgage Loans identified on Schedule A hereto, having
an aggregate principal balance as of the Cut-off Date of $769,725,543.18.
Such conveyance includes, without limitation, the right to all distributions
of principal and interest received on or with respect to the Mortgage Loans
on or after March 1, 1998 (other than payments of prepaid and interest due
before such date), together with all of Lehman Capital's right, title and
interest in and to each related account and all amounts from time to time
credited to and the proceeds of such account, any REO Property and the
proceeds thereof, Lehman Capital's rights under any Insurance Policies
related to the Mortgage Loans, and Lehman Capital's security interest in any
collateral pledged to secure the Mortgage Loans, including the Mortgaged
Properties and any Additional Collateral.
Concurrently with the execution and delivery of this Agreement, Lehman
Capital hereby assigns to the Depositor all of its rights and interest under
the Transfer Agreements, and delegates to the Depositor all of its
obligations thereunder. Concurrently with the execution hereof, the
Depositor tenders the purchase price of $769,725,543.18. The Depositor
hereby accepts such assignment and delegation, and shall be entitled to
exercise all such rights of Lehman Capital under the Transfer Agreements, as
if the Depositor had been a party to the Transfer Agreements.
Section 1.02. Delivery of Documents. (a) In connection with such
---------------------
transfer and assignment of the Mortgage Loans hereunder, Lehman Capital does
hereby deliver, or cause to be delivered, to the Depositor (or its designee)
the documents or instruments with respect to each Mortgage Loan (each a
"Mortgage File") so transferred and assigned, as specified in the Transfer
Agreements.
(b) For Mortgage Loans (if any) that have been prepaid in full after
the Cut-off Date and prior to the Closing Date, Lehman Capital, in lieu of
delivering the related Mortgage Files, herewith delivers to the Depositor an
Officer's Certificate which shall include a statement to the effect that all
amounts received in connection with such prepayment that are required to be
deposited in the account maintained by the Servicer for such purpose have
been so deposited.
Section 1.03. Review of Documentation. The Depositor, by execution
-----------------------
and delivery hereof, acknowledges receipt of the Mortgage Files pertaining to
the Mortgage Loans listed on the Mortgage Loan Schedule, subject to review
thereof by First Trust National Association or Chase Bank of Texas, N.A., as
applicable, as custodian (each a "Custodian") for the Depositor.
---------
Each Custodian is required to review, within 45 days following the Closing
Date, each applicable Mortgage File. If in the course of such review a
Custodian identifies any Material Defect, Lehman Capital shall be obligated
to cure such defect or to repurchase the related Mortgage Loan from the
Depositor (or, at the direction of and on behalf of the Depositor, from the
Trust Fund), or to substitute a Qualifying Substitute Mortgage Loan therefor,
in each case to the same extent and in the same manner as the Depositor is
obligated to the Trustee and the Trust Fund under Section 2.02(c) of the
Trust Agreement.
Section 1.04. Representations and Warranties of Lehman Capital. (a)
------------------------------------------------
Lehman Capital hereby represents and warrants to the Depositor that as of the
date hereof that:
(i) Lehman Capital is a corporation duly organized, validly
existing and in good standing under the laws governing its creation and
existence and has full corporate power and authority to own its
property, to carry on its business as presently conducted, and to enter
into and perform its obligations under this Agreement;
(ii) the execution and delivery by Lehman Capital of this Agreement
have been duly authorized by all necessary corporate action on the part
of Lehman Capital; neither the execution and delivery of this Agreement,
nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof, will conflict with or result in a
breach of, or constitute a default under, any of the provisions of any
law, governmental rule, regulation, judgment, decree or order binding on
Lehman Capital or its properties or the certificate of incorporation or
bylaws of Lehman Capital;
(iii) the execution, delivery and performance by Lehman Capital
of this Agreement and the consummation of the transactions contemplated
hereby do not require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in respect
of, any state, federal or other governmental authority or agency, except
such as has been obtained, given, effected or taken prior to the date
hereof;
(iv) this Agreement has been duly executed and delivered by Lehman
Capital and, assuming due authorization, execution and delivery by the
Depositor, constitutes a valid and binding obligation of Lehman Capital
enforceable against it in accordance with its terms except as such
enforceability may be subject to (A) applicable bankruptcy and
insolvency laws and other similar laws affecting the enforcement of the
rights of creditors generally and (B) general principles of equity
regardless of whether such enforcement is considered in a proceeding in
equity or at law; and
(v) there are no actions, suits or proceedings pending or, to the
knowledge of Lehman Capital, threatened or likely to be asserted against
or affecting Lehman Capital, before or by any court, administrative
agency, arbitrator or governmental body (A) with respect to any of the
transactions contemplated by this Agreement or (B) with respect to any
other matter which in the judgment of Lehman Capital will be determined
adversely to Lehman Capital and will if determined adversely to Lehman
Capital materially and adversely affect it or its business, assets,
operations or condition, financial or otherwise, or adversely affect its
ability to perform its obligations under this Agreement.
(b) The representations and warranties of each Transferor with respect
to the Mortgage Loans in the applicable Transfer Agreement were made as of
the date of such Transfer Agreement. To the extent that any fact, condition
or event with respect to a Mortgage Loan constitutes a breach of both (i) a
representation or warranty of a Transferor under the applicable Transfer
Agreement and (ii) a representation or warranty of Lehman Capital under this
Agreement, the only right or remedy of the Depositor shall be the right to
enforce the obligations of such Transferor under any applicable
representation or warranty made by it. The Depositor acknowledges and agrees
that the representations and warranties of Lehman Capital in this Section
1.04(b) are applicable only to facts, conditions or events that do not
constitute a breach of any representation or warranty made by the related
Transferor in the applicable Transfer Agreement. Lehman Capital shall have
no obligation or liability with respect to any breach of a representation or
warranty made by it with respect to the Mortgage Loans if the fact, condition
or event constituting such breach also constitutes a breach of a
representation or warranty made by the related Transferor in such Transfer
Agreement, without regard to whether the related Transferor fulfills its
contractual obligations in respect of such representation or warranty.
Subject to the foregoing, Lehman Capital represents and warrants upon
delivery of the Mortgage Loans to the Depositor hereunder, as to each, that:
(i) The information set forth with respect to the Mortgage Loans
on the Mortgage Loan Schedule provides an accurate listing of the
Mortgage Loans, and the information with respect to each Mortgage Loan
on the Mortgage Loan Schedule is true and correct in all material
respects at the date or dates respecting which such information is
given;
(ii) There are no defaults in complying with the terms of any
Mortgage, and Lehman Capital has no notice as to any taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents which previously became due and owing
but which have not been paid;
(iii) Except in the case of Cooperative Loans, each Mortgage
requires all buildings or other improvements on the related Mortgaged
Property to be insured by a generally acceptable insurer against loss by
fire, hazards of extended coverage and such other hazards as are
customary in the area where the related Mortgaged Property is located
pursuant to insurance policies conforming to the requirements of the
guidelines of FNMA or FHLMC. If upon origination of the Mortgage Loan,
the Mortgaged Property was in an area identified in the Federal Register
by the Federal Emergency Management Agency as having special flood
hazards (and such flood insurance has been made available) a flood
insurance policy meeting the requirements of the current guidelines of
the Federal Flood Insurance Administration is in effect which policy
conforms to the requirements of the current guidelines of the Federal
Flood Insurance Administration. Each Mortgage obligates the related
Mortgagor thereunder to maintain the hazard insurance policy at the
Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such
insurance at such Mortgagor's cost and expense, and to seek
reimbursement therefor from the Mortgagor. Where required by state law
or regulation, each Mortgagor has been given an opportunity to choose
the carrier of the required hazard insurance, provided the policy is not
a "master" or "blanket" hazard insurance policy covering the common
facilities of a planned unit development. The hazard insurance policy
is the valid and binding obligation of the insurer, is in full force and
effect, and will be in full force and effect and inure to the benefit of
the Depositor upon the consummation of the transactions contemplated by
this Agreement.
(iv) Each Mortgage has not been satisfied, cancelled, subordinated
or rescinded, in whole or in part, and the Mortgaged Property has not
been released from the lien of the Mortgage, in whole or in part, nor
has any instrument been executed that would effect any such release,
cancellation, subordination or recision;
(v) Each Mortgage evidences a valid, subsisting, enforceable and
perfected first lien on the related Mortgaged Property (including all
improvements on the Mortgaged Property). The lien of the Mortgage is
subject only to: (1) liens of current real property taxes and
assessments not yet due and payable and, if the related Mortgaged
Property is a condominium unit, any lien for common charges permitted by
statute, (2) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording
of such Mortgage acceptable to mortgage lending institutions in the area
in which the related Mortgaged Property is located and specifically
referred to in the lender's Title Insurance Policy or attorney's opinion
of title and abstract of title delivered to the originator of such
Mortgage Loan, and (3) such other matters to which like properties are
commonly subject which do not, individually or in the aggregate,
materially interfere with the benefits of the security intended to be
provided by the Mortgage. Any security agreement, chattel mortgage or
equivalent document related to, and delivered to the Trustee in
connection with, a Mortgage Loan establishes a valid, subsisting and
enforceable first lien on the property described therein and the
Depositor has full right to sell and assign the same to the Trustee;
(vi) Immediately prior to the transfer and assignment of the
Mortgage Loans to the Depositor, Lehman Capital was the sole owner of
record and holder of each Mortgage Loan, and Lehman Capital had good and
marketable title thereto, and has full right to transfer and sell each
Mortgage Loan to the Depositor free and clear, except as described in
paragraph (v) above, of any incumbrance, equity, participation interest,
lien, pledge, charge, claim or security interest, and has full right and
authority, subject to no interest or participation of, or agreement
with, any other party, to sell and assign each Mortgage Loan pursuant to
this Agreement;
(vii) Each Mortgage Loan other than any Cooperative Loan is
covered by either (i) an attorney's opinion of title and abstract of
title the form and substance of which is generally acceptable to
mortgage lending institutions originating mortgage loans in the locality
where the related Mortgaged Property is located or (ii) an ALTA
mortgagee Title Insurance Policy or other generally acceptable form of
policy of insurance, issued by a title insurer qualified to do business
in the jurisdiction where the Mortgaged Property is located, insuring
the originator of the Mortgage Loan, and its successors and assigns, as
to the first priority lien of the Mortgage in the original principal
amount of the Mortgage Loan (subject only to the exceptions described in
paragraph (v) above. If the Mortgaged Property is a condominium unit
located in a state in which a title insurer will generally issue an
endorsement, then the related Title Insurance Policy contains an
endorsement insuring the validity of the creation of the condominium
form of ownership with respect to the project in which such unit is
located. With respect to any Title Insurance Policy, the originator is
the sole insured of such mortgagee Title Insurance Policy, such
mortgagee Title Insurance Policy is in full force and effect and will
inure to the benefit of the Depositor upon the consummation of the
transactions contemplated by this Agreement, no claims have been made
under such mortgagee Title Insurance Policy and no prior holder of the
related Mortgage, including Lehman Capital, has done, by act or
omission, anything that would impair the coverage of such mortgagee
Title Insurance Policy;
(viii) To the best of Lehman Capital's knowledge, no foreclosure
action is being threatened or commenced with respect to any Mortgage
Loan. There is no proceeding pending for the total or partial
condemnation of any Mortgaged Property (or, in the case of a Cooperative
Loan, the related cooperative unit) and each such property is undamaged
by waste, fire, earthquake or earth movement, windstorm, flood, tornado
or other casualty, so as to have a material adverse effect on the value
of the related Mortgaged Property as security for the related Mortgage
Loan or the use for which the premises were intended;
(ix) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding
that under the law could give rise to such liens) affecting the related
Mortgaged Property which are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage;
(x) Each Mortgage Loan was 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; and
(xi) Each Mortgage Loan is a "qualified mortgage" within the
meaning of Section 860G of the Code and Treas. Reg. Section1.860G-2.
It is understood and agreed that the representations and warranties set
forth herein survive delivery of the Mortgage Files and the Assignment of
Mortgage of each Mortgage Loan to the Depositor. Upon discovery by either
Lehman Capital or the Depositor of a breach of any of the foregoing
representations and warranties that adversely and materially affects the
value of the related Mortgage Loan, and that does not also constitute a
breach of a representation or warranty of the related Transferor in the
applicable Transfer Agreement, the party discovering such breach shall give
prompt written notice to the other party. Within 60 days of the discovery of
any such breach, Lehman Capital shall either (a) cure such breach in all
material respects, (b) repurchase such Mortgage Loan or any property acquired
in respect thereof from the Depositor at the applicable Purchase Price or (c)
within the two year period following the Closing Date, substitute a
Qualifying Substitute Mortgage Loan for the affected Mortgage Loan.
Section 1.05. Grant Clause. It is intended that the conveyance of
------------
Lehman Capital's right, title and interest in and to Mortgage Loans and other
property conveyed pursuant to this Agreement shall constitute, and shall be
construed as, a sale of such property and not a grant of a security interest
to secure a loan. However, if such conveyance is deemed to be in respect of
a loan, it is intended that: (1) the rights and obligations of the parties
shall be established pursuant to the terms of this Agreement; (2) Lehman
Capital hereby grants to the Depositor a first priority security interest in
all of Lehman Capital's right, title and interest in, to and under, whether
now owned or hereafter acquired, such Mortgage Loans and other property; and
(3) this Agreement shall constitute a security agreement under applicable
law.
Section 1.06 Assignment by Depositor. The Depositor shall have the
-----------------------
right, upon notice to but without the consent of Lehman Capital, to assign,
in whole or in part, its interest under this Agreement with respect to the
Mortgage Loans to the Trustee, and the Trustee then shall succeed to all
rights of the Depositor under this Agreement. All references to the
Depositor in this Agreement shall be deemed to include its assignee or
designee, specifically including the Trustee.
ARTICLE II
MISCELLANEOUS PROVISIONS
Section 2.01. 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.
Section 2.02. Entire Agreement. This Agreement contains the entire
----------------
agreement and understanding among 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, of any nature whatsoever with respect to the subject matter
hereof. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms
hereof.
Section 2.03. Amendment. (a) This Agreement may be amended from
---------
time to time by Lehman Capital and the Depositor, without notice to or the
consent of any of the Holders, (i) to cure any ambiguity, (ii) to cause the
provisions herein to conform to or be consistent with or in furtherance of
the statements made with respect to the Certificates, the Trust Fund, the
Trust Agreement or this Agreement in any Offering Document; or to correct or
supplement any provision herein which may be inconsistent with any other
provisions herein, (iii) to make any other provisions with respect to matters
or questions arising under this Agreement or (iv) to add, delete, or amend
any provisions to the extent necessary or desirable to comply with any
requirements imposed by the Code and the REMIC Provisions. No such amendment
effected pursuant to clause (iii) of the preceding sentence shall adversely
affect in any material respect the interests of any Holder. Any such
amendment shall be deemed not to adversely affect in any material respect any
Holder, if the Trustee receives written confirmation from each Rating Agency
that such amendment will not cause such Rating Agency to reduce the then
current rating assigned to the Certificates (and any Opinion of Counsel
requested by the Trustee in connection with any such amendment may rely
expressly on such confirmation as the basis therefor).
(b) This Agreement may also be amended from time to time by Lehman
Capital and the Depositor with the consent of the Holders of not less than
66-2/3% of the Class Certificate Principal Amount (or Percentage Interest) of
each Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, payments received on Mortgage Loans which
are required to be distributed on any Certificate without, the consent of the
Holder of such Certificate or (ii) reduce the aforesaid percentages of Class
Certificate Principal Amount (or Percentage Interest) of Certificates of each
Class, the Holders of which are required to consent to any such amendment
without the consent of the Holders of 100% of the Class Certificate Principal
Amount (or Percentage Interest) of each Class of Certificates affected
thereby. For purposes of this paragraph, references to "Holder" or "Holders"
shall be deemed to include, in the case of any Class of Book-Entry
Certificates, the related Certificate Owners.
(c) It shall not be necessary for the consent of Holders under this
Section 2.03 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Holders shall be subject to such reasonable regulations
as the Trustee may prescribe.
Section 2.04. 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 REGARD TO CONFLICT OF LAWS PRINCIPLES
APPLIED IN NEW YORK.
Section 2.05. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 2.06. Indulgences; No Waivers. Neither the failure nor any
-----------------------
delay on the part of a party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or of any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power
or privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.
Section 2.07. Headings Not to Affect Interpretation. The headings
-------------------------------------
contained in this Agreement are for convenience of reference only, and they
shall not be used in the interpretation hereof.
Section 2.08. Benefits of Agreement. Nothing in this Agreement,
---------------------
express or implied, shall give to any Person, other than the parties to this
Agreement and their successors hereunder, any benefit or any legal or
equitable right, power, remedy or claim under this Agreement.
Section 2.09. Counterparts. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed to be an original, and
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Lehman Capital and the Depositor have caused their
names to be signed hereto by their respective duly authorized officers as of
the date first above written.
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
By:
----------------------------------------
Name:
Title:
STRUCTURED ASSET SECURITIES
CORPORATION
By:
----------------------------------------
Name:
Title:
SCHEDULE A
----------
MORTGAGE LOAN SCHEDULE
EXECUTION
SPECIAL SERVICING AGREEMENT
THIS SPECIAL SERVICING AGREEMENT (this "Agreement"), entered into as of
the 1st day of March, 1998, by and between LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation ("Lehman Capital"), and
OCWEN FEDERAL BANK FSB, a federal savings bank ("the Special Servicer"):
RECITALS
WHEREAS, Lehman Capital has conveyed certain Mortgage Loans identified
on Schedule I hereto (the "Serviced Mortgage Loans") to Structured Asset
Securities Corporation ("SASCO"), which in turn has conveyed the Serviced
Mortgage Loans to First Union National Bank, as trustee (the "Trustee") under
a trust agreement dated as of March 1, 1998 (the "Trust Agreement"), among
the Trustee, Norwest Bank Minnesota, National Association, as master servicer
("Norwest," and, together with any successor Master Servicer appointed
pursuant to the provisions of the Trust Agreement, the "Master Servicer") and
SASCO.
WHEREAS, multiple classes of Certificates, including the Class X
Certificate, will be issued on the Closing Date pursuant to the Trust
Agreement, and Ocwen Partnership, L.P. (together with any successor in
interest thereto and any permitted assignee or transferee thereof, the
"Directing Holder") is expected to purchase the Class X Certificate from the
Placement Agent and is expected to be the initial registered Holder (other
than the Placement Agent and any nominee thereof) of the Class X Certificate;
WHEREAS, Lehman Capital desires that the Special Servicer perform the
services with respect to the Serviced Mortgage Loans as provided in this
Agreement (including those provisions that are incorporated by reference
herein), and the Special Servicer has agreed to do so, subject to the
conditions set forth herein.
WHEREAS, Norwest and any successor Master Servicer shall be obligated,
among other things, to supervise the servicing of the Serviced Mortgage Loans
on behalf of the Trustee, and shall have the right, under certain
circumstances, to terminate the rights and obligations of the Special
Servicer under this Special Servicing Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lehman Capital and the Special
Servicer hereby agree as follows:
AGREEMENT
I. Definitions. Capitalized terms used and not defined in this
-----------
Agreement, including Exhibit A hereto and any provisions of the Servicing
Agreement dated as of December 1, 1997, between Lehman Capital and the
Servicer (the "Servicing Agreement") incorporated by reference herein, shall
have the meanings ascribed to such terms in the Trust Agreement.
II. Special Servicing. The Special Servicer agrees, with respect to
-----------------
the Serviced Mortgage Loans, to perform and observe the duties,
responsibilities and obligations that are to be performed and observed under
the provisions of the Servicing Agreement, except as otherwise provided
herein and on Exhibit A hereto, and that the provisions of the Servicing
Agreement, as so modified, are and shall be a part of this Agreement to the
same extent as if set forth herein in full.
III. Master Servicing; Termination of Special Servicer. The Special
-------------------------------------------------
Servicer, including any successor special servicer hereunder, shall be
subject to the supervision of the Master Servicer, which Master Servicer
shall be obligated to ensure that the Special Servicer services the Serviced
Mortgage Loans in accordance with the provisions of this Agreement. The
Master Servicer, acting on behalf of the Trustee pursuant to the Trust
Agreement, shall have the same rights as the "Owner" (as defined in the
Servicing Agreement) to enforce the obligations of the Special Servicer under
the Servicing Agreement. The Master Servicer shall be entitled to terminate
the rights and obligations of the Special Servicer under this Agreement upon
the failure of the Special Servicer to perform any of its obligations under
this Agreement, after the expiration of any notice and cure periods, if any,
as provided in Section 9.01 of the Servicing Agreement. If the Special
Servicer is in default under this Agreement, after the expiration of any
notice and cure periods, if any, the Master Servicer shall, upon the written
direction of the Directing Holder, terminate the rights and obligations of
the Special Servicer under this Agreement.
Upon prior written notice, the Directing Holder shall have the exclusive
right to terminate the rights and obligations of the Special Servicer under
this Agreement without cause and without payment of any termination fee in
connection with such termination; provided, that any successor special
servicer shall be appointed in the manner provided below.
Notwithstanding anything to the contrary in Sections 9.01, 9.02 and
10.01 of the Servicing Agreement, the Directing Holder shall, within 30 days
of the receipt by the Special Servicer of a copy of any termination notice
delivered by the Master Servicer to the Special Servicer or upon delivery by
the Directing Holder of any such notice pursuant Section 9.02 or upon receipt
by the Directing Holder of any resignation notice given by the Special
Servicer, notify the Master Servicer in writing of the Directing Holder's
nominee as successor special servicer, which nominee shall be appointed as
special servicer by the Master Servicer unless the Master Servicer reasonably
objects to such nominee within 10 days following receipt of such notice. If
the Master Servicer objects to such nominee, then the Master Servicer shall,
within such 10-day period, appoint a successor special servicer, which
successor shall be reasonably acceptable to the Directing Holder.
IV. No Representations. Neither the Special Servicer nor the Master
------------------
Servicer shall be obligated or required to make any representations and
warranties regarding the Serviced Mortgage Loans in connection with the
transactions contemplated by the Trust Agreement and issuance of the
certificates issued pursuant thereto.
V. Notices. All notices and communications between or among the
-------
parties hereto shall be in writing and shall be deemed received or given when
mailed first-class mail, postage prepaid, addressed to each other party at
its address specified below. Each party may designate to the other parties
in writing, from time to time, other addresses to which notices and
communications hereunder shall be sent.
VI. Governing Law. THIS SPECIAL SERVICING AGREEMENT SHALL BE GOVERNED
-------------
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
NOTWITHSTANDING NEW YORK OR OTHER CHOICE OF LAW RULES TO THE CONTRARY.
VII. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an
original, but all of which counterparts shall together constitute but one and
the same instrument.
VIII. Reconstitution. Lehman Capital and the Special Servicer agree
--------------
that this Agreement is a Reconstitution Agreement, and that the date hereof
is the Reconstitution Date, each as defined in the Servicing Agreement. This
Agreement amends the terms and provisions of the Servicing Agreement only
with respect to the Serviced Mortgage Loans identified on Schedule I hereto
and does not purport to amend or modify the Servicing Agreement with respect
to any other loans that are or may become subject to the Servicing Agreement.
IX. Notices and Remittances to the Master Servicer. All notices
----------------------------------------------
required to be delivered to the Owner or the Master Servicer under this
Agreement shall be delivered to the Master Servicer at the following address:
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044
Attn: Master Servicing Department, SASCO 1998-3
Copies of all such notices, and all notices to be delivered to the
Directing Holder under this Agreement, shall be delivered to the Directing
Holder at the following address:
Ocwen Asset Investment Corp.
The Forum
Suite 1002
1675 Palm Beach Lakes Boulevard
West Palm Beach, Florida 33410
Attn: Secretary
All remittances required to be made to the Master Servicer under this
Agreement shall be made to the following wire account:
Norwest Bank Minnesota, National Association
Minneapolis, Minnesota
ABA#: 091-000-019
Account Name: Corporate Trust Clearing
Account Number: 3970771416
For further credit to: 13415500, SASCO 1998-3
X. Termination of Rights of Directing Holder. The parties hereto
-----------------------------------------
intend that the Directing Holder be a third party beneficiary of this
Agreement. All rights of the Directing Holder hereunder and under the Trust
Agreement and all obligations of the other parties hereto with respect to the
Directing Holder shall terminate immediately upon any transfer of the Class X
Certificate to any other Person, unless (i) the Special Servicer consents in
writing to the transfer of such rights and (ii) the Trustee is provided with
a letter from each Rating Agency to the effect that the transfer of the
rights of the Directing Holder to such transferee will not result in the
qualification, withdrawal or downgrade of the ratings then assigned to any
Class of Certificates.
XI. Annual Audit Report. On or before April 30 of each year, beginning
-------------------
with April 30, 1999, Special Servicer shall cause a firm of independent
public accountants (who may also render other services to Special Servicer),
which is a member of the American Institute of Certified Public Accountants,
to furnish a statement to Owner, Directing Holder and Master Servicer, to the
effect that such firm has examined certain documents and records for the
preceding calendar year (or during the period from the date of commencement
of such servicer's duties hereunder until the end of such preceding calendar
year in the case of the first such certificate) and that, on the basis of
such examination conducted substantially in compliance with the Uniform
Single Attestation Program for Mortgage Bankers, such firm is of the opinion
that Special Servicer's overall servicing operations have been conducted in
compliance with the Uniform Single Attestation Program for Mortgage Bankers
except for such exceptions that, in the opinion of such firm, the Uniform
Single Attestation Program for Mortgage Bankers requires it to report, in
which case such exceptions shall be set forth in such statement.
XII. Annual Officer's Certificate. On or before April 30 of each year,
----------------------------
beginning with April 30, 1999, the Special Servicer, at its own expense, will
deliver to the Owner, Directing Holder and Master Servicer a Servicing
Officer's certificate stating, as to each signer thereof, that (i) a review
of the activities of the Special Servicer during such preceding fiscal year
and of performance under this Agreement has been made under such officers'
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Special Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment
of all such obligations, specifying each such default known to such officers
and the nature and status thereof including the steps being taken by the
Special Servicer to remedy such default.
Executed as of the day and year first above written.
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
By:
---------------------------------
Name:
Title:
OCWEN FEDERAL BANK FSB
By:
---------------------------------
Name: Jay B. Goldman
Title: Vice President
EXHIBIT A
Modifications to the Servicing Agreement
1. The following is hereby added immediately following the words
"incidental fees and charges" in the definition of "Ancillary Income" in
Article I: ", but not including any premium or penalty associated with
a prepayment of principal of a Mortgage Loan."
2. The definition of "Base Servicing Fee" is hereby amended by deleting the
last sentence therefrom.
3. The definition of "Custodial Agreement" in Article I is hereby deleted
and replaced with the following:
"The custodial agreement relating to custody of the Serviced Mortgage
Loans between First Trust National Association, as Custodian, and First
Union National Bank, as Trustee, dated as of March 1, 1998."
4. The following is hereby added immediately following the words "Special
Servicer" in the definition of "Opinion of Counsel" in Article I:
"(except that such counsel must be Independent (as defined in the Trust
Agreement) outside counsel with respect to any such opinion relating to
the REMIC Provisions)"
5. The definition of "Primary Servicer" in Article I is hereby deleted and
replaced with the following:
"Any of Option One Mortgage Corporation, Aurora Loan Services Inc. or
any successor to either of them."
6. The following definitions are hereby added to Article I:
"Monthly Advance: With respect to each Remittance Date and each
---------------
Mortgage, an amount equal to the Monthly Payment (with the interest portion
of such Monthly Payment adjusted to the Mortgage Loan Remittance Rate) which
was due on the Mortgage Loan, and (i) which was delinquent at the close of
business on the immediately preceding Determination Date and (ii) which was
not the subject of a previous Monthly Advance, unless such Advance would
constitute a Nonrecoverable Advance.
"REMIC Provisions: The provisions of the federal income tax law
----------------
relating to a REMIC, which appear at Section 860A through 860G of Subchapter
M of Chapter 1, Subtitle A of the Code, and related provisions, and
regulations, rulings or pronouncements promulgated thereunder, as the
foregoing may be in effect from time to time."
7. The definition of "Remittance Date" in Article I is hereby deleted and
replaced with the following:
"The 18th day (or if such 18th day is not a Business Day, the first
Business Day immediately following) of any month, following the First
Remittance Date."
8. Section 2.03 is hereby amended by deleting the first, second and third
paragraphs thereof in their entirety and, in the fourth paragraph
thereof, deleting the following: "(and any applicable Acknowledgement
Agreement)".
9. Section 2.05(a)(i) is deleted in its entirety and replaced with the
following:
"(a)(i) Within five business days following a Transfer Date, the
Special Servicer shall reimburse the Primary Servicer for all principal
and interest and Servicing Advances made by such Primary Servicer and
all accrued and unpaid Servicing Fees due to the Primary Servicer with
respect to any Transferred Mortgage Loan identified on such Notice of
Transfer for which the Primary Servicer has not been reimbursed.
Thereafter, such amounts paid by the Special Servicer, if any, shall be
reimbursed to the Special Servicer in accordance with Section 3.04
hereof."
10. Section 3.01 is hereby amended by deleting clause (a) of the third
paragraph of subsection (B) thereof and by adding the following at the
end of such Section:
"(C) In connection with the transfer of any Distressed Mortgage
Loan, (i) the Special Servicer will be responsible for servicing the
Distressed Mortgage Loan from and after the effective date of transfer
of servicing to the Special Servicer, but shall have no obligation to
service such Distressed Mortgage Loan on or prior to such effective date
of the transfer of servicing, (ii) notwithstanding clause (i) above, the
Special Servicer shall not include the Distressed Mortgage Loan in its
monthly remittance report pursuant to Section 4.02 for the month in
which such transfer is effected and shall not be obligated to make the
Monthly Advance with respect to such Distressed Mortgage Loan on the
Remittance Date in the month in which such transfer is effected, in each
case, regardless of whether the Remittance Date occurs before or after
the effective date of such transfer, (iii) the amount of Monthly
Advances to be reimbursed to the Servicer by the Special Servicer
hereunder shall include the Monthly Advance made by the Servicer on such
Remittance Date, regardless of whether the Servicer makes such Monthly
Advance before or after the effective date of such transfer, and (iv)
the Special Servicer shall be entitled to the Base Servicing Fee with
respect to each such Distressed Mortgage Loan for the entire month in
which such transfer occurs."
11. The words "(Special Servicer, in trust for Lehman Capital, A Division of
Lehman Brothers Holdings, Inc., owner of Residential Mortgage Loans,
Group No. ______, and various Mortgagors" in the first paragraph of
Section 3.03 are hereby deleted and replaced with the following: "Ocwen
Federal Bank FSB, in trust for Norwest Bank Minnesota, National
Association, as master servicer for SASCO 1998-3."
12. Section 3.04(ii) is deleted in its entirety and replaced with the
following:
"(ii) to reimburse itself for unreimbursed advances of the
Special Servicer's funds made pursuant to Section 2.05 hereof, including
advances by the Special Servicer to reimburse the Primary Servicer for
principal and interest advances, Servicing Advances and unpaid servicing
fees due to them, if any, the Special Servicer's right to reimburse
itself pursuant to this subclause (ii) being limited to either (x)
amounts received on the related Transferred Mortgage Loan which
represent late payments of principal and/or interest respecting which
any such advance was made, and related Liquidation Proceeds,
condemnation proceeds, Insurance Proceeds, REO Disposition Proceeds and
other amounts received in respect of the related Mortgage Loan, it being
understood that, in the case of any such reimbursement, the Special
Servicer's right thereto shall be prior to the rights of the Owner, the
Master Servicer, any Primary Servicer and any Certificateholder or (y)
any other amounts in the Collection Account in the event that such
advances have been deemed to be Nonrecoverable Advances or are not
recovered from recoveries in respect of the related Transferred Mortgage
Loan or REO Property after a final determination has been made as to
what amounts have been or will be recovered, it being understood that
for those Transferred Mortgage Loans in foreclosure, the Owner shall
reimburse the Special Servicer for Servicing Advances and advances made
pursuant to Section 2.05 hereof through the completion of the sale of
the defaulted Mortgage Loan, or the foreclosure and disposition of the
REO Property;"
13. Section 3.04 is hereby amended by deleting clause (iii) in its entirety
and replacing such clause with the following clauses (iii) and (iv):
"(iii) to reimburse itself for Monthly Advances of the Special
Servicer's funds made pursuant to Section 7.03, the Special Servicer's
right to reimburse itself pursuant to this subclause (iii) being limited
to amounts received on the related Mortgage Loan which represent late
payments of principal and/or interest respecting which any such advance
was made, related Liquidation Proceeds, Insurance Proceeds, condemnation
proceeds, REO Disposition Proceeds and other amounts received in respect
of the related REO Property, and such other amounts as may be collected
by the Special Servicer from the Mortgagor or otherwise relating to such
Mortgage Loan, it being understood that, in the case of any such
reimbursement, the Special Servicer's right thereto shall be prior to
the rights of the Owner, the Master Servicer, any Primary Servicer and
any Certificateholder ; provided, that if the Special Servicer
reasonably determines that any unreimbursed Advance is a Nonrecoverable
Advance, the foregoing limitation shall not apply thereto;
(iv) to reimburse itself for unreimbursed Servicing Advances, and
for any unpaid Base Servicing Fees, the Special Servicer's right to
reimburse itself pursuant to this subclause (viii) with respect to any
Mortgage Loan being limited to related late collections, Liquidation
Proceeds, condemnation proceeds, Insurance Proceeds, REO Disposition
Proceeds and other amounts received in respect of the related REO
Property, and such other amounts as may be collected by the Special
Servicer from the Mortgagor or otherwise relating to the Mortgage Loan,
it being understood that, in the case of any such reimbursement, the
Special Servicer's right thereto shall be prior to the rights of the
Owner; provided, that if the Special Servicer reasonably determines that
any unreimbursed Advance is a Nonrecoverable Advance, the foregoing
limitation shall not apply thereto;"
Clauses (iv) through (viii) in Section 3.04 are hereby redesignated
clauses (v) through (ix), as applicable.
14. The words "Special Servicer, in trust for Lehman Capital, A Division of
Lehman Brothers Holdings, Inc., owner of Residential Mortgage Loans,
Group No. ______, and various Mortgagors" in the first paragraph of
Section 3.05 are hereby deleted and replaced with the following: "Ocwen
Federal Bank FSB, in trust for Norwest Bank Minnesota, National
Association, as master servicer for SASCO 1998-3."
15. Section 3.10(a) is deleted in its entirety and replaced with the
following:
"(a) Default Management Responsibilities: Subject only to Accepted
-----------------------------------
Servicing Practices and Section 3.11 below, the Special Servicer shall have
full power and authority to do or cause to be done any and all things in
connection with such servicing and administration which it may deem necessary
or desirable. Without limiting the generality of the foregoing, the Special
Servicer is hereby authorized and empowered by the Owner (if, in the Special
Servicer's reasonable judgment, such action with respect to the Transferred
Mortgage Loans and/or the Mortgaged Properties is in the best interests of
Owner in accordance with, or is required by, this Agreement, and subject to
Accepted Servicing Practices to take the following actions (without
limitation): (i) prepare, execute and deliver, on behalf of the Owner with
expenses associated therewith being Servicing Advances hereunder, any and all
financing statements, continuation statements and other documents or
instruments necessary to maintain the lien on each Mortgaged Property and
related collateral; and, subject to the remaining terms and provisions of
this Section, modifications, waivers (including, without limitation, waivers
of any late payment charge in connection with any delinquent payment on a
Transferred Mortgage Loan), consents, amendments, discounted payoff
agreements, forbearance agreements, cash management agreements or consents to
or with respect to any documents contained in the related servicing file; and
any and all instruments of satisfaction or cancellation, or of partial or
full release or discharge, and all other instruments comparable to any of the
types of instruments described in this subsection (i), and (ii) institute and
prosecute judicial and non-judicial foreclosures, suits on promissory notes,
indemnities, guaranties or other loan documents, actions for equitable and/or
extraordinary relief (including, without limitation, actions for temporary
restraining orders, injunctions, and appointment of receivers), suits for
waste, fraud and any and all other tort, contractual and/or other claims of
whatever nature, and to appear in and file on behalf of the Owner such
pleadings or documents as may be necessary or advisable in any bankruptcy
action, state or federal suit or any other action. In the event that any
Mortgage Loan is in default or, in the judgment of the Special Servicer, such
default is reasonably foreseeable, the Special Servicer, consistent with
Accepted Servicing Practices, may waive, modify or vary any term of such
Mortgage Loan (including modifications that would change the Mortgage
Interest Rate, defer or forgive the payment of principal or interest or
extend the final maturity date of such Mortgage Loan), accept payment from
the related Mortgagor of an amount less than the full outstanding and unpaid
principal balance in final satisfaction of such Mortgage or consent to the
postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor if in the Special Servicer's determination such
waiver, modification, postponement or indulgence is not materially adverse to
the interests of the Certificateholders (taking into account any estimated
Realized Loss that might result absent such action). In addition, if, with
respect to a Transferred Mortgage Loan, a default (or any condition resulting
in a default being reasonably foreseeable) is cured (such Mortgage Loan being
referred to herein as a "Performing Loan"), the Special Servicer may
thereafter waiver, modify or vary terms of such Performing Loan provided that
no such action will (A) decrease the Mortgage Rate on the Performing Loan,
(B) defer or forgive the payment of principal or interest (except with
respect to liquidation of such Performing Loan) or (C) extend the final
maturity date of such Performing Loan, provided, however, that no such
modification shall be permitted to the extent that it would (a) affect
adversely the status of the Trust Fund as a REMIC or (b) cause the Trust Fund
to be subject to a tax on "prohibited transactions" or "contributions"
pursuant to the REMIC Provisions.
Notwithstanding anything to the contrary in this Agreement, the
Special Servicer shall not waive any premium or penalty in connection
with a prepayment of principal of any Mortgage Loan, and shall not
consent to the modification of any Mortgage Note to the extent that such
modification relates to payment of a prepayment premium or penalty;
provided, that the foregoing shall not (i) apply to any Severely
Delinquent Loan or (ii) prohibit the Special Servicer from entering into
any agreement for modification, waiver, forbearance, amendment or
discounted payoff of a Mortgage Loan in accordance with this Agreement
that does not have the effect of waiving any prepayment premium or
penalty or modifying any provision requiring payment thereof.
Notwithstanding the foregoing, in the event of any conflict between
the provisions of this Section 3.10 and the provisions of Section 3.11,
the provisions of Section 3.11 shall control."
16. Section 3.10(e) is hereby deleted in its entirety and replaced with the
following:
"(e) At any time, the Directing Holder may request that the Special
Servicer take a particular action with respect to a particular Mortgage
Loan, including without limitation foreclosure, waivers or
modifications. Any such request shall be in writing, a copy of which
shall be delivered to the Master Servicer. If the Special Servicer
determines that such requested action is consistent with Accepted
Servicing Practices, then the Special Servicer may, but is not required
to, comply with such request. Within two Business Days of receipt of
such a request, the Special Servicer shall notify the Directing Holder
whether the Special Servicer intends to comply with such request. If
the Special Servicer declines to comply with such request (or fails to
notify the Directing Holder of its decision within the two Business Day
period), then the Directing Holder may, at its sole option and upon
written notice to the Special Servicer and the Master Servicer, purchase
the related Mortgage Loan from the Trust Fund at the Purchase Price (as
defined in the Trust Agreement). If the Directing Holder does not
indicate whether it wishes to exercise this option within two Business
Days of receipt of such notice, then the Directing Holder shall not be
entitled to object to the action taken by the Special Servicer with
respect to such Mortgage Loan." In addition, the Directing Holder may
purchase any Severely Delinquent Mortgage Loan upon written notice to
the Master Servicer and the Special Servicer within three days of the
day on which such Mortgage Loan becomes a Severely Delinquent Loan.
The Special Servicer shall have the right to purchase any Severely
Delinquent Loan at the Purchase Price (as defined in the Trust
Agreement). The Special Servicer shall send a written notice (the
"Initial Notice") to the Directing Holder advising the Directing Holder
that the Special Servicer intends to purchase a Severely Delinquent
Loan. The Directing Holder shall have the option to (i) direct the
Special Servicer not to purchase any such Severely Delinquent Loan but
to proceed with a particular default resolution strategy otherwise
mutually acceptable to the Special Servicer and the Directing Holder,
(ii) direct the Special Servicer to proceed with the purchase of such
loan on the terms proposed by the Special Servicer, or (iii) indicate
that the Directing Holder intends to purchase such Severely Delinquent
Loan, in which case the Directing Holder shall have the sole right and
option to purchase the Severely Delinquent Loan at the Purchase Price;
provided, however, that if the Directing Holder fails or refuses to
deliver a written notice of its election to the Special Servicer within
two Business Days after the Special Servicer has sent to the Directing
Holder the Initial Notice, then the Directing Holder shall be deemed to
have consented to the Special Servicer purchasing the Severely
Delinquent Loan for its own account."
17. The following Section 3.11 is hereby added immediately following Section
3.10:
"Section 3.11 REMIC Provisions.
----------------
(a) Unless the Mortgagor is in default with respect to the related
Mortgage Loan or such default is, in the judgment of the Special
Servicer, reasonably foreseeable, the Special Servicer shall not permit
any modification of any material term of any Mortgage Loan, including
any modification that would change the Mortgage Interest Rate, defer or
forgive the payment of principal or interest, reduce or increase the
outstanding principal balance (except for actual payments of principal),
change the final maturity date on such Mortgage Loan, or permit any
alteration, substitution or release of any collateral for such Mortgage
Loan.
(b) The Special Servicer shall dispose of any REO Property as soon
as possible and shall sell such REO Property in any event within three
years after title has been taken to such REO Property, unless (i) the
Owner shall have been supplied with an Opinion of Counsel to the effect
that the holding by the Trust Fund of such Mortgaged Property subsequent
to such three-year period (and specifying the period beyond such three-
year period for which the Mortgaged Property may be held) will not
result in the imposition of taxes on "prohibited transactions" of the
Trust Fund as defined in section 860F of the Code, or cause the related
REMIC to fail to qualify as a REMIC, in which case the Trust Fund may
continue to hold such Mortgaged Property (subject to any conditions
contained in such Opinion of Counsel), or (ii) the Owner (at the Special
Servicer's expense) or the Special Servicer shall have applied for, not
later than 61 days prior to the expiration of such three-year period, an
extension of such three-year period in the manner contemplated by
section 856(e)(3) of the Code, in which case the three-year period shall
be extended by the applicable period. If a period longer than three
years is permitted under the foregoing sentence and is necessary to sell
any REO Property, (i) the Special Servicer shall report monthly to the
Owner as to the progress being made in selling such REO Property and
(ii) if, with the written consent of the Owner, a purchase money
mortgage is taken in connection with such sale, such purchase money
mortgage shall name the Special Servicer as mortgagee, and such purchase
money mortgage shall not be held pursuant to this Agreement, but instead
a separate participation agreement between the Special Servicer and the
Owner shall be entered into with respect to such purchase money
mortgage.
Notwithstanding any other provision of this Agreement, no Mortgaged
Property held by a REMIC shall be rented (or allowed to continue to be
rented) or otherwise used for the production of income by or on behalf
of the Trust Fund or sold in such a manner or pursuant to any terms that
would (i) cause such Mortgaged Property to fail to qualify at any time
as "foreclosure property" within the meaning of section 860G(a)(8) of
the Code, (ii) subject the Trust Fund to the imposition of any federal
or state income taxes on "net income from foreclosure property" with
respect to such Mortgaged Property within the meaning of section 860G(c)
of the Code, or (iii) cause the sale of such Mortgaged Property to
result in the receipt by the Trust Fund of any income from non-permitted
assets as described in section 860F(a)(2)(B) of the Code, unless the
Special Servicer has agreed to indemnify and hold harmless the Trust
Fund with respect to the imposition of any such taxes."
18. The first paragraph of Section 4.01 is hereby deleted and replaced with
the following:
"On each Remittance Date the Servicer shall remit by wire transfer
of immediately available funds to the Master Servicer (a) all amounts
deposited in the Custodial Account as of the close of business on the
last day of the related Collection Period (net of charges against or
withdrawals from the Custodial Account pursuant to Section 3.04), plus
(b) all amounts, if any, which the Servicer is obligated to advance
pursuant to Section 7.03, minus (c) any amounts attributable to
Principal Prepayments, Liquidation Proceeds, Insurance Proceeds or REO
Disposition Proceeds received after the applicable Prepayment Period,
which amounts shall be remitted on the following Remittance Date,
together with any additional interest required to be deposited in the
Custodial Account in connection with such Principal Prepayment in
accordance with Section 7.03, and minus (d) any amounts attributable to
Monthly Payments collected but due on a due date or dates subsequent to
the first day of the month in which such Remittance Date occurs, which
amounts shall be remitted on the Remittance Date next succeeding the Due
Period for such amounts."
19. Section 4.02 is hereby amended by deleting the words "Remittance Date"
in the first line of such Section, and substituting the following:
"tenth day of each month, or if such tenth day is not a Business Day,
the immediately preceding Business Day"
20. Section 5.01 is hereby amended by deleting the last sentence of each of
subsections (a) and (b) thereof.
21. The following Sections 7.03 and 7.04 are hereby added immediately
following Section 7.02:
"Section 7.03 Monthly Advances and Compensating Interest.
------------------------------------------
(a) Notwithstanding anything to the contrary herein, the Special
Servicer shall make Monthly Advances (other than Balloon Payments as
defined in the Trust Agreement) on each Remittance Date through the
Remittance Date immediately preceding the distribution of all
Liquidation Proceeds and other payments or recoveries (including
Insurance Proceeds and condemnation proceeds) with respect to the
related Mortgage Loans.
(b) Notwithstanding anything to the contrary herein, with respect
to each Principal Prepayment of a Mortgage Loan the Special Servicer
shall deposit in the Custodial Account on a daily basis and retain
therein the Prepayment Interest Shortfall Amount, if any, for the month
of distribution. Such deposit shall be made from the Special Servicer's
own funds, without reimbursement therefor, up to a maximum amount per
month equal to the aggregate of the Base Servicing Fees otherwise
payable to the Special Servicer with respect to such month.
Section 7.04 Special Servicing Compensation. Notwithstanding
------------------------------
anything to the contrary herein, the Special Servicer shall not be entitled
to pay itself any compensation out of amounts collected on or in respect of
the Mortgage Loans other than the Base Servicing Fee and any Ancillary
Income, to the extent provided herein. Any other compensation payable to the
Special Servicer hereunder, including the Special Servicing Fee, the Extended
Special Servicing Fee and the Incentive Fee, shall be payable to the Special
Servicer on each Distribution Date as provided in the Trust Agreement.
22. Section 9.02 is hereby deleted in its entirety.
23. The following paragraph is added at the end of Section 10.01:
"Neither the Master Servicer nor any successor special servicer
(including the Owner and the Master Servicer) shall be liable for any
acts or omissions of the Special Servicer or any predecessor servicer.
In particular, neither the Master Servicer nor any successor special
servicer (including the Owner and the Master Servicer) shall be liable
for any servicing errors or interruptions resulting from any failure of
the Special Servicer to maintain computer and other information systems
that are year-2000 compliant."
24. All references in the Servicing Agreement or in any schedules or
exhibits thereto, including, without limitation, Exhibit I, to the
"Decision Matrix" are hereby deleted in their entirety.
25. The following definition is hereby added:
"Prepayment Period: With respect to the first Remittance Date, the
-----------------
period beginning on the Cut-off Date and ending on April 1. With respect to
each subsequent Remittance Date, the period commencing on the second day of
the month immediately preceding the month in which such Remittance Date
occurs and ending on the first day of the month in which such Remittance Date
occurs."
26. The definitions of "Extended Special Servicing Fee," "Incentive Fee,"
"Loss Severity Percentage" and "Special Servicing Fee" are hereby
deleted in their entirety.
27. Section 5.01 is hereby deleted in its entirety and replaced with the
following:
"Section 5.01 Servicing Compensation. As consideration for servicing
----------------------
the Transferred Mortgage Loans subject to this Agreement, the Special
Servicer shall be entitled to (i) retain the Base Servicing fee equal to one-
twelfth of (x) the Servicing Fee Rate and (y) the outstanding principal
balance of such Transferred Mortgage Loan during any month or part thereof
(unless otherwise specified herein) and (ii) receive such additional
compensation as is specified in a separate letter agreement dated the Closing
Date."
SERVICING AGREEMENT
BETWEEN
LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.,
OWNER
AND
OCWEN FEDERAL BANK FSB,
SPECIAL
SERVICER
DATED AS OF DECEMBER 1, 1997
RESIDENTIAL ADJUSTABLE AND FIXED RATE MORTGAGE LOANS
GROUP NO. OFB-LB1
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
ARTICLE II
OWNER'S ENGAGEMENT OF STANDBY SERVICER TO PERFORM STANDBY SERVICING
RESPONSIBILITIES
Section 2.01. Contract for Standby Servicing; Possession of Servicing
Files .................................................. 14
Section 2.02. Books and Records ...................................... 14
Section 2.03. Commencement of Standby Servicing Responsibilities and
Servicing Responsibilities ............................. 15
Section 2.04. Owner Covenants Regarding Transfer of Servicing for
Transferred Mortgage Loans ............................. 16
Section 2.05. Special Servicer Covenants Regarding Transfer of
Servicing Transferred Mortgage Loans .................. 18
Section 2.06. Custodial Agreement .................................... 19
ARTICLE III
SERVICING OF THE TRANSFERRED MORTGAGE LOANS
Section 3.01. Special Servicer to Service Transferred Mortgage Loans .. 21
Section 3.02. Collection of Mortgage Loan Payments .................... 23
Section 3.03. Establishment of and Deposits to Custodial Account ...... 23
Section 3.04. Permitted Withdrawals From Custodial Account ............ 24
Section 3.05. Establishment of and Deposits to Escrow Account ......... 25
Section 3.06. Permitted Withdrawals From Escrow Account ............... 26
Section 3.07. Notification of Adjustments ............................. 27
Section 3.08. Completion and Recordation of Assignment of Mortgage .... 27
Section 3.09. Protection of Accounts ................................. 28
Section 3.10. Default Management Provisions ........................... 28
ARTICLE IV
PAYMENTS TO OWNER
Section 4.01. Remittances ............................................. 33
Section 4.02. Statements to Owner ..................................... 33
ARTICLE V
GENERAL SERVICING PROCEDURES
Section 5.01 Servicing Compensation .................................. 35
ARTICLE VI
REPRESENTATIONS, WARRANTIES
Section 6.01. Representations, Warranties and Agreements of the Special
Servicer ............................................... 37
Section 6.02. Remedies for Breach of Representations and Warranties of
the Special Servicer ................................... 39
Section 6.03. Representations and Warranties of the Owner ............ 40
Section 6.04. Remedies for Breach of Representations and Warranties of
the Owner .............................................. 41
ARTICLE VII
WHOLE LOAN TRANSFER; PASS-THROUGH TRANSFER
Section 7.01. Removal of Mortgage Loans from Inclusion Under this
Agreement Upon a Pass-Through Transfer or a Whole Loan
Transfer on One or More Reconstitution Dates ........... 43
Section 7.02. Additional Indemnification by the Special Servicer; Third
Party Claims .......................................... 44
ARTICLE VIII
THE STANDBY SERVICER
Section 8.01. Merger or Consolidation of the Special Servicer ....... 46
Section 8.02. Limitation on Liability of the Special Servicer and
Others ............................................... 46
Section 8.03. Limitation on Resignation and Assignment by the Special
Servicer ............................................. 47
ARTICLE IX
TERMINATION
Section 9.01. Termination for Cause ................................. 48
Section 9.02. Termination Without Cause ............................ 50
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Successor to the Special Servicer .................... 51
Section 10.02. Closing .............................................. 52
Section 10.03. Closing Documents .................................... 53
Section 10.04. Costs ................................................ 53
Section 10.05. Protection of Confidential Information ............... 54
Section 10.06. Notices .............................................. 54
Section 10.07. Severability Clause .................................. 55
Section 10.08. No Personal Solicitation ............................. 55
Section 10.09. Counterparts ......................................... 56
Section 10.10. Place of Delivery and Governing Law .................. 56
Section 10.11. Further Agreements ................................... 56
Section 10.12. Intention of the Parties.............................. 56
Section 10.13. Successors and Assigns; Assignment of Servicing
Agreement ............................................ 56
Section 10.14. Waivers .............................................. 57
Section 10.15. Exhibits ............................................. 57
Section 10.16. General Interpretive Principles ...................... 57
Section 10.17. Reproduction of Documents ............................ 57
EXHIBITS
EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT B FORM OF NOTICE OF TRANSFER
EXHIBIT C CUSTODIAL ACCOUNT CERTIFICATION
EXHIBIT D ESCROW ACCOUNT CERTIFICATION
EXHIBIT E-1 OFFICER'S CERTIFICATE FOR FIRST CLOSING
EXHIBIT E-2 OFFICER'S CERTIFICATE FOR SUBSEQUENT CLOSINGS
EXHIBIT F-1 THE FIRST TRUST CUSTODIAL AGREEMENT
EXHIBIT F-2 THE TEXAS COMMERCE CUSTODIAL AGREEMENT
EXHIBIT F-3 FORM OF ASSIGNMENT OF CUSTODIAL AGREEMENT
EXHIBIT G FORM OF OPINION OF COUNSEL OF THE SPECIAL SERVICER
EXHIBIT H FORM OF ACKNOWLEDGMENT AGREEMENT
EXHIBIT I DECISION MATRIX
SERVICING AGREEMENT
-------------------
This is a Servicing Agreement (the "Agreement"), dated as of
December 1, 1997, by and between Lehman Capital, A Division of Lehman
Brothers Holdings Inc., having an office at 3 World Financial Center 12th
Floor, 200 Vesey Street, New York, New York 10285-1200 (the "Owner") and
Ocwen Federal Bank FSB, having an office at The Forum, Suite 1002, 1675 Palm
Beach Lakes Blvd., West Palm Beach, Florida 33401 (the "Special Servicer").
W I T N E S S E T H
WHEREAS, the Owner has acquired certain first and second lien fixed
and adjustable rate residential mortgage loans (collectively, the "Mortgage
Loans") identified in the Mortgage Loan Schedule attached hereto as Exhibit A
pursuant to that certain Seller's Warranties and Servicing Agreement dated as
of September 30, 1997 by and between the Owner and Option One Mortgage
Corporation ("Option One") and that certain Purchase and Servicing Agreement
dated as of October 1, 1997 by and between the Owner and Long Beach Mortgage
Company ("Long Beach Mortgage" and together with Option One and Ameriquest,
the "Primary Servicers") and it being further understood that the servicing
rights to the Mortgage Loans acquired from Long Beach Mortgage will be
transferred to Aurora Loan Services Inc. ("Aurora"), pursuant to that certain
Flow Servicing Agreement dated September 1, 1997, by and between the Owner
and Aurora;
WHEREAS, the Owner may acquire mortgage loans in the future (the
"Additional Mortgage Loans") for which the Owner desires to contract with the
Special Servicer for certain special servicing responsibilities with respect
to such Additional Mortgage Loans;
WHEREAS, the Owner desires to contract with the Special Servicer
for certain special servicing responsibilities associated with the Mortgage
Loans and the Special Servicer desires to assume the special servicing
responsibilities with respect to such Mortgage Loans as more particularly
described herein; and
WHEREAS, the Owner desires to contract with the Special Servicer
for certain servicing responsibilities associated with the Transferred
Mortgage Loans (as defined herein) and the Special Servicer desires to assume
the servicing responsibilities with respect to such Transferred Mortgage
Loans.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and reasonable consideration, the
receipt and adequacy of which is hereby acknowledged, the Owner and Special
Servicer hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms are defined as follows (except as otherwise
agreed in writing by the parties):
Accepted Servicing Practices: As defined in Section 3.01(A).
----------------------------
Acknowledgment Agreement: The document to be executed by the Owner
------------------------
and the Special Servicer on or prior to each Additional Mortgage Loan
Transfer Date which document shall amend the Mortgage Loan Schedule attached
as Exhibit A hereto to reflect the addition of Additional Mortgage Loans to
such Exhibit A and which document reflects the addition of Additional
Mortgage Loans which are subject to the terms and conditions of this
Agreement. A form of the Acknowledgment Agreement is attached hereto as
Exhibit H.
Additional Mortgage Loan: Any mortgage loan for which the Owner
------------------------
and the Special Servicer mutually agree, subsequent to the execution of this
Agreement, that such mortgage loan shall be governed by this Agreement.
Additional Mortgage Loan Transfer Date(s): The date or dates upon
-----------------------------------------
which the Special Servicer receives the transfer of additional servicing
responsibilities with respect to Additional Mortgage Loans and begins to
perform the servicing of such Additional Mortgage Loans in accordance with
the terms set forth herein which dates shall be as set forth in the related
Acknowledgment Agreement.
Agreement: This Servicing Agreement and all amendments hereof and
---------
supplements hereto.
Ancillary Income: All income derived from the Transferred Mortgage
----------------
Loans, other than Transferred Mortgage Loan Servicing Fees, including but not
limited to, late charges, fees received with respect to checks or bank drafts
returned by the related bank for non-sufficient funds, assumption fees,
optional insurance administrative fees and all other incidental fees and
charges. The Special Servicer shall retain all Ancillary Income for the
Transferred Mortgage Loans.
Appraised Value: The value set forth in an appraisal made in
---------------
connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
Appropriate Federal Banking Agency: Appropriate Federal Banking
----------------------------------
Agency shall have the meaning ascribed to it by Section 1813(q) of Title 12
of the United States Code, as amended from time to time.
Assignment of Mortgage: An assignment of the Mortgage, notice of
----------------------
transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the transfer of the Mortgage to the party indicated therein.
Base Servicing Fee: With respect to any Mortgage Loan that becomes
------------------
a Transferred Mortgage Loan for any month or part thereof, commencing in the
month after the related Transfer Date, one-twelfth the product of (a) the
Servicing Fee Rate and (b) the outstanding principal balance of such
Transferred Mortgage Loan or, in the case of an REO Property, the outstanding
principal balance of the Transferred Mortgage Loan immediately prior to its
becoming an REO Property. The obligation of the Owner to pay the Base
Servicing Fee is limited to, and such Base Servicing Fee is payable solely
from, the interest portion (including recoveries with respect to late
payments, Insurance Proceeds and/or Liquidation Proceeds to the extent
permitted by Section 3.04 of this Agreement) of such Monthly Payment
collected by the Special Servicer, or as otherwise provided under this
Agreement. To the extent such amount is not sufficient to cover the Base
Servicing Fee, the Special Servicer shall send to the Owner an invoice
detailing the amount of the unpaid Base Servicing Fee owed to the Special
Servicer and the Owner shall pay such amount to the Special Servicer within
20 Business Days of receiving such an invoice.
Best Efforts: Efforts determined to be reasonably diligent by the
------------
Owner or Special Servicer, as the case may be, in its sole discretion. Such
efforts do not require the Owner or Special Servicer, as the case may be, to
enter into any litigation, arbitration or other legal or quasi-legal
proceeding, nor do they require the Owner or Special Servicer, as the case
may be, to advance or expend fees or sums of money in addition to those
specifically set forth in this Agreement.
Breach: As defined in Section 6.02.
------
Business Day: Any day other than (i) a Saturday or Sunday, or (ii)
------------
a day on which banking and savings and loan institutions in the State of
Florida or in the State of New York are authorized or obligated by law or
executive order to be closed.
Closing Date: December 8, 1997.
------------
Conversion Date: The date on which a Severely Delinquent Loan
---------------
becomes a Resolved Loan.
Custodial Account: The separate account or accounts created and
-----------------
maintained pursuant to Section 3.03.
Custodial Agreement: Either of the custodial agreements among the
-------------------
Owner, as initial Servicer, the Owner and First Trust National Association,
dated as of February 1, 1993, which is annexed hereto as Exhibit F-1 and the
custodial agreement among the Owner, Long Beach and Texas Commerce Bank,
dated as of October 1, 1997, which is annexed hereto as Exhibit F-2.
Custodian: The Custodian under the applicable Custodial Agreement,
---------
or its successors in interest or assigns or any successor to the related
Custodian under the related Custodial Agreement as provided therein.
Decision Matrix: As defined in Section 3.10(e).
---------------
Determination Date: The last day of the month immediately
------------------
preceding the related Remittance Date (or if such day is not a Business Day,
the Business Day immediately preceding such day).
Distressed Mortgage Loan: Any Mortgage Loan with respect to which
-------------------------
the related Mortgagor is 61 or more days delinquent (without giving effect to
any grace period permitted by the related Mortgage Note) in the payment of a
scheduled Monthly Payment.
Eligible Investments: Any one or more of the obligations and
--------------------
securities listed below which investment provides for a date of maturity not
later than the Determination Date in each month:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America, 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; and
(ii) federal funds, demand and time deposits in, certificates
of deposits of, or bankers' acceptances issued by, any
depository institution or trust company incorporated or
organized under the laws of the United States of America
or any state thereof and subject to supervision and
examination by federal and/or state banking authorities,
so long as at the time of such investment or contractual
commitment providing for such investment the commercial
paper or other short-term debt obligations of such
depository institution or trust company (or, in the case
of a depository institution or trust company which is the
principal subsidiary of a holding company, the commercial
paper or other short-term debt obligations of such
holding company) are rated "P-1" by Moody's and the long-
term debt obligations of such holding company) are rated
"P-1" by Moody's and the long-term debt obligations of
such depository institution or trust company (or, in the
case of a depository institution or trust company which
is the principal subsidiary of a holding company, the
long-term debt obligations of such holding company) are
rated at least "Aa" by Moody's;
provided, however, that no such instrument shall be an Eligible
-------- -------
Investment if such instrument evidences either (i) a right to receive only
interest payments with respect to the obligations underlying such instrument,
or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with
respect to such instrument provide a yield to maturity of greater than 120%
of the yield to maturity at par of such underlying obligations.
Errors and Omissions Insurance: Errors and Omissions Insurance to
------------------------------
be maintained by the Special Servicer pursuant to the FNMA Guides or FHLMC
Guides.
Escrow Account: The separate account or accounts operated and
--------------
maintained pursuant to Section 3.05.
Escrow Payments: With respect to any Mortgage Loan, the amounts
---------------
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, homeowners association charges, and any other
payments required to be escrowed by the Mortgagor with the mortgagee pursuant
to the Mortgage or any other document.
Event of Default: Any event set forth in Section 9.01.
----------------
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, or any
-----
successor thereto.
FHLMC Guides: The FHLMC Selling Guide and the FHLMC Servicing
------------
Guide and all amendments or additions thereto.
Fidelity Bond: A fidelity bond to be maintained by the Special
-------------
Servicer pursuant to the FNMA Guides or FHLMC Guides.
First Remittance Date: With respect to each Mortgage Loan, the 10th
---------------------
day of the month following the month in which the related Transfer Date
occurs, or if such 10th day is not a Business Day, the first Business Day
immediately following such 10th day.
FNMA: The Federal National Mortgage Association, or any successor
----
thereto.
FNMA Guides: The FNMA Selling Guide and the FNMA Servicing Guide
-----------
and all amendments or additions thereto.
Foreclosed Mortgage Loan: A Transferred Mortgage Loan for which
------------------------
title to the Mortgaged Property is taken back by the Special Servicer either
through a deed in lieu of foreclosure or through the completion of the
foreclosure process consistent with this Agreement and the resulting REO
Property is liquidated consistent with the terms of this Agreement.
Insurance Expenses: Expenses incurred by the Special Servicer in
------------------
connection with pursuing any insurance claim with respect to any Transferred
Mortgage Loan or REO Property acquired in respect thereof (including, without
limitation, reasonable legal fees and reasonable expenses) and any Servicing
Advances incurred and any unpaid Transferred Mortgage Loan Servicing Fee
payable with respect to such Transferred Mortgage Loan or such property not
previously reimbursed from collections or other proceeds therefrom.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds
------------------
of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.
Insured Depository Institution: Insured Depository Institution
------------------------------
shall have the meaning ascribed to such term by Section 1813(c)(2) of Title
12 of the United States Code, as amended from time to time.
Liquidation Expenses: Expenses incurred by the Special Servicer
--------------------
in connection with the liquidation of any Transferred Mortgage Loan or REO
Property acquired in respect thereof (including, without limitation,
reasonable legal fees and expenses, committee or referee fees, and, if
applicable, brokerage commissions, and conveyance taxes) and any Servicing
Advances incurred and any unpaid Transferred Mortgage Loan Servicing Fee
payable with respect to such Transferred Mortgage Loan or such REO Property
not previously reimbursed from collections or other proceeds therefrom.
Liquidation Proceeds: The amount (other than Insurance Proceeds)
--------------------
received in connection with (i) the taking of a Mortgaged Property by
exercise of the power of eminent domain or condemnation, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the express
requirements of the Mortgage or Mortgage Note or any other Mortgage Loan
Documents or in accordance with Accepted Servicing Practices, (ii) the
liquidation of a Transferred Mortgage Loan through a trustee's sale,
foreclosure sale or otherwise, (iii) the sale of a Transferred Mortgage Loan
or an REO Property in accordance with the terms of this Agreement or (iv) the
sale of all of the Mortgage Loans.
Modified Mortgage Loan: A Transferred Mortgage Loan which is
----------------------
modified in a manner consistent with this Agreement and for which the
Mortgagor has made three consecutive payments consistent with the terms of
such Transferred Mortgage Loan as so modified.
Monthly Payment: The scheduled monthly payment of principal and
---------------
interest on a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument securing
--------
a Mortgage Note, which creates a first lien on an unsubordinated estate in
fee simple in real property securing the Mortgage Note.
Mortgage Impairment Insurance Policy: A mortgage impairment or
------------------------------------
blanket hazard insurance policy as described in the FNMA Guides or FHLMC
Guides.
Mortgage Interest Rate: The annual rate of interest borne on a
----------------------
Mortgage Note.
Mortgage Loan: An individual Mortgage Loan which is the subject
-------------
of this Agreement, each Mortgage Loan subject to this Agreement being
identified on the Mortgage Loan Schedule, which Mortgage Loan includes
without limitation the Mortgage Loan documents, the Monthly Payments,
Principal Prepayments, Liquidation Proceeds, Insurance Proceeds, REO
Disposition Proceeds, and all other rights, benefits, proceeds and
obligations arising from or in connection with such Mortgage Loan.
Mortgage Loan Documents: The documents listed in the applicable
-----------------------
section of the applicable Custodial Agreement.
Mortgage Loan Remittance Rate: With respect to each Mortgage Loan,
-----------------------------
the annual rate of interest remitted to the Owner, which shall be equal to
the Mortgage Interest Rate minus the applicable Transferred Mortgage Loan
Servicing Fee.
Mortgage Loan Schedule: A schedule of certain Mortgage Loans
----------------------
setting forth information with respect to such Mortgage Loans, which schedule
supplements this Agreement and becomes part of Exhibit A hereof on the
Closing Date which shall be modified from time to time upon repurchase or
substitution of a Mortgage Loan by the Primary Servicer or to reflect the
addition of any Additional Mortgage Loan to the terms of this Agreement.
Mortgage Note: The note or other evidence of the indebtedness of
-------------
a Mortgagor secured by a Mortgage.
Mortgaged Property: The real property securing repayment of the
------------------
debt evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
---------
Net Insurance Proceeds: The excess of Insurance Proceeds received
----------------------
with respect to any Mortgage Loan or REO Property over the amount of
Insurance Expenses incurred with respect thereto.
Net Liquidation Proceeds: The excess of Liquidation Proceeds
------------------------
received with respect to any Mortgage Loan or REO Property over the amount of
Liquidation Expenses incurred with respect thereto.
Net Resolution Proceeds: With respect to each Resolved Loan, the
------------------------
"gross proceeds" received with respect to the final disposition of such
Resolved Loan on the Conversion Date; minus all customary and reasonable
expenses incurred in connection with the servicing and Resolution of
such Mortgage Loan including without limitation, any (a) legal expenses,
(b) advances of interest at the Mortgage Interest Rate, (c) unrecovered taxes
paid, (d) unrecovered hazard insurance premiums, (e) property protection
expenses, (f) maintenance expenses and (g) property expenses and with respect
to (i) a Foreclosed Mortgage Loan, the term "gross proceeds" shall mean
all proceeds from the sale of the REO Property less any real estate
brokerage fees and closing costs, (ii) a Paid-Off Mortgage Loan, the
term "gross proceeds" shall mean all the proceeds actually received by
the Special Servicer including prepayment penalties but not including late
charges and Ancillary Income, (iii) a Reinstated Mortgage Loan, the term
"gross proceeds" shall mean an amount equal to the unpaid principal
balance of the Reinstated Mortgage Loan at the time of the entering into
of the agreement with the related Mortgagor, and (iv) a Modified
Mortgage Loan, the term "gross proceeds" shall mean an amount equal to the
unpaid principal balance of the Modified Mortgage Loan at the time of the
entering into of the agreement with the related Mortgagor.
Nonrecoverable Advance: Any portion of an advance (whether an
----------------------
advance under Section 2.05 or a Servicing Advance) proposed to be made or
previously made which has not been previously reimbursed to the Special
Servicer, and which the Special Servicer has determined in its good faith
business judgment will not or, in the case of a proposed advance, would not,
be ultimately recoverable by the Special Servicer from late payments,
Insurance Proceeds, Liquidation Proceeds and other collections on or in
respect of the related Mortgage Loan. To the extent that any Mortgagor is
not obligated under the related Mortgage Loan Documents to pay or reimburse
any portion of any advances that are outstanding with respect to the related
Mortgage Loan as a result of a modification of such Mortgage Loan by the
Special Servicer which forgives unpaid scheduled payments or other amounts
which the Special Servicer had previously advanced, and the Special Servicer
determines that no other source of payment or reimbursement for such advances
is available to it, such advances shall be deemed to be nonrecoverable;
provided, however, that in connection with the foregoing the Special Servicer
shall provide a certificate as described below. The determination by the
Special Servicer that it has made a Nonrecoverable Advance or that any
proposed advance, if made, would constitute a Nonrecoverable Advance shall be
evidenced by a certificate of a Servicing Officer delivered to the Owner
setting forth such determination and the procedures and considerations of the
Special Servicer forming the basis of such determination, which shall include
a copy of any broker's price opinion and any other information or reports
obtained by the Special Servicer which may support such determinations.
Notice of Transfer: The document to be executed by the Owner on
------------------
or prior to each subsequent Transfer Date which document shall set forth the
Mortgage Loan or Mortgage Loans for which the Special Servicer must assume
servicing responsibilities which are subject to the terms and conditions of
this Agreement, a form of which is attached hereto as Exhibit B.
Officer's Certificate: A certificate signed by the Chairman of the
---------------------
Board or the Vice Chairman of the Board or the President or a Vice President
or an assistant Vice President and by the Treasurer or the Secretary or one
of the Assistant Treasurers or Assistant Secretaries of the Owner, and
delivered to the Special Servicer as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be an
------------------
employee of the Special Servicer, reasonably acceptable to the Owner.
Owner: Lehman Capital, A Division of Lehman Brothers Holdings
-----
Inc., or its successors in interest and assigns.
Paid-Off Mortgage Loan: A Transferred Mortgage Loan which is paid
----------------------
in full or for which a lesser final payment is made consistent with the terms
of this Agreement and such payment in full or lesser final payment is
received by the Special Servicer in full satisfaction of the indebtedness
owed under the applicable Mortgage Note.
Pass-Through Transfer: The sale or transfer of some or all of the
---------------------
Mortgage Loans to a trust to be formed as part of a publicly-issued and/or
privately placed, rated or unrated, mortgage pass-through transaction,
including a sale or transfer to FNMA or FHLMC pursuant to specially
negotiated transactions, retaining the Special Servicer as "standby servicer"
(with or without a primary servicer or master servicer) thereunder.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, limited liability company,
unincorporated organization, government or any agency or political
subdivision thereof.
Prepayment Interest Shortfall Amount: With respect to any Mortgage
------------------------------------
Loan that was subject to a Principal Prepayment in full during any Due
Period, which Principal Prepayment was applied to such Mortgage Loan prior to
such Mortgage Loan's Due Date in such Due Period, the amount of interest (net
of the related Transferred Mortgage Loan Servicing Fee) that would have
accrued on the amount of such Principal Prepayment during the period
commencing on the date as of which such Principal Prepayment was applied to
such Mortgage Loan and ending on the day immediately preceding such Due Date,
inclusive.
Prime Rate: The prime rate announced to be in effect from time to
----------
time, as published as the average rate in The Wall Street Journal Northeast
--- ---- ------ ------- ---------
Edition.
- - -------
Principal Prepayment: Any payment or other recovery of principal
--------------------
on a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon and which is not
accompanied by an amount of interest representing scheduled interest due on
any date or dates in any month or months subsequent to the month of
prepayment.
Principal Prepayment Period: The month preceding the month in
---------------------------
which the related Remittance Date occurs.
Primary Servicer: Any one of Option One, Long Beach Mortgage or
----------------
Ameriquest or such other party as the Owner shall designate.
Qualified Depository: A depository the accounts of which are
--------------------
insured by the FDIC and the debt obligations of which are rated A or better
by Standard & Poor's Corporation and meets such requirements as are necessary
for any Reconstitution Agreement.
Reconstitution Agreements: The agreement or agreements entered
-------------------------
into by the Owner, the Special Servicer, or certain third parties on the
Reconstitution Date(s) with respect to any or all of the Mortgage Loans
serviced hereunder, in connection with a Whole Loan Transfer or a Pass-
Through Transfer as set forth in Section 7.01, including, but not limited to
(i) a Pooling and Servicing Agreement and/or a subservicing/master servicing
agreement and related custodial/trust agreement and related documents with
respect to a Pass-Through Transfer and (ii) a Seller's Warranties and
Servicing Agreement or a Sale and Servicing Agreement and related custodial
agreement and closing documents with respect to a Whole Loan Transfer. Such
agreement or agreements shall prescribe the rights and obligations of the
Special Servicer in providing servicing with respect to Distressed Mortgage
Loans which the Trustee thereunder determines should be serviced by the
Special Servicer and shall provide for servicing compensation to the Special
Servicer (calculated on a weighted average basis for all the related Mortgage
Loans as of the Reconstitution Date), at least equal to the Transferred
Mortgage Loan Servicing Fee due the Special Servicer in accordance with this
Agreement or the servicing fee required pursuant to the Reconstitution
Agreement. The form of relevant Reconstitution Agreement to be entered into
by the Owner and/or master servicer or trustee and the Special Servicer with
respect to Pass-Through Transfers and/or Whole Loan Transfers shall be
reasonably satisfactory in form and substance to the Owner and the Special
Servicer (giving due regard to any rating or master servicing requirements)
and the representations and warranties and servicing provisions contained
therein shall be substantially similar to those contained in this Agreement
(except that the Special Servicer may be required to service on a
scheduled/scheduled basis and may be required to pay up to 30 days
compensating interest on Principal Prepayments), or in Reconstitution
Agreements entered into by special servicers in connection with Pass-Through
Transfers substantially similar to any Pass-Through Transfer governed by such
Reconstitution Agreement otherwise mutually agreed by the parties.
Reconstitution Date: The date or dates on which any or all of the
-------------------
Mortgage Loans subject to this Agreement shall be removed from this Agreement
and reconstituted as part of a Pass-Through Transfer or a Whole Loan Transfer
pursuant to Section 7.01 hereof. On such date or dates, the Mortgage Loans
transferred shall cease to be covered by this Agreement and the Special
Servicer's responsibilities shall cease under this Agreement with respect to
the related transferred Mortgage Loans except as expressly set forth herein.
Reinstated Mortgage Loan: A Transferred Mortgage Loan for which
------------------------
the Mortgagor brings the Transferred Mortgage Loan back to a contractually
current status either through a lump-sum payment or otherwise consistent with
the terms of this Agreement and has made three consecutive timely payments
subsequent to bringing such Transferred Mortgage Loan's status current.
Remittance Date: The 10th day (or if such 10th day is not a
---------------
Business Day, the first Business Day immediately following) of any month,
following the First Remittance Date. Upon the reconstitution of any
Transferred Mortgage Loan, the Remittance Date shall be the date prescribed
by such Reconstitution Agreement.
Resolution: Where a Transferred Mortgage Loan becomes a Resolved
----------
Mortgage Loan.
Resolved Loan: Each of a Reinstated Mortgage Loan, a Modified
-------------
Mortgage Loan, a Paid-Off Mortgage Loan or a Foreclosed Mortgage Loan.
REMIC: A "real estate mortgage investment conduit" within the
-----
meaning of Section 860D of the Code.
REO Disposition: The final sale by the Special Servicer of any REO
---------------
Property.
REO Disposition Proceeds: All amounts received with respect to an
------------------------
REO Disposition.
REO Property: A Mortgaged Property acquired by the Special
------------
Servicer on behalf of the Owner through foreclosure or by deed in lieu of
foreclosure.
Servicing Advances: All customary, reasonable and necessary "out
------------------
of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Special Servicer or Primary
Servicer, as applicable, of its servicing obligations, including, but not
limited to, the cost of (a) the preservation, restoration and protection of
the Mortgaged Property, (b) any enforcement or administrative or judicial
proceedings, including foreclosures, (c) the management and liquidation of
the Mortgaged Property if the Mortgaged Property is acquired in satisfaction
of the Mortgage, (d) taxes, assessments, water rates, sewer rates and other
charges which are or may become a lien upon the Mortgaged Property and fire
and hazard insurance coverage, (e) any losses sustained by the Special
Servicer or Primary Servicer, as applicable, with respect to the liquidation
of the Mortgaged Property and (f) compliance with the obligations pursuant to
the provisions of the FNMA Guides and FHLMC Guides or Accepted Servicing
Practices.
Servicing Fee Rate: With respect to each Mortgage Loan subject to
------------------
this Agreement as of the Closing Date and which becomes a Transferred
Mortgage Loan, 0.50% per annum. With respect to each Additional Mortgage
Loan which becomes a Transferred Mortgage Loan, the rate per annum set forth
in the applicable Acknowledgment Agreement.
Servicing File: The items pertaining to a particular Mortgage Loan
--------------
including, but not limited to, the computer files, data disks, books,
records, data tapes, notes, and all additional documents generated as a
result of or utilized in originating and/or servicing each Mortgage Loan,
which are held in trust for the Owner by the Primary Servicer the Special
Servicer.
Servicing Officer: Any officer of the Special Servicer involved
-----------------
in or responsible for, the administration and servicing of the Mortgage Loans
whose name appears on a list of servicing officers furnished by the Special
Servicer to the Owner upon request, as such list may from time to time be
amended.
Severely Delinquent Loan: Any Transferred Mortgage Loan which does
------------------------
not become a Resolved Loan prior to the 150th day of delinquency (without
giving effect to any grace period permitted by the related Mortgage Note) in
the payment of a Monthly Payment.
Special Servicer: Ocwen Federal Bank FSB or its successor in
----------------
interest or assigns or any successor to the Special Servicer under this
Agreement as herein provided.
Transfer Date: Any date specified on the Notice of Transfer on
-------------
which the Special Servicer receives additional servicing responsibilities
pursuant to receipt of such Notice of Transfer from the Owner with respect to
any Distressed Mortgage Loan.
Transferred Mortgage Loan: Any Distressed Mortgage Loan for which
-------------------------
a Notice of Transfer has been delivered to the Special Servicer.
Transferred Mortgage Loan Servicing Fee: Each of the Base
---------------------------------------
Servicing Fee, the Special Servicing Fee, the Extended Special Servicing Fee,
if any and the Incentive Fee, if any.
Well Capitalized: Well Capitalized shall mean, with respect to any
----------------
Insured Depository Institution, the maintenance by such Insured Depository
Institution of capital ratios at or above the required minimum levels for
such capital category under the regulations promulgated pursuant to Section
1831(o) of the United States Code, as amended from time to time, by the
Appropriate Federal Banking Agency for such institution, as such regulation
may be amended from time to time.
Whole Loan Transfer: The sale or transfer of some or all of the
-------------------
Mortgage Loans to a third party purchaser in a whole loan transaction
pursuant to a seller's warranties and servicing agreement or a participation
and servicing agreement, retaining the Special Servicer as "special servicer"
hereunder.
ARTICLE II
OWNER'S ENGAGEMENT OF STANDBY SERVICER TO PERFORM STANDBY SERVICING
RESPONSIBILITIES
Section 2.01. Contract for Standby Servicing; Possession of Servicing
-------------------------------------------------------
Files.
- - -----
The Owner, by execution and delivery of this Agreement (and any
related Acknowledgment Agreement with respect to any Additional Mortgage
Loans), does hereby contract with the Special Servicer, subject to the terms
of this Agreement, for the standby servicing of the Mortgage Loans, and
pursuant to this Agreement, on any Transfer Date, the Owner shall transfer or
cause to be transferred by the Primary Servicers the Servicing Files with
respect to any Transferred Mortgage Loan identified on the related Notice of
Transfer to the Special Servicer to be held in trust for the Owner pursuant
to this Agreement. On or before the related Transfer Date, the Owner shall
cause to be delivered or will use its Best Efforts to cause to be delivered
each Servicing File relating to such Transferred Mortgage Loans to the
Special Servicer. Each Servicing File delivered to the Special Servicer
shall be held by the Special Servicer in order to service the Transferred
Mortgage Loans pursuant to this Agreement and are and shall be held in trust
by the Special Servicer for the benefit of the Owner as the owner thereof.
The Special Servicer's possession of any portion of the Transferred Mortgage
Loan documents shall be at the will of the Owner for the sole purpose of
facilitating servicing of the related Transferred Mortgage Loan pursuant to
this Agreement, and such retention and possession by the Special Servicer
shall be in a custodial capacity only. The ownership of each Mortgage Note,
Mortgage, and the contents of the Servicing File shall be vested in the Owner
and the ownership of all records and documents with respect to the related
Transferred Mortgage Loan prepared by or which come into the possession of
the Special Servicer shall immediately vest in the Owner and shall be
retained and maintained, in trust, by the Special Servicer at the will of the
Owner in such custodial capacity only. The portion of each Servicing File
retained by the Special Servicer pursuant to this Agreement shall be
segregated from the other books and records of the Special Servicer and shall
be appropriately marked to clearly reflect the ownership of the related
Transferred Mortgage Loan by the Owner. The Special Servicer shall release
from its custody the contents of any Servicing File retained by it only in
accordance with this Agreement.
Section 2.02. Books and Records.
-----------------
Record title to each Mortgage and the related Mortgage Note shall
remain in the name of (i) the Owner or (ii) in the name as the Owner shall
designate. The Owner shall cause to be prepared and recorded any Assignments
of Mortgage required pursuant to this Section 2.02 and any powers of attorney
required to be executed in favor of the Special Servicer. The Owner or the
Primary Servicer shall pay all necessary fees associated with the preparation
and recording of the Assignments of Mortgage and such powers of attorney as
referred to above. Notwithstanding the foregoing, the Special Servicer shall
cooperate with the Owner or its designee in the Owner's or such designee's
preparation and recording of any and all Assignments of Mortgage relating to
Transferred Mortgage Loans. Additionally, the Special Servicer shall prepare
and execute, at the direction of the Owner, any note endorsements required in
connection with any and all Reconstitution Agreements. All rights arising
out of the Mortgage Loans shall be vested in the Owner. All funds received
on or in connection with a Transferred Mortgage Loan shall be received and
held by the Special Servicer in trust for the benefit of the Owner as the
owner of the Transferred Mortgage Loans pursuant to the terms of this
Agreement.
This Agreement continuously, from the time of its execution, shall
be an official record of the Special Servicer and Special Servicer will
maintain a copy of this Agreement and each agreement related hereto in its
official books and records.
Section 2.03. Commencement of Standby Servicing Responsibilities and
------------------------------------------------------
Servicing Responsibilities.
- - --------------------------
Pursuant to the execution of this Agreement the Special Servicer
shall assume and accept such appointment for, all standby servicing
responsibilities for the Mortgage Loans identified in the Mortgage Loan
Schedule attached hereto as Exhibit A.
On each Additional Mortgage Loan Transfer Date, the Owner shall
appoint the Special Servicer to perform, and the Special Servicer shall
assume and accept such appointment for, all standby servicing
responsibilities for the related Additional Mortgage Loans on the related
Mortgage Loan Schedule. The engagement of the Special Servicer to perform
the standby servicing responsibilities with respect to the Additional
Mortgage Loans hereunder is not mandatory and is expressly conditioned upon
the acquisition of the related Additional Mortgage Loans by the Owner, the
election of the Owner respecting the engagement of the Special Servicer to
perform the related standby servicing responsibilities and the election, in
the manner hereinafter set forth, of the Special Servicer to accept such
transfer.
Upon the Owner's determination in its sole discretion to engage the
Special Servicer to perform the standby servicing responsibilities with
respect to Additional Mortgage Loans pursuant to the terms of this Agreement,
the Owner shall execute and the Owner shall notify the Special Servicer by
telephone of its determination to transfer such standby servicing
responsibilities to the Special Servicer and shall deliver an Acknowledgment
Agreement to the Special Servicer within 2 Business Days of such verbal
notification. The Special Servicer may elect to accept or reject on an all
or nothing basis such engagement to perform the standby servicing
responsibilities with respect to the Additional Mortgage Loans by either (i)
in the case of an acceptance, executing the Acknowledgment Agreement and
delivering the same to the Owner within 5 Business Days of receipt of such
Acknowledgment Agreement, or (ii) in the case of a rejection, by written
notification thereof delivered to the Owner within 5 Business Days of
receipt of such Acknowledgment Agreement.
Pursuant to the execution of this Agreement (and any applicable
Acknowledgment Agreement), the Owner shall have the right, at its option, to
transfer servicing responsibilities with respect to any Distressed Mortgage
Loan to the Special Servicer upon five calendar days notice to the Special
Servicer pursuant to a Notice of Transfer. On each Transfer Date, the Owner
may appoint, pursuant to the execution of a Notice of Transfer, the Special
Servicer to perform, and the Special Servicer shall assume and accept such
appointment for, all servicing responsibilities for the related Transferred
Mortgage Loans identified in the related Notice of Transfer. The engagement
of the Special Servicer to perform the servicing responsibilities with
respect to Transferred Mortgage Loans hereunder is mandatory.
Section 2.04. Owner Covenants Regarding Transfer of Servicing for
---------------------------------------------------
Transferred Mortgage Loans.
- - --------------------------
On or before each Transfer Date the Owner shall use its Best
Efforts to cause the Primary Servicer to effectuate and evidence the transfer
of the servicing of any Transferred Mortgage Loan from such Primary Servicer
to the Special Servicer including the following:
(a) Notice to Mortgagors. The Owner shall cause the relevant
--------------------
Primary Servicer to mail to the Mortgagor of each Mortgage a letter advising
the Mortgagor of the transfer of the servicing thereof to the Special
Servicer, in accordance with the relevant provisions of the Cranston-Gonzales
National Affordable Housing Act, as the same may be amended from time to
time, and the regulations provided in accordance with the Real Estate
Settlement Procedures Act. The Owner shall cause the related Primary
Servicer to promptly provide the Special Servicer with copies of all such
notices.
(b) Notice to Taxing Authorities and Insurance Companies. The
----------------------------------------------------
Owner shall cause the related Primary Servicer to transmit to the applicable
taxing authorities and insurance companies and/or agents, notification of the
transfer of the servicing to the Special Servicer and instructions to deliver
all notices, tax bills and insurance statements, as the case may be, to the
Special Servicer from and after the related Transfer Date. The Owner shall
cause the Primary Servicer to promptly provide the Special Servicer with
copies of all such notices.
(c) Delivery of Servicing Records. The Owner shall cause the
-----------------------------
Primary Servicer to forward to the Special Servicer all Servicing Files
within five (5) Business Days prior to the Transfer Date, and any other
Mortgage Loan documents in the Primary Servicer's possession relating to each
Transferred Mortgage Loan.
(d) Escrow Payments; Servicing Advances. The Owner shall cause
-----------------------------------
the Primary Servicer to provide the Special Servicer with immediately
available funds by wire transfer in the amount of the net Escrow Payments and
suspense balances and all loss draft balances associated with the Transferred
Mortgage Loans. The Owner shall cause the Primary Servicer to provide the
Special Servicer with an accounting statement of Escrow Payments and suspense
balances and loss draft balances sufficient to enable the Special Servicer to
reconcile the amount of such payment with the accounts of the
Transferred Mortgage Loans. Additionally, the Owner shall cause the
Primary Servicer (i) to provide to the Special Servicer Mortgage Loan
level documentation regarding unreimbursed Servicing Advances and (ii) to
wire the Special Servicer the amount of any agency, trustee or prepaid
Transferred Mortgage Loan payments and all other similar amounts held by the
Primary Servicer.
(e) Payoffs and Assumptions. The Owner shall cause the Primary
-----------------------
Servicer to provide to the Special Servicer copies of all assumption and
payoff statements generated by the Primary Servicer on the Transferred
Mortgage Loans.
(f) Costs, Expenses and Information. The Owner shall be
-------------------------------
responsible for all costs and expenses associated with a Transferred Mortgage
Loan resulting from a Primary Servicer or any previous servicer failing to
service such Transferred Mortgage Loan correctly or failing to give correct
information with respect to such Transferred Mortgage Loan to any previous
servicer, Primary Servicer or the Special Servicer (including, but not
limited to, tax information, insurance information and a failure to make
servicing advances). The Owner shall be responsible for all out-of-pocket
costs associated with the transfer of a Transferred Mortgage Loan to the
Special Servicer. The Owner shall cause the Primary Servicer to forward to
the Special Servicer all information required to be transferred pursuant to
this Agreement in the form of data tapes or other electronic media reasonably
acceptable to the Special Servicer.
(g) Mortgage Payments Received Prior to Transfer Date. The Owner
-------------------------------------------------
shall cause the Primary Servicer to forward all payments received by the
Primary Servicer on each Transferred Mortgage Loan prior to the related
Transfer Date to the account of the particular Mortgagor.
(h) Mortgage Payments Received After Transfer Date. The Owner
----------------------------------------------
shall cause the Primary Servicer to endorse any Monthly Payments received by
the Primary Servicer after the related Transfer Date directly to the Special
Servicer with respect to any Transferred Mortgage Loan and shall cause the
Primary Servicer to forward any such endorsed Monthly Payment to the Special
Servicer by overnight mail on the date of receipt. The Owner shall cause the
Primary Servicer to notify the Special Servicer of the particulars of the
payment, which notification requirement shall be satisfied if the Primary
Servicer forwards with its payment sufficient information to permit
appropriate processing of the payment by the Special Servicer. The Owner
shall cause the Primary Servicer to assume full responsibility for the
necessary and appropriate legal application of Monthly Payments received by
the Primary Servicer after the related Transfer Date with respect to
Transferred Mortgage Loans then in foreclosure or bankruptcy; provided, for
purposes of this Agreement, necessary and appropriate legal application of
such Monthly Payments shall include, but not be limited to endorsement of a
Monthly Payment to the Special Servicer with the particulars of the payment
such as the account number, dollar amount, date received and any special
Mortgagor application instructions.
(i) Reconciliation; Principal and Interest Advances. The Owner
-----------------------------------------------
shall cause the Primary Servicer to, on or before the related Transfer Date,
reconcile principal balances and make any monetary adjustments required by
the Special Servicer. Any such monetary adjustments will be transferred
between the Primary Servicer and the Special Servicer as appropriate. In
addition, the Owner shall cause the Primary Servicer to provide the
Special Servicer Mortgage Loan Level documentation regarding principal
and interest advances.
(j) IRS Forms. The Owner shall cause the Primary Servicer to file
---------
all IRS forms 1098, 1099, 1099A or 1041 and K-1 which are required to be
filed on or before the related Transfer Date in relation to the servicing and
ownership of the Transferred Mortgage Loans for the current calendar year.
The Special Servicer shall be responsible for the filing of forms 1098, 1099
and 1099A and will provide all required information and data to the Owner
necessary for the Owner to file forms 1041 and K-1 with respect to
Transferred Mortgage Loans relating to the actual time periods for which the
Special Servicer has serviced the Transferred Mortgage Loans. The Owner
shall cause the Primary Servicer to provide copies of such forms to the
Special Servicer or the Mortgagors upon request and shall cause the Primary
Servicer to reimburse the Special Servicer for any costs or penalties
incurred by the Special Servicer due to the Primary Servicer's failure to
comply with this paragraph.
Section 2.05. Special Servicer Covenants Regarding Transfer of
------------------------------------------------
Servicing of Transferred Mortgage Loans.
- - ---------------------------------------
(a)(i) Within five business days following a Transfer Date, the
Special Servicer shall reimburse the Primary Servicer for all principal and
interest and Servicing Advances made by such Primary Servicer with respect
to any Transferred Mortgage Loan identified on such Notice of Transfer for
which the Primary Servicer has not been reimbursed. Thereafter, such amounts
shall be reimbursed to the Special Servicer in accordance with Section 3.04
hereof.
(ii) The Special Servicer shall, in accordance with the relevant
provisions of the Cranston-Gonzales National Affordable Housing Act, as the
same may be amended from time to time, and the regulations provided in
accordance with the Real Estate Settlement Procedures Act, provide notice to
the Mortgagor of each Mortgage of the transfer of the servicing thereto to
the Special Servicer.
(iii) The Special Servicer shall be responsible for the
preparation and costs associated with notifications to Mortgagors sent by the
Special Servicer, with respect to the assumption of servicing by the Special
Servicer. The Special Servicer shall not be responsible for the preparation
and costs associated with notifications to Mortgagors sent by a Primary
Servicer with respect to assumption of servicing by the Special Servicer.
(b) The Special Servicer, with the Owner and the Primary
Servicers, in order to accomplish any provision contained herein, shall take
any steps reasonably necessary, including, but not limited to (i) executing,
acknowledging and delivering all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may be
reasonably required in order to accomplish any provision herein, (ii)
facilitating and completing the transfer of any Servicing File with respect
to any Transferred Mortgage Loan from a Primary Servicer to the Special
Servicer, (iii) entering into and performing under any Reconstitution
Agreement and (iv) remitting to a Primary Servicer any principal and interest
or Servicing Advance made by such Primary Servicer with respect to a
Transferred Mortgage Loan for which such Primary Servicer has not been
reimbursed. All costs and expenses incurred by compliance with Section
2.05(b), (i) through (iv) shall be the responsibility of the Owner or the
Primary Servicer, as applicable, and all costs incurred by compliance with
Section 2.05(b), (iv) shall be the responsibility of the Special Servicer.
Section 2.06. Custodial Agreement.
-------------------
Pursuant to the applicable Custodial Agreement, the Owner shall
deliver and release to the related Custodian on or prior to each Transfer
Date those Mortgage Loan documents required by the applicable Custodial
Agreement with respect to each Transferred Mortgage Loan, a list of which is
set forth in Section 2 of the applicable Custodial Agreement. In the event
of any conflict, inconsistency or discrepancy between any of the provisions
of this Agreement and any of the provisions of the applicable Custodial
Agreement, the provisions of this Agreement shall control and be binding upon
the Owner and the Special Servicer.
Prior to each Transfer Date, the related Custodian shall have
certified its receipt of all such Mortgage Loan documents required to be
delivered pursuant to the applicable Custodial Agreement, as evidenced by the
Initial Certification of the related Custodian in the form annexed to the
applicable Custodial Agreement. The Owner shall be responsible for, as and
when due, any and all initial document review fees, initial and final
certification fees and recertification fees and any costs associated with
correcting any deficiencies identified in connection with such review(s).
The Owner shall be responsible for maintaining the applicable Custodial
Agreement with respect to the Transferred Mortgage Loans and shall pay all
other fees and expenses of the related Custodian including but not limited
to, (i) any and all annual and warehousing fees, (ii) any and all termination
fees in the event the related Custodian is terminated by the Special
Servicer, except that the Owner shall pay such termination fees in the event
the related Custodian is terminated pursuant to the Owner's request and (iii)
any and all fees due in connection with the deposit or retrieval of a
Transferred Mortgage Loan document or documents.
The Special Servicer shall forward to the related Custodian
original documents evidencing an assumption, modification, consolidation or
extension of any Transferred Mortgage Loan entered into in accordance with
this Agreement within two weeks of their execution, provided, however, that
the Special Servicer shall provide the related 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 thirty
days after such certified document is returned from such public recording
office.
ARTICLE III
SERVICING OF THE TRANSFERRED MORTGAGE LOANS
Section 3.01. Special Servicer to Service Transferred Mortgage Loans.
------------------------------------------------------
(A) Acting directly or through one or more subservicers as
provided in Section 8.03 hereof, the Special Servicer, as an independent
contractor, shall service and administer the Transferred Mortgage Loans from
and after the related Transfer Date on behalf of the Owner in accordance with
the terms of this Agreement and the respective Transferred Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which it
services and administers similar mortgage loans for its own portfolio, giving
due consideration to customary and usual standards of practice of prudent
mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:
(i) any relationship that the Special Servicer, any subservicer or
any affiliate of the Special Servicer or any subservicer may have with the
related Mortgagor;
(ii) the Special Servicer's obligation to make principal and
interest advances or Servicing Advances; or
(iii) the Special Servicer's or any subservicer's right to
receive compensation for its services hereunder or with respect to any
particular transaction.
The standards set forth in this Section 3.01(A) shall be defined
herein as "Accepted Servicing Practices."
(B) The Special Servicer shall (i) enforce each Mortgagor's
obligations under the related Mortgage Loan to cause each Mortgaged Property
to be insured against risks, hazards and liabilities as required by all
applicable laws, regulations and Mortgage Loan Documents, in an amount at
least equal to the lesser of (A) the full replacement cost of the
improvements, and (B) the outstanding principal balance of the related
Mortgage Loan or such other amount as is necessary to prevent any reduction
in such policy by reason of the application of co-insurance and to prevent
the Owner from being deemed to be a co-insurer, and (ii) cause each REO
Property to be insured against risks, hazards and liabilities, in an amount
which is at least equal to the lesser of (A) the full replacement value of
the improvements which are a part of such REO Property, and (B) the
outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property; such insurance shall be obtained from an insurer
having a "General Policy Rating" of A or better in Best's Key Rating Guide.
The Special Servicer shall retain copies of all hazard insurance policies or
certificates of insurance representing such coverage. In the event of an
insured loss with respect to any Mortgaged Property, unless the Special
Servicer has actual knowledge that the Mortgagor has filed such a claim with
respect to a Mortgaged Property, the Special Servicer shall promptly file or
cause to be filed a claim on the hazard insurance. In the case of a
Mortgaged Property, the Special Servicer shall apply or disburse all
insurance proceeds in accordance with the terms and provisions of the
Mortgage Loans and this Agreement, and, in the case of a REO Property, the
Special Servicer shall apply or disburse all insurance proceeds in accordance
with the instructions of Owner, in each case net of any amounts due to
Special Servicer as otherwise provided herein. The Special Servicer shall,
where the Mortgagor fails or refuses to maintain insurance on the
Mortgaged Property in accordance with the applicable Mortgage Loan (or
to pay escrows sufficient therefor, as the case may be), subject the
Mortgaged Property to the coverage of its "force-placed" hazard insurance
policy with such deductible as the Special Servicer maintains for similar
mortgaged properties serviced for itself and for others. The amount
of any premiums to the Special Servicer resulting from obtaining such
coverage shall be treated as a Servicing Advance hereunder. The Owner shall
be solely responsible for the amount of the deductible in the event of any
loss and the Special Servicer shall have no liability to Owner therefor.
Subject to the preceding paragraph, the Special Servicer shall, at
its own expense, keep in force during the term of this Agreement a fidelity
bond and a policy or policies of insurance covering errors and omissions in
the performance of the Special Servicer's obligations under this Agreement.
Such fidelity bond and policy or policies shall be maintained with recognized
insurers and shall be in such form and amount as would permit the Special
Servicer to be qualified as a FNMA or FHLMC seller-servicer. The Servicer
shall be deemed to have complied with this provision if an affiliate of the
Special Servicer has such errors and omissions and fidelity bond coverage
and, by the terms of such insurance policy or fidelity bond, the coverage
afforded thereunder extends to the Special Servicer.
Notwithstanding the foregoing paragraph, the Owner and the Special
Servicer hereby agree as follows:
(a) The Owner or the Owner's designee shall prepare and record all
Assignments of Mortgage and powers of attorney, and shall pay the recording
costs associated therewith. The Special Servicer shall track such
Assignments of Mortgage, with respect to Transferred Mortgage Loans, to
ensure they have been recorded.
(b) The Special Servicer shall utilize its internal tax services
and will bear the expense of any outside tax services, if utilized;
provided, however, in accordance with Accepted Servicing Practices, if the
Special Servicer uses outside tax services, the cost of such services, so
long as such cost is reasonable, shall be paid by the Owner.
(c) The Special Servicer shall retain all Ancillary Income with
respect to Transferred Mortgage Loans.
(d) Notwithstanding the foregoing, at any time and from time to
time, the Owner may at its election terminate this Agreement with respect to
any Transferred Mortgage Loan or REO Property as provided by Section 9.02.
Consistent with and subject to Accepted Servicing Practices and the
terms of this Agreement, the Special Servicer may waive, modify or vary any
term of any Transferred Mortgage Loan. or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor. Without limiting the generality of the foregoing, the Special
Servicer shall continue, and is hereby authorized and empowered, to execute
and deliver on behalf of itself and the Owner, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and
all other comparable instruments, with respect to the Transferred Mortgage
Loans and with respect to the related Mortgaged Properties. If reasonably
required by the Special Servicer, the Owner shall furnish the Special
Servicer with any powers of attorney and other documents necessary or
appropriate to enable the Special Servicer to carry out its servicing
and administrative duties under this Agreement.
Section 3.02. Collection of Mortgage Loan Payments.
------------------------------------
Continuously from the related Transfer Date until the date each
Transferred Mortgage Loan ceases to be subject to this Agreement, the Special
Servicer shall proceed diligently to collect all payments due under each of
the Transferred Mortgage Loans when the same shall become due and payable and
shall take special care in ascertaining and estimating Escrow Payments and
all other charges that will become due and payable with respect to the
Transferred Mortgage Loans and each related Mortgaged Property, to the end
that the installments payable by the Mortgagors will be sufficient to pay
such charges as and when they become due and payable.
Section 3.03. Establishment of and Deposits to Custodial Account.
--------------------------------------------------
The Special Servicer shall segregate and hold all funds collected
and received pursuant to the Transferred Mortgage Loans separate and apart
from any of its own funds and general assets and shall establish and maintain
one or more Custodial Accounts, in the form of time deposit or demand
accounts, titled "(Special Servicer), in trust for Lehman Capital, A Division
of Lehman Brothers Holdings Inc., owner of Residential Mortgage Loans, Group
No. _______, and various Mortgagors". The Custodial Account shall be
established with a Qualified Depository. Any funds deposited in the
Custodial Account shall at all times be fully insured by the FDIC and any
amounts therein may be invested in Eligible Investments subject to the
provisions of Section 3.09 hereof. Funds deposited in the Custodial Account
may be drawn on by the Special Servicer in accordance with Section 3.04. The
creation of any Custodial Account shall be evidenced by a certification in
the form of Exhibit C hereto. A copy of such certification shall be
furnished to the Owner and, upon request, to any subsequent owner of the
Mortgage Loans.
The Special Servicer shall deposit in the Custodial Account on a
daily basis, and retain therein, the following collections received by the
Special Servicer in the Special Servicer's lock-box and payments required to
be made by the Special Servicer after the related Transfer Date:
(i) all payments on account of principal on the
Transferred Mortgage Loans, including all Principal Prepayments;
(ii) all payments on account of interest on the Transferred
Mortgage Loans adjusted to the Mortgage Loan Remittance Rate;
(iii) all Net Liquidation Proceeds;
(iv) all Net Insurance Proceeds;
(v) any amount required to be deposited in the Custodial
Account;
(vi) any amounts required to be deposited by the Special
Servicer in connection with the deductible clause in any blanket hazard
insurance policy; and
(vii) any amounts received with respect to or related to any
REO Property or REO Disposition Proceeds.
Any interest paid on funds deposited in the Custodial Account by
the depository institution shall accrue to the benefit of the Special
Servicer and the Special Servicer shall be entitled to retain and withdraw
such interest from the Custodial Account pursuant to Section 3.04.
Additionally, any other benefit derived from the Custodial Account associated
with the receipt, disbursement and accumulation of principal, interest,
taxes, hazard insurance, mortgage insurance, etc. shall accrue to the Special
Servicer.
Section 3.04. Permitted Withdrawals From Custodial Account.
--------------------------------------------
The Special Servicer shall, from time to time, withdraw funds from
the Custodial Account (without implication) for the following purposes:
(i) to make payments to the Owner in the amounts and in the
manner provided for in Section 4.01;
(ii) to reimburse itself for unreimbursed advances of the
Special Servicer's funds made pursuant to Section 2.05 hereof and for
any unreimbursed Servicing Advances, the Special Servicer's right to
reimburse itself pursuant to this subclause (ii) being limited to either
(x) amounts received on the related Transferred Mortgage Loan which
represent late payments of principal and/or interest respecting which
any such advance was made, it being understood that, in the case of any
such reimbursement, the Special Servicer's right thereto shall be prior
to the rights of the Owner or (y) any other amounts in the Collection
Account in the event that such advances have been deemed to be
Nonrecoverable Advances or are not recovered from recoveries in respect
of the related Transferred Mortgage Loan or REO Property after a final
determination has been made as to what amounts have been or will be
recovered, it being understood that for those Transferred Mortgage Loans
in foreclosure, the Owner shall reimburse the Special Servicer for
Servicing Advances and advances made pursuant to Section 2.05 hereof
through the completion of the sale of the defaulted Mortgage Loan, or
the foreclosure and disposition of the REO Property. If the disposition
of a Transferred Mortgage Loan results in the Special Servicer not
recovering all of the foregoing sums, the Owner shall be responsible for
reimbursing to the Special Servicer a sum equal to such non-recovered
amount. In the event that a Transferred Mortgage becomes a
Reconstituted Mortgage Loan, pursuant to the related Reconstitution
Agreement, the Special Servicer shall be able to recover unreimbursed
advances from the related Custodial Account prior to payments to be made
to certificateholders;
(iii) to pay itself any unpaid Transferred Mortgage Loan
Servicing Fees, it being understood that for those Transferred Mortgage
Loans in foreclosure, the Owner shall reimburse the Special Servicer
for Transferred Mortgage Loan Servicing Fees through the completion
of the sale of the defaulted Mortgage Loan or the foreclosure and
disposition of the REO Property. If the disposition of a Transferred
Mortgage Loan results in the Special Servicer not recovering all of the
foregoing sums, the Owner shall be responsible for reimbursing to the
Special Servicer a sum equal to such non-recovered amount;
(iv) to pay itself interest on funds deposited in the Custodial
Account;
(v) to clear and terminate the Custodial Account upon the
termination of this Agreement;
(vi) to transfer funds to another Qualified Depository in
accordance with Section 3.09 hereof;
(xii) to invest funds in certain Eligible Investments in
accordance with Section 3.09 hereof; and
(viii) to withdraw amounts erroneously deposited into the
Custodial Account.
Section 3.05. Establishment of and Deposits to Escrow Account.
-----------------------------------------------
The Special Servicer shall segregate and hold all funds collected
and received pursuant to a Transferred Mortgage Loan constituting Escrow
Payments separate and apart from any of its own funds and general assets and
shall establish and maintain one or more Escrow Accounts, in the form of time
deposit or demand accounts, titled, "(Special Servicer), in trust for Lehman
Capital, A Division of Lehman Brothers Holdings Inc., owner of Residential
Mortgage Loans, Group No. _______, and various Mortgagors". The Escrow
Accounts shall be established with a Qualified Depository in a manner that
shall provide maximum available insurance thereunder. Funds deposited in the
Escrow Account may be drawn on by the Special Servicer in accordance with
Section 3.06. The creation of any Escrow Account shall be evidenced by a
certification in the form of Exhibit D hereto. A copy of such certification
shall be furnished to the Owner and, upon request, to any subsequent owner of
the Transferred Mortgage Loans.
The Special Servicer shall deposit in the Escrow Account or
Accounts on a daily basis, and retain therein:
(i) all Escrow Payments collected on account of the
Transferred Mortgage Loans, for the purpose of effecting timely payment
of any such items as required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or
Liquidation Proceeds which are to be applied to the restoration or
repair of any Mortgaged Property relating to a Transferred Mortgage
Loan.
The Special Servicer shall make withdrawals from the Escrow Account
only to effect such payments as are required under this Agreement, as set
forth in Section 3.06. The Special Servicer shall retain any interest paid
on funds deposited in the Escrow Account by the depository institution,
other than interest on escrowed funds required by law to be paid to the
Mortgagor. To the extent required by law, the Special Servicer shall
pay interest on escrowed funds to the Mortgagor notwithstanding that the
Escrow Account may be non-interest bearing or that interest paid thereon
is insufficient for such purposes.
Section 3.06. Permitted Withdrawals From Escrow Account.
-----------------------------------------
Withdrawals from the Escrow Account or Accounts may be made by the
Special Servicer only:
(i) to effect timely payments of ground rents, taxes,
assessments, water rates, mortgage insurance premiums, condominium
charges, homeowners association charges, fire and hazard insurance
premiums or other items constituting Escrow Payments for the related
Mortgage;
(ii) to reimburse the Special Servicer for any Servicing
Advance made by the Special Servicer with respect to a related
Transferred Mortgage Loan, but only from amounts received on the related
Transferred Mortgage Loan which represent late collections of Escrow
Payments thereunder;
(iii) to refund to any Mortgagor any funds found to be in excess
of the amounts required under the terms of the related Transferred
Mortgage Loan;
(iv) for transfer to the Custodial Account and application to
reduce the principal balance of the Transferred Mortgage Loan in
accordance with the terms of the related Mortgage and Mortgage Note;
(v) for application to restoration or repair of the
Mortgaged Property in accordance with Accepted Servicing Practices;
(vi) to pay to the Special Servicer, or any Mortgagor to the
extent required by law, any interest paid on the funds deposited in the
Escrow Account; and
(vii) to clear and terminate the Escrow Account on the
termination of this Agreement.
Section 3.07. Notification of Adjustments.
---------------------------
With respect to each adjustable rate Transferred Mortgage Loan, the
Special Servicer shall adjust the Mortgage Interest Rate on the related
interest rate adjustment date and shall adjust the Monthly Payment on the
related mortgage payment adjustment date, if applicable, in compliance with
the requirements of applicable law and the related Mortgage and Mortgage
Note. The Special Servicer shall execute and deliver any and all necessary
notices required under applicable law and the terms of the related Mortgage
Note and Mortgage regarding the Mortgage Interest Rate and Monthly Payment
adjustments. The Special Servicer shall promptly, upon written request
therefor, deliver to the Owner such notifications and any additional
applicable data regarding such adjustments and the methods used to calculate
and implement such adjustments. Such data provided by the Special Servicer
shall be in a form acceptable to the Owner and shall be provided by the
Special Servicer within a reasonable period of time subsequent to such
request. Upon the discovery by the Special Servicer or the receipt of notice
from the Owner that the Special Servicer has failed to adjust a Mortgage
Interest Rate or Monthly Payment in accordance with the terms of the related
Mortgage Note, the Special Servicer shall immediately deposit in the
Custodial Account from its own funds the amount of any interest loss or
deferral caused the Owner thereby. Any such losses, to the extent resulting
from the conveyance of incorrect data to the Special Servicer from any
Primary Servicer or any previous servicer, as the case may be, shall not be
the responsibility of the Special Servicer.
Section 3.08. Completion and Recordation of Assignment of Mortgage.
----------------------------------------------------
To the extent permitted by applicable law, each of the Assignments
of Mortgage is subject to recordation in all appropriate public offices for
real property records in all 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 at the Owner's expense at the direction of the Owner. At the
Owner's direction, the Special Servicer shall cause to be made the
endorsements on the Mortgage Note, the Assignment of Mortgage and the
assignment of security agreement.
Section 3.09. Protection of Accounts.
----------------------
The Special Servicer may transfer the Custodial Account or the
Escrow Account to a different Qualified Depository from time to time. Such
transfer shall be made only upon obtaining the consent of the Owner, which
consent shall not be withheld unreasonably.
The Special Servicer shall bear any expenses, losses or damages
sustained by the Owner if the Custodial Account and/or the Escrow Account are
not demand deposit accounts.
Amounts on deposit in the Custodial Account may at the option of
the Special Servicer be invested in Eligible Investments; provided that in
the event that amounts on deposit in the Custodial Account exceed the amount
fully insured by the FDIC (the "Insured Amount") the Servicer shall be
--------------
obligated to invest the excess amount over the Insured Amount in Eligible
Investments on the same Business Day as such excess amount becomes present in
the Custodial Account. Any such Eligible Investment shall mature no later
than the Determination Date next following the date of such Eligible
Investment, provided, however, that if such Eligible Investment is an
obligation of a Qualified Depository (other than the Special Servicer) that
maintains the Custodial Account, then such Eligible Investment may mature on
such Remittance Date. Any such Eligible Investment shall be made in the
name of the Special Servicer in trust for the benefit of the Owner. All
income on or gain realized from any such Eligible Investment shall be for
the benefit of the Special Servicer and may be withdrawn at any time by the
Special Servicer. Any losses incurred in respect of any such investment
shall be deposited in the Custodial Account, by the Special Servicer
out of its own funds immediately as realized.
Section 3.10. Default Management Provisions.
-----------------------------
(a) Default Management Responsibilities: Subject only to Accepted
-----------------------------------
Servicing Practices and the Decision Matrix attached hereto as Exhibit I, the
Special Servicer shall have full power and authority to do or cause to be
done any and all things in connection with such servicing and administration
which it may deem necessary or desirable. Without limiting the generality of
the foregoing, Special Servicer is hereby authorized and empowered by Owner
(if, in the Special Servicer's reasonable judgment, such action with respect
to the Transferred Mortgage Loans and/or the Mortgaged Properties is in the
best interests of Owner in accordance with, or is required by, this
Agreement, and subject to Accepted Servicing Practices and the Decision
Matrix) to take the following actions (without limitation (i) prepare,
execute and deliver, on behalf of the Owner at its expense, any and all
financing statements, continuation statements and other documents or
instruments necessary to maintain the lien on each Mortgaged Property and
related collateral; and, subject to the remaining terms and provisions of
this Section, modifications, waivers (including, without limitation, waivers
of any late payment charge in connection with any delinquent payment on a
Transferred Mortgage Loan), consents, amendments, discounted payoff
agreements, forbearance agreements, cash management agreements or consents to
or with respect to any documents contained in the related servicing file; and
any and all instruments of satisfaction or cancellation, or of partial or
full release or discharge, and all other instruments comparable to any of the
types of instruments described in this subsection (i), and (ii) institute and
prosecute judicial and non-judicial foreclosures, suits on promissory notes,
indemnities, guaranties or other Transferred Mortgage Loan documents, actions
for equitable and/or extraordinary relief (including, without limitation,
actions for temporary restraining orders, injunctions, and appointment of
receivers), suits for waste, fraud and any and all other tort, contractual
and/or other claims of whatever nature, and to appear in and file on behalf
of the Owner such pleadings or documents as may be necessary or advisable in
any bankruptcy action, state or federal suit or any other action.
(b) Alternatives to Foreclosure:
---------------------------
(i) Repayment Plan and Forbearance Agreement. If the Special
----------------------------------------
Servicer pursues a repayment plan in respect of a Transferred Mortgage Loan
pursuant to the authority granted to the Special Servicer by the terms and
provisions of Section 3.10 (a) above, the Special Servicer will negotiate an
agreement with the Mortgagor for repayment of the delinquent payments over a
period and for forbearance from foreclosure during the term of such
agreement. If such Mortgagor shall at any time be in default under any such
agreement, the Special Servicer shall promptly proceed with foreclosure
proceedings in accordance with Section 3.10 (c) hereof (while simultaneously
pursuing other resolution strategies). The Special Servicer shall retain any
fees paid by the Mortgagor in connection with such repayment plan or
forbearance agreement as Ancillary Income.
(ii) Suit Against the Mortgagor; Garnishments, Etc.: If the
----------------------------------------------
Special Servicer determines in accordance with Accepted Servicing Practices
and this Agreement that it would be prudent to file suit against a Mortgagor
rather than to seek foreclosure, the Special Servicer may file suit against a
Mortgagor directly to recover the indebtedness, to seek a garnishment of
wages, to seek a temporary restraining order and/or temporary and/or
permanent injunction, and/or to seek any other relief available at law or in
equity against the Mortgagor. Additionally, if the circumstances warrant
same and applicable law so permits, the Special Servicer may file any such
suit while simultaneously seeking nonjudicial or judicial foreclosure or may
seek such relief in the same action as that filed to seek a judicial
foreclosure.
(iii) Pre-Sale. In order to avoid foreclosure, the Special
--------
Servicer may (pursuant to the authority granted to the Special Servicer by
the terms and provisions of Section 3.10 (a) above) attempt (i) to effect a
sale of the Mortgaged Property (including causing the Mortgaged Property to
be listed for sale with a real estate broker) or (ii) to effect an assumption
or prepayment of the Mortgage Loan, with the Mortgagor's cooperation, and, if
appropriate, enter into an agreement with the Mortgagor regarding payment of
any deficiency (a "Pre-Sale"). The Special Servicer, or any of its
affiliates, may act as a broker on behalf of the Mortgagor. The Owner
acknowledges that if the Special Servicer or any affiliate of the Special
Servicer has accepted a listing agreement with a Mortgagor in connection with
such sale or assumption, the Special Servicer or such affiliate, acting in
such capacity, is legally obligated to present all offers to purchase the
Mortgaged Property or assume the Mortgage Loan to the Mortgagor and will
negotiate a sale of the Mortgaged Property or assumption of the Transferred
Mortgage Loan pursuant to the instructions from the Mortgagor. The proceeds
of any Pre-Sale distributable to the Owner pursuant to and subject to the
distribution priorities set forth in this Agreement will reflect reductions
for customary and reasonable costs of closing, including brokerage
commissions, make-ready expenses, title insurance, financing costs, recording
fees, transfer taxes, tax certificates, title and closing agent fees and pro-
rated items, that will reduce the proceeds of sale payable to the Owner.
(iv) Sale of Distressed Mortgage Loan. The Special Servicer may
--------------------------------
effect a sale of a Distressed Mortgage Loan or Severely Delinquent Mortgage
Loan to a third party.
(v) Modification. If the Special Servicer pursues a modification
------------
of a Transferred Mortgage Loan pursuant to the authority granted to the
Special Servicer by the terms and provisions of Section 3.10 (a) above, the
Special Servicer will negotiate and execute Mortgage Loan modification
documents on behalf of the Owner in accordance with Accepted Servicing
Practices. The Special Servicer shall retain any fees paid by the Mortgagor
in connection with such modification as Ancillary Income.
(vi) Discounted Payoff. The Special Servicer may (pursuant to the
-----------------
authority granted to the Special Servicer by the terms and provisions of
Section 3.10 (a) above), subject to the Decision Matrix, accept a discounted
payoff of a Transferred Mortgage Loan. The Special Servicer, or any of its
affiliates, may provide new financing to the Mortgagor to facilitate such
discounted payoff provided that the Special Servicer obtains the Owner's
prior written consent with respect thereto. The Owner acknowledges
that if the Special Servicer provides such financing, the Special
Servicer may receive fees from the Mortgagor in connection therewith and
the Owner will not be entitled to any such fees to the extent that such
fees are customary and reasonable.
(vii) Deed in Lieu of Foreclosure. If the Special Servicer
---------------------------
pursues a deed in lieu of foreclosure pursuant to the authority granted to
the Special Servicer by the terms and provisions of Section 3.10 (a) above,
the Special Servicer will retain counsel to prepare appropriate
documentation, execute and deliver such documentation on behalf of the Owner
and may enter into an agreement with Mortgagor regarding payment of any
deficiency. The actions described herein shall be taken by the Special
Servicer in accordance with Accepted Servicing Practices or otherwise with
the consent of the Owner. Title to such Mortgaged Property may be taken in
the name of the Owner or its designee. Notwithstanding anything to the
contrary contained herein, in connection with a deed in lieu of foreclosure,
in the event the Special Servicer has reasonable cause to believe that a
Mortgaged Property is an Environmental Problem Property as described in
Section 3.10 (g) hereof, the Special Servicer shall notify the Owner of the
existence of the Environmental Problem Property, describe such problem, make
a recommendation to the Owner regarding handling such Environmental Problem
Property and carry out the recommendation unless otherwise directed by the
Owner in writing within five (5) Business Days after the Owner's receipt of
such notice. In no event will the Special Servicer be required to acquire
record title to an Environmental Problem Property. The Special Servicer will
provide the services described in Section 3.10 (g) with respect to each
Mortgaged Property for which a deed in lieu of foreclosure is received by the
Special Servicer.
(viii) Priority; Insurance Claims. The Special Servicer will
--------------------------
be responsible for retaining counsel on behalf of the Owner to advise the
Special Servicer whether any proposed relief for the Mortgagor pursuant to
this Section 3.10 (b) will adversely affect claims against any other
Mortgagor or the priority of the lien securing the Mortgage Loan. The
Special Servicer shall consider the effect of such relief on the priority of
the lien and claims against other Mortgagors in acting hereunder.
(ix) Monitoring. The Special Servicer will be responsible for
----------
monitoring compliance with a repayment plan, modification agreement,
agreement regarding payment of a deficiency or other agreement entered into
pursuant to this Section 3.10 (b) regarding payments in respect of a Mortgage
Loan, and sending appropriate reminder notices to the Mortgagor or other
appropriate Person.
(c) Foreclosure. If the Special Servicer reasonably determines
-----------
that foreclosure is appropriate with respect to a Mortgage Loan (including if
it determines that foreclosure is appropriate in conjunction with or as an
alternative to collection efforts and default management services hereunder),
the Special Servicer will (pursuant to the authority granted to the Special
Servicer by the terms and provisions of Section 3.10 (a) above) retain an
attorney and supervise the conduct of the foreclosure proceeding. If the
Mortgaged Property is acquired in the foreclosure proceeding, the Special
Servicer may acquire the Mortgaged Property in the name of the Owner or its
designee (as specified by the Owner), and the Special Servicer shall
commence providing property management and disposition services as provided
in Section 3.10 (f). Notwithstanding, anything to the contrary contained
herein, in connection with a foreclosure, in the event the Special Servicer
has reasonable cause to believe that a Mortgaged Property is an Environmental
Problem Property as described in Section 3.10 (g) hereof, the Special
Servicer shall notify the Owner of the existence of the Environmental Problem
Property, describe such problem, make a recommendation to the Owner regarding
handling the Environmental Problem Property and carry out the recommendation
unless otherwise directed by the Owner in writing within five (5) Business
Days after the Owner's receipt of such notice. In no event will the Special
Servicer be required to acquire record title to an Environmental Problem
Property. If the Special Servicer elects to proceed with a foreclosure in
accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related Mortgagor or any other liable party if the laws
of the state do not permit such a deficiency judgment after such foreclosure
or if the Special Servicer determines, in accordance with Accepted Servicing
Practices, that the likely recovery if a deficiency judgment is obtained will
not be sufficient to warrant the cost, time, expense and/or exposure to the
Owner of pursuing the deficiency judgment.
(d) Bankruptcy of Mortgagor. If the Special Servicer has actual
-----------------------
knowledge that a Mortgagor 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 Special Servicer will (pursuant to the authority granted to the
Servicer by the terms and provisions of Section 3.10 (a) above) retain an
attorney to pursue claims to payment on the Mortgage Loan and foreclosure on
the Mortgaged Property. If the Mortgaged Property is acquired in an
insolvency proceeding it shall be acquired in the name of the Owner or its
designee.
(e) Decision Matrix. The Special Servicer shall be authorized to
---------------
do or cause to be done any and all things in connection with the Transferred
Mortgage Loans and related Mortgaged Properties in accordance with Accepted
Servicing Practices and the terms and provisions of this Article III as
limited by the matrix (the "Decision Matrix") attached hereto and made a part
hereof for all purposes as Exhibit I.
(f) Property Management and Disposition Responsibilities. With
----------------------------------------------------
respect to each Mortgaged Property that becomes an REO Property, the Special
Servicer shall, in accordance with Accepted Servicing Practices, provide
property management and disposition services with respect to such REO
Property, including analysis of sale and leasing potential of such REO
Property, leasing and collection of rents, property management (including
maintenance and repairs to such REO Property to render it leasable or
salable), Escrow Account administration for payment of Escrow Payments and
property sales.
(g) Environmental Problems. If the Servicer hereafter becomes
----------------------
aware that a Mortgaged Property is in violation of any environmental law,
rule or regulation (an "Environmental Problem Property"), the Special
Servicer will notify the Owner of the existence of the Environmental Problem
Property. Additionally, the Special Servicer shall set forth in such notice
a description of such problem, a recommendation to the Owner relating to the
proposed action regarding the Environmental Problem Property and the Special
Servicer shall carry out the recommendation set forth in such notice
unless otherwise directed by the Owner in writing within five (5)
Business Days after the Owner's receipt of such notice. If the Special
Servicer has reason to believe that a Mortgaged Property is in violation of
any environmental law, rule or regulation (e.g., the Special Servicer
obtains a broker's price opinion which reveals the potential for such
problem), the Special Servicer will not accept a deed-in-lieu of
foreclosure upon any such Mortgaged Property without first obtaining a
preliminary environmental investigation for the Mortgaged Property
satisfactory to the Owner.
ARTICLE IV
PAYMENTS TO OWNER
Section 4.01. Remittances.
-----------
On each Remittance Date the Special Servicer shall remit by wire
transfer of immediately available funds to the Owner all amounts deposited in
the Custodial Account as of the close of business on the Determination Date
(net of charges against or withdrawals from the Custodial Account pursuant to
Section 3.04).
With respect to any remittance received by the Owner after the
second Business Day following the Business Day on which such payment was due,
the Special Servicer shall pay to the Owner interest on any such late payment
at an annual rate equal to the Prime Rate, adjusted as of the date of each
change, plus two percentage points, but in no event greater than the maximum
amount permitted by applicable law. Such interest shall be deposited in the
Custodial Account by the Special Servicer on the date such late payment is
made and shall cover the period commencing with the day following such second
Business Day and ending with the Business Day on which such payment is made,
both inclusive. Such interest shall be remitted along with the distribution
payable on the next succeeding Remittance Date. The payment by the Special
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 Special Servicer. The
Special Servicer shall have no advancing obligations with respect to
principal and/or interest on the Transferred Mortgage Loans, other than with
respect to a Reconstitution Agreement as described herein.
Section 4.02. Statements to Owner.
-------------------
Not later than the Remittance Date, the Special Servicer shall
furnish to the Owner a monthly remittance advice containing such information
in the form of FNMA form 2010 and any other information mutually agreed upon
by the Special Servicer and the Owner and any REO reports, foreclosure
reports and any reports reasonably requested by the Owner) in hard copy and
electronic medium mutually acceptable to the parties as to the accompanying
remittance and the period ending on the preceding Determination Date.
In addition, not more than 60 days after the end of each calendar
year, commencing December 31, 1997, the Special Servicer shall furnish to the
Owner at any time during such calendar year sufficient information for the
Owner to file tax reports.
Such obligation of the Special Servicer shall be deemed to have
been satisfied to the extent that substantially comparable information shall
be provided by the Special Servicer pursuant to any requirements of the
Internal Revenue Code as from time to time are in force.
The Special Servicer shall prepare and file IRS forms 1098, 1099
and 1099A (and will provide all data and information necessary for the Owner
to file forms 1041 and K-1) for all time periods that the Special Servicer
actually services any Transferred Mortgage Loans during the term of this
Agreement. In addition, the Special Servicer shall provide the Owner with
such information concerning the Transferred Mortgage Loans as is necessary
for the Owner to prepare its federal income tax return as the Owner may
reasonably request from time to time.
ARTICLE V
GENERAL SERVICING PROCEDURES
[Omitted]
ARTICLE VI
REPRESENTATIONS, WARRANTIES
AND AGREEMENTS
Section 6.01. Representations, Warranties and Agreements of the Special
---------------------------------------------------------
Servicer.
- - --------
The Special Servicer, as a condition to the consummation of the
transactions contemplated hereby, hereby makes the following representations
and warranties to the Owner as of each Transfer Date:
(a) Due Organization and Authority. The Special Servicer is a
------------------------------
federal savings bank duly organized, validly existing and in good standing
under the laws of the United States 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 a Mortgaged Property is located if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Special Servicer, and in any event the Special
Servicer is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of the terms of this Agreement; the
Special Servicer has the full 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 Special Servicer and the
consummation of the transactions contemplated hereby have been duly and
validly authorized; this Agreement evidences the valid, binding and
enforceable obligation of the Special Servicer and all requisite action has
been taken by the Special Servicer to make this Agreement valid and binding
upon the Special Servicer in accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
---------------------------
transactions contemplated by this Agreement are in the ordinary course of
business of the Special Servicer;
(c) No Conflicts. Neither the execution and delivery of this
------------
Agreement, the acquisition of the servicing responsibilities by the Special
Servicer or the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, will conflict
with or result in a breach of any of the terms, conditions or provisions of
the Special Servicer's charter or by-laws or any legal restriction or any
agreement or instrument to which the Special Servicer is now a party or by
which it is bound, or constitute a default or result in an acceleration under
any of the foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Special Servicer or its
property is subject, or impair the ability of the Special Servicer to service
the Mortgage Loans, or impair the value of the Mortgage Loans;
(d) Ability to Perform. The Special Servicer does not believe,
------------------
nor does it have any reason or cause to believe, that it cannot perform each
and every covenant contained in this Agreement. The Special Servicer is
solvent and the transfer of servicing responsibilities to the Special
Servicer hereunder is not undertaken to hinder, delay or defraud any of the
Special Servicer's creditors;
(e) No Litigation Pending. There is no action, suit, proceeding
---------------------
or investigation pending or threatened against the Special 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 Special Servicer, or in any material impairment of the right
or ability of the Special Servicer to carry on its business substantially as
now conducted, or in any material liability on the part of the Special
Servicer, or which would draw into question the validity of this Agreement or
of any action taken or to be taken in connection with the obligations of the
Special Servicer contemplated herein, or which would be likely to impair
materially the ability of the Special Servicer to perform under the terms of
this Agreement;
(f) No Consent Required. No consent, approval, authorization or
-------------------
order of any court or governmental agency or body is required for the
execution, delivery and performance by the Special Servicer of or compliance
by the Special Servicer with this Agreement, or if required, such approval
has been obtained prior to each Transfer Date;
(g) Ability to Service. The Servicer is an approved
------------------
seller/servicer of conventional residential mortgage loans for FNMA or FHLMC,
with the facilities, procedures, and experienced personnel necessary for the
sound servicing of mortgage loans of the same type as the Mortgage Loans.
The Servicer is in good standing to service mortgage loans for either FNMA or
FHLMC, and no event has occurred, including but not limited to a change in
insurance coverage, which would make the Servicer unable to comply with
either FNMA or FHLMC eligibility requirements or which would require
notification to any of FNMA or FHLMC;
(h) No Untrue Information. No representation or warranty made by
---------------------
the Special Servicer pursuant to this Section 6.01 contains any untrue
statement of fact or omits to state a fact necessary to make the statements
contained therein not misleading; and
(i) No Commissions to Third Parties. The Special Servicer has not
-------------------------------
dealt with any broker or agent or anyone else who might be entitled to a fee
or commission in connection with this transaction other than the Owner.
(j) Insured Depository Institution Representations. Special
----------------------------------------------
Servicer is an "insured depository institution" as that term is defined in
Section 1813(c)(2) of Title 12 of the United States Code, as amended, and
accordingly, Special Servicer makes the following additional representations
and warranties:
(i) This Agreement between Owner and Special Servicer
conforms to all applicable statutory and regulatory requirements; and
(ii) This Agreement is (1) executed contemporaneously with the
agreement reached by Owner and Special Servicer, (2) approved by a
specific corporate or banking association resolution by the Special
Servicer's board of directors, which approval shall be reflected in the
minutes of said board, and (3) an official record of the Special
Servicer. A copy of such resolution, certified by a vice president or
higher officer of Special Servicer has been provided to Owner.
Section 6.02. Remedies for Breach of Representations and Warranties of
--------------------------------------------------------
the Special Servicer.
- - --------------------
It is understood and agreed that the representations and warranties
set forth in Section 6.01 shall survive the engagement of the Special
Servicer to perform the servicing responsibilities under this Agreement and
shall inure to the benefit of the Owner. Upon discovery by either the
Special Servicer or the Owner of a Breach of any of the foregoing
representations and warranties which materially and adversely affects the
ability of the Special Servicer to perform its duties and obligations under
this Agreement or otherwise materially and adversely affects the value of the
Mortgage Loans, the Mortgaged Property or the priority of the security
interest on such Mortgaged Property or the interest of the Owner (in the case
of any of the foregoing, a "Breach"), the party discovering such Breach shall
give prompt written notice to the other.
Within 60 days of the earlier of either discovery by or notice to
the Special Servicer of any Breach of a representation or warranty set forth
in Section 6.01 which materially and adversely affects the ability of the
Special Servicer to perform its duties and obligations under this Agreement
or otherwise materially and adversely affects the value of the Mortgage
Loans, the Mortgaged Property or the priority of the security interest on
such Mortgaged Property, the Special Servicer shall use its Best Efforts
promptly to cure such Breach in all material respects and, if such Breach
cannot be cured, the Special Servicer shall, at the Owner's option, assign
the Special Servicer's rights and obligations under this Agreement (or
respecting the affected Mortgage Loans) to a successor standby servicer,
subject to the approval of the Owner, which approval shall be in the Owner's
sole discretion. Such assignment shall be made in accordance with Section
10.01.
In addition, the Special Servicer shall indemnify the Owner and
hold it harmless 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 from, a Breach of the Special
Servicer representations and warranties contained in this Agreement. It is
understood and agreed that the obligation of the Special Servicer to
indemnify the Owner pursuant to this Section 6.02 constitutes the sole remedy
of the Owner respecting a breach of the foregoing representations and
warranties.
Any cause of action against the Special Servicer relating to or
arising out of the Breach of any representations and warranties made in
Section 6.01 shall accrue upon (i) discovery of such Breach by the Special
Servicer or notice thereof by the Owner to the Special Servicer, (ii) failure
by the Special Servicer to cure such Breach within the applicable cure
period, and (iii) demand upon the Special Servicer by the Owner for
compliance with this Agreement.
Section 6.03. Representations and Warranties of the Owner.
-------------------------------------------
The Owner, as a condition to the consummation of the transactions
contemplated hereby, makes the following representations and warranties to
the Special Servicer as of each Transfer Date:
(a) Due Organization and Authority. The Owner is a Delaware
------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has all licenses necessary to
carry on its business as now being conducted; the Owner has the full
corporate 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 Owner and the consummation of the
transactions contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, binding and enforceable obligation of the
Owner; and all requisite corporate action has been taken by the Owner to make
this Agreement valid and binding upon the Owner in accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
---------------------------
transactions contemplated by this Agreement are in the ordinary course of
business of the Owner;
(c) No Conflicts. Neither the execution and delivery of this
------------
Agreement, the conveyance of the servicing responsibilities to the Special
Servicer or the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, will conflict
with or result in a Breach of any of the terms, conditions or provisions of
the Owner's charter or by-laws or any legal restriction or any agreement or
instrument to which the Owner is now a party or by which it is bound, or
constitute a default or result in an acceleration under any of the foregoing,
or result in the violation of any law, rule, regulation, order, judgment or
decree to which the Owner or its property is subject, or impair the value of
the servicing contract consummated hereby;
(d) Ability to Perform. The Owner does not believe, nor does it
------------------
have any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement;
(e) No Litigation Pending. There is no action, suit, proceeding
---------------------
or investigation pending or threatened against the Owner 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
Owner, or in any material impairment of the right or ability of the Owner to
carry on its business substantially as now conducted, or in any material
liability on the part of the Owner, or which would draw into question the
validity of this Agreement or of any action taken or to be taken in
connection with the obligations of the Owner contemplated herein, or which
would be likely to impair materially the ability of the Owner to perform
under the terms of this Agreement;
(f) No Consent Required. No consent, approval, authorization or
-------------------
order of any court or governmental agency or body is required for the
execution, delivery and performance by the Owner of or compliance by the
Owner with this Agreement, or if required, such approval has been obtained
prior to each Transfer Date;
(g) Ownership. The Owner is the sole owner and holder of the
---------
Mortgage Loans;
(h) No Untrue Information. No representation or warranty made by
---------------------
the Owner pursuant to this Section 6.03 contains any untrue statement of fact
or omits to state a fact necessary to make the statements contained therein
not misleading; and
(i) No Commissions to Third Parties. The Owner has not dealt with
-------------------------------
any broker or agent or anyone else who might be entitled to a fee or
commission in connection with this transaction other than the Special
Servicer.
Section 6.04. Remedies for Breach of Representations and Warranties of
--------------------------------------------------------
the Owner.
- - ---------
It is understood and agreed that the representations and warranties
set forth in Section 6.03 shall survive the engagement of the Special
Servicer to perform the standby servicing responsibilities as of any Transfer
Date and the delivery of Servicing Files to the Special Servicer and shall
inure to the benefit of the Special Servicer. Upon discovery by either the
Special Servicer or the Owner of a Breach of any of the foregoing
representations and warranties which materially and adversely affects the
value of the servicing contract established herein or the interest of the
Special Servicer, the party discovering such Breach shall give prompt written
notice to the other.
Within 60 days of the earlier of either discovery by or notice to
the Owner of any Breach of a representation or warranty set forth in Section
6.03 which materially and adversely affects the value of the servicing
contract, the Owner shall use its Best Efforts promptly to cure such Breach
in all material respects.
The Owner shall indemnify the Special Servicer and hold it harmless
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 from, a Breach of the Owner representations and
warranties contained in this Agreement. It is understood and agreed that the
obligation of the Owner to indemnify the Special Servicer pursuant to this
Section 6.04 constitutes the sole remedy of the Special Servicer respecting a
Breach of the foregoing representation and warranties.
Any cause of action against the Owner relating to or arising out of
the Breach of any representations and warranties made in Section 6.03 shall
accrue upon (i) discovery of such Breach by the Owner or notice thereof by
the Special Servicer to the Owner, (ii) failure by the Owner to cure such
Breach within the applicable cure period, and (iii) demand upon the Owner by
the Special Servicer for compliance with this Agreement.
ARTICLE VII
WHOLE LOAN TRANSFER; PASS-THROUGH TRANSFER
Section 7.01. Removal of Mortgage Loans from Inclusion Under this
---------------------------------------------------
Agreement Upon a Pass-Through Transfer or a Whole
-------------------------------------------------
Loan Transfer on One or More Reconstitution Dates.
-------------------------------------------------
The Owner and the Special Servicer agree that with respect to some
or all of the Mortgage Loans, from time to time the Owner shall effect a
Whole Loan Transfer and/or a Pass-Through Transfer, retaining the Special
Servicer as the standby servicer thereof. On the related Reconstitution Date,
the Mortgage Loans transferred shall continue to be covered by this
Agreement.
The Special Servicer shall cooperate with the Owner in connection
with any Pass-Through Transfer or Whole Loan Transfer contemplated by the
Owner pursuant to this Section 7.01. In that connection, the Special
Servicer shall (a) execute any Reconstitution Agreement within a reasonable
period of time after receipt of any Reconstitution Agreement which time shall
be sufficient for the Special Servicer and Special Servicer's counsel to
review such Reconstitution Agreement, but such time shall not exceed ten (10)
Business Days after such receipt, and (b) provide to the trustee, subject to
any Reconstitution Agreement and/or the Owner: (i) any and all information
and appropriate verification of information which may be reasonably available
to the Special Servicer, whether through letters of its auditors and counsel
or otherwise, as the Owner shall reasonably request and at the Owner's
expense; and (ii) such additional representations, warranties, covenants,
opinions of counsel (at the Owner's expense), letters from auditors (at the
Owner's expense), and certificates of public officials or officers of the
Special Servicer as are reasonably believed necessary by the trustee, any
master servicer, any rating agency or the Owner, as the case may be, in
connection with such transactions. The Owner shall be responsible for
reasonable and documented out-of-pocket costs of the Special Servicer in
connection with the review of any Reconstitution Agreement by the Special
Servicer.
In the event that the Special Servicer enters into any
Reconstitution Agreement in accordance with the provisions of this Section,
the servicing of the applicable Mortgage Loans subject thereto shall be
governed by the servicing provisions set forth therein. Such servicing
provisions shall be substantially similar to the servicing provisions set
forth herein or may provide for the Special Servicer (i) to service in
accordance with FNMA, FHLMC or REMIC servicing, (ii) to service on a
"scheduled/scheduled" basis and advance principal and interest payments
through liquidation of each Mortgage Loan or until any such advances are
deemed nonrecoverable, (iii) to pay up to 30 days' compensating interest on
any prepayments of principal and interest (up to the amount of its monthly
servicing fee) and (iv) to otherwise comply with any applicable REMIC or
rating agency servicing requirements.
In the event the Owner has elected to have an entity other than the
Owner hold record title to the Mortgages, prior to a Reconstitution Date the
Owner or its designee shall prepare an Assignment of Mortgage in blank from
the Owner, acceptable to the trustee, for each Mortgage Loan that is part of
a Whole Loan Transfer or Pass-Through Transfer and shall pay all preparation
and recording costs associated therewith. At the expense of the Owner, the
Special Servicer shall execute each Assignment of Mortgage, track such
Assignments of Mortgage to ensure they have been recorded and deliver them as
required by the trustee upon the Special Servicer's receipt thereof.
Additionally, the Special Servicer shall prepare and execute, at the
direction of the Owner, any note endorsements in connection with any and all
Reconstitution Agreements.
All Mortgage Loans not sold or transferred pursuant to a Whole Loan
Transfer or Pass-Through Transfer and any and all Mortgage Loans repurchased
by the Owner pursuant to Section 7.02 below with respect to a Whole Loan
Transfer or Pass-Through Transfer shall be subject to this Agreement and
shall continue to be serviced in accordance with the terms of this Agreement
and with respect thereto this Agreement shall remain in full force and
effect.
Section 7.02. Additional Indemnification by the Special Servicer;
-----------------------------------------------------
Third Party Claims.
------------------
The Special Servicer shall indemnify the Owner and hold it harmless
against any and all claims, losses, damages, penalties, fines, forfeitures,
reasonable and necessary legal fees and related costs, judgments, and any
other costs, fees and expenses that the Owner may sustain in any way related
to the failure of the Special Servicer to perform its duties and service the
Transferred Mortgage Loans in strict compliance with the terms of this
Agreement or any Reconstitution Agreement entered into pursuant to Section
7.01. The Special Servicer shall immediately notify the Owner if a claim is
made by a third party with respect to this Agreement or any Reconstitution
Agreement or the Transferred Mortgage Loans, shall promptly notify the
trustee or other relevant third party with respect to any claim made by a
third party with respect to any Reconstitution Agreement, assume (with the
prior written consent of the Owner) the defense of any such claim and pay all
expenses in connection therewith, including reasonable counsel fees, promptly
pay, discharge and satisfy any judgment or decree which may be entered
against it or the Owner in respect of such claim and follow any written
instructions received from the Owner in connection with such claim. The Owner
promptly shall reimburse the Special Servicer for all amounts advanced by it
pursuant to the preceding sentence except when the claim is in any way
related to the Special Servicer's indemnification pursuant to Section 6.02,
or the failure of the Special Servicer to service and administer the
Transferred Mortgage Loans in strict compliance with the terms of this
Agreement or any Reconstitution Agreement. In the event a dispute arises
between the Special Servicer and the Owner with respect to any of the rights
and obligations of the parties pursuant to this Agreement, and such dispute
is adjudicated in a court of law, by an arbitration panel or any other
judicial process, then the losing party shall indemnify and reimburse the
winning party for all reasonable attorney's fees and other reasonable costs
and expenses related to the adjudication of said dispute.
ARTICLE VIII
THE STANDBY SERVICER
Section 8.01. Merger or Consolidation of the Special Servicer.
-----------------------------------------------
The Special Servicer shall keep in full effect its existence,
rights and franchises as a federal savings bank, and shall obtain and
preserve its qualification to do business (or any exemption therefrom) in
each jurisdiction in which such qualification (or exemption) is or shall be
necessary to protect the validity and enforceability of this Agreement or any
of the Mortgage Loans and to perform its duties under this Agreement.
Any Person into which the Special Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Special Servicer shall be a party, or any Person
succeeding to the business of the Special Servicer, shall be the successor of
the Special Servicer hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding, provided, however, that the successor or
surviving Person shall be an institution (i) having a net worth of not less
than $25,000,000, and (ii) which is a FNMA- and FHLMC-approved Servicer in
good standing.
Section 8.02. Limitation on Liability of the Special Servicer and
---------------------------------------------------
Others.
- - ------
Neither the Special Servicer nor any of the directors, officers,
employees or agents of the Special Servicer shall be under any liability to
the Owner 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 Special Servicer
or any such person against any Breach of warranties or representations made
herein, or failure to perform its obligations in strict compliance with any
standard of care set forth in this Agreement, or any liability which would
otherwise be imposed by reason of any breach of the terms and conditions of
this Agreement. The Special Servicer and any director, officer, employee or
agent of the Special Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Special Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its duties to standby service the Mortgage Loans in accordance
with this Agreement and which in its opinion may involve it in any expense or
liability, provided, however, that the Special Servicer may, with the consent
of the Owner, undertake any such action which it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the
parties hereto. In such event, the Special Servicer shall be entitled to
reimbursement from the Owner for the reasonable legal expenses and costs of
such action. Notwithstanding the foregoing, in no event shall the Special
Servicer be liable to the Owner for indirect, consequential, punitive or
loss-of-profit damages; provided, however, the Special Servicer shall
indemnify the Owner for any losses with respect to punitive damages caused by
the Special Servicer and incurred by the Owner from a final and non-
appealable judgment from a court of competent jurisdiction in favor of a
third party, provided that the Special Servicer has been provided with an
opportunity to defend and control the litigation and that the Owner has not
agreed to any settlement without the Special Servicer's prior written consent
which consent shall not be unreasonably withheld. This Section 8.02 shall
survive any termination of this Agreement.
Section 8.03. Limitation on Resignation and Assignment by the Special
-------------------------------------------------------
Servicer.
- - --------
The Owner has entered into this Agreement with the Special Servicer
and subsequent transferees of the Owner will purchase the Mortgage Loans in
reliance upon the independent status of the Special Servicer, and the
representations as to the adequacy of its servicing facilities, plant,
personnel, records and procedures, its integrity, reputation and financial
standing, and the continuance thereof. Therefore, the Special Servicer shall
not assign this Agreement or the servicing responsibilities hereunder or
delegate its rights or duties hereunder or any portion hereof (to other than
a Subservicer) or sell or otherwise dispose of all or substantially all of
its property or assets without the prior written consent of the Owner, which
consent shall be granted or withheld in the sole discretion of the Owner.
Except in connection with any termination permitted to be exercised
by the Special Servicer in accordance with Section 9.02, the Special Servicer
shall not resign from the obligations and duties hereby imposed on it except
by mutual consent of the Special Servicer and the Owner or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Special Servicer.
Any such determination permitting the resignation of the Special Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Owner which Opinion of Counsel shall be in form and substance acceptable to
the Owner. No such resignation shall become effective until a successor
shall have assumed the Special Servicer's responsibilities and obligations
hereunder in the manner provided in Section 10.01.
Without in any way limiting the generality of this Section 8.03, in
the event that the Special Servicer either shall assign this Agreement or the
servicing responsibilities hereunder or delegate its duties hereunder or any
portion thereof (to other than a Subservicer) or sell or otherwise dispose of
all or substantially all of its property or assets, without the prior written
consent of the Owner, then the Owner shall have the right to terminate this
Agreement upon notice given as set forth in Section 9.01, without any payment
of any penalty or damages and without any liability whatsoever to the Special
Servicer or any third party.
ARTICLE IX
TERMINATION
Section 9.01. Termination for Cause.
---------------------
(a) This Agreement shall be terminable at the sole option of the
Owner, if any of the following events of default exist on the part of the
Special Servicer:
(i) any failure by the Special Servicer to remit to the Owner
any payment required to be made under the terms of this Agreement which
continues unremedied for a period of five Business Days after the date
upon which written notice of such failure, requiring the same to be
remedied, shall have been given to the Special Servicer by the Owner; or
(ii) failure by the Special Servicer duly to observe or
perform in any material respect any other of the covenants or agreements
on the part of the Special Servicer set forth in this Agreement which
continues unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Special Servicer by the Owner; or
(iii) to the extent that the Special Servicer is required to
maintain a license, failure by the Special Servicer to maintain its
license to do business or service residential mortgage loans in any
jurisdiction where the Mortgaged Properties are located; or
(iv) 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,
including bankruptcy, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Special Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period of 60
days; or
(v) the Special 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 Special Servicer or of or relating to all or
substantially all of its property; or
(vi) the Special 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, bankruptcy or reorganization
statute, make an assignment for the benefit of its creditors,
voluntarily suspend payment of its obligations or cease its normal
business operations for three Business Days; or
(vii) the Special Servicer fails to maintain a minimum net
worth of $25,000,000; or
(viii) the Special Servicer, if it is an Insured Depository
Institution, shall become the subject of a cease and desist order of the
Appropriate Federal Banking Agency or interest into a memorandum of
understanding, consent agreement or any similar agreement with the
Appropriate Federal Banking Agency, any of which, would have or is
purportedly the result of, any condition which would have a material
adverse effect on the Mortgage Loans, the Special Servicer, or the
Special Servicer's ability to service the Mortgage Loans as provided
hereunder; or
(ix) the Special Servicer shall fail to maintain its status
as Well Capitalized; or
(x) the Special Servicer attempts, without the consent of
the Owner, to assign the standby servicing of the Mortgage Loans or the
servicing of the Transferred Mortgage Loans or its right to servicing
compensation hereunder or the Special Servicer attempts, without the
consent of the Owner, to sell or otherwise dispose of all or
substantially all of its property or assets or to assign this Agreement
or the servicing responsibilities hereunder or to delegate its duties
hereunder or any portion thereof.
In each and every such case, so long as an event of default shall
not have been remedied, in addition to whatever rights the Owner may have at
law or equity to damages, including injunctive relief and specific
performance, the Owner, by notice in writing to the Special Servicer, may
terminate all the rights and obligations of the Special Servicer under this
Agreement and in and to the servicing contract established hereby and the
proceeds thereof.
Upon receipt by the Special Servicer of such written notice, all
authority and power of the Special Servicer under this Agreement, whether
with respect to the Mortgage Loans or otherwise, shall pass to and be vested
in a successor servicer appointed by the Owner. Upon written request from
the Owner, the Special Servicer shall prepare, execute and deliver to the
successor entity designated by the Owner any and all documents and other
instruments, place in such successor's possession all Servicing Files, 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 Transferred Mortgage
Loans and related documents, at the Special Servicer's sole expense. The
Special Servicer shall cooperate with the Owner and such successor in
effecting the termination of the Special Servicer's responsibilities and
rights hereunder, including without limitation, the transfer to such
successor for administration by it of all cash amounts which shall at the
time be credited by the Special Servicer to the Custodial Account or Escrow
Account or thereafter received with respect to the Transferred Mortgage
Loans.
By a written notice, the Owner may waive any default by the Special
Servicer in the performance of its obligations hereunder and its
consequences. Upon any waiver of a past default, such default shall cease to
exist, and any 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
thereon except to the extent expressly so waived.
Section 9.02. Termination Without Cause.
-------------------------
This Agreement shall terminate upon the earlier of: (a) the
distribution of the final payment or liquidation proceeds on the last
Mortgage Loan to the Owner (or advances by the Primary Servicer or Special
Servicer for the same), (b) the disposition of all REO Property acquired upon
foreclosure of the last Mortgage Loan and the remittance of all funds due
hereunder or (c) any mutual or unilateral termination as hereinafter
provided. In no event shall this Agreement terminate pursuant to this
Section within six months of the date of this Agreement. Any termination
pursuant to this Section 9.02 subsequent to such six month period but prior
to six years from the date of this Agreement is subject to rating agency
approval (with respect to Transferred Mortgage Loans subject to a
Reconstitution Agreement) and a termination fee per Transferred Mortgage Loan
and/or REO Property in an amount as the Special Servicer and the Owner shall
mutually agree upon at the time of termination of this Agreement. On or
after six years from the date of this Agreement but prior to ten years from
the date of this Agreement, this Agreement may be terminated upon mutual
consent of the Owner and the Special Servicer in writing. On or after ten
years from the date of this Agreement, this Agreement may be terminated
pursuant to sixty days notice by either party to the other.
Any such notice of termination shall be in writing and delivered to
the Special Servicer by registered mail to the address set forth at the
beginning of this Agreement. The Owner and the Special Servicer shall comply
with the termination procedures set forth in Sections 9.01 and 10.01 hereof.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Successor to the Special Servicer.
---------------------------------
Simultaneously with the termination of the Special Servicer's
responsibilities and duties under this Agreement pursuant to Sections 6.02,
8.03, 9.01 or 9.02, the Owner shall (i) succeed to and assume all of the
Special Servicer's responsibilities, rights, duties and obligations under
this Agreement, or (ii) appoint a successor having the characteristics set
forth in clauses (i) and (ii) of Section 8.01 and which shall succeed to all
rights and assume all of the responsibilities, duties and liabilities of the
Special Servicer under this Agreement simultaneously with the termination of
the Special Servicer's responsibilities, duties and liabilities under this
Agreement. In connection with such appointment and assumption, the Owner may
make such arrangements for the compensation of such successor out of payments
on Mortgage Loans as it and such successor shall agree, provided, however,
that no such compensation shall be in excess of that permitted the Special
Servicer under this Agreement without the consent of the Owner. In the event
that the Special Servicer's duties, responsibilities and liabilities under
this Agreement should be terminated pursuant to the aforementioned sections,
the Special Servicer shall discharge such duties and responsibilities during
the period from the date it acquires knowledge of such termination until the
effective date thereof with the same degree of diligence and prudence which
it is obligated to exercise under this Agreement, and shall take no action
whatsoever that might impair or prejudice the rights or financial condition
of its successor. The resignation or removal of the Special Servicer
pursuant to the aforementioned sections shall not become effective until a
successor shall be appointed pursuant to this Section 10.01 and shall in no
event relieve the Special Servicer of the representations and warranties made
pursuant to Sections 6.01 and the remedies available to the Owner under
Section 6.02 and 7.02, it being understood and agreed that the provisions of
such Sections 6.01, 6.02 and 7.02 shall be applicable to the Special Servicer
notwithstanding any such resignation or termination of the Special Servicer,
or the termination of this Agreement.
Within 30 days of the appointment of a successor entity by the
Owner, the Special Servicer shall prepare, execute and deliver to the
successor entity any and all documents and other instruments, place in such
successor's possession all Servicing Files, 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 of the Mortgage Notes and related documents, and the preparation
and recordation of Assignments of Mortgage, with respect to Transferred
Mortgage Loans, at the discretion of the Owner and, at the Owner's sole
expense. The Special Servicer shall cooperate with the Owner and such
successor in effecting the termination of the Special Servicer's
responsibilities and rights hereunder and the transfer of servicing
responsibilities to the successor standby servicer, including without
limitation, the transfer to such successor for administration by it of all
cash amounts which shall at the time be credited by the Special Servicer to
the Custodial Account or Escrow Account or thereafter received with respect
to the Transferred Mortgage Loans.
Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Special Servicer and to the Owner an
instrument accepting such appointment, wherein the successor shall make
the representations and warranties set forth in Section 6.01, whereupon
such successor shall become fully vested with all the rights,
powers, duties, responsibilities, obligations and liabilities of the
Special Servicer, with like effect as if originally named as a party
to this Agreement. Any termination or resignation of the Special
Servicer or termination of this Agreement pursuant to Sections 6.02, 8.03,
9.01 or 9.02 shall not affect any claims that the Owner may have against
the Special Servicer arising out of the Special Servicer's actions or
failure to act prior to any such termination or resignation.
The Special Servicer shall deliver promptly to the successor
standby servicer the funds in the Custodial Account and Escrow Account and
all Mortgage Loan documents and related documents and statements held by it
hereunder and the Special Servicer shall account for all funds and shall
execute and deliver such instruments and do such other things as may
reasonably be required to more fully and definitively vest in the successor
all such rights, powers, duties, responsibilities, obligations and
liabilities of the Special Servicer.
Upon a successor's acceptance of appointment as such, the Special
Servicer shall notify by mail the Owner of such appointment in accordance
with the procedures set forth in Section 10.06.
Section 10.02. Closing.
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The closing for the engagement of the Special Servicer to perform
the standby servicing responsibilities respecting Mortgage Loans shall take
place on the Closing Date. At the Owner's option, the closing shall be
either: by telephone, confirmed by letter or wire as the parties shall agree;
or conducted in person, at such place as the parties shall agree.
Each closing shall be subject to each of the following conditions:
a) all of the representations and warranties of the Special
Servicer and the Owner under this Agreement shall be true and
correct as of the Closing Date and no event shall have
occurred which, with notice or the passage of time, would
constitute a default under this Agreement;
b) the Owner and Special Servicer each shall have received, or
the Owner's attorneys shall have received in escrow, all
Closing Documents as specified in Section 10.03 hereof and the
Closing Documents specified in (b), (c), (f) and (i) of
Section 10.03 hereof, in such forms as are agreed upon and
acceptable to the Special Servicer and the Owner, duly
executed by all signatories other than the Owner as required
pursuant to the respective terms thereof; and
c) all other terms and conditions of this Agreement shall have
been complied with and no default or Event of Default under
this Agreement shall have occurred and be continuing for a
period of 30 days or more prior to the Closing Date.
Section 10.03. Closing Documents.
-----------------
The Closing Documents shall consist of fully executed originals of
the following documents:
d) this Agreement;
e) the Mortgage Loan Schedule, with one copy to be attached to
each counterpart of this Agreement as Exhibit A,;
f) with respect to each Transfer Date, a Notice of Transfer in
the form of Exhibit B hereto;
g) a Custodial Account Letter Agreement in the form of Exhibit C
hereto;
h) an Escrow Account Letter Agreement in the form of Exhibit D
hereto;
i) an Officer's Certificate of the Special Servicer, in the form
of Exhibit E-1 hereto, including all attachments thereto, and
with respect to subsequent Transfer Dates, an Officer's
Certificate in the form of Exhibit E-2 hereto, including all
attachments thereto;
j) an Opinion of Counsel of the Special Servicer in the form of
Exhibit G hereto;
k) an Assignment of the applicable Custodial Agreement in the
form of Exhibit F-3 hereto; and
l) with respect to Additional Mortgage Loan Transfer Dates (i) a
Mortgage Loan Schedule reflecting the Additional Mortgage
Loans to be serviced by the Special Servicer and a cumulative
Mortgage Loan Schedule, reflecting all Mortgage Loans being
serviced by the Special Servicer from the Closing Date up to,
and including the related Subsequent Transfer Date and (ii) an
Acknowledgment Agreement in the form of Exhibit H hereto.
Section 10.04. Costs.
-----
The Owner shall pay any commissions due its salesmen and the legal
fees and expenses of its attorneys. Costs and expenses incurred in
connection with the transfer of the servicing responsibilities, including
fees for delivering Servicing Files, costs associated with notifications sent
by the Primary Servicer to notify Mortgagors of a transfer and powers of
attorney, shall be paid by the Owner or the Primary Servicer, as applicable.
The Owner or Primary Servicer, as applicable, shall pay the costs associated
with the preparation, delivery and recording of Assignments of Mortgages
required on each Reconstitution Date and any customary reasonable out-of-
pocket costs of the Special Servicer to review Reconstitution Agreements, and
any other reasonable fees, costs and expenses of the Special Servicer
incurred in connection with any Pass-Through Transfer, Whole Loan Transfer or
Reconstitution Agreement including, without limitation, any reasonable fees,
costs and expenses of the Special Servicer's accountants for any comfort
letters or audits required by the Owner, any underwriter, any rating agency
and/or any certificate insurer and any reasonable fees, costs and expenses of
the Special Servicer's attorneys for any such review of any such
Reconstitution Agreement or the rendering of any opinion in connection
therewith. All other costs and expenses associated with this Agreement shall
be borne by the applicable party as set forth in this Agreement.
Section 10.05. Protection of Confidential Information.
--------------------------------------
The Special Servicer shall keep confidential and shall not divulge
to any party, without the Owner's prior written consent, any Transferred
Mortgage Loan Servicing Fee paid by the Owner for the servicing of the
Mortgage Loans, any other economic arrangements between the Owner and the
Special Servicer set forth in this Agreement and any information pertaining
to the Mortgage Loans or any borrower thereunder, except to the extent that
it is appropriate for the Special Servicer to do so in working with legal
counsel, auditors, taxing authorities or other governmental agencies.
Section 10.06. Notices.
-------
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed by overnight
courier, addressed as follows (or such other address as may hereafter be
furnished to the other party by like notice):
(i) if to the Owner:
Lehman Capital, A Division of
Lehman Brothers Holdings Inc.
3 World Financial Center
200 Vesey Street, 12th Floor
New York, New York 10285-1200
Attention: Manager Contract Finance
(ii) if to the Special Servicer:
Ocwen Federal Bank FSB
The Forum, Suite 1002
1675 Palm Beach Lakes Blvd.
West Palm Beach, Florida 33401
Attention: Secretary
Any such demand, notice or communication hereunder shall be deemed
to have been received on the date delivered to or received at the premises of
the addressee.
Section 10.07. Severability Clause.
-------------------
Any part, provision, representation or warranty of this Agreement
which is prohibited or which is held to be void or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part, provision,
representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction
shall be ineffective, as to such jurisdiction, to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction as
to any Mortgage Loan shall not invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable
law, the parties hereto waive any provision of law which prohibits or renders
void or unenforceable any provision hereof. If the invalidity of any part,
provision, representation or warranty of this Agreement shall deprive any
party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good-faith, to develop a structure the economic
effect of which is as close as possible to the economic effect of this
Agreement without regard to such invalidity.
Section 10.08. No Personal Solicitation. From and after each
------------------------
related Transfer Date, the Special Servicer hereby agrees that it will not
take any action or permit or cause any action to be taken by any of its
agents or affiliates, or by any independent contractors on the Special
Servicer's behalf, to personally, by telephone or mail, solicit the borrower
or obligor under any Mortgage Loan for any purpose whatsoever, including to
refinance a Mortgage Loan, in whole or in part, without the prior written
consent of the Owner. It is understood and agreed that all rights and
benefits relating to the solicitation of any Mortgagors and the attendant
rights, title and interest in and to the list of such Mortgagors and data
relating to their Mortgages (including insurance renewal dates) shall be
transferred to the Owner pursuant hereto on the related Transfer Date and the
Special Servicer shall take no action to undermine these rights and benefits.
A response to an inquiry from a Mortgagor regarding refinancing shall not be
considered a personal solicitation under this Section 10.08. General
solicitation by the Special Servicer or an affiliate of the Special Servicer
of such affiliate's or Special Servicer's customer base, shall not constitute
a breach of this Section 10.08. Notwithstanding the foregoing, it is
understood and agreed that offers to refinance a Mortgage Loan made within 30
days following receipt by the Special Servicer of a pay-off request from the
Mortgagor and promotions undertaken by the Special Servicer or any affiliate
of the Special Servicer which are directed to the general public at large,
including, without limitation, mass mailing based on commercially acquired
mailing lists, newspaper, radio and television advertisements shall not
constitute solicitation under this Section 10.08.
Section 10.09. Counterparts.
------------
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all
such counterparts shall constitute one and the same instrument.
Section 10.10. Place of Delivery and Governing Law.
-----------------------------------
THIS AGREEMENT SHALL BE DEEMED IN EFFECT WHEN A FULLY EXECUTED
COUNTERPART THEREOF IS RECEIVED BY THE OWNER IN THE STATE OF NEW YORK AND
SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK. THE 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 THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT PREEMPTED BY FEDERAL LAW.
Section 10.11. Further Agreements.
------------------
The Owner and the Special Servicer each agree to execute and
deliver to the other such reasonable and appropriate additional documents,
instruments or agreements as may be necessary or appropriate to effectuate
the purposes of this Agreement.
Section 10.12. Intention of the Parties.
------------------------
It is the intention of the parties that the Owner is conveying, and
the Special Servicer is receiving only a contract for servicing the Mortgage
Loans. Accordingly, the parties hereby acknowledge that the Owner remains
the sole and absolute owner of the Mortgage Loans and all rights related
thereto.
Section 10.13. Successors and Assigns; Assignment of Servicing
-----------------------------------------------
Agreement.
- - ---------
This Agreement shall bind and inure to the benefit of and be
enforceable by the Special Servicer and the Owner and the respective
successors and assigns of the Special Servicer and the Owner. This Agreement
shall not be assigned, pledged or hypothecated by the Special Servicer to a
third party without the prior written consent of the Owner, which consent
shall be given or withheld at the sole discretion of the Owner.
Section 10.14. Waivers.
-------
No term or provision of this Agreement may be waived or modified
unless such waiver or modification is in writing and signed by the party
against whom such waiver or modification is sought to be enforced.
Section 10.15. Exhibits.
--------
The exhibits to this Agreement are hereby incorporated and made a
part hereof and are an integral part of this Agreement.
Section 10.16. General Interpretive Principles.
-------------------------------
For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the singular, and
the use of any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(c) references herein to "Articles", "Sections", "Subsections",
"Paragraphs", and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions
of this Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean by reason of
enumeration.
Section 10.17. Reproduction of Documents.
-------------------------
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications which may
hereafter be executed, (b) documents received by any party at the closing,
and (c) financial statements, certificates and other information previously
or hereafter furnished, may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process. The
parties agree that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding, whether or
not the original is in existence and whether or not such reproduction was
made by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
IN WITNESS WHEREOF, the Special Servicer and the Owner have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the date first above written.
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
(Owner)
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
OCWEN FEDERAL BANK FSB
(Special Servicer)
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
EXECUTION
SERVICING AGREEMENT
THIS SERVICING AGREEMENT (this "Agreement"), entered into as of the 1st
day of March, 1998, by and between LEHMAN CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC., a Delaware corporation ("Lehman Capital"), and AURORA
LOAN SERVICES INC., a Delaware corporation ("the Servicer"), recites and
provides as follows:
RECITALS
WHEREAS, Lehman Capital has conveyed certain Mortgage Loans identified
on Schedule I hereto (the "Serviced Mortgage Loans") on a servicing-retained
basis to Structured Asset Securities Corporation ("SASCO"), which in turn has
conveyed the Serviced Mortgage Loans to First Union National Bank, as trustee
(the "Trustee") under a trust agreement dated as of March 1, 1998 (the "Trust
Agreement"), among the Trustee, Norwest Bank Minnesota, National Association,
as master servicer ("Norwest," and, together with any successor Master
Servicer appointed pursuant to the provisions of the Trust Agreement, the
"Master Servicer") and SASCO.
WHEREAS, Lehman Capital continues to own the servicing rights to the
Serviced Mortgage Loans, and may freely transfer such rights, subject to the
terms hereof.
WHEREAS, Lehman Capital desires that the Servicer service the Serviced
Mortgage Loans, and the Servicer has agreed to do so, subject to the right of
Lehman Capital to terminate the rights and obligations of the Servicer
hereunder at any time and to the other conditions set forth herein.
WHEREAS, Norwest and any successor Master Servicer shall be obligated,
among other things, to supervise the servicing of the Serviced Mortgage Loans
on behalf of the Trustee, and shall have the right, under certain
circumstances, to terminate the rights and obligations of the Servicer under
this Servicing Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lehman Capital and the Servicer
hereby agree as follows:
AGREEMENT
1. Definitions. Capitalized terms used and not defined in this
-----------
Agreement, including Exhibit A hereto and any provisions of the Flow
Servicing Agreement dated as of September 1, 1997, between Lehman Capital and
the Servicer (the "Flow Servicing Agreement") incorporated by reference
herein, shall have the meanings ascribed to such terms in the Trust
Agreement.
2. Servicing. The Servicer agrees, with respect to the Serviced
---------
Mortgage Loans, to perform and observe the duties, responsibilities and
obligations that are to be performed and observed under the provisions of the
Flow Servicing Agreement, except as otherwise provided herein and on Exhibit
A hereto, and that the provisions of the Flow Servicing Agreement, as so
modified, are and shall be a part of this Agreement to the same extent as if
set forth herein in full.
3. Master Servicing; Termination of Servicer. The Servicer, including
-----------------------------------------
any successor servicer hereunder, shall be subject to the supervision of the
Master Servicer, which Master Servicer shall be obligated to ensure that the
Servicer services the Serviced Mortgage Loans in accordance with the
provisions of this Agreement. The Master Servicer, acting on behalf of the
Trustee pursuant to the Trust Agreement, shall have the same rights as the
"Owner" (as defined in the Flow Servicing Agreement) to enforce the
obligations of the Servicer under the Flow Servicing Agreement. The Master
Servicer shall be entitled to terminate the rights and obligations of the
Servicer under this Agreement upon the failure of the Servicer to perform any
of its obligations under this Agreement, as provided in Article IX of the
Flow Servicing Agreement.
In addition, in the event that Lehman Capital transfers the servicing
rights in respect of the Serviced Mortgage Loans to one or more successor
servicers, the rights and obligations of the Servicer under this Agreement
shall terminate, at the sole option of Lehman Capital, without cause, upon
thirty days written notice to the Servicer, and each successor servicer shall
succeed to the rights and obligations of the Servicer under this Agreement as
of such date. Upon such termination the terminated Servicer shall not be
entitled to the Servicing Fee or any portion thereof, or, except as provided
in the Flow Servicing Agreement, to any other amounts in respect of the
Serviced Mortgage Loans.
The Servicer agrees that, notwithstanding anything to the contrary in
the Flow Servicing Agreement, Lehman Capital is the sole owner of the
servicing rights relating to the Serviced Mortgaged Loans, and the Servicer
shall have no right to transfer the servicing thereof.
4. No Representations. Neither the Servicer nor the Master Servicer
------------------
shall be obligated or required to make any representations and warranties
regarding the Serviced Mortgage Loans in connection with the transactions
contemplated by the Trust Agreement and issuance of the certificates issued
pursuant thereto.
5. Notices. All notices and communications between or among the
-------
parties hereto shall be in writing and shall be deemed received or given when
mailed first-class mail, postage prepaid, addressed to each other party at
its address specified below. Each party may designate to the other parties
in writing, from time to time, other addresses to which notices and
communications hereunder shall be sent.
6. Governing Law. THIS SERVICING AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
NOTWITHSTANDING NEW YORK OR OTHER CHOICE OF LAW RULES TO THE CONTRARY.
7. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an
original, but all of which counterparts shall together constitute but one and
the same instrument.
8. Reconstitution. Lehman Capital and the Servicer agree that this
--------------
Agreement is a Reconstitution Agreement, and that the date hereof is the
Reconstitution Date, each as defined in the Flow Servicing Agreement.
9. Notices and Remittances to the Master Servicer. All notices
----------------------------------------------
required to be delivered to the Owner or the Master Servicer under this
Agreement shall be delivered to the Master Servicer at the following address:
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044
Attn: Master Servicing Department, SASCO 1998-3
All remittances required to be made to the Master Servicer under this
Agreement shall be made to the following wire account:
Norwest Bank Minnesota, National Association
Minneapolis, Minnesota
ABA#: 091-000-019
Account Name: Corporate Trust Clearing
Account Number: 3970771416
For further credit to: 13415500, SASCO 1998-3
10. Errors and Omissions Insurance. The Servicer shall keep in force
------------------------------
during the term of this Agreement a fidelity bond and a policy or policies of
insurance covering errors and omissions in the performance of the Servicer's
obligations under this Agreement. Such fidelity bond and policy pr policies
shall be maintained with recognized insurers and shall be in such form and
amount as would permit the Servicer to be qualified as a FNMA or FHLMC
seller-servicer. The Servicer shall be deemed to have complied with this
provision if an affiliate of the Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Servicer. The Servicer
shall furnish to the Master Servicer a copy of each such bond and insurance
policy if (i) the Master Servicer so requests and (ii) the Servicer is not an
affiliate of Lehman Brothers Inc. at the time of such request.
11. Annual Audit Report. On or before April 30 of each year, beginning
-------------------
with April 30, 1999, Servicer shall cause a firm of independent public
accountants (who may also render other services to Servicer), which is a
member of the American Institute of Certified Public Accountants, to furnish
a statement to Owner, Directing Holder and Master Servicer, to the effect
that such firm has examined certain documents and records for the preceding
fiscal year (or during the period from the date of commencement of such
servicer's duties hereunder until the end of such preceding fiscal year in
the case of the first such certificate) and that, on the basis of such
examination conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers, such firm is of the opinion that
Servicer's overall servicing operations have been conducted in compliance
with the Uniform Single Attestation Program for Mortgage Bankers except for
such exceptions that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers requires it to report, in which case
such exceptions shall be set forth in such statement.
12. Annual Officer's Certificate. On or before April 30 of each year,
----------------------------
beginning with April 30, 1999, the Servicer, at its own expense, will deliver
to the Owner, Directing Holder and Master Servicer a Servicing Officer's
certificate stating, as to each signer thereof, that (i) a review of the
activities of the Servicer during such preceding fiscal year and of
performance under this Agreement has been made under such officers'
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
for such year, or, if there has been a default in the fulfillment of all such
obligations, specifying each such default known to such officers and the
nature and status thereof including the steps being taken by the Servicer to
remedy such default.
Executed as of the day and year first above written.
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
By:
---------------------------------
Name:
Title:
AURORA LOAN SERVICES INC.
By:
---------------------------------
Name:
Title:
EXHIBIT A
Modifications to the Flow Servicing Agreement
I. The following is hereby added immediately following the words
"incidental fees and charges" in the definition of "Ancillary Income" in
Article I: ", but not including any premium or penalty associated with
a prepayment of principal of a Mortgage Loan."
II. The definition of "Custodial Agreement" in Article I is hereby deleted
and replaced with the following:
"The custodial agreement relating to custody of the Serviced Mortgage
Loans between First Trust National Association, as Custodian, and First
Union National Bank, as Trustee, dated as of March 1, 1998."
III. The following definition is hereby added:
"Prepayment Period: With respect to the first Remittance Date, the
-----------------
period beginning on the Cut-off Date and ending on April 1. With respect to
each subsequent Remittance Date, the period commencing on the second day of
the month immediately preceding the month in which such Remittance Date
occurs and ending on the first day of the month in which such Remittance Date
occurs."
IV. The definition of "Monthly Advance" in Article I is hereby amended by
adding at the end of such definition the following: ", but only to the
extent that such amount is expected, in the reasonable judgment of the
Servicer, to be recoverable from collections or other recoveries in
respect of such Mortgage Loan."
V. The definition of "Qualified Depository" in Article I is hereby deleted
and replaced with the following:
"Any of (i) a depository the accounts of which are insured by the FDIC
and the debt obligations of which are rated AA or better by Fitch and
S&P; (ii) the corporate trust department of any bank the debt
obligations of which are rated at least A-1 or its equivalent by each of
Fitch and S&P; or (iii) the Servicer, unless the Master Servicer is
notified by either Fitch or S&P that the designation of the Servicer as
a Qualified Depository will result in a qualification, withdrawal or
downgrade of the then-current rating of any of the Certificates."
VI. The definition of "Remittance Date" in Article I is hereby deleted and
replaced with the following:
"The 18th day (or if such 18th day is not a Business Day, the first
Business Day immediately following) of any month, following the First
Remittance Date."
VII. The definition of "Servicing Advance" in Article I is hereby amended by
adding, immediately after the phrase "but not limited to, the cost of",
the following: "transfer of servicing of Distressed Mortgage Loans to
the Special Servicer pursuant to Section 9.02, and".
VIII. The first sentence of the definition of "Servicing Fee" in Article
I is hereby deleted and replaced with the following: "The
servicing fee shall be an amount equal to one-twelfth the product
of (a) a rate per annum equal to 0.50% and (b) the outstanding
principal balance of such Mortgage Loan. The obligation of the
Master Servicer to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion
(including recoveries with respect to interest from Liquidation
Proceeds to the extent permitted by Section 3.02 of this Agreement)
of such Monthly Payment collected by the Servicer, or as otherwise
provided under this Agreement."
IX. The fourth and fifth paragraphs of Section 3.01 are hereby deleted and
replaced with the following paragraph:
"Consistent with the terms of this Agreement, the Servicer may
waive any late payment charge, assumption fee or other fee that may be
collected in the ordinary course of servicing the Mortgage Loans. The
Servicer shall not make any future advances to any obligor under any
Mortgage Loan, and (unless the Mortgagor is in default with respect to
the Mortgage Loan or such default is, in the judgment of the Servicer,
reasonably foreseeable) the Servicer shall not permit any modification
of any material term of any Mortgage Loan, including any modification
that would change the Mortgage Interest Rate, defer or forgive the
payment of principal or interest, reduce or increase the outstanding
principal balance (except for actual payments of principal) or change
the final maturity date on such Mortgage Loan. In the event of any such
modification which permits the deferral of interest or principal
payments on any Mortgage Loan, the Servicer shall, on the Business Day
immediately preceding the Remittance Date in any month in which any such
principal or interest payment has been deferred, make a Monthly Advance
in accordance with Section 4.03, in an amount equal to the difference
between (a) such month's principal and one month's interest at the
Remittance Rate on the unpaid principal balance of such Mortgage Loan
and (b) the amount paid by the Mortgagor. The Servicer shall be
entitled to reimbursement for such advances to the same extent as for
all other advances made pursuant to Section 4.03. Without limiting the
generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered, to execute and deliver on behalf of itself and
the Master Servicer, all instruments of satisfaction or cancellation, or
of partial or full release, discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. Upon the request of the Servicer, the Master
Servicer shall execute and deliver to the Servicer any powers of
attorney and other documents, furnished to it by the Servicer and
reasonably satisfactory to the Master Servicer, necessary or appropriate
to enable the Servicer to carry out its servicing and administrative
duties under this Agreement.
Notwithstanding anything to the contrary in this Agreement, the
Servicer shall not waive any premium or penalty in connection with a
prepayment of principal of any Mortgage Loan, and shall not consent to
the modification of any Mortgage Note to the extent that such
modification relates to payment of a prepayment premium or penalty."
X. The words "Lehman Capital, A Division of Lehman Brothers Holdings Inc.,
owner of residential Mortgage Loans, Group No. 1997-ALSI, and various
Mortgagors" in the first paragraph of Section 3.03 are hereby deleted
and replaced with the following: "Norwest Bank Minnesota, National
Association, as master servicer for SASCO 1998-3."
XI. Section 3.03 is further amended by deleting the word "and" at the end of
clause (viii), replacing the period at the end of clause (ix) with ";
and", and adding the following immediately after clause (ix):
"(x) any principal prepayment penalties received in connection with
the Mortgage Loans."
XII. Section 3.04 is amended by deleting the word "and" at the end of clause
(v), replacing the period at the end of clause (vi) with "; and", and
adding the following immediately following clauses (vii) and (viii):
"(vii) to reimburse itself for Monthly Advances of the Servicer's
funds made pursuant to Section 7.03, it being understood that, in the
case of any such reimbursement, the Servicer's right thereto shall be
prior to the rights of the Trust Fund;
(viii) to reimburse itself for unreimbursed Servicing Advances, and
for any unpaid Servicing Fees, the Servicer's right to reimburse itself
pursuant to this subclause (viii) with respect to any Mortgage Loan
being limited to related Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds, REO Disposition Proceeds and other amounts received
in respect of the related REO Property, and such other amounts as may be
collected by the Servicer from the Mortgagor or otherwise relating to
the Mortgage Loan, it being understood that, in the case of any such
reimbursement, the Servicer's right thereto shall be prior to the rights
of the Purchaser;"
XIII. The words "Lehman Capital, A Division of Lehman Brothers Holdings
Inc., owner of residential Mortgage Loans, Group No. 1997-ALSI, and
various Mortgagors" in the first paragraph of Section 3.05 are
hereby deleted and replaced with the following: "Norwest Bank
Minnesota, National Association, as master servicer for SASCO 1998-
3."
XIV. All references in Section 3.11 to the disposition of REO Properties
within a two year period are hereby deleted and replaced with a three
year period.
XV. The first paragraph of Section 4.01 is hereby deleted and replaced with
the following:
"On each Remittance Date the Servicer shall remit by wire transfer
of immediately available funds to the Master Servicer (a) all amounts
deposited in the Custodial Account as of the close of business on the
last day of the related Due Period (net of charges against or
withdrawals from the Custodial Account pursuant to Section 3.04), plus
(b) all amounts, if any, which the Servicer is obligated to distribute
pursuant to Section 7.03, minus (c) any amounts attributable to
Principal Prepayments, Liquidation Proceeds, Insurance Proceeds,
Condemnation Proceeds or REO Disposition Proceeds received after the
applicable Prepayment Period, which amounts shall be remitted on the
following Remittance Date, together with any additional interest
required to be deposited in the Custodial Account in connection with
such Principal Prepayment in accordance with Section 7.03, and minus (d)
any amounts attributable to Monthly Payments collected but due on a due
date or dates subsequent to the first day of the month in which such
Remittance Date occurs, which amounts shall be remitted on the
Remittance Date next succeeding the Due Period for such amounts."
XVI. Section 4.02 is hereby amended by deleting the words "Remittance Date"
in the first line of such Section, and substituting the following:
"tenth Business Day of each month"
XVII. The third paragraph of Section 5.01 is hereby deleted.
XVIII. The following paragraph is hereby added at the end of Section 9.02:
"On the second Business Day of each month, the Servicer shall
orally inform the Master Servicer and the Special Servicer as to which
Mortgage Loans have become delinquent for a period of 61 days or more,
without giving effect to any grace period permitted by the related
Mortgage Note (each, a "Distressed Mortgage Loan"). No Mortgage Loan
shall be considered to be delinquent for such purpose by virtue of the
related Mortgagor having made payment to a prior servicer. Any such
Mortgage Loan as to which all past due payments are made prior to the
Notice Date shall not be considered to be a Distressed Mortgage Loan,
and the servicing thereof shall not be transferred as provided below.
On the fourth Business Day of each month (the "Notice Date"), the
Servicer shall send by facsimile a written listing of the Distressed
Mortgage Loans to the Master Servicer, the Trustee and the Custodian,
and shall mail to the Mortgagor of each Mortgage Loan listed in a
Transfer Notice a letter advising each such Mortgagor of the transfer of
the servicing of the related Mortgage Loan to the Special Servicer, in
accordance with the Cranston Gonzales National Affordable Housing Act of
1990; provided, however, the content and format of such letter shall
have the prior approval of the Special Servicer. The Servicer shall
promptly provide the Special Servicer with copies of all such notices.
The transfer of servicing with respect to each such Mortgage Loan to the
Special Servicer shall be effected by the Servicer not later than
fifteenth day following the applicable Notice Date (the "Transfer
Date"). By the Business Day immediately following each Notice Date, the
Servicer shall provide the Master Servicer, the Special Servicer, the
Trustee and the Custodian with a certification (the "Transfer Notice")
listing the Distressed Mortgage Loans.
At least five Business Days prior to the Transfer Date, the
Servicer shall deliver, with respect to the Distressed Mortgage Loans
listed on the related Transfer Notice, to the Special Servicer all
Servicing Files, and to the Special Servicer and the Master Servicer a
preliminary loan level tape or other electronic media (a "Report") in
form reasonably acceptable to the Servicer, the Master Servicer and the
Special Servicer. Within two Business Days following such Transfer
Date, the Servicer shall deliver such Report in final form reasonably
acceptable to the Master Servicer and the Special Servicer, and
commensurate with generally acceptable industry standards, detailing the
amount of any unreimbursed Monthly Advances, Servicing Advances and
accrued and unpaid Servicing Fees on a loan level basis. Should the
Master Servicer or the Special Servicer desire a loan level tape or
other electronic media containing information which is not readily
extractable from the Servicer's servicing system, the Servicer shall
diligently cooperate to make such loan level data available to the
Master Servicer and Special Servicer. In addition, at least five
Business Days prior to the Transfer Date, the Servicer shall transfer to
the Special Servicer any funds held in an Escrow Account or Custodial
Account relating to the Distressed Mortgage Loans listed in the related
Transfer Notice. Upon the successful completion of the transfer of
servicing for Distressed Mortgage Loans, the Special Servicer will
reimburse the Servicer for any unreimbursed Monthly Advances, Servicing
Advances and accrued and unpaid Servicing Fees with respect to such
Distressed Mortgage Loans which have been properly documented. The
Servicer shall be paid, from the Custodial Account, a termination fee of
$25.00 for each Distressed Mortgage Loan transferred to the Special
Servicer.
In connection with the transfer of any Distressed Mortgage Loan,
(i) the Servicer will be responsible for servicing the Distressed
Mortgage Loan until the effective date of transfer of servicing to the
Special Servicer, but shall have no right or obligation to service such
Distressed Mortgage Loan from and after the effective date of the
transfer of servicing to the Special Servicer, (ii) notwithstanding
clause (i) above, the Servicer shall include the Distressed Mortgage
Loan in its monthly remittance report pursuant to Section 4.02 for the
month in which such transfer is effected and shall be obligated, subject
to Section 7.03, to make the Monthly Advance with respect to such
Distressed Mortgage Loan on the Remittance Date in the month in which
such transfer is effected, in each case, regardless of whether the
Remittance Date occurs before or after the effective date of such
transfer, (iii) the amount of Monthly Advances to be reimbursed to the
Servicer by the Special Servicer hereunder shall include the Monthly
Advance described in clause (ii) above regardless of whether the
Servicer makes such Monthly Advance before or after the effective date
of such transfer, (iv) the Servicer shall, no later than the end of the
month in which such transfer is effected, provide to the Special
Servicer loan level information (in the loan level tape or other
electronic media or other agreed-upon form) regarding the Distressed
Mortgage Loan during the month of such transfer as may be necessary to
enable the Special Servicer to provide such information in its
remittance report for the next following month, and (v) the Servicer
shall not be entitled to the Servicing Fee with regard to any such
Distressed Mortgage Loan for the month in which such transfer occurs."
XIX. The following paragraph is added at the end of Section 10.01:
"Neither the Master Servicer nor any successor servicer (including
the Owner and the Master Servicer) shall be liable for any acts or
omissions of the Servicer or any predecessor servicer. In particular,
neither the Master Servicer nor any successor servicer (including the
Owner and the Master Servicer) shall be liable for any servicing errors
or interruptions resulting from any failure of the Servicer to maintain
computer and other information systems that are year-2000 compliant."
XX. The following words are hereby added after the words "Attention: Rick
Skogg" in Section 10.06(ii):
"with a copy to:
Aurora Loan Services Inc.
601 Fifth Avenue
P.O. Box 1706
Scottsbluff, Nebraska 69361
Telephone No.: (308) 635-3500
Telecopier No.: (308) 632-4287
Attention: Lee Trautman"
FLOW SERVICING AGREEMENT
between
LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
OWNER
and
AURORA LOAN SERVICES INC.
SERVICER
Dated as of September 1, 1997
Residential Adjustable and Fixed Rate Mortgage Loans
Group No. 1997-ALSI
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
OWNER'S ENGAGEMENT OF SERVICER TO PERFORM SERVICING RESPONSIBILITIES
Section Page
- - ------- ----
2.01 Contract for Servicing; Possession
of Servicing Files ......................... 13
2.02 Books and Records................................. 13
2.03 Commencement of Servicing Responsibilities ....... 14
2.04 Owner Covenants Regarding Transfer of Servicing .. 14
2.05 Custodial Agreement .............................. 16
ARTICLE III
SERVICING THE MORTGAGE LOANS
3.01 Servicer to Service .............................. 18
3.02 Collection of Mortgage Loan Payments ............. 20
3.03 Establishment of and Deposits to
Custodial Account ........................... 20
3.04 Permitted Withdrawals From
Custodial Account ........................... 21
3.05 Establishment of and Deposits to
Escrow Account .............................. 22
3.06 Permitted Withdrawals From Escrow Account ........ 22
3.07 Maintenance of FHA Mortgage Insurance and
VA Guaranty ................................. 23
3.08 Notification of Adjustments ...................... 23
3.09 Completion and Recordation of Assignment of
Mortgage and FHA and VA Change Notices ...... 24
3.10 Protection of Accounts ........................... 24
3.11 Title, Management and Disposition of REO Property. 25
3.12 Real Estate Owned Reports ........................ 26
ARTICLE IV
PAYMENTS TO OWNER
4.01 Remittances....................................... 27
4.02 Statements to Owner .............................. 27
4.03 Monthly Advances by Servicer ..................... 28
ARTICLE V
GENERAL SERVICING PROCEDURES
5.01 Servicing Compensation ........................... 29
5.02 Reimbursement of Servicing Advances .............. 29
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; REMEDIES AND BREACH
6.01 Representations, Warranties and
Agreements of the Servicer ................. 30
6.02 Remedies for Breach of Representations
and Warranties of the Servicer ............. 31
6.03 Representations and Warranties of
the Owner .................................. 32
6.04 Remedies for Breach of Representations
and Warranties of the Owner ................ 33
ARTICLE VII
AGENCY TRANSFER; WHOLE LOAN TRANSFER; PASS-THROUGH TRANSFER
7.01 Removal of Mortgage Loans from
Inclusion under this Agreement
upon an Agency Transfer, a Pass-Through
Transfer or a Whole Loan Transfer
on one or more Reconstitution Dates ........ 35
7.02 Additional Indemnification by the
Servicer; Third Party Claims ............... 36
7.03 Monthly Advances, Compensating Interest and
Servicing Fees after Reconstitution ........ 37
7.04 Maintenance of Custodial and Escrow Accounts
after Reconstitution ....................... 37
7.05 Owner's Repurchase and Indemnification
Obligations ................................ 38
7.06 Termination Fees after Reconstitution .......... 39
7.07 Additional Remittance ........................... 39
7.08 Transfer of Servicing Following Reconstitution .. 40
ARTICLE VIII
THE SERVICER
8.01 Merger or Consolidation of the Servicer ......... 41
8.02 Limitation on Liability of the Servicer
and Others ................................. 41
8.03 Limitation on Resignation and Assignment
by the Servicer ........................... 41
ARTICLE IX
TERMINATION
9.01 Termination For Cause ........................... 42
9.02 Termination Without Cause ....................... 43
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01 Successor to the Servicer ................. 45
10.02 Closing.................................... 46
10.03 Closing Documents ......................... 47
10.04 Costs ..................................... 48
10.05 Protection of Confidential Information .... 48
10.06 Notices ................................... 48
10.07 Severability Clause ....................... 49
10.08 No Personal Solicitation .................. 49
10.09 Counterparts .............................. 50
10.10 Place of Delivery and
Governing Law ............................. 50
10.11 Further Agreements ........................ 50
10.12 Intention of the Parties .................. 50
10.13 Successors and Assigns; Assignment of
Servicing Agreement ....................... 51
10.14 Waivers ................................... 51
10.15 Exhibits .................................. 51
10.16 General Interpretive Principles ........... 51
10.17 Reproduction of Documents ................. 51
EXHIBITS
EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT B-1 FORM OF ACKNOWLEDGMENT AGREEMENT
EXHIBIT B-2 FORM OF CONFIRMATION AGREEMENT
EXHIBIT C CUSTODIAL ACCOUNT LETTER AGREEMENT
EXHIBIT D ESCROW ACCOUNT LETTER AGREEMENT
EXHIBIT E-1 OFFICER'S CERTIFICATE FOR FIRST CLOSING
EXHIBIT E-2 OFFICER'S CERTIFICATE FOR SUBSEQUENT CLOSINGS
EXHIBIT F FORM OF CUSTODIAL AGREEMENT
EXHIBIT G FORM OF OPINION OF COUNSEL OF THE SERVICER
EXHIBIT H FORM OF COLLATERAL PLEDGE AND SECURITY AGREEMENT
FLOW SERVICING AGREEMENT
This is a Flow Servicing Agreement (the "Agreement"), dated as of
September 1, 1997, by and between Lehman Capital, A Division of Lehman
Brothers Holdings Inc., having an office at Three World Financial Center,
12th Floor, New York, New York 10285 (the "Owner") and Aurora Loan Services
Inc., having an office at 2530 South Parker Road, Aurora, Colorado 80014 (the
"Servicer").
W I T N E S S E T H
WHEREAS, the Owner shall acquire from time to time certain
ownership to and the servicing rights for certain fixed and adjustable rate
first and second lien mortgage loans ("Conventional Loans") and/or certain
FHA insured ("FHA Loans") and VA guaranteed ("VA Loans") mortgage loans from
various third party sellers and servicers thereof (the Conventional Loans,
FHA Loans and VA Loans collectively referred to herein as the "Mortgage
Loans");
WHEREAS, the Owner desires to contract with the Servicer for the
servicing responsibilities associated with the Mortgage Loans and the
Servicer desires to assume the servicing responsibilities to such Mortgage
Loans; and
WHEREAS, the Owner desires to sell some or all of the Mortgage
Loans from time to time (a) to FNMA under its Cash Purchase Program or MBS
SWAP Program (Special Servicing Option) (each a "FNMA Transfer"); or (b) to
FHLMC under its Freddie Mac Cash Program or Gold PC Program (the "FHLMC
Transfer"); or (c) to GNMA under its MBS Swap Program I (the "GNMA
Transfer");or (d) to one or more third party purchasers in one or more whole
loan pools (each a "Whole Loan Transfer"); or (e) directly or indirectly, to
certain trusts to be formed as part of publicly-issued or privately placed,
rated or unrated, mortgage pass-through transactions (each a "Pass-Through
Transfer"), in any or all cases (subject to the terms of this Agreement)
retaining the Servicer to service the Mortgage Loans.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and reasonable consideration, the
receipt and adequacy of which is hereby acknowledged, the Owner and Servicer
hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms are defined as follows (except as otherwise
agreed in writing by the parties):
Accepted Servicing Practices: With respect to any Mortgage Loan,
those mortgage servicing practices of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loans in the
jurisdiction where the related Mortgaged Property is located.
Acknowledgment Agreement: The document to be executed by the Owner
and the Servicer which document shall amend the Mortgage Loan Schedule
attached as Exhibit A hereto to reflect the addition of Mortgage Loans to
such Exhibit A and which document reflects the addition of Mortgage Loans
which are subject to the terms and conditions of this Agreement.
Act: The National Housing Act, as amended from time to time.
Additional Remittance: With respect to each Mortgage Loan subject
to an Agency Transfer, a Whole Loan Transfer or a Pass-Through Transfer, the
portion of the Reconstituted Servicing Fee received by the Servicer under a
Reconstitution Agreement which amount shall be equal to the difference
between such Reconstituted Servicing Fee and the Servicing Fee set forth
herein, which amount shall be remitted to the Owner or its assigns and shall
be freely transferable by the Owner or its assigns.
Additional Remittance Date: The last Business Day of each month of
the related Remittance Date under the applicable Reconstitution Agreement.
Adjustable Rate Mortgage Loan: A Mortgage Loan serviced pursuant
to this Agreement under which the Mortgage Interest Rate is adjusted from
time to time in accordance with the terms and provisions of the Mortgage
Note.
Agency Transfer: The sale or transfer by Owner of some or all of
the Mortgage Loans to FNMA under its Cash Purchase Program or its MBS Swap
Program (Special Servicing Option) or to FHLMC under its Freddie Mac Cash
Program or Gold PC Program, or to GNMA under its MBS Swap Program, retaining
the Servicer as "servicer" thereunder.
Agreement: This Flow Servicing Agreement and all amendments hereof
and supplements hereto.
Ancillary Income: All income derived from the Mortgage Loans,
other than Servicing Fees, including but not limited to, late charges, fees
received with respect to checks or bank drafts returned by the related bank
for non-sufficient funds, assumption fees, optional insurance administrative
fees and all other incidental fees and charges. The Owner shall retain
all Ancillary Income with the exception of optional insurance and
administrative fees payable as a direct result of the Servicer's efforts.
Applicable Agency: With respect to Conventional Loans, FNMA, and
with respect to FHA Loans or VA Loans, GNMA.
Appraised Value: The value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
Assignment Fee: The Assignment Fee indicated on the applicable
Acknowledgment Agreement, which fee shall be payable within 30 days following
the later to occur of (i) the completion of the transfer of all of the
applicable Mortgage Loan information onto the Servicer's computer system or
(ii) the receipt by the Owner of an invoice from the Servicer for the
Assignment Fee.
Assignment of Mortgage: An assignment of the Mortgage, notice of
transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the transfer of the Mortgage to the party indicated therein, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering the Mortgage Loans secured by
Mortgaged Properties located in the same jurisdiction, if permitted by law.
Best Efforts: Efforts determined to be reasonably diligent by the
Owner or Servicer, as the case may be, in its sole discretion. Such efforts
do not require the Owner or Servicer, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Owner or Servicer, as the case may be, to advance or expend fees
or sums of money in addition to those specifically set forth in this
Agreement.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking and savings and loan institutions in the State of New
York are authorized or obligated by law or executive order to be closed.
Code: The Internal Revenue Code of 1986, as it may be amended from
time to time or any successor statute thereto, and applicable U.S. Department
of the Treasury regulations issued pursuant thereto.
Collateral Pledge and Security Agreement: With respect to each
Reconstitution Date, the security agreement to be executed by the Owner and
the Servicer, in the form attached hereto as Exhibit H, which agreement shall
serve to create a security interest in favor of the Owner and its assigns in
the servicing rights related to the Mortgage Loans being reconstituted.
Condemnation Proceeds: All awards of settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan documents.
Confirmation Agreement: The document to be executed by the Owner
and the Servicer and returned by the Servicer to the Owner in accordance with
Section 10.06 within 5 Business Days of receipt of such document from the
Owner which document shall confirm the Servicer's acceptance of its
engagement to perform servicing responsibilities for the Owner with respect
to additional Mortgage Loans.
Conventional Loan: A conventional residential first or second lien
fixed or adjustable rate Mortgage Loan which is neither FHA insured nor VA
guaranteed.
Costs: For any Person, any claims, losses, damages, penalties,
fines, forfeitures, reasonable and necessary legal fees and related costs,
judgments, and other costs and expenses of such Person.
Custodial Account: The separate account or accounts created and
maintained pursuant to Section 3.03.
Custodial Agreement: The agreement or agreements governing the
retention of original Mortgage Loan documents which shall be substantially
similar in form and substance to the Custodial Agreement attached as Exhibit
F hereto.
Custodian: The Custodian under the related Custodial Agreement
identified in the related Confirmation Agreement and related Acknowledgment
Agreement, or its successors in interest or assigns or any successor to the
related Custodian under the Custodial Agreement as provided therein.
Determination Date: For each month that this Agreement is in
effect, the last Business Day of such month as determined by the Servicer on
a monthly basis.
Delinquent Mortgage Loan: A Mortgage Loan which is more than 89
days delinquent (without regard to any applicable grace period).
Due Date: The day of the month on which the Monthly Payment is due
on a Mortgage Loan, exclusive of any days of grace. With respect to the
Mortgage Loans for which payment from the Mortgagor is due on a day other
than the first day of the month, such Mortgage Loans will be treated as if
the Monthly Payment is due on the first day of the month following the actual
Due Date.
Due Period: With respect to each Remittance Date, the period
commencing on the second day of the month preceding the month of the
Remittance Date and ending on the first day of the month of the Remittance
Date.
Eligible Investments: Any one or more of the obligations and
securities listed below which investment provides for a date of maturity
not later than the Determination Date in each month:
(i) direct obligations of, and obligations fully guaranteed by,
the United States of America, 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; and
(ii) federal funds, demand and time deposits in, certificates of
deposits of, or bankers' acceptances issued by, any depository
institution or trust company incorporated or organized under
the laws of the United States of America or any state thereof
and subject to supervision and examination by federal and/or
state banking authorities, so long as at the time of such
investment or contractual commitment providing for such
investment the commercial paper or other short-term debt
obligations of such depository institution or trust company
(or, in the case of a depository institution or trust company
which is the principal subsidiary of a holding company, the
commercial paper or other short-term debt obligations of such
holding company) are rated "P-1" by Moody's Investors Service,
Inc. and the long-term debt obligations of such holding
company) are rated "P-1" by Moody's Investors Service, Inc.
and the long-term debt obligations of such depository
institution or trust company (or, in the case of a depository
institution or trust company which is the principal subsidiary
of a holding company, the long-term debt obligations of such
holding company) are rated at least "Aa" by Moody's Investors
Service, Inc.;
provided, however, that no such instrument shall be an Eligible
Investment if such instrument evidences either (i) a right to receive only
interest payments with respect to the obligations underlying such instrument,
or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with
respect to such instrument provide a yield to maturity of greater than 120%
of the yield to maturity at par of such underlying obligations.
Errors and Omissions Insurance: Errors and Omissions Insurance to
be maintained by the Servicer pursuant to the FNMA Guides.
Escrow Account: The separate account or accounts created and
maintained pursuant to Section 3.05.
Escrow Payments: With respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed
by the Mortgagor with the mortgagee pursuant to the Mortgage or any other
document.
Event of Default: Any event set forth in Section 9.01.
FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.
FHA: The Federal Housing Administration, an agency within the
United States Department of Housing and Urban Development, or any successor
thereto and including the Federal Housing Commissioner and the Secretary of
Housing and Urban Development where appropriate under the FHA Regulations.
FHA Approved Mortgagee: A corporation or institution approved as a
mortgagee by FHA under the Act, and applicable HUD regulations, and eligible
to own and service mortgage loans such as the FHA Loans.
FHA Assigned Mortgage Loan: A Mortgage Loan that has been in
default for longer than the applicable FHA grace period and respecting which
written notice of an intention to assign has been filed with the FHA, whether
or not such Mortgage Loan has in fact been assigned to the FHA.
FHA Insurance Contract: The contractual obligation of FHA
respecting the insurance of a Mortgage Loan.
FHA Loan: A residential Mortgage Loan which is the subject of an
FHA Insurance Contract as evidenced by a mortgage insurance certificate.
FHA Mortgage Insurance: Mortgage insurance authorized under the Act and
provided by the FHA.
FHA Regulations: Regulations promulgated by HUD under the National
Housing Act, codified in 24 Code of Federal Regulations, and other HUD
issuances relating to FHA Loans, including the related handbooks, circulars,
notices and mortgagee letters.
FHLMC: The Federal Home Loan Mortgage Corporation, or any
successor thereto.
Fidelity Bond: A fidelity bond to be maintained by the Servicer
pursuant to the FNMA Guides.
First Remittance Date: With respect to each Mortgage Loan, the 10th
day of the month following the month in which the related Transfer Date
occurs, or if such 10th day is not a Business Day, the first Business Day
immediately following such 10th day.
Fixed Rate Mortgage Loan: Any individual Mortgage Loan serviced
pursuant to this Agreement wherein the Mortgage Interest Rate set forth in
the Mortgage Note is fixed for the term of such Mortgage Loan.
FNMA: The Federal National Mortgage Association, or any successor
thereto.
FNMA Guides: The FNMA Selling Guide and the FNMA Servicing Guide
and all amendments or additions thereto.
GNMA: The Government National Mortgage Association, or any
successor thereto.
HUD: The Department of Housing and Urban Development, or any
federal agency or official thereof which may from time to time succeed to the
functions thereof with regard to FHA Mortgage Insurance. The term "HUD," for
purposes of this Agreement, is also deemed to include subdivisions thereof
such as the FHA and Government National Mortgage Association.
Initial Transfer Date: The first Transfer Date with respect to
servicing of Mortgage Loans hereunder.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds
of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property including FHA insurance proceeds and/or VA guaranty proceeds.
Liquidation Proceeds: Cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan, trustee's sale, foreclosure sale or
otherwise, or the sale of the related REO Property, if the Mortgaged Property
is acquired in satisfaction of the Mortgage Loan.
Monthly Advance: With respect to each Remittance Date and each
Mortgage Loan, an amount equal to the Monthly Payment (with the interest
portion of such Monthly Payment adjusted to the Mortgage Loan Remittance
Rate) which was due on the Mortgage Loan, and (i) which was delinquent at the
close of business on the immediately preceding Determination Date and (ii)
which was not the subject of a previous Monthly Advance.
Monthly Payment: The scheduled monthly payment of principal and
interest on a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument securing
a Mortgage Note, which creates a first or second lien on an unsubordinated
estate in fee simple in real property securing the Mortgage Note.
Mortgage Impairment Insurance Policy: A mortgage impairment or
blanket hazard insurance policy as described in the FNMA Guides.
Mortgage Interest Rate: The annual rate of interest borne on a
Mortgage Note.
Mortgage Loan: An individual Mortgage Loan which is the subject
of this Agreement, each Mortgage Loan subject to this Agreement being
identified on the Mortgage Loan Schedule, which Mortgage Loan includes
without limitation the Mortgage Loan documents, the Monthly Payments,
Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds, REO Disposition Proceeds, and all other rights,
benefits, proceeds and obligations arising from or in connection with such
Mortgage Loan.
Mortgage Loan Remittance Rate: With respect to each Mortgage Loan,
the annual rate of interest remitted to the Owner, which shall be equal to
the Mortgage Interest Rate minus the applicable Servicing Fee.
Mortgage Loan Schedule: A schedule of certain Mortgage Loans
setting forth information with respect to such Mortgage Loans, which schedule
supplements this Agreement and becomes part of Exhibit A hereof on the
related Transfer Date to reflect the addition of such Mortgage Loans to the
terms of this Agreement.
Mortgage Note: The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
Mortgaged Property: The real property securing repayment of the
debt evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
Net Sale Proceeds: The proceeds from the sale of REO Property, net
of all expenses incurred by the Servicer in connection with such sale,
including, without limitation, legal fees and expenses, referral fees,
brokerage commissions, conveyance taxes and any other related expense.
Officer's' Certificate: A certificate signed by the Chairman of
the Board or the Vice Chairman of the Board or the President or a Vice
President or an assistant Vice President and by the Treasurer or the
Secretary or one of the Assistant Treasurers or Assistant Secretaries of the
Owner, and delivered to the Servicer as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be an employee of
the Servicer, reasonably acceptable to the Owner.
Owner: Lehman Capital, A Division of Lehman Brothers Holdings Inc., or its
successors in interest and assigns.
Pass-Through Transfer: The sale or transfer of some or all of the
Mortgage Loans to a trust to be formed as part of a publicly-issued and/or
privately placed, rated or unrated, mortgage pass-through transaction,
retaining the Servicer as "servicer" (with or without a master servicer)
thereunder.
Person: Any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof.
PMI Policy: A policy of primary mortgage guaranty insurance issued
by a Qualified Insurer, as required by this Agreement with respect to certain
Mortgage Loans.
Prepayment Interest Shortfall Amount: With respect to any Mortgage
Loan that was subject to a Principal Prepayment in full during any Due
Period, which Principal Prepayment was applied to such Mortgage Loan prior to
such Mortgage Loan's Due Date in such Due Period, the amount of interest (net
the related Reconstituted Servicing Fee) that would have accrued on the
amount of such Principal Prepayment during the period commencing on the date
as of which such Principal Prepayment was applied to such Mortgage Loan and
ending on the day immediately preceding such Due Date, inclusive.
Prime Rate: The prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal Northeast
Edition.
Principal Prepayment: Any payment or other recovery of principal
on a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon and which is not
accompanied by an amount of interest representing scheduled interest due on
any date or dates in any month or months subsequent to the month of
prepayment.
Prior Servicer: Any prior servicer (other than the Servicer) of
any or all of the Mortgage Loans.
Qualified Depository: A depository the accounts of which are
insured by the FDIC and the debt obligations of which are rated in the two
highest categories by Standard & Poor's Ratings Group and Moody's Investors
Service, Inc. and meets such requirements as are necessary for any
Reconstitution Agreement. The Servicer shall be deemed to be a Qualified
Depository under this Agreement so long as it meets the applicable
requirements of FNMA.
Qualified Insurer:A mortgage guaranty insurance company duly
authorized and licensed where required by law to transact mortgage guaranty
insurance business and approved as an insurer by FNMA, FHLMC and GNMA.
Reconstitution Agreements: The agreement or agreements entered
into by the Owner, the Servicer, FNMA, FHLMC or GNMA or certain third parties
on the Reconstitution Date(s) with respect to any or all of the Mortgage
Loans serviced hereunder, in connection with a Whole Loan Transfer, a Pass-
Through Transfer or an Agency Transfer as set forth in Section 7.01,
including, but not limited to, (i) a FNMA Mortgage Selling and Servicing
Contract, a Pool Purchase Contract, and any and all servicing agreements and
tri-party agreements reasonably required by FNMA with respect to a FNMA
Transfer, (ii) a Purchase Contract and all purchase documents associated
therewith as set forth in the Freddie Mac Sellers' & Servicers' Guide, and
any and all servicing agreements and tri-party agreements reasonably required
by FHLMC with respect to a FHLMC Transfer, (iii) any and all documents as set
forth in the GNMA Mortgage-Backed Securities Guide, and any and all servicing
agreements and tri-party agreements reasonably required by GNMA with respect
to a GNMA Transfer, (iv) a pooling and servicing agreement and/or a
subservicing/master servicing agreement and related custodial/trust agreement
and related documents with respect to a Pass-Through Transfer and (iv) a
seller's warranties and servicing agreement or a sale and servicing agreement
and related custodial agreement and closing documents with respect to a Whole
Loan Transfer. Such agreement or agreements shall prescribe the rights and
obligations of the Servicer in servicing the related Mortgage Loans and shall
provide for a Reconstituted Servicing Fee to the Servicer, net of any
guarantee fees due FNMA, FHLMC or GNMA, if applicable, at least equal to the
Servicing Fee due the Servicer in accordance with this Agreement or the
Reconstituted Servicing Fee required pursuant to the Reconstitution
Agreement, whichever is greater. The Reconstituted Servicing Fee and the
form of relevant Reconstitution Agreement to be entered into by the Owner
and/or master servicer or trustee and the Servicer with respect to Pass-
Through Transfers and/or Whole Loan Transfers shall be reasonably
satisfactory in form and substance to the Owner and the Servicer (giving due
regard to any rating or master servicing requirements and the provisions of
Section 9.02 hereof) and the representations and warranties and servicing
provisions contained therein shall be substantially similar to those
contained in this Agreement, unless otherwise mutually agreed by the parties.
Reconstitution Date: The date or dates on which any or all of the
Mortgage Loans serviced under this Agreement shall be removed from this
Agreement and reconstituted as part of an Agency Transfer, a Pass-Through
Transfer or a Whole Loan Transfer pursuant to Section 7.01 hereof. On such
date or dates, the Mortgage Loans transferred shall cease to be covered by
this Agreement and the Servicer's servicing responsibilities shall cease
under this Agreement with respect to the related transferred Mortgage Loans,
other than the obligation to remit the Additional Remittance in accordance
with the provisions set forth in Section 7.07 hereof and the right of the
Owner to cause a transfer of the servicing responsibilities to the Mortgage
Loans and/or REO Properties in accordance with Section 7.08 hereof.
Reconstituted Servicing Fee: With respect to each reconstituted
Mortgage Loan that is subject to a Reconstitution Agreement, the monthly fee
to which the Servicer thereunder is entitled, which shall be equal to the
servicing fee specified in the applicable Reconstitution Agreement.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
Remittance Date: The 10th day (or if such 10th day is not a
Business Day, the first Business Day immediately following) of any month,
following the First Remittance Date.
REO Disposition: The final sale by the Servicer of any REO
Property.
REO Disposition Proceeds: All amounts received with respect to an
REO Disposition pursuant to Section 3.11.
REO Property: A Mortgaged Property acquired by the Servicer on
behalf of the Owner through foreclosure or by deed in lieu of foreclosure,
pursuant to Section 3.11.
Servicer: Aurora Loan Services Inc. or its successor in interest or assigns
or any successor to the Servicer under this Agreement as herein provided.
Servicing Advances: All customary, reasonable and necessary "out
of pocket" costs and expenses (including reasonable attorneys' fees and
disbursements) incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
administrative or judicial proceedings, including foreclosures, (c) the
management and liquidation of the Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage, (d) taxes, assessments,
water rates, sewer rents and other charges which are or may become a lien
upon the Mortgaged Property, and PMI Policy premiums and fire and hazard
insurance coverage, (e) any losses sustained by the Servicer with respect to
the liquidation of the Mortgaged Property and (f) compliance with the
obligations pursuant to the provisions of the FNMA Guides.
Servicing Fee: With respect to each Mortgage Loan that has not
been removed from this Agreement as part of an Agency Transfer, a Pass-
Through Transfer or a Whole Loan Transfer, and with respect to each Mortgage
Loan that has been removed from this Agreement as part of an Agency Transfer,
a Pass-Through Transfer or a Whole Loan Transfer and subsequently repurchased
by the Owner pursuant to Section 7.05 hereof and again becoming subject to
this Agreement, the servicing fee shall be, with respect to each (i) fixed
rate Mortgage Loan, an amount equal to $10.00 per month; (ii) adjustable rate
Mortgage Loan, an amount equal to $11.00 per month; and (iii) Delinquent
Mortgage Loan, an amount equal to $40.00 per month. Such fee shall be
payable monthly and shall be pro rated for any portion of a month during
which the Mortgage Loan is serviced pursuant to this Agreement.
Servicing File: The items pertaining to a particular Mortgage Loan
including, but not limited to, the computer files, data disks, books,
records, data tapes, notes, and all additional documents generated as a
result of or utilized in originating and/or servicing each Mortgage Loan,
which are held in trust for the Owner by the Servicer.
Servicing Officer:Any officer of the Servicer involved in or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished by the Servicer to the
Owner upon request, as such list may from time to time be amended.
Servicing Rights: Any and all of the following: (a) any and all
rights to service the Mortgage Loans; (b) any payments to or monies received
by the Servicer for servicing the Mortgage Loans; (c) any late fees,
penalties or similar payments with respect to the Mortgage Loans; (d) all
agreements or documents creating, defining or evidencing any such servicing
rights to the extent they relate to such servicing rights and all rights
of the Servicer thereunder; (e) Escrow Payments or other similar payments
with respect to the Mortgage Loans and any amounts actually collected
by the Servicer with respect thereto; (f) all accounts and other rights to
payment related to any of the property described in this paragraph; and (g)
any and all documents, files, records, servicing files, servicing documents,
servicing records, data tapes, computer records, or other information
pertaining to the Mortgage Loans or pertaining to the past, present or
prospective servicing of the Mortgage Loans.
Set-Up Fee: The set-up fee indicated on the applicable
Acknowledgment Agreement, which fee shall be payable within 30 days following
the later to occur of (i) the completion of the transfer of all of the
applicable Mortgage Loan information onto the Servicer's computer system or
(ii) the receipt by the Owner of an invoice from the Servicer for the Set-Up
Fee.
Transfer Date: The date or dates upon which the Servicer commences
the servicing responsibilities with respect to Mortgage Loans in accordance
with the terms set forth herein which dates shall be as set forth in the
related Confirmation Agreement and Acknowledgment Agreement.
VA: The Veterans Administration, an agency of the United States of
America, or any successor thereto including the Administrator of Veterans
Affairs.
VA Approved Lender: Those lenders which are approved by the VA to
act as a lender in connection with the origination of VA Loans.
VA Loan: A Mortgage Loan which is the subject of a VA Loan
Guaranty Agreement as evidenced by a Loan Guaranty Certificate, or a Mortgage
Loan which is a vendee loan sold by the VA.
VA Loan Guaranty Agreement: The obligation of the United States to
pay a specific percentage of a Mortgage Loan (subject to a maximum amount)
upon default of the Mortgagor pursuant to the Servicemen's Readjustment Act,
as amended.
VA Loan Guaranty Certificate: The certificate evidencing a VA Loan
Guaranty Agreement.
VA Regulations: Regulations promulgated by the Veteran's
Administration pursuant to the Servicemen's Readjustment Act, as amended,
codified in 38 Code of Federal Regulations, and other VA issuances relating
to VA Loans, including related Handbooks, Circulars and Notices.
Whole Loan Transfer: The sale or transfer of some or all of the
Mortgage Loans to a third party purchaser in a whole loan transaction
pursuant to a seller's warranties and servicing agreement or a participation
and servicing agreement, retaining the Servicer as "servicer" thereunder.
ARTICLE II
OWNER'S ENGAGEMENT OF SERVICER TO PERFORM SERVICING
RESPONSIBILITIES
Section 2.01. Contract for Servicing; Possession of Servicing Files.
The Owner, by execution and delivery of this Agreement (and the
related Acknowledgment Agreement and Confirmation Agreement), does hereby
contract with the Servicer, subject to the terms of this Agreement, for the
servicing of the Mortgage Loans. On or before each Transfer Date, the Owner
shall cause to be delivered or will use its Best Efforts to cause to be
delivered the Servicing Files with respect to the Mortgage Loans listed on
the related Mortgage Loan Schedule to the Servicer to be held in trust for
the Owner pursuant to this Agreement. On or before each Transfer Date, the
Owner shall, with respect to the Mortgage Loans on the related Mortgage Loan
Schedule, execute and deliver an Acknowledgment Agreement in the form
attached hereto as Exhibit B-1, which Acknowledgment Agreement shall be
executed and delivered simultaneously by the Servicer to the Owner. Each
Servicing File delivered to the Servicer shall be held by the Servicer in
order to service the Mortgage Loans pursuant to this Agreement and are and
shall be held in trust by the Servicer for the benefit of the Owner as the
owner thereof. The Servicer's possession of any portion of the Mortgage Loan
documents shall be at the will of the Owner for the sole purpose of
facilitating servicing of the related Mortgage Loan pursuant to this
Agreement, and such retention and possession by the Servicer shall be in a
custodial capacity only. The ownership of each Mortgage Note, Mortgage, and
the contents of the Servicing File shall be vested in the Owner and the
ownership of all records and documents with respect to the related 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 such custodial capacity only.
The portion of each Servicing File retained by the Servicer pursuant to this
Agreement shall be segregated from the other books and records of the
Servicer and shall be appropriately marked to clearly reflect the ownership
of the related Mortgage Loan by the Owner. The Servicer shall release from
its custody the contents of any Servicing File retained by it only in
accordance with this Agreement.
Section 2.02. Books and Records.
Record title to each Mortgage and the related Mortgage Note shall,
at the Owner's option, remain in the name of (i) the Servicer or (ii) in the
name as the Owner shall designate. Subject to Section 3.01(a) hereof, the
Owner, its designee or the Servicer shall prepare or cause to be prepared and
record or cause to be recorded any Assignments of Mortgage required pursuant
to this Section 2.02. and shall pay all necessary fees associated with the
preparation and recording of the Assignments of Mortgage. Notwithstanding
the foregoing, the Servicer shall cooperate with the Owner in the Owner's
preparation and recording of any and all Assignments of Mortgage.
Additionally, the Servicer shall prepare and execute, at the direction of the
Owner, any note endorsements in connection with any and all Reconstitution
Agreements. All rights arising out of the Mortgage Loans shall be
vested in the Owner. All funds received on or in connection with a Mortgage
Loan shall be received and held by the Servicer in trust for the benefit of
the Owner as the owner of the Mortgage Loans pursuant to the terms of this
Agreement.
Section 2.03. Commencement of Servicing Responsibilities.
On each Transfer Date, the Owner shall appoint the Servicer to
perform, and the Servicer shall assume and accept such appointment for, all
servicing responsibilities for the related Mortgage Loans on the related
Mortgage Loan Schedule. The engagement of the Servicer to perform the
servicing responsibilities hereunder is not mandatory and is expressly
conditioned upon the acquisition of the related Mortgage Loans by the Owner,
the election of the Owner respecting the engagement of the Servicer to
perform the related servicing responsibilities and the election, in the
manner hereinafter set forth, of the Servicer to accept such transfer.
Upon the Owner's determination in its sole discretion to engage the
Servicer to perform the servicing responsibilities with respect to
Conventional Loans, FHA Loans and/or VA Loans pursuant to the terms of this
Agreement, the Owner shall execute a Confirmation Agreement in the form
attached as Exhibit B-2 hereto, and deliver the same to the Servicer. The
Owner shall notify the Servicer by telephone of its determination to transfer
such servicing responsibilities to the Servicer and shall deliver the
Confirmation Agreement to the Servicer within 2 Business Days of such verbal
notification. The Servicer may elect to accept or reject on an all or
nothing basis such engagement to perform the servicing responsibilities with
respect to the additional Conventional Loans, FHA Loans and/or VA Loans by
either (i) in the case of an acceptance, executing the Confirmation Agreement
and delivering the same to the Owner in accordance with Section 10.06 within
5 Business Days of receipt of such Confirmation Agreement, or (ii) in the
case of a rejection, by written notification thereof delivered to the Owner
in accordance with Section 10.06 within 5 Business Days of receipt of such
Confirmation Agreement.
Section 2.04. Owner Covenants Regarding Transfer of Servicing.
On or before each Transfer Date the Owner shall use its Best
Efforts to cause the Prior Servicer to effectuate and evidence the transfer
of the servicing of the related Mortgage Loans from the Prior Servicer to the
Servicer including the following:
(a) Notice to Mortgagors. The Owner shall use its Best Efforts to
cause the Prior Servicer to mail to the Mortgagor of each Mortgage a letter
advising the Mortgagor of the transfer of the servicing thereof to the
Servicer, in accordance with the relevant provisions of the Cranston-Gonzales
National Affordable Housing Act of 1990, as the same may be amended from time
to time, and the regulations provided in accordance with the Real Estate
Settlement Procedures Act. The Owner shall use its Best Efforts to cause the
Prior Servicer to promptly provide the Servicer with copies of all such
notices.
(b) Notice to Taxing Authorities and Insurance Companies and HUD (if
applicable). The Owner shall use its Best Efforts to cause the Prior
Servicer to transmit to the applicable taxing authorities and insurance
companies (including PMI Policy insurers, if applicable) and/or agents,
notification of the transfer of the servicing to the Servicer and
instructions to deliver all notices, tax bills and insurance statements, as
the case may be, to the Servicer from and after the related Transfer Date.
The Owner shall use its Best Efforts to cause the Prior Servicer to promptly
provide the Servicer with copies of all such notices. With respect to FHA
Loans, in addition to the requirements set forth above, the Owner shall use
its Best Efforts to cause the Prior Servicer to provide notice to HUD on HUD
Form 92080 or such other form prescribed by HUD.
(c) Delivery of Servicing Records. The Owner shall use its Best
Efforts to cause the Prior Servicer to forward to the Servicer all Servicing
Files and any other Mortgage Loan documents in the Prior Servicer's
possession relating to each Mortgage Loan.
(d) Escrow Payments. The Owner shall use its Best Efforts to cause the
Prior Servicer to provide the Servicer with immediately available funds by
wire transfer in the amount of the net Escrow Payments and suspense balances
and all loss draft balances associated with the Mortgage Loans. The Owner
shall use its Best Efforts to cause the Prior Servicer to provide the
Servicer with an accounting statement of Escrow Payments and suspense
balances and loss draft balances sufficient to enable the Servicer to
reconcile the amount of such payment with the accounts of the Mortgage Loans.
Additionally, the Owner shall use its Best Efforts to cause the Prior
Servicer to wire the Servicer the amount of any agency or trustee Mortgage
Loan payments, any prepaid Mortgage Loan payments and all other similar
amounts held by the Prior Servicer.
(e) Payoffs and Assumptions. The Owner shall use its Best Efforts to
cause the Prior Servicer to provide to the Servicer copies of all assumption
and payoff statements generated by the Prior Servicer on the Mortgage Loans.
(f) Mortgage Payments Received Prior to Transfer Date. The Owner
shall use its Best Efforts to cause the Prior Servicer to apply all payments
received by the Prior Servicer on each Mortgage Loan prior to the related
Transfer Date to the account of the particular Mortgagor.
(g) Mortgage Payments Received After Transfer Date. The Owner shall
use its Best Efforts to cause the Prior Servicer to forward the amount of any
Monthly Payments received by the Prior Servicer after the related Transfer
Date to the Servicer by overnight mail on the date of receipt. The Owner
shall use its Best Efforts to cause the Prior Servicer to notify the Servicer
of the particulars of the payment, which notification requirement shall be
satisfied if the Prior Servicer forwards with its payment sufficient
information to permit appropriate processing of the payment by the Servicer.
The Owner shall use its Best Efforts to cause the Prior Servicer to assume
full responsibility for the necessary and appropriate legal application of
Monthly Payments received by the Prior Servicer after the related Transfer
Date with respect to Mortgage Loans then in foreclosure or bankruptcy;
provided, for purposes of this Agreement, necessary and appropriate legal
application of such Monthly Payments shall include, but not be limited to
endorsement of a Monthly Payment to the Servicer with the particulars of
the payment such as the account number, dollar amount, date received and
any special Mortgagor application instructions.
(h) Reconciliation. The Owner shall use its Best Efforts to cause the
Prior Servicer to, on or before the related Transfer Date, reconcile
principal balances and make any monetary adjustments required by the
Servicer. Any such monetary adjustments will be transferred between the
Prior Servicer and the Servicer as appropriate.
(i) IRS Forms. The Owner shall use its Best Efforts to cause the Prior
Servicer to file all IRS forms 1098, 1099, 1099A or 1041 and K-1, or any
successor forms thereto, which are required to be filed on or before the
related Transfer Date in relation to the servicing and ownership of the
Mortgage Loans for the current calendar year. The Owner shall use its Best
Efforts to cause the Prior Servicer to provide copies of such forms to the
Servicer or the Mortgagors upon request and shall use its Best Efforts to
cause the Prior Servicer to reimburse the Servicer for any costs or penalties
incurred by the Servicer due to the Prior Servicer's failure to comply with
this paragraph.
Section 2.05. Custodial Agreement.
With respect to all Mortgage Loans which become subject to this
Agreement, pursuant to the related Custodial Agreement as identified in the
related Confirmation Agreement and related Acknowledgment Agreement, the
Owner shall deliver and release to the related Custodian on or prior to each
Transfer Date those Mortgage Loan documents required by the Custodial
Agreement with respect to each Mortgage Loan, a list of which is set forth in
Section 2 of the Custodial Agreement. 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 each Transfer Date, the related Custodian shall have
certified its receipt of all Mortgage Loan documents required to be delivered
pursuant to the Custodial Agreement, as evidenced by the trust receipt and
initial certification of the related Custodian in the form annexed to the
Custodial Agreement. The Owner shall be responsible for, as and when due,
any and all initial document review fees, initial and final certification
fees and recertification fees and any costs associated with correcting any
deficiencies identified in connection with such review(s). The Owner shall
be responsible for maintaining the Custodial Agreement and shall pay all
other fees and expenses of the related Custodian including but not limited
to, (i) any and all annual and warehousing fees, (ii) any and all termination
fees in the event the related Custodian is terminated by the Owner, except
that the Servicer shall pay such termination fees in the event the related
Custodian is terminated pursuant to the Servicer's request and (iii) any and
all fees due in connection with the deposit or retrieval of a Mortgage Loan
document or documents (collectively, the "Custodial Fees"). With respect to
any Mortgage Loans which become subject to an Agency Transfer, upon the
request of the Servicer the Owner shall terminate the related Custodian and
be responsible for any related termination fees; provided, however, that the
Servicer shall (A) appoint a successor custodian that meets the requirements
of the related Reconstitution Agreement (such successor custodian may be the
Servicer if permitted under such Reconstitution Agreement) and (B) from and
after the date of such termination be responsible for any and all fees and
expenses of the successor custodian. Notwithstanding the foregoing, in the
event that the Servicer acquires the Servicing Rights to any or all the
Mortgage Loans pursuant to Section 7.01, all Custodial Fees associated
with such Mortgage Loans shall be paid by the Servicer.
The Servicer shall forward to the related Custodian original
documents evidencing an assumption, modification, consolidation or extension
of any Mortgage Loan entered into in accordance with this Agreement within
one week of their execution, provided, however, that the Servicer shall
provide the related 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. If such copy has not been returned by the applicable recording
office within sixty days of its submission, the Servicer shall notify the
Owner and the related Custodian of such delinquency, demonstrating that the
Servicer has used its Best Efforts to obtain such copy (the "Delinquent
Document"). Upon adequate demonstration of a Best Efforts attempt by the
Servicer to obtain the Delinquent Document, the Owner shall, in its sole
discretion, extend the time period for the receipt of the Delinquent Document
for a reasonable time period by which it is reasonably expected that the
Delinquent Document will be received.
ARTICLE III
SERVICING OF THE MORTGAGE LOANS
Section 3.01 Servicer to Service.
The Servicer, as an independent contractor, shall service and
administer the Mortgage Loans from and after the related Transfer Date and
shall have full power and authority, acting alone, to do any and all things
in connection with such servicing and administration which the Servicer may
deem necessary or desirable, consistent with the terms of this Agreement and
with Accepted Servicing Practices, including taking all actions that a
mortgagee is permitted or required to take by the FHA or VA, with respect to
FHA Loans and VA Loans, as the case may be. Except as set forth in this
Agreement, the Servicer shall service the Mortgage Loans in strict compliance
with the servicing provisions related to the FNMA MBS Program (Special
Servicing Option) of the FNMA Guides, which include, but are not limited to,
provisions regarding the liquidation of Mortgage Loans, the collection of
Mortgage Loan payments, the payment of taxes, insurance and other charges,
the maintenance of hazard insurance, the maintenance of mortgage impairment
insurance, the maintenance of a Fidelity Bond and Errors and Omissions
Insurance, inspections, the restoration of Mortgaged Property, the
maintenance of PMI Policies, insurance claims, the title, management and
disposition of REO Property, permitted withdrawals with respect to REO
Property, REO reports, liquidation reports, and reports of foreclosures and
abandonments of Mortgaged Property, the transfer of Mortgaged Property, the
release of Mortgage Loan documents, annual statements, and examination of
records and facilities. In the event of any conflict, inconsistency or
discrepancy between any of the servicing provisions of this Agreement and any
of the servicing provisions of the FNMA Guides, the provisions of this
Agreement shall control and be binding upon the Owner and the Servicer.
It is understood and agreed that the Owner shall approve all
foreclosures for which approval would be necessary by the Applicable Agency
prior to the commencement of any foreclosure proceedings and that the Owner
must approve any and all advances with respect to foreclosures made by the
Servicer in excess of 20% of the outstanding principal balance of the
applicable Mortgage Loan. In the event that Owner does not disapprove of any
such advance or foreclosure within three (3) days of receipt of notice of
such advance or foreclosure, then the Owner is deemed to have approved such
advance or foreclosure.
Notwithstanding the foregoing paragraph, the Owner and the Servicer
hereby agree as follows:
(a) As per the terms of the applicable Acknowledgment Agreement,
either (i) the Owner or the Owner's designee or (ii) the Servicer, for an
Assignment Fee, shall (A) prepare or cause to be prepared all Assignments of
Mortgage, (B) record or cause to be recorded all Assignments of Mortgage, (C)
shall pay the recording costs associated with the Mortgage Loans associated
with this Acknowledgment Agreement and/or (D) shall track such Assignments of
Mortgage to ensure they have been recorded for the Assignment Fee set forth
on the applicable Acknowledgment Agreement.
(b) The Servicer shall, in accordance with the relevant provisions
of the Cranston-Gonzales National Affordable Housing Act of 1990, as the same
may be amended from time to time, and the regulations provided in accordance
with the Real Estate Settlement Procedures Act, provide notice to the
Mortgagor of each Mortgage of the transfer of the servicing thereto to the
Servicer.
(c) The Servicer shall be responsible for the preparation and
costs associated with notifications to Mortgagors of the assumption of
servicing by the Servicer.
(d) The Owner shall retain all Ancillary Income.
Prior to a Mortgage Loan becoming subject to a Reconstitution
Agreement and consistent with the terms of this Agreement, the Servicer may
(i) waive, modify or vary any term of any Mortgage Loan or (ii) consent to
the postponement of strict compliance with any such term or (iii) in any
manner grant indulgence to any Mortgagor, if such modification would not
require the notification to and/or consent by the Applicable Agency, without
the prior consent of the Owner. Where such notification to and/or consent by
the Applicable Agency is required for any such modification, the Servicer
must first obtain the prior written consent of the Owner before making such
modification. In the event that the Owner does not disapprove of any such
modification within ten (10) days of receipt of a request for consent to such
modification, then the Owner is deemed to have consented to such
modification. Notwithstanding the foregoing, once a Mortgage Loan becomes
subject to a Reconstitution Agreement, the Servicer may not (i) waive, modify
or vary any term of any Mortgage Loan or (ii) consent to the postponement of
strict compliance with any such term or (iii) in any manner grant indulgence
to any Mortgagor without first obtaining the prior written consent of the
applicable Persons required thereunder.
Without limiting the generality of the foregoing, the Servicer
shall continue, and is hereby authorized and empowered, to execute and
deliver on behalf of itself and the Owner, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect
to the Mortgaged Properties. If reasonably required by the Servicer, the
Owner shall furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.
In servicing and administering the FHA Loans and VA Loans, the
Servicer shall comply strictly with the National Housing Act and the FHA
Regulations, the Servicemen's Readjustment Act, the VA Regulations and
administrative guidelines issued thereunder or pursuant thereto, and, to the
extent permitted hereunder, promptly discharge all of the obligations of the
mortgagee thereunder and under each Mortgage including the payment of any
fees, premiums and charges and the timely giving of notices.
In servicing and administering the Mortgage Loans, the Servicer
shall employ procedures (including collection procedures) and exercise the
same care that it customarily employs and exercises in servicing and
administering mortgage loans for its own account, giving due consideration to
Accepted Servicing Practices where such practices do not conflict with the
requirements of this Agreement, the FNMA Guides, the FHA Regulations and the
VA Regulations, and the Owner's reliance on the Servicer.
Section 3.02 Collection of Mortgage Loan Payments.
Continuously from the related Transfer Date until the date each
Mortgage Loan ceases to be subject to this Agreement, the Servicer shall
proceed diligently to collect all payments due under each of the Mortgage
Loans when the same shall become due and payable and shall take special care
in ascertaining and estimating Escrow Payments and all other charges that
will become due and payable with respect to the Mortgage Loans and each
related Mortgaged Property, to the end that the installments payable by the
Mortgagors will be sufficient to pay such charges as and when they become due
and payable.
Section 3.03 Establishment of and Deposits to Custodial Account.
The Servicer shall segregate and hold all funds collected and
received pursuant to the Mortgage Loans separate and apart from any of its
own funds and general assets and shall establish and maintain one or more
Custodial Accounts, in the form of time deposit or demand accounts, titled
"Aurora Loan Services Inc., in trust for Lehman Capital, A Division of Lehman
Brothers Holdings Inc., owner of Residential Mortgage Loans, Group No. 1997-
ALSI, and various Mortgagors". The Custodial Account shall be established
with a Qualified Depository. Any funds deposited in the Custodial Account
may be invested in Eligible Investments subject to the provisions of Section
3.10 hereof. Funds deposited in the Custodial Account may be drawn on by the
Servicer in accordance with Section 3.04. The creation of any Custodial
Account shall be evidenced by a letter agreement in the form of Exhibit C. A
copy of such certification or letter agreement shall be furnished to the
Owner and, upon request, to any subsequent owner of the Mortgage Loans.
The Servicer shall deposit in the Custodial Account on a daily
basis, and retain therein, the following collections received by the Servicer
and payments made by the Servicer after the related Transfer Date:
(i) all payments on account of principal on the Mortgage Loans,
including all Principal Prepayments;
(ii) all payments on account of interest on the Mortgage Loans
adjusted to the Mortgage Loan Remittance Rate;
(iii) all Liquidation Proceeds;
(iv) all Insurance Proceeds;
(v) all Ancillary Income;
(vi) all Condemnation Proceeds that are not applied to the
restoration or repair of the Mortgaged Property or released to the Mortgagor;
(vii) any amount required to be deposited in the Custodial
Account;
(viii) any amounts required to be deposited by the Servicer in
connection with the deductible clause in any blanket hazard insurance policy;
and
(ix) any amounts received with respect to or related to any REO
Property or REO Disposition Proceeds.
Any interest paid on funds deposited in the Custodial Account by
the depository institution shall accrue to the benefit of the Servicer and
the Servicer shall be entitled to retain and withdraw such interest from the
Custodial Account pursuant to Section 3.04. Additionally, any other benefit
derived from the Custodial Account associated with the receipt, disbursement
and accumulation of principal, interest, taxes, hazard insurance, mortgage
insurance, etc. shall accrue to the Servicer.
Section 3.04 Permitted Withdrawals From Custodial Account.
The Servicer shall, from time to time, withdraw funds from the
Custodial Account for the following purposes:
(i) to make payments to the Owner in the amounts and in the manner
provided for in Section 4.01;
(ii) in the event the Servicer has elected not to retain the
Servicing Fee out of any Mortgagor payments on account of interest or other
recovery of interest with respect to a particular Mortgage Loan (including
late collections of interest on such Mortgage Loan, or interest portions of
Insurance Proceeds or Liquidation Proceeds) prior to the deposit of such
Mortgagor payment or recovery in the Custodial Account, to pay to itself the
related Servicing Fee from all such Mortgagor payments on account of interest
or other such Mortgagor payments on account of interst or other such recovery
for interst with repsect to that Mortgage Loan;
(iii) to pay itself interest on funds deposited in the
Custodial Account;
(iv) to clear and terminate the Custodial Account upon the
termination of this Agreement;
(v) to transfer funds to another Qualified Depository in
accordance with Section 3.10 hereof; and
(vi) to invest funds in certain Eligible Investments in accordance
with Section 3.10 hereof.
Section 3.05 Establishment of and Deposits to Escrow Account.
The Servicer shall segregate and hold all funds collected and
received pursuant to a Mortgage Loan constituting Escrow Payments separate
and apart from any of its own funds and general assets and shall establish
and maintain one or more Escrow Accounts, in the form of time deposit or
demand accounts, titled, "Aurora Loan Services Inc., in trust for Lehman
Capital, A Division of Lehman Brothers Holdings Inc., owner of Residential
Mortgage Loans, Group No. 1997-ALSI, and various Mortgagors". The Escrow
Accounts shall be established with a Qualified Depository in a manner that
shall provide maximum available insurance thereunder. Funds deposited in the
Escrow Account may be drawn on by the Servicer in accordance with Section
3.06. The creation of any Escrow Account shall be evidenced by a letter
agreement in the form of Exhibit D. A copy of such certification or letter
agreement shall be furnished to the Owner and, upon request, to any
subsequent owner of the Mortgage Loans.
The Servicer shall deposit in the Escrow Account or Accounts on a
daily basis, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any such items as
required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or Condemnation
Proceeds which are to be applied to the restoration or repair of any
Mortgaged Property.
The Servicer shall make withdrawals from the Escrow Account only to
effect such payments as are required under this Agreement, as set forth in
Section 3.06. The Servicer shall retain any interest paid on funds deposited
in the Escrow Account by the depository institution, other than interest on
escrowed funds required by law to be paid to the Mortgagor. Additionally,
any other benefit derived from the Escrow Account associated with the
receipt, disbursement and accumulation of principal, interest, taxes, hazard
insurance, mortgage insurance, etc. shall accrue to the Servicer. To the
extent required by law, the Servicer shall pay interest on escrowed funds to
the Mortgagor notwithstanding that the Escrow Account may be non-interest
bearing or that interest paid thereon is insufficient for such purposes.
Section 3.06 Permitted Withdrawals From Escrow Account.
Withdrawals from the Escrow Account or Accounts may be made by the
Servicer only:
(i) to effect timely payments of ground rents, taxes, assessments,
water rates, sewer rents, mortgage insurance premiums, condominium charges,
fire and hazard insurance premiums or other items constituting Escrow
Payments for the related Mortgage;
(ii) to refund to any Mortgagor any funds found to be in excess of
the amounts required under the terms of the related Mortgage Loan;
(iii) for transfer to the Custodial Account and application to
reduce the principal balance of the Mortgage Loan in accordance with the
terms of the related Mortgage and Mortgage Note;
(iv) for application to restoration or repair of the Mortgaged
Property in accordance with the FNMA Guides;
(v) for transfer to the Custodial Account of fire and hazard
insurance proceeds and Escrow Payments with respect to any FHA Loan or VA
Loan, where the FHA or the VA, respectively, has directed application of
funds as a credit against the proceeds of the FHA Insurance Contract or VA
Loan Guaranty Agreement;
(iv) to pay to the Servicer, or any Mortgagor to the extent
required by law, any interest paid on the funds deposited in the Escrow
Account; and
(vii) to clear and terminate the Escrow Account on the
termination of this Agreement.
Section 3.07 Maintenance of FHA Mortgage Insurance and VA Guaranty.
With respect to FHA Loans and VA Loans, the Servicer shall maintain
and keep the FHA Mortgage Insurance and the VA Guaranty, respectively, in
full force and effect throughout the term of this Agreement and discharge its
obligations arising out of FHA Mortgage Insurance and the VA Guaranty
Certificate. The Servicer hereby agrees that it shall be liable to the Owner
for any loss, liability or expense incurred by the Owner by reason of any FHA
Mortgage Insurance or VA Guaranty being voided, reduced, released or
adversely affected by reason of the negligence or willful misconduct of the
Servicer. The Servicer will service and administer the Mortgage Loans in
accordance with the obligations of mortgagees under the Act and the
applicable regulations thereunder and under the Servicemen's Readjustment Act
and VA Regulations and will discharge all obligations of the mortgagee under
each Mortgage Loan including, with respect to FHA Loans and VA Loans, paying
all FHA and VA insurance premiums, fees or charges, as required, and, subject
to the right to assign the Mortgage Loan to the FHA or VA, as the case may
be, will take all action reasonably necessary to preserve the lien of such
Mortgage, including, the defense of actions to challenge or foreclose such
lien.
Section 3.08 Notification of Adjustments.
With respect to each Adjustable Rate Mortgage Loan, the Servicer
shall adjust the Mortgage Interest Rate on the related interest rate
adjustment date and shall adjust the Monthly Payment on the related mortgage
payment adjustment date, if applicable, in compliance with the requirements
of applicable law and the related Mortgage and Mortgage Note. The Servicer
shall execute and deliver any and all necessary notices required under
applicable law and the terms of the related Mortgage Note and Mortgage
regarding the Mortgage Interest Rate and Monthly Payment adjustments. The
Servicer shall promptly, upon written request therefor, deliver to the Owner
such notifications and any additional applicable data regarding such
adjustments and the methods used to calculate and implement such adjustments.
Upon the discovery by the Servicer or the receipt of notice from the Owner
that the Servicer has failed to adjust a Mortgage Interest Rate or Monthly
Payment in accordance with the terms of the related Mortgage Note, the
Servicer shall immediately deposit in the Custodial Account from its own
funds the amount of any interest loss or deferral caused the Owner thereby.
Section 3.09 Completion and Recordation
of Assignments of Mortgage
and FHA and VA Change Notices.
To the extent permitted by applicable law, each of the Assignments
of Mortgage is subject to recordation in all appropriate public offices for
real property records in all 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 (subject to Section 3.01(a)) at either the
Servicer's, Owner's or its designee's expense. At the Owner's direction, the
Servicer shall cause the endorsements on the Mortgage Note, the Assignments
of Mortgage (subject to Section 3.01(a)), the assignment of security
agreement and the HUD form 92080 Mortgage Record Change with respect to all
FHA Loans to be completed, and shall give notice to the VA of a transfer of
insurance credits, if applicable, with respect to VA Loans on the form
prescribed by the VA.
Section 3.10 Protection of Accounts.
The Servicer may transfer the Custodial Account or the Escrow
Account to a different Qualified Depository from time to time. Such transfer
shall be made only upon obtaining the consent of the Owner, which consent
shall not be withheld unreasonably.
The Servicer shall bear any expenses, losses or damages sustained
by the Owner if the Custodial Account and/or the Escrow Account are not
demand deposit accounts.
Amounts on deposit in the Custodial Account and the Escrow Account
may at the option of the Servicer be invested in Eligible Investments;
provided that in the event that amounts on deposit in the Custodial Account
or the Escrow Account exceed the amount fully insured by the FDIC (the
"Insured Amount") the Servicer shall be obligated to invest the excess amount
over the Insured Amount in Eligible Investments on the same Business Day as
such excess amount becomes present in the Custodial Account or the Escrow
Account. Any such Eligible Investment shall mature no later than the
Determination Date next following the date of such Eligible Investment,
provided, however, that if such Eligible Investment is an obligation of a
Qualified Depository (other than the Servicer) that maintains the Custodial
Account or the Escrow Account, then such Eligible Investment may mature on
such Remittance Date. Any such Eligible Investment shall be made in the name
of the Servicer in trust for the benefit of the Owner. All income on or gain
realized from any such Eligible Investment shall be for the benefit of the
Servicer and may be withdrawn at any time by the Servicer. Any losses
incurred in respect of any such investment shall be deposited in the
Custodial Account or the Escrow Account, by the Servicer out of its own funds
immediately as realized.
Section 3.11 Title, Management and Disposition of REO Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be taken in the name of the Owner, or in the event the Owner is
not authorized or permitted to hold title to real property in the state where
the REO Property is located, or would be adversely affected under the "doing
business" or tax laws of such state by so holding title, the deed or
certificate of sale shall be taken in the name of such Person or Persons as
shall be consistent with an Opinion of Counsel obtained by the Servicer from
any attorney duly licensed to practice law in the state where the REO
Property is located. The Person or Persons holding such title other than the
Owner shall acknowledge in writing that such title is being held as nominee
for the Owner.
The Servicer shall manage, conserve, protect and operate each REO
Property for the Owner solely for the purpose of its prompt disposition and
sale. The Servicer, either itself or through an agent selected by the
Servicer, shall manage, conserve, protect and operate the REO Property in the
same manner that it manages, conserves, protects and operates other
foreclosed property for its own account, and in the same manner that similar
property in the same locality as the REO Property is managed. The Servicer
shall attempt to sell the same (and may temporarily rent the same for a
period not greater than one year, except as otherwise provided below) on such
terms and conditions as the Servicer deems to be in the best interest of the
Owner.
The Servicer shall use its best efforts to dispose of the REO
Property as soon as possible and shall sell such REO Property in any event
within two years after title has been taken to such REO Property, unless (a)
a REMIC election has not been made with respect to the arrangement under
which the Mortgage Loans and the REO Property are held, and (b) the Servicer
determines, and gives an appropriate notice to the Owner to such effect, that
a longer period is necessary for the orderly liquidation of such REO
Property. If a period longer than two years is permitted under the foregoing
sentence and is necessary to sell any REO Property, (i) the Servicer shall
report monthly to the Owner as to the progress being made in selling such REO
Property and (ii) if, with the written consent of the Owner, a purchase money
mortgage is taken in connection with such sale, such purchase money mortgage
shall name the Servicer as mortgagee, and such purchase money mortgage shall
not be held pursuant to this Agreement, but instead a separate participation
agreement among the Servicer and Owner shall be entered into with respect to
such purchase money mortgage. Notwithstanding anything herein to the
contrary, the Servicer shall not be required to provide financing for the
sale of any REO Property.
The Servicer shall also maintain on each REO Property fire and
hazard insurance with extended coverage in amount which is at least equal to
the maximum insurable value of the improvements which are a part of such
property, liability insurance and, to the extent required and available under
the Flood Disaster Protection Act of 1973, as amended, flood insurance in the
amount required above.
Subject to the approval of the Owner as described in this
paragraph, the disposition of REO Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interests of the Owner. Prior to acceptance by the
Servicer of an offer to sell any REO Property, the Servicer shall notify the
Owner of such offer in writing which notification shall set forth all
material terms of said offer (each a "Notice of Sale"). The Owner shall be
deemed to have approved the sale of any REO Property unless the Owner
notifies the Servicer in writing, within 1 Business Day after its receipt of
the related Notice of Sale, that it disapproves of the related sale. With
respect to any REO Property, upon a REO Disposition, the Servicer shall be
entitled to retain from REO Disposition Proceeds a disposition fee equal to
the lesser of (A) 1.5% of the Net Sale Proceeds or (B) $1,250; provided,
however, that (1) in the event that the REO Disposition Proceeds exceed
$25,000, such disposition fee shall not be less than $500 and (2) in the
event that the REO Disposition Proceeds are $25,000 or less, such disposition
fee shall be equal to $250. The proceeds of sale of the REO Property shall
be promptly deposited in the Custodial Account. After the expenses of such
disposition shall have been paid, the Servicer shall submit a reasonably
detailed invoice for reimbursement of Servicing Advances it incurred
thereunder. Such invoice shall be submitted on a monthly basis according to
Section 5.02 hereof.
The Servicer shall withdraw the Custodial Account funds necessary
for the proper operation, management and maintenance of the REO Property,
including the cost of maintaining any hazard insurance pursuant to the FNMA
Guides. The Servicer shall make monthly distributions on each Remittance
Date to the Owner of the net cash flow from the REO Property (which shall
equal the revenues from such REO Property net of the expenses described in
this Section 3.11 and of any reserves reasonably required from time to time
to be maintained to satisfy anticipated liabilities for such expenses).
Section 3.12 Real Estate Owned Reports.
Together with the statement furnished pursuant to Section 4.02, the
Servicer shall furnish to the Owner on or before the Remittance Date each
month a statement with respect to any REO Property covering the operation of
such REO Property for the previous month and the Servicer's efforts in
connection with the sale of such REO Property and any rental of such REO
Property incidental to the sale thereof for the previous month. That
statement shall be accompanied by such other information as the Owner shall
reasonably request.
ARTICLE IV
PAYMENTS TO OWNER
Section 4.01 Remittances.
On each Remittance Date the Servicer shall remit by wire transfer
of immediately available funds to the Owner all amounts deposited in the
Custodial Account as of the close of business on the Determination Date (net
of charges against or withdrawals from the Custodial Account pursuant to
Section 3.04).
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 Prime
Rate, adjusted as of the date of each change, plus two percentage points, but
in no event greater than the maximum amount permitted by applicable law.
Such interest shall be deposited in the Custodial Account by the Servicer on
the date such late payment is made and shall cover the period commencing with
the day following such Business Day and ending with the Business Day on which
such payment is made, both inclusive. Such interest shall be remitted along
with the distribution payable on the next succeeding Remittance Date. 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 Servicer.
Section 4.02 Statements to Owner.
Not later than the Remittance Date, the Servicer shall furnish to
the Owner (a) a monthly remittance advice containing such information in the
form of FNMA form 2010 or such other form as shall be required by the FNMA
Guides or by the Owner as to the accompanying remittance and the period
ending on the preceding Determination Date and (b) all such information
required pursuant to clause (a) above on a magnetic tape or other similar
media reasonably acceptable to Owner.
In addition, not more than 60 days after the end of each calendar
year, commencing December 31, 1997, the Servicer shall furnish to each Person
who was an Owner of the Mortgage Loans at any time during such calendar year
as required by applicable law or if not required by applicable law, at the
request of the Owner as to the aggregate of remittances for the applicable
portion of such year.
Such obligation of the Servicer shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Servicer pursuant to any requirements of the Internal Revenue
Code as from time to time are in force.
Beginning with calendar year 1998, the Servicer shall prepare and
file any and all tax returns, information statements or other filings for the
portion of the tax year 1997 and the portion of subsequent tax years for
which the Servicer has serviced some or all of the Mortgage Loans hereunder
as such returns, information statements or other filings are required
to be delivered to any governmental taxing authority or to the Owner pursuant
to any applicable law with respect to the Mortgage Loans and the transactions
contemplated hereby. In addition, the Servicer shall provide the Owner with
such information concerning the Mortgage Loans as is necessary for the Owner
to prepare its federal income tax return as the Owner may reasonably request
from time to time.
Section 4.03 Monthly Advances by Servicer.
Subject to Section 7.03, the Servicer shall have no obligation to
advance any amounts constituting delinquent principal and interest payments
with respect to the Mortgage Loans.
ARTICLE V
GENERAL SERVICING PROCEDURES
Section 5.01 Servicing Compensation.
As consideration for servicing the Mortgage Loans subject to this
Agreement, the Servicer shall retain the relevant Servicing Fee for each
Mortgage Loan remaining subject to this Agreement during any month. Such
Servicing Fee shall be payable monthly.
The Servicer shall be required to pay all expenses incurred by it
in connection with its servicing activities hereunder and shall not be
entitled to reimbursement thereof except as specifically provided for herein.
In addition to the servicing compensation that the Servicer shall
receive pursuant to this Section 5.01, the Owner reserves the right, but not
the obligation, to pay to the Servicer, in the Owner's sole discretion, an
incentive fee based upon the quality level at which the Servicer performs its
obligations pursuant to this Agreement. Such incentive fee shall be payable,
if any, in an amount and at a time specified by the Owner in its sole
discretion.
Section 5.02 Reimbursement of Servicing Advances.
The Owner shall reimburse the Servicer for Servicing Advances on a
monthly basis within 10 Business Days following the receipt from the Servicer
of reasonably detailed written invoices for any Servicing Advances along with
reasonably detailed supporting documentation in connection therewith. The
Servicer shall deliver such invoices and documentation, upon the request of
the Owner, at the time it delivers statements to the Owner in accordance with
Section 4.02 hereof.
ARTICLE VI
REPRESENTATIONS, WARRANTIES
AND AGREEMENTS
Section 6.01. Representations, Warranties and Agreements of the
Servicer.
The Servicer, as a condition to the consummation of the
transactions contemplated hereby, hereby makes the following representations
and warranties to the Owner as of each Transfer Date:
(a) Due Organization and Authority. The Servicer is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Delaware and has all licenses, or is in the process of obtaining all
licenses (which in any event will be received by December 31, 1997),
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each state where a Mortgaged Property is
located if the laws of such state require licensing or qualification in order
to conduct business of the type conducted by the Servicer, and in any event
the Servicer is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of the terms of this Agreement; the
Servicer has the full 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 Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized;
this Agreement evidences the valid, binding and enforceable obligation of the
Servicer and all requisite action has been taken by the Servicer to make this
Agreement valid and binding upon the Servicer in accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Servicer;
(c) No Conflicts. Neither the execution and delivery of this
Agreement, the acquisition of the servicing responsibilities by the Servicer
or the transactions contemplated hereby, nor the fulfillment of or compliance
with the terms and conditions of this Agreement, will conflict with or result
in a breach of any of the terms, conditions or provisions of the Servicer's
organizational documents or any legal restriction or any agreement or
instrument to which the Servicer is now a party or by which it is bound, or
constitute a default or result in an acceleration under any of the foregoing,
or result in the violation of any law, rule, regulation, order, judgment or
decree to which the Servicer or its property is subject, or impair the
ability of the Servicer to service the Mortgage Loans, or impair the value of
the Mortgage Loans;
Ability to Perform. The Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement;
No Litigation Pending. There is no action, suit, proceeding or
investigation pending or threatened against the 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 Servicer, or in any material impairment of the right or
ability of the Servicer to carry on its business substantially as now
conducted, or in any material liability on the part of the Servicer, or
which would draw into question the validity of this Agreement or of
any action taken or to be taken in connection with the obligations of the
Servicer contemplated herein, or which would be likely to impair materially
the ability of the Servicer to perform under the terms of this Agreement;
No Consent Required. No consent, approval, authorization or order
of any court or governmental agency or body is required for the execution,
delivery and performance by the Servicer of or compliance by the Servicer
with this Agreement, or if required, such consent, approval, authorization or
order will be obtained prior to December 31, 1997;
Ability to Service. The Servicer is or will be prior to December
31, 1997 an FHA Approved Mortgagee, a VA Approved Lender and an approved
seller/servicer of conventional residential mortgage loans for FNMA, FHLMC or
GNMA, with the facilities, procedures, and experienced personnel necessary
for the sound servicing of mortgage loans of the same type as the Mortgage
Loans. The Servicer is or will be prior to December 31, 1997 in good
standing to service mortgage loans for the FHA and the VA and either FNMA,
FHLMC or GNMA;
No Untrue Information. Neither this Agreement nor any statement,
report or other document furnished or to be furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby contains
any untrue statement of fact or omits to state a fact necessary to make the
statements contained therein not misleading; and
No Commissions to Third Parties. The Servicer has not dealt with
any broker or agent or anyone else who might be entitled to a fee or
commission in connection with this transaction other than the Owner.
Section 6.02. Remedies for Breach of Representations and Warranties of
the Servicer.
It is understood and agreed that the representations and warranties
set forth in Section 6.01 shall survive the engagement of the Servicer to
perform the servicing responsibilities as of each Transfer Date hereunder and
the delivery of the Servicing Files to the Servicer and shall inure to the
benefit of the Owner. Upon discovery by either the Servicer or the Owner of
a breach of any of the foregoing representations and warranties which
materially and adversely affects the ability of the Servicer to perform its
dutie0s and obligations under this Agreement or otherwise materially and
adversely affects the value of the Mortgage Loans, the Mortgaged Property or
the priority of the security interest on such Mortgaged Property or the
interest of the Owner, the party discovering such breach shall give prompt
written notice to the other.
Within 60 days of the earlier of either discovery by or notice to
the Servicer of any breach of a representation or warranty set forth in
Section 6.01 which materially and adversely affects the ability of the
Servicer to perform its duties and obligations under this Agreement or
otherwise materially and adversely affects the value of the Mortgage Loans,
the Mortgaged Property or the priority of the security interest on such
Mortgaged Property, the Servicer shall use its Best Efforts promptly to cure
such breach in all material respects and, if such breach cannot be cured, the
Servicer shall, at the Owner's option, assign the Servicer's rights and
obligations under this Agreement (or respecting the affected Mortgage Loans)
to a successor servicer, subject to the approval of the Owner, which approval
shall be in the Owner's sole discretion. Such assignment shall be made in
accordance with Sections 10.01 and 10.02.
In addition, the Servicer shall indemnify the Owner and hold it
harmless against any Costs resulting from any claim, demand, defense or
assertion based on or grounded upon, or resulting from, a breach of the
Servicer representations and warranties contained in this Agreement. It is
understood and agreed that the remedies set forth in this Section 6.02
constitute the sole remedies of the Owner respecting a breach of the
foregoing representations and warranties.
Any cause of action against the Servicer relating to or arising out
of the breach of any representations and warranties made in Section 6.01
shall accrue upon (i) discovery of such breach by the Servicer or notice
thereof by the Owner to the Servicer, (ii) failure by the Servicer to cure
such breach within the applicable cure period, and (iii) demand upon the
Servicer by the Owner for compliance with this Agreement.
Section 6.03. Representations and Warranties of the Owner.
The Owner, as a condition to the consummation of the transactions
contemplated hereby, makes the following representations and warranties to
the Servicer as of each Transfer Date:
(a) Due Organization and Authority. The Owner is a Delaware
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has all licenses necessary to
carry on its business as now being conducted; the Owner has the full
corporate power and authority to execute and deliver this Agreement and to
perform in accordance herewith; the execution, delivery and performance of
this Agreement by the Owner and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this Agreement
evidences the valid, binding and enforceable obligation of the Owner; and all
requisite corporate action has been taken by the Owner to make this Agreement
valid and binding upon the Owner in accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Owner;
(c) No Conflicts. Neither the execution and delivery of this
Agreement, the conveyance of the servicing responsibilities to the Servicer
or the transactions contemplated hereby, nor the fulfillment of or compliance
with the terms and conditions of this Agreement, will conflict with or result
in a breach of any of the terms, conditions or provisions of the Owner's
charter or by-laws or any legal restriction or any agreement or instrument to
which the Owner is now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the foregoing, or result in
the violation of any law, rule, regulation, order, judgment or decree to
which the Owner or its property is subject, or impair the value of the
servicing contract consummated hereby;
(d) Ability to Perform. The Owner does not believe, nor does it
have any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement;
(e) No Litigation Pending. There is no action, suit, proceeding
or investigation pending or threatened against the Owner 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
Owner, or in any material impairment of the right or ability of the Owner to
carry on its business substantially as now conducted, or in any material
liability on the part of the Owner, or which would draw into question the
validity of this Agreement or of any action taken or to be taken in
connection with the obligations of the Owner contemplated herein, or which
would be likely to impair materially the ability of the Owner to perform
under the terms of this Agreement;
(f) No Consent Required. No consent, approval, authorization or
order of any court or governmental agency or body is required for the
execution, delivery and performance by the Owner of or compliance by the
Owner with this Agreement, or if required, such approval has been obtained
prior to each Transfer Date;
(g) Ownership. The Owner is the sole owner and holder of the
Mortgage Loans. With respect to each Mortgage Loan which becomes subject to
this Agreement on a Transfer Date, the servicing responsibilities contracted
for as of the relevant Transfer Date have not been assigned or pledged, and,
the Owner has good and marketable interest therein, and has full right to
transfer the servicing responsibilities to the Servicer free and clear of any
encumbrance, equity, interest, lien, pledge, charge, claim or security
interest, and has full right and authority subject to no interest, or
agreement with, any other party, (other than any notice required by law,
regulation or otherwise, to be delivered to the Mortgagors) to assign the
servicing responsibilities pursuant to this Agreement; and
(h) No Commissions to Third Parties. The Owner has not dealt with
any broker or agent or anyone else who might be entitled to a fee or
commission in connection with this transaction other than the Servicer.
Section 6.04. Remedies for Breach of Representations and Warranties of
the Owner.
It is understood and agreed that the representations and warranties
set forth in Section 6.03 shall survive the engagement of the Servicer to
perform the servicing responsibilities as of each Transfer Date and the
delivery of the Servicing Files to the Servicer and shall inure to the
benefit of the Servicer. Upon discovery by either the Servicer or the Owner
of a breach of any of the foregoing representations and warranties which
materially and adversely affects the value of the servicing contract
established herein or the interest of the Servicer, the party discovering
such breach shall give prompt written notice to the other.
Within 60 days of the earlier of either discovery by or notice to
the Owner of any breach of a representation or warranty set forth in Section
6.03 which materially and adversely affects the value of the servicing
contract, the Owner shall use its Best Efforts promptly to cure such breach
in all material respects.
The Owner shall indemnify the Servicer and hold it harmless against
any Costs resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, (i) a breach of the Owner representations
and warranties contained in this Agreement; (ii) actions or omissions of a
Prior Servicer; and (iii) the failure of the Owner to cause any event to
occur which requires its "Best Efforts" under this Agreement. It is
understood and agreed that the obligation of the Owner to indemnify the
Servicer pursuant to this Section 6.04 constitutes the sole remedy of the
Servicer respecting a breach of the foregoing representation and warranties.
Any cause of action against the Owner relating to or arising out of
the breach of any representations and warranties made in Section 6.03 shall
accrue upon (i) discovery of such breach by the Owner or notice thereof by
the Servicer to the Owner, (ii) failure by the Owner to cure such breach
within the applicable cure period, and (iii) demand upon the Owner by the
Servicer for compliance with this Agreement.
ARTICLE VII
AGENCY TRANSFER; WHOLE LOAN TRANSFER; PASS-THROUGH TRANSFER
Section 7.01. Removal of Mortgage Loans from Inclusion Under this
Agreement Upon an Agency Transfer, a Pass-Through Transfer
or a Whole Loan Transfer on One or More Reconstitution
Dates.
The Owner and the Servicer agree that with respect to some or all
of the Mortgage Loans, from time to time the Owner may, in its sole
discretion choose to reconstitute a portion or all of the Mortgage Loans
effecting any of the following:
(1) An Agency Transfer, and/or
(2) A Whole Loan Transfer, and/or
(3) A Pass-Through Transfer.
In connection with the foregoing, the Owner shall offer to sell the
Servicing Rights to the Servicer at a price specified by the Owner with
respect to the affected Mortgage Loans (each offer a "Purchase Offer"). The
Servicer shall, upon receipt of a Purchase Offer, have three (3) Business
Days to accept the terms of such Purchase Offer (the "Acceptance Period").
If the Servicer fails to accept the Purchase Offer by the expiration of the
Acceptance Period, the Purchase Offer shall be deemed rejected by the
Servicer and the Owner shall have the right to offer the Servicing Rights to
any third party upon comparable terms. Subject to Section 10.01, on the
related Reconstitution Date, the Mortgage Loans transferred shall cease to be
covered by this Agreement, except with respect to the obligation to remit the
Additional Remittance in accordance with the provisions set forth herein and
the right of the Owner to cause a transfer of the servicing responsibilities
with respect to the Mortgage Loans and/or REO Properties in accordance with
Sections 7.07 and 7.08, respectively.
The Servicer shall cooperate with the Owner in connection with any
Agency Transfer, Pass-Through Transfer or Whole Loan Transfer contemplated by
the Owner pursuant to this Section 7.01. In that connection, the Servicer
shall (a) execute any Reconstitution Agreement within a reasonable period of
time after receipt thereof which time shall be sufficient for the Servicer
and Servicer's counsel to review such Reconstitution Agreement, but such time
shall not exceed ten (10) Business Days after such receipt, and (b) provide
to FNMA, FHLMC, GNMA, the trustee or a third party purchaser, as the case may
be, subject to any Reconstitution Agreement and/or the Owner: (i) any and all
information and appropriate verification of information which may be
reasonably available to the Servicer, whether through letters of its auditors
and counsel or otherwise, as the Owner shall reasonably request; and (ii)
such additional representations, warranties, covenants, opinions of counsel,
letters from auditors, and certificates of public officials or officers of
the Servicer as are reasonably believed necessary by FNMA, FHLMC, GNMA, the
trustee, such third party purchaser, any master servicer, any rating agency
or the Owner, as the case may be, in connection with such transactions.
Prior to incurring any out-of-pocket expenses pursuant to this paragraph, the
Servicer shall notify the Owner in writing of the estimated amount of such
expense. The Owner shall reimburse the Servicer for any such
expense following its receipt of appropriate details thereof.
In accordance with Section 3.01(a) hereof, as per the terms of the
applicable Acknowledgment Agreement, either (i) the Owner or the Owner's
designee or (ii) the Servicer, for an Assignment Fee, shall (A) prepare or
cause to be prepared and record or cause to be recorded all Assignments of
Mortgage in blank from the then mortgagee of record, acceptable to FNMA,
FHLMC, GNMA, the trustee or such third party, as the case may be, for each
Mortgage Loan that is part of an Agency Transfer, Whole Loan Transfer or
Pass-Through Transfer and shall pay the recording costs associated therewith
and/or (B) shall track such Assignments of Mortgage to ensure they have been
recorded and deliver them as required by FNMA, FHLMC, GNMA, the trustee or
such third party, as the case may be, upon the Servicer's receipt thereof.
Additionally, the Servicer shall prepare and execute, at the direction of the
Owner, any note endorsements in connection with any and all Reconstitution
Agreements.
With respect to FHA Loans, prior to the related Reconstitution
Date, the Servicer shall prepare a HUD form 92080 Mortgage Record Change for
each FHA Loan. With respect to each VA Loan, prior to the related
Reconstitution Date, if applicable, the Servicer shall give notice to the VA
of a transfer of insurance credits with respect thereto.
All Mortgage Loans not sold or transferred pursuant to an Agency
Transfer, Pass-Through Transfer or Whole Loan Transfer shall be subject to
this Agreement and shall continue to be serviced in accordance with the terms
of this Agreement and with respect thereto this Agreement shall remain in
full force and effect.
Section 7.02. Additional Indemnification by the Servicer; Third Party
Claims.
The Servicer shall indemnify the Owner and hold it harmless against
any and all Costs that the Owner may sustain in any way related to (i) the
failure of the Servicer to perform its duties and service the Mortgage Loans
in material compliance with the terms of this Agreement or any Reconstitution
Agreement entered into pursuant to Section 7.01 or (ii) the failure of the
Servicer to cause any event to occur which requires its "Best Efforts" under
this Agreement. The Servicer shall immediately notify the Owner if a claim
is made by a third party with respect to this Agreement or any Reconstitution
Agreement or the Mortgage Loans, shall promptly notify FNMA, FHLMC, GNMA, the
trustee or other relevant third party with respect to any claim made by a
third party with respect to any Reconstitution Agreement, assume (with the
prior written consent of the Owner) the defense of any such claim and pay all
expenses in connection therewith, including counsel fees, promptly pay,
discharge and satisfy any judgment or decree which may be entered against it
or the Owner in respect of such claim and follow any written instructions
received from the Owner in connection with such claim. The Owner promptly
shall reimburse the Servicer for all amounts advanced by it pursuant to the
preceding sentence except when the claim is in any way related to the
Servicer's indemnification pursuant to Section 6.02, or the failure of the
Servicer to service and administer the Mortgage Loans in material compliance
with the terms of this Agreement or any Reconstitution Agreement. In the
event a dispute arises between the Servicer and the Owner with respect to any
of the rights and obligations of the parties pursuant to this Agreement, and
such dispute is adjudicated in a court of law, by an arbitration panel or any
other judicial process, then the losing party shall indemnify and reimburse
the winning party for all attorney's fees and other costs and expenses
related to the adjudication of said dispute.
Section 7.03 Monthly Advances, Compensating Interest and Servicing
Fees after Reconstitution.
Notwithstanding anything contained herein to the contrary, in
connection with (a) a Pass-Through Transfer, the Servicer shall make Monthly
Advances through the Remittance Date immediately preceding the distribution
of all Liquidation Proceeds and other payments or recoveries (including
Insurance Proceeds and Condemnation Proceeds) with respect to the related
Mortgage Loans or such earlier time period as set forth in the related
Reconstitution Agreement, (b) an Agency Transfer, the Servicer shall make
Monthly Advances as required by FNMA, FHLMC or GNMA, as applicable, and (c) a
Whole Loan Transfer, the Servicer shall make Monthly Advances through the
Remittance Date immediately preceding the date that such Mortgage Loan
becomes REO Property.
Notwithstanding anything contained herein to the contrary, in
connection with a Reconstitution Agreement, the Servicing Fee as set forth on
the applicable Acknowledgment Agreement and/or Confirmation Agreement of each
reconstituted Mortgage Loan shall be changed upon reconstitution to the
Reconstituted Servicing Fee.
Notwithstanding anything contained herein to the contrary,
following a Reconstitution Agreement, with respect to each Principal
Prepayment of reconstituted Mortgage Loans, the Servicer shall deposit
in the Custodial Account on a daily basis, and retain therein the
Prepayment Interest Shortfall Amount, if any, for the month of distribution.
Such deposit shall be made from the Servicer's own funds, without
reimbursement therefor;
Section 7.04 Maintenance of Custodial and Escrow Accounts after
Reconstitution.
Notwithstanding anything herein to the contrary, in connection with
(a) a Pass-Through Transfer, the Servicer shall maintain Custodial Accounts
and Escrow Accounts in accordance with the related master servicer's
requirements, and pursuant to the related Reconstitution Agreement, (b) an
Agency Transfer, the Servicer shall maintain Custodial Accounts and Escrow
Accounts in accordance with the requirements of FNMA, FHLMC or GNMA, as
applicable, and (c) a Whole Loan Transfer, the Servicer shall maintain
Custodial Accounts and Escrow Accounts in accordance with terms that are
substantially similar to the terms of this Agreement. For purposes of this
paragraph, the obligation to maintain Custodial Accounts and Escrow Accounts
includes the obligation of the Servicer to remove amounts from such accounts
that exceed the amount fully insured by the FDIC, if required by the
applicable investor. In connection with any Pass-Through Transfer, Agency
Transfer, or Whole Loan Transfer the Servicer shall be obligated to maintain
the related Custodial Accounts and Escrow Accounts with such institutions
required by the applicable investor, which institutions might not include the
Servicer.
Section 7.05. Owner's Repurchase and Indemnification Obligations.
Upon receipt by the Servicer of notice from FNMA, FHLMC, GNMA or
other such third party purchaser of a breach of any Owner representation or
warranty contained in any Reconstitution Agreement or a request by FNMA,
FHLMC, GNMA, the trustee or such third party purchaser, as the case may be,
for the repurchase of any Mortgage Loan transferred to FNMA, FHLMC or GNMA
pursuant to an Agency Transfer or to a trustee pursuant to a Pass-Through
Transfer or to a third party purchaser pursuant to a Whole Loan Transfer, the
Servicer shall promptly notify the Owner of same and shall, at the direction
of the Owner, use its Best Efforts to cure and correct any such breach and to
satisfy the requests or concerns of FNMA, FHLMC, GNMA, the trustee or the
third party purchaser related to such deficiencies of the related Mortgage
Loans transferred to FNMA, FHLMC, GNMA, the trustee or other such third party
purchaser.
The Owner shall repurchase from the Servicer any Mortgage Loan
transferred to FNMA, FHLMC or GNMA pursuant to an Agency Transfer or to a
trustee pursuant to a Pass-Through Transfer or to a third party purchaser
pursuant to a Whole Loan Transfer with respect to which the Servicer has been
required by FNMA, FHLMC, GNMA, the trustee or such third party purchaser to
repurchase due to a breach of a representation or warranty made by the Owner
with respect to the Mortgage Loans, or the servicing thereof prior to the
related Transfer Date to FNMA, FHLMC, GNMA, the trustee or any third party
purchaser in any Reconstitution Agreement and not due to a breach of the
Servicer's obligations thereunder or pursuant to this Agreement. The
repurchase price to be paid by the Owner to the Servicer shall equal that
repurchase price paid by the Servicer to FNMA, FHLMC, GNMA, the trustee or
the third party purchaser plus all reasonable costs and expenses borne
by the Servicer in connection with the cure of said breach of a
representation or warranty made by the Owner and in connection with the
repurchase of such Mortgage Loan from FNMA, FHLMC, GNMA, the trustee or
the third party purchaser, including, but not limited to, reasonable
and necessary attorneys' fees.
At the time of repurchase, the Custodian and the Servicer shall
arrange for the reassignment of the repurchased Mortgage Loan to the Owner
according to the Owner's instructions and the delivery to the Custodian of
any documents held by FNMA, FHLMC, GNMA, the trustee or other relevant third
party purchaser with respect to the repurchased Mortgage Loan pursuant to the
related Reconstitution Agreement. In the event of a repurchase, the Servicer
shall, simultaneously with such reassignment, give written notice to the
Owner that such repurchase has taken place, and amend the Mortgage Loan
Schedule to reflect the addition of the repurchased Mortgage Loan to this
Agreement. In connection with any such addition, the Servicer and the Owner
shall be deemed to have made as to such repurchased Mortgage Loan the
representations and warranties set forth in this Agreement except that all
such representations and warranties set forth in this Agreement shall be
deemed made as of the date of such repurchase.
Section 7.06. Termination Fees after Reconstitution.
In the event that the Servicer acquires the Servicing Rights
pursuant to Section 7.01 hereof, the Servicer shall be entitled to the
Reconstituted Termination Fee (as defined below) set forth in the applicable
Reconstitution Agreement. In all other cases, the Servicer and the Owner
hereby agree and acknowledge that the Owner is the sole owner of the
Servicing Rights. In the event that any Reconstitution Agreement provides
for a payment of a termination fee (a "Reconstituted Termination Fee") to the
Servicer upon the termination of the Servicer as the servicer or as the
applicable "seller/servicer" thereunder, the Servicer shall (a) notify the
Owner, in writing, upon receipt of notice that the Servicer will be
terminated as servicer or "seller/servicer" under such Reconstitution
Agreement, and (b) promptly remit to the Owner by wire transfer of
immediately available funds the amount of the related Reconstituted
Termination Fee if it is received by the Servicer. Upon receipt by the Owner
of the Reconstituted Termination Fee, the Owner shall remit to the Servicer,
within 10 Business Days, the applicable Termination Fee due to the Servicer,
if any, pursuant to Section 9.02 hereof. In addition, the Servicer shall not
modify, amend or waive the right to receive a Reconstituted Termination Fee
under any Reconstitution Agreement without first obtaining the written
consent of the Owner which consent may be withheld by the Owner in its sole
discretion. The provisions of this Section 7.06 shall survive the
termination of this Agreement.
Section 7.07. Additional Remittance.
From the applicable Reconstituted Servicing Fee, the Servicer shall
retain an amount equal to the Servicing Fee and shall remit the Additional
Remittance to the Owner on the Additional Remittance Date. In connection
therewith, the Owner and the Servicer shall agree upon a mutually acceptable
monthly report to be sent to the Owner or its assigns thereof on or prior to
the related Additional Remittance Date. The right to receive the Additional
Remittance shall be freely transferable by the Owner and shall be secured by
a collateral pledge of the servicing rights associated with the Mortgage
Loans being reconstituted.
On each Reconstitution Date, the Owner and the Servicer hereby
agree to execute a Collateral Pledge and Security Agreement in form and
substance reasonably acceptable to both the Owner and the Servicer and such
other agreements and UCC-1's as shall reasonably be required to perfect the
Owner's security interest with respect to the servicing rights related to the
Mortgage Loans being reconstituted.
With respect to the Mortgage Loans subject to one or more Agency
Transfers, Whole Loan Transfers or Pass-Through Transfers, in the event that
any party to the Reconstitution Agreement other than the Owner disapproves or
terminates the Servicer and selects another servicer to replace the Servicer,
then from and after the date of substitution, neither the Servicer nor any
successor servicer hereunder shall be under any obligation to remit to the
Owner or its assigns any Additional Remittance accruing after the date of
substitution. Notwithstanding the foregoing, in the event that the Servicer
is terminated without cause under any Reconstitution Agreement, the Owner
shall be entitled to receive the sum of all fees, amounts or compensation
received by the Servicer under the applicable Reconstitution Agreement in
connection with a termination without cause. Additionally, in the event that
the Servicer is terminated as a consequence of a breach under any applicable
Reconstitution Agreement, the Servicer shall be liable to the Owner for any
actual and consequential damages which the Owner may sustain as a consequence
of any such termination; provided, however, that the Servicer shall not be
obligated to pay such damages to the Owner if the Servicer's termination is
directly related to the quality or suitability of the Mortgage Loans subject
to any Reconstitution Agreement. In the event that the Servicer judicially
contests any termination under a Reconstitution Agreement as a wrongful
termination thereunder, the Servicer shall not be obligated to pay damages to
the Owner until such time as a judicial determination on such claim is made,
provided that the Servicer shall diligently pursue such claim. In the event
that the Servicer continues to receive its Servicing Fee under a
Reconstitution Agreement during the time in which it is contesting a
termination as wrongful, the Servicer shall continue to be obligated to pay
the Additional Remittance to the Owner. Notwithstanding the fact that the
Servicer's obligation to pay damages if it contests a termination under a
Reconstitution Agreement as wrongful shall be delayed until a judicial
determination is made, such damages will nevertheless accrue as of the date
of termination.
Section 7.08. Transfer of Servicing Following Reconstitution.
Following a reconstitution of Mortgage Loans or REO Properties, the
Owner shall have the right, in its sole discretion, to cause the Servicer at
any time under any Reconstitution Agreement to transfer the servicing
responsibilities and duties associated therewith to the Owner or any designee
of the Owner; provided, however, that (i) the Owner shall provide the
Servicer with 30 days prior written notice, (ii) such transfer shall be
subject to the approval of the Applicable Agency, trustee, master servicer or
rating agency with respect to Agency Transfers, Pass-Through Transfers or any
relevant third party purchaser with respect to Whole Loan Transfers, (iii)
the costs associated with the transfer of servicing pursuant to this Section
7.08 shall not be borne by the Servicer and (iv) the Servicer shall be
entitled to the Termination Fee as set forth in Section 9.02. The Servicer
agrees to cooperate with the Owner in such transfer of servicing
responsibilities and shall comply with the termination procedures set forth
in Sections 9.01 and 10.01 hereof.
ARTICLE VIII
THE SERVICER
Section 8.01. Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and shall obtain and preserve its qualification
to do business as a foreign entity in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform
its duties under this Agreement.
Any Person into which the Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Servicer shall be a party, or any Person 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, anything herein to the contrary notwithstanding,
provided, however, that the successor or surviving Person shall be an
institution (i) having a net worth of not less than $25,000,000, and (ii)
which is a FNMA-, FHLMC-, and GNMA-approved servicer in good standing and an
FHA approved Mortgagee and a VA Approved Lender.
Section 8.02 Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees
or agents of the Servicer shall be under any liability to the Owner 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 breach of warranties or representations made herein, or failure to
perform its obligations in strict compliance with any standard of care set
forth in this Agreement, or any liability which would otherwise be imposed by
reason of any breach of the terms and conditions of this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may
rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising hereunder. The
Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the
Mortgage Loans in accordance with this Agreement and which in its opinion may
involve it in any expense or liability, provided, however, that the Servicer
may, with the consent of the Owner, undertake any such action which it may
deem necessary or desirable in respect of this Agreement and the rights and
duties of the parties hereto. In such event, the Servicer shall be entitled
to reimbursement from the Owner for the reasonable legal expenses and costs
of such action.
Section 8.03 Limitation on Resignation and Assignment by the Servicer.
The Owner has entered into this Agreement with the Servicer and
subsequent transferees of the Owner will purchase the Mortgage Loans in
reliance upon the independent status of the Servicer, and the representations
as to the adequacy of its servicing facilities, plant, personnel, records and
procedures, its integrity, reputation and financial standing, and the
continuance thereof. Therefore, the Servicer shall not assign this Agreement
or the servicing responsibilities hereunder or delegate its rights or duties
hereunder or any portion hereof or sell or otherwise dispose of all or
substantially all of its property or assets without the prior written consent
of the Owner, which consent shall be granted or withheld in the sole
discretion of the Owner.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except by mutual consent of the Servicer and the Owner
or upon the determination that its duties hereunder are no longer permissible
under applicable law and such incapacity cannot be cured by the Servicer.
Any such determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Owner
which Opinion of Counsel shall be in form and substance acceptable to the
Owner. No such resignation shall become effective until a successor shall
have assumed the Servicer's responsibilities and obligations hereunder in the
manner provided in Section 10.01.
Without in any way limiting the generality of this Section 8.03, in
the event that the Servicer either shall assign this Agreement or the
servicing responsibilities hereunder or delegate its duties hereunder or any
portion thereof or sell or otherwise dispose of all or substantially all of
its property or assets, without the prior written consent of the Owner, then
the Owner shall have the right to terminate this Agreement upon notice given
as set forth in Section 9.01, without any payment of any penalty or damages
and without any liability whatsoever to the Servicer or any third party.
ARTICLE IX
TERMINATION
Section 9.01. Termination for Cause.
(a) This Agreement shall be terminable at the sole option of the
Owner, if any of the following events of default exist on the part of the
Servicer:
(i) any failure by the Servicer to remit to the Owner any payment
required to be made under the terms of this Agreement which continues
unremedied for a period of two Business Days after the date upon which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Owner; or
(ii) failure by the Servicer duly to observe or perform in any
material respect any other of the covenants or agreements on the part of the
Servicer set forth in this Agreement which continues unremedied for a period
of 30 days; or
(iii) failure by the Servicer to maintain its license to do
business or service residential mortgage loans in any jurisdiction where the
Mortgaged Properties are located; or
(iv) 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, including
bankruptcy, marshaling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(v) the 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
Servicer or of or relating to all or substantially all of its property; or
(vi) 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, bankruptcy or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily suspend payment of
its obligations or cease its normal business operations for three Business
Days; or
(vii) the Servicer ceases to meet the qualifications of a FNMA,
FHLMC or GNMA lender/servicer or ceases to be an FHA Approved Mortgagee or
ceases to be a VA Approved Lender; or
(viii) the Servicer attempts, without the consent of the Owner,
to assign the servicing of the Mortgage Loans or its right to servicing
compensation hereunder or the Servicer attempts, without the consent of the
Owner, to sell or otherwise dispose of all or substantially all of its
property or assets or to assign this Agreement or the servicing
responsibilities hereunder or to delegate its duties hereunder or any
portion thereof; or
(ix) the Company fails to maintain a minimum net worth of
$25,000,000.
In each and every such case, so long as an event of default shall
not have been remedied, in addition to whatever rights the Owner may have at
law or equity to damages, including injunctive relief and specific
performance, the Owner, by notice in writing to the Servicer, may terminate
all the rights and obligations of the Servicer under this Agreement and in
and to the servicing contract established hereby and the proceeds thereof.
Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall pass to and be vested in a successor
servicer appointed by the Owner. Upon written request from the Owner, the
Servicer shall prepare, execute and deliver to the successor entity
designated by the Owner any and all documents and other instruments, place in
such successor's possession all Servicing Files, 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 Mortgage Loans and related documents, at the
Servicer's sole expense. The Servicer shall cooperate with the Owner and
such successor in effecting the termination of the Servicer's
responsibilities and rights hereunder, including without limitation, the
transfer to such successor for administration by it of all cash amounts which
shall at the time be credited by the Servicer to the Custodial Account or
Escrow Account or thereafter received with respect to the Mortgage Loans.
By a written notice, the Owner may waive any default by the
Servicer in the performance of its obligations hereunder and its
consequences. Upon any waiver of a past default, such default shall cease to
exist, and any 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
thereon except to the extent expressly so waived.
Section 9.02. Termination Without Cause.
This Agreement shall terminate upon: (i) the later of (a) the
distribution of the final payment or liquidation proceeds on the last
Mortgage Loan to the Owner (or advances by the Servicer for the same), and
(b) the disposition of all REO Property acquired upon foreclosure of the last
Mortgage Loan and the remittance of all funds due hereunder, or (ii) mutual
consent of the Servicer and the Owner in writing. Any such notice of
termination shall be in writing and delivered to the Servicer by registered
mail to the address set forth at the beginning of this Agreement. The Owner
and the Servicer shall comply with the termination procedures set forth in
Sections 9.01 and 10.01 hereof. In the event that Servicer is terminated as
servicer pursuant Sections 7.06, 7.08 and 9.02(ii), it shall be entitled to a
termination fee (the "Termination Fee") equal to $10 per Mortgage Loan then
being serviced pursuant to this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Successor to the Servicer.
Simultaneously with the termination of the Servicer's
responsibilities and duties under this Agreement pursuant to Sections 6.02,
8.03, 9.01 or 9.02, the Owner shall (i) succeed to and assume all of the
Servicer's responsibilities, rights, duties and obligations under this
Agreement, or (ii) appoint a successor having the characteristics set forth
in clauses (i) and (ii) of Section 8.01 and which shall succeed to all rights
and assume all of the responsibilities, duties and liabilities of the
Servicer under this Agreement simultaneously with the termination of the
Servicer's responsibilities, duties and liabilities under this Agreement.
Any successor to the Servicer shall be an FHA Approved Mortgagee and a VA
Approved Lender. In addition, with respect to all FHA Loans serviced
hereunder, the Servicer shall provide notice of such change in servicers to
HUD on HUD form 92080 or such other form as prescribed by HUD, at least 10
days prior to such transfer of servicing. In connection with such appointment
and assumption, the Owner may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor
shall agree, provided, however, that no such compensation shall be in excess
of that permitted the Servicer under this Agreement without the consent of
the Owner. In the event that the Servicer's duties, responsibilities and
liabilities under this Agreement should be terminated pursuant to the
aforementioned sections, the Servicer shall discharge such duties and
responsibilities during the period from the date it acquires knowledge of
such termination until the effective date thereof with the same degree of
diligence and prudence which it is obligated to exercise under this
Agreement, and shall take no action whatsoever that might impair or prejudice
the rights or financial condition of its successor. The resignation or
removal of the Servicer pursuant to the aforementioned sections shall not
become effective until a successor shall be appointed pursuant to this
Section 10.01 and shall in no event relieve the Servicer of the
representations and warranties made pursuant to Sections 6.01 and the
remedies available to the Owner under Section 6.02 and 7.02, it being
understood and agreed that the provisions of such Sections 6.01, 6.02 and
7.02 shall be applicable to the Servicer notwithstanding any such resignation
or termination of the Servicer, or the termination of this Agreement.
Within a reasonable period of time, but in no event longer than 30
days of the appointment of a successor entity by the Owner, the Servicer
shall prepare, execute and deliver to the successor entity any and all
documents and other instruments, place in such successor's possession all
Servicing Files, 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 of the
Mortgage Notes and related documents, and the preparation and recordation of
Assignments of Mortgage, at the discretion of the Owner and, at the Owner's
sole expense. The Servicer shall cooperate with the Owner and such successor
in effecting the termination of the Servicer's responsibilities and rights
hereunder and the transfer of servicing responsibilities to the successor
servicer, including without limitation, the transfer to such successor for
administration by it of all cash amounts which shall at the time be credited
by the Servicer to the Custodial Account or Escrow Account or thereafter
received with respect to the Mortgage Loans.
Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Servicer and to the Owner an instrument
accepting such appointment, wherein the successor shall make the
representations and warranties set forth in Section 6.01, whereupon such
successor shall become fully vested with all the rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer, with like
effect as if originally named as a party to this Agreement. Any termination
or resignation of the Servicer or termination of this Agreement pursuant to
Sections 6.02, 8.03, 9.01 or 9.02 shall not affect any claims that the Owner
may have against the Servicer arising out of the Servicer's actions or
failure to act prior to any such termination or resignation.
The Servicer shall deliver promptly to the successor servicer the
funds in the Custodial Account and Escrow Account and all Mortgage Loan
documents and related documents and statements held by it hereunder and the
Servicer shall account for all funds and shall execute and deliver such
instruments and do such other things as may reasonably be required to more
fully and definitively vest in the successor all such rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer.
Upon a successor's acceptance of appointment as such, the Servicer
shall notify by mail the Owner of such appointment in accordance with the
procedures set forth in Section 10.06.
Section 10.02. Closing.
Each closing for the engagement of the Servicer to perform the
servicing responsibilities respecting Mortgage Loans shall take place on the
related Transfer Date. At the Owner's option, the closing shall be either: by
telephone, confirmed by letter or wire as the parties shall agree; or
conducted in person, at such place as the parties shall agree.
Each closing shall be subject to each of the following conditions:
a) all of the representations and warranties of the Servicer
and the Owner under this Agreement shall be true and
correct as of each Transfer Date and no event shall have
occurred which, with notice or the passage of time, would
constitute a default under this Agreement;
b) the Owner and Servicer each shall have received, or the
Owner's attorneys shall have received in escrow, (i) with
respect to the Initial Transfer Date, all Closing
Documents as specified in Section 10.03 hereof, and
(ii) with respect to all Transfer Dates, the Closing
Documents specified in (b), (c) and (i) of Section
10.03 hereof, in such forms as are agreed upon and
acceptable to the Servicer and the Owner, duly executed
by all signatories as required pursuant to the respective
terms thereof; and
c) all other terms and conditions of this Agreement shall
have been complied with and no default or Event of
Default under this Agreement shall have occurred and be
continuing for a period of 30 days or more prior to the
related Transfer Date.
Section 10.03. Closing Documents.
The Closing Documents shall consist of fully executed originals of
the following documents:
(a) with respect to the Initial Transfer Date, this
Agreement;
(b) with respect to the Initial Transfer Date, the Mortgage
Loan Schedule, with one copy to be attached to each
counterpart of this Agreement as Exhibit A, and with
respect to each subsequent Transfer Date, a Mortgage Loan
Schedule reflecting the additional Mortgage Loans to be
serviced by the Servicer and a cumulative Mortgage Loan
Schedule, reflecting all Mortgage Loans being serviced by
the Servicer from the Initial Transfer Date up to, and
including, the related subsequent Transfer Date;
(c) with respect to each subsequent Transfer Date, an
Acknowledgment Agreement in the form of Exhibit B-1
hereto;
(d) with respect to the Initial Transfer Date, a Custodial
Account Letter Agreement in the form of Exhibit C hereto;
(e) with respect to the Initial Transfer Date, an Escrow
Account Letter Agreement in the form of Exhibit D hereto;
(f) with respect to the Initial Transfer Date, an Officer's
Certificate of the Servicer, in the form of Exhibit E-1
hereto, including all attachments thereto, and with
respect to subsequent Transfer Dates, in the event that
any item contained in the most recent Officer's
Certificate becomes untrue or at the request of the
Owner, an Officer's Certificate in the form of Exhibit E-
2 hereto, including all attachments thereto;
(g) an Opinion of Counsel delivered following the Initial
Transfer Date upon the request of the Owner, in the form
of Exhibit G hereto;
(h) with respect to the Initial Transfer Date, a Custodial
Agreement; and
(i) with respect to each Transfer Date, a trust receipt and
initial certification of the related Custodian, as
required under the Custodial Agreement.
Section 10.04. Costs.
The Owner shall pay any commissions due its salesmen and the legal
fees and expenses of its attorneys. Costs and expenses incurred in
connection with the transfer of the servicing responsibilities, including
fees for delivering Servicing Files, shall be paid by the Owner. Subject to
Section 3.01(a) the Owner, its designee or the Servicer shall pay the costs
associated with the preparation, delivery and recording of Assignments of
Mortgages required on each Reconstitution Date.
Section 10.05. Protection of Confidential Information.
The Servicer shall keep confidential and shall not divulge to any
party, without the Owner's prior written consent, the purchase price paid by
the Owner for the Mortgage Loans and any information pertaining to the
Mortgage Loans or any borrower thereunder, except to the extent that it is
appropriate for the Servicer to do so in working with legal counsel,
auditors, taxing authorities or other governmental agencies.
Section 10.06. Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if sent by facsimile or
mailed by overnight courier, addressed as follows (or such other address as
may hereafter be furnished to the other party by like notice):
(i) if to the Owner:
Lehman Capital, A Division of
Lehman Brothers Holdings Inc.
Three World Financial Center
New York, New York 10285
Attention: Manager, Contract Finance
Telecopier No.: (212) 528-6659
Telephone No.: (212) 526-5837
(ii) if to the Servicer:
Aurora Loan Services Inc.
2530 South Parker Road
Aurora, Colorado 80014
Telecopier No.: (303) 338-2289
Telephone No.: (303) 745-3661
Attention: Rick Skogg
Any such demand, notice or communication hereunder shall be deemed
to have been received on the date delivered to or received at the premises of
the addressee.
Section 10.07. Severability Clause.
Any part, provision, representation or warranty of this Agreement
which is prohibited or which is held to be void or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part, provision,
representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction
shall be ineffective, as to such jurisdiction, to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction as
to any Mortgage Loan shall not invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable
law, the parties hereto waive any provision of law which prohibits or renders
void or unenforceable any provision hereof. If the invalidity of any part,
provision, representation or warranty of this Agreement shall deprive any
party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good-faith, to develop a structure the economic
effect of which is as close as possible to the economic effect of this
Agreement without regard to such invalidity.
Section 10.08. No Personal Solicitation.
From and after each related Transfer Date, the Servicer hereby
agrees that it will not take any action or permit or cause any action to be
taken by any of its agents or affiliates, or by any independent contractors
on the Servicer's behalf, to personally, by telephone or mail, solicit the
borrower or obligor under any Mortgage Loan (on a targeted basis) for any
purposes of prepayment, refinancing or modification of the related Mortgage
Loan, provided, however, that this limitation shall not prohibit Servicer
from soliciting such Mortgagor for purposes of prepayment, refinance or
modification of any loan owned or serviced by Servicer other than a Mortgage
Loan. It is understood and agreed that, among other marketing activities,
promotions undertaken by Servicer which are directed of the general public at
large or which are directed generally to a segment of the then existing
customers of Servicer or any of its direct or indirect subsidiaries
(including, without limitation, the mailing of promotional materials to
Servicer's deposit customers by inserting such materials into customer
account statements, mass mailings based on commercially acquired mailing
lists and newspaper, radio and television advertisements) shall not
constitute solicitation under this section. In the event the Servicer does
refinance any Mortgage Loan as a result of a violation of the requirements
set forth in this Section 10.08, Servicer hereby agrees to pay to Owner an
amount equal to the difference, if any, between the amount that the Owner
would have received if it had sold the Mortgage Loan to a third party, and
the proceeds received by the Owner as result of such refinancing.
Section 10.09. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all
such counterparts shall constitute one and the same instrument.
Section 10.10. Place of Delivery and Governing Law.
This Agreement shall be deemed in effect when a fully executed
counterpart thereof is received by the Owner in the State of New York and
shall be deemed to have been made in the State of New York. The 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 the laws of the State of New York, except to
the extent preempted by Federal law.
Section 10.11. Further Agreements.
The Owner and the Servicer each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of
this Agreement.
Section 10.12. Intention of the Parties.
It is the intention of the parties that the Owner is conveying, and
the Servicer is receiving only a contract for servicing the Mortgage Loans.
accordingly, the parties hereby acknowledge that the Owner remains the sole
and absolute owner of the Mortgage Loans and all rights related thereto.
Section 10.13. Successors and Assigns; Assignment of Servicing
Agreement.
This Agreement shall bind and inure to the benefit of and be
enforceable by the Servicer and the Owner and the respective successors and
assigns of the Servicer and the Owner. This Agreement shall not be assigned,
pledged or hypothecated by the Servicer to a third party without the prior
written consent of the Owner, which consent shall be given at the sole
discretion of the Owner.
Section 10.14. Waivers.
No term or provision of this Agreement may be waived or modified
unless such waiver or modification is in writing and signed by the party
against whom such waiver or modification is sought to be enforced.
Section 10.15. Exhibits.
The exhibits to this Agreement are hereby incorporated and made a
part hereof and are an integral part of this Agreement.
Section 10.16. General Interpretive Principles.
For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the singular, and
the use of any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(c) references herein to "Articles", "Sections", "Subsections",
"Paragraphs", and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions
of this Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean by reason of
enumeration.
Section 10.17. Reproduction of Documents.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications which may
hereafter be executed, (b) documents received by any party at the closing,
and (c) financial statements, certificates and other information previously
or hereafter furnished, may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process. The
parties agree that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding, whether or
not the original is in existence and whether or not such reproduction was
made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
IN WITNESS WHEREOF, the Servicer and the Owner have caused their
names to be signed hereto by their respective officers thereunto duly
authorized as of the date first above written.
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
(Owner)
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
AURORA LOAN SERVICES INC.
(Servicer)
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
EXECUTION
SERVICING AGREEMENT
THIS SERVICING AGREEMENT (this "Agreement"), entered into as of the 1st
day of March, 1998, by and between LEHMAN CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC., a Delaware corporation ("Lehman Capital"), and OPTION
ONE MORTGAGE CORPORATION, a California corporation ("the Servicer"), recites
and provides as follows:
RECITALS
WHEREAS, Lehman Capital has conveyed certain Mortgage Loans identified
on Schedule I hereto (the "Serviced Mortgage Loans") to Structured Asset
Securities Corporation ("SASCO"), which in turn has conveyed the Serviced
Mortgage Loans to First Union National Bank, as trustee (the "Trustee") under
a trust agreement dated as of March 1, 1998 (the "Trust Agreement"), among
the Trustee, Norwest Bank Minnesota, National Association, as master servicer
("Norwest," and, together with any successor Master Servicer appointed
pursuant to the provisions of the Trust Agreement, the "Master Servicer") and
SASCO.
WHEREAS, Lehman Capital desires that the Servicer service the Serviced
Mortgage Loans, and the Servicer has agreed to do so, subject to the
conditions set forth herein.
WHEREAS, Norwest and any successor Master Servicer shall be obligated,
among other things, to supervise the servicing of the Serviced Mortgage Loans
on behalf of the Trustee, and shall have the right, under certain
circumstances, to terminate the rights and obligations of the Servicer under
this Servicing Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lehman Capital and the Servicer
hereby agree as follows:
AGREEMENT
1. Definitions. Capitalized terms used and not defined in this
-----------
Agreement, including Exhibit A hereto and any provisions of the Seller's
Warranties and Servicing Agreement dated as of September 30, 1997, between
Lehman Capital and the Servicer (the "Warranties and Servicing Agreement")
incorporated by reference herein, shall have the meanings ascribed to such
terms in the Trust Agreement.
2. Servicing. The Servicer agrees, with respect to the Serviced
---------
Mortgage Loans, to perform and observe the duties, responsibilities and
obligations that are to be performed and observed under the provisions of the
Warranties and Servicing Agreement, except as otherwise provided herein and
on Exhibit A hereto, and that the provisions of the Warranties and Servicing
Agreement, as so modified, are and shall be a part of this Agreement to the
same extent as if set forth herein in full.
3. Master Servicing; Termination of Servicer. The Servicer, including
-----------------------------------------
any successor servicer hereunder, shall be subject to the supervision of the
Master Servicer, which Master Servicer shall be obligated to ensure that the
Servicer services the Serviced Mortgage Loans in accordance with the
provisions of this Agreement. The Master Servicer, acting on behalf of the
Trustee pursuant to the Trust Agreement, shall have the same rights as the
"Purchaser" (as defined in the Warranties and Servicing Agreement) to enforce
the obligations of the Servicer under the Warranties and Servicing Agreement.
The Master Servicer shall be entitled to terminate the rights and obligations
of the Servicer under this Agreement upon the failure of the Servicer to
perform any of its obligations under this Agreement, as provided in Article X
of the Warranties and Servicing Agreement.
4. No Representations. Neither the Servicer nor the Master Servicer
------------------
shall be obligated or required to make any representations and warranties
regarding the Serviced Mortgage Loans in connection with the transactions
contemplated by the Trust Agreement and issuance of the certificates issued
pursuant thereto.
5. Notices. All notices and communications between or among the
-------
parties hereto shall be in writing and shall be deemed received or given when
mailed first-class mail, postage prepaid, addressed to each other party at
its address specified below. Each party may designate to the other parties
in writing, from time to time, other addresses to which notices and
communications hereunder shall be sent.
6. Governing Law. THIS SERVICING AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
NOTWITHSTANDING NEW YORK OR OTHER CHOICE OF LAW RULES TO THE CONTRARY.
7. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an
original, but all of which counterparts shall together constitute but one and
the same instrument.
8. Reconstitution. Lehman Capital and the Servicer agree that this
--------------
Agreement is a Reconstitution Agreement, and that the date hereof is the
Reconstitution Date, each as defined in the Warranties and Servicing
Agreement.
9. Notices and Remittances to the Master Servicer. All notices
----------------------------------------------
required to be delivered to the Purchaser or the Master Servicer under this
Agreement shall be delivered to the Master Servicer at the following address:
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044
Attn: Master Servicing Department, SASCO 1998-3
All remittances required to be made to the Master Servicer under this
Agreement shall be made to the following wire account:
Norwest Bank Minnesota, National Association
Minneapolis, Minnesota
ABA#: 091-000-019
Account Name: Corporate Trust Clearing
Account Number: 3970771416
For further credit to: 13415500, SASCO 1998-3
10. Errors and Omissions Insurance. The Servicer shall keep in force
------------------------------
during the term of this Agreement a fidelity bond and a policy or policies of
insurance covering errors and omissions in the performance of the Servicer's
obligations under this Agreement. Such fidelity bond and policy or policies
shall be maintained with recognized insurers and shall be in such form and
amount as would permit the Servicer to be qualified as a FNMA or FHLMC
seller-servicer. The Servicer shall be deemed to have complied with this
provision if an affiliate of the Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Servicer. The Servicer
shall furnish to the Master Servicer a copy of each such bond and insurance
policy upon receipt thereof by the Servicer.
Executed as of the day and year first above written.
LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
By:
---------------------------------
Name:
Title:
OPTION ONE MORTGAGE CORPORATION
By:
---------------------------------
Name:
Title:
EXHIBIT A
Modifications to the Warranties and Servicing Agreement
1. All references to "Pool I," "Pool 1," "Pool 2" and "Pool II" in the
Warranties and Servicing Agreement are hereby deleted.
2. The definition of "Custodial Agreement" in Article I is hereby deleted
and replaced with the following:
"The custodial agreement relating to custody of the Serviced Mortgage
Loans between First Trust National Association, as Custodian, and First
Union National Bank, as Trustee, dated as of March 1, 1998."
3. The definition of "Monthly Advance" in Article I is hereby amended by
adding at the end of such definition the following: ", but only to the
extent that such amount is expected, in the reasonable judgment of the
Company, to be recoverable from collections or other recoveries in
respect of such Mortgage Loan."
4. The definition of "Servicing Advance" in Article I is hereby amended by
adding, immediately after the phrase "but not limited to, the cost of",
the following: "transfer of servicing of Delinquent Mortgage Loans to
the Special Servicer pursuant to Section 11.02, and".
5. The word "or" at the beginning of line twelve of the second paragraph in
Section 4.01 is hereby deleted and replaced with a comma, and the
following is hereby added immediately following the words "change the
final maturity date on such Mortgage Loan" in such line twelve: "or
permit any alteration, substitution or release of any collateral for
such Mortgage Loan."
6. The fourth and fifth paragraphs of Section 4.01 are hereby deleted in
their entirety and replaced with the following:
"Notwithstanding anything to the contrary in this Agreement, the
Company shall not waive any premium or penalty in connection with a
prepayment of principal of any Mortgage Loan, and shall not consent to
the modification of any Mortgage Note to the extent that such
modification relates to payment of a prepayment premium or penalty."
7. The following paragraph is hereby added at the end of Section 4.02:
"Notwithstanding the foregoing, in the event of any conflict
between the provisions of this Section 4.02 and the provisions of
Section 11.02, the provisions of Section 11.02 shall control."
8. The words "the Purchaser of Conventional Residential Adjustable and
Fixed Rate Mortgage Loans, Group No. 1997-LB/00" in the first paragraph
of Section 4.04 are hereby deleted and replaced with the following:
"Norwest Bank Minnesota, National Association, as master servicer for
SASCO 1998-3."
9. Section 4.05 is amended by deleting the word "and" at the end of clause
(vi), replacing the period at the end of clause (vii) with "; and", and
adding the following immediately following clause (viii):
"(viii) to reimburse itself for Monthly Advances of the Company's
funds made pursuant to Section 7.03, the Company's right to reimburse
itself pursuant to this subclause (viii) (x) being limited to amounts
received on the related Mortgage Loan which represent late payments of
principal and/or interest respecting which any such advance was made,
related Liquidation Proceeds, Insurance Proceeds, Condemnation Proceeds,
REO Property, and such other amounts as may be collected by the Company
from the Mortgagor or otherwise relating to such Mortgage Loan, and (y)
if, after the liquidation of such Mortgage Loan, such amounts are
insufficient to reimburse the Company for such unreimbursed Monthly
Advances, the Company may seek reimbursement from other amounts in the
Custodial Account, it being understood that, in the case of any such
reimbursement, the Company's right thereto shall be prior to the rights
of the Purchaser;
10. Section 4.05 is further amended by adding, immediately after the words
"unreimbursed Servicing Advances" in the first line of clause (ii), the
following: ", and for any unpaid Servicing Fees,".
11. The words "the Purchaser of Conventional Residential Adjustable and
Fixed Rate Mortgage Loans, Group No. 1997-LB/00" in the first paragraph
of Section 4.06 are hereby deleted and replaced with the following:
"Norwest Bank Minnesota, National Association, as master servicer for
SASCO 1998-3."
12. All references in Section 4.15 to the disposition of REO Properties
within a two year period are hereby deleted and replaced with a three
year period.
13. The first paragraph of Section 5.01 is hereby deleted and replaced with
the following:
"On each Remittance Date the Company shall remit by wire transfer
of immediately available funds to the Master Servicer (a) all amounts
deposited in the Custodial Account as of the close of business on the
Determination Date (net of charges against or withdrawals from the
Custodial Account pursuant to Section 4.05), plus (b) all advances, if
any, which the Company is obligated to make pursuant to Section 7.03,
minus (c) any amounts attributable to Principal Prepayments, Liquidation
Proceeds, Insurance Proceeds, Condemnation Proceeds or REO Disposition
Proceeds received after the applicable Prepayment Period, which amounts
shall be remitted on the following Remittance Date, together with any
additional interest required to be deposited in the Custodial Account in
connection with such Principal Prepayment in accordance with Section
7.04, and minus (d) any amounts attributable to Monthly Payments
collected but due (giving effect to Section 5.03) on a due date or dates
subsequent to the first day of the month in which such Remittance Date
occurs, which amounts shall be remitted on the Remittance Date next
succeeding the Due Period for such amounts."
14. Section 5.02 is hereby amended by deleting the words "Remittance Date"
in the first line of such Section, and substituting the following:
"tenth day of each month, or if such tenth day is not a Business Day,
the immediately preceding Business Day,"
15. Section 5.03 is hereby deleted in its entirety.
16. Section 6.03 is hereby amended by adding the following immediately after
the words "other ancillary fees" in the second paragraph of such
Section: ", but not including any premium or penalty associated with a
prepayment of principal of a Mortgage Loan."
17. The second paragraph of Section 11.02 is hereby deleted in its entirely
and replaced with the following:
"On the second Business Day of each month, the Company shall orally
inform the Master Servicer and the Special Servicer as to which Mortgage
Loans have become delinquent for a period of 61 days or more, without
giving effect to any grace period permitted by the related Mortgage Note
(each, a "Distressed Mortgage Loan"). Any such Mortgage Loan as to
which all past due payments are made prior to the Notice Date shall not
be considered to be a Distressed Mortgage Loan, and the servicing
thereof shall not be transferred as provided below. On the fourth
Business Day of each month (the "Notice Date"), the Company shall send
by facsimile a written listing of the Distressed Mortgage Loans to the
Master Servicer, the Trustee and the Custodian, and shall mail to the
Mortgagor of each Mortgage Loan listed in a Transfer Notice a letter
advising each such Mortgagor of the transfer of the servicing of the
related Mortgage Loan to the Special Servicer, in accordance with the
Cranston Gonzales National Affordable Housing Act of 1990; provided,
however, the content and format of such letter shall have the prior
approval of the Special Servicer. The Company shall promptly provide
the Special Servicer with copies of all such notices. The transfer of
servicing with respect to each such Mortgage Loan to the Special
Servicer shall be effected by the Company not later than the fifteenth
day following the applicable Notice Date (the "Transfer Date"). By the
Business Day immediately following each Notice Date, the Company shall
provide the Master Servicer, the Special Servicer, the Trustee and the
Custodian with a certification (the "Transfer Notice") listing the
Distressed Mortgage Loans.
At least five Business Days prior to each Transfer Date, the
Company shall deliver, with respect to the Distressed Mortgage Loans
listed on the related Transfer Notice, to the Special Servicer all
Servicing Files, and to the Special Servicer and the Master Servicer a
loan level tape or other electronic media containing loan set-up
information in form reasonably acceptable to the Master Servicer and the
Special Servicer. Within two Business Days following such Transfer
Date, the Servicer shall deliver a final trial balance (subject to
special claims), in form reasonably acceptable to the Master Servicer
and the Special Servicer, and commensurate with generally acceptable
industry standards, detailing the amount of any unreimbursed Monthly
Advances, Servicing Advances and accrued and unpaid Servicing Fees on a
loan level basis. Should the Master Servicer or the Special Servicer
desire a loan level tape or other electronic media containing
information which is not readily extractable from the Company's
servicing system, the Company shall reasonably cooperate to make such
loan level data available to the Master Servicer and Special Servicer.
In addition, no more than two Business Days after the Transfer Date, the
Company shall transfer to the Special Servicer any funds held in an
Escrow Account or Custodial Account relating to the Distressed Mortgage
Loans listed in the related Transfer Notice. Upon reasonable compliance
by the Company with the provisions of this Section regarding the
transfer of servicing for Distressed Mortgage Loans, the Special
Servicer will reimburse the Company within five Business Days for any
unreimbursed Monthly Advances, Servicing Advances and accrued and unpaid
Servicing Fees with respect to such Distressed Mortgage Loans which have
been properly documented. Notwithstanding anything herein to the
contrary, the transfer of servicing for Distressed Mortgage Loans shall
not require the payment of a termination fee therefor.
In connection with the transfer of any Distressed Mortgage Loan, (i) the
Company will be responsible for servicing the Distressed Mortgage Loan
until the effective date of transfer of servicing to the Special
Servicer, but shall have no right or obligation to service such
Distressed Mortgage Loan from and after the effective date of the
transfer of servicing to the Special Servicer, (ii) notwithstanding
clause (i) above, the Company shall include the Distressed Mortgage Loan
in its monthly remittance report pursuant to Section 5.02 for the month
in which such transfer is effected and shall be obligated, subject to
Section 7.03, to make the Monthly Advance with respect to such
Distressed Mortgage Loan on the Remittance Date in the month in which
such transfer is effected, in each case, regardless of whether the
Remittance Date occurs before or after the effective date of such
transfer, (iii) the amount of Monthly Advances to be reimbursed to the
Company by the Special Servicer hereunder shall include the Monthly
Advance described in clause (ii) above regardless of whether the Company
makes such Monthly Advance before or after the effective date of such
transfer, (iv) the Company shall, no later than the end of the month in
which such transfer is effected, provide to the Special Servicer loan
level information (in the loan level tape or other electronic media or
other agreed-upon form) regarding the Distressed Mortgage Loan during
the month of such transfer as may be necessary to enable the Special
Servicer to provide such information in its remittance report for the
next following month, and (v) the Company shall be entitled to its pro
rata portion of the Servicing Fee with respect to any such Distressed
Mortgage Loan for the month in which such transfer occurs, based on the
number of days in such month that precede the Transfer Date."
18. The following paragraph is added at the end of Section 12.01:
"Neither the Master Servicer nor any successor servicer (including
the Purchaser and the Master Servicer) shall be liable for any acts or
omissions of the Company or any predecessor servicer. In particular,
neither the Master Servicer nor any successor servicer (including the
Purchaser and the Master Servicer) shall be liable for any servicing
errors or interruptions resulting from any failure of the Company to
maintain computer and other information systems that are year-2000
compliant."
19. The following definition is hereby added:
"Prepayment Period: With respect to the first Remittance Date, the
-----------------
period beginning on the Cut-off Date and ending on April 1. With respect to
each subsequent Remittance Date, the period commencing on the second day of
the month immediately preceding the month in which such Remittance Date
occurs and ending on the first day of the month in which such Remittance Date
occurs."
Lehman Capital, A Division of Lehman Brothers Holdings Inc.,
Purchaser
and
Option One Mortgage Corporation,
Company
/_____________________________________________/
SELLER'S WARRANTIES AND SERVICING AGREEMENT
Dated as of September 30, 1997
/_____________________________________________/
Conventional Residential Adjustable and Fixed Rate Mortgage Loans
Group No. 1997-LB/00
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES; BOOKS AND
RECORDS; CUSTODIAL AGREEMENT; DELIVERY OF DOCUMENTS
Section 2.01 Conveyance of Mortgage Loans; Possession of Mortgage Files;
Maintenance of Servicing Files . . . . . . . . . . . . . . . . 16
Section 2.02 Books and Records; Transfers of Mortgage Loans . . . . . . 17
Section 2.03 Custodial Agreement; Delivery of Documents . . . . . . . . 18
ARTICLE III
REPRESENTATIONS AND WARRANTIES; REMEDIES AND BREACH
Section 3.01 Company Representations and Warranties . . . . . . . . . . 19
Section 3.02 Representations and Warranties Regarding Individual
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.03 Purchaser Representations and Warranties . . . . . . . . . 36
Section 3.04 Remedies for Breach of Representations and Warranties. . . 37
Section 3.05 Restrictions and Requirements Applicable in the Event . . . 39
Section 3.06 Repurchase of Mortgage Loans With First Payment Defaults . 42
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 4.01 Company to Act as Servicer . . . . . . . . . . . . . . . . 43
Section 4.02 Liquidation of Mortgage Loans . . . . . . . . . . . . . . . 45
Section 4.03 Collection of Mortgage Loan Payments . . . . . . . . . . . 46
Section 4.04 Establishment of and Deposits to Custodial Account . . . . 47
Section 4.05 Permitted Withdrawals From Custodial Account . . . . . . . 48
Section 4.06 Establishment of and Deposits to Escrow Account . . . . . . 49
Section 4.07 Permitted Withdrawals From Escrow Account . . . . . . . . . 50
Section 4.08 Payment of Taxes, Insurance and Other Charges . . . . . . . 51
Section 4.09 Protection of Accounts . . . . . . . . . . . . . . . . . . 51
Section 4.10 Maintenance of Hazard Insurance . . . . . . . . . . . . . . 52
Section 4.11 Maintenance of Mortgage Impairment Insurance . . . . . . . 54
Section 4.12 Maintenance of Fidelity Bond and Errors and Omissions
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.13 Inspections . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 4.14 Restoration of Mortgaged Property . . . . . . . . . . . . . 55
Section 4.15 Title, Management and Disposition of REO Property . . . . . 56
Section 4.16 Real Estate Owned Reports . . . . . . . . . . . . . . . . . 57
Section 4.17 Liquidation Reports . . . . . . . . . . . . . . . . . . . . 58
Section 4.18 Notification of Adjustments . . . . . . . . . . . . . . . . 58
Section 4.19 Reports of Foreclosures and Abandonments of Mortgaged
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 4.20 Monthly Advances by Servicer . . . . . . . . . . . . . . . . 58
ARTICLE V
PAYMENTS TO PURCHASER
Section 5.01 Remittances . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.02 Statements to Purchaser . . . . . . . . . . . . . . . . . . 59
Section 5.03 Due Dates Other Than the First of the Month . . . . . . . . 60
ARTICLE VI
GENERAL SERVICING PROCEDURES
Section 6.0l Transfers of Mortgaged Property . . . . . . . . . . . . . . 61
Section 6.02 Satisfaction of Mortgages and Release of Mortgage Files . . 62
Section 6.03 Servicing Compensation . . . . . . . . . . . . . . . . . . 62
Section 6.04 Annual Statement as to Compliance . . . . . . . . . . . . . 62
Section 6.05 Annual Independent Public Accountants' Servicing Report . . 63
Section 6.06 Right to Examine Company Records . . . . . . . . . . . . . 63
ARTICLE VII
AGENCY TRANSFER; PASS-THROUGH TRANSFER
Section 7.01 Removal of Mortgage Loans from Inclusion Under this
Agreement Upon an Agency Transfer, or a Pass-Through Transfer
on One or More Reconstitution Dates . . . . . . . . . . . . . . 64
Section 7.02 Purchaser's Repurchase and Indemnification Obligations . . 65
Section 7.03 Monthly Advances. . . . . . . . . . . . . . . . . . . . . . 66
Section 7.04 Compensating Interest . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII
COMPANY TO COOPERATE
Section 8.01 Provision of Information . . . . . . . . . . . . . . . . . 67
Section 8.02 Financial Statements; Servicing Facility . . . . . . . . . 67
ARTICLE IX
THE COMPANY
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . . . . 68
Section 9.02 Merger or Consolidation of the Company . . . . . . . . . . 68
Section 9.03 Limitation on Liability of Company and Others . . . . . . . 69
Section 9.04 Limitation on Resignation and Assignment by Company . . . . 69
ARTICLE X
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . . . 71
Section 10.02 Waiver of Defaults . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XI
TERMINATION
Section 11.01 Termination . . . . . . . . . . . . . . . . . . . . . . . 73
Section 11.02 Termination Without Cause . . . . . . . . . . . . . . . . 73
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Successor to Company . . . . . . . . . . . . . . . . . . . 75
Section 12.02 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.03 Governing Law 76
Section 12.04 Duration of Agreement . . . . . . . . . . . . . . . . . . 76
Section 12.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.06 Severability of Provisions . . . . . . . . . . . . . . . . 77
Section 12.07 Relationship of Parties . . . . . . . . . . . . . . . . . 77
Section 12.08 Execution; Successors and Assigns . . . . . . . . . . . . 77
Section 12.09 Recordation of Assignments of Mortgage . . . . . . . . . . 77
Section 12.10 Assignment by Purchaser . . . . . . . . . . . . . . . . . 78
Section 12.11 No Personal Solicitation . . . . . . . . . . . . . . . . . 78
EXHIBITS
EXHIBIT A MORTGAGE LOAN SCHEDULE
EXHIBIT A-1 POOL 1 MORTGAGE LOAN SCHEDULE
EXHIBIT A-2 SUB-POOL 1a MORTGAGE LOAN SCHEDULE
EXHIBIT A-3 SUB-POOL 1b MORTGAGE LOAN SCHEDULE
EXHIBIT A-4 SUB-POOL 1c MORTGAGE LOAN SCHEDULE
EXHIBIT A-5 POOL 2 MORTGAGE LOAN SCHEDULE
EXHIBIT B CONTENTS OF EACH MORTGAGE FILE
EXHIBIT C-1 MORTGAGE LOAN DOCUMENTS
EXHIBIT C-2 CUSTODIAL AGREEMENT WITH EXHIBITS
EXHIBIT D-1 FORM OF CUSTODIAL ACCOUNT
CERTIFICATION
EXHIBIT D-2 FORM OF CUSTODIAL ACCOUNT
LETTER AGREEMENT
EXHIBIT E-1 FORM OF ESCROW ACCOUNT CERTIFICATION
EXHIBIT E-2 FORM OF ESCROW ACCOUNT
LETTER AGREEMENT
EXHIBIT F FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT G FORM OF ASSIGNMENT AND ASSUMPTION
EXHIBIT H UNDERWRITING GUIDELINES
EXHIBIT I DELINQUENT LOANS
EXHIBIT J MORTGAGE LOANS WITH ODD DUE DATES
EXHIBIT K BAILEE AGREEMENT
EXHIBIT L SECOND LIEN MORTGAGE LOANS
This is a Seller's Warranties and Servicing Agreement for conventional
adjustable and fixed Rate residential first and second lien mortgage loans,
dated and effective as of September 30, 1997, and is executed between Lehman
Capital, A Division of Lehman Brothers Holdings Inc., as purchaser (the
"Purchaser"), and Option One Mortgage Corporation, as seller and servicer
(the "Company").
W I T N E S S E T H
WHEREAS, the Purchaser has agreed to purchase from the Company and
the Company has agreed to sell to the Purchaser certain Mortgage Loans which
have an aggregate outstanding principal balance as of the close of business
on the Cut-off Date, after deduction of payments due on or before such date
of $385,000,000;
WHEREAS, each of the Mortgage Loans is secured by a mortgage, deed
of trust or other security instrument creating a first or second lien on a
residential dwelling located in the jurisdiction indicated on the Mortgage
Loan Schedule, which is annexed hereto as Exhibit A; and
WHEREAS, the Purchaser and the Company wish to prescribe the manner
of purchase of the Mortgage Loans and the management, servicing and control
of the Mortgage Loans.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Purchaser and the
Company agree as follows:
ARTICLE I
DEFINITIONS
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
Accepted Servicing Practices: With respect to any Mortgage Loan,
those mortgage servicing practices of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located.
Agency Transfer: The sale or transfer by Purchaser of some or all
of the Mortgage Loans to FNMA under its Cash Purchase Program or its MBS Swap
Program (Special Servicing Option) or to FHLMC under its Freddie Mac Cash
Program or Gold PC Program, retaining the Company as "servicer thereunder".
Agreement: This Seller's Warranties and Servicing Agreement and
all amendments hereof and supplements hereto.
ALTA: The American Land Title Association or any successor
thereto.
Appraised Value: With respect to any Mortgaged Property, the
lesser of (i) the lesser of (a) the value thereof as determined by an
appraisal made for the originator of the Mortgage Loan at the time of
origination of the Mortgage Loan by an appraiser who met the minimum
requirements of FNMA and FHLMC and (b) the value thereof as determined by a
review appraisal conducted by the Company in the event any such review
appraisal determines an appraised value more than ten percent lower than the
value thereof as determined by the appraisal referred to in clause (i)(a)
above, and (ii) the purchase price paid for the related Mortgaged Property by
the Mortgagor with the proceeds of the Mortgage Loan, provided, however, (A)
in the case of a Refinanced Mortgage Loan, such value of the Mortgaged
Property is based solely upon the lesser of (1) the value determined by an
appraisal made for the originator of such Refinanced Mortgage Loan at the
time of origination of such Refinanced Mortgage Loan by an appraiser who met
the minimum requirements of FNMA and FHLMC and (2) the value thereof as
determined by a review appraisal conducted by the Company in the event any
such review appraisal determines an appraised value more than ten percent
lower than the value thereof as determined by the appraisal referred to in
clause (ii)(A)(1) above and (B) in the case of a Mortgage Loan originated in
connection with a "lease-option purchase", such value of the Mortgaged
Property is based on the lower of the value determined by an appraisal made
for the originator of such Mortgage Loan at the time of origination or the
sale price of such Mortgaged Property if the "lease option purchase price"
was set less than 12 months prior to origination, and is based on the value
determined by an appraisal made for the originator of such Mortgage Loan at
the time of origination if the "lease option purchase price" was set 12
months or more prior to origination.
Appropriate Federal Banking Agency: Appropriate Federal Banking
Agency shall have the meaning ascribed to it by Section 1813(q) of Title 12
of the United States Code, as amended from time to time.
Assignment of Mortgage: An assignment of the Mortgage, notice of
transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Purchaser.
BIF: The Bank Insurance Fund, or any successor thereto.
Business Day: Any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking and savings and loan institutions in the State of
California, Pennsylvania or New York are authorized or obligated by law or
executive order to be closed.
Closing Date: October 30, 1997.
CLTA: The California Land Title Association or any successor
thereto.
Code: The Internal Revenue Code of 1986, as it may be amended from
time to time or any successor statute thereto, and applicable U.S. Department
of the Treasury regulations issued pursuant thereto.
Company: Option One Mortgage Corporation, or its successor in
interest or assigns, or any successor to the Company under this Agreement
appointed as herein provided.
Condemnation Proceeds: All awards or settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
Credit Grade: As defined in the Underwriting Guidelines.
Custodial Account: The separate account or accounts created and
maintained pursuant to Section 4.04.
Custodial Agreement: The agreement governing the retention of the
originals of each Mortgage Note, Mortgage, Assignment of Mortgage and other
Mortgage Loan Documents, which is annexed hereto as Exhibit C-2.
Custodian: The Custodian under the Custodial Agreement, or its
successor in interest or assigns or any successor to the Custodian under the
Custodial Agreement as provided therein.
Cut-off Date: September 30, 1997.
Defaulted Mortgage Loan: As defined in Section 3.02 hereof.
Deleted Mortgage Loan: A Mortgage Loan which is repurchased by the
Company in accordance with the terms of this Agreement and which is, in the
case of a substitution pursuant to Section 3.04, replaced or to be replaced
with a Qualified Substitute Mortgage Loan.
Delinquent Mortgage Loan: As defined in Section 11.02 hereof.
Determination Date: The 13th day (or if such 13th day is not a
Business Day, the Business Day immediately preceding such 13th day) of the
month of the related Remittance Date.
Disqualified Organization: An organization defined as such in
Section 860E(e) of the Code.
Due Date: The day of the month on which the Monthly Payment is due
on a Mortgage Loan, exclusive of any days of grace. With respect to the
Mortgage Loans for which payment from the Mortgagor is due on a day other
than the first day of the month, such Mortgage Loans will be treated as if
the Monthly Payment is due on the first day of the month following the actual
Due Date.
Due Period: With respect to each Remittance Date, the period
commencing on the second day of the month preceding the month of the
Remittance Date and ending in the first day of the month of the Remittance
Date.
Eligible Investments: Any one or more of the obligations and
securities listed below which investment provides for a date of maturity not
later than the Determination Date in each month:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States,
Federal Housing Administration debentures, FHLMC senior debt obligations, and
FNMA senior debt obligations, but excluding any of such securities whose
terms do not provide for payment of a fixed dollar amount upon maturity or
call for redemption;
(b) Federal Housing Administration debentures; provided, that any
such investment shall be rated in one of the two highest ratings categories
by each Rating Agency;
(c) FHLMC participation certificates which guaranty timely payment
of principal and interest and senior debt obligations;
(d) Consolidated senior debt obligations of any Federal Home Loan
Banks;
(e) FNMA mortgage-backed securities (other than stripped mortgage
securities which are valued greater than par on the portion of unpaid
principal) and senior debt obligations;
(f) Federal funds, certificates of deposit time deposits, and
bankers' acceptances (having original maturities of not more than 365 days)
of any domestic bank, the short-term debt obligations of which have been
rated F-1+ or better by Fitch, A-1+ or better by Standard & Poor's and P-1 by
Moody's;
(g) Deposits of any bank or savings and loan association (the
long-term deposit rating of which is Baa3 or better by Moody's and BBB by
each of Standard & Poor's and Fitch) which has combined capital, surplus and
undivided profits of at least $50,000,000 which deposits are insured by the
FDIC and held up to the limits insured by the FDIC;
(h) Investment agreements provided:
1. The agreement is with a bank or insurance company which
has unsecured, uninsured and unguaranteed senior debt obligations rated
Aa2 or better by Moody's and AA or better by each of Standard & Poor's
and Fitch, or is the lead bank of a parent bank holding company with an
uninsured, unsecured and unguaranteed senior debt obligation meeting
such rating requirements;
2. Moneys invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day's notice (provided
such notice may be amended or canceled at any time prior to the
withdrawal date);
3. The agreement is not subordinated to any other
obligations of such insurance company or bank;
4. The same guaranteed interest rate will be paid on any
future deposits made pursuant to such agreement; and
5. The Purchaser receives an opinion of counsel (at the
expense of the party requesting the investment) that such agreement is
an enforceable obligation of such insurance company or bank.
(i) Repurchase agreements collateralized by securities described
in (a), (c), or (e) above with any registered broker/dealer subject to the
Securities Investors Protection Corporation's jurisdiction and subject to
applicable limits therein promulgated by Securities Investors Protection
Corporation or any commercial bank, if such broker/dealer or bank has an
uninsured, unsecured and unguaranteed short-term or long-term obligation
rated P-1 or Aa2, respectively, or better by Moody's, A-1+ or AA,
respectively or better by Standard & Poor's and A-1+ or AA, respectively, or
better by Fitch, provided:
a. A master repurchase agreement or specific written
repurchase agreement governs the transaction;
b. The securities are held free and clear of any lien by the
Purchaser or an independent third party acting solely as agent for the
Purchaser, and such third party is (a) a Federal Reserve Bank or (b) a
bank which is a member of the FDIC and which has combined capital,
surplus and undivided profits of not less than $125 million, and the
Purchaser shall have received written confirmation from such third party
that it holds such securities, free and clear of any lien, as agent for
the Purchaser;
c. A perfected first security interest under the Uniform
Commercial Code, or book entry procedures prescribed at 31 CFR 306.1 et
seq. or 31 CFR 350.0 et seq., in such securities is created for the
benefit of the Purchaser;
d. The repurchase agreement has a term of thirty days or
less and the Purchaser will value the collateral securities no less
frequently than monthly and will liquidate the collateral securities if
any deficiency in the required collateral percentage is not restored
within two business days of such valuation; and
e. The fair market value of the collateral securities in
relation to the amount of the repurchase obligation, including principal
and interest, is equal to at least 106%;
(j) Commercial paper (having original maturities of not more than
270 days) rated in the highest short-term rating categories of each Rating
Agency; and
(k) Investments in no load money market funds registered under the
Investment Company Act of 1940, whose shares are registered under the
Securities act and rated Aaa by Moody's, AAAm or AAAm-G by Standard & Poor's
and AAA, if rated by Fitch; provided that no instrument described above shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument and the interest
and principal payments with respect to such instrument provided a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further that all instruments described
hereunder shall mature at par on or prior to the next succeeding Payment Date
unless otherwise provided in this Agreement and that no instrument described
hereunder may be purchased at a price greater than par if such instrument may
be prepaid or called at a price less than its purchase price prior to stated
maturity.
Notwithstanding anything herein to the contrary, with respect to
Mortgage Loans subject to an Agency Transfer or a Pass-Through Transfer, in
the event that the applicable Reconstitution Agreement has a more limiting
definition of "Eligible Investments", then the definition contained in such
Reconstitution Agreement shall apply to such Mortgage Loans.
Errors and Omissions Insurance Policy: An errors and omissions
insurance policy to be maintained by the Company pursuant to Section 4.12.
Escrow Account: The separate account or accounts created and
maintained pursuant to Section 4.06.
Escrow Mortgage Loan: The Mortgage Loans for which the Company has
established an escrow account for items constituting Escrow Payments.
Escrow Payments: With respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed
by the Mortgagor with the mortgagee pursuant to the Mortgage or any other
related document.
Event of Default: Any one of the conditions or circumstances
enumerated in Section 10.01.
FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, or any
successor thereto.
Fidelity Bond: A fidelity bond to be maintained by the Company
pursuant to Section 4.12.
First Remittance Date: November 18, 1997.
FNMA: The Federal National Mortgage Association, or any successor
thereto.
FNMA Guides: The FNMA Sellers' Guide and the FNMA Servicers' Guide
and all amendments or additions thereto.
Gross Margin: With respect to each Pool I Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note of not less than 425
basis points (4.25%) and not more than 963 basis points (9.63%), which amount
is added to the Index in accordance with the terms of the related Mortgage
Note to determine, on each Interest Rate Adjustment Date, the Mortgage
Interest Rate for such Mortgage Loan.
Index: The applicable rate, on each Interest Rate Adjustment Date,
which shall be adjusted semi-annually based upon the rate per annum equal to
the average of interbank offered rates for six-month U.S. Dollar Denominated
deposits in the London Market (LIBOR) as published in the Wall Street
Journal.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds
of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.
Insured Depository Institution: Insured Depository Institution
shall have the meaning ascribed to such term by Section 1813(c)(2) of Title
12 of the United States Code, as amended from time to time.
Interest Rate Adjustment Date: The date on which an adjustment to
the Mortgage Interest Rate on a Mortgage Note becomes effective.
Liquidation Proceeds: Cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan, trustee's sale, foreclosure sale or
otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage Loan.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the
ratio of the outstanding principal balance of the Mortgage Loan as of the
Cut-off Date (unless otherwise indicated) to the lesser of (a) the Appraised
Value of the Mortgaged Property and (b) if the Mortgage Loan was made to
finance the acquisition of the related Mortgaged Property, the purchase price
of the Mortgaged Property, expressed as a percentage.
Monthly Advance: With respect to each Remittance Date and each
Mortgage Loan, an amount equal to the Monthly Payment (with the interest
portion of such Monthly Payment adjusted to the Mortgage Loan Remittance
Rate) which was due on the Mortgage Loan, and (i) which was delinquent at the
close of business on the immediately preceding Determination Date and (ii)
which was not the subject of a previous Monthly Advance.
Monthly Payment: The scheduled monthly payment of principal and
interest on a Mortgage Loan.
Mortgage: The mortgage, deed of trust or other instrument securing
a Mortgage Note, which creates a first or second lien on an unsubordinated
estate in fee simple in real property securing the Mortgage Note.
Mortgage File: The items pertaining to a particular Mortgage Loan
referred to in Exhibit B annexed hereto, and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
Mortgage Impairment Insurance Policy: A mortgage impairment or
blanket hazard insurance policy as described in Section 4.11.
Mortgage Interest Rate: The annual rate of interest borne on a
Mortgage Note, as adjusted from time to time in accordance with the
provisions of the Mortgage Note. The Mortgage Interest Rate, as determined
on each Interest Rate Adjustment Date, is equal to the sum of the Index and
the Gross Margin, adjusted, if necessary, to comply with the Mortgage
Interest Rate Cap.
Mortgage Interest Rate Cap: The limit on each Mortgage Interest
Rate adjustment, such that as to each Mortgage Loan on each Interest Rate
Adjustment Date, no change in the Mortgage Interest Rate shall: (i) exceed 1%
above or below the Mortgage Interest Rate in effect immediately prior to the
particular Interest Rate Adjustment Date of the related Mortgage Loan, and
(ii) exceed the maximum Mortgage Interest Rate Cap provided in the related
Mortgage Note.
Mortgage Loan: An individual Mortgage Loan which is the subject of
this Agreement, each Mortgage Loan originally sold and subject to this
Agreement being identified on the Mortgage Loan Schedule, which Mortgage Loan
includes without limitation the Mortgage File, the Monthly Payments,
Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds, REO Disposition Proceeds and all other rights, benefits, proceeds
and obligations arising from or in connection with such Mortgage Loan.
Mortgage Loan Documents: The documents listed in Exhibit C-1
hereto.
Mortgage Loan Remittance Rate: With respect to each Mortgage Loan,
the annual rate of interest remitted to the Purchaser, which shall be equal
to the Mortgage Interest Rate minus the Servicing Fee Rate.
Mortgage Loan Schedule: A schedule of Mortgage Loans annexed
hereto as Exhibit A, such schedule setting forth the following information
with respect to each Mortgage Loan: (1) the Company's Mortgage Loan
identifying number; (2) the Mortgagor's name; (3) the street address of the
Mortgaged Property including the state and the zip code; (4) a code
indicating whether the Mortgaged Property is a single family residence, a 2-4
family residence, a condominium unit, a manufactured home, a townhouse or a
unit in a planned unit development; (5) the original months to maturity or
the remaining months to maturity from the Cut-off Date, in any case based on
the original amortization schedule, and if different, the maturity expressed
in the same manner but based on the actual amortization schedule; (6) the
Loan-to-Value Ratio at origination; (7) the Mortgage Interest Rate as of the
Cut-off Date; (8) the first payment date of the Mortgage Loan; (9) the stated
maturity date; (10) the amount of the Monthly Payment;(11) the next due date
of the Mortgage Loan; (12) the original principal amount of the Mortgage
Loan; (13) the principal balance of the Mortgage Loan as of the close of
business on the Cut-off Date, after deduction of payments of principal
actually collected on or before the Cut-off Date; (14) the Mortgage Loan
Remittance Rate as of the Cut-off Date; (15) the next Interest Rate
Adjustment Date; (16) the Gross Margin; (17) the next Payment Adjustment
Date (18) the maximum Mortgage Interest Rate under the terms of the Mortgage
Note; (19) a code indicating whether the loan is an adjustable or fixed rate
Mortgage Loan; (20) a code indicating whether the loan is a first or a second
lien Mortgage Loan; (21) a code indicating the occupancy status at
origination; (22) a code indicating the loan purpose; (23) the Index; and
(24) the loan documentation type. With respect to the Mortgage Loans in the
aggregate, the Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date: (1) the number of Mortgage Loans; (2)
the current aggregate outstanding principal balance of the Mortgage Loans;
(3) the weighted average Mortgage Interest Rate of the Mortgage Loans; and
(4) the weighted average maturity of the Mortgage Loans.
Mortgage Note: The Mortgage Note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage.
Mortgaged Property: The real property securing repayment of the
debt evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
Net Margin: With respect to each Pool I Mortgage Loan, an amount
equal to the Gross Margin minus the Servicing Fee Rate.
Non-Escrow Mortgage Loan: Any Mortgage Loan which is not an Escrow
Mortgage Loan.
Officer's Certificate: A certificate signed by the Chairman of the
Board or the Vice Chairman of the Board or the President or a Vice President
or an assistant Vice President and by the Treasurer or the Secretary or one
of the Assistant Treasurers or Assistant Secretaries of the Company, and
delivered to the Purchaser as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be an
employee of the Company, reasonably acceptable to the Purchaser, provided
that any Opinion of Counsel relating to (a) qualification of the Mortgage
Loans in a REMIC or (b) compliance with the REMIC Provisions, must be an
opinion of counsel who (i) is in fact independent of the Company and any
master servicer of the Mortgage Loans, (ii) does not have any material direct
or indirect financial interest in the Company or any master servicer of the
Mortgage Loans or in an affiliate of either and (iii) is not connected with
the Company or any master servicer of the Mortgage Loans as an officer,
employee, director or person performing similar functions.
Pass-Through Transfer: The sale or transfer of some or all of the
Mortgage Loans to a trust to be formed as part of a publicly-issued and/or
privately placed, rated or unrated, mortgage pass-through transaction,
retaining the Company as "servicer" (with or without a master servicer)
thereunder.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof.
Pool 1 Mortgage Loans: Adjustable rate Mortgage Loans listed in
Exhibit A-1 hereto.
Pool 2 Mortgage Loans: Fixed rate Mortgage Loans listed in Exhibit
A-5 hereto.
Prepayment Interest Shortfall Amount: With respect to any Mortgage
Loan that was subject to a Principal Prepayment in full during any Due
Period, which Principal Prepayment was applied to such Mortgage Loan prior to
such Mortgage Loan's Due Date in such Due Period, the amount of interest (net
the related Servicing Fee) that would have accrued on the amount of such
Principal Prepayment during the period commencing on the date as of which
such Principal Prepayment was applied to such Mortgage Loan and ending on the
day immediately preceding such Due Date, inclusive.
Principal Prepayment: Any payment or other recovery of principal
on a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon and which is not
accompanied by an amount of interest representing scheduled interest due on
any date or dates in any month or months subsequent to the month of
prepayment.
Prime Rate: The prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal.
Purchaser: Lehman Capital, A Division of Lehman Brothers Holdings
Inc. or its successor in interest or any successor to the Purchaser under
this Agreement as herein provided.
Qualified Depository: A depository the accounts of which are
insured by the FDIC through the BIF or the SAIF and the debt obligations of
which are rated AA or better by Standard & Poor's Corporation.
Qualified Insurer: A mortgage guaranty insurance company duly
authorized and licensed where required by law to transact mortgage guaranty
insurance business and approved as an insurer by FNMA or FHLMC.
Qualified Substitute Mortgage Loan: A mortgage loan eligible to be
substituted by the Company for a Deleted Mortgage Loan which must, on the
date of such substitution, (i) have an outstanding principal balance, after
deduction of all scheduled payments due in the month of substitution (or in
the case of a substitution of more than one mortgage loan for a Deleted
Mortgage Loan, an aggregate principal balance), not in excess of the
outstanding principal balance of the Deleted Mortgage Loan; (ii) have a
Mortgage Loan Remittance Rate not less than and not more than 2% greater than
the Mortgage Loan Remittance Rate of the Deleted Mortgage Loan; (iii) have a
remaining term to maturity not greater than and not more than one year less
than that of the Deleted Mortgage Loan; (iv) have a Gross Margin not less
than that of the Deleted Mortgage Loan; (v) have a maximum Mortgage Interest
Rate Cap not less than that of the Deleted Mortgage Loan; (vi) have a maximum
periodic mortgage Interest Rate Cap not less than that of the Deleted
Mortgage Loan; (vii) comply with each representation and warranty set forth
in Sections 3.01 and 3.02; and (viii) be a REMIC Eligible Mortgage Loan.
Rating Agency: Any of Fitch, Moody's or Standard & Poor's, Duff &
Phelps or their respective successors designed by the Purchaser.
Reconstitution Agreements: The agreement or agreements entered
into by the Purchaser, the Company, FNMA or FHLMC or certain third parties on
the Reconstitution Date(s) with respect to any or all of the Mortgage Loans
serviced hereunder, in connection with a Pass-Through Transfer or an Agency
Transfer as set forth in Section 7.01, including, but not limited to, (i) a
FNMA Mortgage Selling and Servicing Contract, a Pool Purchase Contract, and
any and all servicing agreements and tri-party agreements reasonably required
by FNMA with respect to a FNMA Transfer, (ii) a Purchase Contract and all
purchase documents associated therewith as set forth in the Freddie Mac
Sellers' & Servicers' Guide, and any and all servicing agreements and tri-
party agreements reasonably required by FHLMC with respect to a FHLMC
Transfer, and (iii) a Pooling and Servicing Agreement and/or a
subservicing/master servicing agreement and related custodial/trust agreement
and related documents with respect to a Pass-Through Transfer. Such
agreement or agreements shall prescribe the rights and obligations of the
Company in servicing the related Mortgage Loans and shall provide for
servicing compensation to the Company (calculated on a weighted average basis
for all the related Mortgage Loans as of the Reconstitution Date), net of any
guarantee fees due FNMA or FHLMC, if applicable, at least equal to the
Servicing Fee due the Company in accordance with this Agreement or the
servicing fee required pursuant to the Reconstitution Agreement, whichever is
greater. The form of relevant Reconstitution Agreement to be entered into by
the Purchaser and/or master servicer or trustee and the Company with respect
to Pass-Through Transfers shall be reasonably satisfactory in form and
substance to the Purchaser and the Company (giving due regard to any rating
or master servicing requirements) and the representations and warranties and
servicing provisions contained therein shall be substantially similar to
those contained in this Agreement and shall not contain any obligations
materially more onerous than those contained herein that materially increase
the expenses of the Servicer, unless otherwise mutually agreed by the
parties.
Reconstitution Date: The date or dates on which any or all of the
Mortgage Loans serviced under this Agreement shall be removed from this
Agreement and reconstituted as part of an Agency Transfer or a Pass-Through
Transfer pursuant to Section 7.01 hereof. On such date or dates, the
Mortgage Loans transferred shall cease to be covered by this Agreement and
the Company's servicing responsibilities shall cease under this Agreement
with respect to the related transferred Mortgage Loans.
Record Date: The close of business of the last Business Day of the
month preceding the month of the related Remittance Date.
Refinanced Mortgage Loan: A Mortgage Loan the purpose of which is
to refinance an existing mortgage loan.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC Documents: The document or documents creating and governing
the administration of a REMIC.
REMIC Eligible Mortgage Loan: A Mortgage Loan held by a REMIC
which satisfies and/or complies with all applicable REMIC Provisions.
REMIC Provisions: Provisions of the federal income tax law
relating to a REMIC, which appear at Section 860A through 86OG of Subchapter
M of Chapter 1, Subtitle A of the Code, and related provisions, and
regulations, rulings or pronouncements promulgated thereunder, as the
foregoing may be in effect from time to time.
Remittance Date: The 18th day (or if such 18th day is not a
Business Day, the first Business Day immediately following) of any month,
beginning with the First Remittance Date.
REO Disposition: The final sale by the Company of any REO
Property.
REO Disposition Proceeds: All amounts received with respect to an
REO Disposition pursuant to Section 4.15.
REO Property: A Mortgaged Property acquired by the Company on
behalf of the Purchaser through foreclosure or by deed in lieu of
foreclosure, as described in Section 4.15.
Repurchase Price: With respect to any Mortgage Loan, a price equal
to (i) the outstanding principal balance of the Mortgage Loan plus (ii)
interest on such outstanding principal balance at the Mortgage Loan
Remittance Rate from the date on which interest has last been paid and
distributed to the Purchaser to the date of repurchase, less amounts received
in respect of such repurchased Mortgage Loan which are being held in the
Custodial Account for distribution in the month of repurchase.
SAIF: The Savings Association Insurance Fund, or any successor
thereto.
Securities Act of 1933 or the 1933 Act: The Securities Act of
1933, as amended.
Servicing Advances: All customary, reasonable and necessary "out
of pocket" costs and expenses other than Monthly Advances (including
reasonable attorneys' fees and disbursements) incurred in the performance by
the Company of its servicing obligations, including, but not limited to, the
cost of (a) the preservation, restoration, protection and inspection of the
Mortgaged Property, (b) any enforcement or judicial proceedings, including
foreclosures, (c) the management and liquidation of any REO Property and (d)
compliance with the obligations under Section 4.08.
Servicing Fee: With respect to each Mortgage Loan, the amount of
the annual fee the Purchaser shall pay to the Company, which shall, for a
period of one full month, be equal to one-twelfth of the product of (a) the
Servicing Fee Rate and (b) the outstanding principal balance of such Mortgage
Loan. Such fee shall be payable monthly, computed on the basis of the same
principal amount and period respecting which any related interest payment on
a Mortgage Loan is computed. The obligation of the Purchaser to pay the
Servicing Fee is limited to, and the Servicing Fee is payable solely from,
the interest portion (including recoveries with respect to interest from
Liquidation Proceeds) of such Monthly Payment collected by the Company.
Servicing Fee Rate: 0.50% per annum.
Servicing File: With respect to each Mortgage Loan, the file
retained by the Company consisting of originals of all documents in the
Mortgage File which are not delivered to the Custodian and copies of the
Mortgage Loan Documents listed in Exhibit C-1 the originals of which are
delivered to the Custodian pursuant to Section 2.01.
Servicing Officer: Any officer of the Company involved in or
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished by the Company to the
Purchaser upon request, as such list may from time to time be amended.
Sub-pool 1a Mortgage Loans: Adjustable rate Mortgage Loans listed
in Exhibit A-2 hereto.
Sub-pool 1b Mortgage Loans: Adjustable rate Mortgage Loans listed
in Exhibit A-3 hereto.
Sub-pool 1c Mortgage Loans: Adjustable rate Mortgage Loans listed
in Exhibit A-4 hereto.
Subservicer: Any Subservicer which is subservicing the Mortgage
Loans pursuant to a Subservicing Agreement meeting the qualifications set
forth in Section 4.01.
Subservicing Agreement: An agreement between the Company and a
Subservicer for the servicing of the Mortgage Loans.
Tax Returns: The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed on behalf of any REMIC under the REMIC Provisions,
together with any and all other information, reports or returns that may be
required to be furnished to the certificate holders under a REMIC or filed
with the Internal Revenue Service or any other governmental taxing authority
under any applicable provisions of federal, state or local tax laws.
Underwriting Guidelines: The Seller's underwriting guidelines as
set forth on Exhibit H attached hereto.
Whole Loan Transfer: The sale or transfer of some or all of the
Mortgage Loans to a third party purchaser in a whole loan transaction
pursuant to a seller's warranties and servicing agreement or a participation
and servicing agreement, retaining the Servicer as "servicer" thereunder.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES;
BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
DELIVERY OF DOCUMENTS
Section 2.01 Conveyance of Mortgage Loans; Possession of
Mortgage Files; Maintenance of Servicing Files.
The Company, simultaneously with the execution and delivery of this
Agreement, does hereby sell, transfer, assign, set over and convey to the
Purchaser, without recourse, but subject to the terms of this Agreement, all
the right, title and interest of the Company in and to the Mortgage Loans.
Pursuant to Section 2.03, the Company has delivered the Mortgage Loan
Documents to the Custodian.
The contents of each Mortgage File not delivered to the Custodian
are and shall be held in trust by the Company for the benefit of the
Purchaser as the owner thereof. The Company shall maintain a Servicing File
consisting of a copy of the contents of each Mortgage File and the originals
of the documents in each Mortgage File not delivered to the Custodian. The
possession of each Servicing File by the Company is at the will of the
Purchaser for the sole purpose of servicing the related Mortgage Loan, and
such retention and possession by the Company is in a custodial capacity only.
Upon the sale of the Mortgage Loans the ownership of each Mortgage Note, the
related Mortgage and the related Mortgage File and Servicing File shall vest
immediately in the Purchaser, and the ownership of all records and documents
with respect to the related Mortgage Loan prepared by or which come into the
possession of the Company shall vest immediately in the Purchaser and shall
be retained and maintained by the Company, in trust, at the will of the
Purchaser and only in such custodial capacity. Each Servicing File shall be
segregated from the other books and records of the Company and shall be
marked appropriately on the Company's servicing system to reflect clearly the
sale of the related Mortgage Loan to the Purchaser. The Company shall
release its custody of the contents of any Servicing File only in accordance
with written instructions from the Purchaser, unless such release is required
as incidental to the Company's servicing of the Mortgage Loans or is in
connection with a repurchase of any Mortgage Loan pursuant to Section 3.03,
3.05 or 6.02.
Section 2.02 Books and Records; Transfers of Mortgage Loans.
From and after the sale of the Mortgage Loans to the Purchaser all
rights arising out of the Mortgage Loans including but not limited to all
funds received on or in connection with the Mortgage Loans, shall be received
and held by the Company in trust for the benefit of the Purchaser as owner of
the Mortgage Loans, and the Company shall retain record title to the related
Mortgages for the sole purpose of facilitating the servicing and the
supervision of the servicing of the Mortgage Loans.
The sale of each Mortgage Loan shall be reflected on the Company's
balance sheet and other financial statements as a sale of assets by the
Company. The Company shall be responsible for maintaining, and shall
maintain, a complete set of books and records for each Mortgage Loan which
shall be marked clearly to reflect the ownership of each Mortgage Loan by the
Purchaser. In particular, the Company shall maintain in its possession,
available for inspection by the Purchaser, or its designee and shall deliver
to the Purchaser upon demand, evidence of compliance with all federal, state
and local laws, rules and regulations, including but not limited to
documentation as to the method used in determining the applicability of the
provisions of the Flood Disaster Protection Act of 1973, as amended, to the
Mortgaged Property, documentation evidencing insurance coverage and periodic
inspection reports as required by Section 4.13. To the extent that original
documents are not required for purposes of realization of Liquidation
Proceeds or Insurance Proceeds, documents maintained by the Company may be in
the form of microfilm or microfiche or such other reliable means of
recreating original documents, including but not limited to, optical imagery
techniques.
The Company shall maintain with respect to each Mortgage Loan and
shall make available for inspection by any Purchaser or its designee the
related Servicing File during the time the Purchaser retains ownership of a
Mortgage Loan and thereafter in accordance with applicable laws and
regulations.
The Company shall keep at its servicing office books and records in
which, subject to such reasonable regulations as it may prescribe, the
Company shall note on its books and records any transfers of Mortgage Loans.
No transfer of a Mortgage Loan may be made unless such transfer is in
compliance with the terms hereof. For the purposes of this Agreement, the
Company shall be under no obligation to deal with any person with respect to
this agreement or the Mortgage Loans unless the books and records show such
person as the owner of the Mortgage Loan. The Purchaser may, subject to the
terms of this Agreement, sell and transfer one or more of the Mortgage Loans,
provided, however, that (i) the transferee will not be deemed to be a
Purchaser hereunder binding upon the Company unless such transferee shall
agree in writing to be bound by the terms of this Agreement and an original
counterpart of the instrument of transfer and an assignment and assumption of
this Agreement in the form of Exhibit G hereto executed by the transferee
shall have been delivered to the Company, and (ii) in no event shall there be
more than five Persons at any given time having the status of "Purchaser"
hereunder. The Purchaser also shall advise the Company of the transfer.
Upon receipt of notice of the transfer, the Company shall mark its books and
records to reflect the ownership of the Mortgage Loans of such assignee, and
shall release the previous Purchaser from its obligations hereunder with
respect to the Mortgage Loans sold or transferred.
Section 2.03 Custodial Agreement; Delivery of Documents .
Pursuant to a bailee agreement (the "Bailee Agreement"), dated as
of October 10, 1997, by and between Company and Custodian in the form
attached hereto as Exhibit K, the Company shall use its best efforts to
deliver to the Custodian at least six (6) Business Days prior to the Closing
Date those Mortgage Loan Documents as required by the Custodial Agreement
with respect to each Mortgage Loan a list of which is attached as Exhibit C-1
hereto, provided that, in no event shall the Company deliver such documents
less than two (2) Business Days prior to the Closing Date.
The Custodian has certified its receipt of all such Mortgage Loan
Documents required to be delivered pursuant to the Custodial Agreement, as
evidenced by the Initial Certification of the Custodian in the form annexed
to the Custodial Agreement. The Purchaser shall be responsible for
maintaining the Custodial Agreement and shall pay all fees and expenses of
the Custodian.
The Company shall forward to the Custodian original documents
evidencing an assumption, modification, consolidation or extension of any
Mortgage Loan entered into in accordance with Section 4.01 or 6.01 within one
week of their execution, provided, however, that the Company 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES AND BREACH
Section 3.01 Company Representations and Warranties.
The Company represents and warrants to the Purchaser that as of
the Closing Date:
(a) Due Organization and Authority. The Company 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 and is licensed, qualified and in good
standing in each state where a Mortgaged Property is located if the laws
of such state require licensing or qualification in order to conduct
business of the type conducted by the Company, and in any event the
Company is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of the related Mortgage Loan and
the servicing of such Mortgage Loan in accordance with the terms of this
Agreement; the Company has the full corporate 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 Company and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, binding and enforceable obligation of the
Company; and all requisite corporate action has been taken by the
Company to make this Agreement valid and binding upon the Company in
accordance with its terms;
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course
of business of the Company, and the transfer, assignment and conveyance
of the Mortgage Notes and the Mortgages by the Company pursuant to this
Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(c) No Conflicts. Neither the execution and delivery of this
Agreement, the acquisition of the Mortgage Loans by the Company, the
sale of the Mortgage Loans to the Purchaser or the transactions
contemplated hereby, nor the fulfillment of or compliance with the terms
and conditions of this Agreement, will conflict with or result in a
breach of any of the terms, conditions or provisions of the Company's
charter or by-laws or any legal restriction or any agreement or
instrument to which the Company is now a party or by which it is bound,
or constitute a default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Company or its property is
subject, or impair the ability of the Purchaser to realize on the
Mortgage Loans, or impair the value of the Mortgage Loans;
(d) Ability to Service. The Company is an approved servicer of
conventional residential mortgage loans for FNMA, with the facilities,
procedures, and experienced personnel necessary for the sound servicing
of mortgage loans of the same type as the Mortgage Loans. The Company
is in good standing to service mortgage loans for FNMA, and no event has
occurred, including but not limited to a change in insurance coverage,
which would make the Company unable to comply with FNMA eligibility
requirements or which would require notification to FNMA;
(e) Reasonable Servicing Fee. The Company acknowledges and agrees
that the Servicing Fee, as calculated at the Servicing Fee Rate,
represents reasonable compensation for performing such services and that
the entire Servicing Fee shall be treated by the Company, for accounting
and tax purposes, as compensation for the servicing and administration
of the Mortgage Loans pursuant to this Agreement.
(f) Ability to Perform. The Company does not believe, nor does it
have any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement. The Company is solvent and
the sale of the Mortgage Loans is not undertaken to hinder, delay or
defraud any of the Company's creditors;
(g) No Litigation Pending. There is no action, suit, proceeding
or investigation pending or, to the Company's knowledge, threatened
against the Company 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 Company, or
in any material impairment of the right or ability of the Company to
carry on its business substantially as now conducted, or in any material
liability on the part of the Company, or which would draw into question
the validity of this Agreement or the Mortgage Loans or of any action
taken or to be taken in connection with the obligations of the Company
contemplated herein, or which would be likely to impair materially the
ability of the Company to perform under the terms of this Agreement;
(h) No Consent Required. No consent, approval, authorization or
order of any court or governmental agency or body is required for the
execution, delivery and performance by the Company of or compliance by
the Company with this Agreement or the sale of the Mortgage Loans as
evidenced by the consummation of the transactions contemplated by this
Agreement, or if required, such approval has been obtained prior to the
Closing Date;
(i) Pool 1 Mortgage Loan Characteristics. The Pool 1 Mortgage
Loans have a maturity from the date of origination of at least 15 years
and no more than 30 years. The Pool 1 Mortgage Loans have a net
weighted average margin of 4.931%. The average weighted periodic
Mortgage Interest Rate cap on the Pool 1 Mortgage Loans as of the Cut-
off Date was 2.81%. The average weighted lifetime Mortgage Interest
Rate cap on the Pool 1 Mortgage Loans as of the Cut-off Date was 16.22%.
The weighted average Interest Rate Adjustment Date as of the Cut-off
Date was July 1, 1999. The average outstanding principal balance of the
Pool 1 Mortgage Loans on the Cut-off Date was $316,844,939. With
respect to Sub-pool 1a Mortgage Loans, the Mortgage Interest Rate
payable by the Mortgagor is subject to adjustment after the initial two
year period. With respect to Sub-pool 1b Mortgage Loans, the Mortgage
Interest Rate payable by the Mortgagor is subject to adjustment after
the initial three year period. The Pool 1 Mortgage Loans have a
weighted average maturity of approximately 358 months. With respect to
the aggregate unpaid principal balance of all the Pool 1 Mortgage Loans,
the Mortgaged Properties are located as follows: (i) 13.2% of the
Mortgaged Properties are located in California; (ii) 9.1% of the
Mortgaged Properties are located in Massachusetts; (iii) 6.7% of the
Mortgaged Properties are located in Illinois; and the remaining
Mortgaged Properties are geographically dispersed. With respect to both
aggregate outstanding principal balance and numerical count of all the
Pool 1 Mortgage Loans, (a) no more than 6.2% are secured by real
property improved by two- to four-family dwellings, (b) no more than
4.5% are secured by real property improved by individual condominium
units, (c) no more than 7.6% are secured by real property improved by an
individual unit in a planned unit development, and (d) at least 81.6%
are secured by real property with a one-family residence erected
thereon. With respect to the aggregate unpaid principal balance of the
Pool 1 Mortgage Loans at the time of origination, (a) no more than 2.8%
of the Mortgaged Properties were owner-occupied second homes, (b) no
more than 5.8% of the Mortgaged Properties were investor properties and
(c) at least 91.4% of the Mortgaged Properties were owner-occupied
primary residences. With respect to the aggregate unpaid principal
balance of the Pool 1 Mortgage Loans, (a) no more than 44.6% are "cash-
out" refinance mortgage loans, (b) no more than 11.2% are rate and term
refinance mortgage loans and (c) at least 44.2% are purchase money
mortgage loans. No Pool 1 Mortgage Loan contains a negative
amortization provision. No Pool 1 Mortgage Loan contains a provision
whereby the Mortgagor can convert his mortgage loan to a fixed rate
instrument.
(j) Credit Grades for Pool 1 Mortgage Loans. With respect to the
aggregate unpaid principal balance of all the Sub-pool 1a Mortgage
Loans, the Mortgage Loans have the following Credit Grades: (i) 22.3%
of the Mortgage Loans are Credit Grade AA; (ii) 31.5% of the Mortgage
Loans are Credit Grade A; (iii) 34.8% of the Mortgage Loans are Credit
Grade B; (iv) 2.8% of the Mortgage Loans are Credit Grade CC; and (v)
8.6% of the Mortgage Loans are Credit Grade C. With respect to the
aggregate unpaid principal balance of all the Sub-pool 1b Mortgage
Loans, the Mortgage Loans have the following Credit Grades: (i) 16.5%
of the Mortgage Loans are Credit Grade AA; (ii) 34.2% of the Mortgage
Loans are Credit Grade A; (iii) 31.6% of the Mortgage Loans are Credit
Grade B; (iv) 8.6% of the Mortgage Loans are Credit Grade CC; and (v)
9.1% of the Mortgage Loans are Credit Grade C. With respect to the
aggregate unpaid principal balance of all the Sub-pool 1c Mortgage
Loans, the Mortgage Loans have the following Credit Grades: (i) 39.6%
of the Mortgage Loans are Credit Grade AA; (ii) 32.8% of the Mortgage
Loans are Credit Grade A; (iii) 22.7% of the Mortgage Loans are Credit
Grade B; (iv) 0.8% of the Mortgage Loans are Credit Grade CC; and (v)
4.4% of the Mortgage Loans are Credit Grade C.
(k) Pool 1 Mortgage Loans prepayment penalties. With respect to
the aggregate unpaid principal balance of all the Sub-pool 1a Mortgage
Loans, the Mortgage Loans have the following prepayment penalty
percentages: (i) 2.8% of the Mortgage Loans have one year prepayment
penalties and (ii) 5.9% of the Mortgage Loans have two year prepayment
penalties. With respect to the aggregate unpaid principal balance of
the Sub-pool 1a Mortgage Loans, the Mortgage Loans have a weighted
average prepayment penalty term of 1.97 years. With respect to the
aggregate unpaid principal balance of all the Sub-pool 1b Mortgage
Loans, the Mortgage Loans have the following prepayment penalty
percentages: (i) 2.8% of the Mortgage Loans have one year prepayment
penalties; (ii) 5.9% of the Mortgage Loans have two year prepayment
penalties; (iii) 26.6% of the Mortgage Loans have three year prepayment
penalties and (iv) 18.4% of the Mortgage Loans have five year prepayment
penalties. With respect to the aggregate unpaid principal balance of
the Sub-pool 1b Mortgage Loans, the Mortgage Loans have a weighted
average prepayment penalty term of 3.47 years. With respect to the
aggregate unpaid principal balance of all the Sub-pool 1c Mortgage
Loans, the Mortgage Loans have the following prepayment penalty
percentages: (i) 17% of the Mortgage Loans have one year prepayment
penalties; (ii) 1.3% of the Mortgage Loans have two year prepayment
penalties; (iii) 22.1% of the Mortgage Loans have three year prepayment
penalties and (iv) 10.1% of the Mortgage Loans have five year prepayment
penalties. With respect to the aggregate unpaid principal balance of
the Sub-pool 1c Mortgage Loans, the Mortgage Loans have a weighted
average prepayment penalty term of 2.95 years.
(l) Pool 2 Mortgage Loan Characteristics. The Pool 2 Mortgage
Loans have a maturity from the date of origination of at least 15 years
and no more than 30 years. The average principal balance of the Pool 2
Mortgage Loans on the Cut-off Date was $83,281,651. The Pool 2 Mortgage
Loans have a weighted average maturity of approximately 280 months.
With respect to the aggregate unpaid principal balance of all the Pool 2
Mortgage Loans, the Mortgage Loans have the following Credit Grades:
(i) 31.9% of the Mortgage Loans are Credit Grade AA; (ii) 35.9% of the
Mortgage Loans are Credit Grade A; (iii) 25.8% of the Mortgage Loans are
Credit Grade B; (iv) 1.5% of the Mortgage Loans are Credit Grade CC; (v)
5% of the Mortgage Loans are Credit Grade C. With respect to the
aggregate unpaid principal balance of all the Pool 2 Mortgage Loans, the
Mortgage Loans have the following prepayment penalty percentages: (i)
9.2% of the Mortgage Loans have one year prepayment penalties; (ii) 6.2%
of the Mortgage Loans have two year prepayment penalties; (iii) 43.8% of
the Mortgage Loans have three year prepayment penalties and (iv) 27.4%
of the Mortgage Loans have five year prepayment penalties. With respect
to the aggregate unpaid principal balance of all the Pool 2 Mortgage
Loans, the Mortgaged Properties are located as follows: (i) 18.2% of
the Mortgaged Properties are located in California; (ii) 14.4% of the
Mortgaged Properties are located in Florida; (iii) 6.7% of the Mortgaged
Properties are located in New York; and the remaining Mortgaged
Properties are geographically dispersed. With respect to both aggregate
outstanding principal balance and numerical count of all the Pool 2
Mortgage Loans, (a) no more than 8.2% are secured by real property
improved by two- to four-family dwellings, (b) no more than 2.3% are
secured by real property improved by individual condominium units, (c)
no more than 6.1% are secured by real property improved by an individual
unit in a planned unit development, and (d) at least 85.7% are secured
by real property with a one-family residence erected thereon. With
respect to the aggregate unpaid principal balance of the Pool 2 Mortgage
Loans at the time of origination, (a) no more than 0.9% of the Mortgaged
Properties were owner-occupied second homes, (b) no more than 7.7% of
the Mortgaged Properties were investor properties and (c) at least 91.4%
of the Mortgaged Properties were owner-occupied primary residences.
With respect to the aggregate unpaid principal balance of the Pool 2
Mortgage Loans, (a) no more than 65.8% are "cash-out" refinance mortgage
loans, (b) no more than 14.8% are rate and term refinance mortgage loans
and (c) at least 19.3% are purchase money mortgage loans.
(m) Sale Treatment. The Company has determined that the
disposition of the Mortgage Loans pursuant to this Agreement will be
afforded sale treatment for accounting and tax purposes;
(n) Financial Statements. The Company has delivered to the
Purchaser (i) audited financial statements as to its last three complete
fiscal years and (ii) unaudited financial statements as to any later
quarter ended more than 60 days prior to the execution of this
Agreement. All such financial statements fairly present the pertinent
results of operations and changes in financial position at the end of
each such period of the Company and its subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set
forth in the Mortgage Notes thereto. In addition, the Company has
delivered information as to its loan gain and loss experience for the
immediately preceding three-year period, in each case with respect to
mortgage loans owned by it and such mortgage loans serviced for others
during such period, and all such information so delivered is true and
correct in all material respects. There has been no change in the
business, operations, financial condition, properties or assets of the
Company since the date of the Company's financial statements that would
have a material adverse effect on its ability to perform its obligations
under this Agreement. The Company has completed any forms requested by
the Purchaser in a timely manner and in accordance with the provided
instructions;
(o) No Brokers' Fees. The Company has not dealt with any broker,
investment banker, agent or other person that may be entitled to any
commission or compensation in connection with the sale of the Mortgage
Loans;
(p) Fair Consideration. The consideration received by the Company
upon the sale of the Mortgage Loans under this Agreement constitutes
fair consideration and reasonably equivalent value for the Mortgage
Loans; and
(q) Accuracy of Statements. The information contained in the
Mortgage Loan Schedule and all information provided regarding
delinquencies in the Mortgage Loans are true and correct in all material
respects. Neither the Mortgage Loan Schedule nor the Mortgage File nor
any other document furnished in connection with this transaction
contains any untrue statement of fact by Company or its affiliates, or
omits to state a fact, necessary to make the statements of Company or
its affiliates contained therein not materially misleading.
Section 3.02 Representations and Warranties Regarding Individual
Mortgage Loans.
With respect to each Mortgage Loan, Company represents and warrants
to, and covenants with Purchaser as follows as of the Closing Date on which
such Mortgage Loan is sold:
(a) Title to Mortgage Loans. Company has good title to and is the
sole owner of record and holder of the Mortgage Loan and the
indebtedness evidenced by each Mortgage Note. The Mortgage Loan is not
assigned or pledged, and Company has good, indefeasible and marketable
title thereto, and has full right to transfer and sell the Mortgage
Loans to Purchaser free and clear of any encumbrance, equity interest,
participation interest, lien, pledge, charge, claim or security
interest, and has full right and authority subject to no interest or
participation or, or agreement with, any other party, to sell and assign
each Mortgage Loan pursuant to this Agreement, and following the sale of
each Mortgage Loan, Purchaser will own such Mortgage Loan free and clear
of any encumbrance, equity interest, participation interest, lien,
pledge, charge, claim or security interest.
(b) Delivery of Mortgage Documents. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other documents required to
be delivered for the Mortgage Loan by the Company under this Agreement
have been delivered to the Custodian. The Company is in possession of a
complete, true and accurate Mortgage File, except for such documents the
originals of which have been delivered to the Custodian;
(c) Accuracy of the Mortgage Loan Schedule. The Mortgage Loan is
as described in the Mortgage Loan Schedule delivered by Company to
Purchaser, and the information contained in the Mortgage Loan Schedule
is true and correct in all material respects as of the Closing Date.
(d) Payments. Except as set forth in Exhibit I (which Mortgage
Loans shall not exceed 1.5% of the total outstanding principal balance
of the Mortgage Loans as of the Cut-off Date (the "Defaulted Mortgage
Loans")), as of the Closing Date, no Mortgage Loan is 30 or more days
delinquent as to principal and interest payments (determined on a
contractual basis). Except for the Defaulted Mortgage Loans, no
Mortgage Loan will have been 30 or more days delinquent as to principal
and interest payments (determined on a contractual basis) more than once
during the 12 months preceding the Closing Date. The first Monthly
Payment has been made with respect to the Mortgage Loan (except for one
percent (1%) of the total Mortgage Loans as measured against the total
outstanding principal balance of all the Mortgage Loans as of the Cut-
off Date) on its Due Date or within the grace period, all in accordance
with the terms of the related Mortgage Note.
(e) No Outstanding Charges. At origination, all outstanding
taxes, governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments or ground rents previously due and
owing had been paid, or an escrow of funds had been established in an
amount sufficient to pay for every such item which remained unpaid and
which had been assessed but was not yet due and payable. To the best of
Company's knowledge as of the Closing Date, all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents which previously became due and owing
have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which has
been assessed but is not yet due and payable. Company has not advanced
funds, or induced or solicited or knowingly received any advance of
funds by a party other than the Mortgagor, directly or indirectly, for
the payment of principal or interest required under the Mortgage Loan,
except for interest accruing from the date of the Mortgage Note or date
of disbursement of the Mortgage Loan proceeds, whichever occurred later,
to the day which precedes by one month the Due Date of the first Monthly
Payment.
(f) Original Terms Unmodified. The terms of the Mortgage Note and
the Mortgage have not been impaired, waived, altered or modified in any
respect, except by a written instrument which has been recorded, if
necessary to protect the interests of Purchaser. The substance of any
such waiver, alteration or modification has been approved by the title
insurer, to the extent required by the policy, and its terms are
reflected on the Mortgage Loan Schedule. No Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement approved by the title insurer, to the extent, required by the
policy, and which assumption agreement is part of the Mortgage Loan
File.
(g) Absence of Defenses. The Mortgage Loan and the Mortgage Note
are not subject to any right of rescission, set-off, counterclaim, or
defense (including the defense of usury), based on the invalidity or
unenforceability of the Mortgage Note and/or Mortgage or on any conduct
of Company or any of its officers, employees, representatives,
Affiliates or assignors in origination or servicing the Mortgage Loan
prior to the Closing Date, nor will the operations of any of the terms
of the Mortgage Loan or the Mortgage Note, or the exercise of any right
thereunder, render the Mortgage Loan or the Mortgage Note unenforceable,
in whole or in part, or subject to any right of rescission, set-off,
counterclaim, or defense with respect thereto. No such right of
recission, set-off, counterclaim or defense has been asserted to Company
or, to Company's knowledge, has been asserted to any other person and,
no Mortgagor was a debtor in any state or federal bankruptcy or
insolvency proceeding at the time the Mortgage Loan was originated. The
making of the Mortgage Loan did not violate any existing court order and
was in compliance with any statutes, rules and regulations.
(h) Hazard Insurance. Pursuant to the terms of the Mortgage, all
improvements upon the Mortgaged Property are insured by an insurer
acceptable to FNMA against loss by fire and such other risks as are
usually insured against in the broad form of extended coverage hazard
insurance available from time to time, including flood hazards if upon
origination of the Mortgage Loan, the Mortgaged Property was in an area
identified in the Federal Register by the Federal Emergency Management
Agency as having special flood hazards (and if flood insurance was
required by federal regulation and such flood insurance has been made
available). All such insurance policies (collectively, the "hazard
insurance policy") meet the requirements of the current guidelines of
the Federal Insurance Administration, conform to the requirements of the
FNMA Servicers' Guide, and are a standard policy of insurance for the
locale where the Mortgaged Property is located. The amount of the
insurance is at least in the amount of the full insurable value of the
Mortgaged Property on a replacement cost basis or the unpaid balance of
the Mortgage Loan, whichever is less. The hazard insurance policy names
(and will name) the Mortgagor as the insured and contains a standard
mortgagee loss payable clause in favor of Company (or Company's
servicer) and it successors and assigns. The Mortgage obligates the
Mortgagor thereunder to maintain the hazard insurance policy at the
Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such
insurance at such Mortgagor's cost and expense, and to seek
reimbursement therefor from the Mortgagor. Where required by state law
or regulation, the Mortgagor has been given an opportunity to choose the
carrier of the required hazard insurance policy, provided that the
policy is not a "master" or "blanket" hazard insurance policy covering a
condominium, or any hazard insurance policy covering the common
facilities of a planned unit development. The hazard insurance policy
is the valid and binding obligation of the insurer. The hazard
insurance policy is in full force and effect, and will be in full force
and effect and inure to the benefit of Purchaser upon the consummation
of the transactions contemplated by this Agreement. Company has not
engaged in, and has no knowledge of the Mortgagor's or any subservicer's
having engaged in, any act or omission which would impair the coverage
of any such policy, the benefits of the endorsements provided for
therein, or the validity and binding effect of either. To the Company's
best knowledge, in connection with the issuance of the hazard insurance
policy, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained
or realized by any attorney, firm or other person or entity. No such
unlawful items have been received, retained or realized by Company.
(i) Compliance with Applicable Laws. Any and all requirements of
any federal, state or local law including, without limitation, usury,
truth-in-lending, real estate closing procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to
the Mortgage Loan have been complied with, and the Company shall
maintain in its possession available for the Purchaser's inspection, and
shall deliver to the Purchaser upon demand, evidence of compliance with
all such requirements. The consummation of the transactions
contemplated hereby will not involve the violation of any such laws or
regulations.
(j) No Satisfaction of Mortgage or Mortgage Note. Neither the
Mortgage nor the Mortgage Note has been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole
or in part, nor has any instrument been executed that would effect any
such release, cancellation, subordination or rescission. The Company
has not waived the performance by the Mortgagor of any action, if the
Mortgagor's failure to perform such action would cause the Mortgage Loan
to be in default, nor has the Company waived any default resulting from
any action or inaction by the Mortgagor.
(k) Location and Type of Mortgaged Property. Each of the
Mortgaged Properties is located in the United States and consists of a
single parcel of real property with a single family residence erected
thereon, or a two to four-family dwelling, a townhouse, a manufactured
home, or an individual condominium unit in a high-rise or low-rise
condominium project, or an individual unit in a planned unit
development. Any unit in a planned unit development or condominium
project shall conform with the Company's requirements regarding such
dwellings and no residence or dwelling is a mobile home (the term
"mobile home" shall not include a manufactured dwelling), nor is any
Mortgaged Property used for commercial purposes. The Mortgaged Property
is either a fee simple estate or a long-term residential lease. If the
Mortgage Loan is secured by a long-term residential lease, (A) the terms
of such lease expressly permit the mortgaging of the leasehold estate,
the assignment of the lease without the lessor's consent (or the
lessor's consent has been obtained and such consent is in the Mortgage
File) and the acquisition by the holder of the Mortgage of the rights of
the lessee upon foreclosure or assignment in lieu of foreclosure or
provide the holder of the Mortgage with substantially similar
protection; (B) the terms of such lease do not (i) allow the termination
thereof upon the lessee's default without the holder of the Mortgage
being entitled to receive written notice of, and opportunity to cure,
such default, (ii) allow the termination of the lease in the event of
damage or destruction as long as the Mortgage is in existence or (iii)
prohibit the holder of the Mortgage from being insured under the hazard
insurance policy relating to the Mortgaged Property; (C) the original
term of such lease is not less than 15 years; (D) the term of such lease
does not terminate earlier than five years after the maturity date of
the Mortgage Note; and (E) the Mortgaged Property is located in a
jurisdiction in which the use of leasehold estates for residential
properties is a widely accepted practice.
(l) Valid Lien. Except as set forth on Exhibit L, the Mortgage
for any Mortgage Loan creates a valid, subsisting, enforceable and
perfected first lien on the Mortgaged Property, and includes all
buildings on the Mortgaged Property and all installations and
mechanical, electrical, plumbing, heating and air conditioning systems
located in or annexed to such buildings, and all additions, alterations
and replacements made at any time with respect to the foregoing. The
lien of the Mortgage is subject only to "Permitted Exceptions," which
consists of the following:
(1) the lien of current real property taxes and assessments
not yet due and payable;
(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to prudent mortgage lending institutions
generally and specifically referred to in the lender's title
insurance policy delivered to the originator of the Mortgage Loan
and referred to or otherwise considered in the appraisal made for
the originator of the Mortgage Loan; and
(3) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged
Property.
Except as set forth on Exhibit L, any security agreement, chattel
mortgage or equivalent document related to and delivered in connection
with the Mortgage Loan established and created a valid, subsisting,
enforceable and perfected first lien and first priority security
interest on the property described therein, and Company has full right
to sell and assign the same to Purchaser. The Mortgaged Property was
not, as of the date of origination of the Mortgage Loans, subject to a
mortgage, deed of trust, deed to secure debt or other security
instrument creating a lien, subordinate to the lien of the Mortgage.
(a) Validity of Mortgage Documents. The Mortgage Note and the
Mortgage and every other agreement, if any, executed and delivered
by the Mortgagor in connection with the Mortgage Loan are genuine,
and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms. All parties to
the Mortgage Note, the Mortgage and each other such related
agreement had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note, the Mortgage and each other
such related agreement, and the Mortgage Note, the Mortgage and
each other such related agreement have been duly and properly
executed by the respective Mortgagors. Company has reviewed all of
the documents constituting the Mortgage File and has made such
inquiries as it deems necessary to make and confirm the accuracy of
the representations set forth herein. To the best of Company's
knowledge after reasonable inquiry, the documents, instruments and
agreements submitted for Mortgage Loan underwriting were not
falsified by any party and contain no untrue statement of material
fact or omit to state a material fact required to be stated therein
or necessary to make the information and statements therein not
misleading. To the best of Company's knowledge, no fraud was
committed by any party in connection with the origination of the
Mortgage Loan.
(b) Full Disbursement of Proceeds. The Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future advances
thereunder, and any and all requirements as to completion of any
on-site or off-site improvement and as to disbursements of any
escrow funds therefor have been complied with. All costs, fees and
expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage were paid, and the Mortgagor is not
entitled to any refund of any amounts paid or due under the
Mortgage Note or Mortgage.
(c) Doing Business. All parties which have had any interest
(other than interests created by this transaction) in the Mortgage
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 where the Mortgaged
Property is located, except where failure to comply with such
licensing requirements will not adversely affect Purchaser's
interest in the Mortgage Loan, all parties were (2)(a) organized
under the laws of such a state, or (b) qualified to do business in
such state, or (c) federal savings and loan associations, savings
banks, or national banks having principal offices in such state, or
(d) not doing business in such state.
(d) LTV. No Pool 1 Mortgage Loan had at origination a loan to
value ratio in excess of 95%. No Pool 2 Mortgage Loan had at
origination a loan to value ratio in excess of 95%.
(e) Title Insurance. The Mortgage Loan is covered by either (a)
an attorney's opinion of title and abstract of title the form and
substance of which is acceptable to FNMA, or (b) an ALTA lender's
title insurance policy or (c) a CLTA lender's title insurance
policy or other generally acceptable form of policy of insurance
issued by a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring
Company, its successors and assigns, as to the first or second
priority lien of the Mortgage in the original principal amount of
the Mortgage Loan subject only to the Permitted Exceptions, and
against any loss by reason of the invalidity or unenforceability of
the lien resulting from the provisions of the Mortgage providing
for adjustment in the Mortgage Interest Rate and Monthly Payment.
Additionally, such lender's title insurance policy affirmatively
insures ingress and egress, and against encroachments by or upon
the Mortgaged Property or any interest therein. Where required by
state law or regulation, the Mortgagor has been given the
opportunity to choose the carrier of such lender's title insurance
policy. Company, its successors and assigns, are the sole insureds
of such lender's title insurance policy, and such lender's title
insurance policy is valid and remains in full force and effect and
will be in full force and effect upon the sale of the Mortgage Loan
to Purchaser. No claims have been made under such lender's title
insurance policy, and no prior holder of the Mortgage, including
Company, has done anything which would impair the coverage of such
lender's title insurance policy. In connection with the issuance
of such lender's title insurance policy, no unlawful fee,
commission, kickback or other unlawful compensation or value of any
kind has been or will be received, retained or realized by any
attorney, firm or other person or entity, and no such unlawful
items have been received, retained or realized by Company.
(f) No Defaults. Except as set forth on Exhibit I, there is no
default, breach, violation or event of acceleration existing under
the Mortgage or the Mortgage Note or related documents and no event
which, with the passage of time or with notice and the expiration
of any applicable grace or cure period, would constitute a default,
breach, violation or event of acceleration, and neither Company nor
its predecessors have waived any default, breach, violation or
event of acceleration.
(g) No Mechanics' Liens. There are no mechanics' or similar liens
or claims which have been filed for work, labor or material (and no
rights are outstanding that under the law could give rise to such
liens) affecting the related Mortgaged Property which are or may be
liens prior to, or equal or coordinate with, the lien of the
related Mortgage.
(h) Location of Improvements; No Encroachments. All improvements
which were considered in determining the Appraised Value of the
Mortgaged Property lay wholly within the boundaries and building
restriction lines of the Mortgaged Property, no improvements on
adjoining properties to which value was assigned encroach upon the
Mortgaged Property; further, the value of the Mortgaged Property is
not diminished by any improvements on adjoining properties which
encroach the Mortgaged Property. No improvement located on or
being part of the Mortgaged Property (upon which value was given in
determining the Appraised Value) is in violation of any applicable
zoning law or regulation; provided, that in no event shall a legal
nonconforming use of the Mortgaged Property be considered a
violation of any such zoning law or regulation.
(i) Payment Terms. Except for the Mortgage Loans listed on
Exhibit J, and any balloon Mortgage Loans (i) for Pool 2 Mortgage
Loans, the Mortgage Note is payable on the first day of each month
in equal monthly installments (other than the last payment) of
principal and interest; and (ii) for Pool 1 Mortgage Loans, the
Mortgage Interest Rate is adjusted and the Mortgage Note is payable
on the first day of each month and during an adjustment period or
initial period, in equal monthly installments of principal and
interest. All required notices of interest rate and payment amount
adjustment have been sent to the Mortgagor on a timely basis and
the computations of such adjustments were properly calculated.
Installments of interest are subject to change due to the
adjustments to the Mortgage Interest Rate on each Interest Rate
Adjustment Date, with interest calculated and payable in arrears,
sufficient to amortize the Mortgage Loan fully by the stated
maturity date, over an original term of not more than thirty years
from inception of the Mortgage Loan. All interest rate adjustments
applicable to the Mortgage Loans have been made in strict
compliance with state and federal law and the terms of the related
Mortgage Note. Any interest required to be paid pursuant to state
and local law has been properly paid and credited.
(j) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of
the holder thereof adequate for the realization against the of the
benefits of the security provided thereby, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's
sale, and (ii) otherwise by judicial or nonjudicial foreclosure.
Upon default by an Mortgagor on a Mortgage Loan and foreclosure on,
or trustee's sale of, the Mortgaged Property pursuant to the proper
procedures, the holder of the Mortgage Loan will be able to deliver
good and merchantable title to the Mortgaged Property. There is no
homestead or other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage subject to
applicable federal and state laws and judicial precedent with
respect to bankruptcy and right of redemption.
(k) Occupancy of the Mortgaged Property. All inspections,
licenses and certificates required to be made or issued with0
respect to all occupied portions of the Mortgaged Property and with
respect to the use and occupancy of the same, including, but not
limited to, certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate
authorities unless the failure of the Mortgagor to obtain said
inspections, licenses and certificates would not affect the value
of the Mortgaged Property or affect the enforceability of the
Mortgage. The Mortgaged Properties are lawfully occupied.
(l) No Additional Collateral. The Mortgage Note is not and has
not been secured by any collateral except the lien of the
corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage referred to in the "Valid
Lien" representation above.
(m) Deeds of Trust. In the event the Mortgage constitutes a deed
of trust, a trustee, authorized and duly qualified under applicable
law to serve as such, has been properly designated and currently so
serves and is named in the Mortgage, and no fees or expenses are or
will become payable by Purchaser to the trustee under the deed of
trust, except in connection with a trustee's sale after default by
the Mortgagor.
(n) Due on Sale. Each Mortgage, together with any such documents
as may be required under applicable law, contains a provision for
the acceleration of the payment of the unpaid principal balance of
the Mortgage Loan in the event that the Mortgaged Property is sold
or transferred without the prior written consent of the mortgagee
thereunder, at the option of the mortgagee. This provision
provides that the mortgagee cannot exercise its option if either
(a) the exercise of such option is prohibited by federal law or
(b)(i) the Mortgagor causes to be submitted to the mortgagee
information required by the mortgagee to evaluate the intended
transferee as if a new Mortgage Loan were being made to such
transferee and (ii) the mortgagee reasonably determines that the
mortgagee's security will not be impaired by the assumption or such
Mortgage Loan by the transferee and that the risk of breach of any
covenant or agreement in the documents evidencing such Mortgage
Loan is acceptable to the mortgagee. To the best of Company's
knowledge, such provision is enforceable.
(o) Transfer of Mortgage Loans. Each of the Mortgage and the
Assignment of Mortgage (upon the insertion of the assignee's name)
is in recordable form and is acceptable for recording under the
laws of the jurisdiction in which the Mortgaged Property is
located, and each Mortgage has been delivered to the appropriate
recorder's office for recording. Each Assignment of Mortgage (upon
the insertion of the assignee's name) shall be sufficient to effect
the transfer of Company's security interest in the corresponding
Mortgaged Property.
(p) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions pursuant
to which Monthly Payments are paid or partially paid with funds
deposited in any separate account established by Company, the
Mortgagor or anyone on behalf of the Mortgagor, or paid by any
source other than the Mortgagor, nor does it contain any other
similar provisions currently in effect which may constitute a
"buydown" provision. The Mortgage Loan is not a graduated payment
mortgage and the Mortgage Loan does not have a shared appreciation
or other contingent interest feature.
(q) Consolidation of Future Advances. Any future advances made to
the Mortgagor prior to the Cut-off Date have been consolidated with
the outstanding principal amount secured by the Mortgage, and the
secured principal amount, as consolidated, bears a single interest
readjustment feature or rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is
expressly insured as having first or second lien priority by a
title insurance policy, an endorsement to the policy insuring the
mortgagee's consolidated interest or by other title evidence
acceptable to Purchaser, FNMA or FHLMC. The consolidated principal
amount does not exceed the original principal amount of the
Mortgage Loan.
(r) Mortgaged Property Undamaged; No Condemnation Proceedings.
There is no proceeding pending or threatened for the total or
partial condemnation of the Mortgaged Property for which the
Company has either received service of process or actual notice.
The Mortgaged Property is undamaged by waste, fire, earthquake or
earth movement, windstorm, flood, water, tornado or other casualty
so as to adversely affect the value of the Mortgaged Property as
security for the Mortgage Loan or the use for which the premises
were intended and each Mortgaged Property is in good repair. There
have not been any condemnation proceedings with respect to the
Mortgaged Property and Company has no knowledge of any such
proceedings in the future.
(s) Collection Practices; Escrow Deposits. The origination,
servicing and collection practices used by Company with respect to
the Mortgage Loans have been in accordance with Accepted Servicing
Practices and are in all respects in compliance with all applicable
laws and regulations. With respect to escrow deposits and Escrow
Payments for Escrow Mortgage Loans, all such payments are in
possession of Company or the servicer of such Mortgage Loan and
there exists no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made.
With respect to Escrow Mortgage Loans, all Escrow Payments have
been collected in full compliance with state and federal law. With
respect to Escrow Mortgage Loans, unless prohibited by applicable
law, an escrow of funds has been established in an amount
sufficient to pay for every item which remains unpaid and which has
been assessed but is not yet due and payable. With respect to
Escrow Mortgage Loans, no escrow deposits or Escrow Payments or
other charges or payments due Company have been added to the
outstanding principal balance on the Mortgage Loan Schedule.
(t) Appraisals. Company has delivered to Purchaser an appraisal
of the Mortgaged Property signed prior to the approval of the
Mortgage application by the qualified appraiser, who (i) is
licensed in the state where the Mortgaged Property is located, (ii)
has no interest, direct or indirect, in the Mortgaged Property or
in any Mortgage Loan or the security therefor, and (iii) does not
receive compensation that is affected by the approval or
disapproval of the Mortgage Loan, and the appraisal and appraiser
both satisfy the requirements of Title XI of the Federal
Institutions Reform, Recovery, and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date
the Mortgage Loan was originated.
(u) Soldier's and Sailor's Relief Act. The Mortgagor has not
notified Company and Company has no knowledge of any relief
requested or allowed to the Mortgagor under the Soldier's and
Sailor's Civil Relief Act of 1940.
(v) Environmental Matters. To the best of the Company's
knowledge, there exists no violation of any local, state or federal
environmental law, rule or regulation in respect of the Mortgaged
Property which violation has or could have a material adverse
effect on the market value of such Mortgaged Property. Company has
no knowledge of any pending action of proceeding directly or
indirectly involving the related Mortgaged Property in which
compliance with any environmental law, rule or regulation is in
issue; and, to the best of Company's knowledge, nothing further
remains to be done to satisfy in full all requirements of each such
law, rule or regulation constituting a prerequisite to the use and
enjoyment of such Mortgaged Property.
(w) Mortgagor Acknowledgment. The Mortgagor has executed a
statement to the effect that the Mortgagor has received all
disclosure materials required by applicable law with respect to the
making of adjustable rate Mortgage Loans. Company shall maintain
or cause to be maintained such statement in the Mortgage File.
(x) No Construction Mortgage Loans. The Mortgage Loan was not
made in connection with (a) the construction or rehabilitation of a
Mortgaged Property or (b) facilitating the trade-in or exchange of
a Mortgaged Property.
(y) Selection. The Mortgage Loans were not intentionally selected
for inclusion under this Agreement from among Company's mortgage
loan portfolio on any basis which would have an adverse effect on
the interests of Purchaser.
(z) Circumstances Affecting Value, Marketability or Prepayment.
Except as otherwise disclosed to Purchaser in writing, Company has
no knowledge of any circumstances or conditions with respect to the
Mortgage, the Mortgaged Property, or the Mortgagor's credit
standing that could reasonably be expected to adversely affect the
value or the marketability of any Mortgaged Property or Mortgage
Loan, other than the economic and geological conditions generally
and specifically applicable to the area in which the Mortgaged
Property is located, or cause the Mortgage Loan to become
delinquent.
(aa) Riegle Act. Except as disclosed on the Mortgage Loan
Schedule, none of the Mortgage Loans are classified as "high cost"
Mortgage Loans under Section 32 of the Home Ownerships and Equity
Protection Act of 1994.
(bb) REMIC Status. The Mortgage Loan is a qualified mortgage for
inclusion in a "real estate mortgage investment conduit" for
federal income tax purposes.
(cc) Origination. Each of the Mortgage Loans meets the
underwriting standards of Company set forth in Exhibit H to this
Agreement, and were underwritten in strict accordance therewith.
Each Loan was originated in accordance with Section 3(a)(41)(A)(ii)
of the Securities Exchange Act of 1934 by the Company (or if
generated on behalf of Company, by a person other than Company
which is subject to the same standards and procedures used by
Company in originating mortgage loans directly 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 a savings
and loan association, a savings bank, a commercial bank, a credit
union, an insurance company, or similar institution which is
supervised and examined by a Federal or State authority. The
Mortgage Note, the Mortgage and all other documents contained in
the Mortgage Loan Files are on FNMA or FHLMC uniform instruments or
are on forms acceptable to FNMA or FHLMC or on forms acceptable in
the secondary market. To the best of Company's knowledge after
reasonable inquiry, the documents, instruments and agreements
submitted for loan underwriting were not falsified and contain no
untrue statement of material fact and do not omit to state a
material fact required to be stated therein or necessary to make
the information and statements therein not misleading. Company has
not made any representations to the Mortgagor that are inconsistent
with the mortgage instruments used.
(dd) Genuineness of Signatures. Each of the documents in the
Mortgage Loan File is genuine and contains genuine signatures.
Each document that Purchaser requires to be an original document is
an original document. All certified copies of original documents
are true copies and meet the applicable requirements and
specifications of this Agreement and any other written requirements
that Purchaser has reasonably made of Company.
(ee) Regarding the Mortgagor. The Mortgagor is one or more natural
persons and/or trustees for an Illinois land trust or a trustee
under a "living trust' and such "living trust" is in compliance
with the guidelines established by prudent mortgage lending
institutions.
Section 3.03 Purchaser Representations and Warranties
As of the date hereof, and as of the Closing Date, Purchaser
represents and warrants as follows:
(a) Organization. Purchaser is a corporation, duly organized,
validly existing, and in good standing under the laws of the State of
Delaware, and is qualified and authorized to transact business in, and
is in good standing under the laws of , each jurisdiction in which such
qualification is required for Purchaser to do business. Purchaser has
the requisite corporate power and authority to own and operate its
properties, to carry on its business as it is now being conducted, to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement.
(b) Authorization of this Agreement. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the
part of Purchaser are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Purchaser and constitutes a legal,
valid, and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, except that such enforcement may
be affected by bankruptcy, by other insolvency laws, or by general
principle of equity.
(c) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course
of business of the Purchaser.
(d) No Conflict or Violation. The execution and delivery of this
Agreement by Purchaser does not, and the performance of this Agreement
by Purchaser will not, (i) result in a violation of or conflict with any
provisions of the charter or by-laws or equivalent governing instruments
of Purchaser, (ii) violate any law, rule, regulation, code, ordinance,
judgment, injunction, order, writ, decree, or ruling applicable to
Purchaser, or (iii) conflict with or violate any agreement, permit,
concession, grant, franchise, license, or other governmental
authorization or approval necessary for purchase of the Loans by
Purchaser. No regulatory approvals or consents are required with
respect to Purchaser's consummation of the transactions contemplated by
this agreement.
(e) Litigation No action, suit, proceeding, or governmental
investigation or inquiry is currently pending, or to the knowledge of
Purchaser, threatened against Purchaser which, if adversely determined,
would have a material adverse effect on the business, combined assets or
financial condition of Purchaser or on the Loans or would prevent the
consummation of the transactions contemplated by this Agreement.
(f) Financial Condition. Purchaser has previously furnished
Company with Purchaser's most recent unaudited financial statements,
which have been prepared in accordance with generally accepted
accounting principles. Each of the balance sheets included in the
financial statements sets forth Purchaser's financial condition as of
the date thereof, and there have been no material adverse changes in
Purchaser's business or financial conditions since that date.
(g) Ability to Perform; Solvency. Purchaser does not believe, nor
does it have any reason or cause to believe, that it cannot perform each
and every covenant contained in this Agreement. Purchaser is solvent
and the purchase of the Mortgage Loans will not cause Purchaser to
become insolvent.
(h) No Consent Required. No consent, approval, authorization or
order of any court or governmental agency or body is required for the
execution, delivery and performance by Purchaser of or compliance by
Purchaser with this Agreement or the Mortgage Loans, or the sale of the
Mortgage Loans to the Purchaser or the consummation of the transactions
contemplated by this Agreement, or if required, such approval has been
obtained prior to the Closing Date.
Section 3.04 Remedies for Breach of Representations and
Warranties.
It is understood and agreed that the representations and warranties
set forth in Sections 3.01, 3.02 and 3.03 shall survive the sale of the
Mortgage Loans to the Purchaser and the delivery of the Mortgage Loan
Documents to the Custodian and shall inure to the benefit of the Purchaser,
notwithstanding any restrictive or qualified endorsement on any Mortgage Note
or Assignment of Mortgage or the examination or failure to examine any
Mortgage File. Upon discovery by either the Company or the Purchaser of a
breach of any of the foregoing representations and warranties which
materially and adversely affects the value of the Mortgage Loans or the
interest of the Purchaser, or which materially and adversely affects the
interests of Purchaser in the related Mortgage Loan in the case of a
representation and warranty relating to a particular Mortgage Loan (in the
case of any of the foregoing, a "Breach"), the party discovering such Breach
shall give prompt written notice to the other.
Within 60 days of the earlier of either discovery by or notice to
the Company of any Breach of a representation or warranty, the Company shall
use its best efforts promptly to cure such Breach in all material respects
and, if such Breach cannot be cured, the Company shall, at the Purchaser's
option and subject to Section 3.05, repurchase such Mortgage Loan at the
Repurchase Price. In the event that a Breach shall involve any
representation or warranty set forth in Sections 3.01, and such Breach cannot
be cured within 60 days of the earlier of either discovery by or notice to
the Company of such Breach, all of the Mortgage Loans shall, at the
Purchaser's option and subject to Section 3.05, be repurchased by the Company
at the Repurchase Price. However, if the Breach shall involve a
representation or warranty set forth in Section 3.02 and the Company
discovers or receives notice of any such Breach within 120 days of the
Closing Date, the Company shall, at the Purchaser's option and provided that
the Company has a Qualified Substitute Mortgage Loan, rather than repurchase
the Mortgage Loan as provided above, remove such Mortgage Loan (a "Deleted
Mortgage Loan") and substitute in its place a Qualified Substitute Mortgage
Loan or Loans, provided that any such substitution shall be effected not
later than 120 days after the Closing Date. If the Company has no Qualified
Substitute Mortgage Loan, it shall repurchase the deficient Mortgage Loan.
Any repurchase of a Mortgage Loan or Loans pursuant to the foregoing
provisions of this Section 3.04 shall be accomplished by deposit in the
Custodial Account of the amount of the Repurchase Price for distribution to
Purchaser on the next scheduled Remittance Date, after deducting therefrom
any amount received in respect of such repurchased Mortgage Loan or Loans and
being held in the Custodial Account for future distribution.
At the time of repurchase or substitution, the Purchaser and the
Company shall arrange for the reassignment of the Deleted Mortgage Loan to
the Company and the delivery to the Company of any documents held by the
Custodian relating to the Deleted Mortgage Loan. In the event of a
repurchase or substitution, the Company shall, simultaneously with such
reassignment, give written notice to the Purchaser that such repurchase or
substitution has taken place, amend the Mortgage Loan Schedule to reflect the
withdrawal of the Deleted Mortgage Loan from this Agreement, and, in the case
of substitution, identify a Qualified Substitute Mortgage Loan and amend the
Mortgage Loan Schedule to reflect the addition of such Qualified Substitute
Mortgage Loan to this Agreement. In connection with any such substitution,
the Company shall be deemed to have made as to such Qualified Substitute
Mortgage Loan the representations and warranties set forth in this Agreement
except that all such representations and warranties set forth in this
Agreement shall be deemed made as of the date of such substitution. The
Company shall effect such substitution by delivering to the Custodian for
such Qualified Substitute Mortgage Loan the documents required by Section
2.03, with the Mortgage Note endorsed in a manner as specified by the
Purchaser. No substitution will be made in any calendar month after the
Determination Date for such month. The Company shall deposit in the
Custodial Account the Monthly Payment less the Servicing Fee due on such
Qualified Substitute Mortgage Loan or Loans in the month following the date
of such substitution. Monthly Payments due with respect to Qualified
Substitute Mortgage Loans in the month of substitution shall be retained by
the Company. For the month of substitution, distributions to Purchaser shall
include the Monthly Payment due on any Deleted Mortgage Loan in the month of
substitution, and the Company shall thereafter be entitled to retain all
amounts subsequently received by the Company in respect of such Deleted
Mortgage Loan.
For any month in which the Company substitutes a Qualified
Substitute Mortgage Loan for a Deleted Mortgage Loan, the Company shall
determine the amount (if any) by which the aggregate principal balance of all
Qualified Substitute Mortgage Loans as of the date of substitution is less
than the aggregate outstanding principal balance of all Deleted Mortgage
Loans (after application of scheduled principal payments due in the month of
substitution). The amount of such shortfall shall be distributed by the
Company in the month of substitution pursuant to Section 5.01. Accordingly,
on the date of such substitution, the Company shall deposit from its own
funds into the Custodial Account an amount equal to the amount of such
shortfall.
In addition to such repurchase or substitution obligation, the
Company shall indemnify the Purchaser and hold it harmless 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 from, a Breach of the Company representations and
warranties contained in this Agreement. It is understood and agreed that the
obligations of the Company set forth in this Section 3.04 to cure, substitute
for or repurchase a defective Mortgage Loan and to indemnify the Purchaser as
provided in this Section 3.04 constitute the sole remedies of the Purchaser
respecting a Breach of the foregoing representations and warranties.
Any cause of action against the Company relating to or arising out
of the Breach of any representations and warranties made in Sections 3.01 and
3.02 shall accrue as to any Mortgage Loan upon (i) discovery of such Breach
by the Purchaser or notice thereof by the Company to the Purchaser, (ii)
failures by the Company to cure such Breach or repurchase such Mortgage Loan
as specified above, and (iii) demand upon the Company by the Purchaser for
compliance with this Agreement.
Section 3.05 Restrictions and Requirements Applicable in the
Event that a Mortgage Loan is Acquired by a REMIC.
In the event that any Mortgage Loan is held by a REMIC,
notwithstanding any contrary provision of this Agreement, the following
provisions shall be applicable to such Mortgage Loan:
(A) Repurchase of Mortgage Loans.
With respect to any Mortgage Loan that is not in default or as to
which no default is imminent, no repurchase or substitution pursuant to
Section 3.05 or 7.02 shall be made, unless, if so required by the applicable
REMIC Documents the Company has obtained an Opinion of Counsel to the effect
that such repurchase will not (i) result in the imposition of taxes on
"prohibited transactions" of such REMIC (as defined in Section 860F of the
Code) or otherwise subject the REMIC to tax, or (ii) cause the REMIC to fail
to qualify as a REMIC at any time.
(B) Tax Returns.
(1) With respect to the Mortgage Loans serviced by the Company
under this Agreement, the Company covenants and agrees that it shall
cooperate and provide any and all information to enable the trustee or other
responsible party to perform all of the following duties: (a) prepare, file
and sign all Tax Returns using a calendar year as the taxable year for the
REMIC and the accrual method of accounting when and as required by the REMIC
Provisions and other applicable federal income tax laws; (b) make an
election, on behalf of the REMIC to be treated as a REMIC on the Tax Returns
of the REMIC for its first taxable year, in accordance with the REMIC
Provisions; (c) prepare and file or cause to be prepared and filed, and
deliver, any and all Tax Returns, information statements or other filings
required to be delivered to any governmental taxing authority, or to any
owner thereunder, pursuant to any applicable federal, state or local tax law
with respect to the REMIC or the certificates issued thereunder and the
transactions contemplated thereby; (d) cause to be provided to the owner
thereunder such data necessary for their original issue discount computations
and market discount computations with respect to the certificates issued
thereunder for federal income tax purposes as the owner thereunder may
reasonably request from time to time; (e) conduct the affairs of the REMIC so
as to maintain the status thereof as a REMIC under the REMIC Provisions; (f)
not knowingly or intentionally take any action or omit to take any action
that would cause the termination of the REMIC status of the REMIC; (g) make
any election required by the REMIC Provisions to treat as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code all property
that the REMIC has acquired or will acquire that may qualify as such
foreclosure property; (h) cause to be provided notice to the holders of any
certificates issued thereunder of the existence of the restrictions on
transfers and exchange provided under the REMIC documents; (i) cause to be
provided information necessary for the computation of tax imposed on the
transfer of a residual certificate issued thereunder to a Disqualified
Organization, or an agent of a Disqualified Organization, provided that the
reasonable cost of computing and furnishing such information may be charged
to the person liable for such tax; and (j) in a timely manner cause to be
paid the amount of any and all federal, state and local taxes imposed on the
REMIC or its respective assets or transactions including, without limitation,
(i) "prohibited transaction" penalty taxes as defined in Section 860F of the
Code, if, when and as the same shall be due and payable, (ii) any tax on
contributions to a REMIC after the closing date of such REMIC imposed under
Section 860G(d) of the Code and (iii) any tax on "net income from foreclosure
property" as defined in Section 860G(c) of the Code.
(2) Within 30 days after the closing date of any REMIC, if so
required by the applicable REMIC Documents, the Company shall cooperate and
provide any and all information necessary or helpful to enable the trustee or
other responsible party to prepare and file with the Internal Revenue Service
Form 8811, "Information Return for Real Estate Mortgage Investment Conduits
(REMIC) and Issuers of Collateralized Debt Obligations" for the REMIC. The
trustee or other responsible party shall sign such returns and is hereby
indemnified and held harmless by the Company with respect to any tax or
liability arising from the trustee's or other responsible party's signing
such information returns to the extent that such tax or liability results
from information provided by or on behalf of the Company or information that
should have been provided by or on behalf of the Company.
(C) General Servicing Obligations.
The Company shall sell any REO Property within two years after its
acquisition by the REMIC unless (i) the Company applies for an extension of
such two-year period from the Internal Revenue Service pursuant to the REMIC
Provisions and Code Section 856(e)(3), in which event such REO Property shall
be sold within the applicable extension period, or (ii) the Company obtains
for the Purchaser an Opinion of Counsel, addressed to the Purchaser and the
Company, to the effect that the holding by the REMIC of such REO Property
subsequent to such two year period will not result in the imposition of taxes
on "prohibited transactions" as defined in Section 860F of the Code or cause
the REMIC to fail to qualify as a REMIC under the REMIC Provisions or
comparable provisions of relevant state laws at any time. The Company shall
manage, conserve, protect and operate each REO Property for the Purchaser
solely for the purpose of its prompt disposition and sale in a manner which
does not cause such REO Property to fail to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) or result in the receipt by the
REMIC of any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code or any "net income from foreclosure property" which
is subject to taxation under Section 860G(a)(1) of the Code. Pursuant to its
efforts to sell such REO Property, the Company shall either itself or through
an agent selected by the Company protect and conserve such REO Property in
the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection
of the interests of the Purchaser, rent the same, or any part thereof, as the
Company deems to be in the best interest of the Company and the Purchaser for
the period prior to the sale of such REO Property; provided, however, that
any rent received or accrued with respect to such REO Property qualifies as
"rents from real property" as defined in Section 856(d) of the Code.
(D) Additional Covenants.
In addition to the provision set forth in this Section 3.05(C), if
a REMIC election is made with respect to the arrangement under which any of
the Mortgage Loans or REO Properties are held, then, with respect to such
Mortgage Loans and/or REO Properties, and notwithstanding the terms of this
Agreement, the Company shall not take any action, cause the REMIC to take any
action or fail to take (or fail to cause to be taken) any action that, under
the REMIC Provisions, if taken or not taken, as the case may be, could (i)
endanger the status of the REMIC as a REMIC or (ii) result in the imposition
of a tax upon the REMIC (including but not limited to the tax on "prohibited
transactions" as defined in Section 860F(a)(2) of the Code and the tax on
"contributions" to a REMIC set forth in Section 860G(d) of the Code) unless
the Company has received an Opinion of Counsel (at the expense of the party
seeking to take such action) to the effect that the contemplated action will
not endanger such REMIC status or result in the imposition of any such tax.
If a REMIC election is made with respect to the arrangement under
which any Mortgage Loans or REO Properties are held, the Company shall amend
this Agreement such that it will meet all Rating Agency requirements.
Section 3.06 Repurchase of Mortgage Loans With First Payment
Defaults.
With respect to any Mortgage Loan, if the related Mortgagor is
delinquent with respect to the Mortgage Loans' first Monthly Payment, the
Company shall repurchase such Mortgage Loan from the Purchaser in accordance
with Section 3.04 hereof, provided however, the Company's obligation to
repurchase any Mortgage Loans pursuant to this Section 3.06 shall be limited
to the amount exceeding 1% of the outstanding original principal balance of
the Mortgage Loans as of the Closing Date.
ARTICLE IV
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 4.01 Company to Act as Servicer.
The Company, as an independent contractor, shall service and
administer the Mortgage Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Company may deem necessary or desirable, consistent
with the terms of this Agreement and with Accepted Servicing Practices.
Consistent with the terms of this Agreement, the Company may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to
any Mortgagor if in the Company's reasonable and prudent determination such
waiver, modification, postponement or indulgence is not materially adverse to
the Purchasers, provided, however, that the Company shall not make any future
advances with respect to a Mortgage Loan and (unless the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment
of the Company, imminent and the Company has obtained the prior written
consent of the Purchaser) the Company shall not permit any modification with
respect to any Mortgage Loan that would change the Mortgage Interest Rate,
defer or forgive the payment of principal or interest, reduce or increase the
outstanding principal balance (except for actual payments of principal) or
change the final maturity date on such Mortgage Loan. In the event of any
such modification which permits the deferral of interest or principal
payments on any Mortgage Loan, the Company shall, on the Business Day
immediately preceding the Remittance Date in any month in which any such
principal or interest payment has been deferred, deposit in the Custodial
Account from its own funds, in accordance, the difference between (a) such
month's principal and one month's interest at the Mortgage Loan Remittance
Rate on the unpaid principal balance of such Mortgage Loan and (b) the amount
paid by the Mortgagor. Without limiting the generality of the foregoing, the
Company shall continue, and is hereby authorized and empowered, to execute
and deliver on behalf of itself and the Purchasers, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and
all other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. If reasonably required by the Company,
the Purchaser shall furnish the Company with any powers of attorney and other
documents necessary or appropriate to enable the Company to carry out its
servicing and administrative duties under this Agreement.
In servicing and administering the Mortgage Loans, the Company
shall employ procedures (including collection procedures) and exercise the
same care that it customarily employs and exercises in servicing and
administering mortgage loans for its own account, giving due consideration to
Accepted Servicing Practices where such practices do not conflict with the
requirements of this Agreement, and the Purchaser's reliance on the Company.
If the Company is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by the superior
lien, or has declared or intends to declare a default under the Mortgage or
the Mortgage Note secured thereby, or has filed or intends to file an
election to have the Mortgaged Property sold or foreclosed, the Company shall
immediately notify the Purchaser of any such notice from or action by the
superior lienholder and of the amount necessary to cure the default or
reinstate the superior lien. The Company shall further make recommendations
to the Purchaser so as to best protect the Purchaser's interest in and the
security of the related Mortgage Loan. If the Purchaser directs the Company
to cure a default under or otherwise reinstate a superior lien, the Purchaser
will advance to the Company necessary funds to cure the default or reinstate
the superior lien. The Company shall thereafter take immediate action to
recover from the Mortgagor the amount so advanced. The Purchaser shall
notify the Company in writing of any and all action which it requests the
Company to take.
Under normal circumstances, the Company shall take no action
whatsoever under this Section 4.01 unless the Purchaser provides such
previous written direction to the Company. In the event that the Company
reasonably deems that the factual circumstances require prompt action, the
Company may (but shall not be obligated to) without notice to the Purchaser,
advance the necessary funds to cure the default or reinstate the superior
lien so as to best protect the Purchaser's interest. The Company shall
thereafter notify the Purchaser of the action taken, including the amount of
the advance. The Purchaser shall reimburse the Company for all advances made
pursuant to this paragraph. The Company shall thereafter take immediate
action to recover from the Mortgagor the amount so advanced.
The Mortgage Loans may be subserviced by the Subservicer on behalf
of the Company provided that the Subservicer is a FNMA-approved servicer or a
FHLMC servicer in good standing, and no event has occurred, including but not
limited to a change in insurance coverage, which would make it unable to
comply with the eligibility requirements for lenders imposed by FNMA or for
seller/servicers imposed by FHLMC, or which would require notification to
FNMA or FHLMC. The Company may perform any of its servicing responsibilities
hereunder or may cause the Subservicer to perform any such servicing
responsibilities on its behalf, but the use by the Company of the Subservicer
shall not release the Company from any of its obligations hereunder and the
Company shall remain responsible hereunder for all acts and omissions of the
Subservicer as fully as if such acts and omissions were those of the Company.
The Company shall pay all fees and expenses of the Subservicer from its own
funds, and the Subservicer's fee shall not exceed the Servicing Fee.
At the cost and expense of the Company, without any right of
reimbursement from the Custodial Account, the Company shall be entitled to
terminate the rights and responsibilities of the Subservicer and arrange for
any servicing responsibilities to be performed by a successor Subservicer
meeting the requirements in the preceding paragraph, provided, however, that
nothing contained herein shall be deemed to prevent or prohibit the Company,
at the Company's option, from electing to service the related Mortgage Loans
itself. In the event that the Company's responsibilities and duties under
this Agreement are terminated pursuant to Section 9.04, 10.01 or 11.02, and
if requested to do so by the Purchaser, the Company shall at its own cost and
expense terminate the rights and responsibilities of the Subservicer as soon
as is reasonably possible. The Company shall pay all fees, expenses or
penalties necessary in order to terminate the rights and responsibilities of
the Subservicer from the Company's own funds without reimbursement from the
Purchaser.
Notwithstanding any of the provisions of this Agreement relating to
agreements or arrangements between the Company and the Subservicer or any
reference herein to actions taken through the Subservicer or otherwise, the
Company shall not be relieved of its obligations to the Purchaser and shall
be obligated to the same extent and under the same terms and conditions as if
it alone were servicing and administering the Mortgage Loans. The Company
shall be entitled to enter into an agreement with the Subservicer for
indemnification of the Company by the Subservicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
Any Subservicing Agreement and any other transactions or services
relating to the Mortgage Loans involving the Subservicer shall be deemed to
be between the Subservicer and Company alone, and the Purchaser shall have no
obligations, duties or liabilities with respect to the Subservicer including
no obligation, duty or liability of Purchaser to pay the Subservicer's fees
and expenses. For purposes of distributions and advances by the Company
pursuant to this Agreement, the Company shall be deemed to have received a
payment on a Mortgage Loan when the Subservicer has received such payment.
Section 4.02 Liquidation of Mortgage Loans.
In the event that any payment due under any Mortgage Loan and not
postponed pursuant to Section 4.01 is not paid when the same becomes due and
payable, or in the event the Mortgagor fails to perform any other covenant or
obligation under the Mortgage Loan and such failure continues beyond any
applicable grace period, the Company shall take such action as (1) the
Company would take under similar circumstances with respect to a similar
mortgage loan held for its own account for investment, (2) shall be
consistent with Accepted Servicing Practices and (3) the Company shall
determine prudently to be in the best interest of Purchaser. In the event
that any payment due under any Mortgage Loan is not postponed pursuant to
Section 4.01 and remains delinquent for a period of 90 days or any other
default continues for a period of 90 days beyond the expiration of any grace
or cure period, the Company shall commence foreclosure proceedings and
provide notice thereof to the Purchaser in writing. In such connection, the
Company shall from its own funds make all necessary and proper Servicing
Advances, provided, however, that the Company shall not be required to expend
its own funds in connection with any foreclosure or towards the restoration
or preservation of any Mortgaged Property, unless in its good faith business
judgment, the Company reasonably believes (a) that such preservation,
restoration and/or foreclosure will increase the proceeds of liquidation of
the Mortgage Loan to Purchaser after reimbursement to itself for such
expenses and (b) that such expenses will be recoverable by it either through
Liquidation Proceeds (respecting which it shall have priority for purposes of
withdrawals from the Custodial Account pursuant to Section 4.05) or through
Insurance Proceeds (respecting which it shall have similar priority). If the
Company determines not to make a Servicing Advance pursuant to the preceding
sentence, then the Company shall deliver an Officer's Certificate setting
forth the reasons for such determination.
Notwithstanding anything to the contrary contained herein, in
connection with a foreclosure or acceptance of a deed in lieu of foreclosure,
in the event the Company has reasonable cause to believe that a Mortgaged
Property is contaminated by hazardous or toxic substances or wastes, or if
the Purchaser otherwise requests an environmental inspection or review of
such Mortgaged Property to be conducted by a qualified inspector, the Company
shall cause such inspection to occur. Upon completion of the inspection,
the Company shall promptly provide the Purchaser with a written report of the
environmental inspection.
After reviewing the environmental inspection report, the Purchaser
shall determine how the Company shall proceed with respect to the Mortgaged
Property. In the event (a) the environmental inspection report indicates
that the Mortgaged Property is contaminated by hazardous or toxic substances
or wastes and (b) the Purchaser directs the Company to proceed with
foreclosure or acceptance of a deed in lieu of foreclosure, the Company shall
be reimbursed for all reasonable costs associated with such foreclosure or
acceptance of a deed in lieu of foreclosure and any related environmental
clean up costs, as applicable, from the related Liquidation Proceeds, or if
the Liquidation Proceeds are insufficient to fully reimburse the Company, the
Company shall be entitled to be reimbursed from amounts in the Custodial
Account pursuant to Section 4.05 hereof. In the event the Purchaser directs
the Company not to proceed with foreclosure or acceptance of a deed in lieu
of foreclosure, the Company shall be reimbursed for all Servicing Advances
made with respect to the related Mortgaged Property from the Custodial
Account pursuant to Section 4.05 hereof.
Section 4.03 Collection of Mortgage Loan Payments.
Continuously from the date hereof until the principal and interest
on all Mortgage Loans are paid in full, the Company shall proceed diligently
to collect all payments due under each of the Mortgage Loans when the same
shall become due and payable and with respect to Escrow Mortgage Loans only,
shall take special care in ascertaining and estimating Escrow Payments and
all other charges that will become due and payable with respect to the
Mortgage Loan and the Mortgaged Property, to the end that the installments
payable by the Mortgagors will be sufficient to pay such charges as and when
they become due and payable.
Section 4.04 Establishment of and Deposits to Custodial Account.
The Company shall segregate and hold all funds collected and
received pursuant to a Mortgage Loan separate and apart from any of its own
funds and general assets and shall establish and maintain one or more
Custodial Accounts, in the form of time deposit or demand accounts, titled
"Option One Mortgage Corporation in trust for the Purchaser of Conventional
Residential Adjustable and Fixed Rate Mortgage Loans, Group No. 1997-LB/00".
The Custodial Account shall be established with a Qualified Depository
acceptable to the Purchaser. Any funds deposited in the Custodial Account
shall at all times be fully insured to the full extent permitted under
applicable law. Funds deposited in the Custodial Account may be drawn on by
the Company in accordance with Section 4.05. The creation of any Custodial
Account shall be evidenced by a certification in the form of Exhibit D-1
hereto, in the case of an account established with the Company, or by a
letter agreement in the form of Exhibit D-2 hereto, in the case of an account
held by a depository other than the Company. A copy of such certification or
letter agreement shall be furnished to the Purchaser and, upon request, to
any subsequent Purchaser.
The Company shall deposit in the Custodial Account on a daily
basis, and retain therein, the following collections received by the Company:
(i) all payments on account of principal on the Mortgage Loans,
including all Principal Prepayments;
(ii) any principal prepayment penalties received in connection with
the Mortgage Loans;
(iii) all payments on account of interest on the Mortgage Loans
adjusted to the Mortgage Loan Remittance Rate;
(iv) all Liquidation Proceeds;
(v) all Insurance Proceeds including amounts required to be
deposited pursuant to Section 4.10 (other than proceeds to be held in the
Escrow Account and applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with Section 4.14),
Section 4.11 and Section 4.14;
(vi) all Condemnation Proceeds which are not applied to the
restoration or repair of the Mortgaged Property or released to the Mortgagor
in accordance with Section 4.14;
(vii) any amount required to be deposited in the Custodial
Account pursuant to Section 4.01, 4.09, 6.01 or 6.02;
(viii) any amounts payable in connection with the repurchase of
any Mortgage Loan pursuant to Section 3.04, or 3.06 and all amounts required
to be deposited by the Company in connection with a shortfall in principal
amount of any Qualified Substitute Mortgage Loan pursuant to Section 3.03;
(ix) any amounts required to be deposited by the Company pursuant
to Section 4.11 in connection with the deductible clause in any blanket
hazard insurance policy; and
(x) any amounts received with respect to or related to any REO
Property and all REO Disposition Proceeds pursuant to Section 4.15.
The foregoing requirements for deposit into the Custodial Account
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of (x) late payment
charges, (y) assumption fees and (z) Servicing Fees and ancillary income
which are payable solely from the interest portion of Monthly Payments,
insurance proceeds, condemnation proceeds or Liquidation Proceeds need not be
deposited by the Company into the Custodial Account. Any interest paid on
funds deposited in the Custodial Account by the depository institution shall
accrue to the benefit of the Company and the Company shall be entitled to
retain and withdraw such interest from the Custodial Account pursuant to
Section 4.05.
Section 4.05 Permitted Withdrawals From Custodial Account.
The Company shall, from time to time, withdraw funds from the
Custodial Account for the following purposes:
(i) to make payments to the Purchaser in the amounts and in the
manner provided for in Section 5.01;
(ii) to reimburse itself for unreimbursed Servicing Advances,
the Company's right to reimburse itself pursuant to this subclause (ii) with
respect to any Mortgage Loan (a) being limited to related Liquidation
Proceeds, Condemnation Proceeds, Insurance Proceeds and such other amounts as
may be collected by the Company from the Mortgagor or otherwise relating to
the Mortgage Loan and (b) if, after the liquidation of such Mortgage Loan,
such payments are insufficient to satisfy such unreimbursed Servicing
Advances then the Company may seek reimbursement from other amounts in the
Custodial Account, it being understood that, in the case of any such
reimbursement, the Company's right thereto shall be prior to the rights of
Purchaser except where the Company is required to repurchase a Mortgage Loan
pursuant to Section 3.04, 3.05 or 6.02, in which case the Company's right to
such reimbursement shall be subsequent to the payment to the Purchasers of
the Repurchase Price pursuant to such Sections and all other amounts required
to be paid to the Purchasers with respect to such Mortgage Loan;
(iii) to pay itself interest on funds deposited in the
Custodial Account;
(iv) to reimburse itself for expenses incurred and
reimbursable to it pursuant to Section 9.01;
(v) to pay any amount required to be paid pursuant to Section 4.15
related to any REO Property, it being understood that in the case of any such
expenditure or withdrawal related to a particular REO Property, the amount of
such expenditure or withdrawal from the Custodial Account shall be limited to
amounts on deposit in the Custodial Account with respect to the related REO
Property;
(vi) to clear and terminate the Custodial Account upon the
termination of this Agreement; and
(vii) to withdraw funds deposited in error.
In the event that the Custodial Account is interest bearing, on
each Remittance Date, the Company shall withdraw all funds from the Custodial
Account except for those amounts which, pursuant to Section 5.01, the Company
is not obligated to remit on such Remittance Date. The Company may use such
withdrawn funds only for the purposes described in this Section 4.05.
Section 4.06 Establishment of and Deposits to Escrow Account.
The Company shall segregate and hold all funds collected and
received pursuant to a Mortgage Loan constituting Escrow Payments separate
and apart from any of its own funds and general assets and shall establish
and maintain one or more Escrow Accounts, in the form of time deposit or
demand accounts, titled, "Option One Mortgage Corporation, in trust for the
Purchaser of Conventional Residential Adjustable and Fixed Rate Mortgage
Loans, Group No. 1997-LB/00, and various Mortgagors". The Escrow Accounts
shall be established with a Qualified Depository, in a manner which shall
provide maximum available insurance thereunder. Funds deposited in the
Escrow Account may be drawn on by the Company in accordance with Section
4.07. The creation of any Escrow Account shall be evidenced by a
certification in the form of Exhibit E-1 hereto, in the case of an account
established with the Company, or by a letter agreement in the form of Exhibit
E-2 hereto, in the case of an account held by a depository other than the
Company. A copy of such certification shall be furnished to the Purchaser
and, upon request, to any subsequent Purchaser.
The Company shall deposit in the Escrow Account or Accounts on a
daily basis, and retain therein:
(i) all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting timely payment of any such items as
required under the terms of this Agreement; and
(ii) all amounts representing Insurance Proceeds or
Condemnation Proceeds which are to be applied to the restoration or repair of
any Mortgaged Property.
The Company shall make withdrawals from the Escrow Account only to
effect such payments as are required under this Agreement, as set forth in
Section 4.07. The Company shall be entitled to retain any interest paid on
funds deposited in the Escrow Account by the depository institution, other
than interest on escrowed funds required by law to be paid to the Mortgagor.
To the extent required by law, the Company shall pay interest on escrowed
funds to the Mortgagor notwithstanding that the Escrow Account may be non-
interest bearing or that interest paid thereon is insufficient for such
purposes.
Section 4.07 Permitted Withdrawals From Escrow Account.
Withdrawals from the Escrow Account or Accounts may be made by the
Company only:
(i) to effect timely payments of ground rents, taxes, assessments,
water rates, mortgage insurance premiums, condominium charges, fire and
hazard insurance premiums or other items constituting Escrow Payments for the
related Mortgage;
(ii) to reimburse the Company for any Servicing Advances made
by the Company pursuant to Section 4.08 with respect to a related Mortgage
Loan, but only from amounts received on the related Mortgage Loan which
represent late collections of Escrow Payments thereunder;
(iii) to refund to any Mortgagor any funds found to be in
excess of the amounts required under the terms of the related Mortgage Loan;
(iv) for transfer to the Custodial Account and application to
reduce the principal balance of the Mortgage Loan in accordance with the
terms of the related Mortgage and Mortgage Note;
(v) for application to restoration or repair of the Mortgaged
Property in accordance with the procedures outlined in Section 4.14;
(vi) to pay to the Company, or any Mortgagor to the extent
required by law, any interest paid on the funds deposited in the Escrow
Account;
(vii) to clear and terminate the Escrow Account on the
termination of this Agreement; and
(viii) to withdraw funds deposited in error.
Section 4.08 Payment of Taxes, Insurance and Other Charges.
With respect to each Mortgage Loan, the Company shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates, sewer rents, and other charges which are or may become a lien
upon the Mortgaged Property and fire and hazard insurance coverage and shall
obtain, from time to time, all bills for the payment of such charges
(including renewal premiums) and shall effect payment thereof prior to the
applicable penalty or termination date, employing for such purpose deposits
of the Mortgagor in the Escrow Account which shall have been estimated and
accumulated by the Company in amounts sufficient for such purposes, as
allowed under the terms of the Mortgage. To the extent that a Mortgage does
not provide for Escrow Payments, the Company shall use commercially
reasonable efforts consistent with Accepted Servicing Practices to determine
that any such payments are made by the Mortgagor at the time they first
become due. The Company assumes full responsibility for the timely payment
of all such bills and (a) with regard to Escrow Mortgage Loans, shall effect
timely payment of all such charges irrespective of each Mortgagor's faithful
performance in the payment of same or the making of the Escrow Payments, and
the Company shall make advances from its own funds to effect such payments,
and (b) with regard to Non-Escrow Mortgage Loans, the Company shall make
advances from its own funds to effect any such delinquent payments to avoid
the lapse of insurance coverage on the Mortgaged Property or to avoid the
imposition of a tax lien; provided, however, that notwithstanding anything
contained herein to the contrary, if a tax lien is imposed on any Mortgaged
Property and the taxing authority forecloses on such Mortgaged Property, the
Company shall repurchase the related Mortgage Loan pursuant to the procedures
set forth in Section 3.04.
Section 4.09 Protection of Accounts.
The Company may transfer the Custodial Account or the Escrow
Account to a different Qualified Depository from time to time. Such transfer
shall be made only upon obtaining the consent of the Purchaser, which consent
shall not be withheld unreasonably, provided, however, if the Purchaser does
not respond within 30 days after receipt of request for consent, the
Purchaser shall have been deemed to consent to such transfer.
The Company shall bear any expenses, losses or damages sustained by
the Purchaser because the Custodial Account and/or the Escrow Account are not
demand deposit accounts.
Amounts on deposit in the Custodial Account and the Escrow Account
may at the option of the Company be invested in Eligible Investments;
provided that in the event that amounts on deposit in the Custodial Account
or the Escrow Account exceed the amount fully insured by the FDIC (the
"Insured Amount") the Company shall be obligated to invest the excess amount
over the Insured Amount in Eligible Investments on the same Business Day as
such excess amount becomes present in the Custodial Account or the Escrow
Account. Any such Eligible Investment shall mature no later than the
Determination Date next following the date of such Eligible Investment,
provided, however, that if such Eligible Investment is an obligation of a
Qualified Depository (other than the Company) that maintains the Custodial
Account or the Escrow Account, then such Eligible Investment may mature on
such Remittance Date. Any such Eligible Investment shall be made in the name
of the Company in trust for the benefit of the Purchaser. All income on or
gain realized from any such Eligible Investment shall be for the benefit of
the Company and may be withdrawn at any time by the Company. Any losses
incurred in respect of any such investment shall be deposited in the
Custodial Account or the Escrow Account, by the Company out of its own funds
immediately as realized.
Section 4.10 Maintenance of Hazard Insurance.
The Company shall cause to be maintained for each Mortgage Loan
hazard insurance such that all buildings upon the Mortgaged Property are
insured by a generally acceptable insurer rated B:III or better in the
current Best's Key Rating Guide ("Best's") against loss by fire, hazards of
extended coverage and such other hazards as are customary in the area where
the Mortgaged Property is located, in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing
such Mortgage Loan and (ii) the greater of (a) the outstanding principal
balance of the Mortgage Loan and (b) an amount such that the proceeds thereof
shall be sufficient to prevent the Mortgagor or the loss payee from becoming
a co-insurer.
If upon origination of the Mortgage Loan, the related Mortgaged
Property was located in an area identified in the Federal Register by the
Flood Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available) a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance
Administration is in effect with a generally acceptable insurance carrier
rated B:III or better in Best's in an amount representing coverage equal to
the lesser of (i) the minimum amount required, under the terms of coverage,
to compensate for any damage or loss on a replacement cost basis (or the
unpaid balance of the mortgage if replacement cost coverage is not available
for the type of building insured) and (ii) the maximum amount of insurance
which is available under the Flood Disaster Protection Act of 1973, as
amended. If at any time during the term of the Mortgage Loan, the Company
determines in accordance with applicable law and pursuant to the FNMA Guides
that a Mortgaged Property is located in a special flood hazard area and is
not covered by flood insurance or is covered in an amount less than the
amount required by the Flood Disaster Protection Act of 1973, as amended, the
Company shall notify the related Mortgagor that the Mortgagor must obtain
such flood insurance coverage, and if said Mortgagor fails to obtain the
required flood insurance coverage within forty-five (45) days after such
notification, the Company shall immediately force place the required flood
insurance on the Mortgagor's behalf.
If a Mortgage is secured by a unit in a condominium project, the
Company shall verify that the coverage required of the owner's association,
including hazard, flood, liability, and fidelity coverage, is being
maintained in accordance with then current FNMA requirements, and secure from
the owner's association its agreement to notify the Company promptly of any
change in the insurance coverage or of any condemnation or casualty loss that
may have a material effect on the value of the Mortgaged Property as
security.
The Company shall cause to be maintained on each Mortgaged Property
earthquake or such other or additional insurance as may be required pursuant
to such applicable laws and regulations as shall at any time be in force and
as shall require such additional insurance, or pursuant to the requirements
of any private mortgage guaranty insurer, or as may be required to conform
with Accepted Servicing Practices.
In the event that any Purchaser or the Company shall determine that
the Mortgaged Property should be insured against loss or damage by hazards
and risks not covered by the insurance required to be maintained by the
Mortgagor pursuant to the terms of the Mortgage, the Company shall, at its
discretion, communicate with the Mortgagor with respect to the need for such
insurance and bring to the Mortgagor's attention the desirability of
protection of the Mortgaged Property.
All policies required hereunder shall name the Company as loss
payee and shall be endorsed with standard or union mortgagee clauses, without
contribution, which shall provide for at least 30 days prior written notice
of any cancellation, reduction in amount or material change in coverage.
The Company shall not interfere with the Mortgagor's freedom of
choice in selecting either his insurance carrier or agent, provided, however,
that the Company shall not accept any such insurance policies from insurance
companies unless such companies are rated B:III or better in Best's and are
licensed to do business in the jurisdiction in which the Mortgaged Property
is located. The Company shall determine that such policies provide
sufficient risk coverage and amounts, that they insure the property owner,
and that they properly describe the property address. The Company shall
furnish to the Mortgagor a formal notice of expiration of any such insurance
in sufficient time for the Mortgagor to arrange for renewal coverage by the
expiration date.
Pursuant to Section 4.04, any amounts collected by the Company
under any such policies (other than amounts to be deposited in the Escrow
Account and applied to the restoration or repair of the related Mortgaged
Property, or property acquired in liquidation of the Mortgage Loan, or to be
released to the Mortgagor, in accordance with the Company's normal servicing
procedures as specified in Section 4.14) shall be deposited in the Custodial
Account subject to withdrawal pursuant to Section 4.05.
Section 4.11 Maintenance of Mortgage Impairment Insurance.
In the event that the Company shall obtain and maintain a blanket
policy insuring against losses arising from fire and hazards covered under
extended coverage on all of the Mortgage Loans, then, to the extent such
policy provides coverage in an amount equal to the amount required pursuant
to Section 4.10 and otherwise complies with all other requirements of Section
4.10, it shall conclusively be deemed to have satisfied its obligations as
set forth in Section 4.10. Any amounts collected by the Company under any
such policy relating to a Mortgage Loan shall be deposited in the Custodial
Account or Escrow Account subject to withdrawal pursuant to Sections 4.05 or
4.14. Such policy may contain a deductible clause, in which case, in the
event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 4.10, and there shall have been a
loss which would have been covered by such policy, the Company shall deposit
in the Custodial Account at the time of such loss the amount not otherwise
payable under the blanket policy because of such deductible clause, such
amount to deposited from the Company's funds, without reimbursement therefor.
Upon request of any Purchaser, the Company shall cause to be delivered to
such Purchaser a certified true copy of such policy and a statement from the
insurer thereunder that such policy shall in no event be terminated or
materially modified without 30 days' prior written notice to such Purchaser.
Section 4.12 Maintenance of Fidelity Bond and Errors and
Omissions Insurance.
The Company shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance
Policy, with broad coverage on all officers, employees or other persons
acting in any capacity requiring such persons to handle funds, money,
documents or papers relating to the Mortgage Loans ("Company Employees").
Any such Fidelity Bond and Errors and Omissions Insurance Policy shall be in
the form of the Mortgage Banker's Blanket Bond and shall protect and insure
the Company against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such Company Employees. Such
Fidelity Bond and Errors and Omissions Insurance Policy also shall protect
and insure the Company against losses in connection with the release or
satisfaction of a Mortgage Loan without having obtained payment in full of
the indebtedness secured thereby. No provision of this Section 4.12
requiring such Fidelity Bond and Errors and Omissions Insurance Policy shall
diminish or relieve the Company from its duties and obligations as set forth
in this Agreement. The minimum coverage under any such bond and insurance
policy shall be at least equal to the corresponding amounts required by FNMA
in the FNMA Mortgage-Backed Securities Selling and Servicing Guide or by
FHLMC in the FHLMC Sellers' & Servicers' Guide. Upon the request of any
Purchaser, the Company shall cause to be delivered to such Purchaser a
certified true copy of such fidelity bond and insurance policy and a
statement from the surety and the insurer that such fidelity bond and
insurance policy shall in no event be terminated or materially modified
without 30 days' prior written notice to the Purchaser.
Section 4.13 Inspections.
The Company shall inspect the Mortgaged Property as often as deemed
necessary by the Company to assure itself that the value of the Mortgaged
Property is being preserved. In addition, if any Mortgage Loan is more than
60 days delinquent, the Company immediately shall inspect the Mortgaged
Property and shall conduct subsequent inspections in accordance with Accepted
Servicing Practices. The Company shall keep a written report of each such
inspection.
Section 4.14 Restoration of Mortgaged Property.
The Company need not obtain the approval of the Purchaser prior to
releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to
be applied to the restoration or repair of the Mortgaged Property if such
release is in accordance with Accepted Servicing Practices. At a minimum,
with respect to claims of $5000 or more, the Company shall comply with the
following conditions in connection with any such release of Insurance
Proceeds or Condemnation Proceeds:
(i) the Company shall receive satisfactory independent
verification of completion of repairs and issuance of any required approvals
with respect thereto;
(ii) the Company shall take all steps necessary to preserve
the priority of the lien of the Mortgage, including, but not limited to
requiring waivers with respect to mechanics' and materialmen's liens;
(iii) the Company shall verify that the Mortgage Loan is not 60
or more days delinquent; and
(vi) pending repairs or restoration, the Company shall place
the Insurance Proceeds or Condemnation Proceeds in the Escrow Account.
With respect to claims of less than $5000, the Company shall comply
with the following conditions in connection with any such release of
Insurance Proceeds or Condemnation Proceeds:
(i) the related Mortgagor shall provide an affidavit
verifying the completion of repairs and issuance of any required approvals
with respect thereto;
(ii) the Company shall verify the total amount of the claim
with the applicable insurance company; and
(iii) pending repairs or restoration, the Company shall place
the Insurance Proceeds or Condemnation Proceeds in the Escrow Account.
If the Purchaser is named as an additional loss payee, the Company
is hereby empowered to endorse any loss draft issued in respect of such a
claim in the name of the Purchaser.
Section 4.15 Title, Management and Disposition of REO
Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be taken in the name of the Purchaser, or in the event the
Purchaser is not authorized or permitted to hold title to real property in
the state where the REO Property is located, or would be adversely affected
under the "doing business" or tax laws of such state by so holding title, the
deed or certificate of sale shall be taken in the name of such Person or
Persons as shall be consistent with an Opinion of Counsel obtained by the
Company from any attorney duly licensed to practice law in the state where
the REO Property is located. The Person or Persons holding such title other
than the Purchaser shall acknowledge in writing that such title is being held
as nominee for the Purchaser.
The Company shall manage, conserve, protect and operate each REO
Property for the Purchaser solely for the purpose of its prompt disposition
and sale. The Company, either itself or through an agent selected by the
Company, shall manage, conserve, protect and operate the REO Property in the
same manner that it manages, conserves, protects and operates other
foreclosed property for its own account, and in the same manner that similar
property in the same locality as the REO Property is managed. The Company
shall attempt to sell the same (and may temporarily rent the same for a
period not greater than one year, except as otherwise provided below) on such
terms and conditions as the Company deems to be in the best interest of the
Purchaser.
The Company shall use its best efforts to dispose of the REO
Property as soon as possible and shall sell such REO Property in any event
within two years after title has been taken to such REO Property, unless (i)
(A) a REMIC election has not been made with respect to the arrangement under
which the Mortgage Loans and the REO Property are held, and (ii) the Company
determines, and gives an appropriate notice to the Purchaser to such effect,
that a longer period is necessary for the orderly liquidation of such REO
Property. If a period longer than one year is permitted under the foregoing
sentence and is necessary to sell any REO Property, (i) the Company shall
report monthly to the Purchaser as to the progress being made in selling such
REO Property and (ii) if, with the written consent of the Purchaser, a
purchase money mortgage is taken in connection with such sale, such purchase
money mortgage shall name the Company as mortgagee, and such purchase money
mortgage shall not be held pursuant to this Agreement, but instead a separate
participation agreement among the Company and Purchaser shall be entered into
with respect to such purchase money mortgage.
The Company shall also maintain on each REO Property fire and
hazard insurance with extended coverage in an amount which is at least equal
to the maximum insurable value of the improvements which are a part of such
property, liability insurance and, to the extent required and available under
the Flood Disaster Protection Act of 1973, as amended, flood insurance in the
amount required above.
The disposition of REO Property shall be carried out by the Company
at such price, and upon such terms and conditions, as the Company deems to be
in the best interests of the Purchaser. The proceeds of sale of the REO
Property shall be promptly deposited in the Custodial Account. As soon as
practical thereafter the expenses of such sale shall be paid and the Company
shall reimburse itself for any related unreimbursed Servicing Advances,
unpaid Servicing Fees, and on the Remittance Date immediately following the
date on which such sale proceeds are received the net cash proceeds of such
sale remaining in the Custodial Account shall be distributed to the
Purchaser.
The Company shall advance funds necessary for the proper operation,
management and maintenance of the REO Property, including the cost of
maintaining any hazard insurance pursuant to Section 4.10 and the fees of any
managing agent of the Company, a Subservicer, or the Company itself which
advances shall be deemed "Servicing Advances" for the purposes hereunder.
The REO management fee shall be an amount that is reasonable and customary in
the area where the Mortgaged Property is located. The Company shall make
monthly distributions on each Remittance Date to the Purchasers of the net
cash flow from the REO Property (which shall equal the revenues from such REO
Property net of the expenses described in the Section 4.15 and of any
reserves reasonably required from time to time to be maintained to satisfy
anticipated liabilities for such expenses).
Notwithstanding the foregoing, at any time and from time to time,
the Purchaser may at its election terminate this Agreement with respect to
one or more REO Properties as provided by Section 11.02.
Section 4.16 Real Estate Owned Reports.
Together with the statement furnished pursuant to Section 5.02, the
Company shall furnish to the Purchaser on or before the Remittance Date each
month a statement with respect to any REO Property covering the operation of
such REO Property for the previous month and the Company's efforts in
connection with the sale of such REO Property and any rental of such REO
Property incidental to the sale thereof for the previous month. That
statement shall be accompanied by such other information as the Purchaser
shall reasonably request.
Section 4.17 Liquidation Reports.
Upon the foreclosure sale of any Mortgaged Property or the
acquisition thereof by the Purchaser pursuant to a deed in lieu of
foreclosure, the Company shall submit to the Purchaser a liquidation report
with respect to such Mortgaged Property.
Section 4.18 Notification of Adjustments.
With respect to each Pool I Mortgage Loan, the Company shall adjust
the Mortgage Interest Rate on the related Interest Rate Adjustment Date in
compliance with the requirements of applicable law and the related Mortgage
and Mortgage Note. The Company shall execute and deliver any and all
necessary notices required under applicable law and the terms of the related
Mortgage Note and Mortgage regarding the Mortgage Interest Rate adjustments.
The Company shall promptly, upon written request therefor, deliver to the
Purchaser such notifications and any additional applicable data regarding
such adjustments and the methods used to calculate and implement such
adjustments. Upon the discovery by the Company or the receipt of notice from
the Purchaser that the Company has failed to adjust a Mortgage Interest Rate
in accordance with the terms of the related Mortgage Note, the Company shall
immediately deposit in the Custodial Account from its own funds the amount of
any interest loss or deferral caused the Purchaser thereby.
Section 4.19 Reports of Foreclosures and Abandonments of
Mortgaged Property.
Following the foreclosure sale or abandonment of any Mortgaged
Property, the Company shall report such foreclosure or abandonment as
required pursuant to Section 6050J of the Code.
Section 4.20 Monthly Advances by Servicer.
Subject to Section 7.03, the Servicer shall have no obligation to
advance any amounts constituting delinquent principal and interest payments
with respect to the Mortgage Loans.
ARTICLE V
PAYMENTS TO PURCHASER
Section 5.01 Remittances.
On each Remittance Date the Company shall remit by wire transfer of
immediately available funds to the Purchaser all amounts deposited in the
Custodial Account as of the close of business on the Determination Date (net
of charges against or withdrawals from the Custodial Account pursuant to
Section 4.05).
With respect to any remittance received by the Purchaser after the
second Business Day following the Business Day on which such payment was due,
the Company shall pay to the Purchaser interest on any such late payment at
an annual rate equal to the Prime Rate, adjusted as of the date of each
change, plus three percentage points, but in no event greater than the
maximum amount permitted by applicable law. Such interest shall be deposited
in the Custodial Account by the Company on the date such late payment is made
and shall cover the period commencing with the day following such second
Business Day and ending with the Business Day on which such payment is made,
both inclusive. Such interest shall be remitted along with the distribution
payable on the next succeeding Remittance Date. The payment by the Company
of any such interest shall not be deemed an extension of time for payment or
a waiver of any Event of Default by the Company.
Section 5.02 Statements to Purchaser.
Not later than the Remittance Date, the Company shall furnish to
the Purchaser a Monthly Remittance Advice, with a trial balance report
attached thereto, in the form of Exhibit F annexed hereto in hard copy and
electronic medium mutually acceptable to the parties as to the preceding
remittance and the period ending on the preceding Determination Date.
In addition, not more than 60 days after the end of each calendar
year, the Company shall furnish to each Person who was a Purchaser at any
time during such calendar year an annual statement in accordance with the
requirements of applicable federal income tax law as to the aggregate of
remittances for the applicable portion of such year.
Such obligation of the Company shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Company pursuant to any requirements of the Internal Revenue
Code as from time to time are in force.
The Company shall prepare and file any and all tax returns,
information statements or other filings required to be delivered to any
governmental taxing authority or to any Purchaser pursuant to any applicable
law with respect to the Mortgage Loans and the transactions contemplated
hereby. In addition, the Company shall provide each Purchaser with such
information concerning the Mortgage Loans as is necessary for such Purchaser
to prepare its federal income tax return as any Purchaser may reasonably
request from time to time.
Section 5.03 Due Dates Other Than the First of the Month.
Mortgage Loans having Due Dates other than the first day of a
month, including Mortgage Loans permitting semi-annual amortization of
principal, shall be accounted for as described in this Section 5.03. Any
payment due on a day other than the first day of each month shall be
considered due on the first day of the month in which that payment is due as
if such payment were due on the first day of said month. For example, a
payment due on August 15 shall be considered to be due on August 1 of said
month. With respect to a Mortgage Note permitting semi-annual amortization
of principal, the Company shall be required to remit monthly scheduled
principal and interest based on a monthly amortization schedule. Any payment
collected on a Mortgage Loan after the Cut-off Date shall be deposited in the
Custodial Account. For Mortgage Loans with Due Dates on the first day of a
month, deposits to the Custodial Account begin with the payment due on the
first of the month following the Cut-off Date.
ARTICLE VI
GENERAL SERVICING PROCEDURES
Section 6.0l Transfers of Mortgaged Property.
The Company shall use its best efforts to enforce any "due-on-sale"
provision contained in any Mortgage or Mortgage Note and to deny assumption
by the person to whom the Mortgaged Property has been or is about to be sold
whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains liable on the Mortgage and the Mortgage Note; provided
that, if in the Company's prudent business judgment, it determines that an
assumption of the Mortgage Loan is in the best interests of the Purchaser, it
shall deliver notice of such determination to the Purchaser and may permit
such assumption if approved by the Purchaser. When the Mortgaged Property
has been conveyed by the Mortgagor, the Company shall, to the extent it has
knowledge of such conveyance or the Purchaser's consent otherwise in
accordance with the preceding sentence, exercise its rights to accelerate the
maturity of such Mortgage Loan under the "due-on-sale" clause applicable
thereto, provided, however, that the Company shall not exercise such rights
if prohibited by law from doing so.
If the Company reasonably believes it is unable under applicable
law to enforce such "due-on-sale" clause or if the Purchaser approves such
assumption pursuant to the preceding paragraph, the Company shall enter into
(i) an assumption and modification agreement with the person to whom such
property has been conveyed, pursuant to which such person becomes liable
under the Mortgage Note and the original Mortgagor remains liable thereon or
(ii) in the event the Company is unable under applicable law to require that
the original Mortgagor remain liable under the Mortgage Note and the Company
has the prior consent of the primary mortgage guaranty insurer, a
substitution of liability agreement with the purchaser of the Mortgaged
Property pursuant to which the original Mortgagor is released from liability
and the purchaser of the Mortgaged Property is substituted as Mortgagor and
becomes liable under the Mortgage Note. If an assumption fee is collected by
the Company for entering into an assumption agreement, such assumption fee
shall be retained by the Company. In connection with any such assumption,
neither the Mortgage Interest Rate borne by the related Mortgage Note, the
term of the Mortgage Loan nor the outstanding principal amount of the
Mortgage Loan shall be changed.
To the extent that any Mortgage Loan is assumable, the Company
shall inquire diligently into the creditworthiness of the proposed
transferee, and shall use the underwriting criteria for approving the credit
of the proposed transferee which are used by the Company with respect to
underwriting mortgage loans of the same type as the Mortgage Loans. If the
credit of the proposed transferee does not meet such underwriting criteria,
the Company diligently shall, to the extent permitted by the Mortgage or the
Mortgage Note and by applicable law, accelerate the maturity of the Mortgage
Loan.
Section 6.02 Satisfaction of Mortgages and Release of Mortgage
Files.
Upon the payment in full of any Mortgage Loan the Company shall
notify the Purchaser in the Monthly Remittance Advice as provided in Section
5.02, and may request the release of any Mortgage Loan Documents.
If the Company satisfies or releases a Mortgage without first
having obtained payment in full of the indebtedness secured by the Mortgage
or should the Company otherwise prejudice any rights the Purchaser may have
under the mortgage instruments, upon written demand of the Purchaser, the
Company shall repurchase the related Mortgage Loan at the Repurchase Price by
deposit thereof in the Custodial Account within 2 Business Days of receipt of
such demand by the Purchaser. The Company shall maintain the Fidelity Bond
and Errors and Omissions Insurance Policy as provided for in Section 4.12
insuring the Company against any loss it may sustain with respect to any
Mortgage Loan not satisfied in accordance with the procedures set forth
herein.
Section 6.03 Servicing Compensation.
As compensation for its services hereunder, the Company shall be
entitled to withdraw from the Custodial Account or to retain from interest
payments on the Mortgage Loans the amount of its Servicing Fee. The
Servicing Fee shall be payable monthly and shall be computed on the basis of
the same unpaid principal balance and for the period respecting which any
related interest payment on a Mortgage Loan is computed. The Servicing Fee
shall be payable only at the time of and with respect to those Mortgage Loans
for which payment is in fact made of the entire amount of the Monthly Payment
(except for any de minimus amount which shall not exceed $15.00 which is
advanced by the Company, except as provided in Section 11.02 herein). The
obligation of the Purchaser to pay the Servicing Fee is limited to, and
payable solely from, the interest portion of such Monthly Payments collected
by the Company. For defaulted Mortgage Loans, the Company shall be entitled
to the Servicing Fee from Liquidation Proceeds in respect to such Mortgage
Loan.
Additional servicing compensation in the form of assumption fees,
late payment charges and other ancillary fees shall be retained by the
Company to the extent not required to be deposited in the Custodial Account.
The Company shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled
to reimbursement thereof except as specifically provided for herein.
Section 6.04 Annual Statement as to Compliance.
The Company shall deliver to the Purchaser, on or before July 31
each year beginning July 31, 1998, an Officer's Certificate, stating that (i)
a review of the activities of the Company during the preceding calendar year
and of performance under this Agreement has been made under such officer's
supervision, and (ii) the Company has complied fully with the provisions of
Article II and Article IV, and (iii) to the best of such officer's knowledge,
based on such review, the Company has fulfilled all its obligations under
this 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 the action being taken by
the Company to cure such default.
Section 6.05 Annual Independent Public Accountants' Servicing
Report.
On or before July 31st of each year beginning July 31, 1998, the
Company, at its expense, shall cause a firm of independent public accountants
which is a member of the American Institute of Certified Public Accountants
to furnish a statement to each Purchaser stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Company which includes an assertion that the Company has complied with
certain minimum residential mortgage loan servicing standards, identified in
the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America, with respect to the servicing of
residential mortgage loans during the most recently completed fiscal year and
(ii) on the basis of an examination conducted by such firm in accordance with
standards established by the American Institute of Certified Public
Accountants, such representation is fairly stated in all material respects,
subject to the exception and other qualifications that may be appropriate.
On or before July 31st of each year beginning July 31, 1998, at the
Purchaser's request the Company, at the Purchaser's expense, shall cause a
firm of independent public accountants which is a member of the American
Institute of Certified Public Accountants to furnish a statement to each
Purchaser to the effect that such firm has examined certain documents and
records relating to the servicing of the Mortgage Loans and this Agreement
and that such firm is of the opinion that the provisions of Article II and
Article IV have been complied with, and that, on the basis of such
examination, nothing has come to their attention which would indicate that
such servicing has not been conducted in compliance therewith, except for (i)
such exceptions as such firm shall believe to be immaterial, and (ii) such
other exceptions as shall be set forth in such statement.
Section 6.06 Right to Examine Company Records.
The Purchaser shall have the right to examine and audit any and all
of the books, records, or other information of the Company, whether held by
the Company or by another on its behalf, with respect to or concerning this
Agreement or the Mortgage Loans, during business hours or at such other times
as may be reasonable under applicable circumstances, upon reasonable advance
notice.
ARTICLE VII
AGENCY TRANSFER; PASS-THROUGH TRANSFER
Section 7.01 Removal of Mortgage Loans from Inclusion Under this
Agreement Upon an Agency Transfer, or a Pass-Through
Transfer on One or More Reconstitution Dates.
The Purchaser and the Company agree that with respect to some or
all of the Mortgage Loans, from time to time (but not more than five (5)
times) the Purchaser shall:
(1) Effect an Agency Transfer, and/or
(2) Effect a Pass-Through Transfer, in each case retaining the
Company as the servicer thereof, or as applicable the "seller/servicer". On
the related Reconstitution Date, the Mortgage Loans transferred shall cease
to be covered by this Agreement.
The Company shall reasonably cooperate with the Purchaser in
connection with any Agency Transfer or Pass-Through Transfer contemplated by
the Purchaser pursuant to this Section 7.01. In that connection, the Company
shall (a) execute any Reconstitution Agreement within a reasonable period of
time after receipt of any Reconstitution Agreement which time shall be
sufficient for the Company and Company's counsel to review such
Reconstitution Agreement, but such time shall not exceed ten (10) Business
Days after such receipt, and (b) provide to FNMA, FHLMC, the trustee or a
third party purchaser, as the case may be, subject to any Reconstitution
Agreement and/or the Purchaser: (i) any and all information and appropriate
verification of information which may be reasonably available to the Company,
whether through letters of its auditors (the reasonable out-of-pocket cost of
which will be borne by the Purchaser) and counsel or otherwise, as the
Purchaser shall reasonably request; (ii) to bring each of the Mortgage Loan
representations and warranties current (except for items (a), (c), (r), (v)
and (cc) of Section 3.02 and the Company shall only make the representation
and warranty contained in Section 3.02(v) current if the related
Reconstitution Date occurs within 90 days after the Closing Date) as of the
date the Mortgage Loans are being transferred pursuant to a Pass-through
Transfer or Agency Transfer, provided that, such Mortgage Loan
representations and warranties shall be revised, to the extent allowed or
required by the rating agencies and the certificate insurer and acceptable to
the Purchaser, to reflect the actual pool of Mortgage Loans being
securitized; notwithstanding the foregoing, Company shall, at the time of
securitization, be entitled to state certain exceptions to the Mortgage Loan
representations and warranties necessary to make same true and correct as of
the time of the Pass-through Transfer or Agency Transfer and (iii) such
additional representations, warranties, covenants, opinions of counsel,
letters from auditors, and certificates of public officials or officers of
the Company as are reasonably believed necessary by FNMA, FHLMC, the trustee,
such third party purchaser, any master servicer, any rating agency or the
Purchaser, as the case may be, in connection with such transactions;
provided, however, that these items shall not be more onerous than such
similar items set forth herein.
In the event the Purchaser has elected to have the Company hold
record title to the Mortgages, prior to a Reconstitution Date the Company or
its designee shall prepare an Assignment of Mortgage in blank from the
Company, acceptable to FNMA, FHLMC, the trustee or such third party, as the
case may be, for each Mortgage Loan that is part of an Agency Transfer, or
Pass-Through Transfer and shall pay all preparation and recording costs
associated therewith. The Company shall execute each Assignment of Mortgage,
track such Assignments of Mortgage to ensure they have been recorded and
deliver them as required by FNMA, FHLMC, the trustee or such third party, as
the case may be, upon the Company's receipt thereof. Additionally, the
Company shall prepare and execute, at the direction of the Purchaser, any
Mortgage Note endorsements in connection with any and all Reconstitution
Agreements.
All Mortgage Loans not sold or transferred pursuant to an Agency
Transfer or Pass-Through Transfer and any Mortgage Loans repurchased by the
Purchaser pursuant to Section 7.02 hereof, shall be subject to this Agreement
and shall continue to be serviced in accordance with the terms of this
Agreement and with respect thereto this Agreement shall remain in full force
and effect.
Section 7.02 Purchaser's Repurchase and Indemnification
Obligations.
Upon receipt by the Company of notice from FNMA, FHLMC or the
trustee of a breach of any Purchaser representation or warranty contained in
any Reconstitution Agreement or a request by FNMA, FHLMC or the trustee, as
the case may be, for the repurchase of any Mortgage Loan transferred to FNMA
or FHLMC pursuant to an Agency Transfer or to a trustee pursuant to a Pass-
Through Transfer, the Company shall promptly notify the Purchaser of same and
shall, at the direction of the Purchaser, use its best efforts to cure and
correct any such breach and to satisfy the requests or concerns of FNMA,
FHLMC, or the trustee related to such deficiencies of the related Mortgage
Loans transferred to FNMA, FHLMC, or the trustee.
The Purchaser shall repurchase from the Company any Mortgage Loan
transferred to FNMA or FHLMC pursuant to an Agency Transfer or to a trustee
pursuant to a Pass-Through Transfer with respect to which the Company has
been required by FNMA, FHLMC, or the trustee to repurchase due to a breach of
a representation or warranty made by the Purchaser with respect to the
Mortgage Loans, or the servicing thereof prior to the transfer date to FNMA,
FHLMC, or the trustee in any Reconstitution Agreement and not due to a breach
of the Company's representations or obligations thereunder or pursuant to
this Agreement. The repurchase price to be paid by the Purchaser to the
Company shall equal that repurchase price paid by the Company to FNMA, FHLMC,
or the third party purchaser plus all reasonable costs and expenses borne by
the Company in connection with the cure of said breach of a representation or
warranty made by the Purchaser and in connection with the repurchase of such
Mortgage Loan from FNMA, FHLMC, or the trustee, including, but not limited
to, reasonable and necessary attorneys' fees.
At the time of repurchase, the Custodian and the Company shall
arrange for the reassignment of the repurchased Mortgage Loan to the
Purchaser according to the Purchaser's instructions and the delivery to the
Custodian of any documents held by FNMA, FHLMC, or the trustee with respect
to the repurchased Mortgage Loan pursuant to the related Reconstitution
Agreement. In the event of a repurchase, the Company shall, simultaneously
with such reassignment, give written notice to the Purchaser that such
repurchase has taken place, and amend the Mortgage Loan Schedule to reflect
the addition of the repurchased Mortgage Loan to this Agreement.
Section 7.03 Monthly Advances.
Notwithstanding anything contained herein to the contrary, in
connection with (a) a Pass-Through Transfer, the Servicer shall make Monthly
Advances through the Remittance Date immediately preceding the distribution
of all Liquidation Proceeds and other payments or recoveries (including
Insurance Proceeds and Condemnation Proceeds) with respect to the related
Mortgage Loans or such earlier time period as set forth in the related
Reconstitution Agreement, (b) an Agency Transfer, the Servicer shall make
Monthly Advances as required by FNMA or FHLMC as applicable, and (c) a Whole
Loan Transfer, the Servicer shall make Monthly Advances through the
Remittance Date immediately preceding the date that such Mortgage Loan
becomes REO Property.
Section 7.04 Compensating Interest.
Notwithstanding anything contained herein to the contrary, in
connection with (a) a Pass-Through Transfer, or (b) an Agency Transfer, or
(c) a Whole Loan Transfer, the Company shall deposit in the Custodial Account
on a daily basis, and retain therein with respect to each Principal
Prepayment in full, the Prepayment Interest Shortfall Amount, if any, for the
month of distribution. Such deposit shall be made from the Company's own
funds, without reimbursement therefor up to a maximum amount per month of the
Servicing Fee actually received for such month for the Mortgage Loans.
ARTICLE VIII
COMPANY TO COOPERATE
Section 8.01 Provision of Information.
During the term of this Agreement, the Company shall furnish to the
Purchaser such periodic, special, or other reports or information and copies
or originals of any documents contained in the Servicing File for each
Mortgage Loan, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Purchaser, any regulatory
requirement pertaining to the Purchaser or the purposes of this Agreement.
All such reports, documents or information shall be provided by and in
accordance with all reasonable instructions and directions which the
Purchaser may give.
The Company shall execute and deliver all such instruments and take
all such action as the Purchaser may reasonably request from time to time, in
order to effectuate the purposes and to carry out the terms of this
Agreement.
Section 8.02 Financial Statements; Servicing Facility.
In connection with marketing the Mortgage Loans, the Company will
make available to a prospective Purchaser a Consolidated Statement of
Operations of the Company for the most recently completed five fiscal years
for which such a statement is available, as well as a Consolidated Statement
of Condition at the end of the last two fiscal years covered by such
Consolidated Statement of Operations. The Company also shall make available
any comparable interim statements to the extent any such statements have been
prepared by or on behalf of the Company (and are available upon request to
members or stockholders of the Company or to the public at large). If it has
not already done so, the Company shall furnish promptly to the Purchaser
copies of the statement specified above.
Upon prior notice and during normal business hours, the Company
also shall make available to Purchaser or prospective Purchaser a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting recent developments affecting the Company or the
financial statements of the Company, and to permit any prospective Purchaser
to inspect the Company's servicing facilities or those of any Subservicer for
the purpose of satisfying such prospective Purchaser that the Company and any
Subservicer have the ability to service the Mortgage Loans as provided in
this Agreement.
ARTICLE IX
THE COMPANY
Section 9.01 Indemnification; Third Party Claims.
The Company shall indemnify the Purchaser and hold it harmless
against any and all claims, losses, damages, penalties, fines, forfeitures,
reasonable and necessary legal fees and related costs, judgments, and any
other costs, fees and expenses that the Purchaser may sustain in any way
related to the failure of the Company to perform its duties and service the
Mortgage Loans in strict compliance with the terms of this Agreement or any
Reconstitution Agreement entered into pursuant to Section 7.01. The Company
immediately shall notify the Purchaser if a claim is made by a third party
with respect to this Agreement or any Reconstitution Agreement or the
Mortgage Loans, shall promptly notify FNMA, FHLMC, or the trustee with
respect to any claim made by a third party with respect to any Reconstitution
Agreement, assume (with the prior written consent of the Purchaser) the
defense of any such claim and pay all expenses in connection therewith,
including counsel fees, and promptly pay, discharge and satisfy any judgment
or decree which may be entered against it or the Purchaser in respect of such
claim. The Company shall follow any written instructions received from the
Purchaser in connection with such claim. The Purchaser promptly shall
reimburse the Company for all amounts advanced by it pursuant to the
preceding sentence except when the claim is in any way related to the
Company's indemnification pursuant to Section 3.03, or the failure of the
Company to service and administer the Mortgage Loans in strict compliance
with the terms of this Agreement or any Reconstitution Agreement.
Section 9.02 Merger or Consolidation of the Company.
The Company shall keep in full effect its existence, rights and
franchises as a corporation, and shall obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform
its duties under this Agreement.
Any person into which the Company may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to
which the Company shall be a party, or any Person succeeding to the business
of the Company, shall be the successor of the Company hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding, provided,
however, that the successor or surviving Person shall be an institution (i)
having a net worth of not less than $15,000,000, and (ii) which is a FNMA-
approved company in good standing.
Section 9.03 Limitation on Liability of Company and Others.
Neither the Company nor any of the directors, officers, employees
or agents of the Company shall be under any liability to the Purchaser 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 Company or any such person
against any Breach of warranties or representations made herein, or failure
to perform its obligations in strict compliance with any standard of care set
forth in this Agreement, or any liability which would otherwise be imposed by
reason of any breach of the terms and conditions of this Agreement. The
Company and any director, officer, employee or agent of the Company may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The
Company shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the
Mortgage Loans in accordance with this Agreement and which in its opinion may
involve it in any expense or liability, provided, however, that the Company
may, with the consent of the Purchaser, undertake any such action which it
may deem necessary or desirable in respect to this Agreement and the rights
and duties of the parties hereto. In such event, the Company shall be
entitled to reimbursement from the Purchaser of the reasonable legal expenses
and costs of such action.
Section 9.04 Limitation on Resignation and Assignment by Company.
The Purchaser has entered into this Agreement with the Company and
subsequent Purchasers will purchase the Mortgage Loans in reliance upon the
independent status of the Company, and the representations as to the adequacy
of its servicing facilities, plant, personnel, records and procedures, its
integrity, reputation and financial standing, and the continuance thereof.
Therefore, the Company shall neither assign this Agreement or the servicing
hereunder or delegate its rights or duties hereunder or any portion hereof
(to other than a Subservicer or to a third party in the case of outsourcing
routine tasks such as taxes, insurance and property inspection, in which case
the Company shall be fully liable for such tasks as if the Company performed
them itself) or sell or otherwise dispose of all or substantially all of its
property or assets without the prior written consent of the Purchaser, which
consent shall be granted or withheld in the reasonable discretion of the
Purchaser.
The Company shall not resign from the obligations and duties hereby
imposed on it except by mutual consent of the Company and the Purchaser or
upon the determination that its duties hereunder are no longer permissible
under applicable law and such incapacity cannot be cured by the Company. Any
such determination permitting the resignation of the Company shall be
evidenced by an Opinion of Counsel to such effect delivered to the Purchaser
which Opinion of Counsel shall be in form and substance acceptable to the
Purchaser. No such resignation shall become effective until a successor
shall have assumed the Company's responsibilities and obligations hereunder
in the manner provided in Section 12.01.
Without in any way limiting the generality of this Section 9.04, in
the event that the Company either shall assign this Agreement or the
servicing responsibilities hereunder or delegate its duties hereunder or any
portion thereof (to other than a Subservicer or to a third party in the case
of outsourcing routine tasks such as taxes, insurance and property
inspection, in which case the Company shall be fully liable for such tasks as
if the Company performed them itself) or sell or otherwise dispose of all or
substantially all of its property or assets, without the prior written
consent of the Purchaser, then the Purchaser shall have the right to
terminate this Agreement upon notice given as set forth in Section 10.01,
without any payment of any penalty or damages and without any liability
whatsoever to the Company or any third party.
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
Each of the following shall constitute an Event of Default on the
part of the Company:
(a) any failure by the Company to remit to the Purchaser any
payment required to be made under the terms of this Agreement which
continues unremedied for a period of five days after the date upon which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Company by the Purchaser; or
(b) failure by the Company duly to observe or perform in any
material respect any other of the covenants or agreements on the part of
the Company set forth in this Agreement or in the Custodial Agreement
which continues unremedied for a period of 30 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given to the Company by the Purchaser; or
(c) failure by the Company to maintain its license to do business
in any jurisdiction where the Mortgaged Property is located; or
(d) 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,
including bankruptcy, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Company and such decree or order shall
have remained in force undischarged or unstayed for a period of 60 days;
or
(e) the Company 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 Company or of or relating to all or substantially all of
its property; or
(f) the Company 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, bankruptcy or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily suspend payment
of its obligations or cease its normal business operations for three
Business Days; or
(g) the Company ceases to meet the qualifications of a FNMA
servicer; or
(h) the Company fails to maintain a minimum net worth of
$15,000,000; or
(i) the Company attempts to assign its right to servicing
compensation hereunder or the Company attempts, without the consent of
the Purchaser, to sell or otherwise dispose of all or substantially all
of its property or assets or to assign this Agreement or the servicing
responsibilities hereunder or to delegate its duties hereunder or any
portion thereof (to other than a Subservicer or to a third party in the
case of outsourcing routine tasks such as taxes, insurance and property
inspection, in which case the Company shall be fully liable for such
tasks as if the Company performed them itself) in violation of Section
9.04.
In each and every such case, so long as an Event of Default shall
not have been remedied, in addition to whatsoever rights the Purchaser may
have at law or equity to damages, including injunctive relief and specific
performance, the Purchaser, by notice in writing to the Company, may
terminate all the rights and obligations of the Company under this Agreement
and in and to the Mortgage Loans and the proceeds thereof.
Upon receipt by the Company of such written notice, all authority
and power of the Company under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall pass to and be vested in the successor
appointed pursuant to Section 12.01. Upon written request from any
Purchaser, the Company shall prepare, execute and deliver to the successor
entity designated by the Purchaser any and all documents and other
instruments, place in such successor's possession all Mortgage Files, 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 Mortgage Loans and
related documents, at the Company's sole expense. The Company shall
cooperate with the Purchaser and such successor in effecting the termination
of the Company's responsibilities and rights hereunder, including without
limitation, the transfer to such successor for administration by it of all
cash amounts which shall at the time be credited by the Company to the
Custodial Account or Escrow Account or thereafter received with respect to
the Mortgage Loans.
Section 10.02 Waiver of Defaults.
By a written notice, the Purchaser may waive any default by the
Company in the performance of its obligations hereunder and its consequences.
Upon any waiver of a past default, such default shall cease to exist, and any
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 thereon except to
the extent expressly so waived.
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon either: (i) the later of the
final payment or other liquidation (or any advance with respect thereto) of
the last Mortgage Loan or the disposition of any REO Property with respect to
the last Mortgage Loan and the remittance of all funds due hereunder; or (ii)
mutual consent of the Company and the Purchaser in writing.
Section 11.02 Termination Without Cause.
The Purchaser may terminate, at its sole option, this Agreement,
without cause, as provided in this Section 11.02. Any such notice of
termination shall be in writing and delivered to the Company by registered
mail as provided in Section 12.05. The termination fee for the termination
of servicing without cause pursuant to this Section 11.02 shall be 1.25% of
the outstanding principal balance of the Mortgage Loans for which servicing
is being terminated.
On the second Business Day of each month, the Company shall orally
inform the Purchase of which Mortgage Loans have become delinquent for a
period of 61 days or more (each, a "Delinquent Mortgage Loan") and shall send
a written listing of such Delinquent Mortgage Loans to the Purchaser. By the
tenth day of each month (or if such tenth day is not a Business Day then the
next Business Day following such tenth day), the Purchaser shall provide the
Company with a certification (the "Transfer Notice") listing the Delinquent
Mortgage Loans which the Company desires to transfer the servicing by month
end to its designee (such designee, the "Special Servicer"). By the
fifteenth day of each month (and no later than the thirteenth day in February)
the Company shall mail to the Mortgagor of each Mortgage Loan listed in a
Transfer Notice a letter advising each such Mortgagor of the transfer of the
servicing of the related Mortgage Loan to the Special Servicer; in accordance
with the Cranston Gonzales National Affordable Housing Act of 1990 provided,
however, the content and format of the letter shall have the prior approval
of the Special Servicer. The Company shall promptly provide the Special
Servicer with copies of all such notices. At least five (5) Business Days
prior to the end of each month, the Company shall deliver, with respect to
the Delinquent Mortgage Loans listed on the related Transfer Notice, all
Servicing Files, a loan level tape in form reasonably acceptable to the
Purchaser and the Special Servicer, and supporting documentation, reasonably
acceptable to the Purchaser and the Special Servicer and commensurate with
generally acceptable industry standards, detailing the amount of any
unreimbursed Servicing Advances and accrued and unpaid Servicing Fees on a
loan level basis. Should the Purchaser and Special Servicer desire a loan
level tape containing information which is not readily extractable from the
Company's servicing system, the Company shall diligently cooperate to make
such loan level tape available to the Purchaser and Special Servicer. Upon
the successful completion of the transfer of servicing for Delinquent
Mortgage Loans, the Company shall cause the Special Servicer to reimburse the
Company for any unreimbursed Servicing Advances and accrued and unpaid
Servicing Fees with respect to such Delinquent Mortgage Loans which have been
properly documented. Notwithstanding anything herein to the contrary, the
transfer of servicing for Delinquent Mortgage Loans shall not require the
payment of a termination fee therefor.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01 Successor to Company.
Prior to termination of the Company's responsibilities and duties
under this Agreement pursuant to Sections 9.04, 10.01, 11.01 (ii) or pursuant
to Section 11.02 after the 90 day period has expired, the Purchaser shall,
(i) succeed to and assume all of the Company's responsibilities, rights,
duties and obligations under this Agreement, or (ii) appoint a successor
having the characteristics set forth in clauses (i) through (iii) of Section
9.02 and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Company under this Agreement
prior to the termination of Company's responsibilities, duties and
liabilities under this Agreement. In connection with such appointment and
assumption, the Purchaser may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor
shall agree. In the event that the Company's duties, responsibilities and
liabilities under this Agreement should be terminated pursuant to the
aforementioned sections, the Company shall discharge such duties and
responsibilities during the period from the date it acquires knowledge of
such termination until the effective date thereof with the same degree of
diligence and prudence which it is obligated to exercise under this
Agreement, and shall take no action whatsoever that might impair or prejudice
the rights or financial condition of its successor. The resignation or
removal of the Company pursuant to the aforementioned sections shall not
become effective until a successor shall be appointed pursuant to this
Section 12.01 and shall in no event relieve the Company of the
representations and warranties made pursuant to Sections 3.01 and 3.02 and
the remedies available to the Purchaser under Sections 3.04 and 3.05, it
being understood and agreed that the provisions of such Sections 3.01, 3.02,
3.03 and 3.05 shall be applicable to the Company notwithstanding any such
sale, assignment, resignation or termination of the Company, or the
termination of this Agreement.
Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Company and to the Purchaser an instrument
accepting such appointment, wherein the successor shall make the
representations and warranties set forth in Section 3.01, except for
subsections (j), (l), (m), (o) and (p) thereof, whereupon such successor
shall become fully vested with all the rights, powers, duties,
responsibilities, obligations and liabilities of the Company, with like
effect as if originally named as a party to this Agreement. Any termination
or resignation of the Company or termination of this Agreement pursuant to
Section 9.04, 10.01, 11.01 or 11.02 shall not affect any claims that any
Purchaser may have against the Company arising out of the Company's actions
or failure to act prior to any such termination or resignation.
The Company shall deliver promptly to the successor servicer the
funds in the Custodial Account and Escrow Account and all Mortgage Files and
related documents and statements held by it hereunder and the Company shall
account for all funds and shall execute and deliver such instruments and do
such other things as may reasonably be required to more fully and
definitively vest in the successor all such rights, powers, duties,
responsibilities, obligations and liabilities of the Company.
Upon a successor's acceptance of appointment as such, the Company
shall notify by mail the Purchaser of such appointment in accordance with the
procedures set forth in Section 12.05.
Section 12.02 Amendment.
This Agreement may be amended from time to time by the Company and
the Purchaser by written agreement signed by the Company and the Purchaser.
Section 12.03 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.
Section 12.04 Duration of Agreement.
This Agreement shall continue in existence and effect until
terminated as herein provided. This Agreement shall continue notwithstanding
transfers of the Mortgage Loans by the Purchaser.
Section 12.05 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 registered mail, postage prepaid, addressed as follows:
(i) if to the Company:
Option One Mortgage Corporation
2020 East First Street, Suite 100
Santa Ana, California 92705
Attention: Mr. Dave Wells
or such other address as may hereafter be furnished to the Purchaser in
writing by the Company;
(ii) if to Purchaser:
Lehman Capital, A Division of
Lehman Brothers Holdings Inc.
3 World Financial Center
12th Floor
200 Vesey Street
New York, New York 10285-1200
Attention: Contract Finance
Section 12.06 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 provisions of this Agreement.
Section 12.07 Relationship of Parties.
Nothing herein contained shall be deemed or construed to create a
partnership or joint venture between the parties hereto and the services of
the Company shall be rendered as an independent contractor and not as agent
for the Purchaser.
Section 12.08 Execution; Successors and Assigns.
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. This Agreement shall inure to
the benefit of and be binding upon the Company and the Purchaser and their
respective successors and assigns.
Section 12.09 Recordation of Assignments of Mortgage.
To the extent permitted by applicable law, each of the Assignments
of Mortgage is subject to recordation in all appropriate public offices for
real property records in all 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 at the Purchaser's expense in the event recordation is either
necessary under applicable law or requested by the Purchaser at its sole
option.
Section 12.10 Assignment by Purchaser.
The Purchaser shall have the right, without the consent of the
Company but subject to the limit set forth in Section 2.02 hereof, to assign,
in whole or in part, its interest under this Agreement with respect to some
or all of the Mortgage Loans, and designate any person to exercise any rights
of the Purchaser hereunder, by executing an Assignment and Assumption
Agreement substantially in the form of Exhibit G hereto. Upon such
assignment of rights and assumption of obligations, the assignee or designee
shall accede to the rights and obligations hereunder of the Purchaser with
respect to such Mortgage Loans and the Purchaser as assignor shall be
released from all obligations hereunder with respect to such Mortgage Loans
from and after the date of such Assignment and Assumption. All references to
the Purchaser in this Agreement shall be deemed to include its assignee or
designee.
Section 12.11 No Personal Solicitation.
From and after the Closing Date, the Company hereby agrees that it
will not take any action or permit or cause any action to be taken by any of
its agents or affiliates, or by any independent contractors on the Company's
behalf, to personally, by telephone or mail, solicit the borrower or obligor
under any Mortgage Loan for the purpose of refinancing a Mortgage Loan,
without the prior written consent of the Purchaser. It is understood and
agreed that all rights and benefits relating to the solicitation of any
Mortgagors and the attendant rights, title and interest in and to the list of
such Mortgagors and data relating to their Mortgages (including insurance
renewal dates) shall be transferred to the Purchaser pursuant hereto on
Closing Date and the Company shall take no action to undermine these rights
and benefits. Notwithstanding the foregoing, it is understood and agreed
that and promotions for (a) optional insurance products or (b) promotions
undertaken by the Company or any affiliate of the Company which are directed
to the general public at large, including, without limitation, mass mailing
based on commercially acquired mailing lists, newspaper, radio and television
advertisements shall not constitute solicitation under this Section 12.11.
In addition, it is understood and agreed that: (i) upon the receipt of a
verification of mortgage; (ii) a request for demand for payoff or (iii) a
Mortgagor initiated written or verbal communication indicating a desire to
prepay the related Mortgage Loan, contact from the Company shall not
constitute solicitation under this Section 12.11.
IN WITNESS WHEREOF, the Company and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.
LEHMAN CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC.
By:
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Name:
--------------------------------
Title:
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OPTION ONE MORTGAGE CORPORATION
By:
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Name:
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Title:
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