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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 29, 1996
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
(AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT, DATED
AS OF MARCH 1, 1996, PROVIDING FOR THE ISSUANCE OF ASSET-BACKED
FLOATING RATE CERTIFICATES, SERIES 1996-AFF1
Salomon Brothers Mortgage Securities VII, Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-84924 13-3439681
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
Seven World Trade Center
New York, New York 10048
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (212) 783-7000
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<PAGE>
-2-
Item 1, Items 3 through 6, and Item 8 are not included because they are not
applicable.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 29, 1996, a single series of asset-backed floating
rate certificates, entitled Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1996-AFF1 (the "Certificates"),
was issued pursuant to a pooling and servicing agreement (the "Pooling
Agreement") attached hereto as Exhibit 4.1 and dated as of March 1, 1996 (the
"Cut-off Date"), among Salomon Brothers Mortgage Securities VII, Inc., as
depositor (the "Registrant"), First Nationwide Mortgage Corporation, Norwest
Bank Minnesota, N.A., and Securitized Asset Services Corporation, as master
servicers, The Chase Manhattan Bank, N.A., as trustee, and MBIA Insurance
Corporation, as certificate insurer. The Certificates consist of two classes
(each, a "Class") of Certificates, designated as the Class A-1 Certificates (the
"Offered Certificates") and the Class R Certificates (the "Private
Certificates"). The Certificates evidence in the aggregate the entire beneficial
ownership interest in a trust fund (the "Trust Fund") consisting primarily of a
segregated pool of conventional, one- to four-family, adjustable-rate, first
lien mortgage loans (the "Mortgage Loans") having an aggregate principal balance
as of the Cut-off Date of $229,670,666.
The Mortgage Loans were acquired by the Registrant from
Salomon Brothers Realty Corp. (the "Seller") pursuant to a Mortgage Loan
Purchase Agreement, dated as of March 27, 1996 (the "Purchase Agreement"),
between the Registrant and the Seller. The Certificates were sold by the
Registrant to Salomon Brothers Inc (the "Underwriter") pursuant to an
underwriting agreement, dated as of March 27, 1996 (the "Underwriting
Agreement"), between the Registrant and the Underwriter.
<PAGE>
-3-
The Certificates have the following initial Certificate
Balances and initial PassThrough Rates:
Initial Initial
Certificate Pass-Through
Class Balance Rate(1)
A-1 $225,651,429.00 5.31675%
R $4,019,237.00 N/A(2)
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(1) The Pass-Through Rate for the Class A-1 Certificates is variable and
subject to change.
(2) The Class R Certificates do not bear interest.
The Offered Certificates and the Mortgage Loans are more
particularly described in the Prospectus, dated January 25, 1995, and the
Prospectus Supplement, dated March 27, 1996, as previously filed with the
Securities and Exchange Commission pursuant to Rule 424(b). Capitalized terms
used but not otherwise defined herein have the meanings set forth in the
Prospectus Supplement.
<PAGE>
-4-
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
4.1 Pooling and Servicing Agreement, dated as of March 1, 1996,
attached hereto as Exhibit 4.1, among Salomon Brothers
Mortgage Securities VII, Inc. as depositor, First Nationwide
Mortgage Corporation, Norwest Bank Minnesota, N.A. and
Securitized Asset Services Corporation as master servicers,
The Chase Manhattan Bank, N.A. as trustee, and MBIA Insurance
Corporation as certificate insurer, relating to Asset-Backed
Floating Rate Certificates, Series 1996- AFF1.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By: /s/ SUSAN WOODBURY
Name: Susan Woodbury
Title: Assistant Vice President
Dated: April 11, 1996
<PAGE>
<TABLE>
<CAPTION>
Index To Exhibits
Sequentially
Exhibit No. Description Numbered Page
<S> <C> <C>
4.1 Pooling and Servicing Agreement, dated as of
March 1, 1996, attached hereto as Exhibit 4.1,
among Salomon Brothers Mortgage Securities
VII, Inc. as depositor, First Nationwide Mortgage
Corporation, Norwest Bank Minnesota, N.A., and
Securitized Asset Services Corporation as master
servicers, The Chase Manhattan Bank, N.A., as
trustee, and MBIA Insurance Corporation as
certificate insurer relating to Asset-Backed
Floating Rate Certificates, Series 1996-AFF1.
</TABLE>
Exhibit 4.1
<PAGE>
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SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.,
DEPOSITOR
FIRST NATIONWIDE MORTGAGE CORPORATION
NORWEST BANK MINNESOTA, N.A.
SECURITIZED ASSET SERVICES CORPORATION,
MASTER SERVICERS
THE CHASE MANHATTAN BANK, N.A.
TRUSTEE
AND
MBIA INSURANCE CORPORATION,
CERTIFICATE INSURER
POOLING AND SERVICING AGREEMENT
DATED AS OF MARCH 1, 1996
ASSET-BACKED FLOATING RATE CERTIFICATES
SERIES 1996-AFF1
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<PAGE>
SECTION PAGE
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01. DEFINED TERMS............................ 2
ACCRUED CERTIFICATE INTEREST............................... 2
ADJUSTMENT DATE............................................ 2
ADVERSE REMIC EVENT........................................ 2
AFFILIATE.................................................. 2
AGREEMENT.................................................. 2
ASSIGNMENT................................................. 2
AVAILABLE DISTRIBUTION AMOUNT.............................. 3
AVAILABLE FUNDS PASS-THROUGH RATE.......................... 3
BANKRUPTCY AMOUNT.......................................... 3
BANKRUPTCY CODE............................................ 3
BANKRUPTCY LOSS............................................ 3
BASIS RISK SHORTFALL....................................... 3
BOOK-ENTRY CERTIFICATE..................................... 4
BUSINESS DAY............................................... 4
CASH LIQUIDATION........................................... 4
CERTIFICATE................................................ 4
CERTIFICATEHOLDER" OR "HOLDER.............................. 4
CERTIFICATE INSURER........................................ 4
CERTIFICATE INSURER DEFAULT................................ 4
CERTIFICATE INSURER PREMIUM................................ 5
CERTIFICATE INSURER PREMIUM RATE........................... 5
CERTIFICATE MATURITY DATE.................................. 5
CERTIFICATE OWNER.......................................... 5
CERTIFICATE PRINCIPAL BALANCE.............................. 5
CERTIFICATE REGISTER" AND "CERTIFICATE REGISTRAR........... 5
CLASS...................................................... 6
CLASS A-1 CERTIFICATE"..................................... 6
CLASS A-1 PRINCIPAL DISTRIBUTION AMOUNT"................... 6
CLASS R CERTIFICATE" OR "RESIDUAL CERTIFICATE.............. 7
CLOSING DATE............................................... 7
CODE....................................................... 7
COLLECTION ACCOUNT......................................... 7
COMMITMENT LETTER.......................................... 7
CONVERTED MORTGAGE LOAN.................................... 7
CONVERTIBLE MORTGAGE LOAN.................................. 7
i
<PAGE>
SECTION PAGE
CORPORATE TRUST OFFICE..................................... 7
CUMULATIVE INSURANCE PAYMENTS.............................. 7
CUSTODIAN.................................................. 8
CUSTODIAL AGREEMENT........................................ 8
CUT-OFF DATE............................................... 8
DEBT SERVICE REDUCTION..................................... 8
DEFICIENCY AMOUNT.......................................... 8
DEFICIENT VALUATION........................................ 8
DELETED MORTGAGE LOAN...................................... 8
DELINQUENCY RATIO.......................................... 9
DEPOSITOR.................................................. 9
DEPOSITORY................................................. 9
DEPOSITORY INSTITUTION..................................... 9
DEPOSITORY PARTICIPANT..................................... 9
DETERMINATION DATE......................................... 9
DIRECTLY OPERATE........................................... 9
DISQUALIFIED ORGANIZATION.................................. 10
DISTRIBUTION ACCOUNT....................................... 10
DISTRIBUTION DATE.......................................... 10
DUE DATE................................................... 10
DUE PERIOD................................................. 10
ELIGIBLE ACCOUNT........................................... 10
ESTATE IN REAL PROPERTY.................................... 11
EVENT OF DEFAULT........................................... 11
EXCESS BANKRUPTCY LOSS..................................... 11
EXCESS FRAUD LOSS.......................................... 11
EXCESS SPECIAL HAZARD LOSS................................. 11
EXCESS SUBORDINATED AMOUNT................................. 11
EXTRAORDINARY LOSS......................................... 11
FDIC....................................................... 12
FHLMC...................................................... 12
FINAL RECOVERY DETERMINATION............................... 12
FIRST NATIONWIDE........................................... 12
FIRST NATIONWIDE LOAN...................................... 12
FIRST NATIONWIDE MORTGAGE LOAN SCHEDULE.................... 12
FNMA....................................................... 12
FRAUD LOSS................................................. 12
FRAUD LOSS AMOUNT.......................................... 12
FUND....................................................... 13
GROSS MARGIN............................................... 13
INDEPENDENT................................................ 13
INDEPENDENT CONTRACTOR..................................... 13
INDEX...................................................... 14
INSURANCE ACCOUNT.......................................... 14
ii
<PAGE>
SECTION PAGE
INSURANCE AGREEMENT........................................ 14
INSURANCE PROCEEDS......................................... 14
INSURED PAYMENT............................................ 14
INTEREST ACCRUAL PERIOD.................................... 14
INTEREST DETERMINATION DATE................................ 14
ISSUE PRICE................................................ 15
LATE COLLECTIONS........................................... 15
LATE PAYMENT RATE.......................................... 15
LIBOR...................................................... 15
LIBOR PASS-THROUGH RATE.................................... 15
LIQUIDATION PROCEEDS....................................... 15
LOAN-TO-VALUE RATIO........................................ 16
LONDON BUSINESS DAY........................................ 16
MAJORITY CLASS R CERTIFICATEHOLDER......................... 16
MASTER SERVICER............................................ 16
MASTER SERVICER REMITTANCE DATE............................ 16
MATERIAL ADVERSE CHANGE.................................... 16
MAXIMUM CLASS A-1 PASS-THROUGH RATE........................ 16
MAXIMUM MORTGAGE RATE...................................... 16
MINIMUM MORTGAGE RATE...................................... 16
MINIMUM SPREAD............................................. 16
MONTHLY PAYMENT............................................ 16
MOODY'S.................................................... 17
MORTGAGE................................................... 17
MORTGAGE FILE.............................................. 17
MORTGAGE LOAN.............................................. 17
MORTGAGE LOAN PURCHASE AGREEMENT........................... 17
MORTGAGE LOAN SCHEDULE..................................... 17
MORTGAGE NOTE.............................................. 18
MORTGAGE RATE.............................................. 18
MORTGAGED PROPERTY......................................... 19
MORTGAGOR.................................................. 19
NET MONTHLY EXCESS CASHFLOW"............................... 19
NEW LEASE.................................................. 19
NONRECOVERABLE P&I ADVANCE................................. 19
NON-UNITED STATES PERSON................................... 19
NORWEST.................................................... 19
NORWEST LOAN............................................... 20
OFFICERS' CERTIFICATE...................................... 20
OPINION OF COUNSEL......................................... 20
OWNERSHIP INTEREST......................................... 20
PASS-THROUGH RATE.......................................... 20
PERCENTAGE INTEREST........................................ 20
PERIODIC RATE CAP.......................................... 21
iii
<PAGE>
SECTION PAGE
PERMITTED INVESTMENTS...................................... 21
PERMITTED TRANSFEREE....................................... 22
PERSON..................................................... 22
PHMC....................................................... 22
P&I ADVANCE................................................ 22
POLICY..................................................... 22
PREFERENCE AMOUNT.......................................... 23
PREPAYMENT ASSUMPTION...................................... 23
PREPAYMENT INTEREST SHORTFALL.............................. 23
PREPAYMENT PERIOD.......................................... 23
PRIMARY INSURANCE POLICY................................... 23
PRINCIPAL PREPAYMENT....................................... 23
PURCHASE PRICE............................................. 23
QUALIFIED SUBSTITUTE MORTGAGE LOAN......................... 24
RATING AGENCY.............................................. 24
REALIZED LOSS.............................................. 24
RECORD DATE................................................ 25
REFERENCE BANKS............................................ 25
RELIEF ACT................................................. 25
REMIC...................................................... 25
REMIC PROVISIONS........................................... 25
REMITTANCE REPORT.......................................... 25
RENTS FROM REAL PROPERTY................................... 26
REO ACCOUNT................................................ 26
REO DISPOSITION............................................ 26
REO IMPUTED INTEREST....................................... 26
REO PRINCIPAL AMORTIZATION................................. 26
REO PROPERTY............................................... 26
REQUEST FOR RELEASE........................................ 26
REQUIRED SUBORDINATED AMOUNT............................... 26
RESERVE INTEREST RATE...................................... 27
RESIDENTIAL DWELLING....................................... 27
RESPONSIBLE OFFICER........................................ 27
SASCOR..................................................... 27
SASCOR LOAN................................................ 27
SASCOR MORTGAGE LOAN SCHEDULE.............................. 27
SELLER..................................................... 27
SERVICER................................................... 28
SERVICING ACCOUNT.......................................... 28
SERVICING ADVANCES......................................... 28
SERVICING AGREEMENT........................................ 28
SERVICING FEE.............................................. 28
SERVICING FEE RATE......................................... 28
SERVICING OFFICER.......................................... 29
iv
<PAGE>
SECTION PAGE
SINGLE CERTIFICATE......................................... 29
SPECIAL HAZARD AMOUNT...................................... 29
SPECIAL HAZARD LOSS........................................ 29
S&P........................................................ 29
STARTUP DAY................................................ 29
STATED PRINCIPAL BALANCE................................... 29
STAYED FUNDS............................................... 30
SUBORDINATED AMOUNT........................................ 30
"SUBORDINATION DEFICIENCY AMOUNT........................... 30
SUBORDINATION INCREASE AMOUNT.............................. 30
SUBORDINATION REDUCTION AMOUNT"............................ 30
SUB-SERVICER............................................... 31
SUB-SERVICING ACCOUNT...................................... 31
SUB-SERVICING AGREEMENT.................................... 31
SUB-SERVICING FEE.......................................... 31
SUB-SERVICING FEE RATE..................................... 31
SUPERVISION AGREEMENT...................................... 31
TAX RETURNS................................................ 31
TRANSACTION DOCUMENTS...................................... 32
TRANSFER................................................... 32
TRANSFEREE................................................. 32
TRANSFEROR................................................. 32
TRUST FUND................................................. 32
TRUST FUND EXPENSE RATE.................................... 32
TRUSTEE.................................................... 32
TRUSTEE FEE................................................ 32
TRUSTEE FEE RATE........................................... 32
UNDERLYING SERVICING AGREEMENTS............................ 32
UNINSURED CAUSE............................................ 33
UNITED STATES PERSON....................................... 33
UNPAID BASIS RISK SHORTFALLS............................... 33
VALUE...................................................... 33
VOTING RIGHTS.............................................. 33
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
2.01. CONVEYANCE OF MORTGAGE LOANS............. 34
2.02. ACCEPTANCE BY TRUSTEE.................... 36
2.03. REPURCHASE OR SUBSTITUTION OF MORTGAGE
LOANS BY THE SELLER OR THE DEPOSITOR..... 38
2.04. REPRESENTATIONS AND WARRANTIES OF THE
DEPOSITOR................................ 41
v
<PAGE>
SECTION PAGE
2.05. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE MASTER SERVICERS..................... 43
2.06. ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE MASTER SERVICERS....... 45
2.07. ADDITIONAL COVENANTS OF THE MASTER
SERVICERS................................ 47
2.08. EXECUTION OF CERTIFICATES................ 50
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
3.01. MASTER SERVICERS TO ACT AS MASTER
SERVICERS; ADMINISTRATION OF THE TRUST
FUND..................................... 51
3.02. SUB-SERVICING AGREEMENTS BETWEEN
MASTER SERVICER AND SUB-SERVICERS;
AMENDMENT OF THE SERVICING AGREEMENTS.... 55
3.03. SUCCESSOR SUB-SERVICERS.................. 57
3.04. LIABILITY OF THE MASTER SERVICER......... 57
3.05. NO CONTRACTUAL RELATIONSHIP BETWEEN
SUB-SERVICERS AND TRUSTEE, CERTIFICATE
INSURER OR CERTIFICATEHOLDERS............ 57
3.06. ASSUMPTION OR TERMINATION OF SUB-
SERVICING AGREEMENTS BY TRUSTEE.......... 57
3.07. COLLECTION OF CERTAIN MORTGAGE LOAN
PAYMENTS................................. 58
3.08. SUB-SERVICING ACCOUNTS................... 58
3.09. COLLECTION OF TAXES, ASSESSMENTS AND
SIMILAR ITEMS; SERVICING ACCOUNTS........ 59
3.10. COLLECTION ACCOUNT AND DISTRIBUTION
ACCOUNT.................................. 59
3.11. WITHDRAWALS FROM THE COLLECTION
ACCOUNT.................................. 62
3.12. INVESTMENT OF FUNDS IN THE COLLECTION
ACCOUNT AND THE DISTRIBUTION ACCOUNT..... 64
3.13. MAINTENANCE OF PRIMARY INSURANCE
POLICIES; COLLECTIONS THEREUNDER......... 65
3.14. MAINTENANCE OF HAZARD INSURANCE AND
ERRORS AND OMISSIONS AND FIDELITY
COVERAGE................................. 66
3.15. ENFORCEMENT OF DUE-ON-SALE CLAUSES;
ASSUMPTION AGREEMENTS.................... 67
3.16. REALIZATION UPON DEFAULTED MORTGAGE
LOANS.................................... 69
3.17. TRUSTEE TO COOPERATE; RELEASE OF
MORTGAGE FILES........................... 70
3.18. SERVICING COMPENSATION................... 71
3.19. REPORTS TO THE TRUSTEE; COLLECTION
ACCOUNT STATEMENTS....................... 72
3.20. STATEMENT AS TO COMPLIANCE............... 72
3.21. INDEPENDENT PUBLIC ACCOUNTANTS'
SERVICING REPORT......................... 73
3.22. ACCESS TO CERTAIN DOCUMENTATION.......... 73
3.23. TITLE, MANAGEMENT AND DISPOSITION OF
REO PROPERTY............................. 74
3.24. ADDITIONAL OBLIGATIONS OF THE MASTER
SERVICER................................. 79
3.25. OBLIGATIONS OF THE MASTER SERVICER IN
RESPECT OF MORTGAGE RATES AND MONTHLY
PAYMENTS................................. 79
3.26. OBLIGATIONS OF THE MASTER SERVICER IN
RESPECT OF CONVERTED MORTGAGE
vi
<PAGE>
SECTION PAGE
LOANS.................................... 79
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
4.01. DISTRIBUTIONS............................ 81
4.02. STATEMENTS TO CERTIFICATEHOLDERS......... 83
4.03. REMITTANCE REPORTS; P&I ADVANCES BY THE
MASTER SERVICER.......................... 86
4.04. ALLOCATION OF REALIZED LOSSES............ 88
4.05. COMPLIANCE WITH WITHHOLDING
REQUIREMENTS............................. 89
4.06. THE POLICY............................... 89
ARTICLE V
THE CERTIFICATES
5.01. THE CERTIFICATES......................... 91
5.02. REGISTRATION OF TRANSFER AND EXCHANGE OF
CERTIFICATES............................. 92
5.03. MUTILATED, DESTROYED, LOST OR STOLEN
CERTIFICATES............................. 97
5.04. PERSONS DEEMED OWNERS.................... 98
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICERS
6.01. LIABILITY OF THE DEPOSITOR AND THE MASTER
SERVICER................................. 99
6.02. MERGER OR CONSOLIDATION OF THE DEPOSITOR
OR THE MASTER SERVICERS.................. 99
6.03. LIMITATION ON LIABILITY OF THE DEPOSITOR,
THE MASTER SERVICERS AND OTHERS..........100
6.04. LIMITATION ON RESIGNATION OF THE MASTER
SERVICER.................................101
6.05. RIGHTS OF THE DEPOSITOR IN RESPECT OF THE
MASTER SERVICERS.........................102
ARTICLE VII
DEFAULT
7.01. EVENTS OF DEFAULT........................104
7.02. TRUSTEE TO ACT; APPOINTMENT OF
SUCCESSOR................................106
7.03. NOTIFICATION TO CERTIFICATEHOLDERS.......107
7.04. WAIVER OF EVENTS OF DEFAULT..............108
vii
<PAGE>
SECTION PAGE
ARTICLE VIII
CONCERNING THE TRUSTEE
8.01. DUTIES OF TRUSTEE........................109
8.02. CERTAIN MATTERS AFFECTING THE TRUSTEE....110
8.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR
MORTGAGE LOANS...........................111
8.04. TRUSTEE MAY OWN CERTIFICATES.............112
8.05. TRUSTEE'S FEES AND EXPENSES..............112
8.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.....112
8.07. RESIGNATION AND REMOVAL OF THE TRUSTEE...113
8.08. SUCCESSOR TRUSTEE........................114
8.09. MERGER OR CONSOLIDATION OF TRUSTEE.......114
8.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE
TRUSTEE..................................114
8.11. APPOINTMENT OF CUSTODIANS................115
8.12. APPOINTMENT OF OFFICE OR AGENCY..........116
8.13. REPRESENTATIONS AND WARRANTIES OF THE
TRUSTEE..................................116
ARTICLE IX
TERMINATION
9.01. TERMINATION UPON PURCHASE OR
LIQUIDATION OF ALL MORTGAGE LOANS........118
9.02. ADDITIONAL TERMINATION REQUIREMENTS......120
ARTICLE X
REMIC PROVISIONS
10.01. REMIC ADMINISTRATION.....................122
10.02. PROHIBITED TRANSACTIONS AND
ACTIVITIES...............................124
10.03. MASTER SERVICER AND TRUSTEE
INDEMNIFICATION..........................125
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01. AMENDMENT................................126
11.02. RECORDATION OF AGREEMENT;
COUNTERPARTS.............................127
11.03. LIMITATION ON RIGHTS OF
CERTIFICATEHOLDERS.......................127
11.04. GOVERNING LAW............................128
11.05. NOTICES..................................128
11.06. SEVERABILITY OF PROVISIONS...............129
11.07. NOTICE TO RATING AGENCIES AND THE
CERTIFICATE INSURER......................129
viii
<PAGE>
SECTION PAGE
11.08. GRANT OF SECURITY INTEREST...............130
11.09. ARTICLE AND SECTION REFERENCES...........131
11.10. RIGHTS OF THE CERTIFICATE INSURER........131
EXHIBITS
EXHIBIT A-1 FORM OF CLASS A-1 CERTIFICATE
EXHIBIT A-2 FORM OF CLASS R CERTIFICATE
EXHIBIT B-1 FORM OF TRUSTEE'S PRELIMINARY EXCEPTION REPORT
EXHIBIT B-2 FORM OF TRUSTEE'S INTERIM CERTIFICATION
EXHIBIT B-3 FORM OF TRUSTEE'S FINAL CERTIFICATION
EXHIBIT C FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
EXHIBIT D-1 REQUEST FOR RELEASE
EXHIBIT D-2 REQUEST FOR RELEASE OF MORTGAGE LOANS PAID IN FULL
EXHIBIT E-1 FORM OF TRANSFEROR REPRESENTATION LETTER
EXHIBIT E-2 FORM OF TRANSFEREE REPRESENTATION LETTER
EXHIBIT E-3 FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
EXHIBIT E-4 FORM OF TRANSFEROR AFFIDAVIT
EXHIBIT E-5 FORM OF TRANSFEROR CERTIFICATE PURSUANT TO RULE
144A
EXHIBIT E-6 FORM OF TRANSFEREE CERTIFICATE PURSUANT TO RULE
144A
EXHIBIT F-1 FIRST NATIONWIDE MORTGAGE LOAN SCHEDULE
EXHIBIT F-2 NORWEST MORTGAGE LOAN SCHEDULE
EXHIBIT F-3 SASCOR MORTGAGE LOAN SCHEDULE
EXHIBIT G CERTIFICATE GUARANTY INSURANCE POLICY
EXHIBIT H-1 SUPERVISION AGREEMENT RELATING TO MORTGAGE
LOAN POOL 1995-W18
EXHIBIT H-2 SUPERVISION AGREEMENT RELATING TO MORTGAGE LOAN
SUB-POOL 1995-W24A
EXHIBIT H-3 SUPERVISION AGREEMENT RELATING TO MORTGAGE LOAN
SUB-POOLS 1995-W24B, 1995- W24C AND 1995- W24D
EXHIBIT I-1 SERVICING AGREEMENT RELATING TO MORTGAGE LOAN
POOL 1995-W18
EXHIBIT I-2 SERVICING AGREEMENT RELATING TO MORTGAGE LOAN
SUB-POOL 1995-W24A
EXHIBIT I-3 SERVICING AGREEMENT RELATING TO MORTGAGE LOAN
SUB-POOL 1995-W24B
EXHIBIT I-4 SERVICING AGREEMENT RELATING TO MORTGAGE LOAN
SUB-POOL 1995-W24C
EXHIBIT I-5 SERVICING AGREEMENT RELATING TO MORTGAGE LOAN
SUB-POOL 1995-W24D
ix
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, IS DATED AND EFFECTIVE
AS OF MARCH 1, 1996, AMONG SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., AS
DEPOSITOR, FIRST NATIONWIDE MORTGAGE CORPORATION, NORWEST BANK MINNESOTA, N.A.,
AND SECURITIZED ASSET SERVICES CORPORATION, AS MASTER SERVICERS, THE CHASE
MANHATTAN BANK, N.A., AS TRUSTEE AND MBIA INSURANCE CORPORATION, AS CERTIFICATE
INSURER.
PRELIMINARY STATEMENT
THE DEPOSITOR INTENDS TO SELL PASS-THROUGH CERTIFICATES
(COLLECTIVELY, THE "CERTIFICATES"), TO BE ISSUED HEREUNDER IN MULTIPLE CLASSES,
WHICH IN THE AGGREGATE WILL EVIDENCE THE ENTIRE BENEFICIAL OWNERSHIP INTEREST IN
THE MORTGAGE LOANS (AS DEFINED HEREIN). AS PROVIDED HEREIN, THE TRUSTEE WILL
ELECT TO TREAT THE SEGREGATED POOL OF ASSETS SUBJECT TO THIS AGREEMENT
(INCLUDING THE MORTGAGE LOANS) AS A REAL ESTATE MORTGAGE INVESTMENT CONDUIT (A
"REMIC") FOR FEDERAL INCOME TAX PURPOSES.
THE FOLLOWING TABLE SETS FORTH THE DESIGNATION, PASS-THROUGH
RATE, INITIAL AGGREGATE CERTIFICATE PRINCIPAL BALANCE AND CERTIFICATE MATURITY
DATE FOR EACH CLASS OF CERTIFICATES COMPRISING THE INTERESTS IN THE TRUST FUND
CREATED HEREUNDER.
<TABLE>
<CAPTION>
Initial Aggregate
Certificate
Principal Maturity
Designation Pass-through Rate Balance Date (1)
----------- ----------------- --------- --------
<S> <C> <C> <C>
Class A-1 Variable $225,651,429 January 25, 2026
Class R Not Applicable $ 4,019,237 Not Applicable
</TABLE>
(1) Calculated based on the assumptions stated herein in the definition of
"Certificate Maturity Date"
As provided herein, the Class R Certificates will be
subordinate to the Class A-1 Certificates, to the extent described herein.
The Class A-1 Certificates will evidence "regular interests"
in the REMIC created hereunder. The "residual interest" in the REMIC created
hereunder will be evidenced by the Class R Certificates.
As of the Cut-off Date, the Mortgage Loans have an aggregate
Stated Principal Balance, after deducting all principal payments due on the
Mortgage Loans on or before the Cutoff Date, equal to $229,670,666.
In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicers, the Trustee and the Certificate Insurer
agree as follows:
<PAGE>
-2-
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement or in the Preliminary
Statement, the following words and phrases, unless the context otherwise
requires, shall have the meanings specified in this Article. Unless otherwise
specified, all calculations described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months.
"Accrued Certificate Interest": With respect to each
Distribution Date, as to any Class A-1 Certificate, one month's interest accrued
during the related Interest Accrual Period at the Pass-Through Rate for such
Distribution Date on the Certificate Principal Balance of such Certificate
immediately prior to such Distribution Date. All distributions of interest will
be calculated on the basis of the actual number of days in the Interest Accrual
Period and on a 360- day year. Accrued Certificate Interest with respect to each
Distribution Date in each such case shall be reduced by an amount equal to the
sum of (a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution Date to the extent not covered by payments pursuant to Section 3.24
and (b) the aggregate amount of any shortfall in interest with respect to any
Mortgage Loan resulting from the application of the Relief Act to any Monthly
Payment occurring on the related Due Date.
"Adjustment Date": With respect to each Mortgage Loan, each
annual Adjustment Date, which is the first day of the month in which the
Mortgage Rate of a Mortgage Loan changes pursuant to the related Mortgage Note.
The first Adjustment Date following the Cut-off Date as to each Mortgage Loan is
set forth in the related Mortgage Loan Schedule.
"Adverse REMIC Event": As defined in Section 10.01(f).
"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. For purposes of
determining whether any Person is an Affiliate of the Depositor, the Seller or a
Master Servicer, the Trustee shall be entitled to request and rely conclusively
on an Officers' Certificate of the Depositor, the Seller or the related Master
Servicer, as the case may be.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the
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related Mortgaged Property is located to reflect of record the sale of the
Mortgage, which assignment, notice of transfer or equivalent instrument may be
in the form of one or more blanket assignments covering Mortgages secured by
Mortgaged Properties located in the same county, if permitted by law and
acceptable for recording.
"Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate amounts
on deposit in each Collection Account and the Distribution Account as of the
close of business on the related Determination Date, including any amount
required to be withdrawn from any REO Account and deposited in the Distribution
Account for such Distribution Date, (b) the aggregate of any amounts deposited
in the Distribution Account in respect of Prepayment Interest Shortfalls for
such Distribution Date pursuant to Section 3.24 and (c) the aggregate amount of
any P&I Advances made by the Master Servicers and received by the Trustee
pursuant to Section 4.03 for such Distribution Date, minus (2) the sum of (a)
the portion of the amount described in clause (1)(a) hereof that represents (i)
Monthly Payments received from a Mortgagor on or prior to the related
Determination Date but due during any Due Period subsequent to the related Due
Period, (ii) Principal Prepayments received after the related Prepayment Period
(together with any interest payments received with such Principal Prepayments to
the extent they represent payment of interest accrued on the related Mortgage
Loans during a period subsequent to the related Prepayment Period), (iii)
Liquidation Proceeds and Insurance Proceeds received after the related
Prepayment Period, (iv) any amounts reimbursable or payable to the Depositor,
the Master Servicers, the Trustee, the Seller or any Sub-Servicer pursuant to
Section 3.11 and (v) any amount payable from the Distribution Account in respect
of taxes pursuant to Section 10.01(g)(iii) as of such Distribution Date and (b)
the sum of (i) the Certificate Insurer Premium payable on such Distribution Date
and (ii) the Trustee Fee payable on such Distribution Date.
"Available Funds Pass-Through Rate": With respect to the Class
A-1 Certificates and each Distribution Date, a per annum rate equal to (i) the
weighted average of the Mortgage Rates on the then outstanding Mortgage Loans,
as adjusted for the actual number of days in the related Interest Accrual Period
and on a 360-day year, minus (ii) the sum of (a) the Trust Fund Expense Rate,
(b) the Minimum Spread and (c) the weighted average of the Servicing Fee Rates
on the then outstanding Mortgage Loans.
"Bankruptcy Amount": As of any date of determination, an
amount equal to the excess, if any, of (i) $100,000 over (ii) the aggregate
amount of Bankruptcy Losses allocated solely to one or more specific Classes of
Certificates in accordance with Section 4.04.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.
"Basis Risk Shortfall": With respect to any Distribution Date
on which the Pass-Through Rate is calculated pursuant to the definition thereof
using the Available Funds Pass-
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Through Rate, an amount equal to one month interest accrued during the related
Interest Accrual Period on the Certificate Principal Balance of the Class A-1
Certificates immediately prior to such Distribution Date at a rate equal to the
excess of (a) the lesser of (i) the LIBOR Pass-Through Rate for such
Distribution Date and (ii) the Maximum Class A-1 Pass-Through Rate over (b) the
Available Funds Pass-Through Rate for such Distribution Date.
"Book-Entry Certificate": Any Certificate registered in the
name of the Depository or its nominee.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of New York,
the State of Maryland or the State of California or in the city in which the
Corporate Trust Office of the Trustee is located, are authorized or obligated by
law or executive order to be closed.
"Cash Liquidation": With respect to any defaulted Mortgage
Loan (other than a Mortgage Loan that became an REO Property or a Mortgage Loan
purchased by the Seller, the Depositor, PHMC or the Certificate Insurer pursuant
to Section 2.03, 3.16(b), 3.26 or 9.01) the recovery of all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries which the related Master
Servicer expects to be finally recoverable. Each Master Servicer shall maintain
records, prepared by a Servicing Officer, of each related Cash Liquidation.
"Certificate": Any Class A-1 or Class R Certificate.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization (as defined in Section 860e(c)(5) of the Code) or a
Non-United States Person shall not be a Holder of a Residual Certificate for any
purposes hereof and, solely for the purposes of giving any consent pursuant to
this Agreement, any Certificate registered in the name of the Depositor or any
Master Servicer or any Affiliate thereof shall be deemed not to be outstanding
and the Voting Rights to which it is entitled shall not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent has been obtained, except as otherwise provided in
Section 11.01. The Trustee may conclusively rely upon a certificate of the
Depositor or the related Master Servicer in determining whether a Certificate is
held by an Affiliate thereof.
"Certificate Insurer": MBIA Insurance Corporation or its
successor in interest.
"Certificate Insurer Default": The existence and continuance
of any of the following: (a) a failure by the Certificate Insurer to make a
payment required under the Policy in accordance with its terms or (b) (i) (A)
the Certificate Insurer files any petition or commences any case or proceeding
under any provision or chapter of the Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (B) makes a general assignment for the benefit of
its creditors, or (C) has an order for relief entered against it under the
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is
final
<PAGE>
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and nonappealable; or (ii) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory authority enters a final
and nonappealable order, judgment or decree (A) appointing a custodian, trustee,
agent or receiver for the Certificate Insurer or for all or any material portion
of its property or (B) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Certificate Insurer (or the taking of
possession of all or any material portion of the property of the Certificate
Insurer).
"Certificate Insurer Premium": The premium payable to the
Certificate Insurer on each Distribution Date pursuant to Section 3.10(c)
commencing on the Distribution Date in April 1996, in an amount (rounded to the
nearest dollar) equal to one-twelfth of the product of the Certificate Insurer
Premium Rate and the Certificate Principal Balance of the Class A-1 Certificates
immediately preceding such Distribution Date.
"Certificate Insurer Premium Rate": A per annum rate equal to
0.12%.
"Certificate Maturity Date": The latest possible maturity
date, solely for purposes of Section 1.860G-1(a)(4)(iii) of the proposed
Treasury regulations, by which the Certificate Principal Balance of the Class
A-1 Certificates would be reduced to zero as determined under a hypothetical
scenario that assumes, among other things, that (i) scheduled interest and
principal payments on the Mortgage Loans are received in a timely manner, with
no delinquencies or losses, (ii) there are no principal prepayments and (iii)
the Depositor or the Seller will not repurchase any Mortgage Loan and neither of
the Majority Class R Certificateholder nor the Certificate Insurer will exercise
its option to purchase the Mortgage Loans and thereby cause a termination of the
Trust Fund.
"Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Certificate Principal Balance": With respect to each Class
A-1 Certificate as of any date of determination, the Certificate Principal
Balance of such Class A-1 Certificate on the Distribution Date immediately prior
to such date of determination, minus all distributions allocable to principal
made thereon and Realized Losses allocated thereto on such immediately prior
Distribution Date (or, in the case of any date of determination up to and
including the first Distribution Date, the initial Certificate Principal Balance
of such Class A-1 Certificate, as stated on the face thereof). With respect to
each Class R Certificate, on any date of determination, an amount equal to the
Percentage Interest evidenced by such Certificate times the excess, if any, of
(A) the then aggregate Stated Principal Balance of the Mortgage Loans over (B)
the then aggregate Certificate Principal Balance of all Class A-1 Certificates
then outstanding.
"Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 5.02.
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"Class": Collectively, all of the Certificates bearing the
same class designation.
"Class A-1 Certificate": Any one of the Class A-1 Certificates
executed and delivered by the Trustee substantially in the form annexed hereto
as Exhibit A-1, and evidencing an interest designated as a "regular interest" in
the Trust Fund for purposes of the REMIC Provisions.
"Class A-1 Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a) the excess of (i) the related Available Distribution
Amount over (ii) the amount payable on the Class A-1
Certificates pursuant to Section 4.01(a)(i); and
(b) the sum of:
(i) the principal portion of each Monthly Payment due
during the related Due Period, to the extent received
or advanced, on each Mortgage Loan;
(ii) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related Prepayment
Period pursuant to or as contemplated by Section
2.03, 3.16(b), 3.26 or 9.01 and the amount of any
shortfall deposited in the related Collection Account
in connection with the substitution of a Deleted
Mortgage Loan pursuant to Section 2.03 during the
related Prepayment Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds
and REO Principal Amortization) received during the
related Prepayment Period, net of any portion thereof
that represents a recovery of principal for which an
advance was made by a Master Servicer pursuant to
Section 4.03 in respect of a preceding Distribution
Date; and
(iv) the principal portion of any Realized Losses
incurred (or deemed to have been occurred) on any
Mortgage Loans in the calendar month preceding such
Distribution Date to the extent covered by Net
Monthly Excess Cashflow for such Distribution Date;
and
(v) the amount of any Subordination Increase Amount
for such Distribution Date;
MINUS
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(vi) the amount of any Subordination Reduction Amount
for such Distribution Date.
"Class R Certificate" or "Residual Certificate": Any one of
the Certificates designated on the face thereof as a Class R Certificate and
executed and delivered hereunder by the Trustee substantially in the form
annexed hereto as Exhibit A-2, evidencing an interest designated as a "residual
interest" in the Trust Fund for purposes of the REMIC Provisions.
"Closing Date": March 29, 1996.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by each Master Servicer pursuant to Section 3.10(a), which shall be
entitled, as appropriate, "[First Nationwide Mortgage Corporation] [Norwest Bank
Minnesota, N.A.] [Securitized Asset Services Corporation], as Master Servicer
for The Chase Manhattan Bank, N.A., as Trustee, in trust for registered holders
of Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed Floating Rate
Certificates, Series 1996-AFF1 and MBIA Insurance Corporation", and which shall
be an Eligible Account.
"Commitment Letter": The letter between the Certificate
Insurer and the Depositor, dated the Closing Date, in respect of the Certificate
Insurer Premium and other matters.
"Converted Mortgage Loan": Each Convertible Mortgage Loan the
Mortgage Rate of which has been converted at the election of the Mortgagor from
an adjustable Mortgage Rate to a fixed Mortgage Rate.
"Convertible Mortgage Loan": A Mortgage Loan that by its terms
and subject to certain conditions allows the Mortgagor to convert the adjustable
Mortgage Rate thereon to a fixed Mortgage Rate.
"Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with the Certificates shall be administered, which office at the date
of the execution of this instrument is located at 4 Chase MetroTech Center, 3rd
Floor, Brooklyn, New York 11245, Attention: Tom Provenzano, Institutional Trust
Group, or at such other address as the Trustee may designate from time to time
by notice to the Certificateholders, the Certificate Insurer, the Depositor and
the Master Servicers.
"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insured Payments previously made by the
Certificate Insurer under the Policy plus interest thereon from the date such
amount became due until paid in full, at a rate of interest equal to the Late
Payment Rate and in accordance with Section 3.03(a) of the Insurance Agreement
minus the sum of (i) all payments previously made to the Certificate Insurer
pursuant
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to Section 4.01 hereof as reimbursement for such amounts and (ii) any payments
made by the Certificate Insurer attributable to Excess Bankruptcy Losses, Excess
Fraud Losses, Excess Special Hazard Losses and Extraordinary Losses.
"Custodian": With respect to the SASCOR Loans in the Trust
Fund on the Closing Date, First Trust National Association; with respect to the
First Nationwide Loans in the Trust Fund on the Closing Date, First Nationwide
Bank; and, in all other cases, any entity appointed by the Trustee pursuant to
Section 8.11.
"Custodial Agreement": With respect to those SASCOR Loans
included in the mortgage loan pool referred to as 1995-W18, the Custodial
Agreement, dated as of June 2, 1995, among SASCOR as master servicer, PHMC as
servicer and the Custodian as custodian; with respect to those SASCOR Loans
included in the mortgage loan pool referred to as 1995- W24, the Custodial
Agreement, dated as of December 1, 1995, among SASCOR as master servicer, PHMC
as servicer and the Custodian as custodian; with respect to the First Nationwide
Loans, the Custodial Agreement, dated as of January 1, 1996, among the Seller as
purchaser, First Nationwide as the company and the Custodian as custodian.
"Cut-off Date": March 1, 1996.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting a Deficient Valuation or any reduction that results in a
permanent forgiveness of principal.
"Deficiency Amount": With respect to the Class A-1
Certificates as of any Distribution Date (i) any shortfall in amounts available
in the Distribution Account to pay interest for the related Interest Accrual
Period on the Certificate Principal Balance of the Class A-1 Certificates at the
then applicable Pass-Through Rate, net of any Prepayment Interest Shortfalls and
any interest shortfalls relating to the Relief Act and allocated to the Class
A-1 Certificates, (ii) the principal portion of any Realized Loss allocated to
the Class A-1 Certificates, and, without duplication, the excess, if any, of (a)
the aggregate Certificate Principal Balances of all the Class A-1 Certificates
then outstanding over (b) the aggregate Stated Principal Balances of the
Mortgage Loans then outstanding, and (iii) the Certificate Principal Balance of
the Class A-1 Certificates to the extent unpaid on the final Distribution Date
or earlier termination of the Trust Fund pursuant to the terms of this
Agreement.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
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"Delinquency Ratio": With respect to any Distribution Date,
the percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Stated Principal Balances of all Mortgage Loans that are 60 or more
days delinquent, in foreclosure or converted to REO Properties as of the last
day of the related Due Period and (b) the denominator of which is the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of such Due
Period.
"Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company and has no separately rated debt obligations, such holding
company has unsecured commercial paper or other short-term unsecured debt
obligations) that are rated A-1 by S&P and P-1 by Moody's (or comparable ratings
if S&P and Moody's are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Distribution Date
and as regards First Nationwide, the 15th day of the calendar month in which
such Distribution Date occurs or, if such 15th day is not a Business Day, the
Business Day immediately preceding such 15th day. With respect to each
Distribution Date and as regards SASCOR, the 17th day of the calendar month in
which such Distribution Date occurs or, if such 17th day is not a Business Day,
the Business Day immediately preceding such 17th day. With respect to each
Distribution Date and as regards Norwest, the 18th day of the calendar month in
which such Distribution Date occurs or, if such 18th day is not a Business Day,
the Business Day immediately preceding such 18th day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by the Trust Fund other
than through an Independent Contractor; provided, however, that the
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Trustee (or the related Master Servicer on behalf of the Trustee) shall not be
considered to Directly Operate an REO Property solely because the Trustee (or
the related Master Servicer on behalf of the Trustee) establishes rental terms,
chooses tenants, enters into or renews leases, deals with taxes and insurance,
or makes decisions as to repairs or capital expenditures with respect to such
REO Property.
"Disqualified Organization": Either (i) the United States, any
State or political subdivision thereof, foreign government, any international
organization, or any agency or instrumentality of any of the foregoing, (ii) any
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 or (iii)
any organization described in Section 1381(a)(2)(C) of the Code. 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 FHLMC, a majority of its board of directors is not
selected by a governmental unit.
"Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.10(b) which shall be
entitled "The Chase Manhattan Bank, N.A., as Trustee, in trust for registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed Floating
Rate Certificates, Series 1996-AFF1 and MBIA Insurance Corporation" and which
must be an Eligible Account.
"Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing on April 25, 1996.
"Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is the
day of the month on which the Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.
"Due Period": With respect to any Distribution Date, the
period commencing on the second day of the calendar month preceding the calendar
month in which such Distribution Date occurs and ending on the related Due Date.
"Eligible Account": Either (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company) are rated A-1 or better by S&P and P-2 or better by Moody's (or
comparable ratings if S&P and Moody's are not the Rating Agencies) at the time
any amounts are held in deposit therein, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained in the corporate trust department with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity. Eligible Accounts may bear interest.
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"Estate in Real Property": A fee simple estate in a parcel of
land.
"Event of Default": One or more of the events described in
Section 7.01.
"Excess Bankruptcy Loss": Any Bankruptcy Loss, or portion
thereof, which exceeds the then applicable Bankruptcy Amount.
"Excess Fraud Loss": Any Fraud Loss, or portion thereof, which
exceeds the then applicable Fraud Loss Amount.
"Excess Special Hazard Loss": Any Special Hazard Loss, or
portion thereof, which exceeds the then applicable Special Hazard Loss Amount.
"Excess Subordinated Amount": With respect to each
Distribution Date, the excess, if any, of (i) the Subordinated Amount for such
Distribution Date over (ii) the Required Subordinated Amount for such
Distribution Date.
"Extraordinary Loss": Any loss caused by or resulting from:
(i) wear and tear, deterioration, rust or corrosion,
mold, wet or dry rot; inherent vice or latent defect;
animals, birds, vermin, insects;
(ii) smog, smoke, vapor, liquid or dust discharge from
agricultural or industrial operations; pollution;
contamination;
(iii) settling, subsidence, cracking, shrinkage, bulging or
expansion of pavements, foundations, walls, floors,
roofs or ceilings;
(iv) errors in design, faulty workmanship or faulty
materials, unless the collapse of the property or a
part thereof ensues and then only for the ensuing
loss;
(v) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical contamination, all whether
controlled or uncontrolled and whether such loss be
direct or indirect, proximate or remote or be in
whole or in part caused by, contributed to or
aggravated by a peril insured against;
(vi) hostile or warlike action in time of peace or war,
including action in hindering, combating or defending
against an actual, impending or expected attack by
any government or sovereign power, DE JURE, or DE
FACTO, or by any authority maintaining or using
military, naval or air forces, or by military, naval
or air forces, or by an agent of any such government,
power, authority or forces;
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(vii) any weapon of war employing atomic fission or
radioactive forces whether in time of peace or war;
and
(viii) insurrection, rebellion, revolution, civil war,
usurped power or action taken by governmental
authority in hindering, combating or defending
against such an occurrence, seizure or destruction
under quarantine or customs regulations, confiscation
by order of any government or public authority, or
risks of contraband or illegal transactions or trade.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor, PHMC or the Certificate Insurer pursuant
to or as contemplated by Section 2.03, 3.16(b), 3.26 or 9.01), a determination
made by the related Master Servicer that all Insurance Proceeds, Liquidation
Proceeds and other payments or recoveries which such Master Servicer, in its
reasonable good faith judgment, expects to be finally recoverable in respect
thereof have been so recovered. Each Master Servicer shall maintain records,
prepared by a Servicing Officer, of each Final Recovery Determination made by it
and give prompt written notice thereof to the Trustee.
"First Nationwide": First Nationwide Mortgage Corporation, a
corporation organized under the laws of the State of Delaware, or any successor
master servicer thereto appointed as herein provided.
"First Nationwide Loan": A Mortgage Loan master serviced by
First Nationwide and listed on the First Nationwide Mortgage Loan Schedule.
"First Nationwide Mortgage Loan Schedule": As of any date, the
list of First Nationwide Loans included in the Trust Fund on such date, attached
hereto as Exhibit F-1 (as amended from time to time to reflect the addition of
Qualified Substitute Mortgage Loans), which list shall set forth the information
specified in the definition of "Mortgage Loan Schedule" with respect to each
First Nationwide Loan.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Fraud Loss": Any Realized Loss or portion thereof sustained
by reason of a default arising from fraud, dishonesty or misrepresentation in
connection with the related Mortgage Loan, including by reason of the denial of
coverage under any related Primary Insurance Policy.
"Fraud Loss Amount": Initially, an amount equal to $6,890,120.
As of any date of determination after the Cut-off Date, an amount equal to: (X)
prior to the first anniversary
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of the Cut-off Date an amount equal to 3.00% of the aggregate outstanding
principal balance of all of the Mortgage Loans as of the Cut-off Date minus the
aggregate amount of Fraud Losses allocated solely to the Class R Certificates in
accordance with Section 4.04 since the Cut-off Date up to such date of
determination; (Y) from the first to the second anniversary of the Cut-off Date,
an amount equal to (1) the lesser of (a) the Fraud Loss Amount as of the most
recent anniversary of the Cut-off Date and (b) 2.00% of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2) the Fraud Losses allocated solely to
the Class R Certificates in accordance with Section 4.04 since the most recent
anniversary of the Cut-off Date up to such date of determination; and (Z) from
the second to the fifth anniversary of the Cut-off Date, an amount equal to (1)
the lesser of (a) the Fraud Loss Amount as of the most recent anniversary of the
Cut-off Date and (b) 1.00% of the aggregate outstanding principal balance of all
of the Mortgage Loans as of the most recent anniversary of the Cut-off Date
minus (2) the Fraud Losses allocated solely to the Class R Certificates in
accordance with Section 4.04 since the most recent anniversary of the Cut-off
Date up to such date of determination. On and after the fifth anniversary of the
Cut-off Date, the Fraud Loss Amount shall be zero.
"Fund": The VISTA U.S. Government Money Market Fund and the
VISTA Prime Money Market Fund, referred to collectively.
"Gross Margin": With respect to each Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note that is added to the Index on
each Adjustment Date in accordance with the terms of the related Mortgage Note
used to determine the Mortgage Rate for such Mortgage Loan.
"Independent": When used with respect to any specified Person,
any such Person who (i) is in fact independent of the Depositor or the Master
Servicers or any Affiliate thereof, (ii) does not have any direct financial
interest in or any material indirect financial interest in any of the Depositor
or any Master Servicer or any Affiliate thereof, and (iii) is not connected with
the Depositor or any Master Servicer or any Affiliate thereof as an officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, however, that a Person shall not fail to be
Independent of the Depositor or any Master Servicer or any Affiliate thereof
merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Depositor or any Master Servicer or any Affiliate
thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Master Servicers) that would be an "independent contractor" with respect to
the Trust Fund within the meaning of Section 856(d)(3) of the Code if the Trust
Fund were a real estate investment trust (except that the ownership tests set
forth in that section shall be considered to be met by any Person that owns,
directly or indirectly, 35 percent or more of any Class of Certificates), so
long as the Trust Fund does not receive or derive any income from such Person
and provided that the relationship between such Person and the Trust Fund is at
arm's length, all within the meaning of Treasury Regulation Section
1.856-4(b)(5), or (ii) any other Person (including the Master Servicer) if the
Trustee has received an Opinion of Counsel to the effect that the taking of any
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action in respect of any REO Property by such Person, subject to any conditions
therein specified, that is otherwise herein contemplated to be taken by an
Independent Contractor will not cause such REO Property to cease to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code
(determined without regard to the exception applicable for purposes of Section
860D(a) of the Code), or cause any income realized in respect of such REO
Property to fail to qualify as Rents from Real Property.
"Index": With respect to each Mortgage Loan, the index
specified in the Mortgage Note used to determine the Mortgage Rate on such
Mortgage Loan, which will be a rate per annum equal to the average weekly quoted
yield on U.S. Treasury securities adjusted to a constant maturity of one year as
published in the Federal Reserve Statistical Release H.15(519). If the Index is
no longer available, the related Master Servicer will choose a new index in
accordance with Section 2.05(ix).
"Insurance Account": The account or accounts created and
maintained pursuant to Section 4.06, which shall be entitled "The Chase
Manhattan Bank, N.A., as trustee, in trust for the registered holders of Salomon
Brothers Mortgage Securities VII, Inc., Asset-Backed Floating Rate Certificates,
Series 1996-AFF1, Class A-1 and MBIA Insurance Corporation", and which must be
an Eligible Account.
"Insurance Agreement": The Insurance Agreement, dated as of
March 1, 1996, among the Certificate Insurer, the Trustee, the Depositor and the
Seller.
"Insurance Proceeds": Proceeds of any Primary Insurance
Policy, title policy, hazard policy or other insurance policy (excluding the
Policy) covering a Mortgage Loan, 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 procedures that the related Master Servicer
would follow in servicing mortgage loans held for its own account or a
Sub-Servicer would follow pursuant to a Sub-Servicing Agreement, in either case,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Insured Payment": With respect to the Class A-1 Certificates
(i) as of any Distribution Date, the Deficiency Amount, if any, for such
Distribution Date and (ii) the Preference Amount, if any.
"Interest Accrual Period": With respect to any Class A-1
Certificate and any Distribution Date, the period commencing on the 25th day of
the month immediately preceding the month in which such Distribution Date occurs
(or, in the case of the first period, commencing on the Closing Date) and ending
on the 24th day of the month in which such Distribution Date occurs.
"Interest Determination Date": With respect to any Interest
Accrual Period, the second London Business Day preceding the commencement of
such Interest Accrual Period.
"Issue Price": As to each Class of Certificates, the "issue
price" as defined in
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the REMIC Provisions.
"Late Collections": With respect to any Mortgage Loan and the
amounts due thereon during any Due Period, all amounts received subsequent to
the Determination Date immediately following such Due Period, whether as late
payments of Monthly Payments or as Insurance Proceeds, Liquidation Proceeds or
otherwise, which represent late payments or collections of Monthly Payments due
(without regard to any acceleration of payments under the related Mortgage and
Mortgage Note) but delinquent for such Due Period and not previously recovered.
"Late Payment Rate": As defined in the Insurance Agreement.
"LIBOR": With respect to any Interest Accrual Period, the rate
determined by the Trustee on the related Interest Determination Date on the
basis of the offered rates of the Reference Banks for one-month U.S. dollar
deposits, as such rates appear on the Reuters Screen LIBO Page, as of 11:00 A.M.
(London time) on such Interest Determination Date. On each Interest
Determination Date, LIBOR for the related Interest Accrual Period will be
established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such
offered quotations (rounded upwards if necessary to the
nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the
related Interest Accrual Period shall be the higher of (i)
LIBOR as determined on the previous Interest Determination
Date and (ii) the Reserve Interest Rate.
"LIBOR Pass-Through Rate": With respect to the Class A-1
Certificates and each Distribution Date, a per annum rate equal to LIBOR plus
0.47%; provided, however, that on any Distribution Date when the aggregate
principal balance of the Mortgage Loans is 10% or less of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date, the LIBOR
Pass-Through Rate shall be a per annum rate equal to LIBOR plus 1.47%.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of any REO Property prior to any REO
Disposition) received by the related Master Servicer in connection with (i) the
taking of all or a part of Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property in
accordance with Section 2.03, Section 3.16(b), Section 3.23, Section 3.26 or
Section 9.01.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan
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at such date and the denominator of which is the Value of the related Mortgaged
Property.
"London Business Day": Any day on which banks in the City of
London are open and conducting transactions in U.S. dollars.
"Majority Class R Certificateholder": Any single Holder of
Class R Certificates representing a greater than 50% Percentage Interest in such
Class.
"Master Servicer": Each of First Nationwide, Norwest and
SASCOR (other than as described in Section 3.01).
"Master Servicer Remittance Date": With respect to any
Distribution Date and the Norwest Loans, the first Business Day preceding such
Distribution Date. With respect to any Distribution Date and the First
Nationwide Loans and the SASCOR Loans included in mortgage loan pool 1995-W18,
the 18th day of such month, or if such day is not a Business Day, the next
succeeding Business Day with respect to any Distribution Date and the SASCOR
Loans included in mortgage loan pool 1995-W24, the 21st day of such month, or if
such day is not a Business Day, the next succeeding Business Day.
"Material Adverse Change": With respect to any Master
Servicer, a material adverse change in (i) the business, financial condition,
results or operations or properties of such Master Servicer or (ii) the ability
of such Master Servicer to perform its obligations under any of the Transaction
Documents.
"Maximum Class A-1 Pass-Through Rate": With respect to the
Class A-1 Certificates and each Distribution Date, a per annum rate equal to (i)
the weighted average of the Maximum Mortgage Rates on the Mortgage Loans and REO
Properties, as adjusted for the actual number of days in the related Interest
Accrual Period and on a 360-day year, minus (ii) the sum of (a) the Trust Fund
Expense Rate, (b) the Minimum Spread and (c) the weighted average of the
Servicing Fee Rates on the then outstanding Mortgage Loans.
"Maximum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the Maximum Mortgage
Rate thereunder.
"Minimum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the Minimum Mortgage
Rate thereunder.
"Minimum Spread": 0.52% per annum.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined (i) after giving effect to any Principal Prepayment with
respect to such Mortgage Loan applied prior to such Monthly Payment; (ii) on the
assumption that all other amounts, if any, due thereunder are paid when due;
(iii) without giving effect to any modification, waiver or amendment granted or
agreed to
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by the related Master Servicer pursuant to Section 3.07; (iv) after giving
effect to any Deficient Valuation in respect of such Mortgage Loan; and (v)
after giving effect to any reduction in the amount of interest collectible from
the related Mortgagor pursuant to the Relief Act.
"Moody's": Moody's Investors Service or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time
held as a part of the Trust Fund, the Mortgage Loans so held being identified in
the Mortgage Loan Schedules.
"Mortgage Loan Purchase Agreement": The agreement regarding
the Mortgage Loans, substantially in the form of Exhibit C annexed hereto.
"Mortgage Loan Schedule": As of any date, each of the First
Nationwide Mortgage Loan Schedule, the Norwest Mortgage Loan Schedule and the
SASCOR Mortgage Loan Schedule. The Mortgage Loan Schedules, in the aggregate,
will indicate all the Mortgage Loans included in the Trust Fund as of any date
of determination. Each Mortgage Loan Schedule shall set forth the following
information with respect to each Mortgage Loan described therein:
(i) the loan number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property,
including the city, state and zip code;
(iv) the type of Mortgaged Property;
(v) (a) the first Adjustment Date following the Cut-off
Date and (b) the Mortgage Rate in effect for the Due
Period immediately following the Cut-off Date;
(vi) the original term;
(vii) the remaining number of months to maturity as of the
Cut-off Date;
(viii) the original principal balance;
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(ix) the due date of the first Monthly Payment;
(x) the amount of the Monthly Payment due on the first
Due Date following the Cut-off Date;
(xi) the Stated Principal Balance as of the Cut-off Date;
(xii) the Loan-to-Value Ratio at origination;
(xiii) whether the Mortgage Loan is covered by a Primary
Insurance Policy as of the Cut-off Date;
(xiv) the Gross Margin;
(xv) the Maximum Mortgage Rate;
(xvi) the Sub-Servicer, if any or, on the SASCOR Mortgage
Loan Schedule, the Servicer;
(xvii) the Periodic Rate Cap;
(xviii) the Minimum Mortgage Rate;
(xix) whether the Mortgage Loan contains a conversion
option; and
(xx) the Servicing Fee Rate.
Each such schedule shall also set forth the total of the amounts described under
(xi) above for all of the related Mortgage Loans. Such list may be in the form
of more than one list, collectively setting forth all of the information
required. Each Mortgage Loan Schedule shall be amended from time to time by the
related Master Servicer in accordance with the provisions of this Agreement.
With respect to any Qualified Substitute Mortgage Loan, the information
described in clauses (v), (vii), (x), (xi) and (xiii) shall be set forth as of
the date of substitution.
"Mortgage Note": The original executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgage Rate": With respect to each Mortgage Loan other than
a Converted Mortgage Loan, the annual rate at which interest accrues on such
Mortgage Loan from time to time in accordance with the provisions of the related
Mortgage Note, which rate, (1) as of any date of determination until the first
Adjustment Date following the Cut-off Date shall be the rate set forth in the
related Mortgage Loan Schedule as the Mortgage Rate in effect for the Due Period
immediately following the Cut-off Date and (2) as of any date of determination
thereafter shall be the rate as adjusted on the most recent Adjustment Date, to
equal the sum, rounded either to the nearest or to the next highest 0.125% as
provided in the Mortgage Note, of the
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applicable Index, as most recently available as of a date prior to the
Adjustment Date as set forth in the related Mortgage Note, plus the related
Gross Margin; provided that the Mortgage Rate on such Mortgage Loan on any
Adjustment Date shall never be more than the lesser of (i) the sum of the
Mortgage Rate in effect immediately prior to the Adjustment Date plus the
related Periodic Rate Cap, if any, and (ii) the related Maximum Mortgage Rate,
and shall never be less than the greater of (i) the Mortgage Rate in effect
immediately prior to the Adjustment Date less the Periodic Rate Cap, if any, and
(ii) the related Minimum Mortgage Rate. With respect to each Mortgage Loan,
other than a Converted Mortgage Loan, that becomes an REO Property, as of any
date of determination, the annual rate determined in accordance with the
immediately preceding sentence as if such REO Property were still such Mortgage
Loan on such date of determination. With respect to each Converted Mortgage
Loan, the fixed annual rate at which interest accrues on such Mortgage Loan.
With respect to each Converted Mortgage Loan that becomes an REO Property, the
rate determined in accordance with the preceding sentence on such Converted
Mortgage Loan.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to each
Distribution Date, the excess of (x) the related Available Distribution Amount
over (y) the sum of (i) the sum of the amount payable on such Distribution Date
on the Class A-1 Certificates pursuant to Section 4.01(a)(i) and the amount
described in clauses (b)(i)-(iii) of the definition of "Class A-1 Principal
Distribution Amount" for such Distribution Date.
"New Lease": Any lease of REO Property entered into on behalf
of the Trust Fund, including any lease renewed or extended on behalf of the
Trust Fund if the Trust Fund has the right to renegotiate the terms of such
lease.
"Nonrecoverable P&I Advance": Any P&I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the judgment of the related Master Servicer, will not or, in the case of a
proposed P&I Advance, would not, be ultimately recoverable by the related Master
Servicer from Late Collections, Insurance Proceeds or Liquidation Proceeds on
such Mortgage Loan or REO Property.
"Non-United States Person": Any Person other than a United
States Person.
"Norwest": Norwest Bank Minnesota, N.A., a national banking
association, or any successor master servicer thereto appointed as herein
provided.
"Norwest Loan": A Mortgage Loan master serviced by Norwest and
listed on the Norwest Mortgage Loan Schedule.
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"Norwest Mortgage Loan Schedule": As of any date, the list of
Norwest Loans included in the Trust Fund on such date, attached hereto as
Exhibit F-2 (as amended from time to time to reflect the addition of Qualified
Substitute Mortgage Loans), which list shall set forth the information specified
in the definition of "Mortgage Loan Schedule" with respect to each Norwest Loan.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of any Master Servicer, the Seller
or the Depositor.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or any Master
Servicer, acceptable to the Trustee and the Certificate Insurer, except that any
opinion of counsel relating to (a) the qualification of any account required to
be maintained pursuant to this Agreement as an Eligible Account, (b)
qualification of the Trust Fund as a REMIC or (c) compliance with the REMIC
Provisions must be an opinion of counsel who (i) is in fact Independent of the
Depositor and the Master Servicers, (ii) does not have any direct financial
interest or any material indirect financial interest in the Depositor or any
Master Servicer or in an Affiliate of either and (iii) is not connected with the
Depositor or any Master Servicer as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Class A-1
Certificates and any Distribution Date, a rate equal to the lesser of (i) the
LIBOR Pass-Through Rate for such Distribution Date and (ii) the Available Funds
Pass-Through Rate for such Distribution Date.
"Percentage Interest": With respect to any Certificate, the
undivided percentage ownership in such Class evidenced by such Certificate,
expressed as a percentage, the numerator of which is the initial Certificate
Principal Balance represented by such Certificate and the denominator of which
is the aggregate initial Certificate Principal Balance of all of the
Certificates of such Class. The Certificates are issuable only in minimum
Percentage Interests corresponding to minimum initial Certificate Principal
Balances of $25,000 and increments of $1,000 in excess thereof, except that one
Certificate of each Class may be issued in a denomination equal to the sum of
$25,000 and any amount by which the initial Certificate Balance of such Class
exceeds the next lowest integral multiple of $1000. The Class R Certificates are
issuable only in minimum Percentage Interests equal to no less than 25% of all
of the interests represented by the Class R Certificates.
"Periodic Rate Cap": With respect to each Mortgage Loan and
any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or
<PAGE>
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decrease (without regard to the Maximum Mortgage Rate or the Minimum Mortgage
Rate) on such Adjustment Date from the Mortgage Rate in effect immediately prior
to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, any Master Servicer, the Trustee
or any of their respective Affiliates:
(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;
(ii) demand and time deposits in, certificates of
deposit of, or bankers' acceptances (which shall each have an original
maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days or a remaining maturity of more than 30 days) denominated in
United States dollars and issued by any Depository Institution;
(iii) repurchase obligations with respect to any
security described in clause (i) above maturing not more than one month
from the date of acquisition thereof and entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a
discount that are issued by any corporation incorporated under the laws
of the United States of America or any State thereof and that are rated
by each Rating Agency in one of its two highest long-term unsecured
rating categories at the time of such investment or contractual
commitment providing for such investment;
(v) commercial paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than one
year after the date of issuance thereof) of any corporation
incorporated under the laws of the United States or any State thereof
which on the date of acquisition has been rated by each Rating Agency
in its highest short-term unsecured rating categories, provided that
such commercial paper shall have a remaining maturity of not more than
30 days;
(vi) units of money market funds or common trust
funds that have been rated in the highest long-term or highest
short-term rating category by each of the Rating Agencies;
(vii) if previously confirmed in writing to the
Trustee, any other demand, money market or time deposit, or any other
obligation, security or investment, as may be acceptable to each Rating
Agency and the Certificate Insurer as a permitted investment of funds
backing securities having ratings equivalent to its initial rating of
the
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Class A-1 Certificates; and
(viii) the Fund for so long as the Fund is rated
"AAA" by S&P and "Aaa" by Moody's;
provided that no instrument described hereunder 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 provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee other than (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for the FHLMC, a majority of its board of directors
is not selected by such governmental unit), (ii) a foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (v) any other
Person so designated by the Trustee based upon an Opinion of Counsel that the
holding of a Percentage Interest in a Residual Certificate by such Person may
cause either the Trust Fund or any Person having a Percentage Interest in any
Class of Certificates other than such Person, to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of a Percentage Interest in a Residual Certificate to such Person.
The terms "United States", "State" and "international organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PHMC": The Prudential Home Mortgage Company, Inc.
"P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the related Master Servicer in respect of any Distribution Date
pursuant to Section 4.03.
"Policy": The Certificate Guaranty Insurance Policy 20773
issued by the Certificate Insurer, a copy of which is attached hereto as Exhibit
G.
"Preference Amount": As defined in the Policy.
"Prepayment Assumption": A Constant Prepayment Rate ("CPR") of
20% per annum, used solely for determining the accrual of original issue
discount on the Certificates for
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federal income tax purposes. A CPR represents an annualized constant assumed
rate of prepayment each month of a pool of Mortgage Loans relative to its
outstanding principal balance for the life of such Mortgage Loans.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Prepayment Period of (i) a Principal Prepayment in full or (ii) a
Principal Prepayment in part that is applied by the related Master Servicer to
reduce the outstanding principal balance of such loan on a date preceding the
Due Date in the succeeding Prepayment Period, an amount equal to interest at the
applicable Mortgage Rate minus the related Servicing Fee Rate on the amount of
such Principal Prepayment for the number of days commencing on the date on which
the prepayment is applied and ending on the Due Date in the next succeeding
Prepayment Period.
"Prepayment Period": With respect to any Distribution Date,
the calendar month preceding the calendar month in which such Distribution Date
occurs.
"Primary Insurance Policy": Each primary policy of mortgage
guaranty insurance in effect in accordance with Section 2.04(vi) and as so
indicated on the related Mortgage Loan Schedule, or any replacement policy
therefor obtained by the related Master Servicer or SubServicer pursuant to
Section 3.13.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase Price": With respect to any Mortgage Loan required
to be purchased pursuant to Section 2.03, 3.16(b), 3.26 or 9.01 and as confirmed
by an Officers' Certificate from the related Master Servicer or the Majority
Class R Certificateholder to the Trustee, an amount equal to the sum of (i) 100%
of the Stated Principal Balance thereof as of the date of purchase, (ii) accrued
interest for each calendar month commencing with the calendar month in which
occurred the Due Date as to which interest was last paid by the Mortgagor or
advanced by the related Master Servicer and ending with the calendar month in
which such purchase is effected, in each case at a rate equal to the applicable
Mortgage Rate on the Stated Principal Balance of such Mortgage Loan as of the
close of business on the Distribution Date during each such calendar month,
(iii) any unreimbursed Servicing Advances and P&I Advances and any unpaid
Servicing Fees allocable to such Mortgage Loan, (iv) in the event the Mortgage
Loan is required to be purchased pursuant to Section 2.03, expenses reasonably
incurred or to be incurred by the related Master Servicer or the Trustee in
respect of the breach or defect giving rise to the purchase obligation,
including any expenses arising out of the enforcement of the purchase
obligation, and (v) any Realized Loss previously incurred with respect to such
Mortgage Loan in connection with a Deficient Valuation and allocated to
Certificateholders on or before the date of purchase.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted
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Mortgage Loan pursuant to the terms of this Agreement which must, on the date of
such substitution, either have been approved by the Certificate Insurer or (i)
have an outstanding principal balance, after deduction of all scheduled payments
of principal and interest due in the month of substitution, not in excess of the
Stated Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs (or, in the case of a
substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an
aggregate outstanding principal balance, after such deduction), (ii) have a
Mortgage Rate not less than (and not more than one percentage point in excess
of) the Mortgage Rate of the Deleted Mortgage Loan, (iii) have a Maximum
Mortgage Rate not less than the Maximum Mortgage Rate on the Deleted Mortgage
Loan, (iv) have a Minimum Mortgage Rate not less than the Minimum Mortgage Rate
of the Deleted Mortgage Loan, (v) have a Gross Margin equal to the Gross Margin
of the Deleted Mortgage Loan, (vi) have a next Adjustment Date not more than two
months later than the next Adjustment Date on the Deleted Mortgage Loan, (vii)
have a remaining term to maturity not greater than (and not more than one year
less than) that of the Deleted Mortgage Loan, (viii) have the same Due Date as
the Due Date on the Deleted Mortgage Loan, (ix) have a Loan-to-Value Ratio as of
the Due Date in the month of substitution equal to or lower than the
Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (x) be covered
under a Primary Insurance Policy with an equivalent rating if such Qualified
Substitute Mortgage Loan has a Loan-to-Value Ratio in excess of 80% and (xi)
conform to each representation and warranty set forth in Section 6 of the
Mortgage Loan Purchase Agreement and Section 2.04 hereof.
"Rating Agency": S&P and Moody's or a successor. If either
such agency or its successor is no longer in existence, "Rating Agency" shall be
such nationally recognized statistical rating agency, or other comparable
Person, designated by the Depositor and the Certificate Insurer, notice of which
designation shall be given to the Trustee and the Master Servicers.
"Realized Loss": With respect to each Mortgage Loan as to
which a Cash Liquidation has occurred, an amount (not less than zero or greater
than the unpaid principal balance of the Mortgage Loan immediately prior to the
date of the Cash Liquidation) equal to (i) the unpaid principal balance of the
Mortgage Loan immediately prior to the date of the Cash Liquidation, plus (ii)
accrued interest for each calendar month commencing with the calendar month in
which the Due Date as to which interest was last paid by the Mortgagor occurred
and ending with the calendar month in which such Cash Liquidation occurred, in
each case at a rate equal to the applicable Mortgage Rate minus the related
Servicing Fee on the Stated Principal Balance of such Mortgage Loan as of the
close of business on the Distribution Date during each such calendar month,
minus (iii) the proceeds, if any, received in connection with such Cash
Liquidation, net of amounts that are payable therefrom to the related Master
Servicer or any Sub-Servicer with respect to such Mortgage Loan pursuant to
clause (iii) of Section 3.11. With respect to any REO Property as to which an
REO Disposition has occurred, an amount (not less than zero or greater than the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of the REO Property) equal to (i) the unpaid principal balance of
the Mortgage Loan as of the date of acquisition of the REO Property, plus (ii)
accrued interest for each calendar month commencing with the calendar month in
which the Due Date as to which
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interest was last paid by the Mortgagor occurred and ending with the calendar
month immediately preceding the calendar month in which such REO Property was
acquired, in each case at a rate equal to the Mortgage Rate for the related
Mortgage Loan minus the related Servicing Fee Rate on the Stated Principal
Balance of the related Mortgage Loan as of the close of business on the
Distribution Date during each such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such REO Disposition occurred, minus (iv) the aggregate
of all P&I Advances made by the related Master Servicer in respect of such REO
Property or the related Mortgage Loan for which the related Master Servicer was
reimbursed pursuant to Section 3.23 out of income from such REO Property or the
proceeds of such REO Disposition, minus (v) the total of all net income from
such REO Property and the net proceeds of such REO Disposition transferred to
the Distribution Account pursuant to Section 3.23. With respect to each Mortgage
Loan which has become the subject of a Deficient Valuation, the difference
between the principal balance of the Mortgage Loan outstanding immediately prior
to such Deficient Valuation and the principal balance of the Mortgage Loan as
reduced by the Deficient Valuation.
"Record Date": With respect to each Distribution Date, the
last Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC and their successors in
interest; PROVIDED that if any of the foregoing banks are not suitable to serve
as a Reference Bank, then any leading banks selected by the Trustee which are
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market (i) with an established place of business in London, (ii) not
controlling, under the control of or under common control with the Depositor or
any Affiliate thereof, (iii) whose quotations appear on the Reuters Screen LIBO
Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Trustee.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations and rulings promulgated thereunder, as the foregoing
may be in effect from time to time.
"Remittance Report": A report prepared by each of First
Nationwide and Norwest pursuant to Section 4.03 as agreed to by the Trustee, the
Certificate Insurer and such Master Servicer. With respect to SASCOR, a report
prepared by it and delivered to the Trustee pursuant to each of the Supervision
Agreements.
"Rents from Real Property": With respect to any REO Property,
gross income
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of the character described in Section 856(d) of the Code as being included in
the term "rents from real property".
"REO Account": The account or accounts maintained pursuant to
Section 3.23.
"REO Disposition": The receipt by the related Master Servicer
of all Insurance Proceeds, Liquidation Proceeds and other payments or recoveries
(including proceeds of a final sale) which the related Master Servicer expects
to be finally recoverable from the sale or other disposition of the REO
Property.
"REO Imputed Interest": As to any REO Property, (i) for the
calendar month during which such REO Property was acquired, an amount equal to
one month's interest (at the Mortgage Rate for the related Mortgage Loan) on the
Stated Principal Balance of the REO Property as of the close of business on the
later of the date of acquisition and the Distribution Date in such calendar
month and (ii) for any calendar month thereafter during which such REO Property
was at any time part of the Trust Fund, one month's interest at the applicable
Mortgage Rate on the Stated Principal Balance of such REO Property as of the
close of business on the Distribution Date in such calendar month.
"REO Principal Amortization": With respect to any REO
Property, for any Determination Date, the excess, if any, of all net proceeds
from such REO Property transferred to the Distribution Account on such
Determination Date pursuant to Section 3.23(d) or (f), over the REO Imputed
Interest on such REO Property for the most recently ended calendar month.
"REO Property": A Mortgaged Property acquired by any Master
Servicer on behalf of the Certificateholders and the Certificate Insurer through
foreclosure or deed-in-lieu of foreclosure, as described in Section 3.23.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit D-1 or Exhibit D-2 attached hereto.
"Required Subordinated Amount": With respect to any
Distribution Date, an amount equal to the greater of (i) 1.75% of the aggregate
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date, and (ii)
two times the excess of (A) the aggregate Stated Principal Balance of the
Mortgage Loans which are 91 or more days delinquent (including REO Properties)
as of such date over (B) three times the current Net Monthly Excess Cash Flow
(net of Cumulative Insurance Payments) for such Distribution Date; PROVIDED,
HOWEVER, that so long as no claim has been made on the Policy by the Trustee
with respect to any Distribution Date after the later to occur of (a) the 30th
Distribution Date following the Cut-off Date and (b) the first Distribution Date
on which the Stated Principal Balance of the Mortgage Loans, after giving effect
to distributions to be made on such Distribution Date, is equal to or less than
50% of the aggregate Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date, the Required Subordinated Amount will equal the greater of (i) the
lesser of (A) 1.75% of the aggregate Stated Principal Balance of the Mortgage
Loans as of the Cut-off Date and (B) 3.5% times the then outstanding aggregate
Stated Principal Balance of the Mortgage Loans immediately
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preceding such Distribution Date (but in no event less than $400,000) and (ii)
two times the excess of (A) 50% of the aggregate Stated Principal Balance of the
Mortgage Loans which are 91 or more days delinquent (including REO Properties)
as of such date over (B) three times the current Net Monthly Excess Cash Flow
(net of Cumulative Insurance Payments) for such Distribution Date.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residential Dwelling": Any one of the following: (i) a
detached or semi- detached single-family dwelling, (ii) a two- to four-unit
dwelling, (iii) a townhouse or (iv) a unit in a condominium, cooperative
apartment or a planned unit development, none of which is a mobile or
manufactured home.
"Responsible Officer": When used with respect to the Trustee,
any officer assigned to the corporate trust department or any other department
customarily performing functions similar to those performed by its corporate
trust department and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"SASCOR": Securitized Asset Servicing Corporation, a
corporation organized under the laws of the State of New Jersey, or any
successor master servicer thereto appointed as herein provided.
"SASCOR Loan": A Mortgage Loan master serviced by SASCOR, and
listed on the SASCOR Mortgage Loan Schedule.
"SASCOR Mortgage Loan Schedule": As of any date, the list of
SASCOR Loans included in the Trust Fund on such date, attached hereto as Exhibit
F-3 (as amended from time to time to reflect the addition of Qualified
Substitute Mortgage Loans), which list shall set forth the information specified
in the definition of "Mortgage Loan Schedule" with respect to each SASCOR Loan.
"Seller": Salomon Brothers Realty Corp., or its successor in
interest.
"Servicer": Each of Columbia Equities, Ltd., First Town
Mortgage Corporation, International Savings and Loan Association and The
Prudential Home Mortgage Company, Inc.
"Servicing Account": The account or accounts created and
maintained by the
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Master Servicers pursuant to Section 3.09 or a similar account or accounts
created and maintained by each Servicer pursuant to the related Servicing
Agreement.
"Servicing Advances": All customary, reasonable and necessary
"out of pocket" costs and expenses incurred in the performance by the related
Master Servicer or a Sub-Servicer of its servicing obligations, including, but
not limited to, the cost of (i) the preservation, restoration and protection of
a Mortgaged Property, (ii) any enforcement or judicial proceedings, including
foreclosures, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property, and (iv) performance of its
obligations under Sections 3.01, 3.09, 3.13, 3.14, 3.16 and 3.23 and the similar
costs and expenses incurred by any Servicer, which does not constitute a P&I
Advance, pursuant to the terms of the related Servicing Agreement.
"Servicing Agreement": With respect to those of the SASCOR
Loans included (i) in the mortgage loan pool referred to as 1995-W18 and
serviced by PHMC, the Servicing Agreement, dated as of June 2, 1995, between
PHMC as servicer and SASCOR as principals and attached hereto as Exhibit I-1;
(ii) in the mortgage loan sub-pool referred to as 1995-W24A and serviced by
PHMC, the Servicing Agreement, dated as of December 1, 1995, between PHMC as
servicer and SASCOR as principal, and attached hereto as Exhibit I-2; (iii) in
the mortgage loan sub-pool referred to as 1995-W24B and serviced by Columbia
Equities, Ltd., the Servicing Agreement, dated as of August 31, 1993, between
Columbia Equities, Inc. as servicer and PHMC as principal and attached as
Exhibit I-3; (iv) in the mortgage loan sub-pool referred to as 1995-W24C and
serviced by International Savings and Loan Association, the Servicing Agreement,
dated as of February 8, 1995, among International Savings and Loan Association
as servicer, PHMC as principal and SASCOR as master servicer, and attached
hereto as Exhibit I-4; and (v) in the mortgage loan sub-pool referred to as
1995-W24D and serviced by First Town Mortgage Corporation, the Servicing
Agreement, dated as of August 20, 1993, between First Town Mortgage Corporation
as servicer and PHMC as principal, and attached hereto as Exhibit I-5.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the applicable Servicing Fee Rate on
that principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": With respect to each Mortgage Loan, the
Servicing Fee Rate set forth on the related Mortgage Loan Schedule; provided,
however, that with respect to any Norwest Loan, if Norwest is no longer acting
as Master Servicer with respect to such Mortgage Loan, the minimum Servicing Fee
Rate applicable to such Mortgage Loan shall equal 0.25% per annum on the Stated
Principal Balance of such Mortgage Loan.
"Servicing Officer": Any officer of any Master Servicer
involved in, or
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responsible for, the administration and servicing of the Mortgage Loans, whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee and the Certificate Insurer by the related Master Servicer on the
Closing Date, as such list may from time to time be amended.
"Single Certificate": With respect to the Class A-1
Certificates (other than the Class R Certificates), a hypothetical Certificate
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Certificate Principal Balance of $1,000. With respect to the Class R
Certificates, a hypothetical Class R Certificate evidencing a 100% Percentage
Interest in such Class.
"Special Hazard Amount": As of any Distribution Date, an
amount equal to $4,196,105 minus the sum of (i) the aggregate amount of Special
Hazard Losses allocated solely to the Class R Certificates in accordance with
Section 4.04 and (ii) the Adjustment Amount (as defined below) as most recently
calculated. For each anniversary of the Cut-off Date, the Adjustment Amount
shall be equal to the amount, if any, by which the amount calculated in
accordance with the preceding sentence (without giving effect to the deduction
of the Adjustment Amount for such anniversary) exceeds the greatest of (i) twice
the outstanding principal balance of the Mortgage Loan in the Trust Fund which
has the largest outstanding principal balance on the Distribution Date
immediately preceding such anniversary, (ii) the product of 1.00% multiplied by
the outstanding principal balance of all Mortgage Loans on the Distribution Date
immediately preceding such anniversary and (iii) the aggregate outstanding
principal balance (as of the immediately preceding Distribution Date) of the
Mortgage Loans in any five-digit California zip code area with the largest
amount of Mortgage Loans by aggregate principal balance as of such anniversary.
"Special Hazard Loss": Any loss not in excess of the lesser of
the cost of repair or the cost of replacement of a Mortgaged Property suffered
by such Mortgaged Property on account of direct physical loss, exclusive of (i)
any loss of a type covered by a hazard policy or a flood insurance policy
required to be maintained in respect of such Mortgaged Property pursuant to
Section 3.14, except to the extent of the portion of such loss not covered as a
result of any coinsurance provision and (ii) any Extraordinary Loss.
"S&P": Standard & Poor's Ratings Services or its successor in
interest.
"Startup Day": The day designated as such pursuant to Section
10.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan,
as of any date of determination, the Stated Principal Balance of such Mortgage
Loan as of the Cut-off Date, as shown in the related Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment due on a Due
Date subsequent to the Cut-off Date, to the extent received from the Mortgagor
or advanced by the related Master Servicer and distributed to Certificateholders
on or before such date of determination, (ii) all Principal Prepayments received
after the Cut-off Date, to the extent distributed to Certificateholders on or
before such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the
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related Master Servicer as recoveries of principal in accordance with the
provisions of Section 3.16 and distributed to Certificateholders on or before
such date of determination, and (iv) any Realized Loss incurred with respect
thereto as a result of a Deficient Valuation, to the extent allocated to
Certificateholders on or before such date of determination. For purposes of this
definition, the date of substitution shall be deemed to be the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan. With respect to any REO
Property, as of any date of determination, an amount (not less than zero) equal
to the Stated Principal Balance of the related Mortgage Loan as of the date on
which such REO Property was acquired, minus the sum (i) if such REO Property was
acquired before the Distribution Date in the calendar month of acquisition, the
principal portion of the Monthly Payment due on the Due Date in the calendar
month of acquisition, to the extent advanced by the Master Servicer and
distributed to Certificateholders on or before such date of determination, and
(ii) the aggregate amount of REO Principal Amortization in respect of such REO
Principal for all Determination Dates occurring prior to such date of
determination, to the extent distributed to Certificateholders on or before such
date of determination.
"Stayed Funds": As defined in Section 7.02(b).
"Subordinated Amount": As of any Distribution Date, the
excess, if any, of (a) the aggregate Stated Principal Balances of the Mortgage
Loans immediately following such Distribution Date over (b) the Certificate
Principal Balance of the Class A-1 Certificates as of such Distribution Date
(after taking into account the payment of the amounts described in clauses
(b)(i)-(iv) of the definition of "Class A-1 Principal Distribution Amount" on
such Distribution Date).
"Subordination Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Subordinated Amount
applicable to such Distribution Date over (b) the Subordinated Amount applicable
to such Distribution Date prior to taking into account the payment of any
related Subordination Increase Amounts on such Distribution Date.
"Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Subordination Deficiency Amount as of
such Distribution Date (after taking into account the payment of the Class A-1
Principal Distribution Amount on such Distribution Date (exclusive of the
payment of any Subordination Increase Amount)) and (b) the amount of Net Monthly
Excess Cashflow on such Distribution Date as reduced by any Cumulative Insurance
Payments or Realized Losses allocated thereto with respect to such Distribution
Date pursuant to Section 4.04.
"Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount and (b) the sum of the amounts available for distribution specified in
clauses (b)(i)-(iii) of the definition of "Class A-1 Principal Distribution
Amount" on such Distribution Date.
"Sub-Servicer": Any Person with which any Master Servicer has
entered into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to
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Section 3.02.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the related Master Servicer.
"Sub-Servicing Agreement": The written contract between any
Master Servicer and a Sub-Servicer and any successor Sub-Servicer relating to
servicing and administration of certain Mortgage Loans as provided in Section
3.02.
"Sub-Servicing Fee": With respect to each Mortgage Loan and
for any calendar month, an amount (payable by the related Master Servicer to any
related Sub-Servicer as provided hereunder out of its Servicing Fee) equal to
one month's interest (or in the event of any payment of interest which
accompanies a Principal Prepayment in full made by the Mortgagor during such
calendar month, interest for the number of days covered by such payment of
interest) at the applicable Sub-Servicing Fee Rate on that principal amount on
which interest on such Mortgage Loan accrues for such calendar month.
"Sub-Servicing Fee Rate": With respect to each Mortgage Loan,
the per annum rate set forth on the related Mortgage Loan Schedule.
"Supervision Agreement": With respect to those of the SASCOR
Loans included (i) in the mortgage loan pool referred to as 1995-W18, the
Supervision Agreement, dated as of September 2, 1995, between SASCOR as master
servicer and principal and PHMC as owner, and attached hereto as Exhibit H-1;
(ii) in the mortgage loan sub-pool referred to as 1995- W24A, the Supervision
Agreement, dated as of December 1, 1995, between SASCOR as master servicer and
principal and PHMC as owner, and attached hereto as Exhibit H-2; and (iii) in
the mortgage loan sub-pools referred to as 1995-W24B, 1995-W24C and 1995-W24D,
the Supervision Agreement, dated as of December 2, 1995, between SASCOR as
master servicer and PHMC as owner and principal, and attached hereto as Exhibit
H-3.
"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 the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.
"Transaction Documents": With respect to any Master Servicer,
this Agreement and any of the following documents to which such Master Servicer
is a party: the Custodial Agreements, the Servicing Agreements, the Supervision
Agreements and any Sub-Servicing Agreement.
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"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of Assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, together with all
collections thereon and proceeds thereof, (ii) any REO Property, together with
all collections thereon and proceeds thereof, (iii) the Trustee's rights with
respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof, (iv) the
Depositor's rights under the Mortgage Loan Purchase Agreement (including any
security interest created thereby), (v) the Collection Account and the
Distribution Account and such assets that are deposited therein from time to
time and any investments thereof, together with any and all income, proceeds and
payments with respect thereto and (vi) the Policy and any proceeds thereof.
"Trust Fund Expense Rate": A per annum rate equal to the sum
of the Trustee Fee Rate and the Certificate Insurer Premium Rate.
"Trustee": The Chase Manhattan Bank, N.A., a national banking
association or its successor in interest, or any successor trustee appointed as
herein provided.
"Trustee Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee Fee Rate and
(ii) the aggregate Scheduled Principal Balance of the Mortgage Loans and any REO
Properties as of the second preceding Due Date (or, in the case of the initial
Distribution Date, the Cut-off Date).
"Trustee Fee Rate": 0.012% per annum.
"Underlying Servicing Agreements": With respect to First
Nationwide, the Seller's Warranties and Servicing Agreement, dated as of January
1, 1996, between the Seller, as purchaser, and First Nationwide, as seller and
servicer; and with respect to Norwest, the Liquidation Agreement, dated as of
January 31, 1996, among the Depositor, as depositor, Norwest, as successor in
interest to Ryland Mortgage Company, as master servicer, and State Street Bank
and Trust Company, in its capacity as trustee, in each case under the pooling
and servicing agreement, dated as of May 1, 1992 and relating to the Mortgage
Pass-Through Certificates, Series 1992-C, issued by the Depositor, State Street
Bank and Trust Company, as
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custodian under such Liquidation Agreement, and Salomon Brothers Inc as holder
of 100% of the aggregate interests represented by the related certificates.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.
"United States Person": 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 whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States.
"Unpaid Basis Risk Shortfalls": With respect to each
Distribution Date, the aggregate of all Basis Risk Shortfalls for any previous
Distribution Dates plus interest accrued at the Pass-Through Rate on each Basis
Risk Shortfall less all payments made in respect of such Basis Risk Shortfalls
on or prior to such Distribution Date pursuant to Section 4.01(a).
"Value": With respect to any Mortgaged Property, the lesser of
(i) the value thereof as determined by an appraisal made for the originator at
the time of the origination of the related Mortgage Loan, and (ii) the sales
price of such Mortgaged Property at such time of origination. With respect to a
Mortgage Loan the proceeds of which were used to refinance an existing loan, the
appraised value of the Mortgaged Property at the time of origination of such
Mortgage Loan.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, the percentage of all the Voting Rights allocated among
Holders of each Class of Certificates shall be the fraction, expressed as a
percentage, the numerator of which is the aggregate Certificate Principal
Balance of all the Certificates of such Class then outstanding and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans then outstanding. The Voting Rights allocated to each Class of Certificate
shall be allocated among Holders of each such Class in accordance with their
respective Percentage Interests as of the most recent Distribution Date.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of Mortgage Loans.
The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey to the Trustee
without recourse for the benefit of the Certificateholders and the Certificate
Insurer all the right, title and interest of the Depositor, including any
security interest therein for the benefit of the Depositor, in and to the
Mortgage Loans identified on the Mortgage Loan Schedules, the rights of the
Depositor under the Mortgage Loan Purchase Agreement with respect to such
Mortgage Loans, and all other assets included or to be included in the Trust
Fund for the benefit of the Certificateholders and the Certificate Insurer. Such
assignment includes all interest and principal received by the Depositor or the
Master Servicers on or with respect to the Mortgage Loans (other than payments
of principal and interest due on the Mortgage Loans on or before the Cut-off
Date).
In connection with such transfer and assignment, the Depositor
does hereby deliver or cause to be delivered to the Trustee the Policy and the
Depositor does hereby deliver to, and deposit with, the Trustee, or to and with
one or more Custodians, as the duly appointed agent or agents of the Trustee for
such purpose, the following documents or instruments with respect to each
Mortgage Loan (a "Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed (pursuant to
the direction of the Depositor given pursuant to the Mortgage
Loan Purchase Agreement) in the following form: "Without
recourse, pay to the order of The Chase Manhattan Bank, N.A.,
as Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Asset-Backed Floating Rate
Certificates, Series 1996-AFF1", with all prior and
intervening endorsements showing a complete chain of
endorsement from the originator to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;
(iii) an original Assignment of the Mortgage executed
(pursuant to the direction of the Depositor given pursuant to
the Mortgage Loan Purchase Agreement) in the following form:
"The Chase Manhattan Bank, N.A., as Trustee for the registered
holders of Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-AFF1";
(iv) the original Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the
originator;
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(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if
any;
(vi) the original lender's title insurance policy
insuring the priority of the Mortgage as a first lien on the
Mortgaged Property represented therein as a fee interest
vested in the Mortgagor; and
(vii) the original Primary Insurance Policy for each
Mortgage Loan, if any, identified on the related Mortgage Loan
Schedule as being insured by a Primary Insurance Policy.
The Depositor shall promptly (and in no event later than
fifteen Business Days following the Closing Date) submit or cause to be
submitted for recording, at no expense to the Trust Fund or to the Trustee, in
the appropriate public office for real property records, each Assignment
referred to in Section 2.01(A)(iii) and (iv) above, provided, however, that no
such assignment shall be required to be recorded with respect to any Mortgage
Loan secured by any Mortgaged Property located in any state in which, as
evidenced by an Opinion of Counsel, such recording is not required to protect
the Trustee's interest in the Mortgage Loan against any other transferee or
creditor of the Depositor or the originator of the Mortgage Loan. In the event
that any such Assignment is lost or returned unrecorded because of a defect
therein, the Depositor shall promptly prepare or cause to be prepared a
substitute Assignment or cure or cause to be cured such defect, as the case may
be, and thereafter cause each such Assignment to be duly recorded.
If any of the documents referred to in Section 2.01(ii), (iii)
or (iv) above has as of the Closing Date been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y) has
been lost or such public recording office has retained the original of such
document, the obligations of the Depositor to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Trustee, or to the appropriate
Custodian on behalf of the Trustee, of a copy of each such document certified by
the Depositor or the Seller in the case of (x) above or the applicable public
recording office in the case of (y) above to be a true and complete copy of the
original that was submitted for recording and (2) if such copy is certified by
the Depositor or the Seller, delivery to the Trustee, or to the appropriate
Custodian on behalf of the Trustee, promptly upon receipt thereof (which
Depositor shall use its best efforts to obtain) of either the original or a copy
of such document certified by the applicable public recording office to be a
true and complete copy of the original. If the original lender's title insurance
policy was not delivered pursuant to Section 2.01(vi) above, the Depositor shall
deliver or cause to be delivered to the Trustee a written commitment or interim
binder or preliminary report of title issued by the title insurance or escrow
company, with the original to be delivered to the Trustee, or to the appropriate
Custodian on behalf of the Trustee, promptly upon receipt thereof. If the
original Primary Insurance Policy (if applicable) was not delivered pursuant to
Section 2.01(vii) above, the Depositor shall deliver or cause to be delivered to
the Trustee, or to the appropriate Custodian on behalf of the Trustee, a written
commitment from the mortgage insurer to issue such policy, with the original to
be delivered to the Trustee, or to the appropriate Custodian on behalf of the
Trustee, promptly upon receipt
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thereof.
Notwithstanding the foregoing, the Depositor shall deliver or
cause to be delivered to the Trustee, or to the appropriate Custodian on behalf
of the Trustee, promptly upon receipt thereof: (a) the original recorded
Mortgage and power of attorney in those instances where certified copies thereof
were delivered to the Trustee, or to the appropriate Custodian on behalf of the
Trustee; (b) the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of title from the originator in those instances where
certified copies thereof were delivered to the Trustee, or to the appropriate
Custodian on behalf of the Trustee; (c) the original recorded Assignment of the
Mortgage to the Trustee in those instances where such Assignment was required to
be submitted for recording; (d) the original lender's title insurance policy
where a written commitment to issue such policy, an interim binder or a
preliminary report of title was delivered to the Trustee, or to the appropriate
Custodian on behalf of the Trustee; (e) the original Primary Insurance Policy
where a written commitment to issue such policy was delivered to the Trustee, or
to the appropriate Custodian on behalf of the Trustee; and (f) any other
original documents constituting a part of a Mortgage File received with respect
to any Mortgage Loan, including, but not limited to, any original documents
evidencing an assumption or modification of any Mortgage Loan.
All original documents relating to the Mortgage Loans that are
not delivered to the Trustee, or to the appropriate Custodian on behalf of the
Trustee, are and shall be held by the Seller, the Depositor, the related Master
Servicer or the related Sub-Servicer, as the case may be, in trust for the
benefit of the Trustee on behalf of the Certificateholders and the Certificate
Insurer. In the event that any such original document is required pursuant to
the terms of this Section to be a part of a Mortgage File, such document shall
be delivered promptly to the Trustee, or to the appropriate Custodian on behalf
of the Trustee. Any original document that is not required pursuant to the terms
of this Section to be a part of a Mortgage File delivered to or held by the
Depositor shall be delivered promptly to the related Master Servicer.
The Depositor herewith delivers to the Trustee an executed
copy of the Mortgage Loan Purchase Agreement.
SECTION 2.02. Acceptance by Trustee.
The Trustee acknowledges receipt (or, with respect to Mortgage
Loans subject to a Custodial Agreement, receipt by the respective Custodian as
the duly appointed agent of the Trustee), subject to the provisions of Section
2.01 (and, in the case of the documents referred to in Section 2.01, subject to
any exceptions previously noted on the Trustee's preliminary exception report in
the form annexed hereto as Exhibit B-1 delivered to the Depositor, the
Certificate Insurer and the Master Servicers on the Closing Date), of the
documents referred to in Section 2.01 above and all other assets included in
clauses (i), (iv), (v) (to the extent of amounts deposited into the Distribution
Account) and (vi) of the definition of "Trust Fund" and declares that it (or
such Custodian as its agent) holds and will hold such documents and the other
documents delivered to it constituting the Mortgage Files, and that it holds or
will hold all such assets and such other assets included in the definition of
"Trust Fund" in trust for the exclusive
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use and benefit of all present and future Certificateholders and the Certificate
Insurer.
The Trustee agrees, for the benefit of the Certificateholders
and the Certificate Insurer, to review or cause the related Custodian to review
each Mortgage File within 45 days after receipt of such Mortgage File and to
certify in substantially the form attached hereto as Exhibit B-2 that, as to
each Mortgage Loan listed in each Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in the
preliminary exception report in the form annexed hereto as Exhibit B-1 as not
covered by this certification), (i) all documents constituting part of such
Mortgage File (other than such documents described in Section 2.01(v)) required
to be delivered to it pursuant to this Agreement are in its possession, (ii)
such documents have been reviewed by it or such Custodian and appear regular on
their face and relate to such Mortgage Loan, (iii) based on its or such
Custodian's examination and only as to the foregoing, the information set forth
in the Mortgage Loan Schedule that corresponds to items (i)-(iii), (vi), (viii),
(ix), (xiv), (xv), (xvii), (xviii) and (xix) of the definition of "Mortgage Loan
Schedule" accurately reflects information set forth in the related Mortgage
File. It is herein acknowledged that, in conducting such review, the Trustee or
such Custodian was under no duty or obligation (i) to inspect, review or examine
any such documents, instruments, certificates or other papers to determine that
they are genuine, enforceable, or appropriate or legally sufficient for the
represented purpose or that they have actually been recorded or that they are
other than what they purport to be on their face, or (ii) to determine whether
any Mortgage File should include any of the documents specified in clause (v) of
Section 2.01.
Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor, the Certificate Insurer and the Master
Servicers a final certification in the form annexed hereto as Exhibit B-3
evidencing the completeness of the Mortgage Files, with any applicable
exceptions noted thereon.
If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above the
Trustee or any Custodian finds any document or documents constituting a part of
a Mortgage File to be missing or defective in any material respect, at the
conclusion of its review the Trustee shall so notify the Depositor, the
Certificate Insurer and the related Master Servicer. In addition, upon the
discovery by the Depositor, any Master Servicer or the Trustee of a breach of
any of the representations and warranties made by the Seller in the Mortgage
Loan Purchase Agreement in respect of any Mortgage Loan which materially
adversely affects such Mortgage Loan or the interests of the Certificateholders
or the Certificate Insurer in such Mortgage Loan, the party discovering such
breach shall give prompt written notice to the other parties.
The Trustee shall, at the expense and written request of any
Certificateholder or the Certificate Insurer, provide a written report to such
Certificateholder or the Certificate Insurer, as the case may be, of all
Mortgage Files released to any Master Servicer for servicing purposes.
SECTION 2.03. Repurchase or Substitution of
Mortgage Loans by the Seller or the
Depositor.
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(a) Upon discovery or receipt of written notice of any
materially defective document in, or that a document is missing from, a Mortgage
File or of the breach by the Seller of any representation, warranty or covenant
under the Mortgage Loan Purchase Agreement which materially adversely affects
the value of any Mortgage Loan or the interest therein of the Certificateholders
or the Certificate Insurer (in the case of any such representation or warranty
made to the knowledge or the best of knowledge of the Seller or as to which the
Seller has no knowledge, without regard to the Seller's lack of knowledge with
respect to the substance of such representation or warranty being inaccurate at
the time it was made), the Trustee shall promptly notify the Seller and the
Master Servicers of such defect, missing document or breach and request that the
Seller deliver such missing document or cure such defect or breach within 60
days from the date the Seller was notified of such missing document, defect or
breach, and if the Seller does not deliver such missing document or cure such
defect or breach in all material respects during such period the Trustee shall
enforce the Seller's obligation to repurchase such Mortgage Loan from the Trust
Fund on behalf of the Certificateholders and the Certificate Insurer at the
Purchase Price within 90 days after the date on which the Seller was notified of
such missing document, defect or breach, if and to the extent that the Seller is
obligated to do so under the Mortgage Loan Purchase Agreement. In addition, in
the event that the Federal Deposit Insurance Corporation (the "FDIC"), as
receiver for any institution from which the Seller either directly or indirectly
acquired any of the Norwest Loans, asserts any rights to repurchase any Norwest
Loan, Norwest shall use reasonable and diligent efforts to enforce the Seller's
obligations to repurchase such Norwest Loan from the Trust Fund in the same
manner and at the same price as described in this Section 2.03 for repurchases
of Mortgage Loans for any other cause. The Purchase Price for the repurchased
Mortgage Loan shall be delivered to the related Master Servicer for deposit in
the related Collection Account and the Trustee, upon receipt of certification by
such Master Servicer of such deposit, shall release to the Seller the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as shall be furnished to it by such
Master Servicer to vest in the Seller any Mortgage Loan released pursuant hereto
and the Trustee shall have no further responsibility with regard to such
Mortgage File. In lieu of repurchasing any such Mortgage Loan as provided above,
if so provided in the Mortgage Loan Purchase Agreement, the Seller may cause
such Mortgage Loan to be removed from the Trust Fund (in which case it shall
become a Deleted Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans in the manner and subject to the limitations set forth in Section
2.03(d). It is understood and agreed that the obligation of the Seller to cure
or to repurchase (or to substitute for) any Mortgage Loan as to which a document
is missing, a material defect in a constituent document exists or as to which
such a breach has occurred and is continuing shall constitute the sole remedy
respecting such omission, defect or breach available to the Trustee on behalf of
the Certificateholders.
(b) Subject to Section 2.03(e), within 90 days of the earlier
of discovery by the Depositor or receipt of notice by the Depositor of the
breach of any representation or warranty of the Depositor set forth in Section
2.04 with respect to any Mortgage Loan, which materially adversely affects the
value of such Mortgage Loan or the interest therein of the Certificateholders or
the Certificate Insurer, the Depositor shall (i) cure such breach in all
material respects, (ii) repurchase the Mortgage Loan from the Trustee at the
Purchase Price or
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(iii) remove such Mortgage Loan from the Trust Fund (in which case it shall
become a Deleted Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans in the manner and subject to the limitations set forth in Section
2.03(d). If any such breach is a breach of any of the representations and
warranties included in Section 2.04(iv), and the Depositor is unable to cure
such breach, the Depositor shall repurchase or substitute the smallest number of
Mortgage Loans as shall be required to make such representation or warranty true
and correct. The Purchase Price for any repurchased Mortgage Loan shall be
delivered to the Trustee for deposit in the Distribution Account and the
Trustee, upon receipt of such deposit, shall at the Depositor's direction
release to the Depositor the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment furnished by the Depositor, in each
case without recourse, as shall be necessary to vest in the Depositor any
Mortgage Loan released pursuant hereto.
(c) Within 90 days of the earlier of discovery by any Master
Servicer or receipt of notice by any Master Servicer of the breach of any
representation, warranty or covenant of such Master Servicer set forth in
Section 2.05 which materially and adversely affects the value of any Mortgage
Loan or interests of the Certificateholders or the Certificate Insurer in any
Mortgage Loan, the related Master Servicer shall cure such breach in all
material respects. If such Master Servicer is diligently attempting to cure such
breach but has been unable to do so, such Master Servicer shall have an
additional 90 days to cure such breach.
(d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of the
Seller, or Section 2.03(b), in the case of the Depositor, must be effected prior
to the date which is two years after the Startup Day.
As to any Deleted Mortgage Loan for which the Depositor or the
Seller substitutes a Qualified Substitute Mortgage Loan or Loans, such
substitution shall be effected by the Seller or the Depositor, as the case may
be, delivering to the Trustee, for such Qualified Substitute Mortgage Loan or
Loans the Mortgage Note, the Mortgage, the related Assignment, and such other
documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers' Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below), if any,
in connection with such substitution. The Trustee shall acknowledge receipt for
such Qualified Substitute Mortgage Loan or Loans and, within five Business Days
thereafter, review such documents as specified in Section 2.02 and deliver to
the Depositor and the related Master Servicer, with respect to such Qualified
Substitute Mortgage Loan or Loans, a certification substantially similar to that
made by the Trustee in the second paragraph of Section 2.02. Within one year of
the date of substitution, the Trustee shall deliver to the Depositor and the
related Master Servicer a certification in the form of Exhibit B-2 hereto with
respect to such Qualified Substitute Mortgage Loan or Loans pursuant to Section
2.02. Monthly Payments due with respect to Qualified Substitute Mortgage Loans
in the month of substitution are not part of the Trust Fund and will be retained
by the Depositor or the Seller, as the case may be. For the month of
substitution, distributions to Certificateholders will reflect the Monthly
Payment due on such Deleted Mortgage Loan on or before the Due Date in the
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month of substitution, and the Depositor or the Seller, as the case may be,
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Mortgage Loan. The Depositor shall give or cause to be
given written notice to the Certificateholders and the Certificate Insurer that
such substitution has taken place, shall amend the appropriate Mortgage Loan
Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of
this Agreement and the substitution of the Qualified Substitute Mortgage Loan or
Loans and shall deliver a copy of such amended Mortgage Loan Schedule to the
Trustee. Upon such substitution, such Qualified Substitute Mortgage Loan or
Loans shall be subject to the terms of this Agreement in all respects,
including, in the case of a substitution effected by the Seller, the
representations and warranties included in the Mortgage Loan Purchase Agreement,
and in the case of a substitution effected by the Depositor, the representations
and warranties set forth in Section 2.04, in each case as of the date of
substitution.
For any month in which the Depositor or the Seller substitutes
one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage
Loans, the related Master Servicer will determine the amount (the "Substitution
Shortfall Amount"), if any, by which the aggregate Purchase Price of all such
Deleted Mortgage Loans exceeds the aggregate of, as to each such Qualified
Substitute Mortgage Loan, the Stated Principal Balance thereof as of the date of
substitution, together with one month's interest on such Stated Principal
Balance at the applicable Mortgage Rate. On the date of such substitution, the
Depositor or the Seller, as the case may be, will deliver or cause to be
delivered to the Trustee for deposit from its own funds into the Distribution
Account an amount equal to the Substitution Shortfall Amount, if any, without
reimbursement therefor, and the Trustee, upon receipt of the related Qualified
Substitute Mortgage Loan or Loans and such Substitution Shortfall Amount, if
any, shall release to the Depositor or the Seller, as the case may be, the
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall be necessary to
vest therein any Deleted Mortgage Loan released pursuant hereto.
In addition, the Depositor or the Seller, as the case may be,
shall obtain at its own expense and deliver to the Trustee and the Certificate
Insurer an Opinion of Counsel to the effect that such substitution will not
cause: (a) any federal tax to be imposed on the Trust Fund, including without
limitation, any federal tax imposed on "prohibited transactions" under Section
860F(a)(1) of the Code or on "contributions after the startup date" under
Section 860G(d)(1) of the Code; or (b) the Trust Fund to fail to qualify as a
REMIC at any time that any Certificate is outstanding.
(e) Upon discovery by the Seller, the Depositor, the related
Master Servicer or the Trustee that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the
party discovering such fact shall within two Business Days give written notice
thereof to the other parties and the Certificate Insurer. In connection
therewith, the Seller or the Depositor shall repurchase or, subject to the
limitations set forth in Section 2.03(d), substitute one or more Qualified
Substitute Mortgage Loans for the affected Mortgage Loan within 90 days of the
earlier of discovery or receipt of notice by the related Master Servicer or the
Trustee. Such repurchase or substitution shall be made by (i) the Seller, if the
affected Mortgage Loan's status as a non-qualified mortgage is a breach of any
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representation, warranty or covenant made by the Seller under the Mortgage Loan
Purchase Agreement, or (ii) the Depositor, if the affected Mortgage Loan's
status as a non-qualified mortgage is a breach of any representation or warranty
of the Depositor set forth in Section 2.04. Any such repurchase or substitution
shall be made in the same manner as set forth in Section 2.03(a) or 2.03(b), if
made by the Seller or the Depositor, respectively. The Trustee shall reconvey to
the Seller the Mortgage Loan to be released pursuant hereto in the same manner,
and on the same terms and conditions, as it would a Mortgage Loan repurchased
for breach of a representation or warranty contained in Section 2.03.
SECTION 2.04. Representations and Warranties of
the Depositor.
The Depositor hereby represents and warrants to the Trustee
and the Certificate Insurer that as of the Closing Date or as of such other date
specifically provided herein:
(i) The information set forth in the related Mortgage
Loan Schedule with respect to each Mortgage Loan is complete,
true and correct in all material respects at the date or dates
respecting which such information is furnished;
(ii) As of the Cut-off Date, no Mortgage Loan was more
than 30 days delinquent and no Mortgage Loan was no more than
30 days delinquent in payment more than once in the twelve
month period prior to the Cut-off Date;
(iii) If the Mortgaged Property securing a Mortgage Loan
is located at the time of origination of such Mortgage Loan in
a federally designated special flood hazard area, flood
insurance (either under the federal flood insurance program or
from private insurers) in the amount required under Section
3.14 covers such Mortgaged Property at the Closing Date;
(iv) The Mortgage Loans have an original term to
maturity of not more than 360 months. The Mortgage Loans
provide for interest payable in arrears on the first day of
each month. Each Mortgage Loan is currently a fully
amortizing, adjustable rate Mortgage Loan with monthly
payments due on the first day of each month. On the first
Adjustment Date, and on each Adjustment Date thereafter, the
Mortgage Rate on each Mortgage Loan will be adjusted to equal
the sum, rounded either to the nearest or next highest 0.125%,
as provided in the related Mortgage Note, of the Index plus
the Gross Margin, subject to a Periodic Rate Cap, a Maximum
Mortgage Rate and a Minimum Mortgage Rate. With respect to
approximately 4.83% of the Mortgage Loans by aggregate
principal balance as of the Cut-off Date, the Mortgage Loan
contains a provision whereby the Mortgagor is permitted to
convert the Mortgage Loan to a fixed-rate mortgage loan upon
the terms set forth in the related Mortgage Note. The Mortgage
Rates for the Mortgage Loans range between 5.000% and 9.500%
and the weighted average Mortgage Rate is approximately
7.102%;
(v) No more than approximately 53.71% of the Mortgage
Loans,
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measured by aggregate principal balance as of the Cut-off Date
will be secured by a Mortgaged Property located in the State
of California; no more than approximately 6.57% of the
Mortgage Loans, measured by aggregate principal balance as of
the Cut-off Date will be secured by a Mortgaged Property
located in the State of Connecticut; no more than
approximately 6.55% of the Mortgage Loans, measured by
aggregate principal balance as of the Cut-off Date will be
secured by a Mortgaged Property located in the State of New
Jersey; and no more than approximately 4.99% of the Mortgage
Loans, measured by aggregate principal balance as of the
Cut-off Date will be secured by a Mortgaged Property located
in any other state. Each Mortgaged Property is (a) a single
family dwelling unit; (b) an individual condominium unit, a
planned unit development or townhouse; or (c) a two- to
four-family dwelling unit; the aggregate principal balance of
all Mortgage Loans secured by properties described in the
immediately preceding clauses (b) and (c) does not exceed
approximately 33.07% of the aggregate principal balance of all
of the Mortgage Loans;
(vi) With respect to at least approximately 78.90% of
the Mortgage Loans, the Loan-to-Value Ratio was not more than
80% at the origination of the Mortgage Loan. With respect to
not more than approximately 21.10% of the Mortgage Loans, the
Loan-to-Value Ratio was between 80.01% and 100% at the
origination of the Mortgage Loan and, except with respect to
approximately 1.48% of the Mortgage Loans by aggregate
principal balance as of the Cut-off Date, each such Mortgage
Loan is and will be subject to a Primary Insurance Policy (a)
issued by a FNMA or FHLMC approved insurer with a claims
paying ability satisfactory to the Rating Agency in respect of
mortgage pass-through certificates rated in one of the two
highest categories and (b) which insures at least that portion
of the principal balance of the Mortgage Loan that exceeds the
amount equal to 75% of the Value of the related Mortgaged
Property;
(vii) With respect to at least approximately 93.79% of
the Mortgage Loans, measured by aggregate principal balance,
at the time that the Mortgage Loan was made, the Mortgagor
represented in its loan application that the Mortgaged
Property would be owner-occupied as a primary residence; and
(viii) No Mortgage Loan is a buydown Mortgage Loan.
It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the
respective Mortgage Files to the Trustee or a Custodian and shall inure to the
benefit of the Trustee and the Certificate Insurer notwithstanding any
restrictive or qualified endorsement or assignment. Upon discovery by any of the
Depositor, any Master Servicer, the Certificate Insurer or the Trustee of a
breach of any of the foregoing representations and warranties which materially
and adversely affects the value of any Mortgage Loan or the interests therein of
the Certificateholders or the Certificate Insurer, the party discovering such
breach shall give prompt written notice to the other parties, and in no event
later than two Business Days from the date of such discovery. It is understood
and agreed that
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the obligations of the Depositor set forth in Section 2.03(b) to cure,
substitute for or repurchase a Mortgage Loan constitute the sole remedies
available to the Certificateholders or to the Trustee on their behalf respecting
a breach of the representations and warranties contained in this Section 2.04.
SECTION 2.05. Representations, Warranties and
Covenants of the Master Servicers.
Each Master Servicer hereby represents, warrants and covenants
to the Trustee and the Certificate Insurer that as of the Closing Date or as of
such date specifically provided herein:
(i) Such Master Servicer is a corporation duly
organized, validly existing and in good standing under the
laws of its state of incorporation or a national banking
association duly organized, validly existing and in good
standing under the laws of the United States, as the case may
be, and is and will remain in compliance with the laws of each
State in which any Mortgaged Property is located to the extent
necessary to ensure the enforceability of each Mortgage Loan
in accordance with the terms of the Transaction Documents;
(ii) The execution and delivery of the Transaction
Documents by such Master Servicer and its performance of and
compliance with the terms of the Transaction Documents will
not violate such Master Servicer's articles of incorporation
or by-laws or articles of association or by-laws, as the case
may be, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default)
under, or result in the breach or acceleration of, any
material contract, agreement or other instrument to which such
Master Servicer is a party or which may be applicable to such
Master Servicer or any of its assets;
(iii) Such Master Servicer has the full power and
authority to enter into and consummate all transactions
contemplated by the Transaction Documents, has duly authorized
the execution, delivery and performance of the Transaction
Documents, and has duly executed and delivered the Transaction
Documents. The Transaction Documents, assuming due
authorization, execution and delivery by the other parties
thereto, constitutes a valid, legal and binding obligation of
such Master Servicer, enforceable against it in accordance
with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or
affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(iv) Such Master Servicer is not in violation of, and
the execution and delivery of the Transaction Documents by
such Master Servicer and its performance and compliance with
the terms of the Transaction Documents will
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not constitute a violation with respect to, any order or
decree of any court or any order or regulation of any federal,
state, municipal or governmental agency having jurisdiction
over such Master Servicer or its properties, which violation
might have consequences that would materially and adversely
affect the condition (financial or other) or operations of
such Master Servicer or its properties or might have
consequences that would materially and adversely affect the
performance of its duties hereunder;
(v) There are no actions or proceedings against, or
investigations of, such Master Servicer pending, or, to the
knowledge of such Master Servicer, threatened, before any
court, administrative agency or other tribunal (A) that if
determined adversely to the Master Servicer would prohibit its
entering into the Transaction Documents or render the
Certificates invalid, (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the
transactions contemplated by the Transaction Documents or (C)
that if determined adversely to the Master Servicer would
prohibit or materially and adversely affect the performance by
such Master Servicer of its obligations under, or the validity
or enforceability of, the Transaction Documents or the
Certificates;
(vi) Such Master Servicer will examine each related
Sub-Servicing Agreement and will be familiar with the terms
thereof. Each designated related Sub-Servicer and the terms of
each related Sub-Servicing Agreement will be required to
comply with the provisions of Section 3.02. The terms of any
related Sub-Servicing Agreement will not be inconsistent with
any of the provisions of the Transaction Documents;
(vii) Such Master Servicer (or, with respect to SASCOR,
each Servicer) is an approved seller/servicer of conventional
mortgage loans for FNMA and FHLMC in good standing;
(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 such Master Servicer with, the Transaction
Documents or the Certificates, or for the consummation of the
transactions contemplated by the Transaction Documents, except
for such consents, approvals, authorizations and orders, if
any, that have been obtained prior to the Closing Date; and
(ix) In the event the Index is not published or is
otherwise unavailable, such Master Servicer, in accordance
with the terms of the Mortgage Notes, will select a comparable
alternative index over which it has no control and which is
readily verifiable by Mortgagors.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the respective Mortgage Files to the Trustee
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or a Custodian and shall inure to the benefit of the Trustee and the Certificate
Insurer. Upon discovery by any of the Depositor, any Master Servicer or the
Trustee of a breach of any of the foregoing representations, warranties and
covenants which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Certificateholders or the Certificate Insurer,
the party discovering such breach shall give prompt written notice (but in no
event later than two Business Days following such discovery) to the other
parties. The obligation of each Master Servicer set forth in Section 2.03(c) to
cure breaches shall constitute the sole remedies available to the
Certificateholders, the Depositor or the Trustee on behalf of the
Certificateholders respecting a breach of the representations, warranties and
covenants contained in this Section 2.05, except that any failure by any Master
Servicer to cure any such breach as provided in Section 2.03(c) shall constitute
an Event of Default under Section 7.01(ii) for which such Master Servicer may be
terminated pursuant to Section 7.01.
SECTION 2.06. Additional Representations and
Warranties of the Master Servicers.
(a) Norwest hereby represents and warrants to the Trustee and
the Certificate Insurer that as of the Closing Date or as of such other date
specifically provided herein:
(i) no practice, procedure or policy employed, or
proposed to be employed, by such Master Servicer in the
conduct of its business violates any law, regulation,
judgment, agreement, order or decree known to it that, if
enforced, could reasonably be expected to result in a Material
Adverse Change with respect to such Master Servicer;
(ii) such Master Servicer and such Master Servicer's
parent company or companies have filed prior to the date
hereof all federal and state tax returns that are required to
be filed and paid all taxes, including any assessments
received by them that are not being contested in good faith,
to the extent that such taxes have become due, except for any
failures to file or pay that, individually or in the
aggregate, would not result in a Material Adverse Change with
respect to such Master Servicer; and
(iii) such Master Servicer does not contemplate the
commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in
respect of such Master Servicer or any of its assets.
(b) SASCOR hereby represents and warrants to the Trustee and
the Certificate Insurer that as of the Closing Date or as of such other date
specifically provided herein:
(i) no practice, procedure or policy employed, or
proposed to be employed, by such Master Servicer in the
conduct of its business violates any law, regulation,
judgment, agreement, order or decree applicable to it that, if
enforced, could reasonably be expected to result in a Material
Adverse Change
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with respect to such Master Servicer; and
(ii)such Master Servicer does not contemplate the
commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in
respect of such Master Servicer or any of its assets.
(c) First Nationwide hereby represents and warrants to the
Trustee and the Certificate Insurer that as of the Closing Date or as of such
other date specifically provided herein:
(i) no practice, procedure or policy employed by such
Master Servicer in the conduct of its business violates any
law, regulation, judgment, agreement, order or decree
applicable to it that, if enforced, could reasonably be
expected to result in a Material Adverse Change with respect
to such Master Servicer;
(ii) such Master Servicer has filed prior to the date
hereof all federal and state tax returns that are required to
be filed and paid all taxes, including any assessments
received by it that are not being contested in good faith, to
the extent that such taxes have become due, except for any
failures to file or pay that, individually or in the
aggregate, would not result in a Material Adverse Change with
respect to such Master Servicer;
(iii) such Master Servicer does not contemplate the
commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in
respect of such Master Servicer or any of its assets;
(iv) the Financial Statements of such Master
Servicer, copies of which have been furnished to the
Certificate Insurer, (a) are, as of the dates and for the
periods referred to therein, complete and correct in all
material respects, (b) present fairly the financial condition
and results of operations of such Master Servicer as of the
dates and for the periods indicated and (c) have been prepared
in accordance with generally accepted accounting principles
consistently applied, except as noted therein (subject as to
interim statements to normal year-end adjustments). "Financial
Statements" means, with respect to such Master Servicer, the
balance sheets and the statements of income, retained earnings
and cash flows and the notes thereto which have been provided
to the Certificate Insurer by such Master Servicer; and
(v) neither the Transaction Documents, nor other
information relating to the Mortgage Loans, the operations of
such Master Servicer (including servicing or origination of
loans) or the financial condition of such Master Servicer
(collectively, the "Documents"), as amended, supplemented or
superseded, furnished in writing to the Certificate Insurer by
such Master
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Servicer contain any statement of a material fact by such
Master Servicer which was untrue or misleading in any material
adverse respect when made.
SECTION 2.07. Additional Covenants of the Master
Servicers.
(a) Norwest hereby agrees that while (i) the Certificates are
outstanding, (ii) such Master Servicer is master servicing any Mortgage Loan
hereunder, and (iii) no Certificate Insurer Default exists as such is defined in
clause (a) of the definition thereof, unless the Certificate Insurer shall
otherwise expressly consent in writing:
(i) such Master Servicer shall be obligated promptly
to inform the Certificate Insurer in writing of the occurrence
of any of the following to the extent any of the following
relate to it:
(A) the submission of any claim or the
initiation or threat of any legal process, litigation
or administrative or judicial investigation, or rule
making or disciplinary proceeding by or against such
Master Servicer that (1) is required to be disclosed
to the Securities and Exchange Commission or to such
Master Servicer's shareholders or (2) results in a
Material Adverse Change with respect to such Master
Servicer, or the promulgation of any proceeding or
any proposed or final rule which would result in a
Material Adverse Change with respect to such Master
Servicer; and
(B) the receipt of notice that (1) such
Master Servicer is being placed under regulatory
supervision, (2) any license, permit, charter,
registration or approval necessary for the conduct of
any of such Master Servicer's business is to be, or
may be suspended or revoked, or (C) such Master
Servicer is to cease and desist any practice,
procedure or policy employed by such Master Servicer
in the conduct of its business, and such cessation
would result in a Material Adverse Change with
respect to such Master Servicer;
(ii) such Master Servicer shall, upon the request of
the Certificate Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged
and delivered, within 10 days of such request, such amendments
hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction
Documents. In addition, such Master Servicer agrees to
cooperate with S&P and Moody's in connection with any review
of the transaction contemplated hereby that may be undertaken
by S&P and Moody's after the date hereof;
(iii) such Master Servicer, or any successors thereto
shall maintain all licenses, permits, charters and
registrations which are material to the conduct of its
business; and
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(iv) such Master Servicer shall not take any action,
or fail to take any action, if such action or failure to take
action would result in a material adverse change as described
in clause (ii) of the definition of Material Adverse Change
with respect to such Master Servicer, or may interfere with
the enforcement of any rights of the Certificate Insurer under
or with respect to the Transaction Documents. Such Master
Servicer shall give the Certificate Insurer written notice of
any such action or failure to act promptly, but in no event
later than the date upon which any publicly available filing
or release is made with respect to such action or failure to
act.
(b) SASCOR hereby agrees that while (i) the Certificates are
outstanding, (ii) such Master Servicer is master servicing any Mortgage Loan
hereunder, and (iii) no Certificate Insurer Default exists as such is defined in
clause (a) of the definition thereof, unless the Certificate Insurer shall
otherwise expressly consent in writing:
(i) such Master Servicer shall be obligated promptly
to inform the Certificate Insurer in writing of the occurrence
of any of the following to the extent any of the following
relate to it:
(A) the submission of any claim or the
initiation or threat of any legal process, litigation
or administrative or judicial investigation, or rule
making or disciplinary proceeding by or against such
Master Servicer that (1) could be required to be
disclosed to the Securities and Exchange Commission
or to such Master Servicer's shareholders or (2)
could result in a Material Adverse Change with
respect to such Master Servicer, or the promulgation
of any proceeding or any proposed or final rule which
would result in a Material Adverse Change with
respect to such Master Servicer; and
(B) the receipt of notice that (1) such
Master Servicer is being placed under regulatory
supervision, (2) any license, permit, charter,
registration or approval necessary for the conduct of
any of such Master Servicer's business is to be, or
may be suspended or revoked, or (C) such Master
Servicer is to cease and desist any practice,
procedure or policy employed by such Master Servicer
in the conduct of its business, and such cessation
may result in a Material Adverse Change with respect
to such Master Servicer;
(ii) such Master Servicer shall, upon the request of
the Certificate Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged
and delivered, within 10 days of such request, such amendments
hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction
Documents. In addition, such Master Servicer agrees to
cooperate with S&P and Moody's in connection with any review
of the
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transaction contemplated hereby that may be undertaken by S&P
and Moody's after the date hereof;
(iii) such Master Servicer, or any successors thereto
shall maintain all licenses, permits, charters and
registrations which are material to the conduct of its
business;
(iv) such Master Servicer shall not take any action,
or fail to take any action, if such action or failure to take
action may result in a material adverse change as described in
clause (ii) of the definition of Material Adverse Change with
respect to such Master Servicer, or may interfere with the
enforcement of any rights of the Certificate Insurer under or
with respect to the Transaction Documents. Such Master
Servicer shall give the Certificate Insurer written notice of
any such action or failure to act on the earlier of: (i) the
date upon which any publicly available filing or release is
made with respect to such action or failure to act or (ii)
promptly prior to the date of consummation of such action or
failure to act;
(v) during the term of this Agreement, such Master
Servicer shall maintain errors and omission insurance and a
fidelity bond in accordance with requirements of Section 3.14
hereof and shall require each Servicer to maintain such errors
and omission insurance and fidelity bond;
(vi) such Master Servicer shall not enter into any
custodial arrangements as discussed in Section 2.04 of the
respective Supervision Agreements, other than the existing
Custodial Agreements, without the consent of the Certificate
Insurer which shall not be unreasonably withheld;
(vii) the Master Servicer Remittance Account or
Accounts maintained by such Master Servicer pursuant to 3.02
of the respective Supervision Agreements (together, the
"SASCOR Collection Account") shall be held in trust for the
benefit of the Certificateholders and the Certificate Insurer,
the funds held in the SASCOR Collection Account shall not be
commingled with funds relating to any mortgage loans except
the Mortgage Loans, the SASCOR Collection Account shall be an
Eligible Account and all funds in the SASCOR Collection
Account shall be invested in Permitted Investments; and
(viii) withdrawals from the SASCOR Collection Account
pursuant to Section 3.03 of the respective Supervision
Agreements as a result of indemnification of SASCOR and its
partners, directors, officers, employees and agents pursuant
to Section 6.03 of each Supervision Agreements shall not
exceed $100,000 in the aggregate in any calendar year.
(c) First Nationwide hereby agrees that while (i) the
Certificates are
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outstanding, (ii) such Master Servicer is master servicing any
Mortgage Loan hereunder, and (iii) no Certificate Insurer Default exists as such
is defined in clause (a) of the definition thereof, unless the Certificate
Insurer shall otherwise expressly consent in writing:
(i) such Master Servicer shall, upon the request of
the Certificate Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged
and delivered, within 30 days of such request, such amendments
hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction
Documents; provided that no such amendment, instrument or
action, in the reasonable judgment of such Master Servicer,
will, unless otherwise agreed to by such Master Servicer, (a)
increase or expand its duties, obligations or efforts
hereunder or (b) cause it any additional expense. In addition,
such Master Servicer agrees to reasonably cooperate with S&P
and Moody's with 30 days written notice in connection with any
review of the transaction contemplated hereby that may be
undertaken by S&P and Moody's after the date hereof; provided
that no such cooperation, in the reasonable judgment of such
Master Servicer, will, unless otherwise agreed to by such
Master Servicer, (a) increase or expand its duties,
obligations or efforts hereunder or (b) cause it any
additional expense; and
(ii) such Master Servicer, or any successors thereto
shall maintain all licenses, permits, charters and
registrations which are material to the conduct of its
business.
SECTION 2.08. Execution of Certificates.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery of the Mortgage Files to it, subject to the provisions of
Sections 2.01 and 2.02 and, concurrently with such delivery, has executed and
caused to be authenticated and delivered to or upon the order of the Depositor,
in exchange for the Mortgage Loans, receipt of which is hereby acknowledged,
Certificates duly authenticated by the Certificate Registrar in authorized
denominations evidencing ownership of the entire Trust Fund.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
SECTION 3.01. Master Servicers to Act as Master
Servicers; Administration of the
Trust Fund.
(a) Unless otherwise specified, all references to actions to
be taken by "the Master Servicer" under this Article III or any other provision
of this Agreement with respect to a Mortgage Loan or Mortgage Loans or with
respect to an REO Property or REO Properties shall be to actions to be taken by
each of Norwest and First Nationwide with respect to a Mortgage Loan or Mortgage
Loans serviced by it or with respect to an REO Property or REO Properties
administered by it. In addition, unless otherwise specified, all references to
actions previously taken by "the Master Servicer" under this Article III or any
other provision of this Agreement with respect to a Mortgage Loan or Mortgage
Loans or with respect to an REO Property or REO Properties shall be to actions
previously taken by Norwest or First Nationwide, as the case may be, with
respect to such Mortgage Loan or Mortgage Loans or with respect to such REO
Property or REO Properties. Furthermore, unless otherwise specified, all
references to actions to be taken by "the Master Servicer" with respect to "the
Collection Account" shall be to actions to be taken by Norwest or First
Nationwide, as the case may be, with respect to the Collection Account to be
established and maintained by it, and all references to actions previously taken
by "the Master Servicer" under this Article III or any other provision of this
Agreement with respect to "the Collection Account" shall be to actions
previously taken by Norwest or First Nationwide, as the case may be, with
respect to the Collection Account established and maintained by it. Consistent
with the foregoing, but only insofar as the context so permits, this Article III
is to be read with respect to each of Norwest and First Nationwide as if such
Master Servicer alone was servicing and administering its respective Mortgage
Loans hereunder. Notwithstanding the foregoing and unless specifically
contravened in this Agreement, all references to a Master Servicer in this
Agreement (except those in Article III) shall apply to SASCOR and the related
Servicer. If such a reference shall be deemed applicable to a Servicer, such
Servicer's actions shall be governed by the related Servicing Agreement.
(b) The Master Servicer shall service and administer the
Mortgage Loans on behalf of the Trustee and in the best interests of and for the
benefit of the Certificateholders and the Certificate Insurer (as determined by
the Master Servicer in its reasonable judgment) in accordance with the terms of
this Agreement and the respective 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 but
without regard to:
(i) any relationship that the Master Servicer, any
Sub-Servicer or any Affiliate of the Master Servicer or any
Sub-Servicer may have with the related Mortgagor;
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(ii) the ownership of any Certificate by the Master
Servicer or any Affiliate of the Master Servicer;
(iii) the Master Servicer's obligation to make P&I
Advances or Servicing Advances; or
(iv) the Master Servicer's or any Sub-Servicer's right
to receive compensation for its services hereunder or with
respect to any particular transaction.
To the extent consistent with the foregoing, the Master Servicer shall also seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, 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
Master Servicer in its own name or in the name of a Sub-Servicer is hereby
authorized and empowered by the Trustee when the Master Servicer believes it
appropriate in its best judgment in accordance with the servicing standard set
forth above, to execute and deliver, on behalf of the Certificateholders, the
Certificate Insurer and the Trustee or any of them, and upon notice to the
Trustee, 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 the Mortgaged Properties and to institute foreclosure
proceedings or obtain a deed-in-lieu of foreclosure so as to convert the
ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee and Certificateholders. The Master Servicer
shall service and administer the Mortgage Loans in accordance with applicable
state and federal law and shall provide to the Mortgagors any reports required
to be provided to them by it. Subject to Section 3.17, the Trustee shall
execute, at the written direction of the Master Servicer or any Sub-Servicer,
any powers of attorney and other documents necessary or appropriate to enable
the Master Servicer or any SubServicer to carry out their servicing and
administrative duties hereunder and the Trustee shall not be accountable for the
actions of the Master Servicer or any Sub-Servicers under such powers of
attorney or under the authority given to the Master Servicer under this
paragraph and the Master Servicer shall indemnify the Trustee for any action
taken by the Master Servicer pursuant to the application of any such power of
attorney or under the authority given to the Master Servicer under this
paragraph. The relationship of the Master Servicer (and of any successor
thereto) to the Trustee under this Agreement is intended by the parties to be
that of an independent contractor and not that of a joint venturer, partner or
agent.
In accordance with the standards of the preceding paragraph,
the Master Servicer shall advance or cause Sub-Servicers to advance funds as
necessary for the purpose of effecting the timely payment of taxes and
assessments on the Mortgaged Properties, which advances shall be reimbursable in
the first instance from related collections from the Mortgagors pursuant to
Section 3.09, and further as provided in Section 3.11. Any cost incurred by the
Master Servicer or by Sub-Servicers in effecting the timely payment of taxes and
assessments on a Mortgaged
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Property shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary,
neither the Master Servicer nor any Sub-Servicer may make any future advances
with respect to a Mortgage Loan and neither the Master Servicer nor any
Sub-Servicer shall (unless the Mortgagor is in default with respect to the
Mortgage Loan or such default is, in the judgment of the Master Servicer or any
Sub-Servicer, imminent) permit any modification with respect to any Mortgage
Loan that would change the Mortgage Rate, reduce or increase the principal
balance (except for reductions resulting from actual payments of principal) or
change the final maturity date on such Mortgage Loan.
The Master Servicer may delegate its responsibilities under
this Agreement; provided, however, that no such delegation shall release the
Master Servicer from the responsibilities or liabilities arising under this
Agreement.
(c) Except as specifically set forth herein, SASCOR shall be
responsible only for monitoring and overseeing the servicing of the SASCOR Loans
by the Servicers and the performance by each Servicer of all the duties,
responsibilities and obligations that are to be observed or performed by such
Servicer under the related Servicing Agreement, all on behalf of the Trustee,
and in the best interests of and for the benefit of the Certificateholders and
the Certificate Insurer. Each Servicer shall service the related SASCOR Loans in
accordance with the terms of the related Servicing Agreement and SASCOR shall
monitor and oversee the performance of each Servicer in accordance with the
terms of the related Supervision Agreements and, to the extent consistent with
such terms, giving due consideration to customary and usual standards of
practice of prudent mortgage lenders and mortgage servicers as such standards
related to SASCOR's obligation to monitor and oversee the Servicers and to the
Trustee's, the Certificate Insurer's and the Certificateholders' reliance on
SASCOR but without regard to:
(i) any relationship that SASCOR, any Servicer or any
Affiliate of SASCOR or any Servicer may have with the related
Mortgagor;
(ii) the ownership of any Certificate by SASCOR, any
Servicer or any Affiliate of SASCOR or any Servicer;
(iii) SASCOR's obligation or option, as the case may
be, to make P&I Advances pursuant to the Supervision Agreements or any
Servicer's obligation to make P&I Advances pursuant to the related
Servicing Agreement; or
(iv) SASCOR's or any Servicer's right to receive
compensation for its services hereunder or with respect to any
particular transaction.
In addition, SASCOR shall consult fully with each Servicer as
appropriate from
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time to time to fulfill SASCOR's obligations hereunder and shall receive, review
and evaluate all reports, information and other data and documents provided to
SASCOR by each Servicer pursuant to the related Servicing Agreement.
At SASCOR's written request, the Trustee shall furnish to
SASCOR and any Servicer any powers of attorney and other documents necessary or
appropriate to enable SASCOR and each Servicer to carry out their respective
duties under this Agreement, the related Supervision Agreement and the related
Servicing Agreement, as the case may be. The Trustee shall not be responsible
for any action taken by SASCOR or any Servicer pursuant to the application of
such powers of attorney.
(d) If, with respect to a Servicer, an "event of default" (or
equivalent thereof) occurs under, and as defined in, the related Servicing
Agreement or an event occurs that otherwise permits the termination of the
Servicer thereunder, then, and in each and every such case, SASCOR shall
promptly notify the Trustee, the Certificate Insurer and the Depositor and shall
deliver to each an Officer's Certificate describing such event and the
applicable provisions of the related Servicing Agreement pursuant to which such
Servicer may be terminated and shall provide such further information as it may
reasonably obtain regarding such event at the request of the Trustee, the
Certificate Insurer or the Depositor. So long as such event shall not have been
remedied, the Depositor and the Trustee may (with the prior written consent of
the Certificate Insurer), and, subject to 11.10(d), at the written direction of
the Holders of Certificates entitled to at least 51% of the Voting Rights, the
Trustee shall, by notice in writing to SASCOR and the Certificate Insurer (and
to the Depositor if given by the Trustee or to the Trustee if given by the
Depositor), require that the Trustee terminate such Servicer as servicer under
the Servicing Agreement. In the event of any such termination, the Trustee may
enter into a substitute Servicing Agreement at SASCOR's nomination, with PHMC
or, if SASCOR fails to nominate PHMC to be the successor Servicer or PHMC is
unavailable to be the successor servicer, with another mortgage loan service
company acceptable to the Trustee, SASCOR and each Rating Agency and consented
to by the Certificate Insurer, under which such substitute servicer shall
service and administer the related Mortgage Loans and REO Properties, which
successor Servicer shall, notwithstanding any provisions to the contrary set
forth in such Servicing Agreement, be (a) acceptable to each Rating Agency for
mortgage pass-through certificates having the same original ratings as the
Certificates and (b)(i) authorized to transact business in the state or states
where the Mortgaged Properties are situated, if and to the extent required by
applicable law to enable the successor Servicer to perform its obligations under
such Servicing Agreement, (ii) an institution approved as a mortgage loan
originator by the Federal Housing Administration or an institution the deposit
accounts in which are insured by the FDIC and (iii) a FHLMC or FNMA approved
mortgage servicer. After the termination of any Servicer becomes effective and
until such time as the Trustee enters into a substitute Servicing Agreement with
respect to the related Mortgage Loans, SASCOR shall assume, satisfy, perform and
carry out all obligations which otherwise were to have been satisfied, performed
and carried out by the Servicer under the terminated Servicing Agreement.
However, in no event shall SASCOR be deemed to have assumed any obligation of
such Servicer to purchase Mortgage Loans due to a breach of a representation or
warranty in respect of such Mortgage Loan. SASCOR will be entitled to any
servicing compensation to which the terminated Servicer would have been
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entitled if the related Servicing Agreement with such Servicer had not been
terminated.
Notwithstanding anything to the contrary, each of First
Nationwide and Norwest hereby agree and acknowledge that the provisions of this
Agreement as such relate to the First Nationwide Loans and the Norwest Loans
respectively supersede the servicing arrangements set forth in the Underlying
Servicing Agreements.
SECTION 3.02. Sub-Servicing Agreements Between
Master Servicer and Sub-Servicers;
Amendment of the Servicing
Agreements.
(a) The Master Servicer may enter into Sub-Servicing
Agreements (provided such agreements would not result in a withdrawal or a
downgrading (without regard to the Policy) by either Rating Agency of the rating
on any Class of Certificates) with Sub-Servicers, for the servicing and
administration of the Mortgage Loans. Each Sub-Servicer shall be (i) authorized
to transact business in the state or states where the related Mortgaged
Properties it is to service are situated, if and to the extent required by
applicable law to enable the SubServicer to perform its obligations hereunder
and under the Sub-Servicing Agreement, (ii) an institution approved as a
mortgage loan originator by the Federal Housing Administration or an institution
the deposit accounts in which are insured by the FDIC and (iii) a FHLMC or FNMA
approved mortgage servicer. Each Sub-Servicing Agreement must impose on the
Sub-Servicer requirements conforming to the provisions set forth in Section 3.08
and provide for servicing of the Mortgage Loans consistent with the terms of
this Agreement. The Master Servicer and the Sub-Servicers may enter into and
make amendments to the Sub-Servicing Agreements or enter into different forms of
Sub-Servicing Agreements; provided, however, that any such amendments or
different forms shall be consistent with and not violate the provisions of this
Agreement, and that no such amendment or different form shall be made or entered
into which could be reasonably expected to be materially adverse to the
interests of the Certificateholders or the Certificate Insurer, without the
consent of, subject to Section 11.10(d), the Holders of Certificates entitled to
at least 66% of the Voting Rights. Any variation without the consent of, subject
to Section 11.10(d), the Holders of Certificates entitled to at least 66% of the
Voting Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub-Servicing Accounts or the timing and amount of remittances by
the Sub-Servicers to the Master Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited and any such variation
shall be deemed of no force and effect. The Master Servicer shall deliver to the
Trustee and the Certificate Insurer copies of all Sub-Servicing Agreements, and
any amendments or modifications thereof, promptly upon the Master Servicer's
execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee, the Certificate Insurer and the
Certificateholders, shall enforce the obligations of each Sub-Servicer under the
related Sub-Servicing Agreement, including, without limitation, any obligation
to make advances in respect of delinquent payments as required by a
Sub-Servicing Agreement, or to purchase a Mortgage Loan on account of missing or
defective documentation or on account of a breach of a representation, warranty
or covenant, as described
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in Section 2.03(a). Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Sub-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, 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.
(c) The Trustee (with the prior written consent of the
Certificate Insurer) may consent to any amendment of any Servicing Agreement
with the related Servicer, whether or not at the request of SASCOR, or any
Supervision Agreement with SASCOR, without the consent of any of the
Certificateholders, so long as the amendment is (i) to cure any ambiguity, (ii)
to correct or supplement any provisions therein which may be inconsistent with
any other provisions therein, or (iii) to make any other provisions with respect
to matters or questions arising thereunder which shall not be inconsistent with
the provisions of this Agreement. Any such amendment shall not, as evidenced by
an Opinion of Counsel (which shall not be an expense of the Trustee) delivered
to the Trustee, the Certificate Insurer and each Master Servicer, adversely
affect in any material respect the interests of any Certificateholder or the
Certificate Insurer.
Any Servicing Agreement or Supervision Agreement may also be
amended from time to time by the related Servicer, SASCOR and the Trustee, as
appropriate, with the consent of, subject to Section 11.10(d), the Holders of
Certificates entitled to at least 66% of the Voting Rights for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Servicing Agreement or Supervision Agreement or of modifying
in any manner the rights of the Trustee; provided, however, that no such
amendment shall (i) reduce in any manner the amount or, or delay the timing of,
payments received on the related Mortgage Loans which are required to be
remitted, without the consent of the Holders of the Certificates entitled to
100% of the Voting Rights, or (ii) adversely affect in any material respect the
interests of the Holders of any Class of Certificates, in a manner other than
described in clause (i) above, without the consent of, subject to Section
11.10(d), the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class. Notwithstanding any other provisions
of this Agreement and subject to Section 11.10(d), for the purposes of the
giving or withholding of consents pursuant to this Section 3.02(c), Certificates
registered in the name of the Depositor, any Master Servicer, any Servicer or an
Affiliate of any thereof shall be entitled to Voting Rights with respect to
matters affecting such Certificates.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to any Supervision Agreement or
Servicing Agreement unless it shall have first received an Opinion of Counsel
(at the expense of the party requesting the amendment) to the effect that such
amendment will not result in the imposition of any tax on the Trust Fund
pursuant to the REMIC Provisions or cause the Trust Fund to fail to qualify as a
REMIC at any time that any Certificates are outstanding. Any Opinion of Counsel
delivered to the Trustee
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pursuant to this paragraph shall also be delivered to each Master Servicer, the
Certificate Insurer and the Depositor.
SECTION 3.03. Successor Sub-Servicers.
The Master Servicer shall be entitled to terminate any
Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Master Servicer without any act or deed on the part of
such Sub-Servicer or the Master Servicer, and the Master Servicer either shall
service directly the related Mortgage Loans or shall enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02.
SECTION 3.04. Liability of the Master Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a SubServicer or reference to actions taken through a
Sub-Servicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Trustee, the Certificate Insurer and Certificateholders
for the servicing and administering of the Mortgage Loans in accordance with the
provisions of Section 3.01 without diminution of such obligation or liability by
virtue of such Sub-Servicing Agreements or arrangements or by virtue of
indemnification from the SubServicer and to the same extent and under the same
terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Trustee,
Certificate Insurer or
Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such and not as an originator shall be deemed to be between
the Sub-Servicer and the Master Servicer alone, and the Trustee, the Certificate
Insurer and Certificateholders shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to the
Sub-Servicer except as set forth in Section 3.06. The Master Servicer shall be
solely liable for all fees owed by it to any Sub-Servicer, irrespective of
whether the Master Servicer's compensation pursuant to this Agreement is
sufficient to pay such fees.
SECTION 3.06. Assumption or Termination of
Sub-Servicing Agreements by Trustee.
In the event the Master Servicer shall for any reason no
longer be the master
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servicer (including by reason of an Event of Default), the Trustee or its
designee shall thereupon assume all of the rights and obligations of the Master
Servicer under each Sub-Servicing Agreement that the Master Servicer may have
entered into (except any liability of the Master Servicer existing prior to such
assumption), unless the Trustee elects to terminate any SubServicing Agreement
in accordance with its terms. The Trustee, its designee or the successor to the
Master Servicer appointed pursuant to Section 7.02 shall be deemed to have
assumed all of the Master Servicer's interest therein and to have replaced the
Master Servicer as a party to each Sub-Servicing Agreement to the same extent as
if each Sub-Servicing Agreement had been assigned to the assuming party, except
that the Master Servicer shall not thereby be relieved of any liability or
obligations under any Sub-Servicing Agreement arising in connection with or
relating to anything which occurred prior to the appointment of a successor to
the Master Servicer.
The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
SECTION 3.07. Collection of Certain Mortgage Loan
Payments.
The Master Servicer or the Sub-Servicer shall make reasonable
efforts to collect all payments called for under the terms and provisions of the
Mortgage Loans, and shall, to the extent such procedures shall be consistent
with this Agreement and the terms and provisions of any related Primary
Insurance Policy, follow such collection procedures as the Master Servicer would
follow with respect to mortgage loans comparable to the Mortgage Loans and held
for its own account. Consistent with the foregoing, either the Master Servicer
or a Sub-Servicer may in its discretion waive any late payment charge or penalty
interest, only upon determining that the coverage of such Mortgage Loan by the
related Primary Insurance Policy, if any, will not be affected, and extend the
due dates for the Monthly Payments due on a Mortgage Note for a period of not
greater than 125 days, provided that any such waiver or extension shall not
affect the amortization schedule of any Mortgage Loan for purposes of any
computation hereunder or the coverage of such Mortgage Loan by the related
Primary Insurance Policy, if any, or materially adversely affect the lien of the
related Mortgage; provided further that the Master Servicer may not modify
materially or permit any Sub-Servicer to modify any Mortgage Loan, including
without limitation any modification that would change the Mortgage Rate, forgive
the payment of any principal or interest or extend the final maturity date of
such Mortgage Loan, unless such Mortgage Loan is in default or, in the judgment
of the Master Servicer, such default is reasonably foreseeable.
SECTION 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage
Loan pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be
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an Eligible Account. The Sub-Servicer will be required to deposit into the
Sub-Servicing Account no later than the first Business Day after receipt of all
proceeds of Mortgage Loans received by the Sub-Servicer, less its servicing
compensation to the extent permitted by the SubServicing Agreement and to remit
such proceeds as are required for deposit in the Collection Account to the
Master Servicer for deposit in the Collection Account on or before the following
Determination Date thereafter. For purposes of this Agreement, the Master
Servicer shall be deemed to have received payments on the Mortgage Loans when
the Sub-Servicer is required to remit such payments to the Master Servicer
pursuant to the Sub-Servicing Agreement.
SECTION 3.09. Collection of Taxes, Assessments and
Similar Items; Servicing Accounts.
The Master Servicer may and, if required by the Master
Servicer, the SubServicers shall, establish and maintain one or more accounts
(the "Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub-Servicers) for the payment of taxes, assessments,
hazard insurance premiums, and comparable items for the account of the
Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Master Servicer shall deposit or shall
cause the SubServicers to deposit in the Servicing Accounts on a daily basis,
and retain therein, all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting the timely payment of any such items as
required under the terms of this Agreement. Withdrawals of amounts so collected
from a Servicing Account may be made only to (i) effect timely payment of taxes,
assessments, hazard insurance premiums, and comparable items; (ii) reimburse the
Master Servicer (or a Sub-Servicer to the extent provided in the related
Sub-Servicing Agreement) out of related collections for any advances made
pursuant to Section 3.01 (with respect to taxes and assessments) and Section
3.14 (with respect to hazard insurance); (iii) refund to Mortgagors any sums as
may be determined to be overages; (iv) pay interest, if required and as
described below, to Mortgagors on balances in the Servicing Account; or (v)
clear and terminate the Servicing Account at the termination of this Agreement
in accordance with Section 9.01. As part of its servicing duties, the Master
Servicer or Sub-Servicers shall pay to the Mortgagors interest on funds in
Servicing Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement therefor. The
Master Servicer or SubServicer shall be entitled to retain any interest income
paid on funds deposited in the Servicing Account other than interest on such
funds which is required by law to be paid to the Mortgagors.
SECTION 3.10. Collection Account and Distribution
Account.
(a) The Master Servicer shall establish and maintain one or
more accounts (collectively, the "Collection Account"), held in trust for the
benefit of the Trustee, the Certificate Insurer and the Certificateholders. The
Master Servicer shall deposit or cause to be deposited in the Collection Account
on a daily basis, as and when received or as otherwise required hereunder, the
following payments and collections received or made by it subsequent to the
Cut-off Date (other than in respect of principal or interest on the Mortgage
Loans due on or before the Cut-off Date), or payments (other than Principal
Prepayments) received by it on
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or prior to the Cut-off Date but allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on each
Mortgage Loan (other than the Servicing Fee);
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds derived from an REO Disposition and
amounts paid by the Majority Class R Certificateholder or the
Certificate Insurer in connection with a purchase of all the
Mortgage Loans and REO Properties pursuant to Section 9.01);
(iv) any amounts required to be deposited pursuant to
Section 3.12 in respect of any losses realized on Permitted
Investments with respect to funds held in the Collection
Account;
(v) any amounts required to be deposited by the Master
Servicer pursuant to the second paragraph of Section 3.14 in
respect of any blanket policy deductibles; and
(vi) the Purchase Price for any Mortgage Loan.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of prepayment
or late payment charges, penalty interest or assumption fees need not be
deposited by the Master Servicer in the Collection Account. In the event the
Master Servicer shall deposit in the Collection Account any amount not required
to be deposited therein, it may at any time withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding.
(b) The Trustee shall establish and maintain one or more
accounts (collectively, the "Distribution Account"), held in trust for the
benefit of the Certificateholders and the Certificate Insurer. The Master
Servicer shall deliver to the Trustee in immediately available funds for deposit
in the Distribution Account (i) on each Master Servicer Remittance Date (in the
case of Norwest, by 10:00 a.m. (New York City time) on such date), (a) with
respect to Norwest and First Nationwide, that portion of the Available
Distribution Amount (calculated without regard to clause (2)(b) of the
definition thereof) for the related Distribution Date then on deposit in the
Collection Account, (b) with respect to SASCOR, an amount equal to the aggregate
of the amounts required to be remitted to SASCOR pursuant to each Servicing
Agreement, and (ii) on each Business Day as of the commencement of which the
balance on deposit in the Collection Account exceeds $75,000 following any
withdrawals pursuant to the
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next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account". If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account", the Master Servicer shall,
on or before twelve o'clock noon New York City time on such Business Day,
withdraw from the Collection Account any and all amounts payable or reimbursable
to the Depositor, the Master Servicer, the Trustee, the Seller or any
Sub-Servicer pursuant to Section 3.11 and shall pay such amounts to the Persons
entitled thereto.
(c) On each Distribution Date on which there exists no
Certificate Insurer Event of Default (as defined in clause (a) of the definition
thereof) which has continued unremedied for five or more Business Days, prior to
making any other distributions referred to in Section 4.01 herein, the Trustee
shall withdraw from the Distribution Account and pay to the Certificate Insurer,
by wire transfer of immediately available funds in accordance with the Insurance
Agreement, the Certificate Insurer Premium for such Distribution Date.
(d) Funds in the Collection Account or Distribution Account
may be invested in Permitted Investments in accordance with the provisions set
forth in Section 3.12. The Master Servicer shall give notice to the Trustee and
the Certificate Insurer of the location of the Collection Account and prior to
any change thereof. The Trustee shall give notice to the Master Servicer, the
Certificate Insurer and the Depositor of any location of the Distribution
Account other than the Corporate Trust Office and prior to any change thereof.
(e) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for Distribution
Accounts as set forth in the definition thereof) and for all purposes of this
Agreement shall be deemed to be a part of the Collection Account; provided,
however, that the Trustee shall have the sole authority to withdraw any funds
held pursuant to this subsection (e). In addition, the Master Servicer shall
deliver to the Trustee from time to time for deposit in the Distribution Account
or the Trustee, in its individual capacity, as appropriate, shall deposit from
time to time in the Distribution Account:
(i) any P&I Advances, as required pursuant to Section
4.03:
(ii) any amounts required to be deposited pursuant to
Section 3.23(d), (g) or (i) by the Master Servicer in
connection with any REO Property;
(iii) any amounts required to be deposited pursuant to
Section 3.12 in connection with losses realized on Permitted
Investments with respect to funds held in the Distribution
Account;
(iv) any amounts to be paid by the Majority Class R
Certificateholder or the Certificate Insurer in connection
with a purchase of all the Mortgage Loans and REO Properties
pursuant to Section 9.01;
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(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters;
(vi) any amount required to be deposited pursuant to
Section 3.24 by the Master Servicer in connection with any
Prepayment Interest Shortfalls;
(vii) any amounts required to be deposited pursuant to
Section 3.25 in respect to adjustment to Mortgage Rates or
Monthly Payments; and
(viii) any amounts to be paid by the Master Servicer, the
Seller or the Depositor in connection with the repurchase or
substitution of a Mortgage Loan pursuant to Section 2.03 or
3.16.
(f) Promptly upon receipt of any Stayed Funds, whether from
the Master Servicer, a trustee in bankruptcy, or federal bankruptcy court or
other source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder.
SECTION 3.11. Withdrawals from the Collection
Account.
The Master Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.03:
(i) to remit to the Trustee for deposit in the
Distribution Account the amounts required to be so remitted
pursuant to Section 3.10(b);
(ii) subject to Section 3.16(c), to reimburse the Master
Servicer or a Sub-Servicer for P&I Advances, but only to the
extent of amounts received which represent Late Collections
(net of the related Servicing Fees) of Monthly Payments on
Mortgage Loans with respect to which such P&I Advances were
made in accordance with the provisions of Section 4.03;
(iii) subject to Section 3.16(c), to reimburse the Master
Servicer or any Sub-Servicer for unpaid Servicing Fees (or
portion thereof representing unpaid Sub-Servicing Fees) and
unreimbursed Servicing Advances with respect to each Mortgage
Loan, to the extent of any Liquidation Proceeds and Insurance
Proceeds received with respect to such Mortgage Loan;
(iv) to pay to the Master Servicer or any Sub-Servicer
any unpaid Servicing Fees (or portion thereof representing
unpaid Sub-Servicing Fees) out of payments of interest
received with respect to each Mortgage Loan;
(v) to pay to the Master Servicer as servicing
compensation (in addition to the Servicing Fee) on each Master
Servicer Remittance Date any interest or investment income
earned on funds deposited in the Collection
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Account;
(vi) to pay to the Master Servicer, the Depositor or the
Seller, as the case may be, with respect to each Mortgage Loan
that has previously been purchased or replaced pursuant to
Section 2.03 or Section 3.16(b) all amounts received thereon
subsequent to the date of purchase or substitution, as the
case may be;
(vii) to reimburse the Master Servicer for P&I Advances
and to reimburse the Master Servicer for any P&I Advance
previously made which the Master Servicer has determined to be
a Nonrecoverable P&I Advance;
(viii) to reimburse the Master Servicer or the Depositor
for expenses incurred by or reimbursable to the Master
Servicer or the Depositor, as the case may be, pursuant to
Section 6.03; provided, however, that, with respect to First
Nationwide, reimbursements pursuant to this subclause shall in
the aggregate not exceed $200,000 in any calendar year except
as provided in Section 6.03;
(ix) to reimburse the Master Servicer or the Trustee, as
the case may be, for expenses reasonably incurred in respect
of the breach or defect giving rise to the purchase obligation
under Section 2.03 of this Agreement that were included in the
Purchase Price of the Mortgage Loan, including any expenses
arising out of the enforcement of the purchase obligation;
(x) to reimburse the Trustee for amounts advanced in
respect of any Class of Certificates pursuant to Section
7.02(b), either (a) from the Stayed Funds in respect of which
such advance was made or (b) from any funds in the Collection
Account if the Trustee has made a good faith determination
that such advance ultimately will not be recoverable from the
Stayed Funds in respect of which such advance was made;
(xi) to withdraw from the Collection Account any funds
that were not required to be deposited;
(xii) to reimburse the Master Servicer for expenses
incurred with respect to any Mortgage Loan pursuant to Section
3.23; and
(xiii) to clear and terminate the Collection Account
pursuant to Section 9.01.
The Master Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
justifying any payment from the Collection Account pursuant to such subclauses
(ii) - (vii) and (ix).
SECTION 3.12. Investment of Funds in the
Collection Account and the
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Distribution Account.
(a) The Master Servicer may direct any depository institution
maintaining the Collection Account, the Servicing Account and the REO Account
and, as regards Norwest, the Distribution Account to the extent of those funds
it has remitted to the Trustee for deposit in the Distribution Account, and the
Trustee, in its individual capacity, may direct, except as provided above, any
depository institution maintaining a Distribution Account (each Collection
Account, Servicing Account, REO Account and Distribution Account, an "Investment
Account"), to invest the funds in an Investment Account in one or more Permitted
Investments bearing interest or sold at a discount, and maturing, unless payable
on demand, (i) no later than the Business Day immediately preceding the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if a Person other than the Trustee is the obligor thereon, and (ii)
no later than the date on which such funds are required to be withdrawn from
such account pursuant to this Agreement, if the Trustee is the obligor thereon.
All such Permitted Investments shall be held to maturity, unless payable on
demand. If the Master Servicer or the Trustee, as the case may be, does not
provide any such investment directions, funds held in any Investment Account
will be invested in the Permitted Investments specified in clause (iii) of the
definition thereof. Any investment of funds in an Investment Account shall be
made in the name of the Master Servicer (in its capacity as such and in trust
for the Certificateholders and the Certificate Insurer) or in the name of the
Trustee (in its capacity as such and in trust for the Certificateholders and the
Certificate Insurer) or in the name of a nominee of the Trustee, as the case may
be. The Trustee or the Master Servicer, as the case may be, shall have sole
control (except with respect to investment direction of the Investment Accounts,
over each such investment and the income thereon, and any certificate or other
instrument evidencing any such investment shall be delivered directly to the
Trustee or its agent or the Master Servicer or its agent, as the case may be,
together with any document of transfer necessary to transfer title to such
investment to the Trustee or its nominee or the Master Servicer, as the case may
be. In the event amounts on deposit in an Investment Account are at any time
invested in a Permitted Investment payable on demand, the Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on
the last day such Permitted Investment may otherwise
mature hereunder in an amount equal to the lesser of
(1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly
upon determination by the Trustee that such Permitted
Investment would not constitute a Permitted
Investment in respect of funds thereafter on deposit
in the Investment Account.
(b) All income and gain realized from investment of funds
deposited in the Collection Accounts shall be for the benefit of the Master
Servicer and shall be subject to its withdrawal in accordance with Section 3.11.
The Master Servicer shall deposit in the Investment Accounts the amount of any
loss incurred in respect of any such Permitted Investment
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immediately upon realization of such loss. All income and gain realized from the
investment of funds received from Norwest and deposited in the Distribution
Account shall be for Norwest's benefit and shall be distributed thereto on the
Distribution Date. Norwest shall deliver to the Trustee for deposit in the
Distribution Account the amount of any loss incurred in respect of any such
Permitted Investment immediately upon realization of such loss. All income and
gain realized from the investment of funds deposited in the Distribution
Account, except as provided above, shall be for the benefit of the Trustee, in
its individual capacity, and shall be distributed to the Trustee, in its
individual capacity, on the first day of the month following the month in which
such income or gain is received. The Trustee, in its individual capacity, shall
deposit in the Distribution Account the amount of any loss incurred in respect
of any such Permitted Investment immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01, upon the
request of, subject to Section 11.10(d), the Holders of Certificates
representing more than 50% of the Voting Rights of any Class, shall take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate proceedings.
SECTION 3.13. Maintenance of Primary Insurance
Policies; Collections Thereunder.
The Master Servicer will maintain or cause the related
Sub-Servicer, if any, to maintain in full force and effect, if required under
Section 2.04(vi) and to the extent available, a Primary Insurance Policy
conforming in all respects to the description set forth in Section 2.04(vi) with
respect to each Mortgage Loan so insured as of the Cut-off Date (or, in the case
of a Qualified Substitute Mortgage Loan, on the date of substitution), as so
indicated on the related Mortgage Loan Schedule. Such coverage will be
maintained with respect to each such Mortgage Loan for so long as it is
outstanding and with respect to any Qualified Substitute Mortgage Loan required
to be so insured, for so long as it is outstanding subject to any applicable
laws. The Master Servicer shall pay or shall cause the Sub-Servicer to pay the
premium for each Primary Insurance Policy on a timely basis and shall pay such
premium out of its own funds if the related Mortgagor fails to do so. The
payment of such premium shall be reimbursable as a Servicing Advance. The Master
Servicer or the related Sub-Servicer, if any, will not cancel or refuse to renew
any such Primary Insurance Policy in effect on the Closing Date (or, in the case
of a Qualified Substitute Mortgage Loan, on the date of substitution) that is
required to be kept in force under this Agreement unless a replacement Primary
Insurance Policy for such canceled or non-renewed policy is obtained from and
maintained with an insurer that satisfies the standards set forth in Section
2.04(vi). The Master Servicer shall not take, or permit any Sub-Servicer to
take, any action which would result in non-coverage under any applicable Primary
Insurance Policy of any loss which, but for the actions of the Master Servicer
or Sub-Servicer, would have been covered thereunder. In connection with any
assumption and modification agreement or substitution of liability agreement
entered into or to be entered into pursuant to Section 3.15, the Master Servicer
shall promptly notify the insurer under the related
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Primary Insurance Policy, if any, of such assumption in accordance with the
terms of such policy and shall take all actions which may be required by such
insurer as a condition to the continuation of coverage under the Primary
Insurance Policy. If such Primary Insurance Policy is terminated as a result of
such assumption, the Master Servicer or the related Sub-Servicer shall obtain or
cause the related Mortgagor to obtain a replacement Primary Insurance Policy as
provided above.
In connection with its activities as administrator and
servicer of the Mortgage Loans, the Master Servicer agrees to prepare and
present, on behalf of itself, the Trustee, the Certificate Insurer and the
Certificateholders, claims to the insurer under any Primary Insurance Policy in
a timely fashion in accordance with the terms of such policies and, in this
regard, to take such action as shall be necessary to permit recovery under any
Primary Insurance Policy respecting a defaulted Mortgage Loan. Pursuant to
Section 3.10, any amounts collected by the Master Servicer under any Primary
Insurance Policy shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3.11. In those cases in which a Mortgage Loan is
serviced by a Sub-Servicer, the Sub-Servicer, on behalf of itself, the Trustee,
the Certificate Insurer and the Certificateholders, will present claims to the
insurer under the Primary Insurance Policy and all collections thereunder shall
be deposited initially in the SubServicing Account.
SECTION 3.14. Maintenance of Hazard Insurance and
Errors and Omis- sions and Fidelity
Coverage.
The Master Servicer shall maintain or shall cause a
Sub-Servicer to maintain for each Mortgage Loan fire insurance with extended
coverage on the related Mortgaged Property in an amount which is at least equal
to the lesser of the current principal balance of such Mortgage Loan and the
amount necessary to fully compensate for any damage or loss to the improvements
which are a part of such property on a replacement cost basis, in each case in
an amount not less than such amount as is necessary to avoid the application of
any coinsurance clause contained in the related hazard insurance policy. The
Master Servicer shall also maintain or shall cause a Sub-Servicer to maintain
fire insurance with extended coverage on each REO Property in an amount which is
at least equal to the lesser of (i) the maximum insurable value of the
improvements which are a part of such property and (ii) the outstanding
principal balance of the related Mortgage Loan at the time it became an REO
Property, plus accrued interest at the Mortgage Rate and related Servicing
Advances. Pursuant to Section 3.10, any amounts to be collected by the Master
Servicer or a Sub-Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with the
procedures that the Master Servicer would follow in servicing loans held for its
own account, subject to the terms and conditions of the related Mortgage and
Mortgage Note) shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3.11. Any cost incurred by the Master Servicer or
a Sub-Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Certificateholders, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no earthquake
or other additional insurance is to be required of any
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Mortgagor other than pursuant to such applicable laws and regulations as shall
at any time be in force and as shall require such additional insurance. If the
Mortgaged Property or REO Property is located in a federally designated special
flood hazard area, the Master Servicer will maintain or cause a Sub-Servicer to
maintain flood insurance in respect thereof to the extent such flood insurance
may be purchased. Such flood insurance shall be in an amount equal to the lesser
of (i) the unpaid principal balance of the related Mortgage Loan and (ii) the
maximum amount of such insurance available for the related Mortgaged Property
under the national flood insurance program (assuming that the area in which such
Mortgaged Property is located is participating in such program).
In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer having a rating acceptable to FNMA or
FHLMC insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.14, it being understood and agreed that
such policy may contain a deductible clause, in which case the Master Servicer
shall, in the event that there shall not have been maintained on the related
Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Master Servicer agrees to
prepare and present, on behalf of itself, the Trustee, the Certificate Insurer
and Certificateholders, claims under any such blanket policy in a timely fashion
in accordance with the terms of such policy.
The Master Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies 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, unless the Master Servicer has obtained a waiver of such requirements
from FNMA or FHLMC. The Master Servicer shall also maintain a fidelity bond in
the form and amount that would meet the requirements of FNMA or FHLMC, unless
the Master Servicer has obtained a waiver of such requirements from FNMA or
FHLMC. The Master Servicer shall be deemed to have complied with this provision
if an Affiliate of the Master 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 Master Servicer. Any such
errors and omissions policy and fidelity bond shall not be canceled without
thirty days' prior written notice to the Trustee and the Certificate Insurer.
The Master Servicer shall also cause each Sub-Servicer to maintain a policy of
insurance covering errors and omissions and a fidelity bond which would meet
such requirements.
SECTION 3.15. Enforcement of Due-On-Sale Clauses;
Assumption Agree- ments.
The Master Servicer or a Sub-Servicer will, to the extent that
either the Master Servicer or a Sub-Servicer has knowledge of any conveyance or
prospective conveyance of any
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Mortgaged Property by any Mortgagor (whether by absolute conveyance or by
contract of sale, and whether or not the Mortgagor remains or is to remain
liable under the Mortgage Note and/or the Mortgage), exercise its rights to
accelerate the maturity of such Mortgage Loan under the "due-on-sale" clause, if
any, applicable thereto; provided, however, that neither the Master Servicer nor
any Sub-Servicer shall exercise any such rights (a) if prohibited by law from
doing so or if the exercise of such rights would impair or threaten to impair
any recovery under the related Primary Insurance Policy, if any or (b) so long
as the Mortgage Loan is not a Converted Mortgage Loan, if the transfer is to a
creditworthy transferee who satisfies the underwriting standards of the Master
Servicer. If the Master Servicer reasonably believes it and any SubServicer are
unable under applicable law to enforce such "due-on-sale" clause, the Master
Servicer will enter into or cause any Sub-Servicer to enter into an assumption
and modification agreement from or with the person to whom such property has
been conveyed or is proposed to be conveyed, pursuant to which such person
becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Master Servicer
is also authorized to enter into or cause any Sub-Servicer to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
the Mortgagor and becomes liable under the Mortgage Note, provided that no such
substitution shall be effective unless such person satisfies the underwriting
criteria of the Master Servicer. In connection with any assumption or
substitution, the Master Servicer or any Sub-Servicer shall apply such
underwriting standards and follow such practices and procedures as shall be
normal and usual in the Master Servicer's general mortgage servicing activities
and as it applies to other mortgage loans owned solely by the Master Servicer.
Neither the Master Servicer nor a Sub-Servicer shall take or enter into any
assumption and modification agreement, however, unless (to the extent
practicable in the circumstances) the Master Servicer or the Sub-Servicer shall
have received confirmation, in writing, of the continued effectiveness of any
applicable Primary Insurance Policy and the hazard insurance policy. Any fee
collected in respect of an assumption or substitution of liability agreement
will be retained by the Master Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the related Mortgage Rate, the amount of the
Monthly Payment, the Maximum Mortgage Rate and the Minimum Mortgage Rate) may be
amended or modified, except as otherwise required pursuant to the terms thereof.
The Master Servicer shall make or cause to be made any necessary recordation and
shall notify the Trustee that any such substitution or assumption agreement has
been completed by forwarding to the Trustee the original copy of such
substitution or assumption agreement, which copy shall be added to the related
Mortgage File and shall, for all purposes, be considered a part of such Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or by the terms of the
Mortgage Note or any assumption which the Master Servicer or a Sub-Servicer may
be restricted by law from preventing, for any reason whatever. For purposes of
this Section 3.15, the term "assumption" is deemed to also include a sale (of
the Mortgaged Property) subject to the Mortgage that is not accompanied by an
assumption or
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substitution of liability agreement.
SECTION 3.16. Realization Upon Defaulted Mortgage
Loans.
(a) The Master Servicer, or a Sub-Servicer upon the direction
of the Master Servicer, shall use reasonable and diligent efforts, consistent
with the servicing standard set forth in Section 3.01, to foreclose upon or
otherwise comparably convert the ownership of 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
pursuant to Section 3.07. The Master Servicer shall be responsible for all costs
and expenses incurred by it in any such proceedings; provided, however, that
such costs and expenses will be recoverable as Servicing Advances by the Master
Servicer as contemplated in Section 3.11 and 3.23. The foregoing is subject to
the provision that, in any case in which Mortgaged Property shall have suffered
damage from an Uninsured Cause, the Master Servicer shall not be required to
expend its own funds toward the restoration of such property unless it shall
determine in its discretion that such restoration will increase the proceeds of
liquidation of the related Mortgage Loan to Certificateholders or the
Certificate Insurer after reimbursement to itself for such expenses.
(b) The Master Servicer may at its option purchase from the
Trust Fund any Mortgage Loan which is 90 days or more delinquent and which the
Master Servicer determines in good faith will otherwise become subject to
foreclosure proceedings (evidence of such determination to be delivered in
writing to the Trustee prior to purchase), at a price equal to the Purchase
Price. The Purchase Price for any Mortgage Loan purchased hereunder shall be
delivered to the Trustee for deposit into the Distribution Account and the
Trustee, upon such deposit, shall release or cause to be released to the Master
Servicer the related Mortgage File and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the Master Servicer title to any Mortgage Loan released
pursuant hereto.
(c) The proceeds of any Cash Liquidation, as well as any
recovery resulting from a partial collection of Insurance Proceeds or
Liquidation Proceeds in respect of any Mortgage Loan, will be applied in the
following order of priority: first, to reimburse the Master Servicer or any
Sub-Servicer for any related unreimbursed Servicing Advances, pursuant to
Section 3.11(iii); second, to accrued and unpaid interest on the Mortgage Loan,
at the Mortgage Rate, to the date of the Cash Liquidation, or to the Due Date
prior to the Distribution Date on which such amounts are to be distributed if
not in connection with a Cash Liquidation; and third, as a recovery of principal
of the Mortgage Loan. If the amount of the recovery so allocated to interest is
less than the full amount of accrued and unpaid interest due on such Mortgage
Loan, the amount of such recovery will be allocated by the Master Servicer as
follows: first, to unpaid Servicing Fees; and second, to interest. The portion
of the recovery so allocated to unpaid Servicing Fees shall be reimbursed to the
Master Servicer or any Sub-Servicer pursuant to Section 3.11(iii). The portion
of the recovery allocated to interest and the portion of the recovery allocated
to principal of the Mortgage Loan shall be applied as follows: first, to
reimburse the Master Servicer or any Sub-Servicer for any related unreimbursed
P&I Advances in accordance with Section 3.11(ii), and second, as part of the
amounts to be transferred to the Distribution
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Account in accordance with Section 3.10(b).
(d) The proceeds of any REO Disposition and any income from
REO Property will be applied in the manner specified in Section 3.23.
SECTION 3.17. Trustee to Cooperate; Release of
Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt
by the Master Servicer of a notification that payment in full shall be escrowed
in a manner customary for such purposes, the Master Servicer will immediately
notify the Trustee by a certification in the form of Exhibit D-2 (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 3.10 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such certification and request, the Trustee shall
promptly release, or cause the related Custodian to release, the related
Mortgage File to the Master Servicer or a Sub-Servicer, as directed by the
Master Servicer. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Collection
Account or the Distribution Account.
From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any Primary Insurance Policy, the Trustee shall, upon request of the Master
Servicer and delivery to the Trustee of a Request for Release in the form of
Exhibit D-l, release, or cause the related Custodian to release, the related
Mortgage File to the Master Servicer, and the Trustee shall, at the direction of
the Master Servicer, execute such documents furnished to it by the Master
Servicer as shall be necessary to the prosecution of any such proceedings. Such
Request for Release shall obligate the Master Servicer to return each and every
document previously requested from the Mortgage File to the Trustee when the
need therefor by the Master Servicer no longer exists, unless the Mortgage Loan
has been liquidated and the Liquidation Proceeds relating to the Mortgage Loan
have been deposited in the Collection Account or the Mortgage File or such
document has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered to the
Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation which are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, the Request for Release
shall be released by the Trustee to the Master Servicer.
If the Request for Release is accompanied by an assignment of
mortgage or a release of mortgage prepared by the Master Servicer and such
Request for Release and assignment of mortgage or release of mortgage are
completed by the Master Servicer to the satisfaction of the Trustee, the Trustee
shall execute the assignment of mortgage or the release
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of mortgage in accordance with the written instructions of the Master Servicer,
and shall deliver such assignment of mortgage or release of mortgage to the
Master Servicer promptly following receipt thereof by the Trustee.
Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Master Servicer any court pleadings, requests
for trustee's sale or other documents necessary to the foreclosure or trustee's
sale in respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Mortgage Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
SECTION 3.18. Servicing Compensation.
As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan pursuant to Section 3.11(iv), subject to Section
3.24. In addition, the Master Servicer shall be entitled to recover unpaid
Servicing Fees out of Insurance Proceeds or Liquidation Proceeds to the extent
permitted by Section 3.11(iii) and out of amounts derived from the operation and
sale of an REO Property to the extent permitted by Section 3.23. The Servicing
Fee may not be transferred in whole or in part except in connection with the
transfer of all of the Master Servicer's responsibilities and obligations under
this Agreement. SASCOR and First Nationwide are each responsible for paying,
from its own funds, the fees due to its related Custodian with no right to
reimbursement therefor.
Additional servicing compensation in the form of prepayment
charges, assumption fees, late payment or other similar charges, fees payable in
connection with conversions of Convertible Mortgage Loans or otherwise shall be
retained by the Master Servicer or a SubServicer only to the extent such fees or
charges are received by the Master Servicer or a SubServicer. The Master
Servicer shall also be entitled pursuant to Section 3.11(v) to withdraw from the
Collection Account, pursuant to Section 3.12 to receive from the Distribution
Account, and pursuant to Section 3.23(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.12 and Section 3.24. The Master Servicer shall be
required to pay or shall cause a Sub-Servicer to pay all expenses incurred by it
in connection with its servicing activities hereunder (including payment of
premiums for Primary Insurance Policies, if any, and premiums for the insurance
required by Section 3.14, to the extent such premiums are not paid by the
related Mortgagors or by a Sub-Servicer and servicing compensation of each
Sub-Servicer and shall not be entitled to reimbursement therefor except as
specifically provided in this Agreement.
SECTION 3.19. Reports to the Trustee; Collection
Account Statements.
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Not later than fifteen days after each Distribution Date, the
Master Servicer (which shall include SASCOR for the purposes of this Section)
shall forward to the Trustee and the Depositor (and the Trustee shall promptly
deliver to the Certificate Insurer) a statement prepared by the Master Servicer
setting forth the status of the Collection Account as of the close of business
on such Distribution Date and showing, for the period covered by such statement,
the aggregate amount of deposits into and withdrawals from the Collection
Account of each category of deposit specified in Section 3.10(a) and each
category of withdrawal specified in Section 3.11. Such statement may be in the
form of the then current FNMA Monthly Accounting Report for its Guaranteed
Mortgage Pass-Through Program with appropriate additions and changes, and shall
also include information as to the aggregate of the outstanding principal
balances of all of the Mortgage Loans as of the last day of the calendar month
immediately preceding such Distribution Date. Copies of such statement shall be
provided by the Trustee to any Certificateholder upon request at the requesting
Certificateholder's expense, provided such statement is delivered by the Master
Servicer to the Trustee.
SECTION 3.20. Statement as to Compliance.
The Master Servicer (which shall include SASCOR for the
purposes of this Section) will deliver to the Trustee and the Depositor (and the
Trustee shall promptly deliver to the Certificate Insurer) not later than 90
days following the end of each fiscal year of the Master Servicer (beginning
with the fiscal year thereof ending in the 1996 calendar year), an Officers'
Certificate stating, as to each signatory thereof, that (i) a review of the
activities of the Master Servicer during the preceding year and of performance
under this Agreement has been made under such officers' supervision, (ii) to the
best of such officers' knowledge, based on such review, the Master Servicer has
fulfilled all of its obligations under this Agreement throughout such year
including specifically a certification that the Master Servicer has complied
with Article X, 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, (iii) (with respect to SASCOR and First Nationwide) the
financial statements submitted in accordance with Section 6.05 hereof are
complete and correct in all material respects and present fairly the financial
condition and results of operations of such Master Servicer as of the dates and
for the periods indicated, in accordance with generally accepted accounting
principles consistently applied; and (iv) such Master Servicer has in full force
and effect a blanket fidelity bond (or direct surety bond) and an errors and
omissions insurance policy (with respect to Norwest and First Nationwide in
accordance with the terms and requirements of Section 3.14 of this Agreement and
with respect to SASCOR in accordance with the terms and requirements of Section
2.04(b)(v) of this Agreement. Copies of such statement shall be provided by the
Trustee to any Certificateholder upon request at the expense of the requesting
Certificateholder, provided such statement is delivered by the Master Servicer
to the Trustee. The fiscal year with respect to Norwest ends, as of the Closing
Date, on December 31 of each calendar year. With respect to First Nationwide,
the fiscal year, as of the Closing Date, ends on December 31 of each calendar
year.
SECTION 3.21. Independent Public Accountants'
Servicing Report.
Not later than 90 days following the end of each fiscal year
of the Master
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Servicer, the Master Servicer at its expense shall cause a nationally recognized
firm of independent public accountants (which may also render other services to
the Master Servicer) which is a member of the American Institute of Certified
Public Accountants to furnish a statement to the Trustee, the Certificate
Insurer and the Depositor to the effect that such firm has examined certain
documents and records relating to the servicing by the Master Servicer and each
Sub-Servicer of the Mortgage Loans under this Agreement or of mortgage loans
under pooling and servicing agreements (including the Mortgage Loans and this
Agreement) substantially similar one to another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby including this Agreement) and that, on the basis of such examination
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers established by the Mortgage Bankers Association of
America, such firm confirms that such servicing has been conducted in compliance
with such pooling and servicing agreements except for such significant
exceptions or errors in records that, in the opinion of such firm, the Uniform
Single Attestation Program for Mortgage Bankers established by the Mortgage
Bankers Association of America requires it to report (the "USAP Audit");
provided, however, that the Master Servicer shall be required to provide any
such report with respect to the Master Servicer's servicing activities only if
the Master Servicer has directly serviced any Mortgage Loans during such fiscal
year. In rendering such statement, such firm may rely, as to matters relating to
direct servicing of mortgage loans by Sub-Servicers, upon comparable statements
for examinations conducted substantially in compliance with the Uniform Single
Audit Program for Mortgage Bankers or the Audit Program for Mortgages serviced
for FHLMC (rendered within one year of such statement) of independent public
accountants with respect to the related Sub-Servicer. Copies of such statement
shall be provided by the Trustee to any Certificateholder upon request at the
Master Servicer's expense, provided that such statement is delivered by the
Master Servicer to the Trustee, each Rating Agency and the Certificate Insurer.
Promptly upon receipt, SASCOR shall deliver to the Trustee, the Certificate
Insurer and the Depositor any USAP Audit or other servicing audit it receives
from any Servicer pursuant to the related Servicing Agreement.
SECTION 3.22. Access to Certain Documentation.
The Master Servicer (which shall include SASCOR for the
purposes of this Section) shall provide to the Office of Thrift Supervision, the
FDIC, and any other federal or state banking or insurance regulatory authority
that may exercise authority over any Certificateholder or the Certificate
Insurer, access to the documentation regarding the Mortgage Loans required by
applicable laws and regulations. Such access shall be afforded without charge,
but only upon reasonable request and during normal business hours at the offices
of the Master Servicer designated by it. In addition, access to the
documentation regarding the Mortgage Loans will be provided to the Certificate
Insurer upon reasonable request during normal business hours at the offices of
the Master Servicer designated by it at the expense of the Certificate Insurer.
The Master Servicer shall provide such access only at such offices. If the
Master Servicer retrieved such documentation from off-site storage, the
Certificate Insurer shall reimburse the Master Servicer for all costs incurred
in connection with the retrieval. On an annual basis the Master Servicer (which,
for purposes here, shall include SASCOR) shall, upon the reasonable request of
the Certificate Insurer, permit the Certificate Insurer or its authorized
agents: (i) to
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inspect the books and records of each Master Servicer as they may relate to the
Mortgage Loans and the obligations of the Master Servicers under the Transaction
Documents; (ii) to discuss the affairs, finances and accounts of the Master
Servicer with the chief operating officer and the chief financial officer of the
Master Servicer; and (iii) with the Master Servicer's consent, which consent
shall not be unreasonably withheld, to discuss the affairs, finances and
accounts of the Master Servicer with the Master Servicer's independent
accountants, provided that an officer of the Master Servicer shall have the
right to be present during such discussions. Such inspections and discussions
shall be conducted during normal business hours and shall not unreasonably
disrupt the business of the Master Servicer. The books and records of the Master
Servicer will be maintained at the address of the Master Servicer designated
herein for receipt of notices, unless the Master Servicer shall otherwise advise
the parties hereto in writing.
SECTION 3.23. Title, Management and Disposition of
REO Property.
(a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, on behalf of the
Certificateholders and the Certificate Insurer. The Master Servicer, on behalf
of the Trust Fund, shall sell or cause a Sub-Servicer to sell any REO Property
within two years after the Trust Fund acquires ownership of such REO Property
for purposes of Section 860G(a)(8) of the Code, unless the Master Servicer has
delivered to the Trustee and the Certificate Insurer an Opinion of Counsel
(which shall be an expense of the Trust Fund), addressed to the Trustee, the
Certificate Insurer and the Master Servicer, to the effect that the holding by
the Trust Fund of such REO Property subsequent to two years after its
acquisition 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 Trust Fund to fail to qualify as a REMIC under federal law at any time that
any Certificates are outstanding. The Master Servicer shall, or shall cause a
Sub-Servicer to, manage, conserve, protect and operate each REO Property for the
Certificateholders and the Certificate Insurer 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) of the Code or result in the receipt by the Trust Fund 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 the REMIC Provisions.
(b) The Master Servicer or a Sub-Servicer shall segregate and
hold all funds collected and received in connection with the operation of any
REO Property separate and apart from its own funds and general assets and shall
establish and maintain with respect to each REO Property an account held in
trust for the Trustee for the benefit of the Certificateholders and the
Certificate Insurer (each, an "REO Account"), which shall be an Eligible
Account. The Master Servicer shall be entitled to retain or withdraw any
interest income paid on funds deposited in each REO Account by the depository.
(c) The Master Servicer or a Sub-Servicer shall have full
power and authority, subject only to the specific requirements and prohibitions
of this Agreement, to do any and all things in connection with any REO Property
as are consistent with the manner in which the Master Servicer manages and
operates similar property owned by the Master Servicer or any of
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its Affiliates, all on such terms and for such period as the Master Servicer
deems to be in the best interests of Certificateholders and the Certificate
Insurer. In connection therewith, the Master Servicer shall deposit, or cause a
Sub-Servicer to deposit, on a daily basis in the REO Account all revenues
received by it with respect to the related REO Property and shall withdraw
therefrom funds necessary for the proper operation, management and maintenance
of the REO Property including, without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect of
such REO Property that may result in the imposition of a lien
thereon; and
(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i)-(iii) above
with respect to such REO Property, the Master Servicer shall advance from its
own funds such amount as is necessary for such purposes if, but only if, the
Master Servicer would make such advances if the Master Servicer owned the
related REO Property and if in the Master Servicer's judgment, the payment of
such amounts will be recoverable from the operation or sale of the REO Property.
Notwithstanding the foregoing, neither the Master Servicer nor
any Sub-Servicer shall:
(i) permit the Trust Fund to enter into, renew or
extend any New Lease with respect to any REO Property, if the
New Lease by its terms will give rise to any income that does
not constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under
any New Lease other than amounts that will constitute Rents
from Real Property;
(iii) authorize or permit any construction on any REO
Property, other than the completion of a building or other
improvement thereon, and then only if more than ten percent of
the construction of such building or other improvement was
completed before default on the related Mortgage Loan became
imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) allow any Person to Directly Operate any REO
Property on any date more than 90 days after its date of
acquisition by the Trust Fund;
unless, in any such case, the Master Servicer has obtained an Opinion of Counsel
(which shall be an expense of the Trust Fund), a copy of which shall be
forwarded to the Certificate Insurer, to the effect that such action will not
cause such REO Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code at any time that it is held by
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the Trust Fund, in which case the Master Servicer may take such actions or cause
a Sub-Servicer to take such actions as are specified in such Opinion of Counsel.
The Master Servicer or a Sub-Servicer may contract with any
Independent Contractor for the operation and management of any REO Property,
provided that:
(i) the terms and conditions of any such contract shall
not be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay
all costs and expenses incurred in connection with the
operation and management of such REO Property, including those
listed above and remit all related revenues (net of such costs
and expenses) to the Master Servicer as soon as practicable,
but in no event later than thirty days following the receipt
thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.23(c)
relating to any such contract or to actions taken through any
such Independent Contractor shall be deemed to relieve the
Master Servicer of any of its duties and obligations to the
Trustee on behalf of the Certificateholders and the
Certificate Insurer with respect to the operation and
management of any such REO Property; and
(iv) the Master Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all
duties and obligations in connection with the operation and
management of such REO Property.
The Master Servicer or a Sub-Servicer shall be entitled to enter into any
agreement with any Independent Contractor performing services for it related to
its duties and obligations hereunder for indemnification of the Master Servicer
or a Sub-Servicer by such Independent Contractor, and nothing in this Agreement
shall be deemed to limit or modify such indemnification. The Master Servicer
shall be solely liable for all fees owed by it to any such Independent
Contractor, irrespective of whether the Master Servicer's compensation pursuant
to Section 3.18 is sufficient to pay such fees.
(d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself unpaid Servicing Fees in respect
of the related Mortgage Loan; and (ii) to reimburse itself or any Sub-Servicer
for unreimbursed Servicing Advances and P&I Advances made in respect of such REO
Property or the related Mortgage Loan. On each Determination Date, the Master
Servicer shall withdraw from each REO Account and deposit into the Distribution
Account in accordance with Section 3.10(e)(ii), for distribution on the related
Distribution Date in accordance with Section 4.01, the income from the related
REO Property, net of any withdrawals made pursuant to Section 3.23(c) or this
Section 3.23(d).
(e) Within 30 days after any REO Disposition, the Master
Servicer shall
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provide to the Trustee and the Certificate Insurer a statement of accounting for
the related REO Property and REO Accounts, including without limitation (1) each
category of deposit to, withdrawal from and investment earnings within such REO
Accounts, (2) the loan number of the related Mortgage Loan, (3) the date such
Mortgage Loan was acquired in foreclosure or by deed in lieu of foreclosure, (4)
the date of REO Disposition, (5) the gross sales price and the related selling
and other expenses, (6) accrued interest, calculated from the date of
acquisition to the disposition date, and (7) such other information as the
Trustee or the Certificate Insurer may reasonably request.
(f) Subject to the time constraints set forth in Section
3.23(a), each REO Disposition shall be carried out by the Master Servicer or a
Sub-Servicer at such price and upon such terms and conditions as the Master
Servicer shall deem necessary or advisable, as shall be normal and usual in its
general servicing activities and as are in accordance with general FNMA
guidelines.
(g) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(e)(ii) on the Determination Date in the month
following receipt thereof for distribution on the related Distribution Date in
accordance with Section 4.01.
(h) The Master Servicer shall, or shall cause a Sub-Servicer
to, prepare and file reports of foreclosure and abandonment in accordance with
Section 6050(J) of the Code.
(i) The proceeds of any REO Disposition will be applied in the
following order of priority: first, to reimburse the Master Servicer or any
Sub-Servicer for any related unreimbursed Servicing Advances; second, to
interest on the Stated Principal Balance of the related Mortgage Loan at the
Mortgage Rate to the date of acquisition of title to the REO Property and to REO
Imputed Interest from the date of acquisition of title to the REO Property to
the date of the REO Disposition; third, as a recovery of principal of the
Mortgage Loan up to the Stated Principal Balance of such REO Property and
fourth, to the Mortgagor under the related Mortgage Loan, if required by the
terms of the related Mortgage Loan or by applicable law, and otherwise to the
Certificate Insurer for reimbursement in an amount equal to the Cumulative
Insurance Payments and then to the Class R Certificates. If the amount of the
recovery so allocated to interest is less than the full amount described in
clause second of the immediately preceding sentence, the amount of such recovery
will be allocated by the Master Servicer as follows: first, to unpaid Servicing
Fees and Trustee Fees; second, to interest on the Stated Principal Balance of
the related Mortgage Loan at the Mortgage Rate (less the Servicing Fee Rate and
the Trustee Fee Rate) to the date of acquisition of title to the REO Property;
and third, to REO Imputed Interest. The portion of the recovery so allocated to
unpaid Servicing Fees shall be reimbursed to the Master Servicer or any
Sub-Servicer pursuant to Section 3.11(iii). The portions of the recovery so
allocated to REO Imputed Interest and to principal of the REO Property shall be
applied as follows: first, to reimburse the Master Servicer or any Sub-Servicer
for any related unreimbursed P&I Advances in accordance with this Section 3.23;
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and second, pursuant to Section 4.01.
(j) Notwithstanding the foregoing provisions of this Section
3.23, with respect to any Mortgage Loan as to which the Master Servicer has
received actual notice of, or has actual knowledge of, the presence of any toxic
or hazardous substance on the Mortgaged Property, the Master Servicer shall not,
on behalf of the Trustee, either (i) obtain title to a Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, or (ii) otherwise acquire
possession of, or take any other action, with respect to, any Mortgaged
Property, if, as a result of any such action, the Trustee, for the
Certificateholders and the Certificate Insurer, would be considered to hold
title to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of the Comprehensive
Environmental Responsibility Cleanup and Liability Act of 1980, as amended from
time to time, or any comparable law, unless the Master Servicer has also
previously determined, based on its reasonable judgment and a prudent report
prepared by a Person who regularly conducts environmental audits using customary
industry standards, that:
(i) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it would be in
the best economic interest of the Trust Fund to take such
actions as are necessary to bring the Mortgaged Property in
compliance therewith; and
(ii) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Fund to take such actions
with respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Master Servicer as an expense of the
Trust Fund, and the Master Servicer shall be reimbursed therefor from the
Collection Account as provided in Section 3.11(xii), any such right of
reimbursement being prior to the rights of the Certificateholders to receive any
amount in the Collection Account.
If the Master Servicer determines, as described above, that it
is in the best economic interest of the Trust Fund and the Certificate Insurer
to take such actions as are necessary to bring any such Mortgaged Property in
compliance with applicable environmental laws, or to take such action with
respect to the containment, clean-up or remediation of hazardous substances,
hazardous materials, hazardous wastes, or petroleum-based materials affecting
any such Mortgaged Property, then the Master Servicer shall take such action as
it deems to be in the best economic interest of the Trust Fund and the
Certificate Insurer. The cost of any such compliance, containment, cleanup or
remediation shall be advanced by the Master Servicer as an expense of the Trust
Fund, and the Master Servicer shall be entitled to be
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reimbursed therefor from the Collection Account as provided in Section
3.11(xii), any such right of reimbursement being prior to the rights of the
Certificateholders to receive any amount in the Collection Account.
SECTION 3.24. Additional Obligations of the Master
Servicer.
The Master Servicer shall deliver to the Trustee for deposit
into the Distribution Account on each Master Servicer Remittance Date from its
own funds or funds remitted to the Master Servicer by the Sub-Servicer an amount
equal to the lesser of (i) the aggregate of the Prepayment Interest Shortfalls
for the related Distribution Date resulting solely from Principal Prepayments
during the related Prepayment Period and (ii) (a) with respect to Norwest, the
SubServicing Fee for the related Mortgage Loans payable to the related
Sub-Servicer for the most recently ended calendar month and (b) with respect to
First Nationwide, the Servicing Fee for the related Mortgage Loans payable to
First Nationwide for the most recently ended calendar month.
SECTION 3.25. Obligations of the Master Servicer
in Respect of Mortgage Rates and
Monthly Payments.
In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Master Servicer in a manner not consistent with the terms
of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deliver to the Trustee
for deposit in the Distribution Account from its own funds the amount of any
such shortfall and shall indemnify and hold harmless the Trust Fund, the
Trustee, the Certificate Insurer, the Depositor and any successor master
servicer in respect of any such liability. Such indemnities shall survive the
termination or discharge of this Agreement.
SECTION 3.26. Obligations of the Master Servicer
in Respect of Converted Mortgage
Loans.
(a) The Trustee, as Note Holder (as defined in the Mortgage
Notes for the Mortgage Loans), hereby authorizes and directs the Master
Servicer, on behalf of the Note Holder, to determine fixed rates into which
Mortgagors under Convertible Mortgage Loans may convert the adjustable rates on
their Mortgage Notes in accordance with the fixed formula pursuant to the terms
of such Mortgage Notes. The Master Servicer agrees to make such determinations
and otherwise administer the program contemplated in the Mortgage Notes for the
Convertible Mortgage Loans until the later to occur of (i) the date on which all
the Convertible Mortgage Loans have become Converted Mortgage Loans and (ii) the
date on which each Convertible Mortgage Loan is no longer eligible to become a
Converted Mortgage Loan.
(b) Notwithstanding that a First Nationwide Loan or a Norwest
Loan becomes a Converted Mortgage Loan in any month, such Converted Mortgage
Loan shall remain in the Trust Fund and all payments in respect thereof shall
remain in the Trust Fund.
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(c) Upon becoming aware of the conversion of any SASCOR Loan
which is a Convertible Mortgage Loan, on the last day of the calendar month in
which a Convertible Mortgage Loan has become a Converted Mortgage Loan, SASCOR
shall cause PHMC to purchase such Converted Mortgage Loan from the Trust Fund at
the Purchase Price. The Purchase Price for the purchased Converted Mortgage Loan
shall be deposited in the Collection Account held by or on behalf of SASCOR, and
the Trustee, upon written certification from SASCOR of such deposit, shall
release to SASCOR the related Mortgage File and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as SASCOR
shall furnish and as shall be necessary to vest in PHMC all right, title and
interest in any Mortgage Loan released pursuant to this Section.
(d) Notwithstanding that a SASCOR Loan becomes a Converted
Mortgage Loan in any month, such Converted Mortgage Loan shall remain in the
Trust Fund and all payments in respect thereof shall remain in the Trust Fund
unless and until such Converted Mortgage Loan is purchased by PHMC pursuant to
Section 3.26(c), whereupon such Converted Mortgage Loan shall cease to be part
of the Trust Fund.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a) On each Distribution Date the Trustee shall withdraw from
the Distribution Account and distribute to the Certificateholders the following
amounts, in the following order of priority, in each case to the extent of the
Available Distribution Amount:
(i) to the Class A-1 Certificateholders, in an amount
equal to (A) all Accrued Certificate Interest on the Class A-1
Certificates for such Distribution Date, plus (B) any
undistributed amount described in the immediately preceding
clause (i)(A) from any previous Distribution Date for which no
Insured Payment has been previously paid to the Class A-1
Certificateholders;
(ii) to the Class A-1 Certificateholders, in an amount
equal to the Class A-1 Principal Distribution Amount, except
for any portion of the Class A-1 Principal Distribution Amount
consisting of any Subordination Increase Amount (applied to
reduce the Certificate Principal Balance of such Class A-1
Certificates until such Certificate Principal Balance is
reduced to zero);
(iii) to the Certificate Insurer, to reimburse the
Certificate Insurer for claims under the Policy, to the extent
of Cumulative Insurance Payments;
(iv) to the Class A-1 Certificateholders, the portion of
the Class A-1 Principal Distribution Amount consisting of any
Subordination Increase Amount;
(v) to the Class A-1 Certificateholders, in an amount
equal to the Prepayment Interest Shortfall for such
Distribution Date;
(vi) to the Class A-1 Certificateholders, in an amount
equal to any Basis Risk Shortfall for such Distribution Date;
(vii) to the Class A-1 Certificateholders, in an amount
equal to any Unpaid Basis Risk Shortfalls on such Distribution
Date;
(viii) to SASCOR or First Nationwide, as the case may be,
to reimburse such Master Servicer for expenses incurred by or
reimbursable to such Master Servicer pursuant to, with respect
to SASCOR, Section 3.03 or Section 6.03 of the Supervision
Agreements and, with respect to First Nationwide, Section
3.11(viii) herein (to the extent such Master Servicer has not
previously been reimbursed for such expenses from amounts on
deposit in the related Collection Account); and
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(ix) to the Class R Certificateholders, the balance, if
any, of the Available Distribution Amount.
(b) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(d) or
Section 9.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Certificates having an initial
aggregate Certificate Principal Balance that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Certificate Principal Balance of
such Class of Certificates, or otherwise by check mailed by first class mail to
the address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office or
such other location specified in the notice to Certificateholders of such final
distribution.
Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the
Certificate Registrar, the Depositor, the Certificate Insurer or any Master
Servicer shall have any responsibility therefor except as otherwise provided by
this Agreement or applicable law.
(c) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. None of the Holders of any Class of Certificates, the Trustee, the
Master Servicers or the Certificate Insurer shall in any way be responsible or
liable to the Holders of any other Class of Certificates in respect of amounts
properly previously distributed on the Certificates.
(d) Except as otherwise provided in Section 9.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than the related Record Date, mail to each Holder on such date of such
Class of Certificates a notice to the effect that:
(i) the Trustee expects that the final distribution with
respect to such Class of
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Certificates will be made on such Distribution Date but only upon
presentation and surrender of such Certificates at the office of the
Trustee therein specified, and
(ii) no interest shall accrue on such Certificates from and after
the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificates as to which notice has been given pursuant to this Section
4.01(d) shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining nontendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trustee shall, directly or through an
agent, contact the remaining non-tendering Certificateholders concerning
surrender of their Certificates in the manner reasonably specified to the
Trustee by the Master Servicer in writing. The costs and expenses of maintaining
the funds in trust and of contacting such Certificateholders shall be paid out
of the assets remaining in the trust fund. If within two years after the second
notice any such Certificates shall not have been surrendered for cancellation,
the Trustee shall continue to hold any remaining funds for the benefit of the
non-tendering Certificateholders, subject to any applicable escheat statutes. No
interest shall accrue or be payable to any Certificateholder on any amount held
in trust by the Trustee as a result of such Certificateholder's failure to
surrender its Certificate(s) for final payment thereof in accordance with this
Section 4.01(d).
SECTION 4.02. Statements to Certificateholders.
On each Distribution Date, the Trustee shall prepare (based
solely on information received from the Master Servicers) and forward by mail to
each Holder of a Certificate and the Certificate Insurer, a statement as to such
distribution and as to each Class of Certificates, in the extent applicable,
setting forth:
(i) the amount of such distribution to the Holders of
Certificates of such Class applied to reduce the Certificate
Principal Balance thereof, if applicable;
(ii) the amount of such distribution to Holders of
Certificates of such Class allocable to Accrued Certificate
Interest;
(iii) the amount of related servicing compensation
received by each Master Servicer and the Sub-Servicers and
such other customary information as the Trustee deems
necessary or desirable, or which a Certificateholder
reasonably requests, to enable Certificateholders to prepare
their tax returns;
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(iv) the aggregate amount of P&I Advances included in
such distribu- tion;
(v) the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties at the close of business
on such Distribution Date;
(vi) the number and aggregate unpaid principal balance
of Mortgage Loans (a) 30 days delinquent, (b) 60 days
delinquent, (c) 90 days delinquent and (d) as to which
foreclosure proceedings have been commenced;
(vii) with respect to any Mortgage Loan that became an
REO Property during the preceding calendar month, the number
of such Mortgage Loans, the unpaid principal balance and the
Stated Principal Balance of such Mortgage Loan as of the date
it became an REO Property;
(viii) the book value of any REO Property as of the close
of business on the last Business Day of the calendar month
preceding the Distribution Date;
(ix) the aggregate Certificate Principal Balance of each
Class of Certificates after giving effect to the distribution,
and allocation of Realized Losses, made on such Distribution
Date, separately identifying any reduction thereof due to
Realized Losses;
(x) the Special Hazard Amount, Fraud Loss Amount and
Bankruptcy Amount as of the close of business on such
Distribution Date and a description of any change in the
calculation of such amounts;
(xi) the aggregate amount of Principal Prepayments made
and Realized Losses incurred during the related Prepayment
Period, separately identifying whether such Realized Losses
constituted Special Hazard Losses, Fraud Losses, Bankruptcy
Losses or Extraordinary Losses;
(xii) the Basis Risk Shortfall, if any, for such
Distribution Date;
(xiii) the Unpaid Basis Risk Shortfalls outstanding after
reimbursements therefor on such Distribution Date;
(xiv) the Required Subordinated Amount for such
Distribution Date;
(xv) the Subordination Increase Amount, if any for such
Distribution Date;
(xvi) the Subordination Reduction Amount, if any, for
such Distribution Date;
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(xvii) the aggregate amount of Accrued Certificate
Interest, if any, remaining unpaid for each Class of
Certificates, after giving effect to the distribution made on
such Distribution Date;
(xviii) the amount of any Prepayment Interest Shortfall,
the portion thereof covered by the Master Servicers or the
Sub-Servicer pursuant to Section 3.24, in respect of such
Distribution Date;
(xix) the amount of any interest shortfall resulting from
application of the Relief Act;
(xx) the Pass-Through Rate applicable to the Class A-1
Certificates for such Distribution Date and the immediately
succeeding Distribution Date; and
(xxi) the amount of any Insured Payment made on such
distribution date, the amount of any reimbursement payment
made to the Certificate Insurer on such Distribution Date
pursuant to Section 4.01(a) and the amount of Cumulative
Insurance Payments after giving effect to any such Insured
Payment or any such reimbursement payment to the Certificate
Insurer.
In the case of information furnished pursuant to subclauses
(i)-(iii) above, the amounts shall be expressed as a dollar amount per Single
Certificate.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Certificate a statement containing the
information set forth in subclauses (i)-(iii) above, aggregated for such
calendar year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time are in force.
On each Distribution Date the Trustee shall forward to the
Depositor and to each Holder of a Residual Certificate a copy of the reports
forwarded to the Class A-1 Certificateholders on such Distribution Date and a
statement setting forth the amounts, if any, actually distributed with respect
to the Residual Certificates on such Distribution Date.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Residual Certificate a statement setting
forth the amount, if any, actually distributed with respect to the Residual
Certificates aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder.
The Trustee shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise
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with respect to the purposes of this Agreement, all such reports or information
to be provided at the expense of the Certificateholder in accordance with such
reasonable and explicit instructions and directions as the Certificateholder may
provide. For purposes of this Section 4.02, the Trustee's duties are limited to
the extent that the Trustee receives timely reports containing such requested
information from the Master Servicers.
SECTION 4.03. Remittance Reports; P&I Advances by
the Master Servicers.
(a) On or prior to the third Business Day preceding each
Distribution Date with respect to Norwest and with respect to SASCOR and First
Nationwide the 18th day of such calendar month or, if such 18th day is not a
Business Day, the next succeeding Business Day, each Master Servicer shall
deliver to the Trustee (and the Trustee shall promptly deliver to the
Certificate Insurer) by telecopy (or by such other means as such Master Servicer
and the Trustee may agree from time to time) the Remittance Report with respect
to the related Distribution Date. Not later than the second Business Day
preceding the Distribution Date, the Trustee shall (i) furnish a statement to
the Depositor, the related Master Servicer and the Certificate Insurer setting
forth the Available Distribution Amount and the amount to be withdrawn from the
respective Collection Accounts and deposited into the Distribution Account for
distribution on the related Distribution Date pursuant to Section 4.01, and
containing a certification that no legal action has been filed against the
Trustee with respect to this transaction or if legal action has been filed
against the Trustee with respect to this transaction, specifying the details
thereof, and (ii) determine (and notify by telecopy the Depositor and the
Certificate Insurer the results of such determination) the amount of P&I
Advances to be made by each Master Servicer in respect of the related
Distribution Date, which, subject to Section 4.03(e), shall be in an aggregate
amount equal to the aggregate amount of Monthly Payments (with each interest
portion thereof after giving effect to any modification thereof pursuant to the
Relief Act, if any) due on the related Due Date, but delinquent as of the close
of business as of the related Determination Date, plus, with respect to each REO
Property which was acquired during or prior to the related Prepayment Period and
as to which an REO Disposition did not occur during the related Prepayment
Period, an amount equal to the excess, if any, of the Monthly Payments that
would have been due on the related Mortgage Loan had such Mortgage Loan not
become an REO Property over the net income from the REO Property transferred to
the Distribution Account for such Distribution Date pursuant to Section 3.23.
The Trustee shall be under no duty to recalculate, verify or recompute the
information provided to it hereunder by the Master Servicers.
(b) The amount of P&I Advances to be made by each Master
Servicer for any Distribution Date shall equal, subject to Section 4.03(e), the
sum of (i) the aggregate amount of Monthly Payments, due on the related Due Date
in respect of the Mortgage Loans master serviced by it, which Monthly Payments
were delinquent as of the close of business on the related Determination Date
and (ii) with respect to each REO Property, which REO Property master serviced
by it was acquired during or prior to the related Prepayment Period and as to
which REO Property an REO Disposition did not occur during the related
Prepayment Period, an amount equal to the aggregate amount of Monthly Payments
that would have been due on the related Mortgage Loans had such Mortgage Loans
not become REO Properties.
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On or before 5:00 p.m. New York City time (or, with respect to
Norwest, on or before 10:00 a.m. New York City time) on each Master Servicer
Remittance Date, each Master Servicer shall remit in immediately available funds
to the Trustee for deposit in the related Distribution Account an amount equal
to, with respect to SASCOR, the amount specified in 4.03(c) below, and with
respect to Norwest and First Nationwide, the aggregate amount of P&I Advances,
if any, to be made in respect of the Mortgage Loans and REO Properties master
serviced by it for the related Distribution Date either (i) from its own funds
or (ii) from the Collection Account held by or on behalf of it, to the extent of
funds held therein for future distribution (in which case it will cause to be
made an appropriate entry in the records of such Collection Account that amounts
held for future distribution have been, as permitted by this Section 4.03, used
by such Master Servicer in discharge of any such P&I Advance) or (iii) in the
form of any combination of (i) and (ii) aggregating the total amount of P&I
Advances to be made by such Master Servicer with respect to the Mortgage Loans
and REO Properties master serviced by it. Any amounts held for future
distribution and so used shall be appropriately reflected in the related Master
Servicer's records and replaced by such Master Servicer by deposit in the
Collection Account held by or on behalf of it on or before any future Master
Servicer Remittance Date to the extent that the Available Distribution Amount
for the related Distribution Date (determined without regard to P&I Advances to
be made on such Master Servicer Remittance Date) shall be less than the total
amount that would be distributed to the related Classes of Certificateholders
pursuant to Section 4.01 on such Distribution Date if such amounts held for
future distributions had not been so used to make P&I Advances. The Trustee will
provide notice to any Master Servicer and the Certificate Insurer by telecopy by
the close of business on any Master Servicer Remittance Date in the event that
the amount remitted by such Master Servicer to the Trustee on such date is less
than the P&I Advances required to be made by such Master Servicer for the
related Distribution Date.
(c) The amount remitted by SASCOR pursuant to this Section in
each month shall be equal to the aggregate of P&I Advances (whether or not made
by the related Servicer) due from each Servicer in each month pursuant to the
related Servicing Agreement.
(d) The obligation of the Master Servicers to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement,
and, with respect to any Mortgage Loan or REO Property, shall continue until a
Cash Liquidation or an REO Disposition in connection therewith or the purchase
or repurchase thereof from the Trust Fund pursuant to any applicable provision
of this Agreement, except as otherwise provided in this Section.
(e) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder if such P&I Advance would, if
made, constitute a Nonrecoverable P&I Advance. The determination by any Master
Servicer that it has made a Nonrecoverable P&I Advance or that any proposed P&I
Advance, if made, would constitute a Nonrecoverable P&I Advance, shall be
evidenced by an Officers' Certificate delivered to the Depositor, the
Certificate Insurer and the Trustee.
(f) The amount of any reimbursement in respect of outstanding
P&I Advances on any Distribution Date shall be allocated to specific Monthly
Payments due but delinquent for
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previous Due Periods, which allocation shall be made, to the extent practicable,
to Monthly Payments which have been delinquent for the longest period of time.
Such allocations shall be conclusive for purposes of reimbursement to the
related Master Servicer from recoveries on related Mortgage Loans pursuant to
Section 3.11.
SECTION 4.04. Allocation of Realized Losses.
(a) Prior to each Determination Date, each Master Servicer
shall determine as to each Mortgage Loan and REO Property master serviced by it
and the Trustee shall determine in the aggregate: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Fraud Losses, Special Hazard
Losses or Extraordinary Losses; and (iii) the respective portions of such
Realized Losses allocable to interest and allocable to principal. Prior to each
Determination Date, each Master Servicer shall also determine as to each
Mortgage Loan master serviced by it and the Trustee shall determine in the
aggregate: (i) the total amount of Realized Losses, if any, incurred in
connection with any Deficient Valuations made during the related Prepayment
Period; and (ii) the total amount of Realized Losses, if any, incurred in
connection with Debt Service Reductions in respect of Monthly Payments due
during the related Due Period. The information described in the two preceding
sentences that is to be supplied by each Master Servicer shall be evidenced by
an Officers' Certificate delivered to the Trustee and the Certificate Insurer by
such Master Servicer prior to the Determination Date immediately following the
end of (i) in the case of Bankruptcy Losses allocable to interest, the Due
Period during which any such Realized Loss was incurred, and (ii) in the case of
all other Realized Losses, the Prepayment Period during which any such Realized
Loss was incurred.
(b) All Realized Losses, other than Excess Special Hazard
Losses, Extraordinary Losses, Excess Bankruptcy Losses and Excess Fraud Losses,
shall be allocated as follows: first, to the Net Monthly Excess Cashflow on each
Distribution Date; second, to the Class R Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and, third, to the Class A-1
Certificates. Any Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess
Fraud Losses and Extraordinary Losses will be allocated between the Class A-1
Certificates and the Class R Certificates on a PRO RATA basis.
(c) As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among two or more specified Classes of Certificates means an
allocation on a PRO RATA basis, among the various Classes so specified, to each
such Class of Certificates on the basis of their then outstanding Certificate
Principal Balances, prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the Certificates of such Class
in proportion to the Percentage Interests evidenced thereby.
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SECTION 4.05. Compliance with Withholding
Requirements.
Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall notify such Certificateholder of the
amount withheld.
SECTION 4.06. The Policy.
(a) On the second Business Day immediately preceding each
Distribution Date, the Trustee shall determine whether a Deficiency Amount
relating to such Distribution Date is greater than zero. If, at such time, the
Trustee determines that a Deficiency Amount for any Distribution Date is greater
than zero, the Trustee shall complete the notice in the form of Exhibit A to the
Policy (the "Notice") and submit such Notice in accordance with the Policy to
the Certificate Insurer or its agent no later than 12:00 P.M., New York City
time, on the Business Day immediately preceding such Distribution Date, as a
claim for an Insured Payment in an amount equal to such Deficiency Amount. The
Trustee shall, as necessary, make a claim on the Policy in respect of Preference
Amounts in accordance with the terms of the Policy.
(b) The Trustee shall establish and maintain the Insurance
Account on behalf of the Holders of the Class A-1 Certificates for the exclusive
use as an account into which to deposit any proceeds of the Policy. Upon receipt
of an Insured Payment from the Certificate Insurer on behalf of the Class A-1
Certificateholders, the Trustee shall deposit such Insured Payment in the
Insurance Account. All amounts on deposit in the Insurance Account shall remain
uninvested. On each Distribution Date, the Trustee shall (i) transfer any
Insured Payment then on deposit in the Insurance Account to the Distribution
Account and (ii) return to the Certificate Insurer any funds in the Insurance
Account which do not constitute a portion of an Insured Payment. The Trustee
shall distribute on each Distribution Date the Deficiency Amount for such
Distribution Date from the Distribution Account to the Class A-1
Certificateholders on such Distribution Date.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Class A-1 Certificateholder any Insured Payment from the Certificate Insurer and
(ii) distribute such Insured Payment to such Class A-1 Certificateholders as set
forth in subsection (b) above. Insured Payments disbursed by the Trustee from
proceeds of the Policy shall not be considered payment by the Trust Fund with
respect to the Class A-1 Certificates, nor shall such disbursement of such
Insured Payments discharge the obligations of the Trust Fund with respect to the
amounts thereof, and the Certificate Insurer shall become owner of such amounts
to the extent covered by such Insured Payments as the deemed assignee and
subrogee of such Class A- 1 Certificateholders. The Trustee hereby agrees on
behalf of each Class A-1 Certificateholder (and each Class A-1
Certificateholder, by its acceptance of its Class A-1 Certificates, hereby
agrees) for the benefit of the Certificate Insurer that the Trustee shall
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recognize that to the extent the Certificate Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Trustee), to the Class
A-1 Certificateholders, the Certificate Insurer will be entitled to
reimbursement in an amount equal to the Cumulative Insurance Payments in
accordance with the priority set forth in Section 4.01.
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
(a) The Certificates consist of the Class A-1 Certificates and
the Residual Certificates, which are designated as the Class R Certificates. The
Certificates in the aggregate will represent the entire beneficial ownership
interest in the Mortgage Loans and all other assets included in the Trust Fund.
At the Closing Date, the aggregate Certificate Principal Balance of the Class
A-1 and Class R Certificates will equal the aggregate Stated Principal Balance
of the Mortgage Loans as of the Cut-off Date.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 and A-2. The Certificates of each Class will be issuable
in registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.
Upon original issue, the Certificates shall be executed and
delivered by the Trustee and the Trustee shall cause the Certificates to be
authenticated by the Certificate Registrar to or upon the order of the
Depositor. The Certificates shall be executed and attested by manual or
facsimile signature on behalf of the Trustee by an authorized signatory under
its seal imprinted thereon. Certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Trustee shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificates. 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 herein
executed by the Certificate Registrar by manual signature, and such certificate
of authentication 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.
(b) The Class A-1 Certificates shall initially be issued as
one or more Certificates registered in the name of the Depository or its nominee
and, except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with Ownership Interests
therein. The Certificate Owners shall hold their respective Ownership Interests
in and to such Certificates through the book-entry facilities of the Depository
and, except as provided below, shall not be entitled to definitive, fully
registered Certificates ("Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of
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brokerage firms for which it acts as agent in accordance with the Depository's
normal procedures.
The Trustee, the Master Servicers, the Certificate Insurer and
the Depositor may for all purposes (including the making of payments due on the
Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and
votes of, the Depository as Holder of Book-Entry Certificates with respect to
any particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The Trustee may establish a reasonable
record date in connection with solicitations of consents from or voting by
Certificateholders and shall give notice to the Depository of such record date.
If (i)(A) the Depositor advises the Trustee and the
Certificate Insurer in writing that the Depository is no longer willing or able
to properly discharge its responsibilities as Depository, and (B) the Depositor
is unable to locate a qualified successor, (ii) the Depositor at its option
advises the Trustee and the Certificate Insurer in writing that it elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of an Event of Default, Certificate Owners representing in the
aggregate not less than 51% of the Ownership Interests of the Book-Entry
Certificates advise the Trustee through the Depository, in writing, that the
continuation of a book-entry system through the Depository is no longer in the
best interests of the Certificate Owners, the Trustee shall notify all
Certificate Owners, through the Depository, 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 Depository, accompanied by registration instructions from
the Depository for registration of transfer, the Trustee shall issue the
Definitive Certificates. Such Definitive Certificates will be issued in minimum
denominations of $1,000, except that any beneficial ownership that was
represented by a Book-Entry Certificate in an amount less than $1,000
immediately prior to the issuance of a Definitive Certificate shall be issued in
a minimum denomination equal to the amount represented by such Book-Entry
Certificate. None of the Depositor, the Master Servicers, the Certificate
Insurer or the Trustee shall be liable for any delay in the 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 Depository 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.
SECTION 5.02. Registration of Transfer and
Exchange of Certificates.
(a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11 a Certificate Register
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in which, subject to such reasonable regulations as it may prescribe, the
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee will initially serve
as Certificate Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided. The Certificate
Registrar may appoint, by a written instrument delivered to the Master Servicer,
any other bank or trust company to act as Certificate Registrar under such
conditions as the predecessor Certificate Registrar may prescribe, provided that
the predecessor Certificate Registrar shall not be relieved of any of its duties
or responsibilities hereunder by reason of such appointment. If the Trustee
shall at any time not be the Certificate Registrar, the Trustee shall have and
maintain the right to inspect the Certificate Register or to obtain a copy
thereof at all reasonable times, and to rely conclusively upon a certificate of
the Certificate Registrar as to the information set forth in the Certificate
Register.
(b) No transfer of any Class R Certificate shall be made
unless that transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), and effective
registration or qualification under applicable state securities laws, or is made
in a transaction which does not require such registration or qualification. In
the event that such a transfer is to be made without registration or
qualification, then the Certificate Registrar shall require, in order to assure
compliance with such laws, receipt of: (i) if such transfer is purportedly being
made in reliance upon Rule 144A under the 1933 Act, either (A) a certificate
from the Certificateholder desiring to effect such transfer, substantially in
the form attached as Exhibit E-5 hereto, or (B) a certificate from the
Certificateholder desiring to effect such transfer substantially in the form
attached as Exhibit E-1 hereto and a certificate from such Certificateholder's
prospective transferee substantially in the form attached as Exhibit E-6 hereto;
and (ii) in all other cases, an Opinion of Counsel satisfactory to the Trustee
and the Certificate Registrar to the effect that such transfer may be made
without such registration or qualification (which Opinion of Counsel shall not
be an expense of the Trust Fund or of the Depositor, any Master Servicer, the
Trustee or the Certificate Registrar in their respective capacities as such),
together with the written certification(s) as to the facts surrounding such
transfer from the Certificateholder desiring to effect such transfer and/or such
Certificateholder's prospective transferee on which such Opinion of Counsel is
based, which certifications may be substantially in the forms attached hereto as
Exhibits E-1 and E-2. None of the Depositor, the Trustee or the Certificate
Registrar is obligated to register or qualify the Class R Certificates under the
1933 Act or any other securities law or to take any action not otherwise
required under this Agreement to permit the transfer of any Class R Certificate
without registration or qualification. Any Certificateholder desiring to effect
such a transfer shall, and does by holding a Class R Certificate agree to,
indemnify the Trustee, the Certificate Registrar, the Certificate Insurer and
the Depositor against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws.
(c) No transfer of a Class R Certificate or any interest
therein may be made to employee benefit plans and certain other retirement plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested that are subject
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to the fiduciary responsibility provisions of ERISA and Section 4975 of the Code
("Plans") or any person who is directly or indirectly purchasing the Class R
Certificate or interest therein on behalf of, as named fiduciary of, as trustee
of, or with assets of a Plan, unless the prospective transferee provides the
Trustee with a certification of facts and an opinion of counsel which establish
to the satisfaction of the Trustee that such transfer will not result in a
violation of Section 406 of ERISA or Section 4975 of the Code or cause the
Master Servicers or Trustee to be deemed a fiduciary of such Plan or result in
the imposition of an excise tax under Section 4975 of the Code. In the absence
of its having received the certification of facts and opinion of counsel
contemplated by the preceding sentence, the Trustee shall require the
prospective transferee of any Class R Certificate to certify that it is neither
a Plan nor a Person who is directly or indirectly purchasing such Certificate on
behalf of, as named fiduciary of, as trustee of, or with assets of a Plan.
(d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of Transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:
(A) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall be
a Permitted Transferee and a United States Person and
shall promptly notify the Trustee of any change or
impending change in its status as a Permitted
Transferee.
(B) In connection with any proposed Transfer
of any Ownership Interest in a Residual Certificate,
the Trustee shall require delivery to it, and shall
not register the Transfer of any Residual Certificate
until its receipt of, an affidavit and agreement (a
"Transfer Affidavit and Agreement" attached hereto as
Exhibit E-3) from the proposed Transferee,
representing and warranting that such Transferee is a
Permitted Transferee, that it is not acquiring its
Ownership Interest in the Residual Certificate that
is the subject of the proposed Transfer as a nominee,
trustee or agent for any Person that is not a
Permitted Transferee, that for so long as it retains
its Ownership Interest in a Residual Certificate, it
will endeavor to remain a Permitted Transferee, and
that it has reviewed the provisions of this Section
5.02(d) and agrees to be bound by them.
(C) Notwithstanding the delivery of a
Transfer Affidavit and Agreement by a proposed
Transferee under clause (B) above, if the Trustee has
actual knowledge that the proposed Transferee is not
a Permitted Transferee, no Transfer of an Ownership
Interest in a Residual Certificate to such proposed
Transferee shall be effected.
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(D) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall
agree (x) to require a Transfer Affidavit and
Agreement from any other Person to whom such Person
attempts to transfer its Ownership Interest in a
Residual Certificate and (y) not to transfer its
Ownership Interest unless it provides a certificate
(attached hereto as Exhibit E-3) to the Trustee
stating that, among other things, it has no actual
knowledge that such other Person is not a Permitted
Transferee.
(E) Each Person holding or acquiring an
Ownership Interest in a Class R Certificate, by
purchasing an Ownership Interest in such Certificate,
agrees to give the Trustee written notice that it is
a "pass-through interest holder" within the meaning
of temporary Treasury regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Class R Certificate, if it
is, or is holding an Ownership Interest in a Class R
Certificate on behalf of, a "pass-through interest
holder".
(ii) The Trustee will register the Transfer of any
Residual Certificate only if it shall have received the
Transfer Affidavit and Agreement and all of such other
documents as shall have been reasonably required by the
Trustee as a condition to such registration. In addition, no
Transfer of a Residual Certificate shall be made unless the
Trustee shall have received a representation letter from the
Transferee of such Certificate to the effect that such
Transferee is not a NonUnited States Person or a Disqualified
Organization.
(iii) (A) If any purported Transferee shall become a
holder of a Residual Certificate in violation of the
provisions of this Section 5.02(d), then the last preceding
Permitted Transferee shall be restored, to the extent
permitted by law, to all rights as holder thereof retroactive
to the date of registration of such 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
5.02(d) or for making any payments due on such Certificate to
the holder thereof or for taking any other action with respect
to such holder under the provisions of this Agreement.
(B) If any purported Transferee shall become
a holder of a Residual Certificate in violation of
the restrictions in this Section 5.02(d) and to the
extent that the retroactive restoration of the rights
of the holder of such Residual Certificate as
described in clause (iii)(A) above shall be invalid,
illegal or unenforceable, then the Trustee shall have
the right, without notice to the holder or any prior
holder of such Residual Certificate, to sell such
Residual Certificate to a purchaser selected by the
Trustee on such terms as the Trustee may choose. Such
purported Transferee shall promptly endorse and
deliver each Residual Certificate
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in accordance with the instructions of the Trustee.
Such purchaser may be the Trustee itself or any
Affiliate of the Trustee. The proceeds of such sale,
net of the commissions (which may include commissions
payable to the Trustee or its Affiliates), expenses
and taxes due, if any, will be remitted by the
Trustee to such purported Transferee. The terms and
conditions of any sale under this clause (iii)(B)
shall be determined in the sole discretion of the
Trustee, and the Trustee shall not be liable to any
Person having an Ownership Interest in a Residual
Certificate as a result of its exercise of such
discretion.
(iv) The Trustee shall make available to the Internal
Revenue Service and those Persons specified by the REMIC
Provisions all information necessary to compute any tax
imposed (A) as a result of the Transfer of an Ownership
Interest in a Residual Certificate to any Person who is not a
Permitted Transferee, including the information described in
proposed Treasury regulation Sections 1.860D-1(b)(5) and
1.860E-2(a)(5) with respect to the "excess inclusions" of such
Residual Certificate and (B) as a result of any regulated
investment company, real estate investment trust, common trust
fund, partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a
Class R Certificate having as among its record holders at any
time any Person which is not a Permitted Transferee.
Reasonable compensation for providing such information may be
accepted by the Trustee.
(v) The provisions of this Section 5.02(d) set forth
prior to this Section (v) may be modified, added to or
eliminated, provided that there shall have been delivered to
the Trustee the following:
(A) written notification from the
Certificate Insurer and each Rating Agency to the
effect that the modification, addition to or
elimination of such provisions will not cause such
Rating Agency to downgrade its then-current ratings
of the Class A-1 Certificates; and
(B) a certificate of the Trustee stating
that the Trustee has received an Opinion of Counsel,
in form and substance satisfactory to the Trustee, to
the effect that such modification, addition to or
absence of such provisions will not cause the Trust
Fund to cease to qualify as a REMIC and will not
create a risk that (x) the Trust Fund may be subject
to an entity-level tax caused by the Transfer of any
Residual Certificate to a Person which is not a
Permitted Transferee or (y) a Certificateholder or
another Person will be subject to a REMIC-related tax
caused by the Transfer of a Residual Certificate to a
Person which is not a Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose
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pursuant to Section 8.11, the Trustee shall execute and the Certificate
Registrar shall authenticate and deliver, in the name of the designated
Transferee or Transferees, one or more new Certificates of the same Class of a
like aggregate Percentage Interest.
(f) At the option of the Certificateholders, each Certificate
may be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose pursuant to Section 8.11. Whenever any Certificates are so
surrendered for exchange the Trustee shall execute and cause the Certificate
Registrar to authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall (if so required by the
Trustee) be duly endorsed by, or be accompanied by a written instrument of
transfer in the form satisfactory to the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing.
(g) No service charge to the Certificateholders shall be made
for any Transfer or exchange of Certificates, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any Transfer or exchange of Certificates.
(h) All Certificates surrendered for Transfer and exchange
shall be canceled and destroyed by the Certificate Registrar in accordance with
its customary procedures.
(i) The Trustee will cause the Certificate Registrar (unless
the Trustee is acting as Certificate Registrar) to provide notice to the Trustee
of each transfer of a Certificate and to provide the Trustee with an updated
copy of the Certificate Register on the first Business Day after January 1 and
July 1 of each year, commencing July 1, 1996.
(j) The Depositor shall provide to the Trustee, upon request
of the Trustee, an adequate inventory of Certificates to facilitate the issuance
and transfer of Certificates.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the Trustee
or the Certificate Registrar, or the Trustee and the Certificate Registrar
receive evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee, the Certificate Insurer
and the Certificate Registrar such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of actual knowledge by
the Trustee or the Certificate Registrar that such Certificate has been acquired
by a bona fide purchaser, the Trustee shall execute and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of the same Class and of like denomination and Percentage Interest.
Upon the issuance of any new Certificate under this Section, the Trustee 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 Certificate Registrar) connected therewith. Any
replacement Certificate issued pursuant to
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this Section shall constitute complete and indefeasible evidence of ownership in
the Trust Fund, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 5.04. Persons Deemed Owners.
The Depositor, any Master Servicer, the Trustee, the
Certificate Insurer, the Certificate Registrar and any agent of any of them may
treat the Person in whose name any Certificate is registered in the Certificate
Register as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.01 and for all other purposes whatsoever,
and none of the Depositor, any Master Servicer, the Trustee, the Certificate
Insurer, the Certificate Registrar nor any agent of any of them shall be
affected by notice to the contrary.
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ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICERS
SECTION 6.01. Liability of the Depositor and the
Master Servicers.
Subject to provisions regarding good faith actions and errors
in judgment in Section 6.03, the Depositor and each Master Servicer shall be
liable in accordance herewith to the parties hereto only to the extent of their
respective obligations specifically imposed by and undertaken under this
Agreement (and, with respect to SASCOR, obligations specifically imposed by and
undertaken by SASCOR under the Supervision Agreements and the obligations
specifically imposed by and undertaken by the Servicers under the Servicing
Agreements), including, without limitation, obligations to transfer, remit and
advance funds in accordance with the terms hereof (and, with respect to SASCOR,
obligations to transfer, remit and advance funds in accordance with the terms of
the Supervision Agreements and this Agreement and the Servicer's obligations to
transfer, remit and advance funds in accordance with the terms of Servicing
Agreements), and each Master Servicer (excluding Norwest) shall reimburse the
Trustee and the Certificate Insurer for damages caused by any failure of such
Master Servicer to transfer, remit or advance funds in accordance with the terms
hereof (and, with respect to SASCOR, SASCOR's failure to transfer, remit or
advance funds in accordance with the terms of the Supervision Agreements and
this Agreement and any Servicer's failure to transfer, remit or advance funds in
accordance with the related Servicing Agreements).
Subject to provisions regarding good faith actions and errors
in judgment in Section 6.03, First Nationwide agrees to indemnify and hold
harmless the Trust Fund against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Trust Fund may sustain in any way related to the failure
of First Nationwide to perform its duties and service the First Nationwide Loans
in compliance with the terms of this Agreement.
SECTION 6.02. Merger or Consolidation of the
Depositor or the Master Servicers.
Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Each Master Servicer will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the jurisdiction of its incorporation and its qualification, to the extent such
Master Servicer has such qualification, as an approved conventional
seller/servicer for FNMA or FHLMC in good standing. The Depositor and the Master
Servicers each will 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, the
Certificates or any of the Mortgage Loans and to perform its respective duties
under this Agreement.
The Depositor or any Master Servicer may be merged or
consolidated with or into
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any Person, or transfer all or substantially all of its assets to any Person, in
which case any Person resulting from any merger or consolidation to which the
Depositor or such Master Servicer shall be a party, or any Person succeeding to
the business of such Depositor or such Master Servicer, shall be the successor
of the Depositor or such Master Servicer, as the case may be, 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 (i) the Rating Agency's rating of any Class of Certificates in
effect immediately prior to such merger or consolidation will not be qualified,
reduced or withdrawn as a result thereof (as evidenced by a letter to such
effect from the Rating Agency), (ii) the Certificate Insurer's "shadow" rating
in connection with the issuance of the Certificates shall not be adversely
affected and (iii) the successor or surviving Person to such Master Servicer
shall meet the requirements for a successor master servicer set forth in the
following paragraph.
Notwithstanding anything set forth herein to the contrary,
each Master Servicer may sell and assign its rights and delegate its duties and
obligations in their entirety under this Agreement; provided, however, that (i)
the purchaser or transferee accepting such assignment or delegation (a) shall be
a Person which shall be qualified to service mortgage loans for FNMA or FHLMC,
(b) shall have a net worth of not less than $15,000,000 (unless otherwise
approved by the Depositor, the Certificate Insurer and each Rating Agency
pursuant to clause (ii) below), (c) shall be reasonably satisfactory to the
Trustee, the Certificate Insurer and the Depositor as evidenced by their written
consent to such transfer, sale or assignment, and (d) shall execute and deliver
to the Trustee an agreement, in form and substance reasonably satisfactory to
the Trustee, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by such Master Servicer under this Agreement from and after the date of
such agreement, (ii) each Rating Agency shall be given prior written notice of
the identity of the proposed successor master servicer and such Rating Agency's
rating of the Certificates in effect immediately prior to such assignment, sale
or transfer will not be qualified, downgraded or withdrawn as a result of such
assignment, sale or transfer, and (iii) the assigning or selling Master Servicer
shall deliver to the Trustee and the Certificate Insurer an Officer's
Certificate and an Opinion of Counsel acceptable to the Trustee and the
Certificate Insurer stating that all conditions precedent to such action under
this Agreement have been completed and such action is permitted by and complies
with the terms of this Agreement.
SECTION 6.03. Limitation on Liability of the
Depositor, the Master Servicers and
Others.
None of the Depositor, any Master Servicer nor any of the
directors, officers, employees or agents of the Depositor or any Master Servicer
shall be under any liability to the Trust Fund 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 Depositor, the Master Servicers or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicers
pursuant hereto, or against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or gross negligence in
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the performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Master Servicers and any director, officer,
employee or agent of the Depositor or any Master Servicer may rely in good faith
on any document of any kind which, PRIMA FACIE, is properly executed and
submitted by any Person respecting any matters arising hereunder. The Depositor,
the Master Servicers and any director, officer, employee or agent of the
Depositor or any Master Servicer shall be indemnified and held harmless by the
Certificateholders against any loss, liability or expense incurred in connection
with any legal action relating to this Agreement or the Certificates, other than
any loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) or any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. None of the Depositor nor any Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under this Agreement and,
in its opinion, does not involve it in any expense or liability; provided,
however, (i) that the Depositor or any Master Servicer may in its discretion
undertake any such action which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders and the Certificate Insurer hereunder and
(ii) that unless a Certificate Insurer default continues, the Depositor or any
Master Servicer shall undertake such action if directed by the Certificate
Insurer. In such event, the legal expenses and costs of such action and any
liability resulting therefrom (except any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or gross negligence in the performance
of duties hereunder or by reason of reckless disregard of obligations and duties
hereunder) shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor and such Master Servicer shall be entitled to be reimbursed therefor
from the Collection Account as provided in Section 3.11 (or, with respect to
SASCOR, Sections 3.03 and 6.03 of the Supervision Agreements, subject to the
limitations set forth in Section 2.07(b)(viii) hereof), (but without regard to
any cap if such action is taken at the direction of the Certificate Insurer) any
such right of reimbursement being prior to the rights of Certificateholders to
receive any amount in the Collection Account. First Nationwide shall not settle
any such action for an amount greater than $200,000 without the written consent
of the Certificate Insurer. If the Certificate Insurer consents to such a
settlement, First Nationwide shall be entitled to withdraw the full amount of
such settlement from the related Collection Account immediately, without regard
to the limitation contained in Section 3.11(viii). Norwest shall (i) notify the
Certificate Insurer of any such action, (ii) consult with the Certificate
Insurer as regards such action, (iii) not appoint counsel with respect to any
such action, except Hunton & Williams, without the consent of the Certificate
Insurer and (iv) not settle any such action without the written consent of the
Certificate Insurer.
SECTION 6.04. Limitation on Resignation of the
Master Servicers.
No Master Servicer shall resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law or pursuant to Section 6.02. Any
such determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to
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the Trustee and the Certificate Insurer. No resignation of a Master Servicer
shall become effective until the Trustee or a successor master servicer shall
have assumed such Master Servicer's responsibilities, duties, liabilities (other
than those liabilities arising prior to the appointment of such successor) and
obligations under this Agreement.
Except as expressly provided herein, no Master Servicer shall
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 such Master Servicer hereunder. If, pursuant to any provision
hereof, the duties of any Master Servicer are transferred to a successor Master
Servicer, the entire amount of the Servicing Fee and other compensation payable
to such Master Servicer pursuant hereto shall thereafter be payable to such
successor Master Servicer.
SECTION 6.05. Rights of the Depositor in Respect
of the Master Servicers.
Each Master Servicer shall afford the Depositor, the
Certificate Insurer and the Trustee, upon reasonable notice, during normal
business hours, reasonable access to all records maintained by such Master
Servicer in respect of its rights and obligations hereunder (including SASCOR's
rights and obligations under the Supervision Agreements) and reasonable access
to officers of such Master Servicer responsible for such obligations. Each
Master Servicer shall furnish to the Depositor, the Certificate Insurer and the
Trustee such Master Servicer's annual financial statements (which financial
statements may be consolidated with one or more of the Master Servicer's
Affiliates). Upon request, SASCOR and Norwest shall furnish to the Depositor,
the Certificate Insurer and the Trustee such Master Servicer's most recent
financial statements and such other information relating to its capacity to
perform its obligations under this Agreement as such Master Servicer possesses.
To the extent such information is not otherwise available to the public, the
Depositor, the Certificate Insurer and the Trustee shall not disseminate any
information obtained pursuant to the preceding three sentences without
applicable Master Servicer's written consent, except as required pursuant to
this Agreement or to the extent that it is appropriate to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies
or rating agencies or reinsurers or in regard to the transactions contemplated
by this Agreement or (ii) pursuant to any law, rule, regulation, order,
judgment, writ, injunction or decree of any court or governmental authority
having jurisdiction over the Depositor, the Trustee, the Certificate Insurer or
the Trust Fund, and in any case, the Depositor, the Trustee or the Certificate
Insurer, as the case may be, shall use its best efforts to assure the
confidentiality of any such disseminated non-public information. The Depositor
may, but is not obligated to, enforce the obligations of each Master Servicer
under this Agreement and may, but is not obligated to, perform, or cause a
designee to perform, any defaulted obligation of each Master Servicer under this
Agreement or exercise the rights of each Master Servicer under this Agreement;
provided that no Master Servicer shall be relieved of any of its obligations
under this Agreement by virtue of such performance by the Depositor or its
designee. The Depositor shall not have any responsibility or liability for any
action or failure to act by any Master Servicer and is not obligated to
supervise the performance of any Master Servicer under this Agreement or
otherwise. The Master Servicer shall not have any responsibility or liability
for any action or failure to act by the Depositor and is not obligated
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to supervise the performance of the Depositor under this Agreement or otherwise.
SECTION 6.06. Assignment or Delegation of Duties
by a Master Servicer.
Except as expressly provided herein, no Master Servicer shall
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 such Master Servicer hereunder; PROVIDED, HOWEVER, that each Master
Servicer shall have the right without the prior written consent of the Trustee,
the Depositor, the Rating Agencies or the Certificate Insurer to delegate or
assign to or subcontract with or authorize or appoint an Affiliate of such
Master Servicer to perform and carry out any duties, covenants or obligations to
be performed and carried out by such Master Servicer hereunder. In no case,
however, shall any such delegation, subcontracting or assignment to an Affiliate
of a Master Servicer relieve such Master Servicer of any liability hereunder.
Notice of such permitted assignment shall be given promptly by a Master Servicer
to the Depositor, the Certificate Insurer and the Trustee. If, pursuant to any
provision hereof, the duties of a Master Servicer are transferred to a successor
master servicer, the entire amount of the Servicing Fees and other compensation
payable to such Master Servicer pursuant hereto, including amounts payable to,
or permitted to be retained by such Master Servicer pursuant to this Agreement
shall thereafter be payable to such successor master servicer.
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ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default.
(a) "Event of Default", wherever used herein, means any one of
the following events; provided, however, that no Master Servicer shall be
obligated or liable for any default by any other Master Servicer:
(i) any failure by a Master Servicer to remit to the
Trustee for distribution to the Certificateholders any payment
including P&I Advances required to be made under the terms of
the Certificates and this Agreement which continues unremedied
until 10:00 a.m. (New York City time) on the Business Day
prior to the related Distribution Date; or
(ii) any failure on the part of a 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 the Certificates or 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 such Master Servicer by the
Depositor, the Certificate Insurer or the Trustee, or to such
Master Servicer, the Depositor and the Trustee by the Holders
of Certificates entitled to at least 25% of the Voting Rights;
or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in
an involuntary case under any present or future federal or
state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against a Master Servicer
and such decree or order shall have remained in force
undischarged or unstayed for a period of 30 days; or
(iv) a 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 or
similar proceedings of or relating to such Master Servicer or
of or relating to all or substantially all of its property; or
(v) a 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.
(b) With respect to SASCOR, "Event of Default", whenever used
herein with
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respect thereto, means any one of the following events:
(i) any "event of default" (or equivalent thereof)
under any Supervision Agreement;
(ii) any failure of SASCOR to remit to the Trustee on
the Master Servicer Remittance Date an amount, which shall
include P&I Advances (whether or not made by the related
Servicer), equal to the aggregate of the amounts required to
be remitted to SASCOR pursuant to each Servicing Agreement
which continues unremedied until 10:00 a.m. (New York City
time) on the Business Day prior to the related Distribution
Date.
If an Event of Default described in clauses (a)(ii)-(a)(v) or
clause (b)(i) of this Section shall occur, then, and in each and every such
case, so long as such Event of Default shall not have been remedied, either the
Depositor or the Trustee shall, at the direction of the Certificate Insurer
(unless a Certificate Insurer Default is continuing) or, and at the written
direction of, subject to Section 11.10(d), the Holders of Certificates entitled
to at least 51% of Voting Rights, by notice in writing to the applicable Master
Servicer (and to the Depositor and the Certificate Insurer) if given by the
Trustee or to the Trustee (and the Certificate Insurer if given by the
Depositor), terminate all of the rights and obligations of such Master Servicer
in its capacity as Master Servicer under this Agreement, to the extent permitted
by law, and in and to the Mortgage Loans and the proceeds thereof, other than
its rights as a Certificateholder hereunder; provided, however, that unless a
Certificate Insurer Default is continuing unremedied for five Business Days, the
successor or Master Servicer appointed pursuant to Section 7.02 shall be
acceptable to the Certificate Insurer and shall have accepted the duties of
Master Servicer effective upon the resignation of the applicable Master
Servicer. If an Event of Default described in clause (a)(i) or clause (b)(ii)
hereof shall occur, the Trustee shall, unless a Certificate Insurer Default is
continuing unremedied for five Business Days with the consent of the Certificate
Insurer, by notice in writing to the applicable Master Servicer and the
Depositor, terminate all of the rights and obligations of such Master Servicer
in its capacity as Master Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof. On or after the receipt by such Master
Servicer of either of such written notices, all authority and power of such
Master Servicer under this Agreement, whether with respect to the Certificates
(other than as a Holder of any Certificate) or the Mortgage Loans or otherwise,
shall pass to and be vested in the Trustee pursuant to and under this Section,
and, without limitation, the Trustee is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of such Master Servicer, 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 promptly (and in any event no
later than ten Business Days subsequent to such notice) to provide the Trustee
with all documents and records (electronic or otherwise) requested by it to
enable it to assume such Master Servicer's functions under this Agreement, and
to cooperate with the Trustee in effecting the termination of such Master
Servicer's responsibilities and rights under this Agreement, including, without
limitation, the transfer within
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one Business Day to the Trustee for administration by it of all cash amounts
which shall at the time be or should have been credited by such Master Servicer
to the Collection Account or the Distribution Account or thereafter be received
with respect to the Mortgage Loans (provided, however, that such Master Servicer
shall continue to be entitled to receive all amounts accrued or owing to it
under this Agreement on or prior to the date of such termination, whether in
respect of P&I Advances or otherwise, and shall continue to be entitled to the
benefits of Section 6.03 notwithstanding any such termination). For purposes of
this Section 7.01, the Trustee shall not be deemed to have knowledge of an Event
of Default unless a Responsible Officer of the Trustee assigned to and working
in the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such an Event of Default is
received by the Trustee and such notice references the Certificates, the
Depositor, the Trust Fund or this Agreement.
SECTION 7.02. Trustee to Act; Appointment of
Successor.
(a) On and after the time a defaulting Master Servicer
receives a notice of termination pursuant to Section 7.01 or Section 7.05 or
resigns in accordance with Section 6.04, the Certificate Insurer may appoint a
successor thereto and if the Certificate Insurer fails to do so within 30 days,
the Trustee shall be the successor in all respects to such Master Servicer in
its capacity as a Master Servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto and arising thereafter placed on such
Master Servicer (except for any representations or warranties of such Master
Servicer under this Agreement, the responsibilities, duties and liabilities
contained in Section 2.03(c) and its obligation to deposit amounts in respect of
losses pursuant to Section 3.12) by the terms and provisions hereof including,
without limitation, such Master Servicer's obligations to make P&I Advances
pursuant to Section 4.03; provided, however, that if the Trustee is prohibited
by law or regulation from obligating itself to make advances regarding
delinquent mortgage loans, then the Trustee shall not be obligated to make P&I
Advances pursuant to Section 4.03; and provided further, that any failure to
perform such duties or responsibilities caused by such Master Servicer's failure
to provide information required by Section 7.01 shall not be considered a
default by the Trustee as successor to such Master Servicer hereunder. As
compensation therefor, the Trustee shall be entitled to the Servicing Fees and
all funds relating to the Mortgage Loans serviced by such Master Servicer to
which such Master Servicer would have been entitled if such Master Servicer had
continued to act hereunder. Notwithstanding the above, the Trustee may, if it
shall be unwilling to so act, or shall, if it is unable to so act or if it is
prohibited by law from making advances regarding delinquent mortgage loans or
if, subject to Section 11.10(d), the related Holders of Certificates entitled to
at least 51% of the Voting Rights so request in writing to the Trustee, promptly
appoint, or petition a court of competent jurisdiction to appoint, an
established mortgage loan servicing institution acceptable to each Rating Agency
and the Certificate Insurer and having a net worth of not less than $15,000,000,
as the successor to the defaulting Master Servicer under this Agreement in the
assumption of all or any part of the responsibilities, duties or liabilities of
such Master Servicer under this Agreement. No appointment of a successor to the
defaulting Master Servicer under this Agreement shall be effective until the
assumption by the successor of all of such Master Servicer's responsibilities,
duties and liabilities hereunder. In connection
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with such appointment and assumption described herein, 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 the defaulting Master Servicer
as such hereunder. The Depositor, the Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. Pending appointment of a successor to the defaulting Master
Servicer under this Agreement, the Trustee shall act in such capacity as
hereinabove provided.
(b) If any Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of the Certificates and this Agreement (for purposes of this Section
7.02(b), a "Remittance") because such Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of such Remittance
is prohibited by Section 362 of the federal Bankruptcy Code, the Trustee shall
upon notice of such prohibition, regardless of whether it has received a notice
of termination under Section 7.01, advance the amount of such Remittance by
depositing such amount in the related Distribution Account on the related
Distribution Date. The Trustee shall be obligated to make such advance only if
(i) such advance, in the good faith judgment of the Trustee, can reasonably be
expected to be ultimately recoverable from funds which are in the custody of
such Master Servicer, a trustee in bankruptcy or a federal bankruptcy court and
should have been the subject of such Remittance absent such prohibition (the
"Stayed Funds") and (ii) the Trustee is not prohibited by law from making such
advance or obligating itself to do so. Upon remittance of the Stayed Funds to
the Trustee or the deposit thereof in the related Distribution Account by such
Master Servicer, a trustee in bankruptcy or a federal bankruptcy court, the
Trustee may recover the amount so advanced, without interest, by withdrawing
such amount from such Distribution Account; however, nothing in this Agreement
shall be deemed to affect the Trustee's rights to recover from such Master
Servicer's own funds interest on the amount of any such advance. If the Trustee
at any time makes an advance under this Subsection which it later determines in
its good faith judgment will not be ultimately recoverable from the Stayed Funds
with respect to which such advance was made, the Trustee shall be entitled to
reimburse itself for such advance, without interest, by withdrawing from the
Distribution Account, out of amounts on deposit therein, an amount equal to the
portion of such advance attributable to the Stayed Funds.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any such termination pursuant to Section 7.01 above
or appointment of a successor to any Master Servicer, the Trustee shall give
prompt written notice thereof to Certificateholders at their respective
addresses appearing in the Certificate Register and the Certificate Insurer.
(b) Within 60 days after the occurrence of any event, which
constitutes or which, with notice or lapse of time or both, would constitute an
Event of Default, the Trustee shall transmit by mail to all Holders of
Certificates and the Certificate Insurer notice of each such event hereunder
known to the Trustee, unless such default or Event of Default shall have
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been cured or waived.
SECTION 7.04. Waiver of Events of Default.
Subject to Section 11.10(d), the Holders representing at least
66% of the Voting Rights evidenced by all Classes of Certificates affected by
any default or Event of Default hereunder, may waive such Default or Event of
Default; PROVIDED, HOWEVER, that a default or Event of Default under clause (i)
or (vi) of Section 7.01(a) or clauses (i) or (ii) of Section 7.01(b) may be
waived only, subject to Section 11.10(d), by all of the Holders of the Class A-1
Certificates. Upon any such waiver of a default or Event of Default, such
default or Event of Default shall cease to exist and shall be deemed to have
been remedied for every purpose hereunder. No such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon except to the extent expressly so waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. During an Event of Default, 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 man would exercise or
use under the circumstances in the conduct of such person's own affairs. Any
permissive right of the Trustee enumerated in this Agreement shall not be
construed as a duty.
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
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take such action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders and the
Certificate Insurer.
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 misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and
after the curing of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement,
the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in
this Agreement, no implied covenants or obligations shall be
read into this Agreement against the Trustee and, in the
absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee that conform
to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer
or Responsible Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) 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
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direction of Holders of Certificates entitled to at least 25%
of the Voting Rights relating 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.
The Trustee shall provide to the Certificate Insurer such
information as the Certificate Insurer may reasonably request regarding the
Certificates, as appears from the books and records under its custody or
control, or as otherwise known to it. The Trustee shall permit the Certificate
Insurer to inspect and make copies of all such books and records at any time
reasonably requested by the Certificate Insurer.
SECTION 8.02. Certain Matters Affecting the
Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any
resolution, Officers' Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document reasonably 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
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 Opinion of Counsel;
(iii) The Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation
hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon
the occurrence of an Event of Default (which has not been
cured or waived), to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of
care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of such
person's own affairs;
(iv) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement;
(v) Prior to the occurrence of an Event of Default
hereunder and after
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the curing of all Events of Default which may have occurred,
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,
unless requested in writing to do so by the Holders of
Certificates entitled to at least 25% of the Voting Rights;
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 such Certificateholders,
the Trustee may require reasonable indemnity against such
expense, or liability from such Certificateholders as a
condition to taking any such action;
(vi) 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; and
(vii) The Trustee shall not be personally liable for any
loss resulting from the investment of funds held in a
Collection Account at the direction of the related Master
Servicer pursuant to Section 3.12.
(b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
SECTION 8.03. Trustee Not Liable for Certificates
or Mortgage Loans.
The recitals contained herein and in the Certificates (other
than the signature of the Trustee, the authentication of the Certificate
Registrar on the Certificates, the acknowledgments of the Trustee contained in
Article II and the representations and warranties of the Trustee in Section
8.13) shall be taken as the statements of the Depositor and the Trustee assumes
no responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth in Section 8.13) or of the Certificates (other than the
signature of the Trustee and authentication of the Certificate Registrar on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or any Master Servicer in respect
of the Mortgage Loans or deposited in or withdrawn from the Collection Accounts
by any Master Servicer, other than any funds held by or on behalf of the Trustee
in accordance with Section 3.10.
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SECTION 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity
may become the owner or pledgee of Certificates with the same rights it would
have if it were not Trustee.
SECTION 8.05. Trustee's Fees and Expenses.
The Trustee shall withdraw from the Distribution Account on
each Distribution Date and pay to itself the Trustee Fee and, to the extent that
the funds therein are at anytime insufficient for such purpose, the Depositor
shall pay such fees. The Trustee shall pay any and all fees and expenses of any
Custodian appointed hereunder (other than those entities serving as Custodian
with respect to any Mortgage Loans as of the Closing Date). The Trustee, subject
to the right of Norwest to certain of such amounts pursuant to Section 3.12,
shall also be entitled pursuant to Section 3.12 to receive from the related
Distribution Account, as additional compensation, interest or other income
earned on deposits therein. The Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Trust Fund and held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to this Agreement or the Certificates, or the performance of any
of the Trustee's duties hereunder, other than any loss, liability or expense (i)
resulting from any Master Servicer's actions or omissions in connection with
this Agreement and the Mortgage Loans, (ii) that constitutes a specific
liability of the Trustee pursuant to Section 10.01(c) or (iii) any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder or as a result of a breach of the
Trustee's obligations under Article X hereof; provided, however, that unless a
Certificate Insurer Default continues, that the Trustee shall notify the
Certificate Insurer of such legal action (provided that the failure to notify
the Certificate Insurer shall not waive the rights of the Trustee to
indemnification) and such indemnification by the Trust Fund shall be
preconditioned on the Trustee's duty (a) to allow the Certificate Insurer to
control the defense or settlement of any such action and (b) to allow the
Certificate Insurer to direct the Trustee with respect thereto. Each Master
Servicer agrees to indemnify the Trustee from, and hold it harmless against, any
loss, liability or expense arising in respect of such Master Servicer's acts or
omissions in connection with this Agreement and the Mortgage Loans serviced by
such Master Servicer. Such indemnities shall survive the termination or
discharge of this Agreement and the resignation or removal of the Trustee. Any
payment hereunder made by the Depositor or any Master Servicer to the Trustee
shall be from the Depositor's or such Master Servicer's own funds, without
reimbursement from the related Trust Fund therefor.
SECTION 8.06. Eligibility Requirements for
Trustee.
The Trustee hereunder shall at all times be a corporation or
an association (other than the Depositor, the Seller, the Master Servicers or
any Affiliate of the foregoing) acceptable to the Certificate Insurer, 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 at least $50,000,000 and subject to supervision
or examination
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by federal or state authority. If such corporation or association publishes
reports of conditions 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 association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07.
SECTION 8.07. Resignation and Removal of the
Trustee.
The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Depositor, the
Master Servicers, the Certificate Insurer and the Certificateholders. Upon
receiving such notice of resignation, the Certificate Insurer may appoint a
successor thereto and if the Certificate Insurer fails to do so within 30 days,
the Depositor shall promptly appoint a successor trustee acceptable to the
Certificate Insurer by written instrument, in duplicate, which instrument shall
be delivered to the resigning Trustee and to the successor trustee. A copy of
such instrument shall be delivered to the Certificateholders, the Certificate
Insurer and the Master Servicers by the Depositor. If no successor trustee shall
have been so appointed and 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.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor (with the consent of the Certificate
Insurer so long as no Certificate Insurer Default exists and has continued
uremedied for five Business Days) or the Certificate Insurer, or if at any time
the Trustee shall become incapable of acting, or shall be adjudged 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, then the Depositor (with the consent of the Certificate Insurer so
long as no Certificate Insurer Default exists and has continued uremedied for
five Business Days) may remove the Trustee and appoint a successor trustee
acceptable to the Certificate Insurer by written instrument, in duplicate, which
instrument shall be delivered to the Trustee so removed and to the successor
trustee. A copy of such instrument shall be delivered to the Certificateholders,
the Certificate Insurer and the Master Servicers by the Depositor.
Subject to Section 11.10(d), the Holders of Certificates
entitled to at least 51% of the Voting Rights, with the consent of the
Certificate Insurer, may at any time remove the Trustee and appoint a successor
trustee acceptable to the Certificate Insurer by written instrument or
instruments, in triplicate, signed by such Holders, or the Certificate Insurer,
as the case may be, or their attorneys-in-fact duly authorized, one complete set
of which instruments shall be delivered to the Depositor, one complete set to
the Trustee so removed and one complete set to the successor so appointed. A
copy of such instrument shall be delivered to the Certificateholders, the
Certificate Insurer and the Master Servicers by the Depositor.
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Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07
shall execute, acknowledge and deliver to the Depositor 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 the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
related Mortgage Files and related documents and statements, as well as all
moneys, held by it hereunder (other than any Mortgage Files at the time held by
a Custodian, which shall become the agent of any successor trustee hereunder),
and the Depositor and the predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Depositor shall mail notice of the succession of
such trustee hereunder to all related Holders of Certificates at their addresses
as shown in the Certificate Register and to the Certificate Insurer. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.
SECTION 8.09. Merger or Consolidation of Trustee.
Any corporation or association into which the Trustee may be
merged or converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, 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.
SECTION 8.10. Appointment of Co-Trustee or
Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing the same may at the time be located,
the related Master Servicer and the
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Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 8.10, such powers,
duties, obligations, rights and trusts as the related Master Servicer and the
Trustee may consider necessary or desirable. If the related Master Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06 hereunder and no notice to
Holders of Certificates of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all 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 or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Master Servicer hereunder),
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 or co-trustee at the
direction of the Trustee.
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 or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. 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.
Any separate trustee or co-trustee 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
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 8.11. Appointment of Custodians.
The Trustee may, with the consent of the Depositor, the
Certificate Insurer and
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the related Master Servicer, appoint one or more Custodians to hold all or a
portion of the Mortgage Files as agent for the Trustee, by entering into a
Custodial Agreement. The appointment of any Custodian may at any time be
terminated and a substitute Custodian appointed therefor upon the reasonable
request of the related Master Servicer to the Trustee and the Certificate
Insurer, the consent to which shall not be unreasonably withheld. Subject to
this Article VIII, the Trustee agrees to comply with the terms of each Custodial
Agreement and to enforce the terms and provisions thereof against the Custodian
for the benefit of the Certificateholders and the Certificate Insurer. Each
Custodian shall be a depository institution or trust company subject to
supervision by federal or state authority, shall have combined capital and
surplus of at least $15,000,000 and shall be qualified to do business in the
jurisdiction in which it holds any Mortgage File. Each Custodial Agreement may
be amended only as provided in Section 11.01.
SECTION 8.12. Appointment of Office or Agency.
The Trustee will appoint an office or agency in the City of
New York where the Certificates may be surrendered for registration of transfer
or exchange, and presented for final distribution, and where notices and demands
to or upon the Trustee in respect of the Certificates and this Agreement may be
served.
SECTION 8.13. Representations and Warranties of
the Trustee.
The Trustee hereby represents and warrants to the Master
Servicers, the Certificate Insurer and the Depositor, as of the Closing Date,
that:
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States.
(ii) The execution and delivery of this Agreement by the
Trustee, and the performance and compliance with the terms of this
Agreement by the Trustee, will not violate the Trustee's charter or
bylaws or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or result in the
breach of, any material agreement or other instrument to which it is a
party or which is applicable to it or any of its assets.
(iii) The Trustee has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Master Servicers and the Depositor, constitutes a
valid, legal and binding obligation of the Trustee, enforceable against
the Trustee in accordance with the terms hereof, subject to (A)
applicable bankruptcy, insolvency, receivership, reorganization,
moratorium and other laws affecting the enforcement of creditors'
rights generally, and
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(B) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.
(v) The Trustee is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the
terms of this Agreement will not constitute a violation of, any law,
any order or decree of any court or arbiter, or any order, regulation
or demand of any federal, state or local governmental or regulatory
authority, which violation, in the Trustee's good faith and reasonable
judgment, is likely to affect materially and adversely either the
ability of the Trustee to perform its obligations under this Agreement
or the financial condition of the Trustee.
(vi) No litigation is pending or, to the best of the Trustee's
knowledge, threatened against the Trustee which would prohibit the
Trustee from entering into this Agreement or, in the Trustee's good
faith reasonable judgment, is likely to materially and adversely affect
either the ability of the Trustee to perform its obligations under this
Agreement or the financial condition of the Trustee.
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ARTICLE IX
TERMINATION
SECTION 9.01. Termination Upon Purchase or
Liquidation of All Mortgage Loans.
Subject to Section 9.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicers and
the Trustee (other than the obligations of the Master Servicers to the Trustee
pursuant to Section 8.05 and of the Master Servicers to provide for and the
Trustee to make payments to Certificateholders as hereafter set forth) shall
terminate upon payment to the Certificateholders and the deposit of all amounts
held by or on behalf of the Trustee and required hereunder to be so paid or
deposited on the Distribution Date coinciding with or following the earlier to
occur of (i) the purchase by the Majority Class R Certificateholder or the
Certificate Insurer of all Mortgage Loans and each REO Property remaining in the
Trust Fund at a price equal to the greater of (A) the aggregate Purchase Price
of all the Mortgage Loans included in the Trust Fund, plus the appraised value
of each REO Property, if any, included in the Trust Fund, such appraisal to be
conducted by an appraiser mutually agreed upon by such Holder and the Trustee in
their reasonable discretion (and approved by the Certificate Insurer in its
reasonable discretion) and (B) the aggregate fair market value of all of the
assets of the Trust Fund (as determined by such Holder and the Trustee, as of
the close of business on the third Business Day next preceding the date upon
which notice of any such termination is furnished to Certificateholders pursuant
to the third paragraph of this Section 9.01), and, in the case of either (A) or
(B), all amounts due the Certificate Insurer under the Insurance Agreement and
this Agreement and (ii) the final payment or other liquidation (or any advance
with respect thereto) of the last Mortgage Loan or REO Property remaining in the
Trust Fund; provided, however, that in no event shall the trust created hereby
continue beyond 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, living on the date hereof.
The Majority Class R Certificateholder shall have the right
and, to the extent the Majority Class R Certificateholder fails to exercise such
right, the Certificate Insurer shall have the right, to purchase all of the
Mortgage Loans and each REO Property remaining in the Trust Fund pursuant to
clause (i) of the preceding paragraph no later than the Determination Date in
the month immediately preceding the Distribution Date on which the Certificates
will be retired; provided, however, that such Holder or the Certificate Insurer,
as provided above, may elect to purchase all of the Mortgage Loans and each REO
Property remaining in the Trust Fund pursuant to clause (i) above only if the
aggregate Stated Principal Balance of the Mortgage Loans and each REO Property
remaining in the Trust Fund at the time of such election is less than 10% of the
aggregate Stated Principal Balance of the Mortgage Loans at the Cut-off Date.
Notice of any termination shall be given promptly by the
Trustee by letter to Certificateholders and the Certificate Insurer mailed (a)
in the event such notice is given in connection with the purchase of the
Mortgage Loans and each REO Property by the Majority
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Class R Certificateholder or the Certificate Insurer, not earlier than the 15th
day and not later than the 25th day of the month next preceding the month of the
final distribution on the Certificates or (b) otherwise during the month of such
final distribution on or before the Determination Date in such month, in each
case specifying (i) the Distribution Date upon which the Trust Fund will
terminate and final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office of the Trustee therein designated,
(ii) the amount of any such final payment, (iii) that no interest shall accrue
in respect of the Certificates from and after the Interest Accrual Period
relating to the final Distribution Date therefor and (iv) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Trustee. The Trustee shall give such notice to the Certificate Registrar at
the time such notice is given to Certificateholders. In the event such notice is
given in connection with the purchase of all of the Mortgage Loans and each REO
Property remaining in the Trust Fund by the Majority Class R Certificateholder
or the Certificate Insurer, the Majority Class R Certificateholder or the
Certificate Insurer, as the case may be, shall deliver to the Trustee for
deposit in the Distribution Account not later than the last Business Day of the
month next preceding the month of the final distribution on the Certificates an
amount in immediately available funds equal to the above-described purchase
price. Upon certification to the Trustee by a Servicing Officer, following any
such final deposit by such Holder or the Certificate Insurer, as the case may
be, the Trustee shall promptly release to the applicable Master Servicers or the
Certificate Insurer, as the case may be, the Mortgage Files for the remaining
Mortgage Loans and the Trustee shall execute all assignments, endorsements and
other instruments necessary to effectuate such transfer.
Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates (i)
the amount otherwise distributable on such Distribution Date in accordance with
Section 4.01 in respect of the Certificates so presented and surrendered, if not
in connection with the purchase of all of the Mortgage Loans and each REO
Property, or (ii) if in connection with such purchase, an amount equal to the
purchase price as provided above, any such purchase being in lieu of the
distribution otherwise required to be made on the Distribution Date upon which
the purchase is effected. If the Trust Fund is to terminate in connection with
the purchase of all of the Mortgage Loans and each REO Property in the Trust
Fund as provided above, the Available Distribution Amount for the final
Distribution Date shall be allocated as follows: FIRST, to distributions to the
Class A-1 Certificateholders of the amounts otherwise payable thereto on such
Distribution Date pursuant to Section 4.01(a)(i); SECOND, to distributions to
the Class A-1 Certificateholders, to be applied in the manner described in
Section 4.01(a)(ii), to reduce the Certificate Principal Balance of the Class
A-1 Certificates, but in no event more than the outstanding Certificate
Principal Balance of the Class A-1 Certificates; THIRD, to the Class A-1
Certificateholders in an amount equal to the sum of all Realized Losses
previously allocated to the Class A-1 Certificates that were not covered by a
payment under the Policy; FOURTH, to the Certificate Insurer, to reimburse the
Certificate Insurer for claims under the Policy, to the extent of Cumulative
Insurance Payments, as specified in Section 4.01(a)(iii); FIFTH, to SASCOR or
First Nationwide, as the case may be, for amounts specified in Section
4.01(viii); and SIXTH, to distributions to the Class R Certificateholders of the
balance, if any.
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Immediately following the deposit of funds in trust hereunder, the related Trust
Fund shall terminate.
Any funds not distributed to any Holder or Holders of
Certificates being retired on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust and credited to the account of the appropriate
non-tendering Holder or Holders. If any Certificates as to which notice has been
given pursuant to this Section 9.01 shall not have been surrendered for
cancellation within six months after the time specified in such notice, the
Trustee shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trustee shall, directly or through an agent, make reasonable
efforts to contact the remaining non-tendering Certificateholders concerning
surrender of their Certificates in the manner reasonably specified to the
Trustee by the Master Servicers in writing. The costs and expenses of
maintaining the funds in trust and of contacting such Certificateholders shall
be paid out of the assets remaining in the Trust Funds. If within two years
after the second notice any such Certificates shall not have been surrendered
for cancellation, the Trustee shall pay to the Master Servicers all amounts
distributable to the Holders thereof and the Master Servicers shall thereafter
hold such amounts for the benefit of such Holders. No interest shall accrue or
be payable to any Certificateholder on any amount held in trust by the Trustee
or by the Master Servicers as a result of such Certificateholder's failure to
surrender its Certificate(s) for final payment thereof in accordance with this
Section 9.01.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
SECTION 9.02. Additional Termination Requirements.
(a) The Trust Fund shall be terminated in accordance with the
following additional requirements:
(i) Within 90 days prior to the time of the making of
the final payment on the Certificates, the Trustee on behalf
of the Trust Fund shall adopt and sign a plan of complete
liquidation of such Trust Fund, meeting the requirements of a
qualified liquidation under Section 860F of the Code and any
regulations thereunder, as evidenced by an Opinion of Counsel;
(ii) At or after the time of adoption of such a plan of
complete liquidation and at or prior to the time of making of
the final payment on the Certificates, the Trustee shall sell
all of the assets of such Trust Fund, if any, to the Master
Servicer for cash; and
(iii) At the time of the making of the final payment on
the Certificates, the Trustee shall distribute or credit, or
cause to be distributed or credited, to the
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Holders of the Residual Certificates all cash on hand (other
than cash retained to meet claims), and the related Trust Fund
shall terminate at that time.
(b) At the requesting parties expense, the Majority Class R
Certificateholder shall prepare the documentation required in connection with
the adoption of a plan of liquidation of a Trust Fund pursuant to this Section
9.02.
(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to sign and thereby adopt a plan of
complete liquidation of the related Trust Fund, which authorization shall be
binding upon all successor Certificateholders.
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ARTICLE X
REMIC PROVISIONS
SECTION 10.01. REMIC Administration.
(a) The Trustee shall elect to treat the Trust Fund as a REMIC
under the Code and, if necessary, under applicable state law. Such election will
be made on Form 1066 or other appropriate federal tax or information return or
any necessary state return for the taxable year ending on the last day of the
calendar year in which the Certificates are issued. For the purposes of such
election, the Class A-1 Certificates shall be designated as the "regular
interests" in the REMIC within the meaning of Section 860G(a)(1) of the Code and
the Class R Certificates shall be designated as the single class of "residual
interest" in the REMIC within the meaning of Section 860G(a)(2) of the Code. The
Trustee and the Depositor shall not permit the creation of any "interests" in
the Trust Fund (within the meaning of Section 860G of the Code) other than
interests represented by the Certificates.
(b) The Closing Date is hereby designated as the "Startup Day"
of the REMIC within the meaning of Section 860G(a)(9) of the Code.
(c) The Trustee shall pay out of its own funds, without any
right of reimbursement, any and all tax related expenses of the Trust Fund
(including, but not limited to, any professional fees or expenses related to
audits or any administrative or judicial proceedings with respect to the Trust
Fund that involve the Internal Revenue Service or state tax authorities), other
than the expense of obtaining any Opinion of Counsel required pursuant to
Section 9.02(a)(i) or 10.01(j) and other than taxes except as specified herein.
The Trustee, as agent for the Trust Fund's tax matters person, shall act on
behalf of such tax matters person in relation to any tax matter or controversy
involving the Trust Fund and shall represent the Trust Fund in any
administrative or judicial proceeding relating to an examination or audit by any
governmental taxing authority. The holder of the largest Percentage Interest of
the Class R Certificates during the taxable year in question shall be designated
as the tax matters person of the Trust Fund in the manner provided under
Treasury regulations section 1.860F-4(d) and temporary Treasury regulation
section 301.6231(a)(7)-1T. By their acceptance thereof, the holders, from time
to time, of the largest Percentage Interest of the Class R Certificates hereby
agree to irrevocably appoint the Trustee or an Affiliate as their agent to
perform all of the duties of the tax matters person for the Trust Fund.
(d) The Trustee shall prepare, sign, and shall file all of the
Trust Fund's Tax Returns. The expenses of preparing and filing such Returns
shall be borne by the Trustee without any right of reimbursement therefor. The
Master Servicers shall provide on a timely basis to the Trustee or its designee
such information with respect to the assets of the Trust Fund as is in their
possession and reasonably required by the Trustee to enable it to perform its
obligations under this Article.
(e) The Trustee shall perform on behalf of the Trust Fund all
reporting and
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other tax compliance duties that are the responsibility of the Trust Fund under
the Code, REMIC Provisions or other compliance guidance issued by the Internal
Revenue Service or any state or local taxing authority. Among its other duties,
as required by the Code, REMIC Provisions or other such compliance guidance, the
Trustee shall provide (i) to any Transferor of a Class R Certificate such
information as is necessary for the application of any tax relating to the
transfer of a Class R Certificate to any Person who is not a Permitted
Transferee, (ii) to the Certificateholders such information or reports as are
required by the Code or REMIC Provisions including reports relating to interest,
original issue discount and market discount or premium using the Prepayment
Assumption as required and (iii) to the Internal Revenue Service on Form 8811
the name, title, address and telephone number of the person who will serve as
the representative of the Trust Fund. Each Master Servicer shall provide on a
timely basis to the Trustee such information with respect to the assets of the
Trust Fund, including, without limitation, the related Mortgage Loans, as is in
its possession and is reasonably requested by the Trustee to enable it to
perform its obligations under this subsection. In addition, the Depositor shall
provide or cause to be provided to the Trustee, within ten (10) days after the
Closing Date, all information or data that the Trustee reasonably determines to
be relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates.
(f) The Trustee shall take any action or cause the Trust Fund
to take any action necessary to create or maintain the status of the Trust Fund
as a REMIC under the REMIC Provisions (and each Master Servicer shall assist the
Trustee, to the extent reasonably requested by it). The Trustee shall not take
any action, cause the Trust Fund 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 Trust Fund as a
REMIC or (ii) result in the imposition of a tax upon the Trust Fund (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 the Trust Fund set forth
in Section 860G(d) of the Code) (either such event, an "Adverse REMIC Event")
unless the Trustee has received an Opinion of Counsel (at the expense of the
party seeking to take such action) addressed to the Trustee and the Certificate
Insurer to the effect that the contemplated action will not endanger such status
or result in the imposition of such a tax, nor shall any Master Servicer take or
fail to take any action (whether or not authorized hereunder) as to which the
Trustee has advised it in writing that it has received an Opinion of Counsel to
the effect that an Adverse REMIC Event could occur with respect to such action.
In addition, prior to taking any action with respect to the Trust Fund or the
assets therein, or causing the Trust Fund to take any action, which is not
expressly permitted under the terms of this Agreement, the Master Servicer
proposing to take such action will consult with the Trustee and the Certificate
Insurer or their respective designees, in writing, with respect to whether such
action could cause an Adverse REMIC Event to occur with respect to the Trust
Fund, and such Master Servicer shall not take any such action or cause the Trust
Fund to take any such action as to which the Trustee or the Certificate Insurer
has advised it in writing that an Adverse REMIC Event could occur. The Trustee
may consult with counsel to make such written advice, and the cost of same shall
be borne by the party seeking to take action not permitted by this Agreement. At
all times as may be required by the Code, the Trustee will ensure that
substantially all of the assets of the Trust Fund will consist of "qualified
mortgages"
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as defined in Section 860G(a)(3) of the Code and "permitted investments" as
defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on "prohibited
transactions" of the Trust Fund as defined in Section 860F(a)(2) of the Code, on
the "net income from foreclosure property" of the REMIC as defined in Section
860G(c) of the Code, on any contributions to the Trust Fund after the Startup
Day pursuant to Section 860G(d) of the Code, or any other tax is imposed by the
Code or any applicable provisions of state or local tax laws, such tax shall be
charged (i) to the Trustee pursuant to Section 10.03 hereof, if such tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Article X, (ii) to the applicable Master Servicer pursuant to Section 10.03
hereof, if such tax arises out of or results from a breach by a Master Servicer
of any of its obligations under Article III or this Article X, or otherwise
(iii) to the Trust Fund and shall be paid by withdrawal from the Distribution
Account.
(h) On or before April 15 of each calendar year, commencing
April 15, 1997, the Trustee shall deliver to each Master Servicer and the
Certificate Insurer and each Rating Agency a certificate from a Responsible
Officer of the Trustee stating the Trustee's compliance with this Article X.
(i) The Trustee and each Master Servicer shall, for federal
income tax purposes, maintain books and records with respect to the Trust Fund
on a calendar year and on an accrual basis.
(j) Following the Startup Day, the Trustee shall not accept
any contributions of assets to the Trust Fund other than in connection with any
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03
unless it shall have received an Opinion of Counsel to the effect that the
inclusion of such assets will not cause the Trust Fund to fail to qualify as a
REMIC at any time that any Certificates are outstanding or subject the Trust
Fund to any tax under the REMIC Provisions or other applicable provisions of
federal, state and local law or ordinances.
(k) Neither the Trustee nor any Master Servicer shall enter
into any arrangement by which the Trust Fund will receive a fee or other
compensation for services nor permit the Trust Fund to receive any income from
assets other than "qualified mortgages" as defined in Section 860G(a)(3) of the
Code or "permitted investments" as defined in Section 860G(a)(5) of the Code.
SECTION 10.02. Prohibited Transactions and
Activities.
None of the Depositor, any Master Servicer or the Trustee
shall sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of the related Trust Fund (iii) the
termination of the Trust Fund pursuant to Article IX of this Agreement, (iv) a
substitution pursuant to Article II of this Agreement or (v) a purchase of
Mortgage Loans pursuant to Article
<PAGE>
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II or III of this Agreement), nor acquire any assets for the Trust Fund (other
than REO Property acquired in respect of a defaulted Mortgage Loan), nor sell or
dispose of any investments in a Collection Account or the Distribution Account
for gain, nor accept any contributions to the Trust Fund after the Closing Date
(other than a Qualified Substitute Mortgage Loan delivered in accordance with
Section 2.03), unless it has received an Opinion of Counsel, addressed to the
Trustee and the Certificate Insurer (at the expense of the party seeking to
cause such sale, disposition, substitution, acquisition or contribution) that
such sale, disposition, substitution, acquisition or contribution will not (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.
SECTION 10.03. Master Servicer and Trustee
Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund and the
related Master Servicers for any taxes and costs including, without limitation,
any reasonable attorneys fees imposed on or incurred by the Trust Fund, or the
related Master Servicers, as a result of a breach of the Trustee's covenants set
forth in this Article X.
(b) Each Master Servicer agrees to indemnify the Trust Fund
and the Trustee for any taxes and costs including, without limitation, any
reasonable attorneys' fees imposed on or incurred by the Trust Fund, or the
Trustee, as a result of a breach of such Master Servicer's covenants set forth
in Article III or this Article X.
(c) These indemnity provisions shall survive the termination
of this Agreement and shall survive until the statute of limitations has run on
any causes of actions which arise from one of these reasons and until all suits
filed as a result thereof have been finally concluded.
<PAGE>
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ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. Amendment.
This Agreement may be amended from time to time by the
Depositor, the Master Servicers and the Trustee, with the consent of the
Certificate Insurer, but without the consent of any of the Certificateholders,
(i) to cure any ambiguity, (ii) to correct or supplement any provisions herein
which may be inconsistent with any other provisions herein, or (iii) to make any
other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with the provisions of this Agreement,
provided that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee, adversely affect in any material respect the interests
of any Certificateholder.
This Agreement may also be amended from time to time by the
Depositor, the Master Servicers and the Trustee, with the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (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, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights of such Class, or (iii) reduce the percentage of Voting Rights
required by (ii), as described in (ii), without the consent of the Holders of
all Certificates of such Class then outstanding. Notwithstanding any other
provision of this Agreement, for purposes of the giving or withholding of
consents pursuant to this Section 11.01, Certificates registered in the name of
the Depositor or any Master Servicer or any Affiliate thereof shall be entitled
to Voting Rights with respect to matters affecting such Certificates.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on the Trust Fund pursuant to the REMIC
Provisions or cause the Trust Fund to fail to qualify as a REMIC at any time
that any Certificates are outstanding.
Promptly after the execution of any such amendment the Trustee
shall furnish written notice of the substance of such amendment to each
Certificateholder.
It shall not be necessary for the consent of
Certificateholders under this Section 11.01 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 Certificateholders shall be
subject to
<PAGE>
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such reasonable regulations as the Trustee may prescribe.
The cost of any Opinion of Counsel to be delivered pursuant to
this Section 11.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.
SECTION 11.02. Recordation of Agreement;
Counterparts.
To the extent permitted by applicable law, this Agreement 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 properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer servicing the largest aggregate principle amount
of Mortgage Loans and at the expense of the Certificateholders, but only upon
direction of the Trustee accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders or the Certificate Insurer.
For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
SECTION 11.03. Limitation on Rights of
Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control 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.
No Certificateholder shall have any right by virtue 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 the
Certificate Insurer has given its prior written consent and unless such Holder
previously shall have given to the Trustee and the Certificate Insurer a written
notice of default and of the continuance thereof, as hereinbefore provided, and
unless also the Holders of Certificates entitled to at least 25% of the Voting
Rights shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as
<PAGE>
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Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby and the Certificate Insurer shall have given its
written consent, and the Trustee, for 15 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. It is understood and intended, and 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 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 equal, ratable and common 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 11.04. 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.
SECTION 11.05. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service, to (a) in the case of the Depositor, Seven World Trade Center,
New York, New York 10048, Attention: Mortgage Finance Group (telecopy number
(212) 783-2316), or such other address or telecopy number as may hereafter be
furnished to the Master Servicers and the Trustee in writing by the Depositor,
(b) in the case of the Master Servicers, (i) First Nationwide Mortgage
Corporation, 135 Main Street, San Francisco, California 94121, Attention:
Capital Markets (telecopy number: (415) 904-0169) and First Nationwide Mortgage
Corporation, 5280 Corporate Drive, Frederick, Maryland 21701, Attention:
Residential Loan Servicing (telecopy number: (301) 696-4270) (ii) Norwest Bank
Minnesota, N.A., 11000 Broken Land Parkway, 2nd floor, Columbia, Maryland
21044-3562, Attention: Master Servicing Department, Salomon 1996-AFF1 (telecopy
number: (410) 715- 7902), and (iii) Securitized Asset Services Corporation, 7485
New Horizon Way, Frederick, Maryland 21701, Attention: Vice President (telecopy
number: (301-815-6125), or such other address or telecopy number as may
hereafter be furnished to the Trustee and the Depositor in writing by each
Master Servicer, (c) in the case of the Trustee, 4 Chase Manhattan Center, 3rd
Floor, Brooklyn, New York 11245, Attention: Institutional Trust Group (telecopy
number (718) 242-6818), or such other address or telecopy number as may
hereafter be furnished to the Master Servicers and the Depositor in writing by
the Trustee and (d) in the case of the Certificate Insurer, MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management - Structured Finance (IPM-SF) or such other address as may
hereafter be furnished in writing by the Certificate Insurer. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
first class mail, postage prepaid,
<PAGE>
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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 when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
SECTION 11.06. 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 11.07. Notice to Rating Agencies and the
Certificate Insurer.
The Trustee shall use its best efforts promptly to provide
notice to each Rating Agency and the Certificate Insurer with respect to each of
the following of which it has actual knowledge:
1. Any proposed material change or amendment to this
Agreement;
2. The occurrence of any Event of Default;
3. The proposed resignation or termination of any Master
Servicer or the Trustee or a change in the majority
ownership of the Trustee;
4. The repurchase or substitution of Mortgage Loans
pursuant to Section 2.03, 3.16(b) or pursuant to the
Mortgage Loan Purchase Agreement;
5. The final payment to Holders of the Certificates of
any Class;
6. Any change in the location of the Collection Account
or the Distribution Account;
7. Any event that would result in the inability of the
Trustee to make advances regarding delinquent
mortgage loans;
8. In the event that the Index is no longer published or
is otherwise unavailable, the comparable alternative
index selected by the Master Servicer; and
9. The filing of any claim under any Master Servicer's
blanket fidelity bond and errors and omissions
insurance policy required by Section 3.14 or the
<PAGE>
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cancellation or material modification of coverage
under any such instrument.
In addition, the Trustee shall promptly furnish to each Rating
Agency and the Certificate Insurer copies of each report to Certificateholders
described in Section 4.02 and each Master Servicer shall promptly furnish to
each Rating Agency and the Certificate Insurer copies of the following:
1. Each annual statement as to compliance described in
Section 3.20; and
2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 11.07 shall be in
writing and shall be deemed to have been duly given if personally delivered or
mailed by first class mail, postage prepaid, or by express delivery service to
Standard and Poor's Ratings Services, 26 Broadway, New York, New York 10004, and
to Moody's Investors Service, 99 Church Street, New York, New York 10007 or such
other address as each Rating Agency may designate in writing to the parties
hereto.
SECTION 11.08. Grant of Security Interest.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Depositor to the Trustee be, and be
construed as, a sale of the Mortgage Loans by the Depositor and not a pledge of
the Mortgage Loans by the Depositor to secure a debt or other obligation of the
Depositor. However, in the event that, notwithstanding the aforementioned intent
of the parties, the Mortgage Loans are held to be property of the Depositor,
then, (a) it is the express intent of the parties that such conveyance be deemed
a pledge of the Mortgage Loans by the Depositor to the Trustee to secure a debt
or other obligation of the Depositor and (b)(1) this Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of the
Uniform Commercial Code as in effect from time to time in the State of New York;
(2) the conveyance provided for in Section 2.01 hereof shall be deemed to be a
grant by the Depositor to the Trustee of a security interest in all of the
Depositor's right, title and interest in and to the Mortgage Loans and all
amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account and the Distribution Account,
whether in the form of cash, instruments, securities or other property; (3) the
obligations secured by such security agreement shall be deemed to be all of the
Depositor's obligations under this Agreement, including the obligation to
provide to the Certificateholders the benefits of this Agreement relating to the
Mortgage Loans and the Trust Fund; and (4) notifications to persons holding such
property, and acknowledgements, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgements, receipts
or confirmations from, financial intermediaries, bailees or agents (as
applicable) of the Trustee for the purpose
<PAGE>
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of perfecting such security interest under applicable law. Accordingly, the
Depositor hereby grants to the Trustee a security interest in the Mortgage Loans
and all other property described in clause (2) of the preceding sentence, for
the purpose of securing to the Trustee the performance by the Depositor of the
obligations described in clause (3) of the preceding sentence. Notwithstanding
the foregoing, the parties hereto intend the conveyance pursuant to Section 2.01
to be a true, absolute and unconditional sale of the Mortgage Loans and assets
constituting the Trust Fund by the Depositor to the Trustee. The Depositor and
the Trustee shall, to the extent consistent with this Agreement, take such
actions as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in the Mortgage Loans, such security interest would
be deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such for so long as any of the Mortgage Loans
remain outstanding and any related Mortgaged Property is held by the Trustee.
Without limiting the generality of the foregoing, the Depositor shall file, or
shall cause to be filed, all filings necessary to maintain the effectiveness of
any original filings necessary under the Uniform Commercial Code as in effect in
any jurisdiction to perfect the Trustee's security interest in or lien on the
Mortgage Loans and the related Mortgage Notes and Mortgages, including without
limitation (x) continuation statements and (y) such other statements as may be
occasioned by (1) any change of name of the Depositor or the Trustee, (2) any
change of location of the place of business or the chief executive office of the
Depositor or (3) any transfer of any interest of the Depositor in any Mortgage
Loan.
SECTION 11.09. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
SECTION 11.10. Rights of the Certificate Insurer.
(a) On each Distribution Date the Trustee shall forward to the
Certificate Insurer a copy of the reports furnished to the Class A-1
Certificateholders and the Depositor on such Distribution Date.
(b) The Trustee shall provide to the Certificate Insurer
copies of any report, notice, Opinion of Counsel, Officer's Certificate, request
for consent or request for amendment to any document related hereto promptly
upon the Trustee's production or receipt thereof.
(c) Unless a Certificate Insurer Default exists and continues
for at least five Business Days, the Trustee and the Depositor shall not agree
to any amendment to this Agreement without first having obtained the prior
written consent of the Certificate Insurer, if such consent is not unreasonably
withheld; provided; however, that in no event shall this Agreement be amended in
a manner which would increase the Certificate Insurer's obligations hereunder or
under the Policy without the Certificate Insurer's consent.
(d) So long as there does not exist a failure by the
Certificate Insurer to make a required payment under the Policy, the Certificate
Insurer shall have the right to exercise all
<PAGE>
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rights of the Holders of the Class A-1 Certificates under this Agreement
(including rights to vote) without any consent of such Holders, and such Holders
may exercise such rights only with the prior written consent of the Certificate
Insurer, except as provided herein.
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicers, the
Trustee and the Certificate Insurer have caused their names to be signed hereto
by their respective officers thereunto duly authorized, in each case as of the
day and year first above written.
SALOMON BROTHERS MORTGAGE THE CHASE MANHATTAN BANK, N.A.,
SECURITIES VII, INC., as Trustee
as Depositor
By: By:
Name: Name:
Title: Title:
FIRST NATIONWIDE MORTGAGE MBIA INSURANCE CORPORATION,
CORPORATION, as Certificate Insurer
as Master Servicer
By: By:
Name: Name:
Title: Title:
NORWEST BANK MINNESOTA, N.A.,
as Master Servicer
By:
Name:
Title:
SECURITIZED ASSET SERVICES CORPORATION,
as Master Servicer
By:
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 29th day of March, 1996 before me, a notary public in
and for said State, personally appeared Susan Woodbury known to me to be an
Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc., one
of the corporations that executed the within instrument, and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
On the ______ day of March, 1996 before me, a notary public in
and for said State, personally appeared ____________________ known to me to be a
____________________ of Securitized Asset Services Corporation, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
On the ______ day of March, 1996 before me, a notary public in
and for said State, personally appeared ___________________ known to me to be a
_____________________ of First Nationwide Mortgage Corporation, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
STATE OF ___________________ )
) ss.:
COUNTY OF __________________ )
On the ______ day of March, 1996 before me, a notary public in
and for said State, personally appeared ____________________ known to me to be a
____________________ of Norwest Bank Minnesota, N.A., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
STATE OF ___________________ )
) ss.:
COUNTY OF __________________ )
On the ______ day of March, 1996 before me, a notary public in
and for said State, personally appeared _____________________ known to me to be
a ___________________ of The Chase Manhattan Bank, N.A., a national banking
association, one of the corporations that executed the within instrument, and
also known to me to be the person who executed it on behalf of said corporation,
and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
On the _____ day of March, 1996 before me, a notary public in
and for said State, personally appeared _____________________ known to me to be
a ___________________ of MBIA Insurance Corporation, one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A-1
Form of Class A-1 Certificate
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT", AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
<TABLE>
<S> <C>
Series 1996-AFF1, Class A-1 Aggregate Certificate Principal Balance of
Class A-1 Certificates as of the Issue Date:
Variable Pass-Through Rate $225,651,429
Date of Pooling and Servicing Agreement Denomination: $________
and Cut-off Date: March 1, 1996
Master Servicers: First Nationwide
First Distribution Date: Mortgage Corporation, Norwest Bank
April 25, 1996 Minnesota, N.A., and Securitized Asset
Services Corporation
No. ____ Trustee: The Chase Manhattan Bank, N.A.
Issue Date: March 29, 1996
CUSIP: 79548K QK7
</TABLE>
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCI-
PAL BALANCE OF THIS CERTIFICATE MAY BE MADE MONTHLY
AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING
CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY
BE LESS THAN THE AMOUNT SHOWN BELOW.
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION
OF OR INTEREST IN SALOMON BROTHERS MORTGAGE
<PAGE>
SECURITIES VII, INC., ANY MASTER SERVICER, THE
TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY
OF THE UNITED STATES.
This certifies that ___________________________________ is the
registered owner of a Percentage Interest (obtained by dividing the denomination
of this Certificate by the aggregate Certificate Principal Balance of the Class
A-1 Certificates) in that certain beneficial ownership interest evidenced by all
the Class A-1 Certificates in the Trust Fund created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor",
which term includes any successor entity under the Agreement), the Master
Servicers, the Trustee and the Certificate Insurer, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from the Available
Distribution Amount in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to the
Holders of Class A-1 Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register, provided that the Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.
The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the LIBOR Pass-Through Rate for such
Distribution Date and (ii) the Available Funds Pass-Through Rate for such
Distribution Date.
-2-
<PAGE>
This Certificate is one of a duly authorized issue of Certificates
designated as Asset-Backed Floating Rate Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class A-1 Certificates specified on the face hereof.
The Class A-1 Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicers, the Trustee and the Certificate Insurer and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Master Servicer, the Trustee and the Certificate Insurer with the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights and the Certificate Insurer. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
-3-
<PAGE>
The Depositor, any Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, any Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being 10% or less of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
-4-
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
[SEAL] By: _________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK, N.A.,
as Certificate Registrar
-----------------------------------
By: Authorized Signatory
-5-
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
of survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Certificate
of a like Percentage Interest and Class to the above named assignee and deliver
such Certificate to the following address:
___________________________________________________
- ----------------------------------------------------------------.
Dated:
---------------------------------------
Signature by or on behalf of assignor
---------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to
_______________________________________________________________
____________________________________________________________________ for the
account of _________________________________________________ account number
____________________________, or, if mailed by check, to ______________________
_______________________________. Applicable statements should be mailed to
____________________________________________________. This information is
provided by _______________________________________________, the assignee named
above, or ___________________________, as its agent.
-2-
<PAGE>
EXHIBIT A-2
Form of Class R Certificate
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED
STATES PERSON
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE CLASS A-1 CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS
CONSTITUTING THE AVAILABLE DISTRIBUTION AMOUNT UNTIL SUCH
TIME AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN
A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION
AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN
OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE
CODE WILL BE REGISTERED EXCEPT IN COMPLIANCE WITH THE
PROCEDURES DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY
BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN AFFIDAVIT TO THE
CERTIFICATE REGISTRAR AND THE TRUSTEE THAT SUCH TRANSFEREE IS NOT (A) THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN
A COOPERATIVE DESCRIBED IN SECTION
<PAGE>
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, (C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF
THE CODE, (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR
(C) BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (D)
AN AGENT OF A DISQUALIFIED ORGANIZATION AND (2) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH
TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE
REGISTRATION IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER
DISPOSITION OF THIS CLASS R CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR
AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED
TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT
NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
HOLDER OF A CLASS R CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE
DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE
PROVISIONS OF SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS
PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CLASS R
CERTIFICATE.
-2-
<PAGE>
<TABLE>
<S> <C>
Series 1996-AFF1, Class R Aggregate Certificate Principal Balance of
Class R Certificates as of the Issue Date:
Date of Pooling and Servicing Agreement $4,019,237
and Cut-off Date: March 1, 1996
Master Servicers: First Nationwide
First Distribution Date: Mortgage Corporation, Norwest Bank
April 25, 1996 Minnesota, N.A., and Securitized Asset
Services Corporation
No. ____
Trustee: The Chase Manhattan Bank, N.A.
Denomination: $_________________
Issue Date: March 29, 1996
</TABLE>
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional one- to four-family first
mortgage loans formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., ANY MASTER
SERVICER OR THE TRUSTEE OR ANY OF THEIR AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY
ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________________ is the registered owner
of the Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class R
Certificates) in that certain beneficial ownership interest evidenced by all the
Class R Certificates in the Trust Fund created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor",
which term includes any successor entity under the Agreement), the Master
Servicers, the Trustee and the Certificate Insurer, a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, distributions will be made
on the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified
-3-
<PAGE>
above, to the Person in whose name this Certificate is registered at the close
of business on the last Business Day of the month immediately preceding the
month of such distribution (the "Record Date") from the Available Distribution
Amount in an amount equal to the product of the Percentage Interest evidenced by
this Certificate and the amount required to be distributed to the Holders of
Class R Certificates on such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class R Certificates having an aggregate initial
Certificate Principal Balance that is in excess of two-thirds of the initial
Certificate Principal Balance of the Class R Certificates, or by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register, provided that the Trustee may
deduct a reasonable wire transfer fee from any payment made by wire transfer.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose as provided in the Agreement.
This Certificate is one of a duly authorized issue of Certificates
designated as Asset-Backed Floating Rate Certificates of the series specified on
the face hereof (herein called the "Certificates") and representing the
Percentage Interest specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class R Certificates specified on the face
hereof.
The Class R Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Accounts and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicers and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights and the Certificate Insurer. Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates but
with the consent of the Certificate Insurer.
-4-
<PAGE>
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No transfer of this Certificate shall be made unless that transfer
is made pursuant to an effective registration statement under the 1933 Act and
effective registration or qualification under applicable state securities laws,
or is made in a transaction which does not require such registration or
qualification. In the event that a transfer is to be made without registration
or qualification, the Trustee and the Certificate Registrar shall require, in
order to assure compliance with such laws, either (i) that the Certificateholder
desiring to effect the transfer and such Certificateholder's prospective
transferee each execute a representation letter in the form described by the
Agreement certifying to the Trustee and the Certificate Registrar the facts
surrounding the transfer, or (ii) that the Trustee and the Certificate Registrar
shall require an Opinion of Counsel satisfactory to them that such transfer may
be made without such registration or qualification, which Opinion of Counsel
shall not be an expense of the Depositor, the Trustee or the Certificate
Registrar, in their respective capacities as such. None of the Depositor, the
Certificate Registrar nor the Trustee is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any such Certificateholder desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Depositor, the
Certificate Registrar and any Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
Except as otherwise set forth in the next succeeding paragraph, no
transfer of a Certificate or any interest therein may be made to employee
benefit plans and certain other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh plans and collective
investment funds and separate accounts in which such plans, accounts or
arrangements are invested that are subject to the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code ("Plans") or any person who is
directly or indirectly purchasing the Certificate or interest therein on behalf
of, as named fiduciary of, as trustee of, or with assets of a Plan, unless the
prospective transferee provides the Trustee with a certification of facts and an
opinion of counsel which establish to the satisfaction of the Trustee that such
transfer will not result in a violation of Section 406 of ERISA or
-5-
<PAGE>
Section 4975 of the Code or cause the Master Servicer or Trustee to be deemed a
fiduciary of such Plan or result in the imposition of an excise tax under
Section 4975 of the Code. In the absence of its having received the
certification of facts and opinion of counsel contemplated by the preceding
sentence, the Trustee shall (unless the next succeeding paragraph applies)
require the prospective transferee of any Certificate to certify that it is
neither a Plan nor a Person who is directly or indirectly purchasing such
Certificate on behalf of, as named fiduciary of, as trustee of, or with assets
of a Plan.
The Holder of this Certificate, by its acceptance hereof, shall be
deemed for all purposes to have consented to the provisions of Section 5.02 of
the Agreement and to any amendment of the Agreement deemed necessary by counsel
of the Depositor to ensure that the transfer of this Certificate to any Person
other than a Permitted Transferee or any other Person will not cause the Trust
Fund to cease to qualify as a REMIC or cause the imposition of a tax upon the
REMIC.
No service charge will be made for any such registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.
The Depositor, any Master Servicer, the Trustee, the Certificate
Insurer and the Certificate Registrar and any agent of the Depositor, any Master
Servicer, the Trustee, the Certificate Insurer or the Certificate Registrar may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Depositor, any Master Servicer, the
Trustee, the Certificate Insurer, the Certificate Registrar nor any such agent
shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all Mortgage Loans and all property acquired in respect of such
Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate principal balance of the Mortgage Loans at the time of purchase
being 10% or less of the aggregate Stated Principal Balance of the Mortgage
Loans at the Cut-off Date.
The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been executed
by the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
-6-
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed under its official seal.
Dated:
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
[SEAL] By:____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in
the within-mentioned Agreement.
THE CHASE MANHATTAN BANK, N.A.,
as Certificate Registrar
-----------------------------
By: Authorized Signatory
-7-
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
-------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right _________________
of survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ____________________________________________________________
- ----------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
__________________________________________________________
- ----------------------------------------------------------------.
Dated:
---------------------------------------
Signature by or on behalf of assignor
---------------------------------------
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to________________________________________________
- ------------------------------------------------------------------------------
for the account of ___________________________________________________________
account number ________________, or, if mailed by check, to ____________________
__________________________________________________. Applicable statements should
be mailed to _________________________________. This information is provided by
___________________________________________________, the assignee named above,
or _____________________________, as its agent.
-2-
<PAGE>
EXHIBIT B-1
FORM OF TRUSTEE'S PRELIMINARY EXCEPTION REPORT
____________________, 1996
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Attention:
and
Attention:
Re: Pooling and Servicing Agreement dated as of March
1, 1996 among Salomon Brothers Mortgage
Securities VII, Inc., First Nationwide Mortgage
Corporation, Norwest Bank Minnesota, N.A.,
Securitized Asset Services Corporation, The Chase
Manhattan Bank, N.A. and MBIA Insurance
Corporation, Asset-Backed Floating Rate
Certificates, Series 1996-AFF1
------------------------------
Gentlemen:
Attached is the Trustee's preliminary exceptions in accordance
with Section 2.02 of the above-referenced Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"). Capitalized terms used but not otherwise
defined herein have the meanings set forth in the Pooling and Servicing
Agreement. In accordance with the Pooling and Servicing Agreement, attached
hereto are Trust Receipts and Final Certifications of the Custodian with respect
to certain of the Mortgage Loans.
<PAGE>
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedules or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
THE CHASE MANHATTAN BANK, N.A.,
AS TRUSTEE
By:
Name:
Title:
-2-
<PAGE>
EXHIBIT B-2
FORM OF TRUSTEE'S INTERIM CERTIFICATION
____________________, 1996
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Attention:
and
Attention:
Re: Pooling and Servicing Agreement dated as of March
1, 1996 among Salomon Brothers Mortgage
Securities VII, Inc., First Nationwide Mortgage
Corporation, Norwest Bank Minnesota, N.A.,
Securitized Asset Services Corporation, The Chase
Manhattan Bank, N.A. and MBIA Insurance
Corporation, Asset-Backed Floating Rate
Certificates, Series 1996-AFF1
------------------------------
Gentlemen:
In accordance with Section 2.02 of the above-referenced Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that
subject to the exceptions noted on the attached report as to each Mortgage Loan
listed in the Mortgage Loan Schedules (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in the preliminary exception report
as not covered by this certification), it has reviewed or has caused its related
Custodian to review the Mortgage File and determined that (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(v) required to be delivered to it pursuant to the Pooling and
Servicing Agreement are in its or its related Custodian's possession, (ii) such
documents have been reviewed by it or such Custodian and appear regular on their
face and relate to such Mortgage Loan, (iii) based on its or such Custodian's
examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedule that corresponds to items (i)-(iii), (vi), (viii), (ix),
(xiv), (xv), (xvii), (xviii) and (xix) of the definition of "Mortgage Loan
Schedule" accurately reflects information set forth in the Mortgage File.
<PAGE>
Neither the Trustee nor its related Custodian has made any
independent examination of any documents contained in each Mortgage File beyond
the review specifically required in the above-referenced Pooling and Servicing
Agreement. The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in the Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedules or (ii) the collectability, insurability, effectiveness
or suitability of any such Mortgage Loan.
THE CHASE MANHATTAN BANK, N.A.,
AS TRUSTEE
By:
Name:
Title:
-2-
<PAGE>
EXHIBIT B-3
FORM OF TRUSTEE'S FINAL CERTIFICATION
[date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
Attention:
and
Attention:
Re: Pooling and Servicing Agreement dated as of March
1, 1996 among Salomon Brothers Mortgage
Securities VII, Inc., First Nationwide Mortgage
Corporation, Norwest Bank Minnesota, N.A.,
Securitized Asset Services Corporation, The Chase
Manhattan Bank, N.A. and MBIA Insurance
Corporation, Asset-Backed Floating Rate
Certificates, Series 1996-AFF1
------------------------------
Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedules (other than any
Mortgage Loan paid in full or listed on the attachment hereto), it has received:
(i) the original recorded Mortgage, and the original
recorded power of attorney, if the Mortgage was executed pursuant
to a power of attorney, or a certified copy thereof in those
instances where the public recording office retains the original
or where the original has been lost; and
(ii) an original recorded Assignment of the Mortgage to the
Trustee together with the original recorded Assignment or
Assignments of the Mortgage showing a complete chain of assignment
from the originator, or a certified copy
<PAGE>
of such Assignments in those instances where the public recording
retains the original or where original has been lost; and
(iii) the original lender's title insurance policy; and
(iv) the original Primary Insurance Policy for each Mortgage
Loan indicated on the Mortgage Loan Schedules as being insured by
a Primary Insurance Policy.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedules, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
THE CHASE MANHATTAN BANK, N.A.,
AS TRUSTEE
By:
Name:
Title:
-2-
<PAGE>
EXHIBIT C
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
<PAGE>
EXHIBIT D-1
REQUEST FOR RELEASE
(for Trustee)
LOAN INFORMATION
Name of Mortgagor: _____________________________
Master Servicer
Loan No.: _____________________________
TRUSTEE
Name: _____________________________
Address: _____________________________
_____________________________
Trustee
Mortgage File No.: _____________________________
DEPOSITOR
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address: _____________________________
_____________________________
Certificates: Asset-Backed Floating Rate Certificates,
Series 1996-AFF1.
The undersigned Master Servicer hereby acknowledges that it has received
from _______________________, as Trustee for the Holders of Asset-Backed
Floating Rate Certificates, Series 1996-AFF1, the documents referred to below
(the "Documents"). All capitalized terms not otherwise defined in this Request
for Release shall have the meanings given them in the Pooling and Servicing
Agreement dated as of March 1, 1996 (the "Pooling and Servicing Agreement")
among the Trustee, the Depositor, the Master Servicers and the Certificate
Insurer.
<PAGE>
( ) Promissory Note dated _______________, 19__, in the original principal sum
of $__________, made by _____________________, payable to, or endorsed to
the order of, the Trustee.
( ) Mortgage recorded on as instrument no. ____________________ in the County
Recorder's Office of the County of _________________, State of __________-
________ in book/reel/docket _________________ of official records at
page/image -------------.
( ) Deed of Trust recorded on ___________________ as instrument no.
_____________- ___ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image ______________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
_____________- ______ as instrument no. _________ in the County Recorder's
Office of the County of , State of in book/reel/docket ____________ of
official records at page/image ____________.
( ) Other documents, including any amendments, assignments or other assumptions
of the Mortgage Note or Mortgage.
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the purposes
provided in the Agreement.
(2) The Master Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security interest,
charges, writs of attachment or other impositions nor shall the Master
Servicer assert or seek to assert any claims or rights of setoff to or
against the Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document previously
requested from the Mortgage File to the Trustee when the need therefor no
longer exists, unless the Mortgage Loan relating to the Documents has been
liquidated and the proceeds thereof have been remitted to the Collection
Account and except as expressly provided in the Agreement.
-2-
<PAGE>
(4) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the Master Servicer shall
at all times be earmarked for the account of the Trustee, and the Master
Servicer shall keep the Documents and any proceeds separate and distinct
from all other property in the Master Servicer's possession, custody or
control.
[MASTER SERVICER]
By:
Name:
Title:
Date: _____________________, 19__
-3-
<PAGE>
EXHIBIT D-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
ASSET-BACKED FLOATING RATE CERTIFICATES
SERIES 1996-AFF1
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET FORTH
BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER: _______________ BORROWER'S NAME: ________________
COUNTY:_____________________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLEC- TION ACCOUNT PURSUANT TO
SECTION 3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE
CREDITED.
___________ _____________________ DATED:_________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT E-1
FORM OF TRANSFEROR REPRESENTATION LETTER
________________________, 1992
TO: [TRUSTEE]
and
[CERTIFICATE REGISTRAR]
Attention:
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series
1996-AFF1, issued pursuant to a Pooling and
Servicing Agreement ("Pooling Agreement"),
dated as of March 1, 1996, by and among Salomon
Brothers Mortgage Securities VII, Inc., as
Depositor, First Nationwide Mortgage
Corporation, Norwest Bank Minnesota, N.A. and
Securitized Asset Corporation, as Master
Servicers, The Chase Manhattan Bank, N.A., as
Trustee, and MBIA Insurance Corporation, as
Certificate Insurer
-------------------
Gentlemen:
In connection with the purchase by _____________________________________
from us today of $__________ in principal amount of Class ___ Certificates
issued on _________- __, 199_ pursuant to the referenced Pooling Agreement, we
hereby represent and warrant to you as follows:
We are the lawful owner of the Certificate with the full right to
transfer the Certificate free from any and all claims and encumbrances
whatsoever.
Neither we nor anyone acting on our behalf (i) have offered,
transferred, pledged, sold or otherwise disposed of any Certificate (as
defined in the Pooling Agreement), any interest in any Certificate or
any other similar security to any person in any manner, (ii) have
solicited any offer to buy or accept a pledge, disposition or other
transfer of any Certificate, any interest in any Certificate or any
other similar security from any
<PAGE>
person in any manner, (iii) have otherwise approached or negotiated with
respect to any Certificate, any interest in any Certificate or any other
similar security with any person in any manner, (iv) have made any
general solicitation by means of general advertising or in any other
manner, or (v) have taken any other action, which (in the case of any of
the acts described in clauses (i) through (v) hereof) would constitute a
distribution of the Certificates under the Securities Act of 1933, as
amended (the "1933 Act"), would render the disposition of any
Certificate a violation of Section 5 of the 1933 Act or any state
securities laws, or would require registration or qualification pursuant
to the 1933 Act or any state securities laws.
[NAME OF OWNER]
By:
[Name of Officer]
[Title of Officer]
-2-
<PAGE>
EXHIBIT E-2
FORM OF TRANSFEREE REPRESENTATION LETTER
_____________________, 1992
To: [TRUSTEE]
and
[CERTIFICATE REGISTRAR]
Re: Salomon Brothers Mortgage Securities
VII, Inc., Asset- Backed Floating Rate
Certificates, Series 1996-AFF1, Class
_______ Certificates, $
In connection with our purchase from _____________________
__________________- _______ on the date hereof of the above-captioned Class
_______ Certificates (the "Certifi- cates"), we hereby certify that:
(1) We are acquiring the Certificates for our own account for investment
and not with a view to or for sale or transfer in connection with
any distribution thereof in any manner that would violate the
Securities Act of 1933 (the "Act") or any applicable state
securities laws.
(2) We understand that the Certificates have not been and will not be
registered under the Act or any applicable state securities laws,
neither the Depositor, the Certificate Registrar nor the Trustee is
obligated so to register or qualify the Certificates and the
Certificates may not be resold or transferred unless they are (a)
registered pursuant to the Act and any applicable state securities
laws or (b) sold or transferred in transactions that are exempt from
registration and (i) the Trustee and the Certificate Registrar have
received certifications from both the transferor and the transferee
certifying to the facts surrounding the transfer and, if required,
(ii) the Trustee and the Certificate Registrar have received an
Opinion of Counsel satisfactory to it with respect to the
availability of such exemption.
(3) We will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of Section 5.02 of the
Pooling and Servicing Agreement, dated as of March 1, 1996, among
Salomon Brothers Mortgage Securities
<PAGE>
VII, Inc., as Depositor, First Nationwide Mortgage Corporation,
Norwest Bank Minnesota, N.A. and Securitized Asset Securities
Corporation, as Master Servicers, The Chase Manhattan Bank, N.A., as
Trustee, and MBIA Insurance Corporation, as Certificate Insurer (the
"Pooling and Servicing Agreement") pursuant to which the
Certificates were issued.
(4) Neither we nor anyone acting on our behalf (a) has offered, pledged,
sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any
person in any manner, (b) has solicited any offer to buy or to
accept a pledge, disposition or other transfer of any Certificate,
any interest in any Certificate or any other similar security from
any person in any manner, (c) has otherwise approached or negotiated
with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has
made any general solicitation by means of general advertising or in
any other manner, or (e) has taken any other action, that (in the
case of any of the acts described in clauses (a) through (e) hereof)
would constitute a distribution of the Certificates under the
Securities Act, that would render the disposition of any Certificate
a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification
pursuant thereto. We will not act, nor have we authorized or will we
authorize any person to act, in any manner set forth in the
foregoing sentence with respect to any Certificate. We will not sell
or otherwise transfer any of the Certificates, except in compliance
with the provisions of the Pooling and Servicing Agreement.
(5) We have received any documents and information concerning the
Certificates, the assets in which the Certificates represent
interests, the Pooling and Servicing Agreement, the Depositor and
the Master Servicers which we have requested.
(6) We are an "accredited investor," as such term is defined in Rule
501(a) of Regulation D under the Act, or other sophisticated
institutional investor, in either case with such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the
Certificates, and we are able to bear the economic risks of such an
investment.
(7) We are not (a) an employee benefit plan, as defined in Section (3)
of the Employee Retirement Income Security Act of 1974 ("ERISA"),
that is subject to the provisions of Title I of ERISA, (b) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of
1986, as amended [or (c) an entity whose underlying assets include
plan assets by reason of a plan's investment in the entity].
[(8) ________________________________________________, as to itself,
represents and warrants to the Company, as its sole
representation and warranty as to source of funds, that (i) it
is an insurance company chartered under the ______- _________
State Insurance Law and is subject to supervision and
examination by the Department of Insurance of the State of
__________________; (ii) it is
-2-
<PAGE>
primarily engaged in the production and sale of a product or
service other than the investment of capital; (iii) all of the
funds to be used by it to purchase the Certificates to be
purchased by it are held in a general account; and (iv) it is
qualified under the laws of more than one state to manage,
acquire or dispose of the assets of such general account. The
only source of funds used by us to purchase the Certificates is
our general account and the only employee benefit plans that
purchase contracts from us are plans maintained by employers
described in section 501(c)(3) of the Internal Revenue Code or
certain public schools.]
Capitalized terms not otherwise defined herein have the meanings set
forth in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
the date first written above.
[TRANSFEREE]
By:
[Name of Officer]
[Title of Officer]
-3-
<PAGE>
EXHIBIT E-3
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF )
: ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes, represents and
warrants:
1. That he is the [Title of Officer] of [Name of Owner] (the record or
beneficial owner (the "Owner") of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-AFF1, Class R, (the
"Class R Certificate")), a [savings institution] [corporation] duly organized
and existing under the laws of [the State of ] [the United
States], on behalf of which he makes this affidavit.
2. That the Owner (i) is and will be a "Permitted Transferee" as of
[date of transfer] and (ii) is acquiring the Class R Certificate for its own
account or for the account of another Owner from which it has received an
affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.
3. That the Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificate to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificate after March 31, 1988; (ii) that such tax would be on the transferor,
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false and; (iv) that the Residual
Certificate may be a "noneconomic residual interest" within the meaning of
proposed Treasury regulations promulgated under the Code and that the transferor
of a "noneconomic residual interest" will remain liable for any taxes due with
respect to
<PAGE>
the income on such residual interest, unless no significant purpose of the
transfer is to impede the assessment or collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-through entity"
holding the Class R Certificate if at any time during the taxable year of the
pass-through entity a nonPermitted Transferee is the record holder of an
interest in such entity. (For this purpose, a "pass-
through entity" includes a regulated investment company, a real estate
investment trust or common trust fund, a partnership, trust or estate, and
certain cooperatives.)
5. That the Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
6. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificate will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.
7. That the Owner's taxpayer identification number is _______________.
8. That the Owner has reviewed the restrictions set forth on the face of
the Class R Certificate and the provisions of Section 5.02(d) of the Pooling and
Servicing Agreement under which the Class R Certificate was issued (in
particular, clauses (iii)(A) and (iii) (B) of Section 5.02(d) which authorize
the Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
9. That the Owner is not acquiring and will not transfer the Class R
Certificate in order to impede the assessment or collection of any tax.
10. That the Owner anticipates that it will, so long as it holds the
Class R Certificate, have sufficient assets to pay any taxes owed by the holder
of such Class R Certificate.
11. That the Owner has no present knowledge that it may become insolvent
or subject to a bankruptcy proceeding for so long as it holds the Class R
Certificate.
12. That the Owner has no present knowledge or expectation that it will
be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
13. That the Owner is not acquiring the Class R Certificate with the
intent to transfer the Class R Certificate to any person or entity that will not
have sufficient assets to pay any taxes owed by the holder of such Class R
Certificate, or that may become insolvent
-2-
<PAGE>
or subject to a bankruptcy proceeding, for so long as the Class R Certificate
remains outstanding.
14. That Owner will, in connection with any transfer that it makes of
the Class R Certificate, obtain from its transferee the representations required
by Section 5.02(d) of the Pooling and Servicing Agreement under which the Class
R Certificate was issued and will not consummate any such transfer if it knows,
or knows facts that should lead it to believe, that any such representations are
false.
15. That Owner will, in connection with any transfer that it makes of
the Class R Certificate, deliver to the Trustee an affidavit, which represents
and warrants that it is not transferring the Class R Certificate to impede the
assessment or collection of any tax and that it has no actual knowledge that the
proposed transferee: (i) has insufficient assets to pay any taxes owed by such
transferee as holder of the Class R Certificate; (ii) may become insolvent or
subject to a bankruptcy proceeding, for so long as the Class R Certificate
remains outstanding and; (iii) is not a "Permitted Transferee".
16. That the Owner is 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 whose income from sources without the United States is includable in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
-3-
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this day of
, 199__.
[NAME OF OWNER]
By:
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
[Assistant] Secretary
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 Owner, and acknowledged to me
that he executed the same as his free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this day of _____________________,
199_.
NOTARY PUBLIC
COUNTY OF
STATE OF
My Commission expires the _________ day of ___________, 19__.
<PAGE>
EXHIBIT E-4
FORM OF TRANSFEROR AFFIDAVIT
STATE OF )
:ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes, represents and
warrants:
1. That he is [Title of Officer] or [Name of Owner] (record or
beneficial owner of the Class R Certificates (the "Owner")), a [savings
institution] [corporation] duly organized and existing under the laws of [the
State of ] [the United States], on behalf of which he makes this affidavit and
agreement.
2. That Owner is not transferring the Class R Certificate to impede the
assessment or collection of any tax.
3. That Owner has no actual knowledge that the Person which is the
proposed transferee of the Class R Certificate: (i) has insufficient assets to
pay any taxes owed by such proposed transferee as holder of the Class R
Certificate; (ii) may become insolvent or subject to a bankruptcy proceeding,
for so long as the Class R Certificate remains outstanding and, (iii) is not a
Permitted Transferee.
4. The Owner understands that the Purchaser has delivered to the Trustee
a transfer affidavit and agreement in the form attached to the Pooling and
Servicing Agreement as Exhibit F-3. The Owner does not know or believe that any
representation contained therein is false.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be executed
on its behalf, pursuant to the authority of its Board of Directors, by its
[Title of Officer] and its corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this _____ day of ________________, 199__.
[NAME OF OWNER]
By:
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
- ---------------------------------
[Assistant] Secretary
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 Owner, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Owner.
Subscribed and sworn before me this ____ day of ______________, 199__.
NOTARY PUBLIC
COUNTY OF
STATE OF
My Commission expires the ____ day of ____________, 19___.
-2-
<PAGE>
EXHIBIT E-5
FORM OF TRANSFEROR CERTIFICATE
PURSUANT TO RULE 144A
_____________, 19__
[CERTIFICATE REGISTRAR]
Re: Salomon Brothers Mortgage Securities VII, Inc., Asset-
Backed Floating Rate Certificates, Series 1996-AFF1,
CLASS __ CERTIFICATES
Dear Sirs:
This letter is delivered to you in connection with the transfer by
_________________ (the "Transferor") to _________________ (the "Transferee") of
a Certificate evidencing a _______% Percentage Interest in the captioned Class
of Certificates (the "Certificate"), pursuant to Section 5.02 of the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of March
1, 1996, among Salomon Brothers Mortgage Securities VII, Inc., as depositor,
First Nationwide Mortgage Corporation, Norwest Bank Minnesota, N.A. and
Securitized Asset Services Corporation, as master servicers, The Chase Manhattan
Bank, N.A., as trustee, and MBIA Insurance Corporation, as certificate insurer.
All terms used herein and not otherwise defined shall have the meanings set
forth in the Pooling and Servicing Agreement. The Transferor hereby certifies,
represents and warrants to you, as Certificate Registrar, that:
1. The Transferor is the lawful owner of the Certificate with the full
right to transfer the Certificate free from any and all claims and
encumbrances whatsoever.
2. Neither the Transferor nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Certificate, any
interest in the Certificate or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other disposition of the
Certificate, any interest in the Certificate or any other similar security
from, or otherwise approached or negotiated with respect to the Certificate,
any interest in the Certificate or any other similar security with, any
person by means of any form of general solicitation or general advertising,
including but not limited to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar news medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or advertising, or
in any manner which would constitute a distribution under the Securities Act
of 1933 (the
<PAGE>
"1933 Act") or which would render the disposition of the Certificate a
violation of Section 5 of the 1933 Act or require registration pursuant
thereto.
3. The Transferor and any person acting on behalf of the Transferor
reasonably believe that the Transferee is a "qualified institutional buyer"
(as that term is defined in Rule 144A under the 1933 Act) purchasing for its
own account. In determining whether the Transferee is a "qualified
institutional buyer", the Transferor and any person acting on behalf of the
Transferor has relied upon the following method(s) of establishing the
Transferee's ownership and discretionary investments of securities (check
one or more):
___ (a) The Transferee's most recent publicly available financial
statements, which statements present the information as of a
date within 16 months preceding the date of sale of the
Certificate in the case of a U.S. purchaser and within 18 months
preceding such date of sale for a foreign purchaser; or
___ (b) The most recent publicly available information appearing in
documents filed by the Transferee with the Securities and
Exchange Commission or another United States federal, state, or
local governmental agency or self-regulatory organization, or
with a foreign governmental agency or self-regulatory
organization, which information is as of a date within 16 months
preceding the date of sale of the Certificate in the case of a
U.S. purchaser and with 18 months preceding such date of sale
for a foreign purchaser; or
___ (c) The most recent publicly available information appearing in
a recognized securities manual, which information is as of a
date within 16 months preceding the date of sale of the
Certificate in the case of a U.S. purchaser and within 18 months
preceding such date of sale for a foreign purchaser; or
___ (d) A certification by the chief financial officer, a person
fulfilling an equivalent function, or other executive officer of
the Transferee, specifying the amount of securities owned and
invested on a discretionary basis by the Transferee as of a
specific date on or since the close of the Transferee's most
recent fiscal year, or, in the case of a Transferee that is a
member of a "family of investment companies", as that term is
defined in Rule 144A, a certification by an executive officer of
the investment adviser specifying the amount of securities owned
by the "family of investment companies" as of a specific date on
or since the close of the Transferee's most recent fiscal year.
4. The Transferor and any person acting on behalf of the Transferor
understand that in determining the aggregate amount of securities owned and
invested on a discretionary basis by an entity for purposes of establishing
whether such entity is a "qualified institutional buyer":
(a) the following instruments and interests shall be excluded:
securities of issuers that are affiliated with the Transferee;
securities that are part of an unsold allotment to or subscription
by the Transferee, if the Transferee is a dealer; securities of
issuers that are part of the Transferee's "family of investment
companies", if the
-2-
<PAGE>
Transferee is a registered investment company; securities issued or
guaranteed by the United States or by any person controlled or
supervised by and acting as an instrumentality of the Government of
the United States pursuant to authority granted by the Congress of
the United States; bank deposit notes and certificates of deposit;
loan participations; repurchase agreements; securities owned but
subject to a repurchase agreement; and currency, interest rate and
commodity swaps;
(b) the aggregate value of the securities shall be the cost of such
securities, except where the entity reports its securities holdings
in its financial statements on the basis of their market value, and
no current information with respect to the cost of those securities
has been published, in which case the securities may be valued at
market;
(c) securities owned by subsidiaries of the entity that are
consolidated with the entity in its financial statements prepared in
accordance with generally accepted accounting principles may be
included if the investments of such subsidiaries are managed under
the direction of the entity, except that, unless the entity is a
reporting company under Section 13 or 15(d) of the Securities
Exchange Act of 1934, securities owned by such subsidiaries may not
be included if the entity itself is a majority-owned subsidiary that
would be included in the consolidated financial statements of
another enterprise.
5. The Transferor or a person acting on its behalf has taken reasonable
steps to ensure that the Transferee is aware that the Transferor is relying
on the exemption from the provisions of Section 5 of the 1933 Act provided
by Rule 144A.
-3-
<PAGE>
6. The Transferor or a person acting on its behalf has furnished, or
caused to be furnished, to the Transferee all information regarding (a) the
Certificate and distributions thereon, (b) the nature, performance and
servicing of the Mortgage Loans, (c) the Pooling and Servicing Agreement,
and (d) any credit enhancement mechanism associated with the Certificate,
that the Transferee has requested.
(Transferor)
By:
Name:
Title:
-4-
<PAGE>
EXHIBIT E-6
FORM OF TRANSFEREE CERTIFICATE
PURSUANT TO RULE 144A
_____________, 19__
[CERTIFICATE REGISTRAR]
Re: Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed
Floating Rate Certificates, Series 1996-AFF1, Class __
Certificates
Dear Sirs:
This letter is delivered to you in connection with the transfer by
_____________________ (the "Transferor") to ______________________ (the
"Transferee") of a Certificate evidencing a ____% Percentage Interest in the
captioned Class of Certificates (the "Certificate"), pursuant to Section 5.02 of
the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of March 1, 1996, among Salomon Brothers Mortgage Securities VII, Inc.,
as depositor, First Nationwide Mortgage Corporation, Norwest Bank Minnesota,
N.A., and Securitized Asset Services Corporation, as master servicers, The Chase
Manhattan Bank, N.A., as trustee, and MBIA Insurance Corporation, as certificate
insurer. All terms used herein and not otherwise defined shall have the meanings
set forth in the Pooling and Servicing Agreement. The Transferee hereby
certifies, represents and warrants to you, as Certificate Registrar, that:
1. The Transferee is a "qualified institutional buyer" as that term is
defined in Rule 144A ("Rule 144A") under the Securities Act of 1933 (the
"1933 Act") and has completed either of the forms of certification to that
effect attached hereto as Annex 1 or Annex 2. The Transferee is aware that
the sale to it is being made in reliance on Rule 144A. The Transferee is
acquiring the Certificate for its own account or for the account of a
qualified institutional buyer, and understands that such Certificate may be
resold, pledged or transferred only (i) to a person reasonably believed to
be a qualified institutional buyer that purchases for its own account or for
the account of a qualified institutional buyer to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A, or
(ii) pursuant to another exemption from registration under the 1933 Act.
<PAGE>
2. The Transferee has been furnished with all information regarding (a)
the Certificate and distributions thereon, (b) the nature, performance and
servicing of the Mortgage Loans, (c) the Pooling and Servicing Agreement,
and (d) any credit enhancement mechanism associated with the Certificate,
that it has requested.
(Transferee)
By:
Name:
Title:
-2-
<PAGE>
ANNEX 1 TO EXHIBIT E-6
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to [name of Transferor] (the
"Transferor") and The Chase Manhattan Bank, N.A., as Certificate Registrar, with
respect to the assetbacked floating rate certificate (the "Certificate")
described in the Transferee Certificate to which this certification relates and
to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the entity
purchasing the Certificate (the "Transferee").
2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Transferee owned and/or
invested on a discretionary basis $______________________1 in securities (except
for the excluded securities referred to below) as of the end of the Transferee's
most recent fiscal year (such amount being calculated in accordance with Rule
144A) and (ii) the Transferee satisfies the criteria in the category marked
below.
___ CORPORATION, ETC. The Transferee is a corporation (other than a
bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or any
organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986.
___ BANK. The Transferee (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements, A COPY OF WHICH IS
ATTACHED HERETO.
___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised
and examined by a State or Federal authority having supervision over
any such institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as
- --------
1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.
<PAGE>
demonstrated in its latest annual financial statements, A COPY OF
WHICH IS ATTACHED HERETO.
___ BROKER-DEALER. The Transferee is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
___ INSURANCE COMPANY. The Transferee is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State, territory
or the District of Columbia.
___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
___ ERISA PLAN. The Transferee is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of
1974.
___ INVESTMENT ADVISOR. The Transferee is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i) securities
of issuers that are affiliated with the Transferee, (ii) securities that are
part of an unsold allotment to or subscription by the Transferee, if the
Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Transferee, the Transferee used
the cost of such securities to the Transferee and did not include any of the
securities referred to in the preceding paragraph. Further, in determining such
aggregate amount, the Transferee may have included securities owned by
subsidiaries of the Transferee, but only if such subsidiaries are consolidated
with the Transferee in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Transferee's direction. However, such
securities were not included if the Transferee is a majority-owned, consolidated
subsidiary of another enterprise and the Transferee is not itself a reporting
company under the Securities Exchange Act of 1934.
5. The Transferee acknowledges that it is familiar with Rule 144A and
understands that the Transferor and other parties related to the Certificate are
relying and will continue to rely on the statements made herein because one or
more sales to the Transferee may be in reliance on Rule 144A.
-2-
<PAGE>
___ ___ Will the Transferee be purchasing the Certificate
Yes No only for the Transferee's own account?
6. If the answer to the foregoing question is "no", the Transferee
agrees that, in connection with any purchase of securities sold to the
Transferee for the account of a third party (including any separate account) in
reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Certificate will
constitute a reaffirmation of this certification as of the date of such
purchase. In addition, if the Transferee is a bank or savings and loan as
provided above, the Transferee agrees that it will furnish to such parties
updated annual financial statements promptly after they become available.
Print Name of Transferee
By:
Name:
Title:
Date:
-3-
<PAGE>
ANNEX 2 TO EXHIBIT E-6
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That Are Registered Investment Companies]
The undersigned hereby certifies as follows to [name of Transferor] (the
"Transferor") and The Chase Manhattan Bank, N.A., as Certificate Registrar, with
respect to the mortgage pass-through certificate (the "Certificate") described
in the Transferee Certificate to which this certification relates and to which
this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the entity purchasing the Certificate (the
"Transferee") or, if the Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A under the Securities Act of 1933 ("Rule 144A")
because the Transferee is part of a Family of Investment Companies (as defined
below), is such an officer of the investment adviser (the "Adviser").
2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as defined in Rule 144A because (i) the
Transferee is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Transferee alone, or the Transferee's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year. For purposes of determining the amount of
securities owned by the Transferee or the Transferee's Family of Investment
Companies, the cost of such securities was used.
____ The Transferee owned $___________________ in securities (other than
the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
____ The Transferee is part of a Family of Investment Companies which
owned in the aggregate $______________ in securities (other than the
excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "SECURITIES" as used herein does not include (i) securities
of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
<PAGE>
agreements, (vi) securities owned but subject to a repurchase agreement and
(vii) currency, interest rate and commodity swaps.
5. The Transferee is familiar with Rule 144A and understands that the
parties to which this certification is being made are relying and will continue
to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
6. The undersigned will notify the parties to which this certification
is made of any changes in the information and conclusions herein. Until such
notice, the Transferee's purchase of the Certificate will constitute a
reaffirmation of this certification by the undersigned as of the date of such
purchase.
Print Name of Transferee or Adviser
By:
Name:
Title:
IF AN ADVISER:
Print Name of Transferee
Date:
-2-
<PAGE>
EXHIBIT F-1
FIRST NATIONWIDE MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT F-2
NORWEST MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT F-3
SASCOR MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT G
CERTIFICATE GUARANTY INSURANCE POLICY
<PAGE>
MBIA
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: $225,651,429 Policy Number 20773
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1996-AFF1, Class A-l
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Certificate Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Insured
Payment will be received by The Chase Manhattan Bank, N.A., or its successor, as
trustee for the Owners (the "Trustee"), on behalf of the Owners, from the
Insurer for distribution by the Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations hereunder
with respect to a particular Insured Payment shall be discharged to the extent
funds equal to the applicable Insured Payment are received by the Trustee,
whether or not such funds are properly applied by the Trustee. Insured Payments
shall be made only at the time set forth in this Policy, and no accelerated
Insured Payments shall be made regardless of any acceleration of the
Obligations, unless such acceleration is at the sole option of the Insurer. This
Policy does not cover Prepayment Interest Shortfalls, Relief Act Shortfalls,
Basis Risk Shortfalls or Unpaid Basis Risk Shortfalls.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust Fund, the REMIC
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of a
preference payment, (ii) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (iii) an assignment in such form
as is reasonably required by the Insurer, irrevocably assigning to the Insurer
all rights and claims of the Owner relating to or arising under the Obligations
against the debtor which made such preference payment or otherwise with respect
to such preference payment and (iv) appropriate instruments to the effect the
appointment of the Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon, New York City time on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
<PAGE>
MBIA
The Insurer will pay any amounts payable hereunder no later than 12:00
noon, New York City time, on the later of the Distribution Date on which the
related Deficiency Amount is due or the Business Day following receipt in New
York, New York on a Business Day by State Street Bank and Trust Company, N.A.,
as Fiscal Agent for the Insurer or any successor fiscal agent appointed by the
Insurer (the "Fiscal Agent") of a Notice (as described below); provided that if
such Notice is received after 12:00 noon, New York City time, on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim hereunder, it shall be deemed not
to have been received by the Fiscal Agent for purposes of this paragraph, and
the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise
the Trustee and the Trustee may submit an amended Notice.
Insured Payments due hereunder, unless otherwise stated herein, will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"AGREEMENT" means the Pooling and Servicing Agreement dated as of March
1, 1996 among Salomon Brothers Mortgage Securities VII, Inc., as depositor,
First Nationwide Mortgage Corporation, Securitized Asset Services Corporation
and Norwest Bank Minnesota, N.A., as master servicers, the Trustee, as trustee,
and the Insurer, as certificate insurer, without regard to any amendment or
supplement thereto unless such amendment or supplement has been approved in
writing by the Insurer.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee under the Agreement or the Insurer is
located are authorized or obligated by law or executive order to close.
"DEFICIENCY AMOUNT" means, with respect to the Class A-l Certificates
as of any Distribution Date, (i) any shortfall in amounts available in the
Distribution Account to pay interest for the related Interest Accrual Period
interest on the Certificate Principal Balance of the Class A-1 Certificates at
the then applicable Pass-Through Rate, net of any Prepayment Interest Shortfalls
and any interest shortfalls relating to the Relief Act and allocated to the
Class A-1 Certificates, (ii) the principal portion of any Realized Loss
allocated to the Class
-2-
<PAGE>
MBIA
A-l Certificates and, without duplication, the excess, if any, of (a) the
aggregate Certificate Principal Balances of all the Class A-1 Certificates then
outstanding over (b) the Stated Principal Balances of the Mortgage Loans then
outstanding and (iii) the Certificate Principal Balance of the Class A-l
Certificates to the extent unpaid on the final Distribution Date or earlier
termination of the Trust Fund pursuant to the terms of the Agreement.
"INSURED PAYMENT" means (i) as of any Distribution Date, any Deficiency
Amount and (ii) any Preference Amount.
"NOTICE" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached hereto,
the original of which is subsequently delivered by registered or certified mail,
from the Trustee specifying the Insured Payment which shall be due and owing on
the applicable Distribution Date.
"OWNER" means each Holder (as defined in the Agreement) of any Class
A-1 Certificate who, on the applicable Distribution Date, is entitled under the
terms of the Obligations to payment thereunder.
"PREFERENCE AMOUNT" means any amount previously distributed to an Owner
on the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment to
or modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be
made at the address listed below for the Fiscal Agent or such other address as
the Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
-3-
<PAGE>
MBIA
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
-4-
<PAGE>
MBIA
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 29th day of March, 1996.
MBIA Insurance Corporation
President
Attest:
Assistant Secretary
-5-
<PAGE>
MBIA
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 20773
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 20773
State Street Bank and Trust Company, N.A., as Fiscal
Agent for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [ ], as trustee (the
"Trustee"), hereby certifies to State Street Bank and Trust Company, N.A. (the
"Fiscal Agent") and MBIA Insurance Corporation (the "Insurer"), with reference
to Certificate Guaranty Insurance Policy Number: 20773 (the "Policy") issued by
the Insurer in respect of the $225,651,429 Salomon Brothers Mortgage Securities
VII, Inc., Asset-Backed Floating Rate Certificates, Series 1996-AFF1, Class A-1
(the "Obligations"), that:
(i) the Trustee is the trustee under the Pooling and
Servicing Agreement dated as of March 1, 1996 among Salomon Brothers
Mortgage Securities VII, Inc., as Depositor; First Nationwide Mortgage
Corporation, Securitized Asset Services Corporation and Norwest Bank
Minnesota, N.A., as Master Servicers, the Trustee, as trustee for the
Owners and the Insurer, as Certificate Insurer;
(ii) the amount due pursuant to the definition of
"Deficiency Amount" for the Distribution Date occurring on (the
"Applicable Distribution Date") is $ ; (the "Deficiency Amount");
(iii) the amount of previously distributed Distribution
Amount that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the Bankruptcy Code
in accordance with a final nonappealable order of a court having
competent jurisdiction is $ (the "Preference Amount");
<PAGE>
MBIA
(iv) the total Insured Payment due is $ , which amount
equals the Deficiency Amount and the Preference Amount;
(v) the Trustee is making a claim under and pursuant to
the terms of the Policy for the dollar amount of the Insured Payment
set forth in (ii) above to be applied to the payment on the Obligations
for the Applicable Distribution Date in accordance with the Agreement
and for the dollar amount of the Insured Payment set forth in (iii)
above to be applied to the payment of any Preference Amount; and
(vi) the Trustee directs that payment of the Insured
Payment be made to the following account by bank wire transfer of
federal or other immediately available funds in accordance with the
terms of the Policy: [TRUSTEE'S ACCOUNT].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE
COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
[TRUSTEE], as Trustee
By
Title
-2-
<PAGE>
EXHIBIT H-1
SUPERVISION AGREEMENT RELATING TO MORTGAGE LOAN POOL 1995-W18
<PAGE>
SECURITIZED ASSET SERVICES CORPORATION
(Master Servicer)
and
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Owner)
and
SECURITIZED ASSET SERVICES CORPORATION
(Principal)
SUPERVISION AGREEMENT
Dated as of September 2, 1995
-2-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions...................................................................................I-1
Section 1.02. Acts of Owners................................................................................I-6
Section 1.03 Effect of Headings and Table of Contents......................................................I-7
Section 1.04 Benefits of Agreement.........................................................................I-7
<CAPTION>
ARTICLE II
MORTGAGE LOANS
AND
SERVICING AGREEMENTS
<S> <C> <C>
Section 2.01. Mortgage Loans Master Serviced Hereunder.....................................................II-1
Section 2.02. Servicing Agreement Additions................................................................II-l
Section 2.03. Servicing Agreement Deletions................................................................II-2
Section 2.04. Custodial Arrangements.......................................................................II-2
<CAPTION>
ARTICLE III
MASTER SERVICING OF MORTGAGE LOANS
<S> <C> <C>
Section 3.01. The Master Servicer.........................................................................III-l
Section 3.02. Receipt of Certain Mortgage Loan Payments; Master
Servicer Custodial Account.........................................................III-1
Section 3.03. Permitted Withdrawals from the Master Servicer
Custodial Account..................................................................III-1
Section 3.04. Master Servicing Fee; Master Servicing Compensation.........................................III-2
Section 3.05. Rights of the Owners in Respect of the Master Servicer......................................III-3
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV
DISTRIBUTIONS;
STATEMENTS AND REPORTS
<S> <C> <C>
Section 4.01. Distributions................................................................................IV-1
Section 4.02. Statements to Owners.........................................................................IV-1
Section 4.03. Reports of Foreclosure and Abandonment of Mortgaged
Property............................................................................IV-2
<CAPTION>
ARTICLE V
THE MASTER SERVICER
<S> <C> <C>
Section 5.01. Liability of the Master Servicer..............................................................V-1
Section 5.02. Merger or Consolidation of the Master Servicer; Transfer
of Master Servicing..................................................................V-1
Section 5.03. Limitation on Liability of the Master Servicer
and Others...........................................................................V-2
Section 5.04. The Master Servicer Not to Resign.............................................................V-3
Section 5.05. PHMC's Termination............................................................................V-3
<CAPTION>
ARTICLE VI
DEFAULT
<S> <C> <C>
Section 6.01. Events of Default............................................................................VI-1
Section 6.02. Notification to Owners.......................................................................VI-2
<CAPTION>
ARTICLE VII
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 7.01. Amendment...................................................................................VII-1
Section 7.02. Counterparts................................................................................VII-1
Section 7.03. Governing Law; Jurisdiction.................................................................VII-1
Section 7.04. Notices.....................................................................................VII-1
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.05. Severability of Provisions..................................................................VII-3
</TABLE>
-5-
<PAGE>
This Supervision Agreement, effective as of September 2, 1995, executed
by SECURITIZED ASSET SERVICES CORPORATION, as the Master Servicer, THE
PRUDENTIAL HOME MORTGAGE COMPANY, INC., as the Owner, and SECURITIZED ASSET
SERVICES CORPORATION, as the Principal.
WITNESSETH THAT:
WHEREAS, the Owner has acquired, and will acquire, mortgage loans from
various sellers pursuant to related purchase agreements; and
WHEREAS, such mortgage loans are, and will be, serviced for the benefit
of the owners of the mortgage loans pursuant to various servicing agreements
between the Principal and the related servicers (each a "Servicing Agreement");
and
WHEREAS, each Servicing Agreement contemplates, and will contemplate,
that a master servicer will be engaged to supervise the actions of the related
servicer and to provide certain administrative functions; and
WHEREAS, the Owner and the Principal desire to engage the Master
Servicer to act as master servicer hereunder and under the Servicing Agreements
and to perform various administrative functions with respect to the mortgage
loans which are serviced pursuant to any of the Servicing Agreements from time
to time (the "Mortgage Loans"); and
WHEREAS, the Master Servicer agrees to act in such capacity;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Owner, the Master Servicer and the Principal agree as follows:
ARTICLE I
DEFINITIONS
Section 1.0. DEFINITIONS. Whenever used herein, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article and, if not so defined herein, as defined in the
related Servicing Agreement:
AGREEMENT: This Supervision Agreement and all amendments and
supplements hereto.
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii) a
legal holiday in the City of New York, State of Maryland, State of Minnesota or
State of Missouri or (iii) a day on which banking institutions in the City of
New York, or the State of Maryland, State of Minnesota or State of Missouri 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, any successor statutes thereto, and applicable U.S. Department of the
Treasury temporary or final regulations promulgated thereunder.
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CURTAILMENT: Any Principal Prepayment made by a Mortgagor which is not
a Prepayment In Full.
DETERMINATION DATE: The 17th day of the month in which the related
Distribution Date occurs, or if such 17th day is not a Business Day, the
Business Day preceding such 17th day.
DISTRIBUTION DATE: The 18th day of any month, beginning in the month
following the month of initial issuance of the Certificates, or if such 18th day
is not a Business Day, the Business Day following such 18th day.
DUE DATE: With respect to any Mortgage Loan, the day of the month in
which the monthly payment on such Mortgage Loan is scheduled to be paid.
ELIGIBLE ACCOUNT: One or more accounts (i) that are maintained with a
depository institution whose long-term debt obligations (or, in the case of a
depository institution which is part of a holding company structure, the
long-term debt obligations of which holding company structure) at the time of
deposit therein are rated at least "A" (or the equivalent) long term and "A-1"
short term by each of the rating agencies rating such institution, (ii) the
deposits in which are fully insured by the FDIC through either the Bank
Insurance Fund or the Savings Association Insurance Fund, or (iii) that are
trust accounts maintained with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity.
ELIGIBLE INVESTMENTS: At any time, any one or more of the following
obligations and securities which shall mature not later than the Business Day
preceding the Distribution Date next succeeding the date of such investment,
provided that such investments qualify as "cash flow investments" as defined in
Code Section 860G(a)(6):
(i) obligations of the United States of America or any
agency thereof, provided such obligations are backed by the full faith
and credit of the United States of America;
(ii) general obligations of or obligations guaranteed by
any state of the United States of America or the District of Columbia
receiving the first or second highest short-term or first or second
highest long-term rating of each rating agency rating such institution;
(iii) commercial or finance company paper which has the
first or second highest short-term or the first or second highest
long-term commercial or finance company paper rating of each rating
agency rating such institution;
(iv) certificates of deposit, demand or time deposits,
federal funds or banker's acceptances issued by any depository
institution or trust company incorporated under the laws of the United
States or of any state thereof and subject to supervision and
examination by federal and/or state banking authorities, provided that
the commercial paper and/or debt obligations of such depository
institution or trust company (or in the case of the principal
depository institution in a holding company
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system, the commercial paper or debt obligations of such holding
company) has the first or second highest short-term or the first or
second highest long-term rating for such securities of each of the
rating agencies rating such institution;
(v) guaranteed reinvestment agreements issued by any
bank, insurance company or other corporation acceptable to each rating
agency rating such institution at the time of the issuance of such
agreements;
(vi) repurchase agreements on obligations with respect
to any security described in clauses (i) or (ii) above or any other
security issued or guaranteed by an agency or instrumentality of the
United States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in (iv)
above; and
(vii) securities (other than stripped bonds or stripped
coupon 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, at the time of such investment or
contractual commitment providing for such investment, which have the
first or second highest short-term or the first or second highest
long-term rating by each rating agency rating such institution.
In no event shall an instrument 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 interest
and principal payments with respect to such instrument provide a yield to
maturity at the date of investment of greater than 120% of the yield to maturity
at par of such underlying obligations.
EVENT OF DEFAULT: Any of the events specified in Section 6.01.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
thereto.
FNMA: The Federal National Mortgage Association or any successor
thereto.
INDEPENDENT: When used with respect to any specified Person, such
Person who (i) is in fact independent of the Master Servicer, (ii) does not have
any direct financial interest or any material indirect financial interest in the
Master Servicer or in an affiliate of either, and (iii) is not connected with
the Master Servicer as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan.
LIQUIDATED LOAN: A Mortgage Loan with respect to which the related
Mortgaged Property has been acquired, liquidated or foreclosed and with respect
to which the related
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Servicer determines that all Liquidation Proceeds which it expects to recover
have been recovered.
LIQUIDATION PROCEEDS: Amounts received by the related Servicer
(including Insurance Proceeds) in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, whether through
foreclosure, sale or otherwise, including payments in connection with such
Mortgage Loans received from the Mortgagor, other than amounts required to be
paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be
applied otherwise pursuant to law.
MASTER SERVICER: Securitized Asset Services Corporation, a New Jersey
corporation, or its successor in interest or permitted assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: The trust account established and
maintained pursuant to Section 3.02. The Master Servicer Custodial Account shall
be an Eligible Account.
MASTER SERVICING FEE: With respect to any Mortgage Loan and any
Distribution Date, the fee payable monthly to the Master Servicer pursuant to
Section 3.04 for the master servicing of such Mortgage Loan, such fee, being
equal to 1/12th of the Master Servicing Fee Rate (expressed as a per annum rate)
of the unpaid principal balance of such Mortgage Loan.
MASTER SERVICING FEE RATE: With respect to any Mortgage Loan as forth
in Schedule A with respect to the related Servicing Agreement.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
first lien on Mortgaged Property securing a Mortgage Note together with any
Mortgage Loan Rider, if applicable.
MORTGAGE LOAN RIDER: The standard FNMA/FHLMC riders to the Mortgage
Note and/or Mortgage riders required when the Mortgaged Property is a
condominium unit or a unit in a planned unit development.
MORTGAGE LOANS: Each of the mortgage loans set forth from time to time
in the mortgage loan schedule attached as Schedule I to each Servicing Agreement
set forth on Schedule A hereto.
MORTGAGE NOTE: The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan together with any related
Mortgage Loan Riders, if applicable.
MORTGAGED PROPERTY: The property subject to a Mortgage, which may
include co-op shares.
MORTGAGOR: The obligor on a Mortgage Note.
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NON-U.S. PERSON: As defined in Section 4.01(b).
OFFICERS' CERTIFICATE: With respect to any Person, a certificate signed
by the Chairman of the Board, the President or a Vice President, and by the
Treasurer, the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of such Person (or, in the case of a Person which is not a
corporation, signed by the person or persons having like responsibilities.)
OPINION OF COUNSEL: A written opinion of counsel, who may be outside or
salaried counsel for the Master Servicer, or any affiliate of the Master
Servicer.
OWNER: The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, or its successor in interest.
OWNER OF THE RELATED MORTGAGE LOAN: As to each Mortgage Loan, the owner
of the related Mortgage Loan as shown on Schedule II to the related Servicer
Agreement, as assignee of the Owner, or assignee of any such subsequent assignee
with respect to such Mortgage Loan.
PERIODIC ADVANCE: The aggregate of the advances required to be made by
the Servicers in respect of principal or interest on the Mortgage Loans on any
Distribution Date pursuant to the related Servicing Agreements.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
PHMC: The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, or its successor in interest.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, a payment
consisting of a Principal Prepayment in the amount of the outstanding principal
balance of such loan.
PRINCIPAL: Securitized Asset Services Corporation, a New Jersey
corporation, or its successor in interest or permitted assigns.
PRINCIPAL PREPAYMENT: Any Mortgagor payment or other recovery of
principal on a Mortgage Loan which is received in advance of its Due Date and is
not accompanied by an amount representing scheduled interest for any period
subsequent to the date of prepayment, including, without limitation, all
proceeds received from any condemnation award or proceeds in lieu of
condemnation other than that portion of such proceeds released to the Mortgagor
in accordance with the terms of the Mortgage or accepted servicing practices
under the related Servicing Agreement.
REMIC: A "real estate mortgage investment conduit" as defined in Code
Section 860D.
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SERVICER: The entity designated as servicer in any Servicing Agreement
listed on Schedule A hereto.
Section 1.02. ACTS OF OWNERS.
(a) 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 a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. When such
execution is by a signer acting in a capacity other than his or her individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his or her authority.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action of the owner of the Mortgage Loans shall bind every
future owner of such Mortgage Loan.
Section 1.03. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings in this Agreement and the Table of
Contents are for convenience of reference only and shall not affect the
interpretation or construction of this Agreement.
Section 1.04. 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
and the owners of the Mortgage Loans and their respective assigns, any benefit
or any legal or equitable right, power, remedy or claim under this Agreement.
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ARTICLE II
MORTGAGE LOANS
AND
SERVICING AGREEMENTS
Section 2.01. MORTGAGE LOANS MASTER SERVICED HEREUNDER. The Mortgage
Loans master serviced under this Agreement, from time to time, shall include all
the mortgage loans listed on the mortgage loan schedules (generally identified
as Schedule I thereto) to the Servicing Agreements listed on Schedule A hereto,
from time to time. As the mortgage loan schedules of such Servicing Agreements
are amended from time to time to include additional mortgage loans or to delete
certain mortgage loans, such changes will be deemed incorporated hereunder as
such changes are made. Thus, at any given time, the mortgage loans listed on
each such mortgage loan schedule to a Servicing Agreement (Schedule I thereto)
listed on Schedule A hereto shall be the Mortgage Loans master serviced under
this Agreement. Further, the ownership of the Mortgage Loans as indicated on
Schedule II to the Servicing Agreements shall for all purposes hereunder be
regarded as the owners of the related Mortgage Loans and the Master Servicer may
conclusively rely on such designations of ownership and the addresses listed
thereunder, provided that without the consent of the Master Servicer, no
transfer of ownership of an interest in the Mortgage Loans, the Servicing
Agreement or this Agreement will be recognized hereunder if it would result in
there being more than six distinct owners of the Mortgage Loans at any one time
(without regard to any beneficial owners of a trust, where such trust owns
Mortgage Loans master serviced hereunder) which Mortgage Loans comprised a pool
of mortgage loans sold or transferred by The Prudential Home Mortgage Company,
Inc. to a purchaser or a transferee on any one day, excluding from such
computation, Mortgage Loans owned by The Prudential Home Mortgage Company, Inc.,
an Affiliate thereof, or an entity formed by either of the foregoing.
Section 2.02. SERVICING AGREEMENT ADDITIONS. From time to time, the
Principal and the Owner, as the owner of the mortgage loans serviced under a
servicing agreement proposed for inclusion hereunder may propose that such
servicing agreement, and the mortgage loans serviced thereunder, be included to
be master serviced under this Agreement. Such proposal shall include (i) a copy
of the servicing agreement proposed for inclusion hereunder, (ii) a proposed
master servicing fee rate arrived at through consultation with the Master
Servicer and (iii) the date on which such master servicing will commence. If the
Master Servicer agrees to master service with respect to such servicing
agreement, and the mortgage loans serviced thereunder, then the Master Servicer
shall amend Schedule A hereto to include such servicing agreement, the
applicable Master Servicing Fee for the mortgage loans serviced thereunder and
the date of initial coverage under this Agreement.
Section 2.03. SERVICING AGREEMENT DELETIONS. From time to time, the
Principal and the owners of the related Mortgage Loans may notify the Master
Servicer that a Servicing Agreement has been terminated pursuant to the
provisions thereunder and upon receipt an affidavit to such effect, which
specifies the date of termination, the Master Servicer shall amend Schedule A
hereto to indicate the date of deletion of such Servicing Agreement.
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Section 2.04. CUSTODIAL ARRANGEMENTS: (a) The Owner, as owner of each
of the related Mortgage Loans when such Mortgage Loans are first subject to this
Agreement, hereby authorizes the Master Servicer to act as its agent to enter
into, from time to time, appropriate custodial arrangements on behalf of the
Owner with regard to certain Mortgage Loan Documents, relating to the Mortgage
Loans, which authority shall include, without limitation, the selection of a
custodian, the negotiation and execution of custodial agreements and dealing
with such custodian with respect to such agreements. The Owner and the Master
Servicer agree that, except as provided in paragraph (c) hereof, such agency
shall be irrevocable with respect to any Mortgage Loan for such period as this
Agreement governs the master servicing of such Mortgage Loan. Further, any
assignee of the Owner, or assignee of any such subsequent assignee, as a
subsequent owner of any related Mortgage Loans shall, by taking an assignment of
this Agreement and the related Servicing Agreement with respect such Mortgage
Loans, ratify such agency.
(b) The Master Servicer shall provide each owner of the related
Mortgage Loans with a copy of the related custodial agreements. The Master
Servicer shall provide each owner of the related Mortgage Loans with prior
written notice of any proposed change of the custodian, together with a copy of
the proposed custodial agreement.
(c) Any owner of the related Mortgage Loans may elect to engage a
different custodian for its Mortgage Loans if such owner satisfies all of the
following conditions:
(i) such owner provides the Master Servicer with 30
days prior written notice of the proposed change of custodian which
notice includes the identity of the proposed custodian and a copy of
the proposed custodial agreement;
(ii) such proposed custodial agreement is not
inconsistent with the provisions of the related Servicing Agreement and
is no more burdensome upon the related Servicer than the existing
custodial agreement; and
(iii) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which (A) such owner
agrees to pay the ongoing costs, fees or expenses of the proposed
custodian, (B) such owner agrees to pay any transfer costs of the
existing custodian and the proposed custodian, which are occasioned by
such transfer, and (C) such owner authorizes the Master Servicer to
withdraw from funds otherwise payable to such owner under this
agreement any costs, fees, or expenses which remain unpaid by such
owner under clauses (A) and (B) hereof.
The Master Servicer shall, from time to time, amend Schedule B hereto to reflect
the existence of such alternate custodial arrangements.
(d) Any owner of the related Mortgage Loans may elect to act as its own
custodian for its Mortgage Loans if such owner satisfies all of the following
conditions:
(i) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which such owner agrees
(A) to pay the
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ongoing costs, fees or expenses it would incur as custodian, (B) to pay
its costs and any transfer costs of the existing custodian which are
occasioned by such transfer, and (C) to authorize the Master Servicer
to withdraw from funds otherwise payable to such owner under this
agreement any costs, fees, or expenses which remain unpaid by such
owner under clauses (A) and (B) hereof.
(ii) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which it agrees that (A)
such owner acknowledges receipt of the Mortgage Notes, the Mortgages,
the assignments and any other Owner Mortgage Loan File documents
relating to the Mortgage Loans that are transferred to it, and (B) upon
its receipt from the Servicer of a written request for release of
documents in the form of Exhibit C to this Agreement or such other form
as approved by the Master Servicer for such use, such owner shall
promptly release the requested documents to the Servicer in connection
with the Servicer's proper servicing of the Mortgage Loans transferred
to such owner; and
(iii) such owner agrees, in writing, to indemnify and
hold harmless the Master Servicer and the Servicer from and against all
claims, liabilities, losses, actions, suits or proceedings at law or in
equity, or any other expenses, fees or charges of any character or
nature which the Master Servicer and the Servicer may incur by reason
of such owner acting as its own custodian, including indemnification of
the Master Servicer and the Servicer against any and all expenses,
including attorney's fees if counsel for the Master Servicer and the
Servicer has been approved by such owner and the cost of defending any
action, suit or proceeding or resisting any claim.
The Master Servicer shall, from time to time, amend Schedule B hereto to reflect
the existence of such alternate custodial arrangements.
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ARTICLE III
MASTER SERVICING OF MORTGAGE LOANS
Section 3.01. THE MASTER SERVICER. The Master Servicer shall supervise
and monitor the servicing of the Mortgage Loans by the related Servicer pursuant
to the Servicing Agreements listed from time to time on Schedule A. The Master
Servicer shall perform such function by (i) exercising its discretion to provide
instructions to each Servicer or to give consent to certain proposed actions of
each Servicer, in each case only under certain limited circumstances
specifically identified in the related Servicing Agreements, and (ii) to
generally monitor each Servicer's performance of its duties under the related
Servicing Agreement and to notify the owners of the related Mortgage Loans, if
the Master Servicer discovers that a Servicer has breached its obligations under
the related Servicing Agreement. In so undertaking the obligations of this
Agreement, the Master Servicer will not be (x) servicing, or called upon to
service, the Mortgage Loans, (y) guarantying or assuring the performance of each
Servicer under the related Servicing Agreements, or (z) be responsible for any
funds with respect to the Mortgage Loans which were not received from the
related Servicer. The Master Servicer's liability, if any, with respect to the
Servicing Agreements or the Mortgage Loans shall solely be pursuant to the
provisions of this Agreement.
Section 3.02. RECEIPT OF CERTAIN MORTGAGE LOAN PAYMENTS; MASTER
SERVICER CUSTODIAL ACCOUNT. The Master Servicer shall establish and maintain one
or more Master Servicer Custodial Accounts, (i) each of which relate to all
Mortgage Loans owned by a common owner of the related Mortgage Loans, (ii) which
may be the same account as employed by the Master Servicer for such common owner
under other supervision agreements, and (iii) each of which must be a separate,
trust account maintained with a depository institution. The Master Servicer
shall deposit in the Master Servicer Custodial Account any amounts representing
payments on the Mortgage Loans received from the Servicers pursuant to the
related Servicing Agreements on or after the related Remittance Date. The Master
Servicer may invest the funds in the Master Servicer Custodial Account only in
Eligible Investments. The foregoing requirements for deposit in the Master
Servicer Custodial Account shall be exclusive. If the Master Servicer or the
Servicer deposits in the Master Servicer Custodial Account any amount not
required to be deposited therein, the Master Servicer may at any time withdraw
such amount from the Master Servicer Custodial Account, any provision herein to
the contrary notwithstanding.
Section 3.03. PERMITTED WITHDRAWALS FROM THE MASTER SERVICER CUSTODIAL
ACCOUNT. The Master Servicer may, from time to time, make withdrawals from the
Master Servicer Custodial Account for the following purposes:
(i) to pay to itself the amount of any unpaid Master
Servicing Fee with respect to prior Distribution Dates;
(ii) except to the extent specified in clause (i) above,
in the event it has elected not to withhold 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 Master Servicer
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Custodial Account, to pay to itself the Master Servicing Fee, from any
such Mortgagor payment as to interest or such other recovery;
(iii) to reimburse itself for expenses incurred by it or
advances made by it and recoverable by or reimbursable to it pursuant
to Section 5.03 or to reimburse itself for advances made by it to the
extent that, in exercising its rights pursuant to Section 3.01, the
Master Servicer has advanced its funds, in its sole discretion, to
fulfill an advance obligation of the related Servicer and such advances
would have been recoverable by or reimbursable to the related Servicer
under the related Servicing Agreement;
(iv) to pay itself any interest earned on or investment
income earned with respect to funds in the Master Servicer Custodial
Account;
(v) to withdraw from the Master Servicer Custodial
Account any amount deposited in the Master Servicer Custodial Account
that was not required to be deposited therein;
(vi) to clear and terminate the Master Servicer
Custodial Account upon termination of this Agreement; and
(vii) to make distributions pursuant to Section 4.01.
The Master Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the Master
Servicer Custodial Account pursuant to such subclauses (i) and (ii).
Section 3.04. MASTER SERVICING FEE; MASTER SERVICING COMPENSATION. The
Master Servicer shall be entitled, at its election, either (a) to pay itself the
Master Servicing Fee out of any Mortgagor payment on account of interest prior
to the deposit of such payment in the Master Servicer Custodial Account or (b)
to withdraw from the Master Servicer Custodial Account such Master Servicing Fee
pursuant to Section 3.03. 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 out of Liquidation Proceeds in respect of such Mortgage
Loan or other recoveries with respect thereto to the extent permitted in Section
3.02 or (b) to withdraw from the Master Servicer Custodial Account the Master
Servicing Fee in respect of each such Mortgage Loan to the extent of such
Liquidation Proceeds or other recoveries, to the extent permitted by Section
3.03. The Master Servicer shall be entitled to retain as additional master
servicing compensation any earnings on the funds in the Master Servicer
Custodial Account. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder.
Section 3.05. RIGHTS OF THE OWNERS IN RESPECT OF THE MASTER SERVICER.
The Master Servicer shall afford the Principal and the owners of the Mortgage
Loans, upon reasonable notice, during normal business hours access to all
records maintained by the Master Servicer in respect of its rights and
obligations hereunder and access to officers of the Master Servicer responsible
for such obligations.
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ARTICLE IV
DISTRIBUTIONS;
STATEMENTS AND REPORTS
Section 4.01. DISTRIBUTIONS. (a) On each Distribution Date, the Master
Servicer shall pay to the owners of the related Mortgage Loans (or their
designees), which are listed as an owner as of the close of business of the last
Business Day of the month prior to the month of such Distribution Date, the
funds received with respect to such Mortgage Loans from the related Servicer on
the related Remittance Date, less the applicable Master Servicing Fee, by wire
transfer to such owner where the amount of funds payable to such owner for such
Distribution Date exceeds $100,000 and owner has provided wire transfer
instructions to the Master Servicer, or otherwise by first class U.S. mail.
(b) The Master Servicer shall withhold or cause to be withheld such
amounts as may be required by the Code (giving full effect to any exemptions
from withholding and related certifications required to be furnished by the
owners of the Mortgage Loans, any reductions to withholding by virtue of any
bilateral tax treaties and any applicable certification required to be furnished
by the owners of the Mortgage Loans with respect thereto) from distributions to
be made to owners of the Mortgage Loans, including any back-up withholding or
withholding of taxes on distributions made to Non-U.S. Persons. For the purposes
of this paragraph, a "Non-U.S. Person" is 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.
Section 4.02. STATEMENTS TO OWNERS; (a) Concurrently with each
distribution pursuant to Section 4.01, the Master Servicer, shall forward or
cause to be forwarded by mail to each owner of the Mortgage Loans and the
Principal a statement setting forth:
(i) the amount of such distribution to such owner of
the Mortgage Loans allocable to principal, separately identifying the
aggregate amount of any Principal Prepayments included therein;
(ii) the amount of such distribution to such owners of
the Mortgage Loans allocable to interest;
(iii) the number of Mortgage Loans outstanding as of the
end of the prior month;
(iv) the scheduled principal balance of the Mortgage
Loans for such Distribution Date;
(v) the amount of any Periodic Advances made by any
Servicer;
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(vi) the number and aggregate principal balances of
Mortgage Loans Delinquent (a) one month, (b) two months and (c) three
months or more;
(vii) the number and aggregate principal balances of the
Mortgage Loans in foreclosure as of the end of the preceding
Determination Date;
(viii) the book value of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(ix) the principal and interest portions of liquidation
losses suffered as of the end of the prior month;
(x) the unpaid principal balance of any Mortgage Loan
as to which the related Servicer has determined not to foreclose
because it believes the related Mortgaged Property may be contaminated
with or affected by hazardous wastes or hazardous substances;
(xi) the amount of the aggregate Servicing Fees paid
with respect to the related Distribution Date and the amount by which
the aggregate Servicing Fee has been reduced by Month End Interest
Shortfall for the related Distribution Date; and
(xii) such other customary information as the Master
Servicer deems necessary or desirable to enable owners of the Mortgage
Loans to prepare their tax returns.
(b) On each Distribution Date, the Master Servicer shall provide to
each owner and the Principal a copy of the information set forth in Section
4.02(a) on a loan-by-loan basis in electronically readable diskette format.
(c) The Master Servicer may combine payments and reports to each owner
of the related Mortgage Loans with payments and reports concerning other pools
and subpools of mortgage loans which are owned by such owner that are master
serviced by the Master Servicer, provided that such payments and reports show a
breakdown on a pool-by-pool, or subpool-by-subpool basis, as the case may be, as
well as aggregate figures.
Section 4.03. REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY. The owners of the Mortgage Loans may be required to make the reports
of foreclosures and abandonments of any Mortgaged Property pursuant to Code
Section 605OJ. In order to facilitate this reporting process, the Master
Servicer, on or before January 15th of each year, shall provide to each owner
information relating to each instance occurring during the previous calendar
year in which a related Servicer (i) on behalf of the related owner acquires an
interest in a Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Mortgage Loan, or (ii) knows or
has reason to know that a Mortgaged Property has been abandoned. Reports from
the Master Servicer shall be in form and substance sufficient to meet the
reporting requirements imposed by Code Section 6050J.
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ARTICLE V
THE MASTER SERVICER
Section 5.01. LIABILITY OF THE MASTER SERVICER. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement and undertaken hereunder by the Master
Servicer herein.
Section 5.02. MERGER OR CONSOLIDATION OF THE MASTER SERVICER; TRANSFER
OF MASTER SERVICING. Subject to the following paragraph, the Master Servicer
will keep in full effect its existence, rights and franchises as a corporation
under the laws of the jurisdiction of its incorporation, and will 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 respective duties under this Agreement.
Any person into which the Master Servicer may be merged or consolidated
or any person resulting from any merger, conversion or consolidation to which
the Master Servicer is a party, or any Person succeeding to the business of
Master Servicer through the transfer of substantially all its assets, shall be
the successor of 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.
Notwithstanding anything to the contrary contained in this Section 5.02
or in Section 5.04, the Master Servicer may assign its rights and delegate its
duties and obligations under this Agreement; provided that the purchaser or
transferee accepting such assignment or delegation shall be a Person which shall
be qualified to service mortgage loans for FNMA or FHLMC, and shall execute and
deliver to the Principal an agreement, in form and substance reasonably
satisfactory to the Principal, which contains an assumption by such Person of
the due and punctual performance and observance of each covenant and condition
to be performed or observed by the Master Servicer under this Agreement from and
after the date of such agreement.
In the case of any assignment and delegation of rights, duties and
obligations under this Agreement pursuant to this Section 5.02, the Master
Servicer shall be released from its duties and obligations under this Agreement,
except that the Master Servicer shall remain liable for all liabilities and
obligations incurred by it as Master Servicer hereunder prior to the
satisfaction of the conditions to such assignment and delegation set forth in
the preceding paragraph.
Section 5.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND
OTHERS. Neither the Principal nor the Master Servicer nor any of their
respective partners, directors, officers, employees or agents, shall be under
any liability to the owners of the related Mortgage Loans and all such Persons
shall be held harmless for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, any Servicing Agreement or
related Custodial Agreement, or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Master Servicer against any liability which
would otherwise be
V-1
<PAGE>
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties hereunder, or under any Servicing Agreement or related Custodial
Agreement. The Principal, the Master Servicer and any of their respective
partners, directors, officers, employees or agents, may rely in good faith on
any document of any kind which, prima facie, is properly executed and submitted
by any Person respecting any matters arising hereunder, or under any Servicing
Agreement or related Custodial Agreement. The Principal, the Master Servicer and
each of their respective partners, directors, officers, employees or agents,
shall be indemnified by the owners of the related Mortgage Loans and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement, any Servicing Agreement or related
Custodial Agreement other than any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or gross negligence in the performance of his
or its duties hereunder, under any Servicing Agreement or related Custodial
Agreement or by reason of reckless disregard of his or its obligations and
duties hereunder, under any Servicing Agreement or related Custodial Agreement.
Neither the Principal nor the Master Servicer shall be under any obligation to
appear in, prosecute or defend any legal action unless such action is related to
its respective duties under this Agreement and which in its opinion may involve
it in any expense or liability; PROVIDED, HOWEVER, that the Master Servicer may
in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interest of the owners of the Mortgage Loans hereunder if
the owners of the Mortgage Loans offer to the Master Servicer reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred thereby. In such event, the legal expenses and costs of such action and
any liability resulting therefrom shall be expenses, costs and liabilities of
the owners of the Mortgage Loans and the Master Servicer shall be entitled to be
reimbursed therefor out of the Master Servicer Custodial Account, and such
amounts shall, on the following Distribution Date or Distribution Dates, be
allocated in reduction of distributions to the owners of the Mortgage Loans pro
rata.
Section 5.04. THE MASTER SERVICER NOT TO RESIGN. Except as specifically
authorized pursuant to Section 5.02 above, the Master Servicer shall not resign
from the obligations and duties hereby imposed on it, except upon determination
that its duties hereunder are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
carried on by it. Any such determination permitting the resignation of the
Master Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Principal. No such resignation shall become effective until a
successor master servicer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with Section 5.02.
Section 5.05. PHMC'S TERMINATION. In the event that The Prudential Home
Mortgage Company, Inc. is the Servicer with respect to the Mortgage Loans which
are serviced pursuant to Servicing Agreements listed on Schedule A hereto and
The Prudential Home Mortgage Company, Inc. is terminated or resigns as such
Servicer, then notwithstanding any other provision in this Agreement,
Securitized Asset Services Corporation shall resign as Master Servicer
hereunder, effective upon the appointment and acceptance of a successor master
servicer in accordance with the provisions of Section 5.02. If a successor
master servicer does not replace Securitized Asset Services Corporation as the
Master Servicer
V-2
<PAGE>
within a reasonable time after The Prudential Home Mortgage Company, Inc.'s
termination or resignation as the related Servicer, then Securitized Asset
Services Corporation shall be entitled to reasonable additional compensation for
its continued services hereunder.
V-3
<PAGE>
ARTICLE VI
DEFAULT
Section 6.01. EVENTS OF DEFAULT. In case one or more of the following
Events of Default by the Master Servicer shall occur and be continuing, that is
to say:
(i) any failure by the Master Servicer to distribute or
cause to be distributed to owners of the Mortgage Loans any payment
required to be made by the Master Servicer under the terms of this
Agreement which continues unremedied for a period of 10 days after the
date upon which written notice of such failure, requiring the same to
be remedied, shall have been given to the Master Servicer by the
Principal or the owners of the Mortgage Loans; 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 the Master Servicer in this
Agreement which continues unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer by the Principal
or owners of the Mortgage Loans; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator in any
bankruptcy, 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 and unstayed for a period of 60 days; or
(iv) the Master Servicer shall consent to the
appointment of a trustee, conservator, receiver or liquidator or
liquidating committee in any bankruptcy, insolvency, readjustment of
debt, marshalling of assets and liabilities, voluntary liquidation or
similar proceedings of or relating to the 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, bankruptcy 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
5.02;
then, and in each and every such case, subject to applicable law, so long as an
Event of Default shall not have been remedied, the owners of the related
Mortgage Loans, by notice
VI-1
<PAGE>
in writing to the Master Servicer may terminate all of the rights and
obligations of the Master Servicer under this Agreement with respect to such
Mortgage Loans upon the appointment and acceptance of a successor master
servicer who satisfies the requirements of Section 5.02, but without prejudice
to any rights which the Master Servicer may have to the aggregate Master
Servicing Fees due prior to the date of transfer of the Master Servicer's
responsibilities hereunder, reimbursement of expenses to the extent permitted by
this Agreement. The compensation of any successor master servicer so appointed
shall not exceed the compensation specified in Section 3.04.
Section 6.02. NOTIFICATION TO OWNERS. Upon any termination of the
Master Servicer or appointment of a successor master servicer, in each case as
provided herein, the Principal shall give prompt written notice thereof to the
owners of the related Mortgage Loans at their respective addresses.
VI-2
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. AMENDMENT. This Agreement may be amended from time to
time by the Master Servicer and the Principal, without the consent of any of the
owners of the Mortgage Loans, (i) to cure any ambiguity or correct any mistake,
(ii) to correct or supplement any provisions herein or therein which may be
inconsistent with any other provisions herein or therein, (iii) to change the
timing and/or nature of deposits into the Master Servicer Custodial Account
provided that such change shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any owner of the
Mortgage Loans and (iv) to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be materially
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any owners of the Mortgage Loans.
This Agreement may also be amended from time to time by the Master
Servicer and the Principal with the consent of the owners of the Mortgage Loans.
Promptly after the execution of any amendment requiring the consent of
owners of the Mortgage Loans, the Principal shall furnish written notification
of the substance of such amendment to each of the owners of the Mortgage Loans.
Section 7.02. COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 7.03. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PORTION HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.04. 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 certified or registered mail, return
receipt requested (i) in the case of the Master Servicer, to Securitized Asset
Services Corporation, 7485 New Horizon Way, Frederick, Maryland 21701,
Attention: Vice President, or such other address as may hereafter be furnished
in writing by the Master Servicer, and (ii) in the case of an owner of the
related Mortgage Loans, to such owner at such address as is shown in Schedule II
of the related Servicing Agreement. Any notice required or permitted to be
mailed to an owner shall be given by first class mail, postage prepaid, at the
address of such owner in Schedule II of related Servicing Agreement. Any notice
mailed or transmitted within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the addressee
receives such notice, PROVIDED, HOWEVER, that any demand, notice or
communication to or upon the Master Servicer or the Principal shall not be
effective until received.
VII-1
<PAGE>
Section 7.05. 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.
VII-2
<PAGE>
IN WITNESS WHEREOF, the Owner, the Master Servicer and the Principal
have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the day and year first above written.
SECURITIZED ASSET SERVICES
CORPORATION
as Master Servicer
By:
Name: B. David Bialzak
Title: Vice President
THE PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Owner
By:
Name: B. David Bialzak
Title: Vice President
SECURITIZED ASSET SERVICES
CORPORATION
as Principal
By:
Name: B. David Bialzak
Title: Vice President
VII-3
<PAGE>
STATE OF NEW JERSEY )
ss.:
COUNTY OF ESSEX )
On this 2nd day of September, 1995, before me, a notary public in and
for the State of New Jersey, personally appeared B. David Bialzak, known to me
who, being by me duly sworn, did depose and say that he resides at Frederick,
Maryland; that he is a Vice President of Securitized Asset Services Corporation,
a New Jersey corporation, one of the parties that executed the foregoing
instrument; and that he signed his name thereto under the authority granted by
order of the Board of Directors of said corporation.
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW JERSEY )
ss.:
COUNTY OF ESSEX )
On this 2nd day of September, 1995, before me, a notary public in and
for the State of New Jersey, personally appeared B. David Bialzak, known to me
who, being by me duly sworn, did depose and say that he resides at Frederick,
MD; that he is a Vice President of The Prudential Home Mortgage Company, Inc., a
New Jersey corporation, one of the parties that executed the foregoing
instrument; and that he signed his name thereto under the authority granted by
order of the Board of Directors of said corporation.
Notary Public
[NOTARIAL SEAL]
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
Servicing Agreement Schedule
Master
Coverage Deletion Servicing
Servicing Agreement Date Date Fee Rate
<S> <C> <C> <C>
The Prudential Home Mortgage Company, Inc. 6/2/95
0.00%
and
Securitized Asset Services Corporation
dated as of 6/2/95
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
Non-Standard Custodial Agreement Schedule
Affected Mortgage Loans Alternate Custodial Coverage
Master Servicer Loan Agreement Date
Number
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
REQUEST FOR RELEASE
(for custodian)
LOAN INFORMATION
Name of Mortgagor:
Servicer
Loan No.:
CUSTODIAN
Name:
Address:
Custodian
Mortgage File No.:
SELLER
Name:
Address:
Mortgage Loan Pool: The Prudential Home
Mortgage Company, Inc.
Mortgage Pool
199__-W
The undersigned Servicer hereby acknowledges that it has received from the
custodian the documents referred to below (the "Documents"). All capitalized
terms not otherwise defined in this Request for Release shall have the meanings
given them in the Servicing Agreement dated as June 2, 1995 (the "Servicing
Agreement") between Securitized Asset Services Corporation and The Prudential
Home Mortgage Company, Inc. ( ) Promissory Note dated , 199__, in the original
principal sum of $ , made by -------------------- ---- , payable to, or endorsed
to the order of, the Trustee. ------------
<PAGE>
( ) Mortgage recorded on _________________ as instrument no. ________________in
the County Recorder's Office of the County of _________________________, State
of _________________ in book/reel/docket ________________ of official records
at page/image ______________________.
( ) Deed of Trust recorded on ______________________ as instrument no. ________
in the County Recorder's Office of the County of ______________________, State
of ______________ in _______________book/reel/docket __________________ of
official records at page/image ________________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
_____________________ as instrument no. ______________ in the County Recorder's
Office of the County of ________________, State of _____________________ in
book/reel/docket _____________ of official records at page/image ____________.
( ) Other documents, including any amendments, assignments or other assumptions
of the Mortgage Note or Mortgage.
( )
( )
( )
( )
The undersigned Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents in trust for
the benefit of the custodian, solely for the purposes provided in the Agreement.
(2) The Servicer shall not cause or permit the Documents to become subject to,
or encumbered by, any claim, liens, security interest, charges, writs of
attachment or other impositions nor shall the Servicer assert or seek to assert
any claims or rights of setoff to or against the Documents or any proceeds
thereof. (3) The Servicer shall return the Documents to the Custodian when the
need therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been remitted to the
Master Servicer Custodial Account and except as expressly provided in the
Agreement. (4) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the fill in Servicer shall at
all times be earmarked for the account of the custodian, and the Servicer shall
keep the Documents and any proceeds separate and distinct from all other
property in the Servicer's possession, custody or control.
PRUDENTIAL HOME MORTGAGE COMPANY, INC.
as Servicer
By:
Title:
Date: , 19__
C-2
<PAGE>
EXHIBIT H-2
SUPERVISION AGREEMENT RELATING
TO MORTGAGE LOAN SUB-POOL 1995-W24A
<PAGE>
SECURITIZED ASSET SERVICES CORPORATION
(Master Servicer)
and
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Owner)
and
SECURITIZED ASSET SERVICES CORPORATION
(Principal)
SUPERVISION AGREEMENT
Dated as of December 1, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions...................................................................................I-1
Section 1.02. Acts of Owners................................................................................I-6
Section 1.03. Effect of Headings and Table of Contents......................................................I-7
Section 1.04 Benefits of Agreement.........................................................................I-7
<CAPTION>
ARTICLE II
MORTGAGE LOANS
AND
SERVICING AGREEMENTS
<S> <C> <C>
Section 2.01. Mortgage Loans Master Serviced Hereunder.....................................................II-1
Section 2.02. Servicing Agreement Additions................................................................II-l
Section 2.03. Servicing Agreement Deletions................................................................II-2
Section 2.04. Custodial Arrangements.......................................................................II-2
<CAPTION>
ARTICLE III
MASTER SERVICING OF MORTGAGE LOANS
<S> <C> <C>
Section 3.01. The Master Servicer.........................................................................III-l
Section 3.02. Receipt of Certain Mortgage Loan Payments; Master
Servicer Custodial Account.........................................................III-1
Section 3.03. Permitted Withdrawals from the Master Servicer
Custodial Account..................................................................III-1
Section 3.04. Master Servicing Fee; Master Servicing Compensation.........................................III-2
Section 3.05. Rights of the Owners in Respect of the Master Servicer......................................III-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV
DISTRIBUTIONS;
STATEMENTS AND REPORTS
<S> <C> <C>
Section 4.01. Distributions................................................................................IV-1
Section 4.02. Statements to Owners.........................................................................IV-1
Section 4.03. Reports of Foreclosure and Abandonment of Mortgaged
Property............................................................................IV-2
<CAPTION>
ARTICLE V
THE MASTER SERVICER
<S> <C> <C>
Section 5.01. Liability of the Master Servicer..............................................................V-1
Section 5.02. Merger or Consolidation of the Master Servicer; Transfer
of Master Servicing..................................................................V-1
Section 5.03. Limitation on Liability of the Master Servicer
and Others...........................................................................V-2
Section 5.04. The Master Servicer Not to Resign.............................................................V-3
Section 5.05. PHMC's Termination............................................................................V-3
<CAPTION>
ARTICLE VI
DEFAULT
<S> <C> <C>
Section 6.01. Events of Default............................................................................VI-1
Section 6.02. Notification to Owners.......................................................................VI-2
<CAPTION>
ARTICLE VII
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 7.01. Amendment...................................................................................VII-1
Section 7.02. Counterparts................................................................................VII-1
Section 7.03. Governing Law; Jurisdiction.................................................................VII-1
Section 7.04. Notices.....................................................................................VII-1
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.05. Severability of Provisions..................................................................VII-3
</TABLE>
<PAGE>
This Supervision Agreement, effective as of December 1, 1995, executed
by SECURITIZED ASSET SERVICES CORPORATION, as the Master Servicer, THE
PRUDENTIAL HOME MORTGAGE COMPANY, INC., as the Owner, and SECURITIZED ASSET
SERVICES CORPORATION, as the Principal.
WITNESSETH THAT:
WHEREAS, the Owner has acquired, and will acquire, mortgage loans from
various sellers pursuant to related purchase agreements; and
WHEREAS, such mortgage loans are, and will be, serviced for the benefit
of the owners of the mortgage loans pursuant to various servicing agreements
between the Principal and the related servicers (each a "Servicing Agreement");
and
WHEREAS, each Servicing Agreement contemplates, and will contemplate,
that a master servicer will be engaged to supervise the actions of the related
servicer and to provide certain administrative functions; and
WHEREAS, the Owner and the Principal desire to engage the Master
Servicer to act as master servicer hereunder and under the Servicing Agreements
and to perform various administrative functions with respect to the mortgage
loans which are serviced pursuant to any of the Servicing Agreements from time
to time (the "Mortgage Loans"); and
WHEREAS, the Master Servicer agrees to act in such capacity;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Owner, the Master Servicer and the Principal agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the meanings
specified in this Article and, if not so defined herein, as defined in the
related Servicing Agreement:
AGREEMENT: This Supervision Agreement and all amendments and
supplements hereto.
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii) a
legal holiday in the City of New York, State of Maryland, State of Minnesota or
State of Missouri or (iii) a day on which banking institutions in the City of
New York, or the State of Maryland, State of Minnesota or State of Missouri 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, any successor statutes thereto, and applicable U.S. Department of the
Treasury temporary or final regulations promulgated thereunder.
I-1
<PAGE>
CURTAILMENT: Any Principal Prepayment made by a Mortgagor which is not
a Prepayment In Full.
DETERMINATION DATE: The 17th day of the month in which the related
Distribution Date occurs, or if such 17th day is not a Business Day, the
Business Day preceding such 17th day.
DISTRIBUTION DATE: The 21st day of any month, beginning in the month
following the month of the sale of the Mortgage Loans, or if such 21st day is
not a Business Day, the Business Day following such 21st day.
DUE DATE: With respect to any Mortgage Loan, the day of the month in
which the monthly payment on such Mortgage Loan is scheduled to be paid.
ELIGIBLE ACCOUNT: One or more accounts (i) that are maintained with a
depository institution whose long-term debt obligations (or, in the case of a
depository institution which is part of a holding company structure, the
long-term debt obligations of which holding company structure) at the time of
deposit therein are rated at least "A" (or the equivalent) long term and "A-1"
short term by each of the rating agencies rating such institution, (ii) the
deposits in which are fully insured by the FDIC through either the Bank
Insurance Fund or the Savings Association Insurance Fund, or (iii) that are
trust accounts maintained with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity.
ELIGIBLE INVESTMENTS: At any time, any one or more of the following
obligations and securities which shall mature not later than the Business Day
preceding the Distribution Date next succeeding the date of such investment,
provided that such investments qualify as "cash flow investments" as defined in
Code Section 860G(a)(6):
o obligations of the United States of America or any agency
thereof, provided such obligations are backed by the full faith and
credit of the United States of America;
o general obligations of or obligations guaranteed by any
state of the United States of America or the District of Columbia
receiving the first or second highest short-term or first or second
highest long-term rating of each rating agency rating such institution;
o commercial or finance company paper which has the first or
second highest short-term or the first or second highest long-term
commercial or finance company paper rating of each rating agency rating
such institution;
o certificates of deposit, demand or time deposits, federal
funds or banker's acceptances issued by any depository institution or
trust company incorporated under the laws of the United States or of
any state thereof and subject to supervision and examination by federal
and/or state banking authorities, provided that the commercial paper
and/or debt obligations of such depository institution or trust company
(or in the case of the principal depository institution in a holding
company
I-2
<PAGE>
system, the commercial paper or debt obligations of such holding
company) has the first or second highest short-term or the first or
second highest long-term rating for such securities of each of the
rating agencies rating such institution;
o guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation acceptable to each rating agency
rating such institution at the time of the issuance of such agreements;
o repurchase agreements on obligations with respect to any
security described in clauses (i) or (ii) above or any other security
issued or guaranteed by an agency or instrumentality of the United
States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in (iv)
above; and
o securities (other than stripped bonds or stripped coupon
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, at the time of such investment or
contractual commitment providing for such investment, which have the
first or second highest short-term or the first or second highest
long-term rating by each rating agency rating such institution.
In no event shall an instrument 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 interest
and principal payments with respect to such instrument provide a yield to
maturity at the date of investment of greater than 120% of the yield to maturity
at par of such underlying obligations.
EVENT OF DEFAULT: Any of the events specified in Section 6.01.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
thereto.
FNMA: The Federal National Mortgage Association or any successor
thereto.
INDEPENDENT: When used with respect to any specified Person, such
Person who (i) is in fact independent of the Master Servicer, (ii) does not have
any direct financial interest or any material indirect financial interest in the
Master Servicer or in an affiliate of either, and (iii) is not connected with
the Master Servicer as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan.
LIQUIDATED LOAN: A Mortgage Loan with respect to which the related
Mortgaged Property has been acquired, liquidated or foreclosed and with respect
to which the related
I-3
<PAGE>
Servicer determines that all Liquidation Proceeds which it expects to recover
have been recovered.
LIQUIDATION PROCEEDS: Amounts received by the related Servicer
(including Insurance Proceeds) in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, whether through
foreclosure, sale or otherwise, including payments in connection with such
Mortgage Loans received from the Mortgagor, other than amounts required to be
paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be
applied otherwise pursuant to law.
MASTER SERVICER: Securitized Asset Services Corporation, a New Jersey
corporation, or its successor in interest or permitted assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: The trust account established and
maintained pursuant to Section 3.02. The Master Servicer Custodial Account shall
be an Eligible Account.
MASTER SERVICING FEE: With respect to any Mortgage Loan and any
Distribution Date, the fee payable monthly to the Master Servicer pursuant to
Section 3.04 for the master servicing of such Mortgage Loan, such fee, being
equal to 1/12th of the Master Servicing Fee Rate (expressed as a per annum rate)
of the unpaid principal balance of such Mortgage Loan.
MASTER SERVICING FEE RATE: With respect to any Mortgage Loan as set
forth in Schedule A with respect to the related Servicing Agreement.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
first lien on Mortgaged Property securing a Mortgage Note together with any
Mortgage Loan Rider, if applicable.
MORTGAGE LOAN RIDER: The standard FNMA/FHLMC riders to the Mortgage
Note and/or Mortgage riders required when the Mortgaged Property is a
condominium unit or a unit in a planned unit development.
MORTGAGE LOANS: Each of the mortgage loans set forth from time to time
in the mortgage loan schedule attached as Schedule I to each Servicing Agreement
set forth on Schedule A hereto.
MORTGAGE NOTE: The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan together with any related
Mortgage Loan Riders, if applicable.
MORTGAGED PROPERTY: The property subject to a Mortgage, which may
include coop shares.
MORTGAGOR: The obligor on a Mortgage Note.
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NON-U.S. PERSON: As defined in Section 4.01(b).
OFFICERS' CERTIFICATE: With respect to any Person, a certificate signed
by the Chairman of the Board, the President or a Vice President, and by the
Treasurer, the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of such Person (or, in the case of a Person which is not a
corporation, signed by the person or persons having like responsibilities.)
OPINION OF COUNSEL: A written opinion of counsel, who may be outside or
salaried counsel for the Master Servicer, or any affiliate of the Master
Servicer.
OWNER: The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, or its successor in interest.
OWNER OF THE RELATED MORTGAGE LOAN : As to each Mortgage Loan, the
owner of the related Mortgage Loan as shown on Schedule II to the related
Servicer Agreement, as assignee of the Owner, or assignee of any such subsequent
assignee with respect to such Mortgage Loan.
PERIODIC ADVANCE: The aggregate of the advances required to be made by
the Servicers in respect of principal or interest on the Mortgage Loans on any
Distribution Date pursuant to the related Servicing Agreements.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
PHMC: The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, or its successor in interest.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, a payment
consisting of a Principal Prepayment in the amount of the outstanding principal
balance of such loan.
PRINCIPAL: Securitized Asset Services Corporation, a New Jersey
corporation, or its successor in interest or permitted assigns.
PRINCIPAL PREPAYMENT: Any Mortgagor payment or other recovery of
principal on a Mortgage Loan which is received in advance of its Due Date and is
not accompanied by an amount representing scheduled interest for any period
subsequent to the date of prepayment, including, without limitation, all
proceeds received from any condemnation award or proceeds in lieu of
condemnation other than that portion of such proceeds released to the Mortgagor
in accordance with the terms of the Mortgage or accepted servicing practices
under the related Servicing Agreement.
REMIC: A "real estate mortgage investment conduit" as defined in Code
Section 860D.
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SERVICER: The entity designated as servicer in any Servicing Agreement
listed on Schedule A hereto.
Section 1.02. ACTS OF OWNERS. (a) 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 a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. When such execution is by a signer acting in a capacity other than his
or her individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his or her authority.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action of the owner of the Mortgage Loans shall bind every
future owner of such Mortgage Loan.
Section 1.03. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings in this Agreement and the Table of Contents are for convenience
of reference only and shall not affect the interpretation or construction of
this Agreement.
Section 1.04. 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 and the owners of the Mortgage Loans and their
respective assigns, any benefit or any legal or equitable right, power, remedy
or claim under this Agreement.
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ARTICLE II
MORTGAGE LOANS
AND
SERVICING AGREEMENTS
Section 2.01. MORTGAGE LOANS MASTER SERVICED HEREUNDER. The Mortgage
Loans master serviced under this Agreement from time to time, shall include all
the mortgage loans listed on the mortgage loan schedules (generally identified
as Schedule I thereto) to the Servicing Agreements listed on Schedule A hereto,
from time to time. As the mortgage loan schedules of such Servicing Agreements
are amended from time to time to include additional mortgage loans or to delete
certain mortgage loans, such changes will be deemed incorporated hereunder as
such changes are made. Thus, at any given time, the mortgage loans listed on
each such mortgage loan schedule to a Servicing Agreement (Schedule I thereto)
listed on Schedule A hereto shall be the Mortgage Loans master serviced under
this Agreement. Further, the ownership of the Mortgage Loans as indicated on
Schedule II to the Servicing Agreements shall for all purposes hereunder be
regarded as the owners of the related Mortgage Loans and the Master Servicer may
conclusively rely on such designations of ownership and the addresses listed
thereunder, provided that without the consent of the Master Servicer, no
transfer of ownership of an interest in the Mortgage Loans, the Servicing
Agreement or this Agreement will be recognized hereunder if it would result in
there being more than six distinct owners of the Mortgage Loans at any one time
(without regard to any beneficial owners of a trust, where such trust owns
Mortgage Loans master serviced hereunder) which Mortgage Loans comprised a pool
of mortgage loans sold or transferred by The Prudential Home Mortgage Company,
Inc. to a purchaser or a transferee on any one day, excluding from such
computation, Mortgage Loans owned by The Prudential Home Mortgage Company, Inc.,
an Affiliate thereof, or an entity formed by either of the foregoing.
Section 2.02. SERVICING AGREEMENT ADDITIONS. From time to time, the
Principal and the Owner, as the owner of the mortgage loans serviced under a
servicing agreement proposed for inclusion hereunder may propose that such
servicing agreement, and the mortgage loans serviced thereunder, be included to
be master serviced under this Agreement. Such proposal shall include (i) a copy
of the servicing agreement proposed for inclusion hereunder, (ii) a proposed
master servicing fee rate arrived at through consultation with the Master
Servicer and (iii) the date on which such master servicing will commence. If the
Master Servicer agrees to master service with respect to such servicing
agreement, and the mortgage loans serviced thereunder, then the Master Servicer
shall amend Schedule A hereto to include such servicing agreement, the
applicable Master Servicing Fee for the mortgage loans serviced thereunder and
the date of initial coverage under this Agreement.
Section 2.03. SERVICING AGREEMENT DELETIONS. From time to time, the
Principal and the owners of the related Mortgage Loans may notify the Master
Servicer that a Servicing Agreement has been terminated pursuant to the
provisions thereunder and upon receipt of an affidavit to such effect, which
specifies the date of termination, the Master Servicer shall amend Schedule A
hereto to indicate the date of deletion of such Servicing Agreement.
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Section 2.04. CUSTODIAL ARRANGEMENTS: (a) The Owner, as owner of each
of the related Mortgage Loans when such Mortgage Loans are first subject to this
Agreement, hereby authorizes the Master Servicer to act as its agent to enter
into, from time to time, appropriate custodial arrangements on behalf of the
Owner with regard to certain Mortgage Loan Documents, relating to the Mortgage
Loans, which authority shall include, without limitation, the selection of a
custodian, the negotiation and execution of custodial agreements and dealing
with such custodian with respect to such agreements. The Owner and the Master
Servicer agree that, except as provided in paragraph (c) hereof, such agency
shall be irrevocable with respect to any Mortgage Loan for such period as this
Agreement governs the master servicing of such Mortgage Loan. Further, any
assignee of the Owner, or assignee of any such subsequent assignee, as a
subsequent owner of any related Mortgage Loans shall, by taking an assignment of
this Agreement and the related Servicing Agreement with respect such Mortgage
Loans, ratify such agency.
(b) The Master Servicer shall provide each owner of the related
Mortgage Loans with a copy of the related custodial agreements. The Master
Servicer shall provide each owner of the related Mortgage Loans with prior
written notice of any proposed change of the custodian, together with a copy of
the proposed custodial agreement.
(c) Any owner of the related Mortgage Loans may elect to engage a
different custodian for its Mortgage Loans if such owner satisfies all of the
following conditions:
(i) such owner provides the Master Servicer with 30
days prior written notice of the proposed change of custodian which
notice includes the identity of the proposed custodian and a copy of
the proposed custodial agreement;
(ii) such proposed custodial agreement is not
inconsistent with the provisions of the related Servicing Agreement and
is no more burdensome upon the related Servicer than the existing
custodial agreement; and
(iii) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which (A) such owner
agrees to pay the ongoing costs, fees or expenses of the proposed
custodian, (B) such owner agrees to pay any transfer costs of the
existing custodian and the proposed custodian, which are occasioned by
such transfer, and (C) such owner authorizes the Master Servicer to
withdraw from funds otherwise payable to such owner under this
agreement any costs, fees, or expenses which remain unpaid by such
owner under clauses (A) and (B) hereof.
The Master Servicer shall, from time to time, amend Schedule B hereto to reflect
the existence of such alternate custodial arrangements.
(d) Any owner of the related Mortgage Loans may elect to act as its own
custodian for its Mortgage Loans if such owner satisfies all of the following
conditions:
(i) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which such owner agrees
(A) to pay the
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ongoing costs, fees or expenses it would incur as custodian, (B) to pay
its costs and any transfer costs of the existing custodian which are
occasioned by such transfer, and (C) to authorize the Master Servicer
to withdraw from funds otherwise payable to such owner under this
agreement any costs, fees, or expenses which remain unpaid by such
owner under clauses (A) and (B) hereof.
(ii) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which it agrees that (A)
such owner acknowledges receipt of the Mortgage Notes, the Mortgages,
the assignments and any other Owner Mortgage Loan File documents
relating to the Mortgage Loans that are transferred to it, and (B) upon
its receipt from the Servicer of a written request for release of
documents in the form of Exhibit C to this Agreement or such other form
as approved by the Master Servicer for such use, such owner shall
promptly release the requested documents to the Servicer in connection
with the Servicer's proper servicing of the Mortgage Loans transferred
to such owner; and
(iii) such owner agrees, in writing, to indemnify and
hold harmless the Master Servicer and the Servicer from and against all
claims, liabilities, losses, actions, suits or proceedings at law or in
equity, or any other expenses, fees or charges of any character or
nature which the Master Servicer and the Servicer may incur by reason
of such owner acting as its own custodian, including indemnification of
the Master Servicer and the Servicer against any and all expenses,
including attorney's fees if counsel for the Master Servicer and the
Servicer has been approved by such owner and the cost of defending any
action, suit or proceeding or resisting any claim.
The Master Servicer shall, from time to time, amend Schedule B hereto to reflect
the existence of such alternate custodial arrangements.
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ARTICLE III
MASTER SERVICING OF MORTGAGE LOANS
Section 3.01. THE MASTER SERVICER. The Master Servicer shall supervise
and monitor the servicing of the Mortgage Loans by the related Servicer pursuant
to the Servicing Agreements listed from time to time on Schedule A. The Master
Servicer shall perform such function by (i) exercising its discretion to provide
instructions to each Servicer or to give consent to certain proposed actions of
each Servicer, in each case only under certain limited circumstances
specifically identified in the related Servicing Agreements, and (ii) (a) to
generally monitor each Servicer's performance of its duties under the related
Servicing Agreement, (b) to notify the owners of the related Mortgage Loans, if
the Master Servicer discovers that a Servicer has breached its obligations under
the related Servicing Agreement, (c) where such breach or other condition
constitutes an event of default under the related Servicing Agreement, to
promptly provide the owners of the related Mortgage Loans with a recommendation
concerning the possible termination of such Servicer and (d) upon a decision of
the owners of the related Mortgage Loan to terminate such Servicer, to convey
notice of such termination to such Servicer and to promptly effect the
termination and replacement of such Servicer in accordance with the terms of the
related Servicing Agreement. In so undertaking the obligations of this
Agreement, the Master Servicer will not be (x) servicing, or called upon to
service, the Mortgage Loans, (y) guarantying or assuring the performance of each
Servicer under the related Servicing Agreements, or (z) be responsible for any
funds with respect to the Mortgage Loans which were not received from the
related Servicer; provided however, to the extent that the related Servicer
fails on any Remittance Date to make the required P&I Advances in accordance
with the terms of the related Servicing Agreement, (a) the Master Servicer shall
undertake to pay an amount equal to the deficiency in such P&I Advances with
respect to the Mortgage Loans and (b) the Master Servicer shall be entitled to
reimbursement for such P&I Advances under the same conditions as provided for
the reimbursement of the related Servicer under the related Servicing Agreement.
The Master Servicer's liability, if any, with respect to the Servicing
Agreements or the Mortgage Loans shall solely be pursuant to the provisions of
this Agreement.
Section 3.02. RECEIPT OF CERTAIN MORTGAGE LOAN PAYMENTS; MASTER
SERVICER CUSTODIAL ACCOUNT. The Master Servicer shall establish and maintain one
or more Master Servicer Custodial Accounts, (i) each of which relate to all
Mortgage Loans owned by a common owner of the related Mortgage Loans, (ii) which
may be the same account as employed by the Master Servicer for such common owner
under other supervision agreements, and (iii) each of which must be a separate,
trust account maintained with a depository institution. The Master Servicer
shall deposit in the Master Servicer Custodial Account any amounts representing
payments on the Mortgage Loans received from the Servicers pursuant to the
related Servicing Agreements on or after the related Remittance Date and the
amount of any fund paid by the Master Servicer to cover deficiencies in P&I
Advances pursuant to the provisions of Section 3.01. The Master Servicer may
invest the funds in the Master Servicer Custodial Account only in Eligible
Investments. The foregoing requirements for deposit in the Master Servicer
Custodial Account shall be exclusive. If the Master Servicer or the Servicer
deposits in the Master Servicer Custodial Account any amount not required to be
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deposited therein, the Master Servicer may at any time withdraw such amount from
the Master Servicer Custodial Account, any provision herein to the contrary
notwithstanding.
Section 3.03. PERMITTED WITHDRAWALS FROM THE MASTER SERVICER CUSTODIAL
ACCOUNT. The Master Servicer may, from time to time, make withdrawals from the
Master Servicer Custodial Account for the following purposes:
o to pay to itself the amount of any unpaid Master Servicing
Fee with respect to prior Distribution Dates;
o except to the extent specified in clause (i) above, in the
event it has elected not to withhold 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 Master Servicer Custodial Account,
to pay to itself the Master Servicing Fee, from any such Mortgagor
payment as to interest or such other recovery;
o to reimburse itself for expenses incurred by it or advances
made by it and recoverable by or reimbursable to it pursuant to Section
5.03 or to reimburse itself for advances made by it to the extent that,
in exercising its rights pursuant to Section 3.01, the Master Servicer
has advanced its funds, in its sole discretion, to fulfill an advance
obligation of the related Servicer and such advances would have been
recoverable by or reimbursable to the related Servicer under the
related Servicing Agreement;
o to pay itself any interest earned on or investment income
earned with respect to funds in the Master Servicer Custodial Account;
o to withdraw from the Master Servicer Custodial Account any
amount deposited in the Master Servicer Custodial Account that was not
required to be deposited therein;
o to clear and terminate the Master Servicer Custodial Account
upon termination of this Agreement; and
o to make distributions pursuant to Section 4.01.
The Master Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the Master
Servicer Custodial Account pursuant to such subclauses (i) and (ii).
Section 3.04. MASTER SERVICING FEE; MASTER SERVICING COMPENSATION. The
Master Servicer shall be entitled, at its election, either (a) to pay itself the
Master Servicing Fee out of any Mortgagor payment on account of interest prior
to the deposit of such payment in the Master Servicer Custodial Account or (b)
to withdraw from the Master Servicer Custodial Account such Master Servicing Fee
pursuant to Section 3.03. The Master Servicer shall also be entitled, at its
election, either (a) to pay itself the Master Servicing Fee in respect of each
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delinquent Mortgage Loan out of Liquidation Proceeds in respect of such Mortgage
Loan or other recoveries with respect thereto to the extent permitted in Section
3.02 or (b) to withdraw from the Master Servicer Custodial Account the Master
Servicing Fee in respect of each such Mortgage Loan to the extent of such
Liquidation Proceeds or other recoveries, to the extent permitted by Section
3.03. The Master Servicer shall be entitled to retain as additional master
servicing compensation any earnings on the funds in the Master Servicer
Custodial Account. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder.
Section 3.05. RIGHTS OF THE OWNERS IN RESPECT OF THE MASTER SERVICER.
The Master Servicer shall afford the Principal and the owners of the Mortgage
Loans, upon reasonable notice, during normal business hours access to all
records maintained by the Master Servicer in respect of its rights and
obligations hereunder and access to officers of the Master Servicer responsible
for such obligations.
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ARTICLE IV
DISTRIBUTIONS;
STATEMENTS AND REPORTS
Section 4.01. DISTRIBUTIONS. (a) On each Distribution Date, the Master
Servicer shall pay to the owners of the related Mortgage Loans (or their
designees), which are listed as an owner as of the close of business of the last
Business Day of the month prior to the month of such Distribution Date, the
funds received with respect to such Mortgage Loans from the related Servicer on
the related Remittance Date, less the applicable Master Servicing Fee, by wire
transfer to such owner where the amount of funds payable to such owner for such
Distribution Date exceeds $100,000 and owner has provided wire transfer
instructions to the Master Servicer, or otherwise by first class U.S. mail.
The Master Servicer shall withhold or cause to be withheld such amounts
as may be required by the Code (giving full effect to any exemptions from
withholding and related certifications required to be furnished by the owners of
the Mortgage Loans, any reductions to withholding by virtue of any bilateral tax
treaties and any applicable certification required to be furnished by the owners
of the Mortgage Loans with respect thereto) from distributions to be made to
owners of the Mortgage Loans, including any back-up withholding or withholding
of taxes on distributions made to Non-U.S. Persons. For the purposes of this
paragraph, a "Non-U.S. Person" is 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.
Section .02. STATEMENTS TO OWNERS. (a) Concurrently with each
distribution pursuant to Section 4.01, the Master Servicer, shall forward or
cause to be forwarded by mail to each owner of the Mortgage Loans and the
Principal a statement setting forth:
o the amount of such distribution to such owner of the
Mortgage Loans allocable to principal, separately identifying the
aggregate amount of any Principal Prepayments included therein;
o the amount of such distribution to such owners of the
Mortgage Loans allocable to interest;
o the number of Mortgage Loans outstanding as of the end of
the prior month;
o the scheduled principal balance of the Mortgage Loans for
such Distribution Date;
o the amount of any Periodic Advances made by any Servicer;
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o the number and aggregate principal balances of Mortgage
Loans Delinquent (a) one month, (b) two months and (c) three months or
more;
o the number and aggregate principal balances of the Mortgage
Loans in foreclosure as of the end of the preceding Determination Date;
o the book value of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
o the principal and interest portions of liquidation losses
suffered as of the end of the prior month;
o the unpaid principal balance of any Mortgage Loan as to
which the related Servicer has determined not to foreclose because it
believes the related Mortgaged Property may be contaminated with or
affected by hazardous wastes or hazardous substances;
o the amount of the aggregate Servicing Fees paid with respect
to the related Distribution Date and the amount by which the aggregate
Servicing Fee has been reduced by Month End Interest Shortfall for the
related Distribution Date; and
o such other customary information as the Master Servicer
deems necessary or desirable to enable owners of the Mortgage Loans to
prepare their tax returns.
(b) On each Distribution Date, the Master Servicer shall provide to
each owner and the Principal a copy of the information set forth in Section
4.02(a) on a loan-by-loan basis in electronically readable diskette format.
(c) The Master Servicer may combine payments and reports to each owner
of the related Mortgage Loans with payments and reports concerning other pools
and subpools of mortgage loans which are owned by such owner that are master
serviced by the Master Servicer, provided that such payments and reports show a
breakdown on a pool-by-pool, or subpool-by-subpool basis, as the case may be, as
well as aggregate figures.
Section 4.03. REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY. The owners of the Mortgage Loans may be required to make the reports
of foreclosures and abandonments of any Mortgaged Property pursuant to Code
Section 6050J. In order to facilitate this reporting process, the Master
Servicer, on or before January 15th of each year, shall provide to each owner
information relating to each instance occurring during the previous calendar
year in which a related Servicer (i) on behalf of the related owner acquires an
interest in a Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Mortgage Loan, or (ii) knows or
has reason to know that a Mortgaged Property has been abandoned. Reports from
the Master Servicer shall be in form and substance sufficient to meet the
reporting requirements imposed by Code Section 6050J.
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ARTICLE V
THE MASTER SERVICER
Section 5.01. LIABILITY OF THE MASTER SERVICER. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement and undertaken hereunder by the Master
Servicer herein.
Section 5.02. MERGER OR CONSOLIDATION OF THE MASTER SERVICER; TRANSFER
OF MASTER SERVICING. Subject to the following paragraph, the Master Servicer
will keep in full effect its existence, rights and franchises as a corporation
under the laws of the jurisdiction of its incorporation, and will 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 respective duties under this Agreement.
Any person into which the Master Servicer may be merged or consolidated
or any person resulting from any merger, conversion or consolidation to which
the Master Servicer is a party, or any Person succeeding to the business of
Master Servicer through the transfer of substantially all its assets, shall be
the successor of 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.
Notwithstanding anything to the contrary contained in this Section 5.02
or in Section 5.04, the Master Servicer may assign its rights and delegate its
duties and obligations under this Agreement; provided that the purchaser or
transferee accepting such assignment or delegation shall be a Person which shall
be qualified to service mortgage loans for FNMA or FHLMC, and shall execute and
deliver to the Principal an agreement, in form and substance reasonably
satisfactory to the Principal, which contains an assumption by such Person of
the due and punctual performance and observance of each covenant and condition
to be performed or observed by the Master Servicer under this Agreement from and
after the date of such agreement.
In the case of any assignment and delegation of rights, duties and
obligations under this Agreement pursuant to this Section 5.02, the Master
Servicer shall be released from its duties and obligations under this Agreement,
except that the Master Servicer shall remain liable for all liabilities and
obligations incurred by it as Master Servicer hereunder prior to the
satisfaction of the conditions to such assignment and delegation set forth in
the preceding paragraph.
Section 5.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND
OTHERS. Neither the Principal nor the Master Servicer nor any of their
respective partners, directors, officers, employees or agents, shall be under
any liability to the owners of the related Mortgage Loans and all such Persons
shall be held harmless for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, any Servicing Agreement or
related Custodial Agreement, or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Master Servicer against any liability which
would otherwise be
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imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties hereunder, or under any Servicing Agreement or related Custodial
Agreement. The Principal, the Master Servicer and any of their respective
partners, directors, officers, employees or agents, may rely in good faith on
any document of any kind which, PRIMA FACIE, is properly executed and submitted
by any Person respecting any matters arising hereunder, or under any Servicing
Agreement or related Custodial Agreement. The Principal, the Master Servicer and
each of their respective partners, directors, officers, employees or agents,
shall be indemnified by the owners of the related Mortgage Loans and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement, any Servicing Agreement or related
Custodial Agreement other than any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or gross negligence in the performance of his
or its duties hereunder, under any Servicing Agreement or related Custodial
Agreement or by reason of reckless disregard of his or its obligations and
duties hereunder, under any Servicing Agreement or related Custodial Agreement.
Neither the Principal nor the Master Servicer shall be under any obligation to
appear in, prosecute or defend any legal action unless such action is related to
its respective duties under this Agreement and which in its opinion may involve
it in any expense or liability; PROVIDED, however, that the Master Servicer may
in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interest of the owners of the Mortgage Loans hereunder if
the owners of the Mortgage Loans offer to the Master Servicer reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred thereby. In such event, the legal expenses and costs of such action and
any liability resulting therefrom shall be expenses, costs and liabilities of
the owners of the Mortgage Loans and the Master Servicer shall be entitled to be
reimbursed therefor out of the Master Servicer Custodial Account, and such
amounts shall, on the following Distribution Date or Distribution Dates, be
allocated in reduction of distributions to the owners of the Mortgage Loans pro
rata.
Section 5.04. THE MASTER SERVICER NOT TO RESIGN. Except as specifically
authorized pursuant to Section 5.02 above, the Master Servicer shall not resign
from the obligations and duties hereby imposed on it, except upon determination
that its duties hereunder are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
carried on by it. Any such determination permitting the resignation of the
Master Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Principal. No such resignation shall become effective until a
successor master servicer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with Section 5.02.
Section 5.05. PHMC'S TERMINATION. In the event that The Prudential Home
Mortgage Company, Inc. is the Servicer with respect to the Mortgage Loans which
are serviced pursuant to Servicing Agreements listed on Schedule A hereto and
The Prudential Home Mortgage Company, Inc. is terminated or resigns as such
Servicer, then notwithstanding any other provision in this Agreement,
Securitized Asset Services Corporation shall resign as Master Servicer
hereunder, effective upon the appointment and acceptance of a successor master
servicer in accordance with the provisions of Section 5.02. If a successor
master servicer does not replace Securitized Asset Services Corporation as the
Master Servicer
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within a reasonable time after The Prudential Home Mortgage Company, Inc.'s
termination or resignation as the related Servicer, then Securitized Asset
Services Corporation shall be entitled to reasonable additional compensation for
its continued services hereunder.
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ARTICLE VI
DEFAULT
Section 6.01. EVENTS OF DEFAULT. In case one or more of the following
Events of Default by the Master Servicer shall occur and be continuing, that is
to say:
o any failure by the Master Servicer to distribute or cause to
be distributed to owners of the Mortgage Loans any payment required to
be made by the Master Servicer under the terms of this Agreement which
continues unremedied for a period of 10 days after the date upon which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Principal or the
owners of the Mortgage Loans; or
o 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 the Master Servicer in this Agreement
which continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer by the Principal
or owners of the Mortgage Loans; or
o a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
trustee, conservator, receiver or liquidator in any bankruptcy,
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 and unstayed
for a period of 60 days; or
o the Master Servicer shall consent to the appointment of a
trustee, conservator, receiver or liquidator or liquidating committee
in any bankruptcy, insolvency, readjustment of debt, marshalling of
assets and liabilities, voluntary liquidation or similar proceedings of
or relating to the Master Servicer, or of or relating to all or
substantially all of its property; or
o 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, bankruptcy or reorganization
statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
o 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 5.02;
then, and in each and every such case, subject to applicable law, so long as an
Event of Default shall not have been remedied, the owners of the related
Mortgage Loans, by notice in writing to the Master Servicer may terminate all of
the rights and obligations of the
VI-1
<PAGE>
Master Servicer under this Agreement with respect to such Mortgage Loans upon
the appointment and acceptance of a successor master servicer who satisfies the
requirements of Section 5.02, but without prejudice to any rights which the
Master Servicer may have to the aggregate Master Servicing Fees due prior to the
date of transfer of the Master Servicer's responsibilities hereunder,
reimbursement of expenses to the extent permitted by this Agreement. The
compensation of any successor master servicer so appointed shall not exceed the
compensation specified in Section 3.04.
Section 6.02. NOTIFICATION TO OWNERS. Upon any termination of the
Master Servicer or appointment of a successor master servicer, in each case as
provided herein, the Principal shall give prompt written notice thereof to the
owners of the related Mortgage Loans at their respective addresses.
VI-2
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. AMENDMENT. This Agreement may be amended from time to
time by the Master Servicer and the Principal, without the consent of any of the
owners of the Mortgage Loans, (i) to cure any ambiguity or correct any mistake,
(ii) to correct or supplement any provisions herein or therein which may be
inconsistent with any other provisions herein or therein, (iii) to change the
timing and/or nature of deposits into the Master Servicer Custodial Account
provided that such change shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any owner of the
Mortgage Loans and (iv) to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be materially
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any owners of the Mortgage Loans.
This Agreement may also be amended from time to time by the Master
Servicer and the Principal with the consent of the owners of the Mortgage Loans.
Promptly after the execution of any amendment requiring the consent of
owners of the Mortgage Loans, the Principal shall furnish written notification
of the substance of such amendment to each of the owners of the Mortgage Loans.
Section 7.02. COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 7.03. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.04. 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 certified or registered mail, return
receipt requested (i) in the case of the Master Servicer, to Securitized Asset
Services Corporation, 7485 New Horizon Way, Frederick, Maryland 21701,
Attention: Vice President, or such other address as may hereafter be furnished
in writing by the Master Servicer, and (ii) in the case of an owner of the
related Mortgage Loans, to such owner at such address as is shown in Schedule II
of the related Servicing Agreement. Any notice required or permitted to be
mailed to an owner shall be given by first class mail, postage prepaid, at the
address of such owner in Schedule II of related Servicing Agreement. Any notice
mailed or transmitted within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the addressee
receives such notice, PROVIDED, HOWEVER, that any demand, notice or
communication to or upon the Master Servicer or the Principal shall not be
effective until received.
VII-1
<PAGE>
Section 7.05. 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.
VII-2
<PAGE>
IN WITNESS WHEREOF, the Owner, the Master Servicer and the Principal
have caused their names to be signed hereto by their respective officers
"hereunto duly authorized, all as of the day and year first above written.
SECURITIZED ASSET SERVICES
CORPORATION
as Master Servicer
By:
Name: B. David Bialzak
Title: Vice President
THE PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Owner
By:
Name: B. David Bialzak
Title: Vice President
SECURITIZED ASSET SERVICES
CORPORATION
as Principal
By:
Name: B. David Bialzak
Title: Vice President
VII-3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
Servicing Agreement Schedule
Master Coverage Deletion Master Servicing
Servicing Agreement Date Date Fee Rate
<S> <C> <C> <C>
The Prudential Home Mortgage 12/1/95 0.375 minus the Servicing
Company, Inc. and Securitized Fee Rate of the individual
Asset Services Corporation dated Mortgage Loan
as of 12/1/95 (solely with respect
to Mortgage Loan Pool 1995-
W24, Subpool A)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
Non-Standard Custodial Agreement Schedule
Affected Mortgage Loans
Master Servicer Loan Alternate Custodial Coverage
Number Agreement Date
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
REQUEST FOR RELEASE
(for custodian)
LOAN INFORMATION
Name of Mortgagor:
Servicer
Loan No.:
CUSTODIAN
Name:
Address:
Custodian
Mortgage File No.:
SELLER
Name:
Address:
Mortgage Loan Pool: The Prudential Home Mortgage
Company, Inc. Mortgage Pool 199__ -W
The undersigned Servicer hereby acknowledges that it has received from the
custodian the documents referred to below (the "Documents"). All capitalized
terms not otherwise defined in this Request for Release shall have the meanings
given them in the Servicing Agreement dated as December 1, 1995 (the "Servicing
Agreement") between Securitized Asset Services Corporation and The Prudential
Home Mortgage Company, Inc. (__) Promissory Note dated _________________, 199__,
in the original principal sum of $____, made by ___, payable to, or endorsed to
the order of, the Trustee.
(___) Mortgage recorded on ________________ as instrument no. ______________ in
the County Recorder's Office of the County of ______________, State of ________
in book/reel/docket ___________ of official records at page/image ____________.
(___) Deed of Trust recorded on _________________ as instrument no. ___________
in the County Recorder's Office of the County of _____________________, State
of _________________ in book/reel/docket ______________________________ of
official records at page/image _________________.
(___) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
_________________________ as instrument no. ________________ in the County
Recorder's Office of the County of _____________, State of _______________ in
book/reel/docket of official records at page/image ___________________.
(___) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
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<PAGE>
(___)
(___)
(___)
(___)
The undersigned Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents in trust for
the benefit of the custodian, solely for the purposes provided in the Agreement.
(2) The Servicer shall not cause or permit the Documents to become subject to,
or encumbered by, any claim, liens, security interest, charges, writs of
attachment or other impositions nor shall the Servicer assert or seek to assert
any claims or rights of setoff to or against the Documents or any proceeds
thereof.
(3) The Servicer shall return the Documents to the Custodian when the need
therefor no longer exists, unless the Mortgage Loan relating to the Documents
has been liquidated and the proceeds thereof have been remitted to the Master
Servicer Custodial Account and except as expressly provided in the Agreement.
(4) The Documents and any proceeds thereof, including any proceeds of proceeds,
coming into the possession or control of the fill in Servicer shall at all times
be earmarked for the account of the custodian, and the Servicer shall keep the
Documents and any proceeds separate and distinct from all other property in the
Servicer's possession, custody or control.
PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Servicer
By:
Title:
Date: ,19__
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<PAGE>
EXHIBIT H-3
SUPERVISION AGREEMENT RELATING TO MORTGAGE LOAN
SUB-POOLS 1995-W24B, 1995-W24C AND 1995-W24D
<PAGE>
SECURITIZED ASSET SERVICES CORPORATION
(Master Servicer)
and
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Owner)
and
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Principal)
SUPERVISION AGREEMENT
Dated as of December 2, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions.....................................................................................1
Section 1.02. Acts of owners..................................................................................6
Section 1.03. Effect of Headings and Table of Contents........................................................7
Section 1.04 Benefits of Agreement...........................................................................7
<CAPTION>
ARTICLE II
MORTGAGE LOANS
AND
SERVICING AGREEMENTS
<S> <C> <C>
Section 2.01. Mortgage Loans Master Serviced Hereunder........................................................7
Section 2.02. Servicing Agreement Additions...................................................................7
Section 2.03. Servicing Agreement Deletions...................................................................8
Section 2.04. Custodial Arrangements..........................................................................8
<CAPTION>
ARTICLE III
MASTER SERVICING OF MORTGAGE LOANS
<S> <C> <C>
Section 3.01. The Master Servicer............................................................................10
Section 3.02. Receipt of Certain Mortgage Loan Payments; Master
Servicer Custodial Account............................................................11
Section 3.03. Permitted Withdrawals from the Master Servicer
Custodial Account.....................................................................11
Section 3.04. Master Servicing Fee; Master Servicing Compensation............................................12
Section 3.05. Rights of the Owners in Respect of the Master Servicer.........................................12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV
DISTRIBUTIONS;
STATEMENTS AND REPORTS
<S> <C> <C>
Section 4.01. Distributions..................................................................................13
Section 4.02. Statements to Owners...........................................................................13
Section 4.03. Reports of Foreclosure and Abandonment of Mortgaged
Property..............................................................................15
<CAPTION>
ARTICLE V
THE MASTER SERVICER
<S> <C> <C>
Section 5.01. Liability of the Master Servicer...............................................................15
Section 5.02. Merger or Consolidation of the Master Servicer; Transfer
of Master Servicing...................................................................15
Section 5.03. Limitation on Liability of the Master Servicer
and Others............................................................................16
Section 5.04. The Master Servicer Not to Resign..............................................................17
<CAPTION>
ARTICLE VI
DEFAULT
<S> <C> <C>
Section 6.01. Events of Default..............................................................................17
Section 6.02. Notification to Owners.........................................................................18
<CAPTION>
ARTICLE VII
MISCELLANEOUS PROVISIONS
<S> <C> <C>
Section 7.01. Amendment......................................................................................19
Section 7.02. Counterparts...................................................................................19
Section 7.03. Governing Law; Jurisdiction....................................................................19
Section 7.04. Notices........................................................................................19
Section 7.05. Severability of Provisions.....................................................................20
</TABLE>
<PAGE>
This Supervision Agreement, effective as of December 2, 1995, executed
by SECURITIZED ASSET SERVICES CORPORATION, as the Master Servicer, THE
PRUDENTIAL HOME MORTGAGE COMPANY, INC., as the Owner, and THE PRUDENTIAL HOME
MORTGAGE COMPANY, INC., as the Principal.
WITNESSETH THAT:
WHEREAS, the Owner has acquired, and will acquire, mortgage loans from
various sellers pursuant to related purchase agreements; and
WHEREAS, such mortgage loans are, and will be, serviced for the benefit
of the owners of the mortgage loans pursuant to various servicing agreements
between the Principal and the related servicers (each a "Servicing Agreement");
and
WHEREAS, each Servicing Agreement contemplates, and will contemplate,
that a master servicer will be engaged to supervise the actions of the related
servicer and to provide certain administrative functions; and
WHEREAS, the Owner and the Principal desire to engage the Master
Servicer to act as master servicer hereunder and under the Servicing Agreements
and to perform various administrative functions with respect to the mortgage
loans which are serviced pursuant to any of the Servicing Agreements from time
to time (the "Mortgage Loans"); and
WHEREAS, the Master Servicer agrees to act in such capacity;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Owner, the Master Servicer and the Principal agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the meanings
specified in this Article and, if not so deemed herein, as defined in the
related Servicing Agreement:
AGREEMENT: This Supervision Agreement and all amendments and
supplements hereto.
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii) a
legal holiday in the City of New York, State of Maryland, State of Minnesota or
State of Missouri or (iii) a day on which banking institutions in the City of
New York, or the State of Maryland, State of Minnesota or State of Missouri 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, any successor statutes thereto, and applicable U.S. Department of the
Treasury temporary or final regulations promulgated thereunder.
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<PAGE>
CURTAILMENT: Any Principal Prepayment made by a Mortgagor which is not
a Prepayment In Full.
DETERMINATION DATE: The 17th day of the month in which the related
Distribution Date occurs, or if such 17th day is not a Business Day, the
Business Day preceding such 17th day.
DISTRIBUTION DATE: The 21st day of any month, beginning in the month
following the month of the sale of the Mortgage Loans, or if such 21st day is
not a Business Day, the Business Day following such 21st day.
DUE DATE: With respect to any Mortgage Loan, the day of the month in
which the monthly payment on such Mortgage Loan is scheduled to be paid.
ELIGIBLE ACCOUNT: One or more accounts (i) that are maintained with a
depository institution whose long-term debt obligations (or, in the case of a
depository institution which is part of a holding company structure, the
long-term debt obligations of which holding company structure) at the time of
deposit therein are rated at least "A" (or the equivalent) long term and "A-1"
short term by each of the rating agencies rating such institution, (ii) the
deposits in which are fully insured by the FDIC through either the Bank
Insurance Fund or the Savings Association Insurance Fund, or (iii) that are
trust accounts maintained with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity.
ELIGIBLE INVESTMENTS: At any time, any one or more of the following
obligations and securities which shall mature not later than the Business Day
preceding the Distribution Date next succeeding the date of such investment,
provided that such investments qualify as "cash flow investments" as defined in
Code Section 860G(a)(6):
o obligations of the United States of America or any agency
thereof, provided such obligations are backed by the full
faith and credit of the United States of America;
o general obligations of or obligations guaranteed by any state
of the United States of America or the District of Columbia
receiving the first or second highest short-term or first or
second highest long-term rating of each rating agency rating
such institution;
o commercial or finance company paper which has the first or
second highest short-term or the first or second highest
long-term commercial or finance company paper rating of each
rating agency rating such institution;
o certificates of deposit, demand or time deposits, federal
funds or banker's acceptances issued by any depository
institution or trust company incorporated under the laws of
the United States or of any state thereof and subject to
supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or debt
obligations of such depository institution or trust company
(or in the case of the principal depository
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<PAGE>
institution in a holding company system, the commercial paper
or debt obligations of such holding company) has the first or
second highest short-term or the first or second highest
long-term rating for such securities of each of the rating
agencies rating such institution;
o guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation acceptable to each
rating agency rating such institution at the time of the
issuance of such agreements;
o repurchase agreements on obligations with respect to any
security described in clauses (i) or (ii) above or any other
security issued or guaranteed by an agency or instrumentality
of the United States of America, in either case entered into
with a depository institution or trust company (acting as
principal) described in (iv) above; and
o securities (other than stripped bonds or stripped coupon
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, at the time of
such investment or contractual commitment providing for such
investment, which have the first or second highest short-term
or the first or second highest long-term rating by each rating
agency rating such institution.
In no event shall an instrument 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 interest
and principal payments with respect to such instrument provide a yield to
maturity at the date of investment of greater than 120% of the yield to maturity
at par of such underlying obligations.
EVENT OF DEFAULT: Any of the events specified in Section 6.01.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
thereto.
FNMA: The Federal National Mortgage Association or any successor
thereto.
INDEPENDENT: When used with respect to any specified Person, such
Person who (i) is in fact independent of the Master Servicer, (ii) does not have
any direct financial interest or any material indirect financial interest in the
Master Servicer or in an affiliate of either, and (iii) is not connected with
the Master Servicer as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan.
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<PAGE>
LIQUIDATED LOAN: A Mortgage Loan with respect to which the related
Mortgaged Property has been acquired, liquidated or foreclosed and with respect
to which the related Servicer determines that all Liquidation Proceeds which it
expects to recover have been recovered.
LIQUIDATION PROCEEDS: Amounts received by the related Servicer
(including Insurance Proceeds) in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, whether through
foreclosure, sale or otherwise, including payments in connection with such
Mortgage Loans received from the Mortgagor, other than amounts required to be
paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be
applied otherwise pursuant to law.
MASTER SERVICER: Securitized Asset Services Corporation, a New Jersey
corporation, or its successor in interest or permitted assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: The trust account established and
maintained pursuant to Section 3.02. The Master Servicer Custodial Account shall
be an Eligible Account.
MASTER SERVICING FEE: With respect to any Mortgage Loan and any
Distribution Date, the fee payable monthly to the Master Servicer pursuant to
Section 3.04 for the master servicing of such Mortgage Loan, such fee, being
equal to 1/12th of the Master Servicing Fee Rate (expressed as a per annum rate)
of the unpaid principal balance of such Mortgage Loan.
MASTER SERVICING FEE RATE: With respect to any Mortgage Loan as set
forth in Schedule A with respect to the related Servicing Agreement.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
first lien on Mortgaged Property securing a Mortgage Note together with any
Mortgage Loan Rider, if applicable.
MORTGAGE LOAN RIDER: The standard FNMA/FHLMC riders to the Mortgage
Note and/or Mortgage riders required when the Mortgaged Property is a
condominium unit or a unit in a planned unit development.
MORTGAGE LOANS: Each of the mortgage loans set forth from time to time
in the mortgage loan schedule attached as Schedule I to each Servicing Agreement
set forth on Schedule A hereto.
MORTGAGE NOTE: The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan together with any related
Mortgage Loan Riders, if applicable.
MORTGAGED PROPERTY: The property subject to a Mortgage, which may
include co-op shares.
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<PAGE>
MORTGAGOR: The obligor on a Mortgage Note.
NON-U.S. PERSON: As defined in Section 4.01(b).
OFFICERS' CERTIFICATE: With respect to any Person, a certificate signed
by the Chairman of the Board, the President or a Vice President, and by the
Treasurer, the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of such Person (or, in the case of a Person which is not a
corporation, signed by the person or persons having like responsibilities.)
OPINION OF COUNSEL: A written opinion of counsel, who may be outside or
salaried counsel for the Master Servicer, or any affiliate of the Master
Servicer.
OWNER: The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, or its successor in interest.
OWNER OF THE RELATED MORTGAGE LOAN: As to each Mortgage Loan, the owner
of the related Mortgage Loan as shown on Schedule II to the related Servicer
Agreement, as assignee of the Owner, or assignee of any such subsequent assignee
with respect to such Mortgage Loan.
PERIODIC ADVANCE: The aggregate of the advances required to be made by
the Servicers in respect of principal or interest on the Mortgage Loans on any
Distribution Date pursuant to the related Servicing Agreements.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated origination or
government or any agency or political subdivision thereof.
PHMC: The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, or its successor in interest.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, a payment
consisting of a Principal Prepayment in the amount of the outstanding principal
balance of such loan.
PRINCIPAL: The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, or its successor in interest or permitted assigns.
PRINCIPAL PREPAYMENT: Any Mortgagor payment or other recovery of
principal on a Mortgage Loan which is received in advance of its Due Date and is
not accompanied by an amount representing scheduled interest for any period
subsequent to the date of prepayment, including, without limitation, all
proceeds received from any condemnation award or proceeds in lieu of
condemnation other than that portion of such proceeds released to the Mortgagor
in accordance with the terms of the Mortgage or accepted servicing practices
under the related Servicing Agreement.
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<PAGE>
REMIC: A "real estate mortgage investment conduit" as defined in Code
Section 860D.
SERVICER: The entity designated as servicer in any Servicing Agreement
listed on Schedule A hereto.
Section 1.02. ACTS OF OWNERS. (a) 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 a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. When such execution is by a signer acting in a capacity other than his
or her individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his or her authority.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action of the owner of the Mortgage Loans shall bind every
future owner of such Mortgage Loan.
Section 1.03. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings in this Agreement and the Table of Contents are for convenience
of reference only and shall not affect the interpretation or construction of
this Agreement.
Section 1.04. 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 and the owners of the Mortgage Loans and their
respective assigns, any benefit or any legal or equitable right, power, remedy
or claim under this Agreement.
ARTICLE II
MORTGAGE LOANS
AND
SERVICING AGREEMENTS
Section 2.01. MORTGAGE LOANS MASTER SERVICED HEREUNDER. The Mortgage
Loans master serviced under this Agreement, from time to time, shall include all
the mortgage loans listed on the mortgage loan schedules (generally identified
as Schedule I thereto) to the Servicing Agreements listed on Schedule A hereto,
from time to time. As the mortgage loan schedules of such Servicing Agreements
are amended from time to time to include additional mortgage loans or to delete
certain mortgage loans, such changes will be deemed incorporated hereunder as
such changes are made. Thus, at any given time, the mortgage loans listed on
each such mortgage loan schedule to a Servicing Agreement (Schedule I thereto)
listed on Schedule A hereto shall be the Mortgage Loans master serviced under
this Agreement. Further, the ownership of the Mortgage Loans as indicated on
Schedule II to the Servicing Agreements shall for all purposes hereunder be
regarded as the owners of the related Mortgage Loans and the Master Servicer may
conclusively rely on such designations of ownership and the addresses listed
thereunder, provided that without the consent of the Master Servicer, no
transfer of ownership of an interest in the Mortgage Loans, the
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<PAGE>
Servicing Agreement or this Agreement will be recognized hereunder if it would
result in there being more than four distinct owners of the Mortgage Loans at
any one time (without regard to any beneficial owners of a trust, where such
trust owns Mortgage Loans master serviced hereunder) which Mortgage Loans
comprised a pool of mortgage loans sold or transferred by The Prudential Home
Mortgage Company, Inc. to a purchaser or a transferee on any one day, excluding
from such computation, Mortgage Loans owned by The Prudential Home Mortgage
Company, Inc., an Affiliate thereof, or an entity formed by either of the
foregoing.
Section 2.02. SERVICING AGREEMENT ADDITIONS. From time to time, the
Principal and the Owner, as the owner of the mortgage loans serviced under a
servicing agreement proposed for inclusion hereunder may propose that such
servicing agreement, and the mortgage loans serviced thereunder, be included to
be master serviced under this Agreement. Such proposal shall include (i) a copy
of the servicing agreement proposed for inclusion hereunder, (ii) a proposed
master servicing fee rate arrived at through consultation with the Master
Servicer and (iii) the date on which such master servicing will commence. If the
Master Servicer agrees to master service with respect to such servicing
agreement, and the mortgage loans serviced thereunder, then the Master Servicer
shall amend Schedule A hereto to include such servicing agreement, the
applicable Master Servicing Fee for the mortgage loans serviced thereunder and
the date of initial coverage under this Agreement.
Section 2.03. SERVICING AGREEMENT DELETIONS. From time to time, the
Principal and the owners of the related Mortgage Loans may notify the Master
Servicer that a Servicing Agreement has been terminated pursuant to the
provisions thereunder and upon receipt an affidavit to such effect, which
specifies the date of termination, the Master Servicer shall amend Schedule A
hereto to indicate the date of deletion of such Servicing Agreement.
Section 2.04. CUSTODIAL ARRANGEMENTS: (a) The Owner, as owner of each
of the related Mortgage Loans when such Mortgage Loans are first subject to this
Agreement, hereby authorizes the Master Servicer to act as its agent to enter
into, from time to time, appropriate custodial arrangements on behalf of the
Owner with regard to certain Mortgage Loan Documents, relating to the Mortgage
Loans, which authority shall include, without limitation, the selection of a
custodian, the negotiation and execution of custodial agreements and dealing
with such custodian with respect to such agreements. The Owner and the Master
Servicer agree that, except as provided in paragraph (c) hereof, such agency
shall be irrevocable with respect to any Mortgage Loan for such period as this
Agreement governs the master servicing of such Mortgage Loan. Further, any
assignee of the Owner, or assignee of any such subsequent assignee, as a
subsequent owner of any related Mortgage Loans shall, by taking an assignment of
this Agreement and the related Servicing Agreement with respect such Mortgage
Loans, ratify such agency.
(b) The Master Servicer shall provide each owner of the related
Mortgage Loans with a copy of the related custodial agreements. The Master
Servicer shall provide each owner of the related Mortgage Loans with prior
written notice of any proposed change of the custodian, together with a copy of
the proposed custodial agreement.
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<PAGE>
(c) Any owner of the related Mortgage Loans may elect to engage a
different custodian for its Mortgage Loans if such owner satisfies all of the
following conditions:
(i) such owner provides the Master Servicer with 30
days prior written notice of the proposed change of custodian which
notice includes the identify of the proposed custodian and a copy of
the proposed custodial agreement;
(ii) such proposed custodial agreement is not
inconsistent with the provisions of the related Servicing Agreement and
is no more burdensome upon the related Servicer than the existing
custodial agreement; and
(iii) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which (A) such owner
agrees to pay the ongoing costs, fees or expenses of the proposed
custodian, (B) such owner agrees to pay any transfer costs of the
existing custodian and the proposed custodian, which are occasioned by
such transfer, and (C) such owner authorizes the Master Servicer to
withdraw from funds otherwise payable to such owner under this
agreement any costs, fees, or expenses which remain unpaid by such
owner under clauses (A) and (B) hereof.
The Master Servicer shall, from time to time, amend Schedule B hereto to reflect
the existence of such alternate custodial arrangements.
(d) Any owner of the related Mortgage Loans may elect to act as its own
custodian for its Mortgage Loans if such owner satisfies all of the following
conditions:
(i) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which such owner agrees
(A) to pay the ongoing costs, fees or expenses it would incur as
custodian, (B) to pay its costs and any transfer costs of the existing
custodian which are occasioned by such transfer, and (C) to authorize
the Master Servicer to withdraw from funds otherwise payable to such
owner under this agreement any costs, fees, or expenses which remain
unpaid by such owner under clauses (A) and (B) hereof.
(ii) such owner provides the Master Servicer with a
written undertaking, signed by such owner, in which it agrees that (A)
such owner acknowledges receipt of the Mortgage Notes, the Mortgages,
the assignments and any other Owner Mortgage Loan File documents
relating to the Mortgage Loans that are transferred to it, and (B) upon
its receipt from the Servicer of a written request for release of
documents in the form of Exhibit C to this Agreement or such other form
as approved by the Master Servicer for such use, such owner shall
promptly release the requested documents to the Servicer in connection
with the Servicer's proper servicing of the Mortgage Loans transferred
to such owner; and
(iii) such owner agrees, in writing, to indemnify and
hold harmless the Master Servicer and the Servicer from and against all
claims, liabilities, losses, actions, suits or proceedings at law or in
equity, or any other expenses, fees or
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<PAGE>
charges of any character or nature which the Master Servicer and the
Servicer may incur by reason of such owner acting as its own custodian,
including indemnification of the Master Servicer and the Servicer
against any and all expenses, including attorney's fees if counsel for
the Master Servicer and the Servicer has been approved by such owner
and the cost of defending any action, suit or proceeding or resisting
any claim.
The Master Servicer shall, from time to time, amend Schedule B hereto to reflect
the existence of such alternate custodial arrangements.
ARTICLE III
MASTER SERVICING OF MORTGAGE LOANS
Section 3.01. THE MASTER SERVICER. The Master Servicer shall supervise
and monitor the servicing of the Mortgage Loans by the related Servicer pursuant
to the Servicing Agreements listed from time to time on Schedule A. The Master
Servicer shall perform such function by (i) exercising its discretion to provide
instructions to each Servicer or to give consent to certain proposed actions of
each Servicer, in each case only under certain limited circumstances
specifically identified in the related Servicing Agreements, and (ii) (a) to
generally monitor each Servicer's performance of its duties under the related
Servicing Agreement, (b) to notify the owners of the related Mortgage Loans, if
the Master Servicer discovers that a Servicer has breached its obligations under
the related Servicing Agreement, (c) where such breach or other condition
constitutes an event of default under the related Servicing Agreement, to
promptly provide the owners of the related Mortgage Loans with a recommendation
concerning the possible termination of such Servicer and (d) upon a decision of
the owners of the related Mortgage Loan to terminate such Servicer, to convey
notice of such termination to such Servicer and to promptly effect the
termination and replacement of such Servicer in accordance with the terms of the
related Servicing Agreement. In so undertaking the obligations of this
Agreement, the Master Servicer will not be (x) servicing, or called upon to
service, the Mortgage Loans, (y) guarantying or assuring the performance of each
Servicer under the related Servicing Agreements, or (z) be responsible for any
funds with respect to the Mortgage Loans which were not received from the
related Servicer; provided however, to the extent that the related Servicer
fails on any Remittance Date to make the required P&I Advances in accordance
with the terms of the related Servicing Agreement, (a) the Master Servicer shall
undertake to pay an amount equal to the deficiency in such P&I Advances with
respect to the Mortgage Loans and (b) the Master Servicer shall be entitled to
reimbursement for such P&I Advances under the same conditions as provided for
the reimbursement of the related Servicer under the related Servicing Agreement.
The Master Servicer's liability, if any, with respect to the Servicing
Agreements or the Mortgage Loans shall solely be pursuant to the provisions of
this Agreement.
Section 3.02. RECEIPT OF CERTAIN MORTGAGE LOAN PAYMENTS; MASTER
SERVICER CUSTODIAL ACCOUNT. The Master Servicer shall establish and maintain one
or more Master Servicer Custodial Accounts, (i) each of which relate to all
Mortgage Loans owned by a common owner of the related Mortgage Loans, (ii) which
may be the same account as employed by the Master Servicer for such common owner
under other supervision agreements, and (iii)
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each of which must be a separate, trust account maintained with a depository
institution. The Master Servicer shall deposit in the Master Servicer Custodial
Account any amounts representing payments on the Mortgage Loans received from
the Servicers pursuant to the related Servicing Agreements on or after the
related Remittance Date and the amount of any fund paid by the Master Servicer
to cover deficiencies in P&I Advances pursuant to the provisions of Section
3.01. The Master Servicer may invest the funds in the Master Servicer Custodial
Account only in Eligible Investments. The foregoing requirements for deposit in
the Master Servicer Custodial Account shall be exclusive. If the Master Servicer
or the Servicer deposits in the Master Servicer Custodial Account any amount not
required to be deposited therein, the Master Servicer may at any time withdraw
such amount from the Master Servicer Custodial Account, any provision herein to
the contrary notwithstanding.
Section 3.03. PERMITTED WITHDRAWALS FROM THE MASTER SERVICER CUSTODIAL
ACCOUNT. The Master Servicer may, from time to time, make withdrawals from the
Master Servicer Custodial Account for the following purposes:
o to pay to itself the amount of any unpaid Master
Servicing Fee with respect to prior Distribution
Dates;
o except to the extent specified in clause (i) above,
in the event it has elected not to withhold 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 Master
Servicer Custodial Account, to pay to itself the
Master Servicing Fee, from any such Mortgagor payment
as to interest or such other recovery;
o to reimburse itself for expenses incurred by it or
advances made by it and recoverable by or
reimbursable to it pursuant to Section 5.03 or to
reimburse itself for advances made by it to the
extent that, in exercising its rights pursuant to
Section 3.01, the Master Servicer has advanced its
funds, in its sole discretion, to fulfill an advance
obligation of the related Servicer and such advances
would have been recoverable by or reimbursable to the
related Servicer under the related Servicing
Agreement;
o to pay itself any interest earned on or investment
income earned with respect to funds in the Master
Servicer Custodial Account;
o to withdraw from the Master Servicer Custodial
Account any amount deposited in the Master Servicer
Custodial Account that was not required to be
deposited therein;
o to clear and terminate the Master Servicer Custodial
Account upon termination of this Agreement; and
o to make distributions pursuant to Section 4.01.
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The Master Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the Master
Servicer Custodial Account pursuant to such subclauses (i) and (ii).
Section 3.04. MASTER SERVICING FEE; MASTER SERVICING COMPENSATION. The
Master Servicer shall be entitled, at its election, either (a) to pay itself the
Master Servicing Fee out of any Mortgagor payment on account of interest prior
to the deposit of such payment in the Master Servicer Custodial Account or (b)
to withdraw from the Master Servicer Custodial Account such Master Servicing Fee
pursuant to Section 3.03. 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 out of Liquidation Proceeds in respect of such Mortgage
Loan or other recoveries with respect thereto to the extent permitted in Section
3.02 or (b) to withdraw from the Master Servicer Custodial Account the Master
Servicing Fee in respect of each such Mortgage Loan to the extent of such
Liquidation Proceeds or other recoveries, to the extent permitted by Section
3.03. The Master Servicer shall be entitled to retain as additional master
servicing compensation any earnings on the funds in the Master Servicer
Custodial Account. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder.
Section 3.05. RIGHTS OF THE OWNERS IN RESPECT OF THE MASTER SERVICER.
The Master Servicer shall afford the Principal and the owners of the Mortgage
Loans, upon reasonable notice, during normal business hours access to all
records maintained by the Master Servicer in respect of its rights and
obligations hereunder and access to officers of the Master Servicer responsible
for such obligations.
ARTICLE IV
DISTRIBUTIONS;
STATEMENTS AND REPORTS
Section 4.01. DISTRIBUTIONS. (a) On each Distribution Date, the Master
Servicer shall pay to the owners of the related Mortgage Loans (or their
designees), which are listed as an owner as of the close of business of the last
Business Day of the month prior to the month of such Distribution Date, the
funds received with respect to such Mortgage Loans from the related Servicer on
the related Remittance Date, less the applicable Master Servicing Fee, by wire
transfer to such owner where the amount of funds payable to such owner for such
Distribution Date exceeds $100,000 and owner has provided wire transfer
instructions to the Master Servicer, or otherwise by first class U.S. mail.
The Master Servicer shall withhold or cause to be withheld such amounts
as may be required by the Code (giving full effect to any exemptions from
withholding and related certifications required to be furnished by the owners of
the Mortgage Loans, any reductions to withholding by virtue of any bilateral tax
treaties and any applicable certification required to be furnished by the owners
of the Mortgage Loans with respect thereto) from distributions to be made to
owners of the Mortgage Loans, including any back-up withholding or withholding
of taxes on distributions made to Non-U.S. Persons. For the purposes of this
paragraph, a "Non-U.S. Person" is an individual, corporation, partnership or
other person
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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.
Section 4.02. STATEMENTS TO OWNERS. (a) Concurrently with each
distribution pursuant to Section 4.01, the Master Servicer, shall forward or
cause to be forwarded by mail to each owner of the Mortgage Loans and the
Principal a statement setting forth:
o the amount of such distribution to such owner of the Mortgage
Loans allocable to principal, separately identifying the
aggregate amount of any Principal Prepayments included
therein;
o the amount of such distribution to such owners of the Mortgage
Loans allocable to interest;
o the number of Mortgage Loans outstanding as of the end of the
prior month;
o the scheduled principal balance of the Mortgage Loans for such
Distribution Date;
o the amount of any Periodic Advances made by any Servicer;
o the number and aggregate principal balances of Mortgage Loans
Delinquent (a) one month, (b) two months and (c) three months
or more;
o the number and aggregate principal balances of the Mortgage
Loans in foreclosure as of the end of the preceding
Determination Date;
o the book value of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure;
o the principal and interest portions of liquidation losses
suffered as of the end of the prior month;
o the unpaid principal balance of any Mortgage Loan as to which
the related Servicer has determined not to foreclose because
it believes the related Mortgaged Property may be contaminated
with or affected by hazardous wastes or hazardous substances;
o the amount of the aggregate Servicing Fees paid with respect
to the related Distribution Date and the amount by which the
aggregate Servicing Fee has been reduced by Month End Interest
Shortfall for the related Distribution Date; and
o such other customary information as the Master Servicer deems
necessary or desirable to enable owners of the Mortgage Loans
to prepare their tax returns.
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(b) On each Distribution Date, the Master Servicer shall provide to
each owner and the Principal a copy of the information set forth in Section
4.02(a) on a loan-by-loan basis in electronically readable diskette format.
(c) The Master Servicer may combine payments and reports to each owner
of the related Mortgage Loans with payments and reports concerning other pools
and subpools of mortgage loans which are owned by such owner that are master
serviced by the Master Servicer, provided that such payments and reports show a
breakdown on a pool-by-pool, or subpool-by-subpool basis, as the case may be, as
well as aggregate figures.
Section 4.03. REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY. The owners of the Mortgage Loans may be required to make the reports
of foreclosures and abandonments of any Mortgaged Property pursuant to Code
Section 6050J. In order to facilitate this reporting process, the Master
Servicer, on or before January 15th of each year, shall provide to each owner
information relating to each instance occurring during the previous calendar
year in which a related Servicer (i) on behalf of the related owner acquires an
interest in a Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Mortgage Loan, or (ii) knows or
has reason to know that a Mortgaged Property has been abandoned. Reports from
the Master Servicer shall be in form and substance sufficient to meet the
reporting requirements imposed by Code Section 6050J.
ARTICLE V
THE MASTER SERVICER
Section 5.01. LIABILITY OF THE MASTER SERVICER. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement and undertaken hereunder by the Master
Servicer herein.
Section 5.02. MERGER OR CONSOLIDATION OF THE MASTER SERVICER; TRANSFER
OF MASTER SERVICING. Subject to the following paragraph, the Master Servicer
will keep in full effect its existence, rights and franchises as a corporation
under the laws of the jurisdiction of its incorporation, and will 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 respective duties under this Agreement.
Any person into which the Master Servicer may be merged or consolidated
or any person resulting from any merger, conversion or consolidation to which
the Master Servicer is a party, or any Person succeeding to the business of
Master Servicer through the transfer of substantially all its assets, shall be
the successor of 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.
Notwithstanding anything to the contrary contained in this Section 5.02
or in Section 5.04, the Master Servicer may assign its rights and delegate its
duties and obligations under this Agreement; provided that the purchaser or
transferee accepting such assignment or
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delegation shall be a Person which shall be qualified to service mortgage loans
for FNMA or FHLMC, and shall execute and deliver to the Principal an agreement,
in form and substance reasonably satisfactory to the Principal, which contains
an assumption by such Person of the due and punctual performance and observance
of each covenant and condition to be performed or observed by the Master
Servicer under this Agreement from and after the date of such agreement.
In the case of any assignment and delegation of rights, duties and
obligations under this Agreement pursuant to this Section 5.02, the Master
Servicer shall be released from its duties and obligations under this Agreement,
except that the Master Servicer shall remain liable for all liabilities and
obligations incurred by it as Master Servicer hereunder prior to the
satisfaction of the conditions to such assignment and delegation set forth in
the preceding paragraph.
Section 5.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND
OTHERS. Neither the Principal nor the Master Servicer nor any of their
respective partners, directors, officers, employees or agents, shall be under
any liability to the owners of the related Mortgage Loans and all such Persons
shall be held harmless for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, any Servicing Agreement or
related Custodial Agreement, or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Master Servicer against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties hereunder, or under any Servicing Agreement or
related Custodial Agreement. The Principal, the Master Servicer and any of their
respective partners, directors, officers, employees or agents, may rely in good
faith on any document of any kind which, PRIMA FACIE, is properly executed and
submitted by any Person respecting any matters arising hereunder, or under any
Servicing Agreement or related Custodial Agreement. The Principal, the Master
Servicer and each of their respective partners, directors, officers, employees
or agents, shall be indemnified by the owners of the related Mortgage Loans and
held harmless against any loss, liability or expense incurred in connection with
any legal action relating to this Agreement, any Servicing Agreement or related
Custodial Agreement other than any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or gross negligence in the performance of his
or its duties hereunder, under any Servicing Agreement or related Custodial
Agreement or by reason of reckless disregard of his or its obligations and
duties hereunder, under any Servicing Agreement or related Custodial Agreement.
Neither the Principal nor the Master Servicer shall be under any obligation to
appear in, prosecute or defend any legal action unless such action is related to
its respective duties under this Agreement and which in its opinion may involve
it in any expense or liability; PROVIDED, HOWEVER, that the Master Servicer may
in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interest of the owners of the Mortgage Loans hereunder if
the owners of the Mortgage Loans offer to the Master Servicer reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred thereby. In such event, the legal expenses and costs of such action and
any liability resulting therefrom shall be expenses, costs and liabilities of
the owners of the Mortgage Loans and the Master Servicer shall be entitled to be
reimbursed therefor out of the Master Servicer Custodial Account, and such
amounts
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shall, on the following Distribution Date or Distribution Dates, be allocated in
reduction of distributions to the owners of the Mortgage Loans pro rata.
Section 5.04. THE MASTER SERVICER NOT TO RESIGN. Except as specifically
authorized pursuant to Section 5.02 above, the Master Servicer shall not resign
from the obligations and duties hereby imposed on it, except upon determination
that its duties hereunder are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
carried on by it. Any such determination permitting the resignation of the
Master Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Principal. No such resignation shall become effective until a
successor master servicer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with Section 5.02.
ARTICLE VI
DEFAULT
Section 6.01. EVENTS OF DEFAULT. In case one or more of the following
Events of Default by the Master Servicer shall occur and be continuing, that is
to say:
o any failure by the Master Servicer to distribute or cause to
be distributed to owners of the Mortgage Loans any payment
required to be made by the Master Servicer under the terms of
this Agreement which continues unremedied for a period of 10
days after the date upon which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Master Servicer by the Principal or the owners of the
Mortgage Loans; or
o 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 the Master Servicer in this
Agreement which continues unremedied for a period of 60 days
after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to
the Master Servicer by the Principal or owners of the Mortgage
Loans; or
o a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator
in any bankruptcy, 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 and
unstayed for a period of 60 days; or
o the Master Servicer shall consent to the appointment of a
trustee, conservator, receiver or liquidator or liquidating
committee in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, voluntary liquidation
or similar proceedings of or relating to the Master Servicer,
or of or relating to all or substantially all of its property;
or
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o 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, bankruptcy or
reorganization statute, make an assignment for the benefit of
its creditors or voluntarily suspend payment of its
obligations; or
o 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 5.02;
then, and in each and every such case, subject to applicable law, so long as an
Event of Default shall not have been remedied, the owners of the related
Mortgage Loans, by notice in writing to the Master Servicer may terminate all of
the rights and obligations of the Master Servicer under this Agreement with
respect to such Mortgage Loans upon the appointment and acceptance of a
successor master servicer who satisfies the requirements of Section 5.02, but
without prejudice to any rights which the Master Servicer may have to the
aggregate Master Servicing Fees due prior to the date of transfer of the Master
Servicer's responsibilities hereunder, reimbursement of expenses to the extent
permitted by this Agreement. The compensation of any successor master servicer
so appointed shall not exceed the compensation specified in Section 3.04.
Section 6.02. NOTIFICATION TO OWNERS. Upon any termination of the
Master Servicer or appointment of a successor master servicer, in each case as
provided herein, the Principal shall give prompt written notice thereof to the
owners of the related Mortgage Loans at their respective addresses.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. AMENDMENT. This Agreement may be amended from time to
time by the Master Servicer and the Principal, without the consent of any of the
owners of the Mortgage Loans, (i) to cure any ambiguity or correct any mistake,
(ii) to correct or supplement any provisions herein or therein which may be
inconsistent with any other provisions herein or therein, (iii) to change the
timing and/or nature of deposits into the Master Servicer Custodial Account
provided that such change shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any owner of the
Mortgage Loans and (iv) to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be materially
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any owners of the Mortgage Loans.
This Agreement may also be amended from time to time by the Master
Servicer and the Principal with the consent of the owners of the Mortgage Loans.
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Promptly after the execution of any amendment requiring the consent of
owners of the Mortgage Loans, the Principal shall furnish written notification
of the substance of such amendment to each of the owners of the Mortgage Loans.
Section 7.02. COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 7.03. GOVERNING LAW; JURISDICTION. This Agreement shall be
construed in accordance with the laws of the State of New York (without regard
to conflicts of laws principles), and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
Section 7.04. 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 certified or registered mail, return
receipt requested (i) in the case of the Master Servicer, to Securitized Asset
Services Corporation, 7485 New Horizon Way, Frederick, Maryland 21701,
Attention: Vice President, or such other address as may hereafter be furnished
to the Principal in writing by the Master Servicer, (ii) in the case of the
Principal, to the Prudential Home Mortgage Company, Inc., 7485 New Horizon Way,
Frederick, Maryland 21701, Attention: Vice President, or such other address as
may hereafter be furnished to the Master Servicer in writing by the Principal,
and (iii) in the case of an owner of the related Mortgage Loans, to such owner
at such address as is shown in Schedule II of the related Servicing Agreement.
Any notice required or permitted to be mailed to an owner shall be given by
first class mail, postage prepaid, at the address of such owner in Schedule II
of related Servicing Agreement. Any notice mailed or transmitted within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the addressee receives such notice, provided, however,
that any demand, notice or communication to or upon the Master Servicer or the
Principal shall not be effective until received.
Section 7.05. 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.
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IN WITNESS WHEREOF, the Owner, the Master Servicer and the Principal
have caused their names to be signed hereto by their respective officers
"hereunto duly authorized, all as of the day and year first above written.
SECURITIZED ASSET SERVICES
CORPORATION
as Master Servicer
By:
Name: B. David Bialzak
Title: Vice President
THE PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Owner
By:
Name: B. David Bialzak
Title: Vice President
THE PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Principal
By:
Name: B. David Bialzak
Title: Vice President
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<TABLE>
<CAPTION>
SCHEDULE A
Servicing Agreement Schedule
Master Servicing Agreement Coverage Date Master Servicing Fee Rate
<S> <C> <C>
Columbia Equities, Ltd. 8/31/95 0.250% minus the Servicing
and Fee Rate of the individual
The Prudential Home Mortgage Mortgage Loan
Company, Inc.
dated as of 8/31/93 (solely with
respect to Mortgage Loan Pool
1995-W24, Subpool B)
International Savings & Loan 2/8/95 0.375% minus the Servicing
Association and Fee Association Rate of the
The Prudential Home Mortgage individual Mortgage Loan
Company, Inc.
dated as of 2/8/95 (solely with
respect to Mortgage Loan Pool
1995-W24, Subpool C)
First Town Mortgage Corporation 8/20/93 0.250% minus the Servicing
and Fee Rate of the individual
The Prudential Home Mortgage Mortgage Loan
Company, Inc.
dated as of 8/20/93, as amended,
(solely with respect to Mortgage
Loan Pool 1995-W24, Subpool D)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
Non-Standard Custodial Agreement Schedule
Affected Mortgage Loans
Master Servicer Loan Alternate Custodial Coverage
Number Agreement Date
<S> <C> <C>
</TABLE>
<PAGE>
EXHIBIT A
REQUEST FOR RELEASE
(for custodian)
LOAN INFORMATION
Name of Mortgagor:
Servicer
Loan No.:
CUSTODIAN
Name:
Address:
Custodian
Mortgage File No.:
SELLER
Name:
Address:
Mortgage Loan Pool: The Prudential Home
Mortgage Company, Inc.
Mortgage Pool
199__-W
The undersigned Servicer hereby acknowledges that it has received from
the custodian the documents referred to below (the "Documents"). All capitalized
terms not otherwise defined in this Request for Release shall have the meanings
given them in the Servicing Agreement dated as December 2, 1995 (the "Servicing
Agreement") between Securitized Asset Services Corporation and The Prudential
Home Mortgage Company, Inc. ( ) Promissory Note dated _________________, 199___,
in the original principal sum of $____________________, made by _____________,
payable to, or endorsed to the order of, the Trustee.
( ) Mortgage recorded on __________________ as instrument no. ______ in the
County Recorder's Office of the County of ________________, State of
______________ in ______________ book/reel/docket _____________________
of official records at page/image
( ) Deed of Trust recorded on ________________ as instrument no.
___________ in the County Recorder's Office of the County of
_____________, State of ______________ in book/reel/docket
_________________ of official records at page/image _________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
_____________________ as instrument no. _________________ in the County
Recorder's Office of the County of ____________________, State of
____________ in ______________ book/reel/docket _________________ of
official records at page/image _______________________.
<PAGE>
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( )
( )
( )
( )
The undersigned Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents in trust
for the benefit of the custodian, solely for the purposes provided in
the Agreement.
(2) The Servicer shall not cause or permit the Documents to become subject
to, or encumbered by, any claim, liens, security interest, charges,
writs of attachment or other impositions nor shall the Servicer assert
or seek to assert any claims or rights of setoff to or against the
Documents or any proceeds thereof.
(3) The Servicer shall return the Documents to the Custodian when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been
remitted to the Master Servicer Custodial Account and except as
expressly provided in the Agreement.
(4) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the fill in Servicer
shall at all times be earmarked for the account of the custodian, and
the Servicer shall keep the Documents and any proceeds separate and
distinct from all other property in the Servicer's possession, custody
or control.
PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Servicer
By:
Title:
Date: , 19
<PAGE>
EXHIBIT I-1
SERVICING AGREEMENT RELATING TO MORTGAGE LOAN POOL 1995-W18
<PAGE>
SECURITIZED ASSET SERVICES CORPORATION
(Principal)
and
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Servicer)
SERVICING AGREEMENT
Dated as of June 2, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1 DEFINITIONS.......................................................................................... 1
-----------
ACH .............................................................................................. 1
Adjusted Tangible Net Worth............................................................................ 1
Advance .............................................................................................. 1
Affiliate.............................................................................................. 1
Amounts Held for Future Distribution................................................................... 1
Appraisal Report....................................................................................... 2
ARM Loan .............................................................................................. 2
Assignment............................................................................................. 2
Assumption............................................................................................. 2
Balloon Amount......................................................................................... 2
Balloon Loan........................................................................................... 2
Bankruptcy Code........................................................................................ 2
BIF .............................................................................................. 2
Borrower .............................................................................................. 2
Business Day........................................................................................... 2
Buydown Agreement...................................................................................... 2
Buydown Funds.......................................................................................... 2
Certificate............................................................................................ 3
Code .............................................................................................. 3
Condominium Project.................................................................................... 3
Condominium Unit....................................................................................... 3
Converted Mortgage Loan................................................................................ 3
Current Value.......................................................................................... 3
Curtailment............................................................................................ 3
Custodial Buydown Account.............................................................................. 3
Custodial Principal and Interest (P&I) Account......................................................... 3
Custodial Taxes and Insurance (T&I) Account............................................................ 3
Custodian.............................................................................................. 3
Cut-Off Date........................................................................................... 3
Debt Service Reduction................................................................................. 3
Deficient Valuation.................................................................................... 4
Delinquency/Delinquent................................................................................. 4
Determination Date..................................................................................... 4
Directly Operate....................................................................................... 4
Due Date .............................................................................................. 4
Due-On-Sale Clause..................................................................................... 4
Duff & Phelps.......................................................................................... 4
Eligible Account....................................................................................... 4
Eligible Custodial P&I Account......................................................................... 5
Eligible Investments................................................................................... 5
Errors and Omissions Policy............................................................................ 6
Escrow Funds........................................................................................... 6
Escrow Item............................................................................................ 6
FDIC .............................................................................................. 6
</TABLE>
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<TABLE>
<S> <C>
FHA .............................................................................................. 6
FHLMC .............................................................................................. 6
Fidelity Bond.......................................................................................... 7
Fitch .............................................................................................. 7
Flood Insurance........................................................................................ 7
FNMA .............................................................................................. 7
GNMA .............................................................................................. 7
GPM (or GPARM) Loan.................................................................................... 7
Gross Margin........................................................................................... 7
Hazard Insurance....................................................................................... 7
HUD .............................................................................................. 7
Index .............................................................................................. 7
Insurance Policy....................................................................................... 7
Insurance Proceeds..................................................................................... 7
Interest Adjustment Date............................................................................... 7
Liquidation............................................................................................ 8
Liquidation Proceeds................................................................................... 8
Loan Originator........................................................................................ 8
Loan-to-Value (LTV).................................................................................... 8
Master Servicer........................................................................................ 8
Master Servicer Custodial Account...................................................................... 8
Master Servicer Loan Number............................................................................ 8
Maximum Lifetime Mortgage Interest Rate................................................................ 8
Maximum Negative Amortization Amount................................................................... 8
Minimum Lifetime Mortgage Interest Rate................................................................ 8
Month End Interest..................................................................................... 8
Month End Interest Shortfall........................................................................... 8
Monthly Accounting Records............................................................................. 8
Monthly Payment........................................................................................ 9
Monthly Remittance..................................................................................... 9
Monthly Servicing Compensation......................................................................... 9
Moody's .............................................................................................. 9
Mortgage Interest Rate................................................................................. 9
Mortgage Loan.......................................................................................... 9
Mortgage Loan Documents................................................................................ 9
Mortgage Note.......................................................................................... 9
Mortgage Note Assumption Rider......................................................................... 9
Mortgaged Property..................................................................................... 9
Mortgagee.............................................................................................. 9
Net Mortgage Interest Rate............................................................................. 10
Non-Recoverable Advance................................................................................ 10
Notice of Periodic Adjustment.......................................................................... 10
Officer .............................................................................................. 10
Opinion of Counsel..................................................................................... 10
Owner or Owner of the Mortgage Loans................................................................... 10
Owner Mortgage Loan File............................................................................... 10
Owner-Occupied Property................................................................................ 10
P&I Advance............................................................................................ 10
Partial Liquidation Proceeds........................................................................... 10
</TABLE>
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<TABLE>
<S> <C>
Partial Liquidation Receipt Period..................................................................... 10
Payment Adjustment Date................................................................................ 11
Periodic Payment Cap................................................................................... 11
Periodic Rate Cap...................................................................................... 11
Person .............................................................................................. 11
Pool Insurance......................................................................................... 11
Pool Insurer........................................................................................... 11
Pool [X] Mortgage Loan................................................................................. 11
Preliminary Title Report............................................................................... 11
Prepayment In Full..................................................................................... 11
Primary Mortgage Insurance............................................................................. 11
Primary Mortgage Insurer............................................................................... 11
Primary Residence...................................................................................... 11
Principal.............................................................................................. 11
Property Inspection Report............................................................................. 12
Prudent Servicing Practices............................................................................ 12
PUD (Planned Unit Development)......................................................................... 12
PUD Unit .............................................................................................. 12
Purchase Agreement..................................................................................... 12
Purchase Price......................................................................................... 12
Real Estate Owned (REO)................................................................................ 12
Realized Loss.......................................................................................... 12
Reference Bank......................................................................................... 12
REMIC .............................................................................................. 12
REMIC Provisions....................................................................................... 12
Remittance Date........................................................................................ 13
Rents from Real Property............................................................................... 13
REO Disposition........................................................................................ 13
Representing Party..................................................................................... 13
S&P .............................................................................................. 13
SAIF .............................................................................................. 13
Scheduled Principal Balance............................................................................ 13
Security Instrument.................................................................................... 13
Servicer .............................................................................................. 13
Servicer Loan Mortgage Number.......................................................................... 13
Servicer Mortgage Loan File............................................................................ 13
Servicer Number........................................................................................ 14
Servicing Fee.......................................................................................... 14
Servicing Fee Percentage............................................................................... 14
Single Family Property................................................................................. 14
Subpool [X] Mortgage Loan.............................................................................. 14
Supervision Agreement.................................................................................. 14
Tangible Net Worth..................................................................................... 14
T&I Advance............................................................................................ 14
Threshold Amount....................................................................................... 14
Title Insurance........................................................................................ 14
Transfer of Ownership.................................................................................. 14
Unpaid Principal Balance............................................................................... 15
Unpooled Mortgage Loan................................................................................. 15
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
VA .............................................................................................. 15
Value .............................................................................................. 15
ARTICLE 2 CONSTRUCTION......................................................................................... 15
------------
Section 2.1 LEGAL CONSTRUCTION.................................................................. 15
------------------
2.1.1 Compliance with Applicable Law...................................................... 15
2.1.2 Potential Conflict.................................................................. 15
2.1.3 Consistent Legal Compliance......................................................... 15
2.1.4 General Interpretive Rules.......................................................... 15
2.1.5 Construction of Provisions.......................................................... 16
Section 2.2 SERVICER PRACTICES.................................................................. 16
------------------
2.2.1 Prudent Servicing Practices......................................................... 16
2.2.2 Non-Discrimination Practices........................................................ 16
Section 2.3 GENERAL PROVISIONS.................................................................. 16
------------------
2.3.1 Servicer's Agreement................................................................ 16
2.3.2 Term of Agreement................................................................... 16
2.3.3 Amended Mortgage Loan Schedule...................................................... 16
2.3.4 Assignment and Replacement.......................................................... 17
2.3.5 Notices............................................................................. 17
2.3.6 Change of Accountants............................................................... 18
Section 2.4 SERVICING OF MORTGAGE LOANS FOR MULTIPLE OWNERS..................................... 18
-----------------------------------------------
2.4.1 Transfer of Mortgage Loans.......................................................... 18
2.4.2 Ownership Schedule.................................................................. 18
ARTICLE 3 REMIC PROVISIONS..................................................................................... 19
----------------
Section 3.1 GENERAL............................................................................. 19
-------
3.1.1 Applicability....................................................................... 19
3.1.2 Modifications of Mortgage Loans..................................................... 19
3.1.3 Indemnification with Respect to Certain Taxes
and Loss of REMIC Status............................................................ 19
Section 3.2 REO QUALIFICATION................................................................... 19
-----------------
3.2.1 Foreclosure Property Qualification.................................................. 19
3.2.2 Foreclosure Property Qualification Restrictions..................................... 20
3.2.3 REO Disposition Accounting.......................................................... 20
Section 3.3 PROHIBITED TRANSACTIONS AND ACTIVITIES.............................................. 20
--------------------------------------
3.3.1 Mortgage Loan Disposition Restriction............................................... 20
3.3.2 Personal Property Restriction....................................................... 21
Section 3.4 ELIGIBLE INVESTMENTS................................................................ 21
--------------------
3.4.1 Custodial Account Investments....................................................... 21
3.4.2 Escrow Account Investments.......................................................... 22
ARTICLE 4 SERVICER CONSIDERATIONS.............................................................................. 22
-----------------------
Section 4.1 [RESERVED].......................................................................... 22
Section 4.2 SERVICER ELIGIBILITY STANDARDS...................................................... 22
------------------------------
4.2.1 Regulatory Approvals and Licensing.................................................. 22
4.2.2 Net Worth and Portfolio Requirements................................................ 23
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
4.2.3 Auditor's Opinion and Other Annual Reports.......................................... 23
4.2.4 Servicing Experience................................................................ 23
4.2.5 Material Changes.................................................................... 24
Section 4.3 ERRORS AND OMISSIONS INSURANCE...................................................... 24
------------------------------
4.3.1 E & O Requirement................................................................... 24
4.3.2 E & O Coverage...................................................................... 24
4.3.3 E & O Scope......................................................................... 25
4.3.4 E & O Policy Maintenance............................................................ 25
4.3.5 E & O Deductible.................................................................... 25
4.3.6 E & O Qualifications................................................................ 25
4.3.7 Notice of Claim..................................................................... 25
Section 4.4 FIDELITY BOND COVERAGE.............................................................. 25
----------------------
4.4.1 Fidelity Bond Requirement........................................................... 25
4.4.2 Fidelity Bond Coverage.............................................................. 26
4.4.3 Fidelity Bond Scope................................................................. 26
4.4.4 Fidelity Bond Maintenance........................................................... 26
4.4.5 Fidelity Bond Deductible............................................................ 26
4.4.6 Fidelity Bond Rating Requirement.................................................... 26
4.4.7 Notice of Event..................................................................... 26
Section 4.5 SERVICER'S LIABILITY................................................................ 26
--------------------
4.5.1 Liability Exposure.................................................................. 26
4.5.2 Scope of Liability.................................................................. 27
Section 4.6 [RESERVED].......................................................................... 27
Section 4.7 INDEMNIFICATION..................................................................... 27
---------------
4.7.1 Scope of Indemnity.................................................................. 27
4.7.2 Survival of Indemnity............................................................... 28
Section 4.8 SERVICER'S COMPENSATION............................................................. 28
-----------------------
4.8.1 Servicing Fee Amount................................................................ 28
4.8.2 Servicing Fee Source................................................................ 28
ARTICLE 5 REPRESENTATIONS AND WARRANTIES....................................................................... 28
------------------------------
Section 5.1 GENERAL.................................................................................... 28
5.1.1 Reliance............................................................................ 28
5.1.2 Survival of Representations and Warranties.......................................... 28
5.1.3 Breach of Representation or Warranty................................................ 29
5.1.4 Assignment of Representations and Warranties........................................ 29
Section 5.2 SERVICER REPRESENTATIONS AND WARRANTIES............................................. 29
---------------------------------------
5.2.1 Qualification of Servicer........................................................... 29
5.2.2 Requisite Authority................................................................. 30
5.2.3 No Conflicts........................................................................ 30
5.2.4 Enforceable Agreement............................................................... 30
5.2.5 No Consents Required................................................................ 30
5.2.6 Agency Approval..................................................................... 30
5.2.7 Financial Condition................................................................. 30
5.2.8 Servicing Compliance................................................................ 30
5.2.9 No Impairment....................................................................... 31
5.2.10 No Inquiries........................................................................ 31
5.2.11 Custodial and Escrow Accounts Current............................................... 31
5.2.12 Insurance Maintenance............................................................... 31
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
ARTICLE 6 CUSTODIAL ACCOUNTING................................................................................. 32
--------------------
Section 6.1 IN GENERAL.......................................................................... 32
----------
6.1.1 Custodial Account Establishment..................................................... 32
6.1.2 Custodial Account Separateness...................................................... 32
6.1.3 Custodial Account Maintenance....................................................... 32
6.1.4 Escrow Investment................................................................... 33
6.1.5 Clearing Account.................................................................... 33
6.1.6 Custodial Buydown Account........................................................... 34
6.1.7 Master Servicer Custodial Account................................................... 34
Section 6.2 CUSTODIAL P&I ACCOUNT............................................................... 34
---------------------
6.2.1 Mandatory Deposits.................................................................. 34
6.2.2 Optional Deposits................................................................... 35
6.2.3 Permissible Withdrawals............................................................. 35
6.2.4 Account Beneficiary................................................................. 36
6.2.5 Use of Accounts..................................................................... 36
Section 6.3 CUSTODIAL T&I ACCOUNT............................................................... 36
---------------------
6.3.1 Mandatory Deposits.................................................................. 36
6.3.2 Permissible Withdrawals............................................................. 36
6.3.3 Account Requirements................................................................ 36
6.3.4 Account Balance..................................................................... 37
Section 6.4 ELIGIBLE ACCOUNT INVESTMENTS........................................................ 37
----------------------------
6.4.1 Eligible Investments Permitted...................................................... 37
6.4.2 Eligible Investment Restrictions.................................................... 37
6.4.3 Eligible Investment Income.......................................................... 37
6.4.4 Eligible Investment Losses.......................................................... 37
6.4.5 Eligible Investment Limitations..................................................... 37
6.4.6 Eligible Investments Reports........................................................ 37
ARTICLE 7 MORTGAGE LOAN ACCOUNTING............................................................................. 38
------------------------
Section 7.1 IN GENERAL.......................................................................... 38
----------
7.1.1 Mortgage Loan Accounting Practices.................................................. 38
7.1.2 Record Keeping...................................................................... 38
7.1.3 Record Review....................................................................... 38
Section 7.2 MORTGAGE LOAN RECORDS............................................................... 38
---------------------
7.2.1 Account Records..................................................................... 38
7.2.2 Account Record Information.......................................................... 38
7.2.3 Accounting Practice................................................................. 39
7.2.4 Access to Certain Documentation and
Information Regarding the Mortgage Loans............................................ 39
Section 7.3 ACCOUNTING PROCEDURES............................................................... 39
---------------------
7.3.1 Principal and Interest Computation.................................................. 39
7.3.2 Amortization Requirement............................................................ 39
7.3.3 Negative Amortization............................................................... 40
7.3.4 Interest Calculations............................................................... 40
7.3.5 Buydown Loans....................................................................... 40
Section 7.4 APPLICATION PROCEDURE............................................................... 40
---------------------
7.4.1 Application Priority................................................................ 40
</TABLE>
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<TABLE>
<S> <C>
7.4.2 Reapplication of Prior Payments..................................................... 40
7.4.3 Advance Payments.................................................................... 40
Section 7.5 CURTAILMENTS........................................................................ 40
------------
7.5.1 Curtailment Amount.................................................................. 40
7.5.2 Curtailment Application............................................................. 41
7.5.3 Effect of Curtailment............................................................... 41
7.5.4 Curtailment Transmission............................................................ 41
Section 7.6 LIQUIDATIONS........................................................................ 41
------------
7.6.1 Month End Interest.................................................................. 41
7.6.2 Liquidation Reports................................................................. 41
7.6.3 Deposit of Funds.................................................................... 41
7.6.4 Document Request.................................................................... 41
Section 7.7 REALIZED LOSSES..................................................................... 42
---------------
7.7.1 Liquidation Realized Loss Determination............................................. 42
7.7.2 Bankruptcy Realized Loss Determination.............................................. 42
7.7.3 Reporting Requirement............................................................... 42
7.7.4 Servicer's Liability................................................................ 42
ARTICLE 8 ARM LOANS............................................................................................ 43
---------
Section 8.1 ARM LOAN SERVICING.................................................................. 43
------------------
8.1.1 In General.......................................................................... 43
8.1.2 Servicer's Liability................................................................ 43
8.1.3 Adjustment Reports.................................................................. 43
8.1.4 Substitute Index.................................................................... 43
Section 8.2 NOTICE OF PERIODIC ADJUSTMENT....................................................... 43
-----------------------------
8.2.1 Notice Requirement.................................................................. 43
8.2.2 Notice Contents..................................................................... 44
8.2.3 Legal Compliance.................................................................... 44
Section 8.3 ARM LOAN CONVERSION................................................................. 44
-------------------
8.3.1 Servicer's Determination............................................................ 44
8.3.2 Conversion Notification............................................................. 45
8.3.3 Purchase by Servicer................................................................ 45
ARTICLE 9 MORTGAGE LOAN FILES.................................................................................. 45
-------------------
Section 9.1 OWNER MORTGAGE LOAN FILES........................................................... 45
-------------------------
9.1.1 Owner Mortgage Loan File Requirements............................................... 45
9.1.2 Custodian........................................................................... 46
9.1.3 Release of Documents from Owner Mortgage Loan File.................................. 47
9.1.4 Execution by owner.................................................................. 47
9.1.5 Custodial Fees...................................................................... 47
9.1.6 Representing Party Officers' Certificate............................................ 47
9.1.7 Financing Arrangements.............................................................. 48
Section 9.2 SERVICER MORTGAGE LOAN FILES........................................................ 48
----------------------------
9.2.1 Servicer Mortgage Loan File Requirements............................................ 48
9.2.2 Servicer Mortgage Loan File Access.................................................. 49
9.2.3 Alternate Media..................................................................... 49
Section 9.3 REQUISITE FORM...................................................................... 50
--------------
</TABLE>
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<TABLE>
<S> <C>
9.3.1 Form of Endorsements................................................................ 50
9.3.2 Form of Assignment.................................................................. 50
ARTICLE 10 ESCROWS............................................................................................. 51
-------
Section 10.1 ESCROW CRITERIA..................................................................... 51
---------------
10.1.1 Escrow Requirement.................................................................. 51
Section 10.2 PAYMENT OF ESCROW ITEMS............................................................. 51
-----------------------
10.2.1 Escrow Payment Obligation........................................................... 51
10.2.2 Escrow Item Payments................................................................ 51
10.2.3 Escrow Fund Insufficiency........................................................... 51
10.2.4 Nonpayment Notice................................................................... 52
Section 10.3 ESCROW FUND DETERMINATION........................................................... 52
-------------------------
10.3.1 Escrow Funds Analysis............................................................... 52
10.3.2 Escrow Fund Surplus................................................................. 52
10.3.3 Escrow Fund Deficiency.............................................................. 52
Section 10.4 RECORDS............................................................................. 52
-------
10.4.1 Escrow Funds Records................................................................ 52
10.4.2 Escrow Obligations Records.......................................................... 52
Section 10.5 ESCROW WAIVER....................................................................... 52
-------------
10.5.1 Waiver Conditions................................................................... 52
10.5.2 Waiver Rescission................................................................... 53
ARTICLE 11 COLLECTION AND SERVICING PRACTICES.................................................................. 53
----------------------------------
Section 11.1 GENERAL SERVICING REQUIREMENTS...................................................... 53
------------------------------
11.1.1 Servicing Practices................................................................. 53
11.1.2 Tax Returns and Other Reports....................................................... 53
11.1.3 Servicer Internal Controls.......................................................... 53
11.1.4 Pool Insurance Compliance........................................................... 53
11.1.5 Primary Mortgage Insurance Compliance............................................... 53
Section 11.2 DELEGATION OF DUTIES................................................................ 53
--------------------
11.2.1 Permissible Delegations............................................................. 53
11.2.2 Delegee's Qualifications............................................................ 54
11.2.3 Responsibility for Costs............................................................ 54
11.2.4 Servicer's Liability................................................................ 55
Section 11.3 DUE-ON-SALE CLAUSE ENFORCEMENT...................................................... 55
------------------------------
11.3.1 Enforcement Requirement............................................................. 55
11.3.2 Litigation Considerations........................................................... 55
11.3.3 Approval Requirement................................................................ 55
11.3.4 Exempt Transactions................................................................. 55
Section 11.4 ASSUMPTIONS......................................................................... 57
-----------
11.4.1 Assumption Requirements............................................................. 57
11.4.2 Approval and Release................................................................ 57
11.4.3 Notification of Assumption.......................................................... 57
11.4.4 Assumption Fees..................................................................... 58
11.4.5 Disclosure Requirement.............................................................. 58
Section 11.5 PARTIAL RELEASES AND EASEMENTS...................................................... 58
------------------------------
11.5.1 Prerequisites....................................................................... 58
</TABLE>
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<TABLE>
<S> <C>
11.5.2 Release or Modification of Lien..................................................... 58
11.5.3 Master Servicer's Approval.......................................................... 59
Section 11.6 RECORDATION OF ASSIGNMENTS.......................................................... 59
--------------------------
11.6.1 Recordation Requirement............................................................. 59
11.6.2 Extension of Recording Period....................................................... 59
11.6.3 Delivery Requirement................................................................ 59
11.6.4 Waiver of Recordation............................................................... 59
Section 11.7 GENERAL SERVICING CONSIDERATIONS.................................................... 60
--------------------------------
11.7.1 Abandonment......................................................................... 60
11.7.2 Buydown Funds....................................................................... 60
11.7.3 Notification Matters................................................................ 60
11.7.4 Eminent Domain...................................................................... 60
11.7.5 Late Charges........................................................................ 61
Section 11.8 BORROWER BANKRUPTCY................................................................. 61
-------------------
11.8.1 Servicer's Duty..................................................................... 61
11.8.2 Responsibility for Costs............................................................ 61
11.8.3 Challenge Bankruptcy Reductions..................................................... 61
11.8.4 Bankruptcy Adjustments.............................................................. 61
11.8.5 Bankruptcy Plan Surveillance........................................................ 61
ARTICLE 12 DELINQUENCY MANAGEMENT.............................................................................. 62
----------------------
Section 12.1 IN GENERAL.......................................................................... 62
----------
12.1.1 Servicing Practices................................................................. 62
12.1.2 Servicer's Capabilities............................................................. 62
12.1.3 Servicing Objectives................................................................ 62
12.1.4 Servicer's Expenses................................................................. 62
Section 12.2 DELINQUENCY SERVICING PROCEDURES.................................................... 62
--------------------------------
12.2.1 Late Notice......................................................................... 62
12.2.2 Telephonic Inquiry.................................................................. 62
12.2.3 Notice of Default................................................................... 63
12.2.4 Borrower Interview.................................................................. 63
12.2.5 Continuing Contacts................................................................. 63
12.2.6 Property Inspection................................................................. 63
Section 12.3 RELIEF OF BORROWERS................................................................. 63
-------------------
12.3.1 Servicer's Role..................................................................... 63
12.3.2 Servicer's Discretion............................................................... 63
12.3.3 Relief Requirement.................................................................. 64
12.3.4 Primary Mortgage Insurance Considerations........................................... 64
12.3.5 Responsibility for Costs............................................................ 64
12.3.6 Forbearance Plan.................................................................... 64
12.3.7 Accommodation Limitations........................................................... 64
12.3.8 Pool Insurance Considerations....................................................... 64
Section 12.4 SPECIAL DELINQUENCY SERVICING CONSIDERATIONS........................................ 65
--------------------------------------------
12.4.1 Advance Responsibility During Delinquency........................................... 65
12.4.2 Primary Mortgage Insurance Compliance............................................... 65
12.4.3 Pool Insurance Compliance........................................................... 65
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 13 FORECLOSURE ADMINISTRATION.......................................................................... 65
--------------------------
Section 13.1 FORECLOSURE PREREQUISITES........................................................... 65
-------------------------
13.1.1 Chronic Delinquency................................................................. 65
13.1.2 Liquidation Recommendation.......................................................... 65
13.1.3 Foreclosure Expenses................................................................ 66
13.1.4 Hazardous Wastes.................................................................... 66
Section 13.2 DEED-IN-LIEU OF FORECLOSURE......................................................... 67
---------------------------
13.2.1 Conditions.......................................................................... 67
13.2.2 Subsequent Actions.................................................................. 67
Section 13.3 ACTIONS PRIOR TO FORECLOSURE........................................................ 68
----------------------------
13.3.1 Notice Requirements................................................................. 68
13.3.2 Initiation of Proceedings........................................................... 68
Section 13.4 FORECLOSURE PROCEDURES.............................................................. 68
----------------------
13.4.1 Foreclosure Expenses................................................................ 68
13.4.2 Bidding Instructions................................................................ 68
13.4.3 Buydown Funds Use................................................................... 69
13.4.4 Servicer's Responsibilities......................................................... 69
13.4.5 Conveyance Documents................................................................ 69
Section 13.5 MORTGAGE LOAN REINSTATEMENT......................................................... 70
---------------------------
13.5.1 Borrower's Full Payment............................................................. 70
13.5.2 Borrower's Partial Payment.......................................................... 70
13.5.3 Obligations upon Reinstatement...................................................... 70
13.5.4 Certain Assumptions Permitted....................................................... 70
ARTICLE 14 REO ADMINISTRATION.................................................................................. 70
------------------
Section 14.1 GENERAL PROVISIONS.................................................................. 70
------------------
14.1.1 REO Action Plan..................................................................... 70
Section 14.2 REO SERVICING....................................................................... 71
-------------
14.2.1 REO Servicing Requirements.......................................................... 71
14.2.2 Servicer's Responsibilities......................................................... 71
14.2.3 Notice.............................................................................. 72
Section 14.3 REO RECORDS AND REPORTS............................................................. 72
-----------------------
14.3.1 Records Retention................................................................... 72
14.3.2 Evidence of Title................................................................... 72
14.3.3 REO Expenses........................................................................ 72
14.3.4 REO Documents....................................................................... 72
Section 14.4 REO MARKETING....................................................................... 73
-------------
14.4.1 REO Marketing Efforts............................................................... 73
14.4.2 REO Sales........................................................................... 73
14.4.3 Primary Mortgage Insurance Considerations........................................... 73
14.4.4 Master Servicer Instructions........................................................ 73
14.4.5 Pool Insurance Considerations....................................................... 73
Section 14.5 REO REHABILITATION.................................................................. 73
------------------
14.5.1 REO Rehabilitation Requirement...................................................... 73
14.5.2 Master Servicer Approval............................................................ 73
14.5.3 Written Contractor Bids............................................................. 74
14.5.4 Primary Mortgage Insurance Considerations........................................... 74
</TABLE>
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Section 14.6 REO ADMINISTRATION FAILURE.......................................................... 74
--------------------------
14.6.1 Servicer Removal.................................................................... 74
14.6.2 Servicer's Continuing Obligations................................................... 74
14.6.3 Servicer's Duty to Compensate....................................................... 74
ARTICLE 15 INSURANCE........................................................................................... 75
---------
Section 15.1 GENERAL PROVISIONS.................................................................. 75
------------------
15.1.1 Insurance Requirements.............................................................. 75
15.1.2 Uninsured Losses.................................................................... 75
15.1.3 Servicer's Obligation to Maintain Insurance......................................... 75
15.1.4 Insurance Notices................................................................... 76
15.1.5 Default by Insurer.................................................................. 76
15.1.6 Insurance Carrier Rating............................................................ 76
15.1.7 Insurance Carrier Licenses.......................................................... 76
15.1.8 Risk Exposure....................................................................... 76
15.1.9 Evidence of Insurance............................................................... 76
Section 15.2 PRIMARY MORTGAGE INSURANCE.......................................................... 77
--------------------------
15.2.1 Primary Mortgage Insurance Requirement.............................................. 77
15.2.2 Primary Mortgage Insurance Coverage................................................. 77
15.2.3 Primary Mortgage Insurer Downgrading................................................ 77
15.2.4 Primary Mortgage Insurance Cancellation............................................. 78
15.2.5 Primary Mortgage Insurance Claims................................................... 78
Section 15.3 HAZARD INSURANCE.................................................................... 78
----------------
15.3.1 Hazard Insurance Requirement........................................................ 79
15.3.2 Hazard Insurance Coverage........................................................... 79
15.3.3 Hazard Insurance Deductible......................................................... 79
15.3.4 Hazard Insurance Vacancy Coverage................................................... 79
15.3.5 Hazard Insurance Mortgagee Provisions............................................... 79
Section 15.4 FLOOD INSURANCE..................................................................... 79
---------------
15.4.1 Flood Insurance Requirement......................................................... 79
15.4.2 Flood Insurance Coverage............................................................ 79
15.4.3 Flood Insurance Deductible.......................................................... 79
Section 15.5 TITLE INSURANCE..................................................................... 80
---------------
15.5.1 Title Insurance Requirement......................................................... 80
15.5.2 Title Insurance Coverage............................................................ 80
15.5.3 Servicer's Obligations.............................................................. 80
15.5.4 Policy Custody...................................................................... 80
15.5.5 Title Insurance Claims.............................................................. 80
Section 15.6 INSURANCE LOSS SETTLEMENTS.......................................................... 80
--------------------------
15.6.1 Settlement Approval................................................................. 80
15.6.2 Settlement Disbursements............................................................ 80
15.6.3 Settlement Funds.................................................................... 81
15.6.4 Settlement Notice................................................................... 81
15.6.5 Continuing Coverage................................................................. 81
15.6.6 Property Inspections................................................................ 82
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ARTICLE 16 CONDOMINIUM AND PUD INSURANCE....................................................................... 82
-----------------------------
Section 16.1 GENERAL PROVISIONS.................................................................. 82
------------------
16.1.1 Applicability....................................................................... 82
16.1.2 Premiums............................................................................ 82
16.1.3 Deductible Reserves................................................................. 82
16.1.4 Name of Insured..................................................................... 82
16.1.5 Mortgagee Clause.................................................................... 82
16.1.6 Reconstruction Coverage............................................................. 82
Section 16.2 COMMON AREA MULTIPLE PERIL INSURANCE................................................ 82
------------------------------------
16.2.1 Common Area Multiple Peril Insurance Requirement.................................... 82
16.2.2 Common Area Multiple Peril Insurance Coverage....................................... 83
16.2.3 Common Area Multiple Peril Insurance Deductible..................................... 83
16.2.4 Boiler and Machinery Coverage....................................................... 83
Section 16.3 BLANKET HAZARD INSURANCE............................................................ 83
------------------------
16.3.1 Blanket Hazard Insurance Requirement................................................ 83
16.3.2 Blanket Hazard Insurance Coverage................................................... 83
16.3.3 Blanket Hazard Insurance Deductible................................................. 83
Section 16.4 COMMON AREA COMPREHENSIVE
GENERAL LIABILITY (CGL) INSURANCE................................................... 84
---------------------------------
16.4.1 Common Area CGL Insurance Requirement............................................... 84
16.4.2 Common Area CGL Insurance Coverage.................................................. 84
Section 16.5 OWNERS' ASSOCIATION FIDELITY INSURANCE.............................................. 84
--------------------------------------
16.5.1 Owners' Association Fidelity Insurance Requirement.................................. 84
16.5.2 Owners' Association Fidelity Insurance Coverage..................................... 84
Section 16.6 BLANKET FLOOD INSURANCE............................................................. 84
-----------------------
16.6.1 Blanket Flood Insurance Requirement................................................. 84
16.6.2 Blanket Flood Insurance Coverage.................................................... 84
16.6.3 Blanket Flood Insurance Deductible.................................................. 85
ARTICLE 17 ADVANCES............................................................................................ 85
--------
Section 17.1 PRINCIPAL AND INTEREST ADVANCES..................................................... 85
-------------------------------
17.1.1 P&I Advance Requirement............................................................. 85
17.1.2 P&I Advance Limitation.............................................................. 85
17.1.3 P&I Advance Recovery................................................................ 85
17.1.4 Advance During Bankruptcy and Foreclosure........................................... 85
Section 17.2 FORECLOSURE ADVANCES................................................................ 86
--------------------
17.2.1 Foreclosure Advance Requirement..................................................... 86
17.2.2 Foreclosure Advance Limitation...................................................... 86
17.2.3 Foreclosure Advance Recovery........................................................ 86
17.2.4 Foreclosure Advance Records......................................................... 86
Section 17.3 TAX & INSURANCE ADVANCES............................................................ 86
------------------------
17.3.1 T&I Advance Requirement............................................................. 86
17.3.2 T&I Advance Recovery................................................................ 86
17.3.3 T&I Advance Limitation.............................................................. 86
17.3.4 Advance During Bankruptcy and Foreclosure........................................... 86
Section 17.4 NON-RECOVERABLE ADVANCES............................................................ 87
------------------------
17.4.1 Ordinary Recovery................................................................... 87
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17.4.2 Final Recovery...................................................................... 87
17.4.3 Non-Recoverable Advance Determination............................................... 87
Section 17.5 FAILURE TO ADVANCE.................................................................. 87
------------------
17.5.1 Grounds for Termination............................................................. 87
17.5.2 Servicer Reimbursement.............................................................. 87
Section 17.6 REHABILITATION ADVANCE.............................................................. 88
----------------------
17.6.1 Rehabilitation Advance Requirement.................................................. 88
17.6.2 Rehabilitation Advance Limitation................................................... 88
17.6.3 Rehabilitation Advance Recovery..................................................... 88
ARTICLE 18 REPORTING REQUIREMENTS.............................................................................. 88
----------------------
Section 18.1 MONTHLY ACCOUNTING REPORTS.......................................................... 88
--------------------------
18.1.1 Monthly Accounting Report Requirement............................................... 88
18.1.2 Monthly Accounting Report Elements.................................................. 88
18.1.3 Automated Reports................................................................... 88
18.1.4 Electronic Reporting................................................................ 89
18.1.5 Machine Readable Records............................................................ 89
Section 18.2 ACCOUNT RECONCILIATIONS............................................................. 89
-----------------------
18.2.1 Reconciliation Preparation.......................................................... 89
18.2.2 Account Records..................................................................... 89
Section 18.3 MONTHLY REMITTANCE REQUIREMENTS..................................................... 89
-------------------------------
18.3.1 Remittance of Funds................................................................. 89
18.3.2 Servicer Compensation............................................................... 90
ARTICLE 19 TRANSFERS AND TERMINATION OF SERVICING.............................................................. 90
--------------------------------------
Section 19.1 TRANSFER OF SERVICING............................................................... 90
---------------------
19.1.1 Transfer Prohibition................................................................ 90
19.1.2 Transfer Request.................................................................... 90
19.1.3 Servicer Liability.................................................................. 91
19.1.4 Master Servicer's Determination..................................................... 91
Section 19.2 TERMINATION OF SERVICING............................................................ 91
------------------------
19.2.1 Grounds for Termination............................................................. 91
19.2.2 Owner Notification.................................................................. 91
19.2.3 Servicer Termination................................................................ 91
19.2.4 Consequences of Termination......................................................... 91
19.2.5 Effect of Termination............................................................... 91
19.2.6 Custodial Account Threshold Reduction............................................... 91
ARTICLE 20 MISCELLANEOUS PROVISIONS............................................................................ 92
------------------------
Section 20.1 AMENDMENTS.......................................................................... 92
----------
20.1.1 Unilateral Authority................................................................ 92
20.1.2 Consensual Amendment................................................................ 92
20.1.3 Owner Notification.................................................................. 92
20.1.4 Owner Disapproval................................................................... 92
Section 20.2 GENERAL CONSTRUCTION...................................................................... 92
20.2.1 Binding Nature...................................................................... 92
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20.2.2 Entire Agreement.................................................................... 92
20.2.3 Governing Law....................................................................... 93
20.2.4 Indulgences Not Waivers............................................................. 93
20.2.5 Titles Not to Affect Interpretation................................................. 93
20.2.6 Provisions Severable................................................................ 93
20.2.7 Servicer an Independent Contractor.................................................. 93
20.2.8 Third Party Beneficiary............................................................. 93
20.2.9 Counterparts........................................................................ 93
</TABLE>
SCHEDULE I
SCHEDULE II
EXHIBIT A Notification of Sale of Mortgage Loans
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This Servicing Agreement, made as of this 2nd day of June,
1995 (the "Agreement"), between The Prudential Home Mortgage Company, Inc., a
New Jersey corporation (the "Servicer") and Securitized Asset Services
Corporation, a New Jersey corporation, (the "Principal"), recites and provides
as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing
residential mortgage loans, and the Principal, on behalf of the Owners of the
related Mortgage Loans, desires to retain the Servicer, and the Servicer desires
to be retained, to service the Mortgage Loans identified on Schedule I hereto
subject to and in accordance with the terms of this Agreement; and
WHEREAS, the Master Servicer acting pursuant to a Supervision
Agreement will supervise, monitor and oversee the performance of the Servicer
under this Agreement;
NOW THEREFORE, in consideration of the mutual promises,
covenants, representations and warranties hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Servicer and the Principal agree as follows:
ARTICLE 1
DEFINITIONS
ACH: Automated Clearing House.
ADJUSTED TANGIBLE NET WORTH: As of the date of determination
thereof, the sum of: (i) Servicer's Tangible Net Worth; plus (ii) one percent
(1%) of the amount of Servicer's servicing portfolio, as determined by the
Master Servicer in the Master Servicer's reasonable discretion.
ADVANCE: Any payment made with respect to a Mortgage Loan or
the related Mortgaged Property by the Servicer from its own funds made in the
nature of an advance pursuant to the provisions of this Agreement.
AFFILIATE: Any person or entity controlling, controlled by or
under common control with a specified entity. The term "control" means the power
to direct the management and policies of a person or entity, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise, "controlling" and "controlled" shall have meanings correlative to the
foregoing.
AMOUNTS HELD FOR FUTURE DISTRIBUTION: As to any Remittance
Date, amounts on account of (i) all prepayments of principal received in the
month of such Remittance Date and all related payments of interest on such
principal prepayments, Liquidation Proceeds received in the month of such
Remittance Date, and amounts received from the Servicer or a Representing Party
in the month of such Remittance Date as the Purchase Price for any
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repurchased Mortgage Loan and (ii) payments which represent early receipt of
scheduled payments of principal and interest due on a date or dates subsequent
to the related Due Date.
APPRAISAL REPORT: A report setting forth the fair market value
of a Mortgaged Property as determined by an appraiser who, at the time the
appraisal was conducted, met the minimum qualifications of FNMA and FHLMC for
appraisers of conventional residential mortgage loans.
ARM LOAN: An "adjustable rate" Mortgage Loan, the Mortgage
Interest Rate of which is subject to periodic adjustment in accordance with the
terms of the related Mortgage Note.
ASSIGNMENT: The document which transfers all the rights of the
secured party pursuant to a Security Instrument to a transferee for valid
consideration.
ASSUMPTION: The process whereby, on sale or transfer of a
legal or beneficial interest in a Mortgaged Property, the new owner of such
Mortgaged Property becomes legally obligated under the terms of the related
existing Security Instrument, Mortgage Note and any addenda and riders to such
Security Instrument or Mortgage Note. Subsequent to the Assumption, the new
owner of the property shall be deemed to be the Borrower under the related
Mortgage Loan Documents.
BALLOON AMOUNT: The remaining principal balance to be paid at
maturity of a Balloon Loan by the related Borrower pursuant to the terms of the
related Mortgage Note.
BALLOON LOAN: A Mortgage Loan which amortizes its principal
payments over a period which is longer than the stated maturity of such Mortgage
Loan pursuant to the terms of the related Mortgage Note so as to require the
payment of the Balloon Amount at maturity in order to retire the Mortgage Loan.
BANKRUPTCY CODE: The Bankruptcy Code of 1978, as amended.
BIF: The Bank Insurance Fund.
BORROWER: The individual obligated to repay a Mortgage Loan.
(The Borrower may be the beneficiary or beneficiaries of an Illinois land trust
when the Mortgaged Property is located in Illinois.)
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday,
or (ii) a legal holiday in the City of New York, State of Maryland, State of
Minnesota or State of Missouri or (iii) a day on which banking institutions in
the City of New York, or the State of Maryland, State of Minnesota or State of
Missouri are authorized or obligated by law or executive order to be closed.
BUYDOWN AGREEMENT: An agreement governing the application of
Buydown Funds with respect to a Mortgage Loan.
BUYDOWN FUNDS: Money advanced by a builder, seller or other
interested party to reduce a Borrower's Monthly Payment during the initial years
of a Mortgage Loan.
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CERTIFICATE: A mortgage backed security issued by an Owner of
the related Mortgage Loans which is secured, in whole or in part, by such
Mortgage Loans.
CODE: The Internal Revenue Code of 1986, as it may be amended
from time to time, any successor statutes thereto, and applicable U.S.
Department of the Treasury temporary or final regulations promulgated
thereunder.
CONDOMINIUM PROJECT: Real estate including the separate
ownership in fee, or on a satisfactory leasehold estate, of a particular
residential unit with an indivisible interest in the real estate designated for
common ownership strictly by unit owners.
CONDOMINIUM UNIT: A Single Family Property within a
Condominium Project.
CONVERTED MORTGAGE LOAN: An ARM Loan with respect to which the
Borrower has complied with the applicable requirements of the related Mortgage
Note to convert the related Mortgage Interest Rate to a fixed rate of interest,
and the Servicer has processed such conversion.
CURRENT VALUE: The appraised value of the related Mortgaged
Property from an Appraisal Report conducted within six (6) months of the use of
such value under this Agreement.
CURTAILMENT: A partial prepayment by the Borrower of principal
on a Mortgage Loan that otherwise is current, which prepayment is not
accompanied by an amount representing the full amount of scheduled interest due
on the related Mortgage Loan.
CUSTODIAL BUYDOWN ACCOUNT: An account maintained by the
Servicer specifically to hold all Buydown Funds to be applied to individual
Mortgage Loans.
CUSTODIAL PRINCIPAL AND INTEREST (P&I) ACCOUNT: An account
maintained by the Servicer, specifically for the collection of principal and
interest, Insurance Proceeds, Liquidation Proceeds and other amounts received
with respect to Mortgage Loans.
CUSTODIAL TAXES AND INSURANCE (T&I) ACCOUNT: An account
maintained by the Servicer, specifically for the payment of real estate tax
assessments and insurance premiums in respect of Mortgaged Property related to
Mortgage Loans.
CUSTODIAN: First Trust National Association, which shall hold
all or part of the Owner Mortgage Loan File with respect to a Mortgage Loan on
behalf of the Master Servicer as agent for the Owner of such Mortgage Loan.
CUT-OFF DATE: With respect to any Mortgage Loan, the date set
forth on Schedule I, or on Schedule II as to a subsequent Owner, after which any
payments of principal or interest that become due, whether received before, on
or after such date are to be deposited to the Custodial P&I Account for the
benefit of the Owner of the related Mortgage Loan.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting a Deficient Valuation.
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DEFICIENT VALUATION: With respect to any Mortgage Loan the
related Mortgaged Property of which is involved in a bankruptcy proceeding, the
reduction by the bankruptcy court of the Unpaid Principal Balance of the
Mortgage Note.
DELINQUENCY/DELINQUENT: A Delinquency with respect to a
Mortgage Loan occurs, or a Mortgage Loan is Delinquent when all or part of a
Borrower's Monthly Payment or, where applicable, an Escrow Item is paid after
the applicable Due Date. For reporting purposes, a Delinquency that remains
uncured for 30 days or more, but less than 60 days, is considered a 30-day
Delinquency. A Delinquency that has been uncured for more than 60 days, but less
than 90 days, is considered a 60-day Delinquency. A Delinquency that has been
uncured for 90 days or more is considered a 90-day Delinquency. The foregoing
shall be determined based on an assumption of a year comprised of twelve 30-day
months.
DETERMINATION DATE: The 17th day of the month in which the
related Remittance Date occurs, or if such 17th day is not a Business Day, the
Business Day preceding such 17th day.
DIRECTLY OPERATE: With respect to any REO, the direct or
indirect furnishing or rendering of services to the tenants thereof, management
or operation os such REO, the holding of such REO primarily for sale to
customers, performance of any construction work thereon or any use of such REO
in a trade or business, in each case other than with the approval of the Master
Servicer; provided, however, that the Servicer shall not be considered to
Directly Operate an REO solely because it establishes rental terms, chooses
tenants, enters into or renews leases, deals with taxes and insurance, or makes
decisions as to repairs or capital expenditures with respect to such REO.
DUE DATE: With respect to a Mortgage Loan, the day of each
month on which a Monthly Payment and, where applicable, an Escrow Funds payment
is due as stated in the related Mortgage Note. The Due Date for all Mortgage
Loans will be the first day of each month.
DUE-ON-SALE CLAUSE: The clause in a Security Instrument
requiring the payment of the Unpaid Principal Balance of the related Mortgage
Loan upon the sale of, or the transfer of an interest in, the related Mortgaged
Property.
DUFF & PHELPS: Duff & Phelps Credit Rating Co. or its
successor-in-interest.
ELIGIBLE ACCOUNT: One or more accounts (i) that are maintained
with a depository institution whose long-term debt obligations (or, in the case
of a depository institution which is part of a holding company structure, the
long-term debt obligations of which holding company structure) at the time of
deposit therein are rated in one of the two highest rating categories by each of
Moody's, S&P, Fitch and Duff & Phelps (if so rated by such entity), (ii) the
deposits in which are fully insured by the FDIC through either BIF or SAIF,
(iii) the deposits in which are insured by the FDIC through either BIF or SAIF
(to the limit established by the FDIC) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of Counsel
delivered to the Master Servicer which is satisfactory to the Master Servicer,
the Owners of the related Mortgage Loans, and where there are beneficial owners
as to any such Owners, on behalf of any such beneficial owners, has a claim with
respect to the funds in such accounts or a perfected first priority security
interest against any collateral securing such funds
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that is superior to claims of any other depositors or creditors of the
depository institution with which such accounts are maintained, (iv) maintained
as a trust account or accounts with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity or (v) such other account that is acceptable to the Master Servicer.
ELIGIBLE CUSTODIAL P&I ACCOUNT: As defined in Section 6.1.2.
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, FNMA, FHLMC 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; PROVIDED,
HOWEVER, that any obligation of, or guarantee by, FNMA or FHLMC, other
than an unsecured senior debt obligation of FNMA or FHLMC or a mortgage
participation or pass-through certificate guaranteed by FNMA or FHLMC,
shall be an Eligible Investment only if, at the time of investment,
such investment would not adversely affect the rating, if any, on any
class of Certificates which are secured by Mortgage Loans that are the
source of funds which are the subject of such investment (as confirmed
in writing by the Rating Agencies);
(ii) 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 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 are
rated "A-1+" by S&P, "Duff-l+" by Duff & Phelps (if rated by Duff &
Phelps), rated in the highest category by Fitch (if rated by Fitch) and
"P-1" by Moody's and the long-term debt obligations of such depository
institution or trust company are rated at least "Aa2" by Moody's, "AA"
by Duff & Phelps (if rated by Duff & Phelps), "AA" by Fitch (if rated
by Fitch) and "AA" by S&P;
(iii) repurchase agreements or obligations with
respect to any security described in clause (i) above where such
security has a remaining maturity of one year or less and where such
repurchase obligation has been entered into with a depository
institution or trust company (acting as principal) described in clause
(ii) above and where such repurchase obligation will mature prior to
the next Remittance Date;
(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 securities have a
credit rating from S&P, Duff & Phelps (if rated by Duff & Phelps),
Fitch (if rated by Fitch) and Moody's, at the time of investment or the
contractual commitment providing for such investment, at least equal to
the second highest long-term credit rating assigned by S&P, Duff &
Phelps (if rated by Duff & Phelps), Fitch (if rated by Fitch) and
Moody's to the Certificates; PROVIDED, HOWEVER, that securities issued
by any particular corporation will not be Eligible Investments to the
extent the investment therein will cause the then outstanding principal
amount of securities issued by such corporation and held as part of the
Custodial Accounts to exceed
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10% of (a) the aggregate Unpaid Principal Balance of the Mortgage Loans
serviced by the Servicer or (b) the aggregate principal amount of all
Eligible Investments in the Custodial Accounts;
(v) commercial paper (including both
noninterest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than one
year after the date of issuance thereof) rated "A-1" by S&P, rated
"Duffl" by Duff & Phelps (if rated by Duff & Phelps), rated in the
highest category by Fitch (if rated by Fitch) and rated "P-1" by
Moody's;
(vi) units of investment funds rated in the highest
category by S&P, Duff & Phelps (if rated by Duff & Phelps), Fitch (if
rated by Fitch) and Moody's;
(vii) a qualified guaranteed investment contract; and
(viii) any other demand, money market or time deposit
or obligation, or interest-bearing or other security or investment,
acceptable to the Master Servicer;
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 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.
Eligible Investments that are subject to prepayment or call
may not be purchased at a price in excess of par.
ERRORS AND OMISSIONS POLICY: An insurance policy naming the
initial Owner of the related Mortgage Loans, its successors and assigns as loss
payees relative to losses caused by errors or omissions of the Servicer and its
personnel, including, but not limited to losses caused by the failure to pay
insurance premiums or taxes, to record or perfect liens, to effect valid
transfers of Mortgage Notes, or to properly service Mortgage Loans.
ESCROW FUNDS: All funds collected with respect to a Mortgage
Loan by the Servicer to cover related Escrow Items according to the provisions
of this Agreement.
ESCROW ITEM: An expense required to be paid by a Borrower
under the related Security Instrument including, without limitation, taxes,
special assessments, ground rents, water, sewer and other governmental
impositions or charges that are or may become liens on the related Mortgaged
Property prior to that of the related Security Instrument, as well as Hazard
Insurance, Flood Insurance and Primary Mortgage Insurance premiums.
FDIC: Federal Deposit Insurance Corporation and its
successors.
FHA: The Federal Housing Administration and its successors.
FHLMC: Federal Home Loan Mortgage Corporation and its
successors.
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FIDELITY BOND: An insurance policy naming the initial Owner of
the related Mortgage Loans, its successors and assigns as loss payees relative
to losses caused by improper or unlawful acts of the Servicer's personnel.
FITCH: Fitch Investors Service, Inc. or its
successor-in-interest.
FLOOD INSURANCE: An insurance policy insuring against flood
damage to a Mortgaged Property, where required.
FNMA: Federal National Mortgage Association and its
successors.
GNMA: Government National Mortgage Association and its
successors.
GPM (OR GPARM) LOAN: A fixed rate Mortgage Loan or ARM Loan
that provides during a portion of its term that the interest portion of the
Monthly Payment on such Mortgage Loan shall be less than the full amount of
interest due on such Mortgage Loan based on the related Mortgage Interest Rate.
GROSS MARGIN: With respect to each ARM Loan, the fixed
percentage specified in the related Mortgage Note that is added to the
applicable Index on each Interest Adjustment Date to determine the new Mortgage
Interest Rate for such ARM Loan.
HAZARD INSURANCE: A fire and casualty extended coverage
insurance policy insuring against loss or damage from fire and other perils
covered within the scope of standard extended hazard coverage naming the Owner
of the related Mortgage Loan, its successors and assigns, as a mortgagee under a
standard mortgagee clause, together with all riders and endorsements thereto.
HUD: The United States Department of Housing and Urban
Development and its successors.
INDEX: With respect to each ARM Loan, the applicable index
specified in the related Mortgage Note that is added to the related Gross Margin
on each Interest Adjustment Date to determine the new Mortgage Interest Rate for
such ARM Loan.
INSURANCE POLICY: Any insurance policy for a Mortgage Loan
required hereunder, including, without limitation, Primary Mortgage Insurance,
Hazard Insurance, Flood Insurance, Pool Insurance and Title Insurance policies.
INSURANCE PROCEEDS: Proceeds from an Insurance Policy, other
than such proceeds which are applied by the Borrower or held to be applied by
the Borrower to the restoration of the related Mortgaged Property.
INTEREST ADJUSTMENT DATE: With respect to each ARM Loan, the
date on which the related Mortgage Interest Rate changes in accordance with the
terms of such Mortgage Note, the first of which is set forth in such Mortgage
Note and on the respective Mortgage Loan Schedule.
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LIQUIDATION: Application of full payment to a Mortgage Loan
which results in the release of the lien of the related Security Instrument on
any related Mortgaged Property, whether through foreclosure and sale of the
related REO, condemnation, prepayment in full or otherwise, or the realization
of all sums from the final disposition of the related REO.
LIQUIDATION PROCEEDS: The amount received by the Servicer
which ultimately relate to the Liquidation of a Mortgage Loan.
LOAN ORIGINATOR: The entity that closes a Mortgage Loan in its
own name.
LOAN-TO-VALUE (LTV): The ratio that results when the Unpaid
Principal Balance of a Mortgage Loan is divided by the Value of the related
Mortgaged Property.
MASTER SERVICER: Securitized Asset Services Corporation, or
any successors and assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: A segregated custodial
account established by the Master Servicer into which the Servicer shall remit
funds from the related Custodial P&I Account.
MASTER SERVICER LOAN NUMBER: A unique number assigned by the
Master Servicer to each Mortgage Loan set forth in Schedule I.
MAXIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each
ARM (or GPARM) Loan, the interest rate set forth in the related Mortgage Note as
the maximum Mortgage Interest Rate thereunder.
MAXIMUM NEGATIVE AMORTIZATION AMOUNT: With respect to any
Mortgage Loan that provides for negative amortization, the maximum principal
balance which is permitted under the terms of the related Mortgage Note.
MINIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each
ARM Loan, the interest rate set forth in the related Mortgage Note as the
minimum Mortgage Interest Rate thereunder, if any.
MONTH END INTEREST: In the event of any Prepayment in Full of
a Mortgage Loan, the difference between the interest payment that would have
been paid on such Mortgage Loan or portion thereof that was prepaid through the
last day of the month in which such prepayment occurred and the interest payment
actually received by the Servicer on such Mortgage Loan or portion thereof that
was prepaid.
MONTH END INTEREST SHORTFALL: The portion of Month End
Interest for all Mortgage Loans for any month unable to be paid by the Servicer
out of the portion of its Monthly Servicing Compensation pursuant to clause (a)
of Section 4.8.1 for such month due to the exhaustion of such portion of such
Monthly Servicing Compensation in paying such Month End Interest.
MONTHLY ACCOUNTING REPORTS: The reports due from a Servicer on
a monthly basis (due no later than the tenth calendar day of the month, or the
preceding Business Day if the 10th
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day is not a Business Day) relative to all Mortgage Loans serviced by the
Servicer, which reports are required to be submitted to the Master Servicer.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest due in the applicable month
under the terms of the related Mortgage Note.
MONTHLY REMITTANCE: The Servicer's aggregate payment due each
month with respect to all Mortgage Loans owned by a common Owner to the
appropriate Master Servicer Custodial Account as specified in Section 18.3.1.
MONTHLY SERVICING COMPENSATION: The aggregate servicing
compensation due the Servicer in each month.
MOODY'S: Moody's Investors Service, Inc. or its
successor-in-interest.
MORTGAGE INTEREST RATE: The interest rate payable by the
Borrower on a Mortgage Loan according to the terms of the Mortgage Note which,
in the case of ARM Loans, may be adjusted periodically as provided in such
Mortgage Note.
MORTGAGE LOAN: A mortgage loan identified on Schedule I which
is owned by the respective Owner shown on Schedule II. "Mortgage Loan" includes
all of the respective Owner's right, title and interest in and to such Mortgage
Loan, including, without limitation, the related Mortgage Loan Documents and all
other material and information collected by the Servicer in connection with the
Mortgage Loan including Monthly Payments, Liquidation Proceeds, Insurance
Proceeds and all other rights, benefits and proceeds arising from or in
connection with such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: With respect to a Mortgage Loan, the
original related Mortgage Note with applicable addenda and riders, the original
related Security Instrument and the originals of any required addenda and
riders, the original related Assignment and any original intervening related
Assignments, the original related Title Insurance policy, related Primary
Mortgage Insurance policy, if any, and the related Appraisal Report made at the
time such Mortgage Loan was originated, and all other documents described in
Article 9 hereof.
MORTGAGE NOTE: A manually executed written instrument
evidencing the related Borrower's promise to repay a stated sum of money, plus
interest, to the related Loan Originator by a specific date according to a
schedule of monthly principal and interest payments.
MORTGAGE NOTE ASSUMPTION RIDER: A rider attached to a Mortgage
Note which states the terms upon which an Assumption may occur, including, but
not limited to, consent in writing by the insurer under any Primary Mortgage
Insurance Policy with respect to the related Mortgage Loan.
MORTGAGED PROPERTY: Land and improvements thereon subject to
the lien of a Security Instrument, securing repayment of the debt evidenced by
the related Mortgage Note.
MORTGAGEE: The secured party to which a Security Instrument
initially grants a lien on the related Mortgaged Property.
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NET MORTGAGE INTEREST RATE: With respect to a Mortgage Loan,
the difference between (a) the Mortgage Interest Rate on such Mortgage Loan and
(b) the Servicing Fee Percentage for such Mortgage Loan.
NON-RECOVERABLE ADVANCE: Any amount previously advanced by the
Servicer with respect to a Mortgage Loan, which the Servicer has determined,
pursuant to the terms of this Agreement, not to be recoverable from Insurance
Proceeds, Liquidation Proceeds or other payments with respect to such Mortgage
Loan.
NOTICE OF PERIODIC ADJUSTMENT: With respect to each ARM Loan,
a notice provided to the Borrower of any changes or adjustments to the related
Mortgage Interest Rate or the related Monthly Payment.
OFFICER: An officer of a corporation or a principal of a
partnership, who is authorized to execute documents on behalf of his corporation
or partnership, respectively.
OPINION OF COUNSEL: A written opinion of counsel, reasonably
acceptable in form and substance to the Master Servicer, and who may be in-house
or outside counsel to the Servicer but which must be Independent outside counsel
with respect to any such opinion of counsel concerning the taxation, or status
for tax purposes, of the Owner.
OWNER OR OWNER OF THE MORTGAGE LOANS: With respect to each
Mortgage Loan, the respective Person listed on Schedule II.
OWNER MORTGAGE LOAN FILE: With respect to each Mortgage Loan,
a file maintained by the Owner of the related Mortgage Loan or the Custodian for
such Mortgage Loan, which file contains the documents specified in Section 9.1
hereof, as well as any other documents that come into the Custodian's possession
with respect to such Mortgage Loan.
OWNER-OCCUPIED PROPERTY: A one- to four-unit property which is
the Primary Residence of the owner of record.
P&I ADVANCE: With respect to any Mortgage Loan, an advance by
the Servicer of any principal and interest payments not timely paid by the
related Borrower (other than with respect to a Balloon Loan, any amounts of
principal payments in respect of Balloon Amounts), excluding the amount of the
related Servicing Fee.
PARTIAL LIQUIDATION PROCEEDS: As to any Remittance Date,
Liquidation Proceeds received by the Servicer on a Mortgage Loan during the
related Partial Liquidation Receipt Period other than those Liquidation Proceeds
received during such Partial Liquidation Receipt Period which result from the
complete and final Liquidation of such Mortgage Loan.
PARTIAL LIQUIDATION RECEIPT PERIOD: As to any Remittance Date,
the period from and including the Determination Date occurring in the month
preceding the month of such Remittance Date (or, in the case of the first
Remittance Date, from and including the Cut-off Date) to but not including the
Determination Date occurring in the month of such Remittance Date.
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PAYMENT ADJUSTMENT DATE: With respect to each ARM Loan, the
date on which the Borrower's Monthly Payment changes in accordance with the
terms of the related Mortgage Note.
PERIODIC PAYMENT CAP: With respect to an ARM Loan, the limit
on the percentage increase that may be made on the related Monthly Payment on
any Payment Adjustment Date, as set forth in the related Mortgage Note.
PERIODIC RATE CAP: With respect to an ARM Loan, the limit,
expressed as incremental percentage points, on the increase or decrease that may
be made to the related Mortgage Interest Rate on any Interest Adjustment Date
from such Mortgage Interest Rate immediately prior to such Interest Adjustment
Date, as set forth in the related Mortgage Note.
PERSON: Any individual, corporation, partnership, joint
venture, association, joint- stock company, trust or unincorporated
organization.
POOL INSURANCE: An insurance policy insuring against certain
credit risk losses on certain Mortgage Loans up to a certain amount.
POOL INSURER: With respect to any Mortgage Loan, the insurer
under the Pool Insurance policy relating to such Mortgage Loan.
POOL [X] MORTGAGE LOAN: Any Mortgage Loan listed on Schedule I
hereto under the heading "Pool [X]".
PRELIMINARY TITLE REPORT: A report issued by a title insurance
company in anticipation of issuing a Title Insurance policy which evidences
existing liens and gives a preliminary opinion as to the absence of any
encumbrance on title to a Mortgaged Property, except liens to be removed on or
before purchase or refinance, as the case may be, by the Borrower and Permitted
Encumbrances.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, any
payment by the Borrower in the amount of the outstanding principal balance of
such Mortgage Loan which is received in advance of its Due Date and is not
accompanied by an amount representing scheduled interest for any period
subsequent to the date of prepayment.
PRIMARY MORTGAGE INSURANCE: Insurance obtained from a Primary
Mortgage Insurer which insures the holder of a Mortgage Note against loss in the
event the related Borrower defaults under such Mortgage Note or the related
Security Instrument, including all riders and endorsements thereto.
PRIMARY MORTGAGE INSURER: With respect to any Mortgage Loan,
the insurer under the Primary Mortgage Insurance policy relating to such
Mortgage Loan.
PRIMARY RESIDENCE: The principal and permanent residence of a
Borrower.
PRINCIPAL: Securitized Asset Services Corporation, or any
successors, or any assigns.
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PROPERTY INSPECTION REPORT: A report, submitted by the
Servicer to the Master Servicer, describing the related Mortgaged Property.
PRUDENT SERVICING PRACTICES: Such practices observed generally
by servicers in discharging their servicing obligations in a prudent manner in
accordance with industry standards for mortgage loans similar to the Mortgage
Loans.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that
contains property and improvements owned and maintained by a homeowners'
association, corporation or trust for the enjoyment and use of individual PUD
Unit owners within that parcel of land. The shared portions of the parcel are
known as common property.
PUD UNIT: A single family residential property within a PUD.
PURCHASE AGREEMENT: Any mortgage loan purchase agreement to
which the initial Owner of a related Mortgage Loan, as the purchaser thereunder,
is a party and by which the Mortgage Loan was acquired by such Owner.
PURCHASE PRICE: An amount equal to (a) the Unpaid Principal
Balance of the Mortgage Loan, plus (b) accrued interest thereon at the Mortgage
Interest Rate through the last day of the month in which the purchase occurs,
and, if the Servicer is the entity paying the Purchase Price, minus (c) any
unreimbursed advances of principal and interest made by the Servicer on such
Mortgage Loan and any outstanding Servicing Fee owed with respect to such
Mortgage Loan. Further, in connection with any such purchase of a Mortgage Loan
as a result of a breach of a representation or warranty under this Agreement,
the Servicer shall provide the Owner with an indemnity, in form and substance
satisfactory to the Master Servicer, against additional costs, expenses and
taxes arising out of the repurchase.
REAL ESTATE OWNED (REO): Any Mortgaged Property the title to
which is acquired on behalf of the Owner of the related Mortgage Loan through
foreclosure, deed-in-lieu of foreclosure, abandonment or reclamation from
bankruptcy in connection with a defaulted Mortgage Loan.
REALIZED LOSS: As to any defaulted Mortgage Loan, any loss
realized by the Owner of such Mortgage Loan as calculated pursuant to Section
7.7 hereof.
REFERENCE BANK: Bankers Trust or if such entity is no longer
lending money or no longer quoting a prime rate, such other entity as the Master
Servicer may specify by written notice to the Servicer.
REMIC: The segregated pool or pools of assets designated as a
real estate mortgage investment conduit pursuant to, and within the meaning of,
the REMIC Provisions, or as the context requires, a particular REMIC to which a
Mortgage Loan has been transferred.
REMIC PROVISIONS: The provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time and including any proposed legislation or regulations which, as proposed,
would have an effective date prior to enactment thereof.
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REMITTANCE DATE: The 17th day of each month (or the preceding
Business Day if the 17th day is not a Business Day). Each month, the Servicer
must transfer all required funds from the Custodial P&I Account to the Master
Servicer Custodial Account on or before the Remittance Date.
RENTS FROM REAL PROPERTY: With respect to any REO, gross
income of the character described in Section 856(d) of the Code (generally, rent
for the use of real property, the amount of which is not dependent, in whole or
in part, upon the income or profit of any person, including certain payments for
certain services and personal property incidental to and customarily provided in
connection with the rental of such real property.)
REO DISPOSITION: The receipt by the Servicer of Liquidation
Proceeds and other payments and recoveries (including proceeds of a final sale)
from the sale or other disposition of the REO.
REPRESENTING PARTY: A Person that has sold or intends to sell
Mortgage Loans, directly or through one or more intermediaries, to the initial
Owner of the related Mortgage Loans pursuant to an agreement for the sale of
Mortgage Loans pursuant to which a Representing Party has made representations
and warranties with respect to certain Mortgage Loans, and under which the Owner
of such Mortgage Loans, its successors and assigns has recourse against such
Representing Party for any breach thereunder.
S&P: Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., or its successor-in-interest.
SAIF: The Savings Association Insurance Fund.
SCHEDULED PRINCIPAL BALANCE: With respect to each Mortgage
Loan (or related REO), the principal balance of such Mortgage Loan as of the
applicable Due Date calculated by taking into account the application of any
Monthly Payments due on or before such Due Date (whether or not such Monthly
Payments were received from the Borrower), and Curtailments, Insurance Proceeds
or Liquidation Proceeds, and Realized Losses received or realized by the
Servicer prior to such Due Date.
SECURITY INSTRUMENT: A written instrument creating a valid
first lien on a Mortgaged Property. A Security Instrument may be in the form of
a mortgage, deed of trust, deed to secure debt or security deed, including any
riders and addenda thereto.
SERVICER: The Prudential Home Mortgage Company, Inc., the
entity that has entered into this Agreement with the Principal, any successors,
or any assigns.
SERVICER LOAN MORTGAGE NUMBER: A unique number assigned by the
Servicer to a Loan.
SERVICER MORTGAGE LOAN FILE: A file maintained by the Servicer
for each Mortgage Loan that contains the documents specified in Section 9.2
hereof, as well as any other documents that come into the Servicer's possession
with respect to a Mortgage Loan.
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SERVICER NUMBER: A three digit number assigned to the Servicer
by the Master Servicer. The Servicer Number shall be used on all correspondence
and forms and in all telephone conversations with the Master Servicer.
SERVICING FEE: For each Mortgage Loan, the compensation due
the Servicer in an amount equal to the product of (i) one-twelfth of the
Servicing Fee Percentage and (ii) the Scheduled Principal Balance of the
Mortgage Loan as of the immediately preceding Due Date (without taking into
account any payment of principal due on such Due Date).
SERVICING FEE PERCENTAGE: With respect to each Mortgage Loan,
the Servicing Fee Percentage shall be identified on Schedule I hereto.
SINGLE FAMILY PROPERTY: A one-unit residential property.
SUBPOOL [X1 MORTGAGE LOAN: Any Mortgage Loan listed on
Schedule I hereto under the heading "Subpool [X]"
SUPERVISION AGREEMENT: A supervision agreement between the
Master Servicer and the Principal.
TANGIBLE NET WORTH: As of the date of determination thereof,
the par value (or value stated on the Servicer's books) of the capital stock of
all classes of the Servicer, plus, or minus in the case of a deficiency, the
amount of paid in capital and retained earnings of the Servicer, all determined
in accordance with generally accepted accounting principles as are then in
effect. The Master Servicer may exclude assets that are unacceptable, in the
Master Servicer's reasonable discretion, from the determination of the
Servicer's Tangible Net Worth.
T&I ADVANCE: An advance by the Servicer of any taxes and
insurance premiums due with respect to any Mortgage Loan.
THRESHOLD AMOUNT: With respect to any Custodial P&I Account,
(i) $100,000 or, in the case of any Eligible Custodial P&I Account, the
aggregate amount on deposit therein (i.e., an unlimited amount); or (ii) after
any notice has been given pursuant to Section 19.2.6, the amount specified in
such notice.
TITLE INSURANCE: An American Land Title Association (ALTA)
mortgage loan title policy form 1970, or other form of Title Insurance Policy
acceptable to FNMA or FHLMC, including all riders and endorsements thereto,
insuring that the Security Instrument constitutes a valid first lien on the
related Mortgaged Property subject only to permitted encumbrances.
TRANSFER OF OWNERSHIP: Includes, but is not limited to, the
conveyance of a Mortgaged Property, whether legal or equitable, voluntary or
involuntary, by any of the following methods:
(a) outright sale;
(b) deed;
(c) installment sale contract;
(d) land contract;
(e) contract for deed;
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(f) leasehold interest with the term greater than three
years;
(g) lease with option to purchase;
(h) land trust; or
(i) any other conveyance of an interest in real property,
including those involving secondary financing.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan,
the outstanding principal balance payable by the Borrower under the terms of the
Mortgage Note.
UNPOOLED MORTGAGE LOAN: Any Mortgage Loan listed on the
Schedule I hereto under the heading "Unpooled Mortgage Loans."
VA: The Department of Veterans Affairs and its successors.
VALUE: The lesser of the appraised value or sales price of the
related Mortgaged Property at the time the Mortgage Loan is closed. For a
refinanced Mortgage Loan, the Value of the related Mortgaged Property is its
appraised value at the time the refinanced Mortgage Loan is closed.
ARTICLE 2
CONSTRUCTION
Section 2.1 LEGAL CONSTRUCTION
2.1.1 COMPLIANCE WITH APPLICABLE LAW. The obligations of the Servicer
pursuant to this Agreement shall at all times be performed in
compliance with all applicable laws.
2.1.2 POTENTIAL CONFLICT. If any obligation of the Servicer pursuant to
this Agreement shall give rise to a potential conflict with applicable
law, such obligation shall be construed so as to (a) comply with all
applicable laws and (b) effectuate with respect to such obligations, to
the fullest extent permitted by law, the intention of the parties
hereto as expressed in this Agreement.
2.1.3 CONSISTENT LEGAL COMPLIANCE. The fact that certain provisions of
this Agreement contain language which expressly requires compliance
with all applicable laws, shall not give rise to an implication that
other provisions, which do not expressly include such language, operate
in derogation of the requirement for such legal compliance.
2.1.4 GENERAL INTERPRETIVE RULES. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires, (i) 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; (ii) reference herein to "Article",
"Section", "Clause", and other subdivisions, and to "Exhibits", without
reference to a document, are to designated Articles, Sections, Clauses
and other subdivisions of, and to Exhibits to, this Agreement; (iii)
reference to a Clause without further reference to a Section is a
reference to such
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Clause as contained in the same Section in which the reference appears,
and this rule shall also apply to other subdivisions; (iv) "including"
means "including but not limited to"; and (v) the words "herein",
"hereof", "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular provision.
2.1.5 CONSTRUCTION OF PROVISIONS. Although certain provisions of this
Agreement contain express language which precludes the Servicer's
recovery of, or reimbursement for, expenses incurred hereunder, no
inference to the contrary shall be drawn from absence of such, or
similar, language in any other provision hereof regarding expenses.
Section 2.2 SERVICER PRACTICES
2.2.1 PRUDENT SERVICING PRACTICES. Where not inconsistent with the
provisions of this Agreement, the Servicer shall at all times perform
its obligations hereunder in accordance with Prudent Servicing
Practices, which shall not be less exacting than the Servicer employs
and exercises in servicing and administering mortgage loans for its own
account, or for the account of FNMA or FHLMC, including exploring
alternatives to foreclosure to mitigate Realized Losses.
2.2.2 NON-DISCRIMINATION PRACTICES. The Servicer shall at all times
perform its obligations under this Agreement so as to (a) treat
Borrowers on the basis of their individual merits and (b) not
discriminate against Borrowers on the basis of their race, creed or
national origin.
Section 2.3 GENERAL PROVISIONS
2.3.1 SERVICER'S AGREEMENT. The Servicer agrees with the Principal, on
behalf of the Owners of the related Mortgage Loans, to service the
Mortgage Loans in accordance with the provisions of this Agreement and,
to the extent of any instructions of the Master Servicer that are
given, such instructions and, subject to the provisions hereof and
without any further instruction by the Master Servicer except as shall
be expressly provided for herein, shall have full power and authority
to do all things necessary in connection therewith.
2.3.2 TERM OF AGREEMENT. Except as otherwise provided herein, the
duties, responsibilities and obligations to be performed and carried
out by the Servicer under this Agreement shall commence upon the
execution of this Agreement and shall continue until (a) each Mortgage
Loan is (i) liquidated or (ii) otherwise paid in full, (b) all payments
related thereto are remitted in accordance with this Agreement, and (c)
all obligations hereunder related thereto are discharged.
2.3.3 AMENDED MORTGAGE LOAN SCHEDULE. From time to time as additional
Mortgage Loans are transferred to be serviced hereunder by the
Servicer, Schedule I shall be amended by the Principal to include the
new Mortgage Loans. Due to defects in documentation and for other
reasons, certain Mortgage Loans referred to in the Mortgage Loan
Schedule may be deleted and other Mortgage Loans may be added. The
Servicer hereby agrees to any such addition and/or deletion of any
Mortgage Loans and, in the event any Mortgage Loans are added and/or
deleted from the Mortgage Loan Schedule, the Servicer authorizes the
Master Servicer to amend and attach hereto a corrected
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Mortgage Loan Schedule, as Schedule I, reflecting only those Mortgage
Loans that are serviced hereunder. The Master Servicer will provide the
Servicer with the corrected and updated Mortgage Loan Schedule. The
Principal, with the consent of the related Owner of the Mortgage Loans
may group, and may alter such groupings of, certain Mortgage Loans
under headings of a specific pool, subpool or as unpooled Mortgage
Loans and may alter Schedules I and II to reflect such groupings.
2.3.4 ASSIGNMENT AND REPLACEMENT. The Servicer acknowledges and agrees
that in the event that the Master Servicer resigns as Master Servicer
under this Agreement, any successor master servicer has the right to
assume the Master Servicer's rights and obligations and to enforce the
Servicer's obligations under this Agreement.
2.3.5 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given, made and received upon actual
receipt of registered or certified mail, postage prepaid, return
receipt requested, addressed as set forth below:
(a) if to the Principal:
Securitized Asset Services Corporation
7485 New Horizon Way
Frederick, MD 21701
Attention: Vice President
(b) if to the Master Servicer:
Securitized Asset Services Corporation
7485 New Horizon Way
Frederick, MD 21701
Attention: Director of Master Servicing
(c) if to the Servicer:
The Prudential Home Mortgage Company, Inc.
7485 New Horizon Way
Frederick, MD 21701
Attention: Senior Vice President, Servicing
(d) if to the Custodian:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Vice President, Administration
(e) if to the Owner of a related Mortgage Loan to such address as
is shown on Schedule II for such Owner.
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Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
2.3.6 CHANGE OF ACCOUNTANTS. During the term of this Agreement, the
Servicer shall not change, or make any substitution of, its certified
public accountants except upon written notice to the Master Servicer
given 30 days prior to such change or substitution.
Section 2.4 SERVICING OF MORTGAGE LOANS FOR MULTIPLE OWNERS
2.4.1 TRANSFER OF MORTGAGE LOANS. An Owner, may, from time to time, (i)
sell its interest in any Mortgage Loan or Mortgage Loans to another
person who would become the Owner thereof, and (ii) assign an interest
in this Agreement to such person with respect to such Mortgage Loan or
Mortgage Loans. Without the consent of the Master Servicer, no transfer
of ownership of an interest in the Mortgage Loans or this Agreement
will be permitted if it would result in there being more than four
distinct owners of the Mortgage Loans at any one time (without regard
to any beneficial owners of a trust where such trust owns Mortgage
Loans serviced hereunder) which Mortgage Loans comprise a pool of
mortgage loans sold or transferred by The Prudential Home Mortgage
Company, Inc. to a purchaser or a transferee on any one day, excluding
from such computation, Mortgage Loans owned by The Prudential Home
Mortgage Company, Inc., an Affiliate thereof, or an entity formed by
either of the foregoing. The transfer of ownership and assignment of
interest will be reflected as provided for in Section 2.4.2 hereof. The
Servicer agrees (a) to continue to service each Mortgage Loan for the
benefit of the related Owner of such Mortgage Loan in accordance with
the terms of this Agreement, and (b) to obey the instructions of the
Master Servicer regarding the performance of this Agreement.
2.4.2 OWNERSHIP SCHEDULE. The Master Servicer shall amend Schedule II
to reflect the change of ownership of any Mortgage Loan which is
serviced hereunder, upon thirty (30) days prior written notice, which
shall specify the ownership transfer date (referred to as the Cut-Off
Date in clause (c) below), given by an Owner with respect to such
Mortgage Loans which notice shall include a signed writing, in the form
set forth as Exhibit A hereto, evidencing the transfer of such Mortgage
Loans executed by both the transferor Owner which transferred the
Mortgage Loans and the transferee to which such Mortgage Loans were
transferred, which party shall become the Owner at the time of such
amendment to Schedule II. The signed writing described in Exhibit A
hereof shall be accompanied by incumbency certificates of the
transferor and the transferee which indicate the appropriate signatory
authority. The entry in Schedule II shall (a) identify the Mortgage
Loan by its respective Master Servicer Loan Number, (b) specify the
name and mailing address of the Owner of such Mortgage Loan and (c)
indicate the Cut-Off Date which applies to the change of ownership of
the Mortgage Loan to the listed Owner.
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ARTICLE 3
REMIC COMPLIANCE
Section 3.1 GENERAL
3.1.1 APPLICABILITY. The provisions of this Article 3 apply to all the
Mortgage Loans or Mortgaged Property unless the Mortgage Loan has not
been transferred (or been identified for a future transfer) to an
entity with respect to which an election to be characterized as a REMIC
has been (or is expected to be) made.
3.1.2 MODIFICATIONS OF MORTGAGE LOANS. Notwithstanding anything to the
contrary in this Agreement, the Servicer shall not permit any
modification of any material term of a Mortgage Loan (including the
interest rate, the principal balance, the amortization schedule, or any
other term affecting the amount or timing of payments on the Mortgage
Loan) unless the Master Servicer has consented thereto and, if such
modification is not the result of a default or imminent default under
the Mortgage Loan, the Servicer has received an Opinion of Counsel or a
ruling from the Internal Revenue Service (at the expense of the
Servicer or the party making the request of the Servicer to modify the
Mortgage Loan) to the effect that such modification would not be
treated as giving rise to a new debt instrument for federal income tax
purposes or a disposition of the modified Mortgage Loan and that such
modification is permitted under the REMIC Provisions.
3.1.3 INDEMNIFICATION WITH RESPECT TO CERTAIN TAXES AND LOSS OF REMIC
STATUS. In the event that the REMIC fails to qualify as a REMIC, loses
its status as a REMIC, or incurs state or local taxes, or tax as a
result of a prohibited transaction or contribution subject to taxation
under the REMIC Provisions due to the negligent performance by the
Servicer of its duties and obligations set forth herein, the Servicer
shall indemnify the respective trustee, the Master Servicer and the
holders of the related Certificates against any and all losses, claims,
damages, liabilities or expenses ("REMIC FAILURE LOSSES") resulting
from such negligence; PROVIDED, HOWEVER, that the Servicer shall not be
liable for any such REMIC Failure Losses attributable to the action or
inaction of the Master Servicer or the holders of such Certificates nor
for any such REMIC Failure Losses resulting from misinformation
provided by the Master Servicer on which the Servicer has relied. The
foregoing shall not be deemed to limit or restrict the rights and
remedies of the other holders of the Certificates now or hereafter
existing at law or in equity.
Section 3.2 REO QUALIFICATION
3.2.1 FORECLOSURE PROPERTY QUALIFICATION. Notwithstanding any other
provision of this Agreement, the Servicer, shall not rent, lease, or
otherwise earn income on behalf of the REMIC with respect to any REO
which might cause such REO to fail to qualify as "foreclosure" property
within the meaning of section 860G(a)(8) of the Code (e.g., rent based
upon the earnings of the lessee) or result in the receipt by the REMIC
of any "income from non-permitted assets" within the meaning of section
860F(a)(2) of the Code (e.g., income attributable to any asset which is
not a qualified mortgage, a cash flow or reserve fund investment, or
personal property not incidental to the REO) or any "net income from
foreclosure property" which is subject to tax under the REMIC
Provisions unless the Master Servicer has received an Opinion of
Counsel (at the
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Servicer's expense) to the effect that, under the REMIC Provisions and
(where appropriate, any relevant proposed legislation) any income
generated for the REMIC by the REO would not result in the imposition
of a tax upon the REMIC. In general, the purpose of this Section 3.2
and the REMIC Provisions (which this section is intended to implement)
is to ensure that the income earned by the REMIC is passive type income
such as interest on mortgages and passive type rental income on real
property.
3.2.2 FORECLOSURE PROPERTY QUALIFICATION RESTRICTIONS. Without limiting
the generality of the foregoing, the Servicer shall not:
(i) permit the REMIC to enter into, renew or extend any
lease with respect to any REO, if the lease by its
terms will give rise to any income that does not
constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under any
lease other than amounts that will constitute Rents
from Real Property;
(iii) authorize or permit any construction on any REO,
other than the completion of a building or other
improvement thereon, and then only if more than ten
percent of the construction of such building or other
improvement was completed before default on the
related Mortgage Loan became imminent, all within the
meaning of Section 856(e)(4)(B) of the Code; or
(iv) Directly Operate or allow any other Person to
Directly Operate, any REO on any date more than 90
days after its acquisition date;
unless, in any such case, the Servicer has requested and received an
Opinion of Counsel (at the Servicer's expense) to the effect that such
action will not cause such REO to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any
time that it is held by the REMIC, in which case the Servicer may take
such actions as are specified in such Opinion of Counsel.
3.2.3 REO DISPOSITION ACCOUNTING. Within 30 days following an REO
Disposition, the Servicer shall provide to the Master Servicer a
statement of accounting for the related REO, including without
limitation, (i) the loan number of the related Mortgage Loan, (ii) the
date such Mortgaged Property was acquired in foreclosure or by deed in
lieu of foreclosure, (iii) the date of REO Disposition, (iv) the gross
sales price and related selling and other expenses, (v) accrued
interest calculated from the date of acquisition to the disposition
date, and (vi) such other information as the related trustee may
reasonably request.
Section 3.3 PROHIBITED TRANSACTIONS AND ACTIVITIES
3.3.1 MORTGAGE LOAN DISPOSITION RESTRICTION. The Servicer shall not
permit the sale, disposition or substitution for any of the Mortgage
Loans (except in a disposition pursuant to (i) the foreclosure or
default of a Mortgage Loan, (ii) the bankruptcy or insolvency of the
REMIC, (iii) the termination of the REMIC in a "qualified liquidation"
or "clean-up" call as defined in Section 860F of the Code, or (iv) a
substitution of a
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Qualifying Substitution Mortgage Loan as permitted under the REMIC
Provisions), nor acquire any assets for the REMIC, after the startup
day of the REMIC, nor sell or dispose of any investments in any of the
accounts established by the Servicer for the REMIC for gain, nor accept
any contributions to the REMIC (other than a cash contribution during
the 3-month period beginning on the startup day of the REMIC), unless
it has received an Opinion of Counsel (at the expense of the Person
requesting the Servicer to take such action) to the effect that such
disposition, acquisition, substitution, or acceptance will not (a)
affect adversely the status of the REMIC as a REMIC or of the
Certificates, other than the Certificates representing the residual
interest in the REMIC, as the regular interests therein within the
meaning of the REMIC Provisions, (b) affect the distribution of
interest or principal on the Certificates, (c) result in the
encumbrance of the assets transferred or assigned to the REMIC (except
pursuant to the provisions of this Agreement) or (d) cause the REMIC to
be subject to a tax on "prohibited transactions" or "prohibited
contributions" pursuant to the REMIC Provisions.
3.3.2 PERSONAL PROPERTY RESTRICTION. The Servicer shall not acquire any
personal property relating to any Mortgage Loan unless either:
(a) such personal property is incident to real property (within
the meaning of Section 856(e)(1) of the Code) so acquired by
the Servicer; or
(b) the Servicer shall have requested and received an Opinion of
Counsel, at the expense of the Servicer, to the effect that
the holding of such personal property by the REMIC will not
cause the imposition of a tax on the REMIC under the REMIC
Provisions or cause the REMIC to fail to qualify as a REMIC at
any time that any Certificate is outstanding.
Section 3.4 ELIGIBLE INVESTMENTS
3.4.1 CUSTODIAL ACCOUNT INVESTMENTS. Funds in any custodial accounts
established by the Servicer and maintained in respect of the REMIC may
be invested and, if invested, shall be invested in Eligible Investments
selected by the Servicer which shall mature not later than the Business
Day immediately preceding the next Remittance Date, 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 REMIC or its nominee. All income and gain realized from any such
investment shall be, as long as the Servicer is servicing the Mortgage
Loans held by the REMIC, for the benefit of the Servicer as additional
compensation and shall be subject to its withdrawal or order from time
to time. The amount of any losses incurred in respect of any such
investments shall be deposited in the relevant account by the Servicer
out of its own funds immediately as realized. The foregoing
requirements for deposit in such account are exclusive, it being
understood and agreed that, without limiting the generality of the
foregoing, payments of interest on funds in such account and, as long
as the Servicer is servicing the Mortgage Loans held by the REMIC,
payments in the nature of prepayment fees, late payment charges,
assumption fees or any similar fees customarily associated with the
servicing mortgage loans paid by any mortgagor need not be deposited by
the Servicer in such account and may be retained by the Servicer as
additional servicing compensation. If the Servicer
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deposits in such account any amount not required to be deposited
therein, it may at any time withdraw such amount, any provision herein
to the contrary notwithstanding.
3.4.2 ESCROW ACCOUNT INVESTMENTS. Subject to the terms of the related
Mortgage Notes and Security Instrument, and further subject to
applicable law, any funds in any escrow account shall be invested in
Eligible Investments that mature prior to the date on which payments
have to be made out of the related escrow account and any such Eligible
Investment shall not be sold or disposed of prior to its maturity;
provided that, if any loss is incurred on any such investment, the
Servicer shall cover such loss by making a deposit into the appropriate
escrow account out of its own funds in the amount of such loss.
Withdrawals from any escrow account may be made (to the extent amounts
have been escrowed for such purpose and to the extent permitted by the
related Security Interest and Mortgage Note) only (i) to effect timely
payment of Escrow Items in connection with the related Mortgage Loan,
(ii) to reimburse the Master Servicer or Servicer out of related
collections for advances with respect to Escrow Items, (iii) to refund
to any mortgagors any sums determined to be overages, (iv) to pay
interest, if any, owed to mortgagors on such account to the extent
required by law, (v) for application to restoration or repair of the
Mortgaged Property or (vi) to clear and terminate the escrow account on
the termination of this Agreement. The Servicer shall be entitled to
all investment income on any escrow account not required to be paid to
mortgagors pursuant to the preceding sentence.
ARTICLE 4
SERVICER CONSIDERATIONS
Section 4.1 [RESERVED]
Section 4.2 SERVICER ELIGIBILITY STANDARDS.
To service Mortgage Loans under this Agreement the Servicer must
satisfy the eligibility standards set forth in this Section 4.2
initially and at all times thereafter.
4.2.1 REGULATORY APPROVALS AND LICENSING. A Servicer must be:
(a) FNMA or FHLMC approved and in good standing;
(b) a HUD approved mortgagee in good standing;
(c) in compliance with all applicable capital requirements and
other requirements from time to time specified by any
governmental agency or quasi-governmental authority having
jurisdiction over the Servicer; and
(d) properly licensed to service the Mortgage Loans in all
relevant jurisdictions where such licenses are required.
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4.2.2 NET WORTH AND PORTFOLIO REQUIREMENTS.
(a) The Servicer must maintain a Tangible Net Worth of at least
$1,000,000.
(b) The Servicer must maintain an Adjusted Tangible Net Worth of
at least $1,000,000.
(c) The Servicer must maintain a servicing portfolio of at least
$1,000,000,000.
4.2.3 AUDITOR'S OPINION AND OTHER ANNUAL REPORTS. The Servicer must
provide the Master Servicer, as part of the application process (except
as to clause (c)) and annually thereafter within 120 days after the
close of the Servicer's fiscal year, with the following reports and
opinions:
(a) financial statements for the most recently closed fiscal year,
together with an unqualified opinion thereon of an independent
certified public accountant who is a member of the American
Institute of Certified Public Accountants, unless the Master
Servicer, in its reasonable discretion, decides to waive this
requirement regarding qualification;
(b) a statement from the independent certified public accountant
who prepared the above-referenced financial statements for the
Servicer, certifying that, on the basis of an examination of
certain documents and records relating to the mortgage loans
being serviced by the Servicer conducted substantially in
compliance with the Uniform Single Audit Program for Mortgage
Bankers, the servicing of such mortgage loans was conducted in
compliance with the provisions of this Agreement and other
similar agreements, except for (i) such exceptions as such
firm believes to be immaterial and (ii) such other exceptions
as are set forth in such statement; and
(c) a certificate signed by any Officer of the Servicer involved
in, or responsible for, the administration and servicing of
the Mortgage Loans certifying that the Officer signing such
certificate has supervised a review of the activities of the
Servicer during the preceding fiscal year and of the
Servicer's performance during the most recently closed fiscal
year under this Agreement and that to the best of such
officer's knowledge, based on such review, the Servicer has
fulfilled its duties, responsibilities and obligations under
this Agreement throughout such year, or, if there has been
failure by the Servicer to fulfill any duty, responsibility or
obligation under this Agreement, specifying the nature and
status of each such failure.
4.2.4 SERVICING EXPERIENCE. The Servicer shall satisfactorily
demonstrate to the Master Servicer, in the Master Servicer's reasonable
discretion, the following experience:
(a) that it has at least three (3) years of conventional mortgage
loan servicing experience;
(b) that it has a staff knowledgeable in servicing of Mortgage
Loans and the administration of REO; and
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(c) that it has experience maintaining a servicing portfolio in
excess of $1 billion.
4.2.5 MATERIAL CHANGES. The Servicer shall promptly report to the
Master Servicer any change in its business operations, financial
condition, properties or assets since the date of the latest submitted
financial statements which could have a material adverse effect on the
Servicer's ability to perform its obligations hereunder. Events for
which the Master Servicer must receive notice include, but are not
limited to, the following:
(a) any change in the Servicer's business address and/or telephone
number;
(b) any merger, consolidation, or significant reorganization;
(c) any changes in the Servicer's ownership whether by direct or
indirect means. Indirect means include any change in ownership
of the Servicer's parent;
(d) any change in the Servicer's corporate name;
(e) if the Servicer is a savings and loan association, any change
in the Servicer's charter from federal to state or vice versa;
(f) any decreases in capital, adverse alteration of debt/equity
ratios, or changes in management ordered or required by a
regulatory authority supervising or licensing the Servicer;
(g) any significant adverse change in the Servicer's financial
position;
(h) entry of any court judgment or regulatory order in which the
Servicer is or may be required to pay a claim or claims which,
in the Master Servicer's reasonable opinion, have a material
adverse effect on the Servicer's financial condition; and
(i) the Servicer admits to committing, or is found to have
committed, a material, in the Master Servicer's reasonable
opinion, violation of any law, regulation, or order.
Section 4.3 ERRORS AND OMISSIONS INSURANCE
4.3.1 E & O REQUIREMENT. A Servicer must maintain, at all times and at
its own expense and consistent with FNMA or FHLMC requirements, an
Errors and Omissions Policy, in the amount and having the other terms
described below, with broad coverage from an incorporated surety
company authorized to do business in the Servicer's state of domicile.
4.3.2 E & O COVERAGE. The Servicer must maintain an Errors and
Omissions Policy in a minimum amount per occurrence equal to the
greater of (i) $1,000,000 or (ii) the Fidelity Bond coverage amount
required of the Servicer as set forth in Section 4.4 hereof. This
coverage may not be changed except as to an increase in the amount of
coverage.
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4.3.3 E & O SCOPE. The Errors and Omissions Policy must explicitly
insure the Servicer, its successors and assigns, against any losses
resulting from negligence, errors or omissions on the part of officers,
employees or other persons acting on behalf of the Servicer in the
performance of its duties as a Servicer pursuant to this Agreement,
including, but not limited to, the following:
(a) payment when due of all applicable insurance premiums,
including, but not limited to, any Primary Mortgage Insurance,
Hazard Insurance and any Flood Insurance in accordance with
the insurance requirements in Articles 15 and 16 of this
Agreement;
(b) where applicable, compliance with Primary Mortgage Insurance
and/or Pool Insurance requirements for Mortgage Loans serviced
under this Agreement;
(c) payment of real estate taxes and special assessments; and
(d) determination of whether any Mortgaged Property is located in
an area where Flood Insurance is available and required by the
Flood Disaster Protection Act of 1973, as amended.
4.3.4 E & O POLICY MAINTENANCE. The Servicer must maintain in effect
the Errors and Omissions Policy at all times and the Errors and
Omissions Policy may not be cancelled, permitted to lapse or otherwise
terminated without thirty Business Days' prior written notice by
registered mail to the Master Servicer. Further, the Errors and
Omissions Policy must provide that, or the insurer must state in
writing to the Master Servicer that, the Errors and Omissions Policy
shall not be cancelable without the giving of notice as provided for in
the prior sentence.
4.3.5 E & O DEDUCTIBLE. The terms of the Errors and Omissions Policy
must provide for a deductible amount that does not exceed the greater
of $100,000 per occurrence or 5.0% of the coverage amount per
occurrence.
4.3.6 E & O QUALIFICATIONS. The Errors and Omissions Policy must be
obtained by the Servicer from an insurer which satisfies FNMA or FHLMC
standards in this regard.
4.3.7 NOTICE OF CLAIM. The Servicer must immediately report to the
Master Servicer all claims made against the insurer under the Errors
and Omissions Policy, and shall promptly follow such report with a
written notice to the Master Servicer.
Section 4.4 FIDELITY BOND COVERAGE
4.4.1 FIDELITY BOND REQUIREMENT. A Servicer must maintain, at all
times, at its own expense and consistent with FNMA requirements, a
Fidelity Bond, in the amounts and having the other terms described
below with broad coverage from an incorporated surety company
authorized to do business in the Servicer's state of domicile. The
Fidelity Bond may be in the form of either individual bonds or a
blanket bond.
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4.4.2 FIDELITY BOND COVERAGE. The amount of Fidelity Bond coverage
shall be as follows:
(a) a minimum of $300,000 for the Servicer's servicing portfolio,
the current principal amount of which totals $100 million or
less; plus
(b) an additional 0.15% of the amount of the current principal
amount of the Servicer's servicing portfolio between $100
million and $500 million; plus
(c) an additional 0.125% of the amount of the current principal
amount of the Servicer's servicing portfolio between $500
million and $1 billion; plus
(d) an additional 0.1% of the amount of the current principal
amount of the Servicer's servicing portfolio in excess of $1
billion.
This coverage may not be changed except as to an increase in the amount
of coverage.
4.4.3 FIDELITY BOND SCOPE. The coverage of the Fidelity Bond must
explicitly insure the Servicer, its successors and assigns, against any
losses resulting from dishonest, fraudulent or criminal acts on the
part of Officers, employees or other persons acting on behalf of the
Servicer.
4.4.4 FIDELITY BOND MAINTENANCE. The Servicer must maintain in effect
the Fidelity Bond at all times and the Fidelity Bond may not be
cancelled, permitted to lapse or otherwise terminated without thirty
Business Days' prior written notice by registered mail to the Master
Servicer. Further, the Fidelity Bond must provide that, or the insurer
must state in writing to the Master Servicer that, the Fidelity Bond
shall not be cancelable without the giving of notice as provided for in
the prior sentence.
4.4.5 FIDELITY BOND DEDUCTIBLE. The terms of the Fidelity Bond must
provide for a deductible amount that does not exceed the greater of
$100,000 per occurrence or 5.0% of the coverage amount per occurrence.
4.4.6 FIDELITY BOND RATING REQUIREMENT. The Fidelity Bond must be
obtained from a company which satisfies FNMA or FHLMC standards in this
regard.
4.4.7 NOTICE OF EVENT. The Servicer must promptly report to the Master
Servicer any and all occurrences against the Fidelity Bond of the
Servicer.
Section 4.5 SERVICER'S LIABILITY
4.5.1 LIABILITY EXPOSURE. Any and all losses not covered under the
Fidelity Bond or Errors and Omissions Policy, as a result of (i) the
respective deductible provisions thereof, (ii) the limits of coverage
of the Fidelity Bond or Errors and Omissions Policy, or (iii) any claim
denied which should have been covered by the Fidelity Bond or the
Errors and Omissions Policy, as the case may be, according to the terms
of this Agreement had the Fidelity Bond or Errors and Omissions Policy
been properly obtained and maintained and respective claim been
properly submitted for payment, shall be borne
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by the Servicer, where the Servicer has acted in a manner in which the
Servicer is not relieved from liability as described in Section 4.5.2
hereof.
4.5.2 SCOPE OF LIABILITY. Neither the Servicer or any subservicer
appointed by it, nor any of their respective partners, directors,
officers, employees or agents, or its delegees pursuant to Section
11.2.1 hereof, shall be under any liability to the Principal, the
Master Servicer, or the Owners of the related Mortgage Loan 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, any
subservicer or any of their respective partners, directors, officers,
employees or agents, or its delegees pursuant to Section 11.2.1 hereof,
against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance
of his or its duties or by reason of reckless disregard of his or its
obligations and duties hereunder. The Servicer, any subservicer, and
any of their respective partners, directors, officers, employees or
agents, or its delegees pursuant to Section 11.2.1 hereof, 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.
Section 4.6 [RESERVED]
Section 4.7 INDEMNIFICATION
4.7.1 SCOPE OF INDEMNITY. The Servicer hereby agrees to indemnify and
hold harmless (a) the Master Servicer, (b) the Principal, (c) each
Owner of any Mortgage Loan, and (d) the officers, directors, employees,
agents and Affiliates of any of the foregoing (any of the foregoing
hereinafter referred to as the "Indemnified Party"), from and against
any and all claims, losses, damages, liabilities, fines, settlements,
awards, offsets, defenses, counterclaims, actions, penalties,
forfeitures, legal fees, judgments and any other costs, fees and
expenses (including, without limitation, reasonable attorneys' fees and
court costs) (any of the foregoing which satisfy the criteria of this
paragraph are collectively referred to as "Claims"), either directly or
indirectly arising out of, based upon, or relating to (i) a breach by
the Servicer, its officers, directors, employees, or agents, or its
delegees pursuant to Section 11.2.1 hereof, of any representation or
warranty contained herein, or any failure to disclose any matter that
makes such representation and warranty misleading or inaccurate, or any
inaccuracy in material information furnished by the Servicer regarding
itself, (ii) a breach of any representation or warranty made by any
Indemnified Party in reliance upon any such representation or warranty,
failure to disclose, or inaccuracy in information furnished by the
Servicer regarding itself, (iii) any failure of the Servicer, its
officers, directors, employees, or agents, or its delegees pursuant to
Section 11.2.1 hereof, to perform any of its obligations under this
Agreement in a manner in which the Servicer is not relieved from
liability as described in Section 4.5.2 hereof, and (iv) any acts or
omissions of the Servicer, its officers, directors, employees, or
agents, or its delegees pursuant to Section 11.2.1 hereof, in a manner
in which the Servicer is not relieved from liability as described in
Section 4.5.2 hereof. Each Indemnified Party shall cooperate with the
Servicer in the defense of such Claims and shall not settle any such
Claim without the prior written consent of the Servicer.
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4.7.2 SURVIVAL OF INDEMNITY. This indemnification shall survive
purchase, transfer of any interest in a Mortgage Loan by any
indemnified party, the Liquidation of such Mortgage Loan, termination
of any such Servicer's servicing rights with respect to such Mortgage
Loan and termination or expiration of this Agreement between the
Servicer and the Principal, and its successors and assigns.
Section 4.8 SERVICER'S COMPENSATION
4.8.1 SERVICING FEE AMOUNT. In consideration of the services rendered
under this Agreement, absent default by the Servicer, the Servicer
shall on each Remittance Date be entitled to a monthly aggregate
servicing compensation (the "Monthly Servicing Compensation") for the
preceding month which shall equal the sum of (a) the Servicing Fee
payable with respect to each Mortgage Loan serviced during such month
and (b) any interest earnings on each Custodial P&I Account with
respect to such month other than interest earnings thereon which are
payable to the Borrower pursuant to the Security Instrument or
applicable law, subject to any adjustment for Month End Interest as
described in Section 7.6.1. Absent default by the Servicer, the
Servicer shall also be entitled to retain in addition to the Monthly
Servicing Compensation any late charges, prepayment fees, penalty
interest, assumption fees, modification fees or deficiency recovery
fees paid by the Borrower or any other customary income, which amount
are not required to be deposited into the Custodial P&I Account. 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 therefor except as specifically provided for
herein.
4.8.2 SERVICING FEE SOURCE. The Servicing Fee for each Mortgage Loan
shall be payable solely from the interest portion of the related
Monthly Payment paid by the Borrower or other payment of interest paid
with respect to the Mortgage Loan, whether from the proceeds of
foreclosure or any judgment, writ of attachment or levy against the
Borrower or his assets, or from funds paid in connection with any
prepayment in full or from Insurance Proceeds or Liquidation Proceeds.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 GENERAL
5.1.1 RELIANCE. The Master Servicer and the Principal rely upon the
representations and warranties contained in this Article 5 hereof, in
the acceptance of the Servicer. The representations and warranties
contained herein shall inure to the benefit of the Master Servicer and
the Principal, and to each Owner of the related Mortgage Loans with
respect to such Mortgage Loans.
5.1.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made herein shall survive termination of this Agreement,
and shall inure to the benefit of the Master Servicer and the
Principal, and to their respective successors, Affiliates and assigns
and each indemnified party under Section 4.7.1, and to each Owner of
the related
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Mortgage Loans with respect to such Mortgage Loans, and its successors
and assigns, in each case, regardless of any review or investigation
made by or on behalf of such parties with respect to any Mortgage Loan.
5.1.3 BREACH OF REPRESENTATION OR WARRANTY. Upon breach of any
requirement or representation or warranty included in this Agreement
relative to any Mortgage Loan, the Servicer must:
(a) Promptly notify the Master Servicer in writing of the nature
of the breach, the date on which the breach occurred or began
and the Servicer's plans, if any, for curing the breach;
(b) Effect a cure of the breach within 30 days after its
occurrence or onset and a reasonable extension will be granted
if warranted and necessary to fully cure the breach but in no
event greater than 90 days; and
(c) If no complete cure has been effected within such period in
the Master Servicer's reasonable discretion, purchase any
Mortgage Loan in which the Owner's interest has been impaired
or which, in the reasonable opinion of the Master Servicer,
has suffered a material impairment of Value; provided that
purchase shall be within five days after receipt by the
Servicer of written notice from the Master Servicer requesting
the Servicer's purchase of the Mortgage Loan at the Purchase
Price.
5.1.4 ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES. The Servicer agrees
that each Owner of the related Mortgage Loans with respect to such
Mortgage Loans may, at any time, assign the representations and
warranties given by the Servicer as set forth in this Article 5 which
it then possesses, in whole or in part, or an undivided interest
therein, to one or more Persons.
Section 5.2 SERVICER REPRESENTATIONS AND WARRANTIES
The Servicer represents and warrants, as of the date of this Agreement
and, except as otherwise provided, throughout the term of this
Agreement, that the statements set forth below in this Section 5.2 are
true and accurate.
RELATIVE TO THE SERVICER:
5.2.1 QUALIFICATION OF SERVICER. The Servicer is duly incorporated,
validly existing and in good standing under the laws of the state of
its incorporation and is duly qualified to do business and is in good
standing under the laws of each jurisdiction that requires such
qualification wherein it owns or leases any material properties, or in
which it conducts any material business or in which the performance of
its duties under this Agreement would require such qualification,
except where the failure to so qualify would not have a material
adverse effect on (a) the Servicer's performance of its obligations
under this Agreement, (b) the value or marketability of the Mortgage
Loans, or (c) the ability to foreclose on the related Mortgaged
Properties.
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5.2.2 REQUISITE AUTHORITY. The Servicer has the corporate power and
authority to own its properties and conduct any and all business
required or contemplated by this Agreement and to perform the covenants
and obligations to be performed by it under this Agreement. The
Servicer holds all material licenses, certificates and permits from all
governmental authorities necessary for conducting its business as it is
presently conducted.
5.2.3 NO CONFLICTS. The execution and delivery of this Agreement are
within the corporate power of the Servicer and have been duly
authorized by all necessary actions on the part of the Servicer;
neither the execution and delivery of this Agreement by the Servicer,
nor the consummation by the Servicer of the transactions herein
contemplated, nor compliance with the provisions hereof by the
Servicer, will (i) conflict with or result in a breach of, or
constitute a default under, any of the provisions of the articles of
incorporation or bylaws of the Servicer or any law, governmental rule
or regulation, or any judgment, decree or order binding on the Servicer
or any of its properties, or any of the provisions of any indenture,
mortgage, deed of trust, contract or other instrument to which it is a
party or by which it is bound or (ii) result in the creation or
imposition of any lien, charge or encumbrance upon any of its
properties pursuant to the terms of any such indenture, mortgage, deed
of trust, contract or other instrument.
5.2.4 ENFORCEABLE AGREEMENT. This Agreement, when duly executed and
delivered by the Servicer, will constitute a legal, valid and binding
agreement of the Servicer, enforceable in accordance with its terms,
subject, as to enforcement or remedies, to applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally from time to time in effect, and to general principles
of equity.
5.2.5 NO CONSENTS REQUIRED. No consent, approval, order or
authorization of any governmental authority or registration,
qualification or declaration with any such authority is required in
order for the Servicer to perform its obligations under this Agreement.
5.2.6 AGENCY APPROVAL. The Servicer has been approved by FNMA or FHLMC
and will remain approved as an negligible seller/servicer" of
conventional, residential mortgage loans as provided in FNMA or FHLMC
guidelines and in good standing. The Servicer has not received any
notification from FNMA or FHLMC that the Servicer is not in compliance
with the requirements of the approved seller/servicer status or that
such agencies have threatened the servicer with revocation of its
approved seller/servicer status.
5.2.7 FINANCIAL CONDITION. The Servicer is not, and, with passage of
time, does not expect to become, insolvent or bankrupt. The Servicer
shall promptly notify the Master Servicer of any material adverse
change of its financial condition.
5.2.8 SERVICING COMPLIANCE. The servicing practices used by the
Servicer under this Agreement have been and are in all respects in
compliance with all federal, state and local laws, rules, regulations
and requirements in connection therewith and are in accordance with
Prudent Servicing Practices.
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5.2.9 NO IMPAIRMENT. There is no action, suit, proceeding or
investigation pending or, to the best of the Servicer's knowledge after
due inquiry, threatened, against the Servicer which, either in any one
instance or in the aggregate, may result in any material adverse change
in 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 if
adversely determined would affect 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.
5.2.10 NO INQUIRIES. The Servicer has not been the subject of an audit
by any of the Master Servicer, FHA, HUD, FDIC, FNMA, FHLMC, GNMA or any
Primary Mortgage Insurer, which audit included material allegations of
failure to comply with applicable loan origination, servicing or claims
procedures, or resulted in a request for repurchase of Mortgage Loans
or indemnification in connection with the Mortgage Loans.
RELATIVE TO THE MORTGAGE LOANS:
5.2.11 CUSTODIAL AND ESCROW ACCOUNTS CURRENT. All Custodial P&I
Accounts, Custodial T&I Accounts, Custodial Buydown Accounts and Escrow
Funds are maintained by the Servicer and have been maintained in
accordance with applicable law and the terms of the Mortgage Loans. The
Escrow Items required by the Mortgages which have been paid to the
Servicer for the account of the Borrower are on deposit in the
appropriate Custodial Account. All funds received by the Servicer in
connection with the Mortgage Loans, including, without limitation,
foreclosure proceeds, Insurance Proceeds, condemnation proceeds and
principal reductions, have promptly been deposited in the appropriate
Custodial Account, and all such funds have-been applied to reduce the
principal balance of the Mortgage Loans in question, or for
reimbursement of repairs to the Mortgaged Property or as otherwise
required by applicable law.
5.2.12 INSURANCE MAINTENANCE. Pursuant to the terms of the related
Security Instrument, all buildings or other improvements upon the
related Mortgaged Property are insured by an insurance policy or
policies meeting the requirements of Articles 15 and 16 hereof. The
related Security Instrument obligates the Borrower thereunder to
maintain the hazard insurance policy at the Borrower's cost and
expense, and upon the Borrower's failure to do so, authorizes the
Mortgagee under the related Security Instrument to obtain and maintain
such insurance at the Borrower's cost and expense, and to seek
reimbursement therefor from the Borrower. 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 Owner of the related Mortgage Loan. The Servicer and the
Borrower have not engaged in any act or omission that would impair the
coverage of any such policy, the benefits of the endorsement provided
for herein, or the validity and binding effect of either. The Mortgage
Loan Documents permit the maintenance of an escrow account to pay the
premiums for the above mentioned insurance, and the requirement for
such escrows has not been waived, unless otherwise required by
applicable state law.
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ARTICLE 6
CUSTODIAL ACCOUNTING
Section 6.1 IN GENERAL
6.1.1 CUSTODIAL ACCOUNT ESTABLISHMENT. The Servicer must establish
appropriate custodial accounts for the benefit of the Owner of the
related Mortgage Loans, its successors and assigns for the deposit of
funds collected in connection with such Mortgage Loans. All custodial
accounts and related records must be maintained in accordance with
sound and controlled accounting practices.
6.1.2 CUSTODIAL ACCOUNT SEPARATENESS. At least one custodial account
for principal and interest (i.e., a Custodial P&I Account), one
custodial account for taxes and insurance (i.e., a Custodial T&I
Account), and one custodial account for Buydown Funds, if applicable
(i.e., a Custodial Buydown Account), shall be established and
maintained for the Mortgage Loans. Without the written consent of the
Master Servicer, funds in these accounts may not be commingled with
other funds held by the Servicer. If the Mortgage Loans are owned by
more than one Owner, the Servicer shall establish an Eligible Account
("Eligible Custodial P&I Account") to serve as the Custodial P&I
Account.
6.1.3 CUSTODIAL ACCOUNT MAINTENANCE. The Servicer must ensure that each
Custodial P&I Account, Custodial T&I Account and Custodial Buydown
Account (if applicable) meets the following guidelines:
(a) the accounts must be Eligible Accounts;
(b) the name of each Custodial P&I Account, Custodial T&I Account
and Custodial Buydown Account shall include a reference to the
name of the Owner of the related Mortgage Loans or the
designation of the respective pool or subpool of such Mortgage
Loans as prescribed by the Master Servicer;
(c) the Servicer must transfer all funds on hand relating to such
Mortgage Loans, Monthly Payments due on or after the related
Cut-Off Date and any principal prepayments received after the
related Cut-Off Date, into the appropriate custodial accounts
meeting the requirements of Sections 6.1.1 and 6.1.2 hereof;
(d) beginning with any payment due on or after the related Cut-Off
Date, all collections on the Mortgage Loans must be credited
to the appropriate custodial account no later than the first
Business Day following receipt;
(e) (i) the Servicer shall not permit the balance of any Custodial
P&I Account to exceed the Threshold Amount or include any
amounts then required to be remitted to the Master Servicer
Custodial Account pursuant to Section 18.3.1, (ii) in the
event the Servicer collects amounts in excess of the Threshold
Amount prior to the next scheduled transfer of funds to the
respective Master Servicer Custodial Account, the Servicer
must transfer the excess funds directly to the related Master
Servicer Custodial Account by wire before the close of
business on any day on which the amount on deposit in such
account exceeds the
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Threshold Amount, and (iii) in the event that the Servicer
fails to transfer the funds in excess of the Threshold Amount
to the related Master Servicer Custodial Account or to remit
to the Master Servicer Custodial Account the Monthly
Remittance on the Remittance Date pursuant to Section 18.3.1,
the Master Servicer is authorized to debit such Custodial P&I
Account and transfer such amounts to the related Master
Servicer Custodial Account;
(f) (i) the Servicer must file with the Master Servicer the
appropriate ACH Debit Form for each Custodial P&I Account;
(ii) the Master Servicer may monitor the principal balance of
each Custodial P&I Account and may issue an ACH debit for
amounts on deposit in any such account in excess of the
Threshold Amount or otherwise in violation of Section
6.1.3(e); (iii) such amounts will immediately be deposited
into the appropriate Master Servicer Custodial Account; and
(iv) the ability of the Master Servicer to withdraw and remit
such funds to the appropriate Master Servicer Custodial
Account does not relieve the Servicer of its obligations to
remit such funds to the related Master Servicer Custodial
Account;
(g) upon the establishment of a Custodial P&I Account, Custodial
T&I Account or Custodial Buydown Account, the Servicer shall
promptly advise the Master Servicer in writing of, or of any
change in, the name and address of the depository, the
individual employee of the depository who is responsible for
overseeing such account, the account number, the title of the
account and the individuals whose names appear on the
signature card; and
(h) (i) establishment and maintenance of the Custodial P&I
Account, Custodial T&I Account and Custodial Buydown Account
will be an expense of the Servicer; (ii) such custodial
accounts may be interest-bearing accounts provided that such
accounts comply with all local, state and federal laws and
regulations governing interest-bearing accounts and, in the
case of a Custodial T&I Account or Custodial Buydown Account,
governing Borrower escrow accounts; and (iii) the Servicer
must ensure that all interest credited to any custodial
account that is not due the Borrower is removed by the
Servicer within 30 days after receipt of such interest.
6.1.4 ESCROW INVESTMENT. If the Servicer elects or is required by law
to deposit the Borrower's Escrow Funds into an interest-bearing
custodial account, the Servicer shall either (a) deposit such funds
into an account which permits withdrawal on demand so as to pay Escrow
Items as they come due, or (b) invest such funds in an Eligible Account
so that adequate funds mature the Business Day prior to the date
payment is due for each Escrow Item.
6.1.5 CLEARING ACCOUNT. If the Servicer finds it necessary to use a
clearing account, the following guidelines must be followed:
(a) the titles of such accounts must reflect that they are
custodial in nature, and the depository in which the accounts
are maintained must be informed in writing that the accounts
are custodial accounts;
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(b) a check drawn on or funds transferred from a Custodial P&I
Account or Custodial T&I Account must be deposited to a
disbursement clearing account before or at the same time as
any checks on the clearing account are issued;
(c) a single clearing account must not be utilized both as a
collection and disbursement clearing account;
(d) the accounts must be held at depository institutions in which
accounts are insured by the FDIC, through either the BIF or
SAIF;
(e) the Servicer must maintain adequate records and audit trails
to support all debits and credits of each Borrower's payment
records and accounts; and
(f) collections deposited to a depository clearing account must be
credited to the appropriate custodial account no later than
one Business Day following receipt by the Servicer.
6.1.6 CUSTODIAL BUYDOWN ACCOUNT. The Servicer must establish a separate
custodial account to hold Buydown Funds on Mortgage Loans being
serviced for the Owner of the related Mortgage Loans, its successors
and assigns. These accounts must be clearly marked to indicate that the
Servicer is a custodian for Buydown Funds being held for the Owner of
the related Mortgage Loans, its successors and assigns.
6.1.7 MASTER SERVICER CUSTODIAL ACCOUNT. The Master Servicer shall
establish a segregated Master Servicer Custodial Account which relates
to all the Mortgage Loans owned by each common Owner into which the
Servicer shall remit, on or before each Remittance Date, all amounts
due pursuant to Section 18.3 hereof. The name assigned to each Master
Servicer Custodial Account shall include a reference to the Owner of
the related Mortgage Loans. The Master Servicer shall be the only party
authorized to direct the withdrawal of funds from each Master Servicer
Custodial Account. In the Master Servicer's reasonable discretion and
where the Owner of the related Mortgage Loans is a trust which has
issued mortgage backed securities backed by such Mortgage Loans, the
Master Servicer may elect to employ a certificate account created under
the related pooling and servicing agreement as the related Master
Servicer Custodial Account.
Section 6.2 CUSTODIAL P&I ACCOUNT
6.2.1 MANDATORY DEPOSITS. The following funds must be deposited into
each related Custodial P&I Account within one Business Day after the
Servicer's receipt of such amounts, or in the case of clause (d)
hereof, on the Remittance Date:
(a) Principal collections from related Mortgage Loans (including
Prepayments in Full and Curtailments), together with Month End
Interest, if applicable, other than the Month End Interest
Shortfall;
(b) Interest collections from related Mortgage Loans (net of
Servicing Fees or other compensation of the Servicer as set
forth in Section 4.8.1);
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(c) Liquidation Proceeds and Insurance Proceeds from related
Mortgage Loans other than proceeds held in an escrow account
and applied to the restoration and repair of the related
Mortgaged Property;
(d) related P&I Advances; and
(e) the proceeds of any purchase, or substitution under a purchase
agreement, of a related Mortgage Loan by the Servicer or a
Representing Party, or sale of an REO.
6.2.2 OPTIONAL DEPOSITS. The following funds may, but are not required
to, be deposited into each related Custodial P&I Account:
(a) late charges;
(b) prepayment fees;
(c) penalty interest;
(d) assumption fees; and
(e) unapplied funds if the Borrower that remitted such funds is
not required to maintain Escrow Funds.
The Servicer shall maintain separate accounting for each of the
foregoing types of funds. Provided that the Servicer is not in default
of its obligations hereunder, the Servicer may retain any late charges,
prepayment fees, penalty interest and assumption fees as additional
servicing compensation.
6.2.3 PERMISSIBLE WITHDRAWALS. The Servicer may make withdrawals from
each related Custodial P&I Account solely for the following:
(a) remittances to the related Master Servicer Custodial Account;
(b) reimbursement to itself for advances which have been recovered
by subsequent collections including late payments, Liquidation
Proceeds or Insurance Proceeds, to the extent funds on deposit
recovered by such subsequent collections relate to the
Mortgage Loans as to which such advances were made;
(c) interest earnings on deposits to the related Custodial P&I
Account, but only to the extent that such interest has been
credited;
(d) removal of amounts deposited in error;
(e) removal of charges or other such amounts deposited on a
temporary basis in the account;
(f) removal of Servicing Fees to the extent deposited therein; and
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(g) termination of the account.
6.2.4 ACCOUNT BENEFICIARY. Each Custodial P&I Account (other than any
Eligible Custodial P&I Account) must be titled to show the respective
interests of the Servicer as trustee and of the Master Servicer as
beneficiary.
6.2.5 USE OF ACCOUNTS. The Servicer shall not use the Custodial P&I
Account as a collection clearing account.
Section 6.3 CUSTODIAL T&I ACCOUNT
6.3.1 MANDATORY DEPOSITS. The following funds must be deposited into
each respective Custodial T&I Account:
(a) related Borrowers' Escrow Funds;
(b) related T&I Advances;
(c) the remaining balance of Title Insurance loss drafts;
(d) rent receipts to offset any related T&I Advances by the
Servicer;
(e) unapplied funds; and
(f) Liquidation Proceeds from a related Mortgage Loan that offset
a deficit balance in the related Borrower's Escrow Funds.
6.3.2 PERMISSIBLE WITHDRAWALS. With respect to each related Borrower,
the Servicer may make withdrawals from each respective Custodial T&I
Account to the extent of the balance of such related Borrower's Escrow
Funds for the following:
(a) timely payment of such related Borrower's taxes and insurance
premiums;
(b) refunds to such related Borrower of excess Escrow Funds
collected from him;
(c) recovering T&I Advances made with respect to such related
Borrower by the Servicer;
(d) payment of interest, if required, to such related Borrower on
his Escrow Funds;
(e) removal of any deposits made in error; and
(f) termination of the account.
6.3.3 ACCOUNT REQUIREMENTS. Each Custodial T&I Account is to be
designated in the name of the Servicer acting as an agent for the
individual related Borrowers to make such Escrow Item payments in order
to show that the account is custodial in nature. The Servicer is
required to keep records identifying each Borrower's payment deposited
into the account.
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6.3.4 ACCOUNT BALANCE. The Servicer must never allow any Custodial T&I
Account to become overdrawn as to any individual related Borrower. If
there are insufficient funds in the account, the Servicer must advance
its own funds to cure the overdraft.
Section 6.4 ELIGIBLE ACCOUNT INVESTMENTS
6.4.1 ELIGIBLE INVESTMENTS PERMITTED. Unless prevented or restricted by
written notice of the Master Servicer pursuant to Section 6.4.5 hereof,
the Servicer may, from time to time, withdraw funds from an Eligible
Account, other than a Custodial T&I Account, and immediately invest
such funds in Eligible Investments in accordance with this Agreement.
Upon the maturity of such Eligible Investments, such funds shall be
redeposited into the Eligible Account which they were drawn from or
into the Master Servicer Custodial Account. Where the Owner of the
related Mortgage Loans is a trust which has issued mortgage backed
securities securitized by such Mortgage Loans and where a statistical
rating agency selected by such Owner to rate such mortgage backed
securities shall require that Eligible Investments can only be made if
such funds remain within an Eligible Account, then the Master Servicer
shall notify the Servicer, pursuant to Section 6.4.5 hereof, that the
Servicer's ability to invest in Eligible Investments shall be so
restricted and that no withdrawal of funds from an Eligible Account for
the purpose of making an Eligible Investment shall be allowed.
6.4.2 ELIGIBLE INVESTMENT RESTRICTIONS. No Eligible Investment shall be
sold or disposed of at a gain prior to maturity unless the Servicer has
obtained the consent of the Master Servicer.
6.4.3 ELIGIBLE INVESTMENT INCOME. All income (other than any gain from
a sale or disposition of the type referred to in Section 6.4.2 hereof)
realized from any such Eligible Investment shall be for the benefit of
the Servicer an additional servicing compensation.
6.4.4 ELIGIBLE INVESTMENT LOSSES. The amount of any losses incurred in
respect of any investments permitted under this Section 6.4 shall be
deposited in the Master Servicer Custodial Account by the Servicer out
of its own funds immediately as realized. The Master Servicer may, in
its reasonable discretion, from time to time, require the Servicer to
provide a reasonable amount of security to cover the risk of such
investment losses. To the extent that the Servicer shall not
immediately deposit the amount of such losses in the Master Servicer
Custodial Account, the Master Servicer may immediately act against such
security as well as pursue all other remedies permitted by law.
6.4.5 ELIGIBLE INVESTMENT LIMITATIONS. At any time, the Master
Servicer, in its reasonable discretion, may restrict or totally limit
the ability of the Servicer to invest in Eligible Investments pursuant
to this Section 6.4.
6.4.6 ELIGIBLE INVESTMENTS REPORTS. The Servicer shall, at any time
provide such information and reports regarding its Eligible Investments
under this Agreement as the Master Servicer may request.
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ARTICLE 7
MORTGAGE LOAN ACCOUNTING
Section 7.1 IN GENERAL
7.1.1 MORTGAGE LOAN ACCOUNTING PRACTICES. The Servicer shall administer
the application and accounting of payments made on the Mortgage Loans
in accordance with the provisions of this Agreement.
7.1.2 RECORD KEEPING. The Servicer must maintain complete and accurate
records of all transactions affecting any Mortgage Loan. Each Mortgage
Loan must be clearly marked to indicate that it is being serviced for
the Owner of such Mortgage Loan, its successors and assigns.
7.1.3 RECORD REVIEW. The Master Servicer and its designee have the
right to:
(a) conduct reviews and audits of the Servicer's records and
operating procedures during any Business Day; and
(b) examine the Servicer's financial records, the Borrowers'
Escrow Funds records and any and all other relevant documents
and materials, whether held by the Servicer or by another on
behalf of the Servicer, to ensure compliance with terms and
conditions of this Agreement and the Master Servicer's
standards.
Section 7.2 MORTGAGE LOAN RECORDS
7.2.1 ACCOUNT RECORDS. Permanent Mortgage Loan account records must be
maintained by the Servicer for each Mortgage Loan. Each account record
must be identifiable by the Servicer Loan Number.
7.2.2 ACCOUNT RECORD INFORMATION. The Servicer shall maintain the
following information for each Mortgage Loan in a readily accessible
form:
(a) the Master Servicer Loan Number;
(b) the current Unpaid Principal Balance;
(c) the date of receipt, amount of payment and distribution of
such payment for each Monthly Payment received with respect to
such Mortgage Loan as to each related Due Date;
(d) for ARM Loans, the current Mortgage Interest Rate, all
limitations contained in the Mortgage Note with respect to
periodic adjustments in the Mortgage Interest Rate, the
scheduled Interest Adjustment Dates, Payment Adjustment Dates,
the Gross Margin and the Index;
(e) other transactions affecting the amounts due from or payable
to the related Borrower;
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(f) the current outstanding balances of principal and interest
deposits, advances, taxes and insurance deposits and unapplied
payments with respect to such Mortgage Loan;
(g) any overdraft of the Borrower's Escrow Funds;
(h) any servicing reports or loan histories; and
(i) any other information customarily maintained by a mortgage
loan servicer of one to four family residential mortgages.
7.2.3 ACCOUNTING PRACTICE. Except as otherwise provided herein, all
Mortgage Loan account records must be maintained according to (a) the
Uniform Single Audit Program for Mortgage Bankers and (b) where
applicable, sound and generally accepted accounting practices.
7.2.4 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS. At the request of the Master Servicer, the Servicer
shall provide to the Master Servicer, the Office of Thrift Supervision,
the FDIC and the supervisory agents and examiners of the Office of
Thrift Supervision and the examiners of the FDIC, as appropriate,
access to the documentation regarding the Mortgage Loans required by
applicable regulations of the Office of Thrift Supervision or the FDIC,
such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer
designated by it. The Servicer shall permit such representatives to
photocopy any such documentation and shall provide equipment for that
purpose at a charge reasonably approximating the cost of such
photocopying to the Servicer.
Section 7.3 ACCOUNTING PROCEDURES
7.3.1 PRINCIPAL AND INTEREST COMPUTATION. All Mortgage Loans must
amortize with interest calculated and paid in arrears. Under this
method, the interest due from a Borrower on a Due Date is calculated
based on (a) the Unpaid Principal Balance of the related Mortgage Loan
prior to application of the principal portion of the related current
Monthly Payment, (b) thirty days' interest at the related Mortgage
Interest Rate and (c) adjusted as herein provided for the effects of
Curtailments, Partial Liquidation Proceeds, Prepayments in Full and
Liquidations. The calculated interest portion is then subtracted from
the related Monthly Payment to obtain the principal portion. The
principal portion is then applied to the Unpaid Principal Balance of
the related Mortgage Loan. The amount to be applied to interest for a
multiple installment must be calculated using the Unpaid Principal
Balance of the related Mortgage Loan remaining after the previous
interest calculation and principal application.
7.3.2 AMORTIZATION REQUIREMENT. The amortization of each Mortgage Loan
must reduce to zero, or as to Balloon Loans, the respective Balloon
Amount, at the end of the Mortgage Loan term through the application of
regular monthly payments. Capitalization of interest is not permitted,
except as provided by the terms of any Mortgage Loan that provides for
negative amortization.
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7.3.3 NEGATIVE AMORTIZATION. To the extent any Mortgage Loan provides
for negative amortization, such as a GPM or GPARM Loan, the Servicer
must assure that the Unpaid Principal Balance of such Mortgage Loan
never exceeds the related Maximum Negative Amortization Amount, and
that the related Monthly Payment is recast as provided for in the
Mortgage Note such that the balance fully amortizes within the
remaining term of such Mortgage Loan.
7.3.4 INTEREST CALCULATIONS. Monthly interest calculations for periods
of a full month must be based on a 30-day month and a 360-day year.
Factors used for such calculations should be carried to ten decimal
places. The dollar amount of any interest payment shall be carried out
to four decimal places. Interest calculations for a period of less than
a full month must be based on a 365-day year.
7.3.5 BUYDOWN LOANS. The Servicer must amortize a Mortgage Loan for
which Buydown Funds are applied at the Mortgage Interest Rate, not at
the buy-down rate, in order to ensure that payments are collected to
amortize properly the Mortgage Loan.
Section 7.4 APPLICATION PROCEDURE
7.4.1 APPLICATION PRIORITY. A payment from a Borrower will normally
consist of interest, principal, deposits for insurance and taxes and
late charges, if applicable. Payments received from Borrowers must be
applied in the order provided for in the related Security Instrument.
To the extent not inconsistent with the related Security Instrument,
such payments shall be applied in the following order:
(a) required monthly interest;
(b) required monthly principal;
(c) deposits for taxes and insurance;
(d) prepayment charges; and
(e) any fees which may be retained by the Servicer, including late
charges, returned check fees, and assumption fees.
7.4.2 REAPPLICATION OF PRIOR PAYMENTS. The Servicer may not reapply
prior prepayments or accumulated Curtailments for payment of subsequent
installments.
7.4.3 ADVANCE PAYMENTS. Payments made by the Borrower to satisfy future
installments must be accounted for as prepaid installments of principal
and interest. The Servicer should contact the Borrower if there is a
question about the Borrower's intention in making any unscheduled
payment.
Section 7.5 CURTAILMENTS
7.5.1 CURTAILMENT AMOUNT. The Servicer may accept Curtailments at any
time. If a Mortgage Loan is delinquent, funds received must first be
applied to bring the Mortgage Loan current. If there are excess funds
after the application of amounts received from
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the Borrower to pay the related Monthly Payment, the excess funds
represent a Curtailment and may be applied as a partial principal
prepayment.
7.5.2 CURTAILMENT APPLICATION. If a Curtailment is received on or after
the Due Date, the Servicer may either (i) retroactively apply the
Curtailment to the Scheduled Principal Balance of the related Mortgage
Loan as of the Due Date, or (ii) to the extent permitted by law and the
Mortgage Loan, apply such Curtailment at the end of the current period.
The interest portion of the next installment due is then calculated
based on the Unpaid Principal Balance of the related Mortgage Loan
after application of the Curtailment.
7.5.3 EFFECT OF CURTAILMENT. A Curtailment may not be used to reduce
the related Monthly Payment or the related Mortgage Interest Rate for
any Mortgage Loan, or to postpone the Due Date of any payment.
7.5.4 CURTAILMENT TRANSMISSION. Each Curtailment must be deposited into
the related Custodial P&I Account within one Business Day after receipt
and must be remitted no later than the regularly scheduled Monthly
Remittance to the related Master Servicer Custodial Account.
Section 7.6 LIQUIDATIONS
7.6.1 MONTH END INTEREST. If a Prepayment in Full of a Mortgage Loan
occurs and the Servicer does not receive a full 30 days of interest
(calculated on a 30-day month, 360- day year basis) on the prepaid
amount for the month in which such Prepayment in Full occurs, the
Servicer must pay, to the extent of the portion of its Monthly
Servicing Compensation pursuant to clause (a) of Section 4.8.1 for all
Mortgage Loans, the Month End Interest on all such Mortgage Loans no
prepaid in full on the Remittance Date in the month following the month
of such prepayment. To the extent that the portion of Servicer's
Monthly Servicing Compensation pursuant to clause (a) of Section 4.8.1
for all Mortgage Loans is insufficient funds to pay all such Month End
Interest, the resulting Month End Interest Shortfall for any month
shall not be recoverable from the Servicer or any other source in the
future. The payment of Month End Interest by the Servicer, as provided
for above, shall not be an "advance" and shall not be reimbursable from
the proceeds of any Mortgage Loan.
7.6.2 LIQUIDATION REPORTS. The Servicer will report information with
respect to Liquidations in the monthly reports delivered to the Master
Servicer by the tenth calendar day of each succeeding month.
7.6.3 DEPOSIT OF FUNDS. Within one day after the Liquidation of a
Mortgage Loan, the Servicer shall deposit the related Liquidation
Proceeds together with the related Month End Interest into the related
Custodial P&I Account.
7.6.4 DOCUMENT REQUEST. Within five Business Days after any
Liquidation, the Servicer must complete and send a Request for Release
of Documents to the Master Servicer.
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Section 7.7 REALIZED LOSSES
7.7.1 LIQUIDATION REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss suffered on the related Mortgage Loan on
a Liquidation of such Mortgage Loan, the amount of such Realized Loss
is equal to (a) the sum of:
(i) Unpaid Principal Balance;
(ii) unpaid interest accrued at the related Mortgage
Interest Rate;
(iii) attorneys' fees and other foreclosure and sale
expenses;
(iv) unpaid taxes;
(v) unpaid property maintenance expenses;
(vi) unpaid insurance premiums; and
(vii) hazard loss expenses;
less (b) the sum of:
(i) the balance of Escrow Funds, if any;
(ii) any refund of any Hazard Insurance premium;
(iii) rental income receipts;
(iv) Insurance Proceeds;
(v) cash proceeds of any foreclosure sale;
(vi) proceeds from sale of a REO; and
(vii) any amounts received pursuant to bankruptcy or
insolvency proceedings.
7.7.2 BANKRUPTCY REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss on a Mortgage Loan subject to a
Deficient Valuation, the amount of the Realized Loss is the difference
between the Unpaid Principal Balance of the related Mortgage Loan
immediately prior to the Deficient Valuation and the Unpaid Principal
Balance as reduced by the Deficient Valuation.
7.7.3 REPORTING REQUIREMENT. As to any defaulted Mortgage Loan, the
Servicer must account to, and report in writing to, the Master Servicer
as to any Realized Loss (or gain) upon the Liquidation or Deficient
Valuation in respect of such Mortgage Loan.
7.7.4 SERVICER'S LIABILITY. Except in the case of a purchase by the
Servicer of a Mortgage Loan from the Owner thereof due to a breach of a
representation or warranty
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by the Servicer or failure to perform the servicing procedures as set
forth in this Agreement, the Servicer is not liable for any Realized
Loss on any Mortgage Loan.
ARTICLE 8
ARM LOANS
Section 8.1 ARM LOAN SERVICING
8.1.1 IN GENERAL. It is the Servicer's responsibility to enforce each
ARM Loan (and any other Mortgage Loan) according to its terms and in
conformity with all applicable law. The Servicer's records must, at all
times, reflect the then-current Mortgage Interest Rate and Monthly
Payment for such ARM Loan and the Servicer must timely notify the
Borrower of any changes to the Mortgage Interest Rate and/or the
Borrower's Monthly Payment.
8.1.2 SERVICER'S LIABILITY. If the Servicer fails to make either a
timely or accurate adjustment to the Mortgage Interest Rate or Monthly
Payment for an ARM Loan or to notify the Borrower of such adjustments,
and subsequently receives a short Monthly Payment, the Servicer must
pay from its own funds any shortage until the Servicer has made the
necessary corrections in conformance with applicable law so as to
secure the correct Monthly Payment from the Borrower. In the event that
such error results in the Borrower making a Monthly Payment in excess
of the amount which he should have made if such adjustment were
properly calculated, then the Servicer shall promptly (a) make the
required adjustment to the Borrower's Monthly Payment and Mortgage
Interest Rate so that they reflect the amounts as properly calculated
as of the related Payment Adjustment Date, (b) refund to the Borrower
the amount of any such excess received by the Servicer from the related
Payment Adjustment Date, and (c) deduct from the respective Custodial
P&I Account or the Master Servicer Custodial Account the amount of such
refund to reimburse the Servicer for making such refund. If the
Servicer's failure to make a scheduled change affects the Owner of the
ARM Loan's rights to make future adjustments under the terms of the ARM
Loan, the Servicer shall be required to purchase the ARM Loan. Any
amounts paid by the Servicer pursuant to this Section shall not be an
advance and shall not be reimbursable from the proceeds of any Mortgage
Loan.
8.1.3 ADJUSTMENT REPORTS. All Mortgage Interest Rate and Monthly
Payment adjustments must be reported to the Master Servicer in a ARM
Loan change report.
8.1.4 SUBSTITUTE INDEX. If the Index required to be used to determine
the Mortgage Interest Rate for a Mortgage Loan is not available on an
Interest Adjustment Date, the Servicer, after consultation with the
Master Servicer, will select an alternative interest rate index that is
readily verifiable by Borrowers.
Section 8.2 NOTICE OF PERIODIC ADJUSTMENT
8.2.1 NOTICE REQUIREMENT. The Notice of Periodic Adjustment is the
legal and official announcement to the Borrower of an ARM Loan of a
change in the Mortgage Interest
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Rate or the Monthly Payment. The Servicer must send this notice to the
Borrower, as stated in the related Mortgage Note and in accordance with
applicable law, and at least 25 days before each Payment Adjustment
Date.
8.2.2 NOTICE CONTENTS. Each Notice of Periodic Adjustment pertaining to
an ARM Loan shall include the following information:
(a) the new Mortgage Interest Rate;
(b) the date on which the new Mortgage Interest Rate becomes
effective, that is, the Interest Adjustment Date;
(c) the Index value on which the new Mortgage Interest Rate is
based, the Gross Margin, and how the new Mortgage Interest
Rate was calculated;
(d) the projected Unpaid Principal Balance on the upcoming Payment
Adjustment Date, assuming timely payment of the remaining
Monthly Payments due prior to the Payment Adjustment Date;
(e) the new Monthly Payment;
(f) the Payment Adjustment Date, that is, the date on which the
new Monthly Payment becomes effective;
(g) the dates of the next Interest Adjustment Date and Payment
Adjustment Date;
(h) the fact that the Borrower may repay the ARM Loan in whole or
in part without penalty at any time;
(i) the title and telephone number of an employee of the Servicer
who can answer questions about the notice; and
(j) if the Borrower is eligible and has the right to convert the
ARM Loan to a fixed rate Mortgage Loan, such shall be stated.
8.2.3 LEGAL COMPLIANCE. The Servicer also must ensure that the Notice
of Periodic Adjustment provides the Borrower with any other disclosure
information required by applicable federal or state laws or
regulations.
Section 8.3 ARM LOAN CONVERSION
8.3.1 SERVICER'S DETERMINATION. In the event a Borrower with a
convertible ARM Loan exercises its option to convert such Mortgage Loan
to a fixed interest rate, the Servicer will determine whether the
conditions and qualifications for conversion have been met and
determine the fixed rate to be applied to such Mortgage Loan pursuant
to the terms of the related Mortgage Note.
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8.3.2 CONVERSION NOTIFICATION. Upon any such conversion, the Servicer
shall prepare an ARM Loan conversion notification and send such
notification to the Master Servicer within three Business Days after
the conversion.
8.3.3 PURCHASE BY SERVICER. If a Converted Mortgage Loan is owned by a
trust which has issued mortgage-backed securities, then the Servicer
will purchase such Converted Mortgage Loan from the applicable trust at
the Purchase Price by depositing the Purchase Price into the respective
Custodial P&I Account.
ARTICLE 9
MORTGAGE LOAN FILES
Section 9.1 OWNER MORTGAGE LOAN FILES
9.1.1 OWNER MORTGAGE LOAN FILE REQUIREMENTS. For each Mortgage Loan,
the Servicer will ensure that an appropriate Custodian will maintain an
Owner Mortgage Loan File on behalf of the Owner of such Mortgage Loan
that contains each of the following documents:
(a) the original related Mortgage Note pertaining to such Mortgage
Loan endorsed by the respective prior owner of such Mortgage
Loan to the Owner of such Mortgage Loan, in the manner
described in Section 9.3.1 hereof (which may be endorsed in
blank); the Servicer will assure that the related Mortgage
Note shall include all prior and intervening endorsements as
are necessary to show a complete chain of endorsements from
the respective Loan Originator to the respective prior owner
of such Mortgage Loan;
(b) either the recorded original related Security Instrument
pertaining to such Mortgage Loan, together with any addenda
and riders, certified by the recording office, or, if the
related Security Instrument is in the process of being
recorded, a photocopy of the related Security Instrument,
certified by an Officer of the respective prior owner of such
Mortgage Loan or by the applicable title insurance company,
closing/settlement/escrow agent or company or closing attorney
to be a true and correct copy of the related Security
Instrument transmitted for recordation;
(c) either a recorded original Assignment of the related Security
Instrument from the respective prior owner of such Mortgage
Loan assigning the related Security Instrument to the Owner of
such Mortgage Loan, in the manner described in Section 9.3.2
hereof (which may be assigned in blank), certified by the
recording office, or, if such Assignment is in the process of
being recorded, a photocopy of the related Security Instrument
transmitted for recordation certified by an Officer of the
respective prior owner of such Mortgage Loan to be a true and
correct copy of such Assignment submitted for recordation; if
recordation is waived by the Servicer pursuant to the
provisions of Section 11.6.4 hereof, the Custodian will hold
such an Assignment in recordable form (which may be assigned
in blank);
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(d) each recorded original intervening Assignment of the Security
Instrument as is necessary to show a complete chain of title
from the respective Loan Originator to the respective prior
owner of such Mortgage Loan or, if any such original is
unavailable because it is in the process of being recorded, a
photocopy of such intervening Assignment certified by an
Officer of the prior owner of such Mortgage Loan to be a true
and correct copy of such intervening Assignment submitted for
recordation;
(e) an original Title Insurance policy pertaining to such Mortgage
Loan or, with respect to loans secured by properties in
jurisdictions where title policies are not available, the
original attorney's opinion of title; in the event that the
policy has not been issued or is not otherwise available, (i)
a written binding ALTA commitment for such a policy (or a
photocopy thereof) issued by the respective title insurance
company, or (ii) a Preliminary Title Report (or a photocopy
thereof) if the Mortgaged Property are in a state designated
by the Master Servicer as a Preliminary Title Report state;
(f) for each Mortgage Loan listed on Schedule I to this Agreement
which is required to have Primary Mortgage Insurance pursuant
to this Agreement or the related Mortgage Loan Documents, a
Primary Mortgage Insurance policy or a certificate of Primary
Mortgage Insurance (or a photocopy thereof) issued by the
respective insurer or its agent indicating that such a policy
is in effect;
(g) for each Mortgage Loan listed on Schedule I to this Agreement
which is required to have Pool Insurance pursuant to this
Agreement or the related Mortgage Loan Documents, a Pool
Insurance certificate (or a photocopy thereof) issued by the
respective insurer or its agent indicating the eligibility of
such Mortgage Loan for such Pool Insurance; and
(h) originals of each assumption agreement, modification, written
assurance or substitution agreement pertaining to such
Mortgage Loan, if any, or, if any such document is in the
process of being recorded, a photocopy of such document,
certified by an Officer of the respective prior owner of such
Mortgage Loan or by the applicable title insurance company,
closing/settlement/escrow agent or company or closing attorney
to be a true and correct copy of such document transmitted for
recordation.
9.1.2 CUSTODIAN. The Custodian will hold originals of all documents
included in each Owner Mortgage Loan File charged to his custody except
that copies of recorded Security Instruments or Assignments will be
held if the originals are held by the recording office. If the original
Security Instrument, Assignment from the respective prior owner of the
related Mortgage Loan to the Owner of the related Mortgage Loan or any
prior Assignment of the Security Instrument has not been delivered to
the Custodian on the date of the transfer of ownership of such Mortgage
Loan to the Owner because it is in the process of being recorded, the
Servicer will within five Business Days after its receipt of the
original recorded document, deliver it to the Custodian. The Servicer
will promptly deliver to the Custodian any other Mortgage Loan Document
to be included in an Owner Mortgage Loan File, charged to the custody
of the Custodian, that comes into Servicer's possession.
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Notwithstanding any other provision of this Agreement, to the extent
that certain Mortgage Loans are owned by a trust which has issued
mortgage-backed securities which are securitized by such Mortgage Loans
and the Master Servicer has given prior written notice to the Servicer,
the related Owner and the existing Custodian, if any, the trustee
acting on behalf of such trust shall be regarded as the Custodian
hereunder and the custodial arrangements pursuant to the related
Pooling and Servicing Agreement shall instead control the custody of
the related Mortgage Loan Documents.
9.1.3 RELEASE OF DOCUMENTS FROM OWNER MORTGAGE LOAN FILE. In the event
any document contained in an Owner Mortgage Loan File is needed by the
Servicer for the proper servicing of a Mortgage Loan, the Servicer must
send to the Owner of the related Mortgage Loan or the Custodian, as the
case may be, a request for release of documents. The Master Servicer
hereby authorizes the Owner of the related Mortgage Loan, or the
Custodian, as the case may be, to release such Mortgage Loan Documents
after receipt of such Servicer's request (i) upon payment in full of
such Mortgage Loan, (ii) when necessary for foreclosure or (iii) for
such other cause as the Master Servicer deems appropriate, in its
reasonable discretion. The Servicer will be responsible for such
Mortgage Loan Documents while they are in transit and while they are in
its possession and will be deemed to hold such Mortgage Loan Documents
in trust for the benefit of the Owner of the related Mortgage Loan. If
such Mortgage Loan has not been paid in full or otherwise liquidated,
the Servicer shall promptly return such Mortgage Loan Documents when
they are no longer required. Notwithstanding the foregoing, unless such
Mortgage Loan has been liquidated or the related Mortgage Loan
Documents have been delivered to an attorney, a public trustee or other
public official in order to foreclose on the related Mortgaged
Property, all such Mortgage Loan Documents released by the Owner of the
related Mortgage Loan, or the respective Custodian, as the case may be,
must be returned within 21 calendar days after their release.
9.1.4 EXECUTION BY OWNER. In the event the Owner of the related
Mortgage Loan's signature is required on any document with respect to a
Mortgage Loan for any reason, including payment in full, assumption or
foreclosure, the Servicer shall deliver to the Master Servicer a
written notice requesting that the Owner of the related Mortgage Loan
execute such documents and certifying as to the reason such documents
are required. Upon receipt of such executed documents, the Servicer
will record, file or deliver such documents as appropriate for the
proper servicing of such Mortgage Loan.
9.1.5 CUSTODIAL FEES. The Servicer is responsible for the related
ongoing fees of each Custodian. Each Custodian shall bill the Servicer
directly for its fees. If for any reason at any time the Master
Servicer pays custodial fees, the Servicer will promptly reimburse the
Master Servicer for such payments.
9.1.6 REPRESENTING PARTY OFFICERS' CERTIFICATE. If it is necessary for
the respective Representing Party to deliver an Officers' certificate
with respect to the existence of a Title Insurance policy or a Primary
Mortgage Insurance policy for several Mortgage Loans, the Master
Servicer may consent to the delivery of a single Officers' certificate
of the respective Representing Party for a schedule of mortgage loans
in lieu of a separate Officers' certificate for each such Mortgage
Loan.
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9.1.7 FINANCING ARRANGEMENTS. To the extent that the Owner of a
Mortgage Loan shall utilize such Mortgage Loan as collateral for a
financing, the endorsements which are required pursuant to Section
9.1.1 hereof with respect to the original related Mortgage Note, the
original related Security Instrument, and the original and each
intervening Assignment of the related Security Instrument shall also
include such further endorsements as such Owner, in accordance with the
relevant financing documents, shall direct.
Section 9.2 SERVICER MORTGAGE LOAN FILES
9.2.1 SERVICER MORTGAGE LOAN FILE REQUIREMENTS. The Servicer must
maintain a Servicer Mortgage Loan File for each Mortgage Loan, which
may be distributed among several different files, each of which shall
be clearly marked with the Servicer Loan Number and shall be readily
accessible to the Master Servicer during regular business hours, that
includes the following:
(a) copies of each of the documents listed in Section 9.1.1 that
are held by the Custodian;
(b) an original Hazard Insurance policy, or a copy thereof, or a
certificate of insurance issued by the applicable insurer or
its agent indicating such a policy is in effect for the
related Mortgaged Property;
(c) a Flood Insurance policy or a certificate of insurance issued
by the insurer or its agent indicating that such a policy is
in effect with respect to the related Mortgaged Property, if
Flood Insurance is required pursuant to the provisions of
Section 15.4 or Section 16.6 hereof for such Mortgaged
Property;
(d) originals or copies of all documents submitted to a Primary
Mortgage Insurer for credit and property underwriting approval
with respect to the related Mortgaged Property, if Primary
Mortgage Insurance is required pursuant to the provisions of
Section 15.2 hereof for such Mortgaged Property;
(e) the originals of all RESPA and Regulation Z disclosure
statements executed by the Borrower with respect to such
Mortgage Loan;
(f) the related Appraisal Report made at the time such Mortgage
Loan was originated;
(g) the HUD-1 or other settlement statement for the purchase or
refinance, as the case may be, of the Mortgaged Property by
the Borrower and mortgagor under the related Mortgage Note and
Security Instrument with respect to such Mortgage Loan;
(h) evidence of any tax service contract, if any;
(i) copies of documentation, including the appropriate approval by
the Master Servicer, relating to any modifications to the
related original Mortgage Loan Documents;
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(j) documentation, including the appropriate approval by the
Master Servicer, relating to any releases of any collateral
supporting such Mortgage Loan;
(k) collection letters or form notices sent to the Borrower with
respect to such Mortgage Loan, but only if the Servicer does
not maintain separate collection files, including all
collection letters or notices, indexed by Borrower;
(l) foreclosure correspondence, bankruptcy correspondence and
legal notifications, if applicable with respect to the related
Mortgaged Property; and
(m) all other related Mortgage Loan Documents which are
customarily maintained in accordance with Prudent Servicing
Practices in a mortgage loan file in order to properly service
a mortgage loan including, without limitation, documents
regarding title claims.
9.2.2 SERVICER MORTGAGE LOAN FILE ACCESS. The Servicer acknowledges
that each Servicer Mortgage Loan File will be held in trust for the
Owner of such Mortgage Loan. The Servicer further acknowledges that the
Master Servicer may, from time-to-time, request immediate delivery of
any or all Mortgage Loan records and documents to the Master Servicer,
the Owner of such Mortgage Loan, the Custodian or another entity
designated by the Master Servicer, and the Servicer shall thereupon
immediately deliver such records and documents, at the expense of the
Servicer. The Servicer agrees to permit the Master Servicer, from time
to time to conduct audits or inspections of any Servicer Mortgage Loan
Files at one or more of the Servicer's offices during normal business
hours with advance notice. The Servicer must grant the Master Servicer
access to all books, records and files relating to the Servicer's
systems and procedures for servicing Mortgage Loans as to all Servicer
Mortgage Loan Files or to the Servicer's compliance with the terms and
conditions of this Agreement.
9.2.3 ALTERNATE MEDIA. Subject to any applicable law concerning
document retention requirements, the Servicer may transfer any Servicer
Mortgage Loan File, or any portion thereof, to microfilm, microfiche,
optical storage or magnetic media and may retain the microfilm,
microfiche, optical storage or magnetic media in lieu of hard copies of
the documents required to be maintained in such Servicer Mortgage Loan
Files. The following requirements must be met:
(a) the process must accurately reproduce originals onto a durable
medium;
(b) unless the Master Servicer provides otherwise by notice to the
Servicer, the Master Servicer Loan Number must be clearly
marked on the copies or optical storage or magnetic media;
(c) the copies or optical storage or magnetic media must be easily
transferable to legible hard copies of the material relating
to the Mortgage Loans; and
(d) backup copies of the microfilm, microfiche, optical storage or
magnetic media must be made by the Servicer and retained
off-site to protect against fire and other hazard losses.
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If the copies, optical storage or magnetic media become damaged or lost
for any reason, the Servicer must bear the entire cost of restoring
each Servicer Mortgage Loan File and any other related documents which
had been transferred to microfilm, microfiche, optical storage or
magnetic media. The Servicer also must bear all costs of reproducing
legible hard copies reasonably requested by the Master Servicer. The
Master Servicer may reasonably request copies of any Servicer Mortgage
Loan File in optical storage or magnetic media which the Servicer has
previously transferred to magnetic media or optical storage, as the
case may be. The Servicer shall furnish to the Master Servicer optical
storage or magnetic media copies of the requested Servicer Mortgage
Loan File in such format as maintained by the Servicer at the
Servicer's expense.
Section 9.3 REQUISITE FORM
9.3.1 FORM OF ENDORSEMENTS. Except where endorsements in blank are
authorized by the Master Servicer, the Servicer shall require that
endorsements of any Mortgage Notes comply with the format stated
herein. If the Owner of the related Mortgage Loan is a trust, then the
following format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of trustee], AS
TRUSTEE under the agreement dated as of [Date of
trust agreement], and its successors and assigns,
[Name of prior owner]
[Signature of Officer]
[Officer's Name and Title]
Otherwise, except as the Master Servicer shall otherwise require, the
following format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of Owner], and its successors and assigns
[Name of prior owner]
[Signature of Applicable Officer]
[Applicable Officer's Name and Title]
9.3.2 FORM OF ASSIGNMENT. Except where assignments in blank are
authorized by the Master Servicer, the Servicer shall require that
assignments of any Security Instrument comply with the format stated
herein, including, without limitation, as to the name of the assignee.
If the Owner of the related Mortgage Loan is a trust then the following
format shall be employed:
[Name of trustee], AS
TRUSTEE under the agreement dated as of
[Date of trust agreement], and its successors and assigns
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Otherwise, except as the Master Servicer shall otherwise require, the
following format shall be employed:
[Name of Owner], and its successors and assigns
ARTICLE 10
ESCROWS
Section 10.1 ESCROW CRITERIA
10.1.1 ESCROW REQUIREMENT. Unless, (a) at the origination of a Mortgage
Loan the Borrower is not required to make Escrow Item payments
thereafter, (b) Escrow Funds collection has been waived pursuant to
Section 10.5.1 hereof, or (c) the collection of Escrow Funds is
precluded by applicable law, the Servicer must continue to collect
1/12th of the annual total for all Escrow Items with each Monthly
Payment on such Mortgage Loan, as determined pursuant to Section 10.3.1
hereof.
10.1.2 MORTGAGE LOANS WITHOUT ESCROW. If the Servicer is not required
to collect Escrow Funds on a Mortgage Loan, the Servicer shall require
proof of payment of all taxes, ground rents, assessments, insurance or
other charges, or use other means commonly used in the mortgage
industry to ascertain that such items are paid on a timely basis.
Section 10.2 PAYMENT OF ESCROW ITEMS
10.2.1 ESCROW PAYMENT OBLIGATION. Where the Servicer is responsible for
the collection of Escrow Funds with respect to a Mortgage Loan, the
Servicer shall promptly pay all bills for any Escrow Items in such a
manner as to avoid late charges or penalties and to take advantage of
any available discount.
10.2.2 ESCROW ITEM PAYMENTS. Where (a) the Servicer has been collecting
Escrow Funds with respect to a Mortgage Loan, or (b) the Borrower has
not been obliged to make Escrow Funds payments or such payments have
been waived and such Borrower has failed to timely pay obligations
which otherwise would be Escrow Items, the Servicer must pay any
obligation (i) which could become a first lien on the related Mortgaged
Property, or (ii) to maintain in force the applicable Insurance
Policies. Where Escrow Funds are maintained by the Servicer, such
obligations should be paid from the Borrower's Escrow Funds, or in
accordance with Section 10.2.3 hereof.
10.2.3 ESCROW FUND INSUFFICIENCY. When a Borrower's Escrow Funds are
insufficient to pay taxes, assessments and premiums, when due, subject
to applicable law, the Servicer must attempt to obtain the additional
funds from such Borrower. If sufficient additional funds have not been
recovered by the time the payment is due, the Servicer must advance its
own funds to ensure prompt payment. The Servicer may elect to advance
funds prior to attempting to obtain the additional funds from such
Borrower; however, to the extent permitted by applicable law, the
Servicer shall thereafter attempt to obtain the advanced funds from the
Borrower.
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10.2.4 NONPAYMENT NOTICE. The Servicer must notify the Master Servicer
immediately of any Escrow Item that does not conform to either FNMA or
FHLMC standards.
Section 10.3 ESCROW FUND DETERMINATION
10.3.1 ESCROW FUNDS ANALYSIS. Subject to all applicable Federal, State
and local laws, the Servicer must conduct an analysis of each
Borrower's Escrow Funds at least annually to determine the monthly
deposits which must be made by such Borrower. The analysis will be
performed based upon (a) reasonable projections of the expenses to be
paid from the Escrow Funds and (b) that as such expenses come due, the
Escrow Funds balance shall at all times be sufficient to effect the
payment of such expenses, unless a lower amount is required by
applicable law. Each Borrower must receive a statement of this
analysis. The analysis also must determine whether there is a surplus
or deficiency in such Borrower's Escrow Funds.
10.3.2 ESCROW FUND SURPLUS. As a Borrower may direct, a surplus in such
Borrower's Escrow Funds shall be (a) used as a Curtailment as to the
related Mortgage Loan, (b) refunded to such Borrower or (c) taken into
consideration in determining the amount to be collected for Escrow
Funds during the next twelve months.
10.3.3 ESCROW FUND DEFICIENCY. Where it is determined that a deficiency
exists in such Borrower's Escrow Funds, such Borrower may be requested
to pay the shortage in full or the deficiency may be taken into
consideration in determining the amount to be collected for Escrow
Funds during the next twelve months.
Section 10.4 RECORDS
10.4.1 ESCROW FUNDS RECORDS. The Servicer shall keep records of Escrow
Funds collected from each Borrower.
10.4.2 ESCROW OBLIGATIONS RECORDS. The Servicer must maintain accurate
records of the imposition of Escrow Item obligations and the payment of
Escrow Items.
Section 10.5 ESCROW WAIVER
10.5.1 WAIVER CONDITIONS. For any Mortgage Loan (other than a GPM or
GPARM Loan which provides for negative amortization in the future) that
has amortized down so that its current LTV is 80% or less, the Servicer
may waive the Borrower's future obligation to make Escrow Funds
payments provided:
(a) the Unpaid Principal Balance of such Mortgage Note divided by
the value of the Mortgaged Property based on an appraisal made
within 60 days of the date of determination is 80% or less;
(b) such Mortgage Loan is at least 12 months old; and
(c) such Mortgage Loan has not been more than 30 days delinquent
during the preceding 12 months.
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10.5.2 WAIVER RESCISSION. The Servicer shall enforce the Escrow Funds
requirements with respect to any Mortgage Loan if the related Borrower
fails to act responsibly in making the required payments.
ARTICLE 11
COLLECTION AND SERVICING PRACTICES
Section 11.1 GENERAL SERVICING REQUIREMENTS
11.1.1 SERVICING PRACTICES. The Servicer agrees to service Mortgage
Loans in accordance with the requirements of this Agreement. In
general, where not otherwise expressly required by the provisions of
this Agreement, the Servicer shall service the Mortgage Loans in
accordance with Prudent Servicing Practices and generally in accordance
with FNMA guidelines. As to each Mortgage Loan, the Servicer shall take
all such actions as may be necessary to preserve the lien of the
related Security Instrument upon the related Mortgaged Property.
11.1.2 TAX RETURNS AND OTHER REPORTS. Unless otherwise instructed by
notice from the Master Servicer, the Servicer shall forward to each
Mortgagor such forms and furnish such information within the control of
the Servicer as are required by the Code to be furnished to them and
will prepare and file annual reports required by the state authorities.
By way of example, the Servicer shall provide the Mortgagors with the
reports required under Code Sections 6050H (e.g., reporting on Form
1098 any mortgage interest, including points, received and any
reimbursements of qualified mortgage interest) and 6050J (Abandonments
and Foreclosure of Real Property, Form 1099-A).
11.1.3 SERVICER INTERNAL CONTROLS. The Servicer shall maintain at all
times an adequate system of audit and internal controls in accordance
with Prudent Servicing Practices.
11.1.4 POOL INSURANCE COMPLIANCE. Notwithstanding any other provision
of this Agreement, the Servicer shall at all times comply with all
applicable Pool Insurance policy requirements so as to assure the full
benefit of such Pool Insurance policy to the Owner of the related
Mortgage Loan.
11.1.5 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Notwithstanding any other
provision of this Agreement, the Servicer shall at all times comply
with all applicable Primary Mortgage Insurance policy requirements so
as to assure the full benefit of such Primary Mortgage Insurance policy
to the Owner of the related Mortgage Loan.
Section 11.2 DELEGATION OF DUTIES
11.2.1 PERMISSIBLE DELEGATIONS. Without the written consent of the
Master Servicer authorizing further delegations, the only servicing
duties which the Servicer may elect to delegate, by agency, subcontract
or otherwise, and the only categories of such delegees, are as follows:
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(a) professional collection agencies to perform those duties and
functions for the collection of delinquent amounts due on any
Mortgage Loan that are customarily performed by such agencies
in the locality where the related Mortgaged Property are
located;
(b) title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the condition
of title to any Mortgaged Property and services incidental to
the foreclosure or acquisition in lieu of foreclosure of any
Mortgaged Property, or the sale or disposition of any
Mortgaged Property acquired by the Servicer;
(c) attorneys licensed to practice in the state where the related
Mortgaged Property is located to perform customary legal
services in connection with the foreclosure or acquisition of
such Mortgaged Property or the sale or disposition of such
Mortgaged Property acquired by the Servicer at or in lieu of
foreclosure, or for the collection of delinquent sums owed on
any Mortgage Loan;
(d) professional property inspection companies and appraisers to
conduct routine inspections of, and provide written inspection
reports on, any Mortgaged Property as required by this
Agreement;
(e) title companies, escrow companies and real estate tax service
companies to provide periodic reports as to the amount of real
estate taxes due on any Mortgaged Property and the due date or
dates of each required installment;
(f) credit bureaus or credit reporting companies to provide credit
reports on Borrowers or persons who have applied to assume any
Mortgage Loans;
(g) construction companies, contractors and laborers to provide
labor, materials and supplies necessary to protect, preserve
and repair any Mortgaged Property as required by this
Agreement; and
(h) lock box providers or payment processing administrators to
provide payment processing services.
11.2.2 DELEGEE'S QUALIFICATIONS. The Servicer shall assure that each
Person retained to provide any of the services set forth in Section
11.2.1 hereof is fully licensed and holds all required Federal, State
or local governmental franchises, certificates and permits necessary to
conduct the business in which he is engaged and that such Person is
reputable, knowledgeable, skilled and experienced and has the necessary
personnel, facilities and equipment required to provide the services
for which he is retained.
11.2.3 RESPONSIBILITY FOR COSTS. Any Person retained in accordance with
Section 11.2.1 hereof shall be retained solely for the Servicer's
account and at the Servicer's sole expense and shall not be deemed to
be an agent or representative of the Owners of the related Mortgage
Loans, their successors or assigns, or the Master Servicer or its
successors or assigns.
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11.2.4 SERVICER'S LIABILITY. The Servicer shall remain liable to the
Principal, for the performance of the Servicer's duties and obligations
under this Agreement, notwithstanding the delegation of any servicing
function pursuant to this Section 11.2.
Section 11.3 DUE-ON-SALE CLAUSE ENFORCEMENT
11.3.1 ENFORCEMENT REQUIREMENT. The Servicer is required to enforce the
Due-on-Sale Clause on any Mortgage Loan to the extent permitted by
applicable law upon the transfer of title of the related Mortgaged
Property unless (a) a Mortgage Loan is assumable pursuant to the terms
of the related Mortgage Note Assumption Rider, or (b) enforcement of
the Due-on-Sale Clause will jeopardize the Primary Mortgage Insurance
coverage on such Mortgage Loan.
11.3.2 LITIGATION CONSIDERATIONS. Where, in the Servicer's judgment,
the issue of enforceability is reasonably expected to be litigated, the
Servicer will obtain the written consent of the Master Servicer before
enforcing any Due-on-Sale Clause.
11.3.3 APPROVAL REQUIREMENT. In all circumstances of an unapproved
transfer of a Mortgaged Property initiated by the Borrower, the
Servicer is required to promptly notify the Master Servicer and, where
applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, of such transfer and obtain written approval
before initiating enforcement proceedings.
11.3.4 EXEMPT TRANSACTIONS. (a) The Servicer will not be required to
enforce the due-on-sale (or transfer) provision of this Agreement for
certain types of property transfers or related transactions. The
Servicer will process these exempt transactions without the approval or
notification of the Master Servicer. In each case, the Mortgaged
Property will remain subject to the lien of the related Mortgage Loan,
and each transferee or grantee described below shall take subject to
such lien. The following transactions shall be deemed to be exempt
transactions and will require the review and approval of the Servicer
only prior to transfer:
(i) a transfer of the Mortgaged Property to the surviving
party on the death of a joint tenant or a tenant by
the entirety;
(ii) a transfer of the Mortgaged Property to a junior
lienholder as the result of a foreclosure or the
acceptance of a deed in lieu of foreclosure for the
subordinate mortgage;
(iii) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) to a
relative of a deceased Borrower (or, in the case of
an INTER VIVOS revocable trust Borrower, to a
relative of the individual who established the
trust), provided that the transferee will occupy the
Mortgaged Property;
(iv) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) to
the spouse, child(ren), parent(s), brother(s), or
sister(s), grandparent(s), or grandchild(ren) of the
Borrower (or, in the case of an INTER VIVOS
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revocable trust Borrower, of the individual who
established the trust), provided that the transferee
will occupy the Mortgaged Property;
(v) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) to a
spouse of the Borrower (or, in the case of an INTER
VIVOS revocable trust Borrower, of the individual who
established the trust) under a divorce decree or
legal separation agreement or from an incidental
property settlement agreement, provided that the
transferee will occupy the Mortgaged Property;
(vi) a transfer of a Mortgaged Property that is jointly
owned by unrelated coborrowers from one of the
Borrowers to the other, provided that the Borrower
who is gaining full ownership of the Mortgaged
Property will continue to occupy it and the transfer
occurs after at least 12 months have elapsed since
the Mortgage Loan was closed;
(vii) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) into
an INTER VIVOS revocable trust (or, if the Borrower
is an INTER VIVOS revocable trust, into a new trust),
so long as the Borrower (or the individual who
established the original INTER VIVOS revocable trust)
will be the beneficiary of the trust and the occupant
of the Mortgaged Property;
(viii) the granting of a leasehold interest in the Mortgaged
Property that has a term of three or fewer years and
does not provide an option to purchase the Mortgaged
Property, or a renewal option that would allow the
term to extend beyond three years;
(ix) the creation of a subordinate lien upon the Mortgaged
Property, provided that there is no transfer of
occupancy rights therein; or
(x) the creation of a purchase money security interest
for household appliances which are situated in or
upon the Mortgaged Property.
(b) If the individual or entity transferring the Mortgaged
Property requests a release of liability, the Servicer must
review the credit and financial capacity of the individual
or entity receiving the Mortgaged Property. The Servicer may
approve the release of liability if it believes the
recipient is capable of assuming the mortgage obligations
and, where applicable, with the consent of the respective
Primary Mortgage Insurer and/or the respective Pool Insurer.
If the Servicer does not believe that the recipient is
credit worthy or if the consent of the respective Primary
Mortgage Insurer and/or the respective Pool Insurer is
required but not obtained, the Servicer shall deny the
request for the release of liability, although the transfer
may still be processed without the release. If the request
is denied based solely on the Primary Mortgage Insurer's or
the respective Pool Insurer's decision, the denial letter
should state that fact.
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(c) The Servicer shall advise (i) each insurance company
providing Hazard Insurance and Flood Insurance, where
applicable, (ii) the relevant tax authorities, where
applicable, (iii) the respective Primary Mortgage Insurer
and/or the respective Pool Insurer, and (iv) other
interested parties when it processes transactions under this
Section 11.3.4. The Master Servicer does not need to be
notified about such a transaction unless the Servicer agrees
to a release of liability under Section 11.3.4(b).
Section 11.4 ASSUMPTIONS
11.4.1 ASSUMPTION REQUIREMENTS. Any Assumption permitted under this
Agreement shall be performed in accordance with Prudent Servicing
Practices. In connection with an Assumption of an assumable Mortgage
Loan, the Servicer shall process such Assumption as provided for in the
Mortgage Note or the Mortgage Note Assumption Rider and shall verify
that:
(a) no material term of the Mortgage Note (including, but not
limited to, the Mortgage Interest Rate, the remaining term
to maturity, the Gross Margin, the Index, the Maximum
Lifetime Mortgage Interest Rate, the Minimum Lifetime
Mortgage Interest Rate, and any Periodic Rate Cap or any
Periodic Payment Cap) may be changed in connection with such
Assumption;
(b) that the new Borrower qualifies for credit under the Master
Servicer's criteria and standards for similar loans;
(c) where applicable, the respective Primary Mortgage Insurer,
and/or the respective Pool Insurer has in advance approved
in writing such Assumption of such Mortgage Loan by the new
Borrower and such Mortgage Loan will continue to be insured
by such Primary Mortgage Insurer and/or such Pool Insurer;
(d) the documents relating to such Assumption (i) create a valid
and enforceable promise to pay the Unpaid Principal Balance
of the related Mortgage Loan, together with interest thereon
in accordance with the related Mortgage Note by the new
Borrower, and (ii) the related Security Instrument continues
to evidence a valid and perfected first lien on the related
Mortgaged Property; and
(e) such Mortgage Loan will continue to be a valid first
priority security interest upon the related Mortgaged
Property.
11.4.2 APPROVAL AND RELEASE. In connection with an Assumption of an
assumable Mortgage Loan and in accordance with the provisions of the
related Mortgage Loan Documents, upon such verification, (a) the
Servicer may approve such Assumption and (b) only with the prior
written approval of, where applicable, the Primary Mortgage Insurer
and/or the Pool Insurer, unless such approval is precluded by the terms
of the Mortgage Loan Documents, release the previous Borrower from
liability.
11.4.3 NOTIFICATION OF ASSUMPTION. The Servicer shall notify the Master
Servicer of any Assumption by the tenth calendar day of the month
following the month in which the
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Assumption took place using the Assumption Report and shall provide to
the Custodian the original assumption agreement.
11.4.4 ASSUMPTION FEES. Subject to applicable law or regulation and the
provisions of the related Mortgage Note, the Servicer may charge the
Borrower and retain a reasonable and customary assumption fee. Such fee
is receivable only from the Borrower directly and may not be withdrawn
from any of the custodial accounts maintained hereunder.
11.4.5 DISCLOSURE REQUIREMENT. In connection with an Assumption of an
assumable Mortgage Loan, the Servicer shall make all disclosures
required by applicable law.
Section 11.5 PARTIAL RELEASES AND EASEMENTS
11.5.1 PREREQUISITES. The Servicer must take the following actions
prior to permitting the grant of a partial release of a Mortgaged
Property from the lien of the related Security Instrument, easement,
consent to substantial alterations and any other changes affecting the
related Mortgage Loan or such Mortgaged Property:
(a) where applicable, obtain the respective Primary Mortgage
Insurer's and/or the respective Pool Insurer's prior written
approval;
(b) if the value of the released property is more than five
thousand ($5,000) dollars, obtain an acceptable Appraisal
Report showing the current market value of such Mortgaged
Property before and after the release and showing
individually both the value of the land and of the
improvements thereon;
(c) ensure that any and all cash consideration received at least
equals the current market value of property or rights to be
released regarding such Mortgaged Property;
(d) ensure that any and all cash consideration received is
applied to the Unpaid Principal Balance of such Mortgage
Loan to the extent of the diminution of the value of such
Mortgaged Property;
(e) cause all legal documents for the transaction to be
reviewed;
(f) ensure that such Mortgaged Property, following such release
or change, adequately secures the Unpaid Principal Balance
of the Mortgage Loan and accrued interest thereon and that
the related Loan-to-Value ratio will not be greater than
80%, after giving effect to clause (d) hereof; and
(g) obtain written notification from the respective Title
Insurer that the related Title Insurance policy remains
fully in effect with respect to such Mortgaged Property, as
modified, following such release or change.
11.5.2 RELEASE OR MODIFICATION OF LIEN. With the consent, where
applicable, of the respective Primary Mortgage Insurer, and/or the
respective Pool Insurer, the Servicer may approve applications for
partial release of a Mortgaged Property from the lien of the related
Security Instrument, easements, consent to substantial alterations and
any other
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changes affecting the related Mortgage Loan or such Mortgaged Property
if the perquisites in Section 11.5.1 have been satisfied. The Servicer
shall promptly notify the Master Servicer of any approval under Section
11.5.1 and this Section 11.5.2 affecting the lien upon a Mortgaged
Property.
11.5.3 MASTER SERVICER'S APPROVAL. If the Servicer is not able to meet
the prerequisites specified in Section 11.5.1 or if the amount of
consideration received is less than the reduction in the value of the
Mortgaged Property due to the partial release or other changes, the
Servicer must obtain the approval of the Master Servicer prior to
permitting an application described in Section 11.5.2. The Servicer
shall furnish such information as the Master Servicer shall request in
connection with an application under this Section 11.5.3.
Section 11.6 RECORDATION OF ASSIGNMENTS
11.6.1 RECORDATION REQUIREMENT. Regarding the initial acquisition of
the Mortgage Loans pursuant to the Sales Agreement, the Servicer must,
at its own expense, record the Assignment of each Security Instrument
to the Owner of the related Mortgage Loan, as well as any previously
unrecorded intervening Assignments. If any such Security Instrument or
Assignment is not recorded within the later to occur of (i) the date
120 days after the acquisition of the related Mortgage Loan by its
Owner, if the Servicer has been servicing such Mortgage Loan from such
Owner's date of acquisition or (ii) the date 120 days after the date
the Servicer began servicing such Mortgage Loan, the Master Servicer
will have the right to so effect such recordation at the Servicer's
expense.
11.6.2 EXTENSION OF RECORDING PERIOD. The time to record an Assignment
of a Security Instrument may be extended from the end of permissible
recordation period set forth in Section 11.6.1 if the Servicer provides
an Officer's certificate acceptable to the Master Servicer certifying
that the Servicer has used its best efforts to complete the recordation
process for the Security Instrument and/or Assignment, as applicable,
and that the factors preventing completion of the recordation process
are beyond the Servicer's control.
11.6.3 DELIVERY REQUIREMENT. Promptly following the recordation of any
Security Instrument or an Assignment, the Servicer will deliver to the
Custodian, unless otherwise directed in writing by the Master Servicer,
such Security Instrument or Assignment bearing evidence of recordation
or, if the original Security Instrument or Assignment is retained by
the recording office, a certified copy of the original recorded
Security Instrument or Assignment.
11.6.4 WAIVER OF RECORDATION. The Master Servicer will generally
require the Servicer to record an Assignment of the Security Instrument
for each Mortgage Loan to the Owner of related Mortgage Loan. However,
the recordation requirement with respect to an Assignment may be waived
for a Mortgage Loan if (a) the related Mortgaged Property is in a state
in which recordation of such an Assignment is not required to protect
the Owner of the related Mortgage Loan's right, title and interest in
and to the related Mortgage Loan and (b) the Seller or the Servicer has
delivered to the Master Servicer an opinion of counsel, acceptable to
the Master Servicer, to that effect.
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Section 11.7 GENERAL SERVICING CONSIDERATIONS
11.7.1 ABANDONMENT. If the Servicer discovers that any Mortgaged
Property is not occupied, the Servicer must immediately attempt to
contact the Borrower in order to determine the reason for the vacancy.
If the Servicer determines that such Mortgaged Property has been
abandoned, the Servicer, at its own expense, must take all necessary
actions to protect such Mortgaged Property from waste, damage and
vandalism. Such expenses shall be recoverable by the Servicer solely
from the Liquidation Proceeds of the related Mortgage Loan, if any, or
directly from the Borrower.
11.7.2 BUYDOWN FUNDS. The Servicer must distribute any Buydown Funds in
each Custodial Buydown Account in accordance with the terms of the
applicable Buydown Agreement.
11.7.3 NOTIFICATION MATTERS. Based upon information obtained pursuant
to its obligations under Section 12.2.6, the Servicer shall (i)
maintain accurate records of and (ii) except in the case of paragraph
(f) hereof involving a monetary default of the Borrower addressed by
Article 12 hereof, immediately notify the Master Servicer upon
discovering any of the following:
(a) deterioration of, waste of, or lack of repair to, any
Mortgaged Property, which materially and adversely affects
the Value of such Mortgaged Property and the Borrower
refuses or is not financially able to make the necessary
repairs;
(b) sale or transfer of any Mortgaged Property in a manner not
approved by the Servicer pursuant to the provisions of this
Agreement;
(c) material litigation involving any Mortgaged Property;
(d) abandonment of any Mortgaged Property;
(e) a material default, determined in accordance with Prudent
Servicing Practices, under the terms of any Security
Instrument, Mortgage Note, Condominium Project or PUD
constituent document or similar obligations of a Borrower;
or
(f) any other situation that may materially and adversely affect
the value of any Mortgage Loan.
11.7.4 EMINENT DOMAIN. The Servicer must submit appropriate
recommendations and documentation to the Master Servicer and, where
applicable the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, of any taking by eminent domain if:
(a) the Mortgaged Property will be taken in whole and the
consideration to be paid to the Borrower will be
insufficient to satisfy the Unpaid Principal Balance (plus
any unreimbursed Advances) of the related Mortgage Loan, or
(b) the Mortgaged Property will be taken in part and (i) the
ratio of the (A) Unpaid Principal Balance (plus any un
reimbursed Advances) of the Mortgage Loan to
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(B) the Current Value of the remaining Mortgaged Property is
higher than (ii) the LTV ratio of the Mortgage Loan
immediately before the taking, even after applying any
consideration to the Unpaid Principal Balance of the
Mortgage Loan.
The Servicer must take all steps necessary to prevent loss of any
Primary Mortgage Insurance or Pool Insurance benefits due to any taking
by eminent domain.
11.7.5 LATE CHARGES. Late charges may not be assessed unless a Borrower
failed to make payments in accordance with the Mortgage Note.
Section 11.8 BORROWER BANKRUPTCY
11.8.1 SERVICER'S DUTY. The Servicer will be responsible for
representing the interests of the Owner of the related Mortgage Loan in
any bankruptcy proceedings involving a Borrower.
11.8.2 RESPONSIBILITY FOR COSTS. The costs of protecting the interests
of the Owner of a Mortgage Loan shall be advanced by the Servicer and
are not (a) chargeable to the related Borrower's Escrow Funds or (b)
reimbursable from the Master Servicer.
11.8.3 CHALLENGE BANKRUPTCY REDUCTIONS. If the bankruptcy judge or
trustee should propose to (a) reduce the Unpaid Principal Balance of a
Mortgage Note, (b) reduce the related Mortgage Interest Rate, (c)
extend the final maturity of such Mortgage Note, or (d) reduce the
level of any monthly payment on such Mortgage Note, the Servicer shall
(i) challenge any such modification on a timely basis, (ii) notify the
Master Servicer immediately, and (iii) follow the Master Servicer's
instructions regarding the bankruptcy proceedings, and in the absence
of explicit instructions, exercise reasonable judgment to protect the
interests of the Owner of such Mortgage Loan.
11.8.4 BANKRUPTCY ADJUSTMENTS. If the action of any court results in a
Deficient Valuation or Debt Service Reduction, the Servicer will
provide a calculation of the effects of such modification notifying the
Master Servicer of the new principal balance, Mortgage Interest Rate,
new final maturity, or monthly payment level, as the case may be, of
such Mortgage Loan.
11.8.5 BANKRUPTCY PLAN SURVEILLANCE. With respect to each Mortgage Loan
which is the subject of a Deficient Valuation or a Debt Service
Reduction, the Servicer shall verify that payments are being made in
accordance with the plan approved in the related bankruptcy
proceedings.
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ARTICLE 12
DELINQUENCY MANAGEMENT
Section 12.1 IN GENERAL
12.1.1 SERVICING PRACTICES. The provisions set forth in this Article
constitute the minimum guidelines and procedures for servicing
Delinquent Mortgage Loans. The Servicer must use collection procedures
which meet or exceed these guidelines. The Servicer's procedures must
be sufficient for promptly dealing with delinquencies. The Master
Servicer retains the right to require the Servicer to perform
additional collection procedures which the Master Servicer deems, in
its reasonable discretion, necessary to realize the objectives set
forth herein or otherwise to protect the interests of the Owner of the
related Mortgage Loan.
12.1.2 SERVICER'S CAPABILITIES. The Servicer's collection staff must be
sufficiently skilled in financial counseling and mortgage servicing
techniques to assist a Borrower to bring his Mortgage Loan current and
to protect his equity and credit rating, while at the same time
protecting the interests of the Owner of the related Mortgage Loan and
of the Master Servicer.
12.1.3 SERVICING OBJECTIVES. The purpose of any collection effort is to
cure a Delinquency in the shortest possible time. The Servicer should
treat each Delinquency individually. Discussions with the Borrower must
cover the cause of such Delinquency and the time frame in which such
Delinquency will be cured. The Servicer should use notices, letters,
telegrams, telephone calls, face-to-face contact and other responsible
collection techniques consistent with Prudent Servicing Practices. The
Servicer is required to maintain all collection records. The Servicer
must vary its collection techniques to fit individual circumstances,
avoiding a fixed collection pattern which may be ineffective in dealing
with particular Borrowers. The Servicer should recognize the importance
of telephone and face-to-face contact in any collection program. As
part of its collection procedures, the Servicer shall closely monitor
all newly originated Mortgage Loans.
12.1.4 SERVICER'S EXPENSES. Unless otherwise specified, the cost of any
of the servicing procedures detailed in this Agreement shall be borne
solely by the Servicer. The Servicer may not charge such expenses
against the Borrower's Escrow Funds. The foregoing shall not preclude
the Servicer from recovering such expenses from the Borrower to the
extent permitted by applicable law and the related Mortgage Loan
Documents.
Section 12.2 DELINQUENCY SERVICING PROCEDURES
12.2.1 LATE NOTICE. A late notice shall be mailed by the Servicer to
the Borrower by the 18th day of such Delinquency.
12.2.2 TELEPHONIC INQUIRY. The Servicer shall use best efforts to make
telephone contact with the Borrower by the 20th day of such
Delinquency.
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12.2.3 NOTICE OF DEFAULT. Notification of default of such Mortgage Loan
shall be mailed by the Servicer to the Borrower by the 35th day of such
Delinquency.
12.2.4 BORROWER INTERVIEW. The Servicer shall use best efforts to
conduct a face-to-face interview between the 45th day and the 60th day
of such Delinquency if satisfactory arrangements to cure the
Delinquency have not been made. If, for geographic reasons, a
face-to-face meeting is not feasible, an in-depth telephone interview
may be conducted instead.
12.2.5 CONTINUING CONTACTS. If satisfactory arrangements have not been
made to cure such Delinquency by the 90th day, the Servicer must
continue to contact the Borrower until either the related Mortgage Loan
has been brought current or the Servicer has made a recommendation in
writing to the Master Servicer for foreclosure of such Mortgaged
Property or other action.
12.2.6 PROPERTY INSPECTION. The Servicer is required to inspect each
Mortgaged Property no later than the 60th day of the Delinquency if no
satisfactory arrangements have been made to cure such Delinquency of
the related Mortgage Loan. The inspection should determine the physical
condition and the occupancy status of such Mortgaged Property. The
Servicer is required to inspect such Mortgaged Property monthly after
the 60th day of such Delinquency until such Delinquency is cured or the
related Mortgage Loan is Liquidated. The results of any inspection
should be used in determining whether a recommendation for foreclosure
or for the transfer of deed-in-lieu of foreclosure is necessary. The
Servicer must prepare a Property Inspection Report following each
inspection. All Property Inspection Reports must be retained by the
Servicer and copies thereof must be forwarded to the Master Servicer
promptly upon request. All expenses related to the foregoing shall be
borne by the Servicer and such expenses shall not be recoverable by the
Servicer from the Master Servicer or the Principal or from Liquidation
Proceeds, Insurance Proceeds, payments on the related Mortgage Loan or
any other source relating to the related Mortgage Loan or the related
Mortgaged Property. The foregoing shall not preclude the Servicer from
recovering such expenses from the Borrower to the extent permitted by
applicable law and the related Mortgage Loan Documents.
Section 12.3 RELIEF OF BORROWERS
12.3.1 SERVICER'S ROLE. The Servicer shall be readily available to
Borrowers to offer skilled financial counsel and advice and shall make
personal contact with delinquent Borrowers as often as possible to
achieve a solution that will bring the Mortgage Loan current as soon as
possible. The Servicer shall be fully familiar with the form of relief
to Borrowers provided for herein and will employ such relief.
12.3.2 SERVICER'S DISCRETION. The Servicer shall have reasonable
discretion to extend appropriate relief to Borrowers who encounter
hardship and who are cooperative and demonstrate proper regard for
their obligations. However, no such relief shall be granted to any
Borrower under a Mortgage Loan unless the Servicer reasonably believes
that there is a reasonable expectation that such Borrower will bring
his Mortgage Loan current within 180 days following the onset of
Delinquency. Further, without the
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consent of the Master Servicer, no such relief shall be granted other
than with respect to a Mortgage Loan that has at least a 31-day
Delinquency.
12.3.3 RELIEF REQUIREMENT. Prior to granting relief with respect to a
delinquent Mortgage Loan as herein provided, the Servicer shall
ascertain that (i) the reasons for the default and (ii) the attitude
and circumstances of such Borrower justify the relief to be granted.
12.3.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. Where applicable, the
Servicer shall satisfy all requirements under the applicable Primary
Mortgage Insurance policy regarding the relief granted with respect to
a delinquent Mortgage Loan.
12.3.5 RESPONSIBILITY FOR COSTS. The Servicer is responsible for
collection from such Borrower of any recording or similar costs or
expenses incidental to the granting of relief with respect to a
delinquent Mortgage Loan.
12.3.6 FORBEARANCE PLAN. Where relief is appropriate, the Servicer
shall arrange with a Borrower a "Forbearance Plan" giving such Borrower
a definite period in which to reinstate his Mortgage Loan by
immediately commencing payments in excess of the regular Monthly
Payments. Without the prior written consent of the Master Servicer,
special forbearance relief agreements reducing or suspending the
regular Monthly Payment of the related Mortgage Loan for a specified
period of time are not permitted. To the extent that (i) the priority
of the lien represented by such Mortgage Loan remains in effect and is
not adversely affected, (ii) where applicable, the related Primary
Mortgage Insurance policy remains in full force and effect, and (iii)
where applicable, the related Pool Insurance policy remains in full
force and effect, the Servicer, in its discretion, may enter into a
Forbearance Plan that provides that the total amount owed during such
Delinquency, including costs and expenses, will be repaid within the
shortest period practicable, commencing immediately. With respect to
such Mortgage Loan, the Forbearance Plan shall provide that such
Delinquency will be cured within 180 days after the Due Date of the
earliest unpaid installment, unless the Master Servicer and, where
applicable, the respective Pool Insurer and/or the respective Primary
Mortgage Insurer, consent to a longer period of time. The Forbearance
Plan for such Mortgage Loan shall be set forth in writing and executed
by the Borrower and by the Servicer in the form of a letter agreement
if the earliest unpaid installment is more than 60 days past due.
12.3.7 ACCOMMODATION LIMITATIONS. No modification, recast, extension,
or capitalization of delinquent payments of a Mortgage Loan other than
as provided in Section 12.3.6 hereof shall be permitted with respect to
a Mortgage Loan unless there is at least a 90-day Delinquency with
respect to such Mortgage Loan unless permitted by the Master Servicer.
12.3.8 POOL INSURANCE CONSIDERATIONS. Where applicable, the Servicer
shall satisfy all requirements under the applicable Pool Insurance
policy regarding the relief granted with respect to a delinquent
Mortgage Loan, including, without limitation, securing the prior
written consent of the respective Pool Insurer regarding (a) any change
in any term of such Mortgage Loan, (b) the release of the related
Borrower from any liability related to such Mortgage Loan, or (c) the
release of any portion of, or interest in, the Mortgaged Property from
the lien of the related Security Instrument.
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Section 12.4 SPECIAL DELINQUENCY SERVICING CONSIDERATIONS
12.4.1 ADVANCE RESPONSIBILITY DURING DELINQUENCY. In the event of a
Delinquency with respect to a Mortgage Loan, the Servicer agrees to
advance from its own funds the full amount of Monthly Payments (which
may be net of the related Servicing Fee) for such Mortgage Loan. These
advances shall provide the Owner of such Mortgage Loan with a regular
flow of funds on such delinquent Mortgage Loan. The advance obligation
stated above is in addition to any other advance obligations which the
Servicer has pursuant to the provisions of this Agreement. The Servicer
must still advance funds in accordance with the provisions of this
Agreement even if a forbearance has been granted.
12.4.2 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Where applicable, the
Servicer shall be familiar with and shall satisfy all requirements of
the applicable Primary Mortgage Insurance policy with respect to a
delinquent Borrower. The Servicer shall have adequate controls to
assure timely filing of all notices to the appropriate Primary Mortgage
Insurer. The Servicer shall prepare and file all appropriate claims
with respect to the applicable Primary Mortgage Insurance policy, and
the Servicer shall prepare and deliver to the Master Servicer copies of
all claims forms and other papers received from or presented to any
Primary Mortgage Insurer in connection with any claims presented under
any such policy, unless the Servicer is otherwise instructed by the
Master Servicer.
12.4.3 POOL INSURANCE COMPLIANCE. Where applicable, the Servicer shall
be familiar with and shall satisfy all requirements of the applicable
Pool Insurance policy with respect to a delinquent Borrower. The
Servicer shall have adequate controls to assure timely filing of all
notices to the appropriate Pool Insurer. Copies of all such notices
shall be sent to the Master Servicer, unless otherwise instructed. The
Servicer shall prepare and file all appropriate claims with respect to
the applicable Pool Insurance policy, and the Servicer shall prepare
and deliver to the Master Servicer copies of all claims forms and other
papers received from or presented to any Pool Insurer in connection
with any claims presented under any such policy, unless the Servicer is
otherwise instructed by the Master Servicer.
ARTICLE 13
FORECLOSURE ADMINISTRATION
Section 13.1 FORECLOSURE PREREQUISITES
13.1.1 CHRONIC DELINQUENCY. If a Borrower is chronically delinquent and
the Servicer, based upon Prudent Servicing Practices, has exhausted all
reasonable means of curing the Delinquency, the Servicer must realize
upon the related defaulted Mortgage Loan in accordance with Prudent
Servicing Practices and recommend either (i) the commencement of
foreclosure procedures or (ii) an alternate to foreclosure, each in
accordance with the terms of the related Security Instrument and
applicable law.
13.1.2 LIQUIDATION RECOMMENDATION. Prior to the commencement of any
action to foreclose on a Mortgaged Property, or prior to the acceptance
of a deed-in-lieu of foreclosure, the Servicer shall notify the Master
Servicer and, where applicable, the
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respective Primary Mortgage Insurer and/or the respective Pool Insurer,
of the Servicer's recommendation as to whether foreclosure should be
commenced, or a deed-in-lieu of foreclosure accepted, and, where
applicable, shall provide all other notices, reports or information
required by the Master Servicer or the applicable Primary Mortgage
Insurance policy and/or Pool Insurance policy. If the respective prior
approval of the Master Servicer and, where applicable, the respective
Primary Mortgage Insurer and/or the respective Pool Insurer, is not
withheld, the Servicer shall initiate foreclosure or accept a
deed-in-lieu of foreclosure, as the case may be. Where such Mortgaged
Property is covered by a Primary Mortgage Insurance policy and/or Pool
Insurance policy, if the respective Primary Mortgage Insurer or the
respective Pool Insurer, as the case may be, withhold its approval, the
Servicer shall act according to the respective Primary Mortgage
Insurer's instructions or the respective Pool Insurer's instructions
provided such actions are consistent with, and contemplated by, the
applicable Primary Mortgage Insurance policy or the applicable Pool
Insurance policy, as the case may be. Notwithstanding any of the
foregoing, if the Master Servicer directs the Servicer to follow a
course of action regarding the liquidation of a Mortgaged Property, the
Servicer shall follow the Master Servicer's instructions.
13.1.3 FORECLOSURE EXPENSES. All fees and expenses shall be consistent
with FNMA standards and, where applicable, shall not exceed those
permitted under the respective Pool Insurance policy and/or the
respective Primary Mortgage Insurance policy. Fees in excess of the
amount permitted by FNMA guidelines or extraordinary legal services
must be approved in writing in advance by the Master Servicer, and,
where applicable, by the respective Primary Mortgage Insurer or the
respective Pool Insurer, as the case may be, if required by the
applicable policy. All attorneys' fees, and other costs in excess of
FNMA's standards in respect of any foreclosure or acquisition in lieu
of foreclosure shall be identified in advance and a detailed estimate
of the amounts thereof shall be set forth in the Servicer's written
recommendation. The billing by a foreclosure attorney must demonstrate
the appropriateness of any extraordinary fees by the services required.
In cases of full or partial reinstatement of the related Mortgage Loan,
the fees shall be reasonable and in proportion to the authorized fee
for services rendered for a completed foreclosure. Unless otherwise
expressly agreed in writing, neither the Master Servicer, any of its
Affiliates, their respective officers, directors, employees, agents,
successors or assigns, the Owner of the related Mortgage Loan, nor any
beneficial owners thereof shall be liable for any attorneys' fees,
trustees' fees, witness fees, title search fees, court costs or other
expenses incurred by the Servicer in respect of any foreclosure or
acquisition in lieu of foreclosure, except to the extent that such
fees, costs and expenses are fully reimbursable under a Primary
Mortgage Insurance policy and in fact are reimbursed.
13.1.4 HAZARDOUS WASTES. In the event that the Mortgaged Property,
related to a Mortgage Loan which is being considered for liquidation by
foreclosure or the transfer of a deed-in-lieu of foreclosure, contains,
and the Servicer has reason to believe that it contains, hazardous or
regulated substances which may impose liability, for damages,
remediation or otherwise, upon the owner of such Mortgaged Property
pursuant to Federal, State or local law, the Servicer shall not, except
with the express prior written approval of the Master Servicer, which
approval makes specific reference to the presence of such hazardous or
regulated substances, undertake or continue the process of foreclosure
with respect to such Mortgaged Property.
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Section 13.2 DEED-IN-LIEU OF FORECLOSURE
13.2.1 CONDITIONS. If the Master Servicer and the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, if applicable,
have approved the liquidation of a Mortgage Loan by accepting a
deed-in-lieu of foreclosure of the related Mortgaged Property, the
Servicer may accept such deed without any further action or approval by
the Master Servicer or, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, provided that:
(a) the Servicer determines that the pursuit of a
deficiency judgment is not practical or warranted;
(b) the Mortgaged Property has been listed for sale at a
market value for three months or more without a
reasonable sales offer;
(c) there reasonably appear to be legal impediments to
pursuing foreclosure;
(d) the acceptance of the deed-in-lieu of foreclosure
will enable the Owner of the related Mortgage Loan to
acquire the Mortgaged Property earlier than under a
foreclosure action;
(e) the Borrower acknowledges in writing that the deed is
being accepted as an accommodation to him or her;
(f) where applicable, the respective Primary Mortgage
Insurer and/or the respective Pool Insurer has agreed
to the acceptance of a deed-in-lieu;
(g) the Borrower has not received cash consideration to
deed the Mortgaged Property over to the Owner of the
related Mortgage Loan, unless the Master Servicer
otherwise approves;
(h) the Borrower can convey acceptable marketable title,
evidenced by a Title Insurance policy;
(i) the Mortgaged Property is vacant (unless, where
applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer has agreed to
accept an occupied property);
(j) the Mortgaged Property is not subject to liens (held
by others), judgments, or attachments; and
(k) the Borrower agrees to assign and transfer to the
benefit of the Owner of the related Mortgage Loan,
where applicable, any rents if the Mortgaged Property
is rented, and the Servicer agrees to collect any
rental income.
13.2.2 SUBSEQUENT ACTIONS. Upon acquisition by the Owner of the related
Mortgage Loan of such Mortgaged Property, the Servicer shall promptly
notify the Master Servicer and, if applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, indicating the
details of the transaction and reasons for the conveyance and
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providing such other information as is required under a Primary
Inspection Report to the Master Servicer and, if applicable, to the
Primary Mortgage Insurer and/or the Pool Insurer. Title shall be
conveyed directly from the Borrower to the Owner of the related
Mortgage Loan or to such other Person designated by the Master
Servicer.
Section 13.3 ACTIONS PRIOR TO FORECLOSURE
13.3.1 NOTICE REQUIREMENTS. The Servicer shall send the Borrower a
letter, not less than 30 days before the commencement of foreclosure
proceedings, setting out (i) the nature of the default, (ii) the steps
that must be taken by the Borrower to cure the default, and (iii) the
date when foreclosure proceedings will begin. If the Servicer has
reason to believe that the related Mortgaged Property has been
abandoned or if the Borrower has displayed an obvious disregard for his
obligations under such Mortgage Loan, the foregoing notice shall be
forwarded at the earliest possible date following the Borrower's
default.
13.3.2 INITIATION OF PROCEEDINGS. If foreclosure approval has not been
withheld by the Master Servicer and, where applicable, by the
respective Primary Mortgage Insurer and/or the respective Pool Insurer,
with respect to a Mortgaged Property, the Servicer shall initiate or
cause to be initiated such foreclosure actions as are authorized by law
and consistent with practices in the locality where the Mortgaged
Property are located. If such Mortgaged Property has been abandoned or
vacated by the Borrower and the Borrower has evidenced no intention of
honoring his obligations under the related Mortgage Loan, the
foreclosure process shall be expedited to the fullest extent permitted
by law.
Section 13.4 FORECLOSURE PROCEDURES
13.4.1 FORECLOSURE EXPENSES. During the period in which the Mortgaged
Property related to a Mortgage Loan is being foreclosed, remaining
Escrow Funds, if any, as well as any rent receipts, shall be used to
pay all taxes and insurance premiums that become due with respect to
such Mortgaged Property to the extent permitted by law. Except where
other arrangements have been made with the applicable Primary Mortgage
Insurer, the Servicer shall, with respect to each Mortgaged Property
undergoing foreclosure, advance payment of attorneys' fees, trustees'
fees and other foreclosure costs from the commencement of foreclosure
proceedings pertaining to such Mortgaged Property.
13.4.2 BIDDING INSTRUCTIONS. (a) The Servicer shall issue bidding
instructions to the attorney or trustee in a foreclosure proceeding.
Where applicable, the Servicer shall incorporate any bidding
requirements issued by the respective Primary Mortgage Insurer and/or
the respective Pool Insurer. Any proceeds received from an insurance
loss settlement shall be included as part of the bid amount. Where a
claim or claim settlement under a Hazard Insurance or Flood Insurance
policy is pending, the Servicer shall contact the Hazard Insurance or
Flood Insurance carrier to verify that the proposed bid will not
invalidate the claim, in that, in certain jurisdictions, a bid for the
total indebtedness will be considered as satisfaction of the debt and
would thus bar the Hazard Insurance or Flood Insurance claim.
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(b) The Servicer's bidding instructions to the attorney or trustee in a
foreclosure proceeding shall be to enter a bid amount which is the
lesser of (i) the total amount of indebtedness, which shall include the
Unpaid Principal Balance, unpaid accrued interest up to, and including,
the date of the sale (calculated using the interest rate in effect for
each payment on the date it became due), any T&I Advances and other
servicing Advances including, without limitation, foreclosure costs and
any reimbursable property inspection fees or (ii) the fair market value
of the related Mortgaged Property established by a current broker's
price opinion.
(c) If the Servicer is not able to comply with the bidding instructions
outlined in subsection (b) hereof, the Servicer shall request from the
Master Servicer an initial bid amount and bidding instructions for the
Servicer to follow at the applicable foreclosure sale. In no event
shall the bidding instructions from the Master Servicer supersede or
invalidate the bidding instructions provided by the respective Primary
Mortgage Insurer and/or respective Pool Insurer, where applicable.
13.4.3 BUYDOWN FUNDS USE. Unless the related Buydown Agreement provides
otherwise, the Servicer may not use Buydown Funds relating to a
Mortgage Loan to cure a Delinquency with respect to such Mortgage Loan.
Any Buydown Funds remaining in the associated Custodial Buydown Account
of a Mortgage Loan in foreclosure must be disposed of in accordance
with the terms of the related Buydown Agreement.
13.4.4 SERVICER'S RESPONSIBILITIES. Subject to the provisions of
Article Three hereof, after acquisition of a Mortgaged Property,
through foreclosure or a deed-in-lieu of foreclosure, or after the
Servicer shall have taken possession of the Mortgaged Property,
whichever occurs first, the Servicer shall be responsible for the
management of such Mortgaged Property. The Servicer shall remain
responsible until possession has been assumed by the applicable Primary
Mortgage Insurer or the applicable Pool Insurer or until such Mortgaged
Property are otherwise disposed of, as the case may be. The Servicer
shall take such action as is necessary to protect the Owner of the
related Mortgage Loan's security or, after acquisition thereof,
ownership interest in such Mortgaged Property. Such action shall
include, without limitation, (i) management of such Mortgaged Property,
(ii) maintenance of such Mortgaged Property, and (iii) if such
Mortgaged Property are vacant, protection of such Mortgaged Property
against vandals and the elements.
13.4.5 CONVEYANCE DOCUMENTS. Where applicable, any conveyance by the
Servicer to the respective Primary Mortgage Insurer or the respective
Pool Insurer of a Mortgaged Property shall be made by the form of deed
commonly used in the particular jurisdiction where such Mortgaged
Property is located. The Servicer shall prepare the necessary documents
within two weeks after the date of sale at foreclosure or confirmation
of sale, if applicable, or within a reasonable time frame. The
documents shall be forwarded to the Master Servicer for approval and
execution. After execution by the Owner of the related Mortgage Loan,
such documents will be returned to the Servicer for delivery to the
respective Primary Mortgage Insurer or the respective Pool Insurer
which is acquiring such Mortgaged Property.
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Section 13.5 MORTGAGE LOAN REINSTATEMENT
13.5.1 BORROWER'S FULL PAYMENT. If a Borrower offers to fully reinstate
his Mortgage Loan during the foreclosure process, the Servicer shall
accept the offer. To achieve full reinstatement of his Mortgage Loan, a
Borrower shall make payment of all (i) payments due to bring such
Mortgage Loan current, (ii) attorneys' fees, (iii) trustees' fees, (iv)
any additional legal costs, (v) all applicable late fees, and (vi) any
other expenditures or Advances made by the Servicer during the
foreclosure process.
13.5.2 BORROWER'S PARTIAL PAYMENT. Except where otherwise required by
applicable law, the Servicer may not accept an amount in payment from a
Borrower which is less than the amount required for full reinstatement
pursuant to Section 13.5.1 hereof toward reinstatement of a Mortgage
Loan during the foreclosure process without the prior written approval
from the Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer.
13.5.3 OBLIGATIONS UPON REINSTATEMENT. Upon accepting the reinstatement
of a Mortgage Loan, the Servicer shall immediately contact the
appropriate foreclosure attorney or trustee to avoid incurring
additional legal costs or fees. The Servicer must apply the
reinstatement Funds upon receipt from a Borrower in payment of the
expenses enumerated in Section 13.5.1 hereof. Upon receipt of the
reinstatement funds from a Borrower the Servicer must (i) notify the
Master Servicer of the reinstatement of the related Mortgage Loan and
(ii) return to the Master Servicer, the related Mortgage Note and other
related Mortgage Loan Documents for reinclusion in the related Mortgage
Loan File.
13.5.4 CERTAIN ASSUMPTIONS PERMITTED. The Servicer is authorized,
notwithstanding the other provisions of this Article 13, to permit the
assumption of a defaulted Mortgage Loan rather than to foreclose or
accept a deed-in-lieu of foreclosure if, in the Servicer's judgment,
the default is unlikely to be cured and the assuming borrower meets the
underwriting guidelines that originally applied to such Mortgage Loan.
ARTICLE 14
REO ADMINISTRATION
Section 14.1 GENERAL PROVISIONS
14.1.1 REO ACTION PLAN. With regard to each REO which is acquired, the
Servicer shall prepare a plan of action within 30 Business Days after
the date on which the Owner of the related Mortgage Loan acquires
marketable title to such REO. Each plan of action shall set forth (i) a
recommendation for the most effective manner to dispose of the REO,
based on a current appraisal report, a broker's price opinion and a
market analysis; (ii) the steps to be taken by the Servicer to secure
such REO; and (iii) an estimate of the amount of time that is required
to dispose of such REO. The Servicer shall promptly submit copies of
each plan of action to the Master Servicer and, where applicable, to
the respective Primary Mortgage Insurer, and/or the respective Pool
Insurer. Unless otherwise directed by the Master Servicer, the Servicer
shall implement each plan of
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action in an expeditious manner. Further, the Master Servicer may
instruct the Servicer to modify any plan of action as the Master
Servicer shall direct. The Servicer shall provide the Master Servicer
with monthly progress reports with regard to each plan of action
detailing the status of the related REO and the progress achieved in
implementing the plan of action.
Section 14.2 REO SERVICING
14.2.1 REO SERVICING REQUIREMENTS. The Servicer shall service each REO
from its acquisition through its disposition and shall ensure that all
funds received with respect to such REO are deposited to the
appropriate Custodial P&I Account for remittance to the Owner of the
related Mortgage Loan, unless the Master Servicer has relieved the
Servicer of these responsibilities by written notification.
14.2.2 SERVICER'S RESPONSIBILITIES. In addition to any other
obligations set forth herein, upon acquisition of each REO, the
Servicer shall be responsible for:
(a) managing, maintaining and securing such REO until it
is conveyed or sold;
(b) inspecting such REO at least once every 30 days and
promptly sending the Master Servicer an updated
Property Inspection Report;
(c) paying all taxes, insurance, maintenance, management
and foreclosure costs relating to such REO;
(d) submitting recommendations for listing and soliciting
offers on such REO;
(e) marketing such REO;
(f) completing the sale of such REO;
(g) depositing sales proceeds relating to such REO into
the appropriate Custodial P&I Account for remittance
to the Owner of the related Mortgage Loan;
(h) where applicable, satisfying all of the Primary
Mortgage Insurer's procedural requirements and filing
all required forms and claims;
(i) where applicable, depositing Primary Mortgage
Insurance or Pool Insurance proceeds relating to such
REO into the applicable Custodial P&I Account for
remittance to the Owner of the related Mortgage Loan;
(j) processing the conveyance of such REO to the Primary
Mortgage Insurer, where applicable; and
(k) reporting (1) all changes in status of such REO and
(2) all material expenses relating to such REO to the
Master Servicer on a monthly basis.
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14.2.3 NOTICE. The Servicer shall notify the Master Servicer in writing
as soon as each REO is acquired.
Section 14.3 REO RECORDS AND REPORTS
14.3.1 RECORDS RETENTION. The Servicer shall retain in its files copies
of all documents, reports and invoices described in this Section.
14.3.2 EVIDENCE OF TITLE. Evidence that title to a REO is held by the
Owner of the related Mortgage Loan shall be submitted by the Servicer
to the Master Servicer and, if applicable, to the Primary Mortgage
Insurer and/or the Pool Insurer, within ten Business Days after
marketable title to such RBO has been acquired.
14.3.3 REO EXPENSES. At the end of each month following the receipt of
any invoice relating to expenses incurred in administering each REO,
the Servicer shall send a report listing such expenses to the Master
Servicer and, if applicable, to the Primary Mortgage Insurer and/or the
Pool Insurer. The Servicer shall retain such invoices in its records
and shall, by request, (i) produce any such invoices for inspection or
(ii) at its own expense, provide copies of any such invoices to the
Master Servicer and, if applicable, to the Primary Mortgage Insurer
and/or the Pool Insurer, as directed. The foregoing expense invoices
shall include, without limitation, the following:
(a) insurance premiums;
(b) real estate tax bills;
(c) special assessments;
(d) owners' association dues; and
(e) utility bills.
14.3.4 REO DOCUMENTS. Promptly upon receipt, the Servicer shall send
copies to the Master Servicer and, where applicable, to the respective
Primary Mortgage Insurer and/or the respective Pool Insurer, of the
following documents relating to each REO:
(a) any forced placed Hazard Insurance policy or Flood
Insurance policy, if applicable;
(b) any maintenance contracts;
(c) any contractor bids relating to the rehabilitation of
such REO pursuant to Section 14.5.3 hereof;
(d) an updated Title Insurance policy which reflects the
occurrence of foreclosure; and
(e) plat map or house location survey, if already
available.
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Section 14.4 REO MARKETING
14.4.1 REO MARKETING EFFORTS. The Servicer shall begin efforts to
market a REO as soon as marketable title is acquired by the Owner of
the related Mortgage Loan.
14.4.2 REO SALES. The Servicer shall obtain the best market price for a
REO for the Owner of the related Mortgage Loan while disposing of such
REO in a timely and efficient manner. Unless otherwise directed by the
Master Servicer, the Servicer, acting on behalf of the Owner of the
related Mortgage Loan, shall dispose or cooperate with the Owner of the
related Mortgage Loan in disposing of such REO within 24 months after
its acquisition by the Owner of the related Mortgage Loan. If the
Servicer is otherwise unable to sell such REO, unless otherwise
directed by the Master Servicer, the Servicer shall before the end of
the 24-month period following the acquisition of such REO, auction such
REO to the highest bidder in an auction reasonably designed to bring a
fair price. The Servicer shall consult with the Master Servicer prior
to holding such auction. The Servicer is eligible to bid in such an
auction.
14.4.3 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. The Servicer must
ensure that any action taken with respect to the sale of a REO does not
jeopardize the maximum benefits available under the related Primary
Mortgage Insurance Policy, if any, with respect to the related Mortgage
Loan. The Servicer must inform the related Primary Mortgage Insurer of
any listing agreements or purchase offers that are received before the
related Primary Mortgage Insurer has finalized the disposition of the
claim.
14.4.4 MASTER SERVICER INSTRUCTIONS. Where the Servicer receives
instructions from the Master Servicer regarding the marketing and sale
of a REO, either with respect to a specific property or generally, such
instructions shall govern the Servicer's actions, notwithstanding any
provision herein.
14.4.5 POOL INSURANCE CONSIDERATIONS. The Servicer must ensure that any
action taken with respect to the sale of a REO does not jeopardize the
maximum benefits available under the related Pool Insurance Policy, if
any, with respect to the related Mortgage Loan. The Servicer must
inform the related Pool Insurer of any listing agreements or purchase
offers that are received before the Primary Mortgage Insurer has
finalized the disposition of the claim.
Section 14.5 REO REHABILITATION
14.5.1 REO REHABILITATION REQUIREMENT. Unless the Master Servicer shall
otherwise direct, and subject to Section 17.6.2, the Servicer must
ensure that any rehabilitation work (which shall not include the
cleaning of a recently acquired REO property) to any REO which is
necessary to restore such REO to a marketable condition is performed
and that such work is performed in a professional and workmanlike
manner.
14.5.2 MASTER SERVICER APPROVAL. The Servicer must obtain the Master
Servicer's prior written approval for rehabilitation work (which shall
not include the cleaning of a recently acquired REO property) when the
aggregate rehabilitation expenses with regard to a REO exceeds seven
thousand five hundred dollars ($7,500.00).
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14.5.3 WRITTEN CONTRACTOR BIDS. The Servicer shall solicit detailed
written bids from independent contractors when the value of a contract
for rehabilitation of a REO exceeds five hundred dollars ($500.00)
(which shall not include the cleaning of a recently acquired REO
property). Where the value of a contract exceeds five thousand dollars
($5,000.00) (which shall not include the cleaning of a recently
acquired REO property), the Servicer shall receive bids from a minimum
of two independent and unrelated contractors and, upon request, forward
copies of such bids to the Master Servicer. Where the value of a
contract exceeds fifty thousand dollars ($50,000.00) (which shall not
include the cleaning of a recently acquired REO property), the Servicer
shall receive bids from a minimum of three independent and unrelated
contractors and, upon request, forward copies of such bids to the
Master Servicer.
14.5.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. If a Mortgaged
Property which has become a REO and the related Mortgage Loan is
covered by a policy of Primary Mortgage Insurance, the Servicer shall
notify the related Primary Mortgage Insurer of such rehabilitation
plans before the completion of the Primary Mortgage Insurance claim to
ensure reimbursement from the Primary Mortgage Insurer. If the related
Primary Mortgage Insurer elects not to reimburse all rehabilitation
expenses, work should be postponed until after final disposition of the
Primary Mortgage Insurance claim.
Section 14.6 REO ADMINISTRATION FAILURE
14.6.1 SERVICER REMOVAL. The Master Servicer may in its reasonable
discretion, in the event that the Servicer's actions or omissions
result in damage to any REO or a failure to sell any REO property
within a reasonable time, the Master Servicer may remove the servicing
of such REO from the Servicer and assume responsibility for management,
control, maintenance, security, rehabilitation and disposition of such
REO.
14.6.2 SERVICER'S CONTINUING OBLIGATIONS. In the event that the
Servicer is removed from servicing a REO by virtue of the provisions of
Section 14.6.1, the Servicer, as to such REO, will nevertheless remain
responsible to (a) pay when due all insurance premiums, property taxes
and assessments; (b) file when due all claims for Primary Mortgage
Insurance, Pool Insurance, Hazard Insurance and, if applicable, Flood
Insurance benefits; and (c) fulfill any other related responsibilities
required by the Master Servicer.
14.6.3 SERVICER'S DUTY TO COMPENSATE. Whether or not a Servicer is
removed from servicing with respect to a particular REO, the Servicer
must compensate the Master Servicer for any damages caused as a result
of the Servicer's breach of its obligation to service efficiently each
REO. The Servicer acknowledges that any damages suffered as a result of
the Servicer's inefficiency in managing a REO may not be quantified in
advance of the Master Servicer assuming responsibility for such REO.
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ARTICLE 15
INSURANCE
Section 15.1 GENERAL PROVISIONS
15.1.1 INSURANCE REQUIREMENTS
The Servicer must verify that each Mortgage Loan has the insurance
coverage required pursuant to Articles 15 and 16. All claims arising
under Insurance Policies maintained hereunder must be settled or
otherwise disposed of by the Servicer, and all such Insurance Policies
must be maintained, including, without limitation, the payment of
premiums on a timely basis, by the Servicer at no expense to the Owner
of the related Mortgage Loan, or the Master Servicer.
If the Insurance Proceeds paid in respect of any Mortgage Loan are not
used to repair the related Mortgaged Property due to the particular
circumstances of the loss, and instead such Insurance Proceeds are
applied to reduce the Unpaid Principal Balance of such Mortgage Loan
and such application causes the Unpaid Principal Balance of such
Mortgage Loan to reduce to zero, the Servicer must treat the
application of such proceeds as a Liquidation, and notify the Master
Servicer of such Liquidation.
15.1.2 UNINSURED LOSSES. The Servicer must take the following actions
in the event of loss or damage to any Mortgaged Property caused by an
earthquake, flood, tornado or other natural disaster immediately
following, the earlier to occur of (x) its notification or discovery of
such loss or damage or (y) the time at which the Servicer reasonably
should have known of such loss or damage in the exercise of Prudent
Servicing Practices:
(a) determine the extent of the losses or damages;
(b) secure any abandoned Mortgaged Property from
vandalism and the elements;
(c) communicate with and counsel the respective Borrower
on any disaster relief programs or other assistance
which is available; and
(d) notify the Master Servicer and recommend appropriate
action to protect the interests of the Owner of the
related Mortgage Loan and the respective Borrower.
15.1.3 SERVICER'S OBLIGATION TO MAINTAIN INSURANCE. If the Servicer
discovers that a Borrower does not have adequate insurance coverage as
required pursuant to the provisions of this Article, the Servicer must
obtain and maintain at its own expense the required insurance coverage
on the related Mortgaged Property. The Servicer may, in its discretion,
cause the required coverage to be maintained through a blanket
insurance policy. Such expenses shall not be recoverable by the
Servicer from the Master Servicer or the Principal or from payments on
the Mortgage Loan or any other source relating to the related Mortgage
Loan or the related Mortgaged Property, other than from Liquidation
Proceeds or Insurance Proceeds from the related Mortgage Loan. To the
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extent permitted by applicable law and the related Mortgage Loan
Documents, the Servicer may initiate forced placed coverage with
respect to such Mortgaged Property and thereafter attempt to recover
such expenses from the related Borrower.
15.1.4 INSURANCE NOTICES. The Servicer must arrange for all insurance
drafts, notices, policies, invoices, or other correspondence to be
delivered directly to the Servicer. The Owner of the related Mortgage
Loan, its successors and assigns, must be named as the Mortgagee, the
endorsement must show the Servicer's address as shown in the following
example:
[Owner of the Mortgage Loan, its successors and assigns]
c/o [Servicer]
[Servicer's Address]
15.1.5 DEFAULT BY INSURER. If the Servicer knows or has reasonable
cause to suspect that an insurer under any applicable insurance policy
required pursuant to the provisions of this Article will, for any
reason, be unable to pay a valid claim, the Servicer shall immediately
notify the Master Servicer upon receipt of such information or
formulation of such belief. The Servicer shall then (i) find a
substitute insurer and (ii) pay any premiums to the insurer. In any
case, the Servicer shall not be liable in any way for the financial
inability of any insurer under any insurance policy required herein to
pay a valid claim so long as the provisions of Articles 15 and 16
hereof are complied with.
15.1.6 INSURANCE CARRIER RATING. Each Insurance Policy must be
underwritten by an insurance carrier that is a FNMA approved Mortgage
Insurer.
15.1.7 INSURANCE CARRIER LICENSES. Each insurance carrier must be
licensed or otherwise authorized by law to conduct business in each
state in which a related Mortgaged Property is located.
15.1.8 RISK EXPOSURE. If any Mortgaged Property is exposed to hazards
not fully covered by Hazard Insurance or Flood Insurance, the Servicer
must notify the Master Servicer immediately with a recommendation for
additional coverage.
15.1.9 EVIDENCE OF INSURANCE. (a) The Servicer must maintain the
following documentation with respect to insurance coverage on each
Mortgage Loan:
(i) if Primary Mortgage Insurance is required, a copy of
the Primary Mortgage Insurance policy and any related
endorsements;
(ii) for one- to four-unit dwellings, an original of the
Hazard Insurance policy, if applicable, and any
related endorsements;
(iii) a copy of the Title Insurance policy and any related
endorsements;
(iv) for properties covered under a blanket policy, an
original of any blanket policy, and any related
endorsements; and
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(v) an original of any Flood Insurance policy, if Flood
Insurance is required, and any related endorsements.
(b) A certificate of insurance is acceptable in lieu of any of the
foregoing policies if it contains the following information:
(i) named insured and Mortgagee or, for PUD or
Condominium Units, named insured association, unit
owner and unit owner Mortgagee;
(ii) address of the Mortgaged Property;
(iii) type, amount and effective dates of coverage;
(iv) deductible amount;
(v) any endorsement or optional coverage obtained and
made part of the original policy;
(vi) insurer's agreement to provide at least ten days'
prior written notice to the Servicer and Borrower (or
applicable unit owner Mortgagee if for a PUD or
Condominium Unit) before any reduction in coverage or
cancellation of the policy; and
(vii) signature of an authorized representative of the
insurer, if required by applicable law.
Section 15.2 PRIMARY MORTGAGE INSURANCE
15.2.1 PRIMARY MORTGAGE INSURANCE REQUIREMENT. Unless Primary Mortgage
Insurance coverage with respect to a Mortgage Loan has been waived in
writing by the Owner of the Mortgage Loan at the time it purchases such
Mortgage Loan or such Primary Mortgage Insurance is cancelled as
provided in Section 15.2.4 herein, the Servicer must maintain at all
times Primary Mortgage Insurance on any Mortgage Loan with an original
LTV ratio in excess of 80%.
15.2.2 PRIMARY MORTGAGE INSURANCE COVERAGE. As to each Mortgage Loan
which is required to have Primary Mortgage Insurance, pursuant to this
Agreement or the related Mortgage Loan Documents, Primary Mortgage
Insurance must at least provide coverage which insures against loss of
that portion of the Unpaid Principal Balance of the Mortgage Loan that
exceeds 75% of the Value of the Mortgaged Property. If the Mortgage
Loan provides for negative amortization or for the potential of
negative amortization, the Primary Mortgage Insurance policy must also
insure any increase in the Unpaid Principal Balance from the original
principal balance of the related Mortgage Note.
15.2.3 PRIMARY MORTGAGE INSURER DOWNGRADING. In the event that the
rating assigned by a Rating Agency to the claims paying ability of any
Primary Mortgage Insurer is reduced below the level permitted under
Section 15.1.6, the Servicer will use its best efforts to replace each
Primary Mortgage Insurance Policy issued by such Primary
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Mortgage Insurer with a new Primary Mortgage Insurance policy issued by
an insurer whose claims paying ability is acceptable to the Master
Servicer. The premium for any replacement Primary Mortgage Insurance
policy shall not exceed the premium for the discontinued Primary
Mortgage Insurance policy.
15.2.4 PRIMARY MORTGAGE INSURANCE CANCELLATION. If a Borrower requests
cancellation of the Primary Mortgage Insurance policy with respect to
his Mortgaged Property, the following requirements must be met:
(a) The current LTV ratio must be 80% or less. The
current LTV ratio must be calculated by dividing the
Unpaid Principal Balance of the related Mortgage Loan
by the Current Value of the Mortgaged Property;
(b) The related Mortgage Loan may not have been 30 days
or more delinquent within the preceding twelve
months; and
(c) There may not have been any other default under the
terms of the related Mortgage Loan at any time during
the preceding twelve months.
If the foregoing requirements are met, the Servicer may request the
cancellation of such Primary Mortgage Insurance policy by submitting to
the Master Servicer a Request for Primary Mortgage Insurance
Cancellation. If there are indications that the Current Value of the
Mortgaged Property has declined, the Servicer shall obtain an Appraisal
Report with respect to such Mortgaged Property that is not more than 60
days old. The expense of such an Appraisal Report shall not be borne by
the Master Servicer. The Current Value of such Mortgaged Property set
forth the Appraisal Report shall be used as the divisor in clause (a)
hereof to determine whether the recalculated current LTV is 80% or
less. If the recalculated current LTV is greater, the Primary Mortgage
Insurance cancellation request will be denied. In addition, the Master
Servicer may deny such a request if it determines, in its reasonable
discretion, that the interests of the Owner of the related Mortgage
Loan may be harmed by such cancellation.
15.2.5 PRIMARY MORTGAGE INSURANCE CLAIMS. The Servicer must take all
steps to ensure the payment of the maximum benefits payable under the
terms of any Primary Mortgage Insurance policy. The Servicer must work
diligently with each Primary Mortgage Insurer to determine whether such
insurer will settle the claim by taking title to the Mortgaged Property
in question or in some other manner. The Servicer also must notify the
Master Servicer immediately in writing of any decision made by the
applicable Primary Mortgage Insurer relative to a claim. Upon receipt
of any Primary Mortgage Insurance proceeds, the Servicer must deposit
such amounts in the appropriate Custodial P&I Account. The Servicer
shall promptly notify the Master Servicer in writing if any Primary
Mortgage Insurer at any time denies any or all of a claim filed under
its Primary Mortgage Insurance policy.
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Section 15.3 HAZARD INSURANCE
15.3.1 HAZARD INSURANCE REQUIREMENT. Unless alternative coverage is
provided pursuant to Section 16.3 hereunder, the Servicer must ensure
that each Mortgaged Property is covered at all times by Hazard
Insurance.
15.3.2 HAZARD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Hazard Insurance must be at least equal to the lesser of (a)
the Unpaid Principal Balance of the related Mortgage Loan, or (b) 100%
of the replacement cost of the improvements on the Mortgaged Property.
15.3.3 HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by an applicable law, each Hazard Insurance deductible may not
exceed the lesser of (a) $1,000 or (b) one percent of the applicable
amount of coverage.
15.3.4 HAZARD INSURANCE VACANCY COVERAGE. The Servicer must ensure that
each Mortgaged Property is adequately covered even when vacant and,
where available, must obtain a vacancy permit endorsement.
15.3.5 HAZARD INSURANCE MORTGAGEE PROVISIONS. Each Hazard Insurance
Policy must contain or have attached a standard mortgagee clause in the
form customarily used by or required by private institutional mortgage
loan investors. Such clause must provide that the Hazard Insurance
carrier will notify the named Mortgagee at least ten days before any
reduction in coverage or cancellation of the policy. All mortgagee
clauses must be properly endorsed, necessary notices of transfer must
be given and any other action must be taken that is necessary in order
to protect the interests of the Owner of the related Mortgage Loan, its
successors and/or assigns. The standard mortgagee clause should read as
follows: "Insuring [Servicer's Name], as agent for the [Owner of the
Mortgage Loan], its successors and/or assigns."
Section 15.4 FLOOD INSURANCE
15.4.1 FLOOD INSURANCE REQUIREMENT. Unless alternate coverage is
provided pursuant to Section 16.6 hereunder, the Servicer must ensure
that Flood Insurance is maintained at all times on Mortgaged Property
that are in a special flood hazard area identified by the Secretary of
HUD or the Director of the Federal Emergency Management Agency.
15.4.2 FLOOD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Flood Insurance must be at least equal to the lesser of (a)
the maximum amount available under the National Flood Insurance
Program's regular program or its emergency program, (b) the Unpaid
Principal Balance of the related Mortgage Loan or (c) 100% of the
replacement cost of the improvements on the Mortgaged Property.
15.4.3 FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by applicable law, each Flood Insurance deductible may not
exceed the lesser of (a) $1,000 or (b) one percent of the applicable
amount of coverage.
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Section 15.5 TITLE INSURANCE
15.5.1 TITLE INSURANCE REQUIREMENT. Unless otherwise directed by the
Master Servicer, the Servicer shall maintain at all times with respect
to each Mortgage Loan and the related Mortgaged Property a Title
Insurance policy in full force and effect until such Mortgage Loan is
fully paid.
15.5.2 TITLE INSURANCE COVERAGE. The Servicer shall not reduce the
amount of or otherwise change the scope of the coverage under, or
otherwise do or authorize any act or omission that would affect the
coverage of, any Title Insurance policy, unless the Servicer has
received written direction from the Master Servicer specifying the
amount or amounts or scope to which the coverage is to be changed.
15.5.3 SERVICER'S OBLIGATIONS. The Servicer shall perform and comply
with all requirements and conditions of each Title Insurance policy for
each Mortgage Loan and the related Mortgaged Property that are to be
performed or observed by the "Insured" or obligee thereunder as a
condition to maintaining and keeping it in force, or making a claim
under, such Title Insurance policy. The Servicer shall be named as a
payee on all Title Insurance policy loss drafts, and upon receipt
thereof, the funds shall be credited to the extent of the sum of (i)
the Unpaid Principal Balance of such Mortgage Loan and any interest
accrued thereon, (ii) any outstanding advances thereon and (iii) any
expenses owed by such Borrower which are due the Owner of such Mortgage
Loan, the Master Servicer or the Servicer, whether for its own account
or others, to the appropriate Custodial P&I Account and the balance of
such funds, if any, shall be credited to the appropriate Custodial T&I
Account.
15.5.4 POLICY CUSTODY. The Servicer shall cause the original of such
Title Insurance policy to be sent directly to the Custodian.
15.5.5 TITLE INSURANCE CLAIMS. The Master Servicer must be notified
contemporaneously with the making of any claim under the Title
Insurance policy. The Servicer shall disburse the proceeds of any such
settlement in accordance with the instructions and requirements of the
Master Servicer.
Section 15.6 INSURANCE LOSS SETTLEMENTS
15.6.1 SETTLEMENT APPROVAL. The approval of the Master Servicer need
not be requested for disposition of insurance loss settlements where
property damage is $10,000 or less, and the Servicer may disburse the
loss proceeds as provided herein. The Master Servicer must be notified
before disposition of any insurance loss settlement involving property
damage over $10,000.
15.6.2 SETTLEMENT DISBURSEMENTS. For each Mortgage Loan, including a
Mortgage Loan secured by Mortgaged Property located in a Condominium
Project or PUD, the Servicer is fully responsible for the disbursement
of insurance loss settlements under each Hazard Insurance policy and
each Flood Insurance policy, including but not limited to:
(a) arranging for and authorizing the restoration and
rehabilitation of the related damaged Mortgaged
Property in cooperation with the Borrower;
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(b) subject to applicable law, applying the Insurance
Proceeds to reduction of the Unpaid Principal Balance
of such Mortgage Loan, provided that the Servicer (i)
shall have determined that such proceeds are
insufficient to repair and restore the related
Mortgaged Property, or that the repair and
restoration of such Mortgaged Property is not
feasible; and (ii) shall have obtained authorization
of the Master Servicer to make such application of
the Insurance Proceeds;
(c) collecting, endorsing and disbursing the Insurance
Proceeds and arranging for progress inspections and
payments, if necessary;
(d) complying with all requirements of any Primary
Mortgage Insurance policy pertaining to the filing of
claims and the settlement of insurance losses to
assure that the security of such Mortgage Loan is not
impaired and that the coverage of such Primary
Mortgage Insurance policy is not jeopardized or
otherwise adversely affected;
(e) assuring, through the receipt of Borrower's
affidavits, repair contract copies, lien waivers and
the like, that the priority of the lien of the
Security Instrument is preserved, and that the
Insurance Proceeds are applied to the restoration or
repair of the related Mortgaged Property if not
applied in payment of such Mortgage Loan;
(f) obtain releases or waivers of liens and taking such
other actions as are necessary to avoid the filing of
laborers', materialmen's or mechanic's liens against
the related Mortgaged Property; and
(g) maintaining procedures and practices acceptable to
the Master Servicer and in conformity with Prudent
Servicing Practices for the control and disposition
of insurance loss drafts.
15.6.3 SETTLEMENT FUNDS. The Servicer shall be named as a payee on all
insurance loss drafts and upon receipt thereof, the funds shall be
credited to the Borrower's Insurance Proceeds balance and deposited
into (a) where such funds will be applied to the repair and restoration
of the related Mortgaged Property, one or more separate escrow
accounts, so that the balance on deposit in such accounts is fully
insured at all times by the FDIC through either the BIF or SAIF, or (b)
where such funds will not be applied to the repair and restoration of
the related Mortgaged Property, the respective Custodial P&I Account.
15.6.4 SETTLEMENT NOTICE. The Servicer shall report any such settlement
to the Master Servicer on a Hazard Insurance Loss Draft Notification,
together with a summary of the disposition of the proceeds.
15.6.5 CONTINUING COVERAGE. If a letter of assurance is obtained from
any insurer under a Hazard Insurance policy or a Flood Insurance policy
that the insurance coverage will continue in full force and effect, the
Servicer shall deposit such letter in the appropriate Servicer Mortgage
Loan File.
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15.6.6 PROPERTY INSPECTIONS. The Servicer shall conduct property
inspections in accordance with the milestones of the repair and
rehabilitation plan for such Mortgaged Property and prepare Property
Inspection Reports on any Mortgaged Property involving property damage
over $15,000. The Servicer shall furnish a copy of the repair and
rehabilitation plan for such Mortgaged Property to the Master Servicer
upon request.
ARTICLE 16
CONDOMINIUM AND PUD INSURANCE
Section 16.1 GENERAL PROVISIONS
16.1.1 APPLICABILITY. The provisions of this Article pertain solely to
Mortgage Loans secured by Condominium Units or PUD Units.
16.1.2 PREMIUMS. The premiums for insurance policies required pursuant
to this Article must be paid as a common expense by the Owners'
Association.
16.1.3 DEDUCTIBLE RESERVES. Funds for each of the deductibles
associated with the insurance policies required pursuant to this
Article must be included in the Owners' Association's reserves and must
be so designated.
16.1.4 NAME OF INSURED. The name of the insured stated under each
Insurance Policy required pursuant to the provisions of this Article
must be similar in form and substance to the following:
"Association of Owners of the [Name of Condominium Project or
PUD] for use and benefit of the individual Condominium or PUD
Unit owners" (designated by name, if required).
16.1.5 MORTGAGEE CLAUSE. Each insurance policy required pursuant to the
provisions of this Article must contain the standard mortgagee clause
endorsed to provide that any disbursements will be paid to the Owners'
Association for the use and benefit of Mortgagees as their interests
may appear, or otherwise endorsed to fully protect the interest of (a)
the Owner of the respective Mortgage Loan and (b) the holders of a
beneficial interest therein, if any.
16.1.6 RECONSTRUCTION COVERAGE. If, with respect to a PUD or
Condominium Project in which a Mortgaged Property is located, there is
a construction code provision that would require changes to undamaged
portions of the PUD or Condominium Project's building(s) even when only
part of a building is destroyed by an insured hazard, then the Servicer
must ensure that each insurance policy required by this Article
contains the necessary construction code endorsements to cover this
exposure.
Section 16.2 COMMON AREA MULTIPLE PERIL INSURANCE
16.2.1 COMMON AREA MULTIPLE PERIL INSURANCE REQUIREMENT. The Servicer
must ensure that the Owner's Association maintains, with respect to the
PUD or Condominium
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Project in which a Mortgaged Property is located, a policy of Common
Area Multiple Peril Insurance, with premiums being paid as a common
expense. The Common Area Multiple Peril Insurance policy must at least
protect against loss or damage by fire and all other hazards that are
normally covered by the standard extended coverage endorsement, and all
of the perils customarily covered for similar types of projects,
including those covered by the standard "all risk" endorsement.
16.2.2 COMMON AREA MULTIPLE PERIL INSURANCE COVERAGE. As to each
Condominium Project or PUD in which a Mortgaged Property is located, a
Common Area Multiple Peril Insurance policy must cover 100% of the
current replacement cost of all of the common areas (other than the
land and foundation), common elements including fixtures and building
service equipment, as well as common personal property and supplies.
16.2.3 COMMON AREA MULTIPLE PERIL INSURANCE DEDUCTIBLE. Except as a
greater amount may be required by applicable law, each Common Area
Multiple Peril Insurance deductible may not exceed the lesser of (a)
$10,000 or (b) one percent of the applicable amount of coverage.
16.2.4 BOILER AND MACHINERY COVERAGE. If a steam boiler is operating
within the Condominium Project or PUD in which a Mortgaged Property is
located, then the Servicer must ensure that boiler and machinery
coverage is in force at all times. This coverage must be evidenced by
the standard form of boiler and machinery endorsement. The minimum
liability coverage per accident under boiler and machinery coverage
must equal the insurable value of the boiler and equipment and the
building housing such boiler or machinery, based upon current
replacement cost, or S2 million, whichever is less.
Section 16.3 BLANKET HAZARD INSURANCE
16.3.1 BLANKET HAZARD INSURANCE REQUIREMENT. Unless alternative
coverage is provided pursuant to Section 16.3 hereunder, the Servicer
must verify that each such Mortgaged Property is covered at all times
by Hazard Insurance policy which provides blanket coverage for the
individual units in the Condominium Project or PUD.
16.3.2 BLANKET HAZARD INSURANCE COVERAGE. As to each Condominium
Project or PUD which contains a Mortgaged Property for which its Hazard
Insurance coverage is provided through a blanket policy, the amount of
Hazard Insurance for a blanket policy, a Condominium Project or PUD
must be at least equal to the lesser of (a) the aggregate of the
outstanding principal balances of all mortgage notes secured by units
within the Condominium Project or PUD (including the Mortgage Notes
secured by Mortgaged Properties), or (b) 100% of the replacement cost
of the improvements on the Condominium Project or PUD Unit site.
16.3.3 BLANKET HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by an applicable law, each Hazard Insurance deductible
for a blanket policy covering a Condominium Project or PUD may not
exceed the lesser of (a) $10,000 or (b) one percent of the applicable
amount of coverage.
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Section 16.4 COMMON AREA COMPREHENSIVE GENERAL LIABILITY (CGL) INSURANCE
16.4.1 COMMON AREA CGL INSURANCE REQUIREMENT. The Servicer must ensure
that the Owners' Association maintains a Comprehensive General
Liability Insurance policy covering all of the common areas, common
elements, commercial spaces and public ways in the Condominium Project
or PUD in which a Mortgaged Property is located.
16.4.2 COMMON AREA CGL INSURANCE COVERAGE. As to each Condominium
Project or PUD in which a Mortgaged Property is located, a CGL
Insurance policy should provide coverage of at least $1,000,000 for
personal injury, bodily injury or property damage for any single
occurrence. Each CGL Insurance policy must contain a severability of
interest endorsement preventing the insurer from denying the claim of a
Condominium or PUD Unit owner because of negligent acts of the Owners'
Association or other unit owners. Each CGL Insurance policy must
include all other types of coverage and endorsements in the types and
amounts required by private institutional mortgage loan investors for
developments similar in construction, location and use.
Section 16.5 OWNERS' ASSOCIATION FIDELITY INSURANCE
16.5.1 OWNERS' ASSOCIATION FIDELITY INSURANCE REQUIREMENT. The Servicer
must ensure that the Owners' Association maintains a fidelity bond or
insurance against dishonest and fraudulent acts on the part of
directors, managers, trustees, employees or volunteers responsible for
handling funds belonging to or administered by the association.
16.5.2 OWNERS' ASSOCIATION FIDELITY INSURANCE COVERAGE. The Owners'
Association fidelity bond or insurance must name the Owners'
Association as the insured and must be written in an amount sufficient
to provide protection at least 150% of the insured's estimated annual
operating expenses and reserves. An appropriate endorsement to the
policy to cover any persons who serve without remuneration must be
added if the policy would not otherwise cover volunteers. Owners'
Association fidelity insurance coverage must be in an amount equal to
at least 3 months assessments on all units in the Condominium Project
or PUD. Owners' Association fidelity insurance coverage is not required
if the Condominium Project or the PUD have fewer than 20 units.
Section 16.6 BLANKET FLOOD INSURANCE
16.6.1 BLANKET FLOOD INSURANCE REQUIREMENT. Where a Mortgaged Property
is a Condominium Unit or PUD Unit and is not individually covered by a
Flood Insurance policy in accordance with the provisions of Section
15.4 hereof, the Servicer must verify that a Flood Insurance policy
which provides blanket coverage for the individual units in the
Condominium Project or PUD, is maintained at all times on Mortgaged
Property that are in a special flood hazard area identified by the
Secretary of HUD or the Director of the Federal Emergency Management
Agency.
16.6.2 BLANKET FLOOD INSURANCE COVERAGE. As to each Condominium Project
or PUD which contains a Mortgaged Property for which its Flood Hazard
Insurance coverage is provided through a blanket policy, the amount of
Flood Insurance must be at least equal to the lesser of (a) the maximum
amount available under the National Flood Insurance Program's regular
program or the its emergency program, (b) the aggregate of the
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outstanding principal balances of all mortgage notes secured by units
within the Condominium Project or PUD (including the Mortgage Notes
secured by Mortgaged Properties), or (c) 100% of the replacement cost
of the improvements on the Condominium Project or PUD Unit site.
16.6.3 BLANKET FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by applicable law, each Flood Insurance deductible for
a blanket policy covering a Condominium Project or PUD may not exceed
the lesser of (a) $5,000 or (b) one percent of the applicable amount of
coverage.
ARTICLE 17
ADVANCES
Section 17.1 PRINCIPAL AND INTEREST ADVANCES
17.1.1 P&I ADVANCE REQUIREMENT. The Servicer shall advance P&I Advances
and deposit to the respective Custodial P&I Account on or before each
Remittance Date an amount equal to the aggregate of the difference, if
any, with respect to each Mortgage Loan, between (a) the Monthly
Payment that each Borrower was required to pay to the Servicer on the
immediately preceding Due Date (excluding the amount of the related
Servicing Fee) and (b) the amount actually received with respect to the
related Monthly Payment by the Servicer (excluding the amount of the
related Servicing Fee).
17.1.2 P&I ADVANCE LIMITATION. The Servicer is required to make P&I
Advances with respect to a Mortgage Loan unless a P&I Advance is
reasonably determined by the Servicer to be eventually non-recoverable
from any Insurance Proceeds, Liquidation Proceeds, or the Borrower.
17.1.3 P&I ADVANCE RECOVERY. The Servicer's P&I Advance will be
recoverable from subsequent Borrower Monthly Payments, Insurance
Proceeds, Liquidation Proceeds or, if the Representing Party is
obligated to purchase a Mortgage Loan from its Owner, from the price
paid for such Mortgage Loan.
17.1.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Owner of a related
Mortgage Loan through foreclosure or a deed-inlieu of foreclosure is
held by such Owner or its successors, the Servicer must continue to
make monthly P&I Advances in respect of each such Mortgage Loan or REO
to the respective Custodial P&I Account. Subject to the provisions of
Section 17.1.2 hereof, these P&I Advances must be made until the (i)
Liquidation of each Mortgage Loan subject to such proceedings or (ii)
in the case of REO transferred to the Owner of Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure, the Liquidation of such
REO. Advances with respect to REO will be made as if the related
Mortgage Loan and Mortgage Note remained in effect.
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Section 17.2 FORECLOSURE ADVANCES
17.2.1 FORECLOSURE ADVANCE REQUIREMENT. During foreclosure proceedings,
the Servicer must advance from its own funds all foreclosure expenses
as they occur in accordance with the terms of this Agreement. Such
advances must be made by the Servicer up to the time of final
disposition of the related Mortgaged Property.
17.2.2 FORECLOSURE ADVANCE LIMITATION. The Servicer is required to make
advances pursuant to Section 17.2.1 with respect to a Mortgage Loan
unless the Servicer reasonably determines (i) that such foreclosure
will not increase the proceeds to the Owner thereof or the beneficial
owners thereof of liquidation of such Mortgage Loan after reimbursement
of the Servicer for its expenses or (ii) that such expenses will be
eventually non-recoverable from any Insurance Proceeds, Liquidation
Proceeds or the Borrower.
17.2.3 FORECLOSURE ADVANCE RECOVERY. If foreclosure proceedings are
terminated, the Servicer must collect all legal fees and costs from the
Borrower. Otherwise, the Servicer's advances for reasonable foreclosure
expenses will be recoverable from Insurance Proceeds, Liquidation
Proceeds or, if the Representing Party is obligated to purchase a
Mortgage Loan from its Owner, from the price paid for such Mortgage
Loan.
17.2.4 FORECLOSURE ADVANCE RECORDS. All foreclosure advances by the
Servicer and reimbursements to the Servicer must be clearly
identifiable in the respective Custodial T&I Account.
Section 17.3 TAX & INSURANCE ADVANCES
17.3.1 T&I ADVANCE REQUIREMENT. It a Borrower's Escrow Funds are
insufficient to pay taxes or insurance premiums, the Servicer must
advance from its own funds to the respective Custodial T&I Account an
amount sufficient to cover the shortage and so as to assure the
maintenance of a first lien position of the related Security Instrument
on the related Mortgaged Property.
17.3.2 T&I ADVANCE RECOVERY. T&I Advances may be recovered from the
Borrower's subsequent monthly escrow payments, Insurance Proceeds,
Liquidation Proceeds or the Borrower, but must never be recovered from
scheduled principal or interest collections. The Servicer may not
recover T&I Advances from another Borrower's Escrow Funds.
17.3.3 T&I ADVANCE LIMITATION. The Servicer is required to make a T&I
Advance with respect to a Mortgage Loan unless such T&I Advance is
reasonably determined by the Servicer to be eventually non-recoverable
from any Insurance Proceeds, Liquidation Proceeds, or the Borrower.
17.3.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Owner of a related
Mortgage Loan through foreclosure or a deed-inlieu of foreclosure is
held by such Owner, the Servicer must continue to make required T&I
Advances in respect of each such Mortgage Loan or REO to the respective
Custodial T&I Account. These T&I Advances must be made until each
Mortgage Loan
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subject to such proceedings is liquidated or in the case of REO
transferred to the Owner of the related Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure is liquidated. Advances
with respect to REO will be made as if the related Mortgage Loan and
Mortgage Note remained in effect.
Section 17.4 NON-RECOVERABLE ADVANCES
17.4.1 ORDINARY RECOVERY. If at any time an advance made by a Servicer
hereunder is determined by the Servicer to be a Non-Recoverable
Advance, then the Servicer shall be entitled to be reimbursed for such
advance by withdrawing from the Custodial P&I Account an amount equal
to the Non-Recoverable Advance.
17.4.2 FINAL RECOVERY. If the amounts on deposit in the related
Custodial P&I Account are insufficient to reimburse the Servicer, then
prior to any distribution to the Owner of the related Mortgage Loan,
the Servicer shall be entitled to reimbursement from the payments made
and the proceeds received with respect to such Mortgage Loan.
17.4.3 NON-RECOVERABLE ADVANCE DETERMINATION. To determine whether an
Advance is a Non-Recoverable Advance, the Servicer shall employ a
broker's price opinion, which is no more than twelve months old when so
employed, of the fair market value of the Mortgaged Property related to
the Mortgage Loan which is subject to such Advance, and calculate the
difference between (a) the fair market value of such Mortgaged Property
and (b) the sum of (i) a reasonable estimate of foreclosure costs which
may be incurred in the foreclosure of such Mortgaged Property, and (ii)
the amount of unreimbursed Advances made by the Servicer with respect
to the related Mortgage Loan pursuant to the terms of this Agreement,
is greater than zero. If such a difference is greater than zero, then
such difference represents the maximum amount of additional Advances
which the Servicer shall make before determining that any additional
Advances in excess of such amount are Non-Recoverable Advances. If such
difference is negative, then the magnitude of such difference is the
amount of previously made unreimbursed Advances which the Servicer may
now regard as Non-Recoverable Advances. The Servicer shall provide the
Master Servicer with an Officer's certificate upon the determination
that any Advance is a Non-Recoverable Advance.
Section 17.5 FAILURE TO ADVANCE
17.5.1 GROUNDS FOR TERMINATION. The failure of the Servicer to advance
any funds required to be advanced by the Servicer under this Article 17
is cause for termination of Servicer under this Agreement.
17.5.2 SERVICER REIMBURSEMENT. To the extent the Master Servicer or the
respective trustee, if any, must advance their respective funds due to
the failure of the Servicer to advance as provided for in this
Agreement or to remit funds to the Master Servicer Custodial Account as
required by Section 18.3.1, the Servicer shall reimburse the advancing
party for such amounts, on demand, together with all costs and expenses
incurred by the advancing party, including, but not limited to,
interest on the funds advanced. Such interest will be calculated at the
lesser of the "prime rate" publicly announced in effect from time to
time at the Reference Bank plus one percentage point and the maximum
interest rate permitted by law.
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Section 17.6 REHABILITATION ADVANCE
17.6.1 REHABILITATION ADVANCE REQUIREMENT. The Servicer must advance
from its own funds such amounts as are necessary to restore any damaged
REO not covered by Hazard Insurance or Special Hazard Insurance in
accordance with Section 14.5.
17.6.2 REHABILITATION ADVANCE LIMITATION. The Servicer is required to
make advances pursuant to Sections 17.6.1 and 14.5 with respect to a
Mortgage Loan unless the Servicer reasonably determines (i) that such
rehabilitation will not increase the proceeds to the Owner thereof or
the beneficial owners thereof on liquidation of such Mortgage Loan
after reimbursement of the Servicer for its expenses or (ii) that such
expenses will be eventually non-recoverable from any Insurance
Proceeds, Liquidation Proceeds or the Borrower.
17.6.3 REHABILITATION ADVANCE RECOVERY. The Servicer's advances for
reasonable rehabilitation expenses will be recoverable from Insurance
Proceeds, Liquidation Proceeds, or, if the Representing Party is
obligated to purchase a Mortgage Loan from its Owner, from the price
paid for such Mortgage Loan.
ARTICLE 18
REPORTING REQUIREMENTS
Section 18.1 MONTHLY ACCOUNTING REPORTS
18.1.1 MONTHLY ACCOUNTING REPORT REQUIREMENT. With respect to any
Remittance Date, the period for monthly accounting reports shall be
from the first Business Day of the prior month through the last
Business Day of the prior month, provided that in addition such report
shall include only (a) the scheduled Monthly Payments anticipated to be
received by the Servicer in the month of such Remittance Date which
relate to the Due Date in such month, and (b) any anticipated P&I
Advances made in respect of such Monthly Payments. All monthly reports
prepared by the Servicer must be complete and must be received by the
Master Servicer by the tenth calendar day of the following month. All
monthly accounting reports must show information in, and must be
submitted in, a sequence according to Servicer Loan Number order.
18.1.2 MONTHLY ACCOUNTING REPORT ELEMENTS. The Servicer shall forward
to the Master Servicer a Monthly Accounting Report setting forth
substantially the information required by FNMA Form 2010.
The Servicer must also complete and forward to the Master Servicer any
other form or report as provided for in this Agreement, or as
reasonably requested by the Master Servicer.
18.1.3 AUTOMATED REPORTS. The Servicer may submit to the Master
Servicer for review the Servicer's automated reports which include all
of the information required by the provisions of Section 18.1.2 hereof.
Upon approval by the Master Servicer, the Servicer
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may submit approved automated reports to the Master Servicer instead of
the Forms listed in Section 18.1.2 hereof.
18.1.4 ELECTRONIC REPORTING. With the prior written consent of the
Master Servicer, all reports to be made by the Servicer to the Master
Servicer may be transmitted electronically in lieu of written
reporting. If the Servicer services more than one hundred Mortgage
Loans for the Master Servicer, it shall arrange for electronic
transmission of the required reports. Any expenses occasioned by the
electronic transmission of reports shall be borne by the Servicer.
18.1.5 MACHINE READABLE RECORDS. At the request of the Master Servicer,
the Servicer will provide to the Master Servicer, in a mutually agreed
machine readable format, the current names and mailing addresses of
each Borrower. The Master Servicer will utilize such information solely
for audit purposes, or in the event the Servicer is terminated
hereunder.
Section 18.2 ACCOUNT RECONCILIATIONS
18.2.1 RECONCILIATION PREPARATION. The Servicer shall prepare
reconciliations for each Custodial P&I Account, Custodial T&I Account
and Custodial Buydown Account on a monthly basis and shall forward the
same to the Master Servicer upon request.
18.2.2 ACCOUNT RECORDS. Upon request of the Master Servicer, the
Servicer shall also cause the depository for each of the accounts
described in Section 18.2.1 hereof to forward directly to the Master
Servicer, copies of all monthly account statements for the preceding
monthly reporting period.
Section 18.3 MONTHLY REMITTANCE REQUIREMENTS
18.3.1 REMITTANCE OF FUNDS. On each Remittance Date with respect to
each distinct Owner of Mortgage Loans, the Servicer shall transfer, to
the extent not previously transferred as required pursuant to Section
6.1.3(e), from the funds in (or required hereunder to be in) the
respective Custodial P&I Account as of the close of the Business Day
immediately preceding the Determination Date in the month of such
Remittance Date to the related Master Servicer Custodial Account, the
following (other than any Amounts Held for Future Distribution in
respect of such Remittance Date not exceeding the Threshold Amount and
any amounts permitted to be retained by the Servicer or withdrawn from
such account by the Servicer pursuant to the terms of this Agreement):
(i) all payments on account of principal, including
prepayments of principal (whether full or partial),
and interest and all net REO Disposition proceeds;
(ii) all net Liquidation Proceeds, all net Partial
Liquidation Proceeds and Insurance Proceeds, other
than any portion of Insurance Proceeds to be applied
to the restoration or repair of the related Mortgaged
Property or released to the Borrower in accordance
with the requirements of law or Prudent Servicing
Practices;
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(iii) all P&I Advances made by the Servicer;
(iv) the Purchase Price, or portion thereof, paid for any
Mortgage Loans or property acquired in respect
thereof repurchased or substituted by the Servicer or
a representing party; and
(v) all other amounts required to be deposited in the
Custodial P&I Account or the Master Servicer
Custodial Account pursuant to this Agreement.
Notwithstanding Section 18.3.1, the Servicer shall be entitled to
withhold and to pay to itself the applicable Servicing Fee (as adjusted
pursuant to Section 7.6.1) from any payment on account of interest or
other recovery (including Net REO Proceeds) as received and prior to
deposit of such payments in the Master Servicer Custodial Account;
PROVIDED FURTHER that with respect to any payment of interest received
by the Servicer in respect of a Mortgage Loan (whether paid by the
Mortgagor or received as Liquidation Proceeds, Insurance Proceeds or
otherwise) which is less than the full amount of interest then due with
respect to such Mortgage Loan, only that portion of such payment that
bears the same relationship to the total amount of such payment of
interest as the per annum rate used to calculate the Servicing Fee, as
set forth in Section 4.8, bears to the Mortgage Interest Rate borne by
such Mortgage Loan shall be allocated to the Servicing Fee with respect
to such Mortgage Loan.
18.3.2 SERVICER COMPENSATION. The Servicer shall withdraw its Servicing
Fee for each Mortgage Loan net of any Month End Interest payable
pursuant to Section 7.6.1 from the related Custodial P&I Account prior
to the remittance of such amounts to the Master Servicer Custodial
Account with all other payments received with respect to the Mortgage
Loans.
ARTICLE 19
TRANSFERS AND TERMINATION OF SERVICING
Section 19.1 TRANSFER OF SERVICING
19.1.1 TRANSFER PROHIBITION. The Servicer may not sell or transfer its
portfolio serviced hereunder without the prior written consent of the
Master Servicer, which consent cannot be unreasonably withheld.
Further, the Servicer may not subcontract any of its servicing duties,
except as set forth in Section 11.2.1.
19.1.2 TRANSFER REQUEST. Any request for sale or transfer of servicing
will be reviewed on an individual basis. For a request to be
considered, however, the transferor must submit a written request to
the Master Servicer. The transferee must agree to enter into a
servicing agreement with the Master Servicer substantially in the form
of this Agreement and must be approved by the Master Servicer, and, if
applicable, any rating agency with respect Mortgage Loans which are
owned by a trust which has issued mortgage-backed securities,
securitized by such Mortgage Loans, which have been rated at the
request of such trust by such rating agency. The Master Servicer must
receive this documentation at least 45 days prior to the requested date
of transfer. The transferor will
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be notified in writing of the Master Servicer's approval or denial.
Such transfer will be denied if the transferee does not meet the
approval requirements of the Master Servicer, or any such rating
agency.
19.1.3 SERVICER LIABILITY. The transferor of servicing shall be liable
to the Master Servicer, and the Owner of the related Mortgage Loans for
any servicing obligation violations that occur before, during, and up
to and including the day the portfolio is actually transferred. The
transferee of servicing shall be liable for any breach of servicing
obligations that occurs after the transfer of the servicing portfolio.
19.1.4 MASTER SERVICER'S DETERMINATION. If the transferor and
transferee disagree about liability for violations of representations
and warranties and servicing requirements hereunder, the Master
Servicer has the right, in its reasonable discretion, to determine
which party or parties are liable for such violations.
Section 19.2 TERMINATION OF SERVICING
19.2.1 GROUNDS FOR TERMINATION. The Owners of the related Mortgage
Loans, will have the right to terminate for cause the servicing
privileges of the Servicer under this Agreement, either with respect to
certain Mortgage Loans serviced hereunder or with respect to all
Mortgage Loans serviced hereunder in the event that (i) any of the
following occur, (ii) the related Owner or the Master Servicer on its
behalf has given the Servicer prior written notice of the occurrence of
such event, and (iii) with respect to clauses (a), (b) or (f) hereof,
the Servicer has failed to cure such event within a reasonable time,
which shall in all cases be no less than ninety (90) days:
(a) the Servicer has breached any material obligation set
forth or incorporated by reference in this Agreement
or any Sales Agreement, including, without
limitation, the Servicer's failure to
under this Agreement, as well as any other documents
or reports held by the Servicer concerning such
Mortgage Loans, to the transferee designated by the
Master Servicer, which may be the Master Servicer,
and will assist in the efficient and timely transfer
of the servicing to such transferee. The Servicer
shall not be entitled to compensation for servicing
following its termination.
19.2.5 EFFECT OF TERMINATION. In the event of the termination of this
Agreement, the Servicer is not released from its obligations under this
Agreement. If its servicing is terminated for cause, the Servicer must
pay the expenses of the Master Servicer incurred in connection with
transfer of the servicing and any actual and direct damages, including,
without limitation, actual and direct damages or losses, of the Owner
of the related Mortgage Loans, or the Master Servicer resulting from
such termination.
19.2.6 CUSTODIAL ACCOUNT THRESHOLD REDUCTION. In the event that any of
the events specified in clauses (a) through (h) of Section 19.2.1 or in
clauses (g), (h), or (i) of Section 4.2.5 occur, the Master Servicer,
in its reasonable discretion, may notify the Servicer in writing that
the applicable Threshold Amount has been reduced to such amount not
less than $1,000 as shall be specified in such notice.
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ARTICLE 20
MISCELLANEOUS PROVISIONS
Section 20.1 AMENDMENTS
20.1.1 UNILATERAL AUTHORITY. The Servicer acknowledges that the Master
Servicer, acting on behalf of the Principal and its successors and
assigns, may, upon written notice, supplement or amend the provisions
of this Agreement from time to time, without the need to obtain the
Servicer's consent to (a) correct ambiguous or erroneous provisions in
this Agreement; (b) make changes necessary or helpful to maintain
compliance with applicable law; (c) conform to evolving industry
standards regarding the servicing of residential mortgage loans
generally; or (d) make such other modifications or amendments thereto,
which the Master Servicer deems advisable, provided that no such
modification or amendment shall have a material adverse impact so as to
materially increase the obligations of, or to materially decrease the
benefits to, the Servicer.
20.1.2 CONSENSUAL AMENDMENT. Except as provided for in Section 20.1.1
hereof, the Master Servicer, acting on behalf of the Principal and its
successors and assigns, must obtain the written consent of the Servicer
to any amendment hereto that would either increase materially the
obligations of the Servicer or decrease materially the benefits to the
Servicer.
20.1.3 OWNER NOTIFICATION. The Owners of the related Mortgage Loans
shall be provided with notice of the substance of any amendments or
modifications made to this Servicing Agreement pursuant to the
provisions of this Section 20.1.
20.1.4 OWNER DISAPPROVAL. With regard to any proposed modification or
amendment to this Agreement which shall have a material adverse impact
upon the beneficial rights enjoyed hereunder by an Owner of the related
Mortgage Loans, each such Owner shall receive written notice of the
substance of any proposed amendments or modifications at least ten
business days prior to the proposed date of enactment of such amendment
or modification which shall also state therein the proposed date of
enactment. If a majority vote of the Owners so materially adversely
affected, with the vote of each such Owner weighted in proportion to
the aggregate of the Unpaid Principal Balance of Mortgage Loans
serviced hereunder for such Owner, notify the Master Servicer in
writing, prior to the proposed date of enactment, of their opposition
to the adoption of such an amendment or modifications, the Master
Servicer shall not proceed with such modification or amendment.
Section 20.2 GENERAL CONSTRUCTION
20.2.1 BINDING NATURE. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and permitted assigns.
20.2.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous
servicing agreements, understandings,
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inducements and conditions, expressed or implied, oral or written, of
any nature whatsoever with respect to the subject matter thereof. The
express terms hereof control and supersede any course of performance
and/or usage of the trade inconsistent with any of the terms hereof.
20.2.3 GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed
by, construed, interpreted and enforced in accordance with the laws of
the State of New York, notwithstanding any New York or other
choice-of-law rules to the contrary.
20.2.4 INDULGENCES NOT 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.
20.2.5 TITLES NOT TO AFFECT INTERPRETATION. The titles of the articles
and sections contained in this Agreement are for convenience only, and
they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.
20.2.6 PROVISIONS SEVERABLE. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.
20.2.7 SERVICER AN INDEPENDENT CONTRACTOR. All services, duties and
responsibilities of the Servicer under this Agreement shall be
performed and carried out by the Servicer as an independent contractor,
and none of the provisions of this Agreement shall be deemed to make,
authorize or appoint the Servicer as agent or representative of any
Owner of any Mortgage Loans, of the Principal, or of the Master
Servicer.
20.2.8 THIRD PARTY BENEFICIARY. The parties agree that the Master
Servicer and any Owner are intended third party beneficiaries of the
representations, warranties, covenants and agreements of the Servicer
set forth in this Agreement. The Master Servicer shall have full
authorization to enforce directly against the Servicer any of the
obligations of the Servicer provided for herein.
20.2.9 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date set forth above.
THE PRUDENTIAL HOME
MORTGAGE COMPANY, INC.
as Servicer
By:
Name: Elaine Stangl
Title: Vice President
SECURITIZED ASSET SERVICES
CORPORATION
as Principal
By:
Name: Brian W. Bartlett
Title: Vice President
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<TABLE>
<CAPTION>
SCHEDULE I
Mortgage Loan Schedule
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C>
</TABLE>
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<TABLE>
<CAPTION>
SCHEDULE II
List Of Owners Of The Mortgage Loans
CUT-OFF
DATE
RELATING
MASTER SERVICER OWNER'S TO OWNER'S
LOAN NUMBER OWNER ADDRESS ACQUISITION
<S> <C> <C> <C>
</TABLE>
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EXHIBIT A
NOTIFICATION OF SALE OF MORTGAGE LOANS
RE: PHMC MORTGAGE LOAN POOL 199_ - W_
For the purpose of the registration of the transfer of ownership of the
mortgage loans set forth below (the "Mortgage Loans") pursuant to Section 2.4.2
of the Servicing Agreement, dated June 2, 1995, between Securitized Asset
Services Corporation and The Prudential Home Mortgage Company, Inc. (the
"Servicing Agreement"), the Current Owner, ________________
___________________________________, hereby notifies the Master Servicer of its
sale of the Mortgage Loans to the indicated New Owner. The right to register a
transfer of ownership of the Mortgage Loans under Section 2.4.1 of the Servicing
Agreement is subject at any time to certain numerical limits regarding the
number of simultaneous Owners of Mortgage Loans for a given mortgage loan pool.
Please contact, Bond Administration, Securitized Asset Service Corporation at
(301) 846-8130 or by facsimile at (301) 846-8152 regarding the status of such
numerical limits with respect to any particular mortgage loan pool. If the
transfer of ownership of the Mortgage Loans is registered, the Master Servicer
will effect payments to the New Owner following the related Cut-Off Date. The
New Owner agrees to provide the same notification to the Master Servicer for
subsequent sales of the Mortgage Loans.
Attached hereto are incumbency certificates of the Current Owner and
the New Owner which indicate the signatory authority of the parties executing
this notification.
This notification, dated this _______ day of __________________, _____,
has been agreed to by the following parties.
- ----------------------------- -----------------------------
Current Owner New Owner
By: ________________________ By: ________________________
Name: Name:
Title: Title:
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<TABLE>
<CAPTION>
CUT-OFF
DATE
RELATING
TO NEW
MASTER SERVICER NEW NEW OWNER'S OWNER'S
LOAN NUMBER OWNER ADDRESS ACQUISITION
<S> <C> <C> <C>
</TABLE>
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EXHIBIT I-2
SERVICING AGREEMENT RELATING TO MORTGAGE LOAN SUB-POOL 1995-W24A
<PAGE>
SECURITIZED ASSET SERVICES CORPORATION
(Principal)
and
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Servicer)
SERVICING AGREEMENT
Dated as of December 1, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
Article 1
Definitions
<S> <C>
ACH........................................................................................... 1
Adjusted Tangible Net Worth................................................................... 1
Advance....................................................................................... 1
Affiliate..................................................................................... 1
Amounts Held for Future Distribution.......................................................... 1
Appraisal Report.............................................................................. 2
ARM Loan...................................................................................... 2
Assignment.................................................................................... 2
Assumption.................................................................................... 2
Balloon Amount................................................................................ 2
Balloon Loan.................................................................................. 2
Bankruptcy Code............................................................................... 2
BIF........................................................................................... 2
Borrower...................................................................................... 2
Business Day.................................................................................. 2
Buydown Agreement............................................................................. 3
Buydown Funds................................................................................. 3
Certificate................................................................................... 3
Code.......................................................................................... 3
Condominium Project........................................................................... 3
Condominium Unit.............................................................................. 3
Converted Mortgage Loan....................................................................... 3
Current Value................................................................................. 3
Curtailment................................................................................... 3
Custodial Buydown Account..................................................................... 3
Custodial Principal and Interest (P&I) Account................................................ 3
Custodial Taxes and Insurance (T&I) Account................................................... 3
Custodian..................................................................................... 4
Cut-Off Date.................................................................................. 4
Debt Service Reduction........................................................................ 4
Deficient Valuation........................................................................... 4
Delinquency/Delinquent........................................................................ 4
Determination Date............................................................................ 4
Directly Operate.............................................................................. 4
Due Date...................................................................................... 4
Due-On-Sale Clause............................................................................ 5
Duff & Phelps................................................................................. 5
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Eligible Account.............................................................................. 5
Eligible Custodial P&I Account................................................................ 5
Eligible Investments.......................................................................... 5
Errors and Omissions Policy................................................................... 7
Escrow Funds.................................................................................. 7
Escrow Item................................................................................... 7
FDIC.......................................................................................... 7
FHA........................................................................................... 7
FHLMC......................................................................................... 7
Fidelity Bond................................................................................. 7
Fitch......................................................................................... 7
Flood Insurance............................................................................... 7
FNMA.......................................................................................... 7
GNMA.......................................................................................... 7
GPM (or GPARM) Loan........................................................................... 7
Gross Margin.................................................................................. 8
Hazard Insurance.............................................................................. 8
HUD........................................................................................... 8
Index......................................................................................... 8
Insurance Policy.............................................................................. 8
Insurance Proceeds............................................................................ 8
Interest Adjustment Date...................................................................... 8
Liquidation................................................................................... 8
Liquidation Proceeds.......................................................................... 8
Loan Originator............................................................................... 8
Loan-to-Value (LTV)........................................................................... 9
Master Servicer............................................................................... 9
Master Servicer Custodial Account............................................................. 9
Master Servicer Loan Number................................................................... 9
Maximum Lifetime Mortgage Interest Rate....................................................... 9
Maximum Negative Amortization Amount.......................................................... 9
Minimum Lifetime Mortgage Interest Rate....................................................... 9
Month End Interest............................................................................ 9
Month End Interest Shortfall.................................................................. 9
Monthly Accounting Reports.................................................................... 9
Monthly Payment............................................................................... 10
Monthly Remittance............................................................................ 10
Monthly Servicing Compensation................................................................ 10
Moody's....................................................................................... 10
Mortgage Interest Rate........................................................................ 10
Mortgage Loan................................................................................. 10
Mortgage Loan Documents....................................................................... 10
Mortgage Note................................................................................. 10
Mortgage Note Assumption Rider................................................................ 10
</TABLE>
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<TABLE>
<S> <C>
Mortgaged Property............................................................................ 10
Mortgagee..................................................................................... 11
Net Mortgage Interest Rate.................................................................... 11
Non-Recoverable Advance....................................................................... 11
Notice of Periodic Adjustment................................................................. 11
Officer....................................................................................... 11
Opinion of Counsel............................................................................ 11
Owner or Owner of the Mortgage Loans.......................................................... 11
Owner Mortgage Loan File...................................................................... 11
Owner-Occupied Property....................................................................... 11
P&I Advance................................................................................... 11
Partial Liquidation Proceeds.................................................................. 11
Partial Liquidation Receipt Period............................................................ 12
Payment Adjustment Date....................................................................... 12
Periodic Payment Cap.......................................................................... 12
Periodic Rate Cap............................................................................. 12
Person........................................................................................ 12
Pool Insurance................................................................................ 12
Pool Insurer.................................................................................. 12
Pool [X] Mortgage Loan........................................................................ 12
Preliminary Title Report...................................................................... 12
Prepayment In Full............................................................................ 12
Primary Mortgage Insurance.................................................................... 12
Primary Mortgage Insurer...................................................................... 13
Primary Residence............................................................................. 13
Principal..................................................................................... 13
Property Inspection Report.................................................................... 13
Prudent Servicing Practices................................................................... 13
PUD (Planned Unit Development)................................................................ 13
PUD Unit...................................................................................... 13
Purchase Agreement............................................................................ 13
Purchase Price................................................................................ 13
Real Estate Owned (REO)....................................................................... 13
Realized Loss................................................................................. 14
Reference Bank................................................................................ 14
REMIC......................................................................................... 14
REMIC Provisions.............................................................................. 14
Remittance Date............................................................................... 14
Rents from Real Property...................................................................... 14
REO Disposition............................................................................... 14
Representing Party............................................................................ 14
S&P........................................................................................... 14
SAIF.......................................................................................... 14
Scheduled Principal Balance................................................................... 15
</TABLE>
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<TABLE>
<S> <C>
Security Instrument........................................................................... 15
Servicer...................................................................................... 15
Servicer Loan Mortgage Number................................................................. 15
Servicer Mortgage Loan File................................................................... 15
Servicer Number............................................................................... 15
Servicing Fee................................................................................. 15
Servicing Fee Percentage...................................................................... 15
Single Family Property........................................................................ 15
Subpool [X] Mortgage Loan..................................................................... 15
Supervision Agreement......................................................................... 15
Tangible Net Worth............................................................................ 15
T&I Advance................................................................................... 16
Threshold Amount.............................................................................. 16
Title Insurance............................................................................... 16
Transfer of Ownership......................................................................... 16
Unpaid Principal Balance...................................................................... 16
Unpooled Mortgage Loan........................................................................ 16
VA............................................................................................ 16
Value......................................................................................... 16
Article 2
Construction
Section 2.1 Legal Construction.................................................. 17
2.1.1 Compliance with Applicable Law...................................... 17
2.1.2 Potential Conflict.................................................. 17
2.1.3 Consistent Legal Compliance......................................... 17
2.1.4 General Interpretive Rules.......................................... 17
2.1.5 Construction of Provisions.......................................... 17
Section 2.2 Servicer Practices.................................................. 17
2.2.1 Prudent Servicing Practices......................................... 17
2.2.2 Non-Discrimination Practices........................................ 18
Section 2.3 General Provisions.................................................. 18
2.3.1 Servicer's Agreement................................................ 18
2.3.2 Term of Agreement................................................... 18
2.3.3 Amended Mortgage Loan Schedule...................................... 18
2.3.4 Assignment and Replacement.......................................... 18
2.3.5 Notices............................................................. 19
2.3.6 Change of Accountants............................................... 19
Section 2.4 Servicing of Mortgage Loans for Multiple Owners..................... 19
2.4.1 Transfer of Mortgage Loans.......................................... 19
2.4.2 Ownership Schedule.................................................. 20
</TABLE>
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<TABLE>
<S> <C>
Article 3
REMIC Provisions
Section 3.1 General............................................................. 20
3.1.1 Applicability....................................................... 20
3.1.2 Modifications of Mortgage Loans..................................... 20
3.1.3 Indemnification with Respect to Certain Taxes and Loss of REMIC
Status........................................................................................ 21
Section 3.2 REO Qualification................................................... 21
3.2.1 Foreclosure Property Qualification.................................. 21
3.2.2 Foreclosure Property Qualification Restrictions..................... 21
3.2.3 REO Disposition Accounting.......................................... 22
Section 3.3 Prohibited Transactions and Activities.............................. 22
3.3.1 Mortgage Loan Disposition Restriction............................... 22
3.3.2 Personal Property Restriction....................................... 23
Section 3.4 Eligible Investments................................................ 23
3.4.1 Custodial Account Investments....................................... 23
3.4.2 Escrow Account Investments.......................................... 23
Article 4
Servicer Considerations
Section 4.1 [RESERVED].......................................................... 24
Section 4.2 Servicer Eligibility Standards...................................... 24
4.2.1 Regulatory Approvals and Licensing.................................. 24
4.2.2 Net Worth and Portfolio Requirements................................ 24
4.2.3 Auditor's Opinion and Other Annual Reports.......................... 24
4.2.4 Service Experience.................................................. 25
4.2.5 Material Changes.................................................... 25
Section 4.3 Errors and Omissions Insurance...................................... 26
4.3.1 E & O Requirement................................................... 26
4.3.2 E & O Coverage...................................................... 26
4.3.3 E & O Scope......................................................... 26
4.3.4 E & O Policy Maintenance............................................ 27
4.3.5 E & O Deductible.................................................... 27
4.3.6 E & O Qualifications................................................ 27
4.3.7 Notice of Claim..................................................... 27
Section 4.4 Fidelity Bond Coverage.............................................. 27
4.4.1 Fidelity Bond Requirement........................................... 27
4.4.2 Fidelity Bond Coverage.............................................. 27
4.4.3 Fidelity Bond Scope................................................. 28
4.4.4 Fidelity Bond Maintenance........................................... 28
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4.4.5 Fidelity Bond Deductible............................................ 28
4.4.6 Fidelity Bond Rating Requirement.................................... 28
4.4.7 Notice of Event..................................................... 28
Section 4.5 Servicer's Liability................................................ 28
4.5.1 Liability Exposure.................................................. 28
4.5.2 Scope of Liability.................................................. 28
Section 4.6 [RESERVED].......................................................... 29
Section 4.7 Indemnification..................................................... 29
4.7.1 Scope of Indemnity.................................................. 29
4.7.2 Survival of Indemnity............................................... 29
Section 4.8 Servicer's Compensation............................................. 30
4.8.1 Servicing Fee Amount................................................ 30
4.8.2 Servicing Fee Source................................................ 30
Article 5
Representations And Warranties
Section 5.1 General............................................................. 30
5.1.1 Reliance............................................................ 30
5.1.2 Survival of Representations and Warranty............................ 30
5.1.3 Breach of Representation or Warranty................................ 31
5.1.4 Assignment of Representations and Warranties........................ 31
Section 5.2 Servicer Representations and Warranties............................. 31
5.2.1 Qualification of Servicer........................................... 31
5.2.2 Requisite Authority................................................. 31
5.2.3 No Conflicts........................................................ 32
5.2.4 Enforceable Agreement............................................... 32
5.2.5 No Consents Required................................................ 32
5.2.6 Agency Approval..................................................... 32
5.2.7 Financial Condition................................................. 32
5.2.8 Servicing Compliance................................................ 32
5.2.9 No Impairment....................................................... 32
5.2.10 No Inquiries........................................................ 33
5.2.11 Custodial and Escrow Accounts Current............................... 33
5.2.12 Insurance Maintenance............................................... 33
Article 6
Custodial Accounting
Section 6.1 In General.......................................................... 34
6.1.1 Custodial Account Establishment..................................... 34
6.1.2 Custodial Account Separateness...................................... 34
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6.1.3 Custodial Account Maintenance....................................... 34
6.1.4 Escrow Investment................................................... 35
6.1.5 Clearing Account.................................................... 36
6.1.6 Custodial Buydown Account........................................... 36
6.1.7 Master Servicer Custodial Account................................... 36
Section 6.2 Custodial P&I Account............................................... 36
6.2.1 Mandatory Deposits.................................................. 36
6.2.2 Optional Deposits................................................... 37
6.2.3 Permissible Withdrawals............................................. 37
6.2.4 Account Beneficiary................................................. 38
6.2.5 Use of Accounts..................................................... 38
Section 6.3 Custodial T&I Account............................................... 38
6.3.1 Mandatory Deposits.................................................. 38
6.3.2 Permissible Withdrawals............................................. 38
6.3.3 Account Requirements................................................ 38
6.3.4 Account Balance..................................................... 38
Section 6.4 Eligible Account Investments........................................ 39
6.4.1 Eligible Investments Permitted...................................... 39
6.4.2 Eligible Investment Restrictions.................................... 39
6.4.3 Eligible Investment Income.......................................... 39
6.4.4 Eligible Investment Losses.......................................... 39
6.4.5 Eligible Investment Limitations..................................... 39
6.4.6 Eligible Investments Reports........................................ 39
Article 7
Mortgage Loan Accounting
Section 7.1 In General.......................................................... 40
7.1.1 Mortgage Loan Accounting Practices.................................. 40
7.1.2 Record Keeping...................................................... 40
7.1.3 Record Review....................................................... 40
Section 7.2 Mortgage Loan Records............................................... 40
7.2.1 Account Records..................................................... 40
7.2.2 Account Record Information.......................................... 40
7.2.3 Accounting Practice................................................. 41
7.2.4 Access to Certain Documentation and Information Regarding the
Mortgage Loans................................................................................ 41
Section 7.3 Accounting Procedures............................................... 41
7.3.1 Principal and Interest Computation.................................. 41
7.3.2 Amortization Requirement............................................ 41
7.3.3 Negative Amortization............................................... 42
7.3.4 Interest Calculations............................................... 42
7.3.5 Buydown Loan........................................................ 42
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Section 7.4 Application Procedure............................................... 42
7.4.1 Application Priority................................................ 42
7.4.2 Reapplication of Prior Payments..................................... 42
7.4.3 Advance Payments.................................................... 42
Section 7.5 Curtailments........................................................ 42
7.5.1 Curtailment Amount.................................................. 42
7.5.2 Curtailment Application............................................. 43
7.5.3 Effect of Curtailment............................................... 43
7.5.4 Curtailment Transmission............................................ 43
Section 7.6 Liquidations........................................................ 43
7.6.1 Month End Interest.................................................. 43
7.6.2 Liquidation Reports................................................. 43
7.6.3 Deposit of Funds.................................................... 43
7.6.4 Document Request.................................................... 43
Section 7.7 Realized Losses..................................................... 44
7.7.1 Liquidation Realized Loss Determination............................. 44
7.7.2 Bankruptcy Realized Loss Determination.............................. 44
7.7.3 Reporting Requirement............................................... 44
7.7.4 Servicer's Liability................................................ 44
Article 8
ARM Loans
Section 8.1 ARM Loan Servicing.................................................. 45
8.1.1 In General.......................................................... 45
8.1.2 Servicer's Liability................................................ 45
8.1.3 Adjustment Reports.................................................. 45
8.1.4 Substitute Index.................................................... 45
Section 8.2 Notice of Periodic Adjustment....................................... 45
8.2.1 Notice Requirement.................................................. 45
8.2.2 Notice Contents..................................................... 46
8.2.3 Legal Compliance.................................................... 46
Section 8.3 ARM Loan Conversion................................................. 46
8.3.1 Servicer's Determination............................................ 46
8.3.2 Conversion Notification............................................. 46
8.3.3 Purchase by Servicer................................................ 46
Article 9
Mortgage Loan Files
Section 9.1 Owner Mortgage Loan Files........................................... 47
9.1.1 Owner Mortgage Loan File Requirements............................... 47
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9.1.2 Custodian........................................................... 48
9.1.3 Release of Documents from Owner Mortgage Loan File.................. 49
9.1.4 Execution by Owner.................................................. 49
9.1.5 Custodial Fees...................................................... 49
9.1.6 Representing Party Officers' Certificate............................ 49
9.1.7 Financing Arrangements.............................................. 50
Section 9.2 Servicer Mortgage Loan Files........................................ 50
9.2.1 Servicer Mortgage Loan File Requirements............................ 50
9.2.2 Servicer Mortgage Loan File Access.................................. 51
9.2.3 Alternate Media..................................................... 51
Section 9.3 Requisite Form...................................................... 52
9.3.1 Form of Endorsements................................................ 52
9.3.2 Form of Assignment.................................................. 52
Article 10
Escrows
Section 10.1 Escrow Criteria..................................................... 53
10.1.1 Escrow Requirement.................................................. 53
10.1.2 Mortgage Loans without Escrow....................................... 53
Section 10.2 Payment of Escrow Items............................................. 53
10.2.1 Escrow Payment Obligation........................................... 53
10.2.2 Escrow Item Payments................................................ 53
10.2.3 Escrow Fund Insufficiency........................................... 54
10.2.4 Nonpayment Notice................................................... 54
Section 10.3 Escrow Fund Determination........................................... 54
10.3.1 Escrow Funds Analysis............................................... 54
10.3.2 Escrow Fund Surplus................................................. 54
10.3.3 Escrow Fund Deficiency.............................................. 54
Section 10.4 Records............................................................. 54
10.4.1 Escrow Funds Records................................................ 54
10.4.2 Escrow Obligations Records.......................................... 54
Section 10.5 Escrow Waiver....................................................... 54
10.5.1 Waiver Conditions................................................... 54
10.5.2 Waiver Rescission................................................... 55
Article 11
Collection and Servicer Practices
Section 11.1 General Servicing Requirements...................................... 55
11.1.1 Servicing Practices................................................. 55
11.1.2 Tax Returns and Other Reports....................................... 55
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11.1.3 Servicer Internal Controls.......................................... 55
11.1.4 Pool Insurance Compliance........................................... 55
11.1.5 Primary Mortgage Insurance Compliance............................... 56
Section 11.2 Delegation of Duties................................................ 56
11.2.1 Permissible Delegations............................................. 56
11.2.2 Delegee's Qualifications............................................ 56
11.2.3 Responsibility for Costs............................................ 57
11.2.4 Servicer's Liability............................................... 57
Section 11.3 Due-on-Sale Clause Enforcement...................................... 57
11.3.1 Enforcement Requirement............................................. 57
11.3.2 Litigation Considerations........................................... 57
11.3.3 Approval Requirement................................................ 57
11.3.4 Exempt Transactions................................................. 57
Section 11.4 Assumptions......................................................... 59
11.4.1 Assumption Requirements............................................. 59
11.4.2 Approval and Release................................................ 59
11.4.3 Notification of Assumption.......................................... 60
11.4.4 Assumption Fees..................................................... 60
11.4.5 Disclosure Requirement.............................................. 60
Section 11.5 Partial Releases and Easements...................................... 60
11.5.1 Prerequisites....................................................... 60
11.5.2 Release or Modification of Lien..................................... 61
11.5.3 Master Servicer's Approval.......................................... 61
Section 11.6 Recordation of Assignments.......................................... 61
11.6.1 Recordation Requirement............................................. 61
11.6.2 Extension of Recording Period....................................... 61
11.6.3 Delivery Requirement................................................ 61
11.6.4 Waiver of Recordation............................................... 62
Section 11.7 General Servicing Considerations.................................... 62
11.7.1 Abandonment......................................................... 62
11.7.2 Buydown Funds....................................................... 62
11.7.3 Notification Matters.......................................................... 62
11.7.4 Eminent Domain...................................................... 63
11.7.5 Late Charges........................................................ 63
Section 11.8 Borrower Bankruptcy................................................. 63
11.8.1 Servicer's Duty..................................................... 63
11.8.2 Responsibility for Costs............................................ 63
11.8.3 Challenge Bankruptcy Reductions..................................... 63
11.8.4 Bankruptcy Adjustments.............................................. 63
11.8.5 Bankruptcy Plan Surveillance........................................ 64
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Article 12
Delinquency Management
Section 12.1 In General.......................................................... 64
12.1.1 Servicing Practices................................................. 64
12.1.2 Servicer's Capabilities............................................. 64
12.1.3 Servicing Objectives................................................ 64
12.1.4 Servicer's Expenses................................................. 64
Section 12.2 Delinquency Servicing Procedures.................................... 65
12.2.1 Late Notice......................................................... 65
12.2.2 Telephonic Inquiry.................................................. 65
12.2.3 Notice of Default................................................... 65
12.2.4 Borrower Interview.................................................. 65
12.2.5 Continuing Contacts................................................. 65
12.2.6 Property Inspection................................................. 65
Section 12.3 Relief of Borrowers................................................. 65
12.3.1 Servicer's Role..................................................... 65
12.3.2 Servicer's Discretion............................................... 66
12.3.3 Relief Requirement.................................................. 66
12.3.4 Primary Mortgage Insurance Considerations........................... 66
12.3.5 Responsibility for Costs............................................ 66
12.3.6 Forbearance Plan.................................................... 66
12.3.7 Accommodation Limitations........................................... 67
12.3.8 Pool Insurance Considerations....................................... 67
Section 12.4 Special Delinquency Servicing Considerations........................ 67
12.4.1 Advance Responsibility During Delinquency........................... 67
12.4.2 Primary Mortgage Insurance Compliance............................... 67
12.4.3 Pool Insurance Compliance........................................... 67
Article 13
Foreclosure Administration
Section 13.1 Foreclosure Prerequisites........................................... 68
13.1.1 Chronic Delinquency................................................. 68
13.1.2 Liquidation Recommendation.......................................... 68
13.1.3 Foreclosure Expenses................................................ 68
13.1.4 Hazardous Wastes.................................................... 69
Section 13.2 Deed-in-Lieu of Foreclosure......................................... 69
13.2.1 Conditions.......................................................... 69
13.2.2 Subsequent Actions.................................................. 70
Section 13.3 Actions Prior to Foreclosure........................................ 70
13.3.1 Notice Requirements................................................. 70
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13.3.2 Initiation of Proceedings........................................... 70
Section 13.4 Foreclosure Procedures.............................................. 70
13.4.1 Foreclosure Expenses................................................ 70
13.4.2 Bidding Instructions................................................ 71
13.4.3 Buydown Funds Use................................................... 71
13.4.4 Servicer's Responsibilities......................................... 71
13.4.5 Conveyance Documents................................................ 72
Section 13.5 Mortgage Loan Reinstatement......................................... 72
13.5.1 Borrower's Full Payment............................................. 72
13.5.2 Borrower's Partial Payment.......................................... 72
13.5.3 Obligations upon Reinstatement...................................... 72
13.5.4 Certain Assumptions Permitted....................................... 72
Article 14
REO Administration
Section 14.1 General Provisions.................................................. 73
14.1.1 REO Action Plan..................................................... 73
Section 14.2 REO Servicing....................................................... 73
14.2.1 REO Servicing Requirements.......................................... 73
14.2.2 Servicer's Responsibilities......................................... 73
14.2.3 Notice.............................................................. 74
Section 14.3 REO Records and Reports............................................. 74
14.3.1 Records Retention................................................... 74
14.3.2 Evidence of Title................................................... 74
14.3.3 REO Expenses........................................................ 74
14.3.4 REO Documents....................................................... 74
Section 14.4 REO Marketing....................................................... 75
14.4.1 REO Marketing Efforts............................................... 75
14.4.2 REO Sales........................................................... 75
14.4.3 Primary Mortgage Insurance Considerations........................... 75
14.4.4 Master Servicer Instructions........................................ 75
14.4.5 Pool Insurance Considerations....................................... 75
Section 14.5 REO Rehabilitation.................................................. 76
14.5.1 REO Rehabilitation Requirement...................................... 76
14.5.2 Master Servicer Approval............................................ 76
14.5.3 Written Contractor Bids............................................. 76
14.5.4 Primary Mortgage Insurance Considerations........................... 76
Section 14.6 REO Administration Failure....................................................... 76
14.6.1 Servicer Removal.............................................................. 76
14.6.2 Servicer's Continuing Obligations............................................. 76
14.6.3 Servicer's Duty to Compensate................................................. 77
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Article 15
Insurance
Section 15.1 General Provisions............................................................... 77
15.1.1 Insurance Requirements........................................................ 77
15.1.2 Uninsured Losses.............................................................. 77
15.1.3 Servicer's Obligation to Maintain Insurance................................... 78
15.1.4 Insurance Notices............................................................. 78
15.1.5 Default by Insurer............................................................ 78
15.1.6 Insurance Carrier Rating...................................................... 78
15.1.7 Insurance Carrier Licenses.................................................... 78
15.1.8 Risk Exposure................................................................. 78
15.1.9 Evidence of Insurance......................................................... 78
Section 15.2 Primary Mortgage Insurance....................................................... 79
15.2.1 Primary Mortgage Insurance Requirement........................................ 79
15.2.2 Primary Mortgage Insurance Coverage........................................... 79
15.2.3 Primary Mortgage Insurer Downgrading.......................................... 80
15.2.4 Primary Mortgage Insurance Cancellation....................................... 80
15.2.5 Primary Mortgage Insurance Claims............................................. 80
Section 15.3 Hazard Insurance................................................................. 81
15.3.1 Hazard Insurance Requirement.................................................. 81
15.3.2 Hazard Insurance Coverage..................................................... 81
15.3.3 Hazard Insurance Deductible................................................... 81
15.3.4 Hazard Insurance Vacancy Coverage............................................. 81
15.3.5 Hazard Insurance Mortgagee Provisions......................................... 81
Section 15.4 Flood Insurance.................................................................. 81
15.4.1 Flood Insurance Requirement................................................... 81
15.4.2 Flood Insurance Coverage...................................................... 81
15.4.3 Flood Insurance Deductible.................................................... 82
Section 15.5 Title Insurance.................................................................. 82
15.5.1 Title Insurance Requirement................................................... 82
15.5.2 Title Insurance Coverage...................................................... 82
15.5.3 Servicer's Obligations........................................................ 82
15.5.4 Policy Custody................................................................ 82
15.5.5 Title Insurance Claims........................................................ 82
Section 15.6 Insurance Loss Settlements. ..................................................... 82
15.6.1 Settlement Approval........................................................... 82
15.6.2 Settlement Disbursements...................................................... 83
15.6.3 Settlement Funds.............................................................. 83
15.6.4 Settlement Notice............................................................. 83
15.6.5 Continuing Coverage........................................................... 84
15.6.6 Property Inspections.......................................................... 84
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Article 16
Condominium and PUD Insurance
Section 16.1 General Provisions............................................................... 84
16.1.1 Applicability................................................................. 84
16.1.2 Premiums...................................................................... 84
16.1.3 Deductible Reserves........................................................... 84
16.1.4 Name of Insured............................................................... 84
16.1.5 Mortgagee Clause.............................................................. 84
16.1.6 Reconstruction Coverage....................................................... 84
Section 16.2 Common Area Multiple Peril Insurance............................................. 85
16.2.1 Common Area Multiple Peril Insurance Requirement.............................. 85
16.2.2 Common Area Multiple Peril Insurance Coverage................................. 85
16.2.3 Common Area Multiple Peril Insurance Deductible............................... 85
16.2.4 Boiler and Machinery Coverage................................................. 85
Section 16.3 Blanket Hazard Insurance......................................................... 85
16.3.1 Blanket Hazard Insurance Requirement.......................................... 85
16.3.2 Blanket Hazard Insurance Coverage............................................. 85
16.3.3 Blanket Hazard Insurance Deductible........................................... 86
Section 16.4 Common Area Comprehensive General Liability (CGL) Insurance...................... 86
16.4.1 Common Area CGL Insurance Requirement......................................... 86
16.4.2 Common Area CGL Insurance Coverage............................................ 86
Section 16.5 Owners' Association Fidelity Insurance........................................... 86
16.5.1 Owners' Association Fidelity Insurance Requirement............................ 86
16.5.2 Owners' Association Fidelity Insurance Coverage............................... 86
Section 16.6 Blanket Flood Insurance.......................................................... 87
16.6.1 Blanket Flood Insurance Requirement........................................... 87
16.6.2 Blanket Flood Insurance Coverage.............................................. 87
16.6.3 Blanket Flood Insurance Deductible............................................ 87
Article 17
Advances
Section 17.1 Principal and Interest Advances.................................................. 87
17.1.1 P&I Advance Requirement....................................................... 87
17.1.2 P&I Advance Limitation........................................................ 87
17.1.3 P&T Advance Recovery.......................................................... 88
17.1.4 Advance During Bankruptcy and Foreclosure..................................... 88
Section 17.2 Foreclosure Advances............................................................. 88
17.2.1 Foreclosure Advance Requirement............................................... 88
17.2.2 Foreclosure Advance Limitation................................................ 88
17.2.3 Foreclosure Advance Recovery.................................................. 88
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17.2.4 Foreclosure Advance Records................................................... 88
Section 17.3 Tax & Insurance Advances......................................................... 88
17.3.1 T&I Advance Requirement....................................................... 88
17.3.2 T&I Advance Recovery.......................................................... 89
17.3.3 T&I Advance Limitation........................................................ 89
17.3.4 Advance During Bankruptcy and Foreclosure..................................... 89
Section 17.4 Non-Recoverable Advances......................................................... 89
17.4.1 Ordinary Recovery............................................................. 89
17.4.2 Final Recovery................................................................ 89
17.4.3 Non-Recoverable Advance Determination......................................... 89
Section 17.5 Failure to Advance............................................................... 90
17.5.1 Grounds for Termination....................................................... 90
17.5.2 Servicer Reimbursement........................................................ 90
Section 17.6 Rehabilitation Advance........................................................... 90
17.6.1 Rehabilitation Advance Requirement............................................ 90
17.6.2 Rehabilitation Advance Limitation............................................. 90
17.6.3 Rehabilitation Advance Recovery............................................... 90
Article 18
Reporting Requirements
Section 18.1 Monthly Accounting Reports....................................................... 91
18.1.1 Monthly Accounting Report Requirement......................................... 91
18.1.2 Monthly Accounting Report Elements............................................ 91
18.1.3 Automated Reports............................................................. 91
18.1.4 Electronic Reporting.......................................................... 91
18.1.5 Machine Readable Records...................................................... 91
Section 18.2 Account Reconciliations.......................................................... 92
18.2.1 Reconciliation Preparation.................................................... 92
18.2.2 Account Records............................................................... 92
Section 18.3 Monthly Remittance Requirements.................................................. 92
18.3.1 Remittance of Funds........................................................... 92
18.3.2 Servicer Compensation......................................................... 93
Article 19
Transfers and Termination of Servicing
Section 19.1 Transfer of Servicing............................................................ 93
19.1.1 Transfer Prohibition.......................................................... 93
19.1.2 Transfer Request.............................................................. 93
19.1.3 Servicer Liability............................................................ 93
19.1.4 Master Servicer's Determination............................................... 93
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Section 19.2 Termination of Servicing......................................................... 94
19.2.1 Grounds for Termination....................................................... 94
19.2.2 Owner Notification............................................................ 94
19.2.3 Servicer Termination.......................................................... 94
19.2.4 Consequences of Termination................................................... 95
19.2.5 Effect of Termination......................................................... 95
19.2.6 Custodial Account Threshold Reduction......................................... 95
Article 20
Miscellaneous Provisions
Section 20.1 Amendments....................................................................... 95
20.1.1 Unilateral Authority.......................................................... 95
20.1.2 Consensual Amendment.......................................................... 95
20.1.3 Owner Notification............................................................ 96
20.1.4 Owner Disapproval............................................................. 96
Section 20.2 General Construction............................................................. 96
20.2.1 Binding Nature................................................................ 96
20.2.2 Entire Agreement.............................................................. 96
20.2.3 GOVERNING LAW................................................................. 96
20.2.4 Indulgences Not Waivers....................................................... 96
20.2.5 Titles Not to Affect Interpretation........................................... 97
20.2.6 Provisions Severable.......................................................... 97
20.2.7 Servicer an Independent Contractor............................................ 97
20.2.8 Third Party Beneficiary....................................................... 97
20.2.9 Counterparts.................................................................. 97
SCHEDULE I.................................................................................... 98
SCHEDULE II................................................................................... 99
EXHIBIT A.....................................................................................100
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This Servicing Agreement, made as of this 1st day of December,
1995 (the "Agreement"), between The Prudential Home Mortgage Company, Inc., a
New Jersey corporation (the "Servicer") and Securitized Asset Services
Corporation, a New Jersey corporation (the "Principal"), recites and provides as
follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing
residential mortgage loans, and the Principal, on behalf of the Owners of the
related Mortgage Loans, desires to retain the Servicer, and the Servicer desires
to be retained, to service the Mortgage Loans identified on Schedule I hereto
subject to and in accordance with the terms of this Agreement; and
WHEREAS, the Master Servicer acting pursuant to a Supervision
Agreement will supervise, monitor and oversee the performance of the Servicer
under this Agreement;
NOW THEREFORE, in consideration of the mutual premises,
covenants, representations and warranties hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Servicer and the Principal agree as follows:
Article 1
DEFINITIONS
ACH: Automated Clearing House.
ADJUSTED TANGIBLE NET WORTH: As of the date of determination
thereof, the sum of: (i) Servicer's Tangible Net Worth; plus (ii) one percent
(1%) of the amount of Servicer's servicing portfolio, as determined by the
Master Servicer in the Master Servicer's reasonable discretion.
ADVANCE: Any payment made with respect to a Mortgage Loan or
the related Mortgaged Property by the Servicer from its own funds made in the
nature of an advance pursuant to the provisions of this Agreement.
AFFILIATE: Any person or entity controlling, controlled by or
under common control with a specified entity. The term "control" means the power
to direct the management and policies of a person or entity, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "controlling" and "controlled" shall have meanings correlative to the
foregoing.
AMOUNTS HELD FOR FUTURE DISTRIBUTION: As to any Remittance
Date, amounts on account of (i) all prepayments of principal received in the
month of such Remittance Date and
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all related payments of interest on such principal prepayments, Liquidation
Proceeds received in the month of such Remittance Date, and amounts received
from the Servicer or a Representing Party in the month of such Remittance Date
as the Purchase Price for any repurchased Mortgage Loan and (ii) payments which
represent early receipt of scheduled payments of principal and interest due on a
date or dates subsequent to the related Due Date.
APPRAISAL REPORT: A report setting forth the fair market value
of a Mortgaged Property as determined by an appraiser who, at the time the
appraisal was conducted, met the minimum qualifications of FNMA and FHLMC for
appraisers of conventional residential mortgage loans.
ARM LOAN: An "adjustable rate" Mortgage Loan, the Mortgage
Interest Rate of which is subject to periodic adjustment in accordance with the
terms of the related Mortgage Note.
ASSIGNMENT: The document which transfers all the rights of the
secured party pursuant to a Security Instrument to a transferee for valid
consideration.
ASSUMPTION: The process whereby, on sale or transfer of a
legal or beneficial interest in a Mortgaged Property, the new owner of such
Mortgaged Property becomes legally obligated under the terms of the related
existing Security Instrument, Mortgage Note and any addenda and riders to such
Security Instrument or Mortgage Note. Subsequent to the Assumption, the new
owner of the property shall be deemed to be the Borrower under the related
Mortgage Loan Documents.
BALLOON AMOUNT: The remaining principal balance to be paid at
maturity of a Balloon Loan by the related Borrower pursuant to the terms of the
related Mortgage Note.
BALLOON LOAN: A Mortgage Loan which amortizes its principal
payments over a period which is longer than the stated maturity of such Mortgage
Loan pursuant to the terms of the related Mortgage Note so as to require the
payment of the Balloon Amount at maturity in order to retire the Mortgage Loan.
BANKRUPTCY CODE: The Bankruptcy Code of 1978, as amended.
BIF: The Bank Insurance Fund.
BORROWER: The individual obligated to repay a Mortgage Loan.
(The Borrower may be the beneficiary or beneficiaries of an Illinois land trust
when the Mortgaged Property is located in Illinois).
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday,
or (ii) a legal holiday in the City of New York, State of Maryland, State of
Minnesota or State of Missouri or (iii) a day on which banking institutions in
the City of New York, or the State of Maryland,
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State of Minnesota or State of Missouri are authorized or obligated by law or
executive order to be closed.
BUYDOWN AGREEMENT: An agreement governing the application of
Buydown Funds with respect to a Mortgage Loan.
BUYDOWN FUNDS: Money advanced by a builder, seller or other
interested party to reduce a Borrower's Monthly Payment during the initial years
of a Mortgage Loan.
CERTIFICATE: A mortgage backed security issued by an Owner of
the related Mortgage Loans which is secured, in whole or in part, by such
Mortgage Loans.
CODE: The Internal Revenue Code of 1986, as it may be amended
from time to time, any successor statutes thereto, and applicable U.S.
Department of the Treasury temporary or final regulations promulgated
thereunder.
CONDOMINIUM PROJECT: Real estate including the separate
ownership in fee, or on a satisfactory leasehold estate, of a particular
residential unit with an indivisible interest in the real estate designated for
common ownership strictly by unit owners.
CONDOMINIUM UNIT: A Single Family Property within a
Condominium Project.
CONVERTED MORTGAGE LOAN: An ARM Loan with respect to which the
Borrower has complied with the applicable requirements of the related Mortgage
Note to convert the related Mortgage Interest Rate to a fixed rate of interest,
and the Servicer has processed such conversion.
CURRENT VALUE: The appraised value of the related Mortgaged
Property from an Appraisal Report conducted within six (6) months of the use of
such value under this Agreement.
CURTAILMENT: A partial prepayment by the Borrower of principal
on a Mortgage Loan that otherwise is current, which prepayment is not
accompanied by an amount representing the full amount of scheduled interest due
on the related Mortgage Loan.
CUSTODIAL BUYDOWN ACCOUNT: An account maintained by the
Servicer specifically to hold all Buydown Funds to be applied to individual
Mortgage Loans.
CUSTODIAL PRINCIPAL AND INTEREST (P&I) ACCOUNT: An account
maintained by the Servicer, specifically for the collection of principal and
interest, Insurance Proceeds, Liquidation Proceeds and other amounts received
with respect to Mortgage Loans.
CUSTODIAL TAXES AND INSURANCE (T&I) ACCOUNT: An account
maintained by the Servicer, specifically for the payment of real estate tax
assessments and insurance premiums in respect of Mortgaged Property related to
Mortgage Loans.
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CUSTODIAN: First Trust National Association, which shall hold
all or part of the Owner Mortgage Loan File with respect to a Mortgage Loan on
behalf of the Master Servicer as agent for the Owner of such Mortgage Loan.
CUT-OFF DATE: With respect to any Mortgage Loan, the date set
forth on Schedule I, or on Schedule II as to a subsequent Owner, after which any
payments of principal or interest that become due, whether received before, on
or after such date are to be deposited to the Custodial P&I Account for the
benefit of the Owner of the related Mortgage Loan.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting a Deficient Valuation.
DEFICIENT VALUATION: With respect to any Mortgage Loan the
related Mortgaged Property of which is involved in a bankruptcy proceeding, the
reduction by the bankruptcy court of the Unpaid Principal Balance of the
Mortgage Note.
DELINQUENCY/DELINQUENT: A Delinquency with respect to a
Mortgage Loan occurs, or a Mortgage Loan is Delinquent when all or part of a
Borrower's Monthly Payment or, where applicable, an Escrow Item is paid after
the applicable Due Date. For reporting purposes, a Delinquency that remains
uncured for 30 days or more, but less than 60 days, is considered a 30-day
Delinquency. A Delinquency that has been uncured for more than 60 days, but less
than 90 days, is considered a 60-day Delinquency. A Delinquency that has been
uncured for 90 days or more is considered a 90-day Delinquency. The foregoing
shall be determined based on an assumption of a year comprised of twelve 30-day
months.
DETERMINATION DATE: The 17th day of the month in which the
related Remittance Date occurs, or if such 17th day is not a Business Day, the
Business Day preceding such 17th day.
DIRECTLY OPERATE: With respect to any REO, the direct or
indirect furnishing or rendering of services to the tenants thereof, management
or operation of such REO, the holding of such REO primarily for sale to
customers, performance of any construction work thereon or any use of such REO
in a trade or business, in each case other than with the approval of the Master
Servicer; provided, however, that the Servicer shall not be considered to
Directly Operate an REO solely because it establishes rental terms, chooses
tenants, enters into or renews leases, deals with taxes and insurance, or makes
decisions as to repairs or capital expenditures with respect to such REO.
DUE DATE: With respect to a Mortgage Loan, the day of each
month on which a Monthly Payment and, where applicable, an Escrow Funds payment
is due as stated in the related Mortgage Note. The Due Date for all Mortgage
Loans will be the first day of each month.
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DUE-ON-SALE CLAUSE: The clause in a Security Instrument
requiring the payment of the Unpaid Principal Balance of the related Mortgage
Loan upon the sale of, or the transfer of an interest in, the related Mortgaged
Property.
DUFF & PHELPS: Duff & Phelps Credit Rating Co. or its
successor-in-interest.
ELIGIBLE ACCOUNT: One or more accounts (i) that are maintained
with a depository institution whose long-term debt obligations (or, in the case
of a depository institution which is part of a holding company structure, the
long-term debt obligations of which holding company structure) at the time of
deposit therein are rated in one of the two highest rating categories by each of
Moody's, S&P, Fitch and Duff & Phelps (if so rated by such entity), (ii) the
deposits in which are fully insured by the FDIC through either BIF or SAIF,
(iii) the deposits in which are insured by the FDIC through either BIF or SAIF
(to the limit established by the FDIC) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of Counsel
delivered to the Master Servicer which is satisfactory to the Master Servicer,
the Owners of the related Mortgage Loans, and where there are beneficial owners
as to any such Owners, on behalf of any such beneficial owners, has a claim with
respect to the funds in such accounts or a perfected first priority security
interest against any collateral securing such funds that is superior to claims
of any other depositors or creditors of the depository institution with which
such accounts are maintained, (iv) maintained as a trust account or accounts
with the trust department of a federal or state chartered depository institution
or trust company acting in its fiduciary capacity or (v) such other account that
is acceptable to the Master Servicer.
ELIGIBLE CUSTODIAL P&I ACCOUNT: As defined in Section 6.1.2.
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, FNMA, FHLMC 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; PROVIDED,
HOWEVER, that any obligation of, or guarantee by, FNMA or FHLMC, other
than an unsecured senior debt obligation of FNMA or FHLMC or a mortgage
participation or pass-through certificate guaranteed by FNMA or FHLMC,
shall be an Eligible Investment only if, at the time of investment,
such investment would not adversely affect the rating, if any, on any
class of Certificates which are secured by Mortgage Loans that are the
source of funds which are the subject of such investment (as confirmed
in writing by the Rating Agencies);
(ii) 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 or state banking authorities, so
long as at the time of investment or the contractual commitment
providing for such investment the
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commercial paper or other short-term debt obligations of such
depository institution or trust company are rated "A-1+" by S&P,
"Duff-1+" by Duff & Phelps (if rated by Duff & Phelps), rated in the
highest category by Fitch (if rated by Fitch) and "P-1" by Moody's and
the long-term debt obligations of such depository institution or trust
company are rated at least "Aa2" by Moody's, "AA" by Duff & Phelps (if
rated by Duff & Phelps), "AA" by Fitch (if rated by Fitch) and "AA" by
S&P;
(iii) repurchase agreements or obligations with respect
to any security described in clause (i) above where such security has a
remaining maturity of one year or less and where such repurchase
obligation has been entered into with a depository institution or trust
company (acting as principal) described in clause (ii) above and where
such repurchase obligation will mature prior to the next Remittance
Date;
(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 securities have a credit
rating from S&P, Duff & Phelps (if rated by Duff & Phelps), Fitch (if
rated by Fitch) and Moody's, at the time of investment or the
contractual commitment providing for such investment, at least equal to
the second highest long-term credit rating assigned by S&P, Duff &
Phelps (if rated by Duff & Phelps), Fitch (if rated by Fitch) and
Moody's to the Certificates; PROVIDED, HOWEVER, that securities issued
by any particular corporation will not be Eligible Investments to the
extent the investment therein will cause the then outstanding principal
amount of securities issued by such corporation and held as part of the
Custodial Accounts to exceed 10% of (a) the aggregate Unpaid Principal
Balance of the Mortgage Loans serviced by the Servicer or (b) the
aggregate principal amount of all Eligible Investments in the Custodial
Accounts;
(v) commercial paper (including both
noninterest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than one
year after the date of issuance thereof) rated "A-1" by S&P, rated
"Duff- 1" by Duff & Phelps (if rated by Duff & Phelps), rated in the
highest category by Fitch (if rated by Fitch) and rated "P-1" by
Moody's;
(vi) units of investment funds rated in the highest
category by S&P, Duff & Phelps (if rated by Duff & Phelps), Fitch (if
rated by Fitch? and Moody's;
(vii) a qualified guaranteed investment contract; and
(viii) any other demand, money market or time deposit or
obligation, or interest-bearing or other security or investment,
acceptable to the Master Servicer;
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
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underlying such instrument and the 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.
Eligible Investments that are subject to prepayment or call
may not be purchased at a price in excess of par.
ERRORS AND OMISSIONS POLICY: An insurance policy naming the
initial Owner of the related Mortgage Loans, its successors and assigns as loss
payees relative to losses caused by errors or omissions of the Servicer and its
personnel, including, but not limited to losses caused by the failure to pay
insurance premiums or taxes, to record or perfect liens, to effect valid
transfers of Mortgage Notes, or to properly service Mortgage Loans.
ESCROW FUNDS: All funds collected with respect to a Mortgage
Loan by the Servicer to cover related Escrow Items according to the provisions
of this Agreement.
ESCROW ITEM: An expense required to be paid by a Borrower
under the related Security Instrument including, without limitation, taxes,
special assessments, ground rents, water, sewer and other governmental
impositions or charges that are or may become liens on the related Mortgaged
Property prior to that of the related Security Instrument, as well as Hazard
Insurance, Flood Insurance and Primary Mortgage Insurance premiums.
FDIC: Federal Deposit Insurance Corporation and its
successors.
FHA: The Federal Housing Administration and its successors.
FHLMC: Federal Home Loan Mortgage Corporation and its
successors.
FIDELITY BOND: An insurance policy naming the initial Owner of
the related Mortgage Loans, its successors and assigns as loss payees relative
to losses caused by improper or unlawful acts of the Servicer's personnel.
FITCH: Fitch Investors Service, Inc. or its
successor-in-interest.
FLOOD INSURANCE: An insurance policy insuring against flood
damage to a Mortgaged Property, where required.
FNMA: Federal National Mortgage Association and its
successors.
GNMA: Government National Mortgage Association and its
successors.
GPM (OR GPARM) LOAN: A fixed rate Mortgage Loan or ARM Loan
that provides during a portion of its term that the interest portion of the
Monthly Payment on such
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Mortgage Loan shall be less than the full amount of interest due on such
Mortgage Loan based on the related Mortgage Interest Rate.
GROSS MARGIN: With respect to each ARM Loan, the fixed
percentage specified in the related Mortgage Note that is added to the
applicable Index on each Interest Adjustment Date to determine the new Mortgage
Interest Rate for such ARM Loan.
HAZARD INSURANCE: A fire and casualty extended coverage
insurance policy insuring against loss or damage from fire and other perils
covered within the scope of standard extended hazard coverage naming the Owner
of the related Mortgage Loan, its successors and assigns, as a mortgagee under a
standard mortgagee clause, together with all riders and endorsements thereto.
HUD: The United States Department of Housing and Urban
Development and its successors.
INDEX: With respect to each ARM Loan, the applicable index
specified in the related Mortgage Note that is added to the related Gross Margin
on each Interest Adjustment Date to determine the new Mortgage Interest Rate for
such ARM Loan.
INSURANCE POLICY: Any insurance policy for a Mortgage Loan
required hereunder, including, without limitation, Primary Mortgage Insurance,
Hazard Insurance, Flood Insurance, Pool Insurance and Title Insurance policies.
INSURANCE PROCEEDS: Proceeds from an Insurance Policy, other
than such proceeds which are applied by the Borrower or held to be applied by
the Borrower to the restoration of the related Mortgaged Property.
INTEREST ADJUSTMENT DATE: With respect to each ARM Loan, the
date on which the related Mortgage Interest Rate changes in accordance with the
terms of such Mortgage Note, the first of which is set forth in such Mortgage
Note and on the respective Mortgage Loan Schedule.
LIQUIDATION: Application of full payment to a Mortgage Loan
which results in the release of the lien of the related Security Instrument on
any related Mortgaged Property, whether through foreclosure and sale of the
related REO, condemnation, prepayment in full or otherwise, or the realization
of all sums from the final disposition of the related REO.
LIQUIDATION PROCEEDS: The amount received by the Servicer
which ultimately relate to the Liquidation of a Mortgage Loan.
LOAN ORIGINATOR: The entity that closes a Mortgage Loan in its
own name.
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LOAN-TO-VALUE (LTV): The ratio that results when the Unpaid
Principal Balance of a Mortgage Loan is divided by the Value of the related
Mortgaged Property.
MASTER SERVICER: Securitized Asset Services Corporation, or
any successors and assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: A segregated custodial
account established by the Master Servicer into which the Servicer shall remit
funds from the related Custodial P&I Account.
MASTER SERVICER LOAN NUMBER: A unique number assigned by the
Master Servicer to each Mortgage Loan set forth in Schedule I.
MAXIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each
ARM (or GPARM) Loan, the interest rate set for in the related Mortgage Note as
the maximum Mortgage Interest Rate thereunder.
MAXIMUM NEGATIVE AMORTIZATION AMOUNT: With respect to any
Mortgage Loan that provides for negative amortization, the maximum principal
balance which is permitted under the terms of the related Mortgage Note.
MINIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each
ARM Loan, the interest rate set forth in the related Mortgage Note as the
minimum Mortgage Interest Rate thereunder, if any.
MONTH END INTEREST: In the event of any Prepayment in Full of
a Mortgage Loan, the difference between the interest payment that would have
been paid on such Mortgage Loan or portion thereof that was prepaid through the
last day of the month in which such prepayment occurred and the interest payment
actually received by the Servicer on such Mortgage Loan or portion thereof that
was prepaid.
MONTH END INTEREST SHORTFALL: The portion of Month End
Interest for all Mortgage Loans for any month unable to be paid by the Servicer
out of the portion of its Monthly Servicing Compensation pursuant to clause (a)
of Section 4.8.1 for such month due to the exhaustion of such portion of such
Monthly Servicing Compensation in paying such Month End Interest.
MONTHLY ACCOUNTING REPORTS: The reports due from a Servicer on
a monthly basis (due no later than the tenth calendar day of the month, or the
preceding Business Day if the 10th day is not a Business Day) relative to all
Mortgage Loans serviced by the Servicer, which reports are required to be
submitted to the Master Servicer.
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MONTHLY PAYMENT: With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest due in the applicable month
under the terms of the related Mortgage Note.
MONTHLY REMITTANCE: The Servicer's aggregate payment due each
month with respect to all Mortgage Loans owned by a common Owner to the
appropriate Master Servicer Custodial Account as specified in Section 18.3.1.
MONTHLY SERVICING COMPENSATION: The aggregate servicing
compensation due the Servicer in each month.
MOODY'S: Moody's Investors Service, Inc. or its
successor-in-interest.
MORTGAGE INTEREST RATE: The interest rate payable by the
Borrower on a Mortgage Loan according to the terms of the Mortgage Note which,
in the case of ARM Loans, may be adjusted periodically as provided in such
Mortgage Note.
MORTGAGE LOAN: A mortgage loan identified on Schedule I which
is owned by the respective Owner shown on Schedule II. "Mortgage Loan" includes
all of the respective Owner's right, title and interest in and to such Mortgage
Loan, including, without limitation, the related Mortgage Loan Documents and all
other material and information collected by the Servicer in connection with the
Mortgage Loan including Monthly Payments, Liquidation Proceeds, Insurance
Proceeds and all other rights, benefits and proceeds arising from or in
connection with such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: With respect to a Mortgage Loan, the
original related Mortgage Note with applicable addenda and riders, the original
related Security Instrument and the originals of any required addenda and
riders, the original related Assignment and any original intervening related
Assignments, the original related Title Insurance policy, related Primary
Mortgage Insurance policy, if any, and the related Appraisal Report made at the
time such Mortgage Loan was originated, and all other documents described in
Article 9 hereof.
MORTGAGE NOTE: A manually executed written instrument
evidencing the related Borrower's promise to repay a stated sum of money, plus
interest, to the related Loan Originator by a specific date according to a
schedule of monthly principal and interest payments.
MORTGAGE NOTE ASSUMPTION RIDER: A rider attached to a Mortgage
Note which states the terms upon which an Assumption may occur, including, but
not limited to, consent in writing by the insurer under any Primary Mortgage
Insurance Policy with respect to the related Mortgage Loan.
MORTGAGED PROPERTY: Land and improvements thereon subject to
the lien of a Security Instrument, securing repayment of the debt evidenced by
the related Mortgage Note.
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MORTGAGEE: The secured party to which a Security Instrument
initially grants a lien on the related Mortgaged Property.
NET MORTGAGE INTEREST RATE: With respect to a Mortgage Loan,
the difference between (a) the Mortgage Interest Rate on such Mortgage Loan and
(b) the Servicing Fee Percentage for such Mortgage Loan.
NON-RECOVERABLE ADVANCE: Any amount previously advanced by the
Servicer with respect to a Mortgage Loan, which the Servicer has determined,
pursuant to the terms of this Agreement, not to be recoverable from Insurance
Proceeds, Liquidation Proceeds or other payments with respect to such Mortgage
Loan.
NOTICE OF PERIODIC ADJUSTMENT: With respect to each ARM Loan,
a notice provided to the Borrower of any changes or adjustments to the related
Mortgage Interest Rate or the related Monthly Payment.
OFFICER: An officer of a corporation or a principal of a
partnership, who is authorized to execute documents on behalf of his corporation
or partnership, respectively.
OPINION OF COUNSEL: A written opinion of counsel, reasonably
acceptable in form and substance to the Master Servicer, and who may be in-house
or outside counsel to the Servicer but which must be Independent outside counsel
with respect to any such opinion of counsel concerning the taxation, or status
for tax purposes, of the Owner.
OWNER OR OWNER OF THE MORTGAGE LOANS: With respect to each
Mortgage Loan, the respective Person listed on Schedule II.
OWNER MORTGAGE LOAN FILE: With respect to each Mortgage Loan,
a file maintained by the Owner of the related Mortgage Loan or the Custodian for
such Mortgage Loan, which file contains the documents specified in Section 9.1
hereof, as well as any other documents that come into the Custodian's possession
with respect to such Mortgage Loan.
OWNER-OCCUPIED PROPERTY: A one- to four-unit property which is
the Primary Residence of the owner of record.
P&I ADVANCE: With respect to any Mortgage Loan, an advance by
the Servicer of any principal and interest payments not timely paid by the
related Borrower (other than with respect to a Balloon Loan, any amounts of
principal payments in respect of Balloon Amounts), excluding the amount of the
related Servicing Fee.
PARTIAL LIQUIDATION PROCEEDS: As to any Remittance Date,
Liquidation Proceeds received by the Servicer on a Mortgage Loan during the
related Partial Liquidation Receipt Period other than those Liquidation Proceeds
received during such Partial Liquidation Receipt Period which result from the
complete and final Liquidation of such Mortgage Loan.
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PARTIAL LIQUIDATION RECEIPT PERIOD: As to any Remittance Date,
the period from and including the Determination Date occurring in the month
preceding the month of such Remittance Date (or, in the case of the first
Remittance Date, from and including the Cut-off Date) to but not including the
Determination Date occurring in the month of such Remittance Date.
PAYMENT ADJUSTMENT DATE: With respect to each ARM Loan, the
date on which the Borrower's Monthly Payment changes in accordance with the
terms of the related Mortgage Note.
PERIODIC PAYMENT CAP: With respect to an ARM Loan, the limit
on the percentage increase that may be made on the related Monthly Payment on
any Payment Adjustment Date, as set forth in the related Mortgage Note.
PERIODIC RATE CAP: With respect to an ARM Loan, the limit,
expressed as incremental percentage points, on the increase or decrease that may
be made to the related Mortgage Interest Rate on any Interest Adjustment Date
from such Mortgage Interest Rate immediately prior to such Interest Adjustment
Date, as set forth in the related Mortgage Note.
PERSON: Any individual, corporation, partnership, joint
venture, association, joint- stock company, trust or unincorporated
organization.
POOL INSURANCE: An insurance policy insuring against certain
credit risk losses on certain Mortgage Loans up to a certain amount.
POOL INSURER: With respect to any Mortgage Loan, the insurer
under the Pool Insurance policy relating to such Mortgage Loan.
POOL [X] MORTGAGE LOAN: Any Mortgage Loan listed on Schedule I
hereto under the heading "Pool [X]".
PRELIMINARY TITLE REPORT: A report issued by a title insurance
company in anticipation of issuing a Title Insurance policy which evidences
existing liens and gives a preliminary opinion as to the absence of any
encumbrance on title to a Mortgaged Property, except liens to be removed on or
before purchase or refinance, as the case may be, by the Borrower and Permitted
Encumbrances.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, any
payment by the Borrower in the amount of the outstanding principal balance of
such Mortgage Loan which is received in advance of its Due Date and is not
accompanied by an amount representing scheduled interest for any period
subsequent to the date of prepayment.
PRIMARY MORTGAGE INSURANCE: Insurance obtained from a Primary
Mortgage Insurer which insures the holder of a Mortgage Note against loss in the
event the related
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Borrower defaults under such Mortgage Note or the related Security Instrument,
including all riders and endorsements thereto.
PRIMARY MORTGAGE INSURER: With respect to any Mortgage Loan,
the insurer under the Primary Mortgage Insurance policy relating to such
Mortgage Loan.
PRIMARY RESIDENCE: The principal and permanent residence of a
Borrower.
PRINCIPAL: Securitized Asset Services Corporation, or any
successors, or any assigns.
PROPERTY INSPECTION REPORT: A report, submitted by the
Servicer to the Master Servicer, describing the related Mortgaged Property.
PRUDENT SERVICING PRACTICES: Such practices observed generally
by servicers in discharging their servicing obligations in a prudent manner in
accordance with industry standards for mortgage loans similar to the Mortgage
Loans.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that
contains property and improvements owned and maintained by a homeowners'
association, corporation or trust for the enjoyment and use of individual PUD
Unit owners within that parcel of land. The shared portions of the parcel are
known as common property.
PUD UNIT: A single family residential property within a PUD.
PURCHASE AGREEMENT: Any mortgage loan purchase agreement to
which the initial Owner of a related Mortgage Loan, as the purchaser thereunder,
is a party and by which the Mortgage Loan was acquired by such Owner.
PURCHASE PRICE: An amount equal to (a) the Unpaid Principal
Balance of the Mortgage Loan, plus (b) accrued interest thereon at the Mortgage
Interest Rate through the last day of the month in which the purchase occurs,
and, if the Servicer is the entity paying the Purchase Price, minus (c) any
unreimbursed advances of principal and interest made by the Servicer on such
Mortgage Loan and any outstanding Servicing Fee owed with respect to such
Mortgage Loan. Further, in connection with any such purchase of a Mortgage Loan
as a result of a breach of a representation or warranty under this Agreement,
the Servicer shall provide the Owner with an indemnity, in form and substance
satisfactory to the Master Servicer, against additional costs, expenses and
taxes arising out of the repurchase.
REAL ESTATE OWNED (REO): Any Mortgaged Property the title to
which is acquired on behalf of the Owner of the related Mortgage Loan through
foreclosure, deed-in-lieu of foreclosure, abandonment or reclamation from
bankruptcy in connection with a defaulted Mortgage Loan.
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REALIZED LOSS: As to any defaulted Mortgage Loan, any loss
realized by the Owner of such Mortgage Loan as calculated pursuant to Section
7.7 hereof.
REFERENCE BANK: Bankers Trust or if such entity is no longer
lending money or no longer quoting a prime rate, such other entity as the Master
Servicer may specify by written notice to the Servicer.
REMIC: The segregated pool or pools of assets designated as a
real estate mortgage investment conduit pursuant to, and within the meaning of,
the REMIC Provisions, or as the context requires, a particular REMIC to which a
Mortgage Loan has been transferred.
REMIC PROVISIONS: The provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time and including any proposed legislation or regulations which, as proposed,
would have an effective date prior to enactment thereof.
REMITTANCE DATE: The 21st day of each month (or the preceding
Business Day if the 21st day is not a Business Day). Each month, the Servicer
must transfer all required funds from the Custodial P&I Account to the Master
Servicer Custodial Account on or before the Remittance Date.
RENTS FROM REAL PROPERTY: With respect to any REO, gross
income of the character described in Section 856(d) of the Code (generally, rent
for the use of real property, the amount of which is not dependent, in whole or
in part, upon the income or profit of any person, including certain payments for
certain services and personal property incidental to and customarily provided in
connection with the rental of such real property).
REO DISPOSITION: The receipt by the Servicer of Liquidation
Proceeds and other payments and recoveries (including proceeds of a final sale)
from the sale or other disposition of the REO.
REPRESENTING PARTY: A Person that has sold or intends to sell
Mortgage Loans, directly or through one or more intermediaries, to the initial
Owner of the related Mortgage Loans pursuant to an agreement for the sale of
Mortgage Loans pursuant to which a Representing Party has made representations
and warranties with respect to certain Mortgage Loans, and under which the Owner
of such Mortgage Loans, its successors and assigns has recourse against such
Representing Party for any breach thereunder.
S&P: Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., or its successor-in-interest.
SAIF: The Savings Association Insurance Fund.
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SCHEDULED PRINCIPAL BALANCE: With respect to each Mortgage
Loan (or related REO), the principal balance of such Mortgage Loan as of the
applicable Due Date calculated by taking into account the application of any
Monthly Payments due on or before such Due Date (whether or not such Monthly
Payments were received from the Borrower), and Curtailments, Insurance Proceeds
or Liquidation Proceeds, and Realized Losses received or realized by the
Servicer prior to such Due Date.
SECURITY INSTRUMENT: A written instrument creating a valid
first lien on a Mortgaged Property. A Security Instrument may be in the form of
a mortgage, deed of trust, deed to secure debt or security deed, including any
riders and addenda thereto.
SERVICER: The Prudential Home Mortgage Company, Inc., the
entity that has entered into this Agreement with the Principal, any successors,
or any assigns.
SERVICER LOAN MORTGAGE NUMBER: A unique number assigned by the
Servicer to a Loan.
SERVICER MORTGAGE LOAN FILE: A file maintained by the Servicer
for each Mortgage Loan that contains the documents specified in Section 9.2
hereof, as well as any other documents that come into the Servicer's possession
with respect to a Mortgage Loan.
SERVICER NUMBER: A three digit number assigned to the Servicer
by the Master Servicer. The Servicer Number shall be used on all correspondence
and forms and in all telephone conversations with the Master Servicer.
SERVICING FEE: For each Mortgage Loan, the compensation due
the Servicer in an amount equal to the product of (i) one-twelfth of the
Servicing Fee Percentage and (ii) the Scheduled Principal Balance of the
Mortgage Loan as of the immediately preceding Due Date (without taking into
account any payment of principal due on such Due Date).
SERVICING FEE PERCENTAGE: With respect to each Mortgage Loan,
the Servicing Fee Percentage shall be identified on Schedule I hereto.
SINGLE FAMILY PROPERTY: A one-unit residential property.
SUBPOOL [X] MORTGAGE LOAN: Any Mortgage Loan listed on
Schedule I hereto under the heading "Subpool [X]".
SUPERVISION AGREEMENT: A supervision agreement between the
Master Servicer and the Principal.
TANGIBLE NET WORTH: As of the date of determination thereof,
the par value (or value stated on the Servicer's books) of the capital stock of
all classes of the Servicer, plus, or minus in the case of a deficiency, the
amount of paid in capital and retained earnings of the
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Servicer, all determined in accordance with generally accepted accounting
principles as are then in effect. The Master Servicer may exclude assets that
are unacceptable, in the Master Servicer's reasonable discretion, from the
determination of the Servicer's Tangible Net Worth.
T&I ADVANCE: An advance by the Servicer of any taxes and
insurance premiums due with respect to any Mortgage Loan.
THRESHOLD AMOUNT: With respect to any Custodial P&I Account,
(i) $100,000 or, in the case of any Eligible Custodial P&I Account, the
aggregate amount on deposit therein (I.E., an unlimited amount); or (ii) after
any notice has been given pursuant to Section 19.2.6, (the amount specified in
such notice.
TITLE INSURANCE: An American Land Title Association (ALTA)
mortgage loan title policy form 1970, or other form of Title Insurance Policy
acceptable to FNMA or FHLMC, including all riders and endorsements thereto,
insuring that the Security Instrument constitutes a valid first lien on the
related Mortgaged Property subject only to permitted encumbrances.
TRANSFER OF OWNERSHIP: Includes, but is not limited to, the
conveyance of a Mortgaged Property, whether legal or equitable, voluntary or
involuntary, by any of the following methods:
(a) outright sale;
(b) deed;
(c) installment sale contract;
(d) land contract;
(e) contract for deed;
(f) leasehold interest with the term greater than three
years;
(g) lease with option to purchase; (h) land trust; or (i)
any other conveyance of an interest in real property,
including those involving secondary financing.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan,
the outstanding principal balance payable by the Borrower under the terms of the
Mortgage Note.
UNPOOLED MORTGAGE LOAN: Any Mortgage Loan listed on the
Schedule I hereto under the heading "Unpooled Mortgage Loans".
VA: The Department of Veterans Affairs and its successors.
VALUE: The lesser of the appraised value or sales price of the
related Mortgaged Property at the time the Mortgage Loan is closed. For a
refinanced Mortgage Loan, the Value of the related Mortgaged Property is its
appraised value at the time the refinanced Mortgage Loan is closed.
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Article 2
CONSTRUCTION
Section 2.1 LEGAL CONSTRUCTION
2.1.1 COMPLIANCE WITH APPLICABLE LAW. The obligations of the Servicer
pursuant to this Agreement shall at all times be performed in compliance with
all applicable laws.
2.1.2 POTENTIAL CONFLICT. If any obligation of the Servicer pursuant to
this Agreement shall give rise to a potential conflict with applicable law, such
obligation shall be construed so as to (a) comply with all applicable laws and
(b) effectuate with respect to such obligations, to the fullest extent permitted
by law, the intention of the parties hereto as expressed in this Agreement.
2.1.3 CONSISTENT LEGAL COMPLIANCE. The fact that certain provisions of
this Agreement contain language which expressly requires compliance with all
applicable laws, shall not give rise to an implication that other provisions,
which do not expressly include such language, operate in derogation of the
requirement for such legal compliance.
2.1.4 GENERAL INTERPRETIVE RULES. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
(i) 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; (ii) reference
herein to "Article", "Section", "Clause", and other subdivisions, and to
"Exhibits", without reference to a document, are to designated Articles,
Sections, Clauses and other subdivisions of, and to Exhibits to, this Agreement;
(iii) reference to a Clause without further reference to a Section is a
reference to such Clause as contained in the same Section in which the reference
appears, and this rule shall also apply to other subdivisions; (iv) "including"
means "including but not limited to"; and (v) the words "herein", "hereof",
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular provision.
2.1.5 CONSTRUCTION OF PROVISIONS. Although certain provisions of this
Agreement contain express language which precludes the Servicer's recovery of,
or reimbursement for, expenses incurred hereunder, no inference to the contrary
shall be drawn from absence of such, or similar, language in any other provision
hereof regarding expenses.
Section 2.2 SERVICER PRACTICES
2.2.1 PRUDENT SERVICING PRACTICES. Where not inconsistent with the
provisions of this Agreement, the Servicer shall at all times perform its
obligations hereunder in accordance with Prudent Servicing Practices, which
shall not be less exacting than the Servicer employs and exercises in servicing
and administering mortgage loans for its own account, or for the account
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of FNMA or FHLMC, including exploring alternatives to foreclosure to mitigate
Realized Losses.
2.2.2 NON-DISCRIMINATION PRACTICES. The Servicer shall at all times
perform its obligations under this Agreement so as to (a) treat Borrowers on the
basis of their individual merits and (b) not discriminate against Borrowers on
the basis of their race, creed or national origin.
Section 2.3 GENERAL PROVISIONS
2.3.1 SERVICER'S AGREEMENT. The Servicer agrees with the Principal, on
behalf of the Owners of the related Mortgage Loans, to service the Mortgage
Loans in accordance with the provisions of this Agreement and, to the extent of
any instructions of the Master Servicer that are given, such instructions and,
subject to the provisions hereof and without any further instruction by the
Master Servicer except as shall be expressly provided for herein, shall have
full power and authority to do all things necessary in connection therewith.
2.3.2 TERM OF AGREEMENT. Except as otherwise provided herein, the
duties, responsibilities and obligations to be performed and carried out by the
Servicer under this Agreement shall commence upon the execution of this
Agreement and shall continue until (a) each Mortgage Loan is (i) liquidated or
(ii) otherwise paid in full, (b) all payments related thereto are remitted in
accordance with this Agreement, and (c) all obligations hereunder related
thereto are discharged.
2.3.3 AMENDED MORTGAGE LOAN SCHEDULE. From time to time as additional
Mortgage Loans are transferred to be serviced hereunder by the Servicer,
Schedule I shall be amended by the Principal to include the new Mortgage Loans.
Due to defects in documentation and for other reasons, certain Mortgage Loans
referred to in the Mortgage Loan Schedule may be deleted and other Mortgage
Loans may be added. The Servicer hereby agrees to any such addition and/or
deletion of any Mortgage Loans and, in the event any Mortgage Loans are added
and/or deleted from the Mortgage Loan Schedule, the Servicer authorizes the
Master Servicer to amend and attach hereto a corrected Mortgage Loan Schedule,
as Schedule I, reflecting only those Mortgage Loans that are serviced hereunder.
The Master Servicer will provide the Servicer with the corrected and updated
Mortgage Loan Schedule. The Principal, with the consent of the related Owner of
the Mortgage Loans may group, and may alter such groupings of, certain Mortgage
Loans under headings of a specific pool, subpool or as unpooled Mortgage Loans
and may alter Schedules I and II to reflect such groupings.
2.3.4 ASSIGNMENT AND REPLACEMENT. The Servicer acknowledges and agrees
that in the event that the Master Servicer resigns as Master Servicer under this
Agreement, any successor master servicer has the right to assume the Master
Servicer's rights and obligations and to enforce the Servicer's obligations
under this Agreement.
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2.3.5 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(a) if to the Principal:
Securitized Asset Services Corporation
7485 New Horizon Way
Frederick, MD 21701
Attention: Vice President
(b) if to the Master Servicer:
Securitized Asset Services Corporation
7485 New Horizon Way
Frederick, MD 21701
Attention: Director of Master Servicing
(c) if to the Servicer:
The Prudential Home Mortgage Company, Inc.
7485 New Horizon Way
Frederick, MD 21701
Attention: Senior Vice President, Servicing
(d) if to the Custodian:
First Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Vice President, Administration
(e) if to the Owner of a related Mortgage Loan to such address
as is shown on Schedule II for such Owner. Any party may alter
the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with
the provisions of this paragraph for the giving of notice.
2.3.6 CHANGE OF ACCOUNTANTS. During the term of this Agreement, the
Servicer shall not change, or make any substitution of, its certified public
accountants except upon written notice to the Master Servicer given 30 days
prior to such change or substitution.
Section 2.4 SERVICING OF MORTGAGE LOANS FOR MULTIPLE OWNERS
-----------------------------------------------
2.4.1 TRANSFER OF MORTGAGE LOANS. An Owner, may, from time to time, (i)
sell its interest in any Mortgage Loan or Mortgage Loans to another person who
would become the Owner thereof, and (ii) assign an interest in this Agreement to
such person with respect to such
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Mortgage Loan or Mortgage Loans. Without the consent of the Master Servicer, no
transfer of ownership of an interest in the Mortgage Loans or this Agreement
will be permitted if it would result in there being more than six distinct
owners of the Mortgage Loans at any one time (without regard to any beneficial
owners of a trust where such trust owns Mortgage Loans serviced hereunder) which
Mortgage Loans comprise a pool of mortgage loans sold or transferred by The
Prudential Home Mortgage Company, Inc. to a purchaser or a transferee on any one
day, excluding from such computation, Mortgage Loans owned by The Prudential
Home Mortgage Company, Inc., an Affiliate thereof, or an entity formed by either
of the foregoing. The transfer of ownership and assignment of interest will be
reflected as provided for in Section 2.4.2 hereof. The Servicer agrees (a) to
continue to service each Mortgage Loan for the benefit of the related Owner of
such Mortgage Loan in accordance with the terms of this Agreement, and (b) to
obey the instructions of the Master Servicer regarding the performance of this
Agreement.
2.4.2 OWNERSHIP SCHEDULE. The Master Servicer shall amend Schedule II
to reflect the change of ownership of any Mortgage Loan which is serviced
hereunder, upon thirty (30) days prior written notice, which shall specify the
ownership transfer date (referred to as the Cut-Off Date in clause (c) below),
given by an Owner with respect to such Mortgage Loans which notice shall include
a signed writing, in the form set forth as Exhibit A hereto, evidencing the
transfer of such Mortgage Loans executed by both the transferor Owner which
transferred the Mortgage Loans and the transferee to which such Mortgage Loans
were transferred, which party shall become the Owner at the time of such
amendment to Schedule II. The signed writing described in Exhibit A hereof shall
be accompanied by incumbency certificates of the transferor and the transferee
which indicate the appropriate signatory authority. The entry in Schedule II
shall (a) identify the Mortgage Loan by its respective Master Servicer Loan
Number, (b) specify the name and mailing address of the Owner of such Mortgage
Loan and (c) indicate the Cut-Off Date which applies to the change of ownership
of the Mortgage Loan to the listed Owner.
Article 3
REMIC PROVISIONS
Section 3.1 GENERAL
3.1.1 APPLICABILITY. The provisions of this Article 3 apply to all the
Mortgage Loans or Mortgaged Property unless the Mortgage Loan has not been
transferred (or been identified for a future transfer) to an entity with respect
to which an election to be characterized as a REMIC has been (or is expected to
be) made.
3.1.2 MODIFICATIONS OF MORTGAGE LOANS. Notwithstanding anything to the
contrary in this Agreement, the Servicer shall not permit any modification of
any material term of a Mortgage Loan (including the interest rate, the principal
balance, the amortization schedule, or any other term affecting the amount or
timing of payments on the Mortgage Loan) unless the Master Servicer has
consented thereto and, if such modification is not the result of a default or
imminent
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default under the Mortgage Loan, the Servicer has received an Opinion of Counsel
or a ruling from the Internal Revenue Service (at the expense of the Servicer or
the party making the request of the Servicer to modify the Mortgage Loan) to the
effect that such modification would not be treated as giving rise to a new debt
instrument for federal income tax purposes or a disposition of the modified
Mortgage Loan and that such modification is permitted under the REMIC
Provisions.
3.1.3 INDEMNIFICATION WITH RESPECT TO CERTAIN TAXES AND LOSS OF REMIC
STATUS. In the event that the REMIC fails to qualify as a REMIC, loses its
status as a REMIC, or incurs state or local taxes, or tax as a result of a
prohibited transaction or contribution subject to taxation under the REMIC
Provisions due to the negligent performance by the Servicer of its duties and
obligations set forth herein, the Servicer shall indemnify the respective
trustee, the Master Servicer and the holders of the related Certificates against
any and all losses, claims, damages, liabilities or expenses ("REMIC Failure
Losses") resulting from such negligence; provided, however, that the Servicer
shall not be liable for any such REMIC Failure Losses attributable to the action
or inaction of the Master Servicer or the holders of such Certificates nor for
any such REMIC Failure Losses resulting from misinformation provided by the
Master Servicer on which the Servicer has relied. The foregoing shall not be
deemed to limit or restrict the rights and remedies of the other holders of the
Certificates now or hereafter existing at law or in equity.
Section 3.2 REO QUALIFICATION
3.2.1 FORECLOSURE PROPERTY QUALIFICATION. Notwithstanding any other
provision of this Agreement, the Servicer, shall not rent, lease, or otherwise
earn income on behalf of the REMIC with respect to any REO which might cause
such REO to fail to qualify as "foreclosure" property within the meaning of
section 860G(a)(8) of the Code (E.G., rent based upon the earnings of the
lessee) or result in the receipt by the REMIC of any "income from non-permitted
assets" within the meaning of section 860F(a)(2) of the Code (E.G., income
attributable to any asset which is not a qualified mortgage, a cash flow or
reserve fund investment, or personal property not incidental to the REO) or any
"net income from foreclosure property" which is subject to tax under the REMIC
Provisions unless the Master Servicer has received an Opinion of Counsel (at the
Servicer's expense) to the effect that, under the REMIC Provisions and (where
appropriate, any relevant proposed legislation) any income generated for the
REMIC by the REO would not result in the imposition of a tax upon the REMIC. In
general, the purpose of this Section 3.2 and the REMIC Provisions (which this
section is intended to implement) is to ensure that the income earned by the
REMIC is passive type income such as interest on mortgages and passive type
rental income on real property.
3.2.2 FORECLOSURE PROPERTY QUALIFICATION RESTRICTIONS. Without limiting
the generality of the foregoing, the Servicer shall not:
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(i) permit the REMIC to enter into, renew or extend any
lease with respect to any REO, if the lease by its terms
will give rise to any income that does not constitute
Rents from Real Property;
(ii) permit any amount to be received or accrued under any
lease other than amounts that will constitute Rents from
Real Property;
(iii) authorize or permit any construction on any REO, other
than the completion of a building or other improvement
thereon, and then only if more than ten percent of the
construction of such building or other improvement was
completed before default on the related Mortgage Loan
became imminent, all within the meaning of Section
856(e)(4)(B) of the Code; or
(iv) Directly Operate or allow any other Person to Directly
Operate, any REO on any date more than 90 days after its
acquisition date;
unless, in any such case, the Servicer has requested and received an
Opinion of Counsel (at the Servicer's expense) to the effect that such
action will not cause such REO to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any
time that it is held by the REMIC, in which case the Servicer may take
such actions as are specified in such Opinion of Counsel.
3.2.3 REO DISPOSITION ACCOUNTING. Within 30 days following an REO
Disposition, the Servicer shall provide to the Master Servicer a statement of
accounting for the related REO, including without limitation, (i) the loan
number of the related Mortgage Loan, (ii) the date such Mortgaged Property was
acquired in foreclosure or by deed in lieu of foreclosure, (iii) the date of REO
Disposition, (iv) the gross sales price and related selling and other expenses,
(v) accrued interest calculated from the date of acquisition to the disposition
date, and (vi) such other information as the related trustee may reasonably
request.
Section 3.3 PROHIBITED TRANSACTIONS AND ACTIVITIES
3.3.1 MORTGAGE LOAN DISPOSITION RESTRICTION. The Servicer shall not
permit the sale, disposition or substitution for any of the Mortgage Loans
(except in a disposition pursuant to (i) the foreclosure or default of a
Mortgage Loan, (ii) the bankruptcy or insolvency of the REMIC, (iii) the
termination of the REMIC in a "qualified liquidation" or "clean-up" call as
defined in Section 860F of the Code, or (iv) a substitution of a Qualifying
Substitution Mortgage Loan as permitted under the REMIC Provisions), nor acquire
any assets for the REMIC, after the startup day of the REMIC, nor sell or
dispose of any investments in any of the accounts established by the Servicer
for the REMIC for gain, nor accept any contributions to the REMIC (other than a
cash contribution during the 3-month period beginning on the startup day of the
REMIC), unless it has received an Opinion of Counsel (at the expense of the
Person requesting the Servicer to take such action) to the effect that such
disposition, acquisition, substitution, or acceptance will not (a) affect
adversely the status of the REMIC as a REMIC or of the Certificates, other than
the Certificates representing the residual interest in the REMIC, as the regular
interests therein within the meaning of the REMIC Provisions, (b) affect the
distribution of interest or principal on the Certificates, (c) result in the
encumbrance of the assets transferred
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or assigned to the REMIC (except pursuant to the provisions of this Agreement)
or (d) cause the REMIC to be subject to a tax on "prohibited transactions" or
"prohibited contributions" pursuant to the REMIC Provisions.
3.3.2 PERSONAL PROPERTY RESTRICTION. The Servicer shall not acquire any
personal property relating to any Mortgage Loan unless either:
such personal property is incident to real property
(within the meaning of Section 856(e)(1) of the Code)
so acquired by the Servicer; or the Servicer shall
have requested and received an Opinion of Counsel, at
the expense of the Servicer, to the effect that the
holding of such personal property by the REMIC will
not cause the imposition of a tax on the REMIC under
the REMIC Provisions or cause the REMIC to fail to
qualify as a REMIC at any time that any Certificate
is outstanding.
Section 3.4 ELIGIBLE INVESTMENTS
3.4.1 CUSTODIAL ACCOUNT INVESTMENTS. Funds in any custodial accounts
established by the Servicer and maintained in respect of the REMIC may be
invested and, if invested, shall be invested in Eligible Investments selected by
the Servicer which shall mature not later than the Business Day immediately
preceding the next Remittance Date, 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 REMIC or its nominee. All income and gain
realized from any such investment shall be, as long as the Servicer is servicing
the Mortgage Loans held by the REMIC, for the benefit of the Servicer as
additional compensation and shall be subject to its withdrawal or order from
time to time. The amount of any losses incurred in respect of any such
investments shall be deposited in the relevant account by the Servicer out of
its own funds immediately as realized. The foregoing requirements for deposit in
such account are exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments of interest on funds in such
account and, as long as the Servicer is servicing the Mortgage Loans held by the
REMIC, payments in the nature of prepayment fees, late payment charges,
assumption fees or any similar fees customarily associated with the servicing
mortgage loans paid by any mortgagor need not be deposited by the Servicer in
such account and may be retained by the Servicer as additional servicing
compensation. If the Servicer deposits in such account any amount not required
to be deposited therein, it may at any time withdraw such amount, any provision
herein to the contrary notwithstanding.
3.4.2 ESCROW ACCOUNT INVESTMENTS. Subject to the terms of the related
Mortgage Notes and Security Instrument, and further subject to applicable law,
any funds in any escrow account shall be invested in Eligible Investments that
mature prior to the date on which payments have to be made out of the related
escrow account and any such Eligible Investment shall not be sold or disposed of
prior to its maturity; provided that, if any loss is incurred on any such
investment, the Servicer shall cover such loss by making a deposit into the
appropriate escrow account out of its own funds in the amount of such loss.
Withdrawals from any escrow account
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may be made (to the extent amounts have been escrowed for such purpose and to
the extent permitted by the related Security Interest and Mortgage Note) only
(i) to effect timely payment of Escrow Items in connection with the related
Mortgage Loan, (ii) to reimburse the Master Servicer or Servicer out of related
collections for advances with respect to Escrow Items, (iii) to refund to any
mortgagors any sums determined to be overages, (iv) to pay interest, if any,
owed to mortgagors on such account to the extent required by law, (v) for
application to restoration or repair of the Mortgaged Property or (vi) to clear
and terminate the escrow account on the termination of this Agreement. The
Servicer shall be entitled to all investment income on any escrow account not
required to be paid to mortgagors pursuant to the preceding sentence.
Article 4
SERVICER CONSIDERATIONS
Section 4.1 [RESERVED]
Section 4.2 SERVICER ELIGIBILITY STANDARDS. To service Mortgage Loans under this
Agreement the Servicer must satisfy the eligibility standards set forth in this
Section 4.2 initially and at all times thereafter.
4.2.1 REGULATORY APPROVALS AND LICENSING. A Servicer must
be:
(a) FNMA or FHLMC approved and in good standing;
(b) a HUD approved mortgagee in good standing;
(c) in compliance with all applicable capital
requirements and other requirements from time to time
specified by any governmental agency or
quasi-governmental authority having jurisdiction over
the Servicer; and
(d) properly licensed to service the Mortgage Loans in
all relevant jurisdictions where such licenses are
required.
4.2.2 NET WORTH AND PORTFOLIO REQUIREMENTS.
(a) The Servicer must maintain a Tangible Net Worth of at
least $1,000,000.
(b) The Servicer must maintain an Adjusted Tangible Net
Worth of at least $1,000,000.
(c) The Servicer must maintain a servicing portfolio of
at least $1,000,000,000.
4.2.3 AUDITOR'S OPINION AND OTHER ANNUAL REPORTS. The Servicer must
provide the Master Servicer, as part of the application process (except as to
clause (c)) and annually thereafter within 120 days after the close of the
Servicer's fiscal year, with the following reports and opinions:
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(a) financial statements for the most recently closed
fiscal year, together with an unqualified opinion
thereon of an independent certified public accountant
who is a member of the American Institute of
Certified Public Accountants, unless the Master
Servicer, in its reasonable discretion, decides to
waive this requirement regarding qualification;
(b) a statement from the independent certified public
accountant who prepared the above-referenced
financial statements for the Servicer, certifying
that, on the basis of an examination of certain
documents and records relating to the mortgage loans
being serviced by the Servicer conducted
substantially in compliance with the Uniform Single
Audit Program for Mortgage Bankers, the servicing of
such mortgage loans was conducted in compliance with
the provisions of this Agreement and other similar
agreements, except for (i) such exceptions as such
firm believes to be immaterial and (ii) such other
exceptions as are set forth in such statement; and
(c) a certificate signed by any Officer of the Servicer
involved in, or responsible for, the administration
and servicing of the Mortgage Loans certifying that
the Officer signing such certificate has supervised a
review of the activities of the Servicer during the
preceding fiscal year and of the Servicer's
performance during the most recently closed fiscal
year under this Agreement and that to the best of
such officer's knowledge, based on such review, the
Servicer has fulfilled its duties, responsibilities
and obligations under this Agreement throughout such
year, or, if there has been failure by the Servicer
to fulfill any duty, responsibility or obligation
under this Agreement, specifying the nature and
status of each such failure.
4.2.4 SERVICE EXPERIENCE. The Servicer shall satisfactorily demonstrate
to the Master Servicer, in the Master Servicer's reasonable discretion, the
following experience:
(a) that it has at least three (3) years of conventional
mortgage loan servicing experience;
(b) that it has a staff knowledgeable in servicing of
Mortgage Loans and the administration of REO; and
(c) that it has experience maintaining a servicing
portfolio in excess of $1 billion.
4.2.5 MATERIAL CHANGES. The Servicer shall promptly report to the
Master Servicer any change in its business operations, financial condition,
properties or assets since the date of the latest submitted financial statements
which could have a material adverse effect on the Servicer's ability to perform
its obligations hereunder. Events for which the Master Servicer must receive
notice include, but are not limited to, the following:
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(a) any change in the Servicer's business address and/or
telephone number;
(b) any merger, consolidation, or significant
reorganization;
(c) any changes in the Servicer's ownership whether by
direct or indirect means. Indirect means include any
change in ownership of the Servicer's parent;
(d) any change in the Servicer's corporate name;
(e) if the Servicer is a savings and loan association,
any change in the Servicer's charter from federal to
state or vice versa;
(f) any decreases in capital, adverse alteration of
debt/equity ratios, or changes in management ordered
or required by a regulatory authority supervising or
licensing the Servicer;
(g) any significant adverse change in the Servicer's
financial position;
(h) entry of any court judgment or regulatory order in
which the Servicer is or may be required to pay a
claim or claims which, in the Master Servicer's
reasonable opinion, have a material adverse effect on
the Servicer's financial condition; and
(i) the Servicer admits to committing, or is found to
have committed, a material, in the Master Servicer's
reasonable opinion, violation of any law, regulation,
or order.
Section 4.3 ERRORS AND OMISSIONS INSURANCE
4.3.1 E & O REQUIREMENT. A Servicer must maintain, at all times and at
its own expense and consistent with FNMA or FHLMC requirements, an Errors and
Omissions Policy in the amount and having the other terms described below, with
broad coverage from an incorporated surety company authorized to do business in
the Servicer's state of domicile.
4.3.2 E & O COVERAGE. The Servicer must maintain an Errors and
Omissions Policy in a minimum amount per occurrence equal to the greater of (i)
$1,000,000 or (ii) the Fidelity Bond coverage amount required of the Servicer as
set forth in Section 4.4 hereof. This coverage may not be changed except as to
an increase in the amount of coverage.
4.3.3 E & O SCOPE. The Errors and Omissions Policy must explicitly
insure the Servicer, its successors and assigns, against any losses resulting
from negligence, errors or omissions on the part of officers, employees or other
persons acting on behalf of the Servicer in the performance of its duties as a
Servicer pursuant to this Agreement, including, but not limited to, the
following:
(a) payment when due of all applicable insurance
premiums, including, but not limited to, any Primary
Mortgage Insurance, Hazard Insurance and any Flood
Insurance in accordance with the insurance
requirements in Articles 15 and 16 of this Agreement;
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(b) where applicable, compliance with Primary Mortgage
Insurance and/or Pool Insurance requirements for
Mortgage Loans serviced under this Agreement;
(c) payment of real estate taxes and special assessments;
and
(d) determination of whether any Mortgaged Property is
located in an area where Flood Insurance is available
and required by the Flood Disaster Protection Act of
1973, as amended.
4.3.4 E & O POLICY MAINTENANCE. The Servicer must maintain in effect
the Errors and Omissions Policy at all times and the Errors and Omissions Policy
may not be canceled, permitted to lapse or otherwise terminated without thirty
Business Days' prior written notice by registered mail to the Master Servicer.
Further, the Errors and Omissions Policy must provide that, or the insurer must
state in writing to the Master Servicer that, the Errors and Omissions Policy
shall not be cancelable without the giving of notice as provided for in the
prior sentence.
4.3.5 E & O DEDUCTIBLE. The terms of the Errors and Omissions Policy
must provide for a deductible amount that does not exceed the greater of
$100,000 per occurrence or 5.0% of the coverage amount per occurrence.
4.3.6 E & O QUALIFICATIONS. The Errors and Omissions Policy must be
obtained by the Servicer from an insurer which satisfies FNMA or FHLMC standards
in this regard.
4.3.7 NOTICE OF CLAIM. The Servicer must immediately report to the
Master Servicer all claims made against the insurer under the Errors and
Omissions Policy, and shall promptly follow such report with a written notice to
the Master Servicer.
Section 4.4 FIDELITY BOND COVERAGE
4.4.1 FIDELITY BOND REQUIREMENT. A Servicer must maintain, at all
times, at its own expense and consistent with FNMA requirements, a Fidelity
Bond, in the amounts and having the other terms described below with broad
coverage from an incorporated surety company authorized to do business in the
Servicer's state of domicile. The Fidelity Bond may be in the form of either
individual bonds or a blanket bond.
4.4.2 FIDELITY BOND COVERAGE. The amount of Fidelity Bond coverage
shall be as follows:
(a) a minimum of $300,000 for the Servicer's servicing
portfolio, the current principal amount of which
totals $100 million or less; plus
(b) an additional 0.15 % of the amount of the current
principal amount of the Servicer's servicing
portfolio between $100 million and $500 million; plus
(c) an additional 0.125% of the amount of the current
principal amount of the Servicer's servicing
portfolio between $500 million and $1 billion; plus
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(d) an additional 0.1% of the amount of the current
principal amount of the Servicer's servicing
portfolio in excess of $1 billion.
This coverage may not be changed except as to an increase in the amount of
coverage.
4.4.3 FIDELITY BOND SCOPE. The coverage of the Fidelity Bond must
explicitly insure the Servicer, its successors and assigns, against any losses
resulting from dishonest, fraudulent or criminal acts on the part of Officers,
employees or other persons acting on behalf of the Servicer.
4.4.4 FIDELITY BOND MAINTENANCE. The Servicer must maintain in effect
the Fidelity Bond at all times and the Fidelity Bond may not be canceled,
permitted to lapse or otherwise terminated without thirty Business Days' prior
written notice by registered mail to the Master Servicer. Further, the Fidelity
Bond must provide that, or the insurer must state in writing to the Master
Servicer that, the Fidelity Bond shall not be cancelable without the giving of
notice as provided for in the prior sentence.
4.4.5 FIDELITY BOND DEDUCTIBLE. The terms of the Fidelity Bond must
provide for a deductible amount that does not exceed the greater of $100,000 per
occurrence or 5.0% of the coverage amount per occurrence.
4.4.6 FIDELITY BOND RATING REQUIREMENT. The Fidelity Bond must be
obtained from a company which satisfies FNMA or FHLMC standards in this regard.
4.4.7 NOTICE OF EVENT. The Servicer must promptly report to the Master
Servicer any and all occurrences against the Fidelity Bond of the Servicer.
Section 4.5 SERVICER'S LIABILITY
4.5.1 LIABILITY EXPOSURE. Any and all losses not covered under the
Fidelity Bond or Errors and Omissions Policy, as a result of (i) the respective
deductible provisions thereof, (ii) the limits of coverage of the Fidelity Bond
or Errors and Omissions Policy, or (iii) any claim denied which should have been
covered by the Fidelity Bond or the Errors and Omissions Policy, as the case may
be, according to the terms of this Agreement had the Fidelity Bond or Errors and
Omissions Policy been properly obtained and maintained and respective claim been
properly submitted for payment, shall be borne by the Servicer, where the
Servicer has acted in a manner in which the Servicer is not relieved from
liability as described in Section 4.5.2 hereof.
4.5.2 SCOPE OF LIABILITY. Neither the Servicer or any subservicer
appointed by it, nor any of their respective partners, directors, officers,
employees or agents, or its delegees pursuant to Section 11.2.1 hereof, shall be
under any liability to the Principal, the Master Servicer, or the Owners of the
related Mortgage Loan 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,
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HOWEVER, that this provision shall not protect the Servicer, any subservicer or
any of their respective partners, directors, officers, employees or agents, or
its delegees pursuant to Section 11.2.1 hereof, against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of his or its duties or by reason of reckless
disregard of his or its obligations and duties hereunder. The Servicer, any
subservicer, and any of their respective partners, directors, officers,
employees or agents, or its delegees pursuant to Section 11.2.1 hereof, 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.
Section 4.6 [RESERVED]
Section 4.7 INDEMNIFICATION
4.7.1 SCOPE OF INDEMNITY. The Servicer hereby agrees to indemnify and
hold harmless (a) the Master Servicer, (b) the Principal, (c) each Owner of any
Mortgage Loan, and (d) the officers, directors, employees, agents and Affiliates
of any of the foregoing (any of the foregoing hereinafter referred to as the
"Indemnified Party"), from and against any and all claims, losses, damages,
liabilities, fines, settlements, awards, offsets, defenses, counterclaims,
actions, penalties, forfeitures, legal fees, judgments and any other costs, fees
and expenses (including, without limitation, reasonable attorneys' fees and
court costs) (any of the foregoing which satisfy the criteria of this paragraph
are collectively referred to as "Claims"), either directly or indirectly arising
out of, based upon, or relating to (i) a breach by the Servicer, its officers,
directors, employees, or agents, or its delegees pursuant to Section 11.2.1
hereof, of any representation or warranty contained herein, or any failure to
disclose any matter that makes such representation and warranty misleading or
inaccurate, or any inaccuracy in material information furnished by the Servicer
regarding itself, (ii) a breach of any representation or warranty made by any
Indemnified Party in reliance upon any such representation or warranty, failure
to disclose, or inaccuracy in information furnished by the Servicer regarding
itself, (iii) any failure of the Servicer, its officers, directors, employees,
or agents, or its delegees pursuant to Section 11.2.1 hereof, to perform any of
its obligations under this Agreement in a manner in which the Servicer is not
relieved from liability as described in Section 4.5.2 hereof, and (iv) any acts
or omissions of the Servicer, its officers, directors, employees, or agents, or
its delegees pursuant to Section 11.2.1 hereof, in a manner in which the
Servicer is not relieved from liability as described in Section 4.5.2 hereof.
Each Indemnified Party shall cooperate with the Servicer in the defense of such
Claims and shall not settle any such Claim without the prior written consent of
the Servicer.
4.7.2 SURVIVAL OF INDEMNITY. This indemnification shall survive
purchase, transfer of any interest in a Mortgage Loan by any indemnified party,
the Liquidation of such Mortgage Loan, termination of any such Servicer's
servicing rights with respect to such Mortgage Loan and termination or
expiration of this Agreement between the Servicer and the Principal, and its
successors and assigns.
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Section 4.8 SERVICER'S COMPENSATION
4.8.1 SERVICING FEE AMOUNT. In consideration of the services rendered
under this Agreement, absent default by the Servicer, the Servicer shall on each
Remittance Date be entitled to a monthly aggregate servicing compensation (the
"Monthly Servicing Compensation") for the preceding month which shall equal the
sum of (a) the Servicing Fee payable with respect to each Mortgage Loan serviced
during such month and (b) any interest earnings on each Custodial P&I Account
with respect to such month other than interest earnings thereon which are
payable to the Borrower pursuant to the Security Instrument or applicable law,
subject to any adjustment for Month End Interest as described in Section 7.6.1.
Absent default by the Servicer, the Servicer shall also be entitled to retain in
addition to the Monthly Servicing Compensation any late charges, prepayment
fees, penalty interest, assumption fees, modification fees or deficiency recover
fees paid by the Borrower or any other customary income, which amounts are not
required to be deposited into the Custodial P&I Account. 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 therefor except
as specifically provided for herein.
4.8.2 SERVICING FEE SOURCE. The Servicing Fee for each Mortgage Loan
shall be payable solely from the interest portion of the related Monthly Payment
paid by the Borrower or other payment of interest paid with respect to the
Mortgage Loan, whether from the proceeds of foreclosure or any judgment, writ of
attachment or levy against the Borrower or his assets, or from funds paid in
connection with any prepayment in full or from Insurance Proceeds or Liquidation
Proceeds.
Article 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 GENERAL
5.1.1 RELIANCE. The Master Servicer and the Principal rely upon the
representations and warranties contained in this Article 5 hereof, in the
acceptance of the Servicer. The representations and warranties contained herein
shall inure to the benefit of the Master Servicer and the Principal, and to each
Owner of the related Mortgage Loans with respect to such Mortgage Loans.
5.1.2 SURVIVAL OF REPRESENTATIONS AND WARRANTY. The representations and
warranties made herein shall survive termination of this Agreement, and shall
inure to the benefit of the Master Servicer and the Principal, and to their
respective successors, Affiliates and assigns and each indemnified party under
Section 4.7.1, and to each Owner of the related Mortgage Loans with respect to
such Mortgage Loans, and its successors and assigns, in each case, regardless of
any review or investigation made by or on behalf of such parties with respect to
any Mortgage Loan.
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5.1.3 BREACH OF REPRESENTATION OR WARRANTY. Upon breach of any
requirement or representation or warranty included in this Agreement relative to
any Mortgage Loan, the Servicer must:
(a) Promptly notify the Master Servicer in writing of the
nature of the breach, the date on which the breach
occurred or began and the Servicer's plans, if any, for
curing the breach;
(b) Effect a cure of the breach within 30 days after its
occurrence or onset and a reasonable extension will be
granted if warranted and necessary to fully cure the
breach but in no event greater than 90 days; and
(c) If no complete cure has been effected within such
period in the Master Servicer's reasonable discretion,
purchase any Mortgage Loan in which the Owner's
interest has been impaired or which, in the reasonable
opinion of the Master Servicer, has suffered a material
impairment of Value; provided that purchase shall be
within five days after receipt by the Servicer of
written notice from the Master Servicer requesting the
Servicer's purchase of the Mortgage Loan at the
Purchase Price.
5.1.4 ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES. The Servicer agrees
that each Owner of the related Mortgage Loans with respect to such Mortgage
Loans may, at any time, assign the representations and warranties given by the
Servicer as set forth in this Article 5 which it then possesses, in whole or in
part, or an undivided interest therein, to one or more Persons.
Section 5.2 SERVICER REPRESENTATIONS AND WARRANTIES. The Servicer represents and
warrants, as of the date of this Agreement and, except as otherwise provided,
throughout the term of this Agreement, that the statements set forth below in
this Section 5.2 are true and accurate.
RELATIVE TO THE SERVICER:
5.2.1 QUALIFICATION OF SERVICER. The Servicer is duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation and is duly qualified to do business and is in good standing under
the laws of each jurisdiction that requires such qualification wherein it owns
or leases any material properties, or in which it conducts any material business
or in which the performance of its duties under this Agreement would require
such qualification, except where the failure to so qualify would not have a
material adverse effect on (a) the Servicer's performance of its obligations
under this Agreement, (b) the value or marketability of the Mortgage Loans, or
(c) the ability to foreclose on the related Mortgaged Properties.
5.2.2 REQUISITE AUTHORITY. The Servicer has the corporate power and
authority to own its properties and conduct any and all business required or
contemplated by this Agreement and to perform the covenants and obligations to
be performed by it under this Agreement. The
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Servicer holds all material licenses, certificates and permits from all
governmental authorities necessary for conducting its business as it is
presently conducted.
5.2.3 NO CONFLICTS. The execution and delivery of this Agreement are
within the corporate power of the Servicer and have been duly authorized by all
necessary actions on the part of the Servicer; neither the execution and
delivery of this Agreement by the Servicer, nor the consummation by the Servicer
of the transactions herein contemplated, nor compliance with the provisions
hereof by the Servicer, will (i) conflict with or result in a breach of, or
constitute a default under, any of the provisions of the articles of
incorporation or bylaws of the Servicer or any law, governmental rule or
regulation, or any judgment, decree or order binding on the Servicer or any of
its properties, or any of the provisions of any indenture, mortgage, deed of
trust, contract or other instrument to which it is a party or by which it is
bound or (ii) result in the creation or imposition of any lien, charge or
encumbrance upon any of its properties pursuant to the terms of any such
indenture, mortgage, deed of trust, contract or other instrument.
5.2.4 ENFORCEABLE AGREEMENT. This Agreement, when duly executed and
delivered by the Servicer, will constitute a legal, valid and binding agreement
of the Servicer, enforceable in accordance with its terms, subject, as to
enforcement or remedies, to applicable bankruptcy, reorganization, insolvency or
other similar laws affecting creditors' rights generally from time to time in
effect, and to general principles of equity.
5.2.5 NO CONSENTS REQUIRED. No consent, approval, order or
authorization of any governmental authority or registration, qualification or
declaration with any such authority is required in order for the Servicer to
perform its obligations under this Agreement.
5.2.6 AGENCY APPROVAL. The Servicer has been approved by FNMA or FHLMC
and will remain approved as an "eligible seller/servicer" of conventional,
residential mortgage loans as provided in FNMA or FHLMC guidelines and in good
standing. The Servicer has not received any notification from FNMA or FHLMC that
the Servicer is not in compliance with the requirements of the approved
seller/servicer status or that such agencies have threatened the servicer with
revocation of its approved seller/servicer status.
5.2.7 FINANCIAL CONDITION. The Servicer is not, and, with passage of
time, does not expect to become, insolvent or bankrupt. The Servicer shall
promptly notify the Master Servicer of any material adverse change of its
financial condition.
5.2.8 SERVICING COMPLIANCE. The servicing practices used by the
Servicer under this Agreement have been and are in all respects in compliance
with all federal, state and local laws, rules, regulations and requirements in
connection therewith and are in accordance with Prudent Servicing Practices.
5.2.9 NO IMPAIRMENT. There is no action, suit, proceeding or
investigation pending or, to the best of the Servicer's knowledge after due
inquiry, threatened, against the Servicer which,
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either in any one instance or in the aggregate, may result in any material
adverse change in 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 if adversely determined
would affect 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.
5.2.10 NO INQUIRIES. The Servicer has not been the subject of an audit
by any of the Master Servicer, FHA, HUD, FDIC, FNMA, FHLMC, GNMA or any Primary
Mortgage Insurer, which audit included material allegations of failure to comply
with applicable loan origination, servicing or claims procedures, or resulted in
a request for repurchase of Mortgage Loans or indemnification in connection with
the Mortgage Loans.
RELATIVE TO THE MORTGAGE LOANS:
5.2.11 CUSTODIAL AND ESCROW ACCOUNTS CURRENT. All Custodial P&I
Accounts, Custodial T&I Accounts, Custodial Buydown Accounts and Escrow Funds
are maintained by the Servicer and have been maintained in accordance with
applicable law and the terms of the Mortgage Loans. The Escrow Items required by
the Mortgages which have been paid to the Servicer for the account of the
Borrower are on deposit in the appropriate Custodial Account. All funds received
by the Servicer in connection with the Mortgage Loans, including, without
limitation, foreclosure proceeds, Insurance Proceeds, condemnation proceeds and
principal reductions, have promptly been deposited in the appropriate Custodial
Account, and all such funds have been applied to reduce the principal balance of
the Mortgage Loans in question, or for reimbursement of repairs to the Mortgaged
Property or as otherwise required by applicable law.
5.2.12 INSURANCE MAINTENANCE. Pursuant to the terms of the related
Security Instrument, all buildings or other improvements upon the related
Mortgaged Property are insured by an insurance policy or policies meeting the
requirements of Articles 15 and 16 hereof. The related Security Instrument
obligates the Borrower thereunder to maintain the hazard insurance policy at the
Borrower's cost and expense, and upon the Borrower's failure to do so,
authorizes the Mortgagee under the related Security Instrument to obtain and
maintain such insurance at the Borrower's cost and expense, and to seek
reimbursement therefor from the Borrower. 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 Owner of the
related Mortgage Loan. The Servicer and the Borrower have not engaged in any act
or omission that would impair the coverage of any such policy, the benefits of
the endorsement provided for herein, or the validity and binding effect of
either. The Mortgage Loan Documents permit the maintenance of an escrow account
to pay the premiums for the above mentioned insurance, and the requirement for
such escrows has not been waived, unless otherwise required by applicable state
law.
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Article 6
CUSTODIAL ACCOUNTING
Section 6.1 IN GENERAL
6.1.1 CUSTODIAL ACCOUNT ESTABLISHMENT. The Servicer must establish
appropriate custodial accounts for the benefit of the Owner of the related
Mortgage Loans, its successors and assigns for the deposit of funds collected in
connection with such Mortgage Loans. All custodial accounts and related records
must be maintained in accordance with sound and controlled accounting practices.
6.1.2 CUSTODIAL ACCOUNT SEPARATENESS. At least one custodial account
for principal and interest (I.E., a Custodial P&I Account), one custodial
account for taxes and insurance (I.E., a Custodial T&I Account), and one
custodial account for Buydown Funds, if applicable (I.E., a Custodial Buydown
Account), shall be established and maintained for the Mortgage Loans. Without
the written consent of the Master Servicer, funds in these accounts may not be
commingled with other funds held by the Servicer. If the Mortgage Loans are
owned by more than one Owner, the Servicer shall establish an Eligible Account
("Eligible Custodial P&I Account") to serve as the Custodial P&I Account.
6.1.3 CUSTODIAL ACCOUNT MAINTENANCE. The Servicer must ensure that each
Custodial P&I Account, Custodial T&I Account and Custodial Buydown Account (if
applicable) meets the following guidelines:
(a) the accounts must be Eligible Accounts;
(b) the name of each Custodial P&I Account, Custodial T&I
Account and Custodial Buydown Account shall include a
reference to the name of the Owner of the related
Mortgage Loans or the designation of the respective
pool or subpool of such Mortgage Loans as prescribed
by the Master Servicer;
(c) the Servicer must transfer all funds on hand relating
to such Mortgage Loans, Monthly Payments due on or
after the related Cut-Off Date and any principal
prepayments received after the related Cut-Off Date,
into the appropriate custodial accounts meeting the
requirements of Sections 6.1.1 and 6.1.2 hereof;
(d) beginning with any payment due on or after the
related Cut-Off Date, all collections on the Mortgage
Loans must be credited to the appropriate custodial
account no later than the first Business Day
following receipt;
(e) (i) the Servicer shall not permit the balance of any
Custodial P&I Account to exceed the Threshold Amount
or include any amounts then required to be remitted
to the Master Servicer Custodial Account pursuant to
Section 18.3.1, (ii) in the event the Servicer
collects amounts in excess of the Threshold Amount
prior to the next scheduled transfer of funds to the
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respective Master Servicer Custodial Account, the
Servicer must transfer the excess funds directly to
the related Master Servicer Custodial Account by wire
before the close of business on any day on which the
amount on deposit in such account exceeds the
Threshold Amount, and (iii) in the event that the
Servicer fails to transfer the funds in excess of the
Threshold Amount to the related Master Servicer
Custodial Account or to remit to the Master Servicer
Custodial Account the Monthly Remittance on the
Remittance Date pursuant to Section 18.3.1, the
Master Servicer is authorized to debit such Custodial
P&I Account and transfer such amounts to the related
Master Servicer Custodial Account;
(f) (i) the Servicer must file with the Master Servicer
the appropriate ACH Debit Form for each Custodial P&I
Account; (ii) the Master Servicer may monitor the
principal balance of each Custodial P&I Account and
may issue an ACH debit for amounts on deposit in any
such account in excess of the Threshold Amount or
otherwise in violation of Section 6.1 .3(e); (iii)
such amounts will immediately be deposited into the
appropriate Master Servicer Custodial Account; and
(iv) the ability of the Master Servicer to withdraw
and remit such funds to the appropriate Master
Servicer Custodial Account does not relieve the
Servicer of its obligations to remit such funds to
the related Master Servicer Custodial Account;
(g) upon the establishment of a Custodial P&I Account,
Custodial T&I Account or Custodial Buydown Account,
the Servicer shall promptly advise the Master
Servicer in writing of, or of any change in, the name
and address of the depository, the individual
employee of the depository who is responsible for
overseeing such account, the account number, the
title of the account and the individuals whose names
appear on the signature card; and
(h) (i) establishment and maintenance of the Custodial
P&I Account, Custodial T&I Account and Custodial
Buydown Account will be an expense of the Servicer;
(ii) such custodial accounts may be interest- bearing
accounts provided that such accounts comply with all
local, state and federal laws and regulations
governing interest-bearing accounts and, in the case
of a Custodial T&I Account or Custodial Buydown
Account, governing Borrower escrow accounts; and
(iii) the Servicer must ensure that all interest
credited to any custodial account that is not due the
Borrower is removed by the Servicer within 30 days
after receipt of such interest.
6.1.4 ESCROW INVESTMENT. If the Servicer elects or is required by law
to deposit the Borrower's Escrow Funds into an interest-bearing custodial
account, the Servicer shall either (a) deposit such funds into an account which
permits withdrawal on demand so as to pay Escrow Items as they come due, or (b)
invest such funds in an Eligible Account so that adequate funds mature the
Business Day prior to the date payment is due for each Escrow Item.
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6.1.5 CLEARING ACCOUNT. If the Servicer finds it necessary to use a
clearing account, the following guidelines must be followed:
(a) the titles of such accounts must reflect that they
are custodial in nature, and the depository in which
the accounts are maintained must be informed in
writing that the accounts are custodial accounts;
(b) a check drawn on or funds transferred from a
Custodial P&I Account or Custodial T&I Account must
be deposited to a disbursement clearing account
before or at the same time as any checks on the
clearing account are issued;
(c) a single clearing account must not be utilized both
as a collection and disbursement clearing account;
(d) the accounts must be held at depository institutions
in which accounts are insured by the FDIC, through
either the BIF or SAIF;
(e) the Servicer must maintain adequate records and audit
trails to support all debits and credits of each
Borrower's payment records and accounts; and
(f) collections deposited to a depository clearing
account must be credited to the appropriate custodial
account no later than one Business Day following
receipt by the Servicer.
6.1.6 CUSTODIAL BUYDOWN ACCOUNT. The Servicer must establish a separate
custodial account to hold Buydown Funds on Mortgage Loans being serviced for the
Owner of the related Mortgage Loans, its successors and assigns. These accounts
must be clearly marked to indicate that the Servicer is a custodian for Buydown
Funds being held for the Owner of the related Mortgage Loans, its successors and
assigns.
6.1.7 MASTER SERVICER CUSTODIAL ACCOUNT. The Master Servicer shall
establish a segregated Master Servicer Custodial Account which relates to all
the Mortgage Loans owned by each common Owner into which the Servicer shall
remit, on or before each Remittance Date, all amounts due pursuant to Section
18.3 hereof. The name assigned to each Master Servicer Custodial Account shall
include a reference to the Owner of the related Mortgage Loans. The Master
Servicer shall be the only party authorized to direct the withdrawal of funds
from each Master Servicer Custodial Account. In the Master Servicer's reasonable
discretion and where the Owner of the related Mortgage Loans is a trust which
has issued mortgage backed securities backed by such Mortgage Loans, the Master
Servicer may elect to employ a certificate account created under the related
pooling and servicing agreement as the related Master Servicer Custodial
Account.
Section 6.2 CUSTODIAL P&I ACCOUNT
6.2.1 MANDATORY DEPOSITS. The following funds must be deposited into
each related Custodial P&I Account within one Business Day after the Servicer's
receipt of such amounts, or in the case of clause (d) hereof, on the Remittance
Date:
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(a) Principal collections from related Mortgage Loans
(including Prepayments in Full and Curtailments),
together with Month End Interest, if applicable,
other than the Month End Interest Shortfall;
(b) Interest collections from related Mortgage Loans (net
of Servicing Fees or other compensation of the
Servicer as set forth in Section 4.8.1);
(c) Liquidation Proceeds and Insurance Proceeds from
related Mortgage Loans other than proceeds held in an
escrow account and applied to the restoration and
repair of the related Mortgaged Property;
(d) related P&I Advances; and
(e) the proceeds of any purchase, or substitution under a
purchase agreement, of a related Mortgage Loan by the
Servicer or a Representing Party, or sale of an REO.
6.2.2 OPTIONAL DEPOSITS. The following funds may, but are not required
to, be deposited into each related Custodial P&I Account:
(a) late charges;
(b) prepayment fees;
(c) penalty interest;
(d) assumption fees; and
(e) unapplied funds if the Borrower that remitted such
funds is not required to maintain Escrow Funds.
The Servicer shall maintain separate accounting for each of the foregoing types
of funds. Provided that the Servicer is not in default of its obligations
hereunder, the Servicer may retain any late charges, prepayment fees, penalty
interest and assumption fees as additional servicing compensation.
6.2.3 PERMISSIBLE WITHDRAWALS. The Servicer may make withdrawals from
each related Custodial P&I Account solely for the following:
(a) remittances to the related Master Servicer Custodial
Account;
(b) reimbursement to itself for advances which have been
recovered by subsequent collections including late
payments, Liquidation Proceeds or Insurance Proceeds,
to the extent funds on deposit recovered by such
subsequent collections relate to the Mortgage Loans
as to which such advances were made;
(c) interest earnings on deposits to the related
Custodial P&I Account, but only to the extent that
such interest has been credited;
(d) removal of amounts deposited in error;
(e) removal of charges or other such amounts deposited on
a temporary basis in the account;
(f) removal of Servicing Fees to the extent deposited
therein; and
(g) termination of the account.
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6.2.4 ACCOUNT BENEFICIARY. Each Custodial P&I Account (other than any
Eligible Custodial P&I Account) must be titled to show the respective interests
of the Servicer as trustee and of the Master Servicer as beneficiary.
6.2.5 USE OF ACCOUNTS. The Servicer shall not use the Custodial P&I
Account as a collection clearing account.
Section 6.3 CUSTODIAL T&I ACCOUNT
6.3.1 MANDATORY DEPOSITS. The following funds must be deposited into
each respective Custodial T&I Account:
(a) related Borrowers' Escrow Funds;
(b) related T&I Advances;
(c) the remaining balance of Title Insurance loss drafts;
(d) rent receipts to offset any related T&I Advances by
the Servicer;
(e) unapplied funds; and
(f) Liquidation Proceeds from a related Mortgage Loan
that offset a deficit balance in the related
Borrower's Escrow Funds.
6.3.2 PERMISSIBLE WITHDRAWALS. With respect to each related Borrower,
the Servicer may make withdrawals from each respective Custodial T&I Account to
the extent of the balance of such related Borrower's Escrow Funds for the
following:
(a) timely payment of such related Borrower's taxes and
insurance premiums;
(b) refunds to such related Borrower of excess Escrow
Funds collected from him;
(c) recovering T&I Advances made with respect to such
related Borrower by the Servicer;
(d) payment of interest, if required, to such related
Borrower on his Escrow Funds;
(e) removal of any deposits made in error; and
(f) termination of the account.
6.3.3 ACCOUNT REQUIREMENTS. Each Custodial T&I Account is to be
designated in the name of the Servicer acting as an agent for the individual
related Borrowers to make such Escrow Item payments in order to show that the
account is custodial in nature. The Servicer is required to keep records
identifying each Borrower's payment deposited into the account.
6.3.4 ACCOUNT BALANCE. The Servicer must never allow any Custodial T&I
Account to become overdrawn as to any individual related Borrower. If there are
insufficient funds in the account, the Servicer must advance its own funds to
cure the overdraft.
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Section 6.4 ELIGIBLE ACCOUNT INVESTMENTS
6.4.1 ELIGIBLE INVESTMENTS PERMITTED. Unless prevented or restricted by
written notice of the Master Servicer pursuant to Section 6.4.5 hereof, the
Servicer may, from time to time, withdraw funds from an Eligible Account, other
than a Custodial T&I Account, and immediately invest such funds in Eligible
Investments in accordance with this Agreement. Upon the maturity of such
Eligible Investments, such funds shall be redeposited into the Eligible Account
which they were drawn from or into the Master Servicer Custodial Account. Where
the Owner of the related Mortgage Loans is a trust which has issued mortgage
backed securities securitized by such Mortgage Loans and where a statistical
rating agency selected by such Owner to rate such mortgage backed securities
shall require that Eligible Investments can only be made if such funds remain
within an Eligible Account, then the Master Servicer shall notify the Servicer,
pursuant to Section 6.4.5 hereof, that the Servicer's ability to invest in
Eligible Investments shall be so restricted and that no withdrawal of funds from
an Eligible Account for the purpose of making an Eligible Investment shall be
allowed.
6.4.2 ELIGIBLE INVESTMENT RESTRICTIONS. No Eligible Investment shall be
sold or disposed of at a gain prior to maturity unless the Servicer has obtained
the consent of the Master Servicer.
6.4.3 ELIGIBLE INVESTMENT INCOME. All income (other than any gain from
a sale or disposition of the type referred to in Section 6.4.2 hereof) realized
from any such Eligible Investment shall be for the benefit of the Servicer as
additional servicing compensation.
6.4.4 ELIGIBLE INVESTMENT LOSSES. The amount of any losses incurred in
respect of any investments permitted under this Section 6.4 shall be deposited
in the Master Servicer Custodial Account by the Servicer out of its own funds
immediately as realized. The Master Servicer may, in its reasonable discretion,
from time to time, require the Servicer to provide a reasonable amount of
security to cover the risk of such investment losses. To the extent that the
Servicer shall not immediately deposit the amount of such losses in the Master
Servicer Custodial Account, the Master Servicer may immediately act against such
security as well as pursue all other remedies permitted by law.
6.4.5 ELIGIBLE INVESTMENT LIMITATIONS. At any time, the Master
Servicer, in its reasonable discretion, may restrict or totally limit the
ability of the Servicer to invest in Eligible Investments pursuant to this
Section 6.4.
6.4.6 ELIGIBLE INVESTMENTS REPORTS. The Servicer shall, at any time
provide such information and reports regarding its Eligible Investments under
this Agreement as the Master Servicer may request.
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Article 7
MORTGAGE LOAN ACCOUNTING
Section 7.1 IN GENERAL
7.1.1 MORTGAGE LOAN ACCOUNTING PRACTICES. The Servicer shall administer
the application and accounting of payments made on the Mortgage Loans in
accordance with the provisions of this Agreement.
7.1.2 RECORD KEEPING. The Servicer must maintain complete and accurate
records of all transactions affecting any Mortgage Loan. Each Mortgage Loan must
be clearly marked to indicate that it is being serviced for the Owner of such
Mortgage Loan, its successors and assigns.
7.1.3 RECORD REVIEW. The Master Servicer and its designee have the
right to:
(a) conduct reviews and audits of the Servicer's records
and operating procedures during any Business Day; and
(b) examine the Servicer's financial records, the
Borrowers' Escrow Funds records and any and all other
relevant documents and materials, whether held by the
Servicer or by another on behalf of the Servicer, to
ensure compliance with terms and conditions of this
Agreement and the Master Servicer's standards.
Section 7.2 MORTGAGE LOAN RECORDS
7.2.1 ACCOUNT RECORDS. Permanent Mortgage Loan account records must be
maintained by the Servicer for each Mortgage Loan. Each account record must be
identifiable by the Servicer Loan Number.
7.2.2 ACCOUNT RECORD INFORMATION. The Servicer shall maintain the
following information for each Mortgage Loan in a readily accessible form:
(a) the Master Servicer Loan Number;
(b) the current Unpaid Principal Balance;
(c) the date of receipt, amount of payment and
distribution of such payment for each Monthly Payment
received with respect to such Mortgage Loan as to
each related Due Date;
(d) for ARM Loans, the current Mortgage Interest Rate,
all limitations contained in the Mortgage Note with
respect to periodic adjustments in the Mortgage
Interest Rate, the scheduled Interest Adjustment
Dates, Payment Adjustment Dates, the Gross Margin and
the Index;
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(e) other transactions affecting the amounts due from or
payable to the related Borrower;
(f) the current outstanding balances of principal and
interest deposits, advances, taxes and insurance
deposits and unapplied payments with respect to such
Mortgage Loan;
(g) any overdraft of the Borrower's Escrow Funds;
(h) any servicing reports or loan histories; and
(i) any other information customarily maintained by a
mortgage loan servicer of one to four family
residential mortgages.
7.2.3 ACCOUNTING PRACTICE. Except as otherwise provided herein, all
Mortgage Loan account records must be maintained according to (a) the Uniform
Single Audit Program for Mortgage Bankers and (b) where applicable, sound and
generally accepted accounting practices.
7.2.4 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS. At the request of the Master Servicer, the Servicer shall
provide to the Master Servicer, the Office of Thrift Supervision, the FDIC and
the supervisory agents and examiners of the Office of Thrift Supervision and the
examiners of the FDIC, as appropriate, access to the documentation regarding the
Mortgage Loans required by applicable regulations of the Office of Thrift
Supervision or the FDIC, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. The Servicer shall permit such representatives to
photocopy any such documentation and shall provide equipment for that purpose at
a charge reasonably approximating the cost of such photocopying to the Servicer.
Section 7.3 ACCOUNTING PROCEDURES
7.3.1 PRINCIPAL AND INTEREST COMPUTATION. All Mortgage Loans must
amortize with interest calculated and paid in arrears. Under this method, the
interest due from a Borrower on a Due Date is calculated based on (a) the Unpaid
Principal Balance of the related Mortgage Loan prior to application of the
principal portion of the related current Monthly Payment, (b) thirty days
interest at the related Mortgage Interest Rate and (c) adjusted as herein
provided for the effects of Curtailments, Partial Liquidation Proceeds,
Prepayments in Full and Liquidations. The calculated interest portion is then
subtracted from the related Monthly Payment to obtain the principal portion. The
principal portion is then applied to the Unpaid Principal Balance of the related
Mortgage Loan. The amount to be applied to interest for a multiple installment
must be calculated using the Unpaid Principal Balance of the related Mortgage
Loan remaining after the previous interest calculation and principal
application.
7.3.2 AMORTIZATION REQUIREMENT. The amortization of each Mortgage Loan
must reduce to zero, or as to Balloon Loans, the respective Balloon Amount, at
the end of the Mortgage Loan term through the application of regular monthly
payments. Capitalization of interest is not permitted, except as provided by the
terms of any Mortgage Loan that provides for negative amortization.
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7.3.3 NEGATIVE AMORTIZATION. To the extent any Mortgage Loan provides
for negative amortization, such as a GPM or GPARM Loan, the Servicer must assure
that the Unpaid Principal Balance of such Mortgage Loan never exceeds the
related Maximum Negative Amortization Amount, and that the related Monthly
Payment is recast as provided for in the Mortgage Note such that the balance
fully amortizes within the remaining term of such Mortgage Loan.
7.3.4 INTEREST CALCULATIONS. Monthly interest calculations for periods
of a full month must be based on a 30-day month and a 360-day year. Factors used
for such calculations should be carried to ten decimal places. The dollar amount
of any interest payment shall be carried out to four decimal places. Interest
calculations for a period of less than a full month must be based on a 365-day
year.
7.3.5 BUYDOWN LOANS. The Servicer must amortize a Mortgage Loan for
which Buydown Funds are applied at the Mortgage Interest Rate, not at the
buy-down rate, in order to ensure that payments are collected to amortize
properly the Mortgage Loan.
Section 7.4 APPLICATION PROCEDURE
7.4.1 APPLICATION PRIORITY. A payment from a Borrower will normally
consist of interest, principal, deposits for insurance and taxes and late
charges, if applicable. Payments received from Borrowers must be applied in the
order provided for in the related Security Instrument. To the extent not
inconsistent with the related Security Instrument, such payments shall be
applied in the following order:
(a) required monthly interest;
(b) required monthly principal;
(c) deposits for taxes and insurance;
(d) prepayment charges; and
(e) any fees which may be retained by the Servicer,
including late charges, returned check fees, and
assumption fees.
7.4.2 REAPPLICATION OF PRIOR PAYMENTS. The Servicer may not reapply
prior prepayments or accumulated Curtailments for payment of subsequent
installments.
7.4.3 ADVANCE PAYMENTS. Payments made by the Borrower to satisfy future
installments must be accounted for as prepaid installments of principal and
interest. The Servicer should contact the Borrower if there is a question about
the Borrower's intention in making any unscheduled payment.
Section 7.5 CURTAILMENTS
7.5.1 CURTAILMENT AMOUNT. The Servicer may accept Curtailments at any
time. If a Mortgage Loan is delinquent, funds received must first be applied to
bring the Mortgage Loan
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current. If there are excess funds after the application of amounts received
from the Borrower to pay the related Monthly Payment, the excess funds represent
a Curtailment and may be applied as a partial principal prepayment.
7.5.2 CURTAILMENT APPLICATION. If a Curtailment is received on or after
the Due Date, the Servicer may either (i) retroactively apply the Curtailment to
the Scheduled Principal Balance of the related Mortgage Loan as of the Due Date,
or (ii) to the extent permitted by law and the Mortgage Loan, apply such
Curtailment at the end of the current period. The interest portion of the next
installment due is then calculated based on the Unpaid Principal Balance of the
related Mortgage Loan after application of the Curtailment.
7.5.3 EFFECT OF CURTAILMENT. A Curtailment may not be used to reduce
the related Monthly Payment or the related Mortgage Interest Rate for any
Mortgage Loan, or to postpone the Due Date of any payment.
7.5.4 CURTAILMENT TRANSMISSION. Each Curtailment must be deposited into
the related Custodial P&I Account within one Business Day after receipt and must
be remitted no later than the regularly scheduled Monthly Remittance to the
related Master Servicer Custodial Account.
Section 7.6 LIQUIDATIONS
7.6.1 MONTH END INTEREST. If a Prepayment in Full of a Mortgage Loan
occurs and the Servicer does not receive a full 30 days of interest (calculated
on a 30-day month, 360-day year basis) on the prepaid amount for the month in
which such Prepayment in Full occurs, the Servicer must pay, to the extent of
the portion of its Monthly Servicing Compensation pursuant to clause (a) of
Section 4.8.1 for all Mortgage Loans, the Month End Interest on all such
Mortgage Loans so prepaid in full on the Remittance Date in the month following
the month of such prepayment. To the extent that the portion of Servicer's
Monthly Servicing Compensation pursuant to clause (a) of Section 4.8.1 for all
Mortgage Loans is insufficient funds to pay all such Month End Interest, the
resulting Month End interest Shortfall for any month shall not be recoverable
from the Servicer or any other source in the future. The payment of Month End
Interest by the Servicer, as provided for above, shall not be an "advance" and
shall not be reimbursable from the proceeds of any Mortgage Loan.
7.6.2 LIQUIDATION REPORTS. The Servicer will report information with
respect to Liquidations in the monthly reports delivered to the Master Servicer
by the tenth calendar day of each succeeding month.
7.6.3 DEPOSIT OF FUNDS. Within one day after the Liquidation of a
Mortgage Loan, the Servicer shall deposit the related Liquidation Proceeds
together with the related Month End Interest into the related Custodial P&I
Account.
7.6.4 DOCUMENT REQUEST. Within five Business Days after any
Liquidation, the Servicer must complete and send a Request for Release of
Documents to the Master Servicer.
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Section 7.7 REALIZED LOSSES
7.7.1 LIQUIDATION REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss suffered on the related Mortgage Loan on a
Liquidation of such Mortgage Loan, the amount of such Realized Loss is equal to
(a) the sum of:
(i) Unpaid Principal Balance;
(ii) unpaid interest accrued at the related Mortgage
Interest Rate;
(iii) attorneys' fees and other foreclosure and sale
expenses;
(iv) unpaid taxes;
(v) unpaid property maintenance expenses;
(vi) unpaid insurance premiums; and
(vii) hazard loss expenses;
less (b) the sum of:
(i) the balance of Escrow Funds, if any;
(ii) any refund of any Hazard Insurance premium;
(iii) rental income receipts;
(iv) Insurance Proceeds;
(v) cash proceeds of any foreclosure sale;
(vi) proceeds from sale of a REO; and
(vii) any amounts received pursuant to bankruptcy or
insolvency proceedings.
7.7.2 BANKRUPTCY REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss on a Mortgage Loan subject to a Deficient
Valuation, the amount of the Realized Loss is the difference between the Unpaid
Principal Balance of the related Mortgage Loan immediately prior to the
Deficient Valuation and the Unpaid Principal Balance as reduced by the Deficient
Valuation.
7.7.3 REPORTING REQUIREMENT. As to any defaulted Mortgage Loan, the
Servicer must account to, and report in writing to, the Master Servicer as to
any Realized Loss (or gain) upon the Liquidation or Deficient Valuation in
respect of such Mortgage Loan.
7.7.4 SERVICER'S LIABILITY. Except in the case of a purchase by the
Servicer of a Mortgage Loan from the Owner thereof due to a breach of a
representation or warranty by the Servicer or failure to perform the servicing
procedures as set forth in this Agreement, the Servicer is not liable for any
Realized Loss on any Mortgage Loan.
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Article 8
ARM LOANS
Section 8.1 ARM LOAN SERVICING
8.1.1 IN GENERAL. It is the Servicer's responsibility to enforce each
ARM Loan (and any other Mortgage Loan) according to its terms and in conformity
with all applicable law. The Servicer's records must, at all times, reflect the
then-current Mortgage Interest Rate and Monthly Payment for such ARM Loan and
the Servicer must timely notify the Borrower of any changes to the Mortgage
Interest Rate and/or the Borrower's Monthly Payment.
8.1.2 SERVICER'S LIABILITY. If the Servicer fails to make either a
timely or accurate adjustment to the Mortgage Interest Rate or Monthly Payment
for an ARM Loan or to notify the Borrower of such adjustments, and subsequently
receives a short Monthly Payment, the Servicer must pay from its own funds any
shortage until the Servicer has made the necessary corrections in conformance
with applicable law so as to secure the correct Monthly Payment from the
Borrower. In the event that such error results in the Borrower making a Monthly
Payment in excess of the amount which he should have made if such adjustment
were properly calculated, then the Servicer shall promptly (a) make the required
adjustment to the Borrower's Monthly Payment and Mortgage Interest Rate so that
they reflect the amounts as properly calculated as of the related Payment
Adjustment Date, (b) refund to the Borrower the amount of any such excess
received by the Servicer from the related Payment Adjustment Date, and (c)
deduct from the respective Custodial P&I Account or the Master Servicer
Custodial Account the amount of such refund to reimburse the Servicer for making
such refund. If the Servicer's failure to make a scheduled change affects the
Owner of the ARM Loan's rights to make future adjustments under the terms of the
ARM Loan, the Servicer shall be required to purchase the ARM Loan. Any amounts
paid by the Servicer pursuant to this Section shall not be an advance and shall
not be reimbursable from the proceeds of any Mortgage Loan.
8.1.3 ADJUSTMENT REPORTS. All Mortgage Interest Rate and Monthly
Payment adjustments must be reported to the Master Servicer in a ARM Loan change
report.
8.1.4 SUBSTITUTE INDEX. If the Index required to be used to determine
the Mortgage Interest Rate for a Mortgage Loan is not available on an Interest
Adjustment Date, the Servicer, after consultation with the Master Servicer, will
select an alternative interest rate index that is readily verifiable by
Borrowers.
Section 8.2 NOTICE OF PERIODIC ADJUSTMENT
8.2.1 NOTICE REQUIREMENT. The Notice of Periodic Adjustment is the
legal and official announcement to the Borrower of an ARM Loan of a change in
the Mortgage Interest Rate or the Monthly Payment. The Servicer must send this
notice to the Borrower, as stated in the
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related Mortgage Note and in accordance with applicable law, and at least 25
days before each Payment Adjustment Date.
8.2.2 NOTICE CONTENTS. Each Notice of Periodic Adjustment pertaining to
an ARM Loan shall include the following information:
(a) the new Mortgage Interest Rate;
(b) the date on which the new Mortgage Interest Rate
becomes effective, that is, the Interest Adjustment
Date;
(c) the Index value on which the new Mortgage Interest
Rate is based, the Gross Margin, and how the new
Mortgage Interest Rate was calculated;
(d) the projected Unpaid Principal Balance on the
upcoming Payment Adjustment Date, assuming timely
payment of the remaining Monthly Payments due prior
to the Payment Adjustment Date;
(e) the new Monthly Payment;
(f) the Payment Adjustment Date, that is, the date on
which the new Monthly Payment becomes effective;
(g) the dates of the next Interest Adjustment Date and
Payment Adjustment Date;
(h) the fact that the Borrower may repay the ARM Loan in
whole or in part without penalty at any time;
(i) the title and telephone number of an employee of the
Servicer who can answer questions about the notice;
and
(j) if the Borrower is eligible and has the right to
convert the ARM Loan to a fixed rate Mortgage Loan,
such shall be stated.
8.2.3 LEGAL COMPLIANCE. The Servicer also must ensure that the Notice
of Periodic Adjustment provides the Borrower with any other disclosure
information required by applicable federal or state laws or regulations.
Section 8.3 ARM LOAN CONVERSION
8.3.1 SERVICER'S DETERMINATION. In the event a Borrower with a
convertible ARM Loan exercises its option to convert such Mortgage Loan to a
fixed interest rate, the Servicer will determine whether the conditions and
qualifications for conversion have been met and determine the fixed rate to be
applied to such Mortgage Loan pursuant to the terms of the related Mortgage
Note.
8.3.2 CONVERSION NOTIFICATION. Upon any such conversion, the Servicer
shall prepare an ARM Loan conversion notification and send such notification to
the Master Servicer within three Business Days after the conversion.
8.3.3 PURCHASE BY SERVICER. If a Converted Mortgage Loan is owned by a
trust which has issued mortgage-backed securities, then the Servicer will
purchase such Converted Mortgage
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Loan from the applicable trust at the Purchase Price by depositing the Purchase
Price into the respective Custodial P&I Account.
Article 9
MORTGAGE LOAN FILES
Section 9.1 OWNER MORTGAGE LOAN FILES
9.1.1 OWNER MORTGAGE LOAN FILE REQUIREMENTS. For each Mortgage Loan,
the Servicer will ensure that an appropriate Custodian will maintain an Owner
Mortgage Loan File on behalf of the Owner of such Mortgage Loan that contains
each of the following documents:
(a) the original related Mortgage Note pertaining to such
Mortgage Loan endorsed by the respective prior owner
of such Mortgage Loan to the Owner of such Mortgage
Loan, in the manner described in Section 9.3.1 hereof
(which may be endorsed in blank); the Servicer will
assure that the related Mortgage Note shall include
all prior and intervening endorsements as are
necessary to show a complete chain of endorsements
from the respective Loan Originator to the respective
prior owner of such Mortgage Loan;
(b) either the recorded original related Security
Instrument pertaining to such Mortgage Loan, together
with any addenda and riders, certified by the
recording office, or, if the related Security
Instrument is in the process of being recorded, a
photocopy of the related Security Instrument,
certified by an Officer of the respective prior owner
of such Mortgage Loan or by the applicable title
insurance company, closing/settlement/escrow agent or
company or closing attorney to be a true and correct
copy of the related Security Instrument transmitted
for recordation;
(c) either a recorded original Assignment of the related
Security Instrument from the respective prior owner
of such Mortgage Loan assigning the related Security
Instrument to the Owner of such Mortgage Loan, in the
manner described in Section 9.3.2 hereof (which may
be assigned in blank), certified by the recording
office, or, if such Assignment is in the process of
being recorded, a photocopy of the related Security
Instrument transmitted for recordation certified by
an Officer of the respective prior owner of such
Mortgage Loan to be a true and correct copy of such
Assignment submitted for recordation; if recordation
is waived by the Servicer pursuant to the provisions
of Section 11.6.4 hereof, the Custodian will hold
such an Assignment in recordable form (which may be
assigned in blank);
(d) each recorded original intervening Assignment of the
Security Instrument as is necessary to show a
complete chain of title from the respective Loan
Originator to the respective prior owner of such
Mortgage Loan or, if any
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such original is unavailable because it is in the
process of being recorded, a photocopy of such
intervening Assignment certified by an Officer of the
prior owner of such Mortgage Loan to be a true and
correct copy of such intervening Assignment submitted
for recordation;
(e) an original Title Insurance policy pertaining to such
Mortgage Loan or, with respect to loans secured by
properties in jurisdictions where title policies are
not available, the original attorney's opinion of
title; in the event that the policy has not been
issued or is not otherwise available, (i) a written
binding ALTA commitment for such a policy (or a
photocopy thereof) issued by the respective title
insurance company, or (ii) a Preliminary Title Report
(or a photocopy thereof) if the Mortgaged Property
are in a state designated by the Master Servicer as a
Preliminary Title Report state;
(f) for each Mortgage Loan listed on Schedule I to this
Agreement which is required to have Primary Mortgage
Insurance pursuant to this Agreement or the related
Mortgage Loan Documents, a Primary Mortgage Insurance
policy or a certificate of Primary Mortgage Insurance
(or a photocopy thereof) issued by the respective
insurer or its agent indicating that such a policy is
in effect;
(g) for each Mortgage Loan listed on Schedule I to this
Agreement which is required to have Pool Insurance
pursuant to this Agreement or the related Mortgage
Loan Documents, a Pool Insurance certificate (or a
photocopy thereof) issued by the respective insurer
or its agent indicating the eligibility of such
Mortgage Loan for such Pool Insurance; and
(h) originals of each assumption agreement, modification,
written assurance or substitution agreement
pertaining to such Mortgage Loan, if any, or, if any
such document is in the process of being recorded, a
photocopy of such document, certified by an Officer
of the respective prior owner of such Mortgage Loan
or by the applicable title insurance company,
closing/settlement/escrow agent or company or closing
attorney to be a true and correct copy of such
document transmitted for recordation.
9.1.2 CUSTODIAN. The Custodian will hold originals of all documents
included in each Owner Mortgage Loan File charged to his custody except that
copies of recorded Security Instruments or Assignments will be held if the
originals are held by the recording office. If the original Security Instrument,
Assignment from the respective prior owner of the related Mortgage Loan to the
Owner of the related Mortgage Loan or any prior Assignment of the Security
Instrument has not been delivered to the Custodian on the date of the transfer
of ownership of such Mortgage Loan to the Owner because it is in the process of
being recorded, the Servicer will within five Business Days after its receipt of
the original recorded document, deliver it to the Custodian. The Servicer will
promptly deliver to the Custodian any other Mortgage Loan Document to be
included in an Owner Mortgage Loan File, charged to the custody of the
Custodian, that comes into Servicer's possession.
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Notwithstanding any other provision of this Agreement, to the
extent that certain Mortgage Loans are owned by a trust which has issued
mortgage-backed securities which are securitized by such Mortgage Loans and the
Master Servicer has given prior written notice to the Servicer, the related
Owner and the existing Custodian, if any, the trustee acting on behalf of such
trust shall be regarded as the Custodian hereunder and the custodial
arrangements pursuant to the related Pooling and Servicing Agreement shall
instead control the custody of the related Mortgage Loan Documents.
9.1.3 RELEASE OF DOCUMENTS FROM OWNER MORTGAGE LOAN FILE. In the event
any document contained in an Owner Mortgage Loan File is needed by the Servicer
for the proper servicing of a Mortgage Loan, the Servicer must send to the Owner
of the related Mortgage Loan or the Custodian, as the case may be, a request for
release of documents. The Master Servicer hereby authorizes the Owner of the
related Mortgage Loan, or the Custodian, as the case may be, to release such
Mortgage Loan Documents after receipt of such Servicer's request (i) upon
payment in full of such Mortgage Loan, (ii) when necessary for foreclosure or
(iii) for such other cause as the Master Servicer deems appropriate, in its
reasonable discretion. The Servicer will be responsible for such Mortgage Loan
Documents while they are in transit and while they are in its possession and
will be deemed to hold such Mortgage Loan Documents in trust for the benefit of
the Owner of the related Mortgage Loan. If such Mortgage Loan has not been paid
in full or otherwise liquidated, the Servicer shall promptly return such
Mortgage Loan Documents when they are no longer required. Notwithstanding the
foregoing, unless such Mortgage Loan has been liquidated or the related Mortgage
Loan Documents have been delivered to an attorney, a public trustee or other
public official in order to foreclose on the related Mortgaged Property, all
such Mortgage Loan Documents released by the Owner of the related Mortgage Loan,
or the respective Custodian, as the case may be, must be returned within 21
calendar days after their release.
9.1.4 EXECUTION BY OWNER. In the event the Owner of the related
Mortgage Loan's signature is required on any document with respect to a Mortgage
Loan for any reason, including payment in full, assumption or foreclosure, the
Servicer shall deliver to the Master Servicer a written notice requesting that
the Owner of the related Mortgage Loan execute such documents and certifying as
to the reason such documents are required. Upon receipt of such executed
documents, the Servicer will record, file or deliver such documents as
appropriate for the proper servicing of such Mortgage Loan.
9.1.5 CUSTODIAL FEES. The Servicer is responsible for the related
ongoing fees of each Custodian. Each Custodian shall bill the Servicer directly
for its fees. If for any reason at any time the Master Servicer pays custodial
fees, the Servicer will promptly reimburse the Master Servicer for such
payments.
9.1.6 REPRESENTING PARTY OFFICERS' CERTIFICATE. If it is necessary for
the respective Representing Party to deliver an Officers' certificate with
respect to the existence of a Title Insurance policy or a Primary Mortgage
Insurance policy for several Mortgage Loans, the Master Servicer may consent to
the delivery of a single Officers' certificate of the respective
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Representing Party for a schedule of mortgage loans in lieu of a separate
Officers' certificate for each such Mortgage Loan.
9.1.7 FINANCING ARRANGEMENTS. To the extent that the Owner of a
Mortgage Loan shall utilize such Mortgage Loan as collateral for a financing,
the endorsements which are required pursuant to Section 9.1.1 hereof with
respect to the original related Mortgage Note, the original related Security
Instrument, and the original and each intervening Assignment of the related
Security Instrument shall also include such further endorsements as such Owner,
in accordance with the relevant financing documents, shall direct.
Section 9.2 SERVICER MORTGAGE LOAN FILES
9.2.1 SERVICER MORTGAGE LOAN FILE REQUIREMENTS. The Servicer must
maintain a Servicer Mortgage Loan File for each Mortgage Loan, which may be
distributed among several different files, each of which shall be clearly marked
with the Servicer Loan Number and shall be readily accessible to the Master
Servicer during regular business hours, that includes the following:
(a) copies of each of the documents listed in Section
9.1.1 that are held by the Custodian;
(b) an original Hazard Insurance policy, or a copy
thereof, or a certificate of insurance issued by the
applicable insurer or its agent indicating such a
policy is in effect for the related Mortgaged
Property;
(c) a Flood Insurance policy or a certificate of
insurance issued by the insurer or its agent
indicating that such a policy is in effect with
respect to the related Mortgaged Property, if Flood
Insurance is required pursuant to the provisions of
Section 15.4 or Section 16.6 hereof for such
Mortgaged Property;
(d) originals or copies of all documents submitted to a
Primary Mortgage Insurer for credit and property
underwriting approval with respect to the related
Mortgaged Property, if Primary Mortgage Insurance is
required pursuant to the provisions of Section 15.2
hereof for such Mortgaged Property;
(e) the originals of all RESPA and Regulation Z
disclosure statements executed by the Borrower with
respect to such Mortgage Loan;
(f) the related Appraisal Report made at the time such
Mortgage Loan was originated;
(g) the HUD-1 or other settlement statement for the
purchase or refinance, as the case may be, of the
Mortgaged Property by the Borrower and mortgagor
under the related Mortgage Note and Security
Instrument with respect to such Mortgage Loan;
(h) evidence of any tax service contract, if any;
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(i) copies of documentation, including the appropriate
approval by the Master Servicer, relating to any
modifications to the related original Mortgage Loan
Documents;
(j) documentation, including the appropriate approval by
the Master Servicer, relating to any releases of any
collateral supporting such Mortgage Loan;
(k) collection letters or form notices sent to the
Borrower with respect to such Mortgage Loan, but only
if the Servicer does not maintain separate collection
files, including all collection letters or notices,
indexed by Borrower;
(l) foreclosure correspondence, bankruptcy correspondence
and legal notifications, if applicable with respect
to the related Mortgaged Property; and
(m) all other related Mortgage Loan Documents which are
customarily maintained in accordance with Prudent
Servicing Practices in a mortgage loan file in order
to properly service a mortgage loan including,
without limitation, documents regarding title claims.
9.2.2 SERVICER MORTGAGE LOAN FILE ACCESS. The Servicer acknowledges
that each Servicer Mortgage Loan File will be held in trust for the Owner of
such Mortgage Loan. The Servicer further acknowledges that the Master Servicer
may, from time-to-time, request immediate delivery of any or all Mortgage Loan
records and documents to the Master Servicer, the Owner of such Mortgage Loan,
the Custodian or another entity designated by the Master Servicer, and the
Servicer shall thereupon immediately deliver such records and documents, at the
expense of the Servicer. The Servicer agrees to permit the Master Servicer, from
time to time to conduct audits or inspections of any Servicer Mortgage Loan
Files at one or more of the Servicer's offices during normal business hours with
advance notice. The Servicer must grant the Master Servicer access to all books,
records and files relating to the Servicer's systems and procedures for
servicing Mortgage Loans as to all Servicer Mortgage Loan Files or to the
Servicer's compliance with the terms and conditions of this Agreement.
9.2.3 ALTERNATE MEDIA. Subject to any applicable law concerning
document retention requirements, the Servicer may transfer any Servicer Mortgage
Loan File, or any portion thereof, to microfilm, microfiche, optical storage or
magnetic media and may retain the microfilm, microfiche, optical storage or
magnetic media in lieu of hard copies of the documents required to be maintained
in such Servicer Mortgage Loan Files. The following requirements must be met:
(a) the process must accurately reproduce originals onto
a durable medium;
(b) unless the Master Servicer provides otherwise by
notice to the Servicer, the Master Servicer Loan
Number must be clearly marked on the copies or
optical storage or magnetic media;
(c) the copies or optical storage or magnetic media must
be easily transferable to legible hard copies of the
material relating to the Mortgage Loans; and
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(d) backup copies of the microfilm, microfiche, optical
storage or magnetic media must be made by the
Servicer and retained off-site to protect against
fire and other hazard losses.
If the copies, optical storage or magnetic media become damaged or lost for any
reason, the Servicer must bear the entire cost of restoring each Servicer
Mortgage Loan File and any other related documents which had been transferred to
microfilm, microfiche, optical storage or magnetic media. The Servicer also must
bear all costs of reproducing legible hard copies reasonably requested by the
Master Servicer. The Master Servicer may reasonably request copies of any
Servicer Mortgage Loan File in optical storage or magnetic media which the
Servicer has previously transferred to magnetic media or optical storage, as the
case may be. The Servicer shall furnish to the Master Servicer optical storage
or magnetic media copies of the requested Servicer Mortgage Loan File in such
format as maintained by the Servicer at the Servicer's expense.
Section 9.3 REQUISITE FORM
9.3.1 FORM OF ENDORSEMENTS. Except where endorsements in blank are
authorized by the Master Servicer, the Servicer shall require that endorsements
of any Mortgage Notes comply with the format stated herein. If the Owner of the
related Mortgage Loan is a trust, then the following format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of trustee], AS
TRUSTEE under the agreement dated as of [Date of
trust agreement], and its successors and assigns,
[Name of prior owner]
[Signature of Officer]
[Officer's Name and Title]
Otherwise, except as the Master Servicer shall otherwise require, the
following format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of Owner], and its successors and assigns
[Name of prior owner]
[Signature of Applicable Officer]
[Applicable Officer's Name and Title]
9.3.2 FORM OF ASSIGNMENT. Except where assignments in blank are
authorized by the Master Servicer, the Servicer shall require that assignments
of any Security Instrument comply with the format stated herein, including,
without limitation, as to the name of the assignee. If the Owner of the related
Mortgage Loan is a trust then the following format shall be employed:
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.
[Name of trustee], AS
TRUSTEE under the agreement dated as of
[Date of trust agreement], and its successors and assigns
Otherwise, except as the Master Servicer shall otherwise require, the
following format shall be employed:
[Name of Owner], and its successors and assigns
Article 10
ESCROWS
Section 10.1 ESCROW CRITERIA
10.1.1 ESCROW REQUIREMENT. Unless, (a) at the origination of a Mortgage
Loan the Borrower is not required to make Escrow Item payments thereafter, (b)
Escrow Funds collection has been waived pursuant to Section 10.5.1 hereof, or
(c) the collection of Escrow Funds is precluded by applicable law, the Servicer
must continue to collect 1/12th of the annual total for all Escrow Items with
each Monthly Payment on such Mortgage Loan, as determined pursuant to Section
10.3.1 hereof.
10.1.2 MORTGAGE LOANS WITHOUT ESCROW. If the Servicer is not required
to collect Escrow Funds on a Mortgage Loan, the Servicer shall require proof of
payment of all taxes, ground rents, assessments, insurance or other charges, or
use other means commonly used in the mortgage industry to ascertain that such
items are paid on a timely basis.
Section 10.2 PAYMENT OF ESCROW ITEMS
10.2.1 ESCROW PAYMENT OBLIGATION. Where the Servicer is responsible for
the collection of Escrow Funds with respect to a Mortgage Loan, the Servicer
shall promptly pay all bills for any Escrow Items in such a manner as to avoid
late charges or penalties and to take advantage of any available discount.
10.2.2 ESCROW ITEM PAYMENTS. Where (a) the Servicer has been collecting
Escrow Funds with respect to a Mortgage Loan, or (b) the Borrower has not been
obliged to make Escrow Funds payments or such payments have been waived and such
Borrower has failed to timely pay obligations which otherwise would be Escrow
Items, the Servicer must pay any obligation (i) which could become a first lien
on the related Mortgaged Property, or (ii) to maintain in force the applicable
Insurance Policies. Where Escrow Funds are maintained by the Servicer, such
obligations should be paid from the Borrower's Escrow Funds, or in accordance
with Section 10.2.3 hereof.
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10.2.3 ESCROW FUND INSUFFICIENCY. When a Borrower's Escrow Funds are
insufficient to pay taxes, assessments and premiums, when due, subject to
applicable law, the Servicer must attempt to obtain the additional funds from
such Borrower. If sufficient additional funds have not been recovered by the
time the payment is due, the Servicer must advance its own funds to ensure
prompt payment. The Servicer may elect to advance funds prior to attempting to
obtain the additional funds from such Borrower; however, to the extent permitted
by applicable law, the Servicer shall thereafter attempt to obtain the advanced
funds from the Borrower.
10.2.4 NONPAYMENT NOTICE. The Servicer must notify the Master Servicer
immediately of any Escrow Item that does not conform to either FNMA or FHLMC
standards.
Section 10.3 ESCROW FUND DETERMINATION
10.3.1 ESCROW FUNDS ANALYSIS. Subject to all applicable Federal, State
and local laws, the Servicer must conduct an analysis of each Borrower's Escrow
Funds at least annually to determine the monthly deposits which must be made by
such Borrower. The analysis will be performed based upon (a) reasonable
projections of the expenses to be paid from the Escrow Funds and (b) that as
such expenses come due, the Escrow Funds balance shall at all times be
sufficient to effect the payment of such expenses, unless a lower amount is
required by applicable law. Each Borrower must receive a statement of this
analysis. The analysis also must determine whether there is a surplus or
deficiency in such Borrower's Escrow Funds.
10.3.2 ESCROW FUND SURPLUS. As a Borrower may direct, a surplus in such
Borrower's Escrow Funds shall be (a) used as a Curtailment as to the related
Mortgage Loan, (b) refunded to such Borrower or (c) taken into consideration in
determining the amount to be collected for Escrow Funds during the next twelve
months.
10.3.3 ESCROW FUND DEFICIENCY. Where it is determined that a deficiency
exists in such Borrower's Escrow Funds, such Borrower may be requested to pay
the shortage in full or the deficiency may be taken into consideration in
determining the amount to be collected for Escrow Funds during the next twelve
months.
Section 10.4 RECORDS
10.4.1 ESCROW FUNDS RECORDS. The Servicer shall keep records of Escrow
Funds collected from each Borrower.
10.4.2 ESCROW OBLIGATIONS RECORDS. The Servicer must maintain accurate
records of the imposition of Escrow Item obligations and the payment of Escrow
Items.
Section 10.5 ESCROW WAIVER
10.5.1 WAIVER CONDITIONS. For any Mortgage Loan (other than a GPM or
GPARM Loan which provides for negative amortization in the future) that has
amortized down so that its
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current LTV is 80% or less, the Servicer may waive the Borrower's future
obligation to make Escrow Funds payments provided:
(a) the Unpaid Principal Balance of such Mortgage Note
divided by the value of the Mortgaged Property based
on an appraisal made within 60 days of the date of
determination is 80% or less;
(b) such Mortgage Loan is at least 12 months old; and
(c) such Mortgage Loan has not been more than 30 days
delinquent during the preceding 12 months.
10.5.2 WAIVER RESCISSION. The Servicer shall enforce the Escrow Funds
requirements with respect to any Mortgage Loan if the related Borrower fails to
act responsibly in making the required payments.
Article 11
COLLECTION AND SERVICER PRACTICES
Section 11.1 GENERAL SERVICING REQUIREMENTS
11.1.1 SERVICING PRACTICES. The Servicer agrees to service Mortgage
Loans in accordance with the requirements of this Agreement. In general, where
not otherwise expressly required by the provisions of this Agreement, the
Servicer shall service the Mortgage Loans in accordance with Prudent Servicing
Practices and generally in accordance with FNMA guidelines. As to each Mortgage
Loan, the Servicer shall take all such actions as may be necessary to preserve
the lien of the related Security Instrument upon the related Mortgaged Property.
11.1.2 TAX RETURNS AND OTHER REPORTS. Unless otherwise instructed by
notice from the Master Servicer, the Servicer shall forward to each Mortgagor
such forms and furnish such information within the control of the Servicer as
are required by the Code to be furnished to them and will prepare and file
annual reports required by the state authorities. By way of example, the
Servicer shall provide the Mortgagors with the reports required under Code
Sections 6050H (E.G., reporting on Form 1098 any mortgage interest, including
points, received and any reimbursements of qualified mortgage interest) and
6050J (Abandonments and Foreclosure of Real Property, Form 1099-A).
11.1.3 SERVICER INTERNAL CONTROLS. The Servicer shall maintain at all
times an adequate system of audit and internal controls in accordance with
Prudent Servicing Practices.
11.1.4 POOL INSURANCE COMPLIANCE. Notwithstanding any other provision
of this Agreement, the Servicer shall at all times comply with all applicable
Pool Insurance policy requirements so as to assure the full benefit of such Pool
Insurance policy to the Owner of the related Mortgage Loan.
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11.1.5 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Notwithstanding any other
provision of this Agreement, the Servicer shall at all times comply with all
applicable Primary Mortgage Insurance policy requirements so as to assure the
full benefit of such Primary Mortgage Insurance policy to the Owner of the
related Mortgage Loan.
Section 11.2 DELEGATION OF DUTIES
11.2.1 PERMISSIBLE DELEGATIONS. Without the written consent of the
Master Servicer authorizing further delegations, the only servicing duties which
the Servicer may elect to delegate, by agency, subcontract or otherwise, and the
only categories of such delegees, are as follows:
(a) professional collection agencies to perform those
duties and functions for the collection of delinquent
amounts due on any Mortgage Loan that are customarily
performed by such agencies in the locality where the
related Mortgaged Property are located;
(b) title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the
condition of title to any Mortgaged Property and
services incidental to the foreclosure or acquisition
in lieu of foreclosure of any Mortgaged Property, or
the sale or disposition of any Mortgaged Property
acquired by the Servicer;
(c) attorneys licensed to practice in the state where the
related Mortgaged Property is located to perform
customary legal services in connection with the
foreclosure or acquisition of such Mortgaged Property
or the sale or disposition of such Mortgaged Property
acquired by the Servicer at or in lieu of
foreclosure, or for the collection of delinquent sums
owed on any Mortgage Loan;
(d) professional property inspection companies and
appraisers to conduct routine inspections of, and
provide written inspection reports on, any Mortgaged
Property as required by this Agreement;
(e) title companies, escrow companies and real estate tax
service companies to provide periodic reports as to
the amount of real estate taxes on any Mortgaged
Property and the due date or dates of each required
installment;
(f) credit bureaus or credit reporting companies to
provide credit reports on Borrowers or persons who
have applied to assume any Mortgage Loans;
(g) construction companies, contractors and laborers to
provide labor, materials and supplies necessary to
protect, preserve and repair any Mortgaged Property
as required by this Agreement; and
(h) lock box providers or payment processing
administrators to provide payment processing
services.
11.2.2 DELEGEE'S QUALIFICATIONS. The Servicer shall assure that each
Person retained to provide any of the services set forth in Section 11.2.1
hereof is fully licensed and holds all
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required Federal, State or local governmental franchises, certificates and
permits necessary to conduct the business in which he is engaged and that such
Person is reputable, knowledgeable, skilled and experienced and has the
necessary personnel, facilities and equipment required to provide the services
for which he is retained.
11.2.3 RESPONSIBILITY FOR COSTS. Any Person retained in accordance with
Section 11.2.1 hereof shall be retained solely for the Servicer's account and at
the Servicer's sole expense and shall not be deemed to be an agent or
representative of the Owners of the related Mortgage Loans, their successors or
assigns, or the Master Servicer or its successors or assigns.
11.2.4 SERVICER'S LIABILITY. The Servicer shall remain liable to the
Principal, for the performance of the Servicer's duties and obligations under
this Agreement, notwithstanding the delegation of any servicing function
pursuant to this Section 11.2.
Section 11.3 DUE-ON-SALE CLAUSE ENFORCEMENT
11.3.1 ENFORCEMENT REQUIREMENT. The Servicer is required to enforce the
Due-on-Sale Clause on any Mortgage Loan to the extent permitted by applicable
law upon the transfer of title of the related Mortgaged Property unless (a) a
Mortgage Loan is assumable pursuant to the terms of the related Mortgage Note
Assumption Rider, or (b) enforcement of the Due-on-Sale Clause will jeopardize
the Primary Mortgage Insurance coverage on such Mortgage Loan.
11.3.2 LITIGATION CONSIDERATIONS. Where, in the Servicer's judgment,
the issue of enforceability is reasonably expected to be litigated, the Servicer
will obtain the written consent of the Master Servicer before enforcing any
Due-on-Sale Clause.
11.3.3 APPROVAL REQUIREMENT. In all circumstances of an unapproved
transfer of a Mortgaged Property initiated by the Borrower, the Servicer is
required to promptly notify the Master Servicer and, where applicable, the
respective Primary Mortgage Insurer and/or the respective Pool Insurer, of such
transfer and obtain written approval before initiating enforcement proceedings.
11.3.4 EXEMPT TRANSACTIONS. (a) The Servicer will not be required to
enforce the due-on-sale (or transfer) provision of this Agreement for certain
types of property transfers or related transactions. The Servicer will process
these exempt transactions without the approval or notification of the Master
Servicer. In each case, the Mortgaged Property will remain subject to the lien
of the related Mortgage Loan, and each transferee or grantee described below
shall take subject to such lien. The following transactions shall be deemed to
be exempt transactions and will require the review and approval of the Servicer
only prior to transfer:
(i) a transfer of the Mortgaged Property to the surviving
party on the death of a joint tenant or a tenant by
the entirety;
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(ii) a transfer of the Mortgaged Property to a junior
lienholder as the result of a foreclosure or the
acceptance of a deed in lieu of foreclosure for the
subordinate mortgage;
(iii) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) to a
relative of a deceased Borrower (or, in the case of
an INTER VIVOS revocable trust Borrower, to a
relative of the individual who established the
trust), provided that the transferee will occupy the
Mortgaged Property;
(iv) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) to
the spouse, child(ren), parent(s), brother(s), or
sister(s), grandparent(s), or grandchild(ren) of the
Borrower (or, in the case of an INTER VIVOS revocable
trust Borrower, of the individual who established the
trust), provided that the transferee will occupy the
Mortgaged Property;
(v) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) to a
spouse of the Borrower (or, in the case of an INTER
VIVOS revocable trust Borrower, of the individual who
established the trust) under a divorce decree or
legal separation agreement or from an incidental
property settlement agreement, provided that the
transferee will occupy the Mortgaged Property;
(vi) a transfer of a Mortgaged Property that is jointly
owned by unrelated coborrowers from one of the
Borrowers to the other, provided that the Borrower
who is gaining full ownership of the Mortgaged
Property will continue to occupy it and the transfer
occurs after at least 12 months have elapsed since
the Mortgage Loan was closed;
(vii) a transfer of the Mortgaged Property (or, if the
Borrower is an INTER VIVOS revocable trust, a
transfer of a beneficial interest in such trust) into
an INTER VIVOS revocable trust (or, if the Borrower
is an INTER VIVOS revocable trust, into a new trust),
so long as the Borrower (or the individual who
established the original INTER VIVOS revocable trust)
will be the beneficiary of the trust and the occupant
of the Mortgaged Property;
(viii) the granting of a leasehold interest in the Mortgaged
Property that has a term of three or fewer years and
does not provide an option to purchase the Mortgaged
Property, or a renewal option that would allow the
term to extend beyond three years;
(ix) the creation of a subordinate lien upon the Mortgaged
Property, provided that there is no transfer of
occupancy rights therein; or
(x) the creation of a purchase money security interest
for household appliances which are situated in or
upon the Mortgaged Property.
(b) If the individual or entity transferring the Mortgaged Property requests a
release of liability, the Servicer must review the credit and financial capacity
of the individual or entity receiving the Mortgaged Property. The Servicer may
approve the release of liability if it believes the recipient is capable of
assuming the mortgage obligations and, where applicable, with the
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consent of the respective Primary Mortgage Insurer and/or the respective Pool
Insurer. If the Servicer does not believe that the recipient is credit worthy or
if the consent of the respective Primary Mortgage Insurer and/or the respective
Pool Insurer is required but not obtained, the Servicer shall deny the request
for the release of liability, although the transfer may still be processed
without the release. If the request is denied based solely on the Primary
Mortgage Insurer's or the respective Pool Insurer's decision, the denial letter
should state that fact. (c) The Servicer shall advise (i) each insurance company
providing Hazard Insurance and Flood Insurance, where applicable, (ii) the
relevant tax authorities, where applicable, (iii) the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, and (iv) other interested
parties when it processes transactions under this Section 11.3.4. The Master
Servicer does not need to be notified about such a transaction unless the
Servicer agrees to a release of liability under Section 11.3.4(b).
Section 11.4 ASSUMPTIONS
11.4.1 ASSUMPTION REQUIREMENTS. Any Assumption permitted under this
Agreement shall be performed in accordance with Prudent Servicing Practices. In
connection with an Assumption of an assumable Mortgage Loan, the Servicer shall
process such Assumption as provided for in the Mortgage Note or the Mortgage
Note Assumption Rider and shall verify that:
(a) no material term of the Mortgage Note (including, but
not limited to, the Mortgage Interest Rate, the
remaining term to maturity, the Gross Margin, the
Index, the Maximum Lifetime Mortgage Interest Rate,
the Minimum Lifetime Mortgage Interest Rate, and any
Periodic Rate Cap or any Periodic Payment Cap) may be
changed in connection with such
Assumption;
(b) that the new Borrower qualifies for credit under the
Master Servicer's criteria and standards for similar
loans;
(c) where applicable, the respective Primary Mortgage
Insurer, and/or the respective Pool Insurer has in
advance approved in writing such Assumption of such
Mortgage Loan by the new Borrower and such Mortgage
Loan will continue to be insured by such Primary
Mortgage Insurer and/or such Pool Insurer;
(d) the documents relating to such Assumption (i) create
a valid and enforceable promise to pay the Unpaid
Principal Balance of the related Mortgage Loan,
together with interest thereon in accordance with the
related Mortgage Note by the new Borrower, and (ii)
the related Security Instrument continues to evidence
a valid and perfected first lien on the related
Mortgaged Property; and
(e) such Mortgage Loan will continue to be a valid first
priority security interest upon the related Mortgaged
Property.
11.4.2 APPROVAL AND RELEASE. In connection with an Assumption of an
assumable Mortgage Loan and in accordance with the provisions of the related
Mortgage Loan Documents,
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upon such verification, (a) the Servicer may approve such Assumption and (b)
only with the prior written approval of, where applicable, the Primary Mortgage
Insurer and/or the Pool Insurer, unless such approval is precluded by the terms
of the Mortgage Loan Documents, release the previous Borrower from liability.
11.4.3 NOTIFICATION OF ASSUMPTION. The Servicer shall notify the Master
Servicer of any Assumption by the tenth calendar day of the month following the
month in which the Assumption took place using the Assumption Report and shall
provide to the Custodian the original assumption agreement.
11.4.4 ASSUMPTION FEES. Subject to applicable law or regulation and the
provisions of the related Mortgage Note, the Servicer may charge the Borrower
and retain a reasonable and customary assumption fee. Such fee is receivable
only from the Borrower directly and may not be withdrawn from any of the
custodial accounts maintained hereunder.
11.4.5 DISCLOSURE REQUIREMENT. In connection with an Assumption of an
assumable Mortgage Loan, the Servicer shall make all disclosures required by
applicable law.
Section 11.5 PARTIAL RELEASES AND EASEMENTS
11.5.1 PREREQUISITES. The Servicer must take the following actions
prior to permitting the grant of a partial release of a Mortgaged Property from
the lien of the related Security Instrument, easement, consent to substantial
alterations and any other changes affecting the related Mortgage Loan or such
Mortgaged Property:
(a) where applicable, obtain the respective Primary
Mortgage Insurer's and/or the respective Pool
Insurer's prior written approval;
(b) if the value of the released property is more than
five thousand ($5,000) dollars, obtain an acceptable
Appraisal Report showing the current market value of
such Mortgaged Property before and after the release
and showing individually both the value of the land
and of the improvements thereon;
(c) ensure that any and all cash consideration received
at least equals the current market value of property
or rights to be released regarding such Mortgaged
Property;
(d) ensure that any and all cash consideration received
is applied to the Unpaid Principal Balance of such
Mortgage Loan to the extent of the diminution of the
value of such Mortgaged Property;
(e) cause all legal documents for the transaction to be
reviewed;
(f) ensure that such Mortgaged Property, following such
release or change, adequately secures the Unpaid
Principal Balance of the Mortgage Loan and accrued
interest thereon and that the related Loan-to-Value
ratio will not be greater than 80%, after giving
effect to clause (d) hereof; and
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(g) obtain written notification from the respective Title
Insurer that the related Title Insurance policy
remains fully in effect with respect to such
Mortgaged Property, as modified, following such
release or change.
11.5.2 RELEASE OR MODIFICATION OF LIEN. With the consent, where
applicable, of the respective Primary Mortgage Insurer, and/or the respective
Pool Insurer, the Servicer may approve applications for partial release of a
Mortgaged Property from the lien of the related Security Instrument, easements,
consent to substantial alterations and any other changes affecting the related
Mortgage Loan or such Mortgaged Property if the prerequisites in Section 11.5.1
have been satisfied. The Servicer shall promptly notify the Master Servicer of
any approval under Section 11.5.1. and this Section 11.5.2 affecting the lien
upon a Mortgaged Property.
11.5.3 MASTER SERVICER'S APPROVAL. If the Servicer is not able to meet
the prerequisites specified in Section 11.5.1 or if the amount of consideration
received is less than the reduction in the value of the Mortgaged Property due
to the partial release or other changes, the Servicer must obtain the approval
of the Master Servicer prior to permitting an application described in Section
11.5.2. The Servicer shall furnish such information as the Master Servicer shall
request in connection with an application under this Section 11.5.3.
Section 11.6 RECORDATION OF ASSIGNMENTS
11.6.1 RECORDATION REQUIREMENT. Regarding the initial acquisition of
the Mortgage Loans pursuant to the Sales Agreement, the Servicer must, at its
own expense, record the Assignment of each Security Instrument to the Owner of
the related Mortgage Loan, as well as any previously unrecorded intervening
Assignments. If any such Security Instrument or Assignment is not recorded
within the later to occur of (i) the date 120 days after the acquisition of the
related Mortgage Loan by its Owner, if the Servicer has been servicing such
Mortgage Loan from such Owner's date of acquisition or (ii) the date 120 days
after the date the Servicer began servicing such Mortgage Loan, the Master
Servicer will have the right to so effect such recordation at the Servicer's
expense.
11.6.2 EXTENSION OF RECORDING PERIOD. The time to record an Assignment
of a Security Instrument may be extended from the end of permissible recordation
period set forth in Section 11.6.1 if the Servicer provides an Officer's
certificate acceptable to the Master Servicer certifying that the Servicer has
used its best efforts to complete the recordation process for the Security
Instrument and/or Assignment, as applicable, and that the factors preventing
completion of the recordation process are beyond the Servicer's control.
11.6.3 DELIVERY REQUIREMENT. Promptly following the recordation of any
Security Instrument or an Assignment, the Servicer will deliver to the
Custodian, unless otherwise directed in writing by the Master Servicer, such
Security Instrument or Assignment bearing evidence of recordation or, if the
original Security Instrument or Assignment is retained by the recording office,
a certified copy of the original recorded Security Instrument or Assignment.
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11.6.4 WAIVER OF RECORDATION. The Master Servicer will generally
require the Servicer to record an Assignment of the Security Instrument for each
Mortgage Loan to the Owner of related Mortgage Loan. However, the recordation
requirement with respect to an Assignment may be waived for a Mortgage Loan if
(a) the related Mortgaged Property is in a state in which recordation of such an
Assignment is not required to protect the Owner of the related Mortgage Loan's
right, title and interest in and to the related Mortgage Loan and (b) the Seller
or the Servicer has delivered to the Master Servicer an opinion of counsel,
acceptable to the Master Servicer, to that effect.
Section 11.7 GENERAL SERVICING CONSIDERATIONS
11.7.1 ABANDONMENT. If the Servicer discovers that any Mortgaged
Property is not occupied, the Servicer must immediately attempt to contact the
Borrower in order to determine the reason for the vacancy. If the Servicer
determines that such Mortgaged Property has been abandoned, the Servicer, at its
own expense, must take all necessary actions to protect such Mortgaged Property
from waste, damage and vandalism. Such expenses shall be recoverable by the
Servicer solely from the Liquidation Proceeds of the related Mortgage Loan, if
any, or directly from the Borrower.
11.7.2 BUYDOWN FUNDS. The Servicer must distribute any Buydown Funds in
each Custodial Buydown Account in accordance with the terms of the applicable
Buydown Agreement.
11.7.3 NOTIFICATION MATTERS. Based upon information obtained pursuant
to its obligations under Section 12.2.6, the Servicer shall (i) maintain
accurate records of and (ii) except in the case of paragraph (f) hereof
involving a monetary default of the Borrower addressed by Article 12 hereof,
immediately notify the Master Servicer upon discovering any of the following:
(a) deterioration of, waste of, or lack of repair to, any
Mortgaged Property, which materially and adversely
affects the Value of such Mortgaged Property and the
Borrower refuses or is not financially able to make
the necessary repairs;
(b) sale or transfer of any Mortgaged Property in a
manner not approved by the Servicer pursuant to the
provisions of this Agreement;
(c) material litigation involving any Mortgaged Property;
(d) abandonment of any Mortgaged Property;
(e) a material default, determined in accordance with
Prudent Servicing Practices, under the terms of any
Security Instrument, Mortgage Note, Condominium
Project or PUD constituent document or similar
obligations of a Borrower; or
(f) any other situation that may materially and adversely
affect the value of any Mortgage Loan.
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11.7.4 EMINENT DOMAIN. The Servicer must submit appropriate
recommendations and documentation to the Master Servicer and, where applicable
the respective Primary Mortgage Insurer and/or the respective Pool Insurer, of
any taking by eminent domain if:
(a) the Mortgaged Property will be taken in whole and the
consideration to be paid to the Borrower will be
insufficient to satisfy the Unpaid Principal Balance
(plus any unreimbursed Advances) of the related
Mortgage Loan, or
(b) the Mortgaged Property will be taken in part and (i)
the ratio of the (A) Unpaid Principal Balance (plus
any unreimbursed Advances) of the Mortgage Loan to
(B) the Current Value of the remaining Mortgaged
Property is higher than (ii) the LTV ratio of the
Mortgage Loan immediately before the taking, even
after applying any consideration to the Unpaid
Principal Balance of the Mortgage Loan.
The Servicer must take all steps necessary to prevent loss of any Primary
Mortgage Insurance or Pool Insurance benefits due to any taking by eminent
domain.
11.7.5 LATE CHARGES. Late charges may not be assessed unless a Borrower
failed to make payments in accordance with the Mortgage Note.
Section 11.8 BORROWER BANKRUPTCY
11.8.1 SERVICER'S DUTY. The Servicer will be responsible for
representing the interests of the Owner of the related Mortgage Loan in any
bankruptcy proceedings involving a Borrower.
11.8.2 RESPONSIBILITY FOR COSTS. The costs of protecting the interests
of the Owner of a Mortgage Loan shall be advanced by the Servicer and are not
(a) chargeable to the related Borrower's Escrow Funds or (b) reimbursable from
the Master Servicer.
11.8.3 CHALLENGE BANKRUPTCY REDUCTIONS. If the bankruptcy judge or
trustee should propose to (a) reduce the Unpaid Principal Balance of a Mortgage
Note, (b) reduce the related Mortgage Interest Rate, (c) extend the final
maturity of such Mortgage Note, or (d) reduce the level of any monthly payment
on such Mortgage Note, the Servicer shall (i) challenge any such modification on
a timely basis, (ii) notify the Master Servicer immediately, and (iii) follow
the Master Servicer's instructions regarding the bankruptcy proceedings, and in
the absence of explicit instructions, exercise reasonable judgment to protect
the interests of the Owner of such Mortgage Loan.
11.8.4 BANKRUPTCY ADJUSTMENTS. If the action of any court results in a
Deficient Valuation or Debt Service Reduction, the Servicer will provide a
calculation of the effects of such modification notifying the Master Servicer of
the new principal balance, Mortgage Interest Rate, new final maturity, or
monthly payment level, as the case may be, of such Mortgage Loan.
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11.8.5 BANKRUPTCY PLAN SURVEILLANCE. With respect to each Mortgage Loan
which is the subject of a Deficient Valuation or a Debt Service Reduction, the
Servicer shall verify that payments are being made in accordance with the plan
approved in the related bankruptcy proceedings.
Article 12
DELINQUENCY MANAGEMENT
Section 12.1 IN GENERAL
12.1.1 SERVICING PRACTICES. The provisions set forth in this Article
constitute the minimum guidelines and procedures for servicing Delinquent
Mortgage Loans. The Servicer must use collection procedures which meet or exceed
these guidelines. The Servicer's procedures must be sufficient for promptly
dealing with delinquencies. The Master Servicer retains the right to require the
Servicer to perform additional collection procedures which the Master Servicer
deems, in its reasonable discretion, necessary to realize the objectives set
forth herein or otherwise to protect the interests of the Owner of the related
Mortgage Loan.
12.1.2 SERVICER'S CAPABILITIES. The Servicer's collection staff must be
sufficiently skilled in financial counseling and mortgage servicing techniques
to assist a Borrower to bring his Mortgage Loan current and to protect his
equity and credit rating, while at the same time protecting the interests of the
Owner of the related Mortgage Loan and of the Master Servicer.
12.1.3 SERVICING OBJECTIVES. The purpose of any collection effort is to
cure a Delinquency in the shortest possible time. The Servicer should treat each
Delinquency individually. Discussions with the Borrower must cover the cause of
such Delinquency and the time frame in which such Delinquency will be cured. The
Servicer should use notices, letters, telegrams, telephone calls, face-to-face
contact and other responsible collection techniques consistent with Prudent
Servicing Practices. The Servicer is required to maintain all collection
records. The Servicer must vary its collection techniques to fit individual
circumstances, avoiding a fixed collection pattern which may be ineffective in
dealing with particular Borrowers. The Servicer should recognize the importance
of telephone and face-to-face contact in any collection program. As part of its
collection procedures, the Servicer shall closely monitor all newly originated
Mortgage Loans.
12.1.4 SERVICER'S EXPENSES. Unless otherwise specified, the cost of any
of the servicing procedures detailed in this Agreement shall be borne solely by
the Servicer. The Servicer may not charge such expenses against the Borrower's
Escrow Funds. The foregoing shall not preclude the Servicer from recovering such
expenses from the Borrower to the extent permitted by applicable law and the
related Mortgage Loan Documents.
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Section 12.2 DELINQUENCY SERVICING PROCEDURES
12.2.1 LATE NOTICE. A late notice shall be mailed by the Servicer to
the Borrower by the 18th day of such Delinquency.
12.2.2 TELEPHONIC INQUIRY. The Servicer shall use best efforts to make
telephone contact with the Borrower by the 20th day of such Delinquency.
12.2.3 NOTICE OF DEFAULT. Notification of default of such Mortgage Loan
shall be mailed by the Servicer to the Borrower by the 35th day of such
Delinquency.
12.2.4 BORROWER INTERVIEW. The Servicer shall use best efforts to
conduct a face-to-face interview between the 45th day and the 60th day of such
Delinquency if satisfactory arrangements to cure the Delinquency have not been
made. If, for geographic reasons, a facetoface meeting is not feasible, an
in-depth telephone interview may be conducted instead.
12.2.5 CONTINUING CONTACTS. If satisfactory arrangements have not been
made to cure such Delinquency by the 90th day, the Servicer must continue to
contact the Borrower until either the related Mortgage Loan has been brought
current or the Servicer has made a recommendation in writing to the Master
Servicer for foreclosure of such Mortgaged Property or other action.
12.2.6 PROPERTY INSPECTION. The Servicer is required to inspect each
Mortgaged Property no later than the 60th day of the Delinquency if no
satisfactory arrangements have been made to cure such Delinquency of the related
Mortgage Loan. The inspection should determine the physical condition and the
occupancy status of such Mortgaged Property. The Servicer is required to inspect
such Mortgaged Property monthly after the 60th day of such Delinquency until
such Delinquency is cured or the related Mortgage Loan is Liquidated. The
results of any inspection should be used in determining whether a recommendation
for foreclosure or for the transfer of deed-in-lieu of foreclosure is necessary.
The Servicer must prepare a Property Inspection Report following each
inspection. All Property Inspection Reports must be retained by the Servicer and
copies thereof must be forwarded to the Master Servicer promptly upon request.
All expenses related to the foregoing shall be borne by the Servicer and such
expenses shall not be recoverable by the Servicer from the Master Servicer or
the Principal or from Liquidation Proceeds, Insurance Proceeds, payments on the
related Mortgage Loan or any other source relating to the related Mortgage Loan
or the related Mortgaged Property. The foregoing shall not preclude the Servicer
from recovering such expenses from the Borrower to the extent permitted by
applicable law and the related Mortgage Loan Documents.
Section 12.3 RELIEF OF BORROWERS
12.3.1 SERVICER'S ROLE. The Servicer shall be readily available to
Borrowers to offer skilled financial counsel and advice and shall make personal
contact with delinquent Borrowersas often as possible to achieve a solution that
will bring the Mortgage Loan current as soon as
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possible. The Servicer shall be fully familiar with the form of relief to
Borrowers provided for herein and will employ such relief.
12.3.2 SERVICER'S DISCRETION. The Servicer shall have reasonable
discretion to extend appropriate relief to Borrowers who encounter hardship and
who are cooperative and demonstrate proper regard for their obligations.
However, no such relief shall be granted to any Borrower under a Mortgage Loan
unless the Servicer reasonably believes that there is a reasonable expectation
that such Borrower will bring his Mortgage Loan current within 180 days
following the onset of Delinquency. Further, without the consent of the Master
Servicer, no such relief shall be granted other than with respect to a Mortgage
Loan that has at least a 31-day Delinquency.
12.3.3 RELIEF REQUIREMENT. Prior to granting relief with respect to a
delinquent Mortgage Loan as herein provided, the Servicer shall ascertain that
(i) the reasons for the default and (ii) the attitude and circumstances of such
Borrower justify the relief to be granted.
12.3.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. Where applicable, the
Servicer shall satisfy all requirements under the applicable Primary Mortgage
Insurance policy regarding the relief granted with respect to a delinquent
Mortgage Loan.
12.3.5 RESPONSIBILITY FOR COSTS. The Servicer is responsible for
collection from such Borrower of any recording or similar costs or expenses
incidental to the granting of relief with respect to a delinquent Mortgage Loan.
12.3.6 FORBEARANCE PLAN. Where relief is appropriate, the Servicer
shall arrange with a Borrower a "Forbearance Plan" giving such Borrower a
definite period in which to reinstate his Mortgage Loan by immediately
commencing payments in excess of the regular Monthly Payments. Without the prior
written consent of the Master Servicer, special forbearance relief agreements
reducing or suspending the regular Monthly Payment of the related Mortgage Loan
for a specified period of time are not permitted. To the extent that (i) the
priority of the lien represented by such Mortgage Loan remains in effect and is
not adversely affected, (ii) where applicable, the related Primary Mortgage
Insurance policy remains in full force and effect, and (iii) where applicable,
the related Pool Insurance policy remains in full force and effect, the
Servicer, in its discretion, may enter into a Forbearance Plan that provides
that the total amount owed during such Delinquency, including costs and
expenses, will be repaid within the shortest period practicable, commencing
immediately. With respect to such Mortgage Loan, the Forbearance Plan shall
provide that such Delinquency will be cured within 180 days after the Due Date
of the earliest unpaid installment, unless the Master Servicer and, where
applicable, the respective Pool Insurer and/or the respective Primary Mortgage
Insurer, consent to a longer period of tine. The Forbearance Plan for such
Mortgage Loan shall be set forth in writing and executed by the Borrower and by
the Servicer in the form of a letter agreement if the earliest unpaid
installment is more than 60 days past due.
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12.3.7 ACCOMMODATION LIMITATIONS. No modification, recast, extension,
or capitalization of delinquent payments of a Mortgage Loan other than as
provided in Section 12.3.6 hereof shall be permitted with respect to a Mortgage
Loan unless there is at least a 90-day Delinquency with respect to such Mortgage
Loan unless permitted by the Master Servicer.
12.3.8 POOL INSURANCE CONSIDERATIONS. Where applicable, the Servicer
shall satisfy all requirements under the applicable Pool Insurance policy
regarding the relief granted with respect to a delinquent Mortgage Loan,
including, without limitation, securing the prior written consent of the
respective Pool Insurer regarding (a) any change in any term of such Mortgage
Loan, (b) the release of the related Borrower from any liability related to such
Mortgage Loan, or (c) the release of any portion of, or interest in, the
Mortgaged Property from the lien of the related Security Instrument.
Section 12.4 SPECIAL DELINQUENCY SERVICING CONSIDERATIONS
12.4.1 ADVANCE RESPONSIBILITY DURING DELINQUENCY. In the event of a
Delinquency with respect to a Mortgage Loan, the Servicer agrees to advance from
its own funds the full amount of Monthly Payments (which may be net of the
related Servicing Fee) for such Mortgage Loan. These advances shall provide the
Owner of such Mortgage Loan with a regular flow of funds on such delinquent
Mortgage Loan. The advance obligation stated above is in addition to any other
advance obligations which the Servicer has pursuant to the provisions of this
Agreement. The Servicer must still advance funds in accordance with the
provisions of this Agreement even if a forbearance has been granted.
12.4.2 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Where applicable, the
Servicer shall be familiar with and shall satisfy all requirements of the
applicable Primary Mortgage Insurance policy with respect to a delinquent
Borrower. The Servicer shall have adequate controls to assure timely filing of
all notices to the appropriate Primary Mortgage Insurer. The Servicer shall
prepare and file all appropriate claims with respect to the applicable Primary
Mortgage Insurance policy, and the Servicer shall prepare and deliver to the
Master Servicer copies of all claims forms and other papers received from or
presented to any Primary Mortgage Insurer in connection with any claims
presented under any such policy, unless the Servicer is otherwise instructed by
the Master Servicer.
12.4.3 POOL INSURANCE COMPLIANCE. Where applicable, the Servicer shall
be familiar with and shall satisfy all requirements of the applicable Pool
Insurance policy with respect to a delinquent Borrower. The Servicer shall have
adequate controls to assure timely filing of all notices to the appropriate Pool
Insurer. Copies of all such notices shall be sent to the Master Servicer, unless
otherwise instructed. The Servicer shall prepare and file all appropriate claims
with respect to the applicable Pool Insurance policy, and the Servicer shall
prepare and deliver to the Master Servicer copies of all claims forms and other
papers received from or presented to any Pool Insurer in connection with any
claims presented under any such policy, unless the Servicer is otherwise
instructed by the Master Servicer.
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Article 13
FORECLOSURE ADMINISTRATION
Section 13.1 FORECLOSURE PREREQUISITES
13.1.1 CHRONIC DELINQUENCY. If a Borrower is chronically delinquent and
the Servicer, based upon Prudent Servicing Practices, has exhausted all
reasonable means of curing the Delinquency, the Servicer must realize upon the
related defaulted Mortgage Loan in accordance with Prudent Servicing Practices
and recommend either (i) the commencement of foreclosure procedures or (ii) an
alternate to foreclosure, each in accordance with the terms of the related
Security Instrument and applicable law.
13.1.2 LIQUIDATION RECOMMENDATION. Prior to the commencement of any
action to foreclose on a Mortgaged Property, or prior to the acceptance of a
deed-in-lieu of foreclosure, the Servicer shall notify the Master Servicer and,
where applicable, the respective Primary Mortgage Insurer and/or the respective
Pool Insurer, of the Servicer's recommendation as to whether foreclosure should
be commenced, or a deed-in-lieu of foreclosure accepted, and, where applicable,
shall provide all other notices, reports or information required by the Master
Servicer or the applicable Primary Mortgage Insurance policy and/or Pool
Insurance policy. If the respective prior approval of the Master Servicer and,
where applicable, the respective Primary Mortgage Insurer and/or the respective
Pool Insurer, is not withheld, the Servicer shall initiate foreclosure or accept
a deed-in-lieu of foreclosure, as the case may be. Where such Mortgaged Property
is covered by a Primary Mortgage Insurance policy and/or Pool Insurance policy,
if the respective Primary Mortgage Insurer or the respective Pool Insurer, as
the case may be, withhold its approval, the Servicer shall act according to the
respective Primary Mortgage Insurer's instructions or the respective Pool
Insurer's instructions provided such actions are consistent with, and
contemplated by, the applicable Primary Mortgage Insurance policy or the
applicable Pool Insurance policy, as the case may be. Notwithstanding any of the
foregoing, if the Master Servicer directs the Servicer to follow a course of
action regarding the liquidation of a Mortgaged Property, the Servicer shall
follow the Master Servicer's instructions.
13.1.3 FORECLOSURE EXPENSES. All fees and expenses shall be consistent
with FNMA standards and, where applicable, shall not exceed those permitted
under the respective Pool Insurance policy and/or the respective Primary
Mortgage Insurance policy. Fees in excess of the amount permitted by FNMA
guidelines or extraordinary legal services must be approved in writing in
advance by the Master Servicer, and, where applicable, by the respective Primary
Mortgage Insurer or the respective Pool Insurer, as the case may be, if required
by the applicable policy. All attorneys' fees, and other costs in excess of
FNMA's standards in respect of any foreclosure or acquisition in lieu of
foreclosure shall be identified in advance and a detailed estimate of the
amounts thereof shall be set forth in the Servicer's written recommendation. The
billing by a foreclosure attorney must demonstrate the appropriateness of any
extraordinary fees by the services required. In cases of full or partial
reinstatement of the related Mortgage Loan, the fees shall be reasonable and in
proportion to the authorized fee for
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services rendered for a completed foreclosure. Unless otherwise expressly agreed
in writing, neither the Master Servicer, any of its Affiliates, their respective
officers, directors, employees, agents, successors or assigns, the Owner of the
related Mortgage Loan, nor any beneficial owners thereof shall be liable for any
attorneys' fees, trustees' fees, witness fees, title search fees, court costs or
other expenses incurred by the Servicer in respect of any foreclosure or
acquisition in lieu of foreclosure, except to the extent that such fees, costs
and expenses are fully reimbursable under a Primary Mortgage Insurance policy
and in fact are reimbursed.
13.1.4 HAZARDOUS WASTES. In the event that the Mortgaged Property,
related to a Mortgage Loan which is being considered for liquidation by
foreclosure or the transfer of a deed-in-lieu of foreclosure, contains, and the
Servicer has reason to believe that it contains, hazardous or regulated
substances which may impose liability, for damages, remediation or otherwise,
upon the owner of such Mortgaged Property pursuant to Federal, State or local
law, the Servicer shall not, except with the express prior written approval of
the Master Servicer, which approval makes specific reference to the presence of
such hazardous or regulated substances, undertake or continue the process of
foreclosure with respect to such Mortgaged Property.
Section 13.2 DEED-IN-LIEU OF FORECLOSURE
13.2.1 CONDITIONS. If the Master Servicer and the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, if applicable, have
approved the liquidation of a Mortgage Loan by accepting a deed-in-lieu of
foreclosure of the related Mortgaged Property, the Servicer may accept such deed
without any further action or approval by the Master Servicer or, where
applicable, the respective Primary Mortgage Insurer and/or the respective Pool
Insurer, provided that:
(a) the Servicer determines that the pursuit of a
deficiency judgment is not practical or warranted;
(b) the Mortgaged Property has been listed for sale at a
market value for three months or more without a
reasonable sales offer;
(c) there reasonably appear to be legal impediments to
pursuing foreclosure;
(d) the acceptance of the deed-in-lieu of foreclosure
will enable the Owner of the related Mortgage Loan to
acquire the Mortgaged Property earlier than under a
foreclosure action;
(e) the Borrower acknowledges in writing that the deed is
being accepted as an accommodation to him or her;
(f) where applicable, the respective Primary Mortgage
Insurer and/or the respective Pool Insurer has agreed
to the acceptance of a deed-in-lieu;
(g) the Borrower has not received cash consideration to
deed the Mortgaged Property over to the Owner of the
related Mortgage Loan, unless the Master Servicer
otherwise approves;
(h) the Borrower can convey acceptable marketable title,
evidenced by a Title Insurance policy;
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(i) the Mortgaged Property is vacant (unless, where
applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer has agreed to
accept an occupied property);
(j) the Mortgaged Property is not subject to liens (held
by others), judgments, or attachments; and
(k) the Borrower agrees to assign and transfer to the
benefit of the Owner of the related Mortgage Loan,
where applicable, any rents if the Mortgaged Property
is rented, and the Servicer agrees to collect any
rental income.
13.2.2 SUBSEQUENT ACTIONS. Upon acquisition by the Owner of the related
Mortgage Loan of such Mortgaged Property, the Servicer shall promptly notify the
Master Servicer and, if applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer, indicating the details of the transaction
and reasons for the conveyance and providing such other information as is
required under a Primary Inspection Report to the Master Servicer and, if
applicable, to the Primary Mortgage Insurer and/or the Pool Insurer. Title shall
be conveyed directly from the Borrower to the Owner of the related Mortgage Loan
or to such other Person designated by the Master Servicer.
Section 13.3 ACTIONS PRIOR TO FORECLOSURE
13.3.1 NOTICE REQUIREMENTS. The Servicer shall send the Borrower a
letter, not less than 30 days before the commencement of foreclosure
proceedings, setting out (i) the nature of the default, (ii) the steps that must
be taken by the Borrower to cure the default, and (iii) the date when
foreclosure proceedings will begin. If the Servicer has reason to believe that
the related Mortgaged Property has been abandoned or if the Borrower has
displayed an obvious disregard for his obligations under such Mortgage Loan, the
foregoing notice shall be forwarded at the earliest possible date following the
Borrower's default.
13.3.2 INITIATION OF PROCEEDINGS. If foreclosure approval has not been
withheld by the Master Servicer and, where applicable, by the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, with respect to a Mortgaged
Property, the Servicer shall initiate or cause to be initiated such foreclosure
actions as are authorized by law and consistent with practices in the locality
where the Mortgaged Property is located. If such Mortgaged Property has been
abandoned or vacated by the Borrower and the Borrower has evidenced no intention
of honoring his obligations under the related Mortgage Loan, the foreclosure
process shall be expedited to the fullest extent permitted by law.
Section 13.4 FORECLOSURE PROCEDURES
13.4.1 FORECLOSURE EXPENSES. During the period in which the Mortgaged
Property related to a Mortgage Loan is being foreclosed, remaining Escrow Funds,
if any, as well as any rent receipts, shall be used to pay all taxes and
insurance premiums that become due with respect to such Mortgaged Property to
the extent permitted by law. Except where other arrangements have been made with
the applicable Primary Mortgage Insurer, the Servicer shall, with respect
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to each Mortgaged Property undergoing foreclosure, advance payment of attorneys'
fees, trustees' fees and other foreclosure costs from the commencement of
foreclosure proceedings pertaining to such Mortgaged Property.
13.4.2 BIDDING INSTRUCTIONS. (a) The Servicer shall issue bidding
instructions to the attorney or trustee in a foreclosure proceeding. Where
applicable, the Servicer shall incorporate any bidding requirements issued by
the respective Primary Mortgage Insurer and/or the respective Pool Insurer. Any
proceeds received from an insurance loss settlement shall be included as part of
the bid amount. Where a claim or claim settlement under a Hazard Insurance or
Flood Insurance policy is pending, the Servicer shall contact the Hazard
Insurance or Flood Insurance carrier to verify that the proposed bid will not
invalidate the claim, in that, in certain jurisdictions, a bid for the total
indebtedness will be considered as satisfaction of the debt and would thus bar
the Hazard Insurance or Flood Insurance claim.(b) The Servicer's bidding
instructions to the attorney or trustee in a foreclosure proceeding shall be to
enter a bid amount which is the lesser of (i) the total amount of indebtedness,
which shall include the Unpaid Principal Balance, unpaid accrued interest up to,
and including, the date of the sale (calculated using the interest rate in
effect for each payment on the date it became due), any T&I Advances and other
servicing Advances including, without limitation, foreclosure costs and any
reimbursable property inspection fees or (ii) the fair market value of the
related Mortgaged Property established by a current broker's price opinion. (c)
If the Servicer is not able to comply with the bidding instructions outlined in
subsection (b) hereof, the Servicer shall request from the Master Servicer an
initial bid amount and bidding instructions for the Servicer to follow at the
applicable foreclosure sale. In no event shall the bidding instructions from the
Master Servicer supersede or invalidate the bidding instructions provided by the
respective Primary Mortgage Insurer and/or respective Pool Insurer, where
applicable.
13.4.3 BUYDOWN FUNDS USE. Unless the related Buydown Agreement provides
otherwise, the Servicer may not use Buydown Funds relating to a Mortgage Loan to
cure a Delinquency with respect to such Mortgage Loan. Any Buydown Funds
remaining in the associated Custodial Buydown Account of a Mortgage Loan in
foreclosure must be disposed of in accordance with the terms of the related
Buydown Agreement.
13.4.4 SERVICER'S RESPONSIBILITIES. Subject to the provisions of
Article Three hereof, after acquisition of a Mortgaged Property, through
foreclosure or a deed-in-lieu of foreclosure, or after the Servicer shall have
taken possession of the Mortgaged Property, whichever occurs first, the Servicer
shall be responsible for the management of such Mortgaged Property. The Servicer
shall remain responsible until possession has been assumed by the applicable
Primary Mortgage Insurer or the applicable Pool Insurer or until such Mortgaged
Property are otherwise disposed of, as the case may be. The Servicer shall take
such action as is necessary to protect the Owner of the related Mortgage Loan's
security or, after acquisition thereof, ownership interest in such Mortgaged
Property. Such action shall include, without limitation, (i) management of such
Mortgaged Property, (ii) maintenance of such Mortgaged Property, and (iii) if
such Mortgaged Property is vacant, protection of such Mortgaged Property against
vandals and the elements.
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13.4.5 CONVEYANCE DOCUMENTS. Where applicable, any conveyance by the
Servicer to the respective Primary Mortgage Insurer or the respective Pool
Insurer of a Mortgaged Property shall be made by the form of deed commonly used
in the particular jurisdiction where such Mortgaged Property is located. The
Servicer shall prepare the necessary documents within two weeks after the date
of sale at foreclosure or confirmation of sale, if applicable, or within a
reasonable time frame. The documents shall be forwarded to the Master Servicer
for approval and execution. After execution by the Owner of the related Mortgage
Loan, such documents will be returned to the Servicer for delivery to the
respective Primary Mortgage Insurer or the respective Pool Insurer which is
acquiring such Mortgaged Property.
Section 13.5 MORTGAGE LOAN REINSTATEMENT
13.5.1 BORROWER'S FULL PAYMENT. If a Borrower offers to fully reinstate
his Mortgage Loan during the foreclosure process, the Servicer shall accept the
offer. To achieve full reinstatement of his Mortgage Loan, a Borrower shall make
payment of all (i) payments due to bring such Mortgage Loan current, (ii)
attorneys' fees, (iii) trustees' fees, (iv) any additional legal costs, (v) all
applicable late fees, and (vi) any other expenditures or Advances made by the
Servicer during the foreclosure process.
13.5.2 BORROWER'S PARTIAL PAYMENT. Except where otherwise required by
applicable law, the Servicer may not accept an amount in payment from a Borrower
which is less than the amount required for full reinstatement pursuant to
Section 13.5.1 hereof toward reinstatement of a Mortgage Loan during the
foreclosure process without the prior written approval from the Master Servicer
and, where applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer.
13.5.3 OBLIGATIONS UPON REINSTATEMENT. Upon accepting the reinstatement
of a Mortgage Loan, the Servicer shall immediately contact the appropriate
foreclosure attorney or trustee to avoid incurring additional legal costs or
fees. The Servicer must apply the reinstatement Funds upon receipt from a
Borrower in payment of the expenses enumerated in Section 13.5.1 hereof. Upon
receipt of the reinstatement funds from a Borrower the Servicer must (i) notify
the Master Servicer of the reinstatement of the related Mortgage Loan and (ii)
return to the Master Servicer, the related Mortgage Note and other related
Mortgage Loan Documents for reinclusion in the related Mortgage Loan File.
13.5.4 CERTAIN ASSUMPTIONS PERMITTED. The Servicer is authorized,
notwithstanding the other provisions of this Article 13, to permit the
assumption of a defaulted Mortgage Loan rather than to foreclose or accept a
deed-in-lieu of foreclosure if, in the Servicer's judgment, the default is
unlikely to be cured and the assuming borrower meets the underwriting guidelines
that originally applied to such Mortgage Loan.
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Article 14
REO ADMINISTRATION
Section 14.1 GENERAL PROVISIONS
14.1.1 REO ACTION PLAN. With regard to each REO which is acquired, the
Servicer shall prepare a plan of action within 30 Business Days after the date
on which the Owner of the related Mortgage Loan acquires marketable title to
such REO. Each plan of action shall set forth (i) a recommendation for the most
effective manner to dispose of the REO, based on a current appraisal report, a
broker's price opinion and a market analysis; (ii) the steps to be taken by the
Servicer to secure such REO; and (iii) an estimate of the amount of time that is
required to dispose of such REO. The Servicer shall promptly submit copies of
each plan of action to the Master Servicer and, where applicable, to the
respective Primary Mortgage Insurer, and/or the respective Pool Insurer. Unless
otherwise directed by the Master Servicer, the Servicer shall implement each
plan of action in an expeditious manner. Further, the Master Servicer may
instruct the Servicer to modify any plan of action as the Master Servicer shall
direct. The Servicer shall provide the Master Servicer with monthly progress
reports with regard to each plan of action detailing the status of the related
REO and the progress achieved in implementing the plan of action.
Section 14.2 REO SERVICING
14.2.1 REO SERVICING REQUIREMENTS. The Servicer shall service each REO
from its acquisition through its disposition and shall ensure that all funds
received with respect to such REO are deposited to the appropriate Custodial P&I
Account for remittance to the Owner of the related Mortgage Loan, unless the
Master Servicer has relieved the Servicer of these responsibilities by written
notification.
14.2.2 SERVICER'S RESPONSIBILITIES. In addition to any other
obligations set forth herein, upon acquisition of
each REO, the Servicer shall be responsible for:
(a) managing, maintaining and securing such REO until it
is conveyed or sold;
(b) inspecting such REO at least once every 30 days and
promptly sending the Master Servicer an updated
Property Inspection Report;
(c) paying all taxes, insurance, maintenance, management
and foreclosure costs relating to such REO;
(d) submitting recommendations for listing and soliciting
offers on such REO;
(e) marketing such REO;
(f) completing the sale of such REO;
(g) depositing sales proceeds relating to such REO into
the appropriate Custodial P&I Account for remittance
to the Owner of the related Mortgage Loan;
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(h) where applicable, satisfying all of the Primary
Mortgage Insurer's procedural requirements and filing
all required forms and claims;
(i) where applicable, depositing Primary Mortgage
Insurance or Pool Insurance proceeds relating to such
REO into the applicable Custodial P&I Account for
remittance to the Owner of the related Mortgage Loan;
(j) processing the conveyance of such REO to the Primary
Mortgage Insurer, where applicable; and
(k) reporting (1) all changes in status of such REO and
(2) all material expenses relating to such REO to the
Master Servicer on a monthly basis.
14.2.3 NOTICE. The Servicer shall notify the Master Servicer
in writing as soon as each REO is acquired.
Section 14.3 REO RECORDS AND REPORTS
14.3.1 RECORDS RETENTION. The Servicer shall retain in its files copies
of all documents, reports and invoices described in this Section.
14.3.2 EVIDENCE OF TITLE. Evidence that title to a REO is held by the
Owner of the related Mortgage Loan shall be submitted by the Servicer to the
Master Servicer and, if applicable, to the Primary Mortgage Insurer and/or the
Pool Insurer, within ten Business Days after marketable title to such REO has
been acquired.
14.3.3 REO EXPENSES. At the end of each month following the receipt of
any invoice relating to expenses incurred in administering each REO, the
Servicer shall send a report listing such expenses to the Master Servicer and,
if applicable, to the Primary Mortgage Insurer and/or the Pool Insurer. The
Servicer shall retain such invoices in its records and shall, by request, (i)
produce any such invoices for inspection or (ii) at its own expense, provide
copies of any such invoices to the Master Servicer and, if applicable, to the
Primary Mortgage Insurer and/or the Pool Insurer, as directed. The foregoing
expense invoices shall include, without limitation, the following:
(a) insurance premiums;
(b) real estate tax bills;
(c) special assessments;
(d) owners' association dues; and
(e) utility bills.
14.3.4 REO DOCUMENTS. Promptly upon receipt, the Servicer shall send
copies to the Master Servicer and, where applicable, to the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, of the following documents
relating to each REO:
(a) any forced placed Hazard Insurance policy or Flood
Insurance policy, if applicable;
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(b) any maintenance contracts;
(c) any contractor bids relating to the rehabilitation of
such REO pursuant to Section 14.5.3 hereof;
(d) an updated Title Insurance policy which reflects the
occurrence of foreclosure; and
(e) plat map or house location survey, if already
available.
Section 14.4 REO MARKETING
14.4.1 REO MARKETING EFFORTS. The Servicer shall begin efforts to
market a REO as soon as marketable title is acquired by the Owner of the related
Mortgage Loan.
14.4.2 REO SALES. The Servicer shall obtain the best market price for a
REO for the Owner of the related Mortgage Loan while disposing of such REO in a
timely and efficient manner. Unless otherwise directed by the Master Servicer,
the Servicer, acting on behalf of the Owner of the related Mortgage Loan, shall
dispose or cooperate with the Owner of the related Mortgage Loan in disposing of
such REO within 24 months after its acquisition by the Owner of the related
Mortgage Loan. If the Servicer is otherwise unable to sell such REO, unless
otherwise directed by the Master Servicer, the Servicer shall before the end of
the 24-month period following the acquisition of such REO, auction such REO to
the highest bidder in an auction reasonably designed to bring a fair price. The
Servicer shall consult with the Master Servicer prior to holding such auction.
The Servicer is eligible to bid in such an auction.
14.4.3 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. The Servicer must
ensure that any action taken with respect to the sale of a REO does not
jeopardize the maximum benefits available under the related Primary Mortgage
Insurance Policy, if any, with respect to the related Mortgage Loan. The
Servicer must inform the related Primary Mortgage Insurer of any listing
agreements or purchase offers that are received before the related Primary
Mortgage Insurer has finalized the disposition of the claim.
14.4.4 MASTER SERVICER INSTRUCTIONS. Where the Servicer receives
instructions from the Master Servicer regarding the marketing and sale of a REO,
either with respect to a specific property or generally, such instructions shall
govern the Servicer's actions, notwithstanding any provision herein.
14.4.5 POOL INSURANCE CONSIDERATIONS. The Servicer must ensure that any
action taken with respect to the sale of a REO does not jeopardize the maximum
benefits available under the related Pool Insurance Policy, if any, with respect
to the related Mortgage Loan. The Servicer must inform the related Pool Insurer
of any listing agreements or purchase offers that are received before the
Primary Mortgage Insurer has finalized the disposition of the claim.
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Section 14.5 REO REHABILITATION
14.5.1 REO REHABILITATION REQUIREMENT. Unless the Master Servicer shall
otherwise direct, and subject to Section 17.6.2, the Servicer must ensure that
any rehabilitation work (which shall not include the cleaning of a recently
acquired REO property) to any REO which is necessary to restore such REO to a
marketable condition is performed and that such work is performed in a
professional and workmanlike manner.
14.5.2 MASTER SERVICER APPROVAL. The Servicer must obtain the Master
Servicer's prior written approval for rehabilitation work (which shall not
include the cleaning of a recently acquired REO property) when the aggregate
rehabilitation expenses with regard to a REO exceeds seven thousand five hundred
dollars ($7,500.00).
14.5.3 WRITTEN CONTRACTOR BIDS. The Servicer shall solicit detailed
written bids from independent contractors when the value of a contract for
rehabilitation of a REO exceeds five hundred dollars ($500.00) (which shall not
include the cleaning of a recently acquired REO property). Where the value of a
contract exceeds five thousand dollars ($5,000.00) (which shall not include the
cleaning of a recently acquired REO property), the Servicer shall receive bids
from a minimum of two independent and unrelated contractors and, upon request,
forward copies of such bids to the Master Servicer. Where the value of a
contract exceeds fifty thousand dollars ($50,000.00) (which shall not include
the cleaning of a recently acquired REO property), the Servicer shall receive
bids from a minimum of three independent and unrelated contractors and, upon
request, forward copies of such bids to the Master Servicer.
14.5.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. If a Mortgaged
Property which has become a REO and the related Mortgage Loan is covered by a
policy of Primary Mortgage Insurance, the Servicer shall notify the related
Primary Mortgage Insurer of such rehabilitation plans before the completion of
the Primary Mortgage Insurance claim to ensure reimbursement from the Primary
Mortgage Insurer. If the related Primary Mortgage Insurer elects not to
reimburse all rehabilitation expenses, work should be postponed until after
final disposition of the Primary Mortgage Insurance claim.
Section 14.6 REO ADMINISTRATION FAILURE.
14.6.1 SERVICER REMOVAL. The Master Servicer may in its reasonable
discretion, in the event that the Servicer's actions or omissions result in
damage to any REO or a failure to sell any REO property within a reasonable
time, the Master Servicer may remove the servicing of such REO from the Servicer
and assume responsibility for management, control, maintenance, security,
rehabilitation and disposition of such REO.
14.6.2 SERVICER'S CONTINUING OBLIGATIONS. In the event that the
Servicer is removed from servicing a REO by virtue of the provisions of Section
14.6.1, the Servicer, as to such REO, will nevertheless remain responsible to
(a) pay when due all insurance premiums, property taxes and assessments; (b)
file when due all claims for Primary Mortgage Insurance, Pool Insurance,
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Hazard Insurance and, if applicable, Flood Insurance benefits; and (c) fulfill
any other related responsibilities required by the Master Servicer.
14.6.3 SERVICER'S DUTY TO COMPENSATE. Whether or not a Servicer is
removed from servicing with respect to a particular REO, the Servicer must
compensate the Master Servicer for any damages caused as a result of the
Servicer's breach of its obligation to service efficiently each REO. The
Servicer acknowledges that any damages suffered as a result of the Servicer's
inefficiency in managing a REO may not be quantified in advance of the Master
Servicer assuming responsibility for such REO.
Article 15
INSURANCE
Section 15.1 GENERAL PROVISIONS
15.1.1 INSURANCE REQUIREMENTS. The Servicer must verify that each
Mortgage Loan has the insurance coverage required pursuant to Article 15 and 16.
All claims arising under Insurance Policies maintained hereunder must be settled
or otherwise disposed of by the Servicer, and all such Insurance Policies must
be maintained, including, without limitation, the payment of premiums on a
timely basis, by the Servicer at no expense to the Owner of the related Mortgage
Loan, or the Master Servicer.
If the Insurance Proceeds paid in respect of any Mortgage Loan are not
used to repair the related Mortgaged Property due to the particular
circumstances of the loss, and instead such Insurance Proceeds are applied to
reduce the Unpaid Principal Balance of such Mortgage Loan and such application
causes the Unpaid Principal Balance of such Mortgage Loan to reduce to zero, the
Servicer must treat the application of such proceeds as a Liquidation, and
notify the Master Servicer of such Liquidation.
15.1.2 UNINSURED LOSSES. The Servicer must take the following actions
in the event of loss or damage to any Mortgaged Property caused by an
earthquake, flood, tornado or other natural disaster immediately following, the
earlier to occur of (x) its notification or discovery of such loss or damage or
(y) the time at which the Servicer reasonably should have known of such loss or
damage in the exercise of Prudent Servicing Practices:
(a) determine the extent of the losses or damages;
(b) secure any abandoned Mortgaged Property from vandalism and
the elements;
(c) communicate with and counsel the respective Borrower on any
disaster relief programs or other assistance which is
available; and
(d) notify the Master Servicer and recommend appropriate action
to protect the interests of the Owner of the related Mortgage
Loan and the respective Borrower.
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15.1.3 SERVICER'S OBLIGATION TO MAINTAIN INSURANCE. If the Servicer
discovers that a Borrower does not have adequate insurance coverage as required
pursuant to the provisions of this Article, the Servicer must obtain and
maintain at its own expense the required insurance coverage on the related
Mortgaged Property. The Servicer may, in its discretion, cause the required
coverage to be maintained through a blanket insurance policy. Such expenses
shall not be recoverable by the Servicer from the Master Servicer or the
Principal or from payments on the Mortgage Loan or any other source relating to
the related Mortgage Loan or the related Mortgaged Property, other than from
Liquidation Proceeds or Insurance Proceeds from the related Mortgage Loan. To
the extent permitted by applicable law and the related Mortgage Loan Documents,
the Servicer may initiate forced placed coverage with respect to such Mortgaged
Property and thereafter attempt to recover such expenses from the related
Borrower.
15.1.4 INSURANCE NOTICES. The Servicer must arrange for all insurance
drafts, notices, policies, invoices, or other correspondence to be delivered
directly to the Servicer. The Owner of the related Mortgage Loan, its successors
and assigns, must be named as the Mortgagee, the endorsement must show the
Servicer's address as shown in the following example:
[Owner of the Mortgage Loan, its successors and assigns]
c/o [Servicer]
[Servicer's Address]
15.1.5 DEFAULT BY INSURER. If the Servicer knows or has reasonable
cause to suspect that an insurer under any applicable insurance policy required
pursuant to the provisions of this Article will, for any reason, be unable to
pay a valid claim, the Servicer shall immediately notify the Master Servicer
upon receipt of such information or formulation of such belief. The Servicer
shall then (i) find a substitute insurer and (ii) pay any premiums to the
insurer. In any case, the Servicer shall not be liable in any way for the
financial inability of any insurer under any insurance policy required herein to
pay a valid claim so long as the provisions of Article 15 and 16 hereof are
complied with.
15.1.6 INSURANCE CARRIER RATING. Each Insurance Policy must be
underwritten by an insurance carrier that is a FNMA approved
Mortgage Insurer.
15.1.7 INSURANCE CARRIER LICENSES. Each insurance carrier must be
licensed or otherwise authorized by law to conduct business
in each state in which a related Mortgaged Property is
located.
15.1.8 RISK EXPOSURE. If any Mortgaged Property is exposed to hazards
not fully covered by Hazard Insurance or Flood Insurance, the Servicer must
notify the Master Servicer immediately with a recommendation for additional
coverage.
15.1.9 EVIDENCE OF INSURANCE. (a) The Servicer must maintain the
following document- ation with respect to insurance coverage
on each Mortgage Loan:
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(i) if Primary Mortgage Insurance is required, a copy of
the Primary Mortgage Insurance policy and any related
endorsements;
(ii) for one- to four-unit dwellings, an original of the
Hazard Insurance policy, if applicable, and any
related endorsements;
(iii) a copy of the Title Insurance policy and any related
endorsements;
(iv) For properties covered under a blanket policy, an
original of any blanket policy, and any related
endorsements; and
(v) an original of any Flood Insurance policy, if Flood
Insurance is required, and any related endorsements.
(b) A certificate of insurance is acceptable in lieu of any of the foregoing
policies if it contains the following information:
(i) named insured and Mortgagee or, for PUD or
Condominium Units, named insured association, unit
owner and unit owner Mortgagee;
(ii) address of the Mortgaged Property;
(iii) type, amount and effective dates of coverage;
(iv) deductible amount;
(v) any endorsement or optional coverage obtained and
made part of the original policy;
(vi) insurer's agreement to provide at least ten day's
prior written notice to the Servicer and Borrower (or
applicable unit owner Mortgagee if for a PUD or
Condominium Unit) before any reduction in coverage or
cancellation of the policy; and
(vii) signature of an authorized representative of the
insurer, if required by applicable law.
Section 15.2 PRIMARY MORTGAGE INSURANCE
15.2.1 PRIMARY MORTGAGE INSURANCE REQUIREMENT. Unless Primary Mortgage
Insurance coverage with respect to a Mortgage Loan has been waived in writing by
the Owner of the Mortgage Loan at the time it purchases such Mortgage Loan or
such Primary Mortgage Insurance is canceled as provided in Section 15.2.4
herein, the Servicer must maintain at all times Primary Mortgage Insurance on
any Mortgage Loan with an original LTV ratio in excess of 80%.
15.2.2 PRIMARY MORTGAGE INSURANCE COVERAGE. As to each Mortgage Loan
which is required to have Primary Mortgage Insurance, pursuant to this Agreement
or the related Mortgage Loan Documents, Primary Mortgage Insurance must at least
provide coverage which insures against loss of that portion of the Unpaid
Principal Balance of the Mortgage Loan that exceeds 75% of the Value of the
Mortgaged Property. If the Mortgage Loan provides for negative amortization or
for the potential of negative amortization, the Primary Mortgage Insurance
policy must also insure any increase in the Unpaid Principal Balance from the
original principal balance of the related Mortgage Note.
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15.2.3 PRIMARY MORTGAGE INSURER DOWNGRADING. In the event that the
rating assigned by a Rating Agency to the claims-paying ability of any Primary
Mortgage Insurer is reduced below the level permitted under Section 15.1.6, the
Servicer will use its best efforts to replace each Primary Mortgage Insurance
Policy issued by such Primary Mortgage Insurer with a new Primary Mortgage
Insurance policy issued by an insurer whose claims-paying ability is acceptable
to the Master Servicer. The premium for any replacement Primary Mortgage
Insurance policy shall not exceed the premium for the discontinued Primary
Mortgage Insurance policy.
15.2.4 PRIMARY MORTGAGE INSURANCE CANCELLATION. If a Borrower requests
cancellation of the Primary Mortgage Insurance policy with respect to his
Mortgaged Property, the following requirements must be met:
(a) The current LTV ratio must be 80% or less. The
current LTV ratio must be calculated by dividing the
Unpaid Principal Balance of the related Mortgage Loan
by the Current Value of the Mortgaged Property;
(b) The related Mortgage Loan may not have been 30 days
or more delinquent within the preceding twelve
months; and
(c) There may not have been any other default under the
terms of the related Mortgage Loan at any time during
the preceding twelve months.
If the foregoing requirements are met, the Servicer may request the cancellation
of such Primary Mortgage Insurance policy by submitting to the Master Servicer a
Request for Primary Mortgage Insurance Cancellation. If there are indications
that the Current Value of the Mortgaged Property has declined, the Servicer
shall obtain an Appraisal Report with respect to such Mortgaged Property that is
not more than 60 days old. The expense of such an Appraisal Report shall not be
borne by the Master Servicer. The Current Value of such Mortgaged Property set
forth the Appraisal Report shall be used as the divisor in clause (a) hereof to
determine whether the recalculated current LTV is 80% or less. If the
recalculated current LTV is greater, the Primary Mortgage Insurance cancellation
request will be denied. In addition, the Master Servicer may deny such a request
if it determines, in its reasonable discretion, that the interests of the Owner
of the related Mortgage Loan may be harmed by such cancellation.
15.2.5 PRIMARY MORTGAGE INSURANCE CLAIMS. The Servicer must take all
steps to ensure the payment of the maximum benefits payable under the terms of
any Primary Mortgage Insurance policy. The Servicer must work diligently with
each Primary Mortgage Insurer to determine whether such insurer will settle the
claim by taking title to the Mortgaged Property in question or in some other
manner. The Servicer also must notify the Master Servicer immediately in writing
of any decision made by the applicable Primary Mortgage Insurer relative to a
claim. Upon receipt of any Primary Mortgage Insurance proceeds, the Servicer
must deposit such amounts in the appropriate Custodial P&I Account. The Servicer
shall promptly notify the Master Servicer in writing if any Primary Mortgage
Insurer at any time denies any or all of a claim filed under its Primary
Mortgage Insurance policy.
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Section 15.3 HAZARD INSURANCE
15.3.1 HAZARD INSURANCE REQUIREMENT. Unless alternative coverage is
provided pursuant to Section 16.3 hereunder, the Servicer must ensure that each
Mortgaged Property is covered at all times by Hazard Insurance.
15.3.2 HAZARD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Hazard Insurance must be at least equal to the lesser of (a) the
Unpaid Principal Balance of the related Mortgage Loan, or (b) 100% of the
replacement cost of the improvements on the Mortgaged Property.
15.3.3 HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by an applicable law, each Hazard Insurance deductible may not exceed
the lesser of (a) $1,000 or (b) one percent of the applicable amount of
coverage.
15.3.4 HAZARD INSURANCE VACANCY COVERAGE. The Servicer must ensure that
each Mortgaged Property is adequately covered even when vacant and, where
available, must obtain a vacancy permit endorsement.
15.3.5 HAZARD INSURANCE MORTGAGEE PROVISIONS. Each Hazard Insurance
Policy must contain or have attached a standard mortgagee clause in the form
customarily used by or required by private institutional mortgage loan
investors. Such clause must provide that the Hazard Insurance carrier will
notify the named Mortgagee at least ten days before any reduction in coverage or
cancellation of the policy. All mortgagee clauses must be properly endorsed,
necessary notices of transfer must be given and any other action must be taken
that is necessary in order to protect the interests of the Owner of the related
Mortgage Loan, its successors and/or assigns. The standard mortgagee clause
should read as follows: "Insuring [Servicer's Name], as agent for the [Owner of
the Mortgage Loan], its successors and/or assigns."
Section 15.4 FLOOD INSURANCE
15.4.1 FLOOD INSURANCE REQUIREMENT. Unless alternate coverage is
provided pursuant to Section 16.6 hereunder, the Servicer must ensure that Flood
Insurance is maintained at all times on Mortgaged Property that are in a special
flood hazard area identified by the Secretary of HUD or the Director of the
Federal Emergency Management Agency.
15.4.2 FLOOD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Flood Insurance must be at least equal to the lesser of (a) the
maximum amount available under the National Flood Insurance Program's regular
program or its emergency program, (b) the Unpaid Principal Balance of the
related Mortgage Loan or (c) 100% of the replacement cost of the improvements on
the Mortgaged Property.
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15.4.3 FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by applicable law, each Flood Insurance deductible may not exceed the
lesser of (a) $1,000 or (b) one percent of the applicable amount of coverage.
Section 15.5 TITLE INSURANCE
15.5.1 TITLE INSURANCE REQUIREMENT. Unless otherwise directed by the
Master Servicer, the Servicer shall maintain at all times with respect to each
Mortgage Loan and the related Mortgaged Property a Title Insurance policy in
full force and effect until such Mortgage Loan is fully paid.
15.5.2 TITLE INSURANCE COVERAGE. The Servicer shall not reduce the
amount of or otherwise change the scope of the coverage under, or otherwise do
or authorize any act or omission that would affect the coverage of, any Title
Insurance policy, unless the Servicer has received written direction from the
Master Servicer specifying the amount or amounts or scope to which the coverage
is to be changed.
15.5.3 SERVICER'S OBLIGATIONS. The Servicer shall perform and comply
with all requirements and conditions of each Title Insurance policy for each
Mortgage Loan and the related Mortgaged Property that are to be performed or
observed by the "Insured" or obligee thereunder as a condition to maintaining
and keeping it in force, or making a claim under, such Title Insurance policy.
The Servicer shall be named as a payee on all Title Insurance policy loss
drafts, and upon receipt thereof, the funds shall be credited to the extent of
the sum of (i) the Unpaid Principal Balance of such Mortgage Loan and any
interest accrued thereon, (ii) any outstanding advances thereon and (iii) any
expenses owed by such Borrower which are due the Owner of such Mortgage Loan,
the Master Servicer or the Servicer, whether for its own account or others, to
the appropriate Custodial P&I Account and the balance of such funds, if any,
shall be credited to the appropriate Custodial T&I Account.
15.5.4 POLICY CUSTODY. The Servicer shall cause the original of such
Title Insurance policy to be sent directly to the Custodian.
15.5.5 TITLE INSURANCE CLAIMS. The Master Servicer must be notified
contemporaneously with the making of any claim under the Title Insurance policy.
The Servicer shall disburse the proceeds of any such settlement in accordance
with the instructions and requirements of the Master Servicer.
Section 15.6 INSURANCE LOSS SETTLEMENTS.
15.6.1 SETTLEMENT APPROVAL. The approval of the Master Servicer need
not be requested for disposition of insurance loss settlements where property
damage is $10,000 or less, and the Servicer may disburse the loss proceeds as
provided herein. The Master Servicer must be notified before disposition of any
insurance loss settlement involving property damage over $10,000.
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15.6.2 SETTLEMENT DISBURSEMENTS. For each Mortgage Loan, including a
Mortgage Loan secured by Mortgaged Property located in a Condominium Project or
PUD, the Servicer is fully responsible for the disbursement of insurance loss
settlements under each Hazard Insurance policy and each Flood Insurance policy,
including but not limited to:
(a) arranging for and authorizing the restoration and
rehabilitation of the related damaged Mortgaged Property in
cooperation with the Borrower;
(b) subject to applicable law, applying the Insurance Proceeds to
reduction of the Unpaid Principal Balance of such Mortgage
Loan, provided that the Servicer (i) shall have determined
that such proceeds are insufficient to repair and restore the
related Mortgaged Property, or that the repair and
restoration of such Mortgaged Property is not feasible; and
(ii) shall have obtained authorization of the Master Servicer
to make such application of the Insurance Proceeds;
(c) collecting, endorsing and disbursing the Insurance Proceeds
and arranging for progress inspections and payments, if
necessary;
(d) complying with all requirements of any Primary Mortgage
Insurance policy pertaining to the filing of claims and the
settlement of insurance losses to assure that the security of
such Mortgage Loan is not impaired and that the coverage of
such Primary Mortgage Insurance policy is not jeopardized or
otherwise adversely affected;
(e) assuring, through the receipt of Borrower's affidavits,
repair contract copies, lien waivers and the like, that the
priority of the lien of the Security Instrument is preserved,
and that the Insurance Proceeds are applied to the
restoration or repair of the related Mortgaged Property if
not applied in payment of such Mortgage Loan;
(f) obtain releases or waivers of liens and taking such other
actions as are necessary to avoid the filing of laborers',
materialmen's or mechanic's liens against the related
Mortgaged Property; and
(g) maintaining procedures and practices acceptable to the Master
Servicer and in conformity with Prudent Servicing Practices
for the control and disposition of insurance loss drafts.
15.6.3 SETTLEMENT FUNDS. The Servicer shall be named as a payee on all
insurance loss drafts and upon receipt thereof, the funds shall be credited to
the Borrower's Insurance Proceeds balance and deposited into (a) where such
funds will be applied to the repair and restoration of the related Mortgaged
Property, one or more separate escrow accounts, so that the balance on deposit
in such accounts is fully insured at all times by the FDIC through either the
BIF or SAIF, or (b) where such funds will not be applied to the repair and
restoration of the related Mortgaged Property, the respective Custodial P&I
Account.
15.6.4 SETTLEMENT NOTICE. The Servicer shall report any such settlement
to the Master Servicer on a Hazard Insurance Loss Draft Notification, together
with a summary of the disposition of the proceeds.
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15.6.5 CONTINUING COVERAGE. If a letter of assurance is obtained from
any insurer under a Hazard Insurance policy or a Flood Insurance policy that the
insurance coverage will continue in full force and effect, the Servicer shall
deposit such letter in the appropriate Servicer Mortgage Loan File.
15.6.6 PROPERTY INSPECTIONS. The Servicer shall conduct property
inspections in accordance with the milestones of the repair and rehabilitation
plan for such Mortgaged Property and prepare Property Inspection Reports on any
Mortgaged Property involving property damage over $15,000. The Servicer shall
furnish a copy of the repair and rehabilitation plan for such Mortgaged Property
to the Master Servicer upon request.
Article 16
CONDOMINIUM AND PUD INSURANCE
Section 16.1 GENERAL PROVISIONS
16.1.1 APPLICABILITY. The provisions of this Article pertain solely to
Mortgage Loans secured by Condominium Units or PUD Units.
16.1.2 PREMIUMS. The premiums for insurance policies required pursuant
to this Article must be paid as a common expense by the Owners' Association.
16.1.3 DEDUCTIBLE RESERVES. Funds for each of the deductibles
associated with the insurance policies required pursuant to this Article must be
included in the Owners' Association's reserves and must be so designated.
16.1.4 NAME OF INSURED. The name of the insured stated under each
Insurance Policy required pursuant to the provisions of this Article must be
similar in form and substance to the following:
"Association of Owners of the [Name of Condominium Project or
PUD] for use and benefit of the individual Condominium or PUD
Unit owners" (designated by name, if required).
16.1.5 MORTGAGEE CLAUSE. Each insurance policy required pursuant to the
provisions of this Article must contain the standard mortgagee clause endorsed
to provide that any disbursements will be paid to the Owners' Association for
the use and benefit of Mortgagees as their interests may appear, or otherwise
endorsed to fully protect the interest of (a) the Owner of the respective
Mortgage Loan and (b) the holders of a beneficial interest therein, if any.
16.1.6 RECONSTRUCTION COVERAGE. If, with respect to a PUD or
Condominium Project in which a Mortgaged Property is located, there is a
construction code provision that would require changes to undamaged portions of
the PUD or Condominium Project's building(s) even when only part of a building
is destroyed by an insured hazard, then the Servicer must ensure that
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each insurance policy required by this Article contains the necessary
construction code endorsements to cover this exposure.
Section 16.2 COMMON AREA MULTIPLE PERIL INSURANCE
16.2.1 COMMON AREA MULTIPLE PERIL INSURANCE REQUIREMENT. The Servicer
must ensure that the Owner's Association maintains, with respect to the PUD or
Condominium Project in which a Mortgaged Property is located, a policy of Common
Area Multiple Peril Insurance, with premiums being paid as a common expense. The
Common Area Multiple Peril Insurance policy must at least protect against loss
or damage by fire and all other hazards that are normally covered by the
standard extended coverage endorsement, and all of the perils customarily
covered for similar types of projects, including those covered by the standard
"all risk" endorsement.
16.2.2 COMMON AREA MULTIPLE PERIL INSURANCE COVERAGE. As to each
Condominium Project or PUD in which a Mortgaged Property is located, a Common
Area Multiple Peril Insurance policy must cover 100% of the current replacement
cost of all of the common areas (other than the land and foundation), common
elements including fixtures and building service equipment, as well as common
personal property and supplies.
16.2.3 COMMON AREA MULTIPLE PERIL INSURANCE DEDUCTIBLE. Except as a
greater amount may be required by applicable law, each Common Area Multiple
Peril Insurance deductible may not exceed the lesser of (a) $10,000 or (b) one
percent of the applicable amount of coverage.
16.2.4 BOILER AND MACHINERY COVERAGE. If a steam boiler is operating
within the Condominium Project or PUD in which a Mortgaged Property is located,
then the Servicer must ensure that boiler and machinery coverage is in force at
all times. This coverage must be evidenced by the standard form of boiler and
machinery endorsement. The minimum liability coverage per accident under boiler
and machinery coverage must equal the insurable value of the boiler and
equipment and the building housing such boiler or machinery, based upon current
replacement cost, or $2 million, whichever is less.
Section 16.3 BLANKET HAZARD INSURANCE
16.3.1 BLANKET HAZARD INSURANCE REQUIREMENT. Unless alternative
coverage is provided pursuant to Section 16.3 hereunder, the Servicer must
verify that each such Mortgaged Property is covered at all times by Hazard
Insurance policy which provides blanket coverage for the individual units in the
Condominium Project or PUD.
16.3.2 BLANKET HAZARD INSURANCE COVERAGE. As to each Condominium
Project or PUD which contains a Mortgaged Property for which its Hazard
Insurance coverage is provided through a blanket policy, the amount of Hazard
Insurance for a blanket policy a Condominium Project or PUD must be at least
equal to the lesser of (a) the aggregate of the outstanding principal balances
of all mortgage notes secured by units within the Condominium Project or
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PUD (including the Mortgage Notes secured by Mortgaged Properties), or (b) 100%
of the replacement cost of the improvements on the Condominium Project or PUD
Unit site.
16.3.3 BLANKET HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by an applicable law, each Hazard Insurance deductible for a
blanket policy covering a Condominium Project or PUD may not exceed the lesser
of (a) $10,000 or (b) one percent of the applicable amount of coverage.
Section 16.4 COMMON AREA COMPREHENSIVE GENERAL LIABILITY (CGL) INSURANCE
16.4.1 COMMON AREA CGL INSURANCE REQUIREMENT. The Servicer must ensure
that the Owners' Association maintains a Comprehensive General Liability
Insurance policy covering all of the common areas, common elements, commercial
spaces and public ways in the Condominium Project or PUD in which a Mortgaged
Property is located.
16.4.2 COMMON AREA CGL INSURANCE COVERAGE. As to each Condominium
Project or PUD in which a Mortgaged Property is located, a CGL Insurance policy
should provide coverage of at least $1,000,000 for personal injury, bodily
injury or property damage for any single occurrence. Each CGL Insurance policy
must contain a severability of interest endorsement preventing the insurer from
denying the claim of a Condominium or PUD Unit owner because of negligent acts
of the Owners' Association or other unit owners. Each CGL Insurance policy must
include all other types of coverage and endorsements in the types and amounts
required by private institutional mortgage loan investors for developments
similar in construction, location and use.
Section 16.5 OWNERS' ASSOCIATION FIDELITY INSURANCE
16.5.1 OWNERS' ASSOCIATION FIDELITY INSURANCE REQUIREMENT. The Servicer
must ensure that the Owners' Association maintains a fidelity bond or insurance
against dishonest and fraudulent acts on the part of directors, managers,
trustees, employees or volunteers responsible for handling funds belonging to or
administered by the association.
16.5.2 OWNERS' ASSOCIATION FIDELITY INSURANCE COVERAGE. The Owners'
Association fidelity bond or insurance must name the Owners' Association as the
insured and must be written in an amount sufficient to provide protection at
least 150% of the insured's estimated annual operating expenses and reserves. An
appropriate endorsement to the policy to cover any persons who serve without
renumeration must be added if the policy would not otherwise cover volunteers.
Owners' Association fidelity insurance coverage must be in an amount equal to at
least 3 months assessments on all units in the Condominium Project or PUD.
Owners' Association fidelity insurance coverage is not required if the
Condominium Project or the PUD have fewer than 20 units.
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Section 16.6 BLANKET FLOOD INSURANCE
16.6.1 BLANKET FLOOD INSURANCE REQUIREMENT. Where a Mortgaged Property
is a Condominium Unit or PUD Unit and is not individually covered by a Flood
Insurance policy in accordance with the provisions of Section 15.4 hereof, the
Servicer must verify that a Flood Insurance policy which provides blanket
coverage for the individual units in the Condominium Project or PUD, is
maintained at all times on Mortgaged Property that are in a special flood hazard
area identified by the Secretary of HUD or the Director of the Federal Emergency
Management Agency.
16.6.2 BLANKET FLOOD INSURANCE COVERAGE. As to each Condominium Project
or PUD which contains a Mortgaged Property for which its Flood Hazard Insurance
coverage is provided through a blanket policy, the amount of Flood Insurance
must be at least equal to the lesser of (a) the maximum amount available under
the National Flood Insurance Program's regular program or its emergency program,
(b) the aggregate of the outstanding principal balances of all mortgage notes
secured by units within the Condominium Project or PUD (including the Mortgage
Notes secured by Mortgaged Properties), or (c) 100% of the replacement cost of
the improvements on the Condominium Project or PUD Unit site.
16.6.3 BLANKET FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by applicable law, each Flood Insurance deductible for a blanket
policy covering a Condominium Project or PUD may not exceed the lesser of (a)
$5,000 or (b) one percent of the applicable amount of coverage.
Article 17
ADVANCES
Section 17.1 PRINCIPAL AND INTEREST ADVANCES
17.1.1 P&I ADVANCE REQUIREMENT. The Servicer shall advance P&I Advances
and deposit to the respective Custodial P&I Account on or before each Remittance
Date an amount equal to the aggregate of the difference, if any, with respect to
each Mortgage Loan, between (a) the Monthly Payment that each Borrower was
required to pay to the Servicer on the immediately preceding Due Date (excluding
the amount of the related Servicing Fee) and (b) the amount actually received
with respect to the related Monthly Payment by the Servicer (excluding the
amount of the related Servicing Fee).
17.1.2 P&I ADVANCE LIMITATION. The Servicer is required to make P&I
Advances with respect to a Mortgage Loan unless a P&I Advance is reasonably
determined by the Servicer to be eventually non-recoverable from any Insurance
Proceeds, Liquidation Proceeds, or the Borrower.
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17.1.3 P&T ADVANCE RECOVERY. The Servicer's P&I Advance will be
recoverable from subsequent Borrower Monthly Payments, Insurance Proceeds,
Liquidation Proceeds or, if the Representing Party is obligated to purchase a
Mortgage Loan from its Owner, from the price paid for such Mortgage Loan.
17.1.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any Mortgage
Loan or while REO transferred to the Owner of a related Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure is held by such Owner or its
successors, the Servicer must continue to make monthly P&I Advances in respect
of each such Mortgage Loan or REO to the respective Custodial P&I Account.
Subject to the provisions of Section 17.1.2 hereof, these P&I Advances must be
made until the (i) Liquidation of each Mortgage Loan subject to such proceedings
or (ii) in the case of REO transferred to the Owner of Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure, the Liquidation of such REO.
Advances with respect to REO will be made as if the related Mortgage Loan and
Mortgage Note remained in effect.
Section 17.2 FORECLOSURE ADVANCES
17.2.1 FORECLOSURE ADVANCE REQUIREMENT. During foreclosure proceedings,
the Servicer must advance from its own funds all foreclosure expenses as they
occur in accordance with the terms of this Agreement. Such advances must be made
by the Servicer up to the time of final disposition of the related Mortgaged
Property.
17.2.2 FORECLOSURE ADVANCE LIMITATION. The Servicer is required to make
advances pursuant to Section 17.2.1 with respect to a Mortgage Loan unless the
Servicer reasonably determines (i) that such foreclosure will not increase the
proceeds to the Owner thereof or the beneficial owners thereof of liquidation of
such Mortgage Loan after reimbursement of the Servicer for its expenses or (ii)
that such expenses will be eventually non-recoverable from any Insurance
Proceeds, Liquidation Proceeds or the Borrower.
17.2.3 FORECLOSURE ADVANCE RECOVERY. If foreclosure proceedings are
terminated, the Servicer must collect all legal fees and costs from the
Borrower. Otherwise, the Servicer's advances for reasonable foreclosure expenses
will be recoverable from Insurance Proceeds, Liquidation Proceeds or, if the
Representing Party is obligated to purchase a Mortgage Loan from its Owner, from
the price paid for such Mortgage Loan.
17.2.4 FORECLOSURE ADVANCE RECORDS. All foreclosure advances by the
Servicer and reimbursements to the Servicer must be clearly identifiable in the
respective Custodial T & I Account.
Section 17.3 TAX & INSURANCE ADVANCES
17.3.1 T&I ADVANCE REQUIREMENT. If a Borrower's Escrow Funds are
insufficient to pay taxes or insurance premiums, the Servicer must advance from
its own funds to the respective
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Custodial T&I Account an amount sufficient to cover the shortage and so as to
assure the maintenance of a first lien position of the related Security
Instrument on the related Mortgaged Property.
17.3.2 T&I ADVANCE RECOVERY. T&I Advances may be recovered from the
Borrower's subsequent monthly escrow payments, Insurance Proceeds, Liquidation
Proceeds or the Borrower, but must never be recovered from scheduled principal
or interest collections. The Servicer may not recover T&I Advances from another
Borrower's Escrow Funds.
17.3.3 T&I ADVANCE LIMITATION. The Servicer is required to make a T&I
Advance with respect to a Mortgage Loan unless such T&I Advance is reasonably
determined by the Servicer to be eventually non-recoverable from any Insurance
Proceeds, Liquidation Proceeds, or the Borrower.
17.3.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any Mortgage
Loan or while REO transferred to the Owner of a related Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure is held by such Owner, the Servicer
must continue to make required T&I Advances in respect of each such Mortgage
Loan or REO to the respective Custodial T&I Account. These T&I Advances must be
made until each Mortgage Loan subject to such proceedings is liquidated or in
the case of REO transferred to the Owner of the related Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure is liquidated. Advances with
respect to REO will be made as if the related Mortgage Loan and Mortgage Note
remained in effect.
Section 17.4 NON-RECOVERABLE ADVANCES
17.4.1 ORDINARY RECOVERY. If at any time an advance made by a Servicer
hereunder is determined by the Servicer to be a Non-Recoverable Advance, then
the Servicer shall be entitled to be reimbursed for such advance by withdrawing
from the Custodial P&I Account an amount equal to the Non-Recoverable Advance.
17.4.2 FINAL RECOVERY. If the amounts on deposit in the related
Custodial P&I Account are insufficient to reimburse the Servicer, then prior to
any distribution to the Owner of the related Mortgage Loan, the Servicer shall
be entitled to reimbursement from the payments made and the proceeds received
with respect to such Mortgage Loan.
17.4.3 NON-RECOVERABLE ADVANCE DETERMINATION. To determine whether an
Advance is a Non-Recoverable Advance, the Servicer shall employ a broker's price
opinion, which is no more than twelve months old when so employed, of the fair
market value of the Mortgaged Property related to the Mortgage Loan which is
subject to such Advance, and calculate the difference between (a) the fair
market value of such Mortgaged Property and (b) the sum of (i) a reasonable
estimate of foreclosure costs which may be incurred in the foreclosure of such
Mortgaged Property, and (ii) the amount of unreimbursed Advances made by the
Servicer with respect to the related Mortgage Loan pursuant to the terms of this
Agreement, is greater than
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zero. If such a difference is greater than zero, then such difference represents
the maximum amount of additional Advances which the Servicer shall make before
determining that any additional Advances in excess of such amount are
Non-Recoverable Advances. If such difference is negative, then the magnitude of
such difference is the amount of previously made unreimbursed Advances which the
Servicer may now regard as Non-Recoverable Advances. The Servicer shall provide
the Master Servicer with an Officer's certificate upon the determination that
any Advance is a Non-Recoverable Advance.
Section 17.5 FAILURE TO ADVANCE
17.5.1 GROUNDS FOR TERMINATION. The failure of the Servicer to advance
any funds required to be advanced by the Servicer under this Article 17 is cause
for termination of Servicer under this Agreement.
17.5.2 SERVICER REIMBURSEMENT. To the extent the Master Servicer or the
respective trustee, if any, must advance their respective funds due to the
failure of the Servicer to advance as provided for in this Agreement or to remit
funds to the Master Servicer Custodial Account as required by Section 18.3.1,
the Servicer shall reimburse the advancing party for such amounts, on demand,
together with all costs and expenses incurred by the advancing party, including,
but not limited to, interest on the funds advanced. Such interest will be
calculated at the lesser of the "prime rate" publicly announced in effect from
time to time at the Reference Bank plus one percentage point and the maximum
interest rate permitted by law.
Section 17.6 REHABILITATION ADVANCE.
17.6.1 REHABILITATION ADVANCE REQUIREMENT. The Servicer must advance
from its own funds such amounts as are necessary to restore any damaged REO not
covered by Hazard Insurance or Special Hazard Insurance in accordance with
Section 14.5.
17.6.2 REHABILITATION ADVANCE LIMITATION. The Servicer is required to
make advances pursuant to Sections 17.6.1 and 14.5 with respect to a Mortgage
Loan unless the Servicer reasonably determines (i) that such rehabilitation will
not increase the proceeds to the Owner thereof or the beneficial owners thereof
on liquidation of such Mortgage Loan after reimbursement of the Servicer for its
expenses or (ii) that such expenses will be eventually nonrecoverable from any
Insurance Proceeds, Liquidation Proceeds or the Borrower.
17.6.3 REHABILITATION ADVANCE RECOVERY. The Servicer's advances for
reasonable rehabilitation expenses will be recoverable from Insurance Proceeds,
Liquidation Proceeds, or if the Representing Party is obligated to purchase a
Mortgage Loan from its Owner, from the price paid for such Mortgage Loan.
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Article 18
REPORTING REQUIREMENTS
Section 18.1 MONTHLY ACCOUNTING REPORTS
18.1.1 MONTHLY ACCOUNTING REPORT REQUIREMENT. With respect to any
Remittance Date, the period for monthly accounting reports shall be from the
first Business Day of the prior month through the last Business Day of the prior
month, provided that in addition such report shall include only (a) the
scheduled Monthly Payments anticipated to be received by the Servicer in the
month of such Remittance Date which relate to the Due Date in such month, and
(b) any anticipated P&I Advances made in respect of such Monthly Payments. All
monthly reports prepared by the Servicer must be complete and must be received
by the Master Servicer by the tenth calendar day of the following month. All
monthly accounting reports must show information in, and must be submitted in, a
sequence according to Servicer Loan Number order.
18.1.2 MONTHLY ACCOUNTING REPORT ELEMENTS. The Servicer shall forward
to the Master Servicer a Monthly Accounting Report setting forth substantially
the information required by FNMA Form 2010.
The Servicer must also complete and forward to the Master Servicer any
other form or report as provided for in this Agreement, or as reasonably
requested by the Master Servicer.
18.1.3 AUTOMATED REPORTS. The Servicer may submit to the Master
Servicer for review the Servicer's automated reports which include all of the
information required by the provisions of Section 18.1.2 hereof. Upon approval
by the Master Servicer, the Servicer may submit approved automated reports to
the Master Servicer instead of the Forms listed in Section 18.1.2 hereof.
18.1.4 ELECTRONIC REPORTING. With the prior written consent of the
Master Servicer, all reports to be made by the Servicer to the Master Servicer
may be transmitted electronically in lieu of written reporting. If the Servicer
services more than one hundred Mortgage Loans for the Master Servicer, it shall
arrange for electronic transmission of the required reports. Any expenses
occasioned by the electronic transmission of reports shall be borne by the
Servicer.
18.1.5 MACHINE READABLE RECORDS. At the request of the Master Servicer,
the Servicer will provide to the Master Servicer, in a mutually agreed machine
readable format, the current names and mailing addresses of each Borrower. The
Master Servicer will utilize such information solely for audit purposes, or in
the event the Servicer is terminated hereunder.
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Section 18.2 ACCOUNT RECONCILIATIONS
18.2.1 RECONCILIATION PREPARATION. The Servicer shall prepare
reconciliations for each Custodial P&I Account, Custodial T&I Account and
Custodial Buydown Account on a monthly basis and shall forward the same to the
Master Servicer upon request.
18.2.2 ACCOUNT RECORDS. Upon request of the Master Servicer, the
Servicer shall also cause the depository for each of the accounts described in
Section 18.2.1 hereof to forward directly to the Master Servicer, copies of all
monthly account statements for the preceding monthly reporting period.
Section 18.3 MONTHLY REMITTANCE REQUIREMENTS
18.3.1 REMITTANCE OF FUNDS. On each Remittance Date with respect to
each distinct Owner of Mortgage Loans, the Servicer shall transfer, to the
extent not previously transferred as required pursuant to Section 6.1.3(e), from
the funds in (or required hereunder to be in) the respective Custodial P&I
Account as of the close of the Business Day immediately preceding the
Determination Date in the month of such Remittance Date to the related Master
Servicer Custodial Account, the following (other than any Amounts Held for
Future Distribution in respect of such Remittance Date not exceeding the
Threshold Amount and any amounts permitted to be retained by the Servicer or
withdrawn from such account by the Servicer pursuant to the terms of this
Agreement):
all payments on account of principal, including
prepayments of principal (whether full or partial),
and interest and all net REO Disposition proceeds;
all net Liquidation Proceeds, all net Partial
Liquidation Proceeds and Insurance Proceeds, other
than any portion of Insurance Proceeds to be applied
to the restoration or repair of the related Mortgaged
Property or released to the Borrower in accordance
with the requirements of law or Prudent Servicing
Practices; all P&I Advances made by the Servicer; the
Purchase Price, or portion thereof, paid for any
Mortgage Loans or property acquired in respect
thereof repurchased or substituted by the Servicer or
a representing party; and all other amounts required
to be deposited in the Custodial P&I Account or the
Master Servicer Custodial Account pursuant to this
Agreement.
Notwithstanding Section 18.3.1, the Servicer shall be entitled to withhold and
to pay to itself the applicable Servicing Fee (as adjusted pursuant to Section
7.6.1) from any payment on account of interest or other recovery (including Net
REO Proceeds) as received and prior to deposit of such payments in the Master
Servicer Custodial Account; PROVIDED FURTHER that with respect to any payment of
interest received by the Servicer in respect of a Mortgage Loan (whether paid by
the Mortgagor or received as Liquidation Proceeds, Insurance Proceeds or
otherwise) which
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is less than the full amount of interest then due with respect to such Mortgage
Loan, only that portion of such payment that bears the same relationship to the
total amount of such payment of interest as the per annum rate used to calculate
the Servicing Fee, as set forth in Section 4.8, bears to the Mortgage Interest
Rate borne by such Mortgage Loan shall be allocated to the Servicing Fee with
respect to such Mortgage Loan.
18.3.2 SERVICER COMPENSATION. The Servicer shall withdraw its Servicing
Fee for each Mortgage Loan net of any Month End Interest payable pursuant to
Section 7.6.1 from the related Custodial P&I Account prior to the remittance of
such amounts to the Master Servicer Custodial Account with all other payments
received with respect to the Mortgage Loans.
Article 19
TRANSFERS AND TERMINATION OF SERVICING
Section 19.1 TRANSFER OF SERVICING
19.1.1 TRANSFER PROHIBITION. The Servicer may not sell or transfer its
portfolio serviced hereunder without the prior written consent of the Master
Servicer, which consent cannot be unreasonably withheld. Further, the Servicer
may not subcontract any of its servicing duties, except as set forth in Section
11.2.1.
19.1.2 TRANSFER REQUEST. Any request for sale or transfer of servicing
will be reviewed on an individual basis. For a request to be considered,
however, the transferor must submit a written request to the Master Servicer.
The transferee must agree to enter into a servicing agreement with the Master
Servicer substantially in the form of this Agreement and must be approved by the
Master Servicer, and, if applicable, any rating agency with respect to Mortgage
Loans which are owned by a trust which has issued mortgage-backed securities,
securitized by such Mortgage Loans, which have been rated at the request of such
trust by such rating agency. The Master Servicer must receive this documentation
at least 45 days prior to the requested date of transfer. The transferor will be
notified in writing of the Master Servicer's approval or denial. Such transfer
will be denied if the transferee does not meet the approval requirements of the
Master Servicer, or any such rating agency.
19.1.3 SERVICER LIABILITY. The transferor of servicing shall be liable
to the Master Servicer, and the Owner of the related Mortgage Loans for any
servicing obligation violations that occur before, during, and up to and
including the day the portfolio is actually transferred. The transferee of
servicing shall be liable for any breach of servicing obligations that occurs
after the transfer of the servicing portfolio.
19.1.4 MASTER SERVICER'S DETERMINATION. If the transferor and
transferee disagree about liability for violations of representations and
warranties and servicing requirements hereunder,the Master Servicer has the
right, in its reasonable discretion, to determine which party or parties are
liable for such violations.
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Section 19.2 TERMINATION OF SERVICING
19.2.1 GROUNDS FOR TERMINATION. The Owners of the related Mortgage
Loans, will have the right to terminate for cause the servicing privileges of
the Servicer under this Agreement, either with respect to certain Mortgage Loans
serviced hereunder or with respect to all Mortgage Loans serviced hereunder in
the event that (i) any of the following occur, (ii) the related Owner or the
Master Servicer on its behalf has given the Servicer prior written notice of the
occurrence of such event, and (iii) with respect to clauses (a), (b) or (f)
hereof, the Servicer has failed to cure such event within a reasonable time,
which shall in all cases be no less than ninety (90) days:
(a) the Servicer has breached any material obligation set
forth or incorporated by reference in this Agreement
or any Sales Agreement, including, without
limitation, the Servicer's failure to maintain the
requisite Fidelity Bond and Errors and Omissions
Policy in the amounts specified herein;
(b) the Servicer has made one or more false or misleading
representations or warranties in this Agreement or
any Sales Agreement, or in any documents relating to
the foregoing agreements;
(c) the appointment of a trustee or receiver for the
Servicer or any of its property;
(d) the execution by the Servicer of an assignment for
the benefit of its creditors;
(e) any material change in the financial status of the
Servicer that, in the opinion of the Master Servicer,
could materially adversely affect the Owner of the
related Mortgage Loans, the Master Servicer or the
Servicer's ability to service the Mortgage Loans;
(f) the Servicer's placement on probation or suspension
by a federal or state government agency, including,
without limitation, FHLMC, FNMA or GNMA;
(g) the Servicer's assignment or attempted assignment of
any of its interests, rights, or obligations set
forth herein without the Master Servicer's prior
written consent; or
(h) the Servicer has been terminated for cause pursuant
to the terms of another servicing agreement with the
Principal.
19.2.2 OWNER NOTIFICATION. The Master Servicer shall notify the Owners
of the related Mortgage Loans of the occurrence of any of the events set forth
in Section 19.2.1, together with the Master Servicer's recommended course of
action regarding the termination of the Servicer.
19.2.3 SERVICER TERMINATION. Following the occurrence of any of the
events set forth in Section 19.2.1, each Owner of the related Mortgage Loans
may elect, at its reasonablediscretion, to terminate the Servicer under this
Agreement with respect to the Mortgage Loans owned by such Owner as shown on
Schedule II hereof. Each such Owner shall provide a written termination notice
to the Servicer.
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19.2.4 CONSEQUENCES OF TERMINATION. If this Agreement with the Servicer
is terminated pursuant to Section 19.2.3 hereof, the Servicer will deliver all
Servicer Mortgage Loan Files, in their entirety, for those Mortgage Loans
serviced under this Agreement, as well as any other documents or reports held by
the Servicer concerning such Mortgage Loans, to the transferee designated by the
Master Servicer, which may be the Master Servicer, and will assist in the
efficient and timely transfer of the servicing to such transferee. The Servicer
shall not be entitled to compensation for servicing following its termination.
19.2.5 EFFECT OF TERMINATION. In the event of the termination of this
Agreement, the Servicer is not released from its obligations under this
Agreement. If its servicing is terminated for cause, the Servicer must pay the
expenses of the Master Servicer incurred in connection with transfer of the
servicing and any actual and direct damages, including, without limitation,
actual and direct damages or losses, of the Owner of the related Mortgage Loans,
or the Master Servicer resulting from such termination.
19.2.6 CUSTODIAL ACCOUNT THRESHOLD REDUCTION. In the event that any of
the events specified in clauses (a) through (h) of Section 19.2.1 or in clauses
(g), (h), or (i) of Section 4.2.5 occur, the Master Servicer, in its reasonable
discretion, may notify the Servicer in writing that the applicable Threshold
Amount has been reduced to such amount not less than $1,000 as shall be
specified in such notice.
Article 20
MISCELLANEOUS PROVISIONS
Section 20.1 AMENDMENTS
20.1.1 UNILATERAL AUTHORITY. The Servicer acknowledges that the Master
Servicer, acting on behalf of the Principal and its successors and assigns, may,
upon written notice, supplement or amend the provisions of this Agreement from
time to time, without the need to obtain the Servicer's consent to (a) correct
ambiguous or erroneous provisions in this Agreement; (b) make changes necessary
or helpful to maintain compliance with applicable law; (c) conform to evolving
industry standards regarding the servicing of residential mortgage loans
generally; or (d) make such other modifications or amendments thereto, which the
Master Servicer deems advisable, provided that no such modification or amendment
shall have a material adverse impact so as to materially increase the
obligations of, or to materially decrease the benefits to, the Servicer.
20.1.2 CONSENSUAL AMENDMENT. Except as provided for in Section 20.1.1
hereof, the Master Servicer, acting on behalf of the Principal and its
successors and assigns, must obtain the written consent of the Servicer to any
amendment hereto that would either increase materially the obligations of the
Servicer or decrease materially the benefits to the Servicer.
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20.1.3 OWNER NOTIFICATION. The Owners of the related Mortgage Loans
shall be provided with notice of the substance of any amendments or
modifications made to this Servicing Agreement pursuant to the provisions of
this Section 20.1.
20.1.4 OWNER DISAPPROVAL. With regard to any proposed modification or
amendment to this Agreement which shall have a material adverse impact upon the
beneficial rights enjoyed hereunder by an Owner of the related Mortgage Loans,
each such Owner shall receive written notice of the substance of any proposed
amendments or modifications at least ten business days prior to the proposed
date of enactment of such amendment or modification which shall also state
therein the proposed date of enactment. If a majority vote of the Owners so
materially adversely affected, with the vote of each such Owner weighted in
proportion to the aggregate of the Unpaid Principal Balance of Mortgage Loans
serviced hereunder for such Owner, notify the Master Servicer in writing, prior
to the proposed date of enactment, of their opposition to the adoption of such
an amendment or modifications, the Master Servicer shall not proceed with such
modification or amendment.
Section 20.2 GENERAL CONSTRUCTION
20.2.1 BINDING NATURE. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
20.2.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous servicing agreements,
understandings, inducements and conditions, expressed or implied, oral or
written, of any nature whatsoever with respect to the subject matter thereof.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof.
20.2.3 GOVERNING LAW. THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS
VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT SHALL BE GOVERNED BY,
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, NOTWITHSTANDING ANY NEW YORK OR OTHER CHOICE-OF-LAW RULES TO THE
CONTRARY.
20.2.4 INDULGENCES NOT 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.
96
<PAGE>
20.2.5 TITLES NOT TO AFFECT INTERPRETATIONN. The titles of the articles
and sections contained in this Agreement are for convenience only, and they
neither form a part of this Agreement nor are they to be used in the
construction or interpretation hereof.
20.2.6 PROVISIONS SEVERABLE. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
20.2.7 SERVICER AN INDEPENDENT CONTRACTOR. All services, duties and
responsibilities of the Servicer under this Agreement shall be performed and
carried out by the Servicer as an independent contractor, and none of the
provisions of this Agreement shall be deemed to make, authorize or appoint the
Servicer as agent or representative of any Owner of any Mortgage Loans, of the
Principal, or of the Master Servicer.
20.2.8 THIRD PARTY BENEFICIARY. The parties agree that the Master
Servicer and any Owner are intended third party beneficiaries of the
representations, warranties, covenants and agreements of the Servicer set forth
in this Agreement. The Master Servicer shall have full authorization to enforce
directly against the Servicer any of the obligations of the Servicer provided
for herein.
20.2.9 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
set forth above.
THE PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Servicer
By: _____________________________________
Name: B. David Bialzak
Title: Vice President
SECURITIZED ASSET SERVICES
CORPORATION
as Principal
By: ______________________________________
Name: Brian W. Bartlett
Title: Vice President
97
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C>
</TABLE>
98
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
PRUDENTIAL HOME MORTGAGE INC.
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
3099458 $ 380,336.44 12/1/95 0.375%
3217645 $ 199,976.82 12/1/95 0.375%
3357277 $ 444,119.52 12/1/95 0.375%
3444735 $ 252,371.31 12/1/95 0.375%
3449842 $ 467,433.60 12/1/95 0.375%
3491596 $ 154,070.71 12/1/95 0.375%
3491869 $ 332,384.53 12/1/95 0.375%
3506885 $ 246,811.66 12/1/95 0.375%
3507032 $ 352,124.97 12/1/95 0.375%
3545801 $ 381,060.77 12/1/95 0.375%
3550107 $ 364,501.61 12/1/95 0.375%
3557571 $ 254,313.53 12/1/95 0.375%
3557925 $ 405,640.49 12/1/95 0.375%
3563296 $ 297,410.34 12/1/95 0.375%
3564490 $ 811,710.30 12/1/95 0.375%
3571590 $ 378,139.78 12/1/95 0.375%
3576713 $ 398,300.38 12/1/95 0.375%
3577151 $ 216,306.40 12/1/95 0.375%
3581059 $ 210,655.91 12/1/95 0.375%
3583173 $ 267,485.06 12/1/95 0.375%
3583376 $ 397,236.49 12/1/95 0.375%
3584692 $ 264,639.76 12/1/95 0.375%
3590710 $ 36,234.04 12/1/95 0.375%
3595303 $ 274,021.41 12/1/95 0.375%
4452695 $ 128,539.77 12/1/95 0.375%
4453022 $ 104,988.07 12/1/95 0.375%
4453038 $ 123,115.50 12/1/95 0.375%
</TABLE>
Page 1
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
PRUDENTIAL HOME MORTGAGE INC.
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
4453154 $ 194,031.34 12/1/95 0.375%
4453160 $ 132,061.32 12/1/95 0.375%
4453187 $ 178,718.82 12/1/95 0.375%
4453442 $ 50,095.01 12/1/95 0.375%
4453519 $ 347,051.08 12/1/95 0.375%
4454227 $ 177,425.15 12/1/95 0.375%
4454234 $ 119,069.60 12/1/95 0.375%
4454253 $ 113,419.84 12/1/95 0.375%
4454301 $ 163,489.94 12/1/95 0.375%
4454341 $ 187,189.74 12/1/95 0.375%
4454556 $ 59,471.17 12/1/95 0.375%
4454586 $ 289,452.33 12/1/95 0.375%
4456676 $ 119,898.66 12/1/95 0.375%
4456737 $ 129,426.33 12/1/95 0.375%
4456747 $ 96,063.48 12/1/95 0.375%
4456759 $ 136,093.14 12/1/95 0.375%
4456843 $ 102,356.74 12/1/95 0.375%
4457064 $ 96,852.42 12/1/95 0.375%
4457169 $ 79,896.13 12/1/95 0.375%
4457633 $ 98,595.28 12/1/95 0.375%
4457658 $ 54,398.19 12/1/95 0.375%
4457659 $ 82,255.82 12/1/95 0.375%
4457691 $ 121,181.39 12/1/95 0.375%
4457709 $ 75,227.99 12/1/95 0.375%
4457715 $ 127,268.87 12/1/95 0.375%
4457773 $ 120,091.13 12/1/95 0.375%
4457775 $ 96,790.73 12/1/95 0.375%
</TABLE>
Page 2
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
PRUDENTIAL HOME MORTGAGE INC.
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
4457784 $ 124,145.03 12/1/95 0.375%
4457814 $ 168,748.73 12/1/95 0.375%
4457873 $ 60,947.66 12/1/95 0.375%
4458321 $ 110,642.22 12/1/95 0.375%
4458532 $ 163,007.88 12/1/95 0.375%
4458936 $ 237,509.69 12/1/95 0.375%
4460750 $ 381,860.64 12/1/95 0.375%
4461299 $ 74,540.88 12/1/95 0.375%
4461308 $ 93,381.60 12/1/95 0.375%
4462056 $ 347,627.96 12/1/95 0.375%
4462198 $ 199,255.11 12/1/95 0.375%
4462405 $ 288,675.83 12/1/95 0.375%
4463922 $ 279,097.77 12/1/95 0.375%
4464615 $ 314,748.09 12/1/95 0.375%
4465530 $ 222,944.33 12/1/95 0.375%
4466145 $ 215,679.87 12/1/95 0.375%
4466152 $ 391,520.87 12/1/95 0.375%
4466804 $ 278,797.00 12/1/95 0.375%
4467173 $ 373,800.00 12/1/95 0.375%
4467226 $ 259,770.61 12/1/95 0.375%
4467364 $ 581,043.08 12/1/95 0.375%
4468438 $ 239,772.27 12/1/95 0.375%
4468490 $ 89,786.88 12/1/95 0.375%
4468740 $ 447,574.91 12/1/95 0.375%
4468835 $ 244,363.61 12/1/95 0.375%
4469259 $ 206,184.50 12/1/95 0.375%
4469463 $ 243,339.25 12/1/95 0.375%
</TABLE>
Page 3
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
PRUDENTIAL HOME MORTGAGE INC.
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
4470091 $ 166,252.08 12/1/95 0.375%
4471063 $ 107,843.16 12/1/95 0.375%
4471327 $ 48,959.83 12/1/95 0.375%
4471391 $ 283,224.45 12/1/95 0.375%
4471424 $ 273,750.00 12/1/95 0.375%
4472419 $ 236,061.06 12/1/95 0.375%
4472772 $ 263,783.60 12/1/95 0.375%
4472871 $ 287,327.11 12/1/95 0.375%
4473594 $ 89,798.34 12/1/95 0.375%
4473876 $ 319,523.54 12/1/95 0.375%
4474711 $ 237,315.37 12/1/95 0.375%
4474869 $ 129,334.26 12/1/95 0.375%
4475102 $ 321,687.03 12/1/85 0.375%
4475443 $ 280,000.00 12/1/95 0.375%
4475592 $ 302,188.00 12/1/95 0.375%
4475736 $ 219,759.19 12/15 0.375%
4475977 $ 286,707.38 12/1/85 0.375%
4476952 $ 289,744.13 12/15 0.375%
4476977 $ 411,609.08 12/1/95 0.375%
4477902 $ 300,000.00 12/1/95 0.375%
4479159 $ 400,000.00 12/1/95 0.375%
4479239 $ 249,784.75 12/1/95 0.375%
4479546 $ 348,435.82 12/1/95 0.375%
4481475 $ 419,600.00 12/1/95 0.375%
4481514 $ 287,786.26 12/1/95 0.375%
4481968 $ 239,803.27 12/1/95 0.375%
4483413 $ 586,250.00 12/1/95 0.375%
</TABLE>
Page 4
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
PRUDENTIAL HOME MORTGAGE INC.
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
9034427 $ 77,863.75 12/1/95 0.375%
9038994 $ 96,032.03 12/1/95 0.375%
9054422 $ 62,366.50 12/1/95 0.375%
111 $ 25,953,357.07
</TABLE>
Page 5
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
FIRST TOWN MORTGAGE CORP
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
3487061 $ 183,909.16 12/1/95 0.250%
3502147 $ 259,686.19 12/1/95 0.250%
3503874 $ 134,415.13 12/1/95 0.250%
3526286 $ 346,884.21 12/1/95 0.250%
3529103 $ 43,275.50 12/1/95 12/1/95
3538869 $ 145,344.53 12/1/95 0.250%
3544217 $ 193,093.97 12/1/95 0.250%
3544388 $ 117,678.33 12/1/95 0.250%
3556468 $ 348,593.04 12/1/95 0.250%
3556599 $ 271,697.02 12/1/95 0.250%
10 $ 2,044,559.08
</TABLE>
Page 6
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
COLUMBIA EQUITIES, LTD.
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
3459734 $ 410,160.09 12/1/95 0.250%
3496284 $ 185,116.30 12/1/95 0.250%
3510220 $ 106,238.69 12/1/95 0.250%
3510635 $ 223,625.57 12/1/95 0.250%
3519309 $ 79,020.27 12/1/95 0.250%
3523830 $ 320,611.67 12/1/95 0.250%
3553463 $ 181,833.83 12/1/95 0.250%
7 $ 1,506,606.42
</TABLE>
Page 1
<PAGE>
SCHEDULE A
MORTGAGE LOAN SCHEDULE
INTERNATIONAL SAVINGS AND LOAN
<TABLE>
<CAPTION>
CUT-OFF DATE
CUT-OFF DATE REGARDING
UNPAID INITIAL COVERAGE
MASTER SERVICER PRINCIPAL UNDER THIS SERVICING FEE
LOAN NUMBER BALANCE AGREEMENT PERCENTAGE
<S> <C> <C> <C> <C>
3588841 $ 329,467.98 12/1/95 0.375%
1 $ 329,467.98
</TABLE>
Page 1
<PAGE>
SCHEDULE II
LIST OF OWNERS OF THE MORTGAGE LOANS
Cut-Off Date
Relating
Master Servicer's to Owner's
LOAN NUMBER OWNER'S ADDRESS ACQUISITION
99
<PAGE>
EXHIBIT A
NOTIFICATION OF SALE OF MORTGAGE LOANS
Re: PHMC Mortgage Loan Pool 199 - W
For the purpose of the registration of the transfer of ownership of the
mortgage loans set forth below (the "Mortgage Loans") pursuant to Section 2.4.2
of the Servicing Agreement, dated December 1, 1995, between Securitized Asset
Services Corporation and The Prudential Home Mortgage Company, Inc. (the
"Servicing Agreement"), the Current Owner, , hereby notifies the
--------------
Master Servicer of its sale of the Mortgage Loans to the indicated New Owner.
The right to register a transfer of ownership of the Mortgage Loans under
Section 2.4.1 of the Servicing Agreement is subject at any time to certain
numerical limits regarding the number of simultaneous Owners of Mortgage Loans
for a given mortgage loan pool. Please contact, Bond Administration, Securitized
Asset Service Corporation at (301) 846-8130 or by facsimile at (301) 846-8152
regarding the status of such numerical limits with respect to any particular
mortgage loan pool. If the transfer of ownership of the Mortgage Loans is
registered, the Master Servicer will effect payments to the New Owner following
the related Cut-Off Date. The New Owner agrees to provide the same notification
to the Master Servicer for subsequent sales of the Mortgage Loans.
Attached hereto are incumbency certificates of the Current Owner and
the New Owner which indicate the signatory authority of the parties executing
this notification.
This notification, dated this day of , , has
----- --------- ---------
been agreed to by the following parties.
- ------------------------- -------------------------------
Current Owner New Owner
By: By:
---------------------- ---------------------------
Name: Name:
Title: Title:
100
<PAGE>
Cut-Off Date
Relating
Master Servicer's New to New Owner's
LOAN NUMBER OWNER'S ADDRESS ACQUISITION
101
<PAGE>
EXHIBIT I-3
SERVICING AGREEMENT RELATING TO MORTGAGE LOAN SUB-POOL 1995-W24B
<PAGE>
EXECUTION COPY
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Principal)
and
COLUMBIA EQUITIES, LTD.
(Servicer)
SERVICING AGREEMENT
Dated as of August 31, 1993
<PAGE>
TABLE OF CONTENTS
Article 1
<TABLE>
<S> <C>
ACH.................................................................................................... 1
Adjusted Tangible Net Worth............................................................................ 1
Affiliate.............................................................................................. 1
Amounts Held for Future Distribution................................................................... 1
Appraisal Report....................................................................................... 2
ARM Loan............................................................................................... 2
Assignment............................................................................................. 2
Assumption............................................................................................. 2
Balloon Amount......................................................................................... 2
Balloon Loan........................................................................................... 2
BIF.................................................................................................... 2
Borrower............................................................................................... 2
Business Day........................................................................................... 2
Buydown Agreement...................................................................................... 2
Buydown Funds.......................................................................................... 2
Certificate............................................................................................ 3
Code................................................................................................... 3
Condominium Project.................................................................................... 3
Condominium Unit....................................................................................... 3
Converted Mortgage Loan................................................................................ 3
Curtailment............................................................................................ 3
Curtailment Interest................................................................................... 3
Custodial Buydown Account.............................................................................. 3
Custodial Principal and Interest (P&I) Account......................................................... 3
Custodial Taxes and Insurance (T&I) Account............................................................ 3
Custodian.............................................................................................. 3
Cut-Off Date........................................................................................... 4
Debt Service Reduction................................................................................. 4
Deficient Valuation.................................................................................... 4
Delinquency/Delinquent................................................................................. 4
Directly Operate....................................................................................... 4
Due Date............................................................................................... 4
Due-On-Sale Clause..................................................................................... 4
Duff & Phelps.......................................................................................... 4
Eligible Account....................................................................................... 4
Eligible Custodial P&I Account......................................................................... 5
Eligible Investments................................................................................... 5
Errors and Omissions Policy............................................................................ 6
Escrow Funds........................................................................................... 7
Escrow Item............................................................................................ 7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
FDIC................................................................................................... 7
FHA.................................................................................................... 7
FHLMC.................................................................................................. 7
Fidelity Bond.......................................................................................... 7
Fitch.................................................................................................. 7
Flood Insurance........................................................................................ 7
FNMA................................................................................................... 7
GNMA................................................................................................... 7
GPM (or GPARM) Loan.................................................................................... 7
Gross Margin........................................................................................... 7
Hazard Insurance....................................................................................... 7
HUD.................................................................................................... 8
Index.................................................................................................. 8
Insurance Policy....................................................................................... 8
Insurance Proceeds..................................................................................... 8
Interest Adjustment Date............................................................................... 8
Liquidation............................................................................................ 8
Liquidation Proceeds................................................................................... 8
Loan Originator........................................................................................ 8
Loan-to-Value (LTV).................................................................................... 8
Master Servicer........................................................................................ 8
Master Servicer Custodial Account...................................................................... 8
Master Servicer Loan Number............................................................................ 8
Maximum Lifetime Mortgage Interest Rate................................................................ 8
Maximum Negative Amortization Amount................................................................... 9
Minimum Lifetime Mortgage Interest Rate................................................................ 9
Month End Interest..................................................................................... 9
Month End Interest Shortfall........................................................................... 9
Monthly Accounting Reports............................................................................. 9
Monthly Payment........................................................................................ 9
Monthly Remittance..................................................................................... 9
Monthly Servicing Compensation......................................................................... 9
Moody's................................................................................................ 9
Mortgage Interest Rate................................................................................. 9
Mortgage Loan.......................................................................................... 9
Mortgage Loan Documents................................................................................ 10
Mortgaged Property..................................................................................... 10
Mortgagee.............................................................................................. 10
Mortgage Note.......................................................................................... 10
Mortgage Note Assumption Rider......................................................................... 10
Net Mortgage Interest Rate............................................................................. 10
Non-Recoverable Advance................................................................................ 10
Notice of Periodic Adjustment.......................................................................... 10
Officer................................................................................................ 10
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Opinion of Counsel..................................................................................... 10
Owner or Owner of the Mortgage Loans................................................................... 11
Owner Mortgage Loan File............................................................................... 11
Owner-Occupied Property................................................................................ 11
PSI Advance............................................................................................ 11
Payment Adjustment Date................................................................................ 11
Periodic Payment Cap................................................................................... 11
Periodic Rate Cap...................................................................................... 11
Person................................................................................................. 11
Pool Insurance......................................................................................... 11
Pool Insurer........................................................................................... 11
Pooling and Servicing Agreement........................................................................ 11
Preliminary Title Report............................................................................... 12
Prepayment In Full..................................................................................... 12
Primary Mortgage Insurance............................................................................. 12
Primary Mortgage Insurer............................................................................... 12
Primary Residence...................................................................................... 12
Principal.............................................................................................. 12
Property Inspection Report............................................................................. 12
Prudent Servicing Practices............................................................................ 12
PUD (Planned Unit Development)......................................................................... 12
PUD Unit............................................................................................... 12
Purchase Price......................................................................................... 12
Real Estate Owned (REO)................................................................................ 13
Realized Loss.......................................................................................... 13
Reference Bank......................................................................................... 13
Remittance Date........................................................................................ 13
REO Disposition........................................................................................ 13
Representing Party..................................................................................... 13
S&P.................................................................................................... 13
SAIF................................................................................................... 13
Sales Agreement........................................................................................ 13
Scheduled Principal Balance............................................................................ 13
Security Instrument.................................................................................... 14
Servicer............................................................................................... 14
Servicer Information Statement......................................................................... 14
Servicer Loan Mortgage Number.......................................................................... 14
Servicer Mortgage Loan File............................................................................ 14
Servicer Number........................................................................................ 14
Servicing Fee.......................................................................................... 14
Servicing Fee Percentage............................................................................... 14
Servicing Retained Commitment Letter................................................................... 14
Single Family Property................................................................................. 14
Supervision Agreement.................................................................................. 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Tangible Net Worth..................................................................................... 14
T&I Advance............................................................................................ 15
Threshold Amount....................................................................................... 15
Title Insurance........................................................................................ 15
Transfer of Ownership.................................................................................. 15
Trust.................................................................................................. 15
Trustee................................................................................................ 15
Unpaid Principal Balance............................................................................... 15
VA..................................................................................................... 15
Value.................................................................................................. 16
</TABLE>
<TABLE>
<CAPTION>
Article 2
<S> <C>
Construction........................................ 16
Section 2.1 Legal Construction.......................................................... 16
2.1.1 Compliance with Applicable Law...................................... 16
2.1.2 Potential Conflict.................................................. 16
2.1.3 Consistent Legal Compliance......................................... 16
2.1.4 General Interpretive Rules.......................................... 16
2.1.5 Construction of Provisions.......................................... 16
Section 2.2 Servicer Practices.......................................................... 17
2.2.1 Prudent Servicing Practices......................................... 17
2.2.2 Non-Discrimination Practices........................................ 17
Section 2.3 General Provisions.......................................................... 17
2.3.1 Servicer's Agreement................................................ 17
2.3.2 Term of Agreement................................................... 17
2.3.3 Amended Mortgage Loan Schedule...................................... 17
2.3.4 Assignment and Replacement.......................................... 17
2.3.5 Notices............................................................. 18
2.3.6 Change of Accountants............................................... 19
Section 2.4 Servicing of Mortgage Loans for Multiple Owners............................. 19
2.4.1 Transfer of Mortgage Loans.......................................... 19
2.4.2 Ownership Schedule.................................................. 19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Article 3
<S> <C>
Servicing Provisions.................................... 19
Section 3.1 General..................................................................... 19
3.1.1 Applicability....................................................... 19
3.1.2 Modifications of Mortgage Loans..................................... 19
Section 3.2 REO Qualification........................................................... 20
3.2.1 Foreclosure Property Qualification.................................. 20
3.2.2 Foreclosure Property Qualification Restrictions..................... 20
3.2.3 REO Disposition Accounting.......................................... 20
Section 3.3 Prohibited Transactions and Activities...................................... 20
3.3.1 Mortgage Loan Disposition Restriction............................... 20
3.3.2 Personal Property Restriction....................................... 20
Section 3.4 Eligible Investments........................................................ 21
3.4.1 Custodial Account Investments....................................... 21
3.4.2 Escrow Account Investments.......................................... 21
Article 4
Servicer Considerations........................................... 22
Section 4.1 Servicer Information Statement.............................................. 22
4.1.1 Servicer Information Statement Requirement.......................... 22
4.1.2 Servicer Information Statement's Purpose........................... 22
4.1.3 Disclosure of Servicer Information.................................. 22
Section 4.2 Servicer Eligibility Standards.............................................. 22
4.2.1 Regulatory Approvals and Licensing.................................. 22
4.2.2 Net Worth and Portfolio Requirements................................ 23
4.2.3 Auditor's Opinion and Other Annual Reports.......................... 23
4.2.4 Servicing Experience................................................ 24
4.2.5 Material Changes.................................................... 24
Section 4.3 Errors and Omissions Insurance.............................................. 25
4.3.1 E & O Requirement................................................... 25
4.3.2 E & O Coverage...................................................... 25
4.3.3 E & O Scope......................................................... 26
4.3.4 E & O Policy Maintenance............................................ 26
4.3.5 E & O Deductible.................................................... 26
4.3.6 E & O Qualifications................................................ 26
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4.3.7 Notice of Claim..................................................... 26
Section 4.4 Fidelity Bond Coverage.............................................. 27
4.4.1 Fidelity Bond Requirement........................................... 27
4.4.2 Fidelity Bond Coverage.............................................. 27
4.4.3 Fidelity Bond Scope................................................. 27
4.4.4 Fidelity Bond Maintenance........................................... 27
4.4.5 Fidelity Bond Deductible............................................ 27
4.4.6 Fidelity Bond Rating Requirement.................................... 28
4.4.7 Notice of Event..................................................... 28
Section 4.5 Servicer's Liability........................................................ 28
4.5.1 Liability Exposure.................................................. 28
4.5.2 Continued Liability................................................. 28
Section 4.6 Inactive Servicers.......................................................... 28
4.6.1 Sale of Servicing................................................... 28
4.6.2 Servicing Price..................................................... 28
Section 4.7 Indemnification............................................................. 28
4.7.1 Scope of Indemnity.................................................. 28
4.7.2 Survival of Indemnity............................................... 29
Section 4.8 Servicer's Compensation..................................................... 29
4.8.1 Servicing Fee Amount................................................ 29
4.8.2 Servicing Fee Source................................................ 30
Article 5
Representations And Warranties........................................ 30
Section 5.1 General..................................................................... 30
5.1.1 Reliance............................................................ 30
5.1.2 Survival of Representations and Warranties.......................... 30
5.1.3 Breach of Representation or Warranty................................ 30
5.1.4 Disclosure of Representations and Warranties........................ 31
5.1.5 Assignment of Representations and Warranties........................ 31
Section 5.2 Servicer Representations and Warranties..................................... 31
5.2.1 Qualification of Servicer........................................... 31
5.2.2 Requisite Authority................................................. 31
5.2.3 No Conflicts........................................................ 32
5.2.4 Enforceable Agreement............................................... 32
5.2.5 No Consents Required................................................ 32
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5.2.6 Agency Approval..................................................... 32
5.2.7 Financial Condition................................................. 32
5.2.8 Servicing Compliance............................................... 32
5.2.9 No Impairment....................................................... 33
5.2.10 No Inquiries................................................................. 33
5.2.11 Custodial and Escrow Accounts Current........................................ 33
Section 5.3 Mortgage Loan Representations and Warranties................................ 33
5.3.1 No Outstanding Charges............................................. 33
5.3.2 Insurance Maintenance............................................... 34
5.3.3 Servicing Compliance................................................ 34
5.3.4 No Satisfaction of Mortgage........................................ 34
5.3.5 Primary Mortgage Insurance Compliance............................... 34
5.3.6 Pool Insurance Compliance........................................... 35
5.3.7 Servicing Practices; Escrow Funds................................... 35
Section 5.4 Conditional Mortgage Loan Representations................................... 35
5.4.1 Payments Current.................................................... 35
5.4.2 Title Insurance..................................................... 35
5.4.3 No Defaults......................................................... 36
5.4.4 Original Terms Unmodified........................................... 36
5.4.5 Mortgaged Property Undamaged; No Condemnation...................... 36
5.4.6 No Other Hazards................................................... 36
Article 6
Custodial Accounting............................................. 36
Section 6.1 In General.................................................................. 36
6.1.1 Custodial Account Establishment.................................... 36
6.1.2 Custodial Account Separateness...................................... 36
6.1.3 Custodial Account Maintenance....................................... 37
6.1.4 Escrow Investment................................................... 38
6.1.5 Clearing Account.................................................... 38
6.1.6 Custodial Buydown Account........................................... 39
6.1.7 Master Servicer Custodial Account................................... 39
Section 6.2 Custodial P&I Account....................................................... 39
6.2.1 Mandatory Deposits.................................................. 40
6.2.2 Optional Deposits................................................... 40
6.2.3 Permissible Withdrawals............................................. 40
6.2.4 Account Beneficiary................................................. 41
6.2.5 Use of Accounts..................................................... 41
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Section 6.3 Custodial T&I Account...................................................... 41
6.3.1 Mandatory Deposits.................................................. 41
6.3.2 Permissible Withdrawals............................................. 42
6.3.3 Account Requirements................................................ 42
6.3.4 Account Balance..................................................... 42
Section 6.4 Eligible Account Investments................................................ 42
6.4.1 Eligible Investments Permitted...................................... 42
6.4.2 Eligible Investment Restrictions.................................... 43
6.4.3 Eligible Investment Income.......................................... 43
6.4.4 Eligible Investment Losses.......................................... 43
6.4.5 Eligible Investment Limitations..................................... 43
6.4.6 Eligible Investments Reports........................................ 43
Article 7
Mortgage Loan Accounting........................................... 43
Section 7.1 In General.................................................................. 43
7.1.1 Mortgage Loan Accounting Practices.................................. 43
7.1.2 Record Keeping...................................................... 44
7.1.3 Record Review....................................................... 44
Section 7.2 Mortgage Loan Records....................................................... 44
7.2.1 Account Records..................................................... 44
7.2.2 Account Record Information.......................................... 44
7.2.3 Accounting Practice................................................. 45
7.2.4 Access to Certain Documentation and Information Regarding the
Mortgage Loans....................................................................... 45
Section 7.3 Accounting Procedures....................................................... 45
7.3.1 Principal and Interest Computation.................................. 45
7.3.2 Amortization Requirement............................................ 46
7.3.3 Negative Amortization............................................... 46
7.3.4 Interest Calculations............................................... 46
7.3.5 Buydown Loans....................................................... 46
Section 7.4 Application Procedure....................................................... 46
7.4.1 Application Priority................................................ 46
7.4.2 Reapplication of Prior Payments..................................... 46
7.4.3 Advance Payments.................................................... 47
Section 7.5 Curtailments................................................................ 47
7.5.1 Curtailment Amount.................................................. 47
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7.5.2 Curtailment Application............................................. 47
7.5.3 Effect of Curtailment............................................... 47
7.5.4 Curtailment Transmission............................................ 47
Section 7.6 Liquidations................................................................ 47
7.6.1 Month End Interest.................................................. 47
7.6.2 Liquidation Reports................................................. 48
7.6.3 Deposit of Funds.................................................... 48
7.6.4 Document Request.................................................... 48
Section 7.7 Realized Losses............................................................. 48
7.7.1 Liquidation Realized Loss Determination............................. 48
7.7.2 Bankruptcy Realized Loss Determination.............................. 49
7.7.3 Reporting Requirement............................................... 49
7.7.4 Servicer's Liability................................................ 49
Article 8
ARM Loans.................................................. 49
Section 8.1 ARM Loan Servicing.......................................................... 49
8.1.1 In General.......................................................... 49
8.1.2 Servicer's Liability................................................ 49
8.1.3 Adjustment Reports.................................................. 50
8.1.4 Substitute Index.................................................... 50
Section 8.2 Notice of Periodic Adjustment............................................... 50
8.2.1 Notice Requirement.................................................. 50
8.2.2 Notice Contents..................................................... 50
8.2.3 Legal Compliance.................................................... 51
Section 8.3 ARM Loan Conversion......................................................... 51
8.3.1 Servicer's Determination............................................ 51
8.3.2 Conversion Notification............................................. 51
8.3.3 Purchase by Servicer................................................ 51
Article 9
Mortgage Loan Files............................................. 51
Section 9.1 Owner Mortgage Loan Files................................................... 51
9.1.1 Owner Mortgage Loan File Requirements............................... 51
9.1.2 Custodians.......................................................... 53
9.1.3 Release of Documents from Owner Mortgage Loan File.................. 53
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9.1.4 Execution by Owner.................................................. 54
9.1.5 Custodial Fees...................................................... 54
9.1.6 Representing Party Officers' Certificate............................ 54
9.1.7 Financing Arrangements.............................................. 54
Section 9.2 Servicer Mortgage Loan Files................................................ 54
9.2.1 Servicer Mortgage Loan File Requirements............................ 54
9.2.2 Servicer Mortgage Loan File Access.................................. 56
9.2.3 Alternate Media..................................................... 56
Section 9.3 Requisite Form.............................................................. 57
9.3.1 Form of Endorsements................................................ 57
9.3.2 Form of Assignment.................................................. 57
Article 10
Escrows................................................... 58
Section 10.1 Escrow Criteria............................................................. 58
10.1.1 Escrow Requirement.................................................. 58
10.1.2 Mortgaqe Loans without Escrow....................................... 58
Section 10.2 Payment of Escrow Items..................................................... 58
10.2.1 Escrow Payment Obligation........................................... 58
10.2.2 Escrow Item Payments................................................ 58
10.2.3 Escrow Fund Insufficiency........................................... 58
10.2.4 Nonpayment Notice................................................... 59
Section 10.3 Escrow Fund Determination................................................... 59
10.3.1 Escrow Funds Analysis......................................................... 59
10.3.2 Escrow Fund Surplus................................................. 59
10.3.3 Escrow Fund Deficiency.............................................. 59
Section 10.4 Records..................................................................... 59
10.4.1 Escrow Funds Records................................................ 59
10.4.2 Escrow Obligations Records.......................................... 59
Section 10.5 Escrow Waiver............................................................... 59
10.5.1 Waiver Conditions................................................... 59
10.5.2 Waiver Rescission................................................... 60
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Article 11
Collection and Servicing Practices...................................... 60
Section 11.1 General Servicing Requirements.............................................. 60
11.1.1 Servicing Practices.......................................................... 60
11.1.2 Tax Returns and Other Reports....................................... 60
11.1.3 Servicer Internal Controls.......................................... 60
11.1.4 Pool Insurance Compliance........................................... 60
11.1.5 Primary Mortgage Insurance Compliance............................... 61
Section 11.2 Delegation of Duties........................................................ 61
11.2.1 Permissible Delegations............................................. 61
11.2.2 Delegee's Qualifications............................................ 62
11.2.3 Responsibility for Costs............................................ 62
11.2.4 Servicer's Liability................................................ 62
Section 11.3 Due-on-Sale Clause Enforcement.............................................. 62
11.3.1 Enforcement Requirement............................................. 62
11.3.2 Litigation Considerations........................................... 62
11.3.3 Approval Requirement................................................ 62
Section 11.4 Assumptions................................................................. 63
11.4.1 Assumption Requirements............................................. 63
11.4.2 Approval and Release................................................ 63
11.4.3 Notification of Assumption.......................................... 63
11.4.4 Assumption Fees..................................................... 64
11.4.5 Disclosure Requirement.............................................. 64
Section 11.5 Partial Releases and Easements.............................................. 64
11.5.1 Master Servicer's Approval.......................................... 64
11.5.2 Prerequisites....................................................... 64
Section 11.6 Recordation of Assignments.................................................. 65
11.6.1 Recordation Requirement............................................. 65
11.6.2 Extension of Recording Period....................................... 65
11.6.3 Delivery Requirement................................................ 65
11.6.4 Waiver of Recordation............................................... 65
Section 11.7 General Servicing Considerations............................................ 66
11.7.1 Abandonment......................................................... 66
11.7.2 Buydown Funds....................................................... 66
11.7.3 Notification Matters................................................ 66
11.7.4 Eminent Domain...................................................... 67
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11.7.5 Late Charges........................................................ 67
Section 11.8 Borrower Bankruptcy......................................................... 67
11.8.1 Servicer's Duty..................................................... 67
11.8.2 Responsibility for Costs............................................ 67
11.8.3 Challenge Bankruptcy Reductions..................................... 67
11.8.4 Bankruptcy Adjustments.............................................. 67
11.8.5 Bankruptcy Plan Surveillance........................................ 67
Article 12
Delinquency Management............................................ 67
Section 12.1 In General.................................................................. 68
12.1.1 Servicing Practices................................................. 68
12.1.2 Servicer's Capabilities............................................. 68
12.1.3 Servicing Objectives................................................ 68
12.1.4 Servicer's Performance.............................................. 68
12.1.5 Servicer's Expenses................................................ 68
Section 12.2 Delinquency Servicing Procedures............................................ 68
12.2.1 Late Notice......................................................... 69
12.2.2 Telephonic Inquiry.................................................. 69
12.2.3 Notice of Default................................................... 69
12.2.4 Borrower Interview.................................................. 69
12.2.5 Continuing Contacts................................................. 69
12.2.6 Property Inspection................................................. 69
Section 12.3 Relief of Borrowers....................................................................... 69
12.3.1 Servicer's Role..................................................... 69
12.3.2 Servicer's Discretion............................................... 70
12.3.3 Relief Requirement.................................................. 70
12.3.4 Primary Mortgage Insurance Considerations........................... 70
12.3.5 Responsibility for Costs............................................ 70
12.3.6 Forbearance Plan.................................................... 70
12.3.7 Accommodation Limitations........................................... 71
12.3.8 Pool Insurance Considerations....................................... 71
Section 12.4 Special Delinquency Servicing Considerations................................ 71
12.4.1 Advance Responsibility During Delinquency........................... 71
12.4.2 Primary Mortgage Insurance Compliance............................... 71
12.4.3 Pool Insurance Compliance........................................... 71
Article 13
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FORECLOSURE ADMINISTRATION.......................................... 72
Section 13.1 Foreclosure Prerequisites................................................... 72
13.1.1 Chronic Delinquency................................................. 72
13.1.2 Liquidation Recommendation.......................................... 72
13.1.3 Foreclosure Expenses................................................ 73
13.1.4 Hazardous Wastes.................................................... 73
Section 13.2 Deed-in-Lieu of Foreclosure................................................. 73
13.2.1 Conditions................................................................... 73
13.2.2 Subsequent Actions.................................................. 74
Section 13.3 Actions Prior to Foreclosure................................................ 75
13.3.1 Notice Requirements................................................. 75
13.3.2 Initiation of Proceedings........................................... 75
Section 13.4 Foreclosure Procedures...................................................... 75
13.4.1 Foreclosure Expenses................................................ 75
13.4.2 Foreclosure Notice.................................................. 75
13.4.3 Buydown Funds Use................................................... 76
13.4.4 Servicer's Responsibilities......................................... 76
13.4.5 Property Inspections................................................ 76
13.4.6 Conveyance Documents................................................ 76
Section 13.5 Mortgage Loan Reinstatement................................................. 76
13.5.1 Borrower's Full Payment............................................. 76
13.5.2 Borrower's Partial Payment.......................................... 77
13.5.3 Obligations upon Reinstatement...................................... 77
13.5.4 Certain Assumptions Permitted....................................... 77
Article 14
REO Administration.............................................. 77
Section 14.1 General Provisions.......................................................... 77
14.1.1 REO Action Plan..................................................... 77
14.2.3 Notice.............................................................. 79
Section 14.3 REO Records and Reports..................................................... 79
14.3.1 Records Retention................................................... 79
14.3.2 Evidence of Title................................................... 79
14.3.3 REO Expenses........................................................ 79
14.3.4 REO Documents....................................................... 79
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Section 14.4 REO Marketing............................................................... 80
14.4.1 REO Marketing Efforts............................................... 80
14.4.2 REO Sales........................................................... 80
14.4.3 Primary Mortgage Insurance Considerations........................... 80
14.4.4 Master Servicer Instructions........................................ 80
14.4.5 Pool Insurance Considerations....................................... 80
Section 14.5 REO Rehabilitation.......................................................... 81
14.5.1 REO Rehabilitation Requirement...................................... 81
14.5.2 Master Servicer Approval............................................ 81
14.5.3 Written Contractor Bids............................................. 81
14.5.4 Primary Mortgage Insurance Considerations........................... 81
Section 14.6 REO Administration Failure.................................................. 81
14.6.1 Servicer Removal.................................................... 81
14.6.2 Servicer's Continuing Obligations................................... 81
14.6.3 Servicer's Duty to Compensate....................................... 82
Article 15
Insurance.................................................. 82
Section 15.1 General Provisions.......................................................... 82
15.1.1 Insurance Requirements.............................................. 82
15.1.2 Uninsured Losses.................................................... 82
15.1.3 Servicer's Obligation to Maintain Insurance......................... 83
15.1.4 Insurance Notices................................................... 83
15.1.5 Default by Insurer.................................................. 83
15.1.6 Insurance Carrier Rating............................................ 83
15.1.7 Insurance Carrier Licenses.......................................... 83
15.1.8 Risk Exposure....................................................... 84
15.1.9 Evidence of Insurance............................................... 84
Section 15.2 Primary Mortgage Insurance.................................................. 84
15.2.1 Primary Mortgage Insurance Requirement.............................. 85
15.2.2 Primary Mortgage Insurance Coverage................................. 85
15.2.3 Primary Mortgage Insurer Downgrading................................ 85
15.2.4 Primary Mortgage Insurance Cancellation............................. 85
15.2.5 Primary Mortgage Insurance Claims................................... 86
Section 15.3 Hazard Insurance............................................................ 86
15.3.1 Hazard Insurance Requirement........................................ 86
15.3.2 Hazard Insurance Coverage........................................... 86
15.3.3 Hazard Insurance Deductible......................................... 86
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15.3.4 Hazard Insurance Vacancy Coverage................................... 86
15.3.5 Hazard Insurance Mortgagee Provisions............................... 86
Section 15.4 Flood Insurance............................................................. 87
15.4.1 Flood Insurance Requirement......................................... 87
15.4.2 Flood Insurance Coverage............................................ 87
15.4.3 Flood Insurance Deductible.......................................... 87
Section 15.5 Title Insurance............................................................. 87
15.5.1 Title Insurance Requirement......................................... 87
15.5.2 Title Insurance Coverage............................................ 87
15.5.3 Servicer's Obligations.............................................. 87
15.5.4 Policy Custody...................................................... 88
15.5.5 Title Insurance Claims.............................................. 88
Section 15.6 Insurance Loss Settlements.................................................. 88
15.6.1 Settlement Approval................................................. 88
15.6.2 Settlement Disbursements............................................ 88
15.6.3 Settlement Funds.................................................... 89
15.6.4 Settlement Notice................................................... 89
15.6.5 Continuing Coverage................................................. 89
15.6.6 Property Inspections................................................ 89
Article 16
Condominium and PUD Insurance........................................ 89
Section 16.1 General Provisions.......................................................... 90
16.1.1 Applicability....................................................... 90
16.1.2 Premiums............................................................ 90
16.1.3 Deductible Reserves................................................. 90
16.1.4 Name of Insured..................................................... 90
16.1.5 Mortgagee Clause.................................................... 90
16.1.6 Reconstruction Coverage............................................. 90
Section 16.2 Common Area Multiple Peril Insurance........................................ 90
16.2.1 Common Area Multiple Peril Insurance Requirement.................... 90
16.2.2 Common Area Multiple Peril Insurance Coverage....................... 91
16.2.3 Common Area Multiple Peril Insurance Deductible..................... 91
16.2.4 Boiler and Machinery Coverage....................................... 91
Section 16.3 Blanket Hazard Insurance.................................................................. 91
16.3.1 Blanket Hazard Insurance Requirement................................ 91
16.3.2 Blanket Hazard Insurance Coverage................................... 91
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16.3.3 Blanket Hazard Insurance Deductible................................. 91
Section 16.4 Common Area CGL Insurance................................................... 91
16.4.1 Common Area CGL Insurance Requirement............................... 92
16.4.2 Common Area CGL Insurance Coverage.................................. 92
Section 16.5 Owners' Association Fidelity Insurance...................................... 92
16.5.1 Owners' Association Fidelity Insurance Requirement.................. 92
16.5.2 Owners' Association Fidelity Insurance Coverage..................... 92
Section 16.6 Blanket Flood Insurance..................................................... 92
16.6.1 Blanket Flood Insurance Requirement................................. 92
16.6.2 Blanket Flood Insurance Coverage.................................... 92
16.6.3 Blanket Flood Insurance Deductible.................................. 93
Article 17
Advances................................................... 93
Section 17.1 Principal and Interest Advances............................................. 93
17.1.1 P&I Advance Requirement............................................. 93
17.1.2 P&I Advance Limitation.............................................. 93
17.1.3 P&I Advance Recovery................................................ 93
17.1.4 Advance During Bankruptcy and Foreclosure........................... 93
Section 17.2 Foreclosure Advances........................................................ 94
17.2.1 Foreclosure Advance Requirement..................................... 94
17.2.2 Foreclosure Advance Limitation...................................... 94
17.2.3 Foreclosure Advance Recovery........................................ 94
17.2.4 Foreclosure Advance Records......................................... 94
Section 17.3 Tax & Insurance Advances.................................................... 94
17.3.1 T&I Advance Requirement............................................. 94
17.3.2 T&I Advance Recovery................................................ 94
17.3.3 T&I Advance Limitation.............................................. 95
17.3.4 Advance During Bankruptcy and Foreclosure........................... 95
Section 17.4 Non-Recoverable Advances.................................................... 95
17.4.1 Ordinary Recovery................................................... 95
17.4.2 Final Recovery...................................................... 95
Section 17.5 Failure to Advance.......................................................... 95
17.5.1 Grounds for Termination............................................. 95
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17.5.2 Servicer Reimbursement.............................................. 95
Section 17.6 Rehabilitation Advance...................................................... 96
17.6.1 Rehabilitation Advance Requirement.................................. 96
17.6.2 Rehabilitation Advance Limitation................................... 96
17.6.3 Rehabilitation Advance Recovery..................................... 96
Article 18
Reporting Requirements............................................ 96
Section 18.1 Monthly Accounting Records.................................................. 96
18.1.1 Monthly Accounting Report Requirement............................... 96
18.1.2 Monthly Accounting Report Elements.................................. 96
18.1.3 Automated Reports................................................... 97
18.1.4 Electronic Reporting................................................ 97
18.1.5 Machine Readable Records............................................ 97
18.1.6 Late Reporting Fee.................................................. 97
Section 18.2 Account Reconciliations..................................................... 98
18.2.1 Reconciliation Preparation.......................................... 98
18.2.2 Account Records..................................................... 98
Section 18.3 Monthly Remittance Requirements............................................. 98
18.3.1 Remittance of Funds................................................. 98
Article 19
Transfers and Termination of Servicing.................................... 99
Section 19.1 Transfer of Servicing....................................................... 99
19.1.1 Transfer Prohibition................................................ 99
19.1.2 Transfer Request.................................................... 99
19.1.3 Servicer Liability.................................................. 99
19.1.4 Master Servicer's Determination..................................... 99
Section 19.2 Termination of Servicing....................................................100
19.2.1 Grounds for Termination.............................................100
19.2.2 Owner Notification..................................................101
19.2.3 Servicer Termination................................................101
19.2.4 Consequences of Termination.........................................101
19.2.5 Effect of Termination...............................................101
19.2.6 Custodial Account Threshold Reduction...............................101
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Article 20
Miscellaneous Provisions...........................................101
Section 20.1 Amendments..................................................................102
20.1.1 Unilateral Authority................................................102
20.1.2 Consensual Amendment................................................102
20.1.3 Owner Notification.................................................102
20.1.4 Owner Disapproval..................................................102
Section 20.2 General Construction........................................................102
20.2.1 Binding Nature......................................................102
20.2.2 Entire Agreement....................................................102
20.2.3 Governing Law.......................................................103
20.2.4 Indulgences Not Waivers.............................................103
20.2.5 Titles Not to Affect Interpretation.................................103
20.2.6 Provisions Severable................................................103
20.2.7 Servicer an Independent Contractor..................................103
20.2.8 Third Party Beneficiary.............................................103
20.2.9 Counterparts.......................................................103
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This Servicing Agreement, made as of this thirty-first day of August,
1993 (the "Agreement"), between Columbia Equities, LTD., a New York corporation
(the "Servicer") and The Prudential Home Mortgage Company, Inc., a New Jersey
corporation, (the "Principal"), recites and provides as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing
residential mortgage loans, and the Principal desires to retain the Servicer,
and the Servicer desires to be retained, to service the Mortgage Loans
identified on Schedule I hereto subject to and in accordance with the terms of
this Agreement; and
WHEREAS, the Master Servicer acting pursuant to a Supervision Agreement
or a Pooling and Servicing Agreement will supervise, monitor and oversee the
performance of the Servicer under this Agreement; and
WHEREAS, the Principal may, at its sole discretion, assign an undivided
interest in its rights hereunder with respect to certain Mortgage Loans to the
respective Owner of such Mortgage Loans;
NOW THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Servicer and the Principal agree as follows:
ARTICLE 1
DEFINITIONS
ACH: Automated Clearing House.
ADJUSTED TANGIBLE NET WORTH: As of the date of determination thereof,
the sum of: (i) Servicer's Tangible Net Worth; plus (ii) one percent (1%) of the
amount of Servicer's servicing portfolio, as determined by the Master Servicer
in the Master Servicer's sole and absolute discretion.
AFFILIATE: Any person or entity controlling, controlled by or under
common control with a specified entity. "control" means the power to direct the
management and policies of a person or entity, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise. "controlling"
and "controlled" shall have meanings correlative to the foregoing.
AMOUNTS HELD FOR FUTURE DISTRIBUTION: As to any Remittance Date,
amounts on account of (i) all prepayments of principal received in the month of
such Remittance Date and all related payments of interest on such principal
prepayments, Liquidation Proceeds received in the month of such Remittance Date
and amounts received from the Seller or the Principal in the month of
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such Remittance Date as the Purchase Price for any repurchased Mortgage Loan and
(ii) payments which represent early receipt of scheduled payments of principal
and interest due on a date or dates subsequent to the related Due Date.
APPRAISAL REPORT: A report setting forth the fair market value of a
Mortgaged Property as determined by an appraiser who, at the time the appraisal
was conducted, met the minimum qualifications of FNMA and FHLMC for appraisers
of conventional residential mortgage loans.
ARM LOAN: An "adjustable rate" Mortgage Loan, the Mortgage Interest
Rate of which is subject to periodic adjustment in accordance with terms of the
related Mortgage Note.
ASSIGNMENT: The document which transfers all the rights of the secured
party pursuant to a Security Instrument to a transferee for valid consideration.
ASSUMPTION: The process whereby, on sale or transfer of a legal or
beneficial interest in a Mortgaged Property, the new owner of such Mortgaged
Property becomes legally obligated under the terms of the related existing
Security Instrument, Mortgage Note and any addenda and riders to such Security
Instrument or Mortgage Note. Subsequent to the Assumption, the new owner of the
property shall be deemed to be the Borrower under the related Mortgage Loan
Documents.
BALLOON AMOUNT: The remaining principal balance to be paid at Maturity
of a Balloon Loan by the related Borrower pursuant to the terms of the related
Mortgage Note.
BALLOON LOAN: A Mortgage Loan which amortizes its principal payments
over a period which is longer than the stated maturity of such Mortgage Loan
pursuant to the terms of the related Mortgage Note so as to require the payment
of the Balloon Amount at maturity in order to retire the Mortgage Loan.
BIF: The Bank Insurance Fund.
BORROWER: The individual obligated to repay a Mortgage Loan. (The
Borrower may be the beneficiary or beneficiaries of an Illinois land trust when
the Mortgaged Property is located in Illinois.)
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which national banking institutions in the state in which the Master
Servicer has its principal place of business are authorized or obligated by law
or executive order to remain closed.
BUYDOWN AGREEMENT: An agreement governing the application of Buydown
Funds with respect to a Mortgage Loan.
BUYDOWN FUNDS: Money advanced by a builder, seller or other interested
party to reduce a Borrower's Monthly Payment during the initial years of a
Mortgage Loan.
2
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CERTIFICATE: A mortgage backed security issued by an Owner of the
related Mortgage Loans which is secured, in whole or in part, by such Mortgage
Loans.
CODE: The Internal Revenue Code of 1986.
CONDOMINIUM PROJECT: Real estate including the separate ownership in
fee, or on a satisfactory leasehold estate, of a particular residential unit
with an indivisible interest in the real estate designated for common ownership
strictly by unit owners.
CONDOMINIUM UNIT: A Single Family Property within a Condominium
Project.
CONVERTED MORTGAGE LOAN: An ARM Loan with respect to which the Borrower
has complied with the applicable requirements of the related Mortgage Note to
convert the related Mortgage Interest Rate to a fixed rate of interest, and the
Servicer has processed such conversion.
CURTAILMENT: A partial prepayment by the Borrower of principal on a
Mortgage Loan that otherwise is current, which prepayment is not accompanied by
an amount representing the full amount of scheduled interest due on the related
Mortgage Loan.
CURTAILMENT INTEREST: When a Curtailment is applied retroactively by a
Servicer to the Unpaid Principal Balance of a Mortgage Loan outstanding on the
first day of the month in which such Curtailment is received, an amount equal to
30 days of interest on the amount of such Curtailment at the related Mortgage
Interest Rate.
CUSTODIAL BUYDOWN ACCOUNT: An account maintained by the Servicer
specifically to hold all Buydown Funds to be applied to individual Mortgage
Loans owned by a common Owner of the Mortgage Loans.
CUSTODIAL PRINCIPAL AND INTEREST (P&I) ACCOUNT: An account maintained
by the Servicer, specifically for the collection of principal and interest,
Insurance Proceeds, Liquidation Proceeds and other amounts received with respect
to Mortgage Loans owned by a common Owner of the Mortgage Loans.
CUSTODIAL TAXES AND INSURANCE (T&I) ACCOUNT: An account maintained by
the Servicer, specifically for the payment of real estate tax assessments and
insurance premiums in respect of Mortgaged Property related to Mortgage Loans
owned by a common Owner of the Mortgage Loans.
CUSTODIAN: First Trust National Association, which shall hold all or
part of the Owner Mortgage Loan File with respect to a Mortgage Loan on behalf
of the Owner of such Mortgage Loan.
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CUT-OFF DATE: With respect to any Mortgage Loan, the date set forth on
Schedule I, or on Schedule II as to a subsequent Owner, after which any payments
of principal or interest that become due, whether received before, on or after
such date are to be deposited to the Custodial P&I Account for the benefit of
the Owner of the related Mortgage Loan, its successors and assigns.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction
in the scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction
constituting a Deficient Valuation.
DEFICIENT VALUATION: With respect to any Mortgage Loan the related
Mortgaged Property of which is involved in a bankruptcy proceeding, the
reduction by the bankruptcy court of the Unpaid Principal Balance of the
Mortgage Note.
DELINQUENCY/DELINQUENT: A Delinquency with respect to a Mortgage Loan
occurs, or a Mortgage Loan is Delinquent when all or part of a Borrower's
Monthly Payment or, where applicable, an Escrow Item is paid after the
applicable Due Date. For reporting purposes, a Delinquency that remains uncured
for 30 days or more, but less than 60 days, is considered a 30-day Delinquency.
A Delinquency that has been uncured for more than 60 days, but less than 90
days, is considered a 60-day Delinquency. A Delinquency that has been uncured
for 90 days or more is considered a 90-day Delinquency.
DIRECTLY OPERATE: With respect to any REO, the direct or indirect
furnishing or rendering of services to the tenants thereof, management or
operation of such REO, the holding of such REO primarily for sale to customers,
performance of any construction work thereon or any use of such REO in a trade
or business, in each case other than with the approval of the Master Servicer;
provided, however, that the Servicer shall not be considered to Directly Operate
an REO solely because it establishes rental terms, chooses tenants, enters into
or renews leases, deals with taxes and insurance, or makes decisions as to
repairs or capital expenditures with respect to such REO.
DUE DATE: With respect to a Mortgage Loan, the day of each month on
which a Monthly Payment and, where applicable, an Escrow Funds payment is due as
stated in the related Mortgage Note. The Due Date for all Mortgage Loans will be
the first day of each month.
DUE-ON-SALE CLAUSE: The clause in a Security Instrument requiring the
payment of the Unpaid Principal Balance of the related Mortgage Loan upon the
sale of, or the transfer of an interest in, the related Mortgaged Property.
DUFF & PHELPS: Duff & Phelps Credit Rating Co. or its
successor-in-interest.
ELIGIBLE ACCOUNT: One or more accounts (i) that are maintained with a
depository institution whose long-term debt obligations (or, in the case of a
depository institution which is
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part of a holding company structure, the long-term debt obligations of which
holding company structure) at the time of deposit therein are rated at least
"AA" (or the equivalent) by each of Moody's, S&P, Fitch and Duff & Phelps (if so
rated by such entity), (ii) the deposits in which are fully insured by the FDIC
through either BIF or SAIF, (iii) the deposits in which are insured by the FDIC
through either BIF or SAIF (to the limit established by the FDIC) and the
uninsured deposits in which accounts are otherwise secured such that, as
evidenced by an Opinion of Counsel delivered to the Master Servicer which is
satisfactory to the Master Servicer, the Owners of the related Mortgage Loans,
and where there are beneficial owners as to any such Owners, on behalf of any
such beneficial owners, has a claim with respect to the funds in such accounts
or a perfected first security interest against any collateral securing such
funds that is superior to claims of any other depositors or creditors of the
depository institution with which such accounts are maintained, (iv) maintained
as a trust account or accounts with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity or (v) such other account that is acceptable to the Master Servicer.
ELIGIBLE CUSTODIAL P&I ACCOUNT: As defined in Section 6.1.2.
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,
FNMA, FHLMC 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; PROVIDED, HOWEVER, that any obligation of, or guarantee by,
FNMA or FHLMC, other than an unsecured senior debt obligation of FNMA or FHLMC
or a mortgage participation or pass-through certificate guaranteed by FNMA or
FHLMC, shall be an Eligible Investment only if, at the time of investment, such
investment would not adversely affect the rating, if any, on any class of
Certificates which are secured by Mortgage Loans that are the source of funds
which are the subject of such investment (as confirmed in writing by the Rating
Agencies);
(ii) 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 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 are
rated "A-1+" by S&P, "Duff-l+" by Duff & Phelps (if rated by Duff & Phelps),
rated in the highest category by Fitch (if rated by Fitch) and "P-1" by Moody's
and the long-term debt obligations of such depository institution or trust
company are rated at least "Aa2" by Moody's, "AA" by Duff & Phelps (if rated by
Duff & Phelps), "AA" by Fitch (if rated by Fitch) and "AA" by S&P;
(iii) repurchase agreements or obligations with respect to any
security described in clause (i) above where such security has a remaining
maturity of one year or less and where such repurchase obligation has been
entered into with a depository institution or trust company
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(acting as principal) described in clause (ii) above and where such repurchase
obligation will mature prior to the next Remittance Date;
(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 securities have a credit rating from S&P, Duff & Phelps
(if rated by Duff & Phelps), Fitch (if rated by Fitch) and Moody's, at the time
of investment or the contractual commitment providing for such investment, at
least equal to the second highest long-term credit rating assigned by S&P, Duff
& Phelps (if rated by Duff & Phelps), Fitch (if rated by Fitch) and Moody's to
the Certificates; PROVIDED, HOWEVER, that securities issued by any particular
corporation will not be Eligible Investments to the extent the investment
therein will cause the then outstanding principal amount of securities issued by
such corporation and held as part of the Custodial Accounts to exceed 10% of (a)
the aggregate Unpaid Principal Balance of the Mortgage Loans serviced by the
Servicer or (b) the aggregate principal amount of all Eligible Investments in
the Custodial Accounts;
(v) commercial paper (including both
noninterest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than one
year after the date of issuance thereof) rated "A-1" by S&P, rated
"Duff- 1" by Duff & Phelps (if rated by Duff & Phelps), rated in the
highest category by Fitch (if rated by Fitch) and rated "P-1" by
Moody's;
(vi) units of investment funds rated in the highest
category by S&P, Duff & Phelps (if rated by Duff & Phelps), Fitch (if
rated by Fitch) and Moody's;
(vii) a qualified guaranteed investment contract; and
(viii) any other demand, money market or time deposit
or obligation, or interest-bearing or other security or investment,
acceptable to the Master Servicer;
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 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.
Eligible Investments that are subject to prepayment or call may not be
purchased at a price in excess of par.
ERRORS AND OMISSIONS POLICY: An insurance policy naming the Principal,
its successors and assigns as a loss payee relative to losses caused by errors
or omissions of the Servicer and its personnel, including, but not limited to
losses caused by the failure to pay insurance
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premiums or taxes, to record or perfect liens, to effect valid transfers of
Mortgage Notes, or to properly service Mortgage Loans.
ESCROW FUNDS: All funds collected with respect to a Mortgage Loan by
the Servicer to cover related Escrow Items according to the provisions of this
Agreement.
ESCROW ITEM: An expense required to be paid by a Borrower under the
related Security Instrument including, without limitation, taxes, special
assessments, ground rents, water, sewer and other governmental impositions or
charges that are or may become liens on the related Mortgaged Property prior to
that of the related Security Instrument, as well as Hazard Insurance, Flood
Insurance and Primary Mortgage Insurance premiums.
FDIC: Federal Deposit Insurance Corporation and its successors.
FHA: The Federal Housing Authority and its successors.
FHLMC: Federal Home Loan Mortgage Corporation and its successors.
FIDELITY BOND: An insurance policy naming the Principal, its successors
and assigns as a loss payee relative to losses caused by improper or unlawful
acts of the Servicer's personnel.
FITCH: Fitch Investors Service, Inc. or its successor-in-interest.
FLOOD INSURANCE: An insurance policy insuring against flood damage to a
Mortgaged Property, where required.
FNMA: Federal National Mortgage Association and its successors.
GNMA: Government National Mortgage Association and its successors.
GPM (OR GPARM) LOAN: A fixed rate Mortgage Loan or ARM Loan that
provides during a portion of its term that the interest portion of the Monthly
Payment on such Mortgage Loan shall be less than the full amount of interest due
on such Mortgage Loan based on the related Mortgage Interest Rate.
GROSS MARGIN: With respect to each ARM Loan, the fixed percentage
specified in the related Mortgage Note that is added to the applicable Index on
each Interest Adjustment Date to determine the new Mortgage Interest Rate for
such ARM Loan.
HAZARD INSURANCE: A fire and casualty extended coverage insurance
policy insuring against loss or damage from fire and other perils covered within
the scope of standard extended hazard coverage naming the Owner of the related
Mortgage Loan, its successors and assigns, as a mortgagee under a standard
mortgagee clause, together with all riders and endorsements thereto.
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HUD: The United States Department of Housing and Urban Development and
its successors.
INDEX: With respect to each ARM Loan, the applicable index specified in
the related Mortgage Note that is added to the related Gross Margin on each
Interest Adjustment Date to determine the new Mortgage Interest Rate for such
ARM Loan.
INSURANCE POLICY: Any insurance policy for a Mortgage Loan required
hereunder, including, without limitation, Primary Mortgage Insurance, Hazard
Insurance, Flood Insurance, Pool Insurance and Title Insurance policies.
INSURANCE PROCEEDS: Proceeds from an Insurance Policy.
INTEREST ADJUSTMENT DATE: With respect to each ARM Loan, the date on
which the related Mortgage Interest Rate changes in accordance with the terms of
such Mortgage Note, the first of which is set forth in such Mortgage Note and on
the respective Mortgage Loan Schedule.
LIQUIDATION: Application of full payment to a Mortgage Loan which
results in the release of the lien of the related Security Instrument on any
related Mortgaged Property, whether through foreclosure and sale of the related
REO, condemnation, prepayment in full or otherwise, or the realization of all
sums from the final disposition of the related REO.
LIQUIDATION PROCEEDS: The amount received by the Servicer in connection
with any Liquidation of a Mortgage Loan.
LOAN ORIGINATOR: The entity that closes a Mortgage Loan in its own
name.
LOAN-TO-VALUE (LTV): The ratio that results when the Scheduled
Principal Balance of a Mortgage Loan is divided by the Value of the related
Mortgaged Property.
MASTER SERVICER: Securitized Asset Services Corporation, or any
successors and assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: A custodial account established by
the Master Servicer into which the Servicer shall remit funds from the related
Custodial P&I Account.
MASTER SERVICER LOAN NUMBER: A unique number assigned by the Master
Servicer to each Mortgage Loan set forth in Schedule I.
MAXIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each ARM (or
GPARM) Loan, the interest rate set forth in the related Mortgage Note as the
maximum Mortgage Interest Rate thereunder.
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MAXIMUM NEGATIVE AMORTIZATION AMOUNT: With respect to any Mortgage Loan
that provides for negative amortization, the maximum principal balance which is
permitted under the terms of the related Mortgage Note.
MINIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each ARM Loan,
the interest rate set forth in the related Mortgage Note as the minimum Mortgage
Interest Rate thereunder, if any.
MONTH END INTEREST: In the event of any Prepayment in Full or
Curtailment of a Mortgage Loan, the difference between the interest payment that
would have been paid on such Mortgage Loan or portion thereof that was prepaid
through the last day of the month in which such prepayment occurred and the
interest payment actually received by the Servicer on such Mortgage Loan or
portion thereof that was prepaid.
MONTH END INTEREST SHORTFALL: The portion of Month End Interest for all
Mortgage Loans for any month unable to be paid by the Servicer out of its
Monthly Servicing Compensation for such month due to the exhaustion of such
Monthly Servicing Compensation in paying such Month End Interest.
MONTHLY ACCOUNTING REPORTS: The reports due from a Servicer on a
monthly basis (due no later than the eighth calendar day of the month) relative
to all Mortgage Loans serviced by the Servicer, which reports are required to be
submitted to the Master Servicer.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest due in the applicable month under the
terms of the related Mortgage Note.
MONTHLY REMITTANCE: The Servicer's aggregate payment due each month
with respect to all Mortgage Loans owned by a common Owner to the appropriate
Master Servicer Custodial Account as specified in Section 18.3.1.
MONTHLY SERVICING COMPENSATION: The aggregate servicing compensation
due the Servicer in each month.
MOODY'S: Moody's Investors Service, Inc. or its successor-in-interest.
MORTGAGE INTEREST RATE: The interest rate payable by the Borrower on a
Mortgage Loan according to the terms of the Mortgage Note which, in the case of
ARM Loans, may be adjusted periodically as provided in such Mortgage Note.
MORTGAGE LOAN: A mortgage loan identified on Schedule I which is owned
by the respective Owner shown on Schedule II. "Mortgage Loan" includes all of
the respective Owner's right, title and interest in and to such Mortgage Loan,
including, without limitation, the related Mortgage Loan Documents and all other
material and information collected by the Servicer in
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connection with the Mortgage Loan including Monthly Payments, Liquidation
Proceeds, Insurance Proceeds and all other rights, benefits and proceeds arising
from or in connection with such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: With respect to a Mortgage Loan, the original
related Mortgage Note with applicable addenda and riders, the original related
Security Instrument and the originals of any required addenda and riders, the
original related Assignment and any original intervening related Assignments,
the original related Title Insurance policy, related Primary Mortgage Insurance
policy, if any, and the related Appraisal Report made at the time such Mortgage
Loan was originated, and all other documents described in Article 9 hereof.
MORTGAGED PROPERTY: Land and improvements thereon subject to the lien
of a Security Instrument, securing repayment of the debt evidenced by the
related Mortgage Note.
MORTGAGEE: The secured party to which a Security Instrument initially
grants a lien on the related Mortgaged Property.
MORTGAGE NOTE: A manually executed written instrument evidencing the
related Borrower's promise to repay a stated sum of money, plus interest, to the
related Loan Originator by a specific date according to a schedule of monthly
principal and interest payments.
MORTGAGE NOTE ASSUMPTION RIDER: A rider attached to a Mortgage Note
which states the terms upon which an Assumption may occur, including, but not
limited to, consent in writing by the insurer under any Primary Mortgage
Insurance Policy with respect to the related Mortgage Loan.
NET MORTGAGE INTEREST RATE: With respect to a Mortgage Loan, the
difference between (a) the Mortgage Interest Rate on such Mortgage Loan and (b)
the Servicing Fee Percentage for such Mortgage Loan.
NON-RECOVERABLE ADVANCE: Any amount previously advanced by the Servicer
with respect to a Mortgage Loan, which the Servicer has determined not to be
recoverable from Insurance Proceeds, Liquidation Proceeds or other payments with
respect to such Mortgage Loan.
NOTICE OF PERIODIC ADJUSTMENT: With respect to each ARM Loan, a notice
provided to the Borrower of any changes or adjustments to the related Mortgage
Interest Rate or the related Monthly Payment.
OFFICER: An officer of a corporation or a principal of a partnership,
who is authorized to execute documents on behalf of his corporation or
partnership, respectively.
OPINION OF COUNSEL: A written opinion of counsel, reasonably acceptable
in form and substance to the Master Servicer, and who may be in-house or outside
counsel to the Servicer
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but which must be Independent outside counsel with respect to any such opinion
of counsel concerning the taxation, or status for tax purposes, of the Owner.
OWNER OR OWNER OF THE MORTGAGE LOANS: With respect to each Mortgage
Loan, the respective Person listed on Schedule II.
OWNER MORTGAGE LOAN FILE: A file maintained by the Owner of a Mortgage
Loan or the Custodian for such Mortgage Loan, which file contains the documents
specified in Section 9.1 hereof, as well as any other documents that come into
the Custodian's possession with respect to such Mortgage Loan.
OWNER-OCCUPIED PROPERTY: A one- to four-unit property which is the
Primary Residence of the owner of record.
PSI ADVANCE: With respect to any Mortgage Loan, an advance by the
Servicer of any principal and interest payments not timely paid by the related
Borrower, excluding the amount of the related Servicing Fee.
PAYMENT ADJUSTMENT DATE: With respect to each ARM Loan, the date on
which the Borrower's Monthly Payment changes in accordance with the terms of the
related Mortgage Note.
PERIODIC PAYMENT CAP: With respect to an ARM Loan, the limit on the
percentage increase that may be made on the related Monthly Payment on any
Payment Adjustment Date, as set forth in the related Mortgage Note.
PERIODIC RATE CAP: With respect to an ARM Loan, the limit, expressed as
incremental percentage points, on the increase or decrease that may be made to
the related Mortgage Interest Rate on any Interest Adjustment Date from such
Mortgage Interest Rate immediately prior to such Interest Adjustment Date, as
set forth in the related Mortgage Note.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust or unincorporated organization.
POOL INSURANCE: An insurance policy insuring against certain credit
risk losses on certain Mortgage Loans up to a certain amount.
POOL INSURER: With respect to any Mortgage Loan, the insurer under the
Pool Insurance policy relating to such Mortgage Loan.
POOLING AND SERVICING AGREEMENT: A pooling and servicing agreement
among a Trustee, the Principal and the Master Servicer which governs the
administration of a pool of Mortgage Loans.
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PRELIMINARY TITLE REPORT: A report issued by a title insurance company
in anticipation of issuing a Title Insurance policy which evidences existing
liens and gives a preliminary opinion as to the absence of any encumbrance on
title to a Mortgaged Property, except liens to be removed on or before purchase
or refinance, as the case may be, by the Borrower and Permitted Encumbrances.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, any payment by
the Borrower in the amount of the outstanding principal balance of such Mortgage
Loan which is received in advance of its Due Date and is not accompanied by an
amount representing scheduled interest for any period subsequent to the date of
date of prepayment.
PRIMARY MORTGAGE INSURANCE: Insurance obtained from a Primary Mortgage
Insurer which insures the holder of a Mortgage Note against loss in the event
the related Borrower defaults under such Mortgage Note or the related Security
Instrument, including all riders and endorsements thereto.
PRIMARY MORTGAGE INSURER: With respect to any Mortgage Loan, the
insurer under the Primary Mortgage Insurance policy relating to such Mortgage
Loan.
PRIMARY RESIDENCE: The principal and permanent residence of a Borrower.
PRINCIPAL: The Prudential Home Mortgage Company, Inc.
PROPERTY INSPECTION REPORT: A report, submitted by the Servicer to the
Master Servicer, describing the related Mortgaged Property.
PRUDENT SERVICING PRACTICES: Such practices observed generally by
servicers in discharging their servicing obligations in a prudent manner in
accordance with industry standards for mortgage loans similar to the Mortgage
Loans.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that contains
property and improvements owned and maintained by a homeowners' association,
corporation or trust for the enjoyment and use of individual PUD Unit owners
within that parcel of land. The shared portions of the parcel are known as
common property.
PUD UNIT: A single family residential property within a PUD.
PURCHASE PRICE: An amount equal to (a) the greater of (i) the fair
market value of the Mortgage Loan or (ii) the Unpaid Principal Balance of the
Mortgage Loan, plus (b) accrued interest thereon at the Mortgage Interest Rate
through the last day of the month in which the purchase occurs, and, if the
Servicer is the purchaser, minus (c) any unreimbursed advances of principal made
by the Servicer on such Mortgage Loan and any outstanding Servicing Fee owed
with respect to such Mortgage Loan. If the purchaser is an entity other than the
Servicer, the Purchase Price will also include an amount equal to any interest
payments advanced by the
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Servicer and any outstanding Servicing Fee owed with respect to the Mortgage
Loan. Further, in connection with any such purchase of a Mortgage Loan as a
result of a breach of a representation or warranty under the respective
Servicing Retained Commitment Letter or under this Agreement, the Servicer shall
either provide the Owner with an indemnity, in form and substance satisfactory
to the Master Servicer, against, additional costs, expenses and taxes arising
out of the repurchase.
REAL ESTATE OWNED (REO): Any Mortgaged Property the title to which is
acquired on behalf of the Owner of the related Mortgage Loan through
foreclosure, deed-in-lieu of foreclosure, abandonment or reclamation from
bankruptcy in connection with a defaulted Mortgage Loan.
REALIZED LOSS: As to any defaulted Mortgage Loan, any loss realized by
the Owner of such Mortgage Loan as calculated pursuant to Section 7.7 hereof.
REFERENCE BANK: Bankers Trust or if such entity is no longer lending
money or no longer quoting a prime rate, such other entity as the Master
Servicer may specify by written notice to the Servicer.
REMITTANCE DATE: The 18th day of each month (or the preceding Business
Day if the 18th day is not a Business Day). Each month, the Servicer must
transfer all required funds from the Custodial P&I Account to the Master
Servicer Custodial Account on or before the Remittance Date.
REO DISPOSITION: The receipt by the Servicer of Liquidation Proceeds
and other payments and recoveries (including proceeds of a final sale) from the
sale or other disposition of the REO.
REPRESENTING PARTY: A Person that has sold or intends to sell Mortgage
Loans, directly or through one or more intermediaries, to the Principal pursuant
to an agreement for the sale of Mortgage Loans pursuant to which a Representing
Party has made representations and warranties with respect to certain Mortgage
Loans, and under which the Owner of such Mortgage Loans, its successors and
assigns has recourse against such Representing Party for any breach thereunder.
S&P: Standard & Poor's Corporation or its successor-in-interest.
SAIF: The Savings Association Insurance Fund.
SALES AGREEMENT: An agreement between the Servicer, acting as seller,
and the Principal or an affiliate thereof, acting as buyer, by which certain
Mortgage Loans were acquired.
SCHEDULED PRINCIPAL BALANCE: With respect to each Mortgage Loan (or
related REO), the principal balance of such Mortgage Loan as of the applicable
Due Date calculated by taking into
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account the application of any Monthly Payments due on or before such Due Date
(whether or not such Monthly Payments were received from the Borrower), and
Curtailments, Insurance Proceeds or Liquidation Proceeds, and Realized Losses
received or realized by the Servicer prior to such Due Date.
SECURITY INSTRUMENT: A written instrument creating a valid first lien
on a Mortgaged Property. A Security Instrument may be in the form of a mortgage,
deed of trust, deed to secure debt or security deed, including any riders and
addenda thereto.
SERVICER: Columbia Equities, LTD., the entity that has entered into
this Agreement with the Principal.
SERVICER INFORMATION STATEMENT: A statement prepared by the Servicer in
the form prescribed by the Master Servicer which provides information concerning
the Service continuing qualification to serve as a servicer under this
Agreement.
SERVICER LOAN MORTGAGE NUMBER: A unique number assigned by the Servicer
to a Loan.
SERVICER MORTGAGE LOAN FILE: A file maintained by the Servicer for each
Mortgage Loan that contains the documents specified in Section 9.2 hereof, as
well as any other documents that come into the Servicer's possession with
respect to a Mortgage Loan.
SERVICER NUMBER: A three digit number assigned to the Servicer by the
Master Servicer. The Servicer Number shall be used on all correspondence and
forms and in all telephone conversations with the Master Servicer.
SERVICING FEE: For each Mortgage Loan, the compensation due the
Servicer in an amount equal to the product of (i) one-twelfth of the Servicing
Fee Percentage and (ii) the Scheduled Principal Balance of the Mortgage Loan as
of the immediately preceding Due Date (without taking into account any payment
of principal due on such Due Date).
SERVICING FEE PERCENTAGE: With respect to each Mortgage Loan, the
Servicing Fee Percentage shall be identified on Schedule I hereto.
SERVICING RETAINED COMMITMENT LETTER: An agreement between the
Principal and the Servicer, in its capacity as seller of Mortgage Loans, by
which the Principal acquired ownership of such Mortgage Loans.
SINGLE FAMILY PROPERTY: A one-unit residential property.
SUPERVISION AGREEMENT: A supervision agreement between the Master
Servicer and the Principal.
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TANGIBLE NET WORTH: As of the date of determination thereof, the par
value (or value stated on the Servicer's books) of the capital stock of all
classes of the Servicer, plus, or minus in the case of a deficiency, the amount
of paid in capital and retained earnings of the Servicer, all determined in
accordance with generally accepted accounting principles as are then in effect.
The Master Servicer may exclude assets that are unacceptable, in the Master
Servicer's sole discretion, from the determination of the Servicer's Tangible
Net Worth.
T&I ADVANCE: An advance by the Servicer of any taxes and insurance
premiums due with respect to any Mortgage Loan.
THRESHOLD AMOUNT: With respect to any Custodial P&I Account, (i)
$100,000 or, in the case of any Eligible Custodial P&I Account, the aggregate
amount on deposit therein (I.E., an unlimited amount); or (ii) after any notice
has been given pursuant to Section 19.3, the amount specified in such notice.
TITLE INSURANCE: An American Land Title Association (ALTA) mortgage
loan title policy form 1970, or other form of Title Insurance Policy acceptable
to FNMA or FHLMC, including all riders and endorsements thereto, insuring that
the Security Instrument constitutes a valid first lien on the related Mortgaged
Property subject only to Permitted Encumbrances.
TRANSFER OF OWNERSHIP: Includes, but is not limited to, the conveyance
of a Mortgaged Property, whether legal or equitable, voluntary or involuntary,
by any of the following methods:
(a) outright sale;
(b) deed;
(c) installment sale contract;
(d) land contract;
(e) contract for deed;
(f) leasehold interest with the term greater
than three years;
(g) lease with option to purchase;
(h) land trust; or
(i) any other conveyance of an interest in real
property, including those involving
secondary financing.
TRUST: The Trust formed by deposit with the respective Trustee of
certain Mortgage Loans pursuant to the terms of the related Pooling and
Servicing Agreement.
TRUSTEE: The Trustee with respect to the related Trust as identified in
the related Pooling and Servicing Agreement, or any other Person that shall
become the "trustee" for such Trust.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan, the
outstanding principal balance payable by the Borrower under the terms of the
Mortgage Note.
VA: The Department of Veterans Affairs and its successors.
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VALUE: The lesser of the appraised value or sales price of the related
Mortgaged Property at the time the Mortgage Loan is closed. For a refinanced
Mortgage Loan, the Value of the related Mortgaged Property is its appraised
value at the time the refinanced Mortgage Loan is closed.
Article 2
CONSTRUCTION
Section 2.1 LEGAL CONSTRUCTION
2.1.1 COMPLIANCE WITH APPLICABLE LAW. The obligations of the Servicer
pursuant to this Agreement shall at all times be performed in
compliance with all applicable laws.
2.1.2 POTENTIAL CONFLICT. If any obligation of the Servicer pursuant to
this Agreement shall give rise to a potential conflict with applicable
law, such obligation shall be construed so as to (a) comply with all
applicable laws and (b) effectuate with respect to such obligations, to
the fullest extent permitted by law, the intention of the parties
hereto as expressed in this Agreement.
2.1.3 CONSISTENT LEGAL COMPLIANCE. The fact that certain provisions of
this Agreement contain language which expressly requires compliance
with all applicable laws, shall not give rise to an implication that
other provisions, which do not expressly include such language, operate
in derogation of the requirement for such legal compliance.
2.1.4 GENERAL INTERPRETIVE RULES. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires, (i) 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; (ii) reference herein to "Article",
"Section", "Clause", and other subdivisions, and to "Exhibits", without
reference to a document, are to designated Articles, Sections, Clauses
and other subdivisions of, and to Exhibits to, this Agreement; (iii)
reference to a Clause without further reference to a Section is a
reference to such Clause as contained in the same Section in which the
reference appears, and this rule shall also apply to other
subdivisions; (iv) "including" means "including but not limited to";
and (v) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular provision.
2.1.5 CONSTRUCTION OF PROVISIONS. Although certain provisions of this
Agreement contain express language which precludes the Servicer's
recovery of, or reimbursement for, expenses incurred hereunder, no
inference to the contrary shall be drawn from absence of such, or
similar, language in any other provision hereof regarding expenses.
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Section 2.2 SERVICER PRACTICES
2.2.1 PRUDENT SERVICING PRACTICES. Where not inconsistent with the
provisions of this Agreement, the Servicer shall at all times perform
its obligations hereunder in accordance with Prudent Servicing
Practices, which shall not be less exacting than the Servicer employs
and exercises in servicing and administering mortgage loans for its own
account, or for the account of FNMA or FHLMC.
2.2.2 NON-DISCRIMINATION PRACTICES. The Servicer shall at all times
perform its obligations under this Agreement so as to (a) treat
Borrowers on the basis of their individual merits and (b) not
discriminate against Borrowers on the basis of their race, creed or
national origin.
Section 2.3 GENERAL PROVISIONS
2.3.1 SERVICER'S AGREEMENT. The Servicer agrees with the Principal to
service the Mortgage Loans in accordance with the provisions of this
Agreement and, to the extent of any instructions of the Master Servicer
that are given, such instructions and, subject to the provisions hereof
and without any further instruction by the Master Servicer except as
shall be expressly provided for herein, shall have full power and
authority to do all things necessary in connection therewith.
2.3.2 TERM OF AGREEMENT. Except as otherwise provided herein, the
duties, responsibilities and obligations to be performed and carried
out by the Servicer under this Agreement shall commence upon the
execution of this Agreement and shall continue until (a) each Mortgage
Loan is (i) liquidated or (ii) otherwise paid in full, (b) all payments
related thereto are remitted in accordance with this Agreement, and (c)
all obligations hereunder related thereto are discharged.
2.3.3 AMENDED MORTGAGE LOAN SCHEDULE. From time to time as additional
Mortgage Loans are transferred to be serviced hereunder by the
Servicer, Schedule I shall be amended by the Principal to include the
new Mortgage Loans. Due to defects in documentation and for other
reasons, certain Mortgage Loans referred to in the Mortgage Loan
Schedule may be deleted and other Mortgage Loans may be added. The
Servicer hereby agrees to any such deletion of any Mortgage Loans and,
in the event any Mortgage Loans are deleted from the Mortgage Loan
Schedule, the Servicer authorizes the Master Servicer to amend and
attach hereto a corrected Mortgage Loan Schedule, as Schedule I,
reflecting only those Mortgage Loans that are serviced hereunder. The
Master Servicer will provide the Servicer with the corrected and
updated Mortgage Loan Schedule.
2.3.4 ASSIGNMENT AND REPLACEMENT. The Servicer acknowledges and agrees
that: (a) the Principal, and its successors and assigns, may at any
time, without the consent of the Servicer, assign and transfer all of
the Principal's and/or the Master Servicer's right, title
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and interest under this Agreement to any other Person, (b) in the event
the Master Servicer is terminated or resigns as Master Servicer under
the related Pooling and Servicing Agreement, the Principal or any
successor master servicer has the right to assume the Master Servicer's
rights and obligations and to enforce the Servicer's obligations under
this Agreement, and (c) the Principal, and its successors and assigns,
may at any time, without the consent of the Servicer, direct, in a
written notice furnished to the Servicer, that all or part of the
functions of the Master Servicer hereunder may be performed instead by
another entity designated by the Principal for such functions and time
periods as specified in such writing and that the Servicer shall
respect the instructions of such entity as if it were the Master
Servicer hereunder.
2.3.5 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given, made and received upon actual
receipt of registered or certified mail, postage prepaid, return
receipt requested, addressed as set forth below:
(a) if to the Principal:
The Prudential Home Mortgage Company, Inc.
7470 New Technology Way
Frederick, MD 21701
Attention: Senior Vice President
(b) if to the Master Servicer:
Securitized Asset Services Corporation
7435 New Technology Way
Frederick, MD 21701
Attention: Director of Master Servicing
(c) if to the Servicer:
Columbia Equities, LTD.
150 White Plains Road
Tarrytown, New York
Attention: Robert Pardes
(d) if to the Custodian:
First [Trust,] [Bank] National Association
180 East Fifth Street
St. Paul, MN 55101
Attention: Eve Kaplan
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(e) if to the Owner of a related Mortgage Loan to such address as is
shown on Schedule II for such Owner.
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
2.3.6 CHANGE OF ACCOUNTANTS. During the term of this Agreement, the
Servicer shall not change, or make any substitution of, its certified
public accountants except upon written notice to the Master Servicer
given 30 days prior to such change or substitution.
Section 2.4 SERVICING OF MORTGAGE LOANS FOR MULTIPLE OWNERS
-----------------------------------------------
2.4.1 TRANSFER OF MORTGAGE LOANS. The Principal, or a subsequent Owner,
may, from time to time, (i) sell its interest in any Mortgage Loan or
Mortgage Loans to another person who would become the Owner thereof,
and (ii) assign an undivided interest in this Agreement to such person
with respect to such Mortgage Loan or Mortgage Loans. The transfer of
ownership and assignment of interest will be reflected as provided for
in Section 2.4.2 hereof. The Servicer agrees (a) to continue to service
each Mortgage Loan for the benefit of the related Owner of such
Mortgage Loan in accordance with the terms of this Agreement, and (b)
to obey the instructions of the Principal and the Master Servicer
regarding the performance of this Agreement.
2.4.2 OWNERSHIP SCHEDULE. The Principal shall amend Schedule II to
reflect the change of ownership of any Mortgage Loan which is serviced
hereunder. The entry in Schedule II shall (a) identify the Mortgage
Loan by its respective Master Servicer Loan Number, (b) specify the
name and mailing address of the Owner of such Mortgage Loan and (c)
indicate the Cut-Off Date which applies to the change of ownership of
the Mortgage Loan to the listed Owner.
Article 3
SERVICING PROVISIONS
Section 3.1 GENERAL
3.1.1 APPLICABILITY. The provisions of this Article 3 apply to all the
Mortgage Loans or Mortgaged Property.
3.1.2 MODIFICATIONS OF MORTGAGE LOANS. Notwithstanding anything to the
contrary in this Agreement (other than as provided in Section 12.3
hereof), without the consent of the Master Servicer, the Servicer shall
not permit any modification of any term of a Mortgage Loan (including
the interest rate, the principal balance, the amortization schedule, or
any other term affecting the amount or timing of payments on the
Mortgage
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Loan) unless the Master Servicer has consented thereto and, if such
modification is not the result of a 90-day Delinquency or more under
the Mortgage Loan.
Section 3.2 REO Qualification
3.2.1 FORECLOSURE PROPERTY QUALIFICATION. Notwithstanding any other
provision of this Agreement, the Servicer shall not foreclose on a
Mortgage without the prior consent of the Master Servicer. Furthermore,
the Servicer shall not rent, lease, or otherwise earn income with
respect to any REO without prior approval by the Master Servicer.
Notwithstanding the foregoing, the Servicer may enter into a lease with
respect to REO provided that the lease does not hamper the disposition
of the REO and provides, that the lessee does not own 35% of any class
of securities issued by the related Owner, the leases call for fixed
rent and all of the rent is allocable to the real property (except that
up to 15 percent of the rent may be allocable to personal property
leased under, or in connection with, the lease of the real property).
3.2.2 FORECLOSURE PROPERTY QUALIFICATION RESTRICTIONS. Without limiting
the generality of the foregoing, the Servicer shall not, absent prior
approval of the Master Servicer, authorize or permit any construction
on any REO, other than the completion of a building or other
improvement thereon, and then only if more than ten percent of the
construction of such building or other improvement was completed before
default on the related Mortgage Loan became imminent, or Directly
Operate or allow any other Person to Directly Operate, any REO on any
date more than 90 days after its acquisition date.
3.2.3 REO DISPOSITION ACCOUNTING. Within 30 days of an REO Disposition,
the Servicer shall provide to the Master Servicer a statement of
accounting for the related REO, including without limitation, (i) the
loan number of the related Mortgage Loan, (ii) the date such Mortgaged
Property was acquired in foreclosure or by deed in lieu of fore-
closure, (iii) the date of REO Disposition, (iv) the gross
sales price and related selling and other expenses, (v) accrued
interest calculated from the date of acquisition to the disposition
date, and (vi) such other information as the related Trustee may
reasonably request.
Section 3.3 PROHIBITED TRANSACTIONS AND ACTIVITIES
3.3.1 MORTGAGE LOAN DISPOSITION RESTRICTION. Without the prior approval
Master Servicer, the Servicer shall not permit the sale, disposition or
substitution of any of the Mortgage Loans, nor acquire any assets on
behalf of the related Owner, nor sell or dispose of any investments in
any of the Accounts established by the Servicer for the related Owner
for gain, nor accept any contributions on behalf of the Owner.
3.3.2 PERSONAL PROPERTY RESTRICTION. Without the prior approval of
Master Servicer, the Servicer shall not acquire any personal property
relating to any Mortgage Loan unless such Personal Property is incident
to the REO. For this purpose, personal property will
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be considered incident to the REO if the personal property is used in a
trade or business conducted on the property or the use of the personal
property is otherwise an ordinary and necessary corollary of the use to
which the REO is put.
Section 3.4 ELIGIBLE INVESTMENTS
3.4.1 CUSTODIAL ACCOUNT INVESTMENTS. Funds in any Custodial Accounts
established by the Servicer and maintained in respect of the related
Owner may be invested and, if invested, shall be invested in Eligible
Investments selected by the Servicer which shall mature not later than
the Business Day immediately preceding the next Remittance Date, 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 related Owner or its nominee. All income and gain realized from
any such investment shall be, as long as the Servicer is servicing the
Mortgage Loans held by the related Owner, for the benefit of the
Servicer as additional compensation and shall be subject to its
withdrawal or order from time to time. The amount of any losses
incurred in respect of any such investments shall be deposited in the
relevant Custodial Account by the Servicer out of its own funds
immediately as realized. The foregoing requirements for deposit in such
Custodial Account are exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments of interest
on funds in such Custodial Account and, as long as the Servicer is
servicing the Mortgage Loans held by the related Owner, payments in the
nature of prepayment fees, late payment charges, assumption fees or any
similar fees customarily associated with the servicing mortgage loans
paid by any Mortgagor need not be deposited by the Servicer in such
Account and may be retained by the Servicer as additional servicing
compensation. If the Servicer deposits in such Account any amount not
required to be deposited therein, it may at any time withdraw such
amount, any provision herein to the contrary notwithstanding.
3.4.2 ESCROW ACCOUNT INVESTMENTS. Subject to the terms of the related
Mortgage Notes and Mortgages, and further subject to applicable law,
any funds in any Escrow Account shall be invested in Eligible
Investments that mature prior to the date on which payments have to be
made out of the related Escrow Account and any such Eligible Investment
shall not be sold or disposed of prior to its maturity; provided that,
if any loss is incurred on any such investment, the Servicer shall
cover such loss by making a deposit into the appropriate Escrow Account
out of its own funds in the amount of such loss. Withdrawals from any
Escrow Account may be made (to the extent amounts have been escrowed
for such purpose and to the extent permitted by the related Mortgage
and Mortgage Note) only (i) to effect timely payment of Escrow Amounts
in connection with the related Mortgage Loan, (ii) to reimburse the
Master Servicer or Servicer out of related collections for Advances
with respect to Escrow Amounts, (iii) to refund to any Mortgagors any
sums determined to be overages, (iv) to pay interest, if any, owed to
Mortgagors on such account to the extent required by law, (v) for
application to restoration or repair of the Mortgaged Property or (vi)
to clear and terminate the Escrow Account on the termination of this
Agreement. The Servicer shall be entitled to all
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investment income on any Escrow Account not required to be paid to
Mortgagors pursuant to the preceding sentence.
ARTICLE 4
SERVICER CONSIDERATIONS
Section 4.1 SERVICER INFORMATION STATEMENT
4.1.1 SERVICER INFORMATION STATEMENT REQUIREMENT. To service Mortgage
Loans under this Agreement a Servicer must complete and maintain up to
date a Servicer Information Statement. The Servicer Information
Statement must be submitted along with the Servicer's previous two
years' audited financial statements, the most recent interim financial
statements and such other financial information as the Master Servicer
may require in the exercise of its reasonable discretion.
4.1.2 SERVICER INFORMATION STATEMENT'S PURPOSE. The additional
information provided by the Servicer pursuant to the Servicer
Information Statement is required to assess:
(a) the financial strength and business responsibility of
the Servicer in regard to its ability to meet
servicing warranties required under this Agreement;
and
(b) the sufficiency of the servicing system and the
abilities of the servicing staff to perform the
servicing of the Mortgage Loans and the required
reporting to the Master Servicer.
4.1.3 DISCLOSURE OF SERVICER INFORMATION. The Servicer recognizes that
the Mortgage Loans have been acquired by the Principal and are being
serviced by the Servicer with a view to their ultimate securitization
as collateral for mortgage backed securities. The Servicer (i) agrees
to furnish to the Principal upon request, and to keep up to date, a
description of the Servicer and its activities, suitable, in the
Principal's sole discretion, for disclosure purposes for use in any
prospectus, private placement memorandum or offering circular which
offers securities which are backed by Mortgage Loans serviced by the
Servicer hereunder, and (ii) consents to the inclusion of such
description in any such prospectus, private placement memorandum or
offering circular. The Servicer recognizes that the Principal and its
affiliates will rely upon the truthfulness and accuracy of such
description which is to be used in such disclosure documents.
Section 4.2 SERVICER ELIGIBILITY STANDARDS.
To service Mortgage Loans under this Agreement the Servicer must
satisfy the eligibility standards set forth in this Section 4.2
initially and at all times thereafter.
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4.2.1 REGULATORY APPROVALS AND LICENSING. A Servicer must
be:
(a) FNMA or FHLMC approved and in good standing;
(b) an FDIC insured institution that is a member of SAIF
or BIF, or is a HUD approved mortgagee in good
standing;
(c) in compliance with all applicable capital
requirements and other requirements from time to time
specified by the Office of Thrift Supervision, the
FDIC, the Office of the Comptroller of the Currency
or any other governmental agency or
quasi-governmental authority having jurisdiction over
the Servicer; and
(d) properly licensed as a mortgage servicer in all
relevant jurisdictions where such licenses are
required.
4.2.2 NET WORTH AND PORTFOLIO REQUIREMENTS.
(a) The Servicer must maintain a Tangible Net Worth of at
least $1,000,000.
(b) The Servicer must maintain an Adjusted Tangible Net
Worth at least equal to the amount specified in the
applicable Servicing Retained Commitment Letter.
(c) The Servicer must maintain a servicing portfolio of
at least $1,000,000,000.
(d) A servicer that is a commercial bank must be reported
in the top three quartiles of capital adequacy as
reported in the IDC Score or successor publication.
4.2.3 AUDITOR'S OPINION AND OTHER ANNUAL REPORTS. The
Servicer must provide the Master Servicer, as part of
the application process (except as to clause (c)) and
annually thereafter within 120 days after the close
of the Servicer's fiscal year, with the following
reports and opinions:
(a) financial statements for the most recently closed
fiscal year, together with an unqualified opinion
thereon of an independent certified public accountant
who is a member of the American Institute of
Certified Public Accountants, unless the Master
Servicer, in its sole discretion, decides to waive
this requirement regarding qualification;
(b) a statement from the independent certified public
accountant who prepared the above-referenced
financial statements for the Servicer, certifying
that,
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on the basis of an examination of certain documents
and records relating to the mortgage loans being
serviced by the Servicer conducted substantially in
compliance with the Uniform Single Audit Program for
Mortgage Bankers, the servicing of such mortgage
loans was conducted in compliance with the provisions
of this Agreement and other similar agreements,
except for (i) such exceptions as such firm believes
to be immaterial and (ii) such other exceptions as
are set forth in such statement; and
(c) a certificate signed by any Officer of the Servicer
involved in, or responsible for, the administration
and servicing of the Mortgage Loans certifying that
the Officer signing such certificate has supervised a
review of the activities of the Servicer during the
preceding fiscal year and of the Servicer's
performance during the most recently closed fiscal
year under this Agreement and that to the best of
such officer's knowledge, based on such review, the
Servicer has fulfilled its duties, responsibilities
and obligations under this Agreement throughout such
year, or, if there has been failure by the Servicer
to fulfill any duty, responsibility or obligation
under this Agreement, specifying the nature and
status of each such failure.
4.2.4 SERVICING EXPERIENCE. The Servicer shall satisfactorily
demonstrate to the Master Servicer, in the Master Servicer's sole
discretion, the following experience:
(a) that it has at least three (3) years of conventional
mortgage loan servicing experience;
(b) that it has a staff knowledgeable in servicing of
Mortgage Loans and the administration of REO;
(c) that it has experience maintaining a servicing
portfolio in excess of $1 billion; and
(d) that it has delinquency rates which are acceptable to
Master Servicer.
4.2.5 MATERIAL CHANGES. The Servicer shall immediately
report to the Master Servicer any change in its
business operations, financial condition, properties
or assets since the date of the latest submitted
financial statements which could have a material
adverse effect on the Servicer's ability to perform
its obligations hereunder. Events for which Master
Servicer must receive notice include, but are not
limited to, the following:
(a) any change in the Servicer's business address and/or
telephone number;
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(b) any merger, consolidation, or significant
reorganization;
(c) any changes in the Servicer's ownership whether by
direct or indirect means. Indirect means include any
change in ownership of the Servicer's parent;
(d) any change in the Servicer's corporate name;
(e) if the Servicer is a savings and loan association,
any change in the Servicer's charter from federal to
state or vice versa;
(f) any decreases in capital, adverse alteration of
debt/equity ratios, or changes in management ordered
or required by a regulatory authority supervising or
licensing the Servicer;
(g) any significant adverse change in the Servicer's
financial position;
(h) resignation of any officer overseeing the servicing,
origination, underwriting, closing and, if
applicable, secondary marketing operations of the
Servicer. Resumes of replacement personnel must be
furnished for Master Servicer review within thirty
(30) days of such replacement;
(i) closing of any branch offices of the Servicer, which
cumulatively with the closure of any other branch
offices of the Servicer, which are as yet unreported
to the Master Servicer pursuant to the terms of this
Section 4.2.5, represent 40% or more of the
origination or servicing volume of such Servicer; the
notice shall state the percentage of its origination
and servicing volume represented by such closed
branches;
(j) entry of any court judgment or regulatory order in
which the Servicer is or may be required to pay a
claim or claims which have a material adverse effect
on the Servicer's financial condition; and
(k) the Servicer admits to committing, or is found to
have committed, a material violation of any law,
regulation, or order.
Section 4.3 ERRORS AND OMISSIONS INSURANCE
4.3.1 E & O REQUIREMENT. A Servicer must maintain, at all times and at
its own expense and consistent with FNMA or FHLMC requirements, an
Errors and Omissions Policy, in the amount and having the other terms
described below, with broad coverage from an incorporated surety
company authorized to do business in the Servicer's state of domicile.
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4.3.2 E & O COVERAGE. The Servicer must maintain an Errors and
Omissions Policy in a minimum amount per occurrence equal to the
greater of (i) $1,000,000 or (ii) the Fidelity Bond coverage amount
required of the Servicer as set forth in Section 4.4 hereof. This
coverage may not be changed except as to an increase in the amount of
coverage.
4.3.3 E & O SCOPE. The Errors and Omissions Policy must explicitly
insure the Servicer, its successors and assigns, against any losses
resulting from negligence, errors or omissions on the part of officers,
employees or other persons acting on behalf of the Servicer in the
performance of its duties as a Servicer pursuant to this Agreement,
including, but not limited to, the following:
(a) payment when due of all applicable insurance
premiums, including, but not limited to, any Primary
Mortgage Insurance, Hazard Insurance and any Flood
Insurance in accordance with the insurance
requirements in Articles 15 and 16 of this Agreement;
(b) where applicable, compliance with Primary Mortgage
Insurance and/or Pool Insurance requirements for
Mortgage Loans serviced under this Agreement;
(c) payment of real estate taxes and special assessments;
and
(d) determination of whether any Mortgaged Property are
located in an area where Flood Insurance is available
and required by the Flood Disaster Protection Act of
1973, as amended.
4.3.4 E & O POLICY MAINTENANCE. The Servicer must maintain
in effect the Errors and Omissions Policy at all
times and the Errors and Omissions Policy may not be
cancelled, permitted to lapse or otherwise terminated
without thirty Business Days' prior written notice by
registered mail to the Master Servicer. Further, the
Errors and Omissions Policy must provide that, or the
insurer must state in writing to the Master Servicer
that, the Errors and Omissions Policy shall not be
cancelable without the giving of notice as provided
for in the prior sentence.
4.3.5 E & O DEDUCTIBLE. The terms of the Errors and
Omissions Policy must provide for a deductible amount
that does not exceed the greater of $100,000 per
occurrence or 5.0% of the coverage amount per
occurrence.
4.3.6 E & O QUALIFICATIONS. The Errors and Omissions Policy
must be obtained by the Servicer from an insurer with
a general policyholder's rating of B/VI or better in
the current Best's Key Rating Guide.
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4.3.7 NOTICE OF CLAIM. The Servicer must immediately report
to the Master Servicer all claims made against the
insurer under the Errors and Omissions Policy, and
shall promptly follow such report with a written
notice to the Master Servicer.
Section 4.4 FIDELITY BOND COVERAGE
4.4.1 FIDELITY BOND REQUIREMENT. A Servicer must maintain,
at all times, at its own expense and consistent with
FNMA requirements, a Fidelity Bond, in the amounts
and having the other terms described below with broad
coverage from an incorporated surety company
authorized to do business in the Servicer's state of
domicile. The Fidelity Bond may be in the form of
either individual bonds or a blanket bond.
4.4.2 FIDELITY BOND COVERAGE. The amount of Fidelity Bond
coverage shall be as follows:
(a) a minimum of $300,000 for the Servicer's servicing
portfolio, the current principal amount of which
totals $100 million or less; plus
(b) an additional 0.15% of the amount of the current
principal amount of the Servicer's servicing
portfolio between $100 million and $500 million; plus
(c) an additional 0.125% of the amount of the current
principal amount of the Servicer's servicing
portfolio between $500 million and S1 billion; plus
(d) an additional 0.1% of the amount of the current
principal amount of the Servicer's servicing
portfolio in excess of $1 billion.
This coverage may not be changed except as to an increase in the amount
of coverage.
4.4.3 FIDELITY BOND SCOPE. The coverage of the Fidelity Bond must
explicitly insure the Servicer, its successors and assigns, against any
losses resulting from dishonest, fraudulent or criminal acts on the
part of Officers, employees or other persons acting on behalf of the
Servicer.
4.4.4 FIDELITY BOND MAINTENANCE. The Servicer must maintain in effect
the Fidelity Bond at all times and the Fidelity Bond may not be
cancelled, permitted to lapse or otherwise terminated without thirty
Business Days' prior written notice by registered mail to the Master
Servicer. Further, the Fidelity Bond must provide that, or the insurer
must state in writing to the Master Servicer that, the Fidelity Bond
shall not be cancelable without the giving of notice as provided for in
the prior sentence.
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4.4.5 FIDELITY BOND DEDUCTIBLE. The terms of the Fidelity Bond must
provide for a deductible amount that does not exceed the greater of
$100,000 per occurrence or 5.0% of the coverage amount per occurrence.
4.4.6 FIDELITY BOND RATING REQUIREMENT. The Fidelity Bond must be
obtained from a company with a general policyholder's rating of B/VI or
better in the current Best's Key Rating Guide.
4.4.7 NOTICE OF EVENT. The Servicer must promptly report to the Master
Servicer any and all occurrences against the Fidelity Bond of the
Servicer.
Section 4.5 SERVICER'S LIABILITY
4.5.1 LIABILITY EXPOSURE. Any and all losses not covered under the
Fidelity Bond or Errors and Omissions Policy, as a result of (i) the
respective deductible provisions thereof, (ii) the limits of coverage
of the Fidelity Bond or Errors and Omissions Policy, or (iii) any claim
denied which should have been covered by the Fidelity Bond or the
Errors and Omissions Policy, as the case may be, according to the terms
of this Agreement had the Fidelity Bond or Errors and Omissions Policy
been properly obtained and maintained and respective claim been
properly submitted for payment, shall be borne by the Servicer.
4.5.2 CONTINUED LIABILITY. The Servicer shall remain fully liable to
the Principal, its successors and assigns for any and all damages,
losses or injuries of any nature or kind, resulting from dishonest,
fraudulent, criminal or negligent acts, errors or omissions of the
Servicer and/or on the part of officers, employees or other persons
acting on behalf of the Servicer.
Section 4.6 INACTIVE SERVICERS
4.6.1 SALE OF SERVICING. At the option of, and in its sole
discretion, the Master Servicer reserves the right to
have an Affiliate purchase and the Servicer hereby
agrees to sell, the servicing on any and all Mortgage
Loans serviced under this Agreement in the event that
the Servicer is servicing less than $5 million, and
all outstanding commitments to sell additional
Mortgage Loans have expired.
4.6.2 SERVICING PRICE. The purchase price which the
Affiliate of the Master Servicer shall pay the
Servicer for the purchase of such servicing pursuant
to Section 4.6.1 hereof shall be an amount equal to
the fair market value of such servicing. Except as
provided for in Section 4.6.1 hereof, neither the
Master Servicer nor any Affiliate thereof shall be
obliged to pay the Servicer for the transfer or
termination of any servicing rights hereunder.
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Section 4.7 INDEMNIFICATION
4.7.1 SCOPE OF INDEMNITY. The Servicer hereby agrees to
indemnify and hold harmless (a) the Master Servicer,
(b) the Principal, (c) each Owner of any Mortgage
Loan, (d) any underwriter of any of the Certificates,
(e) the successors and assigns of any of the
foregoing, and (f) the officers, directors,
employees, agents and Affiliates of any of the
foregoing (any of the foregoing hereinafter referred
to as the "indemnified party"), from and against any
and all claims, losses, damages, liabilities, fines,
settlements, awards, offsets, defenses,
counterclaims, actions, penalties, forfeitures, legal
fees, judgments and any other costs, fees and
expenses (including, without limitation, attorneys'
fees and court costs), either directly or indirectly
arising out of, based upon, or relating to (i) a
breach by the Servicer, its officers, directors,
employees, or agents, or its delegees pursuant to
Section 11.2.1 hereof, of any representation,
warranty or obligation contained herein or any other
agreement between the Master Servicer and the
Servicer relating to the servicing or administering
of any Mortgage Loan, or any failure to disclose any
matter that makes such representation and warranty
misleading or inaccurate, or any inaccuracy in
information furnished by the Servicer, (ii) a breach
of any representation, warranty or obligation made by
any indemnified party in reliance upon any such
representation, warranty or obligation, failure to
disclose, or inaccuracy in information furnished by
the Servicer, (iii) any failure of the Servicer, its
officers, directors, employees, or agents, or its
delegees pursuant to Section 11.2.1 hereof, to
perform any of its obligations under this Agreement,
and (iv) any acts or omissions of the Servicer, its
officers, directors, employees, or agents, or its
delegees pursuant to Section 11.2.1 hereof.
4.7.2 SURVIVAL OF INDEMNITY. This indemnification shall survive
purchase, transfer of any interest in a Mortgage Loan by any
indemnified party, the Liquidation of such Mortgage Loan, termination
of any such Servicer's servicing rights with respect to such Mortgage
Loan and termination or expiration of this Agreement between the
Servicer and the Principal, and its successors and assigns.
Section 4.8 SERVICER'S COMPENSATION
4.8.1 SERVICING FEE AMOUNT. In consideration of the services rendered
under this Agreement, absent default by the Servicer, the Servicer
shall be entitled to a monthly aggregate servicing compensation (the
"Monthly Servicing Compensation") which shall equal the sum of (a) the
Servicing Fee payable with respect to each Mortgage Loan serviced and
(b) any interest earnings on each Custodial P&I Account other than
interest earnings thereon which are payable to the Borrower pursuant to
the Security Instrument or applicable law, subject to any adjustment
for Month End Interest as described in Section 7.6. Absent default by
the Servicer, the Servicer shall also be entitled to retain in addition
to the Monthly Servicing Compensation any late charges, prepayment
fees, penalty interest, assumption fees paid by the Borrower or any
other customary income,
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which amounts are not required to be deposited into the Custodial P&I
Account. 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 therefor except as specifically provided
for herein.
4.8.2 SERVICING FEE SOURCE. The Servicing Fee for each Mortgage Loan
shall be payable solely from the interest portion of the related
Monthly Payment paid by the Borrower or other payment of interest paid
with respect to the Mortgage Loan, whether from the proceeds of
foreclosure or any judgment, writ of attachment or levy against the
Borrower or his assets, or from funds paid in connection with any
prepayment in full or from Insurance Proceeds or Liquidation Proceeds.
Article 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 GENERAL
5.1.1 RELIANCE. The Master Servicer and the Principal rely
upon the representations and warranties contained in
this Article 5 hereof, in the acceptance of the
Servicer. The representations and warranties
contained herein shall inure to the benefit of the
Master Servicer and the Principal, and to their
respective successors, Affiliates and assigns.
5.1.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall
survive termination of this Agreement, and shall
inure to the benefit of the Master Servicer and the
Principal, and to their respective successors,
Affiliates and assigns and each indemnified party
under Section 4.7.1, regardless of any review or
investigation made by or on behalf of such parties
with respect to any Mortgage Loan.
5.1.3 BREACH OF REPRESENTATION OR WARRANTY. Upon breach of
any requirement or representation or warranty
included in this Agreement relative to any Mortgage
Loan, except with respect to a representation made
pursuant to Section 5.4 hereof as to which the
Servicer correctly stated whether or not such
representation was true and accurate, the Servicer
must:
(a) Promptly notify the Master Servicer in writing of the
nature of the breach, the date on which the breach
occurred or began and the Servicer's plans, if any,
for curing the breach;
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(b) Effect a cure of the breach within 30 days after
notice of its occurrence or onset and reasonable
extension will be granted if warranted and necessary
to fully cure breach but in no event greater than 90
days; and
(c) If no complete cure has been effected within such
period in the Master Servicer's sole discretion,
purchase any Mortgage Loan in which the Owner's
interest has been impaired or which, in the opinion
of the Master Servicer, has suffered a material
impairment of Value; provided that purchase shall be
within five days after receipt by the Servicer of
written notice from the Master Servicer requesting
the Servicer's purchase of the Mortgage Loan at the
Purchase Price.
5.1.4 DISCLOSURE OF REPRESENTATIONS AND WARRANTIES. The Servicer
recognizes that the Mortgage Loans have been acquired by the Principal
and are being serviced by the Servicer with a view to their ultimate
securitization as collateral for mortgage backed securities. The
Servicer hereby consents to the inclusion of a statement of the
representations and warranties set forth in this Article 5 as being
those of the Servicer in any prospectus, private placement memorandum
or offering circular which offers securities which are backed by
Mortgage Loans serviced hereunder. The Servicer recognizes that the
Principal and its affiliates will rely upon the truthfulness and
accuracy of such representations and warranties which are to be used in
such disclosure documents.
5.1.5 ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES. The Servicer agrees
that the Principal may, at any time, assign the representations and
warranties given by the Servicer as set forth in this Article 5, in
whole or in part, or an undivided interest therein, to one or more
Persons.
Section 5.2 SERVICER REPRESENTATIONS AND WARRANTIES
The Servicer represents and warrants, as of the date of this Agreement
and, except as otherwise provided, throughout the term of this
Agreement, that the statements set forth below in this Section 5.2 are
true and accurate.
5.2.1 QUALIFICATION OF SERVICER. The Servicer is duly incorporated,
validly existing and in good standing under the laws of the state of
its incorporation and is duly qualified to do business and is in good
standing under the laws of each jurisdiction that requires such
qualification wherein it owns or leases any material properties, or in
which it conducts any material business or in which the performance of
its duties under this Agreement would require such qualification,
except where the failure to so qualify would not have a material
adverse affect on (a) the Servicer's performance of its obligations
under this Agreement, (b) the value or marketability of the Mortgage
Loans, or (c) the ability to foreclose on the related Mortgaged
Properties.
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5.2.2 REQUISITE AUTHORITY. The Servicer has the corporate
power and authority to own its properties and conduct
any and all business required or contemplated by this
Agreement and to perform the covenants and
obligations to be performed by it under this
Agreement. The Servicer holds all material licenses,
certificates and permits from all governmental
authorities necessary for conducting its business as
it is presently conducted.
5.2.3 NO CONFLICTS. The execution and delivery of this
Agreement are within the corporate power of the
Servicer and have been duly authorized by all
necessary actions on the part of the Servicer;
neither the execution and delivery of this Agreement
by the Servicer, nor the consummation by the Servicer
of the transactions herein contemplated, nor
compliance with the provisions hereof by the
Servicer, will (i) conflict with or result in a
breach of, or constitute a default under, any of the
provisions of the articles of incorporation or bylaws
of the Servicer or any law, governmental rule or
regulation, or any judgment, decree or order binding
on the Servicer or any of its properties, or any of
the provisions of any indenture, mortgage, deed of
trust, contract or other instrument to which it is a
party or by which it is bound or (ii) result in the
creation or imposition of any lien, charge or
encumbrance upon any of its properties pursuant to
the terms of any such indenture, mortgage, deed of
trust, contract or other instrument.
5.2.4 ENFORCEABLE AGREEMENT. This Agreement, when duly
executed and delivered by the Servicer, will
constitute a legal, valid and binding agreement of
the Servicer, enforceable in accordance with its
terms, subject, as to enforcement or remedies, to
applicable bankruptcy, reorganization, insolvency or
other similar laws affecting creditors' rights
generally from time to time in effect, and to general
principles of equity.
5.2.5 NO CONSENTS REQUIRED. No consent, approval, order or
authorization of any governmental authority or
registration, qualification or declaration with any
such authority is required in order for the Servicer
to perform its obligations under this Agreement.
5.2.6 AGENCY APPROVAL. The Servicer has been approved by
FNMA or FHLMC and will remain approved as an
"eligible seller/servicer" of conventional,
residential mortgage loans as provided in FNMA or
FHLMC guidelines and in good standing. The Servicer
has not received any notification from FNMA or FHLMC
that the Servicer is not in compliance with the
requirements of the approved seller/servicer status
or that such agencies have threatened the servicer
with revocation of its approved seller/servicer
status.
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5.2.7 FINANCIAL CONDITION. The Servicer is not, and, with passage of
time, does not expect to become, insolvent or bankrupt. The Servicer
shall promptly notify the Master Servicer of any material adverse
change of its financial condition.
5.2.8 SERVICING COMPLIANCE. The servicing practices used by the
Servicer with respect to each Mortgage Loan have been and are in all
respects in compliance with all federal, state and local laws, rules,
regulations and requirements in connection therewith and are otherwise
proper in the mortgage origination and servicing business.
5.2.9 NO IMPAIRMENT. There is no action, suit, proceeding or
investigation pending or, to the best of the Servicer's knowledge after
due inquiry, threatened, against the Servicer which, either in any one
instance or in the aggregate, may result in any material adverse change
in 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 if
adversely determined would affect the validity of this Agreement of the
Mortgage Loans 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.
5.2.10 NO INQUIRIES. The Servicer has not been the subject of an audit
by any of Master Servicer, FHA, HUD, FDIC, FNMA, FHLMC, GNMA or any
Primary Mortgage Insurer, which audit included material allegations of
failure to comply with applicable loan origination, servicing or claims
procedures, or resulted in a request for repurchase of Mortgage Loans
or indemnification in connection with the Mortgage Loans.
5.2.11 CUSTODIAL AND ESCROW ACCOUNTS CURRENT. All Custodial P&I
Accounts, Custodial T&I Accounts, Custodial Buydown Accounts and Escrow
Funds are maintained by the Servicer and have been maintained in
accordance with applicable law and the terms of the Mortgage Loans. The
Escrow Items required by the Mortgages which have been paid to the
Servicer for the account of the Borrower are on deposit in the
appropriate Custodial Account. All funds received by the Servicer in
connection with the Mortgage Loans, including, without limitation,
foreclosure proceeds, Insurance Proceeds, condemnation proceeds and
Principal reductions, have promptly been deposited in the appropriate
Custodial Account, and all such funds have been applied to reduce the
principal balance of the Mortgage Loans in question, or for
reimbursement of repairs to the Mortgaged Property or as otherwise
required by applicable law.
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Section 5.3 MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES.
--------------------------------------------
As to each Mortgage Loan set forth on Schedule I, the Servicer
represents and warrants, as of the date of this Agreement and
throughout the term of this Agreement, that the statements set forth
below in this Section 5.3 are true and accurate.
5.3.1 NO OUTSTANDING CHARGES. There has been no default under the terms
of the related Security Instrument, and any and all taxes, including,
without limitation, any and all transfer taxes due and payable to any
state or municipality relating to the transfer of the ownership and
occupancy interest in the related Mortgaged Property, and all
governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments and/or ground rents that
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
that remains unpaid and that has been assessed but is not yet due and
payable.
5.3.2 INSURANCE MAINTENANCE. Pursuant to the terms of the related
Security Instrument, all buildings or other improvements upon the
related Mortgaged Property are insured by an insurance policy or
policies meeting the requirements of Articles 15 and 16 hereof. The
related Security Instrument obligates the Borrower thereunder to
maintain the hazard insurance policy at the Borrower's cost and
expense, and upon the Borrower's failure to do so, authorizes the
Mortgagee under the related Security Instrument to obtain and maintain
such insurance at the Borrower's cost and expense, and to seek
reimbursement therefor from the Borrower. 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 Owner of the related Mortgage Loan. The Servicer and the
Borrower have not engaged in any act or omission that would impair the
coverage of any such policy, the benefits of the endorsement provided
for herein, or the validity and binding effect of either. The Mortgage
Loan Documents permit the maintenance of an escrow account to pay the
premiums for the above mentioned insurance, and the requirement for
such escrows has not been waived, unless otherwise required by
applicable state law.
5.3.3 SERVICING COMPLIANCE. The Servicer has duly and faithfully
complied with and will continue to comply with:
(i) all applicable laws, rules, regulations, decrees, pronouncements,
directives, orders, and contractual requirements with respect to the
servicing of the Mortgage Loan; and (ii) any and all other applicable
federal, state, county, municipal, or other local laws, including,
without limitation, those laws relating to consumer credit protection,
usury limitations, fair housing, equal credit opportunity, collection
practices, and real estate appraisals.
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5.3.4 NO SATISFACTION OF MORTGAGE. The related Security Instrument has
not been satisfied, cancelled, subordinated, or rescinded, in whole or
in part, and the related Mortgage Property has not been released, in
whole or in part, from the lien of the related Security Instrument, nor
has any instrument been executed that would effect any such release,
cancellation, subordination, or rescission.
5.3.5 PRIMARY MORTGAGE INSURANCE COMPLIANCE. With respect to each
Mortgage Loan which should be covered by a Primary Mortgage Insurance
policy, all provisions of such Primary Mortgage Insurance policy have
been and are being complied with, and such policy is written with a
Private Mortgage Insurer in accordance with this Agreement, is the
binding obligation of such Insurer, is in full force and effect, and
all premiums due thereunder have been paid. No one has engaged in any
act or omission which would impair the coverage or validity of any such
policy, the benefit of the endorsement thereof, or the validity or
binding effect of either. Any Mortgage Loan subject to a Primary
Mortgage Insurance policy obligates the Borrower thereunder to maintain
such Primary Mortgage Insurance policy and to pay all premiums and
charges in connection therewith.
5.3.6 POOL INSURANCE COMPLIANCE. With respect to each Mortgage Loan
which should be covered by a Pool Insurance policy, all provisions of
such Pool Insurance policy have been and are being complied with, and
such policy is written with a Pool Insurer in accordance with this
Agreement, is the binding obligation of such Insurer, is in full force
and effect. No one has engaged in any act or omission which would
impair the coverage or validity of any such policy.
5.3.7 SERVICING PRACTICES; ESCROW FUNDS. The collection and servicing
practices used with respect to the Mortgage Loan have been in
accordance with this Agreement and with Prudent Servicing Practices,
and have been in all respects legal and proper. With respect to Escrow
Funds, all such funds are in the possession of the Servicer and there
exists no deficiency in connection therewith for which customary
arrangements for repayment thereof have not been made. No Escrow Funds
or other charges or payments have been capitalized under the related
Security Instrument or the related Mortgage Note.
Section 5.4 CONDITIONAL MORTGAGE LOAN REPRESENTATIONS
At the request of the Master Servicer, as to each Mortgage Loan set
forth on Schedule I which is the subject of a pending transfer of
ownership, the Servicer shall, at such reasonable times specified by
the Master Servicer in anticipation of such transfer of ownership, and
upon such transfer of ownership, state whether or not each of the
representations set forth below in this Section 5.4 is true and
accurate.
5.4.1 PAYMENTS CURRENT. All payments required to be made through the
most recent related Due Date for the Mortgage Loan under the terms of
the related Mortgage
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Note have been made and credited. No payment required under the
Mortgage Loan is delinquent nor has any payment under the Mortgage Loan
been delinquent at any time since the origination of the Mortgage Loan.
For the purposes of this paragraph, a Mortgage Loan will be deemed to
be delinquent if any payment due thereunder was not paid by the
Borrower in the month such payment was due.
5.4.2 TITLE INSURANCE. With regard to the Title Insurance policy
relating to the Mortgage Loan, no claims have been made under such
Title Insurance policy, the accuracy of any attorney's opinion of title
has not been disputed, and no prior holder of the Mortgage Loans has
done, by act or omission, anything that would impair the coverage of
such Title Insurance policy or the accuracy of such attorney's opinion
of title.
5.4.3 NO DEFAULTS. There is no default, breach, violation, or event of
acceleration existing under the Security Instrument or the related
Mortgage Note, no event has occurred or condition exists that, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation, or event of
acceleration, and neither has there been a waiver of any default,
breach, violation, or event of acceleration.
5.4.4 ORIGINAL TERMS UNMODIFIED. The original terms of the Security
Instrument and the related Mortgage Note have not been impaired,
waived, altered, or modified in any respect, except by a written
instrument that the Owner of the related Mortgage Loan or the Master
Servicer has approved and has been recorded, if necessary, to protect
the interests of the Owner of the related Mortgage Loan. The substance
of any such waiver, alteration, or modification has been approved by
the related Primary Mortgage Insurer, the related Pool Insurer and the
Title Insurer, to the extent required by the respective policies. No
Borrower has been released, in whole or in part.
5.4.5 MORTGAGED PROPERTY UNDAMAGED; NO CONDEMNATION. The Mortgaged
Property is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado, or other casualty so as to affect adversely
the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended; and the Mortgaged
Property is in good repair. There are no condemnation proceedings by
any federal, state, or local authority pending or, to the Servicer's
knowledge, threatened against the Mortgaged Property.
5.4.6 NO OTHER HAZARDS. To the best of the Servicer's knowledge, except
as has been specifically disclosed to the Master Servicer by the
Servicer in writing, the Mortgaged Property is not exposed to hazards
(such as toxic or hazardous waste) not covered by fire and extended
coverage insurance or other available insurance.
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ARTICLE 6
CUSTODIAL ACCOUNTING
Section 6.1 IN GENERAL
6.1.1 CUSTODIAL ACCOUNT ESTABLISHMENT. The Servicer must establish
appropriate custodial accounts for the benefit of the Owner of the
related Mortgage Loans, its successors and assigns for the deposit of
funds collected in connection with such Mortgage Loans. All custodial
accounts and related records must be maintained in accordance with
sound and controlled accounting practices.
6.1.2 CUSTODIAL ACCOUNT SEPARATENESS. At least one custodial account
for principal and interest (I.E., a Custodial P&I Account), one
custodial account for taxes and insurance (I.E., a Custodial T&I
Account), and one custodial account for Buydown Funds, if applicable
(I.E., a Custodial (Buydown Account), shall be established and
maintained for the Mortgage Loans owned by each discrete Owner of
Mortgage Loans. Without the written consent of the Master Servicer,
funds in these accounts may not be commingled with funds held by the
Servicer (a) with respect to Mortgage Loans owned by another Owner or
(b) for other parties. With the written consent of the Master Servicer,
the Servicer may establish an Eligible Account ("Eligible Custodial P&I
Account") to serve as a unitary Custodial P&I Account both for the
Certificates of the series issued under a Pooling and Servicing
Agreement and for other series of mortgage pass-through certificates
issued under different Pooling and Servicing Agreements having
Securitized Asset Services Corporation as Master Servicer and the same
financial institution as trustee of all such series, which Eligible
Account shall be maintained in the name of such financial institution,
in its respective capacities as the trustee for each such series.
6.1.3 CUSTODIAL ACCOUNT MAINTENANCE. The Servicer must ensure that each
Custodial P&I Account, Custodial T&I Account and Custodial Buydown
Account (if applicable) meets the following guidelines:
(a) the accounts must be held with a depository institution such
as a commercial bank, mutual savings bank or savings and loan
association, the deposits of which (except in the case of an
Eligible Custodial P&I Account) are insured by the BIF or SAIF
of the FDIC;
(b) the name of each Custodial P&I Account, Custodial T&I Account
and Custodial Buydown Account shall include a reference to the
name of the Owner of the related Mortgage Loans as prescribed
by the Master Servicer;
(c) the Servicer must transfer all funds on hand relating to such
Mortgage Loans, Monthly Payments due on or after the related
Cut-Off Date and any principal
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prepayments received after the related Cut-Off Date, into the
appropriate custodial accounts meeting the requirements of
Sections 6.1.1 and 6.1.2 hereof;
(d) beginning with any payment due on or after the related Cut-Off
Date, all collections on the Mortgage Loans must be credited
to the appropriate custodial account no later than the first
Business Day following receipt;
(e) (i) the Servicer shall not permit the balance of any Custodial
P&I Account to exceed the Threshold Amount or include any
amounts then required to be remitted to the Master Servicer
Custodial Account pursuant to Section 18.3.1, (ii) in the
event the Servicer collects amounts in excess of the Threshold
Amount prior to the next scheduled transfer of funds to the
respective Master Servicer Custodial Account, the Servicer
must transfer the excess funds directly to the related Master
Servicer Custodial Account by wire before the close of
business on any day on which the amount on deposit in such
account exceeds the Threshold Amount, and (iii) in the event
that the Servicer fails to transfer the funds in excess of the
Threshold Amount to the related Master Servicer Custodial
Account or to remit to the Master Servicer Custodial Account
the Monthly Remittance on the Remittance Date pursuant to
Section 18.3.1, the Master Servicer is authorized to debit
such Custodial P&I Account and transfer such amounts to the
related Master Servicer Custodial Account;
(f) (i) the Servicer must file with the Master Servicer the appropriate ACH
Debit Form for each Custodial P&I Account; (ii) the Master Servicer may
monitor the principal balance of each Custodial P&I Account and may
issue an ACH debit for amounts on deposit in any such account in excess
of the Threshold Amount or otherwise in violation of Section 6.1.3(e);
(iii) such amounts will immediately be deposited into the appropriate
Master Servicer Custodial Account; and (iv) the ability of the Master
Servicer to withdraw and remit such funds to the appropriate Master
Servicer Custodial Account does not relieve the Servicer of its
obligations to remit such funds to the related Master Servicer
Custodial Account;
(g) upon the establishment of a Custodial P&I Account, Custodial T&I
Account or Custodial Buydown Account, the Servicer shall promptly
advise the Master Servicer in writing of, or of any change in, the name
and address of the depository, the individual employee of the
depository who is responsible for overseeing such account, the account
number, the title of the account and the individuals whose names appear
on the signature card; and
(h) (i) establishment and maintenance of the Custodial P&I Account,
Custodial T&I Account and Custodial Buydown Account will be an expense
of the Servicer; (ii) such custodial accounts may be interest-bearing
accounts provided that such accounts comply with all local, state and
federal laws and regulations governing
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interest-bearing accounts and, in the case of a Custodial T&I Account
or Custodial Buydown Account, governing Borrower escrow accounts; and
(iii) the Servicer must ensure that all interest credited to any
custodial account that is not due the Borrower is removed by the
Servicer within 30 days after receipt of such interest.
6.1.4 ESCROW INVESTMENT. If the Servicer elects or is required by law
to deposit the Borrower's Escrow Funds into an interest-bearing
custodial account, the Servicer shall either (a) deposit such funds
into an account which permits withdrawal on demand so as to pay Escrow
Items as they come due, or (b) invest such funds in an Eligible Account
so that adequate funds mature the Business Day prior to the date
payment is due for each Escrow Item.
6.1.5 CLEARING ACCOUNT. If the Servicer finds it necessary to use a
clearing account, the following guidelines must be followed:
(a) the titles of such accounts must reflect that they are
custodial in nature, and the depository in which the accounts
are maintained must be informed in writing that the accounts
are custodial accounts:
(b) a check drawn on or funds transferred from a Custodial P&I
Account or Custodial T&I Account must be deposited to a
disbursement clearing account before or at the same time as
any checks on the clearing account are issued;
(c) a single clearing account must not be utilized both as a
collection and disbursement clearing account;
(d) the accounts must be held at depository institutions in which
accounts are insured by the FDIC, BIF or SAIF;
(e) the Servicer must maintain adequate records and audit trails
to support all debits and credits of each Borrower's payment
records and accounts; and
(f) collections deposited to a depository clearing account must be
credited to the appropriate custodial account no later than
one Business Day following receipt by the Servicer.
6.1.6 CUSTODIAL BUYDOWN ACCOUNT. The Servicer must establish a separate
custodial account to hold Buydown Funds on Mortgage Loans being
serviced for the Owner of the related Mortgage Loans, its successors
and assigns. These accounts must be clearly marked to indicate that the
Servicer is a custodian for Buydown Funds being held for the Owner of
the related Mortgage Loans, its successor and assigns.
6.1.7 MASTER SERVICER CUSTODIAL ACCOUNT. The Master Servicer shall
establish a Master Servicer Custodial Account which relates to all the
Mortgage Loans owned by
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each common Owner into which the Servicer shall remit, on or before
each Remittance Date, all amounts due pursuant to Section 18.3 hereof.
The name assigned to each Master Servicer Custodial Account shall
include a reference to the Owner of the related Mortgage Loans. The
Master Servicer shall be the only party authorized to direct the
withdrawal of funds from each Master Servicer Custodial Account. In the
Master Servicer's sole discretion and where the Owner of the related
Mortgage Loans is a Trust which has issued mortgage backed securities
backed by such Mortgage Loans, the Master Servicer may elect to employ
the Certificate Account created under the related Pooling and Servicing
Agreement (as defined therein) as the related Master Servicer Custodial
Account.
Section 6.2 CUSTODIAL P&I ACCOUNT
6.2.1 MANDATORY DEPOSITS. The following funds must be deposited into
each related Custodial P&I Account within one Business Day after the
Servicer's receipt of such amounts, or in the case of clause (d)
hereof, on the Remittance Date:
(a) Principal collections from related Mortgage Loans
(including Prepayments in Full and Curtailments),
together with Month End Interest, if applicable;
(b) Interest collections from related Mortgage Loans (net
of Servicing Fees);
(c) Liquidation Proceeds and Insurance Proceeds from
related Mortgage Loans other than proceeds held in an
escrow account and applied to the restoration and
repair of the related Mortgaged Property;
(d) related P&I Advances; and
(e) the proceeds of any purchase of a related Mortgage
Loan by the Servicer, or sale of an REO.
6.2.2 OPTIONAL DEPOSITS. The following funds may, but are not required
to, be deposited into each related Custodial P&I Account:
(a) late charges;
(b) prepayment fees;
(c) penalty interest;
(d) assumption fees; and
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(e) unapplied funds if the Borrower that remitted such
funds is not required to maintain Escrow Funds.
The Servicer shall maintain separate accounting for each of the foregoing types
of funds. Provided that the Servicer is not in default of its obligations
hereunder, the Servicer may retain any late charges, prepayment fees, penalty
interest and assumption fees as additional servicing compensation.
6.2.3 PERMISSIBLE WITHDRAWALS. The Servicer may make withdrawals from
each related Custodial P&I Account solely for the following:
(a) remittances to the related Master Servicer Custodial
Account;
(b) reimbursement to itself for advances which have been
recovered by subsequent collections including late
payments, Liquidation Proceeds or Insurance Proceeds,
to the extent funds on deposit recovered by such
subsequent collections relate to the Mortgage Loans
as to which such advances were made;
(c) interest earnings on deposits to the related
Custodial P&I Account, but only to the extent that
such interest has been credited;
(d) removal of amounts deposited in error;
(e) removal of charges or other such amounts deposited on
a temporary basis in the account;
(f) removal of Servicing Fees to the extent deposited
therein; and
(g) termination of the account.
6.2.4 ACCOUNT BENEFICIARY. Each Custodial P&I Account (other than any
Eligible Custodial P&I Account) must be titled to show the respective
interests of the Servicer as trustee and of the Master Servicer as
beneficiary.
6.2.5 USE OF ACCOUNTS. The Servicer shall not use the Custodial P&I
Account as a collection clearing account.
Section 6.3 CUSTODIAL T&I ACCOUNT
6.3.1 MANDATORY DEPOSITS. The following funds must be deposited into
each respective Custodial T&I Account:
(a) related Borrowers' Escrow Funds;
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(b) related T&I Advances;
(c) the remaining balance of Title Insurance loss drafts;
(d) rent receipts to offset any related T&I Advances by
the Servicer;
(e) unapplied funds; and
(f) Liquidation Proceeds from a related Mortgage Loan
that offset a deficit balance in the related
Borrower's Escrow Funds.
6.3.2 PERMISSIBLE WITHDRAWALS. With respect to each related
Borrower, the Servicer may make withdrawals from each
respective Custodial T&I Account to the extent of the
balance of such related Borrower's Escrow Funds for
the following:
(a) timely payment of such related Borrower's
taxes and insurance premiums;
(b) refunds to such related Borrower of excess
Escrow Funds collected from him;
(c) recovering advances made with respect to
such related Borrower by the Servicer for
taxes and insurance;
(d) payment of interest, if required, to such
related Borrower on his Escrow Funds;
(e) removal of any deposits made in error; and
(f) termination of the account.
6.3.3 ACCOUNT REQUIREMENTS. Each Custodial T&I Account is to be
designated in the name of the Servicer acting as an agent for the
individual related Borrowers to make such Escrow Item payments in order
to show that the account is custodial in nature. The Servicer is
required to keep records identifying each Borrower's payment deposited
into the account.
6.3.4 ACCOUNT BALANCE. The Servicer must never allow any Custodial T&I
Account to become overdrawn as to any individual related Borrower. If
there are insufficient funds in the account, the Servicer must advance
its own funds to cure the overdraft.
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Section 6.4 ELIGIBLE ACCOUNT INVESTMENTS
6.4.1 ELIGIBLE INVESTMENTS PERMITTED. Unless prevented or restricted by
written notice of the Master Servicer pursuant to Section 6.4.5 hereof,
the Servicer may, from time to time, withdraw funds from an Eligible
Account, other than a Custodial T&I Account, and immediately invest
such funds in Eligible Investments in accordance with this Agreement.
Upon the maturity of such Eligible Investments, such funds shall be
redeposited into the Eligible Account which they were drawn from or
into the Master Servicer Custodial Account. Where the Owner of the
related Mortgage Loans is a trust which has issued mortgage backed
securities securitized by such Mortgage Loans and where a statistical
rating agency selected by such Owner to rate such mortgage backed
securities shall require that Eligible Investments can only be made if
such funds remain within an Eligible Account, then the Master Servicer
shall notify the Servicer, pursuant to Section 6.4.5 hereof, that the
Servicer's ability to invest in Eligible Investments shall be so
restricted and that no withdrawal of funds from an Eligible Account for
the purpose of making an Eligible Investment shall be allowed.
6.4.2 ELIGIBLE INVESTMENT RESTRICTIONS. No Eligible Investment shall be
sold or disposed of at a gain prior to maturity unless the Servicer has
obtained the consent of the Master Servicer.
6.4.3 ELIGIBLE INVESTMENT INCOME. All income (other than any gain from
a sale or disposition of the type referred to in Section 6.4.2 hereof)
realized from any such Eligible Investment shall be for the benefit of
the Servicer as additional servicing compensation.
6.4.4 ELIGIBLE INVESTMENT LOSSES. The amount of any losses incurred in
respect of any investments permitted under this Section 6.4 shall be
deposited in the Master Servicer Custodial Account by the Servicer out
of its own funds immediately as realized. The Master Servicer may, in
its sole discretion, from time to time, require the Servicer to provide
a reasonable amount of security to cover the risk of such investment
losses. To the extent that the Servicer shall not immediately deposit
the amount of such losses in the Master Servicer Custodial Account, the
Master Servicer may immediately act against such security as well as
pursue all other remedies permitted by law.
6.4.5 ELIGIBLE INVESTMENT LIMITATIONS. At any time, the Master
Servicer, in its sole discretion, may restrict or totally limit the
ability of the Servicer to invest in Eligible Investments pursuant to
this Section 6.4.
6.4.6 ELIGIBLE INVESTMENTS REPORTS. The Servicer shall, at any time
provide such information and reports regarding its Eligible Investments
under this Agreement as the Master Servicer may request.
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ARTICLE 7
MORTGAGE LOAN ACCOUNTING
Section 7.1 IN GENERAL
7.1.1 MORTGAGE LOAN ACCOUNTING PRACTICES. The Servicer shall administer
the application and accounting of payments made on the Mortgage Loans
in accordance with the provisions of this Agreement. However, if the
Owner of a Mortgage Loan is a Trust which has issued mortgage-backed
securities secured by such Mortgage Loan pursuant to the terms of a
Pooling and Servicing Agreement, and a copy of which has been furnished
by the Master Servicer to the Servicer, then the provisions of such
Pooling and Servicing Agreement regarding the application and
accounting of payments made on such Mortgage Loan shall instead control
to the extent such provisions require a different manner of application
or accounting.
7.1.2 RECORD KEEPING. The Servicer must maintain complete and accurate
records of all transactions affecting any Mortgage Loan. Each Mortgage
Loan must be clearly marked to indicate that it is being serviced for
the Owner of such Mortgage Loan, its successors and assigns.
7.1.3 RECORD REVIEW. The Master Servicer and its designee have the
right to:
(a) conduct reviews and audits of the Servicer's records
and operating procedures during any Business Day; and
(b) examine the Servicer's financial records, the
Borrowers' Escrow Funds records and any and all other
relevant documents and materials, whether held by the
Servicer or by another on behalf of the Servicer, to
ensure compliance with terms and conditions of this
Agreement and the Master Servicer's standards.
Section 7.2 MORTGAGE LOAN RECORDS
7.2.1 ACCOUNT RECORDS. Permanent Mortgage Loan account records must be
maintained by the Servicer for each Mortgage Loan. Each account record
must be identifiable by the Servicer Loan Number.
7.2.2 ACCOUNT RECORD INFORMATION. The Servicer shall maintain the
following information for each Mortgage Loan in a readily accessible
form:
(a) the Master Servicer Loan Number;
(b) the current Unpaid Principal Balance;
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(c) the date of receipt, amount of payment and distribution of
such payment for each Monthly Payment received with respect to
such Mortgage Loan as to each related Due Date;
(d) for ARM Loans, the current Mortgage Interest Rate, all
limitations contained in the Mortgage Note with respect to
periodic adjustments in the Mortgage Interest Rate, the
scheduled Interest Adjustment Dates, Payment Adjustment
Dates, the Gross Margin and the Index;
(e) other transactions affecting the amounts due from or payable
to the related Borrower;
(f) the current outstanding balances of principal and interest
deposits, advances, taxes and insurance deposits and unapplied
payments with respect to such Mortgage Loan;
(g) any overdraft of the Borrower's Escrow Funds;
(h) any servicing reports or loan histories; and
(i) any other information customarily maintained by a mortgage
loan servicer of one to four family residential mortgages.
7.2.3 ACCOUNTING PRACTICE. Except as otherwise provided herein, all
Mortgage Loan account records must be maintained according to (a) the
Uniform Single Audit Program for Mortgage Bankers and (b) where
applicable, sound and generally accepted accounting practices.
7.2.4 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS. In the event that compliance with the Section 7.2.4
shall make the Certificates legal for investment by federally insured
savings and loan associations, the Servicer shall provide to the
related Trustee, if any, the Master Servicer, the Office of Thrift
Supervision, the FDIC and the supervisory agents and examiners of the
Office of Thrift Supervision and the examiners of the FDIC, as
appropriate, access to the documentation regarding the Mortgage Loans
required by applicable regulations of the Office of Thrift Supervision
or the FDIC, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of
the Servicer designated by it. The Servicer shall permit such
representatives to photocopy any such documentation and shall provide
equipment for that purpose at a charge reasonably approximating the
cost of such photocopying to the Servicer.
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Section 7.3 ACCOUNTING PROCEDURES
7.3.1 PRINCIPAL AND INTEREST COMPUTATION. All Mortgage Loans must
amortize with interest calculated and paid in arrears. Under this
method, the interest due from a Borrower on a Due Date is calculated
based on (a) the Unpaid Principal Balance of the related Mortgage Loan
prior to application of the principal portion of the related current
Monthly Payment, (b) thirty days interest at the related Mortgage
Interest Rate and (c) adjusted as herein provided for the effects of
Curtailments, Prepayments in Full and liquidations. The calculated
interest portion is then subtracted from the related Monthly Payment to
obtain the principal portion. The principal portion is then applied to
the Unpaid Principal Balance of the related Mortgage Loan. The amount
to be applied to interest for a multiple installment must be calculated
using the Unpaid Principal Balance of the related Mortgage Loan
remaining after the previous interest calculation and principal
application.
7.3.2 AMORTIZATION REQUIREMENT. The amortization of each Mortgage Loan
must reduce to zero, or as to Balloon Loans, the respective Balloon
Amount, at the end of the Mortgage Loan term through the application of
regular monthly payments. Capitalization of interest is not permitted,
except as provided by the terms of any Mortgage Loan that provides for
negative amortization.
7.3.3 NEGATIVE AMORTIZATION. To the extent any Mortgage Loan provides
for negative amortization, such as a GPM or GPARM Loan, the Servicer
must assure that the Unpaid Principal Balance of such Mortgage Loan
never exceeds the related Maximum Negative Amortization Amount, and
that the related Monthly Payment is recast as provided for in the
Mortgage Note such that the balance fully amortizes within the
remaining term of such Mortgage Loan.
7.3.4 INTEREST CALCULATIONS. Monthly interest calculations for periods
of a full month must be based on a 30-day month and a 360-day year.
Factors used for such calculations should be carried to ten decimal
places. The dollar amount of any interest payment shall be carried out
to four decimal places. Interest calculations for periods of less than
a full month must be based on a 365-day year.
7.3.5 BUYDOWN LOANS. The Servicer must amortize a Mortgage Loan for
which Buydown Funds are applied at the Mortgage Interest Rate, not at
the buy-down rate, in order to ensure that payments are collected to
amortize properly the Mortgage Loan.
Section 7.4 APPLICATION PROCEDURE
7.4.1 APPLICATION PRIORITY. A payment from a Borrower will normally
consist of interest, principal, deposits for insurance and taxes and
late charges, if applicable. Payments received from Borrowers must be
applied in the following order:
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(a) prepayment charges;
(b) deposits for taxes and insurance;
(c) required monthly interest;
(d) required monthly principal; and
(e) any fees which may be retained by the Servicer, including late
charges, returned check fees, and assumption fees.
7.4.2 REAPPLICATION OF PRIOR PAYMENTS. The Servicer may not reapply
prior prepayments or accumulated Curtailments for payment of subsequent
installments.
7.4.3 ADVANCE PAYMENTS. Payments made by the Borrower to satisfy future
installments must be accounted for as prepaid installments of principal
and interest. The Servicer should contact the Borrower if there is a
question about the Borrower's intention in making any unscheduled
payment.
Section 7.5 CURTAILMENTS
7.5.1 CURTAILMENT AMOUNT. The Servicer may accept Curtailments at any
time. If a Mortgage Loan is delinquent, funds received must first be
applied to bring the Mortgage Loan current. If there are excess funds
after the application of amounts received from the Borrower to pay the
related Monthly Payment, the excess funds represent a Curtailment and
may be applied as a partial principal prepayment.
7.5.2 CURTAILMENT APPLICATION. If a Curtailment is received on or after
the Due Date, the Servicer may either (i) retroactively apply the
Curtailment to the Scheduled Principal Balance of the related Mortgage
Loan as of the Due Date, or (ii) to the extent permitted by law and the
Mortgage Loan, apply such Curtailment at the end of the current period.
To the extent that the Servicer retroactively applies the Curtailment
to the Scheduled Principal Balance of the related Mortgage Loan, the
Servicer must either collect Curtailment Interest from the Borrower,
or, to the extent specified in Section 7.6.1, pay such amount out of
its own funds. The interest portion of the next installment due is then
calculated based on the Unpaid Principal Balance of the related
Mortgage Loan after application of the Curtailment. To the extent the
Servicer applies the Curtailment at the end of the current period,
Curtailment Interest is not collected or paid by the Servicer.
7.5.3 EFFECT OF CURTAILMENT. A Curtailment may not be used to reduce
the related Monthly Payment or the related Mortgage Interest Rate for
any Mortgage Loan, or to postpone the Due Date of any payment.
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7.5.4 CURTAILMENT TRANSMISSION. Each Curtailment must be deposited into
the related Custodial P&I Account within one Business Day after receipt
and must be remitted no later than the regularly scheduled Monthly
Remittance to the related Master Servicer Custodial Account.
Section 7.6 LIQUIDATIONS
7.6.1 MONTH END INTEREST. If a Prepayment in Full or a Curtailment of a
Mortgage Loan occurs and the Servicer does not receive a full 30 days
of interest (calculated on a 30day month, 360-day year basis) on the
prepaid amount for the month in which the Prepayment in Full or
Curtailment occurs, the Servicer must pay, to the extent of its Monthly
Servicing Compensation for all Mortgage Loans, the Month End Interest
on all such Mortgage Loans so prepaid in full or in part. To the extent
that the Servicer's Monthly Servicing Compensation for all Mortgage
Loans is insufficient funds to pay all such Month End Interest, the
resulting Month End Interest Shortfall for any month shall not be
recoverable from the Servicer or any other source in the future. The
payment of Month End Interest by the Servicer shall not be an "advance"
and shall not be reimbursable from the proceeds of any Mortgage Loan.
7.6.2 LIQUIDATION REPORTS. The Servicer will report information with
respect to Liquidations in the monthly reports delivered to the Master
Servicer by the eighth calendar day of each succeeding month.
7.6.3 DEPOSIT OF FUNDS. Within one day after the Liquidation of a
Mortgage Loan, the Servicer shall deposit the related Liquidation
Proceeds together with the related Month End Interest into the related
Custodial P&I Account.
7.6.4 DOCUMENT REQUEST. Within five Business Days after any
Liquidation, the Servicer must complete and send a Request for Release
of Documents to the Master Servicer.
Section 7.7 REALIZED LOSSES
7.7.1 LIQUIDATION REALIZED LOSS DETERMINATION. With respect
to the calculation of a Realized Loss suffered on the
related Mortgage Loan on a Liquidation of such
Mortgage Loan, the amount of such Realized Loss is
equal to (a) the sum of:
(i) Unpaid Principal Balance;
(ii) unpaid interest accrued at the related Mortgage
Interest Rate;
(iii) attorneys' fees and other foreclosure expenses;
(iv) unpaid taxes;
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(v) unpaid Property Maintenance Expenses;
(vi) unpaid insurance premiums; and
(vii) Hazard Loss expenses;
less (b) the sum of:
(i) the balance of Escrow Funds, if any;
(ii) any refund of any Hazard Insurance premium;
(iii) rental income receipts;
(iv) Insurance Proceeds;
(v) cash proceeds of any foreclosure sale;
(vi) proceeds from sale of a REO; and
(vii) any amounts received pursuant to bankruptcy
or insolvency proceedings.
7.7.2 BANKRUPTCY REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss on a Mortgage Loan subject to a
Deficient Valuation, the amount of the Realized Loss is the difference
between the Unpaid Principal Balance of the related Mortgage Loan
immediately prior to the Deficient Valuation and the Unpaid Principal
Balance as reduced by the Deficient Valuation.
7.7.3 REPORTING REQUIREMENT. As to any defaulted Mortgage Loan, the
Servicer must account to, and report in writing to, the Master Servicer
as to any Realized Loss (or gain) upon the Liquidation or Deficient
Valuation in respect of such Mortgage Loan.
7.7.4 SERVICER'S LIABILITY. The Servicer is not liable for any Realized
Loss on any Mortgage Loan except in the case of a (i) purchase by the
Servicer of a Mortgage Loan from the Owner thereof due to a breach of a
representation or warranty by the Servicer or (ii) to the extent that
the failure to perform the servicing procedures as set forth in this
Agreement cause such loss.
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ARTICLE 8
ARM LOANS
Section 8.1 ARM LOAN SERVICING
8.1.1 IN GENERAL. It is the Servicer's responsibility to enforce each
ARM Loan (and any other Mortgage Loan) according to its terms and in
conformity with all applicable law. The Servicer's records must, at all
times, reflect the then-current Mortgage Interest Rate and Monthly
Payment for such ARM Loan and the Servicer must timely notify the
Borrower of any changes to the Mortgage Interest Rate and/or the
Borrower's Monthly Payment.
8.1.2 SERVICER'S LIABILITY. If the Servicer fails to make either a
timely or accurate adjustment to the Mortgage Interest Rate or Monthly
Payment for an ARM Loan or to notify the Borrower of such adjustments,
and subsequently receives a short Monthly Payment, the Servicer must
pay from its own funds any shortage until the Servicer has made the
necessary corrections in conformance with applicable law so as to
secure the correct Monthly Payment from the Borrower. If the Servicer's
failure to make a scheduled change affects the Owner of the ARM Loan's
rights to make future adjustments under the terms of the ARM Loan, the
Servicer shall be required to purchase the ARM Loan. Any amounts paid
by the Servicer pursuant to this Section shall not be an advance and
shall not be reimbursable from the proceeds of any Mortgage Loan
8.1.3 ADJUSTMENT REPORTS. All Mortgage Interest Rate and Monthly
Payment adjustments must be reported to the Master Servicer in a ARM
Loan change report.
8.1.4 SUBSTITUTE INDEX. If the Index required to be used to determine
the Mortgage Interest Rate for a Mortgage Loan is not available on an
Interest Adjustment Date, the Servicer, after consultation with the
Master Servicer, will select an alternative interest rate index that is
readily verifiable by Borrowers.
Section 8.2 NOTICE OF PERIODIC ADJUSTMENT
8.2.1 NOTICE REQUIREMENT. The Notice of Periodic Adjustment is the
legal and official announcement to the Borrower of an ARM Loan of a
change in the Mortgage Interest Rate or the Monthly Payment. The
Servicer must send this notice to the Borrower, as stated in the
related Mortgage Note and in accordance with applicable law, and at
least 25 days before each Payment Adjustment Date.
8.2.2 NOTICE CONTENTS. Each Notice of Periodic Adjustment pertaining to
an ARM Loan shall include the following information:
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(a) the new Mortgage Interest Rate;
(b) the date on which the new Mortgage Interest Rate becomes
effective, that is, the Interest Adjustment Date;
(c) the Index value on which the new Mortgage Interest Rate is
based, the Gross Margin, and how the new Mortgage Interest
Rate was calculated;
(d) the projected Unpaid Principal Balance on the upcoming Payment
Adjustment Date, assuming timely payment of the remaining
Monthly Payments due prior to the Payment Adjustment Date;
(e) the new Monthly Payment;
(f) the Payment Adjustment Date, that is, the date on which the
new Monthly Payment becomes effective;
(g) the dates of the next Interest Adjustment Date and
Payment Adjustment Date;
(h) the fact that the Borrower may repay the ARM Loan in
whole or in part without penalty at any time;
(i) the title and telephone number of an employee of the
Servicer who can answer questions about the notice;
and
(j) if the Borrower is eligible and has the right to
convert the ARM Loan to a fixed rate Mortgage Loan,
such shall be stated.
8.2.3 LEGAL COMPLIANCE. The Servicer also must ensure that the Notice
of Periodic Adjustment provides the Borrower with any other disclosure
information required by applicable federal or state laws or
regulations.
Section 8.3 ARM LOAN CONVERSION
8.3.1 SERVICER'S DETERMINATION. In the event a Borrower with a
convertible ARM Loan exercises its option to convert such Mortgage Loan
to a fixed interest rate, the Servicer will determine whether the
conditions and qualifications for conversion have been met and
determine the fixed rate to be applied to such Mortgage Loan pursuant
to the terms of the related Mortgage Note.
8.3.2 CONVERSION NOTIFICATION. Upon any such conversion, the Servicer
shall prepare an ARM Loan conversion notification and send such
notification to the Master Servicer within three Business Days after
the conversion.
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8.3.3 PURCHASE BY SERVICER. If a Converted Mortgage Loan is owned by a
Trust which has issued mortgage-backed securities, then the Servicer
will purchase such Converted Mortgage Loan from the applicable Trust at
the Purchase Price by depositing the Purchase Price into the respective
Custodial P&I Account.
Article 9
MORTGAGE LOAN FILES
Section 9.1 OWNER MORTGAGE LOAN FILES
9.1.1 OWNER MORTGAGE LOAN FILE REQUIREMENTS. For each Mortgage Loan,
the Servicer will ensure that an appropriate Custodian will maintain an
Owner Mortgage Loan File on behalf of the Owner of such Mortgage Loan
that contains each of the following documents:
(a) the original related Mortgage Note pertaining to such Mortgage
Loan endorsed by the respective prior owner of such Mortgage
Loan to the Owner of such Mortgage Loan, in the manner
described in Section 9.3.1 hereof, together with, where
applicable, the related Power of Attorney, Surety Agreement,
Guaranty Agreement, Mortgage Note Assumption Rider and/or
Buydown Agreement. The Servicer will assure that the related
Mortgage Note shall include all prior and intervening
endorsements as are necessary to show a complete chain of
endorsements from the respective Loan originator to the
respective prior owner of such Mortgage Loan;
(b) either the recorded original related Security Instrument
pertaining to such Mortgage Loan, together with any addenda
and riders, certified by the recording office, or, if the
related Security Instrument is in the process of being
recorded, a photocopy of the related Security Instrument,
certified by an officer of the respective prior owner of such
Mortgage Loan or by the applicable title insurance company,
closing/settlement/escrow agent or company or closing attorney
to be a true and correct copy of the related Security
Instrument transmitted for recordation;
(c) either a recorded original Assignment of the related Security
Instrument from the respective prior owner of such Mortgage
Loan assigning the related Security Instrument to the Owner of
such Mortgage Loan, in the manner described in Section 9.3.2
hereof, certified by the recording office, or, if such
Assignment is in the process of being recorded, a photocopy of
the related Security Instrument transmitted for recordation
certified by an Officer of the respective prior owner of such
Mortgage Loan to be a true and correct copy of such Assignment
submitted for recordation. If recordation is waived by the
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Servicer pursuant to the provisions of Section 11.6.4 hereof,
the Custodian will hold such an Assignment in recordable form;
(d) each recorded original intervening Assignment of the Security
Instrument as is necessary to show a complete chain of title
from the respective Loan Originator to the respective prior
owner of such Mortgage Loan or, if any such original is
unavailable because it is in the process of being recorded, a
photocopy of such intervening Assignment certified by an
Officer of the prior owner of such Mortgage Loan to be a true
and correct copy of such intervening Assignment submitted for
recordation;
(e) an original Title Insurance policy pertaining to such Mortgage
Loan or, with respect to loans secured by properties in
jurisdictions where title policies are not available, the
original attorney's opinion of title. In the event that the
policy has not been issued or is not otherwise available, (i)
a written binding ALTA commitment for such a policy issued by
the respective title insurance company and an Officer's
certificate of the respective prior owner of such Mortgage
Loan certifying that all of the requirements specified in such
commitment have been satisfied, or (ii) a Preliminary Title
Report if the Mortgaged Property are in a state designated by
the Master Servicer as a Preliminary Title Report state;
(f) for each Mortgage Loan listed on Schedule I to this Agreement
which is required to have Primary Mortgage Insurance pursuant
to this Agreement or the related Mortgage Loan Documents, a
Primary Mortgage Insurance policy or a certificate of Primary
Mortgage Insurance issued by the respective insurer or its
agent indicating that such a policy is in effect;
(g) for each Mortgage Loan listed on Schedule I to this Agreement
which is required to have Pool Insurance pursuant to this
Agreement or the related Mortgage Loan Documents, a Pool
Insurance certificate issued by the respective insurer or its
agent indicating the eligibility of such Mortgage Loan for
such Pool Insurance; and
(h) originals of each assumption agreement, modification, written
assurance or substitution agreement pertaining to such
Mortgage Loan, if any.
9.1.2 CUSTODIANS. The Custodian will hold originals of all documents
included in each Owner Mortgage Loan File charged to his custody except
that copies of recorded Security Instruments or Assignments will be
held if the originals are held by the recording office. If the original
Security Instrument, Assignment from the respective prior owner of the
related Mortgage Loan to the Owner of the related Mortgage Loan or any
prior Assignment of the Security Instrument has not been delivered to
the Custodian on the date of the transfer of ownership of such Mortgage
Loan to the
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Owner because it is in the process of being recorded, the Servicer will
within five Business Days after its receipt of the original recorded
document, deliver it to the Custodian. The Servicer will promptly
deliver to the Custodian any other Mortgage Loan Document to be
included in an Owner Mortgage Loan File, charged to the custody of the
Custodian, that comes into Servicer's possession.
9.1.3 RELEASE OF DOCUMENTS FROM OWNER MORTGAGE LOAN FILE. In the event
any document contained in an Owner Mortgage Loan File is needed by the
Servicer for the proper servicing of a Mortgage Loan, the Servicer must
send to the Master Servicer a request for release of documents. The
Master Servicer will authorize the Owner of the related Mortgage Loan,
or the Custodian, as the case may be, to release such Mortgage Loan
Documents after receipt of such Servicer's request (a) (i) upon payment
in full of such Mortgage Loan, (ii) when necessary for foreclosure or
(iii) for such other cause as the Master Servicer deems appropriate, in
its sole discretion, and (b) upon the Master Servicer's satisfaction
that reasonable safeguards will be taken to safeguard such Mortgage
Loan Documents. The Servicer will be responsible for such Mortgage Loan
Documents while they are in transit and while they are in its
possession and will be deemed to hold such Mortgage Loan Documents in
trust for the benefit of the Owner of the related Mortgage Loan. If
such Mortgage Loan has not been paid in full or otherwise liquidated,
the Servicer shall promptly return such Mortgage Loan Documents when
they are no longer required. Notwithstanding the foregoing, unless such
Mortgage Loan has been liquidated or the related Mortgage Loan
Documents have been delivered to an attorney, a public trustee or other
public official in order to foreclose on the related Mortgaged
Property, all such Mortgage Loan Documents released by the Owner of the
related Mortgage Loan, or the respective Custodian, as the case may be,
must be returned within 21 calendar days after their release.
9.1.4 EXECUTION BY OWNER. In the event the Owner of the related
Mortgage Loan's signature is required on any document with respect to a
Mortgage Loan for any reason, including payment in full, assumption or
foreclosure, the Servicer shall deliver to the Master Servicer a
written notice requesting that the Owner of the related Mortgage Loan
execute such documents and certifying as to the reason such documents
are required. Upon receipt of such executed documents, the Servicer
will record, file or deliver such documents as appropriate for the
proper servicing of such Mortgage Loan.
9.1.5 CUSTODIAL FEES. The Servicer is responsible for the related
ongoing fees of each Custodian. Each Custodian shall bill the Servicer
directly for its fees. If for any reason at any time the Master
Servicer pays custodial fees, the Servicer will promptly reimburse the
Master Servicer for such payments.
9.1.6 REPRESENTING PARTY OFFICERS' CERTIFICATE. If it is necessary for
the respective Representing Party to deliver an Officers' certificate
with respect to the existence of a
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Title Insurance policy or a Primary Mortgage Insurance policy for
several Mortgage Loans, the Master Servicer may consent to the delivery
of a single Officers' certificate of the respective Representing Party
for a schedule of mortgage loans in lieu of a separate Officers'
certificate for each such Mortgage Loan.
9.1.7 FINANCING ARRANGEMENTS. To the extent that the Owner of a
Mortgage Loan shall utilize such Mortgage Loan as collateral for a
financing, the endorsements which are required pursuant to Section
9.1.1 hereof with respect to the original related Mortgage Note, the
original related Security Instrument, and the original and each
intervening Assignment of the related Security Instrument shall also
include such further endorsements as such Owner, in accordance with the
relevant financing documents, shall direct.
Section 9.2 SERVICER MORTGAGE LOAN FILES
9.2.1 SERVICER MORTGAGE LOAN FILE REQUIREMENTS. The Servicer must
maintain a Servicer Mortgage Loan File for each Mortgage Loan, each of
which shall be clearly marked with the Servicer Loan Number and shall
be readily accessible to the Master Servicer during regular business
hours, that includes the following:
(a) copies of each of the documents listed in Section
9.1.1 that are held by the Custodian;
(b) an original Hazard Insurance policy or a certificate of
insurance issued by the applicable insurer or its agent
indicating such a policy is in effect for the related
Mortgaged Property;
(c) a Flood Insurance policy or a certificate of insurance issued
by the insurer or its agent indicating that such a policy is
in effect with respect to the related Mortgaged Property, if
Flood Insurance is required pursuant to the provisions of
Section 15.4 or Section 16.6 hereof for such Mortgaged
Property;
(d) originals or copies of all documents submitted to a Primary
Mortgage Insurer for credit and property underwriting approval
with respect to the related Mortgaged Property, if Primary
Mortgage Insurance is required pursuant to the provisions of
Section 15.2 hereof for such Mortgaged Property;
(e) the originals of all RESPA and Regulation Z disclosure
statements executed by the Borrower with respect to such
Mortgage Loan;
(f) the related Appraisal Report made at the time such Mortgage
Loan was originated;
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(g) the HUD-l or other settlement statement for the purchase or
refinance, as the case may be, of the Mortgaged Property by
the Borrower and mortgagor under the related Mortgage Note and
Security Instrument with respect to such Mortgage Loan;
(h) evidence of any tax service contract, if any;
(i) copies of documentation, including the appropriate approval by
the Master Servicer, relating to any modifications to the
related original Mortgage Loan Documents;
(j) documentation, including the appropriate approval by the
Master Servicer, relating to any releases of any collateral
supporting such Mortgage Loan;
(k) collection letters or form notices sent to the Borrower with
respect to such Mortgage Loan, but only if the Servicer does
not maintain separate collection files, including all
collection letters or notices, indexed by Borrower;
(l) foreclosure correspondence, bankruptcy correspondence and
legal notifications, if applicable with respect to the related
Mortgaged Property; and
(m) all other related Mortgage Loan Documents which are
customarily maintained in accordance with Prudent
Servicing Practices in a mortgage loan file in order
to properly service a mortgage loan including,
without limitation, documents regarding title claims.
9.2.2 SERVICER MORTGAGE LOAN FILE ACCESS. The Servicer acknowledges
that each Servicer Mortgage Loan File will be held in trust for the
Owner of such Mortgage Loan, its successors and assigns. The Servicer
further acknowledges that the Master Servicer may, from time-to-time,
request immediate delivery of any or all Mortgage Loan records and
documents to the Master Servicer, the Owner of such Mortgage Loan, the
Custodian or another entity designated by the Master Servicer, and the
Servicer shall thereupon immediately deliver such records and
documents, at the expense of the Servicer. The Servicer agrees to
permit the Master Servicer, its agents, its successors or assigns, from
time to time to conduct audits or inspections of any Servicer Mortgage
Loan Files at one or more of the Servicer's offices during normal
business hours with advance notice. The Servicer must grant the Master
Servicer access to all books, records and files relating to the
Servicer's systems and procedures for servicing Mortgage Loans as to
all Servicer Mortgage Loan Files or to the Servicer's compliance with
the terms and conditions of this Agreement.
9.2.3 ALTERNATE MEDIA. Subject to any applicable law concerning
document retention requirements, the Servicer may transfer any Servicer
Mortgage Loan File to microfilm, microfiche, optical storage or
magnetic media and may retain the
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microfilm, microfiche, optical storage or magnetic media in lieu of
hard copies of the documents required to be maintained in such Servicer
Mortgage Loan Files. The following requirements must be met:
(a) the process must accurately reproduce originals onto
a durable medium;
(b) unless the Master Servicer provides otherwise by
notice to the Servicer, the Master Servicer Loan
Number must be clearly marked on the copies or
optical storage or magnetic media;
(c) the copies or optical storage or magnetic media must
be easily transferable to legible hard copies of the
material relating to the Mortgage Loans; and
(d) backup copies of the microfilm, microfiche, optical
storage or magnetic media must be made by the
Servicer and retained off-site to protect against
fire and other hazard losses.
If the copies, optical storage or magnetic media become damaged or lost
for any reason, the Servicer must bear the entire cost of restoring
each Servicer Mortgage Loan File and any other related documents which
had been transferred to microfilm, microfiche, optical storage or
magnetic media. The Servicer also must bear all costs of reproducing
legible hard copies requested by the Master Servicer. The Master
Servicer may request copies of any Servicer Mortgage Loan File in
optical storage or magnetic media which the Servicer has previously
transferred to magnetic media or optical storage, as the case may be.
The Servicer shall furnish to the Master Servicer optical storage or
magnetic media copies of the requested Servicer Mortgage Loan File in
such format as maintained by the Servicer at the Servicer's expense.
Section 9.3 REQUISITE FORM
9.3.1 FORM OF ENDORSEMENTS. The Servicer shall require that
endorsements of any Mortgage Notes comply with the format stated
herein. If the owner of the related Mortgage Loan is a trust, then the
following format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of Trustee], AS
TRUSTEE under the agreement dated as of [Date of
Trust Agreement], and its successors and assigns,
[Name of Principal]
[Signature of Officer]
[Officer's Name and Title]
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Otherwise, except as the Master Servicer shall otherwise require, the following
format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of Owner], and its successors and assigns
[Name of Principal]
[Signature of Applicable Officer]
[Applicable Officer's Name and Title]
9.3.2 FORM OF ASSIGNMENT. The Servicer shall require that assignments
of any Security Instrument comply with the format stated herein,
including, without limitation, as to the name of the assignee. If the
Owner of the related Mortgage Loan is a trust then the following format
shall be employed:
[Name of Trustee], AS
TRUSTEE under the agreement dated as of
[Date of Trust Agreement], and its successors and assigns
Otherwise, except as the Master Servicer shall otherwise require, the
following format shall be employed:
[Name of Owner], and its successors and assigns
ARTICLE 10
ESCROWS
Section 10.1 ESCROW CRITERIA
10.1.1 ESCROW REQUIREMENT. Unless, (a) at the origination of a Mortgage
Loan the Borrower is not required to make Escrow Item payments
thereafter, (b) Escrow Funds collection has been waived pursuant to
Section 10.5.1 hereof, or (c) the collection of Escrow Funds is
precluded by applicable law, the Servicer must continue to collect
1/12th of the annual total for all Escrow Items with each Monthly
Payment on such Mortgage Loan, as determined pursuant to Section 10.3.1
hereof.
10.1.2 MORTGAQE LOANS WITHOUT ESCROW. If the Servicer is not required
to collect Escrow Funds on a Mortgage Loan, the Servicer shall require
proof of payment of all taxes, ground rents, assessments, insurance or
other charges, or use other means commonly used in the mortgage
industry to ascertain that such items are paid on a timely basis.
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Section 10.2 PAYMENT OF ESCROW ITEMS
10.2.1 ESCROW PAYMENT OBLIGATION. Where the Servicer is responsible for
the collection of Escrow Funds with respect to a Mortgage Loan, the
Servicer shall promptly pay all bills for any Escrow Items in such a
manner as to avoid late charges or penalties and to take advantage of
any available discount.
10.2.2 ESCROW ITEM PAYMENTS. Where (a) the Servicer has been collecting
Escrow Funds with respect to a Mortgage Loan, or (b) the Borrower has
not been obliged to make Escrow Funds payments or such payments have
been waived and such Borrower has failed to timely pay obligations
which otherwise would be Escrow Items, the Servicer must pay any
obligation (i) which could become a first lien on the related Mortgaged
Property, or (ii) to maintain in force the applicable Insurance
Policies. Where Escrow Funds are maintained by the Servicer, such
obligations should be paid from the Borrower's Escrow Funds, or in
accordance with Section 10.2.3 hereof.
10.2.3 ESCROW FUND INSUFFICIENCY. When a Borrower's Escrow Funds are
insufficient to pay taxes, assessments and premiums, when due, subject
to applicable law, the Servicer must attempt to obtain the additional
funds from such Borrower. If sufficient additional funds have not been
recovered by the time the payment is due, the Servicer must advance its
own funds to ensure prompt payment. The Servicer may elect to advance
funds prior to attempting to obtain the additional funds from such
Borrower; however, to the extent permitted by applicable law, the
Servicer shall thereafter attempt to obtain the advanced funds from the
Borrower.
10.2.4 NONPAYMENT NOTICE. The Servicer must notify the Master Servicer
immediately of any Escrow Item not paid in a timely basis and which
remains unpaid for a period of ninety days thereafter.
Section 10.3 ESCROW FUND DETERMINATION
10.3.1 ESCROW FUNDS ANALYSIS. Subject to all applicable Federal, State
and local laws, the Servicer must conduct an analysis of each
Borrower's Escrow Funds at least annually to determine the monthly
deposits which must be made by such Borrower. The analysis will be
performed based upon (a) reasonable projections of the expenses to be
paid from the Escrow Funds and (b) that as such expenses come due, the
Escrow Funds balance shall at all times be sufficient to effect the
payment of such expenses, unless a lower amount is required by
applicable law. Each Borrower must receive a statement of this
analysis. The analysis also must determine whether there is a surplus
or deficiency in such Borrower's Escrow Funds.
10.3.2 ESCROW FUND SURPLUS. As a Borrower may direct, a surplus in such
Borrower's Escrow Funds shall be (a) used as a Curtailment as to the
related
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Mortgage Loan, (b) refunded to such Borrower or (c) taken into
consideration in determining the amount to be collected for Escrow
Funds during the next twelve months.
10.3.3 ESCROW FUND DEFICIENCY. Where it is determined that a deficiency
exists in such Borrower's Escrow Funds, such Borrower may be requested
to pay the shortage in full or the deficiency may be taken into
consideration in determining the amount to be collected for Escrow
Funds during the next twelve months.
Section 10.4 RECORDS
10.4.1 ESCROW FUNDS RECORDS. The Servicer shall keep records of Escrow
Funds collected from each Borrower.
10.4.2 ESCROW OBLIGATIONS RECORDS. The Servicer must maintain accurate
records of the imposition of Escrow Item obligations and the payment of
Escrow Items.
Section 10.5 ESCROW WAIVER
10.5.1 WAIVER CONDITIONS. For any Mortgage Loan (other than a GPM or
GPARM Loan which provides for negative amortization in the future) that
has amortized down so that its current LTV is 80% or less, the Servicer
may waive the Borrower's future obligation to make Escrow Funds
payments provided:
(a) the Unpaid Principal Balance of such Mortgage Note divided
by the value of the Mortgaged Property based on an appraisal made within 60 days
of the date of determination is 80% or less;
(b) such Mortgage Loan is at least 12 months old; and
(c) such Mortgage Loan has not been more than 30 days
delinquent during the preceding 12 months.
10.5.2 WAIVER RESCISSION. The Servicer shall enforce the Escrow Funds
requirements with respect to any Mortgage Loan if the related Borrower
fails to act responsibly in making the required payments.
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ARTICLE 11
COLLECTION AND SERVICING PRACTICES
Section 11.1 GENERAL SERVICING REQUIREMENTS
11.1.1 SERVICING PRACTICES. The Servicer agrees to service Mortgage
Loans in accordance with the requirements of this Agreement. In
general, where not otherwise expressly required by the provisions of
this Agreement, the Servicer shall service the Mortgage Loans in
accordance with prudent mortgage loan servicing standards and
procedures accepted in the mortgage banking industry and generally in
accordance with FNMA guidelines. As to each Mortgage Loan, the Servicer
shall take all such actions as may be necessary to preserve the lien of
the related Security Instrument upon the related Mortgaged Property.
11.1.2 TAX RETURNS AND OTHER REPORTS. Unless otherwise instructed by
notice from the Master Servicer or the respective Trustee, if any, the
Servicer shall forward to each Mortgagor such forms and furnish such
information within the control of the Servicer as are required by the
Code to be furnished to them and will prepare and file annual reports
required by the state authorities. By way of example, the Servicer
shall provide the Mortgagors with the reports required under Code
Sections 6050H (E.G., reporting on Form 1098 any mortgage interest,
including points, received and any reimbursements of qualified mortgage
interest) and 6050J (Abandonments and Foreclosure of Real Property,
Form 1099-A).
11.1.3 SERVICER INTERNAL CONTROLS. The Servicer shall maintain at all
times an adequate system of audit and internal controls in accordance
with Prudent Servicing Practices.
11.1.4 POOL INSURANCE COMPLIANCE. Notwithstanding any other provision
of this Agreement, the Servicer shall at all times comply with all
applicable Pool Insurance policy requirements so as to assure the full
benefit of such Pool Insurance policy to the Owner of the related
Mortgage Loan.
11.1.5 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Notwithstanding any other
provision of this Agreement, the Servicer shall at all times comply
with all applicable Primary Mortgage Insurance policy requirements so
as to assure the full benefit of such Primary Mortgage Insurance policy
to the Owner of the related Mortgage Loan.
Section 11.2 DELEGATION OF DUTIES
11.2.1 PERMISSIBLE DELEGATIONS. Without the written consent of the
Master Servicer authorizing further delegations, the only servicing
duties which the Servicer
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may elect to delegate, by agency, subcontract or otherwise, and the
only categories of such delegees, are as follows:
(a) professional collection agencies to perform those
duties and functions for the collection of delinquent
amounts due on any Mortgage Loan that are customarily
performed by such agencies in the locality where the
related Mortgaged Property are located;
(b) title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the
condition of title to any Mortgaged Property and
services incidental to the foreclosure or acquisition
in lieu of foreclosure of any Mortgaged Property, or
the sale or disposition of any Mortgaged Property
acquired by the Servicer;
(c) attorneys licensed to practice in the state where the
Mortgaged Property are located to perform customary
legal services in connection with the foreclosure or
acquisition of such Mortgaged Property or the sale or
disposition of such Mortgaged Property acquired by
the Servicer at or in lieu of foreclosure, or for the
collection of delinquent sums owed on any Mortgage
Loan;
(d) professional property inspection companies and
appraisers to conduct routine inspections of, and
provide written inspection reports on, Mortgaged
Property as required by this Agreement.
(e) title companies, escrow companies and real estate tax
service companies to provide periodic reports as to
the amount of real estate taxes due on any Mortgaged
Property and the due date or dates of each required
installment;
(f) credit bureaus or credit reporting companies to
provide credit reports on Borrowers or persons who
have applied to assume Mortgage Loans;
(g) construction companies, contractors and laborers to
provide labor, materials and supplies necessary to
protect, preserve and repair Mortgaged Property as
required by this Agreement; and
(h) lock box providers or payment processing
administrators to provide payment processing
services.
11.2.2 DELEGEE'S QUALIFICATIONS. The Servicer shall assure that each
Person retained to provide any of the services set forth in Section
11.2.1 hereof is fully licensed and holds all required Federal, State
or local governmental franchises, certificates and permits necessary to
conduct the business in which he is engaged and
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that such Person is reputable, knowledgeable, skilled and experienced
and has the necessary personnel, facilities and equipment required to
provide the services for which he is retained.
11.2.3 RESPONSIBILITY FOR COSTS. Any Person retained in accordance with
Section 11.2.1 hereof shall be retained solely for the Servicer's
account and at the Servicer's sole expense and shall not be deemed to
be an agent or representative of the Owners of the related Mortgage
Loans, their successors or assigns, or the Master Servicer or its
successors or assigns.
11.2.4 SERVICER'S LIABILITY. The Servicer shall remain liable to the
Principal, its successors and assigns for the performance of the
Servicer's duties and obligations under this Agreement, notwithstanding
the delegation of any servicing function pursuant to this Section 11.2.
Section 11.3 DUE-ON-SALE CLAUSE ENFORCEMENT
11.3.1 ENFORCEMENT REQUIREMENT. The Servicer is required to enforce the
Due- on-Sale Clause on any Mortgage Loan to the extent permitted by
applicable law upon the transfer of title of the related Mortgaged
Property unless (a) a Mortgage Loan is assumable pursuant to the terms
of the related Mortgage Note Assumption Rider, or (b) enforcement of
the Due-on-Sale Clause will jeopardize the Primary Mortgage Insurance
coverage on such Mortgage Loan.
11.3.2 LITIGATION CONSIDERATIONS. Where, in the Servicer's judgment,
the issue of enforceability is reasonably expected to be litigated, the
Servicer will obtain the written consent of the Master Servicer before
enforcing any Due-on-Sale Clause.
11.3.3 APPROVAL REQUIREMENT. In all circumstances of an unapproved
transfer of a Mortgaged Property initiated by the Borrower, the
Servicer is required to promptly notify the Master Servicer and, where
applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, of such transfer and obtain written approval
before initiating enforcement proceedings.
Section 11.4 ASSUMPTIONS
11.4.1 ASSUMPTION REQUIREMENTS. Any Assumption permitted under this
Agreement shall be performed in accordance with Prudent Servicing
Practices. In connection with an Assumption of an assumable Mortgage
Loan, the Servicer shall process such Assumption as provided for in the
Mortgage Note or the Mortgage Note Assumption Rider and shall verify
that:
(a) no material term of the Mortgage Note (including, but not
limited to, the Mortgage Interest Rate, the remaining term to
maturity, the Gross Margin, the
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Index, the Maximum Lifetime Mortgage Interest Rate, the
Minimum Lifetime Mortgage Interest Rate, and any Periodic Rate
Cap or any Periodic Payment Cap) may be changed in connection
with such Assumption;
(b) that the new Borrower qualifies for credit under the
Master Servicer's criteria and standards for similar
loans;
(c) where applicable, the respective Primary Mortgage
Insurer, and/or the respective Pool Insurer has in
advance approved in writing such Assumption of such
Mortgage Loan by the new Borrower and such Mortgage
Loan will continue to be insured by such Primary
Mortgage Insurer and/or such Pool Insurer;
(d) the documents relating to such Assumption (i) create
a valid and enforceable promise to pay the Unpaid
Principal Balance of the related Mortgage Loan,
together with interest thereon in accordance with the
related Mortgage Note by the new Borrower, and (ii)
the related Security Instrument continues to evidence
a valid and perfected first lien on the related
Mortgaged Property; and
(e) such Mortgage Loan will continue to be a valid first
priority security interest upon the related Mortgaged
Property.
11.4.2 APPROVAL AND RELEASE. In connection with an Assumption of an
assumable Mortgage Loan and in accordance with the provisions of the
related Mortgage Loan Documents, upon such verification, (a) the
Servicer may approve such Assumption and (b) only with the prior
written approval where applicable the Primary Mortgage Insurer and/or
the Pool Insurer, unless such approval is precluded by the terms of the
Mortgage Loan Documents, release the previous Borrower from liability.
11.4.3 NOTIFICATION OF ASSUMPTION. The Servicer shall notify the Master
Servicer of any Assumption by the eighth calendar day of the month
following month in which the Assumption took place using the Assumption
Report and shall provide to the Custodian the original assumption
agreement.
11.4.4 ASSUMPTION FEES. Subject to applicable law or regulation and the
provisions of the related Mortgage Note, the Servicer may charge the
Borrower and retain a reasonable and customary assumption fee. Such fee
is receivable only from the Borrower directly and may not be withdrawn
from any of the custodial accounts maintained hereunder.
11.4.5 DISCLOSURE REQUIREMENT. In connection with an Assumption of an
assumable Mortgage Loan, the Servicer shall make all disclosures
required by applicable law.
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Section 11.5 PARTIAL RELEASES AND EASEMENTS
11.5.1 MASTER SERVICER'S APPROVAL. Applications for partial release of
a Mortgaged Property from the lien of the related Security Instrument,
easements, consent to substantial alterations and any other matters
relating to changes affecting the related Mortgage Loan or such
Mortgaged Property must be approved by the Master Servicer and, where
applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, if (a) the request involves the diminution of
the current value of such Mortgaged Property by five hundred dollars
($500.00) or greater or (b) the related Mortgage Loan is covered by a
policy of Primary Mortgage Insurance or Pool Insurance. The Servicer
shall promptly furnish such information as the Master Servicer shall
request in connection with an application under this Section 11.5.
11.5.2 PREREQUISITES. The Servicer must take the following actions
prior to permitting a partial release or any other changes:
(a) where applicable, obtain the respective Primary Mortgage
Insurer's and/or the respective Pool Insurer's prior written
approval;
(b) obtain an acceptable Appraisal Report showing the current
market value of such Mortgaged Property before and after the
release and showing individually both the value of the land
and of the improvements thereon;
(c) ensure that any and all cash consideration received at least
equals the current market value of property or rights to be
released regarding such Mortgaged Property;
(d) ensure that any and all cash consideration received is applied
to the Unpaid Principal Balance of such Mortgage Loan to the
extent of the diminution of the value of such Mortgaged
Property;
(e) cause all legal documents for the transaction to be reviewed;
(f) ensure that such Mortgaged Property, following such release or
change, adequately secures the Unpaid Principal Balance of the
Mortgage Loan and accrued interest thereon and that the
related Loan-to-Value ratio will not be greater than 80%,
after giving effect to clause (d) hereof;
(g) obtain written notification from the respective Title
Insurer that the related Title Insurance policy
remains fully in effect with respect to such
Mortgaged Property, as modified, following such
release or change; and
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(h) receive approval from the Master Servicer for such
release or other change.
Section 11.6 RECORDATION OF ASSIGNMENTS
11.6.1 RECORDATION REQUIREMENT. The Servicer must, at its own expense,
record the Assignment of each Security Instrument to the Owner of the
related Mortgage Loan, as well as any previously unrecorded intervening
Assignments. If any such Security Instrument or Assignment is not
recorded within the later to occur of (i) the date 120 days after the
acquisition of the related Mortgage Loan by its Owner, if the Servicer
has been servicing such Mortgage Loan from such Owner's date of
acquisition or (ii) the date 120 days after the date the Servicer began
servicing such Mortgage Loan, the Master Servicer will have the right
to so effect such recordation at the Servicer's expense.
11.6.2 EXTENSION OF RECORDING PERIOD. The time to record an Assignment
of a Security Instrument may be extended for a period of up to 240 days
from the end of permissible recordation period set forth in Section
11.6.1 if the Servicer provides an Officer's Certificate acceptable to
the Master Servicer certifying that the Servicer has used its best
efforts to complete the recordation process for the Security Instrument
and/or Assignment, as applicable, and that the factors preventing
completion of the recordation process are beyond the Servicer's
control.
11.6.3 DELIVERY REQUIREMENT. Promptly following the recordation of any
Security Instrument or an Assignment, the Servicer will deliver to the
Custodian, unless otherwise directed in writing by the Master Servicer,
such Security Instrument or Assignment bearing evidence of recordation
or, if the original Security Instrument or Assignment is retained by
the recording office, a certified copy of the original recorded
Security Instrument or Assignment.
11.6.4 WAIVER OF RECORDATION. The Master Servicer will generally
require the Servicer to record an Assignment of the Security Instrument
for each Mortgage Loan to the Owner of related Mortgage Loan. However,
the recordation requirement with respect to an Assignment may be waived
for a Mortgage Loan if (a) the related Mortgaged Property is in a state
in which recordation of such an Assignment is not required to protect
the Owner of the related Mortgage Loan's right, title and interest in
and to the related Mortgage Loan and (b) the Seller or the Servicer has
delivered to the Master Servicer an opinion of counsel, acceptable to
the Master Servicer, to that effect.
Section 11.7 General Servicing Considerations
11.7.1 ABANDONMENT. If the Servicer discovers that any Mortgaged
Property is not occupied, the Servicer must immediately attempt to
contact the Borrower in order
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to determine the reason for the vacancy. If the Servicer determines
that such Mortgaged Property has been abandoned, the Servicer, at its
own expense, must take all necessary actions to protect such Mortgaged
Property from waste, damage and vandalism. Such expenses shall be
recoverable by the Servicer solely from the Liquidation Proceeds of the
related Mortgage Loan, if any, or directly from the Borrower.
11.7.2 BUYDOWN FUNDS. The Servicer must distribute any Buydown Funds in
each Custodial Buydown Account in accordance with the terms of the
applicable Buydown Agreement.
11.7.3 NOTIFICATION MATTERS. The Servicer shall (i) maintain accurate
records of and (ii) except in the case of paragraph (f) hereof
involving a monetary default of the Borrower addressed by Article 12
hereof, immediately advise and make recommendation to the Master
Servicer upon discovering any of the following:
(a) deterioration of, waste of, or lack of repair to, any
Mortgaged Property;
(b) sale or transfer of any Mortgaged Property in a
manner not approved by the Servicer pursuant to the
provisions of this Agreement;
(c) material litigation involving any Mortgaged Property;
(d) vacancy of any Mortgaged Property;
(e) with respect to a Mortgage Loan which the Mortgage
Loan Documents indicate that the related Mortgaged
Property is Owner Occupied, occupancy of any
Mortgaged Property by a tenant;
(f) a material default, determined in accordance with
Prudent Servicing Practices, under the terms of any
Security Instrument, Mortgage Note, Condominium
Project or PUD constituent document or similar
obligations of a Borrower; or
(g) any other situation that may materially and adversely
affect any Mortgage Loan.
11.7.4 EMINENT DOMAIN. The Servicer must notify immediately the Master
Servicer and, where applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer, of any taking by eminent domain of
all or part of any Mortgaged Property. The Servicer must take all steps
necessary to prevent loss of any Primary Mortgage Insurance or Pool
Insurance benefits due to any taking by eminent domain.
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11.7.5 LATE CHARGES. Late charges may not be assessed unless a Borrower
failed to make payments in accordance with the Security Instrument.
Section 11.8 BORROWER BANKRUPTCY
11.8.1 SERVICER'S DUTY. The Servicer will be responsible for
representing the interests of the Owner of the related Mortgage Loan in
any bankruptcy proceedings involving a Borrower.
11.8.2 RESPONSIBILITY FOR COSTS. The costs of protecting the interests
of the Owner of a Mortgage Loan shall be borne by the Servicer and are
not (a) chargeable to the related Borrower's Escrow Funds or (b)
reimbursable from the Master Servicer in its sole discretion.
11.8.3 CHALLENGE BANKRUPTCY REDUCTIONS. If the bankruptcy judge or
trustee should propose to (a) reduce the Unpaid Principal Balance of a
Mortgage Note, (b) reduce the related Mortgage Interest Rate, (c)
extend the final maturity of such Mortgage Note, or (d) reduce the
level of any monthly payment on such Mortgage Note, the Servicer shall
(i) challenge any such modification on a timely basis, (ii) notify the
Master Servicer immediately, and (iii) follow the Master Servicer's
instructions regarding the bankruptcy proceedings, and in the absence
of explicit instructions, exercise reasonable judgment to protect the
interests of the Owner of such Mortgage Loan.
11.8.4 BANKRUPTCY ADJUSTMENTS. If the action of any court results in a
Deficient Valuation or Debt Service Reduction, the Servicer will
provide a calculation of the effects of such modification notifying the
Master Servicer of the new principal balance, Mortgage Interest Rate,
new final maturity, or monthly payment level, as the case may be, of
such Mortgage Loan.
11.8.5 BANKRUPTCY PLAN SURVEILLANCE. With respect to each Mortgage Loan
which is the subject of a Deficient Valuation or a Debt Service
Reduction, the Servicer shall verify that payments are being made in
accordance with the plan approved in the related bankruptcy
proceedings.
Article 12
DELINQUENCY MANAGEMENT
Section 12.1 IN GENERAL
12.1.1 SERVICING PRACTICES. The provisions set forth in this Article
constitute the minimum guidelines and procedures for servicing
Delinquent Mortgage Loans. The Servicer must use collection procedures
which meet or exceed these guidelines.
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The Servicer's procedures must be sufficient for promptly dealing with
delinquencies. The Master Servicer retains the right to require the
Servicer to perform additional collection procedures which the Master
Servicer deems, in its sole discretion, necessary to realize the
objectives set forth herein or otherwise to protect the interests of
the Owner of the related Mortgage Loan.
12.1.2 SERVICER'S CAPABILITIES. The Servicer's collection staff must be
sufficiently skilled in financial counseling and mortgage servicing
techniques to assist a Borrower to bring his Mortgage Loan current and
to protect his equity and credit rating, while at the same time
protecting the interests of the Owner of the related Mortgage Loan and
of the Master Servicer.
12.1.3 SERVICING OBJECTIVES. The purpose of any collection effort is to
cure a Delinquency in the shortest possible time. The Servicer should
treat each Delinquency individually. Discussions with the Borrower must
cover the cause of such Delinquency and the time frame in which such
Delinquency will be cured. The Servicer should use notices, letters,
telegrams, telephone calls, face-to-face contact and other responsible
collection techniques consistent with Prudent Servicing Practices. The
Servicer is required to maintain all collection records. The Servicer
must vary its collection techniques to fit individual circumstances,
avoiding a fixed collection pattern which may be ineffective in dealing
with particular Borrowers. The Servicer should recognize the importance
of telephone and face-to-face contact in any collection program. As
part of its collection procedures, the Servicer shall closely monitor
all newly originated Mortgage Loans.
12.1.4 SERVICER'S PERFORMANCE. The Servicer's continued participation
in the Master Servicer's program is contingent upon maintaining
Delinquency rates that are comparable to the national and/or regional
mortgage banker associations publicized delinquency rates for similar
products and acceptable to the Master Servicer.
12.1.5 SERVICER'S EXPENSES. Unless otherwise specified, the cost of any
of the servicing procedures detailed in this Agreement shall be borne
solely by the Servicer. The Servicer may not charge such expenses
against the Borrower's Escrow Funds. The foregoing shall not preclude
the Servicer from recovering such expenses from the Borrower to the
extent permitted by applicable law and the related Mortgage Loan
Documents.
Section 12.2 DELINQUENCY SERVICING PROCEDURES
12.2.1 LATE NOTICE. A late notice shall be mailed by the Servicer to
the Borrower by the 18th day of such Delinquency.
12.2.2 TELEPHONIC INQUIRY. The Servicer shall use best efforts to make
telephone contact with the Borrower by the 20th day of such
Delinquency.
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12.2.3 NOTICE OF DEFAULT. Notification of default of such Mortgage Loan
shall be mailed by the Servicer to the Borrower by the 35th day of such
Delinquency.
12.2.4 BORROWER INTERVIEW. The Servicer shall use best efforts to
conduct a face-to-face interview between the 45th day and the 60th day
of such Delinquency if satisfactory arrangements to cure the
Delinquency have not been made. If, for geographic reasons, a
face-to-face meeting is not feasible, an in-depth telephone interview
may be conducted instead.
12.2.5 CONTINUING CONTACTS. If satisfactory arrangements have not been
made to cure such Delinquency by the 60th day, the Servicer must
continue to contact the Borrower until either the related Mortgage Loan
has been brought current or the Servicer has made a recommendation in
writing to the Master Servicer for foreclosure of such Mortgaged
Property or other action.
12.2.6 PROPERTY INSPECTION. The Servicer is required to inspect each
Mortgaged Property no later than the 60th day of the Delinquency if no
satisfactory arrangements have been made to cure such Delinquency of
the related Mortgage Loan. The inspection should determine the physical
condition and the occupancy status of such Mortgaged Property. The
Servicer is required to inspect such Mortgaged Property monthly after
the 60th day of such Delinquency until such Delinquency is cured or the
related Mortgage Loan is Liquidated. The results of any inspection
should be used in determining whether a recommendation for foreclosure
or for the transfer of deed-in-lieu of foreclosure is necessary. The
Servicer must prepare a Property Inspection Report following each
inspection. All Property Inspection Reports must be retained by the
Servicer and copies thereof must be forwarded to the Master Servicer
promptly upon request. All expenses related to the foregoing shall be
borne by the Servicer and such expenses shall not be recoverable by the
Servicer from the Master Servicer or the Principal or from Liquidation
Proceeds, Insurance Proceeds, payments on the related Mortgage Loan or
any other source relating to the related Mortgage Loan or the related
Mortgaged Property. The foregoing shall not preclude the Servicer from
recovering such expenses from the Borrower to the extent permitted by
applicable law and the related Mortgage Loan Documents.
Section 12.3 RELIEF OF BORROWERS
12.3.1 SERVICER'S ROLE. The Servicer shall be readily available to
Borrowers to offer skilled financial counsel and advice and shall make
personal contact with delinquent Borrowers as often as possible to
achieve a solution that will bring the Mortgage Loan current as soon as
possible. The Servicer shall be fully familiar with the form of relief
to Borrowers provided for herein and will employ such relief.
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12.3.2 SERVICER'S DISCRETION. The Servicer shall have reasonable
discretion to extend appropriate relief to Borrowers who encounter
hardship and who are cooperative and demonstrate proper regard for
their obligations. However, no such relief shall be granted to any
Borrower under a Mortgage Loan unless the Servicer reasonably believes
that there is a reasonable expectation that such Borrower will bring
his Mortgage Loan current within 180 days following the onset of
Delinquency. Further, without the consent of the Master Servicer, no
such relief shall be granted other than with respect to a Mortgage Loan
that has at least a 31-day Delinquency.
12.3.3 RELIEF REQUIREMENT. Prior to granting relief with respect to a
delinquent Mortgage Loan as herein provided, the Servicer shall
ascertain that (i) the reasons for the default and (ii) the attitude
and circumstances of such Borrower justify the relief to be granted.
12.3.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. Where applicable, the
Servicer shall satisfy all requirements under the applicable Primary
Mortgage Insurance policy regarding the relief granted with respect to
a delinquent Mortgage Loan.
12.3.5 RESPONSIBILITY FOR COSTS. The Servicer is responsible for
collection from such Borrower of any recording or similar costs or
expenses incidental to the granting of relief with respect to a
delinquent Mortgage Loan.
12.3.6 FORBEARANCE PLAN. Where relief is appropriate, the Servicer
shall arrange with a Borrower a "Forbearance Plan" giving such Borrower
a definite period in which to reinstate his Mortgage Loan by
immediately commencing payments in excess of the regular Monthly
Payments. Special forbearance relief agreements reducing or suspending
the regular Monthly Payment of the related Mortgage Loan for a
specified period of time are not permitted. To the extent that (i) the
priority of the lien represented by such Mortgage Loan remains in
effect and is not adversely affected, (ii) where applicable, the
related Primary Mortgage Insurance policy remains in full force and
effect, and (iii) where applicable, the related Pool Insurance policy
remains in full force and effect, the Servicer, in its discretion, may
enter into a Forbearance Plan that provides that the total amount owed
during such Delinquency, including costs and expenses, will be repaid
within the shortest period practicable, commencing immediately. With
respect to such Mortgage Loan, the Forbearance Plan shall provide that
such Delinquency will be cured within 180 days after the Due Date of
the earliest unpaid installment, unless the Master Servicer and, where
applicable, the respective Pool Insurer and/or the respective Primary
Mortgage Insurer, consent to a longer period of time. The Forbearance
Plan for such Mortgage Loan shall be set forth in writing and executed
by the Borrower and by the Servicer in the form of a letter agreement
if the earliest unpaid installment is more than 60 days past due.
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12.3.7 ACCOMMODATION LIMITATIONS. No modification, recast, extension,
or capitalization of delinquent payments of a Mortgage Loan other than
as provided in Section 12.3.6 hereof shall be permitted with respect to
a Mortgage Loan unless there is at least a 90-day Delinquency with
respect to such Mortgage Loan unless permitted by the Master Servicer.
12.3.8 POOL INSURANCE CONSIDERATIONS. Where applicable, the Servicer
shall satisfy all requirements under the applicable Pool Insurance
policy regarding the relief granted with respect to a delinquent
Mortgage Loan, including, without limitation, securing the prior
written consent of the respective Pool Insurer regarding (a) any change
in any term of such Mortgage Loan, (b) the release of the related
Borrower from any liability related to such Mortgage Loan, or (c) the
release of any portion of, or interest in, the Mortgaged Property from
the lien of the related Security Instrument.
Section 12.4 SPECIAL DELINQUENCY SERVICING CONSIDERATIONS
12.4.1 ADVANCE RESPONSIBILITY DURING DELINQUENCY. In the event of a
Delinquency with respect to a Mortgage Loan, the Servicer agrees to
advance from its own funds the full amount of Monthly Payments for such
Mortgage Loan. These advances shall provide the Owner of such Mortgage
Loan with a regular flow of funds on such delinquent Mortgage Loan. The
advance obligation stated above is in addition to any other advance
obligations which the Servicer has pursuant to the provisions of this
Agreement. The Servicer must still advance funds in accordance with the
provisions of this Agreement even if a forbearance has been granted.
12.4.2 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Where applicable, the
Servicer shall be familiar with and shall satisfy all requirements of
the applicable Primary Mortgage Insurance policy with respect to a
delinquent Borrower. The Servicer shall have adequate controls to
assure timely filing of all notices to the appropriate Primary Mortgage
Insurer. Copies of all such notices shall be sent to the Master
Servicer, unless otherwise instructed. The Servicer shall prepare and
file all appropriate claims with respect to the applicable Primary
Mortgage Insurance policy, and the Servicer shall prepare and deliver
to the Master Servicer copies of all claims forms and other papers
received from or presented to any Primary Mortgage Insurer in
connection with any claims presented under any such policy, unless the
Servicer is otherwise instructed by the Master Servicer.
12.4.3 POOL INSURANCE COMPLIANCE. Where applicable, the Servicer shall
be familiar with and shall satisfy all requirements of the applicable
Pool Insurance policy with respect to a delinquent Borrower. The
Servicer shall have adequate controls to assure timely filing of all
notices to the appropriate Pool Insurer. Copies of all such notices
shall be sent to the Master Servicer, unless otherwise instructed. The
Servicer shall prepare and file all appropriate claims with respect to
the applicable Pool
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Insurance policy, and the Servicer shall prepare and deliver to the
Master Servicer copies of all claims forms and other papers received
from or presented to any Pool Insurer in connection with any claims
presented under any such policy, unless the Servicer is otherwise
instructed by the Master Servicer.
ARTICLE 13
FORECLOSURE ADMINISTRATION
Section 13.1 FORECLOSURE PREREQUISITES
13.1.1 CHRONIC DELINQUENCY. If a Borrower is chronically delinquent and
the Servicer, based upon Prudent Servicing Practices, has exhausted all
reasonable means of curing the Delinquency, the Servicer must realize
upon the related defaulted Mortgage Loan in accordance with Prudent
Servicing Practices and recommend either (i) the commencement of
foreclosure procedures or (ii) an alternate to foreclosure, each in
accordance with the terms of the related Security Instrument and
applicable law.
13.1.2 LIQUIDATION RECOMMENDATION. Prior to the commencement of any
action to foreclose on a Mortgaged Property, or prior to the acceptance
of a deed-in-lieu of foreclosure, the Servicer shall notify in writing
the Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, of the Servicer's
recommendation as to whether foreclosure should be commenced, or a
deed-in-lieu of foreclosure accepted, and, where applicable, shall
provide all other notices, reports or information required by the
Master Servicer or the applicable Primary Mortgage Insurance policy
and/or Pool Insurance policy. The Servicer shall also set forth in such
notice the estimate of any loss to be incurred on the liquidation of
such Mortgaged Property. If the respective prior written approval of
the Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, is obtained, the
Servicer shall initiate foreclosure or accept a deed-in-lieu of
foreclosure, as the case may be, consistent with such approval. Where
such Mortgaged Property is covered by a Primary Mortgage Insurance
policy and/or Pool Insurance policy, if the respective Primary Mortgage
Insurer or the respective Pool Insurers, as the case may be, does not
accept the Servicer's recommendation but directs otherwise, the
Servicer shall act according to the respective Primary Mortgage
Insurer's instructions or the respective Pool Insurer's instructions
provided such actions are consistent with, and contemplated by, the
applicable Primary Mortgage Insurance policy or the applicable Pool
Insurance policy, as the case may be. Notwithstanding any of the
foregoing, if the Master Servicer directs the Servicer to follow a
course of action regarding the liquidation of a Mortgaged Property, the
Servicer shall follow the Master Servicer's instructions.
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13.1.3 FORECLOSURE EXPENSES. All attorneys' fees, and other costs in
respect of any foreclosure or acquisition in lieu of foreclosure shall
be identified in advance and a detailed estimate of the amounts thereof
shall be set forth in the Servicer's written recommendation. All fees
and expenses shall be consistent with FNMA standards and, where
applicable, shall not exceed those permitted under the respective Pool
Insurance policy and/or the respective Primary Mortgage Insurance
policy. Fees in excess of the amount customary for routine cases or
extraordinary legal services must be approved in writing in advance by
the Master Servicer, and, where applicable, by the respective Primary
Mortgage Insurer or the respective Pool Insurer, as the case may be, if
required by the applicable policy. The billing by a foreclosure
attorney must demonstrate the appropriateness of any extraordinary fees
by the services required. In cases of full or partial reinstatement of
the related Mortgage Loan, the fees shall be reasonable and in
proportion to the authorized fee for services rendered for a completed
foreclosure. Unless otherwise expressly agreed in writing, neither the
Master Servicer, any of its affiliates, their respective officers,
directors, employees, agents, successors or assigns, the Owner of the
related Mortgage Loan, nor any beneficial owners thereof shall be
liable for any attorneys' fees, trustees' fees, witness fees, title
search fees, court costs or other expenses incurred by the Servicer in
respect of any foreclosure or acquisition in lieu of foreclosure,
except to the extent that such fees, costs and expenses are fully
reimbursable under a Primary Mortgage Insurance policy and in fact are
reimbursed.
13.1.4 HAZARDOUS WASTES. In the event that the Mortgaged Property,
related to a Mortgage Loan which is being considered for liquidation by
foreclosure or the transfer of a deed-in-lieu of foreclosure, contains,
or the Servicer has reason to believe that it contains, hazardous or
regulated substances which may impose liability, for damages,
remediation or otherwise, upon the owner of such Mortgaged Property
pursuant to Federal, State or local law, the Servicer shall not, except
with the express prior written approval of the Master Servicer, which
approval makes specific reference to the presence of such hazardous or
regulated substances, undertake or continue the process of foreclosure
with respect to such Mortgaged Property. In the event that the Servicer
in violation of this Section 13.1.4 acquires a Mortgaged Property by
foreclosure or a transfer of a deed in-lieu of foreclosure, such
acquisition shall be for the Servicer's own account and the Servicer
shall pay the Owner of the related Mortgage Loan the Unpaid Principal
Balance of such Mortgage Loan, together with all accrued but unpaid
interest. In such case, the Servicer's actions being its own, and not
as agent for the Master Servicer or the Owner of the related Mortgage
Loan, neither the Master Servicer nor the Owner of the related Mortgage
Loan shall have ever owned the related Mortgaged Property.
Section 13.2 DEED-IN-LIEU OF FORECLOSURE
13.2.1 CONDITIONS. If the Master Servicer and the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, if applicable,
have approved the liquidation
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of a Mortgage Loan by accepting a deed-in-lieu of foreclosure of the
related Mortgaged Property, the Servicer may accept such deed without
any further action or approval by the Master Servicer or, where
applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, provided that:
(a) marketable title, as evidenced by an applicable Title
Insurance policy, can by conveyed to and acquired by
the Owner of such Mortgage Loan;
(b) where applicable, the transaction complies with all
the requirements of the respective Primary Mortgage
Insurer and/or the respective Pool Insurer and does
not and will not violate or contravene any
restriction or prohibition of the respective Primary
Mortgage Insurance policy or the respective Pool
Insurance policy or otherwise result in any loss of
benefits, or reduction in the coverage under either
such policy;
(c) no cash consideration is paid to the related
Borrower;
(d) the related Mortgaged Property is vacant at the time
of the related Borrower's conveyance thereof, unless
occupancy has been approved in writing by the Master
Servicer and, where applicable, by the respective
Primary Mortgage Insurer and/or the respective Pool
Insurer;
(e) the Servicer has obtained from the related Borrower a
written acknowledgement that the deed is being
accepted as an accommodation to the related Borrower
and on the condition that the related Mortgaged
Property will be transferred to the Owner of such
Mortgage Loan free and clear of all claims, liens,
encumbrances, attachments, reservations or
restrictions except for those to which such Mortgaged
Property were subject at the time such Mortgaged
Property became subject to the lien of the Security
Instrument;
(f) the related Borrower's inability to pay is justified
by a full financial disclosure verifying such
inability;
(g) that related Mortgaged Property has been subject to
at least a six month marketing period; and
(h) that the related Mortgaged Property is either (i)
owner occupied or (ii) if not owner occupied, that an
assignment of rentals is provided.
13.2.2 SUBSEQUENT ACTIONS. Upon acquisition by the owner of the related
Mortgage Loan of such Mortgaged Property, the Servicer shall promptly
notify the Master Servicer and, if applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, indicating the
details of the transaction and reasons for
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the conveyance and providing such other information as is required
under a Primary Inspection Report to the Master Servicer and, if
applicable, to the Primary Mortgage Insurer and/or the Pool Insurer.
Title shall be conveyed directly from the Borrower to the Owner of the
related Mortgage Loan or to such other Person designated by the Master
Servicer.
Section 13.3 ACTIONS PRIOR TO FORECLOSURE
13.3.1 NOTICE REQUIREMENTS. The Servicer shall send the Borrower a
letter, not less than 30 days before the commencement of foreclosure
proceedings, setting out (i) the nature of the default, (ii) the steps
that must be taken by the Borrower to cure the default, and (iii) the
date when foreclosure proceedings will begin. If the Servicer has
reason to believe that the related Mortgaged Property has been
abandoned or if the Borrower has displayed an obvious disregard for his
obligations under such Mortgage Loan, the foregoing notice shall be
forwarded at the earliest possible date following the Borrower's
default.
13.3.2 INITIATION OF PROCEEDINGS. If foreclosure has been approved by
the Master Servicer and, where applicable, by the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, with respect to a
Mortgaged Property, the Servicer shall initiate or cause to be
initiated such foreclosure actions as are authorized by law and
consistent with practices in the locality where the Mortgaged Property
are located. If such Mortgaged Property has been abandoned or vacated
by the Borrower and the Borrower has evidenced no intention of honoring
his obligations under the related Mortgage Loan, the foreclosure
process shall be expedited to the fullest extent permitted by law.
Section 13.4 FORECLOSURE PROCEDURES
13.4.1 FORECLOSURE EXPENSES. During the period in which the Mortgaged
Property related to a Mortgage Loan is being foreclosed, remaining
Escrow Funds, if any, as well as any rent receipts, shall be used to
pay all taxes and insurance premiums that become due with respect to
such Mortgaged Property to the extent permitted by law. Except where
other arrangements have been made with the applicable Primary Mortgage
Insurer, the Servicer shall, with respect to each Mortgaged Property
undergoing foreclosure, advance payment of attorneys' fees, trustees'
fees and other foreclosure costs from the commencement of foreclosure
proceedings pertaining to such Mortgaged Property.
13.4.2 FORECLOSURE NOTICE. The Servicer shall give prompt notice to the
Master Servicer and, if applicable, to the Primary Mortgage Insurer
and/or the Pool Insurer, prior to a proposed foreclosure sale, which
notice shall set forth the date, location and time of the foreclosure
sale and the Servicer shall request from the Master Servicer and, if
applicable, from the Primary Mortgage Insurer and/or the
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Pool Insurer, bids and bidding instructions for the Servicer to follow
at such foreclosure sale.
13.4.3 BUYDOWN FUNDS USE. Unless the related Buydown Agreement provides
otherwise, the Servicer may not use Buydown Funds relating to a
Mortgage Loan to cure a Delinquency with respect to such Mortgage Loan.
Any Buydown Funds remaining in the associated Custodial Buydown Account
of a Mortgage Loan in foreclosure must be disposed of in accordance
with the terms of the related Buydown Agreement.
13.4.4 SERVICER'S RESPONSIBILITIES. Subject to the provisions of
Article Three (3) hereof, after acquisition of a Mortgaged Property,
through foreclosure or a deed- in-lieu of foreclosure, or after the
Servicer shall have taken possession of the Mortgaged Property,
whichever occurs first, the Servicer shall be responsible for the
management of such Mortgaged Property. The Servicer shall remain
responsible until possession has been assumed by the applicable Primary
Mortgage Insurer or the applicable Pool Insurer or until such Mortgaged
Property are otherwise disposed of, as the case may be. The Servicer
shall take such action as is necessary to protect the Owner of the
related Mortgage Loan's security or, after acquisition thereof,
ownership interest in such Mortgaged Property. Such action shall
include, without limitation, (i) management of such Mortgaged Property,
(ii) maintenance of such Mortgaged Property, and (iii) if such
Mortgaged Property are vacant, protection of such Mortgaged Property
against vandals and the elements.
13.4.5 PROPERTY INSPECTIONS. The Servicer shall make monthly
inspections of each Mortgaged Property undergoing the foreclosure
process to assure that such Mortgaged Property are not damaged by
vandals or the elements. The Servicer shall promptly prepare a Property
Inspection Report and keep such report on file and forward any such
Property Inspection Reports to the Master Servicer on request.
13.4.6 CONVEYANCE DOCUMENTS. Where applicable, any conveyance by the
Servicer to the respective Primary Mortgage Insurer or the respective
Pool Insurer of a Mortgaged Property shall be made by the form of deed
commonly used in the particular jurisdiction where such Mortgaged
Property is located. The Servicer shall prepare the necessary documents
not later than two weeks prior to the expected date of sale at
foreclosure or confirmation of sale, if applicable. The documents shall
be forwarded to the Master Servicer for approval and execution. After
execution by the Owner of the related Mortgage Loan, such documents
will be returned to the Servicer for delivery to the respective Primary
Mortgage Insurer or the respective Pool Insurer which is acquiring such
Mortgaged Property.
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Section 13.5 MORTGAGE LOAN REINSTATEMENT
13.5.1 BORROWER'S FULL PAYMENT. If a Borrower offers to fully reinstate
his Mortgage Loan during the foreclosure process, the Servicer shall
accept the offer. To achieve full reinstatement of his Mortgage Loan, a
Borrower shall make payment of all (i) payments due to bring such
Mortgage Loan current, (ii) attorneys' fees, (iii) trustees' fees, (iv)
any additional legal costs, and (v) any other expenditures or advances
made by the Servicer during the foreclosure process.
13.5.2 BORROWER'S PARTIAL PAYMENT. Except where otherwise required by
applicable law, the Servicer may not accept an amount in payment from a
Borrower which is less than the amount required for full reinstatement
pursuant to Section 13.5.1 hereof toward reinstatement of a Mortgage
Loan during the foreclosure process without the prior written approval
from the Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer.
13.5.3 OBLIGATIONS UPON REINSTATEMENT. Upon accepting the reinstatement
of a Mortgage Loan, the Servicer shall immediately contact the
appropriate foreclosure attorney or trustee to avoid incurring
additional legal costs or fees. The Servicer must apply the
reinstatement Funds upon receipt from a Borrower in payment of the
expenses enumerated in Section 13.5.1 hereof. Upon receipt of the
reinstatement funds from a Borrower the Servicer must (i) notify the
Master Servicer of the reinstatement of the related Mortgage Loan and
(ii) return to the Master Servicer, the related Mortgage Note and other
related Mortgage Loan Documents for reinclusion in the related Mortgage
Loan File.
13.5.4 CERTAIN ASSUMPTIONS PERMITTED. The Servicer is authorized,
notwithstanding the other provisions of this Article 13, to permit the
assumption of a defaulted Mortgage Loan rather than to foreclose or
accept a deed-in-lieu of foreclosure if, in the Servicer's judgment,
the default is unlikely to be cured and the assuming borrower meets the
underwriting guidelines that originally applied to such Mortgage Loan.
ARTICLE 14
REO ADMINISTRATION
Section 14.1 GENERAL PROVISIONS
14.1.1 REO ACTION PLAN. With regard to each REO which is acquired, the
Servicer shall prepare a plan of action within 30 Business Days after
the date on which the Owner of the related Mortgage Loan acquires
marketable title to such REO. Each plan of action shall set forth (i) a
recommendation for the most effective manner to dispose of the REO,
based on a current appraisal report, a broker's price
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opinion and a market analysis; (ii) the steps to be taken by the
Servicer to secure such REO; and (iii) an estimate of the amount of
time that is required to dispose of such REO. The Servicer shall
promptly submit copies of each plan of action to the Master Servicer
and, where applicable, to the respective Primary Mortgage Insurer,
and/or the respective Pool Insurer. Unless otherwise directed by the
Master Servicer, the Servicer shall implement each plan of action in an
expeditious manner. Further, the Master Servicer may instruct the
Servicer to modify any plan of action as the Master Servicer shall
direct. The Servicer shall provide the Master Servicer with written
monthly progress reports with regard to each plan of action detailing
the status of the related REO and the progress achieved in implementing
the plan of action.
14.2.1 REO SERVICING REQUIREMENTS. The Servicer shall service each REO
from its acquisition through its disposition and shall ensure that all
Funds received with respect to such REO are deposited to the
appropriate Custodial P&I Account for remittance to the Owner of the
related Mortgage Loan, unless the Master Servicer has relieved the
Servicer of these responsibilities by written notification.
14.2.2 SERVICER'S RESPONSIBILITIES. In addition to any other
obligations set forth herein, upon acquisition of each REO, the
Servicer shall be responsible for:
(a) managing, maintaining and securing such REO until it
is conveyed or sold;
(b) inspecting such REO at least once every 30 days and
promptly sending the Master Servicer an updated
Property Inspection Report;
(c) paying all taxes, insurance, maintenance, management
and foreclosure costs relating to such REO;
(d) submitting recommendations for listing and soliciting
offers on such REO;
(e) marketing such REO;
(f) completing the sale of such REO;
(g) depositing sales proceeds relating to such REO into
the appropriate Custodial P&I Account for remittance
to the owner of the related Mortgage Loan;
(h) where applicable, satisfying all of the Primary
Mortgage Insurer's procedural requirements and filing
all required forms and claims;
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(i) where applicable, depositing Primary Mortgage
Insurance or Pool Insurance proceeds relating to such
REO into the applicable Custodial P&I Account for
remittance to the Owner of the related Mortgage Loan;
(j) processing the conveyance of such REO to the Primary
Mortgage Insurer, where.applicable; and
(k) reporting (1) all changes in status of such REO and
(2) all material expenses relating to such REO to the
Master Servicer on a monthly basis.
14.2.3 NOTICE. The Servicer shall notify the Master Servicer in writing
as soon as each REO is acquired.
Section 14.3 REO RECORDS AND REPORTS
14.3.1 RECORDS RETENTION. The Servicer shall retain in its files copies
of all documents, reports and invoices described in this Section.
14.3.2 EVIDENCE OF TITLE. Evidence that title to a REO is held by the
Owner of the related Mortgage Loan shall be submitted by the Servicer
to the Master Servicer and, if applicable, to the Primary Mortgage
Insurer and/or the Pool Insurer, within ten Business Days after
marketable title to such REO has been acquired.
14.3.3 REO EXPENSES. At the end of each month following the receipt of
any invoice relating to expenses incurred in administering each REO,
the Servicer shall send a report listing such expenses to the Master
Servicer and, if applicable, to the Primary Mortgage Insurer and/or the
Pool Insurer. The Servicer shall retain such invoices in its records
and shall, by request, (i) produce any such invoices for inspection or
(ii) at its own expense, provide copies of any such invoices to the
Master Servicer and, if applicable, to the Primary Mortgage Insurer
and/or the Pool Insurer, as directed. The foregoing expense invoices
shall include, without limitation, the following:
(a) insurance premiums;
(b) real estate tax bills;
(c) special assessments;
(d) owners' association dues; and
(e) utility bills.
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14.3.4 REO DOCUMENTS. Promptly upon receipt, the Servicer shall send
copies to the Master Servicer and, where applicable, to the respective
Primary Mortgage Insurer and/or the respective Pool Insurer, of the
following documents relating to each REO:
(a) any forced placed Hazard Insurance policy or Flood
Insurance policy, if applicable;
(b) any maintenance contracts;
(c) any contractor bids relating to the rehabilitation of
such REO pursuant to Section 14.5.3 hereof;
(d) an updated Title Insurance policy which reflects the
occurrence of foreclosure; and
(e) plat map or house location survey, if already
available.
Section 14.4 REO MARKETING
14.4.1 REO MARKETING EFFORTS. The Servicer shall begin efforts to
market a REO as soon as marketable title is acquired by the Owner of
the related Mortgage Loan.
14.4.2 REO SALES. The Servicer shall obtain the best market price for a
REO for the Owner of the related Mortgage Loan while disposing of such
REO in a timely and efficient manner. Unless otherwise directed by the
Master Servicer, the Servicer, acting on behalf of the Owner of the
related Mortgage Loan, shall dispose or cooperate with the Owner of the
related Mortgage Loan in disposing of such REO within 18 months after
its acquisition by the Owner of the related Mortgage Loan. If the
Servicer is otherwise unable to sell such REO, unless otherwise
directed by the Master Servicer, the Servicer shall before the end of
the 18-month period following the acquisition of such REO, auction such
REO to the highest bidder in an auction reasonably designed to bring a
fair price. The Servicer shall consult with the Master Servicer prior
to holding such auction. The Servicer is eligible to bid in such an
auction.
14.4.3 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. The Servicer must
ensure that any action taken with respect to the sale of a REO does not
jeopardize the maximum benefits available under the related Primary
Mortgage Insurance Policy, if any, with respect to the related Mortgage
Loan. The Servicer must inform the related Primary Mortgage Insurer of
any listing agreements or purchase offers that are received before the
related Primary Mortgage Insurer has finalized the disposition of the
claim.
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14.4.4 MASTER SERVICER INSTRUCTIONS. Where the Servicer receives
instructions from the Master Servicer regarding the marketing and sale
of a REO, either with respect to a specific property or generally, such
instructions shall govern the Servicer's actions, notwithstanding any
provision herein.
14.4.5 POOL INSURANCE CONSIDERATIONS. The Servicer must ensure that any
action taken with respect to the sale of a REO does not jeopardize the
maximum benefits available under the related Pool Insurance Policy, if
any, with respect to the related Mortgage Loan. The Servicer must
inform the related Pool Insurer of any listing agreements or purchase
offers that are received before the Primary Mortgage Insurer has
finalized the disposition of the claim.
Section 14.5 REO REHABILITATION
14.5.1 REO REHABILITATION REQUIREMENT. Unless the Master Servicer shall
otherwise direct, and subject to Section 17.6.2, the Servicer must
ensure that any rehabilitation work to any REO which is necessary to
restore such REO to a marketable condition is performed and that such
work is performed in a professional and workmanlike manner.
14.5.2 MASTER SERVICER APPROVAL. The Servicer must obtain the Master
Servicer's prior written approval for rehabilitation work when the
aggregate rehabilitation expenses with regard to a REO exceeds one
thousand dollars ($1,000.00).
14.5.3 WRITTEN CONTRACTOR BIDS. The Servicer shall solicit detailed
written bids from independent contractors when the value of a contract
for rehabilitation of a REO exceeds five hundred dollars ($500.00).
Where the value of a contract exceeds five thousand dollars
($5,000.00), the Servicer shall receive bids from a minimum of two
independent and unrelated contractors and, upon request, forward copies
of such bids to the Master Servicer. Where the value of a contract
exceeds fifty thousand dollars ($50,000.00), the Servicer shall receive
bids from a minimum of three independent and unrelated contractors and,
upon request, forward copies of such bids to the Master Servicer.
14.5.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. If a Mortgaged
Property which has become a REO and the related Mortgage Loan is
covered by a policy of Primary Mortgage Insurance, the Servicer shall
notify the related Primary Mortgage Insurer of such rehabilitation
plans before the completion of the Primary Mortgage Insurance claim to
ensure reimbursement from the Primary Mortgage Insurer. If the related
Primary Mortgage Insurer elects not to reimburse all rehabilitation
expenses, work should be postponed until after final disposition of the
Primary Mortgage Insurance claim.
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Section 14.6 REO ADMINISTRATION FAILURE.
14.6.1 SERVICER REMOVAL. The Master Servicer may in its sole
discretion, in the event that the Servicer's actions or omissions
result in damage to any REO or a failure to sell any REO property
within a reasonable time, the Master Servicer may remove the servicing
of such REO from the Servicer and assume responsibility for management,
control, maintenance, security, rehabilitation and disposition of such
REO.
14.6.2 SERVICER'S CONTINUING OBLIGATIONS. In the event that the
Servicer is removed from servicing a REO by virtue of the provisions of
Section 14.6.1, the Servicer, as to such REO, will nevertheless remain
responsible to (a) pay when due all insurance premiums, property taxes
and assessments; (b) file when due all claims for Primary Mortgage
Insurance, Pool Insurance, Hazard Insurance and, if applicable, Flood
Insurance benefits; and (c) fulfill any other related responsibilities
required by the Master Servicer.
14.6.3 SERVICER'S DUTY TO COMPENSATE. Whether or not a Servicer is
removed from servicing with respect to a particular REO, the Servicer
must compensate the Master Servicer for any damages caused as a result
of the Servicer's breach of its obligation to service efficiently each
REO. The Servicer acknowledges that any damages suffered as a result of
the Servicer's inefficiency in managing a REO may not be quantified in
advance of the Master Servicer assuming responsibility for such REO.
Article 15
INSURANCE
Section 15.1 GENERAL PROVISIONS
15.1.1 INSURANCE REQUIREMENTS
The Servicer must verify that each Mortgage Loan has the insurance
coverage required pursuant to Article 15 and 16. All claims arising
under Insurance Policies maintained hereunder must be settled or
otherwise disposed of by the Servicer, and all such Insurance Policies
must be maintained, including, without limitation, the payment of
premiums on a timely basis, by the Servicer at no expense to the Owner
of the related Mortgage Loan, its successors or assigns, or the Master
Servicer, its successors or assigns.
If the Insurance Proceeds paid in respect of any Mortgage Loan are not
used to repair the related Mortgaged Property due to the particular
circumstances of the loss, and instead such Insurance Proceeds are
applied to reduce the Unpaid Principal Balance of
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such Mortgage Loan and such application causes the Unpaid Principal
Balance of such Mortgage Loan to reduce to zero, the Servicer must
treat the application of such proceeds as a Liquidation, and notify the
Master Servicer of such Liquidation.
15.1.2 UNINSURED LOSSES. The Servicer must take the following actions
in the event of loss or damage to any Mortgaged Property caused by an
earthquake, flood, tornado or other natural disaster immediately
following, the earlier to occur of (x) its notification or discovery of
such loss or damage or (y) the time at which the Servicer reasonably
should have known of such loss or damage in the exercise of Prudent
Servicing Practices:
(a) determine the extent of the losses or damages;
(b) secure any abandoned Mortgaged Property from
vandalism and the elements;
(c) communicate with and counsel the respective Borrower
on any disaster relief programs or other assistance
which is available; and
(d) notify the Master Servicer and recommend appropriate
action to protect the interests of the Owner of the
related Mortgage Loan and the respective Borrower.
15.1.3 SERVICER'S OBLIGATION TO MAINTAIN INSURANCE. If the Servicer
discovers that a Borrower does not have adequate insurance coverage as
required pursuant to the provisions of this Article, the Servicer must
obtain and maintain at its own expense the required insurance coverage
on the related Mortgaged Property. Such expenses shall not be
recoverable by the Servicer from the Master Servicer or the Principal
or from payments on the Mortgage Loan or any other source relating to
the related Mortgage Loan or the related Mortgaged Property, other than
from Liquidation Proceeds or Insurance Proceeds from the related
Mortgage Loan. To the extent permitted by applicable law and the
related Mortgage Loan Documents, the Servicer may initiate forced
placed coverage with respect to such Mortgaged Property and thereafter
attempt to recover such expenses from the related Borrower.
15.1.4 INSURANCE NOTICES. The Servicer must arrange for all insurance
drafts, notices, policies, invoices, or other correspondence to be
delivered directly to the Servicer. The Owner of the related Mortgage
Loan, its successors and assigns, must be named as the Mortgagee, the
endorsement must show the Servicer's address as shown in the following
example:
[Owner of the Mortgage Loan, its successors and assigns]
c/o [Servicer]
[Servicer's Address]
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15.1.5 DEFAULT BY INSURER. If the Servicer knows or has reasonable
cause to suspect that an insurer under any applicable insurance policy
required pursuant to the provisions of this Article will, for any
reason, be unable to pay a valid claim, the Servicer shall immediately
notify the Master Servicer upon receipt of such information or
formulation of such belief. The Servicer shall then (i) find a
substitute insurer and (ii) pay any premiums to the insurer. In any
case, the Servicer shall not be liable in any way for the financial
inability of any insurer under any insurance policy required herein to
pay a valid claim so long as the provisions of Article 15 and 16 hereof
are complied with.
15.1.6 INSURANCE CARRIER RATING. Each Insurance Policy must be
underwritten by an insurance carrier that has either (a) a current
rating by Best's Insurance Reports of B/VI or better, or (b) both (i) a
financial rating by Best's Insurance Reports of Class V and (ii) a
general policyholder's rating of at least A by Best's Insurance
Reports.
15.1.7 INSURANCE CARRIER LICENSES. Each insurance carrier must be
licensed or otherwise authorized by law to conduct business in each
state in which a related Mortgaged Property is located.
15.1.8 RISK EXPOSURE. If any Mortgaged Property is exposed to hazards
not fully covered by Hazard Insurance or Flood Insurance, the Servicer
must notify the Master Servicer immediately with a recommendation for
additional coverage.
15.1.9 EVIDENCE OF INSURANCE. (a) The Servicer must maintain the
following documentation with respect to insurance coverage on each
Mortgage Loan:
(i) if Primary Mortgage Insurance is required, a copy of
the Primary Mortgage Insurance policy and any related
endorsements;
(ii) for one- to four-unit dwellings, an original of the
Hazard Insurance policy, if applicable, and any
related endorsements;
(iii) a copy of the Title Insurance policy and any related
endorsements; and
(iv) For properties covered under a blanket policy, an
original of any Flood Insurance policy, if Flood
Insurance is required, and any related endorsements.
(b) A certificate of insurance is acceptable in lieu of any of the
foregoing policies if it contains the following information:
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(i) named insured and Mortgagee or, for PUD or
Condominium Units, named insured association, unit
owner and unit owner Mortgagee;
(ii) address of the Mortgaged Property;
(iii) type, amount and effective dates of coverage;
(iv) deductible amount;
(v) any endorsement or optional coverage obtained and
made part of the original policy;
(vi) insurer's agreement to provide at least ten day's
prior written notice to the Servicer and Borrower (or
applicable unit owner Mortgagee if for a PUD or
Condominium Unit) before any reduction in coverage or
cancellation of the policy; and
(vii) signature of an authorized representative of the
insurer, if required by applicable law.
Section 15.2 PRIMARY MORTGAGE INSURANCE
15.2.1 PRIMARY MORTGAGE INSURANCE REQUIREMENT. Unless Primary Mortgage
Insurance coverage with respect to a Mortgage Loan has been waived in
writing by the Owner of the Mortgage Loan at the time it purchases such
Mortgage Loan or such Primary Mortgage Insurance is cancelled as
provided in Section 15.2.4 herein, the Servicer must maintain at all
times Primary Mortgage Insurance on any Mortgage Loan with an original
LTV ratio in excess of 80%.
15.2.2 PRIMARY MORTGAGE INSURANCE COVERAGE. As to each Mortgage Loan,
Primary Mortgage Insurance must at least provide coverage which insures
against loss of that portion of the Unpaid Principal Balance of the
Mortgage Loan that exceeds 75% of the Value of the Mortgaged Property.
If the Mortgage Loan provides for negative amortization or for the
potential of negative amortization, the Primary Mortgage Insurance
policy must also insure any increase in the Unpaid Principal Balance
from the original principal balance of the related Mortgage Note.
15.2.3 PRIMARY MORTGAGE INSURER DOWNGRADING. In the event that the
rating assigned by a Rating Agency to the claims paying ability of any
Primary Mortgage Insurer is reduced below the level permitted under
Section 15.1.6, the Servicer will use its best efforts to replace each
Primary Mortgage Insurance Policy issued by such Primary Mortgage
Insurer with a new Primary Mortgage Insurance policy issued by an
insurer whose claims paying ability is acceptable to the Master
Servicer. The
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premium for any replacement Primary Mortgage Insurance policy shall not
exceed the premium for the discontinued Primary Mortgage Insurance
policy.
15.2.4 PRIMARY MORTGAGE INSURANCE CANCELLATION. If a Borrower requests
cancellation of the Primary Mortgage Insurance policy with respect to
his Mortgaged Property, the following requirements must be met:
(a) The current LTV ratio must be 80% or less. The current LTV
ratio must be calculated by dividing the Unpaid Principal
Balance of the related Mortgage Loan by the Value of the
Mortgaged Property;
(b) The related Mortgage Loan may not have been 30 days or more
delinquent within the preceding twelve months; and
(c) There may not have been any other default under the terms of
the related Mortgage Loan at any time during the preceding
twelve months.
If the foregoing requirements are met, the Servicer may request the
cancellation of such Primary Mortgage Insurance policy by submitting to
the Master Servicer a Request for Primary Mortgage Insurance
Cancellation. If there are indications that the Value of the Mortgaged
Property has declined, the Servicer shall obtain an Appraisal Report
with respect to such Mortgaged Property that is not more than 60 days
old. The expense of such an Appraisal Report shall not be borne by the
Master Servicer. The Value of such Mortgaged Property set forth the
Appraisal Report shall be used as the divisor in clause (a) hereof to
determine whether the recalculated current LTV is 80% or less. If the
recalculated current LTV is greater, the Primary Mortgage Insurance
cancellation request will be denied. In addition, the Master Servicer
may deny such a request if it determines, in its sole discretion, that
the interests of the Owner of the related Mortgage Loan may be harmed
by such cancellation.
15.2.5 PRIMARY MORTGAGE INSURANCE CLAIMS. The Servicer must take all
steps to ensure the payment of the maximum benefits payable under the
terms of any Primary Mortgage Insurance policy. The Servicer must work
diligently with each Primary Mortgage Insurer to determine whether such
insurer will settle the claim by taking title to the Mortgaged Property
in question or in some other manner. The Servicer also must notify the
Master Servicer immediately in writing of any decision made by the
applicable Primary Mortgage Insurer relative to a claim. Upon receipt
of any Primary Mortgage Insurance proceeds, the Servicer must deposit
such amounts in the appropriate Custodial P&I Account. The Servicer
shall promptly notify the Master Servicer in writing if any Primary
Mortgage Insurer at any time denies any or all of a claim filed under
its Primary Mortgage Insurance policy.
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Section 15.3 HAZARD INSURANCE
15.3.1 HAZARD INSURANCE REQUIREMENT. Unless alternative coverage is
provided pursuant to Section 16.3 hereunder, the Servicer must ensure
that each Mortgaged Property is covered at all times by Hazard
Insurance.
15.3.2 HAZARD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Hazard Insurance must be at least equal to the lesser of (a)
the Unpaid Principal Balance of the related Mortgage Loan, or (b) 100%
of the replacement cost of the improvements on the Mortgaged Property.
15.3.3 HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by an applicable law, each Hazard Insurance deductible may not
exceed the lesser of (a) $1,000 or (b) one percent of the applicable
amount of coverage.
15.3.4 HAZARD INSURANCE VACANCY COVERAGE. The Servicer must ensure that
each Mortgaged Property is adequately covered even when vacant and,
where available, must obtain a vacancy permit endorsement.
15.3.5 HAZARD INSURANCE MORTGAGEE PROVISIONS. Each Hazard Insurance
Policy must contain or have attached a standard mortgagee clause in the
form customarily used by or required by private institutional mortgage
loan investors.
Such clause must provide that the Hazard Insurance carrier will notify
the named Mortgagee at least ten days before any reduction in coverage
or cancellation of the policy. All mortgagee clauses must be properly
endorsed, necessary notices of transfer must be given and any other
action must be taken that is necessary in order to protect the
interests of the Owner of the related Mortgage Loan, its successors
and/or assigns. The standard mortgagee clause should read as follows:
"Insuring [Servicer's Name], as agent for the [Owner of the Mortgage
Loan], its successors and/or assigns."
Section 15.4 FLOOD INSURANCE
15.4.1 FLOOD INSURANCE REQUIREMENT. Unless alternate coverage is
provided pursuant to Section 16.6 hereunder, the Servicer must ensure
that Flood Insurance is maintained at all times on Mortgaged Property
that are in a special flood hazard area identified by the Secretary of
HUD or the Director of the Federal Emergency Management Agency.
15.4.2 FLOOD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Flood Insurance must be at least equal to the lesser of (a)
the maximum amount available under the National Flood Insurance
Program's regular program or its
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emergency program, (b) the Unpaid Principal Balance of the related
Mortgage Loan or (c) 100% of the replacement cost of the improvements
on the Mortgaged Property.
15.4.3 FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by applicable law, each Flood Insurance deductible may not
exceed the lesser of (a) $1,000 or (b) one percent of the applicable
amount of coverage.
Section 15.5 TITLE INSURANCE
15.5.1 TITLE INSURANCE REQUIREMENT. Unless otherwise directed by the
Master Servicer, the Servicer shall maintain at all times with respect
to each Mortgage Loan and the related Mortgaged Property a Title
Insurance policy in full force and effect until such Mortgage Loan is
fully paid.
15.5.2 TITLE INSURANCE COVERAGE. The Servicer shall not reduce the
amount of or otherwise change the scope of the coverage under, or
otherwise do or authorize any act or omission that would affect the
coverage of, any Title Insurance policy, unless the Servicer has
received written direction from the Master Servicer specifying the
amount or amounts or scope to which the coverage is to be changed.
15.5.3 SERVICER'S OBLIGATIONS. The Servicer shall perform and comply
with all requirements and conditions of each Title Insurance policy for
each Mortgage Loan and the related Mortgaged Property that are to be
performed or observed by the "Insured" or obligee thereunder as a
condition to maintaining and keeping it in force, or making a claim
under, such Title Insurance policy. The Servicer shall be named as a
payee on all Title Insurance policy loss drafts, and upon receipt
thereof, the funds shall be credited to the extent of the sum of (i)
the Unpaid Principal Balance of such Mortgage Loan and any interest
accrued thereon, (ii) any outstanding advances thereon and (iii) any
expenses owed by such Borrower which are due the Owner of such Mortgage
Loan, the Master Servicer or the Servicer, whether for its own account
or others, to the appropriate Custodial P&I Account and the balance of
such funds, if any, shall be credited to the appropriate Custodial T&I
Account.
15.5.4 POLICY CUSTODY. The Servicer shall cause the original of such
Title Insurance policy to be sent directly to the Custodian.
15.5.5 TITLE INSURANCE CLAIMS. The Master Servicer must be notified
contemporaneously with the making of any claim under the Title
Insurance policy. The Servicer shall disburse the proceeds of any such
settlement in accordance with the instructions and requirements of the
Master Servicer.
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Section 15.6 INSURANCE LOSS SETTLEMENTS
15.6.1 SETTLEMENT APPROVAL. The approval of the Master Servicer need
not be requested for disposition of insurance loss settlements where
property damage is $15,000 or less, and the Servicer may disburse the
loss proceeds as provided herein. The written approval of the Master
Servicer must be obtained before disposition of any insurance loss
settlement involving property damage over S15,000.
15.6.2 SETTLEMENT DISBURSEMENTS. For each Mortgage Loan, including a
Mortgage Loan secured by Mortgaged Property located in a Condominium
Project or PUD, the Servicer is fully responsible for the disbursement
of insurance loss settlements under each Hazard Insurance policy and
each Flood Insurance policy, including but not limited to:
(a) arranging for and authorizing the restoration and
rehabilitation of the related damaged Mortgaged
Property in cooperation with the Borrower;
(b) subject to applicable law, applying the Insurance
Proceeds to reduction of the Unpaid Principal Balance
of such Mortgage Loan, provided that the Servicer (i)
shall have determined that such proceeds are
insufficient to repair and restore the related
Mortgaged Property, or that the repair and
restoration of such Mortgaged Property is not
feasible; and (ii) shall have obtained authorization
of the Master Servicer to make such application of
the Insurance Proceeds;
(c) collecting, endorsing and disbursing the Insurance Proceeds
and arranging for progress inspections and payments, if
necessary;
(d) complying with all requirements of any Primary Mortgage
Insurance policy pertaining to the filing of claims and the
settlement of insurance losses to assure that the security of
such Mortgage Loan is not impaired and that the coverage of
such Primary Mortgage Insurance policy is not jeopardized or
otherwise adversely affected;
(e) assuring, through the receipt of Borrower's affidavits, repair
contract copies, lien waivers and the like, that the priority
of the lien of the Security Instrument is preserved, and that
the Insurance Proceeds are applied to the restoration or
repair of the related Mortgaged Property if not applied in
payment of such Mortgage Loan;
(f) obtain releases or waivers of liens and taking such other
actions as are necessary to avoid the filing of laborers',
materialmen's or mechanic's liens against the related
Mortgaged Property; and
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(g) maintaining procedures and practices acceptable to the Master
Servicer and in conformity with Prudent Servicing Practices
for the control and disposition of insurance loss drafts.
15.6.3 SETTLEMENT FUNDS. The Servicer shall be named as a payee on all
insurance loss drafts and upon receipt thereof, the funds shall be
credited to the Borrower's Insurance Proceeds balance and deposited
into (a) where such funds will be applied to the repair and restoration
of the related Mortgaged Property, one or more separate escrow
accounts, so that the balance on deposit in such accounts is fully
insured at all times by BIF or SAIF, or (b) where such funds will not
be applied to the repair and restoration of the related Mortgaged
Property, the respective Custodial P&I Account.
15.6.4 SETTLEMENT NOTICE. The Servicer shall report any such settlement
to the Master Servicer on a Hazard Insurance Loss Draft Notification,
together with a summary of the disposition of the proceeds.
15.6.5 CONTINUING COVERAGE. If a letter of assurance is obtained from
any insurer under a Hazard Insurance policy or a Flood Insurance policy
that the insurance coverage will continue in full force and effect, the
Servicer shall deposit such letter in the appropriate Servicer Mortgage
Loan File.
15.6.6 PROPERTY INSPECTIONS. The Servicer shall conduct property
inspections in accordance with the milestones of the repair and
rehabilitation plan for such Mortgaged Property and prepare Property
Inspection Reports on any Mortgaged Property involving property damage
over $15,000. The Servicer shall furnish a copy of the repair and
rehabilitation plan for such Mortgaged Property to the Master Servicer
upon request.
ARTICLE 16
CONDOMINIUM AND PUD INSURANCE
Section 16.1 GENERAL PROVISIONS
16.1.1 APPLICABILITY. The provisions of this Article pertain solely to
Mortgage Loans secured by Condominium Units or PUD Units.
16.1.2 PREMIUMS. The premiums for insurance policies required pursuant
to this Article must paid as a common expense by the Owners'
Association.
16.1.3 DEDUCTIBLE RESERVES. Funds for each of the deductibles
associated with the insurance policies required pursuant to this
Article must be included in the Owners' Association's reserves and must
be so designated.
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16.1.4 NAME OF INSURED. The name of the insured stated under each
Insurance Policy required pursuant to the provisions of this Article
must be similar in form and substance to the following:
"Association of Owners of the [Name of Condominium Project or
PUD] for use and benefit of the individual Condominium or PUD
Unit owners" (designated by name, if required).
16.1.5 MORTGAGEE CLAUSE. Each insurance policy required pursuant to the
provisions of this Article must contain the standard mortgagee clause
endorsed to provide that any disbursements will be paid to the Owners'
Association for the use and benefit of Mortgagees as their interests
may appear, or otherwise endorsed to fully protect the interest of (a)
the Owner of the respective Mortgage Loan and (b) the holders of a
beneficial interest therein, if any.
16.1.6 RECONSTRUCTION COVERAGE. If, with respect to a PUD or
Condominium Project in which a Mortgaged Property is located, there is
a construction code provision that would require changes to undamaged
portions of the PUD or Condominium Project's building(s) even when only
part of a building is destroyed by an insured hazard, then the Servicer
must ensure that each insurance policy required by this Article
contains the necessary construction code endorsements to cover this
exposure.
Section 16.2 COMMON AREA MULTIPLE PERIL INSURANCE
------------------------------------
16.2.1 COMMON AREA MULTIPLE PERIL INSURANCE REQUIREMENT. The Servicer
must ensure that the Owner's Association maintains, with respect to the
PUD or Condominium Project in which a Mortgaged Property is located, a
policy of Common Area Multiple Peril Insurance, with premiums being
paid as a common expense. The Common Area Multiple Peril Insurance
policy must at least protect against loss or damage by fire and all
other hazards that are normally covered by the standard extended
coverage endorsement, and all of the perils customarily covered for
similar types of projects, including those covered by the standard "all
risk" endorsement.
16.2.2 COMMON AREA MULTIPLE PERIL INSURANCE COVERAGE. As to each
Condominium Project or PUD in which a Mortgaged Property is located, a
Common Area Multiple Peril Insurance policy must cover 100% of the
current replacement cost of all of the common areas (other than the
land and foundation), common elements including fixtures and building
service equipment, as well as common personal property and supplies.
16.2.3 COMMON AREA MULTIPLE PERIL INSURANCE DEDUCTIBLE. Except as a
greater amount may be required by applicable law, each Common Area
Multiple Peril
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Insurance deductible may not exceed the lesser of (a) $10,000 or (b)
one percent of the applicable amount of coverage.
16.2.4 BOILER AND MACHINERY COVERAGE. If a steam boiler is operating
within the Condominium Project or PUD in which a Mortgaged Property is
located, then the Servicer must ensure that boiler and machinery
coverage is in force at all times. This coverage must be evidenced by
the standard form of boiler and machinery endorsement. The minimum
liability coverage per accident under boiler and machinery coverage
must equal the insurable value of the boiler and equipment and the
building housing such boiler or machinery, based upon current
replacement cost, or S2 million, whichever is less.
Section 16.3 BLANKET HAZARD INSURANCE
16.3.1 BLANKET HAZARD INSURANCE REQUIREMENT. Unless alternative
coverage is provided pursuant to Section 16.3 hereunder, the Servicer
must verify that each such Mortgaged Property is covered at all times
by Hazard Insurance policy which provides blanket coverage for the
individual units in the Condominium Project or PUD.
16.3.2 BLANKET HAZARD INSURANCE COVERAGE. As to each Condominium
Project or PUD which contains a Mortgaged Property for which its Hazard
Insurance coverage is provided through a blanket policy, the amount of
Hazard Insurance for a blanket policy, a Condominium Project or PUD
must be at least equal to the lesser of (a) the aggregate of the
outstanding principal balances of all mortgage notes secured by units
within the Condominium Project or PUD (including the Mortgage Notes
secured by Mortgaged Properties), or (b) 100% of the replacement cost
of the improvements on the Condominium Project or PUD Unit site.
16.3.3 BLANKET HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by an applicable law, each Hazard Insurance deductible
for a blanket policy covering a Condominium Project or PUD may not
exceed the lesser of (a) $100,000 or (b) one percent of the applicable
amount of coverage.
Section 16.4 COMMON AREA CGL INSURANCE
16.4.1 COMMON AREA CGL INSURANCE REQUIREMENT. The Servicer must ensure
that the Owners' Association maintains a Comprehensive General
Liability Insurance policy covering all of the common areas, common
elements, commercial spaces and public ways in the Condominium Project
or PUD in which a Mortgaged Property is located.
16.4.2 COMMON AREA CGL INSURANCE COVERAGE. As to each Condominium
Project or PUD in which a Mortgaged Property is located, a CGL
Insurance policy
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should provide coverage of at least $1,000,000 for personal injury,
bodily injury or property damage for any single occurrence. Each CGL
Insurance policy must contain a severability of interest endorsement
preventing the insurer from denying the claim of a Condominium or PUD
Unit owner because of negligent acts of the Owners' Association or
other unit owners. Each CGL Insurance policy must include all other
types of coverage and endorsements in the types and amounts required by
private institutional mortgage loan investors for developments similar
in construction, location and use.
Section 16.5 OWNERS' ASSOCIATION FIDELITY INSURANCE
16.5.1 OWNERS' ASSOCIATION FIDELITY INSURANCE REQUIREMENT. The Servicer
must ensure that the Owners' Association maintains a fidelity bond or
insurance against dishonest and fraudulent acts on the part of
directors, managers, trustees, employees or volunteers responsible for
handling Funds belonging to or administered by the association.
16.5.2 OWNERS' ASSOCIATION FIDELITY INSURANCE COVERAGE. The Owners'
Association fidelity bond or insurance must name the Owners'
Association as the insured and must be written in an amount sufficient
to provide protection at least 150% of the insured's estimated annual
operating expenses and reserves. An appropriate endorsement to the
policy to cover any persons who serve without remuneration must be
added if the policy would not otherwise cover volunteers.
Section 16.6 BLANKET FLOOD INSURANCE
16.6.1 BLANKET FLOOD INSURANCE REQUIREMENT. Where a Mortgaged Property
is a Condominium Unit or PUD Unit and is not individually covered by a
Flood Insurance policy in accordance with the provisions of Section
15.4 hereof, the Servicer must verify that a Flood Insurance policy
which provides blanket coverage for the individual units in the
Condominium Project or PUD, is maintained at all times on Mortgaged
Property that are in a special flood hazard area identified by the
Secretary of HUD or the Director of the Federal Emergency Management
Agency.
16.6.2 BLANKET FLOOD INSURANCE COVERAGE. As to each Condominium Project
or PUD which contains a Mortgaged Property for which its Flood Hazard
Insurance coverage is provided through a blanket policy, the amount of
Flood Insurance must be at least equal to the lesser of (a) the maximum
amount available under the National Flood Insurance Program's regular
program or its the emergency program, (b) the aggregate of the
outstanding principal balances of all mortgage notes secured by units
within the Condominium Project or PUD (including the Mortgage Notes
secured by Mortgaged Properties), or (c) 100% of the replacement cost
of the improvements on the Condominium Project or PUD Unit site.
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16.6.3 BLANKET FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by applicable law, each Flood Insurance deductible for
a blanket policy covering a Condominium Project or PUD may not exceed
the lesser of (a) $1,000 or (b) one percent of the applicable amount of
coverage.
ARTICLE 17
ADVANCES
Section 17.1 PRINCIPAL AND INTEREST ADVANCES
17.1.1 P&I ADVANCE REQUIREMENT. The Servicer shall advance P&I Advances
and deposit to the respective Custodial P&I Account on or before each
Remittance Date an amount equal to the aggregate of the difference, if
any, with respect to each Mortgage Loan, between (a) the Monthly
Payment that each Borrower was required to pay to the Servicer on the
immediately preceding Due Date and (b) the amount actually received
with respect to the related Monthly Payment by the Servicer.
17.1.2 P&I ADVANCE LIMITATION. The Servicer is required to make P&I
Advances with respect to a Mortgage Loan unless a P&I Advance is
reasonably determined by the Servicer to be eventually non-recoverable
from any Insurance Proceeds, Liquidation Proceeds, or the Borrower.
17.1.3 P&I ADVANCE RECOVERY. The Servicer's P&I Advance will be
recoverable from subsequent Borrower Monthly Payments, Insurance
Proceeds, Liquidation Proceeds or, if the Representing Party is
obligated to purchase a Mortgage Loan from its Owner, from the price
paid for such Mortgage Loan.
17.1.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Owner of a related
Mortgage Loan through foreclosure or a deed-in-lieu of foreclosure is
held by such Owner or its successors, the Servicer must continue to
make monthly P&I Advances in respect of each such Mortgage Loan or REO
to the respective Custodial P&I Account. Subject to the provisions of
Section 17.1.2 hereof, these P&I Advances must be made until the (i)
Liquidation of each Mortgage Loan subject to such proceedings or (ii)
in the case of REO transferred to the Owner of Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure, the Liquidation of such
REO. Advances with respect to REO will be made as if the related
Mortgage Loan and Mortgage Note remained in effect.
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Section 17.2 FORECLOSURE ADVANCES
17.2.1 FORECLOSURE ADVANCE REQUIREMENT. During foreclosure proceedings,
the Servicer must advance from its own funds all foreclosure expenses
as they occur in accordance with the terms of this Agreement. Such
advances must be made by the Servicer up to the time of final
disposition of the related Mortgaged Property.
17.2.2 FORECLOSURE ADVANCE LIMITATION. The Servicer is required to make
advances pursuant to Section 17.2.1 with respect to a Mortgage Loan
unless the Servicer reasonably determines (i) that such foreclosure
will not increase the proceeds to the Owner thereof or the beneficial
owners thereof of liquidation of such Mortgage Loan after reimbursement
of the Servicer for its expenses or (ii) that such expenses will be
eventually non-recoverable from any Insurance Proceeds, Liquidation
Proceeds or the Borrower.
17.2.3 FORECLOSURE ADVANCE RECOVERY. If foreclosure proceedings are
terminated, the Servicer must collect all legal fees and costs from the
Borrower. Otherwise, the Servicer's advances for reasonable foreclosure
expenses will be recoverable from Insurance Proceeds, Liquidation
Proceeds or, if the Representing Party is obligated to purchase a
Mortgage Loan from its Owner, from the price paid for such Mortgage
Loan.
17.2.4 FORECLOSURE ADVANCE RECORDS. All foreclosure advances by the
Servicer and reimbursements to the Servicer must be clearly
identifiable in the respective Custodial T & I Account.
Section 17.3 TAX & INSURANCE ADVANCES
17.3.1 T&I ADVANCE REQUIREMENT. If a Borrower's Escrow Funds are
insufficient to pay taxes or insurance premiums, the Servicer must
advance from its own funds to the respective Custodial T&I Account an
amount sufficient to cover the shortage and so as to assure the
maintenance of a first lien position of the related Security Instrument
on the related Mortgaged Property.
17.3.2 T&I ADVANCE RECOVERY. T&I Advances may be recovered from the
Borrower's subsequent monthly escrow payments, Insurance Proceeds,
Liquidation Proceeds or the Borrower, but must never be recovered from
scheduled principal or interest collections. The Servicer may not
recover T&I Advances from another Borrower's Escrow Funds.
17.3.3 T&I ADVANCE LIMITATION. The Servicer is required to make a T&I
Advance with respect to a Mortgage Loan unless such T&I Advance is
reasonably determined by the Servicer to be eventually non-recoverable
from any Insurance Proceeds, Liquidation Proceeds, or the Borrower.
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17.3.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Owner of a related
Mortgage Loan through foreclosure or a deed-in-lieu of foreclosure is
held by such Owner, the Servicer must continue to make required T&I
Advances in respect of each such Mortgage Loan or REO to the respective
Custodial T&I Account, consistent with applicable law including,
without limitation, the bankruptcy laws. These T&I Advances must be
made until each Mortgage Loan subject to such proceedings is liquidated
or in the case of REO transferred to the Owner of Mortgage Loan through
foreclosure or a deed-in-lieu of foreclosure is liquidated. Advances
with respect to REO will be made as if the related Mortgage Loan and
Mortgage Note remained in effect.
Section 17.4 NON-RECOVERABLE ADVANCES
17.4.1 ORDINARY RECOVERY. If at any time an advance made by a Servicer
hereunder is determined by the Servicer to be a Non-Recoverable
Advance, then the Servicer shall be entitled to be reimbursed for such
advance by withdrawing from the Custodial P&I Account an amount equal
to the Non-Recoverable Advance.
17.4.2 FINAL RECOVERY. If the amounts on deposit in the related
Custodial P&I Account are insufficient to reimburse the Servicer, then
prior to any distribution to the Owner of the related Mortgage Loan,
the Servicer shall be entitled to reimbursement from the payments made
and the proceeds received with respect to such Mortgage Loan.
Section 17.5 FAILURE TO ADVANCE
17.5.1 GROUNDS FOR TERMINATION. The failure of the Servicer to advance
any funds required to be advanced by the Servicer under this Article 17
is cause for termination of Servicer under this Agreement.
17.5.2 SERVICER REIMBURSEMENT. To the extent the Master Servicer or the
respective Trustee, if any, must advance their respective funds due to
the failure of the Servicer to advance as provided for in this
Agreement or to remit funds to the Master Servicer Custodial Account as
required by Section 18.3.1, the Servicer shall reimburse the advancing
party for such amounts, on demand, together with all costs and expenses
incurred by the advancing party, including, but not limited to,
interest on the funds advanced. Such interest will be calculated at the
lesser of the "prime rate" publicly announced in effect from time to
time at the Reference Bank plus one percentage point and the maximum
interest rate permitted by law.
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Section 17.6 REHABILITATION ADVANCE.
17.6.1 REHABILITATION ADVANCE REQUIREMENT. The Servicer must advance
from its own funds such amounts as are necessary to restore any damaged
REO not covered by Hazard Insurance or Special Hazard Insurance in
accordance with Section 14.5.
17.6.2 REHABILITATION ADVANCE LIMITATION. The Servicer is required to
make advances pursuant to Sections 17.6.1 and 14.5 with respect to a
Mortgage Loan unless the Servicer reasonably determines (i) that such
rehabilitation will not increase the proceeds to the Owner thereof or
the beneficial owners thereof on liquidation of such Mortgage Loan
after reimbursement of the Servicer for its expenses or (ii) that such
expenses will be eventually non-recoverable from any Insurance
Proceeds, Liquidation Proceeds or the Borrower.
17.6.3 REHABILITATION ADVANCE RECOVERY. The Servicer's advances for
reasonable rehabilitation expenses will be recoverable from Insurance
Proceeds, Liquidation Proceeds, or, if the Representing Party is
obligated to purchase a Mortgage Loan from its Owner, from the price
paid for such Mortgage Loan.
Article 18
REPORTING REQUIREMENTS
Section 18.1 MONTHLY ACCOUNTING RECORDS
18.1.1 MONTHLY ACCOUNTING REPORT REQUIREMENT. The period for monthly
accounting reports shall be from the first Business Day of the month
through the last Business Day of the month. All monthly reports
prepared by the Servicer must be complete and must be received by the
Master Servicer by the eighth calendar day of the following month. All
monthly accounting reports must show information and must be submitted
in a sequence according to Servicer Loan Number order.
18.1.2 MONTHLY ACCOUNTING REPORT ELEMENTS. Monthly Accounting Reports
shall include the following, all in a form satisfactory to the Master
Servicer:
(a) Monthly Summary Report and Certification;
(b) Monthly Remittance Report;
(c) Mortgage Loans Added Report;
(d) Mortgage Loans Deleted Report;
(e) Mortgage Loan Trial Balance Report;
(f) Mortgage Loan Transactions Journal;
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(g) Prepayment Detail Report;
(h) Delinquency Detail Report;
(i) Action Code Change Report;
(j) Monthly ARM Loan Change Report, if applicable;
(k) Monthly Buydown Detail Report, if applicable;
(l) Calculation of Realized Loss, if applicable;
(m) Foreclosure Remittance Summary, if applicable;
(n) Non-Advancing Mortgage Loan Report, if applicable;
and
(o) ARM Loan Conversion Notification, if applicable; and
(p) any other report that impacts Monthly Remittance.
The Servicer must also complete and forward to the Master Servicer any
other form or report as provided for in this Agreement, or as
reasonably requested by the Master Servicer.
18.1.3 AUTOMATED REPORTS. Servicers may submit to the Master Servicer
for review the Servicer's automated reports which include all of the
information required by the provisions of Section 18.1.2 hereof. Upon
approval by the Master Servicer, the Servicer may submit approved
automated reports to the Master Servicer instead of the Forms listed in
Section 18.1.2 hereof.
18.1.4 ELECTRONIC REPORTING. With the prior written consent of the
Master Servicer, all reports to be made by the Servicer to the Master
Servicer may be transmitted electronically in lieu of written
reporting. If the Servicer services more than one hundred Mortgage
Loans for the Master Servicer, it shall arrange for electronic
transmission of the required reports. Any expenses occasioned by the
electronic transmission of reports shall be borne by the Servicer.
18.1.5 MACHINE READABLE RECORDS. At the request of the Master Servicer,
the Servicer will provide to the Master Servicer, in a mutually agreed
machine readable format, the current names and mailing addresses of
each Borrower. The Master Servicer will utilize such information solely
for audit purposes, or in the event the Servicer is terminated
hereunder.
18.1.6 LATE REPORTING FEE. Each late or incomplete monthly accounting
report will be subject to a late fee, the amount of the late fee
initially shall equal $100 for each month which a late or incomplete
monthly accounting report remains incomplete or unfired. The recurring
failure of the Servicer to timely file complete monthly
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accounting reports constitutes grounds for termination of the Servicer
for cause hereunder.
Section 18.2 ACCOUNT RECONCILIATIONS
18.2.1 RECONCILIATION PREPARATION. The Servicer shall prepare
reconciliations for each Custodial P&I Account, Custodial T&I Account
and Custodial Buydown Account on a monthly basis and shall forward the
same to the Master Servicer upon request.
18.2.2 ACCOUNT RECORDS. Upon request of the Master Servicer, the
Servicer shall also cause the depository for each of the accounts
described in Section 18.2.1 hereof to forward directly to the Master
Servicer, copies of all monthly account statements for the preceding
monthly reporting period.
Section 18.3 MONTHLY REMITTANCE REQUIREMENTS
18.3.1 REMITTANCE OF FUNDS. On each Remittance Date with respect to
each distinct Owner of Mortgage Loans, the Servicer shall transfer, to
the extent not previously transferred as required pursuant to Section
6.1.3(e), from the funds in (or required hereunder to be in) the
respective Custodial P&I Account to the related Master Servicer
Custodial Account, the following (other than any Amounts Held for
Future Distribution in respect of such Remittance Date not exceeding
the Threshold Amount):
(i) all payments on account of principal, including prepayments of
principal "whether full or partial), and interest, and all net
REO Disposition proceeds;
(ii) all net Liquidation Proceeds and Insurance Proceeds,
other than any portion of Insurance Proceeds to be
applied to the restoration or repair of the related
Mortgaged Property or released to the Borrower in
accordance with the requirements of law or Prudent
Servicing Practices;
(iii) all P&I Advances made by the Servicer;
(iv) the Purchase Price paid for any Mortgage Loans or
property acquired in respect thereof repurchased by
the Servicer; and
(v) all other amounts required to be deposited in the
Custodial P&I Account or the Master Servicer
Custodial Account pursuant to this Agreement.
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Notwithstanding Section 18.3.1, the Servicer shall be entitled to
withhold and to pay to itself the applicable Servicing Fee (as adjusted
pursuant to Section 7.6.1) from any payment on account of interest or
other recovery (including Net REO Proceeds) as received and prior to
deposit of such payments in the Master Servicer Custodial Account;
PROVIDED FURTHER that with respect to any payment of interest received
by the Servicer in respect of a Mortgage Loan (whether paid by the
Mortgagor or received as Liquidation Proceeds, Insurance Proceeds or
otherwise) which is less than the full amount of interest then due with
respect to such Mortgage Loan, only that portion of such payment that
bears the same relationship to the total amount of such payment of
interest as the per annum rate used to calculate the Servicing Fee, as
set forth in Section 4.8, bears to the Mortgage Interest Rate borne by
such Mortgage Loan shall be allocated to the Servicing Fee with respect
to such Mortgage Loan.
18.3.2 SERVICER COMPENSATION. The Servicer shall withdraw its Servicing
Fee for each Mortgage Loan net of any Month End Interest pursuant to
Section 7.6.1 from the related Custodial P&I Account prior to the
remittance of such amounts to the Master Servicer Custodial Account
with all other payments received with respect to the Mortgage Loans.
Article 19
TRANSFERS AND TERMINATION OF SERVICING
Section 19.1 TRANSFER OF SERVICING
19.1.1 TRANSFER PROHIBITION. The Servicer may not sell or transfer its
portfolio serviced hereunder without the prior written consent of the
Master Servicer. Further, the Servicer may not subcontract any of its
servicing duties, except as set forth in Section 11.2.1.
19.1.2 TRANSFER REQUEST. Any request for sale or transfer of servicing
will be reviewed on an individual basis. For a request to be
considered, however, the transferor must submit a written request to
the Master Servicer. The transferee must agree to enter into a
servicing agreement with the Master Servicer substantially in the form
of this Agreement and must be approved by the Master Servicer, and, if
applicable, any Rating Agency with respect to Mortgage Loans which are
owned by a Trust which has issued mortgage-backed securities,
securitized by such Mortgage Loans, which have been rated at the
request of such Trust by such Rating Agency. The Master Servicer must
receive this documentation at least 45 days prior to the requested date
of transfer. The transferor will be notified in writing of the Master
Servicer's approval or denial. Such transfer will be denied if the
transferee does not meet the approval requirements of the Master
Servicer, or any such Rating Agency.
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19.1.3 SERVICER LIABILITY. The transferor of servicing shall be liable
to the Master Servicer, and the Owner of the related Mortgage Loans for
any servicing obligation violations that occur before, during, and up
to and including the day the portfolio is actually transferred. The
transferee of servicing shall be liable for any breach of servicing
obligations that occurs after the transfer of the servicing portfolio.
19.1.4 MASTER SERVICER'S DETERMINATION. If the transferor and
transferee disagree about liability for violations of representations
and warranties and servicing requirements hereunder, the Master
Servicer has the right, in its sole discretion, to determine which
party or parties are liable for such violations.
Section 19.2 TERMINATION OF SERVICING
19.2.1 GROUNDS FOR TERMINATION. The Owners of the related Mortgage
Loans, will have the right to terminate for cause the servicing
privileges of the Servicer under this Agreement, either with respect to
certain Mortgage Loans serviced hereunder or with respect to all
Mortgage Loans serviced hereunder, and the Master Servicer will have
the right to revoke the Servicer's approved status in the event of any
of the following occur:
(a) the Servicer has breached any obligation set forth or
incorporated by reference in this Agreement or any
Sales Agreement, including, without limitation, the
Servicer's failure to maintain the requisite Fidelity
Bond and Errors and Omissions Policy in the amounts
specified herein;
(b) the Servicer has made one or more false or misleading
representations or warranties in this Agreement or
any Sales Agreement, or in any documents relating to
the foregoing agreements;
(c) the appointment of a trustee or receiver for the
Servicer or any of its property;
(d) the execution by the Servicer of an assignment for
the benefit of its creditors;
(e) any change in the financial or organizational status
of the Servicer that, in the opinion of the Master
Servicer, could materially adversely affect the Owner
of the related Mortgage Loans, the Master Servicer or
the Servicer's ability to service the Mortgage Loans;
(f) the Servicer's placement on probation or suspension
by a federal or state government agency, including,
without limitation, FHLMC, FNMA or GNMA;
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(g) reasonable determination by the Master Servicer that
the Servicer's obligations hereunder are
disproportionate to its capital and/or assets;
(h) the Servicer's assignment or attempted assignment of
any of its interests, rights, or obligations set
forth herein without the Master Servicer's prior
written consent;
(i) the Servicer has been terminated for cause pursuant
to the terms of another servicing agreement with the
Principal; or
(j) the Servicer has failed to properly administer
certain REO and has been removed from the servicing
of certain REO pursuant to Section 14.1.6 hereof and
that the frequency and severity of such
maladministration is such, in the reasonable
determination of the Master Servicer, that the
termination of the Servicer is warranted.
19.2.2 OWNER NOTIFICATION. The Master Servicer shall notify the Owners
of the related Mortgage Loans of the occurrence of any of the events
set forth in Section 19.2.1, together with the Master Servicer's
recommended course of action regarding the termination of the Servicer.
19.2.3 SERVICER TERMINATION. Following the occurrence of any of the
events set forth in Section 19.2.1, each Owner of the related Mortgage
Loans may elect, at its sole discretion, to terminate the Servicer
under this Agreement with respect to the Mortgage Loans owned by such
Owner as shown on Schedule II hereof. Each such Owner shall provide a
written termination notice to the Servicer.
19.2.4 CONSEQUENCES OF TERMINATION. If this Agreement with the Servicer
is terminated pursuant to Section 19.2.3 hereof, the Servicer will
deliver all Servicer Mortgage Loan Files, in their entirety, for those
Mortgage Loans serviced under this Agreement, as well as any other
documents or reports held by the Servicer concerning such Mortgage
Loans, to the transferee designated by the Master Servicer, which may
be the Master Servicer, and will assist in the efficient and timely
transfer of the servicing to such transferee. The Servicer shall not be
entitled to compensation for servicing following its termination.
19.2.5 EFFECT OF TERMINATION. In the event of the termination of this
Agreement, the Servicer is not released from its obligations under this
Agreement. If its servicing is terminated for cause, the Servicer must
pay the expenses of the respective Trustee and the Master Servicer
incurred in connection with transfer of the servicing and any damages,
including, without limitation, consequential damages or losses, of the
Owner of the related Mortgage Loans, such Trustee or the Master
Servicer resulting from such termination.
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19.2.6 CUSTODIAL ACCOUNT THRESHOLD REDUCTION. In the event that any of
the events specified in clauses (a) through (j) of Section 19.2.1 or in
clauses (g), (j), or (k) of Section 4.2.5 occur, the Master Servicer,
in its sole discretion, may notify the Servicer in writing that the
applicable Threshold Amount has been reduced to such amount not less
than $1,000 as shall be specified in such notice.
ARTICLE 20
MISCELLANEOUS PROVISIONS
Section 20.1 AMENDMENTS
20.1.1 UNILATERAL AUTHORITY. The Servicer acknowledges that the Master
Servicer, acting on behalf of the Principal and its successors and
assigns, may, upon written notice, supplement or amend the provisions
of this Agreement from time to time, without the need to obtain the
Servicer's consent to (a) correct ambiguous or erroneous provisions in
this Agreement; (b) make changes necessary or helpful to maintain
compliance with applicable law; c) conform to evolving industry
standards regarding the servicing of residential mortgage loans
generally; or d) make such other modifications or amendments thereto,
which the Master Servicer deems advisable, provided that no such
modification or amendment shall have a material adverse impact so as to
materially increase the obligations of, or to materially decrease the
benefits to, the Servicer.
20.1.2 CONSENSUAL AMENDMENT. Except as provided for in Section 20.1.1
hereof, the Master Servicer, acting on behalf of the Principal and its
successors and assigns, must obtain the written consent of the Servicer
to any amendment hereto that would either increase materially the
obligations of the Servicer or decrease materially the benefits to the
Servicer.
20.1.3 OWNER NOTIFICATION. The Owners of the related Mortgage Loans
shall be provided with notice of the substance of any amendments or
modifications made to this Servicing Agreement pursuant to the
provisions of this Section 20.1.
20.1.4 OWNER DISAPPROVAL. With regard to any proposed modification or
amendment to this Agreement which shall have a material adverse impact
upon the beneficial rights enjoyed hereunder by an Owner of the related
Mortgage Loans, each such Owner shall receive written notice of the
substance of any proposed amendments or modifications at least ten
business days prior to the proposed date of enactment of such amendment
or modification which shall also state therein the proposed date of
enactment. If a majority vote of the Owners so materially adversely
affected, with the vote of each such Owner weighted in proportion to
the aggregate of the Unpaid Principal Balance of Mortgage Loans
serviced hereunder for such Owner, notify the
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Master Servicer in writing, prior to the proposed date of enactment, of
their opposition to the adoption of such an amendment or modifications,
the Master Servicer shall not proceed with such modification or
amendment.
Section 20.2 GENERAL CONSTRUCTION
20.2.1 BINDING NATURE. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and permitted assigns.
20.2.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous
servicing agreements, understandings, inducements and conditions,
expressed or implied, oral or written, of any nature whatsoever with
respect to the subject matter thereof. The express terms hereof control
and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof.
20.2.3 GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed
by, construed, interpreted and enforced in accordance with the laws of
the State of New York, notwithstanding any New York or other
choice-of-law rules to the contrary.
20.2.4 INDULGENCES NOT 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.
20.2.5 TITLES NOT TO AFFECT INTERPRETATION. The titles of the articles
and sections contained this Agreement are for convenience only, and
they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.
20.2.6 PROVISIONS SEVERABLE. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.
20.2.7 SERVICER AN INDEPENDENT CONTRACTOR. All services, duties and
responsibilities of the Servicer under this Agreement shall be
performed and carried out by the Servicer as an independent contractor,
and none of the provisions of this
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Agreement shall be deemed to make, authorize or appoint the Servicer as
agent or representative of any Owner of any Mortgage Loans, of the
Principal, or of the Master Servicer.
20.2.8 THIRD PARTY BENEFICIARY. The parties agree that the Master
Servicer and any Owner are intended third party beneficiaries of the
representations, warranties, covenants and agreements of the Servicer
set forth in this Agreement. The Master Servicer shall have full
authorization to enforce directly against the Servicer any of the
obligations of the Servicer provided for herein.
20.2.9 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts shall
constitute one and the same instrument.
106
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date set forth above.
COLUMBIA EQUITIES, LTD.
as Servicer
By:______________________________
Name: Robert Pardes
Title: President
THE PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Principal
By:_______________________________
Name: Albert V. Will
Title: Senior Vice President
107
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
Cut-Off Date
Cut-Off Date Regarding
Unpaid initial coverage
Master Servicer Principal under this Servicing Fee
Loan Number Balance Agreement Percentage
<S> <C> <C> <C>
</TABLE>
108
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
LIST OF OWNERS OF THE MORTGAGE LOANS
Cut-Off
Date Relating
Master Servicers Owner's to Owner's
Loan Number Owner Address Acquisition
<S> <C> <C> <C>
</TABLE>
109
<PAGE>
EXHIBIT I-4
SERVICING AGREEMENT RELATING TO MORTGAGE LOAN SUB-POOL 1995-W24C
<PAGE>
SERVICING AGREEMENT
This Servicing Agreement (the "Servicing Agreement") is dated as of FEBRUARY 8,
1995 among THE PRUDENTIAL HOME MORTGAGE COMPANY, INC. ("Principal"),
INTERNATIONAL SAVINGS AND LOAN ASSOCIATION, LIMITED, ("Servicer") and
SECURITIZED ASSET SERVICES CORPORATION ("Master Servicer").
Principal intends to buy, or has bought, residential, conventional whole
mortgage loans on a servicing retained basis. Principal intends that Servicer
service such mortgage loans, subject to the direction of Master Servicer,
pursuant to the terms of this Servicing Agreement and Master Servicer's
Servicing Guide (as it may be amended from time to time, the "Servicer Guide").
All capitalized terms used in this Servicing Agreement and not otherwise defined
shall have the meanings set forth in the Servicer Guide.
In consideration of the above premises, and of the mutual agreements set forth
below, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Principal and Servicer hereby agree as
follows:
1. SERVICER GUIDE. Principal has provided to Servicer, and Servicer has
received and reviewed, the Servicer Guide, and the Servicer Guide is
incorporated by reference in its entirety into this Servicing
Agreement. Principal and Servicer agree to comply with and be bound by
all of the terms and provisions of the Servicer Guide, including, but
not limited to, the Eligibility Standards, the requirement to service
Mortgage Loans in accordance with the Applicable Standards, and the
representations, warranties, and covenants.
2. MORTGAGE LOAN SCHEDULE. The Mortgage Loans that are the subject of this
Servicing Agreement are specified in the attached Mortgage Loan
Schedule. The Mortgage Loan Schedule includes the Servicing Fee
Percentage applicable to each Mortgage Loan. From time to time,
Servicer may agree that additional Mortgage Loans are to be serviced
under this Servicing Agreement, and pursuant to the terms of the
Servicer Guide, certain Mortgage Loans referred to in the Mortgage Loan
Schedule may be deleted or other Mortgage Loans may be added. Upon the
addition or deletion of Mortgage Loans, Principal and Servicer
authorize Master Servicer to amend the Mortgage Loan Schedule, and
Master Servicer shall provide a copy of such amended Mortgage Loan
Schedule to Servicer.
3. OWNERSHIP SCHEDULE. The attached List of Owners of the Mortgage Loans
specifies the current Owners. The Servicer Guide provides that
Principal may sell its interest in any or all Mortgage Loans at any
time, without Servicer's consent. Principal shall amend the list to
reflect any change of Owners, and shall provide a copy of such amended
list to Servicer and Master Servicer. In any event, the Servicer will
be required to report to one Master Servicer.
<PAGE>
4. ADJUSTED TANGIBLE NET WORTH. Servicer must maintain an Adjustable
Tangible Net Worth of at least in an amount acceptable to the Master
Servicer.
5. ASSIGNMENT AND REPLACEMENT. Servicer acknowledges and agrees that
Principal, and its successors and assigns, may at any time, without the
consent of Servicer, assign and transfer all of Principal's and/or
Master Servicer's right, title and interest under this Servicing
Agreement to any other Person. The Servicer Guide also provides that,
in certain circumstances, an Owner may terminate Servicer's servicing
privileges hereunder.
6. TERM OF SERVICING AGREEMENT. Except as otherwise provided herein and in
the Servicer Guide, the duties, responsibilities and obligations to be
performed and carried out by Servicer under this Servicing Agreement,
shall commence upon the execution of this Servicing Agreement and shall
continue until: (a) each Mortgage Loan is Liquidated or otherwise paid
in full; (b) all payments related thereto are remitted in accordance
with this Servicing Agreement; and (c) all obligations hereunder are
discharged.
7. NOTICES. All notices must be sent and will be deemed delivered as set
forth in the Servicer Guide. Notices to Servicer or Principal must be
sent to the following respective addresses or telecopier numbers:
To Servicer:
International Savings and Loan Association, Limited
1111 Bishop Street
Honolulu, Hawaii 96813
Attention: Loan Servicing Manager
To Principal:
The Prudential Home Mortgage Company, Inc.
5325 Spectrum Drive
Frederick, MD 21701
Attention: Sr. Vice President
8. COUNTERPARTS. This Servicing Agreement may be executed in
counterparts, each of which shall be deemed an original, and such
counterparts shall constitute one and the same instrument.
9. AMENDMENTS TO SERVICER GUIDE. The following provisions apply instead
of the provisions specified in the Servicer Guide:
A. In lieu of the Servicer Information Statement, Servicer must
submit to Master Servicer a Lender Application (in the form
customarily used by Principal), in form and substance
acceptable to Master Servicer. For purposes of the Servicer
2
<PAGE>
Guide, this Lender Application shall be deemed to be the
Servicer Information Statement.
B. Section 215.1 is amended by deleting the last sentence.
C. Sections 224 and 225 are amended to read as follows:
Unless expressly prohibited by law, the Servicer must provide
notification in writing to the Master Servicer in accordance
with the disclosure requirements for a "small business issuer"
filing under the Securities Act of 1933 and the Securities
Exchange Act of 1934.
D. The first sentence of Section 333 is amended to read as
follows:
Master Servicer may, in its sole discretion, direct Servicer
to sell to a party designated by Master Servicer the servicing
on any and all Mortgage Loans serviced hereunder if the
aggregate principal amount of Mortgage Loans serviced
hereunder by servicer is less than ten percent (10%) of the
initial aggregate principal amount of Mortgage Loans listed on
the Mortgage Loan Schedule to the Servicing Agreement.
E. The first sentence of Section 518 - "Clearing Account" has
been amended by deleting (ii), a single clearing account must
not be utilized as a collection and disbursement clearing
account.
F. The third sentence of Section 212 - "Regulatory Approvals" is
amended to read as follows: "In connection with the
application to become a Servicer, Servicer must disclose, if
permitted under applicable federal laws to Master Servicer the
results of any audit by FHA, HUD, FDIC, FNMA, FHLMC, GNMA or
any Primary Mortgage Insurer, if such audit included material
allegations of failure to comply with applicable loan
origination, servicing or claims procedures, or resulted in a
request for repurchase of mortgage loans or indemnification in
connection with mortgage loans."
G. The fifth sentence of Section 213 - "Net Worth and Portfolio
Requirement" is amended to read as follows. "Servicer must
service at least $800 million in aggregate principal amount of
loans."
H. The last sentence of Section 222 - "Financial Reports" is
amended to read as follows. "During the term of the Servicing
Agreement, in the event the Servicer changes or makes a
substitution of its certified public accountants, the Servicer
will be required to notify the Master Servicer within 90 days
of any change or substitution."
3
<PAGE>
I. Section 815 - "Covenants of the Servicer" is amended by
changing (i) to read as follows: "comply with all reasonable
directions, instructions and requests, of the Master Servicer
given or made by the Master Servicer pursuant to this
Servicing Guide and the Servicing Agreement and"
J. The last sentence of Section 832 - "Consequences of
Termination" is amended to read as follows: "In such case, the
Servicer must pay all reasonable expenses of the Trustee,
Master Servicer and Owner incurred in connection with transfer
of the servicing and any damages, including, without
limitation, consequential damages or losses, of the owner of
the related Mortgage Loans, such Trustee or Master Servicer
resulting from such termination."
K. Section 924 - "Knowledge Standard" is amended by deleting the
second sentence.
L. The first sentence of the last paragraph of Section 613 -
"Evidence of Insurance" is amended by deleting "unit owner and
unit owner mortgagee" from (i).
M. Section 634 - "Risk Exposure" is amended to read as follows.
"If any Mortgaged Property is exposed to hazards not fully
covered by Hazard Insurance or Flood Insurance, the Servicer
will implement a force-placed policy ensuring adequate
coverage is in place."
N. Section 640 - "Title Insurance Requirements" is amended by
changing the third sentence of this Section to read as
follows. "Servicer shall cause a copy of such Title Insurance
policy to be sent directly to the Custodian"
O. Section 652 - "Reconstruction Coverage" is amended to read as
follows. "If there is a construction code provision that would
require changes to the undamaged portions of the buildings in
the PUD or Condominium Project in which a Mortgaged Property
is located, even when only part of a building is destroyed by
an insured hazard, Servicer shall use its best efforts to
ensure that each Insurance Policy contains the necessary
construction code endorsement to cover this exposure."
IN WITNESS WHEREOF, the parties hereto have caused this Servicing Agreement to
be executed by their duly authorized representatives as of the date set forth
above.
INTERNATIONAL SAVINGS AND LOAN ASSOCIATION, LIMITED
By: /S/ JASEN TAKEI
---------------------
Name: JASEN TAKEI
---------------------
Title: SENIOR VICE PRESIDENT
---------------------
4
<PAGE>
By: /S/ RICHARD M. FUKUDA
--------------------------------
Name: RICHARD M. FUKUDA
--------------------------------
Title: VICE PRESIDENT
--------------------------------
THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
By: /S/ BRIAN BARTLETT
--------------------------------
Name: BRIAN BARTLETT
--------------------------------
Title: VICE PRESIDENT-INVESTOR SERVICES
--------------------------------
SECURITIZED ASSET SERVICES CORPORATION
By: /S/ ROBERT J. PERRE
--------------------------------
Name: ROBERT J. PERRE
--------------------------------
Title: VICE PRESIDENT
--------------------------------
5
<PAGE>
MORTGAGE LOAN SCHEDULE
<TABLE>
<CAPTION>
=============================================================================================================================
<S> <C> <C> <C>
Cut-Off Date
Cut-Off Date Regarding
Unpaid initial coverage
Master Servicer Principal under the Servicing Fee
LOAN NUMBER BALANCE SERVICING AGREEMENT PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
=============================================================================================================================
</TABLE>
6
<PAGE>
LIST OF OWNERS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
============================================================================================================================
<S> <C> <C> <C>
Cut-Off
Date Relating
Master Servicer Owner's to Owner's
LOAN NUMBER OWNER ADDRESS ACQUISITION
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>
7
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
CHAPTER 1
INTRODUCTION.................................................................................................... 1
110 SECURITIZED ASSET SERVICES CORPORATION SERVICER GUIDE......................................... 1
120 THE SERVICING AGREEMENT....................................................................... 1
130 THE MASTER SERVICER........................................................................... 1
140 OWNERSHIP OF MORTGAGE LOANS................................................................... 2
150 ORGANIZATION OF THE SERVICER GUIDE............................................................ 2
160 UPDATES AND AMENDMENTS........................................................................ 2
170 COMMUNICATION BETWEEN SERVICER AND MASTER
SERVICER...................................................................................... 3
CHAPTER 2
SERVICER ELIGIBILITY............................................................................................ 4
210 SERVICER ELIGIBILITY STANDARDS................................................................ 4
211 Qualification and Licenses........................................................... 4
212 Regulatory Approvals................................................................. 4
213 Net Worth and Portfolio Requirements................................................. 5
214 Servicing Experience................................................................. 5
215 Fidelity Bond and Errors and Omissions Insurance
215.1 Requirement to Maintain; Acceptable Insurer.................................... 6
215.2 Scope of Coverage.............................................................. 6
215.3 Amount of Coverage............................................................. 6
215.4 Servicer's Liability........................................................... 7
220 PROVISION OF REQUIRED INFORMATION TO MASTER
SERVICER...................................................................................... 7
221 Servicer Information Statement, Financial Reports......................................... 7
222 Financial Reports.................................................................... 7
223 Annual Financial Reports and Certifications.......................................... 7
224 Corporate Changes.................................................................... 8
225 Other Material Changes............................................................... 8
226 Other Information.................................................................... 9
230 EXAMINATIONS, BOOKS AND RECORDS............................................................... 9
240 DISCLOSURE OF SERVICER INFORMATION............................................................ 9
CHAPTER 3
GENERAL SERVICING PRACTICES..................................................................................... 11
310 SERVICER TO SERVICE IN ACCORDANCE WITH APPLICABLE
STANDARDS..................................................................................... 11
</TABLE>
i
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<TABLE>
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PAGE
320 SERVICER COMPENSATION......................................................................... 12
321 Servicing Fee Amount................................................................. 12
322 Servicing Fee Source................................................................. 12
330 TRANSFERS OF SERVICING
331 Restrictions on Transfer............................................................. 12
332 Liability Upon Transfer.............................................................. 13
333 Sale of Servicing of Inactive Servicers.............................................. 13
340 DELEGATION OF DUTIES.......................................................................... 13
341 Permissible Delegations.............................................................. 13
342 Delegee Qualifications............................................................... 14
343 Responsibility for Costs and Liability............................................... 14
350 ARM LOAN SERVICING............................................................................ 14
351 Notice of Periodic Adjustment........................................................ 15
352 ARM Loan Conversion.................................................................. 15
353 Servicer's Liability................................................................. 15
360 ASSUMPTIONS................................................................................... 16
361 Verifications........................................................................ 16
362 Approval and Notifications........................................................... 16
370 PARTIAL RELEASES AND EASEMENTS, EMINENT DOMAIN................................................ 17
371 Required Approvals................................................................... 17
372 Prerequisites........................................................................ 17
373 Eminent Domain....................................................................... 17
380 GENERAL SERVICING CONSIDERATIONS.............................................................. 18
381 Due-on-sale Clause Enforcement....................................................... 18
382 Tax Returns and Other Reports........................................................ 18
383 Pool and Primary Mortgage Insurance Compliance....................................... 18
384 Abandonment.......................................................................... 18
385 Notification to Master Servicer...................................................... 19
386 Late Charges......................................................................... 19
387 Borrower Bankruptcy.................................................................. 19
387.1 Costs and Responsibility.................................................... 19
387.2 Challenge Bankruptcy Reductions............................................. 20
387.3 Bankruptcy Adjustments...................................................... 20
387.4 Notice of Bankruptcy........................................................ 20
390 ESCROWS........................................................................................20
391 Escrow Requirement................................................................... 20
392 Escrow Waiver........................................................................ 20
393 Payment of Escrow Items.............................................................. 21
394 Mortgage Loans without Escrow........................................................ 21
395 Escrow Funds Analysis................................................................ 21
</TABLE>
ii
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<TABLE>
<S> <C>
PAGE
CHAPTER 4
MORTGAGE LOAN FILES............................................................................................. 22
410 OWNER MORTGAGE LOAN FILES
411 Owner Mortgage Loan File Requirements................................................ 22
412 Custodians........................................................................... 23
413 Release of Documents from Owner Mortgage Loan File................................... 23
414 Execution by Owner................................................................... 24
415 Custodial Fees....................................................................... 24
416 Representing Party Officers' Certificate............................................. 24
417 Financing Arrangements............................................................... 24
420 SERVICER MORTGAGE LOAN FILES.................................................................. 24
421 Servicer Mortgage Loan File Requirements............................................. 24
422 Servicer Mortgage Loan File Access................................................... 25
423 Alternate Media...................................................................... 26
430 ENDORSEMENTS AND ASSIGNMENTS...................................................................26
431 Form of Endorsements................................................................. 26
432 Form of Assignment................................................................... 27
433 Recordation of Assignments........................................................... 27
CHAPTER 5
CUSTODIAL ACCOUNTS, ELIGIBLE INVESTMENTS AND ACCOUNTS........................................................... 29
510 CUSTODIAL ACCOUNT ESTABLISHMENT AND MAINTENANCE................................................29
511 Custodial Account Establishment...................................................... 29
512 Custodial Account Separateness....................................................... 29
513 Eligible Accounts.................................................................... 29
514 Custodial Account Maintenance........................................................ 30
515 Deposits and Withdrawals to and from Custodial
Accounts............................................................................. 30
516 Threshold Amount..................................................................... 30
517 Interest-Bearing Accounts............................................................ 31
518 Clearing Account..................................................................... 31
519 Master Servicer Custodial Account.................................................... 31
520 CUSTODIAL P&I ACCOUNT......................................................................... 32
521 Deposits............................................................................. 32
521.1 Mandatory Deposits.......................................................... 32
521.2 Optional Deposits........................................................... 32
522 Permissible Withdrawals.............................................................. 32
530 CUSTODIAL T&I ACCOUNT......................................................................... 33
531 Deposits............................................................................. 33
531.1 Mandatory Deposits.......................................................... 33
531.2 Permissible Withdrawals..................................................... 33
540 CUSTODIAL BUYDOWN ACCOUNT..................................................................... 33
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
PAGE
550 MONTHLY REMITTANCE REQUIREMENTS............................................................... 34
551 Remittance of Funds.................................................................. 34
552 Payment of Servicing Fee............................................................. 34
560 ADVANCES
561 Principal and Interest Advances...................................................... 35
562 Foreclosure Advances................................................................. 35
563 Tax & Insurance Advances............................................................. 36
564 Rehabilitation Advance............................................................... 36
565 Non-Recoverable Advances............................................................. 36
566 Failure to Advance................................................................... 37
570 ELIGIBLE INVESTMENTS.......................................................................... 37
571 Definition of Eligible Investments................................................... 37
572 Limitations on Eligible Investments.................................................. 39
573 Income, Gains and Losses............................................................. 39
574 Escrow Account Investments........................................................... 39
580 MORTGAGE LOAN ACCOUNTING...................................................................... 40
581 Mortgage Loan Account Records........................................................ 40
582 Mortgage Loan Accounting Practices................................................... 40
583 Principal and Interest Computation; Amortization
583.1 Principal and Interest...................................................... 41
583.2 Amortization................................................................ 41
583.3 Interest Calculations....................................................... 41
584 Application Procedure................................................................ 42
585 Curtailments......................................................................... 42
586 Liquidations; Month-End Interest..................................................... 42
587 Realized Losses...................................................................... 43
590 REPORTING REQUIREMENTS........................................................................ 43
591 Monthly Accounting Reports........................................................... 43
592 Electronic Transmission and Automated Reports........................................ 44
593 Machine Readable Records............................................................. 44
594 Late Reporting Fee................................................................... 45
CHAPTER 6
INSURANCE....................................................................................................... 46
610 GENERAL INSURANCE REQUIREMENTS................................................................ 46
611 Servicer's Obligation to Maintain Insurance.......................................... 46
612 Insurance Notices.................................................................... 46
613 Evidence of Insurance................................................................ 47
614 Eligible Insurers.................................................................... 47
620 PRIMARY MORTGAGE INSURANCE.....................................................................48
621 Primary Mortgage Insurance Requirement............................................... 48
622 Primary Mortgage Insurance Coverage.................................................. 48
</TABLE>
iv
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<TABLE>
<S> <C>
PAGE
623 Primary Mortgage Insurance Cancellation.............................................. 48
624 Primary Mortgage Insurer Downgrading................................................. 48
625 Primary Mortgage Insurance Claims.................................................... 49
630 HAZARD AND FLOOD INSURANCE REQUIREMENTS....................................................... 49
631 Hazard Insurance Coverage............................................................ 49
632 Flood Insurance Coverage............................................................. 49
633 Hazard Insurance Mortgagee Provisions................................................ 50
634 Risk Exposure........................................................................ 50
635 Servicers Duties Regarding Loss or Damage............................................ 50
636 Loss Settlement Approval............................................................. 50
637 Loss Settlements..................................................................... 51
638 Disbursements........................................................................ 51
639 Insurance Proceeds Not Used For Repair............................................... 52
640 TITLE INSURANCE REQUIREMENTS.................................................................. 52
641 Title Insurance Coverage............................................................. 52
642 Title Insurance Claims............................................................... 52
650 CONDOMINIUM AND PUD INSURANCE................................................................. 53
651 General Requirements................................................................. 53
652 Reconstruction Coverage.............................................................. 53
653 Common Area Multiple Peril Insurance................................................. 53
654 Blanket Hazard Insurance............................................................. 54
655 Common Area CGL Insurance............................................................ 54
657 Blanket Flood Insurance.............................................................. 55
CHAPTER 7
DELINQUENCY, FORECLOSURES AND REOs.............................................................................. 56
710 DELINQUENCY MANAGEMENT........................................................................ 56
711 Servicing Objectives................................................................. 56
712 Delinquency Servicing Procedures..................................................... 56
713 Collection Expenses.................................................................. 57
714 Obligation to Advance During Delinquency............................................. 57
715 Primary Mortgage Insurance Compliance................................................ 58
716 Pool Insurance Compliance............................................................ 58
720 RELIEF........................................................................................ 58
721 Servicing Objectives................................................................. 58
722 Forbearance Plan..................................................................... 58
723 Accommodation Limitations............................................................ 59
724 Relief Costs......................................................................... 59
725 Certain Assumptions Permitted........................................................ 59
730 FORECLOSURE ADMINISTRATION.................................................................... 59
731 Liquidation Recommendation........................................................... 59
732 Direction of Master Servicer and Insurers............................................ 60
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
PAGE
733 Foreclosure Expenses................................................................. 60
734 Hazardous Wastes..................................................................... 60
735 Deed-in-Lieu Of Foreclosure.......................................................... 61
736 Foreclosure Proceedings.............................................................. 62
737 Post-Possession Responsibilities .................................................... 63
738 Conveyance Documents................................................................. 63
739 Mortgage Loan Reinstatement.......................................................... 64
740 REO ADMINISTRATION............................................................................ 64
741 REO Action Plan...................................................................... 64
742 REO Servicing........................................................................ 64
743 REO Marketing........................................................................ 65
744 REO Rehabilitation................................................................... 66
745 Restrictions on Leases and Construction.............................................. 66
746 Primary Mortgage Insurance and Pool Insurance
Considerations....................................................................... 67
747 REO Documents and Reports............................................................ 67
748 REO Disposition Accounting........................................................... 67
749 REO Administration Failure........................................................... 68
CHAPTER 8
SERVICER RESPONSIBILITIES....................................................................................... 69
810 REPRESENTATIONS AND WARRANTIES................................................................ 69
811 Concerning Servicer.................................................................. 69
812 Concerning the Mortgage Loans........................................................ 71
813 Covenants Concerning Mortgage Loans.................................................. 73
814 Disclosure and Assignment of Representations, Warranties and
Covenants............................................................................ 74
815 Covenants of the Servicer............................................................ 75
820 EVENTS OF DEFAULT, REMEDIES, INDEMNIFICATION.................................................. 75
821 Events of Default.................................................................... 75
822 Right to Demand Reasonable Assurances................................................ 76
823 Remedies............................................................................. 76
824 Waiver of Defaults................................................................... 77
825 Attorneys' Fees...................................................................... 77
826 Indemnification...................................................................... 77
827 Survival of Remedies................................................................. 78
830 TERMINATION OF SERVICING WITH CAUSE........................................................... 78
831 Grounds for Termination, Notification................................................ 78
832 Consequences of Termination.......................................................... 78
840 MISCELLANEOUS PROVISIONS...................................................................... 78
841 Binding Nature....................................................................... 78
842 Entire Agreement..................................................................... 79
</TABLE>
vi
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<TABLE>
<S> <C>
PAGE
843 Governing Law........................................................................ 79
844 Indulgences Not Waivers.............................................................. 79
845 Titles Not to Affect Interpretation.................................................. 79
846 Provisions Severable................................................................. 79
847 Servicer an Independent Contractor................................................... 79
CHAPTER 9
DEFINITIONS AND RULES OF CONSTRUCTION........................................................................... 81
910 DEFINITIONS................................................................................... 81
CHAPTER 10
DIRECTORY AND NOTICES........................................................................................... 92
</TABLE>
vii
<PAGE>
CHAPTER 1
INTRODUCTION
110 SECURITIZED ASSET SERVICES CORPORATION SERVICER GUIDE
This Servicer Guide sets forth the terms and conditions governing the
servicing of Mortgage Loans for which Securitized Asset Services
Corporation, or its successors or assigns, acts as Master Servicer.
These Mortgage Loans may include certain loans purchased on a servicing
released basis by The Prudential Home Mortgage Company, Inc. through
its LENDER EXPRESS PROGRAM(R), as well as certain mortgage loans
acquired directly by Securitized Asset Sales, Inc. from third parties.
The Prudential Home Mortgage Company, Inc., Securitized Asset Sales,
Inc., and Securitized Asset Services Corporation are wholly-owned
subsidiaries of Residential Services Corporation of America, a
wholly-owned subsidiary of The Prudential Insurance Company of America.
The definitions of all capitalized terms used in this Servicer Guide
and not otherwise defined, as well as certain important rules of
construction, are set forth in Chapter 9 of this Servicer Guide.
120 THE SERVICING AGREEMENT
This Servicer Guide is applicable to Mortgage Loans that are the
subject of a Servicing Agreement between Servicer and either: (i) The
Prudential Home Mortgage Company, Inc., with respect to Mortgage Loans
acquired by The Prudential Home Mortgage Company, Inc. pursuant to the
LENDER EXPRESS PROGRAM; (ii) Securitized Asset Sales, Inc., with
respect to Mortgage Loans acquired by Securitized Asset Sales, Inc.; or
(iii) other unrelated parties. The Servicing Agreement specifies, among
other things, that Servicer agrees to be bound and abide by the
procedures, terms and conditions set forth in this Servicer Guide, as
this Servicer Guide may be amended from time to time. The Servicing
Agreement may contain provisions expressly modifying certain provisions
of the Servicer Guide, and, in such case, Servicer must adhere to terms
of the Servicer Guide as modified by the express provisions of the
Servicing Agreement. The party to the Servicing Agreement with Servicer
(The Prudential Home Mortgage Company, Inc., Securitized Asset Sales,
Inc., or the applicable other party), is referred to in this Servicer
Guide as "Principal," and Servicer is referred to as "Servicer."
130 THE MASTER SERVICER
The Servicing Agreement specifies that the terms and conditions of this
Servicer Guide will be administered by Master Servicer. Master Servicer
will act in accordance with the terms of a Supervision Agreement
between Principal and Master Servicer, or a Pooling and Servicing
Agreement among Principal, Trustee, and Master Servicer. By executing
the Servicing Agreement, Servicer agrees to by bound by the direction
of
<PAGE>
Master Servicer, as specified in this Servicer Guide, and expressly
acknowledges and agrees that Master Servicer, including any successors
or assigns, is an intended third party beneficiary of the Servicing
Agreement and this Servicer Guide. Master Servicer is authorized to
enforce directly against Servicer any of the obligations of Servicer
provided for herein. Unless otherwise specified in the Servicing
Agreement, Securitized Asset Services Corporation will serve as Master
Servicer unless and until another entity becomes Master Servicer
pursuant to the terms of the Supervision Agreement or Pooling and
Servicing Agreement, as applicable. In such case, Principal or any
successor master servicer has the right to assume Master Servicer's
rights and obligations and to enforce Servicer's obligations hereunder
and under the Servicing Agreement. Master Servicer may, at any time,
without Servicer's consent, direct in writing that all or part of the
functions of Master Servicer be performed instead by another entity
designated by Master Servicer for such functions and time periods as
Master Servicer deems appropriate. Servicer agrees to respect the
instructions of such entity as if it were Master Servicer.
140 OWNERSHIP OF MORTGAGE LOANS
Principal is the initial Owner of the Mortgage Loans that are the
subject of this Servicer Guide. Principal may, from time to time,
without the consent of Servicer, sell its interest in any or all
Mortgage Loans and assign an undivided interest in the Servicing
Agreement and this Servicer Guide with respect to such Mortgage Loans
to a new Owner. In the event of such sale and assignment of interest,
Servicer must continue to service each Mortgage Loan for the benefit of
the related Owner in accordance with the terms of the Servicing
Agreement and this Servicer Guide, and must obey the instructions of
Master Servicer regarding the performance of the Servicing Agreement
and the Servicer Guide.
150 ORGANIZATION OF THE SERVICER GUIDE
The material contained in this Servicer Guide is organized topically
into numbered Chapters that are subdivided into Sections and
Subsections, as set forth in the preceding Table of Contents. For ease
of reference, Chapter 10 lists certain addresses and telephone numbers
and requirements concerning legal notices. All exhibits attached to or
referenced in this Servicer Guide are incorporated into and made a part
of this Servicer Guide.
160 UPDATES AND AMENDMENTS
Master Servicer, acting on behalf of the Owner, unilaterally may amend
the Servicing Agreement and this Servicer Guide from time to time to:
(i) correct ambiguous or erroneous provisions; (ii) make changes
necessary or helpful to maintain compliance with Applicable Standards
or any tax laws or regulations applicable to a Trust; or (iii) make
such other modifications that Master Servicer deems advisable that do
not materially and adversely increase the obligations of, or decrease
the benefits to, Servicer. Each such
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amendment will be made by means of a written notice to Servicer. The
written notice will specify the terms of the amendment and the
effective date.
Except as provided above, amendments may be made only by a written
agreement signed by Master Servicer, on behalf of the Owner, and by
Servicer. In lieu of a written agreement, Master Servicer may propose
amendments by notifying Servicer in writing of the proposed amendment
at least 30 calendar days in advance of the effective date. If Servicer
does not notify Master Servicer in writing that Servicer objects to
such amendment prior to the proposed effective date specified in the
notice, Servicer shall be deemed to have agreed to the amendment, and
such amendment shall automatically become effective without any further
notice or action on the part of Owner, Master Servicer or Servicer.
Notwithstanding the foregoing, in the event that Master Servicer
determines that an amendment or modification to the Servicing Guide is
necessary or appropriate for the Master Servicer to insulate itself or
any Owner from potential harm or loss and such amendment or
modification may materially and adversely increase the obligations of,
or decrease the benefits to, Servicer, the Servicer upon the expiration
of such time period shall have the option of agreeing to such amendment
or modification within the time period specified by the Master
Servicer, the Master Servicer may terminate the Servicer and transfer
servicing of the Mortgage Loans as provided in Section 832 hereof. This
right of termination of the Servicer by the Master Servicer is in
addition to any other rights of the Master Servicer provided in Section
831 hereof."
170 COMMUNICATION BETWEEN SERVICER AND MASTER SERVICER
Except as otherwise expressly provided in this Servicer Guide, all
notices, demands and communications from Servicer to Master Servicer
shall be given in the manner and to the addresses and telephone numbers
specified in the Directory in Chapter 10 of this Servicer Guide.
Notices from Master Servicer to Servicer will be given as specified in
the Servicing Agreement.
This Servicer Guide may also be made available in a computer-readable
format via a computer software service or by other means. Any
electronic format is provided only as a convenience to Servicer, and is
not intended to supplement or amend the printed Servicer Guide. In such
case, the printed Servicer Guide and the Servicing Agreement, as they
may be amended from time to time, will continue to constitute the
official contract between Owner and Servicer. Final reliance must
always be placed on the printed Servicer Guide.
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CHAPTER 2
SERVICER ELIGIBILITY
This chapter describes and explains the requirements and qualifications
that an entity must meet and maintain to be a Servicer. These
requirements and qualifications are referred to as the "Eligibility
Standards."
210 SERVICER ELIGIBILITY STANDARDS
To service Mortgage Loans, Servicer must initially meet and must
continue to maintain the Eligibility Standards throughout the term of
the Servicing Agreement. Master Servicer may waive or modify one or
more of such requirements on a case-by-case basis without affecting its
subsequent ability to waive or modify Eligibility Standards. Initial
approval of a Servicer does not prevent Master Servicer from revoking
such approval, or otherwise pursuing rights or remedies under this
Servicer Guide if Master Servicer determines that Servicer did not or
does not satisfy the Eligibility Standards.
211 QUALIFICATION AND LICENSES
Servicer must be duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its formation. Upon Master
Servicer's request, Servicer must provide evidence satisfactory to
Master Servicer that Servicer: (i) has obtained and currently maintains
all required licenses, registrations, permits, approvals, and
qualifications, and is licensed, qualified, and in good standing in
each state where Mortgaged Property is located and in each state in
which Servicer conducts business; or (ii) is exempt from such
requirements. Servicer must disclose to Master Servicer in writing
whether Servicer does business under any fictitious name and must
provide to Master Servicer, upon request, evidence satisfactory to
Master Servicer that Servicer has complied with all filings and other
requirements under federal, state and local law pertaining to the use
of any fictitious name.
212 REGULATORY APPROVALS
A Servicer must be: (i) FNMA or FHLMC approved, and must remain
approved as an "eligible seller/servicer" of conventional, residential
mortgage loans as provided in FNMA or FHLMC guidelines and in good
standing; (ii) an FDIC-insured institution that is a member of SAIF or
BIF, or is a HUD-approved mortgagee in good standing; and (iii) in
compliance with all applicable capital requirements and other
requirements from time to time specified by the Office of Thrift
Supervision, the FDIC, the Office of the Comptroller of the Currency or
any other federal, state or local governmental agency or
quasi-governmental authority having jurisdiction or regulatory
authority over Servicer. Servicer must immediately notify Master
Servicer if Servicer receives any notification from FNMA or FHLMC, or
if Servicer is otherwise aware, that Servicer is not in compliance with
the requirements of the approved seller/servicer status or that FNMA or
FHLMC has threatened Servicer with revocation of its approved
seller/servicer status. In connection with the application to become a
Servicer, Servicer must disclose to Master
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Servicer the results of any audit by FHA, HUD, FDIC, FNMA, FHLMC, GNMA
or any Primary Mortgage Insurer, if such audit included material
allegations of failure to comply with applicable loan origination,
servicing or claims procedures, or resulted in a request for repurchase
of mortgage loans or indemnification in connection with mortgage loans.
213 NET WORTH AND PORTFOLIO REQUIREMENTS
Servicer must maintain a Tangible Net Worth of at least One Million
Dollars ($1,000,000), and an Adjusted Tangible Net Worth at least equal
to the amount specified in the Servicing Agreement. "Tangible Net
Worth" is the par value (or value stated on Servicer's books) of the
capital stock of all classes of Servicer, plus, or minus in the case of
a deficiency, the amount of paid in capital and retained earnings of
Servicer, all determined in accordance with generally accepted
accounting principles as are then in effect. "Adjusted Tangible Net
Worth" is the sum of the Tangible Net Worth, plus one percent (1%) of
the amount of Servicer's servicing portfolio, determined in Master
Servicer's discretion. Master Servicer may exclude assets that are
unacceptable, in the Master Servicer's discretion, from these
determinations. Servicer must service at least One Billion Dollars
($1,000,000,000) in aggregate principal amount of loans. A servicer
that is a commercial bank must be reported in the top three quartiles
of capital adequacy as reported in the IDC Score or successor
publication. By applying to become a Servicer, Servicer represents and
warrants to Master Servicer that Servicer is not, and, with passage of
time, does not expect to become, insolvent or bankrupt. Servicer must
promptly notify Master Servicer of any material adverse change in
Servicer's financial condition.
214 SERVICING EXPERIENCE
Servicer must demonstrate to the satisfaction of Master Servicer that
Servicer has: (i) at least three (3) consecutive years of conventional
mortgage loan servicing experience; (ii) a staff knowledgeable in the
servicing of Mortgage Loans and the administration of REO; (iii)
experience maintaining a servicing portfolio in excess of One Billion
Dollars ($1,000,000,000); and (iv) delinquency rates that are
acceptable to Master Servicer. Servicer must at all times maintain an
adequate system of audit and internal controls in accordance with the
Applicable Standards. Servicer's continued participation as a Servicer
is contingent upon maintaining Delinquency rates that are acceptable to
Master Servicer and that are comparable to the national and/or regional
mortgage banker associations published delinquency rates for similar
products and an adequate system of audit and internal controls that are
acceptable to Master Servicer based upon the Applicable Standards.
215 FIDELITY BOND AND ERRORS AND OMISSIONS INSURANCE
215.1 REQUIREMENT TO MAINTAIN; ACCEPTABLE INSURER. Servicer must
maintain at all times at its own expense an errors and omissions policy
and a blanket fidelity bond with an insurance company acceptable to
Master Servicer. The insurance company must have
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a general policyholder's rating of B/VI or better in the current Best's
Key Rating Guide. Upon request, Servicer must supply Master Servicer
with a copy of the fidelity bond and errors and omissions insurance
policy certified true by the insurer and a statement from the surety
and the insurer that such fidelity bond and errors and omissions
insurance policy will in no event be terminated or materially modified
without thirty (30) days prior written notice to Master Servicer.
Servicer must immediately report to Master Servicer all claims made
against the insurer under the errors and omissions policy and any and
all occurrences against Servicer's fidelity bond.
215.2 SCOPE OF COVERAGE. The errors and omissions insurance policy and
fidelity bond must provide broad coverage on all officers, employees
and other persons acting in any capacity in connection with Mortgage
Loans. The errors and omissions insurance policy must explicitly insure
Servicer and its successors and assigns against any losses resulting
from negligence, errors or omissions on the part of officers, employees
or other persons acting on behalf of Servicer in the performance of the
duties of Servicer pursuant to this Servicer Guide, including, but not
limited to: (i) payment when due of all applicable insurance premiums;
(ii) compliance with applicable Primary Mortgage Insurance and/or Pool
Insurance requirements; (iii) payment of real estate taxes and special
assessments; and (iv) determination of whether any Mortgaged Property
is located in an area where Flood Insurance is available and required
by the Flood Disaster Protection Act of 1973, as amended. The fidelity
bond must explicitly insure Servicer and its successors and assigns
against any and all losses resulting from dishonest, fraudulent or
criminal acts on the part of officers, employees and any other persons
acting on behalf of Servicer.
215.3 AMOUNT OF COVERAGE. The errors and omissions insurance policy
must provide coverage per occurrence at least equal to the greater of:
(i) the amount required by FNMA; (ii) One Million Dollars ($1,000,000);
or (iii) the amount of required fidelity bond coverage. The fidelity
bond coverage must equal a minimum of Three Hundred Thousand Dollars
($300,000), plus an additional 0.15% of the current principal amount of
the Servicer's servicing portfolio between One Hundred Million Dollars
($100,000,000) and Five Hundred Millon Dollars ($500,000,000), plus an
additional 0.125% of the amount of the current principal amount of the
Servicer's servicing portfolio between Five Hundred Million Dollars
($500,000,000) and One Billion Dollars ($1,000,000,000), plus an
additional 0.1% of the amount of the current principal amount of the
Servicer's servicing portfolio in excess of One Billion Dollars
($1,000,000,000). The deductible amount under the errors and omissions
insurance policy and the fidelity bond, respectively, may not exceed
the greater of One Hundred Thousand Dollars ($100,000) per occurrence
or 5.0% of the coverage amount per occurrence.
215.4 SERVICER'S LIABILITY. Regardless of insurance coverage, Servicer
shall remain fully liable to Master Servicer, Principal and any and all
Owners for any and all damages, losses or injuries of any nature or
kind, resulting from dishonest, fraudulent, criminal or negligent acts,
errors or omissions of Servicer and/or on the part of officers,
employees or other persons acting on behalf of Servicer. Servicer shall
be solely liable
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for the payment of any and all losses not covered under the fidelity
bond or errors and omissions policy, as a result of: (i) the respective
deductible provisions; (ii) the limits of coverage; or (iii) any claim
denied which should have been covered had the required fidelity bond or
errors and omissions insurance policy been properly obtained and
maintained and/or had the respective claim been properly submitted for
payment.
220 PROVISION OF REQUIRED INFORMATION TO MASTER SERVICER
221 SERVICER INFORMATION STATEMENT, FINANCIAL REPORTS.
In connection with the application to become a Servicer, Servicer must
submit to Master Servicer a Servicer Information Statement. Servicer
must immediately notify Master Servicer in writing if any of the
information set forth in the Servicer Information Statement becomes
incorrect, untrue or misleading in any way.
222 FINANCIAL REPORTS
In connection with the application to become a Servicer, Servicer must
submit to Master Servicer Servicer's previous two years' audited
financial statements, the most recent interim financial statements and
such other financial information as Master Servicer may require. The
financial statements must be covered by an unqualified opinion by an
independent certified public accountant who is a member of the American
Institute of Certified Public Accountants, and a certification from the
accountant that, based upon an examination of certain documents and
records relating to the mortgage loans being serviced by the Servicer
conducted substantially in compliance with the Uniform Single Audit
Program for Mortgage Bankers, the servicing of such mortgage loans was
conducted in compliance with FNMA requirements. During the term of the
Servicing Agreement, Servicer may not change, or make any substitution
of, its certified public accountants except upon written notice to
Master Servicer given 30 days prior to such change or substitution.
223 ANNUAL FINANCIAL REPORTS AND CERTIFICATIONS
Annually during the term of the Servicing Agreement, within 120 days
after the close of each fiscal year, Servicer must submit to Master
Servicer audited financial statements for the fiscal year, accompanied
by the opinion and certification specified in SECTION 222, and by a
certificate (signed by any Officer of Servicer involved in or
responsible for the servicing of the Mortgage Loans) certifying that
the Officer signing such certificate has supervised a review of the
activities of Servicer during the preceding fiscal year and of
Servicer's performance during the most recently closed fiscal year, and
that, to the best of such Officer's knowledge, based on such review,
Servicer has fulfilled its duties, responsibilities and obligations
under this Servicer Guide throughout such year, or, if there has been a
failure by Servicer to fulfill any duty, responsibility or obligation,
specifying the nature and status of each such failure.
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224 CORPORATE CHANGES
Unless expressly prohibited by applicable law, Servicer immediately
must notify Master Servicer in writing of: (i) any pending, proposed,
or actual change in direct or indirect ownership or control of
Servicer, whether by sale, transfer, merger, consolidation or
otherwise, including, but not limited to, a sale of all or any
substantial portion of Servicer's assets; provided, however, this
notice requirement shall not apply to any sale of shares of capital
stock in any corporation whose stock is publicly traded on a national
securities exchange or on the National Association of Securities
Dealers Automated Quotation System, which sale does not constitute the
transfer of fifty percent (50%) or more of the ownership interests of
Servicer; (ii) any change in name, or reorganization of corporate form,
whether or not such change materially affects Servicer's business
activities or financial condition, and Servicer must provide Master
Servicer with copies of any filings, registrations, and certifications
required by any state or federal regulatory authority in connection
therewith; (iii) any substantial change in ownership affecting
Servicer's corporate parent, any owner of the parent, and any other
beneficial owner of Servicer that does not own a direct interest in
Servicer; (iv) any change in Servicer's senior management, and of the
resignation or termination of any officer overseeing the servicing,
origination, underwriting, closing and, if applicable, secondary
marketing operations of the Servicer, in which case resumes of
replacement personnel must be furnished for Master Servicer review
within thirty (30) days after such replacement; and (v) the closing of
any branch offices of Servicer, if the cumulative closure represents
offices responsible for 10% or more of the origination or servicing
volume after such Servicer (the notice must state the percentage of
Servicer's origination and servicing volume represented by each closed
branch).
225 OTHER MATERIAL CHANGES
The Servicer immediately must report to Master Servicer any change in
Servicer's business operations, financial condition, properties or
assets since the date of the latest submitted financial statements if
the change is likely to have a material adverse effect on Servicer's
ability to perform its obligations under this Servicer Guide and the
Servicing Agreement, or that would cause the any information previously
submitted to Master Servicer to be materially incorrect, untrue or
misleading. Material changes that Servicer must report to Master
Servicer include, but are not limited to: (i) any decreases in capital,
adverse change in debt/equity ratios, or changes in management ordered
or required by a regulatory authority supervising or licensing
Servicer, or any other significant adverse change in Servicer's
financial position; (ii) entry of any court judgment or regulatory
order in which Servicer is or may be required to pay a claim or claims
resulting or likely to result in a material adverse effect on
Servicer's financial condition; and (iii) Servicer admits to
committing, or is found to have committed, a material violation of any
law, regulation, or order. Master Servicer shall have the right to
determine whether any particular change is material.
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226 OTHER INFORMATION
Upon Master Servicer's request, Servicer must furnish to Master
Servicer any other periodic, special or other reports or information as
may be necessary, reasonable or appropriate with respect to Servicer.
All financial statements and reports must be in form and substance
acceptable to Master Servicer. Servicer must disclose to Master
Servicer all final written reports, actions and/or sanctions undertaken
or imposed by any federal or state agency or instrumentality with
respect to Servicer's mortgage servicing operations.
230 EXAMINATIONS, BOOKS AND RECORDS
Servicer must permit Owner, Master Servicer and/or their agents and
representatives to conduct periodic examinations, reviews and audits of
Servicer's books, records and operating procedures on any Business Day
during normal business hours. Servicer agrees to make a knowledgeable
person available during the conduct of any such examination for the
purpose of answering questions regarding the financial statements and
any developments affecting the financial condition of Servicer.
Servicer also agrees that Owner and Master Servicer are entitled, at
reasonable times and upon reasonable notice to Servicer, to audit
Servicer's origination and servicing procedures and practices,
including, without limitation, the Escrow Funds records and any and all
other relevant documents and materials, whether held by Servicer or by
another on behalf of Servicer, and to examine any other records and
policies regarding the Mortgage Loans as may be necessary to satisfy
Owner and Master Servicer that Servicer has the ability to originate
and service Mortgage Loans in compliance with the terms and conditions
of this Servicer Guide and the Servicing Agreement. Servicer authorizes
Owner and Master Servicer to cooperate fully with any federal, state or
local authority conducting a formal or informal investigation,
examination or audit of Servicer.
If the Certificates are legal for investment by federally insured
savings and loan associations, Servicer shall provide to the related
Trustee, if any, Master Servicer, the Office of Thrift Supervision, the
FDIC and the supervisory agents and examiners of the Office of Thrift
Supervision and the examiners of the FDIC, as appropriate, access
without charge to the documentation regarding the Mortgage Loans
required by applicable regulations of the Office of Thrift Supervision
or the FDIC. Servicer shall permit any such agents and examiners to
photocopy any such documentation and shall provide equipment for that
purpose at a charge reasonably approximating the cost of such
photocopying to Servicer.
240 DISCLOSURE OF SERVICER INFORMATION.
The Mortgage Loans have been acquired by Principal and are being
serviced by Servicer with a view to their ultimate securitization as
collateral for mortgage backed securities. Servicer: (i) agrees to
furnish to Principal upon request, and to keep up to date, a
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description of Servicer and its activities, suitable, in Principal's
discretion, for disclosure purposes for use in any prospectus, private
placement memorandum or offering circular that offers securities backed
by Mortgage Loans; and (ii) consents to the inclusion of such
description in any such prospectus, private placement memorandum or
offering circular. Servicer recognizes that Principal and its
affiliates will rely upon the truthfulness and accuracy of such
description. Pursuant to Section 826 hereof, Servicer shall indemnify
the Indemnified Parties with respect to such description.
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CHAPTER 3
GENERAL SERVICING PRACTICES
This Chapter explains the general servicing requirements that Servicer
must follow with respect to all Mortgage Loans, and includes provisions
regarding the servicing of particular types of Mortgage Loans. This
Chapter also explains how Servicer is compensated for servicing
Mortgage Loans, and contains provisions restricting Servicer's ability
to transfer servicing.
310 SERVICER TO SERVICE IN ACCORDANCE WITH APPLICABLE STANDARDS
Servicer must service the Mortgage Loans and fulfill all other
obligations under this Servicer Guide and the Servicing Agreement in
strict conformance with the "Applicable Standards," which are: (i) the
terms of this Servicer Guide, the Servicing Agreement and any other
contractual obligation of Servicer, and the reasonable and customary
practices of prudent mortgage lending institutions that service
mortgage loans of the same type as the Mortgage Loans in the
jurisdiction in which the related Mortgaged Properties are located;
subject to (ii) the terms of the Mortgage Loan Documents; and further
subject to (iii) all applicable federal, state and local laws and
regulations, including, without limitation, all laws, rules,
regulations, decrees, pronouncements, directives, orders, judicial and
administrative judgments, stipulations, writs and injunctions,
including, without limitation, those laws relating to consumer credit
protection, usury limitations, fair housing, equal credit opportunity,
collection practices, escrow practices, and real estate appraisals. The
Applicable Standards also include the following concepts: (a) at all
times Servicer must perform its obligations hereunder so as to treat
Borrowers on the basis of their individual merits and to not
discriminate against Borrowers on the basis of their race, creed or
national origin; and (b) Servicer must take all such actions as may be
necessary to preserve the lien of the related Security Instrument upon
the related Mortgaged Property as to each Mortgage Loan. It is
Servicer's responsibility to review the Mortgage Loan Documents to
assess all applicable laws and regulations, and to determine whether
such laws or regulations or the Mortgage Loan Documents require any
deviation from the express terms of the Servicer Guide and the
Servicing Agreement in connection with servicing the Mortgage Loans.
Certain provisions of this Servicer Guide and the Servicing Agreement
contain language which expressly requires compliance with the
Applicable Standards. The absence of such provisions elsewhere in this
Servicer Guide and the Servicing Agreement shall not give rise to an
implication that other provisions, that do not expressly include such
language, operate in derogation of the requirement for compliance with
the Applicable Standards.
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320 SERVICER COMPENSATION
321 SERVICING FEE AMOUNT
In consideration of the services rendered under this Servicer Guide and
the Servicing Agreement, absent an Event of Default by Servicer,
Servicer shall be entitled to compensation equal to the sum of: (i) a
Servicing Fee payable monthly with respect to each Mortgage Loan, equal
to the product of one-twelfth (1/12) of the Servicing Fee Percentage
specified in the Servicing Agreement and the Scheduled Principal
Balance of the Mortgage Loan as of the immediately preceding Due Date
(without taking into account any payment of principal due on such Due
Date); and (ii) any interest earnings on each Custodial P&I Account
other than interest earnings which are payable to Borrower pursuant to
the Applicable Standards, subject to any adjustment for Month End
Interest. Absent an Event of Default by Servicer, subject to the
Applicable Standards, Servicer shall also be entitled to retain any
late charges, prepayment fees, penalty interest, assumption fees paid
by Borrower, or any other similar amounts not required pursuant to this
Servicer Guide to be deposited into the Custodial P&I Account as
additional compensation. The Servicer shall pay all expenses incurred
by it in connection with its servicing activities and shall not be
entitled to reimbursement except as specifically provided for herein.
322 SERVICING FEE SOURCE
The Servicing Fee for each Mortgage Loan shall be payable solely from
the interest portion of the related Monthly Payment paid by Borrower or
other payment of interest paid with respect to the Mortgage Loan,
including the interest portion, if any, of: (i) the proceeds of
foreclosure or any judgment, writ of attachment or levy against
Borrower or Borrower's assets; (ii) funds paid in connection with any
prepayment in full; (iii) Insurance Proceeds; or (iv) Liquidation
Proceeds. Servicer shall withdraw its Servicing Fee for each Mortgage
Loan net of any Month End Interest from the related Custodial P&I
Account prior to the remittance of such amounts to the Master Servicer
Custodial Account.
330 TRANSFERS OF SERVICING
331 RESTRICTIONS ON TRANSFER
Servicer may not sell or transfer any Mortgage Loan serviced hereunder
without the prior written consent of Master Servicer. Servicer may
subcontract its servicing duties only as expressly permitted herein.
Servicer must submit all requests for sale or transfer of servicing in
writing to Master Servicer. The transferee must agree to enter into an
agreement with Master Servicer substantially in the form of the
Servicing Agreement and this Servicer Guide, must meet the Eligibility
Standards, and must be approved by Master Servicer, and, if applicable,
by the Rating Agency if any Mortgage Loans are owned by a Trust that
has issued mortgage-backed securities supported by such Mortgage Loans,
and such securities have been rated at the request of such Trust by
such Rating
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Agency. Master Servicer must receive all supporting documentation at
least forty-five (45) days prior to the requested date of transfer.
332 LIABILITY UPON TRANSFER
If Servicer transfers Mortgage Loans, servicer shall be liable to
Master Servicer and the Owner of the related Mortgage Loans for any
servicing obligation violations that occur before, during, and up to
and including the day the portfolio is actually transferred. The
transferee of servicing shall be liable for any breach of servicing
obligations that occurs after the transfer of the servicing portfolio.
If the transferor and transferee disagree about liability for
violations of representations, warranties, covenants or any other
servicing requirements hereunder, Master Servicer has the right, in its
sole discretion, to determine which party or parties are liable for
such violations.
333 SALE OF SERVICING OF INACTIVE SERVICERS
Master Servicer may, in its sole discretion, direct Servicer to sell to
a party designated by Master Servicer the servicing on any and all
Mortgage Loans serviced hereunder if the aggregate principal amount of
Mortgage Loans serviced hereunder by Servicer is less than Fifteen
Million Dollars ($15,000,000). The purchase price for the purchase of
such servicing shall equal the lesser of: (i) the fair market value of
such servicing; or (ii) the product of one hundred (100) basis points
and the then current Unpaid Principal Balance of each Mortgage Loan for
which servicing will be purchased.
340 DELEGATION OF DUTIES
341 PERMISSIBLE DELEGATIONS
Without the written consent of Master Servicer authorizing further
delegations, Servicer may elect to delegate, by agency, subcontract or
otherwise, only the following servicing duties to only the following
categories of delegees:
(a) professional collection agencies to perform those duties and
functions for the collection of delinquent amounts due on any
Mortgage Loan that are customarily performed by such agencies
in the locality where the related Mortgaged Property is
located;
(b) title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the condition
of title to any Mortgaged Property and services incidental to
the foreclosure or acquisition in lieu of foreclosure of any
Mortgaged Property, or the sale or disposition of any
Mortgaged Property acquired by Servicer;
(c) attorneys licensed to practice in the state in which the
Mortgaged Property is located to perform customary legal
services in connection with the foreclosure or acquisition of
such Mortgaged Property or the sale or disposition of such
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Mortgaged Property acquired by Servicer at or in lieu of
foreclosure, or for the collection of delinquent sums owed on
any Mortgage Loan;
(d) professional property inspection companies and appraisers to
conduct routine inspections of Mortgaged Property and to
provide written inspection reports, as required hereunder;
(e) title companies, escrow companies and real estate tax service
companies to provide periodic reports of the amount of real
estate taxes due on any Mortgaged Property and the due dates
of each required installment, and the payment of taxes;
(f) credit bureaus or credit reporting companies to provide credit
reports on Borrowers or persons who have applied to assume
Mortgage Loans;
(g) construction companies, contractors and laborers to provide
labor, materials and supplies necessary to protect, preserve
and repair Mortgaged Property, as required hereunder; and
(h) lock box providers or payment processing administrators to
provide payment processing services.
342 DELEGEE QUALIFICATIONS
Servicer shall assure that each Person retained to provide any
permitted delegation of duties is fully licensed and holds all required
federal, state and local governmental franchises, certificates and
permits, and that such Person is reputable, knowledgeable, skilled and
experienced and has the necessary personnel, facilities and equipment
required to provide such services.
343 RESPONSIBILITY FOR COSTS AND LIABILITY
Any delegee shall be retained solely for Servicer's account and at
Servicer's sole expense and shall not be deemed to be an agent or
representative of the Owners, their successors or assigns, or of Master
Servicer or its successors or assigns. Servicer shall remain liable to
Master Servicer and Owner, and their respective successors and assigns,
for the performance of Servicer's duties and obligations hereunder,
notwithstanding the delegation of any servicing function.
350 ARM LOAN SERVICING
Servicer must service all ARM Loans in accordance with the Applicable
Standards. Servicer's records must, at all times, reflect the
then-current Mortgage Interest Rate and Monthly Payment for such ARM
Loan and Servicer must timely notify the Borrower of any changes to the
Mortgage Interest Rate and/or the Borrower's Monthly Payment. All
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Mortgage Interest Rate and Monthly Payment adjustments must be reported
to Master Servicer in an ARM Loan change report.
351 NOTICE OF PERIODIC ADJUSTMENT
The Notice of Periodic Adjustment is the legal and official
announcement to the Borrower of an ARM Loan of a change in the Mortgage
Interest Rate or the Monthly Payment. Servicer must send this notice to
the Borrower in accordance with the Applicable Standards. Each Notice
of Periodic Adjustment shall, subject to the Applicable Standards,
include the following information: (i) the new Mortgage Interest Rate
and the date on which the new Mortgage Interest Rate becomes effective
(the Interest Adjustment Date); (ii) the Index value on which the new
Mortgage Interest Rate is based, the Gross Margin, and how the new
Mortgage Interest Rate was calculated. If the required Index is not
available on an Interest Adjustment Date, Servicer, after consultation
with Master Servicer, must select an alternative interest rate index in
accordance with the Applicable Standards; (iii) the projected Unpaid
Principal Balance on the upcoming Payment Adjustment Date, assuming
timely payment of the remaining Monthly Payments due prior to the
Payment Adjustment Date; (iv) the new Monthly Payment; (v) the Payment
Adjustment Date; (vi) the dates of the next Interest Adjustment Date
and Payment Adjustment Date; (vii) that Borrower may repay the ARM Loan
in whole or in part without penalty at any time; (viii) the title and
telephone number of an employee of Servicer who can answer questions
about the notice; and (ix) if applicable, that Borrower is eligible and
has the right to convert the ARM Loan to a fixed rate Mortgage Loan.
352 ARM LOAN CONVERSION
If a Borrower with a convertible ARM Loan exercises an option to
convert the Mortgage Loan to a fixed interest rate, Servicer must
determine whether the conditions and qualifications for conversion have
been met, and Servicer must determine the fixed rate to be applied to
such Mortgage Loan pursuant to the Applicable Standards. Upon
conversion, Servicer must prepare and send an ARM Loan conversion
notification to Master Servicer within three Business Days after the
conversion. If a Mortgage Loan so converted is owned by a Trust that
has issued mortgage-backed securities, Servicer must purchase the
converted Mortgage Loan from the applicable Trust at the Purchase Price
by depositing the Purchase Price into the respective Custodial P&I
Account.
353 SERVICER'S LIABILITY
If Servicer fails to make either a timely or accurate adjustment to the
Mortgage Interest Rate or Monthly Payment for an ARM Loan or to notify
Borrower of such adjustments, and subsequently receives a short Monthly
Payment, Servicer must pay from its own funds any shortage until
Servicer has made the necessary corrections in conformance with
applicable law so as to secure the correct Monthly Payment from
Borrower. If Servicer's failure to make a scheduled change affects the
Owner's rights to make future adjustments under the terms of the ARM
Loan, Servicer shall be required to purchase the ARM Loan at the
Purchase Price by depositing the Purchase Price into the respective
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Custodial P&I Account. Any amounts paid by Servicer pursuant to this
Section shall not be an advance and shall not be reimbursable from the
proceeds of any Mortgage Loan.
360 ASSUMPTIONS
Any Assumption must be performed in accordance with the Applicable
Standards. Servicer shall process such Assumption as provided for in
the Mortgage Note or the related Mortgage Note Assumption Rider
attached to the Mortgage Note.
361 VERIFICATIONS
Prior to approving an Assumption, Servicer shall verify that:
(a) no material term of the Mortgage Note (including, but not
limited to, the Mortgage Interest Rate, the remaining term to
maturity, the Gross Margin, the Index, the maximum lifetime
mortgage interest rate, the minimum lifetime mortgage interest
rate, and any periodic rate cap or any periodic payment cap)
will be changed in connection with such Assumption;
(b) that the new Borrower qualifies for credit under Master
Servicer's criteria and standards for similar loans;
(c) where applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer has in advance approved in
writing such Assumption of such Mortgage Loan by the new
Borrower (unless such approval is precluded by the terms of
the Mortgage Loan Documents) and such Mortgage Loan will
continue to be insured by such Primary Mortgage Insurer and/or
such Pool Insurer; and
(d) the documents relating to such Assumption create a valid and
enforceable promise to pay the Unpaid Principal Balance of the
Mortgage Loan, together with interest thereon in accordance
with the related Mortgage Note, by the new Borrower, the
Security Instrument continues to evidence a valid and
perfected first lien on the Mortgaged Property, and the
Mortgage Loan will continue to be a valid first priority
security interest upon the Mortgaged Property.
362 APPROVAL AND NOTIFICATIONS
Upon such verification, Servicer may approve the Assumption and release
the previous Borrower from liability. Servicer shall notify Master
Servicer of any Assumption by the eighth calendar day of the month
following the month in which the Assumption took place using the
Assumption report and Servicer shall provide to the Custodian the
original assumption agreement. Servicer shall make all disclosures
required by the Applicable Standards in connection with the Assumption.
Subject to Applicable Standards, Servicer may charge Borrower and
retain a reasonable and customary
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assumption fee. Such fee is receivable only from Borrower directly and
may not be withdrawn from any of the custodial accounts maintained
hereunder.
370 PARTIAL RELEASES AND EASEMENTS, EMINENT DOMAIN
371 REQUIRED APPROVALS
Applications for partial release of a Mortgaged Property from the lien
of the related Security Instrument, easements, consent to substantial
alterations and any other matters relating to changes affecting the
Mortgage Loan or Mortgaged Property must be approved in writing by
Master Servicer and, where applicable, the respective Primary Mortgage
Insurer and/or the respective Pool Insurer, if the request involves the
diminution of the current value of the Mortgaged Property by Five
Hundred Dollars ($500) or more or if the Mortgage Loan is covered by a
policy of Primary Mortgage Insurance or Pool Insurance. Servicer shall
promptly furnish all information requested by Master Servicer in
connection with any request for such partial release or easement.
372 PREREQUISITES
Prior to approving the release or other change, Servicer must obtain
the written approval of Master Servicer, and, if applicable, the
respective Primary Mortgage Insurer and/or the Pool Insurer. Servicer
must cause all legal documents for the transaction to be reviewed.
Servicer also must obtain an Appraisal Report, acceptable to Master
Servicer, showing the market value of such Mortgaged Property before
and after the release and showing individually both the value of the
land and of the improvements thereon, and Servicer must ensure that
following the release or change the Mortgaged Property will adequately
secure the Unpaid Principal Balance of the Mortgage Loan and accrued
interest thereon and that the related Loan-to-Value ratio will not be
greater than eighty percent (80%). Any and all cash consideration
received with respect to the release or other change must at least
equal the current market value of property or rights to be released,
and any and all cash consideration received must be applied to the
Unpaid Principal Balance of the Mortgage Loan to the extent of the
diminution of the value of the Mortgaged Property. Servicer must obtain
written notification from the respective Title Insurer that the Title
Insurance policy will remain fully in effect with respect to the
Mortgaged Property, as modified, following such release or change.
373 EMINENT DOMAIN
Servicer immediately must notify Master Servicer and, where applicable,
the respective Primary Mortgage Insurer and/or the respective Pool
Insurer, of any taking by eminent domain of all or part of any
Mortgaged Property. Servicer must take all steps necessary to prevent
loss of any Primary Mortgage Insurance or Pool Insurance benefits due
to any taking by eminent domain.
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380 GENERAL SERVICING CONSIDERATIONS
381 DUE-ON-SALE CLAUSE ENFORCEMENT
Servicer must enforce the Due-on-Sale Clause on any Mortgage Loan in
accordance with the Applicable Standards upon the transfer of title of
the related Mortgaged Property unless a Mortgage Loan is assumable and
has been assumed pursuant to the terms of this Servicer Guide, or
unless enforcement of the Due-on-Sale Clause would jeopardize the
Primary Mortgage Insurance coverage on the Mortgage Loan. Where, in
Servicer's judgment, the issue of enforceability is reasonably expected
to be litigated, Servicer must obtain the written consent of Master
Servicer before enforcing any Due-on-Sale Clause. In all cases of an
unapproved transfer of a Mortgaged Property initiated by the Borrower,
Servicer is required to promptly notify Master Servicer and, where
applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, of such transfer and obtain written approval
before initiating enforcement proceedings.
382 TAX RETURNS AND OTHER REPORTS
Unless otherwise instructed by Master Servicer or the respective
Trustee, if any, Servicer shall forward to each Borrower such forms and
information within the control of Servicer as are required by the
Applicable Standards, including, without limitation, and forms and
information required by the Internal Revenue Code of 1986, as amended
(the "Code"). By way of example, and not of limitation, Servicer must
provide Borrowers with the reports required under Code Sections 6050H
(E.G. reporting on Form 1098 any mortgage interest, including points,
received and any reimbursements of qualified mortgage interest) and
6050J (E.G. reporting on Form 1099-A abandonments and foreclosure of
real property). Servicer must also prepare and file any annual reports
required by state authorities.
383 POOL AND PRIMARY MORTGAGE INSURANCE COMPLIANCE
Notwithstanding any other provision of this Servicer Guide or the
Servicing Agreement, but subject to the Applicable Standards, Servicer
shall at all times comply with all applicable Pool Insurance and
Primary Mortgage Insurance policy requirements so as to assure the full
benefit of the respective Pool Insurance policy and Primary Mortgage
Insurance policy to the Owner of the related Mortgage Loan.
384 ABANDONMENT
If Servicer discovers that any Mortgaged Property is not occupied,
Servicer must immediately attempt to contact Borrower to determine the
reason for the vacancy. If Servicer determines that such Mortgaged
Property has been abandoned, Servicer, at its own expense, must take
all necessary actions to protect such Mortgaged Property from waste,
damage and vandalism. Such expenses shall be recoverable by Servicer
solely from the Liquidation Proceeds of the related Mortgage Loan, if
any, or directly from the Borrower.
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385 NOTIFICATION TO MASTER SERVICER
Servicer shall maintain accurate records of and immediately advise and
make written recommendations to Master Servicer upon discovering any of
the following:
(a) deterioration of, waste of, or lack of repair to, any
Mortgaged Property (including, without limitation,
discovery of the presence of hazardous materials or
conditions);
(b) sale or transfer of any Mortgaged Property in a
manner not approved by Servicer pursuant to the
provisions of this Servicer Guide;
(c) material litigation involving any Mortgaged Property;
(d) vacancy or abandonment of any Mortgaged Property;
(e) occupancy of Mortgaged Property by a tenant, if the
related Mortgage Loan Documents indicate such
Mortgaged Property is to be owner- occupied;
(f) a material default under the terms of any Security
Instrument, Mortgage Note, Condominium Project or PUD
constituent document or similar obligations of a
Borrower (except in the case of a monetary default of
the Borrower already addressed under the guidelines
for delinquency management set forth in this Servicer
Guide); or
(g) any other situation that may materially and adversely
affect any Mortgage Loan or any other situation which
the Master Servicer has determined, based upon the
Master Servicer's obligations and liabilities under
the Supervision Agreement or the Pooling and
Servicing Agreement, as applicable, it desires to
receive notice of, and with respect to which it has
previously provided written notice thereof to the
Servicer.
386 LATE CHARGES
Late charges may only be assessed pursuant to the terms of the Mortgage
Loan Documents, and may only be assessed in accordance with the
Applicable Standards.
387 BORROWER BANKRUPTCY
387.1 COSTS AND RESPONSIBILITY. Servicer will be responsible
for representing the interests of the Owner of the related
Mortgage Loan in any bankruptcy proceedings involving a
Borrower. The costs of protecting the interests of the Owner
of a Mortgage Loan shall be borne by Servicer and are not
chargeable to the related Borrower's Escrow Funds or
reimbursable from Master Servicer.
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387.2 CHALLENGE BANKRUPTCY REDUCTIONS. If the bankruptcy judge
or trustee should propose to: (i) reduce the Unpaid Principal
Balance of a Mortgage Note; (ii) reduce the related Mortgage
Interest Rate; (iii) extend the final maturity of such
Mortgage Note; or (iv) reduce the level of any monthly payment
on such Mortgage Note, Servicer, subject to the Applicable
Standards, shall: (a) challenge any such modification on a
timely basis; (b) notify Master Servicer immediately; and (c)
follow Master Servicer's instructions regarding the bankruptcy
proceedings, and in the absence of explicit instructions,
exercise reasonable judgment to protect the interests of the
Owner of such Mortgage Loan.
387.3 BANKRUPTCY ADJUSTMENTS. If the action of any court
results in a Deficient Valuation or Debt Service Reduction,
Servicer's will calculate the effects of such modification and
will notify Master Servicer of the new principal balance,
Mortgage Interest Rate, new final maturity, or Monthly
Payment, as the case may be, of such Mortgage Loan. With
respect to each Mortgage Loan that is the subject of a
Deficient Valuation or a Debt Service Reduction, Servicer
shall verify that payments are being made in accordance with
the plan approved in the related bankruptcy
387.4 NOTICE OF BANKRUPTCY. Promptly after the Servicer
receives notice of the bankruptcy of any Borrower, the
Servicer will provide written notice thereof to the Master
Servicer and, from time to time, will provide such information
as the Master Servicer reasonably requests relating to such
bankruptcy proceeding and the actions of the Servicer taken in
connection therewith.
390 ESCROWS
391 ESCROW REQUIREMENT
With respect to each Mortgage Loan, unless Servicer has waived the
collection of Escrow Funds pursuant to the terms of this Servicer
Guide, or unless the collection of Escrow Funds is prohibited by the
Applicable Standards, Servicer shall, in accordance with the Applicable
Standards, collect sufficient Escrow Funds from Borrower to pay Escrow
Items when due.
392 ESCROW WAIVER
For any Mortgage Loan (other than a GPM or GPARM Loan which provides
for negative amortization in the future) that has amortized down so
that its current LTV is 80% or less, Servicer, subject to the
Applicable Standards, may waive Borrower's future obligation to make
Escrow Funds payments to Servicer provided that such Mortgage Loan has
not been more than 30 days delinquent during the preceding 12 months.
Subject to the Applicable Standards, Servicer must retain the right to
reimpose Escrow Funds requirements with respect to any Mortgage Loan if
the related Borrower fails to
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make the required payments for the items for which Escrow Funds had
previously been collected.
393 PAYMENT OF ESCROW ITEMS
If Servicer is responsible for the collection of Escrow Funds with
respect to a Mortgage Loan, Servicer must utilize the related
Borrower's Escrow Funds to pay all Escrow Items. Servicer must promptly
pay all bills for any Escrow Items in such a manner as to avoid late
charges or penalties and to take advantage of any available discount.
If Borrower's Escrow Funds are insufficient to pay taxes, assessments
or premiums, when due, subject to the Applicable Standards, Servicer
must attempt to obtain the additional funds from such Borrower. If
sufficient additional funds have not been recovered by the time the
payment is due, Servicer must advance its own funds to ensure prompt
payment. Subject to the Applicable Standards, Servicer may elect to
advance funds prior to attempting to obtain the additional funds from
such Borrower; however, Servicer shall thereafter attempt to obtain the
advanced funds from the Borrower.
394 MORTGAGE LOANS WITHOUT ESCROW
Subject to the Applicable Standards, Servicer is not required to
collect Escrow Funds on a Mortgage Loan, Servicer shall require proof
of payment of all taxes, ground rents, assessments, insurance and other
charges, or use other means commonly used in the mortgage industry to
ascertain that such items are paid on a timely basis included, but not
limited to, a tax service. If Borrower has failed timely to pay any
Escrow Items, Servicer, from its own funds, must pay any obligation
which could become a first lien on the related Mortgaged Property, and
must maintain in force the applicable Insurance Policies. Servicer must
notify the Master Servicer immediately of any Escrow Item not paid
within ninety (90) days after its due date.
395 ESCROW FUNDS ANALYSIS
Subject to the Applicable Standards, Servicer must conduct an analysis
of each Borrower's Escrow Funds at least annually to determine the
monthly deposits which must be made by such Borrower and must provide a
statement of the analysis to each Borrower. The analysis will be
performed based upon reasonable projections of the expenses to be paid
from the Escrow Funds. Subject to the Applicable Standards, the Escrow
Funds balance shall be sufficient to effect the payment of such
expenses when due, and, as Borrower may direct, any surplus in such
Borrower's Escrow Funds shall be: (i) used as a Curtailment as to the
related Mortgage Loan; (ii) refunded to such Borrower; or (iii) taken
into consideration in determining the amount to be collected for Escrow
Funds during the next twelve months. Where a deficiency exists, subject
to the Applicable Standards, Borrower may be requested to pay the
shortage in full or the deficiency may be taken into consideration in
determining the amount to be collected for Escrow Funds during the next
twelve months.
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CHAPTER 4
MORTGAGE LOAN FILES
This Chapter explains requirements that Servicer must meet concerning
the maintenance of Mortgage Loan files.
410 OWNER MORTGAGE LOAN FILES
411 OWNER MORTGAGE LOAN FILE REQUIREMENTS
On behalf of the Owner of each Mortgage Loan, Servicer must ensure that
an appropriate Custodian maintains an Owner Mortgage Loan File
containing each of the following documents:
(a) the original Mortgage Note together with, where applicable,
the Power of Attorney, Surety Agreement, Guaranty Agreement,
Mortgage Note Assumption Rider and/or Buydown Agreement.
Servicer must ensure that Mortgage Note includes all prior and
intervening endorsements necessary to show a complete chain of
endorsements from the respective loan originator to the
respective prior
owner of the Mortgage Loan;
(b) either the recorded original Security Instrument, together
with any addenda and riders, certified by the recording
office, or, if the Security Instrument is in the process of
being recorded, a photocopy of the Security Instrument
certified by an officer of the prior owner of the Mortgage
Loan or by the applicable title insurance company,
closing/settlement/escrow agent or company or closing attorney
to be a true and correct copy of the Security Instrument
transmitted for recordation;
(c) either a recorded original Assignment of the Security
Instrument from the prior owner of the Mortgage Loan assigning
the Security Instrument to the Owner, certified by the
recording office, or, if such Assignment is in the process of
being recorded, a photocopy of the Security Instrument
transmitted for recordation certified by an Officer of the
prior owner of the Mortgage Loan to be a true and correct copy
of the Assignment submitted for recordation. If recordation is
waived by Servicer as permitted hereunder, the Custodian will
hold the Assignment in recordable form;
(d) each recorded original intervening Assignment of the Security
Instrument necessary to show a complete chain of title from
the loan originator to the prior owner of the Mortgage Loan
or, if any such original is unavailable because it is in the
process of being recorded, a photocopy of such intervening
Assignment certified by an Officer of the prior owner of the
Mortgage Loan to be a true and correct copy of such
intervening Assignment submitted for recordation;
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(e) an original Title Insurance policy or, with respect to loans
secured by properties in jurisdictions where title policies
are not available, the original attorney's opinion of title.
In the event that the policy has not been issued or is not
otherwise available, a written binding ALTA commitment for a
policy issued by the respective title insurance company and an
Officer's certificate of the prior owner of such Mortgage Loan
certifying that all of the requirements specified in such
commitment have been satisfied, or a Preliminary Title Report
if the Mortgaged Property is in a state designated by Master
Servicer as a Preliminary Title Report state;
(f) for each Mortgage Loan which is required to have Primary
Mortgage Insurance pursuant to the Applicable Standards, a
Primary Mortgage Insurance policy or a certificate of Primary
Mortgage Insurance issued by the insurer or its agent
indicating that the a policy is in effect;
(g) for each Mortgage Loan required to have Pool Insurance
pursuant to the Applicable Standards, a Pool Insurance
certificate issued by the insurer or its agent indicating the
eligibility of the Mortgage Loan for Pool Insurance; and
(h) originals of each Assumption agreement, modification, written
assurance or substitution agreement pertaining to the Mortgage
Loan, if any.
412 CUSTODIANS
The Custodian will hold originals of all documents included in each
Owner Mortgage Loan File charged to its custody, except that copies of
recorded Security Instruments or Assignments will be held if the
originals are held by the recording office. If the original Security
Instrument, Assignment from the prior owner of the related Mortgage
Loan to the Owner or any prior Assignment of the Security Instrument
has not been delivered to the Custodian on the date of the transfer of
ownership of such Mortgage Loan to the Owner because it is in the
process of being recorded, Servicer will deliver the original recorded
document to the Custodian within five Business Days after receipt.
Servicer will promptly deliver to the Custodian any other Mortgage Loan
Document to be included in an Owner Mortgage Loan File that comes into
Servicer's possession.
413 RELEASE OF DOCUMENTS FROM OWNER MORTGAGE LOAN FILE
If Servicer needs any document from the Owner Mortgage Loan File to
properly service a Mortgage Loan, Servicer must send a request for
release of documents to Master Servicer. Upon Master Servicer's
determination that reasonable safeguards will be taken to safeguard the
requested Mortgage Loan Documents, Master Servicer will authorize the
Owner or the Custodian, as the case may be, to release the Mortgage
Loan Documents: (i) upon payment in full of such Mortgage Loans; (ii)
when necessary for foreclosure; (iii) or for any other cause that
Master Servicer deems appropriate. Servicer will be responsible for
such Mortgage Loan Documents while they are in transit and while they
are in its possession and will be deemed to hold such Mortgage Loan
Documents in trust
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for the benefit of the Owner. If the Mortgage Loan has not been paid in
full or otherwise liquidated, Servicer shall promptly return the
Mortgage Loan Documents when they are no longer required by Servicer,
and, unless the Mortgage Loan has been liquidated or the Mortgage Loan
Documents have been delivered to an attorney, a public trustee or other
public official to foreclose on the related Mortgaged Property, all
such Mortgage Loan Documents must be returned to the Owner or
Custodian, as applicable, within twenty-one (21) calendar days after
their release.
414 EXECUTION BY OWNER
If the Owner's signature is required on any document relating to a
Mortgage Loan for any reason, including payment in full, assumption or
foreclosure, Servicer shall deliver to Master Servicer a written notice
requesting that the Owner execute any such document and certifying the
reason that the execution of any such document is required. Upon
receipt of the executed documents, Servicer will record, file or
deliver the documents, as is necessary or appropriate for the proper
servicing of the Mortgage Loan.
415 CUSTODIAL FEES
Servicer is responsible for the ongoing fees of each Custodian. Each
Custodian shall bill Servicer directly for such Custodian's fees. If
for any reason at any time Master Servicer pays custodial fees,
Servicer will promptly reimburse Master Servicer for such payments.
416 REPRESENTING PARTY OFFICERS' CERTIFICATE
If it is necessary for the respective Representing Party to deliver an
Officers' certificate with respect to the existence of a Title
Insurance policy or a Primary Mortgage Insurance policy for several
Mortgage Loans, Master Servicer may consent to the delivery of a single
Officers' certificate of the respective Representing Party for a
schedule of Mortgage Loans in lieu of a separate Officers' certificate
for each such Mortgage Loan.
417 FINANCING ARRANGEMENTS
To the extent that the Owner utilizes the Mortgage Loan as collateral
for a financing, the required endorsements and assignments shall also
include such further endorsements as such Owner, in accordance with the
relevant financing documents, shall direct.
420 SERVICER MORTGAGE LOAN FILES
421 SERVICER MORTGAGE LOAN FILE REQUIREMENTS
Servicer must maintain a Servicer Mortgage Loan File for each Mortgage
Loan, each of which shall be clearly marked with the Servicer Loan
Number and shall be readily accessible to Master Servicer during
regular business hours, that includes the following:
(a) true and correct copies of each of the documents that are held
by the Custodian;
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(b) an original Hazard Insurance policy or a certificate of
insurance issued by the applicable insurer or its agent
indicating such a policy is in effect;
(b) a Flood Insurance policy or a certificate of insurance issued
by the applicable insurer or its agent indicating that such a
policy is in effect, if Flood Insurance is required pursuant
to the Applicable Standards;
(c) originals or copies of all documents submitted to a Primary
Mortgage Insurer for credit and property underwriting
approval, if Primary Mortgage Insurance is required pursuant
to the Applicable Standards;
(d) the originals of all RESPA and Regulation Z disclosure
statements executed by, or provided to, Borrower;
(e) the Appraisal Report made at the time the Mortgage Loan was
originated;
(f) the HUD-1 or other settlement statement;
(g) evidence of any tax service contract;
(h) copies of other documentation, including the appropriate
approval by Master Servicer, of any modifications to the
original Mortgage Loan Documents or releases of any collateral
supporting the Mortgage Loan;
(i) collection letters or notices sent to Borrower, but only if
Servicer does not maintain separate collection files,
including all collection letters or notices, indexed by
Borrower;
(j) any and all foreclosure correspondence, bankruptcy
correspondence and legal notifications provided to Borrower;
and
(k) all other related Mortgage Loan Documents which are
customarily maintained in accordance with the Applicable
Standards in a mortgage loan file in order to properly service
a mortgage loan, including, without limitation, documents
regarding title claims.
422 SERVICER MORTGAGE LOAN FILE ACCESS
Servicer acknowledges that each Servicer Mortgage Loan File will be
held in trust for the Owner of such Mortgage Loan, its successors and
assigns. Master Servicer may, from time-to-time, request immediate
delivery of any or all Mortgage Loan records and documents to Master
Servicer, the Owner, the Custodian or another entity designated by
Master Servicer, and Servicer shall immediately deliver such records
and documents at Servicer's expense.
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423 ALTERNATE MEDIA
Subject to the Applicable Standards, Servicer may transfer any Servicer
Mortgage Loan File to microfilm, microfiche, optical storage or
magnetic media and may retain the microfilm, microfiche, optical
storage or magnetic media in lieu of hard copies of the documents
required to be maintained in the Servicer Mortgage Loan Files. In such
event, the following requirements must be met: (i) the process must
accurately reproduce originals onto a durable medium; (ii) unless
Master Servicer otherwise notifies Servicer, the Master Servicer Loan
Number must be clearly marked on the copies or optical storage or
magnetic media; (iii) the copies or optical storage or magnetic media
must be easily transferable to legible hard copies of the material
relating to the Mortgage Loans; and (iv) Servicer must make backup
copies of the microfilm, microfiche, optical storage or magnetic media
and retained the backup copies off-site to protect against fire and
other hazard losses. If the copies, optical storage or magnetic media
become damaged or lost for any reason, Servicer must bear the entire
cost of restoring each Servicer Mortgage Loan File and any other
related documents. Servicer also must bear all costs of reproducing
legible hard copies requested by Master Servicer. Upon request,
Servicer shall furnish to Master Servicer optical storage or magnetic
media copies of the requested Servicer Mortgage Loan File at Servicer's
expense.
430 ENDORSEMENTS AND ASSIGNMENTS
431 FORM OF ENDORSEMENTS
Subject to the Applicable Standards, Servicer must require that
endorsements of any Mortgage Notes comply with one of the following
formats:
(a) if the Owner is a Trust, the format shall be:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of Trustee], AS
TRUSTEE under the agreement dated as of [Date of
Trust Agreement], and its successors and assigns,
[Name of Principal]
[Signature of Officer]
[Officer's Name and Title]
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(b) in all other instances, except as Master Servicer shall
otherwise require, the format shall be:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of Owner], and its successors and assigns
[Name of Principal]
[Signature of Applicable Officer]
[Applicable Officer's Name and Title]
432 FORM OF ASSIGNMENT
Subject to the Applicable Standards, Servicer shall require that
assignments of any Security Instrument comply with one of the following
formats, including, without limitation, the name of the assignee:
(a) if the Owner is a Trust, the format shall be:
[Name of Trustee], AS
TRUSTEE under the agreement dated as of
[Date of Trust Agreement], and its successors and assigns
(b) in all other instances, except as Master Servicer shall
otherwise require, the format shall be:
[Name of Owner], and its successors and assigns
433 RECORDATION OF ASSIGNMENTS
Servicer, at its own expense, shall record each Assignment of the
Security Instrument to the Owner, as well as any previously unrecorded
intervening Assignments. The recordation requirement may be waived for
a Mortgage Loan if Servicer has delivered to Master Servicer an opinion
of counsel, acceptable to Master Servicer, opining that the Mortgaged
Property is in a state in which recordation of an Assignment is not
required to protect the Owner's right, title and interest in and to the
Mortgage Loan. Each Assignment must be recorded within one hundred
twenty (120) days after the acquisition of the related Mortgage Loan by
its Owner (if Servicer has been servicing such Mortgage Loan from such
Owner's date of acquisition), or one hundred twenty (120) days after
the date Servicer began servicing such Mortgage Loan; provided,
however, that this period may be extended for a period of up to two
hundred forty (240) additional days if Servicer provides Master
Servicer with an Officer's certificate, acceptable to Master Servicer,
certifying that Servicer has used its best efforts to complete the
recordation process, and that the factors preventing completion of
recordation are beyond Servicer's control. If the Assignment is not
recorded within the required time, Master Servicer will have the right
to effect recordation at Servicer's expense. Unless otherwise directed
in writing by Master Servicer, promptly following recordation, Servicer
will deliver the original
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Assignment, bearing evidence of recordation, to the Custodian. If the
original Assignment is retained by the recording office, Servicer will
instead deliver a certified copy of the original recorded Assignment.
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CHAPTER 5
CUSTODIAL ACCOUNTS, ELIGIBLE INVESTMENTS AND ACCOUNTS
This chapter explains the requirements concerning the maintenance of
custodial accounts, Eligible Accounts and Eligible Investments, and the
requirements concerning mortgage loan accounts and records.
510 CUSTODIAL ACCOUNT ESTABLISHMENT AND MAINTENANCE
511 CUSTODIAL ACCOUNT ESTABLISHMENT
Servicer must establish appropriate custodial accounts for the benefit
of the Owner of the related Mortgage Loans for the deposit of funds
collected in connection with such Mortgage Loans. All custodial
accounts and related records shall be maintained in accordance with the
Applicable Standards and generally accepted accounting principles.
Servicer shall maintain the following custodial accounts for the
following purposes: (i) Custodial Principal and Interest (P&I) Account,
for the collection of principal and interest, Insurance Proceeds,
Liquidation Proceeds and other amounts received with respect to
Mortgage Loans; (ii) Custodial Taxes and Insurance (T&I) Account, for
the collection of Escrow Funds for the payment of Escrow Items; and
(iii) Custodial Buydown Account, to hold all Buydown Funds to be
applied to individual Mortgage Loans.
512 CUSTODIAL ACCOUNT SEPARATENESS
Unless Master Servicer agrees otherwise, Servicer shall maintain
separate Custodial P&I Accounts, Custodial T&I Accounts, and Custodial
Buydown Accounts for the Mortgage Loans owned by each Owner, and funds
in these accounts may not be commingled with funds relating to Mortgage
Loans owned by another Owner or any other party. With the prior written
consent of Master Servicer, Servicer may establish an Eligible
Custodial P&I Account to serve as a unitary Custodial P&I Account both
for the Certificates of different series issued under a Pooling and
Servicing Agreement and for other series of mortgage pass-through
certificates issued under different Pooling and Servicing Agreements
having Securitized Asset Services Corporation as Master Servicer and
the same financial institution as Trustee of all such series. The
Eligible Custodial P&I Account shall be maintained in the name of the
Trustee in its respective capacities as the Trustee for each such
series.
513 ELIGIBLE ACCOUNTS
Each Custodial P&I Account, Custodial T&I Account and Custodial Buydown
Account must be an Eligible Account. An Eligible Account is an account:
(i) that is maintained with a depository institution whose long-term
debt obligations (or, in the case of a depository institution which is
part of a holding company structure, the long-term debt obligations of
which holding company structure) at the time of deposit therein are
rated at least "AA" (or the equivalent) by each of Moody's, S&P, Fitch
and Duff & Phelps
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(if so rated by such entity); (ii) the deposits in which are fully
insured by the FDIC through either BIF or SAIF (to the limit
established by the FDIC) and the uninsured deposits in such accounts
are otherwise secured such that, as evidenced by an opinion of counsel
delivered to Master Servicer and satisfactory to Master Servicer, the
Owners, and where there are beneficial owners as to any such Owners, on
behalf of any such beneficial owners, have a claim with respect to the
funds in such accounts or a perfected first security interest against
any collateral securing such funds that is superior to claims of any
other depositors or creditors of the depository institution with which
such accounts are maintained; (iii) maintained as a trust account or
accounts with the trust department of a federal or state chartered
depository institution or trust company acting in its fiduciary
capacity, or (iv) such other account that is acceptable to Master
Servicer.
514 CUSTODIAL ACCOUNT MAINTENANCE
Servicer shall promptly advise Master Servicer in writing of, or of any
change in, the name and address of the depository, the individual
employee of the depository who is responsible for overseeing each
account, the account number, the title of the account and the
individuals whose names appear on the signature card. The name of each
custodial account shall include a reference to the name of the Owner as
prescribed by Master Servicer. The establishment and maintenance of
each Custodial P&I Account, Custodial T&I Account and Custodial Buydown
Account will be an expense of Servicer. Upon request by Master
Servicer, each month Servicer shall prepare and shall forward to Master
Servicer reconciliations for each Custodial P&I Account, Custodial T&I
Account and Custodial Buydown Account. Upon request of Master Servicer,
Servicer (shall also cause the depository for each of the custodial
accounts to forward copies of all monthly account statements for the
preceding monthly reporting period directly to Master Servicer.
515 DEPOSITS AND WITHDRAWALS TO AND FROM CUSTODIAL ACCOUNTS
Servicer must transfer all funds on hand relating to Mortgage Loans,
Monthly Payments due on or after the related Cut-Off Date and any
principal prepayments received after the related Cut-Off Date, into the
appropriate custodial accounts. Beginning with any payment due on or
after the related Cut-Off Date, all collections on the Mortgage Loans
must be credited to the appropriate custodial account no later than the
first Business Day following receipt.
516 THRESHOLD AMOUNT
Servicer shall not permit the balance of any Custodial P&I Account to
exceed the Threshold Amount. The Threshold Amount is an amount equal
to: (i) One Hundred Thousand Dollars ($100,000) or, in the case of any
Eligible Custodial P&I Account, the aggregate amount on deposit in such
account (I.E., an unlimited amount); or (ii) if an Event of Default has
occurred and is continuing, a lesser amount determined by Master
Servicer, not less than One Thousand Dollars ($1,000), and specified in
a written notice from Master Servicer to Servicer. If Servicer collects
amounts in excess of the Threshold Amount prior to the next scheduled
transfer of funds to the respective Master
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Servicer Custodial Account, Servicer must transfer the excess funds
directly to the related Master Servicer Custodial Account by wire
before the close of business on any Business Day on which the amount on
deposit in such account exceeds the Threshold Amount. Master Servicer
may (but has no obligation to) monitor the principal balance of each
Custodial P&I Account. If Servicer fails to transfer the funds in
excess of the Threshold Amount to the related Master Servicer Custodial
Account or to remit to the Master Servicer Custodial Account the
Monthly Remittance on the Remittance Date, Master Servicer is
authorized to debit such Custodial P&I Account and transfer such
amounts to the related Master Servicer Custodial Account. Servicer
shall file the appropriate Automated Clearing House Debit Form for each
Custodial P&I Account with Master Servicer for this purpose. The
ability of Master Servicer to withdraw and remit such funds to the
appropriate Master Servicer Custodial Account does not relieve Servicer
of its obligations to remit such funds to the related Master Servicer
Custodial Account.
517 INTEREST-BEARING ACCOUNTS
Custodial accounts may be interest-bearing accounts provided that such
accounts comply with the Applicable Standards and provided that
Servicer must ensure that all interest credited to any custodial
account that is not due the Borrower is removed by Servicer within
thirty (30) days after receipt of such interest. If Servicer elects or
is required by the Applicable Standards to deposit Borrower's Escrow
Funds into an interest-bearing custodial account, Servicer shall either
deposit such funds into an account which permits withdrawal on demand
so as to pay Escrow Items as they come due, or invest such funds in an
Eligible Account so that adequate funds mature on or before the
Business Day prior to the date payment is due for each Escrow Item.
518 CLEARING ACCOUNT
Servicer may utilize clearing accounts, subject to the following
requirements: (i) the titles of such accounts must reflect that they
are custodial in nature, and the depository in which the accounts are
maintained must be informed in writing that the accounts are custodial
accounts; (ii) a single clearing account must not be utilized both as a
collection and disbursement clearing account; (iii) a check drawn on or
funds transferred from a Custodial P&I Account or Custodial T&I Account
must be deposited to a disbursement clearing account before or at the
same time as any checks on the clearing account are issued; (iv) the
accounts must be Eligible Accounts; (v) Servicer must maintain adequate
records and audit trails to support all debits and credits of each
Borrower's payment records and accounts; and (vi) collections deposited
to a depository clearing account must be credited to the appropriate
custodial account no later than one (1) Business Day following receipt
by Servicer.
519 MASTER SERVICER CUSTODIAL ACCOUNT
Master Servicer shall establish separate Master Servicer Custodial
Accounts with respect to each Owner, and the name assigned to each
Master Servicer Custodial Account shall include a reference to the
applicable Owner. On or before each Remittance Date, Servicer shall
remit all amounts due to be remitted to Master Servicer hereunder into
the
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appropriate Master Servicer Custodial Account. Master Servicer (or its
designee) shall be the only party authorized to direct the withdrawal
of funds from each Master Servicer Custodial Account. If the Owner of
the related Mortgage Loans is a Trust that has issued mortgage backed
securities backed by such Mortgage Loans, Master Servicer may elect, in
its sole discretion, to employ the Certificate Account created under
the related Pooling and Servicing Agreement as the related Master
Servicer Custodial Account.
520 CUSTODIAL P&I ACCOUNT
Each Custodial P&I Account (other than any Eligible Custodial P&I
Account) must be titled to show the respective interests of Servicer as
trustee and of Master Servicer as beneficiary. Servicer shall not use
the Custodial P&I Account as a collection clearing account. Provided
that no Event of Default has occurred and is continuing, subject to the
Applicable Standards, Servicer may retain any late charges, prepayment
fees, penalty interest and assumption fees as additional servicing
compensation.
521 DEPOSITS
Servicer shall maintain separate accounting for each of the following
types of funds deposited into the Custodial T&I Account:
521.1 MANDATORY DEPOSITS. Subject to the Applicable Standards,
the following funds shall be deposited into each related
Custodial P&I Account within one Business Day after Servicer's
receipt of such amounts: (i) Principal collections from
related Mortgage Loans (including Prepayments in Full and
Curtailments), together with Month End Interest, if
applicable; (ii) Interest collections from related Mortgage
Loans (net of Servicing Fees); (iii) Liquidation Proceeds and
Insurance Proceeds from related Mortgage Loans other than
proceeds held in an escrow account and applied to the
restoration and repair of the related Mortgaged Property; and
(iv) the proceeds of any purchase of a related Mortgage Loan
by Servicer, or sale of an REO. P&I Advances must be deposited
into the appropriate Custodial P&I Account on the Remittance
Date
521.2 OPTIONAL DEPOSITS. Subject to the Applicable Standards,
the following funds may, but are not required to, be deposited
into each related Custodial P&I Account: (i) late charges;
(ii) prepayment fees; (iii) penalty interest; (iv) assumption
fees; and (v) unapplied funds if the Borrower that remitted
such funds is not required to maintain Escrow Funds.
522 PERMISSIBLE WITHDRAWALS
Servicer may make withdrawals from each related Custodial P&I Account
solely for the following: (i) remittances to the related Master
Servicer Custodial Account; (ii) reimbursement to itself for advances
which have been recovered by subsequent collections including late
payments, Liquidation Proceeds or Insurance Proceeds, to the
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extent funds on deposit recovered by such subsequent collections relate
to the Mortgage Loans as to which such advances were made; (iii)
interest earnings on deposits to the related Custodial P&I Account, but
only to the extent that such interest has been credited; (iv) removal
of amounts deposited in error; (v) removal of Servicing Fees to the
extent deposited therein; and (vi) termination of the account.
530 CUSTODIAL T&I ACCOUNT
Each Custodial T&I Account must be designated in the name of Servicer
acting as an agent for the individual related Borrowers regarding
Escrow Funds to show that the account is custodial in nature. Servicer
is required to keep records identifying each Borrower's payment
deposited into the account. Servicer must never allow any Custodial T&I
Account to become overdrawn as to any individual related Borrower. If
there are insufficient funds in the account, Servicer must advance its
own funds to cure the overdraft.
531 DEPOSITS
531.1 MANDATORY DEPOSITS. The following funds must be
deposited into each respective Custodial T&I Account: (i)
Escrow Funds; (ii) T&I Advances; (iii) the remaining balance
of Hazard Insurance loss drafts; (iv) rent receipts to offset
any related T&I Advances by Servicer; (v) unapplied funds; and
(vi) Liquidation Proceeds from the related Mortgage Loan that
offset a deficit balance in the related Borrower's Escrow
Funds.
531.2 PERMISSIBLE WITHDRAWALS. Subject to the Applicable
Standards, with respect to each related Borrower, Servicer may
make withdrawals from each respective Custodial T&I Account to
the extent of the balance of such related Borrower's Escrow
Funds for the following reasons: (i) timely payment of such
Borrower's Escrow Items; (ii) refunds of excess Escrow Funds
collected from such Borrower; (iii) recovering advances made
with respect to such Borrower by Servicer for Escrow Items;
(iv) payment of interest, if required, to such Borrower on his
Escrow Funds; (v) removal of any deposits made in error; and
(vi) termination of the account.
540 CUSTODIAL BUYDOWN ACCOUNT
Servicer shall establish a separate custodial account to hold Buydown
Funds on Mortgage Loans being serviced for the Owner. These accounts
must be clearly marked to indicate that Servicer is a custodian for
Buydown Funds being held for the Owner. Servicer must distribute
Buydown Funds in each Custodial Buydown Account in accordance with the
terms of the applicable Buydown Agreement and the Applicable Standards.
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550 MONTHLY REMITTANCE REQUIREMENTS
551 REMITTANCE OF FUNDS
On each Remittance Date, with respect to each distinct Owner, Servicer
shall transfer, to the extent not previously transferred as required
pursuant to the Threshold Amount requirement, from the funds in (or
required hereunder to be in) the respective Custodial P&I Account to
the related Master Servicer Custodial Account, the following:
(a) all payments on account of principal, including
prepayments of principal (whether full or partial),
and interest, and all net REO Disposition proceeds;
(b) all net Liquidation Proceeds and Insurance Proceeds,
other than any portion of Insurance Proceeds to be
applied to the restoration or repair of the related
Mortgaged Property or released to the Borrower in
accordance with the requirements of the Applicable
Standards;
(c) all P&I Advances made by Servicer;
(d) the Purchase Price paid for any Mortgage Loans or
property acquired in respect thereof repurchased by
Servicer; and
(e) all other amounts required to be deposited in the
Custodial P&I Account or the Master Servicer
Custodial Account pursuant hereto.
Notwithstanding this remittance requirement, Servicer may hold for
future distribution as specified hereunder the following amounts not
exceeding the Threshold Amount: (i) all prepayments of principal
received in the month of such Remittance Date and all related payments
of interest on such principal prepayments; (ii) Liquidation Proceeds
received in the month of such Remittance Date; (iii) amounts received
from Principal or another Person in the month of such Remittance Date
representing the Purchase Price for any Mortgage Loan repurchased
pursuant to a contract of purchase between Principal and such Person;
and (iv) payments which represent early receipt of scheduled payments
of principal and interest due on a date or dates subsequent to the
related Due Date.
552 PAYMENT OF SERVICING FEE
Notwithstanding the remittance requirements of the immediately
preceding section, Servicer shall be entitled to withhold and to pay to
itself the applicable Servicing Fee (as adjusted for Month End Interest
pursuant hereto) from any payment on account of interest or other
recovery (including Net REO Proceeds) as received and prior to deposit
of such payments in the Master Servicer Custodial Account; PROVIDED
FURTHER that with respect to any payment of interest received by
Servicer in respect of a Mortgage Loan (whether paid by the Borrower or
received as Liquidation Proceeds, Insurance Proceeds or otherwise)
which payment is in an amount that is less than the full amount of
interest
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then due with respect to such Mortgage Loan, only that portion of such
payment that bears the same relationship to the total amount of such
payment of interest as the per annum rate used to calculate the
Servicing Fee bears to the Mortgage Interest Rate borne by such
Mortgage Loan shall be allocated to the Servicing Fee with respect to
such Mortgage Loan.
560 ADVANCES
561 PRINCIPAL AND INTEREST ADVANCES
Unless a P&I Advance is reasonably determined by Servicer to be
eventually nonrecoverable from any Insurance Proceeds, Liquidation
Proceeds, or Borrower, Servicer shall advance and deposit to the
respective Custodial P&I Account on or before each Remittance Date a
P&I Advance in an amount equal to the difference between the Monthly
Payment that each Borrower was required to pay to Servicer on the
immediately preceding Due Date and the amount actually received. The
P&I Advance will be recoverable from subsequent, Borrower Monthly
Payments, Insurance Proceeds, Liquidation Proceeds or, if the
Representing Party is obligated to purchase a Mortgage Loan from the
Owner, from the price paid for such Mortgage Loan. Servicer must
continue to make monthly P&I Advances during litigation, bankruptcy
proceedings or foreclosure proceedings pertaining to the Mortgage Loan
or while REO transferred to the Owner through foreclosure or a
deed-in-lieu of foreclosure is held by such Owner or its successors.
Unless a P&I Advance is reasonably determined by Servicer to be
eventually non-recoverable from any Insurance Proceeds, Liquidation
Proceeds, or Borrower, these P&I Advances must be made until the (i)
Liquidation of each Mortgage Loan subject to such proceedings or (ii)
in the case of REO transferred to the Owner through foreclosure or a
deed-in-lieu of foreclosure, the Liquidation of such REO. Advances with
respect to REO will be made as if the related Mortgage Loan and
Mortgage Note remained in effect.
562 FORECLOSURE ADVANCES
During foreclosure proceedings, Servicer must advance from its own
funds all foreclosure expenses as they occur in accordance with the
terms of this Servicer Guide. Such advances must be made by Servicer up
to the time of final disposition of the related Mortgaged Property.
Servicer is required to make these advances unless Servicer reasonably
determines: (i) that such foreclosure will not increase the proceeds to
the Owner of liquidation of such Mortgage Loan after reimbursement of
Servicer for its expenses; or (ii) that such expenses will be
eventually non-recoverable from any Insurance Proceeds, Liquidation
Proceeds or Borrower. If foreclosure proceedings are terminated,
Servicer must collect all legal fees and costs from Borrower;
otherwise, Servicer's advances for reasonable foreclosure expenses will
be recoverable from Insurance Proceeds, Liquidation Proceeds or, if the
Representing Party is obligated to purchase a Mortgage Loan from the
Owner, from the price paid for such Mortgage
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Loan. All foreclosure advances by Servicer and reimbursements to
Servicer must be clearly identifiable in the respective Custodial T&I
Account.
563 TAX & INSURANCE ADVANCES
If a Borrower's Escrow Funds are insufficient to pay taxes or insurance
premiums, Servicer must advance from its own funds to the respective
Custodial T&I Account an amount sufficient to cover the shortage and so
as to assure the maintenance of a first lien position of the related
Security Instrument on the related Mortgaged Property. T&I Advances may
be recovered from Borrower's subsequent monthly escrow payments,
Insurance Proceeds, Liquidation Proceeds or Borrower, but must never be
recovered from scheduled principal or interest collections. Servicer
may not recover T&I Advances from another Borrower's Escrow Funds.
Servicer must make a T&I Advance unless Servicer reasonably determines
that the T&I Advance will be eventually non-recoverable from any
Insurance Proceeds, Liquidation Proceeds, or Borrower. During
litigation, bankruptcy proceedings or foreclosure proceedings
pertaining to any Mortgage Loan or while REO transferred to the Owner
through foreclosure or a deed-in-lieu of foreclosure is held by such
Owner, Servicer must continue to make required T&I Advances until the
Mortgage Loan is liquidated or, in the case of REO transferred to the
Owner through foreclosure or a deed-in-lieu of foreclosure, the REO is
liquidated. Advances with respect to REO will be made as if the related
Mortgage Loan and Mortgage Note remained in effect.
564 REHABILITATION ADVANCE
Servicer must advance from its own funds such amounts as are necessary
to restore any damaged REO not covered by Hazard Insurance or Special
Hazard Insurance as required hereunder, unless Servicer reasonably
determines: (i) that rehabilitation will not increase the proceeds to
the Owner on liquidation of the Mortgage Loan after reimbursement of
Servicer for its expenses; or (ii) that such expenses will be
eventually non-recoverable from any Insurance Proceeds, Liquidation
Proceeds or Borrower. Servicer's advances for reasonable rehabilitation
expenses will be recoverable from Insurance Proceeds, Liquidation
Proceeds, or, if the Representing Party is obligated to purchase a
Mortgage Loan from the Owner, from the price paid for such Mortgage
Loan.
565 NON-RECOVERABLE ADVANCES
If at any time an advance made by Servicer is determined by Servicer,
in the exercise of its reasonable discretion, to be non-recoverable
from Insurance Proceeds, Liquidation Proceeds, or other payments with
respect to a Mortgage Loan, Servicer shall be entitled to withdrawal
from the Custodial P&I Account an amount equal to the non-recoverable
advance. If the amounts on deposit in the related Custodial P&I Account
are insufficient to reimburse Servicer, then prior to any distribution
to the Owner, Servicer shall be entitled to reimbursement from the
payments made and the proceeds received with respect to such Mortgage
Loan.
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566 FAILURE TO ADVANCE
The failure of Servicer to advance any funds required to be advanced
hereunder is Event of Default and cause for termination of Servicer. To
the extent Master Servicer or the respective Trustee, if any, must
advance their respective funds due to the failure of Servicer to
advance or to remit funds to the Master Servicer Custodial Account,
Servicer shall reimburse the advancing party for such amounts, on
demand, together with all costs and expenses incurred by the advancing
party, including, but not limited to, interest on the funds advanced.
Such interest will be calculated at the lesser of: (i) the publicly
announced "prime rate" in effect from time to time at the Reference
Bank plus one percent (1%), and (ii) the maximum interest rate
permitted by law.
570 ELIGIBLE INVESTMENTS
Subject to the Applicable Standards, unless prevented or restricted by
written notice from Master Servicer, Servicer may, from time to time,
withdraw funds from an Eligible Account, other than a Custodial T&I
Account, and immediately invest such funds in Eligible Investments.
Upon the maturity of such Eligible Investments, such funds shall be
redeposited into the Eligible Account from which they were drawn or
into the Master Servicer Custodial Account. Upon demand, Servicer
immediately must provide Master Servicer with any requested information
and reports regarding Servicer's Eligible Investments. An Eligible
Investment of Custodial Account funds must mature by no later than the
Business Day immediately preceding the next Remittance Date. All such
Eligible Investments shall be made in the name of the related Owner or
its nominee. Servicer may at any time withdraw from an Eligible
Investment any amount not required to be deposited into the relevant
Eligible Account.
571 DEFINITION OF ELIGIBLE INVESTMENTS
Any one or more of the following obligations or securities shall
constitute an "Eligible Investment":
(a) direct obligations of, and obligations fully guaranteed as to
timely payment of principal and interest by, the United States
of America, FNMA, FHLMC 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; PROVIDED, HOWEVER, that any obligation of, or
guarantee by, FNMA or FHLMC, other than an
unsecured senior debt obligation of FNMA or FHLMC or a
mortgage participation or pass-through certificate guaranteed
by FNMA or FHLMC, shall be an Eligible Investment only if, at
the time of investment, such investment would not adversely
affect the rating, if any, on any class of Certificates which
are secured by Mortgage Loans that are the source of funds
which are the subject of such investment (as confirmed in
writing by the Rating Agencies);
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(b) 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 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 are rated "A-1+" by
S&P, "Duff-1+" by Duff & Phelps (if rated by Duff & Phelps),
rated in the highest category by Fitch (if rated by Fitch) and
"P-1" by Moody's and the long-term debt obligations of such
depository institution or trust company must be rated at least
"Aa2" by Moody's, "AA" by Duff & Phelps (if rated by Duff &
Phelps), "AA" by Fitch (if rated by Fitch) and "AA" by S&P;
(c) repurchase agreements or obligations with respect to any
security described in clause (a) above where such security has
a remaining maturity of one year or less and where such
repurchase obligation has been entered into with a depository
institution or trust company (acting as principal) described
in clause (b) above and where such repurchase obligation will
mature prior to the next Remittance Date;
(d) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United
States of America or any state thereof, which securities have
a credit rating from S&P, Duff & Phelps (if rated by Duff &
Phelps), Fitch (if rated by Fitch) and Moody's, at the time of
investment or the contractual commitment providing for such
investment, at least equal to the second highest long-term
credit rating assigned by S&P, Duff & Phelps (if rated by Duff
& Phelps), Fitch (if rated by Fitch) and Moody's to the
Certificates; PROVIDED, HOWEVER, that securities issued by any
particular corporation will not be Eligible Investments to the
extent the investment therein will cause the then outstanding
principal amount of securities issued by such corporation and
held as part of the Custodial Accounts to exceed ten percent
(10%) of (i) the aggregate Unpaid Principal Balance of the
Mortgage Loans serviced by Servicer or (ii) the aggregate
principal amount of all Eligible Investments in the Custodial
Accounts;
(e) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand
or on a specified date not more than one year after the date
of issuance thereof) rated "A-1" by S&P, rated "Duff-1" by
Duff & Phelps (if rated by Duff & Phelps), rated in the
highest category by Fitch (if rated by Fitch) and rated "P-1"
by Moody's;
(f) units of investment funds rated in the highest category by
S&P, Duff & Phelps (if rated by Duff & Phelps), Fitch (if
rated by Fitch) and Moody's;
(g) a qualified guaranteed investment contract; and
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(h) any other demand, money market or time deposit or obligation,
or interest-bearing or other security or investment,
acceptable to Master Servicer.
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
interest payments with respect to such instrument provide a
yield to maturity of greater than one hundred twenty percent
(120%) of the yield to maturity at par of such underlying
obligations. Eligible Investments that are subject to
prepayment or call may not be purchased at a price in excess
of par.
572 LIMITATIONS ON ELIGIBLE INVESTMENTS
At any time, Master Servicer, in its sole discretion, may restrict or
totally limit the ability of Servicer to invest in Eligible
Investments. Where the Owner of the related Mortgage Loans is a Trust
which has issued mortgage backed securities securitized by such
Mortgage Loans and where a statistical rating agency selected by such
Owner to rate such mortgage backed securities shall require that
Eligible Investments can only be made if such funds remain within an
Eligible Account, then Master Servicer shall notify Servicer that
Servicer's ability to invest in Eligible Investments shall be so
restricted and that no withdrawal of funds from an Eligible Account for
the purpose of making an Eligible Investment shall be allowed.
573 INCOME, GAINS AND LOSSES
No Eligible Investment shall be sold or disposed of at a gain prior to
maturity without Master Servicer's prior written consent. As long as
Servicer is servicing the related Mortgage Loans, and so long as an
Event of Default has not occurred hereunder, all income (other than any
gain from a premature sale or disposition of the type referred to in
the immediately preceding sentence) realized from any such Eligible
Investment shall be for the benefit of Servicer as additional servicing
compensation. Servicer must deposit into the relevant Custodial Account
or, if applicable, Master Servicer Custodial Account, its own funds in
an amount equal to any losses incurred in respect of any such
investments immediately upon realization of such losses. Master
Servicer may, in its sole discretion, from time to time, require
Servicer to provide a reasonable amount of security to cover the risk
of such investment losses. To the extent that Servicer shall not
immediately deposit the amount of such losses in the relevant Custodial
Account or Master Servicer Custodial Account, Master Servicer may
immediately act against such security as well as pursue all other
remedies permitted by law.
574 ESCROW ACCOUNT INVESTMENTS
Servicer shall establish and maintain Escrow Accounts in accordance
with the Applicable Standards with respect to each loan for which
Servicer collects Escrow Funds. Subject to the Applicable Standards,
any funds in any Escrow Account shall be invested in Eligible
Investments that mature prior to the date on which payments have to be
made
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out of the related escrow account, and any such Eligible Investment
shall not be sold or disposed of prior to its maturity. Servicer shall
cover the loss on any such investment depositing its own funds in the
amount of such loss into the appropriate escrow account. Subject to the
Applicable Standards, Servicer may make withdrawals from an Escrow
Account: (i) to effect timely payment of Escrow Items; (ii) to
reimburse Master Servicer or Servicer out of related collections for
Advances with respect to Escrow Items; (iii) to refund to any Borrowers
any sums determined to be overages; (iv) to pay interest, if any, owed
to Borrowers on such account; (v) for application to restoration or
repair of the Mortgaged Property; or (vi) to clear and terminate the
Escrow Account on the termination of the Servicing Agreement. Servicer
shall be entitled to all investment income on any Escrow Account not
required to be paid to Borrowers pursuant to the Applicable Standards.
580 MORTGAGE LOAN ACCOUNTING
581 MORTGAGE LOAN ACCOUNT RECORDS
Servicer must maintain permanent Mortgage Loan account records for each
Mortgage Loan, including, without limitation, complete and accurate
records of all transactions affecting any Mortgage Loan, in accordance
with the Applicable Standards. Each Mortgage Loan must be clearly
marked to indicate that it is being serviced for the Owner, and each
account record must be identifiable by the Servicer Loan Number.
Servicer shall maintain the following information for each Mortgage
Loan in a readily accessible form: (i) the Master Servicer Loan Number;
(ii) the current Unpaid Principal Balance; (iii) the date of receipt,
amount of payment and distribution of such payment for each Monthly
Payment received with respect to such Mortgage Loan as to each related
Due Date; (iii) for ARM Loans, the current Mortgage Interest Rate, all
limitations contained in the Mortgage Note with respect to periodic
adjustments in the Mortgage Interest Rate, the scheduled Interest
Adjustment Dates, Payment Adjustment Dates, the Gross Margin and the
Index; (iv) other transactions affecting the amounts due from or
payable to Borrower; (v) the current outstanding balances of principal
and interest deposits, advances, taxes and insurance deposits and
unapplied payments with respect to such Mortgage Loan; (vi) any
overdraft of Borrower's Escrow Funds; (vii) any servicing reports or
loan histories; and (viii) any other information customarily maintained
by a mortgage loan servicer of one to four family residential
mortgages.
582 MORTGAGE LOAN ACCOUNTING PRACTICES
Servicer shall administer the application and accounting of payments
made on the Mortgage Loans in accordance with the Applicable Standards.
If the Owner of a Mortgage Loan is a Trust which has issued
mortgage-backed securities secured by such Mortgage Loan pursuant to
the terms of a Pooling and Servicing Agreement, and a copy of such
Pooling and Servicing Agreement has been furnished by Master Servicer
to Servicer, then, subject to applicable law, the provisions of such
Pooling and Servicing Agreement regarding the application and
accounting of payments made on such Mortgage
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Loan shall control to the extent such provisions require a different
manner of application or accounting. Except as otherwise provided
herein, all Mortgage Loan account records must be maintained according
to the Uniform Single Audit Program for Mortgage Bankers and generally
accepted accounting principles.
583 PRINCIPAL AND INTEREST COMPUTATION; AMORTIZATION
583.1 PRINCIPAL AND INTEREST. All Mortgage Loans must amortize
with interest calculated and paid in arrears. Under this
method, the interest due from a Borrower on a Due Date is
calculated based on: (i) the Unpaid Principal Balance of the
related Mortgage Loan prior to application of the principal
portion of the related current Monthly Payment; (ii) thirty
days interest at the related Mortgage Interest Rate; and (iii)
adjusted as herein provided for the effects of Curtailments,
Prepayments in Full and Liquidations. The calculated interest
portion is then subtracted from the related Monthly Payment to
obtain the principal portion. The principal portion is then
applied to the Unpaid Principal Balance of the related
Mortgage Loan. The amount to be applied to interest for a
multiple installment must be calculated using the Unpaid
Principal Balance of the related Mortgage Loan remaining after
the previous interest calculation and principal application.
583.2 AMORTIZATION. The amortization of each Mortgage Loan
must reduce to zero, or as to balloon loans, the respective
remaining principal balance to be paid at Maturity pursuant to
the terms of the related Mortgage Note, at the end of the
Mortgage Loan term through the application of regular monthly
payments. Capitalization of interest is not permitted, except
as provided by the terms of any Mortgage Loan that provides
for negative amortization. To the extent any Mortgage Loan
provides for negative amortization, such as a GPM or GPARM
Loan, Servicer must assure that the Unpaid Principal Balance
of such Mortgage Loan never exceeds the related maximum
negative amortization amount permitted under the Mortgage
Note, and that the related Monthly Payment is recast as
provided for in the Mortgage Note such that the balance fully
amortizes within the remaining term of such Mortgage Loan.
Servicer must amortize a Mortgage Loan for which Buydown Funds
are applied at the Mortgage Interest Rate, not at the buy-down
rate, in order to ensure that payments are collected to
amortize properly the Mortgage Loan.
583.3 INTEREST CALCULATIONS. Monthly interest calculations for
periods of a full month must be based on a 30-day month and a
360-day year. Factors used for such calculations should be
carried to ten decimal places. The dollar amount of any
interest payment shall be carried out to four decimal places.
Interest calculations for periods of less than a full month
must be based on a 365-day year.
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584 APPLICATION PROCEDURE
A payment from a Borrower will normally consist of interest, principal,
deposits for insurance and taxes and late charges, if applicable.
Subject to the Applicable Standards, Payments received from Borrowers
must be applied in the following order: (i) prepayment charges; (ii)
deposits for taxes and insurance; (iii) required monthly interest; (iv)
required monthly principal; and (v) any fees which may be retained by
Servicer, including late charges, returned check fees, and assumption
fees. Servicer may not reapply prior prepayments or accumulated
Curtailments for payment of subsequent installments. Payments made by
the Borrower to satisfy future installments must be accounted for as
prepaid installments of principal and interest. Servicer should contact
the Borrower if there is a question about the Borrower's intention in
making any unscheduled payment.
585 CURTAILMENTS
Servicer may accept Curtailments at any time. If a Mortgage Loan is
delinquent, funds received must first be applied to bring the Mortgage
Loan current, and if there are excess funds after the application of
amounts received from the Borrower to pay the related Monthly Payment,
the excess funds represent a Curtailment and may be applied as a
partial principal prepayment. If a Curtailment is received on or after
the Due Date, Servicer may either: (i) retroactively apply the
Curtailment to the Scheduled Principal Balance of the related Mortgage
Loan as of the Due Date; or (ii) to the extent permitted by law and the
Mortgage Loan, apply such Curtailment at the end of the current period.
To the extent that Servicer retroactively applies the Curtailment to
the Scheduled Principal Balance of the related Mortgage Loan, Servicer
must either collect curtailment interest an amount equal to 30 days of
interest on the amount of the Curtailment at the related Mortgage
Interest Rate from Borrower, or, to the extent specified herein, pay
such amount out of its own funds. The interest portion of the next
installment due is then calculated based on the Unpaid Principal
Balance of the related Mortgage Loan after application of the
Curtailment. To the extent Servicer applies the Curtailment at the end
of the current period, Servicer does not collect or pay such
curtailment interest. A Curtailment may not be used to reduce the
related Monthly Payment or the related Mortgage Interest Rate for any
Mortgage Loan, or to postpone the Due Date of any payment. Each
Curtailment must be deposited into the related Custodial P&I Account
within one Business Day after receipt and must be remitted no later
than the regularly scheduled Monthly Remittance to the related Master
Servicer Custodial Account.
586 LIQUIDATIONS; MONTH-END INTEREST
If a Prepayment in Full or a Curtailment of a Mortgage Loan occurs and
Servicer does not receive a full 30 days of interest (calculated on a
30-day month, 360-day year basis) on the prepaid amount for the month
in which the Prepayment in Full or Curtailment occurs, Servicer must
pay, to the extent of its aggregate servicing compensation due in that
month for all Mortgage Loans, the Month End Interest on all such
Mortgage Loans so prepaid in full or in part. To the extent that
Servicer's aggregate monthly servicing compensation for all Mortgage
Loans is insufficient funds to pay all such Month End
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Interest, the resulting shortfall shall not be recoverable from
Servicer or any other sourcein the future. The payment of Month End
Interest by Servicer shall not be an "advance" and shall not be
reimbursable from the proceeds of any Mortgage Loan. Within one day
after the Liquidation of a Mortgage Loan, Servicer shall deposit the
related Liquidation Proceeds together with the related Month End
Interest into the related Custodial P&I Account. Servicer must report
information with respect to Liquidations in the monthly reports
delivered to Master Servicer by the eighth calendar day of each
succeeding month. Within five Business Days after any Liquidation,
Servicer must complete and send a Request for Release of Documents to
Master Servicer.
587 REALIZED LOSSES
Servicer must account and report in writing to Master Servicer any
Realized Loss (or gain) upon the Liquidation or Deficient Valuation of
any defaulted Mortgage Loan. Except in the case of Servicer's
obligation to purchase a Mortgage Loan from the Owner due to a breach
of a representation or warranty by Servicer or failure to perform the
servicing procedures according to the Applicable Standards, Servicer is
not liable for any Realized Loss on any Mortgage Loan. With respect to
the Liquidation of a Mortgage Loan, the Realized Loss is: (i) the sum
of the Unpaid Principal Balance, unpaid interest accrued at the related
Mortgage Interest Rate, attorneys' fees and other foreclosure expenses,
unpaid taxes and other non-tax charges due and owing, unpaid property
maintenance expenses, unpaid hazard insurance premiums, and Hazard Loss
expenses; less (ii) the sum of the balance of Escrow Funds, if any, any
refund of any Hazard Insurance premium, rental income receipts,
Insurance Proceeds collected, cash proceeds of any foreclosure sale,
proceeds from sale of a REO, and any amounts received by Servicer
pursuant to bankruptcy or insolvency proceedings. With respect to a
Mortgage Loan subject to a Deficient Valuation, the Realized Loss is
the difference between the Unpaid Principal Balance of the related
Mortgage Loan immediately prior to the Deficient Valuation and the
Unpaid Principal Balance as reduced by the Deficient Valuation.
590 REPORTING REQUIREMENTS
591 MONTHLY ACCOUNTING REPORTS
Servicer must complete and forward to Master Servicer monthly
accounting reports in form and substance acceptable to Master Servicer
covering the period including the first Business Day of the month
through the last Business Day of the month. All monthly reports must be
received by Master Servicer by the eighth calendar day of the following
month, and must show information and be submitted in a sequence
according to Servicer Loan Number order. Servicer must complete and
forward to Master Servicer all forms and reports provided for in this
Servicer Guide, and such additional forms or reports reasonably
requested by Master Servicer. The monthly accounting reports include:
(a) Monthly Summary Report and Certification;
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(b) Monthly Remittance Report;
(c) Mortgage Loans Added Report;
(d) Mortgage Loans Deleted Report;
(e) Mortgage Loan Trial Balance Report;
(f) Mortgage Loan Transactions Journal;
(g) Prepayment Detail Report;
(h) Delinquency Detail Report;
(i) Action Code Change Report;
(j) Monthly ARM Loan Change Report, if applicable;
(k) Monthly Buydown Detail Report, if applicable;
(l) Calculation of Realized Loss, if applicable;
(m) Foreclosure Remittance Summary, if applicable;
(n) Non-Advancing Mortgage Loan Report,if applicable; and
(o) ARM Loan Conversion Notification, if applicable; and
(p) any other report that impacts Monthly Remittance.
592 ELECTRONIC TRANSMISSION AND AUTOMATED REPORTS
With the prior written consent of Master Servicer, all reports to be
made by Servicer to Master Servicer may be transmitted electronically
in lieu of written reporting. If Servicer services more than one
hundred Mortgage Loans for Master Servicer, Servicer must arrange for
electronic transmission of the required reports. Any expenses
occasioned by the electronic transmission of reports shall be borne by
the Servicer. With the prior written consent of Master Servicer,
Servicer may utilize automated reports if such reports include all of
the information required by the provisions of this Section.
593 MACHINE READABLE RECORDS
At the request of Master Servicer, Servicer will provide to Master
Servicer the current names and mailing addresses of each Borrower in a
mutually agreed machine readable format. Master Servicer will utilize
such information solely for audit purposes, or in the event the
Servicer is terminated hereunder.
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594 LATE REPORTING FEE
Each late or incomplete monthly accounting report will be subject to a
late fee, initially One Hundred Dollars ($100) for each month which a
late or incomplete monthly accounting report remains incomplete or
unfiled. The recurring failure of Servicer to timely file complete
monthly accounting reports constitutes and Event of Default and grounds
for termination of Servicer for cause hereunder.
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CHAPTER 6
INSURANCE
This Chapter explains the servicing requirements relating to insurance.
Servicer must verify that each Mortgage Loan has the insurance coverage
required hereunder. All claims arising under the Insurance Policies
must be settled or otherwise disposed of by Servicer, and all such
Insurance Policies must be maintained, including, without limitation,
the payment of premiums on a timely basis, by Servicer at no expense to
the Owner or Master Servicer.
610 GENERAL INSURANCE REQUIREMENTS
The requirements specified in this Section apply to all Insurance
Policies, including, without limitation, Primary Mortgage Insurance,
Hazard Insurance, Flood Insurance, Pool Insurance, and Title Insurance.
611 SERVICER'S OBLIGATION TO MAINTAIN INSURANCE
If Servicer discovers that a Borrower does not have the insurance
coverage required hereunder, Servicer must obtain and maintain at its
own expense the required insurance coverage on the related Mortgaged
Property. Such expenses shall not be recoverable by Servicer from
Master Servicer or the Principal or from payments on the Mortgage Loan
or any other source relating to the related Mortgage Loan or the
related Mortgaged Property, other than from Liquidation Proceeds or
Insurance Proceeds from the related Mortgage Loan. To the extent
permitted by the Applicable Standards, Servicer may initiate forced
placed coverage with respect to such Mortgaged Property and thereafter
attempt to recover such expenses from the related Borrower.
612 INSURANCE NOTICES
Servicer must arrange for all insurance drafts, notices, policies,
invoices, or other correspondence to be delivered directly to Servicer.
The Owner of the related Mortgage Loan, its successors and assigns,
must be named as the Mortgagee, the endorsement must show Servicer's
address as shown in the following example:
[Owner of the Mortgage Loan, its successors and assigns]
c/o [Servicer]
[Servicer's Address]
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613 EVIDENCE OF INSURANCE
Servicer must maintain the following documentation with respect to
insurance coverage on each Mortgage Loan:
(a) if Primary Mortgage Insurance is required, a copy of the
Primary Mortgage Insurance policy and any related
endorsements;
(b) if Hazard Insurance is required, the original Hazard Insurance
policy, and any related endorsements;
(c) a copy of the Title Insurance policy and any related
endorsements;
(d) if Flood Insurance is required, the original Flood Insurance
policy and any related endorsements; and
(e) for any blanket insurance policy, a copy of such policy and
any endorsements.
A certificate of insurance is acceptable in lieu of any of the
foregoing policies if it contains the following information: (i) named
insured and Mortgagee or, for PUD or Condominium Units, the named
insured association, unit owner and unit owner Mortgagee; (ii) address
of the Mortgaged Property; (iii) type, amount and effective dates of
coverage; (iv) deductible amount; (v) any endorsement or optional
coverage obtained and made part of the original policy; (vi) insurer's
agreement to provide at least ten day's prior written notice to
Servicer and Borrower (or applicable unit owner Mortgagee if for a PUD
or Condominium Unit) before any reduction in coverage or cancellation
of the policy; and (vii) signature of an authorized representative of
the insurer, if required by applicable law.
614 ELIGIBLE INSURERS
Servicer must ensure that each Insurance Policy is underwritten by an
insurance carrier that has either: (i) a current rating by Best's
Insurance Reports of B/VI or better; or (ii) both a financial rating by
Best's Insurance Reports of Class V and a general policyholder's rating
of at least A by Best's Insurance Reports. Each insurance carrier must
be licensed or otherwise authorized by law to conduct business in each
state in which a related Mortgaged Property is located. Servicer must
immediately notify Master Servicer if Servicer knows or has reasonable
cause to suspect that an insurer under any Insurance Policy will, for
any reason, be unable to pay a valid claim, and Servicer shall then
find a substitute insurer and pay any premiums to the substitute
insurer. In any case, Servicer shall not be liable in any way for the
financial inability of any insurer under any Insurance Policy to pay a
valid claim so long as Servicer is in compliance with the provisions of
this Servicer Guide.
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620 PRIMARY MORTGAGE INSURANCE
621 PRIMARY MORTGAGE INSURANCE REQUIREMENT
Unless Primary Mortgage Insurance coverage with respect to a Mortgage
Loan has been waived in writing by the Owner of the Mortgage Loan at
the time Owner purchases such Mortgage Loan or such Primary Mortgage
Insurance is cancelled as provided herein, Servicer must maintain at
all times Primary Mortgage Insurance on any Mortgage Loan with an
original LTV ratio in excess of eighty percent (80%).
622 PRIMARY MORTGAGE INSURANCE COVERAGE
For each Mortgage Loan, Primary Mortgage Insurance must at least
provide coverage which insures against loss of that portion of the
Unpaid Principal Balance of the Mortgage Loan that exceeds seventy-five
(75%) of the Value of the Mortgaged Property. If the Mortgage Loan
provides for negative amortization or for the potential of negative
amortization, the Primary Mortgage Insurance policy must also insure
any increase in the Unpaid Principal Balance from the original
principal balance of the related Mortgage Note.
623 PRIMARY MORTGAGE INSURANCE CANCELLATION
Subject to the Applicable Standards, Servicer may cancel the Primary
Mortgage Insurance policy if Borrower requests cancellation and all of
the following requirements are met:
(a) The current LTV ratio must be eighty percent (80%) or less,
calculated as the Unpaid Principal Balance of the Mortgage
Loan divided by the Value of the Mortgaged Property. If there
are indications that the Value of the Mortgaged Property has
declined, Servicer must obtain an Appraisal Report that is not
more than sixty (60) days old, and the calculation will be
based upon this appraised value. The expense of the Appraisal
Report will not be borne by Master Servicer;
(b) The related Mortgage Loan may not have been thirty (30 days or
more delinquent within the preceding twelve months;
(c) There may not have been any other default under the terms of
the related Mortgage Loan at any time during the preceding
twelve months; and
(d) Servicer must submit a Request for Primary Mortgage Insurance
Cancellation to Master Servicer. Master Servicer may deny the
request if it determines, in its sole discretion, that the
interests of the Owner may be harmed by such cancellation.
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624 PRIMARY MORTGAGE INSURER DOWNGRADING
If the rating assigned by a Rating Agency to the claims paying ability
of any Primary Mortgage Insurer is reduced below the level permitted
hereunder, Servicer will use its best efforts to replace each Primary
Mortgage Insurance Policy issued by such Primary Mortgage Insurer with
a new Primary Mortgage Insurance policy issued by an insurer whose
claims paying ability is acceptable to Master Servicer. The premium for
any replacement Primary Mortgage Insurance policy shall not exceed the
premium for the discontinued Primary Mortgage Insurance policy.
625 PRIMARY MORTGAGE INSURANCE CLAIMS
Servicer must take all steps necessary to ensure the payment of the
maximum benefits payable under the terms of any Primary Mortgage
Insurance policy. Servicer must work diligently with each Primary
Mortgage Insurer to determine whether such insurer will settle the
claim by taking title to the Mortgaged Property in question or in some
other manner. Servicer also must notify Master Servicer immediately in
writing of any decision made by the applicable Primary Mortgage Insurer
relative to a claim. Servicer must deposit any Primary Mortgage
Insurance proceeds in the appropriate Custodial P&I Account immediately
upon receipt. Servicer shall promptly notify Master Servicer in writing
if any Primary Mortgage Insurer at any time denies any or all of a
claim filed under its Primary Mortgage Insurance policy.
630 HAZARD AND FLOOD INSURANCE REQUIREMENTS
631 HAZARD INSURANCE COVERAGE
Unless Blanket Hazard Insurance is provided in accordance with the
requirements hereunder, Servicer must ensure that each Mortgaged
Property is covered at all times by Hazard Insurance. Subject to the
Applicable Standards, the amount of Hazard Insurance must be at least
equal to the lesser of the Unpaid Principal Balance of the related
Mortgage Loan, or one hundred percent (100%) of the replacement cost of
the improvements on the Mortgaged Property, and each Hazard Insurance
deductible may not exceed the lesser of One Thousand Dollars ($1,000)
or one percent (1%) of the applicable amount of coverage. The amount of
insurance must be sufficient to prevent the application of any
co-insurance contribution or any loss. Servicer must ensure that each
Mortgaged Property is adequately covered even when vacant and, where
available, must obtain a vacancy permit endorsement.
632 FLOOD INSURANCE COVERAGE
Unless a blanket coverage is provided in accordance with the
requirements hereunder, Servicer must ensure that Flood Insurance is
maintained at all times on Mortgaged Property that are in a special
flood hazard area identified by the Secretary of HUD or the Director of
the Federal Emergency Management Agency. Subject to the Applicable
Standards, the amount of Flood Insurance must be at least equal to the
lesser of the maximum amount available under the National Flood
Insurance Program's regular
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program or its emergency program, the Unpaid Principal Balance of the
related Mortgage Loan, or one hundred percent (100%) of the replacement
cost of the improvements on the Mortgaged Property, and each Flood
Insurance deductible may not exceed the lesser of One Thousand Dollars
($1,000) or one percent of the applicable amount of coverage.
633 HAZARD INSURANCE MORTGAGEE PROVISIONS
Each Hazard Insurance Policy must contain or have attached a standard
mortgagee clause in the form customarily used by or required by private
institutional mortgage loan investors. This clause must provide that
the Hazard Insurance carrier will notify the named Mortgagee at least
ten days before any reduction in coverage or cancellation of the
policy. All mortgagee clauses must be properly endorsed, necessary
notices of transfer must be given and any other action must be taken
that is necessary in order to protect the interests of the Owner, its
successors and/or assigns. The standard mortgagee clause should read as
follows: "Insuring [Servicer's Name], as agent for the [Owner of the
Mortgage Loan], its successors and/or assigns."
634 RISK EXPOSURE
If any Mortgaged Property is exposed to hazards not fully covered by
Hazard Insurance or Flood Insurance, Servicer must notify Master
Servicer immediately with a recommendation for additional coverage.
635 SERVICER'S DUTIES REGARDING LOSS OR DAMAGE
Immediately upon Servicer's notification or discovery of a loss or
damage to any Mortgaged Property caused by an earthquake, flood,
tornado or other natural disaster, Servicer must take the following
actions:
(a) determine the extent of the losses or damages;
(b) secure any abandoned Mortgaged Property from vandalism and the
elements;
(c) communicate with and counsel the respective Borrower on any
disaster relief programs or other assistance which is
available; and
(d) notify Master Servicer and recommend appropriate action to
protect the interests of the Owner of the related Mortgage
Loan and the respective Borrower.
Servicer will be liable for any additional damage or loss that results
from Servicer's failure to discover the initial loss or damage if
Servicer reasonably should have known of such initial loss or damage in
the exercise of prudent servicing practices.
636 LOSS SETTLEMENT APPROVAL
The approval of the Master Servicer is not required for disposition of
insurance loss settlements where property damage is Fifteen Thousand
Dollars ($15,000) or less, and the Servicer may disburse the loss
proceeds as provided herein. Master Servicer's
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written approval must be obtained before disposition of any insurance
loss settlement involving property damage over Fifteen Thousand Dollars
($15,000). Servicer shall conduct property inspections in accordance
with a repair and rehabilitation plan for such Mortgaged Property and
prepare Property Inspection Reports on any Mortgaged Property involving
property damage over Fifteen Thousand Dollars ($15,000). Servicer shall
furnish a copy of the repair and rehabilitation plan for such Mortgaged
Property to Master Servicer upon request.
637 LOSS SETTLEMENTS
Subject to the Applicable Standards, Servicer shall be named as a payee
on all insurance loss drafts and upon receipt thereof, the funds shall
be credited to the Borrower's Insurance Proceeds balance and deposited
into: (i) one or more separate escrow accounts, so that the balance on
deposit in such accounts is fully insured at all times by BIF or SAIF,
where such funds will be applied to the repair and restoration of the
related Mortgaged Property; or (ii) the respective Custodial P&I
Account, if such funds will not be applied to the repair and
restoration of the related Mortgaged Property. Servicer shall report
any such settlement to the Master Servicer on a Hazard Insurance Loss
Draft Notification, together with a summary of the disposition of the
proceeds.
638 DISBURSEMENTS
Subject to the Applicable Standards, Servicer is responsible for the
disbursement of insurance loss settlements under each Hazard Insurance
policy and each Flood Insurance policy, including but not limited to:
(a) arranging for and authorizing the restoration and
rehabilitation of the related damaged Mortgaged Property in
cooperation with the Borrower;
(b) collecting, endorsing and disbursing the Insurance Proceeds
and arranging for progress inspections and payments, if
necessary;
(c) complying with all requirements of any Primary Mortgage
Insurance policy pertaining to the filing of claims and the
settlement of insurance losses to assure that the security of
such Mortgage Loan is not impaired and that the coverage of
such Primary Mortgage Insurance policy is not jeopardized or
otherwise adversely affected;
(d) assuring, through the receipt of Borrower's affidavits, repair
contract copies, lien waivers and the like, that the priority
of the lien of the Security Instrument is preserved, and that
the Insurance Proceeds are applied to the restoration or
repair of the related Mortgaged Property if not applied in
payment of such Mortgage Loan;
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(e) obtaining releases or waivers of liens and taking such other
actions as are necessary to avoid the filing of laborers',
materialmen's or mechanic's liens against the related
Mortgaged Property;
(f) maintaining procedures and practices acceptable to Master
Servicer, in conformance with Applicable Standards, for the
control and disposition of insurance loss drafts; and
(g) If a letter of assurance is obtained from any insurer under a
Hazard Insurance policy or a Flood Insurance policy that the
insurance coverage will continue in full force and effect,
Servicer must deposit such letter in the appropriate Servicer
Mortgage Loan File.
639 INSURANCE PROCEEDS NOT USED FOR REPAIR
If Servicer determines that the Insurance Proceeds are insufficient to
repair and restore the related Mortgaged Property, or that the repair
and restoration of such Mortgaged Property is not feasible, after
obtaining authorization from Master Servicer, Servicer shall apply the
Insurance Proceeds to reduction of the Unpaid Principal Balance of a
Mortgage Loan. In such case, if the application of Insurance Proceeds
causes the Unpaid Principal Balance of the Mortgage Loan to reduce to
zero, Servicer must treat the application of such proceeds as a
Liquidation, and notify Master Servicer of such Liquidation.
640 TITLE INSURANCE REQUIREMENTS
641 TITLE INSURANCE COVERAGE
Servicer must maintain a Title Insurance policy with respect to each
Mortgage Loan and the related Mortgaged Property until such Mortgage
Loan is paid in full. Servicer shall not reduce the amount or change
the scope of coverage under any Title Insurance policy, or otherwise do
or authorize any act or omission that would affect the coverage of any
Title Insurance policy, unless Servicer has received written direction
from Master Servicer specifying amount or amounts or scope to which the
coverage is to be changed. Servicer shall cause the original of such
Title Insurance policy to be sent directly to the Custodian. Servicer
must perform and comply with all requirements and conditions of each
Title Insurance policy for each Mortgage Loan and the related Mortgaged
Property that are to be performed or observed by the "Insured" or
obligee thereunder as a condition to maintaining and keeping it in
force or making a claim.
642 TITLE INSURANCE CLAIMS
Servicer must notify Master Servicer contemporaneously with the making
of any claim. Servicer shall be named as a payee on all Title Insurance
policy loss drafts, and upon receipt shall credit funds to the
appropriate Custodial P&I Account the extent of the sum of: (i) the
Unpaid Principal Balance of the Mortgage Loan and any interest accrued
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thereon; (ii) any outstanding advances thereon; and (iii) any expenses
owed by the Borrower which are due the Owner, Master Servicer or
Servicer, whether for its own account or others. The balance of funds,
if any, shall be credited to the appropriate Custodial T&I Account.
Servicer shall disburse the proceeds of any settlement in accordance
with Master Servicer's instructions and requirements.
650 CONDOMINIUM AND PUD INSURANCE
The provisions of this Section pertain solely to Mortgage Loans secured
by Condominium Units or PUD Units. Except for provisions of this
section that are in conflict with the other provisions of Chapter 6 of
this Servicer Guide, the other provisions of Chapter 6 also apply to
Mortgage Loans secured by Condominium Units or PUD Units.
651 GENERAL REQUIREMENTS
The premiums for the required Insurance Policies must be paid as a
common expense by the owners' association. Funds for each of the
deductibles associated with the Insurance Policies must be included in
the owners' association's reserves and must be so designated. The named
insured under each Insurance Policy must be similar in form and
substance to the following:
"Association of Owners of the [Name of Condominium Project or
PUD] for use and benefit of the individual Condominium or PUD
Unit owners" (designated by name, if required).
Each Insurance Policy must contain the standard mortgagee clause
endorsed to provide that any disbursements will be paid to the owners'
association for the use and benefit of Mortgagees as their interests
may appear, or otherwise endorsed to fully protect the interest of the
Owner and the holders of a beneficial interest therein, if any.
652 RECONSTRUCTION COVERAGE
If there is a construction code provision that would require changes to
undamaged portions of the building in the PUD or Condominium Project in
which a Mortgaged Property is located even when only part of a building
is destroyed by an insured hazard, Servicer must ensure that each
Insurance Policy contains the necessary construction code endorsements
to cover this exposure.
653 COMMON AREA MULTIPLE PERIL INSURANCE
Servicer must ensure that the owner's association maintains a policy of
Common Area Multiple Peril Insurance with respect to the PUD or
Condominium Project in which a Mortgaged Property is located. The
Common Area Multiple Peril Insurance policy must at least protect
against loss or damage by fire and all other hazards that are normally
covered by the standard extended coverage endorsement, and all of the
perils customarily covered for similar types of projects, including
those covered by the standard "all risk"
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endorsement. Subject to the Applicable Standards the policy must cover
one hundred percent (100%) of the current replacement cost of all of
the common areas (other than the land and foundation), common elements
including fixtures and building service equipment, as well as common
personal property and supplies, and the deductible may not exceed the
lesser of Ten Thousand Dollars ($10,000) or one percent (1%) of the
applicable amount of coverage. If a steam boiler is operating within
the Condominium Project or PUD, Servicer must ensure that boiler and
machinery coverage is in force at all times and evidenced by the
standard form of boiler and machinery endorsement. Subject to the
Applicable Standards, the minimum liability coverage per accident under
boiler and machinery coverage must equal the insurable value of the
boiler and equipment and the building housing such boiler or machinery,
based upon current replacement cost, or Two Million Dollars
($2,000,000), whichever is less.
654 BLANKET HAZARD INSURANCE
Unless alternative coverage is provided as permitted hereunder,
Servicer must verify that each such Mortgaged Property is covered at
all times by Hazard Insurance policy which provides blanket coverage
for the individual units in the Condominium Project or PUD. Subject to
the Applicable Standards, the amount of Hazard Insurance for a blanket
policy must be at least equal to the lesser of the aggregate of the
outstanding principal balances of all mortgage notes secured by units
within the Condominium Project or PUD (including the Mortgage Notes
secured by Mortgaged Properties) or one hundred percent (100%) of the
replacement cost of the improvements on the Condominium Project or PUD
Unit site, and each Hazard Insurance deductible for a blanket policy
may not exceed the lesser of Ten Thousand Dollars ($10,000) or one
percent (1%) of the applicable amount of coverage.
655 COMMON AREA CGL INSURANCE
Servicer must ensure that the owners' association maintains a
Comprehensive General Liability Insurance policy covering all of the
common areas, common elements, commercial spaces and public ways in the
Condominium Project or PUD in which a Mortgaged Property is located.
Subject to the Applicable Standards each CGL Insurance policy: (i) must
provide coverage of at least One Million Dollars ($1,000,000) for
personal injury, bodily injury or property damage for any single
occurrence; (ii) must contain a severability of interest endorsement
preventing the insurer from denying the claim of a Condominium or PUD
Unit owner because of negligent acts of the owners' association or
other unit owners; and (iii) must include all other types of coverage
and endorsements in the types and amounts required by private
institutional mortgage loan investors for developments similar in
construction, location and use.
656 OWNERS' ASSOCIATION FIDELITY INSURANCE
Except for Condominium Project or the PUD have fewer than twenty (20)
units (for which owners' association fidelity insurance coverage is not
required), Servicer must ensure that the owners' association maintains
a fidelity bond or insurance against dishonest and fraudulent acts on
the part of directors, managers, trustees, employees or
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volunteers responsible for handling Funds belonging to or administered
by the association. Such bond or insurance must name the owners'
association as the insured and must be written in an amount sufficient
to provide protection at least one hundred fifty percent (150%) of the
insured's estimated annual operating expenses and reserves. An
appropriate endorsement to the policy to cover any persons who serve
without remuneration must be added if the policy would not otherwise
cover volunteers. Owners' association fidelity insurance coverage must
be in an amount equal to at least three (3) months assessments on all
units in the Condominium Project or PUD.
657 BLANKET FLOOD INSURANCE
For each Mortgaged Property that is in a special flood hazard area
identified by the Secretary of HUD or the Director of the Federal
Emergency Management Agency, if the Mortgaged Property is not covered
by an individual Flood Insurance policy in accordance with the
provisions of this Servicer Guide, Servicer must ensure that the
owner's association maintains a Flood Insurance policy which provides
blanket coverage for the individual units in the Condominium Project or
PUD. Subject to the Applicable Standards, the amount of Flood Insurance
under the blanket policy must be at least equal to the lesser of: (i)
the maximum amount available under the National Flood Insurance
Program's regular program or its emergency program; (ii) the aggregate
of the outstanding principal balances of all mortgage notes secured by
units within the Condominium Project or PUD (including the Mortgage
Notes secured by Mortgaged Properties); or (iii) one hundred percent
(100%) of the replacement cost of the improvements on the Condominium
Project or PUD Unit site, and each deductible may not exceed the lesser
of (a) Five Thousand Dollars ($5,000) or (b) one percent (1%) of the
applicable amount of coverage.
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CHAPTER 7
DELINQUENCY, FORECLOSURES AND REO'S
This Chapter explains Servicer's responsibilities with respect to delinquent
Mortgage Loans, as well as the procedures relating to foreclosures and REO's.
The provisions set forth in this Chapter constitute the minimum guidelines and
procedures for servicing Delinquent Mortgage Loans, and Servicer must use
collection procedures which meet or exceed these guidelines. Master Servicer
retains the right to require Servicer to perform additional collection
procedures which Master Servicer deems, in its sole discretion, necessary to
realize the objectives set forth herein or otherwise to protect the interests of
the Owner.
710 DELINQUENCY MANAGEMENT
711 SERVICING OBJECTIVES
The purpose of any collection effort is to cure a Delinquency in the
shortest possible time. Servicer's collection staff must be
sufficiently skilled in financial counseling and mortgage servicing
techniques to assist a Borrower to bring his Mortgage Loan current and
to protect his equity and credit rating, while at the same time
protecting the interests of the Owner and of Master Servicer.
712 DELINQUENCY SERVICING PROCEDURES
Servicer should treat each Delinquency individually, and must vary its
collection techniques to fit individual circumstances, avoiding a fixed
collection pattern which may be ineffective in dealing with particular
Borrowers. Servicer should use notices, letters, telegrams, telephone
calls, face-to-face contact and other responsible collection techniques
consistent with the Applicable Standards. Servicer should recognize the
importance of telephone and face-to-face contact in any collection
program. Discussions with the Borrower must cover the cause of
Delinquency and the time frame in which the Delinquency will be cured.
As part of its collection procedures, Servicer must closely monitor all
newly originated Mortgage Loans. Subject to the Applicable Standards,
Servicer must, at a minimum, adhere to the following collection
procedures:
(a) LATE NOTICE. A late notice shall be mailed to the Borrower by
the eighteenth (18th) day of Delinquency;
(b) TELEPHONIC INQUIRY. Servicer shall use best efforts to make
telephone contact with the Borrower by the twentieth (20th)
day of such Delinquency;
(c) NOTICE OF DEFAULT. Notification of default shall be mailed to
the Borrower by the thirty-fifth (35th) day of Delinquency;
(d) BORROWER INTERVIEW. Servicer shall use best efforts to conduct
a face-to-face interview between the forty-fifth (45th) day
and the sixtieth (60th) day of
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Delinquency if satisfactory arrangements to cure the
Delinquency have not been made. If, for geographic reasons, a
face-to-face meeting is not feasible, an in-depth telephone
interview may be conducted instead;
(e) CONTINUING CONTACTS. If satisfactory arrangements have not
been made to cure the Delinquency by the sixtieth (60th) day,
Servicer must continue to contact the Borrower until either
the related Mortgage Loan has been brought current or Servicer
has made a recommendation in writing to Master Servicer for
foreclosure of such Mortgaged Property or other action;
(f) PROPERTY INSPECTION. Servicer is required to inspect the
related Mortgaged ---------------------- Property no later
than the sixtieth (60th) day of the Delinquency if no
satisfactory arrangements have been made to cure the
Delinquency. The inspection should determine the physical
condition and the occupancy status of the Mortgaged Property.
Servicer is required to inspect the Mortgaged Property monthly
after the sixtieth (60th) day of Delinquency, until the
Delinquency is cured or the related Mortgage Loan is
Liquidated. The results of any inspection should be used in
determining whether a recommendation for foreclosure or for
the transfer of deed-in-lieu of foreclosure is necessary.
Servicer must prepare a Property Inspection Report following
each inspection. Servicer must retain all Property Inspection
Reports and must forward copies to the Master Servicer
promptly upon request; and
(g) COLLECTION RECORDS. Servicer is required to maintain all
collection records.
713 COLLECTION EXPENSES
All expenses related to the foregoing collection activities, and the
cost of any of the servicing procedures detailed herein and in the
Servicing Agreement, shall be borne solely by Servicer and shall not be
recoverable by Servicer from Master Servicer or and the Owner or from
Liquidation Proceeds, Insurance Proceeds, payments on the related
Mortgage Loan or any other source relating to the related Mortgage Loan
or the related Mortgaged Property. Servicer may, subject to the
Applicable Standards, recover such expenses from the Borrower.
714 OBLIGATION TO ADVANCE DURING DELINQUENCY
Servicer agrees to advance from its own funds the full amount of
Monthly Payments in the event of a Delinquency of a Mortgage Loan.
These advances shall provide the Owner of the Mortgage Loan with a
regular flow of funds on the delinquent Mortgage Loan. This advance
obligation is in addition to any other advance obligations Servicer has
hereunder. Servicer must still advance funds even if a forbearance has
been granted.
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715 PRIMARY MORTGAGE INSURANCE COMPLIANCE
Where applicable, Servicer must be familiar with and shall satisfy all
requirements of the applicable Primary Mortgage Insurance policy with
respect to a Delinquent Borrower. Servicer must have adequate controls
to assure timely filing of all notices to the appropriate Primary
Mortgage Insurer. Servicer must prepare and file all appropriate claims
with respect to the applicable Primary Mortgage Insurance policy and
must prepare and deliver to Master Servicer copies of all notice,
claims forms and other papers received from or presented to any Primary
Mortgage Insurer, unless Servicer is otherwise instructed by Master
Servicer.
716 POOL INSURANCE COMPLIANCE
Where applicable, the Servicer shall be familiar with and shall satisfy
all requirements of the applicable Pool Insurance policy with respect
to a delinquent Borrower. Servicer must have adequate controls to
assure timely filing of all notices to the appropriate Pool Insurer.
Servicer must prepare and file all appropriate claims with respect to
the applicable Pool Insurance policy, and must prepare and deliver to
Master Servicer copies of all notice, claims forms and other papers
received from or presented to any Pool Insurer, unless Servicer is
otherwise instructed by Master Servicer.
720 RELIEF
721 SERVICING OBJECTIVES
Servicer shall be readily available to Borrowers to offer skilled
financial counsel and advice and shall make personal contact with
Delinquent Borrowers as often as possible to achieve a solution that
will bring a Delinquent Mortgage Loan current as soon as possible.
Servicer shall have reasonable discretion to extend appropriate relief
to Borrowers who encounter hardship and who are cooperative and
demonstrate proper regard for their obligations. Relief shall be
granted only to those Borrowers that Servicer believes have a
reasonable expectation of bringing the related Mortgage Loans current
within 180 days following the onset of Delinquency. Without the consent
of Master Servicer, no such relief shall be granted other than with
respect to a Mortgage Loan that has at least a 31-day Delinquency.
Prior to granting relief with respect to a delinquent Mortgage Loan,
Servicer must ascertain that the reasons for the default and the
attitude and circumstances of the Borrower justify the relief to be
granted.
722 FORBEARANCE PLAN
Where relief is appropriate, Servicer shall arrange a "Forbearance
Plan" giving the Borrower a definite period, commencing immediately,
during which the Borrower may reinstate the Mortgage Loan by making
payments in excess of the regular Monthly Payments. Without the prior
written consent of Master Servicer, special forbearance relief
agreements reducing or suspending the regular Monthly Payment of the
related Mortgage Loan for a specified period of time are not permitted.
If the earliest unpaid installment is more than 60 days past due, the
Forbearance Plan must be set forth in a
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written letter agreement executed by both Borrower and Servicer. The
Forbearance plan must provide that the total delinquent amount owed,
including costs and expenses, will be repaid within the shortest period
practicable, but in no event more than 180 days after the Due Date of
the earliest unpaid installment, unless Master Servicer and, where
applicable, the Pool Insurer and/or the Primary Mortgage Insurer,
consent to a longer period of time. Servicer must ensure that the
priority of the lien represented by the Mortgage Loan remains in effect
and is not adversely affected, and, where applicable, the related
Primary Mortgage Insurance policy and/or Pool Insurance policy remain
in full force and effect.
723 ACCOMMODATION LIMITATIONS
Except with the written permission of Master Servicer and except for a
Forbearance Plan permitted hereunder, no modification, recast,
extension, or capitalization of delinquent payments of a Mortgage Loan
shall be permitted unless there is at least a 90-day Delinquency. Where
applicable, Servicer must satisfy all requirements under the applicable
Primary Mortgage Insurance policy and/or Pool Insurance policy
regarding the relief granted with respect to a delinquent Mortgage
Loan, including, without limitation, securing the prior written consent
of the respective insurer regarding any change in any term of such
Mortgage Loan, the release of the related Borrower from any liability
related to such Mortgage Loan, or the release of any portion of, or
interest in, the Mortgaged Property from the lien of the related
Security Instrument.
724 RELIEF COSTS
Servicer is responsible for collection from Borrower of any recording
or similar costs or expenses incidental to the granting of relief with
respect to a Delinquent Mortgage Loan.
725 CERTAIN ASSUMPTIONS PERMITTED
Servicer is authorized, notwithstanding the other provisions of this
Servicer Guide and Servicing Agreement, to permit the assumption of a
defaulted Mortgage Loan rather than to foreclose or accept a
deed-in-lieu of foreclosure if, in Servicer's judgment, the default is
unlikely to be cured and the assuming borrower meets the underwriting
guidelines that originally applied to such Mortgage Loan.
730 FORECLOSURE ADMINISTRATION
731 LIQUIDATION RECOMMENDATION
If a Borrower is chronically delinquent and Servicer has exhausted all
reasonable means of curing the Delinquency, Servicer must recommend
either the commencement of foreclosure procedures or an alternative to
foreclosure, in accordance with the Applicable Standards. Prior to the
commencement of any action to foreclose on a Mortgaged Property, or
prior to the acceptance of a deed-in-lieu of foreclosure, Servicer
shall notify Master Servicer in writing and, where applicable, the
respective Primary Mortgage Insurer and/or the respective Pool Insurer,
of the Servicer's recommendation as to
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whether foreclosure should be commenced, or a deed-in-lieu of
foreclosure accepted, and, where applicable, shall provide all other
notices, reports or information required by Master Servicer or the
applicable Primary Mortgage Insurance policy and/or Pool Insurance
policy. Servicer must include in the notice an estimate of any loss to
be incurred on the liquidation of the Mortgaged Property, and an
estimate of all attorneys' fees, and other costs in respect of the
foreclosure or acquisition in lieu of foreclosure.
732 DIRECTION OF MASTER SERVICER AND INSURERS
Servicer shall not foreclose on a Mortgage without the prior consent of
the Master Servicer. Upon receipt of the written approval of Master
Servicer and, where applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer, Servicer shall initiate foreclosure
or accept a deed-in-lieu of foreclosure, as the case may be. If the
respective Primary Mortgage Insurer or the respective Pool Insurers, as
the case may be, do not accept Servicer's recommendation but direct
otherwise, Servicer shall act according to the respective Primary
Mortgage Insurer's instructions or the respective Pool Insurer's
instructions provided such actions are consistent with, and
contemplated by, the applicable Primary Mortgage Insurance policy or
the applicable Pool Insurance policy. Notwithstanding any of the
foregoing, Servicer shall follow Master Servicer's instructions if
Master Servicer directs Servicer to follow a course of action regarding
the liquidation of a Mortgaged Property.
733 FORECLOSURE EXPENSES
All fees and expenses shall be consistent with FNMA standards and,
where applicable, shall not exceed those permitted under the respective
Pool Insurance policy and/or the respective Primary Mortgage Insurance
policy. Fees in excess of the amount customary for routine cases or
extraordinary legal services must be approved in writing in advance by
Master Servicer, and, where applicable, by the respective Primary
Mortgage Insurer or the respective Pool Insurer, as the case may be, if
required by the applicable policy. The billing by a foreclosure
attorney must demonstrate the appropriateness of any extraordinary fees
for the services required. In cases of full or partial reinstatement of
the related Mortgage Loan, the fees shall be reasonable and in
proportion to the authorized fee for services rendered for a completed
foreclosure. Unless otherwise expressly agreed in writing, neither
Master Servicer, any of its affiliates, their respective officers,
directors, employees, agents, successors or assigns, the Owner, nor any
beneficial owners thereof shall be liable for any attorneys' fees,
trustees' fees, witness fees, title search fees, court costs or other
expenses incurred by Servicer in respect of any foreclosure or
acquisition in lieu of foreclosure, except to the extent that such
fees, costs and expenses are fully reimbursable under a Primary
Mortgage Insurance policy and in fact are reimbursed.
734 HAZARDOUS WASTES
If Servicer has reason to believe that Mortgaged Property related to a
Mortgage Loan being considered for foreclosure or a deed-in-lieu of
foreclosure contains hazardous or regulated substances which may impose
liability (for damages, remediation or otherwise)
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upon the owner of such Mortgaged Property pursuant to Federal, State or
local law, Servicer shall not undertake or continue the process of
foreclosure with respect to such Mortgaged Property, except with the
express prior written approval of Master Servicer, and only if such
approval makes specific reference to the presence of such hazardous or
regulated substances. If Servicer violates this requirement and
acquires the Mortgaged Property by foreclosure or a transfer of a
deed-in-lieu of foreclosure, such acquisition shall be for Servicer's
own account and Servicer shall pay the Owner of the related Mortgage
Loan the Unpaid Principal Balance of such Mortgage Loan, together with
all accrued but unpaid interest. In such case, Servicer's actions shall
be its own, and not as agent for Master Servicer or the Owner of the
related Mortgage Loan, and neither Master Servicer nor the Owner shall
have ever owned the related Mortgaged Property.
735 DEED-IN-LIEU OF FORECLOSURE
Servicer may accept deed-in-lieu of foreclosure of the related
Mortgaged Property if Master Servicer and the respective Primary
Mortgage Insurer and/or the respective Pool Insurer have approved the
liquidation of a Mortgage Loan in such manner, subject to the following
conditions:
(a) marketable title, as evidenced by an applicable Title
Insurance policy, can by conveyed to and acquired by the Owner
of such Mortgage Loan;
(b) where applicable, the transaction complies with all the
requirements of the respective Primary Mortgage Insurer and/or
the respective Pool Insurer and does not and will not violate
or contravene any restriction or prohibition of the respective
Primary Mortgage Insurance policy or the respective Pool
Insurance policy or otherwise result in any loss of benefits,
or reduction in the coverage under either such policy;
(c) no cash consideration is paid to the related Borrower;
(d) the related Mortgaged Property is vacant at the time of the
Borrower's conveyance thereof, unless occupancy has been
approved in writing by Master Servicer and, where applicable,
by the respective Primary Mortgage Insurer and/or the
respective Pool Insurer;
(e) Servicer has obtained a written acknowledgement from the
Borrower that the deed is being accepted as an accommodation
to the Borrower and on the condition that the Mortgaged
Property will be transferred to the Owner free and clear of
all claims, liens, encumbrances, attachments, reservations or
restrictions except for those to which the Mortgaged Property
were subject at the time it became subject to the lien of the
Security Instrument;
(f) the Borrower's inability to pay is justified by a full
financial disclosure verifying such inability;
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(g) the Mortgaged Property has been subject to at least a six
month marketing period; and
(h) the Mortgaged Property is either owner occupied or, if not
owner occupied, an assignment of rentals is provided.
Upon acquisition of such Mortgaged Property by the Owner of the related
Mortgage Loan, Servicer shall promptly notify Master Servicer and, if
applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, indicating the details of the transaction and
reasons for the conveyance and providing the other information required
under a Primary Inspection Report to Master Servicer and, if
applicable, to the Primary Mortgage Insurer and/or the Pool Insurer.
Title shall be conveyed directly from the Borrower to the Owner of the
related Mortgage Loan or to such other Person designated by Master
Servicer.
736 FORECLOSURE PROCEEDINGS
If foreclosure has been approved by Master Servicer and, where
applicable, by the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, with respect to a Mortgaged Property, Servicer
shall initiate or cause to be initiated foreclosure actions in
accordance with the Applicable Standards. If the Mortgaged Property has
been abandoned or vacated by the Borrower and the Borrower has
evidenced no intention of honoring the obligations under the related
Mortgage Loan, the foreclosure process shall be expedited to the
fullest extent permitted by law. The following procedures and
requirements shall apply to all foreclosures:
(a) FORECLOSURE NOTICES. Subject to the Applicable Standards,
Servicer must send the Borrower a letter not less than thirty
(30) days before the commencement of foreclosure proceedings,
setting out: (i) the nature of the default; (ii) the steps
that must be taken by the Borrower to cure the default; and
(iii) the date when foreclosure proceedings will begin. If
Servicer has reason to believe that the related Mortgaged
Property has been abandoned or if the Borrower has displayed
an obvious disregard for his obligations under such Mortgage
Loan, the foregoing notice shall be forwarded at the earliest
possible date following the Borrower's default;
(b) FORECLOSURE EXPENSES. While the Mortgaged Property related to
a Mortgage Loan is being foreclosed, remaining Escrow Funds,
if any, as well as any rent receipts, shall be used to pay all
taxes and insurance premiums that become due with respect to
such Mortgaged Property to the extent permitted by law. Except
where other arrangements have been made with the applicable
Primary Mortgage Insurer, from the commencement of foreclosure
proceedings, Servicer shall advance payment of attorneys'
fees, trustees' fees and other foreclosure costs;
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(c) FORECLOSURE NOTICE. Servicer shall give prompt notice to
Master Servicer and, if applicable, to the Primary Mortgage
Insurer and/or the Pool Insurer, prior to a proposed
foreclosure sale. The notice must include the date, location
and time of the foreclosure sale. Servicer must request bids
and bidding instructions from Master Servicer and, if
applicable, from the Primary Mortgage Insurer and/or the Pool
Insurer;
(d) BUYDOWN FUNDS USE. Unless permitted under the Applicable
Standards, Servicer may not use Buydown Funds relating to a
Mortgage Loan to cure a Delinquency. Any Buydown Funds
remaining in the related Custodial Buydown Account must be
disposed of in accordance with the Applicable Standards; and
(e) PROPERTY INSPECTIONS. Servicer shall make monthly inspections
of each Mortgaged Property undergoing the foreclosure process
to assure that each Mortgaged Property is not damaged by
vandals or the elements. Servicer shall promptly prepare and
retain a Property Inspection Report, and must forward the
Property Inspection Reports to Master Servicer on request.
737 POST-POSSESSION RESPONSIBILITIES
After Servicer takes possession of the Mortgaged Property, whether by
acquisition of the Mortgaged Property through foreclosure or a
deed-in-lieu of foreclosure, or otherwise, Servicer shall be
responsible for the management of the Mortgaged Property. Servicer
shall remain responsible until possession has been assumed by the
applicable Primary Mortgage Insurer or the applicable Pool Insurer or
until the Mortgaged Property is otherwise disposed of. Servicer shall
take such action as is necessary to protect the Owner of the related
Mortgage Loan's security or ownership interest in the Mortgaged
Property. Such action shall include, without limitation: (i) management
of the Mortgaged Property; (ii) maintenance of the Mortgaged Property;
and (iii) if the Mortgaged Property is vacant, protection of the
Mortgaged Property against vandals and the elements.
738 CONVEYANCE DOCUMENTS
Where applicable, any conveyance by Servicer to the respective Primary
Mortgage Insurer or the respective Pool Insurer of a Mortgaged Property
shall be made by the form of deed commonly used in the particular
jurisdiction where such Mortgaged Property is located. Servicer shall
prepare the necessary documents not later than two weeks prior to the
expected date of sale at foreclosure or confirmation of sale, if
applicable, and shall forward the documents to Master Servicer for
approval and execution by the Owner. After execution by the Owner,
Master Servicer will return the documents to Servicer for delivery to
the respective Primary Mortgage Insurer or the respective Pool Insurer
acquiring the Mortgaged Property.
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739 MORTGAGE LOAN REINSTATEMENT
During the foreclosure process, Servicer shall accept an offer by
Borrower to reinstate the Mortgage Loan, if Borrower agrees to pay: (i)
all payments due to bring the Mortgage Loan current; (ii) attorneys'
fees; (iii) trustees' fees; (iv) any additional legal costs; (v) all
applicable late fees; and (vi) any other expenditures or advances made
by Servicer during the foreclosure process. Except where otherwise
required by the Applicable Standards, Servicer may not accept less than
this full amount from a Borrower without the prior written approval
from Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer. Upon accepting the
reinstatement, Servicer must immediately contact the appropriate
foreclosure attorney or trustee to avoid incurring additional costs or
fees. Upon receipt of the reinstatement funds from a Borrower, Servicer
must: (a) notify the Master Servicer of the reinstatement of the
related Mortgage Loan; (b) return the related Mortgage Note and other
related Mortgage Loan Documents to Master Servicer for reinclusion in
the Mortgage Loan File; and (c) immediately apply the reinstatement
Funds to pay the expenses enumerated above.
740 REO ADMINISTRATION
741 REO ACTION PLAN
Servicer must notify Master Servicer in writing as soon as each REO is
acquired. Servicer must prepare a plan of action for each REO within
thirty (30) Business Days of acquisition of marketable title to the REO
by the Owner of the related Mortgage Loan. Each plan of action shall
set forth: (i) a recommendation for the most effective manner to
dispose of the REO, based on a current appraisal report, a broker's
price opinion and a market analysis; (ii) the steps Servicer will take
to secure the REO; and (iii) an estimate of the amount of time required
to dispose of the REO. Servicer promptly must submit copies of each
plan to Master Servicer and, where applicable, the respective Primary
Mortgage Insurer, and/or Pool Insurer. Unless otherwise directed by
Master Servicer, Servicer shall implement each plan of action in an
expeditious manner. Master Servicer may direct Servicer to modify any
plan of action. Servicer must provide Master Servicer with written
monthly progress reports regarding each plan of action detailing the
status of the related REO and the progress achieved in implementing the
plan of action.
742 REO SERVICING
Servicer must service each REO from its acquisition through its
disposition. In addition to any other obligations set forth herein,
upon acquisition of each REO, Servicer shall be responsible for:
(a) managing, maintaining and securing the REO until it is
conveyed or sold;
(b) inspecting the REO at least once every 30 days and promptly
sending Master Servicer an updated Property Inspection Report;
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(c) paying all taxes, insurance, maintenance, management and
foreclosure costs relating to the REO;
(d) submitting recommendations for listing and soliciting offers
on the REO;
(e) marketing the REO;
(f) completing the sale of the REO;
(g) depositing sales proceeds relating to the REO into the
appropriate Custodial P&I Account for remittance to the Owner
of the related Mortgage Loan;
(h) where applicable, satisfying all of the Primary Mortgage
Insurer's procedural requirements and filing all required
forms and claims;
(i) where applicable, depositing Insurance Proceeds relating to
the REO into the applicable Custodial P&I Account for
remittance to the Owner of the related Mortgage Loan;
(j) processing the conveyance of the REO to the Primary Mortgage
Insurer, where applicable;
(k) reporting (1) all changes in status of the REO and (2) all
material expenses relating to the REO to Master Servicer on a
monthly basis; and
(l) submitting to Master Servicer and, if applicable, to the
Primary Mortgage Insurer and/or the Pool Insurer, evidence
that title to a REO is held by the Owner of the related
Mortgage Loan within ten Business Days after such marketable
title has been acquired.
743 REO MARKETING
Servicer shall begin efforts to market an REO as soon as marketable
title is acquired by the Owner of the related Mortgage Loan. Servicer
shall obtain the best market price for a REO for the Owner of the
related Mortgage Loan while disposing of such REO in a timely and
efficient manner. Unless otherwise directed by Master Servicer,
Servicer, acting on behalf of the Owner of the related Mortgage Loan,
shall dispose or cooperate with the Owner of the related Mortgage Loan
in disposing of such REO within eighteen (18) months after its
acquisition by the Owner of the related Mortgage Loan. If Servicer is
otherwise unable to sell the REO, unless otherwise directed by Master
Servicer, Servicer shall before the end of the eighteen (18) month
period following the acquisition of such REO, auction such REO to the
highest bidder in an auction reasonably designed to bring a fair price.
Servicer shall consult with Master Servicer prior to holding such
auction. Servicer is eligible to bid in such an auction.
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744 REO REHABILITATION
Unless Master Servicer shall direct otherwise, Servicer must ensure
that any rehabilitation work to any REO which is necessary to restore
such REO to a marketable condition is performed and that such work is
performed in a professional and workmanlike manner. Servicer shall
solicit detailed written bids from independent contractors when the
value of a contract for rehabilitation of a REO exceeds Five Hundred
Dollars ($500), and from at least two independent and unrelated
contractors when the value of a contract exceeds Five Thousand Dollars
($5,000), and at least three (3) such contractors when the value of a
contract exceeds Fifty Thousand Dollars ($50,000). In addition,
Servicer must obtain Master Servicer's prior written approval for
rehabilitation work when the aggregate rehabilitation expenses with
regard to a REO exceeds One Thousand Dollars ($1,000). Upon request
Servicer shall forward copies of such bids to Master Servicer. If a
Mortgaged Property which has become a REO and the related Mortgage Loan
is covered by a policy of Primary Mortgage Insurance, Servicer shall
notify the related Primary Mortgage Insurer of such rehabilitation
plans before the completion of the Primary Mortgage Insurance claim to
ensure reimbursement from the Primary Mortgage Insurer. If the related
Primary Mortgage Insurer elects not to reimburse all rehabilitation
expenses, work should be postponed until after final disposition of the
Primary Mortgage Insurance claim.
745 RESTRICTIONS ON LEASES AND CONSTRUCTION
Servicer shall not rent, lease, or otherwise earn income with respect
to any REO without prior approval by Master Servicer, except that
Servicer may enter into a lease with respect to REO provided that: (i)
the lease does not hamper the disposition of the REO; (ii) the lease
provides that the lessee does not own thirty-five percent (35%) of any
class of securities issued by the related Owner; and (iii) the lease
calls for fixed rent and all of the rent is allocable to the real
property except that up to fifteen percent (15%) of the rent may be
allocable to personal property leased under, or in connection with, the
lease of the real property. Absent Master Servicer's prior approval,
Servicer shall not authorize or permit any construction on any REO,
other than the completion of a building or other improvement, and then
only if more than ten percent (10%) of the construction of such
building or other improvement was completed before default on the
related Mortgage Loan became imminent, or directly operate or allow any
other Person to directly operate, any REO on any date more than 90 days
after its acquisition date. "Directly operate" means, with respect to
any REO, the direct or indirect furnishing or rendering of services to
the tenants thereof, management or operation of such REO, the holding
of such REO primarily for sale to customers, performance of any
construction work thereon or any use of such REO in a trade or
business, in each case other than with the approval of Master Servicer;
provided, however, that Servicer shall not be considered to directly
operate an REO solely because it establishes rental terms, chooses
tenants, enters into or renews leases, deals with taxes and insurance,
or makes decisions as to repairs or capital expenditures with respect
to such REO.
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746 PRIMARY MORTGAGE INSURANCE AND POOL INSURANCE CONSIDERATIONS
Servicer must ensure that any action taken with respect to the sale of
a REO does not jeopardize the maximum benefits available under the
related Primary Mortgage Insurance Policy, if any, and the related Pool
Insurance Policy, if any, with respect to the related Mortgage Loan.
Servicer must inform the related Primary Mortgage Insurer, and, if
applicable, the related Pool Insurer, of any listing agreements or
purchase offers that are received before the related Primary Mortgage
Insurer and/or the related Pool Insurer, has finalized the disposition
of the claim. In any event, instructions to Servicer from the Master
Servicer regarding the marketing and sale of a REO, either with respect
to a specific property or generally, shall govern Servicer's actions,
notwithstanding any contrary instructions by the Primary Mortgage
Insurer or Pool Insurer.
747 REO DOCUMENTS AND REPORTS
Servicer must retain in its files copies of all documents, reports and
invoices described in this Section. Promptly upon receipt, Servicer
shall send copies to Master Servicer and, where applicable, to the
respective Primary Mortgage Insurer and/or the respective Pool Insurer,
of the following documents relating to each REO:
(a) any forced placed Hazard Insurance policy or Flood Insurance
policy, if applicable;
(b) any maintenance contracts;
(c) any contractor bids relating to the rehabilitation of the REO
pursuant hereto;
(d) an updated Title Insurance policy that reflects the occurrence
of foreclosure; and
(e) a plat mat or house location survey, if already available.
At the end of each month following the receipt of any invoice relating
to expenses incurred in administering each REO, Servicer shall also
send a report listing such expenses to Master Servicer and, if
applicable, to the Primary Mortgage Insurer and/or the Pool Insurer.
Servicer shall retain such invoices in its records and shall, by
request, (i) produce any such invoices for inspection or (ii) at its
own expense, provide copies of any such invoices to the Master Servicer
and, if applicable, to the Primary Mortgage Insurer and/or the Pool
Insurer, as directed.
748 REO DISPOSITION ACCOUNTING
Within thirty (30) days of an REO Disposition, Servicer must provide
Master Servicer with a statement of accounting for the related REO. The
statement must include: (i) the loan number of the related Mortgage
Loan; (ii) the date that the Mortgaged Property was acquired; (iii) the
date of REO Disposition; (iv) the gross sales price and related selling
and other expenses; (v) accrued interest calculated from the date of
acquisition to the
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disposition date (calculated at the Mortgage Interest Rate); and (vi)
such other information as Master Servicer or Trustee may request.
749 REO ADMINISTRATION FAILURE
In the event that Servicer's actions or omissions result in damage to
any REO or a failure to sell any REO property within a reasonable time,
Master Servicer may remove the servicing of such REO from Servicer and
assume responsibility for management, control, maintenance, security,
rehabilitation and disposition of the REO. Servicer, as to such REO,
will nevertheless remain responsible to: (i) pay when due all insurance
premiums, property taxes and assessments; (ii) file when due all claims
for Primary Mortgage Insurance, Pool Insurance, Hazard Insurance and,
if applicable, Flood Insurance benefits; and (iii) fulfill any other
related responsibilities required by Master Servicer. Whether or not a
Servicer is removed from servicing with respect to a particular REO,
Servicer must compensate Master Servicer for any damages caused as a
result of Servicer's breach of its obligation to serve each REO
efficiently. Servicer acknowledges that any damages suffered as a
result of Servicer's inefficiency in managing a REO may not be
quantified in advance of Master Servicer assuming responsibility for
such REO.
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CHAPTER 8
SERVICER RESPONSIBILITIES
This chapter sets forth certain representations, warranties and
covenants Servicer makes as a condition of servicing the Mortgage
Loans, and certain other of Servicer's legal obligations.
810 REPRESENTATIONS AND WARRANTIES
Servicer acknowledges that Master Servicer and Owner allow Servicer to
continue to service Mortgage Loans in reliance upon: (i) the truth and
accuracy of the representations and warranties contained in this
Servicer Guide and the Servicing Agreement, each of which
representations and warranties relates to a matter material to Owner's
and Master Servicer's interests; and (ii) Servicer's compliance with
the Applicable Standards. Master Servicer's and Owner's rights in
connection with Servicer's representations, warranties and covenants
survive the termination or expiration of the Servicing Agreement. The
representations and warranties shall inure to the benefit of Master
Servicer and all Owners, and to their respective successors, affiliates
and assigns and each indemnified party hereunder, regardless of any
review or investigation made by or on behalf of such parties with
respect to any Mortgage Loan.
811 CONCERNING SERVICER
In addition to the representations, warranties and covenants set forth
elsewhere in this Servicer Guide and the Servicing Agreement, Servicer:
(i) represents and warrants to Master Servicer, all Owners, and any
Indemnified Party hereunder, as of the date of the Servicing Agreement;
and (ii) covenants throughout the term of the Servicing Agreement as
follows:
(a) Due Organization, Good Standing; Licensing. Servicer is, and
shall continue to be, duly organized, validly existing and in
good standing under the laws of the United States or under the
laws of the jurisdiction in which it was incorporated or
organized, as applicable, and has and shall continue to
maintain all licenses, registrations, certifications and
qualifications necessary to carry out its business as now
being conducted and to perform its duties under this Servicer
Guide, except where the failure to do so would not have a
material adverse affect on: (i) the Servicer's performance of
its obligations under this Servicer Guide; (ii) the value or
marketability of the Mortgage Loans; or (iii) the ability to
foreclose on the related Mortgaged Properties.
(b) Requisite Authority. Servicer has and will maintain the full
corporate or partnership (as the case may be) power and
authority to execute and deliver the Servicing Agreement and
to perform in accordance with each of the terms thereof and
the terms of this Servicer Guide; the execution, delivery and
performance of
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the Servicing Agreement and the Servicer Guide by Servicer,
and the consummation of all transactions contemplated thereby
and hereby, have been duly and validly authorized, and the
Servicer Guide and the Servicing Agreement evidence the legal,
valid and binding obligations of Servicer, enforceable in
accordance with their terms.
(c) No Conflicts. Neither the execution and delivery of the
Servicing Agreement by Servicer, nor the consummation by
Servicer of the transactions contemplated therein or in the
Servicer Guide, nor compliance with the provisions thereof and
hereof by Servicer, will: (i) conflict with or result in a
breach of, or constitute a default under, any of the
provisions of the articles of incorporation or bylaws (or, if
applicable, the partnership agreement) of Servicer or any law,
governmental rule or regulation, or any judgment, decree or
order binding on Servicer or any of its properties, or any of
the provisions of any indenture, mortgage, deed of trust,
contract or other instrument to which Servicer is a party or
by which it is bound; or (ii) result in the creation or
imposition of any lien, charge or encumbrance upon any of its
properties pursuant to the terms of any such indenture,
mortgage, deed of trust, contract or other instrument.
(d) No Consents Required. No consent, approval, order or
authorization of any court or governmental authority or
registration, qualification or declaration with any such
authority is required for Servicer to perform its obligations
under the Servicing Agreement and the Servicer Guide.
(e) No Impairment. There is no action, suit, proceeding or
investigation pending or, to the best of Servicer's knowledge
after due and diligent inquiry, threatened, against Servicer
which, either in any one instance or in the aggregate, may
result in any material adverse change in business operations,
financial condition, properties or assets of Servicer, or in
any material impairment of the right or ability of Servicer to
carry on its business substantially as now conducted, or in
any material liability on the part of Servicer, or which if
adversely determined would affect the validity of the
Servicing Agreement or the Servicer Guide or of the Mortgage
Loans or of any action taken or to be taken in connection with
the obligations of the Servicer contemplated herein or in the
Servicing Agreement, or which would be likely to impair
materially the ability of Servicer to perform under the terms
of the Servicing Agreement or the Servicer Guide.
(f) Eligibility Standards. Servicer fully meets the Eligibility
Standards set forth in the Servicing Agreement and this
Servicer Guide, and will continue to meet the Eligibility
Standards, as they may be amended from time to time, at all
times during the term of the Servicing Agreement.
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812 CONCERNING THE MORTGAGE LOANS
Master Servicer will notify Servicer in writing of each sale of
Mortgage Loans by Principal. Servicer shall review the current status
of each Mortgage Loan listed in each such notice. After receipt of the
notice, and prior to the estimated date of the sale specified in the
notice, Servicer shall notify Master Servicer if any of the
representations and warranties set forth in this Section 812 are not
true and accurate with respect to each Mortgage Loan. Except for such
Mortgage Loans that Servicer has specified do not meet these
representations and warranties, Servicer shall be deemed to represent
and warrant to Master Servicer, the respective Owner, and all other
Indemnified Parties hereunder as follows:
(a) Payments Current. All payments required to be made through the
most recent related Due Date under the terms of the related
Mortgage Note have been made and credited. No required payment
is delinquent nor, except as has been disclosed in writing by
Servicer to Master Servicer, has any payment been delinquent
at any time since the origination of the Mortgage Loan. For
the purposes of this paragraph, a Mortgage Loan will be deemed
to be delinquent if any payment was not paid by the Borrower
in the month such payment was due.
(b) No Defaults. There is no default, breach, violation, or event
of acceleration existing under the related Security Instrument
or Mortgage Note, no event has occurred or condition exists
that, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a
default, breach, violation, or event of acceleration, and
there has been no waiver of any default, breach, violation, or
event of acceleration.
(c) No Outstanding Charges. Any and all taxes, including, without
limitation, any and all transfer taxes due and payable to any
state or municipality relating to the transfer of the
ownership and occupancy interest in the related Mortgaged
Property, and all governmental assessments, tax abatement
charges, insurance premiums, water, sewer and municipal
charges, leasehold payments and/or ground rents or other
charges or fees have been paid when due pursuant to the
Applicable Standards.
(d) Custodial and Escrow Accounts Current. All Custodial P&I
Accounts, Custodial T&I Accounts, Custodial Buydown Accounts
and Escrow Accounts have been and are maintained by Servicer
in accordance with the Applicable Standards. The Escrow Funds
that have been paid to Servicer for the account of Borrower
are on deposit in the appropriate Custodial Account. All funds
received by Servicer in connection with the Mortgage Loans,
including, without limitation, foreclosure proceeds, Insurance
Proceeds, condemnation proceeds and principal reductions, have
promptly been deposited in the appropriate Custodial Account,
and all such funds have been applied to reduce the principal
balance of the Mortgage Loans
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in question, or for reimbursement of repairs to the Mortgaged
Property or as otherwise required by the Applicable Standards.
(e) Title Insurance. No claims have been made under the related
Title Insurance policy, the accuracy of any attorney's opinion
of title has not been disputed, and no prior holder of any of
the Mortgage Loans has done, by act or omission, anything that
would impair the coverage of such Title Insurance policy or
the accuracy of such attorney's opinion of title.
(f) Primary Mortgage Insurance Compliance. All provisions of the
Primary Mortgage Insurance policy, if applicable, have been
and are being complied with, and such policy is written with a
Private Mortgage Insurer in accordance with the Applicable
Standards, is the binding obligation of such Insurer, is in
full force and effect, and all premiums due thereunder have
been paid. No Person has engaged in any act or omission that
would impair the coverage or validity of any such policy, the
benefit of the endorsement thereto, or the validity or binding
effect of either. Any Mortgage Loan subject to a Primary
Mortgage Insurance policy obligates Borrower or Servicer to
maintain such Primary Mortgage Insurance policy and to pay all
premiums and charges in connection therewith.
(g) Pool Insurance Compliance. The terms of the Pool Insurance
Policy, if applicable, have been and are being complied with,
in accordance with the applicable standards, and such policy
is written with a Pool Insurer in accordance with this
Servicer Guide, is the binding obligation of such Insurer, is
in full force and effect. No Person has engaged in any act or
omission which would impair the coverage or validity of any
such policy.
(h) Hazard and Flood Insurance. All buildings or other
improvements upon the related Mortgaged Property are insured
by a Hazard Insurance policy, and, if required pursuant to the
Applicable Standards, a Flood Insurance policy, in accordance
with the Applicable Standards. The related Security Instrument
obligates the Borrower thereunder to maintain such policies at
the Borrower's cost and expense, and upon the Borrower's
failure to do so, authorizes the Mortgagee to obtain and
maintain such insurance at the Borrower's cost and expense,
and to seek reimbursement therefor from the Borrower. The
Hazard Insurance policy, and, if applicable, the Flood
Insurance policy inure to the benefit of the Owner of the
related Mortgage Loan and are the valid and binding
obligations of the insurer, are in full force and effect, and
will be in full force and effect.
(i) Original Terms Unmodified. The original terms of the related
Security Instrument and Mortgage Note have not been impaired,
waived, altered, or modified in any respect, except by a
written instrument that has been: (i) approved by the Owner of
the related Mortgage Loan or Master Servicer and (ii) has been
recorded, if necessary to protect the interests of the Owner.
The
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substance of any such waiver, alteration, or modification has
been approved by the related Primary Mortgage Insurer, Pool
Insurer and Title Insurer, to the extent required by the
respective policies. No Borrower has been released, in whole
or in part, except pursuant to an Assumption permitted
hereunder.
(j) No Satisfaction of Mortgage. The related Security Instrument
has not been satisfied, cancelled, subordinated, or rescinded,
in whole or in part, and, unless Master Servicer has given its
prior written consent, the related Mortgage Property has not
been released, in whole or in part, from the lien of the
related Security Instrument, nor has any instrument been
executed that would effect any such release, cancellation,
subordination, or rescission.
(k) Mortgaged Property Undamaged; No Condemnation. The Mortgaged
Property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado, or other casualty so as
to affect adversely the value of the Mortgaged Property as
security for the Mortgage Loan or the use for which the
premises were intended; and the Mortgaged Property is in good
repair. There are no condemnation proceedings by any federal,
state, or local authority pending or, to the Servicer's
knowledge, threatened against the Mortgaged Property.
(l) No Other Hazards. To the best of Servicer's knowledge, except
as has been specifically disclosed to Master Servicer by
Servicer in writing, the Mortgaged Property is not exposed to
hazards (such as toxic or hazardous waste) not covered by fire
and extended coverage insurance or other available insurance.
813 COVENANTS CONCERNING MORTGAGE LOANS
In addition to the representations, warranties and covenants set forth
elsewhere in this Servicer Guide and the Servicing Agreement, with
respect to each Mortgage Loan, Servicer covenants throughout the term
of the Servicing Agreement that:
(a) Compliance With Applicable Standards. Servicer will Service
each Mortgage Loan and fulfill all other obligations under
this Servicer Guide and the Servicing Agreement in strict and
full compliance with the Applicable Standards.
(b) No Outstanding Charges. Any and all taxes (including, without
limitation, any and all transfer taxes due and payable to any
state or municipality) relating to the transfer of the
ownership and occupancy interest in the related Mortgaged
Property, and all governmental assessments, tax abatement
charges, insurance premiums, water, sewer and municipal
charges, leasehold payments and/or ground rents will be paid
when due pursuant to the terms of this Servicer Guide.
(c) Escrow Funds. If permitted under the Applicable Standards,
unless Principal or Master Servicer has agreed otherwise in
writing, an Escrow Account of funds has been established in an
amount sufficient to pay for the Escrow Items when due
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in accordance with the Applicable Standards. Such escrows will
only be waived in accordance with the Applicable Standards,
and will be administered in accordance with the Applicable
Standards. All Escrow Funds are in the possession of Servicer
and there exists no deficiency in connection therewith for
which customary arrangements for repayment thereof have not
been made. No Escrow Funds or other charges or payments have
been capitalized under the related Security Instrument or the
related Mortgage Note.
(d) Insurance Maintenance. Servicer will not engage in any act or
omission that would impair the coverage of any Insurance
Policy, and will properly remit any and all premiums for such
policies when due, and service the Mortgage Loans with respect
to such insurance policies in accordance with the Applicable
Standards.
(e) Modifications of Mortgage Loans. Except as expressly permitted
herein, and except as a result of a 90-day Delinquency or
more, without the consent of Master Servicer, Servicer shall
not permit any modification of any term of a Mortgage Loan
(including the interest rate, the principal balance, the
amortization schedule, or any other term affecting the amount
or timing of payments on the Mortgage Loan).
(f) Mortgage Loan Disposition Restriction. Without the prior
approval of Master Servicer, Servicer shall not permit the
sale, disposition or substitution of any of the Mortgage
Loans, nor acquire any assets on behalf of the related Owner,
nor sell or dispose of any investments in any of the Accounts
established by the Servicer for the related Owner for gain,
nor accept any contributions on behalf of the Owner.
(g) Personal Property Restriction. Without the prior approval of
Master Servicer, Servicer shall not acquire any personal
property relating to any Mortgage Loan unless such Personal
Property is incident to an REO. For this purpose, personal
property will be considered incident to an REO if the personal
property is used in a trade or business conducted on the
property or the use of the personal property is otherwise an
ordinary and necessary corollary of the use to which the REO
is put.
814 DISCLOSURE AND ASSIGNMENT OF REPRESENTATIONS, WARRANTIES AND
COVENANTS Servicer recognizes that the Mortgage Loans have been
acquired by Principal and are being serviced by Servicer with a view to
their ultimate securitization as collateral for mortgage-backed
securities. Servicer consents to: (i) the inclusion of a statement of
the representations, warranties and covenants set forth herein in any
prospectus, private placement memorandum or offering circular that
offers securities backed by Mortgage Loans; and (ii) the attribution of
such representations, warranties, and covenants to Servicer. Servicer
recognizes that Principal and its affiliates will rely upon the
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truthfulness and accuracy of such representations and warranties which
are to be used in such disclosure documents. Servicer agrees that
Principal may, at any time, without any further notice to, or consent
from, Servicer, assign the representations, warranties and covenants
given by Servicer herein, in whole or in part, or an undivided interest
therein, to one or more Persons.
815 COVENANTS OF THE SERVICER
In addition to the representations, warranties and covenants set forth
elsewhere in this Servicer Guide and the Servicing Agreement, Servicer
covenants throughout the term of the Servicing Agreement that it will
(i) comply with all directions, instructions and requests of the Master
Servicer given or made by the Master Servicer pursuant to this
Servicing Guide and the Servicing Agreement and (ii) provide such
additional information relating to the servicing activities of the
Servicer that the Master Servicer determines is necessary or desirable
in light of its obligations and liabilities under the Supervision
Agreement or Pooling and Servicing Agreement, as applicable.
820 EVENTS OF DEFAULT, REMEDIES, INDEMNIFICATION
821 EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default on the part
of Servicer under this Servicer Guide and the Servicing Agreement:
(a) Any breach of any of the representations, warranties or
covenants set forth in the Servicer Guide or the Servicing
Agreement, including, without limitation, Servicer's failure
to comply fully with the Applicable Standards or the
Eligibility Standards; or
(b) The occurrence of an act of insolvency or bankruptcy
concerning Servicer, including, without limitation: (i) 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 Servicer; or (ii)
Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar
proceedings of or relating to Servicer, or of or relating to
all or substantially all of its property; or (iii) Servicer
shall admit in writing its inability to pay its debts
generally as they become due, or Servicer files a petition to
take advantage of any applicable insolvency or reorganization
statute, makes an assignment for the benefit of creditors, or
voluntarily suspends payment of its obligations; or
(c) Servicer: (i) fails to meet any capital, leverage or other
financial standards imposed by any applicable regulatory
authority; (ii) undergoes a change in
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financial or organizational status that, in the opinion of
Master Servicer, could materially adversely affect Owner's,
Master Servicer's or Servicer's ability to service the
Mortgage Loans, including, without limitation, any
determination by Master Servicer that Servicer's obligations
hereunder are disproportionate to its capital and/or assets;
or (iii) Servicer is placed on probation or suspension by a
federal or state governmental or quasi-governmental, agency,
or by FHLMC, FNMA or GNMA; or
(d) Servicer assigns or attempts to assign any of its interests,
rights, or obligations under the Servicing Agreement and/or
this Servicer Guide without Master Servicer's prior written
consent; or
(e) Servicer has failed to administer properly certain REO and has
been removed from the servicing of certain REO; or
(f) Servicer defaults under the terms of any other agreement to
which Servicer and Master Servicer and/or Principal are
parties, or to any other agreement to which Servicer and any
Owner are Parties, or Servicer has been terminated for cause
pursuant to the terms of another servicing agreement with
Principal.
822 RIGHT TO DEMAND REASONABLE ASSURANCES
If, at any time during the term of the Servicing Agreement, Master
Servicer has reason to believe that Servicer is not conducting its
business in accordance with the Applicable Standards, Master Servicer
shall have the right to demand in writing reasonable assurances that
such belief is unfounded. Any failure of Servicer to provide such
reasonable assurances within the time frame specified in the written
demand therefor shall itself constitute an Event of Default. So long as
no other Event of Default exists, Master Servicer shall only be
entitled to exercise remedies with respect to such Event of Default as
may be necessary and appropriate for Master Servicer to insulate itself
and any Owner from potential harm or loss relating to or caused by the
facts or circumstances giving rise to such Event of Default. Nothing in
this paragraph shall be deemed or construed to limit, waive, or impair
any of Master Servicer's or Owner's rights or remedies with respect to
any Event of Default under any other provision of this Servicer Guide
or the Servicing Agreement.
823 REMEDIES
Upon breach of any requirement, including, without limitation, the
occurrence of any Event of Default, or of any of Servicer's
representations, warranties or covenants herein or in the Servicing
Agreement, Servicer must: (i) promptly notify Master Servicer in
writing of the nature of the breach, the date on which the breach
occurred or began and Servicer's plans, if any, for curing the breach;
(ii) effect a cure of the breach within 30 days after the occurrence or
onset of the breach; and (iii) if no complete cure has been effected
within such period, in Master Servicer's sole discretion, purchase any
Mortgage Loan in which Owner's interest has been impaired or which, in
the opinion of Master
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Servicer, has suffered a material impairment of Value. Such purchase
shall be within five days after receipt by Servicer of written notice
from Master Servicer requesting the Servicer's purchase of the Mortgage
Loan at the Purchase Price.
824 WAIVER OF DEFAULTS
Master Servicer may waive any default by Servicer in the performance of
Servicer's obligations hereunder and its consequences, but only by
written waiver specifying the nature and terms of such waiver. No such
waiver shall extend to any subsequent or other default or impair any
right consequent thereto, nor shall any delay by Master Servicer in
exercising, or the failure to exercise, any right arising from such
default affect or impair Master Servicer's or Owner's rights as to any
such default or any subsequent default.
825 ATTORNEYS' FEES
In addition to any and all other obligations of Servicer hereunder,
Servicer agrees that it shall pay the reasonable attorneys' fees of
Master Servicer and/or Owner in enforcing Servicer's obligations
hereunder.
826 INDEMNIFICATION
Servicer agrees to indemnify and hold harmless: (i) Master Servicer;
(ii) Principal; (iii) each Owner; (iv) any underwriter of any of the
Certificates; (v) the successors and assigns of any of the foregoing;
and (vi) the officers, directors, employees, agents and affiliates of
any of the foregoing indemnified parties, from and against any and all
claims, losses, damages, liabilities, fines, settlements, awards,
offsets, defenses, counterclaims, actions, penalties, forfeitures,
legal fees, judgments, and any other costs, fees and expenses
(including, without limitation, attorneys' fees and court costs),
either directly or indirectly arising out of, based upon, or relating
to: (a) a breach by Servicer, its officers, directors, employees,
agents, or delegees of any representation, warranty, covenant or other
obligation contained in the Servicing Agreement or this Servicer Guide
or any other agreement between Master Servicer and/or Owner and
Servicer relating to the servicing or administering of any Mortgage
Loan, or any failure to disclose any matter that makes such
representation and warranty misleading or inaccurate, or any inaccuracy
in information furnished by Servicer, (b) a breach of any
representation, warranty or obligation made by any indemnified party in
reliance upon any such representation, warranty or obligation, failure
to disclose, or inaccuracy in information furnished by Servicer; (c)
any failure of Servicer, its officers, directors, employees, or agents,
or its delegees to perform any of its obligations in accordance with
the Applicable Standards; and (d) any acts or omissions of Servicer,
its officers, directors, employees, agents or delegees. This
indemnification shall survive purchase, transfer of any interest in a
Mortgage Loan by any indemnified party, the Liquidation of such
Mortgage Loan, termination of any such Servicer's servicing rights with
respect to such Mortgage Loan, and the termination or expiration of the
Servicing Agreement.
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827 SURVIVAL OF REMEDIES
Master Servicer's and/or Owner's remedies for breach of the
representations, warranties, or covenants set forth herein and/or in
the Servicing Agreement shall survive the sale and delivery of the
related Mortgage Loan or Mortgage Loans by Principal and any subsequent
Owner or Owners, notwithstanding any termination or expiration of the
Servicing Agreement, or any qualified or restricted endorsement on any
Mortgage Note or Assignment, or any examination or failure to examine
any related Mortgage Document by Master Servicer or any Owner.
830 TERMINATION OF SERVICING WITH CAUSE
831 GROUNDS FOR TERMINATION, NOTIFICATION
Owner has the right to terminate for cause Servicer's servicing
privileges with respect to certain Mortgage Loans or all Mortgage Loans
serviced hereunder, and Master Servicer has the right to revoke
Servicer's status hereunder as an approved servicer upon the occurrence
of an Event of Default. Master Servicer shall notify Owners of the
related Mortgage Loans of the occurrence of any material Event of
Default, together with Master Servicer's recommended course of action
regarding the future status of Servicer. Upon the occurrence of an
Event of Default, the Owner of the related Mortgage Loans may elect, at
its sole discretion, to terminate Servicer with respect to the Mortgage
Loans owned by such Owner. In such event, each such Owner shall provide
a written termination notice to Servicer.
832 CONSEQUENCES OF TERMINATION
If the Servicing Agreement is terminated pursuant to an Event of
Default, Servicer shall at the direction of Master Servicer, deliver
all Servicer Mortgage Loan Files, in their entirety, for those Mortgage
Loans serviced hereunder, as well as any other documents, reports or
any other materials held by Servicer concerning such Mortgage Loans, to
the transferee designated by Master Servicer, which may be Master
Servicer, and Servicer will assist in the efficient and timely transfer
of the servicing to such transferee. Servicer shall not be entitled to
compensation for servicing after the termination date. In such case,
Servicer must pay the expenses of the respective Trustee, Master
Servicer and Owner incurred in connection with transfer of the
servicing and any damages, including, without limitation, consequential
damages or losses, of the Owner of the related Mortgage Loans, such
Trustee or Master Servicer resulting from such termination.
840 MISCELLANEOUS PROVISIONS
841 BINDING NATURE
The Servicing Agreement and the Servicer Guide shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
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842 ENTIRE AGREEMENT
The Servicing Agreement and the Servicer Guide, including all exhibits
thereto and hereto, contain the final and entire agreement between the
parties hereto with respect to the subject matter hereof and supersede
all prior and contemporaneous servicing agreements, understandings,
inducements and conditions, expressed or implied, oral or written, of
any nature whatsoever with respect to the subject matter thereof. The
express terms of the Servicing Agreement and of this Servicer Guide
control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. To the extent that the
terms of the Servicing Agreement are inconsistent with the terms of
this Servicer Guide, the terms of the Servicing Agreement shall
control.
843 GOVERNING LAW
The Servicing Agreement and the Servicer Guide and all questions
relating to their validity, interpretation, performance and enforcement
of either or both shall be governed by, construed, interpreted and
enforced in accordance with the laws of the State of New York,
notwithstanding any New York or other choice-of-law rules to the
contrary.
844 INDULGENCES NOT WAIVERS
Neither the failure nor any delay on the part of a party to exercise
any right, remedy, power or privilege under the Servicing Agreement or
this Servicer Guide 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.
845 TITLES NOT TO AFFECT INTERPRETATION
The titles of the articles and sections contained in the Servicing
Agreement and/or this Servicer Guide are for convenience only, and they
neither form a part of the agreement nor are they to be used in the
construction or interpretation of such agreement.
846 PROVISIONS SEVERABLE
The provisions of the Servicing Agreement and this Servicer Guide are
independent of and severable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.
847 SERVICER AN INDEPENDENT CONTRACTOR
All services, duties and responsibilities of Servicer under the
Servicing Agreement and this Servicer Guide shall be performed and
carried out by Servicer as an independent contractor, and none of the
provisions herein or therein shall be deemed to make, authorize or
appoint Servicer as agent, partner, or representative of any Owner of
any Mortgage Loans, of Principal, or of Master Servicer. Nothing herein
or in the Servicing
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Agreement shall be deemed or construed to create a partnership or joint
venture between the parties hereto.
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CHAPTER 9
DEFINITIONS AND RULES OF CONSTRUCTION
910 DEFINITIONS
Certain words and phrases are defined in other Sections of this
Servicer Guide. In addition to those definitions, the following words
and phrases shall have the (following meanings:
ALTA: The American Land Title Association.
APPLICABLE STANDARDS: The minimum standards by which Servicer must
conduct all servicing activities relating to Mortgage Loans, as defined
in SECTION 310 hereto.
APPRAISAL REPORT: A complete and accurate report setting forth the fair
market value of a Mortgaged Property as determined by an appraiser who,
at the time the appraisal was conducted, met the minimum qualifications
of FNMA and FHLMC for appraisers of conventional residential mortgage
loans.
ARM LOAN: An "adjustable rate" Mortgage Loan, the Mortgage Interest
Rate of which is subject to periodic adjustment in accordance with
terms of the related Mortgage Note.
ASSIGNMENT: The document which transfers all the rights of the secured
party pursuant to a Security Instrument to a transferee for valid
consideration.
ASSUMPTION: The process whereby, on sale or transfer of a legal or
beneficial interest in a Mortgaged Property, the new owner of such
Mortgaged Property becomes legally obligated under the terms of the
related existing Security Instrument, Mortgage Note and any addenda and
riders to such Security Instrument or Mortgage Note. Subsequent to the
Assumption, the new owner of the property shall be deemed to be the
Borrower under the related Mortgage Loan Documents.
BIF: The Bank Insurance Fund.
BORROWER: The individual obligated to repay a Mortgage Loan. (The
Borrower may be the beneficiary or beneficiaries of an Illinois land
trust when the Mortgaged Property is located in Illinois.)
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which national banking institutions in the state in which Master
Servicer has its principal place of business are authorized or
obligated by law or executive order to remain closed.
BUYDOWN AGREEMENT: An agreement governing the application of Buydown
Funds with respect to a Mortgage Loan.
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BUYDOWN FUNDS: Money advanced by a builder, seller or other interested
party to reduce a Borrower's Monthly Payment during the initial years
of a Mortgage Loan.
CERTIFICATE: A mortgage backed security issued by an Owner of the
related Mortgage Loans which is secured, in whole or in part, by such
Mortgage Loans.
CONDOMINIUM PROJECT: Real estate including the separate ownership in
fee, or on a satisfactory leasehold estate, of a particular residential
unit with an indivisible interest in the real estate designated for
common ownership strictly by unit owners.
CONDOMINIUM UNIT: A Single Family Property within a Condominium
Project.
CURTAILMENT: A partial prepayment by the Borrower of principal on a
Mortgage Loan that otherwise is current, which prepayment is not
accompanied by an amount representing the full amount of scheduled
interest due on the related Mortgage Loan.
CUSTODIAL BUYDOWN ACCOUNT: The account maintained by Servicer pursuant
to SECTION 511 hereto to administer Buydown Funds.
CUSTODIAL PRINCIPAL AND INTEREST (P&I) ACCOUNT: The account maintained
by Servicer pursuant to SECTION 511 hereto to administer principal and
interest payments.
CUSTODIAL TAXES AND INSURANCE (T&I) ACCOUNT: The account maintained by
Servicer pursuant to SECTION 511 hereto to administer Escrow Funds.
CUSTODIAN: First Trust National Association, or its successors or
assigns. Custodian shall hold all or part of the Owner Mortgage Loan
File with respect to a Mortgage Loan on behalf of the Owner of such
Mortgage Loan.
CUT-OFF DATE: With respect to any Mortgage Loan, the date on which any
payments of principal or interest that become due, whether received
before, on or after such date are to be deposited to the Custodial P&I
Account for the benefit of the Owner of the related Mortgage Loan, its
successors and assigns.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction
in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Federal Bankruptcy
Code, except any such reduction constituting a Deficient Valuation.
DEFICIENT VALUATION: With respect to any Mortgage Loan the related
Mortgaged Property of which is involved in a bankruptcy proceeding, the
reduction by the bankruptcy court of the Unpaid Principal Balance of
the Mortgage Note.
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DELINQUENCY/DELINQUENT: A Delinquency with respect to a Mortgage Loan
occurs, or a Mortgage Loan is Delinquent when all or part of a
Borrower's Monthly Payment or, where applicable, an Escrow Item is paid
after the applicable Due Date. For reporting purposes, a Delinquency
that remains uncured for 30 days or more, but less than 60 days, is
considered a 30-day Delinquency. A Delinquency that has been uncured
for more than 60 days, but less than 90 days, is considered a 60-day
Delinquency. A Delinquency that has been uncured for 90 days or more is
considered a 90-day Delinquency.
DUE DATE: With respect to a Mortgage Loan, the day of each month on
which a Monthly Payment and, where applicable, an Escrow Funds payment
is due as stated in the related Mortgage Note. The Due Date for all
Mortgage Loans will be the first day of each month.
DUE-ON-SALE CLAUSE: The clause in a Security Instrument requiring the
payment of the Unpaid Principal Balance of the related Mortgage Loan
upon the sale of, or the transfer of an interest in, the related
Mortgaged Property.
DUFF & PHELPS: Duff & Phelps Credit Rating Co. or its
successor-in-interest.
ELIGIBILITY STANDARDS: The requirements and qualifications that
Servicer must maintain to continue to be eligible to service Mortgage
Loans, as specified in CHAPTER 2 hereto.
ELIGIBLE ACCOUNT: As defined in SECTION 513 hereto.
ELIGIBLE CUSTODIAL P&I ACCOUNT: As defined in SECTION 513 hereto.
ESCROW ACCOUNT: With respect to a Mortgage Loan, the account maintained
by Servicer, in accordance with the Applicable Standards, to administer
Escrow Funds.
ESCROW FUNDS: All funds collected with respect to a Mortgage Loan by
Servicer to cover related Escrow Items according to the provisions of
this Agreement.
ESCROW ITEM: An expense required to be paid by a Borrower under the
related Security Instrument including, without limitation, taxes,
special assessments, ground rents, water, sewer and other governmental
impositions or charges that are or may become liens on the related
Mortgaged Property prior to that of the related Security Instrument, as
well as Hazard Insurance, Flood Insurance and Primary Mortgage
Insurance premiums.
EVENT OF DEFAULT: Any one of the conditions or circumstances enumerated
in SECTION 820 hereto.
---
FDIC: Federal Deposit Insurance Corporation and its successors.
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FHA: The Federal Housing Authority and its successors.
FHLMC: Federal Home Loan Mortgage Corporation and its successors.
FITCH: Fitch Investors Service, Inc. or its successor-in-interest.
FLOOD INSURANCE: An insurance policy insuring against flood damage to a
Mortgaged Property, meeting all of the requirements specified in this
Servicer Guide, including all endorsements and riders thereto.
FNMA: Federal National Mortgage Association and its successors.
GNMA: Government National Mortgage Association and its successors.
GPM (OR GPARM) LOAN: A fixed rate Mortgage Loan or ARM Loan that
provides during a portion of its term that the interest portion of the
Monthly Payment on such Mortgage Loan shall be less than the full
amount of interest due on such Mortgage Loan based on the related
Mortgage Interest Rate.
GROSS MARGIN: With respect to each ARM Loan, the fixed percentage
specified in the related Mortgage Note that is added to the applicable
Index on each Interest Adjustment Date to determine the new Mortgage
Interest Rate for such ARM Loan.
HAZARD INSURANCE: A fire and casualty extended coverage insurance
policy meeting all of the requirements specified in this Servicer
Guide, together with all riders and endorsements thereto.
HUD: The United States Department of Housing and Urban Development and
its successors.
INDEMNIFIED PARTY: A Person that Servicer has agreed to indemnify
pursuant to SECTION 826 hereto.
---
INDEX: With respect to each ARM Loan, the applicable index specified in
the related Mortgage Note that is added to the related Gross Margin on
each Interest Adjustment Date to determine the new Mortgage Interest
Rate for the ARM Loan.
INSURANCE POLICY: Any insurance policy for a Mortgage Loan required
hereunder, including, without limitation, Primary Mortgage Insurance,
Hazard Insurance, Flood Insurance, Pool Insurance and Title Insurance
policies, as well as any forced order coverage utilized by Servicer in
lieu of these Insurance Policies.
INSURANCE PROCEEDS: Proceeds from an Insurance Policy.
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INTEREST ADJUSTMENT DATE: With respect to each ARM Loan, the date on
which the related Mortgage Interest Rate changes in accordance with the
terms of such Mortgage Note, the first of which is set forth in such
Mortgage Note and on the respective Mortgage Loan Schedule.
LIQUIDATION: Application of full payment to a Mortgage Loan which
results in the release of the lien of the related Security Instrument
on any related Mortgaged Property, whether through foreclosure and sale
of the related REO, condemnation, prepayment in full or otherwise, or
the realization of all sums from the final disposition of the related
REO.
LIQUIDATION PROCEEDS: The amount received by Servicer in connection
with any Liquidation of a Mortgage Loan
.
LOAN-TO-VALUE (LTV): The ratio that results when the Scheduled
Principal Balance of a Mortgage Loan is divided by the Value of the
related Mortgaged Property.
MASTER SERVICER: Securitized Asset Services Corporation, or any
successors and assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: A custodial account established by
Master Servicer into which Servicer shall remit funds from the related
Custodial P&I Account.
MASTER SERVICER LOAN NUMBER: A unique number assigned by Master
Servicer to each Mortgage Loan.
MONTH END INTEREST: In the event of any Prepayment in Full or
Curtailment of a Mortgage Loan, the difference between the interest
payment that would have been paid on such Mortgage Loan or portion
thereof that was prepaid through the last day of the month in which
such prepayment occurred and the interest payment actually received by
the Servicer on such Mortgage Loan or portion thereof that was prepaid.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest due in the applicable month
under the terms of the related Mortgage Note.
MONTHLY REMITTANCE: Servicer's aggregate payment due each month with
respect to all Mortgage Loans owned by a common Owner to the
appropriate Master Servicer Custodial Account.
MOODY'S: Moody's Investors Service, Inc. or its successor-in-interest.
MORTGAGED PROPERTY: Land and improvements thereon subject to the lien
of a Security Instrument, securing repayment of the debt evidenced by
the related Mortgage Note.
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MORTGAGEE: The secured party to which a Security Instrument initially
grants a lien on the related Mortgaged Property.
MORTGAGE INTEREST RATE: The interest rate payable by the Borrower on a
Mortgage Loan according to the terms of the Mortgage Note which, in the
case of ARM Loans, may be adjusted periodically as provided in such
Mortgage Note.
MORTGAGE LOAN: A mortgage loan that is the subject of this Servicer
Guide pursuant to the terms of the Servicing Agreement. "Mortgage Loan"
includes all of the respective Owner's right, title and interest in and
to such Mortgage Loan, including, without limitation, the related
Mortgage Loan Documents and all other material and information
collected by Servicer in connection with the Mortgage Loan including
Monthly Payments, Liquidation Proceeds, Insurance Proceeds and all
other rights, benefits and proceeds arising from or in connection with
such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: With respect to a Mortgage Loan, the original
related Mortgage Note with applicable addenda and riders, the original
related Security Instrument and the originals of any required addenda
and riders, the original related Assignment and any original
intervening related Assignments, the original related Title Insurance
policy, related Primary Mortgage Insurance policy, if any, and the
related Appraisal Report made at the time such Mortgage Loan was
originated, and all other documents required hereunder.
MORTGAGE NOTE: A manually executed written instrument evidencing the
related Borrower's promise to repay a stated sum of money, plus
interest, to the related Loan Originator by a specific date according
to a schedule of monthly principal and interest payments.
NOTICE OF PERIODIC ADJUSTMENT: With respect to each ARM Loan, a notice
provided to the Borrower of any changes or adjustments to the related
Mortgage Interest Rate or the related Monthly Payment.
OFFICER: An officer of a corporation or a principal of a partnership,
who is authorized to execute documents on behalf of his corporation or
partnership, respectively.
OWNER OR OWNER OF THE MORTGAGE LOANS: The respective owner or owners of
the right, title and interest in and to each Mortgage Loan, including
all successors and assigns. "Owner" includes the Principal and any
subsequent Owner to which a Mortgage Loan is assigned.
OWNER MORTGAGE LOAN FILE: A file maintained by the Owner of a Mortgage
Loan or the Custodian for such Mortgage Loan containing the documents
specified herein, as well as any other documents that come into the
Custodian's possession with respect to the Mortgage Loan.
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P&I ADVANCE: With respect to any Mortgage Loan, an advance by Servicer
of any principal and interest payments not timely paid by the related
Borrower, excluding the amount of the related Servicing Fee.
PAYMENT ADJUSTMENT DATE: With respect to each ARM Loan, the date on
which the Borrower's Monthly Payment changes and becomes effective in
accordance with the terms of the related Mortgage Note.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust or unincorporated organization.
POOL INSURANCE: An insurance policy insuring against certain credit
risk losses on certain Mortgage Loans up to a certain amount.
POOL INSURER: With respect to any Mortgage Loan, the insurer under the
Pool Insurance policy relating to such Mortgage Loan.
POOLING AND SERVICING AGREEMENT: A pooling and servicing agreement
among a Trustee, the Principal and Master Servicer, which agreement
governs the administration of a pool of Mortgage Loans.
PRELIMINARY TITLE REPORT: A report issued by a title insurance company
in anticipation of issuing a Title Insurance policy which evidences
existing liens and gives a preliminary opinion as to the absence of any
encumbrance on title to a Mortgaged Property, except liens to be
removed on or before purchase or refinance, as the case may be, by the
Borrower, and permitted encumbrances.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, any payment by
Borrower in the amount of the outstanding principal balance of such
Mortgage Loan, which payment is received in advance of its Due Date and
is not accompanied by an amount representing scheduled interest for any
period subsequent to the date of date of prepayment.
PRIMARY MORTGAGE INSURANCE: Insurance obtained from a Primary Mortgage
Insurer which insures the holder of a Mortgage Note against loss in the
event the related Borrower defaults under such Mortgage Note or the
related Security Instrument, including all riders and endorsements
thereto.
PRIMARY MORTGAGE INSURER: With respect to any Mortgage Loan, the
insurer under the Primary Mortgage Insurance policy relating to such
Mortgage Loan.
PRINCIPAL: The initial Owner and party to the Servicing Agreement with
Servicer.
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PROPERTY INSPECTION REPORT: A report, submitted by Servicer to Master
Servicer, describing the related Mortgaged Property.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that contains
property and improvements owned and maintained by a homeowners'
association, corporation or trust for the enjoyment and use of
individual PUD Unit owners within that parcel of land.
The shared portions of the parcel are known as common property.
PUD UNIT: A single family residential property within a PUD.
PURCHASE PRICE: An amount equal to (a) the greater of: (i) the fair
market value of the Mortgage Loan; or (ii) the Unpaid Principal Balance
of the Mortgage Loan; plus (b) accrued interest thereon at the Mortgage
Interest Rate through the last day of the month in which the purchase
occurs, and, if Servicer is the purchaser; minus (c) any unreimbursed
advances of principal made by Servicer on such Mortgage Loan and any
outstanding Servicing Fee owed with respect to such Mortgage Loan. If
the purchaser is an entity other than Servicer, the Purchase Price will
also include an amount equal to any interest payments advanced by
Servicer and any outstanding Servicing Fee owed with respect to the
Mortgage Loan. Further, in connection with any such purchase of a
Mortgage Loan as a result of a breach of a representation or warranty
hereunder, Servicer shall provide the Owner with an indemnity, in form
and substance satisfactory to Master Servicer, against additional
costs, expenses and taxes arising out of the repurchase.
REAL ESTATE OWNED (REO): Any Mortgaged Property the title to which is
acquired on behalf of the Owner of the related Mortgage Loan through
foreclosure, deed-in-lieu of foreclosure, abandonment or reclamation
from bankruptcy in connection with a defaulted Mortgage Loan.
REALIZED LOSS: As to any defaulted Mortgage Loan, any loss realized by
the Owner of such Mortgage Loan as calculated herein.
REFERENCE BANK: Bankers Trust or if such entity is no longer lending
money or no longer quoting a prime rate, such other entity as Master
Servicer may specify by written notice to Servicer.
REMITTANCE DATE: The 18th day of each month (or the preceding Business
Day if the 18th day is not a Business Day). Each month, Servicer must
transfer all required funds from the Custodial P&I Account to Master
Servicer Custodial Account on or before the Remittance Date.
REO DISPOSITION: The receipt by Servicer of Liquidation Proceeds and
other payments and recoveries (including proceeds of a final sale) from
the sale or other disposition of the REO.
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REPRESENTING PARTY: A Person that has sold or intends to sell Mortgage
Loans, directly or through one or more intermediaries, to Principal
pursuant to an agreement for the sale of Mortgage Loans pursuant to
which a Representing Party has made representations and warranties with
respect to certain Mortgage Loans, and under which the Owner of such
Mortgage Loans, its successors and assigns has recourse against such
Representing Party for any breach thereunder.
S&P: Standard & Poor's Corporation or its successor-in-interest.
SAIF: The Savings Association Insurance Fund.
SCHEDULED PRINCIPAL BALANCE: With respect to each Mortgage Loan (or
related REO), the principal balance of such Mortgage Loan as of the
applicable Due Date calculated by taking into account the application
of any Monthly Payments due on or before such Due Date (whether or not
such Monthly Payments were received from the Borrower), and
Curtailments, Insurance Proceeds or Liquidation Proceeds, and Realized
Losses received or realized by Servicer prior to such Due Date.
SECURITY INSTRUMENT: A written instrument creating a valid first lien
on a Mortgaged Property. A Security Instrument may be in the form of a
mortgage, deed of trust, deed to secure debt or security deed,
including any riders and addenda thereto.
SERVICER: The Person that has entered into the Servicing Agreement with
Principal.
SERVICER INFORMATION STATEMENT: A statement prepared by Servicer in the
form prescribed by Master Servicer, which provides information
concerning Servicer's continuing qualifications to serve as a servicer
hereunder.
SERVICER LOAN NUMBER: A unique number assigned by Servicer to a
Mortgage Loan.
SERVICER MORTGAGE LOAN FILE: A file maintained by Servicer for each
Mortgage Loan that contains the documents specified herein, as well as
any other documents that come into Servicer's possession with respect
to a Mortgage Loan.
SERVICER NUMBER: A three digit number assigned to Servicer by Master
Servicer. The Servicer Number shall be used on all correspondence and
forms and in all telephone conversations with Master Servicer.
SERVICING FEE: For each Mortgage Loan, the compensation due Servicer
calculated and payable as specified herein.
SERVICING FEE PERCENTAGE: With respect to each Mortgage Loan, the
Servicing Fee Percentage identified in the Servicing Agreement.
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SINGLE FAMILY PROPERTY: A one-unit residential property.
SUPERVISION AGREEMENT: A supervision agreement between Master Servicer
and Principal.
T&I ADVANCE: An advance by Servicer of any taxes and insurance premiums
due with respect to any Mortgage Loan.
THRESHOLD AMOUNT: As defined in SECTION 516 hereto.
TITLE INSURANCE: An ALTA mortgage loan title policy form 1970, or other
form of Title Insurance Policy acceptable to FNMA or FHLMC, including
all riders and endorsements thereto, insuring that the Security
Instrument constitutes a valid first lien on the related Mortgaged
Property subject only to Permitted Encumbrances.
TRUST: The Trust formed by deposit with the respective Trustee of
certain Mortgage Loans pursuant to the terms of the related Pooling and
Servicing Agreement.
TRUSTEE: The Trustee with respect to the related Trust as identified in
the related Pooling and Servicing Agreement, or any other Person that
shall become the "trustee" for such Trust.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan, the
outstanding principal balance payable by the Borrower under the terms
of the Mortgage Note.
VA: The Department of Veterans Affairs and its successors.
VALUE: The lesser of the value indicated in the Appraisal Report or
sales price of the related Mortgaged Property at the time the Mortgage
Loan is closed. For a refinanced Mortgage Loan, the Value of the
related Mortgaged Property is the value indicated in the Appraisal
Report obtained in connection with the refinanced Mortgage Loan.
920 RULES OF CONSTRUCTION
921 INTERPRETATION
All words used herein shall be construed of such gender or number as
the circumstances require. References herein to "Chapters," "Sections,"
"Exhibits" and other subdivisions are to the designated Chapters,
Sections, Exhibits and other subdivisions hereof. "Including" means
"including but not limited to" and the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Servicer
Guide as a whole and not to any particular provision.
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922 ACCOUNTING MATTERS
All accounting terms used herein without definition shall be
interpreted in accordance with generally accepted accounting
principles, and determinations required t be made pursuant to this
Servicer Guide shall be made in accordance with generally accepted
accounting principles.
923 RELATION TO OTHER DOCUMENTS
Nothing in this Servicer Guide shall be deemed to amend or relieve
Servicer of its obligations under the Servicing Agreement.
924 "KNOWLEDGE STANDARD"
Whenever any representation, warranty or other statement contained in
this Servicer Guide is qualified by reference to Servicer's "knowledge"
or "to the best of Servicer's knowledge," such "knowledge" shall be
deemed to include knowledge of facts or conditions of which Servicer
(including, without limitation, any of its directors, officers, agents,
or employees) either is actually aware or should have been aware under
the circumstances with the exercise of reasonable care, due diligence
and competence in discharging Servicer's duties under this Servicer
Guide and the Servicing Agreement. All matters of public record shall
be deemed to be known to Servicer. Any representation and warranty that
is inaccurate or incomplete in any material respect is presumed to be
made with the knowledge of Servicer, unless Servicer demonstrates
otherwise. For purposes of this SECTION 924, "due diligence" means the
care which Servicer would exercise in obtaining and verifying
information for a loan in which Servicer would be entirely dependent on
the property securing such loan and on the borrower's creditworthiness
as security to protect its investment.
925 MASTER SERVICER'S SOLE DISCRETION
Whenever any provision of this Servicer Guide requires Master Servicer
to make a determination of fact or a decision to act, or to permit,
approve or deny another party's action, such determination or decision
shall be deemed to be in Master Servicer's sole and absolute
discretion.
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CHAPTER 10
DIRECTORY AND NOTICES
This Chapter contains useful addresses, telephone numbers and telecopier numbers
of Master Servicer, Custodian, and Owner. It also specifies requirements for
sending any notices required hereunder to Master Servicer.
1010 NOTICES
Except as otherwise expressly required in this Servicer Guide, all
demands, notices and other communications hereunder shall be in writing
and shall be personally delivered, telecopied, mailed (by registered or
certified United States mail, postage prepaid), or express mailed
(through an overnight delivery service). Such notices shall be sent, in
the case of Master Servicer or Custodian, to the addresses specified
below, or such other address as may be hereafter furnished in writing
by either party to the other, or to the address of any successor Master
Servicer or Custodian hereunder. Such notices shall be sent, in the
case of an Owner, to the address of the Owner specified in the
Servicing Agreement or any amendment or exhibit thereto, and, in the
case of Servicer, to the addresses specified in the Servicing
Agreement, or, in either case, to such other address as may be
hereafter furnished in writing by either party to the other parties.
Notices will be deemed effective upon the earlier of: (i) the date of
delivery (if delivered personally or telecopied); (ii) the next
Business Day after the date of mailing (if sent by express mail or
other overnight delivery service for next day delivery); or (iii) three
(3) Business Days after the date of mailing (if sent by registered or
certified United States mail).
Notices to Master Servicer should be sent to:
Securitized Asset Services Corporation
7435 New Technology Way
Frederick, Maryland 21701
Attention: Master Servicer
Telephone: (301) 815-6399
Fax: (301) 815-6365
Notices to Custodian should be sent to:
First Trust
5303 Spectrum Drive
Frederick, Maryland 21701
Attention: Terry Albertson
Telephone: (301) 620-9025
Fax: (301) 694-7306
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EXHIBIT I-5
SERVICING AGREEMENT RELATING TO MORTGAGE LOAN SUB-POOL 1995-W24D
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EXECUTION COPY
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THE PRUDENTIAL HOME MORTGAGE COMPANY, INC.
(Principal)
and
FIRST TOWN MORTGAGE CORPORATION
(Servicer)
SERVICING AGREEMENT
Dated as of August 20, 1993
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This Servicing Agreement, made as of this twentieth day of August, 1993
(the "Agreement"), between First Town Mortgage Corporation, a New Jersey
corporation (the "Servicer") and The Prudential Home Mortgage Company, Inc., a
New Jersey corporation, (the "Principal"), recites and provides as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing
residential mortgage loans, and the Principal desires to retain the Servicer,
and the Servicer desires to be retained, to service the Mortgage Loans
identified on Schedule I hereto subject to and in accordance with the terms of
this Agreement; and
WHEREAS, the Master Servicer acting pursuant to a Supervision Agreement
or a Pooling and Servicing Agreement will supervise, monitor and oversee the
performance of the Servicer under this Agreement; and
WHEREAS, the Principal may, at its sole discretion, assign an undivided
interest in its rights hereunder with respect to certain Mortgage Loans to the
respective Owner of such Mortgage Loans;
NOW THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Servicer and the Principal agree as follows:
ARTICLE 1
DEFINITIONS
ACH: Automated Clearing House.
ADJUSTED TANGIBLE NET WORTH: As of the date of determination
thereof, the sum of: (i) Servicer's Tangible Net Worth; plus (ii) one percent
(1%) of the amount of Servicer's servicing portfolio, as determined by the
Master Servicer in the Master Servicer's sole and absolute discretion.
AFFILIATE: Any person or entity controlling, controlled by or
under common control with a specified entity. "Control" means the power to
direct the management and policies of a person or entity, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "Controlling" and "controlled" shall have meanings correlative to the
foregoing.
AMOUNTS HELD FOR FUTURE DISTRIBUTION: As to any Remittance
Date, amounts on account of (i) all prepayments of principal received in the
month of such Remittance Date and
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all related payments of interest on such principal prepayments, Liquidation
Proceeds received in the month of such Remittance Date and amounts received from
the Seller or the Principal in the month of such Remittance Date as the Purchase
Price for any repurchased Mortgage Loan and (ii) payments which represent early
receipt of scheduled payments of principal and interest due on a date or dates
subsequent to the related Due Date.
APPRAISAL REPORT: A report setting forth the fair market value
of a Mortgaged Property as determined by an appraiser who, at the time the
appraisal was conducted, met the minimum qualifications of FNMA and FHLMC for
appraisers of conventional residential mortgage loans.
ARM LOAN: An "adjustable rate" Mortgage Loan, the Mortgage
Interest Rate of which is subject to periodic adjustment in accordance with
terms of the related Mortgage Note.
ASSIGNMENT: The document which transfers all the rights of the
secured party pursuant to a Security Instrument to a transferee for valid
consideration.
ASSUMPTION: The process whereby, on sale or transfer of a
legal or beneficial interest in a Mortgaged Property, the new owner of such
Mortgaged Property becomes legally obligated under the terms of the related
existing Security Instrument, Mortgage Note and any addenda and riders to such
Security Instrument or Mortgage Note. Subsequent to the Assumption, the new
owner of the property shall be deemed to be the Borrower under the related
Mortgage Loan Documents.
BALLOON AMOUNT: The remaining principal balance to be paid at
Maturity of a Balloon Loan by the related Borrower pursuant to the terms of the
related Mortgage Note.
BALLOON LOAN: A Mortgage Loan which amortizes its principal
payments over a period which is longer than the stated maturity of such Mortgage
Loan pursuant to the terms of the related Mortgage Note so as to require the
payment of the Balloon Amount at maturity in order to retire the Mortgage Loan.
BIF: The Bank Insurance Fund.
BORROWER: The individual obligated to repay a Mortgage Loan.
(The Borrower may be the beneficiary or beneficiaries of an Illinois land trust
when the Mortgaged Property is located in Illinois.).
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which national banking institutions in the state in which the
Master Servicer has its principal place of business are authorized or obligated
by law or executive order to remain closed.
BUYDOWN AGREEMENT: An agreement governing the application of
Buydown Funds with respect to a Mortgage Loan.
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BUYDOWN FUNDS: Money advanced by a builder, seller or other
interested party to reduce a Borrower's Monthly Payment during the initial years
of a Mortgage Loan.
CERTIFICATE: A mortgage backed security issued by an Owner of
the related Mortgage Loans which is secured, in whole or in part, by such
Mortgage Loans.
CODE: The Internal Revenue Code of 1986.
CONDOMINIUM PROJECT: Real estate including the separate
ownership in fee, or on a satisfactory leasehold estate, of a particular
residential unit with an indivisible interest in the real estate designated for
common ownership strictly by unit owners.
CONDOMINIUM UNIT: A Single Family Property within a
Condominium Project.
CONVERTED MORTGAGE LOAN: An ARM Loan with respect to which the
Borrower has complied with the applicable requirements of the related Mortgage
Note to convert the related Mortgage Interest Rate to a fixed rate of interest,
and the Servicer has processed such conversion.
CURTAILMENT: A partial prepayment by the Borrower of principal
on a Mortgage Loan that otherwise is current, which prepayment is not
accompanied by an amount representing the full amount of scheduled interest due
on the related Mortgage Loan.
CURTAILMENT INTEREST: When a Curtailment is applied
retroactively by a Servicer to the Unpaid Principal Balance of a Mortgage Loan
outstanding on the first day of the month in which such Curtailment is received,
an amount equal to 30 days of interest on the amount of such Curtailment at the
related Mortgage Interest Rate.
CUSTODIAL BUYDOWN ACCOUNT: An account maintained by the
Servicer specifically to hold all Buydown Funds to be applied to individual
Mortgage Loans owned by a common Owner of the Mortgage Loans.
CUSTODIAL PRINCIPAL AND INTEREST (P&I) ACCOUNT: An account
maintained by the Servicer, specifically for the collection of principal and
interest, Insurance Proceeds, Liquidation Proceeds and other amounts received
with respect to Mortgage Loans owned by a common Owner of the Mortgage Loans.
CUSTODIAL TAXES AND INSURANCE (T&I) ACCOUNT: An account
maintained by the Servicer, specifically for the payment of real estate tax
assessments and insurance premiums in respect of Mortgaged Property related to
Mortgage Loans owned by a common Owner of the Mortgage Loans.
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CUSTODIAN: First Trust National Association, which shall hold
all or part of the Owner Mortgage Loan File with respect to a Mortgage Loan on
behalf of the Owner of such Mortgage Loan.
CUT-OFF DATE: With respect to any Mortgage Loan, the date set
forth on Schedule I, or on Schedule II as to a subsequent Owner, after which any
payments of principal or interest that become due, whether received before, on
or after such date are to be deposited to the Custodial P&I Account for the
benefit of the Owner of the related Mortgage Loan, its successors and assigns.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting a Deficient Valuation.
DEFICIENT VALUATION: With respect to any Mortgage Loan the
related Mortgaged Property of which is involved in a bankruptcy proceeding, the
reduction by the bankruptcy court of the Unpaid Principal Balance of the
Mortgage Note.
DELINQUENCY/DELINQUENT: A Delinquency with respect to a
Mortgage Loan occurs, or a Mortgage Loan is Delinquent when all or part of a
Borrower's Monthly Payment or, where applicable, an Escrow Item is paid after
the applicable Due Date. For reporting purposes, a Delinquency that remains
uncured for 30 days or more, but less than 60 days, is considered a 30-day
Delinquency. A Delinquency that has been uncured for more than 60 days, but less
than 90 days, is considered a 60-day Delinquency. A Delinquency that has been
uncured for 90 days or more is considered a go-day Delinquency.
DIRECTLY OPERATE: With respect to any REO, the direct or
indirect furnishing or rendering of services to the tenants thereof, management
or operation of such REO, the holding of such REO primarily for sale to
customers, performance of any construction work thereon or any use of such REO
in a trade or business, in each case other than with the approval of the Master
Servicer; provided, however, that the Servicer shall not be considered to
Directly Operate an REO solely because it establishes rental terms, chooses
tenants, enters into or renews leases, deals with taxes and insurance, or makes
decisions as to repairs or capital expenditures with respect to such REQ.
DUE DATE: With respect to a Mortgage Loan, the day of each
month on which a Monthly Payment and, where applicable, an Escrow Funds payment
is due as stated in the related Mortgage Note. The Due Date for all Mortgage
Loans will be the first day of each month.
DUE-ON-SALE CLAUSE: The clause in a Security Instrument
requiring the payment of the Unpaid Principal Balance of the related Mortgage
Loan upon the sale of, or the transfer of an interest in, the related Mortgaged
Property.
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DUFF & PHELPS: Duff & Phelps Credit Rating Co. or its
successor-in-interest.
ELIGIBLE ACCOUNT: One or more accounts (i) that are maintained
with a depository institution whose long-term debt obligations (or, in the case
of a depository institution which is part of a holding company structure, the
long-term debt obligations of which holding company structure) at the time of
deposit therein are rated at least "AA" (or the equivalent) by each of Moody's,
S&P, Fitch and Duff & Phelps (if so rated by such entity), (ii) the deposits in
which are fully insured by the FDIC through either BIF or SAIF, (iii) the
deposits in which are insured by the FDIC through either BIF or SAIF (to the
limit established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
the Master Servicer which is satisfactory to the Master Servicer, the Owners of
the related Mortgage Loans, and where there are beneficial owners as to any such
Owners, on behalf of any such beneficial owners, has a claim with respect to the
funds in such accounts or a perfected first security interest against any
collateral securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such accounts
are maintained, (iv) maintained as a trust account or accounts with the trust
department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity or (v) such other account that is
acceptable to the Master Servicer.
ELIGIBLE CUSTODIAL P&I ACCOUNT: As defined in Section 6.1.2.
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, FNMA, FHLMC 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; PROVIDED, HOWEVER, that any
obligation of, or guarantee by, FNMA or FHLMC, other than an
unsecured senior debt obligation of FNMA or FHLMC or a
mortgage participation or pass-through certificate guaranteed
by FNMA or FHLMC, shall be an Eligible Investment only if, at
the time of investment, such investment would not adversely
affect the rating, if any, on any class of Certificates which
are secured by Mortgage Loans that are the source of funds
which are the subject of such investment (as confirmed in
writing by the Rating Agencies);
(ii) 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 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
are rated "A- 1+" by S&P, "Duff-1+" by Duff & Phelps (if rated
by Duff &
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Phelps), rated in the highest category by Fitch (if rated by
Fitch) and "P-1" by Moody's and the long-term debt obligations
of such depository institution or trust company are rated at
least "Aa2" by Moody's, "AA" by Duff & Phelps (if rated by
Duff & Phelps), "AA" by Fitch (if rated by Fitch) and "AA" by
S&P;
(iii) repurchase agreements or obligations with
respect to any security described in clause (i) above where
such security has a remaining maturity of one year or less and
where such repurchase obligation has been entered into with a
depository institution or trust company (acting as principal)
described in clause (ii) above and where such repurchase
obligation will mature prior to the next Remittance Date;
(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
securities have a credit rating from S&P, Duff & Phelps (if
rated by Duff & Phelps), Fitch (if rated by Fitch) and
Moody's, at the time of investment or the contractual
commitment providing for such investment, at least equal to
the second highest long-term credit rating assigned by S&P,
Duff & Phelps (if rated by Duff & Phelps), Fitch (if rated by
Fitch) and Moody's to the Certificates; PROVIDED, HOWEVER,
that securities issued by any particular corporation will not
be Eligible Investments to the extent the investment therein
will cause the then outstanding principal amount of securities
issued by such corporation and held as part of the Custodial
Accounts to exceed 10% of (a) the aggregate Unpaid Principal
Balance of the Mortgage Loans serviced by the Servicer or (b)
the aggregate principal amount of all Eligible Investments in
the Custodial Accounts;
(v) commercial paper (including both
noninterest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more
than one year after the date of issuance thereof) rated "A- 1"
by S&P, rated "Duff-1" by Duff & Phelps (if rated by Duff &
Phelps), rated in the highest category by Fitch (if rated by
Fitch) and rated "P-1" by Moody's;
(vi) units of investment funds rated in the
highest category by S&P, Duff & Phelps (if rated by Duff &
Phelps), Fitch (if rated by Fitch) and Moody's;
(vii) a qualified guaranteed investment contract;
and
(viii) any other demand, money market or time
deposit or obligation, or interest-bearing or other security
or investment, acceptable to the Master Servicer;
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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 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.
Eligible Investments that are subject to prepayment or call
may not be purchased at a price in excess of par.
ERRORS AND OMISSIONS POLICY: An insurance policy naming the
Principal, its successors and assigns as a loss payee relative to losses caused
by errors or omissions of the Servicer and its personnel, including, but not
limited to losses caused by the failure to pay insurance premiums or taxes, to
record or perfect liens, to effect valid transfers of Mortgage Notes, or to
properly service Mortgage Loans.
ESCROW FUNDS: All funds collected with respect to a Mortgage
Loan by the Servicer to cover related Escrow Items according to the provisions
of this Agreement.
ESCROW ITEM: An expense required to be paid by a Borrower
under the related Security Instrument including, without limitation, taxes,
special assessments, ground rents, water, sewer and other governmental
impositions or charges that are or may become liens on the related Mortgaged
Property prior to that of the related Security Instrument, as well as Hazard
Insurance, Flood Insurance and Primary Mortgage Insurance premiums.
FDIC: Federal Deposit Insurance Corporation and its
successors.
FHA: The Federal Housing Authority and its successors.
FHLMC: Federal Home Loan Mortgage Corporation and its
successors.
FIDELITY BOND: An insurance policy naming the Principal, its
successors and assigns as a loss payee relative to losses caused by improper or
unlawful acts of the Servicer's personnel.
FITCH: Fitch Investors Service, Inc. or its
successor-in-interest.
FLOOD INSURANCE: An insurance policy insuring against flood
damage to a Mortgaged Property, where required.
FNMA: Federal National Mortgage Association and its
successors.
GNMA: Government National Mortgage Association and its
successors.
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GPM (OR GPARM) LOAN: A fixed rate Mortgage Loan or ARM Loan
that provides during a portion of its term that the interest portion of the
Monthly Payment on such Mortgage Loan shall be less than the full amount of
interest due on such Mortgage Loan based on the related Mortgage Interest Rate.
GROSS MARGIN: With respect to each ARM Loan, the fixed
percentage specified in the related Mortgage Note that is added to the
applicable Index on each Interest Adjustment Date to determine the new Mortgage
Interest Rate for such ARM Loan.
HAZARD INSURANCE: A fire and casualty extended coverage
insurance policy insuring against loss or damage from fire and other perils
covered within the scope of standard extended hazard coverage naming the Owner
of the related Mortgage Loan, its successors and assigns, as a mortgagee under a
standard mortgagee clause, together with all riders and endorsements thereto.
HUD: The United States Department of Housing and Urban
Development and its successors.
INDEX: With respect to each ARM Loan, the applicable index
specified in the related Mortgage Note that is added to the related Gross Margin
on each Interest Adjustment Date to determine the new Mortgage Interest Rate for
such ARM Loan.
INSURANCE POLICY: Any insurance policy for a Mortgage Loan
required hereunder, including, without limitation, Primary Mortgage Insurance,
Hazard Insurance, Flood Insurance, Pool Insurance and Title Insurance policies.
INSURANCE PROCEEDS: Proceeds from an Insurance Policy.
INTEREST ADJUSTMENT DATE: With respect to each ARM Loan, the
date on which the related Mortgage Interest Rate changes in accordance with the
terms of such Mortgage Note, the first of which is set forth in such Mortgage
Note and on the respective Mortgage Loan Schedule.
LIQUIDATION: Application of full payment to a Mortgage Loan
which results in the release of the lien of the related Security Instrument on
any related Mortgaged Property, whether through foreclosure and sale of the
related REO, condemnation, prepayment in full or otherwise, or the realization
of all sums from the final disposition of the related REO.
LIQUIDATION PROCEEDS: The amount received by the Servicer in
connection with any Liquidation of a Mortgage Loan.
LOAN ORIGINATOR: The entity that closes a Mortgage Loan in its
own name.
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LOAN-TO-VALUE (LTV): The ratio that results when the Scheduled
Principal Balance of a Mortgage Loan is divided by the Value of the related
Mortgaged Property.
MASTER SERVICER: Securitized Asset Services Corporation, or
any successors and assigns.
MASTER SERVICER CUSTODIAL ACCOUNT: A custodial account
established by the Master Servicer into which the Servicer shall remit funds
from the related Custodial P&I Account.
MASTER SERVICER LOAN NUMBER: A unique number assigned by the
Master Servicer to each Mortgage Loan set forth in Schedule I.
MAXIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each
ARM (or GPARM) Loan, the interest rate set forth in the related Mortgage Note as
the maximum Mortgage Interest Rate thereunder.
MAXIMUM NEGATIVE AMORTIZATION AMOUNT: With respect to any
Mortgage Loan that provides for negative amortization, the maximum principal
balance which is permitted under the terms of the related Mortgage Note.
MINIMUM LIFETIME MORTGAGE INTEREST RATE: With respect to each
ARM Loan, the interest rate set forth in the related Mortgage Note as the
minimum Mortgage Interest Rate thereunder, if any.
MONTH END INTEREST: In the event of any Prepayment in Full or
Curtailment of a Mortgage Loan, the difference between the interest payment that
would have been paid on such Mortgage Loan or portion thereof that was prepaid
through the last day of the month in which such prepayment occurred and the
interest payment actually received by the Servicer on such Mortgage Loan or
portion thereof that was prepaid.
MONTH END INTEREST SHORTFALL: The portion of Month End
Interest for all Mortgage Loans for any month unable to be paid by the Servicer
out of its Monthly Servicing Compensation for such month due to the exhaustion
of such Monthly Servicing Compensation in paying such Month End Interest.
MONTHLY ACCOUNTING REPORTS: The reports due from a Servicer on
a monthly basis (due no later than the eighth calendar day of the month)
relative to all Mortgage Loans serviced by the Servicer, which reports are
required to be submitted to the Master Servicer.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest due in the applicable month
under the terms of the related Mortgage Note.
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MONTHLY REMITTANCE: The Servicer's aggregate payment due each
month with respect to all Mortgage Loans owned by a common Owner to the
appropriate Master Servicer Custodial Account as specified in Section 18.3.1.
MONTHLY SERVICING COMPENSATION: The aggregate servicing
compensation due the Servicer in each month.
MOODY'S: Moody's Investors Service, Inc. or its
successor-in-interest.
MORTGAGE INTEREST RATE: The interest rate payable by the
Borrower on a Mortgage Loan according to the terms of the Mortgage Note which,
in the case of ARM Loans, may be adjusted periodically as provided in such
Mortgage Note.
MORTGAGE LOAN: A mortgage loan identified on Schedule I which
is owned by the respective Owner shown on Schedule II. "Mortgage Loan" includes
all of the respective Owner's right, title and interest in and to such Mortgage
Loan, including, without limitation, the related Mortgage Loan Documents and all
other material and information collected by the Servicer in connection with the
Mortgage Loan including Monthly Payments, Liquidation Proceeds, Insurance
Proceeds and all other rights, benefits and proceeds arising from or in
connection with such Mortgage Loan.
MORTGAGE LOAN DOCUMENTS: With respect to a Mortgage Loan, the
original related Mortgage Note with applicable addenda and riders, the original
related Security Instrument and the originals of any required addenda and
riders, the original related Assignment and any original intervening related
Assignments, the original related Title Insurance policy, related Primary
Mortgage Insurance policy, if any, and the related Appraisal Report made at the
time such Mortgage Loan was originated, and all other documents described in
Article 9 hereof.
MORTGAGED PROPERTY: Land and improvements thereon subject to
the lien of a Security Instrument, securing repayment of the debt evidenced by
the related Mortgage Note.
MORTGAGEE: The secured party to which a Security Instrument
initially grants a lien on the related Mortgaged Property.
MORTGAGE NOTE: A manually executed written instrument
evidencing the related Borrower's promise to repay a stated sum of money, plus
interest, to the related Loan Originator by a specific date according to a
schedule of monthly principal and interest payments.
MORTGAGE NOTE ASSUMPTION RIDER: A rider attached to a Mortgage
Note which states the terms upon which an Assumption may occur, including, but
not limited to, consent in writing by the insurer under any Primary Mortgage
Insurance Policy with respect to the related Mortgage Loan.
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NET MORTGAGE INTEREST RATE: With respect to a Mortgage Loan,
the difference between (a) the Mortgage Interest Rate on such Mortgage Loan and
(b) the Servicing Fee Percentage for such Mortgage Loan.
NON-RECOVERABLE ADVANCE: Any amount previously advanced by the
Servicer with respect to a Mortgage Loan, which the Servicer has determined not
to be recoverable from Insurance Proceeds, Liquidation Proceeds or other
payments with respect to such Mortgage Loan.
NOTICE OF PERIODIC ADJUSTMENT: With respect to each ARM Loan,
a notice provided to the Borrower of any changes or adjustments to the related
Mortgage Interest Rate or the related Monthly Payment.
OFFICER: An officer of a corporation or a principal of a
partnership, who is authorized to execute documents on behalf of his corporation
or partnership, respectively.
OPINION OF COUNSEL: A written opinion of counsel, reasonably
acceptable in form and substance to the Master Servicer, and who may be in-house
or outside counsel to the Servicer but which must be Independent outside counsel
with respect to any such opinion of counsel concerning the taxation, or status
for tax purposes, of the Owner.
OWNER OR OWNER OF THE MORTGAGE LOANS: With respect to each
Mortgage Loan, the respective Person listed on Schedule II.
OWNER MORTGAGE LOAN FILE: A file maintained by the Owner of a
Mortgage Loan or the Custodian for such Mortgage Loan, which file contains the
documents specified in Section 9.1 hereof, as well as any other documents that
come into the Custodian's possession with respect to such Mortgage Loan.
OWNER-OCCUPIED PROPERTY: A one- to four-unit property which is
the Primary Residence of the owner of record.
P&I ADVANCE: With respect to any Mortgage Loan, an advance by
the Servicer of any principal and interest payments not timely paid by the
related Borrower, excluding the amount of the related Servicing Fee.
PAYMENT ADJUSTMENT DATE: With respect to each ARM Loan, the
date on which the Borrower's Monthly Payment changes in accordance with the
terms of the related Mortgage Note.
PERIODIC PAYMENT CAP: With respect to an ARM Loan, the limit
on the percentage increase that may be made on the related Monthly Payment on
any Payment Adjustment Date, as set forth in the related Mortgage Note.
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PERIODIC RATE CAP: With respect to an ARM Loan, the limit,
expressed as incremental percentage points, on the increase or decrease that may
be made to the related Mortgage Interest Rate on any Interest Adjustment Date
from such Mortgage Interest Rate immediately prior to such Interest Adjustment
Date, as set forth in the related Mortgage Note.
PERSON: Any individual, corporation, partnership, joint
venture, association, joint- stock company, trust or unincorporated
organization.
POOL INSURANCE: An insurance policy insuring against certain
credit risk losses on certain Mortgage Loans up to a certain amount.
POOL INSURER: With respect to any Mortgage Loan, the insurer
under the Pool Insurance policy relating to such Mortgage Loan.
POOLING AND SERVICING AGREEMENT: A pooling and servicing
agreement among a Trustee, the Principal and the Master Servicer which governs
the administration of a pool of Mortgage Loans;
PRELIMINARY TITLE REPORT: A report issued by a title insurance
company in anticipation of issuing a Title Insurance policy which evidences
existing liens and gives a preliminary opinion as to the absence of any
encumbrance on title to a Mortgaged Property, except liens to be removed on or
before purchase or refinance, as the case may be, by the Borrower and Permitted
Encumbrances.
PREPAYMENT IN FULL: With respect to any Mortgage Loan, any
payment by the Borrower in the amount of the outstanding principal balance of
such Mortgage Loan which is received in advance of its Due Date and is not
accompanied by an amount representing scheduled interest for any period
subsequent to the date of date of prepayment.
PRIMARY MORTGAGE INSURANCE: Insurance obtained from a Primary
Mortgage Insurer which insures the holder of a Mortgage Note against loss in the
event the related Borrower defaults under such Mortgage Note or the related
Security Instrument, including all riders and endorsements thereto.
PRIMARY MORTGAGE INSURER: With respect to any Mortgage Loan,
the insurer under the Primary Mortgage Insurance policy relating to such
Mortgage Loan.
PRIMARY RESIDENCE: The principal and permanent residence of a
Borrower.
PRINCIPAL: The Prudential Home Mortgage Company, Inc.
PROPERTY INSPECTION REPORT: A report, submitted by the
Servicer to the Master Servicer, describing the related Mortgaged Property.
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PRUDENT SERVICING PRACTICES: Such practices observed generally
by servicers in discharging their servicing obligations in a prudent manner in
accordance with industry standards for mortgage loans similar to the Mortgage
Loans.
PUD (PLANNED UNIT DEVELOPMENT): A parcel of real estate that
contains property and improvements owned and maintained by a homeowners'
association, corporation or trust for the enjoyment and use of individual PUD
Unit owners within that parcel of land. The shared portions of the parcel are
known as common property.
PUD UNIT: A single family residential property within a PUD.
PURCHASE PRICE: An amount equal to (a) the greater of (i) the
fair market value of the Mortgage Loan or (ii) the Unpaid Principal Balance of
the Mortgage Loan, plus (b) accrued interest thereon at the Mortgage Interest
Rate through the last day of the month in which the purchase occurs, and, if the
Servicer is the purchaser, minus (c) any unreimbursed advances of principal made
by the Servicer on such Mortgage Loan and any outstanding Servicing Fee owed
with respect to such Mortgage Loan. If the purchaser is an entity other than the
Servicer, the Purchase Price will also include an amount equal to any interest
payments advanced by the Servicer and any outstanding Servicing Fee owed with
respect to the Mortgage Loan. Further, in connection with any such purchase of a
Mortgage Loan as a result of a breach of a representation or warranty under the
respective Servicing Retained Commitment Letter or under this Agreement, the
Servicer shall either provide the Owner with an indemnity, in form and substance
satisfactory to the Master Servicer, against, additional costs, expenses and
taxes arising out of the repurchase.
REAL ESTATE OWNER (REO): Any Mortgaged Property the title to
which is acquired on behalf of the Owner of the related Mortgage Loan through
foreclosure, deed-in-lieu of foreclosure, abandonment or reclamation from
bankruptcy in connection with a defaulted Mortgage Loan.
REALIZED LOSS: As to any defaulted Mortgage Loan, any loss
realized by the Owner of such Mortgage Loan as calculated pursuant to Section
7.7 hereof.
REFERENCE BANK: Bankers Trust or if such entity is no longer
lending money or no longer quoting a prime rate, such other entity as the Master
Servicer may specify by written notice to the Servicer.
REMITTANCE DATE: The 18th day of each month (or the preceding
Business Day if the 18th day is not a Business Day). Each month, the Servicer
must transfer all required funds from the Custodial P&I Account to the Master
Servicer Custodial Account on or before the Remittance Date.
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REO DISPOSITION: The receipt by the Servicer of Liquidation
Proceeds and other payments and recoveries (including proceeds of a final sale)
from the sale or other disposition of the REO.
REPRESENTING PARTY: A Person that has sold or intends to sell
Mortgage Loans, directly or through one or more intermediaries, to the Principal
pursuant to an agreement for the sale of Mortgage Loans pursuant to which a
Representing Party has made representations and warranties with respect to
certain Mortgage Loans, and under which the Owner of such Mortgage Loans, its
successors and assigns has recourse against such Representing Party for any
breach thereunder.
S&P: Standard & Poor's Corporation or its
successor-in-interest.
SAIF: The Savings Association Insurance Fund.
SALES AGREEMENT: An agreement between the Servicer, acting as
seller, and the Principal or an affiliate thereof, acting as buyer, by which
certain Mortgage Loans were acquired.
SCHEDULED PRINCIPAL BALANCE: With respect to each Mortgage
Loan (or related REO), the principal balance of such Mortgage Loan as of the
applicable Due Date calculated by taking into account the application of any
Monthly Payments due on or before such Due Date (whether or not such Monthly
Payments were received from the Borrower), and Curtailments, Insurance Proceeds
or Liquidation Proceeds, and Realized Losses received or realized by the
Servicer prior to such Due Date.
SECURITY INSTRUMENT: A written instrument creating a valid
first lien on a Mortgaged Property. A Security Instrument may be in the form of
a mortgage, deed of trust, deed to secure debt or security deed, including any
riders and addenda thereto.
SERVICER: First Town Mortgage Corporation, the entity that has
entered into this Agreement with the Principal.
SERVICER INFORMATION STATEMENT: A statement prepared by the
Servicer in the form prescribed by the Master Servicer which provides
information concerning the Service continuing qualification to serve as a
servicer under this Agreement.
SERVICER LOAN MORTGAGE NUMBER: A unique number assigned by the
Servicer to a Loan.
SERVICER MORTGAGE LOAN FILE: A file maintained by the Servicer
for each Mortgage Loan that contains the documents specified in Section 9.2
hereof, as well as any other documents that come into the Servicer's possession
with respect to a Mortgage Loan.
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SERVICER NUMBER: A three digit number assigned to the Servicer
by the Master Servicer. The Servicer Number shall be used on all correspondence
and forms and in all telephone conversations with the Master Servicer.
SERVICING FEE: For each Mortgage Loan, the compensation due
the Servicer in an amount equal to the product of (i) one-twelfth of the
Servicing Fee Percentage and (ii) the Scheduled Principal Balance of the
Mortgage Loan as of the immediately preceding Due Date (without taking into
account any payment of principal due on such Due Date).
SERVICING FEE PERCENTAGE: With respect to each Mortgage Loan,
the Servicing Fee Percentage shall be identified on Schedule I hereto.
SERVICING RETAINED COMMITMENT LETTER: An agreement between the
Principal and the Servicer, in its capacity as seller of Mortgage Loans, by
which the Principal acquired ownership of such Mortgage Loans.
SINGLE FAMILY PROPERTY: A one-unit residential property.
SUPERVISION AGREEMENT: A supervision agreement between the
Master Servicer and the Principal.
TANGIBLE NET WORTH: As of the date of determination thereof,
the par value (or value stated on the Servicer's books) of the capital stock of
all classes of the Servicer, plus, or minus in the case of a deficiency, the
amount of paid in capital and retained earnings of the Servicer, all determined
in accordance with generally accepted accounting principles as are then in
effect. The Master Servicer may exclude assets that are unacceptable, in the
Master Servicer's sole discretion, from the determination of the Servicer's
Tangible Net Worth.
T&I ADVANCE: An advance by the Servicer of any taxes and
insurance premiums due with respect to any Mortgage Loan.
THRESHOLD AMOUNT: With respect to any Custodial P&I Account,
(i) $100,000 or, in the case of any Eligible Custodial P&I Account, the
aggregate amount on deposit therein (i.e., an unlimited amount); or (ii) after
any notice has been given pursuant to Section 19.3, the amount specified in such
notice.
TITLE INSURANCE: An American Land Title Association (ALTA)
mortgage loan title policy form 1970, or other form of Title Insurance Policy
acceptable to FNMA or FHLMC, including all riders and endorsements thereto,
insuring that the Security Instrument constitutes a valid first lien on the
related Mortgaged Property subject only to Permitted Encumbrances.
TRANSFER OF OWNERSHIP: Includes, but is not limited to, the
conveyance of a Mortgaged Property, whether legal or equitable, voluntary or
involuntary, by any of the following methods:
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(a) outright sale;
(b) deed;
(c) installment sale contract;
(d) land contract;
(e) contract for deed;
(f) leasehold interest with the term greater than three
years;
(g) lease with option to purchase;
(h) land trust; or
(i) any other conveyance of an interest in real property,
including those involving secondary financing.
TRUST: The Trust formed by deposit with the respective Trustee
of certain Mortgage Loans pursuant to the terms of the related Pooling and
Servicing Agreement.
TRUSTEE: The Trustee with respect to the related Trust as
identified in the related Pooling and Servicing Agreement, or any other Person
that shall become the "trustee" for such Trust.
UNPAID PRINCIPAL BALANCE: With respect to any Mortgage Loan,
the outstanding principal balance payable by the Borrower under the terms of the
Mortgage Note.
VA: The Department of Veterans Affairs and its successors.
VALUE: The lesser of the appraised value or sales price of the
related Mortgaged Property at the time the Mortgage Loan is closed. For a
refinanced Mortgage Loan, the Value of the related Mortgaged Property is its
appraised value at the time the refinanced Mortgage Loan is closed.
ARTICLE 2
CONSTRUCTION
Section 2.1 LEGAL CONSTRUCTION
2.1.1 COMPLIANCE WITH APPLICABLE LAW. The obligations of the Servicer
pursuant to this Agreement shall at all times be performed in
compliance with all applicable laws.
2.1.2 POTENTIAL CONFLICT. If any obligation of the Servicer pursuant to
this Agreement shall give rise to a potential conflict with applicable
law, such obligation shall be construed so as to (a) comply with all
applicable laws and (b) effectuate with respect to such obligations, to
the fullest extent permitted by law, the intention of the parties
hereto as expressed in this Agreement.
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2.1.3 CONSISTENT LEGAL COMPLIANCE. The fact that certain provisions of
this Agreement contain language which expressly requires compliance
with all applicable laws, shall not give rise to an implication that
other provisions, which do not expressly include such language, operate
in derogation of the requirement for such legal compliance.
2.1.4 GENERAL INTERPRETIVE RULES. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires, (i) 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; (ii) reference herein to "Article",
"Section", "Clause", and other subdivisions, and to "Exhibits", without
reference to a document, are to designated Articles, Sections, Clauses
and other subdivisions of, and to Exhibits to, this Agreement; (iii)
reference to a Clause without further reference to a Section is a
reference to such Clause as contained in the same Section in which the
reference appears, and this rule shall also apply to other
subdivisions; (iv) "including" means "including but not limited to";
and (v) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular provision.
2.1.5 CONSTRUCTION OF PROVISIONS. Although certain provisions of this
Agreement contain express language which precludes the Servicer's
recovery of, or reimbursement for, expenses incurred hereunder, no
inference to the contrary shall be drawn from absence of such, or
similar, language in any other provision hereof regarding expenses.
Section 2.2 SERVICER PRACTICES
2.2.1 PRUDENT SERVICING PRACTICES. Where not inconsistent with the
provisions of this Agreement, the Servicer shall at all times perform
its obligations hereunder in accordance with Prudent Servicing
Practices, which shall not be less exacting than the Servicer employs
and exercises in servicing and administering mortgage loans for its own
account, or for the account of FNMA or FHLMC.
2.2.2 NON-DISCRIMINATION PRACTICES. The Servicer shall at all times
perform its obligations under this Agreement so as to (a) treat
Borrowers on the basis of their individual merits and (b) not
discriminate against Borrowers on the basis of their race, creed or
national origin.
Section 2.3 GENERAL PROVISIONS
2.3.1 SERVICER'S AGREEMENT. The Servicer agrees with the Principal to
service the Mortgage Loans in accordance with the provisions of this
Agreement and, to the extent of any instructions of the Master Servicer
that are given, such instructions and, subject to the provisions hereof
and without any further instruction by the Master Servicer except as
shall be expressly provided for herein, shall have full power and
authority to do all things necessary in connection therewith.
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2.3.2 TERM OF AGREEMENT. Except as otherwise provided herein, the
duties, responsibilities and obligations to be performed and carried
out by the Servicer under this Agreement shall commence upon the
execution of this Agreement and shall continue until (a) each Mortgage
Loan is (i) liquidated or (ii) otherwise paid in full, (b) all payments
related thereto are remitted in accordance with this Agreement, and (c)
all obligations hereunder related thereto are discharged.
2.3.3 AMENDED MORTGAGE LOAN SCHEDULE. From time to time as additional
Mortgage Loans are transferred to be serviced hereunder by the
Servicer, Schedule I shall be amended by the Principal to include the
new Mortgage Loans. Due to defects in documentation and for other
reasons, certain Mortgage Loans referred to in the Mortgage Loan
Schedule may be deleted and other Mortgage Loans may be added. The
Servicer hereby agrees to any such deletion of any Mortgage Loans and,
in the event any Mortgage Loans are deleted from the Mortgage Loan
Schedule, the Servicer authorizes the Master Servicer to amend and
attach hereto a corrected Mortgage Loan Schedule, as Schedule I,
reflecting only those Mortgage Loans that are serviced hereunder. The
Master Servicer will provide the Servicer with the corrected and
updated Mortgage Loan Schedule.
2.3.4 ASSIGNMENT AND REPLACEMENT. The Servicer acknowledges and agrees
that: (a) the Principal, and its successors and assigns, may at any
time, without the consent of the Servicer, assign and transfer all of
the Principal's and/or the Master Servicer's right, title and interest
under this Agreement to any other Person, (b) in the event the Master
Servicer is terminated or resigns as Master Servicer under the related
Pooling and Servicing Agreement, the Principal or any successor master
servicer has the right to assume the Master Servicer's rights and
obligations and to enforce the Servicer's obligations under this
Agreement, and (c) the Principal, and its successors and assigns, may
at any time, without the consent of the Servicer, direct, in a written
notice furnished to the Servicer, that all or part of the functions of
the Master Servicer hereunder may be performed instead by another
entity designated by the Principal for such functions and time periods
as specified in such writing and that the Servicer shall respect the
instructions of such entity as if it were the Master Servicer
hereunder.
2.3.5 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and
shall be deemed to have been duly given, made and received upon actual
receipt of registered or certified mail, postage prepaid, return
receipt requested, addressed as set forth below:
(a) if to the Principal:
The Prudential Home Mortgage Company, Inc.
7470 New Technology Way
Frederick, MD 21701
Attention: Senior Vice President
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(b) if to the Master Servicer:
Securitized Asset Services Corporation
7435 New Technology Way
Frederick, MD 21701
Attention: Director of Master Servicing
(c) if to the Servicer:
First Town Mortgage Corporation
100 Plaza Drive
Secaucus, New Jersey 07094
Attention:
(d) if to the Custodian:
First [Trust,] [Bank] National Association
180 East Fifth Street
St. Paul, MN 55101
Attention: Eve Kaplan
(e) if to the Owner of a related Mortgage Loan to such address as is
shown on Schedule II for such Owner.
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
2.3.6 CHANCE OF ACCOUNTANTS. During the term of this Agreement, the
Servicer shall not change, or make any substitution of, its certified public
accountants except upon written notice to the Master Servicer given 30 days
prior to such change or substitution.
Section 2.4 SERVICING OF MORTGAGE LOANS FOR MULTIPLE OWNERS
2.4.1 TRANSFER OF MORTGAGE LOANS. The Principal, or a subsequent Owner,
may, from time to time, (i) sell its interest in any Mortgage Loan or
Mortgage Loans to another person who would become the Owner thereof,
and (ii) assign an undivided interest in this Agreement to such person
with respect to such Mortgage Loan or Mortgage Loans. The transfer of
ownership and assignment of interest will be reflected as provided for
in Section 2.4.2 hereof. The Servicer agrees (a) to continue to service
each Mortgage Loan for the benefit of the related Owner of such
Mortgage Loan in accordance with the terms of this Agreement, and (b)
to obey the instructions of the Principal and the Master Servicer
regarding the performance of this Agreement.
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2.4.2 OWNERSHIP SCHEDULE. The Principal shall amend Schedule II to
reflect the change of ownership of any Mortgage Loan which is serviced
hereunder. The entry in Schedule II shall (a) identify the Mortgage
Loan by its respective Master Servicer Loan Number, (b) specify the
name and mailing address of the Owner of such Mortgage Loan and (c)
indicate the Cut-Off Date which applies to the change of ownership of
the Mortgage Loan to the listed Owner.
ARTICLE 3
SERVICING PROVISIONS
Section 3.1 GENERAL
3.1.1 APPLICABILITY. The provisions of this Article 3 apply to all the
Mortgage Loans or Mortgaged Property.
3.1.2 MODIFICATIONS OF MORTGAGE LOANS. Notwithstanding anything to the
contrary in this Agreement (other than as provided in Section 12.3
hereof), without the consent of the Master Servicer, the Servicer shall
not permit any modification of any term of a Mortgage Loan (including
the interest rate, the principal balance, the amortization schedule, or
any other term affecting the amount or timing of payments on the
Mortgage Loan) unless the Master Servicer has consented thereto and, if
such modification is not the result of a 90-day Delinquency or more
under the Mortgage Loan.
Section 3.2 REO QUALIFICATION
3.2.1 FORECLOSURE PROPERTY QUALIFICATION. Notwithstanding any other
provision of this Agreement, the Servicer, shall not foreclose on a
Mortgage without the prior consent of the Master Servicer. Furthermore,
the Servicer shall not rent, lease, or otherwise earn income with
respect to any REO without prior approval by the Master Servicer.
Notwithstanding the foregoing, the Servicer may enter into a lease with
respect to REO provided that the lease does not hamper the disposition
of the REO and provides, that the lessee does not own 35% of any class
of securities issued by the related Owner, the leases call for fixed
rent and all of the rent is allocable to the real property (except that
up to 15 percent of the rent may be allocable to personal property
leased under, or in connection with, the lease of the real property.
3.2.2 FORECLOSURE PROPERTY QUALIFICATION RESTRICTIONS. Without limiting
the generality of the foregoing, the Servicer shall not, absent prior
approval of the Master Servicer, authorize or permit any construction
on any REO,other than the completion of a building or other improvement
thereon, and then only if more than ten percent of the construction of
such building or other improvement was completed before default on the
related Mortgage Loan became imminent, or Directly Operate or allow any
other Person to Directly Operate, any REO on any date more than 90 days
after its acquisition date.
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3.2.3 REO DISPOSITION ACCOUNTING. Within 30 days of an REO Disposition,
the Servicer shall provide to the Master Servicer a statement of
accounting for the related REO, including without limitation, (i) the
loan number of the related Mortgage Loan, (ii) the date such Mortgaged
Property was acquired in foreclosure or by deed in lieu of foreclosure,
(iii) the date of REO Disposition, (iv) the gross sales price and
related selling and other expenses, (v) accrued interest calculated
from the date of acquisition to the disposition date, and (vi) such
other information as the related Trustee may reasonably request.
Section 3.3 PROHIBITED TRANSACTIONS AND ACTIVITIES
3.3.1 MORTGAGE LOAN DISPOSITION RESTRICTION. Without the prior approval
Master Servicer, the Servicer shall not permit the sale, disposition or
substitution of any of the Mortgage Loans, nor acquire any assets on
behalf of the related Owner, nor sell or dispose of any investments in
any of the Accounts established by the Servicer for the related Owner
for gain, nor accept any contributions on behalf of the Owner.
3.3.2 PERSONAL PROPERTY RESTRICTION. Without the prior approval of
Master Servicer, the Servicer shall not acquire any personal property
relating to any Mortgage Loan unless such Personal Property is incident
to the REO. For this purpose, personal property will be considered
incident to the REO if the personal property is used in a trade or
business conducted on the property or the use of the personal property
is otherwise an ordinary and necessary corollary of the use to which
the REO is put.
Section 3.4 ELIGIBLE INVESTMENTS
3.4.1 CUSTODIAL ACCOUNT INVESTMENTS. Funds in any Custodial Accounts
established by the Servicer and maintained in respect of the related
Owner may be invested and, if invested, shall be invested in Eligible
Investments selected by the Servicer which shall mature not later than
the Business Day immediately preceding the next Remittance Date, 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 related Owner or its nominee. All income and gain realized from
any such investment shall be, as long as the Servicer is servicing the
Mortgage Loans held by the related Owner, for the benefit of the
Servicer as additional compensation and shall be subject to its
withdrawal or order from time to time. The amount of any losses
incurred in respect of any such investments shall be deposited in the
relevant Custodial Account by the Servicer out of its own funds
immediately as realized. The foregoing requirements for deposit in such
Custodial Account are exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments of interest
on funds in such Custodial Account and, as long as the Servicer is
servicing the Mortgage Loans held by the related Owner, payments in the
nature of prepayment fees, late payment charges, assumption fees or any
similar fees customarily associated with the servicing mortgage loans
paid by any Mortgagor need not be deposited by the Servicer in such
Account and may be retained
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by the Servicer as additional servicing compensation. If the Servicer
deposits in such Account any amount not required to be deposited
therein, it may at any time withdraw such amount, any provision herein
to the contrary notwithstanding.
3.4.2 ESCROW ACCOUNT INVESTMENTS. Subject to the terms of the related
Mortgage Notes and Mortgages, and further subject to applicable law,
any funds in any Escrow Account shall be invested in Eligible
Investments that mature prior to the date on which payments have to be
made out of the related Escrow Account and any such Eligible Investment
shall not be sold or disposed of prior to its maturity; provided that,
if any loss is incurred on any such investment, the Servicer shall
cover such loss by making a deposit into the appropriate Escrow Account
out of its own funds in the amount of such loss. Withdrawals from any
Escrow Account may be made (to the extent amounts have been escrowed
for such purpose and to the extent permitted by the related Mortgage
and Mortgage Note) only (i) to effect timely payment of Escrow Amounts
in connection with the related Mortgage Loan, (ii) to reimburse the
Master Servicer or Servicer out of related collections for Advances
with respect to Escrow Amounts, (iii) to refund to any Mortgagors any
sums determined to be overages, (iv) to pay interest, if any, owed to
Mortgagors on such account to the extent required by law, (v) for
application to restoration or repair of the Mortgaged Property or (vi)
to clear and terminate the Escrow Account on the termination of this
Agreement. The Servicer shall be entitled to all investment income on
any Escrow Account not required to be paid to Mortgagors pursuant to
the preceding sentence.
ARTICLE 4
SERVICER CONSIDERATIONS
Section 4.1 SERVICER INFORMATION STATEMENT
4.1.1 SERVICER INFORMATION STATEMENT REQUIREMENT. To service Mortgage
Loans under this Agreement a Servicer must complete and maintain up to
date a Servicer Information Statement. The Servicer Information
Statement must be submitted along with the Servicer's previous two
years' audited financial statements, the most recent interim financial
statements and such other financial information as the Master Servicer
may require in the exercise of its reasonable discretion.
4.1.2 SERVICER INFORMATION STATEMENT'S PURPOSE. The additional
information provided by the Servicer pursuant to the Servicer
Information Statement is required to assess:
(a) the financial strength and business responsibility of
the Servicer in regard to its ability to meet
servicing warranties required under this Agreement;
and
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(b) the sufficiency of the servicing system and the
abilities of the servicing staff to perform the
servicing of the Mortgage Loans and the required
reporting to the Master Servicer.
4.1.3 DISCLOSURE OF SERVICER INFORMATION. The Servicer recognizes that
the Mortgage Loans have been acquired by the Principal and are being
serviced by the Servicer with a view to their ultimate securitization
as collateral for mortgage backed securities. The Servicer (i) agrees
to furnish to the Principal upon request, and to keep up to date, a
description of the Servicer and its activities, suitable, in the
Principal's sole discretion, for disclosure purposes for use in any
prospectus, private placement memorandum or offering circular which
offers securities which are backed by Mortgage Loans serviced by the
Servicer hereunder, and (ii) consents to the inclusion of such
description in any such prospectus, private placement memorandum or
offering circular. The Servicer recognizes that the Principal and its
affiliates will rely upon the truthfulness and accuracy of such
description which is to be used in such disclosure documents.
Section 4.2 SERVICER ELIGIBILITY STANDARDS.
To service Mortgage Loans under this Agreement the Servicer must
satisfy the eligibility standards set forth in this Section 4.2
initially and at all times thereafter.
4.2.1 REGULATORY APPROVALS AND LICENSING. A Servicer must
be:
(a) FNMA or FHLMC approved and in good standing;
(b) an FDIC insured institution that is a member of SAIF
or BIF, or is a HUD approved mortgagee in good
standing;
(c) in compliance with all applicable capital
requirements and other requirements from time to time
specified by the Office of Thrift Supervision, the
FDIC, the Office of the Comptroller of the Currency
or any other governmental agency or
quasi-governmental authority having jurisdiction over
the Servicer; and
(d) properly licensed as a mortgage servicer in all
relevant jurisdictions where such licenses are
required.
4.2.2 NET WORTH AND PORTFOLIO REQUIREMENTS.
(a) The Servicer must maintain a Tangible Net Worth of at
least $1,000,000.
(b) The Servicer must maintain an Adjusted Tangible Net
Worth at least equal to the amount specified in the
applicable Servicing Retained Commitment Letter.
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(c) The Servicer must maintain a servicing portfolio of
at least $1,000,000,000.
(d) A servicer that is a commercial bank must be reported
in the top three quarterlies of capital adequacy as
reported in the IDC Score or successor publication.
4.2.3 AUDITOR'S OPINION AND OTHER ANNUAL REPORTS. The Servicer must
provide the Master Servicer, as part of the application process (except
as to clause (c)) and annually thereafter within 120 days after the
close of the Servicer's fiscal year, with the following reports and
opinions:
(a) financial statements for the most recently closed
fiscal year, together with an unqualified opinion
thereon of an independent certified public accountant
who is a member of the American Institute of
Certified Public Accountants, unless the Master
Servicer, in its sole discretion, decides to waive
this requirement regarding qualification;
(b) a statement from the independent certified public
accountant who prepared the above-referenced
financial statements for the Servicer, certifying
that, on the basis of an examination of certain
documents and records relating to the mortgage loans
being serviced by the Servicer conducted
substantially in compliance with the Uniform Single
Audit Program for Mortgage Bankers, the servicing of
such mortgage loans was conducted in compliance with
the provisions of this Agreement and other similar
agreements, except for (i) such exceptions as such
firm believes to be immaterial and (ii) such other
exceptions as are set forth in such statement; and
(c) a certificate signed by any Officer of the Servicer
involved in, or responsible for, the administration
and servicing of the Mortgage Loans certifying that
the Officer signing such certificate has supervised a
review of the activities of the Servicer during the
preceding fiscal year and of the Servicer's
performance during the most recently closed fiscal
year under this Agreement and that to the best of
such officer's knowledge, based on such review, the
Servicer has fulfilled its duties, responsibilities
and obligations under this Agreement throughout such
year, or, if there has been failure by the Servicer
to fulfill any duty, responsibility or obligation
under this Agreement, specifying the nature and
status of each such failure.
4.2.4 SERVICING EXPERIENCE. The Servicer shall satisfactorily
demonstrate to the Master Servicer, in the Master Servicer's sole
discretion, the following experience:
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(a) that it has at least three (3) years of conventional
mortgage loan servicing experience;
(b) that it has a staff knowledgeable in servicing of
Mortgage Loans and the administration of REO;
(c) that it has experience maintaining a servicing
portfolio in excess of $1 billion; and
(d) that it has delinquency rates which are acceptable to
Master Servicer.
4.2.5 MATERIAL CHANGES. The Servicer shall immediately report to the
Master Servicer any change in its business operations, financial
condition, properties or assets since the date of the latest submitted
financial statements which could have a material adverse effect on the
Servicer's ability to perform its obligations hereunder. Events for
which Master Servicer must receive notice include, but are not limited
to, the following:
(a) any change in the Servicer's business address and/or
telephone number;
(b) any merger, consolidation, or significant
reorganization;
(c) any changes in the Servicer's ownership whether by
direct or indirect means. Indirect means include any
change in ownership of the Servicer's parent;
(d) any change in the Servicer's corporate name;
(e) if the Servicer is a savings and loan association,
any change in the Servicer's charter from federal to
state or vice versa;
(f) any decreases in capital, adverse alteration of
debt/equity ratios, or changes in management ordered
or required by a regulatory authority supervising or
licensing the Servicer;
(g) any significant adverse change in the Servicer's
financial position;
(h) resignation of any officer overseeing the servicing,
origination, underwriting, closing and, if
applicable, secondary marketing operations of the
Servicer. Resumes of replacement personnel must be
furnished for Master Servicer review within thirty
(30) days of such replacement;
(i) closing of any branch offices of the Servicer, which
cumulatively with the closure of any other branch
offices of the Servicer, which are as yet unreported
to the Master Servicer pursuant to the terms of this
Section
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4.2.5, represent 10% or more of the origination or
servicing volume of such Servicer; the notice shall
state the percentage of its origination and servicing
volume represented by such closed branches;
(j) entry of any court judgment or regulatory order in
which the Servicer is or may be required to pay a
claim or claims which, in Master Servicer's sole
opinion, have a material adverse effect on the
Servicer's financial condition; and
(k) the Servicer admits to committing, or is found to
have committed, a material, in Master Servicer's sole
opinion, violation of any law, regulation, or order.
Section 4.3 ERRORS AND OMISSIONS INSURANCE
4.3.1 E & O REQUIREMENT. A Servicer must maintain, at all times and at
its own expense and consistent with FNMA or FHLMC requirements, an
Errors and Omissions Policy, in the amount and having the other terms
described below, with broad coverage from an incorporated surety
company authorized to do business in the Servicer's state of domicile.
4.3.2 E & O COVERAGE. The Servicer must maintain an Errors and
Omissions Policy in a minimum amount per occurrence equal to the
greater of (i) $1,000,000 or (ii) the Fidelity Bond coverage amount
required of the Servicer as set forth in Section 4.4 hereof. This
coverage may not be changed except as to an increase in the amount of
coverage.
4.3.3 E & O SCOPE. The Errors and Omissions Policy must explicitly
insure the Servicer, its successors and assigns, against any losses
resulting from negligence, errors or omissions on the part of officers,
employees or other persons acting on behalf of the Servicer in the
performance of its duties as a Servicer pursuant to this Agreement,
including, but not limited to, the following:
(a) payment when due of all applicable insurance
premiums, including, but not limited to, any Primary
Mortgage Insurance, Hazard Insurance and any Flood
Insurance in accordance with the insurance
requirements in Articles 15 and 16 of this Agreement;
(b) where applicable, compliance with Primary Mortgage
Insurance and/or Pool Insurance requirements for
Mortgage Loans serviced under this Agreement;
(c) payment of real estate taxes and special assessments;
and
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(d) determination of whether any Mortgaged Property are
located in an area where Flood Insurance is available
and required by the Flood Disaster Protection Act of
1973, as amended.
4.3.4 E & O POLICY MAINTENANCE. The Servicer must maintain in effect
the Errors and Omissions Policy at all times and the Errors and
Omissions Policy may not be cancelled, permitted to lapse or otherwise
terminated without thirty Business Days' prior written notice by
registered mail to the Master Servicer. Further, the Errors and
Omissions Policy must provide that, or the insurer must state in
writing to the Master Servicer that, the Errors and Omissions Policy
shall not be cancelable without the giving of notice as provided for in
the prior sentence.
4.3.5 E & O DEDUCTIBLE. The terms of the Errors and Omissions Policy
must provide for a deductible amount that does not exceed the greater
of $100,000 per occurrence or 5.0% of the coverage amount per
occurrence.
4.3.6 E & O QUALIFICATIONS. The Errors and Omissions Policy must be
obtained by the Servicer from an insurer with a general policyholder's
rating of B/VI or better in the current Best's Key Rating Guide.
4.3.7 NOTICE OF CLAIM. The Servicer must immediately report to the
Master Servicer all claims made against the insurer under the Errors
and Omissions Policy, and shall promptly follow such report with a
written notice to the Master Servicer.
Section 4.4 FIDELITY BOND COVERAGE
4.4.1 FIDELITY BOND REQUIREMENT. A Servicer must maintain, at all
times, at its own expense and consistent with FNMA requirements, a
Fidelity Bond, in the amounts and having the other terms described
below with broad coverage from an incorporated surety company
authorized to do business in the Servicer's state of domicile. The
Fidelity Bond may be in the form of either individual bonds or a
blanket bond.
4.4.2 FIDELITY BOND COVERAGE. The amount of Fidelity Bond coverage
shall be as follows:
(a) a minimum of $300,000 for the Servicer's servicing
portfolio, the current principal amount of which
totals $100 million or less; plus
(b) an additional 0.15% of the amount of the current
principal amount of the Servicer's servicing
portfolio between $100 million and $500 million; plus
(c) an additional 0.125% of the amount of the current
principal amount of the Servicer's servicing
portfolio between $500 million and $1 billion; plus
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(d) an additional 0.1% of the amount of the current
principal amount of the Servicer's servicing
portfolio in excess of $1 billion.
This coverage may not be changed except as to an increase in the amount
of coverage.
4.4.3 FIDELITY BOND SCOPE. The coverage of the Fidelity Bond must
explicitly insure the Servicer, its successors and assigns, against any
losses resulting from dishonest, fraudulent or criminal acts on the
part of Officers, employees or other persons acting on behalf of the
Servicer.
4.4.4 FIDELITY BOND MAINTENANCE. The Servicer must maintain in effect
the Fidelity Bond at all times and the Fidelity Bond may not be
cancelled, permitted to lapse or otherwise terminated without thirty
Business Days' prior written notice by registered mail to the Master
Servicer. Further, the Fidelity Bond must provide that, or the insurer
must state in writing to the Master Servicer that, the Fidelity Bond
shall not be cancelable without the giving of notice as provided for in
the prior sentence.
4.4.5 FIDELITY BOND DEDUCTIBLE. The terms of the Fidelity Bond must
provide for a deductible amount that does not exceed the greater of
$100,000 per occurrence or 5.0% of the coverage amount per occurrence.
4.4.6 FIDELITY BOND RATING REQUIREMENT. The Fidelity Bond must be
obtained from a company with a general policyholder's rating of B/VI or
better in the current Best's Key Rating Guide.
4.4.7 NOTICE OF EVENT. The Servicer must promptly report to the Master
Servicer any and all occurrences against the Fidelity Bond of the
Servicer.
Section 4.5 SERVICER'S LIABILITY
4.5.1 LIABILITY EXPOSURE. Any and all losses not covered under the
Fidelity Bond or Errors and Omissions Policy, as a result of (i) the
respective deductible provisions thereof, (ii) the limits of coverage
of the Fidelity Bond or Errors and Omissions Policy, or (iii) any claim
denied which should have been covered by the Fidelity Bond or the
Errors and Omissions Policy, as the case may be, according to the terms
of this Agreement had the Fidelity Bond or Errors and Omissions Policy
been properly obtained and maintained and respective claim been
properly submitted for payment, shall be borne by the Servicer.
4.5.2 CONTINUED LIABILITY. The Servicer shall remain fully liable to
the Principal, its successors and assigns for any and all damages,
losses or injuries of any nature or kind, resulting from dishonest,
fraudulent, criminal or negligent acts, errors or omissions of the
Servicer and/or on the part of officers, employees or other persons
acting on behalf of the Servicer.
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Section 4.6 INACTIVE SERVICERS
4.6.1 SALE OF SERVICING. At the option of, and in its sole discretion,
the Master Servicer reserves the right to have an Affiliate purchase
and the Servicer hereby agrees to sell, the servicing on any and all
Mortgage Loans serviced under this Agreement in the event that the
Servicer is servicing less than $15 million.
4.6.2 SERVICING PRICE. The purchase price which the Affiliate of the
Master Servicer shall pay the Servicer for the purchase of such
servicing pursuant to Section 4.6.1 hereof shall be an amount equal to
the lesser of (a) the fair market value of such servicing or (b) the
product of (i) 100 basis points and (ii) the then current Unpaid
Principal Balance of each Mortgage Loan for which servicing has been
purchased. Except as provided for in Section 4.6.1 hereof, neither the
Master Servicer nor any Affiliate thereof shall be obliged to pay the
Servicer for the transfer or termination of any servicing rights
hereunder.
Section 4.7 INDEMNIFICATION
4.7.1 SCONE OF INDEMNITY. The Servicer hereby agrees to indemnify and
hold harmless (a) the Master Servicer, (b) the Principal, (c) each
Owner of any Mortgage Loan, (d) any underwriter of any of the
Certificates, (e) the successors and assigns of any of the foregoing,
and (f) the officers, directors, employees, agents and Affiliates of
any of the foregoing (any of the foregoing hereinafter referred to as
the "indemnified party"), from and against any and all claims, losses,
damages, liabilities, fines, settlements, awards, offsets, defenses,
counterclaims, actions, penalties, forfeitures, legal fees, judgments
and any other costs, fees and expenses (including, without limitation,
attorneys' fees and court costs), either directly or indirectly arising
out of, based upon, or relating to (i) a breach by the Servicer, its
officers, directors, employees, or agents, or its delegees pursuant to
Section 11.2.1 hereof, of any representation, warranty or obligation
contained herein or any other agreement between the Master Servicer and
the Servicer relating to the servicing or administering of any Mortgage
Loan, or any failure to disclose any matter that makes such
representation and warranty misleading or inaccurate, or any inaccuracy
in information furnished by the Servicer, (ii) a breach of any
representation, warranty or obligation made by any indemnified party in
reliance upon any such representation, warranty or obligation, failure
to disclose, or inaccuracy in information furnished by the Servicer,
(iii) any failure of the Servicer, its officers, directors, employees,
or agents, or its delegees pursuant to Section 11.2.1 hereof, to
perform any of its obligations under this Agreement, and (iv) any acts
or omissions of the Servicer, its officers, directors, employees, or
agents, or its delegees pursuant to Section 11.2.1 hereof.
4.7.2 SURVIVAL OF INDEMNITY. This indemnification shall survive
purchase, transfer of any interest in a Mortgage Loan by any
indemnified party, the Liquidation of such Mortgage Loan, termination
of any such Servicer's servicing rights with respect to such
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Mortgage Loan and termination or expiration of this Agreement between
the Servicer and the Principal, and its successors and assigns.
Section 4.8 SERVICER'S COMPENSATION
4.8.1 SERVICING FEE AMOUNT. In consideration of the services rendered
under this Agreement, absent default by the Servicer, the Servicer
shall be entitled to a monthly aggregate servicing compensation (the
"Monthly Servicing Compensation") which shall equal the sum of (a) the
Servicing Fee payable with respect to each Mortgage Loan serviced and
(b) any interest earnings on each Custodial P&I Account other than
interest earnings thereon which are payable to the Borrower pursuant to
the Security Instrument or applicable law, subject to any adjustment
for Month End Interest as described in Section 7.6. Absent default by
the Servicer, the Servicer shall also be entitled to retain in addition
to the Monthly Servicing Compensation any late charges, prepayment
fees, penalty interest, assumption fees paid by the Borrower or any
other customary income, which amounts are not required to be deposited
into the Custodial P&I Account. 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 therefor except as
specifically provided for herein.
4.8.2 SERVICING FEE SOURCE. The Servicing Fee for each Mortgage Loan
shall be payable solely from the interest portion of the related
Monthly Payment paid by the Borrower or other payment of interest paid
with respect to the Mortgage Loan, whether from the proceeds of
foreclosure or any judgment, writ of attachment or levy against the
Borrower or his assets, or from funds paid in connection with any
prepayment in full or from Insurance Proceeds or Liquidation Proceeds.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 GENERAL
5.1.1 RELIANCE. The Master Servicer and the Principal rely upon the
representations and warranties contained in this Article 5 hereof, in
the acceptance of the Servicer. The representations and warranties
contained herein shall inure to the benefit of the Master Servicer and
the Principal, and to their respective successors, Affiliates and
assigns.
5.1.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made herein shall survive termination of this Agreement,
and shall inure to the benefit of the Master Servicer and the
Principal, and to their respective successors, Affiliates and assigns
and each indemnified party under Section 4.7.1, regardless of any
review or investigation made by or on behalf of such parties with
respect to any Mortgage Loan.
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5.1.3 BREACH OF REPRESENTATION OR WARRANTY. Upon breach of any
requirement or representation or warranty included in this Agreement
relative to any Mortgage Loan, except with respect to a representation
made pursuant to Section 5.4 hereof as to which the Servicer correctly
stated whether or not such representation was true and accurate, the
Servicer must:
(a) Promptly notify the Master Servicer in writing of the nature of the
breach, the date on which the breach occurred or began and the
Servicer's plans, if any, for curing the breach;
(b) Effect a cure of the breach within 30 days after its
occurrence or onset; and
(c) If no complete cure has been effected within such period in the
Master Servicer's sole discretion, purchase any Mortgage Loan in which
the Owner's interest has been impaired or which, in the opinion of the
Master Servicer, has suffered a material impairment of Value; provided
that purchase shall be within five days after receipt by the Servicer
of written notice from the Master Servicer requesting the Servicer's
purchase of the Mortgage Loan at the Purchase Price.
5.1.4 DISCLOSURE OF REPRESENTATIONS AND WARRANTIES. The Servicer
recognizes that the Mortgage Loans have been acquired by the Principal
and are being serviced by the Servicer with a view to their ultimate
securitization as collateral for mortgage backed securities. The
Servicer hereby consents to the inclusion of a statement of the
representations and warranties set forth in this Article 5 as being
those of the Servicer in any prospectus, private placement memorandum
or offering circular which offers securities which are backed by
Mortgage Loans serviced hereunder. The Servicer recognizes that the
Principal and its affiliates will rely upon the truthfulness and
accuracy of such representations and warranties which are to be used in
such disclosure documents.
5.1.5 ASSIGNMENT OF REPRESENTATIONS AND WARRANTIES. The Servicer agrees
that the Principal may, at any time, assign the representations and
warranties given by the Servicer as set forth in this Article 5, in
whole or in part, or an undivided interest therein, to one or more
Persons.
Section 5.2 SERVICER REPRESENTATIONS AND WARRANTIES
The Servicer represents and warrants, as of the date of this Agreement
and, except as otherwise provided, throughout the term of this
Agreement, that the statements set forth below in this Section 5.2 are
true and accurate.
5.2.1 QUALIFICATION OF SERVICER. The Servicer is duly incorporated,
validly existing and in good standing under the laws of the state of
its incorporation and is duly qualified to do business and is in good
standing under the laws of each jurisdiction that requires such
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qualification wherein it owns or leases any material properties, or in
which it conducts any material business or in which the performance of
its duties under this Agreement would require such qualification,
except where the failure to so qualify would not have a material
adverse affect on (a) the Servicer's performance of its obligations
under this Agreement, (b) the value or marketability of the Mortgage
Loans, or (c) the ability to foreclose on the related Mortgaged
Properties.
5.2.2 REQUISITE AUTHORITY. The Servicer has the corporate power and
authority to own its properties and conduct any and all business
required or contemplated by this Agreement and to perform the covenants
and obligations to be performed by it under this Agreement. The
Servicer holds all material licenses, certificates and permits from all
governmental authorities necessary for conducting its business as it is
presently conducted.
5.2.3 NO CONFLICTS. The execution and delivery of this Agreement are
within the corporate power of the Servicer and have been duly
authorized by all necessary actions on the part of the Servicer;
neither the execution and delivery of this Agreement by the Servicer,
nor the consummation by the Servicer of the transactions herein
contemplated, nor compliance with the provisions hereof by the
Servicer, will (i) conflict with or result in a breach of, or
constitute a default under, any of the provisions of the articles of
incorporation or bylaws of the Servicer or any law, governmental rule
or regulation, or any judgment, decree or order binding on the Servicer
or any of its properties, or any of the provisions of any indenture,
mortgage, deed of trust, contract or other instrument to which it is a
party or by which it is bound or (ii) result in the creation or
imposition of any lien, charge or encumbrance upon any of its
properties pursuant to the terms of any such indenture, mortgage, deed
of trust, contract or other instrument.
5.2.4 ENFORCEABLE AGREEMENT. This Agreement, when duly executed and
delivered by the Servicer, will constitute a legal, valid and binding
agreement of the Servicer, enforceable in accordance with its terms,
subject, as to enforcement or remedies, to applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors'
rights generally from time to time in effect, and to general principles
of equity.
5.2.5 NO CONSENTS REQUIRED. No consent, approval, order or
authorization of any governmental authority or registration,
qualification or declaration with any such authority is required in
order for the Servicer to perform its obligations under this Agreement.
5.2.6 AGENCY APPROVAL. The Servicer has been approved by FNMA or FHLMC
and will remain approved as an "eligible seller/servicer" of
conventional, residential mortgage loans as provided in FNMA or FHLMC
guidelines and in good standing. The Servicer has not received any
notification from FNMA or FHLMC that the Servicer is not in compliance
with the requirements of the approved seller/servicer status or that
such
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agencies have threatened the servicer with revocation of its approved
seller/servicer status.
5.2.7 FINANCIAL CONDITION. The Servicer is not, and, with passage of
time, does not expect to become, insolvent or bankrupt. The Servicer
shall promptly notify the Master Servicer of any material adverse
change of its financial condition.
5.2.8 SERVICING COMPLIANCE. The servicing practices used by the
Servicer with respect to each Mortgage Loan have been and are in all
respects in compliance with all federal, state and local laws, rules,
regulations and requirements in connection therewith and are otherwise
proper in the mortgage origination and servicing business.
5.2.9 NO IMPAIRMENT. There is no action, suit, proceeding or
investigation pending or, to the best of the Servicer's knowledge after
due inquiry, threatened, against the Servicer which, either in any one
instance or in the aggregate, may result in any material adverse change
in 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 if
adversely determined would affect the validity of this Agreement of the
Mortgage Loans 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.
5.2.10 NO INQUIRIES. The Servicer has not been the subject of an audit
by any of Master Servicer, FHA, HUD, FDIC, FNMA, FHLMC, GNMA or any
Primary Mortgage Insurer, which audit included material allegations of
failure to comply with applicable loan origination, servicing or claims
procedures, or resulted in a request for repurchase of Mortgage Loans
or indemnification in connection with the Mortgage Loans.
5.2.11 CUSTODIAL AND ESCROW ACCOUNTS CURRENT. All Custodial P&I
Accounts, Custodial T&I Accounts, Custodial Buydown Accounts and Escrow
Funds are maintained by the Servicer and have been maintained in
accordance with applicable law and the terms of the Mortgage Loans. The
Escrow Items required by the Mortgages which have been paid to the
Servicer for the account of the Borrower are on deposit in the
appropriate Custodial Account. All funds received by the Servicer in
connection with the Mortgage Loans, including, without limitation,
foreclosure proceeds, Insurance Proceeds, condemnation proceeds and
Principal reductions, have promptly been deposited in the appropriate
Custodial Account, and all such funds have been applied to reduce the
principal balance of the Mortgage Loans in question, or for
reimbursement of repairs to the Mortgaged Property or as otherwise
required by applicable law.
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Section 5.3 MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES.
--------------------------------------------
As to each Mortgage Loan set forth on Schedule I, the Servicer
represents and warrants, as of the date of this Agreement and
throughout the term of this Agreement, that the statements set forth
below in this Section 5.3 are true and accurate.
5.3.1 NO OUTSTANDING CHARGES. There has been no default under the terms
of the related Security Instrument, and any and all taxes, including,
without limitation, any and all transfer taxes due and payable to any
state or municipality relating to the transfer of the ownership and
occupancy interest in the related Mortgaged Property, and all
governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments and/or ground rents that
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
that remains unpaid and that has been assessed but is not yet due and
payable.
5.3.2 INSURANCE MAINTENANCE. Pursuant to the terms of the related
Security Instrument, all buildings or other improvements upon the
related Mortgaged Property are insured by an insurance policy or
policies meeting the requirements of Articles 15 and 16 hereof. The
related Security Instrument obligates the Borrower thereunder to
maintain the hazard insurance policy at the Borrower's cost and
expense, and upon the Borrower's failure to do so, authorizes the
Mortgagee under the related Security Instrument to obtain and maintain
such insurance at the Borrower's cost and expense, and to seek
reimbursement therefor from the Borrower. 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 Owner of the related Mortgage Loan. The Servicer and the
Borrower have not engaged in any act or omission that would impair the
coverage of any such policy, the benefits of the endorsement provided
for herein, or the validity and binding effect of either. The Mortgage
Loan Documents permit the maintenance of an escrow account to pay the
premiums for the above mentioned insurance, and the requirement for
such escrows has not been waived, unless otherwise required by
applicable state law.
5.3.3 SERVICING COMPLIANCE. The Servicer has duly and faithfully
complied with and will continue to comply with:
(i) all applicable laws, rules, regulations, decrees, pronouncements,
directives, orders, and contractual requirements with respect to the
servicing of the Mortgage Loan; and (ii) any and all other applicable
federal, state, county, municipal, or other local laws, including,
without limitation, those laws relating to consumer credit protection,
usury limitations, fair housing, equal credit opportunity, collection
practices, and real estate appraisals.
5.3.4 NO SATISFACTION OF MORTGAGE. The related Security Instrument has
not been satisfied, cancelled, subordinated, or rescinded, in whole or
in part, and the related
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Mortgage Property has not been released, in whole or in part, from the
lien of the related Security Instrument, nor has any instrument been
executed that would effect any such release, cancellation,
subordination, or rescission.
5.3.5 PRIMARY MORTGAGE INSURANCE COMPLIANCE. With respect to each
Mortgage Loan which should be covered by a Primary Mortgage Insurance
policy, all provisions of such Primary Mortgage Insurance policy have
been and are being complied with, and such policy is written with a
Private Mortgage Insurer in accordance with this Agreement, is the
binding obligation of such Insurer, is in full force and effect, and
all premiums due thereunder have been paid. No one has engaged in any
act or omission which would impair the coverage or validity of any such
policy, the benefit of the endorsement thereof, or the validity or
binding effect of either. Any Mortgage Loan subject to a Primary
Mortgage Insurance policy obligates the Borrower thereunder to maintain
such Primary Mortgage Insurance policy and to pay all premiums and
charges in connection therewith.
5.3.6 POOL INSURANCE COMPLIANCE. With respect to each Mortgage Loan
which should be covered by a Pool Insurance policy, all provisions of
such Pool Insurance policy have been and are being complied with, and
such policy is written with a Pool Insurer in accordance with this
Agreement, is the binding obligation of such Insurer, is in full force
and effect. No one has engaged in any act or omission which would
impair the coverage or validity of any such policy.
5.3.7 SERVICING PRACTICES; ESCROW FUNDS. The collection and servicing
practices used with respect to the Mortgage Loan have been in
accordance with this Agreement and with Prudent Servicing Practices,
and have been in all respects legal and proper. With respect to Escrow
Funds, all such funds are in the possession of the Servicer and there
exists no deficiency in connection therewith for which customary
arrangements for repayment thereof have not been made. No Escrow Funds
or other charges or payments have been capitalized under the related
Security Instrument or the related Mortgage Note.
Section 5.4 CONDITIONAL MORTGAGE LOAN REPRESENTATIONS
At the request of the Master Servicer, as to each Mortgage Loan set
forth on Schedule I which is the subject of a pending transfer of
ownership, the Servicer shall, at such reasonable times specified by
the Master Servicer in anticipation of such transfer of ownership, and
upon such transfer of ownership, state whether or not each of the
representations set forth below in this Section 5.4 is true and
accurate.
5.4.1 PAYMENTS CURRENT. All payments required to be made through the
most recent related Due Date for the Mortgage Loan under the terms of
the related Mortgage Note have been made and credited. No payment
required under the Mortgage Loan is delinquent nor has any payment
under the Mortgage Loan been delinquent at any time since the
origination of the Mortgage Loan. For the purposes of this paragraph, a
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Mortgage Loan will be deemed to be delinquent if any payment due
thereunder was not paid by the Borrower in the month such payment was
due.
5.4.2 TITLE INSURANCE. With regard to the Title Insurance policy
relating to the Mortgage Loan, no claims have been made under such
Title Insurance policy, the accuracy of any attorney's opinion of title
has not been disputed, and no prior holder of the Mortgage Loans has
done, by act or omission, anything that would impair the coverage of
such Title Insurance policy or the accuracy of such attorney's opinion
of title.
5.4.3 NO DEFAULTS. There is no default, breach, violation, or event of
acceleration existing under the Security Instrument or the related
Mortgage Note, no event has occurred or condition exists that, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation, or event of
acceleration, and neither has there been a waiver of any default,
breach, violation, or event of acceleration.
5.4.4 ORIGINAL TERMS UNMODIFIED. The original terms of the Security
Instrument and the related Mortgage Note have not been impaired,
waived, altered, or modified in any respect, except by a written
instrument that the Owner of the related Mortgage Loan or the Master
Servicer has approved and has been recorded, if necessary, to protect
the interests of the Owner of the related Mortgage Loan. The substance
of any such waiver, alteration, or modification has been approved by
the related Primary Mortgage Insurer, the related Pool Insurer and the
Title Insurer, to the extent required by the respective policies. No
Borrower has been released, in whole or in part.
5.4.5 MORTGAGED PROPERTY UNDAMAGED; NO CONDEMNATION. The Mortgaged
Property is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado, or other casualty so as to affect adversely
the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended; and the Mortgaged
Property is in good repair. There are no condemnation proceedings by
any federal, state, or local authority pending or, to the Servicer's
knowledge, threatened against the Mortgaged Property.
5.4.6 NO OTHER HAZARDS. To the best of the Servicer's knowledge, except
as has been specifically disclosed to the Master Servicer by the
Servicer in writing, the Mortgaged Property is not exposed to hazards
(such as toxic or hazardous waste) not covered by fire and extended
coverage insurance or other available insurance.
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ARTICLE 6
CUSTODIAL ACCOUNTING
Section 6.1 IN GENERAL
6.1.1 CUSTODIAL ACCOUNT ESTABLISHMENT. The Servicer must establish
appropriate custodial accounts for the benefit of the Owner of the
related Mortgage Loans, its successors and assigns for the deposit of
funds collected in connection with such Mortgage Loans. All custodial
accounts and related records must be maintained in accordance with
sound and controlled accounting practices.
6.1.2 CUSTODIAL ACCOUNT SEPARATENESS. At least one custodial account
for principal and interest (i.e., a Custodial P&I Account), one
custodial account for taxes and insurance (i.e., a Custodial T&I
Account), and one custodial account for Buydown Funds, if applicable
(i.e., a Custodial Buydown Account), shall be established and
maintained for the Mortgage Loans owned by each discrete Owner of
Mortgage Loans. Without the written consent of the Master Servicer,
funds in these accounts may not be commingled with funds held by the
Servicer (a) with respect to Mortgage Loans owned by another Owner or
(b) for other parties. With the written consent of the Master Servicer,
the Servicer may establish an Eligible Account ("Eligible Custodial P&I
Account") to serve as a unitary Custodial P&I Account both for the
Certificates of the series issued under a Pooling and Servicing
Agreement and for other series of mortgage pass-through certificates
issued under different Pooling and Servicing Agreements having
Securitized Asset Services Corporation as Master Servicer and the same
financial institution as trustee of all such series, which Eligible
Account shall be maintained in the name of such financial institution,
in its respective capacities as the trustee for each such series.
6.1.3 CUSTODIAL ACCOUNT MAINTENANCE. The Servicer must ensure that each
Custodial P&I Account, Custodial T&I Account and Custodial Buydown
Account (if applicable) meets the following guidelines:
(a) the accounts must be held with a depository
institution such as a commercial bank, mutual savings
bank or savings and loan association, the deposits of
which (except in the case of an Eligible Custodial
P&I Account) are insured by the BIF or SAIF of the
FDIC;
(b) the name of each Custodial P&I Account, Custodial T&I
Account and Custodial Buydown Account shall include a
reference to the name of the Owner of the related
Mortgage Loans as prescribed by the Master Servicer;
(c) the Servicer must transfer all funds on hand relating
to such Mortgage Loans, Monthly Payments due on or
after the related Cut-Off Date and
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any principal prepayments received after the related
Cut-Off Date, into the appropriate custodial accounts
meeting the requirements of Sections 6.1.1 and 6.1.2
hereof;
(d) beginning with any payment due on or after the
related Cut-Off Date, all collections on the Mortgage
Loans must be credited to the appropriate custodial
account no later than the first Business Day
following receipt;
(e) (i) the Servicer shall not permit the balance of any
Custodial P&I Account to exceed the Threshold Amount
or include any amounts then required to be remitted
to the Master Servicer Custodial Account pursuant to
Section 18.3.1, (ii) in the event the Servicer
collects amounts in excess of the Threshold Amount
prior to the next scheduled transfer of funds to the
respective Master Servicer Custodial Account, the
Servicer must transfer the excess funds directly to
the related Master Servicer Custodial Account by wire
before the close of business on any day on which the
amount on deposit in such account exceeds the
Threshold Amount, and (iii) in the event that the
Servicer fails to transfer the funds in excess of the
Threshold Amount to the related Master Servicer
Custodial Account or to remit to the Master Servicer
Custodial Account the Monthly Remittance on the
Remittance Date pursuant to Section 18.3.1, the
Master Servicer is authorized to debit such Custodial
P&I Account and transfer such amounts to the related
Master Servicer Custodial Account;
(f) (i) the Servicer must file with the Master Servicer
the appropriate ACH Debit Form for each Custodial P&I
Account; (ii) the Master Servicer may monitor the
principal balance of each Custodial P&I Account and
may issue an ACH debit for amounts on deposit in any
such account in excess of the Threshold Amount or
otherwise in violation of Section 6.1.3(e); (iii)
such amounts will immediately be deposited into the
appropriate Master Servicer Custodial Account; and
(iv) the ability of the Master Servicer to withdraw
and remit such funds to the appropriate Master
Servicer Custodial Account does not relieve the
Servicer of its obligations to remit such funds to
the related Master Servicer Custodial Account;
(g) upon the establishment of a Custodial P&I Account,
Custodial T&I Account or Custodial Buydown Account,
the Servicer shall promptly advise the Master
Servicer in writing of, or of any change in, the name
and address of the depository, the individual
employee of the depository who is responsible for
overseeing such account, the account number, the
title of the account and the individuals whose names
appear on the signature card; and
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(h) (i) establishment and maintenance of the Custodial
P&I Account, Custodial T&I Account and Custodial
Buydown Account will be an expense of the Servicer;
(ii) such custodial accounts may be interest- bearing
accounts provided that such accounts comply with all
local, state and federal laws and regulations
governing interest-bearing accounts and, in the case
of a Custodial T&I Account or Custodial Buydown
Account, governing Borrower escrow accounts; and
(iii) the Servicer must ensure that all interest
credited to any custodial account that is not due the
Borrower is removed by the Servicer within 30 days
after receipt of such interest.
6.1.4 ESCROW INVESTMENT. If the Servicer elects or is required by law
to deposit the Borrower's Escrow Funds into an interest-bearing
custodial account, the Servicer shall either (a) deposit such funds
into an account which permits withdrawal on demand so as to pay Escrow
Items as they come due, or (b) invest such funds in an Eligible Account
so that adequate funds mature the Business Day prior to the date
payment is due for each Escrow Item.
6.1.5 CLEARING ACCOUNT. If the Servicer finds it necessary to use a
clearing account, the following guidelines must be followed:
(a) the titles of such accounts must reflect that they
are custodial in nature, and the depository in which
the accounts are maintained must be informed in
writing that the accounts are custodial accounts:
(b) a check drawn on or funds transferred from a
Custodial P&I Account or Custodial T&I Account must
be deposited to a disbursement clearing account
before or at the same time as any checks on the
clearing account are issued;
(c) a single clearing account must not be utilized both
as a collection and disbursement clearing account;
(d) the accounts must be held at depository institutions
in which accounts are insured by the FDIC, BIF or
SAIF;
(e) the Servicer must maintain adequate records and audit
trails to support all debits and credits of each
Borrower's payment records and accounts; and
(f) collections deposited to a depository clearing
account must be credited to the appropriate custodial
account no later than one Business Day following
receipt by the Servicer.
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6.1.6 CUSTODIAL BUYDOWN ACCOUNT. The Servicer must establish a separate
custodial account to hold Buydown Funds on Mortgage Loans being
serviced for the Owner of the related Mortgage Loans, its successors
and assigns. These accounts must be clearly marked to indicate that the
Servicer is a custodian for Buydown Funds being held for the Owner of
the related Mortgage Loans, its successors and assigns.
6.1.7 MASTER SERVICER CUSTODIAL ACCOUNT. The Master Servicer shall
establish a Master Servicer Custodial Account which relates to all the
Mortgage Loans owned by each common Owner into which the Servicer shall
remit, on or before each Remittance Date, all amounts due pursuant to
Section 18.3 hereof. The name assigned to each Master Servicer
Custodial Account shall include a reference to the Owner of the related
Mortgage Loans. The Master Servicer shall be the only party authorized
to direct the withdrawal of funds from each Master Servicer Custodial
Account. In the Master Servicer's sole discretion and where the Owner
of the related Mortgage Loans is a Trust which has issued mortgage
backed securities backed by such Mortgage Loans, the Master Servicer
may elect to employ the Certificate Account created under the related
Pooling and Servicing Agreement (as defined therein) as the related
Master Servicer Custodial Account.
Section 6.2 CUSTODIAL P&I ACCOUNT
6.2.1 MANDATORY DEPOSITS. The following funds must be deposited into
each related Custodial P&I Account within one Business Day after the
Servicer's receipt of such amounts, or in the case of clause (d)
hereof, on the Remittance Date:
(a) Principal collections from related Mortgage Loans
(including Prepayments in Full and Curtailments),
together with Month End Interest, if applicable;
(b) Interest collections from related Mortgage Loans (net
of Servicing Fees);
(c) Liquidation Proceeds and Insurance Proceeds from
related Mortgage Loans other than proceeds held in an
escrow account and applied to the restoration and
repair of the related Mortgaged Property;
(d) related P&I Advances; and
(e) the proceeds of any purchase of a related Mortgage
Loan by the Servicer, or sale of an REO.
6.2.2 OPTIONAL DEPOSITS. The following funds may, but are not required
to, be deposited into each related Custodial P&I Account:
(a) late charges;
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(b) prepayment fees;
(c) penalty interest;
(d) assumption fees; and
(e) unapplied funds if the Borrower that remitted such
funds is not required to maintain Escrow Funds.
The Servicer shall maintain separate accounting for each of the
foregoing types of funds. Provided that the Servicer is not in default
of its obligations hereunder, the Servicer may retain any late charges,
prepayment fees, penalty interest and assumption fees as additional
servicing compensation.
6.2.3 PERMISSIBLE WITHDRAWALS. The Servicer may make withdrawals from
each related Custodial P&I Account solely for the following:
(a) remittances to the related Master Servicer Custodial
Account;
(b) reimbursement to itself for advances which have been
recovered by subsequent collections including late
payments, Liquidation Proceeds or Insurance Proceeds,
to the extent funds on deposit recovered by such
subsequent collections relate to the Mortgage Loans
as to which such advances were made;
(c) interest earnings on deposits to the related
Custodial P&I Account, but only to the extent that
such interest has been credited;
(d) removal of amounts deposited in error;
(e) removal of charges or other such amounts deposited on
a temporary basis in the account;
(f) removal of Servicing Fees to the extent deposited
therein; and
(g) termination of the account.
6.2.4 ACCOUNT BENEFICIARY. Each Custodial P&I Account (other than any
Eligible Custodial P&I Account) must be titled to show the respective
interests of the Servicer as trustee and of the Master Servicer as
beneficiary.
6.2.5 USE OF ACCOUNTS. The Servicer shall not use the Custodial P&I
Account as a collection clearing account.
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Section 6.3 CUSTODIAL T&I ACCOUNT
6.3.1 MANDATORY DEPOSITS. The following funds must be deposited into
each respective Custodial T&I Account:
(a) related Borrowers' Escrow Funds;
(b) related T&I Advances;
(c) the remaining balance of Title Insurance loss drafts;
(d) rent receipts to offset any related T&I Advances by
the Servicer;
(e) unapplied funds; and
(f) Liquidation Proceeds from a related Mortgage Loan
that offset a deficit balance in the related
Borrower's Escrow Funds.
6.3.2 PERMISSIBLE WITHDRAWALS. With respect to each related Borrower,
the Servicer may make withdrawals from each respective Custodial T&I
Account to the extent of the balance of such related Borrower's Escrow
Funds for the following:
(a) timely payment of such related Borrower's taxes and
insurance premiums;
(b) refunds to such related Borrower of excess Escrow
Funds collected from him;
(c) recovering advances made with respect to such related
Borrower by the Servicer for taxes and insurance;
(d) payment of interest, if required, to such related
Borrower on his Escrow Funds;
(e) removal of any deposits made in error; and
(f) termination of the account.
6.3.3 ACCOUNT REQUIREMENTS. Each Custodial T&I Account is to be
designated in the name of the Servicer acting as an agent for the
individual related Borrowers to make such Escrow Item payments in order
to show that the account is custodial in nature. The Servicer is
required to keep records identifying each Borrower's payment deposited
into the account.
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6.3.4 ACCOUNT BALANCE. The Servicer must never allow any Custodial T&I
Account to become overdrawn as to any individual related Borrower. If
there are insufficient funds in the account, the Servicer must advance
its own funds to cure the overdraft.
Section 6.4 ELIGIBLE ACCOUNT INVESTMENTS
6.4.1 ELIGIBLE INVESTMENTS PERMITTED. Unless prevented or restricted by
written notice of the Master Servicer pursuant to Section 6.4.5 hereof,
the Servicer may, from time to time, withdraw funds from an Eligible
Account, other than a Custodial T&I Account, and immediately invest
such funds in Eligible Investments in accordance with this Agreement.
Upon the maturity of such Eligible Investments, such funds shall be
redeposited into the Eligible Account which they were drawn from or
into the Master Servicer Custodial Account. Where the Owner of the
related Mortgage Loans is a trust which has issued mortgage backed
securities securitized by such Mortgage Loans and where a statistical
rating agency selected by such Owner to rate such mortgage backed
securities shall require that Eligible Investments can only be made if
such funds remain within an Eligible Account, then the Master Servicer
shall notify the Servicer, pursuant to Section 6.4.5 hereof, that the
Servicer's ability to invest in Eligible Investments shall be so
restricted and that no withdrawal of funds from an Eligible Account for
the purpose of making an Eligible Investment shall be allowed.
6.4.2 ELIGIBLE INVESTMENT RESTRICTIONS. No Eligible Investment shall be
sold or disposed of at a gain prior to maturity unless the Servicer has
obtained the consent of the Master Servicer.
6.4.3 ELIGIBLE INVESTMENT INCOME. All income (other than any gain from
a sale or disposition of the type referred to in Section 6.4.2 hereof)
realized from any such Eligible Investment shall be for the benefit of
the Servicer as additional servicing compensation.
6.4.4 ELIGIBLE INVESTMENT LOSSES. The amount of any losses incurred in
respect of any investments permitted under this Section 6.4 shall be
deposited in the Master Servicer Custodial Account by the Servicer out
of its own funds immediately as realized. The Master Servicer may, in
its sole discretion, from time to time, require the Servicer to provide
a reasonable amount of security to cover the risk of such investment
losses. To the extent that the Servicer shall not immediately deposit
the amount of such losses in the Master Servicer Custodial Account, the
Master Servicer may immediately act against such security as well as
pursue all other remedies permitted by law.
6.4.5 ELIGIBLE INVESTMENT LIMITATIONS. At any time, the Master
Servicer, in its sole discretion, may restrict or totally limit the
ability of the Servicer to invest in Eligible Investments pursuant to
this Section 6.4.
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6.4.6 ELIGIBLE INVESTMENTS REPORTS. The Servicer shall, at any time
provide such information and reports regarding its Eligible Investments
under this Agreement as the Master Servicer may request.
ARTICLE 7
MORTGAGE LOAN ACCOUNTING
Section 7.1 IN GENERAL
7.1.1 MORTGAGE LOAN ACCOUNTING PRACTICES. The Servicer shall administer
the application and accounting of payments made on the Mortgage Loans
in accordance with the provisions of this Agreement. However, if the
Owner of a Mortgage Loan is a Trust which has issued mortgage-backed
securities secured by such Mortgage Loan pursuant to the terms of a
Pooling and Servicing Agreement, and a copy of which has been furnished
by the Master Servicer to the Servicer, then the provisions of such
Pooling and Servicing Agreement regarding the application and
accounting of payments made on such Mortgage Loan shall instead control
to the extent such provisions require a different manner of application
or accounting.
7.1.2 RECORD KEEPING. The Servicer must maintain complete and accurate
records of all transactions affecting any Mortgage Loan. Each Mortgage
Loan must be clearly marked to indicate that it is being serviced for
the Owner of such Mortgage Loan, its successors and assigns.
7.1.3 RECORD REVIEW. The Master Servicer and its designee have the
right to:
(a) conduct reviews and audits of the Servicer's records
and operating procedures during any Business Day; and
(b) examine the Servicer's financial records, the
Borrowers' Escrow Funds records and any and all other
relevant documents and materials, whether held by the
Servicer or by another on behalf of the Servicer, to
ensure compliance with terms and conditions of this
Agreement and the Master Servicer's standards.
Section 7.2 MORTGAGE LOAN RECORDS
7.2.1 ACCOUNT RECORDS. Permanent Mortgage Loan account records must be
maintained by the Servicer for each Mortgage Loan. Each account record
must be identifiable by the Servicer Loan Number.
7.2.2 ACCOUNT RECORD INFORMATION. The Servicer shall maintain the
following information for each Mortgage Loan in a readily accessible
form:
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(a) the Master Servicer Loan Number;
(b) the current Unpaid Principal Balance;
(c) the date of receipt, amount of payment and
distribution of such payment for each Monthly Payment
received with respect to such Mortgage Loan as to
each related Due Date;
(d) for ARM Loans, the current Mortgage Interest Rate,
all limitations contained in the Mortgage Note with
respect to periodic adjustments in the Mortgage
Interest Rate, the scheduled Interest Adjustment
Dates, Payment Adjustment Dates, the Gross Margin and
the Index;
(e) other transactions affecting the amounts due from or
payable to the related Borrower;
(f) the current outstanding balances of principal and
interest deposits, advances, taxes and insurance
deposits and unapplied payments with respect to such
Mortgage Loan;
(g) any overdraft of the Borrower's Escrow Funds;
(h) any servicing reports or loan histories; and
(i) any other information customarily maintained by a
mortgage loan servicer of one to four family
residential mortgages.
7.2.3 ACCOUNTING PRACTICE. Except as otherwise provided herein, all
Mortgage Loan account records must be maintained according to (a) the
Uniform Single Audit Program for Mortgage Bankers and (b) where
applicable, sound and generally accepted accounting practices.
7.2.4 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS. In the event that compliance with the Section 7.2.4
shall make the Certificates legal for investment by federally insured
savings and loan associations, the Servicer shall provide to the
related Trustee, if any, the Master Servicer, the Office of Thrift
Supervision, the FDIC and the supervisory agents and examiners of the
Office of Thrift Supervision and the examiners of the FDIC, as
appropriate, access to the documentation regarding the Mortgage Loans
required by applicable regulations of the Office of Thrift Supervision
or the FDIC, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of
the Servicer designated by it. The Servicer shall permit such
representatives to photocopy any such documentation and shall provide
equipment for that purpose at a charge reasonably approximating the
cost of such photocopying to the Servicer.
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Section 7.3 ACCOUNTING PROCEDURES
7.3.1 PRINCIPAL AND INTEREST COMPUTATION. All Mortgage Loans must
amortize with interest calculated and paid in arrears. Under this
method, the interest due from a Borrower on a Due Date is calculated
based on (a) the Unpaid Principal Balance of the related Mortgage Loan
prior to application of the principal portion of the related current
Monthly Payment, (b) thirty days interest at the related Mortgage
Interest Rate and (c) adjusted as herein provided for the effects of
Curtailments, Prepayments in Full and liquidations. The calculated
interest portion is then subtracted from the related Monthly Payment to
obtain the principal portion. The principal portion is then applied to
the Unpaid Principal Balance of the related Mortgage Loan. The amount
to be applied to interest for a multiple installment must be calculated
using the Unpaid Principal Balance of the related Mortgage Loan
remaining after the previous interest calculation and principal
application.
7.3.2 AMORTIZATION REQUIREMENT. The amortization of each Mortgage Loan
must reduce to zero, or as to Balloon Loans, the respective Balloon
Amount, at the end of the Mortgage Loan term through the application of
regular monthly payments. Capitalization of interest is not permitted,
except as provided by the terms of any Mortgage Loan that provides for
negative amortization.
7.3.3 NEGATIVE AMORTIZATION. To the extent any Mortgage Loan provides
for negative amortization, such as a GPM or GPARM Loan, the Servicer
must assure that the Unpaid Principal Balance of such Mortgage Loan
never exceeds the related Maximum Negative Amortization Amount, and
that the related Monthly Payment is recast as provided for in the
Mortgage Note such that the balance fully amortizes within the
remaining term of such Mortgage Loan.
7.3.4 INTEREST CALCULATIONS. Monthly interest calculations for periods
of a full month must be based on a 30-day month and a 360-day year.
Factors used for such calculations should be carried to ten decimal
places. The dollar amount of any interest payment shall be carried out
to four decimal places. Interest calculations for periods of less than
a full month must be based on a 365-day year.
7.3.5 BUYDOWN LOANS. The Servicer must amortize a Mortgage Loan for
which Buydown Funds are applied at the Mortgage Interest Rate, not at
the buy-down rate, in order to ensure that payments are collected to
amortize properly the Mortgage Loan.
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Section 7.4 APPLICATION PROCEDURE
7.4.1 APPLICATION PRIORITY. A payment from a Borrower will normally
consist of interest, principal, deposits for insurance and taxes and
late charges, if applicable. Payments received from Borrowers must be
applied in the following order:
(a) prepayment charges;
(b) deposits for taxes and insurance;
(c) required monthly interest;
(d) required monthly principal; and
(e) any fees which may be retained by the Servicer,
including late charges, returned check fees, and
assumption fees.
7.4.2 REAPPLICATION OF PRIOR PAYMENTS. The Servicer may not reapply
prior prepayments or accumulated Curtailments for payment of subsequent
installments.
7.4.3 ADVANCE PAYMENTS. Payments made by the Borrower to satisfy future
installments must be accounted for as prepaid installments of principal
and interest. The Servicer should contact the Borrower if there is a
question about the Borrower's intention in making any unscheduled
payment.
Section 7.5 CURTAILMENTS
7.5.1 CURTAILMENT AMOUNT. The Servicer may accept Curtailments at any
time. If a Mortgage Loan is delinquent, funds received must first be
applied to bring the Mortgage Loan current. If there are excess funds
after the application of amounts received from the Borrower to pay the
related Monthly Payment, the excess funds represent a Curtailment and
may be applied as a partial principal prepayment.
7.5.2 CURTAILMENT APPLICATION. If a Curtailment is received on or after
the Due Date, the Servicer may either (i) retroactively apply the
Curtailment to the Scheduled Principal Balance of the related Mortgage
Loan as of the Due Date, or (ii) to the extent permitted by law and the
Mortgage Loan, apply such Curtailment at the end of the current period.
To the extent that the Servicer retroactively applies the Curtailment
to the Scheduled Principal Balance of the related Mortgage Loan, the
Servicer must either collect Curtailment Interest from the Borrower,
or, to the extent specified in Section 7.6.1, pay such amount out of
its own funds. The interest portion of the next installment due is then
calculated based on the Unpaid Principal Balance of the related
Mortgage Loan after application of the Curtailment. To the extent the
Servicer applies the Curtailment at the end of the current period,
Curtailment Interest is not collected or paid by the Servicer.
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7.5.3 EFFECT OF CURTAILMENT. A Curtailment may not be used to reduce
the related Monthly Payment or the related Mortgage Interest Rate for
any Mortgage Loan, or to postpone the Due Date of any payment.
7.5.4 CURTAILMENT TRANSMISSION. Each Curtailment must be deposited into
the related Custodial P&I Account within one Business Day after receipt
and must be remitted no later than the regularly scheduled Monthly
Remittance to the related Master Servicer Custodial Account.
Section 7.6 LIQUIDATIONS
7.6.1 MONTH END INTEREST. If a Prepayment in Full or a Curtailment of a
Mortgage Loan occurs and the Servicer does not receive a full 30 days
of interest (calculated on a 30-day month, 360-day year basis) on the
prepaid amount for the month in which the Prepayment in Full or
Curtailment occurs, the Servicer must pay, to the extent of its Monthly
Servicing Compensation for all Mortgage Loans, the Month End Interest
on all such Mortgage Loans so prepaid in full or in part. To the extent
that the Servicer's Monthly Servicing Compensation for all Mortgage
Loans is insufficient funds to pay all such Month End Interest, the
resulting Month End Interest Shortfall for any month shall not be
recoverable from the Servicer or any other source in the future. The
payment of Month End Interest by the Servicer shall not be an "advance"
and shall not be reimbursable from the proceeds of any Mortgage Loan.
7.6.2 LIQUIDATION REPORTS. The Servicer will report information with
respect to Liquidations in the monthly reports delivered to the Master
Servicer by the eighth calendar day of each succeeding month.
7.6.3 DEPOSIT OF FUNDS. Within one day after the Liquidation of a
Mortgage Loan, the Servicer shall deposit the related Liquidation
Proceeds together with the related Month End Interest into the related
Custodial P&I Account.
7.6.4 DOCUMENT REQUEST. Within five Business Days after any
Liquidation, the Servicer must complete and send a Request for Release
of Documents to the Master Servicer.
Section 7.7 REALIZED LOSSES
7.7.1 LIQUIDATION REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss suffered on the related Mortgage Loan on
a Liquidation of such Mortgage Loan, the amount of such Realized Loss
is equal to (a) the sum of:
(i) Unpaid Principal Balance;
(ii) unpaid interest accrued at the related Mortgage
Interest Rate;
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(iii) attorneys' fees and other foreclosure expenses;
(iv) unpaid taxes;
(v) unpaid Property Maintenance Expenses;
(vi) unpaid insurance premiums; and
(vii) Hazard Loss expenses;
less (b) the sum of:
(i) the balance of Escrow Funds, if any;
(ii) any refund of any Hazard Insurance premium;
(iii) rental income receipts;
(iv) Insurance Proceeds;
(v) cash proceeds of any foreclosure sale;
(vi) proceeds from sale of a REO; and
(vii) any amounts received pursuant to bankruptcy or
insolvency proceedings.
7.7.2 BANKRUPTCY REALIZED LOSS DETERMINATION. With respect to the
calculation of a Realized Loss on a Mortgage Loan subject to a
Deficient Valuation, the amount of the Realized Loss is the difference
between the Unpaid Principal Balance of the related Mortgage Loan
immediately prior to the Deficient Valuation and the Unpaid Principal
Balance as reduced by the Deficient Valuation.
7.7.3 REPORTING REQUIREMENT. As to any defaulted Mortgage Loan, the
Servicer must account to, and report in writing to, the Master Servicer
as to any Realized Loss (or gain) upon the Liquidation or Deficient
Valuation in respect of such Mortgage Loan.
7.7.4 SERVICER'S LIABILITY. Except in the case of a purchase by the
Servicer of a Mortgage Loan from the Owner thereof due to a breach of a
representation or warranty by the Servicer or failure to perform the
servicing procedures as set forth in this Agreement, the Servicer is
not liable for any Realized Loss on any Mortgage Loan.
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ARTICLE 8
ARM LOANS
Section 8.1 ARM LOAN SERVICING
8.1.1 IN GENERAL. It is the Servicer's responsibility to enforce each
ARM Loan (and any other Mortgage Loan) according to its terms and in
conformity with all applicable law. The Servicer's records must, at all
times, reflect the then-current Mortgage Interest Rate and Monthly
Payment for such ARM Loan and the Servicer must timely notify the
Borrower of any changes to the Mortgage Interest Rate and/or the
Borrower's Monthly Payment.
8.1.2 SERVICER'S LIABILITY. If the Servicer fails to make either a
timely or accurate adjustment to the Mortgage Interest Rate or Monthly
Payment for an ARM Loan or to notify the Borrower of such adjustments,
and subsequently receives a short Monthly Payment, the Servicer must
pay from its own funds any shortage until the Servicer has made the
necessary corrections in conformance with applicable law so as to
secure the correct Monthly Payment from the Borrower. If the Servicer's
failure to make a scheduled change affects the Owner of the ARM Loan's
rights to make future adjustments under the terms of the ARM Loan, the
Servicer shall be required to purchase the ARM Loan. Any amounts paid
by the Servicer pursuant to this Section shall not be an advance and
shall not be reimbursable from the proceeds of any Mortgage Loan.
8.1.3 ADJUSTMENT REPORTS. All Mortgage Interest Rate and Monthly
Payment adjustments must be reported to the Master Servicer in a ARM
Loan change report.
8.1.4 SUBSTITUTE INDEX. If the Index required to be used to determine
the Mortgage Interest Rate for a Mortgage Loan is not available on an
Interest Adjustment Date, the Servicer, after consultation with the
Master Servicer, will select an alternative interest rate index that is
readily verifiable by Borrowers.
Section 8.2 NOTICE OF PERIODIC ADJUSTMENT
8.2.1 NOTICE REQUIREMENT. The Notice of Periodic Adjustment is the
legal and official announcement to the Borrower of an ARM Loan of a
change in the Mortgage Interest Rate or the Monthly Payment. The
Servicer must send this notice to the Borrower, as stated in the
related Mortgage Note and in accordance with applicable law, and at
least 25 days before each Payment Adjustment Date.
8.2.2 NOTICE CONTENTS. Each Notice of Periodic Adjustment pertaining to
an ARM Loan shall include the following information:
(a) the new Mortgage Interest Rate;
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(b) the date on which the new Mortgage Interest Rate
becomes effective, that is, the Interest Adjustment
Date;
(c) the Index value on which the new Mortgage Interest
Rate is based, the Gross Margin, and how the new
Mortgage Interest Rate was calculated;
(d) the projected Unpaid Principal Balance on the
upcoming Payment Adjustment Date, assuming timely
payment of the remaining Monthly Payments due prior
to the Payment Adjustment Date;
(e) the new Monthly Payment;
(f) the Payment Adjustment Date, that is, the date on
which the new Monthly Payment becomes effective;
(g) the dates of the next Interest Adjustment Date and
Payment Adjustment Date;
(h) the fact that the Borrower may repay the ARM Loan in
whole or in part without penalty at any time;
(i) the title and telephone number of an employee of the
Servicer who can answer questions about the notice;
and
(j) if the Borrower is eligible and has the right to
convert the ARM Loan to a fixed rate Mortgage Loan,
such shall be stated.
8.2.3 LEGAL COMPLIANCE. The Servicer also must ensure that the Notice
of Periodic Adjustment provides the Borrower with any other disclosure
information required by applicable federal or state laws or
regulations.
Section 8.3 ARM LOAN CONVERSION
8.3.1 SERVICER'S DETERMINATION. In the event a Borrower with a
convertible ARM Loan exercises its option to convert such Mortgage Loan
to a fixed interest rate, the Servicer will determine whether the
conditions and qualifications for conversion have been met and
determine the fixed rate to be applied to such Mortgage Loan pursuant
to the terms of the related Mortgage Note.
8.3.2 CONVERSION NOTIFICATION. Upon any such conversion, the Servicer
shall prepare an ARM Loan conversion notification and send such
notification to the Master Servicer within three Business Days after
the conversion.
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8.3.3 PURCHASE BY SERVICER. If a Converted Mortgage Loan is owned by a
Trust which has issued mortgage-backed securities, then the Servicer
will purchase such converted Mortgage Loan from the applicable Trust at
the Purchase Price by depositing the Purchase Price into the respective
Custodial P&I Account.
ARTICLE 9
MORTGAGE LOAN FILES
Section 9.1 OWNER MORTGAGE LOAN FILES
9.1.1 OWNER MORTGAGE LOAN FILE REQUIREMENTS. For each Mortgage Loan,
the Servicer will ensure that an appropriate Custodian will maintain an
Owner Mortgage Loan File on behalf of the Owner of such Mortgage Loan
that contains each of the following documents:
(a) the original related Mortgage Note pertaining to such
Mortgage Loan endorsed by the respective prior owner
of such Mortgage Loan to the Owner of such Mortgage
Loan, in the manner described in Section 9.3.1
hereof, together with, where applicable, the related
Power of Attorney, Surety Agreement, Guaranty
Agreement, Mortgage Note Assumption Rider and/or
Buydown Agreement. The Servicer will assure that the
related Mortgage Note shall include all prior and
intervening endorsements as are necessary to show a
complete chain of endorsements from the respective
Loan Originator to the respective prior owner of such
Mortgage Loan;
(b) either the recorded original related Security
Instrument pertaining to such Mortgage Loan, together
with any addenda and riders, certified by the
recording office, or, if the related Security
Instrument is in the process of being recorded, a
photocopy of the related Security Instrument,
certified by an officer of the respective prior owner
of such Mortgage Loan or by the applicable title
insurance company, closing/settlement/escrow agent or
company or closing attorney to be a true and correct
copy of the related Security Instrument transmitted
for recordation;
(c) either a recorded original Assignment of the related
Security Instrument from the respective prior owner
of such Mortgage Loan assigning the related Security
Instrument to the Owner of such Mortgage Loan, in the
manner described in Section 9.3.2 hereof, certified
by the recording office, or, if such Assignment is in
the process of being recorded, a photocopy of the
related Security Instrument transmitted for
recordation certified by an Officer of the respective
prior owner of such Mortgage
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Loan to be a true and correct copy of such Assignment
submitted for recordation. If recordation is waived
by the Servicer pursuant to the provisions of Section
11.6.4 hereof, the Custodian will hold such an
Assignment in recordable form;
(d) each recorded original intervening Assignment of the
Security Instrument as is necessary to show a
complete chain of title from the respective Loan
Originator to the respective prior owner of such
Mortgage Loan or, if any such original is unavailable
because it is in the process of being recorded, a
photocopy of such intervening Assignment certified by
an Officer of the prior owner of such Mortgage Loan
to be a true and correct copy of such intervening
Assignment submitted for recordation;
(e) an original Title Insurance policy pertaining to such
Mortgage Loan or, with respect to loans secured by
properties in jurisdictions where title policies are
not available, the original attorney's opinion of
title. In the event that the policy has not been
issued or is not otherwise available, (i) a written
binding ALTA commitment for such a policy issued by
the respective title insurance company and an
Officer's certificate of the respective prior owner
of such Mortgage Loan certifying that all of the
requirements specified in such commitment have been
satisfied, or (ii) a Preliminary Title Report if the
Mortgaged Property are in a state designated by the
Master Servicer as a Preliminary Title Report state;
(f) for each Mortgage Loan listed on Schedule I to this
Agreement which is required to have Primary Mortgage
Insurance pursuant to this Agreement or the related
Mortgage Loan Documents, a Primary Mortgage Insurance
policy or a certificate of Primary Mortgage Insurance
issued by the respective insurer or its agent
indicating that such a policy is in effect;
(g) for each Mortgage Loan listed on Schedule I to this
Agreement which is required to have Pool Insurance
pursuant to this Agreement or the related Mortgage
Loan Documents, a Pool Insurance certificate issued
by the respective insurer or its agent indicating the
eligibility of such Mortgage Loan for such Pool
Insurance; and
(h) originals of each assumption agreement, modification,
written assurance or substitution agreement
pertaining to such Mortgage Loan, if any.
9.1.2 CUSTODIANS. The Custodian will hold originals of all documents
included in each Owner Mortgage Loan File charged to his custody except
that copies of recorded Security Instruments or Assignments will be
held if the originals are held by the recording office. If the original
o Security Instrument, Assignment from the respective prior owner of
the related Mortgage Loan to the Owner of the related Mortgage Loan
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or any prior Assignment of the Security Instrument has not been
delivered to the Custodian on the date of the transfer of ownership of
such Mortgage Loan to the Owner because it is in the process of being
recorded, the Servicer will within five Business Days after its receipt
of the original recorded document, deliver it to the Custodian. The
Servicer will promptly deliver to the Custodian any other Mortgage Loan
Document to be included in an Owner Mortgage Loan File, charged to the
custody of the Custodian, that comes into Servicer's possession.
9.1.3 RELEASE OF DOCUMENTS FROM OWNER MORTGAGE LOAN FILE. In the event
any document contained in an Owner Mortgage Loan File is needed by the
Servicer for the proper servicing of a Mortgage Loan, the Servicer must
send to the Master Servicer a request for release of documents. The
Master Servicer will authorize the Owner of the related Mortgage Loan,
or the Custodian, as the case may be, to release such Mortgage Loan
Documents after receipt of such Servicer's request (a) (i) upon payment
in full of such Mortgage Loan, (ii) when necessary for foreclosure or
(iii) for such other cause as the Master Servicer deems appropriate, in
its sole discretion, and (b) upon the Master Servicer's satisfaction
that reasonable safeguards will be taken to safeguard such Mortgage
Loan Documents. The Servicer will be responsible for such Mortgage Loan
Documents while they are in transit and while they are in its
possession and will be deemed to hold such Mortgage Loan Documents in
trust for the benefit of the Owner of the related Mortgage Loan. If
such Mortgage Loan has not been paid in full or otherwise liquidated,
the Servicer shall promptly return such Mortgage Loan Documents when
they are no longer required. Notwithstanding the foregoing, unless such
Mortgage Loan has been liquidated or the related Mortgage Loan
Documents have been delivered to an attorney, a public trustee or other
public official in order to foreclose on the related Mortgaged
Property, all such Mortgage Loan Documents released by the Owner of the
related Mortgage Loan, or the respective Custodian, as the case may be,
must be returned within 21 calendar days after their release.
9.1.4 EXECUTION BY OWNER. In the event the Owner of the related
Mortgage Loan's signature is required on any document with respect to a
Mortgage Loan for any reason, including payment in full, assumption or
foreclosure, the Servicer shall deliver to the Master Servicer a
written notice requesting that the Owner of the related Mortgage Loan
execute such documents and certifying as to the reason such documents
are required. Upon receipt of such executed documents, the Servicer
will record, file or deliver such documents as appropriate for the
proper servicing of such Mortgage Loan.
9.1.5 CUSTODIAL FEES. The Servicer is responsible for the related
ongoing fees of each Custodian. Each Custodian shall bill the Servicer
directly for its fees. If for any reason at any time the Master
Servicer pays custodial fees, the Servicer will promptly reimburse the
Master Servicer for such payments.
9.1.6 REPRESENTING PARTY OFFICERS' CERTIFICATE. If it is necessary for
the respective Representing Party to deliver an Officers' certificate
with respect to the existence of a
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Title Insurance policy or a Primary Mortgage Insurance policy for
several Mortgage Loans, the Master Servicer may consent to the delivery
of a single Officers' certificate of the respective Representing Party
for a schedule of mortgage loans in lieu of a separate Officers'
certificate for each such Mortgage Loan.
9.1.7 FINANCING ARRANGEMENTS. To the extent that the Owner of a
Mortgage Loan shall utilize such Mortgage Loan as collateral for a
financing, the endorsements which are required pursuant to Section
9.1.1 hereof with respect to the original related Mortgage Note, the
original related Security Instrument, and the original and each
intervening Assignment of the related Security Instrument shall also
include such further endorsements as such Owner, in accordance with the
relevant financing documents, shall direct.
Section 9.2 SERVICER MORTGAGE LOAN FILES
9.2.1 SERVICER MORTGAGE LOAN FILE REQUIREMENTS. The Servicer must
maintain a Servicer Mortgage Loan File for each Mortgage Loan, each of
which shall be clearly marked with the Servicer Loan Number and shall
be readily accessible to the Master Servicer during regular business
hours, that includes the following:
(a) copies of each of the documents listed in Section
9.1.1 that are held by the Custodian;
(b) an original Hazard Insurance policy or a certificate
of insurance issued by the applicable insurer or its
agent indicating such a policy is in effect for the
related Mortgaged Property;
(c) a Flood Insurance policy or a certificate of
insurance issued by the insurer or its agent
indicating that such a policy is in effect with
respect to the related Mortgaged Property, if Flood
Insurance is required pursuant to the provisions of
Section 15.4 or Section 16.6 hereof for such
Mortgaged Property;
(d) originals or copies of all documents submitted to a
Primary Mortgage Insurer for credit and property
underwriting approval with respect to the related
Mortgaged Property, if Primary Mortgage Insurance is
required pursuant to the provisions of Section 15.2
hereof for such Mortgaged Property;
(e) the originals of all RESPA and Regulation Z
disclosure statements executed by the Borrower with
respect to such Mortgage Loan;
(f) the related Appraisal Report made at the time such
Mortgage Loan was originated;
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(g) the HUD-1 or other settlement statement for the
purchase or refinance, as the case may be, of the
Mortgaged Property by the Borrower and mortgagor
under the related Mortgage Note and Security
Instrument with respect to such Mortgage Loan;
(h) evidence of any tax service contract, if any;
(i) copies of documentation, including the appropriate
approval by the Master Servicer, relating to any
modifications to the related original Mortgage Loan
Documents;
(j) documentation, including the appropriate approval by
the Master Servicer, relating to any releases of any
collateral supporting such Mortgage Loan;
(k) collection letters or form notices sent to the
Borrower with respect to such Mortgage Loan, but only
if the Servicer does not maintain separate collection
files, including all collection letters or notices,
indexed by Borrower;
(l) foreclosure correspondence, bankruptcy correspondence
and legal notifi- cations, if applicable with respect
to the related Mortgaged Property; and
(m) all other related Mortgage Loan Documents which are
customarily maintained in accordance with Prudent
Servicing Practices in a mortgage loan file in order
to properly service a mortgage loan including,
without limitation, documents regarding title claims.
9.2.2 SERVICER MORTGAGE LOAN FILE ACCESS. The Servicer acknowledges
that each Servicer Mortgage Loan File will be held in trust for the
Owner of such Mortgage Loan, its successors and assigns. The Servicer
further acknowledges that the Master Servicer may, from time to time,
request immediate delivery of any or all Mortgage Loan records and
documents to the Master Servicer, the Owner of such Mortgage Loan, the
Custodian or another entity designated by the Master Servicer, and the
Servicer shall thereupon immediately deliver such records and
documents, at the expense of the Servicer. The Servicer agrees to
permit the Master Servicer, its agents, its successors or assigns, from
time to time to conduct audits or inspections of any Servicer Mortgage
Loan Files at one or more of the Servicer's offices during normal
business hours with advance notice. The Servicer must grant the Master
Servicer access to all books, records and files relating to the
Servicer's systems and procedures for servicing Mortgage Loans as to
all Servicer Mortgage Loan Files or to the Servicer's compliance with
the terms and conditions of this Agreement.
9.2.3 ALTERNATE MEDIA. Subject to any applicable law concerning
document retention requirements, the Servicer may transfer any Servicer
Mortgage Loan File to microfilm,
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microfiche, optical storage or magnetic media and may retain the
microfilm, microfiche, optical storage or magnetic media in lieu of
hard copies of the documents required to be maintained in such Servicer
Mortgage Loan Files. The following requirements must be met:
(a) the process must accurately reproduce originals onto
a durable medium;
(b) unless the Master Servicer provides otherwise by
notice to the Servicer, the Master Servicer Loan
Number must be clearly marked on the copies or
optical storage or magnetic media;
(c) the copies or optical storage or magnetic media must
be easily transferable to legible hard copies of the
material relating to the Mortgage Loans; and
(d) backup copies of the microfilm, microfiche, optical
storage or magnetic media must be made by the
Servicer and retained off-site to protect against
fire and other hazard losses.
If the copies, optical storage or magnetic media become damaged or lost
for any reason, the Servicer must bear the entire cost of restoring
each Servicer Mortgage Loan File and any other related documents which
had been transferred to microfilm, microfiche, optical storage or
magnetic media. The Servicer also must bear all costs of reproducing
legible hard copies requested by the Master Servicer. The Master
Servicer may request copies of any Servicer Mortgage Loan File in
optical storage or magnetic media which the Servicer has previously
transferred to magnetic media or optical storage, as the case may be.
The Servicer shall furnish to the Master Servicer optical storage or
magnetic media copies of the requested Servicer Mortgage Loan File in
such format as maintained by the Servicer at the Servicer's expense.
Section 9.3 REQUISITE FORM
9.3.1 FORM OF ENDORSEMENTS. The Servicer shall require that
endorsements of any Mortgage Notes comply with the format stated
herein. If the Owner of the related Mortgage Loan is a trust, then the
following format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
[Name of Trustee], AS
TRUSTEE under the agreement dated as of [Date of
Trust Agreement], and its successors and assigns,
[Name of Principal]
[Signature of Officer]
[Officer's Name and Title]
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Otherwise, except as the Master Servicer shall otherwise
require, the following format shall be employed:
WITHOUT RECOURSE
PAY TO THE ORDER OF
([Name of Owner], and its successors and assigns
[Name of Principal]
[Signature of Applicable Officer]
[Applicable Officer's Name and Title]
9.3.2 FORM OF ASSIGNMENT. The Servicer shall require that assignments
of any Security Instrument comply with the format stated herein,
including, without limitation, as to the name of the assignee. If the
Owner of the related Mortgage Loan is a trust then the following format
shall be employed:
[Name of Trustee], AS
TRUSTEE under the agreement dated as of
[Date of Trust Agreement], and its successors and assigns
Otherwise, except as the Master Servicer shall otherwise
require, the following format shall be employed:
[Name of Owner], and its successors and assigns
ARTICLE 10
ESCROWS
Section 10.1 ESCROW CRITERIA
10.1.1 ESCROW REQUIREMENT. Unless, (a) at the origination of a Mortgage
Loan the Borrower is not required to make Escrow Item payments
thereafter, (b) Escrow Funds collection has been waived pursuant to
Section 10.5.1 hereof, or (c) the collection of Escrow Funds is
precluded by applicable law, the Servicer must continue to collect
1/12th of the annual total for all Escrow Items with each Monthly
Payment on such Mortgage Loan, as determined pursuant to Section 10.3.1
hereof.
10.1.2 MORTGAGE LOANS WITHOUT ESCROW. If the Servicer is not required
to collect Escrow Funds on a Mortgage Loan, the Servicer shall require
proof of payment of all taxes, ground rents, assessments, insurance or
other charges, or use other means commonly used in the mortgage
industry to ascertain that such items are paid on a timely basis.
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Section 10.2 PAYMENT OF ESCROW ITEMS
10.2.1 ESCROW PAYMENT OBLIGATION. Where the Servicer is responsible for
the collection of Escrow Funds with respect to a Mortgage Loan, the
Servicer shall promptly pay all bills for any Escrow Items in such a
manner as to avoid late charges or penalties and to take advantage of
any available discount.
10.2.2 ESCROW ITEM PAYMENTS. Where (a) the Servicer has been collecting
Escrow Funds with respect to a Mortgage Loan, or (b) the Borrower has
not been obliged to make Escrow Funds payments or such payments have
been waived and such Borrower has failed to timely pay obligations
which otherwise would be Escrow Items, the Servicer must pay any
obligation (i) which could become a first lien on the related Mortgaged
Property, or (ii) to maintain in force the applicable Insurance
Policies. Where Escrow Funds are maintained by the Servicer, such
obligations should be paid from the Borrower's Escrow Funds, or in
accordance with Section 10.2.3 hereof.
10.2.3 ESCROW FUND INSUFFICIENCY. When a Borrower's Escrow Funds are
insufficient to pay taxes, assessments and premiums, when due, subject
to applicable law, the Servicer must attempt to obtain the additional
funds from such Borrower. If sufficient additional funds have not been
recovered by the time the payment is due, the Servicer must advance its
own funds to ensure prompt payment. The Servicer may elect to advance
funds prior to attempting to obtain the additional funds from such
Borrower; however, to the extent permitted by applicable law, the
Servicer shall thereafter attempt to obtain the advanced funds from the
Borrower.
10.2.4 NONPAYMENT NOTICE. The Servicer must notify the Master Servicer
immediately of any Escrow Item not paid in a timely basis and which
remains unpaid for a period of ninety days thereafter.
Section 10.3 ESCROW FUND DETERMINATION
10.3.1 ESCROW FUNDS ANALYSIS. Subject to all applicable Federal, State
and local laws, the Servicer must conduct an analysis of each
Borrower's Escrow Funds at least annually to determine the monthly
deposits which must be made by such Borrower. The analysis will be
performed based upon (a) reasonable projections of the expenses to be
paid from the Escrow Funds and (b) that as such expenses come due, the
Escrow Funds balance shall at all times be sufficient to effect the
payment of such expenses, unless a lower amount is required by
applicable law. Each Borrower must receive a statement of this
analysis. The analysis also must determine whether there is a surplus
or deficiency in such Borrower's Escrow Funds.
10.3.2 ESCROW FUND SURPLUS. As a Borrower may direct, a surplus in such
Borrower's Escrow Funds shall be (a) used as a Curtailment as to the
related Mortgage Loan, (b)
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refunded to such Borrower or (c) taken into consideration in
determining the amount to be collected for Escrow Funds during the next
twelve months.
10.3.3 ESCROW FUND DEFICIENCY. Where it is determined that a deficiency
exists in such Borrower's Escrow Funds, such Borrower may be requested
to pay the shortage in full or the deficiency may be taken into
consideration in determining the amount to be collected for Escrow
Funds during the next twelve months.
Section 10.4 RECORDS
10.4.1 ESCROW FUNDS RECORDS. The Servicer shall keep records of Escrow
Funds collected from each Borrower.
10.4.2 ESCROW OBLIGATIONS RECORDS. The Servicer must maintain accurate
records of the imposition of Escrow Item obligations and the payment of
Escrow Items.
Section 10.5 ESCROW WAIVER
10.5.1 WAIVER CONDITIONS. For any Mortgage Loan (other than a GPM or
GPARM Loan which provides for negative amortization in the future) that
has amortized down so that its current LTV is 80% or less, the Servicer
may waive the Borrower's future obligation to make Escrow Funds
payments provided:
(a) the Unpaid Principal Balance of such Mortgage Note
divided by the value of the Mortgaged Property based
on an appraisal made within 60 days of the date of
determination is 80% or less;
(b) such Mortgage Loan is at least 12 months old; and
(c) such Mortgage Loan has not been more than 30 days
delinquent during the preceding 12 months.
10.5.2 WAIVER RESCISSION. The Servicer shall enforce the Escrow Funds
requirements with respect to any Mortgage Loan if the related Borrower
fails to act responsibly in making the required payments.
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ARTICLE 11
COLLECTION AND SERVICING PRACTICES
Section 11.1 GENERAL SERVICING REQUIREMENTS
11.1.1 SERVICING PRACTICES. The Servicer agrees to service Mortgage
Loans in accordance with the requirements of this Agreement. In
general, where not otherwise expressly required by the provisions of
this Agreement, the Servicer shall service the Mortgage Loans in
accordance with prudent mortgage loan servicing standards and
procedures accepted in the mortgage banking industry and generally in
accordance with FNMA guidelines. As to each Mortgage Loan, the Servicer
shall take all such actions as may be necessary to preserve the lien of
the related Security Instrument upon the related Mortgaged Property.
11.1.2 TAX RETURNS AND OTHER REPORTS. Unless otherwise instructed by
notice from the Master Servicer or the respective Trustee, if any, the
Servicer shall forward to each Mortgagor such forms and furnish such
information within the control of the Servicer as are required by the
Code to be furnished to them and will prepare and file annual reports
required by the state authorities. By way of example, the Servicer
shall provide the Mortgagors with the reports required under Code
Sections 6050H (E.G., reporting on Form 1098 any mortgage interest,
including points, received and any reimbursements of qualified mortgage
interest) and 6050J (Abandonments and Foreclosure of Real Property,
Form 1099-A).
11.1.3 SERVICER INTERNAL CONTROLS. The Servicer shall maintain at all
times an adequate system of audit and internal controls in accordance
with Prudent Servicing Practices.
11.1.4 POOL INSURANCE COMPLIANCE. Notwithstanding any other provision
of this Agreement, the Servicer shall at all times comply with all
applicable Pool Insurance policy requirements so as to assure the full
benefit of such Pool Insurance policy to the Owner of the related
Mortgage Loan.
11.1.5 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Notwithstanding any other
provision of this Agreement, the Servicer shall at all times comply
with all applicable Primary Mortgage Insurance policy requirements so
as to assure the full benefit of such Primary Mortgage Insurance policy
to the Owner of the related Mortgage Loan.
Section 11.2 DELEGATION OF DUTIES
11.2.1 PERMISSIBLE DELEGATIONS. Without the written consent of the
Master Servicer authorizing further delegations, the only servicing
duties which the Servicer may elect to delegate, by agency, subcontract
or otherwise, and the only categories of such delegees, are as follows:
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(a) professional collection agencies to perform those
duties and functions for the collection of delinquent
amounts due on any Mortgage Loan that are customarily
performed by such agencies in the locality where the
related Mortgaged Property are located;
(b) title insurance companies, escrow companies and trust
companies to issue or provide reports reflecting the
condition of title to any Mortgaged Property and
services incidental to the foreclosure or acquisition
in lieu of foreclosure of any Mortgaged Property, or
the sale or disposition of any Mortgaged Property
acquired by the Servicer;
(c) attorneys licensed to practice in the state where the
Mortgaged Property are located to perform customary
legal services in connection with the foreclosure or
acquisition of such Mortgaged Property or the sale or
disposition of such Mortgaged Property acquired by
the Servicer at or in lieu of foreclosure, or for the
collection of delinquent sums owed on any Mortgage
Loan;
(d) professional property inspection companies and
appraisers to conduct routine inspections of, and
provide written inspection reports on, Mortgaged
Property as required by this Agreement.
(e) title companies, escrow companies and real estate tax
service companies to provide periodic reports as to
the amount of real estate taxes due on any Mortgaged
Property and the due date or dates of each required
installment;
(f) credit bureaus or credit reporting companies to
provide credit reports on Borrowers or persons who
have applied to assume Mortgage Loans;
(g) construction companies, contractors and laborers to
provide labor, materials and supplies necessary to
protect, preserve and repair Mortgaged Property as
required by this Agreement; and
(h) lock box providers or payment processing
administrators to provide payment processing
services.
11.2.2 DELEGEE'S QUALIFICATIONS. The Servicer shall assure that each
Person retained to provide any of the services set forth in Section
11.2.1 hereof is fully licensed and holds all required Federal, State
or local governmental franchises, certificates and permits necessary to
conduct the business in which he is engaged and that such Person is
reputable, knowledgeable, skilled and experienced and has the necessary
personnel, facilities and equipment required to provide the services
for which he is retained.
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11.2.3 RESPONSIBILITY FOR COSTS. Any Person retained in accordance with
Section 11.2.1 hereof shall be retained solely for the Servicer's
account and at the Servicer's sole expense and shall not be deemed to
be an agent or representative of the Owners of the related Mortgage
Loans, their successors or assigns, or the Master Servicer or its
successors or assigns.
11.2.4 SERVICER'S LIABILITY. The Servicer shall remain liable to the
Principal, its successors and assigns for the performance of the
Servicer's duties and obligations under this Agreement, notwithstanding
the delegation of any servicing function pursuant to this Section 11.2.
Section 11.3 DUE-ON-SALE CLAUSE ENFORCEMENT
11.3.1 ENFORCEMENT REQUIREMENT. The Servicer is required to enforce the
Due-on-Sale Clause on any Mortgage Loan to the extent permitted by
applicable law upon the transfer of title of the related Mortgaged
Property unless (a) a Mortgage Loan is assumable pursuant to the terms
of the related Mortgage Note Assumption Rider, or (b) enforcement of
the Due-on-Sale Clause will jeopardize the Primary Mortgage Insurance
coverage on such Mortgage Loan.
11.3.2 LITIGATION CONSIDERATIONS. Where, in the Servicer's judgment,
the issue of enforceability is reasonably expected to be litigated, the
Servicer will obtain the written consent of the Master Servicer before
enforcing any Due-on-Sale Clause.
11.3.3 APPROVAL REQUIREMENT. In all circumstances of an unapproved
transfer of a Mortgaged Property initiated by the Borrower, the
Servicer is required to promptly notify the Master Servicer and, where
applicable, the respective Primary Mortgage Insurer and/or the
respective Pool Insurer, of such transfer and obtain written approval
before initiating enforcement proceedings.
Section 11.4 ASSUMPTIONS
11.4.1 ASSUMPTION REQUIREMENTS. Any Assumption permitted under this
Agreement shall be performed in accordance with Prudent Servicing
Practices. In connection with an Assumption of an assumable Mortgage
Loan, the Servicer shall process such Assumption as provided for in the
Mortgage Note or the Mortgage Note Assumption Rider and shall verify
that:
(a) no material term of the Mortgage Note (including, but
not limited to, the Mortgage Interest Rate, the
remaining term to maturity, the Gross Margin, the
Index, the Maximum Lifetime Mortgage Interest Rate,
the Minimum Lifetime Mortgage Interest Rate, and any
Periodic Rate Cap or any Periodic Payment Cap) may be
changed in connection with such Assumption;
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(b) that the new Borrower qualifies for credit under the
Master Servicer's criteria and standards for similar
loans;
(c) where applicable, the respective Primary Mortgage
Insurer, and/or the respective Pool Insurer has in
advance approved in writing such Assumption of such
Mortgage Loan by the new Borrower and such Mortgage
Loan will continue to be insured by such Primary
Mortgage Insurer and/or such Pool Insurer;
(d) the documents relating to such Assumption (i) create
a valid and enforceable promise to pay the Unpaid
Principal Balance of the related Mortgage Loan,
together with interest thereon in accordance with the
related Mortgage Note by the new Borrower, and (ii)
the related Security Instrument continues to evidence
a valid and perfected first lien on the related
Mortgaged Property; and
(e) such Mortgage Loan will continue to be a valid first
priority security interest upon the related Mortgaged
Property.
11.4.2 APPROVAL AND RELEASE. In connection with an Assumption of an
assumable Mortgage Loan and in accordance with the provisions of the
related Mortgage Loan Documents, upon such verification, (a) the
Servicer may approve such Assumption and (b) only with the prior
written approval where applicable the Primary Mortgage Insurer and/or
the Pool Insurer, unless such approval is precluded by the terms of the
Mortgage Loan Documents, release the previous Borrower from liability.
11.4.3 NOTIFICATION OF ASSUMPTION. The Servicer shall notify the Master
Servicer of any Assumption by the eighth calendar day of the month
following the month in which the Assumption took place using the
Assumption Report and shall provide to the Custodian the original
assumption agreement.
11.4.4 ASSUMPTION FEES. Subject to applicable law or regulation and the
provisions of the related Mortgage Note, the Servicer may charge the
Borrower and retain a reasonable and customary assumption fee. Such fee
is receivable only from the Borrower directly and may not be withdrawn
from any of the custodial accounts maintained hereunder.
11.4.5 DISCLOSURE REQUIREMENT. In connection with an Assumption of an
assumable Mortgage Loan, the Servicer shall make all disclosures
required by applicable law.
Section 11.5 PARTIAL RELEASES AND EASEMENTS
11.5.1 MASTER SERVICER'S APPROVAL. Applications for partial release of
a Mortgaged Property from the lien of the related Security Instrument,
easements, consent to substantial alterations and any other matters
relating to changes affecting the related
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Mortgage Loan or such Mortgaged Property must be approved by the Master
Servicer and, where applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer, if (a) the request involves the
diminution of the current value of such Mortgaged Property by five
hundred dollars ($500.00) or greater or (b) the related Mortgage Loan
is covered by a policy of Primary Mortgage Insurance or Pool Insurance.
The Servicer shall promptly furnish such information as the Master
Servicer shall request in connection with an application under this
Section 11.5.
11.5.2 PREREQUISITES. The Servicer must take the following actions
prior to permitting a partial release or any other changes:
(a) where applicable, obtain the respective Primary
Mortgage Insurer's and/or the respective Pool
Insurer's prior written approval;
(b) obtain an acceptable Appraisal Report showing the
current market value of such Mortgaged Property
before and after the release and showing individually
both the value of the land and of the improvements
thereon;
(c) ensure that any and all cash consideration received
at least equals the current market value of property
or rights to be released regarding such Mortgaged
Property;
(d) ensure that any and all cash consideration received
is applied to the Unpaid Principal Balance of such
Mortgage Loan to the extent of the diminution of the
value of such Mortgaged Property;
(e) cause all legal documents for the transaction to be
reviewed;
(f) ensure that such Mortgaged Property, following such
release or change, adequately secures the Unpaid
Principal Balance of the Mortgage Loan and accrued
interest thereon and that the related Loan-to-Value
ratio will not be greater than 80%, after giving
effect to clause (d) hereof;
(g) obtain written notification from the respective Title
Insurer that the related Title Insurance policy
remains fully in effect with respect to such
Mortgaged Property, as modified, following such
release or change; and
(h) receive approval from the Master Servicer for such
release or other change.
Section 11.6 RECORDATION OF ASSIGNMENTS
11.6.1 RECORDATION REQUIREMENT. The Servicer must, at its own expense,
record the Assignment of each Security Instrument to the Owner of the
related Mortgage Loan, as
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well as any previously unrecorded intervening Assignments. If any such
Security Instrument or Assignment is not recorded within the later to
occur of (i) the date 120 days after the acquisition of the related
Mortgage Loan by its Owner, if the Servicer has been servicing such
Mortgage Loan from such Owner's date of acquisition or (ii) the date
120 days after the date the Servicer began servicing such Mortgage
Loan, the Master Servicer will have the right to so effect such
recordation at the Servicer's expense.
11.6.2 EXTENSION OF RECORDING PERIOD. The time to record an Assignment
of a Security Instrument may be extended for a period of up to 240 days
from the end of permissible recordation period set forth in Section
11.6.1 if the Servicer provides an Officer's Certificate acceptable to
the Master Servicer certifying that the Servicer has used its best
efforts to complete the recordation process for the Security Instrument
and/or Assignment, as applicable, and that the factors preventing
completion of the recordation process are beyond the Servicer's
control.
11.6.3 DELIVERY REQUIREMENT. Promptly following the recordation of any
Security Instrument or an Assignment, the Servicer will deliver to the
Custodian, unless otherwise directed in writing by the Master Servicer,
such Security Instrument or Assignment bearing evidence of recordation
or, if the original Security Instrument or Assignment is retained by
the recording office, a certified copy of the original recorded
Security Instrument or Assignment.
11.6.4 WAIVER OF RECORDATION. The Master Servicer will generally
require the Servicer to record an Assignment of the Security Instrument
for each Mortgage Loan to the Owner of the related Mortgage Loan.
However, the recordation requirement with respect to an Assignment may
be waived for a Mortgage Loan if (a) the related Mortgaged Property is
in a state in which recordation of such an Assignment is not required
to protect the Owner of the related Mortgage Loan's right, title and
interest in and to the related Mortgage Loan and (b) the Seller or the
Servicer has delivered to the Master Servicer an opinion of counsel,
acceptable to the Master Servicer, to that effect.
Section 11.7 GENERAL SERVICING CONSIDERATIONS
11.7.1 ABANDONMENT. If the Servicer discovers that any Mortgaged
Property is not occupied, the Servicer must immediately attempt to
contact the Borrower in order to determine the reason for the vacancy.
If the Servicer determines that such Mortgaged Property has been
abandoned, the Servicer, at its own expense, must take all necessary
actions to protect such Mortgaged Property from waste, damage and
vandalism. Such expenses shall be recoverable by the Servicer solely
from the Liquidation Proceeds of the related Mortgage Loan, if any, or
directly from the Borrower.
11.7.2 BUYDOWN FUNDS. The Servicer must distribute any Buydown Funds in
each Custodial Buydown Account in accordance with the terms of the
applicable Buydown Agreement.
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11.7.3 NOTIFICATION MATTERS. The Servicer shall (i) maintain accurate
records of and (ii) except in the case of paragraph (f) hereof
involving a monetary default of the Borrower addressed by Article 12
hereof, immediately advise and make recommendation to the Master
Servicer upon discovering any of the following:
(a) deterioration of, waste of, or lack of repair to, any
Mortgaged Property;
(b) sale or transfer of any Mortgaged Property in a
manner not approved by the Servicer pursuant to the
provisions of this Agreement;
(c) material litigation involving any Mortgaged Property;
(d) vacancy of any Mortgaged Property;
(e) with respect to a Mortgage Loan which the Mortgage
Loan Documents indicate that the related Mortgaged
Property is Owner Occupied, occupancy of any
Mortgaged Property by a tenant;
(f) a material default, determined in accordance with
Prudent Servicing Practices, under the terms of any
Security Instrument, Mortgage Note, Condominium
Project or PUD constituent document or similar
obligations of a Borrower; or
(g) any other situation that may materially and adversely
affect any Mortgage Loan.
11.7.4 EMINENT DOMAIN. The Servicer must notify immediately the Master
Servicer and, where applicable, the respective Primary Mortgage Insurer
and/or the respective Pool Insurer, of any taking by eminent domain of
all or part of any Mortgaged Property. The Servicer must take all steps
necessary to prevent loss of any Primary Mortgage Insurance or Pool
Insurance benefits due to any taking by eminent domain.
11.7.5 LATE CHARGES. Late charges may not be assessed unless a Borrower
failed to make payments in accordance with the Security Instrument.
Section 11.8 BORROWER BANKRUPTCY
11.8.1 SERVICER'S DUTY. The Servicer will be responsible for
representing the interests of the Owner of the related Mortgage Loan in
any bankruptcy proceedings involving a Borrower.
11.8.2 RESPONSIBILITY FOR COSTS. The costs of protecting the interests
of the Owner of a Mortgage Loan shall be borne by the Servicer and are
not (a) chargeable to the related
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Borrower's Escrow Funds or (b) reimbursable from the Master Servicer in
its sole discretion.
11.8.3 CHALLENGE BANKRUPTCY REDUCTIONS. If the bankruptcy judge or
trustee should propose to (a) reduce the Unpaid Principal Balance of a
Mortgage Note, (b) reduce the related Mortgage Interest Rate, (c)
extend the final maturity of such Mortgage Note, or (d) reduce the
level of any monthly payment on such Mortgage Note, the Servicer shall
(i) challenge any such modification on a timely basis, (ii) notify the
Master Servicer immediately, and (iii) follow the Master Servicer's
instructions regarding the bankruptcy proceedings, and in the absence
of explicit instructions, exercise reasonable judgment to protect the
interests of the Owner of such Mortgage Loan.
11.8.4 BANKRUPTCY ADJUSTMENTS. If the action of any court results in a
Deficient Valuation or Debt Service Reduction, the Servicer will
provide a calculation of the effects of such modification notifying the
Master Servicer of the new principal balance, Mortgage Interest Rate,
new final maturity, or monthly payment level, as the case may be, of
such Mortgage Loan.
11.8.5 BANKRUPTCY PLAN SURVEILLANCE. With respect to each Mortgage Loan
which is the subject of a Deficient Valuation or a Debt Service
Reduction, the Servicer shall verify that payments are being made in
accordance with the plan approved in the related bankruptcy
proceedings.
ARTICLE 12
DELINQUENCY MANAGEMENT
Section 12.1 IN GENERAL
12.1.1 SERVICING PRACTICES. The provisions set forth in this Article
constitute the minimum guidelines and procedures for servicing
Delinquent Mortgage Loans. The Servicer must use collection procedures
which meet or exceed these guidelines. The Servicer's procedures must
be sufficient for promptly dealing with delinquencies. The Master
Servicer retains the right to require the Servicer to perform
additional collection procedures which the Master Servicer deems, in
its sole discretion, necessary to realize the objectives set forth
herein or otherwise to protect the interests of the Owner of the
related Mortgage Loan.
12.1.2 SERVICER'S CAPABILITIES. The Servicer's collection staff must be
sufficiently skilled in financial counseling and mortgage servicing
techniques to assist a Borrower to bring his Mortgage Loan current and
to protect his equity and credit rating, while at the same time
protecting the interests of the Owner of the related Mortgage Loan and
of the Master Servicer.
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12.1.3 SERVICING OBJECTIVES. The purpose of any collection effort is to
cure a Delinquency in the shortest possible time. The Servicer should
treat each Delinquency individually. Discussions with the Borrower must
cover the cause of such Delinquency and the time frame in which such
Delinquency will be cured. The Servicer should use notices, letters,
telegrams, telephone calls, face-to-face contact and other responsible
collection techniques consistent with Prudent Servicing Practices. The
Servicer is required to maintain all collection records. The Servicer
must vary its collection techniques to fit individual circumstances,
avoiding a fixed collection pattern which may be ineffective in dealing
with particular Borrowers. The Servicer should recognize the importance
of telephone and face-to-face contact in any collection program. As
part of its collection procedures, the Servicer shall closely monitor
all newly originated Mortgage Loans.
12.1.4 SERVICER'S PERFORMANCE. The Servicer's continued participation
in the Master Servicer's program is contingent upon maintaining
Delinquency rates that are comparable to the national and/or regional
mortgage banker associations publicized delinquency rates for similar
products and acceptable to the Master Servicer.
12.1.5 SERVICER'S EXPENSES. Unless otherwise specified, the cost of any
of the servicing procedures detailed in this Agreement shall be borne
solely by the Servicer. The Servicer may not charge such expenses
against the Borrower's Escrow Funds. The foregoing shall not preclude
the Servicer from recovering such expenses from the Borrower to the
extent permitted by applicable law and the related Mortgage Loan
Documents.
Section 12.2 DELINQUENCY SERVICING PROCEDURES
12.2.1 LATE NOTICE. A late notice shall be mailed by the Servicer to
the Borrower by the 18th day of such Delinquency.
12.2.2 TELEPHONIC INQUIRY. The Servicer shall use best efforts to make
telephone contact with the Borrower by the 20th day of such
Delinquency.
12.2.3 NOTICE OF DEFAULT. Notification of default of such Mortgage Loan
shall be mailed by the Servicer to the Borrower by the 35th day of such
Delinquency.
12.2.4 BORROWER INTERVIEW. The Servicer shall use best efforts to
conduct a face-to-face interview between the 45th day and the 60th day
of such Delinquency if satisfactory arrangements to cure the
Delinquency have not been made. If, for geographic reasons, a
face-to-face meeting is not feasible, an in-depth telephone interview
may be conducted instead.
12.2.5 CONTINUING CONTACTS. If satisfactory arrangements have not been
made to cure such Delinquency by the 60th day, the Servicer must
continue to contact the Borrower until either the related Mortgage Loan
has been brought current or the Servicer has made
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a recommendation in writing to the Master Servicer for foreclosure of
such Mortgaged Property or other action.
12.2.6 PROPERTY INSPECTION. The Servicer is required to inspect each
Mortgaged Property no later than the 60th day of the Delinquency if no
satisfactory arrangements have been made to cure such Delinquency of
the related Mortgage Loan. The inspection should determine the physical
condition and the occupancy status of such Mortgaged Property. The
Servicer is required to inspect such Mortgaged Property monthly after
the 60th day of such Delinquency until such Delinquency is cured or the
related Mortgage Loan is Liquidated. The results of any inspection
should be used in determining whether a recommendation for foreclosure
or for the transfer of deed-in-lieu of foreclosure is necessary. The
Servicer must prepare a Property Inspection Report following each
inspection. All Property Inspection Reports must be retained by the
Servicer and copies thereof must be forwarded to the Master Servicer
promptly upon request. All expenses related to the foregoing shall be
borne by the Servicer and such expenses shall not be recoverable by the
Servicer from the Master Servicer or the Principal or from Liquidation
Proceeds, Insurance Proceeds, payments on the related Mortgage Loan or
any other source relating to the related Mortgage Loan or the related
Mortgaged Property. The foregoing shall not preclude the Servicer from
recovering such expenses from the Borrower to the extent permitted by
applicable law and the related Mortgage Loan Documents.
Section 12.3 RELIEF OF BORROWERS
12.3.1 SERVICER'S ROLE. The Servicer shall be readily available to
Borrowers to offer skilled financial counsel and advice and shall make
personal contact with delinquent Borrowers as often as possible to
achieve a solution that will bring the Mortgage Loan current as soon as
possible. The Servicer shall be fully familiar with the form of relief
to Borrowers provided for herein and will employ such relief.
12.3.2 SERVICER'S DISCRETION. The Servicer shall have reasonable
discretion to extend appropriate relief to Borrowers who encounter
hardship and who are cooperative and demonstrate proper regard for
their obligations. However, no such relief shall be granted to any
Borrower under a Mortgage Loan unless the Servicer reasonably believes
that there is a reasonable expectation that such Borrower will bring
his Mortgage Loan current within 180 days following the onset of
Delinquency. Further, without the consent of the Master Servicer, no
such relief shall be granted other than with respect to a Mortgage Loan
that has at least a 31-day Delinquency.
12.3.3 RELIEF REQUIREMENT. Prior to granting relief with respect to a
delinquent Mortgage Loan as herein provided, the Servicer shall
ascertain that (i) the reasons for the default and (ii) the attitude
and circumstances of such Borrower justify the relief to be granted.
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12.3.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. Where applicable, the
Servicer shall satisfy all requirements under the applicable Primary
Mortgage Insurance policy regarding the relief granted with respect to
a delinquent Mortgage Loan.
12.3.5 RESPONSIBILITY FOR COSTS. The Servicer is responsible for
collection from such Borrower of any recording or similar costs or
expenses incidental to the granting of relief with respect to a
delinquent Mortgage Loan.
12.3.6 FORBEARANCE PLAN. Where relief is appropriate, the Servicer
shall arrange with a Borrower a "Forbearance Plan" giving such Borrower
a definite period in which to reinstate his Mortgage Loan by
immediately commencing payments in excess of the regular Monthly
Payments. Special forbearance relief agreements reducing or suspending
the regular Monthly Payment of the related Mortgage Loan for a
specified period of time are not permitted. To the extent that (i) the
priority of the lien represented by such Mortgage Loan remains in
effect and is not adversely affected, (ii) where applicable, the
related Primary Mortgage Insurance policy remains in full force and
effect, and (iii) where applicable, the related Pool Insurance policy
remains in full force and effect, the Servicer, in its discretion, may
enter into a Forbearance Plan that provides that the total amount owed
during such Delinquency, including costs and expenses, will be repaid
within the shortest period practicable, commencing immediately. With
respect to such Mortgage Loan, the Forbearance Plan shall provide that
such Delinquency will be cured within 180 days after the Due Date of
the earliest unpaid installment, unless the Master Servicer and, where
applicable, the respective Pool Insurer and/or the respective Primary
Mortgage Insurer, consent to a longer period of time. The Forbearance
Plan for such Mortgage Loan shall be set forth in writing and executed
by the Borrower and by the Servicer in the form of a letter agreement
if the earliest unpaid installment is more than 60 days past due.
12.3.7 ACCOMMODATION LIMITATIONS. No modification, recast, extension,
or capitalization of delinquent payments of a Mortgage Loan other than
as provided in Section 12.3.6 hereof shall be permitted with respect to
a Mortgage Loan unless there is at least a 90-day Delinquency with
respect to such Mortgage Loan unless permitted by the Master Servicer.
12.3.8 POOL INSURANCE CONSIDERATIONS. Where applicable, the Servicer
shall satisfy all requirements under the applicable Pool Insurance
policy regarding the relief granted with respect to a delinquent
Mortgage Loan, including, without limitation, securing the prior
written consent of the respective Pool Insurer regarding (a) any change
in any term of such Mortgage Loan, (b) the release of the related
Borrower from any liability related to such Mortgage Loan, or (c) the
release of any portion of, or interest in, the Mortgaged Property from
the lien of the related Security Instrument.
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Section 12.4 SPECIAL DELINQUENCY SERVICING CONSIDERATIONS
12.4.1 ADVANCE RESPONSIBILITY DURING DELINQUENCY. In the event of a
Delinquency with respect to a Mortgage Loan, the Servicer agrees to
advance from its own funds the full amount of Monthly Payments for such
Mortgage Loan. These advances shall provide the Owner of such Mortgage
Loan with a regular flow of funds on such delinquent Mortgage Loan. The
advance obligation stated above is in addition to any other advance
obligations which the Servicer has pursuant to the provisions of this
Agreement. The Servicer must still advance funds in accordance with the
provisions of this Agreement even if a forbearance has been granted.
12.4.2 PRIMARY MORTGAGE INSURANCE COMPLIANCE. Where applicable, the
Servicer shall be familiar with and shall satisfy all requirements of
the applicable Primary Mortgage Insurance policy with respect to a
delinquent Borrower. The Servicer shall have adequate controls to
assure timely filing of all notices to the appropriate Primary Mortgage
Insurer. Copies of all such notices shall be sent to the Master
Servicer, unless otherwise instructed. The Servicer shall prepare and
file all appropriate claims with respect to the applicable Primary
Mortgage Insurance policy, and the Servicer shall prepare and deliver
to the Master Servicer copies of all claims forms and other papers
received from or presented to any Primary Mortgage Insurer in
connection with any claims presented under any such policy, unless the
Servicer is otherwise instructed by the Master Servicer.
12.4.3 POOL INSURANCE COMPLIANCE. Where applicable, the Servicer shall
be familiar with and shall satisfy all requirements of the applicable
Pool Insurance policy with respect to a delinquent Borrower. The
Servicer shall have adequate controls to assure timely filing of all
notices to the appropriate Pool Insurer. Copies of all such notices
shall be sent to the Master Servicer, unless otherwise instructed. The
Servicer shall prepare and file all appropriate claims with respect to
the applicable Pool Insurance policy, and the Servicer shall prepare
and deliver to the Master Servicer copies of all claims forms and other
papers received from or presented to any Pool Insurer in connection
with any claims presented under any such policy, unless the Servicer is
otherwise instructed by the Master Servicer.
ARTICLE 13
FORECLOSURE ADMINISTRATION
Section 13.1 FORECLOSURE PREREQUISITES
13.1.1 CHRONIC DELINQUENCY. If a Borrower is chronically delinquent and
the Servicer, based upon Prudent Servicing Practices, has exhausted all
reasonable means of curing the Delinquency, the Servicer must realize
upon the related defaulted Mortgage Loan in accordance with Prudent
Servicing Practices and recommend either (i) the
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commencement of foreclosure procedures or (ii) an alternate to
foreclosure, each in accordance with the terms of the related Security
Instrument and applicable law.
13.1.2 LIQUIDATION RECOMMENDATION. Prior to the commencement of any
action to foreclose on a Mortgaged Property, or prior to the acceptance
of a deed-in-lieu of foreclosure, the Servicer shall notify in writing
the Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, of the Servicer's
recommendation as to whether foreclosure should be commenced, or a
deed-in-lieu of foreclosure accepted, and, where applicable, shall
provide all other notices, reports or information required by the
Master Servicer or the applicable Primary Mortgage Insurance policy
and/or Pool Insurance policy. The Servicer shall also set forth in such
notice the estimate of any loss to be incurred on the liquidation of
such Mortgaged Property. If the respective prior written approval of
the Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, is obtained, the
Servicer shall initiate foreclosure or accept a deed-in-lieu of
foreclosure, as the case may be, consistent with such approval. Where
such Mortgaged Property is covered by a Primary Mortgage Insurance
policy and/or Pool Insurance policy, if the respective Primary Mortgage
Insurer or the respective Pool Insurers, as the case may be, does not
accept the Servicer's recommendation but directs otherwise, the
Servicer shall act according to the respective Primary Mortgage
Insurer's instructions or the respective Pool Insurer's instructions
provided such actions are consistent with, and contemplated by, the
applicable Primary Mortgage Insurance policy or the applicable Pool
Insurance policy, as the case may be. Notwithstanding any of the
foregoing, if the Master Servicer directs the Servicer to follow a
course of action regarding the liquidation of a Mortgaged Property, the
Servicer shall follow the Master Servicer's instructions.
13.1.3 FORECLOSURE EXPENSES. All attorneys' fees, and other costs in
respect of any foreclosure or acquisition in lieu of foreclosure shall
be identified in advance and a detailed estimate of the amounts thereof
shall be set forth in the Servicer's written recommendation. All fees
and expenses shall be consistent with FNMA standards and, where
applicable, shall not exceed those permitted under the respective Pool
Insurance policy and/or the respective Primary Mortgage Insurance
policy. Fees in excess of the amount customary for routine cases or
extraordinary legal services must be approved in writing in advance by
the Master Servicer, and, where applicable, by the respective Primary
Mortgage Insurer or the respective Pool Insurer, as the case may be, if
required by the applicable policy. The billing by a foreclosure
attorney must demonstrate the appropriateness of any extraordinary fees
by the services required. In cases of full or partial reinstatement of
the related Mortgage Loan, the fees shall be reasonable and in
proportion to the authorized fee for services rendered for a completed
foreclosure. Unless otherwise expressly agreed in writing, neither the
Master Servicer, any of its affiliates, their respective officers,
directors, employees, agents, successors or assigns, the Owner of the
related Mortgage Loan, nor any beneficial owners thereof shall be
liable for any attorneys' fees, trustees' fees, witness fees, title
search fees, court costs or other expenses incurred by the Servicer in
respect of any foreclosure or acquisition in lieu of
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foreclosure, except to the extent that such fees, costs and expenses
are fully reimbursable under a Primary Mortgage Insurance policy and in
fact are reimbursed.
13.1.4 HAZARDOUS WASTES. In the event that the Mortgaged Property,
related to a Mortgage Loan which is being considered for liquidation by
foreclosure or the transfer of a deed-in-lieu of foreclosure, contains,
or the Servicer has reason to believe that it contains, hazardous or
regulated substances which may impose liability, for damages,
remediation or otherwise, upon the owner of such Mortgaged Property
pursuant to Federal, State or local law, the Servicer shall not, except
with the express prior written approval of the Master Servicer, which
approval makes specific reference to the presence of such hazardous or
regulated substances, undertake or continue the process of foreclosure
with respect to such Mortgaged Property. In the event that the Servicer
in violation of this Section 13.1.4 acquires a Mortgaged Property by
foreclosure or a transfer of a deed-in-lieu of foreclosure, such
acquisition shall be for the Servicer's own account and the Servicer
shall pay the Owner of the related Mortgage Loan the Unpaid Principal
Balance of such Mortgage Loan, together with all accrued but unpaid
interest. In such case, the Servicer's actions being its own, and not
as agent for the Master Servicer or the Owner of the related Mortgage
Loan, neither the Master Servicer nor the Owner of the related Mortgage
Loan shall have ever owned the related Mortgaged Property.
Section 13.2 DEED-IN-LIEU OF FORECLOSURE
13.2.1 CONDITIONS. If the Master Servicer and the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, if applicable,
have approved the liquidation of a Mortgage Loan by accepting a
deed-in-lieu of foreclosure of the related Mortgaged Property, the
Servicer may accept such deed without any further action or approval by
the Master Servicer or, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, provided that:
(a) marketable title, as evidenced by an applicable Title
Insurance policy, can be conveyed to and acquired by
the Owner of such Mortgage Loan;
(b) where applicable, the transaction complies with all
the requirements of the respective Primary Mortgage
Insurer and/or the respective Pool Insurer and does
not and will not violate or contravene any
restriction or prohibition of the respective Primary
Mortgage Insurance policy or the respective Pool
Insurance policy or otherwise result in any loss of
benefits, or reduction in the coverage under either
such policy;
(c) no cash consideration is paid to the related
Borrower;
(d) the related Mortgaged Property is vacant at the time
of the related Borrower's conveyance thereof, unless
occupancy has been approved in
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writing by the Master Servicer and, where applicable,
by the respective Primary Mortgage Insurer and/or the
respective Pool Insurer;
(e) the Servicer has obtained from the related Borrower a
written acknowledgement that the deed is being
accepted as an accommodation to the related Borrower
and on the condition that the related Mortgaged
Property will be transferred to the Owner of such
Mortgage Loan free and clear of all claims, liens,
encumbrances, attachments, reservations or
restrictions except for those to which such Mortgaged
Property were subject at the time such Mortgaged
Property became subject to the lien of the Security
Instrument;
(f) the related Borrower's inability to pay is justified
by a full financial disclosure verifying such
inability;
(g) that the related Mortgaged Property has been subject
to at least a six month marketing period; and
(h) that the related Mortgaged Property is either (i)
owner occupied or (ii) if not owner occupied, that an
assignment of rentals is provided.
13.2.2 SUBSEQUENT ACTIONS. Upon acquisition by the Owner of the related
Mortgage Loan of such Mortgaged Property, the Servicer shall promptly
notify the Master Servicer and, if applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, indicating the
details of the transaction and reasons for the conveyance and providing
such other information as is required under a Primary Inspection Report
to the Master Servicer and, if applicable, to the Primary Mortgage
Insurer and/or the Pool Insurer. Title shall be conveyed directly from
the Borrower to the Owner of the related Mortgage Loan or to such other
Person designated by the Master Servicer.
Section 13.3 ACTIONS PRIOR TO FORECLOSURE
13.3.1 NOTICE REQUIREMENTS. The Servicer shall send the Borrower a
letter, not less than 30 days before the commencement of foreclosure
proceedings, setting out (i) the nature of the default, (ii) the steps
that must be taken by the Borrower to cure the default, and (iii) the
date when foreclosure proceedings will begin. If the Servicer has
reason to believe that the related Mortgaged Property has been
abandoned or if the Borrower has displayed an obvious disregard for his
obligations under such Mortgage Loan, the foregoing notice shall be
forwarded at the earliest possible date following the Borrower's
default.
13.3.2 INITIATION OF PROCEEDINGS. If foreclosure has been approved by
the Master Servicer and, where applicable, by the respective Primary
Mortgage Insurer and/or the respective Pool Insurer, with respect to a
Mortgaged Property, the Servicer shall initiate
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or cause to be initiated such foreclosure actions as are authorized by
law and consistent with practices in the locality where the Mortgaged
Property are located. If such Mortgaged Property has been abandoned or
vacated by the Borrower and the Borrower has evidenced no intention of
honoring his obligations under the related Mortgage Loan, the
foreclosure process shall be expedited to the fullest extent permitted
by law.
Section 13.4 FORECLOSURE PROCEDURES
13.4.1 FORECLOSURE EXPENSES. During the period in which the Mortgaged
Property related to a Mortgage Loan is being foreclosed, remaining
Escrow Funds, if any, as well as any rent receipts, shall be used to
pay all taxes and insurance premiums that become due with respect to
such Mortgaged Property to the extent permitted by law. Except where
other arrangements have been made with the applicable Primary Mortgage
Insurer, the Servicer shall, with respect to each Mortgaged Property
undergoing foreclosure, advance payment of attorneys' fees, trustees'
fees and other foreclosure costs from the commencement of foreclosure
proceedings pertaining to such Mortgaged Property.
13.4.2 FORECLOSURE NOTICE. The Servicer shall give prompt notice to the
Master Servicer and, if applicable, to the Primary Mortgage Insurer
and/or the Pool Insurer, prior to a proposed foreclosure sale, which
notice shall set forth the date, location and time of the foreclosure
sale and the Servicer shall request from the Master Servicer and, if
applicable, from the Primary Mortgage Insurer and/or the Pool Insurer,
bids and bidding instructions for the Servicer to follow at such
foreclosure sale.
13.4.3 BUYDOWN FUNDS USE. Unless the related Buydown Agreement provides
otherwise, the Servicer may not use Buydown Funds relating to a
Mortgage Loan to cure a Delinquency with respect to such Mortgage Loan.
Any Buydown Funds remaining in the associated Custodial Buydown Account
of a Mortgage Loan in foreclosure must be disposed of in accordance
with the terms of the related Buydown Agreement.
13.4.4 SERVICER'S RESPONSIBILITIES. Subject to the provisions of
Article Three (3) hereof, after acquisition of a Mortgaged Property,
through foreclosure or a deed-in-lieu of foreclosure, or after the
Servicer shall have taken possession of the Mortgaged Property,
whichever occurs first, the Servicer shall be responsible for the
management of such Mortgaged Property. The Servicer shall remain
responsible until possession has been assumed by the applicable Primary
Mortgage Insurer or the applicable Pool Insurer or until such Mortgaged
Property are otherwise disposed of, as the case may be. The Servicer
shall take such action as is necessary to protect the Owner of the
related Mortgage Loan's security or, after acquisition thereof,
ownership interest in such Mortgaged Property. Such action shall
include, without limitation, (i) management of such Mortgaged Property,
(ii) maintenance of such Mortgaged Property, and (iii) if such
Mortgaged Property are vacant, protection of such Mortgaged Property
against vandals and the elements.
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13.4.5 PROPERTY INSPECTIONS. The Servicer shall make monthly
inspections of each Mortgaged Property undergoing the foreclosure
process to assure that such Mortgaged Property are not damaged by
vandals or the elements. The Servicer shall promptly prepare a Property
Inspection Report and keep such report on file and forward any such
Property Inspection Reports to the Master Servicer on request.
13.4.6 CONVEYANCE DOCUMENTS. Where applicable, any conveyance by the
Servicer to the respective Primary Mortgage Insurer or the respective
Pool Insurer of a Mortgaged Property shall be made by the form of deed
commonly used in the particular jurisdiction where such Mortgaged
Property is located. The Servicer shall prepare the necessary documents
not later than two weeks prior to the expected date of sale at
foreclosure or confirmation of sale, if applicable. The documents shall
be forwarded to the Master Servicer for approval and execution. After
execution by the Owner of the related Mortgage Loan, such documents
will be returned to the Servicer for delivery to the respective Primary
Mortgage Insurer or the respective Pool Insurer which is acquiring such
Mortgaged Property.
Section 13.5 MORTGAGE LOAN REINSTATEMENT
13.5.1 BORROWER'S FULL PAYMENT. If a Borrower offers to fully reinstate
his Mortgage Loan during the foreclosure process, the Servicer shall
accept the offer. To achieve full reinstatement of his Mortgage Loan, a
Borrower shall make payment of all (i) payments due to bring such
Mortgage Loan current, (ii) attorneys' fees, (iii) trustees' fees, (iv)
any additional legal costs, and (v) any other expenditures or advances
made by the Servicer during the foreclosure process.
13.5.2 BORROWER'S PARTIAL PAYMENT. Except where otherwise required by
applicable law, the Servicer may not accept an amount in payment from a
Borrower which is less than the amount required for full reinstatement
pursuant to Section 13.5.1 hereof toward reinstatement of a Mortgage
Loan during the foreclosure process without the prior written approval
from the Master Servicer and, where applicable, the respective Primary
Mortgage Insurer and/or the respective Pool Insurer.
13.5.3 OBLIGATIONS UPON REINSTATEMENT. Upon accepting the reinstatement
of a Mortgage Loan, the Servicer shall immediately contact the
appropriate foreclosure attorney or trustee to avoid incurring
additional legal costs or fees. The Servicer must apply the
reinstatement Funds upon receipt from a Borrower in payment of the
expenses enumerated in Section 13.5.1 hereof. Upon receipt of the
reinstatement funds from a Borrower the Servicer must (i) notify the
Master Servicer of the reinstatement of the related Mortgage Loan and
(ii) return to the Master Servicer, the related Mortgage Note
and other related Mortgage Loan Documents for reinclusion in the
related Mortgage Loan File.
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13.5.4 CERTAIN ASSUMPTIONS PERMITTED. The Servicer is authorized,
notwithstanding the other provisions of this Article 13, to permit the
assumption of a defaulted Mortgage Loan rather than to foreclose or
accept a deed-in-lieu of foreclosure if, in the Servicer's judgment,
the default is unlikely to be cured and the assuming borrower meets the
underwriting guidelines that originally applied to such Mortgage Loan.
ARTICLE 14
REO ADMINISTRATION
Section 14.1 GENERAL PROVISIONS
14.1.1 REO ACTION PLAN. With regard to each REO which is acquired, the
Servicer shall prepare a plan of action within 30 Business Days after
the date on which the Owner of the related Mortgage Loan acquires
marketable title to such REO. Each plan of action shall set forth (i) a
recommendation for the most effective manner to dispose of the REO,
based on a current appraisal report, a broker's price opinion and a
market analysis; (ii) the steps to be taken by the Servicer to secure
such REO; and (iii) an estimate of the amount of time that is required
to dispose of such REO. The Servicer shall promptly submit copies of
each plan of action to the Master Servicer and, where applicable, to
the respective Primary Mortgage Insurer, and/or the respective Pool
Insurer. Unless otherwise directed by the Master Servicer, the Servicer
shall implement each plan of action in an expeditious manner. Further,
the Master Servicer may instruct the Servicer to modify any plan of
action as the Master Servicer shall direct. The Servicer shall provide
the Master Servicer with written monthly progress reports with regard
to each plan of action detailing the status of the related REO and the
progress achieved in implementing the plan of action.
Section 14.2 REO SERVICING
14.2.1 REO SERVICING REQUIREMENTS. The Servicer shall service each REO
from its acquisition through its disposition and shall ensure that all
Funds received with respect to such REO are deposited to the
appropriate Custodial P&I Account for remittance to the Owner of the
related Mortgage Loan, unless the Master Servicer has relieved the
Servicer of these responsibilities by written notification.
14.2.2 SERVICER'S RESPONSIBILITIES. In addition to any other
obligations set forth herein, upon acquisition of each REO, the
Servicer shall be responsible for:
(a) managing, maintaining and securing such REO until it
is conveyed or sold;
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(b) inspecting such REO at least once every 30 days and
promptly sending the Master Servicer an updated
Property Inspection Report;
(c) paying all taxes, insurance, maintenance, management
and foreclosure costs relating to such REO;
(d) submitting recommendations for listing and soliciting
offers on such REO;
(e) marketing such REO;
(f) completing the sale of such REO;
(g) depositing sales proceeds relating to such REO into
the appropriate Custodial P&I Account for remittance
to the Owner of the related Mortgage Loan;
(h) where applicable, satisfying all of the Primary
Mortgage Insurer's procedural requirements and filing
all required forms and claims;
(i) where applicable, depositing Primary Mortgage
Insurance or Pool Insurance proceeds relating to such
REO into the applicable Custodial P&I Account for
remittance to the Owner of the related Mortgage Loan;
(j) processing the conveyance of such REO to the Primary
Mortgage Insurer, where applicable; and
(k) reporting (1) all changes in status of such REO and
(2) all material expenses relating to such REO to the
Master Servicer on a monthly basis.
14.2.3 NOTICE. The Servicer shall notify the Master Servicer in writing
as soon as each REO is acquired.
Section 14.3 REO RECORDS AND REPORTS
14.3.1 RECORDS RETENTION. The Servicer shall retain in its files copies
of all documents, reports and invoices described in this Section.
14.3.2 EVIDENCE OF TITLE. Evidence that title to a REO is held by the
Owner of the related Mortgage Loan shall be submitted by the Servicer
to the Master Servicer and, if applicable, to the Primary Mortgage
Insurer and/or the Pool Insurer, within ten Business Days after
marketable title to such REO has been acquired.
14.3.3 REO EXPENSES. At the end of each month following the receipt of
any invoice relating to expenses incurred in administering each REO,
the Servicer shall send a report
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listing such expenses to the Master Servicer and, if applicable, to the
Primary Mortgage Insurer and/or the Pool Insurer. The Servicer shall
retain such invoices in its records and shall, by request, (i) produce
any such invoices for inspection or (ii) at its own expense, provide
copies of any such invoices to the Master Servicer and, if applicable,
to the Primary Mortgage Insurer and/or the Pool Insurer, as directed.
The foregoing expense invoices shall include, without limitation, the
following:
(a) insurance premiums;
(b) real estate tax bills;
(c) special assessments;
(d) owners' association dues; and
(e) utility bills.
14.3.4 REO DOCUMENTS. Promptly upon receipt, the Servicer shall send
copies to the Master Servicer and, where applicable, to the respective
Primary Mortgage Insurer and/or the respective Pool Insurer, of the
following documents relating to each REO:
(a) any forced placed Hazard Insurance policy or Flood
Insurance policy, if applicable,
(b) any maintenance contracts;
(c) any contractor bids relating to the rehabilitation of
such REO pursuant to Section 14.5.3 hereof;
(d) an updated Title Insurance policy which reflects the
occurrence of foreclosure; and
(e) plat map or house location survey, if already
available.
Section 14.4 REO MARKETING
14.4.1 REO MARKETING EFFORTS. The Servicer shall begin efforts to
market a REO as soon as marketable title is acquired by the Owner of
the related Mortgage Loan.
14.4.2 REO SALES. The Servicer shall obtain the best market price for a
REO for the Owner of the related Mortgage Loan while disposing of such
REO in a timely and efficient manner. Unless otherwise directed by the
Master Servicer, the Servicer, acting on behalf of the Owner of the
related Mortgage Loan, shall dispose or cooperate with the Owner of the
related Mortgage Loan in disposing of such REO within 18 months
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after its acquisition by the Owner of the related Mortgage Loan. If the
Servicer is otherwise unable to sell such REO, unless otherwise
directed by the Master Servicer, the Servicer shall before the end of
the 18-month period following the acquisition of such REO, auction such
REO to the highest bidder in an auction reasonably designed to bring a
fair price. The Servicer shall consult with the Master Servicer prior
to holding such auction. The Servicer is eligible to bid in such an
auction.
14.4.3 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. The Servicer must
ensure that any action taken with respect to the sale of a REO does not
jeopardize the maximum benefits available under the related Primary
Mortgage Insurance Policy, if any, with respect to the related Mortgage
Loan. The Servicer must inform the related Primary Mortgage Insurer of
any listing agreements or purchase offers that are received before the
related Primary Mortgage Insurer has finalized the disposition of the
claim.
14.4.4 MASTER SERVICER INSTRUCTIONS. Where the Servicer receives
instructions from the Master Servicer regarding the marketing and sale
of a REO, either with respect to a specific property or generally, such
instructions shall govern the Servicer's actions, notwithstanding any
provision herein.
14.4.5 POOL INSURANCE CONSIDERATIONS. The Servicer must ensure that any
action taken with respect to the sale of a REO does not jeopardize the
maximum benefits available under the related Pool Insurance Policy, if
any, with respect to the related Mortgage Loan. The Servicer must
inform the related Pool Insurer of any listing agreements or purchase
offers that are received before the Primary Mortgage Insurer has
finalized the disposition of the claim.
Section 14.5 REO REHABILITATION
14.5.1 REO REHABILITATION REQUIREMENT. Unless the Master Servicer shall
otherwise direct, and subject to Section 17.6.2, the Servicer must
ensure that any rehabilitation work to any REO which is necessary to
restore such REO to a marketable condition is performed and that such
work is performed in a professional and workmanlike manner.
14.5.2 MASTER SERVICER APPROVAL. The Servicer must obtain the Master
Servicer's prior written approval for rehabilitation work when the
aggregate rehabilitation expenses with regard to a REO exceeds one
thousand dollars ($1,000.00).
14.5.3 WRITTEN CONTRACTOR BIDS. The Servicer shall solicit detailed
written bids from independent contractors when the value of a contract
for rehabilitation of a REO exceeds five hundred dollars ($500.00).
Where the value of a contract exceeds five thousand dollars
($5,000.00), the Servicer shall receive bids from a minimum of two
independent and unrelated contractors and, upon request, forward copies
of such bids to the Master Servicer. Where the value of a contract
exceeds fifty thousand dollars ($50,000.00), the
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Servicer shall receive bids from a minimum of three independent and
unrelated contractors and, upon request, forward copies of such bids to
the Master Servicer.
14.5.4 PRIMARY MORTGAGE INSURANCE CONSIDERATIONS. If a Mortgaged
Property which has become a REO and the related Mortgage Loan is
covered by a policy of Primary Mortgage Insurance, the Servicer shall
notify the related Primary Mortgage Insurer of such rehabilitation
plans before the completion of the Primary Mortgage Insurance claim to
ensure reimbursement from the Primary Mortgage Insurer. If the related
Primary Mortgage Insurer elects not to reimburse all rehabilitation
expenses, work should be postponed until after final disposition of the
Primary Mortgage Insurance claim.
Section 14.6 REO ADMINISTRATION FAILURE.
14.6.1 SERVICER REMOVAL. The Master Servicer may in its sole
discretion, in the event that the Servicer's actions or omissions
result in damage to any REO or a failure to sell any REO property
within a reasonable time, the Master Servicer may remove the servicing
of such REO from the Servicer and assume responsibility for management,
control, maintenance, security, rehabilitation and disposition of such
REO.
14.6.2 SERVICER'S CONTINUING OBLIGATIONS. In the event that the
Servicer is removed from servicing a REO by virtue of the provisions of
Section 14.6.1, the Servicer, as to such REO, will nevertheless remain
responsible to (a) pay when due all insurance premiums, property taxes
and assessments; (b) file when due all claims for Primary Mortgage
Insurance, Pool Insurance, Hazard Insurance and, if applicable, Flood
Insurance benefits; and (c) fulfill any other related responsibilities
required by the Master Servicer.
14.6.3 SERVICER'S DUTY TO COMPENSATE. Whether or not a Servicer is
removed from servicing with respect to a particular REO, the Servicer
must compensate the Master Servicer for any damages caused as a result
of the Servicer's breach of its obligation to service efficiently each
REO. The Servicer acknowledges that any damages suffered as a result of
the Servicer's inefficiency in managing a REO may not be quantified in
advance of the Master Servicer assuming responsibility for such REO.
ARTICLE 15
INSURANCE
Section 15.1 GENERAL PROVISIONS
15.1.1 INSURANCE REQUIREMENTS. The Servicer must verify that each
Mortgage Loan has the insurance coverage required pursuant to Article
15 and 16. All claims arising under Insurance Policies maintained
hereunder must be settled or otherwise disposed of by the
Servicer, and all such Insurance Policies must be maintained,
including, without
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limitation, the payment of premiums on a timely basis, by the Servicer
at no expense to the Owner of the related Mortgage Loan, its successors
or assigns, or the Master Servicer, its successors or assigns. If the
Insurance Proceeds paid in respect of any Mortgage Loan are not used to
repair the related Mortgaged Property due to the particular
circumstances of the loss, and instead such Insurance Proceeds are
applied to reduce the Unpaid Principal Balance of such Mortgage Loan
and such application causes the Unpaid Principal Balance of such
Mortgage Loan to reduce to zero, the Servicer must treat the
application of such proceeds as a Liquidation, and notify the Master
Servicer of such Liquidation.
15.1.2 UNINSURED LOSSES. The Servicer must take the following actions
in the event of loss or damage to any Mortgaged Property caused by an
earthquake, flood, tornado or other natural disaster immediately
following, the earlier to occur of (x) its notification or discovery of
such loss or damage or (y) the time at which the Servicer reasonably
should have known of such loss or damage in the exercise of Prudent
Servicing Practices:
(a) determine the extent of the losses or damages;
(b) secure any abandoned Mortgaged Property from
vandalism and the elements;
(c) communicate with and counsel the respective Borrower
on any disaster relief programs or other assistance
which is available; and
(d) notify the Master Servicer and recommend appropriate
action to protect the interests of the Owner of the
related Mortgage Loan and the respective Borrower.
15.1.3 SERVICER'S OBLIGATION TO MAINTAIN INSURANCE. If the Servicer
discovers that a Borrower does not have adequate insurance coverage as
required pursuant to the provisions of this Article, the Servicer must
obtain and maintain at its own expense the required insurance coverage
on the related Mortgaged Property. Such expenses shall not be
recoverable by the Servicer from the Master Servicer or the Principal
or from payments on the Mortgage Loan or any other source relating to
the related Mortgage Loan or the related Mortgaged Property, other than
from Liquidation Proceeds or Insurance Proceeds from the related
Mortgage Loan. To the extent permitted by applicable law and the
related Mortgage Loan Documents, the Servicer may initiate forced
placed coverage with respect to such Mortgaged Property and thereafter
attempt to recover such expenses from the related Borrower.
15.1.4 INSURANCE NOTICES. The Servicer must arrange for all insurance
drafts, notices, policies, invoices, or other correspondence to be
delivered directly to the Servicer. The Owner of the related Mortgage
Loan, its successors and assigns, must be named as the
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Mortgagee, the endorsement must show the Servicer's address as shown in
the following example:
[Owner of the Mortgage Loan, its successors and assigns] c/o
[Servicer]
[Servicer's Address]
15.1.5 DEFAULT BY INSURER. If the Servicer knows or has reasonable
cause to suspect that an insurer under any applicable insurance policy
required pursuant to the provisions of this Article will, for any
reason, be unable to pay a valid claim, the Servicer shall immediately
notify the Master Servicer upon receipt of such information or
formulation of such belief. The Servicer shall then (i) find a
substitute insurer and (ii) pay any premiums to the insurer. In any
case, the Servicer shall not be liable in any way for the financial
inability of any insurer under any insurance policy required herein to
pay a valid claim so long as the provisions of Article 15 and 16 hereof
are complied with.
15.1.6 INSURANCE CARRIER RATING. Each Insurance Policy must be
underwritten by an insurance carrier that has either (a) a current
rating by Best's Insurance Reports of B/VI or better, or (b) both (i) a
financial rating by Best's Insurance Reports of Class V and (ii) a
general policyholder's rating of at least A by Best's Insurance
Reports.
15.1.7 INSURANCE CARRIER LICENSES. Each insurance carrier must be
licensed or otherwise authorized by law to conduct business in each
state in which a related Mortgaged Property is located.
15.1.8 RISK EXPOSURE. If any Mortgaged Property is exposed to hazards
not fully covered by Hazard Insurance or Flood Insurance, the Servicer
must notify the Master Servicer immediately with a recommendation for
additional coverage.
15.1.9 EVIDENCE OF INSURANCE. (a) The Servicer must maintain the
following documentation with respect to insurance coverage on each
Mortgage Loan:
(i) if Primary Mortgage Insurance is required, a copy of
the Primary Mortgage Insurance policy and any related
endorsements;
(ii) for one- to four-unit dwellings, an original of the
Hazard Insurance policy, if applicable, and any
related endorsements;
(iii) a copy of the Title Insurance policy and any related
endorsements; and
(iv) For properties covered under a blanket policy, an
original of any Flood Insurance policy, if Flood
Insurance is required, and any related endorsements.
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(b) A certificate of insurance is acceptable in lieu of any of the
foregoing policies if it contains the following information:
(i) named insured and Mortgagee or, for PUD or
Condominium Units, named insured association, unit
owner and unit owner Mortgagee;
(ii) address of the Mortgaged Property;
(iii) type, amount and effective dates of coverage;
(iv) deductible amount;
(v) any endorsement or optional coverage obtained and
made part of the original policy;
(vi) insurer's agreement to provide at least ten day's
prior written notice to the Servicer and Borrower (or
applicable unit owner Mortgagee if for a PUD or
Condominium Unit) before any reduction in coverage or
cancellation of the policy; and
(vii) signature of an authorized representative of the
insurer, if required by applicable law.
Section 15.2 PRIMARY MORTGAGE INSURANCE
15.2.1 PRIMARY MORTGAGE INSURANCE REQUIREMENT. Unless Primary Mortgage
Insurance coverage with respect to a Mortgage Loan has been waived in
writing by the Owner of the Mortgage Loan at the time it purchases such
Mortgage Loan or such Primary Mortgage Insurance is cancelled as
provided in Section 15.2.4 herein, the Servicer must maintain at all
times Primary Mortgage Insurance on any Mortgage Loan with an original
LTV ratio in excess of 80%.
15.2.2 PRIMARY MORTGAGE INSURANCE COVERAGE. As to each Mortgage Loan,
Primary Mortgage Insurance must at least provide coverage which insures
against loss of that portion of the Unpaid Principal Balance of the
Mortgage Loan that exceeds 75% of the Value of the Mortgaged Property.
If the Mortgage Loan provides for negative amortization or for the
potential of negative amortization, the Primary Mortgage Insurance
policy must also insure any increase in the Unpaid Principal Balance
from the original principal balance of the related Mortgage Note.
15.2.3 PRIMARY MORTGAGE INSURER DOWNGRADING. In the event that the
rating assigned by a Rating Agency to the claims paying ability of any
Primary Mortgage Insurer is reduced below the level permitted under
Section 15.1.6, the Servicer will use its best efforts to replace each
Primary Mortgage Insurance Policy issued by such Primary Mortgage
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Insurer with a new Primary Mortgage Insurance policy issued by an
insurer whose claims paying ability is acceptable to the Master
Servicer. The premium for any replacement Primary Mortgage Insurance
policy shall not exceed the premium for the discontinued Primary
Mortgage Insurance policy.
15.2.4 PRIMARY MORTGAGE INSURANCE CANCELLATION. If a Borrower requests
cancellation of the Primary Mortgage Insurance policy with respect to
his Mortgaged Property, the following requirements must be met:
(a) The current LTV ratio must be 80% or less. The
current LTV ratio must be calculated by dividing the
Unpaid Principal Balance of the related Mortgage Loan
by the Value of the Mortgaged Property;
(b) The related Mortgage Loan may not have been 30 days
or more delinquent within the preceding twelve
months; and
(c) There may not have been any other default under the
terms of the related Mortgage Loan at any time during
the preceding twelve months.
If the foregoing requirements are met, the Servicer may request the
cancellation of such Primary Mortgage Insurance policy by submitting to
the Master Servicer a Request for Primary Mortgage Insurance
Cancellation. If there are indications that the Value of the Mortgaged
Property has declined, the Servicer shall obtain an Appraisal Report
with respect to such Mortgaged Property that is not more than 60 days
old. The expense of such an Appraisal Report shall not be borne by the
Master Servicer. The Value of such Mortgaged Property set forth the
Appraisal Report shall be used as the divisor in clause (a) hereof to
determine whether the recalculated current LTV is 80% or less. If the
recalculated current LTV is greater, the Primary Mortgage Insurance
cancellation request will be denied. In addition, the Master Servicer
may deny such a request if it determines, in its sole discretion, that
the interests of the Owner of the related Mortgage Loan may be harmed
by such cancellation.
15.2.5 PRIMARY MORTGAGE INSURANCE CLAIMS. The Servicer must take all
steps to ensure the payment of the maximum benefits payable under the
terms of any Primary Mortgage Insurance policy. The Servicer must work
diligently with each Primary Mortgage Insurer to determine whether such
insurer will settle the claim by taking title to the Mortgaged Property
in question or in some other manner. The Servicer also must notify the
Master Servicer immediately in writing of any decision made by the
applicable Primary Mortgage Insurer relative to a claim. Upon receipt
of any Primary Mortgage Insurance proceeds, the Servicer must deposit
such amounts in the appropriate Custodial P&I Account. The Servicer
shall promptly notify the Master Servicer in writing if any Primary
Mortgage Insurer at any time denies any or all of a claim filed under
its Primary Mortgage Insurance policy.
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Section 15.3 HAZARD INSURANCE
15.3.1 HAZARD INSURANCE REQUIREMENT. Unless alternative coverage is
provided pursuant to Section 16.3 hereunder, the Servicer must ensure
that each Mortgaged Property is covered at all times by Hazard
Insurance.
15.3.2 HAZARD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Hazard Insurance must be at least equal to the lesser of (a)
the Unpaid Principal Balance of the related Mortgage Loan, or (b) 100%
of the replacement cost of the improvements on the Mortgaged Property.
15.3.3 HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by an applicable law, each Hazard Insurance deductible may not
exceed the lesser of (a) $1,000 or (b) one percent of the applicable
amount of coverage.
15.3.4 HAZARD INSURANCE VACANCY COVERAGE. The Servicer must ensure that
each Mortgaged Property is adequately covered even when vacant and,
where available, must obtain a vacancy permit endorsement.
15.3.5 HAZARD INSURANCE MORTGAGEE PROVISIONS. Each Hazard Insurance
Policy must contain or have attached a standard mortgagee clause in the
form customarily used by or required by private institutional mortgage
loan investors. Such clause must provide that the Hazard Insurance
carrier will notify the named Mortgagee at least ten days before any
reduction in coverage or cancellation of the policy. All mortgagee
clauses must be properly endorsed, necessary notices of transfer must
be given and any other action must be taken that is necessary in order
to protect the interests of the Owner of the related Mortgage Loan, its
successors and/or assigns. The standard mortgagee clause should read as
follows: "Insuring [Servicer's Name], as agent for the [Owner of the
Mortgage Loan], its successors and/or assigns."
Section 15.4 FLOOD INSURANCE
15.4.1 FLOOD INSURANCE REQUIREMENT. Unless alternate coverage is
provided pursuant to Section 16.6 hereunder, the Servicer must ensure
that Flood Insurance is maintained at all times on Mortgaged Property
that are in a special flood hazard area identified by the Secretary of
HUD or the Director of the Federal Emergency Management Agency.
15.4.2 FLOOD INSURANCE COVERAGE. As to each Mortgaged Property, the
amount of Flood Insurance must be at least equal to the lesser of (a)
the maximum amount available under the National Flood Insurance
Program's regular program or its emergency program, (b) the Unpaid
Principal Balance of the related Mortgage Loan or (c) 100% of the
replacement cost of the improvements on the Mortgaged Property.
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15.4.3 FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount may be
required by applicable law, each Flood Insurance deductible may not
exceed the lesser of (a) $1,000 or (b) one percent of the applicable
amount of coverage.
Section 15.5 TITLE INSURANCE
15.5.1 TITLE INSURANCE REQUIREMENT. Unless otherwise directed by the
Master Servicer, the Servicer shall maintain at all times with respect
to each Mortgage Loan and the related Mortgaged Property a Title
Insurance policy in full force and effect until such Mortgage Loan is
fully paid.
15.5.2 TITLE INSURANCE COVERAGE. The Servicer shall not reduce the
amount of or otherwise change the scope of the coverage under, or
otherwise do or authorize any act or omission that would affect the
coverage of, any Title Insurance policy, unless the Servicer has
received written direction from the Master Servicer specifying the
amount or amounts or scope to which the coverage is to be changed.
15.5.3 SERVICER'S OBLIGATIONS. The Servicer shall perform and comply
with all requirements and conditions of each Title Insurance policy for
each Mortgage Loan and the related Mortgaged Property that are to be
performed or observed by the "Insured" or obligee thereunder as a
condition to maintaining and keeping it in force, or making a claim
under, such Title Insurance policy. The Servicer shall be named as a
payee on all Title Insurance policy loss drafts, and upon receipt
thereof, the funds shall be credited to the extent of the sum of (i)
the Unpaid Principal Balance of such Mortgage Loan and any interest
accrued thereon, (ii) any outstanding advances thereon and (iii) any
expenses owed by such Borrower which are due the Owner of such Mortgage
Loan, the Master Servicer or the Servicer, whether for its own account
or others, to the appropriate Custodial P&I Account and the balance of
such funds, if any, shall be credited to the appropriate Custodial T&I
Account.
15.5.4 POLICY CUSTODY. The Servicer shall cause the original of such
Title Insurance policy to be sent directly to the Custodian.
15.5.5 TITLE INSURANCE CLAIMS. The Master Servicer must be notified
contemporaneously with the making of any claim under the Title
Insurance policy. The Servicer shall disburse the proceeds of any such
settlement in accordance with the instructions and requirements of the
Master Servicer.
Section 15.6 INSURANCE LOSS SETTLEMENTS
15.6.1 SETTLEMENT APPROVAL. The approval of the Master Servicer need
not be requested for disposition of insurance loss settlements where
property damage is $15,000 or less, and the Servicer may disburse the
loss proceeds as provided herein. The written approval
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of the Master Servicer must be obtained before disposition of any
insurance loss settlement involving property damage over $15,000.
15.6.2 SETTLEMENT DISBURSEMENTS. For each Mortgage Loan, including a
Mortgage Loan secured by Mortgaged Property located in a Condominium
Project or PUD, the Servicer is fully responsible for the disbursement
of insurance loss settlements under each Hazard Insurance policy and
each Flood Insurance policy, including but not limited to:
(a) arranging for and authorizing the restoration and
rehabilitation of the related damaged Mortgaged
Property in cooperation with the Borrower;
(b) subject to applicable law, applying the Insurance
Proceeds to reduction of the Unpaid Principal Balance
of such Mortgage Loan, provided that the Servicer (i)
shall have determined that such proceeds are
insufficient to repair and restore the related
Mortgaged Property, or that the repair and
restoration of such Mortgaged Property is not
feasible; and (ii) shall have obtained authorization
of the Master Servicer to make such application of
the Insurance Proceeds;
(c) collecting, endorsing and disbursing the Insurance
Proceeds and arranging for progress inspections and
payments, if necessary;
(d) complying with all requirements of any Primary
Mortgage Insurance policy pertaining to the filing of
claims and the settlement of insurance losses to
assure that the security of such Mortgage Loan is not
impaired and that the coverage of such Primary
Mortgage Insurance policy is not jeopardized or
otherwise adversely affected;
(e) assuring, through the receipt of Borrower's
affidavits, repair contract copies, lien waivers and
the like, that the priority of the lien of the
Security Instrument is preserved, and that the
Insurance Proceeds are applied to the restoration or
repair of the related Mortgaged Property if not
applied in payment of such Mortgage Loan;
(f) obtain releases or waivers of liens and taking such
other actions as are necessary to avoid the filing of
laborers', materialmen's or mechanic's liens against
the related Mortgaged Property; and
(g) maintaining procedures and practices acceptable to
the Master Servicer and in conformity with Prudent
Servicing Practices for the control and disposition
of insurance loss drafts.
15.6.3 SETTLEMENT FUNDS. The Servicer shall be named as a payee on all
insurance loss drafts and upon receipt thereof, the funds shall be
credited to the Borrower's Insurance
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Proceeds balance and deposited into (a) where such funds will be
applied to the repair and restoration of the related Mortgaged
Property, one or more separate escrow accounts, so that the balance on
deposit in such accounts is fully insured at all times by BIF or SAIF,
or (b) where such funds will not be applied to the repair and
restoration of the related Mortgaged Property, the respective Custodial
P&I Account.
15.6.4 SETTLEMENT NOTICE. The Servicer shall report any such settlement
to the Master Servicer on a Hazard Insurance Loss Draft Notification,
together with a summary of the disposition of the proceeds.
15.6.5 CONTINUING COVERAGE. If a letter of assurance is obtained from
any insurer under a Hazard Insurance policy or a Flood Insurance policy
that the insurance coverage will continue in full force and effect, the
Servicer shall deposit such letter in the appropriate Servicer Mortgage
Loan File.
15.6.6 PROPERTY INSPECTIONS. The Servicer shall conduct property
inspections in accordance with the milestones of the repair and
rehabilitation plan for such Mortgaged Property and prepare Property
Inspection Reports on any Mortgaged Property involving property damage
over $15,000. The Servicer shall furnish a copy of the repair and
rehabilitation plan for such Mortgaged Property to the Master Servicer
upon request.
ARTICLE 16
CONDOMINIUM AND PUD INSURANCE
Section 16.1 GENERAL PROVISIONS
16.1.1 APPLICABILITY. The provisions of this Article pertain solely to
Mortgage Loans secured by Condominium Units or PUD Units.
16.1.2 PREMIUMS. The premiums for insurance policies required pursuant
to this Article must be paid as a common expense by the Owners'
Association.
16.1.3 DEDUCTIBLE RESERVES. Funds for each of the deductibles
associated with the insurance policies required pursuant to this
Article must be included in the Owners' Association's reserves and must
be so designated.
16.1.4 NAME OF INSURED. The name of the insured stated under each
Insurance Policy required pursuant to the provisions of this Article
must be similar in form and substance to the following:
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"Association of Owners of the [Name of Condominium Project or
PUD] for use and benefit of the individual Condominium or PUD
Unit owners" (designated by name, if required).
16.1.5 MORTGAGEE CLAUSE. Each insurance policy required pursuant to the
provisions of this Article must contain the standard mortgagee clause
endorsed to provide that any disbursements will be paid to the Owners'
Association for the use and benefit of Mortgagees as their interests
may appear, or otherwise endorsed to fully protect the interest of (a)
the Owner of the respective Mortgage Loan and (b) the holders of a
beneficial interest therein, if any.
16.1.6 RECONSTRUCTION COVERAGE. If, with respect to a PUD or
Condominium Project in which a Mortgaged Property is located, there is
a construction code provision that would require changes to undamaged
portions of the PUD or Condominium Project's building(s) even when only
part of a building is destroyed by an insured hazard, then the Servicer
must ensure that each insurance policy required by this Article
contains the necessary construction code endorsements to cover this
exposure.
Section 16.2 COMMON AREA MULTIPLE PERIL INSURANCE
------------------------------------
16.2.1 COMMON AREA MULTIPLE PERIL INSURANCE REQUIREMENT. The Servicer
must ensure that the Owner's Association maintains, with respect to the
PUD or Condominium Project in which a Mortgaged Property is located, a
policy of Common Area Multiple Peril Insurance, with premiums being
paid as a common expense. The Common Area Multiple Peril Insurance
policy must at least protect against loss or damage by fire and all
other hazards that are normally covered by the standard extended
coverage endorsement, and all of the perils customarily covered for
similar types of projects, including those covered by the standard "all
risk" endorsement.
16.2.2 COMMON AREA MULTIPLE PERIL INSURANCE COVERAGE. As to each
Condominium Project or PUD in which a Mortgaged Property is located, a
Common Area Multiple Peril Insurance policy must cover 100% of the
current replacement cost of all of the common areas (other than the
land and foundation), common elements including fixtures and building
service equipment, as well as common personal property and supplies.
16.2.3 COMMON AREA MULTIPLE PERIL INSURANCE DEDUCTIBLE. Except as a
greater amount may be required by applicable law, each Common Area
Multiple Peril Insurance deductible may not exceed the lesser of (a)
$10,000 or (b) one percent of the applicable amount of coverage.
16.2.4 BOILER AND MACHINERY COVERAGE. If a steam boiler is operating
within the Condominium Project or PUD in which a Mortgaged Property is
located, then the Servicer must ensure that boiler and machinery
coverage is in force at all times. This coverage must be evidenced by
the standard form of boiler and machinery endorsement.
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The minimum liability coverage per accident under boiler and machinery
coverage must equal the insurable value of the boiler and equipment and
the building housing such boiler or machinery, based upon current
replacement cost, or $2 million, whichever is less.
Section 16.3 BLANKET HAZARD INSURANCE
16.3.1 BLANKET HAZARD INSURANCE REQUIREMENT. Unless alternative
coverage is provided pursuant to Section 16.3 hereunder, the Servicer
must verify that each such Mortgaged Property is covered at all times
by Hazard Insurance policy which provides blanket coverage for the
individual units in the Condominium Project or PUD.
16.3.2 BLANKET HAZARD INSURANCE COVERAGE. As to each Condominium
Project or PUD which contains a Mortgaged Property for which its Hazard
Insurance coverage is provided through a blanket policy, the amount of
Hazard Insurance for a blanket policy a Condominium Project or PUD must
be at least equal to the lesser of (a) the aggregate of the outstanding
principal balances of all mortgage notes secured by units within the
Condominium Project or PUD (including the Mortgage Notes secured by
Mortgaged Properties), or (b) 100% of the replacement cost of the
improvements on the Condominium Project or PUD Unit site.
16.3.3 BLANKET HAZARD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by an applicable law, each Hazard Insurance deductible
for a blanket policy covering a Condominium Project or PUD may not
exceed the lesser of (a) $100,000 or (b) one percent of the applicable
amount of coverage.
Section 16.4 COMMON AREA CGL INSURANCE
16.4.1 COMMON AREA CGL INSURANCE REQUIREMENT. The Servicer must ensure
that the Owners' Association maintains a Comprehensive General
Liability Insurance policy covering all of the common areas, common
elements, commercial spaces and public ways in the Condominium Project
or PUD in which a Mortgaged Property is located.
16.4.2 COMMON AREA CGL INSURANCE COVERAGE. As to each Condominium
Project or PUD in which a Mortgaged Property is located, a CGL
Insurance policy should provide coverage of at least $1,000,000 for
personal injury, bodily injury or property damage for any single
occurrence. Each CGL Insurance policy must contain a severability of
interest endorsement preventing the insurer from denying the claim of a
Condominium or PUD Unit owner because of negligent acts of the Owners'
Association or other unit owners. Each CGL Insurance policy must
include all other types of coverage and endorsements in the types and
amounts required by private institutional mortgage loan investors for
developments similar in construction, location and use.
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Section 16.5 OWNERS' ASSOCIATION FIDELITY INSURANCE
16.5.1 OWNERS' ASSOCIATION FIDELITY INSURANCE REQUIREMENT. The Servicer
must ensure that the Owners' Association maintains a fidelity bond or
insurance against dishonest and fraudulent acts on the part of
directors, managers, trustees, employees or volunteers responsible for
handling Funds belonging to or administered by the association.
16.5.2 OWNERS' ASSOCIATION FIDELITY INSURANCE COVERAGE. The Owners'
Association fidelity bond or insurance must name the Owners'
Association as the insured and must be written in an amount sufficient
to provide protection at least 150% of the insured's estimated annual
operating expenses and reserves. An appropriate endorsement to the
policy to cover any persons who serve without remuneration must be
added if the policy would not otherwise cover volunteers.
Section 16.6 BLANKET FLOOD INSURANCE
16.6.1 BLANKET FLOOD INSURANCE REQUIREMENT. Where a Mortgaged Property
is a Condominium Unit or PUD Unit and is not individually covered by a
Flood Insurance policy in accordance with the provisions of Section
15.4 hereof, the Servicer must verify that a Flood Insurance policy
which provides blanket coverage for the individual units in the
Condominium Project or PUD, is maintained at all times on Mortgaged
Property that are in a special flood hazard area identified by the
Secretary of HUD or the Director of the Federal Emergency Management
Agency.
16.6.2 BLANKET FLOOD INSURANCE COVERAGE. As to each Condominium Project
or PUD which contains a Mortgaged Property for which its Flood Hazard
Insurance coverage is provided through a blanket policy, the amount of
Flood Insurance must be at least equal to the lesser of (a) the maximum
amount available under the National Flood Insurance Program's regular
program or its emergency program, (b) the aggregate of the outstanding
principal balances of all mortgage notes secured by units within the
Condominium Project or PUD (including the Mortgage Notes secured by
Mortgaged Properties), or (c) 100% of the replacement cost of the
improvements on the Condominium Project or PUD Unit site.
16.6.3 BLANKET FLOOD INSURANCE DEDUCTIBLE. Except as a greater amount
may be required by applicable law, each Flood Insurance deductible for
a blanket policy covering a Condominium Project or PUD may not exceed
the lesser of (a) $1,000 or (b) one percent of the applicable amount of
coverage.
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ARTICLE 17
ADVANCES
Section 17.1 PRINCIPAL AND INTEREST ADVANCES
17.1.1 P&I ADVANCE REQUIREMENT. The Servicer shall advance P&I Advances
and deposit to the respective Custodial P&I Account on or before each
Remittance Date an amount equal to the aggregate of the difference, if
any, with respect to each Mortgage Loan, between (a) the Monthly
Payment that each Borrower was required to pay to the Servicer on the
immediately preceding Due Date and (b) the amount actually received
with respect to the related Monthly Payment by the Servicer.
17.1.2 P&I ADVANCE LIMITATION. The Servicer is required to make P&I
Advances with respect to a Mortgage Loan unless a P&I Advance is
reasonably determined by the Servicer to be eventually non-recoverable
from any Insurance Proceeds, Liquidation Proceeds, or the Borrower.
17.1.3 P&I ADVANCE RECOVERY. The Servicer's P&I Advance will be
recoverable from subsequent Borrower Monthly Payments, Insurance
Proceeds, Liquidation Proceeds or, if the Representing Party is
obligated to purchase a Mortgage Loan from its Owner, from the price
paid for such Mortgage Loan.
17.1.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Owner of a related
Mortgage Loan through foreclosure or a deed-in- lieu of foreclosure is
held by such owner or its successors, the Servicer must continue to
make monthly P&I Advances in respect of each such Mortgage Loan or REO
to the respective Custodial P&I Account. Subject to the provisions of
Section 17.1.2 hereof, these P&I Advances must be made until the (i)
Liquidation of each Mortgage Loan subject to such proceedings or (ii)
in the case of REO transferred to the Owner of each Mortgage Loan
through foreclosure or a deed-in-lieu of foreclosure, the Liquidation
of such REO. Advances with respect to REO will be made as if the
related Mortgage Loan and Mortgage Note remained in effect.
However, provided the Servicer has given the Master Servicer written
notice of the occurrence of a condition set forth in clauses tx) or (y)
hereof with respect to each such Mortgage Loan prior to the first
Remittance Date described below, during the period commencing with the
Remittance Date in the month following the month in which either (x)
foreclosure proceedings were commenced against the Mortgaged Property
related to a Mortgage Loan or (y) bankruptcy proceedings were commenced
against the Borrower related to such Mortgage Loan, and continuing
through the eleventh succeeding Remittance Date thereafter, the
Servicer shall (a) not be required to make monthly P&I Advances with
respect to such Mortgage Loan, (b) remit to the Master Servicer, its
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Servicing Fee (though not such portion, if any, to the extent that the
Servicing Fee Percentage thereon is in excess of a rate of 0.25%) with
respect to such Mortgage Loan for such Remittance Date, and (c)
continue to service such Mortgage Loan as provided under this Agreement
in all other respects.
Section 17.2 FORECLOSURE ADVANCES
17.2.1 FORECLOSURE ADVANCE REQUIREMENT. During foreclosure proceedings,
the Servicer must advance from its own funds all foreclosure expenses
as they occur in accordance with the terms of this Agreement. Such
advances must be made by the Servicer up to the time of final
disposition of the related Mortgaged Property.
17.2.2 FORECLOSURE ADVANCE LIMITATION. The Servicer is required to make
advances pursuant to Section 17.2.1 with respect to a Mortgage Loan
unless the Servicer reasonably determines (i) that such foreclosure
will not increase the proceeds to the Owner thereof or the beneficial
owners thereof of liquidation of such Mortgage Loan after reimbursement
of the Servicer for its expenses or (ii) that such expenses will be
eventually non-recoverable from any Insurance Proceeds, Liquidation
Proceeds or the Borrower.
17.2.3 FORECLOSURE ADVANCE RECOVERY. If foreclosure proceedings are
terminated, the Servicer must collect all legal fees and costs from the
Borrower. Otherwise, the Servicer's advances for reasonable foreclosure
expenses will be recoverable from Insurance Proceeds, Liquidation
Proceeds or, if the Representing Party is obligated to purchase a
Mortgage Loan from its Owner, from the price paid for such Mortgage
Loan.
17.2.4 FORECLOSURE ADVANCE RECORDS. All foreclosure advances by the
Servicer and reimbursements to the Servicer must be clearly
identifiable in the respective Custodial T & I Account.
Section 17.3 TAX & INSURANCE ADVANCES
17.3.1 T&I ADVANCE REQUIREMENT. If a Borrower's Escrow Funds are
insufficient to pay taxes or insurance premiums, the Servicer must
advance from its own funds to the respective Custodial T&I Account an
amount sufficient to cover the shortage and so as to assure the
maintenance of a first lien position of the related Security Instrument
on the related Mortgaged Property.
17.3.2 T&I ADVANCE RECOVERY. T&I Advances may be recovered from the
Borrower's subsequent monthly escrow payments, Insurance Proceeds,
Liquidation Proceeds or the Borrower, but must never be recovered from
scheduled principal or interest collections. The Servicer may not
recover T&I Advances from another Borrower's Escrow Funds.
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17.3.3 T&I ADVANCE LIMITATION. The Servicer is required to make a T&I
Advance with respect to a Mortgage Loan unless such T&I Advance is
reasonably determined by the Servicer to be eventually non-recoverable
from any Insurance Proceeds, Liquidation Proceeds, or the Borrower.
17.3.4 ADVANCE DURING BANKRUPTCY AND FORECLOSURE. During litigation,
bankruptcy proceedings or foreclosure proceedings pertaining to any
Mortgage Loan or while REO transferred to the Owner of a related
Mortgage Loan through foreclosure or a deed-in- lieu of foreclosure is
held by such Owner, the Servicer must continue to make required T&I
Advances in respect of each such Mortgage Loan or REO to the respective
Custodial T&I Account. These T&I Advances must be made until each
Mortgage Loan subject to such proceedings is liquidated or in the case
of REO transferred to the Owner of Mortgage Loan through foreclosure or
a deed-in-lieu of foreclosure is liquidated. Advances with respect to
REO will be made as if the related Mortgage Loan and Mortgage Note
remained in effect.
Section 17.4 NON-RECOVERABLE ADVANCES
17.4.1 ORDINARY RECOVERY. If at any time an advance made by a Servicer
hereunder is determined by the Servicer to be a Non-Recoverable
Advance, then the Servicer shall be entitled to be reimbursed for such
advance by withdrawing from the Custodial P&I Account an amount equal
to the Non-Recoverable Advance.
17.4.2 FINAL RECOVERY. If the amounts on deposit in the related
Custodial P&I Account are insufficient to reimburse the Servicer, then
prior to any distribution to the Owner of the related Mortgage Loan,
the Servicer shall be entitled to reimbursement from the payments made
and the proceeds received with respect to such Mortgage Loan.
Section 17.5 FAILURE TO ADVANCE
17.5.1 GROUNDS FOR TERMINATION. The failure of the Servicer to advance
any funds required to be advanced by the Servicer under this Article 17
is cause for termination of Servicer under this Agreement.
17.5.2 SERVICER REIMBURSEMENT. To the extent the Master Servicer or the
respective Trustee, if any, must advance their respective funds due to
the failure of the Servicer to advance as provided for in this
Agreement or to remit funds to the Master Servicer Custodial Account as
required by Section 18.3.1, the Servicer shall reimburse the advancing
party for such amounts, on demand, together with all costs and expenses
incurred by the advancing party, including, but not limited to,
interest on the funds advanced. Such interest will be calculated at the
lesser of the "prime rate" publicly announced in effect from time to
time at the Reference Bank plus one percentage point and the maximum
interest rate permitted by law.
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Section 17.6 REHABILITATION ADVANCE.
17.6.1 REHABILITATION ADVANCE REQUIREMENT. The Servicer must advance
from its own funds such amounts as are necessary to restore any damaged
REO not covered by Hazard Insurance or Special Hazard Insurance in
accordance with Section 14.5.
17.6.2 REHABILITATION ADVANCE LIMITATION. The Servicer is required to
make advances pursuant to Sections 17.6.1 and 14.5 with respect to a
Mortgage Loan unless the Servicer reasonably determines (i) that such
rehabilitation will not increase the proceeds to the Owner thereof or
the beneficial owners thereof on liquidation of such Mortgage Loan
after reimbursement of the Servicer for its expenses or (ii) that such
expenses will be eventually non-recoverable from any Insurance
Proceeds, Liquidation Proceeds or the Borrower.
17.6.3 REHABILITATION ADVANCE RECOVERY. The Servicer's advances for
reasonable rehabilitation expenses will be recoverable from Insurance
Proceeds, Liquidation Proceeds, or, if the Representing Party is
obligated to purchase a Mortgage Loan from its Owner, from the price
paid for such Mortgage Loan.
ARTICLE 18
REPORTING REQUIREMENTS
Section 18.1 MONTHLY ACCOUNTING REPORTS
18.1.1 MONTHLY ACCOUNTING REPORT REQUIREMENT. The period for monthly
accounting reports shall be from the first Business Day of the month
through the last Business Day of the month. All monthly reports
prepared by the Servicer must be complete and must be received by the
Master Servicer by the eighth calendar day of the following month. All
monthly accounting reports must show information and must be submitted
in a sequence according to Servicer Loan Number order.
18.1.2 MONTHLY ACCOUNTING REPORT ELEMENTS. Monthly Accounting Reports
shall include the following, all in a form satisfactory to the Master
Servicer:
(a) Monthly Summary Report and Certification;
(b) Monthly Remittance Report;
(c) Mortgage Loans Added Report;
(d) Mortgage Loans Deleted Report;
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(e) Mortgage Loan Trial Balance Report;
(f) Mortgage Loan Transactions Journal;
(g) Prepayment Detail Report;
(h) Delinquency Detail Report;
(i) Action Code Change Report;
(j) Monthly ARM Loan Change Report, if applicable;
(k) Monthly Buydown Detail Report, if applicable;
(l) Calculation of Realized Loss, if applicable;
(m) Foreclosure Remittance Summary, if applicable;
(n) Non-Advancing Mortgage Loan Report, if applicable;
and
(o) ARM Loan Conversion Notification, if applicable; and
(p) any other report that impacts Monthly Remittance.
The Servicer must also complete and forward to the Master Servicer any
other form or report as provided for in this Agreement, or as
reasonably requested by the Master Servicer.
18.1.3 AUTOMATED REPORTS. Servicers may submit to the Master Servicer
for review the Servicer's automated reports which include all of the
information required by the provisions of Section 18.1.2 hereof. Upon
approval by the Master Servicer, the Servicer may submit approved
automated reports to the Master Servicer instead of the Forms listed in
Section 18.1.2 hereof.
18.1.4 ELECTRONIC REPORTING. With the prior written consent of the
Master Servicer, all reports to be made by the Servicer to the Master
Servicer may be transmitted electronically in lieu of written
reporting. If the Servicer services more than one hundred Mortgage
Loans for the Master Servicer, it shall arrange for electronic
transmission of the required reports. Any expenses occasioned by the
electronic transmission of reports shall be borne by the Servicer.
18.1.5 MACHINE READABLE RECORDS. At the request of the Master Servicer,
the Servicer will provide to the Master Servicer, in a mutually agreed
machine readable format, the current names and mailing addresses of
each Borrower. The Master Servicer will utilize
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such information solely for audit purposes, or in the event the
Servicer is terminated hereunder.
18.1.6 LATE REPORTING FEE. Each late or incomplete monthly accounting
report will be subject to a late fee, the amount of the late fee
initially shall equal $100 for each month in which a late or incomplete
monthly accounting report remains incomplete or unfiled. The recurring
failure of the Servicer to timely file complete monthly accounting
reports constitutes grounds for termination of the Servicer for cause
hereunder.
Section 18.2 ACCOUNT RECONCILIATIONS
18.2.1 RECONCILIATION PREPARATION. The Servicer shall prepare
reconciliations for each Custodial P&I Account, Custodial T&I Account
and Custodial Buydown Account on a monthly basis and shall forward the
same to the Master Servicer upon request.
18.2.2 ACCOUNT RECORDS. Upon request of the Master Servicer, the
Servicer shall also cause the depository for each of the accounts
described in Section 18.2.1 hereof to forward directly to the Master
Servicer, copies of all monthly account statements for the preceding
monthly reporting period.
Section 18.3 MONTHLY REMITTANCE REQUIREMENTS
18.3.1 REMITTANCE OF FUNDS. On each Remittance Date with respect to
each distinct Owner of Mortgage Loans, the Servicer shall transfer, to
the extent not previously transferred as required pursuant to Section
6.1.3(e), from the funds in (or required hereunder to be in) the
respective Custodial P&I Account to the related Master Servicer
Custodial Account, the following (other than any Amounts Held for
Future Distribution in respect of such Remittance Date not exceeding
the Threshold Amount):
(i) all payments on account of principal, including
prepayments of principal (whether full or partial),
and interest, and all net REO Disposition proceeds;
(ii) all net Liquidation Proceeds and Insurance
Proceeds, other than any portion of Insurance
Proceeds to be applied to the restoration or repair
of the related Mortgaged Property or released to
the Borrower in accordance with the requirements of
law or Prudent Servicing Practices;
(iii) all P&I Advances made by the Servicer;
(iv) the Purchase Price paid for any Mortgage Loans or
property acquired in respect thereof repurchased by
the Servicer; and
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(v) all other amounts required to be deposited in the
Custodial P&I Account or the Master Servicer
Custodial Account pursuant to this Agreement.
Notwithstanding Section 18.3.1, the Servicer shall be entitled to
withhold and to pay to itself the applicable Servicing Fee (as adjusted
pursuant to Section 7.6.1) from any payment on account of interest or
other recovery (including Net REO Proceeds) as received and prior to
deposit of such payments in the Master Servicer Custodial Account;
PROVIDED FURTHER that with respect to any payment of interest received
by the Servicer in respect of a Mortgage Loan (whether paid by the
Mortgagor or received as Liquidation Proceeds, Insurance Proceeds or
otherwise) which is less than the full amount of interest then due with
respect to such Mortgage Loan, only that portion of such payment that
bears the same relationship to the total amount of such payment of
interest as the per annum rate used to calculate the Servicing Fee, as
set forth in Section 4.8, bears to the Mortgage Interest Rate borne by
such Mortgage Loan shall be allocated to the Servicing Fee with respect
to such Mortgage Loan.
18.3.2 SERVICER COMPENSATION. The Servicer shall withdraw its Servicing
Fee for each Mortgage Loan net of any Month End Interest pursuant to
Section 7.6.1 from the related Custodial P&I Account prior to the
remittance of such amounts to the Master Servicer Custodial Account
with all other payments received with respect to the Mortgage Loans.
ARTICLE 19
TRANSFERS AND TERMINATION OF SERVICING
Section 19.1 TRANSFER OF SERVICING
19.1.1 TRANSFER PROHIBITION. The Servicer may not sell or transfer its
portfolio serviced hereunder without the prior written consent of the
Master Servicer. Further, the Servicer may not subcontract any of its
servicing duties, except as set forth in Section 11.2.1.
19.1.2 TRANSFER REQUEST. Any request for sale or transfer of servicing
will be reviewed on an individual basis. For a request to be
considered, however, the transferor must submit a written request to
the Master Servicer. The transferee must agree to enter into a
servicing agreement with the Master Servicer substantially in the form
of this Agreement and must be approved by the Master Servicer, and, if
applicable, any Rating Agency with respect to Mortgage Loans which are
owned by a Trust which has issued mortgage-backed securities,
securitized by such Mortgage Loans, which have been rated at the
request of such Trust by such Rating Agency. The Master Servicer must
receive this documentation at least 45 days prior to the requested date
of transfer. The transferor will be notified in writing of the Master
Servicer's approval or denial. Such transfer will be denied if the
transferee does not meet the approval requirements of the Master
Servicer, or any such Rating Agency.
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19.1.3 SERVICER LIABILITY. The transferor of servicing shall be liable
to the Master Servicer, and the Owner of the related Mortgage Loans for
any servicing obligation violations that occur before, during, and up
to and including the day the portfolio is actually transferred. The
transferee of servicing shall be liable for any breach of servicing
obligations that occurs after the transfer of the servicing portfolio.
19.1.4 MASTER SERVICER'S DETERMINATION. If the transferor and
transferee disagree about liability for violations of representations
and warranties and servicing requirements hereunder, the Master
Servicer has the right, in its sole discretion, to determine which
party or parties are liable for such violations.
Section 19.2 TERMINATION OF SERVICING
19.2.1 GROUNDS FOR TERMINATION. The Owners of the related Mortgage
Loans, will have the right to terminate for cause the servicing
privileges of the Servicer under this Agreement, either with respect to
certain Mortgage Loans serviced hereunder or with respect to all
Mortgage Loans serviced hereunder, and the Master Servicer will have
the right to revoke the Servicer's approved status in the event of any
of the following occur:
(a) the Servicer has breached any obligation set forth or
incorporated by reference in this Agreement or any
Sales Agreement, including, without limitation, the
Servicer's failure to maintain the requisite Fidelity
Bond and Errors and Omissions Policy in the amounts
specified herein;
(b) the Servicer has made one or more false or misleading
representations or warranties in this Agreement or
any Sales Agreement, or in any documents relating to
the foregoing agreements;
(c) the appointment of a trustee or receiver for the
Servicer or any of its property;
(d) the execution by the Servicer of an assignment for
the benefit of its creditors;
(e) any change in the financial or organizational status
of the Servicer that, in the opinion of the Master
Servicer, could materially adversely affect the Owner
of the related Mortgage Loans, the Master Servicer or
the Servicer's ability to service the Mortgage Loans;
(f) the Servicer's placement on probation or suspension
by a federal or state government agency, including,
without limitation, FHLMC, FNMA or GNMA;
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(g) reasonable determination by the Master Servicer that
the Servicer's obligations hereunder are
disproportionate to its capital and/or assets;
(h) the Servicer's assignment or attempted assignment of
any of its interests, rights, or obligations set
forth herein without the Master Servicer's prior
written consent;
(i) the Servicer has been terminated for cause pursuant
to the terms of another servicing agreement with the
Principal; or
(j) the Servicer has failed to properly administer
certain REO and has been removed from the servicing
of certain REO pursuant to Section 14.1.6 hereof and
that the frequency and severity of such
maladministration is such, in the reasonable
determination of the Master Servicer, that the
termination of the Servicer is warranted.
19.2.2 OWNER NOTIFICATION. The Master Servicer shall ratify the Owners
of the related Mortgage Loans of the occurrence of any of the events
set forth in Section 19.2.1, together with the Master Servicer's
recommended course of action regarding the termination of the Servicer.
19.2.3 SERVICER TERMINATION. Following the occurrence of any of the
events set forth in Section 19.2.1, each Owner of the related Mortgage
Loans may elect, at its sole discretion, to terminate the Servicer
under this Agreement with respect to the Mortgage Loans owned by such
Owner as shown on Schedule II hereof. Each such Owner shall provide a
written termination notice to the Servicer.
19.2.4 CONSEQUENCES OF TERMINATION. If this Agreement with the Servicer
is terminated pursuant to Section 19.2.3 hereof, the Servicer will
deliver all Servicer Mortgage Loan Files, in their entirety, for those
Mortgage Loans serviced under this Agreement, as well as any other
documents or reports held by the Servicer concerning such Mortgage
Loans, to the transferee designated by the Master Servicer, which may
be the Master Servicer, and will assist in the efficient and timely
transfer of the servicing to such transferee. The Servicer shall not be
entitled to compensation for servicing following its termination.
19.2.5 EFFECT OF TERMINATION. In the event of the termination of this
Agreement, the Servicer is not released from its obligations under this
Agreement. If its servicing is terminated for cause, the Servicer must
pay the expenses of the respective Trustee and the Master Servicer
incurred in connection with transfer of the servicing and any damages,
including, without limitation, consequential damages or losses, of the
Owner of the related Mortgage Loans, such Trustee or the Master
Servicer resulting from such termination.
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19.2.6 CUSTODIAL ACCOUNT THRESHOLD REDUCTION. In the event that any of
the events specified in clauses (a) through (j) of Section 19.2.1 or in
clauses (g), (j), or (k) of Section 4.2.5 occur, the Master Servicer,
in its sole discretion, may notify the Servicer in writing that the
applicable Threshold Amount has been reduced to such amount not less
than $1,000 as shall be specified in such notice.
ARTICLE 20
MISCELLANEOUS PROVISIONS
Section 20.1 AMENDMENTS
20.1.1 UNILATERAL AUTHORITY. The Servicer acknowledges that the Master
Servicer, acting on behalf of the Principal and its successors and
assigns, may, upon written notice, supplement or amend the provisions
of this Agreement from time to time, without the need to obtain the
Servicer's consent to (a) correct ambiguous or erroneous provisions in
this Agreement; (b) make changes necessary or helpful to maintain
compliance with applicable law; (c) conform to evolving industry
standards regarding the servicing of residential mortgage loans
generally; or (d) make such other modifications or amendments thereto,
which the Master Servicer deems advisable, provided that no such
modification or amendment shall have a material adverse impact so as to
materially increase the obligations of, or to materially decrease the
benefits to, the Servicer.
20.1.2 CONSENSUAL AMENDMENT. Except as provided for in Section 20.1.1
hereof, the Master Servicer, acting on behalf of the Principal and its
successors and assigns, must obtain the written consent of the Servicer
to any amendment hereto that would either increase materially the
obligations of the Servicer or decrease materially the benefits to the
Servicer.
20.1.3 OWNER NOTIFICATION. The Owners of the related Mortgage Loans
shall be provided with notice of the substance of any amendments or
modifications made to this Servicing Agreement pursuant to the
provisions of this Section 20.1.
20.1.4 OWNER DISAPPROVAL. With regard to any proposed modification or
amendment to this Agreement which shall have a material adverse impact
upon the beneficial rights enjoyed hereunder by an Owner of the related
Mortgage Loans, each such Owner shall receive written notice of the
substance of any proposed amendments or modifications at least ten
business days prior to the proposed date of enactment of such amendment
or modification which shall also state therein the proposed date of
enactment. If a majority vote of the Owners so materially adversely
affected, with the vote of each such Owner weighted in proportion to
the aggregate of the Unpaid Principal Balance of Mortgage Loans
serviced hereunder for such Owner, notify the Master Servicer in
writing, prior to the proposed date of enactment, of their opposition
to the adoption of such an
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amendment or modification, the Master Servicer shall not proceed with
such modification or amendment.
Section 20.2 GENERAL CONSTRUCTION
20.2.1 BINDING NATURE. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and permitted assigns.
20.2.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous
servicing agreements, understandings, inducements and conditions,
expressed or implied, oral or written, of any nature whatsoever with
respect to the subject matter thereof. The express terms hereof control
and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof.
20.2.3 GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed
by, construed, interpreted and enforced in accordance with the laws of
the State of New York, notwithstanding any New York or other
choice-of-law rules to the contrary.
20.2.4 INDULGENCES NOT 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.
20.2.5 TITLES NOT TO AFFECT INTERPRETATION. The titles of the articles
and sections contained this Agreement are for convenience only, and
they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.
20.2.6 PROVISIONS SEVERABLE. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.
20.2.7 SERVICER AN INDEPENDENT CONTRACTOR. All services, duties and
responsibilities of the Servicer under this Agreement shall be
performed and carried out by the Servicer as an independent contractor,
and none of the provisions of this Agreement shall be deemed to make,
authorize or appoint the Servicer as agent or representative of any
Owner of any Mortgage Loans, of the Principal, or of the Master
Servicer.
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20.2.8 THIRD PARTY BENEFICIARY. The parties agree that the Master
Servicer and any Owner are intended third party beneficiaries of the
representations, warranties, covenants and agreements of the Servicer
set forth in this Agreement. The Master Servicer shall have full
authorization to enforce directly against the Servicer any of the
obligations of the Servicer provided for herein.
20.2.9 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date set forth above.
FIRST TOWN MORTGAGE CORPORATION
as Servicer
By:
Name:
Title:
THE PRUDENTIAL HOME MORTGAGE
COMPANY, INC.
as Principal
By:
Name:
Title:
105
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Mortgage Loan Schedule
Cut-Off Date
Cut-Off Date Regarding
Unpaid initial coverage
Master Servicer Principal under this Servicing Fee
Loan Number Balance Agreement Percentage
<S> <C> <C> <C>
</TABLE>
106
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
List Of Owners Of The Mortgage Loans
Cut-Off
Date Relating
Master Servicer Owner's to Owner's
Loan Number Owner Address Acquisition
<S> <C> <C> <C>
</TABLE>
107
<PAGE>
September 16, 1993
Lucine Gilliland
First Town Mortgage Corporation
400 Interstate North Parkway
Suite 1100
Atlanta, GA 30339
Dear Lucine,
Pursuant to our telephone conversation of September 16, 1993, The Prudential
Home Mortgage Company, Inc. will agree to make the following changes to the
Servicing Agreement between First Town Mortgage Corporation and The Prudential
Home Mortgage Company, Inc. dated 8/22/93.
1. SECTION 4.6.1 - SALE OF SERVICER: The clause reading "in the
event that the Servicer is servicing less than $15 million",
will be changed to "in the event the Servicer is servicing
less than $5 million".
2. SECTION 4.6.2 - SERVICING PRICE: The purchase price which the
affiliate of the Master Servicer will pay the Servicer for the
purchase of such servicing pursuant to Section 4.6.1 shall be
an amount equal to the product of (i) 150 basis points and
(ii) the current unpaid principal balance of each Mortgage
Loan for which servicing has been purchased.
3. Securitized Asset Services Corporation (SASCOR), as Master
Servicer will agree to accept FNMA LASER style reporting (both
hard copy and tape) on a monthly basis.
4. First Town Mortgage Corporation and the Master Servicer are in
agreement that Custodial Principal and Interest, the Custodial
Taxes and Insurance and the Custodial Buydown Account, if
applicable, will be established in the following fashion.
First Town will be required to establish a separate P&I and
T&I Custodial Account for those loans that have been purchased
by the Prudential Home Mortgage Company, Inc. (the Principal)
and have not been sold into a Trust. Upon sale of mortgage
loans into a Trust, First Town will be required to establish a
second set of P&I and T&I custodial accounts In Trust For
Prudential Home Mortgage Company, Inc. and various Owners.
It is not the intent to have First Town maintain separate
custodial accounts for each Owner or Trust that is created.
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5. The intent of Section 6.2.3(b) - Permissible Withdrawals,
allows the servicer to reimburse itself for advances which
have been recovered by subsequent collections to the extent
that funds on deposit recovered by those collections relate to
the individual Mortgage Loans on which advances have been
made. Both First Town Mortgage Corporation and the Master
Servicer acknowledge that this is the intent. The Master
Servicer will agree to permit First Town to use subsequent
collections in the aggregate to recover advances made,
provided that, upon the request of the Master Servicer, First
Town can provide a reconciliation indicating those specific
Mortgage Loans for which advances have been made.
Please sign below as accepted and return original to me.
Thank you for your prompt attention and cooperation. If you have any questions
please let me know.
Sincerely,
Robert J. Perret
Director
Accepted:
Lucine Gilliland
Title:
Date:
109
